Bits Bucket For February 6, 2009
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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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Mortgage Initiative Mired In Details
Foreclosure Aid Key to Reviving Housing Market…
By Renae Merle and David Cho
Washington Post Staff Writers
Friday, February 6, 2009; Page D01
While senior administration officials are finalizing the central elements of their rescue plan for the banking system, they are not as far along in working through the daunting details of how to spend as much as $100 billion to help homeowners facing foreclosure, two sources close to the discussions said yesterday.
Obama administration officials view the mortgage initiative as critical to turning the ailing housing market around and making the politically unpopular bailout more palatable, other sources said. But designing what could be the most sweeping foreclosure prevention program in decades has not been easy. Officials have said they will unveil their rescue plan for the financial system on Monday but have not said whether the mortgage modification effort would also be announced then.
In trying to stem the soaring rate of foreclosures, the administration is aiming to resolve three core issues: How to get help to the right homeowners, how to aid lenders that modify mortgages without encouraging these firms to make bad decisions in the future, and how much risk the government should bear to boost the housing market.
Reagarding how govt can “help” FBs, my advice is to stop whipping that dead foreclosure-horse.
Think hurricane. You cannot steer it or stop it. Nothing can. Attempts to do so are wasted effort.
But you can provide shelter from it to those in need.
Stabilize employment by supporting business of all sorts, big and small. A job, even with bad credit (snicker), provides food and shelter.. rented shelter perhaps, but shelter none the less.
Support and protect the people and their jobs.
Forget trying to support bad loans and failed mortgages. You gotta know when to fold ‘em.
There is an equally large huricane coming in the form of massive business bankruptcies. While household debt increased from $4.5 trillion to $14 trillion over the last 15 years, business debt increased from $3T to $11T.
Any attempt to prop up business will be just as ineffective as attempts to stop residential foreclosures.
Truth is, there are massive chunks of the economy that need to go away. Botox and breast implant sales down… duh. Tanning parlor and nail salons struggling… duh. Teen retailers seeing large sales drops? I’m not shocked. Hummer sales down? Stupid people with weak personalities and low self-esteem lost access to debt.
What? We don’t need a Realtor in every strip mall and a mortgage lender along side? We don’t need a fast food restaurant for every 10 households?
We have a strip mall alongside the freeway here that has like 10 stores.. One that sells just giant grills. One sells giant playhouses. One sells hot tubs. One sells pool tables. One that sells in-home exercise equipment. Not a business in there that will, or should survive this.
Daryll:
Implants are Good you have to pay for them…..Reductions are EVIL, and a very expensive insurance covered cosmetic procedure. Lets save money there.
————————————
Truth is, there are massive chunks of the economy that need to go away. Botox and breast implant sales down… duh
no.
Breast implant sales sagging.
duh.
I hope you’re being facetious… I had a close high school friend who had size G cups by the time she was 18. She was NOT fat (though she was pretty tall). Her breasts were completely out of proportion to her body (and were from the age of 12–which earned her a lot of nasty comments).
By the time she was old enough to enjoy having “assets” in college, they were giving her severe back pain. She decided to have them reduced. She had a job w/ health insurance. (Actually, she was a brilliant student who switched to a physics major halfway through college. She left Drew for BU because Drew wasn’t challenging enough. Upon graduation she got a job at a defense subcontractor.)
Not only would her quality of life have suffered, eventually the back problems take on a life of their own… I would certainly not wish disability upon her.
Peyrotes is covered by health insurance too. Maybe you consider that “optional” as well?
Peyrotes is covered by health insurance too.
Peyote?
Pilates?
I’m confused now.
“What? We don’t need a Realtor in every strip mall and a mortgage lender along side?”
I’m happy to report that, on my trip through Truckee, CA this past week, seemingly ALL of the Realty and Mortgage shops are GONE from the main drag. It was only a few short years ago when I was horrified to find many of the old and charming restaurants and businesses had been displaced by the aforementioned eyesores. Unfortunately, many of these quaint businesses will soon depart as well, replaced by a sea of “For Sale/For Lease” signs .
Corrective surgery to reduce overambitious cleavage is one thing, and the health benefits (eliminating back and shoulder pain) are certainly a positive consideration. But when you convince a whole generation of women who are A or B cups to think they’re deformed unless they pay some troll of a doctor to supersize themselves into android, porn territory, that’s just Wrong. I’ve noticed that the new batch of models are not sporting these uber beach ball breasts. It’s become too much the domain of white trash and aspiring suburban MILFs.
90% are unnecessary its just another feel good thing to do….
But doctors are more then willing to take your(insurance) money.
Ditto for useless storefronts here in the O.C.
I have long held a theory (perhaps a little wild) that
some of these esoteric businesses are nothing more
than fronts for criminal enterprises to launder money.
After all, the $$billions in drug money have to be
sanitized somewhere.
‘Cmon. How many exotic, expensive fireplace
accessory stores can we support along
Pacific Coast Highway?
I almost bought a new BBq grill but fretted how I would move it when I go to my next RENTAL.
Well, if the place stays open through an entire business cycle, you have your answer.
Outside Greenville, SC, there is a magnificent house on a hill with twin stone lions guarding the gate. The owner’s front is a motorcycle repair business, but the neighbors call it “The House that Crack Built.”
Change is coming. With the new stimulus these stores will have to resort to selling even bigger playhouses, grills, and hot tubs if they are to survive. No Business Left Behind. Even if Obama himself has to buy all of the super-sized hot tubs and erect them on the white house lawn these businesses will make it.
RE: With the new stimulus these stores will have to resort to selling even bigger playhouses, grills, and hot tubs if they are to survive.
Who says you have to do anything to survive?
Work is for the idiots in the private sector.
http://timesunion.com/AspStories/story.asp?storyID=767070
More on that subject… and this was nearly a year ago!
“Cities pay huge salaries despite fiscal crises
Erin McCormick, Christopher Heredia,Carolyn Jones - San Francisco Chronicle Staff Writers
Sunday, March 30, 2008
A city nurse earned $350,000. A fire department battalion chief pulled in more than twice as much as the mayor. And a municipal park ranger took home $188,000 in overtime on top of his $71,000 salary.
Such generous payouts were criticized for hastening the fiscal downfall of the city of Vallejo, which narrowly averted bankruptcy this month. But the nurse, firefighter and ranger aren’t from Vallejo - they’re among hundreds of top earners working for the cities of San Francisco, San Jose and Oakland.”
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/03/30/MN7OVQOPK.DTL
8,933 of San Francisco’s 28,000 “public servants” made more than $100,000 in 2008.
That’s one city staffer making $100K for every 90 residents.
Not a misprint!
And if you thought this city was particularly well run… well, unfortunately, you’d also be very wrong.
http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2009/01/09/sfpay2008.DTL
This morning on the local NPR station “Editor’s Roundtable” they were discussing San Diego city employees making over 100/150K. Many of these employees are firefighters who, as a group, make sure there aren’t enough fireman on duty, so that they get tons of overtime. For what they do, firemen are heroes, but they are wearing out their high pro glow with this type of egregious behavior. Other news, sounds like the Chargers may be heading (back) to LA by 2010. None of the cities in SD county are willing to give them the tax money subsidies they’ve come to expect. The first owner of the Chargers, by the way, was Conrad Hilton, circa 1961. The team name refers to the large, sturdy horses that carried knights, and the first jerseys distinctly looked like a medieval banner. Who knew?
darrell_in_phx
I was in the shopping center biz, (started my career in 1985) and agree with you 100%.
This is nothing new, I remember an old SNL skit from the 70’s about a store in a mall that just sold tape.
skroodle
lol
This is nothing new, I remember an old SNL skit from the 70’s about a store in a mall that just sold tape.
Spatulal City!!!
Spatula City!!!
Spatula City!!!
..Just the sticky kind.
+1 for the Wierd Al reference!
” Stupid people with weak personalities and low self-esteem lost access to debt.”
+1,000,000,000,000
When you stop to think that congress is filled to the rafters with the same kind of people - then this all makes a whole lot more sense.
Truth is, there are massive chunks of the economy that need to go away.
Yeah, and then the question is what to do with the army of unemployed in order to avoid civil unrest. That’s where I think a stimulus plan could actually help, rather than propping up the bankers. The WPA was derided by critics for useless “leaf raking” jobs, but this country is kind of like a piece of property or vacant lot that has been let go to seed, and could use some tidying up at this point. Not like the people who worked in the strip mall storefronts that are now closing have much for practical skills. But they do have a lot of hands - might as well use them.
Picking up trash is a much more noble endeavor than most of the “jobs” created in the past decade. Might as well put the idle to work de-uglyfying the country. Orange traffic vests should be handed out to all the out of work realtors and they can start picking styrofoam cups outta our nation’s ditches. We can house them dorm-style in empty McMansions and subdivisions.
Bub Diddley,
You are in rare form today Sir! The problem w/ all the REIC playas over the last decade or is that now that they’ve been allowed to be 6 figure “order takers” how will we -ever- be able to get them to engage in the economy in a meaningful way?
Maybe there aren’t enough useful roles in society for soooooo many people.
Those GD-era works programs were geared towards unemployed men (some women but mostly men) who had no where near the debt and overhead of today’s FB consumer.
Rather than an unemployed man who needs to send his family a few bucks to buy basic necessities and pay rent on a frugal apartment, today’s unemployed man is more likely to have mortgages, car payments, tuition, insurance, and a whole plethora of consumer goods that he will need/want to support.
Japan utilizes every single person till they can no longer function. Eye opening event in 76 saw a man sweeping
parts of the street, old man, and suddenly I realized
that everything is important in their society.
Unlike ours. A few more sweepers and some respect along with it would be noteworthy.
“Might as well put the idle to work de-uglyfying the country.”
What a great idea! They could start with their homes and yards, move on to themselves, then spread out across the country.
All these absurd stimulus package ideas about “saving or creating three million jobs” (note, the Messiah has now changed it from “creating” three or four million, to “saving” OR creating, in case it doesn’t create squat), make no sense. Public infrastructure programs take years and years to initiate, and saving or creating three million jobs at a cost of three hundred thousand dollars per job, just for the first year, is hardly intelligent.
All that’s going to happen is that a lot more useless redundantant government jobs will be invented, and once invented, will be irrevocable.
The Federal Government doesn’t have enough money to employ all the unemployed (and often unemployable); that’s why we’re a capitalist Republic, not a socialist democracy. I guess somebody forgot to tell The One.
that’s why we’re a capitalist Republic, not a socialist democracy
Hah. You mean were?
Well, by the time those young men were working in CCC or whatever, the family house had already been foreclosed on. The banks were very quick to foreclose (also, a lot of people were on 5 year interest only mtgs that came due in full at the end of the term). This helped lead to their downfall, as they would auction the proceeds into a crummy market (in farmerland, the neighbors would often bid nickels on their neighbor’s stuff, and then give it back to them) and take a loss. In big cities, some judges stopped foreclosure, so the homoaner got to live for free. Also they stopped evictions. The deflationary storm ruined the banks, which failed by the dozens in 1933.
Which is to say that by the time we get to the WPA (mid 1930’s), everything that could be repoed or foreclosed upon was, and rents were way, way down.
In a few years, we should be in the same place.
Not so Incredulous:
New slogan: “REPAVE AMERICA”
We can get tons of people working Next Week with pot hole repairs, the horrid conditions of broken asphalt and train tracks all over the country.
You cant import asphalt, so why now pave all the streets that were left to fall apart due to all the cancellations last 2 years when asphalt prices went through the roof?
——————————-
Public infrastructure programs take years and years to initiate, and saving or creating three million jobs at a cost of three hundred thousand dollars per job, just for the first year, is hardly intelligent.
They can start in San Diego. It rains here for barely two days and there are pot holes big enought to devour your car!!!
Stars End
The biggest holes are in their heads.
And only 5-10% of the stimulus package is for infrastructure? We were duped and yet few democrats are screaming.
“Forget trying to support bad loans and failed mortgages. You gotta know when to fold ‘em.”
Dammit, I’ve been readin this blog for over two years without a single Kenny Rogers reference - you just HAD to blow it, didn’t you?!?!
Well, I’ve been systematically and heroically refraining from ever, ever, ever quoting Toby Keith, so you still have that precious gift, don’t yer. Yes! Just clutch that fact to your suit bedecked city-boy bosom, is what I say. While at the same time using your cravat to gently dab away the tears of suffering over the Kenny Rogers quote.
And then go get drunk and be somebody.
Hahahahaha! Hahahahaha! Sorry. I’m so sorry…really. It just sorta slipped out.
Heh we’ll put a boot in this crisis’ ass - it’s the American way!
“…making the politically unpopular bailout more palatable…”
But to whom?
They seem to think that trying to help FBs is somehow more palatable to the majority of Americans than funding banker bonuses. In plain sight they are ignoring the vast majority of Americans - duh - that’s why your bailouts are unpopular DC!
I am so sick of the poor homeowner dragging us down. How ’bout highlighting the wonderful works that renters do to keep homeowners prosperous.
“…the administration is aiming to resolve three core issues: How to get help to the right homeowners…”
Okay, this should stop right there. Who is deciding who the “right” homeowners are? What criteria are being used? Come on DC, where’s the transperency?
The “right” ones are the ones willing to become mortgage slaves if we could just lower the payment to $1 below the max they can afford.
Unfortunatly, all the people they reach want a mass principle reduction, or a some way to live in the house for free for a little longer.
They just can’t find these “right” people that are willing to pay back the massive debt load.
When I read that sentence I read it as meaning they hadn’t figured out which restrictions to put on. The program will be meaningless if it doesn’t apply to anyone, but it will be devestatingly unpopular if it rewards people who are at fault for their own situtation.
Since the number of “innoncents” is diminishingly small even if you discount doing something stupid (only one owner-occupied house, no fraud on the application, etc), I’m not sure how they will resolve it. Even if you found people who didn’t lie and can prove they were actively misled into signing for an unaffordable mortgage, there is a good chance they would be located in neighborhoods that can’t be saved.
Scylla (too inclusive) and Charybdis (not inclusive enough).
Ben has mentioned many times before that mortgage re-writes or cram downs are nothing new, and they aren’t. This go round the numbers seeking to do this are far,far, larger. Can it work? I say no, because for many it goes beyond ’saving’ the house, it’s about propping up prices, and that will not work.
Trying to Help Financially Troubled Homeowners…
People seem to pass certain milestones on the road of financial desperation. First the unpaid bills pile up. Then the bank forecloses. Finally, they reach the end of the line: bankruptcy court.
But now policy makers are talking about redrawing this map by putting the bankruptcy court before foreclosure to give people a chance to keep their homes.
It has been done before, on a relatively small scale and with some success. In the midst of the farm crisis during the 1980s, Congress gave bankruptcy judges the power to reduce onerous farm loans to reflect a steep drop in land prices.
