Bits Bucket For July 12, 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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Sunday sipping a hot brew….a Swedish breakfast is in
order this morning.
One 20% fat hamburger patty with melted cheese on toast, covered with three eggs over easy
cooked with grilled onions.
A good Sunday morning to you all!
No bacon???? Are you on a health kick now?
You don’t need bacon. This is a humongous meal
guaranteed to clog the arteries, just add salt
to taste and some V-8 juice and you’re all set.
Add vodka and tabasco to that V-8!
Bread and fry that patty and you’ll be having a Kentucky breakfast. (Cream gravy i/o cheese.)
Good morning all!
The Husbeast and I are going to go and look at a new rental this morning - a 2b/2b and 2-car garage with a view to die for, overlooking a State Park here in sunny LaLaLand.
Its $200 a month more than our current rental here in the SFV - but shaves almost 20 miles a day off the The Husband’s commute, so all in all not too expensive for us in the grand scheme of things.
The acid test, of course, is if it has decent Internet access - its a dealbreaker without it. We’d literally fade away without good interface to the Interwebs.
Wish us luck!
You wouldn’t literally fade away. That would make you, what? Fog?!?
You’d figuratively fade away.
Poetic license police taking the word “literally”, literally!
Boo-yah!
Stop being mean.
if you have cell phone coverage you could have tethering capability. That is connecting your home pc through your phone.
I did that for 5 months after first moving up here (to Seattle). Comcast refused to support me as a mac user (had intermittent routing problems. It “worked” for their tech, so they said it’s not their problem).
Just tethered my cell phone through t-mobile for $20/month. Slow as heck, but hey, I spend too much time on the internet anyhow
Turns out we can get Fios through Verizon up there, and one of the previous tenants set up a ‘clean’ power source.
Which was enough for the Husband.
And, totally OT - dayum! Its hot today!!
Good story about Milwaukee’s Inner City “orphan houses” problems by Milwaukee Sentinel online.
The “It’s your house”…”No, I don’t want it..You Take it” Game begins
Lenders abandoning foreclosured properties
‘This is just madness’
Cities throughout the country are seeing an increasing number of walkaway properties, said Kathleen Day of the Center for Responsible Lending. She said she knew of no other attempt to quantify the extent of the problem or its impact on a city.
“We hear about it anecdotally all the time here - all the time,” Day said. “This is just madness. There has got to be some better way.”
The seeds for the growth in orphaned properties were planted in the years before the housing bubble burst - back when buyers, sellers and lenders all acted as if prices could only go up”
http://tinyurl.com/m27ago
“The seeds for the growth”
What, no green shoots?
“There has got to be some better way.”
Yeah.. It’s called a bulldozer.
Don’t these people realize that there are just too many houses for the demand? That’s not going to change for a long, long time.. The only solution to the problem is more people (with net new high paying jobs) or a bulldozer. There’s no way to “stimulate” demand any further, the great stimulus (5 years of no down, cash back at close, 10X income loans) is over. Until this realization is common knowledge, we will just continue to be “shocked” that the buyers aren’t stepping up. There’s nobody left!
Certainly there is a very easy way to stimulate demand.
LOWER THE PRICE.
(hint to realturds and deluded house debtors)………. I mean what I say. Not 10%. It’s 40% or more. Sell now at a substantial discount or be priced in forever.
Killdozer II
The 70’s movie or Granby, Colorado style?
i had no idea a person could refuse to accept any part of an inherited estate, but evidently so according to the article.
My FIL is a consultant for charities, they often receive junk in wills and refuse to accept it because there is liability. Strange, but true.
Sometimes Edna’s shit just needs to be thrown out.
Edna! bhwhahahah
Edna, Hazel, Beatrice, Mildred, Gladys, Marge, Harriet, etc.
Don’t leave out Aunt Clara and Aunt Agnes.
Hey what about Grandpa Sherman, Uncle Braswell, and Uncles Harvey, Herbert, and Leland ? And Great-Uncle Alonzo ? All real names in my family = some Scots-Canadian, some deep South. Yikes.
I can see where the law may have provisions whereby some outside party like a charity (due to hardship or processing costs or some lack of resources) might be able to refuse, but the article tells of a woman who’s mother died.
Probate law regarding direct lineage inheritance, like parent-to-child, is well spelled out. Die with a will or Trust (or without either) and the chain of events that follows is pretty much automatic. Beneficiaries don’t have any choices to make. Taxes, bills, debts etc are first paid and either something is left over or it’s not.
If dad left you a ‘72 clunker and you decide to abandon it where it lays, someone will trace the plates to you.. It’s your responsibility.
i had no idea a person could refuse to accept any part of an inherited estate ??
You betcha…How would you like to inherit a toxic waste site…
Like the GM factories? I think we all inherited those.
Yeah, the Messiah’s idea of an “ownership society” is just like Mao’s: bloated, inefficient, government-owned enterprises that could never compete in a real market.
Yeah, because we’ve seen how superior the American way is.
Oh wait…
i didn’t think it was a matter of what I like or don’t like.
I might inherit that waste site but that doesn’t mean I am liable for it’s problems. The entire inherited estate might have to be liquidated to pay for cleanup or similar (the executor’s responsibility) resulting in zero left over for me the beneficiary, but I’m not personally liable for anything involving that property.
In other words, I can’t inherit debts or liabilities. Either I “profit” from a remainder, or the estate is totally liquidated to pay off it’s obligations, and I get zero.
—–
So… if there’s a will leaving it to me, and I refuse to inherit this toxic waste site, who then owns it? The State? Who else could it be?
I find it hard to believe but there it is in black and white, so it must be true..
The polluter owns the damages. It’s the cradle to grave rule under RCRA (resource conservation and recorvery act). GM in this case.
poor little orphan homes *sniff*…..where will they go for Christmas?…..(eyes filling with tears)
The same situation was created during the S&L debacle. Huge sawths of RE just abandoned by the lenders, the owners, the investors, everyone.
They had to create a whole new agency to deal with it. The “Resolution Trust Corporation.”
Deed them back to the Bank.
Why We’ll Leave LA. The business climate of a banana republic.
http://online.wsj.com/article/SB124718265362620253.html
Interesting article. Shows how local governments have gone rabid in their quest for revenue.
I’ve been thinking that prop13 is a banana republic type law.
What we are looking at is a law that locks in a class of people (land owners/home owners). Basically restricting social movement and creating protected classes is what the 3rd world is all about.
I’m guessing it holds on to create further deflation in California. The basic message is don’t come here unless you want to pay for services for someone that happened to be here before.
See how long it lasts.
Get rid of Prop 13 and taxes / fees etc. (property tax is only a small part of it) will rise so high so fast that only wealthy retirees will be able to live in the state.
I’ll guess that 50% of property owners will be forced to sell their property in order to pay their newly “revised” assessment.
As for the guaranteed giant spike in State income taxes one can only imagine where that will lead: today’s moderate business flight morphs to a mad rush to get out of the State?
Property owners will get slammed.. I mean the young couple that bought in 1979 for $80K and who’s property is “worth” $800K on paper. They raised the kids and still work the same jobs. They never HELOCd the property. Like everyone else, they have little money in the bank and drive an old car and getting close to retirement. They are screwed.
Go tell them what social class you think they belong to because they bought a home way back when. They’ll be very surprised.
Taxes would only increase for ppl who are currently getting HUGE tax subsidies. I’m pretty sure we would continue to allow Prop 13-type rules for primary residences, but the commercial property and secondary homes would take a well deserved hit.
And Joey, if you think the 2/3 rule prevents overspending, then you are wrong. When the people can vote in mandatory spending by a majority vote, but the legislature is powerless to increase revenue, then you end up with what is commonly know as a cluster____. That’s where we are today.
Why are people (aside from the Calif legislature) so quick to propose raising our taxes as a cure for our economic ills?
Do you imagine that raising taxes on one group or economic strata of the population doesn’t eventually impact everyone?
Is this the way any of you runs your household budget? When your spending sprees exceed your income and put you deeply in debt, do you blame it on lack of income?
No matter how much or how little tax revenue is available, the State will spend more than they have. Hell, they consistently spend more than they project they will have years down the road!
And the California legislature ranks among the worst (if it’s not the worst) tax-n-spenders in the Nation… maybe the world.
——–
Californians from rich to poor and in between, for the sake of their own survival, finally said enough is enough!
You’re killing us! We’re cutting you off! Learn to live within your means! You will not tax us out of house and home! You will not take even more of our earnings and blow them off on your pet projects, political favors and on further growing this bloated government.
——-
And despite what you see and read in the media, we are doing just fine so butt out thank you very much..
DMV closed on Friday? Who cares? Nobody. Close a few state parks? It’s about time. Cut govt worker pay? Yippee! Trim the fat? Freeze automatic pay raises? Cut budgets across the board?
… its almost too good to be true.
Joey, I find myself AGREEING with you! (You too, V.)
