From Bloomberg:
Franco Is Still Dead, and Housing Is Still Bust
The latest round of housing statistics — sales, starts, homebuilders’ outlook surveys and earnings reports — offered little hope that residential real estate would be back on its feet anytime soon.
“Housing is bust, and wishful thinking cannot unbust it anytime soon,” says Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York.
Just to recap what we learned this week: New home sales plunged 6.6 percent in June to 834,000, just above the seven- year low set in March. Sales are down 22 percent from a year earlier, even with builders throwing in the kitchen sink to sweeten incentives and lighten the load (inventories).
Home resales fell 3.9 percent last month to 5.75 million, a five-year low. They’re down 11 percent in the last 12 months.
The only surprise is that prices haven’t fallen more. The median price of an existing home was unchanged from a year earlier while new home prices fell 2.2 percent, removing the refinancing/cash-out option for strapped homeowners but not much of a real loss given soaring home prices from about 2001 through 2005.
Shepherdson warns against taking any comfort in the stabilization in home prices for two reasons: one, the deterioration in the supply picture; and two, the lack of adjustment in median prices for either seasonal variations or the mix of properties sold from one month to the next.
Because most of the problems have been in the subprime and Alt-A sectors, and because non-prime borrowers probably buy lower-priced homes, “their absence from the market will limit the speed of the decline in the median home price,” he says.
…
Haven’t we seen this movie before? Every bubble has a credit kicker when the price of whatever asset folks were chasing stops rising. Banks find religion when it comes to making new loans. Regulators step in to make sure there will be no repeat of the last bubble. Consumers save more; businesses invest less.Housing has been the economy’s weakest link for some time, subtracting about 1 percentage point from growth in every quarter from the second quarter of 2006 through the first quarter of 2007.
Residential investment, as it’s referred to in the gross domestic product accounts, may not be the real threat to the U.S. economy. The danger lies in the fact that “there’s a lot more household debt associated with housing” than there was with the stock-market bubble, Carson says.
Maybe you can take housing out of the economy for analytical purposes (see “GDP ex-housing”). But when it comes to the real world, the two are inextricably linked.
Bill Gross on Squawk Box calling the high-yield debt market meltdown an “8.0 earthquake”.
Nice start to the day…
Along with a Tsunami?
All about the GDP at 8:30…
jb
I haven’t seen any reporting on this, but all ABX indicies hit new lows yesterday. The one-day drops look to be equal or worse to the declines seen immediately after the Bear Fund blowup. If any hedgies took positions, looking to play the bounce, they’ll be in the same boat Bear was.
jb
I take that back..
From the NY Post (of all places)..
BUBBLE LEAKING
A highly watched asset-backed bond index comprised of AA-rated bonds – the ABX 07-1 index – dropped six points yesterday. It usually moves a point or two, traders told The Post.
Other ABX indexes covering A-rated to BBB-rated bonds dropped between three and five points.
You don’t need a big decline in any market to cause investors to pull back. Vol can accomplish this, by its lonesome. Many doors/exits have been shut. However, the vol door is wide open and getting wider.
Can somebody pull the plug on CNBC. A little vol and you would think the world is coming to an end. Wait until these markets really get juiced. I guess many have just been hypnotized by spooky, quiet markets.
position and location folks! that is what it has always been about and all of you who espouse history that is and always has been the most important take away (stocks or real estate)
From the AP:
Cadbury Taking More Time U.S. Unit Sale
Cadbury Schweppes PLC said Friday that it has extended the timetable for taking bids for its U.S. beverage unit because of market volatility.
…
There are concerns that higher corporate borrowing costs will curb the rapid pace of takeovers that had driven stocks higher this year, analysts said.
…
“However, the leveraged debt markets have experienced extreme volatility in recent days. As a result, a decision has been taken to extend the sale timetable to allow bidders to complete their proposals against a more stable debt financing market,” the company said in an announcement to the London Stock Exchange.
Interesting News coming this Sunday. Newsday is doing an indepth special on how the sellers are coping with having to significantly cut asking prices and having no buyers show up at open houses and have buyers are dealing with the stricter mortgagae application approval process and discuss if a large part of the buying population is cut off due to the new stricter guidelines. Should be interesting.
Also Aug 8th American Home Mortgage has to do its SEC filing, as of 12-31-06 they had 10 billion plus off balance sheet mortgage related holdings on their books that they were holding in their own name. Unlike the hedge funds they have to mark to market the whole thing and make the information public, should make for interesting reading. They have a Big 4 auditor who will double check their work prior to release and since they are SOX compliant there will be little hanky panky in the numbers and we can see the real carnage.
`This is not going to be a short affair,” said V. Anantha-Nageswaran, head of research for Asia at Bank Julius Baer (Singapore) Ltd., part of Switzerland’s biggest independent money manager. “By the time it ends, in three to four years, people will not want to hear of financial markets or real estate.”
position and location folks!
No one here would deny that.
But just realize that sometimes the best position is short, not long, and all a good location means is that you lost less than the other guy.
jb
Stock shake up today…
Global Markets Tumble as Credit Worries Deepen
‘The credit difficulties began in the United States with investors growing worried about losses on securities that helped to finance subprime mortgages for borrowers with weak credit, but now they have spread to highly leveraged companies as well.’
http://www.nytimes.com/2007/07/27/business/27cnd-stox.html
and this –
Asian Stocks Fall Sharply After U.S. Sell-Off
‘The heavy selling in Asia was sparked by a fall on Wall Street blamed on worries over a worsening housing slump and a crisis in the subprime mortgage market.’
http://www.nytimes.com/2007/07/27/business/worldbusiness/27cnd-asiastox.html?_r=1&hp=&adxnnl=1&oref=slogin&adxnnlx=1185539239-ErMmtFTkjukFvPnjjS6ojQ
gdp 3.4%
From MarketWatch:
U.S. Q2 GDP up 3.4% vs revised 0.6% rise in Q1
Led by stronger exports, government spending and inventory building, the U.S. economy accelerated to a 3.4% real annualized growth in the second quarter, the Commerce Department estimated Friday. The first estimate of first-quarter gross domestic product was slightly lower than the 3.6% expected by economists. Growth in the first quarter was revised slightly down to a 0.6% gain compared with previous estimates of a 0.7% increase. Final sales of domestic product increased 3.2% compared with a 1.3% gain in the first quarter. Meanwhile, core consumer prices – which exclude food and energy costs – increased at a 1.4% annual pace, the slowest pace since the second quarter of 2003.
