From MarketWatch:
Troubles emerge in alt-A loans as delinquencies ratchet up
The other shoe just dropped in the U.S. mortgage market.
In the last month, pressure has intensified around mortgage securities made up of so-called Alt-A loans, fueling concerns that a fresh round of losses are awaiting Wall Street firms and other lenders at a time when these companies are struggling to get back on their feet amid the ongoing credit crunch.
Although rising delinquencies have mostly been concentrated among subprime borrowers, recent data show more creditworthy borrowers are increasingly falling behind their payments, underscoring the point that the mortgage meltdown isn’t confined to only those with weak credit.
“You can’t be sure of the performance of these products when it isn’t known how they will perform during stressful times,” said Mark Adelson, a principal at Adelson & Jacob Consulting LLC, which consults on securitization and real-estate issues. “There is potential for a fresh wave of losses.”
Alt-A loans are made to borrowers with generally strong credit but are loans that lack adequate verification, for instance, of income or assets. The lax paperwork paved the way for aggressive lending to the less creditworthy and emboldened borrowers to exaggerate their financial prowess.
In 2006, $612 billion of Alt-A mortgages were underwritten, according to National Mortgage News, a trade publication, while in 2007, there were an estimated $400 billion.
…
Worst affected are bonds that are made up of the more aggressive type of Alt-A mortgages, such as interest-only loans that allow homeowners to postpone principal payments and loans issued in 2006 and part of 2007, when lending standards were loosened. Bonds backed by mortgages in this category are trading as low as 70 cents on the dollar, said two market participants, after selling at par, that is, 100 cents on the dollar, or even higher, about a year ago.
…
“The performance of Alt-A mortgages for the 2006-2007 vintages is getting much worse than people had earlier expected,” said Walt Schmidt, manager of structured products strategy at FTN Financial in Chicago.Delinquency rates for borrowers behind on their mortgage payments by 30 days has been climbing steadily higher since December. In February, the rate jumped to 3.89%, compared with zero as recently as November, according to remittance reports that track performance of home loans.
“Generally speaking, I do not believe Alt-A credit is any better than subprime,” said Alan Fournier, the managing member of Pennant Capital Management LLC in Chatham, N.J. “The performance of this market doesn’t surprise me, given what’s happening to home prices and credit availability today.”
From the WSJ Real Time Economics Blog:
Halfway There For Falling Home Prices?
Lower interest rates from the Federal Reserve may be helping some homeowners and buyers, but they’re not doing much to revive the depressed housing market. One key reason: Many potential home buyers are staying on the sidelines because they expect home prices and interest rates to decline even more.
That’s raising home inventories and pushing the time line for a housing turnaround further down the line. Home prices so far have declined only half as much as they ultimately will fall, said economists on a panel at the National Association for Business Economics’ policy conference today.
Some key measures, such as the supply of new homes, are understated — even at their current high levels — because of the way canceled contracts are recorded, said David Berson, chief economist at the PMI Group. “They’re still building new homes too quickly.” He sees prices declining 15% to 20% between the peak and the trough for home prices in the current cycle.
During previous economic downturns, a turnaround started in part because lower interest rates spurred a rebound in new home sales. “That just doesn’t seem to be in the cards at least in the very near term,” said Richard Peach, a senior vice president at the Federal Reserve Bank of New York.
…
Mr. Peach cites data a newer price index from Radar Logic that forecasts a 25% price decline between the peak and trough, with the market declines continuing until 2011 before a recovery begins. “The honest answer is no one really knows where home prices are going, although the near-term dynamics are certainly not favorable,” he said.
Mark Zandi, chief economist Economy.com, sees home prices dropping 20% between the peak and trough — which he expects to arrive in spring 2009 — with three out of four metro areas ultimately seeing declines.
From the Record:
Developer sells new Hoboken apartment building to raise cash
Tarragon Corp., a New York-based developer, has sold a new 217-unit apartment building in Hoboken to ING Clarion Partners, a real estate investment firm, for $116.2 million.
Along with other recent property sales, the deal helped Tarragon boost its liquidity and working capital, the company said.
The property, called 1000 Jefferson, is part of Tarragon’s ambitious redevelopment of an eight-block section of northwest Hoboken, called Upper Grand.
The building, the fifth built by Tarragon in that neighborhood, was originally planned as a condominium. But when the housing market slowed, Tarragon re-positioned it as a rental.
Tarragon said it plans to continue building in the Upper Grand.
“With this successful transaction, Tarragon looks forward to continuing its role in the redevelopment of Hoboken, where we and our partners control almost 20 acres of land proposed for development of rental and for-sale housing, a public swimming pool and community center, parks, a multiscreen movie theater and retail uses,” said William Rosato, Tarragon’s president.
Tarragon recently sold its interests in six properties in Florida and South Carolina for $156 million, as part of a continuing effort to raise cash.
Last summer, the company said it was in default on payments to lenders and vendors. Since then, the Tarragon has sold a number of properties and paid down debt, and several large lenders have reinstated their loans.
From Bloomberg:
Citigroup May Need Cash as Losses Mount, Dubai Says
Citigroup Inc., the biggest U.S. bank, may need additional capital from outside investors as losses stemming from the collapse of the U.S. subprime mortgage market increase, the head of Dubai International Capital said.
Citigroup received $7.5 billion in November from Dubai’s neighbor, Abu Dhabi, after record mortgage losses wiped out almost half the company’s market value and led to the departure of Chief Executive Officer Charles Prince. The New York-based company said in January it was getting another $14.5 billion from investors, including the governments of Singapore and Kuwait.
“In my view, it will take a lot more than that to rescue Citi and other financial institutions,” said Sameer al-Ansari, who helps run Dubai International, at a private-equity conference in Dubai today. Dubai International is among the investment funds controlled by Dubai ruler Sheikh Mohammed bin Rashid al-Maktoum.
From the Boston Globe:
Forecast: No housing recovery until 2009
A widening credit crunch and rising risks of a US recession will delay the Boston housing market’s recovery until mid-2009, according to a new forecast.
House prices in the Boston metropolitan area, which have fallen 7 percent since their 2005 peak, will decline another 8 percent before starting to recover in the middle of 2009, Moody’s Economy.com said yesterday.
The forecast has “gotten a little bit worse,” said Gus Faucher, director of macroeconomics at the Philadelphia economic consulting firm. “We expect prices to bottom out in 2009.”
Most economists now agree US and local housing prices will fall through 2008 and won’t begin to rise again until next year.
For example, Freddie Mac said yesterday that house prices would continued to decline through 2009. Freddie Mac said prices nationwide would drop another 7.9 percent this year, on average, and 3.3 percent in 2009. They fell 8.9 percent in 2007. Freddie Mac, a quasi-government agency, provides mortgage funding.
Moody’s Economy.com had previously forecast a turnaround for late 2008. But Faucher said mortgage lenders’ tighter credit standards are hitting the housing market hard this year, including in the Boston area.
…
Alicia Sasser, senior economist for the Federal Reserve Bank of Boston, also predicted that house prices in New England, including Massachusetts, would decline for a second year in a row in 2008.
it will be interesting to see the government bailout w/ alt-a no doc loans. I’m sure many falsified income. since many of us feel the government is helping the banks not the poor homeowner. it will be fun to watch how they justify banks lending billions without income verification.
From the AP:
Construction spending plunges in January by most in 14 years
Construction spending took its biggest nosedive in 14 years and manufacturing activity contracted, fresh trouble signs for a struggling economy.
The Commerce Department reported Monday that construction spending plunged by 1.7 percent in January. Builders slashed spending on residential projects, but the weakness spread beyond that ailing sector. There were cutbacks in spending on, among other things, hotels and motels, highways and various projects by state and local governments.
“I think we’re in a self-reinforcing downward cycle,” said Mark Zandi, chief economist at Moody’s Economy.com.
Another report showed fallout from housing and credit problems cutting deeper into manufacturing.
The Institute for Supply Management’s manufacturing index clocked in at 48.3 in February, the weakest reading in nearly five years. A reading above 50 indicates expansion; anything below that shows contraction. Still, the reading was a bit better than the 48.1 that economists were forecasting.
The latest showing on construction activity was worse than economists were expecting. They were forecasting a smaller decline of around 0.8 percent.
The 1.7 percent plunge in total construction spending came after a 1.3 percent decline in December. It was the largest drop since January 1994, when construction spending plummeted by 3.6 percent.
From the WSJ:
Building Slowdown Goes Commercial
By SCOTT PATTERSON and KRIS HUDSON
March 4, 2008; Page C1
Cracks are starting to show in commercial construction.
For the second month in a row, the Commerce Department reported a decline in spending on nonresidential construction — which includes everything from hospitals to office parks to shopping malls. The report yesterday showed construction spending fell 1.7% in January from December, the steepest drop in 14 years. While residential construction accounted for a big part of the decline, spending on nonresidential construction slid 0.8%.
Meanwhile, there may be an oversupply of shopping malls and office buildings after a period of intensive construction. It adds up to bad news for employment, the economy and investors.
While the boom in commercial construction wasn’t as dramatic as in home building, the impact of a slowdown on the economy could be significant. Nonresidential construction accounted for 3.6% of gross domestic product in the fourth quarter of 2007, up from 2.5% five years ago and the most since the second quarter of 1988, according to Moody’s Economy.com.
As home construction got caught in a downward spiral last year, nonresidential construction continued to expand at a healthy clip. Spending on nonresidential structures rose 16% in 2007, the biggest four-quarter increase since 1984, according to Morgan Stanley.
Signs of trouble cropped up at the end of the year. As credit markets tightened, office space sold in the fourth quarter dropped 42% from a year earlier, and sales of large retail properties declined 31%, says Real Capital Analytics, a New York real-estate research group.
Good Morning…
The dailyrecord (morris county paper) used to post “This weeks real estate transfers” every week. I can no longer find this information.
Does anyone know where I can find this information?
thanks.. enjoy…
#3 I think the same could be said for JPMorgan, Wachovia, MBIA, the other Mtg insurers, good old ML. It’s an alphabet soup. At least some of those US dollars will finally make their way home, only to be incinerated like an an under a magnifying lens.
Who could have known that no doc IOs issued when prices are at an all time high and rates are at 40 year lows would under perform and go kaboom?
Shocking.
#9 should be “an ant under a magnifying lens”
need coffee
ChiFi-
Post #3 may not be an analyst report, but you might want to share that info with your client who needs to understand the case against C.
# Clot,
I saw a bunch of houses in the 320 to 359k range in Bridgewater on gsmls. Are those in good areas? I could have sworn they were going for 380 to 420k last year.
From MarketWatch:
The other side of the coin
The Federal Reserve’s 2 1/4 point cut in the federal funds rate since the middle of September may be doing more harm than good — if it is doing any good at all.
First and foremost, lower interest rates hurt savers. And while many people aren’t putting much money away these days, most do have savings that they rely on to supplement their incomes.
This is especially true for seniors who must scrape by on Social Security and whatever they managed to save during their working years. Their funds tend to be in liquid instruments, such as bank savings accounts, certificates of deposit and short-dated Treasuries.
As you might imagine, since they are short-term in nature, rates on these instruments have plummeted along with the federal funds rate, thus cutting into these folks’ incomes.
At the same time, borrowing costs have not fallen all that much. Indeed, between the recent runup in long-term interest rates and the tightening of lending standards for both consumers and business, most are having a tougher time borrowing today than they did last summer — when all manner of rates were higher.
Furthermore, in order to achieve these humongous rate cuts in such a short period of time, the Fed has had to flood the economy with money.
…
Guess what all this money has accomplished. That’s right, Virginia, it has created a whole lot of inflation.
The consumer price index rose 4.3% during the 12 months ending in January — up from little more than 1% in late 2006. For its part, the 7.4% leap in the producer price index over the most recent 12 months was the most for any 12-month period since October 1981!
From the Daily Record:
Morristown condos approved
Pulte Homes will build 66 condos on the hill by Ann and Court streets, plus 16 affordable homes at different sites over the next five years.
The town planning board has appoved the arrangement, which includes a down-sized condo plan .
The project at Ann and Court streets calls for five one-bedroom units and 61 with two bedrooms. There is also a two-story underground parking garage that will include 122 spaces, and nine surface parking spots in the courtyard area.
…
Pulte intends to work with Morris Habitat for Humanity to fulfill the affordable housing goal.
“We are going to work with Habitat for Humanity to build 16 homes within the next five years,” said Jim Mullen, development applications manager for Pulte Homes.
bairen (13)-
They’re crap. Bradley Gardens and Finderne, mostly.
From CNBC:
Citigroup’s Job Cuts Could Total Over 30,000
Citigroup’s job cuts could reach 30,000 or more over the next year and a half because of increasing writedowns from subprime-related debt, CNBC has learned.
The layoffs would exceed the previously reported 24,000 job cuts that had been expected at the banking giant.
From CNBC:
Appraisers And Changing The System: What Took So Long?
This morning NY Attorney General Andrew Cuomo announced a deal with Fannie and Freddie and OFHEO to change the way the whole appraisal system works. No question, this is a good thing. Over-inflated appraisals fuelled unsustainable price appreciation during the housing boom, and those appraisals are, I believe, at least 80 percent to blame for the current predicament the credit market is in.
Lenders, brokers, bankers, etc. pressured appraisers to raise the value of homes so that deals would go through and mortgages would be made for ridiculous amounts. I recently interviewed a high-level appraiser who told me this was totally commonplace, that appraisals during the boom were about as real as the hairy three-eyed monster that lurks in my son’s closet, and very much more dangerous.
…
My question is: Why did it take the NY State Attorney General to do this? Why did Federal regulators allow these practices to go on commonplace for so long? I can’t imagine Fannie and Freddie wanted to spend all this money to do this, but clearly they had to fix the appraisal market themselves, since regulators wouldn’t. Good for them for agreeing to it and taking a stand, no matter how painful!
Interesting little piece here. This is from an ultra-bullish momentum/growth investor, Louis Navellier. I like to use him as a gauge of bullishness, as anyone more “up” than this guy has entered Kudlow territory.
And, Mr. Navellier is not happy:
Bernanke Is In Denial
Despite massive evidence that both recession and inflation – “stagflation” – are now present, Ben Bernanke tried to assure Congress last week that stagflation is not a problem. On Thursday, Bernanke said, “I don’t anticipate stagflation. I do not think we are anywhere near the situation that prevailed in the 1970s.” Well, we may not have the runaway double-digit inflation of the 1970s, but we have rising inflation combined with slow economic growth. In fact, things are likely to get worse before they get better, so I am amazed that Bernanke is in denial about stagflation. Let me give you the evidence that stagflation, namely rising inflation and slowing economic growth, is now with us.
(1) One half of stagflation is rising inflation. On Tuesday, the Labor Department reported that the Producer Price Index (PPI) rose 1% in January (a 12% annual rate), with food prices up 1.7%, the biggest one-month increase since October, 2004. Energy prices were also on the rampage and rose 1.5% in January, with gasoline prices at the pump rising at even a faster pace of 2.9% (a 41% annual rate). If you live in the Northeast, you were likely not a happy camper, since home heating oil prices rose 8.5% in January. Excluding food and energy, the core PPI rose 0.4%, led by higher drug prices, which rose 1.5%. Overall, the PPI is up 7.4% in the past 12 months, the fastest rate since 1981!
(2) The other half of stagflation is slow economic growth. On Thursday, the Commerce Department reported the revised fourth quarter GDP, showing that economic growth decelerated to the slowest pace in five years, to only 0.6%. This GDP revision was disappointing since many economists were expecting an upward revision, due to robust U.S. exports, which rose 4.8% after accelerating 19.1% in the third quarter. But the export number was likely distorted by seasonal adjustments. In summary, if you exclude exports and government spending, many components of the economy are now in retreat. Another piece of evidence that the economy has slipped into a recession is that on Wednesday, the Commerce Department reported that demand for durable goods declined 5.3% in January, due largely to slow business spending. Orders for commercial planes decreased 30.5%, while military aircraft orders fell 32.6%. Hardly any orders rose – a clear indication of a rapid deceleration of the economy.
A possible ray of hope in the fourth-quarter GDP report is that inventories subtracted a whopping 1.5% from GDP growth, so if cautious businesses get around to rebuilding their inventories, then maybe GDP growth will eventually improve. But the bad news is that consumer and business spending is fizzling in 2008, which is why I expect negative GDP growth to be announced soon.
#16 Thanks Clot.
i think if we stay in NJ we’re going to focus on Warren and Green Brook North of 22.
