Weekend Bits Bucket & Craigslist Links
Post any off-topic links, ideas or Craigslist finds here! This thread will be forwarded throughout the weekend.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Getting to be the first? JG Banks informercial “why work when you can make big money in real estate by attending my free workshop to discover the huge profits, eee. ….” secrets of probate profits - hurry, everyone to SF to attend his shows.
June 5 to 7th around the Bay area. Hope it falls down on the suckers.
I have gotten some interest in getting a bubble party together in Phoenix. So far I have Txchick and Catherine’s e-mails. If you want to participate please e-mail me at kbarrett@cskauto.com. You can also send an e-mail to kathy.barrett@cox.net.
Unless you have amazing spamfilter capacities, I’d sugest that you spell out the @ sign as [at] or something similar to reduce some of the volume from the scrapers.
You three scrappy young ladies really ought to get together and run by a few open houses. Pretend you’re calif investors coming to bid on the property, get him/ her good and excited about a sale…then unload….Post the picture of the agents expression after your done with his/ her schooling.
Cruel but fun….
do those gals have pics
Thus living up (or down!) to your handle.
You 3 should call yourselves “The Bubble _____”.
Now everyone think hard.
The Bubble-Buster Babes? (OK, not thinking so hard….)
10-year note yield down big today. What does it portend . . .
http://finance.yahoo.com/q/bc?s=%5ETNX&t=5d
The strength of the bear market scenario versus the accelerating inflation scenario has grown considerably since the May selloff on gold and emerging market stocks (not to mention US stocks up until the day Hank Paulson took over the top job at Treas), and today’s weak new nonfarm payrolls job report (+75K versus expected +174K) added fuel to the bonfire. But you will not find a hint of the mounting anxiety in the glib reporting of Wall Street journalists, despite a clear signal that the bond market is hunkering down for a bad storm.
The 10-yr dipped below the 6-mo Treasury yield today — first yield curve inversion since when — Jan or Feb 2006?
http://www.bloomberg.com/markets/rates/index.html
But at least Toll Bros stock posted a gain for the week. I guess there will be an increase in demand for luxury McMansions in the upcoming recession?
Ugh oh,
Let’s see… long bonds going for less=higher interest rates.
Related: I would love to see a topic on the state of the bond market and how changes might impact real estate.
Neil
What does it mean when long term yield is below short term yield? What does it imply?
I know that it is suppose to be the other way around.
Thanks,
Inverted curve - recession… waves of selling!
As I commented a month ago, the bonds a due for a rally ..so far it is disappointing…..so is the stcok market selloff in USA….
Yes the 10’s rallied but the front of the curve (2’s3′ &5’s) was ON FIRE!—misguided flight to quality?
This is exactly why I believe our govt intervenes in the market here. The rest of the world crashed much harder than we did in May. Of course, I know about the flight-to-quality story, but is the USA really the place where the rest of the world would consider parking money at this point in history?
Absolutely agree with you, but the emerging market meltdown is not over.
“One of the things investors have learned about emerging markets recently is that they are hard to emerge from in an emergency.”
- Robert Hormats, reflecting on the economic crisis in Mexico in 1995
But the meltdown in the markets last month was caused by Japan tightening its credit. The US had no bullets left. And as I posted before I do not believe in a PPT. THERE IS NO GOVERNMENT ALONE OR COMBINED THAT IS AS LARGE AS THE GLOBAL FINANCIAL MARKET.
HOZ,
As I have already mentioned, I have no way to directly support or refute my conjecture that our govt intervenes in our asset markets. But it would be somewhat surprising to me if the truth of the matter were that there is absolutely no effort to create some kind of controlled burn effect when the risk of a major forest fire seems very high. Why do I suspect this?
1) In a rather stark contradiction to the free market principles on which our economy is supposedly based, many branches of our nation’s government seem to operate on a deeply-held conviction that they can control the movement of both nature and markets through top-down engineering. Instances of the former would include flood control (Corps of Engineers Old River project), forestry (controlled burns in National Forests), and hurricane defenses (using levees to keep storm surge out of New Orleans), while the latter would include control of the money supply to not only move short-term interest rates but to sway the bond market, stock market, and labor market at the same time (Federal Reserve policy) and intervention in the foreign exchange markets to move exchange rates, despite the mammoth size of foreign exchange market transactions in comparison to government interventions. Given our government’s hubristic belief in the effectiveness of all of these top-down control strategies, why would they not apply a similar philosophy to controlling the financial asset markets (stocks and bonds) themselves when the motive presented itself?
2) We know that other countries employ this sort of measure (federal intervention in the stock market by Japan and China, for example); why would our government limit its policy options, and why would it not do so in secrecy, given the added advantage of no accountability for bad outcomes that comes with stealth operations?
3) You keep on saying “there is no Plunge Protection Team,” apparently on a matter of faith in contradiction to factual evidence, since there is a Working Group on Financial Assets (created in 1988), as documented in numerous sources (e.g., the Washington Post documents its existence in this article, though the date it says the WGOFA was created is wrong by 10 years:
http://www.washingtonpost.com/wp-dyn/content/article/2006/05/16/AR2006051601745.html).
4) If a modern government has elevated asset price behavior to the status of a national security concern, and it has the technology (computer program trading) and financial tools that provide ample leverage (options), why would it *not* use these defensive weapons as protection against anticipated financial disaster, if doing so was deemed to be in the national interest?
5) I have been an amateur stock market watcher for nearly twenty years now (beginning in 1987), and I can point to many qualitative changes in the response of stock price movements to unanticipated news developments over that time period.
To summarize:
a) The market response is far duller, and often moves in the “wrong” direction for what one would anticipate the effect of the news release to be (e.g., homebuilders announce 30% decline in orders, and their stock rallies by 3%).
b) There is too much correlation across asset classes compared to just a few years back. For instance, when the DJIA goes up and down, most other stocks exhibit very similar patterns of movement, in the same direction at the same time.
c) There are no risk premia to speak of; risky assets (like stocks) pay very low dividend yields relative to risk free assets (like treasuries).
