Bits Bucket For August 2, 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
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While Megabank, Inc celebrates a return to multi-billion dollar profits and the headline stock market indexes rocket skyward, many Americans are currently looking forward to the prospect of running out of unemployment benefits before the longest post-WWII recession ends.
Something just doesn’t smell right here. Has Megabank, Inc similarly profited off the back of Uncle Sam during previous credit busts?
Jobless benefits run out for many
Congress may need to pass another payment extension
In The Union-Tribune on Page A1
By Erik Eckholm
Over the coming months, as many as 1.5 million jobless Americans will exhaust their unemployment insurance benefits, ending what for some has been a last bulwark against foreclosures and destitution.
…
“Officials to seek unemployment benefits extension”
http://www.google.com/hostednews/ap/article/ALeqM5hLKyB9H7lUpiALFVlU7RRJa9-EfwD99QRT6O2
“Something just doesn’t smell right here. Has Megabank, Inc similarly profited off the back of Uncle Sam during previous credit busts?”
Did Uncle Sam try to carry the entire economy on it’s back in the Great Depression, or is this a first?
Serial bottom callers, read carefully:
San Diego Union-Tribune
Dean Calbreath
New wave of defaults on horizon, experts say
2:00 a.m. August 2, 2009
Four years after the housing downturn began, prices in San Diego County and much of the rest of the country are beginning to inch up again. And, locally, at least, there are fewer foreclosures than there were last year.
So are we finally hitting bottom in the housing market? Don’t bet on it.
So far, the nation’s banks, which have been given billions of dollars over the past year under the idea that they’ll use the money to help stabilize the economy, still seem to be reluctant to modify the terms of the loans they’ve made.
A report last week by the Government Accountability Office showed that the nation may be little more than halfway through the foreclosures emanating from the housing bubble.
And now, real estate experts say, we’re about to be hit with another wave of foreclosures, because many homeowners who have been laid off or furloughed during the recession can no longer pay their bills.
“There will be absolutely no shortage of foreclosures going forward,” said Bruce Norris, head of the Norris Group, a real estate investment firm in Riverside.
…
‘One reason for the decline, real estate analysts say, is that the Legislature imposed a 90-day moratorium on foreclosures beginning June 15.
“Once the moratorium is lifted on Sept. 15, there’s going to be an avalanche of foreclosures in the system,” Norris said. “It should make this winter an amazing time for businessmen and real estate investors like me.”’
I thought the California foreclosure moratorium had ended? This article is the first I have read which mentions another one recently began.
So regarding the Sept. 15 end to the moratorium, why would Norris (or anyone else) assume that another one (or an extension) won’t be put in its place?
Yes, there was another one. Yes, that’s been the cause of much head-beating.
On the other hand, I have some friends who are looking to purchase this fall*, so I’ll let them know to start looking in, say, October.
*These are some friends who moved to the Sacramento area in 2005 or thereabouts and freaked when they saw the housing prices. I had been reading this blog and informed them that they’d probably want to start looking in 2009-2011. So hey, positive effect from this blog.
“On the other hand, I have some friends who are looking to purchase this fall*, so I’ll let them know to start looking in, say, October.”
What’s to stop the PTB from putting in place another foreclosure moratorium after the current one expires, then another one after that, then another, then another…
Or from taking a large chunk of public money (say hundreds of billions of dollars) and summarily handing it over to banksters so that they can comfortably ride out the economic storm or perhaps even go on a foreclosure home or land shopping spree while others go homeless or remain priced out of the housing market indefinitely?
Just askin’…
Well, if that happens, I’ll let them know, but they’re like us– what used to be the ideal of the typical home buyer. Young family, stable job (long story short, one of the few companies in the world with huge cash reserves and no debt, no leases, etc., and it runs so lean that every employee in the division is absolutely necessary) and paying more in rent than they would pay for a larger place.*
In other words, they could get a better deal later, but they’ve been waiting on this purchase for four kids, and they’re beginning to wonder when their LL is going into foreclosure.
*Elk Grove, CA, has a crazy set of circumstances that mean it’s castly underserved in terms of real (read: stable) rental properties, so rents have remained higher than they perhaps should. But then, it was $1000/month for a 2 bed apartment in 2000, which is just insane for a suburb community.
Won’t the bond market eventually rebel? I remember like 6-8 weeks ago, the interest rates started creeping up because of the fear of inflation. Is there a limit to the money the government can print?
Given the choices here in the Sacramento MSA, why would anyone consider living in Elk Grove, CA. So many problems down there. Bad Schools. Bad roads and commute. Increasing gang activity (San Francisco Bay Area trash moved there over the years because it was cheap and brought along their gang banger kids). Rows of houses and strip malls. Can’t get anywhere without a car. What a suburbanite wasteland. On par with Fresno or Modesto, CA.
“why would anyone consider living in Elk Grove, CA.”
Job. Seriously, who would choose to live in another part of Sacramento when your job is in Elk Grove?
Also, all you have to do to escape the “gang-banger bad school trashy” vibe is buy in an older part of town. Teachers fight to get in the EG school district, so I’m wondering if you’re just seeing the South Sac bleed-over.
You’ve got me on the strip malls, though. We cook at home.
Makes sense to live there if you work there. Pockets of Elk Grove are nice. Old part like you said. If you are close to the old downtown you can walk to that brew pub (can’t remember the name).
My friend teaches in Elk Grove and she has lots of little ones whose parents show up after school to pickup the kids in the $500 car with $2000 rims bigger than Semi wheels. She must be on the South Sac border. Or maybe they bus kids over from the bad area.
Is it possible to completely stiff the piper?
He’ll lead all our kids away and drown them.
Speaking of making the TARP transparent and accountable, I for one would like to know the accounting explanation for the financial magic which enabled Megabank, Inc to pay bonuses in excess of profits last year. Did it involve the use of rabbits and top hats?
July 2009
TROUBLED ASSET RELIEF PROGRAM
Treasury Actions Needed to Make the Home
Affordable Modification Program More Transparent
and Accountable
The TARP has been a bit of a hot topic at the GAO since last fall. One might guess they ought to be getting to the bottom of the story some time soon now. I am hoping a future report explores the link between Megabank, Inc bonus payments and TARP payments to banks that would have gone bankrupt without government support, as that would appear to qualify as a “transparency and accountability” issue if anything would.
Check out a partial list of the references in the bibliography to the report linked above:
Troubled Asset Relief Program: June 2009 Status of Efforts to Address Transparency and Accountability Issues. GAO-09-658. Washington, D.C.: June 17, 2009.
Troubled Asset Relief Program: March 2009 Status of Efforts to Address Transparency and Accountability Issues. GAO-09-504. Washington, D.C.: March 31, 2009.
Troubled Asset Relief Program: Capital Purchase Program Transactions for the Period October 28, 2008 through March 20, 2009 and Information on Financial Agency Agreements, Contracts, and Blanket Purchase Agreements Awarded as of March 13, 2009. GAO-09-522SP. Washington, D.C.: March 31, 2009.
Troubled Asset Relief Program: Status of Efforts to Address
Transparency and Accountability Issues. GAO-09-539T. Washington, D.C.: March 31, 2009.
Troubled Asset Relief Program: Status of Efforts to Address
Transparency and Accountability Issues. GAO-09-484T. Washington, D.C.: March 19, 2009.
Troubled Asset Relief Program: Status of Efforts to Address
Transparency and Accountability Issues. GAO-09-474T. Washington, D.C.: March, 11, 2009.
Troubled Asset Relief Program: Status of Efforts to Address
Transparency and Accountability Issues. GAO-09-417T. Washington, D.C.: February 24, 2009.
Troubled Asset Relief Program: Status of Efforts to Address
Transparency and Accountability Issues. GAO-09-359T. Washington, D.C.: February 5, 2009.
Troubled Asset Relief Program: Status of Efforts to Address
Transparency and Accountability Issues. GAO-09-296. Washington, D.C.: January 30, 2009.
Troubled Asset Relief Program: Additional Actions Needed to Better
Ensure Integrity, Accountability, and Transparency. GAO-09-266T.
Washington, D.C.: December 10, 2008.
Troubled Asset Relief Program: Status of Efforts to Address Defaults and Foreclosures on Home Mortgages. GAO-09-231T. Washington, D.C.: December 4, 2008.
Troubled Asset Relief Program: Additional Actions Needed to Better
Ensure Integrity, Accountability, and Transparency. GAO-09-161.
Washington, D.C.: December 2, 2008.
Since I first discovered the existence of the GAO I was amazed they were allowed to exist. I’m still amazed they are allowed to exist. That department pulls no punches.
But I guess it doesn’t matter when they are just ignored and have no regulatory powers.
“I for one would like to know the accounting explanation for the financial magic which enabled Megabank, Inc to pay bonuses in excess of profits last year. Did it involve the use of rabbits and top hats?”
Rats and snakes, more likely.
My dad and my baby sister each figured out the solution to the problem of protecting themselves in bear markets: Both fired their investment advisers.
Gail Marksjarvis
Few experts can protect investors in bear markets
2:00 a.m. August 2, 2009
It’s our greatest fantasy as investors: to find the pro who will hold us by the hand, protect us from losses and guide us to the treasure our untrained eyes cannot find.
The trouble is, that stock-market guru does not exist. Investors concerned about protecting their money in downturns are likely to be disappointed: A study of the most respected investment newsletters shows that the pros might have been right in one of the last two market crashes, but typically not both. And in the good times, they generally get it wrong, too.
…
I believe it was Bob Brinker (not a fan) who said you are your own best financial advisor.
Heh! I knew that all along. But most people don’t even what to think about money stuff, except how to spend it. They think somebody can take care of all that so they don’t need to think about it at all.
I know people who are constantly fretting over their money being managed by full service brokers, I mean just ordinary people with meagre holdings, and the thought of transferring it to Vanguard or something similar and managing it themselves just intimidates them no end.
So they go to Merrill Lynch or Edward Jones to have it managed and churned, because some nice young guy in a suit takes care of everything. I’m feeling less and less sympathetic I’m afraid. It’s not much different than all those mucky-mucks turning their money over to Madoff.
I really don’t trust anyone any more. All I do now is buy and sell ETFs with a TD Ameritrade account, and even then I never feel comfortable. The whole business has lost people’s trust, and once trust is lost in a relationship you never really get it back.
Overall consumer expenditures are off by, what, 1.9 percent or so, but school supply expenditures (somewhat of a staple) are projected to be down by 8 percent? Something doesn’t quite fit here…
Learning to cut back
Lean economy trims budgets for school supplies, clothes
By Nina Garin
San Diego Union-Tribune Staff Writer
2:00 a.m. August 2, 2009
…
A recent Deloitte Services survey shows that 32 percent of consumers plan to spend less this back-to-school season – a figure that’s up 10 percentage points from last year.
The federation also projects spending will be down almost 8 percent, to $548.72 per family from $594.24 a year ago. It expects total spending of $47.5 billion.
“We’re in dire straits. There’s just not a lot of good economic news out there,” said George Whalin, president of Retail Management Consultants in Carlsbad. “People aren’t confident to go out and spend a lot of money.”
…
Welcome to the New NORMAL!
—————
People aren’t confident to go out and spend a lot of money.”
“People aren’t confident to go out and spend a lot of money.”
Why, that’s heresy! Just look how well that cash for clunkers program is doing! All kidding aside, however, that’s the “money” quote. Because money’s only as good as the confidence level, when you’re dealing with a fiat system.
Not to worry — the PTB are hard at work behind the scenes to eradicate negative psychology and restore consumer confidence. Any day now, bluebirds of happiness will again flock towards Target and Wall-Mart stores throughout the land
“the PTB are hard at work behind the scenes”
And in front of the scenes as well. Larry Summers was on Meet the Depressed this morning, bombasting and bloviating about how great the administration’s plans for the economy are, etc.
Dang, that guy is one deluded madman, I’m tellin’ ya. He really needs a rubber room, not a seat in front of David Gregory. Really humpin’ to please for that Fed Chairmanship. Bad as Bernanke is, I’d not want to see him replaced by Summers.
“Meet the Depressed” TEE HEE ! How ya doin’ Palmy? I see no tropical stuff yet, I don’t think any yet this year, right?
