Bits Bucket For March 14, 2010
Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
To donate by mail, or to otherwise contact this blogger, please send emails to: thehousingbubble@gmail.com
PayPal is a secure online payment method which accepts ALL major credit cards.
Links
-
January 2025 M T W T F S S « Sep 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
Photo Submission: hbbphotos@gmail.com
View the HBB Photo Gallery *updated 4/13/2008
I told my friends in 2007 not to buy this little house in Burbank, but it was “$50,000 under market!” Since the $550,000 purchase price, it’s now ridden down to $450,000 and losing every month. The option arms/I/Os coming this year and next are going to decimate the nicer parts of LA and my friends will probably be under water to the tune of a couple hundred thousand. This weekend one of them said, “Wish we never bought this house.”
Watch out for falling knives.
I am wondering if we need a new monicker for homes whose equity is gradually draining away, as “falling knives” suggest a fast ride to the ground. Perhaps “descending glaciers” is closer to the right metaphor?
You are right, PBear. Everything has been so drawn out. How about Poe’s gradually-descending pendulum?
the money pit and the pendulum
Death by Numbers?
peine forte et dure
a form of punishment in which the prisoner’s body was pressed with heavy weights
Etymology: severe and hard punishment
or in plain English pressing.
Speaking of numbers, happy Pi Day, everyone.
Be nice to a circle and its diameter if you have the chance!
Always remeber that sphincters are round!!!
And pie are squared…
Happy Pi Day to you polly. Take a look at what Google did.
http://www.google.com
Here’s a scene from the original Star Trek episode “Wolf in the Fold” using the value of pi to get rid of an enemy.
http://www.youtube.com/watch?v=H20cKjz-bjw&feature=player_embedded
Enjoy.
Nerd question for the Pi day theme on Google:
It shows a sine wave with amplitude 2 and period 2*pi. What is the length of the curve which defines the wave itself, which starts at zero, goes up to one, down to negative one and back to zero.
circumference
BSE Computer Engineering, thank you very much.
Things do seem rather long and drawn out, especially when one takes a look at raw land in WA and finds prices parked at or near bubble highs. In fact, there isn’t much land listed for sale.
Looks like the “Housing Market / Commericial RE” has been:
“rode hard and put away wet”
Financial termites? Financial dry rot? A financial sinkhole?
Financial stinkhole is more like it.
Financial Hellhole….
snail crawling along the edge of a razor
+1
ghost riding the whip
Half Life. Like anything else that is radioactive and toxic.
P Bear,
The nicer parts of SD which are older haven’t dropped as much as I thought. When oh when does SD collapse or maybe it doesn’t?
I always liked the “hungry Alligator” waiting for its monthly feeding.
So now what do you all talk about when you go bowling?
Actually, I think the fix is in. The mortgage re-sets may not be a problem at all. Since Bernanke has used the FED to purchase all the bad loans from the banks, the loans are now the problem of the Federal Reserve.
The Federal Reserve money cartel is holding loan rates at ZERO percent. It could be that Bernanke comes up with another special lending program whereby they simple adjust the rates of the mortgages close to zero as a “temporary lending facility”.
This would make the “value” of the houses exceed current values.
The low rates could be maintained until the inflation caused by FED money printing makes its way into the market. Then, with the dollar losing another 50% in value, the “loans” could be re-set and readjusted.
The house you mention could easily be worth the $550,000 price. In fact, it could be worth far more.
The whole game of the FED is continuing “inflation”. The collapse of the debt bubble put a wrench in the cogs of the FED machine.
But rest assured, passing money to their Wallstreet buddies to buy up assets for the benefit of their traders (traitors) is what they will do.
The PRICE of all assets will eventually rise, but their value will be substantially less. However, Goldman-Sachs brokers will have bought up most of the world on the cheap.
So, don’t worry about it. Bernanke is working hard to devalue the dollar and get those house prices back up to where the Mortgage is “solvent” on a face-value basis.
This will end the economic crisis………….and “restore” the economy.
This scares the crap out of me, but until I see wages increase I don’t buy it. I don’t know anyone getting a raise. Even in our higher education bubble, 1% raises are coming this year (on top of 1.5% last year).
You can’t look at “today’s” numbers and understand this. We are still in a deflationary spiral due to the credit bubble collapse, i.e. fake valuations and high leverage loans that could NEVER be repaid. But the FED is working hard to reverse the trend.
It takes time for these things to work their way through the system.
The problem is that the FED reacts to changes in the market while believing they are pro-active. They are always late to react, and therefore wrong in their policies. Listen to all the comments by Bernanke in retrospect.
No Housing Bubble. NO impact from sub-prime mortgages. The impact is “contained. There will be no downturn in the economy.
He is a certified idiot. So are most of the financial advisors in the White House and the Fed Governors.
The FED has not been able to get inflation going in the market place, except in commodity prices……GOLD, OIL, SILVER, etc.
But they are determined.
I believe they will eventually get their way. The problem is that Bernanke thinks he is in control and can pull back the freely flowing money once we see the market inflation taking hold. But, again, the FED will be too late. The inflation will be achieved, but will get out of control. There’s just too much debt to bury and the Congress won’t put brakes on the spending.
I’m with Captain Credit Crunch here. Re-inflating the economy is much, much more difficult than it appears, because printing money doesn’t matter at all. Getting people to spend money is all that matters. In order to do that, people have to have confidence that they will have a job and that job will be paying them substantially more next year.
That won’t happen anytime soon. FDR did everything he could to create that situation in GD1, including creating government based employment programs to employ millions. That didn’t work because he didn’t have the guts to pay those folks much and promise them long term employment at ever better wages.
Emotionally, our government and people aren’t about to go there. Though inflation is the only way out of our debt trap. Push will meet shove one day. But only when the situation gets desperate enough. And it will get very desperate.
“He is a certified idiot.” Unfortunately he has not been offically certified yet. How do we begin the formal registration process?
I’m with Captain Credit Crunch here. Re-inflating the economy is much, much more difficult than it appears, because printing money doesn’t matter at all. Getting people to spend money is all that matters. In order to do that, people have to have confidence that they will have a job and that job will be paying them substantially more next year.
How about they print money and they use it fund entitlement programs, say a national health system that wouldn’r be funded via taxes?
“How about they print money and they use it fund entitlement programs, say a national health system that wouldn’r be funded via taxes?”
Well you have a citizen who didn’t have the money to pay for health care before and probably used the emergency room. So now the Feds give money to a doctor that they see that is not in the emergency room.
Since the hospital no longer has to overcharge insurance companies to make up for the lost money in the emergency room, maybe the insurance companies pass the savings on to employers who choose to increase employee pay instead of passing it on to investors.
I don’t know, a lot of moving parts there.
Getting people to spend money is all that matters.
Yes, in a nutshell.
And to back up to Cap’n Crunch’s post again for a moment, I too am wondering when and by what mechanism wage inflation will happen — I just don’t see it as a likelihood.
To have inflation you must have an increase in spending, debt, and wages. I completely agree with Mike Shedlock’s (MISH) assertion that deflation is a reduction of debt and credit demand.
Essentially, the Fed is pushing on a string and Ben Bernanke’s assertion that he will “print money until I have inflation” or “throw it from helicopters” is so much BS.
He will certainly try. Still, it should be obvious that Bernanke will insure that there are more - and potentially worse - imbalances in the system.
Expect more trouble to come.
The imbalances - too much credit, low returns, not enough savings, China, India, unfunded liabilities, high Govt deficits, TWO WARS!!!, collapse of American manufacturing, and on and on - will be redressed whether he likes or agrees with it or not. The actions of the central banks, gov’ts, and WS-type casino’s, all over the world are a guarantee of a disaster.
The idiots.
Roidy
If Bernanke’s magic inflation wand is going to end the housing market problem, he better start waving it!!! The summer selling season is coming, and with few buyers and fewer lenders, prices are sure to come down on their own. I’ve noticed they already are. More and more people that bought at the height are feeling the pinch and selling short. I think the Fed is really just trying to make is as soft a landing as possible. Speaking of short selling, did anyone else see the house flipping show where Armando Montenegro came to So. Cal to help a delusional couple finish and sell their dream home, just so they could squeeze out maybe 10 or 20K? What an f-ing train wreck. They had two little kids and she was walking the streets, selling her gold, like some hobo. But that’s how people are in So. Cal. So unbelievably out of touch and feeling like they DESERVE to live these lavish lifestyles when they cannot afford it! They ended up getting foreclosed on and living in a friend’s trailer while he finished writing his book. What a joke. Here’s an idea: Get a goddamn job!!!!!!!!!!
Raise…Who is getting raises ?? Government jobs are the only ones that I see…More like wage cuts and layoffs is what I see…
I work in local government in Florida. We’ve had either no wage increases or actual wage cuts over the last 3 years and downsized 15% of employees with much more coming this year.
Maybe the federal government.
In my county the local/county gov has not had a step or raise for two years, looks like it will be three years. With perhaps a 15% staff reduction also.
Jon : I’m with Captain Credit Crunch here. Re-inflating the economy is much, much more difficult than it appears, because printing money doesn’t matter at all. Getting people to spend money is all that matters.
Jon I don’t know either. If the American dollar drops so does the American standard of living. (Also the Canadian standard of living).
Jon: I work in local government in Florida.
