Not all. It all depends on the engineering numbers. Each piece has a specific required strength and to supply anything more would be wasteful. It is all computer-designed and computer-sawn. We use these same wonderful improvements in efficiency to save money on things like highway bridges here in Minneapolis.
I do gotta say tho, I sure didn't expect to be within spitting distance of a new record high on the S&P 500 index right now. I was figuring maybe in 2009-10ish. Just shows what I know. Looking at the financials, if the mark up guys are realling going to turn this around, a new record high should be a piece of cake considering their weighting in the index. Bum, go figure.
Most ARM's are based on the LIBOR, so I dont know what lowering the FFR would really accomplish. The spread between them is bigger this morning and the LIBOR doesnt seem to be coming down.
Tearing these new, but never occupied, houses down in order to build reasonably sized, realistically priced, high density housing for the disenfranchised will be fun!
Hey, this blog has been great as it covered the housing bubble and is now putting up clear facts on the bust. But now the bubble action is moving to commodities and equities. (The claim by many that we are now in an economy of constant, neverending bubbles is proving correct).
So, where is the best place to go to watch the next big show?
I don't understand why the LIBOR level is so scary. I mean, before 2001, the rates were considerably higher all the way back through 1997 which is shown in the following chart.
My question: Is the fact that we had rates so low since 2001 skewing our view of history and what real effect the LIBOR levels might have on the market?
I think that is the story IMNSHO - double header short squeeze and opex Friday - my guess is they will pump the HB's through the end of the week (stock option expiry is the close on Friday I think - anyone got that for certain?).
as LIBOR is the rate that banks can lend to each other. It also effects what rate mortgage lenders will charge borrowers. When LIBOr goes up, rates go up, when it goes down, rates follow. Most mortgages follow the LIBOR. As far a the history portion of your question, I would look at the last 5-6 years as an exagerated blip rather than any norm.
Brian - the bigger spread between FFR and funds rate helps banks And they are such nice guys who wouldn't want to help them. OH! You thought the FED was actually trying to help the regular homeowner.
Bobby - LIBOR isn't scary, only the crappy loans fixed to it.
When does "look at all this deflationary pressure, wow, what a fun time we're having" turn into "look at all this deflationary pressure, wow, what the heck just happened?"
That's what I'd like to know, lol.
There was actually a bit of deflation from 1926 to 1929, and then it just sort of got out of hand apparently.
Combine that with yet another bad housing report and you really have to start wondering.
The thing that struck me in that report is the real lack of easing in the Midwest.
While the Midwest is far smaller than the South and West, and only 50% larger than the Northeast, the slowdown there, according to the report, has been negligible.
I thought the Midwest economy was getting crushed, Why is housing construction holding up so well there? Is the relatively cheap cost of construction (not thinking about the relatively low sales price) playing a role? Is all of this taking place in Chicago (SFH construction is down significantly more than overall so maybe its all multifamily in the cities). It's clear that the Midwest slowed much more in 06, but considering the problems in the region, a bigger slowdown seems sensible.
In fairness, YTD (seasonally adjusted) the Midwest doesn't seem too far out of line...the Northeast is.
Finally, counterintuitively, this report shows that it was not the "bubble areas" that collapsed first, but the weakest market, i.e. the midwest.
Tearing these new, but never occupied, houses down in order to build reasonably sized, realistically priced, high density housing for the disenfranchised will be fun!
That's my thinking as well. Any empty, overpriced, stucco-exterior, granite countertop crap boxes with a front yard the size of a postage stamp need to be torn down. Turn them into parks, or maybe low income housing.
As an added bonus, a public works agency could be created to do the teardowns, kind of like the WPA in the great depression. It would provide jobs for the unemployed and rid us of these malinvestments blighting the landscape.
Do illegal immigrants own houses? If not, then come Jan 2009 when amnesty is granted to one and all, we should have several million prospective new buyers. Don't you think?
Of note is that stocks run further while commodities are flat since the rate cut yesterday. Wheat has actually come down considerably. Stock shorts will be taken to the cleaners. If I remember correctly, the ABX index recovered considerably as well - not that this index means so much anyway.
