Xmas 2008 Topic Suggestions
Just think; four years ago the idea of a housing bubble was considered by most to be a laughable conspiracy theory. And now, it’s collapse is changing almost every person’s life on the planet. The Palm Beach Post. “Short sales, suddenly all the rage amid a cratering housing market, are a lot like the New York Yankees and Sarah Palin: People either love ‘em or hate ‘em. Realtors such as Jared Dalto say these distressed deals are the only thing keeping them in business. He began focusing on short sales earlier this year and has done a dozen such deals.”
“‘If I didn’t switch gears, I’d probably have hardly any closings this year,’ said Dalto, an agent in Palm Beach Gardens.”
“Dalto worked on one short sale of a Palm Beach County home where the lender took seven months to accept an offer. While the lender delayed, the buyer lost his job, and the sale fell apart altogether. ‘Prices went down significantly in those seven months, so by the time they approved it, the contract price was meaningless,’ Dalto said.”
From WPFB-TV. “A Stuart woman said Thursday that she’s learning just how much foreclosure will cost her. This year, Christmas will be scaled down for Susanna Landino, who is alone and raising her 7-year-old grandson. She found a buyer and entered into a contract for what would be a cheaper, single-family home. But the buyer dropped out, and Landino’s townhome went into foreclosure.”
“‘When I was facing two mortgages, that was way out of line,’ she said.”
The Sun Sentinel. “For Nola McGeachy, it’s going to be a lean Christmas. McGeachy, an accountant, plans to give her husband and two children just one present each, and she is not buying gifts for her circle of friends this year. She’s also giving up her annual trip to Jamaica, buying fewer of the expensive organic foods that her family used to eat and heading to Wal-Mart more often to try to stretch her grocery dollars.”
“Multiply McGeachy’s thriftiness by millions of South Floridians, and the effect on the local economy is unmistakable. McGeachy, who lives in Lauderhill, was laid off earlier this year but found another job shortly afterward. ‘The future doesn’t seem too bright,’ McGeachy said. ‘There are layoffs around every day. I want to conserve as much as I can should my company follow suit.’”
“Economic pressures are forcing people “into a position they can’t get out of,’ said Britt Beemer, CEO of a consumer research firm. ‘You have a survival mentality,’ he said. ‘Spend nothing, buy nothing.’”
The Nevada Appeal. “Carson City’s biggest manufacturer, Chromalloy Nevada, laid off more employees this week because of a continued slowdown in business, a spokesman with the business’ parent company said Thursday. Carson City’s unemployment rate is 7.4 percent in a state that’s seen its highest rate in more than 23 years, according to the most recent state report.”
“Michael Roach, who designed tools at Chromalloy, said many workers expected the cuts. This didn’t make losing his job of more than two years easier, however, he said. ‘I am 60 years old,’ Roach said, ‘and this puts the hurt on my Christmas.’”
“Melissa Cavenagh, who worked at Chromalloy for eight years, said she was surprised when her supervisor told her to go to the human resources office Wednesday. ‘I said, ‘It’s happening, isn’t it?’ And he said, ‘Yeah.’”
“Cavenagh said she loved her job as a planner, and, after the lay offs earlier this month, she thought she was safe. She said she doesn’t know what she’s going to do now. She’ll probably have to move, she said, but she wants to stay close to her daughter. She said it is hard to talk about losing her job.”
“‘It was a shock,’ she said. ‘We didn’t see it coming.’”
From the Bits Bucket last Friday. “Just an update, funny how fast things can change in a few days. Bottom line I have lost my job, my call center decided that they didn’t need to pay a big salary to the trainer and moved someone else into the position to save money. Why pay me 50,000 a year when they can pay someone else much less?”
“My offer on the house is now withdrawn. Real nice, get fired a week before Xmas. Last week I said my job was secure and now today I have no job.”
A reply, “Hey SKB, as I posted before, I bought a house that closed on Friday before Thanksgiving…on Wednesday, the day before our givings of Thanks…I was ‘laid-off.’ My dad had to pick me up that day. When I told him what had happened…he was quiet for a few seconds, then said: (with a reassuring smile of wisdom)…’Well, you had a job before this one.’”
“Sure enough just before x-mas, an old supervisor working at another company… heard about the lay-offs and said for me to enjoy the next few weeks of the holiday and report to work at his company after ‘New Years’”
“Hoping for the best for you skb! Good old Dad! Still thinking & remembering about him…& Mom.”
I’ll be traveling tomorrow to spend the holiday with some friends in Vegas (if the snow gets plowed). So I’ll be posting these remotely. BTW, thanks for all the great Christmas cards! And Olygal, that hand-made one you sent was one of the most clever cards I’ve ever seen.
Vegas! Don’t fall for the handcuff trick, Ben.
Merry christmas ben!!!!!It has been an interesting 4 years reading your blog.
Have a wonderful holiday and a great trip Ben. Drive carefully - we need you!
I bought my Christmas cards yesterday and look to send them out the 26th.
Way too normal (and organized) to actually get them out in a timely manner.
As for holiday discussions I wouldn’t mind creating a “true wealth” list. I’ve just recovered from 6 weeks of constant pain due to a back injury. Good health and a pain-free life (which I am once again enjoying) are definitely at the top of my wealth meter because there is no amount of money I would be willing to take in exchange for chronic pain.
Second on my list is probable my dogs smiling at me when I come home.
What’s yours and be aware I may steal ideas to create a list for my clients.
True Wealth List:
keeping your teeth
a warm place to sleep
food on the table
plenty of hugs
True wealth?
1. Good health, for me and for those around me.
2. Close, meaningful, lasting friendships.
The dentist wants to cap 2 molars next year even though I never had a problem with them. One thousand dollars each.
I have to decide between porcelein and gold or not capping them.
My philosophy is — if you have insurance, you’ll get a crown. If not, a filling will do.
Heh.
I’ll one up you. My dentist wants to fill a small cavity in a tooth that’s shadow on an x-ray film. They don’t hurt and there’s evidence anyone can see on the top of my teeth.
I’m waiting until I can feel something (and if I can, I know what it is) until I get it filled.
Don’t get me started about dentists/orthodontists …….the biggest racket in the USA. They have every soccer mom in America convinced that you are some kind of abusive parent, if you don’t agree to spend $5-10 grand on teeth-straighening. Hell, they wanted to put ME in braces (@ 48 years old).
I especially like how they tell you about all these dire health issues that can be “caused” by crooked teeth…..your jaw could fall off, migraines, high blood pressure, male-pattern baldness, you name it.
Amazing to me that the human race survived so long with crooked teeth.
To add another perspective… my dentist just now offered to put his Christmas visit to family in LA on hold to do an emergency surgery (maxillo-facial infection,) on me first thing tomorrow morning because he didn’t trust anyone in the local emergency rooms to properly care for me. Bless your heart, Dr. Bae. Not to say I haven’t put his two kids through college at this point, but still…he didn’t have to.
Just sayin’…
Bless your heart, Dr. Bae.
Can you get him to move here?
Wow, ahansen. How fortunate to have such a thoughtful dentist!
Hope the surgery goes well and that you will be relatively pain-free so you can enjoy Christmas with your family.
After paying a considerable amount to have several crowns done - and being put on a four-month cleaning regimen - I took matters into my own hands and became diligent about brushing, flossing, and rinsing. I also announced my intentions to my dentist and his staff, repeatedly. I’ve become the model of home care, and the price was right. I do trust my dentist, but I count myself very lucky. It’s tough - some places offer a cheaper dental HMO (where a filling will DEFINITELY do, rather than a crown) … or do I choose the standard racket plan?
Happy holidays all!!!
The Wealth List:
a dry cigarette
a cup of coffee
and nobody shooting at you
the rest is all gravy
“live forever…or die in the attempt”
Catch-22
Don’t buy any real estate, no matter what the broker says.
“spend the holiday with some friends in Vegas”
Ben, if time permits, please be sure to go to the strip between NYNY and Belagio to see the City Cosmopolitan fiasco (construction s/b complete late 2009/early 2010). Deutsche bank foreclosed back in January 2008, and when no bids came in, they decided to complete the disaster themselves. It’s quite a construction site, and I can’t wait until Deutsche Bank and the European Central bank go into receivership and the Euro implodes.
PortlandHomeDebtor
“Just think; four years ago the idea of a housing bubble was considered by most to be a laughable conspiracy theory.”
I sure hope some of the high muckamucks who now claim that ‘nobody could have seen it coming’ spare a few moments of their precious time to click on the link in that sentence, just so they can see all the telltale signs that they ignored.
Talk of a Bubble goes back even before 2002 before rates were dropped by the fed. I was reading Wall Street Journal discussion board in 2002 regarding the existance of RE Bubble. It started that long ago. In the SF bay area, we pretty much saw the bubble take off as early as 1999-2000 when prices doubled from 1998 to 2000. I mean 15-20% per quarter vs prior quarter current year…
Jobs, jobs, jobs. As Ben said, that’s where it’s at.
I’d like to send a little Christmas grinching out to Washington and Wall Street, two failed institutions.
“Merry X-mas, jerkoffs! May a thousand fleas infest your armpits and may you all end up waist deep in the runoff of a Chinese factory. May you find a bunch of hopped-up gangbangers on your doorstep on Christmas Eve. And may you and yours get the sort of medical care comparable to your governance of the country and management of the financial sector.” Back atchoo, the Palmster
Of course this was said with love in your heart and a smile on your face.
Aw, Palmie. Have a little X-mas mercy, won’tcha? Fleas shouldn’t have to live that way!
Hah. Excellent, Big V!
BTW.
Appreciate all your feisty commentary. I get this little shiver of anticipation whenever someone posts something politically misogynistic. Your scathing rebuttals to dumb posts are almost like a call-and-response!
“It was sooooo ________…”
(audience,)
“…How _____ WAS it…?
Very reassuring. All is right with the world as long as you’re on the case.
Suit yourself, but Big V is no heroine to me.
IMHO, she is highly reactive to anything that smacks of criticism of women. Her gender defensiveness is grating and sometimes rises to the level of outright misandry. Recently, she effectively confined “unmitigated risk-taking” as a male characteristic.
When she stays spot on the housing market, on the other hand, her commentary is actually pretty good.
You rest my case.
Know I didn’t, Wine Coundry Dude. You should learn how to read. My commentary is always pretty good.
Alright Palmster! And I hope one day those snobby turds have to drive their own piles of broken chinese crap to the dump rather than just set them out in front of the house for us to pick through.
What are HB blogger predictions for when the housing market will bottom out, and why?
I think it will be so bad in 2009 that no statistics are even made. Like the lost years. The dark ages of the housing market in california lasts until 2012. I’m off to burn a witch.
The NAR has stopped reporting statistics for Metro Detroit. A local group published a median of $62,800 for the whole metro area, and another $18,578 in the City of Detroit.
For the metro, with 10% down and the 4.5% interest rate the Federal Reserve is targeting, that implies a monthly mortgage payment of just $285 per month for 30 years.
Look at the BBC report on Detroit. I feel for the area… but why didn’t they reform the Automakers when there was a chance? Ugh… You cannot fix what doesn’t want to be fixed.
http://news.bbc.co.uk/2/hi/business/7789863.stm
Its going to get ugly… I admit I was too much of an optimist.
Got Popcorn?
Neil
I’ve met some UAW types who would rather see the Big 3 go down the tubes before they “gave back” ANYTHING.
