From the AP:
Home prices post 18 percent annual drop in October
A closely watched index shows home prices dropped by the sharpest annual rate on record in October.
The Standard & Poor’s/Case-Shiller 20-city housing index released Tuesday fell by a record 18 percent from October last year, the largest drop since its inception in 2000. The 10-city index tumbled 19.1 percent, its biggest decline in its 21-year history.
Both indices have recorded year-over-year declines for 22 straight months. Prices are at levels not seen since March 2004.
Prices in the 20-city index have plummeted more than 23.4 percent from their peak in July 2006. The 10-city index has fallen 25 percent since its peak in June 2006.
None of the 20 cities saw annual price gains in October — for the seventh consecutive month.
From Bloomberg:
October Home Prices in 20 U.S. Cities Fall 18% From Year Ago
Home prices in 20 U.S. cities declined at the fastest rate on record, depressed by mounting foreclosures and slumping sales.
The S&P/Case-Shiller index declined 18 percent in the 12 months to October, more than forecast, after dropping 17.4 percent in September. The gauge has fallen every month since January 2007, and year-over-year records began in 2001.
The financial market meltdown that’s reverberated around the globe has prompted banks to curb lending, signaling the housing slump will persist for a fourth year in 2009. Falling property values have eroded household wealth, causing consumers to pare spending and deepening what is projected to be the longest recession in the postwar period.
“As 2008 comes to an end, the housing market is left in a weaker state than at the beginning of the year,” Michelle Meyer, an economist at Barclays Capital Inc. in New York, said before the report. “Uncertainty remains high given the unprecedented nature of the recession.”
Economists forecast the 20-city index would fall 17.9 percent from a year earlier, according to the median of 21 estimates in a Bloomberg News survey. Projections ranged from declines of 17 percent to 18.4 percent.
Compared with a year earlier, all areas in the 20-city survey showed a decrease in prices in October, led by a 33 percent drop in Phoenix and a 32 percent decline in Las Vegas.
“The bear market continues,” David Blitzer, chairman of the index committee at S&P, said in a statement. The declines in Atlanta, Seattle and Portland surpassed 10 percent for the first time, he said.
From MarketWatch:
Home prices off record 18% in past year, Case-Shiller says
Home prices in 20 major U.S. cities dropped 2.2% in October from the prior month and had fallen a record 18% from the previous year, according to the Case-Shiller price index published Tuesday by Standard & Poor’s.
Prices have fallen in all 20 cities compared with both the prior month and October 2007, and 14 of the 20 metro areas showed record rates of annual declines. Also, 14 of 20 areas sustianed declines of more than 10% on a year-over-year basis.
For Case-Shiller’s original 10-city index, prices fell a record 19.1% in the previous 12 months.
“The bear market continues; home prices are back to their March 2004 levels,” said David Blitzer, chairman of the index committee at Standard & Poor’s.
The largest price drop for October was seen in Detroit, with a fall of 4.5% amid growing troubles for the Big Three automakers.
For the year, Phoenix chalked up the biggest drop — 32.7%.
From the Wall Street Journal:
Case-Shiller Index Shows Sharpest Home-Price Declines in Sun Belt
Home prices continued to drop as the economic downturn deepened further in October, according to the S&P/Case-Shiller home-price indexes, a closely watched gauge of U.S. home prices, with home prices in the Sun Belt continuing to be hit hardest.
“The bear market continues; home prices are back to their March 2004 levels,” said David M. Blitzer, chairman of S&P’s index committee. He added that both composite indexes and 14 of the 20 metropolitan areas are reporting new record declines. As of October, the 10-city index is down 25% from its mid-2006 peak and the 20-city is down 23%, Mr. Blitzer said.
The indexes showed prices in 10 major metropolitan areas fell 19% in October from a year earlier and 3.6% from September. The drop marks the 10-city index’s 13th straight monthly report of a record decline.
In 20 major metropolitan areas, home prices dropped 18% from the prior year, also a record, and 2.2% from September.
Once again, none of the regions was able to stave off a decline from September to October.
Overview:
S&P/Case-Shiller Home Price Indices Overview
Data:
First?
i dont get to follow the threads everyday but what do most think here? my feeling is worst is yet to come in NJ.
I spoke w/ a realtor from southern monmouth county this weekend he said they are ahead of last year for summer rentals. Sea Girt, Spring Lake and Manasquan area. I figure this area will slow as year goes on.
From the Wall Street Journal:
People Pulling Up to Pawnshops Today Are Driving Cadillacs and BMWs
Well-to-Do Turn to Last-Resort Lenders; Putting Up Diamonds, Dumpsters as Collateral
By GARY FIELDS
PHILADELPHIA — At Society Hill Loan, a pawnshop in a middle-class neighborhood here, a steady rain fell outside as a fashionably dressed young man parked his Cadillac Escalade outside. Looking around warily, he came in to speak with Nat Leonard, co-owner of the store.
The visitor was a 29-year-old engineer who was laid off earlier this year from one of the local chemical companies. Since then, he’s been cleaning planes at the airport for less than half the salary he was earning a year ago.
Now he needs a $2,500 loan on his watch — a Movado Fiero with a diamond bezel — to pay his mortgage note.
“I want to help,” said Mr. Leonard. But unlike Rolex and a few other brands, “there’s no market” for Movado in his pawn universe.
The young man, who didn’t wish to give his name, left the store disappointed. “I’m not sure what I’m going to do,” he said.
Typically, pawnshop customers have a household income of about $29,000, according to Dave Adelman, president of the 2,400-member National Pawnbrokers Association. But operators around the country say they are seeing a surge in new activity fueled in part by a different clientele: middle- and upper-middle-class customers facing ravaged stock portfolios, tightened bank credit and unexpected layoffs. In areas dogged by high unemployment and foreclosure rates, the pawn business is especially robust.
…
Lee Amberg, owner of AA Classic Windy City Jewelry & Loan in affluent Evanston, Ill., said he’s been seeing Cartier watches, two-carat diamonds, David Yurman jewelry and pieces from Tiffany’s. One client, he said, brought in a fur coat from Saks Fifth Avenue that retailed at $9,000. She told him she needed a loan to help buy private-school uniforms for her child.
Diamond Exchange USA is more of a hybrid store. In addition to selling its own pieces, it makes loans against customers’ goods and purchases used jewelry too. Located on a major thoroughfare in Bethesda, Md., it has a constant stream of Mercedes-Benzes, BMWs and other luxury cars pulling into the lot. Virtually all of the clientele are women. Many come to sell their gold or diamond jewelry.
Worst is yet to come? Perhaps. But as long as you have a job and cash…and want to live in NJ, life is good. Real Good.
From Bloomberg:
Atlantic City Bleeds as Would-Be Gamblers Pay Bills Instead
It’s 3:45 a.m. in Atlantic City, New Jersey, and Jimmy Panagiotou just walked away from the poker table after 5 1/2 hours, about $200 lighter.
The 43-year-old professional gambler, wearing a World Series of Poker baseball cap and leather jacket, is on a cigarette-and-coffee break outside Caesar’s casino, pondering his next move. Looking around, he takes his loss in stride as he notes the eerie quiet of the largest gambling district in the U.S. after Las Vegas. Only diehards remain.
“It’s not like it used to be,” Panagiotou said. “All of the casinos are struggling. People are not going to find money to gamble when they need to find it just to live.”
…
James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, said the casino industry is vital for the economy of southern New Jersey and for the tax revenue it generates.
“It’s possible Atlantic City is past its peak,” said Hughes, who predicted the situation may worsen next year. “It could never go back to its past glory. It’s a much tougher game now.”
…
Driving into the city, the roadside provides reminders of the financial maelstrom: Billboards boast of $10 table games all day at casinos where $20 to $25 minimums were once the norm. Three signs pitch a $2.5 billion Pinnacle Entertainment Inc. casino-hotel project, which the Las Vegas-based company put on hold earlier this year.
Another planned $5 billion Atlantic City resort was canceled in October by MGM Mirage, the Las Vegas-based casino company majority-owned by billionaire Kirk Kerkorian. MGM co- owns Atlantic City’s most profitable hotel casino last year, the Borgata. Casino winnings there dropped 2.9 percent last month to $57 million.
…
On a Wednesday night in early December, vacant storefronts and going-out-of-business signs stand out among souvenir stands, taffy stores and storefront massage outlets on the boardwalk. By 1:30 a.m., restaurants and bars are closed along Pacific Avenue, the main strip behind Atlantic City’s beachfront casinos. Vagrants and streetwalkers offer the only signs of life.
i dont get to follow the threads everyday but what do most think here? my feeling is worst is yet to come in NJ.
I agree with Essex, while the worst may still be ahead of us, that doesn’t mean there aren’t opportunities.
I spoke w/ a realtor from southern monmouth county this weekend he said they are ahead of last year for summer rentals. Sea Girt, Spring Lake and Manasquan area. I figure this area will slow as year goes on.
Remember, people that rent for the summer aren’t people that are buying.
Remember, people that rent for the summer aren’t people that are buying.
just looking at this as a measure of NJ economy
Tough to do since it is very possible that renting a shore home could be considered an “inferior good”. Can’t help but cite the traditional example: during recessions people drink more beer instead of expensive spirits rather than curtailing their consumption of alcohol. However, you can’t point to the rise in beer consumption as a sign of a growing economy. I suppose the same could be said of the performance of Hormel lately, I hear the sale of Spam is doing pretty well.
For a large family, renting a house at the Jersey shore might be considerably more cost effective than other options. Likewise, the cost to rent a house for a few weeks in the summer is considerably less than the cost to own it, even though you might spend the same amount of time there. IMHO, it is just as worthwhile to look at the folks taking the less expensive option as it is to look at the folks that opt to do nothing.
“i dont get to follow the threads everyday but what do most think here? my feeling is worst is yet to come in Nj?”
wait till tax time.
many will “come to jesus”
keep your eyes on pension data/news, if anything that will take NJ down like a tree stump of lighting, that would be it.
yes, but i there are opportunities.
start a small buisness that focuses on keeping the money “local”, with in the community or a ways not to get intermediated.
ex. why should I put my money in a bank for 2%, when they in turn loan it out to Grim & Kettle for 12%? or reinvestor for 22.99?
get the drift bloke? i believe that is a model that can sprout all sorts of healthy buisnesses, with a good “green” cause.
corporations are dinosaurs, and most will become extinct.
just my thoughts as I wake up.
SAS
Was waiting for John to post this one, didn’t want to steal his thunder.
From Bloomberg:
GMAC Gets $6 Billion From Treasury to Revive Lending (Update3)
The U.S. Treasury committed $6 billion to support GMAC LLC, the financing arm of General Motors Corp., widening the government’s effort to keep the largest U.S. automaker out of bankruptcy.
The Treasury will purchase a $5 billion stake in GMAC and lend $1 billion to GM so the automaker can contribute to the lender’s reorganization as a bank holding company, according to a statement issued yesterday. The loan is in addition to $13.4 billion the Treasury agreed earlier this month to lend to GM and Chrysler LLC.
The fresh capital will enable GMAC to expand lending to car buyers and help save GM. The automaker’s U.S. sales plunged 22 percent this year through November after GMAC ran short on cash and limited loans to people with only the best credit. The Treasury stepped in after Congress failed to pass an auto- industry bailout earlier this month.
“The relationship with GM is probably a key reason it’s being bailed out,” said Thomas Atteberry, who helps manage $3.5 billion in fixed-income assets at First Pacific Advisors in Los Angeles. “Philosophically, I’m not very happy about the fact that the government has to save an auto-finance company because management ran it into the ground.”
“ex. why should I put my money in a bank for 2%, when they in turn loan it out to Grim & Kettle for 12%? or reinvestor for 22.99?”
my money gets funneled to maga bank in NY or London, they in turn loan in back to my neighbor.
intermediation comes from NY, London, and DC.
SAS
From the WSJ:
U.S. Deepens Involvement With GMAC Move
The U.S. government Monday deepened its involvement in the U.S. automotive industry by committing $6 billion to stabilize GMAC LLC, a financing company vital to the future of struggling car maker General Motors Corp.