If I go back to working in NYC will want to look into BC. Although good luck finding mtg/FI related work unless you’re dealing in foreclosures
#18 Grim, Ron Paul can only do so much. He must have felt like Chicken Little yelling the sky is falling for the last 5 to 10 years.
Greed, lazyness, ignorance, passing the buck to the next generation. Pretty much how our gov works.
“The performance of Alt-A mortgages for the 2006-2007 vintages is getting much worse than people had earlier expected,”
Another blackbox blow up. Same s*it as subprime, just packaged differently. Subprime, Alt A, Prime, Corp debt, cc, auto loans. It’s just a domino effect. There is nothing that BB can do to stop it.
It’s gonna be a long walk home.
Essex Says:
March 3rd, 2008 at 10:46 pm
ah the woes of community parking….yet another thing I hated about renting….especially in crowded areas…..something about coming home and hitting that electric garage door opener….and going under the house into a 2 car garage…..damn near worth the cost of ownership right there.
SX: I rent a SFH…..ya’ gotta think out of the box
grim (18)-
“My question is: Why did it take the NY State Attorney General to do this?”
Because the lending industry and RE lobby have bought off Congress.
Clotpoll Says:
March 4th, 2008 at 6:59 am
ChiFi- Post #3 may not be an analyst report, but you might want to share that info with your client who needs to understand the case against C.
clot: I already sent it about an hour ago.
Chi,
Just show your client this;
http://bigcharts.marketwatch.com/interchart/interchart.asp?symb=C
Let him know the object of the game is to buy an asset that moves from the left side of the chart, upward to the right, not the left side lower to the right.
Any different than trying to explain to some delusional homeowner that their house is actually worth 30% less?
He doesn’t need any confirming evidence, just a course in risk management.
NYC Foreclosures on the Rise
http://seekingalpha.com/article/67001-nyc-foreclosures-on-the-rise?source=feed
No, not NYC. Never.
Anybody into making wine?
http://realestate.yahoo.com/California/Napa/Homes_for_sale/result.html?p=Napa%2C%20CA&type=foreclosure
http://biz.yahoo.com/brn/080228/24596.html?.v=patrick.net&.pf=real-estate
“…Saber Rattling…”
FYI – response to story
chicagofinance Says:
March 4th, 2008 at 7:56 am
Clotpoll Says:
March 4th, 2008 at 6:59 am
ChiFi- Post #3 may not be an analyst report, but you might want to share that info with your client who needs to understand the case against C.
clot: I already sent it about an hour ago.
DOWNSIDE MOVERS – pre market trading
Things keep getting uglier for citigroup.
INTC: 19.80 to 19.25
C: 22.93 to 22.29
SPLS: 21.89 to 20.84
CLWR: 13.51 to 12.30
BBY: 42.35 to 42
Bergabe on deck; ready to speak on “vigorous response” needed from bankers to stem the tide of foreclosure.
Will suggest loan recasts with principal writedowns to keep owners in homes. Boy, that should fill mortgage investors with confidence.
Should be fun to watch the ticker as he opens his mouth and inserts foot (yet again).
Mark Zandi, chief economist Economy.com, sees home prices dropping 20% between the peak and trough — which he expects to arrive in spring 2009 — with three out of four metro areas ultimately seeing declines.
3 out of 4 metro areas…. guess which metro areas won’t see that much of a decline? I opened up a fresh batch of listings last night and they’re still at or near peak prices. Just saying.
re: 18 Grim I agree with Clotpoll.
The real answer lies inside the beltway. My best guess is the banking, real estate, builder and mortgage company lobbyists were able to convince Congress, the Bush Administration, and a host of other Federal Regulators as well as the Fed that the Fox guarding the Hen House is good thing.
Fact is the Appraisers have been complaining for years, and their complaints fell on deaf ears at all levels of the Federal government. Here is their petition which has been circulating since at least 2001 and distributed to all levels of Government.
http://appraiserspetition.com/
As far back as 2001 legislation was introduced in the House of Representatives that contained a provision meant to address this issue. Section 129A(g) of H.R. 3901, states: “No creditor may compensate, directly or indirectly, coerce, or intimidate an appraiser for the purpose of influencing the independent judgment of the appraiser with respect to the value of real estate that is to be covered by a conforming home loan or is being offered as security according to an application for a conforming home loan.”
http://www.appraisalinstitute.org/govtaffairs/downloads/Lndr_Prsr_01_01_Fnl.pdf
I believe that bill along with many other did not make it out of committee.
Also under Regulation Z of the truth in Lending act, the FED is the enforcement arm. Under the last FED chief Greenspan, there may have been discussions about further rules for Appraisers but it never made it into the regulations.
A search of the Fed meeting minutes and any FED Board amendments to Regulation Z might turn up something.
When your government is infected with ticks it might just be time to shoot the horse.
I hate to say it but voting for Obama come Novemeber might actually bring about the change needed inside the beltway, since I do not see McCain doing anything other than putting his feet up on the Oval Office Desk and smoking cigars while he is being “serviced” by the lobbyists.
Grim 35 is in moderation, it is a response to your question on 18
Nouriel Roubini’s Global EconoMonitor
Will Default Rates on Muni Bonds Sharply Rise During the Recession?
Most Likely Yes
Nouriel Roubini | Mar 04, 2008
In a recent analysis I argued that the historical pattern in the last 20 years of low default rates by state and local governments may be seriously tested in a severe recession like the one that the US will experience in 2008. Thus, muni bonds may not be as safe as investors have perceived them to be; and the related view that the monolines’ insurance of muni bonds is a safe and profitable cash cow may soon also be severely tested.
Indeed, there is now evidence that many state/local governments are under serious fiscal and debt strains and that default rates on muni bonds will start to surge.
Let me now elaborate in more detail on the above arguments…
I recently argued that the conventional wisdom that default risk for state and local governments will stay low may be disproven in a serious economic downturn like the one that the US is experiencing now. The way I put it:
“…is it true that muni bonds are that safe because once state or local governments are under financial stress tightening their belt – in the form of spending cuts and/or raising revenues – is almost always preferred to the option of defaulting on their debts?
The relative safety of muni bonds is based on the relatively low rates of default on their bonds in the last quarter of a century. But there are several reasons to worry that default rates by state and local governments may sharply increase during the coming US recession.
First of all, the previous two US recessions – in 1990-91 and 2001 – were relatively shallow – lasting only 8 months – and did not affect as severely the finances of municipalities. The current US recession is highly likely – for reasons we discussed in the past – to be much more severe than the previous two in terms of its length – at least four quarters and possibly six – and its depth. Thus, the experience of low default rates for local governments in the last two recessions may not be an appropriate guide for the current recession. Such default rates may sharply increase if the current recession is more severe than the previous two.
Second, state and local governments rely heavily on three sources of revenues: fees paid by real estate developers; property taxes; and sales taxes. All three sources of revenue are now under severe stress and will sharply fall further during a recession. The biggest housing bust in US history has already led to a fall in housing starts of over 45% and expectations that housing starts will have to fall another 20% to 30% before they bottom out. This fall in new construction activity is a significant drag on the revenues that state and local government get from real estate developers. And that drag will get even worse once – as it is happening now – we have a bust of commercial real estate on top of the bust of residential real estate.
Moreover, the sharp and continued fall in home prices will lead to a significant reduction in the revenues from property taxes that local governments get. In many cities the fall in home values has already led local governments to reduce property taxes as the value of homes has been now assessed downwards. In other localities homeowners are up in arms requesting reductions in their property taxes as the value of their homes is sharply falling. You can expect a significant fall in such property tax revenues as nationally home prices will fall by at least 20% – and possibly as high as 30% – relative to peak.
On top of these revenue losses one has to add the loss of revenues that an economic downturn will imply for revenues from sales taxes. In California alone – where the housing bubble and bust is particularly severe – such sales tax revenues have already fallen by over 10%. So, an economy-wide recession will lead to a sharp worsening of the fiscal conditions of state and local governments: revenues will sharply fall while the ability to cut spending during a recession may be limited by the need to provide counter-cyclical spending for households negatively affected by such a recession.
Third, an economy-wide recession will have much more severe effects on the fiscal conditions of state and local governments in regions where the housing boom and the home prices bubble were particularly large. For example, while the US economy may have entered a recession only in December of 2007 studies suggest that Florida has already been in a recession since the middle of 2007. This means that aggregate nation-wide measures of the size of the recession are less important than local conditions in assessing how severe the stress on state and local government finances will be. In regions and counties and cities where the housing bubble was the biggest the ongoing housing bust will also be the most severe. So a locality that had a housing boom for a few years but is now experiencing a massive housing bust, where home prices are now falling by 30 to 40% and where massive numbers of foreclosures are occurring will very likely experience significant financial stress and will be more likely to default on its muni bonds. Local fiscal conditions and stress – rather than national ones alone – will determine how many local governments will default on their bonds.
Fourth, many state and local governments will have very large fiscal financing needs in the next couple of years. These financing needs come from two sources: one is the need to rollover – or reissue – the existing outstanding muni bonds that are coming to maturity; the second is the need to issue – on net – new bonds if there is an increase in the fiscal deficit of such a locality. The credit conditions for state and local governments will not significantly improve if – as likely – the monoline problems, the TOB and ARS market problems persist and the credit rating of muni bonds is reduced in a recession; then the cost of financing the rollover of existing maturing debt and the cost of issuing of new debt will significantly increase making it more likely that some seriously distressed local governments will prefer to default on their bonds.
The four factors discussed above suggest that the conventional wisdom that state and local governments rarely default will be seriously tested during the current economic recession. And if the current recession will end up – as likely – being more than the previous two investors and markets will be shocked to discover that their presumption that default rates on muni bonds are always low will be proven to be wrong. But if the default rates on state and local government were – as argued here – likely to soar in a recession the consequences – in terms of losses for financial institutions and investors – would be massive. Certainly financial markets have not priced so far the risk of a significant increase in default rates on muni bonds. But then they had not priced either the risk of subprime mortgages’ defaults or the risk of a sharp increase in corporate defaults.
Thus, the risk of a historical regime break – with a sharp increase in default rates on muni bonds – should not be underestimated. If that were to happen the current delusion that the only problems of monoline insurers are in their insurance of structured finance products and that insuring muni bonds is a profitable cash cow could soon be dashed. Then the ensuing systemic effects of a rise in muni bond default rates would be an order of magnitude larger than those of an already large writedown of the toxic structured products currently insured by the monolines.
So, in conclusion, caveat emptor: muni bonds may be much more risky and subject to default than the current conventional wisdom makes them. A serious US recession may reveal what has not occurred for a quarter of a century: a sharp increase in default rates by state and local governments.”
There is now increasing evidence that my recent arguments on the rising risks of defaults by state and local government have significant merit. As reported by Bloomberg under the headline California City Moves Closer to Bankruptcy Filing (hat tip Calculated Risk):
Vallejo, a city of 135,000 outside of San Francisco, moved closer to bankruptcy after negotiations with its labor unions collapsed.
Bondholders will likely be asked to sacrifice some of their investment if the city seeks bankruptcy protection, an attorney for the municipality said last night. Vallejo faces ballooning labor costs and declining housing-related sales-tax revenue, leaving budget officials projecting that money will run out within weeks.
The city council is scheduled to consider a resolution tomorrow to file for Chapter 9 bankruptcy protection, after negotiations with labor unions to win salary concessions broke down Monday.
Vallejo is only the first of many cities and local governments in California and the West that are under serious fiscal strain and likely to default.
Indeed, as recently reported by the press, Moody’s and S&P have recently sharply downgraded Jefferson County in Alabama:
Jefferson County sewer-bond credit rating cut to junk, increasing odds of bankruptcy
Bankruptcy risk up as sewer-bond status dips
Saturday, March 01, 2008 RUSSELL HUBBARD and BARNETT WRIGHT
Jefferson County’s sewer-bond credit rating was cut to junk status Friday, increasing the odds of the largest bankruptcy filing ever by a governmental body.
Standard & Poor’s, which ranks the creditworthiness of borrowers, downgraded the sewer rating to junk level, citing uncertainty that the county can make debt payments to lenders such as pension plans and money managers who bought bonds. The sewer-bond rating was cut six levels to B, five levels below investment grade, from BBB.
The downgrade intensifies pressure on the county’s finances and makes it possible for creditors to demand payment on $341 million of investment contracts called swaps.
These are only two examples of the fiscal strains faced by state and local governments. As argued in a recent study falling property values alone may slash tax revenue for states and cities by more than $6.6 billion in 2008. And the fiscal deficits of state and local governments are now surging making it more expensive to issue the new debt necessary to finance the deficits on top of the old debts that need to be rolled over.
In this regard S&P has recently pointed out that government investment policies and liquidity are important inputs in the rating of such government as they affect their ability to repay debt in a timely manner. And local government investment pools are particularly affected by illiquidity now as there are 125 pools with estimated $200bn assets. Also, the $360bn Auction-Rate Securities (ARS) market is now also very illiquid, as are closed-end funds ($100bn).
Thus, the combination of falling fiscal revenues, high fiscal deficits, high debt ratios, large stocks of short term debts that need to be rolled over at now much higher interest rates (given the seizure in the ARS and TOB markets) is putting severe stress on local governments finances.
Likely ratings downgrades by the credit rating agencies will only exacerbate these problems as they will lead to higher spreads on new debt and/or existing debt that needs to be rolled over and increasing the likelihood of eventual default.
While many state and local government are now considering switching to longer term fixed rate debt given the seizure of the ARS market the interest rates on such longer term instruments is much higher (about double) than the one that prevalied on ARS bonds before the recent credit crunch in this market. And the massive supply of new longer term bonds replacing ARS bonds may lead to a bond supply “Tsunami” that could push further high the yield on such longer terms muni bonds. Either way borrowing cost for local government are sharply rising and making it more likely that the weakest of such governments will decide to default on their bonds rather than keep on servicing them.
No wonder that some commentators are starting to discuss whether Municipal Bonds are the New Junk.
Given the sharp likely increase in muni bond default rates during a serious recession the traditional conventional wisdom that the traditional monolines’ model of insuring such muni bonds was a safe and profitable business will be seriously tested. Recently it has been argued that this muni bond insurance represented the “good apples” of the monolines’ business while their insurance of toxic ABS led to “bad apples”. And if someone could somehow separate the good apples from the bad ones (split the monolines in two) the credit and rating problems of the monolines would be miracolously resolved. But what if muni bonds are not as safe most investors had assumed and what if a severe US recession leads to a “Tsunami” of muni bond defaults like we have not seen in the last twenty years? Then the “good” apples may turn out to be as rotten as the “bad” ones. Thus, caveat emptor!
Sounds like you opened a fresh batch of crap Gary. New listings at old prices will go stale and cost the realtor time and money. Those type of listings are about as valuable as gum on the bottom of your shoe.
3 out of 4 metro areas…. guess which metro areas won’t see that much of a decline? I opened up a fresh batch of listings last night and they’re still at or near peak prices. Just saying.
Looks like we are finally going to close on Thursday after much dickering around with a crazy seller. I’d like to thank the person on this board who gave me advice about working directly with the listing agent (I think it was Pretorious?).
Does anyone have any thoughts about renovating right now? We’d like to redo the kitchen. It’s not critical that we do (I can live with it), but we were thinking that maybe contractors are looking for business right now and it would make sense to do the renovations sooner rather than later.
Re: the first post here — the WSJ blog article — what lower interest rates? Rates have been rising steadily for the last month. And, of course, savings rates have been through the floor — what gives?
Troubles emerge in alt-A loans as delinquencies ratchet up
By Aparajita Saha-Bubna
Last update: 5:40 a.m. EST March 4, 2008
NEW YORK (MarketWatch) — The other shoe just dropped in the U.S. mortgage market.
In the last month, pressure has intensified around mortgage securities made up of so-called Alt-A loans, fueling concerns that a fresh round of losses are awaiting Wall Street firms and other lenders at a time when these companies are struggling to get back on their feet amid the ongoing credit crunch.
Although rising delinquencies have mostly been concentrated among subprime borrowers, recent data show more creditworthy borrowers are increasingly falling behind their payments, underscoring the point that the mortgage meltdown isn’t confined to only those with weak credit.
“You can’t be sure of the performance of these products when it isn’t known how they will perform during stressful times,” said Mark Adelson, a principal at Adelson & Jacob Consulting LLC, which consults on securitization and real-estate issues. “There is potential for a fresh wave of losses.”
