June 7, 2006

Faith In Real Estate Market Weak: Survey

A trio of reports on the survey released yesterday. “America’s wealthiest have higher hopes for their stocks this year, but are worried about prospects for real estate, according to a survey. Faith in the real estate market, however, was weak: Only 48 percent said they expect real estate’s value to increase in the next year, down from 72 percent who thought it would in last year’s survey.”

“Thirty-three percent of respondents expect real estate values to decline over the next year. That number is up from 14 percent who thought that last year.”

“The survey, conducted by asset manager U.S. Trust, polled Americans with annual adjusted gross income of more than $300,000 or net worth greater than $5.9 million, including real estate.”

From Florida. “Less than half of those surveyed nationwide think real estate values will increase over the next 12 months. ‘I think they realize that the level of appreciation has slowed, but Florida will always remain an attractive place to live and buy properties,’ said Mark Stevens, CEO of U.S. Trust’s southeast division in West Palm Beach.”

“Palm City economist William Fruth said those who purchased second or third homes as investments may not turn much of a profit in the immediate future. ‘The local housing market will be hurting for the next 12 months,’ said Fruth.”

“‘If you took this survey 10 years ago, things would be very different,’ said Merle Dimbath, president of Dimbath Economics in Stuart. ‘Their top worry shows that they are concerned for their kids’ and grandkids’ livelihoods and are thinking about whether or not they’ll be able to have the same wealth they enjoyed.’”

“While only the wealthiest individuals were surveyed, Dimbath said the results reflect the financial concerns of everyone. ‘We’re all in this boat together and we all want to float,’ he said.”

From Newsday. “Wealthy investors’ involvement in the real estate market does not reflect their dreary expectations for its performance. As in last year’s survey, they reported that real estate investments comprise 15 percent of their portfolios.”

“‘We felt they have not yet adjusted their portfolios along with their beliefs,’ said U.S. Trust regional president William J. Porter Jr. He said his firm advises ‘trimming that portion of the portfolio’ and investing in alternative assets.”

“Louis Altfest, a financial planner in Manhattan, said ‘the possibility of a decline in real estate is a residential phenomenon.’ Investors may be holding real estate assets despite their expectations because these investments are fundamentally less liquid than stocks and other products, Altfest said. ‘You can’t turn on and turn off real estate in the same way,’ he said.”

“Steven Rogé agreed, saying that a client who purchased a Florida condominium against his firm’s advice had been unable to sell it recently despite reducing the asking price several times.”

“Rogé said investors’ concern over real estate is driven by ‘what they hear in the media and the covers of magazines. It went from a housing boom to a housing bust in probably a year and a half.’”

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Comment by nnvmtgbrkr
2006-06-07 13:29:04

Investors may be holding real estate assets despite their expectations because these investments are fundamentally less liquid than stocks and other products, Altfest said. ‘You can’t turn on and turn off real estate in the same way,’ he said.”

And how many times have we said this on this blog? Instead of being the safe investment many either believed or were made to believe, this is one of the key factors that makes real estate extremely risky for the “investor”.

Also, lack of liquidity is why housing bubbles are slower to deflate than other asset bubbles.

Comment by Ben Jones
2006-06-07 13:34:55

Right, this guy who bought the Florida condo ‘hasn’t lost any money’ on it (Unless you consider carry costs, transaction fees and opportunity cost, but why quibble?) like the last post, because it won’t sell.

Comment by optioned unarmed
2006-06-07 13:38:23

Very true. In the extreme sellers’ market of the past few years people have been taking housing liquidity for granted. But most of us probably have memories from pre-bubble times of how much work and stress it actually can be to liquidate property.

On a sidenote, many of those wealthy investors probably bought their properties before the bubble and are cash-flow positive. It makes sense for the very wealthy to hold a bit of cash-flow positive rental properties in their portfolio simply for the sake of being diversified.

Comment by Getstucco
2006-06-07 13:41:22

One fascinating thing about real estate is that it is extremely liquid when prices are skyrocketing (remember the bygone bid war era?) and almost completely illiquid during a housing slowdown.

Of course, as I have often pointed out here, the problem in the latter case really stems from sellers unwilling or unable to drop their reservation prices in line with falling market prices. Any seller willing to do so could unload a property within a matter of days.

Comment by Chip
2006-06-07 14:07:35

Getstucco — “Any seller willing to do so could unload a property within a matter of days.”

Absolutely true — this is the one phrase I never, ever see in the media, even when they are talking about a down market. If sellers saw this in writing, they might at least give price cutting more serious consideration than is generally evident so far.

