The housing market is in terrible shape. Prices have dropped 35 percent from their peak, 1 in 5 mortgage holders is underwater, and another 2 million people will face foreclosure this year. And, as bad as things are now, they’re going to get a whole lot worse if the banks suddenly dump their inventory of distressed properties onto the market in 2012. If that happens, prices will plunge another 15 percent or so, millions of people will see their hard-earned home equity vanish overnight, and the economy will slide back into recession. Even so, there are experts who think “The Big Dump” is coming, and soon, too. Here’s how they summed it up over at CNN:
The dam may not burst in the next 30 to 45 days, but it will eventually burst, and everyone downstream should be prepared for that to happen — both in terms of new foreclosure activity and new short sale activity. (“Flood of foreclosures to hit the housing market”, CNN)
… even though interest rates are at historic lows, mortgage applicants can still get financing with just 3.5 percent down via FHA, and prices on many foreclosures are below the cost of the materials; housing is still overpriced.
Did you ever think you’d see the day when you could nab a 15-year fixed-rate mortgage for 3.25 percent?
It’s unbelievable! If you adjust for the rate of inflation (currently over 2 percent); you’re only paying roughly 1 percent interest on hundreds of thousands of dollars. What does that tell you?
It tells you that the banks are desperate. They’re giving away money, but no one is standing in line. No one is borrowing, because the economy is dead, because people don’t trust the system anymore, and because housing has become an albatross. Isn’t that what’s happening?
Sure it is. They’ve screwed everything up and now no wants to play their game anymore. That’s why mortgage applications continue to drift lower 5 years after prices peaked. It’s a matter of trust.
The experts at CoreLogic, a California company that analyzes mortgage data, say shadow inventory is presently 1.6 million homes. but, of course, this vastly underestimates the number of people who are 90-days delinquent or in some stage of foreclosure and who will eventually lose their homes. A recent analysis by Bank of America puts the number at 6.6 million homes. Here’s a clip from the paper:
The foreclosure inventory pipeline that must be cleared in the next few years is very large. Our mortgage strategists forecast that another 6.6 million homes will need to be liquidated over the next five years. (“No Housing Recovery Until 2020 In 5 Simple Charts”, zero hedge)
Others say the housing overhang is much bigger. Laurie Goodman of Amherst Securities, who testified before congress, says there’s between 8.3 million to 10.4 million homes that will eventually have to be resold.
So, who’s right? How much supply is really out there? That’s what buyers want to know so they can make an educated decision about (what will probably be) the biggest asset purchase in their lives. But the banks don’t want people to know about the millions of homes that are presently in the pipeline, because that just undermines sales. They’d rather you listen to CNBC’s dyed-blond in the plunging neckline who keeps blowing smoke up your trousers every couple hours. While that may be entertaining, there is a downside, too, which is, that you could get lured into buying a house that’ll probably be worth 10 percent less in 2 years than it is today. Who wants that?
Now get a load of this from Comstock Partners:
The growing optimism on housing is not justified…..Foreclosures have generally declined over the past year as a result of the well-known robo signing scandal that caused banks to voluntarily stop most foreclosures pending some kind of settlement. This has now been accomplished by an overall settlement between the states’ attorney-generals and the major bank mortgage holders. As a result, the significant number of potential foreclosures that were held back by the scandal will now begin to be processed and show up in future inventories. It is highly likely that the vast number of distressed houses coming into the market will depress prices even more in the period ahead.
…..it will be some time before the massive number of actual and shadow inventories are cleared from the system. Until that happens, home prices will remain under continued pressure. (“The growing optimism on housing is not justified”, Comstock Partners, credit writedowns)
None of Obama’s wimpish mortgage refi operations (HARP, HAMP etc) have done anything to revive the housing market. Nor will the administration’s Foreclosures-to-Rental scam. The private equity (PE) boys and other bigtime institutional investors will soon discover that its much easier to make money swapping derivatives and loading up on oil futures, than it is managing property. (Property management requires too much elbowgrease) Oh yeah, they may go hog-wild and buy a million properties or so, (If Obama provides a generous financing package!) but that still leaves 6 or 7 million more to sell. So, no matter how you cut it, there’s a boatload of homes out there that have to be sold in the next few years. And, that’s going to keep prices in the doldrums for some time to come.
…
“… millions of people will see their hard-earned home equity vanish overnight …”
“Hard-earned” home equity?
The money to buy the house may have been hard earned but it was millions of strangers swept up by the mania who caused the prices to rise, and it was these rising prices that was transformed into home equity.
It is rather laughable to call most investment income “hard-earned”, isn’t it? Funny that we give it such preferential treatment at tax time, compared to income from employment- which usually is hard-earned.
“It’s unbelievable! If you adjust for the rate of inflation (currently over 2 percent); you’re only paying roughly 1 percent interest on hundreds of thousands of dollars. What does that tell you?”
That the home’s price is too high, relative to the rent on the money you borrowed to “own” it…
Did you ever think you’d see the day when you could nab a 15-year fixed-rate mortgage for 3.25 percent?
The typical mortgage should be no longer than 15-yrs for an average family’s modest home since too many other expenses occur while raising children, and the interest rate should not be government subsidized or given tax breaks.
the interest rate should not be government subsidized or given tax breaks.
Patience grasshopper, you can bet that the gov will strip this tax break after getting as many people into houses as it can. They can’t tax the elite, they can’t tax the poor, they will tax the middle and uppermiddle class.
Thanks for the information, P-bear. For my own situation, this information does not change my mind that buying was the right choice for me. A 15% drop translates to two years of rent.
And the foreclosure “dump” is likely to be just that: DUMPS.
There is one caveat - rent money is not completely burned. One is actually getting a product in return - a place to stay. But yes, it is more comparable to the ITI portion of the PITI than to the P.
Unless you are in a 15 year mortgage, you don’t pay much P in the first few years of ownership; rather, you are renting money from the bank, property from the local government to whom you pay taxes, and insurance liability from the insurance company to whom you pay home insurance premiums.
oxide
Your view mirrors mine. Paying multiple rents have been dreadful, and even if we pay a premium, the break even point is a data point for us to consider.
All
There is no inventory, and in So Ca the bulk sales (for rentals)and underwater owners have made home pick’ins pretty slim.
One thing that the REIC isn’t mentioning is the MID has shrunk with these engineered low rates. I wonder if buyers realize the reality of their write off situation. Property Tax write off vs. maintenance, insurance, and cosmetics.
I agree with this, oxide. We tried to stay ahead of the price drops, but even if it drops another 30%, I am OK with it. Why? We’re at 2200 sq ft SFH with a mortgage of 140k. Monthly PITI of $1290. I handle my in-law’s rental house, which is 1100 sq ft rowhouse w/ no garage. It rents for $1700. Where there are jobs, rent is going to stay pretty high. Our area (Balt) has a lot of hospitals and gov’t jobs (many of them contractor jobs).
The other thing is, we bought this as a place to live for 30+ years, raise kids, etc. I’ve checked Zillow 2 or 3 times since we bought (about 6 months ago) purely out of curiosity. Especially since Zillow has the wrong sq ft stats. Our house was built in 1951 and the 2nd floor was not “finished” at that time, so that the tax assessments would be based on 1400 sq ft. Houses in our area were built for managers at the huge Bethlehem Steel plant at Sparrow’s Point (just outside Baltimore) and they were tailored to what the buyers wanted… apparently lots of people did this trick with leaving the 2nd floor unfinished and then finishing it a few yrs later without a permit, which would raise the sq footage.
In addition to PITI. I’ll take two years of free rent rather than buy too soon, thank you. You could go on four nice European vacations or purchase two Japanese automobiles on two years of our rent…
The private equity (PE) boys and other bigtime institutional investors will soon discover that its much easier to make money swapping derivatives and loading up on oil futures, than it is managing property.
“Real work is for the birds. The betting game is much more fun and lucrative. We make up the pieces and we make up the rules!”
I have 100k that I would invest if it “penciled out”. That is how I got in to RE in the first place in 1995.
Remembering that all real estate is local; when will coastal CA bottom out? 1990-1995 were the last doldrums and coastal real estate in Goleta, CA, still sold for 300k at the bottom in 1995. It’s probably about 450-500k now for the same house I sold in 2006 for 900k. But it would also pull in $3500/month rent. With lots of fake money student demand from UCSB.
Wondering opinions, where is the bottom and how long will the doldrums last? And is the recent bouncing just the dead cat? Wake me up when prices are really stable or even rising again. I will however, likely have blown thru my 100k downpayment by then anyway!
And Mike, I know it’s hard to have a bit of cash that’s just sitting there doing nothing. But this isn’t the time to invest in rental housing. The people who say it is don’t have your best interests at heart.
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Comment by joesmith
2012-04-24 10:57:21
It depends, slim. If you can do a lot of the work yourself and you can buy for cash, super cheap, I don’t think it’s a bad time to invest in rental properties. The key is, you need to be in a place where people’s income will support occupancy and stable prices.
For most people, especially people closer to retirement or with kids, I would steer clear of this. Always think about what can happen and assume the worst… do you really want to be mucking it up with some PITA tenants when you’re in your 40s and 50s? Or do you really want to hire a property manager who does as little as possible?
A good place to read the opinions of some hard nosed, successful landlords is mrlandlord dot com. Many of them learned from failing early on by donig things like mikeinbend is describing… buying a rental property hours away from where they live and using rosey projections of rental income.
Comment by Arizona Slim
2012-04-24 11:28:17
For most people, especially people closer to retirement or with kids, I would steer clear of this. Always think about what can happen and assume the worst… do you really want to be mucking it up with some PITA tenants when you’re in your 40s and 50s? Or do you really want to hire a property manager who does as little as possible?
My friend was a teenager during the later years of Vietnam War. And she was Vietnamese.
Either she or her family decided that it would be a good idea for her to go to school in Paris. So off to Paris she went.
She has since lived in at least one other European country (I think it was Sweden). And she’s been living in this country since 2001.
So, on the age scale, I’d place her in the early to mid-60s range. Not the sort of age that lends itself to the joys of dealing with tenants and toilets.
I might add that her husband, a Vietnam War veteran with some level service-related disability, is not in the greatest of health. That’s another thing that might interfere with her ability to be an effective property manager.
And don’t get me started on the property management companies around here. Most of ‘em aren’t worth a bucket of warm spit.
Oh, joesmith, thanks for the MrLandlord.com link. Much appreciated.
Comment by RioAmericanInBrasil
2012-04-24 12:24:33
My friend was a teenager during the later years of Vietnam War….I’d place her in the early to mid-60s range
My God what happened to the time? I woke up today and I’m 30 years older than yesterday!!!!
sold for 300k at the bottom in 1995. It’s probably about 450-500k now for the same house I sold in 2006 for 900k. But it would also pull in $3500/month rent.
300K in 1995 and 450K in 2012 and able to generate $3,500 a month rent? Really? And with 100K down? Say what?
Does this not “pencil-out”? Where are you going to generate that much income on 100K as there? How fast would that 450K “value” have to fall more to overcome the cash generated? How fast would the house be paid off with 100K down and all cash flow going towards the 350K owed?
Rio
The situation I landed myself in was a 3/2 with a legal-above the garage-granny flat. I did it for cheap rent as a 20 something bachelor, not thinking about housing bubbles. In 2003 I was renting the 3/2 for 2300 and the granny for 1100. My PITI was 2k, including maintaining it. But now the place was worth close to a mil, so I sold it in 2004.
being 3 miles from UCSB did not hurt. Out of Isla Vista, no problem renting to students who expected less than “real people” and had their parents sign their rent checks. Also had some success renting to visiting faculty, but the German Engineering prof expected more, I found, than the average student. Also rented out to some really cool PHD candidates/profs from Spain and Isreal.
If I go back to CA, it is because I can make $1000 going to LA to sell vegetables on the weekends and sub-teach during the week. Pie in the sky/ not gonna happen in all likelyhood, but I am spitballing here. Family likes it just fine in Oregon, and we have not set foot in CA since 2007.
Long distance landlording was very good for me, I did not screen very well, being a 30 yr old surfer dude who invested into something that subsequently paid all the bills I still am a bit naive regarding LLing. As it never really bit me too hard.
Except for the non-student I rented to that changed the locks and barricaded herself in with 5 wolves and stopped paying rent; and one student with a small pet-pit bull extraction. I managed it myself from Oregon with one month vacancy in 9 years.(wolf lady would not leave until her friends gave her an intervention and animal control removed 3 of her non-disclosed wolf dogs).
I also had a bit of a problem renting to an Oregon family in the Oregon house we bought in around 1999 that used the master as their litter box, we found out upon their exit when selling the place. Poured some copper sealant(sorry don’t remember what it was) on the subfloor for the smell; carpet, paint(done by my mother) and the place sold for 287k when we bought it for 129k(it also had a garage conversion that I also rented out).
So two houses, four units, live in one, rent the other three out, worked but being the ll did get to be a PITA. So now I will not be a landlord for the first time since 1995 with $$ that is gonna get spent on orthodontia for the kids, health insurance, etc.
I wont get into the 2 properties I bought and sold at a huge loss(2007-2009); one a foreclosure and the other in Utah.
If I don’t put the $$ somewhere I will spend it out of necessity in 3 years if I don’t land some health insurance or a better paying job.
Finally went thru the steps of getting the kids state health insurance so they can go to doc and dentist which is a good thing for us.
But yes, rents are astronomical in Santa Barbara/Goleta. But we cashed out planning never to return to live, and probably wont.
May buy something for around 80k here in Bend, if I can find it. Sold my last venture this month after paying 117k, for 125k, after collecting rent uneventfully for two years to the tune of about 20k. So I am accostumed to $$ working for me, at least 5% returns. which is why real estate is tempting, but I don’t trust this low end activity that has realtors buzzing.
Cuz I dont want to have to sell if prices drop, this sale is prophylactic if nothing else; getting out on the bounce.
And Carl-you may know better; but yes, that is exactly what I am suggesting(wishfully thinking). Lucking into market timing in 1995 works better than planning market timing, I do know that so will exercise a modicum of caution.
So not buying diddly right this second. It is just a lifelong friend lives in Cambria and his wife is a realtor, so she is sending me listings.
I remember my father getting angry when I was looking at an RV on a website. He said if I had no intentions of buying it I wouldn’t be looking at it; and he was right. I bought myself an RV. Albeit a travel trailer for 3k, not 100k. I should prolly have her stop sending me listings as they tempt me sorely.
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Comment by Carl Morris
2012-04-24 12:39:44
If I don’t put the $$ somewhere I will spend it out of necessity in 3 years if I don’t land some health insurance or a better paying job.
I can understand the urge to make a real investment before money gets piddled away. But if it will really be “out of necessity” what will you do if you don’t have (or don’t have access to) that money? Necessity implies you might need it REALLY badly when that time comes.
And Carl-you may know better; but yes, that is exactly what I am suggesting(wishfully thinking). Lucking into market timing in 1995 works better than planning market timing, I do know that so will exercise a modicum of caution.
I can sympathize. After all I was a young tech worker in the late 90s in the Denver area who owned a new house. On a good day my small 401(k) AND my house BOTH made more money than I did that day. Felt pretty invincible.
Problem is, I don’t think it’s coming back like that in our lifetimes. Yes, manipulated markets will look good on occasion, but why are they manipulated? My guess it’s in an effort to take your and my money. It’s not based on real growth of any kind. Think hard about risking what you’ve got based on hopes of something that’s only a mirage intended to defraud you.
Comment by mikeinbend
2012-04-24 12:48:50
Word. Thx
Comment by Arizona Slim
2012-04-24 13:04:02
Yes, manipulated markets will look good on occasion, but why are they manipulated? My guess it’s in an effort to take your and my money.
In other words, mikeinbend, hang on to your money. Please.
If you feel the need to talk about this itchy money thing, just holler. We’re here to help.
Comment by mikeinbend
2012-04-24 13:49:06
Thanks. You’re a smart (and plucky!)one in a smart group.
Why I spill my guts here. sanity check.
I have been slapped conscious by some of your-sometimes hard to hear-advice and opinions.
From my criminal dalliances when Polly told me not to risk no stinkin criminal record for unplugging a “toxic tenant’s” holiday lights; got into the DA’s program for minor misdemeanors. And ahansen telling me to quit using pain as an excuse. A virtual reality where one can toss out their experiences and get some food for thought. Cool!
The private equity (PE) boys and other bigtime institutional investors will soon discover that its much easier to make money swapping derivatives and loading up on oil futures, than it is managing property. (Property management requires too much elbowgrease
Funny they should mention property management and elbow grease. Because yesterday afternoon, I had to stage an intervention. Here’s the story:
Friend came a-knockin’ on my door. She was on her way to check out a house that she was thinking of buying as an in-VEST-ment.
Oh. No. Another friend drinking the real estate in-VEST-ment Kool-Aid.
What’s worse, I know the area where she wants to buy the house. Suffice it to say that it’s a run-down house on a run-down block in a run-down part of our fair city of Tucson. Not the sort of place that screams “Red Hot Opportunity!” to Slim.
The friend said she had a big stack of cash that she wanted to do something with. I gathered that the low interest rates being paid by banks and the risks of the stock market didn’t appeal to her.
But to put her hard-earned savings into a dumpy house that would most likely attract university students who’d make it into even more of a dump? Yeesh!
I scribbled the name of one of my favorite real estate books, Leigh Robinson’s 400-plus page Landlording, on a scrap of paper and gave it to her. It’s the book that nailed the coffin as far as my ever investing in real estate was concerned. Well, that and my former landlady’s stories about her lousy tenants. I shared a few of those with my friend.
Then there’s the matter of Tucson’s very high rental vacancy rate. Which means that, as the owner of a rental property, you’re going to be competing with many other empty houses.
After my friend left, I e-mailed her this story from the Naked Capitalism blog:
“So here we go again. Backyard investors will soon be saying “it’s different this time,” arguing that those rents will never fall as they sink their retirement savings into the same houses that wiped out the retirement accounts of the previous occupants. But Mr. Smith’s invisible hand always wins in the end, sometimes with a gentle nudge and sometimes with a violent smack. There are too many houses for too few people and no private funding anywhere on the horizon. As long as those basic fundamentals hold true it’s not a question of if, but only when, the rental bubble bursts and how much damage it will inflict on everybody else.”
I disagree with PB and believe many people are missing the signs of the recovery. When the MSM espouses how bad the market is, the downturn is over, just like when they extolled the virtues of condo flipping in Florida in 2007!
This just in from Calculated Risk today:
“….For house prices the Case-Shiller index has a serious lag and the key right now is to see if the year-over-year change is declining (it is). Note: The current Case-Shiller report was an average of December, January and February closing prices, and some of those sales were probably negotiated last October, about six months ago!
More current, but less reliable, pricing data (such as asking prices, new home prices and some anecdotal comments) suggest that house prices have stopped falling in most areas, and I expect the year-over-year change in the Case-Shiller index to turn slightly positive in the not too distant future (it is difficult to predict when, although I’ll try in a couple of months). Of course the number of REO sales (lender Real Estate Owned) are down, and some of the improvement is related to fewer foreclosures and other distressed sales…..”
The people actively in the market in Sacramento are seeing quite a bit of lift in the sales activity and transaction values in the desirable areas.
Ben, I just dropped $25 into your PayPal account, as I have many times before. Your blog has been the best money I ever invested in my LIFETIME. You helped me understand so much, so early in the game. I watched the Sacramento market turn in Dec. 2005 when everyone else denied a bubble bust could happen.
The most important lesson was three words: Reversion to Mean! EPIC.
I think you make your case reasonably well, but I still think what you say doesn’t apply much to where I live. I hope you’ve nailed the bottom for Sacramento, but I’m still going to sit this one out for a while more.
Got mine written out, will stick in the mailbox later on today.
And I thought the time to buy a house was when the MSM said it was a terrible time to buy a house? We might be getting to that point now. Except, the reasons are non-traditional and convoluted.
The MSM is still saying prices are falling, mountains of foreclosures are coming, no one can get a loan…etc. According to them, it is a TERRIBLE time to buy a house.
I am saying it is a good time to consider buying a house in Sacramento. There is plenty of time as prices are going to jump, but they have firmed, it is cheaper to buy than rent and you lock in your costs for the long term.
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Comment by jingle male
2012-04-24 13:00:23
correction, before everyone jumps on me…
I meant to say “….prices are NOT going to jump…” sorry. There is no expediency to this housing market. Take your time. Find the right house if you want one….
“I disagree with PB and believe many people are missing the signs of the recovery. When the MSM espouses how bad the market is, the downturn is over, just like when they extolled the virtues of condo flipping in Florida in 2007!”
Which recovery?
If you are talking about housing, I think you are missing the signs of market manipulation which are bound to draw this thing out much longer than expected. See my repost elsewhere in the Bit’s Bucket of Tyler Durden’s graphs that show why there will be no U.S. housing recovery until after 2020.
The other thing you may have missed is that this was a global housing bubble, and the U.S. is actually leading the rest of the world in its correction. However, since Canada and China are still bubbly, investors from those countries are propping up the U.S. market for the time being. When their bubbles pop, two of the key pillars preventing the U.S. housing market from finding a stable bottom will be gone.
You may be right PB, but I must say no one from China or Cananda is propping up the housing market in Sacramento. The buyers are local investors buying for investment purposes and to a larger degree, local people who are buying a home in which they will live.
Again, I am not saying housing is going to greatly appreciate, I just see strong signs the market is recovering and demand is growing. Many buyers cannot find a house to purchase, as many homes have multiple offers. Next stop for them: new home builders where certainty of closing the sale is paramount.
I see the prevalence of investors in Sac and everywhere else as prima facie evidence the bubble is not over yet. Compare this period to any other in the history of the U.S. housing market and you will soon learn that the percentage of homes bought as seconds (or more) remains at an unprecedented high level. This will end as more and more people come to the conclusion that real estate is a money-losing investment.
If something cannot go on forever, it will stop.
– Herbert Stein
Comment by JingleMale
2012-04-25 06:45:57
I am making excellent cash flow from my real estate investments. I am very pleased with my ROI. It is much higher than the bank savings rate, it is tax sheltered, the rent is also paying down the loan principal every month and I purchased below reproduction cost. That is a great formula for success in my book.
The only problem I have now is that many people see how beneficial investing in real estate has become and more competition is out there investing.
“It may be surprising that the former chief of Fannie Mae still remains the director of a public company as prominent as Goldman Sachs and Target. But perhaps more surprising, many other executives who had tumultuous reigns are also board members of major public companies: Charles O. Prince III, the former chief executive of Citigroup, who resigned under pressure in 2007 amid huge write-downs at the bank, is a director of Xerox and Johnson & Johnson. E. Stanley O’Neal, the former chief executive of Merrill Lynch on whose watch the firm loaded up on subprime debt that almost bankrupted the company, is a director of the aluminum giant Alcoa.
And a number of other prominent executives could soon be added to that head-scratching list. H. Lee Scott Jr., the former chief of Wal-Mart Stores who was running the company during a bribery scandal at its Mexico unit that was recently uncovered by The New York Times, is a director of Goldman Sachs and continues to serve as a director of Wal-Mart. Another Wal-Mart executive, Eduardo Castro-Wright, who oversaw the Mexico unit and was identified by a former executive there, according to the Times article, as the driving force behind years of bribery, is a director at MetLife.”
I was thinking the same thing myself, combo. The idea that CONgress is going to hold hearings on this matter is a complete joke. So many politicians are completely bought and paid for.
I don’t approve of bribery, and people need to wake up to the fact that this sort of thing is coming to the US big time along with immigrants, legal and illegal, for whom bribery and baksheesh is a way of life. And I mean at the every day job level, in which you don’t get hired unless you pass some long green to the foreman and/or HR manager. In some cases it is probably already happening.
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Comment by In Colorado
2012-04-24 10:29:39
The Mexican oil company, Pemex, was notorious for selling jobs. In some cases you didn’t even have to show up for work, as long as you gave 50% of your salary to your boss. At the peak (in the 70’s) it was estimated that less than half of Pemex’s employees did any work at all.
Comment by mikeinbend
2012-04-24 12:47:22
So funny! I remember those Pemex stations serving us gas out of 1 liter bottles when we were driving the VW bus thru mainland Mex in 1992. Push started that thing out of many a Pemex. Starter stopped working in Tuscon, but did that deter us from driving thru Mexico? Noooo!
