Bits Bucket for February 24, 2013
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The Housing Bubble
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If you bought a house in the last 15 years, you’re going to lose alot of money. ALOT of money.
u should buy some more aapl stock.
Do developers lie even more than realtors?
Denver Post - Denver Landmark developer Zachary Davidson’s fall from grace:
“But Davidson wasn’t everything he appeared on the surface — a fact that became tragically clear when he took his life Jan. 8.
His audacious plan grew in scope to a $500 million development of condos and luxury homes, but he was in over his head and, Arapahoe County prosecutors say, embezzling money.
Davidson became known for his over-the-top parties designed to sell properties and a luxury lifestyle normally reserved for ritzy hotels, but the money he spent wasn’t his.
The Landmark began to unravel in 2008 amid the real-estate crash, and Davidson and his companies filed for bankruptcy over the next two years. Lawsuits and a criminal indictment followed.
Accused of stealing $3.1 million in public funds and on the run from authorities, Davidson last month drove his silver 2003 Mercedes to a state forest in northern Florida’s Hernando County and hanged himself from a tree.
As a newcomer to Denver, Davidson threw a series of increasingly lavish parties to boost his reputation and draw attention to his development.
Davidson boasted to The New York Times in late 2008 that he spent $3 million on 13 parties over the years. One of his first in 2006 set up tents and hosted former Cirque du Soleil performers, creating a buzz among brokers, buyers and investors.
The 135 condos in the first Landmark tower were snapped up on the day they hit the market. The 141 units in the second tower, called the Meridian, took longer to fill, but presales eventually reached high levels.
The project’s design won multiple national awards and maintained a high price per square foot as other developments faltered. That success emboldened Davidson to push forward with the Landmark’s second phase. The European Village was an 11.4-acre planned development of 240 homes based on continental designs that topped out at $3 million for nearly 5,000 square feet.
A 2007 fete to promote the European Village was among the most extravagant he hosted. It offered guests chateaubriand, veal scallopini and lobster salad piled high in martini glasses.
Davidson loaded the model home with artwork and valuable antiques designed to impress. He flew in a rock violinist from Atlanta to entertain the crowd of 700 and gave guests a giant bouquet of market-fresh flowers and a stash of Belgian chocolates on the way out.
“He was an incredible showman. Who in Denver has thrown parties of that magnitude and created a brand that was unmatched?” said Werner, who compared Davidson to the Great Gatsby.
When Davidson couldn’t get the high-end microwaves promised to condo buyers, he put false labels on cheaper models and ended up the subject of a Channel 7 investigative report.
To avoid paying for expensive bathtubs, he copied a high-end design and had a factory in China create a knockoff. Davidson had to replace the tubs and settle a lawsuit with the manufacturer.
Johnson said he advised Davidson to complete and sell out one tower before moving forward on the second, but he refused. Others later warned him he was too stretched to move forward with the European Village.
He argued that wealthy buyers could weather any downturn and took a seven-person design team on a 10-day trip through Europe to study classical architecture.
Despite being severely behind schedule, Davidson would have his construction crews drop everything to set up for the promotional parties.
Unfinished condos meant sales couldn’t close, leaving less money to pay contractors, Johnson said. More buyers dropped out as the delays got longer.
Curtis said her building came in 18 months late, a delay that cost her $1.7 million extra and pushed her into the heart of the mortgage crisis.
“Our relationship started to fracture. He shoved me into such a difficult, difficult position,” Curtis said.
Davidson seemed blind to the harm his delays were causing. He offered to bring Jay Leno out for the grand opening of the Comedy Works South, which would have cost $250,000 or more, Curtis said.
Like so many other broken promises and grand gestures Davidson made, he didn’t follow through.
“He had attributes of a megalomaniac,” she said.
“I think his ego got the better of him as the project went on,” Johnson said. “It was almost like he was a rock star with the hangers-on.”
Davidson would always pick up large tabs for his entourage at frequent visits to Denver’s finer restaurants, Curtis said. He furnished his home with the expensive antiques bought for the Landmark and would later sell them on consignment under his own name, bankruptcy records allege.
The grand-jury indictment claims Davidson was taking more than $90,000 a month in payments from various accounts.
In his February 2010 personal- bankruptcy case, Davidson reported $1.3 million in assets and $164.6 million in liabilities. Despite that huge shortfall, he tried to get the court to declare his wine collection as provisions or food exempt from creditors. He purchased a used Maserati for $60,000, perplexing family and friends.
A family member, who asked not to be named, said Davidson wiped out his mother’s $200,000 in life savings on fix-and-flip deals gone bad and other failed ventures in the final years of his life.”
http://www.denverpost.com/business/ci_22656011/fall-from-grace-zach-davidson-landmark-denver
““He had attributes of a megalomaniac,” she said.”
Was he related to Mitt Romney?
“Accused of stealing $3.1 million in public funds and on the run from authorities, Davidson last month drove his silver 2003 Mercedes to a state forest in northern Florida’s Hernando County and hanged himself from a tree.”
He’s accused of stealing a paltry $3.1m and this is how it ends?
It doesn’t seem right, given how many banksters are out walking scot free after stealing untold billions of dollars from the public.
It sounds like his fatal flaw was that he actually felt guilty.
You are not evolving with the times excretor! Humor me and raise your projection to 70%, since real estate has been appreciating during the past two years(dead cat bounce, I believe. But I can reference two cases cases locally where prices have been gone up these last two or three years; I sold my home for a small profit and my landlord is doing a cash out refi on her rental house while keeping her payment the same, something you can only do in an environment of rising prices/lower interest rates). Given these are low end homes which is where it seems that prices are rising. Over 200k homes have not been selling like the bottom end, true. But revising your 65% number upward should be a no brainer. Which is why I am surprised you havent done it!
Or if prices have indeed been dropping already(tell us where or what part of the market); the 65% number ought to go down some to preserve your original rightness. If a house that was 100k is now 90k; a 10% drop has already occured. Maybe say buy later for 62% less?
Just sayin’ prices have changed since your “65% off” projections began. I say “Why buy now when you can buy later for 3x median income”; which I find a far more likely scenario. I do not believe a 100k house today in Bend will be 35k in any near future.
mike keeping it real!
“I do not believe a 100k house today in Bend will be 35k in any near future.”
You’re in for the surprise of you life my underwater realtard.
Is Mike a Realtor™? I thought he was a school teacher.
You’re in for the surprise of you life my underwater realtard.
Plus he can’t really be underwater, considering that he sold the house he had bought to “always have a roof over our heads.”
mike, did you ever respond to any of my several queries with why you did that? If so, I don’t think I saw the response.
I still really don”t get it. Your livelihood seems no less at risk to me…
There’s only one reason he would be selling the house: To spend the money.
I worry about Mike because he’s spent a lot of money and is running out of things to sell. But when questioned on that he says hey, life is expensive. I get it…but when you run out of stuff to sell and no longer have a choice to spend as much you can hit the wall pretty hard. But I’m glad to see him working on a new business plan…
Sorry PiC
I answered you the day you asked but I am happy to share a few reasons why I am selling. I truly believe that prices will soon fall; maybe I can get into another house later for 65% less! But the main reason is we really don’t want to live in the town the house is in which is even worse than Bend employment wise. Daughter will be able to walk to high school and not change districts if we stay put.
Another reason I bought, besides a roof to fall back on, was getting a return on cash that beat a CD. Guilty there of being a speculator in that sense and I want to get out while the getting is good. I knew that going in that I would possibly sell but maybe I did not make that clear originally. I am not a seasoned investor; so I am not comfortable with muni bonds or other ways to get a decent yield.
I am also interested in buying a small business that is for sale (natural foods store); besides teaching, that is an industry I have 10yrs experience in. It is a produce store across the street from my kids’s current school and they are old enough to work p/t. Better than gaming which they have started getting into with their spare time. I would like to offer them that experience. But only if I can get the business at a price and supplies at a cost that I can expect to make some money; at least along the lines of the 7k per year that the house was producing in return. (10k yearly rent-3k carrying costs). Want to avoid maintanance costs that have been minimal so far.
Sure, I would like to make a living at the business but know that not all businesses make that much money. But I have managed the exact same type of store and doubled sales while doing it. And the store has stable with one owner for at least the last 15 yrs.
Also, I gotta pay some bills as wife had surgery last year and I put it on a CC. O% teaser will become 20%. If I pay off my CC bills from that my credit score will be sufficient(750ish) and our incomes enough(assuming I keep teaching; my wife has recently upgraded from lunch lady to full time employment as dept mananger in a grocery store) that I can buy again using the old fashioned way (using financing).
Parents have offered up the upstairs in their larger but same neighborhood home that is in Prineville; so if we need a roof over our heads, it is there.
They are snowbirds who are gone 6-8 months/year anyway, so it would not suck too bad to live with them if times got tough. It is unlikely that we will end up destitute; thanks to my parents’ careful planning and discipline; I will someday be inheriting their paid off house + some $$. They also both have long term care insurance so their estate will not likely be decimated by medical bills.
Realtor tenant is buying house so we agreed that 6% commision fees will be avoided which is a plus.
I also want to pay for a year of grad school for my masters of Ed, necessary to keep my OR teaching license and teaching is something I have been happy doing(and able to do) the past few years. I have established myself so I only need to go to a couple schools for subbing(and have stopped going to Prineville for work) and those schools are where I will concentrate my job search. Where I know the student body and admin. Or they will continue to keep me busy subbing; however I do need to be licensed either way. If subbing dries up where I like it, I can re-expand my parameters and stay busy subbing as well. I am good enough at subbing that if I go to a school I am usually requested to come back.
Not sure if that covers it but I want to be able to exercise some combination of these various options that will become feasible upon freeing up our $$ now.
But thanks for pointing out that I am not underwater nor am I a realtor.
You’re underwater and you know it. Just like the other 60 million fools who paid massively inflated prices for depreciating assets over the last 16 years.
A business associate recently shared a job prospect in Bend, OR that required strong O&M engineering skills particularly trouble shooting and “outside the box” problem solving, which are among my strong points. Required management and leadership skills are another story though; being former military I have little tolerance for slackers and their excuses.
Anyway, a cursory economic glance at Bend, OR doesn’t inspire confidence. While I dislike where we are living realize that the Columbia river hydro-electric complex churns-out $-billions and provides the region with low cost power that attracts productive businesses and manufacturers. In addition, our housing was never gamed-up like the bubble markets, so no economic rout forecast. A good number of losers took the 125% HELOC bait, but not enough to affect region’s market.
“I worry about Mike because he’s spent a lot of money and is running out of things to sell.”
That reminds me of our neighbors across the street. They must have held twenty garage sales since we have lived here, and have done so recently at increasing frequency. I frankly am starting to wonder how they can possibly have so much inside of one house to sell. My wife also helped them sell a car a couple of weeks back.
Makes me wonder what they will do once they run out of stuff to sell.
Makes me wonder what they will do once they run out of stuff to sell.
Maybe finally reduce their standard of livings, as they probably should have done years ago?
How am I underwater on a home I owe no money on and is in escrow anyway?
Unless I am lying.
Gotta go renew my realtor license
bye now
Because as with everything else, you misrepresent the definition of underwater.
We expect nothing else from you liars.
Wiki-up “Bend, Oregon” and scroll on down to “construction and real estate” for and interesting and informative read.
Should have heeded that warning in 2007; when we purchased a condo for 400k. Yeah that was friggen stupid. Bank sold it in 2012 for under 200k. So even though the bottom end seems to be healthy; anything higher in prices is much more stagnant and has not been appreciating like the 100-150k sector.
I remember in 2001 noting all the white Dodge work trucks; there were 6 on our block alone. The other houses likely had a Ford or Chevy work truck; we owned a white Dodge so that is the one we counted.
We were amazed at framers framing houses for plumbers to buy and plumbers plumbing houses for framers. It did support the whole economy, from what we saw.
One of the nice homes in the condo communityFree standing SFR) I noticed is now bank owned. It is for sale for $400k; at one point it could have sold for twice that. The wife was a personal trainer and her husband a builder. They lived in the condos and she told my wife when they moved into their newly finished home, “So glad to be getting out of that crappy condo”, obviously insensitive to the fact that we also lived in one of those crappy condos. We thought it was quite nice. But the bigger they are the harder they fall. The builder started having trouble staying busy; soon enough for most of his projects he had to go to Beaverton.
Bet they are sorry they kept paying longer than we did; cuz the end result was the same; they threw in the towel and gave it back to the bank. Now it’s (not) selling for 50% of what it would have fetched in 2007.
