The Guillotine Falls In Many Different Ways
The San Francisco Chronicle reports from California. “The number of scheduled foreclosure sales and defaults in core areas of Northern and Southern California exceeded a half million during 2008, up 132 percent from the previous year, according to Default Research. In the Bay Area counties of Alameda, Contra Costa, San Francisco and Solano, the annual total climbed 180 percent to 85,381. ‘My policy prescription: Let them get foreclosed on,’ said Christopher Thornberg, principal at Los Angeles research firm Beacon Economics. ‘The home market is not going to recover, on the building or appreciation side, until two things happen: a) all these people with dodgy mortgages who bought things they couldn’t afford get shoved out and b) all those homes get absorbed. The fastest way to do both of those things is to let prices fall.’”
“Santa Clara County saw the biggest jump in preforeclosure activity among the counties last year, up 234 percent to 18,610. Los Angeles County experienced the highest number, 122,408.”
Bay Area Newsgroup. “Here’s a somber statistic for Silicon Valley: Foreclosure activity increased at a faster clip in Santa Clara County last year than in any other California county, a foreclosure information service said Tuesday. Santa Clara County witnessed last year’s fastest growing foreclosure problem partly because the county had relatively few foreclosures in 2007 compared to other large counties, said Serdar Bankaci, founder of Default Research. But as home prices in some parts of the county fell sharply in 2008, mortgage delinquencies and foreclosures here increased steeply.”
“‘The southern part of California really got hit harder earlier on,’ he said. ‘It was just kind of a lag. We’re seeing a lot of the Northern California areas were hit hard later in 2008.’”
The Mercury News. “Mortgage rates are at their lowest level in decades, but thousands of Silicon Valley residents are discovering that qualifying for a loan is tougher than it has been in years. Banks are reluctant to lend at favorable rates to all but the most bulletproof of borrowers, according to area mortgage brokers.”
“Adding to the difficulty for many people hoping to refinance loans taken out in the past few years is that the collapse in home values has eroded their equity so much that they don’t qualify for a new loan. ‘It’s like cable TV — there’s 200 options and nothing worth watching,’ said Andy DelGesso, who failed to qualify to refinance his loan on his San Ramon home because his equity had declined to less than 20 percent of its value.”
“The banks are demanding tougher appraisals, too. ‘Everything has to be explained in greater detail,’ said appraiser Greg Walker of San Jose. ‘Every appraisal I do, we look at what’s happened in that neighborhood over the past year, and everything’s declined over the past year with the exception of a few neighborhoods.’”
“‘We were all spoiled the last few years when it was so easy to qualify,’ said Patrick Dudum, area sales manager for Equitas Capital in Los Gatos. ‘Relative to 2004 it is difficult, but if you have followed the market for any length of time, this is a normal market.’”
“‘”I’ve been stoked about this market for the last three months,’ said Dudum. ‘The government is going to throw everything in their power at this problem to fix it. We’re going reap the benefits. We’re going see a boom in the next 24 months, and the last one will pale in comparison.’”
“This year’s job market is starting out on a dismal note. Fremont is being jolted with about 500 job cuts this month, primarily from a high-tech sector that has begun to erode. Over a span of several weeks from New Year’s Eve through mid-February, companies are cutting 534 jobs from their Fremont operations. Most of the employment reductions are being undertaken by technology companies, according to official filings.”
“‘The recession started with housing, then moved to consumers because of falling home prices and foreclosures, and as consumers cut back, businesses will contract,’ said Jon Haveman, a partner with Beacon Economics. ‘The cutbacks by businesses mean they will buy fewer tech products.’”
“Yet the recession has battered the entire East Bay, not just Fremont. During the one-year period that ended in November, the East Bay lost 22,500 jobs, according to the state’s Employment Development Department.”
From News 10. “City employees in Lincoln are bracing for layoff notices that could come as early as Friday, according to Mayor Spencer Short. The impending layoffs are especially painful in Lincoln, a town which claimed the title of America’s fastest growing suburb in 2007. Back then, new housing subdivisions and strip malls couldn’t be built fast enough. The population of Lincoln exploded to 40,000 residents.’
“‘I think everyone saw the slowdown coming but it was just a sudden collapse because of the mortgage crisis and everything else,’ said Short.”
“Restaurant owner Sergio Gomez opened up La Fiesta Taqueria during the boom of 2007. The former mortgage banker said his restaurant on Main Street used to be standing room only, but now, business is down about 60 percent.”
“‘A lot of my customers I talk to, they tell me, ‘Hey, I’m getting laid off in a couple of weeks.’ Business has been slow,’ said Gomez.”
The Ventura County Star. “The guillotine falls in many different ways. Employees may be ushered to meetings in conference rooms that seem starved of oxygen. A Ventura woman learned the news when she tried to use her health insurance and was told the benefits were canceled. Alfred Dowd’s 32-year career in construction ended, at least temporarily, in a Ventura office at sunrise the first week of November. He was having coffee with co-workers when the company’s owner came into the room looking grim. All other conversations stopped.”
“‘He said, ‘I have to close the doors, boys,’ said Dowd, 53, of Moorpark, who made about $1,500 a week as a construction supervisor. ‘We just sat there in stunned silence. Things ran through my mind — about my kids and Christmas, about paying bills, about putting food on the table for the next couple of months.’”
“A state list that includes only a fraction of layoffs shows 14 companies in Ventura County let 2,020 workers go in 2008.”
“Dowd…wonders if he’ll have to start a new career at the age of 53. ‘It scares the hell out of me,’ he said. ‘I went from $1,500 a week to nothing. I’m living day to day.’”
The Press Enterprise. “After retreating in fear from housing’s sudden collapse, those who buy homes as an investment are reappearing in Inland Southern California’s beaten down marketplace. Sharply discounted foreclosed properties are luring back the first wave of professional investors and amateurs, both those hoping to ‘flip’ for a quick buck and those wanting to buy and hold for a future rebound.”
“The process of ‘flipping’ is still risky, many experts warn, since the investor has to take into account that home values continue to fall, which could erode anticipated profits from a resale. ‘When values are going up, everybody looks like Einstein. But to make money in a declining market is extremely hard. It is very dangerous to flip houses,’ said Lee Medlin, a real estate agent in Corona.”
“John Salvatore, a Corona real estate broker, said he frequently buys houses so badly vandalized that ‘the only thing left is the paint on the walls. The bathtubs and toilets are ripped out as well as the sinks and kitchen cabinets.’”
“Salvatore said he bought such a house in Riverside for $239,000 that once was worth $900,000. He said after he fixes it up he plans to resell it for between $325,000 and $350,000.”
“Bruce Norris, a veteran Riverside investor who finances and trains other investors, said his group is revamping enough fixer-upper houses to keep four construction crews busy. He said they routinely install new kitchens and bathrooms with granite countertops and tile flooring. Norris said his investment group buys houses so shoddy they would not qualify for the FHA financing that most first-time buyers need.”
“‘We are buying them for $50,000 to $75,000 left and right,’ Norris said. He said he just bought a three-bedroom Moreno Valley house for $50,000 that previously had a $350,000 mortgage on it. He said after fixing it up he plans to sell it for $130,000.”
“Susan Beaver, owner of a Corona firm that manages homeowners associations, said earlier this year she bought two foreclosure properties in Corona, paying $300,000 for a four-bedroom house with a golf course view and $170,000 for a condominium. Beaver said she had no trouble finding tenants to rent the homes for enough to cover the mortgages and she plans to keep the houses at least 10 years to help her build a retirement nest egg.”
“‘I definitely just jumped in,’ Beaver said. ‘I don’t want to be sitting on the sidelines saying I should’ve, I could’ve.’”
‘I’ve been stoked about this market for the last three months,’ said Dudum. ‘The government is going to throw everything in their power at this problem to fix it. We’re going reap the benefits. We’re going see a boom in the next 24 months, and the last one will pale in comparison.’
Note to policy makers; stop meddling about with housing prices. All you are doing is encouraging fools like this guy to put more heads in a noose, when the real issue is the post housing bubble economy.
