From the Wall Street Journal:
Of Victims and Mortgages
December 13, 2007; Page A22
There are bad ideas to address the mortgage meltdown, and then there are ideas so awful that they even have Democrats rebelling against their powerful House chairmen.
Such is the case with the mortgage bankruptcy bill passed yesterday by John Conyers’s House Judiciary Committee. We warned in October about this legislation, which would allow bankruptcy judges to treat mortgage debt the same as credit-card debt. It sounds like a great idea to troubled borrowers, because judges could then reduce the amount that a borrower owes on a mortgage — while letting the owner keep the property.
It’s less great for future home buyers, who can imagine how much fun it will be when markets logically respond by setting mortgage interest rates closer to those on credit-card debt. Mortgage debt has always been treated differently — i.e., the bank will take your house if you don’t pay the agreed-upon tab — precisely to encourage lower rates on a less risky investment.
Justice John Paul Stevens, not exactly a threat to win a Cato Institute fellowship, described the importance of this principle in 1993 in Nobelman v. American Savings Bank: “At first blush it seems somewhat strange that the Bankruptcy Code should provide less protection to an individual’s interest in retaining possession of his or her home than of other assets. The anomaly is, however, explained by the legislative history indicating that favorable treatment of residential mortgagees was intended to encourage the flow of capital into the home lending market.”
High levels of homeownership have been the result. To repeal this policy and make lenders wonder whether mortgage loans will be secured or unsecured can have only one result — more expensive mortgage loans.
That’s why 16 House Democrats wrote to Mr. Conyers in October urging him not to rewrite the bankruptcy code. The controversy forced him to yank the bill — until yesterday. His new version would apply only to subprime and nontraditional mortgages originated since the start of 2000, and Mr. Conyers eked out a razor-thin majority, despite a goal-line stand led by Utah Republican Chris Cannon.
…
One indisputable fact is that mortgage fraud skyrocketed during the Federal Reserve’s easy-credit era. When financial institutions see potentially criminal activity in customer transactions, they are required to send a Suspicious Activity Report (SAR) to the Treasury’s Financial Crimes Enforcement Network (FinCEN). From 2000 to 2006, SARs related to mortgage fraud increased by almost 700%.
…
Even more shocking to Beltway ears, the upcoming FinCEN data show that “frauds for housing,” in which the scam is simply to secure a more expensive property than one’s history and finances would justify, account for 60% of all SARs related to mortgage fraud. Based on Treasury’s data, it is the borrowers, not the brokers, who are most likely to be the culprits when a lender is victimized.Frauds for housing “may be a bigger deal than we all thought,” says Merle Sharick of the Mortgage Asset Research Institute. He adds that regulators and financial firms are now trying to discern just how common this crime is. Taxpayers, investors and future home buyers asked to sacrifice on behalf of today’s subprime “victims” might reasonably ask for a more thorough accounting.
From Bloomberg:
Euribor Stays at 7-Year High, Defying Central Banks
Interest rates on loans in euros stayed at a seven-year high, a day after global central banks teamed up in an attempt to thaw a freeze in money markets.
The three-month borrowing cost was at 4.95 percent, its highest level since December 2000, according to prices from the European Banking Federation today. That’s 95 basis points more than the European Central Bank’s benchmark interest rate and up from 4.18 percent at the start of July, before losses related to subprime mortgages contaminated money markets.
…
“It’s not going to help us find an exit to this crisis,” said Cyril Beuzit, head of interest-rate strategy at BNP Paribas SA in London. “These measures aren’t going to address the root cause of the crisis. Banks are still reluctant to lend money to each other because there are serious concerns about potential further bad news.”
The euro levels suggest that money-market rates for the dollar and pound, which will be set by the British Bankers’ Association later, won’t decline.
“It’s a very disturbing sign,” said Christoph Rieger, a fixed-income strategist at Dresdner Kleinwort in Frankfurt. “I’m alarmed by the impact this is having, which underscores that the funding difficulties out there are enormous.”
From Reuters:
Second rescue saves subprime casualty SachsenLB
The German state and public banks clubbed together for the second time in five months to save subprime-stricken SachsenLB from collapse, heading off a blow to confidence in the country’s financial system.
SachsenLB is one of Germany’s highest-profile casualties in the crisis triggered by subprime mortgages. It was first rescued in August under a deal that forced its sale to a rival, but rising losses threw negotiations into disarray.
From Floyd Norris at the NYT:
Fear at the Fed
The combined actions of the world’s central banks on Wednesday smacks of a real fear that the world’s financial system is in trouble.
Injecting liquidity — that is lending money to banks — when short-term interest rates rise is perfectly normal in this age in which central banks target interest rates.
What is not normal is the Fed using auctions “to inject term funds through a broader range of counterparties and against a broader range of collateral than open market operations.” That move, the Fed says, “could help promote the efficient dissemination of liquidity when the unsecured interbank markets are under stress.”
Many years ago in Texas my father claimed bankruptcy and was able to keep his home, yes you can do that now but you have to keep making the mortgage, he did not have to do that.
KL
From MarketWatch:
Illinois investigating Countrywide’s lending practices: NYT
The attorney general of Illinois has subpoenaed documents from Countrywide Financial Corp. in part of an investigation of home-loan origination practices, the New York Times reported Thursday. The probe is part of the state’s developing inquiry into questionable lending practices that could result in foreclosures, according to the newspaper, which cited a person briefed on the matter.
A Little help please for the addresses of two MLS numbers
2432852 and 2460867
Dems pushing bill that will in end result
make it more costly for low end borrowers to
get loans.In this will hurt first time home buyers & people with lower FICO scores not the well healed What are they thinking.As the party of the little guy ranting against
Repubs on their pro big business & help the wealthy bull.This is burying the same peopls they claim to champion.If they want to make a bad sit. worse this is exactly the thing to do.The Paulson plan,forclosures,and an already tight credit market. Well lets just spook the investors some more, way to tank the market
even further boys.Maybe future buyers here
should be cheering but I don’t think so.This is a bad idea long term.
We put in another offer last night, firm. About 10% off list, or around a 2004 comp plus a little. Sellers countered back with a “meet in the middle” number. We reiterated the “firm” part of the offer.
I know you’ve all talked about putting expiration dates on offers. What’s the strategy behind that, to make them freak out a little and possibly take it? Or just so you know so you can get a move on with your life?
And what’s the optimal amount of time to give a seller to mull an offer before expiring it?
Guys guys guys.. and gals..
The real estate market is OK..
On my way to work this morning, I saw an open house sign complete with bright yellow ribbons and helium balloons.. This on a day when they’re predicting 5-8″ of snow and sleet in the area.
If realtors are going the extra mile today, then the buyers must be-a-knockin!
FYI: This was in Montville on Rt 202 by the 287 south entrance…
-r
Hey when everyone was saying their monthly housing was only 10% of their income, was that gross or net. If you guys are paying 10% of your monthly net income on housing you are either pretty rich or still living at home.
Gross
Consumers won’t see Fed benefits for months
For consumers able and ready to take out new home loans or finance a car, the Federal Reserve’s aggressive initiative announced Wednesday to pump money into the global banking system won’t be of much help now.
The downturn in the housing industry and the growing numbers of foreclosures and credit delinquencies have dried up secondary markets that buy mortgages and large loans. Banks are running scared, reluctant to lend money to each other and to consumers and businesses.
That has left even the most creditworthy consumers without financing to purchase big-ticket items such as homes, cars and boats. If credit is further squeezed, spending on everything from flat-screen TVs to washing machines to new shoes could be severely crimped, leading to a contraction in spending.
Banks are required to hold a certain level of funding to meet any given level of loans that they are carrying on their balance sheets. If banks won’t even lend to each other, then funding becomes expensive and scarce. Banks are in the business of making a profit by lending money. If they can’t make profits, they clamp down on loans and hoard their cash.
Wednesday’s action is aimed at flooding the banking industry with cheap money that it can then turn around and lend out at higher rates.
Still, there’s this potential bonus from the Fed action: better consumer confidence. Sometimes bad karma can be a self-fulfilling prophesy and there’s a growing concern that despite the underlying strengths in the economy the wave of negativity is sparking a fear of spending among consumers.
“The damage to the mortgage market is done,” said Ryan Sweet, an analyst at Moody’s Economy.com. “The housing market is not going to turn around on a dime and consumer confidence is very fragile right now.”
“This is the Fed’s way to help restore confidence in the financial system,” he said.
“If you guys are paying 10% of your monthly net income on housing you are either pretty rich or still living at home.”
John [10],
I agree. If this is the case, The New Jersey Vulture Fund is not a bad idea. Pool capital and buy distressed assets.
Goooood Moooorninggg Inflaaation!
U.S. Nov. PPI up 3.2% – largest change since 1973
Wholesale prices rose 3.2% in November – the largest change since 3.5% in August 1973 — as energy price growth hit a new record, the Labor Department reported Thursday. Wholesale energy prices rose 14.1% in November, beating the prior record growth of 13.4% in January 1990. Growth in gasoline prices of 34.8% also hit a new record – beating the prior record of 28.8% in April 1999. Food prices had 0.0% growth, compared with a gain of 1.0% in the prior month. Excluding volatile food and energy, the core producer prices grew 0.4%. Economists had expected November’s PPI to grow 1.8% and the core to grow 0.2%.
JB [3],
There is major fear. We have gone from boom to bubble and now bust. The geniuses who created this charade are now in charge of rectifying the situation? Goldman sets up a branch in DC and the result is enhanced, super sized, freeze frame, etc.. Strictly a suckers play. However, totally expected. Goldman is the master of sucker plays. If things don’t loosen up within the next 4 weeks, there may be a major downturn.
Just an observation.
“Goooood Moooorninggg Inflaaation!”
I picture Clark Kent getting changed in the phone booth.
#8 ” know you’ve all talked about putting expiration dates on offers. What’s the strategy behind that, to make them freak out a little and possibly take it? Or just so you know so you can get a move on with your life?”
Ann,
In any negotiations, unless you are prepared to walk away, you cannot get the best deal. Likewise, unless the other party knows that you are willing to walk away, you are unlikely to get the best deal. Setting an expiration, combined with the seller’s understanding that you are ready to walk, puts pressure on them (especially if they have been trying to sell their asset for some time) and lets them know that they cant use you as a “backstop,” a buyer they can always go to in case they cannot find anything better.
For me, when playing hardball, I let the other party know that this is the best my offer will ever be and it expires at “x” time and, if they reject it, I will not be willing to make an offer that high again. If they come back to me, after failing to find other buyers, I will not go as high as today’s offer.
I suspect that the lawyers in the room would also say that there is a benefit inasmuch as the offer is “self expiring” and does not require you to notify the seller that the offer is withdrawn. I would consult with a lawyer to get the scoop on what happens in NJ if there is no expiration date and if, after you purchase a place, some past offer that had no expiration date is “accepted” by the seller.
Got a listing this morning from a realtor. This house has been on the market for a long time and even underwent a failed auction. Looks like they are continuing to play the relisting game since it is now showing DOM at 1. Can’t believe they really haven’t lowered the price that much yet.
