Otteau: NJ prices to fall 9% in 2009, no bottom this spring

From the Record:

N.J. homes prices still falling

New Jersey home prices are dropping by an average of about 1 percent a month, and will likely not stabilize before the fourth quarter, appraiser Jeffrey Otteau said today. He predicted a 9 percent decline in prices for 2009 overall.

“Because of job losses, housing will continue to contract,” Otteau told a hotel ballroom full of real estate agents in East Hanover, at his twice-yearly seminar on home prices.

This year’s projected decline will follow a 2008 drop that Otteau estimated at 8 percent statewide. The Standard & Poor’s Case-Shiller index recently said the 2008 drop was 9.2 percent in the New York metropolitan area, which includes North Jersey.

While many potential buyers are waiting for home prices to fall further, Otteau said if they wait too long they may lose the benefit of low mortgage rates, which recently have hovered around 5 percent. If interest rates rise just one percentage point, he said, that raises monthly payments as much as a 9 percent increase in home prices.

“Starting next year, interest rates will begin to rise,” Otteau predicted.

Otteau said home prices may start rising in spring 2010 as the economy recovers, but will increase slowly — around 3 percent a year — in the first few years of the housing market’s rebound. As a result, New Jersey home prices will not return to the peaks reached in 2005 until 2020, he predicted.

Otteau also said:

* Demand for smaller, less expensive homes will outstrip demand for large luxury homes in the coming years, as baby boomers retire and downsize, and their children become first-time buyers with limited incomes.

* New Jersey continues to lose residents to other states that offer a lower cost of living.

* Hudson County, which was one of the strongest housing markets in the state a year ago, is now one of the weakest, because job cuts on Wall Street mean fewer people are looking for homes across the Hudson River.

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141 Responses to Otteau: NJ prices to fall 9% in 2009, no bottom this spring

  1. Vince says:

    first for the first time.

    Where can I get information on bank owned homes. Can I call the bank directly.

  2. #1 – Bank of America-Countrywide-Merril has a page up
    http://www.countrywide.com/purchase/f_reo.asp
    for their reo’s.

  3. 3b says:

    And there goes Mr. Otteau with the better buy now, because rates are going to go up, and now you will be closed out forever;again.

  4. skep-tic says:

    well, to the extent rates rise, prices will have to fall further. pretty simple how this works

  5. Kettle1 says:

    U.S. Considers Expanding TALF to Distressed Assets

    The Obama administration is considering using a new Federal Reserve program designed to spur consumer lending to help remove distressed assets from banks’ balance sheets, according to people familiar with the matter. Officials may meld the Treasury’s plan to set up private investment funds to buy frozen assets with the Fed program, known as the Term Asset-Backed Securities Loan Facility, the people said. The Federal Deposit Insurance Corp. may also get a wider role, the people said. Treasury Secretary Timothy Geithner may use an array of approaches to maximize the likelihood of cleansing banks’ balance sheets so they can start lending again. The next announcement, which may come as soon as this week, will be critical after Geithner’s first unveiling of the strategy caused a sell-off in financial stocks.

    http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=aYnbqnw8K3pc

  6. Clotpoll says:

    Mikey, in full battle mode:

    Wednesday, March 18, 2009

    Line in the Sand

    “I simply cannot find anything that makes me believe the markets will move higher. As I watch the AIG comedy unfold live with testimony that is nothing more than a bad reality show, I realize there is simply no hope. Here are a group of buffoons wasting time discussing $165M in bonus money while the real problem is unfolding before their eyes. Yesterday, we heard one economist talk about AIG’s problems being $1.2T. Now we are hearing from the horse’s mouth, the problems could be as large as $1.6T. That’s a $400 billion increase in 24 hours. I say it is somewhere between two and five trillion . . . but the only thing we really know, is that no one knows.

    Six months ago, the AIG exposure was a maximum of $400 billion and King Henry pulled a quickie to bail out AIG . . . with the slight of hand of bailing out Goldman. No one is talking about the billions Wall Street walked off with in TARP money . . . and is still walking off with. No one is going after Thain, who spent $1.5 million on decorating his office with TARP money. No one is going after Blankfein who walked off with $65 million himself . . . just one guy. Yet they are wasting millions of dollars . . . and every TV media bobblehead is talking about the $165 million.

    I am not going to add any new positions to our portfolios, but I think we have certainly reached a top in here at a S&P 780. I just don’t think it can go any higher. I rarely draw a line in the sand, but I think this is a good time to draw the line. I feel more confident than I have since last summer, that we are up against the wall, and we move lower from here. I don’t even think the markets can rally 2-3% from here. I just think it is all over. The fat lady is signing . . . again.

    This country is in trouble. Big trouble . . . with a gaggle of buffoons posturing for attention like a bunch of monkeys that want people to throw treats. If you don’t believe in prayer, you’d better start now.”

  7. Kettle1 says:

    CLot,

    its a race to the trillion $ bailout….

    Freddie Mac: The Government’s Next Black Hole?

    AIG is to date the most expensive corporate bailout in American history, requiring $180 billion of government funds. But it may soon have competition. Last week, mortgage giant Freddie Mac said that it had lost $50 billion in 2008 alone. A look at the company’s books suggests the government will have to spend at least triple that much to save the financial firm from collapse. If the housing market worsens, the tab could even be larger. “Freddie’s portfolio of [mortgage] insurance is more risky than the market was led to believe,” says Paul Miller, an analysts at FBR Capital Markets. Sister company Fannie Mae lost even more last year, with $58.7 billion of red ink. But Fannie was better capitalized than Freddie going into the credit crunch. So even though Freddie by many measures is smaller than Fannie, the problems at Freddie will probably end up costing more.

    http://news.yahoo.com/s/time/20090317/us_time/08599188558300

  8. Kettle1 says:

    did someone mention moral hazard?