“Should have heeded that warning in 2007; when we purchased a condo for 400k. Yeah that was friggen stupid. Bank sold it in 2012 for under 200k. So even though the bottom end seems to be healthy; anything higher in prices is much more stagnant and has not been appreciating like the 100-150k sector.”
I don’t recall you mentioning that $200K loss when you recently bragged here about how you ‘made a small profit’ on something you bought and rented out for a few years before unloading it.
Exactly how large is your mini-Trump real estate empire, and have you ever tallied up your total losses to date?
Exactly how large is your mini-Trump real estate empire, and have you ever tallied up your total losses to date?
mike gave a nice summary within the past couple of weeks, PB.
IIRC, it was just under $900K in profits, and a small loss on a couple of properties.
Note that it was the LENDER (or taxpayer, more likely), not mike, who took the loss on the $400K->200K condo…
So I’d say all-in-all, he came out alright. I believe he is 100% out right now, though when he decided to flip the paid-off “we will always have a roof over our heads” house, I began to wonder whether a flipper can ever really stop.
“(or taxpayer, more likely)”
$900K in profits achieved by stiffing lenders? And no deficiency judgments to follow?
Hmmmmm…
Brings to mind a former colleague who suddenly quit her job to leave the country for central America, where she and her boyfriend planned to start over again.
He used to work for Countrywide. I also learned (from the girlfriend / former colleague) that he owned a San Diego investment condo which he dumped on the lender when the bubble popped. I have long wondered whether lingering consequences of stiffing the bank on this (and possibly other) investment(s) may have driven his decision to leave America for distant shores.
Is Mike going to give the proceeds of his latest sale to the bank which lost more than $200k on the foreclosure sale of his condo? If not, was Mike going to share the appreciation of that skybox with the bank had things turned out the opposite?
Mike, I think RAL would admit we don’t know when the drop will occur. But based on demographics and the finances of those 50+ (approaching retirement), there will be a drop in home prices. It’s a matter of when. As far as how deep the craaaaater [sic] will be, this depends on how you’re measuring it (real vs nominal), the type of housing unit (SFH vs rowhome vs condo), the particular location (urban/exurban/suburban), the region of the country, etc. We’ve gotten RAL to admit that the 65% thing is just a blunt guess.
As far as your 100k house in Bend example, consider this — if that 100k house in bend only sells for 100k in 20 years, think about how much value it will have lost. And if you aren’t with me on seeing how that is possible, do this experiment. Next time you’re out, for every person over 55 that you see, realize that 1/2 of them won’t be around in 20 years. For every person from 45-55 that you see, realize that 1/5 of them will not be around in 20 years. And that’s just deaths… think about how many of those people could a) afford to stay in their house b) be healthy enough to stay in their house and c) won’t need to move for a job in the meantime.
And for every person from 20-25, have a look at the current unemployment rate in that age-group, and think about their odds of affording to buy a house without a good job.
Mike, I think RAL would admit
That’s where you’re mistaken. RAL’s idea of admitting something is to launch into an ad hominem laced tirade.
“If a house that was 100k is now 90k; a 10% drop has already occured.”
You’re not taking inflation into effect. If 100k sells for 90k a decade later and you take (official) inflation into account, the loss is not 10%, it is more like 40%. And if you take real inflation into account (include food price and energy price inflation) it’s probably over 50%.
So you are saying that a 65% drop could occur without any change at all in nominal price. I do see your point. I am making the same exact amount of dollars subbing as I did 10 years ago. Filling up my gas tank has gone from 50 bucks to 100. Health care premiums have tripled over this time or more. Groceries the same; up at least 2x. I compensate by driving a CRV, using food stamps, and putting the kids on Oregon Health Plan. After my house closes escrow I probably will drop insurance as deductibles are up as well; from $1000 to $7500 in one year. Cheaper to pay out of pocket than to pay the premiums.
It still is more expensive to live so my per hour income from teaching has effectively dropped by half during this decade. Not that I did a lot of teaching when I was hurt and making much better money buying and selling houses.
RAL not qualifying the 65% is even more inaccurate then; he has not specified if this drop will be in nominal or inflation adjusted terms that I know of.
I also agree that housing will fall; as the higher priced units are not following the old saying “A rising tide raises all boats”. The market is not functioning normally and a correction is bound to occur; I agree but like to see statements of fact qualified; even an anecdote here or there would be better than nothing. That is my bone to pick with RAL; I don’t even disagree actually.
They keep saying there is no inflation dude.
Did you make any money flipping houses?
how is the timber industry doing in oregon?
The other point RAL has is that in places like Bend, you can find tons of land within easy driving distance. Yes, prices for the land can fluctuate, but at the end of the day existing homes aren’t protected by a lack of nearby buildable land. Where I think RAL goes overboard is when he claims that even NYC, DC, SF, etc have lots of land around where you can just build new. And this I disagree with - - he greatly overestimates how far people will consider “commutable” and does not account for the fact that even if there is land in certain areas,they’re not where people want to live. But for places like Bend (or 99% of America) this doesn’t apply… land is plentiful. If prices of used housing do start to go up, builders will sense an opening and start building more new houses, effectively constraining resale prices for used stuff.
When is “tons of land” not available to develop within easy driving distance?
When the State doesn’t want it to be built upon.
Look up “urban growth boundary”.
using food stamps, and putting the kids on Oregon Health Plan.
mike, out of curiosity: will having 100k in cash affect your eligibility for SNAP & OHP differently than the 100k in paid-off house equity did?
Look up “urban growth boundary”.
Oregon is pretty fascist in this regard; they will tell you what you can and cannot do with your own land to a degree that far exceeds what other states will do—or at least that is my understanding.
@PIC–
Yup. So all comments about all the “available land” around to build on, clearly haven’t dealt with government agencies when trying to build on such land.
We are working on an entitlement that is within the “sphere of influence” of a city in CA (some growth boundary lingo from here). Despite being within the right area of the City, the entitlement will still ultimately take approximately a decade to complete.
And Oregon is worse.
If you think a 65% nominal decline isn’t in the cards, you’re going to be stunned over the coming years.
@PiC
Yes we will be going off OHP and food stamps as wife’s job now comes with medical coverage and we will be making more than the cutoff $$ for food stamps.
Believe it or not, I don’t like taking welfare but willing to use it if eligible.
Not sure they consider assets equity vs cash differently.
Not 100% out of cash as we still have three paid off vehicles, a garage full of stuff, 6k worth of some I bonds, and 10k in a couple etrade accounts.
When we sold out of CA we pocketed around 300k as we paid 150k in cap gains taxes. So 900k in profit was likely more like 750k. Plus losses of 150k-200k on condo and losses of 65k in Utah(this was the home that we defrayed the losses by renting it out). So perhaps under 500k in profit. Plus any and all rents collected on various rentals.
The CA home we had been using it as a rental for more than 3 of the last 5 years we were there; and were naive to avoiding tax consequences. So the investing fool (that is I) gives to the state as well as taketh away. Now 9 years later; not having worked too much we still have 150k+ net worth(house plus cars+few odds and ends). Not great; buy how much would I have saved after 9 years teaching?
You guys seem to think I am some wanna be Trump. I would have rather kept working and living in CA as it was nice. But I had to change my life due to injury. I just made lemons out of lemonade and am getting back on track towards being productive.
Did you know I also bought my first house to live in and moved out of CA because I could not continue in my profession and went and got a teaching license instead? SLACKER. Or that I paid for 4 surgeries on myself plus had the responsibility to keep medical insurance always.
Not a flipper as never did 0% down stuff and lived in every home we ever bought; also not flipping behavior. Except the one in escrow; that one will turn out to be speculating/investing as we will not end up living in it.
Proffesor, we bought a house in utah for 400k cash and sold it for 289k. That was rented for a couple years. Maybe that was the one I was bragging about. Yeah its been great not being able to function and paying tons of money for medical care(sarc). But mine is a decent perspective on housing and that is what this blog is about no. Dissing me will just encourage me to leave and how will that enrich or diversify the input here?
We put 80k down and payed 80k in mortgage payments before throwing in the towel on the condo. I know we paid about 20k/interest on it for three years. So if they got 200k for it plus the 80k plus the 60k I am not sure how much the taxpayers shouldered. The bank did alright being made whole by letting Fannie Mae pick up the bill. for that house we largely lived in it. That condo and my first house were the only homes out of a total of 6 that we used financing for.
Plus losses of 150k-200k on condo and losses of 65k in Utah(this was the home that we defrayed the losses by renting it out).
On the condo, the loss was the lenders rather than yours—right, mike?
I mean to criticism by that, btw; I was happy to see the banks take the losses, as they should have been in the business of underwriting, and were ignoring that little detail.
Thanks for the summary above of your decision to sell, mike. Sorry if I missed it the last time I asked. A 7% or so annual rate of return doesn’t sound like you did too badly on the rental house; that’s a lot better than my cash has been returning the past few years.
BTW, congrats on the improvements in your financial situation; I’m happy to hear it. I hope the wife’s new gig works out great, and that you find something similarly good for yourself.
““Why buy now when you can buy later for 3x median income”; which I find a far more likely scenario. I do not believe a 100k house today in Bend will be 35k in any near future.”
If a 100K house is the median price in Bend right now, to get to 35K, the median income in Bend would have to be around 15K/yr.
Look at median income of an area and then median home price. If it’s around 3X, then it’s in the ballpark for affordability (the area, not a particular house).
Those expecting median houses for 35K are expecting massive deflation. That’s the only way to get to that kind of number. Inflation = houses rise in value, deflation the opposite. My money is on inflation.
Affordability is subjective. 3x income might be our standard but is it our children’s standard? Is it the standard in other cultures?
Let’s call the delta “affordability drift” and look to see what influences it. Is the how-much-a-month mentality a positive force that lowers affordability or a negative force? Do we see signs that the banking industry is looking for ways to change their side of the equation? What are other cultures’ mortgage norms?
Why does a certain culture value home ownership more than another? Is our cultural view towards home ownership changing?
We live in interesting times!
Follow the money.
My money is on inflation.
Bernanke’s money is on inflation as well.
Inflation = houses rise in value, deflation the opposite. My money is on inflation.”
whats easier to make money or houses ? I expect the government will choose the easy way
I see our own resident liar “Rental Watch” is posting his construction expertise elsewhere and telling people basement walls cost $100k to construct.
What a clueless liar.
You are a bully. To quote a couple sayings from the middle school playbook.
No, YOU’RE a clueless liar.
Or how bout you use the classic “Liar Liar pants on fire, nose as long as a telephone wire” Not quite middle school level but it would be a step up.
He’s not really a bully, he gets pwned here on the regular. Some people ignore him, some talk back. I don’t see why you let RAL bother you. His overall message has some power.
He’s also right if Rental Watch was telling people it costs 100k for basement walls.
Where did he say that? I know we paid 40k to finish a basement in Utah.
And you got ripped off on that too.
but I am lying! HA
It was only 36k
And you cluelessly paid too much.
I trusted the Mormon bishop who brokered the deal. Would have stayed in Utah but they ran us off.
They wouldn’t have charged me extra for not being of the LDS faith?
I grew up among Mormons and accepted them as friends; but they acted differently when they were of the majority.Flat out being told you are going to hell for not wanting to go to a ward party was one of the last straws.
Learned about doing a “sociablility” study before taking the plunge; leaving town was worth every penny of getting ripped off by the lying Mormon realtor, (the builder too) and his “profit”. And not going back to Logan Utah anytime soon .
Isn’t the accepted definition of underwater a borrower who owes more than a place is worth? How can I sell(not Stucco) if I am underwater? I was hopelessly underwwater on a condo and tried to sell it but could not. That is how I found this blog, and learned that paying double on a mortgage compared to renting was flushing money away. I would be far more burdeonsome on the taxpayers had I continued to faithfully pay my wifes’ mortgage until we were flat broke.
You have a propietary definition that no-one else knows about? Perhaps the word means not what you think it means?
Perhaps you just can’t be honest?
My brother moved to Sandy Utah for a job. He lasted all of 6 months.
Utah is a culture shock if you don’t know what you are getting yourself into.
alright I am a 13 y.o. with a penchant for making elaborate stuff up. Snort ya got me
You’re a liar. And you lie about that.
Are you now attributing other people’s comments to me?
Where are these so called posts? I have never said any such thing about $100k for basement walls. I have no knowledge of more expensive construction…as those are not the kind of homes in which we’ve invested.
When we do invest in SFH development, we stick to the “bread and butter” kind (no basements)…homes that you can build for $50psf or so.