Their mistake wasn’t just building the wrong vehicles. It was decades upon decades of creating unnatural demand for ALL vehicles. There are now too many vehicles in the universe. That’s why nobody needs to buy new cars, not even Toyotas.
There are now too many vehicles in the universe. That’s why nobody needs to buy new cars, not even Toyotas.
Yep. Too many houses, too many cars. Same problem.
It is all about busting the unions and making it so the middle class goes up in smoke. Pfffft.
If this goes down and a few others, we will be seeing minimum wage at the Other auto mftrs.
Seriously folks, no one really really bashes and goes after the WS types/ceos/execs/ political admins etc. and says ‘no more money for youse guys’.
Seriously folks, no one really really bashes and goes after the WS types/ceos/execs/ political admins etc. and says ‘no more money for youse guys’.
Maybe because there are a great deal of us who own stocks through 401ks and IRAs and understand that we are the corporations? And that bashing wallstreet bashes our dreams.
In other words, most of us do not trickle our liquid waste from our bodies into our beers.
You don’t think that the UAW workers have stocks? I’ve heard of union guys seeing their savings accounts disappear like the rest of us.
Let’s pick on military people. They join, go to wars that don’t need to be fought, get housing allowances, college educations, and retirement that most private companies don’t seem to be able to provide it’s workers anymore. Oh but wait, that’s un-American. Sure I think unions are too powerful, but I think that the employees are (for once) seeing their share of the pie on the products they create.
Misses the point, Bill.
I trade stocks and options, and tend to be much less forgiving of Wall Street than the union workers.
Why? Because union workers actually produce things of value. Wall Street exists solely to skim the wealth off the middle class, and to suck up the profits earned by the workers (and paid by consumers) who once comprised the middle class. They exist to enslave workers via debt, and there are far too many of these parasites who are now being protected by the (bought and paid-for) government.
“Let’s pick on military people. They join, go to wars that don’t need to be fought, get housing allowances, college educations, and retirement that most private companies don’t seem to be able to provide it’s workers anymore. Oh but wait, that’s un-American.”
Ever wear the uniform? I thought so. Happy holidays!
It was a rolling bust, so it will be a rolling recovery.
I will maintain to the end, however, that the longest suffering will be endured by Larry’s “flyover” country. As some of you point out, the bubble masked the Rust Belt’s death throes. Stories of fleeing manufacturing were already there eight years ago - for those that cared to put their 401k statements down long enough to look. I remember small mfg. closures being well documented in the Midwest press circa 2000.
Given a choice, I’d still cast my lot with the Sun Belt states - over the longer term.
Maybe it’s worth moving to the Sun Belt for a few years before water gets too scarce and we have to move back to the Midwest to get a drink. We could sell our Sun Belt homes at the next peak and buy mega mansions along the shores of Lake Michigan with cash. And never work again!
Think “infrastructure”.
Long pipelines from the Great Lakes to the Everglades!
Refill the Florida swamplands with clean, cool water from Lake Superior.
Plenty of water. Plenty of Sunshine.
Florida Restored, and ready for the next wave of carpet-baggers from Cincinnati.
I’m pretty sure you are somewhat joking, but if you were serious I’d have to tell you that your pipeline idea is pretty much a non-starter. All the US states and Canadian provinces that border the Great Lakes have agreed to a water compact that severely restricts taking water away from the Great Lakes watershed. It’s been ratified and signed by both Federal governments and is in full effect.
There is a wealthy town in Wisconsin that is about 15 or so miles away from Lake Michigan. The subcontinental divide takes a nasty little turn right around there and unfortunately it is outside the Great Lakes watershed. They have been fighting a court battle for years, trying to get access to Lake Michigan water because their own ground water is contaminated and all the filtering mandated by the EPA is fairly expensive. They’re losing the battle. This is not a good sign for Florida if they are counting on a long pipeline. If Florida were lucky enough to convince all Americans that it was a good idea, someone in Quebec has the right to come down, file a lawsuit in Federal court, and block the whole deal.
Basically, don’t count on it.
However, if it really gets bad, I’d say that the rust belt states are not going to be offering a pipeline - they’re going to be offering free water to any business that relocates northward…
He’s kidding. Actually, Florida has plenty of water, at least, the Northern part of it does. Most freshwater springs in the US, and I think we might be #4 in the world.
That’s not to say we might not completely screw it up with pollution and development. And greed. Nestle Waters, for example, has a lease with a private land owner in the Tampa area (Crystal Springs) and pumps out spring water regularly. We do need to put period to that.
We have our own intrastate water wars. Years ago (1970s, I think) Hillsborough and Pasco Counties made a deal to supply water to Pinellas County. When I first moved here in 2000, a realtor showed me some dried lake beds that she said were a combo of drought and Pinellas sucking the lakes dry. She was pretty pissed off, too. My understanding is that Pasco and Hillsborough tried to withdraw from the deal or modify it, and Pinellas screamed bloody murder and threatened to bury the two other counties with lawsuits. Pinellas does have a couple of its own springs, but one is on the private property of one of America’s oldest spas in Safety Harbor.
All the US states and Canadian provinces that border the Great Lakes have agreed to a water compact that severely restricts taking water away from the Great Lakes watershed. It’s been ratified and signed by both Federal governments and is in full effect.
Yes, indeed!
And smart on us.
20% of the world’s fresh water is nothing to sneeze at.
While I personally believe we’re past peak clean water; I’d love to see some states say, “so…you won’t send us water? Fine. We won’t send you oil/coal/nuke power…”
A pipeline from the Great Lakes to Florida is also unlikely to be cost-effective.
A similar scheme was proposed over a similar distance here in Australia; from the monsoon areas in the north of Western Australia to Perth. No inter-state sovereignty issues (although the greenies were certainly mobilising).
Anyway, the cost of water delivered through the proposed pipeline would have been higher than desalinating seawater at the point of consumption, which on a large scale costs very roughly $1/ton.
Just build nuclear reactors along the ocean. Use them to generate electricity. Use them to desalinate water from the ocean into drinking water. And use them to convert lead into gold!
Right on, beach!
“What are HB blogger predictions for when the housing market will bottom out, and why?”
In real dollars, never.
Why? Because the dollar is going to be turned into toilet paper and demographics are such that there will be a glut of homes on the market going forward due to boomers downsizing and family size decreasing.
I think the immigrants will have a positive affect on the real estate markets of such cities as Frisco and NY. I’m from NY, and I can tell you that these immigrants from Korea and South America (Savers) are just keeping otherwise slums from being turned into such. It’s all a tug of war, as it were, but in the last downturn, circa 1991, Jamaica, Queens just but all folded up. Not now. There are all these immigrant businesses to fill the gap with restaurants, cheap stores, like 99 cent stores, etc. Not upscale, but it does seem to have its own economy.
“when and why”
I will still go with 2012. Reserving the right to amend that estimate as time goes forward!
Why not sooner: Prices are still very high by the measure of rents and incomes, and the downward movement of prices, though now accelerated in many areas, would still take a few years to bring prices in line with rents (if rents don’t fall a whole lot). We have often noted that the resets in the Zellman chart and other people’s updates of that chart have a second peak in 2011. I’m not sure if that matters while prices are sinking — foreclosures will feed on themselves without requiring the additional impetus of ARM resets. However, if prices had any other reason to stabilize, the ARM resets would tend to prevent it.
Why not later: Let’s just say, Obama, C. Dodd, B. Frank, and Columbia dean Glenn Hubbard, not to mention Sheila Bair (if she’s rehired) will all be trying very hard to arrest the decline. The worst of it is, they may succeed in making the decline go slower and last much longer. But O will be up for re-election in 2012, so it would be good for him if there had (then) been several months in a row of flat-to-upward house-price statistics.
When I finally get off my lazy ascii and send Ben an Christmas card, for crying out loud.
“What are HB blogger predictions for when the housing market will bottom out, and why?”
Professor, I watch the Case Schiller futures. Unfortunately, they only do 10 cities, but these folks are putting their money where there mouths are. I don’t pay much attention to words and opinions, which are free.
Anyone on the fence, I would suggest staying where you are. Wait until the Madoff repurcussions are reflected by the “affluents” who are about to find out they aren’t affluent if they are overleveraged. A year from now there will probably be smaller versions of Madoffs surfacing as auditors (I’m a CPA auditor) comb through the books a lot more carefully than we have in the past, but the total of these other smaller Madoffs cumulative frauds may exceed Madoff’s $50 billion, possibly by quite a bit.
These “Hamptonites” have been paying mortgage, property tax and extravagent living expenses from the “15% returns” they have been getting, which were only proceeds from Greater Fools coming in the ponzi. Now they’ve lost their principal, still need to eat and pay property taxes. They’ll be selling off any remaining assets they may have.
The world as we currently know it is about to completely change. The way I look at it, everyone is going to switch places. The savers (former servants) are going to replace the overleveraged (former masters), and the overleveraged masters are about to become servants to the savers. Of course, many of the overleveraged deadbeats are going to choose suicide, but that’s their choice, and I’ll not shed any tears, as they enjoyed the good life they were not entitled to.
PortlandHomeDebtor
“The savers (former servants) are going to replace the overleveraged (former masters), and the overleveraged masters are about to become servants to the savers.”
BUT BUT BUT! We “need” rich people! Who will give us jobs?! lmao…
Housing will “bottom out” when the last of the Boomers start selling the houses we retired to. (Actually retired to, not THOUGHT we were GOING to retire to….) This also takes into consideration all the multi-generaltional doubling up we’re going to be seeing. Until we die off, there’s going to be a glut. Sorry, it’s just the demographic coupled with excreable planning/greedy, short-sighted development.
2030.
generalational=generational.
My kid is on the way up with six of his college buddies for Christmas carnage. I’ve already cracked the cabernet….
LOL
That sounds fun ahansen.
I’d be “hiding” the Cabernet, if I waz you…….:)
Hmmmm …
6 college boys are coming over, and ahansen is getting drunk? Please tell me you won’t be posting a porno tomorrow.
Screaming queens to a person…Christmas orphans escaping provincial (unforgiving) family units.
Son, his gf, and I are planning to blog this extravaganza in its entirety- complete with video documentation as they (inevitably,) raid my vintage shoe and accessory closet.
We’re talking serious “Showgirls,” Zac Efron, MMA octogon retrospective here. Also expecting up to 3 feet of new snow overnight. (And me with some vexing medical issues that require molto pain relief.) Pray for me people…?
-to be continued
“6 college boys are coming over, and ahansen is getting drunk? Please tell me you won’t be posting a porno tomorrow.”
Please tell me you will me.
…. will BE.
Why I should never post before 7am.
LOL
have fun Ms Hansen. Merry Christmas and healthy New Year!
Tried to talk a friend from going ‘Jeremiah Johnson’ by using your recorded interviews. He claims he has his bowie, and luger. I suggested you did too.
He claims he has his bowie, and luger. I suggested you did too.
True. But what happened to me was a fluke. Like having a single engine plane crash into your house. Twice.
Not to worry. Sometimes life just goes weird on you, ya know…?
PB
“What are HB blogger predictions for when the housing market will bottom out, and why?”
-
2011
Because there is no way it will be in 2009 and because I can’t think 4 years ahead, otherwise I’d reconsider.
-
Seriously?
2011——–>2014
I just plot Case-Schiller and add a lot of uncertainty.
What are HB blogger predictions for when the housing market will bottom out, and why?