The Obama administration and Congressional Democrats are pushing a similar idea to stem the swelling tide of home foreclosure. Yet a close look at the farm experience raises questions about how widespread any relief would be.
http://www.nytimes.com/2009/02/06/business/06lend.html?_r=1&ref=business
‘mortgage re-writes or cram downs are nothing new’
I’ll thank you to not put words in my mouth. I took two college courses in business law and two in real estate law. There was never a term called cram downs mentioned. If you are talking about bankruptcy court, that is something that everybody involved knows about going in. And if a bankruptcy court violates the rights of any party, it can get thrown out. I work with foreclosures and the related documents everyday. It is nothing BUT contract law in motion.
Contract law derives from hundreds of years of judgements, layer upon layer. It can’t be broken here or there without the whole thing being thrown out. It isn’t specific to any one country or situation. You either follow it or you don’t. This is the basis for international trade, among other things.
The curious thing is why such nonsense gains ground in places like the internet. If this stuff was possible, the government could just wave a wand and the housing bubble would go away. But as we see, instead the entire financial system tetters because the problems can’t be waved off.
I see people waste their time worrying about issues that are out of their control or are nonexistent. This is a time we will remember the rest of our lives, and I for one am not looking for ghosts in the shadows. These foreclosures are real. There are actual empty houses sitting all over the country; somebody has to deal with each and every one. And the impact on all of our lives is just as real, as are the opportunities.
“These foreclosures are real. There are actual empty houses sitting all over the country; somebody has to deal with each and every one. And the impact on all of our lives is just as real, as are the opportunities.”
I’m glad there are opportunities there. There are none that I see here, even in foreclosure sales. I expect there will be.
Like dead bodies lying in a stream, empty foreclosed carcasses present the opportunity for contagion to entire neighborhoods. Its not until some entity removes the problems entirely that the situation will improve. Be it vultures or undertakers, as long as these untouchables exist we will continue the slide. Bad analogy, maybe, but here in ferric oxide Ohio we are experiencing the final phase of too many houses for too few people who can afford them. Its not pretty. City employees, including safety workers, are finally accepting the notion of no employment. CA workers anger and protestations of minor cuts are laughable.
WSJ article today says Ohio on course to lose two congressional seats in the upcoming 2010 census. Even Michigan is only going to lose one.
So what? What have congressmen and do-nothing senators done for Ohio so far? Jack squat! Hopefully, we could refuse any “representation” and secede.
‘mortgage re-writes or cram downs are nothing new’
“I’ll thank you to not put words in my mouth”.
Perhaps it was an article that was posted on this blog that used the term ‘cram downs’. Wasn’t trying to put words in your mouth.
Ben:
What about cramming down Credit cards? Or 0% interest for the next 10 years with no principle reduction.
Some people still have this old idea of trying to pay their debts instead of filing for BK.
You just cant live in America without at least one good usable credit card.
“You just cant live in America without at least one good usable credit card.”
I use a debit card. Works like a credit card but no debt involved.
I assume you have established credit with a car loan or mortgage. You can’t even rent an apt (unless you are illegal), without established credit.
Credit Cards paid in full, on time, every month make sense. Even a car rental uses them as collteral.
Awaiting,
I agree totally. I use my CCs as charge cards (the old business model of Amex) and they are a wonderful financial tool. I could certainly live without them; but they are very useful and helpful if used correctly. I think of them the same way I do an ATM, it’s a great convenience but, if it were to disappear tomorrow, it wouldn’t effect my life significantly, I’d just have to go to the bank more often.
The problem is that many people treat CCs as a lifeline. If you took away their cards they wouldn’t eat next month, or would default on other bills. That’s NOT the way to use them, and, if you do use them that way, you deserve to pay the (admittedly massive) premium to do so.
Look at it this way, morons with CCs subsidize my CC bill. I don’t pay the interchange fees because some out idiot is paying 28% interest. That’s a good deal in my books, it’s like financial Darwinism.
“I assume you have established credit with a car loan or mortgage”
I have a “credit history” and a “credit line”, but it has been years since I’ve used credit. My last four vehicles and my boat were paid for cash and I rent. If I buy land or house it will also be cash. I’m hopeful that I am out of the credit based society. That’s the plan, anyway.
Debt is slavery. There are some things in life that seem tolerable until you are free of them.
Credit cards..Debit cards..Ha ha ha !
My Mom still TRUSTS me with CASH..coupons and a note to the store.
..although she still checks the receipts and counts the change
When credit cards first became widespread, Master Card was “Master Charge”. Guess they didn’t like the image of charging or something.
I’m surprised they didn’t change ‘Master’. It conjures an image of this big anthropomorphized credit card, cracking the whip over a mass of debt slaves.
“Credit Cards paid in full, on time, every month make sense.”
….and if you get one with airline miles every few years you get a “free” trip somewhere. I like having a bank of miles on hand for emergency travel. One time my wife had to go to some little out of the way place in the midwest that had a lot of connections. I can’t remember the exact cost but I think it would have been well over $1T. We just used 25T or 30T airline miles and saved a bundle.
I can’t remember the exact cost but I think it would have been well over $1T.
Over $1 Trillion? Wow, that is out of the way, specifically The Milky Way!
aNYCdj,
I think that’s an excellent point. Corporations are in a constant state of “secondary offerings” re-financing their debt structure and negotiating with their suplliers/vendors etc. as the economy changes. Or simply to get a better rate?
BUT NO!!! Not the “consumer”! We’re supposed to go at this thing with a board strapped to our ass ’til death do us part!
Agreed.
Why can’t the consumer renegotiate their situation as do businesses?
In some instances they can, but don’t know it. In other cases, they have no choice.
“I’m a cram down on your mortgage!
“Oh no you’re not. I’m a re-blow my bubble and rise up from my secret underwater loan and lay a stimulus on you ass!
“I’m a foreclose on you, no-doc NINJA - you can’t stimulus my ass!
“I’m a gonna put you inna HELOC, Mort Gage Banker!”
“Stay tuned! World FB Wrestling will be right back!”
click…
“I took two college courses in business law and two in real estate law. There was never a term called cram downs mentioned.”
I took a three course series in real estate finance at the real estate research firm where I work just a year or two ago. And “cram downs” were right there in the textbook, as part of the strategy of strategic default (the borrower’s put) in commercial real estate.
The kinds of custom mortgages seen in the residential mortgage market only recently are common in the commercial mortgage market, where you never had a Fannie and Freddie to impose “conforming” rules like 20% down.
It should be surprising that with the same type of mortgages, you get the same type of borrower behavior in a downturn.
‘at the real estate research firm’
I’m talking law. The school I attended was the second best in Texas at the time. Every teacher actually did what they taught. If they were teaching law, they were a practicing lawyer, etc.
I’ve tried to point out that what I see in the real foreclosure world isn’t the stuff the TV puts out for public consumption. CNN just discovered the number of foreclosures is undercounted. I found that out, and posted it on the forum a year ago. When the talking heads were reporting moratoriums, I posted about the same firms taking back houses left and right. Seeing something in print or on TV doesn’t make it true. Go to some trustee sales and see contract law in action.
“Go to some trustee sales and see contract law in action.”
What I see when I go is a mess.
Banks stick to their default award amount granted by the judge.
I went this week Wed and plan to go next week Wed, Thur and Fri.
I’ll post.
“Go to some trustee sales and see contract law in action.”
That’s something I plan to do at some point, Ben… While it will be interesting to watch, I really don’t see the opportunity there, since banks tend to bid the severely-overpriced mortgage amount, which is by definition over market value for underwater FB properties.
Ben, I do think a weekend topic on “opportunties” could be interesting; I recommended a good one to a friend last summer, but see little that is actionable for myself at the moment. Eventually, perhaps…
But Seattle is so far behind the curve (at least one year) that opportunities will take longer to show up here…
‘I went this week Wed and plan to go next week Wed, Thur and Fri.
I’ll post.’
Yes, Muir! Post! And you too, Primey, wouldja. Oh, and Primey, how about you give us some Seattle anecdotes. I haven’t been to the Emerald city for a few months. Has Godzilla arrived? I sent him a post-it asking him to wade over and stamp the town flat, because I got mad at my last meeting up there, but of course I specifically requested that he skip your place.
Prime/Muir,
Banks stick to the amount they are owed because for the most part, on a 1st mortgage, if they are Fannie/Freddie loans, the bank can recover every single penny while Fannie/Freddie eats the rest… There is no incentive for them to take less and in some cases they are penalized if they do so. Same thing with SBA loans.
Cram down of first mortgages will be disaster. Cram down on car loans is already allowed. Since credit cards are unsecured they are basically crammed down from their birth….
I am a lawyer who represents a local bank and do my fair share of foreclosure work for them. They will work with folks, but Fannie/Freddie have guidelines and what they can and can not do since they are ultimately the ones eating the “equity sandwich.”
“I haven’t been to the Emerald city for a few months…I got mad at my last meeting up there…”
I’ve got good news to cheer you up, Oly!
“Weyerhaeuser 4Q loss balloons to $1.2B”
DIE, PIG, D I E!!! Read all about it in today’s Seattle Times.
Thank you realestateskeptic.
I did not know that.
“Weyerhaeuser 4Q loss balloons to $1.2B”
Whooo HOOOOOooooOOOOOO!
That IS good news, bear. Jeebus, I HATE Weyerhauser. Their horrible, evil offspring ‘Quadrant Homes’….I cannot even say the name without involuntary throat and uvula convulsions.
And not the good kind.
“And not the good kind.”
LOL… Priceless.
“Oh, and Primey, how about you give us some Seattle anecdotes. [...] Has Godzilla arrived? ”
I’ll work on it Olygal. I have one good anecdote from our HBB meet-up a couple of weeks ago, but been crazy busy since. Will write up and share this weekend.
So far, no sign of Godzilla here, though I have my fingers crossed for arrival sometime soon.
I do think the recent conflation of job cut announcements from pretty much all the biggest employers in town is undermining confidence that it is “different here”, but asking prices still seem to be remarkably high, and the foreclosure listings are still much lower than elsewhere in the country
p.s. Olygal, saw your request for garden info, but only a few days later when I was playing catch-up. Sorry to disappoint. Nothing too exciting: this past year was my “test garden” at my “new” old rental house, and my first time getting my hands dirty in quite a number of years. Next year I plan to expand a bit and get things started sooner; laziness and a late start definitely undermined output last year. Thinking of doing starts in the basement this year with fluorescent lights. Hope my LL doesn’t think it’s a grow-op!
realestateskeptic: Thanks much for the explanation… I knew the “equity sandwich” would likely be Fannie/Freddie’s to eat, but hadn’t thought about them having rules that would affect bidding.
BTW, any tips on what those rules are and how most effectively to negotiate with a bank holding a REO?
Ben, I’ve mentioned several times before, pocket listings are real. They may be illegal, but if you think you’re first in line, no way. If you really are, open fire, go for it.
I had a co-employee bragging to me about how she and her husband own a chit load of good rentals in PA because he sat on the board of a local bank during the last bust. They in fact “snapped up” the houses that were well built for pennies on the dollar.
I’ve seen nothing but trash/teardowns in Florida so far. Yeah, maybe Cape Coral is cheap if you like to live in a place where moms are stolen right out of homes and murdered, and dudes hump blow up dolls in public.
There are, on occasion, real conspiracies out there. It’s a great time to be a bankster that saw all of this when we did. Just sayin’….
“These foreclosures are real. There are actual empty houses sitting all over the country; somebody has to deal with each and every one.”
I’ve heard nary a mention of 19 million vacant homes from Bernanke, Paulson, Sheila Bair or the members of OBwan’s new economics dream team. Perhaps if they just keep ignoring all the empty houses, they will just go away?
Washington Post
NATIONAL BRIEFING
Wednesday, February 4, 2009; Page D02
HOUSING
Vacancy Rate Hits Record
A record 19 million U.S. housing units stood empty at the end of 2008, including properties for sale and for rent, as banks seized homes faster than they could sell them and prices continued to fall.
The number of vacant homes in the fourth quarter was up 6.7 percent from the same period a year earlier, the Census Bureau said in a quarterly report. The share of empty homes that are for sale, the homeowner vacancy rate, rose to 2.9 percent in the quarter, the highest level in data that goes back to 1956.
The United States had 130.8 million housing units in the fourth quarter, including 2.23 million empty homes that were for sale, the Census report said. In addition, the report counted 4.1 million vacant homes for rent and 4.8 million seasonal properties.
The Farm relief thing wasn’t just for Bankrupt cases,It was widespread,and the main effect was it brought Land prices way down,where they stayed for years.Most Farmers are Business minded,and usually quite Smart except when Grain prices Spike.It did work for them.The trouble is ,a lot of folk bought houses that should not have.Nothing will ever pull them out.
During the Real Estate Boom ,borrowers had the wrong reasons for buying the “Dream House .” People were pushed to buy now or be priced out forever ,or to buy and make their house make them a fortune or a life style they deserve . People bought houses they could not afford and the borrowers have no interest in debt slavery
if there isn’t a short term pay off as they expected . The market crashed because it was false and it was a crime -ridden mania . How this mess could grow to this large a scale is mind-blowing .
So in my view ,it has been absurd trying to save the homeowner that just wasn’t buying a place they could afford to live in . The investors during the Boom didn’t even care if the property cashed flowed , so it was all a scheme to flip to the next greater fool . These homeowners that are a problem aren’t long-term homeowners or end-users . Now the homeowners that might of been long term users are defaulting because the other gamblers are bringing them down with the ship . I heard some people openly talking the other day about how they plan to get the bank to write down or cram down their obligation on a mortgage or they will walk . This one jerk that was talking thinks they should get a cram down after they took out 100k to buy another investment . Just foreclose and get real homeowners or prudent investors into these places . I am sick of the schemers and gamblers being considered
fine Citizens who deserve to be bail out ,when they were just loan liars trying to get in on the Real Estate appreciation scheme. I don’t think they can underwrite the loans to determine who the true victims are from the gamblers anyway .
Housing Wizard,
I’d only add that the very scenario you describe also virtually assured there would be -immense- selling pressure as multitudes of loanowners were standing in line to flip the homes they’d bought in ‘04, ‘05 and ‘06.
That’s what were seeing now. I’d heard one person say “It would be easier to simply “list” the homes that *aren’t For Sale in Sacramento!”
( That comment was made several years ago so you can insert the market of your choice now )
“I’m a cram down on your mortgage!
“Oh no you’re not. I’m a re-blow my bubble and rise up from my secret underwater loan and lay a stimulus on you ass!
“I’m a foreclose on you, no-doc NINJA - you can’t stimulus my ass!
“I’m a gonna put you inna HELOC, Morguage Banker!”
“Stay tuned! World FB Wrestling will be right back!”
click…
Banker Bashing Gives Cover to Far Bigger…
Feb. 6 (Bloomberg) — Banker bashing is great sport.