I’ve been selling every market rally these past few weeks. Something tells me that I am not gonna miss one of the best 10 days of the market ( you know that study that show if an investor stayed out the market the 10 best days of the past 25 years yada,yada their returns would be much, much lower) this time around. We were given that about 4 years ago. No way that buying near a top is nutritious.
“(you know that study that show if an investor stayed out the market the 10 best days of the past 25 years yada, yada, yada their returns would be much, much lower)”
I’d like to see some balance in the form of a study which would show how an investor would fare if he was out of the market the WORST ten days over the past 25 years.
Past performance is no indicator of future performance. I am not programmed to respond in that area. Logic is a little tweeting bird chirping in a meadow.
If you had your money out of the market the ten best days and ten worst days, but kept it in cash since 1989, maybe “dollar cos averaged” in the dollar, you’d better be in an industry where your cash savings after expenses increase an annual 5%.
Interesting to plot ^FVX versus ^GSPC on Yahoo finance. ^GSPC has been ahead of the 5 year note since 1985.
I’m thinking yes it was driven by the boomer bubble. The educated white collar professionals who developed computer software, weapons systems, avionics, smart phones, iPads, and so forth. Now their offspring is not having enough kids. I am not sure if betting most of my equities on the USA is the best thing to do: I’m 21% international.
A good bet is that Europe will get out of its socialism before the USA does. Also a good bet is Japan will get out of its funk. World markets will do better in the long run as our austerity kicks in gear.
I move slow, so I am gradually increasing my stake in international stocks and gradually decreasing domestics.
Steve Jobs and Bill Gates never finished college. Sometimes it’s the smart people that are uneducated that invent a new industry.
I wouldn’t say that Gates or Jobs were “uneducated”, sure they dropped out of college. That doesn’t mean they didn’t learn anything while there. Plus a lot of other giants did go to and finish college. Many even have PhDs.
“…sure they dropped out of college.”
Their opportunity costs of finishing their degrees were too high.
I’d like to see some balance in the form of a study which would show how an investor would fare if he was out of the market the WORST ten days over the past 25 years.
+1, combo.
And for balance, I’d also like to see two other studies: how would an investor fare if he was out of the market EXCEPT for the 10 best days, and EXCEPT for the 10 worst days.
Or maybe I’m just projecting, as I’ve been mostly-out the past 5yrs.
I’ve been selling every market rally these past few weeks.”
I’m with you I sold a stock mutual fund and bought short term bond fund
will buy back in if we get a sequestration correction in stocks as I expect
Ray LaHood is putting out some nice propaganda on Meet the Press today about the devastating sequester spending cuts. He was saying how Obama had put a plan together to avoid this disaster but, well you know. He would have had me convinced had I not seen this….
“The Department of Transportation’s budget for 2013 is $74.2 billion. The automatic spending cuts would slice $1 billion out of its budget: that is a cut of less than 1.4 percent.”
“And consider this: even if the cuts go into effect, the Department of Transportation will spend more money this year ($73.2 billion) than it spent last year ($72.6 billion).”
http://abcnews.go.com/blogs/politics/2013/02/devastating-sequester-spending-cuts-give-me-a-break/ -
there cuts are simply not enough to make a dent in the problems. They are racking up a bill that will be impossible to pay.
Can the FED file for bankruptcy?
“there cuts are simply not enough to make a dent in the problems.”
They are not cuts, they are smaller increases in spending.
“They are racking up a bill that will be impossible to pay.”
Maybe our creditors will just foreclose on our Natural Resources. Water, timber, oil, coal, natural gas etc. China need any of that stuff?
Does china or the FED hold more debt?
“Does china or the FED hold more debt?”
Does the FED have 1.3 billion people and an army?
but who is most likely not to get paid?
“but who is most likely not to get paid?”
How to Understand a Trillion-Dollar Deficit
By Barbara Kiviat Sunday, Jan. 11, 2009
“One million seconds comes out to be about 11½ days. A billion seconds is 32 years. And a trillion seconds is 32,000 years. I like to say that I have a pretty good idea what I’ll be doing a million seconds from now, no idea what I’ll be doing a billion seconds from now, and an excellent idea of what I’ll be doing a trillion seconds from now.”
Read more: http://www.time.com/time/business/article/0,8599,1870699,00.html#ixzz2Lq5KqYVJ
U.S. National Debt Clock : Real Time
http://www.usdebtclock.org/ - 211k - Cached - Similar pages
US National Debt Clock : Real Time U.S. National Debt Clock.
One million micro seconds is one second (1,000,000 µs). One billion micro seconds (1,000,000,000 µs) is sixteen minutes and forty seconds from now, and one trillion micro seconds (1,000,000,000,000 µs) is about 11 1/2 days from now.
I know that in one million micro seconds, I will still be typing. I have a pretty good idea I will be driving somewhere in my car one billion micro seconds from now, and I will most likely also be at work one trillion seconds from now.
“Maybe our creditors will just foreclose on our Natural Resources. Water, timber, oil, coal, natural gas etc. China need any of that stuff?”
I believe that’s exactly what the boyz will try.
“I believe that’s exactly what the boyz will try.”
Well that won`t happen because first you would have to disarm the American people and strip them of their 2nd amendment rights. Oh, wait, um uh…
The 290 million guns in private possession in the USA sure didn’t do much to stop the Patriot Act or NDAA from becoming law, did they?
Was gun confiscation part of the National Defense Authorization Act or the Patriot Act? Now having said that I would agree that our rights were being stripped.
Knowing what I know now maybe we all would have been better off if gun confiscation was part of them. But I guess that wouldn`t have worked, I guess when you are taking rights away from a lot of people it`s best to do it a little at a time.
Well that won`t happen because first you would have to disarm the American people and strip them of their 2nd amendment rights. Oh, wait, um uh…
You guys are missing the point—_completely_.
The Chinese don’t need to “foreclose on our Natural Resources.”
They can simply _buy_ what they want, with the dollars that we have already given them. No war or weapons will be required.
That’s part of the deal, when you give others your legal tender. They can buy what they want with it.
How do you defend against _that_ threat?
“That’s part of the deal, when you give others your legal tender. They can buy what they want with it.”
Well then it`s simple.
When they say I would like a $ trillion worth of Natural Resources please. We can just say…. I`m sorry, the $ isn`t worth anything.
SUCKER!
When they say I would like a $ trillion worth of Natural Resources please. We can just say…. I`m sorry, the $ isn`t worth anything.
SUCKER!
Not so simple.
They’ll be spending the dollars buying up natural resources all around the world. They already are, in fact. They’re buying in Africa. They’re buying in South America. They’re buying oil from the middle east.
How do you stop those dollars from coming back home to roost?
They’re buying themselves the Keystone Pipeline folks. And our ND shale reserves. And all the port refineries in the US.
Yet the “patriots” yell for more drilling.
“but who is most likely not to get paid?”
We the people.
Can the FED file for bankruptcy?
When you say “the FED”, did you mean the Federal Reserve? That’s what it usually refers to.
If so, how could they ever possibly need to file for bankruptcy? They can manufacture as much of a profit every year as they might want.
All they have to do is create dollars out of thin air, and use them to buy assets (e.g. Treasuries, corporate bonds, etc) that produce a real return.
You’d have to be a real idiot to go BK when you have that kind of a business model!
“When you say “the FED”
Just switch FED and Bud, throw in a Bernanke when they add weiser and you got yourself a commercial.
1970 Budweiser Commercial - YouTube
http://www.youtube.com/watch?v=_dpTmvSuWbA - 208k -
Sequester is the only way that everyone takes a hit…Households must do it all the time…You think any of those politicians would willfully cut programs in their own backyard….
Don’t be ridiculous. Households don’t do 10% across the board spending cuts all the time. How successful would the average renter be if they went to their landlord after a pay cut and said that they were going to be paying 10% less rent for the rest of the lease term because they have to make across the board cuts. Might they move to a cheaper place? Yeah, but that move costs money to make so the savings might not show up for a while and besides, extra spending to make cuts (like extra spending to improve computer based administrative systems so they can fire the people who otherwise do the record keeping) isn’t available.
What households do is cut the stuff they don’t need - subbing home cooked for meals out or not buying new clothes at all or cutting cable TV and going to the library for internet access. Well, the sequester doesn’t allow the government to make those decisions. It has almost no flexibility. Household cost cutting is totally different.
Don’t be ridiculous..the sequester doesn’t allow the government to make those decisions ??
Read my last sentence POLLY before you go on with your ramble after brain function has ceased…
SEQUESTER? What’s that?
People on this board are missing the obvious.
The “sequester” is what the government will blame after ObamaCare nails everyone’s wallet.
The government knows that “sequester” is meaningless to their own well being.
Polly pulls in $100K+ annually and she and her officemates are scrambling for paper clips?!
WTF? Paperclips cost $1.50 a box. $100K+ salary buys mucho paper clips. An already “stressed” governmental department?
What a pantload.
Government Bubble. Where are those Titanic deck chairs again?
And I have it on excellent authority that new HIRING in an agency now looking at furloughs was still going on as late as this very month!
It’s all a smokescreen.
Mortgage relief not keeping many in homes
Posted: 5:26 p.m. Saturday, Feb. 23, 2013
By Kimberly Miller
Palm Beach Post Staff Writer
More than $7.7 billion in mortgage relief has flowed to Florida homeowners from last year’s landmark foreclosure abuse settlement, but consumer advocates complain too little of it was used to keep people in their homes.
Just 12 percent of Florida’s take so far has gone to making home loans affordable by reducing the amount owed on primary mortgages, according to a progress report released last week by settlement monitor Joseph Smith.
The largest chunk of settlement money _ $3.2 billion, or 42 percent _ has been debt forgiveness to homeowners who complete short sales. Another $2.4 billion was credited to banks for eliminating second mortgages, which is money they would likely lose anyway in the event of a foreclosure.
Nationwide, 46 percent of the debt forgiven through Dec.31 has been through short-sale deficiency waivers. About 14 percent was for principal forgiveness on first mortgages.
“It’s damn hard to figure out what represents real debt forgiveness and what represents balance sheet gymnastics by banks trying to get credit for taking bad debt off their books,” said Dan Petergorsky, lead researcher for the Campaign for a Fair Settlement. “The intention was to keep people in their homes, but they’re using it simply to clean up their balance sheets.”
Government officials and lenders last week touted that $45.8 billion in relief has been awarded to more than 550,000 homeowners nationwide.
In Florida, 101,573 homeowners benefitted from the settlement, with an average relief amount of $75,949. About $935 million was for principal reductions on first mortgages to 7,221 Florida homeowners. That’s an average principal reduction of $129,522.
“As we reach the one-year anniversary (of the settlement), the latest report marks a major milestone in our efforts to assist struggling homeowners,” said U.S. Housing and Urban Development Secretary Shaun Donovan. “We have already surpassed our initial expectations.”
Paul Baltrun, director of corporate development for the Law Office of Paul A. Krasker in West Palm Beach, said several of his firm’s clients have received hefty principal reductions and lower interest rates because of the settlement.
Earlier this month, one client had $205,700 lopped off their mortgage and their interest rate cut to 2 percent. The modification reduced the monthly payment from $5,085 to $1,601. Another client’s mortgage was reduced by $169,000, with $42,000 deferred until the end of the loan, meaning no interest is paid on that amount. Both deals were with Bank of America.
“I look at these individual clients and this has absolutely been a success for them,” Baltrun said. “But looking at it as a whole, I have some concerns.”
Baltrun echoed other consumer advocates in saying too much relief is coming in the form of short sales and other avenues that don’t keep people in their homes. About $7 million was relief to consumers who completed a deed in lieu of foreclosure.
Smith said banks won’t complete their obligations unless 60 percent of the relief is provided in the form of first-and second-lien principal reductions.
Lenders do not earn a dollar-for-dollar match on all relief provided to borrowers. For example, for every dollar forgiven by a lender on a second mortgage, it receives only a 10-cent credit toward its required settlement amount. Lenders and servicers receive between a 20-cent credit and a dollar-for-dollar match on short sales, depending on the kind of debt being forgiven.
But that leads to another problem, Petergorsky said. If banks get more credit for first-lien principal reductions, they’re more likely to target the largest loans, leaving out the little guy.
“There is a perverse incentive to help the most well-off borrowers,” he said.
The longer I watch this play out, the more convinced I become that ‘mortgage relief’ is primarily a rhetorical tool for politicians to show voters with underwater mortgages that they are ‘doing something’ to help them, in order to buy votes.
food stamps are cheaper votes.