Even with weak housing starts we've got an "all go" for the economy, and yes, there will be no recession in 09.
I would urge everyone to be out of shorts - they'll get burned. Also, if you're in a one year CD that means you can't be in the stock market for a full year and may lose considerably out on opportunities. There is always risk, at least the risk of missing out even if you choose the most safest investment vehicles.
This is the continuation of yet another American Century. I'm proud to be part of it. There's no place like this.
Wally, I'm sticking with CR for the duration. One can bubble away all one wants, but in the end it's all about basic economic relationships, and the mean returns. I don't know of a better place to figure out where the current mean truly is.
Mark - now do you get a bit of understanding for what the Fed is dealing with? According to my figures, real CPI declined even more than the official figures. Grocery stores are hurting so bad that they are doing anything they can to get customers in.
Ask a layperson to explain what a Federal Reserve rate cut means for mortgages and you'll probably get a simple answer: They get cheaper! But the reality, as many here know, is a bit more complex. Depending on the type of mortgage you're talking about, the rates being charged could fall in lock step with the Fed cut ... the rates could go down by a smaller margin than the Fed cut ... or they could actually go UP.
HELOC holders are the winners here. Rates on home equity lines of credit follow the prime rate. And the prime rate moves in lock step with the federal funds rate. So if you have a HELOC, you're going to pay 50 basis points less in interest very soon.
Short-term ARM holders are also going to see some relief. Up until recently, as we've been discussing, LIBOR rates had actually been RISING despite a decline in short-term Treasury rates. But the Fed rate cut has succeeded -- at least for now -- in bringing down LIBOR rates (though not by as much as fed funds). Six-month, U.S. dollar-based LIBOR dropped 31 basis points overnight, for instance. That leaves it at 5.11%, its lowest level since March 2006.
So who loses? Anyone going for a long-term fixed-rate mortgage. The Fed's drastic cut in SHORT-TERM rates has revived LONG-TERM inflation fears. After all, the Fed is cutting the cost of money at the same time oil is trading at $82 a barrel and counting ... gold is trading at its highest level since 1980 ... agricultural commodities are soaring in price ... and world economic growth is robust, despite our housing-led downturn. That makes the Fed cut a high-risk move, one that threatens to cement these higher prices into the economy.
Long-term bondholders hate inflation. So long-term Treasury bonds are getting pounded. Long Bond futures were recently down almost a point in price today, after losing 7/32 yesterday. The 10-year Treasury Note yield is UP 6-ish basis points today, after rising a smidge yesterday.
The end result: Rates on 30-year fixed rate mortgages will NOT drop 50 basis points like fed funds. In fact, they may go UP. So if you're looking to refinance out of an ARM into a FRM, don't expect to get any help from the Fed's move.
O-Joe, I think what you mean is that the market will continue to skyrocket as the dollar becomes worthless. So, the market may be up 20%, but only because the dollar is down 20% - it just takes more dollars to buy the same amount of stuff, so it the market goes up since each share costs more. Of course, we'll have $4 to $5 a gallon gas soon enough, but that's fine, I guess...
I wonder if the goofballs running the game will end up tearing down lots of empty homes to create false demand. If they can make sure no area ever has enough housing, they can force people to spend absurd amounts of money on housing. Either that, or go with the plan of stuffing a dozen illegals per house and get rid of the excess that way. The most likely option is to pass that stupid bill that just went through the House that will raise FHA limits to over $700K for a "affordable home" and will get rid of down payment requirements. Not like that got us into this mess or anything - now, the taxpayers can pick up the tab! Anything to prevent housing from being affordable!
Not all. It all depends on the engineering numbers. Each piece has a specific required strength and to supply anything more would be wasteful. It is all computer-designed and computer-sawn. We use these same wonderful improvements in efficiency to save money on things like highway bridges here in Minneapolis.
Come on wally you and I know (who have been driving that bridge since Nixon was President)... that bridge was NOT calculated using internal CAD stress analysis... it was good old American brain power and maybe a slide rule.