In a sign that the government’s role in the industry could become open ended, Treasury said late Monday it had set up a separate program within the Troubled Asset Relief Program, a fund originally designed to help banks, to make investments directed at the auto industry. A Treasury official said the new program didn’t have a specific dollar limit.
In Monday’s move, the Treasury said it purchased $5 billion in senior preferred equity in GMAC and offered a new $1 billion loan to General Motors so that the automaker could participate in a rights offering at GMAC. That loan comes in addition to the recent $17.4 billion emergency plan to rescue General Motors and Chrysler LLC.
“Car Dealership Drumming Up Business With $1 Deal”
Buy one – get one for a buck. In Allentown. Funny how it made it into the news the day after the offer expired.
http://cbs3.com/local/Rothtock.One.Dollar.2.896651.html
not sure if my posts are maken sense.
sorry blokes.
I haven’t had my morning coffee yet, and woke up to a pissed off wife.
SAS
GOD BLESS GM, GMAC, UAW and President Bush for bailing out GMAC!!! Saving GMAC was a big deal for the corporate bond market, the car industry and all the banks below, not to mention all the retirees who got duped into buying GMAC smart notes. Free Market Capitalism RULES!
Auto Rescue: Bank Bailout in Disguise?
Forget Rick Wagoner and the UAW. There’s a potentially bigger winner in any bailout of Detroit: Wall Street.
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The list of banks involved in loan deals with General Motors (GM: 3.60, -0.06, -1.63%) and Ford Motor (F: 2.22, -0.07, -3.05%) is a who’s who of the finance industry. Ford’s debt includes an $18.5 billion credit agreement with J.P. Morgan Chase (JPM: 29.78, -0.02, -0.06%), Citibank (C: 6.57, -0.16, -2.37%), Goldman Sachs (GS: 76.56, +0.59, +0.77%), Deutsche Bank (DB: 38.15, +1.93, +5.32%), HSBC (HBC: 46.60, +0.30, +0.64%), Morgan Stanley (MS: 14.90, +0.25, +1.70%), Lehman Brothers and others. GM has a $4.5 billion credit agreement with a group of banks including Citi and J.P. Morgan.
crossroads,
things will get much worse before they get much better. if the fundamentals of the us economy have changed, for example no more easy money, the busted bubble of the housing market, etc., then there will be many changes that will take place worldwide. it would appear that consumer spending habits have changed. with a low savings rate in the us to support additional spending business will look for new markets in countries where people actually have money saved. is this a permanent change in spending habits? probably, because in the service economy we created people lived on credit because of the loss of good paying jobs.
From CNBC:
Low Interest Rates Generating Low Buyer Interest
A week away from the housing market has given me a slightly new perspective, and not a better one. I was beginning to buy the argument that a drastically lower mortgage interest rate would be the jumpstart the market needs. The initial readings don’t seem to support that theory.
Two weeks ago, thanks to more promises from the federal government that it would buy more mortgage-backed securities, mortgage rates plunged to the point where the rate on the 30-year fixed looked like a teaser rate on a subprime circa 2006. It wasn’t quite the 4.5 percent that some housing gurus are calling for, but it was close enough.
One week later, no surprise, the weekly applications survey from the Mortgage Bankers Association showed a surge with volume up 48 percent from the week before and up 124.6 percent from the same week a year ago. Great news, right? Only if you’re into refis.
The refinance share of mortgage activity increased to 83 percent of total applications, from 77 percent the week before and 53 percent a year ago. So that means that the vast majority of people taking advantage of these low low rates are not actually buying a new home, just saving money on their current home. That’s helpful to those who might have been in danger of default, but it isn’t exactly a jumpstart to home buying.
So suffice it to say, it’s going to take more than low interest rates to get people buying enough homes to add more weight to any kind of recovery. I’m not sure what that more is, but I hope the incoming administration takes note of the initial results of low interest rates: still low interest among potential buyers.
Re: Cars
DH got a flyer from Toyota that they’re “desperate” for his Corolla (2007 model) and they want him to trade in. Maybe we’ll stop in there and ask about a refinance also.
“Free Market Capitalism RULES!”
maybe I missed something, how is intervention free markets?
SAS
“Pier 1 has $36.9M loss in quarter”
It’s enough to make you think no one is re-decorating a new home.
http://www.courierpostonline.com/article/20081230/BUSINESS01/812300327/1003/business
Full disclosure: I own two GMAC bonds that mature in 2009 and one Ford that matures in 2010. Yesterday I bought genworth bonds at 35 cents on a dollar on hopes GMAC would be done and they can move on to getting Genworth on being a bank. Also Christmas eve before close I bought Comerica bonds as they were paying 15% based on fact they made a lot of loans to GM car dealer.
This reminds me of that strategy earlier this year wait till 3pm, short the market and get out a 3:55, Ben and Hank have never met a bail out they didn’t like. Plus when bonds are trading at 35 cents on a dollar you only need them to approve 1 out of 3 bail outs to break even, these nuts are approving 99% of them. It is like playing rouletee and betting on black when 95% of the spots are black. Plan silly.
re 18,
Grim that is precisely the problem the Sunshine Boys face in trying to reinflate the housing bubble. Once people stop believing they will get rich buying real estate there’s no way to make them start believing it again after watching all the fallout on the evening news.
They’d be better off blowing a bubble some place else. Like GMAC bonds.
John,
I am sure these bailouts are all a one time thing…I slay myself:)
18- Grim you’d think someone who watches the market as closely as Olick wouldn’t need a week to come to this realization, stupid is as stupid does.
Bklyn Prev 307 – The web division already absorbed some pretty big cuts. I’m inclined to believe a magazine is the next to go, but they’ve handled this recession much differently than in the recent past. All bets are off.
Ford announces an automatic parallel parking feature on two new Lincolns.
Why do the U.S. Automakers constantly remind me of the Simpsons episode where Homer’s wealthy long-lost brother asks him to design an automobile for the typical “Homer”? Homer cobbles together a mish-mosh of poorly thought out features resulting in a monstrosity that ends up not only bankrupting his brother’s company, but wiping out his fortune as well.
Homer’s Dream Car:
http://girtby.net/images/homer-car.gif
fashionably dressed young man parked his Cadillac Escalade outside..was a 29-year-old engineer who was laid off earlier this year from one of the local chemical companies.
What is a 29 year old chemical engineer doing with a Cadillac Escalade and Movado Fiero watch with a diamond bezel? This guy probably pulls in (or used to) somewhere in the ballpark of $80k.
Retailers may close 73,000 stores in the first half of 2009, according to the International Council of Shopping Centers.
The ICSC predicts, using U.S. Bureau of Labor Statistics data, that 148,000 stores will shut down in 2008. That would be the largest number since 151,000 closings in 2001, during the last recession.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aGQ__icNMvzI&refer=worldwide
73,000?
Why do I think that we wouldn’t even notice if 73,000 stores were shuttered nationwide?
On my way to work I pass at least 5 electronics stores, 3 grocery stores, about a dozen clothing stores, a book store, about 10 delis and bagel places, 2 diners, at least 5 auto dealerships, 2 “dollar” stores, 2 video game stores, and something like 7 furniture and housewares stores.
If half of these places closed I don’t think I’d miss them.
“Ford announces an automatic parallel parking feature on two new Lincolns.”
LOL… great now there’s more time to watch movies while parking my gas guzzling Lincoln
Grim there’s no beer holder in Homers car, must be a misprint.
John,
We are truly happy for you and the success of your bond strategy. The real question though is how long can the bailouts continue? If this recession drags on for more than the first half of 2009, I fear that the public debt and lack of tax revenue will result in a downgrade of our debt. It appears Ben and Hanks strategy is to continue lending to failing businesses to tie them over till the turnaround. The problem is that there seems not to be any impetus for this turnaround. Yes these are loans that are supposed to be paid back, but so were the CDOs. There is no model to predict if the U.S. taxpayer dollars lent will ever be paid back. Additionally, there appears to be no end in site for the drop in the value of homes, especially with the upcoming tsunami of option arms resets.
These bailouts are a complete waste of our money and serve no purpose except to delay the inevitable. The money would be much better spent on retraining our population and for solidifying our unemployment reserves.
It’s funny how the talk here over the last year has morphed from, “when are NJ RE prices going to drop?” to “Will I have a job next month or year?”
And when the history books are written ten years from now, I’m fairly certain that the main lesson to be learned from all of this will be not to waste the remaining few incoming tax dollars constructing false floors hoping for a turn in the economic cycle.
What is needed is tax incentives for individuals and businesses. When will the morons we elect ever learn? Or are they well aware, but simply beholden to their corporate lobbyists?
What is a 29 year old chemical engineer doing with a Cadillac Escalade and Movado Fiero watch with a diamond bezel? This guy probably pulls in (or used to) somewhere in the ballpark of $80k.
———————————–
He was living beyond his means, just like everybody else caught up in this mess. What did they say about Michael Jackson (Jacko) at his trial?- “He is a millionaire living on a billionaire’s budget”, or something like that.
“Why do I think that we wouldn’t even notice if 73,000 stores were shuttered nationwide?”
So how many more unemployed will this be? Got to figure at least 20 people on average per store. That’s another 1.5 million looking for work. In my SRS research, I’ve recently read estimates ranging between 200K and 500K for 2009. Let’s face it, our countries GDP is made up of 70% consumer spending. Even if we all spent 10% less (which is very likely considering that we are all looking at wage cuts and freezes) this will likely bring about a depression.
renting 29-
80k a year, the guy probably HAD more credit than he knew what to do with… a year ago 80k doc and a good FICO could get you a 1.5 mil house, the car and watch went on the CC’s… cant pay, no biggie just walk away
Grim: ref 31. You’re right. The article goes on to say:
“Probably 50,000 stores could close without any effect on consumer choice, Gregory Segall, a managing partner at buyout firm Versa Capital Management Inc., said this month during a panel discussion held at Bloomberg LP’s New York offices.”
Even if we all spent 10% less (which is very likely considering that we are all looking at wage cuts and freezes) this will likely bring about a depression.
Stu,
Look at it this way, if we all decided to save just 5% more of our discretionary spending, we would be looking at a major recession.
Oh bother.
“73,000?
Why do I think that we wouldn’t even notice if 73,000 stores were shuttered nationwide?”
i think someone brought up a good point last night when i posted that article.
what is the yearly avg of store closings?
this way we can know if this number is significant or not… which would make Grim’s point a strong one.
any got that stat?
SAS
speaking of GMAC & black budgets:
“regulation arbitrage”
SAS
SAS,
I’m not sure what the average number of store closings are, but almost all expansion plans have been halted. So not only are we losing current locations, but we must also consider the typical number of new stores that are added each year.
I’ll see what I can dig up on store closings.
16….GM hasn’t been saved…not with the burn rate they are experiencing…they’ll be toast this time next year. Guaranteed.
“Retailers may close 73,000 stores in the first half of 2009”
i hope all 73k are on route 17.
just once i’d like to drive that street without high blood pressure.
SAS
GMAC cutting FICO requirements on new car loans from 700 to 621.
My question is, what rate will they extend to these new subprime customers when they are paying 8% a year to Uncle Sam? Any less will simply drain those funds and leave GMAC awaiting receivership again.
Americans have been conditioned to expect 0% financing, will they bite at rates of even 5%?
ex. why should I put my money in a bank for 2%, when they in turn loan it out to Grim & Kettle for 12%? or reinvestor for 22.99?
Guess what?? You gotta a funny definition of “respect”. I demand that you apologize to me.
Don’t make me ask this more than once.
The car market is trailing the housing market. All the Fed did was postpone the inevitable.
“General Motors’ ownership of GMAC has kept the finance arm lending to dealers and car buyers, even as credit from traditional banks has dried up. If GMAC goes under, other institutions aren’t likely to step in to replace the credit lost by GM’s dealers and customers.”
http://www.philly.com/philly/business/36869314.html
Nobody wants or needs a new car every three years…..as someone who has NEVER bought a new car….I see no advantage to paying a premium for a machine that depreciates by $10k the moment it is driven off the lot.