2012 because the last bust (at least in Cali) started in 1990 and bottomed around 1996- 6 years top to bottom very unscientific
Now I have another question ; How many of you think you will still have a good enough job so you can buy a house in 2012 ?
Makes it hard to move around when you own a home
What are HB blogger predictions for when the housing market will bottom out, and why?
December 2012 and stay flat for at least 5 years.
Because option ARMs peak 2011 and stay high through 2012. Time magazine will post a front cover of a typical house on main street in Podunk in 2017 and call it the worst investment of the 21st century.
Even before 2017 all the liars will be driven from neighborhoods they could not afford anyway. Lots of houses will be bulldozed and turned back into parks or empty lots.
RE prices will take off from 2017 but at a very modest pace, increasing in price 2% a year.
What are HB blogger predictions for when the housing market will bottom out, and why?
————————–
I used to think the housing bubble would settle down in 2012, but that we would never see inflation-adjusted peak prices in decades (or our lifetimes) unless the govt stepped in and created major wage inflation (not sure how???) or basically began handing out money to anyone willing to buy a home (see tax credit that might be turned into a gift of sorts).
After the effects of the bubble have washed out, we will have to deal with Baby Boomers who will be net sellers from this point forward, IMHO. Then, we will also have to deal with the loss of defined-benefit pension plans, healthcare, stable jobs, “guaranteed” raises, etc.
In order for prices to rise, we will have to see sustained wage increases across the economic spectrum. For now, I do not see any compelling reason to believe this will happen in the near future.
“‘It was a shock,’ she said. ‘We didn’t see it coming.’”
The mantra for 2009.
A sucker punch.
A perfect storm.
A financial tsunami.
A one-in-a-million chance.
No one could’ve predicted this.
2009: the year of Implausible Deniability.
And overworked cliches.
you left out “uncharted waters”
How about a Black Swan…
Unprecedented market event.
And don’t forget “It just happened” from the completely uninformed on Main street. What they really mean is “I can’t come up with any other reason and I’m confused”. The truth is we were LED here by a bunch of flag waving knuts babbling stupidity like “tax cuts are good for the economy” and “deficits don’t matter”.
A planner that didn’t see it coming. Says a lot about city planning.
I think whe was a planner with Cromalloy, not a city planner.
Regarding topics over the holiday:
As the economic situation worldwide deteriorates further in 2009 and beyond it would be interesting to hypothesize the different forms that popular dissent will take.
Will there be riots? Will there be crash and grab looting? Will the people take the misery silently and work their way out of it?
What areas of the world will see the most serious unrest? Is there any area of our nation or any nation that will not see trouble?
Keep an eye on the petro-states. The oil price collapse of the 1990s sure helped enable some real meanies. Imagine what the current oil price collapse could give rise to, if it continues that is.
Good example, and when we say “oil states” we should be thinking “balkanization”.
” think; four years ago the idea of a housing bubble was considered by most to be a laughable conspiracy theory. And now, it’s collapse is changing almost every person’s life on the planet.” Unfortunately not everything “collapsed”. House prices in many areas of SouthCal are still 200% up compare to year 2000. People are talking about deflation now, but 200% still means inflation to me. Guys we have way to go till real affordability level .
The Elks in Oregon couldn’t care less.. ah to wonder around and be a buck with a harem, only to chase around the females and fight off the other males. No such thing as bubbles
Ian you are such a rutter!
four years ago the idea of a housing bubble was considered by most to be a laughable conspiracy theory.
As I like to say, everything unknown is a conspiracy, until it isn’t.
I remember my old neighbor accusing me of being a conspiracy theorist. This was because I believed in
1) the housing bubble
2) illegal wiretapping by the Bush administration
He had seriously never even heard about the wiretapping thing. These are the people we’re dealing with here, folks. I think these people may turn out to be the dangerous ones once reality conks them on the head and says “Wake up, your job is gone, your government has run away with your trust, and your assets are worth nothing”.
Yes, we still have a way to go, but it will happen.
For the aging boomers………recall a tune by Arthur Brown, on an Album, the MAD MAD WORLD of Arthur Brown, (or the Crazy world) ……..”FIRE”.
It starts out………”I am the god of Hell-fire, and I bring you……F I R E !!!
….to destroy all you’ve done………..and all you’ve become…”
It was a hit tune for a while and most appropriate for today.
Here’s the Arthur Brown lyrics that fit the current financial scenerio:
I am the god of hell fire, and I bring you
Fire, I’ll take you to burn
Fire, I’ll take you to learn
I’ll see you burn
You fought hard and you saved and earned
But all of it’s going to burn
And your mind, your tiny mind
You know you’ve really been so blind
Now ’s your time, burn your mind
You’re falling far too far behind
Oh no, oh no, oh no, you’re gonna burn
Fire, to destroy all you’ve done
Fire, to end all you’ve become
I’ll feel you burn
You’ve been living like a little girl
In the middle of your little world
And your mind, your tiny mind
You know you’ve really been so blind
Now ’s your time, burn your mind
You’re falling far too far behind
OOhhh
Fire, I’ll take you to burn
Fire, I’ll take you to learn
You’re gonna burn, you’re gonna burn
You’re gonna burn, burn, burn, burn, burn, burn, burn, burn, burn, burn, burn
Fire, I’ll take you to burn
Fire, I’ll take you to learn
Fire, I’ll take you to bed
I can’t believe you posted that, diogenes! I happened to hear it on the radio in the car yesterday! Brought back some memories. I saw that guy at the Fillmore East in NY back when I wuz a pup. He was on the same bill with Sweetwater, Al Kooper and Super Session and BB King. Weird collection of acts. My first hippie concert when I wuz a pup, my buddy’s parents actually took us. They liked BB, hated everyone else. Especially Arthur Brown. Who really kind of creeped me out, but he was ahead of his time with the Marilyn Manson stuff. Although, that night, he was pretty out of it during his song, almost lit the stage on fire and some guy in the audience tried to climb up on the stage and get at him, security had to drag him away. Could have been staged, but looked pretty real to me.
December 2004 seems like a million years ago! Back in the day…. when Gary Watts, Lereah and Greenspan were still taken seriously.
I just got this message from the ACLU:
“In the last couple of weeks, however, we’ve been hit hard in a way that no one could forecast. You have, no doubt, heard about the Bernard Madoff Ponzi scheme in which investors have been horribly defrauded of up to $50 billion. What you may not know is that two foundations that have been incredibly generous and longstanding supporters of our national security and reproductive freedom work have been victimized by the Madoff scandal — forced to close their doors and terminate their grants.”
Madoff may do more damage to some people than the housing bubble.
Wow. And to think this guy continued recruiting more suckers until the very end. I guess that’s what made him a great criminal.
We shall see what his ultimate fate is. Like my dad asked me the other day:”Why hasn’t somebody taken this guy out yet?”
Because nobody in the USA has balls anymore.
I’m waiting for a slew of “execution-style” or “unknown sniper”
-type slayings of some of the jackholes to signal a bottom. “Risk” may take on a whole new meaning.
Of course, all this means that, inadvertently or not, our so-called leadership has turned the good old USA into a Banana Republic…….but this is an insult to “Banana Republics”, because they make the attempt to enforce law and order, and actually sell something that people want to buy (bananas).
Actually, we may see something like Somalia first…..extremely weak governments that are totally impotent, forcing people to look to their own circle of friends/family for mutual security and support. You can see signs of this “circling the wagons” all over.
Then, if we’re lucky, we might eventually evolve into a Banana Republic.
If you looking for “justice” from the government, you are going to be very disappointed.
(sarcasm off…)
“because they make the attempt to enforce law and order”
In my experience law and order is not enforced in banana republics, it’s bought and sold.
You mean…just like here?
No. Not even close.
ahansen,
How many masters of the bubble are behind bars right now?
They are actively prosecuting the lower-level participants like mortgage brokers and borrowers even! But just some lip service (so far) where Wall Street and **Washington D.C.** are concerned.
Obviously, there is a big difference, but I was just making a point.
Also note what the OP mentioned about visiting a jail. All the poor people remained behind bars while the rich can be bonded/bailed out.
To be “politically correct” is its own reward, satisfaction, and justice, right? We should all understand, tolerate and embrace the concept that some people are pathological liars, theives, and frauds. We celebrate diversity in this enlightened age, no?
Bernie didn’t ask to be born different. Those who criticize him are probably just “closet crooks”, anyway. They need to get in touch with their felonious side!
- sarcasm off -
Merry Christmas, everybody!
Some of that shouldn’t be sarcastic. Local governments here in Florida are in real trouble, and the lack of effective local government will create a power vacuum that somebody is going to try to fill. I can foresee a scenario, for example, where the most powerful entity in the city of Clearwater is the Church of Scientology.
“the most powerful entity in the city of Clearwater is the Church of Scientology.”
Snake, I’d say that’s a done deal.
OJ being free really ticked me off, but if you are patient enough you will see some marvelous things. God’s wheels work slowly, buy they grind exceedingly fine.
“Why hasn’t somebody taken this guy out yet?”
You know guys, there are a lot worse crimes in the world that people aren’t “taken out” for. There are child rapists, adult rapists, murderers, torturers, tyrants, and abusers of whatever power they are granted. While we obviously must extract justice for all crimes (including financial ones), it doesn’t really make sense for us to be more upset about Bernard Madoff than we ever were about Robert Pickton.
A big Madoff investor has just committed suicide.
http://gothamist.com/2008/12/23/report_big_madoff_investor_commits.php
Must have been from out of town: NY has long had one of the nation’s lowest suicide rate, but a relatively high homocide rate. Offing Madoff — or hiring someone to do it — would have been more representative of the local culture.
What amazes me the most about Madoff is the extent to which there were hedge funds whose only reason for existing was that they had “access” to him.
That guy could have taken one for the team and taken out Madoff first…
”Why hasn’t somebody taken this guy out yet?”
Maybe because Americans are much nicer, kinder, gentler and more caring than they are portrayed to be? Or more likely he has a Blackwater security detail.
Nope, he doesn’t.
Then I guess it’s the former.
The ACLU lost money? well there is a silver lining.
My question is where, if anywhere, can one hide from the worst economic year of our lifetimes in 2009?
I have a particular concern, with two kids in freshman & junior year of HS. We have actually saved for college.
Will they even get three years of HS before it collapses due to budget cuts?
Where could the college savings be put and not have its value wiped away, particularly if defaulting on debts becomes as much of a social movement among the lemmings as running it up?
And even if the cash I have continues to be king rather than kindling, how could I be sure that any college we send them to won’t crash and burn?
There isn’t much they can do to my wife and I — we can just stay in our paid off house and live our customary cheap way come what may. But the kids’ education is a concern.
What I cannot understand is how the educational institutions can continue to raise tuition. I’ts about time they reduce these costs. If that happens you will get more value.
The 2 useful things I learned in college:
1) Never pay full price for a book
2) See #1
One of the reasons they keep raising tuition is that the states keep cutting funding. For example, I think UVA is down to only 7% from the state.
My hunch is that a decent chunk is due to “stuff” that didn’t exist 30 years ago, such as lap-tops for every student (or even stocking and updating computer labs). My other hunch is to look at how much administrators are paid — it’s not unusual to make >$500k.
I can tell you what’s not driving the tuition increases: faculty salaries. They’ve basically risen proportionally, so that’s not the cause. Nor is it due to an increased number of full-time faculty: that’s actually gone down as universities try to save money by hiring adjuncts for pennies-on-the dollar.
Higher education is the next bubble to pop.