    General Motors Checkmates Obama In Two Moves

    http://www.time.com/time/business/article/0,8599,1886010,00.html

  9. Kettle1 says:

    Grim, Clot

    Please correct me if i am wrong, but once you refinance a loan it becomes a recourse loan, correct?

    if so, then a lot of new debt slaves are being inducted recently…

    U.S. mortgage applications spike on refinance demand

    Refinancings requests represented about 73 percent of all mortgage applications last week.

    http://www.reuters.com/article/topNews/idUSTRE52H2O220090318

  10. Kettle1 says:

    Owners skulking away from “underwater” U.S. homes

    http://www.reuters.com/article/newsOne/idUSTRE52H00Z20090318?sp=true

  11. Hobokenite says:

    So I’m wondering what inspired the round of “Bonus guarantee” contracts in March of 2008………

  12. #14 – There have been a few people who’ve suggested it is nothing more than hush money.

  13. I should say I have no opinion one way or the other on the veracity of such statements.

  14. Alap says:

    Its pathetic how little power this President really has. No wonder all the dems wanted him elected, esp. the big boys. They can manipulate him so easily into taking care of their donors. What a freaking joke this “messiah” is.

  15. confused in nj says:

    The key behind the AIG bailout is that it is a Global Bailout, which is impossible to facilitate with a single Country’s taxpayers. AIG must go into bankruptcy, and the World mst absorb the losses, not one Country. In this sense the current crisis is less solveable then the Great Depression.

  16. Clotpoll says:

    vodka (12)-

    Not necessarily. Generally in NJ, seconds, home equity loans and HELOCs are where you sometimes find the non-recourse feature. These are the kinds of loans whose structures and average balances make non-recourse more of a reasonable choice for the lender, since the chances of a second lienholder actually being able to foreclose on a property to make themselves whole are slim-to-none.

    In the absence of the ability to foreclose, some second lienholders make them non-recourse so that they can pursue deficiency judgments if necessary.

    TD Bank is one such company, although their bad loan exposure is low.

    In practice, virtually all second lienholders on properties that fall to foreclosure are receiving .00 USD to .05 USD per dollar of balance due.

    I have never seen a residential lienholder of any type in NJ file for a deficiency judgment. It’s just good money after bad.

  17. Kettle1 says:

    question:

    does the FOMC’s actions today suggest that the market is deteriorating further and that even with the huge sum of cash already handed to the banks, they still cannot maintain solvency?

  18. confused in nj says:

    Assuming Bernanke isn’t stupid (unlikely), then possibly he is an Economist Terrorist.

  19. Hobokenite says:

    tosh,

    “#14 – There have been a few people who’ve suggested it is nothing more than hush money.”

    But what about the timing?

  20. Kettle1 says:

    confused,

    my current thought is that either AIG or eastern europe will be the big bomb that sets off the next leg down. Both have serious global implications.

    Also notice that the world bank came out today with projections of 6.5% growth for china. 6.5% is still optimistic and even if china hits that they will still have some serious internal issues

    premier Wen cant be happy with the world bank right now.

  21. Clotpoll says:

    vodka (20)-

    I think it shows that the FOMC either:

    – still doesn’t understand it’s a solvency- not a liquidity- problem

    – understands it’s a solvency problem, but wants to present it to us as a liquidity problem in order to prevent panic

    – somehow thinks giant money bombs can kick the detonation of the financial world down the road

    IMO, the deterioration of markets will continue unabated until they crash. Today’s actions show that TPTB may be figuring it out and are now trying to smokescreen the evidence by taking theatrically (and dramatically inappropriate) over-the-top action.

  22. Clotpoll says:

    confused (21)-

    When I saw the Fed’s announcement today, the first thing I thought was that it was a terrorist act.

  23. Clotpoll says:

    vodka (23)-

    Somehow, I think the World Bank is #2 on Mr. Wen’s current shit list.

  24. Stu says:

    For what it’s worth, I agree with Mikey and bought back the 1/6th share of SRS that I sold at 100.

    In other funny happenings, I’m participating in a stock picking contest that started early last year. I picked Sun on the hopes of a buyout. I also chose Kinetic Concepts on the same premise. Contest ends at the end of April 2009. I think I might now be in the lead. Only stock that anyone contestant picked that is in the green is Dollar Tree. Quite telling.

  25. #22 – Do you mean that they knew in March `08 that they were about to go down and were trying to grab some cash?
    – or –
    That these contacts pre-date the massive deterioration in the valuations of the assets in question?
    – or –
    am I missing something?

  26. #20 does the FOMC’s actions today suggest that the market is deteriorating further

    That’s the way I’m viewing it.

  27. NJGator says:

    Can someone with GSMLS access look up the sale history of 191 Midland in Glen Ridge? It was just listed for $629k (2662601) with a prior sale of $675k in 2005 showing in the Monmouth County tax db. The tax db shows a change of owner from 2007-2008, but lists no sale. Was there a 2007/2008 sale? If so, for how much, and is the current listing short?

    Thanks.

  28. Shore Guy says:

    “understands it’s a solvency problem, but wants to present it to us as a liquidity problem in order to prevent panic”

    I don’t know that it is to prevent a panic but suspect it is because they have the tools to deal with liquidity issues. Let’s face it, right now the only tool thay seem to have left in their tool box is a screwdriver. so all they can do now is screw everything in sight.

  29. Clotpoll says:

    As Kettle noted earlier, the only way to combat deflationary debt destruction is to counterbalance the deflation by jamming an equal amount of money into the hands of the average Joe.