My brother-in-law was looking to buy property on which to build in Cape Coral. I told my sister that it was a bad idea. I wanted to ask dimedropped. Jon what do you think?
I was speaking of Government in General and most that I know are doing quite well…
What scares more more is the concept of the Fed succeeding in making everyone poor via inflation. Just keep jacking the price of everything up until we can reach that “dream” where 1% of the population owns the other 99% - and such a dream it’ll be… Argh!
“…Since Bernanke has used the FED to purchase all the bad loans from the banks, the loans are now the problem of the Federal Reserve.”
Clever…and yes this will take a wee lil bit of time…
“Rosebud…while I’m on vacation…”maintain” the property
There’s only a few problems with this scenario:
‘The whole game of the FED is continuing ‘inflation’
‘holding loan rates at ZERO percent’
Zero percent rates and inflation don’t jive. It’s one or the other.
‘the dollar losing another 50% in value…The PRICE of all assets will eventually rise’
I’ve been hearing this for over 30 years.
‘passing money to their Wallstreet buddies to buy up assets …Goldman-Sachs brokers will have bought up most of the world on the cheap.’
This is based on the assumption that the central banks are all powerful. IMO history has shown this to be false. In fact, Greenspan, who was once worshiped by the media, is now widely considered to be a bumbling fool.
The definitions and economic theories of inflation haven’t applied to the real world for decades now. Remember how it was discussed the the Fed had “lost control” of long-term interest rates? Remember AGs “conundrum?” These guys are fighting the last war, and they don’t even seem to know it.
As long as Jamie, Lloyd and the rest of the Fed crime bosses are doing well the Bearded One is happy.
Greemspam was idiolized by TIME Magazine and other “media” propagandists. I NEVER thought he was anything but a bumbling idiot and you can go back and read my commentaries for years concerning that useless fraud. However, he is NOT in the FED. He has no Power and doesn’t effect decisions. The press still trots him out regularly. He should be ignored.
But, let’s look at this. Bernanke is continuing the Greenspan policies to the letter. So, if Greenspan is considered a bumbling idiot. Why is Bernanke “MAN OF THE YEAR” in Time Magazine.
Because he is promoting the game of his masters on Wallstreet, TIME Mag being part of the club, a propagandist for the team.
But how can you call Greenspan a bumbling idiot and then refer to his “Conundrum” on long rates? His stupidity in understanding the time lag of the effects of excessive credit and cheap money is his myopic view of the world economy. Bernanke is looking through the same lens.
He is trying to stimulate with more cheap credit.
So far, we are seeing the results that Japan got with their ZIRP for 20 years. Depression.
But, Bernanke is determined. He has come up with more programs to get money flowing into assets that could ever be imagined by a conservative “banker”. I think he will find a way to force the inflation upon us.
And, if you think “inflation” hasn’t happened or that the dollar hasn’t been continuously devalued by expanding the money supply, then you haven’t been paying attention, or you are under 20 and just haven’t really seen what the purchase value of a dollar is compared to a few years ago. Those with longer memories know that everything cost 100% more than what they think it should cost. I used to buy gas at $0.29 per gallon when i first started driving. My car cost less than the downpayment of a new car. Cigarettes were 0.35 per pack. This was the 1970s. Houses here cost $35,000 on average. A tee-shirt cost $1.00.
College tuition was $400 per quarter. (we had 4 yearly sessions).
Minimum wage was $1.65 per hour.
So, yes, wages and prices have increased, as a result of INFLATION. Wages usually lagging, not leading the price increases. Unfortunately, the “cost adjusted” value of incomes has lagged even more.
This is the game of the FED… a constant devaluing of the currency.
At 2% targeted “inflation”, the goal Bernanke uses, the a dollar is cut in a half in about 20 years. So, those of us trying to save for retirement watch our savings destroyed while prices climb. Let’s not even talk about the price of “healthcare”.
We need to END the FED. Now.
Ben,
They have lost control AND “don’t understand that they don’t understand.”
Poor Mr. Magoo.
He’s such a fool.
Roidy
“In fact, Greenspan, who was once worshiped by the media, is now widely considered to be a bumbling fool.”
Which makes quite interesting the fact that the Fed has never yet changed course off the trajectory Alan Greenspan charted!
So if the Fed (or Fannie/Freddie, or FDIC or whoever they’re all the same to me) hold these toxic assets, they technically own the loans and the housing itself.
Hmm, this could get interesting, if the gov owns the loans, or has to eat the loans and then owns the homes themselves. The gove could create all sorts of programs to make themselves whole. Renting back at market rates, converting McMansions into multi-family projects*, or even the return of the dreaded cramdown.
————
* which would never work. Section 8’s/welfare recipients/homeless/illegals will destroy those houses quicker than any angry FB. Say what you will about the inner-city projects, they were well-built. Yes you’d have to gut them and re-drywall, new windows etc, but they had strong bones.
“Say what you will about the inner-city projects, they were well-built. Yes you’d have to gut them and re-drywall, new windows etc, but they had strong bones.”
My Russian teacher back in the early 1980s was, shall we say, ‘fresh off the boat.’ She was duly impressed by the housing in the urban ghettos for two reasons:
1) There was no shortage of it.
2) It was falling apart.
Apparently nothing the Soviet Union’s government did in the housing arena could hold a candle to the U.S. HUD department’s ability to throw away money and destroy housing at the same time.
Maybe destroying houses is part of the goal. Then, there can be shortages and a new Bubble!
The rates may not adjust up, but the I/O loans will begin a principal+interest payment schedule. For some that will be enought to push them over the edge.
BAD: It used to be that an FB only had to sell because of a major life event — death, divorce, disease, downsizing. In this bubble, people are locked into having to sell even if their lives are going along just peachy. The ones who “had” to sell 2-3 years ago found that they physically ran out of buyers, which precipitated this crash to being with. We’ve predicted this for years.
WORSE: Many of those loans due to recast are from “Primes” who cashed out to buy toys, or traded up to a pergraniteel McTyvek. They took option-ARMs which are basically death.
WORST: In this age of job loss, people who were pretty careful about buying with a fixed rate are still in trouble because of the lost income.
For how much I dislike Elizabeth Warren, her two income trap theory is pretty much also a death sentence for many FBers. Rely on two full time incomes for the purchase, there isn’t any possibility for anything else to carry the mortgage. You base your purchase on one full time income, and if need be, two part time incomes can swing it.
Agreed, Chile. Didn’t know who she was when I read it and I remember not agreeing with some of the solutions, but the lessons of that book have stayed with me ever since. My GF and I discuss this topic (and our futures with it in mind) all the time.
In my neck of the woods, the media is reporting price increases, but since I actually track sales everyday, I know the actual prices are falling. They are still way too high, however, as places are selling for around $500k that would rent for $2,500 or less. After HOA, taxes, and maintenance, my numbers show a $4k cost to own. Also where would be my pool of buyers once market intervention goes away and interest rates are at 9%? I do not think wage inflation would make these properties good investments anytime soon.
“I told my friends in 2007 not to buy this little house in Burbank, but it was “$50,000 under market!”…This weekend one of them said, “Wish we never bought this house.””
Offer them $175,000 in a short sale.
http://www.larouchepub.com/other/2010/3710rogers_vic_tx.html
In a major political development totally blacked out by the national media, a LaRouche Democrat won the Democratic Primary in Texas’s 22nd Congressional District with 53% of the vote, by running on an explicit program of impeaching President Obama.
If an upstart GOP candidate had done the same during the Bush Administration, it would have been all over the news. But this story has been consigned to the memory hole.
Boy Texas, like California, is some kind of magnet ain’t it?
“Boy Texas, like California, is some kind of magnet ain’t it?”
It’s the water…they mix it with loco weed.
“…Boy Texas, like California, is some kind of magnet ain’t it?…”
*sigh* Yes. Yes it is.
by running on an explicit program of impeaching President Obama ??
What do you expect ?…Its Texas for gods sake…
OMG if that is the Dem candidate in the 22nd, what is the GOP candidate like ??
Here is some good news for those who did not buy a home and HELOC it to the hilt in order to buy toys and expensive vacations: HELOCked underwater home owners who funded opulent lifestyles out of the home equity ATM machine need not apply for federal tax relief on their short sales or mortgage loan modifications.
The Nation’s Housing
Some tax issues to consider on mortgage write-downs
Kenneth R. Harney
Saturday, March 13, 2010
… what are the tax implications when your lender essentially says: Okay, we recognize you’re underwater; maybe you’re thinking about walking away, and we’re (SIC) going to write off some of what you owe to keep you in the house? IRS guidance issued March 4 spelled out how financially troubled and underwater borrowers can qualify for tax relief when a lender agrees to lower their debt.
Here are the basics, should you be considering a short sale or loan modification involving principal reduction. Be aware that the federal tax exclusion only applies to mortgage balances on your principal residence and not on second homes, rental real estate or business property. The maximum amount of forgiven debt eligible under the law is $2 million for married taxpayers filing jointly and $1 million for single filers.
But there are potential snares: Your debt reduction can only be for loan amounts that you’ve used to “buy, build or substantially improve your principal residence.” This includes refinancings that increased your total mortgage debt attributable to renovations and capital improvements of your house. But if you used the proceeds for other personal purposes, such as to pay off credit card bills, buy cars or invest in stocks, the mortgage debt attributable to those expenditures is not eligible for tax exclusion.
