Bits Bucket For December 3, 2008
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
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Was looking at the recently-release OFHEO HPI Q3 data yesterday. I posted some observations yesterday though pretty late, so reposting here:
- Charlotte, where prices had been climbing steadily albeit slowly all along, took a rather abrupt turn downward. Being that it’s the 2nd largest banking center in the U.S. (e.g. headquarters of Wachovia), that makes sense.
- Merced continues its drastic plummet (fastest of all areas) - prices have fallen 32% there in just the last 6 months. Ouch.
- Other areas that hadn’t been considered bubbles at all, since prices didn’t rise significantly above inflation - e.g. Atlanta and St. Louis, now are also seeing significantly falling prices. Many on here have predicted fallout to non-bubble areas. That prediction is now proving true.
- Poor Seattle - the last big bubble holdout - is finally succumbing. Prices are now falling at about 8% annual rate, with the rate of fall increasing rapidly - same as has happened to all bubble areas, generally falling at 20-40% annually now since they’re further along the curve.
- The average for all of the U.S. areas is now falling faster on the back end of the bubble, than it rose on the front end. This is true even in non-inflation-adjusted terms.
Thus the bubble is bursting faster than it inflated, by a fair amount. This, combined with the fact that some of the most bubbly areas (CA central valley, FL west coast) are already diving below their inflation-adjusted “normal” indexes, or are obviously going to dive below them within the next couple of quarters, indicates to me that the U.S. overall will be overshooting our home prices on the downside.
This is also supported by the census data indicating that we have yet to make a dent in the overhanging inventory - it remains at peak levels, despite the now-record-low level of new homebuilding. Obviously this is due to foreclosures. This data indicates that home price declines will continue at their current rate for probably 12-18 more months, before slowing the rate of decline.
End conclusion is - we are still in the very early stages of this downturn. While the housing downturn may not get worse in terms of the rate of price declines - it will get a lot worse still in terms of actual prices, and therefore in terms of the number of underwater mortgage holders. Thus I think the bulk of the pain with regards to revenue and profit losses, job losses, and consumer spending is still ahead of us.
the rate of change observation is interesting; the same goes for the stockmarket of course. Fear is stronger than greed?
The old fear was that if one wasn’t greedy enough, you might miss out.
The new fear has nothing to do with greed, people are scared…
some years ago a Dutch bank made an interesting report about reasons why people decided to (not) purchase a home (alternatives being rent, wait a bit with the purchase decision etc). Reason number one for buying (about 70% of buyers): “if I don’t buy now I will never be able to afford a house”. I’m not sure if one should call this greed, but it definitely is a powerful incentive.
I still remember this.
I was thinking that if I couldn’t figure out a way to afford a house (I make a decent professional salary) then how would anyone else afford one?
How was their supposed to be any market?
I’m with ya bro!
Debt is a bad thing no matter how you slice it. Even a mortgage is a necessary evil at best in my book.
I too make a decent salary and felt the same bewilderment at how others in a given neighborhood who likely didn’t make half what I do, were able to afford to live like they did.
Answer: they couldn’t.
But of course WE were the stupid ones because we were missing out on all that debt.
They may have been right, because now it’s you and I that get to pay for it all apparently. Absolutely outrageous. Debtors need to be made to live up to their obligations. Oh you say it hurts too much? Well, I haven’t had a backyard for my little girl to play in all these years because of the trouble YOUR DEBT caused in the form of(among other things) obscene house prices.
Your mess, YOU CLEAN IT UP!! Deal with it.
We can only hope that this debacle finally destroys the myth that completely unrestrained and unregulated capitalism is some kind of absolute good.
Plus the PTB are between a rock and a hard place. If they put too much squeeze on the middle class(what’s left of it), they kill off pretty much the last truly productive segment of the population.
The only answer as far as I can see is to reward the very few that had the foresight and discipline to SAVE their money and sit out on the bacchanalian debt-lust orgy of the last few years.
Show everyone that genuine productivity is rewarded in our society, not punished.
My other post may have been swallowed, but I couldn’t agree more.
Apparently you and I and a few others on this blog are the only ones capable of thinking in terms like that.
Nobody in power seems to have had ANY consideration for the idea of maintaining a sustainable market in all this. They were like a couple teenagers who found the spare credit card while mommy and daddy were on vacation and left them home alone.
Well, the credit card bill has just arrived in the mail, and it ain’t pretty.
“We can only hope that this debacle finally destroys the myth that completely unrestrained and unregulated capitalism is some kind of absolute good. ”
Completely unregulated capitalism would not have been able to pull off the subprime scam. For that one needed a regulated scam: the implicit government guarantee in Freddie and Fannie.
This was state-abetted crony capitalism at work, a nastier form than the pure strain.
“if I don’t buy now I will never be able to afford a house”.
That’s the whole raison d’etre for the explosion in building companies, and the build build build built it mentality. The market wasn’t just for people looking for a place to live, but a market for people looking for a place to live PLUS a market for people looking to flip to each other trying to scalp unsuspecting hot potato catchers.
Speculators that bought two, three, and four houses to flip, set the market for two, three, and four more houses to be built. Unless you think it’s reasonable for people to follow you around a grocery store and snatch up everything you try to buy and attempt to sell it to you for a markup.
Now there is likely around an excess supply of homes out there that matches the supply of every house, town house, and condo that was specu-flipped. This is a variable in addition to income-price ratio, unemployment, and interest rates. Supply is so freaking huge that a normal 3 times income ratio might become a 2 times income ratio due purely to excess supply.
…the build build build built it mentality.
“Build, baby, build”
…a market for people looking to flip to each other trying to scalp unsuspecting hot potato catchers.
This week’s award for ninja metaphor juggling.
“The old fear was that if one wasn’t greedy enough, you might miss out.”
Not just “miss out”—-the fear was worse than that. The fear was that if you held back, you might NEVER be able to afford a house again. Priced out _forever_.
At the rate things were appreciating, that fear seemed reasonable to people at the time. I felt the fingernails of that fear on my back myself, after selling and delaying re-buying due to my bubble-beliefs.
“At the rate things were appreciating, that fear seemed reasonable to people at the time. I felt the fingernails of that fear on my back myself, after selling and delaying re-buying due to my bubble-beliefs.”
It was touch and go in 2006 when I sold. I even moved to Phoenix in case I was wrong and home prices stayed high I really didn’t need to be the town fool who sold and rented and “could never buy again”
Hello Thousand Oaks CA what Amgen didn’t save the day ? gee thats too bad…….
Which seems more likely, that the middle class will be priced out of homeownership forever, or that price/income ratios will return to their historic norms. Now it is perfectly possible for most of us to be priced out of a NEIGHBORHOOD forever. Chances are, I will never be able to afford a house in the neighborhood that I grew up in. But except for the poorest, it simply isn’t possible to be priced out of an entire metropolitin area. There ARE low- moderate income jobs, and there needs to be a place for those people to live. Not everyone can be in a mcmansion or even a single family detached house. It may be run down, and or small, and or distant, and or in a crappy school district, but it HAS to exist. 500k for a cr@p box in Compton is simply unsupportable.
No kidding people are scared. I try to invest in the stockmarket -mostly in an S&P 500 fund. I really don’t have the “stones” or guts to day trade. Looking at the market and the way it goes up and down and I’m glad I left it nearly 2 years ago. I’m in a vanillia money market fund that pays 2.5% per annum.
Theses wild market swings are not normal, and I’m not sure how much I believe in the “hedge fund deleveraging symptoms” hypothesis. I had viewed the stockmarket is an investment until the past 6 years or so. I thought there would be a landing to the market that would be hard, but at least not repeated day in and day out. I could then get back into the market at some point like in 2002. It’s like looking at the same plane crashing over and over in entirely different ways.
The talking heads on Bloomberg and CNBC seem to take this in stride. Doesn’t anyone see the potential for a much bigger mess than we currently have? It’s like there is an Alfred E. Newman “What Me Worry?” attitude. This one is enough for me thank you.
Just nuts.
Roidy
Phil: What would you do if you were stuck in one place and every day was exactly the same, and nothing that you did mattered?
Ralph: That about sums it up for me.
“The new fear has nothing to do with greed, people are scared…”
The difference is that _this_ time, their fear is rooted in reality.
“Poor Seattle - the last big bubble holdout - is finally succumbing.”
I thought Manhattan was the last bubble holdout.
I wonder if housing prices in the NY area will crash rather than deflate. After all, the “souffle” began to sink in many areas when the economy was still growing, and credit still available. New York, on the other hand, is finally hitting the housing downturn in the middle of a financial crisis and severe recession.
There is a former co-worker looking at a plain old house in a plain old working-to-middle class NJ suburb. Bought for $545K, seller transferred and has already moved, seller started at $575K and is down to $470K. The former co-worker, soon to be married and under pressure from the spouse to be, thought about offering $370 but is getting cold feet. I suggested buying that house or one like it or better for $250K next year, from a mortgage servicer.
“I thought Manhattan was the last bubble holdout.”
Could be, though OFHEO doesn’t get that granular - it just has data for the NY metro area (including White Plains etc.).
You’re right though NY metro area is nearly identical to Seattle w/regards to its lateness to the party. Both started their declines in Q1 of this year, though didn’t really get serious until this past quarter.
3-4k former Wamu employees in Seattle will be cut loose in the next 8 weeks. I am sure that will have an effect on house prices and the downtown corporate real estate market.
I expect that Boeing will be doing layoffs soon in Seattle as well. I hear pre-layoff-planning meetings have been held so employees know it is in the pipeline, though I am not privy to any insider info on the timing or size of the layoffs.
But I can’t imagine that in the deepest global recession of recent times, that companies will need to buy nearly as many jumbo-jets.
Actually, Eureka California is the last holdout. Down only 15% when the state’s median is down 41%. Still the median sits at $300,000 when median household income is only $40,600. I’d have to do some checking, but would be willing to bet that the median house price to median household income is among the highest in the state and nation.
Speaking of Eureka and the surrounding CA zone, there was a National Geographic channel show on Marijuana last night/10pm.
I suspect it was interesting.Meant to watch and fell asleep. No pot either.
desertdweller,
I only watched 1/2 of it b/c there really wasn’t any “discovery” there. Typical preface about “Reefer Madness” yada, yada. I was disappointed as Lisa Ling is usually a better journalist than that.
I’m sure San Luis Obispo has you beat there
The ratio in SLO may be a little higher due to college kids’ lack of income. But, I’m pretty sure SLO county’s median home price has fallen more than Humboldt’s.
Speaking of Charlotte… I have a cousin who is regional Sales VP of a major window (and other home supplies) distributor that includes NC and other SE states. When I visited him in April, he said business was booming, with a lot of 3rd and 4th homes being built in western NC. Everything was wonderful.
Spoke with him again about 2 months ago and he said everything came to an abrupt stop right after Easter. He described itas a tale of 2 seasons. Since then business has been as bad as it was good in the pre-Easter timeframe.
“Since then business has been as bad as it was good”
LOL! Not sure if you intended that to ‘be’ funny but sorry, that’s the way “I” see it. It’s weird you would describe it that way because in so many of these “last to fall” markets that’s ‘exactly’ the impression you get from so many of the REIC true believers.
Superbowl party, things couldn’t be finer. Easter? ( Do you have a gun I could “borrow” ? )
My brother used to work for a cabinet manufacturerin Raleigh. Same story. Everything was hunky dory, “it won’t happen here” and then BLAM! sales went down the tubes. He was laid off (with a nice separation package). He found a new job within a few weeks, which he now also worried about losing (automotive supplier). He has been looking around, and tells me that its very slim pickings right now, as opposed to 6 months ago.
In Colorado,
Glad to hear at least your bro got some nice walking papers. I just keep hearing the same sentiment over and over. Now ‘these’ are people that can claim they were “blind sided”. Fed Chairman? Not so much.
What in the world would anyone do with a “3rd and 4th home”? Or is this just an odd way of talking about rental properties?
McCain has 7 homes.
And can afford 7 more (at least his wife can). What’s your point? And at least his realturd agent isn’t in jail unlike a certain President elect.
Well it makes sense for a Congresscritter to own an actual home plus a place in DC.
I often wondered if his pause at answering the question was that he was unclear which of Cindy’s properties were just for investment purposes.
DennisN,
Ben loves to remind us that “2nd/Vacation Homes” (were really just another excuse to speculate) I suppose by 2005 the more remote the property, the more it was viewed as being “exclusive”?
Given this fad, Ted Kazcinski could have had ‘much’ more fashionable diggs.
“2nd/Vacation Homes”
Vacation Prisons
No jive. I thought half the fun of taking a vacation was trashing the place and not even worrying about getting your deposit back?
I’ve seen Ted Kazcinski’s lot. His cabin had already been confiscated by then. He lived in Lincoln, Montana.
Mike
Imagine that, people that lie & cheat are still doing it…
Report: Mortgage fraud incidents up 45 percent, Florida leads nationally…
MIAMI (AP) _ Reported incidents of mortgage fraud grew by 45 percent in the second quarter compared to the year-ago period, as borrowers misstated their financial information to maneuver around tighter lending standards, industry data released Tuesday showed.
Florida properties led the way with about one-fifth of mortgage fraud incidents reported in the second quarter, the Mortgage Asset Research Institute reported. California was second, and Illinois third, the data showed.
Mortgage fraud incident reports had increased 42 percent in this year’s first quarter, compared to the first quarter of 2007.
The largest increase in mortgage fraud in the first half of this year involved borrowers misstating their financial profile, which is not surprising as borrowers try to get around stricter lending guidelines, the report said.
http://www.chicagotribune.com/business/sns-ap-mortgage-fraud,0,5711035.story
What penalties will these fraudsters face? Sounds like none?
Not surprising. I’m sure agents are mainly behind this. Desperation is stronger than greed. When the money is rolling in it’s tempting, but when you haven’t had a commission in months even those with scruples will throw morality to the wind.
“I’m sure agents are mainly behind this.”
+1 Exactly!
Plus, people that became Realtors during the boom was taught to falsify documents. They don’t know any better. They think it is the norm. Kind of like a kid taught to steal while young and does not know it is wrong.
I don’t believe this story, one bit.
Mortgage fraud was what made the “BUBBLE” work. Prices could NEVER have inflated to such levels had there not been a lot of paper shuffling, account pass-throughs, buyer turn-over and FRAUD.
I think the real story is that as mortgage standards have tightened and lenders are now afraid of getting stuck, they are actually reviewing the documents.
Had they done this 5 years ago, we would all be seeing a reasonable housing market, and very few underwater “buyers”.
diogenes,
Couldn’t agree more. If you’ll recall talking to your “friends” that were MB’s from the era they boasted “I can make ‘anything’ happen!” When you amplify that effect along w/ agents that are being “indoctrinated” into a system of fraud it greatly magnifies the effect.
Countryfried even had a software platform called “Desktop Underwriter” where the agent and MB could “tweak” the application until they ‘did’ get an approval!
Nobody was looking for fraud until the ride came to a screeching stop and nobody could get off. At night, the ice weasels come.
Speaking of fraud, what ever happened to Palladin and his crusade?
When I read a news article four or five months back where the FBI said they had someone provide them a whole bunch of fraud info, I wondered if it was him…
Anyone heard anything?
We all miss Paladin. Have gun will travel.
Thing is in the fraud busting business sometimes you take one in the back.
Hope he/she is OK.
I think Paladin was staying out of the public eye (including blogs) because he/she didn’t want to be “discovered” by those who were being turned in.