RE: Gov’t omnipotence
One has to wonder what this fellow’s attitude was towards government regulations in the past.
You misspelled impotence.
Well said, Ben! Dudum’s comments scare me. We all know he is dead wrong, but the fact that there are folks out there who think like he does is yet another indicator that we are nowhere near bottom.
And also an indicator of how ignorant so-called professionals are of the dire consequences of extreme bubbles and market imbalances. Praying for another bubble is like wishing for another rectal exam that makes the last one pale in comparison.
ROTFLMAO
“Dudum’s comments scare me.”
You misspelled Dumbdumb.
Considering that Los Gatos, Saratoga, and Monte Serreno are now full of houses for sale with still to fall nosebleed pricing this guy looks even more stupid.
These ‘premium’ areas haven’t fallen much yet. But they have to — these are places where prices are much higher multiples of local incomes than average, where some people really stretched themselves to buy.
A lot of the corporate-politicians who live there are going to find out the real ‘market value’ of their labor as the recession bites deeper, and it won’t be pretty for housing prices.
Dude(um), you are, like, just so totally wrong.
My thought was du(m)dum, but yours also works.
Too much faith in government. They are SOOOoooo impotent.
Maybe if Obama was sending everyone a $500k stimulous check later this year he might be on to something. I don’t really see that happening though.
Sir Ben,
The real jewel -
No jobs.
“We’re going see a boom in the next 24 months, and the last one will pale in comparison.’”
KaBoooom!
Yes Sireeeeee…this will pale in comparison to all others - er - bubbles.
Next -
Who wants a home? Raise you hands - higher - I can’t see YOU.
OK.
We found the BEST place for us! (About to step off the cliff - H E L P).
17.5+ acres; treeeeeeeeeeeeeeeeeeeeeeeeees; not a macraption; 2200st; Nice basement; 4 bd and 3 ba (why? Big family) etc.
Price.
Grrrrrr.
I love my hubby so - he really wants this place (yes, I will lock him in closet, ya, that worked a year ago)!!
Tadatadah.
Asking $354,800. Offer (blush) - wait for it -
Wait -
$284,800.
Loving one is willing to counter up to $350,000. I KNOW!
Ratts butt - This will end well.
At this point, grrrr…it’s a cash deal.
HELP!!
Lawd I love him so!
The path of least resistance?
Dang,
It is a nice place (not at $350,000).
I am worn out!
Leigh
H.E.L.P.
re: H.E.L.P.
Go to Amazon.com and get a copy of Dmitry Orlov’s wonderful “Reinventing Collapse,” which compares what’s happening in the US with the collapse of the USSR. Wry and right on book, it can only help your case…and might provoke a laff or three. If Beloved Hubby reads and still wants to buy a 350K house, you’ll probably need to reconsider the financial contract between the two of you. (Let HIM buy the house outside of your joint assets?) Hang in there.
Leigh,
Good luck to you either getting it at your offered price or losing it to another buyer at a higher price (unless you really, really, really want it — then I hope you get it).
My DH is getting very restless, too, but there just seems to be so much more downside.
Please let us know how it goes!
The path of least resistance has never worked for me. I can not advise it. I think the closet is in order once again.
‘My policy prescription: Let them get foreclosed on,’ said Christopher Thornberg… ‘The home market is not going to recover, on the building or appreciation side, until two things happen: a) all these people with dodgy mortgages who bought things they couldn’t afford get shoved out and b) all those homes get absorbed. The fastest way to do both of those things is to let prices fall.’”
I’m really getting infatuated with this fellow. I’m thinking of setting up a fan club, or something. Does anyone else want to join? Do any of you happen to be giggly Japanese schoolgirls? Because you need some of those for any decent fan club, although I guess we could make do without them, in a pinch.
How about a half-Japanese old lady of 53? I’m a huge fan of Thornberg and Olympiagal. Maybe we can arrange a date for you two.
In other news, I want to make an offer on a little foreclosure house for my kids (two students and a girlfriend.) It’s in good shape, nice little yard, blue collar neighborhood on a cul de sac, two beds and baths, attached garage. I think I can get it for $100K wih a $70K loan. Their current rent is $1050 for a cramped downtown flat with creepy upstairs tenants. I’m going to do it today. Thoughts?
Are you going to charge them the $1050 in rent, and will they actually pay it?
To be in the Christopher Thornberg fan club? Nohow!
I’m sure that giggly Japanese school-girls are their own reward. I’d never charge them rent.
Hi Dude. No, I don’t think I’ll charge them, since I will get the tax deductions. They can maintain it and pay their utilities, etc, not to mention their school expenses.
Where is this place? Sounds reasonable, but do your due diligence re: zoning, taxes, inspection, etc. (if you’re a hobbyist you already know this).
Sacramento, south Natomas neighborhood. I’ll submit the offer today to the bank’s agent, requiring inspections. Taxes will be low, no HOA, but flood insurance required. If this goes well, 15-year mortage, insurance and taxes will total $800/month, which I can easily handle. We’ll see.
REhobbyist….I would be interested in emailing with you to share data….If you are interested, maybe we can get Ben to swap our email address so we do not need to post our email address on the board…Let me know…
Yup. Give it a whirl, REH. Sounds good.
yeah call me: Gogo Yubari
I see whole groups of jiggly Japanese school girls in Tokyo every day on my way to work. I swear my subway line is the school girl express.
For those lecherous old gits, No!, it’s not that nice, as many of the older school girls don’t deem it necessary to bath that often. And the idea of personal space is foreign.
jiggly or giggly?
Too many barking dogs. Don’t do it. You’ll be sorry eventually.
I’m neither giggly nor japanese nor a school girl, but I’m most decidedly on board with a Chris Thornberg fan club. In fact, he may be my favorite candidate for new governator in 2010.
I’ll second that.
+1
Thornberg has put his neck out to warn and say it how it is. Nothing will fix this economy slowing what must be done.
I know of too many people who ‘own’ 4+ homes with more in debt than the properties are going to be worth before 2020 and no hope of paying the cash burn for more than 20 more months. Seriously! This is too common in LA. For them it would be best to give up and stop the cash burn.
But we’re not at capitulation yet. At the earliest in the spring… and it might not be until later.
Got Popcorn?
Neil
Neil, how do we know if we are in capitulation? What are the signs? I am waiting for this condition also.
When Time magazine runs a cover story on how, “Sophisticated People Rent”.
lol,
Condition #1 is J6P stops pressuring everyone to buy as if its sage advice. People still chat around the water cooler talking about buying or having just bought or buying one more investment property. It also means that people notice that prices have dropped! (But note: They will *never* admit to the real market drop.)
Condition #2: Most of the discussion of J6P is about money lost on real estate.
Condition #3: People believe there is no V recovery. Real estate is talked about in terms of long term cost savings versus renting and not as an investment.
I’m seeing condition #2 starting to be met. But condition #1 and #3… not even close.
Got Popcorn?
Neil
“People believe there is no V recovery.”
I got into this discussion with a good friend over the holiday. He has actually done fairly well having sold his investment properties near the top, but he bought an overpriced piece of crap at the top too that is now worth half what he paid for it.
We were talking about retirement destinations and buying propety in said destinations and he said he was worried about not getting in at the bottom and even used the term “V shaped”.
I said, “Don’t worry, it will be an L.”
You know, the conversation kind of stopped cold after that.
Condition #4: At cocktail parties one will commonly hear variations of this: ‘Don’t buy RE- It’s the worst investment you can make.’
I wouldn’t vote for “governator” to any economist, since they are paid for their predictions. I would vote for Ben Jones and all the other fellows that were making their predictions of coming “train wreck” in this site since 2005 or earlier…
Ben would need to move to Cali, or we could run PB/GS, or myself, or Big V, or MIS, or Jas (heaven forbid). We’ve all been calling this since ‘05.
You obviously aren’t very familiar with Thornberg. He’s one of the good guys.
Dude , I remember that earlier he was part of UCLA Anderson Economic…together with the head of that organization… Edward L… I forgot that “economists” name…
Absolutely, he was the part of UCLA Anderson and left since he couldn’t put up with the BS they were shoveling.