Here is the link:
http://newmls.gsmls.com/public/show_public_report_rpt.do?report=clientfull&Id=26492448_34734
And if the link doesn’t work it is MLS#2467413.
It is
I have an even better way to get a bargain. DONT BUT IT. I will be 20% less next year.
“Growth in gasoline prices of 34.8% also hit a new record – beating the prior record of 28.8% in April 1999.”
Ben is in for a surprise next time he fills up the helicopter.
#18: Nice catch. I remember that house in Short Hills. Has been on market for ages. Have to admire their moxy.
#18
You get a decent amount of house for $1.2 and Millburn to boot. I would guess it has not sold because of the front of the house. If only the architect put a few extra hours into the house so it had some curb appeal. At that price point most people expect to at the very least fall in love with coming home every night.
I have lived a quarter mile from a train station just about 20 of my 35 years. No way in hell would I pay 1.2 million for the priveledge of living 3 blocks froim a train station.
#22 mike: Its just plain ugly, a million bucks for ugly.
#22, BTW, the house is a prefab.
“John Says:
December 13th, 2007 at 8:24 am
Hey when everyone was saying their monthly housing was only 10% of their income, was that gross or net. If you guys are paying 10% of your monthly net income on housing you are either pretty rich or still living at home”
John,
We pay in the range of 4%. Some looking at us would call us rich, but we are not. Far from it. We have bright kids whoshow every sign of being able to go to an Ivy League school, and that thought scares the financial heck out of me. We save lots for retirement, as we are both self employed.
Our home is nice, in the 3400 sq. foot range, in a great town, easy commute, yadda, yadda. We bought our home based on one income, using the second as an insurance policy and to pay off the mortgage faster. We could have moved up several times but it is a good house for raising a family, close to everything, and we just preferred the freedom we obtained from having a primary residence paid off.
We could have any car, boat, big screen plasma TV, or other toy we want, but we see little value in most of them. We are just financially-prudent folks, trying to get by in a responsible way. I know that based on comparative incomes and net worth, many would call us rich. And to be fair, we are in the upper 2-3% of earners. That said, we know all too well how much retirement will cost, how much college will cost for the children, etc. Since we are self employed, there is no company pension plan (not that anyone can count on those anymore) so, even at todays dollar value, if one is looking to have a $70,000 retirement income and is earning 7% interest on investments, one needs to have $2,000,000.00 in the bank today. That will allow for reinvestment of a portion of the $ to keep one from devolving into eating cat or dog food in later years. Now, anyone living in NJ knows that $70k is no great living. First take off just 20% for income tax and another $8,000.00 in property tax (neither figure is very high) and you are down to $48,000.00. By the time one takes into account cars, gas, food, house/car/and other insurance. Things do not look so great. Fast forward a few years, and one can see that having assets in the $5-10 million range might make someone comfortable, but it will not make them rich.
It is for this reason that I shake my head in disbelief when I see people struggling to reach for the ever bigger home, and paying incredible amounts of interest in the first 5-10 years, and not saving for retirement.
Especially in a flat or declining RE market, people do themselves a disservice by not paying themselves first.
So, there are some of us not living in the folk’s basement who have managed to live nicely in their early to mid 40s while paying a small percentage of income to housing.
Here is something to cheer-up everyone:
http://www.marketwatch.com/news/story/schultz-sees-apocalypse-now/story.aspx?guid=%7BB4657333%2DB68C%2D4A34%2DA493%2D266821FC09AB%7D&dist=TNMostRead
NEW YORK (MarketWatch) — The Fed flops and Wall Street is worried. But one letter veteran has been here before, not that it makes him any cheerier.
Occasionally, I get reader emails claiming that The International Harry Schultz Letter’s Harry Schultz is dead. He himself insists in an email to me that he is still alive. But he must be well over 80 now, although he’s always been mysterious about his age. I notice that that he’s now listed as “editor emeritus,” although the letter is still written in his characteristically quirky first-person voice.
Alive or not, Schultz must feel like he’s been resurrected. Systemic financial fears, dollar doubts, gold gains, seeping stagflation – a word Schultz claims he coined – all eerily replicate the 1970s, which he began as a derided crank and ended victorious over the financial establishment. (After which, significantly, he was notably quick to say the storm had passed).
Shultz’s latest letter, just in, is absolutely apocalyptical: “A financial tsunami is upon us,” he says, caused by lax credit and complications introduced by Wall Street’s derivatives craze.
Among other interesting ideas raised by Schultz in his intense, somewhat terrifying introduction: recession, possibly depression; bank failures; exchange controls; housing prices down by 50%; credit card company failures; money market fund dangers; tripling of U.S. jobless numbers; federal bail-outs for Fannie Mae (FNM:Fannie Mae
News, chart, profile, more
Last: 32.12-2.17-6.33%
4:02pm 12/12/2007
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
FNM 32.12, -2.17, -6.3%) and Freddie Mac (FRE:Freddie Mac
News, chart, profile, more
Last: 30.42-0.89-2.84%
4:03pm 12/12/2007
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
FRE 30.42, -0.89, -2.8%) .
His advice, translated out of his shorthand style: “If you have not already done so, take immediate measures to safeguard your assets against the global derivative crisis … Most urgent is close out time deposits, buy non-U.S. government bonds.”
In other words, Schultz is saying the U.S. banking system is threatened. How’s that for a Christmas greeting?
Schultz says “the second biggest danger is owning U.S. dollars in any form, (it) has crashed and going much lower … use dollar rallies to exit dollars or sell short … This is not a time to seek profits, but to protect what U have … Portfolio diversification is essential in troubled times.”
Schultz’s favored currencies: “In order of preference: Swiss Franc, Australian dollar, Euro, Canadian dollar.”
[snip]
I never read a post on here that is more than 2 or 3 sentences, unless it is an article from Grim. Anyone else feel same way?
17 Shore Guy
Good points. I think we will follow up today and put an expiration on it. I would think tomorrow morning would be fine since that would have given them over 24 hours to think about it.
House has been vacant for a year and a half, one year of which was renting, family has relocated out of state. They were originally listed on Foxtons at a really outrageous price so I don’t have much hope that they are sensible people.
I never read a post on here that is more than 2 or 3 sentences, unless it is an article from Grim. Anyone else feel same way?
Even though there isn’t real-time interaction, the dynamic here tends to be conversational in nature.
#24
3b,
I totally agree, the house is crap but I do realize sometimes people have different tastes then me so I try to temper my disgust once in a while. This is what kills me, what moron builder would build that monstrosity in a town like Short Hills, where there is no shortage of charming homes for sale? You pay extra to live in SH exactly because you value the architecture of the current stock of homes there. Openly going against this is a recipe for disaster. I can only imagine if someone tried to put up that monstrosity on my block. I think that both the house and the builder’s personal residence would be faced with an electrical fire on the same night.
From the Times of London:
From The Times
December 13, 2007
Markets still edgy after central banks’ $110bn tonic
Christine Seib, Gary Duncan, Suzy Jagger and Marcus Leroux
British bankers welcomed a planned $110 billion (£53.7 billion) injection into money markets by the world’s key central banks yesterday, saying that the move could wipe out the stigma of borrowing from the Bank of England.
The Bank will release details tomorrow of its plans to hold two auctions of £11.35 billion under co-ordinated moves led by the US Federal Reserve.
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3042903.ec
How exactly does someone get out of dollars and into Swiss Francs or Euros to guard against inflation and bank failures, as Schultz suggests? Is he talking about setting up a Swiss bank account and transfering money overseas?
Besides bank limits, does the U.S. Government impose limits or taxes on money transfered out of the country?
From the WSJ:
Some Lending Pressures Ease, a Bit
By TOM LAURICELLA, DEBORAH LYNN BLUMBERG and SERENA NG
December 13, 2007; Page C1
A crucial corner of the financial markets — short-term lending — showed glimmers of improvement after the Fed stepped in to help yesterday, but deep problems persist.
Since the summer, banks have been less willing to make short-term loans to each other and other financial companies. Yesterday, some short-term lending rates — such as the London interbank offered rate and rates on some commercial paper — eased on the Fed’s action, while investors showed some willingness to venture away from super-safe Treasurys.
[snip]
Among the bright spots was the market for loans between banks, measured by the London interbank offered rate. It has been a major trouble spot. Banks have been charging unusually high rates to lend to each other.
For example, Tuesday the Fed notched down the funds rate by 0.25 percentage point, but Libor fell only about 0.06 percentage point, a sign of banks’ continued unwillingness to lend. However, Libor fell to 4.88% from 5.06% after news of the new efforts by the Fed to spur lending activity.
Treasurys, which had staged a big rally Tuesday after the rate cut, gave up their gains yesterday, a sign they were slightly less risk-averse after the latest move. Investors tend to flock to Treasurys, pushing down these yields, when worries are heightened.
The 10-year Treasury note fell $7.81 for every $1,000 traded, pushing its yield up to 4.075%. The yield on two-year Treasury notes rose to 3.116% from 2.96% a day earlier.
Meanwhile, the commercial-paper market, where many companies fund their short-term borrowing, also welcomed word of the plan.
The commercial-paper market and its subset, the asset-backed commercial-paper market, have been under pressure amid worries about the fallout from the subprime-mortgage market. The asset-backed commercial paper market has used large heapings of subprime mortgages as underlying collateral, the source of its stress.
It has contracted significantly over the last few months. As of December 5, the volume of asset-backed commercial paper outstanding had declined to $801 billion, down nearly a third from $1.19 trillion at the end of July, according to Fed data.
Yesterday morning, there was an uptick in buying of three- and six-month commercial paper and asset-backed commercial paper, noted Deborah Cunningham, head of the taxable money-market group at Federated Investors.
In contrast, investors earlier had been moving to paper carrying shorter-dated maturities, such as overnight or one-week holdings.
The difference between interest rates on some asset-backed commercial-paper issues and Libor narrowed by around 0.25 percentage point yesterday, a sizable move, said John Kodweis, a managing director in J.P. Morgan’s short-term fixed-income group.
http://online.wsj.com/article/SB119747364502623711.html?mod=hps_us_whats_news
#29
In any interaction that involves a contract, it is wise to pay a few bucks to have an attorney guide you. For something like the expiration on the offer, I would be surprised if you would be charged more than 1/10th of an hour’s time. Even at $600/hr it is all of $60.
Hat tip to CR for this one, very interesting..
TROUBLE IN TEXAS: Huge Multifamily Owner Nears Collapse
Apartment Giant MBS Cos. Goes Deep in Arrears on More Than $600 Million in Loans
MBS Cos., one of the largest multifamily property owners in the country, is delinquent, in default or in danger of becoming so, on more than $900 million in loans. For Michael B. Smuck (the MBS in the company name), that means he is in danger of seeing his apartment empire dissipate for the second time in his nearly 30-year real estate career.
Based in the New Orleans area, MBS Cos. owns and operates more than 65 apartment complexes totaling about 17,000 units – all in Texas.
…
As of last month, Smuck-affiliated companies had as many as 65 other loans totaling more than $900 million spread across 36 CMBS deals. Most of the loans were taken out since 2000, some as recently as this year. Nearly two-thirds of those were reported to be at least 30 or more days delinquent, according to analysis last month by Roger V. Lehman and Julia Tcherkassova, CMBS strategists for Merrill Lynch. The delinquencies and defaults were expected to spread to the remaining loans.