U.S. Q2 GDP up 3.4%
Fastest pace since Q1 ’06, consumer spending slows
WASHINGTON (MarketWatch) – After hitting a pothole in the first quarter, the U.S. economy rebounded in the second quarter, growing at an annual rate of 3.4%, the fastest pace since the first quarter of 2006, the Commerce Department said Friday.
The increase in the nation’s real gross domestic product was slightly below market expectations of a gain of 3.6%, according to the survey of economists conducted by MarketWatch. See Economic Calendar.
The GDP had risen just 0.6% in the first quarter.
Economists said the weakness in the first quarter and the subsequent strength in the second quarter are both overstated and the best way to understand the economy was to average the growth rate over the past six months. This produces a 2.0% average growth rate in the first half of the year.
Some economists have concerns that the second half of the year will be slow as consumers are tired and under pressure from the weak housing sector. But other economists believe these fears are overblown.
The improvement in the second quarter was concentrated in a stronger trade performance, faster government spending and a rebuilding of inventories after significant reductions in the past two quarters. These offset a sharp slowdown in consumer spending.
Consumer spending increased 1.3% in the second quarter after a 3.7% gain in the first.
The inflation picture was mixed. The core consumer price index (excluding food and energy) retreated to a 1.4% annual rate in the second quarter from 2.4% in the first, pushing the year-over-year gain down to 2.0%, the top of the Fed’s perceived “comfort zone” on inflation.
But headline inflation accelerated to a 4.3% annual rate, the fastest pace since the fourth quarter of 1990.
Real disposable income fell 0.8% annualized in the second quarter, after rising 5.9% in the first quarter. The savings rate was 0.6% in the second quarter, down from 1.1% in the first.
Details
Imports, which are a subtraction from the calculation of GDP, fell 2.6% in the second quarter, while exports rose 6.4%. The trade deficit added 1.2 percentage points to growth.
Government spending increased 4.2% after falling 0.5% in the first quarter. Federal spending rose 6.7%. Defense spending rose 9.5% in the second quarter and nondefense spending rose 1.3%. State and local government spending rose 2.9%. Government spending contributed 0.8 percentage points to growth.
Businesses added $3.6 billion to their inventories after adding only $100 million in the first quarter. The change in inventories added 0.15 percentage points to growth.
Final sales to domestic purchasers, GDP less the change in private inventories, increased 3.2% in the second quarter, compared with a 1.3% increase in the first quarter.
Residential investment fell 9.3% in the second quarter, the smallest decline since the first quarter of 2006. Investment in residences subtracted 0.49 percentage points from second quarter growth, compared with 0.93 percentage points from first quarter growth.
Business investment increased 2.2% in the second quarter after falling 4.4% in the first. It was the first increase in the past five quarters. Business investment contributed 0.83 percentage points to growth.
Investments in equipment and software increased 2.3% after a 0.3% gain in the first quarter. It was the fastest growth in equipment and software investment since the third quarter of last year. Investments in structures jumped 22.1%, the fastest pace since the second quarter of 1994.
U.S. Q2 consumer spending up 1.3% vs 3.7% in Q1
U.S. Q1 GDP up revised 0.6% vs 0.7% prev est
JB-
Post #13 stuck in moderation
From Market Watch:
U.S. stock market futures pointed to a second day of losses for Friday after the huge sell-off in the past session, with data showing a pick-up in economic growth and a drop in core inflation during the second quarter.
The economic data didn’t, at least in the short term, alleviate selling pressure.
God, in regards to the Dow, we haven’t seen these market levels since mid-July. What will we do?? Is the world coming to an end??
Robert Says:
July 26th, 2007 at 8:58 pm
cf,
I think breathing in the mold all day from your leaking windows at HT is making you sick. See a doctor!
BTW: Are you really serious that the windows there leak? Are you trying to tell me that Governor Corznine and Eli Manning both live in a building with leaking windows, with all their money??
guan: everyone in the buildings knows the story about how Corzine walked down to the concierge and said incredulously “…the ceiling is dripping in my bedroom..”
#20 homseller; The point is the “experts” claimed we were going to hit 14,000, and we did. Mant also claimed once we did, we would not look back. Well, everybody is looking back now so to speak.
#1 Clot: can we move Sept 1 to August 1?
Is the world coming to an end??
Slept like a baby..
jb
Real disposable income fell 0.8% annualized in the second quarter, after rising 5.9% in the first quarter.
Except in New Jersey, where real disposable household income increased 20%, from $250,000 to $300,000
[/sarcasm off]
From the WSJ:
July 26, 2007, 12:34 pm
Economists React: ‘Housing Is Bust’
Economists weigh in on the 6.6% decline in new-home sales, far below the 1.6% drop expected by economists. The median price of a new home fell by 2.2% to $237,900 in June. Regionally last month, new-home sales decreased 27% in the Northeast, 23% in the West, and 17% in the Midwest. Demand rose 7.6% in the South.
# I can’t see clearly now, the rain has not gone… The median price of a newly built home … is now down 15% at an annual rate since the turn of the year. If we were to replace the owners’ equivalent rent series in the CPI with new home prices, then the headline inflation rate would be 1.5% right now and the core would be 0.5%. –David A. Rosenberg, Merrill Lynch
# The collapse in new home sales in the West — where affordability issues are dramatically worse than in the other areas — has been the worst of any region, with the June level of sales at a more than twelve-year low after having plunged 57% from the peak quarterly sales rate hit in 2005Q3. –Morgan Stanley Research
# Sales fell sharply in the Northeast and West but surprisingly rose in the South. A shift to the low-priced South could explain part of the 2.2% year-to-year decline in median prices. –Michelle Meyer, Lehman Brothers
# For the quarter, new home sales actually rose 13% annualized after a 44% annualized drop in the first quarter; however, this small recovery does not necessarily imply stabilization in sales. First, quarterly swings of this magnitude are not uncommon in the volatile new home sales number. Second, changing cancellation rates are likely adding to the volatility. –Abiel Reinhart, J.P. Morgan Chase
# Yet another downward revision – the 15th month in a row — to initial estimates further undermines the credibility of these data. Thanks to cancellations and serial overestimation of initial estimates, “true” new home sales are almost certainly much lower (and inventories higher) than these data show… Bad as these data are, we continue to warn that much worse is to follow. The underlying imbalance between supply and demand is still likely worsening. And the more prices fall, the more a corrosive deflationary psychology will grip the housing market. –Richard Iley, BNP Paribas
# Builders have made only trivial progress in reducing the absolute number of homes for sale, so with activity declining expect further pressure on prices and, hence, their margins. We’ll say it again: Housing is bust, and wishful thinking cannot unbust it any time soon. Expect worse ahead. –Ian Shepherdson, High Frequency Economics
# New home sales are likely to turn around before existing home sales because builders, since they have money tied up in unsold properties, are more willing to budge on price and non-price incentives than homeowners are. –Patrick Newport, Global Insight
# Falling prices and sales incentives that are not included in official price data do not appear to be underpinning sales. –Steven Wood, Insight Economics
Compiled by Phil Izzo
#24 how great is that, we finally agree on something? Fast Money is the best show on CNBC, hands down!