“cheaper votes”
People care the most about the price of an item when it is their own money that is doing the buying.
If it’s the taxpayer’s money - a form of OPM - that does the buying of votes then why should a politician care what the price is?
its obvious they dont care. they will just fee you more when you want to do something to make a buck.
“People care the most about the price of an item when it is their own money that is doing the buying.
If it’s the taxpayer’s money - a form of OPM - that does the buying of votes then why should a politician care what the price is?”
EXACTLY correct. This is why we have people in Washington making $100K+ annually complaining (or is it refusing?) to buy their own box of $1.50 paperclips.
OPM money is great, especially in D.C.
Yet, such people tend to fancy themselves working in the “public interest”.
Draw your own conclusions.
I seriously doubt most people on food stamps vote, so my guess would be that you are wrong.
You need to get out a bit more. You need to visit Compton when Maxine Waters shows up for a political rally and tells her constituants she is there to save them and they need to get out to the polls in force and give to her their votes.
Maxine has a lock.
Only 36.4 percent of the lowest 20 percent of the socio-economic status distribution vote. By contrast, upwards of 60 percent vote for those in the upper 60 percent by socio-economic status criteria.
I’d guess Compton has a disproportionately high share of residents in the bottom 20 percent, making it a less fruitful shopping ground for politicians seeking to buy votes.
“I seriously doubt most people on food stamps vote,”
Inner City Voting Lines In Cleveland, Ohio - YouTube
http://www.youtube.com/watch?v=TBz6xcmwIr4 - 119k -
And everyone who attends a Maxine Waters rally in Compton is on food stamps? Really? Perhaps you’re the one who is cloistered in his presumptions?
“I seriously doubt most people on food stamps vote,”
Woman Votes Multiple Times in Election 2012 but Denies … - YouTube
http://www.youtube.com/watch?v=nX6E2Ucv7S8 - 210k - Cached - Similar pages
Feb 8, 2013 … Woman Votes Multiple Times in Election 2012 but Denies Voter Fraud …
Inner City Voting Lines In Cleveland, Ohio
Obama Causes Welfare Chaos In Detroit
http://www.youtube.com/watch?v=YfGLB8LO1aM
Farmers benefit a lot from SNAP. That’s why it’s run by the Dept of Agriculture.
“Most farmers” are in fact, big agri-biz. Think ADM.
We saw how well “let them foreclose” worked to get votes, now didn’t we?
Socialism at its best. Smoke and mirrors and bureaucrap school marm careers.
Socialism at its best was the Wall St bailout.
Plus all the people who collect a paycheck liked to defense. But hey, that kind of “spending other people’s money” is compatible with Galtian Libertarianism, as long as I get a cut of it, right?
CO: Secret energy lab spawns million dollar govt employee
November 24, 2012
By Tori Richards and Earl Glynn | Colorado Watchdog
GOLDEN, Colo. – The federal government’s dream of a renewable energy empire hinges on a scrubby outpost here, where scientists and executives doggedly explore a
new frontier.
If you live outside Colorado, you probably haven’t heard of the National Renewable Energy Laboratory – NREL for short. It’s the place where solar panels, windmills and corn are deemed the energy source of the future and companies who support such endeavors are courted.
It’s also the place where highly paid staff decide how to spend hundreds of millions in taxpayer dollars.
And the public pays those decision-makers well: NREL’s top executive, Dr. Dan Arvizu, makes close to a million dollars per year. His two top lieutenants rake in more than half a million each and nine others make more than $350,000 a year
But what is really going on there? Energy expert Amy Oliver Cooke drove out to the site, which looks something like Nevada’s Area 51 with its remote location and forbidding concrete buildings. NREL had started a construction project and Cooke wanted to see for herself. She didn’t get far: a man in an SUV seemingly appeared out of nowhere, stopped her car, and told her to leave.
“A beefy looking fellow told me, ‘It’s top secret,’ said Cooke, director of the Energy Policy Center at the Independence Institute think tank. “I said, ‘I’m a taxpayer and I want to see what you’re building’ and he said it was it was ‘top secret so we can bring Americans a better future.’”
With its bloated budget and overseen by a $533 million a year government-funded management company, Cooke isn’t buying it.
“NREL has given us two of the most significant boondoggles, one of them being ethanol and the other being (bankrupt) Abound Solar,” she said. “They were part of the team that pushed Abound Solar along. In fact, they wrote in March 2011 on their website how proud they were of their role in abound solar.
“Am I impressed with NREL? No, not really,” she said.
NREL’s taxpayer-funded management company has seen its budget more than double since 2006. That’s when one of its most ardent supporters, Rep. Ed Perlmutter D-Lakewood, was first elected to Congress. The lab sits in the middle of his district.
But Perlmutter’s ties go beyond merely promoting green legislation and lobbying his colleagues for NREL funds. He has received $12,670 in campaign contributions from executives of NREL and its management company, MRIGlobal, a company that describes itself as “an independent, not-for-profit organization that performs contract research for government and industry.” Perlmuter’s father has served as a trustee for MRI and MRIGlobal during the past decade. Between 2003 and 2005, Perlmutter was also a trustee. These positions were unpaid.
Perlmutter did not respond to phone calls seeking comment for this story.
Dan Arvizu, Alliance president and NREL director
2010: $928,069
2009: $691,570
2008: $652,159
Bobi Garrett, NREL senior vice president of Outreach, Planning and Analysis
2010: $524,226.
2009: $398,022
William Glover, NREL deputy lab director and CEO (retired)
2010: $557,571
2009: $407,361
2008: $315,465
Catherine Porto, NREL senior vice president
2010: $406,339
2009: $223,553
http://watchdog.org/62420/co-secret-energy-lab-spawns-million-dollar-govt-employee/ - 682k -
Good find, hazard.
AL’S EMPORIUM
February 24, 2013
A Job-Hacking Fed Policy
By AL LEWIS
The Federal Reserve’s plan to pump tens of billions of dollars into the banking system each month until the unemployment rate drops to 6.5% doesn’t seem to be working.
Last week, with the release of minutes from the central bank’s January meeting, we learned some Fed officials are worried all this money they printed may cause excessive risk-taking and financial-market instability. Yes, they’re finally beginning to wonder if they should suddenly dump their goal of restoring jobs and stop the presses before there’s another financial calamity or a rash of inflation.
The Fed has been holding interest rates near zero and injecting trillions into the economy since the 2008 financial crisis.
Despite this unprecedented action, the unemployment rate—now at 7.9%—has remained depressingly high. Instead of spurring job creation, the Fed’s money has rebuilt banks that should have failed, reinflated the stock market to postcrash highs and helped companies and investment groups hoard cash.
Companies don’t know what to do with this loot, the rising value of their stock or the funds they can borrow from banks for next to nothing—all thanks to the Fed. They can’t find customers so they can’t create jobs. They also can’t keep their cash hoards in low-interest-bearing accounts forever. Their next best idea: mergers and acquisitions.
This year we’re off to the quickest start for M&A activity since 2000 and the heady days of the Internet bubble, according to data from Dealogic.
…
Deals are great for the stock market. They are good for bankers, lawyers, accountants and analysts. They may even help some struggling companies survive by strapping themselves together like damaged ships in a storm. But they won’t create the millions of jobs America needs to get out of its malaise. In fact, sometimes deals destroy jobs.
…
The private-equity firm that is buying Heinz with Mr. Buffett, 3G Capital, cut hundreds of jobs at Burger King after paying $3.3 billion for the fast-food chain in 2010. The move resulted in higher profits, even as sales fell, in a fine example of addition by subtraction.
The same strategy may not be required at Heinz, but the ketchup deal is already freaking folks out. People across the packaged-food industry say they now anticipate a wave of consolidation.
Denise Morrison, chief executive of Campbell Soup, recently put it this way: “It’s a heightened signal that I’ve got to be even more aggressive about costs.…This is a good call to action.”
So the Fed prints money to create jobs and, ironically enough, some of it only encourages people to destroy jobs. Chalk it up to the law of unintended consequences, but the Fed probably isn’t changing course anytime soon.
Watch out for hatchets at a company near you.
The Federal Reserve’s plan to pump tens of billions of dollars into the banking system each month until the unemployment rate drops to 6.5% doesn’t seem to be working.
So maybe it actually has nothing to do with improving unemployment but that makes a nice cover because people want to hear it AND it’s in their job description?
Watch out for hatchets at a company near you.
We just lowered our projections for this year significantly from last year. We’ve already cut some, but I assume we’ll cut some more.
Welcome to the last 30 years.
Who is your competition if you buy a home now?
1) How-much-a-month Harvey, armed with a 3.5% down payment 3.5% interest 30-year-fixed federally guaranteed loan from the FHA or similar government sponsored mortgage market fluffer.
2) All-cash Chinese, Canadian or other foreign buyers.
3) Blackstone and other hedge funds buying homes to try to cash in on buy-and-hold rental market investing during a period when the Fed is attempting to reflate housing prices with $40 bn a month in MBS purchases and ultra-low interest rates.
Other?
“Other?”
4) Greater fools who buy into the latest “It’s not another bubble” real estate fluff piece from the Wall Street Journal.
PERSONAL FINANCE
February 24, 2013
For Many, 2013 Will Be the Year to Finally Buy a Home
By ANDREA COOMBES
Bidding wars. Buyers paying cash. Homes selling for more than asking price.
Are we entering another housing bubble? No. But prospective buyers in many markets may be shocked at the competitive nature of the home-buying process these days.
The number of homes for sale fell to a 13-year low in January, leaving would-be buyers chasing a shrinking supply of homes just before the spring selling season.
“On a national scale, the market is clearly rebounding,” says Greg McBride, senior financial analyst at Bankrate.com. “It’s not that the prices are crazy, but the buyers outnumber the available homes for sale.”
There was an average of 4.8 months of supply of existing homes for sale in the fourth quarter, according to the National Association of Realtors (that is, it would take 4.8 months to sell off the inventory at the current pace).
Six months’ supply is closer to normal, says Celia Chen, a housing economist with Moody’s Analytics, an economic research firm. In 2010, it went as high as 10 months. “Prices are starting to rise as a result of the strong demand relative to low supplies,” says Ms. Chen.
That said, prices still are about 30% below their peak, she says. And the reasons for the slim pickings aren’t good news. Lenders are taking their time putting bank-owned properties on the market, in part to keep prices up.
Plus, prospective sellers are waiting until prices rise before listing their homes for sale. About 11.9 million homeowners are still underwater—that is, they owe more on their mortgage than the home is worth—according to estimates from Moody’s Analytics.
“When you’re underwater, you’re much less likely to list your home,” Ms. Chen says.
And that means a potentially tough time for buyers. “You might have to look and shop around a lot,” says Keith Gumbinger, vice president of HSH.com, a housing-market data provider. “Competition for the most attractive properties is going to be stronger than you think.”
Real estate is local, of course. Inventories aren’t as tight in Michigan and Ohio, for example, where many distressed homes are on the market, or in Oklahoma, where the market is more stable. But buyers may find their choices limited in parts of Arizona, Florida, Colorado, Texas, California and the Washington, D.C. area, among other places.
If you’re in a tight market, consider these strategies to smooth the process:
1. Stay calm
Don’t spend more than you can really afford.
“There’s a renewed frenzy” in the market these days, says Christy Dean, a real-estate agent with Walt Danley Realty, focused on the luxury market in Paradise Valley, Ariz.
Buyers can get caught up in the hype, and that can mean spending too much, she says.
“I’ve seen it happen so many times. The wife is about to have their first or second baby. They have to have a house on this street,” she says. “Don’t get house poor. Be conservative.”
…
There was an average of 4.8 months of supply of existing homes for sale in the fourth quarter, according to the National Association of Realtors
I gotta hand it to the market manipulators: they have done a bang-up job here.
Five years ago, I never would have thought that we would have less than six-months worth of inventory this soon. I would have thought it impossible.
Live and learn…
Why would a young person wearing an albatross of $40,000 in student loan debt around his neck want to further sink his personal finances by going further into hock to buy an overpriced money pit? Talk about starting life out on the disabled list…
‘Massive student debt levels and their toxic interaction with lenders’ stringent rules on “debt-to-income” ratios.’
Let me correct you here, Kenny Real Estate Pimp Boy: These limits on “debt-to-income” ratios are there as an attempt to help prevent young foolish people from financially hanging themselves when they are starting out life. The standards are not idiot-proof, and some young greater fools will succeed in financially hanging themselves on a cross of debt, despite the safeguards.