Southern Monmouth Rental Market….
I would be hesitant to use Sea Girt, Spring Lake and Manasquan Rentals as a barometer. These are the High Dollar towns in southern Monmouth county. The rentals on the books in December are probably the “regulars” who come down every summer. These reservations were most likely made on Check Out day as they left last August. Only time will tell how many are cancelled this spring.
Ask that Realtor for a better barometer of the area….how many sales this past October in the non-Shore towns in Southern Monmouth?
How many listings with over 180 days on market?
That’d be a number I’d be interested in.
Grim (28)
The best parts of the Homer dream car are the 64 oz. cup holder and the back seat bubble so you cannot hear the kids. If there was a Lincoln like that, I am a buyer.
How many GM dealerships will go under in 2009?
“A half-dozen trailers rolled up to Eckenhoff Cadillac Buick Pontiac GMC in Jenkintown bright and early and wiped the lot clean of $8.4 million in inventory – Hummers, Cadillacs and all.
GMAC, the beleaguered financing arm of General Motors Corp., had called the loan that had enabled Scott Eckenhoff to stock new and used vehicles. Big trailers carted away the collateral from a Big Three retailer that had been hanging on by a thread.
http://www.philly.com/philly/news/local/36793364.html
Cheapo. Why would anyone drive a clunker when they can be driving something shiny and new?
I get a new car every three years because they get costly once they get old. Besides, I like to have the latest gadgets. There’s nothing wrong with that. Attitudes like yours is what is ruining the auto industry.
Essex says:
December 30, 2008 at 8:42 am
Nobody wants or needs a new car every three years…..as someone who has NEVER bought a new car….I see no advantage to paying a premium for a machine that depreciates by $10k the moment it is driven off the lot.
I would agree with Fiddy.
I would use LBI as a barometer. Bigger mix of financial demographic rent there.
Stu, Citadel wrote huge CDS along with a few shaky IBs on GM/F/GMAC bonds. Chase and a host of other major bank bought big high yield bond positons in GM/F/GMAC and hedged them via CDS to be “risk free” and moved them off balance sheet. Citadel and the few remaining IBs now commerical banks can’t afford to pay out on the CDS right now so if GMAC/GM went under, they would go bankrupt, since the off balance sheet GM bonds at the major banks are now worthless and their insurance via CDS is worthless they need to bring it on balance sheet which would bankrupt a few major banks. On top of that GM, FORD GMAC sold bonds in 1K increments with no commission directly to ma and pa investors and retirees all through the 1990s up to the begining of 2008 and these people would be whipped out. On top of that in hundreds of small farming towns ghe GM or Ford dealership is the best paying job in town, pays the most taxes and supports the charities and little leagues. Finally there would be near riots in Detroit when hundred of thousands of middle class family with HS degrees are thrown onto welfare all at once. The fall of GM shows that there is some truth to the fact what is good for GM is good for the economy. If the economy was roaring it could absorb the impact. By giving GM time, even if it fails, it allows CDS to expire, GM/F bonds to mature and for ma and pa investors to keep getting their interest payments while letting most of their bonds mature. This is the classic greater good.
I was listening to Bloomberg on the news yesterday. He was going on about tax revenue for the city and let slip that we will see a massive shuttering of stores come the end of the week. I assume that a lot of places will close Dec 31 and not reopen.
51….cause a ‘clunker’ that I buy is a one year old car with less than 10k miles and a better than new warranty. List on the car is $48 and I buy for $30ish.
51…P.S. you are dumber than dogshit. You know that right?
According to census numbers, from 2004 to 2006, there was an average increase in business establishments of 100,000 per year. Numbers ranged from 7.4 million to 7.6 million. Keep in mind, these are all business establishments and not just retail. A hit of 100,000 in retail alone appears to be pretty significant in my estimation. A hit of 200K to 500K seems very significant.
BTW GM dealerships failing is a GREAT GREAT THING. There is too many of them and the dealers own the franchise. GM to cut costs would have to buy them out to close them. GMAC puts the squeeze on them by calling loans and taking inventory will drive them out of business. Bad for dealer and town great for GM. On of the reasons toyota is more profitable is they have less dealers, with less dealers less compition and with less compitition you can have higher prices.
reinvestor101,
I was just using familiar names as examples. nothing behind it bloke, no harm…no foul..
“Don’t make me ask this more than once”
now your learning :)
SAS
On of the reasons toyota is more profitable is they have less dealers, with less dealers less compition and with less compitition you can have higher prices.
Not sure I agree. Fewer dealers means greater economies of scale for the remaining dealers, greater scale means less cost per unit sold, or more profit per unit sold at the same prices. Doesn’t necessarily mean higher prices.
I do agree that there is massive overcapacity in the auto retail sector. I can’t fathom why we’ve got so many auto dealerships. How often does someone buy a car that they need a car dealer within 5 minutes of their home?
stu – when you said you shopped around to 10 diff mortgage companies looking for the house loan, how many actual applications did you put in?
i figure i could swallow two and just pick the best rate when the time comes … but i thought you said you went to 10 places.
did you mean 10 places ran your credit and you put in 10 applications?
59….It was a nice burn SAS…why the backtrack? Is the ‘internet tough’ wearing you down?
Best I could find for retail establishments is:
2005: 1,123,207
2006: 1,120,319
So a drop of 3,000 may be typical. A drop of 100,000 would be crazy!
grim,
i know you don’t have a crystal ball, but i’ve been reading this blog for months now- and getting your opinion would be great!
we live in a mother/daughter with my parents now. We are fortunate enough to not pay rent, and have plenty of space for our family of four. We make about $120K btwn the both of us…and we have saved the same amount in cash at this time. We are looking to purchase a home in Westfield/Mountainside to raise our children in the neighborhood/school system. Our oldest is 3 1/2 years old. We realize in some ways it would make sense to never leave…but owning a home is never a bad thing. So, needless to say, we aren’t in a rush. I guess my question is–how long should we wait?? Interest rates are great, we are first time buyers with great credit scores…We’ve read about the next foreclosure wave which would more likely affect areas like Westfield/Mountainside… We don’t want to miss the boat, but we also don’t want to buy and see housing prices plummet. We have bid on about 4 homes (we low ball 20%, then go to 15% if the house is worth it to us)…so far we’ve only missed any house by 15-20K. Any words of advice?
“Why would anyone drive a clunker when they can be driving something shiny and new?”
I have to agree with reinvestor101 on this one.
me, i know i lose money buying a new car, as it goes down in value as soon as I drive it off the lot…but i don’t care.
something about braken in a brand new Porsche Boxster is a blast!
SAS
but, i had to give that up, too many tkts & wife would yell, local fuzz would wait for me down the road.
oh well.
SAS
More main stream media bashing of Paulson and Bernake.
“What we have is not a crisis of liquidity but rather a crisis of confidence.”
http://www.time.com/time/business/article/0,8599,1868969,00.html
Grim, you are a funny guy, you mean the japanese pass on their lower prices cause they are nice? I tried to buy a toyota new and the few dealerships that existed near me had an ologopoly and a wink and a nod they stayed around sticker. GM had 5 times the dealerships near me and I played them all versus each other and went to the one near me, last and had him at least match the lowest offer. On paper the Toyota SUV was around 10k more, but in final price the price difference widened to 18k. To someone putting down 10k on a car, buying a gm SUV for 28 verus a similar size Toyota SUV for 46 the amount of the loan goes from 18K to 36K add in the fact that back them toyota made you pay 6% interest versus zero% GM financing the divide gets even wider. Toyota had stupid fat profit margins from 1992 – 2007, but that is ending quickly.
From MarketWatch:
U.S. Oct. Case-Shiller home prices down 2.2% vs. September
U.S. Oct. Case-Shiller home prices down 18% in past year
CS for New York -7% YoY, reading this blog you would think it’s down 70%.
Where’s the recession?
26/NJGator-
Hard to say. Probably like the article aluded to, some mix of profitability, future outlook, glamour factor.
BTW, are you in 4TS or 750 3rd? Or on Sixth? We should grab lunch at 4TS or 750 sometime.
Yikes,
I created a 100 page PDF that had all of the information necessary for the mortgage lenders to verify that I was credit worthy. It essentially contained all of my asset statements, monthly bills, etc. I even included a copy of my credit report. I called all 10 and asked for email addresses where I could send the PDF. So my answer is, I did not fill out any applications. I simply asked for their lowest rates via phone based on my excellent credit. I was lucky that E-Loan offered me a nice low one as I saved myself a lot of time by telling the other lenders what they would need to beat. Only one other bit, but they were not terribly credit worthy so I just ended up going with E-Loan. No complaints whatsoever about the process. It pays to collect all of the information they will need ahead of time to make it seemless. Like I said a week ago. Once you lock, don’t expect to hear from them again until the day of closing. That takes getting used to, but assume no dialogue means you crossed your T’s and dotted your I’s ahead of time.
Home prices plummeted a record 18% in October, according to a closely watched index tracking 20 metro areas. More soon.
S&P NY Metro Area Home Price Index down 12% from peak.
CS numbers-
We’ve got to keep an eye on the New York numbers separate from the entire US. Especially in the coming months.
While the big decreases in Cali, Las Vegas and FLA make for interesting reading…..it’s the NY Metro that impacts us directly.
Stu, there is an old saying in banking, if you need a loan you ain’t that credit worthy. Actually, the best rates are for 100% collateralized loans. Pretty simple, if you have lets say 300K in bonds or stocks you pledge that to the bank on collateral on the loan. The bank then has the bonds/stocks as collateral first and then the lien on the house second. Bank waives nearly all mortgage fees and gives you a crazy great rate. Works great.
“It was a nice burn SAS…why the backtrack? Is the ‘internet tough’ wearing you down?”
as odd as it may sound, i like reinvestor101’s posts. (for the most part, he has his moments, but don’t we all?)
SAS
CS for New York -7% YoY, reading this blog you would think it’s down 70%.
Where’s the recession?
Frank,
A buyer looking to buy a $500k house in North Jersey just saved $35,000 by reading this blog. 35 Grand! That is better than Geico.
Frank, I’ve got clients that call me on a regular basis to tell me that I’ve saved them hundreds of thousands of dollars.
Call it doom and gloom if you like, but my clients are ecstatic about the money I’ve saved them.
grim (18)-
The reaction to lower mortgage rates in my area has been a big, gaping yawn.
It’s about to go from gray to black.
Grim Says: “For a large family, renting a house at the Jersey shore might be considerably more cost effective than other options.”
Crossroads, i think grim is onto the point there. Monmouth Beach rental activity is not a good indicator of real estate. Families who usually go away to hawaii or california rented a house in monmouth for half the price instead… coining the term “stay-cation”. Using that logic, an increase in monouth beach rentals is actually a negative sign for the economy.
I believe Clot touched on this point about the 90’s bailout and the RTC.
“Fortunes will be made here, no doubt about it,”
http://www.nytimes.com/2008/12/29/us/29bank.html?_r=2&hp=&adxnnl=1&adxnnlx=1230646224-IPaXjwS+PFk7pvheUqZtMQ
I have also written up a few things about private equity and sovereign wealth funds buying up America on the cheap.
#78,
7% is commission and fees on a transaction, you could have save this by selling/buying a home without an agent.
Frank,
don’t get bubble economy & real economy confused. seperate the two, i think you may be combining the two.
you read all posts during the xas time?
also, think of it this way too:
hey, I bought some stocks up on margin, it went up 7%, I’m a god damn genius.
but if it goes down 7%, baby…I just lost it all and have to call those guys in Lodi.
SAS
71 Bklyn – I am on the westside. Get my email from Grim and we can do lunch.
Grim,
your a RE agent?
man, I must be all that recreational drug use from the late 60s…
i thought you were some IT geek?
SAS
SAS, #85
He’s both.
He’s multi-tasking. :)
thanks, Stu. Basically, we’re down to 2-3 places, but one definitely seems more eager and ready for action (the one mentioned by the realtor, Wells Fargo).