Our starter had broken and our carb we had to somehow fix with a coat hanger to allow us more than 30 Mph. That bus she blew up in Oaxaca(sp?). We hitched back to Tuscon after our ride to the border that we traded the bus for broke its axle. Three dudes and a pile of surfboards; what a sight.
But what I remember most vividly was the 3:00 A.M. traffic stop by drunk/coked out federales in Puerta Vallerta waving guns in our faces until we could arouse our Spanish speaking travelling comrade; After some Spanish was exchanged then it was like we were old friends. Or the licence plate taken off the car in Guaymas (Hay mas in Guaymas) for illegal parking, looking all over town for the person to bribe to get the plate back. So after those fiascos, we bummed a ride back to CA from our peeved parents. Seemed we were supposed to be studying at the time and I took an emergency student loan out to buy the van. What a wasteful little jerk was I!
fun times and now Im 20 years older and only slightly wiser
I’ll confess to having served on a corporate board. I had to step into my father’s place on this board after he was no longer able to participate.
Dad co-founded the company, and let’s just say it operates in an area that I’ve only heard about via dinner table conversations. I had to get up to speed on topics like manufacturing processes, quality control, venture capital, and corporate growth strategies in a New York minute.
I will say that this board was (and is) free of the celebrity members. Which meant that we had a bunch of work horses, rather than show horses, on board. It made for a much better board.
I can choose whether or not to buy a house if it is overpriced due to using union labor. Do I have an alternative to city parks staff? How about for my city garbage collection? How about my local schools.. can I just choose not to pay state tax to support the teachers or administrative staff that I think are overpaid? You’re playing a strawman argument. You can’t hold someone over a barrel at the end of a gun paying taxes, then say they shouldn’t complain that the organizations they are funding via taxes are lobbying directly against their interests as a taxpayer. Do you hear anyone complaining about the construction industry union? NO (well, at least not as taxpayers).
I can choose whether or not to buy a house if it is overpriced due to using union labor. Do I have an alternative to city parks staff?
Yes. We are free men….you are free. You can move to wherever you choose; and let no central-planner, do-gooder infringe upon that right. Our forefathers fought for a free country which protects our liberty and empowers and protects free-will and it is thus.
If your pursuit of happiness entails settling in an area less shackled by the godless chains of collectivism, our Constitution recognizes your god-given right to pursue that inalienable right.
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Comment by mathguy
2012-04-24 12:49:46
oh thou holy man of retardation how i bow to thee and thy superior intellect. You STILL think I am out to get the guy making a janitor’s living don’t you? I wish nothing but the best for janitors. I think the thing that makes you the maddest is that I actually get to vote on these kinds of things. It’s the one consolation I have.
I guess you’ve never paid attention when I said that individuals working for companies shouldn’t be paying income tax or social security tax and that the corporations they work for should be responsible for those taxes.. You haven’t listened when I’ve said to take away the paperwork and legal burdens from wage earners who can’t afford the legal representation for tax “minimization”, and let them keep their entire paycheck. You haven’t paid attention when I’ve called for removing the regressive sales tax and changing to import taxes and stock and commodities trading taxes.
Say one thing about the lobbying process of public employee unions, the broken State and local pension systems that are mismanaged and over allocated, and the resulting local and I’m sure soon state bankruptcies that are and will be occuring, and I’m some kind of repressive lord and master over the poor “lucky duckies”.
Answer me this: why does a state employee turn around and pay state taxes? If you want something better for state employees, why don’t we just eliminate them paying state taxes and save money on the processing of their state income tax returns?
If you don’t want to pay the taxes for city schools and city services, there are places in this country, that you can move to which charge low taxes because there isn’t the population density to make schools and services worthwhile. Oh, but there are no jobs there, you say? Well, maybe we should question why there are no jobs in these remote areas — perhaps because there are no schools and no city services.
No one is complaining about the construction industry union, but I see plenty of people complaining about the quality of the construction. Maybe you should question why that is too.
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Comment by Arizona Slim
2012-04-24 13:08:01
Sotto voce: I’ve been studying (oh, gawd, I hate to admit it here, but here goes) books on acting. Voice acting, to be specific.
One topic that keeps coming up is joining unions that represent acting talent. I should say “union” because the members of SAG and AFTRA voted something like 80-20 to merge.
If you’re a budding voice actor, you may have hankerings to join the union, but guess what? You better be good enough to compete with union talent. Most rookies aren’t.
“There were incidents where investors and Realtors were in cahoots to buy and flip,” said Forbes
(No sh#t Sherlock)
South Florida third in U.S. with shaky mortgages
By Kimberly Miller Palm Beach Post Staff Writer
Posted: 7:49 p.m. Monday, April 23, 2012
South Florida maintained its position in the top five markets nationwide for suspicious mortgage activity last year as lenders continue to uncover bad boom-time loans and federal examiners note an increase in dubious short sales.
Florida’s overall rank last year was third place per capita and second by volume. California was first in both categories.
“The report shows we’re seeing financial institutions spotting activity that appears to be fraud before it happens, and in the process, helping to prevent it,” said James Freis, director of the Financial Crimes Enforcement Network.
Rodney Forbes, broker for Forbes Realty of South Florida, said banks are taking more precautions to prevent short sale fraud, which can include a practice called “flopping.”
Flopping is where an artificially low appraisal is submitted to the bank, which accepts an offer based on the low amount. The home is then flipped by the new owner at or above the true market value, netting him a hefty profit.
“There were incidents where investors and Realtors were in cahoots to buy and flip,” said Forbes . “Now, before a short sale can close, there has to be an arms-length affidavit signed which states that the buyers, sellers and real estate agents are not related in any way.”
Last week, federal mortgage backers Fannie Mae and Freddie Mac announced stepped-up short-sale timelines for servicers, while Bank of America recently updated its short-sale process to increase efficiency.
Lenders such as JPMorgan Chase and Bank of America also have offered cash incentives to homeowners willing to do a short sale over a foreclosure,.
Despite precautions, short sales are a “Pandora’s box of potential fraud,” said Jack McCabe, chief executive of McCabe Research and Consulting in Deerfield Beach.
“You have to go through a lot of documents and investigation to determine who is involved in the deal,” McCabe said. “It’s so prevalent I believe they can only uncover a very small percentage of the fraud that is actually occurring.”
“There were incidents where investors and Realtors were in cahoots to buy and flip,”
Yes. This is fact. Realtors who are supposed to be marketing inventory out in the open on MLS in fact is holding select inventory off MLS and steering it to pre-determined buyers. This is screwing sellers. I’ve observed this twice with lender owned property.
That’s just the free market at work! There’s no law that says they have to publicly list all their properties! The government just needs to stay out of their business!
I have seen this as well. Places that were on the market and active, I have had one realtor refuse to show me. Just refused to show it; which got him a complaint to the board, but he is still operating and I know several realtors that just turn a blind eye to his listings and refuse to work with him. So his listings, the good ones, are NOT available to the average Joe, even if on the MLS. And this realtor in particular has lots of Fannie HomePath or Freddie HomeSteps properties.
Just don’t try and get a good one from him. Cuz he obviously has a buddy lined up to get that unthrashed foreclosure. But he had plenty of other properties that he wanted to show me that I knew were destroyed at the same price. And told me to get that offer in because he has competing offers already(Do you really need to look at it??? C’mon! Make an offer).
Couldn’t even get in to even look at the one(actually more than one, come to think of it) that seemed to be a relative bargain. Pre-sold to a buddy in the know. I know. Somebody shoud be documenting this chicanery; cuz it’s BS.
Those guys are going to shoot themselves in the face by taking actions that harm the sellers.
I’m aware of a realtor in the Northern Central Valley who is dealing with a huge amount of REO from some big financial institutions. Let’s just put it this way:
He has WAY more to lose than gain by taking any action that is contrary to the seller’s interests.
Controlling REO sales is a career making enterprise…you have one seller, who is a massive source of repeat business…if you are smart, you keep your seller happy.
If you are short-sighted, you screw the sellers. If you aren’t stupid, you build yourself a mansion from the commissions and retire when this mess is over.
Pretty soon cities will collect taxes JUST to pay for public union pensions.
Hey - Who wants to live in California and have a big bulls eye painted on your house?
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Los Angeles insolvency predictable and preventable
OC Register | 04/23/2012 | Brian Calle
When the nation’s second largest city teeters on the verge of bankruptcy, local elected officials – and especially taxpayers elsewhere – ought to take it as a wake-up call and ponder the evident public policy blunders that laid the groundwork for such an unnecessary scenario.
Los Angeles’ potential bankruptcy and $238 million budget shortfall were predictable and preventable. So predictable in fact that former Los Angeles Mayor Richard Riordan warned of the looming crisis in a Wall Street Journal editorial in 2010. Now he says bankruptcy may be just a year away.
What underscores this municipal catastrophe is undue influence of public employee unions on city expenditures, irresponsible decisions by elected leaders and unsustainable benefit structures practically germane to the government sector.
A study released earlier this month by the Stanford Institute for Economic Policy Research estimated that each of the city’s three independent pension funds are unfunded by billions of dollars: the City of Los Angeles Fire and Police Pension System is $9.25 billion unfunded; the Los Angeles City Employees’ Retirement System is $11.32 billion unfunded; and the City of Los Angeles Water and Power Employees’ Retirement System is $6.59 billion unfunded. To put the numbers in context, L.A.’s 2011-12 operating budget is $6.87 billion, according to the city.
Stanford’s study also found that “pension costs increased from 8.5 percent of total city expenditures in 1999 to 13.7 percent in 2011.” For fiscal year 2011-12, estimated pension costs look to be “15.4 percent of city expenditures.”
If the union pensions/pay are the main cause of city’s budget deficit then what can’t last can’t last but first the real problems have to be determined. I’d say you:
1. Look at the city’s taxes collected and see how they stand compared to other cities.
2. Look at the union pension compensation/pay levels and their percentage of the budget and see how they compare to other cities.
3. Go BK and adjust pay/pension/tax levels to reflect average city levels.
But…Is it possible to do #3 when cities and states go BK? What is the procedure? If something is “unfunded” and a city’s taxes and income collected are already at or above national averages, then “unfunded” means exactly that, unfunded.
NEW YORK (Dow Jones)–Weak manufacturing data in China and the Eurozone collided with political uncertainty in France to create a global selloff from riskier assets Monday.
U.S. markets woke up to see a broad sell-off in European equities, setting the stage for the safest and most liquid bonds to outperform.
That appetite helped Treasury prices climb, with yields dropping to their lowest levels since late February. Munis benefited as well, but corporate bonds sold off across the board.
Markit’s CDX North America Investment Grade Index, a proxy for risk, weakened 1.3%, and negative sentiment prevented any company from attempting to issue any new debt.
Most of the market moves took place in the early morning and were followed by sideways movement the rest of the day. Aside from weak global economic data and political uncertainty, the Federal Reserve’s monetary policy meeting this week likely kept investors in a wait-and-see mode.
“Monday’s session offered little by way of new information other than to refocus the market on the political risks that continue to plague the European economy,” wrote Ian Lyngen, strategist at CRT Capital Group.
Treasury bonds and German bunds become market darlings on Monday as investors flocked to safe-harbor assets on fresh signs of troubles in the euro zone.
The flight to safety pushed down the benchmark 10-year Treasury note’s yield, which moves inversely to its price, to as low as 1.909%, the weakest level since late February. The yield is less than 25 basis points from a historic low set in September, a sharp turnaround from the selloff in March that sent the yield to as high as 2.399%.
Yields in German bunds, the benchmark for the euro zone’s debt market, dropped to fresh record lows. The five-year bund’s yield hit as low as 0.598%, while the 10-year bund’s yield touched 1.56%.
The strength of the two major government bond markets, despite meager yields, underlines the continued jitters over the euro zone’s sovereign debt crisis. Investors were jolted by fresh signs that stress, already hitting Spain and Italy, is spreading into the Netherlands and France. For now, investors care more about putting their money in a safe place instead of placing emphasis on returns.
…
Retail doesn’t have the money and after most people (who still had money and decent jobs) saw their 401s take that huge hit, they’ve gone into the bunker with their money, even though they’ve recovered almost the losses.
The banking industry is concerned that Edward DeMarco, the nation’s chief housing regulator, is moving toward a plan that would allow some homeowners to walk away from their mortgages.
Industry groups say that cutting the principal for borrowers who are “underwater” and owe more than their homes are worth would further weigh down the housing recovery.
“Principal reductions create an incentive for a huge group of borrowers who have continued making their payments, despite lower home prices, to stop paying in hopes of principal forgiveness,” said Frank Keating, the president and chief executive of the American Bankers Association.
“A broad principal reduction program would result in fewer investors who are willing to lend for housing finance, increased borrowing costs and tighter credit availability,” Keating said.
DeMarco, the acting director of the Federal Housing Finance Agency (FHFA), has come under pressure from Democrats and the Treasury Department to reduce mortgage principal. They argue the move would help struggling homeowners and save the government money in the long run.
But even with new data that back up those claims, DeMarco remains skeptical about the effects of implementing the program at Fannie Mae and Freddie Mac, the mortgage giants that the government has spent $150 billion keeping afloat.
Bankers argue that principal reductions through Fannie and Freddie would increase the liability for taxpayers and raise the cost of credit by creating incentives for borrowers to stop paying on their loans.
“The taxpayers’ cost for principal reductions generally exceeds the benefit created,” Keating said.
“Recovery in the housing market is extremely important, yet there are more cost-effective and efficient options other than principal reductions for borrowers and American taxpayers,” he added.
…
I have no problem with this as long as the new loan is offered at a rate that reflects that it is made to a person who recently defaulted. Say a risk premium of 4% (higher if a good look at the borrower’s financials warrant it) so that the interest rate goes from 5.5% to 9.5%.
Do you really think the bank will just eat that $75K loss (in my example)? You, everyone who doesn’t default, and everyone who rents will pay one way or another.
Comment by polly
2012-04-24 15:58:40
Hypothetically, they’d more than make it up in the higher interest rate. But the point (which you seem to have missed) is this. No one will take a 25% drop in price if they have to take a 73% (or higher) increase in their interest rate. 5.5% of $300K is $16,500. 9.5% of $225,000 is $21,375. That is an extra $4875 on interest just in the first year. Not a good way to lower your monthly payments.
Now, might you risk someone with the cash sitting in the bank taking the deal and paying off the mortgage a few months later? I suppose. But Joe 6-pack would take one look at this deal and RUN in the other direction. No takers.
Yeah, it has a few issues with banks having to front load their losses (assuming the banks actually own the loans), but since no one would do it, I don’t see the problem.
The other day I saw an actual summons pasted to the door of another apartment. It listed a trial date and time because the landlord was apparently suing the owner for unpaid rent (the leases here are 1 year). I took a picture of it. It’s an actual summons.
I thought wow - wouldn’t it be great if we were able to walk away from rentals as easily as we could from mortgages. Plus, if you stop paying your rent, there’s no months or years of free living. Your stuff is out on the street in a few weeks and you get sued for the unpaid rent. But we never hear sob stories about that.
Much of the sob stories about FBs involve media manipulation by the big advertisers. On DC news radio, they are serious high home price cheerleaders. Today, their lead reporter on it came on and before a housing story prefaced it with, “Houses are the largest investment most people will make in their lives and so we all are interested in seeing prices go up. But Case Shiller went down by .8%” - I thought, “Hah! At least he’s honest.” Side note, it puts the lie to any notions of the possibility of an unbiased media. Every reporter is human and has his own interests to protect and advance.
Several major U.S. banks are planning to trim investment-banking units that were built for an era of deals aplenty. Anupreeta Das has details on The News Hub. Photo: Bloomberg.
Wall Street’s latest problem: too many bankers and not enough deals.
Amid new regulation, lower profits and a dreary market for mergers and acquisitions, several banks are planning to trim investment-banking units that were built for an era of deals aplenty.
Having already slashed bonuses, banks including Citigroup Inc., (C -1.89%) Goldman Sachs Group Inc., (GS -0.61%) J.P. Morgan Chase (JPM +0.30%) & Co. and Morgan Stanley (MS -2.86%) are preparing to cut dozens of jobs, including some held by senior bankers, according to people familiar with the matter. As they pursue this targeted round of trims as soon as next month, they and rivals are also revisiting profit expectations for their advisory businesses, people familiar with the matter said.
Until recently, Wall Street’s ax had largely fallen on trading desks, which shed thousands of jobs as business dried up due to regulations and lackluster markets.
But the cost-cutting focus is now expanding to deal makers and corporate advisers that have remained among Wall Street’s most high-profile professionals even as their contributions to banks’ bottom line has been dwarfed by traders. In addition to mergers-and-acquisitions advisory, investment banking includes raising capital through stock and debt.
“The whole paradigm of banking is changing so there is a lot of right sizing and that will continue throughout this year,” said Michael Karp, managing partner at Options Group, a financial-services industry executive search firm. All of the top firms “have overcapacity,” he added.
As is often the case in Wall Street’s Darwinian culture, the culling is expected to affect the old and the weak. The job losses will target underperforming bankers and those nearing retirement age, according to people familiar with the situation.
The goal is to remove people who aren’t “pulling their weight,” said one investment-banking head at a major bank, adding that “banks are overbuilt” in relation to the work available. As compared with years past, banks are less willing to keep those employees on board in hopes of a near-term recovery.
…
Once you get to the oligopoly monopoly stage of corporate capitalism there is no more need for mergers. Once the public is out of money there is no need for an IPO every week.
Their Goose the laid the golden egg was consumed for dinner last night and now they wonder why they have no money.
I kind of love the “right sizing” thing being turned back on the “masters of the universe.” And those negative percents were for their share prices on the day the article was posted, right? Cause down 0.61% isn’t a slashed bonus by any reasonable definition.
You know, a lot of these people are going to know stuff that the cops might be interested in hearing.
(This assumes that the cops are interested in putting crooks in jail. Lately, that’s a big assumption)
Of course, as I suspect, there will be no “rats” because of generous severance packages, and the “rats/soldiers” may be as guilty of crimes as the “bosses”.
The answer is another bubble. What “thing” can be created that will lead people to believe it will provide safe and reliable returns well above the current norms? Whatever it is, it could be the next bubble.
The best bubbles are in logical constructs - stocks, bonds. Or small, highly liquid items - tulip bulbs, beanie babies. Houses you say? It wasn’t the house that drove the bubble, it was the demand for the mortgage debt that drove the bubble. The house was the physical manifestation of the bubble in supposedly safe and reliable and high interest mortgage backed securities.
Origins of the Indebted American Homeowner Equitable Mortgage Company
Source: Library of Congress Prints and Photographs Division
By R. Daniel Wadhwani
Apr 20, 2012 1:56 PM PT
Not long after the economic crisis began, the president’s landmark Conference on Homeownership reported that “down payments of 10 percent, 5 percent, and even nothing down” had become common practice in the home-mortgage market. Reliance on second mortgages and novel financing terms, the report noted, were also widespread.
Although these developments sound all too familiar, this Conference on Homeownership was held in 1931 and the president sponsoring it was Herbert Hoover, not George W. Bush or Barack Obama. We often think of the expansion of easy mortgage financing as a relatively recent development, but the growth of indebted homeownership has older and more complicated origins.
The rules and institutions for financing homeownership weren’t always as conducive to buying as they are today. In the 19th century, most Americans bought or built a home outright, or saved substantial nest eggs to make large down payments, because financial institutions either didn’t lend to average homebuyers or did so on relatively stringent terms. National banks were actually prohibited from lending on real estate and state banks typically limited mortgages to 50 percent of the underlying value of a property. Such loans also matured in a relatively short period, usually three to five years. These terms meant that buying a home often required years of saving and typically wasn’t an option for young families.
…
NEW YORK (CNNMoney) — U.S. stocks were poised for a mixed open Tuesday as investors turn their attention to two reports on housing and await Apple’s earnings after the close.
The Dow Jones industrial average (INDU) was poised for a slightly higher open, while the Nasdaq (COMP) futures were slightly lower and the S&P 500 (SPX) futures were pointed to little change. Stock futures indicate the possible direction of the markets when they open at 9:30 a.m. ET.
Futures moved lower after the S&P/Case-Shiller showed another decline in home prices for February just before the market open. The U.S. Census will release new-home sales at 10 a.m. ET.
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Selling my house for 12)5k. Will pay off all debt(wife had surgery last month plus some other debts) and be left with around 100k.
Should I put 20% on some coastal CA real estate(Cambria or Los Osos, near Cal Poly). SLO is too hot and same goes for Tehachapi or Temecula, where my friend says things are indeed cheap. If it pencils out and rents cover PITI plus, should I pull the trigger, or should I wait until more blood flows? If it pencils out does that signal a good enough time to come back to CA?(I am a surfer and central CA is relatively unspoiled by overcrowding like most of SoCal) I could work there at my old job selling vegetables for 80k/year, if my body could handle it; or I could just spend the money on education (master’s degree, law school, or just landlord away?) and keep teaching for peanuts here in OR. Need a masters to continue teaching long term in this state, for sub 40k pay. And Beaverton, the second largest district in the state is laying off 300+ teachers; ending up with 30 kids in kindergarten classes by next year. If you ever taught K, you would know that any kid over 20 is a kid too many to handle properly. And no aide or other adult would be provided. So teaching jobs not only are hard to come by; they are subject to layoffs, and with student counts getting so high; the jobs SUCK. As in you never get your work done in 40 hours like your contract says you owe time-wise. so it is complicated as I could work a non-teaching, physically taxing job without more schooling but I have had 4 surgeries and am a little impaired and therefore reluctant to be considering going back to loading trucks and slinging vegetables. And I would rather teach children than talk to carrots. But I could teach my kids how to handle sales and be my own boss if I go back to selling veggies. And get to to drive to Encino, Montrose, all those LA spots I abhor, for work.
20% down in central CA; or buying another house here in OR for mostly cash. Or trying to hold on to the cash for a couple years and seeing how things play out? That one is most likely; but don’t want to spend the 100k without trying to invest it at some point before it is gone.
should I pull the trigger, or should I wait until more blood flows? If it pencils out does that signal a good enough time to come back to CA?(I am a surfer and central CA is relatively unspoiled by overcrowding like most of SoCal) I could work there at my old job selling vegetables for 80k/year, if my body could handle it; or I could just spend the money on education (master’s degree, law school, or just landlord away?)
I have to be honest. Based on your past posts, your decisions end to not be very wise.
1. You’ve already failed at taking risks in real estate. Do you really want to risk everything again on landlording, bloodflowing, or otherwise?
2. College degree, are you NUTS? When you get out, you will be competing with thousands of others masters degrees. And no matter what the laws say, you will be seen as an old, sick, man. They will hire a young, healthy, woman, instead. I’ve seen it happen. And another honest note: You have a family in an unstable financial situation, and you want to spend that $100K on a degree for YOU? That’s selfish, sorry.
3. Stay the F out of California.
4. You don’t want to lift boxes vegetables, but you’re able to surf the waves often enough that you need to (and can afford to?) live in surfer country? Does not compute.
4. I’ll give my standard advice to those who have cash but are not tied to a career: use the cash to go Oil City Plan. No matter what your college degree, buying a cheap house and supporting yourselves with stable Lucky Ducky jobs may be your best bet. Find an Oil City near to a small university town with a major medical center. Lots of good land and rainfall to grow veggies. Lots of granola/health concious faculty/staff to buy your veggies, lots of retiree money to support the Lucky Ducky businesses, perhaps a job on the tray line in the tray line of the hospital cafeteria or nursing home.
There are a lot of such places in this country. Examples: These are East Coast, but I’m sure there are some other examples west of the Mississippi.
“Find an Oil City near to a small university town with a major medical center. Lots of good land and rainfall to grow veggies. Lots of granola/health concious faculty/staff to buy your veggies, lots of retiree money to support the Lucky Ducky businesses, perhaps a job on the tray line in the tray line of the hospital cafeteria or nursing home.”
Is there a university near Bend, OR?
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Comment by Carl Morris
2012-04-24 12:32:43
Mmmm, tray line. Been there, done that…as a high school kid.
