Bits Bucket For December 31, 2008
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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Happy Easter
Happy Wester and New Year!
And goodbye 2008. It was a lousy lousy lousy year.
Actually, I think 2009 is going to be the lousy, lousy year.
I did get a last minute NYE gig..at the same price i was charging in 1992! At least its very close by (2 miles)
Hopefully we will start seeing more articles along these lines in MSM in 2009 ….
Best Way to Fix Housing Market: Let Prices Fall (Fast)
HAPPY NEW YEAR EVERY ONE!
Good for you. Some income is better than none. I just did our business tax caculation and check for 2008, and it was dismal.
Happy and Healthy New Year everyone.
Polly, I wish you the best with your medical issue.
I wish everyone here who has medical issues a good 2009.
Ms. Hansen, if you are reading this, I saw you on television yesterday (on E!, I believe) while en route from Tampa to Denver. You came across very well. I hope you are getting some serious financial benefit from your public airing.
May your pain lessen in the coming year.
Thank you, Eude, and my sincere, teary-eyed gratitude to EVERYONE here who has helped me out over this extraordinarily bizarre (and wonderfully whacky,) 2008. Your support and kind words have given me both comfort and resolve, and I learned a huge lesson about community from the “ursadent”–a lesson, which as I recover, I hope to share in turn. While not a particularly remunerative venture, I DID get a great forum out of this–one which I intend to put to good use in the coming months after the MSM gets through with me. Stay tuned….
Given what’s happened to much of the planet of late, and These Troubled Times (Pussy, I’m too chicken to try your tm superscript trick here,) we’re facing, I think I may have gotten off lucky. To some extent, we’ve ALL been eaten by a bear this year, so for what it’s worth:
I AM PROUD AND HONORED TO HAVE TAKEN ONE FOR THE TEAM!
GO-OOOOOOOO! HBB!!! RAH! RAH! RAH!
ahansen,
What alias are you using for open salon? I love what salon has done on open salon. So many talented writers. I’ve been a big fan of salon for years.
Homelessbb –
This is ridiculously sensible. There is no way top economic policy makers will ever advocate such a simple, direct approach.
From Henry Blodget’s suggested housing market fix:
But there is nothing broken about these markets. Owners who have to sell their houses will cut prices until they find buyers, and those who don’t, won’t. And given that most house prices are still above their long-term average relationship to incomes and rents, it’s no use pretending that 2007 prices were in any way normal or something we can or should immediately return to.
The vast majority of plans to “stop prices from falling” involve subsidies of one form or another (tax credits, subsidized mortgage rates, etc.) These may slow the decline, but they won’t stop it–because even the US government can’t subsidize everyone forever, at least not enough to maintain prices at above-average levels in inflation-adjusted terms with the current inventory glut. And subsidizing/encouraging debt-bingeing and homeownership is what got us until this mess in this first place.
The fastest and most effective way to stop prices from falling is to let them fall until they’ve reached equilibrium. And then start rebuilding wealth, equity, and economic growth from there.
“I’m too chicken to try your tm™ superscript trick here,…”
The only thing we have to fear is fear itself (and real life bears!).
Oh. OH!
Rub it IN, Prof.
Bears are easy. Cyber-ridicule…not so much.
Glad you caught the irony. (Smart folks do tend to pick up on that sort of thing….)
SFBAGal, I use the same semi-alias. Beware, however. Intentionally mal-edited in current iteration. Some good stuff there, though. Thanks for your good vibes!
ahansen –
I had to pay a high cost of personal ridicule to coax FPSS to reveal his “trade” secrets
Stressful year…
By the end of 2009 we’ll wish we had it so lucky as we did in 2008.
By the end of 2009, the implications of the 2008 markets disaster will have permeated the hoi pollois’ collective consciousness, and the anger phase of the housing bubble stages of grief will be in full swing.
2008 was the return to reality. It was necessary.
Happy Mid-Atlantic-er and New Year? Did I get that right?
Happy Northing!
Happy Easter Island! (for Alad)
But shouldn’t it be written in Rongo-Rongo?
Or sung in Rapa Nui?
“But shouldn’t it be written in Rongo-Rongo? Or sung in Rapa Nui?”
No, my comment only makes sense from this very moment, looking backward.
Here’s a link to a commentary piece on the Marketwatch.com website entitled “Risk and the capitulation of capital”:
http://tinyurl.com/8q6amo
I found it to be an interesting read. From the article:
“The lasting solution is fairly simple in approach, but much harder to execute. Look risk square in the eye, measure it, understand it, mitigate it as best you can and come to terms with it. You should either live with risk or just walk away. We need to stop obsessing with the output of predictive models and instead focus intellectual energy on the assumptions we stick in them. Hiding risk under some creamy, rating agency sauce won’t work either. Also, your vision shouldn’t be clouded by pitch-books touting financial products with over-engineered structures and cute acronyms. Clarity and transparency should be everyone’s new obsession. Disguised risk can affect all asset classes, but one place to look at how these trends started is lending — remember those mortgages.”
Happy New Year, everyone.
“Clarity and transparency should be everyone’s new obsession.”
Testify, brothah!
How would Megabank, Inc be able to perpetrate scams in a world of clarity and transparency?
Exactly.
Why, charge a fee for it, of course!
latest news
[FNM] Fannie Mae shares rise 6% in early trade; Freddie Mac up 5%
SEC: Don’t suspend fair-value accounting rules
By Matt Andrejczak, MarketWatch
Last update: 5:55 p.m. EST Dec. 30, 2008
SAN FRANCISCO (MarketWatch) — An accounting rule used to determine the value of hard-to-market market assets should not be suspended, the Securities and Exchange Commission told Congress Tuesday.
Fair-value accounting standards sparked intense lobbying from the banking industry as the global credit crunch accelerated this fall. Banks charged that fair-value rules forced them to take huge markdowns on their balance sheets, further fueling investor unease about their financial stability.
Some had hoped the SEC would impose a moratorium on the rule or suspend it. More than 60 Congressional lawmakers supported suspending the rule back in October.
In its 211-page report, the SEC shot down the claim that fair-value accounting was the driving force behind U.S. bank failures, arguing that the accounting rules “did not appear to play a meaningful role in the bank failures that occurred in 2008.”
Of course smoke and mirror rules weren’t the driving force in popping the bubble. They were the driving force in inflating the bubble! Only by voodoo rules could BBB- NINJA neg-ams be morphed into AAA and then sold to unsuspecting citizens in Reykjavik. No wonder the banks want to keep these rules.
The only worthy question is if Team Messiah will call out the banks on their BS and pop the bubble, followed by the inevitable bailout, of course.
[Hope I'm not wrong here. everything I know, I got from HBB.]
oh gosh. close italics™
I just so much agree with the SEC shooting down the notion that accounting rules were the cause of the failures .Bad lending and a RE Mania of falsely inflated RE values that crashed and created foreclosures by the zillions created the Lenders problems ,not accounting .
I’m with you, Wiz.
May the coming year bring improved health to your wife, and patience and contentment for you as you grow your love through the trying times.
Best wishes for the new year!
So, instead of promising anyone an income in retirement, we should just tell them… enggghhhh… if everything goes to plan, MAYBE we’ll be able to pay you a pension.
When they walk into a bank to make a deposit, instead of saying the money will be there, we say it MAY be there.
Instead of telling them this corporate bond WILL pay them principal + interest of…., we should just tell them, you may or may not get your money back.
Then NO ONE will invest in anything. When people invest, they at least want their investment back. If you tell them the risk up front, they’ll just put the money under the mattress.
Actually, they would just demand a return on investment that was commensurate with the risk and our economic system could actually begin to heal. Right now interest rates are manipulated partially by lowering the percieved risk with government guarantees on everything. I am absolutely willing to put some of my assets at risk but please give me something in return.
Please… people aren’t smart enough to do a risk/reward assessment. They want unfullfillable promises!
Unfortunately, you may be right. On my more pessimistic days I come to the conclusion that this mess has nothing to do with housing or loose credit, but simply a basic lack of intelligence and logic in the majority of our population. It seems most people, even some I once respected, have given up on critical thinking and have turned completely to faith. For some it is faith in the government, for others it is religion, and many just believe there are others out there smarter than themselves that will right this ship and save the world. None would accept the obvious existence of the bubble and now that it has popped most still refuse to acknowledge that it will have long term negative effects. Everyone expects to be saved.
bye bye 2008.
So many villians to blame for Housing Bubble and Financial mess: Congress, Senate, Alan G, the banks, speculators, realtors and anybody who thinks leverage is a good word. An endless list.
But who are the heros? Ben Jones, HBB bloggers who tell it like it is. Who else?
All the economists who predicted this: Robert Talbott, who wrote a book in early 2003 predicting the crash in late 2003. He was far too early, but that’s because he “didn’t anticipate” that banks would so stupidly open up I/O’s and neg-ams to the unwashed masses. It was a legit oversight, IMO.
Shiller. I remember a panel discussion in 2005, when Shiller exhorted that housing was like the dot-com bubble, and he was laughed off the stage by Larry Yun (I think it was Yun).
Roubini. Paul Krugman, but he was late in the game.
And I’m sorry I don’t remember his name, but who was the one who said “get out of financials” in late 2007 and was laughed off all the TV shows (especially that awful woman on, I think CNBC — not Maria babe, the loudmouth bottle semi-blonde).
And to Nightly Business Report, who was pro-business, but fairly neutral in their reporting. I remember 2007, when it seemed that every night Susie Gharib had to say, “X company agreed to be bought by a Private Equity Firm, stocks soared on the news…”
Ed Leamer predicted the bust way early, but later mocked himself with his Polyanna-style Anderson School forecasting.
Yes, he was one of the first economists who predicted the housing bubble and mentioned the “P/E ratio” of prices/rents.
Peter Schiff. He has been ringing the alarm for several years.
His short-term investment picks have been poor, but his long term thesis is strong (and frightening).
http://www.youtube.com/watch?v=B8r-nDBx5Jg
yes, Peter got it and Anderson Cooper gave him an MSM voice. But don’t you think Peter has gone somewhat too gloom and doom longerterm? I guess we will see.