It satisfies the populist need for an identifiable villain in the financial crisis. It provides an outlet for our collective anger. It absolves us from thinking about just how we — the credit-card-loving, mortgage-craving, debt-addicted consumers of America — helped foment the meltdown.
It is even useful, when coupled with $500,000 compensation caps, for a president desperate this week to deflect attention from taxing cabinet matters.
The problem is this game of pin-the-blame-on-the-banker gives cover to those who deserve a far greater share of the blame for this crisis — the people whose job it was and is to set the rules of the game and keep things from getting out of hand.
That would be the government, the Congress and the Federal Reserve, especially former Chairman Alan Greenspan.
Sure, the bankers deserve some blame and punishment. They were greedy and rapacious and stuffed their pockets with as much bonus cash as is humanly possible.
Are we really surprised? Wall Street’s sole reason for being is to make money, the more the better. We always knew that. Pretending otherwise is silly if not disingenuous.
“From the Great Depression, to the stagflation of the seventies, to the current economic crisis caused by the housing bubble, every economic downturn suffered by this country over the past century can be traced to Federal Reserve policy.” ~Ron Paul
..while every economic downturn in the century prior to creation of the Fed cannot be traced to Federal Reserve policy.
Every economic downturn in the century prior can be traced to fractional reserve banking and other “weaker” government banking schemes the “central bankers” were able to get passed. They can also be traced to the greenback printed during the civil war and to the 2nd Bank of U.S.
In effect, it is clearly seen that *every* major economic downturn in history is the direct result of a preceding currency debasement. Fractional Reserve Lending is just a form of currency debasement.
The only exception to this general rule is with tyrannical governments and major wars. (Tyrannical governments and major wars almost always require currency debasement because it is impossible to directly tax enough).
If you care about keeping government power in check, then you must remove the printing press!
can you explain what is soo awful about fractional reserve? If a bank is 100 liquid doesnt that mean they dont loan money? its just a storage place?
From what I have read the real problem was soo much fractional reserve banking but letting the ratio go from 12 to 35 or in some cases 40, or 50
currency debasement?
I’d like to see someone explain how the Panic / Market crashes of 1901 or 1907 had anything to do with, much less were caused by, currency debasement.
Feel free to be as creative as you please.. use whatever logical (or illogical) reasoning tools necessary. I won’t be judgmental. I just wanna hear it.
max4me,
A bank can accept time deposits (CDs) and then lend to others. The bank operates as a “property management” company and “rents” your savings for a fixed period of time during which the depositor does not have access to the funds without penalty.
Banks can also facilitate transactions among individuals (checking, credit card, etc).
The problem with fractional reserve lending is that the bank essentially “naked shorts” the money and then starts an unavoidable chain of events that requires exponential growth in the money supply. If you have alternative ways of creating new money such as “mining it out of the ground” or earning it from some who is outside of your “banking system” then perhaps *some* naked shorting can occur and then be successfully unwound.
Think about it this way, you lend the bank your “gold” at 2%, they then use the fractional reserve process to lend 10x that gold at 5%. They then make 48% profit on the transaction! Meanwhile the prices you pay increase by much more than the 2% they paid you because there is now more in circulation.
I want to clarify my above example. When you deposit “physical gold” in a fractional reserve system that “physical gold” allows the bank to issue 10x that amount in bank notes “payable on demand”. It is a a fraud, because it is impossible for the bank to ever meet all of its “payable on demand” obligations.
When you deposit a bank note back into a bank then it must use the reverse multiplier and only 1/10th of it counts as reserves… effectively they can only lend out 90% of the bank notes you deposit, but 1000% of the real gold you deposit.
Anyone who deposits gold into a fractional reserve bank is being defrauded. Surely, they should be entitled to a 40 or 50% interest rate considering the risk he is taking. The gold depositor bears the risk of the naked short on the part of the bank.
Joey,
Why would anyone panic about the solvency of banks if the issued currency (gold payable on demand) was actually backed by real gold? If they issue more bank notes than gold on deposit that is CURRENCY DEBASEMENT! Prices will go up and the bank will fail if everyone attempts to withdraw their money at the same time… ie, the banks liabilities always exceed its ability to pay and the only thing keeping the bank “alive” is “confidence”. Depositors in said bank are exposed to the full risk of the naked shorting done by the fractional reserve policy and so they lose everything when it unwinds. Depositors are essentially leveraged 10:1 meaning a 10% loan failure rate would wipe out 100% of the capital… this is what causes major economic down turns.
hmmm
I have always thought of it this way, you have money and you have stuff. The amount of money and stuff in the world is always changing, new stuff is made, old stuff wears out, demand grows or shrinks. Namely the world is in a constant state of change.
So money creation and destruction makes sense to manage it. I mean the whole creation of money from fractional reserves was to satisfy the markets demand for credit. The truth utility of money is what it can be traded for.
The current crises really seems to be that we traded future money (credit) for consumables. The managers who were supose to keep things in check were asleep at the switch. And now the whole mess has blown up.
The underlining problem with fractional reserve just doesnt seem apparent to me, but then again I am not a economist so what do I know
Having behind us the producing masses of this nation and the world, supported by the commercial interests, the laboring interests and the toilers everywhere, we will answer their demand for a gold standard by saying to them: You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold.
-William Jennings Bryan
Why would anyone panic about the solvency of banks if the issued currency (gold payable on demand) was actually backed by real gold?
VTDan, Because banks can make bad bets and piss away gold as easily as they can piss away anything else. The nature of the deposits do not matter. The money supply does not matter. Nothing matters except that the bank has somehow been irresponsible with and destroyed the customers’ deposits.
When the public finds out one bank gambled away their deposits, they all panic. All banks are hit.
Everyone wants their money (or gold) now. The banks may or may not be able to return deposits, but money supply certainly dries up immediately. Business cannot get a loan. The economy skids to a halt and the dominos fall one after another.
It makes no difference what style of banking happens to be the current vogue.
Should we save this bank or not? Should we create a central bank that has the power to, among other things, regulate dimwitted banks, restore those depositors losses and, if there’s a need, inject liquidity back into the system to keep the economy moving? Might such a centralized overseeer deter panic runs on the banks in the future?
That was as much a moral as an economic question. We answered it. A lot of people didn’t like the answer and still don’t.
Should we save this bank or not? Should we create a central bank that has the power to, among other things, regulate dimwitted banks, restore those depositors losses and, if there’s a need, inject liquidity back into the system to keep the economy moving?
That was as much a moral as an economic question. We answered it. A lot of people didn’t like the answer and still don’t.
Um, no.
You seem to be implying that the creation of the Fed was a conscious thought out decision on the part of government officials with the best interests of the public at heart. It was none of those things. The Federal Reserve was architected by the banks themselves, who now control it. Read the Creature from Jekyll Island.
Dan, debasement is when you mix lead in with the gold, or nickel in with the silver.
Writing a bunch of bank notes on gold reserves, at some ratio, and then letting them circulate, is monetary inflation, not currency debasement.
The business cycle with accelerate inflation of this sort, or, in a panic/depression/dip/recession/deflationary death spiral this phenomenon goes rapidly into reverse.
The “run on the bank” occurs when the rumor arises that the bank has suffered massive defaults on loans (whether of “real money” or bank notes) and the berumored figure they had better be first in line before the whole thing collapses.
So reserve banking is something like a Ponzi scheme, but it is not a Ponzi scheme, let’s be clear on that.
A larger percent reserves makes the bank more sound. So does more conservative lending. These 3%, 1%, 0% reserves are bs–even a small loss wipes them out. Basta! Pile ridiculously risky loans on top of that, and you have all the makings of government intervention stew.
Now add in the fact that the Federal gov’t has a policy of inflation (now we see the printing presses at work–this is fiat currency, not hard currency), and we see exactly what will happen: print our way out of it. The US govt did this during the Revolution and after the Civil War. And again during the Viet Nam War. Should not surprise anybody.
Creature from Jekyll Island .. by G. Edward Griffin.
“vitamin B17 cures cancer” and “I’ve found Noah’s Ark”. … That Griffin?
yeah.. amazon.. no .. don’t bother with a link.. i’ll find it myself.
I use debasement to refer to “devaluation”, in the case of Rome it was literal debasement.
When a bank makes a loan with money print from thin air it is naked shorting the money and the depositors bear the risk. The banks can earn 50 to 100% return by “leveraging” their bets but ONLY because they issue fraudulent “payable on demand” notes.
A bank could never fail and wipe out its depositors 100% if it were not for fraudulent fractional reserves. Money on deposit at a bank is money the BANK CANNOT TOUCH without your permission to transfer it to someone else. They cannot “piss it away” while still pretending it is a “demand account” without committing a fraud. The worst case loses for a depositor that has a CD is that they lose money at a the default rate (never more than 25%) - the interest on the remaining 75% (CD rates would be much higher than today, probably 10-15%). Far better than being wiped out. Also, these depositors couldn’t do a “run on the bank” without paying a big early withdraw fee (probably similar to the average default rate).
The fallacy that fractional reserve banking was created to meet “credit needs of society” is absurd. All the credit anyone could ever want was available *at a price* that would convince savers to make the loan. FRL simply steals a small portion of value from every monetary unit and then lends it at interest. Now the savers have to compete with against debtors funded with “paper gold” and prices rise. The banks profit, the people do not, and EVERY SINGLE TIME the system ultimately fails.
The last fallacy mentioned above is that “the money supply must change with the supply of goods”. Complete rubbish. Prices are just the exchange rate among different goods and services. If the supply of goods goes up due to profitable production the price will come down. Overall efficiency improvements should cause the “CPI” to fall at a relatively stable 2-3% per year. This fall in prices is not *deflation* if the money supply remains fixed. It will not cause banks to fail or companies to go out of business. It is the sign of an ever more productive and efficient economy profitably producing more and more goods.
Deflation (shrinking of the money supply) also causes prices to fall and creates a self reinforcing cycle of defaults. In this case prices are falling because of defaults, in the prior case prices were falling because of productivity.
Ultimately all “credit” must be funded from “real savings” if you increase the supply of credit (by printing money) you send the economy false signals about the amount of “real savings” and this causes the accidental consumption of our seed corn. Times are good for a while because we are consuming our savings, but once our savings are gone… economic collapse.
The bulk of the downturns of the 19th century can still be traced to central bank policies - the Federal Reserve wasn’t the first.
Nevertheless in the 19th century the method of getting out of recessions didn’t normally include policy that just got us into deeper doodoo for the next one, until bang - we get the mother of all recessions, which is this one.
+1 on mentioning the policy response difference!
You must also ask questions like, why are savings rates at all time lows? Why has credit exploded to all time highs, etc! I can assure you it is not solely related to “individual discipline” and “generational differences” Debt makes sense in an inflationary economy. People are simply responding to the incredibly low debt interest rates and incredibly poor savings interest rates.
If we went back to 100% reserve banking then you will see that as the increase in demand for credit will result in an increase in savings interest rates. Thus the savings rate would naturally climb. Then factor in slow steady price declines across the entire economy and people will have a natural tendency to delay purchases until they *need* them thus causing more savings. Savings is the capital that enables economic prosperity.
“You must also ask questions like, why are savings rates at all time lows? ”
LOL - I’ve seen a lot of mention recently (MSM and otherwise) about people “hoarding” their money - “OMG the savings rate was 3.6 - the highest level is 6 years! Hoarding!!!!”. So then I point out this data (that rate happens to go back exactly 50 years):
2.93% = Average savings rate last 3 months
1.70% = Average savings rate last 12 months
6.85% = Average savings rate last 50 years
9.18% = Average savings rate 1959 – 1984 (first 25 years of 50 year period, back when we were more responsible)
IRAs/401k’s also have an affect on the savings rate. They are not included in savings rates because they replace pensions and the cash value of pension earned in a particular year was not included. But the IRA and 401k are visible and make people think that they are saving more than dad or grandpa did even if they are not.
401ks and IRAs are not real savings. They must be sold before they can be converted into real savings. If everyone tried to access their savings at once it “wouldn’t be there”.
This so called savings has already been invested/spent and so is no longer available as “savings” to society.
Polly:
“IRAs/401k’s also have an affect on the savings rate. They are not included in savings rates because they replace pensions and the cash value of pension earned in a particular year was not included.”
To clarify (maybe this is what you meant) - IRAs and 401k’s do count towards the savings rates, as do pension contributions, though only on the “income” side of the equation. E.g. any money you receive as gross pay and then contribute towards 401k counts as income, but not savings.
I suspect that a large part of the reason there has been a significant drop in savings rates is because more and more companies have been switching from pension funds to 401k’s. Since 401k’s are optional, and generally less contribution-wise than pensions, then people are saving less. You’re right that they might think that they’re saving more than their parents, because 401k balances are generally more tangible than pension balances. This I think is part of the problem. People are actually saving less in part because the savings they do have is more visible.
VTD:
“401ks and IRAs are not real savings. They must be sold before they can be converted into real savings. If everyone tried to access their savings at once it “wouldn’t be there”.”
Hmmm - that’s a good point and something I think most people don’t think about. It begs more digging (I don’t have the time right now) to determine then what goes into this calculation. It’s very complex. So then for instance let’s say I have a brokerage account, and invest in various things, which of the following count as “savings”?:
- Cash
- Money market funds
- CD’s
- Equities
- Mutual funds
- Bonds
- Etc.
Some of those as you mention are things that must be “sold” in order to realize the cash value, and thus require subtraction of cash from the rest of society, and can’t really be counted as savings. Same is true for instance of real estate - socking your money away in real estate isn’t really savings because it has to be sold before you can get the money. Same is true for cars, furniture etc. - these are all things that are assets and not actual money.
Tricky things though are things like CD’s and bonds. These seem like they would count as savings, but likewise they have to be “sold” to get the money - i.e. someone on the other side had to give up money in order for you to have it. In reality, due to our fractional-reserve banking system - the same is true of checking accounts - even moreso actually! Whenever you withdraw $10,000 from your checking account - the bank legally has to call in $100,000 worth loans - i.e. take $100,000 of money out of the system.
So this begs the question then - exactly what is “savings”?
I have no answer, other than perhaps to refer maybe back to my “micro” vs. “macro” economics discussion the other day - the savings rate (e.g. the 3.6% thing for December) is only meaningful on a micro level - on a macro level it is meaningless. So the 3.6% is a sum of the micro savings levels across the U.S., but on a macro saving level probably the value is *always* 0.0% (across the world anyhow).
packman,
You understood my point very well and made some good points; however, I think you lost sight of something.
The heart of “savings” is to consume less than you produce; therefore, there is a macro and micro level of savings. Money is just a proxy for storing the “surplus” production.
You can save in any commodity that you expect to maintain value in the future.
For me, I no longer “save” in dollars. I “save” by purchasing in bulk the things I will need to consume in the future. The result of my surplus production is the have a pantry full of food, a large stack of firewood, and other ‘capital improvements’ to my home that have the effect of reducing future expenses or generating future incomes.
Practically speaking, the only savings you can count are dollars with 0 maturity. Cash in checking, savings, mattress.