Say you refinanced and used some of the proceeds to buy a boat and pay off business debts. Those expenditures would not qualify for the tax-relief provisions because they were not intended to substantially improve your house or build a residence. In all refinancings, make sure you can document where the money flowed.
…
I’m guessing most HELOC/re-fi applicants, when asked why they needed the loan, were either smart enough or well enough coached by the loan officer to put property rennovation on the line.
I’m guessing that unless mortgage fraud is obvious, the IRS is unlikely to be asking for receipts from contractors in most of these cases. Lets face is so many people are grossly unterwater DESPITE putting in granite and the rest of that junk that selling for less that paid for even after “improvement,” isn’t the obvious sign of income tax evasion that it usually is. I’m guessing that this sort of thing will just be an added charge when the send a few Casey’s up the river as an example.
It sounds like the IRS actually is asking for documentary evidence on what kind of home maintenance and improvement was done with the loan money. Of course, this won’t stop tax cheats from lying about the exotic vacations and toys they purchased with the home equity ATM money, with Alan Greenspan’s blessing, of course…
I guess Kenneth really did mean “we’re going to write off some of the debt,” i.e., the lender is giving away money to keep the buyer on the hook for PITI in excess of what said lender could reclaim in a short sale.
Has anybody ever been fishing on a day when the fish just aren’t biting? Then when you finally hook one you make sure to reel it in as slowly as possible.
Lol. And then you allow the fish to rest a bit in a bucket of water before throwing it back into the drink so it can be played some more.
You do this over and over again until the fish is totally exhausted. Then you finish him off.
And, finally, you eat him.
You have to gut it before eating it. Mmmmmm.
You’re right. Be sure to gut it while it’s still alive.
You have to eat it while it’s still alive.
And what a “Goliath” of a auditing problem this would be for the IRS…IMO, 99% of the people who actually owe taxes will go Scott free…The 1% that will pay, will be the ones who have any assets left to target…
I can’t find even an estimation…really…nowhere…no one seems to have even a educated guess.
You all might of thought I was just joking around…but seems it’s “A Mystery Charlie Brown!”
What is the United States worth? the whole “Shebang” land, building’s, library books, highways, dams, business’s, military toys, beanie baby collections, fort Knox, Warner Bros…
What are the odds that Sir Greenisspent would voluntarily return his “Knighthood” back to the Queen?
Welcome to the United States of Iceland:
By Paul Smalera, contributor March 11, 2010 NEW YORK (Fortune)
“It’s looking more and more like our craftiest bankers factored the inimitable strength and guarantee of the U.S. dollar into their reckless gambles.
But the rest of us are really just lucky that the dollar can survive these hurricane-level economic forces without blowing apart. One way or another, the bill is coming due, and America’s 300 million citizens will be paying for the hubris of a few thousand of their own, who dubbed themselves “investment bankers.”
“While Lewis summons a gentle humor to chronicle a tiny nation’s transformation from European fishing capital to destroyer of capital markets, it’s worth remembering America’s Rube Goldberg financial machinery sprung from a society that was once far more concerned with agriculture (and later, manufacturing) than with inventing complicated and opaque ways to manufacture wealth.”
I have heard speculation of the Rocky Mountain states seceeding and joining Canada if something like this happens. The idea sounds better every day!
Canada is a great country .. I was raised there … and I’m still trying to get warm , after 3 decades in the sunny south…… One never forgets the Sept . frosts & the snow .
I “lived” in Grand Forks ND for a spell…you Canadians really are cruel neighbors…makin’ the weather even colder before yous push it across the border hey!
What makes you think you would be allowed to seceed without bringing your share of the debt with you?
Probably couldn’t take any federal land either, which I’m guessing is a good chunk of the Rocky Mt states. End up looking like the west bank and the gaza strip.
Yeah, what she said.
Sure, maybe you can buy that house with no down payment, but if you want to sell it, then you’re going to need to bring cash to the closing table.
So, mountainy rectangular states- if you want to get all Maple Leafy, go ahead. Just remember that good ol’ Uncle Sammy is retaining the mineral rights to your land.
I commented on this irony last week: it used to be you needed to bring 20% to the table to buy your house. Now you need to bring 20% to the table to sell your house.
It will be interesting to see how an insolvent, and military free, Uncle Sam will enforce that when the day comes.
It will be interesting to see how an insolvent, and military free, Uncle Sam will enforce that when the day comes.
Good call. I say, pre-emptive nuclear strike now, while we still have the chance.
Jim Grant, in his March 5 newsletter, has an imaginary prospectus for a 30 year US Treasury offer - It is pretty entertaining, and puts the US Government balance sheet with 2.667 trillion of assets with $14.123 of liabilities –>Net -11.455 trillion.
Lots of new inventory on the market here in Sacramento, including plenty of foreclosures and many new short sales. Should be an interesting spring.
The listings in my hometown peaked at about 210 on Zip in 2008. They dropped to 110 in 2009. They are back to 150 and rising. Oops!
My informal Redfin market updates of houses meeting certain criteria in San Diego show about 3-4 new listings for every one sale since January.
REhobbyist…I may need your opinion on the market there in the future…
My opinion (we bought last year– an ugly but sound foreclosure) is that most of suburbia should end up between $150-$225K. I can’t speak to downtown, as there are quite a few neighborhoods that are historical gems (right near dilapidated neighborhoods). But there is no reason for most of suburbia to be higher than $225K, given the median income for the area and cost-of-living.
Which metro area are you guys talking about?
Sacramento, CA
“My opinion (we bought last year– an ugly but sound foreclosure) is that most of suburbia should end up between $150-$225K.”
Most of suburbia has a median household income of roughly $50k/yr. Take 2.5x that, and you have the $125k truly “affordable” home under sober lending standards. Look at rents; can you get $1,500.00 to $2,250.00 monthly for your place? IMHO, probably not.
In my area, 85086, the banks/mortgage companies are starting to unload some of their McMansions that have been sitting for a while. (some for 2 years). I am talking about 3000+ sq ft less than 10 yrs old.
I have heard about multiple offers, immediate reoffers when the deal falls through and some that are raising the asking price. This house is reported to have had been sold, but it seems it back on the market.
http://www.realtor.com/realestateandhomes-detail/2332-W-Twain-Drive_Anthem_AZ_85086_1115437176?gate=msn&source=a2mszh1t042
Lip
We owned a two-story jungle, fish bowl living McMansion. Actually we were stupid twice, but the second one cured me finally. Worst lifestyle ever. HOA, snotty neighbors, and the yard had no privacy. Never again.
Went house shopping in So Pasadena yesterday. All us open house visitors agreed (meeting on the street in circle) that the place, although beautiful (but privacy issues in the pool/spa yard), was $500K overpriced.
So Pasadena? $500k overpriced? Yikes what do you get for $1.2m?
I don’t know what I’d do if I lived in that area. Oh wait, yes I do, I would rent forever until I could afford to move.
Lip,
The house was built in 1951 and was 2,200 sq ft priced at $1.4M having been the market less than a week. The area is full of majestic trees, nice lots, and no McMansions around. Out of our price range to say the least, but fun to see how the other 1/2 lived. We looked in the more historic downtown-ish part too. $800K for a Craftsman 1908 beauty. Oh well, back to reality. So Pasadena is too rich for our wallets.
Based on the clientele of Anthem Outlets, I’d have thought a house could be worth no more than 130 K in this area.
Also, how about being approached by a mexican youngster trying to sell some loot in the parking lot. He was polite and understood “no thank you”, & I can come across as intimidating @100 pounds. Phoenix area scares me somehow. PS, I only stop in such places to walk, not shop.
That was sunday two weeks ago, Scottsdale center DEAD, while their hotels at a premium. The elite just does not mingle the way it used to??
Lip, Anthem is way out the F@#$ out there. Driving to work every day could drive a brass monkey nutz!
Classic! Predicted here, of course:
Campaign stunt launches a corporate ‘candidate’ for Congress.
By John Wagner
Washington Post Staff Writer
Saturday, March 13, 2010
Murray Hill might be the perfect candidate for this political moment: young, bold, media-savvy, a Washington outsider eager to reshape the way things are done in the nation’s capital. And if these are cynical times, well, then, it’s safe to say Murray Hill is by far the most cynical.
That’s because this little upstart is, in fact, a start-up. Murray Hill is actually Murray Hill Inc., a small, five-year-old Silver Spring public relations company that is seeking office to prove a point (and perhaps get a little attention).
After the Supreme Court declared that corporations have the same rights as individuals when it comes to funding political campaigns, the self-described progressive firm took what it considers the next logical step: declaring for office.
Very funny. I think right after the Supreme Court ruling I made a few pointed observations.
Vote for Senator Lockheed in 2012!
We already have President Goldman Sacks.
“Vote for Senator Lockheed in 2012!”
Maybe force them to take the name of their biggest contributor on the ballot:
VP Halliburton, e.g.
Make them wear uniforms with their sponsors on them like a European soccer player wears.
Some of them would need bigger suits to hold all of the logos of their corporate contributors.
That’s why they invented NASCAR.
I’m going to write “him” a letter, something about growing a beard to make him look wiser.
Companies are people too, or so says our “non-activist” Supreme Court. Will they allow individuals to contribute to the campaign of a company?
Only if you incorporate.
Sure. the Clintons took money from the Chinese and that wasn’t a problem at all.