Look up his quotes historically and he’s been pretty good all along.
That’s my policy prescription too.
Although I wouldn’t mind a court ordered cram down for people who 1) are bona fide homeowners who merely bought at the peak and 2) didn’t HELOC and 3) can afford a reaonable payment. If they can find any.
If they bought at the peak, then they made a really stupid move. I don’t want to have to pay for them in any way. Cram downs just spook banks even more and raise rates for people like me. They also disincentivize risk analysis. Bad idea, IMO.
(Hand raised in Tucson…)
Me, me, me!
Oh, wait a minute. I did buy in 2004 and didn’t HELOC. But, before I bought, I house-hunted for almost 18 months. It took so long because I didn’t want to overpay during a bubble.
So, Slim puts hand back down.
We bought in 2004. We paid 60% of what he was asking in 1999 and paid cash. We are
still very happy with what we did…
Heck, what about me? We sold in 2005 and have been renting and fence-sitting ever since while my IRAs dropped in half and my CDs are earning squat. I’ve paid each and every month’s rent before the due date and we’ve cost the landlord zero in repairs. What do I get?
….a higher tax bill to pay for the vast majority of people that didn’t act as reponsibly as you….
Chip you probably would have lost a lot less money by being a FB….and being foreclosed on, squatting for 2 years and saving all that mortgage money….but who knew?
squatting for 2 year
I hope your tongue was firmly planted in cheek.
“Heck, what about me? We sold in 2005 and have been renting and fence-sitting ever since while my IRAs dropped in half and my CDs are earning squat. I’ve paid each and every month’s rent before the due date and we’ve cost the landlord zero in repairs. What do I get?”
Chip you’re Just like me, and we get nothing but will be taxed on CD interest.
Feeling your pain, Chip (but we sold in 2004 and have been fence-sitting ever since).
Bailouts suck!
Chip-
Your reward will be the opportunity to work until you are 75. Enjoy.
The upside is that loneliness in your old age won’t be a problem. Tens of millions of your contemporaries will be working equally as long.
Meanwhile, live vicariously through your elders!
Same here, I’m beginning to like the idea of cram-downs too, or some kid of really harsh program:
Option 1: If you have 3% equity to meet FHA terms: you declare BK, judge checks your income and crams down principle to fixed. You don’t owe taxes on forgiven amount. Your FICO is trash, and you are a slave to your house, but you get to stay.
Option 2: If you’re underwater because of falling values only: if you have *stable* income: you declare BK, trash FICO, get evicted. You can’t get any other credit, BUT you can qualify for a home based on income (or you can choose to rent). You are forced to downsize to a smaller home or attached product. You don’t owe taxes on forgiven amount.
Option 3: If went underwater by HELOC: you declare BK and do cramdown. BUT, you owe taxes on the forgiven amount — due immediately, so you need to sell a toy. Exempt from tax if you HELOCed for medical or kid college. If you can’t pay the tax, you’re tostada. It’s a bad deal, but that’s okay, we’re trying to get you to walk.
You only get to do this on the home you live in, and if you were fraud-free. If you lied on your app, or have a second home or otherwise specuvested, you’re tostada.
I honestly don’t think this is a bad deal. There’s a bit of moral hazard, but it will cost less in the long run, and all of these options promote falling prices.
RE: WT Economist
Although I wouldn’t mind a court ordered cram down for people who 1) are bona fide homeowners who merely bought at the peak and 2) didn’t HELOC and 3) can afford a reaonable payment. If they can find any.
Yessssssssssssss.
IF they can find ANY!
+1
Leigh
Ya just can’t make this stuff up!
Leigh
Do any of you happen to be giggly Japanese schoolgirls?
Well, there was this one halloween…er, nevermind.
You tease! Dish!
We won’t talk! (too much.)
I remember you…..
You tease! Dish!
We won’t talk! (too much.)
I’m thinking of setting up a fan club, or something. Does anyone else want to join? Do any of you happen to be giggly Japanese schoolgirls?
I certainly hope you plan to model this fan club after ’70s and early ’80s pop band fan clubs (see Kiss, Shaun Cassidy, The Bee Gees, Bay City Rollers, et al) — with glittery t-shirts, fan newsletters, exclusive posters, 8×10 glossies, promo 7-inches and so on.
Giggly Japanese schoolgirls do not want any half-arsed fanclub action.
And neither do I.
Not implying that you would ever half-step on your fan club, of course, but hoping that you will go all the way with the posters and purple glittery t-shirts featuring a picture of Thornberg in a three-piece suit and white leather platform boots … he should tower over his naysayers, wobblin’ disco style.
I…I…I
goodness, I just about fell off my chair with joy and approval of your good ideas! Seriously, I’m almost mute with enthusiasm.
Say, ET, how about you be Vice President? In charge of glitter!
I’m going to call up Thornberg right away, see if his people will agree to a photo-op.
Okay, now I’m definitely on board.
“Susan Beaver, owner of a Corona firm that manages homeowners associations, said earlier this year she bought two foreclosure properties in Corona, paying $300,000 for a four-bedroom house with a golf course view and $170,000 for a condominium. Beaver said she had no trouble finding tenants to rent the homes for enough to cover the mortgages and she plans to keep the houses at least 10 years to help her build a retirement nest egg.”
“‘I definitely just jumped in,’ Beaver said. ‘I don’t want to be sitting on the sidelines saying I should’ve, I could’ve.’”
That’s really cool Susan. Some people just drown a lot slower than others but end up just as dead.
Says mikey, floating around in his RENTED inner tube munching…what else…popcorn
Ms. Beaver may well be just another knife-catcher, but looking at some of that quote (easily tenanted, cash-flow positive, long-term ownership) it’s just possible we are starting to see some of the proverbial strong hands appear in selective parts of the market.
There was a very interesting segment on Bloomberg this morning (Aus time) where some guys were seriously discussing whether, at current prices, it was worthwhile BUYING subprime mortgages and MBS.
Hmmmm, now I’ve read on after making that comment it looks like I’m in a minority of one. I’ll bow to the board’s better local knowledge.
oz, I am with you. If they can afford to hold and like being a landlord, and get it cheap enough, then go for it.
But 170,000 for a condo in Corona is no cheap deal. Thats still about 1,700 per month in cost whether it is lost opportunity, or PITI plus HOA dues. Not to mention the host of landlord issues. She more than likely has an ARM to make it “Seem” that she is covering with rent. She is a knife catcher. Corona will not continue to get that type of rent during this crash.
Mikey a little hard on the beaver tonight aren’t you?
Yeah he’s drowning in it. And I had better stop NOW.
Could be slobbering all over the beaver…
Sounds like Ms. Beaver wants to get herself screwed.
Lawd - I don’t want to get baned.
(Sorry Most Honorable Ben Jones - dirty mind).
WHAT?“
‘I definitely just jumped in,’ Beaver said…
Leave it to the Beaver.
O.K.
Tooooooooo funny!
Do not tip liquids (or solids) to face when reading HBB blog!
Leigh
“Banks are reluctant to lend at favorable rates to all but the most bulletproof of borrowers, according to area mortgage brokers.”
There is another reason for government policy makers to stop meddling with housing prices and let the correction run its course. Banks will not willingly lend again until the risk of collateral damage abates, which in turn will not happen until home prices finish abating.
I’m a Thornberg fan now. While I am not infatuated with him (flaming heterosexual that I am), I am certanly not an exeter style bleeding heart socialist.
“Beaver said she had no trouble finding tenants to rent the homes for enough to cover the mortgages and she plans to keep the houses at least 10 years to help her build a retirement nest egg”
And why is it so hard to just save money the old fashioned way…why does everyone’s retirement depend on real estate in California?
Well, she says she is cash flow positive, but I doubt it. $170k for a IE condo? UFB. Now Norris is probably making some dough with the $50k houses. But he’s likely buying trashed out places in bulk.
She was probaly able to rent them easily due to the need for new digs by recent foreclosees. Just wait until the school year ends and everyone starts playing musical chairs.