    Well, if it has to be borrowed (which is does, since lots of money previously in play has been destroyed), Joe doesn’t want the money…and the banks that have the money don’t want to lend it to Joe, anyway.

    Which leads me to the final thought to which most of my musings take me:

    We are so fcuked.

  30. Steve says:

    Today’s actions show that TPTB may be figuring it out and are now trying to smokescreen the evidence by taking theatrically (and dramatically inappropriate) over-the-top action.

    Clot (24),

    Completely agree – it’s like Feds are in dire need of a specialized screwdriver, but one just doesn’t exist…

    So instead, they pull out a hammer, then a mallet, then a sledgehammer, trying impress everyone with their increasing heft. Unfortunately, as we know, this will be a short-lived game.

    I’m seriously considering doubling down, at these levels, on principle alone. However, my main fear isn’t being wrong, it’s execution risk if these chicken sh*t government braniacs start changing the rules again. The govt can call in all their C or AIG shares they want, but the destination will be the same.

    I love how all these commentators jumping on the rally bandwagon.

    I’ll take the other side all day long.

  31. Shore Guy says:

    From th3 Reuters article, above. One more reason to never hold a mortgage for a buyer:

    ” It can take a year or longer for a bank to seize a home once the owner ceases payments. While a foreclosure hurts credit, owners do not have to make mortgage payments as the process unfolds and can use that saved money to start over”

  32. Steve says:

    How funny Kettle. Just saw your tool post….. lol

  33. Clotpoll says:

    Steve (33)-

    I actually want the brainiacs to change the game/rig the game again.

    Last time around, that worked out great for my portfolio.

    I think there’s also an excellent chance that TPTB did not learn the first time around that messing with short sellers ends up making things worse.

    I’m dying to be locked into a short position when the whole world feels they have no choice but to sell.

  34. Clotpoll says:

    Shore (34)-

    A year? In these parts, a one-year foreclosure is fast.

  35. Shore Guy says:

    If one listens to Geithner and the others “handling” this mess, it is clear they do not want to be accused by history of not doing enough. They look back to Hoover’s response and say, too little too late, and we could not recover from inaction. I am persuaded they would rather make many very bad decisions than err on the other side.

  36. Steve says:

    Clot,

    You have a point.

    See ya in the gulag!

  37. 3b says:

    #20 kettle: That is how it appears to me. I think it’s telling that they removed their economy will recover this year wording from their statment.

  38. Shore Guy says:

    ” In these parts, a one-year foreclosure is fast”

    Egads! Well, if things get bad enough, the banks may end up hiring folks to clean-out properties to prevent damage (to the properties, that is) and loss of value. “The former owner? I dunno. Just disappeared one night.”

  39. PGC says:

    How can you double down? At the moment there is nowhere to run. While some may say that shiny and commodities are the only safe haven, they will have their own issues with the gvmt looking you to pitch them into the pot.

    That still leaves 401 and retirement accounts. Moving to cash and bonds may hold off the plunge until devaluation, but then the cash will just evaporate. Maybe the only way out is to wait for the crash and then move fully into DOW and S&P500 funds and hope that the underlying companies make it through to the otherside.

  40. 3b says:

    #33 steve: Speaking of commentators, Kudlow is not happpy tonight, very upset at today’s Fed actions.

  41. Clotpoll says:

    May end up? My friend, those days are here. In many blighted areas, the companies have sprung up because courts are forcing banks to maintain properties on which they are trying to avoid responsibility, by refusing to foreclose or refusing to maintain after they’ve foreclosed.

    “…if things get bad enough, the banks may end up hiring folks to clean-out properties to prevent damage (to the properties, that is) and loss of value.”

  42. Dink says:

    Gator, I’m seeing a sale price of $617,000 on 6/11/07 for 191 Midland.

    The current listing does not appear to be a short sale.

  43. Clotpoll says:

    3b (43)-

    Is he freebasing on-air?

  44. NJGator says:

    Thanks, Dink.

  45. Steve says:

    Clot,

    Request a bit of advice if you would be so kind. My gf had a family member pass away locally, expecting they’re going to be putting the house on the mkt.

    The Realtor “appraised” at what sounds like close to peak pricing. My take was it was to get the listing locked in, then they’ll deal with reality once the offers come in.

    However, those involved now have it in their head they should be expecting xx and that “they won’t be giving it away.” Oh boy.

    Of course, the comps they were shown were houses in better shape, sold something like 9 months ago.

    Anyway, my advice was: get close-in comps, then price 10% below those and pray you can unload it fast.

    Also, they were told it doesn’t matter if the house is emptied of furniture- won’t this just make it easier to pick them off? Or will it not matter in this mkt?

    Would appreciate your take on the above… thx!

  46. Steve says:

    PGC,

    Sorry- meant those pesky 3x antichrist securities….betting a bit on Armageddon is the only way I sleep at night…

    what a world.

  47. Hobokenite says:

    “Do you mean that they knew in March `08 that they were about to go down and were trying to grab some cash?
    – or –
    That these contacts pre-date the massive deterioration in the valuations of the assets in question?
    – or –
    am I missing something?”

    No, I mean:

    Was it normal for their contracts to be renewed in March?

    Was a contract guaranteeing the same bonus as the previous year normal?

    Who approved the contracts, and do they still work at AIG?

    Do they (contract approvers) have any unexplained large cash infusions into their bank account?

    Who were they talking on the phone to at the time?

    What else happened in March of ’08?

  48. PGC says:

    #49 Steve,

    The big question is how do you ring the bell, cash the chips and get the cash out of the casino?

  49. Clotpoll says:

    Steve (48)-

    You are exactly right on all your assumptions.

    Too bad none of that will matter if they don’t listen to you.

