Risky Bets Sometimes Go Bad
It’s Friday desk clearing time for this blogger. “With relatively robust sales sparked by sales of distressed properties for much of this year, the Solano County housing market, reflecting a statewide trend, will moderate to a more sustainable pace in 2010, said Robert Kleinhenz, deputy chief economist with the California Association of Realtors. ‘It appears home prices are headed up a little bit from the trough (in April),’ said Kleinhenz. ‘It’s a welcome development.’”
“His comments come on the heels of some facts that reveal the extent of the national housing meltdown that began two years ago. The median sales price statewide in August was $293,000 — ‘Down better than 50 percent below the peak ($594,000) back in 2007,’ Kleinhenz said.”
“‘After experiencing its sharpest decline in history, we expect the median price to rise modestly next year,’ said Jim Liptak, president of the California Association of Realtors and a North County real estate agent. ‘2010 will mark the beginning of the new normal for California’s housing market.’”
“‘I’ve said many times that there won’t be a bell that rings when we’ve hit the bottom, but we’ve reached a point where it makes good sense to buy,’ he said. ‘It’s a good indicator when you see investors getting into the marketplace.’”
“Two years ago, Larry Igarashi bet he could build a sprawling house in Orange County’s foothills that would sell for at least $10 million. On Saturday, he put the eight-bedroom house in a gated community on the auction block and received a high bid of $6.6 million — less than he was willing to accept. Even at cut-rate prices, few multimillion-dollar homes are selling. With so many to choose from, even those with enough money are taking their time.”
“‘There’s no sense of urgency among buyers. I just didn’t expect this would happen,’ Igarashi said of the housing crash. ‘I don’t think Wall Street or even the president of the United States believed this could happen.’”
“By most measures, it’s a gem of a house in the Hayden Bridge area of Springfield. But, after more than a year on the market and a succession of price reductions totaling $90,000, it remains unsold. ‘t’s baffled all of us,” said Marie Due, Realtor with Barnhart Associates, who helped build the house and is trying everything she can think of to find a buyer.”
“‘The stand-alone custom builders don’t have the ability to buy a huge, gigantic plot of land and then divide it into $40,000 lots like Hayden does. They have to buy the lot for $125,000. Then, you’ve got (to pay) $20,000 or $30,000 for the permits and everything else. And that’s before you even put a shovel in the dirt. So you’ve got a total of $150,000 and you’re supposed to build a $100,000 house? Oops. That doesn’t work very well, does it? ‘Due said.”
“Home builders in Florida participating Thursday in a teleconference conducted by the National Association of Home Builders say they are concerned that there is not enough momentum in the marketplace to ensure a sustained housing recovery. Alberto Milo, president of the Urban Development Group in Miami, said…’The home buyer tax credit needs to be extended. It is the main incentive that is getting home buyers into the market and making them feel that this is the time to buy and not sit on the sidelines waiting for prices to decline further.’”
“Prices in his area have dropped 50 percent, from a median of $400,000 at the peak of the market to about $200,000 today. As builders have been reporting across the country, Milo said that the appraisal issue has been especially troubling for his business. He cited an appraisal on one of his new homes, which was under contract to sell for $205,000, that came in at an alarming $70,000 last week. That was ‘way under even the cost of producing that unit,’ he said.”
“Like many overinflated U.S. housing markets where the bubble has burst, Las Vegas appears ripe for the picking. Robert Horn of Olympia, Wash., has a Summerlin condo in escrow for about $150,000 and plans to rent it out. The unit is in great condition and sold for $425,000 in 2007, he said. ‘I came down here and basically started to look at properties,’ Horn said. ‘I knew it was a great market, a great place to live and have a place. What you can get for the money, you can’t pass it up.’”
“There’s a significant oversupply of available new units, estimated at 42,000 units for the entire market, including standing inventory, available lots and recently built homes in foreclosure, reported said Marta Borsanyi, principal of a Newport Beach, Calif.-based real estate advisory firm. That also includes 8,000 high-density units, the majority of which are condo-hotels and rentals.”
“Realtor Heather Peck is worried about banks flooding the market with foreclosed homes. If home prices plummet further, ‘We would become Detroit junior,’ she said.”
“The bursting the real estate bubble in the U.S. and the rise of the loonie are creating a ‘once-in-a-lifetime’ chance for Canadians to buy their dreamhome in sunny Arizona, says a former Winnipeg cop turned realtor.Besides cheap houses, Phoenix boasts over 300 days a sunshine a year, professional sports teams and first-class recreation facilities. As an added bonus, Arizona has a relatively benign climate — for a desert.”
“‘No natural disasters. We don’t have mudslides, earthquakes, hurricanes. And it’s a dry heat,’ Diane Olson added with laugh.”
“Homeowners around two southeast Chandler subdivisions say they are worried about their property values as developers shift to building smaller homes in an effort to attract buyers in a depressed housing market. People bought homes there with the expectation that the neighborhood would remain on the same scale, said Reid’s Ranch resident Sean Stecker, and downscaling the remaining homes would hurt existing residents’ property values.”
“‘When my wife and I purchased our home here, the plans for this neighborhood and the ones around it were quite upscale,’ Stecker wrote to city officials. ‘Their proximity to my home, which is considerably larger and consequently more expensive, will hit my family personally from a financial perspective, as the overall value of this immediate area goes down.’”
“Michael Smith, who owns a Reid’s Ranch home, said the subdivision was marketed to him as larger homes on larger lots. ‘Clearly this action flies in the face of that claim…These new small models would not fit visually with the current homes - they will be dwarfed by the existing homes,’ according to Smith. ‘The smaller product will be a drag on already dramatically reduced home values.’”
“For the fourth straight month, bankruptcy filings for the Phoenix metro area hit a yearly high. The 2,472 filings, mostly by consumers, in September marked an 85 percent increase from the same month a year ago, according to the U.S. Bankruptcy Court in Phoenix. Statewide filings also reached a yearly peak.”
“Greg Stark, a certified financial planner in Scottsdale, participated in a program sponsored by The Arizona Republic Tuesday night during which advisers made themselves available at no charge to answer money questions. Unlike past programs, where investment and retirement questions often dominated, debt issues were on the minds of many callers, Stark said.”
“‘The tenor right now is credit, especially residential mortgages,’ he said.”
“John Burns Real Estate Consulting, a California firm that analyzes the U.S. housing market, is not part of the chattering class that thinks the bottom is here or near. The company warns in its most recent newsletter that it sees a ‘massive supply of homes’ coming down the pike via foreclosure.”
“What sort of ‘massive supply’ numbers are we talking about? Pretty, um, massive: One out of every 10 U.S. homeowners is behind on mortgage payments, John Burns Real Estate estimates. Not one in 10 homeowners with mortgages. One in 10 homeowners, period.”
“Foreclosure sales at auction in Denver last month dropped 29.3 percent compared to the same time period last year, a statistic that some experts believe is one of several indicators that the local housing market is beginning to stabilize. However, a Realtor who specializes in selling foreclosed property says many leading banks are delaying going into the foreclosure process and that the numbers aren’t what they seem.”