I cannot say that all of the above add up to conclusive evidence of government intervention, but they are consistent with it, in the sense that a market which used to be at least somewhat driven by fundamentals seems more and more driven by momentum-driven strategies, which push prices off at random directions of movement away from where fundamentals suggest they should go (at least for high-frequency movements), at the very time in history when a more rapid flow of information suggests that efficient reaction to breaking news should instead be increasing. Government intervention is one (but not the only) potential explanation for this phenomenon, as the typical result of govt intervention is to drive a wedge between market prices and what fundamentals dictate they should be.
Exactly…the historical tendency is a flight INTO bonds unless the evidence is overwhelming for a weak outlook for the US economy. Since that evidence has not fully reared its ugly head yet, investors are running into bonds.
Once the US’s macroeconomic picture becomes more clearly weak, which is only beginning to happen, the yield curve will steepen as people flee from the longer term treasuries.
What does it portend??? STAGFLATION. Stagnant economy with high inflation and no jobs. Welcome to hell.
Jersey Shore & PA.
Talked to two realtor friends today.
Jersey Shore realtor: “Nothing is selling.”
PA realtor: “I’ve lost listing because the sellers refuse to reduce their prices.”….”Sellers still believe that what they ‘need’ to sell for determines what they can sell for.”
I ran into a realtor friend this morning who said nothing is moving. However, I did see one excited Mom in school yesterday. Her house sold in 1 day to out of towners.
I did notice on CNYhomes.com that inventory is skyrocketing (doubled since April) and the homes reduced list is about 100/week. The prices dropped isn’t really saying anything as homes relist on that from week to week so the numbers aren’t that reliable.
Must have been priced right.
I don’t think the purchase was about the price. The home was “cottage” -like and private….but actually priced kind of high for what it was. We have pretty low inventory here. I think it was just an example of the right style home for what the buyer wanted.
Southeastern PA is dead. Your right sellers are stubbornly holding onto to their prices and hardly anything is selling except the houses that are resonably priced….those are gone in a few days. Also alot of houses on the market and they just keep coming.
Portland Or is doing fine. A lot of inventory went on the market this spring but I’m seeing a lot of ’sale pending’ signs this weekend.
Portland, OR is a flea on the ass of CA
Portland, OR will follow CA by 12-24 mos.
Prepare for the coming onslaught of Californiactors.
Don’t forget Seattle. We want to be a flea on the @ss of CA too. Our downward sine wave is about 90 degrees lagging that of CA which means we track their downward curve with a log of about 12 months.
It might even look more like a square wave if things just “fall off a cliff”.
In the past,before Nike and Intel etc., when the Portland,Or RE market turned it was always a very steep ride down. This was in the days of timber as the big local industry. Will it be different this time?
Totally agree: Southeastern PA. A co-worker of mine told me yesterday about a house in Telford, PA that she wanted to make an offer on. 1200sf rancher on maybe 1/4 acre listing for $309,000. I said, “In TELFORD?! No way - that’s priced way too high!” She disagreed and told me about how she’ll be able to get ~$360,000 for her house (in Warrington, PA). I asked, “Where’d you get that valuation?” She said, “That’s what the realtor was going to list it at last summer.” (She had made an offer on another home back then - deal fell thru due to high radon levels in the house - common problem in Bucks Co., PA.)
So I introduced her to zillow and ABC real estate. Both websites had her house valued at ~$250,000 and the Telford one at ~$215,000 on zillow and ~$200,000 on ABC. She refused to believe it and called her realtor who told her that, yes, the market is very tough right now and she’d probably have to list her house for ~$320,000 rather than $360,000. I chimed in once again and told her I think she’ll have a whole lot of trouble getting even that much since most of the buyers on the sidelines right now are wise to the market changes and really educating themselves on comps, etc.
While she was mad at me initially, she did eventually thank me for opening her eyes.
Just sharing: interesting WashingtonPost.com real estate chat today:
http://www.washingtonpost.com/wp-dyn/content/discussion/2006/05/19/DI2006051901450.html
THis is astonishing! how many people saying that they have no traffif, they had no offers. I cant believe. This just a small sample of those who logged into the chat!
I knew Maryann couldn’t resist the OFHEO numbers, which are way off for the D.C. area, at least all of Northern VA. We are flat to slightly down in price in all of the counties here.
Love this question:
Alexandria, Va.: My townhouse has been on the market for 40+ days. The asking price was initially $465K, then after several significant reductions, it is now $405K and I simply can’t afford to go any lower. Although I get a lot of foot traffic and good comments from realtors, I’ve had NO offers, not even low-ballers. It seems that the current slowdown has everyone spooked and no one wants to buy, even when it’s a deal. I’m afraid the high “Day on Market” is further scaring people away. What do I need to do to “roll back” the DOM - does the listing have to be off the market for a certain amount of time before the DOM are reset in the MLS?
This person “can’t afford to go lower?” Well, guess what — if the market clearing price is below your asking price, you’re screwed. You don’t set the clearing price, the market does. It’s not like some car lot owner can say “I have 50 cars and I’m not selling any of ‘em for a dime less than $50,000″ … when the going market for cars is $30,000. That’s a surefire way to go out of business, and for this person, the amount they ultimately lose on the property is only going to get worse as the market sinks … sinks … sinks into the abyss. Better to take a $10,000 loss now than a $50,000 loss later.
Reminds me of that post about the lady wanting to sell her beanie baby collection that she had invested over $50K in. She didn’t want to be offended by low ball offers either.