These first wave downside investors who think they can turn profit without sweating are in for a rude awakening JT style as the bust really gets going.
With those December jobs numbers that came out today what do you think the first quarter ‘09 defaults will look like? How many more months before that ADP number hits 1million/month? I’m actually betting on January.
I’d be leery of renting to foreclosees.
Something tells me that they’d be likely to trash my property. After all, that’s what more than a few of them are doing before their dream houses go back to the bank.
Then there’s that matter of a credit check. If you’re not doing those on prospective tenants, you are one dumb landlord.
Slim - good point, in that I’d want to contact the bag-holder of the foreclosed property, to learn the condition in which it was left. These days, it’s not hard in many places to look up the neighbors and give them a call. I doubt that neighbors of a trashed house would be reluctant to spill their guts.
buying trashed out places in bulk ??
I heard a reliable story the other day about a heavy hitter in Palo Alto doing this…Story goes that he is buying “packaged” deals (20 houses or so) that are scattered…Paying roughly 2 mil cash for the last one which is his third…Doing quite well cleaning up and flipping most and just renting out the ones that are not marketable…
“Renting out the ones that are not marketable”
If they’re not marketable as for-sale units, then they are also not marketable as rental units. Slumlording is really not all it’s cracked up to be. He will also need to hire a management company with that many units under his belt.
Not to be overly skeptical, but the detail about the guy being “from Palo Alto” just smacks of Bay Area mythology.
And you have to watch which management company you hire.
Used to live next door to a onetime big playa in Tucson. Boy, what a sleaze. I’m told that was also how he ran his business.
And, after his property went up for foreclosure auction, my landlady took it over. I helped her with the cleanup (there was quite a bit of that) and we had many enjoyable days going through the papers he left behind.
Seems that he and his next of kin couldn’t manage money to save their lives. There wasn’t a bank account that they couldn’t overdraw, a credit card they couldn’t max out, and, heck, they were even behind at the dentist.
Yeah, East Palo Alto , I’ll buy, not Palo Alto proper. Houses are selling for less than 200,000 there, but there’s no rental market that will carry them.
I’m more intimately familiar with San Mateo, though and what I see here: I’ve seen several houses bought in San Mateo and put on the market as rentals and they sit and sit for months while the hopeful landlord slowly lowers his price and still no bites.Of all the home in the mls for rent, none are closing.
from Palo Alto” just smacks of Bay Area mythology ??
I don’t sling Bull$hitt Big V…I started the post off with “I heard a reliable story”…And my post went directly in response to Bens post regarding “Bulk Purchases”…
Dave - here in poor-cousin Florida, at least in the Orlando area, it is tough-to-impossible to buy an SFR for more than about $120K and get it to cash-flow positive as a rental. What suckered all the rubes from Up North into becoming wannabe landlords (after the flip failed) is they thought the math is linear and it isn’t - not by a long shot. The only places that bring enough monthly rent to work in the normal equations will not rent at those rate for 12 months - they usually are condos that are vacant at least four months a year.
Banks are still giving ARMs with low-low initial rates. That’s how some new landlords are still getting cash flow.
Doubtful for rentals. I spoke with my banker a few days ago and he commented on how he’s flooded with calls looking for 4.5% money for 2nd homes, rental properties, and large mortgages. He has to tell them all “no”. That cheap money is only available for primary residences.
If there are such ARMs, it would be news to him (and me).
I suspect a lot of the stupid money flowing into rentals right now is coming from people pulling out of the stock market and other investments. These people lost 50% in the stock market pulled out and are going to lose the rest jumping in early in the falling housing market. I’d love for people who know people buying now to find out where the money is coming from.
They don’t tell the truth on the mortgage application about the place being a rental.
Nor do “They” look for the Truth.
Rinse. Lather. Repeat.
Ya just can’t make this stuff up!
Leigh
Because no one without a bubble income job can get ahead. Read the annual Parade cover story surverying the vast disparity in incomes and you’ll see. Not all of us can be pro athletes or movie stars.
Not all of us can be pro athletes or movie stars ?
Or a fireman for that matter…My surrogate son landed the gold plated job a few years ago..Four spots available…2500 + applicants….Now in his third year…2008 income…$145,000.
And, unlike a lot of $100k-plus folks, he puts his butt on the line.
And, unlike a lot of $100k-plus folks, he puts his butt on the line.
Not to sure about that, there’s a bunch of kids in Iraq and Agganastan doing more for a lot less.
Not quite sure about the butt on the line part Arizona…I think the last firefighter we lost here was in the 1940’s…I think the biggest difficulty with the job is not the risk of injury or death but the philological impact…He see’s a lot of very disturbing stuff…Particularly with kids…
And has little education to boot. That 2500+ applicants thing tells me the pay is a little too high.
Kee-rist. Talk about income disparity. Colorado FFs start at about $40k. When I was down south for Katrina, Louisiana was offering new FFs $20k/yr.
Many combo departments only hire from within the volunteer ranks, so you have to show your stuff for free for a year before getting a nibble.
Fireman is not very dangerous compared to other low paying jobs, such at truck driver or construction worker.
Agreed. Only 114 line-of-duty deaths in 2008.
Tell that to the families of the 343 firefighters who died at the World Trade Center.
Slim:
The WTC was an accident, the real targets were hassidic Synagogues in Williamsburg…..
But in fairness no building has ever collapsed that way before or since, so sending them in based on the history of high rise fires was a proper thing to do.
——————————————————————-
Tell that to the families of the 343 firefighters who died at the World Trade Center.
And has little education to boot ??
He has two degrees…..
only hire from within the volunteer ranks, so you have to show your stuff for free ??
Exactly Limin….He volunteered for two years before he landed the job…
“Fireman is not very dangerous compared to other low paying jobs, such at truck driver or construction worker.”
farm worker is one of the most dangerous jobs and one of the lowest paying
That wasn’t a normal fire.
Bringing up the FF who died at WTC doesn’t add a thing to the argument.
Just tell that to all the non-firefighters who died at the World Trade Center.
I’m gonna get flamed for this…
If I’m not mistaken firefighters are trained in situational risk assessment, and are not required to do anything that could be judged as posing a significant risk of hazard.
I work frequently with equipments that have handled human blood samples and could contain HIV or HepC. I’ve been trained to mitigate risks and protect myself. My job saves as many or more lives in a year than a whole city worth of firefighters. Do I deserve 140K for my personal risk to health?
The money I earn is loosely based on my ability to produce income for my employer, and in fact the dolt simple jobs at my company that produce the smallest value added are the lowest paid. Guess what, the lowest paid workers also have the most frequent exposures to potential contaminants.
If 40K/annum attracts suffient qualified applicants then 40K/annum is what the job should pay. Getting a certain job should not be viewed as winning the lottery.
P.S. I also don’t believe there should be a minimum wage!
Note to self: don’t flame.
“P.S I also don’t believe there should be a minimum wage!”
*shakes head*
Ya know what?
Just maybe a minimum wage hurts the economy -
Wait - what.
Don’t know.
Who does that; live on minimum wage?
Sigh,
Leigh
The hardest working people are the ones working for minimum wage.I appreciate your comments, Leigh.
On the opposite end of the career spectrum are lumberjacks. The study shows these workers, also known as timber cutters and loggers, as having the worst occupation, because of the dangerous nature of their work, a poor employment outlook and low annual pay — just $32,124.
New protective gear — such as trouser covers made of fiber-reinforcement materials — and an increased emphasis on safety have helped to reduce injuries among lumberjacks, says Paul Branch, who manages the timber department at Pike Lumber Co. in Akron, Ind. Still, accidents do occur from time to time, and some even result in death. “It’s not a job everybody can do,” says Mr. Branch.