Searched back for some Roubini predictions in 2007 and in one Roubini article, found Larry Kudlow contridicting him:
“The recession debate is over,” Kudlow declared in his December 5 Kudlow’s Money Politics biog. “It’s not gonna happen…. The Bush boom is alive and well. It’s finishing up its sixth splendid year with many more years to come.” A month later, on January 4, following the release of government data showing unemployment has risen to five percent, Kudlow stubbornly clung to his rosy view. “Despite Friday’s soft jobs number, I do not believe we are heading into a recession,” he said. “Any slowdown in the U.S. will be very short-lived.”
Have to wonder why Larry still has a job?
http://findarticles.com/p/articles/mi_m0JZS/is_3_24/ai_n25018702?tag=content;col1
In November 2007, people were still seriously predicting the Dow would continue its bounce back and go to 15000. (Well, as seriously as TV “experts” ever get.)
Shiller, Roubini, and Ivy Zelman are the three I always cite as the folks who Got It.
Stephen Roach of Morgan Stanley was also one of the first. For some reason, he’s working in Asia now, IIRC. I’ve often wondered if someone was just trying to shut him up.
Bottom line: just about anyone not connected at the hip to our worthless news media. Bought and paid for, the entire lot.
I’ll read Krugman, Schiff, Jim Rogers, Warren Buffet. These people are all honest in their assessments. The rest are mainly paid cheerleaders.
Hi, everyone. I’m back from visiting my family in Vermont. More on that later. Right now, I need a pep talk. Looks like I am going to have to renew my lease for next year at the full price the commercial landlord proposed. I turned in information from three comparable complexes. Two showed that similar one bedroom/one bath apartments to mine (but with better building amenities) are being offered at near my current rent. One shows that I could rent a two bedroom/two bath place for $4 a month more than they are proposing for this one. Here’s my problem. I can’t move this year. Doc thinks I have a meniscus tear (MRI is scheduled for Friday) and if I am facing physical therapy and a brace for a while or even arthroscopic surgery plus recovery time, I probably want to stay in my ground floor apartment and not take on a major move. Stinks, but there it is. Going month to month would cost an extra $200 a month. Besides aparmentratings.com, does anyone know where else I can go to warn other potential renters about this place?
Why do I need a pep talk? I can’t stand the idea of signing a lease at above market rate. It irks. Oh, it will be less than $800 for the whole year, so it is entirely affordable. And I am one of the fortunate few who is actually getting a raise this year. I think the rent increase will be around half of the extra I will take home per month, though I can’t be sure about that until the first new paycheck arrives – in about three weeks. Just skipping my ceramics class this semester will offset the entire amount, though I was planning to do that anyway. (I’m going to start going to an open studio in the area that just charges for clay and firing space instead). Ah, well. At least this incident has finally motivated me to really, truly move next year. It will take that long to get rid of an appropriate amount of stuff and find a place I really want to live. Purchase prices sure aren’t going to be down enough in the DC area by next year – not even close.
I guess my dilemma has also brought something important to light. I’m not going to be able to convince myself to buy a place, any place, until the prices are really in line with economic reality. If a few hundred bucks on a lease make me this upset, what would overpaying multiple tens of thousands for a house or condo do to me? How do the current crop of knife catchers do it? I am baffled.
I didn’t know you were a Vermonster too.
I grew up in MA and went to college in New Hampshire. Love Vermont. My uncle and his partner decided to give up on trying to get academic jobs together and settled there with other sorts of jobs because they like it, uncle’s partner grrew up there and had family there, and because they knew they would be OK there as a gay couple. They adopted three wonderful kids from the Vermont foster care system. Love them, love the boys, but I’m still shivering because they keep the house at about 62 degrees - my blood has thinned.
Polly
Spent summers in Underhill Center at old farm. Rejuvenating place.
Best wishes on your recovery.
polly,
Is your LL raising your rent or are you saying that it should be reduced since it is a re-up? I’m not sure how your comparables would convince the LL to reduce your rent if they are in the same price range as your own appartment?
LL wants an extra $65 per month. I want to keep it the same. Last year they wanted and extra $130 a month and I brought in comparables and they agreed to no increase. This year, despite the comparables, they are claiming I am already at least $150 under market rate (yes, there seems to be a complete misunderstanding of the term “market rate”), so the increase stands despite the comparable apartments renting for near my current rate.
yes, there seems to be a complete misunderstanding of the term “market rate” …
I ran into a similar problem last year — my old landlord hiked our rent and I argued against it, citing the aggressively priced inventory in the local market. (There were small rent increases each of the three years I lived there.) She refused to budge … and we moved.
In our case, we needed a bigger place anyway ’cause we had a critter on the way, so her refusal to come down on the price simply helped put our arses in gear. Over Christmas, I talked to a friend who’s still a tenant in the same building, and noting another looming increase, she said “Patty [the landlord] is certainly confident in her pricing.”
In your case, it sounds like you may need to vote with your feet — next year?
Assuming there are two good knees in play next year, I am out of here. Maybe I should consider this a gift of motivation? I have already made friends with the manager at the best building of the comps I brought in. Called him yesterday and told him I was only passing on his place because of the knee, asked to see the unit when it was vacated, put me on a contact list for any unit that gives him notice they are vacating near the end of my lease, etc.
If there’s anything structurally wrong with your knee, whether or not it needs surgery at the moment, advise you to avoid living in a place with many stairs. Tore a meniscus in 1991, got better with physical therapy, but 2 years later I just leaned forward and POP! developed a bucket-handle tear that locked my knee up and required surgery within 2 weeks. Arthroscopic surgery removed the defect, a month of PT & continuing exercises ever since gives me a 95% painless knee. Visited family over Xmas with lots of stairs & knee got quite painful in just 1 day there. Then moved with family to a 3-day condo rental over Xmas with very nice elevators & knee healed itself.
polly,
If that was the ‘worst’ thing that happened to most people this year ( they’d be throwing one HELL of a New Year’s celebration! ) Kirk Kirkorian would have gladly traded places w/ you!
Thanks for sharing that though, it really exemplifies the scale between “renter problems” and FB problems. World of difference. We all wish you a fast recovery!
I have to concur. $800? For some people, that’s one month of COBRA.
Keep ‘em coming guys. This is exactly what I need. In my head I know that this is the classic “small stuff.” I just need a few more people to keep telling me it is OK to just let it go and allocate it to health care costs in my head.
Just a side note. The reaction from the scheduler at the imaging center (for the MRI) when she heard I had the standard federal employee Blue Cross insurance? It would be funny if it hadn’t been so tragic. She was so happy that she wasn’t going to have to fight with anyone over pre-appoval in the 2 days before and the one day after New Year’s day.
YO POLLY
a First floor apartment? if you live in any big city you know how rare those are, usually apartment 1A is reserved for the super
I’m in the ‘burbs, though still easy walking distance to the Metro. About a quarter of the apartments in this complex are on the first floor.
are first floor NY apartments on a level where crooks would mess w/you ?!
I know here in the west (CA) I always ALWAYS rented at least a 2nd story unit, which was priced higher than ground floor, just for the security peace of mind.
not trying to generalize, but the pics of NY units on the ground floor seems to show the windows arent exactly at street level, or maybe there are bars on the windows ?? but I wonder if that would just be a minor challenge to the riff raff . . .
anyway, best wishes to all for the coming year !
NO usually they are in the back. I had a 3 room apart (#1A) with a back yard..no kidding….very quiet.
They would have had to get inside the building then climb 5 flights of stairs to the roof the go down 5 flights on the fire escape to get to my windows.
———————————-
are first floor NY apartments on a level where crooks would mess w/you ?!
if you have good quiet neighbors why risk moving to get some idiot that will crank up the music. i have to say that is why i have stayed with month to month apartments for the last 2 years. I can move out in one month. i have been in a couple apartments where the neighbors did not care and the complex did not do enough to stop the constant noise. another reason, i will never buy a condo! only a house or rent month to month for me! so far i have been lucky with the month to month but recently getting more noise as the building is filling up and i have more neighbors!
Think of it this way. I’m paying $2600 a month for a beautiful house that I would never be able to afford while home values around me are currently falling at 12-15 K per month. Thus, I’m paying myself $9400 per month to be a renter in the best house of my life.
Yeah, I am renting a home that is so quiet I can hear my ears. I know my rent is god awful, but to rent a place I hate is so much worse. I am a whole person here as I was a prisoner in my last one.
Take the tiny increase!
try a bluff-I’m trying to rent a commercial property and can’t give it away
did you see the BS in WAPO today?
I can buy in FC near metro for 50% off 2005 prices and they say Arlington didn’t budge !! WTF
Fairfax County 50% off? Wow. I wasn’t expecting that, since they won’t have the layoffs. But the place was crawling with spec-u-vestors.
timberlane in falls church
3 br $ 133k
solid financials
Dayum… $133K for 3 br? 3 years ago that would have bought 1/2 of a 400 sq ft studio.
Too late to bluff. My fault, but I wanted to hang in VT with the family, so that is all there is.
Polly,
It’s not easy being a renter and having to deal with greedy LLs, but sounds like you are doing the right thing by staying.
To make yourself feel better, just think about how much money the FBs are losing every single month… I’m sure your rent increase is just a fraction of that (hopefully).
Best wishes to you in the new year, and good luck with your knee. Definitely good to stay away from stairs if you’ve got a bad knee, even if it should start to feel better in the future, IMHO.
polly -
Sounds like you have a great situation. You have the ground floor apartment you need for your circumstances - how great is that, and how much would it suck if you had to deal with the hassle and added expense of moving elsewhere to get another groundfloor place or a place with an elevator!
Breaking even, even making extra bucks in this economy (you got a raise!) is a heckuva better deal than most people are getting this year.
Quality of life, baby, that’s where it’s at. The knife catchers feel a need to improve their quality of life, so they catch knives; that’s how they sleep at night, knowing that they either have the house that they feel they so direly need or want. And they’re willing to offset that perceived quality with high mortgage payments and depreciating assets.
Your quality of life is of a different genre. The small amount that you are paying over market value is well worth keeping what you have. Now, go out and register for that pottery class - don’t do what I do and stop living just because you feel you’re getting a raw deal. You gotta live life while you’re alive, and while we all love getting a fair deal or a bargain, don’t let a bad deal rain on your parade. You make enouigh smart financial decisions that you can afford a wee-little rip-off.