Anyone, anywhere can contribute money to our political campaigns.
And that’s the crux of the problem.
In my crotchety, grumpy opinion, any elected official who accepts campaign contributions from entities outside his/her the district they were elected to represent should be expelled from office and the contributor should be charged with treason.
Treason still carries the death penalty, doesn’t it?
Corporation running for office in MD:
http://www.washingtonpost.com/wp-dyn/content/article/2010/03/12/AR2010031204127.html?hpid=topnews
Campaign stunt launches a corporate ‘candidate’ for Congress
Murray Hill might be the perfect candidate for this political moment: young, bold, media-savvy, a Washington outsider eager to reshape the way things are done in the nation’s capital. And if these are cynical times, well, then, it’s safe to say Murray Hill is by far the most cynical.
That’s because this little upstart is, in fact, a start-up. Murray Hill is actually Murray Hill Inc., a small, five-year-old Silver Spring public relations company that is seeking office to prove a point (and perhaps get a little attention).
After the Supreme Court declared that corporations have the same rights as individuals when it comes to funding political campaigns, the self-described progressive firm took what it considers the next logical step: declaring for office.
“Until now, corporate interests had to rely on campaign contributions and influence-peddling to achieve their goals in Washington,” the candidate, who was unavailable for an interview, said in a statement. “But thanks to an enlightened Supreme Court, now we can eliminate the middle-man and run for office ourselves.”
The question is..
Why should I vote for Murray Hill (inc)? What will Murray Hill do for me? What are it’s plans to fix our problems?
I couldn’t care less if Murray Hill is a person or a company. I care about is it’s political platform and it’s ability to carry out it’s promises.
Maybe electing individual people is overrated. In how many ways is a single human being inferior to a group of human beings?
You sound like a member of the ‘political chattering class’, joey.
—
“Whether or not a corporation ultimately replaces Van Hollen in Congress, Murray Hill’s interest has sparked other speculation among the political chattering class in Maryland.
Why not have an accounting firm run for comptroller, the state’s chief tax collector? Why not a law firm for attorney general? The winning firm could arrive in office with a full cadre of associates and save taxpayers money.”
..Why not have an accounting firm run for comptroller..
If people fail to come up with good reasons why businesses should not be candidates for public office, we will likely allow it.
PB - yesterday you wrote:
“Given govt-sponsored market intervention to artificially prop up home prices, and the likely effect, which is to transfer the next two decades’ worth of potential home equity gains from Main Street home buyers to Wall Street’s owners of toxic MBS, I see no upside potential for getting into a home purchase for the foreseeable future.”
Given that MBSs are debt instruments and not equity instruments I do not understand your point. The cash was taken out by homeowners though actual sales or refis. Please explain whether I am missing something. Do you just mean by making sure the holders recoup more of the debt they are owed than they otherwise would get? Also, Wall Street was the creator of the MBS instruments not the holders (although they certainly owned some, it was not usually the intent for them to be the long term holder). The actual holders of the beneficial instruments are all over the globe. Although Wall Street did often create a residual strip it retained (e.g., sold as weekly floaters, retaining residual interest), another off balance sheet trick.
“Given that MBSs are debt instruments and not equity instruments I do not understand your point.”
One of the best things I ever learned in college was an approach to problem solving passed on by a former math professor: Think of the extreme case, to gain insight to the non-extreme case.
The first extreme case to consider is, what would be the value of the MBS if the collateral (the homes on which the mortgage loans in the MBS bundle were written) were razed by bulldozers, causing their values to drop to $0?
The next extreme case to consider is, what would be the effect on the MBS prices if the home price stabilization measures underway were so wildly successful that they restored home prices to their 2005 values?
Got it?
No, I still don’t get it. Take the easiest case, a mortgage pool with one 500k mortgage on a house that sold for $700k. The sum of all the MBS pieces (there can be complex senior subordinate and tranche structuring but i will ignore) related thereto cannot exceed 500k plus interest on the mortgage. The MBS holders are not entitled to any amounts in excess of principal amount of the mortgage realized from the sale of the home. Thus, all you are left with is how much they will be made whole. If the house sells for less than $500k they take a hit, but they are capped if the house sells for more than $500k (i.e., they never see that gain). The gain (equity) is for the seller. Yes, the value of MBSs change, but not because of an expectation of appreciation beyond the mortgage amount, but because of adjustments based on the threat of debt service shortfalls or changes in interests that make the interest rate on the subject mortgage more or less attractive.
I get it that propping up prices makes these people more likely to get made whole, but they are mainly the losers in this mess. The winners were the sellers who sold at insane appreciation or refi’ed taking cash out, and those that took commissions and fees on setting the structures up.
I should add I clearly do understand the idea that intervention limits MBS losses. I was more confused by what I read (maybe incorrectly) as an implication that MBS holders were the beneficiaries of the bubble rather than those on the front lines of the slaughtering process. I agree, to the extent they get a smaller loss on their investment as a result of intervention they are a beneficiary of the intervention. Perhaps that is all that was meant.
I was thinking about this some more and I have concluded that there was a way (but in limited circumstances and for very short windows of time) for some MBS holders to get equity gains (rather than limited losses) from public intervention. Theoretically, someone that bought MBSs on the second hand market at a deep dicount when many ppl thought the world was ending (e.g., 50 cents on the mortgage dollar last March) could sell for a higher principal amount now (say 80 cents on the dollar) because of the belief that government stabilization programs will. This scenario would generally be limited to secondary market vultures. I have noticed some new MBS funds/etfs emerging. I think they are a little late to the party, and there are no real good plays in this market right now. I also question how much was brought at the low on the secondary market with the expection or hope that government intervention as opposed to actual recovery would boost prices, or with the intent to lobby the government for more intervention. Any thoughts?
natalie:
you can read about current state of toxic MBS on NPR website, there are few comments that will provide more information on how things work. Not whole lot information.
Planet Money’s Toxic Asset
http://www.npr.org/templates/story/story.php?storyId=124587240
Tracking Our Toxic Asset
http://www.npr.org/templates/story/story.php?storyId=124578382
It appears that we must have had 3 forms of currency in the US.
1. Cash
2. Credit
3. Silliness.
There doesn’t appear to be much cash and credit on Main Street and J6P sure isn’t laughing anymore.
Hard to eat those frequent flier miles, isn’t it?
I have a question for the learned HBB community. It may have been covered and I missed it as I was laid off and was lucky enough to find a new position, but it requires much more of my focus so I am here much less these days.
Here is my question, the HBB community has proven very accurate in predicting how things would sequence with the housing bubble. Scary accurate actually. What is the collective opinion regarding where we are at this point? Is there considerable downside left for sales prices in housing? If so what percentages are being anticipated and does that change for markets, as I would expect it to? Since I live in SoCal and am interested in Orange County I will offer my take on where we stand.
Since the peak I believe we are off 30-35% on standards sales prices and 35-40% on foreclosure sales prices. I have seen one high end foreclosures with a 47% haircut. But the GOV and REIC have been doing everything they can to prop up prices and that has slowed the march back toward the mean.
Can they prop prices up long enough to prevent reversion to the mean? Or will the combination of unemployment, high foreclosures, scheduled resets, and at some point, rising interest rates be too much and result in further declines in sales prices?
Thank you in advance,
oc-ed
1. Are sales prices anywhere close to the point at which it actually is not that much more expensive, or less, to own than rent assuming rent will increase at the same pace as appreciation?
2. Is there a possibility you may need to get out quickly (i.e., are their any job or family stability concerns)?
3. Increasing interest rates cut both ways. If you need to sell in the short term, rising interest rates will decrease your pool of qualified buyers. If you are borrowing a large some of money for the purchase and actually remain in the home for a long period of time, however, you would probably come out ahead given the interest rate component.
4. I do not know your price point, but lower end properties are being artifically kept up higher than higher priced homes. Thus, if you are looking at lower end properties intervention really works against you, especially if you do not get the full benefit of the tax credit, since the value thereof (plus some in many cases) is already built into the sales price.
5. I cannot predict where your local economy is headed, but theoretically prices could stay flat for three years and we could reach equilbrium in many areas via inflation if we start having actual recovery.
Excellent points all.
I am actually using my rent costs as the basis for the PITI when I read the funny papers, er, Steal Estate section of the paper and we are not there yet in terms of what I desire, but getting closer. My current rent is 2175 for a 3/1.5 SFR with 1400 sq/ft on a 6000 sq/ft lot, which by my midwestern standards is outrageous, but for a beach city in SoCal is on par. Using a PITI calculator (http://www.realestateabc.com/calculators/PITI.htm) and $300000 loan amount, 5% interest, 1.2% tax, 1% insurance and a 30 yr fixed PITI is $2035.46. Of course the propped up wishing prices are still higher than that. When I do buy I plan to hunker down for the duration, no more moving. No family or (hopefully) job issues on the radar.
Historically haven’t rising rates had a correlative sales price depressive effect?
Thank to all, your comments, as always are very valuable to this HBBer.
“Historically haven’t rising rates had a correlative sales price depressive effect?”