“Personal experience has led Bob Costello of Denver Foreclosure Brokers…thinks that banks aren’t foreclosing as quickly as they should, which is altering the number of foreclosures. ‘At some point banks will have a whole boatload of these things, the question is just when they will unload them,’ he said.”
“Another theory Costello has for the lack of foreclosed properties is that the banks are simply overwhelmed by the number of people who are behind payment on their mortgages. But as he pointed out, people have been predicting a flood of foreclosures for a while and it has yet to hit. ‘It’s all a little bit goofy right now,’ he said.”
“There’s debate in Minnesota and elsewhere about how well a federal program to promote mortgage modifications for troubled homeowners is working. On Thursday, the federal government said its Making Home Affordable program had achieved a key milestone of handling some 500,000 trial modifications and had reached the goal nearly one month ahead of schedule.”
“Michell Vojacek, coordinator for St. Paul’s mortgage foreclosure prevention program, said that in some cases, troubled homeowners seeking modifications through the federal program face lengthy waits to get into a trial deal. In other cases, homeowners who complete the trial program find themselves being offered full modifications with worse terms, Vojacek said.”
“‘It’s kind of all over the board depending on the lender,’ she said. ‘We are seeing some folks that are getting good, fixed-rate loan modifications, and we’re seeing some that aren’t.’”
“The Congressional Oversight Panel…warned that the program seems sure to prove ineffective. The panel simply said that they’ll be swamped by changes in the market. The economic crisis and rising unemployment is pushing many more prime mortgages, even those given to the most creditworthy borrowers, into default. From July 2007 through the end of August, 1.8 million homes were lost to foreclosure and 5.2 million more foreclosures were started, the report said.”
“The program ‘is going to have a fairly marginal effect,’ on the foreclosure crisis, said Laurie Goodman, senior managing director of Amherst Securities in New York. ‘At the end of the day, you’re going to have relatively few successful modifications.’”
“Real estate broker R. Gilliam Kittrell III in Raleigh, North Carolina, answers the phone these days on the first ring. That’s when it rings at all. Mortgage rates near historic lows aren’t producing more buyers, said Kittrell, who recited terms on a rate sheet on his desk which he said were almost unprecedented in his 30 years as a broker. ‘These rates may stimulate the market but they haven’t yet,’ said Kittrel.”
“The median price of an existing home was $177,700 in August, down 12.5 percent from a year earlier, the National Association of Realtors reported. Falling interest rates help support prices from declining more, said Scott Buchta, a mortgage strategist in Chicago. ‘It lets people pay more for a house,’ Buchta said.’
“A U.S. unemployment rate of 9.8 percent in September, the highest in 26 years, and expectations that home prices have further to fall is discouraging buyers. So are forecasts that foreclosures will continue rising, said Jack McCabe, a real estate consultant in Deerfield Beach, Florida. ‘The low rates are a good sign, but you look at everything else and this is like no other real estate downturn in history,’ said McCabe. ‘People who thought they were taking advantage of deals a year ago have lost 20 or 30 percent. They were what you call knife catchers.’”
“In one town, it’s shiny new appliances, fluffy carpets and gleaming countertops. In another, it’s older homes - some in blighted neighborhoods - and most without any luxurious amenities. But the idea is the same: Offer cash to homebuyers. It wasn’t just the stainless steel, the abundance of closets and the customized flooring for the Garcia family. More than $3,000 from the village of Manhattan and other financial incentives from the developer sealed the deal for them when it came to buying a new home. They just moved in a few weeks ago from Naperville because Garcia’s law practice is based out of the south suburbs, as is his church.”
“‘There are a lot of developers out here,’ Garcia said. ‘Getting that incentive helps very much.’”
“The Garcias aren’t the only ones taking advantage of Manhattan’s housing stimulus program….His neighbor Russ Ondo Ondo used the $3,500 to furnish his new townhouse. ‘Without that, I would be living in an empty home,’ said Ondo.”
‘Garcia, on the other hand, used the cash for closing costs. ‘We didn’t have to put out a cent,’ Garcia said.”
“The number of metro-east residents filing for foreclosure increased during the past two months, but numbers are still below figures recorded earlier this year. Al Suguitan, executive director of the Greater Gateway Association of Realtors in Glen Carbon, tracks the housing market in Madison County and surrounding counties. He said that although some economists have declared that the nation’s recession is over, a relatively high foreclosure rate coupled with a 10 percent unemployment rate is not going to help the nation’s housing market.”
“‘If this is what we call a jobless recovery, that is not going to be very beneficial for millions who are out of work,’ Suguitan said. ‘That’s not going to be very beneficial for them unless they can be retrained and positions open up. The quicker the economy can gain its footing in terms of the service and manufacturing sector, I think you’ll see that the number of unemployed go down. I think what is key is to the housing recovery is an employment recovery.’”
“While Leslee Chapman waited to see if her bid on a house would be accepted earlier this year, she began to question if she even wanted it to be. Chapman, 28, says she likes living in her rented townhouse in south Fort Myers. She has a good job, but worries this is a bad time to make a long-term commitment, even with an $8,000 first-time homebuyer tax credit baiting the hook.”
“‘I really did feel a lot of pressure to buy something because prices are so low and I wanted to take advantage of the tax credit,’ Chapman said. ‘I finally had to ask myself if I wanted this for myself or because of outside pressure.’”
“Chapman decided renting is just fine, for now. Across Southwest Florida and beyond, thousands are reaching the same conclusion. The American dream of homeownership has lost some of its sparkle amid the foreclosure crisis.”
“Ted Schiafone and his family are living in a rental home in Miromar Lakes, near Estero, after they sold a vacation home in Wisconsin. Schiafone said he assumed he would shop for a new home, but now he isn’t so sure. ‘You always thought you could get your money back if you needed to sell,’ he said. ‘That’s not the case, now, and with rental rates being what they are, we are probably paying about a third of what we would pay for a mortgage.’”
“Renting a home is an acceptable alternative and makes sense for more people every day, said Joe Gyourko, professor of real estate at the Wharton School of the University of Pennsylvania. Too often, the expectation everyone should own a home leads people to reach beyond their means, Gyourko said.”
“The government even seems to encourage the stretch, offering Federal Housing Administration-backed mortgages with down payments as low as 3 percent, he said. ‘I don’t know why the government keeps encouraging the FHA and others to say there is no real reason to put much equity in your home,’ Gyourko said. ‘Highly leveraged bets on a home are very risky, and risky bets sometimes go bad and hurt the people who make them.’”
U.S. Mortgage Backer May Need Bailout, Experts Say
http://www.cnbc.com//id/33239793
“F.H.A. has stepped into the void left by the private market,” Representative Maxine Waters, Democrat from California, said at the hearing. “Let’s be clear; without F.H.A., there would be no mortgage market right now.”
That was the case for Bernadine Shimon. Like many Americans, Ms. Shimon has recently been through some rough times. She lost a house to foreclosure, declared bankruptcy, got divorced and is now a single mother, teaching high school English in a Denver suburb.
She wanted a house but no lender would touch her. The Federal Housing Administration was more obliging. With the F.H.A. insuring her mortgage, Ms. Shimon was able to buy a $134,000 fixer-upper in August.
—————-
Are you freaking kidding me?!?! How in the world did she even qualify for a FHA loan?