# 7 Mike
Dems pushing bill that will in end result
make it more costly for low end borrowers to
get loans
I am not familiar with the plan you are referring to. But i hear people complain about how loans to people with poor or no credit history cost more and how that is wrong or should be fixed. If someone wants to borrow money and is a higher risk, then why should they not pay more?
kettle,
You mean the bill of rights doesn’t guarantee access to cheap capital for all citizens?
Borrowing is a privilege, not a right.
We seem to have forgotten that.
From Newsday:
Now playing on YouTube: Avoid foreclosure fraud
Freddie Mac is getting hip.
To reach out to homeowners in trouble, Freddie Mac has produced a two-minute video on how con artists can prey on delinquent borrowers.
Though it may not win any Oscars, the video shows how scammers can get copies of foreclosure notices at city hall or a county courthouse and then persuade borrowers to hand over their deeds in exchange for solving their financial problems. The con artists then use the deeds to secure new loans for themselves but let the new loan go into foreclosure, leaving the distressed homeowner out on the street.
Freddie Mac, one of the nation’s largest investors in residential mortgages, took its message to the Web after conducting a survey that found one in four borrowers go to the Internet before their lender when they fall behind in their payments.
http://weblogs.newsday.com/realestate/blog/2007/12/now_playing_on_youtube_avoid_f.html
From the WSJ:
Morgan Keegan Sued
Over Mutual-Fund Woes
By DIYA GULLAPALLI
December 13, 2007; Page C10
Investors in Tennessee filed a federal lawsuit seeking class-action status against Morgan Keegan Asset Management Inc. over two mutual funds that are among the hardest-hit in this year’s credit chaos.
Fund managers and others on Wall Street will be closely watching this case and others that are expected to be filed, as investors take losses from the credit crunch.
At issue are the Regions Morgan Keegan Select Intermediate Bond Fund and the Select High Income Fund, which are down 47% and 56%, respectively, so far this year. The suit alleges, in part, that the funds misrepresented or failed to disclose material facts relating to the risks and ease of trading for certain securities in the portfolios.
It also takes issue with disclosure on how the securities were valued and sales material pointing to how the funds sought diversification and to limit certain excessive risks.
http://online.wsj.com/article/SB119749931192224907.html?mod=loomia&loomia_si=t0:a16:g2:r4:c0.114017
Hwy I have a suggestion to fix the Inflation – how about just exclude energy and food products from it – like they did with CPI??
41 ,,,,,numbers would NOT look NICE !!!
#31 Mike; Agreed. And sadly probably fro the same money, he could have done soemthing much more tastefule, than that eye sore.
Pain,
2432852 334 Sussex Ave
2460867 13 Old Brookside Road
The fallacies and falsehoods in this editorial are laughable. There are a few really good ones, but this one:
…To repeal this policy and make lenders wonder whether mortgage loans will be secured or unsecured can have only one result — more expensive mortgage loans.
That’s why 16 House Democrats wrote to Mr. Conyers in October urging him not to rewrite the bankruptcy code.
Is my favorite.
Those Democrats didn’t oppose the Conyers bill because it’s a bad idea, they opposed it because they are in the pocket of the banking industry.
If being a bad idea could kill bills in Washington, we’d live in a very different world.
BTW, shouldn’t mortgages have been more expensive during the last few years? I mean if risk were being priced appropriately…
#35: So not only are you filthy rich (which you explained to all in full detail), but the attorneys that you know only charge 6 minutes of time for a review/analysis of a contractual issue. You live a charmed life!
OK, I can’t leave this one alone either:
One indisputable fact is that mortgage fraud skyrocketed during the Federal Reserve’s easy-credit era. When financial institutions see potentially criminal activity in customer transactions, they are required to send a Suspicious Activity Report (SAR) to the Treasury’s Financial Crimes Enforcement Network (FinCEN). From 2000 to 2006, SARs related to mortgage fraud increased by almost 700%.
Yes, yes, I can see why lenders would be quick to report their own frauds…
It’s interesting that Power Brokers like Greenspan bail out of US Cash & Bonds, after creating Financial Distress through Bad Decision Making. Maybe Congress needs to make a law that US Power Brokers are not allowed to move their money out of US Cash, Stocks & Bonds. Maybe that would encourage them to make Good Decisions, if their own money was at risk.
From Reuters:
Countrywide November loan funding drops 40 percent
Countrywide Financial Corp said on Thursday that mortgage loan funding tumbled 40 percent to $23 billion in November, sending its shares down nearly 4 percent before the market opened.
The bulk of the decline comes from a near-evaporation of Countrywide’s subprime lending business and a sharp fall-off in adjustable-rate mortgages.
…
The lender said average daily loan application activity was $1.9 billion in November, a 32 percent decline from a year earlier.
The company’s mortgage loan pipeline, or loans in process, was $42.6 billion at November 30, down from $62 billion a year earlier.
Builders’ lobbyist: We made too many homes
Chief of National Association of Home Builders says overbuilding by some members was one factor in the housing meltdown.
http://money.cnn.com/2007/12/12/news/economy/builders/index.htm?postversion=2007121308
Ron Paul’s YouTube rants about Bernanke grab attention
By Sue Kirchhoff, USA TODAY
http://www.usatoday.com/money/economy/2007-12-11-ron-paul_N.htm
Thanks JB, the lovely wife found those and is mildly interested.
Bad ideas in Washington are like opinions, they are never in short supply and rarely are they helpful. See the rhetoric over housing this past year as an example, or listen to Hannity spout how wonderful the economy is thanks to GWB.
BW Article,
Where the Affordable Suburbs Are
In Putnam Valley, N.Y., in the foothills of the Taconic Mountains an hour from midtown Manhattan, the median listing price is $545,000.
However, finding a good, affordable neighborhood in which to raise your family outside cities such as Boston, New York, San Francisco, Honolulu, and Washington, D.C., has gotten harder in recent years. “In places like that, you need to drive until you can afford something,” said Walter Maloney, a spokesman for the National Association of Realtors.
Putnam Valley (N.Y.) supervisor Sam Davis said his town with its winding roads, lakes, and horse farms still has a rural flavor, which is being threatened by development. He said new people are moving to Putnam Valley, looking for a relatively affordable place to live, and they’re helping to push up home prices and property taxes.
Putnam Valley is somewhat affordable, especially compared with neighboring Westchester County, in part because the town is not on the train line to New York City. Residents generally drive to work. Manhattan is approximately an hour away by car.
Closer to home, many Putnam Valley residents work at IBM (IBM) and Pepsi (PEP) in nearby Westchester County, and General Electric (GE) in Stamford, Conn.
“Anybody who wants to move here should buy an existing home, not a new one, if we want to keep it as the ‘best affordable,'” Davis said.
Now Playing: Roubini: “Total (subpime) Losses are More Like $300 Billion”
http://www.paperdinero.com/BNN.aspx?id=472
All folks working in NYC, flock to Putnam Valley and leave your search in NJ.
New York, Putnam Valley, ZIP: 10579
Nearest metro area: New York-White Plains-Wayne
Population: 8,287
Median home price: $545,000
Median household income: $89,742
Unemployment rate: 3.1%
Commute time: 38.6 minutes
Violent crime index: 1
Shoreguy, I think you are oversaving for retirement, most old people don’t spend much and have their house paid off. You just have to get your medical covered via some paln to cover the 1/3 not covered by Medicare, plus now you need to buy nursing home insurance since you have so much cash. Plus, I go back on forth as to why do I need to pay for my kids college in the first place. No one paid for my college and I do a lot better than my friends whose parents paid.
According to BW research, affordable places in NJ,
Clifton, ZIP: 07014
Nearest metro area: New York-White Plains-Wayne
Population: 5,746
Median home price: $489,900
Median household income: $67,795
Unemployment rate: 5.1%
Commute time: 30 minutes
Violent crime index: 2
Lehman making some waves this morning – “Subprime contagion has spread to prime”….
Update with a link;
Apparently %13 of their total assets are now lvl 3.
http://www.reuters.com/article/businessNews/idUSWEN294620071213
are there 2 Johns on this site? some posts are well written, good content and mature. other posts seem a bit arrogant and immature. just an observation.
I will be visting my 96 year old grandma next week. I will be sure to ask lots of questions and take notes on how she and her family survived the Great Depression.
Heck I may even take decent notes and write my own ” Depression for Dummies” book.
Sorry for pasting these town info from BW article.
Pennsylvania, Royersford, ZIP: 19468
Nearest metro area: Philadelphia
Population: 25,641
Median home price: $277,400
Median household income: $73,826
Unemployment rate: 3.4%
Commute time: 32.2 minutes
Violent crime index: 1
Looking at 3 towns in our area, NY, NJ 7and PA, it definitely seems PA is better choice financially. Salaries dont go down that much (maybe 10%), but you can definitely save big on mortgage. From Quality of Life, I am not reconsidering NJ.
#55 SG No need to leave Jersey, prices are correcting, and will continue to.
As the correction continues places like Putnam Co will decline even more,as people will find that they can now afford to buy closer to NYC etc. and will no longer feel forced to purchase there.
The communte from Putnam Co to NYC is brutal.
Typo:
From Quality of Life, I am now reconsidering NJ. I have cousin who lives in Philly suburbs, great job, good life.
SG: i’m with you, my search is now left of the Delaware River.
Depression 101
Basic staple of Italian Depression ERA folks was Pasta Fagioli. Pasta & Beans fed a family quite reasonably. A bag of dried conellini beans is about .79, and a box of ditalini about .89, at Stop N Shop. Another trick my mother used was to mix Stale Bread with a pound of Chop Meat to make it stretch. Unfortunately Chop Meat has gotten much pricer, about 4.49/lb for 90% Fat Free. But during a depression, better to have 80% Fat free, about 3.49/lb. You need the extra fat to stay warm. Stew, which comprised many leftovers, was another hearty stretching meal. Of course in those days, living quarters were much smaller and you could heat them with a Coleman Kerosene Stove in the living room, wood/gas stove in the Kitchen. Railroad rooms allowed a heat source on either side of the house to heat it effectively. This doesn’t work in Box Room McMansions. Depression Folks also planted Victory Gardens to grow produce.
From Bloomberg:
CIBC’s Big Subprime Secret Might Cost Billions: Jonathan Weil
Canadian Imperial Bank of Commerce has a big skeleton in its vault. And the bank’s executives are doing a ham-handed job of trying to keep it there.
CIBC’s lightly guarded secret is the name of a “U.S. financial guarantor” that faces a possible downgrade on its A credit rating and is “not necessarily rated by both Moody’s & S&P.” That’s how CIBC last week described the company that is insuring $3.47 billion, or about a third, of the collateralized- debt obligations it holds that are tied to U.S. subprime mortgages.
The company’s identity matters because the bank said these hedged CDOs were worth just $1.76 billion at Oct. 31, down almost half from their face amount. If the guarantor goes poof, CIBC loses its hedge on these derivative contracts. And the Toronto-based bank would have to recognize the loss, which is growing.
“Lehman making some waves this morning – “Subprime contagion has spread to prime”….”