I agree, don’t drop the ceramics class!
Everybody needs a creative outlet.
Oh, I’m stopping the pottery class because I am at a stage in my learning where I just need to do things over and over and over again, and I don’t need a teacher in a classroom for that. I need a wheel, some “mud” and some time. Going to the open studio is better for that. I’ll go back to class when I reach a plateau on what I can accomplish on my own.
Besides, the class means I miss a lot of my favorite geeky lectures in DC (Carnegie Institute, Air and Space Museum, Smithsonian, etc.). And I am hoping to join a singing group this winter, and maybe do some volunteer work and would rather not totally over commit my evenings. Then there is this whole project I am co-leading at the office that may require a few late nights. Plus I have to travel for some family birthdays, which might lead to missing classes. Dropping the class is because of a lot of things completely unrelated to money.
But again, thanks for the input. This is helping.
Growing up, we had a neighbor down the street with a gas fired kiln in her front lawn. Needless to say, we had no HOA.
Front yard? Interesting choice. I would worry about law suits when the little darlings in the nabe came over and dared their younger siblings to touch it, but that is just me.
Also, even without an HOA, the fire department might have had some issues….
Well that’s where the gas line was. I think that she kept a pretty close watch on it when she was actually firing. I remember her showing me how she took a brick out to look at the cones. I though they looked like little Sydney Opera houses. And I think that it was far enough away from the front wall that the FD wouldn’t have been concerned. It was screened from view by a hedge. But a square planting of high hedge DOES look funny in one’s front yard.
RE: if I am facing physical therapy and a brace for a while or even arthroscopic surgery plus recovery time, I probably want to stay in my ground floor apartment and not take on a major move. Stinks, but there it is.
Take care of your health first.
Havin’ 1st floor digs may mean the difference between a good recovery or a bad one.
All the rest is secondary BS.
OK. There’s the rub. I’m going to sign the thing and write out a check and drop it off. Office closes at 3:00 PM today.
Hope you mend quickly, Polly. Don’t sweat the rent. Maybe prices for houses in your area will fall sufficiently that rent equals buy by the end of 2009. Prices have fallen here in Sacramento sufficiently that buying is starting to look attractive. There’s also a glut of rentals (new landlords who purchased foreclosures), but rents are stable. I’m trying to rush things by making offers 15% less than asking. Still no acceptances, but I keep trying. Less than $100 per square foot in a good neighborhood is my goal.
Doc thinks I have a meniscus tear ??
I have had this proceeder although it was sometime ago…I have had four orthopedic surgery’s two of which were scoped..No way of knowing how bad it is but arthroscopic surgery typically has a quick recovery time…I am thinking your rehab may not be quite as long or painful as you think…I have had friends that were golfing after two weeks of a arthroscopic knee surgery…Maybe just delay the surgery until after you move ??
Pay the higher rent, OR move.
They are playing the arbitrage that you would rather pay more than have to move. Besides, we all know, if you move, they eat your deposit….that is another arbitrage.
They are charging you more, because they can, because you don’t want to have to move.
No deposit. None. Based on my credit score. Why they thought there was a connection between credit scores and spilling stuff on the rug or putting holes in the walls I have no idea.
A high credit score would tend to indicate
1.) You’d actually be likely to continue to pay the rent, on time, to the conclusion of the lease. The importance (and probability) of finding tenants like this is something that the failed flip/ new landlords haven’t realized yet.
2.) You’re likely to be concerned enough with your credit rating to pay for any damages that they billed you for, without having to take you to small claim courts.
I suspect that they might have sensed your reluctance to move out and squeezed you as hard as they could.
Polly,
Can you afford the extra $200.00 a month? If you can I would go that route. Knowing you can move asap when your knee is better, IMHO is worth the extra $200.00 a month.
So, I was in Vermont (Burlington area) for family party and visit with uncles/cousins. Wow. I have acclimated to DC big time. Worried talk about state government budget cuts in the millions sound like small potatoes these days. Anyway, talked to uncle (very, very intelligent man) but even he thought Vermont was “different.” And I have to admit, I saw few “for sale signs” and, even more telling, there was almost nothing on sale in the non-chain stores in Burlington’s downtown Church Street area. This was three days after Christmas. If there has been any downturn in retail spending, they aren’t reacting to it yet. Uncle says there was relatively little predatory lending in Vermont. I have no way to confirm or deny that, but he also said that over the five and a half years they have owned the house, it has increased in value less than 30%. That isn’t normal appreciation, especially as I expect salaries did not increase even close to that much, but it isn’t Las Vegas either. Is it possible that the purveyors of suicide loans thought Vermont was too small to bother with? Sounds unlikely, but I guess it could be partially true.
He also said that the economy is less vulnerable because they aren’t dependent on a single industry like Michigan on autos. There is a lot of agriculture and that can be very vulnerable to substitution effect – local organic veggies can be replaced by non-organic, non-local veggies, or canned or frozen veggies, or just other food. Tourism is also big, but Vermont could plausibly benefit from a substitution effect there – a week of leaf peeping in the fall is a cheaper substitute for two weeks in southern France – but I don’t know if it will happen. Generally, I see not having to depend on one, immediately failing industry as death by a thousand cuts rather than getting your head blown off – slower, but in the end you can still die.
Here is the real kicker. If everything is so hunky dory, why is there such a crisis with the state’s revenue? I asked if he knew where the shortfalls were concentrated (he wasn’t sure). Since Vermont has a large variety of state taxes, it should be possible to figure a lot out based on where the revenue is down – is it from the personal income tax? Then household incomes are down. Is it from a corporate income tax and sales taxes? Then business revenue is down. Is it from hotel and meal taxes? Tourism is down. Or could the crisis all be from cuts in federal assistance? Sounds highly unlikely.
Any real information from the ground in VT? I’m very curious.
Correct me if I’m wrong but your uncle speaks like a true flatlander. Most are entirely clueless about VT for the obvious reason they don’t know the history here. Nevertheless, it would be comical to hear him talk in person. The bubble began blowing in VT far earlier than the more notorious locations. Beginning in 1996 I watched prices begin to escalate and they were clearly overpriced by 1999 which is the year I sold my shack in West Pawlet. Just a note on that; the gross price increase was 32% over the 5 years I owned it. There is little doubt in my mind that anyone who bought in VT subsequent to 1998-1999 period grossly overpaid. Years 2002-2006 speak for themselves as VT was a mere blip on the radar in terms of the scope and scale of the runup but from my observations, prices increased another 50-80% during that time frame.
You’re uncle ignorantly belabors the old RE standby, “we didn’t have a bubble here” to which I say, if you want to own the gains, you must own the loss.
He has been right there in the Burlington area for nearly 10 years now and living in either VT or NH near the VT border for close to 20, so yeah, still a flatlander by Vermont standards.
But his partner is VT born and bred. Uncle-in-law wasn’t around for this particular conversation, so I don’t know what he would have said. It definitely felt wrong to me. Vermont is largely a poor state. Burlington is a Portland/Seattle wanna be (more wanna than be) but the rest?
His other comment was talking about problems with lack of housing in the state. I get that a lot of the housing maybe old enough to be substandard, but that isn’t a lack of housing overall, though there may be a lack of housing that is up to code for government subsidy or disabled access. Just sounds wrong.
By the way, the house is nice, but I always thought that the original price was a bit high. The only improvements they have made are stripping wallpaper, painting and putting new hardware on the kitchen cabinets - all done by owner. Maybe they replaced an appliance or two as they broke.
Yeah B-Ton folks always thought they were different due to IBM’s presence there but clearly it’s not the strength it was some 30 years ago. As far as I know, and it’s only rumor, Burlington IBM worker pop. is on the decline. They were advantaged by there close proximity to Plattsburgh and the AFB but that was shut down years ago due to BRAC. Regardless, Burlington is an island in a rising tide of failing dairy businesses, welfare and chronic under-employment/unemployment.
I assume that you mean Portland OR, not Portland ME.
Yup. Portland, Maine has its own charms, but they are not the ones to which Burlington, Vermont aspires. And Crow bookstore, as nice as it is, is no Powells.
And B.I.W. isn’t the industry that it used to be.
It’s an old flawed parallel Jim. Burlington and IBM, Portland and Intel. Trust me, believe me when I tell you… Burlington is nothing like Portland, Or. I can’t come up with one similarity.
“We didn’t have a bubble here,” is the mantra that I get around here. These realtors seem to equate the bubble with a run-up in prices due to overbuilding and speculative purchases of multiple properties; whereas it’s merely the run-up in prices that define the bubble.
Yeah, I live in an old, well-developed area with little property available for new construction, so we didn’t have the building boom; but boy, prices sure went up, almost exactly as exeter describes, from 1996 on. And while we don’t have the foreclosure issues that other newly-built areas are seeing, prices are dropping, albeit not as quickly as in the areas of explosive growth. It’s the damn, media, I tell ya! If people here didn’t know about falling prices around the rest of the country, selling prices could remain high here.
RE: Correct me if I’m wrong but your uncle speaks like a true flatlander.
Bingo…exeter.
VT is without a doubt the land of the second and third home urban aristocracic flatlander.
Nowhere in New England are single family detached housing prices more completely detached from local income levels.
The denizens of Burlington are especially representative of the “let them eat cake” constituency, as most are employed in the education and health care sectors. In fact, many of the “foo-foo” lifestyle writers don’t even consider the town to be part of VT, but rather a more pedestrian and laid back Greenwich North.
But take a drive up today up 101 from Killington to Waterbury and you can really see things ain’t so great in the outback.
You can see the slow insidious economic rot with all the “For Sale” on the various commercial establishments catering to the tourism and the ski industry.
But it’s hard to convince the most blue state in the union that once the major businesses fail and the young people have split that you can’t run the government on the proceeds from $4 lattes and a Ben & Jerry’s ice cream cone Bernie Sanders notwithstanding.
If there is one thing I’d love to see implode beside the REIC it is the puke inducing commercial brand VT has become and everything associated with it. Historically, VT’s reputation has been one of frugality, hard work, ingenuity, etc. That’s all gone now.
VT never booms- so how can it bust
It didn’t seem to stop Detroit.