People who have planted the trees, built and maintained the neighborhoods, raised money for the hospitals and schools? Yes, you get the same tax rate you started out with. “Legacy” commercial, and second/third/fourth home”owners?” Pay your fair share to join the club we built for you.
HAH! Give ‘em hell, Joey!
“I get it. You figure that you inject that sh*t into me, and under the threat of death, I’ll do whatever you say… just like in New York.”
Exclusivity has ruined many a community nationwide. It’s not just California. Consider Florida and its ludicrious property tax statutes. Only a fool buys real estate in Florida or California. Why pay some predecessors’ taxes? You didn’t use the local/state services - they did. And yet they want to pass the bill along to you.
Consider New York City, too.
These schemes are simply different Ponzis. Nothing more.
As urban [Democratic] administrations pander to the parasites who got them into power with their manipulated bloc voting and pie-in-the-sky promises and patronage, we will see growing resentment from the dwindling productive classes who are forced to pay steeper and steeper taxes that bring no appreciable improvement to their concerns - in fact, the quality of life will continue its downward spiral.
The current “succession of the successful” - whereby those who have the means pull up stakes and move away from dystopias like LA, or move into gated enclaves and send their children to private schools - will be THE trend to watch over the coming years. Look for a proliferation of private security companies, too, since no one will trust their local law enforcement to protect their communities or business interests.
Yep. Add a growing number of doctors to that proliferation list, as well as getaway companies that help individuals and businesses move overseas.
It’s been happening for a couple of decades.
The USA is 3rd only to Mexico and Turkey in the size of the income gap between the rich and the poor.
Google it.
Not per the World Bank - we’re not in either top 30 or the bottom 30. Link to follow.
link
Greatest inequalities are in the African countries generally, then central and south-American countries. Mexico isn’t in the top 30 though.
10 Things Your Real Estate Broker Won’t tell you.
Smartmoney.com
1. “Your open house is really just a networking party for me.”
2. “My fees are negotiable.”
3. “Think you’ve had no offers? Actually, there’ve been several.”
4. “I’m not obligated to keep my mouth shut for you.”
5. “Sometimes I forget whose side I’m on.”
6. “I know zilch about zoning.”
7. “I won’t let termites — or pesky inspectors — kill a deal.”
8. “I sometimes forget I’m not a lawyer.”
9. “My website is a dead end.”
10. “You can probably do this without me.”
http://www.smartmoney.com/spending/for-the-home/10-things-your-real-estate-broker-wont-tell-you/
“Think you’ve had no offers? Actually, there’ve been several.”
“I sometimes forget I’m not a lawyer.”
Two points that supposedly would get a realtor into trouble in Florida. They can’t give legal advice (especially regarding titles) and they have to convey all offers. They’re also supposed to disclose anything they know about the property, but there’s a lot of “don’t ask, don’t tell”.
But then, nobody seems to give a dang about laws or rules or ethics anymore, so why should realtors be any different?
Check out the comments to the article! All sorts of used house salespeople are in a twitter — how dare anyone impugn the integrity of their noble profession!
It’s amusing to hear the enraged sqawks of realtors any time someone points out the obvious: that the REIC was rife with fraud and deception during the bubble years, and a disporportionate share of the blame falls squarely on unethical and in many cases incompetent realtors. And yet, I don’t know of a single case where any realtor went public with their alleged “concerns” about what was going on in the industry, or publicly disagreed with the rosy forecasts being promulgated by NAR shills like LAY or Yun. The few realtors who weren’t actively participating in unethical activities, turned a blind eye to the individual and systemic fraud and sleazy conduct going on within their “profession.” That makes them accomplices in my view.
Yeah, and see yesterday’s Miser post for exactly how much mortgage fraud was commited by realturds.
I don’t think the ethical re persons ‘turned a blind eye’, it is just like WS and everywhere else, you make noise you get fired, lose biz, and your ‘colleagues’ think you are nuts, just a windbag of bad news, lies. Then ‘you’ tend to shut up and do your own ethical biz. You wouldn’t believe the stories I hear about ‘Buyers’. There are Lots and Lots of unethical scam buyers.
Again, it isn’t all of them. Puleeze.
BTW, I am not a re. “Just play one on tv”.
JK.
lol
11. My main objective is getting my commission, all and everyone else be damned.
Very much OT, but perhaps an amusing story for some…
We have a festival going on in my neighborhood this weekend. I live in an apartment a block from the festival. So, we have some new “riff-raff” in the area and whatnot.
So, last night I’m getting ready to go to bed and I hear a woman screaming and cussing, saying things like “stop thinking you’re f’ing better than me. Stop threatening me! I’ve lived here for 15 years! You’re not better than me!”.
I peek out the window and see that the woman who had been overly talkative towards me when I was walking my dog was accosting my neighbor. It would appear she’s lived in the neighborhood 15 years (according to the 19 year old kid on the skateboard who was just calmly observing the altercation). Apparently she takes exception to the fact the owners of my place bought it a year and a half ago bought it, gutted it, and fixed it up nice.
My neighbor (also the apt on-site “manager”) called the police while he was being accosted (After putting up with about 5 minutes or harassment while trying to walk his dog). The woman skedaddled at that point, but not after hurling many more insults, f-bombs, etc. Clearly she was far from sober.
So, the cops come. And what do they do? They turn it around on my neighbor of course and treat him like the offender! Rather than trying to find out what happened, and just making an effort to “keep the peace”, the officer instead takes on a very condescending tone, and says things to the effect that “This is a public alleyway. I’m not going to violate her civil rights and just arrest her for being here”. Apparently in his opinion my neighbor was in the wrong by trying to get a police officer to help break up the confrontation and ask this lady to move on. It was almost like he had been to one too many “sensitivity” trainings.
I’m happy for his great respect for civil rights, but I think perhaps he went a bit overboard.
The other officer (who walked over from the festival) was much more reasonable, and shared that he was very happy that the apartment building had been renovated, as there apparently were a lot of problems there before.
I guess some people just don’t like change, even if it is for the “better”. Sigh.
That’s why everyone should have a never call the cops rule (unless it’s murder or something drastic). You just increase your chances of them turning on you or finding something in your car or on your property to pester you about.
So I shouldn’t call them when I get shorted on my chicken nuggets?
The one that always cracked me up was the lady who had her 20 bucks stolen. She called the police and proceeded to tell them that one of her dealers took her $$$ and didn’t provide the drugs!
We called the cops after our garage was robbed and all our tools were stolen. We tried to explain the timeline to the rookie cops that came out two days later, but they were more interested in our descriptions and stats. I had to explain to them that we weren’t suspects so start asking questions that will help solve the crime or quit wasting our time.
We found the robber ourselves. He had robbed the garage of a cop two blocks away on the same day. The guy was a career criminal. The cops refused to help get our stuff back, but the cop got his tools returned. I never saw his case go to court, so it seems they let him off. Gotta terrorize the populace to keep them dependent I guess.
Frustrating. One thing is for sure, they take care of their cop buddies. The rest of society is nothing more than a perp to them.
Government at any level isn’t interested in administering justice. They only care about stability. They’ll throw a good citizen under the bus in a minute rather than deal decisively with the criminal element.
In this case I don’t know that there was a “criminal element”. I don’t think the lady broke the law in any way, but certainly, if interested in “keeping the peace”, the police should be involved to break up the dispute/harassment. If I tried to do it myself, either by walking my dog out there or with a gun in hand (not in a threatening manner, but more in a “I’m prepared to defend myself if you’re going to keep coming at me”), I don’t doubt that I’d have the cops at my door in a second for “brandishing a firearm in a threatening manner” and whatnot.
I simply found it interesting because 1) The woman clearly had issues with the tenants of this building because she feels we think we’re better than her????, and 2) The cop was just a total, condescending douche for no reason.
Cops could defuse a lot of situations just by telling people to move along. It usually doesn’t take long to spot the instigator in any confrontation. That’s why cops have a uniform, badge, and authority, though they negate the latter when they act like imperious a$$holes instead of doing their job: protect and serve.
I think that riots and such don’t happen because people are unhappy about being poor. What really makes them pissed off is to see people who are doing so much better than they are. Look at all the black-owned businesses that got torched during the LA riots - the rioters hated those business owners for their success.
Protect and Serve? On what planet do you live?
Around here the cops only get out of the cruisers long enough to violate your civil rights. Then it’s back to the doughnut shop. And you had to nerve to disturb them?
I promised myself I would NEVER call the cops again.
drumminj, what do you think set this lady off? Did she have skirmishes in the past with this guy?
Honestly, I don’t know. He had asked her not to sit on the apartment steps, I believe, but how he want about doing that, I didn’t witness.
She clearly was drunk or high (I saw her “walking” down the sidewalk while I was out walking my dog). I don’t imagine it’d take much to set her off, but I don’t know exactly what was said.
Here in Idaho the cops tend to take the side of the guy in the right.
http://www.2news.tv/news/local/50551007.html
A few houses over from mine some doofuses left the front door ajar. Their bone-crunching pit bulls charged out and attacked a jogger. A neighbor came to the jogger’s rescue with a shotgun. One dead pit bull - one pit bull owner probably facing charges. Sheriff says the guy with the shotgun did the right thing.