FIRST-TIME BUYERS SEEM LEFT OUT OF THE MARKET
By U-T San Diego
12:01 a.m. Feb. 24, 2013
Updated 2:45 p.m. Feb. 22, 2013
Though the housing market is rebounding in many local markets, there is one important segment that is not: First-time buyers are missing in action and represent a smaller proportion of overall sales activity than their historical norm.
Whereas first-timers typically account for roughly 40 percent of sales, lately they’ve been involved in anywhere from 30 percent to 35 percent, depending on the source of the data. Lawrence Yun, chief economist for the National Association of Realtors, estimates that there were 2.2 million fewer first-time purchasers in the United States between 2008 and 2012 — a deficit of about 450,000 a year.
…
So what’s the problem? Where are these first-timers who should be jumping in while mortgage interest rates are near all-time lows and prices in some markets are still at 2004-05 levels? Recent economic jolts — the recession and relatively high unemployment rates for younger workers — are crucial factors. Disproportionate numbers of 20- and 30-somethings have moved back home, living with parents, or they’re renting with others, rather than purchasing a house.
Tougher underwriting and qualification requirements by the banks are also important contributors. Fed Chairman Ben Bernanke has said so, and President Barack Obama singled out tight lending standards — even for borrowers with solid credit — as an issue in his State of the Union address.
On top of these burdens, though, there’s still another financial albatross: Massive student debt levels and their toxic interaction with lenders’ stringent rules on “debt-to-income” ratios.
Student loan debt loads have exploded in the past decade and now exceed $1 trillion, according to financial industry estimates. A Pew Research study last fall found that the average student debt balance is $26,682, and that more than one in 10 graduates are carrying close to $62,000 in unpaid student loans. Both numbers are up sharply from just five years earlier.
…
“Even a $30,000 or $40,000 debt can mean you don’t make the cut,” said Paul Skeens, president of Colonial Mortgage Group in Waldorf, Md. Lenders typically look at two measures of debt-to-income to help gauge creditworthiness: the monthly costs of the proposed new mortgage compared with household income; and total recurring household debts — credit cards, auto, student loans and the new mortgage. If you have $3,000 a month in recurring debt payments and $6,000 a month in household income, you’ve got a total debt-to-income ratio of 50 percent.
Under current lending standards, a total debt ratio of 43 percent is about as high as an applicant for a conventional loan can go, absent strong compensating factors such as lots of money in the bank — something most first-timers sorely lack.
FHA-insured mortgages offer a little more flexibility, says Skeens, who recommends them for buyers with student debts.
that is a good point all that student debt is deflationary
except for schools
keep up with the jones?
Because everyone around them is telling them that if they don’t buy now they’ll miss out on great prices and low interest rates.
And yeah, that’s what I hear on a regular basis during lunchtime at the company cafeteria. If RAL were to show up and preach his gospel of 65% price declines to them he would be laughed out the door.
I’d guess most people have no background in finance, and hence completely miss the obvious connection between the Fed’s pedal-to-the-medal easy money low-interest rate policy and higher housing prices. And the Fed leadership pretends to miss the connection.
Bloomberg News
Bernanke Said to Minimize Asset-Bubble Concern at Meeting
By Rich Miller on February 22, 2013
Federal Reserve Chairman Ben S. Bernanke minimized concerns that the central bank’s easy monetary policy has spawned economically-risky asset bubbles in comments at a meeting with dealers and investors this month, according to three people with knowledge of the discussions.
The people, who asked not to be identified because the talks were private, said Bernanke made the remarks at a meeting in early February with the Treasury Borrowing Advisory Committee. Fed spokeswoman Michelle Smith declined to comment.
The Fed chairman brushed off the risks of asset bubbles in response to a presentation on the subject from the group, one person said. Among the concerns raised, according to this person, were rising farmland prices and the growth of mortgage real estate investment trusts. Falling yields on speculative- grade bonds also were mentioned as a potential concern, two people said.
…
I’d guess most people have no background in finance
Or they realize that the economy is rigged.
Plus don’t forget, the masses have been brainwashed into believing that housing is supposed to be utterly unaffordable.
My peers, who mostly earn around 100K per year, believe that only well paid cubicle dwellers are supposed to have houses, and that the Lucky Duckies will have to do with run down apartments and trailers.
My peers, who mostly earn around 100K per year, believe that only well paid cubicle dwellers are supposed to have houses, and that the Lucky Duckies will have to do with run down apartments and trailers.
Historically, it has been only the top 65% of the earnings curve that has been able to afford a house.
So your peers are not that far from the truth.
The difference, in my mind, is that Lucky Duckies used to be less than 35% of the populations.
We may well be heading into an era where they represent far more of the population than that. How high a percentage? Now that might be an interesting weekend topic.
It’s their losses and their losses alone.
They should want their freedom and extreme mobility to be able to grab greater opportunities hundreds of miles away, should they arise.
4) People who sat out the bubble and crash, and now want to buy. I know one person like this…definitely not a how-much-a-month Harvey…a young partner at a professional firm who is now having a hard time finding something to buy.
And here’s the kicker–he’s looking in SF at a price point where FHA loans and Blackstone’s rental strategy don’t work. So, who is he competing with other than the all-cash foreign buyers? My guess is other people like him…
People like this would be well-advised to wait until the Chinese and Canadian bubbles have resoundingly popped, unless they are as rich as the Romneys and hence can shrug off paper losses of +/- $millions.
If you can borrow the money from your dad, I’d say “go for it.”
This person has pretty good insight into real estate markets (that is his area of focus). For years, he and I talked about how it was all going to end badly as we waited, and rented. He’s now married, and fed up with living in an apartment that isn’t as nice as a home that he could afford, so he’s trying to buy.
He recognizes that prices are crazy…he hasn’t bought so far, because he keeps getting outbid, and he’s not willing to play with those “winning” bidders. He’s hoping to buy something that needs some work, where there is a little less competition.
At the end of the day, he is at a stage in his life where he wants to buy, and can afford to do so.
This is the category #4 that you are forgetting.
“This is the category #4 that you are forgetting.”
Oh no, I’d put your friend in my category #4 if he is out there competing with the Bernanke-fueled echo bubble buyers.
Recognizing that prices are crazy, and wanting to buy anyway for quality of shelter reasons is not the same as declaring there is no Fed-induced bubble (a topic that he and I still talk about).
Housing is consumption.
Housing is expensive when you are competing with a cadre of domestic and foreign investors fueled by the Fed’s QE3 hot money injections.
Pimp on.
‘He recognizes that prices are crazy…he hasn’t bought so far, because he keeps getting outbid, and he’s not willing to play with those “winning” bidders. He’s hoping to buy something that needs some work, where there is a little less competition.’
Do you and your ‘friend’ really believe there are homes ‘that need some work’ and are hence out of the competition? Why would you and your ‘friend’ think anyone else in the market wouldn’t be able to figure out how much said work would cost to complete and price that into a discounted bid?
These posts have deception written all over them. Why wouldn’t you just advise your ‘friend’ outright that if they buy in San Francisco today, they are going to lose a bundle when the Fed eventually pulls the plug on their housing price stabilization policy and the hedge funds and all-cash Chinese and Canadian investors all try to lock in their gains as they leave the burning theater?
Friends don’t let friends buy artificially overpriced real estate.
“These posts have deception written all over them.”
Absolutely.
Try this….
Open up this page in MS Word, remove all the usernames, save the file and close. Wait 3 days, open it up and just read the posts. The deceptions jump off the document. Isolate the the web of lies from the document and then come back to this page and see who is lying through their teeth(paid hacks).
This just in: People with money are willing to pay in order to NOT deal with the time and hassle of a rehab. They have the ability to value their free time highly.
The premium for just done is too high based on a cost to complete analysis.
And he hasn’t bought yet…others are willing to pay more than him, even for homes that need fix-up.
My friend needs no one to tell him that homes are overpriced.
This just in: You’re lying and everyone here knows it.
My UHS spy tells me there is a strong uptick of public worker-type city-dwellers quietly seeking “survival” retreats with livable structures on them– and they’re almost laughably furtive about making their wants known.
So maybe the gun furor is actually a government plot to stimulate the market in backwater crapshacks? They may get furloughed, but they’ll still get those pensions….
Secondly, the boom in <$150K housing stock is also being driven by the same buyers who having been foreclosed out of their McMansions starting around 2009 have now passed through the mandatory three-year “punishment” protocols. These aren’t “starter” homes so much as “finisher” homes.
My UHS spy tells me there is a strong uptick of public worker-type city-dwellers quietly seeking “survival” retreats with livable structures on them– and they’re almost laughably furtive about making their wants known.”
getting ready for the zombie invasion
getting ready for the zombie invasion
zombie invasion is the best thing going on television today—The Walking Dead…
Diana Olick , CNBC.com – 1 day
They bailed on mortgage, but now want to buy again
Home sales are slowly climbing back, thanks to investor demand, improving consumer confidence in housing, and the surprising return of former homeowners who once walked away from their commitments.
These so-called “strategic defaulters,” some of them investors and some owner-occupants, are coming back to the market, despite damaged credit, and apparently the market is welcoming them back.
Coming back to home ownership may not be as difficult as some think. Consumers who only defaulted on their mortgage during the recent recession were far better risks than those who went delinquent on multiple credit accounts, like credit cards and auto loans, according to a 2011 study by TransUnion.
http://www.nbcnews.com/business/they-bailed-mortgage-now-want-buy-again-1C8496356?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+msn%2FGWhU+(NBC%3A+Business) - 36k -
yep they turned housing into a casino too.
THE ANGELS My Boyfriend’s Back [original single version] - YouTube
http://www.youtube.com/watch?v=qFdzJ0j8lYo - 199k -
He went away
And it bothered you, every night
And when he didn’t pay his mortgage
You said things that weren’t very nice
The Deadbeats back and you’re gonna be in trouble
(Hey-la-day-la the Deadbeats back)
You see him comin’ housing prices gonna double
(Hey-la-day-la the Deadbeats back)
You been spreading lies he says were untrue
(Hey-la-day-la my Deadbeats back)
So look out now cause he’s buyin’ number two
(Hey-la-day-la the Deadbeats back)
(Hey, he knows that you been cryin’)
(Now he`s back and yes he`s buyin’)
He’s been gone for such a long time
(Hey-la-day-la the Deadbeats back)
He stopped payin’ he was Robo signed
(Hey-la-day-la the Deadbeats back)
You’re gonna be sorry and it won`t be long
(Hey-la-day-la the Deadbeats back)
Cause his credit scores’ lookin awful strong
(Hey-la-day-la the Deadbeats back)
(Hey he knows that he was cheatin’!)
(Now the renters get another beatin’!)
(How in the world they believe all his lies?)
(Wah-ooo, wah-ooo)
(Now he`s back cause he won`t down size
(Wah-ooo, wait and see)
The Deadbeats back he’s gonna save the housing market
(Hey-la-day-la the Deadbeats back)
With a brand new car and a garage where he can park it
(Hey-la, hey-la, the Deadbeats back)
[Fades]
Know he’s buyin’ number two
(La-day-la, the Deadbeats back)
Because he knows the renters get screwed…
Coming back to home ownership may not be as difficult as some think. Consumers who only defaulted on their mortgage during the recent recession were far better risks than those who went delinquent on multiple credit accounts, like credit cards and auto loans, according to a 2011 study by TransUnion.
So all those people paying the CC’s but the not the mortgage weren’t as clueless as many here thought.
So all those people paying the CC’s but the not the mortgage weren’t as clueless as many here thought.
We didn’t argue that they were clueless for doing this, not that I recall. In fact, it was the opposite:
This was one of the first forecasts that shocked me back when I first started reading the blog, but it came to be accepted by most fairly quickly; as a deeply-underwater homedebtor, it made _sense_ to keep the CC’s current (as you need them for everyday life and to buffer the lean times). Being current on the CC payments at the same time as being seriously arrears on the mortgage was the opposite of how mortgages/CC’s had historically performed.
But the forecasts were correct.
They want to buy when the gains are privatized. They will bail again to socialize the losses. Rinse, wash, repeat.
Providing both home buyers and lenders a means to privatize the gains from a home purchase transaction and socialize future losses in case the homeowner ends up unable to repay his debt is a primary function of government-sponsored enterprise operation. This is a key reason Fannie Mae and Freddie Mac went bankrupt in 2008, and why the FHA is near the point of needing a bailout.
Thanks to Timothy Geithner’s efforts, the GSEs have continued to conduct business as usual after bankruptcy at massive ongoing losses to the U.S. taxpayer which are almost never discussed.