There was an article in the L.A. Times three days ago paid for by the NAR which stated ‘you’ll be kicking yourself three years from now if you don’t buy today.” Let’s set a New Year’s Resolution that noone in the “know” on this blog weakens and buys before the true drops in value are in. Be patient my fellow vultures. Carrion takes time.
Once the bottom is in, how long would it last? For example, I’m in a situation where I probably won’t be able to buy for 3 years at least. Would I still get in on a good price in, say, late 2011? Or will prices skyrocket again? My suspicion says no. If a bank requires any type of down payment, then prices will bounce along the bottom for a LONG time.
“If a bank requires any type of down payment, then prices will bounce along the bottom for a LONG time.”
And don’t forget, even the GSE loan programs that allow just a small down payment (e.g. 3%), the buyer still has to qualify to carry 97% financing on the home.
Either way, put a fork in it. Prices aren’t going up anytime soon.
I just don’t trust Ben & Hank - they want to put a floor under prices so badly they seem willing to risk everything to do it. I think that one difference between HBBers and a huge number of potential buyers is that the latter focus just on the cash flow - the monthly payment. If B&H were to engineer mortgage rates down to 1%, for example, then I think house prices *effectively* would rise because inventory would begin to clear before prices fall to the level at which inventory reduction should occur in a non-intervened-in market.
Mortgage rates are meaningless. The real yardstick will be down-payment. It’s one thing to specuvest with no money down, or to specuvest if you can borrow your cash. But to specuvest out of your checking account? No, I think the builders will be faster than the specuvestors.
I wouldn’t worry about Ben and Hank. With his 0.314159% interest (mmmm, pi), Ben has played all his cards. And Hanky Panky will be gone in a month. It’s up to Larry, Sheila, and Tim.
Some commenters here had some good advice: wait until prices begin creeping up - that’s when you’ll know the market hit bottom. You won’t get the absolute lowest price, but you know you won’t be screwed, either.
After the early 90s RE crash in California, prices didn’t start blasting off for another 5 years at least.
Lisa is right. Securitization separated risk from origination, so anyone could get a loan for any amount of money. This is what caused prices to skyrocket.
Now the poeple holding those loans are eating huge losses. Securitization is NOT coming back. Wihtout it, the loan originator will actually care whether or not you can repay the loan, and THAT will keep prices at the normal affordability ratios.
The bubble will NOT be repeating itself, atleast not anytime soon.
Hi oxide. Once things bottom in real estate, they sit there for years. It took four years after the bottom for prices to rise after the 90s California RE bust. If things bottom in 2010, you can wait until 2014 to buy if you’re inclined.
…kicking yourself three years from now…
I will bet that that same NAR article didn’t state:
…kicking yourself *now* because you bought three years *ago*…
Anyone want to take a guess on how much Rochester will fall?
I have a date with that place and a knife.
Muggy,
Rochester, NY? How far ‘could’ it fall? Wasn’t that the town where they had to institute some sort of “Guaranteed Min. Buy Back Price” just to get young couples to buy?
Anyone want to take a guess on how much Rochester will fall?
As a couple people have noted, prices in that area didn’t get bubbly, but the housing boom helped shore up existing prices in the face of generally glum regional news. I’d expect a long, slow deflation in upstate NY prices — no sharp readjustments, but no silver lining either.
DinOR, I’ve never heard of that, but yes, Rochester, NY. You see, if you’re from the one in NY, the one in NH and MN don’t count. It’s part of Rochester’s famed smugness
ET, your thoughts mirror my assessment of the situation. I’m hoping Exeter or Blano can give me a virtual kick in the
jimmy, but the reality is that I will buy when I move back. My target house is already in line with rents…
Keep in mind, this will be the home I die in, and I’m in my early 30’s. I’ll also, possibly, pay cash. At the very least I will be putting 50%+ down.
As for stability, I think the area hasn’t changed much since, well, forever. I’m not saying it couldn’t, just saying it hasn’t…
Jobless claims down to 492,000 according to cnn.money. Have they forgotten that very few employers lay off at Christmas to avoid the Scrooge stigma? Yawn, wait ’till the brutal January and February numbers come out. When does the stock market bottom in this cycle? Discussion?
I would expect that in Jan and Feb we will see the retailers folding and closing stores. Plenty of pain yet to come…
Absolutely. I think lots of businesses were holding on through the end of the year to get what they could during the Christmas shopping season.
IMHO, layoffs and store closings will be brutal in the first half of 2009.
I believe weekly claims over 400K is considered recession territory…
Many of the layoffs were anounced in October and November and since they have to give 60 day notices these folks have not shown up at the local unemployment office yet.
I saw an analyst a few days ago on CNBC say that there could be 125 stores closing in January with many of them being chain stores. So many more people will be losing their jobs. Even stores that don’t close will be laying off people. So it would probably be 150-300 people per mall (1500 malls) and that would be 225,000 - 450,000 new layoffs.
What he said.
Also of note is that continuing claims just went above 4.5M for the first time in this recession. This despite the fact that a very large number of people are giving up on trying, and thus don’t contribute to this count.
Friend in HR at a tech company. Has to lay-off 10% of the office…
Next week….
Jobless claims down to 492,000 ??
But the suspicion is the revisions are going to be significantly upward…
Down and 492,000 shouldn’t be used in same sentence.
Here in Virginia there were reports that the unemployment automated call in line was totally overwhelmed and they had to add more capacity. This was Sunday and Monday this week.
Seasonal adjusted!!!! Seasonal adjustment depends on data from normal markets. If we’re not in a normal market, then the seasonal adjustment will scew the results.
Think about changes in median house price vs. Case-Shiller. Here in AZ, Case-Shiller started showing declines about 3 months before median did. The low end of the market slowed first, scewing the median up to the large, more expensive houses.
For these lay-offs, usually retailers higher a lot of seasonal workers that are being let go this time of year. Well, the retailers didn’t staff up as much as normal, so they have fewer to lay-off. This scewes the seasonal adjustments.
The continuing claims number is not seasonally adjusted, and it continued its steady climb higher and higher.
Next week’s jobs number should be very ugly.
One of my pet peeves and a mild rant:
The friggin MSM missed the possibility of this collapse from 2002 to 2005 and now they are all jumping on the “worst since the great depression” meme. They were wrong proclaiming “goldilocks”; they are wrong now. They look at selective data without looking at outliers and try to fit the data into a pretty mold.
As in 2005, the outliers are leading trends. “Feed the squirrels” marked the top in the housing market (if not actual date, actual mentality). The bottom may have been reached in the economy, no housing bottom for quite a while, by similar inanities from the same idiotic pundits that missed the housing bubble.
PB: re best investments 2008
Yen 12/31/2007 - 111.40 12/31/2008 - 90.70
If you were long JGBs with your Yen, the return was 48%. Your data was backwards.
“Your data was backwards.”
Sorry — I misinterpreted what the Marketwatchers reported…
hoz,
Nice way to sum up the year! It seems the MSM was foaming at the mouth to assign that phrase to whatever report was coming out to make sure they couldn’t somehow shoe horn it in?
If you can’t give me 1929, give me the darkest hours of the 70’s at least fer’ crissakes! And thanks for making a distinction between a bottom in the broader economy and housing ( which I don’t care WHERE it bottoms! )
The housing bubble was one thing but the commodities spike crushed a lot of balance sheets around the globe. Expect huge earnings and dividend adjustments in 2009 plus tons of corporate and municipal bankruptcies. Expect government failures and popular unrest. 2009 is going to be awful.
Agree, mrktMaven. I think 2009 will be worse than 2008. If it’s not (and it’s sustainable), then the Fed, Treasury, and Obama’s team will deserve a whole lot of credit.
ABC is owned by Disney.
NBC is owned by GE.
FOX is owned by Rupert Murdoch.
I don’t know about CBS.
Newspapers are owned by the realtors who buy ad space.
CNBC is greedy enough on its own.
PBS is owned by Big Oil, Big Finance, and a gov just waiting to yank funding at the first hint of bias, intentional or no.
MSM didn’t want to sound any alarms — they probably didn’t even look — because their pwners were making far too much money and paying the money honeys to just please read the teleprompter. But now that the cat’s out of the bag, they have to get ratings the old fashioned way — by screaming Fire and Brimstone and Depression. If it bleeds, it leads. Who’s going to buy a paper if it’s the second worst thing since the depression? Pfft. They want to see homeless selling apples!
Re: “worst since the great depression” meme
Hoz, why do you think this meme is wrong? I think this one likely will be the worst recession since the great depression, and might slip into depression territory.
Why do you think “the bottom may have been reached in the economy”? I see no evidence of that, and only evidence of actions on a broad basis (layoffs, belt-tightening) that will have cyclic reinforcing effects.
Please elaborate… I value your opinion.
Well, I’m back from DC and my hotel on Capitol Hill (steps from the Senate) was opposite the … wait for it … wait for it … NAR® headquarters.
Woe is me.
What have I done to deserve this, I ask?
But it is a very pretty blue color. The building itself is ugly.
Did you hear any wailing and gnashing of teeth?
My apologies in advance, FPSS, but I am LMAO!
Something about you being holed up across the street from NAR…’tis to laugh! Don’t take it personally, as I would say the same thing to anyone on this board.
So, how big a discount did you insist upon at the hotel? 30%?
40%?
Didya see anything/anyone interesting heading in and out of NAR? Did you tour the facility? Did you cause any due embarrassment of our TARP friends?
At $75 (+ lots of taxes) a night for a very nice room, I wasn’t exactly complaining.
Nothing much interesting was noticed there (but then this is the off-season.)
FPSS, did you consider that it might not be what you have done to deserve this, but rather that _they_ have done to deserve you??
Can you perhaps egg their headquarters for us while you’re there? Picture the recent protest video from Iceland…
Were you tempted at all to do some harm to the NAR building? You know like throw rotten eggs, spray graffiti etc..
I was.
But I behaved myself which is no fun.
Plant a “For Sale By Owner” sign
A few great articles in the WSJ today.