It is when you understand the true nature of savings and credit that the fractional reserve system is exposed as a fraud by creating “savings” out of nothing and thereby misallocating resources and stealing from the savers for the benefit of borrowers and banks. There is NOTHING to be gained and everything to lose by FRL.
Packman,
I know this is too late for most people to see, but I believe you are incorrect. When the official stats about the “savings rate” are published they do not include retirement savings. This is done so that longitudinal studies remain valid and the old-form version of 401ks and IRAs (retirement savings you can’t get your hands on right now) was the value (present value of expected stream of future payments) of the pension you had earned.
It isn’t an economic definition, just the one from the statistics.
I think I need to clarify myself because my two posts on this topic are seem contradictory. If you want to save dollars then you cannot count the current dollar “value” of other assets as savings. If you want to save food, wood, or gas then you cannot count your “dollar savings” as being a replacement for a “year supply of food”, etc.
Bottom line is that if you put money in a 401K then instead of “storing food, gold, etc” you are exchanging one piece of paper for another. You don’t have a dollar amount of “savings”.
There is substitute for cash savings if what you need is cash. For every person like me who choose to “save” in unique ways (that don’t depend upon converting back to dollars in the future) someone else should be able to save the cash I spent. If there is no cash saving then there really would be a “credit crunch” because you cannot lend what you haven’t saved. (unless you are the federal reserve or using FRL)
polly - my understanding from looking at various places (will post a link, but they take a while to show up) is that 401k and IRA ARE counted as income, but ARE NOT not counted as savings - perhaps this is what you’re seeing. It’s confusing.
Savings rate = (Income - expenses) / Income
So then for instance if I make $100k gross salary with 6% 401k deferral, and say pay 35k in taxes - then my net income after taxes and 401k is taken out is 100 - 6 - 35 = $59k, however my income for purposes of the calculation is $65k.
Then say I save $5k in that same year, out of my remaining $59k (i.e. I spent $54k). My official savings rate for that year would be (59 - 54) / 65 (about 8%), even though I kinda sorta actually saved (65 - 54 / 65) (about 17%).
italics off.
And danging I can’t find the link I was looking at earlier. Will have to check again tomorrow.
danging = dangit
..while every economic downturn in the century prior to creation of the Fed cannot be traced to Federal Reserve policy.
Actually, they can.
Interestingly, a few of the large bank runs which led to downturns were orchestrated by the bankers themselves, whose companies then went on to found the Federal Reserve.
wait … wait … downturns are caused by central banks?
without central banks we would have a credit expansion mania forever?
I’m sure this isn’t what you mean.
gator,
Many downturns in the 1800’s and early 1900’s were triggered by big banks who wanted to “create a problem” so that they could “propose their solution” while at the same to be the “hero of the day” by making “sacrificial loans” to “save the economy”.
…and taking devalued assets from defaulted borrowers which were then to be resold after their “solutions” were implemented and the economy “recovered” and assets valued increased again.
The game is as old as money itself.
It can also be traced to people going along with Federal Reserve policy. When I wuz a pup and tried to blame something on an influential “friend”, or tried to get my parents to buy me something because somebody else had it, I’d get the old razzmatazz about “If Johnny jumped off the Brooklyn Bridge, would you jump, too?”
The Fed and its policies flourish because people agree to it. The so-called “little guy” has a huge hand in this. A person may not be able to get through to the people at the top, but you can get through to friends and neighbors. You may not like being shunned or laughed at, but you can get through to them. If they don’t listen or ignore you, so be it. From what I’m reading on this blog, friends and neighbors are listening now.
It’s like being fat. Being fat used to be socially ostracized. Enough people agreed it wasn’t a good idea and kids used to make fun of people who were fat. I wonder, if being fat hadn’t been declared to be OK by pop psychology, if more kids would toss around the term “fattie”, instead of being called out for using “hate speech”, maybe we wouldn’t have as much of an obesity epidemic today.
“Tolerance” is a good thing, until it is used as a tool to get people to tolerate the intolerable.
“Tolerance” is a good thing, until it is used as a tool to get people to tolerate the intolerable.
Come on I think you and many on this board benefited from our society’s tolerance on saving money, renting, holding a different opinion regarding real estate etc
They still call us names like “fattie” and deride our choices. They are becoming less and less “tolerant” of saving. One day soon there will be “anit-hoarding” laws where anyone who managed to save real wealth will be hung if they don’t “share” with all of the starving fools.
Right on palmetto . In my view ,this Country took the wrong course ,starting with Dr. Spark in the 50’s , when the tend
started to spare the rod . Don’t get me wrong ,I’m not in favor of beating kids ,but this trend that children need to just do what they want and discover themselves totally ignored the vital human need for boundaries and rules .
…starting with Dr. Spark in the 50’s , when the tend
started to spare the rod .
That wasn’t Dr. Spark. Dr. Spark advocated the use of electricity when disciplining the little monsters
It was Dr Spock who put the neck-pinch on rod wielders.
You can tell them apart by their ears.
…,starting with Dr. Spark in the 50’s , when the tend
started to spare the rod .
That wasn’t Dr. Spark. Dr. Spark advocated the use of electricity when
disciplining the little monsters.
Dr. Spock was the one who put the neck-pinch on the rod-wielders
You can tell them apart by their ears.
OK I’ll blame congress, but congress was bought and paid for by the bankers, hedge fund traders ect. The source of the problem is still bankers.
Temptation is not the source of corruption, only the vehicle of choice.
The ratings agencies gave AAA+ to junk SIV’s, where’s the indictments? without those phony ratings, would we have had banks giving bad loans? also how many municipalities were on the pay-to-play program of bond ratings?
gave AAA+ to junk SIV’s ??
Yep…Start there…
+1
Without securitization and fraudulant rating agencies the housing bubble would be a blip compared to what we have now. This is the #1 cause of this mess. No one has been taken to jail. If they are taken to court they can just feign ignorance and throw a pile of numbers at the jury.
So people don’t have free will, and it’s up to the government to control them?
How many people aside from Ralph Nader lefties would have written that four years ago?
Right. It was so silly that this junk fraudulent paper was passed on to the World and the made up new models of loan risks were accepted .
How about the fact that the new loan Models were not tested long enough to deserve that kind of AAA rating . It is just as bad as putting a drug on the market without testing it just on the notion it will work and in addition saying that another long tested drug worked ,so this one will work also . Wall Street wanted the model to work ,but it was based on a scheme of real estate going up and a bunch of BS about people deserve home ownership in spite of inability to pay .
The maker makers were riding on past steam of a sound secondary market of loan risk, while they switched the rules and they used data from that different time and loan underwriting to justify their folly and bad faith on risk ratings . For instance ,
if you look back on loan risk before ,people will normally go to great extremes to pay their mortgage . In a mania ,people will walk if they don’t achieve their short term objective of appreciation . The old model of loan risk actually embraced underwriting the loan ,the new model said that appreciation will take care of all underwriting sins and breach of duty to prevent fraud . The new model said that slicing up the loan and spreading it out in trenches will reduce loan risk and spread it out accordingly .Didn’t work did it, because loss is loss ,no matter how you dice it .
It allowed buyers AND lenders to have no skin in the game. That should have screamed, disaster. IMO, the only thing that should become ( and remain) nationalized are the rating agencies. Anyone remember when the raters stopped being non-profit? not that it guarantees anything.
The whole scheme was really silly .The Risk Takers and the Investors in the Secondary Market, who put up the money ,were the only parties that had “Skin in the Game “. A game that was based on Real Estate going up and greater fools continuing to buy at
inflated prices ,while the affordability index was going down .
I remember reading a article toward the height of the Boom
where the market makers were urging people to buy 3 or 4 houses ,and they were advertising the next great spot to invest . It was clear that they were running out of greater fools at some point .Everybody wants out and nobody wants in .
I personally own shares of those apparently whoremonger bankers.
I’m pissed that they waste the tax payers money.
I’m also pissed that they waste my companies money. I’m pissed that their good old boy boards and auditors turn a blind eye to their foolishness. I’m pissed that my mutual funds thought banks were a useful investment anytime in the last 2 years.
I’m also waiting for SKF to go to Inf and crash the exchange computers.
Maersk raise Europe to Asia rates $50 per TEU
Citing “unsustainable rates and improved demand” Maersk Line said it would impose two back-to-back, $25-per-TEU general rate increase on containers moving from Europe to Asia on March 1 and April 1, for a total increase of $50 per TEU.
“During the fourth quarter 2008, the industry has experienced declining freight rates in the Europe-to-Asia trade,” Maersk said, adding the trend “continued into 2009.”
However, it said there are now indicators that demand is increasing due to the British pound and euro.
“As a result of increasing costs associated with the growing demand and to ensure sustainable freight rates, Maersk Line will enact a commodity rate increases for export cargo from Europe to Asia. The increase is also necessary to ensure that we can continue to support the trade and provide our customers with the service reliability and customer service they are accustomed to when shipping with Maersk Line,” the company said.
American Shipper
Baltic Dry sees biggest one-day rise in 25 years
By Javier Blas
Published: February 5 2009 02:00 | Last updated: February 5 2009 02:00
The Baltic Dry index, the benchmark for freight costs for dry bulk commodities such as iron ore, coal and iron, yesterday jumped almost 15 per cent, the biggest daily increase in almost 25 years, on signs of a recovery in the raw materials trade.
Shipping brokers said that demand for the largest vessels, known as Capesizes, is slowly recovering as Chinese steelmakers buy more iron ore from Australia and Brazil after running down their ore inventories.
The Baltic Dry index rose 14.6 per cent to 1,316 points, the highest level in 3½ months. The index is still well below last year’s all-time high of 11,793 points, but has recovered 98.5 per cent from its December 22-year low of 663 points…”
FT
“…The contraction in trade finance and a one-off inventory correction (the buildup of inventories in the US — think all the cars piled up near US ports — in q4 triggered a fall in production globally) have pushed Asia’s exports down more sharply than is warranted by the fall in underlying demand. As trade finance is restored and inventories are worked off, intra-Asian and global trade will pick up again….”
Mr. Brad Setser
“recovered 98.5 per cent from its December 22-year low of 663 points”
When it is still roughly 90% off from its high, why would one say it has recovered 98.5%? It hardly looks like the patient is getting out of bed.
I also thought that the author made excellent use of misleading,but true statistical statements. Few people would even stop to think that a 95% fall requires a 2000% gain to recover from. When they report that prices have recovered by 98% they are right, it went from down 95% to down 90% from the high and the cost of shipping has almost doubled recently.
yes, as one recent article shows, all it takes for this deception is showing a two months chart instead of a one year (or longer) version …
even dead cats bounce.
“Baltic Dry sees biggest one-day rise in 25 years”
Kunstler chuckles, as the era of the 3,000 mile salad comes to a close.
Kunstler chuckles, as the era of the 3,000 mile salad comes to a close.
And we’ll all be better for it in the long run.
Support your local grower. Support your local farmer’s market. Eat better food.
Yeah, lotsa lettuce is maturing and ready for harvest right now in this neck of the woods.
BTW, has anyone tried any of the peaches that are coming in from Chile right now? They’re surprisingly good, and surprisingly cheap. Their blueberries don’t taste like ours, however.
Peaches ripen after picking. Blueberries don’t.
Grow Here. Grow NOW. Eat Better!
I just had to throw that out there
Ummm… Isn’t it still 90% cheaper to make a 3,000 mile salad than it was at last year’s peak? And said salad had not disappeared at peak shipping costs, from what I could tell…
OECD Composite Leading Indicators fall to lowest levels since 1970s
OECD composite leading indicators (CLIs) for December 2008 continue to point to a weakening outlook for all the major seven economies. The CLIs in most OECD countries have fallen to levels that were last seen during the oil shocks of the 1970s. The outlook has significantly deteriorated in the major non-OECD member economies who are now also facing strong slowdowns.
The CLI for the OECD area decreased by 1.1 point in December 2008 and was 8.2 points lower than in December 2007. The CLI for the United States fell by 1.4 point in December and was 9.5 points lower than a year ago. The Euro area’s CLI decreased by 0.9 point in December and stood 8.2 points lower than a year ago. In December, the CLI for Japan decreased by 1.4 point, and was 7.3 points lower than a year ago.
The CLI for the United Kingdom fell by 0.4 point in December 2008 and was 6.8 points lower than a year ago. The CLI for Canada decreased by 1.1 point in December and was 7.2 points lower than a year ago. For France, the CLI decreased by 0.5 point in December and was 5.9 points lower than a year ago. The CLI for Germany fell by 1.6 point in December and was 11.8 points lower than a year ago. For Italy, the CLI fell by 0.4 point in December and stood 5.6 points lower than a year ago.
The CLI for China decreased 2.4 points in December 2008 and was 14.0 points lower than a year ago. The CLI for India fell by 0.5 point in December 2008 and was 7.5 points lower than in December 2007. The CLI for Russia decreased by 3.8 points in December and was 17.7 points lower than a year ago. In December 2008 the CLI for Brazil decreased by 1.8 point and was 5.4 points lower than a year ago.”
Caution 4 pg pdf with some fun graphs
http://www.oecd.org/dataoecd/40/27/42123113.pdf
thanks Hoz.
The outlook on Brazil appears to be the least worst. China really is taking the biggest hit according to those charts. I wonder though, based on the previous recovery baseline scenarios, which country is going to to lead out of the trough?
So apparently if you do not keep a house for 3 years then you must pay the $15K tax credit back… I can see this as another “got ya” if people buy a house and then lose their job and have to move within 3 years.
I knew there had to be more to it than just a simple no strings credit.
You over estimate the intelligence of our law makers and the power of the real estate lobbyists.
So, I get $15k today and in three years, the next guy who wants to buy the place won’t have this $15k when he goes to buy.
So if I bought a $150k house, I get 10% relief from the govt, so the home really costs $135k. In three years, the next guy gets 0%. and wants to pay $140k.
1. Do I get to take a 15k loss on my taxes three years from now?
2. Will this screw up the real estate statistics? A bump in prices that will disappear in 2010.
So long as prices are kept unaffordable, that is all that matters.
Who is at fault if a buyer doesn’t accurately calculate the costs of supporting the house’s purchase and upkeep for the 3 years following?
Who is at fault if this buyer lacks the financial strength to weather any storm that might occur, including a drop in that home’s value, or a job layoff, or ill health.. but still makes the purchase?
There is varied opinion as to who was to blame for past defaults. Here we have an opportunity to assign fault prior to the fact.
Shall we blame govt? Bank executives? The Fed? A crooked mortgage broker? The RE agent?
…possibly the buyer?
I agree a wise buyer would save the $15K of tax credit until 3 years had passed. But I disagree with the premise that a buyer can foresee all possible future events. He should be able to eat the transaction costs and the moving costs and go get a new job. Having to pay $15K in taxes is just adding insult to injury to what was already a tough time for an individual who lost their job and had to move to find a new one. While the buyer is ultimately responsible, I suspect that few will even consider that they may end up “owing” that tax.