Tearing these new, but never occupied, houses down in order to build reasonably sized, realistically priced, high density housing for the disenfranchised will be fun!
That is a new urbanist wet dream that will not happen for a couple 2-3 decades at the soonest. They will become nouveau slums first.
Many illegal immigrants are heading home now that construction jobs are drying up. The only houses they will be buying are in Sinaloa and other regions of Mexico.
I thought the Midwest economy was getting crushed, Why is housing construction holding up so well there? Is the relatively cheap cost of construction (not thinking about the relatively low sales price) playing a role?
Ed the Midwest is NOT monolithic any more than the West is... I mean is Denver, Seattle, San Diego all the same?
Then why would you expect Detroit, Chicago, Minneapolis, Kansas City to be the same? Michigan - Indiana - Ohio are getting crushed... Chicago is doing so-so to pretty good... KC, Minneapolis, St. Louis are doing quite well... and the rural in-between is mostly booming on high commodity prices.
The biggest thing holding down home prices are: (1) incomes are fairly low compared to coastal regions and (2) people are generally more frugal here, I do not know many who would be comfortable buying a home at 4 times income or above even if given the loans.
BTW even where there has been foreclosures it was because houses were so expensive - its because incomes 'zeroed' when factories closed. You can't make housing so affordable that unemployed can afford it with out giving it away and as cheap as RE is out here, we don't do that.
I think the only way starts drop is builders go bye-bye. Who's first?
Beazer. Investigations by US Atty General and SEC. Default notice from lender. Only one bank still lending to them, and their credit line just got cut from 100 mil to 17.5.
My CPA wife looked at their financials and said they are in terrible shape.
The stock popped yesterday so I just bought more puts.
Shows the value of the HOA's the builders said would protect value.
I suppose the HOAs of the future will be worrying about the age of the cars in the front yard and the style of the cement blocks they are on, reminding the ad hoc brothels to keep the ladies inside and the red lights muted and the shot houses will be limited in the hours.
Anyone else see that Morgan Stanley said worst of the credit crunch is over?
And this without any effect from yesterday's rate cut....
So, WTF was the big emergency for the big 50-cut?
Was the fed duped?
Just don't get it, do you Joe? This isn't about economics. It's about partisan politics. We need a disaster to bring down the market economy as made incarnate in this troglodyte Bush and his underlings.
I'm tellin' you folks--and yes I know no one asked, but we're now going to take direction from the UK and 3 mo Libor spreads...Mike-in-FL is right to look at that( like many others are too).
Its things like this from out of there that make me concerned, and worried about some Limey-contagion ( don't worry I am an Anglophile).
KB homes has a large development in Petaluma ca on which work has completely stopped.It is on a large hillside above Hwy 101,with a KB sign,the hillside has been graded bare with streets laid out.It looks like several hundred homes were planned (400-500) and work completely stopped in late August.the site is above the Petaluma River,and unless they Hydroseed PDQ a lot of silt will end up in the river,causing our local SUV driving Greens to howl in rage.Here in Sonoma County builders are either rushing to complete and sell,or halting work entirely.KB bought that land at the peak,and I do wonder what their sunk costs are.Abandoning the project at this stage is pretty telling...I have been told by contractors that the permits for a home in this area run $80k.yup, permits alone $80k.
Lehman said the same thing, that the worst is over.
There is anectdotal data in the press that the fed made lots of phone calls before the cut. But the fed won't tell us what they heard. Why? Because there is no data behind it.
So let's recap. The Fed is working on anectodal data which it cannot share with us because things are so bad. MorganStanley & Lehman both say the worst is behind us, ostensibly with the sanction of Sarbanes-Oxley hanging over their heads if they are ever found out to deliberately misleading to shareholders & debtholders.
Which version of the truth do you believe? Can they both be right?
o-joe seems to be spiking the ball on the 5 yd line. We still have Oct right ahead of us, a lot of ARM resets and the despair of millions of foreclosures.
I am now expecting MORE Fed cuts every meeting. I don't think inflation is a concern for the Bernanke Fed. Cramer & the IB's bitch.