Working the stable jobs we have here in Bend, where I could buy outright with the 100k, is our most likely scenario; and I am asking here to get responses such as yours; just for some free feedback that I need to take with a grain of salt but listen to nevertheless.
college= rock and hard place. I need to procure a masters degree if I want to continue teaching in OR, unless I get a private school job. It is the Oregon requirement that all teachers hold masters and I have had ten years with a license and my time is up next year. I can still substitute teach at 20/hr, but only half time, without the masters, so I can chip away at it if I like.
As far as failing in RE goes, I have won some, and lost some. Did not start as a speculator, and also bought an oil city house that I am getting out from under to pay some medical bills.
I have taken 60k seed money earned selling vegetables in LA, and turned it into 100k seed money 17 years later. Could have done better, maybe, but I am not complaining about the results of my decision making. and trying to measure the decisions I make for the future a bit better. Slumlording paid the bills all that time and I got to raise my children with two stay home, or work with the kids type jobs, rather than punch a time clock. So real estate investing has given me 17 years to work part time, get/pay for a teaching license, and pay medical insurance, premiums, and countless procedures for my reluctant back.
I could not surf full time, true, which is part of the reason I moved a few hours from the beach in Central Oregon. I still get to surf selectively and it it truly good enough. Pain patients who stay active have better prognoses than those who become sedentary; so I would rather surf/bike/hike in pain than sit on the couch(which I did for about a decade whist landlording, not surfing for maybe 5 years, before going on pain meds that allow me to somewhat function)
Medical expenses ate 100k or more with uncovered surgeries that were supposedly approved by my insurance, uncovered meds that are advertised on TV refused. 100k capital gains taxes on CA house, and I was young and not the best decision maker(easy come easy go). I realize now it is easy go! and they are the main reason I am selling my oil city house right now is we need to pay for my wifes recent girl-surgery.
Sure she could go bankrupt but that is not how we roll.
I want to put what is left into something; maybe another oil city house here in Bend will fit the bill just fine.
I quit my old job due to pain; I trained my boss’s kids how to run a business and could do the same with my kids now; and it pays better than going back to college to continue teaching. Now that I have able bodied children to lift boxes for me; we would have higher incomes in CA.
I quit surfing full time; so now I don’t need to live in surferland, but the nostalgia and the success and the economy in one little part of CA is tempting.
Thanks for your input and I will chew on it with some crow mixed with a taste of humble pie.
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Comment by polly
2012-04-24 10:08:07
I agree with the basic outline of Oxide’s idea. You have to remember that you pay rent out of money that is taxed. There is no tax on the imputed rent of owning a house to live in. With housing taken care of (other than upkeep and taxes) you don’t need to earn that much to live and if the “that much” is low enough at least your kids might qualify for health insurance. You owe them that.
Under no circumstances are you to pay for that masters degree other than in-state public college rates and then only while you are also working as much as you can. See if you can find a local public college that has on-line classes so you can save the gas money. Good grief. I make a very healthy salary and I refused to finish my master’s degree until I found a way to get the last four credits a public university. The other serious consideration was if I could do it for free. The only other option I even looked into was one that included a small class taught by a person who would have been a really good career contact.
No more real estate unless you are going to live in it for a very long time. You are in a serious financial situation. You need to take it seriously.
Comment by RioAmericanInBrasil
2012-04-24 11:40:42
So real estate investing has given me 17 years to work part time, get/pay for a teaching license, and pay medical insurance, premiums, and countless procedures for my reluctant back.
That’s not a “fail” dude. That’s pretty darn good.
Not having a Masters Degree is a plus in Colorado school districts, as they can pay you less. My son is considering being a high school teacher. His current HS teachers all tell him the same thing: Don’t get the Masters, as you won’t get hired, because they have to pay you more. Get the Master’s later, once you have your foot in the door.
Masters degrees in education are also fairly cheaper here. UNC in Greeley has a school of Education, and tuition is about 7K per year. There’s another teachers’ school in Nebraska, Chadron State. Its even cheaper.
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Comment by Arizona Slim
2012-04-24 10:42:10
Back in the late 60s/early 70s, Mom got the bug in her ear from our next-door neighbor. Bug said, “Go to grad school.”
And Mom did. Darn if she wasn’t the most diligent student on the planet. She’d pack me off to school in the morning, then start working on her homework, research papers, class presentations, what have you.
Her classes were in the evening, and I was responsible for getting my dad fed, the dog walked, etc. I also had my own school work to do.
Mom got that degree in four years, then started applying for teaching jobs. ISTR that she wouldn’t have even been considered without that MA, but I’m not sure.
Once she was in the school district, she embarked on a “Masters Plus” quest. The way the union contract was written, you could move up the pay scale if you had a certain number of credits above your MA/MS. So, Mom went all over eastern PA and northern DE on her effort to earn more credits.
I think she retired with something like 45 credits above that degree.
You’ve already failed at taking risks in real estate.
I don’t agree. How did he fail? Seems he ended up with a paid-off house, did a lot of surfing and fun, had money to partially raise some kids and pulled a lot of cash out of his real estate that does not need to be paid back.
It seems that his back problems have caused him much more woe than his housing problems.
Bend is full of retirees and has good medical. Bubble blew it up from 30k to 80k population wise which does not bode well job wise, however. Lots of builders/contractors/subs/framers/plumbers out of work at this time.
But the wife and I both have stable lucky ducky jobs, I teach and she works for the school nutrition dept.
University is OSU Cascades and is growing, hoping to have 5,000 students by 2030. Does offer the masters I need.
Mike, I live in Temecula and love it. 5 min from wineries and 35 min from the ocean. Hwy 76 is nearing completion on expansion,which should make the drive even quicker and less congested. Home prices are now at about 100-120/sq ft with pools included if that is what you are looking for. Still many std sales available for homes in very good shape that do not carry mello roos taxes or HOAs for that matter. Summers are more than tolerable here as there is a cooling that occurs in the afternoons that is like clockwork. The ocean air filters into Temecula through a break in the mountain range and the evenings are glorious.This is why the wine industry is thriving and starting to produce very good wines. Sure, we are not Napa, but Napa was not Napa at the beginning either.20% only eats up 50K and you have the otehr 50 to invest as you please. I love the central coast as well, but the employment picture there is much tougher. Best of luck to you.
I know some organic farmers there who bring their melons etc to market around LA; it does seem neat and you do have elevation which I like; but living in Santa Barbara/Oxnard I got pretty used to/spoiled at a constant 70 degrees and I wilt once it’s 80. Its cool in Bend
100/sq foot is what I just got for my house in Prineville, OR.
Sounds like it is getting reasonably cheap there.
Thanks for the input. Friend from Cambria recommended it to me. He drives the state constantly so knows where it is nicer and not so nice.
@Polly-thank you, you are right about in state tuition and I am looking at an after work, night school MS degree offered here in Bend thru OSU. Gotta do Masters or the teaching license becomes null and void and I become not a teacher.
Not too sure about transferring teaching license to another state before the license expires and before I embark on a masters. If Oregon is the only state that requires a masters; why is is that the pay is under 40k? Answer, cuz it’s Oregon, stupid!
Look at the numbers. 80K selling vegetables but you can’t handle the labor or 40K teaching?
Sell the vegetables for 80K but hire a 20 year old (maybe one of your kids later?) to follow you around to do the labor (lift the boxes etc). Now you’re making 80K so give the kid a percentage/commission type thing that pencils out to about 25K so you’re making 55K but not doing the labor.
Now here’s the important part. The kid you hire for about 25K is on a percentage type thing so you make sure you hire someone hungry and a go-getter, and you give him a higher commission on generating new business on top of his standard percentage. Maybe after awhile you buy him a new truck and you hire another kid to take his place. In a few years, you might be pulling 100K or more and not doing the hard labor. No?
No we would make 1k per 2 weekend trips to LA. after I hurt my back we would send my wife and a hundred dollar/day musclehead. Our favorite was a fellow we nicknamed “Hamhands”.
During the workweek we did local markets and pulled up to another 1k. The numbers make sense but it is really not too practical to think my body could pull off even managing truck loading/driving countless hours. Usually I could add a guy/outlet and it would take me an extra hour and I would make an extra 40 bucks; not a good trade when you are sorting veggies at 3:00 AM on a Sunday.
So up to 2k per week if I worked 6 days. Cash.
I was that go-getter for my boss who appreciated the wholesale orders I represented for him and he did not care how much I made so long his orders got paid and the cash I brought him enabled him to pay his “trabajo” costs easier.
Things have changed, now, and he pays his sales workers 20% as he realized I made too much money.
So the opportunity has passed in a way; but I still could go to LA for some pretty good $$ compared to teaching but I got tired of the work mentally and physically. So I probably wont pursue that but I do have plenty of other contacts in the organic foods industry which still interests me on more of a macro/wholesale-don’t sell each carrot individually-level.
There is bucks in organic food. In southern Cal anyway. I see my ex-bosses stuff at whole wallet all the time but they were the worst fickle buyers and my boss does not like their bottom-line buying habits which leave him holding the bag when they use another supplier.
Which is how I found my niche retailing/selling to restaurants; crappy wholesale business after the corporations took over organic farming in the early 90s.
He also set up a CSA after I left. I did go so far as to call him today to “catch up”. May try some summer work for him after all…..
Comment by Arizona Slim
2012-04-24 14:10:16
He also set up a CSA after I left. I did go so far as to call him today to “catch up”. May try some summer work for him after all…..
I’m in a CSA. (Matter of fact, part of my breakfast was a CSA organic carrot. Mmm-mmm good!)
The CSA is with a farm about 60 miles east of here, and they grow very good veggies. I want to see them succeed because they’re such nice folks.
You may find that your own CSA attracts a lot of friend-stomers. (That’s a hybrid of “friends” and “customers.”)
Yeah, organic food still seems to be trending favorably here on the west coast, and I’d imagine the rest of the country will some day follow. There are plenty of opportunities to find an underserved niche and pursue it. I had a firned approach me this week about raising local organic poultry, as the local health-food stores were still sourcing from California’s industrial organic companies. Another sold organic herbs to local resturants and made a decent living. Another grew sprout (although sprouts are falling out of favor here with recent salmonella outbreaks).
What I’ve heard you say seems like you’ve thought this through, and I would agree with much that you’ve said. But then again, my situation of home ownership, underemployment, etc. would make people on this board cringe. But I am strictly in it for quality of life, and could never consider going back to the lifestyle I lived in Cincinnati, Pittsburgh, Philly, etc., regardless of money.
Good luck to you. And keep us posted. I rarely post, but read these posts everyday.
My former corner of the world. A decent 3/2 there is roughly $275k, and it’s slipping away. Remove federal mortgage support, and they’d quickly drop to $100k, IMHO, which is based on the area’s median income. Also, there is now a gold plated sewer system being built there with typical property bond levies costing $400/month for 25-yrs. It used to be a quiet place to live cheaply, but no longer. Lastly, if you need more than groceries you’ll be driving at least 15-miles; everything is “a drive” from there.
WASHINGTON - US home prices dropped sharply in February to hit the worst level in nearly a decade, according to a closely-watched index released Tuesday.
The S&P/Case-Shiller 20-city composite index fell 0.8 percent compared to January levels to take the year-on-year drop to 3.5 percent. The index is at its lowest level since October 2002.
Of the 20 cities measured, 16 had negative monthly readings, only three showed gains and one was unchanged.
…
The “bad” Case-Shiller numbers have set the table for the Fed to invoke mortgage-bond purchase QE3. Wait for it.
April 24, 2012, 9:18 a.m. EDT Stock futures ease rise on home-price data Netflix and Big Lots drop sharply; FOMC to convene
By Kate Gibson and Barbara Kollmeyer, MarketWatch
NEW YORK (MarketWatch)—U.S. stock futures wobbled Tuesday after an index had home prices falling sharply in February to their worst level since October 2002.
Stock futures trimmed their gains after the S&P 500/Case-Shiller 20-city composite U.S. home price index fell 0.8% in February compared to the month before.
…
WASHINGTON (AP) — Home prices dropped in February in most major U.S. cities for a sixth straight month, a sign that modest sales gains haven’t been enough to boost prices.
1 month, 3 month and YOY Stats for DC:
Washington DC -0.80% -3.00% -2.34%
Something is not right here, prices only go UP in DC!
“Good housing will go up, bad housing will go way down. Average will be meaningless.”
Why would you expect this?
I’m expecting quite the opposite: High-end housing that was bid to the moon during the bubble years will fall hard as investors at the top tier level eventually throw in the towel. This will put a lid on the prices of everything of lower quality.
I and others have posted numerous articles here to support my thesis. Do you have any evidence whatever to support yours, aside from the fact that you ‘predict’ this without logic or data to back you up?
Here is a good case in point: It looks like this high-end home may turn out to be worth 75% less than the Realtor®/investor thought. This resets the comps for everything in the area of lesser value.
A ground floor room of a for sale, $37 million dollar luxury home at One Pelican Hill Road North is seen in Newport Beach, California April 13, 2012. It has 17 bathrooms, a 17-car garage, marbled floors, gold leaf ceilings, a vineyard, horse stables, tennis courts and a lake - and occupies the largest parcel of residential real estate on southern California’s exclusive Newport Coast. This empty, never-sold, soon-to-be-auctioned mega-mansion is a gaudy symbol of the runaway extravagance that gripped the top end of the U.S. real estate market before the housing crash of 2008. Once valued at $87 million, it could be sold for a quarter of that price at an auction next week. Picture taken April 13, 2012. REUTERS-Lori Shepler
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Comment by Professor Bear
2012-04-24 14:46:29
What sort of greater fool are they expecting to show up with $37M in hand to buy a $1.7M home?
Let me predict here and now that this listing will expire before the home sells.
Property Tax
Taxable Value
Land $857,156
Additions $851,991
Total $1,709,147
Tax (2010) $20,592
Comment by Professor Bear
2012-04-24 14:48:51
It’s pretty funny when the estimate ranges of two major online home price valuation services don’t even overlap.
Home Value Estimates for 1 PELICAN HILL ROAD NORTH
Low Estimate High
Zillow.com $7,541,520 $17,956,000 $35,912,000
Eppraisal.com $3,813,717 $4,486,726 $5,159,734
Comment by Professor Bear
2012-04-24 15:43:43
“…soon-to-be-auctioned mega-mansion…”
If they do auction it, will the price show up in some publicly available source?
Comment by ahansen
2012-04-24 22:55:00
I don’t think those Zillow estimates include the land. It sits on 12.5 acres of unobstructed Newport Beach whitewater view. That’s enough for 50 one-million-dollar lots alone.
But McMonogal is skewered big time on this one.
Comment by Professor Bear
2012-04-24 23:36:44
“That’s enough for 50 one-million-dollar lots alone.”
But there is a huge mansion already built there. Are you suggesting it is destined to become a tear-down before it is ever occupied?
So the shack I am seeing for $375 will be $175 before this is over?
Los Osos, CA is the demographic.
Last time I purchased in CA it was 1995 and prices had stagnated for about 5 years and were starting to rise. But I confess to wanting to go back to CA, only to a very small area am I interested though, SLO/Cambria/Los Osos. Will coastal fall like 65%(I doubt it).
How long to wait to jump in, before my seed money is gone for good? Selling my shack into the dead cat bounce this month for the same as I paid for it. Not paying a realtor to get the job done is in the bag, BTW.
A market won’t turn around until the foreclosures and short sales have burned themselves out in that particular market. However, once that has happened, there will likely be very little inventory, and it could be quite challenging to buy something that you want.
A huge amount of sales are coming from distressed situations today. If the distress is gone, there are few willing sellers at today’s prices.
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Comment by Realtors Are Parasites®
2012-04-24 09:49:32
If you think prices won’t be dramatically lower 10 years from now, you’re gonna be stunned.
“Creditors have been manipulating the court system to extract money from the unemployed, veterans, even seniors who rely solely on their benefits to get by each month,” Illinois Attorney General Lisa Madigan said last month in a statement voicing support for the legislation. “Too many people have been thrown in jail simply because they’re too poor to pay their debts. We cannot allow these illegal abuses to continue.”
Parallels between the 19th century and now:
Robber Barons = 1%er Wall Street pigmen
William Blake’s “dark satanic mills” = Foxconn City
Upton Sinclair’s The Jungle = “pink slime” beef filler
No women’s suffrage = the GOP’s war on women
Read this on Drudge this morning and was waiting for someone else to post it. This, dear HBB, is the Long Hot Summer that the squad has correctly predicted. Expect there will be hundreds if not thousands of similar incidents across the country, and all will be totally ignored by the MSM and the Jackson/Sharpton race hustlers. Having lived in Cincinnati in the aftermath of what CNN termed “demonstrations” in 2001, the squad is very familiar with this sort of mayhem. THE LONG HOT SUMMER IS HERE
Here in Tucson, we have some street basketball. But in our nabe, not so much. Might be due to the public park at the end of the street. Park’s got two outdoor basketball courts and a gym with two more that are air conditioned.
Oh, there was that one house full of crumb-bum renters who have caused nothing but problems over the years. We neighbors have tried everything short of standing on our heads while whistling The National Anthem to get them out of here. So far, nothing has worked.
Any-hoo, they put a portable basketball hoop on the sidewalk, Yours Truly reported a code violation*, and the hoop mysteriously vanished. Not that the kids at that house don’t continue to play in the street. We neighbors are worried about that situation, and, yes, we have reported it. More than once, in fact.
*The violation was blocking a public sidewalk. You can’t do that in Tucson.
I see a bunch of vicious low-life losers looking for any reason to riot.
Comment by goon squad
2012-04-24 12:24:06
Half-Peruvian George Zimmerman shoots Trayvon Martin therefore it’s time to Get Whitey (and loot Foot Locker!)
Read the Enquirer link above about the albino, African-American woman assaulted in the Cincinnati riots because her assailants thought they were going to Get Whitey.
The “racial” aspects of these events are now beyond absurd, but you can guarantee that Jackson and Sharpton will make money off it if they can
There is more dire housing market news today than you can shake a stick at, yet the stock market is up, proving yet again that the U.S. economy has decoupled from housing. It is no longer necessary for housing to recover in order for the rest of the economy to come back.
Recent statistics show foreclosure activity is declining, but, reports Amy Hoak, the nation’s foreclosure problem is far from over. What’s more, the drawn-out foreclosure crisis has lasting consequences.
• Decade-low home prices | City-by-city breakdown | Shiller discusses data | New-home sales fall
Soros Says Bundesbank Guarding Itself Against Euro Break-Up
By Simon Kennedy and Patrick Donahue - Apr 12, 2012 7:45 AM ET
Bloomberg
Billionaire investor George Soros said financial markets are concerned other countries will follow Germany’s Bundesbank in girding against the end of the euro.
The Bundesbank is campaigning against the “indefinite expansion” of money supply and taking steps to limit the losses it would face if the euro splintered, Soros said in a speech in Berlin today.
“This is creating a self-fulfilling prophecy,” he said. “Once the Bundesbank starts guarding against a breakup everybody will have to do the same. Markets are beginning to reflect this.”
As the debt crisis stretches into a third year, Bundesbank President Jens Weidmann has begun warning that the European Central Bank’s emergency liquidity measures “create risks and have to be unwound” after the ECB balance sheet ballooned by about 30 percent since November.
If the ECB continued offering support for a few more years then a “break-up of the euro would become possible without a meltdown,” Soros said.
April 24, 2012, 12:01 a.m. EDT Throwing good money after bad
Commentary: Regardless of IMF, euro is doomed
By Irwin Kellner, MarketWatch
PORT WASHINGTON, N.Y. (MarketWatch) — You might as well flush down the drain the $430 billion just committed to the International Monetary Fund, for all the good it will do to keep the euro zone from breaking up.
The IMF recently was able to raise this sum in the form of extra lending capacity to be used if the euro crisis worsens. As impressive as it seems at first blush, this latest gambit has three strikes against it, making it unlikely that it will achieve its objective.
First, it comes at a time when austerity is the name of the game across the pond. All across Europe (including Britain), finances are being squeezed in an attempt to meet targets for budget deficits set by the European Union.
Instead of trying to stimulate growth, pan-European fiscal policies are focusing on deficit reduction. This depresses already sluggish economies, thus reducing tax revenues flowing into these governments’ coffers.
As a consequence, fewer funds are left to pay down existing debts. Their resulting rise limits these countries’ ability to borrow, boosts their debt-to-GDP ratios, and forces them to adapt even more austere programs.
As you might imagine, government policies that cut programs and raise taxes don’t go down very well with the general population. This is why there are demonstrations in almost every member of the EU almost every day, with regime changes not far behind.
The second strike is an eye-opener, considering that it is occurring among a group of nations that are supposed to be banded together: Rich countries like Germany simply do not want to bail out their poorer brethren.
In a way, this is not surprising, considering that Germany and others in Northern Europe have disparate cultures compared with those in the South. In some cases, they have actually fought each other over the years.
Certainly, they do not feel a kinship to such countries as Spain, Italy or Greece the way New Yorkers do with Mississippi or Arkansas, for example. In our case, we share the same language, history and culture, besides the same currency.
This brings up the third strike: the euro and the basic fallacy behind its creation. In a nutshell, you cannot have one currency serving a group of politically independent nations without having a common economic policy.
To achieve such an objective would require the nations that use this currency to give up their sovereignty to a central government with the power to legislate and enforce common fiscal and monetary policies. The euro zone never had such a centralized authority and lacks one to this day.
…
Certainly, they do not feel a kinship to such countries as Spain, Italy or Greece the way New Yorkers do with Mississippi or Arkansas, for example. In our case, we share the same language, history and culture, besides the same currency.
They may not feel a kinship, but they sure love taking vacations along the Mediterranean shores. Where their boorish ways are deeply resented by the locals.
“Certainly, they do not feel a kinship to such countries as Spain, Italy or Greece the way New Yorkers do with Mississippi or Arkansas, for example.”
“Ford To New York: Drop Dead” “Says He’ll Veto Any Bailout”
Now New Yorkers felt a good deal of kinship toward Mississippi and Arkansas in the 1930s, when they took over the federal government and redistibuted money from the home state to less developed areas of the country. The question is, do they feel the same way today? And how does the rest of the country feel toward New York.
And if LA had an earthquake, would Congress want to send aid — or economic development recruiters?
Especially the sub species that works/lives on Manhattan, Westchester County, and certain portions of western Connecticut. To them, the wretched refuse of Flyover and Foxconn are interchangable.
As soon as the J6P and small business owner Republican-types realize they have more in common with Juan or Xian 6 Packo than they do with these guys, the better off they will be.
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Comment by Realtors Are Parasites®
2012-04-24 13:41:57
There is no way you could possibly be aware of those sentiments(they are true) if you’ve never lived in Westchester or Fairfield Counties.
So fess up…. when did you live there?
Comment by X-GSfixr
2012-04-24 14:21:01
True……my experiences with these folks are based mainly on the ones I had the misfortune to deliver new airplanes to.
My favorite was the azzhole that wrote up 300 paint squawks on his new airplane on a Friday afternoon, thus assuring that me and my crew would be ordered to come in on Saturday and Sunday.
There was nothing wrong with the paint. He just had his own reasons for staying in town for the weekend, and didn’t want for the sale to close until the following Monday or Tuesday
Another was the guy with an airplane two years out of warranty, who spent every waking minute claiming everything we found wrong with his broke-d##k airplane was covered by warranty.
These guys always end up getting free stuff, because it’s cheaper to just give stuff away, than it is to take the time/man-hours to prove they are full of $hit. And of course, everybody forgets about the “free stuff” at performance appraisal time, when the poo-bahs are looking for at the sales numbers, trying to find reasons to reduce/deny a raise/bonus.
Upon further review, maybe I’ve been too narrow/regional in my viewpoint. Henchforth, everyone is a prick, until proven otherwise…..
Comment by Muggy
2012-04-24 17:38:30
The Westchester folks I know are incredibly racist and classist.
SAN LUIS OBISPO, Calif. (MarketWatch) – Yes, this really is the hottest IPO market since 2000. And that’s bad news. Very bad. Remember my last column back in 1999: I posted a list of winners, an unbelievable 19 funds had astronomical one-year returns between 179% to 323%! Yes, that hot!
Real bad news. On March 20, 2000 my headline read: “Next crash? Sorry, you’ll never hear it coming.” Never hear? Why? Investors hate bad news. Deny it. Tune out. No wonder Wall Street lost over $10 trillion of America’s retirement money in the 30-month recession that followed. It was so predictable.