Comment by thejdog
2006-06-07 14:29:35

“Any seller willing to do so could unload a property within a matter of days.”

Absolutley correct. I just sold a home in a week. Two friends sold in April…one in 3 days the other on the first day. Just gotta throw the greed out the window and price them right, and let’s be honest..it’s very easy to come with an accurate price down to the day in a suburban-type tract home.

Amazingly, there ARE still buyers out there…quite a few in Sac…mostly people who are cash rich from selling a previuos home …by this time next year there won’t be any IMO…sorta like 1993-1994 in CA. That’s when it’ll really get interesting.

Comment by Getstucco
2006-06-07 14:40:19

I’m a buyer — just holding out for the 40% off sale that I expect after the wave of resets washes over the I/O ARM crowd in a couple of years.

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Comment by nnvmtgbrkr
2006-06-07 14:42:20

I’ve got a couple friends in the area and one in So Cal selling their home. What I tell them is to look at their recent (very recent) sales and comparable listings and then establish a price. Once a price is established, slash it by 10% and you’ll get interest, maybe. What I’m seeing in our area recently is that 5% and less reductions are getting nothing but yawns.

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Comment by nnvmtgbrkr
2006-06-07 14:52:22

It takes a complete divorcing of emotion to do this. I had to stand on my bro-in-law when he was selling his house in Riverside about a month and a half ago. I suggested he list his house at 385k and it sold in 2 weeks. What freaked him out was the same week he listed his two others in the ‘hood listed theirs, about the same floor plan, for 399k and 405k. He thought he was shorting himself and wanted to raise his list price. As of today, his escrow has been closed for 2 weeks and the two listings are still listings. You can’t take listings to the bank. You gotta jump below that falling knife. Today my bro-in-law calls me “the man”. I don’t know why, though. All this is is common sense.

Comment by thejdog
2006-06-07 14:55:28

Slashing the recent comps by 10% is a little drastic at this point…we’re “only” down 10% from last summer. A more accurate way is to figure out last Augusts price and take 10% off of it, and then take 10K off of that. Make sure the home is IMACULATE…use the games the realtors play. Fresh flowers, some cookies etc. It can only help.

If you get no offers in 2 weeks drop another 10K off the price..and keep doing that. PS - if the home is over 500K you should go in 20K increments

Comment by nnvmtgbrkr
2006-06-07 15:00:52

Not in the Reno/Carson/Tahoe area. 10% reductions are the only thing getting interest. It’s getting freaky over here. Once your local market starts to hit the panic button, and it will, it’s 10% or nothing. Just give it time.

Comment by We Rent!
2006-06-07 17:31:07

“Today my bro-in-law calls me “the man”. I don’t know why, though. All this is is common sense. ”

No, all this is GOOD sense. It will be common in due time. :mrgreen:

Comment by Darth Toll
2006-06-07 15:00:33

This reminds me of a classic stock market meltdown where the bids just vanish and you have asks piling up on the sell side. Since nobody is buying, its tough for the market makers to set the price and freefall is the result.

Comment by GetStucco
2006-06-07 20:11:35

Bingo! Except a housing crash plays out in slow motion, as there are no specialists, no posted prices (other than the slowly emerging and closely guarded real estate sales statistics), and unlike the savvy market participants on Wall Street, Joe Sixpack homeowner has no clue when the market is crashing or when the value of his condominimum has dropped by 30% off last summer’s peak, especially when the Real Estate Industrial Complex has brainwashed him into believing that real estate prices always go up.

Thus the real estate market can stay siezed up for quite some time during the free-fall phase. Only when a critical mass of sellers gets sufficiently desperate (due to resets, job loss, or endless negative cash flow on investment properties) will the market thaw out and liquidity begin to flow again like a waterfall along a flooded river.

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Comment by feepness
2006-06-07 17:49:13

Doesn’t the fact there are far fewer sales indicate that sellers couldn’t sell whenever they wanted? By definition when there are 50K sellers and 5K buyers then 90% of the sellers will be disappointed!

I think it actually gets literally harder to sell. Sure you can beat other sellers but you are definitely competing.

Comment by GetStucco
2006-06-07 20:26:24

Think of the Marshallian supply and demand diagram (a great big X, with the crossing point above the equilibrium quantity of homes on the horizontal axis, and due right of the equilibrium price of homes on the vertical axis). The branch of the X which slopes up to the right is supply, and the branch which slopes down to the right is demand.