Thank goodness. In California the DA will look for any reason to prosecute you. Reasonable force seems to be the favorite. My impression is if someone attacks you, say with a knife, while breaking into your home, you can’t shoot them. Gun vs. knife = excessive force. Or if you use defense ammo, such as hydrashocks, that’s excessive force cause your ammunition was designed to kill via maximum damage to whatever you shoot.
Can’t imagine what cops would do to you if you shot a dog in the street that was attacking a person. Probably take your gun and let PETA burn you at the stake.
Drat! Two of the five fixer houses I’ve been monitoring have now been sold, for at least 50% more than what I think is a reasonable price. In one case (vacant one I REALLY wanted), I looked up the new owners. From Seattle and are either relocating to Portland or flipping the place.
If its the latter, I’m growing really loathsome of the “buy an investment place in the less expensive city” meme.
I just don’t think this crash has been hard enough, at least not around here. I was hoping that these places would linger on the market until the winter, when I would have made my pitch for them. I at least wanted this upcoming second leg down after the stimulus to have started and had some psychological effect, but nooooo!
When I go to my dark place, I really want this city to fail. Sigh….still too many ‘green shoots’ thinkers around here…
In a way, I have to admire the stubborn quality of this VERY slow moving crash. It’s like watching someone cling tenaciously to the edge of a cliff, and I kind of want to do a little tap-dance on their fingers.
I think PNW is seeing some of the CA flight phenomena, exacerbated by recent events. I have a post with a link about companies leaving SoCal and I believe PNW is the beneficiary of this.
That’s just it. For the “largest bubble in human history” as some suggest, the downside sure is taking its time and keeping people in the game.
I also don’t understand the “flight” phenomenon. Why do people assume it’s any better here? This is as much a nanny state as there could be.
Which link are you referring to? Thanks.
And by “in the game”, I mean that people really do seem to think recovery is at hand.
IMO real estate is the slowest asset class to “mark to market”. When the market is down, people will postpone or avoid selling much longer that in, say, a collapsing stock bubble. Much of this is due to the leverage involved and much is due to the belief that, in the long run, real estate always goes up.
A bust like this one should flush out real prices faster than a normal bust, but the PTB are doing everything they can to slow the process.
You should be happy this is the case.
Instead of devaluing the currency to bail out the banks, they are using the specuvestors future earning power to bail out the banks. The guillotine is falling on the correct heads.
Rejoice, f00ls, rejoice!
Rejoicing!
I suspect we’ll see a repeat of this again in 2010 and again in 2011. Possibly even a few years beyond 2011. And that is that people are potentially tired of having their lives on hold, hope or really believe the MSM’s propaganda that house prices have stabilized and buy during the warm months.
Then the fun begins again when house prices continue to drop during the colder months as the foreclosures and large overhang of inventory continue to hit the market.
We touched on this subj before. During the late 80s-90s crunch, when did the bases/ military biz close in CA -yr? and when did the re really flatline in the down mode?
IIRC, it was ‘87, then when I returned from nyc in 93, 94 -98 were flat and you could easily buy a 3000′ house in good neighborhoods in desert for around 200k or lower, as I did for 70k foreclosure.
Then in 1999 it started to take off, 2000 to
‘infinity and beyonddddddddddddddddddddddddddddddddddddddd”
A friend of mine just bought 30 houses in Detroit for $4000 each. Then he hired two Bubbas on parole for property mgrs. So far so good. Hasn’t missed a rent payment yet. Oh yes, they get a % !!! One way of getting rid of inventory and increasing employment for the big O.
I just was this delightful snippet in a craigslist SFH-for-rent posting! What a change in in just a few years.
“And for your rental security - the house is not in any danger of foreclosure & we have no plans to sell this property. The house is owner-occupied (owner lives upstairs).”
In other words, this landlord got the memo about the impact of foreclosure on tenants, and is using his owner-occupied status as a differentiator. Nice!
Smart move on his part. Not only is it a differentiator, but such a statement is likely to help root out poor quality tenants. (You’d think that tenants with money/responsibility wouldn’t deliberately seek landlords with poor track records re: paying their mortgage).
Why not send this advertiser an e-mail, letting him know that he’s playing his cards well?
How is the used home market looking in your area? A casual drive through some area neighborhoods today leaves me thinking the market is moribund around here. There are almost no For Sales signs to be seen on lawns. I saw maybe two or three driving past hundreds of homes in an area where I am reasonably sure many are vacant, due to prices with exceed what area residents can afford. Compared to myriad For Sale signs on area lawns back in 2005-2006, I interpret the absence thereof as a sign that the area’s used home sellers have by and large thrown in the towel.
A quick search on ZipRealty dot com of San Diego used homes and condos suggests the market is in virtual shutdown mode, right at the height of the red-hot summer sales season. There are only 8,562 properties currently listed — less than half the number one would have seen during the peak season three years ago. Many of these are available at a deep discount to what one would have had to pay back then. For instance, in 2006, one could have only found a couple of homes listed below $100,000; today there are over 200 of them.
Yes, very strange goings-on. There are two distinct and different markets: Those that need to sell and those who would like to sell, but have the means to wait. Not keeping these two markets separate can confuse the heck out of an accurate assessment. Properties showing a price reduction is the only differentiator I know.
All’s quiet on the eastern WA front.
The Moses Lake, WA market is all about new home sales. The developers can lower their prices and still make money while sellers of existing homes must lower their prices and bring cash to the closing table. Grant county’s economy is holding-up well though with its cheap hydro power attracting manufacturing, and retirees from the Seattle - Tacoma area continue to arrive paying cash for homes. The bad news continues to be in the large home market; lots of them have sat empty now more than a year, the second summer with no action.
The picture changes considerably if one adds in ForeclosureTown dot com listings to what is on the MLS (represented in ZipRealty dot com). For example, the current inventory in zip codes I follow more than doubles when ForeclosureTown listings are included. I assume this still results in an undercount, due to shadow inventory (REO held off market in hopes that prices will some how come back before the lenders have to sell):
ZipCode ZipRealty ForeclosureTown Totals
92037 506 418 924
92064 128 207 335
92067 309 196 505
92127 198 237 435
92128 140 330 470
92129 66 163 229
92130 277 281 558
Totals 1624 1832 3456
PB, I see some duplicates though in Ziprealty and Foreclosure town - at least in Arizona.
We touched on this subj before. During the late 80s-90s crunch, when did the bases/ military biz close in CA -yr? and when did the re really flatline in the down mode?
IIRC, it was ‘87, then when I returned from nyc in 93, 94 -98 were flat and you could easily buy a 3000′ house in good neighborhoods in desert for around 200k or lower, as I did for 70k foreclosure.
Then in 1999 it started to take off, 2000 to
‘infinity and beyond”
Won’t those Under $100’s be in the not so good neighborhoods of SD?
The market in my area (DC suburbs) actually is experiencing a fair amount of spring bounce this year. Median prices are up a fair amount vs. the winter, though still down vs. last year (by about 8%). It’s a big difference from this time last year, when prices were down 19% vs. 2007, and there was no bounce at all. Still a weak market overall, as for-sale inventory is above average, and sale price percentage is low (around 94% vs. average of about 97%). I’m definitely seeing an effect of the stimulus.
It’ll be interesting to see what this winter brings.
DC, Maryland, and NoVa will be the last places to fall, if ever. The people here are insane and will gladly fork over 50% of their paycheck to “own” a dump in a bad part of town… and then need a room-mate to pay the mortgage even when they’re in their 30’s. Yeah, great, isn’t it?
I just did a search of current single family home list prices on the MLS (SD ZipRealty dot com). Amazingly, the median list price remains stuck at $1,275,000 — well above the May 2009 SFR median sale price of $684,750 reported by DataQuick. In fact, the gap between median list price and median sale price is widening, suggesting the degree of disequilibrium strain on the local market is increasing at the moment. I don’t believe this gap can persist indefinitely, and I expect it to resolve to the downside, given the labor market situation and the ongoing credit crunch.
Clarification: This discussion pertains to our zip code (Rancho Bernardo West — 92127).
(Rancho Bernardo West —
Is that on the west side of Black mountain ? Drove through there yesterday very fancy reminds me of Dos Vientos in Thousand Oaks.
Lots of homes for sale I didn’t even bother to inquire on the price looks like CEO or Medical Doctor territory to me
I don’t even think a CA firemen could afford to live there ?
How many CEOs and medical doctors do you think populate San Diego? I have to assume there are not nearly enough to populate all the new homes targeted in the $500,000+ price range built between Black Mountain and the coast between 1998-2009.
I never did figure out where all the wealth came from when I lived in CA pre 2006 and I still don’t know now that I moved back ?
Home prices still very high and in Poway at least I expect half the home owners are over 65 years old and have very low property taxes and no reason to sell.