Please do not make the mistake of thinking that what he said was the same as the thoughts in his head. Do you think that a regulator getting up in front of an industry conference says, “We think you guys are all crooks and we are doing everything we can to catch you”? No. She talks about working closely with stakeholders and efficiency and that sort of thing no matter what is going on in the industry. That is what you do or people start threatening their reps and senators with no donations next cycle unless someone takes away all the regulators money.
And Meet the Press is no different. They might think that things are really turning around. They might not. They might think they have managed to prevent a disaster from the first wave of resets and the same thing will work the next time around so talking up this one is a good idea. Or they may think they won’t be allowed to do much of anything when the next wave happpend so they better talk up how great this one is so they can blame an obstreperous Congress when they next wave hits and everything collapses. No way to know without hanging out in the hallways in buildings that have snipers on the roof.
It is called spin. It is a way of life. Getting upset about what is said on a Sunday morning show is a waste of cortisol.
Summers as the Fed chairman scares the heck out of me. I don’t even like him in the White House.
Well, what do we expect the spin doctors to say on TV? “We’re doomed. We’re frakking doomed!” ?
Not gonna happen,
“Dang, that guy is one deluded madman, I’m tellin’ ya.”
Stop blaspheming our future Fed Chairman, before God aims a lightning bolt your direction.
Yesterday my wife and I were coming home from the laundromat. We were walking on Jane Street. It was about 5 o’clock in the afternoon. Across the street was a guy with a shopping cart. He had several large plastic bags of cans and bottles. When we were walking by he was very openly peeing out into the street. I don’t think he was trying to be funny or rebel or anything. He just had to go.
I would trust that guy in charge of The Federal Reserve (a fully private bank) and The Treasury more than the current collection of devils we have in there.
“Please do not make the mistake of thinking that what he said was the same as the thoughts in his head.”
Isn’t this pretty much the standard mea culpa for all deliberately misleading propaganda that spews from the mouths of government leaders? How about addressing reality on the ground for a change instead of trying to lure the gullible into predicating their financial decisions on false assumptions?
“We’re doomed. We’re frakking doomed!”
I was thinking maybe ‘This sucker’s going down.’ How does that sound to you?
“He just had to go.
I would trust that guy in charge of The Federal Reserve (a fully private bank) and The Treasury more than the current collection of devils we have in there.”
You certainly can’t fault the guy for dishonesty. Actions speak louder than words.
“This sucker’s going down.”
Bush, like Biden, shares the pleasant trait of occasionally accidentally telling the truth. (One can only imagine their off-screen handler’s nervousness when they’re before a live mic and talking without a script.)
I flocked, and then I returned flocked. I didn’t want to be flocked again.
targe’t will just have to forgive me today.
Flocking Aaaaaaaaa
I think I found my ‘funny bone’ today.
The beggar man and his mighty king are only diff’rent in name,
For they are treated just the same by fate.
Today a smile and tomorrow tears,
We’re never sure what’s in store,
So learn your lesson before too late, so
Be like I, hold your head up high,
Till you find a bluebird of happiness.
You will find greater peace of mind
Knowing there’s a bluebird of happiness.
And when he sings to you,
Though you’re deep in blue,
You will see a ray of light creep through,
And so remember this, life is no abyss,
Somewhere there’s a bluebird of happiness.
Life is sweet, tender and complete
When you find the bluebird of happiness.
You will find perfect peace of mind
When you find the bluebird of happiness.
Two hearts that beat as one,
‘Neath a new found sun,
We are in a world that’s just begun,
And you must sing his song, as you go along,
When you find the bluebird of happiness.
-Best-selling record in 1948 by Art Mooney and his Orchestra
It has beautiful lyrics. I guess I’ll get my blow up doll Lolly out, and we’ll find it on You Tube, and dance to it.
“Just look how well that cash for clunkers program is doing!”
Spending other people’s money is different. I even checked to see whether my car qualifies for the ‘cash for clunkers’ stimulus program, but its gas mileage is too good. For the first time in my life, I find myself wishing I had bought an SUV (just ribbin’ ya!)…
I missed the Cash for Clunkers by two years. I’m driving one of those 8-cylinder gas hogs. Oh well.
Good, at least you are protected more from the idiots.
Oh yes. Plenty of metal between me and the not to great drivers on the road.
Hey San Fran Gal, read your reply to Oly, then went to check it out, then replied to Oly twice, are we on the same page? Thanks.
Yes we are on the same page Ate-Up
You are perpetuating a myth about SUV safety. You may think you’re Rambo, but you’re really a Weeble:
WILMINGTON, Del., Jan. 3 - Children are no safer in a hefty sport utility vehicle (SUV) during a crash than they would be in a standard sedan, researchers here reported.
Action Points
Advise parents that this study suggests that, despite their greater size and weight, SUVs are not any safer than standard sedans for children during a crash because of their increased tendency to roll over.
Remind parents that age-appropriate child restraint and rear seat positioning are critically important for reducing the risk of injury in a crash, regardless of vehicle type.
Any potential safety advantage of the SUV’s greater size and weight is offset by their increased tendency to roll over in a crash compared with sedans cars, said Lauren Daly, M.D., of the A.I. Dupont Hospital for Children here.
The best actions parents can take to make sure children are protected during a crash is restrain them properly in a car, according to a study by Dr. Daly and colleagues n the January issue of Pediatrics. Children younger than 13 should also be banned from the front seat of a car with a passenger-side airbag.
The study included data on nearly 4,000 children who had been in crashes between 2000 and 2003. Data were obtained from an ongoing vehicle crash surveillance system with insurance claims from State Farm Mutual Automobile Insurance Company as the source.
About 38% of these children had been in SUVs, and about 62% had been in a sedan. The study included only vehicles of model year 1998 or newer.
Logistics regression modeling computed odds ratios of injury for children in SUVs, both adjusted and unadjusted for potential confounders including proper child restraint, weight of the vehicle, exposure of children to passenger side airbags, and whether the vehicle rolled over.
Among all children in the study, those restrained appropriately were less likely to be injured (odds ratio=0.25; 95% confidence interval=0.15-0.45) and those in the front seat were more likely to be injured (OR=2.06; 95% CI= 1.33-3.21).
In both vehicle types, children exposed to a passenger airbag were more likely to be injured than were those who were not (OR=4.70; 95% CI=2.36-9.37).
Rollover crashes increased the risk of injury in both vehicle types (OR=3.29; 95% CI=1.88-5.76) and occurred more than twice as frequently with SUVs (2.9% compared with 1.2% for standard passenger cars).
There was a non-significant trend for increasing vehicle weight being a protective factor with both vehicle types (OR=0.86; 95% CI: 0.73-1.01). However, after adjustment for all of the factors, the risk of injury was not significantly different for children in SUVs versus standard passenger cars (adjusted OR=1.50; 95% CI=0.88-2.57).
Especially dangerous for children in SUVs was being unrestrained versus restrained in a rollover crash (OR=24.99; 95% CI=6.68-93.53).
“In either vehicle type, age-appropriate child restraint and rear seat positioning are critically important for reducing the risk of injury in a crash,” the study authors said. “However, because of the higher risk of rollover, pediatricians should reinforce strongly the importance of age-appropriate restraint for all children who ride in SUVs.”
Furthermore, the increased risk of injury posed by deploying passenger-side airbags in either vehicle type reinforces the importance of educating parents to never place children younger than 13 in the front seat of a passenger-side airbag-equipped vehicle, they said.
“This information may assist parents wanting to make fully informed decisions regarding the choice of vehicle for their family or may assist pediatricians called on by families for counseling regarding child passenger safety,” the authors concluded.
Primary source: Pediatrics
Source reference:
Daly L et al. Risk of injury to child passengers in sport utility vehicles. Pediatrics. 2006; 117(1):1-14.
Not sure who you’re pointing at with this article. No where do I say I drive a SUV. I drive a station wagon. One of those metal cars that sit low to the ground and won’t tip over.
You took care of him, so I didn’t have to. Plus, I couldn’t reply. No reply gig.
you’re right, I automatically translated gas-hog into SUV. My bad.
Politicians and I have one thing in common: I like to spend my money, and THEY like to spend my money.
We looked into that as well today. Had to dismiss that my 94 ToyCam gets 1 mph to much. But I still love my toycamwagon.
Was going to wait till next yr anyway.
They can’t spend because they aren’t confident or because they just plain can’t?
There never seems to be any discussion about the future demand that was robbed by the boom. Boom time consumption levels are just taken as a gospel. It oozes out of nearly every article - the implication that the boom was “normal”.
So true. This bugs me, too.
The little munchkins grow out of their stuff very fast particularly in the expensive years “the teens”…I don’t think buying new clothes (at some price point) is much of a choice…
good will
consignment stores
salvation army
and tons of donation stores for churches, hospitals etc all have clothes.
If you live anywhere near wealthy socialites, you can find lots of stuff that they never wore, or once. The New Chic
My daughter did that to get a professional-looking wardrobe for student teaching. She haunted certain thrift stores and got a beautiful assortment of dress and professional clothing for her classroom appearances. When other student teachers were wearing sweatshirts and blue jeans, she showed up in gently-used skirts, dress slacks, tailored blouses, and suit jackets. Boy, did she make a great impression. She still dresses that way. She may wear slacks and sweater from Walmart, but they look professional and she is well-dressed. She always wears low pumps or dressy flats, not running shoes in the classroom.
I consigned my gently used items when I moved from city to desert. No one knows the difference and if you shop regularly the regular workers will call you when good items come.
I still can’t wrap my head around the measly 1.9% drop in consumer spending. I tell myself it’s a huge number, I remind myself that many spend all their income to stay afloat, I think about higher rates on credit card balances maybe contributing, I consider the higher spending on health care- but I still think the drop should be much greater. Every individual industry you read about is on the ropes, with record breaking drops in sales, what few sales that are occurring are at bargain sales prices, unemployment is at record highs, and spending is off less than 2% ? Does not compute. Someone ’splain it to me, please.
It’s called faking the numbers, then ‘revising’ them later.
faked once revised later.
giggle.
I read an article on Bloomberg that explains this.
Most consumption is baked in, and cannot be cut. Health care? Financed or subsidized by government, paid for in taxes, like it or not. Housing? Locked in if you have a house, or generally even an apartment if you aren’t willing to move and your landlord plays chicken. You live in most of America you need that car to get to work. Your long term choices determine the energy use of your home, and can only be modified gradually. And you have to eat.
So with a modest decrease in total consumption results in a huge increase in discretionary consumption.
“Housing? Locked in if you have a house, or generally even an apartment if you aren’t willing to move and your landlord plays chicken.”
Good explanation, except for one little problem: Our country has a record number of households on the brink of foreclosure, not to mention the worst employment picture since 1945 or so.
These circumstances have a tendency to changing the nature of consumption which is normally considered to be ‘baked in, and cannot be cut.’
The big point is that perma growth is over. We have a grow or die economy.
Not according to the owner’s wife/open house person today.
Buy this house now at soft $1.8mill today and in one yr this one acre home will start increasing dramatically. It will come back.
We could hardly contain ourselves.. I had to fight myself to keep my checkbook inside my purse. Oh yea, it was in the car, so not to difficult!
Let me repost…
Has anyone else noticed that Zillow zestimates have gone nuts in the past week?
My old cheap house in San Jose was slowly deflating in zestimates down from the $670K I sold it for in 2006 to around $485K. It just zoomed up $70K in the past 30 days to $555K. What’s that all about? That’s a 7% rise in a month!
Several other houses I’ve checked have done the same. It’s as if someone pushed the “silly” button on the Zillow computer.
We hit bottom dude, didn’t ya get the memo? It’s off to the races again.
Righto — savvy investulators are snapping up foreclosure homes at fire sale prices in eager anticipation of a return to bubble pricing, and Zillow is right there picking up the anticipated price impact.
I thought Zillow was perceived as worthless by many. They had my old house in Spring Hill listed for 275K when I sold it for 152K. It is now worth about 75K, seriously. I haven’t checked lately, maybe I will before I continue this post… Well, they got it at 105K now. That may be about right, I guess.
Worthless — probably not. Consistently upwardly biased? Definitely.
Yes, because everyone knows that market/economic tops and bottoms are always clearly marked. (giggle) The money is there for the taking, folks, just call an agent up and they’ll be sure to get you yours. People are only poor by choice in the land of the “sure thing”.
