Traders betting on home price declines

From the WSJ:

Home-Price Outlook Takes Another Shot
Trading on CME Indicates a Decline Into Late 2011
By JAMES R. HAGERTY
October 4, 2007; Page D6

The outlook for house prices is getting even gloomier as traders on the Chicago Mercantile Exchange bet on steep price declines and the number of homes for sale grows.

The contracts have been trading since May 2006 but last month were adapted so that traders could bet on prices as long as 60 months into the future. The trading is based on expected movements in the S&P/Case-Shiller house price indexes.

Trading is very light so far — about 20 contracts a day, a CME spokeswoman says. That means the contract values provide only a rough idea of the expectations of speculators and people hedging against house-price risks, says Anthony B. Sanders, a professor of finance at Arizona State University. But Dr. Sanders says the contracts are a useful signal, and he expects house prices generally to fall in the next couple of years.

“There are too many houses coming onto the market [in many areas], and the demand is just not there at current price levels,” he says.

The current contract prices show that traders expect prices in the Miami metro area in November 2011 to be down 28% from the mid-2007 level. (The indexes cover metro areas as defined by the U.S. Census Bureau.) The expected drops in other metro areas for the same period are 18% for Las Vegas, 12% for New York, 19% for San Diego, 26% for San Francisco and 13% for Washington, D.C.

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129 Responses to Traders betting on home price declines

  1. grim says:

    So much for the Marcal bailout.

    From the Record:

    Marcal looks for a buyer

  2. pesche says:

    I said from the beginning the company
    was poorly run by a family that lost
    touch many years ago.

    Where’s Corzine when we need him.

    After all, they have about 400 employees
    in NJ.

    Let’s get them on the pad.

    Where’s Nellie Poe, she was quick on a
    bailout.

    This was a money maker for the fees generated by the money guys and the lawyers .

    Nobody will want this company unless
    you move it from business unfriendly NJ.

    and it will go on the cheap for the customer base and thats about it.

  3. grim says:

    BOE holds at 5.75

  4. grim says:

    From the Record:

    If we build it, they will come

    Speculative construction, once the first choice for North Jersey commercial real estate companies in the ’90s, has become a rarity as vacancy rates remain mired near 20 percent, with no end in sight.

    Yet for Parsippany-based SJP Properties, building speculatively – without a specified tenant, in the hopes the building will lure interested parties — has become the company’s specialty.

    SJP is the only company in the state building speculative office buildings in North Jersey and Manhattan.

    “We do a lot of homework to be in the right place at the right time,” said Steven Pozycki, chairman and chief executive officer of SJP.

  5. grim says:

    From the Record:

    Results surprise pollsters, encourage lawmakers

    Two-thirds of New Jersey residents worry about being able to afford health care and nearly half said they’d pay at least $500 more in taxes for universal coverage, a Rutgers University poll released Wednesday found.

    The results surprised researchers who said it’s highly unusual to see health care rise to the same tier as pocketbook concerns in New Jersey. In fact, the poll found that the rising cost of care now exceeds fear of job loss and not being able to pay the rent or mortgage.

  6. iceman says:

    And those housing future contracts are in nominal terms … given that 4 years worth of inflation may be on the order of 15-20%, you’re looking at a real price decline in these cities ranging from 30-50%.

  7. BC Bob says:

    “BOE holds at 5.75”

    Independent decision.

  8. grim says:

    ECB holds

  9. BC Bob says:

    Concerning the index. Does anyubody trade this? If your position is 5 lots, you are 25% of the market. You could be Bunker and/or Herbert Hunt.

  10. BC Bob says:

    You think traffic is bad on the GSP on a summer weekend? Just renegotiate? Not that easy.

    “US mortgage companies are being overwhelmed by the large numbers of homebuyers who need to renegotiate their loans to avoid default, creating a “subprime traffic jam” that could frustrate efforts by regulators to prevent foreclosures, experts say.”

    “Mortgage servicers, the operations that collect loans, say they are having trouble making profits because of record levels of late payments and delinquencies. Litton Loan Servicing estimates that costs have increased 20 per cent in the last year for mortgage servicers, who even in good times depend on razor-thin profit margins.”

    “The result is that few subprime mortgages are being renegotiated. Moody’s, the ratings agency, found that lenders had eased terms on just 1 per cent of subprime loans resetting at higher interest rates in January, April and July this year.”

    http://www.ft.com/cms/s/0/b7b4d912-71d5-11dc-8960-0000779fd2ac.html

  11. grim says:

    Concerning the index. Does anybody trade this?

    We’ve got a reader on a desk that deals with these derivatives, maybe he can chime in..

  12. BC Bob says:

    JB [11],

    I asked for a market once, my desk said forget about it.

  13. John says:

    This is hot stuff. KPMG LLP spun off a consulting business this week located in Great Neck just to focus on this type of consulting and an exchange in NYC has developed a paramutual style betting system on RE that can even be customized to protect your individiual home from market decline through its hedging strategy. My friend with a PhD who does financial modeling is buying a NYC coop is setting up a hedge. He is predicting a 15% coop decline in the next two to three years, he needs the place in NYC so is buying anyhow and hedging. Remember it is always the little guys who get caught with their pants down.

  14. Orion says:

    OT – Property Sales Data Search

    Just found this new search alternative in Asbury Park Press website. All NJ counties are available.

    http://www.app.com/apps/pbcs.dll/section?Category=DATA

  15. BC Bob says:

    John [13],

    Can you provide more details on this? Is it a futures market to compete with Case-Shiller? Are the quants turning bearish?

  16. kettle1 says:

    Just wanted to comment on one of last nights posts.

    I lived in west orange on forest hill rd for several years. I left and went to morris county when my car was broken into multiple times in the course of 4 months and several houses around us had been burglarized in the middle of the day. people were obviously casing the neighborhood during the day and to the best of my knowledge very little was done about it by the police even though most people in the neighborhood were complaining. While filing a police report for one of the break-ins to my car ( actually an attempted break in as the person was apparently to stupid to just smash the window and grab, they torn up the door trying to pry the lock with a screw driver) The cop explained that they focus a large number of their patrols on valley st and one or two blocks on each side of valley street. He explained that they do this because most of the people committing the crimes were coming over from east orange and just walking up the hill. The officer said that they called the patrols “border patrol” to keep out the undesirables……
    That was a sign to me that it was time to leave. Overall it was a nice community though

  17. kettle1 says:

    If i May be so bold…. Is anyone on here a Quant? I am seriously considering changing field and becoming a Quant myself, been looking into it for a year or so and am very interested. ANy Quants here have any general comments/critiques?

  18. kettle1 says:

    Can someone pull the data for

    702 deerfield lane asbury nj

    I know that it has been on the market since about june but i dont know if its listed on NJ or GS MLS

    Thank you in advance :)

  19. Bubbling says:

    #6
    And those housing future contracts are in nominal terms … given that 4 years worth of inflation may be on the order of 15-20%, you’re looking at a real price decline in these cities ranging from 30-50%.

    ICEMan..my FC agrees with your estimates….its just a mater of time.