It will be years if ever home prices fall to reasonable levels here in N. San Diego this isn’t Phoenix
Rancho Bernardo is where all the old people live. It’s east county. It has never been considered posh. Doctors and such prefer to live on the coast because the weather is nice there. RB gets to be 100 degrees in the summer.
Pshawww, 100 degrees? wussy.
115.
JK
heh heh
but so far the humidity is 9%.
108 in Phoenix at 9 at night low temps will be 90 at 4 am
thats hot here in Poway it got 96F and cools rapidly as night falls no big deal
That’s insane. Must be all the brain-addled RB retirees who think that “they don’t have to sell”. Nuts.
Actually I suspect we are looking at the mass exodus of flippers from recently constructed “investment properties” they snapped up like hot cakes from the time they were built post-1998 through 2005. To bolster my point, I split the currently listed SFRs in our zip code by pre- and post-1998 construction:
When Built / No of Homes / Median List Price
)
Pre-1998 12 $616,950
1998-or-later 159 $1,299,000 (there are four homes listed at exactly this price
Total 171 $1,275,000
Good analysis, GS.
Non-banker Americans to Obama: JUST SAY NO TO AIG BAILOUT BONUSES.
* The Wall Street Journal
* INVESTOR’S CALENDAR
* JULY 12, 2009
AIG Seeks Approval for Bonuses
THIS WEEK
AIG Pay: American International Group is seeking Obama administration approval to pay retention bonuses, including about $235 million for employees in its controversial financial products unit.
Is there any possibility of paying the AIG bonuses in common shares of the company stock?
* JULY 9, 2009, 8:02 A.M. ET
Strong Chance AIG Equity May Be Worthless, Citigroup Says
By Ed Welsch
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)–There’s a significant chance that American International Group Inc.’s (AIG) equity may be worthless, a Citigroup analyst said Thursday.
Analyst Joshua Shanker wrote in a research note that there’s a 70% chance that AIG’s equity is worthless due to more losses on credit default swaps, and “management’s increased openness to disposing of businesses at low valuations.”
…
Daily Finance
Memo to comp cop:
Cancel AIG’s latest big buck bonuses
Peter Cohan
Jul 10th 2009 at 8:30AM
American International Group (AIG) is seeking more bonus money for its executives. You might remember AIG because as a taxpayer, you’ve given it $180 billion in your money to keep it from collapsing last fall and your money went to pay $165 million in bonuses to 400 employees of its catastrophically money losing Financial Products unit with another $200 million in the works for 2009. Of course, AIG is trying to deflect public outrage for its latest $2.4 million in executive bonuses onto the new comp cop, Kenneth Feinberg.
This might be good politics but it turns out that since the bonuses were approved before Feinberg started his job, they’re outside of his jurisdiction. Do the AIG executives deserve bonuses? I think they certainly do — as long as AIG is making a profit it should have the right to pay bonuses to its executives out of that profit. There’s just one little problem — AIG lost $99 billion in 2008 and $4.4 billion in the first quarter of 2009. That’s a monumentally lousy performance which does not warrant a bonus.
…
I am not sure I agree with the notion the CA IOUs pay an “above market” return. Doesn’t this conclusion ignore the default risk premium?
Penniless California issues IOUs
Brisk trade in new ‘financial instrument’ as state issues IOUs to head off budget shortfall
* Andrew Clark
* guardian dot co dot uk, Sunday 12 July 2009 17.08 BST
Money woes in the most populous US state have given birth to an impromptu trading market for the newest of American financial instruments – the California IOU.
Encumbered by a $26bn (£16bn) budget shortfall and a seemingly intractable political stalemate, California’s state government is issuing IOUs to businesses, health clinics, college students and taxpayers who are owed money by the state.
The green documents look like any ordinary cheque except for the words “registered warrant” stamped in the corner. They carry a 3.75% interest rate and can be cashed in October, by which time California’s governor, Arnold Schwarzenegger, is hoping that he will have some money.
Entrepreneurs have been quick to leap on the phenomenon, with Craigslist and eBay cluttered with offers. A website, BuyMyIOU dot com, aims to match sellers of the warrants with buyers eager to snap up the above-market interest rate.
“The market’s at an early stage – we’re really in the infancy of it right now,” said Mark Granger, president of Pacific West Managers, a finance company offering to buy IOUs. “It’s a little unusual to see the state of California resorting to paying its bills like this.”
…
California Colonials….
In my estimation they are not legal. Of course they didn’t ask me.
haha thats funny. I am eating lunch here in CA and I hear two park ranger looking men talking about a big project they are working on and how the public knows nothing about anything
ahhh CA truly in Az I could go all day and see no State government employees only remote cameras set up to send fines out. here in CA I doudt I could go an hour without seeing a CA government employee no wonder this state is broke
Boston Real Estate Now
More predictions for our never ending housing recession
Posted by Scott Van Voorhis
July 8, 2009 09:00 AM
Well it’s just raining housing market forecasts right now.
And if there is any pattern to this flood of prognostication, it may be simply that each forecast is progressively gloomier than the last one.
Recent days have given us a series of price predictions, the last one, from Barclays, touting a 40 percent peak to trough drop in home prices across the U.S.
Enter PMI, which is now predicting that home prices may fall in more than half the largest cities in the country right through the first quarter of 2011.
Rising unemployment and an epidemic of foreclosures that just won’t call it quits means 30 of the 50 biggest metro areas have 75 percent chance or greater of seeing prices slide right into 2011, the report finds.
The decline in housing prices that have battered metro markets in Arizona, California and Nevada will spread out to cities across the country, PMI predicts.
Fifteen metro areas, including Providence and Detroit, are in a select group that has a 99 percent chance seeing prices stumble right into 2011. (I guess 100 percent, even for Detroit, would sound a bit arrogant.)
Other winners include Phoenix, Miami, Los Angeles and Las Vegas.
Not to be spared, Boston has an 80 percent chance that prices will continue to fall into 2011, New York an 88 percent chance.
At least PMI does not give The OC a 100 pct chance of falling home prices. I can’t help but wonder what Gary Watts thinks by now about how likely home prices are to fall in The OC?
REAL ESTATE
Orange County among 10 riskiest housing markets nationwide
Region has a 99.9 percent chance that home prices will drop by 2011, says PMI.
By Kristen Schott
Published: July 09, 2009 10:02 AM
Orange County is among the top 10 riskiest housing markets nationwide, according to PMI Insurance Co.’s U.S. Market Risk Index.
The index ranks the nation’s 50 largest metropolitan statistical areas (MSA) using economic, housing and others factors such as home price appreciation, affordability, housing supply and foreclosures. Risk scores anticipate the probability that the price of homes in a selected region will be lower at the end of the next two years, according to PMI.
That’s bad news for the Santa Ana-Anaheim-Irvine MSA, which had a risk index of 99.9 percent. The region will most likely have even lower housing prices in 2011 than it does right now. (The latest release from California Association of Realtors put O.C.’s median home price at $474,110.)
Orange County’s market risk index rose from 99 percent in the fourth quarter of last year to 99.9 percent in the first quarter. Price declines rose from 8 percent in the fourth quarter to 21 percent in the first quarter, putting it at a volatility rate of nearly 27 percent. PMI defines price volatility as the standard deviation of quarterly two-year house prices. The higher the ranking, the riskier the MSA’s real estate market is. And O.C.’s is among the highest.
…
Bottom Line
- Andrew S. Ross
Hotel foreclosures spread throughout California
Andrew S. Ross
Sunday, July 12, 2009
The “challenges” for San Francisco’s biggest business are coming thick and fast. That oft-used word at last Tuesday’s San Francisco Visitors & Convention Bureau luncheon rang loud and clear two days later when the Four Seasons Hotel on Market Street defaulted on a $90 million loan. Those who might have forgotten were reminded that Nob Hill’s famed Stanford Court Hotel had gone into receivership two weeks earlier, owing $89 million after its new owners bought the place for $93 million two years ago and spent $32 million in renovations. But wait, there’s more. Says Joe D’Alessandro, the bureau’s CEO: “I would not be surprised to see at least a couple more go in the next few months.”
There’s a wave of hotel defaults and foreclosures sweeping up and down California, say D’Alessandro and other industry experts. Currently, 32 hotels are in foreclosure and 174 in default statewide, according to a June 28 report by the Atlas Hospitality Group in Irvine. Listed among the more recent ones are a Hawthorne Suites and a Residence Inn in Sacramento.
“The bright spot is that this is going to be the best buying opportunity since the Great Depression,” said Alan Reay, the group’s founder.
…
Talking Business
From Treasury to Banks, an Ultimatum on Mortgage Relief
By JOE NOCERA
Published: July 10, 2009
…
“It’s not just California and Florida anymore,” said Mark Zandi of Moody’s Economy dot com. “Foreclosures are taking place coast to coast. They’re high-end homes, low-end homes, prime mortgages, jumbo loans, you name it. Foreclosure mitigation needs to be front and center.” As of March, according to Mr. Zandi, some 15 million homes were “under water,” meaning that their owners’ mortgage balance was higher — often considerably higher — than the value of the homes. Not all of those people will default on their mortgages. But many will.