There might be a bubble in women’s studies, ethnic studies, and gay/transgender studies. Seriously what do people do with degrees like that? I was just talking to friend of mine who works for county health services. She was telling me about a black woman who had a PhD in some type of ethnic studies. She could carry on an interesting conversation, but when asked to write a report my friend discovered that she was practically illiterate. And she had a PhD!
Many areas allow “dual enrollment” for high school students. They can attend a community college for free (or cheap) and get both high school and college credit at once. And I also highly recommend CLEP tests, AP courses, and other testing out things such as DANTE. There is a program called CollegePlus you can google.
I suggest all this as an alternative to waiting around to see if the school district and your college funds survive. Maybe your kids would be better served by doing their college work, apprenticeships, or trade schools now.
Maybe I should clarify. I mentioned doing college work now because the poster was concerned that his kids’ school district may self-destruct before they both finish high school. He was also concerned that their college fund would be decimated in the next few years. Hence, I suggested looking into just skipping the rest of high school and starting college (or job training) now to help avoid both problems.
Good advice.
Knowing how bad things are going to get, after extra-curriculars, guidance counselors and electives are eliminated, they are going to have to start cutting years of school. What makes most sense to me is eliminating senior years. In the advanced public HS my kids attend, they will have learned more by that time than I did.
I am concerned that instead they will just cut all years, meaning to get that three years of schooling will take six.
Be warning about AP classes- my little Einstein had 25 AP courses, none of which will count as Credits at his Ivy.
The AP’s “helped” him get into the Ivy & he doesn’t have to take most of the “Entry Level” course work.
He still has to have the full credit load to Graduate - so no savings to Mom & Dad !!
oopps - “warned” not “warning”
Why would you expect college-bound HS classes to be counted as college credit?
That’s what HS AP courses are. If the student achieves a high enough grade on the exam, it ’s considered college credit. Unfortunately, the more uppity schools may not accept them as credit.
But the kids’ education is a concern.
You can educate your kids if you have the will. Or your children can self educate. All you need is books on the subject in question and a schedule. Life long self education is always better than the “drink from a garden hose for 4 years” approach to learning that is college.
For instance, I probably know more (now) than the average realtor on how to properly evaluate the price of real estate, thanks to the HBB. When I look back at the development of my youth, I consider most of my education to have been received in the 2 years *after* college.
Educating kids is treated as this giant, complex subject that we “must” hand off to “experts” - right after we read to them, potty train them, and teach them to talk, ride a bike, tie their shoes, and ABCs
You’ve already educated them on some important skills. High school is pretty much the same except they give the answer keys in the teacher’s edition.
I think someone will always be around to issue diplomas and such. The frugal way to have at an education is to test out of the formal classes as much as possible. If your kids need college for some formal professional track (doctor, accounting) - go as cheaply as possible through all of it and supplement on the side.
But then wouldn’t you be depriving yourself of an outside point of view? Interaction with other students? Access to institutional research? The answers to questions that are not on the test?
But then wouldn’t you be depriving yourself of an outside point of view?
Internet solves this one. Only 1 point of view was culturally acceptable at the liberal arts college I attended, which was liberal/left wing in nature. Diversity was the swan song, but it did not exist in my college experience.
Interaction with other students?
A nicety, but completely unnecessary to education at any level. Actually, given the level of hormones in the average high school/college student, I’d wager they’d get a lot more education with *less* interaction. In any case, the Internet solves this one too.
Access to institutional research?
The Internet was invented to do this primarily. I remember the ‘Net when it was just a blue screen connected to other university libraries. Ah, those were the days.
The answers to questions that are not on the test?
I found a whole lot more of these after I graduated college. (And there was not a multiple choice in sight at my top rated college.)
Vermontergal:
We don’t tend to access other points of view through the internet. If we don’t like what a particular website has to say, we typically vent our feelings and then move on, rather than having to write an essay about it. I have a feeling that, if it weren’t for your liberal arts college, you may have never been exposed to the possibility of liberation at all. In that case, you may never have even picked up on the whole internet thing.
Interacation with other students helps you learn how to get along with people that you might not have otherwise understood. It also helps you make friends, which is not a nicety, but rather an exigency.
When I say “institutional research”, I’m talking about doing experiments in a lab, going out and interacting with patients, participating in field surveys, etc. I don’t mean “library research”. The stuff at the library couldn’t have been written if it weren’t for the basic research that went into it.
Answers to questions that are not on the test:
I’m talking about the opportunity to pick up details and nuances that you wouldn’t have gotten had you merely tested out of the class. I just don’t think that the test is a good replacement for the actual class.
We don’t tend to access other points of view through the internet.
We don’t? I would tend to think the HBB proves the opposite. I have seen in previous posts that you and I have a very different viewpoint on life. And yet you and I keep coming back here. Hmmm…
rather than having to write an essay about it.
Ah, the essay. I mastered it when I figured out that what I needed to write was what the professor wanted to hear. I did take that skill with me to the business world.
I have a feeling that, if it weren’t for your liberal arts college, you may have never been exposed to the possibility of liberation at all. In that case, you may never have even picked up on the whole internet thing.
You are making some rather gigantic leaps about my background. I will say this: liberation is defined by the beholder and college did not “liberate” me.
Also, I got a pretty good chuckle about how I wouldn’t have picked up on the whole “Internet” thing as I’ve been interested in computers since I and they were “bornded”.
College only ended up as a detour from that interest.
Interacation with other students helps you learn how to get along with people that you might not have otherwise understood. It also helps you make friends, which is not a nicety, but rather an exigency.
The business world taught me that. In school, you choose your friends (who are usually like you) and max out at usually a semester with unpleasant people. When you have to show up day after day and work with joe schomoe in the next cubicle for months and years, who is a different age and background, then you start to learn how to get along with people.
When I say “institutional research”, I’m talking about doing experiments in a lab, going out and interacting with patients, participating in field surveys, etc.
That only really happens in a meaningful way at graduate levels. (And I went to a college the emphasized a great deal of undergraduate field work and I majored in geology.) Labs at the undergraduate level are generally very scripted and if you don’t come up with “right” answer, you’re wrong. End of statement. Real research is messy and rather subjective.
I’m talking about the opportunity to pick up details and nuances that you wouldn’t have gotten had you merely tested out of the class.
And then promptly forgot 2 semesters later. I think a test is actually a better replacement for the class. If you test out of something, chances are you really worked with the material or have a great deal of experience in the subject. More material has a chance to settle into the long term memory banks.
Many people will continue to get their education through classrooms as it is convenient and provides discipline that many lack. In other words, I don’t think you’d out of a job if there are other methods other than classrooms to a good education.
And all I’m really arguing here is that there are many methods and paths to a get education. College does have it’s merits (convenience being a major one) but in my opinion they are not for the reasons you stated.
I’m talking about the opportunity to pick up details and nuances that you wouldn’t have gotten had you merely tested out of the class. I just don’t think that the test is a good replacement for the actual class.
I think an important consideration is what is the student’s goal for attending college? Are they doing it to learn for learning’s sake or curiosity? Or are they just playing the game to get the degree to get the job? These are two different goals. Most students just want the credentials and from what I can tell, most HR types don’t care what content was learned, as long as the degree is “right.”
If a credential is what is wanted, getting done with college the fastest, cheapest way should strongly be considered. Most people forget that even a full scholarship has the opportunity cost of lost income that could be earned if a student graduated early.
An important point is that the original post was about being able to finish high school (and then worry about college after). How many high schools allow outside points of view or have access to institutional research?
Plus, after self educating with life, jobs, travel etc, each one of us can take an ‘equivalency test’ which when passed, you get credits and go ahead a few grades. Then you can shorten your actual ‘college time’. Actually got 34 credits that way, one time.
Big V,
While I agree with you that college offers an environment where students can learn from one another and do research, you can also do this through less formal “special interest” groups. You can do it for free, can debate back-and-forth until the cows come home (essential to honing and creating a logical flow to your argument), and you can really delve into the topics (sometimes very narrow) that you find particularly exciting and interesting.
Some of this can be done on the internet. How many HBBers are more knowledgeable than most others (even those within the investing and RE communities) about the bubble’s causes and possible solutions to the problems?
Do you have high school age kids? At some point around age 13, they become willing to listen to any adult EXCEPT you. I think a chemical circuit in their brain decides you’ve had your shot.
Actually you’re not allowed to educate your own children in Clownifornia any more unless you have accreditation as a teacher and I believe even as an institution. My hope is that the economic downturn will actually force the state of California to reverse their decision as a means of purely saving money by allowing individuals to educate their children at home.
They reversed this ruling.
In a rare moment of reassessment, the Court of Appeal for the Second Appellate District in Los Angeles, California, recently reversed its February opinion, which formerly held that parents who did not hold a teaching credential could not legally homeschool their children. Though it joins a slim minority of cases that are reheard and reversed, In re Rachel L. (now In re Jonathan L.) is more than a testimony to judicial humility. It also serves to showcase the incredible timing and hand of Providence in the unique way a successful defense of homeschooling, which so eloquently influenced the justices of the court, was brought together. HSLDA had the opportunity to play a crucial role in the reversal.
http://www.usjf.net/modules.php?op=modload&name=News&file=article&sid=485&mode=thread&order=0&thold=0
Merry Christmas! Forbes Top 10 worst hosuing markets for 2009!
Los Angeles is #1
http://money.cnn.com/galleries/2008/fortune/0812/gallery.worst_markets.fortune/index.html
They need to have a “Top 10 list - excluding California”. Those golden staters always have to be the best at everything.
10 Worst Hosing Markets!
LA, Stockton, Riverside, Sacramento, Santa Ana-Anaheim, Fresno, San Diego and Bakersfield all ranked in the top ten, with predicted price declines next year of over 20 percent for all of them. I am wondering what areas of California are predicted to have offsetting price increases to justify the California Association of Used Home Seller’s forecast of a mere six percent price decline next year?
8. San Diego
San Diego
2008 median house price: $412,490
2009 projected change: -21.1%
2010 projected change: -2.9%
As the luxury condo boom continues to fizzles, median home prices in this southern California market are forecast to fall $87,000 to $326,000 in 2009.
A quick check on DataQuick dot com’s SoCal housing report reveals the November 2008 median for San Diego was already down to $305,000. So is Forbes predicting the price will go up to $326,000 in 2009?
BTW, an increase in SD home prices from $305,000 to $326,000 would be a 6.9 percent gain — not exactly consistent with Forbes’ prediction of a loss over 20 pct.
A twenty percent loss off $305,000 would get you down to
$305,000*(1-0.20) = $244,000. I would guess that will be close to the bottom if it gets that low, though I expect the high end to take much longer to bottom out, due to Alt-A and prime resets scheduled for 2009-2010.
Their prediction is stupid, since it has the median San Diegan household earning about $100k/year in 2011, wich is about 2x what people earn today. Don’t think so.
That’s *household* income, not individual. Between a couple that’s possible.
Possible. But not median.
In 2000, the median income for a household in the city was $45,733, and the median income for a family was $53,060. [13] Males had a median income of $36,984 versus $31,076 for females. The per capita income for the city was $23,609.[13] About 10.6% of families and 14.6% of the population were below the poverty line, including 20.0% of those under age 18 and 7.6% of those age 65 or over.
I’d take a guess that 100K puts a household in SD in the top 10% of all households in that area. Which means that only about 10% of the population of that entire city can afford a 300K home. Look out below.