If I understand the article below, those in underwater GSEs can now walk away from their homes, even if they owe hundreds of thousands of dollars more than they can sell for, and let the U.S. taxpayer pick up the deficiency.
Fannie, Freddie to let some walk away
Chronicle News Services
Updated 8:25 pm, Monday, January 28, 2013
MORTGAGES
Fannie Mae and Freddie Mac will let some borrowers who kept up payments as their homes lost value erase their debts by giving up the properties, helping Americans escape underwater loans while adding to losses at the mortgage giants bailed out with $190 billion of taxpayer money.
Nondelinquent borrowers with illness, job changes or other reasons they need to move will become eligible in March to apply for a deed-in-lieu transaction that erases the shortfall between a property’s value and the size of its mortgage. It follows a change in November that lets on-time borrowers sell properties for less than they owe, known as short sales, wiping out the remaining mortgage debt. Normally, the lenders could pursue people to recoup their losses.
Previous foreclosure-prevention programs were designed to help only borrowers on the verge of losing their homes, in effect penalizing those who kept paying.
…
This is toxic government, I think you agree.
Fewer Borrowers Are Behind on Mortgages, but for How Long?
Published: Tuesday, 12 Feb 2013 | 11:29 AM ET By: Diana Olick
CNBC Real Estate Reporter
“The declines in the mortgage delinquency rate will likely be muted for the foreseeable futures as the foreclosure process in some states can take more than 1,000 days,” notes Tim Martin, of TransUnion’s financial services business unit. “It is not clear yet, but recently announced regulatory rules related to mortgage servicing may tend to slow down this process further.”
There are borrowers today that have not made a mortgage payment in several years but have still not lost their homes. New laws in California and Nevada slowed the foreclosure process considerably, while New York and New Jersey are still facing huge backlogs of bad loans that will take years to make their way through the states’ court process.
http://www.cnbc.com/id/100453098/Fewer_Borrowers_Are_Behind_on_Mortgages_but_for_How_Long - 80k
“There are borrowers today that have not made a mortgage payment in several years but still have not lost their homes.”
And this puts these homes in a holding pattern.
As long as the homes are in a holding pattern they won’t be foreclosed on. And if they are not foreclosed on then they won’t have to be put up for sale. And not putting them up for sale distorts the supply/demand forces which keeps the prices of homes that ARE put up for sale higher than where they would otherwise be.
The homebuyers think they are pulling a fase one on the lenders but it’s the lenders that are pulling the fast one.
“There are borrowers today that have not made a mortgage payment in several years but still have not lost their homes.”
I doubt most folks count these homes in shadow inventory, but I do, as they eventually will either come back on the market or crumble to dust. Meanwhile, another component of what I count as shadow inventory, due to aging Baby Boomers who will eventually want to downsize from their empty nest McMansion tract homes to retirement living arrangements, will be putting their homes on the market at increasing rates, and the huge amount of residential housing bought up as rental investments will be luring prospective buyers into cheaper alternatives to the high costs of ownership. AND the effort underway to stimulate the construction sector back into action will add to McMansion tract home supply at a point when fundamental demand (as opposed to transient investor demand) is insufficient to absorb existing inventory (shadow inventory included).
I predict an ongoing supply glut over the next two decades.
These homes are included in the 5.3 million homes that are non-current. I for one count them as part of the shadow inventory.
“it’s the lenders that are pulling the fast one.”
If I understand correctly, lenders are under no legal obligation to foreclose. They just have that option if the borrower doesn’t pay. I guess the lenders have decided that they don’t want the haircut of taking back and unloading this stuff now. This makes some sense, as long as their theory that the homes will be worth more later holds up (which is another matter entirely). But I don’t think of it as them ‘pulling a fast one’. I mean, legal deception has always been the name of the game.
I guess the lenders have decided that they don’t want the haircut of taking back and unloading this stuff now.
Translation: regulators are letting lenders HIDE the losses on their books.
Found the answer to one of my (unanswered) questions from yesterday: Yes the Congress’s operation will be subject to the sequester, though I assume Congress critters will not be subject to furloughs and temporary 20% pay reductions, as that would severely inconvenience them.
Sequestration affecting congressional hiring, Rep. Goodlatte says
Posted by Ed O’Keefe on February 24, 2013 at 9:47 am
The Obama administration has been warning for months that millions of federal employees could face furloughs and potential layoffs if forced budget cuts go into effect this Friday as slated.
But the cuts, totaling roughly $85 billion, also apply to congressional budgets. So how are lawmakers planning to cut back, if necessary?
For House Judiciary Committee Chairman Bob Goodlatte (R-Va.), the solution appears to be keeping some jobs unfilled, just in case.
Appearing Sunday on C-SPAN’s “Newsmakers” and facing questions from a Washington Post reporter, Goodlatte said sequestration has factored into his hiring decisions as he assumed control of the Judiciary committee in recent weeks.
“I’ve been meeting with my committee staff and my personal staff to talk about how the impact of sequestration will affect our budget and making sure that our expenses do not exceed the lowered amount that would take place if sequestration takes affect,” Goodlatte said.
Asked whether his budget cutting would include furloughs or potential layoffs, he said “we have been taking this into account with our hiring both on the committee and in my congressional office, so I hope to be able to avoid that.”
An spokeswoman didn’t immediately return requests for clarification on how many jobs Goodlatte is potentially keeping open and how many people his personal and committee offices employ.
In the interview, Goodlatte suggested that federal agencies also should have spent the last year preparing for the adverse affects of sequestration by keeping at least some positions vacant — just in case.
“Any government agency that has been listening to what’s been going on for the last year and a half since this issue came up I would hope has also taken that into account in their hiring practices so that they can mitigate the affect and maybe not have filled all the positions that they were entitled to fill in a larger budget if they’re facing a reduction right now,” he said. “I don’t have the faith that all of them have done that, but I have and I know many other members of the House have been watching that very carefully.”
…
WILL SAN DIEGO SEE ANY IMMEDIATE EFFECTS MARCH 1 OF THE SEQUESTER OF $85 BILLION IN FEDERAL FUNDS?
By Roger Showley
12:01 a.m. Feb. 24, 2013
Updated 9:21 p.m.Feb. 22, 2013
Tell us what you think: Go to utsandiego.com/sequester to vote yes or no in our poll
This is one of the few times I have seen near-consensus on the answer to a question posed to the UT-San Diego economics panel. The only dissenting view is from a real estate guy who seems a little clueless.
How bad will sequester be for SD?
Will San Diego suffer immediately if the federal budget cuts kick in March 1?
By Roger Showley
Noon Feb. 22, 2013
House Speaker John Boehner, R-Ohio, leaves a news conference after telling reporters that the looming sequester and resulting budget cuts would be like “taking a meat ax to our government,” at the Capitol in Washington, Wednesday, Feb. 6, 2013. Eager to buy time and avoid economic pain, President Barack Obama urged Congress on Tuesday to pass targeted short-term spending cuts and higher taxes as a way to put off sweeping, automatic cuts that would slice deeply into military and domestic programs starting March 1. (AP Photo/J. Scott Applewhite) House Speaker John Boehner, R-Ohio, leaves a news conference after telling reporters that the looming sequester and resulting budget cuts would be like “taking a meat ax to our government,” at the Capitol in Washington, Wednesday, Feb. 6, 2013. Eager to buy time and avoid economic pain, President Barack Obama urged Congress on Tuesday to pass targeted short-term spending cuts and higher taxes as a way to put off sweeping, automatic cuts that would slice deeply into military and domestic programs starting March 1. (AP Photo/J. Scott Applewhite) — AP
Q: Will San Diego see any immediate effects March 1 of the sequester of $85 billion in federal funds?
Panel’s answer: Yes 7, No 1
…
Five out of six (83%) of reader respondents to the poll agree with the panelists.
Feb. 24, 2013, 8:30 a.m. EST
Bernanke bump: Stocks tend to rally on testimony
Stocks have received average 0.5% boost after testimony recently
By Wallace Witkowski, MarketWatch
SAN FRANCISCO (MarketWatch) — Expect stocks to finish higher after Federal Reserve Chairman Ben Bernanke gives his semiannual testimony to Congress on Tuesday and Wednesday, if history serves as any guide.
Over the past six years, the S&P 500 Index SPX +0.88% has finished higher nine out of 12 times during the two-day period over which the Fed chair has answered questions from Congress. By the close of the second day’s testimony, from the close before the first day, the stock index has gained an average 0.5%, a MarketWatch analysis of FactSet data shows. Read more about hawks vs. doves at the Fed going into next week.
Since 2007, the biggest bump to markets during Bernanke’s testimony was Feb. 24-25, 2009, when the S&P 500 rose nearly 3% over the course of the two-day meeting. Then again, the index was dragging its knuckles in the 700s at the time, compared to more than 1500-level as of Friday’s close. The Fed had just cut interest rates to their current near-zero levels that past December, and the first round of quantitative easing measures had started in November. Read more on Bernanke’s Feb. 2009 testimony.
…
how far in advance of everyone else will goldman know when the FED will pull the punchbowl away?
What if the Fed IS Goldman?
What if?
HELLO?!
Zillow just updated their data for the month of January.
While I don’t buy into their home values, the data they see makes their opinion of price direction, etc. more credible.
Why do financiers worship developers who build empires of debt with bloviating hype? Must be symbiosis, as you can’t peddle debt without a front man to lure greater fools into throwing their money down real estate rat holes.
Lunch with the FT
Last updated: February 23, 2013 8:47 am
Lunch with the FT: Donald Trump
By Martin Dickson
Hype seems hard-wired into the billionaire property developer who has also built one of the world’s most recognisable brands.
“Give him some rice, too!” Donald Trump instructs the server behind the buffet counter. Rice? I haven’t asked for rice. I’m more of a potatoes person, and that is what I have just ordered from the display cabinet, to go with my stuffed baked chicken. But if the Donald wants me to try the rice as well, it seems churlish to refuse. This, after all, is his restaurant, the Trump Grill, a wood-panelled, clubby enclave serving American fare in the basement food court of his best known Manhattan building, Trump Tower.
If truth be told, I would prefer to be ordering from the Grill’s set menu – the tourist in me wants the “Trump Grill Burger” followed by “Trump’s Ice Cream” – but the billionaire real estate developer has intimated that it would be good to try the buffet, which he tells me is “the best in New York”.
Business is not exactly brisk at the best buffet in New York. In fact, Trump and I are the only people ordering. But it is a bitter winter’s day, not the tourist season when, Trump insists, the queues down here get very long.
Tall, broad and erect, Trump looks good for his 66 years, though his gravity-defying bouffant hair is whiter and not quite as bouncy as I had expected, while wrinkles are invading the bland smoothness of the face beneath. He is wearing his familiar working uniform of grey suit, white shirt and a plain silk tie, today in bright red.
He helps me choose my chicken. “That piece looks like a winner!” he says, pointing out the plumpest, most golden-brown portion. For himself, he orders a livid beef sandwich and potatoes. As we return to our table, I marvel at his urge to lavish superlatives on the most commonplace Trump-related things. Hype seems hard-wired into him. There ought to be an adjective to describe it: trumptastic, perhaps?
But then Trump, or the “blowhard billionaire” as the New York tabloids call him, has created one of the world’s most recognisable brands through relentless self-promotion, using any available medium: he has a shelf-full of books to his name, with uplifting titles such as Think Like a Billionaire; he is a TV regular, while his own hit show The Apprentice, now rebranded Celebrity Apprentice, is about to begin its 13th US series; and he tweets avidly to his 2m followers on all things from politics (Obama’s re-election was “a total sham and travesty”) to business philosophy and golf. “I’ve won many club championships,” he tells me – twice.
…
“I’ve won many club championships,” he tells me – twice.
Sounds like the American version of a North Korean dear leader.
Twenty-one bucks for a chicken thigh at a lunch buffet in a basement food court = Donald Trump in a nutshell.
The day Mitt Romney snuggled up to Donald Trump was the day I resolved to never vote for him.
From what I’ve heard you say, your default was to vote for Obama, and you were looking for a reason (any reason) to NOT vote for Romney.
Given Obama’s first 4 years, I would have voted for an inanimate carbon rod over him.
Or stayed home like many of us. Or voted 3rd party. I don’t get the idea that we must vote one of the 2 parties.
You are wrong on both counts, but I am not surprised, given your status here as a real estate troll.
And the name calling resumes.
I was just rechanneling PW’s observation there, as he seems to not be around today.
Are you his mouthpiece now?