One notes that NY and Boston are actually worse off because they haven’t fallen much, because that means they have further to go.
http://online.wsj.com/article/SB123068142001844023.html
A WSJ graph compares today’s prices with the peak and 2000! to show how far the bubble has to unwind. Now that some HBB thinking!
http://online.wsj.com/article/SB123064533193442343.html
Finally, the “solution” I wrote about here years ago for those who bought at the peak and can’t afford the mortgage: the mother of all cram downs.
http://online.wsj.com/article/SB123068005350543971.html
It really is the only way. Without a judge to crack the whip, you’ll never get the lenders to write down principal and borrowers to stretch to repay.
Cram downs will ensure that only the government will ever write another mortgage.
And how are the lenders/bond-holders expected to actually eat the $5 trillion in losses that are coming?
Pension plans, insurance companies, bond funds, banks and brokerages…. All hold this stuff, and NONE can afford to eat the loss.
This “solution” may work for the homeowner, but it does nothing to help any of the other stake holders… therefore, even with this “solution” the economy is still toast.
Don’t be so sure… cramdowns came down in the 1930’s and the country survived.
A lot of lenders that didn’t accept cramdowns didn’t, though. Nothing like a hot strong deflation enema to clean up the old financial colon…
(just kidding–I consider coffee enemas to be yet another example of ridiculous woo-woo, on the same level as the notion that graham crackers and cornflakes will “cure” masturbation in young boys)
You can take this loan and cram it down where the sun don’t shine.
Wall Street Journal
* REAL ESTATE
* DECEMBER 31, 2008
Mortgage ‘Cram-Downs’ Loom as Foreclosures Mount
Mortgage lenders who wake up Thursday with a New Year’s hangover are likely to face another headache soon: The effort to give bankruptcy judges the power to rewrite mortgages is gaining steam.
The banking industry hoped the mortgage “cram-down” measure died when Congress removed it from the $700 billion bailout bill that passed in October. But it has been gathering momentum in Democrat-controlled Washington, as evidence emerges that current voluntary foreclosure-prevention programs are falling short.
In a cram-down, a judge modifies a loan, often reducing principal so a borrower can afford it.
Bear,
If the government allows cram-downs to take
place, it effectively destroys the private mortgage
industry. Not one bank would ever give another
loan on property knowing that the government
could change the strictures of the loan. It would
bring total uncertainty to the market when exactly
the opposite needs to be applied.
Unless the government uses the money it just created to pay the banks a very healthy percentage of the cramdown amount.
With T rates where they are why doesn’t the treasury purchase a lot of these loans and then offer them back to the current owner OR the open market on a 30 year payment plan @ 0% interest with a 10 year call on the loan….The loan also being non-assumable….I think that would work and at least the principal is preserved not to mention stabilizing the market….Better than a cramdown IMO…
“If the government allows cram-downs to take
place, it effectively destroys the private mortgage
industry. Not one bank would ever give another
loan on property knowing that the government
could change the strictures of the loan.”
Dont worry, the feds have allready thought about this and they have a solution, everyone can get a FHA FNMA or FMC loan.
Judges that support such notions are basically stating that real estate is essentially worthless.
Why EVER buy real estate if you cannot confirm its market value?
TESTIFY! If they do a cram down they will effectively kill (what’s left of) the RE market. Adjusting the principal may keep a few in their homes but a majority I’d guess will still default or have to sell. They are extending the pain. Comps will drop to the newly crammed down price, buyers will turn to waiters (again).
..give bankruptcy judges the power to rewrite mortgages…
Lets for a moment imagine that such an absurd proposal
does in fact pass into law.
What lender public or private would *ever* make a new
loan “secured” by real estate if, in effect, the terms
and conditions of the mortgage contract can be
modifed post-facto by a 3rd party. (ie. judge).
Just plain crazy! Are we throwing out 200 years of contract
law in this country? If so, why not give 3rd partys power
to modify *any* contract. These proposals are beyond insane!
I dunno. The banks don’t actually hold the mortgage anyway. It’s all securitized and held by China’s central bank.
And the banks can’t securitize the crap and sell it to China anymore anyway, so why should they care? Let it get crammed down.
The problem as I see it would be the Chinese telling the feds that if they allow this to happen then they won’t be buying any of our debt anymore. Then we have would actually have to pay taxes for our goodies instead of pawning them off on our kids. That is a hell I’m not sure we are capable of enduring.
I think what some of the moderates are proposing is to allow the bankruptcy judge to throwout excessive fees and usury interest rates. Some of the mortgage servicers really can pile on the fees after a single missed payment.
Ben:
Thanks for an entertaining, if not infuriating year.
One of the saddest thing is most of the American home-owning public just doesn’t get it. Even people like my parents, whose mortgage has been paid up for 20 years, think falling house prices is some sort of national tragedy.
Last night on the local news, the anchor said (paraphrase): “More bad news about housing: house prices fell another x% last month”. To everyone who avoided spending too much for a house during the bubble, that’s an outrageous statement.
I find the term “housing crisis” itself offensive. There’s no housing crisis! There’s bigger inventory at lower prices than ever before.
In fact, it’s not even a “credit crisis”. It’s a consumer-debt crisis.
Too much consumer debt is what killed auto sales: when 40% of car sales in 2007 were funded with HELOC money, what did they expect to happen.
As far as I can tell, there was no net loss of money during the bubble’s inflation and pop: just a loss of the ability to borrow against perceived value. There were three scenarios after the “pop”
1. You owned a home (or at least started a mortgage) pre-bubble, and watched your imagined home price (Zillow, etc) rise (when you clucked your tongue and felt rich) and fall (when you whined about how much imaginary money you lost). No net loss of any money here.
2. You bought a home and paid too much money. That means SOMEONE ELSE made “too much money”. A net zero for our economy.
3. You borrowed against perceived house price, and bought crap. No loss for our economy. In fact a gain because of the jobs created to sell the crap to the debtor.
I rarely hear anyone mention that for every person who bought a shack in Gilroy for $600K that eventually sold for $120K, there’s another person who sold a $120K house for $600K!
The fact that our economy’s in trouble has little to do with the housing price correction. It has everything to do with the fact that America doesn’t really make anything anymore, and that people no longer have access to EZ credit.
“Even people like my parents, whose mortgage has been paid up for 20 years, think falling house prices is some sort of national tragedy.”
The MSM and the politicians have gone a long way to promoting this misguided thinking. This could have to do with the fact that most writers for the MSM are home owners, lots of politicians are real estate investors who own multiple homes, and very few of these people have a clue about what qualifies as a market failure. Owner-occupied housing is a private good, not a public good, and hence there is no proper role for government in meddling in this market.
Owner-occupied housing is a private good, not a public good, and hence there is no proper role for government in meddling in this market.
While I agree that what qualifies as a “market failure” is open for debate, it seems to me that owner-occupied housing can be both a private and public good — when housing is well-situated, affordable and well-planned, that is.
As far as government meddling goes, I suppose that depends on your definition of meddling. I’d prefer that interventions happen on the front end via regulation of lending institutions and not reactively on the back end via expenditures, by which time the “meddling” is both imprudent and ineffectual.
“I’d prefer that interventions happen on the front end via regulation of lending institutions and not reactively on the back end via expenditures, by which time the “meddling” is both imprudent and ineffectual.”
me too.
Wait, multiple homes are bad? But then there won’t be any new episodes of House Hunters International…:-(
PB,
“This could have to do with the fact that most writers for the MSM are home owners, lots of politicians are real estate investors who own multiple homes, and very few of these people have a clue about what qualifies as a market failure.”
May I say, BINGO, BULLSEYE, and a big YUP.
reuven,
Not sure if everyone is writing more concisely, if it’s the end of the year or “the student is ready to learn” but your’s is among a number of excellent posts of late!
Particularly your #2. I stood in the doorway of my office talking with a guy that early in the year was part of a founding group that sold their stake in an assisted care facility REIT. Really at peak-of-the-market pricing! He was patting himself on the back and saying “God is good!” and I couldn’t help but feel sorry for the poor buyers!
Well, fast forward a few months and the buyers are already in financial peril! They’re in peril and the seller has moved on and now in retirement is producing “Christian” music. Please Lord, bring me a Greater Fool to make all my wet dreams come true! LOL!
Did you call and correct them? I’ve been very vocal in contacting authors of stories. I’ve gotten decent replies, especially from the Bloomberg people.
If your parents hold stocks, bonds, or many other investments, then they care about falling house prices…. If they have a pension, and their pension plan holds any of this stuff… If they own a business and their customers own any of this stuff… Etc. Etc. Etc.
Look, all money is simply an IOU. If the person that owes chooses not to pay, the money goes away. Falling house prices makes it more likely that the loans won’t be repaid, and fuels the deflationary spiral of shrinking money supply and keeps us in the path to depression.
Don’t get me wrong. 5 years ago I was a loan voice in the wilderness here in PHXC saying that the rising house prices was a crisis because it was going to turn and come crashing down. No one wanter to year it then.
I don’t think we can do anything to stop it now.
However, tracking the collapse of our economy is still bad news.
My parents are bleeding-heart liberals, so they feel for these no-money-down teaser-rate pick-a-pay 110% financing folks who have “lost their homes” and get interviewed on the news. That’s the extent of their concern. With state and military pensions + SS + a buttload of savings from a lifetime of thrift, they’re not too worried about themselves (and neither am I)
I own (i.e., no mortgage) the house I live in, plus some swampland in Florida. Of all the things I worry about, falling house prices isn’t one of them.
The top of my worry list is rising crime.
“My parents are bleeding-heart liberals, so they feel for these no-money-down teaser-rate pick-a-pay 110% financing folks who have “lost their homes” and get interviewed on the news”
You know,it is very frustrating, these people who beg for government help to save their second investment home or their equity-stripped home that they used to buy big toys or their flipping flips. But they were not the only ones in the game.
In “maxed out”, the documentary about credit, they interviewed a mother and son, both (truly) mentally challenged and poorly educated, who had a good deal on a very modest little house, that they had obtained through a HUD-like initiative. They were set, they could afford it. A bank knocked on their door and offered to refinance. I don’t remember the refinancing offer, but I think there was a very small amount of cash upfront, and then supposedly cheaper monthly payments, and was billed to them as a smart money move. They showed the documentation, and the signatures were basically “x”s. One of them was completely illiterate. The terms were horrific with very little gain for the borrower and a bomb buried in the back. If someone offered me the terms they were offered, I would laugh in their face (probably quite politely, though
). They didn’t know enough to laugh. That’s worth some pity.