    Show them the Otteau article above as a warning about what can happen if they are wrong. In fact, I think 1% monthly depreciation is a little light in many areas.

    In addition, Otteau has calculated that every 10K in overpricing ends up costing the seller 3K in actual sales price.

  50. Stu says:

    The signal that the FOMC sent today is clear as day. The shite is getting worse, not getting better.

    I continue to ask myself, what is going to turn this ship around?

    Borrowing money from the next few generations or printing money is nothing more than slight of hand tricks.

  51. Shore Guy says:

    Steve,

    I guy I know was in the same boat as you. The killer for him was that the house was in California. He kept pushing to price for a quick sale and the others would not sell. Well, the bottom dropped and they could not sell for even something like 30% less than he suggested initially (a price at which it would have sold quickly back when they first acquired the home). The relatives continued tp hold on for top dollar. This went on for over a year. It turns out they recently found a buyer at a very low price. They had visions of squeezing every last dollar out of the place and, in the end, got squeezed themselves.

  52. Steve says:

    Thanks Clot. I’ve learned from the best of course! :) It’s so dam- frustrating, but you’re exactly right; they don’t want to hear it. Interesting (and scary) stats.

    I tried to explain “chasing the market down” and just got highly annoyed looks. Now, I even bring it up, I’m the bad guy. Normally, could give a sh-t less, but when it’s family it sucks. And of course I’ve never been good at biting my tongue-

    Even now, after all this, educated people are still getting led down the same path of destruction. Just unreal.

  53. #50 – O.k. I can see where you’re going. You know those questions won’t be asked, right? They should be but won’t.

  54. Shore Guy says:

    Stu,

    It is an unsetteling time. I consider moving some cash to RE (either homes or land) but the abysmal financial situations of the states and many local governments gives me pause. Who knows what they will do to taxes, ans even special assessments on second/third homes.

    I am not so sure that half of the current companies on the NYSE are going to be around in 10 years and have already lots too many hundreds of thousands in the last year that I am not persuaded that they are a smart move.

    Metals have pluses, but, if TSHTF, I would not be surprised if the USG HAD to take it all, just to enable trade in necessary goods, like oil.

    We have a six-figure cash position and this has always made me feel secure. But, the policies being advanced right now leave me feeling that the value of the cash may evaporate.

    If they push the “reset” switch, all my and Mrs. Shore’s proper behavior gets devalued and makes us monumental chumps.

    It is hard to know what to do.

  55. Steve says:

    The big question is how do you ring the bell, cash the chips and get the cash out of the casino?

    PGC,

    It’s generally been a matter of when, not how. Having said that, no one has a crystal ball, everyone has their own risk tolerance and goals; mine is primarily as a hedge against my industry.

    Basically, my worldview for some time, plenty of institutions are insolvent, and the US financial system will ultimately have to be nationalized. Horrendous, but I don’t believe we’ll have a choice. Hence, the common equity will be wiped out across many of these firms.

  56. Frank says:

    Don’t spend that bonus just yet, you may have to pay it to the IRS. Heeeeeeee Heeeeeeeeee

    House Sets Vote on 90% Tax on Some Executive Bonuses

    “The 90 percent tax would apply to people with overall income exceeding $250,000, including bonuses. The tax would apply to bonus payments made after Dec. 31, 2008, and it would cease when the U.S. government’s investment in the company fell below $5 billion. The tax wouldn’t apply to any bonus returned to the company.”

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aDp10KHqqRgo&refer=home

  57. Shore Guy says:

    I think I will start with a glass of wine.

  58. leftwing says:

    tosh

    Employees in areas like these at AIG often get contracts mostly when they move to a new firm, threaten to move to another firm with a bonafide offer in hand (which they may have had back in 3/08), when a large group of colleagues leave giving those who stay leverage, when they get undercompensated in the year that just ended, or when they (and the firm) suspect they may be at the edge of a serious market downturn.

    Any number of the above may have been in play. Doubt it’s any more than that, and I would be pretty certain there aren’t any ‘special payments’ to others’ accounts or other conspiracy theories. Pretty standard stuff in the IB world, looking out for #1 best as one can.

  59. Frank says:

    #20,
    “does the FOMC’s actions today suggest that the market”
    Yes, yes and yes, prices are dropping like a rock.

    Clot, I am with you. We are heading for a deep recession or a depression.

  60. Hobokenite says:

    “O.k. I can see where you’re going. You know those questions won’t be asked, right? They should be but won’t.”

    Of course not.

  61. Clotpoll says:

    Mish on a roll today. Just a taste:

    “Please note that Bernanke has already failed. “It” (deflation) has arrived. And deflation has arrived in spite of the fact that Bernanke has slashed rates to 0%, instituted numerous lending facilities that have all failed, squandered $trillions in taxpayer money, and has already implemented phase II (or do I mean phases 2 through 20) of his plan, that being the “offer fixed-term loans to banks at low or zero interest, with a wide range of private assets as collateral.”

    http://tinyurl.com/d5tntn

  62. Steve says:

    Shore (54),

    Depressing for sure.

    Some time ago, I saw a clip of a HF manager in Europe talking about his very accurate but lone-ranger type negative calls…and how isolating it could become.

    “I feel like that kid in the 6th Sense, you know, I See Dead People. That’s me, and my poor wife… I’m miserable to be around sometimes”

    I think many here can relate on that score.

  63. Hobokenite says:

    “Any number of the above may have been in play. Doubt it’s any more than that, and I would be pretty certain there aren’t any ’special payments’ to others’ accounts or other conspiracy theories. Pretty standard stuff in the IB world, looking out for #1 best as one can.”

    Yes, but what else happened in March of ’08?