Median hh income for our zip (SD 92127) = $78,000. Median single family home price last month (DataQuick) exceeded $800,000. We have a long way down from here.
Today’s median household income in San Diego is around $50k/year. Most people do not make that much. Besides, people are starting to figure out how unrealistic it is for mom to keep working full-time while raising two or more kids. They tried that for a while during the bubble, but are sick of it now. I guess kids are taking equity’s place as #1 in the American family.
This is where the problem is……they won’t be able to put a “bottom” on housing prices, until there is a “bottom” in houshold/individual income.
What’s the bottom? Eight bucks an hour? At 2 times income, that means an affordable house will have to sell for around $35,000.
I’m still thinking that a Federal Income Tax holiday/FICA payroll tax suspension of, say, 1-2 years would do more to striaighten things out than any of this “targeted stimulus” they are talking about (all of them assuming that the government knows best on how to pick winners and losers)……hell, just send a 30 thousand buck check to every taxpayer in the USA. J6P cannot possibly waste this money any worse than the Wall Street jerkoffs did.
I refer to it as the “Trickle-Up Theory”
Inflationary? Sure, but they are firing up the printing presses no matter what.
I nominal terms Housing bottom will be when inflation takes off from the stimulus money printing that is going full bore. Not before. My guess is 2012. If you constantly poke a pig it will eventually respond.
In real terms it will never bottom in our lifetimes. The demand will decline for housing and the “investor” will be a rare bird due to low yeilds.—- Glut of current housing combined with downsizing/death of baby boomers will result in 20+ years of declining RE value. The mcmansion trend will disappear and the US will follow the rest of the developed world and want to live small.—- sort of how grunge followed excess of the 80s.
Unless it dies.
Take that Florida!!!
I’ve been saying all along that Cali has a greater capacity for posing than any other place, hands down.
think; four years ago the idea of a housing bubble was considered by most to be a laughable conspiracy theory. And now, it’s collapse is changing almost every person’s life on the planet.
8 months ago the idea of a housing bubble was considered to be a laughable conspiracy where I live (Vancouver).
Now this in our national newspaper, the Globe & Mail (taken from condohype, one of our local blogs:
“Gallows humour, but no denying it: The bubble has now burst. And in B.C. real estate, it’s almost certainly not finished deflating. In a December, 2008, economic update, Royal Bank of Canada described the B.C. real estate market as being in “full-blown correction mode” and “unravelling fast.”
Meanwhile, bloggers are gloating. I’m talking about those real estate death watch sites such as Vancouver (un) Real Estate and Condohype.
…The sarcasm is perhaps a little undignified, but you can hardly blame them for feeling satisfied. They diagnosed market madness. And, with varying degrees of insight and eloquence, they were correct.”
http://condohype.wordpress.com/2008/12/22/the-globe-and-mail-the-bloggers-had-it-right/#comments
I can top that.
8 weeks ago the idea of house prices falling was considered to be laughable throughout most of Australia. The (Southern hemisphere) spring selling season was underway and homes where I live were being listed for 10% or so above last year’s prices, and selling fast.
As of today, the idea of a BUBBLE is still out there in conspiracy land, and the MSM is still touting the most probable outcome for 2009 as a nother round of price rises.
Heck, there are even full page ads appearing in the finance sections of the papers urging people to go away from the risks of the stockmarket to the ‘certainty’ of Real Estate for their retirement investments (and these ads ALWAYS mean residential RE when they say that).
Stories are just starting to appear in the MSM about sales being very slow, and prices starting to fall in the low-end areas of places like Perth and Sydney, but the prevailing view is that these areas are where the riff-raff live and couldn’t possibly prices where WE live.
Meanwhile, a steady drip of job loss announcements is eroding the foundations . . .
Whoa. Thanks Ozajh for that DownUnder info.
ajh,
I thought prices had been dropping there for the past year or so. They were talking about auctions where no bidders were found, etc. Did something change, or did that not really happen, or was it a blip?
That happened, and is still happening, in the far-western and far-south-western suburbs of Sydney. Very roughly equivalent to Riverside or Manteca, I think. A lot of recent subdivisions with LLOOOONNGGG commutes and high mortgages.
So far the infection is claimed to be contained, although a recent prediction of an overall Sydney 6% decline in ‘09 has sent shivers up a few times.
In general, at present, most people are FAR more concerned about share price falls.
Thanks for the clarification.
Merry Christmas!
Prices are dropping in Australia, but the MSM is suppressing the data, or fudging the data, you know, the usual stuff we saw about 18 months ago. One of Australia’s largest mining companies, Rio Tinto, recently laid of thousands of workers.
My wife is Australian and we have a 1-year-old son. We are deliberately delaying moving to Australia until the bubble bursts. It is absolutely unaffordable to raise a family in Oz right now. Their bubble is the last to burst in the western world, but it is bursting… finally.
What will be the effect going forward of the Fed’s open-ended pledge to inflate as much as it deems necessary?
IRWIN KELLNER
Watch that printing press
Commentary: Money supply will soar once banks loosen purse strings
By Irwin Kellner, MarketWatch
Last update: 12:01 a.m. EST Dec. 23, 2008
PORT WASHINGTON, N.Y. (MarketWatch) — As 2008 draws to a close, one of our chief concerns is deflation. A year from now, the nation’s No. 1 problem might well be inflation.
Last week’s statement by the Federal Reserve indicated that, when it comes to interest-rate cuts, the central bank has gone about as far as it can go.
The Fed acknowledged that the actual federal funds rate was well below its target because it has injected massive amounts of liquidity into the economy. So it made this rate its new target, and said that it would concentrate instead on pumping gobs of money into the system. Read previous column.
Not that the central bank has been exactly resting on its oars.
On the contrary, according to the Federal Reserve Bank of St. Louis, the monetary base (the raw material for the money supply) has risen at a seasonally adjusted annual rate of 86% over the past year. Bad enough, but over the past three months this has skyrocketed to an annual rate of almost 1,000%!
“As soon as banks loosen their purse strings…”
Caveat lendor.
“A year from now, the nation’s No. 1 problem might well be inflation.”
I believe that eventually the Government will basically guarantee all loans made by banks to finally get lending happening again. They will of course, put a time limit, but that will get extended time and time again into perpetuity. That’s how Fony Mae got started in the 1930s, and 20 years from now young adults will think that’s how it’s always been.
Similar to SBA loans today, we’ll need Uncle S(c)am to co sign on any loan from an FDIC insured institution. Will it be like student loans (i.e. can’t BK on the debt)? Who knows. But it’s the only option.
However, I believe that it will eventually lead to hyperinflation of the $, until the dollar is replaced by a new fiat currency backed by energy BTUs. IMHO.
“the monetary base (the raw material for the money supply) has risen at a seasonally adjusted annual rate of 86% over the past year.”
Article is correct; however, none of this money is being lent out other than to US Govn’t via Treasuries. Rest of it is sitting in bank vaults masquerading as “capital.”
PortlandHomeDebtor
The banks are not going to loosen purse strings. With the demise of the securitization market, risk has been reattached to origination. Banks are again “loaning their own money”. This means they actually care about getting paid back.
If anything, the purse strings will get tighter.
This is why I’ve changed my mind on the inflation story. To get inflation you have to get money in to the hands of people that will spend it.
They can’t get banks to loan the money to people that will spend it because those people are already in debt upto their eyeballs and can’t pay back the debt they already have.
They tried just handing out money, but too much of it was used to pay down debt… horrid for the banks that need every $ of interest to cover their losses.
Obama seems to be pushing for make work projects, but there is no way they can actually push NEARLY enough money into the economy that way. Just think about it. $4.5 trillion handed out to banks. $850 billion over 2 years for infrastructure and other pork? No way can they make-work the trillions a year into the economy that are needed.
So, how do they get money into the hands of the people that will spend it, without getting any of it into the hands of people that will save it or use it to pay down debt?
‘The banks are not going to loosen purse strings. With the demise of the securitization market, risk has been reattached to origination. Banks are again “loaning their own money”. This means they actually care about getting paid back.’
Isn’t this why the loans need govt guarantees? (See the post above yours by pdxHOMEDEBTOR/ocSANDRENTER for details…)
Perhaps….. I just don’t see it. I think there will be more and more resistance to guaranteeing a refi of existing bad debt. The guaranteeing of NEW debt is even more unlikely, in my opinion.
The cry “Where is my bailout?!” coming from Main Street is getting louder and louder every day.
The politicians keep saying this is a Wall Street problem that they are trying to keep from spreading to Main Street. The people on Main Street know that it started on Main Street and spread to Wall Street. Main Street has seen wages not keep up with inflation for 15 years as more and more jobs are outsourced. Main Street has seen wage replaced with access to debt as their means of maintaining their standard of living. Anyone 30-50, that has been paying attention, realizes they will not get the retirement that their grandparents got and their parents are getting. Heck, even a lot of the 60+ are starting to realize they won’t get the retirement they were promised.
I just don’t see the widespread use of loan guarantees outside the finaicial sector… inside the financial sector, it isn’t “real” money.
The people on Main Street know the politicians took lots of their money and handed it to Wall Street.
I’d gladly take the 15% taken from every paycheck now and forgo SS… I’ll never see it anyway. I’ve told the people at work to look out when SS gets canceled or extended. Knowing that you were taken like a Madeoff investor by your govt yields lack of future investment and violence.
But, if that 15% were given to you and every other working stiff, what makes you think everyone else will save their 15% for retirement?
What if, instead, they took that 15% and bought stuff with it. That would increase prices for you, and reduce the value of your savings, no? You just might end up back and ground zero, with all the non-savers…and everyone will be asking for a handout anyway (moral hazard of the govt bailing everyone/everything out over the years).
With the govt forcing people to save (and I’m suggesting the govt actually save the money, instead of spend it), it spreads the buying power out over many decades, keeping price inflation down.
Just musing…
How’s this for a graph professor?
http://research.stlouisfed.org/fred2/series/ADJSBASE?cid=124
Kinky!
When in doubt, create a financial tsunami.
I think Darrell in Phx is correct. Bush’s goal was to get people borrowing and spending again, but he couldn’t do it (he also looks like a Caucaisain monkey). Obama’s goal is get people working so they don’t default. He also won’t be able to do it because people would need to earn 2x what they do in order to cover their mortgages and HELOCs. Hopefully, Obama’s plan will prevent a Depression without forestallilng the housing crash.
I guess it’s ok to say Bush looks like a Caucasian monkey. Is it ok to say that Obama looks like Curious George?
Yes, but only because I started it. Otherwise, you’d definitely get flamed.
Hopefully, Obama’s plan will prevent a Depression without forestallilng the housing crash.
==============
This is what I’m hoping for as well.
“The banks are not going to loosen purse strings.”
Not if debtors can walk from their debt. But if new laws make it very hard to walk away ? Maybe the government becomes the new lender and the IRS becomes the new collector ?
The way it is now ? No the banks won’t lend, not to broke people at least.
That’s easy. Triple unemployment insurance ‘benefits’. Unemployed people spend every penny they have, out of necessity.
Here’s your answer professor in a one page PDF
http://research.stlouisfed.org/publications/usfd/page3.pdf
Beautiful graph, truly rare.
Would you like to ride in my beautiful balloon
Would you like to ride in my beautiful balloon
We could float among the stars together, you and I
For we can fly we can fly
Up, up and away
My beautiful, my beautiful balloon
The world’s a nicer place in my beautiful balloon
It wears a nicer face in my beautiful balloon
We can sing a song and sail along the silver sky
For we can fly we can fly
Up, up and away
My beautiful, my beautiful balloon
– The Fifth Dimension –
Thank you professor!