I have said this before, but having lived among very poor, middle-class and ultra-wealthy families growing up, I know that poor kids are often not raised with information about personal finance that many of us take for granted. They are more vulnerable, and when they are fleeced, I do feel sorry for them. There ought to be mandatory financial education in elementary and high school. But there isn’t, and combined with usury laws which have gotten very slack, there has been some robbery in broad daylight.
In the book “the ascent of money” which I am reading right now, the author points out that in poor areas (like the housing projects in Glasgow where he came from) there are no credible lending institutions, and that makes fertile ground for loan sharks, to whom you will pay eleven million% interest per annum on a loan. Now, loan sharking has become a legitimate business model.
Someone mentioned last week the percentage of Americans who admire a scam (70%??). Were the respondents thinking of an Ocean’s 11-style scenario, where the money comes from an invisible source (or from “bad people” who deserved it)? Or were they really thinking of the people who have to lose for the scammers to make it? It’s a very sick mindset, often accompanied with a cold disregard for the “suckers” at the other end. For me, I can only get so mad at people at the bottom of the borrowing chain. They’ve got no big lobbyists or lucrative ad campaigns to offer media outlets.
Increased poverty leads to increased violent crime, so you have good reason to worry. My worry? Organized crime, it gains traction in societies which lose faith in their existing political and justice systems.
+1
There are also the many, many folks who HELOCed to pay for medical expenses and related earnings losses.
At least 50% of personal bankruptcies in this country are for medical and related expenses. Don’t hear much mention of that, do we? Nope, just the old “welfare queen” boogy man.
+2
Excellent post, ella.
HELOC for medical expenses may not be the best thing to do, when eligibility for government assistance often excludes the value of one’s primary residence. Why put a judgement-resistant asset at risk?
Many good points, Reuven. But you missed one:
“3. You borrowed against perceived house price, and bought crap. No loss for our economy. In fact a gain because of the jobs created to sell the crap to the debtor.”
Point (3) should be balanced by point (4), which is that the money borrowed and spent via MEW is balanced by an equal and opposite LOSS to the economy when the debt that was borrowed is defaulted on and then short-sold or foreclosed. Those losses reduce money flow and reduce consumer spending via negative wealth effects.
Those resulting losses to the economy have a negative effect on jobs, which is the phase we are just now entering with a vengeance.
Point (3) should be balanced by point (4), which is that the money borrowed and spent via MEW is balanced by an equal and opposite LOSS to the economy when the debt that was borrowed is defaulted on and then short-sold or foreclosed. Those losses reduce money flow and reduce consumer spending via negative wealth effects.
Those resulting losses to the economy have a negative effect on jobs, which is the phase we are just now entering with a vengeance.
===================
Good point, but consider when a borrower has to pay back the loan (plus interest), the effect is the same.
Credit simply pulls demand from the future and brings it to the present.
Great post reuven .
Does anybody here rent a house and have young kids? We’re looking for more space, have a prospective buyer for our house in a perceived “must-buy” situation (a child being born in March) seemingly willing to give us a 2006 price on our house (Yay!); but the bigger house we have our eye on is priced at a 2006 price with sellers not needing to sell, but wanting to (the place has been on the market for over a year with several price decreases).
So I’m thinking of negotiating a rental agreement with the seller of the bigger house, with a first right of refusal clause, but I’m hesitating because I’ve never rented a house and I don’t know the potential pitfalls of doing so with 3 young kids in schools that we love. I see it as a bet against the seller that his house will depreciate over the next year; my hope is that after our first year of renting he will realize that he needs to cut his price substantially. Crazy?
Um well, we have a one year old kid and rent. We’ve never owned, and look at the school thing this way: in the town we are in there are TONS of apartments for rent. *IF* we want to stay in our town, as our kid enters school, we’ll always be able to figure out a way to stay even if we’re renting.
If we lived in a town out in the country, say, we’d be more inclined to buy before the kid enters school, based on the fact that there may not be as many places to rent.
If you are looking for stability for your kids (ie, minimizing chance of needing to move) you might want to look for a rental house that has a long history of being a rental house (ie, the owner is a landlord by choice, not by necessity). It can be rough to rent a house from someone who would rather sell it. You are typically much better off when your living needs do not also serve as the “solution” to someone else’s financial problem… If you can find a good stable rental house, you should be able to wait out the bubble in comfort as long as you want….
Agree with Bungalowball.
We have three small kids, and have been renting for over 4 1/2 years. Before moving in, I had a number of discussions with the LL to figure out what his long-term plans were and how stable their position was (they are original owners, fully paid off and had no intention of selling, even at the peak).
If you need stability, try to find someone like that and possible sign a multi-year lease or at least discuss the possibility of not increasing rents if you pre-pay or some other agreement.
Good luck!
Mikey - there are some pitfalls here. A Right of First Refusal implies that the owner will continue to try to sell the house. That means you would have to put up with “showings” - an invasion of your privacy that would increasingly piss off your wife. Agents may not be enthusiastic at all about showing a house that has an RFR disclosed, and it had better be disclosed unless the sale is FSBO - even then, what’s the advantage for the seller? Seems to me that this would result in a higher rent than you’d pay otherwise, as is typical of lease-to-own situations.
Further, there is an assumption here that the owner would even consider this - not so sure.
Only additional consideration I can think of is window treatments. We chose to rent a condo instead of a house because the houses did not have decent-looking window treatments and we didn’t want to throw money away on that nor live in a house with super-cheezy window coverings.
Plan B could be to offer to rent the bigger house on a one-year lease and then after you’re in and paying promptly, ask the owner to be kind enough to tell you if an offer were to come in near the end of the lease, so that you could consider matching it or beating it.
Not at all crazy. I am in the position you are in- exactaly! I sold my home in 2007 and rented one 5 homes away… I told the LL that to sweeten the deal I’d allow showings, because I knew the price he was asking. Sure, we had 2-3 showings in the first 3 months, but since then the home has been taken off the market till it “returns”. So in the last year we’ve had 0 showings. In the last year we’ve had a furnace breakdown, electrical issues, and snow up to are armpits (think roof shoveling)… One call does it all- to the LL. I pay the cost to fix and take it out of the next months rent. $1100 for 4000SF. Huge yard I have to mow but oh well, I need the exersize. My kids are not in school yet, so I can’t help there sorry.
My wife is starting to see why it makes so much sense to rent. So I’m the hero. Since then two homes have sold on our loop. Bigger than what I sold, on market ALL summer, starting at $365K- down to $349K, down to $329K- one sold $290K the other $280K. I sold @ $309K the year before. In 2001 these homes were $130-$180K we still have a long way to go…
Excellent idea, Mike. I raised my kids in rented flats - we did get kicked out once but were able to find another situation quickly. Kids don’t mind moving when they’re small - they like the excitement. 2006 prices? Take the money and rent. If you buy at 2006 prices we’ll vote you off the site.
Mike,
Our family lived in nothing but rentals during the school years. No harm was done. All five us kids did just fine living in rentals. Still got to go to great public schools in the areas we rented.
Thanks everybody. We’re showing our house to the prospective buyer this weekend; if we get the golden offer, I’m going to make the rental proposal to the seller with a one-year lease. Not too concerned about the showings, especially since the place has been on the market for so long, the seller is currently doing a FSBO, and the house is on the high end of the market out here; so I think I’m going to negotiate the right-of-first-refusal with a guaranteed one-year lease. Window dressings….they’re all custom, likely staying, and my wife loves’em. I’ll make sure that lawn maintenance is the owner’s responsibility. Happy New Year all!
I rent, have 4 teenagers, and have 2 grandchildren and two big dogs. Ever heard of handymen, spackle, and paint? So you lose some of your deposit.
The WSJ is reporting that home prices are back to Spring 2004 levels, but my reading of PPSF data from Radar Logic suggests San Diego is already back to July 2002 pricing.
Date RPX.SD.1
7/17/2002 $198.92
10/28/2008 $192.09
My reading of their data is that the RPX.SD.1 series never again dipped below $200/SqFt between 7/17/2002 and 10/28/2008, and that it is headed lower.
For a somewhat irrelevant perspective, condos in the East Bay Area sold below $100/SqFt in 1996 and for near $300/SqFt at the bubble top circa 2005.
Wall Street Journal
* REAL ESTATE
* DECEMBER 31, 2008
Home Prices Declined at Record Pace in October
S&P/Case-Shiller Data Show Return to 2004 Levels as Tight Credit, Consumers’ Wariness Weigh on Sector
By SUDEEP REDDY
The decline in U.S. home prices continues to intensify as tight credit weighs on the sector and consumers remain wary about making major purchases.
The Standard & Poor’s/Case-Shiller home-price index, a closely watched gauge, fell 2.2% in October from September and 18% from a year earlier, the sharpest declines in the data’s two-decade history. The index has fallen 23.4% since its mid-2006 peak, pushing prices back down to March 2004 levels.
Stating the Obvious: A Consumer Economy Can’t Run Without Consumer Income
http://www.investorsdailyedge.com/article.aspx?id=1671
So, let’s not be so quick to applaud every time we read about layoffs.
And let’s not be too high-minded about preferring desk-bound white-collar jobs to production-line jobs. Only some of those white-collar jobs are truly skilled, and most are learned on the job just like in factories—except the training period is shorter in the white-collar world.
These days, companies hire college grads to be customer service order takers, salesmen and marketing assistants—none of which truly requires 16 years of education. College grads are a dime a dozen. The average machinist is far more explicitly job-skilled and has much greater direct job training than the average new bank teller or loan officer.
And just look where all those loan officers got us, anyway.
One of the worst parts of the FIRE economy was the bad rap **productive** workers got (read: blue collar).
It’s time we give these people the respect they deserve. They are our only hope for rebuilding this once-great country.
Preach it!
I have worked both, and this is so true!
But I must add–most of these dime-a-dozen college grads are lazy bums (the sort who end up temping or in low-level jobs, that is)–while the lazy bums in the blue collar world walk around with a cross expression on their face because they have to do actual work, or else!
I am shocked to learn that Goldman Sachs is among the lucky winners in the taxpayer-funded bailout sweepstakes.