Inexplicably, the Bush administration ignored the mounting foreclosure threat. The Obama administration came to office promising to do better; within a month it had announced the Making Home Affordable program, aimed at prodding the nation’s big mortgage servicers to start modifying loans in large numbers. In addition, Congress passed a law immunizing the servicers from lawsuits that might arise for modifying mortgages.
So far, however, the results have been disheartening. As of July 6, according to some internal Treasury data I was given a peek at, a total of 131,030 mortgages had been modified under the program, on a three-month trial basis (the Obama program calls for three-month trials before the new loan terms are locked in). That may sound good — but it’s a drop in the bucket compared with those 3.5 million potential foreclosures this year.
Pbear….Your on a roll the last couple of days with the “data mining”…Keep it up…Some really good stuff…Thanks…
Great docu on John Ringling on PBS. I’m enjoying the part about the first FL land bust.
As much as you enjoyed Cops from Tampa?
Yeah, I’m not sure Muggy’s recommendations carry a lot of weight knowing that he enjoys watching COPS on Saturday night
On Saturday nights, I myself am torn between Cops and Kings. Kings is awesome, intelligent TV.
“knowing that he enjoys watching COPS on Saturday night”
Lol, you know what line I never get tired of, and laugh at every time?”
Cop: Buddy, is this your crack pipe?
Loser: naw, man, I’m holding it for a friend.
It’s so funny. Every. Time.
Don’t forget Drum, I day-traded FAS/FAZ and did o.k. Sometimes you’re just dumb lucky, sometimes you’re just dumb.
Sometimes you’re just dumb lucky, sometimes you’re just dumb.
True. I’m not sure which you’re saying you are right now, however
I hope you can tell I’m just ribbin’ ya
Watching RENO 911 in Miami now. Love those guys and gals.Almost as much as Barney, Freddie, and Fannie.
I didn’t expect my frugality comment in yesterday’s bits to set off a mini-conflagration of anti-mormon sentiment. I’m sorry if my comment caused anyone duress.
I did go back this afternoon and add a few responses since I was at weddings and a long drive yesterday and didn’t read any of it until quite late.
I’m travelling again tommorow and I’ve been a day behind on blog reading, but many thanks to all who have brought forward some really good info in the last few days. HBB rocks!
Thanks for your comments, I appreciated them.
Does anyone who points out logical inconsistencies in church doctrine or drawbacks about the LDS lifestyle qualify as “anti-Mormon?”
Recommended reading for the curious and open-minded:
“Under the Banner of Heaven: A Story of Violent Faith”
by Jon Krakauer
“Secret Ceremonies: A Mormon Woman’s Intimate Diary of Marriage and Beyond”
by Deborah Laake
“A Gathering of Saints: A True Story of Money, Murder and Deceit”
by Robert Lindsey
PBear, to follow up with you and Michael Viking from last night: I don’t doubt for a minute that there are dogmatic and intolerant “Christians”, and I am certainly not going to defend any particular denomination– but I think Christianity overall has a lot more to offer than you seem to realize. You’re talking about a 2,000-year intellectual tradition– much longer if you include the Hebrew and Greek roots– and you think you can refute it all in one blog post?
Concerning belief in God, yes it ultimately rests on faith, but then so does any belief system. I’ve heard people say they are atheists and simply believe in “logic”. Well, guess what? Mathematical logic relies on a set of axioms. Axioms are statements which must be taken at face value and which NO ATTEMPT IS MADE TO PROVE. So how is that different?
Furthermore, intolerance and dogmatism are by no means confined to professed Christians. I will be happy to elaborate if you want …
“Axioms are statements which must be taken at face value and which NO ATTEMPT IS MADE TO PROVE.”
Nobody ever said that you have to either believe such-and-such axiom, or else face eternal damnation*, did they?
*Substitute the dire consequence of not following the religion of your choice here.
Nobody ever said that you have to either believe such-and-such axiom, or else face eternal damnation*, did they?
Again, I don’t defend coercion or dogmatism. But neither should someone be considered ignorant for believing something which cannot be scientifically proven.
Actually, I get kind of tired of people pounding down Dude’s religious beliefs. While they’re not mine, and I’m not interested in converting to them, I notice that he is unfailingly respectful of others’ religous views, even those which diametrically oppose his own. Maybe he should be accorded the same courtesy. As far as I’m concerned, I enjoy his posts.
“But neither should someone be considered ignorant for believing something which cannot be scientifically proven.”
How about for believing something whose logical inconsistencies suggest on the face of it that it is patently false?
Blasphemy is a victimless crime (sneer!).
“Coffe and tea are both hot drinks made with boiled water, wine is made for getting drunk I suppose but way back when it was made as a way to preserve grape juice, same for beer etc.
If we have clean water to drink from the tap, what healthy purpose do those products serve?”
Feel free to ignore scientific evidence if it does not agree with what the General Authorities say.
Antioxidants in Green and Black Tea
Tea is brimming with antioxidants, the disease-fighting compounds that help your body stave off illness.
ScienceDaily: Your source for the latest research news and science breakthroughs — updated daily
Coffee Jump-starts Short-term Memory
Health Secrets of Red Wine Uncovered
But for maximum benefits, sip don’t gulp, research shows
Posted June 11, 2009
THURSDAY, June 11 (HealthDay News) — Scientists already knew that drinking red wine in moderation is good for your health; now they are figuring out why.
New research is uncovering the disease-prevention secrets of a polyphenol called resveratrol, one of compounds in red wine that seems to improve health. Although the benefits have been touted for years, researchers weren’t sure how polyphenols, and resveratrol in particular, worked in the body.
“The breadth of benefits is remarkable — cancer prevention, protection of the heart and brain from damage, reducing age-related diseases, such as inflammation, reversing diabetes and obesity, and many more,” said Lindsay Brown, an associate professor of the School of Biomedical Sciences at the University of Queensland in Australia and co-author of a study that will appear in the September issue of Alcoholism: Clinical & Experimental Research.
You are a funny guy PBear.
Austin American Statesman article about fixing up your yard for a staycation instead of experiencing the hassles of traveling.
….
partial link: statesman.com/life/content/life/stories/gardening/2009/07/11/0711backyardescapes.html?imw=Y
Staycation Itinerary:
Day one- Climbing expedition to summertime attic to experience the brutal heat and beauty of the Sahara!
Day two- Descent to the bathroom, collect all houseplants, and turn on hot shower and you’re in the Amazon rain forest!
Day three- Trek to basement to behold the wonders of not-so-Mammoth Cave!
Day four-Cruise to the kitchen to stand in front of open fridge and freezer and you’re beholding the rarely seen expanses of Antarctica!
Day five- Begin drinking heavily.
LMAO!! Inquired about a brand new house in Bozeman to rent, talked to a woman on the phone, sent her my email for more photos, then I got an email that said:
You get back to her ASAP, we have to rent that NOW.
After inquiring again, I was sheepishly told the email wasn’t meant for me, but for the woman I’d talked to.
I think I’ll offer half of what they’re asking…nah, maybe I better move on and skip that one.
Wow, that’s a big mix-up on their part.
Personally, I’d try not to take advantage of the ‘privileged’ information that was leaked. Certainly I’d look for a fair ‘market’ rate and act in my own best interest, but I wouldn’t try to rake someone over the coals just because I found out they were vulnerable.
The email had lots of cussing, which I didn’t add to my post above.
I think I’d rather not deal with people who cuss, right Oly??
My guess is that’s just a “normal” level of desperation and they will still try to screw Lost into making their full payments.
Lost,
Your counter offers alone are probably responsible for a 20% reduction in monthly rental payments in Bozeman.
I am looking for some advice from folks in the finance industry. Given some of the rumored salaries of the coder(s) involved in the theft of GS code last week, I am wondering if it makes sense to look at finance / banking for software management positions.
I have a PhD in mathematics from the University of California at Berkeley. I have been working in software architecture and software project management for the last 10 years in various positions. However, other than some course work in finance, I have no direct experience in the field. My software work has been in scientific, consumer, and industrial settings, frequently involving significant numerical analysis to solve problems.
Before formally applying for a job, can anyone give me some sense of a couple of items.
1) Given my background, would there be companies interested in hiring me in the finance field?
2) Realistically what do the pay scales look like for people in that industry?
3) What are the expected working hours? Are these job 40 hours a week with 60 hours of mandatory overtime? Or are they more sane ranging from 40 hours per week normally to 80 hours a week crunch time?
I appreciate any responses you have.
Oliverks
Given that the financial sector is bloated to an all-time high share of the national economy, I am skeptical that opportunities going forward will compare to what they were over the past thirty years.