There is only one problem, though: Clueless Joe Sixpack homeseller has not figured out what we all have, which is that prices are too high for current market conditions — considerably above the crossing point in the X which defines the equilibrium price at which the rate at which homes are selling equals the rate sellers are bringing new ones to the market. Thus we have your 50K sellers (on the supply curve above the crossing point) and 5K buyers in a disequilibrium standoff, as last summer’s price is far above this year’s equilibrium (market) price level. As you might suspect, this situation is not sustainable, and ends with a lower sale price at a level where equilibrium is restored — the number of buyers coming on to the market balances with the number of homes being sold, at a lower price.

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Comment by Sunsetbeachguy
2006-06-08 10:50:10

Calculated Risk had a nice posting on this on his site a while ago.

Comment by garcap
2006-06-07 13:43:39

“Also, lack of liquidity is why housing bubbles are slower to deflate than other asset bubbles. ”

I think this is true in the aggregate, but an individual property can drop in price very fast due to highly motivated seller.

Comment by mad_tiger
2006-06-07 13:51:02

At the moment the liquidity premium for real estate (the higher required return on investment to compensate for the time, expense, and risk of selling an illiquid asset such as real property) would seem to be negative. Last spring when it took a day to sell a property no one was demanding a premium (i.e., a discount to the purchase price). Now buyers see not only that properties are worth less than last year but also the increased difficulty owners are having dumping them. Buyers don’t want to be stuck in the same boat and (implicitly) will demand a premium to compensate for the risk of holding an illiquid asset. This is one more example of how the multiple factors that drove real estate mania in one direction can work just as dramatically in the opposite direction.

Comment by Neil
2006-06-07 14:07:57


Good point. I hadn’t thought to include a “liquidity penalty” in my assumptions for what buyers might offer for homes.

Let’s see, we’re illiquid only because buyers do not like the prices. What happens when we add:
1. Tightening credit standars (e.g., no more 41%+ loans)
2. Increased rates as the bond market recognizes the risk premium required by mortgage backed versus T-bills. Or do we just see higher minimum down payments?
3. All of that lovely under construction stock on the market
4. People who shouldn’t have bought 2+ homes trying to offload.
5. Foreclosures/short sales due to readjusting ARMs, illness, divorce, whatever.

I stand by my prediction that the summer could still be a “hot summer” (house price wise) as all good bubbles usually have one final run up. But wait for fall… by mid-October… the inventory overhang will be too much to ignore.

People are losing faith in the market. But what we’re going to see is capitualization. When is the last time we had a real estate speculation like this? 1925? ;) I’m serious. We’ve all posted how even smart/educated people went absolutely nuts in this market.

I dusted off my old copy of “Idiots guide to selling a home.” (circa 1999 IIRC) Gee… No where in there did it say adding granite counter tops adds 50% to a homes value… Why it recomends:
1. against buying the largest house on the block (poor comps for McMansions)
2. Do not expect to get more than 50% of the funds put in to upgrade a home (only upgrade if your time in the house lets you enjoy the full value of the upgrade).
3. Buy 3X your income (3.5X for young people just starting out is ok).

and on… and on…

Comment by tweedle-dee (not dumb...)
2006-06-07 14:14:51

“People are losing faith in the market. But what we’re going to see is capitualization. When is the last time we had a real estate speculation like this? 1925? ;) I’m serious. We’ve all posted how even smart/educated people went absolutely nuts in this market.”

Which is why I think we’ve got a huge correction coming. I mean HUGE.

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Comment by Getstucco
2006-06-07 14:44:29

“Buy 3X your income (3.5X for young people just starting out is ok).”

OK, maybe 6X income for SD and other coastal cities with vacation appeal. But 10X???!

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Comment by rms
2006-06-07 22:36:59

“3. Buy 3X your income (3.5X for young people just starting out is ok).”

This was a good rule of thumb back when Joe Sixpack could expect his wages to increase; today, after adjusting for inflation, the average paycheck is actually shrinking due to globalism.

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Comment by anoninCA
2006-06-07 14:24:13

Joe Sixpack says: What do you mean housing is illiquid?!?! I can cash-out refi any_damn_time I please!

(he can, of course, until he can’t)

Comment by buddhaman
2006-06-07 16:02:12

And cash out re-fi is not actually getting the value out - you are paying big bucks for it in the long run - way more than what the cash out is worth - the only way to “cash out” is to sell and put that $ in the bank.

Comment by simmsays
2006-06-07 13:30:20

“Rogé said investors’ concern over real estate is driven by ‘what they hear in the media and the covers of magazines. It went from a housing boom to a housing bust in probably a year and a half.’”

Fundamentals are not at fault, its the medias fault. lol


Comment by Ben Jones
2006-06-07 13:37:25

OT, for readers of my foreclosure and M&M blogs: the blogspot network is down, or at least the servers I use are. Please check back later.

