At The Bottom You Don’t Have Anywhere To Go But Up
Readers suggested a topic on the housing bubble. “Is the housing Bubble over yet, or is it only the fifth inning or so?”
A reply, “Over. I expect new bubbles though as the FED Bank runs the economy hot for maximum growth. I watch RE very closely in Moorpark CA every POS is selling and for almost 100K more than it did 8 months ago. WTF ?’
And this, “WT Payment There’s your answer. Housing is just one necessary product….Food & water is another. All around you, we see higher prices in the things we must have. Oil is another example. We had a S & L Bubble…Then we had a Dot-Com bubble….Then we had a Housing Bubble….The latest bubble that we find ourselves in now is a interest rate Bubble and, when it pops the fallout from it will be widespread across many product categories.”
One said, “Some markets in the USA have crashed, other have yet to feel the big crash. In the rest of the world, it is just barely past peak. In China you have 700 sqft condos selling for 70x median household income. In India’s big cities condos are selling for $300K, but the target audience is making $10K a year or less. In some Canadian cities, where income are $40K a year, you can’t buy a house for under $1 million.”
And finally, “There won’t be a peak in Rio de Janeiro. It is not the same here as other places in that we have the beach and mountains and there is no more space to build in the desirable sections. Also with all the oil being found offshore and the Olympics and World Cup coming, too many Brazilians want to live here. All of these factors have come together forming a different type of economic model than other areas. If you buy now, you’re going to make a lot of money here.”
The Gazette Journal. “‘What we noticed this time was that there was a variety of markets, and Reno being one of them, we considered boom towns,’ said Julie Reyolds, VP of Realtor.com. ‘What that means, it’s one of the (146 markets that we have been watching) that zoomed to significantly higher ranking, based on those key metrics.’”
The Press Enterprise. “Bill Blankenship, CEO of the Building Industry Association of Southern California’s Riverside County chapter, said a lack of housing supply is driving the market, as is the pricing. People are coming off the sidelines and builders are seeing more interest from a better qualified pool of buyers, he said, but there’s not a lot of supply out there.”
“‘There isn’t enough inventory, in a nutshell,’ agreed Doug Shepherd, immediate past president of Inland Valleys Association of Realtors, noting that the MLS has 8,000 fewer properties on the market now than one July ago when there were about 18,000 listings. ‘The inventory is way low,’ he said, and that’s pushing prices up. ‘The real story is how hard it’s become to buy a house right now.’”
The Tampa Bay Times. “Inventories across the country, steadily sliding since 2007, are now at a six-year low, National Association of Realtors data shows. Low inventory can lead to a seller’s market, including higher prices. After years of sinking values, that’s good news for sellers, some of whom have seen bidding wars. Squeezing the supply are homeowners waiting to list their homes, betting future price increases could net them a better deal, real estate agents said.”
“‘The people who had problems and had to sell, had to sell. But we’ve been in this down market for four years,’ said Century 21 franchise owner Craig Beggins. ‘People are saying, ‘Why on earth would somebody sell their house now?’”
“While Smith & Associates Realtor Liane Jamason typically carries a dozen active listings, she’s now down to zero and has struggled even to find a new home for herself. Many house hunters still think the market’s wide open with foreclosures, Jamason said, ‘but that’s not reality.’ ‘We still have buyers looking for the bottom. I told somebody today, you missed it,’ said Century 21 Realtor Jaci Stone.”
“When Lisa Gilmore-Sarnowski and her husband began shopping for their first home, they knew the mantra well: Now’s the time to buy. Having moved last year from Chicago, the couple believed Florida held, as Gilmore-Sarnowski said, ‘this amazing abundance of little gems’ tossed aside in the market crash. Their hunt quickly turned frustrating. Most homes they found were already under contract or outside their $150,000 price range. Their best find, a St. Petersburg bungalow, was practically falling apart.”
“‘Honestly, it feels like we’re a day late and a dollar short,’ said Gilmore-Sarnowski, 26, an interior designer whose husband, David Sarnowski, is a Tampa police officer. ‘All that’s left is leftovers.’”
“Rising prices could prompt reluctant homeowners to sell, and banks could increase the flow of repossessed homes, boosting the supply. But for Gilmore-Sarnowski, that could be too late. She and her husband plan to keep looking for a few months, but the slim pickings have them rethinking their search. ‘We’re to the point where we’re thinking,’ she said, ‘maybe we should find somewhere inexpensive to rent.’”
The Seaway News. “While national studies suggest the Canadian real estate market is cooling off, local property experts suggest Cornwall and area should fair pretty well. Steven Iwachniuk of Storm Realty in Cornwall said the city and area is fairly insulated from the forecast real estate price correction, because our property values aren’t inflated to begin with.”
“‘We’re already a lot lower than other areas of Canada,’ he said. ‘In time they’re going to feel the bubble.’”
“In the city of Toronto, 3,520 homes were sold in June, at an average price of $554,077. The Cornwall and District Real Estate Board could not readily provide sales figures for this area, but Iwachniuk said the average price of a home locally is about $160,000. ‘That makes homes very affordable,’ he said. ‘When you’re at the bottom as far as Ontario is concerned, you don’t have anywhere to go, but up.’”
“Ron Macdonell, owner of the local Property Guys franchise agreed while Cornwall should remain safe from wild price fluctuations that could be experienced in larger centres, the local market could use a shot in the arm. ‘Right now it’s kind of soft,’ he said, adding the Cornwall area market is benefitting buyers right now. ‘I’m hearing from some people in town that they are being pressured to lower their prices.’”
$6 Trillion in deficit spending since just 2008.
Trillions in TARP, the Stimulus, HARP, HEMP, unlimited bailouts of Freddie and Fannie, etc.
40 cents of every federal dollar spent in borrowed money.
The money had to go somewhere.
When the money spigot is turned off (maybe in 2013 with a NEW Administration, just maybe) - guess what is going to happen to housing prices AGAIN.
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“How will you help with the housing and foreclosure problems in the U.S.?” in an interview, Romney responded that it would be best not to try and stop the foreclosure process, to let it run its course and hit the bottom, and that he might be open to some government action to encourage refinancing. He also referred to the Obama administration as having “slow walked the foreclosure processes that have long existed, and as a result we still have a foreclosure overhang”, and that that the credit that was given to first-time home buyers was inadequate to turn around the housing market.
http://en.wikipedia.org/wiki/Political_positions_of_Mitt_Romney#Housing_market
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Romney and Ryan both say they want housing market to “hit bottom”
Mitt Romney and Paul Ryan used remarkably similar verbiage to describe their approach to the crippled housing market, with each suggesting in separate interviews almost a year apart that the market should be allowed to “hit bottom.”