If you’re getting no offers then “can’t afford to go lower” translates to “I’m choosing not to sell”
Or, depending on circumstance, “I’m choosing to let the bank have it.” He doesn’t say why he’s selling and can’t afford to go lower.
will only economic girliemen use realtors after the bust ?
face it , if you can’t sell w the internet - you’re lame
RE agents- will they be the stock brokers of the 90’s ?
Or travel agents or elevator operators?
LMAO the only girlie men are the one’s thinking that the internet is going to replace real estate agents. Do you guys just pull this statement out of your a$$ and make it up as you go along or is there a shred of business sense behind it. Yea, I think that would make a good weekend topic. In what fantasy world do you live in that makes you believe the internet is going to replace the real estate agents. Please post all viable business plans here. LMFAO
I agree wiht you Incomestream. But I think the Internet is going to change the way RE is handled, and as soon as posting access to the MLS is no longer restricted, the 6% comission is toast.
Certainly worth a discussion.
Still, I think that there a lot of newbie RE agents who are going to be elevator operators and buggy whip salesmen during ‘07.
“Still, I think that there a lot of newbie RE agents who are going to be elevator operators and buggy whip salesmen during ‘07.”
Trimming of the fat you bet your ass. Just like the run-up trimmed fat the run-down will trim the fat and take a whole lot of meat with it. I don’t dispute that.
Worth a discussion, sure. As I’ve said before if I never sell another piece of property or arrange another loan I’m fine either way. But too suggest real estate agents are going the way of travel agents is a naive assumption. I don’t see it happening in my lifetime. If all things remain the same I have quite a few years left. Will the internet change the way real estate is handled? Yes, it already has. Will the MLS be open to the public for non-restricted posting? I don’t see that happening especially not without a act of congress or a long bitter fight where no one wins in the end.
The internet is changing the real estate industry where it puts more on the back of agents and brokers. If the current crop of tools coming out are any indication. Ex: Right now I can do a whole transaction with the exception of a bug report and home inspection without leaving the office. In the past I would need an escrow company a mortgage company etc etc. Now I can do the whole thing over the web plugged into a CRM.
The only way you’ll see real estate agents go away is with federalization of the whole industry I just don’t see that happening.
It is my understanding that a person is not required to have a real estate agent to contract to sell or buy real estate.
Thus, it is very possible, that people may opt to educate themselves on how to conduct a real estate transaction, and DIY.
An example of a profession, other than travel agent business, that has taken a big hit from DIY, is tax preparation. Many people now just by the tax preparation software and do it themselves.
I am sure that real estate brokers will continue to exist to assist people who don’t have the time or interest in doing the legwork or paperwork on a real estate transaction. That happens with all kinds of work. People hire maids to clean their houses, drivers to drive them around, people to cook for them, even people to clip their toe nails and give them a bath.
But for people who have the time and knowledge, they may decide to conduct their own real estate tranactions.
The very big transaction, such as for huge income producing property may continue to have several attourneys, acountants, and other consultants involved, but that does not necesarily equate into a poorly trained “Realtor(TM)”.
Los Angeles Friends In Deed
Well hell, I’m going to run down to the neighbors and tell him he might not be getting his 150k for doing tax returns next tax season. I’m sure he’ll be very concerned that there is tax software available and that turbo tax is on the internet. Hell he may even have to get a real job and start shining seats with his a$$ on a daily basis. Oh the horror.
I don’t ever see the day when people as a whole will decide to do real estate on their own. As long as their is seller greed it will never happen. Whether you need a license or not.
There’s no laws that say I can’t practice surgery, defend myself in court, do my own tax and estate planning, or sell my own real estate. But I opt not too do those things. But I believe in the theory that only fools represent themselves. I also believe jack of all trades master of none is not in my best interest. When I want my best interest I pay for representation or services. I find it works better that way on the pocketbook. IMO.
There are still plenty of Travel Agents around. I don’t know where you get they idea that they are out of business.
Exactly they said the same thing about Car Salesmen, When was the last time you went on a car lot that was open for business with no salesmen.
I look at the comment that the internet is going to replace salesmen no matter what the industry for that matter the same way that bloggers here believe that real estate never goes down.
Yea Right!
sorry income stream the well has dried up
There are certainly laws that say you cannot practice surgery.
mrincomestream,
most people, who are wage earners, do their taxes using TurboTax in only 5 minutes. You don’t need an accountant to do that.
Most people, who just want to take a week vacation to Hawaii or Cancun, spend at expedia.com maybe half an hour, selecting a package - you don’t need a travel agent for that.
Basically, all brokerage services migrate to the Web. For example, using bankrate.com, I don’t need a CD broker (remember those?). The same will happen to realtors. Already a lot of people use ziprealty.com, and those guys undercut everybody.
Exactly they said the same thing about Car Salesmen, When was the last time you went on a car lot that was open for business with no salesmen.
I did, I did! Using Edmunds.com, I peeked the invoice price, then I called every dealer around Sunnyvale, and found a guy who agreed to sell it at invoice. Then I just came in, and after a few arguments I got the car. At that point, the person representing the dealership was not really acting as a salesman, because he didn’t have any bargaining or brokering power over me.
I bought a new Dodge Ram pickup in 1995 using the internet. No haggling and no salesman to talk to. When the truck showed up at the dealership, I walked in with a check and drove the truck off the lot about fifteen minutes after showing up. Saved about $3,500 off the sticker price too.
Have in front of me my old(1987-1988) copy of the “California Dept of Real estate Reference guide” the 800 page little bible of Californis RE which i obtained in course of getting my RE license in 1990(Never Practiced). There is so much complexity involved in buy-selling RE that I doubt that licensed realtors will go the way of travel agents.
Thank you, Buddha for your perfect wisdom… The internet doesn’t change anything. Information access, information velocity, information accuracy- certainly not the way business is done in REALTY. Hey Brainiac, did you ever think that you would use ‘On-Line Banking’ a decade ago?