#1 Clot: can we move Sept 1 to August 1?
I’d suggest moving it forward, perhaps the second or third full week of September. Why? On September 13, Fannie and Freddie will no longer purchase loans that do not meet the nontraditional mortgage guidance. This will undoubtedly remove additional unqualified individuals from the buyer pool. Those that remain will likely see higher borrowing costs as short-term ARMs continue to be eliminated. While these changes will improve the strength of the housing market in the long-term, we’ll likely see some negative short-term effects due to weakening demand…
jb
#25 Of course!!!
#22
All the talk basically boils down to financial porn. anyone who knows how markets work realizes that they do not go up “in a straight line”. There will be zigs and zags. We’ve been at or near record highs that you’d expect and WANT to be some cooling off. I was just trying to be sarcastic about the whole thing. Most rational people realize that this is a blip on the screen, nothing more, nothing less…
#30 JB stuck in moderation
The economic data didn’t, at least in the short term, alleviate selling pressure.
Despite the positive 2nd quarter numbers, GDP did not meet analysts’ expectations. On a more normal day, this fact would be the headline (or at least a more prominent part of the story) . But with the markets in such a precarious position today, no one wants to be the turd in the punch bowl.
#28 JB: True, and it will probably become even more pronounced during next years Spring /Summer market.
Here are signs of a buyable bottom in RE you can bank on:
When BC Bob, JB, 3b, me and others report we’ve happily closed on our new homes in NJ.
#28 JB wrote: “Those that remain will likely see higher borrowing costs as short-term ARMs continue to be eliminated.”
jb – if one is leaning towards a fixed rate 30yr loan, does your statement still apply? Does the elimination of ARMs drive the costs of other loans up?
thx
twice shy 34,
Based on the contnuous flow of absurd listings I receive on a daily basis, I don’t think I’ll see that in my lifetime.
I’d suggest moving it forward, perhaps the second or third full week of September.
I expect to see an August bounce in sales, similar to the January 2007 bounce. Sellers that have sobered up and realize that the market is not recovering anytime soon will push to sell by Sept. 1 and will make the necessary concessions to do so. I’ve heard of several agents having very frank discussions with their clients to this effect. (Clot, please correct me if I am wrong)
ARM resets peak in November, but those sellers need to get out now, or they will be stuck with higher payments until at least the spring. With new standards in place, refinancing may not be an option.
The point is that the “delusional majority” of sellers may misinterpret this bounce as a sign of a recovery, which could push back the panic and next round of price drops a few weeks.
Slept like a baby.
So did I.
I was up every two hours BECAUSE of the baby.
With all this negativity I figured I would be the contrarian. I just got my tax bill for the upcoming year (went down 10%, woohoo) and the attached letter said avg prices in my town (Chatham Borough) went up 12% from this time in ’06. Interesting factoid at the very least. It may be that the mayor and his statisticians are smoking crack, you never know. Oh yeah, my taxes went down because I fought my assessment (80K over what we paid for the place in late ’06) not because taxes actually decreased overall.
#36 gary: Night is darkest just before the dawn.
And as far as delusional listings I do agree. I got one last night. 2 bed 1 bath ranch, no basement, $8,500 a year in property taxes at a deligthful asking price of 434,900.
In the meantime there are POS capes/colonials 3 bed 1.5 to 2 baths with lower taxes that have been languishing on the market all Spring/Summer.
i do nto get depressed, I just laugh, loudly.
#39 Mike Good job fighting the assessment, although if more people do it, thw town will simply change the tax rate, to collect the taxes they need to finance their operations.
As far as this time in 06, I would suggest that tmay be ancient history at this point. Things have changed a lot in the last 12 months.
#36 gary: One final point, you will see it, because I will be buying, only on my terms. I was a homeowner before, and will be again, and I lived through a housing bust before.
Patience always,always pays off in the end.
jb – if one is leaning towards a fixed rate 30yr loan, does your statement still apply? Does the elimination of ARMs drive the costs of other loans up?
I’m not talking about a change in rates, I’m talking mainly about the elimination of lower-cost mortgage options that drive borrowers into higher-cost loans.
The difference between short term (1-2 year) and medium-term (5 year) ARMs tend to average somewhere around 25bps (keep in mind the spread does change). If we look at the Freddie PMMS data, the spread between the the 1 and 5 year ARMs is a bit wider, pushing towards 50bps.
Short-term ARMS, primarily the 2/28, were chosen simply because they offered a lower rate than the 3/27, and 5 year variants. They were being used to push affordability.
Let’s base an example on the average 1 and 5 year rates, from the Freddie PMMS, roughly ~5.5% and 6%, respectively.
For the sake of argument, let’s say someone can afford a mortgage of $2,000 a month, based on the 5.5% rate (ignore taxes, insurance, etc). That would result in a mortgage amount of roughly $355,000. If that loan option were eliminated, the borrower would need to move up to the longer term option. Unfortunately, because the loan shields the borrower from quick resets, it carries a premium over the shorter-term loan, thus a rate of 6%. At that rate, the borrower can only afford a $335,000 mortgage, a decline of $20,000.