Ryan made his remarks first on Charlie Rose’s program in 2010 and Romney followed with those now-infamous words to the Las Vegas Review Journal last year. Play the Ryan clip back to back with the Romney clip and you will notice the similarities.
The plus: They are sympatico on letting the market, rather than government intervention, solve the problem.
http://www.lasvegassun.com/blogs/ralstons-flash/2012/aug/14/romney-and-ryan-both-say-they-want-housing-market-/
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Romney Offers Hands-Off Approach When it Comes to Housing
However, Romney had also said the most effective way for the market to correct itself was to allow the foreclosure process “…run its course and “hit the bottom.”
http://www.zillow.com/blog/2012-01-09/romney-has-a-hands-off-approach-when-it-comes-to-housing/
I notice those articles you have been posting about what R&R said they would do on housing are out of date.
Do you have anything current to post on this (i.e. since last Saturday’s running mate announcement)? Because I have to assume the etch-a-sketch effect might erase whatever was said many months ago.
I agree. I know Mitt did say that a long time ago, but we haven’t heard another peep since he got criticized for it.
August 16, 2012
Does the Paul Ryan Choice Ensure a Real Housing Debate?
By Samuel Staley & Anthony Randazzo
A standard line in the punditry circuit this week has suggested that Mitt Romney’s selection of Paul Ryan as his running mate will bring a welcome measure of substance to the race. If so, then cheers all around. Hopefully, one critical element of the economy and society that has gotten little substantive attention to date will get its due: housing finance and property markets. In principle, a Romney-Ryan Administration should represent a significant break from what President Obama has done in his first term on housing policy.
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“Romney responded that it would be best not to try and stop the foreclosure process, to let it run its course and hit the bottom,”
I’m sure Obama knows that this is the best medicine as well, he just hasn’t the cajones to say it and do it. However, in your opinion, would Romney have said “let it hit bottom” if he been elected in ‘08? I think not. That’s exactly the kind of talk that would give the 2010 midterms to the Dems.
Could somebody explain this part:
“and that that the credit that was given to first-time home buyers was inadequate to turn around the housing market.”
So Romney wants housing to “hit bottom” but he thinks that first-time homebuyers should be given more credit? Hey wait, isn’t this exactly what’s going on now? Lots of FHA 3.5% down to slowly absorb the overhang while we wait for inflation to slowly inflate people back above water?
“Could somebody explain this part:
“and that that the credit that was given to first-time home buyers was inadequate to turn around the housing market.”
I give him the benefit of the doubt here and say that he was simply calling the administration’s plan ‘inadequate’ in general, not referring to the credit amount.
“‘There isn’t enough inventory, in a nutshell,’ agreed Doug Shepherd, immediate past president of Inland Valleys Association of Realtors, noting that the MLS has 8,000 fewer properties on the market now than one July ago when there were about 18,000 listings. ‘The inventory is way low,’ he said, and that’s pushing prices up. ‘The real story is how hard it’s become to buy a house right now.’”
I can’t tell whether guys like this are referring to physical inventory or just the artificially constrained market inventory?
You forgot something….
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Realtors Are Liars®
He’s talking about homes on the market…these guys don’t look any deeper than that.
“Squeezing the supply are homeowners waiting to list their homes, betting future price increases could net them a better deal, real estate agents said.”
So many housing market participants are betting that the Fed’s winks and nods towards extraordinary command-and-control housing policies will somehow translate into higher future home prices.
Will the Fed be able to deliver on these unstated promises?
“‘We’re to the point where we’re thinking,’ she said, ‘maybe we should find somewhere inexpensive to rent.’”
Renting is the new black.
P.S. I seriously question the Zillow “rent or own” metric, as they seem to have forgotten to factor in capital loss as a cost of home ownership.
Don’t Buy: These 7 Cities Are Renters’ Markets
By Mamta Badkar | Business Insider – 23 hours ago
Despite record low mortgage rates and an apparent bottoming in home prices, Americans have increasingly opted to rent than buy their homes as the economic recovery remains anemic and uncertain.
We drew on Zillow’s newest metric – the breakeven horizon – to identify 7 housing markets where it’s better to rent a home than buy one.
The breakeven horizon refers to the number of years after which buying a home is more “financially advantageous” than renting one. So, with a longer breakeven horizon it makes more sense to rent.
Unlike the price-to-rent ratio this metric includes a whole range of possible costs including mortgage payments, property taxes, utilities costs etc.
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Oh gawd, I just saw a commercial that almost made me puke in my Cheerios. I think it was the NAR, but the commercial was implying that owning a home, in some way, make’s your children’s grades better. It was awful, almost as bad as the Suzanne commercial, so sappy and far too desperate to show their value in society.
Ugh.. You know, a big problem with our world today is that there are a great deal of people (myself, unfortunately, included) who provide no real value to society. Sales people (which is where I put myself) in particular; what real “value” do they bring to the transaction? In some isolated incidents, they certainly do (I do very technical selling, so I do have a role in helping the client implement the product and in making sure everything is ready for implementation).
I’ve mentioned it before, but I work for a Fortune 50 company. I’m pretty much convinced that they could fire 1/2 of the company tomorrow and take no appreciable revenue or customer satisfaction hits. I work with people every day who, if they simply disappeared, the company would be better for it (less process/politics/etc). It’s mind boggling.
NAR’s insidious misrepresentations and lies are the most egregious I’ve ever observed.
They consistently lie to the public and those lies have been proven over and over again.
The reality?
-Housing Demand is at 15 year lows and falling
-Housing Inventory is at an all time record high and rising
-Housing prices are tanking in every statistical area of the country
-Realtors and other Housing Crime Syndicate operators are heading to jail in record numbers.
-NAR spends millions each year on “media consultants” and PR proxies. And they are right here on this blog.
> Ugh.. You know, a big problem with our world today is that there are a great deal of people (myself, unfortunately, included) who provide no real value to society. Sales people (which is where I put myself) in particular; what real “value” do they bring to the transaction
It depends on what you mean by value.
Do soldiers provide value? Well, people killing each other doesn’t seem like it’s all that valuable. So…really, we should just get rid of soldiers and armies, right?
But that’s an unstable situation, because then the one country that *does* create an army can run off with everyone else’s stuff. So you need to have an army because a situation without an army is unstable.
How about salespeople, even if you take a cynical view that they never help a customer find what they want, and simply try to promote their product over that of customers? Well, if *your* company lacks salespeople and another company has salespeople, your company is going to get clobbered; unstable situation.
How about monopolies and power structures that misrepresent the truth to the public in order to profit where the product results in 30 years of massive debt slavery on a rapidly depreciating asset from which your victims never recover?
You bastards are shameless.