Comment by Getstucco
2006-06-07 13:37:45

“America’s wealthiest have higher hopes for their stocks this year, but are worried about prospects for real estate, according to a survey. Faith in the real estate market, however, was weak: Only 48 percent said they expect real estate’s value to increase in the next year, down from 72 percent who thought it would in last year’s survey.”

That is a rather abrupt turnaround in sentiment. I thought everyone learned their lesson in the early 2000s that stocks were risky, but housing was a safe investment because they’re not making anymore land and everyone needs a place to live.

What makes them think that stocks are going to do well this year, now that we have a Fed chairman in office who has made clear his intentions to take away the punch bowl? Maybe the survey does not reflect the rather strongly-worded recent statements out of the Fed calmly explaining that their top priority is maintaining price stability, even if the economy is showing signs of weakness (such as Fed-inspired stock market selloffs).

Comment by frcp_23_b_3
2006-06-07 13:53:40

I’m telling people that this next Christmas is going to be very much an unmerry Christmas. Bernanke can’t raise rates. His paper tiger bluff this week is a joke and the markets quickly realized it. The Forbes article you posted yesterday (well balanced from the mainstream press) nails it: it’s not a question anymore of if we go into a recession, but when and for how long. The article didn’t touch on this but the problem the way I see it is that we are not just dealing with unprecedented speculative excesses; no, we have to deal with a totally destabilizing geopolitical situation as well. Fiscal and trade deficits are at a scale which I doubt the Fouding Fathers ever could have imagined possible(could folks two centuries ago even fathom the concept of one trillion dollars?). Plus there is the destabilizing demographic situation: a giant bulge in our population about to retire and at the same time that bulge is about to get their equity savings wiped out (what’s left of it…what does the average boomer have in their 401? $30K or something?). Many from that bunch thought real estate would carry them and we know for certain that ain’t going to happen. Not good. Not good at all.

Comment by tweedle-dee (not dumb...)
2006-06-07 14:00:10

Bernanke is going to crank rates. The last Fed meeting even discussed 50 BP. You never heard at with Allen Greenspan.

I’m happy Bernanke is raising rates. The fact that the market and economy crash is NOT his fault as so many are saying it is. If they were strong and sound 5.25% or even 6 or 7% wouldn’t be a problem.

Comment by frcp_23_b_3
2006-06-07 14:36:12

I agree he has to raise rates but I don’t know if he will. The whole empire of debt is teetoring and the debt infrastructure just can’t take any more stress of higher rates. But against that reality is the reality of the rapidly evaporating dollar and for that the only remedy is higher rates. This is the classic dead end - the kind that the men and women of the federal reserve are supposed to keep us out of. Instead, they have driven us straight down a dead end.

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Comment by jp
2006-06-07 14:51:24

I agree he has to raise rates but I don’t know if he will

Of course he will. He’s already signaled it loudly. He needs to establish credibility, and doesn’t really give a damn who gets hurt.

If its one thing that Greenspan taught us is that you never get penalized for beating the crap out of some particular sector of the economy, especially when it’s done in the name of fighting-inflation. (For stocks, witness 87 and 02. And that’s just stocks.)

Comment by Mo Money
2006-06-07 14:52:14

I think he has to raise rates. The debt problem isn’t going away until the consumer gets a wake up call akin to a punch in the gut. It’s the only thing that will wake them up from their rampant consumerism to realise the party is over and it’s time to stop spending like they actually have the money. Debt needs to become a dirty word again.

Comment by KLF
2006-06-07 14:53:04

It’s amazing to watch the national media turncoat/bash BB this week. Give the man credit for taking the stand v. greater resistance. He must roll his eyes … listening to “economy experts” vent.

Comment by Mo Money
2006-06-07 14:59:16

No one vested wants the party to end, no matter what the cost down the line. Hence the plaintive bleating of David Lehrah and others……”But we don’t want to stop spending, spending fee lgood !”

Comment by brianb
2006-06-07 14:59:22

I don’t think there’s any way he raises rates. You don’t raise rates at the beginning of a recession unless you want a depression. Depressions aren’t good for banks, which is what the Feds mandate is.

The current inflation is due to loose money supply years ago. It has a large lag. It would be pointless to raise now and restrict credit further.

Comment by thejdog
2006-06-07 15:10:18

“It’s amazing to watch the national media turncoat/bash BB this week. Give the man credit for taking the stand v. greater resistance. He must roll his eyes … listening to “economy experts” vent.”

I agree..I think BB is doing a fine job and would not want his position for all the tea in China.