Now ask yourself, what’ll trigger the next crash? Today’s hot tech IPO mania? Bank risks? Politics? Oil? Euro default? War? Every crash has a unique profile, new trigger, different flashpoint. But the ancient cycle just keeps repeating like clockwork. Endless. A bubble. Then denial. Peak. Pop. Crash. Repeating for centuries. So inevitable. So obvious. Yet we never learn. Today, I’ll explain why.
Another example: Remember the 2008 cycle? That bubble and meltdown were so predictable. For several years ahead of the 2008 meltdown I reported on more than 20 key warnings of a “mega-bubble” building, a new crash that would take down the world economy, as Wall Street’s insatiable casino pushed the U.S. monetary system to the edge of bankruptcy.
Yes, obvious. Yet millions of Main Street investors were again in denial, ignoring the warnings. But in good company: Both Fed Chairmen Ben Bernanke and Alan Greenspan, plus Treasury Secretary Hank Paulson, all publicly dismissed warnings of a coming crash, till too late. Remember Paulson’s delusional claim in Fortune: “Best economy I’ve ever seen in my lifetime.”
Today’s hot IPO market smelling like 90’s dot-com mania
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The truth is: Wall Street does not want the neurosciences to help investors improve their skills. And if you learn nothing else here today, remember this: If the promise of the behavioral sciences really did work for investors, if you got smarter, wised up to Wall Street’s casino operations, knew why the house always wins then Wall Street couldn’t get rich siphoning off a third of your returns. Period.
Robert Shiller joins Markets Hub to discuss U.S. home prices, which continued to push Standard & Poor’s Case-Shiller home-price indexes down to new post-crisis lows in February. Photo: AP.
3.9% doesn’t sound like much until you apply it to the value of a new home in San Diego (”from the $700’s”):
3.9% X $700,000 = $27,300.
That’s more than a year’s rent thrown away on ownership, before even considering PITI!
April 24, 2012, 11:08 a.m. EDT
City-by-city home prices from 20 top markets
By Steve Goldstein, MarketWatch
WASHINGTON (MarketWatch) — The following is the city-by-city breakdown of the cities followed in the S&P/Case-Shiller 20-city composite that was released Tuesday.
Nationally, prices hit a near-decade low in February. Weighed down by foreclosures, stubborn unemployment and tough credit conditions, home prices in 20 major U.S. cities sank in February to the worst level since October 2002.
• Atlanta: Prices down 2.5% monthly and 17.3% yearly. It was the worst annual rate of home value change in the 20-year history of the index.
• Boston: Prices down 1.1% monthly and 2.4% yearly.
• Charlotte: Prices down 0.4% monthly and 1.8% yearly.
• Chicago: Prices down 2.5% monthly and 6.9% yearly.
• Cleveland: Prices down 1.7% monthly and 4.4% yearly.
• Dallas: Prices were steady on the month and down 1% yearly.
• Denver: Prices down 0.9% monthly and up 0.5% yearly.
• Detroit: Prices down 1.3% monthly but up 1.5% annually. Prices in Detroit have dropped by nearly a third since January 2000, by far the worst movement of any of the major cities measured.
• Las Vegas: Prices down 0.4% monthly and 8.5% annually. Las Vegas home values are down 62% from the peak.
• Los Angeles: Prices down 0.8% monthly and 5.2% annually.
• Miami: Prices up 0.6% monthly and up 0.8% annually.
• Minneapolis: Prices down 1% monthly but up 0.4% annually.
• New York: Prices down 0.8% monthly and 3% annually.
• Phoenix: Prices up 1.2% monthly — the only city with back-to-back monthly gains — and up 3.3% annually. The Phoenix market has been helped by low inventories, employment growth and demand from Canadians. See WSJ.com story on Phoenix market.
Portland: Prices down 0.3% monthly and 3% annually.
San Diego: Prices up 0.2% monthly but down 3.9% annually.
San Francisco: Prices down 0.7% monthly and 4.1% annually.
Seattle: Prices down 0.8% monthly and 2.9% annually.
Tampa: Prices down 0.2% monthly and 2.9% annually.
Washington, D.C. : Prices down 0.8% monthly and 2.3% annually.
Too bad Eddie is no longer posting, as Atlanta and Vegas were two of his favorite examples of where the local real estate market was on the upswing:
• Atlanta: Prices down 2.5% monthly and 17.3% yearly. It was the worst annual rate of home value change in the 20-year history of the index.
…
• Las Vegas: Prices down 0.4% monthly and 8.5% annually. Las Vegas home values are down 62% from the peak.
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Gambling was a great economic base when Las Vegas had a monopoly.
Now?
Last I checked you had to travel a long way to end up in a desert.
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Comment by Professor Bear
2012-04-24 12:30:12
Last I checked, the casino gaming industry had transformed itself from a mob-run Las Vegas enterprise to a nationally-accepted sector of the economy with local operations far and wide. I suspect part of the story of the LV real estate crash is the end of their monopoly position in this industry.
Comment by Arizona Slim
2012-04-24 12:40:38
I suspect part of the story of the LV real estate crash is the end of their monopoly position in this industry.
Around these parts, there’s talk of turning a just-closed hotel into a Indian hotel-casino. The local Pascua Yaqui and Tohono O’odham have done great jobs with their casinos.
I just got off the phone with one of those “make money on the Internet” wannabes. Just when I thought they no longer existed.
Guy was under the impression that he could set up a website with affiliate program links and bring in $2,000-$3,000 a month. Yeesh. Where do these people come from?
I think I used the “Good luck!” sarcasm enough to get him off the phone. I also did a quick search and found a trail of crummy looking websites that appear to be abandoned.
Looks like this guy hippety-hops from one business “opportunity” to the next.
What was really sad was how clueless and gullible he sounded. Like, on his very best days, his IQ came within shouting distance of triple digits.
People without real career opportunities will grasp at anything because they have too much time on their hands.
The gullible have always existed, but without meaningful jobs, they become desperate and fall prey to the sharks.
There is a direct correlation between the beginning of job offshoring and the rise of “money making seminars/systems/affiliate/franchise/multi-level/training”.
I told myself I’d just share the link, but I’ll share my thoughts on the data since I’ve been living this stuff over the past couple of years.
“Normal” is ~2.5MM loans at some stage of delinquency at any given time. This is about 5% of all loans. The bulk of this is usually made up of 30-60 day delinquencies, with smaller numbers in the 90+, and foreclosures. Going back 6 months, the trend looks something like this:
<90 day delinquent pool
2,329,000
2,335,000
2,309,000
2,226,000
2,059,000
1,888,000
“normal” for this category is in the 1,750,000 range (~3.5% of all loans)
90+ days delinquent, but not in foreclosure last 6 months
1,759,000
1,809,000
1,792,000
1,772,000
1,722,000
1,643,000
“normal” for this category is in the 500,000 range (1% of all loans)
In the foreclosure process last 6 months
2,210,000
2,116,000
2,066,000
2,084,000
2,065,000
2,060,000
“normal” here I estimate on the low end is 250,000 (half a percent).
In other words, new delinquencies are at about ~110% of normal, 90+ days at ~330% of normal, and foreclosures at ~800% of normal.
There appears to be a bend in the curve downward recently for 90+ delinquent loans, which makes sense given after the settlement, more delinquencies restarted processing (either moved into foreclosure, or were restructured in some way). With this bend down, it didn’t result in more in the foreclosure bucket, meaning that a fair number left the combined pool of 90+ delinquent and foreclosure.
Overall I read this data to mean that the pig is largely in the python (ie. not substantially more supply then “normal” entering the foreclosure pipeline), and we are now firmly in the process of digesting the pig.
We shall see how much the settlement accelerates the process (if at all). The acceleration is mainly needed in judicial states. Non-judicial states were doing OK, but may speed up with the settlement.
The main price risk due to increases in foreclosure activity, IMHO, is in judicial states, as they were most clogged up, and will have the biggest increase in foreclosure activity due to the settlement.
More granular data by state will be available with LPS full report on May 1 (they are always late, so I expect to see it by the end of next week).
By way of example:
Non-current loans in FL (judicial state) peaked at 23.8% in February 2010, and has fallen only to 22.1% at February 2012.
Non-current loans in CA (non-judicial state) peaked at 15.3% in February 2010, and has fallen to 9.6% at February 2012.
Non-current loans in AZ (non-judicial state) peaked at 16.3% in February 2010, and has fallen to 9.6% at February 2012.
Non-current loans in NV (non-judicial state) peaked at 23.3% in February 2010, and has fallen to 15.9% at February 2012. NV however just passed a law that will slow down their process, making them akin to judicial states in terms of working through the inventory.
“Normal” as noted above is about 5% (ND and SD, with all their oil shale, jobs, man-camps, housing shortages, etc. are at 4%, and 5%, respectively).
Based on this data, CA and AZ are more than halfway through their shadow inventory, and FL has just started.
From February to March, both CA and AZ moved down by a fair bit (fell by 0.3%, and 0.5%, respectively, from 9.9% and 10.1%). At that pace, CA is “normal” in 15 months, and AZ in 9. However, drawing the line from the peak in CA to today is remarkably straight and steady. If you extrapolate the line (meaning last month was a bit of an outlier), it puts CA at 5% non-current (”Normal”) for the state as a whole by the end of 2013, not the middle of 2013.
I haven’t run the extrapolation for AZ, but their slope downward is steeper than CA, meaning they’ll reach “normalcy” sooner.
OK…now is the time where RAL calls me a realtor and a liar.
‘Normal” is ~2.5MM loans at some stage of delinquency at any given time. This is about 5% of all loans.’
When I started this blog I ran across a great series of articles the Charlotte Observer was doing on (unknown at the time) subprime loans. These were being made largely by Beazer Homes in their new subdivisions. One of the statistics they looked at was that it only took 1.5% of an areas houses to be in foreclosure to bring down prices for the entire neighborhood.
Today I was researching a post on California for tomorrow. An article on Palm Springs said there were only 995 foreclosures in that county last month. Wow, only close to a thousand foreclosures in one county, in one state, in a month. IMO, we have to keep ’slope downward is steeper’ in perspective.
(Comments wont nest below this level)
Comment by Rental Watch
2012-04-24 22:49:46
Ben,
That makes sense (that 1.5% would cause problems…about 3x “normal” vs. today’s 8x “normal”).
Here’s the Riverside County data from Foreclosure Radar.
A year ago foreclosures were running at about 2k per month (back to bank as REO plus sales to 3rd parties). A reduction from 2k per month, steadily falling over the year to about 1k is a pretty significant move. Still too high, but clearly in the right direction.
From this too, you can see that there is plenty of REO in Riverside…about 8,700 homes.
Also, while Palm Springs is a small market, Riverside is a pretty big county at 2.2 million people, 1/3 the population of Arizona, which had 3k foreclosures last month (REO plus 3rd party sales).
IMO, the asset managers have shifted focus to the judicial foreclosure states after the robo-signing settlement.
Comment by Rental Watch
2012-04-24 23:29:53
I think we’ll find out quite quickly. I don’t know what’s changed on the ground in Florida and other judicial states. Frankly I don’t know what can happen there even if there was a will. I’m assuming they’ll still need to go through the courts. What I do know is they can’t work through their inventory any slower than they have.
Anecdotally in Southern California in the past couple of months, I’ve heard that some banks are planning private auctions with qualified (larger) buyers of REO, completing pre-approved short-sale transactions in bulk and Fannie/Freddie are starting to allow regional bulk sales as opposed to more difficult to manage national portfolios of properties. This is happening with the backdrop of lots of capital coming to market from institutions. If what I’m hearing isn’t a total load of garbage, we should see non-current loans continue to go down in CA at at least the recent pace.
Certainly judicial states should pick up…they couldn’t be going much slower. I remember seeing a CNBC slide show with the best 10 housing markets in the country (as measured by year-on-year price appreciation). 7 of the 10 were in Florida. With an influx of distressed inventory coming, this could be the mother of all head fakes in terms of price recovery.
I found the link…http://www.cnbc.com/id/46329421
P.S. I hate the CNBC slideshows, a huge pain to go through.
Comment by Rental Watch
2012-04-25 02:17:45
I miscounted on the CNBC slideshow…8 of 10 were in FL. Wow.
The same folks who foolishly divested out of Treasurys last year are now calling a housing bottom, even as the Case-Shiller Index keeps falling month-in, month-out.
While the volume of sales has increased, prices still have a way to fall because as many as 6 million homes with delinquent mortgages and in the foreclosure process are likely to come to the market, Scott Simon, head of mortgage- and asset-backed debt at Newport Beach, California-based Pacific Investment Management Co., said yesterday on Bloomberg Television.
“We think we’d go down another 3 or 4 percent over the next 12 months, probably bottoming sometime next year,” Simon said on “Surveillance Midday” with Tom Keene. “One month doesn’t change anything.”
…
I guess it is easy to imagine away the shadow inventory if the REIC is buttering your bread. So many real estate experts seem eager to completely ignore the backlog of shadow inventory left behind by the robo-signing debacle. Some commentators suggest the number of foreclosures and other shadow inventory to work through over the next decade might be as high as ten million or so; besides maybe six million or more foreclosures that remain to work through, myriad baby-boomers will be looking for the exit from family-sized McMansion tract home housing. The future outlook for supply is high.
There is also a glib acceptance of the myriad extraordinary measures currently in place to prop up the housing market. I refer the ‘experts’ who view these props as permanent to Stein’s law.
Finally, I am quite deeply impressed by American economists’ optimistic implicit assumption that our economy has decoupled from China’s and Europe’s, where recessions are currently brewing. They also seem fully convinced that Main Street USA is decoupled from Wall Street, where today’s WSJ indicated major layoffs are on the way in the investment banking sector. Every other time since I started watching many years ago, a major wave of Wall Street layoffs has spilled over to Main Street; I guess the green shooters believe it is different this time?
So much groundless optimism is enough to make a professed bear want to hurl.
Housing market may be on rebound at last
New data show price declines easing in big cities, sales of new homes improving nationally and foreclosures in California dropping to levels not seen since 2007.
Foreclosed home
A foreclosed home in Richmond, Calif., in April 2011. Banks still retain many foreclosed properties on their books. (Justin Sullivan, Getty Images / April 6, 2011)
By Alejandro Lazo, Los Angeles Times
April 25, 2012
The housing market’s long, cold winter may finally be heading into a springtime thaw.
New data show price declines easing in big cities, sales of new homes improving nationally and foreclosures in California dropping to levels not seen since before the start of the credit crunch nearly five years ago.
The easing of foreclosures is seen as key by many economists, since the glut of these properties being sold at a discount has been a significant drag on home prices.
“The foreclosure market is turning into a drought, not a wave, and that has resulted in a lack of inventory,” said Sean O’Toole, chief executive of the firm ForeclosureRadar.com. “If it continues, it will likely mean that we’ve either seen a bottom — or have passed a bottom — in prices because of limited supply and still strong demand.”
Home prices remain depressed from their peak in 2007, when the median-priced home in Southern California sold for $505,000. The median price last month was $280,000.
The economy overall has been improving, however, with unemployment, retail sales, corporate profits and other measures showing steady if unspectacular gains. Housing has been one of the last holdouts, but analysts note that prices have stabilized and sales volume has been gaining.
“What are important are sales and inventory, and those are pointing in the right direction,” said Christopher Thornberg, a principal at Beacon Economics who was one of the early callers of the housing crash. “I would say that by the end of the year, they should translate into better prices.”
Even though layoffs are on the way at Wall Street investment banks, and New York State has a gazillion year supply of shadow inventory to work through, Realtors® assure us that the Manhattan and nearby housing markets have never looked better.
Investment banks including Goldman Sachs, JPMorgan Chase, Citigroup and Morgan Stanley may slash and burn dozens of jobs as soon as next month, as my colleague Halah Touryalai reports. And these positions may never be replaced. It’s the latest round of layoffs for Wall Street, which let thousands of workers, particularly traders, go in 2011.
Wall Streeters have already suffered some discouraging news this year, as cash bonuses for work done in 2011 were cut and capped. A February report estimated that Wall Street bonuses dropped 14% from 2010 to 2011. For staffers at firms like Bank of America and Citigroup, the cuts were as high as 30% and bonuses at Morgan Stanley were capped at $125,000.
All that cost-cutting has had repercussions that fan out past that eight-block swath of downtown Manhattan street where smocked traders scream in pits and analysts calculate risk. In years past, Wall Street has always affected Main Street. Literally.
“The finance sector plays a very large role in New York City and as a result of that, those people play an overall role in the residential real estate market,” explains Gary Malin, president of Citi Habitats, a New York City-based realty firm.
On a grand scale, we saw all too painfully how intertwined Wall Street and real estate were as the housing bubble deflated and the global economy plunged into a recession in early 2009. Locally, Wall Street residential enclaves like the Financial District and New Jersey’s Hoboken emptied out as finance folk packed their bags, newly out of work at companies where balance sheets were rapidly deteriorating and jobs disappearing. In the Tri-State area around the Big Apple residential projects stalled and homes fell into foreclosure.
Now less than four years later, as bonuses shrink and another spate of layoffs roll out, how will that affect the housing market? The answer, like all things in housing today, depends on location and a variety of factors.
In Manhattan, brokers remain positive about the housing market despite compensation woes on Wall Street. Malin, for example, explains that the market has become much more diversified since the days of Lehman Brothers and bankruptcy filings. Wall Street doesn’t represent the bulk of the buying base that it did a decade ago, he says. Foreign buyers have re-entered the market, clocking some of the priciest sales since the downturn, and burgeoning industries like tech have helped inject Manhattan’s residential market with income streams that aren’t tied to investment firms.
“We have been affected by Wall Street bonuses being lower, however, inventory is really low as well,” adds Jarrod Guy Randolph, a vice president at CORE Group. Randolph, who has represented developers’ new condo projects directly for the past decade, says the market has not only been recovering but booming, particularly for new higher-end apartments. He says these “premiere properties” have welcomed multiple bids, bids over asking price, even wait lists in recent months. “People still have to move…so it’s yet to be seen what the layoffs will do to the marketplace, if much.”
But while Manhattan agents remain confident in the city, the neighboring suburbs may be harder hit by labor pains felt on Wall Street. Take the so-called hedge fund capital of the world, Greenwich, Conn., where smaller bonuses are already affecting home sales this year.
“The recovering economy has given us a good real estate market if you are looking at houses under $2 million; but over $2 million, which is primarily the area of the market fueled by Wall Street bonuses, sales are significantly down,” says Mark Pruner, an agent with Prudential Connecticut Realty and author of the Greenwichstreets.com blog. He calculates that sales were up 39% for homes under $2 million and down 31% for pricier properties in the first quarter of 2012.
“What you are seeing is that people are getting smaller cash bonuses and being more conservative about spending them,” Pruner asserts. It has also meant that sales in the tony town often associated with Wall Street have been, like New York City, fueled increasingly by buyers hailing from other industries. He is seeing more advertising and consumer goods executives come to Greenwich — as well as foreign buyers. Pruner notes that 25% of his clients currently hail from Southeast Asia.
Other expensive ZIP codes where wealthy Wall Streeters have long taken up residence saw both sales and prices slip down last year. In February The Real Deal looked at home values in New York’s Nassau County and Westchester County, as well as New Jersey’s Bergen County and Connecticut’s Fairfield County. The real estate publication found that:
…The real estate markets in these wealthy tri-state area suburbs mostly softened in 2011 compared to 2010 in terms of prices and sales activity amid national and global economic turmoil.
Even so, realtors and economists believe these markets will continue to bottom and stabilize in 2012, even as bankers lose their jobs. Westchester County, for example, already welcomed a 28% increase in luxury home sales (priced $2 million or higher) in the first quarter, compared to the first three months of 2010, according to Houlihan Lawrence. The median sales price was down 10% and the majority of those sales remained under $5 million, a 5% decrease from last year.
…
CHICAGO (MarketWatch) — Home prices in a majority of the markets covered in Zillow’s Home Value Forecast are set to bottom this year — if they haven’t already, according to a Zillow report released on Wednesday.
“From an economic perspective, the latter part of the first quarter is full of positive news as the spring selling season gets underway,” said Stan Humphries, Zillow’s chief economist, in a news release. “While it is unlikely that national home values continue to rise at this rate through the rest of the spring and summer, it is undeniable that we are seeing sparks of life in the housing market.”
Nineteen out of 30 markets in Zillow’s monthly report are expected to hit a bottom, in terms of home prices, at some point in 2012, according to the real-estate website.
…
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April 23, 2012
When Pigs Fly
The Housing Market Doldrums
by MIKE WHITNEY
The housing market is in terrible shape. Prices have dropped 35 percent from their peak, 1 in 5 mortgage holders is underwater, and another 2 million people will face foreclosure this year. And, as bad as things are now, they’re going to get a whole lot worse if the banks suddenly dump their inventory of distressed properties onto the market in 2012. If that happens, prices will plunge another 15 percent or so, millions of people will see their hard-earned home equity vanish overnight, and the economy will slide back into recession. Even so, there are experts who think “The Big Dump” is coming, and soon, too. Here’s how they summed it up over at CNN:
… even though interest rates are at historic lows, mortgage applicants can still get financing with just 3.5 percent down via FHA, and prices on many foreclosures are below the cost of the materials; housing is still overpriced.
Did you ever think you’d see the day when you could nab a 15-year fixed-rate mortgage for 3.25 percent?
It’s unbelievable! If you adjust for the rate of inflation (currently over 2 percent); you’re only paying roughly 1 percent interest on hundreds of thousands of dollars. What does that tell you?
It tells you that the banks are desperate. They’re giving away money, but no one is standing in line. No one is borrowing, because the economy is dead, because people don’t trust the system anymore, and because housing has become an albatross. Isn’t that what’s happening?
Sure it is. They’ve screwed everything up and now no wants to play their game anymore. That’s why mortgage applications continue to drift lower 5 years after prices peaked. It’s a matter of trust.
The experts at CoreLogic, a California company that analyzes mortgage data, say shadow inventory is presently 1.6 million homes. but, of course, this vastly underestimates the number of people who are 90-days delinquent or in some stage of foreclosure and who will eventually lose their homes. A recent analysis by Bank of America puts the number at 6.6 million homes. Here’s a clip from the paper:
Others say the housing overhang is much bigger. Laurie Goodman of Amherst Securities, who testified before congress, says there’s between 8.3 million to 10.4 million homes that will eventually have to be resold.
So, who’s right? How much supply is really out there? That’s what buyers want to know so they can make an educated decision about (what will probably be) the biggest asset purchase in their lives. But the banks don’t want people to know about the millions of homes that are presently in the pipeline, because that just undermines sales. They’d rather you listen to CNBC’s dyed-blond in the plunging neckline who keeps blowing smoke up your trousers every couple hours. While that may be entertaining, there is a downside, too, which is, that you could get lured into buying a house that’ll probably be worth 10 percent less in 2 years than it is today. Who wants that?
Now get a load of this from Comstock Partners:
None of Obama’s wimpish mortgage refi operations (HARP, HAMP etc) have done anything to revive the housing market. Nor will the administration’s Foreclosures-to-Rental scam. The private equity (PE) boys and other bigtime institutional investors will soon discover that its much easier to make money swapping derivatives and loading up on oil futures, than it is managing property. (Property management requires too much elbowgrease) Oh yeah, they may go hog-wild and buy a million properties or so, (If Obama provides a generous financing package!) but that still leaves 6 or 7 million more to sell. So, no matter how you cut it, there’s a boatload of homes out there that have to be sold in the next few years. And, that’s going to keep prices in the doldrums for some time to come.
…
“… millions of people will see their hard-earned home equity vanish overnight …”
“Hard-earned” home equity?
The money to buy the house may have been hard earned but it was millions of strangers swept up by the mania who caused the prices to rise, and it was these rising prices that was transformed into home equity.
+1
“Hard-earned” home equity?
It is rather laughable to call most investment income “hard-earned”, isn’t it? Funny that we give it such preferential treatment at tax time, compared to income from employment- which usually is hard-earned.
Not shocked in the least I wasn’t the only one that clued in on this statement.
The 1%er pigmen are job creators because they create jobs for accountants preparing their tax returns to pay less taxes so they can do God’s work.