They’re hitting me over the head with, ‘well, we will definitely be there at closing, if you’re talking to small shops, how do you know they will be?’ and I feel good talking to Wells, but as of yesterday, they can’t do below 5.0, and i have another place saying 4.85.
That’s only like a $19 difference per month, so not huge … and peace of mind is a good thing.
did you have any qualms about going with a small shop?
sean (81)-
Plenty of profit potential in tilling the fields of human misery.
John,
Had enough assets to buy the home outright if you included my retirement dollars. The rate we received 5.5% on a jumbo (when bankrate was listing it at 6%) reflected it.
As to your Toyota vs. American SUV comparison, we had our heart set on a Honda Pilot in 2005. Went into a Honda dealer and they would not drop the price a penny from sticker. They pretty much said pay it or leave, so we left. Went to Nissan on a whim when the new 260 horses transition was taking place in hopes of getting one of their leftover 190 hp 2004 Xterras. At first they tried to play us for suckers and wanted the same amount as we would have had to pay for the Pilot. I point blank said to the moron sales guy that I would buy the Xterra at a fair price that would give the dealership no more than $500 commission. I had the ‘real’ prices in hand from the internet. After an hour of the typical dealer BS, we walked away with the car paying about a $300 commission and our trade had tires that would not pass inspection saving us another $300 minimum. I also negotiated a 4 year extension on the warranty down to $750. We had 0.5% financing or $1,000 cash back. I did the math and the market was still hot, so I took the loan and made some decent money off of the opportunity cost of the lack of downpayment. Hard not to beat .5% in any market.
So the moral of the story is that we ended up landing a very capable truck, with nothing out of pocket and .5% financing on a steal of a deal. Would never buy American. I drove enough of them prior to my Civic to know that they don’t age well. When a girl friends Tempo lit on fire when I turned the key, I was sworn to the rice burner. My Civic turns 14 this year and I still haven’t had a single repair outside of routine maintenance. I change the oil every 5K and do the major maintenance only on the 30s. Still on the original clutch as well.
wow!
its 9:30 and I am still sitting in my pajamas with no coffee? what the heck?
maybe like that show on A&E, i need an “intervention”…I’m addicted to NJ RE bubble blog.
:)
SAS
“pajamas”
what can I say.. grandkids got me pajamas that say #1 grandpa.
but don’t worry, my wallet and resume says: bad mother fu*ker.
have a good day,
SAS
Yikes,
“did you have any qualms about going with a small shop?”
The small shops simply originate the loans. By the time your first payment is due, your loan will have been sold to a big house. Ours went to Wells Fargo actually and they have been very good to deal with. Sad thing is, when I was shopping for the loan, Wells came in .5% higher than E-loan and I really wanted to work with them to get my $1500 of Upromise money back from them. They wouldn’t budge. Back then, the big guys left almost all of the originating to the little guys. As long as you do your homework, I wouldn’t worry too much about the little guys not being there. You can get a new loan done the day of the closing if you are well prepared, and it sounds like you are. Don’t sweat the process and just go with the flow. The people involved will guide you. They want their paycheck with minimal work ;)
crossroads says:
December 30, 2008 at 6:55 am
Remember, people that rent for the summer aren’t people that are buying.
just looking at this as a measure of NJ economy
cross: I work with the Monmouth Ocean Development Corp (MODC). Accordingly to Ben who heads up the place, the Shore is a cash cow for NJ and really it is the weather more than the economy that dictates business success. While it is a primary destination for many, and those people could cut back, it also represents a secondary and tertiary destination for so many others. As a result, on a certain level, you can consider it the McDonald’s / Wal-Mart of vacation resort destinations. Even in a downturn, it is going to flourish as those NC, FLA, Mexico, Carribbean tourist trade down and stay at home.
I agree with grim about the hosue hunter though.
Hey does anyone know anything about CNA Financial Corp? They have investment grade bonds at 14% and are somehow connected to Loews but I can’t seem to find any recent detailed info or news?
John, (you would appreciate this)
My little 95 Civic hatchback has a true ghettoblasting system. I have 2 15-inch subwoofers in the hatch abd run 300 watts per channel to it. Also added a nice pair of Boston Acoustic 3-ways in the rear side panels and front doors. All of it is hidden so it doesn’t get jacked, but if you lower the rear seats, it’s a beautiful sight of fat yellow wires, giants amps and electric crossover. 10 years later, everything still works except I can’t seem to get the CD out of the head. Luckily the one stuck in it is a good blues disc from a Chicago college professor.
SAS you are too much dude. Too Much.
Case calls a housing bottom.
Maybe someone can help me figure out what’s going on . . .
I’ve been “monitoring” properties ($175k-$250k)in the central Jersey area since March 2008 through different realtor websites. I just received an e-mail from Realtor.com indicating that three townhouses in Lakewood and a two-bedroom ranch in Freehold increased in price. I don’t know how much of an increase because I just “save” the properties and wait for updates.
Does this make sense to anyone? Is there some “year-end” game that realtors play?
#96 frank: Not for the NYC Metro area, guranteed. It is really just getting under way here, as the bubble popped here last.
And of course the Wall St layoffs which just started in earnest in the Fall, and are continuing every day. No bottom in the housing market here frank, last to fall hardest to fall.
Frank,
Case called a bottom “sometime in 2009”.
YOUR BAILOUT MONEY AT WORK:
http://www.occ.gov/ftp/release/2008-152a.pdf
7% is commission and fees on a transaction, you could have save this by selling/buying a home without an agent.
That is rough news for those who purchased in the Summer of 2006 and are looking to sell. Factoring in transaction costs and they are looking at a 20% loss. $100,000 loss on a $500,000 property in Haughyville, NJ? Ouch.
Frank,
Here’s your market bottom
http://la.curbed.com/uploads/2008-03-market_bottom.jpg
I guess I pitch in:
Stu says:
December 30, 2008 at 8:28 am
“Why do I think that we wouldn’t even notice if 73,000 stores were shuttered nationwide?”
So how many more unemployed will this be? Got to figure at least 20 people on average per store. That’s another 1.5 million looking for work.
Thats the main effect – and wwhat are thouse people qualification – Floor cleaners, self restokers, cash register clerks and 1-2 managers?? Few security guards is it is a bigger store..
Where are they going to work..
I do agree that there is massive overcapacity in the auto retail sector. I can’t fathom why we’ve got so many auto dealerships. How often does someone buy a car that they need a car dealer within 5 minutes of their home
Once again – where all thouse people going to work – their skill set is excactly what??? Most Dealership salesman I meet were not even that good salesmans…. And also dealerships ahve accountant, managers, loan officers and such…..
Lastly – lets say 73,000 stores do close in 2009… It would mean 1460/state commercial rental spaces available in addition to all existing reltals – just drive down Centennial Ave in Edison-South Plainfield – P-way… It is amazing – all thouse empty places for rent – now they have being for rent for over 2 years, just sitting empty…….
2009-2010 are going to be very interesting years….
Not to mention the fact that the “Case” of “Case Shiller” has always been the bullish of the pair.
Stu, your civic needs maint? My sable god bless her soul when it went to heaven at the hands of a japanese SUV made it to 10 years of age without a problem. Once a year I change the oil with a coupon at the place that gave a free car wash. Only washed it once a year. Never tuned it or ever took it for maint. I follow the joe pesci approach, once I buy it I do absolutely nothing. Actually I don’t have good luck with foreign cars in my old mercedes, I did get cursed out at rally motors once over maint. The 1975 benz I bought in 1993 came in for its 1K check up and when my subframe went in 1999 and I brought it in for a free warranty repair as their was a subframe recall, the guy yell F you, you SOB, bringing a 24 year old car with 130K on it that never paid a nickle on servicing. Deadbeat second owners are not treated nicely at Mercedes. He did fix it after I had a huge dispute with Mercedes parent company, I did get a giggle when rally motors told me after the repair with a few mechanics around me that I better never bring this thing in here again cause you won’t get to call home office as he will Fing kill me in the parking lot and throw my pos benz in the junkyard. Not nice at all. Though I did egg him on after I got benz to force the free subframe repair I asked to use the free shuttle to the train and a cup of free mercedes owner coffee, after he was done screaming at me, I then suggested maybe I could walk to the train from Rally everyday so I could park my old mercedes out front with a big sign on top that says Rally Motors sucks. I have owner a toyota, bmw, mercedes, fiat, subaru, Nissan, AMC, Chrysler, Ford and GM cars. I have no loyalty. But I will never buy a new Mercedes or Japanese car ever again. The worst foreign car I had was a 74 capri, engine and tranny was german body was american, had to use metric wrenches and normal wrenches on car and they were not marked. I stripped more nuts than a squirl on that car. My fiat, forgetabout it the thing went up in flames. My nissan, a loose pickupdoor on I95 sheered the front axle in half. My camry, just needed to many nits and nats for my liking.
“crossroads,
things will get much worse before they get much better. if the fundamentals of the us economy have changed, for example no more easy money, the busted bubble of the housing market, etc., then there will be many changes that will take place worldwide. it would appear that consumer spending habits have changed. ”
When the Titantic hit the iceburg, the bow went down first, those in the stern were actually elevated for a bit. Think of California etc. as the bow. We are all heading to the same place, just some before the others. Any increases are an illusion.
I have been searching for a fix for my POS 2004 Ford, I came across this entry in an Edmunds.com forum. If this works it may save me the $3K bill for a new transmission at 60K miles. This may be the last Big 3 car I ever buy. The tone of her mail makes me feel lucky for what I have in life.
” Ok guys… I know that I have said this before… BUT the fix seemed to work. This time I am quite confident that it is indeed the problem, for the simple reason that my husband (God love his heart) was out working on it in below zero temperatures and could only stay outside for 15 minute intervals, but because it was so cold, we could see the ice trail leading down in to the PCM. There was indeed corrosion on the bottom row of little pegs. The van is running fine now. He said in his personal opinion, it was poorly designed to go back, because the instructions read to remove these 2 little plugs and discard them like they should have never been put there to begin with. I will check back and keep everyone updated. But hopefully that was it. And it only cost a few bucks at the auto store to fix! If it does work, I told my husband, he may have found the answer to his unemployment issue as there are many people that obviously need repairs! lol. Sorry… maybe poor taste, but you gotta laugh to keep from crying! This has been the WORST holiday ever.. w/ no transportation, no phone, behind on bills, my oven broke, and yesterday the fridge died and the pipes froze! I know someone always has it worse off, so let’s all try to keep each other spirits up and keep the motivation to not give up on pursuing these jerks at Ford! “
I love that car!!!!!!!! I give you kudos for a pimped out civic.
Stu says:
December 30, 2008 at 9:38 am
John, (you would appreciate this)
My little 95 Civic hatchback has a true ghettoblasting system. I have 2 15-inch subwoofers in the hatch abd run 300 watts per channel to it. Also added a nice pair of Boston Acoustic 3-ways in the rear side panels and front doors. All of it is hidden so it doesn’t get jacked, but if you lower the rear seats, it’s a beautiful sight of fat yellow wires, giants amps and electric crossover. 10 years later, everything still works except I can’t seem to get the CD out of the head. Luckily the one stuck in it is a good blues disc from a Chicago college professor.
Stu, you mentioned Upromise today, and I’m pretty sure you’ve mentioned them before. I assumed you did all your homework, so rather than me investigating everything on my own, I’ll just ask you. Is there any particular reason why one wouldn’t join Upromise?
From MarketWatch:
U.S. December consumer confidence at record low
U.S. December consumer confidence 38 vs 44.7 in November
U.S. December consumer confidence below 45.8 expected
Al, ref 103: Agree. Not everyone who has lost a job will get picked up in the gov’t mega infrastructure program. From investment banker to master welder is a pretty far leap.
“Below is an impassioned speech delivered Friday to shareholders Winthrop H. Smith, a long-time Merrill employee and son of one of the founders, as they gave the go-ahead to merge with Bank of America”
http://news.hereisthecity.com/news/business_news/8527.cntns
Scared bears bear watching.
“Russia devalued the rouble again Monday and Kremlin leaders urged government unity to deal with the biggest economic challenge in a decade.