You made me laugh and I have a miserable cold in Miami of all places!
I’ve enjoyed your comments a LOT this year, thanks!
to say banks wont lend at all is ridiculus. It is what they do and how they make money. They will lend less if they have risk, but with govt backing loans their risk is limited. Banks are not lending due to their bad debt current and pending from RE stock bonds CDO etc. combined with a worried public who can’t or won’t take more debt. Once the banks have met their capital reserve requirements they will lend (or at least try). Problem is no one really knows when they will hit those marks cuz the bad debt is not on the books………yet. Like a giant sinkhole here in FL. when will it stop.
Banks don’t make money when they lend. They make money when they are paid back with interest. The idea that government will guarantee all loans is just another form of moral hazard. The gov went and guaranteed some loans, so everyone figures it will continue to do so. The fact is that the government doesn’t even have the fire power to actually pay for the loans it has already backed, and our bail-out prone senators are all about to lose their jobs. The government will NOT be backing any more loans.
How can this not lead to hyperinflation?
How can i count the ways…
There’s something very screwy going on behind that graph. Monetary base is cash in the vault, and deposits with the fed iirc. The Fed started paying interest on the deposits, which seems to be what has caused the spike.
So the banks have moved reserves into the federal bank accounts to get interest payments. They’re required to keep the reserves in something as risk free as possible, and right now the Fed is the only game in town. But it doesn’t mean they can increase their lending.
There are only two ways to create money in this system - the treasury prints it, or the banks lend it. This isn’t either of those.
Merry Christmas to all!
I don’t see a recovery, we’re entering unknown
territory and a new financial paradigm will have to
evolve from the economic meltdown that is in the process of happening. Stick close to home and
get know your neighbors.
get know your neighbors.
And agree to a few standard calibers for the neighborhood watch.
Got Popcorn?
Neil
Amen brother, we live on a dead end street that’s
effectively a stone wall. A river on one side,
a large government agency on the other, good people on the other side, and we’re all armed and
friendly……..to each other..
“Don’t see a recovery, we’re entering unknown
territory and a new financial paradigm will have to evolve from the economic meltdown that is in the process of happening.”
Ding! Ding! Ding! Here’s a winner!
Rancher has the clear picture.
Those among us who lived through Great Depression One are quite elderly, and had nothing to do with CAUSING it.
Those who CAUSED it are all dead.
Those in power now who have studied it, like Bernanke, don’t have any answer except to print more money, and throw it endlessly at the same idiots who have CAUSED GD Two.
Our “leaders” have not a single constructive clue, action, or plan among them.
This is more like the “Dark Ages, Part Deux”
Merry Christmas and Happy New Year!
Our “leaders” have not a single constructive clue, action, or plan among them
———————————————————————
WRONG!!!!! THEIR PLAN…WHILE NOT CONSTRUCTIVE…..IS TO TAKE MUCH MORE OF OUR CASH THROUGH HIGHER TAXES. IMO, THEY THINK THEY ARE BETTER STEWARDS OF OUR MONEY THAN WE ARE.
Look on the bright side. Most people only see one great depression in their lifetimes (or are too young or too old to know differently).
When you reach the bottom of the well, you naturally look up and will see light.
1979 survivalists, nuclear winter, runaway inflation. Comet Kohoutek around the late 70s or early 80s too! The future looked bad but I was 20 and captivated by the female form of college coeds (still captivated by 20-something female forms these days - I never grew up).
Half of my neighbors belong to three different gangs. The good news is, they’re not really top tier gangs.
I have a suggestion - as a more or less recent visitor to this blog, how about some links back to dialogs from, as you say, 4 years ago when the idea of a housing bubble was laughable?
http://thehousingbubbleblog.com/?p=16#comments
is a good start…
See the number in the URL?
Start small.
You have to go to the original blog at thehousingbubble dot blogspot dotcom
And IIRC there was also thehousingbubble2 dot blogspot dot com for a while, so this current blog is the 3rd generation.
Like, for example, this page from December 2004, which contains posts about subprime mortgages and Las Vegas bubbliness.
Go to little calender thingy on right hand side from main page.
Yes, we did call it.
This from Sarasota Florida
Home sale prices plunge
http://www.heraldtribune.com/article/20081223/BREAKING/812230260/2055/NEWS?Title=Home_sale_prices_plunge
Is this actually “breaking news”?
ideas of what to invest in in 09
other than treasuries !
I’m stocking up on cocaine, but that’s just me, and I am in Miami after all.
That’s the all time one liner…..
Ok real reply.
Well, at least additional data.
As long as deflation is winning: cash.
SP at 450: all in.
Bernakiiiii triumphs: gold and TIPS
GMNA funds with vanguard or T rowe price
Canned goods, rice oatmeal, and beans.
My Christmas wish:
By the time my children are my age (in 35 years) there will be no more strip malls, no more suburbia, car-culture will be a distant memory, our oceans and forests will be healing as rampant hyper-consumerism will be dead.
They will live in smaller communities that are closer to where they work and where their food is grown. Their entire lives will not be geared toward “getting ahead” or getting rich.
I could go on and on, but this Christmas as everyone is becoming more and more morose, I just keep reminding them to imagine the big picture and the future.
Yes, there is going to be a world of pain in the next decade or two. We will find out what is really true about peak oil and climate change. But there is a distinct possibility that it may all come out for the better. Just not anytime soon.
Maybe Joe and Jane 6pack will realize that we have just been swindled on a scale never before seen and figure out that unregulated capitalism and democracy are antithetical.
Maybe we will realize that unfettered growth is unsustainable and that we don’t need so much STUFF. That there is more to life than what you can buy at Walmart.
So that’s the rosy optimist in me trying to spread some holiday cheer.
The tin foil hat pessimist says get a gun and buy some arable land with access to water. Prepare for massive inflation and eventual fascism as the masses freak out when the 7-11’s close.
Well, 2 more days til Christmas so let’s not go THERE today.
Merry Christmas, y’all. Thanks HBB for sucking many hours from my limited time as I read this blog every day. I’ve learned a lot here!
Commie
Ahhh, if only I could dream again….
“My Christmas wish:
By the time my children are my age (in 35 years) there will be no more strip malls, no more suburbia, car-culture will be a distant memory, our oceans and forests will be healing as rampant hyper-consumerism will be dead.
They will live in smaller communities that are closer to where they work and where their food is grown. Their entire lives will not be geared toward “getting ahead” or getting rich.”
Amen, amen, Muir. Beautifully expressed.
Sounds like Kunstler’s essays. Doesn’t the Oil Drum rate him at a Defcon 1?
sfrenter, was it ever like that before? When?
What is an astronaut’s favorite meal?
Shrimp cocktail, with or without Tang.
Launch.
Cheesy grits in an Astro Squeeze Bag?
Has to be rocket salad.
Klingons from Uranus?
Thank you Big.
Tried it, got lots of groans. So, thanks;)
“She’s also giving up her annual trip to Jamaica”
Oh the poor thing. Guess you’ll have to be like the rest of us who have been ahead of the curve with “Staycations” to save money all of our lives.
I’d laugh if I didn’t see an utter collapse in the airline and hotel industries up ahead.
Think about all the resorts opened up in the last five years alone!
But hey, they have all of those well healed baby boomers retiring… who:
1. Lost their stocks
2. Lost their homes
3. Probably didn’t save anything else
4. Pension? Yea right…
Got Popcorn?
Neil
Is there any cause for hope that the NAR will go bankrupt before the housing bust ends?
SPECIAL REPORT Issue #1: America’s Money Crisis
Home sales, prices in deep plunge
Realtors: Sales of existing homes fall 8.6% - much worse than expected - as median prices suffer the worst decline since the Great Depression.
By Les Christie, CNNMoney.com staff writer
Last Updated: December 23, 2008: 3:09 PM ET
AMERICA’S MONEY CRISIS
* AmEx: We’re getting TARP, too
* Retailers want their bailout too
* AIG’s $150B bailout is just a start
* Bonds fall after record auction
* When mortgage rescues go bad
NEW YORK (CNNMoney.com) — The number of existing homes sold during November plummeted 8.6% as prices plunged by record amounts, according to a closely watched housing industry report issued Tuesday.
The National Association of Realtors said that home sales dropped to an annualized rate of 4.49 million units. That was down from 4.98 in October and much less than the 4.93 million units projected by a consensus of industry analysts as reported by Briefing.com.
“The only region where we’re seeing more sales are where bargain hunters are taking advantage of distressed sale prices,” said Lawrence Yun, the Realtors’ chief economist. “About 45% of transactions, nationally, were of distressed properties.”
Yun blamed the financial market turmoil for the devastating report. For months, sales had hovered 4.9 million to 5.1 million.
“Today’s figure reflects the stock market crash that began in October,” he said.
D’oh…
“Is there any cause for hope that the NAR will go bankrupt before the housing bust ends?”
Nope.
America is brainwashed that Realtors are “professionals.”
It just wont happen.
You are a pessimist. I am quite hopeful that once the full potential of internet technology for real estate sales comes to fruition, the traditional used home sales business model will be permanently broken.
I would gladly, GLADLY, REALLY GLADLY be wrong and hope you are right!
Let’s both make sure to avoid used home sellers like the plague and only use online shopping techniques next time we buy houses, in order to hasten the NAR’s demise.
In the Herald -tribune comments section someone refered to the NAR as the sixpercenters. Reminded me of a city youth gang, back in the 80’s, called the five percenters.
PB et al,
Can anyone explain to an unsophisticated foreigner how a 17.0% fall in Year-on-Year raw sales can translate into a 10.6% fall in Year-on-Year seasonally adjusted sales? I would have thought that one November would be seasonally similar to another.
Interestingly, applying a 17% reduction to the annualised November 2007 sales would yield 4,152,000 for November 2008. This is less than the Inventory number of 4,203,000; so it would mean not only a new record in terms of Months of Supply but also OVER A FULL YEAR of Inventory at the current sales rate.
Now I have seen that metric (a full year’s inventory) used to indicate a truly catastrophic RE market so, if one were a real cynic, one might think that the NAR has just possibly fudged the figures to avoid announcing more than 12 Months of Supply for the US as a whole immediately before Christmas (where it might well be a talking point at family gatherings).
But of course, I’m not that cynical . . .
“Can anyone explain to an unsophisticated foreigner how a 17.0% fall in Year-on-Year raw sales can translate into a 10.6% fall in Year-on-Year seasonally adjusted sales?”
Suppose the seasonal adjustment adds in some amount x to account for predictable seasonal variation, and the raw sales are s1 in year 1 and s2 in year 2. Your question can be addressed by answering whether there are values s1, s2 and x such that
s2/s1 = 1-0.17 = 0.83
and
(s2+x)/(s1+x) = 1-0.106 = 0.894.
The first equation requires s2 = 0.83 s1 while the second requires
s2 + x = 0.894 s1 + 0.894 x, or
x = (0.894 s1 - s2) / (1-0.894).
Substituting s2 = 0.83 s1 from equation 1 yields
x = s1(0.894 - 0.83)/(1-0.894) = 0.603773585 * s1.
So the answer is that if sales in the first period are unusually low, so the seasonal adjustment of 60.4 pct of the base level is feasible, and sales in period two are even lower, then these numbers are possible.