  20. x-underwriter says:

    I just overheard that Countrywide just closed their wholesale office in Roseland yesterday. It was one of the top volume branches in the country. They came in with security guards yesterday and escorted everyone out. The only people left are the Account Execs.

  21. schlivo says:

    Can someone provide history on the following?
    MSL#2448399
    970 Caldwell Avenue
    Union, NJ
    Thanks so much.

  22. BC Bob says:

    “They came in with security guards yesterday and escorted everyone out.”

    x-[20],

    I heard it was the result of Mozilo being pissed off. They weren’t wearing their wristbands.

  23. Sybarite F.K.A. New Investor says:

    #21

    LP: $199,000
    DOM: 6

    Didn’t see a previous listing at that address.

  24. dblko says:

    kettle1 (17):

    Check out the forums on http://www.wilmott.com

  25. kettle1 says:

    #24 Thank you

  26. chicagofinance says:

    BC Bob Says:
    October 4th, 2007 at 9:56 am
    “They came in with security guards yesterday and escorted everyone out.”x-[20],I heard it was the result of Mozilo being pissed off. They weren’t wearing their wristbands.

    Bost: toe tags?

  27. gary says:

    Don Mazilo,

    (Play the theme from “The Godfather” in your head)…

    Perdonilo, io non ha significato disrespect. Stavo provando soltanto a fare che cosa era il la cosa migliore per il compratore. Capisco che siamo nel commercio per fare i soldi. Sono un buon guadagnatore, io sempre ero. Per favore, indossi Mazilo, io desiderano lascilo accadere ancora.

  28. BC Bob says:

    Gary [27],

    Can you serve up some of mom’s eggplant parm with that?

  29. gary says:

    BC Bob,

    lol! Absolutely!

  30. Clotpoll says:

    vodka (17)-

    Not a great time to become a quant. Most of them have been routed and tossed into the street. The arbitrage-style investing that was the quant specialty hasn’t fared too well…and won’t be making a comeback anytime soon. The end of August signaled a major shift of funds away from value into growth-type investing of all caps. There’s a good chance that growth investing will entrench itself for the next 2-3 years, too.

    Even John Henry, king of the quants, has taken a merciless beatdown.

    All disclaimers.

  31. Clotpoll says:

    x (20)-

    Countrywide’s story to my office is that they’re “moving” the wholesale office to another NJ location.

    They didn’t have an answer when I asked them why that would require security guards, though.

  32. x-underwriter says:

    Clotpoll Says:

    Countrywide’s story to my office is that they’re “moving” the wholesale office to another NJ location.

    Where are they moving to? It’s a regional consolidation. I’m sure that’s not the only branch in the nation that got shut down yesterday. I heard the most of the AE’s were down in Atlantic City when this happened.

  33. BC Bob says:

    “They didn’t have an answer when I asked them why that would require security guards, though.”

    Clot [31]

    They sold when Mozilo sold? Carrying out bags of coin?

  34. make money says:

    I just wrote a check to Ron Paul. He deserves a shot. however, I was thinking since he’s a long shot to win the primary, can we get him in Jersey to steamline this Byrocracy.

    I think he’ll have a heartattack when he examines the waste of local, county, township, and state gov’t.

    I really think that NJ can be saved by cutting and consolidating.

  35. kettle1 says:

    # 34 make, I defiantly agree on all points. But can you even imagine the outcry when the public teat gets pulled out of the various interest groups mouths?? Ron Paul would end up having and “accident” one day on the way home!

    Nj can be saved but only if the grip of the the special interest groups can the cycle of social program pandering and be broken

  36. HEHEHE says:

    Layoffs Watch ’07: The Morgan Stanley Employees That Never Will Be

    http://www.dealbreaker.com/2007/10/post_525.php#comments

  37. bi says:

    17#, kettle, my impression is you have PhD in biotech field. it is not too hard to switch to be wall street quant. i believe the easist path is to get a master degree from carnegie mellon (downtown nyc), NYU or columbia. it takes 2 to 3 years and during the class, you will build network since a lot of them are already working in the street.

  38. BC Bob says:

    Make [34],

    How about Fed Chairman? If yes, buy dollars.

  39. Mike NJ says:

    Kettle1

    I agree with Clot on this one. A good friend of mine was recently a quant for a hedge fund and said August was absolutely brutal for his industry. He told me two weeks ago that it will be rough going for the next few years since we had such a brutal correction and many of the risk guys were extremely displeased with how the quants and their black boxes handled the market instability. I would definitely expect slow going for the next few years. Spend the time working on that PhD in math while you are at it (if you don’t already have it that its).

  40. bi says:

    24# and kettle, that wilmott site is great. you can find tons of info on quant world – just as real estate info from this site. for example, you go to FAQ session, you will find what kind of work a quant does in the street before you jump into the field.

  41. Rob says:

    “Most of them have been routed and tossed into the street.”

    Right. But seriously, I work on a quant desk. Not the best time the business has seen, obviously. Probably a great time to make the switch if you’re able. The growth weenies will have their fun for a year or three and then we’ll be back.

    I’m supporting Paul as well, but I am pretty resigned to the fact that the lizard queen will ascend the throne. She’s a lock.

  42. gerry says:

    “just as real estate info from this site”

    hi bi!
    how come you find info here useful and disagree at same time?

    thanks!

  43. kettle1 says:

    Thanks for the responses all, mike/bi/clot :)

    MIke,

    my game plan is to probably do a masters in Math with a finance specialty

  44. BC Bob says:

    kettle,

    The fx market is looking for quants. However, the black box will not be written to assume prices [currencies] always go in the same direction, with little or no volatility and that interest rates will remain low and stable.

  45. kettle1 says:

    I would be looking at a 2 year horizon for additional education completion and job move. My primary motivation is i have become bored with my field and have seen wall street finance through a friend of mine on the street and find his work much more interesting then mine. I am looking for a job that keeps me mentally challenged and my current field hasnt ( its a long story and fairly in depth i know that you would not think of biotech as boring…..)

  46. bi says:

    43#, they have diffenent names but mean the same thing: 1) financial mathematics; 2) quantitative finance; 3) financial engineering. as said in my previous post, the local 3 are better due to the network.

  47. kettle1 says:

    #46 BI

    Yep, i am aware of the different names ( thanks for the info though :) ). I wold probably shoot for columbia, but might have to look into melon. Rutgers has similar programs any body know what their rep is?

  48. bi says:

    45#, another field might be interested to you is to get a MBA in finance from wharton and etc and become a fund manager specifying biotech area. it woul integrate your current expertise. it requires a lot of computer programming work for most quants.

  49. bi says:

    42#, gerry, i disagree on bubble theory. other than that, i found a lot of useful info here.

  50. Clotpoll says:

    kettle (45)-

    “I am looking for a job that keeps me mentally challenged and my current field hasnt…”

    Kettle, you seem like you have a fully-formed personality, complete with a sense of humor and good communication skills.

    How well will you function surrounded by bloodless droids?