“It’s unbelievable! If you adjust for the rate of inflation (currently over 2 percent); you’re only paying roughly 1 percent interest on hundreds of thousands of dollars. What does that tell you?”
That the home’s price is too high, relative to the rent on the money you borrowed to “own” it…
“It’s a matter of trust.”
We went over that here at length a few years back. So far as I am aware, nothing has been done on high to address this fundamental problem.
Ethics, schmethics. I know. I’m a fool.
Waiting until the Year 2030 or so for ethics to finally take social precedence over law among the common folk.
No common folk will be able to afford law by then anyhow. Not that many can right now.
Did you ever think you’d see the day when you could nab a 15-year fixed-rate mortgage for 3.25 percent?
The typical mortgage should be no longer than 15-yrs for an average family’s modest home since too many other expenses occur while raising children, and the interest rate should not be government subsidized or given tax breaks.
the interest rate should not be government subsidized or given tax breaks.
Patience grasshopper, you can bet that the gov will strip this tax break after getting as many people into houses as it can. They can’t tax the elite, they can’t tax the poor, they will tax the middle and uppermiddle class.
Thanks for the information, P-bear. For my own situation, this information does not change my mind that buying was the right choice for me. A 15% drop translates to two years of rent.
And the foreclosure “dump” is likely to be just that: DUMPS.
There is one caveat - rent money is not completely burned. One is actually getting a product in return - a place to stay. But yes, it is more comparable to the ITI portion of the PITI than to the P.
Unless you are in a 15 year mortgage, you don’t pay much P in the first few years of ownership; rather, you are renting money from the bank, property from the local government to whom you pay taxes, and insurance liability from the insurance company to whom you pay home insurance premiums.
oxide
Your view mirrors mine. Paying multiple rents have been dreadful, and even if we pay a premium, the break even point is a data point for us to consider.
All
There is no inventory, and in So Ca the bulk sales (for rentals)and underwater owners have made home pick’ins pretty slim.
One thing that the REIC isn’t mentioning is the MID has shrunk with these engineered low rates. I wonder if buyers realize the reality of their write off situation. Property Tax write off vs. maintenance, insurance, and cosmetics.
have=has oops
I agree with this, oxide. We tried to stay ahead of the price drops, but even if it drops another 30%, I am OK with it. Why? We’re at 2200 sq ft SFH with a mortgage of 140k. Monthly PITI of $1290. I handle my in-law’s rental house, which is 1100 sq ft rowhouse w/ no garage. It rents for $1700. Where there are jobs, rent is going to stay pretty high. Our area (Balt) has a lot of hospitals and gov’t jobs (many of them contractor jobs).
The other thing is, we bought this as a place to live for 30+ years, raise kids, etc. I’ve checked Zillow 2 or 3 times since we bought (about 6 months ago) purely out of curiosity. Especially since Zillow has the wrong sq ft stats. Our house was built in 1951 and the 2nd floor was not “finished” at that time, so that the tax assessments would be based on 1400 sq ft. Houses in our area were built for managers at the huge Bethlehem Steel plant at Sparrow’s Point (just outside Baltimore) and they were tailored to what the buyers wanted… apparently lots of people did this trick with leaving the 2nd floor unfinished and then finishing it a few yrs later without a permit, which would raise the sq footage.
We’re at 2200 sq ft SFH with a mortgage of 140k. Monthly PITI of $1290.
Interesting. You clearly got more house for the money than I did. But I’m getting more mortgage for my PITI than you are.
“A 15% drop translates to two years of rent.”
In addition to PITI. I’ll take two years of free rent rather than buy too soon, thank you. You could go on four nice European vacations or purchase two Japanese automobiles on two years of our rent…
“Real work is for the birds. The betting game is much more fun and lucrative. We make up the pieces and we make up the rules!”
I have 100k that I would invest if it “penciled out”. That is how I got in to RE in the first place in 1995.
Remembering that all real estate is local; when will coastal CA bottom out? 1990-1995 were the last doldrums and coastal real estate in Goleta, CA, still sold for 300k at the bottom in 1995. It’s probably about 450-500k now for the same house I sold in 2006 for 900k. But it would also pull in $3500/month rent. With lots of fake money student demand from UCSB.
Wondering opinions, where is the bottom and how long will the doldrums last? And is the recent bouncing just the dead cat? Wake me up when prices are really stable or even rising again. I will however, likely have blown thru my 100k downpayment by then anyway!
If I didn’t know better it would almost sound like you’re hoping to get in at the bottom for a repeat of last time.
I concur with Carl Morris.
And Mike, I know it’s hard to have a bit of cash that’s just sitting there doing nothing. But this isn’t the time to invest in rental housing. The people who say it is don’t have your best interests at heart.
It depends, slim. If you can do a lot of the work yourself and you can buy for cash, super cheap, I don’t think it’s a bad time to invest in rental properties. The key is, you need to be in a place where people’s income will support occupancy and stable prices.
For most people, especially people closer to retirement or with kids, I would steer clear of this. Always think about what can happen and assume the worst… do you really want to be mucking it up with some PITA tenants when you’re in your 40s and 50s? Or do you really want to hire a property manager who does as little as possible?
A good place to read the opinions of some hard nosed, successful landlords is mrlandlord dot com. Many of them learned from failing early on by donig things like mikeinbend is describing… buying a rental property hours away from where they live and using rosey projections of rental income.
For most people, especially people closer to retirement or with kids, I would steer clear of this. Always think about what can happen and assume the worst… do you really want to be mucking it up with some PITA tenants when you’re in your 40s and 50s? Or do you really want to hire a property manager who does as little as possible?
My friend was a teenager during the later years of Vietnam War. And she was Vietnamese.
Either she or her family decided that it would be a good idea for her to go to school in Paris. So off to Paris she went.
She has since lived in at least one other European country (I think it was Sweden). And she’s been living in this country since 2001.
So, on the age scale, I’d place her in the early to mid-60s range. Not the sort of age that lends itself to the joys of dealing with tenants and toilets.
I might add that her husband, a Vietnam War veteran with some level service-related disability, is not in the greatest of health. That’s another thing that might interfere with her ability to be an effective property manager.
And don’t get me started on the property management companies around here. Most of ‘em aren’t worth a bucket of warm spit.
Oh, joesmith, thanks for the MrLandlord.com link. Much appreciated.
My friend was a teenager during the later years of Vietnam War….I’d place her in the early to mid-60s range
My God what happened to the time? I woke up today and I’m 30 years older than yesterday!!!!
sold for 300k at the bottom in 1995. It’s probably about 450-500k now for the same house I sold in 2006 for 900k. But it would also pull in $3500/month rent.
300K in 1995 and 450K in 2012 and able to generate $3,500 a month rent? Really? And with 100K down? Say what?
Does this not “pencil-out”? Where are you going to generate that much income on 100K as there? How fast would that 450K “value” have to fall more to overcome the cash generated? How fast would the house be paid off with 100K down and all cash flow going towards the 350K owed?
Rio
The situation I landed myself in was a 3/2 with a legal-above the garage-granny flat. I did it for cheap rent as a 20 something bachelor, not thinking about housing bubbles. In 2003 I was renting the 3/2 for 2300 and the granny for 1100. My PITI was 2k, including maintaining it. But now the place was worth close to a mil, so I sold it in 2004.
being 3 miles from UCSB did not hurt. Out of Isla Vista, no problem renting to students who expected less than “real people” and had their parents sign their rent checks. Also had some success renting to visiting faculty, but the German Engineering prof expected more, I found, than the average student. Also rented out to some really cool PHD candidates/profs from Spain and Isreal.
If I go back to CA, it is because I can make $1000 going to LA to sell vegetables on the weekends and sub-teach during the week. Pie in the sky/ not gonna happen in all likelyhood, but I am spitballing here. Family likes it just fine in Oregon, and we have not set foot in CA since 2007.
Long distance landlording was very good for me, I did not screen very well, being a 30 yr old surfer dude who invested into something that subsequently paid all the bills I still am a bit naive regarding LLing. As it never really bit me too hard.
Except for the non-student I rented to that changed the locks and barricaded herself in with 5 wolves and stopped paying rent; and one student with a small pet-pit bull extraction. I managed it myself from Oregon with one month vacancy in 9 years.(wolf lady would not leave until her friends gave her an intervention and animal control removed 3 of her non-disclosed wolf dogs).
I also had a bit of a problem renting to an Oregon family in the Oregon house we bought in around 1999 that used the master as their litter box, we found out upon their exit when selling the place. Poured some copper sealant(sorry don’t remember what it was) on the subfloor for the smell; carpet, paint(done by my mother) and the place sold for 287k when we bought it for 129k(it also had a garage conversion that I also rented out).
So two houses, four units, live in one, rent the other three out, worked but being the ll did get to be a PITA. So now I will not be a landlord for the first time since 1995 with $$ that is gonna get spent on orthodontia for the kids, health insurance, etc.
I wont get into the 2 properties I bought and sold at a huge loss(2007-2009); one a foreclosure and the other in Utah.
If I don’t put the $$ somewhere I will spend it out of necessity in 3 years if I don’t land some health insurance or a better paying job.
Finally went thru the steps of getting the kids state health insurance so they can go to doc and dentist which is a good thing for us.
But yes, rents are astronomical in Santa Barbara/Goleta. But we cashed out planning never to return to live, and probably wont.
May buy something for around 80k here in Bend, if I can find it. Sold my last venture this month after paying 117k, for 125k, after collecting rent uneventfully for two years to the tune of about 20k. So I am accostumed to $$ working for me, at least 5% returns. which is why real estate is tempting, but I don’t trust this low end activity that has realtors buzzing.
Cuz I dont want to have to sell if prices drop, this sale is prophylactic if nothing else; getting out on the bounce.
And Carl-you may know better; but yes, that is exactly what I am suggesting(wishfully thinking). Lucking into market timing in 1995 works better than planning market timing, I do know that so will exercise a modicum of caution.
So not buying diddly right this second. It is just a lifelong friend lives in Cambria and his wife is a realtor, so she is sending me listings.
I remember my father getting angry when I was looking at an RV on a website. He said if I had no intentions of buying it I wouldn’t be looking at it; and he was right. I bought myself an RV. Albeit a travel trailer for 3k, not 100k. I should prolly have her stop sending me listings as they tempt me sorely.
If I don’t put the $$ somewhere I will spend it out of necessity in 3 years if I don’t land some health insurance or a better paying job.
I can understand the urge to make a real investment before money gets piddled away. But if it will really be “out of necessity” what will you do if you don’t have (or don’t have access to) that money? Necessity implies you might need it REALLY badly when that time comes.
And Carl-you may know better; but yes, that is exactly what I am suggesting(wishfully thinking). Lucking into market timing in 1995 works better than planning market timing, I do know that so will exercise a modicum of caution.
I can sympathize. After all I was a young tech worker in the late 90s in the Denver area who owned a new house. On a good day my small 401(k) AND my house BOTH made more money than I did that day. Felt pretty invincible.
Problem is, I don’t think it’s coming back like that in our lifetimes. Yes, manipulated markets will look good on occasion, but why are they manipulated? My guess it’s in an effort to take your and my money. It’s not based on real growth of any kind. Think hard about risking what you’ve got based on hopes of something that’s only a mirage intended to defraud you.
Word. Thx
Yes, manipulated markets will look good on occasion, but why are they manipulated? My guess it’s in an effort to take your and my money.
In other words, mikeinbend, hang on to your money. Please.
If you feel the need to talk about this itchy money thing, just holler. We’re here to help.
Thanks. You’re a smart (and plucky!)one in a smart group.
Why I spill my guts here. sanity check.
I have been slapped conscious by some of your-sometimes hard to hear-advice and opinions.
From my criminal dalliances when Polly told me not to risk no stinkin criminal record for unplugging a “toxic tenant’s” holiday lights; got into the DA’s program for minor misdemeanors. And ahansen telling me to quit using pain as an excuse. A virtual reality where one can toss out their experiences and get some food for thought. Cool!
The private equity (PE) boys and other bigtime institutional investors will soon discover that its much easier to make money swapping derivatives and loading up on oil futures, than it is managing property. (Property management requires too much elbowgrease
Funny they should mention property management and elbow grease. Because yesterday afternoon, I had to stage an intervention. Here’s the story:
Friend came a-knockin’ on my door. She was on her way to check out a house that she was thinking of buying as an in-VEST-ment.
Oh. No. Another friend drinking the real estate in-VEST-ment Kool-Aid.
What’s worse, I know the area where she wants to buy the house. Suffice it to say that it’s a run-down house on a run-down block in a run-down part of our fair city of Tucson. Not the sort of place that screams “Red Hot Opportunity!” to Slim.
The friend said she had a big stack of cash that she wanted to do something with. I gathered that the low interest rates being paid by banks and the risks of the stock market didn’t appeal to her.
But to put her hard-earned savings into a dumpy house that would most likely attract university students who’d make it into even more of a dump? Yeesh!
I scribbled the name of one of my favorite real estate books, Leigh Robinson’s 400-plus page Landlording, on a scrap of paper and gave it to her. It’s the book that nailed the coffin as far as my ever investing in real estate was concerned. Well, that and my former landlady’s stories about her lousy tenants. I shared a few of those with my friend.
Then there’s the matter of Tucson’s very high rental vacancy rate. Which means that, as the owner of a rental property, you’re going to be competing with many other empty houses.
After my friend left, I e-mailed her this story from the Naked Capitalism blog:
Rentals Gone Wild
Key point from the NC post:
“So here we go again. Backyard investors will soon be saying “it’s different this time,” arguing that those rents will never fall as they sink their retirement savings into the same houses that wiped out the retirement accounts of the previous occupants. But Mr. Smith’s invisible hand always wins in the end, sometimes with a gentle nudge and sometimes with a violent smack. There are too many houses for too few people and no private funding anywhere on the horizon. As long as those basic fundamentals hold true it’s not a question of if, but only when, the rental bubble bursts and how much damage it will inflict on everybody else.”
She should send some of that money to me.
I’m not cheap, but I can be bought.
And I’m able to provide other, ummmmm, “services” that you just can’t get from buying a house.
I think her husband would have a thing or two to say about those, uhhhh, “services.”
I disagree with PB and believe many people are missing the signs of the recovery. When the MSM espouses how bad the market is, the downturn is over, just like when they extolled the virtues of condo flipping in Florida in 2007!
This just in from Calculated Risk today:
“….For house prices the Case-Shiller index has a serious lag and the key right now is to see if the year-over-year change is declining (it is). Note: The current Case-Shiller report was an average of December, January and February closing prices, and some of those sales were probably negotiated last October, about six months ago!
More current, but less reliable, pricing data (such as asking prices, new home prices and some anecdotal comments) suggest that house prices have stopped falling in most areas, and I expect the year-over-year change in the Case-Shiller index to turn slightly positive in the not too distant future (it is difficult to predict when, although I’ll try in a couple of months). Of course the number of REO sales (lender Real Estate Owned) are down, and some of the improvement is related to fewer foreclosures and other distressed sales…..”
The people actively in the market in Sacramento are seeing quite a bit of lift in the sales activity and transaction values in the desirable areas.
Ben, I just dropped $25 into your PayPal account, as I have many times before. Your blog has been the best money I ever invested in my LIFETIME. You helped me understand so much, so early in the game. I watched the Sacramento market turn in Dec. 2005 when everyone else denied a bubble bust could happen.
The most important lesson was three words: Reversion to Mean! EPIC.
I think you make your case reasonably well, but I still think what you say doesn’t apply much to where I live. I hope you’ve nailed the bottom for Sacramento, but I’m still going to sit this one out for a while more.
Got mine written out, will stick in the mailbox later on today.
And I thought the time to buy a house was when the MSM said it was a terrible time to buy a house? We might be getting to that point now. Except, the reasons are non-traditional and convoluted.
The MSM is still saying prices are falling, mountains of foreclosures are coming, no one can get a loan…etc. According to them, it is a TERRIBLE time to buy a house.
I am saying it is a good time to consider buying a house in Sacramento. There is plenty of time as prices are going to jump, but they have firmed, it is cheaper to buy than rent and you lock in your costs for the long term.
correction, before everyone jumps on me…
I meant to say “….prices are NOT going to jump…” sorry. There is no expediency to this housing market. Take your time. Find the right house if you want one….
“I disagree with PB and believe many people are missing the signs of the recovery. When the MSM espouses how bad the market is, the downturn is over, just like when they extolled the virtues of condo flipping in Florida in 2007!”
Which recovery?
If you are talking about housing, I think you are missing the signs of market manipulation which are bound to draw this thing out much longer than expected. See my repost elsewhere in the Bit’s Bucket of Tyler Durden’s graphs that show why there will be no U.S. housing recovery until after 2020.
The other thing you may have missed is that this was a global housing bubble, and the U.S. is actually leading the rest of the world in its correction. However, since Canada and China are still bubbly, investors from those countries are propping up the U.S. market for the time being. When their bubbles pop, two of the key pillars preventing the U.S. housing market from finding a stable bottom will be gone.
You may be right PB, but I must say no one from China or Cananda is propping up the housing market in Sacramento. The buyers are local investors buying for investment purposes and to a larger degree, local people who are buying a home in which they will live.
Again, I am not saying housing is going to greatly appreciate, I just see strong signs the market is recovering and demand is growing. Many buyers cannot find a house to purchase, as many homes have multiple offers. Next stop for them: new home builders where certainty of closing the sale is paramount.
I see the prevalence of investors in Sac and everywhere else as prima facie evidence the bubble is not over yet. Compare this period to any other in the history of the U.S. housing market and you will soon learn that the percentage of homes bought as seconds (or more) remains at an unprecedented high level. This will end as more and more people come to the conclusion that real estate is a money-losing investment.
I am making excellent cash flow from my real estate investments. I am very pleased with my ROI. It is much higher than the bank savings rate, it is tax sheltered, the rent is also paying down the loan principal every month and I purchased below reproduction cost. That is a great formula for success in my book.
The only problem I have now is that many people see how beneficial investing in real estate has become and more competition is out there investing.
Not surprising at all.
‘Tainted,’ But Still Serving on Corporate Boards
“It may be surprising that the former chief of Fannie Mae still remains the director of a public company as prominent as Goldman Sachs and Target. But perhaps more surprising, many other executives who had tumultuous reigns are also board members of major public companies: Charles O. Prince III, the former chief executive of Citigroup, who resigned under pressure in 2007 amid huge write-downs at the bank, is a director of Xerox and Johnson & Johnson. E. Stanley O’Neal, the former chief executive of Merrill Lynch on whose watch the firm loaded up on subprime debt that almost bankrupted the company, is a director of the aluminum giant Alcoa.
And a number of other prominent executives could soon be added to that head-scratching list. H. Lee Scott Jr., the former chief of Wal-Mart Stores who was running the company during a bribery scandal at its Mexico unit that was recently uncovered by The New York Times, is a director of Goldman Sachs and continues to serve as a director of Wal-Mart. Another Wal-Mart executive, Eduardo Castro-Wright, who oversaw the Mexico unit and was identified by a former executive there, according to the Times article, as the driving force behind years of bribery, is a director at MetLife.”
http://finance.yahoo.com/news/tainted-still-serving-corporate-boards-100003085.html;_ylt=ApGJBZZQvBMKN
…during a bribery scandal at its Mexico unit…
It’s a well known fact that the third world runs on bribery.
And the first world runs on - what? - political contributions maybe?
I was thinking the same thing myself, combo. The idea that CONgress is going to hold hearings on this matter is a complete joke. So many politicians are completely bought and paid for.
I don’t approve of bribery, and people need to wake up to the fact that this sort of thing is coming to the US big time along with immigrants, legal and illegal, for whom bribery and baksheesh is a way of life. And I mean at the every day job level, in which you don’t get hired unless you pass some long green to the foreman and/or HR manager. In some cases it is probably already happening.
The Mexican oil company, Pemex, was notorious for selling jobs. In some cases you didn’t even have to show up for work, as long as you gave 50% of your salary to your boss. At the peak (in the 70’s) it was estimated that less than half of Pemex’s employees did any work at all.
So funny! I remember those Pemex stations serving us gas out of 1 liter bottles when we were driving the VW bus thru mainland Mex in 1992. Push started that thing out of many a Pemex. Starter stopped working in Tuscon, but did that deter us from driving thru Mexico? Noooo!
Our starter had broken and our carb we had to somehow fix with a coat hanger to allow us more than 30 Mph. That bus she blew up in Oaxaca(sp?). We hitched back to Tuscon after our ride to the border that we traded the bus for broke its axle. Three dudes and a pile of surfboards; what a sight.
But what I remember most vividly was the 3:00 A.M. traffic stop by drunk/coked out federales in Puerta Vallerta waving guns in our faces until we could arouse our Spanish speaking travelling comrade; After some Spanish was exchanged then it was like we were old friends. Or the licence plate taken off the car in Guaymas (Hay mas in Guaymas) for illegal parking, looking all over town for the person to bribe to get the plate back. So after those fiascos, we bummed a ride back to CA from our peeved parents. Seemed we were supposed to be studying at the time and I took an emergency student loan out to buy the van. What a wasteful little jerk was I!
fun times and now Im 20 years older and only slightly wiser
First world? The U.S.? Not any more.
And the first world runs on - what?
Consulting and lobbying, hehe.
Apparently little known fact: most board of directors are also board of directors for more than one other company.
Thanks god there’s no collusion between companies.
They do this to broaden their influence so as to better represent the interests of the stockholders.
/snark
I don’t think this is snark, combo.
I’ll confess to having served on a corporate board. I had to step into my father’s place on this board after he was no longer able to participate.
Dad co-founded the company, and let’s just say it operates in an area that I’ve only heard about via dinner table conversations. I had to get up to speed on topics like manufacturing processes, quality control, venture capital, and corporate growth strategies in a New York minute.
I will say that this board was (and is) free of the celebrity members. Which meant that we had a bunch of work horses, rather than show horses, on board. It made for a much better board.
Don’t get this. Was H.Lee Scott Jr. implicated in bribery scandal?
Realtors Are Parasites®
No, it’s those $12/hour union janitors who are the real parasites. They should be happy to work for only rice and beans!
I can choose whether or not to buy a house if it is overpriced due to using union labor. Do I have an alternative to city parks staff? How about for my city garbage collection? How about my local schools.. can I just choose not to pay state tax to support the teachers or administrative staff that I think are overpaid? You’re playing a strawman argument. You can’t hold someone over a barrel at the end of a gun paying taxes, then say they shouldn’t complain that the organizations they are funding via taxes are lobbying directly against their interests as a taxpayer. Do you hear anyone complaining about the construction industry union? NO (well, at least not as taxpayers).
I can choose whether or not to buy a house if it is overpriced due to using union labor. Do I have an alternative to city parks staff?
Yes. We are free men….you are free. You can move to wherever you choose; and let no central-planner, do-gooder infringe upon that right. Our forefathers fought for a free country which protects our liberty and empowers and protects free-will and it is thus.
If your pursuit of happiness entails settling in an area less shackled by the godless chains of collectivism, our Constitution recognizes your god-given right to pursue that inalienable right.
oh thou holy man of retardation how i bow to thee and thy superior intellect. You STILL think I am out to get the guy making a janitor’s living don’t you? I wish nothing but the best for janitors. I think the thing that makes you the maddest is that I actually get to vote on these kinds of things. It’s the one consolation I have.
I guess you’ve never paid attention when I said that individuals working for companies shouldn’t be paying income tax or social security tax and that the corporations they work for should be responsible for those taxes.. You haven’t listened when I’ve said to take away the paperwork and legal burdens from wage earners who can’t afford the legal representation for tax “minimization”, and let them keep their entire paycheck. You haven’t paid attention when I’ve called for removing the regressive sales tax and changing to import taxes and stock and commodities trading taxes.
Say one thing about the lobbying process of public employee unions, the broken State and local pension systems that are mismanaged and over allocated, and the resulting local and I’m sure soon state bankruptcies that are and will be occuring, and I’m some kind of repressive lord and master over the poor “lucky duckies”.
Answer me this: why does a state employee turn around and pay state taxes? If you want something better for state employees, why don’t we just eliminate them paying state taxes and save money on the processing of their state income tax returns?
Rio is right.