For example, suppose s1 = 1000 homes, implying a seasonal adjustment of 604 in periods 1 and 2.
Then
s2 = 0.83 s1 = 830 homes (your 17 pct decline in the raw data),
while s1+x = 1604 and s2+x = 1434, so
(s1+x)/(s2+x) = 1434/1604 = 89.4 pct, reflecting your 10.6 pct drop in the seasonally adjusted data.
PB,
I get your mathematics, but it seems very odd to me to have an additive constant as the seasonal adjustment factor. I would have thought it more logical to have a multiplicative constant, in which case the YOY variance between raw and SA numbers would be zero by definition.
S’pose the additive constant could be the case, however.
In fact, since I posted I have read elsewhere that the base factor is also adjusted by the number of weekdays and weekend days in the month. The author pointing this out was somewhat critical, suggesting that any such adjustments should be applied to the time the sales were made (most likely September/October) rather than the month of closure.
OK. Consider any conspiracy theory dead.
Do mortgage rescues work?
SPECIAL REPORT Issue #1: America’s Money Crisis
When mortgage rescues go bad
More than half of adjusted loans go into default again. The problem: Many workouts don’t actually lower payments.
By Les Christie, CNNMoney dot com staff writer
Last Updated: December 23, 2008: 2:34 PM ET
NEW YORK (CNNMoney.com) — That lenders are ramping up their attempts to help troubled home borrowers is the good news.
Now for the bad: Most of the mortgage fixes being deployed are destined to fail.
Hope Now, the coalition put together to fight foreclosures, boasts that it has helped 3 million families stay in their homes since the housing crisis began in July 2007.
But a recent report issued by the U.S. Comptroller of the Currency (OCC) found that 53% of borrowers who had their mortgages modified in the first half of 2008 were already at least two months delinquent again. The report covered 60% of the outstanding primary mortgages.
Meanwhile, foreclosures remain on the rise: More than a million homes have been repossessed since the start of the meltdown.
Do mortgage rescues work???? Heck yes, for the person getting the workout. They get to restart the foreclosure process from the beginning, giving them 6 more months to live rent free.
Are U.S. policymakers’ efforts to prop up the hosing market likely to succeed? So far, so bad.
I personally doubt the intervention will serve to fix the problems in the residential real estate market, but at least Megabank, Inc will finally have succeeded in dumping their devalued MBS on to the backs of the U.S. taxpayer.
Financial Times
US existing home sales plunge 8.6%
By Alan Rappeport in New York
Published: December 23 2008 15:55 | Last updated: December 23 2008 16:55
The pace of US existing home sales plunged by 8.6 per cent in November, disappointing economists’ expectations, as buyers retreated from the housing market in spite of falling prices.
Home re-sales fell to an annual rate of 4.49m in November, down 10.6 per cent from the same month a year ago, the National Association of Realtors said on Tuesday. The median price of an existing home plummeted 13.2 per cent to $181,000 on the year, the sharpest decline since record-keeping began in 1968.
“The quickly deteriorating conditions in the job market, stock market, and consumer confidence in October and November have knocked down home sales to another level,” said Lawrence Yun, NAR chief economist.
EDITOR’S CHOICE
Policymakers to prop up US housing market
By Krishna Guha in Washington
Published: December 15 2008 01:26 | Last updated: December 15 2008 01:26
An intensified effort to exploit government control of Fannie Mae and Freddie Mac to drive down US mortgage costs and cushion a decline in house prices could start soon.
This might begin in the final weeks of the Bush presidency and is likely to continue under Barack Obama’sadministration.
By the time it is over, the US taxpayer could own a large chunk of the US residential mortgage-backed securities market.
These guys better hurry up, or the avalanche will have already settled at the bottom of the mountain before they erect their snow catchment barrier.
Tuesday, December 23, 2008, 3:43pm MST
Home sales increase in West
Denver Business Journal
The western U.S. region, including Colorado, was the only area of the country to have an increase in sales of existing homes — nearly 18 percent — from November 2007 to the same month this year, according to data released by the National Association of Realtors on Tuesday.
Median selling price of homes in the West, though, had the biggest regional decrease — nearly 26 percent — supporting Colorado real estate experts’ contention that homes in the state finally are priced to sell.
Nationwide existing-home sales, or those of homes that have been sold at least once before, fell 10.6 percent last month to 4.49 million units from 5.02 million in November 2007. Sales were down 8.6 percent from 4.91 million units in October of this year.
Home sales traditionally drop in the fall and winter months, but pick back up in spring and summer.
Median selling price for homes nationwide decreased 13.2 percent to $181,300 in November from $208,800 for the same month of 2007. Median is the middle price between the highest and lowest selling prices, and is considered a truer price than average because it’s not skewed by the highest and lowest prices.
Types of homes in the NAR study included single-family homes, condominiums, townhomes and co-ops.
By comparison, existing home sales in the West increased 17.9 percent to 1.12 million in November year over year. Sales decreased only 4.3 percent from October of this year.
The median selling price of a home in the West dropped 25.5 percent to $242,500 from the same month last year.
From here on out, we can look forward to an epic battle between govt interventionists who plan an attempt to financially engineer a bottom in housing prices, and Mr Market, who has other ideas entirely.
From the Financial Times article posted a few minutes ago:
“Falling home prices would lead to faster contraction in consumer spending and further deterioration in bank balance sheets,” Mr Yu said. “More importantly, falling home values would lead to higher loan defaults, including those recently modified distressed mortgages.”
Single-family home sales declined by 8 per cent in November, while sales of multi-family homes dropped by 13 per cent. The number of existing homes available for sale rose 0.1 per cent in November to 4.2m, according to the NAR.
“There’s not much redemption here,” said Brian Bethune, an economist at IHS Global Insight. “The industry is still trying to catch up with a very negative cycle.”
Home prices are expected to continue to decline for the next five quarters as a growing number of foreclosures and foreclosure sales further depress prices, according to David Stiff, chief economist at Fiserv Case-Shiller. Falling prices could eventually lead to a rebound in the market, but that could stall if household incomes continue to suffer.
“No clear bottom in sales or prices is in sight especially when such a large share of sales is now foreclosures,” said Alan Ruskin, a strategist at RBS Greenwich Captial.
Houses must be, will be, affordable.
“No clear bottom in sales or prices is in sight especially when such a large share of sales is now foreclosures,” said Alan Ruskin, a strategist at RBS Greenwich Captial.
———————————–
It’s not the foreclosures that are causing prices to fall…most foreclosed properties here in SD are experiencing multiple bids and lots of activity **because they are market priced.** NO shortage of buyers, and many are paying cash **when the price is right.**
What’s causing the foreclosures is the too-high prices that the FBs paid when they thought prices would go up forever.
IOW, high prices are the cause of the “foreclosure crisis” and low prices will be the solution to the “foreclosure crisis.” It really is that simple.
“IOW, high prices are the cause of the “foreclosure crisis” and low prices will be the solution to the “foreclosure crisis.” It really is that simple.”
Unfortunately too simple. No huge bailouts with this statement. No victimization. No complex doublespeak that make the speaker seem smarter than they are. An unprofitable sound bite that will never catch on.
Now if you can reword it so that it is complex and mysterious and there is a bunch of heart-wrenching victims, we may be able to do something with it.
The California Association of Used Home Sellers has retroactively called a trough in the current housing bust. I’m not buying it (unless they are narrowly focused on transactions volume), as unemployement has not peaked, the state is facing a $42 bn budget shortfall going forward, the recession is not over, and the tail end of the last bust (including ongoing home price declines) extended for five years past the official date the early 1990s recession ended. I am not even sure transactions volume has bottomed out yet, given the prospective economic picture.
I am also wondering how LAY’s six percent decline in ‘09 forecast will stand up to a trailing 42 pct price decline?
What ch’yall think?
Tuesday, December 23, 2008, 1:47pm PST
California home sales up 83.2%, median price drops 41.8%
San Francisco Business Times
The unsold inventory index for existing single-family detached homes in California during November was 6.9 months, about halved from the 14.3 months for the same period a year ago.
A report released Tuesday from the California Association of Realtors also said the median number of days it took to sell a single-family home was 44.3 days in November, compared with 61.6 days for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
Home sales increased 83.2 percent in November compared with the same period a year ago, while the median price of an existing home fell 41.8 percent, C.A.R. reported.
“Statewide sales registered a monthly decline for the first time since the first quarter of this year, reacting in part to the worsening situation in the economy, the financial sector, and in terms of consumer and business confidence,” said C.A.R. President James Liptak. “Despite the month-over-month decline, sales were above the 500,000 home level for the third consecutive month. Sales are now 102 percent above the monthly trough for this cycle, which occurred a year ago in September and October, and are 22.3 percent above sales in 2007 in year-to-date terms.”
Sales are up because a lot of those “hold-out” sellers got foreclosed on, so the underlying houses are now being repriced by the bank at somewhere close to a number that someone will actually pay.
This is the scenario I am awaiting. I don’t expect the holdout sellers to ever come to their senses, but I do expect the banks which foreclose on them to eventually unload REO at fire sale prices.
My friend who works for Wells Fargo says none of these people in foreclosures are going to get away with anything. This is going to haunt them longer then they could ever expect.
1)Wells is giving these people 1099’s. Some as much as 300K!
2)If possible they are going after them with judgements.
3)If possible they are seeking deficiency judgements on the main home if the properties being foreclosed on are investment properties.
Talk about Happy Holidays looking at the taxes owed on 300K! And that my friend will not GO AWAY in 3 or 4 years to make your credit better to buy another home!
What is the Mortgage Forgiveness Debt Relief Act of 2007?
The Mortgage Forgiveness Debt Relief Act of 2007 was enacted on December 20, 2007 (see News Release IR-2008-17). Generally, the Act allows exclusion of income realized as a result of modification of the terms of the mortgage, or foreclosure on your principal residence.
What does that mean?
Usually, debt that is forgiven or cancelled by a lender must be included as income on your tax return and is taxable. The Mortgage Forgiveness Debt Relief Act of 2007 allows you to exclude certain cancelled debt on your principal residence from income.
Does the Mortgage Forgiveness Debt Relief Act of 2007 apply to all forgiven or cancelled debts?
No, the Act applies only to forgiven or cancelled debt used to buy, build or substantially improve your principal residence, or to refinance debt incurred for those purposes.
What about refinanced homes?
Debt used to refinance your home qualifies for this exclusion, but only up to the extent that the principal balance of the old mortgage, immediately before the refinancing, would have qualified.
Does this provision apply for the 2007 tax year only?
It applies to qualified debt forgiven in 2007, 2008 or 2009.
If the forgiven debt is excluded from income, do I have to report it on my tax return?
Yes. The amount of debt forgiven must be reported on Form 982 and the Form 982 must be attached to your tax return.
Good thing everyone could have 3+ primary residences!
My friend who works for Wells Fargo says none of these people in foreclosures are going to get away with anything.
In the spirit of the season, God Bless Wells Fargo. It seems like no other bank wants to spend the money on the stamps. I have no problem with someone getting foregiveness on *one* property. Why? I have coworkers by the score who are going to have to walk away from 3+ ‘investments.’
This is far from over…
Got Popcorn?
Neil
Your humor invigorates me to buy….laughing
No, the Act applies only to forgiven or cancelled debt used to buy, build or substantially improve your principal residence
huh? You foreclose and lose your house. Bank forgives, say $300K debt. You don’t have to pay taxes on that $300K if you…do…what? Buy a smaller with money you never actually had? Re-do the basement of a home you were evicted from? Can somebody explain?