Try this link: http://www.buysiderealty.com
Pull your head out of your colon and look around once in a while…
Bwwwaaahhhhaaaa , I knew some a$$hat was going to dredge him up. Rookie broker who thinks the market only goes up, had his license at this point maybe 2-3 yrs and has never seen a down market. Located in Santa Monica if not mistaken. Watched him on T.V real hotshot a$$hat. I could write a thesis on why he’s going to fail without using any N.A.R. spin. But I’ll just let everyone who believes wallow in their smugness untill the realities of a real “buyers” market appears. Put the numbers to the test, I did the market drops 20% and he’s smoked. But here’s two things because I can’t resist slamming a smart guy. 1.) He does nothing below 200 grand why because he can’t it’s not economically feasible he’s barely getting by as it is. When the market turns and it will 200k or less will be the magic number for 80% of the country not located in Santa Monica, Ca. or the west side of the 405 freeway for the most part and especially in Florida and Illinois his other 2 markets. Now when the market drops he’ll still have to pay staff, he’ll still have to advertise, pay phone bills, and the almighty rent. How long do you figure it’ll be before the market goes down by 20%? By my calculation the sooner the market drops 20% the sooner he’ll be out of the buyerside business. I would break down all the numbers but it’ll take to long and really I just don’t feel like it. #2) He doesn’t do FSBO’s, He doesn’t do new home developments unless he can go and register you there’s probably a fee for that whether you buy a house or not, and he doesn’t show houses, I’m curious how he handles the requirements for an agents signature on a T.D.S. but thats irrelevant for this discussion. He also strips the buyer of any recourse in his agreements and his online purchase agreement is a little lacking but he’ll soon discover he needs to fix that. Yes, I have read them. Compound that with the fact that in the inland empire as an example if your agent doesn’t show it they have a common practice on a consistant basis of paying the selling broker 1%. Well that eliminates that market guess you’ll have to buy somewhere else. It also eliminates by way of default a large portion of forclosure and short sale deals which the market will primarily consist of. How many R.E.O brokers do you think are going to get out of there seat to show you a property when they got a lender on the phone demanding they go do B.P.O.’s on the next 10 listing they are shooting down the pipe. I can answer that from first hand experience. Not many. How many times do you think this a$$hat can give out a lockbox code to buyers and keep getting his calls returned?. Not many.
Here’s the bonus
Now if all that doesn’t bring a spotlight to the situation and bring him to his senses pretty damn quick. How many times do you think his clients are going to here this line? Because the market will be tough and folks gotta eat feed the kids etc. etc. Agent: So Mr. Buyer you’re interested in this house? -Buyer: Yes -Agent: So you’re using Buyerside reality Hunh ? Rebate guy right? -Buyer: Yea. -Agent: Man, that’s a good deal. -Buyer: (Breaks out in his best smart guy grin) Yep it sure is. -Agent: Well you know I may be able to get you a better deal.
-Buyer: ( Greed kickin in at full steam) Really, How so? -Agent: (whatever scenario works for the buyer) –Ring Ring Ring– Buyer: Hello -Buyerside Reality Broker: Hello Mr Moron -Buyer: Yes -BRB: Yea this is Mr. A$$hat from BRB, I called to ask how that showing went. -Buyer: Err oh well, I wasnt quite what I anticipated. -BRB: Really, is there anything else you might be looking at. -Buyer: Nah, I’m good for now don’t call me I’ll call you.
How many times do you think that’s going to happen before he and those like him scraps that idea and starts chanting “buyers are liars” the common mantra in a buyers market? Not long
He’ll start scrounging for listings like a demon. Put sellersidereality as his url all the while giving those smug buyers the finger all while he’s doing it.
Everything looks rosey and clear on the way up. And his business model is fine for a bubble market actually makes perfect sense.
But now it’s time for the trench work and if you think the greed was bad on the way up. Wait untill the the ball picks up speed and starts rolling down. He’ll be just like that discount/rebate company in New York who’s already fired their C.E.O and raised prices after 2 yrs. Ben posted an article about it. research it.
Correction the guy is in San Diego.
You RE agents are truly long-winded and full of yourselves. You are a dying breed. Get a life!
I agree with the consensus that Real estate agents are going the way of travel agents.
Now as others have noted, there still are tax accountant and travel agents. No doubt the ones that truly add value earn good salaries.
But it has now been six years since I’ve traveled using a travel agent. My work now charges us $25 to even call the office travel agent! Name your favorite internet travel/airline/hotel/rental car site and that’s how most people do it today. Heck, for my next business trip I’ll probably priceline the hotel as the company reimburses per diem not actualls as is almost standard in my industry.
I plan to use a internet “buyers agent” the next time I purchase a home. Why? I’ll find the house, select my insurer (home), select my mortgage broker, etc. So why would I pay 20k to be driven around in someone else’s car? And the internet agent will help me with the title search/insurance, etc. I’d much rather do fee for service.
Now the flip side is I would hire a selling agent. I believe the services they offer outweight the costs in a *normal* market.
So like travel agents realtors will not disapear. But they will become more rare and I expect “fee for service” will become the norm rather than a commision.
Maybe I’m wrong… But Gen X and Y love the internet… And I’m also one of those weird people who have stopped buying cars at dealerships. Its so much cheaper and easier to buy a new car on the net and have it delivered to work.
So maybe I’m in a minority who thinks this way… but then again, maybe not! (And I drive my cars into the ground… so selling the old car is a non-issue.)
Neil
“I plan to use a internet “buyers agent” the next time I purchase a home. Why? I’ll find the house, select my insurer (home), select my mortgage broker, etc. So why would I pay 20k to be driven around in someone else’s car? And the internet agent will help me with the title search/insurance, etc. I’d much rather do fee for service.”
Here’s where your plan fails. You don’t pay any part of the commission. Really have no say so in regards to it.