[58],
AAA’s backed by prime are down approx 20%, nice of Lehman to make some waves today. If home prices drop 10% you’ll be looking at a decline[total]of approx 50%.
“Depression Folks also planted Victory Gardens to grow produce.”
Confused [66],
Knock down a McMansion and plant grain.
46 “Imus Says:
December 13th, 2007 at 10:13 am
#35: So not only are you filthy rich (which you explained to all in full detail), but the attorneys that you know only charge 6 minutes of time for a review/analysis of a contractual issue. You live a charmed life!”
Imus,
First of all, although I do lead a charmed life, now anyway, I, to the contrary of what you said I said, am not at all rich. Far from it.
As for the 6 minute attorney time, you either misunderstood or mischaracterized what I said. I believe it was in a response to Ann who asked about expirations in offers. I dont know about you but I deal intimately with lawyers every day. Most of the ones I deal with are in Amlaw 100 firms and are at the top of their profession. Most of them bill in 10th of an hour increments. For most of them, if I have a routine question, such as Ann’s “should I have an expiration date in my offer and if I dont, what are the possible negative consequences,” they are able to answer the question off the top of their head in just a few minutes.
#56, You may be correct but I would prefer to over save than under save. In the worst case, I leave more for the kids. As for college, I understand the ambivilance about paying for it. FOr me it is deeply emotional. I had to work 60 hours a week to put myself through school. Even so, I lived in squalor and barely ate. I graduated high school in good shape and left college 30lbs less just skin and bones. I would like my children to graduate debt free.
pain,
did you see the virtual tour on the kitchen?
http://www.obeo.com/Public/Viewer/Unbranded.aspx?ID=400045
Shore Guy,
I think everyone has their own opinion regarding paying for college. As for me, I want my kids to have some skin in the game. I will max them out on the low interest Perkins and Stafford loans in their name and pay for the rest. College tuition is out pacing inflation 2 to 1 lately. Not good for any of us.
Has anybody else noticed less “0% credit card” offers in the mail the past few months?
“BTW, shouldn’t mortgages have been more expensive during the last few years? I mean if risk were being priced appropriately…”
Ridiculous.
They key to risky lending is to LOWER rates.
Sheesh!
72
Mike,
Having skin in the game is a real plus. We will likely make them take out the loans etc, but, if they work hard and make good financial decisions along the way, will likely pay them off for them at graduation.
“Most of them bill in 10th of an hour increments. ”
Correct, unless they’re billing per transaction.
64, 65, in a couple of years so will I.
Speaking of credir cards…
I usually pay any balance off at the end of the month and use my banks electronic payment system instead of checks… Apparently the bank took longer then the delivery [period they d=stated so the payment arrived 2 days late. My rate just went from 8% to 30% !!!! fortunately i do not generally carry a balance, but are you kidding me. I still have to call them to see what the problem here is. I know that this is indeed in the fine print of the CC agreement, but given that i have a very good credit history and have never had a late payment with them before this is ridiculous.
sorry for the grammar, a little worked up ;)
#78 “My rate just went from 8% to 30% !!!! ”
Yikes! When they did that to you, did they kiss you and wear garters and high heels?
60
you’re not the only one who’s noticed the two johns. Some days I want to poke him in the nose, and most other days I expect the best tales from him. The jumper in the air conditioning unit is still my favorite. I think many times he gets a rise out of raising hackles.
Knock down a McMansion and plant grain.
BC Bob (69)
Add a few Apple Trees to the Grain. A popular Depression ERA support was selling Apples on the Street Corner.
On a positive note the potential Depression will reverse the current American Trend towards Obesity.
#80,
Not even a wrap around!
“I know that this is indeed in the fine print of the CC agreement, but given that i have a very good credit history and have never had a late payment with them before this is ridiculous.”
If you have no balance, call them and tell them to put you back at 8% or cancel the card. They’ll likely do the former.
#80,
Not even a reach around!
BOA sent me the 30% letter, but it stated that the increase would occur only if you’ve been delinquent twice in a rolling 12-month period.
Kettle, have you been spending too much time on the blog instead of doing your on-line banking????
By the way, I scribbled “HA HA HA” on the notice of terms and sent it back to them.
but given that i have a very good credit history and have never had a late payment with them before this is ridiculous.
I though you usually had to be late twice to get hit with the penalty rate
RentininNJ…gotcha
Actually this was AMEX that hit me, and i do not recall if it was the twice in a 12month thing or what, however this is my first late payment with them… ever.
#70: Shore Guy: You only deal with “Amlaw 100” firms and “top” lawyers — again I am impressed! Dude, get over yourself.
I too deal with “top” lawyers all day, and I have never received a bill for $60.
I think_I think #71
I sure did, I just look at it as my work has already been started for me
“kettle1 Says:
December 13th, 2007 at 11:54 am
#80,
Not even a reach around!”
I felt so inadequate never having had a “wrap around.” Now I feel better.
As for the rate increase, I agree that you are in a position of strength. I would say, “Hey, I have excellent credit, and you are not now nor have ever been in danger of my not paying you. I get many offers from other credit card companies and I se no reason to stick with you if you insist on sticking it to me.” You may need to get elevated to a supervisor but it should be addressed in your favor, if they are smart.
RE: John’s comment about 10% “big spenders” on housing.
It’s possible some folks have incredibly high expenditures for other items, such as elder care, uninsured medical, child care, or tuition that forces the lower expenditure on housing.
For a long time, we spend a few thousand a month on those items, which did have some impact on our housing decisions.
On a similar topic, how does 30% not run a foul of usury statutes??? if you are that much of a risk then they shouldnt really be lending to you.
“Imus Says:
December 13th, 2007 at 12:01 pm
#70: Shore Guy: You only deal with “Amlaw 100″ firms and “top” lawyers — again I am impressed! Dude, get over yourself.
I too deal with “top” lawyers all day, and I have never received a bill for $60.”
I would noty brag about overpaying. There are a number of decent programs on negotiations that you may benefit from attending. If a lawyer overcharges me, he or she does not work for me anymore.
#94 – kettle1 On a similar topic, how does 30% not run a foul of usury statutes?
IIRC, most of the banks issue their cards from North Dakota or one of the Carolinas which do not have as stringent usury laws as NJ NY etc. Since the card co is in ND, ND law applies. Once again this is from foggy memory.
There was a good Frontline special on this a few years ago
http://www.pbs.org/wgbh/pages/frontline/shows/credit/
Kettle,
Do you pay through Amex’s site or do you first initiate the payment through your bank? I pay a bunch of stuff electronically through my bank but it takes a few days to clear. For my credit cards (all through Citibank) I use Citibank’s electronic transfer service to initiate payments from my bank account. This way I can set the payment to initiate on my due date exactly and the money still takes a couple of days to leave my checking account but it is market as paid by Citi on that day. This is not just a Citi CC to Citi checking, it is Citi to Wamu.
“kettle1 Says:
December 13th, 2007 at 12:04 pm
how does 30% not run a foul of usury statutes??? ”
A number of years ago (late 80s) there was a bar exam question that involved a business transaction. Part of the fact pattern involved interest charges of something like 16%. At the time the question and grading standard was created, that was considered usury and people who did not include that in their answer lost points. The funny thing was, times had changed and 16% was not out of line for most of the test takers.
#96:
Wow, you are also a master negotiator! Add it to the list (you are super rich, your kids are Ivy League caliber, you spend no $ on housing, you are a king of industry, you have a team of lawyers, etc.) — you are truly accomplished!(However,a good speller you are not). Why do we need to know these things?
really hate these articles that claim to have found the “overlooked” cheap suburbs of major cities. There are no overlooked suburbs. Everything which is within reasonable commuting distance (1 hour) and has good schools is very expensive. Period. If there was an exception, people would all buy there and drive up the price. The places that are cheaper are cheaper for a reason (absurd commute or crappy schools).
Mike, the only problem with that is that if you accidentally typo/transpose a # in your account, the payee doesn’t notify you of the error. You’ll simply see a late notice and $75 dollars in late fees. If you’re careful, it’s good, though.
At least paying it directly out of accounts, you can see the debit.
Mike (22):
A lot of house for $1.2 million? WTF?!
I guess the state of housing prices owes a lot to the Stockholm Syndrome.
Pat Says:
December 13th, 2007 at 12:03 pm
RE: John’s comment about 10% “big spenders” on housing.
“It’s possible some folks have incredibly high expenditures for other items, such as elder care, uninsured medical, child care, or tuition that forces the lower expenditure on housing.”
Or we’re all just really cheap. :-)
Actually, at 15% I was on the high side for this group.
Pat(93),
I agree. We are currently in that stage.
Imus, what’s with the attitude? Shore Guy didn’t come across as arrogant, he shared his personal financial details and gave out a bit of practical advice.
Didn’t bother me and I am far from being Richie Rich. Some people have more, some less; fact of life, get over it.
Imus,
I have never said a cross word to or about you. Nor have I ever described myself as rich. Anything I have revealed about my own situation has been done so within the context of an open exchange of information with others here who have an interest in the current RE bubble in NJ.
From the tone of your last comment to me, I detect some hostility about my minimal spending on housing. I dont know why that should offend you. Frankly, if you spend 1% or 80% makes no difference to me.
I am no king of industey, although I do well by most people’s standards. That said, I have never judged myself against the success or failure of others. To do so is folly and leads to overconsumption. Heck even Bill gates has been bested in net worth. If you have more than I, good for you. If you have less, I hope you are comfortable.
Your question, “why do we need to know these things” indicates that you are either a flamethrower or did not read the entire thread to understand the context of what was said. For example, the Ivy League comment was made to emphasize the heavy financial burden such expenses can place on a family — but I suspect you knew that and are just spoiling for a fight that I will not give you.
If you wish to converse with me about RE trends and opportunities, I welcome the discourse. I am, onthe otherhand, not inclined to continue this exchange with you.
Kettle 31 I should have said bill.This was a post in regard to WSJ report on the top of your
page of victims & mortgages.
#31 –
mike –
there are more ugly houses in short hills than you think. i have no doubt they cost a lot of money, they are very big, and probably in good condition with high end upgrades and fixtures, but, nevertheless, they are there, mixed in with the more tasteful ones.
Some of you might find this interesting
Welcome to USASpending.gov, Where Americans Can See Where Their Money Goes
Vhttp://www.usaspending.gov/
A question for the Bankers on the board,
Are credit unions as vulnerable/ in as much trouble as traditional banks in the current financial environment?
Alot of posts about % of income to rent/own.I think that one thing was missed.IF you net 8000
per month & pay 50% you still have 4000 to live on (pay bills,eat,cars & stuff).But if your income is less it doesn’t work.If you net 4800
that leaves 2400 to live on not going to work.It
is all relative to income so % means nothing.
#106, Shore Guy
Well put.
I enjoy reading your perspective on this blog. Please don’t let the occasional hostility get to you.
#106 shoreguy: You perspective and thoughtful responses are appreciated.
T C M
You could very well be right. I only see the ones from the train on my commute and they all seem rather tasteful.
#102
Jamey, you have a point on that. Now that I looked at the inside again there is not really anything in there worth getting excited over. I guess I get a bit too worked up over new construction. I would kill for the insulation in new construction though. It is getting COLD out and my 1940’s house has a hard time keeping that draft out.