Are you kidding me? She could qualify for a FHA loan because there ARE NO qualifications. If you are breathing, you can get an FHA loan. This case just shows it for the world to see, but I’ve known this to be the case for a few years now; FHA is the new subprime. Let’s see, foreclosure, bankruptcy, teaching English (50K income?) with a child…
Sure, we’ll happily lend you 134K with 9K down (which, certainly in this case, was all from the federal “cash for crapshacks” 8K tax credit). So, in effect, this sub-600 FICO just bought a house with nothing down.
Welcome to 2005, all over again.
And yet even with FHA loans, sales are down.
Yes, I think this is one factor people are not considering. Although the PTB is throwing absolutely everything at the housing market, in many areas, it is still very slow…
Milwaukee’s big condo projects are going into forclosure left and right
Wisconsin Tower downtown condos hit with foreclosure suit
By Tom Daykin of the Journal Sentinel
Oct. 9, 2009 11:37 a.m.
Another financially troubled Milwaukee condo high-rise is in foreclosure.
City Real Estate Development LLC, the developer of Wisconsin Tower, 606 W. Wisconsin Ave., is the target of a foreclosure suit filed by M & I Marshall & Ilsley Bank, according to online court records.
…The Wisconsin Tower suit follows this week’s news that the 281-unit Park Lafayette condo development is facing foreclosure
http://tinyurl.com/yfhuwb6
Condo default detailed in suit
Other lawsuits, publicity cited in court papers
By Tom Daykin of the Journal Sentinel
Posted: Oct. 8, 2009
The Park Lafayette condo towers project is the subject of a $100 million foreclosure lawsuit.
Wisconsin Tower downtown condos hit with foreclosure suit
National program for women developers recognizes Goins
Palermo’s expanding Menomonee Valley headquarters
A six-week work stoppage, along with bad publicity tied to several lawsuits, was among the factors that led Milwaukee’s largest new condominium development to default on its mortgage, bringing a $100 million foreclosure suit.
http://tinyurl.com/yfdysyl
We now have the government acting like Countrywide with OUR money. It’s just pitiful.
How did she qualify?
By taking $8,000 of freshly printed Benny-Bucks as her 3.5% down payment to buy that house that she’ll later lose. After all, we need to keep housing expensive and people in debt!
‘He cited an appraisal on one of his new homes, which was under contract to sell for $205,000, that came in at an alarming $70,000 last week. That was ‘way under even the cost of producing that unit,’ he said.’
A first semester economics student could figure out this is supply and demand telling you not to build, dummy.
“…appraisal …under contract to sell for $205,000,…at an alarming $70,000 last week.”
It sounds like the government’s efforts to make housing more affordable are succeeding beyond their wildest dreams!
I can’t wait to see ole Barney lisping his way through this one.
“Oh wellth, me manath to produth low cost howsing. Didn’t we centurian”. Channeling pontius in BF here.
+1 ROTFLMAO! You need some sensitivity training, James.
Another question, is why is someone paying that much over market value. If you are not planning to pay back the loan, I suppose the amount does not matter.
Think of the purchase price as the amount the lender will get paid by taxpayers when the current buyer defaults on the loan. The nominal purchase price will in many cases turn out to be a direct infusion of tax dollars into the lenders’ coffers.
That’s an ugly way to look at it (but very true).
—->That was ‘way under even the cost of producing that unit,’ he said.’<—
Typical mindless, perspective-less BS, as usual.
When you pay grossly inflated prices for the dirt, buildout when lumber futures are trading at an all time high with labor in a 4% unemployment rate environment, you get exactly what you deserve.
Any other time $50/sqft will get you to a mid $70k price tag….. every single time.
Robert Horn of Olympia, Wash., has a Summerlin condo in escrow for about $150,000 and plans to rent it out. The unit is in great condition and sold for $425,000 in 2007, he said. ‘I came down here and basically started to look at properties,’ Horn said. ‘I knew it was a great market, a great place to live and have a place. What you can get for the money, you can’t pass it up.’”
What?! This idjit lives near ME?! I’m outraged! I forbid it! I’m a gonna look him up in the phonebook and then at lunch time go find him and slap the bejabbers outta him! Just for fun! Not because I hope to slap some sense into his pointy noggin! And then eat a delicious and nourishing bagel!
Look at all my exclamation points! The most I’ve ever typed here! Because I am so very fo0kin’ offended!!!
Sounds like a plan. Wish I were there to help. It would be fun.
I wish you were, too. We could spell each other when our girlish hands, or paws in your case, got tired. Then when we judged the slappage to be sufficient we could drive merrily onwards to the next slappee, which you will read about as soon as my indignant post shows up.
It would be so much fun. Why didn’t we stay in Tacoma?
Besides slappage maybe we could do spells?
Sounds like a party to me!
We would have so much fun.
I hope there’s pictures.
Hey, if I didn’t have to be in Tucson this weekend, I’d be there, brandishing my camera.
Just in case the festivities take a ’skyclad’ sort of turn, hmmm?
After it will be a little cool for skyclad soon. Besides I have too many neighbors.
I don’t. Except for frogs, and they’re already skyclad, so they don’t object.
What are you so upset about ? If he bought at a price that is cash flow positive he just made a good investment.
We just want to have fun.
And I’m evil.
Alas. Me, too.
*pseudo sad face *
Hahahaah!
And we so enjoy it.
Sings….
“How looong has this been going on?”
and grabs his camera too
Hard to cashflow a rental when you have no tenants paying rent, isn’t it?
That’s the unspoken truth, as the glut extends to all these rentals, and too many rentals mean two things.
1. Rents will go down
2. Some homes will not get rented
You don’t know that he can’t get a tenant, and you don’t know that rents will go down.
I’m going to go out on a limb and suggest there’s a fat chance anyone would pay $1500/mo to live in a condo in Olympia, WA. $950-ish, maybe.
Aren’t there usually restrictions on % of rentals in a condo bldg? How does he know he just turn around and rent it out?
I’ve heard the figure 25%, as in, the max percentage of rentals allowed is 25%.
“cash flow positive” — doubtful in Vegas, even in Summerlin. I looked at the possibility of becoming a tenant there. It woulda been a heckuva lot cheaper than buying (a year ago), and while prices have continued to fall, not THAT much.
“‘I’ve said many times that there won’t be a bell that rings when we’ve hit the bottom, but we’ve reached a point where it makes good sense to buy,’ he said. ‘It’s a good indicator when you see investors getting into the marketplace.’”
Flippers called themselves investors, people buying houses at 10X income called themselves investors, teachers buying 10 condos called themselves investors…
and we named the lot of them infestors.
I just got a flyer from Castle Hill Investments that says on front:
South Austin Homes are selling VERY QUICKLY!
But when the $8,000 first time homebuyer tax credit expires November 30th, the fun could end.
If you want to sell, NOW is the time.
On back:
Robert says: “South Austin home prices are likely to peak in 2009!”
Gosh, shall I sell my house? Nah, I think I’ll go for a bike ride instead.
“we’ve reached a point where it makes good sense to buy”.
Wait, didn’t they already say that..in 07, 08, 09?
“It’s a good indicator when you see investors getting into the marketplace.”
…definitely. It’s a good indicator that the demand from end-users is not sufficient.