With the way current technology is going like I said in another post. The agent with the most listing wins. Working with buyers is going to be a losing proposition. People are going to be sadly disappointed in the way the industry is going if they think getting a piece of the 6% commission is going to continue to be the norm
“Here’s where your plan fails. You don’t pay any part of the commission. Really have no say so in regards to it.”
You do understand an internet buyers agent collects the 3% commission and then refunds 75% of that to the buyer? Or in other words, one saves 2.25%. Or will selling agents stop splitting commissions? That would certainly change the real estate market.
I do agree the 6% commission will drop. To what though?
Neil
This is all an interesting question, and yes, it’s been like years since I’ve ever used a travel agent, though also I think I generally benefitted from their services when I did. Or not. It’s hard to say. I like the Internet but I’m also a people person so I really don’t know. Sorry for being so ambivalent.
Bottom line, I think you are right now that I think about it some more. Here’s how I think it will work. You will go searching for houses and find what you like, via internet or whatever, then pick up the disclosures when you find a place you would like to make an offer on, then bring it to an agent who will review the disclosures for you for a reasonable fee, not 6% of the selling price, and then you go on from there. As much as my RE agent is my friend, the only thing she has done for me that I cannot do myself is explaining the disclosures, and even that is somewhat iffy.
“I agree with the consensus that Real estate agents are going the way of travel agents.”
I believe that is true statement except for the following reasons:
1) RE agents spent huge amount of money on lobbying, travel agents don’t.
2) RE agents can set commission rate because of the reason above, but travel agents can’t.
But things will change as soon as sellers and buyers get educated using the Internet. And that is not far-fetch from now. The new generation are tech-savy. They grew up with computers at home and not scared to try new things. They will use the internet including RE agents. As soon as the older RE agents (don’t like to change) are phased out as new agents replace them, the internet buying will soar. Sure, they will always be RE agents but not in the zillions that we are seeing today. I would guess that only 5-10% agents will be needed to handle the transactions. Similar to the fate of the travel agents.
Yesterday on NPR in Florida a story about the rising cost of home owners insurance here in Florida.
They were reporting that homeowners were taking out loans to pay for the insurance…..
Hmmm…. a new lending product? The H.O.H.I.A.R.L.
(Home Owners Hurricane Insurance Adjustable Rate Loan)
Howmuchamonth?
“They were reporting that homeowners were taking out loans to pay for the insurance…”
That is rich!
Errrrr, no.
That is poor!
No, the new lending product is called Check-Into-Cash.
Check out the graph which accompanies this moron’s analysis, which points to a different conclusion. Every time (like once in the past 34 years) that gold went as parabolic as it did until just recently, a crash ensued. There were many corrections to bull markets, but if I were a betting man, I would bet that last month’s selloff was not one of them.
(Save your peak oil or hyperinflation retorts — I am tired of reading them.)
http://www.marketwatch.com/News/Story/5j0jB8FdWwFXcbD8LrcWVRQ?siteid=mktw&dist=TNMostMailed
I noticed that real estate had a huge run up in prices from around 1976-9, and that around 1979, gold and silver began to spike in price from 1979-81, and the had a decline by about 30-40%. The price state fairly stable until about 2005.
These occurance seem to be parallel in that the spikes in gold and silver occurred as the real estate market prices peaked and plataued, after a huge run up in prices.
Los Angeles Friends In Deed
Gold would have to rise to over $2000/oz in 2006 dollars to equal the peak price during the 1980 blowoff. Check out a chart like this one for another perspective. IMHO the recent sell-off in gold was a in fact a correction in a longer-term bull market. Yes, gold will eventually go parabolic and crash again, but the recent action was not what it looks like on the Marketwatch chart - what that chart actually shows is an inverted picture of the dollar falling off a cliff. Compare to this chart of the Euro in Dollars. You don’t need peak oil or hyperinflation to explain this.
The dollar falling off the cliff is a picture of Federal reserve policy, and now BB needs to decide whether he would rather be remembered as a latter-day Arthur Burns (an academic who could not cut it against inflation) or his short-lived successor G. William Miller, who worsened the situation (and made gold go really, really parabolicly vertical) or Paul Volcker, who history will remember as the man who saved the dollar the last time it was at great risk of inflating itself to irrelevance as a major reserve currency. The recent swoon in gold is a sign that Ben Bernanke may have decided he would prefer to be remembered as being rather more like Volcker than like Burns or Miller.
Uh, Stucco - I enjoy reading your posts but I think you should reconsider calling Mark Hulbert a “moron”. It reflects poorly on your market knowledge and/or character. You don’t seem to understand what he does or know his track record. BTW, where is your record so I can compare it against his?
Sorry, I tend to refer to lots of people who repeatedly use the same simplistic analysis to make their points “morons.” Hulbert is a good example, as he repeats ad nauseum the same lame contrarian explanation for everything under the sun — “Most newsletters are saying the market is going to go up (down) so a contrarian analysis shows that it is going to go down (up) instead.” This makes for good entertainment, but I don’t put much stock in this line of thinking. And I don’t care much about forecasting track records either, as I am more of a true believer in random walks and black swans than in forecastability of asset prices. But if you are into that kind of thing, then please feel free to scrutinize the umpteenth decimal point in the prediction accuracy of different finanicial soothsayers, and bet your money with the best of them…
Actually, Hulbert calls the recent drop in gold a “correction” which is what I believe it was too. Prepare to resume the bull!
Actually, I wish you bulls good luck, as it looks like gold is crashing (look how vertical the price runup was and how great the volume of hooves thundered into buying it just before the abrupt reversal). But as I have already allowed, I have no soothsayer credentials, and I realize that no less than Sir Isaac Newton found himself incapable of calling the end of a mania, so I wish you gold bugs the best of luck in your gambling activities.