Alt-A loans are made to borrowers with generally strong credit but are loans that lack adequate verification, for instance, of income or assets. The lax paperwork paved the way for aggressive lending to the less creditworthy and emboldened borrowers to exaggerate their financial prowess.
In 2006, $612 billion of Alt-A mortgages were underwritten, according to National Mortgage News, a trade publication, while in 2007, there were an estimated $400 billion.
http://www.marketwatch.com/news/story/troubles-emerge-alt-loans-delinquencies-ratchet/story.aspx?guid=%7B4363524A-D5E8-4119-925C-E850DE6DB551%7D
From MarketWatch:
Fremont gets default notices from buyers of $3.15 bln loans
“Will suggest loan recasts with principal writedowns to keep owners in homes. Boy, that should fill mortgage investors with confidence.”
Clot,
Forget about a turn around in 2-3 years. This will prolong the slump, probably out to the Ice Age.
Mortgage rates at 14%?
good news: if you own a mortgage, your principal portion has been reduced to zero.
enjoy the ride!
Bernanke: More Must Be Done to Stem Foreclosures
One of the suggestions Bernanke made was for mortgage and other financial companies to reduce the amount of the loan to provide relief to a struggling owner. “Principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding deliquency and foreclosure,” Bernanke said.
http://www.cnbc.com/id/23463525
John [39],
I’m just calling it as I see it. Just like I did 6, 12 and 18 months ago. In 6 more months, I’ll call it as I see it then.
“good news:”
bi,
Bad news. Your trading account is marked to the market. You are not afforded the same luxuries/accounting scams as the IB’s.
One of the suggestions Bernanke made was for mortgage and other financial companies to reduce the amount of the loan to provide relief to a struggling owner. “Principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure,” Bernanke said.
With low or negative equity in their home, a stressed borrower has less ability — because there is no home equity to tap — and less financial incentive to try to remain in the home, he said.
Bernanke acknowledged this idea might be a tough sell to lenders. Lenders, he said, are reluctant to write down principal. “They said that if they were to write down the principal and house prices were to fall further, they could feel pressured to write down principal again,” Bernanke said.
This guy should be put in jail for this proposal.
Still, Bernanke suggested such longer-term permanent solutions may work better than shorter-term and temporary ones, where the distressed homeowner could find himself in trouble again. “When the mortgage is `under water’ a reduction in principal may increase the expected payoff by reducing the risk of default and foreclosure,” he said
IMO, this is the only ‘real’ solution. Unfortunately, banks are so damn greedy, they’ll go bankrupt before they give in.
If you look at the amortization schedule of most loans, the bank makes the big dough at the start of the loan. Many also profited off the mortgage closing costs. Certainly, it would be smarter to keep people in the homes, making smaller payments than to boot them out and get creamed on carrying costs as no one is buying the foreclosures.
It’s similar to the mistakes that the NJ Devil’s make with their ticket prices. The average fan spends $20 on concessions/parking. Their are 5,000 empty seats at the average game. Why? Ticket prices are too high. I guarantee if they lowered their ticket prices by $15 and publicized it, they would sell out and make even more profit. But what do I know? People are just plain greedy.
I feel for ChiFi’s customer who thinks Citibank will go up since it went down. I think about 80% of non-professional investors actually do their stock picking based on the same simple theory.
Good morning everyone,
Can someone share with me the history of MLS 20800595 in Brick? Not sure if its a relist or not.
TIA
Jason
From the WSJ:
Some Borrowers Rescued
Over 1 Million Got
Help to Keep Homes;
Foreclosures Rising
By RUTH SIMON
March 4, 2008; Page A3
Mortgage companies have helped more than one million cash-strapped borrowers stay in their homes since the summer, new industry data show.
Even so, the number of homes subject to foreclosure is rising, and the percentage of borrowers who had good credit when they took out their loan and are now seeking help is growing.
In a report released yesterday, the Hope Now Alliance, the group coordinating the mortgage industry’s response to the nation’s mounting wave of foreclosures, said its members helped work out 1.04 million mortgage loans between July 1 and Jan. 31. The methods ranged from rescheduling borrowers’ payments to easing the terms of their loans.
Most of those workouts — 73% — involved repayment plans that allow borrowers to catch up on missed payments or have those missed payments applied to the balance of their loan. About 27% were loan modifications, in which the original terms of the loan contract were changed, usually by reducing the interest rate, forgiving a portion of the principal or extending the maturity of the loan.
[snip]
But the report also highlighted some troubling trends. Borrowers who have “prime” mortgages, those made to individuals with good credit, accounted for 43% of those who were able to arrange a loan workout in January, up from 37% in the fourth quarter.
The percentage of foreclosures that involved prime borrowers also increased — to 41% from 37%. And even with the industry’s efforts, more than 67,000 foreclosures occurred in January, up from an average of about 49,000 a month in the fourth quarter and 45,000 a month in the previous quarter.
[snip]
Critics say that while the industry is intensifying its efforts, it still isn’t helping most of the borrowers in trouble. “Seven out of 10 homeowners who are seriously delinquent get no attention at all” from their mortgage company, and thus aren’t benefiting from workout programs, said Mark Pearce, deputy banking commissioner in North Carolina, citing a recent study by state officials. Mortgage companies say they have a hard time reaching many borrowers who fall behind on their loan payments.
In January, about 4.15% of the nation’s mortgages were at least 30 days past due, according to Equifax and Moody’s Economy.com, up from 3.67% in December and 2.76% a year earlier.
Even though the percentage of troubled prime loans is growing, the industry’s most-aggressive loan workouts are going to subprime borrowers. Loan modifications made up nearly half of subprime-loan workouts in January, up from 35% in the fourth quarter and 19% in the third quarter.
But repayment plans are more common for prime borrowers. Among borrowers with good credit who went through a loan workout in January, just 21% got a loan modification, about the same as in the fourth quarter but slightly more than in the third quarter. The statistics include borrowers who benefited from the mortgage industry’s stepped-up efforts to deal with rising foreclosures, as well as those who would have received help anyway. The data didn’t provide any information on how many borrowers received an interest-rate reduction, a reduction in their loan balance or other specific solution.
http://online.wsj.com/article/SB120459175836609025.html?mod=hps_us_editors_picks
BAA2/BBB 255 64579FKQ5 NEW JERSEY HCF FIN AU REV Zero 07/01/31-17 6.750(M) 21.269 NJ
NJ Bond of the day, 6.75 tax free!!!!
“This guy should be put in jail for this proposal.”
confused,
Solitary confinement.
I don’t know how many people have seen this (or similar) or if it has been posted. I try to stay up to date with everything, but lately I’ve been too busy to keep up with every post…
Anyway… I just saw a map of houses in forclosure as of Q3 last year.
http://www.realtytrac.com/blog/photos/foreclosurepulse_photos/images/3397/original.aspx
TMA $3.97 -$0.35 -8.10%
What a train wreck, after yesterday it is still down over 8% in the first 20 minutes of trading.
bernanke is nuts! what else is he going to come up with….how about a stimulus package that pays off the mrtg on everyone’s home….call OPRAH, i think she has done something like this in the past!
this is getting out of control…
i say let all the homeowners (who knew that they really couldnt afford their home at the price they bought it for) suffer since this is a financial transaction and with it comes certain risks! this is the only way we will learn….
I agree, Bernanke should be put in jail! i wonder how the market will react to our FED CHAIRMAN’s stupid comments!
CAIBC
anybody have a street address or block number for MLS# 2480638. Thanks in Advance
The $2 Trillion Nightmare
The war in Iraq will ultimately cost U.S. taxpayers not hundreds of billions of dollars, but an astonishing $2 trillion, and perhaps more. There has been very little in the way of public conversation, even in the presidential campaigns, about the consequences of these costs, which are like a cancer inside the American economy.
Some former presidents — Washington, Franklin Roosevelt, Truman, Eisenhower — were quoted at the hearing on the need for accountability and shared sacrifice during wartime. But this is the 21st century.
…It’s a new era.
http://www.nytimes.com/2008/03/04/opinion/04herbert.html?ex=1362286800&en=d0
Here’s a fun one from Seeking Alpha with pretty charts and pictures too:
NYC Foreclosures on the Rise
http://seekingalpha.com/article/67001-nyc-foreclosures-on-the-rise
“But two state legislators have been quietly pushing for an even longer reprieve for homeowners in New York State: a one-year moratorium. Assemblyman James F. Brennan, a Brooklyn Democrat, and State Senator Frank Padavan, a Queens Republican, have introduced a bill in both houses that would delay foreclosure proceedings throughout the state for one year.”
#49 Jason
177 Cottage Pl. Brick
Original list- 8/07- $619,000
Current list- $619,000
Last sale-10/04- $525,000
#49 Jason
Oooops
177 Cottage Pl. Brick
Current list- $569,000
It looks like we are entering an interesting point. My gut feeling is that Gov is going to push some sort of homeowner bailout plan on the lenders and that we are going to be looking at 1980 interest rates again. if this is the case then the balance point is to buy before interest rates skyrocket but late enough that you let the bubble deflate as much as possible. basically we are playing chicken with the market.
Even without some form of gov bailout for homeowners i suspect we will still see rates reminiscent of the early 80’s, just not as high as if the gov forces a bailout.
look at the news today, this is why i have been planning on not touching the market before 2010. there are still too many dominoes waiting to fall. I want most of the skeletons out of the closet before i make one of the biggest purchases i will ever make.
“basically we are playing chicken with the market.”
kettle,
Your # 1 priority should be price. Forget about rates. You can always refinance in the future. Hell, let rates go up to 10%. There will be no chicken games, rather games of hot potato.
The sentiment is really starting to change now. Agree?
http://www.msnbc.msn.com/id/23439843/
kettle, in a global market like the one we are in now, i dont think its that easy for the gov to force the financial institutions to just forgive loans like that….i think these institutions will go under if such a bail out is enforced through them!
I am amazed at number of Vacant houses just by looking at pictures. I don’t know if MLS captures information that whether house is Vacant or not.
Hell, let rates go up to 10%. There will be no chicken games, rather games of hot potato.
It all depends on the amount of your DP. but 10% is gonna be a walk in the park. We will see high teens and even 20%.
This will encourage savings and strengthen the dollar however we are at least 3 years away from this and in th emean time it’s all about gold and silver baby.
Overall, the question is for those in properties and able to afford and not needing to move what to do now?
You have to figure raising interest rates would dramatically push down prices right? They would be inversely related. Wouldn’t that really put the sellers in a worse position?
I don’t see the Fed raising rates. I see them lowering and inflating as long as possible and trying to push as much of this stuff off onto our creditors (the chinese, russians, oil states) etc for as long as possible.
I also don’t see any sort of bailout plan of significance until 2010. Nothing’s likely to happen this year with election, both parties need the financial services money. During the first year of a new administration nothings likely to happen either.
Good clip from Fast Money last night, this lady knows her stuff, the clip is better than the trasnscript as they short change the price targets Louise gives for gold, oil and the dollar:
http://www.cnbc.com/id/23450058
If there are only 2 options: high price and low interest or low price and high interest, then isn’t it better to go with the latter? At least you can take a bigger interest deduction?
#57
What else could we do with 2 trillion…..
-10+ Moon bases (200 Billion for first one each would cost less)
– 2+ Manned missons to Mars (200 to 400 Billion each + overhead)
– $6,600 for every man woman and child in the US ( per july 07 population #’s, 301,139,947)
– free college for every single students in the US for the next 5-7 years at an average cost of 7K per year per student
Sean (36)-
I employ two former appraisal company owners who decided- after the RTC debacle- to just get out of appraising and into RE, where nobody would apply pressure on them to perpetrate frauds.
Both of these guys complained for years, prior to RTC. Nobody listened…and, appraisers were unfairly blamed for much of that crisis. Of course, in the latest boom, appraisers cried foul again…and nobody listened.
Note that there is, for all intents and purposes, no appraisal lobby at either the state or federal level. Hmmm…
Your # 1 priority should be price. Forget about rates.
Agree. In fact, I would argue that high rates and good for buyers and low rates are good for sellers (assuming an inverse relationship between the 2).
Prices will have to fall even further if rates go up to maintain even some semblance of affordability. For those of us who actually have down payments, this would be good news. First, you may actually get a meaningful interest rate on your down payment savings. Second, falling house prices will make you down payment even more meaningful.
Also, interest rates are subject to change. If rates fall, you now have the advantage of having purchased at a lower price and you can refinance into a lower interest rate. Plus, you should see some appreciation in your home’s value. If you purchased at a low rate, but high price, you are pretty much stuck with your principal.
BC (43)-
Mortgages at 14%? Hell, I’ve dealt with worse. Just gotta polish off some long-unused skills.
Of course, the one scenario I don’t have experience with is “communal transient living”, aka: huddling around a garbage-drum fire, singing Woody Guthrie songs and wearing pickle barrels on suspenders.
I love that yahoo forclosure link.
We can have the “Ariel Vulture Watch” of Brigadoon.
http://realestate.yahoo.com/New_Jersey/Westfield/Homes_for_sale/result.html?cc=realestate&p=Westfield,%20NJ&priceHigh=&priceLow=&nodeId=750007014&sortBy=price%202&radius=&bedrooms=&bathrooms=&type=foreclosure&b=1
Does anybody have anything to say, good or bad about the Northern Virginia area (DC Suburbs)?
I’m seeing the prices there are coming down much faster than in this area and the job market appears to be very healthy still.
I already know about the gonzo traffic and congestion and that DC itself is a total craphole.
njcoast
Waht happened to #20746860 in Howell? It was an REO I had my eye on.
Montclair is planning on spending upwards of 2 million to improve the railroad grade crossings so the choo choos can silence their whistles. I am against the spending as I chose not to live on the tracks and do not see it as a wise spend of my tax dollars. In researching what other towns in NJ are also registering to establish a railway quiet zone, only one other town in NJ shows up.
Who wants to guess which one?
re: (73)Clotpoll – for the record do you agree that Obama might bring about the changes needed inside the beltway?
From MarketWatch:
SUBPRIME TODAY
Citigroup under pressure again; Ambac won’t split
Gulf investors may not save Citigroup
Merrill trims Citi profit estimates
Ambac won’t split into two parts as it recapitalizes: report
Credit-default swaps reportedly under scrutiny
Troubles emerge in alt-A loans as delinquencies ratchet up
Brokers rein in lending
Few homeowners see relief: report
Schroders warns on subprime
Bank of Montreal’s net hit by subprime, SIVs
Details on each story at the above link, Rich
I noticed that they just broke ground on a new 55+ complex in Mount Arlington. I saw in the Star Ledger that they are pitching 2bd townhouses for $299K.
http://www.nolansridge.com/
This is 5mins from the train station that just opened that does not have enough parking spaces.
The two big problems I see is that this will kill the comps for the other 55+ developments that have been completed in the past 5 years. They average around $450K for a townhouse. The other problem is they overlook another development that has stopped construction. They stopped with only two of five buildings complete. They have multiple open houses every week as owners try and cut their loses. The unfinished buildings (and clubhouse) are just fenced in concrete foundations.
This would have been a perfect development to mothball for a few years before they broke ground. The only reason I could see of building this is if it is the “affordable homes” part of their overall development that they have to put in place or face bigger fines.
x-underwriter Says:
March 4th, 2008 at 10:51 am
Does anybody have anything to say, good or bad about the Northern Virginia area (DC Suburbs)?
I’m seeing the prices there are coming down much faster than in this area and the job market appears to be very healthy still.
I already know about the gonzo traffic and congestion and that DC itself is a total craphole.
x: DC is OK – huge rebound now that they have literally en masse torn down blocks of cityscape and replaced with pre-fab stuff.
NVA? It has cornered the market on upscale prefab everything. What was once acres and acres of open prarie field is now a veritable sterile birthing of mixed used prepackaged, preformed, preplanned, upscale glass offices, communities and PF,TGI-pplebee-agains. So inert it is the chemical equivalent of N2.
You do have Udvar-Hazy center out there, and Dulles in your back pocket.
So inert it is the REAL ESTATE equivalent of N2.
Re: Law of Physics in Ridgewood (or lack thereof):
Can someone explain to me why one house this weekend went for $2MM+ with MULTIPLE bidders while a $3MM house was sold in one day?
How does one make sense of this????