..While the buyer is ultimately responsible..
10-4. We copy that. Over and out.
There is a statute of limitations on when you can refile taxes for previous years. IIRC, its 3 years. So maybe wait 2.5 years or so…
IIRC our Treasury Secretary just refiled back to 2001 with no penalty on taxes he didn’t pay.
I should have been more clear, I was referring to getting a refund. There is a 3 year limit to “refile” for a refund.
Don’t forget that the average buyer is not given the truth. If before every loan a buyer had to take a 1 day class developed by Ben, how many would subsequently have purchased houses in 2006.
Now bankers on the other hand have daily exposure to all of the facts that they try to hide from the public. Yet they continued to make crappy loans and tried to off load them on conservative investors via a bribed rating agency. They bribed the gov to give them ways to hide crappy assetts from their investors.
They’ll never enforce it.
The way things are going there will be a whole new set of looming “catastrophes” in three years.
Mind you, I’m not arguing for this or support it, but the truth is the gov’t and the populace will very likely have other priorities by then. What they’ll be - only time will tell.
Sounds like standard procedure for IRS tax credits for investment incentive. Usually prorated recovery.
No, the law is such that they won’t recover at all as long as you stay for 3 years.
What I am wondering is if the “Tax Credit” will carry over..In other words, If you use $7,000. of the credit in the first year can you carry the remaining $8,000. over to the following year and so on…
hmmm … does this mean that the administration expects to balloon homeprices with at least $15K within the next three years? People are used to getting a free lunch when it comes to home purchases …
Looks like Au & Ag are hanging in there very well.
I smell a new all time high in euro and most other currencies, probably today - despite all the deflation talk.
Uh, if deflation reigns then it makes sense for currencies to gain in value.
I don’t see ANY signs of deflation in Old Europe and most of the world; some disinflation certainly but nearly everything is still rising: wages, social security payouts, consumer prices for goods and services, etc. Petrol prices at the pump is one of the few exceptions to the rule. This situation matches what the gold market is telling me.
Up to now US and UK/Ireland with their crashing housing markets are traveling a very different path.
So, do you think the housing markets across Old Europe will not crack?
The USA is a proven world leader in many things, both good and bad, from pop culture fads to economic decline and recovery. Deflation will be one of them, imo.
Now is the time to sell.
homeprices in Old Europe are clearly unsustainable in the long run relative to incomes etc. But it seems the market is going to solve this disconnect with massive inflation (= bailing out all homeowners) instead of lowering prices like in US/UK.
With mortgage rates at all time lows, and lending still as crazy as ever (close to zero risk for home buyers) I don’t see any chance of a quick correction in prices over here. Maybe we will get a housing crash at a later time, when rates finally get back into normal territory. But that could take years, with the pace that EU policy is usually moving.
Someone did a study substituting Case-Shiller data for owner’s equivalent rent in the CPI, CS-CPI. The result indicates negative 5 pct inflation — deflation.
BINGO
On the way up CPI which uses rent equivalents hid inflation. Now it is hiding deflation.
if they had used Case-Shiller like data in my country for calculating the CPI, the CPI would have been over 6% or so for the last 20 years, instead of just 1-3%
They use rents here as well, which are set by the government, heavily subsidized and never rise more than last years inflation number (there is a small and much more expensive free rental market, but of course this is not used in the CPI).
Both the Dutch statistics office and Eurostat have suggested switching to equivalent rent, based on actual home prices. But they still have not made the switch, indicating that the housing market is still in a topping process. I’m sure the switch will occur as soon as it enables them to lower the CPI.
Few people consider the fact that the gold supply is “inflated” by naked shorts. If people are really de-leveraging then we should see “deflation” in terms of gold which means an increase in the gold price.
Gold does well in both deflation and inflation. The only time gold is a bad-buy is if there is projected medium term political and economic stability.
sure, problem is that the gold market is relatively small and easily manipulated. But I still think it is an excellent indicator for what is actually happening in the market, now that all currencies have joined in the race to the bottom.
I agree it does well in inflation and deflation, but there always is the risk that financial authorities will outlaw gold (again). When official trading at Comex, LME etc. is stopped (or only accessible to the big players), even gold bars might lose a lot of their value.
If they stop official trading it will likely be because demand among “private individuals” is so high that the major players would default on their naked shorts. Your theory assumes that a sizable portion of Gold’s value comes from the Comex etc. I would expect that the desperate move to shutdown Comex would make the gold “in circulation” that much more valuable because it is now *much harder* to get ahold of.
FWIW - I’m not sure about that. That may happen if the crap really hits the fan - i.e. hyperinflation, but otherwise probably not. I heard for instance that after FDR’s 1933 order some people were literally throwing their gold coins in the trash! Not sure if it’s true, but it was from a reputable source.
It really depends on how big the black market becomes, which in turn depends on how viable the white market is.
packman, I think you have a good point. The value of gold is entirely dependent upon the market (white+black) for that gold. If the white market is shutdown and there is no black market then you will have a hard time selling it. I don’t think most owners of gold will be “fooled again” by an attempt to ban it.
I think my point was that they will not just “stop trading” of gold unless demand for physical exposes their short positions. Such a failing would be a huge signal to both buyers and sellers that there isn’t as much gold as they thought.
Besides, there is always a “white” or “black” market somewhere in the world that will give you a good value for you gold. The fact that government makes it difficult for you to realize the value of your gold, does not mean that the gold has lost “real” value.
I think it will matter a lot if gold still trades on some official exchange; I wouldn’t be surprised if Comex and LME are shut down at some point, so that the banksters can continue printing money without an escape path for normal citizens.
But I guess the Arabs and China are eyeing the situation, as long as gold trades somewhere there shouldn’t be a real problem.
By “white market” and “black market” I wasn’t referring to gold, I was referring to the general economy. If the general economy (white market) is in shambles, then the black market economy will thrive. Much of the black market currency exchange will be gold and silver - illegal or not.
Gold “does well in a deflation” against other commodities, not the deflating currency. Think about it.
There is always a haven in hyperinflation, lots of them, they might be less portable is all. I dare say that when ultra portability is the priority, most of us are already at the destination.
Gold is not the only market hanging from a sky hook. It is as if we are about to be visited. Maybe it is just my imagination.
If the white market is shutdown and there is no black market then you will have a hard time selling it.
History shows that shutting down black markets is virtually impossible, no matter how authoritarian the rule. Black markets are like the common cold — they thrive on systemic instability or weakness.
http://www.larouchepub.com/other/2009/3605stop_dope_world.html
The escalating role of drug money in shoring up insolvent banks. These silk-suited drug kingpins will never see their day in court.
Which begs the question, why not legalize and tax the stuff. Throw anyone who commits a crime on it in jail for 2-3x as long as normal and use tax money from drug sales to pay for it. Creat jobs, get irresponsible drug users off the street, and take money away from criminals. I imagine Juarez would be a completely different town without drug money. The Mexican gov has been loosing the battle because drug kingpins have more disposable money.
+1 Pineapple Express
Job losses larger than expected. Market rallies on anticipation of more cash from the government.
I think the market rallies on the TARP2 plan to be released monday. If ‘ buy on the rumor and sell on the news ” holds up I expect a sell off next week?
http://www.larouchepub.com/other/2009/3604winners_biggest_losers.html
International bankster takeovers are blowing up in their faces.
Sounds like Team Barry will be backing off the ‘bad bank’ plan, and continue down the same path.
Feb. 6 (Bloomberg) — U.S. Treasury Secretary Timothy Geithner’s strategy to aid the nation’s banks will likely emphasize guarantees of toxic assets over proposals to create a so-called aggregator bank that would remove them from balance sheets, according to people familiar with the plan.
The government guarantees, which might be modeled on those already given to Citigroup Inc. and Bank of America Corp., may be coupled with the purchase of preferred shares in the banks that would be later convertible into common stock, some of the people said. The aggregator bank or ‘bad bank,’ has lost favor, in part because the potential costs involved, they added.
“Our agenda is to begin to shape the architecture of a financial recovery plan that’ll help get credit flowing again,” Geithner said before a meeting yesterday with Federal Reserve Chairman Ben S. Bernanke and other members of the President’s Working Group on Financial Markets. Geithner will announce the plan on Feb. 9.
The PPT has been bandying about one version or another of the “bad bank bailout” plan since HP proposed the superfund SIV. Correct me if I am off on this, but I believe that idea was abandoned in late 2007. Perhaps if they keep talking for long enough with no follow up action, the bad banks’ bad assets will melt into the ground like the Wicked Witch of the West in Wizard of Oz. If the bad (Wall Street) banks’ assets are equal to approximately $0, then I see no harm done if Uncle Sam takes possession (at market value, of course).
If there was an idea that is worse than the bad bank, it is this “ring fence”. In the bad bank, we buy assets at much more than market price. If a miracle happens, there is some upside potential to tax payers. In the “ring fence”, all the upside is with the bank, but the down-side is on the taxpayer.
It is time to attack this as a too-much-debt issue instead of a bad-debt issue. We need to pay down debts of consumers, NOT just clean up the mess after default/bankruptcy.
Darrell,
I’ll agree. I’d like to see that happen by whatever means available. If we don’t address that here, and now, we’ll have scores of aging boomers w/ zero savings and all the fallout that comes with it in no time.
As Layoffs Surge, Women May Pass Men in Job Force…
New York Times.
With the recession on the brink of becoming the longest in the postwar era, a milestone may be at hand: Women are poised to surpass men on the nation’s payrolls, taking the majority for the first time in American history.
How will workplace culture be affected as women surpass men on the nation’s payrolls?The reason has less to do with gender equality than with where the ax is falling.
The proportion of women who are working has changed very little since the recession started. But a full 82 percent of the job losses have befallen men, who are heavily represented in distressed industries like manufacturing and construction. Women tend to be employed in areas like education and health care, which are less sensitive to economic ups and downs, and in jobs that allow more time for child care and other domestic work.
Funny you should post that…for the first mile of the bus ride to work this morning the bus driver and I were the only dudes on the bus with about a dozen women. All winter the ladies have had us outnumbered.
I’d venture to guess the women folk have fewer qualms about leaving the car home to help save money.
“on the bus with about a dozen women”
I had dreams like that all through high school…… sigh…
Trust me, a CTA bus in February is nothing to dream about.
Laugh.
I was thinkin’ the same thing.
laughing boy was on an entirely diff bus than CTA.
Nothing at all like the cta.
Say, Et, do these women on your bus blink? I’m sure they sniffle a lot, because that’s the rule, but do they BLINK ever?
I ain’t never seen ‘em blink, Oly. Mostly they look glum and read their papers or glare at people when they step on their toes.
Now the El, on the other hand, you can almost find cute and/or interesting people to look at on the El train, no matter what your persuasion. But it’s still nothing to dream about.
‘I’d venture to guess the women folk have fewer qualms about leaving the car home to help save money.
Well, maybe women aren’t as attached to driving around displaying their vehicles, as perhaps they are less likely to be using their great big 600 horsepower trucks as a metaphor for their…*you know *.
(I once read about that sort of thing in a book about automobiles and the American male psyche, so it must be true.)
But if that’s the case, then why do I see so many little midget-sized soccer moms driving around in enormous Escalades and Hummers? What’re THOSE a metaphor for?
Do I want to know?
…less likely to be using their great big 600 horsepower trucks as a metaphor for their…*you know *.
I keep swearing some day I’m going to print up a bunch of bumper stickers for mischievous, “black-ops” application - First among them:
BIG TRUCK
LITTLE WIENIE
“What’re THOSE a metaphor for?”
Yesterday’s real estate sales?
As usual economists were caught off guard by the numbers. The good news is that 92.4% are working.
Employers slash 598K jobs in Jan., most since `74
Employers slash 598,000 jobs in Jan., most since `74; unemployment rate bolts to 7.6 percent
WASHINGTON (AP) — Recession-battered employers eliminated 598,000 jobs in January, the most since the end of 1974, and catapulted the unemployment rate to 7.6 percent. The grim figures were further proof that the nation’s job climate is deteriorating at an alarming clip with no end in sight.
The latest net total of job losses was far worse than the 524,000 that economists expected. Job reductions in November and December also were deeper than previously reported.
The final days of the Cheney-Shrub “Shadow Deception”… are slowly…coming into focus:
“…Job reductions in November and December also were deeper than previously reported…Employers slash 598K jobs in Jan., most since `74″
Hey Opie, better tell Andy to give Barney the double barrel shotgun…one bullet ain’t going to cut this time.
The good news is that 92.4% are working.
(That & Paul Volcker has just been spotted riding into town) 
No - probably only about 70% are working. 22% or so are just out of work and don’t care and/or are living through other means.
And 60% of the working 70% are working/drawing paychecks from government.
(The latest net total of job losses was far worse than the 524,000 that economists expected. Job reductions in November and December also were deeper than previously reported.)
Expect more downward revisions as the unemployment tax records come in. Remember, the current survey data includes a model estimate of jobs in new businesses which (because they are new) are not captured by the survey. My guess is there aren’t any.
Also, according to the household survey, which includes the self-employed, employment fell 1.1 million, or nearly twice as much. That’s small businesses closing, and “freelancers” and “independent contractors” losing their non-jobs.
Anyone see the article yesterday about IBM offerring about to be laid off workers a chance to relocate to a 3rd world office, with the catch that they will be subject to local “terms and conditions”?
Anyone else notice LIBOR going through the floor the last couple of weeks? They’re trying desperately to re-inflate that bubble. It may actually work some, for a little while. I believe most ARMs are tied to LIBOR still right?
yes, and it’s working.
EU Libor was at 1.7% beginning of this week, rates for Dutch ARMS are usually LIBOR + 0.8% so you can now get an ARM at 2.5% or even lower in Netherlands. Spanish rates are also tied to LIBOR. EU mortgage rates (outside UK/Ireland, possibly) are at all time lows. Maybe not a coincidence as a HUGE chunk of Dutch ARM and I/O loans are resetting this year.
This will certainly encourage all homeowners to hang in a little longer with their outrageous asking prices. And in Netherlands I wouldn’t be surprised to see new alltime highs in median homeprice over the next months, as our bubble still refuses to pop
For sure ‘affordability’ (monthly cost) is going to be better than it has been for years.
You saw the NAR “affordability set a new record high” thing the other day right? Sickening.
I don’t follow the US that much, but they shout the same nonsense over here in Europe (while at the same time demanding more help for homeowners). Clearly financial authorities are hoping they can inflate the bubble for another round.
As are a lot of derivatives.
Anyone else notice LIBOR going through the floor the last couple of weeks? They’re trying desperately to re-inflate that bubble. It may actually work some, for a little while. I believe most ARMs are tied to LIBOR still right?
I check it every month. The ARM for my multifamily is tied to the LIBOR. If the loan reset today, my interest rate would drop over 1 percent… sometimes it’s better to be lucky than to be smart.