Also, he/she seemed to have a lot of work, so not sure exactly the reason.
When the story about someone providing info to the FBI came out, I also thought of Paladin.
Great job, if it’s him/her.
To those of you that live in Orlando, I don’t know how you do it.
I hope future archaeologists find Orlando last; if they find it first they’re going to think we’re a bunch of psychopathic clowns that ran over pedestrians with drift cars on our way to rob Wal*Mart dressed in drag so we could grab crappy food from a $5 buffet. And then go ride a roller coaster.
It’s magical!
Lol, Muggy, I lived outside of Orlando for about two months at the height of the housing bubble. And came screaming back over here.
What’s a drift car?
Here, I’ll list all the Florida variations (if you’re not driving one of these, chances are you have a sedan that would fail inspection in other states):
Drift
http://kydrives.net/photos/drift1.jpg
Donk
http://news-images.caradisiac.com/IMG/jpg/4/6/5/2/2/donk2.jpg
Truck
http://rangelife.typepad.com/.a/6a00d83451c8f569e200e55347ae1f8833-pi
Car
http://www.dragtimes.com/images/12888-2006-Lamborghini-Gallardo.jpg
Awesome pics. I get the idea.
ROTFLMAO
“ROTFLMAO”
It’s surreal at first, then comical, then annoying. My above links are no exaggeration. If I had a dollar for every time I had to avoid one of these vehicles on the road…
I know every region has it’s quirks, but Florida’s love affair with vehicles that resemble children’s Matchbox cars shows how cartoonish and immature daily life can be in this state.
I would cry if I had to drive behind that truck…
Truck guy must have a personal ‘tiny engine’ to have such a BIG Truck.
That is my take.
Yeah, and the piston rod is pretty tiny too!
LOL
My MIL told us there were no car inspections in Florida. It totally freaked me out to drive around after that. I remember when I had no money and bald my tires, etc, got at times. At least once a year, though, the car to be brought to a minimal level of safety for state inspection.
(And then she goes on and on about all the sunshine like if we would just realize out gosh darn warm it is down there all the time, we’d be down there in a heart beat. I think we’ll take VT, even with the snow, thanks, though.)
Most states do not require car inspections, many people here probably don’t know what they are. More are requiring smog checks though.
If we have a smoky backyard grill, the California Air Resources Board might send an inspector.
Most states do not require car inspections, many people here probably don’t know what they are.
Wow. Okay, now I’m really freaked. I may never leave VT again.
California only requires vehicle operation inspections under two conditions: getting a car registered after becoming a “salvage title”, or after building a car from a “kit”. I went nuts getting my kit-built Lotus 7 replica registered for street use. Every time I went to the DMV they gave me a diferent “list” of things to do.
I’m not sure if Idaho requires such an inspection in either case.
I thought California required inspection of any car coming in “permanently” from out-of-state, for registration, that had not been bought originally in California - because CA has different emissions requiremetns than the other states.
“I thought California required inspection of any car coming in “permanently” from out-of-state, for registration, that had not been bought originally in California - because CA has different emissions requiremetns than the other states.”
All the newer vehicles are “50-states” qualified.
“What’s a drift car?”
Ever seen the movie “Fast and the Furious: Tokyo Drift”?? Or something like that. Great driving in it if nothing else.
Yeah but imagine what they will think when they find that new Amway Arena (Event Center) they are building.
“Amway Arena”
Between this and the term “drift,” there is probably a really, really funny “Mormon airbag” joke here, but I can’t bring it all together.
How about Amish airbags??
No surprise to me that Florida is #1 in mortgage fraud (even though California is a much larger state). Back in the day when Rick Sanchez was a dopey Florida newscaster, Florida was balls-to-the-walls corrupt everywhere you looked, and nothings really changed since. Florida writer Carl Hiaasen has lampooned Florida’s charms and harms in all its absurdity for years, and you’d all do yourselves a great favor to read some of his outrageously funny books.
Skinny Dip. The best!
Whenever there is a link to a wacky FL story here, I usually reply, “Paging Dr. Hiaasen!”
Dave Berry, although I don’t think he’s ever written a novel about FL, riffs on the absurdity as well. I saw him speak in NY and he was joking about how he just flew in from another country.
Barry, my bad.
Also, I think it would be pretty cool to sit in a on staff meeting at the Herald and listen to those guys bust on every day office stuff.
They probably were 20 years ahead of the TV show.
Muggy/Palmetto- Well fellas as you know I am here in O town and am also an appraiser who starved during the boom. Just could not sign off on the stuff I saw.
The worm has turned as I am now a sole provider to many national mortgage insurers throughout the Central Florida region. Holy smokes batman. I am going to die with my boots on and still doing fraud work I am sure. Based upon the volume here it is a 10 year project and it just keeps gettin better. The fraud is continuing.
The thing that strikes me is how obvious it should be that the fraud is being committed. My area is review of apraisals and within a period of 10 minutes I can clearly spot a sour deal. Maybe it is because I have been doing this for 35 years but it seems to me that anyone could spot this given a few hours of research.
The most prevalent scamsters are in the condo conversion projects as they are selling at 2005 velocities when everyone else is stuck in neutral. I simply do not understand it’s continuing when we know what we do.
However, rest assured that a lot of tails are being shot off daily. I figure since this all took off about 6 months ago I have rendered up about 150 appraisers for roasting and glad to do it.
Based upon the average loss per property you could extend the following. For every condo unit I have reviewed and most of them are from 06′ the loss was in the neighborhood, at the time, of $75,000. Run that gainst some 14,000 sales and you get a pretty good number. Then knock off another $75,000 for market conditions since then as these units are coming back on the market at today’s values which is say $65-70,000 per unit.
So O’town is contributing just in the condo market about $2bn in losses so far. Extend these numbers to single family housing and I think we are in the $5bn range just in Orlando. That’s a pretty big crater and there is no way E&O will cover it.
Rest assured that I will do my best to exact a toll on the people who put us here and damn glad to do it.
The only concern that I have is that the volume is so great that enforcement will only come to a few of the more grievous actors.
DIMEDROPPED, your boots-on-the-ground view is unique and appreciated here — your posts bring ys a perspective that most anecdotal info cannot.
I have to say thats good news to my ears!! I would like to Thank you for the work your doing! Now, if we could just figure out a way to clone you into the thousands, that would be awsome!! Keep up the Fight, your doing this country a great service by exposing these crooks!
hello dimedropped! Glad to see you’re still fighting the good fight, and extra glad that you’re being rewarded for your efforts. The posts you made back when you were shifting your business focus to mortgage fraud were some of the most memorable ones I’ve read here. You’re a very courageous fellow, and a personal hero of mine. Keep up the good work!
RE: Rest assured that I will do my best to exact a toll on the people who put us here and damn glad to do it.
Dd~You got a set of body armour?
I sure the fook would…Nastiest people I ever met in my life were all attached to real estate in one way or another.
Dude-I don’t need no stinking body armour. But I have worn it before. AKA- Viet Nam. Semper Fi!
Dime, your posts are always awesome. You make feel bad for riffing all the time.
Did anyone save Dime’s post about signs of bad times? It was amazing, things like oil stains in driveways. That was really an awesome “from the trenches” post.
Dimedropped,
So glad to hear about the turn of events!!!
You deserve all the work that is coming your way, and then some.
Thank you for having the integrity to do the right thing throughout the bubble.
Best of luck to you in the coming years!
And then go ride a roller coaster.
I heard through the grapevine that Disneyworld bookings for January are at an all time low (only 35% of rooms are booked).
This, in spite of the fact that they have 7 nights for the price of 4 promo (hotel and tickets, you still have to pay for 7 days of meals).
I wonder what percentage of WDW vacations (especially at the pricier resorts) were paid for with HELOCs. Its very easy for a 7 day trip to cost as much as $5000, especially if you stayed at a moderate or deluxe resort.
Third-party Disney Vacation Club resale listings are spiking, especially for the newer resorts. I suspect strongly this is due to HELOCs being used to purchase the original contracts. Many contracts are at wishing prices, but some are surprisingly low.
Disney Vacation Development has right-of-first-refusal on all DVC resales, so the appearance of low-priced contracts on the open market is noteworthy.
Cowtown (you in Kissimmee?) - this should mean that timeshare repos and resales in the Disney area will soon flood the market. In 1973 you could buy prime-week handovers for $500 - essentially just the transfer fee. Wouldn’t be surprised to see something similar before all this is over.
Last week a relative offered to sell me a timeshare she owns outside Florida, for what she thought was a very discounted price. She was pretty surprised when I told her I wouldn’t buy one for any price. Just rent one for a week for the price of the owner’s annual maintenance fee.
A comment from Yesterdays thread.
It’s mind boggling they always want to keep the higher priced house with the adjustable mortgage. (the little wifey cant bear the embarrassment of going backwards) And they want sympathy?
The quality of reporters these days are so low , They would never hire me to research any of these questions. Gawd i wish i had a job where i could get these questions asked in print or on video. But i probably would be fired real fast.
———————————————————–
Right before a foreclosure sale was set to go through, Countrywide accepted a “short” sale of the home for $245,000 to settle the $270,000 mortgage.
But the couple isn’t out of trouble yet. Payments on their current mortgage adjusted higher this month by more than $800 to an amount they can’t afford.
Craig estimates that the newer home, which must compete with new ones still being built, is worth $410,000 but has $450,000 owed on it.
Same issue with the friend we have here….went and bought a McMansion…paid 2x the amount of what he had before..and then is crying the blues?
Hey, we did the opposite. Sold our old house for more and bought a house for less in an area where the housing cost are much more reasonable..could they do that no?
Why? Because wifey whinned about. “Well we already live in a million dollar home and I want another one 2X the cost!”
Sorry, but no sympathy here for you. Now their old house is almost back down to what it is really worth from 02(they equity lined it up) and the current McMansion is already underwater!
Sorry but not my fault you wanted to be a Donald Trump Wannabee!
Mortgage applications surge by record amount…
NEW YORK (Reuters) - Mortgage applications surged by the largest amount on record last week as a new Federal Reserve program pushed interest rates down to their lowest level in more than 3 years, data from an industry group showed on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended November 28 soared a record 112.1 percent to 857.7, the highest reading since the week ended March 21 when it reached 965.9.
“Now it’ll be a matter of qualification as lenders evaluate each borrower individually,” he said.
http://www.reuters.com/article/ousiv/idUSTRE4AP5FO20081203
do they also keep records of what percentage of applications is rejected?
I think we have a similar situation in Netherlands (and probably most of Europe, except UK and Spain where rates are tied to UK Libor). Official mortgage rates are near a 400-year low (again), a little over 4% for a 5-year fixed rate loan. Trouble is, unlike last year it is now difficult to quality for those rates. For many buyers the extra risk premium compensates most of the drop in rates (eg. because of 100% or more financing or because the loan can only be made on the basis of two full incomes, etc.).
“do they also keep records of what percentage of applications is rejected?”
That’s a good question. And there’s no mention of the PMI that probably is going to be required for a lot of borrowers. A friend today mentioned that his kid in CA was preparing to re-fi his 2006 or 07-purchased house. I mentioned that the current appraisal might have to come in showing 20% equity, from what I understand. They hadn’t taken that into account.
“…as a new Federal Reserve program pushed interest rates down to their lowest level in more than 3 years”
WRONG. I beg to differ that rates are the lowest in 3 years. In February of this year 30-year fixed were at 5.5% for quite a while, and in fact dipped briefly to 5.3%. Currently they are at 5.6%.
ARMs are currently *way* higher than they were at the beginning of this year.
See bankrate dot com - generally the reference used for rate data.
Sounds to me like a lot of work for no pay for LO’s. Unless something’s changed since I’ve been out of it and agents are getting paid per app (not!), this is just a lot of spinnin’ the wheels. At least they’ll get the feeling that they’re being productive again.
Like so many hamsters on a wheel going nowhere fast…
ex,
That was my take too. The fact that they’re -applications- ( and nothing more ) should have been emphasized!
Loan applications are like Pending sales..they MEAN NOTHING if they don’t close..
Late bills soaring in city: Debts rise on credit cards, auto loans
BY PHYLLIS FURMAN
DAILY NEWS BUSINESS WRITER
Wednesday, December 3rd 2008, 4:00 AM
Credit card and auto loan delinquencies are surging in the city.
In fact, by the end of next year, the number of New Yorkers expected to be at least 90 days behind on their credit card bills is projected to jump 45%, execs from credit bureau TransUnion told the Daily News.
That would mark the highest percentage of significantly past due credit card bills in at least five years.
In addition, the number of New Yorkers more than 60 days late on their car bills is expected to soar 22% increase.
http://www.nydailynews.com/money/2008/12/03/2008-12-03_late_bills_soaring_in_city_debts_rise_on.html
We have a long way to go to catch up. People are going to find out it CAN happen here.
This ‘may’ be something of lagging indicator. Gas was $4.11 a gallon in July and has since fallen back to nat’l avg. of $1.81. Additionally ( for those that qualify ) mortgage rates have fallen.
A rice bucket that can’t drive in a straight line.
What’s a rice bucket?
Obviously never seen the Fast & the Furious
Nope.
Same as a rice rocket. Generally describes a small Asian car with a halfway potent engine, as opposed to a garden-variety Accord with a beer-can resonator to make it noisy.
Floridians, rejoice! Fidel Martinez won’t be seeking re-election:
http://www.google.com/hostednews/ap/article/ALeqM5gI4HpwThc0LufUbxbSGgMtBgg-9QD94QTRKG0
But, it is interesting that, at the same time, Team Bammy could ease the embargo with Cuba. If they’re going to do that, they should just normalize relations with Cuba, it’s about time. Perhaps Martinez will play a role in this.
The USA learned a painful lesson when we screwed up and allowed all the Cuban refugees to live in Fla., as it messed up the political dynamic
We didn’t repeat the mistake with Vietnamese refugees in the 1970’s, as they were scattered hither and yon instead.
Cuba is an international girlie flirt right now and is receiving prospective suitors. It would in no way shock me if it became part of the US in the not-too-distant future. Our 51st state.
Where’s Muir? I’d like to get his take on this.
Here.
Never happen in a million years!
-
“Cuba is an international girlie flirt right now and is receiving prospective suitors. It would in no way shock me if it became part of the US in the not-too-distant future. Our 51st state.”
“Our 51st state.”
OTOH, there are those pesky hurricanes to worry about…I don’t know how FEMA would work in Cuba.
How does Puerto Rico (currently a US commonwealth) fit into that extra states equation?
As a sidenote, I never really knew much about Cuba until I moved to Florida. One of the hurricanes earlier this year weakened over Cuba’s mountains. You should do a google image search, they’re amazing.
I always pictured Habana and whatnot.
We have enough parasites sucking off this country already. We don’t need a bunch of pauper communists to add to our burdens. We should not allow the ones that make it across the water now to stay here. They all should have been shipped back.
You must remember when Castro took over many left, but MANY stayed behind for the new government hand-outs that we coming. They supported Castro. It just hasn’t worked out too well. They will be a tremendous drain on our country and a criminal nuisance. We already have that problem with the Mexican/Guatamalan gangs.
Obviously, you do not know any Cubans.
It was a civil war, the guys in Miami lost and bought the city.
The ones in Cuba have no interest in being part of the US.
The ones that arrived pre 1980 are more highly educated than 90% of the US (which is not a great achievement)
“The ones that arrived pre 1980 are more highly educated than 90% of the US”
You couldn’t tell that by Martinez. Seriously, though, having been brought up as a Catholic in the Northeast and having lived in Miami for 20 years, I’ve been around Americans of Cuban extraction most of my life and always had a high regard. They did pretty well in Miami, lots of fun, great intellect, many professionals and craftsmen and women who took pride in their work.