If you don’t want to pay the taxes for city schools and city services, there are places in this country, that you can move to which charge low taxes because there isn’t the population density to make schools and services worthwhile. Oh, but there are no jobs there, you say? Well, maybe we should question why there are no jobs in these remote areas — perhaps because there are no schools and no city services.
No one is complaining about the construction industry union, but I see plenty of people complaining about the quality of the construction. Maybe you should question why that is too.
Sotto voce: I’ve been studying (oh, gawd, I hate to admit it here, but here goes) books on acting. Voice acting, to be specific.
One topic that keeps coming up is joining unions that represent acting talent. I should say “union” because the members of SAG and AFTRA voted something like 80-20 to merge.
If you’re a budding voice actor, you may have hankerings to join the union, but guess what? You better be good enough to compete with union talent. Most rookies aren’t.
Strawman? You’re first sentence is a strawman by definition. The allied trades don’t build houses, thus you don’t have a choice there either.
“There were incidents where investors and Realtors were in cahoots to buy and flip,” said Forbes
(No sh#t Sherlock)
South Florida third in U.S. with shaky mortgages
By Kimberly Miller Palm Beach Post Staff Writer
Posted: 7:49 p.m. Monday, April 23, 2012
South Florida maintained its position in the top five markets nationwide for suspicious mortgage activity last year as lenders continue to uncover bad boom-time loans and federal examiners note an increase in dubious short sales.
Florida’s overall rank last year was third place per capita and second by volume. California was first in both categories.
“The report shows we’re seeing financial institutions spotting activity that appears to be fraud before it happens, and in the process, helping to prevent it,” said James Freis, director of the Financial Crimes Enforcement Network.
Rodney Forbes, broker for Forbes Realty of South Florida, said banks are taking more precautions to prevent short sale fraud, which can include a practice called “flopping.”
Flopping is where an artificially low appraisal is submitted to the bank, which accepts an offer based on the low amount. The home is then flipped by the new owner at or above the true market value, netting him a hefty profit.
“There were incidents where investors and Realtors were in cahoots to buy and flip,” said Forbes . “Now, before a short sale can close, there has to be an arms-length affidavit signed which states that the buyers, sellers and real estate agents are not related in any way.”
Last week, federal mortgage backers Fannie Mae and Freddie Mac announced stepped-up short-sale timelines for servicers, while Bank of America recently updated its short-sale process to increase efficiency.
Lenders such as JPMorgan Chase and Bank of America also have offered cash incentives to homeowners willing to do a short sale over a foreclosure,.
Despite precautions, short sales are a “Pandora’s box of potential fraud,” said Jack McCabe, chief executive of McCabe Research and Consulting in Deerfield Beach.
“You have to go through a lot of documents and investigation to determine who is involved in the deal,” McCabe said. “It’s so prevalent I believe they can only uncover a very small percentage of the fraud that is actually occurring.”
http://www.palmbeachpost.com/money/real-estate/south-florida-third-in-u-s-with-shaky-2321391.html -
“There were incidents where investors and Realtors were in cahoots to buy and flip,”
Yes. This is fact. Realtors who are supposed to be marketing inventory out in the open on MLS in fact is holding select inventory off MLS and steering it to pre-determined buyers. This is screwing sellers. I’ve observed this twice with lender owned property.
That’s just the free market at work! There’s no law that says they have to publicly list all their properties! The government just needs to stay out of their business!
I have seen this as well. Places that were on the market and active, I have had one realtor refuse to show me. Just refused to show it; which got him a complaint to the board, but he is still operating and I know several realtors that just turn a blind eye to his listings and refuse to work with him. So his listings, the good ones, are NOT available to the average Joe, even if on the MLS. And this realtor in particular has lots of Fannie HomePath or Freddie HomeSteps properties.
Just don’t try and get a good one from him. Cuz he obviously has a buddy lined up to get that unthrashed foreclosure. But he had plenty of other properties that he wanted to show me that I knew were destroyed at the same price. And told me to get that offer in because he has competing offers already(Do you really need to look at it??? C’mon! Make an offer).
Couldn’t even get in to even look at the one(actually more than one, come to think of it) that seemed to be a relative bargain. Pre-sold to a buddy in the know. I know. Somebody shoud be documenting this chicanery; cuz it’s BS.
Those guys are going to shoot themselves in the face by taking actions that harm the sellers.
I’m aware of a realtor in the Northern Central Valley who is dealing with a huge amount of REO from some big financial institutions. Let’s just put it this way:
He has WAY more to lose than gain by taking any action that is contrary to the seller’s interests.
Controlling REO sales is a career making enterprise…you have one seller, who is a massive source of repeat business…if you are smart, you keep your seller happy.
If you are short-sighted, you screw the sellers. If you aren’t stupid, you build yourself a mansion from the commissions and retire when this mess is over.
Wow - another city destroyed by public unions…
Pretty soon cities will collect taxes JUST to pay for public union pensions.
Hey - Who wants to live in California and have a big bulls eye painted on your house?
——————–
Los Angeles insolvency predictable and preventable
OC Register | 04/23/2012 | Brian Calle
When the nation’s second largest city teeters on the verge of bankruptcy, local elected officials – and especially taxpayers elsewhere – ought to take it as a wake-up call and ponder the evident public policy blunders that laid the groundwork for such an unnecessary scenario.
Los Angeles’ potential bankruptcy and $238 million budget shortfall were predictable and preventable. So predictable in fact that former Los Angeles Mayor Richard Riordan warned of the looming crisis in a Wall Street Journal editorial in 2010. Now he says bankruptcy may be just a year away.
What underscores this municipal catastrophe is undue influence of public employee unions on city expenditures, irresponsible decisions by elected leaders and unsustainable benefit structures practically germane to the government sector.
A study released earlier this month by the Stanford Institute for Economic Policy Research estimated that each of the city’s three independent pension funds are unfunded by billions of dollars: the City of Los Angeles Fire and Police Pension System is $9.25 billion unfunded; the Los Angeles City Employees’ Retirement System is $11.32 billion unfunded; and the City of Los Angeles Water and Power Employees’ Retirement System is $6.59 billion unfunded. To put the numbers in context, L.A.’s 2011-12 operating budget is $6.87 billion, according to the city.
Stanford’s study also found that “pension costs increased from 8.5 percent of total city expenditures in 1999 to 13.7 percent in 2011.” For fiscal year 2011-12, estimated pension costs look to be “15.4 percent of city expenditures.”
Solution: Don’t live in California
Or at least not in LA (ugh!)
Congratulations to Tony Villar!
“Los Angeles insolvency predictable and preventable”
If it’s preventable, what makes you think they won’t?
I note that San Diego’s bankruptcy was being predicted from the time of the HBB’s inception, but so far no such eventuality has occurred…
bankruptcy is the new black.
Couldn’t happen to a nicer city.
Now if it would just become ALL beachfront property to say, Pomona, it would be a much nicer place to live.
another city destroyed by public unions…
If the union pensions/pay are the main cause of city’s budget deficit then what can’t last can’t last but first the real problems have to be determined. I’d say you:
1. Look at the city’s taxes collected and see how they stand compared to other cities.
2. Look at the union pension compensation/pay levels and their percentage of the budget and see how they compare to other cities.
3. Go BK and adjust pay/pension/tax levels to reflect average city levels.
But…Is it possible to do #3 when cities and states go BK? What is the procedure? If something is “unfunded” and a city’s taxes and income collected are already at or above national averages, then “unfunded” means exactly that, unfunded.
How much of the increase in pension costs is due to a decrease in interest rates on treasuries and other safe investments?
Oh, H2BH. Raising rates is unpatriotic. Duh.
Got mattress money?
April 23, 2012, 4:46 p.m. ET
CREDIT MARKETS: Treasury Yields Hit 7-Week Low, Risk Sells Off
By DOW JONES NEWSWIRES
NEW YORK (Dow Jones)–Weak manufacturing data in China and the Eurozone collided with political uncertainty in France to create a global selloff from riskier assets Monday.
U.S. markets woke up to see a broad sell-off in European equities, setting the stage for the safest and most liquid bonds to outperform.
That appetite helped Treasury prices climb, with yields dropping to their lowest levels since late February. Munis benefited as well, but corporate bonds sold off across the board.
Markit’s CDX North America Investment Grade Index, a proxy for risk, weakened 1.3%, and negative sentiment prevented any company from attempting to issue any new debt.
Most of the market moves took place in the early morning and were followed by sideways movement the rest of the day. Aside from weak global economic data and political uncertainty, the Federal Reserve’s monetary policy meeting this week likely kept investors in a wait-and-see mode.
“Monday’s session offered little by way of new information other than to refocus the market on the political risks that continue to plague the European economy,” wrote Ian Lyngen, strategist at CRT Capital Group.
Treasury bonds and German bunds become market darlings on Monday as investors flocked to safe-harbor assets on fresh signs of troubles in the euro zone.
The flight to safety pushed down the benchmark 10-year Treasury note’s yield, which moves inversely to its price, to as low as 1.909%, the weakest level since late February. The yield is less than 25 basis points from a historic low set in September, a sharp turnaround from the selloff in March that sent the yield to as high as 2.399%.
Yields in German bunds, the benchmark for the euro zone’s debt market, dropped to fresh record lows. The five-year bund’s yield hit as low as 0.598%, while the 10-year bund’s yield touched 1.56%.
The strength of the two major government bond markets, despite meager yields, underlines the continued jitters over the euro zone’s sovereign debt crisis. Investors were jolted by fresh signs that stress, already hitting Spain and Italy, is spreading into the Netherlands and France. For now, investors care more about putting their money in a safe place instead of placing emphasis on returns.
…
retail isnt being played for a fool this time around.
Retail doesn’t have the money and after most people (who still had money and decent jobs) saw their 401s take that huge hit, they’ve gone into the bunker with their money, even though they’ve recovered almost the losses.
they have wised up and learned how to play the casino better.
the concept of buying low and selling high is catching on.
What will become of homeowners who stop paying their mortgages in the hopes of qualifying for principal reductions, only to learn they don’t qualify?
Banks, GOP lawmakers fear top housing regulator moving to mortgage write-down
By Vicki Needham - 04/15/12 07:05 PM ET
The banking industry is concerned that Edward DeMarco, the nation’s chief housing regulator, is moving toward a plan that would allow some homeowners to walk away from their mortgages.
Industry groups say that cutting the principal for borrowers who are “underwater” and owe more than their homes are worth would further weigh down the housing recovery.
“Principal reductions create an incentive for a huge group of borrowers who have continued making their payments, despite lower home prices, to stop paying in hopes of principal forgiveness,” said Frank Keating, the president and chief executive of the American Bankers Association.
“A broad principal reduction program would result in fewer investors who are willing to lend for housing finance, increased borrowing costs and tighter credit availability,” Keating said.
DeMarco, the acting director of the Federal Housing Finance Agency (FHFA), has come under pressure from Democrats and the Treasury Department to reduce mortgage principal. They argue the move would help struggling homeowners and save the government money in the long run.
But even with new data that back up those claims, DeMarco remains skeptical about the effects of implementing the program at Fannie Mae and Freddie Mac, the mortgage giants that the government has spent $150 billion keeping afloat.
Bankers argue that principal reductions through Fannie and Freddie would increase the liability for taxpayers and raise the cost of credit by creating incentives for borrowers to stop paying on their loans.
“The taxpayers’ cost for principal reductions generally exceeds the benefit created,” Keating said.
“Recovery in the housing market is extremely important, yet there are more cost-effective and efficient options other than principal reductions for borrowers and American taxpayers,” he added.
…
how many times will they fail before the market recovers?
Let’s see, keep paying the monthly nut on my $300K mortgage or stop paying for a few months and get a cramdown to a $225K balance. Hmmm, tough choice!
I have no problem with this as long as the new loan is offered at a rate that reflects that it is made to a person who recently defaulted. Say a risk premium of 4% (higher if a good look at the borrower’s financials warrant it) so that the interest rate goes from 5.5% to 9.5%.
Where is the stampede? Isn’t anyone interested?
+1 Polly!
Do you really think the bank will just eat that $75K loss (in my example)? You, everyone who doesn’t default, and everyone who rents will pay one way or another.
Hypothetically, they’d more than make it up in the higher interest rate. But the point (which you seem to have missed) is this. No one will take a 25% drop in price if they have to take a 73% (or higher) increase in their interest rate. 5.5% of $300K is $16,500. 9.5% of $225,000 is $21,375. That is an extra $4875 on interest just in the first year. Not a good way to lower your monthly payments.
Now, might you risk someone with the cash sitting in the bank taking the deal and paying off the mortgage a few months later? I suppose. But Joe 6-pack would take one look at this deal and RUN in the other direction. No takers.
Yeah, it has a few issues with banks having to front load their losses (assuming the banks actually own the loans), but since no one would do it, I don’t see the problem.
The other day I saw an actual summons pasted to the door of another apartment. It listed a trial date and time because the landlord was apparently suing the owner for unpaid rent (the leases here are 1 year). I took a picture of it. It’s an actual summons.
I thought wow - wouldn’t it be great if we were able to walk away from rentals as easily as we could from mortgages. Plus, if you stop paying your rent, there’s no months or years of free living. Your stuff is out on the street in a few weeks and you get sued for the unpaid rent. But we never hear sob stories about that.
Much of the sob stories about FBs involve media manipulation by the big advertisers. On DC news radio, they are serious high home price cheerleaders. Today, their lead reporter on it came on and before a housing story prefaced it with, “Houses are the largest investment most people will make in their lives and so we all are interested in seeing prices go up. But Case Shiller went down by .8%” - I thought, “Hah! At least he’s honest.” Side note, it puts the lie to any notions of the possibility of an unbiased media. Every reporter is human and has his own interests to protect and advance.
What will become of homeowners who stop paying their mortgages in the hopes of qualifying for principal reductions, only to learn they don’t qualify?
They’ll be cueing up Nancy Sinatra’s song, “These Boots Are Made For Walking.”
I’m sure this news will have no effect on home prices in or near Manhattan; Manhattan housing prices always go up.
BUSINESS
Updated April 23, 2012, 3:58 p.m. ET
Music Stops for Wall Street Bankers
By ANUPREETA DAS And GINA CHON
Several major U.S. banks are planning to trim investment-banking units that were built for an era of deals aplenty. Anupreeta Das has details on The News Hub. Photo: Bloomberg.
Wall Street’s latest problem: too many bankers and not enough deals.
Amid new regulation, lower profits and a dreary market for mergers and acquisitions, several banks are planning to trim investment-banking units that were built for an era of deals aplenty.
Having already slashed bonuses, banks including Citigroup Inc., (C -1.89%) Goldman Sachs Group Inc., (GS -0.61%) J.P. Morgan Chase (JPM +0.30%) & Co. and Morgan Stanley (MS -2.86%) are preparing to cut dozens of jobs, including some held by senior bankers, according to people familiar with the matter. As they pursue this targeted round of trims as soon as next month, they and rivals are also revisiting profit expectations for their advisory businesses, people familiar with the matter said.
Until recently, Wall Street’s ax had largely fallen on trading desks, which shed thousands of jobs as business dried up due to regulations and lackluster markets.
But the cost-cutting focus is now expanding to deal makers and corporate advisers that have remained among Wall Street’s most high-profile professionals even as their contributions to banks’ bottom line has been dwarfed by traders. In addition to mergers-and-acquisitions advisory, investment banking includes raising capital through stock and debt.
“The whole paradigm of banking is changing so there is a lot of right sizing and that will continue throughout this year,” said Michael Karp, managing partner at Options Group, a financial-services industry executive search firm. All of the top firms “have overcapacity,” he added.
As is often the case in Wall Street’s Darwinian culture, the culling is expected to affect the old and the weak. The job losses will target underperforming bankers and those nearing retirement age, according to people familiar with the situation.
The goal is to remove people who aren’t “pulling their weight,” said one investment-banking head at a major bank, adding that “banks are overbuilt” in relation to the work available. As compared with years past, banks are less willing to keep those employees on board in hopes of a near-term recovery.
…
Once you get to the oligopoly monopoly stage of corporate capitalism there is no more need for mergers. Once the public is out of money there is no need for an IPO every week.
Their Goose the laid the golden egg was consumed for dinner last night and now they wonder why they have no money.
I kind of love the “right sizing” thing being turned back on the “masters of the universe.” And those negative percents were for their share prices on the day the article was posted, right? Cause down 0.61% isn’t a slashed bonus by any reasonable definition.
You know, a lot of these people are going to know stuff that the cops might be interested in hearing.
(This assumes that the cops are interested in putting crooks in jail. Lately, that’s a big assumption)
Of course, as I suspect, there will be no “rats” because of generous severance packages, and the “rats/soldiers” may be as guilty of crimes as the “bosses”.
The answer is another bubble. What “thing” can be created that will lead people to believe it will provide safe and reliable returns well above the current norms? Whatever it is, it could be the next bubble.
The best bubbles are in logical constructs - stocks, bonds. Or small, highly liquid items - tulip bulbs, beanie babies. Houses you say? It wasn’t the house that drove the bubble, it was the demand for the mortgage debt that drove the bubble. The house was the physical manifestation of the bubble in supposedly safe and reliable and high interest mortgage backed securities.
“preparing to cut dozens of jobs”
Oh, the humanity!
Origins of the Indebted American Homeowner
Equitable Mortgage Company
Source: Library of Congress Prints and Photographs Division
By R. Daniel Wadhwani
Apr 20, 2012 1:56 PM PT
Not long after the economic crisis began, the president’s landmark Conference on Homeownership reported that “down payments of 10 percent, 5 percent, and even nothing down” had become common practice in the home-mortgage market. Reliance on second mortgages and novel financing terms, the report noted, were also widespread.
Although these developments sound all too familiar, this Conference on Homeownership was held in 1931 and the president sponsoring it was Herbert Hoover, not George W. Bush or Barack Obama. We often think of the expansion of easy mortgage financing as a relatively recent development, but the growth of indebted homeownership has older and more complicated origins.
The rules and institutions for financing homeownership weren’t always as conducive to buying as they are today. In the 19th century, most Americans bought or built a home outright, or saved substantial nest eggs to make large down payments, because financial institutions either didn’t lend to average homebuyers or did so on relatively stringent terms. National banks were actually prohibited from lending on real estate and state banks typically limited mortgages to 50 percent of the underlying value of a property. Such loans also matured in a relatively short period, usually three to five years. These terms meant that buying a home often required years of saving and typically wasn’t an option for young families.
…
If the mortgage business goes back to the way it was in the 1800s, nobody but the 1%ers are going to be able to own houses.
Some day, we might get back to a point where you can buy a reasonably priced house, with a reasonable mortgage, with reasonable taxes.
Too bad I’ll never live to see it.
The home as vampire squid.
…the president’s landmark Conference on Homeownership…
Sounds like another toga party.
DOWN.
Investors eye housing data
By CNNMoney staff @CNNMoneyMarkets April 24, 2012: 9:17 AM ET
NEW YORK (CNNMoney) — U.S. stocks were poised for a mixed open Tuesday as investors turn their attention to two reports on housing and await Apple’s earnings after the close.
The Dow Jones industrial average (INDU) was poised for a slightly higher open, while the Nasdaq (COMP) futures were slightly lower and the S&P 500 (SPX) futures were pointed to little change. Stock futures indicate the possible direction of the markets when they open at 9:30 a.m. ET.
Futures moved lower after the S&P/Case-Shiller showed another decline in home prices for February just before the market open. The U.S. Census will release new-home sales at 10 a.m. ET.
…
Selling my house for 12)5k. Will pay off all debt(wife had surgery last month plus some other debts) and be left with around 100k.
Should I put 20% on some coastal CA real estate(Cambria or Los Osos, near Cal Poly). SLO is too hot and same goes for Tehachapi or Temecula, where my friend says things are indeed cheap. If it pencils out and rents cover PITI plus, should I pull the trigger, or should I wait until more blood flows? If it pencils out does that signal a good enough time to come back to CA?(I am a surfer and central CA is relatively unspoiled by overcrowding like most of SoCal) I could work there at my old job selling vegetables for 80k/year, if my body could handle it; or I could just spend the money on education (master’s degree, law school, or just landlord away?) and keep teaching for peanuts here in OR. Need a masters to continue teaching long term in this state, for sub 40k pay. And Beaverton, the second largest district in the state is laying off 300+ teachers; ending up with 30 kids in kindergarten classes by next year. If you ever taught K, you would know that any kid over 20 is a kid too many to handle properly. And no aide or other adult would be provided. So teaching jobs not only are hard to come by; they are subject to layoffs, and with student counts getting so high; the jobs SUCK. As in you never get your work done in 40 hours like your contract says you owe time-wise. so it is complicated as I could work a non-teaching, physically taxing job without more schooling but I have had 4 surgeries and am a little impaired and therefore reluctant to be considering going back to loading trucks and slinging vegetables. And I would rather teach children than talk to carrots. But I could teach my kids how to handle sales and be my own boss if I go back to selling veggies. And get to to drive to Encino, Montrose, all those LA spots I abhor, for work.
20% down in central CA; or buying another house here in OR for mostly cash. Or trying to hold on to the cash for a couple years and seeing how things play out? That one is most likely; but don’t want to spend the 100k without trying to invest it at some point before it is gone.
should I pull the trigger, or should I wait until more blood flows? If it pencils out does that signal a good enough time to come back to CA?(I am a surfer and central CA is relatively unspoiled by overcrowding like most of SoCal) I could work there at my old job selling vegetables for 80k/year, if my body could handle it; or I could just spend the money on education (master’s degree, law school, or just landlord away?)
I have to be honest. Based on your past posts, your decisions end to not be very wise.
1. You’ve already failed at taking risks in real estate. Do you really want to risk everything again on landlording, bloodflowing, or otherwise?
2. College degree, are you NUTS? When you get out, you will be competing with thousands of others masters degrees. And no matter what the laws say, you will be seen as an old, sick, man. They will hire a young, healthy, woman, instead. I’ve seen it happen. And another honest note: You have a family in an unstable financial situation, and you want to spend that $100K on a degree for YOU? That’s selfish, sorry.
3. Stay the F out of California.
4. You don’t want to lift boxes vegetables, but you’re able to surf the waves often enough that you need to (and can afford to?) live in surfer country? Does not compute.
4. I’ll give my standard advice to those who have cash but are not tied to a career: use the cash to go Oil City Plan. No matter what your college degree, buying a cheap house and supporting yourselves with stable Lucky Ducky jobs may be your best bet. Find an Oil City near to a small university town with a major medical center. Lots of good land and rainfall to grow veggies. Lots of granola/health concious faculty/staff to buy your veggies, lots of retiree money to support the Lucky Ducky businesses, perhaps a job on the tray line in the tray line of the hospital cafeteria or nursing home.
There are a lot of such places in this country. Examples: These are East Coast, but I’m sure there are some other examples west of the Mississippi.
Bloomington, IN.
http://www.zillow.com/homedetails/3882-S-Sandstone-Ln-Bloomington-IN-47403/85588221_zpid/
Greensborough, NC
http://www.zillow.com/homedetails/4218-Maybrook-Dr-Greensboro-NC-27405/5964299
“Find an Oil City near to a small university town with a major medical center. Lots of good land and rainfall to grow veggies. Lots of granola/health concious faculty/staff to buy your veggies, lots of retiree money to support the Lucky Ducky businesses, perhaps a job on the tray line in the tray line of the hospital cafeteria or nursing home.”
Is there a university near Bend, OR?
Mmmm, tray line. Been there, done that…as a high school kid.
Thanks for your honesty!
Working the stable jobs we have here in Bend, where I could buy outright with the 100k, is our most likely scenario; and I am asking here to get responses such as yours; just for some free feedback that I need to take with a grain of salt but listen to nevertheless.
college= rock and hard place. I need to procure a masters degree if I want to continue teaching in OR, unless I get a private school job. It is the Oregon requirement that all teachers hold masters and I have had ten years with a license and my time is up next year. I can still substitute teach at 20/hr, but only half time, without the masters, so I can chip away at it if I like.
As far as failing in RE goes, I have won some, and lost some. Did not start as a speculator, and also bought an oil city house that I am getting out from under to pay some medical bills.