But Eric Nellans, who has been cutting timber for the past 11 years for Pike Lumber, is passionate about his profession. “It’s a very rewarding job, especially at the end of the day when you see the work you accomplished,” he says. Mr. Nellans, 35, didn’t become discouraged even after he accidentally knocked down a dead tree and broke his right leg in the process four years ago. “I was back in the woods cutting timber in five weeks,” he says.
http://online.wsj.com/article/SB123119236117055127.html?mod=special_page_campaign2008_mostpop
Don’t forget the coal miners, either. It appears, therefore, that salaries really aren’t hugely connected to the dangers of the job. Me thinks that many folks out there get the big bucks for successfully mystifying what they do. We pay for aura, lots of hush hush meetings, intense sessions on Crackberries, and some keyboard stroking. Dilbert meets Madoff.
Jeesh - there is a sentence missing -
Madoff - will be in jail.
In other news, others will follow.
Update at sunrise.
Leigh
That’s pretty much true. After subtracting a handful of highly successful doctors and lawyers, most wealth today where I live is associated with finance, “wealth management,” real estate development, or entertainment. Not a whole lot of productive activity there.
Reading about resurgent speculation and flipping makes me sick. Are banks still able to securitize the loans being made to these clowns? More importantly, is the Treasury using my tax dollars to buy them up as troubled assets?
“Not a whole lot of productive activity there.”
Preach it, snake charmer!
Amen!
Snake - not being facetious - inst the securitization through Fannie and Freddie, who either don’t seem to care or are not competent enough to?
You might be right. I don’t know the answer, but the events of the last eight months leave me with the sneaking suspicion that, from here on out, I somehow will be on the hook for speculative activities that I did not partake in and did not benefit from even in fat times.
“Beaver said she had no trouble finding tenants to rent the homes for enough to cover the mortgages and she plans to keep the houses at least 10 years to help her build a retirement nest egg”
The last time, it took almost 10 years for prices to recover from their prior high. And that bubble was far, far smaller than this one.
In our lifetime, we will never again see inflation adjusted prices of 2005.
“In our lifetime, we will never again see inflation adjusted prices of 2005.”
——————————————————–
Wanna see an RE moonbat have a meltdown? Just say to him what you just said here. It’s truly a sight to behold. Eyes cross, mouth foams, brain shortcircuits and tremors take hold.
In our lifetime, we will never again see inflation adjusted prices of 2005.
Yep.
Not on the coast, it is toast
Not Inland, prices will stick in the sand
Up in the snow? Who has the dough?
Its neither different here nor there.
We’re going to feel the pain everywhere!
Can you tell I have a young child?
Got Popcorn?
Neil
Dr Seuss goes on record about the bubble…..
You go dog…..go!
I would not buy a house here or there, I would not buy a house anywhere. I will not be and FB man, I will not do it Al I am.
“And why is it so hard to just save money the old fashioned way”
Over the last 15 years, miedina household income up 20%, CPI up 50%. Americans went from spending 90% of income to spending 110% of income. If anything, the CPI number is a lie to the low side.
It isn’t really that hard to understand.
Voila! The middle class squeeze. Typical middle class dream of having a nice home in a quiet stable neighborhood of improving housing values and like-minded neighbors, also of two kids, two cars, etc.
Well both parents have to work, sometimes 3 or 4 jobs between the two. And Junior has to mow the neighbors lawns and deliver papers.
And both parents are grossly fat because they spend too much time sitting in their cars or at their desks and have no time to exercise.
A big reason RE started bubbling are boomers and their need to pad their retirements. First time buyers didn’t create the unbelievable demand and there wasn’t even enough professional speculators. Once, the amatuers got involved, the bubble really got going. When you see the herd moving, step aside, or get stampeded.
I don’t agree with that. Everyone got in on the game. Some even signed up their dog.
I believe that’s what I just said, once the amateurs got involved. Maybe it was because I spelled it wrong.
The zip I track for NODs (93551) was up 261% for ‘08 vs. ‘07. The holiday weeks records aren’t available online yet so that’s a best case.
1231 ‘07, 3217 ‘08
This all despite the lawmakers efforts to stem the tide by imposing moratoriums. My records show that there is pent up demand (TM) of NODs that are again building in the system. January ‘09 will no doubt be another record month as all those September ‘08 delayed filings start breeching the regulatory levees.
Me? Still squatting. This is our third month and we’re doing just fine. We got an envelope taped to the front door from a negotiator for the bank who wants to talk about a work out. Since I’m not paying a mortgage nor rent I’m not really interested in a work out. There is no filing for NOD yet that I can see but that’s no surprise since January should 90 days since they stopped paying.
I haven’t heard from the LL since they let me know I could stop paying rent due to their default. For those of you who haven’t heard the case, he’s an internet millionaire who is letting the house go just on business principle. They know they’ll be able to buy one just like it, if not the same house, for half what they owe within two years. I can’t say I disagree with his decision.
Did you give your LL the envelope?
What envelope? I’m not his mother.
If anything ever screamed “Judicial Foreclosure”, that would be the poster case for it.
Most banks won’t do it, but opportunistic people like your LL need to have an experience with contract law.
Chuck Ponzi
No Judicial Foreclosure (that allow deficiency judgements) allowed in CA on purchase money mortgages….refi’s or HELOC’s are a different story….
….that is supposedly why we pay a few basis points more in interest rates here in CA than people in states that do allow Judicial Foreclosure….
Unless of course the loan was obtained fraudulently, then I’m pretty sure the bank will have more options.
thats in palmdale ?
Yeppers.
I guess a million doesn’t go as far as it used to.
I think he may actually have a recourse loan. He bought the house with cash and then took a cash out refinance to buy a beach property in central america.
He has at least one other property in socal but I think he’s still far from insolvent.
He doesn’t know he has a recourse loan! I love it!
“Salvatore said he bought such a house in Riverside for $239,000 that once was worth $900,000. He said after he fixes it up he plans to resell it for between $325,000 and $350,000.”
I think he mistaken if he believes the house was worth $900K, not in the “real” world it wasn’t. My bet is this guy loses money on this flip.
Why has he taken so long to fix it up? Typical procrastinating low life.
Looks like the greater fools are now doing spec renovations. No doubt cheaper than strarting from scratch given all the fees.
There are houses that were selling for $900K in the historic area of Riverside. I know a real tool that bought one in 2/06. Brand new to the area and job. I suggested he rent for a year because the market was going to tank. He told me because I didn’t have a real estate license, there was no reason to listen to me. He paid $900K and dumped another $200K into the place. I wonder what it’s worth now.
Dang, arc. Do work with him? Must be hard not to laugh in his face at this point.
He WAS my boss. I made it about a year and bolted when he started tantrums. I was angry at first, but now when I think of him I smile.
Can’t imagine what the underlying cause of those tantrums was, now can we?
I’ve got an ex-boss of that sort. We still laugh about him on a weekly basis. The most common joke is the funny sound a straw makes when it’s moved in and out of a plastic cup lid. He cured his lymphoma using coffee enemas.
I suggested he rent for a year because the market was going to tank. He told me because I didn’t have a real estate license, there was no reason to listen to me.
I suggest you call him up tonight and remind him of your advice and then laugh your a$$ off!
LA Bill,
Laughter is healing.
I like it!
Pssst - giggle and say nothing is my motto!
Leigh
“He said they routinely install new kitchens and bathrooms with granite countertops and tile flooring.”
When these morons start installing Formica counter tops and Vinyl flooring maybe they will have created some affordable housing rather than perpetuate the fantasy of fake affluence.
Forget affordable, just sensible. It’s 15 years since we rehabbed the kitchen, and my wife is bored with the colors. What if we had put down granite and tile instead of formica and vinyl flooring?
BTW, the floor is trashed, but the countertop is still like new!
I like formica and vinyl. Tile is cold on your feet in the morning and slippery when wet - textured linoleum is warmer and cushiony.
Definitely agree. I really dislike tile and granite.
Granite countertops are the last thing I’d want in a bathroom. Give me Formica any day! Oh, that and a good quality toilet.
I’m a big guy and I recommend the elongated toilets to anyone thinking of replacing an old throne.
Elongated toilets?? Are you a competitive eater?
“That’s not my elongated toilet…..I bought the extra elongated toilet.” (in a Mike Myers sort of way)
Elongated with a bidet(sp?)
Thank you very much!
P.S. me like when my er…bottom…er…
well, not in the bottom…er…of the water.