#111 “is all relative to income so % means nothing. ”
I agree to a point. If one is a low earner, and has 50%+ going to housing costs, they are likely overextended and in danger of any little blip causing them to lose everything.
Ann (8)-
Frankly, I’ve found that the best thing to do in this market is to leave the offer on the table. It indicates to the seller that you’re so confident your offer is the best they’ll see, you’re willing to let them shop it around.
I’ve made this play work four times since August.
#61 Sean Says:
I will be visting my 96 year old grandma next week. I will be sure to ask lots of questions and take notes on how she and her family survived the Great Depression.
Heck I may even take decent notes and write my own ” Depression for Dummies” book.
——————————————-
Aren’t there drugs available that treat depression?
Ann (8)-
PS, if you’re up at night fretting over an offer because you feel you may lose the house, go ahead and pay up.
Imus, I’m glad to see you’re still your old self; popping up at random and picking one person to crap on all day.
Shore: ignore.
Well, as long as people are throwing in their chips on the Shore Guy vs. Imus match (instead of letting them duke it out on their own), I have to say that it’s often difficult to read intent and tone behind words. Helpfulness can often be seen as something else. Imus, you should know that.
If you haven’t been around long, or don’t feel you “know” or trust someone, it’s easy to misconstrue.
There are people who type on this blog, including me, who say stupid things. But I know I give them a little more leeway if they mostly seem to have some brain cells attached to the reality sphere (or if I think they’ve simply been drinking a little more heavily than usual.)
Imus, remember that all information is information and try to keep the emotion away so you get the most value out of the money you spend here.
Mike (22)-
“At that price point most people expect to at the very least fall in love with coming home every night.”
At 1.2 MIL, I’d rather live in a well-guarded tar paper shack, and come home every night to look at a trunk…containing my 1.2 MIL.
Hah, Clot. I was waiting for you to comment on that “fall in love.”
I thought it would be a line about falling in love ONLY with the shovel, not the hovel.
Imus (28)-
“…never read a post on here that is more than 2 or 3 sentences, unless it is an article from Grim. Anyone else feel same way?”
Be glad that bi can only string together a few phrases at a time between grand mal seizures.
Stu
Forget the prescription, recent studies in europe have shown shrooms or LSD used once a year has can alleviate symptoms of clinical depression. Hmm cheaper, used less often, and no secsual side effects, why go to the Doc when you can go to joe on the corner ;)
Shore (35)-
Using an attorney to negotiate a RE purchase is like getting gastric bypass surgery done by a plumber.
116 clot,
Thanks. That is a good point, just to leave it and let them shop it around.
As far as staying up all night fretting over possible homes we might lose, one plus about house hunting in Bergen County (in our price range anyway) is that you really never fall in love with anything.
125 clot
I agree with that, but I still wouldn’t sign the final K without my lawyer reading it.
Oops, hit send too soon…
Re letting them shop it around. If they can get more for it, they should go for it.
BC (69)-
“Knock down a McMansion and plant grain.”
Open up the slab, and dig a mineshaft.
Separate story:
About three weeks ago, we put an offer on practically a fixer-upper (wallpaper disaster) in a “good” town with a “walkable downtown” (code for Starbucks on Main Street). Got rejected with a full-price counter(?).
Well, since then, their listing agent has been calling ours non-stop with counteroffers, even though we have already walked. Our bid was 16% below their LP. Their counteroffer is now 8% below their LP.
One would ask, why don’t they just lower their LP?
I know you all say that this market is going to tank and I believe it and that is obviously the best reason not to buy right now. Another good reason to put the breaks on this house hunt is to not be exposed to these delusional sellers anymore. It is seriously getting really wacky and scary out there.
patient (127)-
“I agree with that, but I still wouldn’t sign the final K without my lawyer reading it.”
That’s what attorney review is for. That’s when attorneys can be attorneys and do waht they do best.
Shore 115 I made that point to show that prices must drop, If avg. husehold income in nj is 70k
year than most homes not just in the boonies(where I am)must come down.Even if you pump it up to 100k a 400k house w/20% down is just making it.Prices must decline as most can’t afford to buy them without exotic mortgages that we found are not sustainable anyway.
Vodka (124)-
“Forget the prescription, recent studies in europe have shown shrooms or LSD used once a year has can alleviate symptoms of clinical depression.”
Always worked for me…
#130 Ann:Got rejected with a full-price counter(?).
So there counter offer was full price? Guess they do not understand the term counter offer.
#130 Ann:Got rejected with a full-price counter(?).
So there counter offer was full price? Guess they do not understand the term counter offer.
Some good points;
U.S.News & World Report
5 Lessons Consumers Learned (Again) in 2007
Monday December 10, 2:26 pm ET
By Rick Newman
It’s been nearly five years since the last recession, and when times are good we tend to forget what we learned when they were bad. So after several years of booming home values, inflated personal wealth, and overconfident spending, 2007 has brought a refresher course in the basic realities of a free-market economy: What goes up must come down. The laws of supply and demand usually prevail. Caveat emptor.
ADVERTISEMENT
One of the byproducts of a strong economy is the Myth of Control: the notion that we can legislate, regulate, incentivize, intimidate, and even buy our way to unending prosperity. The Federal Reserve, of course, has some ability to fuel or restrain growth and rein in inflation. But as the economy sputters into 2008, we’re learning once again that the wizards of Wall Street and Washington (or Shanghai and Bangalore, as the case may be) have no magic pill after all to cure our biggest ailments:
The housing bust. Despite high-level attention from Treasury Secretary Henry Paulson and the CEOs of the nation’s biggest banks, the housing downturn will almost certainly persist well into 2008 and improve only when the inventory of cheap, overbuilt houses dries up and buyers return. One manufactured solution to this problem–the Bush administration’s subprime survival plan to rescue troubled homeowners–is likely to have little impact on the broader economy, since it’s voluntary and limited and may never go into effect as envisioned. More likely: We’ll just have to wait this one out, until the housing market rebounds on its own.
The relearned lesson: If you gamble, be prepared to lose. Many of the people now defaulting on their loans bet that their home values would rise before low “teaser” rates spiked upward a couple years down the road. They guessed wrong. Others didn’t even realize the starter rates would rise. They may have been deceived by slick lenders–but snake-oil salesmen aren’t exactly a new phenomenon. Isn’t that why consumer advocates for millenniums have been preaching “buyer beware”?
High gas prices. At least policymakers seem to have abandoned the old populist tactic of releasing oil from the Strategic Petroleum Reserve every time gas prices go up, to temporarily flood the market and soften prices for a couple of weeks. Drivers may even be getting used to $3 gas, which looks like it is here to stay. But many Americans remain stuck with big gas guzzlers they bought or leased just as gas prices started to rise a couple of years ago.
The relearned lesson: Frugality pays. Sorry to sound like a schoolmarm, but shoppers wooed by come-ons for the Dodge Hemi V-8 or copious horsepower are paying for it, with mileage in the teens and routine fill-ups of $75 or more. There are lots of more sensible choices that don’t require you to surrender your manhood or rattle along in a rust bucket. Just use common sense.
The plunging dollar. A strong country has a strong currency, according to conventional wisdom. So shouldn’t America’s leaders pull the levers to keep the dollar strong? Well, maybe–except that the value of the dollar is linked like the blocks in a Rubik’s cube to numerous other complex factors in the global economy, such as the U.S. trade deficit, foreign investment in the United States, and the maneuverings of currency speculators. The Fed could fiddle with interest rates to strengthen the dollar, but that could have other negative effects, like crimping credit at a time when it’s already drying up. The only real choice is to endure the vagaries of currency fluctuations and be glad that U.S. exports, at least, are booming.
The relearned lesson: What happens in other countries matters, a lot. Strong Chinese investment in the United States, for example, helps keep mortgage rates down. It pays to understand foreign economies.
Unsafe products. It seems like a throwback to the days of thalidomide or the Corvair, yet once again we can’t take the safety of everyday goods for granted. Skyrocketing recalls of toys and other products, mostly from China, revealed startling gaps in quality control at marquee American companies like Mattel and Fisher-Price. And it turns out that the federal government spends more money monitoring the safety of animal feed than testing the safety of products used by children. The good news is that this is actually one problem that’s solvable, with better product design and more oversight of factory floors and imports.
The relearned lesson: Smart consumers still need to educate themselves and rely on their own judgment. Most toys from China, for instance, are safe. But concerned parents need to do some research to be able to tell which ones.
Travel misery. Air-travel frustrations boiled over in 2007, as planes became more crowded than ever and packed skies led to record delays. This resulted from a collision of two powerful forces: A healthy economy has generated strong demand for travel at the same time that the chronically troubled airlines are cutting back capacity to try to earn a profit. And despite talk of revamping the air-traffic control system or taking other drastic measures, travelers should just get used to it–because the economics are actually working in the airlines’ favor, for once. Sold-out planes means they’re pricing their product properly and selling about the right amount of it. Which means that there may be no more airline bankruptcies for the foreseeable future.
The relearned lesson: Fire sales are nice, but stability is better. Everybody loves to hate the airlines, but physical limits on airport space, huge security requirements, and ruthless competition make this one of the toughest businesses in any market. Healthy airlines mean fewer layoffs, more orders for U.S. companies like Boeing, and less chance of scrimping on safety. But the airline story never ends–it just repeats–and if there is indeed a significant slowdown in 2008, then maybe travelers will retrench and planes won’t be so crowded after all. And it will happen without politicians or regulators lifting a finger.
patient (81)-
John is probably the guy who invented dead pools.
mikeinwaiting
Affordability is also about paying what you think a house is worth. We can technically “afford” most of the houses in the towns we are looking. It’s just that they are not worth it to us.
Our realtor has been getting confused on this. She thinks that when we’ll pay X for a house, that’s because it’s all we can “afford.”
On my way to work this morning, I saw an open house sign complete with bright yellow ribbons and helium balloons.. This on a day when they’re predicting 5-8″ of snow and sleet in the area.
If realtors are going the extra mile today, then the buyers must be-a-knockin!
FYI: This was in Montville on Rt 202 by the 287 south entrance…
————————————-
What house was it? If its the Pink house than they prolly have the balloons and crap all over there becuase no one wants to buy it.
its been on the market for over a year. My wifes parents live in that area so we pass by it. The people trying to sell it are on something if they think they will get much of anything for it.
having to deal with people comming off an on the highway. having no sound barrier blocking 287 noise…They will be lucky to get 50 bucks for that awful pink toliet
#126 Ann: Please, its prestigious Bergen County.
134 3b
Nope, they don’t know what counteroffer means. Hilarious.
[123]# Clotpoll Says:
December 13th, 2007 at 1:12 pm
Be glad that bi can only string together a few phrases at a time between grand mal seizures.
I just spewed soup all over myself…
The visual you describe is too much for my tiny brain….ROFLMFAO…
3b 140
It is so prestigious. I feel so fancy driving down Route 17 I can’t even handle it.
#143 Ann: Yes, of course, and every town is only minutes awya from NYC.