24/7 Wall St
December 31, 2008
The Fed Wises Up, Buys Mortgage-Backed Securities (BLK)(GS)
The Fed will step into the market next year and buy mortgage-backed securities with a vengeance. It has finally dawned on the agency that cutting rates and providing banks with low-cost emergency funds is not moving the economy away from the credit crisis.
None of the Fed’s plans have worked so far because the prices of houses are still falling rapidly. S&P Case-Shiller yesterday reported that home values dropped 18% in October. In other words, the government has done nothing to stop the destruction of the value of residences.
According to Bloomberg, “The Fed’s program is intended to lower rates by reducing the supply of outstanding agency mortgage bonds, boosting their prices and thus lowering their yields.” That should help drop mortgage rates, but it should also aid the balance sheets of banks which still hold tons of the bad mortgage-derivative paper. The agency plans to suck up $500 billion of MBS in the first half of 2009.
A few lucky firms will manage the program and make obscene sums of money for their trouble. Those companies include BlackRock Inc (BLK)., Goldman Sachs Asset Management (GS), Pacific Investment Management Co. and Wellington Management Co.
They are being paid to buy the stuff from themselves.
Impressive.
Impressive, isn’t it, how opacity of the bailout program can richly reward without scrutiny the firms who positioned themselves to profit from the mess.
Absolutely sickening, isn’t it?
These people should be in jail, and yet we reward them for their crimes?
———————-
BTW, I refuse to believe that these people truly don’t understand causal relationships.
From the article:
None of the Fed’s plans have worked so far because the prices of houses are still falling rapidly.
They just don’t get it…
Is this a great country or what?
Yep, “managing” this program will mean you can dump your own toxic cr*p first before buying anyone elses…
Shameless.
If this plays out, buying Ginnae Mae is a very good idea.
This is the final act. They are going to try to monetize all the losses, but it will fail when people finally realize the US government is going to default.
This will just give the gangsters enough time to move some assets offshore, leaving us holding the bag.
This hasn’t really hit the bond markets yet, has it?
Is that going to be a whole ‘nother chapter?
The dollar has had some fairly substantial selloffs in recent days, but the PPT is helping to make sure the equilibrium adjustment plays out sufficiently slowly to avoid a race for the exits with the usual trampling deaths as the crowd tries to squeeze through the door.
Buying time for the super wealthy to go to ground (consolidate and retrench) has been ALL that has been happening this year.
Madoff’s folks just weren’t paying attention.
Just what the economy needs: More easy money lending to help people buy cars they can’t afford.
GMAC says standards for lending to be eased
Move follows infusion from federal government
By Vikas Bajaj and Nick Bunkley
2:00 a.m. December 31, 2008
Salesman Scott Gust placed a zero percent financing sticker on a Chevrolet Trailblazer yesterday in Montebello. GM will offer a new round of low-rate financing. (Associated Press) -
The day after it received $6 billion in capital from the federal government, the financing affiliate of General Motors began aggressively trying to draw consumers back into dealerships yesterday.
GMAC said it would begin making loans immediately to borrowers with credit scores of 621 or higher, a significant easing from the 700 minimum score that the company started requiring two months ago as it struggled to stay afloat. GM said it would offer a new round of low-rate financing, including zero percent interest on some models.
Yesterday I read or heard on the radio that these 0% loans will include some for 5 years (for top-credit buyers). That’s a pretty healthy discount, assuming you keep the vehicle to maturity.
Because lowering lending standards in other markets has worked so well… Hmmmm.
Does this portend a massive round of car repo’s in a year or so as the economy continues to sink and auto-FBs throw in the towel on the overpriced POS auto they can no longer afford?
Maybe we could invent some new form of teaser-toxic auto loans! Yeah, that’s the ticket!
“Because lowering lending standards in other markets has worked so well”
That was my wife’s comment upon reading this news.
TRUSTS
anyone know which ones are heavy in oil vs Ngas
other than prudhoe
I wonder whether there is an investment opportunity here….
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/12/30/BAQA151GCA.DTL
California is pressing forward with its plans to issue IOUs in lieu of a check for state income tax returns.
Would these IOUs be freely transferable? If so, how about offering 80% face-value in cash for them and redeem them for full value later on in the year. Some people probably are in real need of those returns for spending money.
A market will inevitably open up to buy these at a steep discount.
It seems the transferability of the IOU will be an issue. If ownership can’t be transferred at the state level to insure the purchaser fully owns the future cash flow, then you aren’t really buying anything just providing a loan against some future income.
Which would be riskier and hence they would trade at steeper discounts than otherwise.
Either way, a market will open up.
Either way, a market will open up.
If you can’t really transfer these things, then there is already a market for that. Just go down to your local bank or hard money lender and try to get a loan.
But we’re basically repeating each other.
In any case, I’d love to buy something like that right now, especially the tax return IOUs. I think its too early for states to start defaulting on that debt just yet and many of the people who had the debt would be folks who were desperately counting on that cash so I would imagine you could get a pretty good discount.
I would think a payday or income tax refund lender would be a more likely participant in this market, not the local bank. Do you really want to become a payday lender?
Issuing I.O.U.s instead of tax refunds?
A very compelling reason to adjust one’s income tax withholding ASAP….
That’s the first thing that crossed my mind. Get your withholding below the probable tax amount. If CA works like the feds, you don’t have to have 100% withheld - I *think* that if you are at either 80% or 85% there is no penalty, provided you file on time and send in the difference then. Not a tax expert, so look it up if it matters to you.
Pols will figure out quickly that this will devastate inward cash flow. And it would be pretty stupid to forbid the slaves to adjust their withholding amounts.
IIRC CA follows the IRS: you can pay quarterly 80% of actual income or 100% of the previous year’s actual income to avoid penalties. The latter is very useful for years in which you haven’t a foggiest notion of how much your income will be - e.g., when I sold my house in May 2006 I got a big cap gains the amount of which was unknowable in April 2006.
Replace “income” with “income tax”.
One of the things that’s nice about retiring in Idaho is that the state doesn’t require quarterly income tax filing - if you don’t have a job, then you just pay the full amount due next April, no penalties.
Of course, if you do end up with an I.O.U. instead of a tax refund, find a friend who owes a similar amount in taxes and give it to them to pay their taxes with….. In effect, California would be issuing its own currency, which would be backed by the full faith and fickleness of the state of California….
There actually is a constitutional problem here. Art. I sec. 10 para 1 states in pertinent part “[n]o State shall….coin money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts…”
So are state issued IOUs unconstitutional? Interesting question.
A Confederate greyback isn’t worth too much nowadays
Ca ventured into the IOU thing back in ‘92, not on tax refunds, but govt. worker salaries - a lawsuit ended that, hence only the not covered by fair labor standards positions (legislators, judges) are to get IOUs this go round. Not sure why that makes me smile, but it does. They also tried stealing from the Ca retirement fund (CALPERS) in the early 90’s - another lawsuit ended that as well. The real pain hasn’t even started tho’ because shrinking inflow from lost specu-income hasn’t hit.
You have to feel sorry for CA. The legislature can’t seem to find anything in the expense column to cut. They can’t raise taxes either, of course. Now there are legal precidents to keep them from stealing in all the old stop-gap ways, and it is harder to find new ways.
All they can do is pretend to pay people.
What if they only paid pensions to CA homeowners? Of course it wouldn’t work, but the disruption (and false hopes) would be hilarious. Moved to Idaho? No more pension moneys.
From today’s Ohio DOT com website: Ohio homeowners to get $44 million from Countrywide settlement …just over 8,000 subprime mortgage customers in Ohio are eligible and will be offered modifications to make their home mortgages more affordable.
In addition, [the Ohio Attorney General] said about 4,000 borrowers who had their homes sold in foreclosure will be offered relief payments of between $500 and $1,500, as part of the Countrywide settlement.
Whoop-de-do.
“Whoop-de-do.”
Exactly, see, nobody wants to be around that dead smell either way.
44 million for 8,000 subprime homeowners is $5,500 each.
Do people still count in millions? What a waste of time. They should round this to the nearest billion, 0 billion. That’s a real world number.
My employer was kind enough to give me today off, so I caught up on some long-delayed chores in the apt. I have always rented. Usually I am too thrashed from working a couple jobs to do them.
Part of it was some neglected bathroom cleaning. I was in there with a bucket and bleach, wondering to myself how many AmeriKKKan fools had let a few years of easy credit go to their heads and had hired crews of illegals to clean the bathrooms and kitchens of the McMansions they were fated to lose anyway.
Now the easy money is gone, the houses are lost, and a lot of folks who had fallen into the habit of thinking they were too good, too rich, too busy to clean up after themselves are becoming reacquainted with the household-cleaner section of Wal-Mart. i wonder if they have the fortitude to live in perceived “diminished circumstances.”
That name of yours shook up a few cobwebs in ol’ Blano’s brain.
Some of the young ‘uns on here might be scratching their head at it though.
Good lord. Him!
Yugo way back, Mr. Broz….
An extra cookie for you Dennis.
Every Breath Bernanke Takes
That was awesome. Too bad that is all we can do against these madmen.
I Am Become Benja, Destroyer Of Wealth
enjoyed. thx
Out here on the least coast, the illegal of choice has been the Central American — Salvadorans primarily — rather than the Mexicans who haunt California and the Southwest like a pestilence.
In the last decade, the number of Salvadorans here became truly monstrous. Since like most Latinos, they have no more than a junior-high education (a failing of their countries and culture), they weren’t coming here to engineer software or cure diseases or design bridges. Just about every man became some sort of construction laborer, while the wife or girlfriend became a house cleaner.
The illegal-alien-bashers were crying out for law enforcement and supersized Berlin Walls to keep out the flood. Guess what, a coming depression is emptying the ranks of the invaders far more effectively than some BS law laid down in Washington. It is probably decimating the bashers with equal savagery. Depressions play no favorites, a reason to like them.
I am no friend of open borders, but during a long residence in California, I never felt the irritation I feel toward the Central Americans of the least coast. The Mexicans in California picked a lot of crops under a blazing sun and didn’t contribute through their work to some sort of “farming bubble” (Mabel, let’s buy a farm, they aren’t making any more of them!). But their Salvadoran brethren on the least coast definitely were a part of the problem. They came surging here by the thousands, perhaps by the million, and provided cheap labor for the biggest bubble in our history. They enabled Realwhores [TM], contractors, banks, Home Depots, and brokers. And when the bubble popped, since their paychecks all depended on a single industry, they became economically useless to the towns they had invaded.