  64. Hobokenite says:
  65. Clotpoll says:

    Steve (55)-

    It’s just like S0dom & G0m0rrah. Just flee the wreckage and don’t look back.

    If you do, you’ll end up like Lot’s wife: a pillar of salt and ash.

  66. Clotpoll says:

    Frank (59)-

    The Constitution tends to take a dim view on writs of attainder. Which this bill is (or will be proven to be, after it’s married to the preening and bloodthirsty comments made by idiots like Schumer).

    It’s amazing to me that Congress is full of lawyers who don’t even bother to think for a moment about stuff like this before diving in.

    However, I think writs of attainder are held in very high esteem in places like Russia.

  67. Steve says:

    So I’m talking to manager the other day, in from London, we’re talking RE and she mentioned her lease had come up. She got her rent cut by 25% right off the bat, and they didn’t even flinch !

    Also, hearing similar anecdotes all over NYC. Used to be just Financial District, now it’s everywhere. And 30% off, with landlord now paying broker fee, is becoming commonplace. That, plus 2-3months free and in some cases no security deposit up front, either.

    Cipriani Club downtown, fancy building, had furnished 1 bdrms going for (rolling eyes) $8500 9 months ago. Same exact places, now at $3k. Let’s see what another year brings.

    Also, in a bizarre twist, Manhattan apts are being vacated so quickly by Wall St folks, apparently you can get a better deal, better apt in the city than the boroughs right now. LIC or Brooklyn pricier than NYC!

    Any by June, lots of severance will be running out…. so thing may accelerate further.

    I can’t tell you how many calls I’m getting from top-shelf talent, colleagues and friends, out of work. It’s overwhelming…

  68. #61 – Thanks leftwing. A lot of the employee compensation deals for IBers is fairly obtuse to me, even though I’ve worked in IBs.

    #67 – Yes, but what else happened in March of ‘08?

    You can only be referring to BSC.

  69. Gman says:

    Otteau sucks!

  70. Hobokenite says:

    And when were all these CDS’s written?

  71. leftwing says:

    Only relevance I can see of March ’08 (unless hobokenite is holding the answer close to his vest) is most bonus checks clear Feb/early March and people are generally reticent to start the ‘guarantee me or I’ll leave to XYZ firm who has already offered me big dollars’ rant until the current year cash is in the account.

  72. Revelations says:

    Any educated opinions on the affects of the govt’s mtg refinancing efforts on these charts from awhile back?

    See Figure 1.7
    http://seekingalpha.com/article/70975-closer-look-at-the-arms-reset-problem

    Or

    http://www.rapidtrends.com/blog/2009/02/05/adjustible-rate-mortgage-aka-arm-resets-2007-to-2012-chart/

    The Seeking Alpha author thought that the first “lump” (subprime) would be mitigated by gov’t effots (did it work??), but that the Option ARMs and Alt As weren’t as of Apr ’08… Is the massive gov’t backed refinance push going to mitigate this 2010/2011 bump on the chart?

    The headlines seem to indicate alot of refinancings.. Is this problem being averted?

  73. Hobokenite says:

    No, Tosh was correct. BSC.

  74. borat obama says:

    Grim for Presidentttt

  75. leftwing says:

    And when were all these CDS’s written?

    **********************************

    With $1.6T of remaining notional exposure, my guess is every day, all day.

  76. Hobokenite says:

    It probably is nothing, but with all the wide scale looting going on, I’d at least like to see the questions asked and answered.

  77. leftwing says:

    No, Tosh was correct. BSC.

    ****************************

    Makes sense. Employees at AIG knew then the ship was going down so they ran like hell to the lifeboats, ladies and children be damned. Not particularly noble, but not out of character for the IB crowd when it comes to comp.

  78. borat obama says:

    Sure, people can take profits. We are overbought now. The profit picture is going to be terrible for a lot of companies, from soft goods like General Mills to hard goods like Emerson But the firmament has changed. The consumer has just been given a huge shot in the arm, a chance to get a 4% mortgage or a 4% refinancing that could change the spring selling season and make it worthwhile to spruce up your house again.
    Instead of thinking, “How can I sell my home in this environment?” people will be saying, “You know what, I will spruce it up, and then the buyers will come.”
    I wanted the government to get into the mortgage business temporarily and offer 4% mortgages for everyone, not just a program for those who some insist on calling deadbeats and who I say are just overstretched homeowners.

    It didn’t happen.

    But now the banks can do it. They can take rates down huge because of what the Fed is doing, and they can make so much money on these loans, they are going to be dreaming about doing it.

  79. borat obama says:

    So, you sell the market, you take profits in the short squeezes, whatever, but you must recognize that all the news about housing and mortgages going forward will be positive, and while much of the news is in the stocks, they have just become awful shorts, soon to be made worse by the reinstitution of the uptick rule.

  80. Revelations says:

    Also,

    Bid on a house in ShoreGuy’s turf in South Monmouth… Asking was $550K, we bid $470K. Did some analysis and decided it was worth ~$480. They dug in at $500, and we stopped at $490. House in great shape, not distressed, they paid $500 in mid ’05. We liked it, but were concerned about the future of housing in NJ (taxes & economy at local and national level)..

    In light of Otteau’s ’09 prediciton, good choice to walk? Or is a ’05 price for a house in great condition worth it? Seems like other good houses are still way overpriced, and “better” price homes are cr@p.

  81. Hobokenite says:

    “Makes sense. Employees at AIG knew then the ship was going down so they ran like hell to the lifeboats, ladies and children be damned. Not particularly noble, but not out of character for the IB crowd when it comes to comp.”

    Wasn’t it shortly after BSC that all the banks suddenly started saying they were “hedged”?