Bingo!
13 exclamation points, is how mad I am!
Oh, and another thing that makes me wild with wrath. It turns out there’s another Olympiagal, evidently some stupid gal who also dares to live in Olympia, who writes a dumba*s*s blog using that very name!
NO! I forbid that, too! IIIIIIII am Olympiagal! The Olympiagal! ME. AND ONLY ME. Therefore, I’m gonna hunt her down as well and slap the bejabbers out of her, ALSO.
(After the bagel, so I’ll be extra nourished and healthy and ready to slap briskly and rhythmically.)
…Man, this is going to be a lonnnng day for the rest of the world. I can already sense it.
“2Q retail sales dropped 14 percent in Washington”
THE ASSOCIATED PRESS
OLYMPIA, Wash. — The state Department of Revenue says taxable retail sales in Washington declined to $25 billion in the second quarter of this year, a 14 percent drop from the same period last year.
The state said Friday that the April-through-June sales decline is the largest one on record. Sales were down 12.8 percent during the first quarter of this year, and 10.8 percent during the fourth quarter of last year, the second- and third-largest declines since reliable records have been kept beginning in 1974, state officials said.
Two of the biggest drops were in retail sales from construction, down 26 percent to $4.3 billion, and motor vehicle and parts, down 21 percent to $2.3 billion.
How can this be? After all, it’s different here! Right?…right?
HAHAHAHAHAHAAHAhAHA!
Does MSFT pay sales tax on their sales? Their NEW piece of caca should fill some holes.
The “retailer” who sells Windows out of the box collects & pays sales tax… but ONLY on sales made INSIDE WA.
Unless MSFT makes a direct sale to an “end-user” in WA… will they pay sales tax to WA.
You know, I was driving near Olympia last week on my way to Vancouver. But I did not stop. I didn’t even stop to pee. I could sense your anger. I was afraid for the frogs.
What?!
I WASN’T ANGRY LAST WEEK! But now, hearing that you COULD have stopped, but DIDN’T stop, NOWWWWWWW I AM ANGRY!
*very angry face! *
Bad move, bink. Bad move. You coulda had tater tots!
And stolen oysters, as well. Although bink’s stolen oysters would not have had a Santa Claus hat glued to one of them.
…You know, sleepless, I shall now entirely forgive you* for spurning tater-tots, because you accepted a drippy bag of oysters, one oyster of which had a little red felt Santa hat glued to it, and you did so with grace and elegance.
*When I say ‘entirely’, I mean, ‘mostly’, in this case.
Look! I LOVE tater-tots. It’ll take me awhile.
OlyGal,
How long have you been in the anger phase of the housing bubble stages of grief? I am relieved to report that I am nearly through with it — on to acceptance of my quasi-permanent lot in life as a renter.
Is it possible to predict off the timing of HBBer passage through the stages of grief to when the rest of the country will experience them? I am personally a bit frightened about how the masses may react to the anger phase. The Rodney King riots are still rather fresh in my memory.
Oh really, get stucco, you should march right out there and buy a house at half price. I mean really. This is what you wanted and now it has arrived, but you still won’t buy. I know prices in Rio Rancho, or whatever, have not precipitated as well as you would have liked to date, but you’re not poor. Get off the pity pot and buy a property!
Wow — a real live REIC troll comes straight out of the closet to implore me to buy. Let’s see how those median list prices in our zip code’s MLS are looking before I get too excited over this fantastic opportunity. From Redfin dot com (92127 zip code):
The median SFR list price for homes currently on the market is (drumroll, please):
$1,229,990 –
About the same as it was in 2005!
I will hold out until I either get too old to want to buy a house, or the sellers leave their state of denial and get real.
P.S. I am not on any pity pot. The only thing that makes me unhappy is that there is so little consumer choice in the SoCal real estate market, thanks to all the ugly, near-identical tract home developments that mar the landscape. The kind of home I would choose to buy, should prices ever come down from their ridiculously overpriced Fed-engineered plateau, may not even exist, thanks to the ubiquitous blight the Wall Street-funded home builders have littered all over the SoCal landscape.
Wow, I feel exactly the same way WRT housing choices.
We’re particularly fond of nice, middle-class custom homes from the 60s and 70s. (think Escondido)
There is another reason to not buy right now, aside from the insanely high Fed-engineered housing prices, which is that California is on the verge of becoming the first failed state in the USA. One of the many advantages of renting is that it makes it quite easy to pull up the tent states and migrate if circumstances dictate the necessity.
OlyGal,
How long have you been in the anger phase of the housing bubble stages of grief?
Just today. But I made up for lost time with the magnificence of my wrath. Serious, you shoulda been here. You coulda videotaped me.
See, I already bought a mortgage a few years ago. So I’ve been a knife catcher a long time. My anger, lo, these many years, has been at the r*pe and destruction of what I hold most precious; the forests and wetlands.
My anger, lo, these many years…
And, of course, burning indignation and fiery wrath over just how stupid humans can be, and be that stupid on purpose.
But I would have had that anyhow.
Now that I think of it, YOU probably would have had that anyhow, as well, huh?
Come on, PB…vent! You always keep it so close to your vest, or your chest, or however the cliche goes?
Most impressive. I wish I could see that — could you possibly do a YouTube post?
That’s a drag, Oly.
Yar!
*snarly face! *
‘…one oyster of which had a little red felt Santa hat glued to it, and you did so with grace and elegance.”
Yeah, for sure. If Olygal handed me an oyster in a little red Santa hat, I would have hit the gate at 98 heading out of Dodge.
The white fluffy brim and the bobble part of the Santa hat was made from the cotton ball out of a vitamin bottle…Vitamin C, I think it was? The chewy kind.
Remember, this was at Christmas time, so it was very seasonal and Martha Stewarty. I intended to tell sleepless that I had walked down the road to the shore to steal him some nice oysters and there, astonishingly, was the Santa of Oysters right in the midst of a merry throng of seasonal oyster celebrants!
But then I started laughing and ruined the story.
Dan*g!
*nostalgic sigh *
Except the barnacles on the da*mn oyster was all leaky and squirty, so the hat never did dry out right.
But he was gracious, like I say.
*exthamen *
ready to slap briskly and rhythmically.)
Sort of like a boxer slapping the hanging punch bag.
Looking like Mickey Rourke or Mike Tyson practicing!!!!!!!!!!!!!!!!!!!!!!
There, trying to add to the fun!
Sort of like a boxer slapping the hanging punch bag.
Looking like Mickey Rourke or Mike Tyson practicing!!!!
Why, I do appreciate your helpfulness.
Even though it’d probably be more like two little pink par-broiled prawns attacking an avocado.
At least in my case. I betcha wolfgirl has a serious punch. And it even has claws in it.
How odd.
You do understand that “avocado” derives from “advocate” as in testimony.
Testimony also has the same root as testicles, since testicles are “proof” of a guy’s manhood. Avocados are named that way in Spanish since they roughly look like testicles: they are “advocates” - i.e. speakers of testimony.
You do understand that “avocado” derives from “advocate” as in testimony.
I didn’t know that. But I’m not surprised you know that—you’ve supplied a fair number of my ‘Word Watching’ entries. Grathiath!