I have taken 60k seed money earned selling vegetables in LA, and turned it into 100k seed money 17 years later. Could have done better, maybe, but I am not complaining about the results of my decision making. and trying to measure the decisions I make for the future a bit better. Slumlording paid the bills all that time and I got to raise my children with two stay home, or work with the kids type jobs, rather than punch a time clock. So real estate investing has given me 17 years to work part time, get/pay for a teaching license, and pay medical insurance, premiums, and countless procedures for my reluctant back.
I could not surf full time, true, which is part of the reason I moved a few hours from the beach in Central Oregon. I still get to surf selectively and it it truly good enough. Pain patients who stay active have better prognoses than those who become sedentary; so I would rather surf/bike/hike in pain than sit on the couch(which I did for about a decade whist landlording, not surfing for maybe 5 years, before going on pain meds that allow me to somewhat function)
Medical expenses ate 100k or more with uncovered surgeries that were supposedly approved by my insurance, uncovered meds that are advertised on TV refused. 100k capital gains taxes on CA house, and I was young and not the best decision maker(easy come easy go). I realize now it is easy go! and they are the main reason I am selling my oil city house right now is we need to pay for my wifes recent girl-surgery.
Sure she could go bankrupt but that is not how we roll.
I want to put what is left into something; maybe another oil city house here in Bend will fit the bill just fine.
I quit my old job due to pain; I trained my boss’s kids how to run a business and could do the same with my kids now; and it pays better than going back to college to continue teaching. Now that I have able bodied children to lift boxes for me; we would have higher incomes in CA.
I quit surfing full time; so now I don’t need to live in surferland, but the nostalgia and the success and the economy in one little part of CA is tempting.
Thanks for your input and I will chew on it with some crow mixed with a taste of humble pie.
I agree with the basic outline of Oxide’s idea. You have to remember that you pay rent out of money that is taxed. There is no tax on the imputed rent of owning a house to live in. With housing taken care of (other than upkeep and taxes) you don’t need to earn that much to live and if the “that much” is low enough at least your kids might qualify for health insurance. You owe them that.
Under no circumstances are you to pay for that masters degree other than in-state public college rates and then only while you are also working as much as you can. See if you can find a local public college that has on-line classes so you can save the gas money. Good grief. I make a very healthy salary and I refused to finish my master’s degree until I found a way to get the last four credits a public university. The other serious consideration was if I could do it for free. The only other option I even looked into was one that included a small class taught by a person who would have been a really good career contact.
No more real estate unless you are going to live in it for a very long time. You are in a serious financial situation. You need to take it seriously.
So real estate investing has given me 17 years to work part time, get/pay for a teaching license, and pay medical insurance, premiums, and countless procedures for my reluctant back.
That’s not a “fail” dude. That’s pretty darn good.
Not having a Masters Degree is a plus in Colorado school districts, as they can pay you less. My son is considering being a high school teacher. His current HS teachers all tell him the same thing: Don’t get the Masters, as you won’t get hired, because they have to pay you more. Get the Master’s later, once you have your foot in the door.
Masters degrees in education are also fairly cheaper here. UNC in Greeley has a school of Education, and tuition is about 7K per year. There’s another teachers’ school in Nebraska, Chadron State. Its even cheaper.
Back in the late 60s/early 70s, Mom got the bug in her ear from our next-door neighbor. Bug said, “Go to grad school.”
And Mom did. Darn if she wasn’t the most diligent student on the planet. She’d pack me off to school in the morning, then start working on her homework, research papers, class presentations, what have you.
Her classes were in the evening, and I was responsible for getting my dad fed, the dog walked, etc. I also had my own school work to do.
Mom got that degree in four years, then started applying for teaching jobs. ISTR that she wouldn’t have even been considered without that MA, but I’m not sure.
Once she was in the school district, she embarked on a “Masters Plus” quest. The way the union contract was written, you could move up the pay scale if you had a certain number of credits above your MA/MS. So, Mom went all over eastern PA and northern DE on her effort to earn more credits.
I think she retired with something like 45 credits above that degree.
You’ve already failed at taking risks in real estate.
I don’t agree. How did he fail? Seems he ended up with a paid-off house, did a lot of surfing and fun, had money to partially raise some kids and pulled a lot of cash out of his real estate that does not need to be paid back.
It seems that his back problems have caused him much more woe than his housing problems.
Bend is full of retirees and has good medical. Bubble blew it up from 30k to 80k population wise which does not bode well job wise, however. Lots of builders/contractors/subs/framers/plumbers out of work at this time.
But the wife and I both have stable lucky ducky jobs, I teach and she works for the school nutrition dept.
University is OSU Cascades and is growing, hoping to have 5,000 students by 2030. Does offer the masters I need.
Mike, I live in Temecula and love it. 5 min from wineries and 35 min from the ocean. Hwy 76 is nearing completion on expansion,which should make the drive even quicker and less congested. Home prices are now at about 100-120/sq ft with pools included if that is what you are looking for. Still many std sales available for homes in very good shape that do not carry mello roos taxes or HOAs for that matter. Summers are more than tolerable here as there is a cooling that occurs in the afternoons that is like clockwork. The ocean air filters into Temecula through a break in the mountain range and the evenings are glorious.This is why the wine industry is thriving and starting to produce very good wines. Sure, we are not Napa, but Napa was not Napa at the beginning either.20% only eats up 50K and you have the otehr 50 to invest as you please. I love the central coast as well, but the employment picture there is much tougher. Best of luck to you.
I know some organic farmers there who bring their melons etc to market around LA; it does seem neat and you do have elevation which I like; but living in Santa Barbara/Oxnard I got pretty used to/spoiled at a constant 70 degrees and I wilt once it’s 80. Its cool in Bend
100/sq foot is what I just got for my house in Prineville, OR.
Sounds like it is getting reasonably cheap there.
Thanks for the input. Friend from Cambria recommended it to me. He drives the state constantly so knows where it is nicer and not so nice.
@Polly-thank you, you are right about in state tuition and I am looking at an after work, night school MS degree offered here in Bend thru OSU. Gotta do Masters or the teaching license becomes null and void and I become not a teacher.
Not too sure about transferring teaching license to another state before the license expires and before I embark on a masters. If Oregon is the only state that requires a masters; why is is that the pay is under 40k? Answer, cuz it’s Oregon, stupid!
Mike, I live in Temecula and love it. 5 min from wineries and 35 min from the ocean.
Close to world-class skydiving too.
to loading trucks and slinging vegetables.
Look at the numbers. 80K selling vegetables but you can’t handle the labor or 40K teaching?
Sell the vegetables for 80K but hire a 20 year old (maybe one of your kids later?) to follow you around to do the labor (lift the boxes etc). Now you’re making 80K so give the kid a percentage/commission type thing that pencils out to about 25K so you’re making 55K but not doing the labor.
Now here’s the important part. The kid you hire for about 25K is on a percentage type thing so you make sure you hire someone hungry and a go-getter, and you give him a higher commission on generating new business on top of his standard percentage. Maybe after awhile you buy him a new truck and you hire another kid to take his place. In a few years, you might be pulling 100K or more and not doing the hard labor. No?
I suspect that the $80K is a typo.
No we would make 1k per 2 weekend trips to LA. after I hurt my back we would send my wife and a hundred dollar/day musclehead. Our favorite was a fellow we nicknamed “Hamhands”.
During the workweek we did local markets and pulled up to another 1k. The numbers make sense but it is really not too practical to think my body could pull off even managing truck loading/driving countless hours. Usually I could add a guy/outlet and it would take me an extra hour and I would make an extra 40 bucks; not a good trade when you are sorting veggies at 3:00 AM on a Sunday.
So up to 2k per week if I worked 6 days. Cash.
I was that go-getter for my boss who appreciated the wholesale orders I represented for him and he did not care how much I made so long his orders got paid and the cash I brought him enabled him to pay his “trabajo” costs easier.
Things have changed, now, and he pays his sales workers 20% as he realized I made too much money.
So the opportunity has passed in a way; but I still could go to LA for some pretty good $$ compared to teaching but I got tired of the work mentally and physically. So I probably wont pursue that but I do have plenty of other contacts in the organic foods industry which still interests me on more of a macro/wholesale-don’t sell each carrot individually-level.
There is bucks in organic food. In southern Cal anyway. I see my ex-bosses stuff at whole wallet all the time but they were the worst fickle buyers and my boss does not like their bottom-line buying habits which leave him holding the bag when they use another supplier.
Which is how I found my niche retailing/selling to restaurants; crappy wholesale business after the corporations took over organic farming in the early 90s.
He also set up a CSA after I left. I did go so far as to call him today to “catch up”. May try some summer work for him after all…..
He also set up a CSA after I left. I did go so far as to call him today to “catch up”. May try some summer work for him after all…..
I’m in a CSA. (Matter of fact, part of my breakfast was a CSA organic carrot. Mmm-mmm good!)
The CSA is with a farm about 60 miles east of here, and they grow very good veggies. I want to see them succeed because they’re such nice folks.
You may find that your own CSA attracts a lot of friend-stomers. (That’s a hybrid of “friends” and “customers.”)
I suspect that the $80K is a typo.
I dunno. Those strawberry pickers make us engineers look like the proletariat.
Yeah, organic food still seems to be trending favorably here on the west coast, and I’d imagine the rest of the country will some day follow. There are plenty of opportunities to find an underserved niche and pursue it. I had a firned approach me this week about raising local organic poultry, as the local health-food stores were still sourcing from California’s industrial organic companies. Another sold organic herbs to local resturants and made a decent living. Another grew sprout (although sprouts are falling out of favor here with recent salmonella outbreaks).
What I’ve heard you say seems like you’ve thought this through, and I would agree with much that you’ve said. But then again, my situation of home ownership, underemployment, etc. would make people on this board cringe. But I am strictly in it for quality of life, and could never consider going back to the lifestyle I lived in Cincinnati, Pittsburgh, Philly, etc., regardless of money.
Good luck to you. And keep us posted. I rarely post, but read these posts everyday.
Los Osos
My former corner of the world. A decent 3/2 there is roughly $275k, and it’s slipping away. Remove federal mortgage support, and they’d quickly drop to $100k, IMHO, which is based on the area’s median income. Also, there is now a gold plated sewer system being built there with typical property bond levies costing $400/month for 25-yrs. It used to be a quiet place to live cheaply, but no longer. Lastly, if you need more than groceries you’ll be driving at least 15-miles; everything is “a drive” from there.
Case-Shiller: U.S. Home Prices Fall Near Decade Low
Updated: Tuesday, 24 Apr 2012, 6:17 AM MST
Published : Tuesday, 24 Apr 2012, 6:16 AM MST
By MarketWatch
WASHINGTON - US home prices dropped sharply in February to hit the worst level in nearly a decade, according to a closely-watched index released Tuesday.
The S&P/Case-Shiller 20-city composite index fell 0.8 percent compared to January levels to take the year-on-year drop to 3.5 percent. The index is at its lowest level since October 2002.
Of the 20 cities measured, 16 had negative monthly readings, only three showed gains and one was unchanged.
…
The “bad” Case-Shiller numbers have set the table for the Fed to invoke mortgage-bond purchase QE3. Wait for it.
April 24, 2012, 9:18 a.m. EDT
Stock futures ease rise on home-price data
Netflix and Big Lots drop sharply; FOMC to convene
By Kate Gibson and Barbara Kollmeyer, MarketWatch
NEW YORK (MarketWatch)—U.S. stock futures wobbled Tuesday after an index had home prices falling sharply in February to their worst level since October 2002.
Stock futures trimmed their gains after the S&P 500/Case-Shiller 20-city composite U.S. home price index fell 0.8% in February compared to the month before.
…
wasnt cramer telling everyone to buy nflx at 300?
US home prices drop for 6th straight month
WASHINGTON (AP) — Home prices dropped in February in most major U.S. cities for a sixth straight month, a sign that modest sales gains haven’t been enough to boost prices.
1 month, 3 month and YOY Stats for DC:
Washington DC -0.80% -3.00% -2.34%
Something is not right here, prices only go UP in DC!
http://www.bloomberg.com/news/2012-04-24/home-prices-in-u-s-cities-fell-at-slower-pace-in-february-1-.html
Down down down we go. Price have much much further to fall.
“Washington DC -0.80% -3.00% -2.34%”
Data blip, or major turning point? I guess time will tell…
I predict that time will show a bifurcation of that price curve. Good housing will go up, bad housing will go way down. Average will be meaningless.
Housing is housing and it’s cratering.
“Good housing will go up, bad housing will go way down. Average will be meaningless.”
Why would you expect this?
I’m expecting quite the opposite: High-end housing that was bid to the moon during the bubble years will fall hard as investors at the top tier level eventually throw in the towel. This will put a lid on the prices of everything of lower quality.
I and others have posted numerous articles here to support my thesis. Do you have any evidence whatever to support yours, aside from the fact that you ‘predict’ this without logic or data to back you up?
Here is a good case in point: It looks like this high-end home may turn out to be worth 75% less than the Realtor®/investor thought. This resets the comps for everything in the area of lesser value.
California mansion fire sale: the fall of a billion-dollar realtor
A ground floor room of a for sale, $37 million dollar luxury home at One Pelican Hill Road North is seen in Newport Beach, California April 13, 2012. It has 17 bathrooms, a 17-car garage, marbled floors, gold leaf ceilings, a vineyard, horse stables, tennis courts and a lake - and occupies the largest parcel of residential real estate on southern California’s exclusive Newport Coast. This empty, never-sold, soon-to-be-auctioned mega-mansion is a gaudy symbol of the runaway extravagance that gripped the top end of the U.S. real estate market before the housing crash of 2008. Once valued at $87 million, it could be sold for a quarter of that price at an auction next week. Picture taken April 13, 2012. REUTERS-Lori Shepler
…
What sort of greater fool are they expecting to show up with $37M in hand to buy a $1.7M home?
Let me predict here and now that this listing will expire before the home sells.
Property History for 1 PELICAN HILL ROAD NORTH
Date Event Price Appreciation Source
Feb 27, 2012 Listed (Active) $37,000,000 – CRMLS #U12000828
Property Tax
Taxable Value
Land $857,156
Additions $851,991
Total $1,709,147
Tax (2010) $20,592
It’s pretty funny when the estimate ranges of two major online home price valuation services don’t even overlap.
Home Value Estimates for 1 PELICAN HILL ROAD NORTH
Low Estimate High
Zillow.com $7,541,520 $17,956,000 $35,912,000
Eppraisal.com $3,813,717 $4,486,726 $5,159,734
“…soon-to-be-auctioned mega-mansion…”
If they do auction it, will the price show up in some publicly available source?
I don’t think those Zillow estimates include the land. It sits on 12.5 acres of unobstructed Newport Beach whitewater view. That’s enough for 50 one-million-dollar lots alone.
But McMonogal is skewered big time on this one.
“That’s enough for 50 one-million-dollar lots alone.”
But there is a huge mansion already built there. Are you suggesting it is destined to become a tear-down before it is ever occupied?
U.S. home prices hit nearly decade low in February
http://www.marketwatch.com/story/us-home-prices-hit-nearly-decade-low-in-february-2012-04-24
Why buy a house when prices are falling? Buy later after prices crater for 65% less.
2nd link
http://www.marketwatch.com/story/us-home-prices-fall-to-nearly-decade-low-2012-04-24
So the shack I am seeing for $375 will be $175 before this is over?
Los Osos, CA is the demographic.
Last time I purchased in CA it was 1995 and prices had stagnated for about 5 years and were starting to rise. But I confess to wanting to go back to CA, only to a very small area am I interested though, SLO/Cambria/Los Osos. Will coastal fall like 65%(I doubt it).
How long to wait to jump in, before my seed money is gone for good? Selling my shack into the dead cat bounce this month for the same as I paid for it. Not paying a realtor to get the job done is in the bag, BTW.
A market won’t turn around until the foreclosures and short sales have burned themselves out in that particular market. However, once that has happened, there will likely be very little inventory, and it could be quite challenging to buy something that you want.
A huge amount of sales are coming from distressed situations today. If the distress is gone, there are few willing sellers at today’s prices.
If you think prices won’t be dramatically lower 10 years from now, you’re gonna be stunned.
OK
I don’t care what you do bud. You keep playing with fire you’re gonna get burned…… again.
Welcome back to the 19th century!
http://www.cbsnews.com/8301-505144_162-57417654/jailed-for-280-the-return-of-debtors-prisons/
“Creditors have been manipulating the court system to extract money from the unemployed, veterans, even seniors who rely solely on their benefits to get by each month,” Illinois Attorney General Lisa Madigan said last month in a statement voicing support for the legislation. “Too many people have been thrown in jail simply because they’re too poor to pay their debts. We cannot allow these illegal abuses to continue.”
Parallels between the 19th century and now:
Robber Barons = 1%er Wall Street pigmen
William Blake’s “dark satanic mills” = Foxconn City
Upton Sinclair’s The Jungle = “pink slime” beef filler
No women’s suffrage = the GOP’s war on women
And for those who care about public services, state and local governments run by the modern equivalent of Tammany Hall.
Realtor writes a spin article for the local news and quotes herself!
http://www.goblueridge.net/index.php?option=com_content&view=article&id=15643:high-country-real-estate-stats-up-&catid=1
Oh crap. It begins. (not good, not good at all. I remember the cities burning in the 1960s)
http://www2.wkrg.com/news/2012/apr/23/man-beaten-mob-critical-condition-ar-3659891/
“As the attackers walked away, leaving Owen bleeding on the ground, Parker says one of them said “Now thats justice for Trayvon.”"
Read this on Drudge this morning and was waiting for someone else to post it. This, dear HBB, is the Long Hot Summer that the squad has correctly predicted. Expect there will be hundreds if not thousands of similar incidents across the country, and all will be totally ignored by the MSM and the Jackson/Sharpton race hustlers. Having lived in Cincinnati in the aftermath of what CNN termed “demonstrations” in 2001, the squad is very familiar with this sort of mayhem. THE LONG HOT SUMMER IS HERE
http://www.enquirer.com/editions/2001/07/09/loc_riots_effects_wont.html
Here in Tucson, we have some street basketball. But in our nabe, not so much. Might be due to the public park at the end of the street. Park’s got two outdoor basketball courts and a gym with two more that are air conditioned.
Oh, there was that one house full of crumb-bum renters who have caused nothing but problems over the years. We neighbors have tried everything short of standing on our heads while whistling The National Anthem to get them out of here. So far, nothing has worked.
Any-hoo, they put a portable basketball hoop on the sidewalk, Yours Truly reported a code violation*, and the hoop mysteriously vanished. Not that the kids at that house don’t continue to play in the street. We neighbors are worried about that situation, and, yes, we have reported it. More than once, in fact.
*The violation was blocking a public sidewalk. You can’t do that in Tucson.
What, you’re not going to call out the squad on his “racism” like you’ve done to dj?
The Long Hot Summer is here, you’ll see
And yes the squad correctly predicted this in post at 06:35:12 in this very thread:
http://thehousingbubbleblog.com/?p=6934
I see a bunch of vicious low-life losers looking for any reason to riot.
Half-Peruvian George Zimmerman shoots Trayvon Martin therefore it’s time to Get Whitey (and loot Foot Locker!)
Read the Enquirer link above about the albino, African-American woman assaulted in the Cincinnati riots because her assailants thought they were going to Get Whitey.
The “racial” aspects of these events are now beyond absurd, but you can guarantee that Jackson and Sharpton will make money off it if they can
Looting is also color blind.
I’m afraid all of you are right.
There is more dire housing market news today than you can shake a stick at, yet the stock market is up, proving yet again that the U.S. economy has decoupled from housing. It is no longer necessary for housing to recover in order for the rest of the economy to come back.
Foreclosure crisis: halftime
Recent statistics show foreclosure activity is declining, but, reports Amy Hoak, the nation’s foreclosure problem is far from over. What’s more, the drawn-out foreclosure crisis has lasting consequences.
• Decade-low home prices | City-by-city breakdown | Shiller discusses data | New-home sales fall
DJIA = 13K or bust!
It was a photo finish at DJIA = 13K on FOMC meeting day. Isn’t that special?
Soros Says Bundesbank Guarding Itself Against Euro Break-Up
By Simon Kennedy and Patrick Donahue - Apr 12, 2012 7:45 AM ET
Bloomberg
Billionaire investor George Soros said financial markets are concerned other countries will follow Germany’s Bundesbank in girding against the end of the euro.
The Bundesbank is campaigning against the “indefinite expansion” of money supply and taking steps to limit the losses it would face if the euro splintered, Soros said in a speech in Berlin today.
“This is creating a self-fulfilling prophecy,” he said. “Once the Bundesbank starts guarding against a breakup everybody will have to do the same. Markets are beginning to reflect this.”
As the debt crisis stretches into a third year, Bundesbank President Jens Weidmann has begun warning that the European Central Bank’s emergency liquidity measures “create risks and have to be unwound” after the ECB balance sheet ballooned by about 30 percent since November.
If the ECB continued offering support for a few more years then a “break-up of the euro would become possible without a meltdown,” Soros said.
http://www.bloomberg.com/news/2012-04-12/soros-says-bundesbank-guarding-itself-against-euro-break-up-1-.html
April 24, 2012, 12:01 a.m. EDT
Throwing good money after bad
Commentary: Regardless of IMF, euro is doomed
By Irwin Kellner, MarketWatch
PORT WASHINGTON, N.Y. (MarketWatch) — You might as well flush down the drain the $430 billion just committed to the International Monetary Fund, for all the good it will do to keep the euro zone from breaking up.
The IMF recently was able to raise this sum in the form of extra lending capacity to be used if the euro crisis worsens. As impressive as it seems at first blush, this latest gambit has three strikes against it, making it unlikely that it will achieve its objective.
First, it comes at a time when austerity is the name of the game across the pond. All across Europe (including Britain), finances are being squeezed in an attempt to meet targets for budget deficits set by the European Union.
Instead of trying to stimulate growth, pan-European fiscal policies are focusing on deficit reduction. This depresses already sluggish economies, thus reducing tax revenues flowing into these governments’ coffers.
As a consequence, fewer funds are left to pay down existing debts. Their resulting rise limits these countries’ ability to borrow, boosts their debt-to-GDP ratios, and forces them to adapt even more austere programs.
As you might imagine, government policies that cut programs and raise taxes don’t go down very well with the general population. This is why there are demonstrations in almost every member of the EU almost every day, with regime changes not far behind.
The second strike is an eye-opener, considering that it is occurring among a group of nations that are supposed to be banded together: Rich countries like Germany simply do not want to bail out their poorer brethren.
In a way, this is not surprising, considering that Germany and others in Northern Europe have disparate cultures compared with those in the South. In some cases, they have actually fought each other over the years.
Certainly, they do not feel a kinship to such countries as Spain, Italy or Greece the way New Yorkers do with Mississippi or Arkansas, for example. In our case, we share the same language, history and culture, besides the same currency.
This brings up the third strike: the euro and the basic fallacy behind its creation. In a nutshell, you cannot have one currency serving a group of politically independent nations without having a common economic policy.
To achieve such an objective would require the nations that use this currency to give up their sovereignty to a central government with the power to legislate and enforce common fiscal and monetary policies. The euro zone never had such a centralized authority and lacks one to this day.
…
Certainly, they do not feel a kinship to such countries as Spain, Italy or Greece the way New Yorkers do with Mississippi or Arkansas, for example. In our case, we share the same language, history and culture, besides the same currency.
They may not feel a kinship, but they sure love taking vacations along the Mediterranean shores. Where their boorish ways are deeply resented by the locals.
That’s another long, hot summer worth watching.
“Certainly, they do not feel a kinship to such countries as Spain, Italy or Greece the way New Yorkers do with Mississippi or Arkansas, for example.”
“Ford To New York: Drop Dead” “Says He’ll Veto Any Bailout”
Now New Yorkers felt a good deal of kinship toward Mississippi and Arkansas in the 1930s, when they took over the federal government and redistibuted money from the home state to less developed areas of the country. The question is, do they feel the same way today? And how does the rest of the country feel toward New York.
And if LA had an earthquake, would Congress want to send aid — or economic development recruiters?
Kinship with Noo Yawkers? Yeah, right.
Especially the sub species that works/lives on Manhattan, Westchester County, and certain portions of western Connecticut. To them, the wretched refuse of Flyover and Foxconn are interchangable.
As soon as the J6P and small business owner Republican-types realize they have more in common with Juan or Xian 6 Packo than they do with these guys, the better off they will be.