I sincerely hope that one day you will reconcile your estimate for demand with actual data. For example, going back to 1987 there were only three years, 2004-06, in which the Total Units Completed exceeded your estimate of 1.7M per year. The total overbuilding during these three years was 650K units (5,750K Completed versus the demand of 5,100K). Of course, lot fewer units than your demand were built for more than a decade prior to 2004. Even if you assume that during the boom 650K of overbuilding took place, the problem should be cleared by 2008Q2 if we believe your estimate for demand and the lowered rate of construction. No?
All the data that I have looked at suggest that you are off by 500K a year in your estimate for demand. That means the supply-demand imbalance of several million over the past dozen years based on whose estimate is correct.
Also, have you looked at the Household Formations data and reconciled your estimate with that? For 1995-2007Q2, it averages out to approximately 0.75M per year!
Average Household Formations (Source: Census/Haver):
1995-2001 1M/year
2002 minus 2M
2003-2007Q2 1M/year
Do illegal immigrants own houses? If not, then come Jan 2009 when amnesty is granted to one and all, we should have several million prospective new buyers. Don't you think?
Bobby | 09.19.07 - 10:34 am |
I know maybe a dozen illegal immigrant in the Chicago area and most own houses, some multiple and many run their own businesses as well...
I covered that in my blog for what it is worth (including energy being temporarily weaker in August). Housing came in flat though and may be the most important part of all.
It's not just the ones that Darius at 1:45 happens to know of, either. I guess this is partly a result of reducing discrimination in lending. At least, that's the story they seem to have been sticking to.
I wonder what the sequel on these loans is? On one hand, there's an easy flight if the terms become onerous, but on the other, there's a real incentive not to call attention to oneself by landing in court.
But, but, but, the Fed cut interest rates, so everything is back to normal now, right???
Bobby - "back to normal", considering the oversupply, would be to have a further drop in building. Thus CR's forecast.
anyone else notice that the 2x 4 trusses used for roof's are now made with 3/4 by 2 1/2 stock
inflation,
Not all. It all depends on the engineering numbers. Each piece has a specific required strength and to supply anything more would be wasteful. It is all computer-designed and computer-sawn. We use these same wonderful improvements in efficiency to save money on things like highway bridges here in Minneapolis.
MaxedOutMama
uhm, I was, u kno, tryin' to be a wise guy.
I do gotta say tho, I sure didn't expect to be within spitting distance of a new record high on the S&P 500 index right now. I was figuring maybe in 2009-10ish. Just shows what I know. Looking at the financials, if the mark up guys are realling going to turn this around, a new record high should be a piece of cake considering their weighting in the index. Bum, go figure.
Most ARM's are based on the LIBOR, so I dont know what lowering the FFR would really accomplish. The spread between them is bigger this morning and the LIBOR doesnt seem to be coming down.
Tearing these new, but never occupied, houses down in order to build reasonably sized, realistically priced, high density housing for the disenfranchised will be fun!
Hand me that wrecking bar, and stand back.
I think the only way starts drop is builders go bye-bye. Who's first?
Hey, this blog has been great as it covered the housing bubble and is now putting up clear facts on the bust. But now the bubble action is moving to commodities and equities. (The claim by many that we are now in an economy of constant, neverending bubbles is proving correct).
So, where is the best place to go to watch the next big show?
I don't understand why the LIBOR level is so scary. I mean, before 2001, the rates were considerably higher all the way back through 1997 which is shown in the following chart.
My question: Is the fact that we had rates so low since 2001 skewing our view of history and what real effect the LIBOR levels might have on the market?
1 Year LIBOR - Rate, Definition & Historical Graph
Builder's stocks are really strong today, despite the weak news. It will be interesting to see how high they can go before the shorts take over again.
Bill,
I think that is the story IMNSHO - double header short squeeze and opex Friday - my guess is they will pump the HB's through the end of the week (stock option expiry is the close on Friday I think - anyone got that for certain?).
The CPI came in tame.
Bernanke might have a bit of breathing room now.
I've posted my thoughts on my blog (in two posts: a prediction followed by the actual results).