Russia’s central bank began a gradual depreciation of the rouble in November in response to slumping oil prices, a worsening economy and investors’ flight from emerging markets.”
None whatsover Dink, although it’s not like you are gonna pay for anyone’s college through it. We’ve been using it for about 5 years and have about $1,000 collected from it. It’s free money and takes little time to set it up. Then the coin just comes on in. If you are willing to get relatives to sign up and they get their friends, it’s the greatest scheme ever. Unfortunately, with 12 neices and nephews, lil’ Gator will have to rely on his parents contributions only.
upromise underdelivers, you have to keep adding cards you use and wait till you have at least 50 bucks before you have to go in and manually transfer it to your already set up 529 plan. The 529 plan in itself is a scam. kills your chance for financial aid. better just have your wife get a job in a college and get a free ride.
John is partially right. You do have to add your credit cards as you get new ones, but the transfers take place automatically. The 529 is not as bad as John makes it out to be. Now is probably a good time to open open one if your kid(s) are still toddlers or below. I sincerely hope the market recovers by the time they are entering college. Of course, the lil gator is gonna be kicking field goals for his scholarship. I got it all worked out!
And if I get laid off, I’m going to write a book about all of my cheapo money saving schemes while I look for a new job. And if any of the copies end up on half.com, I’m gonna buy them myself!
Stu,
Start your own blog. njcheaporeport.com
I’d be there daily.
Stu,
Any idea if Upromise is still offering a deal with Wells Fargo loans? I am going through a refi with Wells right now and I had them originally as well. I did not use the local Jersey Wells guys but the Manhattan office and was able to get 4 7/8th on an 30 year fixed “Agency Jumbo” loan. As for Upromise, it is hard to turn down free money (well almost free). It does work great as we use the Upromise Mastercard for all our purchases. Takes 10 minutes to setup and paired with a 529 it makes sense to me at least.
you should only put in a 529 plan if you have already did your 16.5K 401k match. You kids can take a loan for college but you can’t take a loan for retirement.
My brother in law refinanced his jumbo last week at 3.5%.
“My brother in law refinanced his jumbo last week at 3.5%.”
Is that even possible?
John,
everything you say above goes without having to say it. Of course the 401K is maxed out.
As for 3.5% jumbo refis, I honestly have not heard of a single rate that low. Your brother in law must be banging the mortgage broker.
John 120 – 401k matches are so 2007.
So true Gator!
As for 3.5% jumbo refis, I honestly have not heard of a single rate that low. Your brother in law must be banging the mortgage broker.
Probably either ARM or IO
Now may be a good time to buy on a case by case.
Going back to June 2001, about the start of the take off in RE prices through June 2005 the CAGR of RE prices was 13.54% for the NY metro area. Through October 2008, factoring in declines, the CAGR through June 01 is 6.65% (excluding inflation). Now if one were to buy a reasonable short sale property at 16% below where the market is today, you would be buying a house that, through June of 2001 has only appreciated at a 4.16% CAGR (excluding inflation).
Also, compared to last year, a 5% rate vs. 6% rate on a $300K 30yr would save you about $67,000 in payments or a net present value in todays dollars of $38,960(if inflation was 4%).
If you consider your home like a bond where value moves inverse of yield and factor this into the price, the CAGR today would be less than 3%. From a valuation standpoing, todays market could be attractive in some instances.
From IHS Global Insight (no link):
● The downward trend in prices continued during October: the 10-City Composite Index dropped 19.1% year-on-year (a record decline), while the 20-City Composite was down 18.0% (also a record).
● Year-on-year, prices retreated in all 20 cities covered; adjusted for inflation, prices fell even more, since the CPI was rising 3.7% y/y in October.
● In seven cities, the drop was 20% y/y or more; 14 cities had double-digit declines; and in two cities (Charlotte and Dallas), the drop was less than 5%.
● Fourteen cities recorded record year-on-year declines.
● Phoenix (down 32.7%), Las Vegas (down 31.7%), San Francisco (down 31.0%), and Miami (down 29.0%) reported the steepest declines.
● Six MSA’s—Atlanta, Charlotte, Detroit, Minneapolis, Tampa, and Washington– posted their largest monthly declines ever.
● House prices are back to their March 2004 level.
Now if one were to buy a reasonable short sale property at 16% below where the market is today, you would be buying a house that, through June of 2001 has only appreciated at a 4.16% CAGR (excluding inflation).
Why would home appreciate at 4% excluding inflation???
It is a producing asset or liability??
Historically homes appreciated with inflation.
I simply do not buy all thouse arguments asbout US running out of land.. Not after living in the West.
Why are condos appreciating as much as SFH then??? They have 1/100 of land.
Chase’s online home value estimator. They say we are still worth over 100k more than our 2004 purchase price…so it MUST be true!
http://mortgage.chase.com/pages/other/home_value_estimator.jsp
Stu, great stuff as always.
i see rates ticked up a bit again today (john, what the heck is going on with your bond market?) which means wells is still behind in offering as good a rate as the other place.
Stu says:
December 30, 2008 at 10:43 am
“My brother in law refinanced his jumbo last week at 3.5%.”
Is that even possible?
Buy down points and stuff them into principle.
Upromise mortgage rebates…
Chase:
Close your loan with Chase and then you will receive .25% of your home loan amount as Upromise college savings.
Quicken:
Close your home loan with Quicken Loans and then you will receive your $250 Upromise college savings contribution approximately eight weeks after your home loan closes.
Only Chase and Quicken now. The realtors have some deals as well. You can look ’em up without being a Upromise member.
118/Stu-
Great article on Slate yesterday about frugal blogs/web sites. Good sources to start your book with…
http://www.slate.com/id/2207305/
Grim Says: “A buyer looking to buy a $500k house in North Jersey just saved $35,000 by reading this blog. 35 Grand!”
I’m in mercer county, central jersey, and can tell you as fact that prices are down well more than 12%, more like 25% from peak and coming down faster each month so Grim and the discussions here have helped save me much more than $35K.
RE 129
If you live in the NY Metro area and desire a reasonable commute and a yard. My numbers just look at NY Metro..
From the Wall Street Journal:
New Jersey Is the Perfect Bad Example
When Barack Obama makes his New Year’s resolutions, at the top of his list ought to be the following: “I will not allow America to become New Jersey.”
Think of it as our gift to the nation. Other states offer promising experiments in areas such as Medicaid, taxes, education and regulatory reform. In contrast, the People’s Republic of New Jersey offers America something truly unique: the perfect bad example.
Essex @ 8:42 am — before you die, buy yourself a new car.
GMAC takes that $5 billion with an 8-handle vig and lends it out to a bunch of subprimers at 0%.
Now *THAT* is a business model.
http://finance.yahoo.com/news/GM-offers-0-pct-financing-in-apf-13934445.html
RE 129
I don’t know what you mean?
A home is a producing asset for the owner because you build equity in it and recoup your investment, unlike rent.
mneer,
Lots of numbers for what appears to be a relatively simple and straightforward statement.
Yes, a discount of 16% below today’s prices would be a good deal.
Given that we’ve already seen 12% declines, that would push the total decline to something on the order of 28-30% below peak prices. 30% was the magic number needed to return peak price/income and price/rent levels back to long-term norms.
I definitely don’t mean to be rude (I’m not too familiar with blog etiquette, yet), but could someone respond to post #98?
Frank, perhaps we will see a bottom for the nation soon but its likely just taking longer for nj especially in hoboken and nyc. I guess only time will tell, and i respect your opinion that it wont get that bad but nobody can deny that wall st is taking a couple big steps backwards right now and that is one of regions’s biggest feeding tubes. Its side effects will most likely come to your street soon. Besides, even if hoboken was totally immune to any downturn, its not even a relevant comp for nj. Not many people are willing to live on top of each other listening to 22 year olds partying until 3am, circling the block for an hour to look for a parking spot, sending their children to abbott schools. My wife and I love hoboken and weehawken, we lived there for 5 years, but she would divorce me immediately if I told her we are moving our family there. I’m not comparing the two towns but it’s like saying “east orange prices haven’t really come down through all of this so the economy must be great there right?” If someone made such a rediculous statement, I would respond by saying “who cares what prices are doing in east orange. Crime has always been so horrendous there that prices do not matter at all. It’s not even an option for most people and their families.” When you say “where is the recession?” that is pretty funny, but in all seriousness i say “in 95% of NJ and the rest of the world and getting worse each day.” Just because the 5% sliver of NJ that you live in is experiencing a lag doesn’t really mean anything, the mass wave of nyc layoffs just started two months ago. Simply acknowledging the state of the economic environment doesn’t mean you are being a doom gloom downer like those who reserve the right to seek out unlikely worse case scenarios, on the other hand, ignoring all negatives in total denial of the facts is a severely flawed sense of reality.
POI2008,
You need to realize that asking prices, first and foremost, are marketing tools. Given the fact that sale prices in some areas are running at 90% of last ask, and in the 80% range when you are talking about original list price, you’ve got to take these with a grain of salt. Now, not to say that there aren’t asking prices close to market values at this point, there are, but they are few and far between.
I’ve seen asking prices raised for no other reason than to get the property on the hotsheet, only to have them lowered again a week later, which would trigger another hotsheet and auto-email appearance).
Was it Coldwell or Weichert that ran that silly home sale promotion this past year? A number of their listings had prices raised after the price cuts failed to draw a buyer. Figure that one out.
During the bubble days, price increases were used to create a sense of buyer urgency. Better buy quick or the seller might raise the price again!
Don’t waste your time wondering.
98–prices in Freehold and Lakewood are rising because they have a Christmas Tree Shops down there. Can’t wait until the new one opens in the Lehigh valley–should start buying now as values are sure to go up
Better to have been priced-out-in-2008 than trapped-in-in-2006.
Thanks much, Grim!
LOL ruggles
Grim, by delaying they bought a 500K house for $465 and are giving you kudos today, a year from now when it is worth $400 they will be throwing rotten tomatoes at you.
Grim Says: “A buyer looking to buy a $500k house in North Jersey just saved $35,000 by reading this blog. 35 Grand!”
#98
I think so. My friends out in Chicago just closed on a house in Sept and due to a last minute job change had to move out to San Fran immediately after the close (crap luck). The priced their house $75K (~4%) more than they paid for it in what I assume would be an attempt to try to come close to breaking even on the transaction. In what world would someone pay more for a brand new home (no work was done) than the recent fair market purchase price from only a few months before? They will take a couple hundred thousand dollar loss on this one, no doubt about it. The market has tanked a bunch since Sept (especially the $2 million dollar home market).
I just think realtors play games with pricing all the time in an attempt to find a “ill prepared” buyer. Not too many left out there these days. With so much inventory why would you ever waste your time with such nonsense? Lowball and move on to the next. Eventually you will find someone so desperate that they will bite.
#143 Veto
Mrs PGC would move back to Hamilton Park in a heartbeat. I can’t wait to see what happens when Jersey City finally re-evaluates the property taxes. That area will get crushed. The other The current tax rates are set at the time of construction, so unless you are newer construction, you will see a huge spike in your taxes. The last of the older generations will be forced to sell up.
This is why I don’t buy used cars – I might get one from a guy like this:
John says:
December 30, 2008 at 9:54 am
Stu, your civic needs maint? My sable god bless her soul when it went to heaven at the hands of a japanese SUV made it to 10 years of age without a problem. Once a year I change the oil with a coupon at the place that gave a free car wash. Only washed it once a year. Never tuned it or ever took it for maint. I follow the joe pesci approach, once I buy it I do absolutely nothing.
140 mneer1-
My experience over the past four years as a renter
I have saved on the order of $48K by renting vs. buying (considering interest, tas and association fees, but not insurance because renter’s vs. buyer’s is pretty much a wash), even before taking into account the slump in house prices.
I lived in Arlington, VA from 2004 until 2006 and paid $1750 per month rent for an apartment that would have sold for between $400K and $500K if it had been a condo. Possibly even more, because I was in a high-rise with a view up the mall to the Capitol Building. I got to watch the July 4 fireworks from my balcony.