(that’s Castillian Spanish for ‘Gracias’, by the way)
Testimony also has the same root as testicles, since testicles are “proof” of a guy’s manhood.
I did know that. That’s why ‘Fast and Testimony’ meeting on Sunday morning would generally draw a giggle from me, when I thought about it. Between the agonized suffering that church caused me.
If yours bear any resemblance to avocados…
…all I can say is “Wow.” You have a remarkably large testimonies to your manhood.
I’d be concerned about the green color. But that’s just me.
Actually my post was a little disorganized. Here’s one from answers dot com.
The history of avocado takes us back to the Aztecs and their language, Nahuatl, which contained the word ahuacatl meaning both “fruit of the avocado tree” and “testicle.” The word ahuacatl was compounded with others, as in ahuacamolli, meaning “avocado soup or sauce,” from which the Spanish-Mexican word guacamole derives. In trying to pronounce ahuacatl, the Spanish who found the fruit and its Nahuatl name in Mexico came up with aguacate, but other Spanish speakers substituted the form avocado for the Nahuatl word because ahuacatl sounded like the early Spanish word avocado (now abogado), meaning “lawyer.” In borrowing the Spanish avocado, first recorded in English in 1697 in the compound avogato pear (with a spelling that probably reflects Spanish pronunciation), we have lost some traces of the more interesting Nahuatl word.
IIIIIIII am Olympiagal! The Olympiagal! ME. AND ONLY ME. Therefore, I’m gonna hunt her down as well and slap the bejabbers out of her, ALSO.
Hmmm…..you should go and rent the movie “Fight Club”.
Got it memorized, baybee.
…look, the problem is, (see above post) that “it’d probably be more like two little pink par-broiled prawns attacking an avocado”. This describes my fists of wrath.
I mean, what the heckfire? I’m only gonna beat up avocados?! But avocados are so good! So inoffensive, too. Really, I can’t countenance that sort of abuse. Besides, the avocado would probably sometimes win, and boy wouldn’t I feel dumb then.
One of the sorrows of my life was when I realized I was not gonna grow up to be a menacing lumberjack, despite my desire.
Boy, was I mad on the terrible, terrible day when I realized this. Sigh.
…But we all have our crosses to bear, and must deal with the burden we are given.
So, that’s why I bite when I get in unpleasant situations. Because at least I have big teeth.
*flexes prawn arm sadly *
You can still ask Santa to bring you a chainsaw.
I mean, what the heckfire? I’m only gonna beat up avocados?! But avocados are so good! So inoffensive, too. Really, I can’t countenance that sort of abuse. Besides, the avocado would probably sometimes win, and boy wouldn’t I feel dumb then.
…This makes DennisN’s post seem wayyyyyyy more Freudian than it ought to seem.
You are the one and only Olympiagal.
Thanks!
….That’s good, right? …Right?
Yes, yes, a thousand times yes; it is abundantly good.
BTW, Olygal, I googled “the one who shall remain nameless”, and she is way Way WAY less interesting than you. Your most hung-over inane meandering is a bazillion times more interesting than her literary efforts.
Seriously.
p.s. You’re the one and only, truly incomparable Olygal in my book.
Oly, there’s another “az_lender” too. He or she makes loans through prosper.com, and has a portfolio of notes that are only 53% performing on time.
THAT AIN’T ME!
Don’t take this personally, but isn’t this the
personification of the term “bitchslap”?
The good news is that from what I can tell, I am _still_ the only Prime_Is_Contained.
And I am relatively contained.
“They have to buy the lot for $125,000″
( Note to Marie Due )
No they don’t. They w-a-n-t-e-d to buy the lot for that! In fact, paying a premium for the lot ( in mid-bubble ) only assured you’d be able to demand a premium price!
Again, for rinky-dinky builders, ‘this’ is where the money was made. Who needs the aggravation of actually ‘building’ the house when small-timers can just flip the lots back and forth amongst themselves ( all funded by local banks no less! ) Sorry, better luck in the -next- life dear )
Here in Flagstaff these guys were paying 300-500k for lots.
Ben,
Seriously!? Wow, and I thought ‘Oregon’ came off the rails?
This incited the mad dash for builders to “get big” ( and I mean quick ) to enable them up The Land Bubble Ladder! They’d get loans from Podunk Bank and burned it on lots ( ‘where’ are these again? ) before lunch.
As you’ve painstakingly noted over the years, at the end of the day, a 2 X 4 costs what a 2 X 4 costs!
Around the corner from me on Jessie St. a 60s ranch house on a 1/3 acre lot sold a year or so ago for $450,000 (asking was $495,000). They are building a HUGE house with enormous windows overlooking the ranch house across the street. It’s not a spec.
Their enormous windows in back (with enclosed patio and spa areas) will have a “greenbelt” view of a wooded canyon - but their lot is separated from the canyon by my land behind my house, a funny-shaped long backyard. So their unique view will include me bending over weeding the Swiss chard. If they put in a fence to provide privacy for lower floor, patio and spa, their upstairs giant windows view will still be me weeding the Swiss chard in the foreground of the canyon.
Now, nearby chicken-keeping hippies have an excess of chicks (they keep a rooster) and recently suggested building a big coop out back for me and my neighbor / gardening partner. They will help us build it and supply us with chickens in exchange for us tending theirs if they go out of town.
My land in back isn’t totally Dogpatch, but it’s not a million-dollar house view, even for someone who likes urban green space and gardens and possibly chickens.
AND, across the canyon, another guy paid a half million dollars for a teardown (and another quarter million for the lot next door, for which he considers himself a RE genius) on Kinney Ave. He is building a huge three story modernist house (bottom story down the canyon) with glass walls on the canyon side. Only the trees I planted out back last year will - eventually -prevent these geniuses from looking through their upper-story glass palace walls at each others’ a$$es!
But, hey, being just blocks from South Lamar means that they’ll be only minutes away from plenty of body shops, auto electric, transmission, brake repair, etc. And their kids will be able to walk to the tattoo parlors!
After the house burned down, I could have bought a lot or two, but had been taught to buy income property, not sit on land-land bank, and during 94-97 period, it just didn’t seem the thing to do for a beginner, land bank. Boy don’t I wish I had.
‘Their proximity to my home, which is considerably larger and consequently more expensive, will hit my family personally from a financial perspective, as the overall value of this immediate area goes down.’”
I really hope they put in a train track, light rail, feed lot, raised highway, airport flight path, sewage treatment lift station, etc etc next the these whiners. If the smaller houses are well kept they won’t drive down values at all, they are a totally different target market than the McMansion crowd.
And, while we’re at it, how about if they put in…
1. Apartment complex for college students. Nothing like living next to a never-ending party, is there?
2. An outdoor kennel. Woof! Bark! Yap! Howl! Rinse and repeat!
3. A rendering plant.
Anyone else with evil ideas?
A Cowgirl Saloon, like Boise’s with a well-lit giant parking lot for the fights.
An ATV track.
A cement plant.
A methadone clinic.
(or a house of congress)
garage band
preferably heavy metal, until they decide they want to change course and do N.W.A. covers
Oil well drilling mud sump. Pig scalding tank.Grape fermenting. Sorry I hurt myself.
“Grape fermenting.”