If there’s a commons available you better graze the heck out of it if you’re competing with everybody else. Doesn’t mean in the big scheme of things that it makes sense to have everybody grazing the heck out of it.
Soldiers provide value to the banks that they fight for. War is completely debt driven. More war is more debt. Banks love more debt. Control the world debt and one controls the world. Soldiers work for the banks.
Yeah, but if they really did fire half the company, it would be the wrong half. Better to have some dead weight than have all the useful workers gone.
Article posted: 8/10/2012 5:24 AM
Mortgage debt relief may be extended in tax code
By Ken Harney
WASHINGTON — Here’s some encouraging news for financially stressed homeowners across the country: The Senate Finance Committee approved a bipartisan bill before heading home for summer recess that would extend the Mortgage Forgiveness Debt Relief Act through 2013.
Why is this important? Several reasons: The debt relief law spares homeowners who receive principal reductions on their mortgages from being hit with hefty federal income taxes on the amounts forgiven. Without it, millions of owners who go through foreclosure or leave their homes following short sales would experience even more financial stress.
The law — which has also provided relief to thousands of people who have debt balances written off as part of loan-modification agreements and is crucial to the $25 billion federal-state robo-signing settlement with large banks — is set to expire at the end of December. Some Capitol Hill analysts predicted that, along with a host of other special-interest tax benefits, an extension might have trouble making it through the partisan gantlet in an election year.
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Of course this got extended.
Infinite supply of government cheese, apparently.
I’d be OK with this extension, if for every dollar of income people didn’t get as debt forgiveness income was matched with a dollar of loss that the bank/lender wasn’t able to deduct.
Unfortunately that’s not the case.
I knew it. It will be extended for as long as necessary as merely one of 265 tools that the government uses to support housing prices.
Did it dawn on any of the governmental price supporters that lots of foreign equity locusts are capitalizing on the chance to capture subsidy-driven appreciation, with a plan to cash out at the top of the dead cat bounce we are currently experiencing? The current crop of first-time buyers who thought they were in for the long haul will be left holding the bag with the next generation of underwater mortgages.
I guess there is no problem, so long as foreclosure rescue plans are available for the underwater victims.
“I can’t tell whether guys like this are referring to physical inventory or just the artificially constrained market inventory?”
Yep, for the most part, the MSM doesn’t bother to make the distinction.
Banks holding back REO’s + Underwater FB = low inventory
6.5M low?
“We still have buyers looking for the bottom. I told somebody today, you missed it,’ said Century 21 Realtor Jaci Stone.”
Total BS… Jaci researched this!
I am still surrounded by zombie homes. ZERO action other than the sketchy dudes that mow the lawn and photograph the properties.
“I am still surrounded by zombie homes.”
Do you think these are reflected in the Census Dept’s 18.5M vacancy figure? Or that it’s different in your neighborhood, and there are no zombie homes anywhere else in the U.S.
You can see why I have my serious doubts about that remarkably stable #vacant homes figure…
No doubt. I’m telling you, watching the one next time was a wake-up call, and it was probably the turning point for my wife too.
We talk to the guys that mow the lawn, and they’re always tellin’ us, “yeah, the bank owns it” like we can’t go online and look at the docs.
No, they haven’t foreclosed on it. They haven’t done anything, except pay the taxes… and the do a chitty job of maintaining it.
Multiply this by how many homes?
I seriously doubt the myriad bank-owned homes are properly accounted for in the Census Department’s “Vacant Homes” statistic.
But I’m open to any evidence that Darrell or other data hounds on the HBB can present to convince me otherwise.
The place I bought last winter was six years behind on mortgage payments and long abandoned. The bank had secured the property, changed the locks and took out the trash, paid the taxes and winterized a toilet no longer connected to a water source.
But they didn’t foreclose. The “owner” had to be dragged in to do the closing.
That’s what I’m sayin’.
I don’t think people realize what’s beneath the band-aid.
CIBT, doesn’t “myriad bank-owned” equal about 500k? This is the number I’ve seen most frequently. For perspective, CA is now at approximately 65k (according to ForeclosureRadar).
So, even if ALL those homes are not included (which I doubt, since many times a family is displaced, they go to rent a different house, which was formerly vacant), you are talking about 18.5MM up to approximately 19MM.
Do you think the 18.5MM is understated by more than that?
CIBT, I worked for the 2010 Census, and I can tell you directly that if it’s a “housing unit”, defined by its existence as a unique residence, then it remains in the Census database. And in this case, it’s marked “Vacant”, using that exact word (or whatever code number in the databases that fulfills “Vacant”). The Census generally marks HU status for Census Day, which was April 1st of 2010 for this cycle.
The Decennial Census does the same thing each 10 years, starting about 2 years beforehand (2008), to populate the HU database for use in the actual citizen visits of 2010. The initial field work involves sending out hordes of temp hires to physically and/or visually locate each HU. A lot of housing is built, destroyed, partitioned and merged between census takings, so they opt to find it all, all over again. (The addressable property itself is marked with a GPS coordinate; there are 1 or more HUs per addressable property.) And it can get fairly liberal; if people are living over a garage illegally, then that’s a HU, and it’s put into the database as such, using whatever sensible means of uniquely identifying it, like “345 Rose Lane, GARAGE”. I’ve seen terms like UPPER, LOWER, BACK, SIDE, etc.
Although I never saw such, people who live in a tent on the property would be called an HU, too. (Some judgment call would probably occur at the field manager level.) The HU database is necessarily larger than the USPS database of mailable addresses, since not every HU has a mailbox, or not even a legal residence.
So… I find it unlikely that the Census data on Vacant units is falsified. Ever smaller cycles of checking after Census Day occurred to reduce errors to a practical minimum, so the Census data is a highly reliable indicator of vacant HUs as of mid-2010.
I can’t speak about what the American Community Survey (ACS) does to modify the statistics. I only worked for the USCB in the direct 2010 effort. I can only speak about direct decennial data. Also, my extensive office work with the error-checking data gave me a lot of exposure with the field people, some of whom extended their Census employment by transferring into their regional offices. That’s how I know so much about the HU effort.
“I find it unlikely that the Census data on Vacant units is falsified.”
I find it highly unlikely as well, in the sense of a deliberate effort by those actually involved in preparing the Census to misreport. However, I am not sure about the scope for using a methodology that systematically excludes some categories of housing which technically should be counted as “vacant.” For instance, driving around SoCal, one occasionally comes across entire tract home develops which apparently have never been occupied. Do all of these homes count as vacant HUs?
I guess the other point which seems worth noting is that there are a lot more houses than households in the U.S., no matter the exact number of vacant units. For instance, counting 131,704,730 housing units for 114,235,996 households apparently leaves an excess of 17,468,734 homes compared to the number of U.S. households. I know there are wealthy families like the Romneys who own multiple residences in different parts of the country, but I don’t think there are 17.5M such U.S. families.