So while some borrowers will be pushed out of the market by the elimination of these products, and probably rightly so, it’s more likely that these borrowers will be unable to borrow what the could have with the shorter-term loan. Ultimately, this will result into even more pressure on the demand side..
jb
Let me ask you gals and guys a question: A realtor tells you to take out a HELOC on your current house to buy another house because the people selling their house to you will not want to deal with the contingency of you selling your house first. In other words, don’t wait to close on your house to buy another. Got it so far?
The realtor also tells you to take out the HELOC at least 48 hours before you list your current home or else you might not get the loan. In other words, don’t tell the bank the real reason you want the loan.
So my question is, what is your assessment of this advice?
Mike NJ,
What is the process involved with contesting a property tax assessment? What resources are required, financial and others?
Thanks.
Woops, I meant from the 1st Quarter of ’06 to the first quarter of ’07 for the average price increase of 12%
Mike,
Share your experience, I’m sure many other homeowners here would be interested.
jb
I sometimes listen to a radio station who’s main source of funding seems to come from real estate advertisement. The other day, someone on the air stated that 3% of the mortgage brokers out there are responsible for 90% of the fraud. I really do not believe that. I think its far wider and deeper then 3%. Opinions?
44 Gary,
My assessment is the realtor is an ass. He/she is trying to make a sale. For every penny you borrow against your house, it is something that you will need to pay back when you sell. Only you can decide if the risk is worth it. If you asked me, I would not buy another house until my current one was sold and if they couldn’t understand that, then it just wasn’t meant to be.
3% of the mortgage brokers out there are responsible for 90% of the fraud.
That is the ol’ “Don’t throw the baby out with the bath water” argument. It’s currently being used by the mortgage industry in an attempt to disuade tight regulation of the subprime industry. By saying a handful of bad-actors caused the problem, that leads into the logical solution being a clean up those actors, not changing the fundamentals behind that market.
jb
RE : #22
All the talk basically boils down to financial porn
I guess this mean we are going “down”
Thanks for the detailed reply jb. I was probably overthinking your initial point, wondering if ARMs somehow propped up (down) fixed loan costs.
2 homes I have been watching recently went under contract, only to be back on the market in full within 4-6 wks. Would be interesting to see stats on the leading causes of withdrawn contracts (financing issues, can’t sell old house, withdrawn for other reasons…)
Kurt
3b Says:
“Patience always,always pays off in the end.”
I would add that a thick skin doesn’t hurt either.
Gary – tell your realtor to shove it and remind him that unless he is a CPA or otherwise qualified individual he has no business offering financial advice. Oh and ask him if he is willing to guarantee that his wonderful plan will work by offering to take on your expenses if it doesn’t.
Love how people like to play with other peoples money.
#50 JB:
“that leads into the logical solution being a clean up those actors, not changing the fundamentals behind that market”.
And its the fundamentals behind the market that are really the problem IMHO, not the just the actors.
#44 –
I wouldn’t take that advice for two reasons.
First, obviously, you may wind up with 2 loans.
Secondly, I don’t feel comfortable lying to a bank. I worked in a bank, and did home equities, and in my bank, they did not give home equities if the house was on the market.
3b Says:
July 27th, 2007 at 9:39 am
#36 gary: Night is darkest just before the dawn.
3b: also…..its always darkest just before things go pitch black… :)
#44 –
Rules regarding Realtors;
1. Realtors are sales people whose primary goal is to sell a house and collect a commission. They usually will not give you advice that will benefit you but won’t benefit them as well.
2. Re-read Rule #1
RE: 30YF – the Ten dominates pricing because it is investment grade product and the spreads are tight. Even if spreads “blow out” on mortgage product, the rally/flight-to-quality of the Ten means that you will find good rates at your mortgage originators.
Where you may have found mortgages averaging 150-175 bps higher than the Ten previously, maybe it might be more like 200. I don’t really know or follow mortgages, so someone should definitely speak from knowledge here.
Bear in mind, the yield curve is not inverted per se, but it is a mess right now. I doubt you will find any pickup with an ARM.
Gary –
Thinking it over even more, apart from the potential bank fraud issue, it just doesn’t make sense.
Two years ago when it was easy to sell a house and difficult to find and buy a decent one without a bidding war, a risky play might make some sense.
However, now the situation is reversed, it might take a long time to sell your house even with aggressive pricing and unless they have the best house in the world at the best price, the seller probably isn’t deluged with offers. Plus if this buy falls through there is no shortage of inventory to choose from.
The risks to you are enormous – you could end up with two mortgages on a house and a legal obligation to buy another whose value may be decreasing.
The advice above, which is that in this market it would be preferrable to sell your house first would make the most sense and be a lot less risky.
Thanks all for your insight to my post (#44). I thought maybe I missed that portion of the talking points memo.
#56
You can apply that to anyone who is in the sales or service field (including myself) (ie mechanics, doctors, financial advisors, etc..).
Painting an industry w/a broad brush is as dangerous as a person being totally naieve in purchasing a product.
There are good and bad apples in any bunch. the buyer must do his homework to find a trustworthy agent.
XHB (homebuilder index) up 1.5%. 10 year down 9/32. agree with 57#. yield curve is messy. 2-10 yr is lower than 6m and 30 yr: either short-term needs to move down or middle needs to move up. but i bet short-term will move down
#56
as a follow up to that, I’ll tell my good customers not to purchase something from me if I think it’ll hurt them in the long run. You want your customers to trust you. there are times when making the “quick” or very profitable one time sale works, but my style has kept me successful over the years.
“XHB (homebuilder index) up 1.5%.”
bi,
Big deal. Chuck Wepner is also getting up from the mat again.
#35: By the time housing prices and wages “meet” in NJ, won’t taxes have already gone way too far?
Unless someone has a ton of family that doesn’t like to fly or drive long distances (or can’t because of medical conditions or dependents), or their industry is so completely wrapped up in the NYC metro area (TV, print media, finance) why even stick around? The NYC metro area is a great place to visit, and a lousy place to pay taxes in..
Ironically enough, there’s thousands of square miles of NY state that’s perfect for NY municipal retirees: cheap property, lowish property taxes, no tax on municipal pensions, no flood/hurricane insurance costs that are crippling FL.. Are there any areas left in NJ that aren’t inflated because they’re so “close to NYC” or “close to Philly”? I mean, any areas that don’t require you to walk around with an unlicensed automatic in order to feel safe?