Railway quiet zone? I grew up in a small town, no home was more than 5 blocks from the train, as long as your backyard wasn’t on the tracks it was a great to hear the train go through, even at night. So who exactly that chose to live right on the tracks has the political ($$0 pull to get this done? Why didn’t they just spend their money on a house away from the tracks? Or is the world just filled with crazy people with too much time on their hands? (he types as he is supposed to be working……)
Sean Says:
March 4th, 2008 at 10:59 am
re: (73)Clotpoll – for the record do you agree that Obama might bring about the changes needed inside the beltway?
S-Man: you got to be kidding….do you think a sweet talking summer intern can bring about change on a Wall Street trading desk?
No guesses for the other town?
re: (87) a sweet talking summer intern would not command the attention of the board of directors or perhaps the SEC.
Can someone explain to me why one house this weekend went for $2MM+ with MULTIPLE bidders while a $3MM house was sold in one day?
Just because the price tag on a property may seem high, it doesn’t necessarily mean the property is overpriced.
I’m poor, I don’t understand how anyone can afford to spend $2m on a house. I can’t comprehend it. Just because I can’t comprehend the pile of money doesn’t mean the deal is bad.
Some of the best bargains today are at the very high end of the market. There is significantly more value in the $1.5m+ range in a number of areas. Unfortunately, only a select few can take advantage of them. C’est la vie..
chicagofinance Says:
What was once acres and acres of open prarie field is now a veritable sterile birthing of mixed used prepackaged, preformed, preplanned, upscale glass offices, communities and PF,TGI-pplebee-agains
I think if you go to any place that has grown in the last 10 years will look exactly the same…Atlanta, Charlotte, etc
re (88)
Stu got two:
Edison
Hohokus
alot of “new money” buying houses in that price range. Old money has a different philosophy
These packages differ in the type and scope of workouts permitted by loan servicers.
Bernanke said that holders of the securitized mortgages should permit servicers to write down the mortgage liabilities of borrowers.
He said financial firms should consider reducing the principal of the trouble loans and not only lowering the interest rate of the loans.
What!!!!!!!!!
Nice try Manhattan Exile:
But you’re wrong.
Think foofy.
One thing that is slowing sales is that to buy the new house you have to sell your old house. So you either make it contigent which nobody wants or you buy it non-contingent and be willing to assume you can get zero cash back out of your current house and will rent it if you have to. If that is the case you need a 25-50% downpayment on the next house without extracting any equity from your current house. We are a long way from houses being cheap enough to pull that off. Back in 1992 I saw plenty a person buy a 200k house with 40K down and rent their coop out till the market recovered. But for that to work houses have to be at or near a market bottom otherwise you go from having one sinking asset to two sinking assets.
Can somebody explain to me why on earth a bank would agree to write down a mortgage liability inorder to “give” equity to someone who paid too much for a house.
Come on this is complete b.s. If it weren’t for those nimrods who had to outbid everyone for a home they couldn’t afford in the first place we wouldn’t be in this mess and I could afford a decent house. Now those nimrods get the breaks. Here’s a stimulus idea – give all persons who don’t own a home a governement voucher for a downpayment on a home. Why should the financially reckless get the breaks. SOB this is ridiculous. Give me a break.
Stu,
I’ve been noticing some very interesting multifamilies in Montclair on the MLS lately.
Stu: Is it (prestigious) River Edge?
I agree the high end has better deals. A 1.9 million house for 1.5 million is a good deal. I am house hunting now in the 1.3 to 1.5 range, not house buying as I suspect houses will fall another 10-25%. When those houses go for 900K to 1.1K they will be a much better long term value that a POS cape that peak price was 600K now on sale for 380k cause the bottom line is that at any price it is a pos cape.
(95): proof:
Edison:
Edison Seeking Train Horn Quiet Zone
http://www.nytimes.com/2007/10/21/nyregion/nyregionspecial2/21trainnj.html?_r=1&oref=slogin
Hohokus:
ridgewood people pushing it:
http://www.ridgewoodnj.net/minutes/7%6011%6007.htm
Stu – Glen Rock?
John, I agree in part. If you are accurate on the quality of the house, then the pos will fall faster and further than the 1.3 to 1.5. You may only see a 5% fall there. But then again 5% off 1.3 is better than 10% off 600K.
I ran some numbers for the low rate (6%) higher purchase price (450,000) Vs higher rate (12%) lower purchase price (360,000) with a refinance to a low rate (6%) 5 years into the loan.
First the low rate higher purchase price scenario:
$450,000 purchase price @ 6% fixed 30yr with 20% down (360,000 in financing)
Monthly payment = $2,158
Total Payments over life of loan: $777,017
Total Interest over life of loan: $417,017
Second scenario of high rate and low purchase price ( 20% price reduction) and a refinance to a lower rate (6% 30yr fixed) 5 tears into the loan.
$360,000 purchase price @ 12% fixed 30yr with $90,000 down (the 20% from the 1st scenario) (270,000 in financing)
Monthly payment (years 1-5) = $2,777
Payments(years 1-5): $166,635
Interest (years 1-5): $160,325
Refinance @ 30 yr 6% at end of year 5.
Monthly payment (years 6-36) = $1,580
Payments(years 6-36 ): $569,143
Interest (years 6-36): $305,453
Total costs of home purchase
Total Payments: $735,778
Total Interest: $465,778
What this shows me is that scenario 1 costs $40,000 more then scenario 2 in total payments and about $50,000 less in interest. I think the point here is that it is not a clear cut situation as to whether higher purchase price and lower rate or higher rate and lower purchase price is the best decision. It seems to be a case by case situation as changing the rates or the length of higher vs lower rates can reverse the situation and make it cheaper in the long run to buy at a higher price and lower rate.
Storytime!
Talking with a young guy yesterday, he told me his family has to move, taxes are too high.
He 21 yrs old and lives with mom and dad. This kid saves his money, he’s a tightwad :) So I figure he’s staying around here, mom and dad can move to NC :)
He goes on to say he’s “loaned” his parents a lot of money and they still can’t afford to stay…
He says taxes are more than mortgage. So I ask how much they paid for house (silly me) and he said they bought in 1984 for 80K. They only owe 130K on it now.
“Hmmmm” thinks I. Must be that “new Ben Bernanke math”.
He goes on to tell me they will have to put at least 20K into it, before they can sell, to “patch” problems, like ceilings falling down, foundation cracked, drainage issues, etc.
Hmmmmm.
Says house was appraised at 300K, so they should get that when they sell. (Oh my, I think)
So another conversation participant asks where they plan on moving to? Kid says maybe Milford or Frenchtown… (Hunterdon, not NC) Other person asks how much do they plan on saving by moving?…
Kid not sure. Says they didn’t do the math.
Just figured if they bought a house with lower taxes, they’d be OK.
Hmmmmm. “New math” strikes again.
John,
When folks look at the asking price, they often project that asking price upon the structure that sits on the lot.
When they see a $500k POS Cape, they look at the house and say, “Half a million for THAT!!!!???!?”
Unfortunately, what most people need to do is tilt their head downwards by 90 degrees before they ask the question.
I’ve seen buildable lots going for $300,000 to $400,000 in shitty neighborhoods. That makes the value of the POS Cape on which it stands approximately $100-200k.
Once you realize that you are paying $100k for the POS Cape, swallowing it might be a bit easier.
Because of the high land costs, the fixed costs associated with a house are generally high. However, something very interesting happens. The larger of a home you build, the smaller the impact of the land, per square foot of house cost.
It isn’t any wonder why builders will tear down the POS Cape and build the maximum size house that the town will allow. It simply doesn’t pay to build a small house.
There is an good economic reason behind McMansions in this area, especially on small suburban lots. As a builder, they make sense.
Speaking of Prestigious River Edge. How about new construction that only took 6 months to build? Check out POS# uh..I mean MLS# 2741481
If you are interested in making an offer, be sure to check out these prior MLS#’s
Sold to builder 8/6/07: 2701381 $400,000
Expired Listing (7/5/2006-1/1/2007) # 2626620 OLP $484,500 reduced to $468,000
Expired Listing # 2528834 (9/7/2005-9/7/2006) OLP $539,900 reduced to $499,500
By the way, taxes on the original ranch on that lot were over $11,000 a year. Enjoy!
regarding the nubers i ran,
You would also have to consider what you might be doing with any money saved. is it being invested and at what average rate? clearly this is not a simple question.
Kettle (103),
How did you figure that doubling the interest rate would result in 20% decline in the housing price?
It’s all speculation but I would think if the interest rate were to double then there would be a meltdown in the housing market and the resulting price decrease should be lot higher than 20%.
By the way if a bank cuts a borrower’s principal balance can the borrower get a HELOC to take that equity back out? Yeah the ATM is being filled again.
Jaw, 107
I pulled the general scenario out of thin air. You can probably refine it a bit, but i did it just as a simple illustration, not as a comprehensive model.
I chose a 20% reduction as that is currently a popular # for the average reduction we will see at the end of this game.
#108 – If the principal balance gets cut I’m pretty sure the fallout would preclude widespread HELOC issuance. Just a guess though.
Jam (108),
IMHO, I think the reason bank would be lowering the principal is because the equity in the house has decreased. If the banks were to actually lower the principal, I don’t think homeowners would gain any equity, at least not in the next 3-5 years.
At $350k per lot, if you were to put up a 2,000 sq/ft home, the cost of the land per square foot comes out to $175/sqft.
$175 a square before you even get a permit, lay a block, nail a 2×4? Impossible. Now, figuring $125/sqft for construction (a reasonable estimate. We’re pushing the cost up to $300/sqft. We’re now up to $600k for the small 2,000 square foot home. Add in margin of approximately 30%, and we’d need to sell this place for $850,000?
Impossible.
Let’s play the game at 4,000 square foot, solidly in McMansion territory.
The land cost by square foot of construction goes down to $87.50/sqft.
Now, realize that as home size increases, the cost per square foot of construction falls. Let’s use $115/sqft for our estimate.
Adding this to the land cost, we’re at a bit over $200/sqft. Total cost of comes to $810,000, add in 30% margin and we’re at $1.15m.
So you can get 2000 square feet for $850k.
Or you can get house twice as large, 4000 square feet, for 35% more, not double as one might assume.
Really, the 4,000 square foot at $1.15m is a bargain compared to the 2,000 square foot home at $850k.
MLS # 2800562
No folks, this isnt the Municipal Building. It is a house.
I love how they say in the description:
“NEW CONSTRUCTION OVER EXISTING FOUNDATION ON A QUIET RESIDENTIAL STREET.”
For those who know that area, the “quiet street” is actually a through road to Route 4.
Bernanke is such a chowderhead. How does he come up with such stupid ideas? Is he flailing around desperately trying to hold back the tide? No thought to the law of unintended consequences? Why isn’t the Dow down 1000 points?
Bernanke said that the lenders have to bail out borrowers. Citi is itching to do just that.
grim 113
i see the point of your calcualtions, but i think they have very little real meaning for a home buyer/owner. You are essentially doing production costs modeling and this is indeed an important factor from the builders point of view. However, a “smart” buyer will use factors such as operational costs (utilities/taxes/maint) combined with quality of construction, and to what degree does this property fit you individual requirements for a home (different for everyone).
I am not a builder so i do not care if the largest house possible on a given size lot maximizes their profit/expense ratio. From a buyers point of view (mine in this case) the largest home possible on a given lot is a negative factor.
So yes, i understand that your calculation may be relevant to a builder, but it is for all intents and purposes irrelevant to the buyer
#115 Is he flailing around desperately trying to hold back the tide?
Yes, I think this might actually be empirical evidence.
Why isn’t the Dow down 1000 points?
It looks like everyone is too busy selling off spot gold/oil right now. Don’t worry they’ll get to it though.
Grim(98),
“I’ve been noticing some very interesting multifamilies in Montclair on the MLS lately.”
Unfortunately, my wife and I have been noticing the same thing. Thank the lord we got such a good price on ours and the property tax appeal win helps our case as well. Although we can charge high rents, the out-of-control property tax increases now make the idea of buying a multi for rental income investing too much of a deterrent to profit.
For example, our place was purchased for 480K in 2004. It assessed originally at 650K and we fought it down to 580K. Our improvements so far are around 13K since I did most of them myself. We are currently demolishing and rebuilding three bathrooms to the tune of 32K. So our total out of pocket costs have been 525K if you include the mortgage. We expect to generate 4K/month from the property which works out to 48K per year. Sounds like a great deal, right?
Well it would be if the tax increases were reasonable. In 2006 we paid $11,154 in property taxes. In 2007 we paid $13,900 in property taxes, but after the tax appeal it will be $13,186. So it looks like our property taxes will probably go up between 7-9% a year in perpetuity. At 8% that’s an increase of about $1,000 per year. How the hell do you pass on this $500 a year rent increases every year to your two tenants? Sure, you can do it for a years, but eventually, it won’t make economic sense for the renters to stay. They’ll just buy instead (oh me oh my).
For the next few years, continued ownership makes sense because it’s profitable to us. One cannot forget the tax deductions and depreciation write offs that it generates.
Long term, if things with the welfare state of NJ do not get corrected, either the system will collapse or only ultra-wealthy will be able to live in Montclair. Since most ultra-wealthy people are pretty smart, I would bet on a system collapse.
So if you are going to purchase a multi in Montclair, make sure it’s within walking distance to a train station (serious parking issues) and make sure you get a near market bottom price. Otherwise, it won’t make a great investment.
about oil…
from NYtimes
The day’s highest trading price, $103.95 a barrel on the New York Mercantile Exchange, broke the record set in April 1980 during the second oil shock. That price, $39.50 a barrel, equals $103.76 today, when adjusted for inflation.
http://tinyurl.com/2hjajk
#120 – I saw it hit $103.95, I was expecting to see $104 somewhere today, then it ended up going sub $100 ($99.30).
Come on people. Foofy!!!!
From MarketWatch:
U.S. banks facing more risks, regulators say
U.S. banks remain at risk from a host of potential problems, including a worsening of credit of construction loans and constriction in the markets for mortgage-backed and other securities, regulators told a Senate committee Tuesday.
The banking system is “fundamentally sound,” Comptroller of the Currency John Dugan told senators, but he said that “significant market disruption issues remain to be addressed.”
…
(Sen. Christopher) Dodd said he wants answers from regulators about what they’re doing today to protect against risks related to such instruments as credit default swaps.
“Studying the problem is not enough,” Dodd said. He said he wants specific answers within 60 days, when he plans to convene another hearing.
Dugan said other potential problems facing the industry include potential downgrades of monoline insurance companies, significant funding problems in the auction rate securities market and severe constriction in the securitization markets for commercial mortgage-backed securities.
…
Meanwhile, FDIC Chairman Sheila Bair said her agency is focused now on risks posed by concentrations of commercial real estate in many financial institutions.
She added that one of the “chief risks” to the banking industry is expected continued worsening in the credit quality of construction and development loans.
…
“Our initial assessment of the weaknesses at individual firms indicates that risk management systems and senior management oversight at some institutions were not sufficiently robust,” (Federal Reserve Vice Chairman Donald) Kohn said in testimony prepared for the hearing.
He added that large bank holding companies maintain capital above minimum requirements and that home equity loans have emerged as a “more challenging area.”
#122 – Flickr search results for foofy are kind of interesting
http://www.flickr.com/photos/foofy/
I’ll just give it away then.
Brigadoon!!!
Stu, I often wondered about the train whistle noise. I used to live in Fair Lawn where in the late hours of the night and early morning hours one could hear the train whistle – long load whistles. While in other towns there would be short bursts.
load -> loud
re: Bernake speech today.
There are only two plans that will rescue the poor subprime borrowers and others facing foreclosure.
The first plan would be loan forgiveness by the banks hence Bernanke’s sales pitch today, where he mentioned “preventing foreclosures” about 10 times.
The second plan would be a good old fashioned bipartisan government bailout.
#1 Bernanke is attempting to cajole the Bankers into this loan forgiveness IOU program. In my opinion it will require allot of kicking and screaming and crying since the pay packages these banking execs receive are based upon performance. They will need additional incentive say perhaps a run on deposits, and maybe Bernake can make them watch It’s a wonderful life a few dozen times to get them in the mood to forgive.
#2 won’t happen during an election year, Pelosi, Schumer and the rest of the democrats in charge want as many voters as possible to be angry, hungry, living in a FEMA trailer and living off gov’t cheese come the first Tuesday in November.
The alternatives as they say is a moral hazard.
This is a blast from the past dating to Thursday (I’ve been trapped under a half dozen simultaneous transactions), so my apologies to those who want to skip over it, but I didn’t want to leave jill (whose blog you should read if you haven’t) with the misimpression that that I wouldn’t respond.
re pretorius at 148 on Thursday:
“When I stated “NJ areas close to Manhattan,” the best you could do was measure the distance between Linden and Staten Island.”