The only way I’ll refi now is if congress passes the 4-percent 30yr fixed mortgages. My cost basis is 10.5 x gross annual rents or 125 x gross monthly rent in a great location. Lower rates just improves my yield… of course, selling could be problematic when rates snap back to historic norms again and kill yields, but I’m in this property for the cash flow…
BTW, in my area (southeastern Massachusetts), I’m seeing properties at prices that allow for 110 x gross montly rents. These properties are not in prime condition with lots of deferred maintenance (aka rehab) and the locations often leave much to be desired, but the opportunities for multis are there. My wife and I are looking at SFH in some of the nicer communities and I noticed big price drops in the last two weeks, all on REO’s/short sales. The giveaway is usually at the bottom of the listing “Requires third party approval”. They will set the comps lower for everyone… unless I lose my job in Boston, I see us purchasing an SFH in the fall of 2010 or the spring of 2011.
A buddy of mine suggested allowing FBs to refinance into 40 and 50 year mortgages with low percentage rates would be a good solution to solve the housing crisis and keep people in their (bank’s) homes.
So I can see how this would help buoy house prices :(, encourage people to pay their mortgages rather than just walk away, and avoid the need for the government to just give people money.
I know this has to break down somewhere, but I can’t get my small brain around it.
as soon as rates starting rising the problem rears its head again, because going from 50 to 100 year mortgages is not going to help a lot in the monthly payments. Japan and Netherlands already tried generational mortgages; bad, bad idea.
And of course, when people keep struggling financially to get into a home (paying the maximum they can), the homes will lose value as soon as rates are going up, requiring more future gov. assistance …
all these solutions only delay the reckoning; of course the politicians hope that inflation will bail them out, but in US and UK that doesn’t seem to work up to now.
…refinance into 40 and 50 year mortgages…
Following that line of logic, why not 100 year mortgages?
If your really going for it, how about 200 years?
The answer is diminishing returns from the point of view
of the mortgage payer.
To convince yourself, locate one of the many amortization
calculators on the web and run 15,30,40,50,100 year
payback schedules for a “X” dollar mortgage.
Yeah, no matter how they slice it - the FBs would be doing nothing to improve their overall lot in life.
“A buddy of mine suggested allowing FBs to refinance into 40 and 50 year mortgages”
Remember,Japan went all the way to a 100 year mortgage in the effort to keep the ball in play. It was called a generational mortgage. Everyone knows how well that worked out!
I was a little off, they called it a three-generation loan…
Three Generation Loans in Japan:
Take It From Japan: Bubbles Hurt - New York Times 2005
A similar pattern is found today in the United States, where the methods include interest-only mortgages, which allow homebuyers to repay no principal for a few years. Japan had its own versions of these loans, including the so-called three-generation loan, a 90- or even 100-year mortgage that permitted buyers to spread payments out over their lifetimes and those of their children and grandchildren.
P.S.:
another version of this is where youngsters who are eager to get on the housing ladder but have no money buy an expensive home with the parent home as collateral (most parents have some equity left in their home over here, as a result of 20 years of stellar pricegrowth - maybe that is different from the US situation).
Of course they use I/O loans, paying down the principal is not an option. This has been pretty popular in the Netherlands lately. The banks like it because if things go wrong they have two homes (and 3-4 incomes) as collateral instead of one. But I guess they have not taken the risk of serious price corrections into account.
50 years? Most FB’s will be dead before they can pay off the loan.
Ahead of the Bell: Analysts say banks need $800BFebruary 6, 2009 9:15 AM ET
All Associated Press newsNEW YORK (AP) - Banks worldwide need an additional $800 billion in capital to help the sector emerge from the ongoing credit crisis and bank share prices are still overvalued, Credit Suisse analysts said Friday in a research note.
The analysts based their projection of capital needs on estimates for total losses in the housing market and said banks need to return leverage levels to the lows of the past 10 years.
They estimate that write-offs tied to housing will equal about 10 percent of gross domestic product for countries hit hardest by housing market fallout, such as the United States and United Kingdom. A 2 percent write-off is assumed for developed countries that did not see a housing surge earlier in the decade that collapsed in the past two years.
What are the odds of “owner financing, no qualifying” & “Lease to own” increasing in popularity…over the next 3-4 years?
Lease to own…and YOU get stuck with all the repair bills…
sounds like a WINNER, sell the house 4-5 times to different “construction” types who will fix up the place in exchange for rent, and then manage to lose their jobs or worse get the GF preggo with triplets just as the water heater busts and floods the house warping the floors.
Yes Its a great Idea.
I think you’ll see a lot of it with all those flippers buying multiple properties. Some won’t keep ALL their properties as rentals. The audience for such things will be huge, IMHO.
Peter Schiff: Stimulus Bill Will Lead to “Unmitigated Disaster”
GWB left a giant steaming, stinking pile on the rug and now Barry is going step right in it!
History doesn`t repeat but it rhymes.
Yep! America is full of Forest Gumps: “stupid is as stupid does”
I wrote in Ron Paul for POTUS.
Ha ha - yep. Though I know he’ll leave his own steaming piles before all is done. It’s a lot easier to leave them when the room already stinks.
The difference between GW’s steaming pile and Obamas, is that GW’s was done in order to fleece the country of it’s wealth. BO’s load will fall when he gets a full understanding about how bad the situation is, ie he’ll loose control of his bowels.
Report: IBM offering to relocate laid off workers to India, China, Brazil, Nigeria
InformationWeek, citing an internal document, reports that IBM is helping recently laid off workers find positions with the company overseas. From the document:
“IBM has established Project Match to help you locate potential job opportunities in growth markets where your skills are in demand. Should you accept a position in one of these countries, IBM offers financial assistance to offset moving costs, provides immigration support, such as visa assistance, and other support to help ease the transition of an international move.”
The document goes on to say the program is for Canadian and U.S. workers “willing to work on local terms and conditions.” InformationWeek says that “indicates that workers will be paid according to prevailing norms in the countries to which they relocate. In many cases, that could be substantially less than what they earned in North America.”
Other countries in the program include Mexico, the Czech Republic, Russia, South Africa, Nigeria, and the United Arab Emirates.
——————–
This is the MOST outrageous things I have ever heard. IBM is not only outsourcing jobs; now, it wants to take US workers to 3rd world countries like Nigeria and paid them a fraction of what they would earn in the States.
if the US continues on the current path, maybe people in a few years will be extremely happy to get assistance in moving elsewhere. Especially those who have some savings might be better off moving now, before their savings become worthless.
The world is a finite globe, just where would you move that would be an improvement?
I would go to countries with upside potential (e.g. some countries in Asia, maybe some in South America) or rich in commodities like food, water, space etc. (like New Zealand). Country/region should be relatively stable and not too densily populated (big risk in times of crisis).
trouble is, in most of these countries it is very difficult to get in (except, until recently, when you where a home construction worker …). If I were offered a nice job in a country like New Zealand I wouldn’t hesitate.
Those countries aren’t listed. Didja notice?
Those nice countries noticeably absent from the list..
but ya got your wonderful Nigera, Russia, you name it and as long as it aint ‘pretty’ IBM is offering it to you.
And Saudia Arabia..sheesh.
… rich in commodities like food, water, space etc … Country/region should be relatively stable and not too densily populated (big risk in times of crisis).
Don’t your descriptions all apply to the US and Canada, or am I missing something?
If the US really lands itself in the sh!tter, I imagine the viable alternate options will few and far between.
Japan, in one of the smaller cities, such as Sapporo, Sendai, Hiroshima, or Nagano.
Cheap rail travel anywhere in the country.
Delicious food.
Built-in demand for English teachers due to Ministry of Education requirements for university.
Outstanding hiking opportunities
Hot springs
Extremely friendly, honest people, in general
… but still very expensive homes despite 15 years of price declines (even more so after the recent jump in the yen), and an aging population (same problem as Europe), AFAIK. But maybe the small cities are different?
See ya there! If I can pull it off that is.
It depends on the things that are important to you. If it is money, then no place beats the US. I do not think IBM’s offer is an insult. You don’t have to take the job.
You don’t have to take the job.
You’re absolutely right, Hoz. You don’t have to take the job… and you don’t have to use their software or services. There are plenty of database, BI, middleware and OS choices that aren’t IBM. Plenty of consulting firms other than IBM. In aggregate, individual decisions like this will snowball…
There is a thing called karma.
If there’s a need to send unemployed workers to the far corners of the planet - we could just do what they did in the past - have a draft.
snark off/
I can see the emails now:
Dear Sir,
I am a former IBM employee that relocated to Nigeria and recently laid off. I require your assistance in moving my extrememly large severance package out of the country and back to my native homeland of the United States of America. Please respond with all speed your name, phone and bank account to help with this most pressing matter.
Yours in Faith,
Former IBM Worker
Hahahahaahaha! *makes snorty sounds of mirth *
My favorite part was your use of ‘extrememly’. It was just exactly and perfectly the right touch.
That made me LOL, Skip. Thanks.
Right Brett ,lets have Americans apply for jobs in other Countries to solve the problem of lack of jobs locally . Maybe I can get 2 bucks a hour
for going to a Country where I don’t even know the language . What a joke . When are the power people going to address the true problem that exists when a Country gives up their manufacturing base and they outsource and draw from the World labor force without any regulations .
Of course that worker will spend the money they earn in the Country that they locate in ,that will be real good for America . Why not just have local jobs in the USA ? This is getting crazy .
As I said, these companies and CEOs dont care at all!!!
In a few years, only executives will reside in the US, manufacturing in SouthEast Asia, and engineerin in China & India.
What good jobs will be left in the US?
Coffee service technician?
Yard tools engineer?
Residential sanitation tools operator? (certified of course)
Mobile food service window operators Level III?
Used furniture recycler field technician?
Certified day laborer Level II? (as opposed to entry level day labor)
Small container grocery packer specialist?
Written forms verifier and expediter?
Plenty of jobs!
By doing this, IBM is admitting that there is no shortage of engineering/math/science employees in the United States. They are saying that the do *not* want to pay US based wages to these employees.
Yeah, can we drop this “Service-Based Economy” once and for all? That aside, can you imagine the cost of shipping employees, families and their household effects around the world at the drop of a hat?
Agreed. Silly. Enough.
what type of jobs will be left in the US?
And wait until little Snotleigh learns that she will be attending a 3rd world college.
aside, can you imagine the cost of shipping employees, families and their household effects around the world at the drop of a hat?
The workers that this system is targeting are engineers without family and houses to tie them down, i.e. US educated 20-somethings. The 40+ crowd have homes and families and aren’t likely to relocate, which is just as well, because they are most likely paid 2-3 x what the younger workers are paid, and with higher health-care costs. Lay them all off and salvage the ones with mobility who will likely accept the lower living standards for the sake of experience. One of the most evil “capitalist” ideas I’ve ever heard…
How are they supposed to pay off their student loans making the locally prevailing wage?
This is SO dissapointing; I grew up thinking that being smart and liking math/science was a great way to start when selecting a college degree.
I finished up my engineering degree in a great school (Go Horns!), and I’ve been working for just a year. Over this last year, I have learned how dissapointing and unstable the job market is for engineers in the high-tech industry.
Cyclical lay-offs, outsourcing, unstable environment…. why?
Sometimes, I regret going to an engineering school. In a few years the high-tech industry will only have executives in the US while the engineers are in 3rd world countries.
I choose a similar career but when I finished my degree (biochemistry) in the eighties there were no jobs at all. I think many people of my age, both in Europe and the US, had similar experience. But at least it teaches you to live within the means available, and to take control of your own work life instead of hoping for government or the economy to arrange everything for you.
I did the same Brett. Its sad to think that while I was studying every night, the business majors down the hall who partied all the time are same guys who now the run the investment banks getting TARP money.
I would not suggest math/science/engineering for anyone who does not really love it. And definitely plan for a second career. This outsourcing will continue for at least another 20 years until there is wage parity.
what is your career? still an engineer?
Yes, for now.
Plus, I have to mention the cost of education. I work with people now who will be paying off their student loans for 10-15 years.
..
Meanwhile, your flunky twentysomething friends who never shadowed the doorway of a college classroom got jobs as “Mortgage Brokers”.
They had big coke parties and hookers; you had ramen noodles and cram sessions. They had 5,000 sq ft homes and Escalades with 27″ rims; you lived in a dorm and drove a beat-up 1987 four door Taurus to school.
That is whats so broken about the era we just left behind. We rewarded idiots for doing nothing, shipped off our ability to manufacture to third world countries, and equilibrated the skilled / educated American worker and his lifestyle with that of a Mexican peasant.
On top of it all, I hear that the very banks and businesses who are partaking in the “bailout” want to import another 1-2 million “skilled workers” from India and China who will come on over and program/engineer stuff for a bowl of rice and a mat to sleep on….all while qualified Americans stand outside in the cold waiting in the unemployment line.
How did we, as a country, ever allow this to happen ?!?!
I graduated with a BS in Chemistry and run a Mass Spec department where I work here in FL. I make good money and I am lucky. I can also say, after having worked with MANY people from all over the planet, that American scientists and engineers are THE BEST BY FAR in the modern world.
I have worked with people from various Banana Republics in my area of research and 90% are idiots who lack the most fundamental skills. The Russians are an exception in many cases, however.
This country is pfuckt. We allowed our goverment and business leaders to “p!ss down our backs and tell us it was raining” these last ten years.
Our only hope is that the American people will eventually wake up to this stuff and take to the streets…….we need to claim our country and our economy back from the rest of the world and repeal NAFTA. We need to send everybody who has an H1-B visa packing on back to the mud huts they came here from…
This whole thing has become a nightmare; and the carnage we will soon see will surpass our wildest dreams.
Good luck, everyone.
..
Calm down! Not every person from other countries are working for a bowl of rice and working mattress. There are good, exceptional foreign people who contribute to our society.
You can’t lump everyone into the same category.
Don’t worry - eventually those relocations won’t be voluntary… or the differences between the nations in question won’t be worth mentioning.
The race to the bottom continues!
IBM has established Project Match to help you locate potential job opportunities in growth markets where your skills are in demand.
I am so bothered by this concept that I vow to never do business with IBM as long as they continue to source US jobs overseas. I will make sure that my company never uses IBM software or services again. No DB2, Websphere, AIX, or Cognos, ever. Additionally, I will go out of my way to work on projects that negatively impact IBM, like migrating DB2 to Oracle or MySQL wherever possible. They have probably made an enemy for life…
I’m not new to outsourcing, but this is a new low. The corporate elite in this country think this is a game of finance, where the bottom line is the first, last and only concern? Fine… be willing to accept the consequences when those you’ve insulted and burned revolt, taking their dollars with them.
If there’s one thing I’ve learned from Japan, it’s that there is absolutely a social contract between a corporation, it’s employees, and the government. What is good for the employee, is good for the company and the country. IBM has lost it’s way and I for one will make sure that they are punished for it…
Could you add a lot of other Corporations to the punishment list .