CIBT, take a look at the definitions from the Census:
http://www.census.gov/hhes/www/housing/hvs/qtr212/q212def.html
Vacant Housing Units. A housing unit is vacant if no one is living in it at the time of the interview, unless its occupants are only temporarily absent. In addition, a vacant unit may be one which is entirely occupied by persons who have a usual residence elsewhere. New units not yet occupied are classified as vacant housing units if construction has reached a point where all exterior windows and doors are installed and final usable floors are in place. Vacant units are excluded if they are exposed to the elements, that is, if the roof, walls, windows, or doors no longer protect the interior from the elements, or if there is positive evidence (such as a sign on the house or block) that the unit is to be demolished or is condemned. Also excluded are quarters being used entirely for nonresidential purposes, such as a store or an office, or quarters used for the storage of business supplies or inventory, machinery, or agricultural products. Vacant sleeping rooms in lodging houses, transient accommodations, barracks, and other quarters not defined as housing units are not included in the statistics in this report. (See section on “Housing Unit.”)
Year-round Vacant Units. Beginning in 1990, year-round vacant mobile homes were included as part of the year-round vacant count of housing units. Year-round units are those intended for occupancy at any time of the year, even though they may not be in use the year round. In resort areas, a housing unit which is usually occupied on a year-round basis is considered a year-round unit. As indicated above, year-round units temporarily occupied by persons with usual residence elsewhere are included with year-round vacant units.
Year-round vacant units are classified in the following categories:
Vacant units for rent. This group consists of vacant units offered for rent and those offered both for rent and sale.
Vacant units for sale only. This group is limited to units for sale only; it excludes units both for rent and sale. If a unit was located in a multi-unit structure which was for sale as an entire structure and if the unit was not for rent, it was reported as “held off market.” However, if the individual unit was intended to be occupied by the new owner, it was reported as “for sale.”
Vacant units rented or sold. This group consists of year-round vacant units which have been rented or sold but the new renters or owners have not moved in as of the day of interview.
Vacant units held off the market. Included in this category are units held for occasional use, temporarily occupied by persons with usual residence elsewhere, and vacant for other reasons. These classifications are described below.
For occasional use. If the vacant unit is not for-rent or for-sale-only but is held for weekends or occasional use throughout the year, the unit is included in this category. Time-shared units are classified in this category if the vacant unit is not for-rent or for-sale-only, but held for use for an individual during the time of interview.
Units Occupied by Persons With Usual Residence Elsewhere. A housing unit which is occupied temporarily by persons who usually live elsewhere is interviewed as a vacant unit provided that a usual place of residence is held for the household which is not offered for rent or for sale. For example, a beach cottage occupied at the time of the interview by a family which has a usual place of residence in the city is included in the count of vacant units. Their house in the city would be reported “occupied” and would be included in the count of occupied units since the occupants are only temporarily absent. Units occupied by persons with usual residence elsewhere (URE) are further classified as seasonal vacant or year round vacant units.
Other vacant. Included in this category are year-round units which were vacant for reasons other than those mentioned above: For example, held for occupancy of a caretaker, janitor; held for settlement of an estate, or held for personal reasons of the owner.
Seasonal Vacant Units. Seasonal housing units are those intended for occupancy only during certain seasons of the year and are found primarily in resort areas. Housing units held for occupancy by migratory labor employed in farm work during the crop season are tabulated as seasonal. As of the first quarter 1986 vacant seasonal mobile homes are being counted as a part of the seasonal housing inventory.
The following spreadsheet shows these various categories going back to 1965:
http://www.census.gov/hhes/www/housing/hvs/historic/files/histtab7.xls
The number of the 18.75MM in 2011 is roughly broken down as:
1. 6 million: For rent or sale
2. 1 million: Rented or already sold, but no one has moved in yet.
3. 8 million: “Vacation” and only intended to be used part of the year (Total of Occasional Use, Units with owner typically elsewhere: URE, Seasonal)
4. 3.8 million: Held off the market for “Other Reasons”
Categories #1 and #2 are generally structural (you can’t always have all homes filled with people). Despite the categories being structural in nature, the vacancy rates are higher than usual.
Category #3 is generally luxury (it IS a luxury to own a timeshare, second home, vacation cottage, etc.).
Category #4 is where vacant homes that people want to sell, but just not right now spend their time.
The numbers that appear most out of whack are the homes that are vacant and on the market for sale (there are an inordinately number of vacant homes for sale), and vacant homes held off the market for “Other Reasons” (also inordinately high number). Both are 25-35% higher than should be expected.
Look at the Excel Spreadsheet, compare the numbers in each category relative to the total housing units going back decades…it will give you a sense as to what “normal” should look like.
CIBT said: “For instance, driving around SoCal, one occasionally comes across entire tract home develops which apparently have never been occupied. Do all of these homes count as vacant HUs?”
Yes (in the 2010 Census) as long as (1) they were habitable on April 1st 2010, and (2) they were vacant on April 1st 2010. If they were being constructed on April 1st 2010, they didn’t count as HUs, since they weren’t ready for Human habitation on that day. (We had a category for calling HUs uninhabitable, due to fire, flood, pending demolition, etc.)
I don’t want to keep beating a dead horse, but the 2010 Census data on vacant housing units is fairly sound…. as long as you realize the data only accounts for April 1st of 2010. The field effort after April 1st resolved itself in cycles of error-checking of decreasing size, until in the last cycle we ended up with 1800 HUs we had to run out and confirm, out of perhaps a starting inventory of 260000 for our region. Once we collected that information for those 1800 HUs, penned and QC’d the forms, entered them into our computer system, and then shipped the forms to the regional records center, that was it: We all became unemployed. ;_;
Interest Rates.
They’ll never be raised again? What happens when they do?
House prices drop.
It looks like 1+1=2 to me, but maybe I’m smart.
5th inning is conservative IMO
The money market fund that used to generate a nice fat thousand bucks a month in interest now creates 80 bucks a month if I’m lucky.
Those are never going to go up?
Something’s broken as hell.
Yeah, but who has the stones to raise rates? Like I’ve said before…pandering is the new black.
August 16, 2012, 1:57 PM
Mortgage Rates Inch Higher Again
By Robbie Whelan
Interest rates on home loans ticked up for the third consecutive week, although the cost of borrowing to buy a home still remains near record lows.
Freddie Mac, the government-sponsored mortgage company, reported that the 30-year fixed-rate mortgage averaged 3.62% for the week ending Aug. 16th, up from 3.59% the week before. Consumers like the “plain vanilla” 30-year fixed mortgage because of its predictable monthly payments.