That said, I suggest you talk to Jim Pitman and Steve Evans (I am assuming they are still on the stat faculty at Berkeley?). They have sent some probability theory students on to careers in finance. You might also ask econ department and Haas business school faculty members — especially anyone involved in teaching finance maths — about former students who made careers in finance.
I support software in a technology infrastructure support group at a large US bank.
1) I think you would have trouble getting hired as a programmer in Finance given no prior experience. I say this because the vast majority of those being hired to do programming work are located in Bangalore (surprise, surprise). There are still a lot of support roles in the states but programming is very much going offshore (yes, I think it is crazy to put the programming responsibility for banks in developing countries - don’t get me started).
2) Pay scales are pretty decent and I make a good 20% more than I did at a large computer manufacturer prior to getting my job at the bank.
3) The expected working hours depend on your function. I think programmers can generally get away with standard 40 hour weeks (with more at crunch time, as you would expect), but I don’t think I’ve ever seen any programmer work 80 hours. If on the other hand you are in support/infrastructure the work hours are essentially 24×7 because something could go wrong at any time…but when things are working OK you can generally get away with taking comp time (re: checking email and then taking a 4 hour/4 martini lunch???).
I don’t think the info I’ve provided so far is very interesting or helpful, but hopefully my next statement will help. I can tell you is that there may be something are overlooking - Banks and Financial institutions are cutting. About 15% of our organization was quietly cut recently and nobody is hiring. My point is this - I think your main assumption is wrong - I don’t think that this issue seen at Goldman Sachs is going to result in more job creation in the industry.
The finance executives are hurting, and their own pocket books are hurting. I think they are going to cut the company’s throat and reduce it’s future prospects by reducing technical/skilled headcount in order to reduce expenses before they allow any more money to be taken out of their wallets. I sure don’t see anybody being hired.
All of that said - if you end up going this route, good luck to you.
“Banks and Financial institutions are cutting. About 15% of our organization was quietly cut recently and nobody is hiring.”
That relates directly to my remark about the historical share of the US economy the financial sector currently represents. Mean reversion is sure to follow.
My son has a MBA fom a big name U….two years ago….he works for a big national bank….he has survived two layoffs, including his two supervisors…another big layoff is expectged in October.
You may best be put to use as a consultant on the east coast contracting to do work in information security.
If you want the big money, do not become a federal employee. Software whizes in the federal jobs don’t make the big bucks. Been there, done that.
I received an e-mail from some supposed financial firm purporting to pay top dollar for C/Csharp programmers in NY. I figure it’s a scam. Heard about people in their 20s and 30s earning $500,000 per year in Manhattan doing just that, but from a colleague who knows about it. I figure it’s fly-by-night.
You are better off in homeland security during a recession.
Goldman Sachs profit bonanza could stoke anger
By Steve Eder in New York
Reuters
July 13, 2009 09:51am
UNDER normal circumstances, Goldman Sachs might be afforded a moment of gloating as it struts toward what could be a banner earnings announcement just nine months after being roiled by Wall Street’s worse crisis since the Great Depression.
But these aren’t ordinary times for the biggest US investment bank, which lately has faced a torrent of unwanted publicity stemming from employee theft allegations and an unflattering spread in Rolling Stone magazine.
Now Goldman, expected to announced second-quarter earnings tomorrow, finds itself in a no-win situation.
If earnings are too good critics may lambaste it for ramping up risk too much and embracing a hedge fund-like model that could make it vulnerable to big market swings.
If they fall short, investors may accuse the firm of failing to live up to its reputation for being more aggressive and intelligent than its rivals.
“They are between a rock and a hard place,” said Walter Todd, a portfolio manager with Greenwood Capital Associates, which owns shares of rival Morgan Stanley.
And, regardless of the results, critics may fall back on the old “Government Sachs” refrain, a nod to the number of former Goldman defectors now working in government, and claiming special treatment.
…
Abuse your independence, and suffer the consequence of public outrage and Congressional scrutiny.
Capitol Report
Jul 10, 2009, 1:37 p.m. EST
Efforts on Capitol Hill to scrutinize Fed gather some steam
House and Senate lawmakers want to give GAO access to study the central bank
By Ronald D. Orol, MarketWatch
WASHINGTON (MarketWatch) — The Federal Reserve is facing increasing pressure from a number of fronts as it tries to restore the sickly financial system.
An effort on Capitol Hill to hike scrutiny of the central bank, once considered unlikely to gain approval before Congress, has had the effect of coalescing a growing number of lawmakers and could soon have an impact — with or without congressional action.
‘The Fed could resist … an audit of monetary policy, but it would be in its best interest to accept it.’
John Coffee, Columbia Law School
Two pieces of legislation in the House and one in the Senate would compel the Government Accountability Office, the investigative arm of Congress, to conduct a monetary-policy audit at the Fed and issue a report.
Most recently, a group of 17 House members, including three Democrats and 14 Republicans, including Rep. Scott Garrett, R-N.J., have written a letter to President Barack Obama seeking an investigation into the Federal Reserve.
Supporters of the bills believe the Fed is an overly opaque and far-too independent organization, which doesn’t let outsiders know about key details such as which institutions are coming to its discount window, a government lending facility through which commercial and, in response to the crisis, investment banks borrow reserves. They worry the Fed may favor some borrowers over others, a conflict of interest situation that might be solved with greater transparency.
Criticism of the Fed’s opacity peaked in March, when lawmakers expressed outrage that the Fed did not initially disclose that its taxpayer-funded $190 billion bailout package to keep troubled American International Group Inc. afloat included large payments at par to foreign banks in China and Europe.
…
As long as some financial institution will accept CA IOUs, why does it matter whether Megabank, Inc does?
SPECIAL REPORT Road to Rescue
Big banks stop cashing California IOUs
Residents have fewer places to cash in IOUs after large banks stop redeeming them. SEC warns potential buyers and sellers of possible scams.
By Tami Luhby, CNNMoney dot com senior writer
Last Updated: July 12, 2009: 12:39 PM ET
ROAD TO RESCUE
NEW YORK (CNNMoney dot com) — Californians have fewer places to redeem IOUs issued by the cash-strapped state.
At least three major banks, Wells Fargo (WFC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Bank of America (BAC, Fortune 500), stopped accepting the IOUs after Friday.
More than 60 credit unions, however, continue to accept the paper.
State Controller John Chiang started issuing the IOUs on July 2 to conserve cash, while lawmakers and Gov. Arnold Schwarzenegger tussle over closing a $26 billion budget gap. Friday also marked the start of a mandatory third furlough day for most state employees.
The state, the world’s eighth largest economy, has issued more than 90,000 IOUs worth nearly $355 million. Also called registered warrants, the IOUs pay an interest rate of 3.75% and can be redeemed on Oct. 2 or earlier if divided state officials reach a budget deal.
…
This whole thing seems - odd. Doesn’t it seem like these banks stand to lose a *heck* of a lot of customers by this move? Think about it - you have an account at BofA, you get paid by CA in IOU’s, you need the money. What do you do? Well, I certainly know what I’d do…
Is this really a big vote of “no confidence” by these banks to the state?
Won’t Bank of the West and Citibank stand to reap large profits by accepting CA IOUs when other members of the Megabank, Inc cartel reject them?
LA Times
Bank of the West, Citibank to keep accepting California IOUs
Most other banks refuse state officials’ requests to keep redeeming customers’ IOUs for full cash value. Bank of the West will take IOUs indefinitely; Citi extends its deadline by a week, to July 17.
By Tiffany Hsu
July 11, 2009
Citibank and Bank of the West agreed Friday to honor state officials’ requests that they continue accepting California IOUs, as most other banks refused.
With the state Legislature still embroiled in a fight over how to close a $26-billion budget deficit, the California government is expected to issue nearly $3 billion worth of interest-bearing IOUs this month.
Starting today, major banks such as Bank of America Corp., Wells Fargo & Co., JPMorgan Chase & Co. and Union Bank of California will stop accepting the IOUs, also called registered warrants. Hoping to pressure the state to settle on a budget, the banks rejected state Treasurer Bill Lockyer’s requests to continue redeeming the IOUs for their full value in cash.
…
What am I missing here? Isn’t a Federal Reserve Note really just an IOU (with nothing to back it but the full faith and credit of Uncle Sam)? What does Uncle Sam have on Uncle Arnold?
Wall Street Journal
* July 10, 2009, 10:13 AM ET
Mean Street: California IOUs and the Great American IOU Market
By Evan Newmark
“The recipients of billions of dollars in IOUs being issued by California may soon have a regulated market where they could sell them. Some of the nation’s banks say that starting Friday, they will no longer accept the IOUs.”
– Associated Press, July 9, 2009
Who says the American genius for financial innovation is dead?
Nine months after Wall Street nearly destroyed itself, and we already have a burgeoning new securities market: California IOUs. Apparently, the SEC wants these IOUs to be treated as a form of municipal securities.
All it took was a budget impasse and the near bankruptcy of our largest state to create a brand new $3.3 billion market for securities. That’s what happens when a state is no longer able to issue municipal bonds. So what if the IOUs trade at a discount — and state workers and contractors only get 96 cents or 97 cents on the dollar. And so what if the recipients of IOUs have no choice but to take them. Just think of all those broker commissions!