Really ,unless we are going to become a One-World-Order ,which I doubt is possible , than Jobs a Nation provides for their Citizens is a
survival issue in the final analysis . Its also a matter of where the money is spent . Every dollar spent in a Country creates more jobs .
I just don’t know why the Third World Countries don’t start producing for their own people and raise their standard of living ,so they can create a market . Look, to much money is being created for the Chosen and that would not be proper distribution of money, if your objective is a fair and balance economy that furthers the standard of living for the majority , while it rewards the Corporations also . What good does it do to stave your work force ,these are the very people that would buy products if they had decent wages and it would feed Big Business in the process .
I hear ya! This a new LOW
Let me tell you about IBM or EDS or SAP and their peers: There are sh!t. They will screw you and your project so bad you’ll be too busy scrambling to undo their damage to wonder how they stay in business.
Google it.
IBM is currently losing government contracts all over the country because they screwed up the systems they were supposed streamline.
EDS currently is in a $400 Million dispute with the Navy for screwing up that project.
SAP customer complaints are legendary and their system byzantine at best.
Yes, you can add Dell, MS, HP and Oracle to that list as well.
They will be asking for a hand out, no doubt. They are offering 0% 72mo. financing on ’select’ models. I guess they saw how well that worked for GM,Chrysler,Toyota, etc…
Feb. 6 (Bloomberg) — Ford Motor Co. may have to contribute $4 billion to its pension plan after a 2008 shortfall, a cash drain that risks dragging the second-largest U.S. automaker closer to a federal bailout.
The collapsing stock market left the fund with a $4.1 billion deficit for its projected obligations, after 2007’s $3 billion surplus, Ford said in its fourth-quarter financial results. That may force an infusion of money starting next year, according to the viability plan filed with Congress in December.
It’s real name is: TRAP I… or… 1st TRAP your choice.
I guess the banks are going to have to chew off their leg to get “free” from the snare of “easy money”
“…These are massive handouts to favored institutions to try to make up with taxpayer money the mistakes they made with investor money.”
“The loss estimate is conservative,” …is he refering to the GOP?
1st TRAP Shortchanged Taxpayers by $78 Billion:
http://www.bloomberg.com/apps/news?pid=20601103&sid=aTDor5YnbmQM&refer=us
CA furloughs start today. That should help the Feb, hours worked and average income stats. I bet none of those poeple own houses, so no worry of this making the housing problem there even worse.
You would think, but my co-worker is also a mortgage broker on the side. In some of the more “desirable” areas of the IE (meaning the only places any sane person would want to live) he’s seeing multiple offers and mini-bidding wars with most deals going for above asking price. Prices have hit that “sweet spot” where 10% down gets you below the 417k limit and they all came rushing out of the woodwork. Some are buying “all cash” as well. After all this waiting, now it’s tough to get a decent house for a decent price again. 450k cookie-cutters in Rancho Cucamonga is still 2004 prices, and that’s AFTER a 35% decline.
I was listening to a presentation by Bruce Norris that someone posted yesterday. He is a real estate investor, hard-money lender, commentator. He mentioned that investors dealing with the banks are basically getting the homes in the IE for the value of the lot. Homes in Victorville that that were $360,000 now going for $65,000 (damaged, but wiring/plumbing intact).
On one of the podcasts, he mentioned an IE home that recently had multiple bidders at $165,000; however, the review of the appraisal came back at $140,000.
http://www.thenorrisgroup.com
That is all true, but I was talking about the “desirable” areas of the IE, which boils down to Rancho Cucamonga and Chino Hills. 4/3 in Rancho still mid-400’s and 4/3 in Chino Hills still mid-500’s. Again, in the nicer areas of those towns. these are the only twoplaces I would consider living in the IE (award winning schools, voted Safest Cities in America, etc). Most of the rest of the IE is a wasteland of Mc-Fatties and lifted-truck red-neck types.
They need to be careful that people of California don’t miss them, or furloughs might become permanent. I am sure some sort of bleeding heart story will appear about some almost tragedy that occurred because the DMV was closed for one day.
I thought it was different there?
Canada shed a much worse than expected 129,000 jobs in January, sending unemployment up 0.6 percent to 7.2 percent, Statistics Canada said Friday.
The jobs loss was worse than the grimmest monthly showings of the downturns of the 1980s and 1990s, Statistics Canada said in a statement.
And the January drop in employment topped by far the 40,000 job losses analysts had forecast. They predicted unemployment would edge up to 6.8 percent from 6.6 percent in December.
That would be like loosing 1.2M jobs per month in the US.
Which is what was actually lost according to the household survey.
Feb. 6 (Bloomberg) — Industrial production in Germany, Europe’s largest economy, dropped the most in at least 18 years in December as demand for plant and machinery faltered.
Output fell a seasonally adjusted 4.6 percent from November, the biggest decline since records for a reunified Germany began in January 1991, the Economy Ministry in Berlin said today. It was the fourth straight monthly drop and almost twice the 2.5 percent retreat forecast by economists in a Bloomberg survey.
Companies are paring output and investment after the global financial crisis drove Germany into its worst recession since World War II. Volkswagen AG and Bayerische Motoren Werke AG cut working hours for 86,000 employees to reduce production after demand for cars imploded. The government expects the economy to contract 2.25 percent this year.
“We’ve experienced the sharpest contraction of industrial production in the fourth quarter since the 1960s and we can’t exclude that output will decline at the same speed in the first quarter,” said Lothar Hessler, an economist at HSBC Trinkaus & Burkhardt AG in Duesseldorf, Germany. “It’s bitter and the forecasts for a return to growth at the end of the year are increasingly standing on shaky ground.”
Yes but dry bulk shipping has increased?
I think that had more to do with the banks freezing all letters of credit; that problem seems to be gone now, so international trade is recovering a bit. But I think we need to see a 500% rise or so in the baltic index before anyone can conclude that the depression over …
LOCs the problem fer sure.
A 500% rise is not necessary, profit is necessary and there is now profit. But a 500% rise would be nice, all things come to those that wait.
BEIJING – Plunging exports. Factory closures. More than 20 million people thrown out of work. Official data showing that China’s economy is cooling but still growing strongly obscure what economists say is a sharp recent decline that has inflicted obvious pain.
What is happening matters far beyond China. Whether the third-largest economy is stalling or still growing could affect how quickly the world recovers. A stagnant China would mean less demand for industrial materials and consumer goods from the United States and others.
The difference lies in the way growth is measured. Beijing uses a method that compares growth in one quarter with a full year earlier and says its economy expanded by a healthy 6.8 percent in the final quarter of 2008.
But experts say that compared to the previous three months — the system used by most other major countries — China’s growth fell to as low as 1 percent or possibly zero.
“The recent weakness is much worse than the long-term trend,” said JP Morgan economist Frank F.X. Gong. Merrill Lynch economist Ting Lu said fourth-quarter growth from the previous three months was “close to zero
If china stops buying then what?????????
Kudlow on CNBC was having an orgasm about M2 going up 20% a year! (11:15 AM EST)
And that M2 has gone up 600B in 6 months.
I think it is a lot more.
Anyways, anybody still calling SP at 600?
Seems with inflation the new 600 SP is an SP at 950.
–
Shouldn’t the market rally on inflation expectations?
Wouldn’t it be correct for it to do so?
–
On a related note, even some here have mentioned buying Real Estate now.
yes
probably
no
thank you
On a related note, even some here have mentioned buying Real Estate now.
The 15k handout (if it passes) could very well be the thing that puts me into the buy category.
Inflation, deflation, disinflation….I don’t know whats gonna happen, but I figure either way (inflation/deflation) are possible. So it may be that the 15k handout offsets enough of the deflation risk that it makes sense to buy later this year.
But I’ll probably wait and see what else they can give me. Maybe they’ll throw in a new tractor or a 4% fixed loan to sweeten the deal.
No, it just makes you pay $15,000 more for a house that is STILL overpriced, IMHO.
The price of anything = it’s true market price + handouts from the government.
price of anything = it’s true market price + handouts from the government
Not quite. If the handout moves the demand curve for houses (b/c this is essentially providing buyers with increased income) the price change is going to depend on the elasticity of supply and demand. I think both are relatively elastic right now which indicates that the credit may have very little effect on prices.
Further if you consider the “sticky” nature of prices, what we potentially have right now is a situation where the equilibrium price has already lowered but the market price is taking time to adjust. If that’s true and if the difference between those two prices is >15,000 then the credit won’t affect prices at all. It serves as an aid for buyers to make a purchase closer to the current natural equilibrium.
If course, if as a buyer you could time it such that you buy at the bottom of the market (prices have fully adjusted, etc) but while the credit is still available, then you might just at an extra ~15k in your pocket.
“The 15k handout (if it passes) could very well be the thing that puts me into the buy category.”
Do the math blue! You’d need to buy a $150,000 house to get a $15K tax credit. What is the current rate of decline of housing in your area?
A 10% incentive is just enough to cover your self incarceration fees.
Ok, here’s some math. I bought a newly built house in October, 1998 for 71,000 in Conway, AR. I sold it a year ago (signed a contract in late Jan closed in early March) for 101,000. If I held out I might could have gotten 105.
Assuming 3% growth that house should have been worth about 93,326k when I sold it. Which means ~7.5% of the sale price was “bubble”.
Anecdotally, those numbers IMO fairly represent the market at large around here. Further, 15k would in many cases be just about right for many houses I’ve looked at but passed on b/c of price in the last few years.
Considering asking price, for 200-220k I could get a quite nice place. Say I can knock 15k off that in negotiation and then add on the 15k credit bringing the real price to 170-190, I’m looking at a mortgage in the 100-120k range. PITI for that runs maybe a grand or 1200.
If we have 30% price declines after such a purchase, then I’ve chosen poorly and left some on the table (assuming the 15k handout is still available). But inflation is also a possibility. By holding cash I risk losing purchasing power. I don’t have what I consider a good way to measure the probability of hyperinflation vs severe deflation but given the prices I’m looking at, a 7.5% kicker eats up most of the “deflating bubble” so that I’m really buying at close to “normal” prices.
That still leaves the risks of further, severe deflation and the risk of severe or hyperinflation.
Having a mortgage well under the purchase price of the house (due to a substantial down payment) helps some to mitigate severe deflationary possibilities (i.e. job loss) compared to having a mortgage at 90% of FMV. Even at reduced levels of employment I could continue to maintain that.
Then there is the possibility of severe inflation. As I said, I don’t have a good way to measure the probability of either event, but if I have to bet on one or the other (and we all have to) I consider hyperinflation of the currency to be more likely in the medium-longer term. I don’t think we’re there quite yet, but a year or two out it might not look so crazy. Inflationary destruction of currency is much more common historically than a severe contraction of the money supply, no?
I’m not there quite yet…but it’s getting close. If that 220k place I could get for, say, 170-180 and then throw in the 15k credit, yeah I would probably take that and be happy with it.
I think the $15000 might be an incentive for people in areas where the house prices are under $200,000.
For those of us in CA where the prices for an outdated ordinary looking 3 bed house is still over $500,000 in a not so good area and a $1,000,000+ in a good area - then will $15,000 make us want to jump into the housing market? Not me…….
blue, I see your point. It pretty much depends on the hunch that the crunch is over and the mad dash to spend all the extra monies is thumping on the front door.
hmm.. buy RE now.. as an investment? No way.
Other than that, if you’ve found what you like at a price you can afford and can safely ignore the various risks due to a declining economy? Sure.. why not. You ain’t getting any younger.
I’m not sure this means stocks are good.
I do agree it means bonds are bad.
Oh boy. Another bottom.
It’s like a Brazilian beach. Bottoms everywhere….
http://www.reuters.com/article/gc03/idUSTRE5140H420090205
That’s all they know to do, I just wonder who believes them?
Zandi has been calling a bottom for at least two years now.
The “50%” drops have only happened in the less desirable places and many are still over priced when compared to incomes. God-forbid if you actually want a middle-class home in a low-crime area with good schools. Prices in those place where I live are only off about 15% from their peak. That’s like going into Nordstroms and thinking you got a deal on nice shirt because it has been discounted 15% from its already over-priced price.
“The plans for the development, called One College Park, will include a 170-room hotel, 56 two-story duplexes and 14,000 square feet of retail space.”
http://www.gainesville.com/article/20090206/ARTICLES/902061013/1003/NEWS?Title=Hotel_and_residential_project_moves_ahead
This on the heels of local landlords deeming the Gainesville apartment market one of the worst in the nation. Vacancy rates are skyrocketing, yet huge new projects keep coming on line. Meanwhile the university is reducing enrollment by 10%. Why would any developer build anything new in this environment when you could just buy something that already exists for pennies on the dollar? There are literally rotting shells of failed developments abound.
For hoz, voz, Cat, Mrktmaven and any other trading pros: is this a day to consider taking profits off the table?? Thanks.
do me a favor.. if you’ve got any C, sell it.
Hey, Blano, I’m not one of the financial wizards on this board, but I remember some guy who traded in the futures market who used to say “You can never go wrong by taking a profit”. That has always stuck with me. It’s how I operate in the “stuff” business. When I get a reasonable offer, I take it and don’t look back, wondering if I could have gotten more and I’ve been berated by fellow dealers for not holding out for more. Screw that. Gimme the cash if it’s there to be gotten.
-cant go broke by taking a profit…
Use trailing stops, but my gut tells me this rally has a little more fuel left.
Agree
Not wise to fight the tape.
-never went broke taking a profit
Thanks all!!
Got my R-knee scoped 2 days ago. High as a kite ever since, roflol.
Question du jour….”Will this recession become a …depression?” Observing the scene from Europe, financial news publisher Bill Bonner says this:
“At the foundation of their faith in the Obama stimulus plan…or any of the others for that matter…is a simpleton’s insight: that if private citizens stop spending government should take up the slack. But if it were that easy, there would never be any downturns…because politicians are all too eager to spend money, all they need is an excuse.
“The typical recession is nothing more than the economy taking a little breather after a brisk walk. A depression, on the other hand, occurs after a long, uphill sprint – when the economy clutches its chest and falls down dead.”
The economy hasn’t died, but it’s gasping for breath. Steady inflation since WW2 was the poison causing our near fatal economic distress, and Congress believes that running up another trillion dollars of debt will be the medicine that’ll revive the patient.
Back in 2006 some commentary head lines were ringing alarm bells.
‘Systemic Banking Crisis!’ warned a writer. ‘Debt-driven Meltdown,’ howls another. Still others predict ‘Economic Armageddon,’ ‘Financial Apocalypse,’ and ‘Category 6 Fiscal Storm.’ Articles titled ‘Economic Pain’ and ‘Major Upheaval’ seemed very tame to me, but ‘Demographic Tsunami’ and ‘Economic Earthquake’ laid it right on the line. We’re in for it!”