Bobby:
as LIBOR is the rate that banks can lend to each other. It also effects what rate mortgage lenders will charge borrowers. When LIBOr goes up, rates go up, when it goes down, rates follow. Most mortgages follow the LIBOR. As far a the history portion of your question, I would look at the last 5-6 years as an exagerated blip rather than any norm.
Brian - the bigger spread between FFR and funds rate helps banks
And they are such nice guys who wouldn't want to help them. OH! You thought the FED was actually trying to help the regular homeowner.
Bobby - LIBOR isn't scary, only the crappy loans fixed to it.
Hmmm... The ten year yield is up. So the 50 bp rate cut doesn't help with 30yr mortgages.
Fed to borrowers: take out short term ARM's again.
We all know how that worked out last time...
Brian23
I would look at the last 5-6 years as an exagerated blip rather than any norm
So you're saying the LIBOR is returning to normal, i.e., don't expect rates to drop down to levels seen over the last few years.
I messed that last coment up it was supposed to be difference between FFR and LIBOR
the worse the news gets from housing the closer we must be to a bottom. at least thats what people must be thinking.
this whole rate cut thing is meant only to jiggle loose the credit markets, not help the housing market per se.
look - MBS are here to stay. financial innovation has taken place. but yeah, it overshot and got all wacky.
but, people will figure out which paper is good paper and who makes good paper and then the paper shall flow again.
there are funds coming together right now to pick through distressed MBS to find the good stuff.
heck thats where i should land if i need to land.
mortgage rates improved by 1/8 since yesterday. woo. not.
we've got 6.125% jumbo loans up to 70% LTV with 1 point.
great rate, but note the catcher - 70% LTV.
but still, if people can use conforming money to buy the starter home, then the trade market will be intact.
question is whether or not people buy at all.
OFHEO reversed on its decision to exp[and capr for Fannie and Freddie..albeit by a pediatric 1% or 2%.
Gee, I feel so much better now.
The page cannot be displayed
Bobby - yes. I dont think rates will drop down to levels seen in recent history.
w - I understood what you meant.
Now we have to pray that the $$ doesnt tank, but that may be wishful hoping.
When does "look at all this deflationary pressure, wow, what a fun time we're having" turn into "look at all this deflationary pressure, wow, what the heck just happened?"
That's what I'd like to know, lol.
There was actually a bit of deflation from 1926 to 1929, and then it just sort of got out of hand apparently.
Combine that with yet another bad housing report and you really have to start wondering.
The thing that struck me in that report is the real lack of easing in the Midwest.
While the Midwest is far smaller than the South and West, and only 50% larger than the Northeast, the slowdown there, according to the report, has been negligible.
I thought the Midwest economy was getting crushed, Why is housing construction holding up so well there? Is the relatively cheap cost of construction (not thinking about the relatively low sales price) playing a role? Is all of this taking place in Chicago (SFH construction is down significantly more than overall so maybe its all multifamily in the cities). It's clear that the Midwest slowed much more in 06, but considering the problems in the region, a bigger slowdown seems sensible.
In fairness, YTD (seasonally adjusted) the Midwest doesn't seem too far out of line...the Northeast is.
Finally, counterintuitively, this report shows that it was not the "bubble areas" that collapsed first, but the weakest market, i.e. the midwest.
Tearing these new, but never occupied, houses down in order to build reasonably sized, realistically priced, high density housing for the disenfranchised will be fun!
That's my thinking as well. Any empty, overpriced, stucco-exterior, granite countertop crap boxes with a front yard the size of a postage stamp need to be torn down. Turn them into parks, or maybe low income housing.
As an added bonus, a public works agency could be created to do the teardowns, kind of like the WPA in the great depression. It would provide jobs for the unemployed and rid us of these malinvestments blighting the landscape.
So, where is the best place to go to watch the next big show?
wally | 09.19.07 - 10:02 am |
the unemployment/immigration office
Do illegal immigrants own houses? If not, then come Jan 2009 when amnesty is granted to one and all, we should have several million prospective new buyers. Don't you think?