Seller have to reduce home pricess for another 25-30%. Homes are stil overpriced.
does anyone know why FED is not rasing rates ? Dollar is getting killed !!!
#65
Some people do like the area and for various reasons don’t want to leave, however I would suspect a majority of people want to jump ship but are too afraid to “pull the trigger”.
stay where you are, enjoying watching blue sky and tinkling stars through your leaking apartment roof. sorry. 25-30% down may be possible if you are willing to live a neighborhood with higher crime rate and drugs.
>Seller have to reduce home pricess for another 25-30%. Homes are stil overpriced.
>does anyone know why FED is not rasing rates ? Dollar is getting killed !!!
Lets see take a 100K paycut to save 6k in RE taxes and 15k in state taxes just to move. The Fed taxes are what kill you, the move does not make sense to most people in the affluent areas and makes more sense in the “fluent” areas.
Affluent neighborhood is where the non-english speaking help pick up other people’s kids at school.
Fluent – is a blue collar neighborhood where stay at home english speaking moms pick up their own kids at school.
#68
OMG, talk about a gross generalization or what?
John, I actually had the cajones to make the move and you know what? I’m actually making MORE now than I did in NJ.
There are people who relocated in my neighborhood from Chester, Mendham & surrounding morris county towns. These people I consider affluent, so you are way off base and have no idea what you are talking about my freind.
From MarketWatch:
Fannie, Freddie may see $4.7B in subprime losses: Citigroup
Fannie Mae and Freddie Mac could have $4.7 billion in unrealized losses from the deterioration in subprime mortgages, Citigroup’s fixed-income strategy team estimated on Friday. That’s about 6% of the equity capital of the government-sponsored mortgage finance giants, the strategists noted. Fannie and Freddie’s retained portfolios contain roughly $182 billion of subprime bonds, most of which are rated AAA, they noted. That compares to total exposures of more than $3 trillion in mortgages. Most of this is related to prime mortgages, which is supported by the fact that delinquencies in their guarantee portfolios have not increased so far this year, Citigroup said. Given Fannie and Freddie’s stable funding sources, they may never have to sell their subprime holdings and realize losses, the bank explained. If these securities are held until they mature, the only losses would come from the permanent effect of delinquencies and foreclosures on the underlying assets, the bank added. “We expect these impairment-related losses to be considerably smaller than our topline estimate of $4.7 billion in mark-to-market losses,” Citigroup said in its report.
With many of these LBO/Private Equity deals being delayed now what type of impact will this have on Wall Street bonuses? I know the banks had a good first half of the year but what about the way things seem to be turning?
Reech Emu: are you going to open your faulty trap again and make a pronouncement about how the Ten’s yield is too low and you are going to short?
Come on….come on….you friggin’ fruitcake…
Where are you?
We need more of your pontification…
With falling home prices I think the topic of contesting your assessed value is getting more and more pertinent. I hired a lawyer and he charged 50% of my first year’s savings. He basically filed some paperwork that notified the county that I was contesting my assessment. The local assessor then worked with my attorney to review comps, other market values near me, as well as the details of my sale. Then there was a hearing where all the info was presented and a decision was made. I was really happy with the way it all worked out as my lawyer was able to get my assessment lower than my sale price. He could have even gotten it lower but the fact that the seller used Foxtons and that it was an estate sale worked against me in this regards. I am still very happy with the overall process and it went very smoothly. I received my property tax bill yesterday with the revised numbers. The deadline to get your paperwork was end of March and my lawyer called me in May to tell me the decision of the assessment board. I thought it was a very fair process overall as the assessor looked at all pertinent data points and still gave me a fair and honest assessment. I think a person can do the work themselves but since my lawyer has a close relationship with the assessor I figured I could not go wrong.
just me Says:
July 27th, 2007 at 10:57 am
does anyone know why FED is not rasing rates ? Dollar is getting killed !!!
just: because the Fed doesn’t give a whit
http://business.timesonline.co.uk/tol/business/economics/article559504.ece
Die Dow Die !!!
Die S&P Die !!
I love the carnage.
Another beautiful day today.
People may or may not move for a bunch of reasons, including high taxes. What is of relevance is what your effective tax rate is, not marginal tax rate. You could be in the 28% federal marginal tax bracket, but your effective tax rate could be in the 10-15% range after exemptions and credits.
Even though people complain about Federal taxes, the biggest tax is actually FICA (Social Sec, Medicare) for the vast majority of folks making below six figures since it’s 15.3% flat. 7.65% paid by you and 7.65% paid by your employer, but effectively coming out of your compensation bucket/pool.
If you and your spouse work and both make $97,500K each, each gets hit 15.3% for FICA, i.e. $29,835 in taxes. But is one one works and makes $195K and the other stays home, only $97,500 is taxed for Social Security (6.2% * 2) and the entire $195,000 at (1.45% * 2) for Medicare. The effective tax paid has been substantially reduced to $17,818, almost $12,000 a year, or $1000 a month less!
So calculate your effective tax rate for federal, FICA, state, property, sales tax you pay for consumption. This is one variable among many before deciding on a move to another state.
Mike, #74
Glad you had a good experience, but I’m not entirely sure you would’ve gotten anywhere without a lawyer. I’ve appealed my assessment twice in the past twenty-five years, both times after town-wide revaluations. Did it myself both times. The first time, I was successful; the second time, not at all. (And the second time, my assessment had almost tripled, despite no work at all being done on the house in between.)
It used to be the standard advice that just filing for an appeal would get you 10% off the assessment, because the municipality doesn’t want to deal with it. But that certainly didn’t seem true when I tried. Now I think a lawyer would be the only way to go.
here’s an update on my post yesterday regarding the west orange townhouses on tompkins.
if anybody else is interested, let me save you the trouble. there are 5 3-bedroom townhouses and all 5 haven’t sold. they are definitely in the wrong side of town. put them on the other side of w. orange and they would easily go for 500k. but right where they are…they could put them on a buy-1-get-1 sale and you still wouldn’t touch em.
thanks jb and others
http://biz.yahoo.com/bizwk/070727/jul2007db20070725384162.html?.v=2
Flashing arrows act as “a narrative signpost, planted conveniently to help the audience keep track of what is going on” (For example, in typical slasher films, the audience knows that leaving a door unlocked leads to “unwanted visitors”. The unlocked door acts as a flashing arrow.