  51. Mike NJ says:

    Kettle,

    Go the MBA in finance route and then add on to it with Math/Statistics classes possible getting a masters in that as well. The friend I was talking about designed the next version of wireless protocol that will be seen in a few years after 802.11n. He has a PhD in physics and used to design missile guidance systems for the Israeli air force. He set his sights on quant and went to NYU Stern with me for his MBA. He also spent a lot of his time in the Math dept taking quant specific classes over and above what the MBA program offered. Like I said he is now designing quant algorithms on the street. Stern is a great school and is tops in finance. You can even do it part time as you work. Columbia only has their full time program but Wharton has a great program on the weekends as well if you want to go that route. It can be done but as you are already aware, it will not be easy. I also like the idea of the biotech fund manager. Goldman has many “experts” that have defected from their respective fields in order to run funds and do research. The street loves these industry experts. If you go this route just bang out a quick MBA to get you into the interview room and let your industry experience do the rest.

  52. bi says:

    51#, security analyst/fund manager at buy side would be a growing field in next few years due to more baby boombers entering into retirement and due to gradullly opening up of financial service sector to foreign investors by developing countries such as china and india

  53. skep-tic says:

    you can do a master’s in financial math part time at Columbia. I have a friend who is halfway through the program right now.

  54. Imus says:

    Now, more than ever, you will need a first class (ivy) undergrad and business school pedigree. Bulge brackets and other top shops will not even look at you otherwise.

  55. Cirrus says:

    Quick correction to #51 – Columbia does have an Executive MBA program just like Wharton that allows “working professionals” to get their degree without leaving the workforce.

  56. gerry says:

    Kettle
    you are scrapping your plans for raleigh?

  57. John says:

    By the way I can’t comment on the paramutual betting system related to real estate as it is confidential and not rolled out yet.

    In regards to quants, at Merrill when I was there they only hired PhDs in QA from Harvard/MIT etc. who was top of their class. Our Quant guy is in his 50’s and was the dean of the finance program at a MBA program and has his PhD and is friends with Mr. James Simon and from his academic days personally knew Mr. Scholes and was one of the last people to talk to him prior to his death. If you undersandt the attached link go for it.
    http://en.wikipedia.org/wiki/Black-Scholes.

    This is for fun.
    Total US mortgage debt is something like $14 trillion. Total US working population is about 200 million people (let’s ignore children and the retired).

    This gives us a mortgage debt of about $70,000 per worker, or $140,000 for a couple.

    The median salary is about $20 per hour, but with taxes, it’s closer to $15 per hour. That’s about 9,333 hours of work — but just to pay off the principal.

    Most people end up paying as much or more in interest as they do in principal, so that’s another 9,333 hours of work, for a total of 18,666 hours.

    Housing generally consumes about 1/3 of the family budget, so the total working hours before the house is paid off will be 56,000 hours.

    There are 2,000 working hours in a year, so this is about 28 years. And that’s how long it takes to pay off a mortgage.

  58. grim says:

    From Bloomberg:

    Subprime Loan Delinquencies in Bonds Accelerate, Moody’s Says

    Subprime mortgage bonds created in the first half contain loans that are defaulting at the fastest rate ever, data in a Moody’s Investors Service report shows.

    The average rate of “serious loan delinquencies” in the bonds have been higher than 2006 bonds, New York-based Moody’s analysts Ariel Weil and Amita Shrivastava wrote in a report today. Serious loan delinquencies are those 60 days or more past due, including properties in foreclosure or already foreclosed upon.

    For bonds older than six months, 2006 was the worst year for serious delinquencies since at least 2000, Moody’s said. Data in the Moody’s report suggests that accelerating delinquencies from 2007 bonds are likely to eclipse 2006.

    The report compares with research from Standard & Poor’s in March that said 2006 bonds may be the worst-performing ever.

  59. Mike NJ says:

    #55, I forgot about the Exec MBA program at Columbia, thanks. One thing abut Exec MBA programs, they are extremely tailored towards the mid-level manager than has his/her company paying the tuition. It is a lot more $$ and in my opinion not really tailored for career switchers. Full time is the best for this and regular part time is second best.

  60. Clotpoll says:

    Quants, shcmontze. Growth rules.

    How many MIT geeks does it take to look at a company and check the following:

    sales growth
    cash flow
    operating margin growth
    earnings growth
    earnings momentum
    earnings surprises
    return on equity

    I’m sure the quants can blackbox for the above parameters, but the assumptions can’t be fudged. A company is either performing, or it isn’t. Buy the performers, sell the rest.

    Please tell me I’m being too simplistic.

    All disclaimers.

  61. kettle1 says:

    Wow,

    I seem to have hijacked the board today. Maybe grim can change the name to NJ real estate and career report ;).

    Seriously, i appreciate all the feed back. The fund manager/security analyst t is an interesting angle (thanks Bi/Mike) more research to do now!

    Clot,
    I am used to working with drones, as long as i am personally challenged the drones can go about there day, it generally comes down to knowing who you can ignore and who you cant. A good example is the surveys you hear about that state that the average individual “isnt sure if they BELIEVE in evolution”

    John 57,
    The reason i am looking at Quant is because of the modeling aspect. In my Biochemcial Eng Undegrad, the modeling of systems was the most challenging and interesting. The funny thing is that ultimately whether you are modeling bacteria reproducing and the rate at which they produce the desired drug substance or a financial market the low level descriptions are generally just different versions of the same framework ( Highly generalized). And yes i will admit to full geekdom based on the fact that i get a kick out of modeling complex systems and then seeing them match real world.

    And yes Black-Scholes. does make sense and is very similar to some types of kinetics

  62. njpatient says:

    “They didn’t have an answer when I asked them why that would require security guards, though.”

    Har!

  63. Bloodbath in Winter 2007 says:

    Just so we’re in agreement … everyone thinks the move is to NOT put down more than 20% on a house, right?

  64. kettle1 says:

    Gerry #56,

    NC is just a consideration at this point, but would consider doing the quant/ fund thing and then soon after heading to charlotte perhaps. Thats a little far out at this point. My first goal is to get into a field that doesnt make spend all my time posting here due to boredom. I hope to start a full time program in the next 1/2 years and am starting some of the advanced math classes in Jan

  65. stuw6 says:

    If you think you can earn more than 6 or 7% investing over a 30 year window, then you should put no more than 20% down if you qualify for the mortgage.

  66. njpatient says:

    bi Says:
    “[Kettle], another field might be interested to you is to get a MBA in finance from wharton and etc and become a fund manager specifying biotech area.”

    I agree with bi.

    Now I have to go wash myself.

  67. kettle1 says:

    Just looked at Wharton. 70K/yr @ 2 yrs… $$$$$$

    I like the columbia program for quants @ 50K and 11/12months straight through fulltime. realistically i have to consider a reasonable balance of time/$$ and end pay off. i think Wharton is probably off my radar between the $$ and the time.

  68. John says:

    Put down more than 20% if your outstanding mortgage is over 417K and you can’t get a good jumbo rate and you are not a risk taker with your investing style.

  69. John says:

    http://www.iafe.org/resources.html

    join the financial engineers group if you are interested to becoming a quant. The link is above.

  70. stuw6 says:

    Here is a question for you realtors on here with mortgage experience.