Shhhh. That is Bernanke's plan. Millions of Mexicans can turn their Pesos into Dollars at about 1:1 exchange after he devalues and buy houses here.
Of note is that stocks run further while commodities are flat since the rate cut yesterday. Wheat has actually come down considerably. Stock shorts will be taken to the cleaners. If I remember correctly, the ABX index recovered considerably as well - not that this index means so much anyway.
Even with weak housing starts we've got an "all go" for the economy, and yes, there will be no recession in 09.
I would urge everyone to be out of shorts - they'll get burned. Also, if you're in a one year CD that means you can't be in the stock market for a full year and may lose considerably out on opportunities. There is always risk, at least the risk of missing out even if you choose the most safest investment vehicles.
This is the continuation of yet another American Century. I'm proud to be part of it. There's no place like this.
O-Joe
Wally, I'm sticking with CR for the duration. One can bubble away all one wants, but in the end it's all about basic economic relationships, and the mean returns. I don't know of a better place to figure out where the current mean truly is.
Mark - now do you get a bit of understanding for what the Fed is dealing with? According to my figures, real CPI declined even more than the official figures. Grocery stores are hurting so bad that they are doing anything they can to get customers in.
We don't need your advice around here, O-Joe, thanks.
Ask a layperson to explain what a Federal Reserve rate cut means for mortgages and you'll probably get a simple answer: They get cheaper! But the reality, as many here know, is a bit more complex. Depending on the type of mortgage you're talking about, the rates being charged could fall in lock step with the Fed cut ... the rates could go down by a smaller margin than the Fed cut ... or they could actually go UP.
HELOC holders are the winners here. Rates on home equity lines of credit follow the prime rate. And the prime rate moves in lock step with the federal funds rate. So if you have a HELOC, you're going to pay 50 basis points less in interest very soon.
Short-term ARM holders are also going to see some relief. Up until recently, as we've been discussing, LIBOR rates had actually been RISING despite a decline in short-term Treasury rates. But the Fed rate cut has succeeded -- at least for now -- in bringing down LIBOR rates (though not by as much as fed funds). Six-month, U.S. dollar-based LIBOR dropped 31 basis points overnight, for instance. That leaves it at 5.11%, its lowest level since March 2006.
So who loses? Anyone going for a long-term fixed-rate mortgage. The Fed's drastic cut in SHORT-TERM rates has revived LONG-TERM inflation fears. After all, the Fed is cutting the cost of money at the same time oil is trading at $82 a barrel and counting ... gold is trading at its highest level since 1980 ... agricultural commodities are soaring in price ... and world economic growth is robust, despite our housing-led downturn. That makes the Fed cut a high-risk move, one that threatens to cement these higher prices into the economy.
Long-term bondholders hate inflation. So long-term Treasury bonds are getting pounded. Long Bond futures were recently down almost a point in price today, after losing 7/32 yesterday. The 10-year Treasury Note yield is UP 6-ish basis points today, after rising a smidge yesterday.
The end result: Rates on 30-year fixed rate mortgages will NOT drop 50 basis points like fed funds. In fact, they may go UP. So if you're looking to refinance out of an ARM into a FRM, don't expect to get any help from the Fed's move.
That's my take, anyway.
O-Joe, I think what you mean is that the market will continue to skyrocket as the dollar becomes worthless. So, the market may be up 20%, but only because the dollar is down 20% - it just takes more dollars to buy the same amount of stuff, so it the market goes up since each share costs more. Of course, we'll have $4 to $5 a gallon gas soon enough, but that's fine, I guess...
I wonder if the goofballs running the game will end up tearing down lots of empty homes to create false demand. If they can make sure no area ever has enough housing, they can force people to spend absurd amounts of money on housing. Either that, or go with the plan of stuffing a dozen illegals per house and get rid of the excess that way. The most likely option is to pass that stupid bill that just went through the House that will raise FHA limits to over $700K for a "affordable home" and will get rid of down payment requirements. Not like that got us into this mess or anything - now, the taxpayers can pick up the tab! Anything to prevent housing from being affordable!