Only we’re not talking some guy buying a couple hundred shares of XYZ corp. that he can walk away from. They’re looking for volunteers to gamble on the biggest purchase most will ever make.
Speaking of investulators. Ystdy I drove by Vista,’scuse me,
Villa Portofino DOT com.
It is a Luxury Adult Community.
I wish I had had my camera.
Big fancy gate, HOA is, drumroll, $2,500. per month.
INCLUDES gym, pools_ I only saw 1, Movie theatre, Chef restaurant for all meals, gosh to much to mention.
Well, anyway, not even 1/4 built. Carports do not have coverings on top. Green spray to alleviate the sand blow, all over the place.
Here is the capper, I get the fancy folder and
22 for sale. 11 are bank owned. 2 more are short sales.
And I am not kidding when I say it is only 1/4 built, if that.
Heart of Palm Desert 73755 Country Club Drive, 92260- look it up. Then across the street on corner of Monterey/CC drive is something that really is being built now. Why?
We hit bottom dude, didn’t ya get the memo ??
Yep…The great Mugambe “Greenspan” said as much this morning…
Dennis,
Same here in Southern MD - just as I thought Zillow numbers were beginning to at least resemble something close to actual values…suddenly off to the races.
Still a great site for research - but valuations are way off.
After reading this, I have to wonder how my divorced-mother-of-five SIL will ever again be able to qualify for a home mortgage.
Knowing the score
Consumers find it can be hard to learn credit rating
By Nancy Trejos
THE WASHINGTON POST
2:00 a.m. August 2, 2009
As banks tighten their lending standards, one number is playing an increasingly critical role in determining the financial fortunes of consumers: the credit score.
Lenders use them to decide whether to extend credit and at what interest rate. As lenders demand higher scores, more Americans are having trouble getting loans.
…
“Credit scores have taken on a new degree of importance,” said Scott Talbott, senior vice president for government affairs at the Financial Services Roundtable, an industry group. “In the past, it was a question of ‘What will your interest rate be?’ and now it’s ‘Will you even get a loan?’ ”
As a result, credit is less available to both low-risk and high-risk consumers at a time when they – and the economy – need it the most.
“The consumer who desperately needs credit right now is in a very bad situation,” said John Ulzheimer, president of consumer education for Credit.com. “The consumer who is remaining consistent, the market is passing them by. You have more cars sitting on car lots, and you have houses with for-sale signs.”
Jane Graver is one of those desperate consumers. Graver once had a credit score of about 700, which before the credit crunch made her a desirable candidate for a loan. Most lenders use the FICO score, which runs on a scale of 300 to 850.
Faced with a divorce, serious illness and tough economy, Graver, a small-business owner, missed a few credit-card payments and used up her home-equity line of credit. She was close to being maxed out. Last year, her score dropped to the mid-500s.
Now that lenders are demanding credit scores of 720 or higher, Graver is considered even more of a risk and cannot get a mortgage – or even find a landlord willing to rent her a home. Her house in Orange, N.J., sold at a price high enough to cover her mortgage and line of credit, but she is struggling with what to do next.
“It is difficult to cope,” said Graver, a (divorced) mother of two. “I am absolutely unable to get a mortgage.”
…
—————————————————————————–
TIPS FOR KEEPING YOUR CREDIT SCORE HIGH
-Build up a long history of paying your bills on time. If you do miss a payment, catch up as soon as you can.
-Keep your credit-card balances low. The closer you are to being maxed out, the lower your score will be.
-Don’t close unused credit cards. The proportion of credit lines used affects your score.
-Don’t open too many new cards too rapidly. You might be tempted to do this to increase your available credit, but it could make you look like a higher risk.
-Don’t become delinquent. Call your creditors before you miss payments and ask for a lower rate or other type of workout plan.
wow. mother of five and divorced so do not go together well.
Throw in a McMansion bought at peak housing bubble prices and you have real problems!
I just heard the happy news from my lovely wife that SIL’s x-husband and his new wife are living in said McMansion and keeping up with the mortgage payments (they both work full-tiem
).
I feel a bit ashamed to confess that I cannot wait to hear what happens when my SIL learns why the home is not going into foreclosure (the implication is that x-hubby & new wife will soon be spending more time with the kids in a large, comfortable home, while SIL will soon be hitting the pavement looking for work so she can help finance the three-adult, five-child, two-household living arrangement). It appears that x-hubby and new wife have kept her in the dark thus far…
I’d call that a “three-adult, five-child (so far), two-household living arrangement,” since the new wife has nested.
Hope things go well for your single mom SIL. I wouldn’t want to be in her shoes.
‘…a (divorced) mother of two. “I am absolutely unable to get a mortgage.”’
I don’t mean to sound harsh, but I have to question the writer’s implicit assumption that there is something wrong with the mortgage market if a divorced mother of two struggling under a weight of credit problems can’t qualify for a mortgage. Shouldn’t this be properly construed as a sign that mortgage lending standards are reverting to sanity?
The new game is that if you can’t afford to rent then you try to get a mortgage. How backwards this world around us has become.
…and that ain’t the half if it!
But..but…but…non-creditworthy buyers are ENTITLED to mortgages. The ownership society, remember?
zillow has me up 10% in the last 30 days
22151
Early in July I went onto the Zillow website and made some corrections to the data about my house. They had the wrong values for the square footage and the number of bedrooms.
The Zillow value went up by 3.5% (Charlotte, NC 28269).
Ahansen….What a wonderful essay you wrote a few days ago on boomer demographics…Thanks
Summer 2009 reading list, from the Financial Times:
What a carve up
By John Kay
Published: July 31 2009 16:12 | Last updated: July 31 2009 16:12
Liar’s Poker
By Michael Lewis
Hodder £8.99
FT Bookshop price: £7.19
Binge Trading: The Real Inside Story of Cash, Cocaine and Corruption in the City
By Seth Freedman
Penguin £8.99
FT Bookshop price: £7.19
How I Caused the Credit Crunch
By Tetsuya Ishikawa
Icon Books £8.99
FT Bookshop price: £7.19
Foreclosed: HighRisk Lending, Deregulation, and the Undermining of America’s Mortgage Market
By Dan Immergluck
Cornell University Press, £16.50
A Failure of Capitalism: The Crisis of ‘08 and the Descent Into Depression
By Richard Posner
Harvard University Press, £17.95
Chasing Alpha: How Reckless Growth and Unchecked Ambition Ruined the City’s Golden Decade
By Philip Augar
Bodley Head £20
FT Bookshop price: £16
Review of Financial Regulation
Lord Turner
Financial Services Authority
The Spectre at the Feast: Capitalist Crisis and the Politics of Recession
By Andrew Gamble
Palgrave Macmillan £45
The Storm: The World Economic Crisis and What It Means
By Vince Cable
Atlantic Books £14.99
FT Bookshop price: £11.99
EDITOR’S CHOICE
More from Books - Nov-24
Meltdown: The End of the Age of Greed
By Paul Mason
Verso £7.99
FT Bookshop price: £6.39
Of course, funding for libraries is going to be one of the first things municipalities will cut now that tax revenues are down, so use ‘em while you can! God forbid any politician appear “soft on crime” and suggest that cops might get a smaller raise. But since so many Americans are barely literate anyway, cutting libraries is an easy choice. I am a regular library user, but I know I’m in the minority. The wealthy buy their books if they want them, and many of the poor couldn’t be forced to read at gunpoint (might that be a contributing factor to their poverty?).
Anyway, I finally got “When Money Dies - The Nightmare of the Weimar Collapse” through interlibrary loan. Very interesting. I was surprised what a huge part unions played in raising wages for laborers as inflation increased. Non-union, white-collar workers like doctors and accountants actually had it worse than labor in the initial stages of the collapse because their incomes did not increase as inflation rose. That advantage only lasted a little while, however. Eventually everybody was in the same boat. It made me question how a massive inflation would be possible in the US today, however, given that wage inflation would be harder to drive.
And I just started “And the Money Kept Rolling In (and Out): Wall Street, the IMF, and the Bankrupting of Argentina” by Paul Bluestein. Also very interesting, and better written than When Money Dies. In both of these books, you can find many parallels with our current situation. Reading about the Argentinian crisis is doubly fascinating, however, since it happened so recently.
Add to that an older book, Cadillac Desert.
History of water, dams, and lots of crime,
to bring water to a desert= entire west US.
Enlightening.
Then follow that up with a light tome..Into Thin Air.
Yep, with all these books, I want to get my Tar warmed up
and heading for my box of feather pillows and nearest
elected official, or just cry.
Read into Thin Air. Great book.
“Then follow that up with a light tome..Into Thin Air.”
Suggested sequel (especially for LDS or ex-LDS blog readers):
Under the Banner of Heaven
Whole thing, entire subject is pretty darn scary, ala manson-like with the ‘prophet’ on their side.
Thanks for suggestions!
I wish I could talk my wife into reading that one, but the PTB in the LDS Church have deemed it verboten. (OlyGal — hint, hint…)
Is anyone out there in HBB land in the market for a slightly-used (or even new) container ship?
Business
Shipping in the downturn
Sea of troubles
Jul 30th 2009
From The Economist print edition
The recession is buffeting the world of shipping—with even rougher waters ahead
FROM the sheltered waters of Subic Bay in the Philippines to Falmouth on the south coast of England, a vast, swelling armada lies idle. In Asia’s deep-sea havens 750 vessels—container ships, bulk carriers, tankers, car carriers and others—are laid up. A further 280 are sheltering in European waters. According to Lloyd’s Marine Intelligence Unit, nearly 10% of the world’s merchant ships are swaying gently at anchor because of a collapse in global trade.
Since the recession bit hard last autumn a lot of attention has been paid to the plunge in the Baltic Dry Index, a composite measure of the cost of shipping bulk cargoes such as iron ore and coal. It fell by over 90% between June and October last year, although it has since recovered slightly and is hovering at just above a quarter of its peak. World trade in general remains in its worst slump for generations, although it too is no longer falling. Two of the biggest shipping banks (RBS and HBOS) are in state-backed rehab. The parlous state of the world economy could mean more shipping companies following Eastwind Maritime, which went bankrupt in June. On July 28th Hapag-Lloyd, Germany’s largest container-shipping company, secured a €330m ($468m) bail-out from its shareholders while it seeks up to €1.75 billion to keep it from sinking altogether.
Worse, there is a huge supply of new ships on order and due off the slipways over the next four years. For bulk carriers alone, the backlog is equivalent to more than two-thirds of existing capacity. Philippe Louis-Dreyfus, departing president of the European Community Shipowners’ Associations, has called for an industrywide scrappage scheme to shrink the surplus. Warning of a “bloodbath”, he said in June that shipping capacity would exceed the needs of the market by between 50% and 70% in the near future.
…
“…has called for an industrywide scrappage scheme to shrink the surplus.”
Ha ha! Cash for Clunkers for ocean going vessels! This just keeps getting better and better.
“Baltic Dry Index….is hovering at just above a quarter of its peak.”
I guess that accounts for our 1.9% drop in consumer spending.
Maybe we could buy it and turn it into section 8 appartments.
Then sink them?
Hey, some seniors on seriously fixed incomes are on sec 8s.
I think that the h1n1 virus that is being cooked up is the hope for our world govs to eliminate more populations.
Wouldn’t a mass die-off be *gasp* deflationary?
“Wouldn’t a mass die-off be *gasp* deflationary?”
Not if accompanied by stimulative, surgically targeted use of bulldozers.
“We’re in dire straits. There’s just not a lot of good economic news out there,” said George Whalin, president of Retail Management Consultants in Carlsbad. “People aren’t confident to go out and spend a lot of money.”
Hmmm….shut off the easy credit/house ATM economy, and do Americans actually start considering want versus need before spending money?
Now that the recession is supposedly over, I’m seeing MSM articles that state it ‘was’ the worst since the GD. Finally using that comparison, now that it’s ‘over’. When we enter the second dip, how will they get that cat back in the bag? Or will they just switch seamlessly back to their ’since WW2′ or ’since records were kept’ euphemisms?
Seamlessly.
money.cnn.com
Obama: Recession’s not over yet
President says ‘many more months’ before U.S. exits recession; jobless figures next week will still show that too many Americans are losing work.
Wait a minute! I thought you told us days ago that the recession was over!
http://tinyurl.com/mvp4v4
The amount of people out there this past week making bold and definite predictions and declarations about the economy is unnerving. Can anyone remember so many, including a sitting POTUS, sticking their necks out so far and even giving dates and specifics?