The silver lining is that they are leaving in droves. Leave and never come back!
i have looked at the lower end prices in phoenix, most areas are so bad filled will illegals even if the house were free i would not live there. i believe phoenix must have 500000 illegals alone!finally, found a neighborhood where it is much better and prices i can afford. but, it is still too early. yes, illegals and immigration were all wanted to help prop up housing, but now jobs are the issue and all the illegal buyers will walk as they head home due to lack of jobs! maybe some neighborhoods will improve as a result?
What? You don’t like accordions, violins, and trumpets and singing at the top of lungs in Spanish? You don’t want good ol’ boys in cowboy hats leaning on F-250s drinking Bud in the driveway next door? You don’t want gang fights on your front lawn (happened to me, but not in Phoenix).
What kind of person are you?
Bill,
Tell me again why it is you will live anywhere BUT the midwest???
Nothing personal - just the extreme cold weather, which includes ice!
My parents were from Ohio. I have friends from the midwest. So I’m not against the people. My permanent address has been in the desert since 1985, be it California or Arizona.
I just don’t like the climate - lived in New Jersey and Maryland. Will take them any winter compared to Minnesota. Thanks!
“Chinese shares end 2008 down 65 percent”
That’s gotta hurt.
http://finance.yahoo.com/news/Chinese-shares-end-2008-down-apf-13941024.html
One year in 40 seconds.
http://www.youtube.com/watch?v=lmIFXIXQQ_E
Happy New Year Everyone!
That was beautiful (especially since we don’t get any weather here in So Cal).
Happy New Year!
Since i had a little free time over the holidays, I decided to do some analysis of the Case-Shiller data for Los Angeles. A found a couple of interesting points. First, inflation over the last 93 years averaged 3.4%. I cooked this into the CS numbers, and this is what I came up with:
As of October 2008:
1. Los Angeles is still overvalued by 45%
This actually sounds about right to me. Prices have come down, but they haven’t come down THAT much. A drop of this magnitude puts prices back in line.
2. Real Estate doesn’t go back to fair value until April 2010
Based on the current rate of decline, early 2010 seems to be the first time in a while prices will be back to fair value, on an inflation adjusted basis. But it won’t be the low for this bust by a long shot.
3. The bottom in prices doesn’t come until late 2011 or early 2012
The last bust in So Cal dipped below inflation by 11%. This one is going to be far worse. Assuming 20%+ below inflation adjusted numbers, we have until late 2011 or early 2012 before we hit bottom on prices.
4. Prices are going to stay low for a long time
If we use the last bust in housing as a guide, we will bounce along the bottom for at least 5-15 years. This factors in the baby boomer impact (wall of sellers 15 years long + no savings except for blown up 401k). So they are going to sell like no tomorrow, something that has not happened the last 30 years.
Conclusions:
You don’t want to buy real estate any sooner than April 2010. But late 2011 to early 2012 seems to be the sweet spot on pricing. But expect to see zero appreciation for a long time. The baby boomers will keep a lid on prices for at least 5 years, but up to 15 is possible.
In other words, a home is a place to live. Nothing more. But buying too soon can turn it into a financial prison.
Here in the NY burbs, we seem to be on the eve of destruction, as it were, but you never know. So many people with so much money sloshing around. The thing is is that rentals for anything decent are already comparable to what I’d pay to buy, maybe even cheaper with the tax deduction. It’s really hard to tell, but I’ll try to hold on for as long as possible. We have a rental for “below market rate”, if asking prices are to be believed. Actually, I believe them, as the foreclosures are forcing people to rent. It’s like early stages. The NY burb market is a bit different than, say Las Vegas or Tucson, where there has been so much building. It’s still tight here, so our price depreciation has to be “totally financial”, not just supply and demand, if that makes any sense. In any case, I think I have to wait at least another year, as the wall street crash is relatively new, and it’ll take time for this new information to work it’s way into the REIC’s or sellers’ or even landlords’ brains! I hope my landlords won’t kick me out in the meantime, ’cause I’ll be paying 12K per year more than the price to buy to glean the eventual savings. In any case, HAPPY NEW YEAR HBB’s! And a special thanks to Mr. Ben Jones, who has saved me 150K at least so far! (Not that I have that money anyway, I’d probably be a foreclosure myself by now…!)Thanks everyone for your wisdom!
bananarepublic,
Those numbers sound exactly right to me. Thanks for the post!
Conversation yesterday about Harley’s and the single driving factor in the growth of the HOG over the past decade being MEW by boomers came to mind when I saw this ad on the TV just now…
Buy a Harley Sportster (the “lower end” Hog) and Harley will apply 100% of the purchase price to a trade in…but you only have three months to make up your mind….
“Trying to rev up motorcycle sales in a depressed economy, Harley-Davidson Inc. is launching a program that guarantees the trade-in value of some Sportsters when traded for a more expensive bike.
Harley riders who either buy a new Sportster or trade in their recently purchased one between Dec. 26 and March 31 will get the bike’s original manufacturer’s suggested retail price credited toward the purchase of a qualifying Harley Big Twin or VRSC motorcycle. “
I saw that conversation, too. And I looked up the HOG price. Wow! did you see that Oct/ Nov plunge? Just wow! Will this work? http://finance.yahoo.com/echarts?s=HOG#chart1:symbol=hog;range=5y;indicator=volume;charttype=line
One possible explanation for NAR’s reported 13 pct YOY drop in prices versus S&P/Case-Shiller’s reported 18 pct YOY drop: Case-Shiller is a repeat sales index, which implicitly controls for quality of homes sold; by contrast, the NAR’s median sale price confounds price changes with quality changes. The quality of homes that are selling may be rising as prices drop, resulting in less decline in the NAR median sale price than in the level of the quality-adjusted Case-Shiller price index.
International Herald Tribune
Bottom in the U.S. could be far off
Posted by Kevin Brass in News, General
The fourth quarter was supposed to represent the beginning of the end of the slide in the U.S. market, according to industry boosters. Instead it’s only getting worse.
Newly released data from the Standard & Poor’s/Case Shiller Housing Index shows prices for single family homes in 20 top markets dropped 18 percent in October from a year earlier, the steepest drop in the history of the report. And that’s only a sign of things to come, as the widely tracked index begins to reflect the worst of the financial crisis.
“October was clearly the free-fall month,” David Blitzer, chairman of the index committee at Standard & Poor’s says in this International Herald Tribune report. “Everything was going against us in October, without exception.”
The National Association of Realtors, which works a month ahead of Case Shiller, has already reported that prices dropped 13 percent in November from a year earlier, the steepest drop in 40 years.
No end in sight for US property slump as prices fall at record rate
* Larry Elliott, economics editor
* The Guardian, Wednesday 31 December 2008
House prices in 20 big US cities fell at their fastest rate on record in the year to October as rising unemployment, rationed credit and a glut of foreclosed properties led to fresh weakness in the market, according to a report released yesterday.
The 2009 which awaits us… a forecast:
http://www.energybulletin.net/node/47586
Very Cheerful
I agree for the most part. But the guy contradicted himself in one prediction: The federal government will not be able to help out every Podunk municipality - on the one hand - and he predicts there will be massive migration to small communities on the other hand.
The feral gubmennt will focus first on New York City, Los Angeles, and Chicago - the three largest metro areas. Get it? More people helped / bribed. Neglect will be toward small communities.
I worked at China Lake, a navy base in California years ago. We had required safety standowns annually. The one I remember most to this day is the earthquake safety standown: When the “big one” hits Southern California, priority aid will be to population center (Los Angeles). Peripheral areas will likely not get any aid for days. In fact, Ridgecrest people would probably have no power or water for a week or two, even if the earthquake epicenter is in the high desert and causes severe damage to the LA basin.
I don’t buy anyone’s comments that city residents will have a lower probability of survival in any calamity (short of nuclear war) compared to rural residents.
2009 predictions:
-Year of the ox (brown cow year), so it’s gonna be a slow and steady year
-The world will not end (hopefully)
-We will hear more about bonds (I am still a bit vague about this)
2008 theme song was:
Tribulations, LCD Soundsystem
Oh, oh
Get your payments from the nation
Oh, oh
For your trials and tribulations
(Runner up, Sympathy for the Devil, Rolling Stones..woo-oo-ooh)
2009 theme song options
Change is Gonna Come, Otis Redding
Electric Avenue, Eddie Grant
Burning down the house, Talking Heads
We’re not gonna take it, Twisted Sister
The Safety Dance, Men Without Hats
Ghost Town, The Specials
Eye of the Tiger…doot, doot, doot, DOOT, doot, doot, DOOT, doot, doot, dooooooooooot…
Here’s the famous New Year Song and some info about the song:
The song, “Auld Lang Syne,” playing in the background, is sung at the stroke of midnight in almost every English-speaking country in the world to bring in the new year. At least partially written by Robert Burns in the 1700’s, it was first published in 1796 after Burns’ death. Early variations of the song were sung prior to 1700 and inspired Burns to produce the modern rendition. An old Scotish tune, “Auld Lang Syne” literally means “old long ago,” or simply, “the good old days.”
Should auld acquaintance be forgot
and never brought to mind?
Should auld acquaintance be forgot
and days of auld lang syne?
For auld lang syne, my dear,
for auld lang syne,
we’ll take a cup of kindness yet,
for auld lang syne.
Should auld acquaintance be forgot
and never brought to mind?
Should auld acquaintance be forgot
and days of auld lang syne?
And here’s a hand, my trusty friend
And gie’s a hand o’ thine
We’ll tak’ a cup o’ kindness yet
For auld lang syne
Happy New Year everyone
That`s interesting, thanks SanfranGal and a very Happy New Year to you.
dont shank my prison bitch.
I want the regular readers to say yeah, or nay to my moniker change.
What is your new moniker?
It’s the same as the old one (or the latest one anyway.)
I become:
dont shank my prison bitch
why on earth?
NO!!!
How’s that?
Happy New Year, vozworth/clue!
test