    My wife and I plan to buy another home in late 2008/early 2009. We both have credit scores in the 760-790 range and no debt besides our first jumbo which we owe 360K on at 5.5% where we put 20% down.

    We plan to buy in the $450-$500 range and can put down the requisite 20% down and still have around $100,000 left over in cash. I have left the retirement and college assets out of the equation, but they are substantial.

    So do you think we will qualify for a large, but conforming loan?

    We plan to rent out the 1st home (2-family) and the rent will cover all expenses (insurance, mortgage, taxes and some maintenance) on it.

  71. kettle1 says:

    Can someone check the MLS on the following address.

    702 deerfield lane asbury nj

    I know that it has been on the market since about june but i dont know if its listed on NJ or GS MLS

    I am curious as to what the asking price is. I know the house well; the sellers are currently building a home in NC and planning on retiring there. I am pretty sure that they are asking 06 prices for this house in hunterdon county

  72. Clotpoll says:

    stuw6 (70)-

    Slam dunk. All day long. You’ll get the best rate available with that profile.

  73. John says:

    Here is your NC Quant Job

    Genworth Financial
    Name of Position: Financial Engineer
    Field: Financial Services – Capital Markets
    Location: Raleigh, NC
    Salary: We offer a competitive base salary plus bonus.
    Contact Information: Interested applicants should submit their resume to:

    jenifer.holljes@genworth.com

    Description of Position: This position will provide quantitative/analytics leadership to deploy complex structured finance solutions across domestic and international business segments. The successful associate will:

    Utilize advanced statistical, quantitative, and econometric techniques to develop core analytical capabilities and model libraries for the Global Capital Markets team
    Employ financial engineering methodologies to support derivative valuation (MBS/ABS, CDS, CDO, CLN), optionality pricing, and execution of exotic structures/products
    In conjunction with product development teams, research, model, validate, and implement quantitative structured solutions to allow for new market/country expansion
    Collaborate and lead technical teams on developing “model best-practices” as well as consult on the implementation of new analytic tools across all global platforms
    Aid in the development, documentation, and refinement of global risk measurements / management processes

    BASIC QUALIFICATIONS

    Ability to travel internationally up to 20%, as required.
    2 to 5 years relevant experience in a front/middle office environment with credit derivatives / structured products
    Advanced/Masters in financial engineering, quantitative analysis, econometrics, or equivalent work experience
    High level of proficiency in a programming language such as VBA or Visual C, statistical packages such as SAS and MatLab, with general proficiency in rating agency models such as M3 or LEVELS and data management
    Ability utilize third party copulas and software to assist in building complex in-house modeling modules
    Demonstrable ability to produce complex analysis/documentation on a rigorous schedule. Strong written and verbal communication skills and the ability to articulate difficult financial concepts to large multi-disciplinary audiences on a regular basis.

    PREFERRED QUALIFICATIONS

    PhD, CFA, or Certified Actuary with ability to bridge insurance and capital market methodologies.
    Global structured credits experience including asset classes such as mortgage, credit cards, student and bank loans
    Requirements

    Degree: MS or PhD
    Preferred Field of Degree: financial engineering, econometrics
    Experience: 3- 5 years

  74. grim says:

    My kind of gig..

  75. gerry says:

    just had my 1-br unit appraised for refinancing. got it for 180k in 2002 and the appraisal came in at 225k.
    sounds fair to me but do you guys think it’s too “bubbly”?

  76. kettle1 says:

    Once again thanks for the Quant input, Now back to our regular bubble banter…..

  77. stuw6 says:

    Thanks Clotpoll.

    I suppose the only thing I left out was my SSN ;)

  78. lisoosh says:

    Economic anecdote:

    Friend works in service department of high end car dealership in well off area. Usually humming, customers having no problems dumping thousands into their cars at the first squeak.

    Absolutely dead now. Customers nickle and diming every last repair.
    And this is in an area with serious money. The pain is definitely here.

  79. Joeycasz says:

    Well it looks like they appraised at around 5% per year since you bought it which is a normal market. I just wouldn’t pay 225k for it.

  80. Clotpoll says:

    stuw6 (77)-

    Just to seal the deal, have your mortgage originator put a fake lease in the file, showing your 2-fam is rented at a positive cash flow. :)

    Liar loans can take many forms…

  81. Pat says:

    lisoosh…funny. I called the dealer for a few repairs I need and got a prime Saturday appointment with 2 days notice.

    I thought it was my suave and sophisticated communication style. ;)

  82. John says:

    Kettle-

    To switch careers, full time MBA is the only way to go (having tried both). But solely an MBA isn’t enough to be a true “quant” unless you really compromise on the quality of the firm. Masters in Finance with a quant angle might be a better way to go…and jobs are plentiful.

  83. chicagofinance says:

    Wasn’t I foaming at the mouth about this yesterday?

    WSJ
    Demystifying Goldman Some of Trading Complex
    Is Moved Out of Shadows; Bid for Investor Respect?
    October 4, 2007; Page C12

    [edit]
    Blood on the Street

    Should Wall Street brace for job cuts? This is supposedly the worst credit crunch in two decades. Repackaging mortgages — in fact, the entire structured-credit business — has been all but shut for three months. The private-equity business seems to be on an extended break, too. Thus far, the slowdown hasn’t translated into much in cutbacks.

    True, UBS is culling 1,500 from its fixed-income division after taking roughly $4 billion of write-downs, but the Swiss bank is the exception. Such rivals as Bear Stearns, Credit Suisse Group, Lehman Brothers Holdings and Morgan Stanley have mostly just trimmed their mortgage teams or sacrificed a head honcho or two. Bear ditched its second in command, Warren Spector, in August. Merrill Lynch ousted its head of fixed income, Osman Semerci, this week.

    These surgical strikes might be enough to appease investors if the summer turmoil turns out to be an aberration. If market woes persist, Wall Street will have to take more drastic measures. A fifth of New York City’s financial work force got the boot in the two years after the 2001 downturn, according to the Securities Industry and Financial Markets Association. Similar bloodshed now would mean pink slips for 40,000 Big Apple financiers.

  84. chicagofinance says:

    Mike NJ Says:
    October 4th, 2007 at 12:33 pm
    Stern is a great school and is tops in finance.

    Mikey: you BETTER qualify that statement……

  85. kettle1 says:

    John, Grim # 82

    If JB wouldn’t mind kicking you my e-mail i would love to ask you a few more questions. Would you mind?

  86. gerry says:

    joey-
    why wouldn’t you if you don’t think it’s inflated? not selling but just curious…ty

  87. chicagofinance says:

    Clotpoll Says:
    October 4th, 2007 at 1:56 pm
    Quants, shcmontze. Growth rules.
    How many MIT geeks does it take to look at a company and check the following:
    sales growth cash flow operating margin growth
    earnings growth earnings momentum earnings surprises return on equity
    Please tell me I’m being too simplistic.

    clot: you are being too simplistic….especially now that: #1 companies can no longer spoonfeed info to certain parties without making equal opportunity public disclosure; #2 banks can no longer as freely and obviously swap information across stovepipes

  88. Joeycasz says:

    I of course don’t know what it looks like or what area it’s in. I do know that 5% a year is normal and i was just stating that.