In the past many of you have posted quotes from Hoover and others in the spring of 1930. That’s probably the only other time.
“In the past many of you have posted quotes from Hoover and others in the spring of 1930.”
How’d that work out for them through the lens of history?
“When we enter the second dip, how will they get that cat back in the bag?”
They will never, ever refer back to how many times they mistakenly called a bottom. And years from now, when somebody finally gets the bottom right, you will never hear the end of it from whomever made the correct call.
Have you ever tried to get a cat back into a bag?
No, but you are bringing back a hilarious memory of my former neighbor trying to get his unfixed tom cat into a cage. I have never see a small animal behave so menacingly in my entire time on the planet.
Members of California’s largest state employees union have voted to authorize a strike due to anger over Gov. Arnold Schwarzenegger’s decision to furlough them three days a month. A strike by them is just what California needs!
I hope they do…
Oh yeah, it’s coming…sooner or later. The battle royale of gov’t employees and their unions vs. the rest of the population. Sooner would be better in that it might faster end this maddening game of kick the can that’s being played in statehouses nationwide.
Bring it on !! It can’t happen fast enough as far as I am concerned….
“Bring it on”
horehay DUBYA
Talk about tone-deaf and stupid! A Strike! Wow, that would sure go over well.
Whatever happened to enlightened self interest?
What is CA’s unemployment rate these days?
Enlightened self interest suggests that public employees, if they strike at all, should do so only when the rest of the populous feels the public employees are being treated unfairly.
What is CA’s unemployment rate these days ??
Obviously not high enough to bring on the necessary REVOLT between the State, County & Muni unions with the private sector…
11.6 percent, going on 12 percent.
California unemployment rate rises to 11.6%
www dot chinaview dot cn
2009-07-18 01:26:26
LOS ANGELES, July 17 (Xinhua) — California’s unemployment rate rose in June, reaching 11.6 percent, up 4.5 percentage points from a year earlier, the Bureau of Labor Statistics reported on Friday.
The state, which was one of 38 states reporting higher unemployment rates in June, lost 66,500 jobs last month, according to the bureau.
California has shed 766,300 jobs in the last year, the bureau said.
Last month, California had the sixth-highest unemployment rate in the nation, after Michigan, Rhode Island, Oregon, South Carolina and Nevada. Michigan’s 15.2 percent unemployment rate was the highest since West Virginia broke the 15 percent mark in March of 1984, according to the bureau.
Nationwide, the unemployment rate was 9.5 percent in June, wavered little from May, still a significant increase from the 5.6 percent unemployment rate of June 2008, said the bureau.
…
“California has shed 766,300 jobs in the last year, the bureau said.”
Here are a few questions for the California housing market bottom caller brigade to ponder:
1. How many of these jobs were lost to California homeowner households?
2. How many California homeowner households with lost jobs can no longer afford to make mortgage payments?
3. How many CA households which can no longer afford to make mortgage payments will go into foreclosure?
4. For how much longer will the unemployment rate keep climbing before it reaches a peak?
5. For how long will the CA unemployment rate stay high before it comes back down to levels reflective of a healed economy?
6. How many unemployed households will run out of staying power before the labor market comes back?
The answers to these questions have a rather obvious connection to the related question of when the housing market will bottom out. Those who say the market has already bottomed out are ignoring harsh economic reality which is staring them in the face. A reasonable guess is that the housing market will not bottom out for a period of years, and this would be in line with what happened last time, when the bottom was not reached until 1996, five years after the official end of the recession.
What a golden opportunity Arnie has just been handed to clean house.
Obama now states the recession isn’t over on money.cnn.com
http://tinyurl.com/mvp4v4
You’re not kidding about this well it’s over. A couple of youngters at work just left for business school. One on my colleagues who is 50ish says they timed it just right. The economy will be booming when the kids get out of school. He’s clueless about most things anyway.
i’d have to agree with your colleague… maybe 3, 4, or 5 years down the road things will be ripe for entrepreneurs, since someone will have to replace whatever businesses failed during the crunch.
And getting some business schooling behind you is a smart choice. It sure beats learning as you go.
Depends. Are business schools still thumping their old testament leverage-your-way-to-the-top bibles, or are some teaching new testament welcome-to-the-new-normal theories? If the latter,who? If the former, it’s a waste of a lot of money to learn dinosaur techniques. Might be cheaper and more educational to try and fail at a few businesses of their own instead.
well.. entrepreneurs aren’t exactly the type of people who mindlessly absorb whatever theories some school feeds them. They tend to be innovative and self motivated .. free thinking.
Any school will teach the basics… how to keep the books.. how to manage. What one does with that knowledge is up to the individual.
If i were to guess, I’d say that 95% of start-ups fail due to ignorance of the basics.
One of the first things we were told in our entrpreneurship class was to get a good accountant to set up our accounting system.
The other was that we had to have a passion regarding tyhe nature of the targetted business. And it had to be viable.
What is interesting is that I have seen examples of how this can succeed. I know of people who have turned their passion for Disney Theme parks into viable businesses: Web Sites, specialty vacation businesses (vacation rentals), etc.
the problem is with the guy who’s dad passes away, he inherits a bunch of money and mom’s recipes.. and thinks it’d be great to open a restaurant.
So he goes out and leases a place, sets up a new kitchen, buys a bunch of tables, chairs, forks, spoons, refers, places ads for a great cook to get him started, ad infinitum .. and then opens the doors.. and business is half of what he expected, employee theft is 5 times what he expected, bills are thrice what he expected, and he’s busted within a year..
a couple semesters of school mighta saved him.
Biz school would teach them to execute a highly-leveraged hostile takeover of a whole failing restaurant chain.
whole failing restaurant chain….
IMO, a good school teaches you how to learn. It offers basic skills that you might use to attain other skills in whatever direction you want to go, so you can expand your horizons far beyond what they taught you. Wanna be a corporate raider? Wanna organize a chain of free clinics and hospitals in Africa? Same difference as far as knowledge in concerned.
..but your specific statement is kinda curious. If you go back our little debate from last week, you’ll see you were trying to prove that the evil corporate raiders took over healthy businesses, not failing ones… Has something changed since then?
The good ones, especially in the early days, took over healthy, cash/asset rich, sitting ducks. Just as in all booms, the latecomers had to ’snap up’ less desirable properties/businesses, but having been taught in biz school no other way to look at the world, they leveraged up, held their noses, and bought the shite. And eventually, that always hits a fan.
Fortunately, they were high on OPM when they crashed, and that always takes the sting out of it.
High on OPM.. as if you don’t need OPM? … or that using leverage is somehow distasteful?
Why not give me the opportunity to invest in your business endeavors? You have a workable plan? I’ll front you some money.
That way you don’t need to start off selling oranges out of your pick-up truck on the side of the road.. when you’re not sleeping in it, that is.
Of course, some people need to do things the hard way and i say to each his own.
See, Joey? That’s exactly the mentality that my biz school friends have! ‘How laughably lowly it would be to start a little biz on a shoestring when you can leverage your way straight to the top?’
McD’s, Chipotle, Apple, Microsoft, etc. are all examples of hugely successful companies that did just that. Start small, learn as you grow, let actual revenue generate growth, and build something more than a flashy house of cards. Sure is nice when the wind blows.
Lowly? Who are you to judge people like that? Like I said, to each his own. You might think it lowly to start from scratch. I never said such a thing. I said it was the hard way.
If i can talk you into borrowing some money, fine. If not, fine.
As for your friends, they probably realize they’re not gonna live forever and getting off to a fast start in a highly competitive world makes sense. I agree.
The ‘lowly’ was in quotes, I was imputing it to you, as you had just mocked people starting businesses on a shoestring, instead of using borrowed money to start with a bang. (Which one of us uses debating school techniques?)
As I pointed out earlier, my successful entrepreneurial friends have mostly not been biz school grads, but rather scruffy self-starters, who really couldn’t work well for someone else. Just as some can’t run their own biz, but may be great working for someone else. It takes all kinds. I’m just saying biz school isn’t great prep for starting your own biz. Might be better to invest the tuition in just getting on with it and starting something up. Real world accounting and bookkeeping are easy to learn. It’s the fake crap that requires advanced degrees.
yeah.. i’m sure you used the quotes because you took notes and their words are verbatim.. My bad.
what gets me is you somehow separate “scruffy self-starters” from borrowing start-up money. You’ve lambasted using “leverage”.
That follows suit with what seems to be a common theme in your threads… that lending and borrowing money is somehow wrong or inferior or cheating or fake…
Correct me (again) if I’m mistaken.
I’m just laying a little Ayn Rand on you. Thought you’d appreciate it. Credit’s like booze. It has its place, but it can’t be the linchpin of your plans.
Credit is a ticking time bomb and not to be toyed with. There’s a world of difference between the misuse of credit and showing it the respect it deserves. We currently have a problem due to the misuse of a tool. I don’t fault the tool. It worked as it was designed and intended to work.
As for borrowing/lending money to start a business venture, an angel is usually willing to share the risk.. No charge for the money so it’s not lending. If the plan makes sense and you seem capable, they buy a piece of the action.
I think that they just teach stuff like accounting, finance, net present value, time value of money, etc.
I received an MBA 4 years ago and still consider it a collosal waste of my time. It opened ZERO doors for me. I know of several class mates who are still working as temps.
Never Bet the Farm, co-authored by Stephen Spinelli (founder of Jiffy-Lube), is all about being scrappy, and able to weather failure. We tend to have a betting mentality about entrepreneurship, that you have to throw all your resources into any endeavor to be successful, and this book advises otherwise, in order to overcome the inevitable failures along the way.
Business school is only 2 years. Some astonomical portion of the b-school grads over the last 5-10 years have gone into finance and so the whole culture of the schools has changed to emphasize the value of those jobs and roles.
Oh, and entrepeneurs don’t become that way during business school.
well, if you are gonna go to business school to work for someone else.. jeeze… i dunno what to say.. ‘cept it’s a waste of a life, imo. Why make someone else rich?
ok.. i’m sure i offended about a zillion people with that one.. sorry bout that.
A career in business is as good as any other. Not everyone is cut out to be a business owner, and not everyone has that opportunity.
Owners are not more or less talented, not more or less intelligent and not more or less skilled than anyone else.. they just have a certain mind set that is somewhat rare.
But ownership should be one’s first choice in business, if given the choice, imho.
You didn’t offend me. I think academics fosters sort of an aloof attitude that does not comport with ownership. Owners are anything but detached. They are their own fiercest advocates and they do NOT see the other guy’s side. It makes them frustrating to work with but they do not let down the side and have more staying power because of that. Every good owner is a little Bill Gates or Henry Ford at heart.
I agree In Montana. I have many friends who went through biz school and some went on to lucrative careers in some part of the financial industry, or working for a pre-existing corporation. But precious few started their own businesses, or really have the personalities to do so. Being an entrepreneur or business owner requires a focus and tenacity and flexibility that really can’t be taught. You learn if you have it by opening your own biz.
you are going to spend 100k or upwards on a good b-school to “learn” to be an entrepreneur? what a bunch of crock! Why not just start your own business with that kind of capital? what better way to learn? How many of B-school professors have been successful entrepreneurs, what are they going to teach you?
You said it better than me, sartre. Just when I thought there was ‘no exit’ line.
well.. among a thousand other things, you gotta know some accounting or your accountant
is gonnamay rob you blind. Opportunity.. motive.Anyone who thinks the basic skills required to run a successful business is intuitive, loads of entrepreneurial spirit or no, has another think coming, imho.
If you don’t want to go to school, I’d suggest people at least read a few books written by the know-nothing professors.
Yea but these kids going to biz school will come out just like the boneheads that are ruining this country and making major hay without offering real value.
Johnny Cash Walk the Line
Hello I`m outa Cash
I keep a close watch on this house of mine
I see it`s value droppin all the time
I see Mozzilo skatin from his crime
But I`ll be fine
Cause I`m subprime
The teaser rate was all that I could pay
My mortgage broker said I`d be o.k.
You`ll just refinance on another day
But he was lie`n
Cause I`m subprime
Now Barney Frank says he wants me to stay
But half this payment, I still couldn`t pay
The bank can eat it cause I`m goin away
And I`ll be fine
Cause I`m subprime
Yes I`ll be fine
Cause I`m subprime
Another good one from our resident composer
That would be a lyricist, unless he also wrote a tune to go with his lyrics…
Couldn’t you hear the music ??