I posted this on Bens Money blog a few months ago, but a very good friend of mine who teaches economics at Stanford was a colleague of BBs at Princeton. Dude told me that BB was the smartest man he’s ever met…and this guy is probably the smartest guy I’ve ever met…and I think I’m pretty smart.

These guys no what they are doing IMHO. Problem is when politics get in their way…

Comment by nnvmtgbrkr
2006-06-07 15:12:00

Will someone with more time than I have now please explain to brianb why the Fed is caught between a rock and hard place on this one. The Fed will give us another rate hike, and another, and probably another after that.

Comment by Mo Money
2006-06-07 15:28:40

Lets remember that we are being told constantly that the economy is great/growing and we have job growth also. There in no acknowledgement of trouble ahead so the rate increases are totally justified in the greatly unimformed public mind. Very few people see the recession ahead and we’re the crackpots.

Comment by frcp_23_b_3
2006-06-07 15:47:58


I think BrianB is correct…the cow’s out of the barn already. The near term threat are loan defaults, the long term threat is dollar hegemony. I have a feeling the short term threat gets the balance of attention going forward and while another rate hike might happen, I believe we’re defenitely at the upper end range of what our debt empire can withstand. The M.O. of the Fed going forward will be day to day survival…in other words protect the banks.

Comment by Mort
2006-06-07 19:56:00

1. The fed has lost control of the money supply.
2. The guvmint debt is out of control.
3. The classic liquidity trap that is the credit bubble in the private sector would have worked to get rid of the excess money in the system through asset depreciation except see #1 & #2.
4. The fed must feed the beast (#2) first and foremost because it has no choice. Therefore it must raise rates to keep foreign funds coming in and they are demanding a higher and higher risk premium.
5. The fed will eventually fail unless some fundamental changes are made which are out of their control. They are bailing the Titanic with a teaspoon, IMO.
6. They will all complain to the government that BB is causing a recession when government spending itself is actually causing the recession. How ironic!

Comment by waaahoo
2006-06-07 15:12:56

Civil P. I think one of the blowers of this bubble has been those in that pre-retirement age bracket who knew they didn’t have enough to retire with and when shown a can’t-miss vacation condo / lottery ticket just put the blinders on full dim and bought.

Comment by frcp_23_b_3
2006-06-07 15:48:35

Where did that attitude come from? Woodstock?

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Comment by athena
2006-06-07 15:36:46

The realtors in my area are still betting on the boomers being the best bet for who is still going to be buying real estate… the argument is that the boomers are fine, they are the lucky generation that can carry so much debt closer to retirement and still smell like roses… because they are about to inherit a buttload of wealth from their parents who are dying off and leaving fully paid off houses and stocks and bonds etc….

so they are telling the boomers to go on ahead… buy that second house, or third house, you can’t lose, it will only go up and you can always rent it out and as rents rise, it will pay your mortgage.

Comment by grim
2006-06-07 13:40:13

This is *way* off topic..

Can someone who knows how to migrate from Blogger to Wordpress please drop me a line. Blogger has been down all day and it’s just killing me..

Caveat Emptor!

nnjbubble @ gmail.com

Comment by tweedle-dee (not dumb...)
2006-06-07 13:58:11

Consumers continue to borrow.

Bush has it wrong. Americans aren’t addicted to oil. They are addicted to credit. Consuming oil is a byproduct of that.

Keep spending, Mr. Consumer. The more you spend now, the more you owe later and the worse this whole situation is going to get.

Comment by DannyHSDad
2006-06-07 19:05:16

We can’t let the terrorists win! [so keep spending, even if you are seriously in debt.]

Seriously, what are people thinking? If we get deflation [along with many unemployment], those debts will really hurt. Stagflation won’t help either. Pure inflation would be useful only if jobs continue to grow but what’s going to replace all those R.E. related jobs lost? [realtors, mortgage brokers, construction workers, appraisers, home inspectors, city/county/state code inspectors, tax collectors, etc.]

Comment by tweedle-dee (not dumb...)
2006-06-07 14:10:05

“Rogé said investors’ concern over real estate is driven by ‘what they hear in the media and the covers of magazines. It went from a housing boom to a housing bust in probably a year and a half.’”

Isn’t it funny how people just can’t be convinced to do a little research before they spend $500K, especially since they BORROW it ! I mean, if you asked your neighbor to invest $500K in your company, he would ask you a thousand questions about the product and the market and how he would sell his shares and so on.

But for some reason people think they don’t have to do that when they spen $500K on a house. Probably because “real estate never goes down”. And there will always be another fool that thinks like the buyer that will buy it at an ever higher price. Except when everyone already has a couple houses.