Although rising interest rates create downward pressure on price, the ratio is less than 1:1. Meaning that if rates rise 35%, which is likely, prices will probably not fall anywhere close to that. That is because (i) some ppl still have cash and as rates go up, people shift more of their equity portfolio into paying down the mortgage or paying more cash up front because of the lesser opportunity costs (i.e., many ppl in lower interest rate environments play an arbitrage game by putting the minimum down on real estate and investing the money they would otherwise use as a down payment in the stock market or otherwise because they think they can get a higher rate of return elsewhere than the interest rate they are paying on their mortgage after factoring in tax deduction - at higher rates, the game is more riskier) and (ii) rising rates are sometimes, but not always, associated with wage inflation. Although I think such arbitrage plays may work now, they are much more risky than last year, when I was telling everyone that insisted on buying to take advantage of arbitrage. In short, if interest rate inflation comes with wage inflation, the impact will be minimal. If not, it may be substantial. There are different theories on this board. The biggest risk is a double dip in the recession and the economy in your region. I think we will definitely have another major correction, but not to last March levels.
You sound like you are going about it the right way. Good luck.
People have cash???
I can afford to buy a luxury home all cash, but am a strange bird. I also know ppl with cash, but live in a comparitively wealthy, fiscally conservative, Jewish community, so am on a bit of an island.
You are not only a strange bird, but a rare one and most certainly live in world that most people don’t.
I don’t think this is anywhere near over, there is still a lot of “unwinding” to be done in our economy, and that there are still a lot of people spending the last of their savings/equity and struggling to adapt to the reality of a newly downsized lifestyle.
There are a lot of ripple effects in jobs, taxes, etc. that have not played themselves out.
I’ve been observing the social phenomenon I call “competitive frugality”: the current fashions for gardening, chicken keeping and other homey activities being spun into a stylish lifestyle of “locavore, green, recycling, sustainable, coupon moms”, etc…
I think it’s an interesting re-branding of a genuine need to economize without admitting you are becoming financially poorer.
(Not that I’m opposed to all the homey activities.)
“I don’t think this is anywhere near over, there is still a lot of ‘unwinding’ to be done in our economy, and that there are still a lot of people spending the last of their savings/equity and struggling to adapt to the reality of a newly downsized lifestyle.”
“… still a lot of people spending the last of their savings/equity …”
… And eventually they will become flat broke. That’s when Times will become very Interesting.
“…Since the peak I believe we are off 30-35% on standards sales prices and 35-40% on foreclosure sales prices. I have seen one high end foreclosures with a 47% haircut. But the GOV and REIC have been doing everything they can to prop up prices and that has slowed the march back toward the mean”
In this regard, exeter has an idea:
Comment by exeter
2010-03-13 08:32:03:
“With all the mis-guided incentivization in place, have you noticed not one of these “Drive Housing Prices Up” organizations have a heavily discounted finance rate? Best rate I’ve seen is 4.1% through FHA.
It’s all about making the *entry* into LoanOwnership more possible and never about making homeownership something the average person can endure. Buyer walks in cell, door slams shut. Over.
The incentivization of housing is still misguided, distorted and unfriendly to the end user.”
Thank you Hwy and Exeter by reference. I agree and find it telling as this incentivization benefits the money changers and not the consumer. Nothing has changed really.
Like Real Estate, all recessions are local.
How close we are to market bottom is HIGHLY dependent upon region and market segment. Certainly low end houses in middling markets are probably closer to bottom than the top. Since this crisis hit sub-prime loans first, and these were people with few reserves to fall back on, those segments that depended on those loans are a year or more ahead of other areas. Those extreeme bubble markets where IOs, option ARMS, and other suicide loans were prevelant may have another yearor two of declines, just look at the latest Credit Suise chart of resets. For the most part, the well off in less bubbly areas haven’t seen precipitous declines, but I suspect that they’re comming.
–Just my two cents, and it is certainly the case that I grossly underestimated the degree to which the RE/financial crisis has affected everyday Main street. I did not realize the extant to which this unsustainable financial bubble had enabled a LARGE proportion of Americans, even in non bubble areas to borrow and spend more than they could pay back. And how many jobs would be lost when that artificial stimulus disappeared.
So far, and except for the size and all inclusiveness of the entire finance industry, there has been many parallels to the Savings & Loan disaster.
As for duration, I would again look to the S&L mess, which more or less, began in 1989 and wasn’t over (again, more or less) until 1995.
(no that’s not official, but based on the initiators such as the Tax Reform act of 1986 and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, up to the the final dissolution of the RTC in 1995)
..where we are at this point?..
Around the middle of the third inning.
Is there considerable downside left for sales prices in housing?..
There is nothing but downside as far as the eye can see..
Apologies for the very late comment, but there is another point that really hasn’t been fully addressed.
Every dollar the Fed and the states misdirect toward bailing out banks and individuals is another dollar taken out of the economy elsewhere, or dreamed into existence using the printing press. There will be horrendous follow-on effects for this mal-appropriation.
Whether this manifests as the median dropping another 75% due to a complete lack of capital, or rising 75% due to dollar devaluation is the $10 question. My guess is a dropping median for all but the best housing stock, with the best showing a steady inflation.
My reading of Kenneth Harney’s article this weekend is that the IRS does treat mortgage debt forgiveness as income, unless the borrower can prove the loan proceeds were used for home maintenance and improvement. This calls into question the writer’s assertion in this article (see bolded passage below).
All American tax payers owe the IRS a debt of gratitude for their guidance issued March 4 on the stringent definition of what kind of mortgage debt reduction qualifies for tax relief.
Short-sale tax relief bill goes to governor
* By Timm Herdt
* Posted March 11, 2010 at 2:01 p.m. , updated March 11, 2010 at 8:28 p.m.
SACRAMENTO — The Senate sent to Gov. Arnold Schwarzenegger on Thursday a bill that would eliminate huge state income tax bills faced by people who sold their homes in short sales last year, only to discover that they owed taxes on the amount of their loans that was forgiven in the sale.
The federal government does not treat loan forgiveness as income, and neither did the state in 2007 and 2008. But because Schwarzenegger vetoed a tax conformity bill last year, those Californians who had portions of their mortgages forgiven by lenders last year are now facing massive state tax bills.
As an example, Sean Schieman, an unemployed Ventura resident, said he owes more than $18,000 in state taxes as a result of the sale of his home last year in which the lender wrote off about $140,000 in principal remaining on his mortgage.
The provision providing tax relief from mortgage loan forgiveness was included in a wide-ranging tax conformity bill approved by the Senate 21-15, with only majority Democrats in support.
Schwarzenegger spokesman Aaron McLear said the governor continues to “have serious issues with this bill,” noting that lawmakers did nothing to address his concerns from last year.
…
COMMENTS
* March 11, 2010
* 7:48 p.m.
horsespinner#218774 writes:
once again policy applied evenly except to those we do not like. Equal protection under the law, does not apply here. Change, all we got since hope is running out
* March 12, 2010
* 6:52 a.m.
worldfxr writes:
All of us that have been responsible end up paying for all of those who have been irresponsible. What a mess and it appears to be never ending as more people bail on their committments. Makes one want to quit working and jump on the freeloader bandwagon. The rest of the nation is.
‘All of us that have been responsible end up paying for all of those who have been irresponsible’
This is a common theme I have seen, and it pops up a lot now regarding the housing bubble. But one of the reasons I abandoned politics is I couldn’t see any responsibility at all. I’ve been around long enough to remember the first $100 billion federal budget deficit. And the first $1 trillion, and on and on. I recall how the feds “fixed” social security in the 80’s, with a smoke and mirrors deal. And then congress immediately started taking what little money was coming in and spending even that!
It is everywhere; how about unfunded corporate pensions? Outsourcing jobs to polluting states with absurd pay scales? Pretending to be the “worlds policeman”, while borrowing massively from a corrupt china? Federal officeholders receiving single digit approval ratings, yet being re-elected by 98%, enjoying legal bribery via a lobby system? How many senators are super rich these days? What the hell is up with that?
I wouldn’t want to live in another country. But the way we have collectively operated hasn’t been responsible for a long time.
“I wouldn’t want to live in another country”
OK, who was that who posted “Sovereign Individualist” the other day?
Amish/Mennonites/Hutterites = “Sovereign groups”
but then so are:
Bloods/Crips/MS13
Investment Bankers/Corp. Inc. CEO’s/Fed Inc
Something about “their” behaviors, costs $$$$$ to “Society” …blah,blah,blah
Well, something will take hold that’s for sure, meanwhile, breakfast…out to the garden…then the tree-house.
Don’t Native Americans live in their own nations under their own laws?
“Don’t Native Americans live in their own nations under their own laws?”
Yes, but we finally have them …surrounded, Sir.
Yes, but we finally have them …surrounded, Sir.
lol mikey
Send in the Cavalry, ..I mean, the I.R.S.!
Well it’s complicated, since we made the all US citizens (in the 20s? 30s?).
No no no, Ben, you’ve got it all wrong. Several posters yesterday set me straight on that. It’s all the fault of the banks, the REIC, the MSM, the guv’mint, etc. All those FBs who signed their names to mortgage contracts? Innocent victims of forces beyond their control. All those voters who elect and re-elect politicians that are in bed with Wall Street? They bear no responsibility for the choices they made at the voting booth or their failure to actively seek out and support more principled alternatives. No, those politicians “changed” after they got into office. We never could have foreseen it, even though a simple Google search on their campaign finances would have revealed who they really served (hint: not the duped Main Street voter).