I’ve shared with you specifically, quite a bit of data about CA housing that has formed my opinions on the topic:
physical supply vs. population as compared to other states;
physical supply vs. jobs as compared to other states;
non-current loan rates over the prior 3 years in CA;
vacancy rates as reported by the Census in CA;
homeownership rates in CA;
housing starts vs. job growth in CA;
etc., etc., etc.
Yet you still lump me in with dataless cheerleaders.
Believing what you want, regardless of the data is exactly why the bubble formed in the first place.
You’re a real-Troll and a liar.
What’s really going on in California
California imposed a new law on banks innocuously called “Homeowners Bill of Rights” which forces banks to switch over to a judicial foreclosure process, which they can opt to do on their own, but takes a year or more to renegotiate contracts and compensation structures for the foreclosure law firms who do all the leg work for the banks. And while those changes are being made… it makes it appear that foreclosures have slowed down dramatically in the state.
The reality?
Defaults (undeclared) are spiraling upward that yet have to pass through the foreclosure pipeline.
The truth?
California is still the highest foreclosure state in sheer volume and percentage.
The low-down?
Resale housing is still massively overpriced as a result of unprecedented interference by individual states and the federal government. The market distortions will be removed and the down draft will continue allowing the market to correct.
If you play with fire, you will get burned.
If I play with fire, I cook my dinner.
The house we offered $215k on in 2010 (the deal fell apart) that went for $215k, is under contract for $270k.
I wonder if an appraiser will buy into the price…or if it’s an all-cash buyer.
appraiser simply along for the ride it appears.
“The house we offered $215k on in 2010 (the deal fell apart) that went for $215k, is under contract for $270k.”
Probably being purchased by someone who had a $400k house foreclosed on in 2009.
yep those buyers are back armed with FHA loans.
“yep those buyers are back armed with FHA loans.”
3 years goes by quick especially when you consider some here on this blog have been waiting almost 10 years for this BS to be over so they could buy a house at a price that was nor artificially inflated (through no fault of their own). Had to throw that in there.
The Federal Housing Administration, the government insurer of home loans which now backs just over 20 percent of new loan originations, requires a three-year wait. Fannie Mae and Freddie Mac, which own or guarantee the bulk of the remaining new loan originations, require up to seven years for a strategic defaulter to qualify again for a mortgage.
Foreigner investors are tapping into a slice of the Fed’s hot money injection of $40 bn/month into the U.S. residential real estate market.
Got milkshake?
NY REAL ESTATE RESIDENTIAL
Updated February 20, 2013, 9:29 a.m. ET
Foreign Buyers Hop on Rental Trend
By ROBBIE WHELAN
JERSEY CITY, N.J.—On a recent Tuesday morning, Alan Dixon, an investment manager originally from Canberra, Australia, stood in front of a four-story townhouse here, one of the latest assets he purchased for his company’s shareholders.
Mr. Dixon’s company, US Masters Residential Property Fund, bought the home on Erie Street in this city on the Hudson River waterfront for $830,000 in September. Inside, workmen installed subway tile in the bathrooms, preparing the three-bedroom home to be leased for $3,295 a month, “like something the people from ‘Friends’ would rent,” said Mr. Dixon, referring to the TV sitcom.
US Masters, a real-estate investment trust that has raised $276 million, primarily from Australian retirees, is one of a handful of foreign firms that are betting on the U.S. housing recovery by buying houses at discount prices.
The business of buying-and-renting houses, long dominated by local mom-and-pop investors, has morphed over the past two years into one of the hottest investments on Wall Street. Dozens of pension investors and private-equity firms, such as Blackstone Group LP BX +2.37% and Colony Capital LLC, are clamoring to buy homes in beaten-up markets, sometimes using money from foreign co-investors.
But only recently have foreign firms jumped into the pool. Similar to U.S. firms, they are seeking high returns by renting out the houses initially and eventually selling them into what they are betting will be an improving housing market.
But there is an added bonus: Investors from countries whose currencies are strong can outbid U.S. investors because they also are hoping to make money from foreign-exchange rate fluctuations. “It’s really all about the strength of the Australian dollar,” said Stuart Morton, finance director for Cashel USA Property Partners, an Australian fund that is buying single-family U.S. houses. “It makes the houses really cheap.”
…
Pension follies continue
Assembly Democrats have introduced eight bills to sweeten pensions, the Citizens Budget Commission pointed out yesterday. Here’s a nice CBC chart summarizing those measures. By far the costliest, sponsored by Assemblymen Peter Abbate and William Colton of Brooklyn, would boost the salary “multiplier” used to calculate pensions for employees with more than 30 years service. That would carry a pricetag of $1.1 billion.
http://www.nytorch.com/?p=7131
And then this? Are these politicians math challenged? I know the tooth fairy will solve all the NY State financial problems.
SYRACUSE, N.Y. – The city this month sent foreclosure notices to 200 tax-delinquent property owners, including Robert Romeo, a lawyer who works part-time for the Syracuse Housing Authority and serves on the executive committee of the state Democratic Party.
http://www.syracuse.com/news/index.ssf/2013/02/syracuse_goes_after_200_for_ba.html#incart_river
“When governments fear the people, there is liberty. When the people fear the government, there is tyranny. The strongest reason for the people to retain the right to keep and bear arms is, as a last resort, to protect themselves against tyranny in government.”
Thomas Jefferson
Your local militia vs ONE hummer with a 50 caliber=FAIL
Yeah, Hummer’s were invincible in Iraq.
Your local militia vs ONE hummer with a 50 caliber=FAIL
The national electrical grid vs. a couple dozen scattered kooks putting .50-cal slugs from their muzzle loaders into high voltage transformers = lights out for you, perhaps for months.
The HBB tunesmith must of missed it.
Ace Frehley (nee Paul), who played guitar for KISS in the 80s and late 90s, is on the hook for $735,000 worth of missed mortgage payments on his Yorktown, N.Y. home, the The Journal News reports.
Frehley reportedly stopped paying on the home two years ago, just a few years after he took over the title on the 3-acre, 2,441 sq. ft. pad back in 2006. Many underwater homeowners –– those who owe more on their homes than they are actually worth –– choose to cut their losses, stop making mortgage payments and simply wait for their mortgage lender to foreclose.
Bank I hear ya callin’
’cause I did not pay my loan
http://finance.yahoo.com/news/ex-kiss-guitarist-brink-losing-174340621.html
Ya can’t squeeze blood out of a rock star.
Comment by Hard Rain
Bank I hear ya callin’
’cause I did not pay my loan
The fix is in and the propaganda flows
More than 70,000 South Floridians regained equity in their homes last year
by Kim Miller
Fewer South Florida homeowners are underwater in their mortgages as rising sale prices lifted 70,484 homes out of negative equity.
According to a study released today by Zillow, 39.6 percent of Palm Beach, Broward and Miami-Dade homes were still underwater as of the end of 2012, but that’s up from 41 percent in the third quarter of the year.
The cumulative amount of negative equity in South Florida is $37 billion. Negative equity is when a homeowner owes more on their mortgage than their home is worth.
A new measure from Zillow is predicting another 23,674 South Florida homeowners will get out of negative equity this year, dropping the percent of underwater mortgages to 37.
Zillow Chief Economist Stan Humphries said the dip in negative equity may prompt more homeowners to list their homes for sale, thereby alleviating some of the inventory constraints that have been driving up prices faster than would be expected in this market.
“But negative equity is still very high, and millions of homeowners have a very long way to go to get back above water,” Humphries said. “As a result, negative equity will remain a major factor in the market for the foreseeable future.”
Nationally, 13.8 million homeowners with a mortgage were in negative equity at the end of last year, down from 15.7 million in the fourth quarter of 2011. American homeowners with a mortgage were collectively underwater by more than $1 trillion at the end of 2012.
Areas with the highest negative equity nationwide include, Atlanta (49.5 percent), Orlando (45.3 percent), Riverside, Calif. (43.8 percent), Detroit (43.4 percent), Sacramento (41.7 percent) and Tampa (41.5 percent).
This entry was posted on Thursday, February 21st, 2013 at 7:58 am and is filed under Florida economy, Foreclosures, Mortgages, Real estate bust. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
Responses
DaveAVL Says:
February 21st, 2013 at 9:58 am
That darned Obama, making house prices rise! What a commy. /sarcasm
Toni Says:
February 21st, 2013 at 11:40 am
If you don’t think the housing market is improving just start looking for a new house. Almost every home I click on, on the web says either under contract or contingency & that’s just a couple of days after it’s listed.
Mark Says:
February 21st, 2013 at 1:17 pm
I agree with Toni. I live in a development that has 940 homes. There are currently 2 for sale. In 2010 there were around 50 for sale. Prices are bound to jump up, housing prices are based on supply and demand. Right now there is little supply and lots of demand due to low mortgage rates…You can do the math
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What Mark doesn`t know is that out of his 940 home development he probably has 300+ neighbors who have not made a mortgage payment in well over 3 years. If Mark did know that he probably would not have agreed with Toni but told him about the Shadow inventory, called him a dumb @ss and bitc#ed about his neighbors who live for free while he has to pay his mortgage.
“American homeowners with a mortgage were collectively underwater by more than $1 trillion at the end of 2012.”
That’s a lot of underwaterness! Small wonder there is such a vigorous effort underway from the Obama administration to spread those losses to others who had no part in creating them, aside from trying their best to sit out the mania.
How could $0.0389 trillion ($45.6 bn - $6.7 bn = $38.9 billion) in TARP money possibly suffice to bail out a $1 trillion ($1.0000 trillion) underwaterness problem?
Good luck with that plan?
At any rate, most of these underwater people won’t realize their housing losses until Obama is long gone from office, so I fail to understand the urgency of bailing them out.
DC Retires Housing Issue
Published on: Monday, February 18, 2013
Shanthi Bharatwaj
Despite President Obama’s promises for new fixes to the U.S. housing market during his State of the Union address, many experts believe policymakers in Washington are moving the issue to the back burner. Analysts say there will still be a lot of talk on Capitol Hill, but no one expects any action as all proposed legislation faces a losing battle in Congress. Reform or improvement of programs like the Home Affordable Refinancing Program and the Home Affordable Modification Program is unlikely, and the recovery is making political infighting less of a necessity. For more on this continue reading the following article from TheStreet.
Despite a recovery in housing, there’s still a call for more policy action to stimulate the market.
But, according to Michelle Meyer, an economist at Bank of America Merrill Lynch, there could be more talk than action in Washington this year.
One reason is that the Obama administration has few options that can win favor in Congress. While the government’s Home Affordable Refinancing Program (HARP) has taken off, after a rough start, this option is available only to those with government-backed mortgages. Those with private mortgages, especially those with negative equity, have had more trouble accessing refinancing options and have been unable to tap into low interest rates.
The president has proposed allowing those with privately owned mortgages to refinance through the Federal Housing Administration — he reiterated the promise in his State of the Union address this week — but that requires Congressional approval. Few analysts expect Republicans to approve the bill, given that it calls for an expanded role of the FHA, which is already in financial trouble.
The Treasury Department could lower interest rates on mortgages through its Home Affordable Modification Program (HAMP) and compensate investors through a small payment.
But even this is “not very realistic,” according to Meyer. “The Treasury can potentially draw upon the remaining TARP money allocated to housing — only $6.7 billion of the $45.6 billion has been used — but that would not be sufficient.”
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I love it when politicians pretend they can make a policy change that will solve everybody’s problems while costing nobody a dime.
WILL OBAMA’S REFINANCING IDEA HELP BORROWERS?
By Lily Leung
12:01 a.m. Feb. 23, 2013
Updated 3:10 p.m. Feb. 22, 2013
Murtaza Baxamusa Directs planning and development for the Family Housing Corp., of the San Diego Building Trades
YES: Homeowners refinancing mortgages at lower interest rates benefits not only borrowers, but also taxpayers and the overall economy. For millions of U.S. borrowers, increased competition and the streamlining of lending reduce monthly payments. The success of the Home Affordable Refinance Program reduced mortgages and risks for Freddie Mac and Fannie Mae. For taxpayers, the risk of default is lowered on government-backed mortgages. And most importantly, almost $8 billion is projected to be infused into the economy, as money is freed up. Reducing housing costs by as much as $3,000 annually allows a family’s budget to go farther in meeting basic needs.
Michael Lea Director of the Corky McMillin Center for Real Estate at San Diego State University
NO: I do not think that the global refinance initiative is good public policy. Although it has benefits in terms of more cash in selected household pockets and a reduced risk of future default, it has many costs that outweigh the benefits. Those costs include a massive transfer of wealth from mortgage-security investors to a segment of mortgage borrowers. Not only does this raise fairness questions, it also will likely destroy the mortgage-security market that funds the majority of our mortgages. The proposal doesn’t solve the negative-equity problem and thus will have only a minor impact on future defaults.