  82. grim says:

    From the Star Ledger:

    Drug Fair files for bankruptcy

    The 55-year-old Drug Fair retail chain filed for Chapter 11 bankruptcy today, shortly after announcing it would sell a majority of its stores to the Walgreens Co.

    The nation’s banking crisis, which has tightened credit, coupled with the effects of a severe recession have pushed a number of struggling retailers into bankruptcy, including Circuit City and Fortunoff, the venerable department store chain.

    Yet, even before the nation’s economic troubles set in, the private equity group that owned Drug Fair — Sun Capital Partners — had taken New Jersey-based retailer Rag Shops and California department store chain Mervyn’s into bankruptcy.

    In a letter to employees who were let go on Tuesday, Drug Fair’s troubles were blamed squarely on the credit crunch and the worsening economy.

  83. #84 – I used to work for Drug Fair as a kid in the far distant 80’s. Just sayin’
    I believe Rite Aid is also in financial straits.

  84. Steve says:

    Borat,

    Maybe in Kazakhstan things are looking up, but I don’t see any true positive change in fundamentals here.

    The shell game continues. Check out how many 20%+ bear market rallies occurred during the Depression on way to the multi-year 89.2% drop, with 25 years to get back to break even. Not saying it will take that long to play out, but the severity could be comparable.

    Hope springs eternal. However, without radical changes, tough decisions, and years for the leverage to finally come out, we won’t be seeing the other side.

    Savings will have to increase, consumption diminish, and capacity eliminated. And with the printing presses roaring along, we’ll emerge to hit a brick wall of hyperinflation.

  85. leftwing says:

    One other thought that just sprang to mind while talking about AIG bankers’ comp and contracts….

    Seem to recall the employees were out of NY and London (expats). Any expat comp contracts I’ve dealt with have ironclad tax ‘make whole’ arrangements for the benefit of the banker, i.e. the firm has to ‘gross up’ the employee’s comp to a number so that the employee gets made whole on a net, after tax basis.

    I’m sure all the lawyers in Congress didn’t think of this one either – put an excise tax on the employees to get the marginal rate up to 90% and AIG (taxpayers) will simply have to gross up a $3m paycheck to $12m or so to keep the employee whole on an after tax basis.

  86. leftwing says:

    Wasn’t it shortly after BSC that all the banks suddenly started saying they were “hedged”?

    ************************************

    If the banks weren’t it certainly seems some employees were smart enough to be…. :)

  87. Sastry says:

    Grim/Clot/others… A question on another REO property…

    While I was searching for the bank’s name for 10 Red Bud, I saw your list of links that Grim sent. Went through a few, couldn’t find 10 Red Bud.

    However, to my surprise, I saw 21 Wingate Way, 08812, in GMAC’s list. This is in the same development, same path, as Red Bud Lane, and is listed at 499k, and isn’t listed in MLS (at least the list I saw on Sunday).

    Is it possible that the wingate way house isn’t on the market anymore? Did they forget to update their database?

    The property wasn’t listed in sales part of the MLS list I got too.

    S

  88. Clotpoll says:

    21 Wingate not listed. Doesn’t appear to have ever been listed in the last 2 years.

    Maybe it’s about to be listed.

  89. Sastry says:

    Clot #69

    “The Constitution tends to take a dim view on writs of attainder. Which this bill is (or will be proven to be, after it’s married to the preening and bloodthirsty comments made by idiots like Schumer).”

    Putting on the tinfoil hat… Is it a staged rant to let the guys out on a technicality?

    S

  90. yikes says:

    Hey Now says:
    March 17, 2009 at 9:15 pm

    What do you all think of Hillsborough, NJ? any feedback greatly appreciated…

    less of a community feel compared to other towns that are equally expensive says my wife, who sort of grew up there. we go back there once every 4-5 months.

    transient/commuter town

  91. Clotpoll says:

    Considering that virtually the entire Congress is bankrolled by rackets like AIG, I’d say yes.

    But what do I know?

  92. Revelations says:

    Grim,

    My first comment @75 is in mod. Just noticed now (chores around the apt.)

    Thx

  93. yikes says:

    Unfortunately, the rest of the site has degenerated into an AOL Chatroom circa 1998. Lately, I give it a quick scan at the end of the evening but it’s pretty tedious to wade through the droning of the 8-10 “Dead Horse Beaters”… (Do I get a Cindy Smackdown now?)

    disagree, big-time. i’ve been a reader and commenter for about 3 years now … i’d take pearls of wisdom from here and then parrot them to friend and family.

    today, they’re all telling me how “right I was.” not just talking about real estate, but everything.

    And that’s not me being right – it’s the usual suspects here (Clot, BC Bob, etc).

    i’m a day behind on the comments, but i always catch up because you never know when you’re going to miss something great … like a checklist of things to get for the compound.

    and folks, dont laugh at the compound stuff.

  94. LordJohnWarfen says:

    obokenite siad

    “Makes sense. Employees at AIG knew then the ship was going down so they ran like hell to the lifeboats, ladies and children be damned. Not particularly noble, but not out of character for the IB crowd when it comes to comp.”

    Cheap shot.

    AIG has 190,000 employees, many your neighbors earning less than $80K, the vast majority are not IB crowd.

    You diminish yourself and show a level of ignorance unbecoming of a Hobokanite with such a comment.

    AIG is largely an insurance company; one unit ran a muck and tarnished the entire brand and hurt countless peoples future, within AIG and outside. Keep some perspective.

  95. safeashouses says:

    I used to work for Drug Fair in the 90’s.

    I remember at a company meeting the HR manager announced how we’ve had employees, not Pharmacists or managers but employees working for us for 10, 15, even 20 years, and how something is keeping them here, what could it be?