I’m not so sure, however, that Cuba wouldn’t want to be part of the US. The choices are Russia, China, Venezuela otherwise. If I’m in the political heirarchy in Cuba, I’m thinking the US might be the best bet. Russia didn’t work out so well the last time. We could use the doctors and engineers. The lawyers, not so much.
The USA learned a painful lesson when we screwed up and allowed all the Cuban refugees to live in Fla., as it messed up the political dynamic.
I don’t think the screw up was leaving most Cuban refugees to live in FL (Miami/Dade, specifically), it was allowing them to gather political stature for themselves that’s entirely disproportionate to their numbers — they have national influence in politics and policy, not just the local or regional influence one would expect with such a high concentration of a single demographic.
It appears to be the general policy to spreading any set of refugees out among the states. Do you have any idea how well Sudanese refugees blend into Vermont?
I can’t imagine what it would be like to be brought from a war torn on the verge of desert country to live in a small city (in a rural state), among lily white people whose language (and religion) is completely different, and that has snow for 6 months of the year. I’d imagine I’d blend in about as well as in Sudan.
allowed all the Cuban refugees to live in Fla
LOL - I think the country they left had laws on where people could and couldn’t live.
Yeah, but I hear Jebby might run for his seat.
Oh, sheesh, ed (palmster smacks side of head) this makes perfect sense. I didn’t even think of it. OTOH, I think Jeb wants his crack at the White House. He was supposed to be the Prez, but as they said, they had to go with the Bush they had, not the one they wanted. But, hmm, I guess the game plan is to get elected to the Senate and then start campaigning for prexy.
Thanks for the heads-up. Gotta get busy.
The sad thing for Martinez is that his true aspiration was to be governator of Florida. But he owed a favor to shrub and rove, who pretty much coerced him to go for the Senate seat. His Senate campaign was in the finest Rovian tradition. Even Jeb was pissed when the Martinez campaign sent out some pretty nasty smears on McCollum (current Florida AG, really clueless), on account of McCollum and Jeb are buddies. Jeb hated like hell to sacrifice a buddy to his ‘bro, but blood is thicker than water. I think a deal was cut where Martinez was promised a crack at governor if he’d go along with the Senate thing. So maybe that’s in the works, too. So I guess Jeb said to Martinez, “Shove over, it’s my turn”.
OK, the Palmster puts it all together: Jeb becomes Senator and pulls an Obama and runs for Prez. For his loyal boot-licking, Martinez gets to be Governor of Florida. It never ends, the two branches of the same party passing power back and forth.
But if that were the upcoming planned scenario, if I were martinez, I would be very careful as it could turn out ala
‘KatherineHarris-like’. As in you took care of us, but now we don’t even recognize you, sorry. buhbye.
Mel (free amnesty for illegal aliens) Martinez has lost any hope of getting anywhere. 80% of Americans were against Amnesty and Martinez sponsored the bill.
I, like most others, wanted him REMOVED from office.
I would like to see him sent by to Cuba, also.
That is where he belongs.
OFHEO home price data for Q3 is out. I posted some observations yesterday though late, so reposting this morning:
- Charlotte, where prices had been climbing steadily albeit slowly all along, took a rather abrupt turn downward. Being that it’s the 2nd largest banking center in the U.S. (e.g. headquarters of Wachovia), that makes sense.
- Merced continues its drastic plummet (fastest of all areas) - prices have fallen 32% there in just the last 6 months. Ouch.
- Other areas that hadn’t been considered bubbles at all, since prices didn’t rise significantly above inflation - e.g. Atlanta and St. Louis, now are also seeing significantly falling prices. Many on here have predicted fallout to non-bubble areas. That prediction is now proving true.
- Poor Seattle - the last big bubble holdout - is finally succumbing. Prices are now falling at about 8% annual rate, with the rate of fall increasing rapidly - same as has happened to all bubble areas, generally falling at 20-40% annually now since they’re further along the curve.
- The average for all of the U.S. areas is now falling faster on the back end of the bubble, than it rose on the front end. This is true even in non-inflation-adjusted terms.
Thus the bubble is bursting faster than it inflated, by a fair amount. This, combined with the fact that some of the most bubbly areas (CA central valley, FL west coast) are already diving below their inflation-adjusted “normal” indexes, or are obviously going to dive below them within the next couple of quarters, indicates to me that the U.S. overall will be overshooting our home prices on the downside.
This is also supported by the census data indicating that we have yet to make a dent in the overhanging inventory - it remains at peak levels, despite the now-record-low level of new homebuilding. Obviously this is due to foreclosures. This data indicates that home price declines will continue at their current rate for probably 12-18 more months, before slowing the rate of decline.
End conclusion is - we are still in the very early stages of this downturn. While the housing downturn may not get worse in terms of the rate of price declines - it will get a lot worse still in terms of actual prices, and therefore in terms of the number of underwater mortgage holders. Thus I think the bulk of the pain with regards to revenue and profit losses, job losses, and consumer spending is still ahead of us.
“- Charlotte, where prices had been climbing steadily albeit slowly all along, took a rather abrupt turn downward. Being that it’s the 2nd largest banking center in the U.S. (e.g. headquarters of Wachovia), that makes sense.”
Being that they have vastly overbuilt McMansions the pain will be immense. This is a disaster waiting to happen. They built for 20 years of rich Yankee demand.
Repeat after me. “The hip bone’s connected to the red thing. The red thing’s connected to my wrist watch. Oh, oh.” It’s all intertwined and it’s all coming undone.
What about Dallas?
Dallas is actually one area that has not been a bubble area - even less of a rise than Atlanta, Charlotte, etc. While Dallas is not yet declining, it too is seeing a significant slowing of price rises at least. It had been rising quite consistently at about 4% per year, however the past two quarters have been ramping down - this past quarter there was pretty much no rise:
2006 3 159.51
2006 4 161.27
2007 1 162.14
2007 2 165.69
2007 3 165.09
2007 4 167.09
2008 1 168.84
2008 2 169.26
2008 3 169.30
packman, where did you get that Dallas data?
Will post a link, and presumably will take a little while to show up…
http://www.ofheo.gov/hpi_download.aspx
thanks.
Dallas is a huge city and has plenty of bubbly areas and way too many $1 million condos.
“however the past two quarters have been ramping down - this past quarter there was pretty much no rise”
Looks to me like a decline—-in “real” rather than “nominal” terms.
Oops - sorry guess this is a repost. It takes so dang long for some of these posts to show up.
How large has the debt consolidation industry become?
Hypothesis:
One of the many reasons banks aren’t lending is that they became hugely MORE risk averse during the bubble. They became used to a business model where they made loans and either sold them (avoiding all risk) or didn’t have to worry about ability to pay because of the increasing value of the underlying asset or business (thinking they were avoiding all risk when they weren’t). Now that the first is much harder and the illusion of the second is gone, they simply have no idea how to do their jobs. No idea how to assess risk (to be honest, when you have no idea how bad the recession is going to get, this is a difficult task) and no guts to take on any real risk when they didn’t have to do it over the last few years.
Discuss?
Debt securitization shut down = banks have to directly face the consequences of their underwriting decisions
Some banks, maybe. Some, not so much. For example, Lehman yes, Goldman Paulson, no. Not that they’re “banks” in the true sense of the word. Honestly, if Goldman became a “bank” with branches and checking accounts, would you put your money there? I wouldn’t.
PB,
The debt securitization is not shut down. The US Treasury is a buyer. And the kind folks in Washington announced that it was buying $500B in agency securities next quarter.
Hoz,
What are they planning to do with the debt their buying? Will they just hold onto it and collect payments?
Ditto.
And what about Freddie and Fannie? They still are buying “conforming” loans, aren’t they? I bet you that a loan that qualifies as a “conforming” today will be looked as an insanity risk taking a couple of years from now.
The only thing that changed in the game for the banks, from housing perspective, is that now the risk is transferred to the taxpayer, rather than to the investor in the past.
Fair enough. I should have said “private securitization.” We shall have to see how well government investment with newly printed money serves as a substitute.
If the banks are required to hold onto these loan then they will be very picky about who they lend too. If on the other hand they bundle loans up and sell them, then the bundle will be scrutinized very closely. The third maybe if the government steps in an insure all loans. The latter is the most likely. I don’t know what will happen I am just an average guy making a guess.
“Discuss?”
That may be true, they’re pretty much hoarding the cash they got, making a financial transaction here and there for some profit, etc. LOL! They’re finding out they don’t HAVE to lend to make money. Why bother with taking deposits and having bank branches and tellers and stuff? Just threaten the economy with collapse, force the taxpayers to take out a loan through Treasury and hand over the loot and voila! Life is good.
Now, about shutting down those pesky bank branches…
“That may be true, they’re pretty much hoarding the cash”
By “hoarding” do you mean “saving”? Be careful how you use these terms. There is a reason they are calling it “hoarding”. They want the war on “savers” to escalate. First step is to define savers as hoarders and make them look like the real problem. I would help the people on this blog wouldn’t buy into this “hoarding” bulls–t but it remains to be seen.
Sigh. OK, “squatting”. Jeez, man, lighten up fer Chrissakes.
I mean “squatting on the cash”. Oh, and Merry freakin’ CHRISTMAS!
Palmy, I am not trying to flame you but the hoarding thing is really sick. The use of these terms are definitely meant to pass along a sick message. It is clear to me that it is working. I just want to make sure that we don’t fall into that trap. Thank you for the Christmas wishes.
You’re welcome. And may your and yours never be “food-insecure”.
I get where you’re coming from.
Hoarding Hoarding…I remember during the iran hostage crisis, when gas prices spiked and was a shortage, there was a short lived try to stop people from hoarding gas, by saying if everyone drove with less then 1/2 tank, gas would become available to everyone and prices would come down.
In a 1980’s civil defense survey ( to see how far Clevelanders could get out of town) it was found that the average Cleveland car contained less than 3 gallons of gas. They gave up on their plans to evacuate everybody to the boonies in times of peril. I recall that all the pols and gmint workers were to go to a stocked bunker in Wooster Ohio. My family was directed to a farm field in Lima. We were instructed to bring doors ( to act as roofs over the trenches). That was the year I purchased a very nice gun.
I’m quite comfortable with the word hoard. I’m out to hoard as much cash as I can. Cash is king.
And notice how they call it “hoarding” with the banks, as if it is a bad thing that banks are being prudent. It’s amazing. The system is broken.
Combo, just wait until your neighbors stop by with pitchforks and blowtorches to light up your hoarding a$$.
Combo, just wait until your neighbors stop by with pitchforks and blowtorches to light up your hoarding a$$.
The image of an angry mob with blowtorches (as opposed to large flaming sticks a la Frankenstein) made me laugh — I picture a bunch of unemployed pastry chefs with their little creme brulee torches, demanding cash.
I’m going back to costco to pick up more hoarding supplies. cocoa, water, frozen.
Buying a years worth of food is no easy task.
As a matter of fact it will be funny to say, “remember when we stockpiled back in 08?”
NYCityBoy,
Noticed that myself. A local Doc went down to our local bank to draw out $30k for a new car and was told they could give him $5k and he’d have to come back for the balance over the next few days ( September )
And here all these years we thought banks was where the money was ‘kept’? Sadly what most ‘banks’ became was “loan processing centers”.
A local Doc went down to our local bank to draw out $30k for a new car and was told they could give him $5k and he’d have to come back for the balance over the next few days ( September )
If my bank told me that, I’d flip and start my own run on that bank. $30K should be nothing for the average bank if the funds were settled into their account.
A local Doc went down to our local bank to draw out $30k for a new car and was told they could give him $5k and he’d have to come back for the balance
This is crap. Who goes to a bank and withdraws $30K in cash to buy a car? If you have cash in a bank and want to buy a car with it, you get a bank check for the amount you need… the dealers take them, same as cash.
True, most banks don’t have more than $100,000 in cash at any given time to hand out at the counter. In today’s world there is very little need for actual cash.
This is crap. Who goes to a bank and withdraws $30K in cash to buy a car?
That would make more sense if the bank said no. I thought it was more he wanted a certified check to bring to the dealership and was denied.
Big Brother doesn’t want you to have very much cash (currency). Try buying an airline ticket with cash and the airline will report you to the feds. Try renting a car or paying for your motel room using cash and not producing a credit card.
“First step is to define savers as hoarders and make them look like the real problem.”
I’m with you on this one. That’s the 1984 newspeak method we’ve all come to know and (not) love. Re-definition of terms in order to impart a pejorative connotation.
My latest hoot is “food-insecure”. WTF? What did they used to call it? Poor and hungry?
Food insecure is not all that weird. It means “not actually hungry right now, but no idea where tomorrow’s (or next week’s) meals are going to come from.” It makes a lot more sense when you are talking about people scratching out a living on marginal land in third world countries than it does in countries with a significant social saftey net and where most people have enough money to eat if they made buying food the first priority (may choose to make mortgage/electricity/phone bill top priority), but it is possible here too. They could have used “poor, not yet hungry, but at serious at risk of becoming hungry in the near future” but “food insecure” is a bit more efficient.
Sounds like an engineered phrase to me. Never heard it until recently. “Poor” is what I’m used to. Many “poor” don’t know where their next meal is coming from. I’ve been poor. I can tell you it is possible in this country.
Not so much an engineered phrase as an academic one (from public health) that has been adopted by the media and poverty advocates. And I didn’t say that you couldn’t be hungry in this country, but in the US it is more likely to be “hungry because I had to pay the oil bill or they would cut off my heat” or “hungry because I had to buy medicine and that is all the money I had” or “hungry because I had to buy gas for the car or I couldn’t get to work and then I’d be jobless, homeless and hungry” than “hungry because I have absolutely no food and no money and no way to get any at all from anywhere.”
While I don’t disagree with your overall comment, I would say that if we look at the bailout money specifically given to banks for them to lend out, then keeping that IS hoarding as it was never meant to be saved.
Interesting and timely comment.
Mr. Bergstrom of the Bergstrom automotive group (they own about 25 dealerships in the midwest) was on CNBC this morning saying this exact thing, that people were hoarding and that they needed to get out and spend money, particularly on cars and that they were “unpatriotic” if they continued to save… he intimated that is our duty to save the auto industry by purchasing their products…
It was surreal…
mdsn
I would like Mr. Bergstrom to know that people like him are the reason I ride a bike to work even in freezing weather. It’s not to save the environment, I’m charging at windmills here, but thoroughly enjoy doing my little part to BK the likes of Mr. Bergstrom.
edgewaterjohn,
Being a native Chicagoan myself ( the “environment” has never been ‘that’ big a deal to me? ) but I still walk the block to work and don’t own a car. On those rare instances where I can’t work over the phone I make arrangements to have a car for outside appointments.
Good for you btw!
Mr. B also suggested that the government hand out $5,000 rebates per vehicle to stimulate auto buying, matched by another $5,000 from the manufacturer. The cars are fine, the choice is great, just the stupid consumer pulling back….
“First step is to define savers as hoarders and make them look like the real problem.”
Reminds me of the church service I attended years ago, where the pastor was chastising those who “hoard cash” instead of giving it to the church. I was the church treasurer at the time and had a REALLY hard time biting my tongue during that sermon.
But, boy, knowing (and handling) the financial details of that particular church certainly gave me an education.
No, I don’t attend church anymore.