Thanks for the correction Pbear…
Then I am going to stop because being called a lyricist would get you beat up where I came from.
Ha! You remind me of our friend, the Czech violinist. I long assumed that growing up as violinist in Europe would earn you a measure of respect, rather than abuse, until the time he told me about how other kids would beat him up because of his musical preference
.
Luckily for me I was niether a violinist or a lyricist. I graduated from high school at 6 foot 4 and 265 lbs. I played organized baseball to the age of 18 and accepted a full football scholarship to college. When there was beaten up done I wasn`t on the recieving end. But thanks for your concern PoBa.
Good morning, everyone. What a pretty Sunday! I’m gonna channel Rancher now and tell you I’m drinking coffee. Trader Joe’s Peaberry Limited edition from El Salvadorrrrr. Tasty!
And you know what?! In only 19 little days we will have our very own Trader Joe’s right here in Olympia. Wonderfulness! I will never leave Thurston County again, when that happens.
Another exciting thing is that I hope to meet another HBBer today. The lovely and dynamic not-a-gator. Super! I hope they are here long enough to enjoy the Best Dive bar in the Universe, but if not we’ll just have to make do.
enjoy the Best Dive bar in the Universe ??
Please don’t tease me
Is it below street level? If not, technically, it’s not a ‘dive’ bar. (Pedantic Man strikes again!)
Did you see the post from not a gator yesterday?
Yeah, Oly, did you????
Hi Oly Gal !!! Good Morning to you!
Oly Girl,
I’m coffee’d out. Waaaaaaaaaaaaaaaaaaay to many cups this morning, my hands are shaking and my fingers move all on their own….Whoopee!
We got our new Cuisinart and the brews are stupendous and perfect. Arooooooma and full
bodied coffee for the most serious epicure.
We are also green with envy that thou has a Traders
so close.
Oly, I don’t know if my previous showed up, but did you see the post from not-a gator yesterday?
Anyone checked out the Tiered Case-Schiller home prices index, where they break down the prices into 3 categories: under $104,538, between $104,538 and $176,503 and above $76,503 going back 20 years? Looks like the lower price category has almost reached the level of the 1990-1995, where the higher price category have more to fall until it reaches that level.
Go to S&P website and check it out. Some people (not the serial bottom callers, but some who called the bubble before the MSM caught on) are saying for the lower price category, we maybe reaching the bottom, while the mid-to-higher price category have more room to fall.
Just playing a little devil’s advocate here on a Sunday.
>and above $76,503
Ooops, I mean above $176,503. Need another cup of coffee.
Cougar,
Remember this:
Coffee - makes you do stupid things faster with more energy.
Are incomes rising or falling?
Since rents track incomes, are they rising or falling?
Since prices should track rents long-term, what are your expectations?
What is the role of the 18.4 million empty units which if we were to assume held 4 people each would safely house the entire population of the UK and Israel combined?
Thanks for playing “devil’s advocate”. Your points are not even useless.
>Your points are not even useless.
Apparently my post was useful enough for you to respond.
By the way, those are not my points, those are comments made by a couple of other commentators who called the housing bubble before the MSM did.
They are the tea-leaf readers. I focus on the fundamentals.
What do the fundamentals tell you?
The answer should be so overwhelmingly obvious as to not even provoke debate.
Ah the moment someone said there is no debate required, then that’s when I want to have a debate. IMHO it’s never safe to have one argument and refuse to hear an opposing argument. You may not agree with the other side, but to completely shut them off as they are not “worthy” of you even contemplating the arguments from the other side, that’s when the danger sets in.
This commentator I semi-quoted actually exposed the great sub-prime mortgage fraud inherent in the housing market back in 2005 when the MSM doesn’t even know what sub-prime is, so he is no “tea-leaf readers’ as you claim. He did not, and I did not quote him to say that housing market is at the bottom. He is simply speculating that for the very low end houses, the prices may have reached a bottom in some of these worst hit markets. For all other markets, the price will continue to fall and fall hard in the areas that are catching up now. He doesn’t talk about the housing market as “one and single market” that behaves the same way, it needs to be segmented because the eventual bottom will come in stages and in very different time periods. To me that makes sense.
“Thanks for playing “devil’s advocate”. Your points are not even useless.”
Now, that is anger and I like it.
Hey putty-tat, come on over. You can help us build our ark. I was walking on 6th Ave. to Citarella’s and I got passed by a school of sunfish.
>Now, that is anger and I like it.
It has been like 3-4 months since FPSS attacked one of my posts with his ever-eloquent below the belt kicks, so I was beginning to worry about him losing his touch a bit. I was worried for nothing I guess.
Hey Faster, my fundamentals tell me you can be a butt-hole.
y cougar91
2009-08-02 10:17:23
Ah the moment someone said there is no debate required, then that’s when I want to have a debate. IMHO it’s never safe to have one argument and refuse to hear an opposing argument. You may not agree with the other side, but to completely shut them off as they are not “worthy” of you even contemplating the arguments from the other side, that’s when the danger sets in.
Cougar, while calling a senators office the idiot savant answering told me that the senator doesn’t agree with me, and that she believes I was bad mannered to disagree.
WTF. Can you flocking believe that line? Her mommy told her it was bad manners to disagree.
If you know how far incomes will fall, then you know where the bottom will be. If you don’t know, then your guess is as good as anyone’s.
I can observe the rents for myself and I know how to do long division.
Apparently, this is such a difficult skill that it must be obfuscated with copious amounts of verbal diarrhoea.
Around here, rents are falling in all classifications…
According to wikipedia, median household income for people with “some college” was $45,854 according to the 2003 census bureau.. high school grads it’s $36,835.
Shall we use a 3x factor for home prices? If so home prices on the lower level are approaching affordability.
Or, to repeat the question, do you think incomes will fall.. and if so, how far?
income is the key..
Does witnessing falling rent in your area (NYC, which is very, very late to this housing bust) at this moment necessarily foretells the future for every other market in all price ranges? Does it not strike you in the remotest of possibilities that markets which have been falling hardest for 3 years before NYC even started falling would have different behaviors going forward?
>Around here, rents are falling in all classifications…
Same here in NJ area, but NJ is also late to the housing bust so we have more suffering to go I have to say.
Different markets behaved differently on the way up, so different markets will behave differently on the way down. Same goes for different pricing segments, they behave differently on the way up, so they will behave different on the way down. For the lower price tiers, equilibrium will be reached first before the higher price tiers. It doesn’t even take long division to figure that one out.
“Or, to repeat the question, do you think incomes will fall.. and if so, how far?”
Are you including the recently and soon-to-be unemployed in your sample? Because I am guessing the unemployed face income declines approaching 90 percent or more in many cases, and I would argue that you should average this in to your calculation, as many unemployed folks are homeowners (I myself was one of these in the early 1990s, in fact!).
Does it not strike you in the remotest of possibilities that markets which have been falling hardest for 3 years before NYC even started falling would have different behaviors going forward?
Of course, they will. Hence, the clean metric. Compare the prices to local rents which are tied in turn to local incomes.
Most places still look severely bubbly. The insanity hasn’t worn off yet.
Define different.
I think all geographies move in the same exact way even though they are asynchronous. In other words the low end of a market in Frogballs, Arkansas will act the same as the low end in Hillbilly, West Virginia, just at different times.
If you’re saying that various prices points within a common geography acts different, I believe you are correct. I’m seeing this play out all over the northeast.
“Most places still look severely bubbly. The insanity hasn’t worn off yet.”
Right. Many, many people (especially those in high places in business and government) have yet to even leave the denial phase of the housing bubble stages of grief, yet the serial bottom callers are out in droves announcing ‘it’s over.’
Hi Joey, welcome back. I had wondered whether your recent scare mongering comments had gotten you banned from the blog, but no such luck apparently
.
thank you.. it’s nice to be back.
Isn’t free speech a beautiful thing, Joey, even on blogs?
as is the right to bear arms.. just don’t go around shooting people willy-nilly..
…or threatening to torture them…
“…safely house the entire population of…Israel…”
Middle East peace solution?
Five more banks went kaput over the weekend, making it total of 69 banks so far in 2009. I am waiting to see if Corus bank in Chicago bites the dust before my CD expires in October, I think it’s gonna be close. If it does it would be the 5th bank where I have a CD that has either failed or been forced to be taken over by another bank. So far all have honored the original interest rate agreements on the CDs.
65th Bank Failure of 2009 (1st in OK)
* FDIC Press Release
* Closed Bank: First State Bank of Altus, Altus, OK
* Size: 2 offices, $103.4 million in assets, $98.2 million deposits
* Possible Uninsured Deposits: All deposits transferred
* Acquiring Bank: Herring Bank, Amarillo, TX
* Rate Changes: Herring Bank will review rates
* Estimated Cost to Deposit Insurance Fund: $25.2 million
66th Bank Failure of 2009 (4th in FL)
* FDIC Press Release
* Closed Bank: Integrity Bank, Jupiter, FL
* Size: 1 office, $119 million assets, $102 million deposits
* Possible Uninsured Deposits: All deposits transferred, except some brokered deposits
* Acquiring Bank: Stonegate Bank, Fort Lauderdale, FL
* Rate Changes: Stonegate Bank will review rates
* Estimated Cost to Deposit Insurance Fund: $46 million
67th Bank Failure of 2009 (1st in OH)
* FDIC Press Release
* Closed Bank: Peoples Community Bank, West Chester, OH
* Size: 19 offices, $705.8 million in assets, $598.2 million deposits
* Possible Uninsured Deposits: All deposits transferred, except some brokered deposits
* Acquiring Bank: First Financial Bank, N.A., Hamilton, OH
* Rate Changes: First Financial Bank, N.A. will review rates
* Estimated Cost to Deposit Insurance Fund: $129.5 million
68th Bank Failure of 2009 (2nd in NJ)
* FDIC Press Release
* Closed Bank: First BankAmericano, Elizabeth, NJ
* Size: 6 offices, $166 million assets, $157 million deposits
* Possible Uninsured Deposits: All deposits transferred
* Acquiring Bank: Crown Bank, Brick, NJ
* Rate Changes: Crown Bank will review rates
* Estimated Cost to Deposit Insurance Fund: $15 million
69th Bank Failure of 2009 (13th in IL)
* FDIC Press Release
* Closed Bank: Mutual Bank, Harvey, IL
* Size: 12 offices, $1.6 billion assets, $1.6 billion deposits
* Possible Uninsured Deposits: All deposits transferred
* Acquiring Bank: United Central Bank, Garland, TX
* Rate Changes: United Central Bank will review rates
* Estimated Cost to Deposit Insurance Fund: $696 million
If it does it would be the 5th bank where I have a CD that has either failed or been forced to be taken over
hehe.. i guess that’s what you get when you go for the highest rates..
looking at that last one, “$1.6 billion assets, $1.6 billion deposits” it seems that they simply failed to maintain a reserve.. and UCB found itself a nice deal.. lots of new customers for free.
* FDIC Press Release
* Closed Bank: Integrity Bank, Jupiter, FL
Apparently the Integrity Bank disintegrated, by jove.
Since First State Bank of Althus is in the red and got taken over by Herring Bank, will it be known in the future as the Red Herring Bank?
Dang another clever reply. Love the wit on this blog.
lol- good one Sfo gal.
“…are saying for the lower price category, we maybe reaching the bottom, while the mid-to-higher price category have more room to fall.”
Are these people stupid or are they just liars hoping to profit off the stupidity of others? Anyone who knows jack about economics has to realize that the high end and low end of the housing market are not decoupled, any more than the Asian economies are decoupled from the rest of the globalized economy.
“Are these people stupid or are they just liars hoping to profit off the stupidity of others?”
I long ago lost track of how many times I have raised that question during the course of the housing bubble and its subsequent demise.
I don’t see how the high and low priced properties being coupled together necessarily dictates that the bubble’s deflation will be perfectly homogeneous and in lock step…
If anything, there are reasons lower priced properties should bottom out first. For instance, the average low-end buyer has less staying power dollar-wise, reserve-wise and credit-wise, and is forced to sell sooner than the wealthier owners.
“If anything, there are reasons lower priced properties should bottom out first.”