EW.
Leigh
Clarification.
Hubby DEMANDS a elogated toilet.
I love him so!
Lucky Lady,
Leigh
Toto G-Max. The only way to go.
Toto Neorest is the premier john. I’ve got one in the garage waiting to be installed.
Mike
Home Depot prices on granite countertops is about 50% of what it was 2 years ago. Me thinks that there is a lot of granite sitting around doing nothing.
Stinkin’ lazy granite.
It just doesn’t have the work ethic that Formica has.
LOL
(at kid’s piano lesson)
I don’t know…..in my opinion, the second and third generation Formica doesn’t seem to work as hard as the first generation. Sign of the times I guess…..
In 20 years, granite countertops will be in style in cheap college housing areas like 70s flourescent carpet was sometimes stylish in the 90s!
I love you Bill -Please do NOT paint that picture EVER again.
O.K. ?
This is why we do NOT tip to the face whilst reading de HBB blog!
Eye leaking, belly-button in from outie, toe nail popping, *snort* rib crushing laughter!!
C..aa..k..gh.
Tooooooooooooooooooo funny!
Leigh
LaTimes article “Design Trends We Want to See Gone” 1/3/09
“Some other outs and ins for 2009, as proposed by the pros:
Room design–
Kenneth Wingard, accessories designer and retailer:
Please, in the kitchen, no more granite countertop. It came into vogue in the ’80s, and it makes a place look dated instantaneously.”
“Christopher Thornberg, principal at Los Angeles research firm Beacon Economics. ‘The home market is not going to recover, on the building or appreciation side, until two things happen: a) all these people with dodgy mortgages who bought things they couldn’t afford get shoved out and b) all those homes get absorbed. The fastest way to do both of those things is to let prices fall.’”
No doubt about it, but I have a feeling the number of ‘dodgy’ mortgages far exceeds what many are thinking. There are many more re-sets on the way and many more folks who appear OK on the surface will be uncovered, as not OK. The train of pain will keep heading down the tracks!
“There are many more re-sets on the way and many more folks who appear OK on the surface will be uncovered, as not OK.”
Tsunami trough + naked swimmers at the beach = nudity revelation.
If you want to refinance, but you’re underwater, then you can pay the underwater balance with cash and refinance the above-water part.
Cash???? Where do we borrow some of that from?
D’oh!
In the end, it will come back to wages. 20% increase in wages and 50% increase in CPI over the last 15 years, with lifestyle maintained by 180% increase in per-household debt and 266% increase in business debt.
We went from spending 90% of our income to spending 110% of our income.
People don’t have money, they have debt.
But Debt = Wealth….doesn’t it?
That’s what I learned living in CA the last few years….
Sounds like to me it’s all “washed up”. Get it? Ha, ha, ha. Sometimes I just kill myself with my humor
Bouncing along the bottom…
like a corpse.
Yes, we will see a boom in the next 24 months. A suicide boom, a divorce boom, a bankruptcy boom, a foreclosure boom, and a hahahahahahahahah boom.
been hitting the cooking sherry a bit early ?
I like the hahahahahahahaha and foreclosure boom ideas. The others, less so.
“Here’s a somber statistic for Silicon Valley: Foreclosure activity increased at a faster clip in Santa Clara County last year than in any other California county, a foreclosure information service said Tuesday.
I live in 94087, bought the now-paid-up house pre-bubble.
When houses on my block started selling for over $1Million, I wondered how can anyone afford it!?
Now I know: They couldn’t!
Now I know: They couldn’t!
Repeat for far too many areas.
Got Popcorn?
Neil
No, there was a poster on this blog quite some time ago who explained to us all that these young, attractive new buyers were bright. They were more successful than us because they had more going for themselves than we did. We should be happy for them and not jealous. Geez Bitter, where have you been?
I’ve felt that way about pretty much everything. How do people afford those… fill in the blank…
Vacations
cars
parties
houses
TVs(home theaters)
etc
Answer: they can’t.
They could too afford it. It’s the magic word, or the word that was never spoken in the right circles. I shall name this magical word and brave the wrath of the almighty, the word is CREDIT. So far no lightening bolts.
We wondered for years how everyone around us was living it up and why we felt like PWT. We were paying down debt and living within our means. Now we are doing better and they’re all FUBAR. I read a long time ago that the best financial strategy for the long term was low overhead.
I read a long time ago that the best financial strategy for the long term was low overhead.
Bingo! Keep your fixed costs as low as possible, and it’s easy to live debt-free.
2009 will be the year we take a vacation. 2010 will be the year we buy a car and maybe a new TV. Difference will be that we’ll be charged less and pay without debt. Feels good.
“When houses on my block started selling for over $1Million, I wondered … ”
When that happened to me in 95124 back in the spring of 2006, I bailed out and left the state with cash in my pocket. You should have bailed too!
Maybe, but then again it’s paid off, and the property tax is somewhat inflation protected (prop 13) so basically I pay $400 or so/month to rent a house from the school district.
The peak sale on my block, if I can believe Zillow, was about 2 years ago for $1.4 million. (I paid $300K for mine!)
Paying $1.4 million for 2,000 ft/sq in Sunnyvale is silly, even if you have the cash to do it outright. Most people who wouldn’t miss $1.4 Million wouldn’t put it all in a small house.
And if you were financing, say, $1.2 Million of it, that would be a minimum of $13K/month or so principal + taxes.
For that you can rent a nice apartment right near where you work, and have $10,000 left over each month! I tend to think that people with high enough incomes to support that ($600K/year — don’t forget taxes are murder at that salary and there’s no interest deduction either because of AMT) would be smart enough not to buy into it.
If it weren’t so downright tacky, we’d be pretty close to justify creating gloat.com.
Worst. Website. Ever.
My eyes!
Where is my lawyer -
Leigh
No, AMT permits property tax and house interest deductions. But that’s almost all.
BZZZZZZT! Thanks for playing!
Mortgage interest deductions start to phase out with incomes over $150,000, and are eliminated completely by $250K. Ask your tax guy.
(search for “Mortgage Interest” on this page)
http://www.irs.gov/taxtopics/tc505.html
And for the flip side of deductions on the lower end:
The other thing that people always forget in the equation of renting vs. owning is that you get a standard deduction which is not given if you are writing off interest from a mortgage. So, the calculation should include that loss of the standard deduction and it never does.
‘My policy prescription: Let them get foreclosed on,’ said Christopher Thornberg,…
Patrick Dudum, area sales manager for Equitas Capital in Los Gatos. ‘Relative to 2004 it is difficult, but if you have followed the market for any length of time, this is a normal market.’
Okay, who let the SANE people talk to the media? Where’s the NAR hit squad when you need them>
I would suggest you read all of Patrick Du(m)dum’s quote before grouping him with Mr. Thornberg.
We’re going reap the benefits. We’re going see a boom in the next 24 months, and the last one will pale in comparison.
Sheesh . . .
The recession did not start with housing. It started with offshoring, yet house prices just kept going up and up. I wonder how many people out there are aware of this. I wish CNN would do a poll on it because I’m starting to think that the MSM is actually way more rock-headed than the general public.
I’ve worked in and around the MSM, Big V. What you say is absolutely correct.
Yep, any group that self-congratulatory can not possibly be as smart as the general population.
One great big Napoleonic complex if you ask me…
You are too kind with your description of the MSM. They are two bit actors and actresses, paid to sit and look pleasing to the eye, smile when needed, look sad when needed, furrow their eyebrows when needed, and raise an eyebrow when needed.
Hey Big V, I heard about this offshoring in the early part of this decade before this housing bubble. And I knew at the time that it means higher unemployment for higher salaried people such as myself. While I’m a pure capitalist and in favor of offshoring, I certainly understood that I could not count on my high income to last as long as a mortgage.
That alone is what kept me out of this ridiculous bubble and rent instead.
It’s a different world, and I embrace it. The numskulls who did not do the math and gambled in real estate have no pity from me. I kept up with macroeconomics while they fiddled.
BIG V,
Yeah - five homes for everyone!
Yippy!
This will end well.