…
Yep
Financial Times
California currency chaos
Published: July 8 2009 15:16 | Last updated: July 8 2009 22:21
You owe me, I owe you, but no IOUs please. After taking the extraordinary step of paying certain debts in registered warrants, California’s legislature is considering a bill that would allow tax debts to be paid in this temporary scrip. The measure almost certainly will not pass as it would create a vicious circle for the cash-strapped state, forcing issuance of even more IOUs.
When California began issuing the warrants last week, observers thought they were witnessing the creation of a parallel currency. Now large banks say they will stop accepting payments in IOUs and state officials have quashed a budding secondary market by requiring notarised transfers from the original recipient. Any resemblance to “legal tender for all debts, public and private”, the phrase printed on actual dollars, is fading.
…
CA government leaders have reached the bargaining phase of the housing bubble stages of grief.
Calif. leaders face tough choices in budget talks
By SAMANTHA YOUNG – 1 hour ago
SACRAMENTO, Calif. (AP) — California’s top lawmakers on Sunday focused on cost-saving reforms to social welfare programs and how deeply to cut an array of state services as they dove into the complex task of closing the state’s $26 billion deficit.
Lawmakers warned that severe cuts to many state programs were unavoidable. But they also seemed more optimistic than they have been in weeks that they could find a way out of California’s fiscal morass.
“We’re on a good path here,” said Senate leader Darrell Steinberg, D-Sacramento. He joined other legislative leaders in talks Sunday with Gov. Arnold Schwarzenegger.
Negotiations over closing the shortfall restarted Friday night, ending a temporary impasse.
Lawmakers from both parties said they would not reach a budget-balancing deal Sunday, even as talks were scheduled to continue into the evening. They hoped to reach a compromise sometime in the week ahead.
Assembly Minority Leader Sam Blakeslee described the progress as modest.
“Until we grapple with the question of (education funding) and the ultimate overall size of the cuts, I think it’s premature to declare a victory,” the San Luis Obispo Republican said. “The biggest and hardest decisions are yet before us.”
…
It is a bit surreal to see these apocalyptic stories play out in real time.
California In Crisis
California Faces Day Of Reckoning
by Philip Bruce
California In Crisis: On The Verge Of A Cash Collapse
A man reads a sign at a closed Department of Motor Vehicles office in Santa Clara, Calif.
Paul Sakuma
A man reads a sign at a closed Department of Motor Vehicles office in Santa Clara, Calif. Starting July 10 most California state government offices will close three Fridays a month. The shutdowns are part of Gov. Arnold Schwarzenegger’s order to furlough state employees, effectively reducing their pay about 14 percent. The closures will save the state money as it wrestles with a steep decline in tax revenue. AP
NPR dot org, July 12, 2009 ·
Times are tough all over in California, even for the superrich. According to the Los Angeles Business Journal, the city’s 50 wealthiest people lost a combined total of $32 billion last year — that’s an all-time record.
Across the state, unemployment is in double digits, home foreclosures have taken a huge toll on scores of neighborhoods, and thousands of public school employees are getting pink slips. State parks and beaches may close for lack of money to keep them open, and welfare and public health programs are about to be slashed.
It’s the Golden State’s biggest fiscal mess since the Great Depression.
…
Updated CA negotiation story:
California Politicians Negotiate in Bid to Close Budget Deficit
By William Selway and Ryan Flinn
July 13 (Bloomberg) — California Governor Arnold Schwarzenegger and legislative leaders negotiated through the weekend in a bid to find ways to eliminate a $26 billion budget deficit that’s left the most-populous U.S. state short of cash.
The meetings, held July 11 and July 12 in Schwarzenegger’s Sacramento office, failed to produce a consensus on how to slash government spending to compensate for a drop in revenue brought on by the faltering economy. Democratic legislative leaders said they were optimistic after talks broke down last week.
“We have several more days to go,” Democratic Assembly leader Karen Bass told reporters during a break in the meetings yesterday. “What I think is most important is that talks have not broken down.”
California’s anti-business climate is coming back to bite it.
Many fear long-term damage to California’s reputation as budget stalemate, economy make good punch lines
10:37 PM PDT on Saturday, July 11, 2009
By BEN GOAD and JIM MILLER
The Press-Enterprise
California’s economic woes are providing lots of punch lines for comedians on late-night TV.
Some local officials and business leaders aren’t laughing.
The state — and Inland Southern California in particular — has become a poster child for the recession, prompting national media attention that, together with the ongoing budget mess in Sacramento, has left an unsightly tarnish on the once shiny Golden State image.
It’s difficult to separate the toll of the state’s economic crisis on local communities from other, long-term state and national trends. But as California’s leaders grapple with a $26.3 billion budget gap in Sacramento, the rapid growth that defined the region in recent years is tapering off, enrollment in many Inland schools is dropping and some businesses are pulling up stakes and heading elsewhere.
The state’s problems, along with the jokes and news coverage that bring them to a national audience “begin to put at risk the future of the state,” Riverside Mayor Ron Loveridge said Wednesday. “These are very serious times.”
The negative publicity is forcing California’s business leaders and elected officials to work twice as hard to attract and retain revenue-generating families and companies, Loveridge said.
And there’s no shortage of it.
…
US News & World Report
Legalize Marijuana and Solve California’s Budget Crisis
July 08, 2009 05:52 PM ET
By Bonnie Erbe, Thomas Jefferson Street blog.
Here’s a possible solution to California’s budget crisis, and for that matter, a possible solution to most state’s fiscal crises: legalize and tax marijuana.
These TV ads started airing in California today, featuring a marijuana consumer who—along with millions of others in in the state—wants to pay taxes to help bridge California’s massive budget gap. Nadene Herndon, 58, declares that “instead of being treated like criminals for using a substance safer than alcohol, [marijuana consumers] want to pay our fair share.”
I know what you’re thinking. “Only in the Left Coast would liberals support such an idea.”
…
Are people *really* going to pay a bunch of taxes on something they can grow themselves?
Let’s see - CA population 36M
Budget shortfall $26B
Will a pot tax really bring in $720 per man, woman, and child per year?
Somehow I doubt it.
Easily.
While I am certainly for legalizing all chemicals/drugs, whatever, I am not convinced it will cure California’s budget problems.
While we are at it, maybe we can become like Nevada and legalize prostitution. It’s legal in most of Europe and in Canada, about 54 countries legalize it. The U.S. is still puritanical/inquisitional. Very dark ages on issues of consent.
* The Wall Street Journal
* JULY 13, 2009
CIT Group Scrambles to Survive, Avoid a Run
By JEFFREY MCCRACKEN and SERENA NG
CIT Group Inc. officials spent the weekend trying to hash out a plan that would help calm markets and convince customers and investors that it can work its way out of a deepening liquidity crunch.
Over the weekend, CIT representatives held discussions with members of congress, government officials and regulators as they became increasingly nervous hundreds of small and midsize business customers may rush to withdraw funds or try to draw down credit lines.
CIT executives were worried that customers would be rattled by reports over the weekend that it hired a prominent law firm to prepare for a possible bankruptcy filing after so far failing to get additional government assistance.
…
THE GIANT HAS FALLEN!!!!
Wait, I thought you said Citigroup.
Oh well. Nevermind.
Patience, my friend.
Citigroup unlikely to cheer investors
By Francesco Guerrera
Published: July 13 2009 03:00 | Last updated: July 13 2009 03:00
Citigroup’s second-quarter results on Friday will be closely scrutinised as a health check for both the troubled financial services group and the US consumer, writes Francesco Guerrera .
Investors are likely to find little solace on either front. After interrupting a streak of six losing quarters by recording a profit in the first three months of the year, Citi is expected to have swung back into the red.
The bank is forecast to have recorded a loss of $1.38bn in the three months to June, according to analysts’ estimates.
…
Homes that get stuck on market for years have unwanted upkeep - In the 1 1/2 years that Ed Tuttle, 31, has tried to sell his unoccupied brick one-story in Oklahoma City, he has hired people to mow the lawn, re-grout tile, stage the home, repair a squirrel-eaten hole in the roof, trap squirrels in the attic and fix a blown-down fence.
“It’s an absolute nightmare maintaining it,” said Tuttle, who has moved to Rockville, Md., for a job. “It’s absolutely the most frustrating and demoralizing thing in the world.”
“…he has hired people to mow the lawn, re-grout tile, stage the home, repair a squirrel-eaten hole in the roof, trap squirrels in the attic and fix a blown-down fence.”
But has he reduced the price? Hmm?
Boo hoo. Bummer Ed. Should have rented.
Was in downtown Baltimore over the weekend visiting my sister. Still a “California girl” living there since April. Living in a sixth floor loft rental on the waterfront. She has always been upscale and spends, but does not save, but she is a very dedicated worker.