Try not to let one bad apple (or church) spoil the rest of the bushel as it were, Molly.
Was the pastor just trying to get people to tithe, or give above and beyond the tithe?? Just curious.
Tithewads, don’t they know that religion isn’t free?
You’re right, Blano. By the time we left that church, we were so turned off by the dishonesty and backbiting that it made us really, really hesitant to attend another church (regularly). We’re still working on it.
That pastor was bitter and frustrated because the membership plummeted from 80 members to 28 in three years. Of course, the collection plates reflected this drop. And this was during the housing bubble boom times.
Interesting take, NYCityBoy. It is true that “hoarders” were demonized during the GD-I.
Home prices falling. Unemployment rising. Growth opportunities shrinking. Regulations tightening. In sum, pain increasing.
I’ve decided not to be politically correct this holiday season, so I’ll be wishing people a “Merry Christmas”. Merry freakin’ Christmas, HBBers!
Merry Christmas to you, too!
Thank you!
Thank you Palm, and a Blessed Christmas to you too.
A Blessed, Merry Christmas to you and yours!
Yeah, screw season’s greetings, let’s go back to merry kiss my ass.
This whole PC crap:
Next they will tell people to turn in neighbors who are hoarding.
My wife and I noticed on the news last night that they were lighting the “Holiday Tree” in Chicago. Holiday tree? What crap. I’m an atheist, and I’m gonna call it a Christmas tree. Hell, Christmas trees have nothing to do with Christianity anyway, so it’s not a separation of church-and-state thing.
I hope they don’t start calling that candle-thing the”holiday menorah”…
“Hell, Christmas trees have nothing to do with Christianity anyway, so it’s not a separation of church-and-state thing.”
What the h-e-double-hockey-sticks are you talking about??? Don’t you know that sweet baby Jeebus was born under a Christmas Tree???
You’ll get a “Very Merry Christmas” right back from me too!
I had it with political correctness when my daughters daycare shunned costumes this Halloween in favor of “pajama day” so as not to “offend anyone”. I gave my daughter the choice, and she showed up in school in costume.
Outrageous. Who would be offended and why? Wiccans? I doubt if Wiccans care.
“Who would be offended and why?”
I’m still asking myself that question. I guess are a handful of people who fret about “The Devil’s Holiday”, but I’m talking about a preschool here. In their little world, its about candy and costumes, nothing more.
“…I’m talking about a preschool here. In their little world, its about candy and costumes, nothing more.”
Um, I’m pretty old and Halloween means candy and costumes to me too. And I have the cavities to prove it.
People choose to get offended over the silliest things these days.
offended? why the nutball faux “christians” of course. ‘They’ have a real problem with something akin to pagan rituals. But no one sees it as that at all. Just them.
Meanwhilst they are practicing pagan inspired rituals daily.
A myth doesn’t have to be real to be true.
Just do what I do: Instead of Merry Christmas, wish everyone a happy feast of Saturnalia - the original holiday co-opted by the pope and turned into Christmas. that’s where the whole tree thing comes from in the first place.
Funny how 99% of christians engage in pagan rituals without realizing it….
Don’t get me started on the pagan fertility rite of spring that we call an easter egg hunt these days.
I decided that I’d be wishing everyone a Merry Christmas too about a year or so ago. It gets old not being able to have your own traditions for fear of offending that 1 person or minority member. Life itself turns at that point turns into Wonderbread: soft, gushy, and flavorless.
I sincerely hope that anyone from a non-Christian tradition would understand the spirit the greeting is meant in and return the favor on their high holidays.
So Merry Christmas, Palmetto and Kim!
Merry Christmas to you too!
I struggled a bit with the decision to make Christmas Stockings with my preschool classes (three different groups of kids) this week. I finally decided to go for it, so far so good. I have an Indian girl in one of the classes and her mother loved the stocking her daughter made with me.
There are only so many projects one can do involving purple snowflakes. Last year a parent in my son’s first grade class objected to the blue and white ones they did, claiming they were Chanukah’s colors. The kids don’t care as long as it involves glitter.
I’ve decided not to be politically correct this holiday season so I’ll be wishing people
“Merry Xmas and Happy last consumer orgy”
Amen. And may God be with you.
And also with you!
I love that part, because that always meant it’s time to go home!
LOL +1
LOL!!!!!
Isn’t it amazing how the place becomes so much more lively as he says, “Mass has ended. Go in peace.”
I thought it was “Merry Christmas, and may Allah be with you.”
And a happy solstice to you!
Merry Christmas, Palmy!
Dutch housing bubble finally bursting?
Today realtor organisation NVM says they expect a 5% decline for Dutch homeprices in 2009. Although their expectation is quite a change from last week (= stable prices during 2009), it is extremely optimistic considering the prior runup in prices. I’m sure they will have to adjust their projections sooner or later.
The number of homes that goes on sale with realtors is dropping strongly. The realtors say this is because most homeowners want to wait for better times, they think that if they try to sell now they may not get what the home is really worth (duh …). I guess another factor is that the realtors are no longer interested in customers that cling to unrealistic wishing prices; the inventory for sale is at an all time high.
On another note, the Dutch government is reporting its first severe budget cracks as a result of declining oil prices, which caused gains on natural gas (major income source for Netherlands) to plummet. Totally unexpected of course; there will be many more nasty surprises soon. When there are a few more of those, government will have to cut the 30 billion a year in homeowner subsidies and the real decline in Dutch homeprices will start. Should be quite a sight, my estimate is that a 75-85% price decline is necessary to get back to the trendline (and some overshoot seems likely).
Wow, that is a mouthful if the Dutch bubble is actually bursting. They just did one up on tulips in the last 20 years.
Perhaps if they put tulips in all the window boxes of all the houses it would help support prices indefinitely.
The same for Bulgaria. The country held first place in the world for RE appreciation in 2007 and second place (after Latvia) for 2006. But for the last quarter the sells are down 18%. Anecdotally in the capital Sofia they are down more than 50%, and the price drops on some condos are more than 50%.
“The realtors say this is because most homeowners want to wait for better times, they think that if they try to sell now they may not get what the home is really worth.”
There is no comment to this as the words speak for themselves. Just wanted to highlight it for this who may have missed it.
Okay, I do have one comment: it’s obvious the sellers already DON’T get what the home is really worth.
one word: denial
‘Consumer prices in October fell at the fastest pace in more than 60 years, sucked down by the rapidly deteriorating economy. The prices of oil, food, cars, clothing and electronics have all plunged. Home prices continue to swoon and so do stock prices.’
‘At least in the short term, deflation is inevitable, says Mihir Worah, portfolio manager of the Pimco Real Return fund. “Part of it is already baked in the cake, given the fall in commodity prices,” Worah says.’
http://www.usatoday.com/news/nation/2008-12-02-deflation-bargains-recession_N.htm
This is a good thing, IMO. I’m all for deflation, it is very healthy. I don’t understand the inflationistas.
sure, I’m all for deflation as well but I don’t see much proof for it in Europe. Up to now I only see some bubbles bursting - and a surging money supply.
I think it is all really a deflation scare (especially when scamsters from Pimco etc. mention the subject).
“I think it is all really a deflation scare”
I completely agree. “Deflation” is another one of those things that must be demonized, because it doesn’t fit the model.
Deflation sucks for people who already own stuff and might need to exchange it for cash.
If you own really expensive stuff like houses, land, industrial equipment.. gold bars.. that you might use as collateral for a loan, deflation means you can’t borrow as much as you could previously. And, of course you can’t sell the stuff for as much as you could prior to deflation.
I don’t understand the inflationistas.
Take out a loan for 20x income and then think about it again.
+ 1+19This is a good thing, IMO. I’m all for deflation, it is very healthy. I don’t understand the inflationistas.
Our financial system is biased to inflation. Because every dollar in print exists elsewhere as debt earning interest the currency needs to be devalued slowly for the system to keep functioning properly. The system can tolerate a fair amount of inflation. But, because at some level everything is leveraged, deflation can spiral out of control very quickly. That’s the inflationista case as I understand it.
It’s an argument that I follow, but that said I prefer deflation. I dislike our present monetary system and have little vested interest in it continuing as is.
At this point I am planning for a Japanese-style grind / deflation.
I would like to learn more about disinflation (WMBZ? Hoz? who keeps saying it?).
Disinflation is just a decrease in the rate of inflation. If inflation was 5% and is now 3%, it’s disinflation. Prices are still rising but at a lesser rate.
The balloon (price) continues to gain altitude and has not lost altitude.. (losing altitude is decending = deflation).
It refers to price-inflation and not to traditional money-supply inflation, the distinction between which is necessitated by the widely popular misuse of the word inflation.
yes, wake me up when inflation numbers go consistently negative, that would be real deflation. Zero chance IMHO.
How to avoid the horrors of ’stag- deflation’
By Nouriel Roubini
Published: December 3 2008
“…Further slack in commodity markets as prices fall will lead to sharply lower inflation. Thus inflation in advanced economies will fall towards the 1 per cent level that leads to concerns about deflation….”
http://www.ft.com/cms/s/0/91f008e4-c0dc-11dd-b0a8-000077b07658.html
That is disinflation, a slowing of the rate of inflation. And as for PIMCO, they are selling US Treasuries and buying other government guaranteed debt including FDIC 3 yr debt (avg current yield 2.93%) as well as maintaining a strong position in agency debt.
We will all see next week what the tail is on the Treasury auction of 10s and 3s being sold.
Jas.
Did the Fed plan on deflation, or was this accidental?
We of the social security generation will be getting a 5.8% “raise” come January. If deflation persists through much of 2009, will the Obama govt try to take some of that back the following year?
Bill ….I think they underestimated SS increases from 2004 to 2007 ,but as you must know every time SS gets a increase the
Medical industry raises rates accordingly to get the excess . I think I have read in the last 10 years that medical expenses has gone up 60% . Will the Medical industry drop prices accordingly with deflation ? Will the home insurance industry drop prices with deflation in line with reduced rebuilding prices ? Wheat has gone down 60% in the last couple of months ,so will that be reflected in lower food prices along with the cheaper gas ?
I’d sell my SS annuity due in 15 years, awfully reasonable.
Make offer.
Wizard, SS increases in ‘04 through ‘07 were significantly below the true inflation rate. The gubmint has been cooking the inflation books for quite a while, with one goal being to limit “entitlement” payment increases.
I just think it’s ironic the big increase comes now, at the beginning of a period of flattening prices and a bit of deflation.
I don’t see humungous deflation as long as the gubmint continues to have paper, ink and printing presses.
COLA for SS is 3rd Q to 3rd Q, so the December 2008 adjustment of 5.8% doesn’t include the recent energy and other deflationary pressures that really picked up this Quarter. It is based on the Urban Wage/ Clerical Workers CPI change and I don’t think it can go negative. Historically it averages around 3.0% but has been as low as 1.3% or so. This year is a major outlier/deviation.
They threw a bone at the older crowd ,but as you said in the last 5 or 6 years actually the increases have been a killer for Seniors regarding real costs . Inflation could of been part of the reason why some Seniors went on crazy adjustable loans
when they already paid off their homes ,or should of .
I’m sure the Government will continue to cook the books if we go into a inflation cycle in the near future . You would think with all the entitlement programs in the future the Government would consider the inflation cycle they are sitting up and how it will affect Entitlement programs and increase those costs . I guess in the final analysis ,Seniors should be happy they are getting anything ,especially if you look at what happened in the Great Depression . I guess families took care of the older people ,but also they didn’t live as long in those days either . I would imagine that health care was a luxury that only the rich could afford during the
Great Depression decade .
A couple of friends of mine told me that their family members have lost a ton of money in the stock market and one brother of a friend said he will have to work at least 5 more years to make up for a 67 thousand dollar loss .
Blue Cross still has their hand out. My premium is going up from $328/month to $407/month in January 2009.
DennisN
I canceled Blue Cross after having an Attorney coach me on getting an emergency claim paid. I was fierce and smart.
Kaiser HMO $800/mo (2 healthy adults) going to $900/mo my guessitamation from word on the street.
Our healthcare system is broken and expensive. I can relate to your post. Too bad we’re not illegals (i.e. free).
the FED planned for the biggest deflation scare in history, so they can get away with the biggest money supply inflation of all time.
Yes!
We’re three years away from the housing bubble peak (Aug, 2005), anyone see the trough yet? On a separate note, big Sis and beloved hubby capitulated, they are walking away from the 2 alligators. There will be consequences of course. However and more importantly, it probably means 2009 is the time to buy.
Different places are at different points in the cycle. I won’t be the time to buy in NYC in 2009 unless things go down very fast here. We still have to go through the phase in which people “can’t” sell and banks “can’t” sell to get to the phase where the losses can’t be ignored and sales happen anyway.
Sales in the northeast continued to evaporate but I don’t see any full scale capitulation yet. Not in a way that the pacific northwest appears on the verge of. I do hear of individual cases of severe declines due to divorce but nothing widespread.
“Different places are at different points in the cycle. ”
This is _key_ to remember. Seattle only peaked last summer. We are only one year in, and most participants are still deep in denial.
I do think the places that peaked later will fall harder and faster to catch up, if only because the ebbing away of confidence is occuring much faster since the national/global news and credit conditions are much worse.
“anyone see the trough yet?”
I wish I had saved the graphic that was produced in 2005 by either Mish (Mike Shedlock) or Charles Hugh Smith. It was based on the Japanese bubble. Eight years to bottom, if I recall, with a sucker rally about 2-3 years in to the decline. Of course, the process could be speeded up by the internet, which wasn’t as prevalent when Japan has its day in the barrel.
Ireland bubble update:
Irish unemployment is now at its highest level in ten years (7.8%, expected to increase to 9% next year - don’t take those EU numbers at face value, just the same nonsense as BLS stuff). Good for them, now they can spend even more time flipping homes
“Irish unemployment is now at its highest level in ten years”
Come one, come all. The US is handing out free money.
Actually the Irish are moving in droves to Australia where they will keep on building houses, because everyone wants to live in Australia and everyone knows that the Chinese will keep on buying Australian commodities forever.
I think Ellis Island is closed now.
So is Angel Island in SF bay.
Many Americans still see real estate as their best shot at wealth. In survey after survey, people expect prices to bounce back — in some cases, as soon as six months from now.
slow learners
Is this from a news story? Link?
Because my firsthand observations absolutely correlate with your statement - but I’d love to see some stats on it too.
The peeps are flat out pinning everything on a V-shaped recovery in house prices. Every single local real estate ad and story I read exposes this. Even friends, family and coworkers are certain this is as bad as it will get…and as long as it will last.
“Even friends, family and coworkers are certain this is as bad as it will get…and as long as it will last.”
I’ve heard this all year long. However, I don’t know anyone who is putting their money where their mouth is - by buying. Our area is seeing half the sales it did last year (unfortunately the prices aren’t down by much). “Slow learners” is right.
One example: DH’s coworker sold his condo in Chicago… and is moving into a rental.
The peeps are flat out pinning everything on a V-shaped recovery in house prices.
I know. My in-laws are coming in 4 days and I’m really,really, really hoping to avoid a real estate discussion.
v-shaped as in ‘time the bottom’ and pile in. People are still snowed into thinking there’s going to be some kind of timing involved, that there will be some double-digit y-o-y % gains to be had again. I can’t see an immediate future where the price of real estate goes up again. Can anyone?
There’s always a chance of a short-term dead-cat-bounce rally—-which will pull the suckers off the sidelines just in time for the real carnage.