    225K is too rich for my blood for 1 bedroom.

  89. Rob says:

    Clot, scale your investment criteria up to several billion dollars and then you’ll see where quant modeling might come in.

  90. John says:

    I bought a one bedroom in queens in 1992 for 27k and sold it in 2000 for 86K and now the identical unit in my building in on sale for $250K. From the pictures it has an older kitchen and bathroom then the apartment I sold seven years ago. So the apt went up 300% in my eight years of ownership and another 300% in the next owners seven years of ownership. So is the new person expecting the one bedroom to go up another 300% in 7 years for a final value of $750 for a 750 square foot one bedroom in Queens or a $1,000 a square foot!!! for Queens. I don’t think so. In fact I am shocked it went to $250k otherwise I would have kept the damm thing.

  91. John says:

    To give a idea of the numbers we are dealing with in the Quant world I did a ERM project at a huge bank trading desk. First thing you do is assess their risk appetite for loss. That desk considered any loss under one billion insignificant to their trading activities. Think about it if you are right 51% of the time on the desk you can make money, so if you make on a desk one billion profits in your rapid fire day to day black box trading with all positions closed out by end of day you wagered $100 billion dollars and in winning 51% of time you lost $100 billion and made $101 billion. So during they day they often lose a billion but it is only end of day that counts. The dollars on those black box things are crazy, I remember once doing a repo audit and we were counting 100 million dollar trade tickets like their were mcdonalds coupons.

  92. kettle1 says:

    Since we are talking finance…..

    THIS APPEARED ON CRAIG’S LIST

    What am I doing wrong?

    Okay, I’m tired of beating around the bush. I’m a beautiful (spectacularly beautiful) 25 year old girl. I’m articulate and classy.
    I’m not from New York . I’m looking to get married to a guy who makes at least half a million a year. I know how that sounds, but keep in mind that a million a year is middle class in New York City, so I don’t think I’m overreaching at all.

    Are there any guys who make 500K or more on this board? Any wives? Could you send me some tips? I dated a business man who makes average around 200 – 250. But that’s where I seem to hit a roadblock. 250,000 won’t get me to central park west. I know a woman in my yoga class who was married to an investment banker and lives in Tribeca, and she’s not as pretty as I am, nor is she a great genius. So what is she doing right? How do I get to her level?

    Here are my questions specifically:

    – Where do you single rich men hang out? Give me specifics- bars, restaurants, gyms

    -What are you looking for in a mate? Be honest guys, you won’t hurt my feelings

    -Is there an age range I should be targeting (I’m 25)?

    – Why are some of the women living lavish lifestyles on the upper east side so plain? I’ve seen really ‘plain jane’ boring types who have nothing to offer married to incredibly wealthy guys. I’ve seen drop dead gorgeous girls in singles bars in the east village. What’s the story there?

    – Jobs I should look out for? Everyone knows – lawyer, investment banker, doctor. How much do those guys really make? And where do they hang out? Where do the hedge fund guys hang out?

    – How you decide marriage vs. just a girlfriend? I am looking for MARRIAGE ONLY

    Please hold your insults – I’m putting myself out there in an honest way. Most beautiful women are superficial; at least I’m being up front about it. I wouldn’t be searching for these kind of guys if I wasn’t able to match them – in looks, culture, sophistication, and keeping a nice home and hearth.

    it’s NOT ok to contact this poster with services or other commercial interests
    PostingID: 432279810

    THE ANSWER
    Dear Pers-431649184:

    I read your posting with great interest and have thought meaningfully about your dilemma. I offer the following analysis of your predicament.
    Firstly, I’m not wasting your time, I qualify as a guy who fits your bill; that is I make more than $500K per year. That said here’s how I see it.

    Your offer, from the prospective of a guy like me, is plain and simple a crappy business deal. Here’s why. Cutting through all the B.S., what you suggest is a simple trade: you bring your looks to the party and I bring my money. Fine, simple. But here’s the rub, your looks will fade and my money will likely continue into perpetuity…in fact, it is very likely that my income increases but it is an absolute certainty that you won’t be getting any more beautiful!

    So, in economic terms you are a depreciating asset and I am an earning asset. Not only are you a depreciating asset, your depreciation accelerates! Let me explain, you’re 25 now and will likely stay pretty hot for the next 5 years, but less so each year. Then the fade begins in earnest. By 35 stick a fork in you!

    So in Wall Street terms, we would call you a trading position, not a buy and hold…hence the rub…marriage. It doesn’t make good business sense to “buy you” (which is what you’re asking) so I’d rather lease. In case you think I’m being cruel, I would say the following. If my money were to go away, so would you, so when your beauty fades I need an out. It’s as simple as that. So a deal that makes sense is dating, not marriage.

    Separately, I was taught early in my career about efficient markets. So, I wonder why a girl as “articulate, classy and spectacularly beautiful”
    as you has been unable to find your sugar daddy. I find it hard to believe that if you are as gorgeous as you say you are that the $500K hasn’t found you, if not only for a tryout.

    By the way, you could always find a way to make your own money and then we wouldn’t need to have this difficult conversation.

    With all that said, I must say you’re going about it the right way.
    Classic “pump and dump.”
    I hope this is helpful, and if you want to enter into some sort of lease, let me know.

  93. skep-tic says:

    #91

    this is why meeting and marrying a girl before you hit it big pays huge dividends

  94. Joeycasz says:

    #91

    Eff-ing brilliant!

  95. dblko says:

    I agree with John. For certain quant jobs that involve hard core math and programming (derivative pricing, stat-arb etc.) you need to go for a real financial engineering program.

  96. skep-tic says:

    the girl probably got a lot of emails, however

  97. Mike NJ says:

    Chifi,

    Sorry, need to clarify what I meant. When I said “tops” I meant top 5, not the absolute top (it came out wrong). Based on my research Stern is top 5 in finance in a number of publications. I have many issues with the university of Chicago as a school in a social sense (ie it has none) but on an intellectual level it is truly legit.

    Kettle, As was said before, you will need massive chutzpah to get into this post graduation as I can guarantee you that there are not many people who all of a sudden decide one day that they must slave over computer/math algorithms 14 hours a day for the rest of their lives. Most applicants come from a pure math/physics/econofinance background. With a little effort anything is possible.

  98. RentinginNJ says:

    kettle1#91

    Hilarious.

    Why are some of the women living lavish lifestyles on the upper east side so plain?

    You have to land him before he hits it big. You need to get him while he’s struggling through B-school eating Ramen noodles.

    A single guy in his late 20’s working in NYC making $500k probably isn’t worried too much about marriage.

  99. BC Bob says:

    kettle [91],

    Classic. Can her arb her with her friend?

  100. BC Bob says:

    That’s can he.

  101. dblko says:

    Kettle, if you are in the area just go to one of the NYU seminars to get a feel for the field and check out if that’s what you want to get into

    http://www.math.nyu.edu/seminars/math_finance_seminar.html

    Also you could try to talk to a recruiter and ask what kind of jobs they could place you with your current resume, and what additional qualification you should get.