Her area is awesome. Fell’s point. Lots of little pubs and within walking (humidity/sweating) distance to the Inner Harbor or Canton. We hung out over there, but took a side trip into Columbia.
This morning we ate at Blue Moon Cafe on AliceAnna street. Walking there at 8:00 was a humid experience. air conditioner was on in the little breakfast place but could not counter the heat from the kitchen. The food is incredible. The area has some cobblestone streets. I’m hooked.
Didn’t notice before (been to Inner Harbor about six or seven times) but Ruth Chris is near Barnes & Noble and Hard Rock. Like behind those businesses.
So now the topic of RE. Sunday Baltimore Sun had a RE feature of a high rise loft under construction (some units complete) in an industrial area. From what I saw, it looked great. Even though I lived in White March from late 2007 to late 2008 I am still unfamiliar with some of the locations. The price of a loft seems to be about $280k for 1,000 sf.
48 units have been sold already.
Me? I still am working in LA. Returned back home this afternoon. I am a renter for at least the next two years. By golly, being footloose has won me a bunch of “insects” bugging me that I’m 50 and not married and not an owner of a house. That I will die without having a son to carry on. Seriously. A guy at work on Thursday sat his behind down in my office and said it all, minus real estate. He’s married and has four daughters. Envy? On whose part?
Most people are very uncomfortable with the notion that someone who made completely different choices than they did could nonetheless find personal fulfillment.
Baltimore has some really amazing areas. The only prob with buying in the city is the property taxes - often double what they are in the county, but fewer services (ie, schools are bad). We live just outside the city and love it. It’s a great city, though still overpriced in RE considering the payscale here. Prices are slowly falling … but it is happening, particularly in the city …
Obama seems resolved to set the record straight on matters the Bushies preferred to sweep under the rug.
Obama orders review of alleged slayings of Taliban in Bush era
* Allegations: Bush administration resisted inquiry into CIA-backed Afghan warlord
* Inquiry stems from alleged deaths of at least 1,000 Taliban prisoners under warlord
* Gen. Dostum has served as chief of staff of Afghanistan’s post-Taliban army
* Obama: “There are responsibilities that all nations have, even in war”
(CNN) — President Obama has ordered national security officials to look into allegations that the Bush administration resisted efforts to investigate a CIA-backed Afghan warlord over the killings of hundreds of Taliban prisoners in 2001.
“The indications that this had not been properly investigated just recently was brought to my attention,” Obama told CNN’s Anderson Cooper in an exclusive interview during the president’s visit to Ghana. The full interview will air 10 p.m. Monday.
“So what I’ve asked my national security team to do is to collect the facts for me that are known, and we’ll probably make a decision in terms of how to approach it once we have all of the facts gathered up,” Obama said.
The inquiry stems from the deaths of at least 1,000 Taliban prisoners who had surrendered to the U.S.-backed Northern Alliance in late 2001.
“…we’ll probably make a decision in terms of how to approach it once we have all of the facts gathered up,” Obama said.
Or until the American people have had time to forget about it–which will undoubtably, come first.
This incident is on a par with the My Lai Massacre during the Vietnam war. Will it have the same effect? Probably not. Not with Obama wanting to sweep every issue related to prosecuting war criminals under the rug.
As long as Obama lets these criminals roam free, IMHO, he’s just as responsible.
Good ridance.
At the end of the day, what is the difference between a Federal Reserve Note and a California IOU? Both of them look to me a lot like pieces of paper with official-looking ink printed on them.
Posted on Fri, Jul. 10, 2009 10:15 PM
ROAD TO RICHES
California IOUs are laughable
By MARK DAVIS
The Kansas City Star
Poor, poor, California. It gets no respect.
The recent Rodney Dangerfield of states has become the butt of jokes for its decision to pay IOUs instead of cash.
One wag compared the great state to Popeye’s persistently pinched friend Wimpy: “I will gladly pay you Tuesday for a hamburger today.”
That’s right. Practically out of cash, the good folks in Sacramento are scribbling “IOU” on slips of paper, officially called registered warrants, though no one is being arrested at this point.
Residents and businesses get registered warrants instead of tax refund checks. Vendors, contractors and local governments that do business with the state also get them, in lieu of those slips of paper from the U.S. government they normally settle for.
Supposedly $3.36 billion worth of these IOUs, each earning 3.75 percent interest, will be circulating by the end of the month.
What’s the big deal? I insist that California cash is worth the paper it’s printed on, or thereabouts.
…
“Supposedly $3.36 billion worth of these IOUs, each earning 3.75 percent interest, will be circulating by the end of the month.”
wasting even more money paying interest on IOU’s
when this state crashes hard and lays off thousands of folks and quits paying for thousands more free loaders then maybe home prices will fall down to reasonable income = mortgage ratios.
I saw Huel Howser interviewing homeless people who live in nice apartments in Santa barabra, how sad without the state or whatever pays for the housing they couldn’t live in Santa Barabra
I’m seriously considering buying some of the IOU’s, but 4% doesn’t seems like enough profit, considering the risks..
Some small business or contractor that’s stuck with, say, a warrant for $100,000 might be in such terrible shape that they’d be happy to trade it for $50 or $60,000 cash in hand today, rather than wait for 4 months (or longer)..
July 11 (Bloomberg) — Extremely fat swine flu sufferers may have a tendency to become severely ill, health officials in the U.S. and Europe said, after a report showed a “striking” prevalence of obesity among patients hospitalized in Michigan.
Nine of 10 patients with the pandemic flu strain admitted to an intensive care unit at Ann Arbor from late May to early June, were obese and seven were “extremely obese,” with a body mass index of at least 40, doctors said. Three of the 10 died and seven had no other known health problems.
The Onion?
Absolute Auction - 2/2 Orlando, FL Condo Resort Living
Located close to Universal, Disney, Millenia Mall, I-4 Item number: 280366941626
38 bids so far, $65,095. auction is over in 19 hrs.
Lehigh Acres FL 2214 sq ft CBS 3/2/2 FREE AIRFARE!
Absolute Auction! NO Reserve! Turnkey Home! Upgrades! Item number: 300328357121 33976zipcode,
$71,800. auction due in 19hrs.
This is the area you guys keep talking about, that is in the middle of nowhere.
FREE AIRFARE!
LOL!
Moral hazard problem identified: Bailed-out banks who massively profited from taxpayer largess have little incentive to avoid future strategies which increase the risk for a repeat of last fall’s financial meltdown.
Goldman Sachs regains the envy of Wall Street
Bailed-out bank expected to report windfall profits
By Graham Bowley and Jenny Anderson
NEW YORK TIMES NEWS SERVICE
2:00 a.m. July 13, 2009
NEW YORK – Most of Wall Street, and America, is still waiting for an economic recovery. Then there is Goldman Sachs.
Up and down Wall Street, analysts and traders are buzzing that Goldman, which only recently paid back its government bailout money, will report blowout profits from trading tomorrow.
Analysts predict the bank earned more than $2 billion in the March-June period, thanks to its trading prowess across world markets. If they are right, the bank’s rivals will once again be left to wonder exactly how Goldman, long the envy of Wall Street, could have rebounded so drastically only months after the nation’s financial industry was shaken to its foundations.
The obsessive speculation has already begun, along with banter about how Goldman’s rapid return to minting money will be perceived by lawmakers and taxpayers who aided Goldman with a multibillion-dollar cushion last fall.
“They exist, and others don’t, and taxpayers made it possible,” said one industry consultant, who, like many people interviewed for this article, declined to be named for fear of jeopardizing business relationships.
…
Are grocery store “4:15″ sections becoming the new soup lines?
Economy drives diners to their grocery stores
People are eating out less, buying more prepared food
By Catherine Mitros
2:00 a.m. July 13, 2009
Maria Sinsay ordered a sandwich at Albertsons in East Village last week while her son Elijah Smith ate a cup of chicken noodle soup made at the grocery store. (K.C. Alfred / Union-Tribune) -
With recession-squeezed consumers eating out less, grocery stores are seeing a sales boost from an expanding menu of prepared meals.
For years, traditional grocery stores have lost ground to restaurants and takeout, as busy people looked for a quick-fix dinner or lunch option.
Now those people want bargains as much as convenience. As they seek to stretch their food dollars, they are finding that many supermarkets have been improving their ready-to-go offerings.
The result is that some stores have seen 7 percent to 10 percent growth in sales of prepared items, said Wade Hanson of Technomic, a Chicago-based food and restaurant industry consulting firm.
“This is something that is becoming a viable alternative to restaurants in the eyes of most consumers,” Hanson said.
In March, Albertsons launched “Simply Good Meals,” an initiative that groups together prepared foods so shoppers can easily assemble a meal. The areas where these items are found are dubbed “4:15” sections.
“That is the time of the day when most moms are thinking, ‘What’s for dinner?’ ” said Albertsons spokeswoman Lilia Rodriguez.
…
I like FPSS’s suggestion better: McDonalds is the new soup lines. Specifically the dollar-menu, most likely.