With 300billion (about 600k houses) financed with OptionARM mortgages, I expect the high end will get unstuck in the next couple of years. After all 80% of those are being paid with minimum payment leading both to NegAM and huge payment shock down the road.
in the washington times today an article indicating that futures trading is PART of the driver behind high oil prices (not to take anything away from those who also point to dollar destruction)
"Sen. Richard J. Durbin, Illinois Democrat, applauded the commission's moves to more-closely regulate oil speculators, and said the appropriations subcommittee that he chairs will add to the agency's budget and staff so it can more rigorously pursue possible wrongdoing in the huge and complex futures and derivatives markets for oil.
"Just how much oil prices are being driven by speculation became clearer yesterday as regulators revealed that Wall Street dealers, hedge funds, pension funds and other speculators hold 70 percent of the leading oil futures contracts traded in New York."
snip
"Mr. Durbin and other senators have drafted legislation that would close the so-called "London loophole," which allows investors who route their orders through London to escape the commission's scrutiny.
snip
"CTFC simply doesn´t have enough cops on the beat," he said, noting the agency can monitor only the fraction of oil trading that occurs on U.S. exchanges.
"Trading in commodity markets has exploded, from nearly 500 million trades in 2000 to over 3 billion trades in 2007," while the commission's staff levels dropped by 21 percent, he said."
Hello darkness, my old friend,
Ive come to talk with you again,
Because a vision softly creeping,
Left its seeds while I was sleeping,
And the vision that was planted in my brain
Still remains
Within the sound of silence.
In restless dreams I walked alone
Narrow streets of cobblestone,
neath the halo of a street lamp,
I turned my collar to the cold and damp
When my eyes were stabbed by the flash of
A neon light
That split the night
And touched the sound of silence.
RBS issues global stock and credit crash alert
"The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks. "A very nasty period is soon to be upon us - be prepared," said Bob Janjuah, the bank's credit strategist." RBS issues global stock and credit crash alert - Telegraph
We urgently need congress to step in and replace all those deadbeat California homeowners with rich, educated, responsible people that form a labor-force that's competitive on the global markets, comes with pre-stocked 401k retirement accounts, and requires a minimal amounts of health care for ultra-low insurance premiums.
Quick guys, get out the pen and paper and stroke some new laws and spending bills before the Fed steps in and upstages you by "cleaning up the mess" first!
dryfly, Halo will be history before long - I'm working on a solution that I think everyone will like.
Optimistic-Joe, I think we are starting to see more and more foreclosure activity at the high and middle end. Although prices are already falling in these areas - I expect the foreclosure activity will push down prices more over the next couple of years.
in the washington times today an article indicating that futures trading is PART of the driver behind high oil prices (not to take anything away from those who also point to dollar destruction)
Mock: yes it's the sum of parts but the main factor is the price of oil is demand driven, if am not mistaken crude numbers have fallen by about 10m in the last few weeks, although it fell less today(implying maybe demand destruction is happening) However, the emerging economies are still growing.
Sen. Joe Lieberman, a Connecticut independent, revealed Wednesday the drafts of three bills that would sharply curtail the activities of financial investors in the commodities markets. The most extreme proposal would prohibit private and public pension funds with more than $500 million in assets from investing in agricultural and energy commodities traded on a U.S. futures exchange, foreign exchange or over-the-counter, according to materials provided by Lieberman's office.
"According to Rep Peter DeFazio (D-Or), the entity that owns the most oil in the United States right now is not ExxonMobil or Chevron or Valero: its Morgan Stanley. So whats Morgan Stanley doing with all that oil? Speculating on the petrofraud bonanza."
If indeed prime option arms are supporting higher-priced areas, I expect things to change in the better neighborhoods around the Bay Area next year.
Sure, some of these high-end buyers have the scratch to make a big down and hang tight. But as I never stop hearing around this blog, prices are set at the margins.