Will it happen? Can’t say… But I would not ignore the possibility. My personal expectation is for a low, wide bottom, so I’m in no hurry to get in even if things start going up for a bit.
Are you kiddin’ me? Embrace your inner beast.
There has never been a better time to nail it in!
“Even friends, family and coworkers are certain this is as bad as it will get…and as long as it will last.”
I am not so sure they are certain in the V shape theory, rather than pretending to be. IMO they are casualties of “think positive and everything will be fine” strategy.
The Future for Home Prices
by James R. Hagerty
Tuesday, December 2, 2008
provided by
wsjlogo.gif
Over the past few years, Americans have had a brutal lesson in the risks of real estate. House prices have crashed more than 35% in some parts of the country, millions of people are losing their homes to foreclosure, and banks are failing.
The takeaway? Many Americans still see real estate as their best shot at wealth. In survey after survey, people expect prices to bounce back — in some cases, as soon as six months from now.
http://finance.yahoo.com/real-estate/article/106238/The-Future-for-Home-Prices;_ylt=AuypeXfDutvJ8cppWT_b9Hq7YWsA
Thanks!
That’s what I’m counting on. Are you saying they won’t?
Oh, dear God! I hope you’re wrong.
I’ve got a HELOC and an adjustable loan due to re-set.
I need prices to go up, up and away……………
“slow learners”
a.k.a. “People are stupid.”
It’s just people reacting like Pavlov’s dogs.
They’ve been conditioned to believe that real estate always goes up. Since the early 70’s, it’s gone up at a pretty good clip, in sudden rallies. It flattens out, but spikes up. In most people’s minds, that’s a long experience.
They forget real estate has been around a lot longer. And for some reason, regression to the mean is a very powerful force in nature.
But most folks can’t see beyond the past few months. And when something good happens, they are wired to keep expecting that good thing.
It will take a while for the J6P to disabuse himself of the value of the real estate ponzi scheme. The music has stopped. The politicians are doing their best to beggar our great-grandchildren in trying to reinflate the bubble. I’m kind of skeptical that they’ll have long term success.
Perhaps the slow learners are on this blog, as it appears the Fed and Treasury are beginning a REIC version of the Tet offensive to respike the housing market punch bowl.
It’s arbitration time in Major League Baseball, and surprise-surprise…
Many players aren’t being offered it, as in go find another team.
But most teams are still spending like drunken sailors~
The Angels have a pitcher named Jon Garland that went 14-8 last year that got paid $12 Million for his efforts, and he was offered arbitration.
To put things in perspective about how overpaid pro athletes are:
In 1966 Sandy Koufax and Don Drysdale held out for 3 year contracts of $167k per, were turned down by the Dodgers and ended up settling for $125k and $110k for one-year contracts.
Jon Garland is no Sandy Koufax.
Pro sports. Now THERE’S a bubble. BTW, I hear Bloomberg got up on his hind legs and demanded that they throw the book at Plaxico Burress.
Jon Garland is no Sandy Koufax.
He’s no Mike Mussina, let alone a Sandy Koufax.
The salary appreciation is really apparent when you put it in context with a few Hall of Famers from the modern era.
Baseball is a lot different than it used to be.
Heck, the Mets are getting $400 million over 20 years just for the naming rights to their stadium.
Only if Citi is still around
I am a big Mets fan….
I predict deep depreciation of stadium naming-rights.
Enron Field in Houston,
CMGI Stadium in New England,
Adelphia Stadium in Nashville,
PsiNet Stadium in Baltimore,
I’m sure there are several others - companies that don’t do so well over the long term with stadium naming right deals.
This then is the endgame for the global imbalances. On the one hand are the surplus countries. On the other are these huge fiscal deficits. So deficits aimed at sustaining demand will be piled on top of the fiscal costs of rescuing banking systems bankrupted in the rush to finance excess spending by uncreditworthy households via securitised lending against overpriced houses.
This is not a durable solution to the challenge of sustaining global demand. Sooner or later – sooner in the case of the UK, later in the case of the US – willingness to absorb government paper and the liabilities of central banks will reach a limit. At that point crisis will come….
Wolf — FT
“At that point crisis will come….”
And at that point, the system is scrapped and board re-set. As Ben has often stated, there’s no way the US will EVER pay back those trillions. It’s a joke. Let’s just be sure we have all that alternative energy up and running.
Yup. Ben hypothesized last week, that the Fed can simply move all of the US bubble losses (MBSs, CDOs, etc, etc) to it’s side of the balance sheet ( implying that they can then silently write them off.)
That would work if the US economy functioned in a vacuum. Alas, there is a silent war going on right now. It’s now central bank VS. central bank in a desperate attempt to prop up their individual bubbles while keeping their currency from being dumped in the global market (sure thats a highly simplistic analysis).
Once that war ends, then I’m afraid real blood will start spilling.
“It’s now central bank VS. central bank in a desperate attempt to prop up their individual bubbles while keeping their currency from being dumped in the global market (sure thats a highly simplistic analysis).”
Does this explain the rise of the dollar? Also decoupling is a myth. If we default on our Treasury obligations to China what happens????? Do they invade, I don’ think so. We’ve already seen their economy is closely tied to the US and Eurozone so do they really want to crash that party? Oil rich countries are also seeing that unfold. The rules are the rules until they aren’t, so who is going to take their ball and go home first? Can any country really afford to do so? Even when they all started moving/diversifying into Gold that didn’t work out for them recently either. Just my 2 cents…
If we default on our Treasury obligations to China what happens????? Do they invade, I don’ think so.
What’s to stop China from invading Alaska if we default on our debt obligations? Our military? Our nukes?
We won’t use nukes in a conventional war if the other side has nukes… MAD is still in effect. We can’t win a conventional war against China as we just don’t have the manpower, and our technological advantages are getting slimmer by the year.
As an aside, I’ve been playing Fallout 3 lately and the story takes place 200 years after a nuclear war with China, which started as a conventional war when China invaded Alaska, arguably for the natural resources. For those into video games, it’s easily the finest game of the year and well worth the money.
Why would China invade Alaska when there are much more attractive and less powerful than USA countries to invade, such as Australia or any of the Middle Eastern countries?
Sarah Palin is stopping them from invading Alaska!!!!
Sorry to say but my guess is our Nukes will stop any potential invasion. There is no way any (rational) country would risk that. I don’t think we would draw the line at a distinction between conventional and nuclear options if its the US of A being invaded, esp. if our leaders think we could lose. That sounds like a great video game, but not sure its even close to reality.
The bottom line is that if we default, the rules will have to change, sort of a reboot for the world economy, especially if the US is the main broken link. Nobody really has any effective recourse to get paid on our debt.
Well, let’s hope the game has no basis in reality… so far I’ve spent hours fighting with cannibal Raiders of the Road Warrior persuasion, psychotic killer Robots, mutants the size (and demeanor) of the Hulk packing chain guns, mutated killer bugs of all sorts, and my favorite: feral Gouls (like zombies, but faster)…
On a related note, housing in the game is real cheap… basically free if you can stand the elevated radiation, psychotic-killer neighbors, and goulish home owners associations. Every time I decorate the place, the HOA comes around screaming “Brains!”… I just don’t get it.
Fallout 3
If anyone has to worry about China invading anything, it’s Russia. A move into Central Asia/Siberia makes a lot of sense, if access to resources becomes an issue.
At this point, anything China might do to “punish” us would do as much damage to their economy as it would us.
China can’t/won’t invade Taiwan and you’re worried about Alaska? I’d think that the number of troops they’d have to mass (in the ocean?) in order to pull something like that off would make their intentions very obvious to us.
Nothing to see here folks…
China can’t/won’t invade Taiwan and you’re worried about Alaska?
Not worried about it at all. Just making the point that if China wanted Alaska, it could take it. Our troops are spread thin and our equipment is in shambles from six years of war. It will take years to rebuild our military strength.
The Chinese loan us the money for our military adventures overseas. If that were to stop, how would we afford to fight them? Raise war bonds from US savings like WWII? The American people are dead broke.
China has nukes. We have nukes. In a conventional war, no one will use nukes for fear of escalation. China has a tremendously large military. Numbers count in this game and we don’t have enough to stop them short of using chemical/biological/nuclear weapons.
Let us continue to hope that China takes the path of peacefull trade over empire building. And in regards to Taiwan, when China decides it wants it, there is nothing in the world that will stop it…
Michigan Governor Granholm: “If we can get bailout money, we won’t have to bite the bullet and cut spending.” Sheesh.
http://www.detnews.com/apps/pbcs.dll/article?AID=/20081203/POLITICS/812030377
You have a real winner there, Blano. No wonder I see so many MI license plates here in Chicago.
What an a-hole. No wonder people are irresponsible. The examples are set at the top of govmint and bizzniss. And the scary thing is, state and local govs going hat in hand lose their state’s rights.
Sooner or later, situations have to be faced. The sooner it is done, the easier it is to handle them.
How come we haven’t heard similar saab stories from automakers overseas?
Their sales are down just like ours, but I haven’t seen ceo’s pimping the possibility of unemployment (as if the cars themselves are mere window-dressing) beyond our shores and ken.
As I see it ,one of the biggest problems with bringing down mortgage
interest rates is that these are long term loans . Who but the government would take on a low yield like 4 or 5 % on a fixed 30 year note with a low down payment . One of the reasons why adjustable loans came about in the first place was because investors in the Secondary Market didn’t want to get caught holding a low yield for that many years .Many other countries don’t even have 30 year fixed rates .
So ,that being said ,I think the low rates will stimulate the market ,but the only buyers of these notes will be some Government -backed situation .
Since the Powers never addressed the rampant fraud in the system ,the default rate will still be high as prices still go down on real estate for a time . I’m seeing foreclosures go to 1995 price levels now in a lot of places,
so combined with low interest rates ,people will continue to walk on their current homes and investors will come out of the wood work . They should of cleaned up the system and purged the rot before they started handing out money like there was no tomorrow . How many new buyers are there who want long term ownership ,and the industry is selling 5 year programs now instead of the classic 2 year pump and dump a flip ? In other words ,more loss for the government on low yielding notes for investors .
I think governments are buying time this way (same is happening in Europe already, even though the bubble in most EU countries has not really burst).
however, when governments keep buying too much of these unprofitable banks and mortgages, their own rates will start to climb and the fun will end. In Netherlands you can already see this happening due to a few bank bailouts, government debt climbed 60 bp as a result. The question then is how long they can afford to offer these mortgages at below market rates …
They will keep on kicking the tin can down the road till they find out that the road ends with an abyss. What do you expect? They are politicians. Their longer time horizon is no further than the next election, so they do whatever it takes to keep the system from falling apart until the elections come. It does not matter that their actions today will cause more pain tomorrow as long as they will be reelected.
Well, they will keep on kicking the tin can down the road till they find out that the road ends with an abyss. What do you expect? They are politicians. Their longer time horizon is no further than the next election, so they do whatever it takes to keep the system from falling apart until the elections come. It does not matter that their actions today will cause more pain tomorrow as long as they will be reelected.
They will keep on kicking the tin can down the road till they find out that the road ends with an abyss.
What do you expect? They are politicians. Their longer time horizon is no further than the next election, so they do whatever it takes to keep the system from falling apart until the elections come. It does not matter that their actions today will cause more pain tomorrow as long as they will be reelected.
They will keep on kicking the tin can down the road till they find out that the road ends with an abyss. What do you expect? They are politicians. They care only about one thing – to get reelected. It does not matter that their actions today will cause more pain tomorrow.
It might be that the plan is to subsidize the loans at 4.5% and hold them until the smoke clears. Then sell the paper, fully guaranteed of course, at a discount to get to then-current rates, monetize the discount and stiff the citizens equally for saving the hides of the imprudent.
Housing Prices Continue to Decline Nationwide
For the United States as a whole, the housing market is now slightly undervalued. When weighted by market value, the nation is 3.8% undervalued; when weighted by housing units, it is 5.7% undervalued.
While the contraction in residential real estate value is national in scope, it is most severe in the Southeast and Southwest, areas which were among the most overvalued in the country three years ago. According to the third-quarter analysis, extreme overvaluation is now “essentially nonexistent” — only three metro areas met the definition of extreme overvaluation, down from a peak of 52 metro areas in 2005. Only the Pacific Northwest remains overvalued.
http://biz.yahoo.com/bw/081203/20081203005139.html?.v=1
Anyone notice the ad to the left of the article? 40 and 50 year fixed rates. LOL.
CNN reports that 1 in SIX people in Tennessee rely on food stamps! Is that “food insecure”? What happens when welfare runs out?
“Is that “food insecure”?”
As long as the food stamps keep coming, life’s good.
But this goes to the heart of the matter involving cutting programs and government services. When does that start happening?
palmetto … The Politicians were talking about that on the News yesterday . Apparently there has been a lot of complaints about
the true needy being denied while Congress/Senate bails out the
Banks /investments firms /Car Companies . Food banks are running on empty and they are getting a lot more families coming to them .
The Politicians gave a lot of lip service to needing to address the problems of the homeless and starving . Doesn’t seem like that
problem comes up on the lawmakers agenda very soon as saving Bank and Investment firm
share-holders and investors and Car Companies is first priority
apparently .Investors come before starving people ,don’t you know .
What happens when welfare runs out?
RIOTS
ie this is why I say food stamps and welfare aren’t for the poor, they’re to keep the formerly middle class from rioting before the elite have stripped all the wealth from the country.
A friend of mine is of Jewish Polish ancestry. During WW2, those that were too poor to have anything, just packed up a bag, and got on the next ship out with their meager posessions, and those that had plenty of money traveled first class… The ones that had a house, a small biz, or some savings, and were the ones afraid to lose it all were the ones that in the end lost it all in the concentration camps.
His family was one of the few lucky ones that got out before the SHTF.
One thing the nazis did was to visit Jewish homes and catalogue all the possessions in the home before issuing orders to the family to pack for deportation. Physical brutality is obviously the most horrific part, but the mechanization and the financial dealings of the nazis are so bone-chilling.
What happens when welfare runs out?
RIOTS
Or maybe work, familial cooperation, etc…hard to say.
Certainly some riots tho.
There is an argument out there that welfare has been to the detriment of the black community/family. It’s an interesting thesis at least. After slavery was abolished, there was considerable movement around the country among black folks in the efforts of reuniting family (family members that had been sold downriver and such ostensibly to never see one another again).
One might imagine that if anything could break apart a family, it would be the enslavement and geographical dispersment that happened in the slave trade. However after slavery was abolished many of these familys began to coalesce.
It may be that 50 years of welfare has accomplished what hundreds of years of slavery was unable.
RIOTS
ie this is why I say food stamps and welfare aren’t for the poor, they’re to keep the formerly middle class from rioting before the elite have stripped all the wealth from the country.
————————
Totally agree with this, measton.
Something tells me this isn’t the kind of news that inspires people to buy houses.
Just a funny feeling I’m getting.
You need a *lot* of spin to make that sound good. (This neighborhood has only 2 food stamp recipients!!)
“What happens when welfare runs out?”
Calif.: 3.1 million kids getting school lunch deal
Luckily, the federal program is based on entitlement, so schools are not limited in the number of students they can serve, he said.
http://biz.yahoo.com/ap/081203/ca_economy_school_meals.html?.v=1
Just like this, turn it into an entitlement and the funding will never go away.
Seen a school lunch lately? Being forced to eat those every day is plenty of incentive to get off welfare.
Probably shouldn’t admit this, but when I used to teach at a public school, I ate the “school lunch” daily.