The Media and Govt. used Flashing arrows to build the housing bubble and now is using Flashing arrows to pop the housing bubble. The buyers and sellers are simply puppets that respond to the puppetmaster’s strings.
74 – Mike – Would you mind giving me the name of your attorney? You can get my email address from JB.
My husband and I are currently appealing our 2007 Montclair assessment in the state tax court. We are doing this pro se. Our trial date won’t be until Feb 2008. If we cannot settle with the town (am hoping we can because we have some good comps), we might wind up having to file a second appeal for the 2008 tax year.
Thanks.
Lisa
“Come on….come on….you friggin’ fruitcake…
Where are you?”
Chi, don’t bother with him. He’ll again recommend buying that 10%+ guaranteed natural resources fund that must have taken a nice haircut the past week.
Pooch123, how’s your downpayment doing since you moved into that fund?!
mstu, thanks for the link..
From BusinessWeek:
No Housing Turnaround for Two Years?
First, it was the second half of 2007. Then it was 2008. Now analysts are saying the national housing market may not rebound until 2009
…
Two “bright spots” in June, Yun said, are the decline in housing inventory and the “modest gain” in home prices. Total housing inventory fell 4.2% in the month, to 4.2 million existing homes for sale, representing a supply of 8.8 months. In the same period, the national median existing-home price edged up 0.3% year-over-year, to $230,100. For single-family homes, the median price rose only 0.1%.
“This increase is an aberration,” says Patrick Newport, an economist with Global Insight in Waltham, Mass. “Current inventory levels make it almost a sure thing that prices will continue to slide.” On July 11 the NAR said existing-home prices would recover in 2008, rising 1.8%, to a median of $222,700 after a 1.4% decline this year. But Newport thinks otherwise. “Our view is that the downturn (in sales) will continue into 2008,” he says. “Given the level of unsold homes, however, nominal home prices will probably not rebound until 2009.”
…
Despite the ugly national picture, Realtors are forging ahead, turning the focus to local real estate markets and buying opportunities — and blaming the media for the continued decline in home sales. “The numbers are the numbers,” says Tom Kunz, chief executive officer of Century21 Real Estate, a division of privately held Realogy. “People are going to come home tonight, have dinner, turn on the TV, and see that home sales declined. They’re going to look at that and say ‘Hell, I’ll sit on the fence.'”
But both Kunz and the NAR say that buying conditions are favorable, citing the usual fundamentals: a strong job market and relatively low interest rates. And of course, they stress the fact that all real estate is local. “We’ve just elected that we’re not going to participate in the pity party anymore,” Kunz says. “The economists are talking about the United States of America, and we’re talking about Hometown, USA.”
Despite the ugly national picture, Realtors are forging ahead, turning the focus to local real estate markets and buying opportunities — and blaming the media for the continued decline in home sales.
The media giveth, the media taketh away. LOL.
For those keeping score at home.
DJIA is down another 150pts so far today.
Sure 3% is not a crash, but 3+3+3+3+3 would be ;)
Wall Street often shelved damaging subprime reports
WASHINGTON (Reuters) – Investment banks that bundle and sell home mortgages often commissioned reports showing growing risks in subprime loans to less creditworthy borrowers but did not pass much of the information to credit rating agencies or investors, Wall Street sources said.
The mortgage consultants, known as “due-diligence firms”, were hired by investment banks to make sure blocks of mortgages conform to the mortgage seller’s own standards. The studies provided a first glimpse of loan quality for ratings agencies and investors who do not normally see the full reports.
More at: http://www.reuters.com/article/ousiv/idUSN2743515820070727?sp=true
#68 bi We can have 20 to 25% gains a year in hisue prices, but not the same decline, typical bull rhetoric, because you say so. its OK on the way up, but not ont he way down;as always the inherent fall in the Bull logic.
#87 Stu,
On the brighter side, 3+3+3+3+3 (-14.13%) would still leave us up around 5% for the past 1 year! :)
Actually, historically the falls are usually steeper and faster than the climbs. This is true of most financial cyclicals.
‘Visioning’ process in Woodbridge
http://www.nj.com/news/ledger/middlesex/index.ssf?/base/news-2/118551239172390.xml&coll=1&thispage=1
From syncmaster’s link above:
“I am worried about what’s going on,” said John Hansen, owner of Fords Service Center on New Brunswick Avenue. “My property is my retirement. It’s my 401k.”
Enough said.
From the Journal News:
Putnam housing market slides 9.1 percent
The housing market in Putnam County continued to weaken in the second quarter as sales fell and the median price of a single-family house dropped by 9.1 percent, to $398,500, the Westchester-Putnam Multiple Listing Service said yesterday.
Brokers offered a range of reasons for the trend. They included Putnam taxes and a growing resistance to a southbound commute amid higher fuel costs. Brokers also said that housing prices in Westchester are moderating, which reduces the need by potential buyers to look farther north.
While it was the second quarter in a row that saw a year-over-year decline in the median house price in Putnam, the trends are still “fairly strong” when viewed historically, the MLS report said.
Putnam’s median house price last quarter was virtually flat compared to the second quarter of 2004, when the median house price was $400,000.
But sluggish sales volume has some sellers thinking they may have to change game plans.
Joel and Michele Antonini’s four-bedroom, 4,000-square-foot house at Michaels Glen in Carmel was priced at $649,900 in May. Since then, they’ve reduced the price by $10,000. Just five people showed up at an open house last weekend.
The family bought the newly constructed house in September 2005. Then Joel Antonini, a marketing executive, moved the family to Houston this year when he accepted a job offer there.
He figured it would take some time to sell the house in Carmel since other new houses were being built nearby; now he’s thinking he may have to rent it, or take a small loss on a sale.
“We really loved our place up there in New York. We had a really, really nice house,” he said. “I’m not willing to take a major loss on the house.”
He figured it would take some time to sell the house in Carmel since other new houses were being built nearby; now he’s thinking he may have to rent it, or take a small loss on a sale.