“Clotpoll Says:
December 13th, 2007 at 1:15 pm
Shore (35)-
Using an attorney to negotiate a RE purchase is like getting gastric bypass surgery done by a plumber.”
Why do you believe I said that people should use an attorney to negotiate a RE deal — not that there IS anything wrong with that? My coment about attorneys was made in the context of a discussion of whether one should set an expiration date in a contract. Inasmuch as attorneys, not RE brokers or agents, are the experts in the various states’ laws of contracts, it is wholly appropriate to ask an attorney whether there is any legal advantage/disadvantage to either having one included inthe offer or leaving one out of the offer. Whether it makes sense, for strategic reasons, to include one is a different matter; however, in a society where litigation is frequent, getting advice as to the legal pitfalls of a particular strategy is wise.
re #138 and “Affordability.”
I suspect that all of us here could afford to pay $6 for a gallon of gas. But, why would we if the station downthe street is selling for $3?
Ann Agreed I have never bought the most I could afford.The numbers most work I will not buy unless its a deal for me.Unlike most people I do not care what type of house or land.Well built good heating & the like.I do however need alot of room 3 kids so I pick my town & wait it out.
131 clot
agreed – same page.
Please, its prestigious Bergen County.
LMAO
Burgerking county prestigious hahaha thats the funniest thing I have ever heard.
Please explain why its so prestigious, what becuase home are over priced. Or maybe becuase its an easy commute to NYC…
Maybe some towns are nice but all.
Quite frankly I think we should just sell BK county to NYC and make it the 6th Borough. That way if we sell it to NYC we can fix out debt in NJ and lower property taxes. I mean what does NJ need it for? Its mostly commuters there anyways. So lets sell it to NYC for 100 Billion.
131 Clotpoll Says:
December 13th, 2007 at 1:26 pm
patient (127)-
“I agree with that, but I still wouldn’t sign the final K without my lawyer reading it.”
“That’s what attorney review is for. That’s when attorneys can be attorneys and do waht they do best.”
Not to beat a dead horse, but, attorney review occurs after an offer has been made and accepted. My comment to Ann was made in reference to expirations in offers. Inasmuch as one may (or may not) be put at some legal disadvantage by making a non-expiring offer I still think that there is an advantage to getting that cleared up before doing so. Then again, I am a bit more cautious than most people. Since this is a question any reasonably-competent lawyer with experience with RE transactions should be able to answer in a very short time, I, and I am only speaking for myself, would find the $ well spent. I have as high a regard for RE brokers etc. as the next guy but I will go with my own lawyer’s advice on the state of contract law over that of a Broker anyday.
#148 Homer: Dude, relax, it a running joke some of us have here on the board, I was just kidding,.
As far as Bergen Co. becoming the 6th boro, you better check with pret on that, because he has already decreed that Hudson Co is the 6th boro of NYC.
#148 Homer One last point the overwhelming majortiy of the people who live in Bergen Co, are not, repeat are not employed in NYC.
#148 Can we sell Camden too?
http://media.cnbc.com/i/CNBC/Sections/Video/CNBC_Live/player/cnbc_live.html?v=101
Mitchell is currently delivering his report.
#139 Homer
That pink house is also in a flood zone. But either someone actually bought it or they took it off the market because it doesn’t seem to be listed anymore. It was listed at around $260,000. lol
scribe Says:
December 13th, 2007 at 9:56 am
From the WSJ:
Morgan Keegan Sued
Over Mutual-Fund Woes
So Reech’s fund manager pal is going to get his a$$ hauled off to jail?
dream (155)-
Reech has had one helluva year.
3B I know that not everyone that lives there does not commute to NYC but I just think if we sold it to NYC to make it the 6th borough that we could get rid of our debt in NJ.
Hudson county is not the 6th borough Hudson county Is a land of its own. Mot ny and not quite NJ. Just a lost County of Nomads
#157 Homer: Sorry Bergen county is my home, and so is NJ; I am content to leave it (Bergen) in NJ.
shore – it turned out that horse wasn’t dead – point taken
grim – I have the mitchell report; I can send to you to distribute to anyone who wants it
#156 Clot: Richard posts at midnight now, accused us last night of all being doom and gloom( the nerve!!).
It is now his belief that there will be a mild, shallow recession, and then a quick bounce back.
All remains well in the magical mythical town of Brigadoon.
“#157 Homer: Sorry Bergen county is my home, and so is NJ;”
3b,
How can this be considered home? Aren’t you a transient renter, with no roots?
#`161 Oh no, I owned, cashed out, and will buy again.
Seeking Alpha:
Fannie Mae: Beyond Economical Repair?
http://tinyurl.com/yu2kow
patient [159],
Names?
http://tinyurl.com/3xhafx
#161 BC Bob: Oh and the correct description is dirty, renter, loser.
3b (160)-
Maybe I have a skewed idea of what the word “optimist” means, but I find that most posters here (even His Grimness) are pretty upbeat, optimistic people. None of us here are waking up at 11, slacking around the house, doing bong hits, catching Oprah every day or engaging in any of the other things a person who is down on life might reasonably be found doing. Other than the occasional bout of Schadenfreude, this seems to be a fairly jolly bunch.
Anyone whose mood is controlled- for better or worse- by what happens in real estate markets has some pretty serious issues…or at least has way too much free time on his hands. I’m in the business, and be assured that the minute I walk out of my office, the phone goes off, and I’m on the way to any number of pursuits that define me far more completely than what I do for a living.
That being said, I can only describe as delusional those here who watch the slow-motion train wreck of the current RE market and conclude that what’s transpiring is either mild and/or transitory in nature. Sometimes, a big, festering pile of shit is just what it appears to be.
And, to not call things what they are doesn’t make one an optimist.
Mitchell, works for Red Sox, writes steroids report, names current Yankees,….hmmmm
#164:
Brady Anderson, Manny Alexander, Rick Ankiel, Jeff Bagwell, Bar ry Bonds, Aaron Boone, Rafaeil Bettancourt, Bret Boone, Milton B radley, David Bell, Dante Bichette, Albert Belle, Paul Byrd, Wil Cordero, Ken Caminiti, Mike Cameron, Ramon Castro, Jose and Ozz ie Canseco, Roger Clemens, Paxton Crawford, Wilson Delgado, Lenn y Dykstra, Johnny Damon, Carl Everett, Kyle Farnsoworth, Ryan Fr anklin, Troy Glaus, Rich Garces, Jason Grimsley, Troy Glaus, Jua n Gonzalez, Eric Gagne, Nomar Garciaparra, Jason Giambi, Jeremy Giambi, : Jose Guillen, Jay Gibbons, Juan Gon zalez, Clay Hensley, Jerry Hairston, Felix Heredia, Jr., Darren Holmes, Wally Joyner, Darryl Kile, Matt Lawton, Raul Mondesi, Ma rk McGwire, Guillermo Mota, Robert Machado, Damian Moss, Abraham Nunez, Trot Nixon, Jose Offerman, Andy Pettitte, Mark Prior, Neifi Perez, Rafael Palmiero, Albert Pujols, Brian Roberts Juan Rincon, John Rocker, Pudge Rodriguez, Sammy Sosa, Scott Sc hoenweiis, David Segui, Alex Sanchez, Gary Sheffield, Miguel Tej ada, Julian Tavarez,Fernando Tatis, Maurice Vaughn, IJason Varit ek, Ismael Valdez, Matt Williams and Kerry Wood
Artemis [169],
Thanks.
#18
They may as well convert it into a Seven Elevn or Doctors office. It looks like a commercial building.
No surprises on that list. I love Brett Boone. Punch ‘n Judy hitter for the Reds, lucky if he hit 20 HR’s, juices up and is hitting 40+HR a year and 130 RBI’s for the Mariners.
#167 Clot: As always you hit the nail on the head.
3b – You forgot “bitter”.
169 Artemis
That was a leaked list that turns out not to be accurate (for instance, Damon isn’t named at all).
Here are Yanks and former Yanks who got named:
Roger Clemens
Chuck Knoblauch
Andy Pettitte
Mike Stanton
David Justice
Rondell White
Gary Sheffield
Kevin Brown
Glenallen Hill
Jose Canseco
Denny Neagle
Randy Velarde
Ron Villone
Jason Grimsley
Darren Holmes
Todd Williams
Jose Offerman, Kyle Farnsworth:
Proof that steroids don’t work.
that list is my own culled from reading the report, which is 409 pages.
Mets (off the top of my head):
Dykstra
Hundley
LoDuca
No Red Sox of any consequence were named, just folks like Manny Alexander, Mike Lansing, Chris Donnels, etc. Of course, it would be ludicrous to think that Big Papi or Manny Ramirez ever used.
176 clot
Offerman and Farnsworth were not named in the report.
Fernando Vina was, however, if you want an indication that steroids don’t work.
patient [175],
Is it easier to list those who have not used steroids? Can it be that Jose Canseco was the only individual telling the truth?
Yep, Red Sox clean as the driven snow. No Varitek, Millar, Nixon, Ramirez or Ortiz.
If you read the actual Mitchell report you’ll see that Clemens got involved in Toronto, then came to the Yanks and had them hire the guy who stuck syringes in his arse as strength coach. This in turn led to another string of Yanks getting involved. But seriously, what were some of these guys thinking? Were steroids really going to help Denny Neagle get his 86mph fastball and slew of junk over the dish?
Come on, what a waste of drugs and money.
Question –
Along with the usual inclement weather early school closing calls, hubby got an automated call on his cell stating that the town may need to requisition his (new, mid life crisis) diesel truck.
Ever heard of such a thing?
#174 lisoosh: Ah yes bitter!!
other players listed above who were NOT named:
Pujols
IRod
Both Boone brothers
bichette
Cameron
Delgado
Everett
garces
Kile
Mondesi
prior
Tatis
Varitek
Garciaparra is mentioned, but not regarding anything having to do with steroids.
Sosa is mentioned, but only to say that he refused to answer questions
179 bc
probably right on both counts
I don’t think that NOT being named on the report is any indication of innocence – he makes clear that the report only scratches the surface.
Sosa already cheats with his corked bats.
“hubby got an automated call on his cell stating that the town may need to requisition his (new, mid life crisis) diesel truck.
Ever heard of such a thing?”
‘soosh, I have never heard of such a thing, and that sounds completely insane! How would the town know his cell phone number?
i just received a blast email from a realtor in monmouth county:
“With such an uncertain real estate market locally we’ve begun to see many changes including several brokerages ~ such as Foxtons ~ planning to close its doors. But if you’re thinking the sky is falling on the local real estate market you’d be wrong.
Some exciting news in this month’s update including stats that show LOCAL SALES ARE UP and some new tools available to sellers, investors and buyers that I think you’ll find useful.”
ROFL!
Hahaha, Crazy Carl Everett, I can only imagine the toxic stew flowing through that wack-job’s veins.
report has now been released
http://assets.espn.go.com/media/pdf/071213/mitchell_report.pdf
189 heheheheheh
to be clear, Everett is NOT named in Mitchell’s report. That second list I gave was a list of people who are NOT named in the report, but who were included in the rumor-mill list that artemis posted earlier.