What are you smoking, pismo??? Fermenting grapes smell _fantastic_!!! (and I know this for a truth…
4. Sewage treatment plant. To deal with all the cr*p from all the new development, dontcha know.
And a drag strip
wolfgirl,
Since you’re on a roll anyway..!
With an “Open Class” time trial.., on SUNDAY!
Yeah, I think our HOA Prez. will need ample amounts of gauze and bandages after severely shooting himself in the foot of late? For all my heel dragging he rubber stamped a rental approval and almost -directly- after moving in ( against all my better judgement ) the very, aged truck that helped our new ‘neighbor’ move in is… still parked right where it was left and -has- been ever since!
Smoove move Prez! All we need now is a steady transmission leak and cardboard under to soak it up. The wife and I have only to think that the Prez and Mrs. think all their behind the scenes manipulation will buy them favor when this couple decides whom to leave their condo unit to? ( Hate their kids )
So NOW I’ve become the unwilling accomplice to enable someone ‘else’ to feather their nest egg w/ aging “friends”. Great….
“And a drag strip”
When I was a kid, one of the places I lived was near one of those ubiquitous Southern half-mile dirt tracks. Instead of sitting on the front porch listening to the katydids and watching the flashes of heat lightning way out on the horizon, I heard from my front porch the sound of mufferless, racing cars, and saw on the horizon a red dust cloud obscuring the floodlights. I actually enjoyed it, and would listen for my uncle’s name on the loudspeaker, who had bought and raced one of Lee Petty’s old cars. (My uncle ended up wrecking it, and retired from racing while the getting was good!)
I grew up on the main road to a NASCAR track in the days when the cars were towed to the track. We got a lot of pleasure watching the highway afater the race. Lots of cars to watch.
Don’t forget the rendering plant.
Pig farm/feedlot.
“Woman says she’s being chased out of condo”
http://tinyurl.com/yfywy4q
Both the victim and the suspect are landlords at the condos. They own properties that they rent out, primarily to students. But according to the charges, Van Johnson was at the woman’s condo Tuesday, firing bee bees
“The shots, it was so many times,” said the victim. “It was a deliberate attempt, it’s very obvious.” …Police arrested Johnson. Tuffour says the cops told her he was in a bush with a pellet gun when they arrived. “Once they wrote his name I said but I know this guy. He is a board member. He was the president or the chairman of Colville. How could it be him? I said it’s not him,” Tuffour said.
Ahhhh….more joys of condo ownership.
They say society is just three meals away from anarchy. I wonder what the triggering factor is with these condo folks.
‘I don’t know why the government keeps encouraging the FHA and others to say there is no real reason to put much equity in your home,’
Sounds like a great way to create more plankton to feed the whales of Megabank, Inc.
“While Leslee Chapman waited to see if her bid on a house would be accepted earlier this year, she began to question if she even wanted it to be. Chapman, 28, says she likes living in her rented townhouse in south Fort Myers. She has a good job, but worries this is a bad time to make a long-term commitment, even with an $8,000 first-time homebuyer tax credit baiting the hook.”
“‘I really did feel a lot of pressure to buy something because prices are so low and I wanted to take advantage of the tax credit,’ Chapman said. ‘I finally had to ask myself if I wanted this for myself or because of outside pressure.’”
“Chapman decided renting is just fine, for now. Across Southwest Florida and beyond, thousands are reaching the same conclusion. The American dream of homeownership has lost some of its sparkle amid the foreclosure crisis.”
Leslee, you meanie you!
Don’t you know that renters are losers? Bitter ones at that? And that we, the homeowners/debtors of America, will only regard you with utter contempt unless you’re an owner/debtor like we are?
Actually, I think Leslee’s a pretty smart gal.
Brava Leslee -
She resisted the competitive spend pressure!
Somebody pull up a chair for Leslee and buy her a libation of her choice.
Great to see stories about people doing the math and renting instead of buying, but I don’t see much evidence of that around here (Tri-State NY area).
I don’t know Long Island very well for instance, but from what I hear it’s just miserable …..very high prices, nothing moving, awfully crowded, taxes out of control.
On the other hand, I live in NJ…..
Once Americans start doing the math, look out. That will be the end of our consumption- and debt-based economy.
Personally, I’d rather have an economy where more weight is given to saving and investment. But, hey, that’s just me.
Good thing most Americans can’t do math then, isn’t it. In case you didn’t get the memo, math is hard. And all our children are unique snowflakes; to FORCE them to learn something as hard as math would just be wrong!
Many things are hard. For instance, I can’t drse worth a damn, and am envious of those who can turn a sheet of paper into masterpice using nothing more than a pencil. No matter how hard I try I can’t do that, as my sketches look like they belong on my grandma’s fridge.
Like wise I realize that some people have no business learning advanced math. It doesn’t mean that they shouldn’t master basic high school math, which is all one needs to understands topics like compounded interest.
I found an incredible math book at Goodwill yesterday. It explains Social Security, taxes, interest, and a lot more useful topics in straightforward language. Of course it is 60 years old, so the numbers in the examples aren’t current. Still I’m glad to have found it.
I like numbers. Name of book, please?
Arithmetic for Successfull Living by Anthony I. Marino, Charles E.Merrill Books copywrite 1955.
Arithmetic for Successfull Living by Anthony I. Marino, Charles E.Merrill Books copywrite 1955. Quite a few used copies for sale on Amazon.
Slim:
I don’t think we have the guts as Americans to make home ec or life skills a mandatory class for HS graduation.
——————————————————–
Once Americans start doing the math, look out. That will be the end of our consumption- and debt-based economy.
Holy smokes. I finished all college prep classes early in my HS senior year. I thought it would be a good idea to take some bonehead classes, to relax a little. One was typing and the other I can’t remember, but it was some home budgeting class.
The typing class helped me more in college than anything. Being a fast typist also helped with getting student jobs. Home budgeting taught me the time value of money and how compound interest worked.
How many Doctors, Scientists, Lawyers, etc. do you know that have zero life skills?
Funny, I’m a CPA/MBA and do quite well, but, same here, one of the most valuable things out of high school was my typing class and being able to type 70 WPM, pretty good speed for a dude.
I’m a structural engineer. The three H.S. classes that helped me the most?
1) Home Ec. Learned to balance a checkbook, do laundry, make something other than Mac ‘n’ Cheese for dinner.
2) Manual Drafting (this was in ‘89). I don’t care if everything is CAD now, knowing hows and whys and developing good penmanship was important.
3) Band. I play guitar in my free time.
Bad:
You bought up a dirty word today: penmanship
Today’s kids have none, knat spel eethr
I had more of a blue collar high school, drafting, electronics print-shop, i was assistant Photographer of the year book.
Typing, by far, the most useful class on a daily basis for me today. Also, some of the “structural” math courses (well, really all of them) were very important, Algebra and Geometry being the top of the list. I call them “structural” because (IMHO) they teach you how to structure questions/problems in your head.
Calculus also does this, but I’ve just never really needed that level of math since school, so I wouldn’t put it up there with Algebra and Geometry, those I use all the time.
Worst classes in high school? Foreign language (total waste of time for me, I didn’t learn anything, and I was taking French/Latin. Spanish should be the only lang taught in HS, if you want to take the others; do it in college). Gym (total waste of time).