Other types of loans saw their interest rates rise as well. Loans with a 15-year fixed rate – popular among borrowers looking to refinance their mortgages – rose to 2.88% from last week’s 2.84% average.
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“5th inning is conservative IMO”
I agree. For HBBers that are in their 50s and up, it may never pencil out.
Hell, my daughter is almost 3 and my son is almost 5. Am I really going to buy a house to have for 14 years? Make that 13, I’m in a lease for a year.
In my price range ($150-$180k) it makes no sense as long as rental hover around $1,200/mo. +/-
My friend, the second-generation appraiser, agrees, though he doesn’t really have any sound reasons to support his judgment.
By contrast, I have many, many reasons:
1) Incipient Canada housing crash
2) Incipient China housing crash
3) Grexit Armageddon
4) Global shipping meltdown
5) Looming fiscal cliff
6) U.S. real estate investors cashing out on discovering their capital gains are negative
I could go on and on, but wifey and I have a dinner date.
Sayonora…
‘Incipient Canada housing crash…Incipient China housing crash’
You forgot Australia, India, South Africa, Thailand, Hong Kong, Malaysia, Singapore, Indonesia, Eastern Europe, France, London and Moscow. Probably more.
“You forgot…”
No, really, my wife was getting impatient to go out to dinner. But thanks for filling in some of the missing reasons for me…
Old news, but on topic:
Nevada’s Boom Ends In Record Number Of Empty Homes
By CRISTINA SILVA
03/15/11 08:41 AM ET
LAS VEGAS — The promise of palm tree groves and low-priced real estate lured Alan and Katherine Ackerly across the Rocky Mountains from Denver to Nevada in 2004, where thousands of new houses beckoned brightly as any neon sign.
They came to buy their retirement home. But the real estate bust took its toll, with a flood of short sales and foreclosures in the market, and last month the Ackerly’s dream home was foreclosed on, too.
“I pretty much gave it back to them,” said Alan Ackerly, a 57-year-old electrician who stopped paying his mortgage because he owed more than the house was worth.
The Ackerly’s home is now among a swelling number of abandoned houses in Nevada. There were 167,564 empty houses in the state last year, according to newly released U.S. Census data, more than double the number in 2000. The number of vacant homes represents about one out of every seven houses across Nevada.
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“The Ackerly’s home is now among a swelling number of abandoned houses in Nevada. There were 167,564 empty houses in the state last year, according to newly released U.S. Census data, more than double the number in 2000. The number of vacant homes represents about one out of every seven houses across Nevada.”
Yet, there is an “inventory shortage” being reported in the MSM. So, the builders are building more houses. This is insane.
That’s the roughly 14% that I noted the other day for NV.
They came to buy their retirement home [...] last month the Ackerly’s dream home was foreclosed on [...] stopped paying his mortgage because he owed more than the house was worth.
It was never a retirement home. That’s a f#$%& lie. They were flippers. They were on the property ladder. As a retirement home they were going to die in it, probably a good long time after the time of purchase, since the guy was only 57. They were going to be there at least 15-18 years, possibly 22-25. That’s enough time for the house to recover the purchase price.
I hate these people. I hate the media for just repeating their lies because the RE industry is a big advertising account for them. HATE HATE HATE. Whoo! I’m OK now. ^_^
Caltrans spent millions on unjustified house repairs, audit says
Caltrans spent $22.5 million since 2008 to maintain homes it owns in and near Pasadena, but couldn’t show the work was necessary or cost-effective, the report finds.
By Jack Dolan, Los Angeles Times
August 17, 2012
California transportation officials have spent millions of dollars making overpriced, unjustified repairs to houses the state owns in and around Pasadena, according to an audit released Thursday.
Caltrans bought the houses decades ago to bulldoze for the long-planned, never built extension of the 710 Freeway. The agency has spent $22.5 million since 2008 to maintain the homes, but transportation officials are “unable to demonstrate that the repairs were necessary, reasonable or cost-effective,” according to the report by the California State Auditor, which was sparked by a Times investigation.
The state is also losing $22 million per year because tenants, including 15 state employees, are paying far below market rates for rent. Other homes, some of which have been recognized as historical landmarks, have been boarded up and empty for years.
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“…Storm Realty in Cornwall said the city and area is fairly insulated from the forecast real estate price correction, because our property values aren’t inflated to begin with.”
Sure, you’re on an Indian Reservation where the thugs have bigger guns and faster boats than the Feds. You are “insulated”.
It’s different this time in San Diego. Unlike the dumb real estate investors in 2005, today’s real estate investors, who are “looking for anything they can get,” and “bidding each other up,” are “pretty sophisticated, often with full-time acquisition staff and more likely to do a lot more research before buying.”
I wonder whether Suzanne is doing research for these guys?
Here’s to hoping the suckers who bid up the under-$300K inventory to astronomical price levels have as much luck as Facebook stock owners had when they tried to cash out, thanks to a complete dearth of willing buyers at the inflated prices they paid.
Sunday, Aug. 19th 2012
A QUICK BUCK
Investors are putting cash to work in residential real estate, crowding out first-time homebuyers
Written by Lily Leung
12:01 a.m., Aug. 19, 2012
Updated 9:15 p.m. , Aug. 17, 2012
They’ve got the cash and the manpower working in their favor. They’re buying up parts of your neighborhood in hopes of turning quick profits, and in their own words, moving a once-stagnant market forward. For first-time homebuyers, they’re seen as potential hurdles.
The presence of real estate investors in San Diego County has mushroomed. A total of 1,030 properties were sold in June to absentee buyers, mainly investors and buyers of second homes, DataQuick numbers show. That’s the highest level of absentee-buyer activity since 1,089 in June 2005 — when countywide home prices neared a dizzying peak of $517,500 and amateurs placed risky bets in the real estate game. Their share now of the total housing market in the county has skyrocketed, too. Absentee sales made up 30.1 percent of all homes sold in February, a peak, and has been in the 28 percent region ever since. That’s up from 15.4 percent in March 2002.
An absentee buyer is someone who indicates at the time of sale that their property tax bill be sent to a different address, based on DataQuick’s definition.
So are we back in 2005, a time of fast-and-loose borrowing and rocket-fast price appreciation? Not at all. In today’s market, mortgage underwriting remains tight and prices are steadily climbing. Also, investors now are savvier and eyeing smaller profits and have found strength in numbers. Instead of going at it alone and buying one-offs, they’re working with others and rehabbing several properties at a time.
“Unlike the dumb money of the 2003-2005 period, I would characterize the buyers of 2008-2012 as pretty sophisticated, often with full-time acquisition staff and more likely to do a lot more research before buying,” said Norm Miller, a real estate professor at the University of San Diego.