In response to my suggesting that Linden or Hillside were close to NYC, you rightly pointed out that you were only talking about “close to Manhattan”, which is correct; you were (more on this below). Nevertheless, you gave your definition of “close to Manhattan”:
“Fair enough to ask me to clarify “NJ areas close to Manhattan.” The area I have in mind is Hoboken, Weehawken, and downtown Jersey City.”
By this definition, Cliffside Park and Edgewater are NOT “close to Manhattan”, which I pointed out, but with no response. If that’s your position, that’s fine, but I think it points to something that I find interesting:
Until recently, it seems to me (and correct me if I’m wrong) that there were a number of folks who maintained that NJ would at worst stagnate because of its proximity to NYC. As it has become clear that the outer boros are beginning to suffer (SI, Queens, large parts of Brooklyn), that argument apears to have been re-trenched to cover only Manhattan and close to Manhattan. If that’s the case, there seems to have been a concession that NJ is NOT safe after all, other than the areas in closest proximity to Manhattan. The reason I pursued you on this point (and I’m sorry if I offended jill), is because I’m curious how far that concession goes? Is it the case that all of NJ other than Weehawken, Hoboken and part of JC has now been conceded (including, for example, Bergen County)?
I missed prediction night at the new year, but for the record, and because I don’t want jill to go on thinking I’m hiding, my prediction follows:
– Prices, as listed on the Case/Schiller index for NYC/Metro will fall 6% from 4th quarter 2007 to 4th quarter 2008, 11% when adjusted for NYC area CPI (not core). I choose NYC/Metro because the most consistent argument I’ve heard for why NJ prices won’t fall is overflow from NYC.
Regarding your prediction:
“OFHEO – 575
NAR median price of existing single family homes – $355,000
These figures are consistent with my expectation for stagnant New Jersey home prices this year.”
For the record, I think that pegging your prediction to the price index of the lobbying arm for the real estate industry renders it less meaningful, but in any even I’m confused: are you saying that all of NJ is safe because it’s close to NYC, or that only Weehawken, Hoboken and parts of JC are safe because they’re close to Manhattan?
I’m asking because your opinion, much as I disagree with it, is of interest, but I’d like to actually understand what you’re saying.
By law, trains must blow their whistles 4 times per grade crossing. If you make the grade crossing impenetrable (like reInvestor’s mind), then the town can apply for a quiet zone allowance. Unfortunately, the upgrade of the rail crossings will cost close to 300K per crossing. Montclair has 12 crossings, but probably only 6 or 7 will require the upgrade.
interesting article regarding the impact of the current financial fiasco on retirement
http://tinyurl.com/39dfmp
Retirement crisis: From bad to worse
MSN, By Jim Jubak
You’ve been hearing about a looming Social Security problem for years, but it’s not the only big trouble facing boomers and the generations behind them.
By Jim Jubak
Baby boomers and the post-boomer generations are facing a retirement crisis. And it now goes way beyond the worries about a collapse of Social Security that so preoccupied us before housing prices headed south.
The crisis I’m talking about is a result of economic and monetary policies that have turned a pattern of boom-bust-boom-bust into business as usual in the U.S. economy. The 2007-and-counting collapse of the housing, mortgage and debt markets isn’t an isolated disaster but part of a decade-long shift away from saving and investing toward speculation and gambling with our future.
njrebear [116],
Citi is itching alright. Just not for this.
I don’t understand all the outrage about BB’s speech. It’s not as if the banks or the CDO trustees have a real choice. Boiled down, they own loans that are worth 50-60 cents on the dollar today. Cutting interest rates gets them part way to that true value but it will take an actual principal reduction to do it all. They are screwed and it’s just a matter of time until their books reflect the fact.
Most of the outrage seems aimed at the “homeowners” who it appears will make out like bandits. They will to a certain extent but credit reporting agencies already have coding for debt written off at a discount and, believe me, it doesn’t do your score any favors. They will end up in pretty much the same boat as if they had been foreclosed or walked away.
IMO the long run effect is the end of zero-down, maybe even 5 or 10 down, except at extreme penalty rates like LIBOR + 8, no prepayment allowed.
“I don’t understand all the outrage about BB’s speech.”
Punch,
Why you’re at it, absolve the masses of their CC debt.
BB should suggest that when the Banks lower the mortgage principal, the government will go after the original seller, and get the difference back from them, to reimburse the bank for the difference.
Citigroup could write down another $18 billion of debt tied to souring mortgages,
….
Citigroup because it believes the bank could write down another $18 billion of debt tied to souring mortgages, according to Dow Jones Newswires.
http://news.yahoo.com/s/ap/20080304/ap_on_bi_st_ma_re/wall_street;_ylt=AnbVIb814p5SrcdMaZl0zblv24cA
RE 132, that is the problem. On a macro level no one lost money on real estate. For instance my neighbor was smart enough to sell his house at the peak for 680K to a blue collar couple who are now working six days a week to pay the mortgage on a house that two years later is now worth 550K. The couple who bought lost 130K but in realty the money was not lost that just gave it to the prior owners, they overpaid.
If we give the couple who bought a house at 680K that is worth 550K a check for 130K we are introducing new money into the economy. We can’t get it back from the seller, but if we refund the buyer his loss we are printing money in DC and wild inflation will be the result. Plus it will artificially boost home prices as it will once again show that it makes sense to play with the houses money when you keep the winnings and are covered for your losses.
from previous thread, bath in 07
That’s cool, renting is a good idea. It is really nice out there in Upper Bucks for sure. We did a househunt through Newtown once. Nice town, really good schools. We didn’t find it cheaper though, but we were living in Mercer Cty at the time, so that could be why. People are really nice too overall, even our realtor was a sweetheart. Good luck!
On Tuesday, the two-year note was up 3/32 at 100.252, its yield at 1.591%.
Regarding writing down principle:
It’s going to happen, the question is, will it happen as much as it should.
These seem to be the basic facts:
The banks lent more money to borrowers then the asset that backs the loan is worth. More often than not, there will be little recourse for the banks on the money loaned in excess of the home’s value in a foreclosure.
Foreclosing carries significant transaction costs for both the lender and the borrower — under the current circumstances, especially the lender.
If all that is true, reducing principle makes sense for both the lender and borrower if the transaction cost-savings create a smaller loss than foreclosing which is what they should be thinking about.
#79- hughesrep
MLS#20746860
20 Cambridge Dr. Howell
Under contract 2/29/08
orig. list price- $479,921
current price-$354,500
BTW Muni prices are stablizing. Yields are once again falling. With 1.5% 2 year notes small investors are stepping up to the plate to pick up 3.5% two year munies. I say be next week the buying opportunity will be gone as we get within a week of our next 50bp rate cut. Question is what safe corner of the fixed income market will next be hit with a credit crises?
134.We can’t get it back from the seller
Clinton could. Reno would go to each house and say “give me the money back or I’ll torch you”, like Waco. Most people would write a check, before the FBI fired their gas cannisters.
#124 Shoot. I was going to guess Westfield but I haven’t lived in NJ for so long, I couldn’t remember if they had a train station. Bah!
From Grim’s #1 post
This:
Many potential home buyers are staying on the sidelines because they expect home prices and interest rates to decline even more.
never fails to annoy me.
It appears in story after story, but no one ever says what they base that notion on.
Maybe someday the editors at the WSJ and other papers are going to tell their reporters to stop being so stupid and lazy.
Along those same lines, Man does Tanta take Gretchen Morgensen and the NYT to the woodshed today.
I would like to pose a question to the board. Before I begin, I would like to disclaim that I; Own a home (purchased in Dec ’07) for well under market value (3% YoY appreciation since 2000, with improvements) and have a mortgage (30 year fixed @ 5.8%).
1) If the government decides to bailout homeowners by working with lenders and eliminating some debt, do you think this would apply to; all mortgage holders, those with the best credit, those with the worst credit, etc?
2) Do you think that the nominal prices of homes would remain stable or decrease slightly due to the level of high inflation we see in the next few years, of course bringing down the real value of homes?
Hypothesis: If the government partially bails out home debtors or there is a period of high inflation, those with debt and low rates who can afford to pay it off, are in a very good position due to the levels of inflation and high interest rates we will see in the next few years.
Check out El-Erian on CNBC – he’s talking about “crossing the line on property rights.”
#138 njcoast
Thanks.
BC Bob [131],
I can’t do it for the masses but I assure you it’s being done case by case as we speak.
Two years ago, long before any of the current brown hit the whirligig, I negotiated a 40% principal reduction on a Chase card for an old friend who had gotten himself into trouble. To do that, I had to pay Chase from my own funds but they had no good alternative. My friend had a job but by this point a completely shite FICO and no prospect of coming up with payments to match the schedule and interest and fees they were charging. (Between the penalty rate and the fees, the balance was compounding at over 5% a month.)
After a lot of runaround, Chase took my 60 cents on the dollar (which was sitting in a Chase MM account earning about 1% a year, so what did I care?), and my friend has been paying me back what he could afford. He’s been very reliable and we’re close to finished. I can’t recommend this in general, because friends with 500 FICOs aren’t generally good risks, but I’ve known him for a long time and from what he’d done for me in the past I wasn’t very worried.
Sorry for the digression. The point of the story is that banks will take haircuts on anything if there is no blood in the stone. Credit cards, car loans, what have you. Why should mortgages be different?
Grim – 128 in moderation?
“Citigroup could write down another $18 billion of debt”
That CAN’T be true! bi said there’d be no more writedowns!
59+60 Coast
Thank you
I saw Ben asked banks to reduce the principal on loans. Why not just ask the sellers to go back and refund some of the money from the sale? Or retroactively tax them if they didn’t purchase another house. Lets do it on a case by case basis for every sale in 2004, 5 and 6. If I was running a bank, I know I’d want to be the first in line to do this – once the FED agrees to reimburse them for doing so, which should happen any day now.
Oh, and free puppies to cheer up the kids in the overextended households. That would be nice. How can you be expected to pay your bills when you are all stressed from borrowing money you never had a prayer of repaying? How about a federally funded vacation in one of the many homes in (fill in the name of a distant state from your place of residence) as there are many foreclosed homes there that the Government will eventually own.
I will sleep better knowing my tax dollars are being dumped by the truckload into an incinerator, it seems so wasteful to just use them to light cigars as Washington usually does. Lets speed up the process. This way when I am building my survival shelter, the neighbors will look on with envy and not laughter.
As Charles Manson once said, “Is it hot in here or am I just crazy?’
Also,
I have no trouble paying back my mortgage, but if I am not going to get a cut of the equity reduction because I played my cards right (20% down, 30-year fixed), do you think I can get the bank to cut my principal:)
Can I give some sob story and how would that impact my FICO, if it does at all? I sure would like to take another vacation this year!
Grim – Very good points on why for Builders McMansion make economic sense.
On that note, I have simple proposal that will solve lot of Property Tax issue and reduce this incentive to build McMansions.
There are 2 components in Property tax. One is Land assessment and other is building assessment based. For Building assessment portion, Charge the property tax by square foot of livable space. So in that scenario, 4000 sqft home will pay twice the tax compared to 2000 sq ft home (or 4 times 1000 sq ft townhouse).
I am pissed at the fact that some folks can live in twice the size house, but pay may be only 40% to 50% more in taxes.
“The point of the story is that banks will take haircuts on anything if there is no blood in the stone.”
punch,
The worm has turned. The banks have no blood in the stone. Come to think of it, is there a stone? Who do you think will be paying for this?
Oh by the way, just the first admission by BB that his aggressive rate cutting program is a bust.
144 Pay My Ticket:
I agree. Has anyone here ever questioned a fee on a credit or card or savings/checking account and not had the bank remove the charge?
Recently (during my trip to India), I went over the limit on a CC. Prior to the trip, I asked for a credit limit increase but was denied. This was probably due to the fact that I cost them too much money in the CC benefits. Well I managed to go over the limit thinking that they would not let me. Well, low and behold, a $39 fee for going over and a 35% interest rate on all fees and finance charges.
Well I always pay in full and have never paid a penny of interest or fees in my life so this one really bothered me. Well I checked the CC terms and there in plain English was the fee listed. I called the bank and they immediately removed the charge and returned my interest rate (which really doesn’t matter to me) back to 9%.
I just wonder what percentage of the people actually call.
Similar thing happened with my Discover Card where I wasn’t getting my 5% rewards. A simple call yielded a $20 we’re sorry reward.
I guess the sheeple are just sheeple.
Kettle1
I did not check your numbers, so assuming your calculations are correct (which may be a realy bad assumption…) – so in Scenario 1 you end up paying 40k more while deducting 50k less? Even if you assume you are in a 30% tax bracket you will end up saving another 15k in taxes in Scenario 2 for the total savings of 55K. How is it not clear which is the better scenario?
Punch,
If the banks can forgive principal, they should be allowed to do it but like you said about credit cards, only a few home owners will benefit.
#151 – If the cuts are a bust do we see a move back up in rates? I’m thinking probably not, but would like it.
Also, and completely off topic, it appears Gary Gygax has died. Not relevant but there are enough geeky types here who might be interested.
http://blogs.forbes.com/digitaldownload/
After my property tax assessment reval, our home portion was like $170,000. That is insane. Since my land is so valuable, I might build a well to see if I strike oil. There must be something in my .23 of an acre that makes it worth $410,000.
Unfortunately, whenever I do yard work, all I find is cement and bricks buried under there.
From CNNMoney – gotta love this. Any Comments?
Housing: Best time to buy in four years
Home values have declined across the country, giving homebuyers the best buys they’ve had since 2004.
By Les Christie, CNNMoney.com staff writer
March 4 2008: 1:30 PM EST
NEW YORK (CNNMoney.com) — It may be the best time to buy a house in more than four years.
Home prices have dropped so quickly and so far that valuations – the difference between what a home should cost and its actual price – are the lowest they’ve been since 2004, according to a report.
The Cleveland-based bank National City Corp. (NCC, Fortune 500), together with financial analysis firm Global Insight, revealed Tuesday that more than 88% of the 330 housing markets surveyed showed price declines and improved affordability during the last three months of 2007.
“Housing valuations are almost back to long-term norms,” said National City’s chief economist, Richard DeKaser. He called current affordability “the best in the past four years.”
But DeKaser cautioned that home prices could fall even further.
“This isn’t to say home price declines are over,” he said. “We could move below historic norms. By the end of 2008, housing markets could be broadly under valued.”
Prices still improving
There are still 21 housing markets, or 6% of those surveyed, that are severely over valued, including Atlantic City and Madera, Calif. That’s down from 56 overvalued markets at the peak of the housing bubble in 2006.
The report compares actual median home prices with what the authors determine are proper home values based on population density, relative income levels and interest rates, as well as historically observed market premiums or discounts, to determine whether markets are over or under valued.
The report also factors in market intangibles that make some areas more desirable places to live, and more expensive.
“Declines are no longer confined to once-frothy markets,” said DeKaser.
The survey covered home valuations during the last three months of 2007, but DeKaser pointed out there’s reason to believe that valuations are even more favorable for buyers today.
Price declines have continued into 2008 and interest rates, although they have inched up lately, have been steady or lower compared to late last year. There have even been wage gains; personal income rose 0.5% in December. Soaring foreclosure rates have added inventory to many housing markets, depressing home prices further.
The biggest gains in affordability occurred in California, Michigan and Florida, which are areas that have also been some of the hardest hit by foreclosures. Those states registered 43 of the 50 biggest price declines.
Bend, Ore. currently tops the overvaluation list. Home prices there were judged to be about 59% higher than their fair-market value. Miami, despite a median home price decline of 5.7% last year, is the most overvalued big city, by 44%.
All the best bargains were found in Louisiana and Texas. Houses in Houma, La. were under valued by 31.2%, according to the report. Dallas was the most undervalued big city, by 30%.
Stu,
Are you growing Marijuana on that .23 acres? Actually, I think you can get the same price for Corn and Soy.
“Are you growing Marijuana on that .23 acres? Actually, I think you can get the same price for Corn and Soy.”
It must be my proximity to Manhattan.
Stu, it’s Joisey. Just be happy you’re not finding bones.
“Can somebody explain to me why on earth a bank would agree to write down a mortgage liability inorder to “give” equity to someone who paid too much for a house.”