Now, college is a different story. 50%+ of the classes I took in college were a waste of time. Almost everything I took in my major (Comp Sci) has never been used again. Almost everything I took out of my major was/is still useful/helpful. Comp Sci moves WAY too fast for college, but the time you’re learning it, you’re 10 years behind what people are actually doing in the industry. I knew more about programming coming into college than I knew about it when I left.
Trigonometry. Even with a masters in Physics, I still draw from Mr. Wiseman’s excellent instruction in ‘85-’86.
Two years ago, Larry Igarashi bet he could build a sprawling house in Orange County’s foothills that would sell for at least $10 million.
I wish he had given me a chance to bet against him on that.
Now, how would one go about shorting a wishing price?
He also said “‘There’s no sense of urgency among buyers. I just didn’t expect this would happen,’ Igarashi said of the housing crash. ‘I don’t think Wall Street or even the president of the United States believed this could happen.’”
off the record he said ‘ Hell….even God could not believe this!….WTF!”
“Realtor Heather Peck is worried about banks flooding the market with foreclosed homes. If home prices plummet further, ‘We would become Detroit junior,’ she said.”
I got news for you baybe. YOu got a city under the city living in the sewer system.
You are going to have Detroit beat in no time at all. At least Detroit is further along the curve. They’re reclaiming open space, demolishing buildings and are cheap. Just fix the states closed shop policies and things will begin to improve.
I feel investors from China itching to put up shop in the US soon. Just like having Toyota, Nissan and Honda plants all over the US.
Hey! A little respect for Detroit, here.
Their citizens once produced quality products that the rest of us wanted and needed. That’s way more that can be said for LV.
Ah yes, the village of Manhattan’s homebuyer incentives. It’s been a year or more since I remember posting a blurb about that here. Gee whiz, it’s bad enough the Fed credit is being used to buy furniture, but these people are using the money from a rinky dink southern suburb to furnish and close on their townhouses?
This is so not going to end well.
“What sort of ‘massive supply’ numbers are we talking about? Pretty, um, massive: One out of every 10 U.S. homeowners is behind on mortgage payments, John Burns Real Estate estimates. Not one in 10 homeowners with mortgages. One in 10 homeowners, period.”
We don’t need no stinkin’ reality talk!
“With relatively robust sales sparked by sales of distressed properties for much of this year, the Solano County housing market, reflecting a statewide trend, will moderate to a more sustainable pace in 2010, said Robert Kleinhenz, deputy chief economist with the California Association of Realtors. ‘It appears home prices are headed up a little bit from the trough (in April),’ said Kleinhenz. ‘It’s a welcome development.’”
“His comments come on the heels of some facts that reveal the extent of the national housing meltdown that began two years ago. The median sales price statewide in August was $293,000 — ‘Down better than 50 percent below the peak ($594,000) back in 2007,’ Kleinhenz said.”
It sounds like the new normal already started developing back in 2007…
“The number of metro-east residents filing for foreclosure increased during the past two months, but numbers are still below figures recorded earlier this year. Al Suguitan, executive director of the Greater Gateway Association of Realtors in Glen Carbon, tracks the housing market in Madison County and surrounding counties. He said that although some economists have declared that the nation’s recession is over, a relatively high foreclosure rate coupled with a 10 percent unemployment rate is not going to help the nation’s housing market.”
That’s in ATE-UP’s hood. Are foreclosures ‘higher than expected’ in E-ville, too?
Speaking of risky bets, it was a mighty good week for US investors to own gold or FOREX. Are these bets sustainable?
The Financial Times
US mantra of strong dollar loses its value
By Tom Braithwaite and Sarah O’Connor in Washington
Published: October 9 2009 19:22 | Last updated: October 9 2009 19:22
For 14 years US Treasury secretaries have taken up the mantra as though it were an essential part of the office. So, sure enough, Tim Geithner, like his recent predecessors, believes “in a strong dollar”.
But if one thing has been devalued over that time, it is not so much the currency itself but the impact of the phrase.
After a week that saw the dollar reach a 14-month low against a basket of currencies and a fervour of Republican fretting about the value of the currency, the accusation is doing the rounds that maybe Mr Geithner does not “believe” hard enough.
There are reasons for entertaining this doubt. His commitment to a rebalancing of global trade could be accomplished by higher domestic demand in surplus countries such as China and Germany but it is not hurt by a weaker greenback.
For US business, the picture is mixed. But the large manufacturing groups such as General Electric and Caterpillar are expected to benefit, even if some smaller companies reliant on importing components are less happy.
However, Frank Vargo, of the National Association of Manufacturers, says there is no simple division between great and small: “When I talk to [some of] our smaller, more mid-sized companies, they are very happy as the dollar declines.”
…
EDITOR’S CHOICE
Summers stresses US support for dollar - Oct-09
The Wall Street Journal Opinion
The Weak-Dollar Threat to Prosperity
Measured in euros, U.S. per capita GDP is down 25% since 2000.
By DAVID MALPASS
If you want to know why the dollar has been falling this week and gold hit a new high, look no further than the weak jobs numbers last Friday and the weak communique issued over the weekend at the G-7 meeting in Istanbul. Deploring “excess volatility and disorderly movements in exchange rates” isn’t exactly a ringing defense of the greenback. And 9.8% unemployment convinced markets that monetary policy will remain loose regardless of dollar weakness.
Bond buyer Bill Gross of the Pimco fund summed up the situation nicely in a recent CNBC interview. Asked whether low interest rates will weaken the dollar, the influential allocator of global capital said: “I think that’s part of the administration’s plan. It’s obviously not announced—the ’strong dollar’ is always the policy, so to speak. One of the ways a country gets out from under its debt burden is to devalue.”
On the surface, the weak dollar may not look so bad, especially for Wall Street. Gold, oil, the euro and equities are all rising as much as the dollar declines. They stay even in value terms and create lots of trading volume. And high unemployment keeps the Fed on hold, so anyone with extra dollars or the connections to borrow dollars wins by buying nondollar assets.
Investors have been playing this weak-dollar trade for years, diverting more and more dollars into commodities, foreign currencies and foreign stock markets. This is the Third-World way of asset allocation.
…
wouldnt a weak dollar lower the cost of american goods thus increasing demand among our trading partners, thus increasing production and lowering unemployment…..or am i just confused again
The Financial Times
Summers stresses US support for dollar
By Gregory Meyer in New York
Published: October 9 2009 07:10 | Last updated: October 9 2009 07:10
The chief economic adviser to President Barack Obama on Thursday reiterated the administration’s support for a strong dollar as concerns mount about the currency’s sharp decline.
Lawrence Summers, director of the National Economic Council, supported recent statements by Tim Geithner, the Treasury secretary whose office customarily voices the US stance on the dollar.
“I think he made very clear our awareness of the responsibilities we have in the US, and the special role of the dollar in the international system,” Mr Summers said of his colleague. The Treasury secretary had made clear “our commitment to a strong dollar based on strong fundamentals”, Mr Summers said.
Mr Summers was speaking at a foreign exchange conference organised by Bloomberg in New York.