Anyhow, I heard today that Citigroup is posed to have a big turn around, Vikram Pandit the new CEO will use Vastu to accomplish this. Vatsu is an ancient Indian architectural and design philosophy dating back thousands of years, which teaches that properly orienting a building, its doors and windows, its rooms and furnishings — in relation to the compass, the sun, and cosmic, religious and natural forces — can encourage the flow of positive energies and good fortune.
One of Citigroups first steps is to change the main doors at their headquarters. Lakshmi, the Hindu goddess of prosperity, prefers to use a door in the northeast corner, Citigroup main building on 3rd avenue faces west and their 388 Greenwich location faces East so that is a major cause of the subprime problems.
Vastu comes out of the same well of Indian spiritual traditions as yoga, Ayurveda, a traditional system of medicine, and Vedic astrology, and may well have influenced its better-known cousin, the Chinese practice of feng shui. Where feng shui talks of ch’i, Vastu deals in prana, both words for the energy or breath of life.
In India, Vastu is associated with Hindu deities, gives preference to the north and east and to rectangular shapes, while feng shui, for example, favors the south and curving forms. Both maintain that how you build and decorate can influence well-being. One of the main reasons, Vikram accept the CEO job was that Citigroup’s buildings were already rectangular shape which was a good luck sign. Vikram joked “that it is a good thing he is in banking and not the army cause he could never work at the Pentagon”.
Vastu is based on a grid (representing the nine main directions) within a square, placed over the diagram of a squatting human form, which gives symbolic shape and meaning to the floor plan. Traditional Vastu practitioners, like the one the Sharmas consulted, may recommend that master bedrooms are ideally in the southwest, kitchens in the southeast, studies or personal shrines or entranceways in the northeast, living or family rooms to the west.
Vikram plans on also instructing Citi employees to sleep with their heads anywhere but pointed to north or south. Vastu suggests that the Earth’s north-south magnetic fields interfere with sleep in that position, and Citi employees can now have more restful nights when they reposition their beds.
In addition, Vikram will instalng statues of a Buddha or a Hindu deity in all the foyers, since entrances should emit good energy and be well cared for and pleasing. While Vastu calls for water features such as pools and fountains in the northeast of a property, Vikram is holding off as the water bills and related insurance costs may not be appropriate due to his cost cutting initatives.
(that being said, I agree that Everett probably used steroids and 43 other drugs).
#191 – sorry njpatient for spreading misinformation. I got that first list from WNBC.
Speaking of steroids, any reference regarding Greenspan and other central bankers? M3 wasn’t named since it is so far gone, it would not be appropriate to mention in the same category.
#188 These clowns will stop at nothing,you just have to laugh.
194
wow – I was wondering what the source for that list was, as it’s the third time I’d seen it today. NBC better call their lawyers.
Sounds like some of these guys should be riding in the Tour..
#192 Very funny! Hell, even if it’s true, Vikram can’t do much worse than him immediate predecessors.
I am not accusing any major leaguer of anything, I am sure Crazy Carl and all the Red Sox are on the up and up.
http://www.cnbc.com/id/22217580
“One mid-sized private builder told a friend of mine that potential customers coming through their model-home doors are openly hostile. They’re not just looking for good deals; they’re looking for payback.
Apparently some of today’s new homebuyers blame the builders outright for the current housing predicament. They are telling unwitting sales reps that they are to blame for running up prices and foisting untenable loans on clients during the latest housing boom. Buyers are telling the sales people stories of how rudely they were treated during the boom, how they were told that if they didn’t want to take the deal they could stick it, because there was a line of buyers right behind them.”
patient [201],
Evolution and/or Revolution?
njpatient Says:
“’soosh, I have never heard of such a thing, and that sounds completely insane! How would the town know his cell phone number?”
No idea. He’s not about to hand over $50k worth of truck to anyone anyway.
Although, knowing him, if they offered serious money for his services, I can see him jumping on it.
202 bc
would it be impatient of me to choose the latter?
“He’s not about to hand over $50k worth of truck to anyone anyway.
Although, knowing him, if they offered serious money for his services, I can see him jumping on it.”
I’d assume it’s a scam unless someone of consequence can prove otherwise.
kettle1 Says:
December 13th, 2007 at 11:54 am
#80, Not even a reach around!
Brings back some old memories….
http://www.youtube.com/watch?v=aUc62jD-G0o
Please pardon if this has already been answered, but there are so many posts to go thru to find out I’m throwing this out there anyway.
There is no reason to put an expiration date on an offer, and especially to pay an attorney to do it. For anyone really in pursuit you can put offers on multiple propertiesat once. Find 3-5 homes you can live in ore more ( the inventory certainly supports this) put all the bids in and wait, no answers – do it again.
KL
Hey is the snow piling up in NJ, I have not left NYC yet.
208, its mostly freezing rain here in weehawken
John (192)-
When are they gonna do that Vastu stuff to their blackboxes?
Those things have gotta be full of some bad juju. They should have an exorcist on hand, as backup.
#201
it’s funny how all of these sell side people in the real estate industry take it personally that buyers want deep discounts now. they should be thankful that people are making offers at all given the current environment
#162: I owned, cashed out, and will buy again.
it sounds like the creed of the church of RE.
Eyesores and out-of-place homes:
When one has a street or town that is desirable and the homes are nice and attractive, if there is a real eyesore or out-of-place home there, does the eyesore cause a greater drop in the other homes or does the eyesore get an undeserved bump in value due to the location?
Door position is really important when you are going to push thousands to the street.
njrebear Says:
December 13th, 2007 at 5:49 pm
Door position is really important when you are going to push thousands to the street.
Best to do at 5,000 feet over the water.
skep (211)-
Why? Unworkable offers are no better than delusional asking prices. An idiot is an idiot, no matter which side of the table he’s on.
I spend a good hour every day fielding pea-brained offers from people who think that a tough selling environment should deliver them a house for practically nothing.
Give me a low offer that has some market comps/trends to back it up, and I can work with that all day long.
Come to me with the expectation of something for nothing, and nothing is what you’ll get.
Guy (213)-
Both.
Clot,
So, from your perspective is one better off buying a nice house near an eyesore, rather than the eyesore itself, inasmuch as the eyesore will likely need work to avoid being one and it is being sold at a premium based on its location?
Clotpoll,
You’re acerbic wit is really sizzling today!
LOL
“#162: I owned, cashed out, and will buy again.
it sounds like the creed of the church of RE.”
lol!
Senate bill to get sub-primers into FHA loans:
http://www.cnbc.com/id/22247496/site/14081545
clever word of the day!
REtracement
#216 –
clot –
the problem with offers being workable or unworkable is that prices got so detached from any kind of reality that i can’t say for sure what is delusional or not. you can’t blame a person for not going by todays comps in a market like this, because when tomorrow comes, today’s prices are probably going to be too high. and let’s face it, although prices have come down, it still seems like there’s so much crap left to work itself out in terms of prices adjusting to fundamentals.
again, with regards to delusional – i’ve been looking at the low end of millburn. there was a house listed for 799K a while back. bottom line, i found out it sold for 615K. so if i went in and offered even 650K when it was 799K, i think i would have been accused of asking the owners to “give it away.” as far as comps, prices were all over in that area, so it’s hard to come up with a number. p.s.- it’s appraised at 830ish.
Clot,
Did you take your screen name from Shakespeare?
The problem with defining an offer as delusional is excerbated by the fact that whether or not an offer is delusional depends on where one sits and how much skin they have in the game. The race to get in “before I get locked out forever” and other such behavior pushed homes to delusional heights.
If I bought a home for $900,000 and put 20% down, then paid $10s of thousands in interest over 7-8 years and maybe $100,000 or more in taxes and prices dropped to the point that I have nothing to show for my investment, or even lost $ on the deal, I would likely not feel love for those hammering away at me, even though I might have been very favorably disposed towards them if prices were going the other way and a bidding war ensued.
The only way to find true bottom is for people to make offers that are below comps, since the comps were fold earlier in time and earlier, in this environment, means higher prices. Some people will reject the offers, others will be forced to sell and accept, while holding their noses and washing a xanax down with a shot of scotch.
Shore Dinner (224)-
Yep. As in King Lear’s toady, Oswald.
Shore (218)-
I never really thought about that one. Sorta chicken-and-egg, though.
I think I wouldn’t buy a house at either extreme of quality. Too much downside baked into each example.
Just a few years ago I saw a bilevel hit $400,000 as the asking price and I said that somebody had to be nuts to pay that kind of money for that house.
http://homes.realtor.com/realestate/wayne-nj-07477-1089207145/
tcm (223)-
That’s why I was careful to state “priced to comps/TRENDS”. And, the type of offers I’m calling unworkable are the ones that are so far off either comp or trend that to encourage a seller to entertain them is skirting malpractice.
As far as that Millburn house goes, your offer might well have been rejected as frivolous…at that time. No matter how bad the market, you can’t get tomorrow’s price today (unless you’ve developed your own source of homeowners in the first stages of foreclosure). The events that transpired to drive the value of that house down to 615K hadn’t occurred yet.
Stock touts regularly bemoan their bad calls by claiming they were “early”. As any good investor will tell you, “early” is just a euphemism for “wrong”.
“Clot,
Did you take your screen name from Shakespeare?”
Actually it was from Clot’s idol, Hank Finkel. Clot’s quant ran some simulations on Hank, hence the name Clot.
“As any good investor will tell you, “early” is just a euphemism for “wrong”.”
Clot,
My grandfather was a great stock picker, horrible market timer. His clock was off by 8 hours. He went to bed hungry and woke up h*rny.
Clot’s quant.
Bahhahahahhahha.
http://madamepoot.com/ask/index.html
Clot, you know I’m kidding, right? I just liked the way that rolled off Bob’s tongue (eww?) Clot’s quant.
BC (229)-
Har! The day I hire a quant, please shoot me.
“It could be!”
30 Year Fixed @ 21.99%
In 1971 I bought a starter Colonial in New Providence for $65K. Moving from an apartment in Brooklyn I put $15K down and financed $50K at 8 3/4%, 30yr, with Inverstors S&L. I could afford it because my base salary was $30K. In 1976 I traded up to a larger Split in New Providence which cost $125K. I put $55K down and financed $70K at 16 1/2%, 30yr with Carteret S&L. I could afford this because my base salary was $45K. I subsequently refinanced in 1978 at 12%, 15yr with Summit Federal S&L. Although some of the rates were Usury Like, because I stayed below the 2x’s Salary Metric, I could handle it. The problem today is houses are too expensive to buy, for most people, within a reasonable salary to mortgage metric. This is further exacerbated by the fact that the metric used in the 70’s against Gross Pay (2-3X’s), was in an environment where Net Pay was higher. Today we are taxed and double taxed on everything.
#228 –
i understand what you mean about tomorrows price today, and i may be one of those people.
as far as trading stocks goes though, since they are traded so quickly and easily, with very low transaction costs, i can see why being early is wrong – but with regards to this bubble, unless you were 3 or 4 years early, i don’t think being early is being wrong. this blog was definitely early in calling the bubble, but i don’t think it was wrong.
i also think that the people who are making offers in this market, with the mountain of real negative developments coming to light every day, are brave – if they want an extra discount for taking a risk in buying now, instead of waiting for a turnaround, then, i can’t blame them. of course, sellers are free to take the chance and turn them down too.