To me, this is a clear indicator that seller psychology is shifting. Not all sellers are trying to get peak values, or trying to match past neighborhood comps anymore. Here is a seller who is comfortable with taking a loss on the property. I don’t think we would have seen this a year ago.
jb
95 JB:
Some of the bulls on this forum would call him a fool for willing to cut his losses and get out before the Tsunami hits.
From MarketWatch:
Treasurys turn higher as fund rumors resurface
Treasury prices turned higher at midday Friday, pressing yields lower, as new rumors about possible hedge fund worries linked to the subprime lending sector put the safe-haven bid back in the market.
…
But by midday Treasurys were back in demand as the hedge fund rumors surfaced.
“Fresh hedge fund ‘troubles’ rumors have apparently been doing the rounds and may be amplifying the swings on both Treasurys and stocks this morning,” said Action Economics.
“It would actually be surprising if there weren’t hedge fund troubles after the recent surge in volatility and asset allocation swings, but some are speculating that it may be Basis Capital from Australia,” the firm said.
John (11)-
But, then, how can I get the 20% annual ROI that is my American birthright?
Sarcasm off…
ChiFi (21)-
“…everyone in the buildings knows the story about how Corzine walked down to the concierge and said incredulously “…the ceiling is dripping in my bedroom..”
ChiFi, in all deference to our distaff audience, I will not deposit this BP fastball into the cheap seats.
#94 JB:I’m not willing to take a major loss on the house.”
Well if you bought in 05, and all the way up there, you will probably ahve to. Unless one works in Northern Westchester, or Conn, the communtie from there to NYC is hellish.
3b (23)-
Every day is Sept. 1!
dreamtheater (93)-
That statement makes me wonder how much downward pressure the babyboomers will have as they hit early retirement age next year?
JM
#101 Clot: I like it!!! Not looking to destory any body, just a 20 to 25% discount off 05 prices, and probably flat from there for a couple of years, maybe more, but thats OK.
Really not horrible for current owners in my opinion, unless you did the no money down toxic financing etc, or blew all of your equity.
And if you bought years ago, you will still be exiting with a far bigger price than you ever imagined.
In the end, the real estate market will be stronger for it.
Renting (37)-
Right you are. However, I wouldn’t anticipate the August pop (which I do anticipate) to be anything other than the next cat hitting the pavement.
Keep in mind that agents like me are far outnumbered by the Friskie-eaters who either inflate their sellers’ delusions or are complicit in their sellers’ stupidity by dint of keeping their mouths shut.
Mike (39)-
Taxes down in Chatham?
How are they going to pay for the rat abatement?
My property is my retirement. It’s my 401k.
Alot of people think this way. Why save money when my house does all the saving for me?
We are going to see saving revert to the mean. This will pull a substantial amount of money out of the economy and have a significant impact on consumer spending. I don’t think we get out of this one without a recession.
Gary (44)-
In this kind of market, a seller who won’t entertain a reasonable contingency is a fool.
“The seller doesn’t want to…” is so 2005.
I definitely think that my attorney helped me out. He literally does this every day and he personally knew everyone involved int he process. You can’t put a price tag on that type of insider knowledge and my ignorant ass would have surely messed something up and they probably would have increased my assessment out of spite! I had what I thought was a strong case because I asked for the reassessment right after I moved in so I have a fresh sale that even though it was an estate sale by Foxtons, it was a true at arms length sale and thus legit in every way. As long as it came in at or below my sale price I would have been content. The good thing about an attorney is that he was trying to get every last dollar out of that assessment and he tried as hard as hell to get my nearly $700K assessment to be in the $500’s . He nearly did it so I can’t complain.
ChiFi (58)-
You are spot on there. Just like everyone else these days, mortgage investors are looking for more spread.
As an example, Sovreign Bank is notorious for inter-day rate changes when the 10 is tanking. My processor sometimes bursts out laughing as she gets rate sheet revisions 2-3 hours apart.
So…you’d think on a day like yesterday, Sovereign would be furiously revising downward.
If so, you’d be wrong.
In fact, Sovreign’s rates now stand worse than they did on July 1…which means they’re taking down at least an extra 25 bps on every loan they book going forward.
>>Where are you?
i’m working clown.
No Housing Turnaround for Two Years?
I don’t see a turnaround in 2 years.
I do expect to see stabilization in 2 years and the end of nominal price declines, but that will be followed by years of stagnation before a turnaround.
Some Indian companies are asking employees to work through the weekend to compensate for the 10+% rupee appreciation.
The Fed taxes are what kill you, the move does not make sense to most people in the affluent areas and makes more sense in the “fluent” areas.
Fed taxes aren’t regionally adjusted for the cost of living. If you think of Federal taxes in terms of taxing your purchasing power, then the real tax rate is much higher in affluent areas (you pay more in taxes per unit of purchasing power).
For example, if I need $100k in NJ to achieve the same standard of living that $60k will get me in North Carolina, I’m going to pay a higher tax rate on the $100k in NJ, even though both salaries purchase the same standard of living.
I think #110 missed the ‘a’ before the adjective.
Stop sweating the financial aspect, life in the Carolinas is just nicer. It’s cleaner, people are friendlier, winters are warmer, nicer beaches are closer and at least at this point in time traffic isn’t nearly as bad. There’s more to quality of life than the things you buy.
A house is a pile of rotting sticks on a plot of land it is not a 401K.
PS that assessment attorney is crooked. WOW he knows all the people downtown and wink wink he can get it fixed for a fee. I met a CO expeditor once and Wink Wink told me for a grand he can get my CO processed right away with the 40K a year town worker who drives a new cadilac. Do you think he gives the guy a nice fruit cake and card at x-mas for processing all his CO appplications ahead of the line?
Only a third rate lawyer who spent more time with a bong than a book in law school grieves taxes for a living. I won two out of three times myself in Grievances without paying 1/2 of my first years savings to some tony baroney fly by night attorney.
“My property is my retirement. It’s my 401k.”
The property in question is commercial, not residential.
As an aside, the weak dollar is having quite an impact on my business. The cost of purchasing certain items from abroad is rising so quickly I am looking into moving manufacturing over here. So it is good for somone.
#102
There will not be this “mass exodus” of 401k funds as alot of people assume. Most baby boomers 401k’s are woefully underfunded, so basically they can’t retire to survive….
Mike in NJ – thanks much for the tax assessment report – it’s much appreciated.