…
Spoke to a friend today who got laid off. He was speaking with his neighbor the day it happened, and his neighbor mentioned that if HE were to get laid off, he’d have to sell his house.
Not sure of this guy’s title, but he’s been at Nike for over a dozen years and bought his house last year.
“Tenure” at his company, making decent coin, and yet he’s in a position that demands that if he lost the job, he’d have to sell his house….So, knowing that he’s in that precarious of a position, he buys the house anyway!
This obsession must stop.
Oof. From the NYT article regarding FHA:
http:/www.nytimes.com/imagepages/2009/10/09/business/1009-biz-graph.html
OK, so according to the graph, the 2006 and 2007 vintage FHA loans are going into default at over a 30 percent rate. Isn’t that great for the lenders who made those loans, as they get made whole by the taxpayer?
Alberto Milo, president of the Urban Development Group in Miami, said…’The home buyer tax credit needs to be extended. It is the main incentive that is getting home buyers into the market and making them feel that this is the time to buy and not sit on the sidelines waiting for prices to decline further.’”
Later, when asked if he really just wanted the bubble to return he said ‘Maybe so….I dream about it a lot’
“Later, when asked if he really just wanted the bubble to return he said ‘Maybe so….I dream about it a lot’”
LOL! Might be the red wine talking, but I found his vision of a fantasy bubble return really funny.
What an idiot.
“I pledge allegiance to America’s debt, and to the Chinese government that lends us money, and to the interest, for which we pay, compoundable, with higher taxes and lower pay, until the day we die.”
I love this Economist article, which aptly notes the parallels between John Law’s Mississippi Company bubble and the present day housing bubble. Will Ben Bernanke be recognized by historians as the John Law figure in the updated version of the story, or does that honor rightfully go to Alan Greenspan?
Finance and Economics
Buttonwood
The nature of wealth
Oct 8th 2009
From The Economist print edition
The world confused financial assets with real ones
…
Housing is more complicated than the stockmarket since people get utility from their homes (shelter, relaxation) while simultaneously treating them as assets. Even so, a rise in house prices that outpaces GDP growth does not make a society richer. Instead, all that is achieved is a transfer of wealth from first-time buyers to retirees exiting the property market.
In theory house prices can rise faster than GDP for a while if citizens decide to devote more of their incomes to housing services (for example, they may prefer a bigger flat to a bigger car). In practice it is hard to disentangle such structural shifts from the speculation that is prominent in all property booms.
It is the link between speculation and asset prices that explains this crisis. The ability to borrow money to buy assets fuelled the rise in asset prices. And the wealth effect of higher prices persuaded those in English-speaking countries to borrow money to sustain consumption.
Not long ago the BBC transmitted a programme about credit-card use. One man said he felt “wealthier” because he was given a credit-card limit of £5,000 ($8,000). Of course, once he used the card he was poorer. Not only did he have to repay the £5,000, but he had to service a double-digit interest rate as well. Similarly those who buy an overvalued asset with borrowed money have not made themselves richer but poorer.
Thinking about wealth in this way is also useful when assessing rescue packages for the economy. Will these policies boost the amount of goods and services the economy produces in the long run, or will they have consequences that actually restrict economic activity? Does quantitative easing really boost wealth or simply create more claims on the same underlying pool of assets?
Central banks have repeatedly intervened to rescue financial markets, or paper wealth, over the past 20 years. But have they propped up prices at levels that simply do not reflect the long-term fundamentals? The ingenious schemes of John Law, an 18th-century financier, to hold up the share price of the Mississippi trading company broke down in the end because the delta was not the El Dorado he promised investors, but a fetid swamp.
Good stuff!
The New York Times
National Briefing | West
California: State Revenues Falling
Article Tools Sponsored By
By JENNIFER STEINHAUER
Published: October 9, 2009
California, still reeling from huge budget cuts and tax increases intended to close billions of dollars in deficits, has ended the first quarter of its fiscal year with falling revenues. The state’s combined personal, corporate and sales taxes fell more than $1 billion under estimates, according to a monthly report released by the state controller, John Chiang. The state started the fiscal year on July 1 with an $11.9 billion cash deficit in its general fund, and that deficit grew to $16.2 billion during September.
So it didn’t turn out to be contained after all. At least it is almost all guaranteed…
* The Wall Street Journal
* REVIEW & OUTLOOK
* OCTOBER 10, 2009
Fannie’s Next Big Adventure
Piling a guarantee on a guarantee on . . .
Step right up, taxpayer, because Fannie Mae and Freddie Mac have a new deal for you. And don’t worry—it will make housing more affordable and won’t cost a dime. (Pardon us if you’ve heard this one before.)
Fan and Fred’s latest excellent adventure is intended to help independent mortgage lenders that have been hard hit in the wake of the financial panic. These smaller players have seen their costs of capital rise and access to capital shrink. They never benefited like the big boys from bailout cash from Uncle Sam or the implicit backing of a too-big-to-fail guarantee. As a result, the three biggest U.S. mortgage lenders—Wells Fargo, Bank of America and J.P. Morgan Chase—now make more than half of all new home loans in the country.
Meanwhile, the Federal Reserve and now government-run Fannie and Freddie have been pushing mortgage rates down in a bid to buoy the housing market. These artificially low rates in turn have lowered the rate at which it’s economical for a lender to borrow money to make home loans; this has also increased the squeeze on independent mortgage shops.
Thus the latest Fannie brainstorm: Launch a program to guarantee the short-term debt of these small mortgage lenders, provided they use the money to make mortgages approved by Fan and Fred. Keep in mind that Fan and Fred already guarantee the mortgages themselves. So this new program would pile another taxpayer liability on top of that one by guaranteeing the short-term debt of independent mortgage companies, too.
Now, some might say that in a world in which more than 90% of all mortgages are already taxpayer guaranteed, this is no big deal. If you insure the mortgage product, why not insure the lenders who created it too? Yet by that logic, the taxpayers might as well cut out the middle men and simply nationalize the entire mortgage industry. (On second thought, forget we mentioned that.)
Our point is that piling mortgage guarantee upon guarantee is going in precisely the wrong policy direction. If we are ever going to return to a private mortgage market, the feds need to begin to roll back their guarantees and market share. Yet the more guarantees that are made, the harder it will be to withdraw. This may be precisely what Fannie and Freddie and their Congressional patrons want, since these new guarantees will make it that much harder to reform them and reduce their sway in the housing market.
…
Isn’t guarantee a euphemism for deputizing or nationalizing? It’s all temporary of course.
“A U.S. unemployment rate of 9.8 percent in September, the highest in 26 years, and expectations that home prices have further to fall is discouraging buyers. So are forecasts that foreclosures will continue rising, said Jack McCabe, a real estate consultant in Deerfield Beach, Florida. ‘The low rates are a good sign, but you look at everything else and this is like no other real estate downturn in history,’ said McCabe. ‘People who thought they were taking advantage of deals a year ago have lost 20 or 30 percent. They were what you call knife catchers.’”
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Ding. Ding We have a WINNER !!
‘Garcia, on the other hand, used the cash for closing costs. ‘We didn’t have to put out a cent,’ Garcia said.”
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Ding. Ding. We have a LOOSER. !!
Good to see that Denver real estate starts to stabilize due to the fall of foreclosure sales