    I shouted out “stupidity”.
    I was quitting the next week so I was free to speak the truth.

  96. Revelations says:

    I’ll try again… May be the “@ss” in m@ssive. ;)

    Your comment is awaiting moderation.

    March 18, 2009 at 9:40 pm
    Any educated opinions on the affects of the govt’s mtg refinancing efforts on these charts from awhile back?

    See Figure 1.7
    http://seekingalpha.com/article/70975-closer-look-at-the-arms-reset-problem

    Or

    http://www.rapidtrends.com/blog/2009/02/05/adjustible-rate-mortgage-aka-arm-resets-2007-to-2012-chart/

    The Seeking Alpha author thought that the first “lump” (subprime) would be mitigated by gov’t efforts (did it work??), but that the Option ARMs and Alt As weren’t as of Apr ‘08… Is the m@ssive gov’t backed refinance push going to mitigate this 2010/2011 bump on the chart?

    The headlines seem to indicate alot of refinancings.. Is this problem being averted?

  97. Victorian says:

    One hole in the hyperinflation theory is wage inflation. Inflation is too much money chasing too few goods. How will the govt get the money into the hands of the public to make them chase goods?

    The typical household balance sheet is a disaster and was leveraged to the hilt with credit and MEW. It will take a lot of time to recover. I think the Fed is pushing on a string.

    It is trying to create an “expecation” of inflation so that people will start spending. $300B is nowhere enough to trigger inflation. Too much debt in the system, unless this has to be cleared by default. Bernanke is following his 2002 speech to the letter, not sure that his solutions will work.

  98. Stash says:

    One thing I find pretty funny about the 90% taxes on bonuses, going into effect on payouts after Dec. 31…I believe Goldman paid out their bonuses in Dec. Yet once again, the GS boys are taken care of.

  99. LordJohnWarfen says:

    On a real estate note: just got a commitment for a 30 year refinance at 4.785 from Wells.

    Seems too good to pass up, cheap money.

    Anyone else seeing attractive rates?

  100. Stu says:

    Shore Guy:

    I hear ya and might be in a similar financial position as you are. I think diversification is still the name of the game.

    Or you can always do what I do which is to envision a very simple future devoid of wealth. Most of us are in this together. Just need enough money to escape to my lean-to in central america equipped with a straw roof and a hammock. I’ll fish and garden for sustenance. Actually, this scenario is starting to sound absolutely dreamy to me.

  101. Clotpoll says:

    LJW (97)-

    Unfortunately, the corporate entity (also a “person” of sorts) is an unmitigated stinkbomb.

    All the individuals within the company bear the taint, fairly or unfairly.

  102. Revelations says:

    Grim,

    Tried again with a post about the gov’t mtg refinancing push, and the effects on the Opt ARM reset explosion everyone was anticipating. Took the ‘@ss’ out of massive, but didn’t help.

    Am I in trouble?

  103. LordJohnWarfen says:

    Clot, wow, how judgmental.

    Your kid messes up and we tar and feather you the misses and all the little clots?

  104. Sastry says:

    Clot, do you see anything on 21 Wingate Way, 08812?

    S

  105. Steve says:

    LordJ,

    This is most certainly true.

    However, the fact is, the system is rotten to the core, and AIG – along with many of the big institutions – bought off a complicit Congress and ignorant regulators, all to permit unbridled pilaging of the US and global economy. Helped out of course by plenty of supporting actors.

    Hundreds of thousands of employees played no part in this, and are honest decent people.

    Yet I for one am angry and ashamed at what the rampant Wall St. greed has done to this country, and the unbelievable mentality – shared by more than just the senior execs of this business – that bonuses of any amount are “owed” to the rank and file of bailout recipients. They are not.

    Wall St has no shame, and they’ve proved it time and time again over the past year. People have a right to be outraged when firms that should be liquidated are maintained with their tax dollars.

  106. Sastry says:

    Lord #105…

    In reality, what happens is Clot messes up, and all the little Clots get tarred and feathered, while Clot gets a golden parachute.

    The small fish lose the jobs, and get yelled at by managers that are frustrated that things are getting hotter. The big fish can “inform” (threaten) the management and the country that there will be dire consequences if they aren’t paid their bonuses.

    S

  107. Hobokenite says:

    “Cheap shot.

    AIG has 190,000 employees, many your neighbors earning less than $80K, the vast majority are not IB crowd.

    You diminish yourself and show a level of ignorance unbecoming of a Hobokanite with such a comment.

    AIG is largely an insurance company; one unit ran a muck and tarnished the entire brand and hurt countless peoples future, within AIG and outside. Keep some perspective.”

    I’m not the one who said that. You need to be yelling @ leftwing.

  108. LordJohnWarfen says:

    Steve,

    I agree 100%, the system is so corrupt to the core it is no longer tolerable.

    I am noting that the vast majority of AIG folks are little fish who had all their $ n AIG stock and have lost everything. If anyone wants perp walks just make sure the admins and little guys at AIG get to line the sidewalk

  109. Revelations says:

    Clot,

    Do you do Bucks County RE? If not, anyone else in PA?

    Was looking at property records of a house we are interested in and it had an entry “STAMP” with an amount exactly 1% of the sale price. Did some digging and found references to a RE transfer tax… for both local AND state that totals 2% of purchase price (1% ea)!! Is that true? NJ doesn’t have that, does it?
    Wifey and I are first time home buyers.

  110. Sastry says:

    Steve #107…

    “Wall St has no shame, and they’ve proved it time and time again over the past year.”

    We will all forget it and there will be News Week talking about 2B salary+bonus for some hedge fund managers. Success is often sexy, even if it is obtained through repulsive means.