It seems to me that the recent run-up in the price of gold was driven largely by greed, fear, and speculation (sound familiar?), until the price went up enough to hamper nonivestment demand (i.e., the jewelry industry, i.e., most of the demand), so now the bulls have to ramp up the fear, etc., even more to get some more fools to jump in and keep their market going.
A serious Craigslist Flipping flop. http://tinyurl.com/qkef3
ONLY $1,800,000 for all the hyped prestige you can stand, nothing amazing in upgrades, no improvements and a bare yard!
…And the County Assessor’s office says:
This little flipper thinks he is going to get $419,013 more than what he paid for the place in February 06, just over 3 months ago ($1,380,987). It’s been for sale since April. Same street, an even larger new house is selling for ~$1.4Mil
BTW, “The Crosby at Rancho Santa Fe” is technically not in Rancho Santa Fe. The builders would like you to think it is (hence the name) because RSF is one of the most expensive zips in California.
33,000sf clubhouse
Isn’t that like convention-center size?
MjM
anyone have old census data ? what % of employment was in RE(HIC) in 1990 ?
bet it was alot less than 10% , the 05 number
Did it for Res Construction + Real Estate (using BLS classification); at bottom of the last bust was at 5/1/92 = 1.94%
Then steady growth through the recent high level of 11/1/06 = 2.36%.
Not as much growth as I would have guessed, given the stories about what percent of private sector jobs since 2001 were in RE, but DOL categories probably do not accurately capture the full spectrum of RE industry employment (esp. illegal aliens in construction).
Here is the data source: http://www.bls.gov/webapps/legacy/cesbtab1.htm
To be built: 12 luxury condos, all 2BR/2BA, 1350-1500 sq. ft. All approvals for PUD approved by Plng. Commn. 3 years in the doing. City Council should give final approval June 6. Should be ready to break ground then. Seller is major So. Cal. developer too busy to continue with project. At major intersection one mile from I80 freeway, on uphill slope with view. Over 1/2 acre. 2-story wooden condo bldg. on top of 24 car concrete garage, with 9 more open spaces. Playyard. A investor/developer deal. Price approx. Principals only. Please call for more info.
suppose you bot in spring ‘05 as owner/occupied. do you
A) hang on til ‘07 in hopes that you still have excludable taxable gains
B) sell now, pay your taxes, and be glad you won’t be upside down next spring
B
Agree
Does anyone know how Fannie Mae and Freddie Mac package up the ARM, option ARM’s, negative amortization loans up?
In other words, who has bought these garbage bonds? I know most financial institutions, banks, mutual fund companies, etc buy large denomination FNM and FRE bonds. But who, exactly is holding the junk, and is there anyway to find out which institutions are most at risk?
Not cheaply. These are questions analysts get paid big bucks to answer, or at least estimate.
In fact, one of those analysts used to post here from time to time. Fascinating stuff, even though (s)he didn’t go into any detail, but I haven’t seen a post for a while now.
I was under the impression (quite possibly wrong) that they didn’t buy up Neg-Am Option crap.
I used to sell my mortgages directly to Fannie and Freddie. They absolutley would not buy option arms, no doc loans, no ratio loans, or stated income type deals. They do have a semi stated income product, but you need at least 10% down and you better have a pretty high credit score. The exotic loans are sold to Wall St., foreign governments, and mortgage junk bond investors. Where the bubble could negatively affect Freddie/Fannie is all the people who either bought at high LTV’s in bubble areas (though there is protection there with PMI or combo loans, since most likely the 2nd mortgage paper is held by non-GSE’s) or more likely borrowers who took out higher LTV cash out refi’s in bubble areas. I have seen situations where borrowers bought in 2003 or 2004 with a 5% downpayment or more, and have refinanced for $50,000+ more than the purchase price with a cash out refi (and still had 20% equity to show for it).
Another gauge of the local RE market: builder junk mail.
Builder junk mail has picked up from 1-2/week to 1-2/day in NoVA. I don’t know if builders understand traffic, but I’ve even received ads for locations 75+ miles away.
Hello there, So Cal Bubble watchers! I’ve updated my charts in the south bay area. Enjoy!
I don’t know what’s funnier about this, the Texas stereotypes, the inadvertent malaprops in the text or the contention that Houston and Dallas (with pictures juxtaposed upon each other!) are just a “short ride” away. I guess they are if your mode of transportation is a 747! Obviously marketed to them dam furriners . . . .
http://cgi.ebay.com/ws/eBayISAPI.dll?ViewItem&Item=4467345500&Category=15841
txchick,
I read an article about people buying raw land in the Ft Stockton area sight unseen, the county recorder’s office was very busy, the officeworker said it was unprecedented, the locals can’t understand why anyone would want to buy land there. It is actually one of the most remote areas of the U.S.
About a year ago I drove into Texas from the east on I-20. I had to do a double take when I saw the mileage marker - it was over 600 miles. If you drive I-20 all the way through Texas, then you’re driving over 600 miles. Texas is a big place, and this parcel is in the middle of nowhere.
it’s 10 hard hours in the car from Dallas to El Paso. 10 long BORING hours. You would not wish it on anyone.
El Paso is 1/2 between Dallas & San Diego…thats a lot of land to build houses on.
El Paso is closer to Phoenix than San Antonio.
A buddy in college was from Gruver up in the Tx panhandle. I asked him once if they went Dallas when they “went to the big city.” He say no, Denver was closer.
Yup. I made that drive from Dallas to SD and back moving to and from California. In a Honda Accord with four cats and a dog. You really get an appreciation for how long a drive that is when being serenaded by the furkids for ten hours.
A bit OT, but I liked Ben Stein’s article on corporate corrpution
http://finance.yahoo.com/columnist/article/yourlife/4780
My husband works for a private international firm whose management is as corrupt as the day is long. (They provide banking services). The employees say the trouble is, at least they used to share.