    Funny, just like a realtor about selling a house (“a MBA on your resume is like a kitchen with stainless steel appliances”). If you think a 6% realtor commission is bad, check out WS recruiters (30%).

  102. lisoosh says:

    RentinginNJ Says:

    “You have to land him before he hits it big. You need to get him while he’s struggling through B-school eating Ramen noodles.”

    Don’t those women later get dumped for “trophy wives”?

    Maybe she should be looking for some rich 50 year old, have a kid, divorce him in a couple of years and then use the settlement to attract a young good looking male gold digger.

    I’m sure it’s been done.

  103. lisoosh says:

    Maybe her problem is she is looking for wealthy AND young AND good looking.

    I heard Shirley Conran(?) say once that she went to a dating agency and said her only requirement was “rich”. They sent her a string of short, fat, bald millionaires.

  104. Fiddy Cents on the Dollar says:

    Jerry #75-

    Curious about the appraisal of your 1 bedroom…..Can you tell us what town you’re in?? What is the name of your complex?

    Condos have been taking a beating lately and they can NOT be overappraised. That just won’t fly anymore. The recent sales of 1 bed units will tell the tale.

  105. chicagofinance says:

    Regarding the marriage thing:
    In terms of finance guys, most everyone I know met their wives before they hit the jackpot and they “grew wealthy” together.

    The others met their wives in finance circles.

    So if you’ve come to gold-dig, you are basically SOL without a real plan or real connections. That said, the post is a farce…..

  106. chicagofinance says:

    Re Quant Thing……….

    Please may I introduce G-d………
    http://www.princeton.edu/~yacine/

  107. Essex says:

    Smart/attractive women don’t think like the one who posted….and the response while witty….was a waste of time.

  108. lisoosh says:

    Wow, digging around on the marriage thing – there are even dating agencies EXPRESSELY for women to meet rich men….
    And a bunch of books about it.

    Disclaimer -I married a man who made less than I did. Just happy he makes enough for me to stay home surfing this site all day……

  109. chicagofinance says:

    OT Random:

    classic early-80’s…….check out the clothes…….good tune
    http://video.yahoo.com/video/play?vid=19810&fr=

  110. BC Bob says:

    kettle [93],

    Any truth to the rumor that she’s Tawny’s younger sister? By the way, how is Chuck Finley these days?

    http://www.youtube.com/watch?v=oKTiwCez6Zs

  111. BC Bob says:

    Goldman rules the world.

    “Canadian Prime Minister Stephen Harper picked Mark Carney, a finance ministry official and former investment banker at Goldman Sachs Group Inc., to succeed David Dodge as governor of the Bank of Canada.”

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aKQGX7kvyDZo&refer=home

  112. Clotpoll says:

    Rob (90)-

    Absolutely. Multibillion-dollar portfolios absolutely need modeling and quants. However, the blackbox inputs are a lot more real world when the assumptions aren’t blue sky forever.

  113. Clotpoll says:

    John (92)-

    Which lays out the problems with quants gone amok.

    The minute it’s 1s and 0s- and not real money- a pernicious mindset takes root.

  114. Clotpoll says:

    lisoosh (103)-

    The MILF route is definitely the one to take for the young man taking down 500K.

    So 2007, so practical, so fun!

  115. Clotpoll says:

    BC (112)-

    Chuck Finley?

    Battered by his wife. Then, battered by batters.

  116. Clotpoll says:

    Oops…moderated for using the reference to hot older women made famous in American Pie.

  117. att says:

    kettle and all.

    Thanks for your post on quants. I’m myself in the process of trying to switch careers. Am about to take gmat in 2-3 weeks.

    One thing which kind of turns me off from quant job is that most of the people and some of the forums say that to be considered a “real quant” you must have phd. Well I’m all for doing the Masters in finanacial engineering, but phd is a big commitment (at least 4-5 years). Forums say that in finance world, a masters in financial engineering is always a distant second cousin to the phD quant.

    Well – I do not have any friends in finance industry, so dont know for sure.

    Another angle which I’ve been considering and highly inclined towards it is doing a MBA in finance from one of the top 10 schools and doing a lot of qunat courses as electives. I’ve estimatd that I can actually finish both MFE and MBA in about 2.5 years and then join some big bank or hedge fund.

    Anyone with insight into the finance industry – please chime in. I have to start applying to mba/mfe programs in about a month’s time, and opinions are highly appreciated.

  118. njpatient says:

    Chuck Finley?
    Battered by his wife. Then, battered by batters.”

    And how’s Kris Benson doing?
    Sure was sad they left NYC before he cheated on her…..

  119. njpatient says:

    Really?
    Grim won’t let us say m.i.l.f?

  120. grim says:

    It is in the blacklist. Unfortunately spammers love that one.

  121. Rob says:

    Didn’t Tawny beat Chuck with her shoe? That’s just insult on top of injury. She was really something back in her day though.

  122. John says:

    Actually the good looking guys bang everything in site till they are 35 and then marry the plain nice girl whose dad is a multi millionaire. Who will sit at home while he travels with his various FWBs.

  123. John says:

    Fed’s Kohn says half-point rate cut may be enough

    By Greg Robb
    Last Update: 9:10 AM ET Oct 5, 2007Print Subscribe to RSS Disable Live Quotes

    WASHINGTON (MarketWatch) — The Federal Reserve’s half-a-percentage point rate cut on Sept. 18 may be enough to keep the economy from sinking from the financial market turmoil, said Donald Kohn, the vice-chairman of the Fed Board on Friday. “But pending further evidence, a 50-basis-point easing was not an unreasonable first approximation of what might be required to keep the economy on a sustainable growth path,” Kohn said in a speech to the Greater Philadelphia Chamber of Commerce. It would be better for the Fed to respond “too much or too rapidly” to the turmoil in financial markets rather than acting “too little or too slowly,” Kohn said. With recent favorable inflation news, Kohn said he believes the Fed could reverse the recent rate cut if it turned out to be larger than needed.

  124. John says:

    Housing: That Sinking Feeling
    Homeowners are getting slammed as builders slash prices. The big question: Will this shock treatment help hasten the end of the painful downturn?

    Las Vegas was once the hottest of the red-hot real estate markets. But when sales really started choking up last year, developer KB Home (KBH ) did something drastic. Determined not to be caught with a big backlog of unsold homes through one of the industry’s notorious down cycles, the builder started slashing prices. A lot. In the 1,400-home Huntington community, a subdivision of two-story stucco houses west of the famed Strip, homes that started at $320,000 a year ago are now listed for $270,000–just a starting point for potential deals.

    Slide Show >>Those sorts of discounts seem to be attracting buyers. Pending sales contracts jumped 23% after KB cut list prices by $25,000 in May, one of the recent price breaks in the Huntington subdivision, according to the market research firm Hanley Wood. That may be good for KB, or at least less bad than holding on to a lot of unsold units. It may also be good for current buyers who snap up homes at huge discounts to recent asking prices. “We try to make prudent decisions regarding pricing,” says Jim Widner, regional general manager for KB in Las Vegas. “Prices are going to rise and fall over the short term, but long term a home is one of the best investments.”