    Actually, in my opinion, the biggest tragedy of 2000 to 2010 is not the financial disaster or the dot com bust. It is the war of lies in Iraq that killed over 4k soldiers in the US, and close to 600k people in Iraq. Not that Saddam was a saint, but the “cure” became much worse than the disease.

    S

  111. LordJohnWarfen says:

    Hobokenite, sorry if I directed my comment incorrectly.

  112. Steve says:

    Vic,

    Look at in reverse; if your dollar has been devalued by 50%, all those plasmas and Ipods suddenly just got a lot more expensive.

  113. Clotpoll says:

    LJW (105)-

    Not me. I have nothing but empathy for AIG’s rank-and-file. As I do for all these rotten companies’ foot soldiers.

    However, the world writ large is a harsh judge that does not make fine distinctions.

  114. Clotpoll says:

    sastry (106)-

    Nothing.

  115. Clotpoll says:

    Rev (111)-

    Sorry, not licensed in PA. It takes all my time to destroy the system from the inside in NJ!

  116. LordJohnWarfen says:

    Hobokenite,

    Its is functionally obsolete building, was a tribute / testament to Greenberg.

    Would have made a fine hotel / condo in 2002.

  117. Revelations says:

    @119,

    :D

    -and as hard as you try, Trenton’s always one step ahead..

  118. zieba says:

    RE 118:

    This is crazy. AIG is selling its headquarters for roughly what the paid out in bonuses.

    Cannibalism!

  119. LordJohnWarfen says:

    However, if it houses one of the profitable subsidiaries to be spun off, might be a nice buy at the right cap rate. Unless the world is truly ending.

  120. Sastry says:

    Clot #116… Thanks. I was wondering what the deal was with that place. May be a software bug at GMAC’s site?

    S

  121. Sastry says:

    Regarding AIG buildings…

    Can someone take the property and make them residential condos? 100 bucks a sq ft means 200k/250k for a 2000 sq foot apartment, may be 100k per apartment for conversion?

    Am I totally off base? They can rent the lower parts to 25 cent peep show places like they used to :)

    S

  122. james says:

    If you arent buying armegeddon gear then you best start. This sh@t storm is one misplaced billy club away from getting hot.

    Financially heres what Im doing.

    1. Refinanced to 4.6% fixed. 250,000 will be my hedge agains inflation.
    2. 2 years cash reserves. Gradually moving some to tangible assets. Guns,ammo: defense
    Boat: food, 1 50 lb striper will keep my family fed for a long time.
    Medical gear:
    Gardening gear: have seeds in the window already.
    3. Liquified everything in my mutual fund 3/08. Moved it into RE.
    4. The major hole in my portfolio is fuel. I will work for gasoline. No place to store 2000 gallons. If I could I already would have.

    I guess I will have to barter seafood for fuel. Am I missing anything?

  123. Shore Guy says:

    Well, everyone, thank you for yet another uplifting day. Anyone know a good source for a bulk purchase of silver? Say 1,000 oz?

  124. Hobokenite says:

    “4. The major hole in my portfolio is fuel. I will work for gasoline. No place to store 2000 gallons. If I could I already would have.”

    Get a diesel. Convert it to run on vegetable oil.

  125. cobbler says:

    Making your own vegetable oil in NJ – you are in a sea of trouble, man. Sunflower is the only reasonably yielding oil crop here (soybeans are mostly grown for feed protein, and co-product oil content is pretty low), and the birds will get the seeds before you do. Besides, you’ll also need an oil press and a setup to convert oil to biodiesel (and a few drums of methanol). Better ride a horse… and collect manure for fertilizer.

  126. Sastry says:

    James #125…

    Just curious. Did you take any precautions for Y2K?

    S

  127. Clotpoll says:

    sastry (123)-

    I think it’s in their inventory and yet to be listed.

  128. Clotpoll says:

    Jmaes (125)-

    Grow a set of gills?

    Another Waterworld scenario. Hoo boy, it’s about to get hot up in here.

  129. bi says:

    59#, frank, also in the article, “We go far beyond AIG, Citibank, Freddie Mac, Fannie Mae and others,” said committee Chairman Charles Rangel.

    very soon, the congress is going to set nationalized pay scale.

  130. Shore Guy says:

    Bi,

    I am no fan of Frank, Rangel, etc., but, when one accepts money one also accepts outside control. One accepts a paycheck, the bosss gets to set hours, behavior and dress codes, etc. Mom and Dad front one the money for a car, they get a say in what kind of car. A company accepts bailout funds to keep it afloat thinks things will be different? If so, the leadership of those firms is too stupid to be allowed to continue running their (well, in the case of AIG where we own 80 percent of the place, OUR) company.

  131. reinvestor101 says:

    I’m so happy with what the Fed did, now maybe I can get a damn loan and take out some damn cash and continue building my wealth. Happy days are here again!!

    I need to upgrade my car too. I’ve been looking at that new LS 460. Unlike some of you cheapskates, I can’t drive a 2-3 year old car. That’s pure hell. I’ve got my eye on some real estate down in Florida and the Jersey shore also.

    Cheer up people, now all that pent up demand for housing can be financed!

  132. Clotpoll says:

    tard (134)-

    Your act is wearing a little thin.

  133. Chris says:

    I’m looking for a 4 bedroom in Montvale/River Vale/Old Tappan. Sellers are asking $800-$900K (taxes around $12K). What do you think is a fair price in this market and how would you rate these areas in terms of schools and middle class living. Please chime in. Thanks.

  134. Qwerty says:

    RE: “Even now, after all this, educated people are still getting led down the same path of destruction. Just unreal.”

    Denial is a powerful thing.

  135. borat obama says:

    last

  136. I agree with Clotpoll, I thought the same.

    Daniel

Comments are closed.