What I think Bernanke is worried about is people walking away from their homes. If the bank reduces the principal on the loan, this encourages people who would otherwise be underwater to stay in their homes and keep paying. This is better than foreclosure because it should reduce transaction costs and avoid distressed sales, which will only further erode the value of banks’ remaining collateral.
BC Bob [151],
The people paying for it will be bank shareholders and MBS/CDO holders. Is that a problem?
You might be worried that your tax paying pocket could be picked for this. I see no sign (yet) that you have anything to worry about.
So Stu (Mr. NJGator) and I take a little road trip over the weekend to check out a house I have had my eye on on the GSMLS for some time. The house looks lovely in pics on GSMLS (http://new.gsmls.com/public/getMediaReport.do?mlsNum=2440284&imageCount=10), yet Mapquest shows the location as pretty much right on top of a Rte 24 overpass. The house originally listed for $749k and has since dropped about $100k in ask price (by dribs and drabs of course). The home has been on the market for over 180 days. We knew the location had to be awful, but wanted to see it for ourselves.
The street itself is lovely, but you can hear the buzzing of the highway. There is only one house between this home and the sound wall and Rte 24 overpass. The conservatory, strangely enough was built on the side of the house closest to the highway – that doesn’t sound very serene and peaceful to me!
So Stu and I proceed to wander around town looking for “For Sale” signs and noting addresses so we can check asking prices later. After getting depressed about $830k Bi-levels, I start feeling like I am morphing into Gary and that prices will never be reasonable in Northern NJ again. That is, until today…
Stu sends me a link to yahoo foreclosures and I start looking up the towns that we are interested in. When I look up Madison, I note that there is a new foreclosure listing on the very same street. Some cursory research in the Morris County tax and county clerk’s websites shows that this home is the one.
The house was purchased in Dec 03 for $429k and it looks like the owners actually put 20% down and didn’t piggyback. The house was refinanced twice in 2005 – once for $500k and later that year for $515k. In Oct 2006 a HELOC was taken out for $45k. In June 07 the contractor who built the conservatory files a lien against the house. It looks like they kept refinancing to do the kitchens, bathrooms, conservatory and possibly a 2 story addition in the back of the home.
It’s a shame the location is so awful. I don’t think any buyer will be coming along to save these folks from foreclosure. Stu, of course, would like to offer to buy their Viking range so that they can make another mortgage payment.
Gary, even the prime people are starting to get swept up in this. Have patience.
Actuary 153
My point was that i am not so sure that it is always a clearcut case of which scenario makes more sense. I was not referring to just the 2 sets of numbers i ran.
In my example scenario 2 makes more sense. I was running the example to answer my own questions about whether one of those scenarios is USUALLY better then the other. There are a large number of factors involved in doing a rigorous model of that situation and did not attempt to do it in a rigorous manner so as a first run guess it gave me the info i was looking for.
By the way i have excel sheets setup to calculate amortization tables, taxes, maint, etc for loan calculations.
“Or retroactively tax them if they didn’t purchase another house.”
Hey pally don’t go giving them any ideas!
Tell the truth NJGator. I never said I wanted a Viking range ;)
Well there goes my manhood.
Goldman Happenings:
http://dealbreaker.com/2008/03/some_stuff_happening_at_goldma.php
#162 – Isn’t my pocket already being picked though. The banks get to paper over their losses via the Fed reducing rates, which decreases the value of the dollar (and their debt/loss) which means everything costs more for me. It doesn’t have to be a direct tax funded bailout.
Stu: Thanks for reminding me to call Credit Card company. I had the same experience last month. Anyway, the card company did take off all the finance charges.
The market has made a push lower after Fed Governor Mishkin stated he sees significant downside risk to the economy. However, rate cuts and the fiscal stimulus package should improve the odds of avoiding more adverse outcomes. Mishkin also expects unemployment to rise further.
“Citigroup could write down another $18 billion of debt”
That CAN’T be true! bi said there’d be no more writedowns!
And Bergabe said “Subprime is well contained”
I miss Donald. grim let him in please. he’s fun.
When a Mishkin starts talking straight, lookout below.
Fed funds futures are currently pricing in an 80% probability the FOMC will cut the fed funds rate 75 basis points to 2.25% when it meets March 18. Yesterday the markets were pricing in a 74% probability that the fed funds rate would be trimmed to 2.25%.
grim – can you please help me out of moderation at 128? Thanks.
Sure we all hate to see people work the system and skip on their debts but I wasn’t upset by Bernake’s suggestion. For all I care, lenders and borrowers can do some $ex for equity swap as long as they don’t expect a government bailout using tax dollars.
NJGator [163],
Just as these buyers would rather impale themselves on razor wire than lower their fantasy prices, I too would rather stick a 4 inch sewing needle in each eye than fund their capricious indulgences. I have about 30 – 35 listings that I printed at in early 2006 from various towns. Right now, I’m still not seeing all that much of a difference between those listings and the sh*t I receive on a daily basis. When the day comes that I see visual evidence of blood in the water, I will know that the sharks have arrived.
Came across an interesting quote from a music star.
“a parting shot about Iran-Contra and the war in Iraq. “Iran-Contra! We should have jailed all those guys for ever back then, and we wouldn’t be where we are right now – because it’s the same guys now, the same 20 guys!”
“
From Forbes, Best Places to Get Ahead (sorry in advance if this has been posted already)
10. Williamson Cty Tenn
9. Sussex Cty, NJ
8. Delaware Cty, OH
7. Anne Arundel Cty, MD
6. Prince William Cty, Va
5. Charles Cty, MD
4. Loudoun Cty, VA
3. Calvert Cty, MD
2. Forsyth Cty, GA
1. Stafford Cty, VA
My question is, where is the land of milk and honey, North Carolina?????
http://www.forbes.com/realestate/2008/02/22/income-job-growth-forbeslife-cx_mw_0225realestate_slide_4.html?thisSpeed=15000
OT: Met rumor…Delgado out for the year
Medco Health Solutions
Management rank: 1
Industry rank in Health Care: Pharmacy, Other Services: 1
One reason people like to work here: Its customers like the company, consistently voting it at or near the top in consumer satisfaction surveys.
Medco pays a lot, are hiring and I heard employees do next to nothing all day and can work from home if they want, what gives how does that company in NJ work?
It is hard to impress your boss when you head is covered by a white sheet.
Ann Says:
March 4th, 2008 at 2:25 pm
From Forbes, Best Places to Get Ahead (sorry in advance if this has been posted already)
10. Williamson Cty Tenn
9. Sussex Cty, NJ
8. Delaware Cty, OH
7. Anne Arundel Cty, MD
6. Prince William Cty, Va
5. Charles Cty, MD
4. Loudoun Cty, VA
3. Calvert Cty, MD
2. Forsyth Cty, GA
1. Stafford Cty, VA
My question is, where is the land of milk and honey, North Carolina?????
http://www.forbes.com/realestate/2008/02/22/income-job-growth-forbeslife-cx_mw_0225realestate_slide_4.html?thisSpeed=1
gary
“these buyers would rather impale themselves on razor wire than lower their fantasy prices”
You and NJGator would have enjoyed the episode of “Buy Me” that Mrs. Patient and i watched last night.
Woman lives alone in a three bedroom house. Quits her job and HELOCs the house up to $277K to fund the opening of her dog-clothing boutique.
Dog-clothing boutique goes belly up. Now unemployed and deep in debt, she puts her house up for sale for $304K (enough to pay off her debt after expenses).
After a couple of weeks, she gets an offer of $273K. She’s “offended”. Offer is raised to $284K. She’s still “offended.” Fires agent.
Hires new agent. Relists at $299K. Sells four months later for $259K because she “can’t stand the monthly payment anymore” (which is understandable if you’re unemployed, deep in debt, and living alone in a three-bedroom house).
grim, I’m stuck in moderation…
“OT: Met rumor…Delgado out for the year”
Glad I passed him up for Rickie Weeks in the middle rounds of my draft yesterday!
174 Gary – I don’t think these folks can lower their price much more without approval from the bank. They already owe the whole value of the house to the banks and the sunroom contractor. Who knew a 12×12 sunroom costs $50k?
You will see your blood. It’s gonna be from the folks who have to sell. And there will be plenty of them.
http://promo.realestate.yahoo.com/best-places-to-get-ahead.html
All these growth communities? Most are within an hour’s commute of Washington, DC. What industry centered there could *possibly* be the engine for localized economic growth?
After a couple of weeks, she gets an offer of $273K. She’s “offended”. Offer is raised to $284K. She’s still “offended.” Fires agent.
Hires new agent. Relists at $299K. Sells four months later for $259K because she “can’t stand the monthly payment anymore” (which is understandable if you’re unemployed, deep in debt, and living alone in a three-bedroom house).
I’d say the original agent who got fired should sue her for comissions – he obviously performed his job as good as could have being asked of him.
spam – I think grim is on temporary hiatus – I’ve been in moderation since noon.
A2/A 172967572 CPRP CITIGROUP 8.125% PFD 2.031 25.270 8.097 8.038
This says it all, CITI is borrowing at 8.125% and making mortgages at 5.75% Not exactly a money making strategy.
oh – and spam, having peeked through some of the posts I’ve missed in the last week, let me just say that the notion that your business is only worth what you get paid to run it is absurd and to be ignored.
“I’ve been in moderation since noon.”
Drinking problem?
“This says it all, CITI is borrowing at 8.125% ”
but things have improved if they’re no longer borrowing at 11%……
Re the latest bailout scheme floating around:
Would principle forgiven (per any prospective bailout) be taxable income?
Would capital appreciation (when the house is sold) be figured out on the initial purchase price, or the “adjusted/reduced principle” one?
“Stu Says:
March 4th, 2008 at 2:42 pm
“I’ve been in moderation since noon.”
Drinking problem?”
Larf!
Nah – if I’d been in prohibition since noon, THAT would have been a drinking problem.
“Would principle forgiven (per any prospective bailout) be taxable income?”
Presumably not, under the new rubric that loan forgiveness under a short sale is not (agree, clot?)
that second question the answer should be yes, but that’s just a guess based on logic, and so therefore is likely incorrect.
“Would principle forgiven (per any prospective bailout) be taxable income?”
I think the next thing we will see will be the gvmt paying for their share of the bailout by scrapping Mortgage Interst Tax relief.
Sean (80)-
No. He’s a scuzball, just like all members of Congress. The best a Congressman can aspire to is honest and crazy, like Ron Paul.
Don’t tell me a Chicago machine politician isn’t bought and paid for. It may take a bit more digging, but somebody’s got more access to him than is appropriate.
NJGator,
I was looking in early 2006 at a place in Madison on Greenwood and Valevue right next to 24. It was still a good block from the highway but I could really hear the road noise in the yard. The sad thing was that it was a double property so lots and lots of land (house was OK too). They were asking high $500’s I think and a builder ended up buying the lot and subdividing it. Houses are too big for the land now in my opinion. The best part of my summers consists of a glass of chardonnay while sitting on my deck listening to the silence of the burbs…..priceless
NJP-
Thanks.
The funny thing is, after getting lowballed, I know how some of these sellers feel.
No, not the sellers with an overpriced POS cape at 500K, (BTW-I really like capes…can I admit that now? Can I come “out”?) but the ones who are selling for a normal price, (say 200K) and some turd comes in with an offer for 18K.
Good thing I don’t have to sell.
BTW- Capes are nice and small, not expensive to heat/cool or clean. Gives you more money to spend on horsies. :)
re grim 113-
In that scenario layout of 600k gets 250 and layout on 810 reaps 300k. Seems like a better return on the former case than the latter. Capital would go a bit further too.
I have a alrernative bail-out suggestion:
1. Banks reduce principle.
2. The reduced principle amount (RPA) goes to a special loan which borrower doesn’t have to pay as long as he is paying reduced mortgage amount.
3. when borrower selling off his house – ANY profit made will be first applied to RPA + interest on it (let’s say fixed at 6% apr)
4. Give borrower an option to pay off RPA at any time – in either free installments – pay as you go, or luump sum.
5. IF house mortgage is paid-off before house is sold – RPA starts acting as mortgage.
But again – I think a lot of borrowers will just choose FK/BK instead of thsi option.
Just a suggestion to limit banks losses from FK – this way home seller will sell the house – not Foreclosure, and if home appreciation will pick up – and it is always does at some point – there will be no loosers.
No, not the sellers with an overpriced POS cape at 500K, (BTW-I really like capes…can I admit that now? Can I come “out”?) but the ones who are selling for a normal price, (say 200K) and some turd comes in with an offer for 18K.
I like bigger capes too. But I did not see a single cape at 200K anywhere north of Trenton in my 2 years in NJ…. (OK may be in Orange, Patterson, and Newark)
spam
“Gives you more money to spend on horsies. :)”
Enough land for horsies to roam it will make Mrs. Patient and the little Patients happiest when we buy.
Maybe we should occasionally refer to a POS ranch or POS colonial for fairness…
^ President George W. Bush was asked about the housing boom’s impact on the ability of the questioner’s children to purchase a home. The President answered “… If houses get too expensive, people will stop buying them, which will cause people to adjust their spending habits. … Let the market function properly. I guarantee that your kind of question has been asked throughout the history of homebuilding—you know, prices for my homes are getting bid up so high that I’m afraid I’m not going to have any consumers—or my kid—and yet, things cycle. That’s just the way it works. Economies should cycle.” Bush, George W.. “President Highlights Importance of Small Business in Economic Growth”, The White House, 19 January 2006.
Bush – What the heck happened?
“OT: Met rumor…Delgado out for the year”
One positive note, he’s already in mid season, 2007, form.
#198 – Only if you are operating under the assumption that the builder can move the product associated with the first scenario.
Mike 196 – This lot isn’t all that big – it’s 60×150. It’s only one house away from the wall and overpass. It’s such a shame too because it’s the perfect size house for us – enough bedrooms, but not too big and looks like it needs no work! The noise would drive us crazy though.
Hate Capes.
Not partial to horsies either.
Bah Humbug.
njpatient Says:
March 4th, 2008 at 2:38 pm
Woman lives alone in a three bedroom house. Quits her job and HELOCs the house up to $277K to fund the opening of her dog-clothing boutique.
________________________________________________
Blank stare @ “Dog-clothing boutique.” There was one of these across the street from Headquarters Plaza when I was clerking in Morristown, and I don’t think I ever saw a single person in there other than the clerk-owner–and not only was it a “dog-clothing boutique,” but an “upscale dog-clothing boutique,” for dogs with only the most discriminating taste in fashion.
Don’t know if it’s still there, but as a committed cat-person, I still fervently believe there is a special place in hell for people who place clothing on animals . . .
Squeeky wheel gets the
greasestimulus?From MarketWatch:
Rapid deterioration
Housing is in its “deepest, most rapid downswing since the Great Depression,” the chief economist for the National Association of Home Builders said Wednesday, and the downward momentum on housing prices appears to be accelerating.
The NAHB’s latest forecast calls for new-home sales to drop 22% this year, bringing sales 55% under the peak reached in late 2005. Housing starts are predicted to tumble 31% in 2008, putting starts 60% off their high of three years ago.
“More and more of the country is now involved in the contraction, where six months ago it was not as widespread,” said David Seiders, the NAHB’s chief economist, on a conference call with reporters. “Housing is in a major contraction mode and will be another major, heavy weight on the economy in the first quarter.”
Al,
Where does MEW fit in your scheme?
Today’s rumor – Ambac bailout.
re: (195)Clotpoll
Sigh, I guess it comes down to the lesser of two evils again. McCain has his Keating and Obama has his Resko. I gather neither men are abouve influence peddling to the highest campaign contributor.
I will do what I always do every 4 years, vote for the candidate that I believe will raise my taxes the least amount, not that my taxes won’t go up, but who will pick my pocket less often and take smaller bills.
Bush’s Housing Bubble
“Today’s rumor – Ambac bailout.”
bear,
…and yesterday’s, and tomorrow’s.
#207 – bubbleYum – …as a committed cat-person, I still fervently believe there is a special place in hell for people who place clothing on animals
I submit for your amusement http://kittywigs.com/ .
Tax Payers Against a Wall Street and Mortgage Bailout
FYI
just came across a new ETF for US gasoline called UGA….. enjoy
How receptive are lenders?
“Efforts by mortgage lenders to negotiate new loan terms for borrowers at risk of foreclosure are falling short in California, according to a survey of mortgage counseling agencies released Monday by a consumer advocate group. ”
“The coalition said the results suggest the mortgage industry hasn’t helped borrowers avoid foreclosure “to any significant degree.”