    For homeowners who jumped in at the height of the boom, the discounts aren’t so good. In Quayside Court, a quiet cul-de-sac in Huntington, many residents who bought last year suddenly own homes worth a whole lot less–making it hard for anyone who has to refinance, sell, or borrow against the equity. “When we first moved here [in the summer of 2006], the housing market was incredible,” says Tammy Elder, a mother of three. “Unfortunately we bought a house that was overpriced, and we don’t know if we’ll ever break even.”

    KB’s extreme strategy at Huntington is playing out across the country–even in places like Minneapolis and St. Louis that were bypassed by housing mania. For the first time, big builders are offering massive, often six-figure, price cuts in overbuilt developments nationwide, giving the industry a kind of shock treatment designed to move inventory off the books fast. It remains to be seen whether these radical measures will revive the market or deepen the slump, but it’s certainly having an impact on the local communities. On Sept. 14, Hovnanian Enterprises Inc. (HOV ) kicked off a 72-hour Deal of the Century, in which it slashed prices by as much as $100,000 in 19 states. That same day, Standard Pacific Corp. (SPF ) launched its Mission: Possible campaign in 49 communities across Southern California, promising $20 million in total discounts. And on Sept. 29, D.R. Horton Inc. (DHI ) auctioned off 53 homes in San Diego with bids starting at $150,000, half off the list price. “We wanted to get the message across louder,” says Hovnanian CEO Ara K. Hovnanian. “Customers needed a stimulus.”

    UP-FRONT PAIN
    Builders’ balance sheets needed a boost, too. Even though the five-largest publicly held residential builders have cut the value of their land and unsold homes from $49.7 billion in 2006 to $41.9 billion today, that inventory as a percentage of sales has soared 33% during the past year, according to Banc of America Securities (BAC ). Those idle assets have taken a toll on the industry’s health. A year ago builders’ debt payments were roughly the same as their cash flow. Now debt is 2.5 times cash flow. Profits are disappearing as well, with KB Home, D.R. Horton, and other big builders all reporting losses in the third quarter. On Sept. 25 the country’s No. 2 builder by homes sold last year, Lennar Corp. (LEN ), reported a $513.9 million quarterly loss, the biggest in its 53-year history. And while there have certainly been other influences on the market, builders bear a lot of the blame for their woes.

    The real question is whether the drastic price-cutting will short-circuit the usual long, painful downturn builders seem destined to undergo in this economically sensitive business. This is the first housing slump in which the industry has been big enough and well enough capitalized to even consider such extreme measures. And they are extreme. Margins, which ran as high as 35% at the peak of the housing boom, are close to nil when builders sell at fire-sale prices. If by doing so the builders can force the market to accept the reality that housing values have fallen–and accept it fast–there’s at least the possibility of emerging from the current bust sooner than in earlier down cycles. “The discounts depress the market, and that’s why we think home prices have got more to fall,” says David Wyss, chief economist for Standard & Poor’s, which like BusinessWeek is owned by The McGraw-Hill Cos. (MHP ) “But rather than a prolonged bust, you take the pain up front.” A fast recovery in the housing market wouldn’t just be a tonic for builders; it could also give a much needed boost to the overall economy.

    There is, of course, much that could go wrong. Indeed, potential risks with this untested strategy abound, especially for smaller players. If the price cuts aren’t deep enough or builders don’t rein in production enough, they won’t clear out the glut of unsold homes. Then there’s the worry that the discounts lower prices too much, forcing builders to write down even more of the raw land held on their books. And if prices keep falling, buyers could decide to cancel contracts in hopes of getting a better deal later, as they’ve already started to do. There are also broader markets forces at play, ones that builders may not be able to surmount even by slashing prices. For example, the rising number of foreclosures could add to the backlog of unsold homes faster than they can clear them out. “It’s a losing battle,” says Jim Belfiore, president of Belfiore Real Estate Consulting, a research firm.

    Still, builders figure they’re better off cutting supply fast rather than letting it drag down earnings for months or even years. “You have to keep moving inventory,” says John F. Eilermann, Jr., chief executive officer of McBride & Son Homes, a privately held regional firm that’s offering discounts of up to $100,000 and hosting block parties with pig roasts to lure buyers in St. Louis. “Our biggest cost is the land sitting out there. You have to get yourself in a better position for when the market does turn.”

    PSYCHOLOGICAL BLOW
    Following its deal of the century, Hovnanian, the nation’s No. 7 builder, booked more than 2,100 gross sales with 1,700 contracts and 400 sales deposits. Standard Pacific has 227 pending contracts from its sale. Assuming those and other such deals ultimately close, the homebuilders could recoup some of the capital tied up in their unsold properties and generate enough cash flow to keep up with their debt payments. That’s paramount for builders’ survival. “They’re better off clearing the showrooms than sitting on an asset that’s likely wasting,” says Lawrence J. White, a professor of economics at New York University’s Stern School of Business. “That’s like idle capacity on a factory floor.”

    When builders cut their prices in one fell swoop, rather than letting them drift slowly downward, they in essence force sellers of existing homes to do the same. At the very least, that can be a severe psychological blow that in earlier slumps was absorbed over a period of time rather than all at once. For some homeowners, it’s a catastrophic financial blow as well. With new, clearly established market prices, troubled homeowners who paid peak prices will have a harder time refinancing. Others, who need to sell fast, will most likely do so at a steep loss. If they sell for less than their mortgage, they’ll be left owing money to the bank. And speculators who banked on being able to flip properties fast in a rising market or strapped homeowners struggling with adjustable-rate mortgages that are now resetting with higher payments face their own particular hell. As painful as such situations are, however, the excesses must be wrung out of the market before the sector or the broader economy can recover. “It’s unfortunately a necessary part of the process,” says Richard J. DeKaser, chief economist for Cleveland lender National City Corp. (NCC ) “Once you see developers acting as aggressively as they are, the rest of the housing market is not too far behind.”

    Homeowners are almost always slower than builders to bite the bullet and cut their asking prices. That’s why prices on sales for existing homes haven’t dropped as precipitously as prices for new homes. The average price for a new home in Las Vegas, for example, is down 10% from the previous year compared with 3.8% in the resale market. With owners unwilling to accept lower prices, there’s a growing glut of unsold existing homes here and across the country. On Sept. 25, the number of existing homes for sale nationwide, including vacant and owner-occupied listings, hit a 19-year peak of 4.58 million, up from 2.15 million in January, 2005, according to the National Association of Realtors. The resale market will eventually have to realign–meaning homeowners will have to cut their prices–before the slump can end.

    BUILDERS’ PARADISE
    Driving along interstate 215 west of McCarran International Airport, it’s easy to forget that Vegas’ lifeblood is gambling and not homebuilding. Acres of brand-new subdivisions stretch for miles toward the red rock mountains in the distance. Out here, the brightly colored billboards on the highway aren’t hyping entertainers on the Strip but rather new communities with aspirational names like Canyon Estates and Inspirada. A string of low-rise office buildings read like a who’s who of the housing boom, with signs for Pulte Homes (PHM ), Countrywide Home Loans (CFC ), and Prudential Americana Realtors. Welcome to Constructionland.