Thank goodness one of the pimply-faced bosses just quit. His daddy got him the job as CIO. This year he used department money to buy 800K worth of artwork for the office. My husband went without a raise or a bonus for the third year in a row. We had to sell our house, which is how I found this blog. We’ll be fine as soon as I go back to work but I’m sitting out a few years while the kids are young.
I received a very well paying job offer from a private equity firm this week and turned it down. Apart from thinking that I’d be coming in at the end of a bubble and there might not be much juice left in the orange, I can’t stomach working for or with people like that. Actually, I can barely stomach the idea of working “for” anyone other than perhaps the reincarnation of Gandhi. LOL
One of the good things about working in hi-tech is that your bosses are usually self-effacing geeks.
Further to Ben Stein’s article, you might want to check out how this happened. this book tells an interesting story of how American business came to this. It was written prior to the collapse of Enron and the Internet bubble, but predicted both.
The link is not visible, so here it is explicitly:
http://www.amazon.com/gp/product/0738204846/
I’ve filed a suit or two in my time on behalf of shareholders trying to stop mergers, issuance of bad debt, bankruptcies, all kinds of things. The most recent one was a publicly traded telecom that went bankrupt a few years ago and did not need to, but its bank debt had been shanghaied by a very wealthy local hedge fund bastard (billionaire) who amused himself by torching the company for his own profit and putting over 100 people out of work.
No, I can’t work for people like that.
Last company I worked for, the owner cut everyone’s pay 20% and the next day the owner pulled up in a brand new convertible still with dealer tags. This was on top of the brand new huge RV he had purchased just a couple of months prior to that.
It felt like working for Enron. I was one of three people who quit that week.
It’s June now. I think any buyer with children needs to get settled in a new home by Sept. for the next school year.
I think this means that the selling season (which we keep hearing is going to recover) takes a big hit by July.
Do you agree that things will only get worse for sellers.
I agree it will get worse for sellers.
However, as you note children need a place for school. Thus, the floor won’t truly fall out until after September. Until then, Sellers will have hope that delayed purchases will have no choice but to re-enter the market. By October, they will know their fate.
Neil
From what I’ve seen it takes at least a month to close and move in after an offer is accepted. So for a family to be in a new home by the beginning of the school year in Sept. They need to get a house by the end of July. That’s why I think it will just get so much worse by Aug.
Good point. However, its not uncommon for a district to allow a child to be registered if the home is under contract. There are always a few late closings.
But we’ll see…
I think we can agree its only a question of when, not if.
Neil
In NY, it takes a minimum of 3 months from contract to closing. And that’s only if there are no glitches.
From the Las Vegas Speculators segment:
“To make matters worse, potential homebuyers may be advised to borrow beyond their means, UNLV Lied Institute for Real Estate Studies Executive Director Debra March surmised. “What I had heard is that people were being encouraged to buy as much home as they could afford by the brokers.”
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what a great name for a RE institute
Exotic mortgages fuels the RE frenzy.
http://tinyurl.com/k36uj
I’m in need of some encouragement. Townhomes in my community (Bellevue, WA) went for $280k late last year. Rent has been $1100 and has been flat. A few months ago someone put their condo up for sale. Asking price? $330k. THEY GOT IT. I’m baffled. Now another unit is up for sale. Asking? $340k. And I see people looking at it…
I realize this is chump change compared to some California prices, but I have to wonder. If you make $100k plus, do you really want to “invest” in a 2/2 1100 sq ft condo?
Not unless you’re a greater fool.
No, but at least if you have that kind of money you should be able to afford it and are not spending beyond your means. These people probably believe that it is a “buyers market” because inventory keeps expanding and they are the only ones at the open house, so they think they are getting a really great deal. Such would simply be a decision made in a free market economy and people can spend (squander) their money however they like. It’s when someone is making $30k, and takes out an ARM, interest only, or negative amortization loan, to buy your townhouses, that there is a threat to the entire system, namely taxpayers who will be called to bail out the bad loans.
Same thing is happening in the Bay Area. People who haven’t discovered the blogs are still making RE “investments” entirely disconnected from the fundamentals. That’s fine, all that venture capital money for the tech industry has to blow off somehow.
Exactly - there will still be people who will buy in this market - but within their means for what others would consider crazy prices - but as long as it’s within their means, with large downpayment - it’s not necessarily crazy for them - maybe not the best business decision, but some people will want to live in their own home, and if they can afford it, will do the deal. It’s to someone like this that I am currently selling my apartment - and I will be one of these people in a community in Tampa area within the next year - although I will be buying a nice big new house with my own square of swamp that someone will take a loss on, rather than an overpriced apartment. In my mind, I am just trading some of the fake bubble money I made here for some partially deflated bubble property there.
Friend was up around Medford OR couple three weeks ago. Realtors were telling him it’s basically all CA newbies coming in. I’m a thinkin that the CA investor tap is just about to be turned off. It’ll run a while yet for the ‘equity refugees’. Know several that are looking to permanently bail and have reached for the ejection handle in the last 2 months.
Last year my law firm hired a relative newbie who had prior real estate experience and is, in fact, a licensed broker. One of his ideas was to form our own real estate agency, so we did, kicking in for 10% ownership shares, or more. I capped mine @ 10%, so the buy-in wasn’t a stone-buster. Now I can claim a perc: Access to the multi-list.
Since I’ve not yet been able to figure how to generate historical inventory numbers, I’m presently limited to current stats. Here’s what I can show for Allegheny County (which includes Pittsburgh and surrounding suburbs):
Inventory @ 5/26/06 - 8,250
Inventory @ 6/03/06 - 9,002
I’ll keep track, weekly, throughout the summer.
Small report from North County San Diego. I think maybe some buyers have blinked. There are ~20 or so houses in about a 2 mile radius I keep my eyes on when I do my walks. I the past week 4 of them now have “Sold” signs on them.
I know that means they are under contract, right? and that they are working out the details for financing, etc. Or am I wrong?