There were plenty of condos in the area where I lived, so I didn’t just pull this comp out of the air. Add to that the monthly condo fee and interior maintenance, and my saving was probably close to $2K per month.
I moved to NJ in 2006. I rented a townhouse for $2350 where identical units have sold for as much as $500K. Property tax on a typical unit here is $6.6K per year, so my landlord nets about $1800 per month before interest, insurance, and monthly association fee.
Please explain to me how each of these properties would have been “producing” if I had decided to buy.
As a four-time homeowner I am not arguing against ownership in general, but I am definitely arguing against ownership in this market.
Grim, that is the trouble when you look behind the curtain. GMAC bonds maturing in 2009 last week were trading at 40 cents on the dollar, today they are close to 90 cents on the dollar. My bond trading strategy involves buying high yielding bonds trading at below 75 cents on the dollar that is in line to get bailed out. A good investor and trader don’t need no stinking financials. I am like Wayne Gretsky, his secret to sucess was simple, don’t pass the puck to where your teamate is standing pass it to where your teamate will be standing when the puck reaches him. Bonds are similar. Who cares what bonds are at today? The day you are selling or the day it matures is all you should care about.
SOV, NCC, CIT, GMAC were all buy at 50 cents hold your nose ride the way to maturity at par. They were not pretty to buy but will make you rich. Kinda like a middle class kid can either marry ugly and rich or pretty and poor. Pretty and poor feels good short term but face it all the old hags in the nursing home look the same, somehow a hot 28 year old girl looks the the same as an ugly 28 year old girl when they are 70. Might as well hold your nose and marry rich.
grim says:
December 30, 2008 at 11:44 am
GMAC takes that $5 billion with an 8-handle vig and lends it out to a bunch of subprimers at 0%.
Now *THAT* is a business model.
http://finance.yahoo.com/news/GM-offers-0-pct-financing-in-apf-13934445.html
SC-
Good call. Don’t guy a 10-year-old Sable from this guy. Or any Sable of any age from any guy, for that matter.
buy
RE 141
I wonder if that equilibrium will be reached sooner as competition increases for affordable rentals. I can’t seem to find a good database for rent of a primary residence, however, it did increase .4 in October and .3 in September.
Wondering what a good offer is for a two bedroom in a new condo building in Union City, the building is called the Altessa. I haven’t seen it yet, but when finished will have a roof top pool, running track, 5 yr tax abatement, etc. Broker quoted $ 379k for a 2 bedroom thats 1,284sf. Any suggested low balls?
AAF,
I would watch Union City. They offer those tax abatements but absent the abatements their property tax rates are through the roof. Something to consider when you have to resell down the road.
Priced out 2008–grim is of course right. There’s a house here in western NJ that was listed at 410, then it went fsbo after a month or two (agent must have been fired or gotten fed up with the sellers). They had it for 399 on their own for a month, then relisted for 415. now its still listed but down to 399. Unfortunately, they’re really something like 15-20% too high for today’s market so raising/lowering the price and any of these other silly games they might be playing won’t do much.
Depression odds for 2009 up to 30%.
http://www.intrade.com/jsp/intrade/common/c_cd.jsp?conDetailID=647817&z=1230617689492#
New in NJ
Per my post 127, I was pointing out that I have come across some reasonably valued homes based on today’s market that are comprable to 2001 valuations. In no way was this the case in 2006 or 2007.
Thank you HEHE, do you happen to know the tax rates on new condos in Union City?
I think you are mistaken. An owner-occupied home generates ZERO income in the absence of appreciation. Building equity results from paying back the bank with YOUR money and property appreciation if the market is in fact appreciating.
mneer1 says:
December 30, 2008 at 11:45 am
RE 129
I don’t know what you mean?
A home is a producing asset for the owner because you build equity in it and recoup your investment, unlike rent.
Ah the good ol’ “throwing away money” argument.
Hey, guess what, paying mortgage interest is “throwing away money” too.
Over the life of a $500k, 30 year fixed loan at 6%, the homeowner will “throw away” $579,200 in interest payments that do not build one penny of equity.
138…we ‘did’ buy my wife a Subaru Forrester in 1994….new car….honestly I cannot tell the difference between a clean used car and a new one.
http://cgi.ebay.com/ebaymotors/NO-RES-1997-MERCURY-SABLE-LS-ONE-OWNER-LOW-MILES-NICE_W0QQitemZ330297084407QQihZ014QQcategoryZ6343QQssPageNameZWDVWQQrdZ1QQcmdZViewItem
NJ BMW dealer selling mint sable trade in with low miles for $1,500. You can’t beat it with a stick for a first car for your kid.
PGC 151 – I miss my old place at 5th and Jersey too.
#158 AAJ
Union city has been throwing up a lot of these buildings. A few things to consider are.
A 5yr abatement is not that great for Hudson Co. You wonder how well connected the developer is.
A lot of these buildings are sold on the NYC views. Make sure you are on the right side of the building and high enough that the Hoboken/Wehawken mega condo doesn’t shut out your view. Whats to stop the same size building being built on the next street closer to the river.
What is the owner/renter ratio. Anything under 95% and your insurance rates get jacked up.
How many units have been sold and how many have closed. Do you want to be one of a handful of owners fighting a new owner who bought the place off the bank at 40c on the dollar and has decided to start renting the unsold units as section 8 housing.
Also what will your commute be. Does the unit come with parking?
Overall, I had looked at these new units a possible rental investment. Using the rough rule of the price divided by 15yrs, the monthly figure comes out to $2100. Factor in taxes and maint and no one will pay that for Union city when they can get better for less in Hoboken.
RE 164:
On a $500,000 mortgage, yes you would pay $579,00 in gross interest. However, after you take your the tax deduction at the 25% tax bracket which is $181,000 over 30 years and factor the time value of money at 3.5%, your closer to $250,000 in interest payments in today’s dollars.
Also, over 30 years, now that you’ve paid in $500,000 in principal, and have the option to sell your home in year 2038 for $1,426,644 (using 3.5%) I would argue, yes, I would be much better off than renting.
The devil visited a realtor’s office and made him an offer. “I can arrange some things for you, ” the devil said. “I’ll increase your income five-fold. Your partners will love you; your clients will respect you; you’ll have four months of vacation each year and live to be a hundred. All I require in return is that your wife’s soul, your children’s souls, and their children’s souls rot in hell for eternity.”
The realtor thought for a moment. “What’s the catch?” he asked.
Manhattan rents are falling and vacancies increasing on a year over year basis.
Sale prices will have to come down even more to compensate for the risk of buying in this market.
http://www.tregny.com/manhattan-apt-rental-report.jsp
The line for Abercrombie & Fitch is down the block, and 5th Ave is impossible to walk on. You call this a recession?
http://www.nypost.com/seven/12302008/news/regionalnews/fat_cat_palace_is_a_crah_pad_146510.htm
#158 AAF,
A smaller place, but with the deeded parking, it is much better value. Its at the back of Hoboken which is cheaper, and altough it is 2 blocks from the projects, it is two blocks in the right direction.
http://www.realtor.com/realestate/hoboken-nj-07030-1102552885/
PGC,,,, thanks,,,,they have not closed on ANY units as of yet. The building just started sales this week. They are giving us a “hard hat” tour on Saturday.
One parking space is included (I’m looking for 2 spaces so that would be a negotiation).
Should I wait a few months and see how sales of the units go? I really dont believe they’re going to sell out soon. The Thread building hasnt yet.
For the fancy European chocolate lovers (and re. commercial RE, as well): Mostly Chocolate at Short Hills Mall has its last day on 12/31. Everything was 50% off yesterday – probably will go further down today or tomorrow (as the business wasn’t exactly booming yesterday, and they had tons of stuff left).
Existing inventory in NJ is down 20% from the peak, it could be a hot selling season starting in January 2009.
#176
And sales volumes are down 50%.
#176 Frank
At the time of year when there should be very little inventory as as it is the slowest part of the selling year. There should be nothing around until Superbowl Sunday, which is generally the start of the Residential RE year.
High numbers of listings at this point of the year show that there are a lot of desperate sellers who cannot delist and come back next year.
[64] lennie,
get my email from grim, re: Brigadoon (Westfield)
[175] cobbler
I told my wife and my au pair about the store.
I doubt that there will be anything left at day’s end.
That condo is 354 sf smaller and has no pool or fitness center or running track.
So, is the location which is closer to the ghetto side in Hoboken that much better than Union City?
175 – How fortuitous that I have tomorrow off and need to go shopping for the last of our family holiday GTGs. Thanks.
“The line for Abercrombie & Fitch is down the block”…
Its amazing what lines you can attract with 80% discounts. i think clothing discouonts are a good practical economic indicator. im really picky with clothes and return almost 75% of whatever clothes i get as gifts, even the stuff i buy for myself and really only shop when quality items go on sale in the first place. In early 2002, i bought a pair of gap carpenter jeans for $7 and that convinced me gap was going belly up for sure. i guess i was wrong but this recession might beat that one by a mile. This weekend, i stopped into banana republic to check out their 60% + 20% off sale. Pretty good selection, i got a pair of $100 wool dress pants for $35 bucks and the guy in front of me in line got a suit for $200. Judging from clothing percentage discounts, i’d say we are about as bad as the 2001 recession right now but we still have another year or two to go at least. Frank, to answer your question, the recession is in banana republic.
Sadly, I think housing may recover sooner than later, while you guys were napping, treasuries yields collasped, bank cds and money markets sank and muni yields and investment grade bond yields have been dropping and bargains are gone. Next people will tip toe into stocks and then onto real estate. There is too much cash on the sidelines. As CDs, bonds roll over and people get a glance at their 2% money market they will dive in. I know clot pol and grim think I am nuts, but people have cash. Today I snatched the last over 12% investment grade bond on my screen and saw the last 6% NY GO bond disaappear. People’s dry powder into CDs are going to roll with no where to go. Plus gas at a buck sixty and people refinancing left and right and 5 year zero interest car loans this party is getting started. Don’t worry about 2010 resets, this recession will be history by the time you are eating your burger and hot dogs on memorial day weekend. Sad part is they won’t allow housing to fall too much, they are going to prop that bad boy up. I think at best another 10% down. Sorry folks.
veto jeans cost one buck to make
“These new strategic partners will do much more than manage assets”
//Sarcasm ON – You bet your bottom dollar they will do allot more than manage assests.
//Sarcasm Off
http://www.pbgc.gov/media/news-archive/news-releases/2008/pr09-08.html
Grim #185 in moderation has to do with Pensions
Abercrombie…
Third Quarter Highlights
— Total Company net sales decreased 8% to $896.3; comparable store sales
decreased 14%
— Total direct-to-consumer net sales decreased 6% to $57.5 million
— Abercrombie & Fitch net sales decreased 8% to $385.8 million;
Abercrombie & Fitch comparable store sales decreased 8%
— abercrombie net sales decreased 14% to $109.5 million, abercrombie
comparable store sales decreased 20%
— Hollister Co. net sales decreased 7% to $383.6 million; Hollister
comparable store sales decreased 18%
— RUEHL net sales increased 7% to $13.5 million; RUEHL comparable store
sales decreased 25%
— Net income for the third quarter was $63.9 million
— Net income per diluted share in the third quarter was $0.72
Can’t wait to see the 4th quarter results.
jeans cost one buck to make…
plus overhead like rent, advertising, shipping, employees pushes the cost of those jeans up a little more no?
Reuters:
UPDATE 1-US holiday season weakest since at least 1970-ICSC
http://www.reuters.com/article/marketsNews/idINN3033564820081230?rpc=44
“But the markdowns will take a toll on retailers’ bottom lines. Stifel Nicolaus on Tuesday cut its fourth-quarter earnings forecast for a number of retailers, including American Eagle Outfitters Inc (AEO.N), Abercrombie & Fitch (ANF.N),”
Frank…Why don’t you call up Reuters and tell them “The line for Abercrombie & Fitch is down the block!”
[181] Gator,
Better get there before the women in my house do. Those two in a chocolate shop are like hungry locusts in a wheat field.