Short article about a New York business writer who decided to try her hand at flipping houses in New Jersey then became a RE agent in New York. Fluffy but some nice little quotes.
(short commercial before the article.)
http://www.salon.com/mwt/feature/2007/07/27/realestate_rookie/
“Real Estate Rookie” tells all
Newbie home flipper and broker Alison Rogers talks about bad agents, selling schemes and why it’s impossible to predict the housing market.
I agree Mike. The assessment info is great.
We plan to represent ourselves in the required pretrial meeting with the town attorney. If this fails to result in a settlement, we will bring one with us to trial.
FYI, a couple of years ago, “Smart Money” magazine did a good story about challenging assessments that might be worth reading, if you can find it.
Clotpoll Says:
July 27th, 2007 at 12:48 pm
ChiFi (21)-
“…everyone in the buildings knows the story about how Corzine walked down to the concierge and said incredulously “…the ceiling is dripping in my bedroom..”
ChiFi, in all deference to our distaff audience, I will not deposit this BP fastball into the cheap seats.
I must: “Ms Katz must be worth every penny”
Is this the Smart Money article you were referring to?
Subprime Mess: Let the Blame Begin
#113: Don’t forget that those states with higher incomes also tend to be “donor” states, sending more $$$ to the FedGov than they receive from it. Gotta love the Senate!
BTW, after moving (slightly) south of the NYC metro area and (slightly) south of the Mason-Dixon line, I find that my salary is actually identical to what I would receive back north, and yet my expenses (taxes, rent, utilities, etc.) are largely lower than before, thus leaving more $$$ to save or spend on toys. And Yuengling pints for $2.50? Sign me up!
In fact, gasoline in DE is roughly on par with NJ! While the sin tax on gas is higher in DE, NJ adds sales tax, which becomes significant after it’s raised to 7% and the price of gas tops $2.50/gal.
I can’t imagine seeing a medium-to-large company maintaining a backoffice IT presence in Manhattan in the next 5-10 years, it will all move out where rents and power are cheaper. I don’t think they’ll land or stay in NJ either, as the costs there will rise as NYC costs rise (and with Corzine signing onto the whole green eco thing, power will only cost more and more). Oh, and MD (particularly the eastern shore) is the beneficiary of recent BRAC decisions, so even more defense $$$ will leave NJ and come down south…
And yeah, spending 9 months unemployed since 9/11 has really soured me on the whole NYC area. I just hope DE doesn’t catch the NJ tax-and-spend disease..
dreamtheaterr Says:
July 27th, 2007 at 1:18 pm
I think #110 missed the ‘a’ before the adjective.
yan: well executed
Mike NJ, thanks very much.
#119 No problem, my pleasure
#116 This guy was on the up and up and at the end of the day he did his job and did it well, how is that crooked? I paid him by my estimates well below $100 an hour and guess what, my time is worth more than that (both my free and work). It was a no brainer to pay him. Cost benefit analysis 101.
#115 Is is very nice down in NC, no argument there. We have spent time in Charlotte with friends for the last few summers and have loved it. They paid $290K for their 5 bedroom 3 car garage monster on 3/4 of an acre in a great community. Taxes are like $1800 a year. Is it a better life than up here? I don’t know. My parents love up here and I would be taking my kids away from their grandparents who they see out on LI at least once every two weeks. That would drop to twice a year I fear if we moved. You can’t put a price on my son and future twins spending time with my parents. The look on my parents face every time they spend time with my son is priceless. We may make the move later in life, but right now we are in the tri state area due to family ties. My inlaws are in Chicago so I would be spending every free weekend in the airport, not fun. Plus if we moved to Charlotte we would buy in the area right outside the city center (I forget the name of the area) but it is really nice and very much like my town now (older homes). The home prices are the same there as in my town up here (though the commute is next to nothing). So net net I don’t get much less of a mtg payment and the taxes are probably similar as well. But you can’t beat those warm winters I will agree.
HEHEHE Says:
July 27th, 2007 at 1:53 pm
Clotpoll Says:
July 27th, 2007 at 12:48 pm
ChiFi (21)- “…everyone in the buildings knows the story about how Corzine walked down to the concierge and said incredulously “…the ceiling is dripping in my bedroom..”
ChiFi, in all deference to our distaff audience, I will not deposit this BP fastball into the cheap seats.
I must: “Ms Katz must be worth every penny”
clot / hehehe: I am humbled.
Otis Wildflower Says:
July 27th, 2007 at 1:57 pm
I just hope DE doesn’t catch the NJ tax-and-
spend disease..
Otis My Man: You want a SURE bet [that’s right Reech Emu]. I’ll make you a bet that North Carolina looks EXACTLY like NJ with all its inherent fiscal problems by 2015. Why? Southern efficincy and ethics mixed with Northern hospitality in a frightening gene-splice. The money is coming down there, and there are ample hands ready to swipe it. The people crowing about NC are deluding themselves. They equate freshness and recency with enduring quality. This attitude is a fundamental mistake.
“Credit derivatives markets saw a strong bout of further heavy selling on Thursday in both Europe and the US, with the widely watched indices of riskier credits bearing the brunt of the pain.”
JPMorgan and Goldman Sachs postponed on Wednesday the sale of $12bn of debt financing for Cerberus’s purchase of Chrysler. The US carmaker has agreed to hold $2bn, leaving the banks with a hefty $10bn on their books.
The two banks’ CDS hit their highest levels since 2003 yesterday. JPMorgan’s CDS was at 75bp, an increase of 25bp on the day, according to data from broker Phoenix Partners Group.
The bank is Wall Street’s biggest underwriter of leveraged loans, according to Bloomberg data, and its cost of protection in CDS markets has tripled in the past five weeks.
Meanwhile, Goldman’s CDS jumped as much as 18bp to 85bp.
However, one of the worst hit is Bear Stearns, the largest US underwriter of mortgage-backed bonds, which saw its CDS rise to 105bp from 83.50bp on Wednesday. This is five times the level seen at the beginning of this year, and the highest of any bank on the Street.
http://www.ft.com/cms/s/0f5e9304-3ba5-11dc-8002-0000779fd2ac.html
“That is right 3b! Do you know who else is patient? The sellers!”
$1.99,
Go hit the history books and see how patient sellers fared during bubble busts.