If it was a principal residence, then you do not have to do anything. The act made it non-taxable.
Ann, I believe your friend is a bit confused. My understanding is that (1) (1099s) and (2)/(3) (judgements) are mutually exclusive.
A bank can either write off a loan as uncollectable and book the associated loss (in which case they can 1099, but not try to collect), or can they carry it on their books as an asset and try to collect from the defaulting party (in which case they pursue judgements against any assets via the courts if it is a recourse loan).
They cannot pursue both courses of action at the same time.
(1) is toothless as BigV pointed out above if the property was the debtor’s principal residence.
(2) and (3) are toothless for _most_ debtors, since they have no net worth. If they have no assets that are not already leveraged to the hilt, there is nothing that the courts can attach.
I think the worst that they can do, practically speaking, is to ruin the FB’s credit rating. Which, ironically, is doing them a favor, since that may prevent them from catching a knife in the next few years.
“My friend who works for Wells Fargo says none of these people in foreclosures are going to get away with anything. This is going to haunt them longer then they could ever expect.”
Good
I guess what pisses me off the most is that the housing bubble and resulting crash have/is hurting people who avoided it both ways. It hurt me and my Wife, who live in the Bay Area of SF where even still, home prices are incredibly high.We’ve been saving for years now and We’re not priced out, but buying now ( as the result of the housing crash and accompanying recession) would be economically risky for us given the still-high prices and requirement to have a dual, well-paying income to afford even a ‘modest’ Bay Area home. It priced us out during the boom and has made it risky to buy afterwords.Secondly, we we’re planning to possibly relocate to a cheaper state, but seeing as how jobs are becoming a problem and we both have good ones here, that plan is now on time delay for what I’m guessing is another 2-3 years minimum. Two more years of being pissed at living in a super overpriced, self-righteous area. Great.
On the other hand, I just got a call from Mom today.Her and Dad’s retirement plans have been hit hard. They were planning on retiring in 2 more years. Now it looks like it’ll be another 5-10 years. They have saved all their lives, paid off their house 20 years ago, and live in a more affordable part of the country. Dad just lost one of his two jobs. The company was getting less business, hence they had to cut him loose. He has an older car that’s starting to give him problems and he mentioned he hoped he didn’t have to have it repaired. I’m sort of worried about their financial future.
So there you have it. One young couple just trying to get a normal, semi decent middle class life together while another who is about to retire is just trying to make it to the end of their careers with enough to be able to basically live and eat. Both of us have been screwed.
Multiply your situation by 50 million or so other U.S. households and you begin to grasp the magnitude of what the Wall Street fraudential sector and their K-Street lackeys hath wrought.
And don’t forget the billions in bonuses the fraudential bank CEOs collected as compensation for the pleasure of screwing the rest of us.
Rant tags off.
Nothing that can’t be fixed by tacking on more debt…as the govt assures us that the problem is lack of credit.
/sarcasm
Amen to that..
This “housing crisis” is not about the frozen credit (debt) markets or about subprime mortgages or about slow sales or about increasing inventories or anything else that the NAR wants the mainstream media to grab on to… The actual “housing crisis” started in 1998 or so and ended in 2007 and was 100% a crisis due to increased prices that were way over and above the norm… that’s the only “housing crisis” I’ve seen… what we got now is an unwinding of the real “housing crisis”… actually, I guess you could add the ongoing fiscal and monetary policies we’re seeing in response to the housing crisis from Washington and the Fed to the actual housing crisis itself…
jetson boy:
I wanted to send you a message, but you’re not registered at the forum. Send me an e-mail at BigVHBB at gmail dot com, and I will give you the message.
-Big V
“They have saved all their lives…”
Saved. I don’t think that word means what you think it means.
My parents “saved” throughout their working years and as a result they never lost a cent. Didn’t get much interest on their savings but it was all there when my father retired.
Now if they had “invested” they might have been in more dire straits.
there is no shortage of shoppers this afternoon at Del Amo Mall in 90503 which is but 1 or 2 zips from 90274 Palos Verdes Peninsula, CA that hill between Long Beach and LAX along coast. With one day left I expect tomorrow will only be more crowded.
One has to wonder if they are buying with cash or credit card there are plenty of shoppers out there doing their thing recession or not. And my guess would be Santa Monica promenade, Groove, Topanga plaza….. would be equally crowded.
Stanley, what is your point? Are you trying to convince us all that Palos Verdes is immune? Or that there really isn’t a recession? Hey, you know that hill between Long Beach and LAX along the coast? It’s not immune.
Drove from San Diego to LA today. All the malls we passed today — parking lots totally packed. Not sure if they were buying, though.
Shoplifting?
I went to South Coast Plaza, totally packed. But I was shocked by the amount of people in the stores and the lack of people in check out lines! The mall was packed with families, but hardly any shopping bags full of merchandise were at their sides. People are being very, very picky — and this is killing retailers margins!
New socks and underwear are all family are getting this year.
Cause really, what else do we need right about now?
I mistakenly got into one line to pay for those socks, and the # of cc used for 3 things was incredible.
And watching from that line ,I saw people just wandering aimlessly trying to Think of what to buy for someone. To me, if you dont’ Know what it is before you walk into store, you don’t need to buy them anything. It was weird. Like folks lost in a crowd at disneyland..turning turning . Weird.
Since last weekend and at rush hour, I had to take alternate routes to get way around Del Amo Mall because of the heavy traffic going to the Mall. I’m sure December 26 will be tough too.
This is a reason why I like January and do not like November or December!
Xmas 2008 topics
Now that the housing bust has spread to the world economy how many of us think we will have a good stable job when the RE bottom hits ? So we who waited can buy RE at the bottom.
“So we who waited can buy RE at the bottom.”
Megabank, Inc is sitting on a big war chest composed of your tax dollars. Those few who are qualified to buy may end up getting outbid by Megabank, Inc’s taxpayer-funded residential real estate investment division.
Are you serious? PB. Either I am having a blank moment, or you are serious.
Look at the RTC. I believe that the gov’t allowed large companies / groups to buy the assets at fire sale prices. The same ones the gov’t paid top dollar for? It’s good to have lots of money and friends in high places.
PB is serious. There’s not a capitalist left alive who doesn’t believe in free market intervention and manipulation. They are all advocating propping up housing with investor pools and REMOVING taxes for these God-blessed rich investors who are going to save America by raping us yet again. God bless Madoff for ripping off the rich!
a good stable job
————————————————————————-
soon to be extinct.
Unless you think outside the box and travel city to city for work like I do. It gives you time to save more in diverse assets.
It may well be good in terms of meeting your needs and desires, and maybe stability isn’t something you want, but if you are travelling city to city, is your job “stable”?
My job is by no means stable. That’s what makes it exciting and it never gets stale.
That works for you, since you’re a single male. It will stop working if you ever want to develop a meaningful relationship or have kids. Stability (made possible by farming) is what has allowed the human race to fluorish.
That is certainly a tradeoff. To some people, there is more to life than having a family. To others, having a family is the most important thing in life. I belong in the former camp.
Every developed nation these days is losing population in families of educated professionals. The government policies also encourage the transfer of wealth from productive people to poor people with large families.
Eventually America will be mostly populated by families of manual laborers.
This is what we voted for in every election for several decades. And that is what we will get.
It’s less risky catching the upswing than trying to catch the exact bottom. The key is knowing when to cash in and rent.
> a good stable job
Nah, I’d rather have a good stable income. Don’t want a job.
From Bloomberg:
Japan should write-off its holdings of Treasuries because the U.S. government will struggle to finance increasing debt levels needed to dig the economy out of recession, said Akio Mikuni, president of credit ratings agency Mikuni & Co.
The dollar may lose as much as 40 percent of its value to 50 yen or 60 yen from the current spot rate of 90.40 today in Tokyo unless Japan takes “drastic measures” to help bail out the U.S. economy, Mikuni said. Treasury yields, which are near record lows, may fall further without debt relief, making it difficult for the U.S. to borrow elsewhere, Mikuni said…
The U.S. budget deficit may swell to at least $1 trillion this fiscal year as policy makers flood the country with $8.5 trillion through 23 different programs to combat the worst recession since the Great Depression. Japan is the world’s second-biggest foreign holder of Treasuries after China.
The U.S. government needs to spend on infrastructure to maintain job creation as it will take a long time for banks to recover from $1 trillion in credit-market losses worldwide, Mikuni said. The U.S. also needs to launch public works projects as the Federal Reserve’s interest rate cut to a range of zero to 0.25 percent on Dec. 16. won’t stimulate consumer spending because households are paying down debt, he said….
Japan should also invest in U.S. roads and bridges to support personal spending and secure demand for its goods as a global recession crimps trade, Mikuni said….
Combining debt waivers with infrastructure spending would be similar to the Marshall Plan that helped Europe rebuild after the destruction of World War II, Mikuni said.
—
thats how scared Japan is….the Marshall Plan for the US consumo-tards….
Merry Christmas.
We’re fighting two wars and rebuilding Iraq and we need a Marshall Plan? That’s just absurd. We’d all be better off if they bought our products instead of our debt.
What products? The only thing America still produces domestically are weapons.
Topic suggestion: Staying optimistic and mentally healthy during the financial crisis. (Ben Jones is the resident expert!)
LA Times Business
David Lazarus:
Suicide hotlines see rise in calls as economy tanks
December 24, 2008
Layoffs, foreclosures, cutbacks — there are plenty of grim economic stats out there this holiday season. Here’s perhaps the grimmest one of all: Calls to Los Angeles’ busiest suicide hotline have soared as much as 60% over the last year.
Mental health experts say the sour economy has turned what usually manifests as seasonal blues into a full-blown crisis.
“I’ve been doing this for 10 years, and this is the worst I’ve seen it,” said Kita Curry, president of the Didi Hirsch Community Mental Health Center, which along with nine clinics in the Southland operates the region’s most frequently called suicide hotline — (877) 7-CRISIS.
Last year, she said, the hotline got an average of 1,500 calls per month. Now the total routinely tops 2,000 and sometimes runs as high as 2,400.
Likewise, the National Suicide Prevention Lifeline says it’s getting 35% more calls — roughly 50,000 a month this year compared with about 37,000 last year. The national hotline can be reached at (800) 273-TALK.
“What’s even more noticeable than the increase in call volume is that the intensity of the calls has gone up,” said Sandri Kramer, who began as a hotline volunteer at the Hirsch center about 13 years ago and now is the program director.
“Fear is the No. 1 emotion we’re hearing. People are feeling hopeless and helpless because of the economic crisis, and many feel that things aren’t going to get better.”
After simmering for years and watching the housing bubble boil and now spillover, what are your future expectations? What are you prepared to do if things get worse or better?
So far we’re in a good position, even though my husband hasn’t been working as much. If things improve, he finds a stable job and we find a great deal, we’ll buy a house. We’re in a rent free situation right now, though the house is small and ugly. So if things get worse, we’ll stay put as long as it takes. Otherwise I don’t want buy a house until the job is secure.
I’m curious what everyone’s Christmas shopping experiences have been like. I was surprised by how easy the parking was. There were a lot of cars, but I never had trouble finding a space pretty quickly. Most of the shops at the mall looked overstaffed. And I rarely had to stand in a line to buy something. Sears looked particularly empty.
I’ve been shopping online, which I think is a growing trend, especially with Google checkout. I’m sure profits will be down y-o-y when the reports come out.