Another major difference in the current market is inventory levels. Right now, fewer than 6,000 homes are listed for sale in San Diego County, 55 percent lower than what was available about two years ago, the latest numbers from the San Diego Association of Realtors show.
Fewer homes on the market mean more competition for anyone who wants to buy, from the investor looking for his next project to a couple seeking a starter home. It also means higher chances of multiple bids, sometimes upbids, which can dash first-timer hopes of buying in the under-$300,000 pricing area.
“There’s almost no inventory,” said Stan Gendlin, acquisitions manager with CT Homes, a local home-flipping company. “Investors are looking for anything they can get. Everyone is bidding each other up.”
What kinds of tactics are investors adopting?
Curtis Gabhart has been a full-time real estate investor for 12 years. Like many in his field, he goes where there are opportunities.
Before the real estate bust, Gabhart’s focus was apartment buildings. Post-bust, it’s been single-family homes.
Problem is, he and others like him have already gobbled up most of the under-$300,000 inventory, which also is popular among first-time homebuyers. Homes in that price range have been popular since they cost less to acquire, and if they require little work, could yield higher, faster profits.
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Investors huh?
They’re all Specu-Flippers.
You gotta love how market forces draw in greedy suckers as the ball bounces off each tread on the way down the stairs.
SCHWEEEEEEEEEEEEEET!
But hasn’t the Fed basically promised, through a series of winks and nods, to make all of these savvy latter-day real estate investors rich, by backstopping housing against further price declines?
I think so. The question is can and will they keep that promise? Or are the specu–vestors also being taken in the spirit of “no FB dollar left behind”?
And the Fed has a long history of leading suckers down the path……. leading right to the edge of the cliff.
“And the Fed has a long history of leading suckers down the path……. leading right to the edge of the cliff.”
At what point in time did it become part of the Fed’s mandate to herd greater fools over the edge of the cliff?
Case in point:
Greenspan: Home Equity Loans Boost US Spending
Monday, April 23, 2007 2:42 p.m. EDT
WASHINGTON — U.S. spending may have been lifted by close to 3 percent a year in recent years as owners tapped the enhanced values of their homes for cash, according to a paper coauthored by former Federal Reserve Chairman Alan Greenspan.
The findings could have big implications as the country’s housing market cools. Some economists say the Fed should cut interest rates because the housing downturn will brake consumer spending and tip the economy into recession.
Greenspan, who departed the helm of the U.S. central bank on Jan. 31, 2006, wrote the paper with Fed economist James Kennedy to study how the booming practice of home equity extraction — raising cash by borrowing against surging house prices — might effect the U.S. economy.
The market value of U.S. owner-occupied homes has more than doubled in value to $18 trillion in the last decade and the paper sees a multibillion dollar benefit to U.S. spending.
“From 1991 to 2000, equity extraction financed an average of 0.6 percent of total PCE (personal consumption expenditure), but since then that share has risen to almost 1-3/4 percent,” they noted in the paper, released by the Fed on Monday.
This climbs even more if the net is widened to capture the indirect impact on spending of home equity finance used to pay down nonmortgage debt like credit card bills — on the basis that these were really bridge finance for spending anyway.
“If we include nonmortgage debt repayments, equity extraction financed an annual average of about $115 billion of PCE from 1991 to 2005.
“By this broader measure of PCE funding, equity extraction financed 1.1 percent of PCE from 1991 to 2000 and close to 3 percent from 2001 to 2005,” Greenspan and Kennedy said.
Judging the past importance of rising housing wealth for consumption provides clues for guessing how hard it will hit spending now that the boot is on the other foot — a topic that the paper did not address head-on.
U.S. housing has cooled since 2005, with declining home prices and mounting problems in the subprime mortgage market for borrowers with tainted credit raising fears that this could spill over into the rest of the economy and lead to a recession.
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Here’s the other problem with using tax money to favor certain sectors: It’s inviting corruption as surely as exposed raw meat in a hot climate will invite flies.
People are people. The Bernank puts on his pants one leg at a time. So does Dimon. Both defecate. Both are as self-interested as you or me. They have an interesting mental wiring which gives them a personal mental reality which allows to lead massive organizations. But they’re just people. The same bags of decaying organic matter as you or I.
AND - anyone in position of power seeks to advance their own interests and those of their associates, if it could result in some further improvement of their own position.
So, massive government intervention in the markets to the benefit of certain companies or favored sectors not only is an inappropriate use of public money, which should be used only for public goods, it also invites corruption.
“Both defecate.”
However, it’s odorless.
What I don’t get is all the first-time buyers who are eagerly stepping up to bid against the all-cash investors. Don’t these foolish first-timers realize that when the all-cash equity locust crowd decides to cash out and move on, the end-user owner-occupants will be left holding the bag on falling-knife real estate investments with underwater mortgages?
Is it difficult to see the origins of tomorrow’s “foreclosure victim” class?
Here’s a nice example of a first-time buyer throwing away $25,000 in order to outbid all-cash investors:
“They’ve got the cash and the manpower working in their favor.”
I can’t help but wonder how much of the current wave of investing in San Diego originates from ZIRP loans to the TBTF Wall Street Megabanks? Who else could afford to take these kind of risks of loosing their shirts, when the next race to the exit ensues?
Or is it that the current generation of investors is collectively smart enough to all cash out “first”? I can’t wait to see how this Dead Cat Bounce ends…
There is a graph in the dead tree edition of UT-San Diego which I cannot find in the online edition, which shows the percentage of San Diego County homes bought by investors. Most amazingly, it steadily increases over the period from 2006-2012, starting off a base of around 16% that held from 2000-2006, then steadily trending up to the recent level of 27.7%. Despite this huge influx of fly-by-night buyers, plus record low interest rates, San Diego home prices are barely off their post-crash lows.
Just think how much farther prices will fall once interest rates start increasing back towards normal levels, and the latest wave of investors tries to cash out in droves.
I personally know the owners of a few groups buying in Southern California. Their capital is coming from individuals or institutions. Bank debt only comes into play after the home is purchased, and at about 60-70% LTV. The capital is influenced by the zero interest rate environment, no doubt. That said, there is substantial equity involved in the transactions.
And BTW, these business plans generally are to hold the homes for an intermediate timeframe as rentals (3-5 years).
Whether there will be a rush out (ie. large influx of homes onto MLS) largely depends if there becomes a new class of REITs to manage rental housing. If there is a REIT exit, then don’t expect a huge influx of homes onto MLS….they will stay as rentals and sold to a REIT.
“That said, there is substantial equity involved in the transactions.
And BTW, these business plans generally are to hold the homes for an intermediate timeframe as rentals (3-5 years).”