“muni yields and investment grade bond yields have been dropping and bargains are gone”
there are 2 sides to that coin, and they both ain’t heads.
SAS
Not really pulling one way or the other as I want a healthy market for people to afford homes but as a homeowner I don’t want the bottom to drop too drastically.
On my recent appraisal….Not sure how impartial the appraisers are these days but the third party appraiser seemed to be pretty hard core independent when I met him last week. Our place appraised for about 8% over what we paid for it in late 2006. We put in about half of that increase in improvements which seemed to work out OK.
Sybarite [163],
An owner-occupied home generates ZERO income in the absence of appreciation.
http://en.wikipedia.org/wiki/Imputed_rent
189 Nom – Arghhhh…I am stuck in Manhattan until 5:30.
Stu (and whoever else cares):
Don’t fall for the extended warranty.
The dealer pays about $35 to $50 each (yes, not kidding) for those and you pay X,XXX.00 (typically).
The EPA has mandated emissions related controls are covered to 8 yrs/80K and just about all electronics are “somehow related” ;) to controlling the car’s emissions…
Anyhoo, a negotiating tactic is to let them think you’re taking the ext. warranty, so they’ll play ball on the other prices, but then squash it at the time of signature.
http://tinyurl.com/norecessionhere
* electronics are where your big money is at…
And also, if you read the fine print, they pretty much screw you for any real serious issues, so you really do get nothing if something major goes wrong.
If you buy an EW, you already paid for a bunch of smaller repairs. If they never see you again, they’re happy :)
* electronics are where your big money [repairs are] at…
man, what a dunce I am today…
Spam,
It was the first time I ever went for it on any product ever. I was not terribly sure about the Xterra reliability and talked them down from $1250 to $750 on it. I did the math and I figured there would be at least one big issue between 30K and 70K miles. Well we are approaching 60K and nothing to report whatsoever, so it appears you were right. I had heard they were a waste of money in the past, so I should have listened. Will only consider it when buying a used Sable now on.
http://autos.nytimes.com/2008/Nissan/Xterra/269/3173/293750/researchRatings.aspx
Apparently, there is still time.
In regard to new condo developments, how does one find out about the builder (financial “health”, other projects they have completed, etc?) I have tried googling the builders but can’t seem to find anything else they have built.
“Manhattan rents are falling and vacancies increasing on a year over year basis.
Sale prices will have to come down even more to compensate for the risk of buying in this market.”
Seeing the same thing here.
From the WSJ Real Time Economics blog:
We … saw three new markets enter the ‘double-digit’ club. Atlanta, Seattle and Portland are reporting annual rates of decline of 10.5%, 10.2% and 10.1%, respectively. While not yet experiencing as severe a contraction as in the Sunbelt, it seems the Pacific Northwest and Mid-Atlantic South is not immune to the overall demise in the housing market.” Three of the metro areas have given back, on average, more than 30% of the value of homes since October of last year. Phoenix remains the weakest market, reporting an annual decline of 32.7%, followed by Las Vegas, down 31.7%, and San Francisco down 31.0%. Miami, Los Angeles, and San Diego were close behind with annual declines of 29.0%, 27.9% and 26.7%, respectively. – S&P Case-Shiller
Prices continued to drop the most in cities located in California, Florida, Arizona, and Nevada. The so-called toxic securities that are at the heart of today’s financial crisis are concentrated in these states. …. Although prices are near an equilibrium in many cities, they are likely to undershoot the equilibrium price on the way down—just as they overshot on the way up—because the number of homes on the market remains high. – Patrick Newport, IHS Global Insight
While credit availability in the capital markets reached lows in October, the purchase-to-closing delay in the mortgage and housing markets means that the peak effects of that unavailability are likely to hit in November and December, rather than in October. That in turn suggests worse pain for the Case-Shiller in coming months, and no immediate end to the staggering declines in home prices we’ve been saddled with for months. – Guy LeBas, Janney Montgomery Scott
The rate of decline on a month-over-month basis for the aggregate indices has reaccelerated after moderating somewhat during the peak spring/summer selling season (these data are not seasonally adjusted). We continue to believe that it is unlikely that we are anywhere near a bottom in nationwide home prices. – Joshua Shapiro, MFR Inc.
203
Who is the builder?
http://www.trulia.com/property/1068076166-11-Whitechapel-Ct-Mount-Laurel-NJ-08054
Current asking: $385k
Last Sell Price: $253k; Oct 2003
http://www.trulia.com/property/1063850590-113-Oakmont-Rd-Mount-Laurel-NJ-08054
Current asking: $309k
Last Sell Price: $180k; May 2008
Still too much of this mentality going around.
The builder is Rocha Construction & Development.
Grim: 207 in mod. There may have been a code word embedded in the link again.
#186 John : Who are all these people on the sidelines with cash to buy houses. I am not arguing your other points necessarily (take too much time), but just houses, are these all investors lookig for SFH’s and Condos, multi-family perhaps?
Are they the legions of laid off Wall Streeters, or people from all the other sectors as well that have been subject to layoffs? Are they recent college graduates, newlyweds, immigrants? Who? Who are they?
Do they have down pymts, and on and on I could go.
If you make these statments, you should back them up with some reasonable, rational ideas as to why. Otherwise you are just like the crowd from CNBC the same crowd who for the most part said there were no problems in the first place.
#178 frank:it could be a hot selling season starting in January 2009.
You are kidding right?
#173 frank: If you get laid off, will it than finally be a recession?
Can someone with GSMLS access please let me know the status of 76 Oxford in Glen Ridge? Withdrawn/UC? Thanks.
John (183):
Sadly, I disagree completely with your call for a housing bottom and a recovery to the economy. Your reasoning is that the sideline money won’t be happy making 2% in a CD when it rolls over. Well if that was the case, so much of this money wouldn’t be going into government treasuries yielding nothing.
Looking at the housing numbers, not only are the numbers still awful, but they appear to be accelerating to the downside. Same thing with corporate earnings. Neither of these are going to stop on a dime. Both will require a slowdown and probably a flat period prior to recovering. I also doubt that the recovery will be quick as so many people’s nerves will be shattered making them less likely to reenter equities.
Trickle down don’t work in a recession (nor do I think it works in a prosperous period) since the wealthy are no more likely to buy than the middle and lower classers when times get tough. The messiah might not run out and raise taxes on the rich folk, but I’m fairly certain he’s not going to create stimulus (tax cuts) for them neither.
My gut tells me that the only thing holding up this market is hope (O style) and we all know how far that will get us. We are past the point of simple repair. The vast number of dollars printed and lent to failing businesses built on funny money spending models is incredulous. Someone will have to pay the bill one day and sooner or later a leader somewhere is gonna play isolationist and will piss off China. Unrest in China is getting more and more likely as farmers turned factory owners have to go back to their crappy farming villages.
We still have the option arms, we still have a black (day) to get through and we still have the complete unwillingness of banks to lend to businesses and individuals. One by one, all companies are freezing pensions, eliminating 401k matches and forcing vacations, not to mention layoffs. Local and state governments are approaching their breaking points as are their pension obligations. Crime will undoubtedly tick up as this recession drags on as we are forced to cut the number of officers to meet budgets. Then there is credit card and automotive finance defaults as well as college loan defaults as recent graduates can’t afford to pay them back due to lack of employment. The economic headwinds are just too great. Funny thing is, Japan had tons of savings on the sidelines as well. Eighteen years later, this cash is still sitting on those same sidelines.
I see 2009 as being twice as bad as 2008, if not worse. Without impetus, the world economy is screwed. I don’t hope for a world war to breakout, but I fear that might be the only solution left to turn this ship around. You see hamburgers and beers on Memorial day John, but I see capacity crowds attending unemployment offices. I hope you are right, but my experience tells me otherwise.
208
I’ve never heard of them, although I do very little business up that way. I did a quick search and it appears as if they build some homes, and they built a fire house in Jersey City.
I can’t find them attached to any large projects, which would scare me if I was buying from them or selling them anything.
#207 Dl Agreed. The level of denial is scary.
Is Stu the Russian professor from yesterday?
#211,
Of course I am kidding, I hate to disagree with you.
Frank,
curious bloke…
hve you ever read any of my posts to you?
if so, what you think?
SAS
#214 stu: HJohn sees hot daogs and beer on Memorial Day. Amazing 5 short months from now, and John thinks all will be well.
The denial is scary.
“Frank,
curious bloke…
have you ever read any of my posts to you?”
They are blocked out if his mind, like the experiences he was forced to endure as a young alter boy.
3pm market update…
The stock market is still sporting a solid gain. While the advance reverses the prior session’s decline, the stock market is still down roughly 1.6% for the month.
Reversing the year’s decline would be an even greater feat. The stock market has shed 40% this year. That means the stock market will have to rally more than 65% in order to get back to where it started the year
“Is Stu the Russian professor from yesterday?”
I am Russian, but the only person I’m schooling is your dumb ass!
Bailout Bucks Bait Bulls – I love that headline
I am not in denile, we have a payroll tax break coming, a one trillion dollar stiumulus and another 250 billion TARP money due soon. We have record low gas prices and mortgage rates. local govt will be able to call and refinance bonds as rates are down, fuel costs to heat schools and hospitals are down and the unions for the first time in years are being forced into concessions. That on top of towns could get maybe fleet sales of GM cars with zero % financing. I have been hearing all week of the hundreds people have saved by refinancing and how nice it is to only $20 bucks in the gas tank. We may have big inflation down the road, but for now cash is flowing in from the side lines. No longer will people have to beg for order flow and lines of credit. God Bless Hank and Ben.
“like the experiences he was forced to endure as a young alter boy”
a little over the top bloke.
keep in mind, like the bubble economy…it draws people in too, makes them live in a bubble.
i.e sellers thinken there house is worth more, CEOs at GM, etc..etc..
hard to shake that bubble.
not saying Frank perscribes to this, but i would like to hear his input as to some of the posts I have addressed to him.
:)
SAS
“I am Russian..”
If things are so bad in this country how come I see more and more Russians in this country? How come they are not running back to the mother land?
Stu
you need a disclaimer on your post @ 214. Someone may think you are a subject matter expert, and lose money on a trade that was based only on your lay assessment of the market.
Oh and be careful, you may be showing some confirmational bias
Frank- I just walked by the A+F on Fifth avenue, the one on 56th? I work two streets away, there was no line…
I could have walked right by you. My brush with greatness
“Next people will tip toe into stocks and then onto real estate.”
John,
It’s a market of stocks, not a stock market. Certainly, some sectors will benefefit as $ starts to move. What the hell, the fed expanded their balance sheet close to $2T. It will flow somewhere. The key is to locate the sector. In addition to this, we will get an O bounce. Hopefully, the dead cat bounces to 10,500-11,000. One other thought, if treas yields continue to pay a neg rate throughout 2009, then you can put your Big D hat on.
Anybody buying RE, today, will be tomorrow’s fcuked seller. Unless, they are truly getting a bargain.
John says:
December 30, 2008 at 12:12 pm
Grim, that is the trouble when you look behind the curtain. GMAC bonds maturing in 2009 last week were trading at 40 cents on the dollar, today they are close to 90 cents on the dollar. My bond trading strategy involves buying high yielding bonds trading at below 75 cents on the dollar that is in line to get bailed out. A good investor and trader don’t need no stinking financials. I am like Wayne Gretsky, his secret to sucess was simple, don’t pass the puck to where your teamate is standing pass it to where your teamate will be standing when the puck reaches him. Bonds are similar. Who cares what bonds are at today? The day you are selling or the day it matures is all you should care about.
SOV, NCC, CIT, GMAC were all buy at 50 cents hold your nose ride the way to maturity at par. They were not pretty to buy but will make you rich. Kinda like a middle class kid can either marry ugly and rich or pretty and poor. Pretty and poor feels good short term but face it all the old hags in the nursing home look the same, somehow a hot 28 year old girl looks the the same as an ugly 28 year old girl when they are 70. Might as well hold your nose and marry rich.
grim says:
JJ: I was sitting on LEH unsecured on 9/12. I had a bid at 73. I said to myself f— that, I will be through par on Monday…….WRONGO…..good strategy, but one blow-up (or several) can happen arbitrarily in this environment…..it’s more gambling than slam-dunk, so don’t act as if it isn’t.