$1.75 for a salad (iceberg with icky dressing), entre, drink and a dessert (Jello or ice pop). Not healthy, but a heck of a lot cheaper than making my own, and no storage issues (no refrig in classrooms, and the one in the lunchroom was disgusting).
Hangs head in shame…
What happens when welfare runs out?
GD style soup kitchens and bread lines.
1 in 6 in red state Tennessee is on welfare? Imagine that.
And I’m betting that 98% of “1 in 6″ are Democrats.
Yup. That would make Tenn red huh…. lmao.
Maybe they are too into being “volunteers” and should look for paying jobs.
Who would have ever guessed that philately would come back, in Tennessee of all places?
To buy a brand new home (LP) at 71.38 per square foot sounds very reasonable to me.
We have made an offer, the same house with same options built brand new on a 55,000 lot (same lots were selling for 250,000 last year) would cost in the range of 318,000 (not including the half built pool that is currently there on the property)
We have made an offer of 255,000, (was listed for 275,000 short sale with 450,000 owed) this is a beautiful home that certainly would be considered a dream home by any standard.
But at 71.00 per square foot (total building size 3572 / 2475 under air) ) I think that is about right.
What do you guys think? There is a pool half done that has an open building permitt. I have been told we are looking up to 10,000 to finish it. ( the pool company were scammers and took off with half a job done and all of the cash “Mirage pools”)
We plan on living there as our last home, our payment with taxes, insurance would be smaller than our rent.
This is exactly the home that I wanted since we moved here one year ago.
Be kind it’s my 45 birthday today!
Sounds ok, but the one thing i’d do if I was buying a house, would be to get nosy on the neighbors…
Find out who is living la vida loan-co, or who hasn’t paid their mortgage in 6 months, etc.
Yeah, I second this. Neighbors make or break any living situation.
Sounds reasonable.
I would also check out the finances of the local and state government. For example, here in IL we have extremely high taxes, pricey unions have a lock on much of the labor, and one of the worst funded gov’t pensions in the country. Taxes are certain to go much, much higher to cover these obligations. I would factor something like that into any possible purchase.
Cash or mortgage???
$70 psft isn’t a reasonable benchmark. Material costs are collapsing, and so will labor. It will take a long time (years) for prices to stabilize.
Replacement cost has less relevance in an overbuilt market.
Half cash Half mortgage.
What is a reasonable benchmark then?
I have read many times on this site that 70.00 per square foot would be desireable.
I will end up paying less for the mortgage, insurance,+ taxes than we are paying in our rent on a older home.
We would in exchange be getting a brand new, over the top beautiful home for less money per month.
Living LONG TERM, and paying off that mortage over five years. Saving 16,800 in rent over a year if we stayed here another year and kept hoping to find even a better deal.
skb,
I’m no expert on building costs, but have a business associate who built an average-to-nice house for under $50 psft in 2006. He did the contracting himself, so there was no master contractor profit figured into the cost.
Buying into the face of the biggest bust of our lifetimes takes brass, but it sounds like you are not risking total ruin.
The party is just getting started.
Said this a hundred times here. (-$50 psft)
It might help to disclose your location. There are lots of numbers on the HBB as to desirable ppsf, and it seems to vary depending on locale.
Ditto - the location matters a lot - where is it?. Is the house frame? Brick? 1-side brick or 4-side brick? Concrete block?
A few weeks back, I looked at a 2004-built foreclosed house near Atlanta. 8,000 heated s.f. (biggest house I’ve ever seen from the inside), four-side brick and very high-quality finish - all the extras and no damage. On a 1-acre direct-lakefront lot. Asking $550K.
The deal you describe doesn’t sound fantastic to me in today’s market, but again it matters where it’s located.
(No, I wasn’t serious about buying such a house after seeing how big it is. Could never afford the utilities and upkeep anyway. And yes, the relatively very low asking price per sq. ft. could well reflect the evaporation of the McMansion market in the area.)
Check the offical court county records and cross reference it with the property appraiser office to find out if any NOD/foreclosures have been done in the community. You can do this without disturbing the neighbors who probably won’t be truthful anyway.
Also, check the property tax bill records for the neighbors too…chances are if they didn’t pay their property tax bill they will soon be/or are in trouble..
A very strange thing happened two days ago. A very good friend who owns a lot of clear commercial
property got a call from his bank. They offered him
a lower interest rate on one of his rare properties that they hold the paper on, and after making sure that this wasn’t some form of bait and switch, he went for the re-write.
We sat down and finally figured it out after talking with a few others that had the same thing happen to them.
The banks are not lending, but to show the fed
regulators that they are, they’re just re-writing
currant loans and showing them as new loans to
satisfy the pressure from DC to spread the money
around.
Right or wrong?
Manure Happens…
Merry Christmas, laddie and may the blessings of the Lord be with you.
LOL!
If you re-write a loan ,that isn’t NEW MONEY . Are the Banks writing NEW MONEY loans is the question ? It appears to me that the biggest demand right now is in re-writing OLD MONEY and than passing it to the Government .
This is exactly what we figured. By the
way everyone, MERRY CHRISTMAS ALL.
Screw ‘um
I wonder if it is easier for them to offload new loans to the FED for cash than older established loans????
I would think that it would be easier to offload a New Loan because
the appraisal is more accurate and maybe the underwriting was more strict . I was amazed when I read that they had a 40% default rate on re-written loans already . Those loans written between 2004 and 2007 are just so bad .
Funny…I thought that part of the bailout was that banks could not”modify” investors?
The bailout is bad enough but to reward investors is worse.
FDIC-backed debt soars as banks cash in
By Nicole Bullock in New York
Published: December 3 2008 02:00
US banks have rushed to sell bonds backed by the Federal Deposit Insurance Corp, taking this new type of debt issuance to more than $30bn in a week.
Goldman Sachs, JPMorgan, Morgan Stanley, Bank of America and Citigroup have all raised billions of dollars by issuing debt under the temporary liquidity guarantee programme, one of many government schemes designed to revive the financial system. Wells Fargo is also marketing a debt sale this week.
“The programme has allowed banks to lower funding costs and refinance their securities without having to sell assets,” said Ira Jersey, interest rate strategist at Credit Suisse. “In that regard, it has worked as intended.”…
Tom Lewis, head of the investment-grade syndicate at Morgan Stanley, expected $40bn-$50bn of FDIC-backed issuance by the year-end. The programme expires in June 2009….”
http://www.ft.com/cms/s/0/4e4159f0-c0db-11dd-b0a8-000077b07658.html
A full government guarantee yielding 2% over Treasuries.
hoz, shouldn’t arbitrage close this gap?
Yes. There is no reason to close the gap. I would rather have a guaranteed profit that lasts for a long, long time than a quick overnight profit. People are stupid. Bubble markets take on a life independent from reality.
Harvard’s endowment takes 22 percent hit, and is expected to lose more
CAMBRIDGE, Mass. (AP) — Harvard officials say the university’s largest-in-the-nation endowment lost about 22 percent of its value, or $8 billion, in the four months since the end of the last fiscal year.
The endowment was worth $36.9 billion as of June 30.
Harvard will have to take a “hard look at hiring, staffing levels, and compensation,” university President Drew Faust and Executive Vice President Edward Forst wrote in a letter informing deans of the losses.
They say the university should plan for a 30 percent drop in endowment value by the end of next June.
Forst tells The Harvard Crimson student newspaper that the 22 percent estimate may be conservative because some university money is handled by external managers that have yet to report figures.
I posted the other day that Stanford managers have had to come up with a 3-5-7% cut plan. It’s been upped to 7-10-15% and they are looking for ways to cut/earn 100 M in a short period. 8000 acres + sun = food.
At one time business downturns were called “depressions,” but after the Great Depression the euphenism “recession” came into use. So now there is a vague, undefined idea that a “depression” is different, and worse, than a “recession.”
Anyone want to take a shot at clarifying what the difference is? I a depression a bad recession with deflation?
Recessions end in peacetime?
Depressions end with war?
Here’sthe diffence according to Jim Puplava. A Depression is a deleveraging event (malinvestment, bust of an asset bubble), and a Recession can be corrected by stimulating the economy with interest rate lowering, and less severe twiks. The Roaring 20’s and the Roaring 2000’s were bubble periods.
I wish the govt. would let a business cycle take its course. Every bubble goes back to equalibrium.
What were the 1873 ,1907 , and *pre- 1929 economic turmoil periods called?
Can someone refresh my memory.
*many attempts were made to resuscitate the stock market before the final1929 crash.
panic
I’ve always like old-fashioned terms better for things. “Panic” more accurately describes the feelings of the people during those type of events. Although “Depression” is a good one for what happens afterward.
yeah, and after the 1873 panic, people associated that term with “really bad”, so they started using the term “depression”, which is where WT picks up above…
“The depression heralded by the June 1893 stock-market crash was one of such excruciating length, such grinding and unrelieved misery, the economic historians labeled it the Great Depression until that title was usurped in the 1930s.” –TITAN, by Ron Chernow.
A depression is a recession of more that 10% decline in GDP
source? I didn’t think there was a technical definition for depression, unlike the technical definition we have for recession.
Recessions have no lasting effect. Depressions leave a mark.
Recession is when you lose your job;
Depression is when I lose my job.
right, ‘cept you got it reversed..
Some wikipedite attempts a definition which i think is as worthy as any other:
“There is no widely agreed definition for a depression, even though some have been proposed. In the United States the National Bureau of Economic Research determines contractions and expansions in the business cycle, but does not declare depressions.[1]
———
A proposed definition for depression is a sustained recessionary period in which the population is forced to dispose of tangible assets to fund every day living, as was seen in the US and in Germany in the 1930s.
———
Characteristics
Generally, periods labeled depressions are marked by a substantial and sustained shortfall of the ability to purchase goods relative to the amount that could be produced using current resources and technology (potential output).[2]
..and that seems to boil down to a pronounced, widespread lack of money with which people can buy the necessities of life.
Got cash?
Great definition, FPSS!! That’s a nice personalized version of the one I’ve heard put slightly differently:
Recession is when your neighbor loses his job; depression is when you lose your job.
Speak for yourself. Recessions have caused major loss of high paying mfg jobs( come to Northern Ohio and see the effect). Jobs which have never returned to this country and probably wont for a few hundred years.
“Recessions have caused major loss of high paying mfg jobs…”
So have taxes, from time to time. Remember when just about every U.S. yacht maker left the country, not that long ago?
On the higher education bubble front:
Published college tuition and fees increased 439 percent from 1982 to 2007, adjusted for inflation, while median family income rose 147 percent. Student borrowing has more than doubled in the last decade, and students from lower-income families, on average, get smaller grants from the colleges they attend than students from more affluent families.
I really look forward to the education bubble collapse, even though I have many friends and family employed in the industry.
I commented about this yesterday. I work at a University and we have seen a decrease in enrollment this year and budget cuts as a result. Of course you can ask anyone and they will tell you we are not at all effected by the credit market.
I overheard a student today, while I was walking to my truck, say (on the phone) that he was going to try and find somewhere else to get loans for next semster. That’s about all I heard but it made my ears perk up.
Long time lurker here, first time poster. Hello everyone!
I’m a client of Peter Schiff, and I’m starting to get cold feet. Most of the money we’ve invested through him is in foreign stocks. The goal of this strategy was to preserve purchasing power by avoiding a collapsing dollar. The problem is that equity values around the world are falling steadily, and I’m afraid I’ve made myself into a bagholder. Meanwhile, the dollar isn’t really falling. (Yet?)
What do HBBers think of the strategy of holding onto foreign stocks, at this point? I mean the sort of dividend-paying commodity and manufacturing stocks that Schiff favors. I hate to sell now, because then I would lock in all the losses. But I hate to hold on, because I don’t see any reason for these equity valuations to rise, in the near future. Sure, the dollar might drop, but who knows for sure, and who knows when?
BTW thanks, Ben, for putting this blog together and keeping it up and running.
It’s only a matter of time before the USD tanks, IMHO. And when it does it will be fast and furious. Timeline? Probably within 2-3 more years, introducing a shock to the global financial system just as we think we’re exiting the recession.
Foreign indices, particularly emerging markets, have generally fallen faster than the US counterparts, but the flip side to that is that the US still has potential to drop considerably more. If you were to sell off the foreign stocks at a loss and invest back into the US, I think that you’re setting yourself up for a major loss down the line. It’s not so much that emerging markets are a great bet right now, it’s that I don’t think the US blue chips are all that enticing–yet. The real opportunities to buy will be after the USD crashes and you can cash out of the foreign stocks and reinvest.
There are no correct answers.. nobody knows what will happen. (Many have no idea what has happened). Everyone’s guessing.
Someone out there has just pawned the wife’s sewing machine and sold the family car for money to invest in exactly what you are seriously considering selling at a loss.
We all have different risk tolerance, needs and timelines. Set things up so you’re comfortable and can sleep well.. and be the envy of many wealthy, very unhappy people.
I mean the sort of dividend-paying commodity and manufacturing stocks that Schiff favors.
Can you list some by name? It would be easier to make an analysis.
from the rural Oregon Farmers Co-Op Managers Desk:
Sales are down, however, staples such as: bagged feed, pet supplies, grain, hardware, clothing, electric fence, pumps, plumbing, and seed are equal to or greater than last years sales.
Fall fertilizer sales were the lowest volumes ON RECORD. Dismal. Urea pricing has come down. Potash and Phostphates are still high and prices are very sticky. We hope the market will continue lower on all fertilizer products, not just nitrogen based fertilizers.
Tammy has a new deep fryer, come on in and get some deep fried, double dipped chicken.
Hello Deflation.
Homebuilders’ stocks up big today - anyone know why?
Because Cramer said they don’t deserve a bailout on Bubblevision.
Which of course is a stealthy way of running the idea up the flagpole to see if anyone salutes.
Homebuilders (+10.6%) are showing notable strength. The group is benefiting from the 30-year fixed rate mortgage dropping to 5.65%, according Bankrate.com, and news from the Mortgage Bankers Association that mortgage applications rose by a record 112% last week. The improvement comes after the government said it will utilize up to $500 billion to support the mortgage market.
Yahoo
Apparently what goes unrealized is that the mortgage market separated from the homebuilder market about a year ago. Allowing people to refinance existing homes at a lower rate isn’t going to help relieve the huge new-home inventory overhang, which is exactly what’s killing the homebuilders right now. The only thing that will help the inventory overhang is when prices bottom out, and we’re still a loooonnnng ways away from that.
Oh well. I’m taking it as an excellent opportunity to build up more shorts.
Nailed it Packman. One thing I have noticed is the run up of questionable stocks just before bad news hits. I was looking at FNM and FRE and noticed massive buys happening at open and at noon, both tickers… It is like telling me, “OVER HERE STOOPID! FREE GUV $$$!!!!” all you have to do is wait for the 2-3 days of run ups, then short it, wait for approx 2-3 days (1 sometimes ;)) and put your stop loss really close as not to give up any profit. Wait for the squeeze (insert guv $ here- literally) and do it again. I have been stung (by greed) by putting my stop loss in the traditional places- just to have the stock jump up, kick me out, and then proceed to drop.
“anyone know why?”
Might be because of the rumor that someone (NAR?) is pressing Treasury or the Fed to discount virtually all to-be-issued conforming mortgages to 4.5%. In effect, the gummint would be pricing every mortgage on the market and thus fixing the price of houses higher than they ought to be. This presumably would be an attempt to keep prices from falling farther than they have - and screwing you and me in the process.