I don’t feel sorry for these people and I won’t feel guilty when I profit from their mishap. Especially since I have been looked down on for renting by these same people.

Comment by We Rent!
2006-06-07 17:41:28


Comment by housegeek
2006-06-07 14:13:02

OT, but one indicator of home equity cash machine drying up is consumers are hitting the credit cards harder:


Comment by anoninCA
2006-06-07 14:28:02

Who can blame them…they gotta get their fix somehow.

Comment by Getstucco
2006-06-07 14:50:54

That new development will hit a brick wall before long…

Comment by Neil
2006-06-07 15:12:30

What? Oh yea, we must keep the average savings rate negative. Hey, as long as the bond markets work… I’ve already talked about how the mortgage backed secondary market is going to go through “issues”.

Ok, let’s think about this. I’m currently saving a disgusting % of my take home. (I guess this is the upside of traveling and living where the company needs me and going home on weekends.) Most of my friends are saving $$$. So who the *ell is spending so much. (Never mind, I see it at work every day. And my field is supposed to be full of fiscally conservative folk.)


Comment by We Rent!
2006-06-07 17:44:36

I see it at work every day, too. And my field is supposed to be full of POOR folk (teachers).

Good job on the disgusting % savings. My wife and I only save an obnoxiously ludicrous %. :mrgreen:

Comment by MazNJ
2006-06-08 07:08:42

What terrifies me the most is if I save over half my take home, not including 401K and retirement accounts, over 1/3 of my gross… and the average is negative…. what am I balancing out? 10 people dissaving 5 percent? 100 people dissaving a half percent? And if its based on total incomes rather than just individual percentages which it probably is, the sheer percent of the population becomes even more terrifying.

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Comment by catspit1
2006-06-07 14:37:05

what is up geniuses? Ride out stock market correction or cash out posthaste? I am pretty diversified but EVERYTHING is tanking…

Comment by tweedle-dee (not dumb...)
2006-06-07 14:43:00

Cash, man, cash ! I’m sitting at 100% now.

Comment by azrenter
2006-06-08 03:30:03

money market, state farm bank, 4.4% on accounts over $100,000 good place for equity nomads from ca.

Comment by MazNJ
2006-06-08 07:10:00

http://www.treasurydirect.gov, 28 day tbills 4.783 for the recent settlement.

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Comment by Getstucco
2006-06-07 14:49:42

Maybe you should follow the institutional investors out the exit door. Once that herd of critters takes flight, the markets are toast.

Check out Keri’s take on this (”Don’t try to catch a falling knife,” etc.)
just below the image of a bear on the marketwatch.com home page.

Comment by Gekko
2006-06-07 16:37:50

keep dollar cost averaging into a diversified low cost stock index fund. and keep some cash on hand for opportunities in RE in the next 12-24 months. “the best time to get rich is during a crash.”

Comment by holgs
2006-06-08 07:40:32

Cash out, use cash to buy ITM puts on GGP (no premium)… make $$$!

Comment by nurseliz
2006-06-07 14:59:27

OT quickly, does anyone know if the numbers on foreclosures.com are true when you do a zip code search???? If so, scary

Comment by david cee
2006-06-07 17:47:08

Garbage numbers. They mix in pre-foreclosures with foreclosures

Comment by Mort
2006-06-07 15:27:25

I have tried at least 13 lenders but haven’t found one who would refinance my loan. I have owned my home for two years and have never been late or missed a payment. Doesn’t that count for something?


Yeah, when my rate adjusts I’ll just refinance, how hard could that be? This is going to get so ugly.

Comment by Mo Money
2006-06-07 15:33:33

I smell a sub sub sub-prime borrower suckered into the delights of home ownership. 10% rate rising to 13% , Jeez ! May have well put the house on a credit card.

Comment by Waiting in SD
2006-06-07 15:47:06

Just wait give it a couple of years and it will be at 16%. Many people are going to get burned by ARM’s this time around. Especially if Mr. Bernanke pumps up the rate another 1%..

Comment by mrincomestream
2006-06-07 18:17:36

2 yrs ago at 10.13 wasn’t sub-prime that was hard money

Comment by ken best
2006-06-07 22:16:10

What’s happened to “you can always refinance later”? 13 lenders say no?
She should start suing the realtors, the loan “officers”, if they are
still around.

Comment by mrincomestream
2006-06-08 16:50:17

Sueing them for what?

Comment by Larry Littlefield
2006-06-07 15:35:34

I’m not sure what the Fed should do. I think short term rates are high enough. But long term rates are not. What does the Fed do about that?