JJ: adding to the insult was that the coupon paid on 9/15 and they clawed it back on 9/16….bastards!
“It’s a market of stocks, not a stock market”
good post @ 229.
market of stock
or
market of economical warfare
now and over the past few months has not been a “market”.
SAS
AAF says:
December 30, 2008 at 12:25 pm
Any suggested low balls?
AAF: Well certainly anyone who just had the hernia surgery can be removed from consideration……
John, (224):
“I have been hearing all week of the hundreds people have saved by refinancing and how nice it is to only $20 bucks in the gas tank.”
Only if you have the DP or positive equity.
“We may have big inflation down the road, but for now cash is flowing in from the side lines.”
Flowing in to where? US Treasuries maybe?
John, you appear to be very street and bond savvy. It may be blinding you to the reality that things are much worse than they appear. We used to worry about the financial cost of our tiff with Iraq and Afghanistan. We have now spent somewhere in between 8 to 12 times that. Perhaps there will be one small government debt induced rally before the end our economy as we know it, but soon enough, the United States of Mastercard is going to get torn up.
3b, fact is right now, today there is a record amount of cash being held by people. Was in WSJ yesterday. On top of that companies like Microsoft are sitting on a mountain of cash. I have been buying bonds every single day since Nov 20 without selling. When yields are dropping like a brick you gotta lock in. But now for the people smart enough to lock in high yield CDs, Muni Bonds and Investment grade bonds we now have interest payments flowing in we have to put to work plus CDs maturing with no place to go, on tope of that refinancing has freed up cash, while products, cars, fuel, vacations, electronics have fallen in price. Home prices and 401Ks are imaginary money. If my 401K went up 50% next year and my house went up 50% next year it does not put a nickly in my pocket. Double my interest income and cut my fuel costs in half and I am spending. Hank and Ben know that, plus putting money into the better off crowd does trickle down, a guy with a job might take the extra cash and buy a car or take a vacation. A guy unemployed will just boost his emergency savings or pay down debt. He is not putting it to work. Problem is the average american is not that bright. They would rather pay full price for a GM car in 2007 than 30% off in 2008. They would rather buy a bond at 4% in 2007 than a bond at 12% in 2008.
castration
chicagofinance says:
December 30, 2008 at 3:29 pm
AAF says:
December 30, 2008 at 12:25 pm
Any suggested low balls?
AAF: Well certainly anyone who just had the hernia surgery can be removed from consideration……
grim says:
December 30, 2008 at 12:41 pm
Ah the good ol’ “throwing away money” argument.
To add: Of the people on my street that have purchased in 2003-2006, I would assume my monthly nut is in the area of 70%. Plus, my landscaping is included, and we just had a dishwasher replaced and a plumber show up without charge.
#229 BC Bob: The O bounce IMO will be short lived. Alot of what O has been talking about as far as stimulus,taxes etc.,is not stock market friendly.
#235 John: Again what does any of this have to do with your original post wherby you stated real estate will not decline much more, people on the side lines with money etc.
SAS
Other groups agree with your assessment of the Madoff scheme
The New York Investing meetup has been saying for some time now that there is corruption at the highest levels of the market. Bernie Madoff is a former chair of the Nasdaq Stock Market and around 20% of Nasdaq trades run through his company. While he has admitted to operating what appears to be the biggest financial fraud in U.S. history (Enron is the competition for the number one spot), he could not have done so without a great deal of cooperation, if not out and out complicity from many other parties, both inside and outside the government. I am sure we will be hearing a lot more about this in the future.
I don’t know John…PSE&G just announced that they are cutting NG prices by 5%. My gasoline bill is cut in half. It doesn’t mean crap compared to my salary cut of 10% and loss of retirement benefits. It’s hard to take a vacation if you are no longer allowed to accrue more than 40 hours of vacation time. I try hard to see your side of the story, but you and me are not that different. Just as Frank appears to have found the last available seat on a life boat on the Titanic, you appear to be paddling. The rest of us are still locked down in steerage and the water is rising.
there is law, and there is color of law.
I’d be god damned if i am going to inject anything “mandated” by the state.
I spent alot of time in the military, the govt used us like a bunch of guinea pigs from Petco.
but hey, what do I know, I am just some guy on the web, who says things that can’t be true, cause why would I say some of the things over the net if I wasn’t full of sh^t:)
“NJ Health Officials Extend Vaccine Deadline”
http://tinyurl.com/7d3sdx
SAS
I got nailed on a Wamu that I got 67 in bankruptcy, lucky it was a senior. But the rest I got in around 67 and got par. My problem is I am done, I spread it around and don’t want to go more than 10K in on any one shaky place, right now ben and paul are wrapping up their game of wack a mole and all bets are off once bail out hank is out the door. like all good stratgies it must come to an end.
JJ: I was sitting on LEH unsecured on 9/12. I had a bid at 73. I said to myself f— that, I will be through par on Monday…….WRONGO…..good strategy, but one blow-up (or several) can happen arbitrarily in this environment…..it’s more gambling than slam-dunk, so don’t act as if it isn’t.
and i ain’t left Lodi since 77.
SAS
I got one word for you leverage!!! Home equity at 4% bonds at 14% do a hail mary and ride the wave.
Stu says:
December 30, 2008 at 3:36 pm
I don’t know John…PSE&G just announced that they are cutting NG prices by 5%. My gasoline bill is cut in half. It doesn’t mean crap compared to my salary cut of 10% and loss of retirement benefits. It’s hard to take a vacation if you are no longer allowed to accrue more than 40 hours of vacation time. I try hard to see your side of the story, but you and me are not that different. Just as Frank appears to have found the last available seat on a life boat on the Titanic, you appear to be paddling. The rest of us are still locked down in steerage and the water is rising.
I don’t see the dead cat bouncing so high. The same people not buying cars because they are worried they will be laid off and have seen their 401-K tank, will be the same one’s not buying a house and also the same one’s not buying stocks. Undoubtedly the new prez will get a bounce and this stimulus package will to but once that wad is blown there’s not much else left. Throwing $850B down the snakeholes that are the various local and state governments in this country really does little to improve anything.
Can someone with GSMLS access please let me know the status of 76 Oxford in Glen Ridge? Withdrawn/UC? Thanks.
Withdrawn.
I don’t know what it has to do with real estate. But originally after 9/11 rates were at record lows, commodities in the tank stock market returns were negative and mortgage rates were cheap. All at once money flowed to housing. Well guess what it is December 2008 and Ben and Hank has manufactured the same recipe, I don’t like it but they are brewing up a bottom for housing.
“do a hail mary and ride the wave.”
But what happens if I’m not Doug Flutie and my receiver drops the pass?
Also John…why is gold rising?
“do a hail mary and ride the wave.”
What inning are we in?
Thanks, Grim.
“today there is a record amount of cash being held by people”
John,
Are you drinking today? The stock market has wiped out approx $8T while RE declines ahve erased approx $4T. Yet the public is holding recoreds amount of cash? You meant to say debt, no?
The banks have the cash not John Q. Too bad the banks are holding, adding reserves for futher writedowns. The US public is buried in debt, record levels. We have borrowed/borrowed and consumed and gone bust. How does more borrowing and consumption solve the problem that it caused?
CHIFI, what do you think, double reinsured and AMT FREE?
VIRGIN ISLANDS PUB FIN AUTH REV REV BDS 05.00000% 10/01/2023 VIRGIN IS GROSS RCPT TAX LN NT SER. 200
Basic Analytics
Price (Ask) 77.916
Yield to Worst (Ask) 7.500%
927676MU7
Well guess what it is December 2008 and Ben and Hank has manufactured the same recipe, I don’t like it but they are brewing up a bottom for housing.
Unfortunately they are missing the main ingredient, affordable home prices. They’ve managed to round up some casing, fat, and filler, but alas, no meat.
“But what happens if I’m not Doug Flutie and my receiver drops the pass?”
Stu,
You can borrow my #22 jersey.
Seriously John,
Bear Bailout, Fannie/Freddie Bailout, TARP, arranged marraige for WAMU, Citi Bailout, Ford/GM/Chrysler/GMAC bailout.
What’s been the result in the market after those intial pops?
Why do you think this $850B is going to be any different?
“Other groups agree with your assessment of the Madoff scheme”
yup, I sniffed this out the first second I heard about it & a few phone calls confirmed it.
my sources tell me there is more to the story. so far the scoop has been hearsay, so i don’t want to comment.
hint: that whole sniglet in the media, of Madoff walking by himself in his trechcoat, after this court hearing, media cameras in his face, same clip they played over & over…
-staged-
SAS
BC speak for yourself, I have not borrowed cash. BTW just stating a fact, investors are sitting on a record amount of cash.
“Madoff”
i was barking free market forces vs. economical warefare that brought him/instution down.
possible collabaration of insiders? i hope not, or we are all suckers.
SAS
ok, I’m being to vague and mucken up the boards. sorry.
i just know someone is looking over my shoulders right now, and it ain’t my fairy godmother.
SAS
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what a bunch of egg heads.
John, you do some serious gambling with bonds. Go to AC instead, you get free food.
“BTW just stating a fact, investors are sitting on a record amount of cash.”
When my 401K was in equities and worth 2X, it didn’t have any value to the economy. Now that my 401K has been moved out of equities into MMF it is now cash on the sidelines. I don’t get it. Seems like it hurts the economy more on the sidelines than it helps it, no?
#242 SAS
You can opt out. You can object to vaccinations on religious OR medical grounds.
http://www.mercola.com/article/vaccines/legally_avoid_shots.htm
I shall now assume “duck and cover” from our medical posters.
Stu that is not cash on the sidelines, I am talking investable cash, dry powder in tax accounts.
Whole autism/vaccine thing is unfounded and was contrived by a group of greedy lawyers representing autistic children. Zero evidence to back it up. Same about living near powerlines.
“All at once money flowed to housing. Well guess what it is December 2008 and Ben and Hank has manufactured the same recipe, I don’t like it but they are brewing up a bottom for housing.”
John,
Same recipe, different cooks [do i mean crooks], different patrons. I do agree the money will flow into certain sectors. I don’t agree that housing will be the beneficiary. Too much capacity, price/income ratio still out of whack and purchase/rental still favors renting. In addition to this, we are staring down the barrel of 250-500K jobs lost, per month, in 2009. How does housing accelerate in an environment of declining jos, lower workweek hours?
New bubbles are notorious for different leaders. This one will be no different. Why didn’t the post 9/11 easings flow back to the previous leader, dot com? Housing is done, will continue to go lower, when it eventually bottoms it will be a long L pattern. No V’s nor W’s. If you have a seat get very comfortable.
Just planting mustard seeds and doing my part for free market capitalism.
Frank says:
December 30, 2008 at 3:59 pm
John, you do some serious gambling with bonds. Go to AC instead, you get free food.
New thread, move it on up.
242/265 – Our tenants got their son opted out of the flu vaccine due to medical issues. Their son is classifed for neurological issues (he gets overstimulated easily) and their doctor said that the heavy metal content of the flu vaccine would adversely affect him.
John,
I have some of that too, but I’m not sure how this changes my argument. My taxable dollars used to be in wonderful american companies. Now I am either in cash or shorting those same companies and China as well. I think the economy was better off when I was long it.
“BC speak for yourself, I have not borrowed cash. BTW just stating a fact, investors are sitting on a record amount of cash.”
John,
You are drinking. I wasn’t referring to you. Record household debt levels;
http://research.stlouisfed.org/fred2/series/CMDEBT/97/Max
“John says:
December 30, 2008 at 4:05 pm
Just planting mustard seeds and doing my part for free market capitalism.”
Free Market Capitalism?
#248 John: No that it matters,(only that it shows a pattern) what does this have to do with people ont he sidelines with cash to buy real estate? Afyer all
Again you fail to answer or back up what you have stated with any reasonable response as to why.