Leigh
+1, Big V.
“‘He said, ‘I have to close the doors, boys,’ said Dowd, 53, of Moorpark, who made about $1,500 a week as a construction supervisor. ‘We just sat there in stunned silence. Things ran through my mind — about my kids and Christmas, about paying bills, about putting food on the table for the next couple of months.’”
This is worth noting. Most employees *know* the work is dropping… but somehow think they are immune. Sadly, I know too many who have already received the pink slip. Worse, I have been confided in on far too many layoffs. Everything from bio-tech, ‘dot com 2.0′ and other IT, manufacturing, and the obvious (retail and construction).
Booms are great… until they aren’t.
Got Popcorn?
Neil
I fully expect be asked to cut 20% of staff this spring. I half expect to get the ax myself, but I’ve thought that since 1997.
I’ve thought this for myself since 2003. But now things are worse than ever in this small company. I have 3 months left of my lease here in LA and I’m anticipating going back to Maryland or into Pennsylvania!
And Moorpark spelled backwards is ……….
And Tulsa spelled backwards is…
Ironic story from today. My patient’s mom took a nightshift job with EDS last spring (yes, they hired a night shift so they could print an increasing number of unemployment checks) because she was worried that her husband would lose his job. Last week he did. Lucky she did what she did. She said that today they printed a record number of unemployment checks in California.
Apartment Landlords Find What Goes Up, Does Come Down
Housing Slump Stoked Rise in Tenants, But Now Rental Concessions Abound
http://online.wsj.com/article/SB123128398900958943.html?mod=googlenews_wsj
So much for getting rich in rental real estate.
But Tom Vu told me my rental would “cash flow” immediately if I bought his tapes and workbooks…..I guess I never checked to see if the materials said it would be positive cash flow…..
IMHO this can not funnel down to the unwashed hoards fast enough. The faster the peeps understand that they can negotiate hard on renting and buying the faster this train hits bottom.
Portland has been the leader in “rents won’t go down here” speeches. (I researched it)
Really, that’s why I negotiated $600 off my year’s rent? I only wish I’d asked for more, since they were quick to agree to it.
The ad on CL for the next opening here was priced at my negotiated rate.
Remember a year ago when this was all contained, total losses would be $50 billion or so, and there were going to be about 2 million foreclosures over 4-5 years.
1/2 million… just in CA… just last year as the snowball was just picking up some speed….
Back then I was saying $2 trillion from 4-5 million foreclosures. Think I’ll be shown to be on the low side.
I believe I predicted a $5 trillion decline in home equity (out of $15 trillion) with $2 trillion in realized mortgage losses and $3 trillion for those who purchased a long time ago and don’t care or eat ramen noodles.
The realized mortgage may indeed be higher the way things are going, as no one eats ramen noodles and those who purchased a long time ago get saddled with a new de facto mortgage by the government.
Oh… I think $5 trillion in residential value decline is a WAY underestimation. We went from $11T to $21T, right? I bet we’re back at $13T or less at bottom… worse if wage defaltion takes hold.
The bottom could prove even lower than the starting point, given the momentum buildup of an ever-accelerating price crash. Have you ever seen a meteor crater?
Globalization (wage deflation) and Baby Boomers going from net buyers to net sellers.
The funny money just dried up for this hobbit hole.
http://www.bendshire.com/
I can’t wait to buy a funny lookin’ house in Bend, OR.
Bend just laid off 11 of their planners…..
Does anyone think rents will come down in the desirable cities (north of So Cal) of CA?
Yes.
It may take a while, but yes.
I think rents will come down anywhere there is an excess of housing. Inland CA, yes, coastal, probably no. Oh, and anywhere that the prices are simply unmaintaible by wages like Manhattan.
Rents will come down on the coasts as well. There is no area that was immune to the funny bubble money. If you take away the funny money competition will force concessions.
Rents are directly related to wages. So the question is: Do you expect rising unemployment and falling wages? If yes, than rents are going down. Add the overbuilding for the past 6-7 years and you get the picture.
OMG, they had incoming NAR President Charles McMillian on CNBC awhile ago. Is it just me or does he reimnd you of someone?
http://tinyurl.com/97efzh
Fat Albert?
Tip O’neil?
An NFL player, for sure.
That Mark Lesswing character looks like he’s up to something.. VP and
CTO for the NAR? What does he do, run their web page?
And another one bites the biscuit:
http://us.cnn.com/2009/US/01/07/illinois.realestate.death/index.html
On a memorial blog set up by the Chicago Association of Realtors, for which Good once served as president, friends and colleagues described him as a gregarious man with a big personality …
“The guy was a true blue Realtor,” said Barbara Matthopoulis, the association’s spokeswoman.
C’mon, lady: them’s fightin’ words where I come from.
He was a savvy businessman
oh? I do not think that word means what you think it means.
Sigh… To think in the northern hemisphere February has the most depression (If my memory serves correct). The weather is better but still bad… and that does stuff to people.
Got Popcorn?
Neil
“The weather is better but still bad”
It’s the slush factor, ask anyone from the cold white north. Snow is great, sun is great, slush is a cold wet slog down the path to eternal damnation.
In fairness, if I had stayed in Chicago over all the years since when I lived there, I am pretty sure that I would have killed myself by now during some cold January.
The season for outdoor sports is 22-weeks long up here in the Columbia Basin. During the past 6-weeks we have had temps as low as -12F, drifting snowfall, and now we are at 41F with slush and flooding. It doesn’t bother my kids or the inbred locals, but I grew up in sunny California.
I tried to stop myself but I couldn’t. I left a remark on the memorial blog.
Let see if it gets past the editor…
What a tragedy!
I hope that those who are in need of consolation find it. I hope that his wife and children and assocoates can find some positive force for good in what is otherwise a senseless situation. I hope those who have had business dealings with him over the years will feel that they dealt with him justly now that he’s gone and it’s too late to make ammends.
How many more Realtors (TM) need senselessly die before we do something about this housing debacle!
And now he’s blue in the ground.
BWAHAHAHHAHAHHAHAHAHHAHAHAHHHHHHHHHHHHHH!!!
I’m guessing the guy was a truly underwater real estate investor. Why would a middleman kill himself at this point, when the prospect of future auctions looks so bright?
I think they’re all faking their own deaths. They have enough moolah to pay off the coroner. Way too many of them are doing it, even though they still have loads of money.
“The Smartest Guys in the Room”, the Enron documentary, begins with the suicide of one of the executives, Baxter. Reminds me of that.
Americans, by nature are an optimistic bunch. Even in tough times, there is something to be optimistic about. …That is probably the only reasonable explanation for the findings of this survey conducted by Glassdoor, a Sausalito, Calif.-based start-up that ranks employers by taking anonymous feedback from the employees.
Despite the dismal global economy, and wide spread layoffs and rising unemployment, 61 percent of surveyed employees are not be willing to take a pay cut if they discovered their job was in jeopardy. A whopping 40 percent expect a pay raise in the next 12 months, despite job cuts at their employer. Of those eligible for an annual bonus, 57 percent expect a bonus and 40 percent do not expect a bonus
Most amusing part — four out of five employed adults say they are not concerned about being laid off from their job in the next six months. One in five employees, are concerned they will be laid off during the same period. Perhaps the pessimistic 20 percent are reading the news.
http://gigaom.com/2009/01/07/bad-things-or-layoffs-happen-to-other-people/
To the optimistic 80% - enjoy what you’re smoking for now ;
-”Job security is local.”
-”It’s different at my company.”
-”Salaries only go up.”
Sound familiar? Did I miss any?
Series I Savings bonds only go up?
My company is not giving raises this year. They claim to be giving bonuses, but I already know what will happen. A few well-connected individuals will get all the bonus money. No one is in a position to do anything about it.
This I don’t get: Why drives a middle-man to do himself in at this stage of the game? Isn’t this a great season to run real estate auctions?
I am guessing he must have drunk too much of the REIC’s version of Jonestown Guyanese gimlets.