I can’t think of a bigger Law of Unintended Consequences cluster**** than this, if it turns out to be a true pursuit rather than a rumor. The talking-head theory is that the builders rose because the plan was leaked.
Counting pitchforks, to get to sleep.
Just got back from yet another business trip away. I spend 8-10 months away from home. This past year, I ended a 2 year professional homeless stint (when not working - on vacation, staying in hotels, with friends, etc).
Last May, I landed a great rent deal on a modern high rise condo in Chicago. I must be paying 30-40% less than carrying costs.
Despite all of my research over the years, HBB addiction, doom and gloom talk with friends, etc, it is strange when it hits home. This morning I heard a loud knocking next door, but thought nothing of it. As I left to run an errand, I noticed a bright green pasted sign on my neighbor’s door.
It was a foreclosure notice (DO NOT TRESPASS), courtesy of the Cook County Sheriff.
PS - I never met or heard my neighbor. My guess is that it was yet another failed “investor”.
It was a foreclosure notice (DO NOT TRESPASS), courtesy of the Cook County Sheriff.
It takes our sheriff a long time even to make it that far.
(BTW, if I recall correctly, I can see your building from my office window — I’m at Erie and Orleans.)
Most of my view is N/NE - I can probably see your building from here (16th). Love Erie Cafe for the calamari.
I am going to take a photo of the notice and post it.
Ironically, I receved a “Special Home Equity Offer from Chase” today.
I don’t own any real estate.
Dec. 3 (Bloomberg) — The cost of protecting corporate debt from default jumped to a record in Europe and neared a high in the U.S. amid concern that the global recession will sink into a depression.
Credit-default swaps on a benchmark index tied to below- investment grade companies in Europe reached levels considered distressed for the first time….
Tweeter music stores abruptly shut down today. Seems like yesterday that the old World Music Theater became the Tweeter Center. (although that venue had changed names again since then)
Same here in Orlando - Tweeter-owned chain called Sound Advice. TV showed a screwed customer who paid for his TV yesterday (I think) and came to pick it up today only to find the place shuttered. Assuming he used a credit card, I’d think he would be able to get out of paying.
shocking -
“Jim Bianco of Bianco Research crunched the inflation adjusted numbers. The bailout has cost more than all of these big budget government expenditures combined:
Marshall Plan: Cost: $12.7 billion, Inflation Adjusted Cost: $115.3 billion
Louisiana Purchase: Cost: $15 million, Inflation Adjusted Cost: $217 billion
Race to the Moon: Cost: $36.4 billion, Inflation Adjusted Cost: $237 billion
S&L Crisis: Cost: $153 billion, Inflation Adjusted Cost: $256 billion
Korean War: Cost: $54 billion, Inflation Adjusted Cost: $454 billion
The New Deal: Cost: $32 billion (Est), Inflation Adjusted Cost: $500 billion (Est)
Invasion of Iraq: Cost: $551b, Inflation Adjusted Cost: $597 billion
Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion
NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billion
TOTAL: $3.92 trillion (data courtesy of Bianco Research)
That is $686 billion less than the cost of the credit crisis thus far.
The only single American event in history that even comes close to matching the cost of the credit crisis is World War II: Original Cost: $288 billion, Inflation Adjusted Cost: $3.6 trillion
The $4.6165 trillion dollars committed so far is about a trillion dollars ($979 billion dollars) greater than the entire cost of World War II borne by the United States: $3.6 trillion, adjusted for inflation (original cost was $288 billion).”
SEC adopts new rules aimed at stemming conflicts in credit-rating industry
WASHINGTON (AP) — Federal regulators on Wednesday adopted new rules designed to stem conflicts of interest and provide more transparency for Wall Street’s credit-rating industry, widely faulted for its role in the subprime mortgage debacle and ensuing credit crisis.
The SEC commissioners last June proposed the new rules and opened them to public comment.
Among other things, the conflict-of-interest rules ban the rating agencies from advising investment banks on how to package securities to secure favorable ratings. Gifts over $25 from clients also will be prohibited.
Rating agencies will be banned from making ratings in cases where the agency made recommendations to the company issuing securities or the investment bank underwriting them concerning the corporate structure, assets or activities of the issuing company.
In addition, rating agencies will be required to disclose statistics on all their upgrades and downgrades for each asset type. They also will have to disclose how much verification they performed on the quality of complex securities, such as those underpinned by mortgages, student loans or auto loans, in determining ratings for them.
Investors will receive detailed information on the ratings process for complex securities, thereby exposing potential conflicts of interest for the agencies, SEC officials said.
The SEC commissioners also voted to propose and open to public comment other rules that would require rating agencies to disclose in interactive electronic format the ratings history information for all of their assessments that companies issuing the securities pay them to do.
Some critics, including investor advocates, say the SEC rules don’t go far enough. They want new requirements to govern how the rating agencies are paid and to provide for the suspension of their licenses if they engage in unfair practices.
The agencies say they already have taken steps to increase transparency and will continue to make further enhancements in the future.
Putting lipstick on a pig, securitization and rating agencies are the primary problem and this lipstick will not fix the problem. I think that the rating agencies should be paid with a piece of the product they rated and then they can’t sell it for 3-5 years.
Simple answer . Make the buyers of investments responsible for the fees to the rating agencies .The sellers should never be connected with the raters , in a perfect world .
Good answer, Wiz.
Much like the appraisers working for the mortgage originators/brokers instead of the actual lenders.
Dec. 3 (Bloomberg) — Fortress Investment Group LLC halted withdrawals from its largest hedge fund after investors asked to pull $3.51 billion by year-end…. Fortress didn’t say when investors will be able to get their money.
That’s kind of funny, actually—-as in “your money is in our fortress, and you can’t have it back.”
Dec. 3 (Bloomberg) — Yields on speculative-grade bonds imply a U.S. default rate of 21 percent, higher than the record set during the Great Depression in 1933, according to John Lonski, chief economist at Moody’s Investors Service.
“Roger, go at throttle up”
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
U.S. Job Cuts More Than Double From Year Ago, Challenger Says
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aPx3.YS8vkBc
2.66 on the 10yr.
CMON BERNANKE, SHOW US THE BAZOOKA !!
You’re already looking at it.
Embracing inflation
This once-in-a-lifetime global economic recession requires a unique response. Inflation is needed to combat the crisis
Kenneth Rogoff
“…Fortunately, creating inflation is not rocket science. All central banks need to do is to keep printing money to buy up government debt. The main risk is that inflation could overshoot, landing at 20% or 30% instead of 5-6%. Indeed, fear of overshooting paralysed the Bank of Japan for a decade. But this problem is easily negotiated. With good communication policy, inflation expectations can be contained, and inflation can be brought down as quickly as necessary….”
LOL, he is using the bazooka. Nobody else would buy 10 yr debt at 2.7%. (TIP Yields dropped 200 bps since last Friday)
High muckamuck economist conventional wisdom: Inflation is far easier to cope with than deflation. Just ask any remaining survivors of the Weimar republic if you don’t believe them.
DOW down 112. Headline on Marketwatch: “Bankers and builders fuel rise”
We’ve all heard the phrase “nouveau riche” or “new money.” I was wondering if anyone could suggest a label for the newly poor, also what would you call people who have been poor for quite some?
nouveau risk
Idiots.
nouveau pauvre
“down and out”
Over
“what would you call people who have been poor for quite some?”
Them what’s already sold the Ducati, the cameras, the telescopes, the jewelry and the kids college fund, the guns and let the pool grow.
Don’t pity them: thay still have the big screen and the vacumn tube amps… and the granite.
I wonder which of these economists actually considered home prices versus incomes (i.e., budget constraints) in their valuation assessment? I suspect Baker did, and the others did not.
ECONOMIC REPORT
U.S. homes now undervalued, economists say
Prices fall in 241 metro areas in third quarter, and are likely to fall further
By Rex Nutting, MarketWatch
Last update: 11:47 a.m. EST Dec. 3, 2008
WASHINGTON (MarketWatch) - The U.S. housing market is now slightly undervalued after rapid price declines have overshot fundamentals, economists for IHS Global Insight said Wednesday.
House prices fell at a 6.9% annual pace nationwide in the third quarter, with prices falling in 241 of 330 metropolitan areas. Prices are down 6.5% from their peak in 2007.
Compared with their long-term fundamental values, U.S. homes are now
3.8% undervalued, the economists said.
“With no end in sight to the downward spiral of house prices, it is likely that the long-anticipated market correction will now overshoot fundamental valuations on the downside,” said James Diffley, head of regional economics at Global Insight.
“Weak economic conditions and wary consumers continue to hold the housing market back,” said Jeannine Cataldi, senior economist in charge of Global Insight’s regional real estate analysis. “Although many areas are seeing home sales increase, it is largely due to foreclosure homes being snapped up at significantly discounted prices. As the inventory of these homes is removed from the market, prices will remain on a downward path.”
However, another economist said home prices are still too high in many bubble areas.
“Prices in many markets are still hugely out of line with trend levels, as measured by price-to-rent ratios,” said Dean Baker, co-director of the Center for Economic and Policy Research. “As long as house prices remain inflated, there is no way that the market can stabilize since there will continue to be a large excess supply of housing putting downward pressure on house prices.”
“Compared with their long-term fundamental values, U.S. homes are now 3.8% undervalued, the economists said.”
HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAH!!!!!!!!!!!!
Yeah right.
No place left to hide…
BULLETIN
FED BEIGE BOOK SAYS U.S. ECONOMY WEAK COAST TO COAST
Business contacts downbeat in latest Fed report
By Greg Robb
Last update: 2:00 p.m. EST Dec. 3, 2008
WASHINGTON (MarketWatch) — Business contacts told the Federal Reserve that economic conditions weakened across all of the bank’s 12 regions from mid-October through the end of November, according to a survey released by the central bank on Wednesday. The details of the survey generally match recent poor economic data.
The Fed’s Beige Book, a collection of anecdotal data from the 12 Federal Reserve districts, indicated economic activity weakened across all districts. Generally, districts reported decreased retail sales and weak housing markets characterized by reduced selling prices and low sales activity. Credit standards rose across the nation as loan delinquencies and defaults increased. The districts also reported declines in energy, fuel, materials, and food product costs.
Yahoo
I like the sound of the last two sentences.
Me too. With the cost of almost everything deflating, and a virtual shutdown of the U.S. home construction industry in effect, the replacement cost of homes should fall, which should portend more affordable housing prices down the road. Affordability is what everyone wants, right?
MARK HULBERT
Stocks vs. bonds
Commentary: The S&P’s dividend yield now higher than the 10-year T-note’s
By Mark Hulbert, MarketWatch
Last update: 10:50 p.m. EST Dec. 2, 2008
ANNANDALE, Va. (MarketWatch) — Investors whose historical memories are long enough will recognize the irony in what’s happened recently to bond and stock markets’ yields.
For the first time since 1958, the dividend yield on the Standard & Poor’s 500 index has risen above the interest rate on the 10-year Treasury note. As of Tuesday’s close, for example, the S&P’s dividend yield was 3.3%, while the 10-year T-Note was yielding 2.7% — a spread of 0.6 percentage points in favor of stocks.
uhhh, this is the story right before the dividend slashing begins.
Precisely!
Maybe, but from 1870 to 1958 that was considered the risk premium in owning stocks and in 1958 most firms believed the market would quickly reverse when the US Tbond yields first crossed the market.
Maybe, but from 1870 to 1958 that was considered the risk premium in owning stocks
———————–
That’s exactly what I was thinking while reading that. Dividend yields SHOULD be higher than Treasury debt. Isn’t risk supposed to pay more than risk-free???
Is the best time to buy after dividends are slashed, or does the efficient market price that in already?
Along with Cramer’s insistence to his followers to buy stocks paying decent dividends, which he’s been doing for at least a few weeks now.
Who is offering the best rates on a fixed 30 year mortgages?
Excellent credit
Have you checked Bankrate.com? Compare to your local banks too. Drive a hard bargain on any fees, bogus or not.
Also “interest dot com”
Oooh, Countrywide has a 9 month CD for 3.2%
Might want to hold off…
http://online.wsj.com/article/SB122833771718976731.html
“The plan, which is in the development stages, would use mortgage giants Fannie Mae and Freddie Mac to bring loan rates down as low as 4.5%, a full percentage point lower than the prevailing rates for 30-year fixed mortgages.”
foreclosures banned for two years in uk.
Brown unveils mortgage plan
taxpayers to pay mortgages of fb’s who live in $600,000 houses
for two years. a most excellent plan.
AIG, Fed to terminate some debt obligations
http://biz.yahoo.com/ap/081203/aig_debt.html?.v=1
You can always depend on Mel Brooks to add a bit of levity to any situation. Enjoy!
http://www.youtube.com/watch?v=rYqF_BtIwAU
As Rome goes, so goes the world.
U.S. corporate shares are selling for pennies. Not all of these companies are going out of business, folks. Get ‘em while they last.
latest news
Feb. gold ends down 1.6% at $770.50, lowest since Nov. 20
Big Company Stocks Under $1 And Those Heading There
(TMA)(FNM)(FRE)(SIRI)(LVLT)(ETFC)(F)(C)(S)(NYT)(MNI)
By 24/7 Wall St.
Last update: 8:33 a.m. EST Dec. 3, 2008
Prove that they are not all going out of business. Prove to me that there is a viable plan for them to stay in business.
Where is the corporate profit? Most of those companies should be closed already.
Along the lines of your post below regarding the 4.5 pct mortgage loan respiking plan, I guess we should all hope and expect this mainstay American corporations will get bailed out in order to keep our Terry Schiavo economy going until the outlook brightens.
FAQs: Purchasing Direct Obligations of Housing-Related GSEs
“…What type of GSE direct obligations will the Federal Reserve purchase under the program?
At the beginning of the program, purchases will focus on fixed-rate, non-callable senior benchmark securities issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks. Over the course of the program, the Federal Reserve may change the scope of purchasable securities….
Will these operations be reserve neutral?
No, these operations will be financed through the creation of additional bank reserves….
How often will the New York Fed conduct auctions to purchase GSE direct obligations?
On average, purchases of GSE direct obligations will occur about once per week, subject to market conditions and holiday schedules. The New York Fed will publicly announce each auction on its website one business day prior to the auction….”
http://www.newyorkfed.org/markets/gses_faq.html
The Fed appears to be committed to directly propping up home prices, which should work quite well for banks holding severely devalued MBS.
Old time share: vacation home with fellow owners
New time share: staycation home with fellow squatters
I’ll save America…
Just loan out money to the proles @ -5% interest rate.
Borrow $100, pay back $95 on the 12th of never.
I’ll gLADly pay you for a hamburger on Tuesday for Two Today!
“The S&P 500 moved more than 5% 27 times between 1950 and 2000. And 22 times between October 1 and now.”
Felix Salmon
I posted this link yesterday Re: Deflation . It’s interesting to hear both sides, and both make convincing arguments. There seems to be lots of money still entrenched on a bet either side. Should be interesting.
http://prudentbear.com/index.php/commentary/guestcommentary?art_id=10157
” 1914 a new law authorised the Reichsbank to discount short-term bills issued by the Treasury, together with commercial bills, as cover for its notes…..thus was initiated a monetary inflation that was without precedent in history
……The new powers and policies adopted by the Fed will seem impossibly arcane to most people. They are not. They could be very dangerous. My preliminary look at the Weimar experience suggests potentially ominous parallels. If the Fed embarks on the road of monetising Treasury debt the longer term inflation outlook becomes more frightening. I intend to watch Fed and Treasury actions intently ”
What happened yesterday..oh yeh the fed will buy treasuries to prop the market…that should end well…..