Not all. It all depends on the engineering numbers. Each piece has a specific required strength and to supply anything more would be wasteful. It is all computer-designed and computer-sawn. We use these same wonderful improvements in efficiency to save money on things like highway bridges here in Minneapolis.
Come on wally you and I know (who have been driving that bridge since Nixon was President)... that bridge was NOT calculated using internal CAD stress analysis... it was good old American brain power and maybe a slide rule.
Feel better now?
O-Joe,
For some reason when reading your post the word "Pollyanna" comes to mind.
Tearing these new, but never occupied, houses down in order to build reasonably sized, realistically priced, high density housing for the disenfranchised will be fun!
That is a new urbanist wet dream that will not happen for a couple 2-3 decades at the soonest. They will become nouveau slums first.
Many illegal immigrants are heading home now that construction jobs are drying up. The only houses they will be buying are in Sinaloa and other regions of Mexico.
"Now we have to pray that the $$ doesnt tank, but that may be wishful hoping"
That depends on where you have your money invested 60 on the dollar index would work for me just dandy.
I thought the Midwest economy was getting crushed, Why is housing construction holding up so well there? Is the relatively cheap cost of construction (not thinking about the relatively low sales price) playing a role?
Ed the Midwest is NOT monolithic any more than the West is... I mean is Denver, Seattle, San Diego all the same?
Then why would you expect Detroit, Chicago, Minneapolis, Kansas City to be the same? Michigan - Indiana - Ohio are getting crushed... Chicago is doing so-so to pretty good... KC, Minneapolis, St. Louis are doing quite well... and the rural in-between is mostly booming on high commodity prices.
The biggest thing holding down home prices are: (1) incomes are fairly low compared to coastal regions and (2) people are generally more frugal here, I do not know many who would be comfortable buying a home at 4 times income or above even if given the loans.
BTW even where there has been foreclosures it was because houses were so expensive - its because incomes 'zeroed' when factories closed. You can't make housing so affordable that unemployed can afford it with out giving it away and as cheap as RE is out here, we don't do that.
Hope that helps.
Beazer. Investigations by US Atty General and SEC. Default notice from lender. Only one bank still lending to them, and their credit line just got cut from 100 mil to 17.5.
My CPA wife looked at their financials and said they are in terrible shape.
The stock popped yesterday so I just bought more puts.
The Hedge Fund Implode-O-Meter - tracking the hedge fund implosion - leverage, speculation, SIVs, CDOs, arbitrage, interest rates, credit bubble
Quiz-
I o-joe an employee or employer?
They will become nouveau slums first.
Shows the value of the HOA's the builders said would protect value.
I suppose the HOAs of the future will be worrying about the age of the cars in the front yard and the style of the cement blocks they are on, reminding the ad hoc brothels to keep the ladies inside and the red lights muted and the shot houses will be limited in the hours.
I know the details in the numbers make this calculation a little fuzzy but:
1.33M new homes annual rate vs. 2.91M foreclosures annual rate (12 x MortgageInsider monthly number of 243,947).
With real numbers anywhere close to these, something insane is going on.
Yes, dryfly, I do know that. Just feeling smart-assed this morning, what with the economy's new lease on life and all.
Anyone else see that Morgan Stanley said worst of the credit crunch is over?
And this without any effect from yesterday's rate cut....
So, WTF was the big emergency for the big 50-cut?
Was the fed duped?
Just don't get it, do you Joe? This isn't about economics. It's about partisan politics. We need a disaster to bring down the market economy as made incarnate in this troglodyte Bush and his underlings.
I'm tellin' you folks--and yes I know no one asked, but we're now going to take direction from the UK and 3 mo Libor spreads...Mike-in-FL is right to look at that( like many others are too).
Its things like this from out of there that make me concerned, and worried about some Limey-contagion ( don't worry I am an Anglophile).