I just got back from a supply run to babies R us.
There are a lot fewer open house directional signs in Huntington Beach 92648 and 92649.
However, Ziprealty is the highest it has been in over a year.
It looks like the realtors have given up on their unrealistic sellers expectations and they are letting sellers sit without open houses.
Bubbleheads should see this movie this weekend. It should resonate
http://www.climatecrisis.net/
very well respected people in the 1970s were predicting a new ice age. This “global warming” is just alarmist. Eventually there will be an ice age and eventually there will be a warm age (tropics in Alaska). Eventually each of us gotta die. May as well ignore the talk and enjoy the life you have left. Maybe hedge your bets by buying real estate in Costa Rica and the Yukon?
A fun good read on the Kalifornia bubble.
http://financialsense.com/fsu/editorials/jain/2006/0603.html
City of Fanta Barbie
A long-time friend from City of Fanta Barbie, aka Santa Barbara, called a few days ago and said that he called because talking to me will make him feel better! I mean how many people would call the Prophet of Doom and Gloom to feel better? Anyway, he got an offer for his home that has been on the market for more than six months that is 19% below the original listing price and he accepted the offer. “What did the trick was the second price reduction very recently. His home was not over-priced when it was listed based on the prices that prevailed in the summer of 2005. Had it been listed at the original price in June of 2005 it would have been sold at the asking price or higher some time during the summer.”
So there we have rough anecdotal evidence on how far Santa Barbara prices have fallen since Summer 2005 — roughly 20%…
Anyone out there from the Pensacola area? In-laws have 1100sf 2+1 SFH insured through Allstate. Any information pertaining to current rates and/or rate increases would be appreciated.
Centex is now offering a “2 Day Only” sale in the Sacramento. We’re up to $125,000 off now. I guess the $100,000 off didn’t move enough sticks.
http://www.centexgreatoffer.com/cant_refuse.html?neighborhoodID=45720&divisionID=1016
I had another unsettling conversation with my father today (this happens every time the topic of real estate comes up). He bought his house in 1978 for $70,000. At that time he was earning $23,000/year as a high school math teacher. His house today is value at ~$400,000.
Using the 3x salary formula, the price he paid in `78 was spot on! And, this was a move-up house - not a starter home. We went from a 3BR on very little acreage to a 4BR, 2.5 bath, 2 car garage, acre of land, AND a mother in law cottage attached to the side of the house.
I ask him how he cannot truly believe his property could be overvalued, based on the salary rule-of-thumb, when it translates today into someone making $133,000/year to be able to buy his house now. The median household income in this town is ~$63,000. His reply was, “Oh I know a LOT of people who make more than $63,000/year.” Um, so the census is wrong?… I highly doubt it.
It’s infuriating. I feel like people who own homes are just completely out of touch with how out of whack prices are to incomes. And my father actually has heated arguments with me over this. You’d think at least a parent would have some compassion/sympathy/understanding for my plight. Nope!
“It’s infuriating. I feel like people who own homes are just completely out of touch with how out of whack prices are to incomes. And my father actually has heated arguments with me over this. You’d think at least a parent would have some compassion/sympathy/understanding for my plight. Nope!”
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people like your father have already mentally computed the current house price into their net worth and retirement plans. And many have HELOC’ed the price and so have an even larger stake in believing.
A lot of these older people who have already retired are going to be disappointed when the house tap dries up, the SS and Medicare river runs dry, and the dollar continues to erode us into a third world country.
Condo promotions turn deadly:
LUTZ, Fla. - Two college students were found dead inside a large, deflated helium balloon after apparently pulling it down and crawling inside it, officials said.
ADVERTISEMENT
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The deaths of Jason Ackerman and Sara Rydman, both 21, appear to be accidental, Hillsborough County Sheriff’s Maj. Bob Schrader said.
Their bodies were found Saturday partially inside a deflated helium balloon at the entrance of a condominium complex a few miles north of Tampa. The 8-foot-diameter balloon was used to advertise the complex.
“It was more a fun thing they thought they were doing,” said Linda Rydman, whose daughter was found dead. “You know how you blow up the balloon and suck the helium.”
The county medical examiner said Sunday that the cause of death won’t be released for six weeks, until toxicology results come back.
Inhaling helium can quickly lead to brain damage and death from lack of oxygen, according to the Compressed Gas Association, which develops safety standards in the gas industry.
http://news.yahoo.com/s/ap/20060604/ap_on_re_us/brf_balloon_deaths
“Inhaling helium can quickly lead to brain damage and death from lack of oxygen, according to the Compressed Gas Association, which develops safety standards in the gas industry.”
Do most folks buying condos these days first inhale helium?
The balloon was being used to promote the converting of apartments to condos (for real).
Padres Baseball game telecasts are chock full of downtown condo commercials. The new downtown Petco Park baseball stadium is surrounded by condo construction cranes. I sense developer desperation to move the units.
Is the bubble headed to the heartland, now that the coastal bubble zones are about to see prices drop by 20% (according to First American expert Christopher Cagan, who I have always thought of as somewhat of a housing bull)? Of course, I would guess that a 20% price decline for many coastal areas will prove overly conservative.
http://www.signonsandiego.com/uniontrib/20060604/news_1h04harney.html
P.S. I believe that Cagan’s analysis is flawed because it is overly backward looking; it assumes that the current boom is comparable to past ones, and hence the unraveling thereof. But we know from Ben’s many informative posts that the bubble mania has had a far more pervasive effect on the heartland this time around (e.g., in the past, Wisconsin and Minnesota were little affected by coastal booms, whereas this time, we have seen evidence that the credit bubble has resulted in much more of a building boom and price runup than in past boom periods). Thus I suspect this time is “different”, and the heartland will crash and burn with the coasts (though perhaps more because of a post-bubble jobs recession than a housing crash).