A majority of those who took the survey also said servicers that opted to modify loan terms typically fixed interest rates for only a year.
“These short-term modifications most likely only delay the problem, and are akin to giving the borrower another bad loan with a short period of affordability followed by increasing payments that may be hard to make,” the coalition noted in its report.
http://www.signonsandiego.com/news/business/20080303-1208-california-loanmodification.html
ChiFi-
John’s #187 might be of interest to your clients who are in love with C.
Today’s rumor – Ambac bailout.
Read as ” I’m back…. on life support”
What scared my off from Citi is a 50 year old SVP at Citi I know who is on all the squak box internal calls is always telling me to stay the hell away from the stock it is a train wreck. He was a VP at EF Hutton that got bought by Shearson that got bought by Smith Barney that got bought by Citigroup. He has seen it all and if he is staying the hell away so am I. The only positive I heard from him is they won’t go bankrupt, but that common stock is about as enticing as a used newspaper in a London fish and chip shop.
NJGator,
You guys have nice taste. I like that house a lot as well. You can always change the house, just not the location. Keep looking and you will find the same thing in a better location. We actually gave up in 2004 due to the run ups and resumed in late 2006 and found exactly what we were looking for at the price we wanted. In towns like Madison you may have to wait a bit because if it is anything like Chatham (which I think it is) inventory is limited.
Chi – apropos of our conversation in Grasshoppers, a CEO of a bank you’ve heard of said over lunch yesterday that he sees “a substantial chance that the wheels come off the entire system”.
This is a blast from the past dating to Thursday (I’ve been trapped under a half dozen simultaneous transactions), so my apologies to those who want to skip over it, but I didn’t want to leave jill (whose blog you should read if you haven’t) with the misimpression that that I wouldn’t respond.
re pretorius at 148 on Thursday:
“When I stated “NJ areas close to Manhattan,” the best you could do was measure the distance between Linden and Staten Island.”
In response to my suggesting that Linden or Hillside were close to NYC, you rightly pointed out that you were only talking about “close to Manhattan”, which is correct; you were (more on this below). Nevertheless, you gave your definition of “close to Manhattan”:
“Fair enough to ask me to clarify “NJ areas close to Manhattan.” The area I have in mind is Hoboken, Weehawken, and downtown Jersey City.”
By this definition, Cliffside Park and Edgewater are NOT “close to Manhattan”, which I pointed out, but with no response. If that’s your position, that’s fine, but I think it points to something that I find interesting:
Until recently, it seems to me (and correct me if I’m wrong) that there were a number of folks who maintained that NJ would at worst stagnate because of its proximity to NYC. As it has become clear that the outer boros are beginning to suffer (SI, Queens, large parts of Brooklyn), that argument apears to have been re-trenched to cover only Manhattan and close to Manhattan. If that’s the case, there seems to have been a concession that NJ is NOT safe after all, other than the areas in closest proximity to Manhattan. The reason I pursued you on this point (and I’m sorry if I offended jill), is because I’m curious how far that concession goes? Is it the case that all of NJ other than Weehawken, Hoboken and part of JC has now been conceded (including, for example, Bergen County)?
I missed prediction night at the new year, but for the record, and because I don’t want jill to go on thinking I’m hiding, my prediction follows:
– Prices, as listed on the Case/Schiller index for NYC/Metro will fall 6% from 4th quarter 2007 to 4th quarter 2008, 11% when adjusted for NYC area CPI (not core). I choose NYC/Metro because the most consistent argument I’ve heard for why NJ prices won’t fall is overflow from NYC.
Regarding your prediction:
“OFHEO – 575
NAR median price of existing single family homes – $355,000
These figures are consistent with my expectation for stagnant New Jersey home prices this year.”
For the record, I think that pegging your prediction to the price index of the lobbying arm for the real estate industry renders it less meaningful, but in any even I’m confused: are you saying that all of NJ is safe because it’s close to NYC, or that only Weehawken, Hoboken and parts of JC are safe because they’re close to Manhattan?
I’m asking because your opinion, much as I disagree with it, is of interest, but I’d like to actually understand what you’re saying.
Clotpoll Says:
March 4th, 2008 at 3:34 pm
ChiFi- John’s #187 might be of interest to your clients who are in love with C.
clot: The preferred is not pari passu with the rest of the debt. It is also not the incremental source of borrowing to fund product.
U.S. real yields turn negative on inflation risks
http://www.reuters.com/article/marketsNews/idUKN0459337220080304?rpc=44
njpatient Says:
March 4th, 2008 at 3:53 pm
“a substantial chance that the wheels come off the entire system”.
Can you define the inference?
grim, can 224 come out of moderation? Nothing offensive, I don’t think…
“Can you define the inference?”
I didn’t ask, but I took him to mean that in a kettle1 sense.
njpatient Says:
March 4th, 2008 at 3:59 pm
“Can you define the inference?” I didn’t ask, but I took him to mean that in a kettle1 sense.
um, can you define YOUR inference? :(
Just got this notice via email:
“An abandoned building located at 124th Street has collapsed and all Metro North service in both directions has been suspended.”
I wonder if that means collapsed, or “collapsed.”
“um, can you define YOUR inference? :(”
I’m not smart enough to have one.
#176 Ann – here is your milk and honey.
America’s Fastest-Growing Suburbs (NJ didn’t make the top 100 – NC got 5 spots)
http://www.forbes.com/realestate/2007/07/16/suburbs-growth-housing-forbeslife-cx_mw_0716realestate_2.html
Best Places For Business And Careers (NC 5 – NJ 2)
http://www.forbes.com/lists/2007/1/07bestplaces_Best-Places-For-Business-And-Careers_Rank.html
Here is a list NJ didn’t make either
In Pictures: Most Affordable U.S. Real Estate Markets
http://www.forbes.com/forbeslife/2007/08/01/homes-affordable-property-forbeslife-cx_mw_0802realestate_slide_2.html
oh – chi, if you meant define “the kettle1 sense” I was referring to kettle’s oft-apocalyptic outlook – you know, survival gear, gold buried in the backyard, etc.
GOOG 700!
NJ patient,
what do you see my “inference” as?
Mike 221 – Thanks! We’re not set on town yet, but we will most likely wind up somewhere in that 78/24 corridor between Millburn and Madison. I need a good train commute into the city and Stu needs a good driving commute to Union. Stu is also hell bent on getting out of Essex County.
patient,
I think you have mixed up with clott. I do not see things going well in the near future, but i dont think we are going mad max
grim, did I say something naughty?
245 ket
oops – maybe you’re right – thought I remembered you discussing the collapse of the fiat currency awhile back
hmm,
i did get the title of apocalypse boy a while back in one of the threads….. oh well apocalypse it is then! Hey it should make for great entertainment, better then reality TV anyway
Thanks, grim.
#242
when??
Quite a nce rally at the end of the day…
There is still little hope for my 401K :)
My question is when do all the shareholder class action lawsuits begin?
I wish I would have bought thouse “Short Google options” at 650… But instead, when google was 700 I was considering buying some of it – it seemed soo destined to go to round 1000 and than crash… I thought I would be smart and get out at 900$. But I decided against playing with downpayment money… Plain old boring CD’s.
Now my downpayment is paying my rent for about 1 1/2 month out of the eyar.
Clot:
The man who thinks Ron Paul is “honest.”
A thankless task, but someone’s gotta do it.
If we give the couple who bought a house at 680K that is worth 550K a check for 130K we are introducing new money into the economy. We can’t get it back from the seller, but if we refund the buyer his loss we are printing money in DC and wild inflation will be the result.
John,
I would argue the money has already been printed (i.e. created out of thin air). Where did the blue collar couple get the $680k for the house? They borrowed it. Where did this money come from? This money was created as a result of post dot com crash stimulus. Official inflation was tame because this excess liquidity was absorbed by the housing market.
Ye Gods Mitchell….pack my stuff…I’m heading to Knoxville…that list is invaluable…..thanks!
#256 Essex if your going to be sarcastic at least be funny.
Well my friend…Mitchell…let me tell you one thing….I’ve lived all over this great country, and you can have the nonsense that you find in the south and midwest….I prefer the straight forward, Bruce Springsteen loving…over taxed…over educated…people of the Garden State. Amen.
for those who care, apparently metro north service has been restored, albeit with 90 minute delays and massively crowded trains due to the back up.
What would Lovelock do now, I ask, if he were me? He smiles and says: “Enjoy life while you can. Because if you’re lucky it’s going to be 20 years before it hits the fan.”
http://www.guardian.co.uk/theguardian/2008/mar/01/scienceofclimatechange.climatechange
Actually the article is interesting but depressing.
Mitchell – that’s quite a depressing looking website you have there. It looks like one of those scam sites, that tries to make money off of links.
Let’s see a link to Mitchell’s templated….generic….lame-o web site. He posted it once a while back and it was incredibly forgettable. Guess they don’t need web design in the new souff.
Good for you Essex.
I dont have any dis-taste for people of NJ just the overinflated BS the govt created which is turning the state into a craphole of zombie tax payers. The sad part is watching the state accept the moral decay and increased taxes instead of fighting the real battle and going after Corzine and the people who keep dumping on the state. Go ahead blame other states. How long until you see $300K homes with 15K taxes?
Its like the majority of the state accepts the rear ending the govt give NJ taxpayers and then ask for more. Basing everything around the sole idea of what the job pays and house prices while most have no clue what their true take home pay is. Ok you can go to the township and maybe get a few hundred off your property tax increases but lets be real the decrease they give is only a portion of the increase they stacked on.
Seriously looking at the bottom line of take home, work, and overall lifestyle well instead of sitting on your asses waiting for house prices to decline while they just jack up the taxes so erasing any gain of ownership it might be better to look elsewhere. Even if its working and living in NY.
Why wait? Certainly understandable if the situation doesn’t allow. Sure a lot of people are happy with NJ. I was but then I prefer to have money in my pocket not give it to the state or insurance companies then watch tolls increase.
260 ‘soosh
at least there’s reference to Cornwall, one of my most favoritest places on earth. I’ve got a couple of stones from the beach south of Barra’s Nose in Tintagel sitting within reach of my desk.
quite a depressing looking website you have there. It looks like one of those scam sites, that tries to make money off of links.
I take offense..
http://anticost.com
“I prefer the straight forward, Bruce Springsteen loving…”
Essex [258]
I know a place where the dancing’s free
Now baby won’t you come with me
`cause down the shore everything’s all right
You and your baby on a saturday night
Nothing matters in this whole wide world
When you’re in love with a jersey girl
#261 #262. Why do I matter so much to you?
Why are some of you so angry? And in a blog no less?
#265.
LOL yup ugly websites shame we clutter the web with them.
http://www.BrokenPrices.Com
BTW the one of my crappy cookie cutter website click through scams Is being sold for $2,500 to an local Allen Tate office.
Its been up for a few months. Cost me $7.00 and $2.50 x 6 months = $23.00
$2500 – $23.00 = Loser I guess.
Now that leaves 300+ more cookie cutter crappy websites to sell. Oh well.
“Why do I matter so much to you?”
Mitchell, it’s because you’re so good looking, and yet so far away.
Or maybe because you singlehandedly turn a blog about NJ RE into a blog about NC RE, which many find aggravating (even some of us who intend to leave NJ find it aggravating).
I would suggest to you, as gently as possible, that you are accomplishing the precise opposite of what I believe you intend to accomplish. Throttle down a bit.
267 – You don’t matter to me. I just think your website is ugly.
Out of curiosity, why do you spend do much time on here anyway? There is absolutely no point, and it is keeping you from spending more precious time with your children. Isn’t that why you moved to NC in the first place? Family time. You might as well be sitting on the Turnpike.
#266 I was thinking more “you aint a beauty but hey your all right” Classic Bruce
But hey my wife is built in Ohio raised in NJ.
patient – never been to Cornwall, would LOVE to visit. My sister in London vacations there occasionally and raves about it.
There is radiation there from the tin mines I believe though.
Mitchell you have yet to answer my question from yesterday about click through advertising.
Clickety click and another 1/100 of a cent for me!
#269 The amazing part of some people is they cant figure out who really threw the first stone. Try following the thread and you will know. Because I am associated more with NC than NJ its assumed the no longer local is the first to throw the stone.
And damn I am good looking. Seriously what’s to throttle down. I’m not agitated in the least but some of you are and over me?
Take a chill pill guys.
Mitchell [271],
Pass on to the wife;
Here in northeast Ohio
Back in eighteen-o-three
James and Dan Heaton
Found the ore that was linin’ Yellow Creek
They built a blast furnace
Here along the shore
And they made the cannonballs
That helped the Union win the war
Here in Youngstown
Here in Youngstown
My sweet Jenny I’m sinkin’ down
Here darlin’ in Youngstown
patient – going back to that article, I just noticed it is covered with ads for exactly the type of stuff he is decrying.
I was particularly interested to see the recycled fire hose belt. By the time it is manufactured, moved around the country 10 times and shipped it would be greener just to go out and kill a cow.
BTW:
http://www.BrokenPrices.Com
Look at the registrar history. ;)
Broken Prices a website I created that Grim bought from me several years back. Grim’s is much nicer. Mine helped me learn PHP/MySQL till I didn’t want to do it any more then grim purchased it for the number of inbound internet links I was able to build in the search engines.
If all of these banks are hurting for cash so badly, why can’t I get better than 4% on my savings?
From MarketWatch:
Stirring up the already-murky jobs picture
Estimate based on tax receipts say economy lost 77,000 jobs in February
Employment reports tend to give markets indigestion – particularly when they find themselves with conflicting data from the government and the private sector.
Throw one more into the mix.
An alternate view of the employment picture compiled by TrimTabs Investment Research estimates 77,000 jobs fell off employers’ payrolls in February. That’s in contrast to the 35,000 gain in nonfarm jobs that economists expect the Labor Department to report on Friday. And it’s likely to show a different read than the one set for release Wednesday by payroll provider Automatic Data Processing Inc.
The variation lies in how the three data providers get their pickings.
The Labor Department’s monthly employment release surveys 400,000 business units nationwide and derives estimates on employment, hours and earnings. It adjusts its monthly estimates for seasonality, and it frequently revises those initial estimates. In February it redid the math and figured that it had overcounted an average 15,000 jobs per month last year.
Critics say errors frequently arise because the estimates come from a survey taken during one week of every month, and from the Bureau of Labor Statistics’ method of adjusting its findings for seasonal fluctuations.
ADP uses different sourcing — the payrolls it processes for about 392,000 business clients — but it sorts through the data using a procedure similar to the Labor Department.
The company says its main mission isn’t to forecast the Labor Department data, but does point out there is a strong historical correlation — 0.87 — with the Labor Department’s estimates, particularly with the government’s revisions to its numbers.
…
TrimTabs, for its part, collects information on daily income tax receipts filed with the U.S. Treasury. From this aggregate sum, it factors for wage growth and workers slipping into higher tax brackets as they bring home more money.
TrimTabs says its goal is not to give a preview of the Labor Department report, and market participants don’t seem use the data as a gauge. There’s no pressure for the data to reflect the Labor numbers, and they often don’t — in January, for instance, TrimTabs estimated payrolls fell by 156,000. That was a much more severe dip than the 17,000 loss estimated by the government and the 130,000 gain (later revised to 126,000) estimated by ADP.
TrimTabs President Conrad Gann said the company’s estimates do well by a broader measure — reflecting what’s actually going on with the economy.
In October, for instance, TrimTabs estimated the U.S. labor market lost 74,000 jobs vs. the 166,000 gain in jobs that the Labor Department revealed. The next month, the Dow Jones Industrial Average and S&P 500 lost about 4%. Fourth quarter GDP growth slowed to 0.6%.
“Our employment estimate did a good job of signaling when the effects of the credit crunch hit the underlying economy,” Gann said.
263……Mitchell…not that i even read the whole post….but it’s like this…you make the most of the hand that is dealt you. I like…no make that LOVE the life I have built for myself up here. And I have options. No I am not ‘angry’. Or writing multi paragraph rants either.
From Mitchell’s site…
Get me to NC NOW!!!!!
http://www.interiorliving.com/info.php?id=61
I saw it first!!!! MINE MINE MINE ALL MINE!
Essex Says:
March 4th, 2008 at 5:02 pm
Well my friend…Mitchell
…let me tell you one thing…
I’ve lived all over this great country,
and you can have the nonsense
that you find in the south and midwest
I prefer the straight forward,
Bruce Springsteen loving…
over taxed…over educated…
people of the Garden State. Amen.