Northern Rock bail-out may breach EU laws - Telegraph
KB homes has a large development in Petaluma ca on which work has completely stopped.It is on a large hillside above Hwy 101,with a KB sign,the hillside has been graded bare with streets laid out.It looks like several hundred homes were planned (400-500) and work completely stopped in late August.the site is above the Petaluma River,and unless they Hydroseed PDQ a lot of silt will end up in the river,causing our local SUV driving Greens to howl in rage.Here in Sonoma County builders are either rushing to complete and sell,or halting work entirely.KB bought that land at the peak,and I do wonder what their sunk costs are.Abandoning the project at this stage is pretty telling...I have been told by contractors that the permits for a home in this area run $80k.yup, permits alone $80k.
Tom- saw that development in July, You're right about the silt. I doubt they'll spend the extra $$ for that
I used to sell RE in Rohnert Park in the early 80's. Days of 13-14% interest.
Lehman said the same thing, that the worst is over.
There is anectdotal data in the press that the fed made lots of phone calls before the cut. But the fed won't tell us what they heard. Why? Because there is no data behind it.
So let's recap. The Fed is working on anectodal data which it cannot share with us because things are so bad. MorganStanley & Lehman both say the worst is behind us, ostensibly with the sanction of Sarbanes-Oxley hanging over their heads if they are ever found out to deliberately misleading to shareholders & debtholders.
Which version of the truth do you believe? Can they both be right?
o-joe seems to be spiking the ball on the 5 yd line. We still have Oct right ahead of us, a lot of ARM resets and the despair of millions of foreclosures.
I am now expecting MORE Fed cuts every meeting. I don't think inflation is a concern for the Bernanke Fed. Cramer & the IB's bitch.
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Hello CR,
I sincerely hope that one day you will reconcile your estimate for demand with actual data. For example, going back to 1987 there were only three years, 2004-06, in which the Total Units Completed exceeded your estimate of 1.7M per year. The total overbuilding during these three years was 650K units (5,750K Completed versus the demand of 5,100K). Of course, lot fewer units than your demand were built for more than a decade prior to 2004. Even if you assume that during the boom 650K of overbuilding took place, the problem should be cleared by 2008Q2 if we believe your estimate for demand and the lowered rate of construction. No?
All the data that I have looked at suggest that you are off by 500K a year in your estimate for demand. That means the supply-demand imbalance of several million over the past dozen years based on whose estimate is correct.
Also, have you looked at the Household Formations data and reconciled your estimate with that? For 1995-2007Q2, it averages out to approximately 0.75M per year!
Average Household Formations (Source: Census/Haver):
1995-2001 1M/year
2002 minus 2M
2003-2007Q2 1M/year
Jas
I'm officially questioning my stagflation outlook today and leaning a bit more towards deflationary.
The CPI seems relatively tame. I'm not comfortable with the housing situation. I think a recession is a 50/50 chance now.
CPI Tame?
Food and medical (a larger percent of family budgets than energy) were up over 4 percent for the year and .4 and .5 respective for the month!
Energy prices were low for the month of August. Sept/Oct will be much higher and the Fed will have it's hands tied.
Inflation is real!
Do illegal immigrants own houses? If not, then come Jan 2009 when amnesty is granted to one and all, we should have several million prospective new buyers. Don't you think?
Bobby | 09.19.07 - 10:34 am |
I know maybe a dozen illegal immigrant in the Chicago area and most own houses, some multiple and many run their own businesses as well...
Rain headed for Petaluma this week, Tom Stone.
Uh oh.
cosmodog,
I covered that in my blog for what it is worth (including energy being temporarily weaker in August). Housing came in flat though and may be the most important part of all.
come on i just read in Details Magazine that americans are having more babies than ever.
especially the super duper rich ones in nyc. its a status symbol it appears.
and to me i thought they (the kiddies) were just bundles of joy, not a new BMW
Do illegal immigrants own houses?
It's not just the ones that Darius at 1:45 happens to know of, either. I guess this is partly a result of reducing discrimination in lending. At least, that's the story they seem to have been sticking to.
Selling Illegal Immigrants the American Dream
I wonder what the sequel on these loans is? On one hand, there's an easy flight if the terms become onerous, but on the other, there's a real incentive not to call attention to oneself by landing in court.