Comment by We Rent!
2006-06-07 17:46:21

Our Father, who art in heaven…

Comment by feepness
2006-06-07 20:08:02

Increase scrutiny on loans in order to tighten mortgage lending standards which will raise rates at the long end.

Comment by cereal
2006-06-07 15:48:39


gotta love that two syllable thing on a ONE SYLLABLE word!


Comment by jim A
2006-06-08 05:30:21

So where’s Zoë?

Comment by buddhaman
2006-06-07 16:16:12

I have some knowlegde of markets, but have a question for the experts here - I see SO much money is in the markets via 401K’s & other retirements funds, Mulit-Billion dollar mutual funds, etc. etc. - don’t those managers have to have the money invested somewhere? - If the market Really starts tanking, where do those managers put the money? Or is it all just lost into thin air because they won’t be able to sell it to anyone when the prices are free-falling and the enormous numbers it currently represents will just shrink - paper losses? Or is there enough out there in total, that as some panic sell, there will be enough cash & other more solid paper opportunists to buy up the good stuff from panic sellers?

Comment by kerk93
2006-06-07 16:49:33

It isn’t lost into thin air. Those who sold made the money. Those money managers still are getting their % for “managing”. Those folks who didn’t sell are the ones losing money. As for the money, they do have to have it somewhere, but the fine print always says something to the effect that past performance doesn’t guarantee future performance. It is a RISK. You put in 100K and it can be worth 1K. It doesn’t always have to go up, just like housing. There is a risk in a CD. With hyperinflation, you get it back, but that 100K will buy you what 1K did. That is the beauty of a fiat system. It works great until it doesn’t work at all. It is only as good as the faith backing it. With 1/10 of the time devoted to meaningless sports and movies devoted to understanding their finances, we wouldn’t be here in the first place. Point being, we’re not stupid, just too damned trusting that those in power are serving the public interest vice their own. How we doing so far on that trust?

Sec Snow–Our economy is vibrant. Foreigners still have an appetite for buying our debt.

YGTBSM!! Anyone with half a brain should have gotten the hell out of anything he was managing with that asinine comment. Unfortunately, he is managing our Treasury, and folks think that because he is high up and on TV, he’s got to know what he is talking about. GUESS AGAIN!!

Comment by Mort
2006-06-07 16:55:06

I’m no expert but most of the good 401k plans are highly diversified. If stocks tank they take their lumps and buy more at the lower prices. If two or more sectors take a hit (which seems increasingly likely) they really take their lumps. Underfunded plans will fail in that event.

Comment by kerk93
2006-06-07 17:22:31

I don’t mean any offense, but I’ve heard diversified from a lot of professional money “experts”. It generally boils down to a mix of bonds, CDs, large cap, small cap, blah, blah, blah. From where I’m sitting, that is pretty much tied to the $ no matter what country it is in (US sneezes, the world catches a cold…I wonder why). The only thing/area tied inversely to the dollar are PMs. Unless the 401ks are buying gold/silver, I’d say there eggs are all somewhat tied to the dollar.

Comment by Mort
2006-06-07 17:48:10

Yes, I agree. With the devaluation of the dollar and the current debt/deficits we are all in for a rough ride. I just meant to say that if one sector (housing for instance) takes a hit some of the larger plans have other holdings. Guvmint bonds, corporate bonds, stocks, properties, foreign stocks. If a worldwide recession/depression hits everyone will suffer. The world has been sitting at the edge of a cliff for quite some time now and the paragon of stability that once was the U.S. is now destabilizing the world economy. There really is no “safe place” to put assets or any way to know what things will increase hold value the best. This country is in for a rough ride. If we don’t pull our collective heads out things could get very nasty. What seems to be driving a lot of people crazy on this blog seems to be how to beat inflation (or dollar devaluation). This causes speculation in other areas (commodities for instance). The best investment from my perspective is in a real and healthy economy itself. I don’t hold out much hope for that though because stupidity rules the world and I have given up hope for any smart solutions. getting off soapbox now…

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Comment by feepness
2006-06-07 20:26:00

I thought that too. I investigated my 401K and my wife’s 403B fairly carefully.

The conservative growth stock funds all held FNM and FRE as major positions.

The conservative bond funds all held MBS.

The only stock fund which did not lose compared to the major indexes was a direct index fund.

401Ks and their ilk are unfortunately almost as much of a lie as social security. I was very happy when I found I can put transfer my 401K funds into an account similar to a self-directed IRA. That’s where I buy my gold.

Comment by Moopheus
2006-06-07 16:57:55

“If the market Really starts tanking, where do those managers put the money?”

Cayman Islands bank accounts?