SX: This is Bon Jovi…yes?
And Mitchell….I told you….my own sister is trying to sell her (pretty nice) McMansion on a golf course in Davidson, NC…it aint movin. The market down there is cashed out as well. NC aint doin nothing. Tire kickers and too many sellers down there.
182…Bon Jovi….that dude lives like a King. Wish I had half of his money, I would through mine away….
Oops. Make that ‘Throw’ mine away.
RE:82
PGC, The housing that you are talking about{55 plus} is the original Kara with 2 buildings done. It was taken over by Maplewood homes and is re-opening as Nolans Point.
The 299 is their come on price, and the rec center is being framed and will hopefully be ready by The Grand Opening.
The original units” Horizons” went for up to $485,000{Further up the hill by the lake}. Fortunately I bought my unit when Kara was having its Fire sale for $375,000.
The real problem was that we had to go to court to get permission to close, but it was worth the wait. Although my neighbors always bust me about what I paid,but these people are the best neighbors I have had during 35 years of home ownership in various locals.
Maybe I should take out a mortgage so Bernake could bail me out,pathetic. Lets reward people for not being responsible!
JIM
#279 Essex. I understand I have a few friends back north that are in situations that they cant move. Be it close to being vested, family, etc. I understand.
What I am saying is deeper than the surface of talking about moving out of state. If that is not an option and rightfully it shouldn’t be an option then one should focus on the real issues that are causing the influx of people looking for the greener grass.
From the very beginning I have been saying that the NJ govt is more to blame for problems in NJ than anything else. Forget housing bubble we all know its there and deflating.
While everyone is busy focusing on the real estate issue not enough people are focusing or addressing the real issues that is causing problems in NJ. Taxes, Tolls, Insurance, Etc. If you want real longevity of the real estate market you have to stop the Govt from increasing these items.
Let say you have a 100K for a down payment.
What good is having a 300K house with 15K taxes?
200K loan in NJ with high property taxes.
$ 1330.60 per month house payment
$ 1250.00 per month property taxes
Total $2580.60 per month
I’m not saying move but the question is no longer can you afford the mortgage the question is now can you afford the taxes!
If houses double in value every 10 years LOL. then this is a home that’s worth 600K.
Here is where you have to compare out of state.
Again 100K down except were going to buy a 400K house in another state.
A 300K loan in a place where the taxes aren’t insane.
$ 1995.91 per month on the mortgage
$ 300.00 per month on the property taxes.
Total $2295.91 OMG its cheaper and with a 300K loan maybe a 400K house.
Apply the same rule as above and you have 800K home in 10 years LOL but the money is different in these scenarios. The money is in your home not in the governments pocket and you did it for less.
Now I know a few of you go OH god hes promoting NC again. If you think that then the time for you to buy a new home is now.
Taxes, Tolls, Commute, Insurance, play a bigger role than the mortgage does in NJ. Thats a huge problem. I didn’t create the problem. Ok your angry with me still but you need to address this with the state. I am not the gov.
I dont know but at the end of a mortgage EQUITY is what you get back. There is not 30 years of Taxes you collect at the end.
Broken Prices a website I created that Grim bought from me several years back.
Not Grim, Richie, different person.
Thanks Grim for clearing that up. Thought you were one in the same.
258
“I prefer the straight forward, Bruce Springsteen loving…over taxed…over educated…people of the Garden State. Amen.”
I’ll tell ya, one of my favorite things about NJ is that you always know who your friends are. If people like you, you know it. If people don’t, you know that too. Makes things quite simple.
gary #35
3 out of 4 metro areas…. guess which metro areas won’t see that much of a decline? I opened up a fresh batch of listings last night and they’re still at or near peak prices. Just saying.
______
agreed, sort of. We’re only now starting the downslope for this area*.
We’ve been tracking prices since getting married in q3’05 and as far as housing is concerned it’s been a slow 2.5 years. Even just going by the NAR #’s the q4’04 to q4’05 YOY price changes were +20%ish for the area*… for q4’06 to q4’07 the % pace YOY slowed drastically & prices are just above/at the q4’05 mark. This should be the beginning of the retracement. Now just be patient for another 2.5+ years (2010 if you’re lucky, 2011 for most). I think it oughta bottom out for another 2 after that (2012), and then state rather flat for who knows how long. Just preoccupy yourself with something else until then, quit buying gardening books & collecting paint swatches. When you see election signs again, it’ll be time.
*area = eastern PA areas or ones that include NJ; any NY areas that include NJ; & all NJ stand alones.
Mitchell, I clicked your website twice today from two different computers, that means you will be getting a check for 2/100s of a cent!
I expect a commission on your click through revenue!
Mitchell, I wasn’t referring to the casting of aspersions – generally you don’t. I was referring to the regularity of the 1000 word essays on leaving NJ (again, I say this as someone who will do so). If you could just slow the pace a tad, it would be refreshing.
Anybody here ever travel to Germany? Or has ever bought something from German Amazon and have it shipped here? Or could perhaps contact German Amazon for me and find out if they can ship to the UK or even the US?
# x-underwriter Says:
March 4th, 2008 at 10:51 am
Does anybody have anything to say, good or bad about the Northern Virginia area (DC Suburbs)?
I’m seeing the prices there are coming down much faster than in this area and the job market appears to be very healthy still.
I already know about the gonzo traffic and congestion and that DC itself is a total craphole.
NOVA’s great. expensive as hell. prices will definitely be coming down further. I have a friend who is ‘stuck’ (upgraded without previously selling his townhouse; now is renting one place and living in his primary and his mortgage is slightly more than 4000 a month. No idea how he does it.)
I grew up there and went to HS in the area as well. If you need a realtor, my buddy’s wife just got her license and when we last spoke (two weeks ago) was about to get her license.
Let me know if you’re interested in her info … feel free to email me through Grim.
And DC is no dump … it’s just no NYC. If you live in Arlington, it’s probably the equivalent of Hoboken to NYC, except way better parking, and the bars have better ratios than 10:1 guys.
184: Ann
I look at that list and see…..humidity.
patient
My outlook is pretty much the same as lovelocks (the article lisoosh linked). so i guess that once again i am confirmed as apocalypse boy.
The reason i lean towards that outcome is that from my personal experience very few people realize how drastically complex systems tend to crash once they are perturbed from their steady state conditions. Humans as a whole have essentially been doing everything we can to push the environment out of steady state ever since the industrial revolution started.
The problem is that once you perturb a complex system changes tend to be fast and extreme, and it is hard to get the system to return to its original steady state. More often the system slides into a new steady state which may or may not be a desirable one.
When i look around i see signs of a complex system becoming unstable. it is well known in complex systems that the more complex a system becomes the more prone to failure it becomes also. an extreme example; what breaks first, an abacus or a PC and which is easier to fix?
Did you guys know NC is a state where the next biggest bubble is ??. It has been hyped up sooo much by pimps like Mitchell, people will start loosing money there very soon.
Real estate agents like Mitchell will not even hesitate to pimp their mother/sister to get a commission.
kettle, you’re definitely apocalypse boy, but that’s a good thing.
“one in the same.”
Kinky!
This place in NC has been rated as the worst place to live in the world. Michelle is living there. Who the heck goes there.
5. Horneytown, North Carolina, United States
Its proximity to Hookersville, West Virginia is no coincidence. I also assume that, like Hookersville, the naming of Horneytown took place before “horney” meant “aching for a hot piece of ass” with an extra “e”. But I’m starting to wonder why, pride and tradition aside, the townspeople in these little places never saw it fit to change their homes’ names? Do they enjoy being ridiculed by the entire English-speaking world?
#35 gary:guess which metro areas won’t see that much of a decline? I opened up a fresh batch of listings last night and they’re still at or
STOP YOURSELF!!! A bunch of over priced listings means nothing. It will and is happening here too.
NC and SC are the worst place to live. Allergies.
http://www.city-data.com/forum/greenville-spartanburg-area/187343-greenville-sc-nc-worst-place-allergies.html
Come on. Just because I pimped my mother doesn’t mean I’m bad. This world is all about money and I will even pimp my daughter for some $$$. I moved to NC because I can save some $$$ when I’m old. You NJ thrash cans have no clue what money can bring.
So what if I pimp my daughter.
#45 I’m just calling it as I see it. Just like I did 6, 12 and 18 months ago. In 6 more months, I’ll call it as I see it then.
You atr probably seeing soem of the same lisitngs from 6, 12, 18 months ago too.
patient,
describe “good thing”
Mitchell [286],
That is so sad but could you shill somewhere else from now on?
Ann (#184)
From Forbes, Best Places to Get Ahead (sorry in advance if this has been posted already)
10. Williamson Cty Tenn
I must be a total moron because I moved back to NJ from Williamson County, TN in 2006. My bro and s-i-l live there. They are Chicago MBA grads and maxed out of career growth at 30 years old. If he wants to go up his company told him he had to move to NJ. lol
soosh(293),
I have purchased from Amazon France and it was quite painless. Shipping is expensive, but other than that, the purchase went quite well.
#293 soosh
post your question here
http://how-to-learn-any-language.com/forum/default.asp
It’s a forum for people learning foreign languages. you”ll get a bunch of responses.
People order from all around the world order from the different amazons.
Is mitchell Donald’s southern twin?
Random notes …
– Man, that guy with the Montclair rental situation is in a tough spot – those taxes are insane
– i still laugh at all this bailout talk and will only get worked up when it actually happens
– ok, fine – what good is bailing someone out when you know they CAN’T AFFORD THE HOUSE THEY LIVE IN ANYWAY??? Why delay things?
– 10 places to ‘get ahead’ – is that the most random list ever? How is NYC not on that list?
Oh for heaven’s sake! Enough with the NJ-NC stuff. I’ve lived both places and each has its good and bad points. Honestly, I found NC more of a culture shock than any of the nine states I’ve lived in. Except for the the taxes and the RE prices, New Jersey is a great place to live – lots of stuff to do, close to the shore and the mountains and lots of local stuff too – small community theaters, etc. You don’t HAVE to go into the city. Plus lots of neighborhood things like block parties. I had the best childhood in the world in my blue-collar hometown. The south has newer areas, bigger houses, bigger lots, lower taxes and it’s less densely populated. It’s not necessarily worse than NJ, just different. Call me a wimp, but I could live either place and be happy. SO THERE!!
Chi,
I really hope your client (friend?) takes your wise advice to diversify out.
Whatever upside scenario one might see, it just isn’t worth the myriad of risks IMHO…especially if those same individuals happen to be doubling down via their employment (hope not, but of course not uncommon).
I can’t see how anyone can come close to accurately quantifying those risks. The CEO, top mgmt, with unfettered access to the books (and skeletons) couldn’t do it; if they had, ol’ Chuck wouldn’t have made the promise to the Saudi – no more writedowns – that stamped his walking papers just weeks later. Lampert couldn’t do it, either. And no matter how articulate or insightful, I doubt any sell-side analyst would be able to scratch the surface.
Sometimes, it just comes down to survival instincts. If the individual is at the firm, he/she better take a hard look around. If not, they should start talking to people who do.
Saber rattling? Yikes.
#285 Jim
If that is the clubhouse its a bit of a hike up the hill. Is there an oxygen station halfway up the hill for the older residents….:*) kidding.
We should get together with Kettle for a north Morris meetup. We could have steak and clams at Pub 199
Go Clinton!
Ohio butchered the last election, tonight’s your chance to make things right by having the best Dem candidate beat the dreamer!
ChiFi (232)-
Sorry, I missed that your client was looking at C preferred. I thought it was C common.
Still, other than the preferred’s senior position in event of thermonuclear meltdown, aren’t the differences basically in the stench that each respective shitpile is giving off?
This has absolutely nothing to do with NJ real estate.
I’m just posting this to help out with folks looking.
Click on any of the ads with North Liberties/ Cambridge & 3rd.
http://philadelphia.craigslist.org/apa/595677038.html
Then click on the google map link, go to steet view, full screen, then pan right down Cambridge four clicks, right on Bodine.
Yikes. Yeah, O.K. Take my 2 grand a month…just let me outta here.
Clot
I must have missed it. What is C?
Mitchell (268)-
“Now that leaves 300+ more cookie cutter crappy websites to sell.”
Great. Pat yourself on the back. You’re the 21st century version of the Fuller Brush salesman.
lost (316)-
Citigroup.
Grim – if you want to buy a multi in Montclair, but something on a small lot. Over 2/3 of our assessment is the land. Some of the multis only a few blocks from us pay about $4,000 less/year in taxes because their lot is about 1/2 the size of our palatial .24 acres!
Or if you can swing it buy a 3 family or “2 family with boarder apartment” as so many of the not legal 3 families are called. Our neighbors pull in over $2500/month in rental income with a nice large owners unit…that kind of helps take the edge off the taxes.
I second whoever said let Duck come back. At least he was funny.
Mitchell is like an infected neck goiter.
…and I love NC.
…I love America.
re 296:
‘environment out of steady state’
The idea that there is such a thing as a steady state in environment is another illusion due to the horizon effect.
I have tickets to see Van Halen on the 13th at the Idod center, that is if the band does not break up or Eddie does not OD by then.
Sad to say Eddie was the cause of all of their issues over the last two decades.
Check this you tube. Eddie is a has been, at least Roth is putting forth an effort.
http://www.youtube.com/watch?v=_0f2N5ae3wU
Mitchell (286)-
We’re conversant with the basics of the dysfunction of NJ. We live here. Not to put too fine a point on it, but you:
1) spend far too many words stating the obvious
2) taunt people simply because they live here
3) interject plugs and shills for NC that read as though you believe you’re exercising some sort of subliminal influence
PGC RE 312,
I think Pub 199 has put Mt. Arlington “on the map”.
I am probably the only person on this blog than can get into 55+ housing.Although I do know now why Kara went Bankrupt…these condos are built like a fortress, sometimes I have to knock on my neighbors door, just to make sure he is still alive. You cannot hear any noise, even if a party is going on next door.
JIM
evreything 323
I use the term “steady state” very loosely, and as a term relative to human time scales of hundreds of years, not geologic time scales of millions of years. although i would argue that you can have a dynamic steady state environment where inputs and outputs are stable, such as health predator prey relationships. Geologic and atmospheric systems can not be directly compared ( which you seems to be referring to.
Mitchell, you are a tool
Definition courtesy of the urban dictionary.
Tool –
Someone that thinks they’re cool or funny. One that tries to hang around with a group, thinking theyre all friends, when everyone hates him. Someone that tries adding on to jokes but just turns up as a buzzkill. Someone that everyone likes playing pranks on, but doesn’t realize it and still tries to act like a friend, even after you tell him how much you hate them. and yeah, i know a few.
Another definition
Tool Shed – The entire state of North Carolina.
2490495 street name anybody ?
Holy crap……………Mitchell……I’ll drink a beer with you bro but you can’t try to convert me….I like a blue eyed blonde with huge b**bs….we’re married….we have a little girl who was born in Jersey….She’s a Jersey girl. That’s the whole story. And it rocks.
#324 Sean,
I am planning to go see them too but seeing Eddie in this state makes me wonder if it’s worth it. Here’s a solo by Eddie from the Texas gig…
http://www.youtube.com/watch?v=qb_Thn1Ro2Q
I can’t believe things can go downhill so quickly in a month :)
kettle1,
You would love The Ingenuity Gap by Thomas Homer-Dixon. The book sums up the weaknesses of complex systems especially our lack of understanding of ecology, as well as some interesting stuff about financial complexity. I talked about it at the M-town meetup, but I couldn’t bring the title to mind because Stu kept making me chug beers.
Eddie is a freakin god…..he’ll pull it out dammit.
LOoks like Hil is showing Obama a lil somethin she calls…the SNL factor.
Made you chug beers? Just cause I bought ’em doesn’t mean I forced you to drink ’em!
#330 Jim
I’m renting in a Kara complex and it seems to be getting a little subsidence. The settling cracks in the drywall and finish carpentry are a bit worring. I think the codos should be immune to that as they should be a steel and concrete strucature so the building would move as one. But i’m not an engineer so I’m probably wrong.
PGC, I have to agree with you, the metal framing and 18″ concrete floors may seem to help, also walls are 5/8 in sheetrock and sounproof floors.
The engineering was good, but some workmansip was poor…might be because they were not being paid.
But the Pub is Great!
JIM
Tenafly
SLD
68 CHRISTIE ST
$852,000 9/15/2005
SLD
68 CHRISTIE ST
$797,500 3/6/2008