You see, Ben, collective responsibility implies that “we the people” might bear some ultimate culpability in the mess we find ourselves in. It’s so much easier to just blame “Them.” So please don’t confuse us with inconvenient facts. It makes us uncomfortable. When I did the same yesterday (admittedly for the umpteenth time) a fellow HBB poster threatened to run to you to file a Hurt Feelings Report. So for goodness sake, drop this “collective responsibility” silliness. It’s … hurtful.
I was led to understand that with Obama we got Volcker.
For me this was the deciding factor.
Silly me.
You also get Geithner, Summers, and a host of MegaBank alumni.
An individual president can come and go, but the enduring power elite stays entrenched. The Senate and House consists of many people who have been in DC for a long, long time. The unelected power brokers don’t even have to pretend to run for election.
“An indiviual president can come and go, but the enduring power elite stays entrenched.”
The absolute truth! All the entrenched power elite need do is absorb an eight-year rope-a-dope, then they get to call out “Next?”.
” … It’s so much easier to just blame “Them.” So please don’t confuse us with inconvenient facts. It makes us uncomfortable. …”
Wasn’t there a financially stressed European country whose sheeple bought into this message in the early 20th century and elected a man to power who is now in the all time list of evil dudes category?
I am not making any comparison of that elected evil dude and our current President, my point is that when we collectively take the “victim” role we generally make some very poor collective choices.
Well said.
Sammy, remind me again who gave FINAL approval for the FB’s loans?
Surely you are not saying the vast majority of FBs were also bank loan officers?
Seriously?
Yes, please don’t let the facts inconvenience you.
The banks, Fed, REIC, MSM, etc, all bear responsibility for their part in the bubble. They encouraged, aided, and abetted the Ponzi scheme and should be held accountable. But the ultimate responsibility lies with whoever’s name is on the mortgage contract. Caveat Emptor.
I must say, “I like your anger”.
I was in college in the early ’80’s and an avid Young Republican. I adored Ronald Reagan and everything he stood for.
I look back now and realize that cutting taxes without cutting spending is the definition of irresponsible. Cutting regulations without understanding why they were put in place in the first place was irresponsible. Outsourcing our ability to produce wealth to Communist China was irresponsible, actually idiotic. But I stood by my party and supported every one of those things.
For that, I deeply apologize to my fellow Americans.
Yeah, I never understood the Cult of Saint Ronnie. I liked the guy, but a true conservative he was not.
IMO we can start to see the de-evolution of politics with this administration. Right before he was elected, he came out with “my first 100 days” list of things to do. IIRC, he didn’t do any of it in 8 years.
Fast forward a few decades and we hear “Reagan proved deficits don’t matter.”
It is a RINO stampede lasting 30 years.
Well I was never a fan, but at some level I figured that the pendulum should probably swing back in that direction. But I lost what respect I had for him when he fired Stockman and it became evident that he was NOT going to cut spending after all, just cut taxes and smile.
But surely 4 recessions since and the current world wide economic mess we have today is proof that voodoo, er supply side economics works?
No apologies needed Jon…
My Pa used like to shoot billiards & drink some beers at the local VFW, later, he taught me that one of the first things to “learn” really well was that before you take your shot…walk ALL THE WAY AROUND the table, collect your thoughts & strategy BEFORE you hit the cue ball.
For example… is an illustration of what I mean:
http://farm2.static.flickr.com/1294/758047683_febc0beb0e_o.jpg
That is awesome, I totally disagree with almost everything you say you’re one of the funniest and that link is going to cost me a keyboard.
I laughed out loud. Thanks Hwy.
I think we’d be a lot better off if people would acknowledge their mistakes if they happen, deal with them, then do something different if appropriate.
Instead, we have too many people that cling to bad decisions, unwilling to acknowledge those decisions were not the best, and unwilling to do much differently.
That may be very human, but it’s not very smart.
You crack me up Hwy…
Spot on…+ 1 Ben…
“All American tax payers owe the IRS a debt of gratitude for their guidance issued March 4 on the stringent definition of what kind of mortgage debt reduction qualifies for tax relief.”
So you are suggesting, PB, that I fork over to the U.S. Treasury a goodly portion of my 2009 earned income and my gratitude? The hell I will. Let me put this in perspective for you. As Corey Haim’s life coach I earned nearly a half-a-mil in 2009. Though that earned income is still receivable, I’m am accrual-method taxpayer. Check the tables in the back of your Form 1040 instruction booklet. Gratitude, shmatitude.
Luv,
Jen
Is this a bad time to remind you that it is okay to pay the IRS more than what you owe in taxes?
Yup Good ol’ Warren “I got my bailout” Buffet does it every year…..
Or less, if you are planning a future turn as Treasury Secretary…
put in an offer, wanted to buy from builer direct, but it is a short sale as the builder is in the process of giving stuff back to the bank.
Its a never been lived in house still, but no builder warranty which we really want.
Lately neighborhood comps have been going (albeit slowly) from $65 to $112 per square foot. The most direct comps, from the particular subdivision within the larger comp area, are $110 per square foot, but our offer was based on the average for all the comps.
So we offered $90 per square foot, or $117k. But that made our offer 15% off of asking, and the comps also say that properties are going for 95% of asking, which would be 132k. Also, according to realtor, bank is planning on raising the asking price from $139k when they gain possession via foreclosure. Can’t afford to pay 15k more, as our offer is all I can come up with without a loan
But we are offering cash, 2 week escrow, buying as is (upon “satisfaction upon inspection” contingeny). Offer is good for two weeks.
I hope they will take the offer, what you guys think? I hate short sales, but we do want the house.
Not enough info to call you “a wise man” or a “fool”.
Fool.
Keep it real, yo!
If you or offering a price at or near positive rental cash flow I wouldn’t worry about it. I, however, never understood the use of price per square foot outside of the condo with identical units scenario - or maybe identical houses on identical lots. Outside of this context, I would expect that variations in land price and economies in scale (e.g., doubling square foot by building a two story rather than a ranch should not be twice as expensive) would make the number less useful. I love the line - “according to realtor, bank is planning on raising the asking price from $139k when they gain possession via foreclosure.” The market price is the same regardless of how much transaction costs the bank incurs. In a shortsale be careful to make sure that you get your earnest money back if they dont accept within X days and you decide to cancel as a result.
“I, however, never understood the use of price per square foot outside of the condo with identical units scenario”
This is almost the only thing that matters in a short sale scenario. We’re in this boat right now, and it will be interesting to get the banks appraisal once the send out their own guy for a BPO. He will see that the house upgraded/excellent condition, reject our offer, and then we’re back to square one. Dollars per sq. ft. is everything, because it’s invariably going to be on some guys desk, and he’s going to reach for a calculator, and the first number he’ll chew on is dollars per sq. ft.
Then someone will go and see if it has a Koi pond.
BTW, the house we’re in contract on, has a small amount of water damage (superficial only) to an exterior wall from a Koi pond (it’s now gone). I may place a plaque on it or something to memorialize the bubble.
At this location, in the year of two thousand and six, was situated a Koi Pond. These sanctuaries of beauty and tranquility held goldfish until they froze to death or their owners went broke and starved them.
LOL. I remember all those stories 3 years ago about 50k - 100k or more refi’s to landscape backyards. I would like to see a survey on what percentage today believe it was worth it. I’m thinking less than 20%. Don’t get me wrong, I love gardens and KOI ponds, but most ppl dont keep up with the commitment. $10k to put in, $500 to rip out . . .
I know someone who has…a Koi pond, a chihuahua, and a large kitchen granite counter top…however, it seems that they can never find enough time to maintain any of ‘em…yet, they have the time to remark how fashionable they are in their life.
You could put up a little fishie headstone with a statue of St. Joseph overlooking it.
“I know someone who has…a Koi pond, a chihuahua, and a large kitchen granite counter top”
How big are the koi?
Can they feed the chihuahua to the koi?
Can they clean the koi on the granite counter top?
Make fish stew with the koi.
Problem solved.
Rents for $800 per month, approx, with good demand in this area. This means it would return $9600 minus taxes, vacancy, repairs. Say it returns $6000 on the $120k cash invested. 5% or so beats the 1.75% we get on CDs. Landlording is all I know, its worked in one form or another for us since 1995. Don’t know who’s a fool, FPSS. I do know a few tools, tho.
There are a few things that I would consider:
1. Are sales prices anywhere close to the point at which it actually is not that much more expensive, or less, to own than rent assuming rent will increase at the same pace as appreciation?
2. Is there a possibility you may need to get out quickly (i.e., are their any job or family stability concerns)?
3. Increasing interest rates cut both ways. If you need to sell in the short term, rising interest rates will decrease your pool of qualified buyers. If you are borrowing a large some of money for the purchase and actually remain in the home for a long period of time, however, you would probably come out ahead given the interest rate component.
4.
Hmmm ignore this. It attached unintentionally.
http://www.larouchepub.com/other/2010/3707santander_syndrome.html
While the media has been beating their “Eurozone crisis is contained” drum, with the supposed “rescue package” and spending cuts in Greece, a far worse systemic crisis is unfolding centered around Spanish banks such as Santander.
http://news.bbc.co.uk/2/hi/europe/8566571.stm
War of the Worlds, Georgian style. A hoax media report from a Georgia (the country, not the U.S. state) TV station that Russian tanks had invaded and the Georgian president had been killed caused panic among the population.
I bet a real estate firm was behind this. They would have had about a two-hour window to run door to door snapping up properties for a song.