I guess you subscribe to the decoupling theory, then?
To each his own…
And I said nothing about ‘moving in lockstep.’ That was your own misinterpretation of my comment.
i subscribe to a coupling theory, but it’s not rigidly coupled as with steel links.. more like coupled together with bungy cord, so there’s some elasticity.
“…more like coupled together with bungy cord, so there’s some elasticity.”
We are in agreement on this. The point I have made many times here is that if the high end falls hard, due to a perfect storm of prime- and Alt-A resets coupled with higher- and longer-than-expected white collar unemployment, the price of all less-than-high-end housing will get pushed down, as first principles of consumer preferences dictate that La Jolla housing will never sell for less than comparable Rancho Bernardo housing (remember that “all real estate is local”
).
On the other side of the argument, I recall during the tech stock crash that home prices kept going up and sales kept going strong in the East SF Bay while the South Bay (Silicon Valley) market essentially shut down for a period. My conjecture was that folks who normally would have bought in Silly Valley were instead substituting purchases in lower-priced markets, due to budget constraint factors during the crash (e.g., those who were able to cash out of their dot com stock options before the crash were parking it in relatively cheaper but still desirable Berkeley housing, rather than, say Mountain View estates). But my comment about the strict ordering of comparable housing prices by local desirability still held — i.e., the same quality condo in Richmond was selling for far less than a matching condo located in San Mateo.
>The point I have made many times here is that if the high end falls hard, due to a perfect storm of prime- and Alt-A resets coupled with higher- and longer-than-expected white collar unemployment, the price of all less-than-high-end housing will get pushed down, as first principles of consumer preferences dictate that La Jolla housing will never sell for less than comparable Rancho Bernardo housing (remember that “all real estate is local”
).
I think you got it backwards: in the same market, it is the low-end housing that tends to crater first, and the higher-end housing follows later on since the low-end housing are occupied by more vulnerable people economically speaking and the higher end housing folks tend to have more resources, thus can hang on longer. That’s why sub-prime blew up before Alt-A, Opt-Arm and Prime, but they will all blow up. Yeah in that sense they are not decoupled if the fundamentals don’t make sense, but one (lower end) will reach “equilibrium” before the other (higher end). Saying that is not the same as saying the two ends of the pricing spectrum is decoupled at all, which I think you eventually clarified.
‘…but one (lower end) will reach “equilibrium” before the other (higher end).’
My point: Whatever ‘equilibrium’ the lower end reached before the high end crash (say due to subprime collapse) will get squashed down to a lower ‘equilibrium’ when the high end crashes. I am mainly talking about prices here — in fact, sales volume is likely to accelerate as prices collapse, much as the water at the bottom of a waterfall runs much faster and more turbulent than the smooth flow up towards the beginning of the vertical drop.
What I describe above is what has not yet happened: Outright capitulation…
>will get squashed down to a lower ‘equilibrium’ when the high end crashes.
But then wouldn’t that be some type of circular logic? I mean at first you said the higher price housing will fall and put pressure on lower price housing, but when lower housing reaches “equilibrium” and higher end eventually falls, then that puts new pressure on the lower end again and pushes it down even further. Wouldn’t the cycle then repeats itself again, until prices reach $0 for all houses? I don’t think you mean that or I am not reading what you wrote correctly.
“I am not reading what you wrote correctly.”
That’s correct. My first ‘equilibrium’ was in ‘quotes’ because it is not really an equilibrium, but rather what appeared to some bottom callers to be a price trough at the low end but was not. No bottom in low end prices can be attained until the top end bottoms out, and the latter is highly unlikely until the labor market has righted itself and the tsunami crest of prime- and Alt-A resets has past (some time in 2011?). Whatever initial low level of prices was reached due to the subprime collapse cannot magically correct upwards to prices which exceed those of more desirable homes whose prices are still falling.
Is the point clear by now, or should I state it in still another way?
Speaking of high end.. the fancy mags out here are showing 4 color photos of million $ homes and their NEW prices, Price reduced, Priced to sell and so on. In print.
We shall see.
Still a drop of $600,000.oo is not nearly enough.
Lines from article linked below regarding new reality tv show, called Sharks Tank by Mark Burnett.
I love these 2 lines. Just had to share ;>
“You let your money know that you’re too busy and important to care all that much about it, and suddenly more and more money is following you around, trying desperately to get into your pants.
**********************************************************
“I don’t get emotional about money,” says Kevin.
Money is Kevin’s little bitch.
I’m immediately envious of Kevin. I am money’s needy girlfriend, the one who wastes all her time wondering why money doesn’t call more often. I can’t face the fact that money is just not that into me.”
http://www.salon.com/ent/tv/iltw/2009/08/02/sharks/?source=newsletter
This show is a British remake of Dragons’ Den. It’s on BBC America.
Wasn’t Antiques Roadshow also a British invention? Why are we stealing Old European ideas?? What’s happening to our country???
Eh, not paying attention to BBC America this week. Its SHARK WEEK on Discovery. Evidently they have a whole hour of great whites jumping out of the air and attacking a pretend seal.
There is nothing like lowest common denominator american TV. Well, nothing except the Roman colliseum, maybe.
Gladiators anyone?
Everyone that posted yesterday about my Mom, thank you for your kind thoughts. My mom sends a big hug and kiss.
I don’t know if someone else saw this.
http://www.comcast.net/articles/finance/20090801/US.Lonely.Highrise/
I was struck by the fact that they closed on it “in the fall.” The economy was falling apart and still they closed on the condo.
“We wanted to believe,” Cathy Vangelakos said. “We were looking for what we were offered.” [snip]
He’d (Mr. Vangelakos) like for The Related Group to buy them out.
ok.. so he dumps his life savings into the place, his old lady is a dreamer, to put it kindly.. He won’t move out when offered a place in the identical building next door (for “free” whatever that means) and he’s lawyered up… hoping he can sue someone to get his money back.
Closing last fall seems right in line with what one would expect these hard-headed FBs to do.. If their 19 yo daughter fell even a foot or two away from that tree, she’s looking for her own apartment as we speak..
Wow! Worst case scenario they could have walked and written off their $10K deposit. Instead they decided to go all in with the life savings. Amazing!
Great article on the BBC today. Tangentially talks about a variety of topics including the housing bubble etc. One great section:
On the last day we spent in our home in north-east Washington, they were holding a food-eating competition in a burger bar at the end of our street…
America can be seen as little more than an eating competition, a giant, gaudy, manic effort to stuff grease and gunge into already sated innards.
You could argue that the sub-prime mortgage crisis - the Ground Zero of the world recession - was caused mainly by greed: a lack of proportion, a lack of proper respect for the natural way of things that persuaded companies to stuff mortgages into the mouths of folks whose credit rating was always likely to induce an eventual spray of vomit.
Link to the story.
That was a great article.
I thought so too.
“America can be seen as little more than an eating competition, a giant, gaudy, manic effort to stuff grease and gunge into already sated innards.”
‘giant, gaudy, greasy gunge’
A lovely alliterative lancing of lunkhead American lifestyles!
And even in our eating competitions, scrappy Asian guys beat our behemoths.
Mirrors on the ceiling,
The pink champagne on ice
And she said we are all just prisoners here, of our own device
And in the master’s chambers,
They gathered for the feast
The stab it with their steely knives,
But they just cant kill the beast.
Last thing I remember, I was…
Running for the door.
I had to find the passage back
To the place I was before.
Relax, said the night man,
We are programmed to receive.
“You can check out any time you like, but you just can never leave…”
Welcome, to the Hotel California!
The Eagles’ cryptic lyrics finally explained. I love it!
Still one of my favorite songs by them. I have the Hotel California album.
“You can check out any time you like, but you just can never leave…”
Brings to mind the situation of a mortgagee who is forty percent or so underwater and helocked to the hilt, no?
Question- Is “Hotel California” ultimate housing bubble song?
Working for the Clampdown? (personal fave)
“At the time I met Mark Sanford, the governor of South Carolina, just a few months ago, I didn’t know about the hypocrisy. But I should have guessed when he offered to let me in to a secret. He was a closet tiller of fields, he said, and liked nothing better than to get out with his boys and work the land.
A little too wholesome to be true.
Weeks after telling me that all-American story, it transpired that he was also ploughing furrows in foreign fields. The man disappeared only to turn up in Buenos Aires with an Argentine woman who was not Mrs Sanford.
This from a man who, when he was a congressman, lived in some peculiar Christian fellowship house in DC. It did not stop his Doric columns from being false.”
I love that passage. It reminds me of Bill Clinton — isn’t he a Baptist?
MENDOTA, Calif.–The painted words, in all caps, on the side of a pale pink building say it all: THIS PRIVATE HOME FOR RENT, CAPACITY 36, 12 IN HOME, 12 IN GARAGE, 9 IN BASEMENT, 3 IN TRAILOR IN BACK, ONE KIT, ONE BATHROOM, NO RECEITS, NO CITY LIC. NO IRS REPORTING. $150 PER HEAD PER MONTH.
Let’s all go plant bananas.
Let’s all go smoke Bananas. Rastaman, Mon…
There’s a fruit store on our street
It’s run by a Greek.
And he keeps good things to eat
But you should hear him speak!
When you ask him anything, he never answers “no”.
He just “yes”es you to death, and as he takes your dough
He tells you
“Yes, we have no bananas
We have-a no bananas today.
We’ve string beans, and onions
Cabbages, and scallions,
And all sorts of fruit and say
We have an old fashioned to-mah-to
A Long Island po-tah-to
But yes, we have no bananas.
We have no bananas today.”
Business got so good for him that he wrote home today,
“Send me Pete and Nick and Jim; I need help right away.”
When he got them in the store, there was fun, you bet.
Someone asked for “sparrow grass” and then the whole quartet
All answered
“Yes, we have no bananas
We have-a no bananas today.
Just try those coconuts
Those walnuts and doughnuts
There ain’t many nuts like they.
We’ll sell you two kinds of red herring,
Dark brown, and ball-bearing.
But yes, we have no bananas
We have no bananas today.”
- Frank Silver & Irving Cohn, 1922
I wondered where that came from San Fran Gal !!! Neat!!
Signs of shadow inventory:
On my daily walk, I will often go down cul-de-sacs for no other reason than a variance and to look at houses. There aren’t that many realtor signs up these days.
However, I am seeing many signs of shadow inventory. I’ll see a house with a dead lawn and a “Bank-Owned Property” sign on the door, but it’s not on the MLS. Some of those might be in the process of a sale, but even with the two-month lag that’s not particularly likely for quite so many properties.
Or how about no realtor sign, but the giveaway lockbox on the doorknob?
And just because it amuses me, there’s a property that has been for sale for at least a year, possibly more, and they’ve taken down the interior photos that were surely part of the reason it’s still up for sale (think grandma’s basement, wood paneling and collectible spoon rack.) During that period, the asking price has dropped considerably; I want to say up to $100K but I’ll only guarantee $50K since the only reason I remember is the horrible interior. The lawn is beyond dead and the exterior looks as though there’s dry rot issues.
It’s still listed as “Short Sale Contingent.” I’m just wondering how many other ways the sellers can shoot themselves in the foot.
I see the same thing. However there have been several recent home sales in my neighborhood…one had been on the market for 18 months.
The place we bought had been on the market for seven months when we put in our offer, so nine months by the time we got the keys.
The plus side of that was that the repairs the bank had done prior to putting it up for sale survived an unmaintained winter, so we could feel confident in their quality.
The downside? Spiders.
At least the cats are happy.
‘cul-de-sac’- French, ‘bottom-of-the-sack’
Welcome home!
Here is more fodder for a Congressional audit of the Fed:
Financial Times
Wall Street profits from trades with Fed
By Henny Sender in New York
Published: August 2 2009 23:04 | Last updated: August 2 2009 23:04
Wall Street banks are reaping outsized profits by trading with the Federal Reserve, raising questions about whether the central bank is driving hard enough bargains in its dealings with private sector counterparties, officials and industry executives say.
The Fed has emerged as one of Wall Street’s biggest customers during the financial crisis, buying massive amounts of securities to help stabilise the markets. In some cases, such as the market for mortgage-backed securities, the Fed buys more bonds than any other party.
However, the Fed is not a typical market player. In the interests of transparency, it often announces its intention to buy particular securities in advance. A former Fed official said this strategy enables banks to sell these securities to the Fed at an inflated price.