Sounds like a lot is riding on future appreciation. What if it turns out that this isn’t the bottom, after all? Won’t that equity potentially get completely wiped out?
Or is the presumption that since a bottom is in and real estate prices and rents can only go up from here, these investments are a sure thing?
And BTW, did you catch the story I posted below about a 97.5% drop in San Diego hotel sales this year? What if the bottom fell out of residential real estate investment demand going forward, the same way as hotel purchase demand virtually dried up this year? Wouldn’t that pretty much completely wipe out the equity part of those investments you mentioned?
Not to suggest that is a realistic possibility or anything, as Southern California real estate always goes up…
I don’t think you can compare hotel sales to home sales…hotels are far chunkier. How many hotels were on the market in San Diego in the year when few sold? How many on the market in SD the year when many sold?
With respect to the rental strategy:
The buy-to-rent strategy is being seen as analogous to buying apartments. If you have enough homes, then you can have a nice portfolio of rental properties. Rents falling is a bad thing, but I think most investors feel that the worst is behind us with respect to rental rates.
The business plans that I’ve seen show about a 10% annual return after factoring in leverage. I spoke with an institutional advisor a couple of weeks ago who was looking at the strategy; they were not looking at appreciation, they just wanted to get that yield (or something close to it).
I’ve yet to see anyone say that this strategy is a “sure thing”, but most see safety in residential rental property based on the number of people with impaired credit (who can’t buy), or impaired desire to own (who don’t want to).
“I don’t think you can compare hotel sales to home sales…”
I wasn’t.
I was comparing stupid investors in two different real estate asset classes.
If you know of a distinction between stupid people who invest in hotels versus those who invest in residential, I’d be interested to know what it is.
“…but most see safety in residential rental property based on the number of people with impaired credit (who can’t buy), or impaired desire to own (who don’t want to).”
How does a complete vacuum of demand, aside from the federally-guaranteed FHA life support variety, which might be summarily eliminated with a Romney-Ryan presidency, provide safety?
And just wait until the all-cash Canadian and Chinese equity locusts pull out — you ain’t seen nothin’ yet.
Hotels can only be bought if they are for sale. Far fewer transactions does not necessarily mean far less demand when it comes to hotel sales. It could quite easily mean there were fewer for sale.
“How does a complete vacuum of demand, aside from the federally-guaranteed FHA life support variety, which might be summarily eliminated with a Romney-Ryan presidency, provide safety?”
They are focused on rental demand, not purchase demand. They care about the portfolio of homes being rented near term, not re-sold near term. With vacancy rates in So Cal being far less than 10%, they are assuming that if they buy a few hundred homes, they will have a nicely performing portfolio. FHA going away would create more renters, not less.
San Diego hotel sales have taken a dive this year, down to $37.3M from $1.5bn through this time last year, or in percentage terms, a decline of ($37,300,000-$1,500,000,000)/$1,500,000,000 X 100% = -97.5%.
Luckily, sales to residential real estate investors in San Diego are still running strong!
San Diego hotel sales take a dive
The Inn at Rancho Santa Fe was purchased this year for $28 million by JMI Realty, co-owned by former Padres owner John Moores. — Courtesy of Inn at Rancho Santa Fe
Written by Lori Weisberg
6 a.m., Aug. 18, 2012
San Diego saw a huge drop in hotel sales during the first half of this year, but the decline was expected given the unprecedented number of properties that changed hands last year.
While nearly all the counties in California saw an upswing in hotel transactions during the first six months, the overall dollar volume of sales statewide — $1.7 billion — fell 39 percent, a figure skewed by San Diego’s own 97 percent decline, reported Atlas Hospitality Group, an Orange County brokerage that tracks hotel sales.
“The dollar volume for San Diego in the first six months of 2011 surpassed the entire volume for California in 2009, so it was a pretty phenomenal first half of the year,” said Alan Reay, president of Atlas. “You can’t keep up that pace. You could say, ‘Well, obviously people aren’t interested in San Diego,’ but I think we’re seeing the contrary happening. People are still interested in San Diego.”
In all, just seven hotels valued at $37.3 million were sold during the first half of this year, compared to 23 a year earlier, which sold for a whopping $1.5 billion, Atlas reported on Friday. The biggest transaction this year — the 90-room Inn at Rancho Santa Fe that sold for $28 million — paled in comparison to last year’s top seller, the 1,626-room Manchester Grand Hyatt, purchased by Host Hotels & Resorts for $570 million.
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We sure are lucky that a real estate bottom is already in place, as things don’t look so rosy these days in the stock market investing arena, at least compared to residential real estate investing.
INVESTING
August 18, 2012, 9:08 p.m. ET
Wall Street’s Soothsayers See Darkening Clouds
By SIMON CONSTABLE
Wall Street professionals earn a lot of their oversized paychecks playing the roles of modern-day clairvoyants, peering into the future and telling investors where the economy is heading.
As the presidential election drones on, you could be forgiven for thinking that the country is headed over a cliff. After all, that’s what the one guy keeps saying about the other guy.
Here’s a news flash: Whoever wins, the country probably isn’t collapsing.
But that doesn’t mean there isn’t a lot of uncertainty about the economy—and lots of reasons to be cautious.
We asked some of the savviest fortune tellers on Wall Street to look beyond the election rhetoric and give a sense of what to expect in the next six to 12 months.
Specifically, they were asked to decode some little-known but useful economic indicators and explain what they mean for your investments.
Here’s the short version: Keep your head down for the next few months. There are dark clouds on the economic horizon.
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Aug. 19, 2012, 12:02 a.m. EDT
Atlas shrugged? Manufacturing seems worn out
By Greg Robb, MarketWatch
WASHINGTON (MarketWatch) — There are signs that the manufacturing sector, which has led the economic recovery, is about to take a breather.
“It seems like the [factory] sector is stuck in neutral,” said Guy Berger, an economist at RBS in New York.
Several factors appear to be at work, economists said.
Smurfit-Stone Container Corporation’s facility in Coshocton, Ohio.
Weakness in the global economy is cutting back exports. And factory owners are uncertain about how the outcome of the November election and what it means for taxes and government largesse.
“Japan is going nowhere, Europe is in recession, and we’ve got our own problems,” such as stalemate over tax policy and government spending, said Josh Shapiro, chief U.S. economist with MFR Inc.
Shapiro is concerned that there are no obvious heirs-apparent waiting in the wings to pick up the slack and propel the economy forward.
Housing seems to finally in recovery mode but it seems doubtful it can pick up the load.
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Since the U.S. stock market and real estate market always go up, in the long run, U.S. stock market and real estate invetors can safely ignore the steady drumbeat of gloomy news out of the Eurozone — RIGHT!?.