Our cable is out for a second day. I hate typing on a phone. Go Gophers!
“Our cable is out for a second day.”
Stop wasting your time and call Obama. He just bought my littleman some cheerios and crayons.
Were they free?
Candy Crappin’ Unicorn should always make them free.
“Stop wasting your time and call Obama. He just bought my littleman some cheerios and crayons”
See, the national budget problem is solved.
While Obama was dropping off the Cheerios and crayons, did he mention the multi-trillion dollar IOU he’s slipping to your littleman and his generation?
Go Gophers! ??
They have their hands full with Ohio State BUT, its anybody s tournament this year…My suspicion is that we will see a surprising final four…Maybe even shocking….
NY State SHAKEDOWN by the gang of elected thugs.
New York floods mailboxes with 700,000 vintage tax-delinquency letters: You may be a debtor!
New York state has unearthed billions of dollars in unpaid taxes as old as the 1950s in an attempt to shake money from the pockets of some taxpayers.
In January, the state dug into its archives and mailed a list of outstanding bills to 700,000 people — everyone who has a debt older than three years on the state’s books.
“Maybe they hoped we forgot about it,” Acting Tax Commissioner Jamie Woodward said.
Gov. David Paterson and state legislators are offering a kind of half-off sale on the old debts. If taxpayers pay in full by Monday, they can have a discount.
The effort has sent accountants and retirees into their own archives to find records from businesses they closed decades ago. The notices surprised many people who said they had not been billed previously. Some say the state is mistaken.
The state told Michael Rothman, 59, of Manlius, that he owed $3,491 with penalties and interest on unpaid taxes from 1988.
It was news to him. He sold his car repair business 17 years ago and said he did not hear about an outstanding tax bill until January.
The notices tell taxpayers the tax year, an amount due and amount of the discount. But the letters do not say what kind of tax the state thinks the person owes or how much of it is penalties and interest. The letters offer options to pay by phone, Internet or mail.
They do not offer an avenue for appeal, even though the burden is on the taxpayer to prove the state wrong.
Rothman said he called two phone numbers at the tax department and got no more information.
He said he does not intend to pay.
http://www.syracuse.com/news/index.ssf/2010/03/new_york_floods_mailboxes_with.html
“They do not offer an avenue for appeal, even though the burden is on the taxpayer to prove the state wrong.”
How does that song go? I love new York?
LOL
This is awesome!!!
Let’s assume the total is $7B (highly doubtful.) 700,000 cases.
$10,000 per case maximum.
Good luck collecting that by opening 700,000 separate lawsuits.
Do they still teach long division, or is it one of those lost arts?
Is that a trick question?
My guess is they are hopeing to shake out a few % of what is owed.
“They do not offer an avenue for appeal, even though the burden is on the taxpayer to prove the state wrong.”
How does that song go? I love new York?”
If you live in New York, you always have the affirmative defense by reason of insanity.
Ha ha ha
Reason #47464 to leave NY State and never go back
And what else would one expect from the same state that brought us TARP?
Social Security to start cashing Uncle Sam’s IOUs
PARKERSBURG, W.Va. – The retirement nest egg of an entire generation is stashed away in this small town along the Ohio River: $2.5 trillion in IOUs from the federal government, payable to the Social Security Administration.
It’s time to start cashing them in.
For more than two decades, Social Security collected more money in payroll taxes than it paid out in benefits — billions more each year.
Not anymore. This year, for the first time since the 1980s, when Congress last overhauled Social Security, the retirement program is projected to pay out more in benefits than it collects in taxes — nearly $29 billion more.
Sounds like a good time to start tapping the nest egg. Too bad the federal government already spent that money over the years on other programs, preferring to borrow from Social Security rather than foreign creditors. In return, the Treasury Department issued a stack of IOUs — in the form of Treasury bonds — which are kept in a nondescript office building just down the street from Parkersburg’s municipal offices.
Now the government will have to borrow even more money, much of it abroad, to start paying back the IOUs, and the timing couldn’t be worse. The government is projected to post a record $1.5 trillion budget deficit this year, followed by trillion dollar deficits for years to come.
It all about hope and change!
I bet those younger folks who thought it would be so kewl to have a black hip president will think different once they realize that they will see not one dime of the the 15% of their income they “contribute” to social security for all the years ahead of them…
B…b…but it wasn’t their fault. They were misled. I would call them idiots and tools, but that might give offense. Being insensitive is a cardinal sin in today’s society, you know.
We had such good intentions - don’t blame us! And George Bush was so evil! My teacher told me so.
I bet those younger folks who thought it would be so kewl to have a black hip president will think different once they realize that they will see not one dime of the the 15% of their income they “contribute” to social security for all the years ahead of them…
Those stupid kids!
Everyone knows there’s nothin’ hipper than a Tea Partier!
Yeah, darn, we coulda had McCainster and Caribou Barbie. As if they’d have more of a clue how to fix Soc. Security.
It all about hope and change!
The constant carping about Obama is starting to reach the level of ridiculousness here- and you guys are two of the most tiresome, redundant, and illogical about it. Obama, of course, had almost nothing to do with those IOUs, which I assume you know. But that, of course, would never get in the way of yet another predictable round of Obama-bashing.
It’s starting to look more like an obsession than a rational disagreement. Do you guys see Obama when you close your eyes at night? The rest of us don’t, and we’re getting tired of hearing about your fantasies.
Please. This is one thing you can’t blame on The One. Or Shrub for that matter. The collapse of this Ponzi scheme, hatched by FDR and his buddies, would have happened eventually.
“Eventually” has arrived.
This is one thing you can’t blame on The One. Or Shrub for that matter.
Technically, you might be able to blame it on Shrub. Clinton’s budget surplus could have shored up SS for another 10 years or so. Instead, Bush and his Congress cut taxes on the rich in the early 2000s — by that evil socialist Reconciliation no less. And Bush didn’t even pretend to cut spending like Reagan did.
But then, you’d have to blame Obama too, because he’s deficit spending as well. At least his spending is planting the seeds of a new home-based economy.
Spending during the Bush administration is more Obama’s responsibility than it was Bush’s. Obama was in Congress, where the money is spent. Now Congress is doing worse. Same bunch of Jackals though.
What is this new home-based economy you are thinking about?
Obama was a member of Congress during a portion of Bush’s 2-war presidency and therefore has *more* responsibility for Bush administration spending than Bush? L-O-L
By home-based I mean the usual: healthcare/education/energy. These jobs are for the most part non-outsource-able, and they don’t depend on discretionary spending by consumers.
Alpha, my point is that Congress does the spending. Everybody puts it on the White House. I don’t get that.
Oxide, Energy is the only part of that I can see as productive “economy”. Are we really setting up to produce energy resources? Nuclear, maybe yes. Oil and coal, not so much.
alpha-sloth, you are hardly one to gripe about endless political posts.
Your anti-Bush posts appeared here nearly daily throughout the last election cycle. Doubt me? Look through the HBB archives.
The point is - call the kettle black. Obama is every bit the hapless goon that Bush was.
In regards to the post about bush’s tax breaks
The affects as posted by FORBES
Top 400 income av is 350mill/yr and they pay an effective tax rate of 16%, ie likely less than most people on this board.
I believe ZFACTS.org has a nice graph regarding when debt was incurred.
PS Voted for obabma, and think he and our congress both sides are owned by Wall Street. Note that they can’t even get a windfall profit tax on Wall Street elite onto the floor for a vote. When it’s obvious that these guys would have no profit if not for the US tax payer.
Rather than bashing voters who thought he would go after the bankers we should focus on where the evil in both parties eminates from.
Rome and Wall Street moto = Devide and conquer.
A ha. So,
Healing people is not “productive.”
Educating children is not “productive.”
Good point, let’s not even try to educate our kids. We’ve outsourced so many jobs, may as well outsource ‘em all. And let the sick die in the streets, or more likely, suffer silently in their tent cities. Anything to “reduce the surplus population.”
The “energy” I was referring to was renewables. Without government input,* there is simply no incentive to ramp that up. And alternate energy will need a LOT of ramp-up, for it to be ready when peak oil hits. Oil companies will simply operate like gangbusters right up until that day. For oil/gas, “green” isn’t a plan for the future; it’s a PR stunt for today.
—–
*I’m convinced that government is using global warming as cover for spending tax money on this ramp-up. I personally think it’s because of energy independence, i.e. peak oil and the related geopolitics. To me it doesn’t really matter the reason.
Obama and his democrat minions in the congress and the senate quadrupled the budget deficit in his FIRST year his preseidency.
The constant defense about Obama just trying to clean up the “mess that was handed to him” is starting to reach the level of ridiculousness here.
To put anther way - here is the bill Obama is handing to you.
Sleep well.
What does $6.5 trillion of additional debt imply for the typical family? If spread evenly over all those paying income taxes (which under Mr. Obama’s plan would shrink to a little over 50% of the population), every income-tax paying family would get a tax bill for $163,000. (In ten years, interest would bring the total to well over $200,000, if paid all at once. If paid annually over the succeeding ten years, the tax hike per year would average almost $26,000.) That’s in addition to his explicit tax hikes.
http://online.wsj.com/article/SB123871911466984927.html
http://online.wsj.com/article/SB123871911466984927.html
Yeah!!! And he hasn’t even gotten around to takin’ away my guns yet!