The resulting profits represent a relatively hidden form of support for banks, and Wall Street has geared up to take advantage. Barclays, for example, e-mails clients with news on the Fed’s balance sheet, detailing the share of the market in particular securities held by the Fed.
“You can make big money trading with the government,” said an executive at one leading investment management firm. “The government is a huge buyer and seller and Wall Street has all the pricing power.”
A former official of the US Treasury and the Fed said the situation had reached the point that “everyone games them. Their transparency hurts them. Everyone picks their pocket.”
…
Who gives a flying fark about reputation when you are reaping billions in profits through crony capitalism? If truly this concerns them, I suggest they hire a PR firm to smooth things over, as that worked out very well for Countryslide (didn’t it?)…
Financial Times
Goldman Sachs’ reputation tarnished
By Greg Farrell in New York
Published: August 2 2009 23:04 | Last updated: August 2 2009 23:04
Goldman Sachs’ reputation among both the general public and financially sophisticated Americans has been damaged by the events of the past year, according to research conducted for the Financial Times.
In a survey of 17,000 Americans, Brand Asset Consulting found that Goldman’s stature – as measured by several gauges of brand strength – had suffered in 2008 and 2009.
…
“We have all been here before, we have all been here before…”
Financial Times
Private equity groups in $400bn of debt
By Lina Saigol and Martin Arnold
Published: August 2 2009 23:04 | Last updated: August 2 2009 23:04
The biggest private equity groups are sitting on a $400bn debt mountain that needs to be repaid over the next five years, putting the future of some of the largest buy-out deals in doubt.
Private equity firms raised large amounts of bank debt to buy companies between 2005 and 2007.
They face more than $21bn of debt maturities in the next two years, another $50bn in 2012, $115bn in 2013 and $192bn in 2014, according to data from S&P LCD.
With debt still in short supply and expensive, private equity groups are being forced to find new ways to pay down this debt ahead of schedule.
These include putting new equity into their portfolio companies, selling stakes in businesses to strategic buyers and buying back debt in their own companies at a discount.
They are also trying to persuade lenders to extend maturities on existing loans.
Henry Kravis, co-founder of Kohlberg Kravis Roberts, said: “In every company we have that has debt, we consider either buying it in with excess cash flow where that is possible, refinancing it or effecting an exchange of the debt.”
…
Not sure how this works in the UK, but I am pretty sure that any effort in the US to charge banks insurance premiums to cover future bailout claims would be defeated on K Street by industry lobbyists offering campaign contribution carrots (or the stick of their revocation).
At any rate, it is quite clear by now that the too-big-to-fail banks are among the least efficient, unless you count the ability to throw money down the drain or to induce the government to shore up their gambling losses as efficiency gains.
Financial Times
A bank-weary taxpayer’s pipe-dream
By Tony Jackson
Published: August 2 2009 16:40 | Last updated: August 2 2009 16:40
Speaking as a taxpayer, I am getting seriously fed up with the banks. They seem hell-bent on resuming business as usual, or as near as they can contrive. They will probably get their way. And we will end up with the bill again.
…
For us taxpayers, the fundamental problem with big banks is that we provide them with free insurance. History tells us we cannot stop them repeating their blunders in the next bubble. So the simple way to protect ourselves is to charge for that insurance through regular premiums.
…
I propose this concept should be extended to cover the cost not just of banks going bust, but of being rescued. If a bank is too big or connected to fail, its premiums would reflect the fact. If that proved too onerous, it could always reduce the scale or complexity of its operations.
…
But all this, I concede, is a pipe-dream. Such logical steps are only likely when the banks have damaged us enough. And if this latest episode has not done the job, one shudders to think what will.
Another sign the credit bubble has not finished deflating: Once burned, twice emboldened.
Financial Times
Sovereign wealth funds return to the fray
By Lina Saigol in London
Published: August 2 2009 22:23 | Last updated: August 2 2009 22:23
Sovereign wealth funds are regaining their appetite for deals in western markets after making the lowest number of foreign investments during the first quarter since 2005, following a series of disastrous bets in high-profile public companies.
State-owned investment funds from oil-rich countries and Asian exporters made just 26 investments worth a total $6.8bn in the first three months of the year, according to Monitor Group, the advisory firm, and Fondazione Eni Enrico Mattei, an international research centre.
…
Does the banking industry have a special fund to pay journalists to write MSM apologies for them? It seems way too early to jump to any conclusions about whether any top bankers will soon join Bernie Madoff’s chain gang.
I love how the writer insinuates that BO’s comment was somehow maliciously intended to harm bankers’ otherwise upstanding reputations.
Financial Times
On Wall St: Banker baiting has gone too far
By Spencer Jakab
Published: July 31 2009 16:20 | Last updated: July 31 2009 17:10
“My administration is the only thing between you and the pitchforks,” said Barack Obama according to stunned bankers summoned to the White House in March.
For all their supposed influence, these masters of the universe proved to be lightweights at deflecting public anger while the politician berating them was a master at harnessing it. Then at the height of his popularity, as Wall Street’s reputation was plumbing new depths, he was capable of costing them their jobs, their wealth and what was left of their reputations. Wall Street would be reshaped as Washington saw fit.
But the American people still want their pound of flesh and can hardly take out their anger on synthetic collateralised debt obligations or exotic mortgages. They need flesh and blood villains. As with Bernie Ebbers, Jeffrey Skilling and Dennis Kozlowski of WorldCom, Enron and Tyco infamy. The public craves “perp walks” for those who profited questionably from the boom. This peculiar practice, the 21st century equivalent of putting miscreants in the stocks to be publicly humiliated, involves parading handcuffed white-collar criminals in front of forewarned cameramen. Never mind the presumption of innocence or that most were desperate to surrender quietly.
In spite of this baying for banker blood, few in the top echelons of finance are guilty of actual crimes. There was greed and incompetence aplenty, but illegality has been largely confined to scammers such as Bernie Madoff, exposed by evaporating liquidity. This is far less satisfying than seeing Richard Fuld or John Thain in stainless steel bracelets.
…
Maryann Tobin
Hernando County Political Buzz Examiner
Solution to housing crisis ignored as foreclosure suicides rise
August 2, 3:58 PM
If there were ever a time in this country for big business to put people before profits - that time is now.
Thousands of people facing foreclosure have no where to go if they lose their homes.
There has been little said about it, but an increasing number of the newly homeless have chosen to take their own lives. , according to ABC News.
Is that what we have come to in this country? People are so worried about the “kill grandma” clause of the future - what about the present?
People are dying now - because lenders are not doing the right thing when it comes to keeping people in their homes.
Any lender, if it wishes, can actually forgive a mortgage. It may sound unfair to those who pay their loans, but the crumbling housing market effects those who pay and those who don’t or can’t pay.
Foreclosure is bad for everyone.
This is about the country as a whole. Everyone benefits from a solid housing market - including the mortgage-holders.
So what would happen if banks simply started forgiving individuals for bad loans?
Wouldn’t everyone who is current on their loan suddenly face incentive to stop making payment, in order to qualify for outright forgiveness? Or am I missing something here?
Didn’t Oz just have an inflated bubble that burst? Time seems to be running faster and faster as this global housing bubble pulsates its way through the annals of history…
* The Wall Street Journal
* REAL ESTATE
* AUGUST 3, 2009
Australia Tries to Avoid a Housing Bubble
As Demand for Homes Outpaces Supply, Rising Property Prices Prompt Concerns About Overheating
By JAMES GLYNN
SYDNEY — While much of the world grapples with a housing slump, Australian policy makers are starting to worry about the opposite problem: A housing bubble.
Fueling concerns are a lack of supply of new housing in Australia, along with interest rates at their lowest levels since the early 1960s.
At the same time, evidence is mounting that Australia’s economy will sidestep a recession, with recent indicators pointing to an acceleration in economic activity, boosting buyers’ confidence.
Home values have started rising again, after falling in 2008, and are slightly above their record high reached in February last year.
The median price of a dwelling in major Australian cities recently hit 471,818 Australian dollars (US $394,661) and has risen 4.5% since the end of 2008, according to Rismark International, a Sydney-based research firm.
While those gains are far from the price surges that occurred in the U.S. and other countries during bubbles earlier this decade, policy makers are worried that home prices may be rising faster than consumers’ ability to afford them, an early sign of a bubble in the making.
…
Due to the limited speed of light, if the Sun blinked out right now, it would take about 8 minutes before we were aware of it. Oz wouldn’t know it for a day or so.
* The Wall Street Journal
* AUGUST 3, 2009
High-End Homes Frozen Out of Budding Housing Rebound
By NICK TIMIRAOS and JAMES R. HAGERTY
…
The $8,000 tax credit for first-time homeowners phases out for single buyers whose incomes exceed $75,000, or married couples earning more than $150,000. Low-interest-rate mortgages backed by the FHA and government-controlled mortgage companies Fannie Mae and Freddie Mac are only available on loans below limits set by Congress. Last year, Congress increased those limits to $417,000 in most markets, and to as high as $729,750 in certain high-cost markets, including parts of Hawaii, California, New York and Washington, D.C.
Mortgages for amounts that exceed those limits are called “jumbo” mortgages, and face higher interest rates. Last week, the average rate on a 30-year mortgage below the limits was 5.42% compared with 6.33% for jumbos, according to HSH Associates, a financial publisher.
Extremely wealthy people may not need a mortgage. But buyers who take mortgages for expensive homes generally face higher rates and tighter lending standards. Most banks that offer jumbo mortgages are generally requiring down payments of 20% to 30% or more, knocking out potential buyers who don’t have much equity in their homes and have seen retirement savings fall.
While subprime mortgages sparked the first round of housing problems two years ago, now “troubles are lurking further up the food chain,” says Joshua Shapiro, chief U.S. economist at MFR Inc. White-collar job losses have accelerated while more adjustable-rate loans to prime borrowers are resetting to higher payments. “You put all that together, it leads me to believe that the next leg down on home prices is going to come from the top,” he says.
To be sure, the affluent housing market is substantially smaller than the mass market. Sales of existing homes priced over $750,000 accounted for 2.3% of all sales in the first quarter of this year, compared to 4.4% of the housing market in 2007, according to the National Association of Realtors.
Still, the distress in high-end market has implications for consumer spending: the top 10% of U.S. households in terms of income accounted for 23% of consumer spending in 2007, according to government statistics. As those households watch their home equity evaporate, they are more reluctant to spend on housing upgrades or other items.
Inventory of expensive homes is rising. Overall, the inventory of unsold homes in June was enough to last 9.4 months at the current selling pace, down from 11 months a year ago, according to the NAR. But the supply of unsold homes priced above $750,000 swelled to around 17 months in June, up from a 14.5-month backlog one year ago. A recent forecast by analysts at J.P. Morgan Chase & Co. said it would take until at least 2012 for the expensive-home market to recover and that peak-to-trough declines could surpass 60%, compared to 40% for the rest of the market.
Defaults are rising, too. Among prime mortgages, jumbo mortgages are now leading delinquencies and defaults and are the fastest-rising category for defaults of all types of mortgages. The rate of 60-day delinquencies on prime-jumbo mortgages jumped to 7.4% in May, from 4.5% in November, according to First American CoreLogic. By comparison, 60-day delinquencies on prime-conforming loans reached 4.9% in May, from 3.6% in November.
A recent survey by the NAR found nearly three-quarters of real-estate agents said buyers were purchasing smaller houses due to tighter credit requirements. “We’re in a ‘trade-down’ environment for the first time since the 1930s,” says Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley.
High-end homes are also being hurt by changing perceptions about how much home one should own. For years, people were encouraged to buy the most expensive home they could afford because there would be a payoff when it was time to sell. But buyers can’t count on that any longer.
Having lost large amounts in the stock market and on real estate, “a lot of people are licking their wounds and hoarding their cash,” says Sally Daley, a real-estate broker who sells luxury homes in Vero Beach, Fla. She says many customers are asking, “Do I really need this big a house?”
Even families who can come up with the hefty down payments are buying more conservatively. Gabi Marks, an attorney, and her husband Don, an engineer, recently sold their condo and bought a five-bedroom Victorian house in San Francisco to accommodate their growing family.