Financial Times
Record rise in US home loan applications
By Michael Mackenzie in New York
Published: December 3 2008 20:30 | Last updated: December 3 2008 20:30
A record surge in US home financing activity over the past week has followed the planned purchase of $500bn in mortgage securities by the Federal Reserve.
The latest weekly data, as of November 28, from the Mortgage Bankers Association reveals that its measure of mortgage loan application volume more than doubled (up 112 per cent), the biggest such rise since the index began in 1990.
The index compiles both mortgage refinancings and purchases and is now at its highest level since late March.
The MBA said the average rate on a 30-year mortgage fell to 5.47 per cent from the prior week’s 5.98 per cent. It was the lowest level since June 2005. Earlier this summer, mortgage rates peaked at 6.59 per cent.
“In simple terms, the Fed gave mortgage holders and home shoppers an early Christmas gift,” said Mike Larson, interest rate analyst at Weiss Research.
…
Lower mortgage rates should help to ease the rapid falls in US home prices, which are expected to decline for most of the next year. While lower mortgage rates may not help home owners facing foreclosure, it will reduce the cost of monthly loan payments for millions of people.
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The scale of the Fed’s intended purchases equates to a year’s supply of home loans. That sent the rate on Fannie Mae’s 30-year mortgage tumbling to 4.59 per cent on Tuesday from 5.41 per cent a week ago.
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The surge in applications to refinance mortgages, however, may not fully translate into actual new loans, some analysts warn. Tighter lending standards, falling home prices and rising unemployment are the main factors that threaten stabilisation in the US housing market. Economists expect a sharp rise in unemployment when the November jobs report is released tomorrow and are braced for a big drop in non-farm payrolls on Friday.
Mr Larson said conversion rates for mortgage applications being turned into closed loans “are lower today because qualifying standards are tighter”.
He noted that the “relatively modest” rise in purchase applications – the MBA purchase index rose 38 per cent – illustrated how the weak economy and deteriorating jobs market was limiting that type of activity. In contrast, the MBA mortgage refinancing index rose 203.3 per cent.
That last paragraph:
is key for my above question about why the homebuilders are up so much today. People aren’t looking at the underlying stats - even though mortgage apps are up, they’re mostly refi’s, which doesn’t help homebuilders a bit. In fact I’d be willing to bet that if the purchase apps were further divided into new home purchases vs. used home purchases - the latter would be the bulk, if not all, of the rise - primarily due to the high rate of foreclosure purchase activity. Thus the incredible rise in mortgage apps doesn’t translate into any help for the homebuilders.
(P.S. nice to see Mike getting some airtime - seems to be happening more often these days!)
Mike Larson I mean - not Mike the article’s author.
Comment by clue
2008-12-02 20:55:07
“hoz, meet me here over the weekend. and answer the questions… you too pussycat.”
You want me to give up a weekend of playing in the snow and wind to spend time on a ‘puter?
Sven and Olie
Sven and Olie died and went to Hell. After awhile, the Devil came by to see how his new guests were doing. To his amazement, he found Sven and Olie were still wearing their winter gear and seemed to be quite comfortable. The Devil asked why they weren’t hot.
Olie replied, “We come from the Upper Peninsula where it’s always cold. This is feeling pretty good to us.” This upset the Devil, so he turned up the thermostat. Awhile later the Devil looked in again on Sven and Olie. To his surprise he found they were still wearing their winter gear. The Devil questioned them on it again. “You have to remember that we are from the Upper Peninsula and it’s very, very cold there. This is feeling nice to us.”
The Devil was even madder at this, so he turned the thermostat all the way up to maximum temperature. The Devil waited some time and then went back to Sven and Olie. This time he found they had only unzipped their coats, but still had all their winter clothes on.
The Devil couldn’t understand what was going on. The punishment down here was supposed to be the unbearable heat. It wasn’t working on these two. He had to ask again what the deal was. Sven replied, “We are Yoopers and we just got over a freezing winter. This is really great for Olie and Me.
A light flickered in the Devil’s mind. He went to the thermostat and turned it off. He thought if the heat wasn’t a punishment, maybe he’d give them some freezing temperatures. A little while later the Devil came back to check in on Sven and Olie only to find them cheering and giving each other high fives, happier than ever! The Devil questioned them on their actions and Sven said happily, “Back home they always say, the Packers will win the Super Bowl when Hell freezes over!!!
moral: Adjust to whatever the conditions are and cheer for the Packers.
I Can’t Stand It, I Know You Planned It
But I’m Gonna Set It Straight This Watergate
But I Can’t Stand Rockin’ When I’m In This Place
Because I Feel Disgrace Because You’re All In My Face
But Make No Mistakes And Switch Up My Channel
I’m Buddy Rich When I Fly Off The Handle
What Could It Be, It’s A Mirage
You’re Scheming On A Thing - That’s Arbitrage.
OK Commie Oregonian ex-hippie friend: to make moneys for the beautiful and wonderful Mrs. Clue (she has to be wonderful since she stuck with you- in fact I bet when you come home you are Mr. Wonderful or Mr. Beautiful. As in “You were really Beautiful last night dancing with that lampshade on your head,” Said Mrs Clue brightly.)
Buy Japanese stocks or if uncomfortable with the stocks any Japanese ETF as in but not recommending SCJ or JPP or PJO or EWJ or JSC or DNL or any of the dozen others - look them all up and see which suits your investment desires.
FTSE RAFI Japan Portfolio ETF (PJO)
iShares MSCI Japan Index Fund (EWJ)
iShares MSCI Japan Small Cap Index Fund (SCJ)
iShares S&P/TOPIX 150 Index Fund (ITF)
NETS Tokyo Stock Exchange REIT Index Fund (Japan) (JRE)
NETS TOPIX Index Fund (Japan) (TYI)
ProShares UltraShort MSCI Japan ETF (EWV) AN INVERSE FUND 2X for when it is time to bail.
SPDR Russell/Nomura PRIME Japan ETF (JPP)
SPDR Russell/Nomura Small Cap Japan ETF (JSC)
WisdomTree Dreyfus Japanese Yen Fund (JYF)
WisdomTree Japan High-Yielding Equity Fund (DNL)
WisdomTree Japan SmallCap Dividend Fund (DFJ)
WisdomTree Japan Total Dividend Fund (DXJ)
Depending on your comfort level you might wish to go with the flyers - the stocks and funds that have fallen the greatest percentage, conversely you may to opt for the high dividend stocks and funds. In either case this is Japan, a land of conservative values, including quaint corporate ideas like ultra low debt. Stay with liquidity - which may mean Vanguards fund. Japan is the trade for the next 6 weeks. Recommended asset allocation no more than 25%. Do so at your own risk. This is suitable for me, myself and I and is not suitable for any but the craziest most insane individuals.
EWJ looks like a solid pick.
weekly chart looks right.
concur. Although
I no little about charts, the fundamentals are right.
One more really dumb bailout plan:
buy all mortgages with a 4.5% interest rate.
can’t I go anywhere and not come home to more socialist gyrations? Come on Bear, show us the plan.
Come on Annie! Hope it works. It is not wise to bet on the sun going Nova, if you win the bet there is nobody to collect from.
This is not economics, this is peoples lives. The Federal Reserve will spend every penny, centime, peso available to prevent a repeat of 1931. Failure to do so will result in such massive social upheaval that the country might not survive.
Norway is socialist and has the highest standard of living in the world. I grew up when the US had the highest standard of living in the world and now we are considered third world technology (internet and telecommunications) with the 18th highest standard of living in the world.
“It is not wise to bet on the sun going Nova, if you win the bet there is nobody to collect from.”
There, in a nutshell, is the big problem with the Aladinsane/Watcher bet.
Door bells ring, we’re not listening,
on the stoop, collectors are massing
A scary sight,
We’re depressed tonight.
Stuck in foreclosure wonderland.
Gone away is the house,
Here to stay are the louse
They bite all night long,
As we went wrong,
Stuck in foreclosure wonderland.
In the meadow we can pitch a teepee,
Then pretend that we have equity
We’ll say: How ’bout a HELOC?
We can do it with our sound stock.
The broker can lie better than I
Just put us in a No Doc
Later on, we’ll perspire,
As the bills mount higher
To be totally afraid,
The plans that we’ve made,
Stuck in foreclosure wonderland.
In the meadow we can pitch a teepee,
and pretend that its a marquee
We’ll have lots of fun in the teepee
Until the collectors enforce the decree.
The market falls, value’s sliding,
And in the teepee we are hiding
We’ll hope and pray, the American way
Stuck in foreclosure wonderland.
with apologies to Mr. Richard B. Smith
Anybody wanna go for “Redemption Song”
hat tip Fortress.et al.
nice one hozie old boy, mine above was the Beastie Boys.
hard to hit the exits when the egress is burning.
Constipate, when your equity turns into debt;
Look for the public to bail you out in time.
Buy more than you can ever pay for,
Then stand on a street corner ands begs for them dimes.
Dollar cost averaging has killed our profits,
While we stand aside and look? ooh!
Its not just for fun, Its just the cost of it:
We have to make book.
hoz
Responded with chanteuse - did not post- maybe later it will show up - probably not.
test
Actel Corp. is laying off 54 employees on 12/15/2008 at 2061 Stierlin Court in Mountain View.
Activision Blizzard is laying off 23 employees on 12/19/2008 at 6060 Center Drive, 5th Floor in Los Angeles.
AIGM and 21st Century Insurance Co. is closing down and laying off 106 employees on 12/26/2008 at 1800 East Imperial Highway, Suite 100 in Brea.
AT&T Messaging is closing down and laying off 39 employees on 12/23/2008 at 2623 Camino Ramon in San Ramon.
Capital Beverage Co. has started laying off 100 employees at 2424 Del Monte St. in West Sacramento.
Castaic Brick is laying off 77 employees on 12/24/2008 at 32201 Castaic Lake Drive in Castaic.
Chase Home Lending is closing down and laying off 58 employees on 12/5/2008 at 2633 Camino Ramon in San Ramon.
Conagra Foods Inc. is closing down and laying off 23 employees on 12/12/2008 at 200 Boysenberry Lane in Placentia.
Dealtree Inc. is laying off 82 employees on 12/6/2008 at 16901 Jamboree Road in Irvine.
Electronic Arts Inc. is laying off 56 employees at 5510 Lincoln Blvd. in Playa Vista, 49 employees at 1100 Glendale Ave. 19th Floor, in Los Angeles and 48 employees at 209 Redwood Shores Parkway in Redwood City on 12/31/2008.
E-Loan Inc. is laying off 270 employees on 12/22/2008 at 6230 Stoneridge Mall Road in Pleasanton.
Epicor Software Corp. at 195 Technology Drive in Irvine is laying off about 10% of its workforce of about 280 employees.
Goldenpark LLC is closing down and started laying off 114 employees at 13111 Sycamore Drive in Norwalk.
Goodrich Aerostructures Inc. has started laying off 87 employees at 850 Lagoon Drive in Chula Vista.
GPSG North America is laying off 40 employees on 12/19/2008 at 700 Eubanks Drive in Vacaville.
Health Care Groupin Montrose, 237 employees at 5480 Marengo Ave. In La Mesa, 208 employees at 760 E. Bobier Drive in Vista, 123 employees at 1088 Laguna Drive in Carlsbad, 49 employees at 4960 Mills St. in San Diego and 40 employees at 3423 Channel Way in La Mesa on 12/15/2008.
Hemet Valley Skilled Nursing Facility is closing down and started laying off 104 employees at 1117 E. Devonshire Ave. in Hemet.
Hemosense Inc. is closing down and started laying off 29 employees at 651 River Oaks Parkway in San Jose.
Hubbell Lenoir City Inc. is closing down and laying off 88 employees on 12/31/2008 at 615 North King Road in San Jose.
International Paper Co. is closing down and laying off 86 employees on 12/5/2008 at 10555 Iona Ave. in Hanford.
Kmart Store #4240 is closing down and laying off 89 employees on 12/14/2008 at 19600 Plummer St. in Northridge.
Los Angeles Times is laying off 69 employees on 12/19/2008 at 202 West First St. in Los Angeles.
The Newark Group Inc. will shutdown its solidboard plant at 2121 W. Almond Ave. (48,687 square feet) in Madera due to the lack of business and production is expected to cease by Jan. 15.
NYK Logistics (Americas) Inc. has started laying off 142 employees at 2417 East Carson St., Ste. 100 in Long Beach.
Pacific Clay Products is laying off 106 employees on 12/22/2008 at 14741 Lake St. in Lake Elsinore.
Pearson Ford will merge and relocate its operations San Diego operations at Fairmount and El Cajon boulevards to Kearny Mesa Ford at 7303 Clairemont Mesa Blvd. in Kearny Mesa.
Philips Lumileds Lighting Co. is closing down and laying off 64 employees on 12/12/2008 at 370 W. Trimble Road in San Jose.
Rays Apparel Inc. is closing down and laying off 62 employees on 12/13/2008 at 20 Goodyear in Irvine.
Riverside Cement Co. is laying off 85 employees at 1500 Rubidoux Blvd. in Riverside and 84 employees at 19409 National Trail Hwy in Oro Grande on 12/19/2008.
Seton Medical Center is laying off 60 employees on 12/29/2008 at 45 Southgate Ave., Suite 200 in Daly City.
Shurflo LLC is closing down and laying off 15 employees on 12/20/2008 at 5900 Katella Ave. in Cypress.
United is laying off 107 employees at Los Angeles Int’l Airport in Los Angeles and 499 employees at San Francisco Int’l Airport in San Francisco on 12/7/2008.
Vical Inc. at 10390 Pacific Center Court in San Diego is cutting staff by 29 employees, approximately 20% of its total workforce, and has accelerated the closure of a research facility.
Vicorp Restaurants Inc. is closing down and laying off 117 employees on 12/23/2008 at 12865 Ann St. in Santa Fe Springs.
West Marine Products Inc. is laying off 390 employees on 12/25/2008 at 500 Westridge Drive in Watsonville.
So long California
its been good to know ya
the dollars I spent there
the women I loved.
My inclination is to be angry with Westport Marine, but they are treating their employees the best. The date sucks!
From the Orlando Sentinel:
Woman accused of leaving dog to die in locked crate to be sentenced Thursday
Satta Sarmah | Sentinel Staff Writer
12:19 PM EST, December 3, 2008
A woman accused of leaving her dog to die in a locked crate without food or water will be sentenced on Thursday.
Christine Abrams, 30, is charged with leaving her 2-year-old German shepherd, Ella, locked in a crate for two months, after she moved out of her Cocoa home to live with a new roommate.
Authorities said a large bag of dry dog food was located a few feet away from the crate.
Abrams told authorities she left Ella locked in the crate because her new roommate did not like dogs.
Abrams’ hearing is scheduled for 9 a.m. at the Moore Justice Center in Viera. She is charged with animal cruelty and faces up to a year in jail and a $1,500 fine.
—
A number of HBBers followed this story when it first broke last year. Unimaginable cruelty.
That is horrible!
Horrible indeed. Sentenced to 8 months:
http://www.cfnews13.com/News/Local/2008/12/4/abrams_sentenced_to_8_months_for_dog_abuse.html
An f-ing year in jail is BS not nearly enough. I would sentence her sorry worthless ass to a cramped locked box with no food or water until death.
Wastes of skin like that don’t deserve the blessing of life.
A goog search seems to indicate she is a.. are you ready for this?
Realestate Agent!