Nearly three years have passed. The storm has hit and people are finally searching for the lifeboats. To bad, they are already full, and many folks are looking to D.C. to keep them from drowning. Good luck with that.
Wherever he is, Marx must be laughing his head off.
Since ethics in matters financial has now officially been dismissed as a virtue in this country, I think that most married couples who have a sound relationship should agree to a cheapie divorce. They agree who between them will be the “borrower” of stimulus-led loans. They use the Tears-R-Us index, preferably (perhaps necessarily) making the lower earner or the one with the worst credit score the borrower.
The borrower borrows all that one can borrow from the wheelbarrows of freshly printed money that is designed to stimulate, knowing that they plan to default on the debt. The partner, meanwhile, tends to his or her credit score, job, income and investments - presumably in other currencies.
At the end of the day, Stimulus Round, the borrower gets back part of what was stolen from him or her in the first place, by participating in the looting. Seems logical enough to me. Shack Up, Clean Up!
yes, in Netherlands one can do the same at the moment. Nobody checks this but I think it is an obvious way of gaming the system and I’m wondering how many people use this trick. If one of the two has high income (or savings) they could temporary rent part of the home from the other one at elevated rent, in order to secure an higher mortgage from the ‘expected income stream’?
In Netherlands if things go wrong, a government fund (ultimately the tax payer) will pay the full loss on the mortgage when the home is sold (I think a bit similar to ‘walking away’ in the US) and if necessary the former buyer can file for bankruptcy procedure which basically means living on minimum income for three years (which in such a case doesn’t mean anything of course).
Ok, I am looking to rent a townhouse that is for lease and for sale at the same time (strange because they are offering 1 year lease). I had a friend pull the Title info for me.
Appearently the current owner is a LLC (not sure who owns the LLC). The rent is listed at $2100 with a $3700 deposit plus first month rent. Anyone have advice on renting from a LLC? Here’s the history…looks like original owner got the refinancing ‘bug’ and lost the home on 12/31/2008 by Grant Deed to Joan and Robert. Don’t know why!?! Then Joan and Robert Grant Deed to the LLC, which has a mailing address of a local realestate office where one of the realtors there has the same last name as Joan and Robert. Don’t know what to make of it all. Is this a forclosure and why the LLC? With such a large deposit I fear getting it back from an LLC in small claims court if something bad happens.
I’m not in CA, but generally speaking the LLC is just used to shield one from legal action against them personally. So it’s safe to assume I think that it’s Joan and Robert’s LLC and you’d be dealing with them either way. IMHO that shouldn’t be a problem.
As far as the Grant Deed, I’m not sure of the significance of that, or whether it grants all rights to the property to J & R. You’ll have to look into that yourself and/or get an opinion. But it sounds like owner didn’t “lose” the home, but “sold” and deeded it to J & R.
You might want to try to see who currently has a mortgage on the property. If the mortgage is still in the prior owner’s name, it’s possible J & R bought the property subject to the existing mortgage and brought the prior owner’s mortgage current and left it on the property. If so, renting could still work, and what they did is completely legal, but IMHO it adds additional uncertainties to the equation.
Bottom line, you’re dealing with real estate investors who are trying to flip the property for a quick profit. Keep your eyes wide open if you choose to deal with them. Seems to me you could find a better situation AND a better rental rate. I don’t live in CA, still, $2100 a month for a townhouse is an insane amount to me.
Good luck.
It stinks.
The LLC was likely formed by Joan and Robert to protect their other assets and the property was initially purchased by Joan and Robert individually, then deeded to the LLC. If the LLC is sued, by you or others, J&R don’t have personal liability - thus the beauty of a single-asset LLC. If you had to sue the LLC, the only asset you could attach is the place you would be renting, probably so leveraged up there is no net worth to the LLC and thereby judgement proof.
That being said, I’m sure there are plenty of other landlords that are not LLCs, that have done the same thing, leveraged up and now judgement proof.
The lease document is probably standard, however, if you are really worried, negotiate a much smaller or no deposit - that way you have nothing to lose if the LLC doesn’t pay its mortgage. You could also request the landlord provide evidence to you that they are making their mortgage payments on time. You have the power to make whatever demands you want!
You already figured it out. The LLC is to protect the assets of the owner from any claims. Run away, very quickly. If you simply must talk to them, the first thing to ask is for Jaon and Robert to personally guarantee all debts and responsibilities of the LLC. Check out how the reaction.
‘Blogger: Cash for Gold tried to bribe me’.
http://tinyurl.com/brwvxf
A few months ago, Cockerham posted the tale of a man who claims he sent $180 worth of gold to Cash4Gold only to receive a lowball offer of $60. The item was read and linked to by so many Web users that it quickly climbed the rankings at search engines like Google. …Just a few days before the Super Bowl – and the airing of McMahon’s Super Bowl ad — Cockerham revealed that a Cash4Gold representative had sent him an e-mail offering him “a few thousand” dollars to take down his critical Web site.
Aladdinesane! ALAAAAAAADDDDDD! Where ARE you?
(this oughtta pry him out of his tree, huh, guys? I’m tricky today!)
“Mo Mod” Well here we go, mo money will create “Mo Mod” the turbo tax master will tell how this disaster they will implement will/won’t work next week!
A cornerstone of the economic recovery plan that President Barack Obama is expected to unveil Monday will be modifying problem mortgages, The Post has learned.
In a nod to Main Street over Wall Street, sources familiar with the plan say Treasury Secretary Tim Geithner plans to allocate almost half of the remaining $350 billion in funds from the Trouble Asset Relief Program to the so-called “Mo Mod,” or mortgage modification, platform.
“Mo Mod” is an algorithmic mortgage processing program that can rewrite up to 500,000 loans a month, and will be a major part of Treasury’s plan to help repair tattered bank balance sheets.
The 21-day “Mo Mod” program works by structuring a new mortgage that more accurately reflects a home’s worth so that a troubled borrower no longer owes more on their home than the property is worth.
The process then enables a lender to pool these new mortgages together into securities that reflect more accurately a home’s value, which makes them less risky for investors.
As outlined, this plan will be much broader in scope than the Federal Deposit Insurance Corp.’s plan with IndyMac, which was initiated by FDIC Chairman Sheila Bair and has only been able to rework about 5,000 mortgages since last summer.
But it will also bail out borrowers who helped trigger the housing crisis by taking out loans they were unable to pay back from the outset, something that has drawn criticism because it effectively rewards the bad behavior of rogue borrowers and lenders.
Volume on SPY down to a trickle.
Palmster, LMFAO!
Man pays “Rent Your Home for Superbowl” website $1,200 — wants his money back…
http://blogs.tampabay.com/breakingnews/2009/02/a-super-bowl-re.html
I am very horrified at the moment. Last night, a friend of ours called and heard about us looking to buy a house. He then gave us a curious piece of advice, which I shall pass along in a moment.
See, he’s a lawyer, and currently his firm is attempting to be the ones to put together a class-action suit against some developers who did something perfectly monstrous (not to mention idiotic and short-sighted.) His bare-bones description made me start thinking of one of my mother’s favorite phrases of late: “Tar. Feathers. Rail. Jail.”
I won’t go into it as this has yet to hit the news— and it will— and I don’t want to impact any court judgement with secondhand information put out on the internet. (I am leaving out the state involved for that reason.) I’ll just tell my friend’s piece of advice and leave you to imagine.
“Don’t buy a house where the grass doesn’t grow.”
Tar. Feathers. Rail. Jail. There.
I hope they aren’t in Texas, they will never win.
There are still people living in houses built on bombing ranges.
another love canal?
You are astute, sir. I can foresee a news article which starts exactly the way our friend did. “First the grass died…”
Our grass grew before my wife laid waste to it with her flower beds and new patios and garden.
I finally got my house on the market. I got a paid for mls listing that went up yesterday. It’s the lowest priced home in the neighborhood, except for one short sale for 20k less, but that house is smaller and has only 1 bath and they aren’t showing pics of the inside. I’m asking 199k with 5k incentives. The price ranges in my neighborhood, besides mine and one lower priced house, are 205k to 340k. Most houses sell for asking or 10k below asking within 90 days and most within 30-60 days.
I had one showing yesterday and have 3 showings scheduled for today. Is that a lot? I want a contract within 2 weeks.
What area ? Selling most in 30-60 days?
The new plan to ‘fix’ the mortgage crisis is called “Mo Mod” it is designed to modify/write down as many as 5000 mortgages per month. What’s his face at the treasury will unveil it next week.
This should be fun!
Once again I misspoke this program can write down as many as “500,000″ mortgages per month!
In a nod to Main Street over Wall Street, sources familiar with the plan say Treasury Secretary Tim Geithner plans to allocate almost half of the remaining $350 billion in funds from the Trouble Asset Relief Program to the so-called “Mo Mod,” or mortgage modification, platform.
“Mo Mod” is an algorithmic mortgage processing program that can rewrite up to 500,000 loans a month, and will be a major part of Treasury’s plan to help repair tattered bank balance sheets.
The 21-day “Mo Mod” program works by structuring a new mortgage that more accurately reflects a home’s worth so that a troubled borrower no longer owes more on their home than the property is worth.
So most of the $350 billion is going to be used to eat losses from reducing mortgages??
By my math, that will take care of only about 700,000 houses in California.
This insane plan leads right back to the question, what would stop current mortgage payers from simply stopping payments and then go for a rewrite of their mortgage?
“This insane plan leads right back to the question, what would stop current mortgage payers from simply stopping payments and then go for a rewrite of their mortgage?”
Not only that, but what bank in their right mind is going to want to underwrite new mortgages if cram downs are happening left, right & center? The Gov’t can try to keep FB’s in “their” homes, but all it will do is make it that much harder for anyone other than Bill Gates to qualify for mortgage. RE is a dead asset class for the next decade, at least.
“RE is a dead asset class for the next decade, at least”.
Agreed!
“In a nod to Main Street over Wall Street…”
Did they clear this with the Boyz first?
“In a nod to Main Street over Wall Street…”
How is this a nod to mainstreet. Again loans will be modified to keep people from defaulting on an asset that will continue to fall in value. They are going to maximize what the home owner can pay.
If/when the property goes up in value who gets that upside? I sure hope it isn’t the so-called “homeowner”.
If so, I’ll buy a $1mm+ house and then stop making payments. I’ll get a very nice house with a reduced mortgage and when values increase, the upside to boot.
I was looking thru Craigslist for AZ and found this gem.
According to the finance link you could have this beauty for $5,428 a month if you put down $176,000 .
Says this house is new and just finished.
And I thought some areas of Bullhead City and Havasu were overpriced.
http://flagstaff.craigslist.org/reo/1014323861.html
Anyone watching the buzz over the proposed sale of $67 Billion worth of treasuries next week.
The bond market appears to be all a flutter over whether anyone is willing to step up and put their money down.
Could be a non-event or a very very very bad day for the US.
There will be buyers, it is a non event. The cover will not be good, but bond firms do not try to time entries.
The GOP now opposes pay restrictions on bailed out banks.
LOL
What a bankrupt party. Good riddance!
Yet they tried to impose lower wages on the UAW as a condition of any help going to Detroit.
Their class warfare on Main Street should be obvious even to their retarded apologists.
(sorry if double post. )
‘Blogger: Cash for Gold tried to bribe me’.
http://tinyurl.com/brwvxf
A few months ago, Cockerham posted the tale of a man who claims he sent $180 worth of gold to Cash4Gold only to receive a lowball offer of $60. The item was read and linked to by so many Web users that it quickly climbed the rankings at search engines like Google. …Just a few days before the Super Bowl – and the airing of McMahon’s Super Bowl ad — Cockerham revealed that a Cash4Gold representative had sent him an e-mail offering him “a few thousand” dollars to take down his critical Web site.
THIS oughtta lure Alad out! Aladdinsane…*assumes an insinuating and sly whisper * Alaaaaad….it’s gollllllddddd….
Gotta say, I miss him too… I am safe saying that, right, what with FPSS gone for a bit?
SEC… ” Hair on fire”
I get this image of the SEC enforcers running around like Ricky Bobby in Talladega Nights…
WASHINGTON (Reuters) - The new head of the Securities and Exchange Commission took steps on Friday to reinvigorate the agency’s policing of Wall Street, two days after a congressional hearing chastised SEC investigators for failing to uncover Bernard Madoff’s alleged $50 billion fraud.
“I like to tell the staff we are going to act like our hair is on fire,” SEC Chairman Mary Schapiro told reporters after an appearance at a conference.
Schapiro halted a Bush administration program that made it harder for SEC lawyers to negotiate settlements with companies and vowed to cut red tape for investigators probing possible wrongdoing.
The now-abandoned pilot program requiring SEC investigators to seek commission approval for settlements “discouraged staff from arguing for a penalty,” Schapiro told a Practicing Law Institute conference in Washington.
Schapiro, who promised Congress during her own confirmation hearing that she would take the handcuffs off the SEC’s enforcement division, took action on Friday to speed up the process for approving formal orders.
Schapiro said she was looking for ways to improve how the agency handles tips and whistleblower complaints.
America is all about speed. Hot, nasty, badass speed. -Eleanor Roosevelt, 1936
lol!!
Knifecatcher wall hooks… the perfect housewarming gift for today’s home buyer, no?
http://www.pylones-usa.com/pylones/item.php?product=775&item=THH-KNIFERD&search=knife
The REIC and the lying scum who profit from it are at it again Folks.
Just saw the new Remax commercial that is as offensive as the Century21, Suzanne Researched This abomination. The new one shows “sold” signs and people physically kicking themselves upon seeing said sold signs.
So I head on over to youtube and searched “remax” and low and behold, I find page after page of MLS listings by remax agents, all added in the past 48 hours.
These people are unrepentant liars and felonious criminals.
I think the ad means that if the new buyer finds him/herself underwater in a years time you get to kick the realtor as hard as you can. That is my interpretation.
Yeah, mine too. In fact, I say we be pre-emptive and just go find and kick the cra*p out of some realtors right NOW. Save some waiting, see.
“These people are unrepentant liars and felonious criminals.”
Irregardless, they are doing we taxpayers a great service by convincing knifecatchers to pony up their money. The banks need to be saved and knifecatcher money will help in the effort.
Relax, and learn to love the NAR.
That Progressive car insurance gets my goat. It should say:
“Do you own a home? Yes? That’s actually bad because you’re more likely to torch your car.”
Just for tonight, since my doctor wants me to take it easy: in honor of the Voz, I am drinking Black Dog Ale. An English Style Amber Ale that I am sure all the woosies like.
This week’s New Yorker (the Anniversary issue with Eustace Tilley on the cover) has a great article about how Florida is collapsing. (”The Ponzi State” by George Packer.) It starts with a photo of a new-ish house, completely overgrown and abandoned….
Of course, it paints a fairly sympathetic view of people who got in over their heads, but also tells about the collateral damage to people who weren’t flipping homes or borrowing too much.