Related to the social security IOUs how? Did Obama run up those IOUs?
Seriously, give it a rest. Break it out when it makes sense, not every time something bad happens on the planet. It’ll be more effective that way. As it is, you’re not winning any converts. You’re just sounding like brainwashed dittoheads. And boring, very boring.
You’re complaining to the Wall Street Journal - they wrote the article, not us.
Anybody who liked the way GW ran things is pleased with BO.. and if you didn’t, you aren’t.
Both links go to the *same* opinion piece, by (drum roll) Michael Boskin.
“Mr. Boskin is a professor of economics at Stanford University and a senior fellow at the Hoover Institution. He chaired the Council of Economic Advisers under President George H.W. Bush.”
Truly a reliable source of economic info. LOL
Oh. I now see the light.
Gut Medicare. Cut out the end of life spending, thereby cutting off two years’ worth of both Medicare expenses and Social Security payments for every senior citizen going forward. Voila! Hundreds of Billions saved per year!
I am too much of an optimist to see a conspiracy here. Aren’t you?
Very interesting piece on 60 Minutes tonight - “Inside The Collapse”, a piece on the subprime mortgage collapse:
http://www.cbsnews.com/video/watch/?id=6292987n&tag=contentMain;contentAux
As always, they pretend that no one knew what was going on. The Economist Magazine had their “House of Cards” cover story on the credit and real estate bubble in 04/05. This blog has been discussing it since before then.
“Unexpected”
Yeah, I saw it. Other than the ‘no one saw it coming’ crap, it was a pretty good piece explaining the scam Wall Street was running. Slowly but surely, the MSM seems to be getting it. And actually reporting it, too. They must be getting desperate.
If Wall Street and Washington ever admitted the truth–that they knew full well this day would come–it time for would be pitchforks and torches. They will never, never admit they knew what was going to happen, but they knew all along.
I saw that piece
Pure BS
They put up a guy who bashes the system to gain credibility but then ask “Did Wall Street Know this was going thappen?”, and he says no he thinks they were just stupid. This right after he points out how GS gamed the system.
My take is everyone knew they were dealing with nitro glycerin in regard to MBS, many didn’t know when the bump in the trail would set the whole thing off but they were making bank while it rained. Of course the top firms who tossed the log under the wheel of the wagon knew exactly when it was going to go off and thus sold as many mbs as they could and used AIG to insure the rest knowing that the US gov would make good on AIG’s worthless insurance. We know this because despite using AIG as their insurere, GS took out massive short positions on AIG.
Did you guys see this article?
It actually seems kind of balanced. Where was this reporting a few years ago?
How long until we get the doom and gloom articles that ‘housing is an awful investment’? When valuations finally mean-revert to historic norms?
http://www.nytimes.com/2010/03/14/business/14every.html?hpw
Great Time to Buy (Famous Last Words)
NY Times
In three more years.
“How long until we get the doom and gloom articles that ‘housing is an awful investment’?”
When we do, then it will be safe to call the bottom, when everyone is saying “real estate, yuk, it’s the worst investment EVER!”. I think we still have a ways to go, the bubble was so powerful and the lure of “easy money” through leverage still has a lot of appeal.
And I do think the grind to the bottom will be quieter than the ride up. Bragging about how much your house has gone up and how smart you were to buy makes for much better dinner conversation than how hopelessly in debt you are and how 50% of your take home pay is going to the roof over your head with no hope of profit or break even and how you can’t move to a different house or a new job because of your debt trap.
The sheeple’s education in life’s dear school is already well underway. I will give it another three years or so before everyone realizes that real estate is a terrible investment.
WSJ Blogs
Real Time Economics
Economic insight and analysis from The Wall Street Journal.
* January 5, 2010, 7:34 AM ET
Fed Economist: Housing Is a Lousy Investment
By Jon Hilsenrath
Before the housing bust, Americans tended to think their homes were their best and most important investments –- a view promoted by Washington policy makers who made home ownership a top priority. Karen Pence, who runs the Federal Reserve’s household and real estate finance research group, argues at the American Economic Association’s meetings this week that homes are actually a terrible investment.
Putting aside the fact that home prices have fallen dramatically, she says several factors make homes a lousy investments:
1. It is an indivisible asset. If you own stocks and bonds and suddenly need a little cash, you can sell some of your stocks or bonds but not all. With a home, on the other hand, “you can’t just slice off your bathroom and sell it on the market.”
2. It is undiversified. You can buy stocks or bonds in industries or countries all over the world. A home is a bet on one single neighborhood.
3. Transaction costs are very high when you buy or sell a home because of real estate agent fees, mortgage fees and moving costs.
4. It is asymmetrically liquid, meaning it’s easy to get money out when home prices are going up. (You just take out a bigger mortgage.) But it’s hard to take money out when prices are going down because refinancing becomes more difficult. Put another way, the leverage that you have in your house with a large mortgage means your investment does well in good times but could be lousy in bad times.
5. It is highly correlated to the job market, meaning that home prices in a neighborhood tend to rise when the job market is improving in the area and fall when the job market is worsening. This means that your main financial asset provides the smallest cushion to you when you might need it most.
…
I’m hopeful that your 2nd paragraph happens. So far, it seems that “everyone” has been calling bottom the whole way down which tells me “everyone” largely still thinks RE is a great investment and is waiting for the “it” investment to come back into vogue. Way too many people made way too much money (whether realized or unrealized), for this to go away quickly. I even think FPSS’s 3 years is optimistic unless we have a particularly ugly end of 2010.
“It actually seems kind of balanced.”
LOL. For some reason, I find this hilarious! Great comment.
well - i find it shocking, don’t you?
$8,000 Tax Credit-It’s 10% of the purchase price w/ an $8,000 cap. Here’s the IRS Q&A page (which includes the extention of the credit -April 30th 2010)
http://www.irs.gov/newsroom/article/0,,id=206291,00.html
My husband was out riding his bike this afternoon and stopped to speak to a neighbor who looks to be in his 70’s. The guy commented to him how he is having a hard time keeping up with his mortgage (he had never met this guy before) and was under stress. My husband looked at him and said, “we rent.” The guy glared at him and walked away. I guess misery loves company and everyone assumes you are house poor if you live in the Bay area! Funny!! Just wait until all these option ARMS explode!! Fun times are coming!!
well.. I can understand the guy glaring and walking away. Hubby’s answer might be seen as somewhat cold blooded ..
“My wife is sick and I can’t afford the bills.”
Answer A: “Mine’s not sick.”
Answer B: “Gee, I bet that’s a really tough situation, neighbor.”
These are teh guys that are hurting the worst right now.
He probably had his money in safe investments like MBS and so called solid stocks when the crash hit. He probably sold thinking this is his life line I can’t let it go down, then he probably plowed the money into a money market earning 1%. Now his monthly income has dropped >50% and his costs are fixed. He probably eats into his principle each month at an ever increasing rate.
Telling people that “we rent” is like appearing before them with two heads.
Do you also live in San Diego?
The national debt — the amount of money the government owes its creditors — is about $12.5 trillion, or nearly $42,000 for every man, woman and child in the country.
That is more than I owe in sum total for myself and family. Actually it is twice what I owe. This includes my house.
I HATE being in debt.
Rioidy
Having actually worked, saved and ‘done without’ for several decades, my l’il family has “0” debt but finds itself under attack by the powers that be.
For those in Washington D.Spair, …that means ZERO debt.
…other than the $42K per member of my family your irresponsible and TREASONOUS actions have indentured my family. Meanwhile, you have exempted your privileged and affluent families…you have a completely separate health and retirement system.
..or so you think, grease balls. When it comes down [all dependent on the Chicoms and Japanese] there will be no “safe haven”.
Welcome to the new America…you worthless sacks of pus.
I dream of revenge.
That’s how the system works. It’s of the bankers, by the bankers, for the bankers.
Read ‘The Creature from Jeckyll Island’.
March 15 (Bloomberg) — Chinese Premier Wen Jiabao rebuffed calls for the yuan to appreciate, risking a further downturn in relations with the U.S. where lawmakers and economists say his stance is hampering a global recovery.
“I don’t think the renminbi is undervalued,” Wen said yesterday at a press conference in Beijing marking the end of China’s annual parliamentary meetings, using another term for the yuan. “We oppose countries pointing fingers at each other and even forcing a country to appreciate its currency.”
U.S. lawmakers, including Senator Charles Schumer, are proposing that China should be hit with stiffer tariffs to compensate for the unfair export advantage they say comes from an undervalued currency. Economist Paul Krugman says that global growth would be about 1.5 percentage points higher if China stopped restraining the value of the yuan.
Could it be that China wants to redeem it’s chips? They know the US customer is shot and are willing to jeapordize that shrinking market in order to drive up the purchasing power of their hoard of dollars?
The question is what would US tarifs do to the dollar? Would treasuries rise in any sort of trade war? My guess is yes.
Mill Valley, Ca: 100 houses listed on foreclosure dot com (and this is a very small place), all posted in last four months, most between 1 and 2 million. That amounts to a bit of money right there.
Does that mean anything.
Hell yes, the crash at the higher end is coming. And, to mix metaphors, the shadow inventory is coming out of the closet.
The ‘Shadow Inventory’ is the subject of great debate on the Los Angeles redfin forums, where I post.
Most of the posters are homeowners (or wannabees), so they laugh at us crazy people.