There is no way you could possibly be aware of those sentiments(they are true) if you’ve never lived in Westchester or Fairfield Counties.
So fess up…. when did you live there?
True……my experiences with these folks are based mainly on the ones I had the misfortune to deliver new airplanes to.
My favorite was the azzhole that wrote up 300 paint squawks on his new airplane on a Friday afternoon, thus assuring that me and my crew would be ordered to come in on Saturday and Sunday.
There was nothing wrong with the paint. He just had his own reasons for staying in town for the weekend, and didn’t want for the sale to close until the following Monday or Tuesday
Another was the guy with an airplane two years out of warranty, who spent every waking minute claiming everything we found wrong with his broke-d##k airplane was covered by warranty.
These guys always end up getting free stuff, because it’s cheaper to just give stuff away, than it is to take the time/man-hours to prove they are full of $hit. And of course, everybody forgets about the “free stuff” at performance appraisal time, when the poo-bahs are looking for at the sales numbers, trying to find reasons to reduce/deny a raise/bonus.
Upon further review, maybe I’ve been too narrow/regional in my viewpoint. Henchforth, everyone is a prick, until proven otherwise…..
The Westchester folks I know are incredibly racist and classist.
Upon further review, maybe I’ve been too narrow/regional in my viewpoint. Henchforth, everyone is a prick, until proven otherwise…..
Spoken like an experienced small businessman.
Is there any good money left? Where is it?
April 24, 2012, 12:02 a.m. EDT
Dreaded IPO-crash signal flashes bear warnings
Commentary: Replay of ‘90s IPO mania blows new bubble
By Paul B. Farrell, MarketWatch
SAN LUIS OBISPO, Calif. (MarketWatch) – Yes, this really is the hottest IPO market since 2000. And that’s bad news. Very bad. Remember my last column back in 1999: I posted a list of winners, an unbelievable 19 funds had astronomical one-year returns between 179% to 323%! Yes, that hot!
Real bad news. On March 20, 2000 my headline read: “Next crash? Sorry, you’ll never hear it coming.” Never hear? Why? Investors hate bad news. Deny it. Tune out. No wonder Wall Street lost over $10 trillion of America’s retirement money in the 30-month recession that followed. It was so predictable.
Now ask yourself, what’ll trigger the next crash? Today’s hot tech IPO mania? Bank risks? Politics? Oil? Euro default? War? Every crash has a unique profile, new trigger, different flashpoint. But the ancient cycle just keeps repeating like clockwork. Endless. A bubble. Then denial. Peak. Pop. Crash. Repeating for centuries. So inevitable. So obvious. Yet we never learn. Today, I’ll explain why.
Another example: Remember the 2008 cycle? That bubble and meltdown were so predictable. For several years ahead of the 2008 meltdown I reported on more than 20 key warnings of a “mega-bubble” building, a new crash that would take down the world economy, as Wall Street’s insatiable casino pushed the U.S. monetary system to the edge of bankruptcy.
Yes, obvious. Yet millions of Main Street investors were again in denial, ignoring the warnings. But in good company: Both Fed Chairmen Ben Bernanke and Alan Greenspan, plus Treasury Secretary Hank Paulson, all publicly dismissed warnings of a coming crash, till too late. Remember Paulson’s delusional claim in Fortune: “Best economy I’ve ever seen in my lifetime.”
Today’s hot IPO market smelling like 90’s dot-com mania
…
Key point from the linked article:
The truth is: Wall Street does not want the neurosciences to help investors improve their skills. And if you learn nothing else here today, remember this: If the promise of the behavioral sciences really did work for investors, if you got smarter, wised up to Wall Street’s casino operations, knew why the house always wins then Wall Street couldn’t get rich siphoning off a third of your returns. Period.
Shiller Discusses Latest Housing Data
Robert Shiller joins Markets Hub to discuss U.S. home prices, which continued to push Standard & Poor’s Case-Shiller home-price indexes down to new post-crisis lows in February. Photo: AP.
“I don’t know that home prices will go up any time soon.”
“Atlanta was one of the huge bubble cities.”
Preach it, Professor Shiller!
3.9% doesn’t sound like much until you apply it to the value of a new home in San Diego (”from the $700’s”):
3.9% X $700,000 = $27,300.
That’s more than a year’s rent thrown away on ownership, before even considering PITI!
April 24, 2012, 11:08 a.m. EDT
City-by-city home prices from 20 top markets
By Steve Goldstein, MarketWatch
WASHINGTON (MarketWatch) — The following is the city-by-city breakdown of the cities followed in the S&P/Case-Shiller 20-city composite that was released Tuesday.
Nationally, prices hit a near-decade low in February. Weighed down by foreclosures, stubborn unemployment and tough credit conditions, home prices in 20 major U.S. cities sank in February to the worst level since October 2002.
• Atlanta: Prices down 2.5% monthly and 17.3% yearly. It was the worst annual rate of home value change in the 20-year history of the index.
• Boston: Prices down 1.1% monthly and 2.4% yearly.
• Charlotte: Prices down 0.4% monthly and 1.8% yearly.
• Chicago: Prices down 2.5% monthly and 6.9% yearly.
• Cleveland: Prices down 1.7% monthly and 4.4% yearly.
• Dallas: Prices were steady on the month and down 1% yearly.
• Denver: Prices down 0.9% monthly and up 0.5% yearly.
• Detroit: Prices down 1.3% monthly but up 1.5% annually. Prices in Detroit have dropped by nearly a third since January 2000, by far the worst movement of any of the major cities measured.
• Las Vegas: Prices down 0.4% monthly and 8.5% annually. Las Vegas home values are down 62% from the peak.
• Los Angeles: Prices down 0.8% monthly and 5.2% annually.
• Miami: Prices up 0.6% monthly and up 0.8% annually.
• Minneapolis: Prices down 1% monthly but up 0.4% annually.
• New York: Prices down 0.8% monthly and 3% annually.
• Phoenix: Prices up 1.2% monthly — the only city with back-to-back monthly gains — and up 3.3% annually. The Phoenix market has been helped by low inventories, employment growth and demand from Canadians. See WSJ.com story on Phoenix market.
Portland: Prices down 0.3% monthly and 3% annually.
San Diego: Prices up 0.2% monthly but down 3.9% annually.
San Francisco: Prices down 0.7% monthly and 4.1% annually.
Seattle: Prices down 0.8% monthly and 2.9% annually.
Tampa: Prices down 0.2% monthly and 2.9% annually.
Washington, D.C. : Prices down 0.8% monthly and 2.3% annually.
Too bad Eddie is no longer posting, as Atlanta and Vegas were two of his favorite examples of where the local real estate market was on the upswing:
• Atlanta: Prices down 2.5% monthly and 17.3% yearly. It was the worst annual rate of home value change in the 20-year history of the index.
…
• Las Vegas: Prices down 0.4% monthly and 8.5% annually. Las Vegas home values are down 62% from the peak.
…
Las Vegas home values are down 62% from the peak.
There is something exceptional about a country where something like this happens.
Gambling was a great economic base when Las Vegas had a monopoly.
Now?
Last I checked you had to travel a long way to end up in a desert.
Last I checked, the casino gaming industry had transformed itself from a mob-run Las Vegas enterprise to a nationally-accepted sector of the economy with local operations far and wide. I suspect part of the story of the LV real estate crash is the end of their monopoly position in this industry.
I suspect part of the story of the LV real estate crash is the end of their monopoly position in this industry.
Around these parts, there’s talk of turning a just-closed hotel into a Indian hotel-casino. The local Pascua Yaqui and Tohono O’odham have done great jobs with their casinos.
These numbers don’t jive with housingtracker.net which is, hmmm, now apparently http://www.deptofnumbers.com/asking-prices/.
Cool website…thanks.
“Atlanta: Prices down 2.5% monthly and 17.3% yearly. It was the worst annual rate of home value change in the 20-year history of the index.”
Any explanation for this? I don’t recall metro Atlanta being a particular housing bubble locus, or being hit harder than average by recession.
But it was.
I see the realtor parasites are out in full force attempting to spin CS.
Excellent, relevant programming on PBS tonight. GD1, Origins of the WS Bailout, excellent interviews on Housing Bubble all week.
Newshour
American Experience
Frontline.
Oh, brother.
I just got off the phone with one of those “make money on the Internet” wannabes. Just when I thought they no longer existed.
Guy was under the impression that he could set up a website with affiliate program links and bring in $2,000-$3,000 a month. Yeesh. Where do these people come from?
I think I used the “Good luck!” sarcasm enough to get him off the phone. I also did a quick search and found a trail of crummy looking websites that appear to be abandoned.
Looks like this guy hippety-hops from one business “opportunity” to the next.
What was really sad was how clueless and gullible he sounded. Like, on his very best days, his IQ came within shouting distance of triple digits.
People without real career opportunities will grasp at anything because they have too much time on their hands.
The gullible have always existed, but without meaningful jobs, they become desperate and fall prey to the sharks.
There is a direct correlation between the beginning of job offshoring and the rise of “money making seminars/systems/affiliate/franchise/multi-level/training”.
LPS “First Look” for March delinquency data
http://www.lpsvcs.com/LPSCorporateInformation/NewsRoom/Pages/20120424.aspx
Not knowing the language code, it looks like it’s up to me.
Is that right?
“Number of properties that are 30 or more days delinquent or in foreclosure: (A+B) 5,591,000″
That’s a lot of shadow inventory!
I told myself I’d just share the link, but I’ll share my thoughts on the data since I’ve been living this stuff over the past couple of years.
“Normal” is ~2.5MM loans at some stage of delinquency at any given time. This is about 5% of all loans. The bulk of this is usually made up of 30-60 day delinquencies, with smaller numbers in the 90+, and foreclosures. Going back 6 months, the trend looks something like this:
<90 day delinquent pool
2,329,000
2,335,000
2,309,000
2,226,000
2,059,000
1,888,000
“normal” for this category is in the 1,750,000 range (~3.5% of all loans)
90+ days delinquent, but not in foreclosure last 6 months
1,759,000
1,809,000
1,792,000
1,772,000
1,722,000
1,643,000
“normal” for this category is in the 500,000 range (1% of all loans)
In the foreclosure process last 6 months
2,210,000
2,116,000
2,066,000
2,084,000
2,065,000
2,060,000
“normal” here I estimate on the low end is 250,000 (half a percent).
In other words, new delinquencies are at about ~110% of normal, 90+ days at ~330% of normal, and foreclosures at ~800% of normal.
There appears to be a bend in the curve downward recently for 90+ delinquent loans, which makes sense given after the settlement, more delinquencies restarted processing (either moved into foreclosure, or were restructured in some way). With this bend down, it didn’t result in more in the foreclosure bucket, meaning that a fair number left the combined pool of 90+ delinquent and foreclosure.
Overall I read this data to mean that the pig is largely in the python (ie. not substantially more supply then “normal” entering the foreclosure pipeline), and we are now firmly in the process of digesting the pig.
We shall see how much the settlement accelerates the process (if at all). The acceleration is mainly needed in judicial states. Non-judicial states were doing OK, but may speed up with the settlement.
The main price risk due to increases in foreclosure activity, IMHO, is in judicial states, as they were most clogged up, and will have the biggest increase in foreclosure activity due to the settlement.
More granular data by state will be available with LPS full report on May 1 (they are always late, so I expect to see it by the end of next week).
By way of example:
Non-current loans in FL (judicial state) peaked at 23.8% in February 2010, and has fallen only to 22.1% at February 2012.
Non-current loans in CA (non-judicial state) peaked at 15.3% in February 2010, and has fallen to 9.6% at February 2012.
Non-current loans in AZ (non-judicial state) peaked at 16.3% in February 2010, and has fallen to 9.6% at February 2012.
Non-current loans in NV (non-judicial state) peaked at 23.3% in February 2010, and has fallen to 15.9% at February 2012. NV however just passed a law that will slow down their process, making them akin to judicial states in terms of working through the inventory.
“Normal” as noted above is about 5% (ND and SD, with all their oil shale, jobs, man-camps, housing shortages, etc. are at 4%, and 5%, respectively).
Based on this data, CA and AZ are more than halfway through their shadow inventory, and FL has just started.
From February to March, both CA and AZ moved down by a fair bit (fell by 0.3%, and 0.5%, respectively, from 9.9% and 10.1%). At that pace, CA is “normal” in 15 months, and AZ in 9. However, drawing the line from the peak in CA to today is remarkably straight and steady. If you extrapolate the line (meaning last month was a bit of an outlier), it puts CA at 5% non-current (”Normal”) for the state as a whole by the end of 2013, not the middle of 2013.
I haven’t run the extrapolation for AZ, but their slope downward is steeper than CA, meaning they’ll reach “normalcy” sooner.
OK…now is the time where RAL calls me a realtor and a liar.
Sorry, the move by AZ and CA noted was from January to February…we won’t get the March data until next week.
‘Normal” is ~2.5MM loans at some stage of delinquency at any given time. This is about 5% of all loans.’
When I started this blog I ran across a great series of articles the Charlotte Observer was doing on (unknown at the time) subprime loans. These were being made largely by Beazer Homes in their new subdivisions. One of the statistics they looked at was that it only took 1.5% of an areas houses to be in foreclosure to bring down prices for the entire neighborhood.
Today I was researching a post on California for tomorrow. An article on Palm Springs said there were only 995 foreclosures in that county last month. Wow, only close to a thousand foreclosures in one county, in one state, in a month. IMO, we have to keep ’slope downward is steeper’ in perspective.
Ben,
That makes sense (that 1.5% would cause problems…about 3x “normal” vs. today’s 8x “normal”).
Here’s the Riverside County data from Foreclosure Radar.
http://www.foreclosureradar.com/california/riverside-county-foreclosures
A year ago foreclosures were running at about 2k per month (back to bank as REO plus sales to 3rd parties). A reduction from 2k per month, steadily falling over the year to about 1k is a pretty significant move. Still too high, but clearly in the right direction.
From this too, you can see that there is plenty of REO in Riverside…about 8,700 homes.
Also, while Palm Springs is a small market, Riverside is a pretty big county at 2.2 million people, 1/3 the population of Arizona, which had 3k foreclosures last month (REO plus 3rd party sales).
IMO, the asset managers have shifted focus to the judicial foreclosure states after the robo-signing settlement.
I think we’ll find out quite quickly. I don’t know what’s changed on the ground in Florida and other judicial states. Frankly I don’t know what can happen there even if there was a will. I’m assuming they’ll still need to go through the courts. What I do know is they can’t work through their inventory any slower than they have.
Anecdotally in Southern California in the past couple of months, I’ve heard that some banks are planning private auctions with qualified (larger) buyers of REO, completing pre-approved short-sale transactions in bulk and Fannie/Freddie are starting to allow regional bulk sales as opposed to more difficult to manage national portfolios of properties. This is happening with the backdrop of lots of capital coming to market from institutions. If what I’m hearing isn’t a total load of garbage, we should see non-current loans continue to go down in CA at at least the recent pace.
Certainly judicial states should pick up…they couldn’t be going much slower. I remember seeing a CNBC slide show with the best 10 housing markets in the country (as measured by year-on-year price appreciation). 7 of the 10 were in Florida. With an influx of distressed inventory coming, this could be the mother of all head fakes in terms of price recovery.
I found the link…http://www.cnbc.com/id/46329421
P.S. I hate the CNBC slideshows, a huge pain to go through.
I miscounted on the CNBC slideshow…8 of 10 were in FL. Wow.
The same folks who foolishly divested out of Treasurys last year are now calling a housing bottom, even as the Case-Shiller Index keeps falling month-in, month-out.
Housing Declared Bottoming in U.S.
By John Gittelsohn and Prashant Gopal - Apr 24, 2012 9:01 PM PT
…
Foreclosure Supply
While the volume of sales has increased, prices still have a way to fall because as many as 6 million homes with delinquent mortgages and in the foreclosure process are likely to come to the market, Scott Simon, head of mortgage- and asset-backed debt at Newport Beach, California-based Pacific Investment Management Co., said yesterday on Bloomberg Television.
“We think we’d go down another 3 or 4 percent over the next 12 months, probably bottoming sometime next year,” Simon said on “Surveillance Midday” with Tom Keene. “One month doesn’t change anything.”
…
I guess it is easy to imagine away the shadow inventory if the REIC is buttering your bread. So many real estate experts seem eager to completely ignore the backlog of shadow inventory left behind by the robo-signing debacle. Some commentators suggest the number of foreclosures and other shadow inventory to work through over the next decade might be as high as ten million or so; besides maybe six million or more foreclosures that remain to work through, myriad baby-boomers will be looking for the exit from family-sized McMansion tract home housing. The future outlook for supply is high.
There is also a glib acceptance of the myriad extraordinary measures currently in place to prop up the housing market. I refer the ‘experts’ who view these props as permanent to Stein’s law.
Finally, I am quite deeply impressed by American economists’ optimistic implicit assumption that our economy has decoupled from China’s and Europe’s, where recessions are currently brewing. They also seem fully convinced that Main Street USA is decoupled from Wall Street, where today’s WSJ indicated major layoffs are on the way in the investment banking sector. Every other time since I started watching many years ago, a major wave of Wall Street layoffs has spilled over to Main Street; I guess the green shooters believe it is different this time?
So much groundless optimism is enough to make a professed bear want to hurl.
Housing market may be on rebound at last
New data show price declines easing in big cities, sales of new homes improving nationally and foreclosures in California dropping to levels not seen since 2007.
Foreclosed home
A foreclosed home in Richmond, Calif., in April 2011. Banks still retain many foreclosed properties on their books. (Justin Sullivan, Getty Images / April 6, 2011)
By Alejandro Lazo, Los Angeles Times
April 25, 2012
The housing market’s long, cold winter may finally be heading into a springtime thaw.
New data show price declines easing in big cities, sales of new homes improving nationally and foreclosures in California dropping to levels not seen since before the start of the credit crunch nearly five years ago.
The easing of foreclosures is seen as key by many economists, since the glut of these properties being sold at a discount has been a significant drag on home prices.
“The foreclosure market is turning into a drought, not a wave, and that has resulted in a lack of inventory,” said Sean O’Toole, chief executive of the firm ForeclosureRadar.com. “If it continues, it will likely mean that we’ve either seen a bottom — or have passed a bottom — in prices because of limited supply and still strong demand.”
Home prices remain depressed from their peak in 2007, when the median-priced home in Southern California sold for $505,000. The median price last month was $280,000.
The economy overall has been improving, however, with unemployment, retail sales, corporate profits and other measures showing steady if unspectacular gains. Housing has been one of the last holdouts, but analysts note that prices have stabilized and sales volume has been gaining.
“What are important are sales and inventory, and those are pointing in the right direction,” said Christopher Thornberg, a principal at Beacon Economics who was one of the early callers of the housing crash. “I would say that by the end of the year, they should translate into better prices.”
Thornberg added, “The recovery is here.”
…
Even though layoffs are on the way at Wall Street investment banks, and New York State has a gazillion year supply of shadow inventory to work through, Realtors® assure us that the Manhattan and nearby housing markets have never looked better.
Morgan Brennan, Forbes Staff
I write about real estate markets, outrageous homes and cities.
4/24/2012 @ 10:35PM
How Wall Street Layoffs Will Affect The Housing Market
Investment banks including Goldman Sachs, JPMorgan Chase, Citigroup and Morgan Stanley may slash and burn dozens of jobs as soon as next month, as my colleague Halah Touryalai reports. And these positions may never be replaced. It’s the latest round of layoffs for Wall Street, which let thousands of workers, particularly traders, go in 2011.
Wall Streeters have already suffered some discouraging news this year, as cash bonuses for work done in 2011 were cut and capped. A February report estimated that Wall Street bonuses dropped 14% from 2010 to 2011. For staffers at firms like Bank of America and Citigroup, the cuts were as high as 30% and bonuses at Morgan Stanley were capped at $125,000.
All that cost-cutting has had repercussions that fan out past that eight-block swath of downtown Manhattan street where smocked traders scream in pits and analysts calculate risk. In years past, Wall Street has always affected Main Street. Literally.
“The finance sector plays a very large role in New York City and as a result of that, those people play an overall role in the residential real estate market,” explains Gary Malin, president of Citi Habitats, a New York City-based realty firm.
On a grand scale, we saw all too painfully how intertwined Wall Street and real estate were as the housing bubble deflated and the global economy plunged into a recession in early 2009. Locally, Wall Street residential enclaves like the Financial District and New Jersey’s Hoboken emptied out as finance folk packed their bags, newly out of work at companies where balance sheets were rapidly deteriorating and jobs disappearing. In the Tri-State area around the Big Apple residential projects stalled and homes fell into foreclosure.
Now less than four years later, as bonuses shrink and another spate of layoffs roll out, how will that affect the housing market? The answer, like all things in housing today, depends on location and a variety of factors.
In Manhattan, brokers remain positive about the housing market despite compensation woes on Wall Street. Malin, for example, explains that the market has become much more diversified since the days of Lehman Brothers and bankruptcy filings. Wall Street doesn’t represent the bulk of the buying base that it did a decade ago, he says. Foreign buyers have re-entered the market, clocking some of the priciest sales since the downturn, and burgeoning industries like tech have helped inject Manhattan’s residential market with income streams that aren’t tied to investment firms.
“We have been affected by Wall Street bonuses being lower, however, inventory is really low as well,” adds Jarrod Guy Randolph, a vice president at CORE Group. Randolph, who has represented developers’ new condo projects directly for the past decade, says the market has not only been recovering but booming, particularly for new higher-end apartments. He says these “premiere properties” have welcomed multiple bids, bids over asking price, even wait lists in recent months. “People still have to move…so it’s yet to be seen what the layoffs will do to the marketplace, if much.”
But while Manhattan agents remain confident in the city, the neighboring suburbs may be harder hit by labor pains felt on Wall Street. Take the so-called hedge fund capital of the world, Greenwich, Conn., where smaller bonuses are already affecting home sales this year.
“The recovering economy has given us a good real estate market if you are looking at houses under $2 million; but over $2 million, which is primarily the area of the market fueled by Wall Street bonuses, sales are significantly down,” says Mark Pruner, an agent with Prudential Connecticut Realty and author of the Greenwichstreets.com blog. He calculates that sales were up 39% for homes under $2 million and down 31% for pricier properties in the first quarter of 2012.
“What you are seeing is that people are getting smaller cash bonuses and being more conservative about spending them,” Pruner asserts. It has also meant that sales in the tony town often associated with Wall Street have been, like New York City, fueled increasingly by buyers hailing from other industries. He is seeing more advertising and consumer goods executives come to Greenwich — as well as foreign buyers. Pruner notes that 25% of his clients currently hail from Southeast Asia.
Other expensive ZIP codes where wealthy Wall Streeters have long taken up residence saw both sales and prices slip down last year. In February The Real Deal looked at home values in New York’s Nassau County and Westchester County, as well as New Jersey’s Bergen County and Connecticut’s Fairfield County. The real estate publication found that:
Even so, realtors and economists believe these markets will continue to bottom and stabilize in 2012, even as bankers lose their jobs. Westchester County, for example, already welcomed a 28% increase in luxury home sales (priced $2 million or higher) in the first quarter, compared to the first three months of 2010, according to Houlihan Lawrence. The median sales price was down 10% and the majority of those sales remained under $5 million, a 5% decrease from last year.
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We are all serial bottom callers now.
Except for me. I’m not going to even speculate on when a bottom will be reached until prices stop falling.
April 25, 2012, 12:02 a.m. EDT
Prices to bottom in these 19 markets in 2012
Significant price increases in Phoenix, Miami and Tampa: Zillow
By Amy Hoak, MarketWatch
CHICAGO (MarketWatch) — Home prices in a majority of the markets covered in Zillow’s Home Value Forecast are set to bottom this year — if they haven’t already, according to a Zillow report released on Wednesday.
“From an economic perspective, the latter part of the first quarter is full of positive news as the spring selling season gets underway,” said Stan Humphries, Zillow’s chief economist, in a news release. “While it is unlikely that national home values continue to rise at this rate through the rest of the spring and summer, it is undeniable that we are seeing sparks of life in the housing market.”
Nineteen out of 30 markets in Zillow’s monthly report are expected to hit a bottom, in terms of home prices, at some point in 2012, according to the real-estate website.
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