“Har! The day I hire a quant, please shoot me.”
Clot,
Why hire one, you have bi for free, go the other way. His last sell crude recommendation, impeccable timing. It was worth $6 on the upside. Thanks bi.
#227 gary:its going to rot on the market at that price.
“Citigroup Inc. will bail out its seven structured investment vehicles, bringing $49 billion of assets onto its balance sheet in the biggest move yet by a bank to rescue the failing funds.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=anCb4SVNh.0M&refer=home
tcm (236)-
Yes, RE markets move slowly and are illiquid (and are now having to cope with illiquid mortgage markets, to boot). However, risk only accrues to today’s buyer if that buyer intends to sell before this market cycle plays out. In fact, I will not work right now with a buyer who tells me that his horizon of ownership is under five years. I don’t want to be the agent who comes back to list a client’s home in a few years and gets to deliver the news that he’ll be bringing a check to his closing. Sellers are supposed to get checks, not write them.
However, if a buyer has an ownership horizon that can be expected to outlast this market cycle, I fail to see the risk in purchasing at today’s values. It is overwhelmingly unlikely that we’re near the bottom…but the attempt to catch a market bottom carries its own set of risks, whether it’s stocks or real estate.
I still respectfully submit that a potential buyer who cannot stomach even the short-term “loss” of theoretical money- as in paper equity- will probably either never buy or will actually end up making a bad purchase, as the angst involved in market-timing will cloud the decisionmaking process.
BC (239)-
That’s gonna leave a mark…
Welcome to the nightmare, Mr. Pandit.
#212 Big rambling house that I bought cheap at then end of the last down cycle. Some sweat equity, a talented brother in law carpenter, and then the market insanity,and BOOM walked away with a huge windfall.
Every now and then I happen to drive by it, and note how the current owners have really neglected taking care of it.
#240 clot: The question is how much? To over pay by 20 or 30K,and then have the cycle play out, no big deal. To over pay by 100k or more, thats when it becomes problematic, evn if it all may work out in the end.
And with this real estate bubble that has ended, who knows, so much was involved in this madness that was absent from the last real estate boom and bust.
I submit we are in unchartered territory this time around.
Kudlow predicting 2 to 2.5% inflation rate next year
#297 rhyming:put all the bids in and wait, no answers – do it again.
With the same properties?
#240
Clot,
It is going to be interesting to watch the second-home/vacation-home market. Will potential sellers forego selling or will assorted pressures cause owners to become sellers. As for buyers, since they do not NEED a vacation home will they play extra-hard ball or will the emotions of “Oh, we must have this” take over. Do any of the RE profs here have any experience with this from the late-80s downturn?
3b (243)-
I don’t think we’re in uncharted territory; the only thing different about this bust cycle is that the numbers are bigger.
The form the bust is taking and its inexorable denouement are like kabuki: just a steady, predictable drip of human nature turning from saccharine to rancid. It happens so slowly, that at the end it seems as though the saccharine man and the rancid man are the same.
#250 “a steady, predictable drip of human nature turning from saccharine to rancid”
But how do you really feel, lol.
#243 – 3b
i agree – unless you talk numbers, then it’s hard to talk about acceptable “loss”.
3b (243)-
But, you can’t know you’ve overpaid for a house until you try to sell it.
#250 –
i think people sort of know – trying to sell it just confirms it.
From MarketWatch:
Owe my
Question: What do I do when I owe a $450,000 first mortgage, a second at $115,000 and new houses he same as mine are selling for $500,000? I owe two months on the first and two months on the second, and I cannot pay. What do I do?
60 Donald Place, Waldwick NJ
Purchased: 12/22/2005
Purchase Price: $575,000
Currently listed, active
NJMLS# 2746123 (multiple relists)
Original List: $599,000
Current Asking Price: $464,900
AP
Greenspan: Odds Rising for a Recession
Thursday December 13, 7:00 pm ET
By Jeannine Aversa, AP Economics Writer
Greenspan: Odds of a Recessions Are Rising, Economic Growth Is Getting Close to ‘Stall Speed’
WASHINGTON (AP) — Former Federal Reserve Chairman Alan Greenspan says the odds the U.S. will fall into a recession are “clearly rising” and he believes economic growth is “getting close to stall speed.”
Greenspan, who ran the central bank for 18 1/2 years, until early 2006, offered his views on the economy in an interview on NPR News’ Morning Edition that will air on Friday. Excerpts of the interview were released on Thursday.
A severe slump in the housing market, a stubborn credit crisis and turbulence on Wall Street are endangering the country’s economic health. Growth in the current October through December period is expected to have slowed to a feeble pace of just 1.5 percent, or less.
Economists, including Greenspan, have warned that the chances of a recession are growing.
Asked whether the economy will tip into a recession — something that has not happened since 2001 — Greenspan said, “It’s too soon to say, but the odds are clearly rising.”
He said he felt this way because of the slowing pace of growth. “We are getting close to stall speed,” he said. “We are far more vulnerable at levels where growth is so slow than we would be otherwise,” he added. “Indeed, it’s like someone who has an immune system that’s not working very well is subject to all sorts of diseases and the economy at this lever of growth is subject to all sorts of shocks.”
Greenspan’s remarks come just days after the Federal Reserve, under Chairman Ben Bernanke, sliced a key interest rate for a third time this year to prevent the housing and credit troubles from sinking the economy.
The situation poses the biggest challenge yet to Bernanke since succeeding Greenspan in February 2006.
Some analysts have questioned whether Bernanke waited too long to cut the Fed’s key rate and whether he has acted aggressively enough to soothe the economy’s woes. The Fed initially dropped its key rate in September, the first reduction in four years. That was followed up by additional rate cuts in late October and then again on Tuesday.
Greenspan again rejected criticism that his policy actions helped to feed a housing boom that eventually went bust. Critics say Greenspan held interest rates too low for too long after the 2001 recession.
To have prevented such euphoria in housing that fed a bubble in prices, Greenspan said the Fed would have had to jack up interest rates so high that it would have damaged the economy. “That would have broken the back of the economy, and brought the housing boom down,” Greenspan said.
“But, you can’t know you’ve overpaid for a house until you try to sell it.”
Clot,
Say you try to take out a 2nd mortgage and the appraisal comes back 100K lower than your purchase price. Granted, I am not trying to sell. However, Paul Revere could not ring a louder bell; 1)I overpaid, 2)The market has declined in a rapid fashion, hence I overpaid. Timing is everything.
“To have prevented such euphoria in housing that fed a bubble in prices, Greenspan said the Fed would have had to jack up interest rates so high that it would have damaged the economy. “That would have broken the back of the economy, and brought the housing boom down,” Greenspan said.”
From #254,
Alan, BS,BS. If you just reported retail inflation, the market would have jacked rates by itself. Granted, growth would have been slower. That said, we would have avoided this charade and not be subjected to the storm that will hit in 2008. Let the market set the rates based on true inflation #’s. Abandon the fed and the cronies that you report to, cut the puppet strings. The fed can only accomplish two scenarios, bubbles and busts.
BC (255)-
Granted, a denied cashout or second mortgage indicates that a homeowner is in an upside-down position (or at least a position of diminished equity), but that financing denial is not a liquidation of the investment. The owner still retains use and possession of the property, assuming he’s still paying his first mortgage. The continuing use, possession and whatever tax benefits the owner enjoys have both measurable- and emotional- value. Just because some of the benefit can’t be measured in dollars doesn’t render it worthless.
An appraisal is RE’s equivalent of a brokerage account statement. A statement of opinion on market value is only relevant if the owner decides to sell at that moment.
One of the beauties (or pitfalls) of residential RE is that there are no margin calls. However, I guess there is a sort of horrifying penalty meted out to those in an upside-down position: that of having to continue to pay for an asset that is depreciating.
3B
Sorry to confuse, I really meant move on to the next. There is so much inventory out there, take advantage of that. Yes there will be some you like better than others – go up a little on those, go really low on your least fav, however don’t forget dont go anywhere if you don’t have to. No expirations dates needed.
KL
I purchased my current home in 2005, and it has dropped in value about 60K in the past two years.
Do I like my home any less? No. Do I enjoy it any less or wish I hadn’t bought it? No. Have I decided to cut my losses and let it fall into disrepair, because I don’t want to throw good money after bad in the support of a depreciating asset? No. In fact, I bought my home knowing full well that I’d probably be taking a hit to equity within the first five years. The convenience of the location, enjoyment and benefit that accrues to my kids have a value that outweighs the paper loss.
Were I looking to sell and get out right now, my answers to the above might be different.
I think Grim had asked the other day what effects the cuts at Novartis would have on employment in NNJ. Unfortunately, the company is somewhat vague. They are planning on cutting 3,000 globally from January through March and having another 8,000 reduction in payroll through attrition and retirements.
#250 clot: I can get a very good idea if I bought in 05,and the same houses are for sale now at 75 to 100k less.
Its not a good feeling, I remember it well when the last bubble popped.
Grim – do you have any comp killers in Upper Saddle river? (or any price declines for the many spec homes currently on the market)?
would be interesting to see DOM for the spec homes
#247 clot: True the numbers ar bigger. But I do think there was more recklessnes this time around than last.
Because back then even with all the craziness, you still really did have to qualify for a mtg, including a down payment.
I think this bust is going to be a lot scarier.
3b (263)-
Massive residential and commercial projects- financed by dimwitted S & Ls and based on bogus appraisals- was pretty damn scary at the time.
I also remember several banks (including Chemical and Citi) dangling over the precipice for quite a while.
The passage of time and occurrence of even greater disasters dull our memories of past troubles.
I will never forget some of the RTC auctions I attended or the faces of some of the attendees. They looked like human carrion birds.
Shore Guy about credit cards-
I charge all of the merchandise that I buy for my business on rewards cards through BOA. I have a great way of paying them because I max them out and pay them multiple times each month. The tellers can transfer the money and it gets recorded that same day. The card has no balance the next day and is ready to be maxed out once again. If I do it online it takes about 3 days to be recorded. I’m there a few times a week making deposits anyway.
I have to go with post 235, it does’nt matter what the interest rate is the price of the home is all that matters. My father bought his first home for 32,000 in 72 he put 12,000 down and financed 20,000 at that time he made about 15,000 a year, 8 years later he bought the slightly bigger version for 60,000 he financed 7,000 he was making 30,000, however, he does’nt bat an eye at what it would cost me to buy his house today. As in his oringinal purchase I have almost a year’s salary to put down but the house would cost me 5xs my yearly, so why doe’snt he understand.Everyone has been brainwashed, even the most prudent and practical.
KL
KL, because everybody forgets, like Clot said. Money wipes the memory. Going up with greed, there’s absolutely no memory or fear of taking loans. When your Dad was originally buying, he took larger and larger risks with his loans, as long as he didn’t get burned.
It’s like sex. So many will risk for the payoff when they see that beautiful blonde across the bar after a drink or two.
But when there’s no payoff (or the blonde is there in the morning with that twangy voice and drool all over), they won’t risk anything. That’s the “pull-back” in demand that means people won’t buy as much at ANY price point.
That’s what you see now.