Comment by kerk93
2006-06-07 17:26:56

Ding. But even then, if you put dollars in the bank account, and the FED decides that their solution is creating more, that rig will still cost you, as it is dollar denominated. If you think the dollar is going to fall, diversify by putting it somewhere with an inverse relationship to the dollar. I suppose some other currency would fit the bill, but I don’t see any other Central Banks where I’d put my faith.

Comment by Mort
2006-06-07 17:56:26

Exactly, some of them will print more of their own currency to prop up the dollar. If the dollar goes down hard, as in a complete rejection of its value the world is facing a loss of faith in all currencies, thus a breakdown in international trade. Many in the world will say well, if it happened to the dollar how do we know they won’t do the same thing to the Euro eventually? Very turbulent financial times.

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Comment by Flic
2006-06-07 17:12:30

I have been noticing more people bringing up real estate and the fact it isn’t doing well here in Sarasota FL (ground zero for the housing trainwreck). In fact, I talked to 2 co-workers and a client today and they all had something in common. They all thought real estate was in trouble…but all of them said that prices won’t go down where they live. “Oh, my neighborhood never loses value…blah..blah..” Sounds like denial to me! On a side note, I drove through a new neighborhood that is still putting up numerous stucco boxes and I saw the same 40-50 completed (vacant) homes with ‘For Sale’ signs that I saw a month ago. But this time, I saw more ‘Reduced’ signs and even better, I saw a ton of For Sale signs with a sign underneath that says ‘or For Rent’. I feel sorry for these flippers….NOT. This is going to be fun to watch….

Comment by ken best
2006-06-07 22:22:42

Should take some photos for posterity.

Comment by need 2 leave ca
2006-06-07 17:37:42

What magical genie does this woman in RIchmond want to pull out of her A$$? I guess she is expecting the PPT to come and rescue her, or Bushie and his buddies? Maybe Jesse Jackson, the biggest idiot around, might come to her rescue? Or Useless Ted Kennedy?

Laura Burns said she and her husband were grateful they had been able to weather their financial storm without losing their house. But she said the experience had left her somewhat bitter.

“I have no faith in the American dream anymore,” she said. “You bust your hump year after year, going to work and paying your taxes. Then you get in a hole, and there’s no one there to help you out of it. The government doesn’t help you, the bank doesn’t care.

“If someone legitimately can’t pay their bills — not won’t, but can’t — there should be some type of help for you. We found out there wasn’t.”

Comment by thejdog
2006-06-07 18:16:05

I don’t know who Laura Burns is, but she she’s got the wrong attitude IMHO. Girl, you gotta take care of yourself instead of relying on the gov’t or the bank. What is it she’s after, a subsidy?

Comment by thejdog
2006-06-07 18:18:43

oh I just figured it out..she’s a democrat (sorry couldn’t resist)

Comment by weinerdog43
2006-06-08 04:02:18

“oh I just figured it out..she’s a democrat”

Ha, you mean a Repuke. (sorry, couldn’t resist)

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Comment by athena
2006-06-07 22:24:04

If you can’t pay your bills?

WHO’S bills are they again?

They are YOUR bills!!! So who the fork else should be responsible for paying them?

Comment by flat
2006-06-07 18:19:36

if everyone agrees its going down-then it won’t

Comment by ken best
2006-06-07 22:26:39

Fortunately, the NAR disagree , they’ve been saying that RE always goes up.

Comment by westcoastwndr
2006-06-07 20:44:44

At the risk of presenting an alternative viewpoint, the excess liquidity in the financial system is a factor that has not yet disappeared, and may not disappear for quite some time.

ARM Option resets are a fact, yet as most homeowners can attest, there is no shortage of eager lending institutions lining up to hand out new Option ARMS and in fact, HELOC money is still flowing rather freely.

Granted for the homeowner with absolutely no equity and terrible credit may be in trouble. But this is the exceptional case IMHO

This party may go on for a while yet

Comment by ken best
2006-06-07 22:46:30

Bay Area flippers are everywhere, from Sacramento to Arizona. Perhaps they are trembling with fears; the greater fools are nowhere to be found.

Comment by need 2 leave ca
2006-06-08 07:46:31

Where will the champaigne and cavier toast be when we hear a lot of stories of Bay area and Los Angeles flipper sob stories. The more gut renching, the better - and the more idiotic, the more entertaining.

Comment by Randy
2006-06-09 11:38:48

I predict that Helicopter Ben will have to save the dollar and therefore, kill housing.

A rout on the US dollar in the forex will diminish all of the US’s ability to float t-bills to finance its account and budget deficits. This is really the only way but as we all know, it’s the middle class that’s going to suffer as a result.

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