Wall Street Journal
* COMMERCIAL REAL ESTATE
* JANUARY 7, 2009
Real-Estate Executive Found Dead in Apparent Suicide
By TIMOTHY MARTIN and KEVIN HELLIKER
CHICAGO — Real-estate executive Steven L. Good was found dead of an apparently self-inflicted gunshot wound Monday in his Jaguar in a forest preserve outside Chicago, said the Kane County Sheriff’s Department.
Mr. Good, 52 years old, was chief executive of Sheldon Good & Co., one of the nation’s largest real-estate auction firms. His father founded the company in 1965.
I can’t claim to agree with everything Karl Rove has ever said, but he hit the hammer squarely on the head this time. Let’s hope the masses catch on to this before the negative consequences of destructive government meddling in the housing market lead to a big increase in destructive government meddling.
Wall Street Journal
* OPINION
* JANUARY 8, 2009
President Bush Tried to Rein In Fan and Fred
Democrats and the media have the housing story wrong.
By KARL ROVE
Mythmaking is in full swing as the Bush administration prepares to leave town. Among the more prominent is the assertion that the housing meltdown resulted from unbridled capitalism under a president opposed to all regulation.
Like most myths, this is entertaining but fictional. In reality, Fannie Mae and Freddie Mac were among the principal culprits of the housing crisis, and Mr. Bush wanted to rein them in before things got out of hand.
Rather than a failure of capitalism, the housing meltdown shows what’s likely to happen when government grants special privileges to favored private entities that facilitate bad actors and lousy practices.
Preach it, Brother Karl!
At least with the GSEs pretty much defunct, this story has a happy ending (for the time being, anyway).
When Republican Richard Shelby of Alabama, then chairman of the Senate Banking Committee, pushed for comprehensive GSE reform in 2005, Democrat Sen. Chris Dodd of Connecticut successfully threatened a filibuster. Later, after Fannie and Freddie collapsed, Mr. Dodd asked, “Why weren’t we doing more?” He then voted for the Bush reforms that he once called “ill-advised.”
But Mr. Dodd wasn’t the only Democrat to heap abuse on the Bush reforms. Rep. Barney Frank of Massachusetts defended Fannie and Freddie as “fundamentally sound” and labeled the president’s proposals as “inane.” He later voted for the reforms. Sen. Charles Schumer of New York dismissed Mr. Bush’s “safety and soundness concerns” as “a straw man.” “If it ain’t broke, don’t fix it,” was the helpful advice of both Sen. Thomas Carper of Delaware and Rep. Maxine Waters of California. Rep. Kendrick Meeks of Florida berated a Bush official at a hearing, saying, “I am just pissed off” at the administration for raising the issue.
Democrats had ready allies among lenders accustomed to GSEs buying their risky mortgages. For example, Angelo Mozilo, CEO of Countrywide Financial, complained that “an overly cumbersome regulatory process” would “reduce, or even eliminate, the incentives for the GSEs and their primary market partners.”
It took Fannie and Freddie over three decades to acquire $2 trillion in mortgages and mortgage-backed securities. Together, they held $2.1 trillion in 2000. By 2005, the two GSEs held $4 trillion, up 92% in just five years. By 2008, they’d grown another 24%, to nearly $5 trillion. They held almost half of all American mortgages.
The more the president pushed for reform, the more they bought. Peter Wallison of the American Enterprise Institute and Charles Calomiris of the Columbia Business School suggest $1 trillion of this debt was subprime and “liar loans,” almost all bought between 2005 and 2007. This bulk-up in risky paper made it possible for banks to lend imprudently on a massive scale.
PB:
There were Democrats AND Republicans rooting for GSEs. The Republicans had a majority, remember? Sure, Dodd and Frank are bimbos, but if Bush really wanted reforms, he would have gotten them. He never understood the issues. His “free market ideology” is what caused the need for said reforms to begin with.
That’s a good point, V. The Democrats were never brave enough to filibuster, even once.
I remember they filibustered over that Supreme Court appointment, but I don’t remember whether they filibustered anything else.
I’m still waiting for someone to show me some actual evidence that George W. Bush had any “free market ideology” to speak of. The man doubled the SEC’s regulatory budget, and promulgated new regulations at a rate that matched Clinton’s.
The narrative is that Republicans don’t regulate, but the facts don’t bear it out.
Peter Wallison of the American Enterprise Institute and Charles Calomiris of the Columbia Business School suggest $1 trillion of this debt was subprime and “liar loans,” almost all bought between 2005 and 2007. This bulk-up in risky paper made it possible for banks to lend imprudently on a massive scale.
——————–
While Frand and Dodd and Schumer are absolutely guilty, the GSEs started paring back their purchases and guarantees back in the 2003-2005 period when they were under pressure for their accounting problems. It was during this time that the private lenders and investment banks did their work, and their loans were far more toxic than the GSEs’ mortgages.
When the PTB saw the problems in the mortgage industry in ~2006, they forced the GSEs to essentially buy up the debt from the private market via refinances and direct purchases, IIRC. They ramped up the subprime stuff **after** problems were discovered in the private market and the “connected” financiers were given another opportunity to off-load their crap onto the GSEs.
Wall Street Journal
* LETTERS
* JANUARY 7, 2009, 10:33 P.M. ET
Hispanic Housing Programs: The Best Laid Plans . . .
According to the article “Housing Push for Hispanics Spawns Wave of Foreclosures” (page one, Jan. 5), the artificially high home-ownership rate among Hispanics over the last eight years is being cut down to size. The efforts of congressional members, mortgage lenders and pro-Hispanic groups to put Hispanics in houses are now being exposed as ill-designed and ultimately doing more harm than good.
Unfortunately for everyone, this demographic became regarded as an untapped resource in the recent lending frenzy. Well-intentioned people saw the situation as unfair, Hispanics looking for homes saw an opportunity, and lenders looking for continued mortgages saw a gold mine. The result is now a disproportionate number of foreclosures in Hispanic communities.
Take home messages:
1) Housing is a private good, with no proper role for government intervention.
2) The best long-term remedy for housing market problems: Get the government off the market’s broke back.
Bush did NOT want to rein them in. He gave his blessing to their final bump-up right at the beginning of the crash. He opposed it a little bit at first, but caved right in. Had the regulations not been lifted, then there never would have been anything to rein in.
Accumulated wisdom to live buy so long as you play the investing game:
Wall Street Journal
* OPINION
* JANUARY 8, 2009
Six Lessons for Investors
Be diversified and don’t assume past performance will continue.
By JOHN C. BOGLE
There is almost no limit to the ability of investors to ignore the lessons of the past. This cost them dearly last year. Here are six of the most important of these lessons:
1) Beware of market forecasts, even by experts.
…
2) Never underrate the importance of asset allocation.
…
3) Mutual funds with superior performance records often falter.
…
4) Owning the market remains the strategy of choice.
…
5) Look before you leap into alternative asset classes.
…
6) Beware of financial innovation.
People on this blog advised against owning the market well before the crash. On their advice I got our retirement out of stocks in 2007 and into cash. We now have the option of retiring when we like, while our friends who stayed in stocks after they retired are now looking for work.
“4) Owning the market remains the strategy of choice.”
Not MY choice, thanks.
Turns out the guillotine some times even chops below the belt.
MSN dot com
Porn industry seeks own stimulus … package
Adult industry titans say economy has made Americans ‘go limp’
Seems everyone is lining up for a government handout, but in the case of the porn industry, you may wonder where the hands have been.
TMZ is reporting that Hustler’s Larry Flynt and “Girls Gone Wild” creator Joe Francis are asking for a $5 billion federal bailout of adult entertainment because “the economy has made America’s appetite for sex go limp.”
looks like we are in for “hard times.”
Help in
HardSoftTimes (for the porn industry)- msn dot com news report
- Not obscene
- Completely hilarious
- Every industry is entitled to a bailout now!
- “Porn industry claimed they are recession proof — there wasn’t supposed to be any down sizing.”
I remember reading a SFV story years ago about the introduction of Viagra leading to many fluffers losing their jobs. Really sux!
en.wikipedia.org/wiki/Fluffer
We used to joke here about fluffers working in the REIC a couple of years back…