They paid about $1.58 million, staying below their self-imposed ceiling of $1.8 million. “We made sure we had a sufficient [financial] cushion,” Ms. Marks says. They made a down payment of about 30%, partly to qualify for a lower-cost loan, and plan to pay down a big chunk of debt as soon as the sale of their condo is completed.
When the foreclosure crisis began two years ago, there were few signs the high-end market would suffer. “It’s God’s country,” Leslie Appleton-Young, chief economist for the California Association of Realtors, told an audience of real-estate agents in 2007. “When is the 30% decline in Marin County’s market going to happen? Not in my lifetime.”
Home prices there have fallen by 21% from their 2006 peak, according to Zillow.com, a real-estate Web site. Ms. Appleton-Young now says there’s “no doubt that the high-end housing prices have adjusted and will continue to adjust.”
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I am grateful to the WSJ writers for calling out LAY on her misplaced optimism about Marin County prices. It is important for future generations to have a record of ridiculous things the ‘experts’ said during the bubble run up, in order to avoid making the same mistakes in the future.
“While there are 65 homes on the market, just 13 have sold this year.”
13 homes sold over seven months; 65 = 5 X 13 homes are on the market.
Conclusion: there is a 5 X 7 = 35 months (about 3-year) supply of homes for sale in Kenilworth. That ought to be enough to last right right through to the end of the Alt-A and prime-reset tsunami…
This article is full of rich quotes:
Some residents are angry because policymakers in Washington specifically excluded jumbo mortgages in housing-rescue plans. “We’re considered either rich people who don’t deserve help or deadbeats who bought too much house,” says Kelli Kobor, a 42-year-old substitute high school teacher. “I don’t see Washington prepared to deal with us.”
Five years ago, she and her husband bought their five-bedroom Dutch colonial in Kenilworth for $1.3 million with a 25% down payment using equity they’d built up from two previous homes. Her husband lost his job in December and took a new one that pays much less, making it harder to make mortgage payments. Ms. Kobor says she missed her first mortgage payment in the spring but is now current.
Hummmmmmm…
At least Mrs. Kobor had a good comeback:
Ms. Kobor says it is ironic that two of the most powerful men in the country know of these problems first hand.
Treasury Secretary Timothy Geithner decided to rent out his Larchmont, N.Y., home after it failed to sell and President Obama purchased a $1.65 million Chicago home with a $1.3 million jumbo mortgage in 2005, at the height of the real-estate bubble. The property is now worth $1.2 million, according to an estimate by Zillow.
The Treasury Department and the White House declined to comment.
‘”We’re considered either rich people who don’t deserve help or deadbeats who bought too much house,” says Kelli Kobor, a 42-year-old substitute high school teacher. “I don’t see Washington prepared to deal with us.”
Five years ago, she and her husband bought their five-bedroom Dutch colonial in Kenilworth for $1.3 million with a 25% down payment using equity they’d built up from two previous homes.
…
Local real-estate agents have told her she’d be lucky to sell the house for the $960,000 that’s owed on their jumbo adjustable-rate mortgage. Her lender, Thornburg Mortgage, specialized in prime jumbo loans and filed for protection from creditors under bankruptcy law in March.’
Sounds like they are about $340,000 short. How many years’ worth of substitute high school teacher’s pay would it take to make up that kind of shortfall?
40 short years?
Perhaps her bank can stretch her payments out to 40 years? Whoops — I guess not — the bank is bankrupt…
‘Thornburg Mortgage, specialized in prime jumbo loans and filed for protection from creditors under bankruptcy law in March.’
“Others have pulled their million-dollar homes off the market and are offering them as rentals. Susan Forney rented her six-bedroom Georgian colonial in Northfield, Ill., for $7,500 a month after it didn’t sell.
Over the past two years, she reduced the price by $1 million to $2.25 million, but her only offer came in at $1.6 million, about $100,000 less than she paid for the house in 1999.”
It sounds like high-end Northfield homes have retreated to pre-1999 prices, doesn’t it?
“To be sure, the affluent housing market is substantially smaller than the mass market. Sales of existing homes priced over $750,000 accounted for 2.3% of all sales in the first quarter of this year, compared to 4.4% of the housing market in 2007, according to the National Association of Realtors.”
San Diego reality check:
Number of homes currently on MLS (at least according to ZipRealty dot com listings) = 7,432
Number of these homes listed at $750,000 or above = 3,167
Percentage of current San Diego MLS listings at or above $750,000 =
(3,167 / 7,432) * 100 = 42.6%.
Hummmmm…
I love numbers. They can spew so much BS and then clear it all away.
Roidy
There seemed to me to be a big disconnect between only 2.3% of first quarter sales this year north of $750,000 versus 42.6% of current San Diego listings at that level. I know it is different here and all, but come on!
Once everyone is freed up from having a job, they can all finally move to San Diego.
Can the Obamanomics Dream Team match this proposal to put an end to Megabank, Inc’s bonus mischief?
Brown Backs Withholding Bank Bonuses for Five Years (Update3)
By Gonzalo Vina and Andrew MacAskill
July 16 (Bloomberg) — Prime Minister Gordon Brown said the U.K. government will adopt plans forcing banks to hold back half of all bonuses for senior traders and executives for up to five years to discourage excessive risk taking.
Brown told lawmakers that he is supporting proposals by David Walker, ex-chairman of Morgan Stanley International, calling for limits for traders earning more than members of bank boards. Walker also suggested banks disclose in annual reports how much they pay their top traders.
“Remuneration has got to be long term,” Brown told a committee in Parliament in London today. “In other words, it is only on the basis of long-term performance that we can guarantee the bonus system in the future. He is recommending bonuses should be over a five-year period.”
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What is this guy talking about? I guess he didn’t read the recent story about the use of TARP monies to pay massive Megabank, Inc bonuses?
London vs New York
“What is going on in America is being driven much more by outrage at big bonuses to people at businesses that have effectively gone bust,” said Michael Wainwright, a London-based partner in financial services at law firm Eversheds LLP. “In the U.K., the reforms are aimed at more improving corporate governance, not just a knee-jerk reaction.”
It appears Bank of England Governor King is going to take the lead in cleaning up the whacked-out bonus payment system at Megabank, Inc, while Bernanke and Geithner pretend away that Wall Street is back to business as usual and nothing has changed.
Bank Governor King Slams Bank Bonuses
By REUTERS
Published: August 2, 2009
Filed at 7:42 a.m. ET
LONDON (Reuters) - Bank of England Governor Mervyn King suggested on Sunday tougher banking regulation was still required and said that some bonuses being paid to executives were “absolutely astronomic” and could not be justified.
In an article for the News of the World, King said companies should not get sucked into an attitude that “the other banks are doing it … we must take part too.”
“Executives at the top are earning vast sums, beyond the dreams of ordinary people, for doing a job which it’s very hard to say justifies that kind of bonus,” King wrote.
“It is a form of compensation which rewards gamblers if they win — but with no loss if they lose.”
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WSJ Blogs
Deal Journal
An up-to-the-minute take on deals and deal makers.
* July 31, 2009, 9:30 AM ET
Cuomo’s Bonus Report, the Morning After Reactions
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“New Yorkers’ views of Wall Street bonuses separate us from the rest of the country as surely as the Hudson River Vacancies along Madison Avenue, long lines at Manhattan soup kitchens, axle-threatening potholes, plunging home prices, more than 150,000 lost jobs in New York State, the return of the squeegee-wielders, heightened pandering to foreign tourists who clog our pedestrian walkways - all testify to the damage done to the city by plunging profits at the banks. We need profits - and bonuses- to come back!
— Liz Peek, wife of the CIT Group Inc’s chief executive Jeff Peek, and the author of an essay, “Confessions of a TARP Wife,” on Huffington Post.
“This is what happens when you are playing games with someone else’s money. The crooks and incompetents on the side of the US government gave these companies money with few or no strings attached. You couldn’t get a loan for $50 from your local bank with as little oversight as the government imposed on these bailouts. Why was the government so lax? Because it’s not their money. It’s yours. There’s not a lot of incentive to do things right when there’s no downside for you. Shovel the cash out. If it works, great. If it doesn’t, who cares.”
–David Pearlman, in a comment on this WSJ dot com article.
“Attorney General Cuomo’s report on executive pay at companies receiving taxpayer bailouts is shocking and appalling. Companies that only months ago were facing bankruptcy and sought the help of the Federal government are now paying out billions in compensation–and in some cases without reimbursing taxpayers. This egregious behavior proves that Wall Street still doesn’t get that times have changed and the old way of paying executives is long gone.”
–Statement released by Edolphus Towns, chairman of the House Committee on Oversight and Government Reform.
Luckily this could never happen here, in America:
UPDATE 2-Japan logs record wage fall; bonuses sink
Sun Aug 2, 2009 10:26pm EDT
By Leika Kihara
TOKYO, Aug 3 (Reuters) - Japanese wage earners’ total cash
earnings tumbled 7.1 percent in the year to June, the biggest
annual drop on record, which could hurt consumer spending and add
to deflationary pressure on the economy.
Weakening household demand for goods is playing an increasing
part in pushing the world’s No. 2 economy deeper into deflation,
with core consumer prices falling a record 1.7 percent in the
year to June. [ID:nT23765]
The Bank of Japan is already forecasting two years of
deflation, so price falls alone are unlikely to push it back into
full-blown quantitative easing, which in Japan involved flooding
the banking system with cash to meet a specific monetary target.
But weak wages, coupled with a rise in the jobless rate to a
six-year high in June, may heighten uncertainty over the central
bank’s forecast for a gradual economic recovery towards early
next year, and put on hold any exit from its unconventional
monetary policy steps.
“This puts downside pressure on prices, and deflation will
worsen for the next one year. There is no way the central bank
can move in this situation,” said Masamichi Adachi, senior
economist at JPMorgan Securities in Tokyo.
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Mail Online
How bailed-out U.S. banks kept on dishing out bonuses
By Mail Foreign Service and David Gardner
Last updated at 12:21 AM on 01st August 2009
Lawmakers were voting last night to give the American government unprecedented power over bank bonuses as a new scandal rocked Wall Street.
The U.S. Congress was expected to pass legislation giving government a direct say in deciding the pay of bank bosses and banning excessive bonuses.
The bill was being pushed through just hours after it emerged that payouts to executives at some banks that received taxpayer cash added up to more than the total net income of the banks.
Nine Wall Street banks received a combined £75billion in taxpayer cash last October to help them survive the financial meltdown.
But according to a shocking report by New York Attorney General Andrew Cuomo, bonuses paid by several of the biggest institutions were ’substantially greater’ than the banks’ earnings.
* Goldman Sachs’s net income was £1.4billion, yet it paid out nearly £2.8billion in bonuses. It received £6 billion in bail-out funds.
* Morgan Stanley earned £1billion and paid nearly £2.7billion in bonuses. It also received £6billion from the taxpayer.
* JPMorgan Chase earned £3.3billion, paid £5.2billion in bonuses and received £15 billion from the government.
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I really love this headline.
But I am starting to see a pattern here, as pols on both sides of the pond are busy clucking their tongues at Megabank, Inc’s bonuses, promising reform going forward. The barn door was left open, all the horses are all gone, and they are racing to shut the door! I expect when we look back a decade hence, it will be obvious that other than a massive expanse of hot air, little change resulted from the banking meltdown.
Mail Online
Disgraced fatcat bankers to pocket record £4bn in bonuses despite bringing economy to its knees
By Rupert Steiner and Kirsty Walker
Last updated at 10:56 PM on 02nd August 2009
Bankers are set to pocket a record £4billion in bonuses, less than a year after bringing the economy to the brink of meltdown.
Thousands of City executives are looking forward to mammoth payouts as UK banks report surprise profits this week.
It will be a major embarrassment to Chancellor Alistair Darling and City Minister Lord Myners, who had promised to slam the brakes on corporate excess.
Thousands of city executives are looking forward to mammoth payouts as UK banks report surprise profits this week
The news will also enrage millions of credit-starved businesses and families after taxpayers were forced to pick up a £37billion bill to bail out the banks.
Research from the respected think-tank the Centre for Economic and Business Research predicts there will be £4billion of bonus payouts this year, up from £3.3billion last year.
MPs from across the political spectrum condemned the ‘gut- churning’ scale of the bonuses. They warned that, while bankers are lining their pockets, ordinary families will suffer for decades from soaring taxes and cuts to public services as governments grapple with the ballooning national debt.
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