Linda Lee President of the San Diego Association of Realtors
YES. I support efforts, including this one, to bring relief to struggling homeowners. This would remove barriers preventing numerous Fannie Mae and Freddie Mac borrowers from refinancing their loans to the lowest rate possible, leveling the playing field and unlocking competition between banks. This would lower the cost of refinancing. We also need to look for ways to assist homebuyers who are having trouble securing financing because of the very tight lending environment banks have created.
Marco Sessa Chairman of the Building Industry Association of S.D. County and senior vice president of Sudberry Properties
YES, PARTIALLY: The proposed bill should streamline the process and expand the number of homeowners eligible to refinance their homes, reducing the number of foreclosures. However, increasing access to refinancing should only be one component of much-needed housing reform. Addressing the solvency of Fannie Mae and Freddie Mac as well as providing a path to reduce housing financing’s reliance on government must remain a priority. We need a system where the private sector is making the lending decisions and taking on the credit or default risk on new loans, rather than continuing to let government micromanage the process.
Robert Vallera Senior vice president of Voit Real Estate Services in San Diego
NO: The transfer of risk is a huge, underlying problem. In some cases, interest-rate reductions will lower the borrower’s risk of default in line with prudent lending practices. However, many homeowners trapped with above-market interest rates have little to no equity or are otherwise a poor credit risk. Their current mortgage holder will take a loss in the event of default. Refinancing these mortgages transfers the risk to someone else, most likely you. Would you make those loans? Seriously think about it, because government guarantees don’t solve the problem. They leave you, the taxpayer, on the hook for the loss.
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you didn’t even need to play to pay.
You nailed it. These government-sponsored lending schemes are basically there to encourage foolish gambling and to force those who have and want no part of the gambling activity to pay for it.
They also crowd out the potential for private lenders to bear and underwrite the risks, thereby virtually assuring lots of good money will chase after bad bets.
“That’s a lot of underwaterness!”
-18
If you buy a property thru a tax sale in Ontario, payment of all of the municipal taxes outstanding probably is not the end.
The Municipality can come back on you for reassessments, so can the provincial and federal governments for any debts they can attach to that property. As well as several other government agencies.
And that government debt right can be forever.
So I have just found out.
Federal Reserve Bank = drug dealers
Wall Street traders = army of junkies
Quantitative easing: the markets are struggling with a serious drug habit
Posted by Larry Elliott
Sunday 24 February 2013 12.58 EST
The Guardian
Traders are on the lookout for an injection of more easy money as the world enters the third phase of the monetary policy
Traders at the New York Stock Exchange on Wall Street, where there was a big sell-off last week. Photograph: Richard Drew/AP
Financial markets have become stimulus junkies. They crave their next fix of quantitative easing and when they don’t get it they turn ugly. The rush they get from the drug wears off after a while, and then they become needy and whiny. Witness last week’s sell-off on Wall Street following the hint from the Federal Reserve that it was about to cut off the drug supply.
A similar dependency exists in the UK, where stock market traders expectantly await an injection of QE, courtesy of the Bank of England, after deterioration in the UK’s economic outlook. Governor Sir Mervyn King voted for another £25bn of cheap money and his colleagues should endorse his view in the coming months. The loss of the UK’s much coveted AAA status, thanks to the credit ratings agency Moody’s on Friday night, is likely to make the markets salivate even more.
The prospect of US policymakers taking the opposite view, and raising interest rates, prompted a bit of soul-searching. The markets have rallied strongly since the middle of 2012, but appeared acutely vulnerable to the suggestion that monetary conditions might at some point return to something like normal. For those who don’t have long enough memories to remember what normal is, that would be a world with official interest rates between 3% and 5% and where the electronic printing presses are mothballed.
The situation today is the closest the world has been to a depression since the 1930s. Then, Keynes said a depression was a “chronic condition of subnormal activity for a considerable period without any marked tendency towards recovery or towards complete collapse”. The global economy has exhibited all these traits since the deep slump of 2008-09. Growth has been sub-par for a long period. There is no real sign that output is about to slump as it did four years ago, but the sort of strong recovery expected after previous post-war recessions has proved elusive. It’s a depression all right.
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Now I know Canadian real estate prices are headed down.
A panel of local economists just said that housing prices in Canada will be soft but no free fall !
So far the slide has been gradual with no real sign of declining at an increasing rate. But when you look back only one year, Toronto is down 11% - for starters.
When their condo market splutters this Spring it will probably be the trigger to get out the bailing cans.
I’ve learned over the years that one of the most useful predictive tools is to find out what most economists say will happen and assume pretty much the opposite.
TA DA!
A panel of local economists just said that housing prices in Canada will be soft but no free fall !”
like a soufle
like a soufle
LOL… That was one of the dumbest metaphors ever. Thanks for the reminder…
Many of the folks who recently used the FHA’s low-interest, low-downpayment, federally-guaranteed financing to buy overpriced homes during the faux recovery can expect to lose them in the next recession, unless forbearance is extended to allow them to keep living in the homes without making payments.
This should be no skin off the lenders’ backs, as the loan principle is guaranteed by Uncle Sam.
Feb 5, 2013, 10:41am CST
Study: FHA will need bailout in next recession
Greg Edwards
Reporter- St. Louis Business Journal
The government’s Federal Housing Administration (FHA) is just one recession away from needing a bailout, according to an American Enterprise Institute study.
Even a “run-of-the-mill recession” will do it, Edward Pinto, a fellow at the institute, told The Street. “If the U.S. has a cold, the FHA gets pneumonia,” he said.
Pinto noted that while the FHA has insured more than 30 million homes over the decades, 3 million resulted in foreclosure. In an examination of 2.4 million loans insured by the FHA in 2009 and 2010, he identified 9,000 zip codes in which one in seven borrowers will lose their homes.
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I think Ben Jones earlier identified a triple whammy - a storm of the century - that could happen all at once. Bubbles in stocks, bonds, and housing.
One day corporate cash hoarders will get fed up with the added capital taxes being paid and distribute via dividends (vs buybacks).
These dividends will reduce the stock price; the funds will go into bonds which will cause inflation and sink all existing bond returns; jobs will be reduced to recover the technology gains being absorbed by industry, and housing prices fall - again.
Don’t forget there is two trillion on the sidelines. Only half of that all at once would cause a real headache.
Or if the two trillion in foreign profits were forced into repatriation - Golly.
Banks and Wall street are the only benefactors of Bernanke. And he has given them such freedom in the hopes that they would ignite the economy and get their financial houses in order. Banks are still at 30 ! Wall street has been a negative on the economy for the last six years ! But both players are receiving even better remuneration than ever before !
When is all of that free cheese going to have some measureable reverse promises attached to it’s gifting?
The FIRE sector is over-leveraged by about 60 TRILLION dollars.
That is the ENTIRE world GDP for the next 30 years.
It will not end well.
Food fight at the Fed! I’m looking forward to it. It might be useful to know that William McChesney Martin, Jr.’s father was president of the St. Louis Fed before his son’s appointment as FOMC chair. Bullard presumably wears the mantle of this tradition, rather than that of the Wall Street banking establishment which Alan Greenspan wore religiously.
Feb. 22, 2013, 2:00 p.m. EST
Bernanke may push back against hawkish talk
Fed chief to testify next week at Senate, House committee hearings
By Steve Goldstein and Greg Robb, MarketWatch
WASHINGTON (MarketWatch) — So who’s in charge of the Federal Reserve, James Bullard or Ben Bernanke?
The literal answer, of course, is the latter, who’s chairman of the Federal Reserve; the former is president of the St. Louis Fed. Yet the market seems to be acting like Bullard, a somewhat hawkish central banker who favors a gradual reduction in bond buying, is running the show.
Stocks fell after release of FOMC minutes Wednesday.
Bullard’s views, expressed in speeches and frequent media appearances, fit into the interpretation of the minutes from the last Federal Open Market Committee, which raised concerns about just how long, and how far, the central bank will continue on a program that has it buying $85 billion of government and mortgage-backed bonds each month. Read more about Fed minutes.
“The release of the minutes of the January meeting of the FOMC led to some tensions on financial markets, as they were seen as very hawkish before their digestion was completed,” said Alexandra Estiot, a senior economist at BNP Paribas.
Bernanke, who’s delivering the Fed’s semiannual testimony to the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday, can set the market straight if he chooses.
Ethan Harris, co-head of global economics research at Bank of America Merrill Lynch, says Bernanke may try to re-center the debate at least a bit.
“First of all, we don’t know the fiscal shock this year,” Harris says, referring to the impending sequester that could hit this year’s government spending by $85 billion. “So I can’t imagine he can sound hawkish in any way.”
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High Debt and Falling Demand Trap New Vets
The New York Times
By DAVID SEGAL
Published: February 23, 2013 488 Comments
HAYLEY SCHAFER chose her dream job at the age of 5. Three years later, her grandmother told her that if she wrote it down, the dream would come true. So she found a piece of blue construction paper and scrawled on it with a pencil: “Veterianian.” “No one told me how to spell it,” she remembers. “They just said, ‘Sound it out.’ ”
At the age of 30, she still has the sign, which is framed on her desk at the Caring Hearts Animal Clinic in Gilbert, Ariz., where she works as a vet. She also has $312,000 in student loans, courtesy of Ross University School of Veterinary Medicine, on the Caribbean island of St. Kitts. Or rather, $312,000 was what she owed the last time she could bring herself to log into the Sallie Mae account that tracks the ever-growing balance.
“It makes me sick, watching it increase,” she says. “There’s also the stress of how am I going to save for retirement when I have this bear to pay off.”
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Feels like the 17th century all over again.
Bunga Bunga is back!
Opinion
In Italy, Illusion Is the Only Reality
Filippo Monteforte/Agence France-Presse — Getty Images
A torn billboard for Italy’s former prime minister, Silvio Berlusconi, in downtown Rome on Friday, the last day of campaigning for national elections.
By TIM PARKS
Published: February 23, 2013
IT takes a certain talent to live in happy denial, to slide toward the edge of a precipice and be perfectly relaxed about it. Of all the talents that Italians are renowned for, such nonchalance is perhaps their greatest. Their economy is in deep recession; more than one in three young adults are unemployed; they are unable to compete economically with their neighbors; yet they continue as if nothing were happening, or as if a small glitch in the dolce vita could be fixed with the wave of a wand.
In particular, whether in awe or horror, they continue to be enchanted by the pied piper Silvio Berlusconi, the former and perhaps future prime minister and fabulously wealthy media magnate. In the run-up to the elections that begin today, he has promised to abolish the stiff property tax that was introduced by the previous government and is largely responsible for bringing a little credibility back to the country’s finances (and that he voted for himself when it was introduced). Not only would he abolish it, but he would actually pay back what Italians paid on it last year.
The announcement, despite coming from a man who has repeatedly failed to turn even the most promising political and economic circumstances into anything resembling the collective good, earned Mr. Berlusconi a considerable leap in the polls.
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Maybe the new pontiff will present Silvio Berlusconi with a key to heaven?
It seems the Chinese central bank is far more concerned about potential bubbles than our Fed is. You have to credit the Chinese central bankers for at least slowing the rate they stoke the runaway train’s engine, instead of going full throttle as is done over here.
Feb. 24, 2013, 10:43 p.m. EST
China’s premature overheating
Commentary: Questions surface over Chinese growth numbers
By Craig Stephen
HONG KONG (MarketWatch) — China began this year with an off-the-charts explosion in credit issuance. Last week, it broke records again, this time for the amount of cash drained from its banking system.
This stop-go policy certainly spooked investors, as the benchmark Shanghai Composite Index ended the week with its biggest fall in 21 months, shedding 4.9%.
Beijing’s haste to apply the brakes has renewed fears the economy is already overheating.
The record credit issuance of 2.5 trillion yuan ($400 billion) in January — comprising both bank lending and non-bank financial institutions’ credit — always looked as if it was verging on the reckless.
The surprise perhaps is that this reversal came so early. The central bank withdrew 910 billion yuan from the economy via open-market operations last week, its biggest weekly cash drain ever.
This action coincided with warnings from Beijing for local governments to keep a tight reign on property-market speculation, amid fears of bubbles reappearing.
It looks as if Hong Kong, at least, was listening. On Friday, the government further extended its existing battery of property taxes to try to take the heat out of the market. The new measures target non-residential property and buyers of second homes.
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