    A strong job market, the thriving casino and convention industry, and the highest population growth in the country made Vegas a boomtown for builders. Sin City represented one of the top five markets. Industry researcher Steve Bottfeld of Marketing Solutions estimates there are roughly 568 subdivisions being developed and marketed, the highest per capita in the nation. As recently as two years ago, prospective buyers would camp outside new developments to bid on dirt lots. Today, new homes are empty and communities half-built. The number of unsold homes has reached as much as 48,000, by some estimates, up from a more or less steady level of 10,000 over the last several years. “Builders have a glut of houses that’s going to weigh on home prices for awhile.” says Dennis L. Smith, president of Home Builders Research Inc., a local consultancy.

    Mike Alley has gotten whacked hard by the area’s declining housing market. In the spring of 2005, Alley, an independent real estate agent in Racine, Wis., moved to Las Vegas, lured by the warm weather and the strong real estate market. He quickly found a sales job with Pulte, where he says agents were pulling in $500,000 a year for basically taking orders. “It was nutty,” says Alley. “Houses were flying off the lot.”

    A year later, he decided to jump into the market himself and buy a home. He spent a month searching, settling on KB’s Huntington subdivision. The neighborhood attracted a mix of folks, from couples just starting out to empty nesters. More important, there were a lot of families with young kids the same age as his. The $86,000 worth of upgrades, including higher-end cabinets and granite countertops, thrown in by KB Homes at a discount clinched it. Alley thought he was getting a deal: In August, 2006, he paid $360,000 for a three-bedroom home in Quayside Court, which was appraised for $415,000.

    Yet even Alley, who made his living in this industry, says he was blindsided by the markdowns. Today he reckons his home is worth around $300,000. “I didn’t quite keep my finger on the pulse of what [KB is] doing in this community,” says Alley, who’s largely gotten out of the real estate business. “I’m looking at the sales data, and they were selling my model for $50,000 less even months after I bought it.”

    HOUSING SUMMIT
    For Valentina Decarlo, who lives down the block, the situation is even worse. A longtime Las Vegas resident, the 39-year-old has spent almost 20 years working as a cocktail waitress, currently at Wynn Casino where tips supplement her $32,000-a-year paycheck. She took a gamble of her own last July when she put down $77,000 on a four-bedroom house.

    After DeCarlo got stomach cancer last October, though, she missed work and started relying on credit cards to stay afloat. She’s struggling to keep up with her $2,140 monthly payment. While she paid $367,500 in July, 2006, DeCarlo thinks similar properties are now going for less than $300,000. That means her home may not be worth more than her outstanding mortgage, so she can’t easily refinance. Her lender, Countrywide, suggested selling the home at a loss or finding roommates, she says. “I’m going to lose everything that I’ve worked so hard for,” says DeCarlo. “Our primary objective is to keep people in their homes,” says Jumana Bauwens, a Countrywide spokeswoman, who adds the lender has completed more than 35,000 workouts on troubled mortgages in 2007.

    If DeCarlo can’t find a solution, she will face foreclosure, an increasingly common occurrence in this rapidly deteriorating market. Foreclosures in Las Vegas are the highest in the nation. And there’s no sign of a slowdown: New filings in the city topped 33,000 through August, vs. 19,909 in all of 2006, according to the data firm RealtyTrac. The fallout in Las Vegas has been so bad already that Nevada Governor Jim Gibbons has called for a housing summit on Oct. 4 with the city’s five largest builders, five largest banks, and others like Freddie Mac (FRE ) and Fannie Mae (FNM ) to figure out how to help troubled home­owners. “We are trying to target those folks who are headed downstream toward the waterfall before they get into trouble,” says Lon A. DeWeese, chief financial officer of the Nevada Housing Div.

    Speculators, especially those who bought late in the cycle, are likely to get hit the hardest. Roxasita Yasul, a 66-year-old retired hospital assistant, decided in late 2005 to supplement her Social Security and her husband’s pension by investing in real estate. Back in the 1980s in California, she had tried her luck picking up houses at auction. It was a pretty successful venture. So she got her real estate license and bought four houses last year in new Vegas communities, including one in Huntington. Like most investors, a group who’s rapid-fire buying and selling helped fuel the boom in this area, she figured she could always sell the properties in a rising market.

    It hasn’t worked out that way. Yasul paid $350,000 for the two-story home on Quayside Court in June of last year, but she expects it wouldn’t bring in more than $300,000 today–if she could even find a buyer. She’s not interested in selling now, hoping to wait for the market to rebound. “I’m not lucky with this one,” says Yasul. “Those easy rates and interest-only loans will come due, and people will get hit with reality. The outlook is very gloomy.”

    In the meantime, Yasul is desperately searching for tenants. That causes its own problems. Too many renters in a neighborhood can further depress prices, a worry that’s already causing consternation among her neighbors. “It’s like living in an apartment community,” says Elder, her Huntington neighbor. “Renters don’t care as much about the homes if they don’t own them.”

    The current housing downturn and the damage it’s inflicting on the overall economy are far from over. With a slew of risky, adjustable-rate mortgages still to reset next year, foreclosure rates could climb even higher. That’s a big reason why the stocks of the nation’s 20 largest homebuilders have fallen an average 65% since the start of 2007. But there a few weak rays of light at the end of the tunnel. Builders are taking the painful step of cutting production. Permits are down 49% from the market’s September, 2005, peak. That’s half the time it took to reach this point in the last decline. “Builders definitely responded more quickly this time, and that’s a good thing,” says Banc of America Securities analyst Daniel Oppenheim. “But the inventory overhang is so great, it’s going to take a long time to work through this. They still have a ways to go before there’s a recovery.”

  125. John says:

    Topps Meat to go out of business
    The company responsible for the second-largest beef recall says it will close its plant in Elizabeth, N.J. after distributing contaminated meat.
    October 5 2007: 11:52 AM EDT

    ELIZABETH, N.J. (AP) — Topps Meat Co. LLC, the meat company responsible for the second-largest beef recall in U.S. history, said Friday it will close its plant in Elizabeth, N.J., and go out of business, effective immediately.

    Topps on Sept. 25 began a recall of its frozen hamburger meat that was expanded to comprise 21.7 million pounds of the meat, which may be contaminated with E. coli after federal inspectors discovered inadequate safety measures at its plant.

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    Investigators think 30 people may have been sickened in Indiana and seven other states.

    South Korea halts U.S. beef imports
    In a statement, Chief Operating Officer Anthony D’Urso called the events “tragic.”

    “In one week we have gone from the largest U.S. manufacturer of frozen hamburgers to a company that cannot overcome the economic reality of a recall this large,” he said.

    A “small number” of the 87 plant employees will remain at the plant to assist the U.S. Department of Agriculture with its investigation into the meat recall and handle administrative matters.

    Topps Meat was founded in 1940.

  126. John says:

    Top 5 Cities best value costs compared to salaries
    Rank City Sample Salaries and Jobs
    1 New London, CT Salaries and Jobs
    2 Huntsville, AL Salaries and Jobs
    3 Baltimore, MD Salaries and Jobs
    4 Harrisburg, PA Salaries and Jobs
    5 Tulsa, OK Salaries and Jobs

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