Tension Over Aid to Greece Could Unsettle Markets
Thanassis Stavrakis/Associated Press
Greek Prime Minister Antonis Samaras is under intense political pressure at home to provide relief from the austerity that has made life tough for many Greeks.
By JACK EWING
Published: August 19, 2012
FRANKFURT — While the Greek prime minister, Antonis Samaras, will be greeted with military honors when he arrives in Berlin on Friday, his pleas for easier bailout terms could meet with a cool reception, setting up tension that could unsettle the financial markets next week.
German Chancellor Angela Merkel, left, and Volker Kauder, a top official of Ms. Merkel’s Christian Democrat party, before a parliamentary vote in July.
Their summer vacations over, European political leaders appear to have resumed the maneuvering that has so often caused market turmoil and frustrated outsiders hoping for a quick solution to the euro zone debt crisis.
Mr. Samaras, who leads a fragile coalition, is under intense political pressure at home to provide relief from the austerity that has made life tough for many Greeks. Amid continuous political turmoil and depressionlike economic conditions, Greece has not been able to meet the timetable to get government spending under control or carry out changes intended to improve tax collection and create a better climate for business.
During a week that will take him to Berlin and Paris, Mr. Samaras is expected to ask for a two-year extension for Greece to meet its budgetary and reform commitments. He is scheduled to meet with Angela Merkel, the German chancellor, on Friday, and François Hollande, the president of France, on Saturday.
In addition, Jean-Claude Juncker, the prime minister of Luxembourg and head of the Eurogroup of 17 euro zone finance ministers, will meet Mr. Samaras in Athens on Wednesday.
But top German officials signaled that Greece could face opposition in its bid for concessions. Wolfgang Schäuble, the German finance minister, expressed reluctance to grant more aid to Greece.
“It is not responsible to throw money into a bottomless pit,” Mr. Schäuble said in Berlin on Saturday, Reuters reported. “We cannot create yet another new program.”
Volker Kauder, a top official of Ms. Merkel’s Christian Democrat party, echoed his concerns. Mr. Kauder told the magazine Der Spiegel that German lawmakers were unwilling to give Greece more time to meet commitments, or to ease the terms.
“Sooner or later,” said Mr. Kauder, the leader of the Christian Democrat delegation in Parliament, the Greeks “must answer the question: should we maybe try a little harder, or should we leave the euro?”
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Just remember, a closely-watched pot never boils over.
Aug. 17, 2012, 5:38 a.m. EDT
Get ready for more ‘Grexit’ speculation
By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — Markets are enjoying a summer lull, but German Chancellor Angela Merkel’s domestic political worries and a dire Greek economy may soon reignite speculation Greece will be forced to exit the shared currency sooner rather than later.
While economists debate whether a Greek exit — or “Grexit” — would ultimately be a good thing for both Greece and the euro zone’s remaining 16 members, uncertainty and the prospect for chaos are more likely to trigger another round of turmoil across global markets in the short run, strategists said.
Next week could be crucial. Greek Prime Minister Antonis Samaras is set to meet Merkel in Berlin on Friday and will visit French President François Hollande on Saturday.
He’s reportedly prepared to sound out Merkel on his call to stretch the implementation of new austerity measures over four years rather than the two years agreed as part of the country’s second bailout. Greek news reports, however, said Samaras wouldn’t formally request an extension until a meeting of European Union leaders in October.
Samaras campaigned on that pledge as his center-right New Democracy party eked out a first place finish in June’s parliamentary elections over the left-wing Syriza party, which had vowed to tear up the austerity provisions altogether.
The Greek economy has contracted in 14 of the last 15 quarters and posted a 6.2% year-on-year decline in the second quarter, making it increasingly difficult for the country to repair its balance sheet, noted economists at Rabobank.
But Samaras’s proposal isn’t expected to go over well in Berlin.
“Given the increasingly vocal opposition from German politicians to any further compromises for Greece, there is every chance that Mr. Samaras could find himself being firmly rebuffed by the French and German leaders,” said Simon Derrick, chief currency strategist at Bank of New York Mellon, in a research note.
“Given that extending the austerity program has been a key promise for the [Greek] coalition partners, this could provide the catalyst for some political turbulence in Athens,” he said.
For Merkel, the problem is turbulence at home.
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– Bill Lockyer, California state treasurer
Ever hear of cockroach theory, Bill?
ft dot com
Last updated: August 17, 2012 11:45 pm
Moody’s warns on California city defaults
By Vivianne Rodrigues and Nicole Bullock in New York
Moody’s has unveiled a sweeping review of its ratings of California cities, warning of rising default risk on debt issued in the state, while rival Standard & Poor’s has downgraded one of the state’s largest cities.
Moody’s move comes after three California cities – Stockton, Mammoth Lakes and San Bernardino – filed for bankruptcy this summer, raising concerns about the outlook for the $4tn municipal bond market.
Local governments across the US have been under pressure since the 2007 recession undercut revenues, but California has been particularly hard hit because it was at the epicentre of the housing boom and subsequent bust. Moody’s also said that the state had a “hands-off” policy with regard to the fiscal problems of local governments.
“As a consequence of the adverse economic and fiscal governance environment, the risk of default on municipal bonds in California is rising,” said Robert Kurtter, managing director at Moody’s, on Friday.
Focusing on Fresno, the state’s fifth-largest city by population, S&P on Friday cut its long-term debt rating by three notches to triple B from A, citing fund imbalances. S&P said the outlook for the city’s credit rating is negative.
“The negative outlook reflects our view of current budgetary constraints that may limit the city’s ability to cure projected multiyear general fund deficits absent strong revenue growth, which we consider unlikely given current indications that the city will continue to experience a slow economic recovery,” the agency said.
Moody’s rating revisions on California cities are possible over the next month or two, Mr Kurtter said, adding that further negative rating actions are also possible for the cities experiencing more acute economic and budgetary distress.
Tom Dresslar, a spokesman for Bill Lockyer, the California state treasurer, said: “Moody’s and others should think twice before jumping to the conclusion there’s a significant new risk of cities rushing into bankruptcy to stiff bondholders. California has 482 cities. Three have declared bankruptcy this year. That’s troubling for sure, but hardly evidence of a looming stampede into bankruptcy court and default.”
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It’s a perfect storm at luxury golf course communities! If the club closes, you could end up still having to pay membership fees, despite not being able to play golf.
Real Estate
Prices Crash at Luxury Golf Communities
Prices at luxury private golf communities are crashing, done in by rampant overdevelopment, the economic downturn and waning national interest in the sport. Nancy Keates has details on Lunch Break. Photo: Zachary A. Bennett for The Wall Street Journal.
Vote for WSJ’s House of the Week
7/19/2012 12:34:37 PM1:59