I'm perpetually annoyed to see the Dataquick press release language about
the slowest pace for a [month] in over 20 years
They do typically later state the reality more accurately, such as:
Last month was the slowest May in DataQuick's statistics, which go back to 1988.
Maybe this is a small quibble, but I think there's a huge public perception difference b/t newspaper coverage that says "this is the worst Feb/March/May/whatever in 20 years" and "this is the worst month ever for the 20 years we have data" b/c certainly on a population-adjusted or housing-stock-adjusted basis out here in California that means these are the worst months ever. Ever.
The 20 years stuff makes it sound like this might be some somewhat normal cyclical issue we're dealing with so that the turnaround might be right around the next corner.
Or perhaps I'm making a mountain out of the proverbial molehill.
It will be interesting to see how this story unfolds. In the central valley and lower priced areas of the state, the cost to produce a new home, without land and profit is as follows
Site dev - 40K
Building - 140K (2000 SF, base cost)
Fees - 50K (varies by City)
Indirects - 60K (int, selling, etc)
Minimum - 290K wo land/profit
Indirects can be higher with low sales rates and resales are priced under cost of new, so it will be interesting to see how this unfolds.
At some point, new homes may become a luxury, discretionary purchase.
At some point, new homes may become a luxury, discretionary purchase.
CA Builder | 06.18.08 - 2:16 pm | #
Like in the rest of the country where you can buy an 'adequate' existing structure for half what new housing costs... and they all aren't in ghettos or the Mississippi River flood plain (but luckily for local builders some are!!!)
If it wasn't for floods, tornadoes & arson there'd be no new houses here at all.
It will be interesting to see how this story unfolds. In the central valley and lower priced areas of the state, the cost to produce a new home, without land and profit is as follows
Site dev - 40K
Building - 140K (2000 SF, base cost)
Fees - 50K (varies by City)
Indirects - 60K (int, selling, etc)
Minimum - 290K wo land/profit
A couple of observations, keeping in mind that I agree it is getting really interesting out here.
Expect those fees to come way down over the next few years. Bargaining power is already shifting from the municipalities to the (new) owners of these distressed properties, who can now say to the city: If you want this MPC finished in our lifetime, then lower the fees b/c otherwise this doesn't pencil and I'll sit on this undeveloped dustbowl and give it to my children. Every city will cave eventually.
I'm not totally sure the point you are making, but it sounds like you are saying that the fully loaded cost to construct is above the FMV of the house. That is certainly true today, which is why land appraises back to a negative value on a residual valuation methodology. But in terms of the near term fundamentals of the market, cost to complete new construction is completely irrelevant: there is far too much supply of existing housing stock in most of these markets and certainly ALL of the markets in the central valley.
We urgently need congress to step in and replace all those deadbeat California homeowners with rich, educated, responsible people that form a labor-force that's competitive on the global markets, comes with pre-stocked 401k retirement accounts, and requires a minimal amounts of health care for ultra-low insurance premiums.
BTW, congress. Make sure the new Californians are better looking than the old ones.
Hmmh, take a historic housing bubble, record commodity prices (on a real basis), rising unemployment, and add a rapidly rising Yuan (aka where Walmart gets its goods from) and a sharp stock market decline, and you have the recipe for a real real bad Christmas 2008.
any reasonably good areas are still averaging 2005 level asking price. I dont see any good bargains in Fremont/Milpitas/Pleasanton. I dare not look at the prices in Santa Clara or Palo Alto. The only bargains are in Hayward area, but i wouldn't call those good bargains.
Sticky prices............
Ed Leamer one of the first to call the bubble? Really? When, in 2007? C'mon. Chris Thornburg was a dissenting vote to Leamer who thought housing only went up. He went over to Beacon and has been far more accurate. He called the bust too early, but he had the right idea (underestimated how irresponsible everyone could get). Leamer begrudgingly came around a little after looking in the rear view mirror.
I have a hard time listening to "the bottom is here" talk from the people who never saw this train wreck coming.
Bottom?!?! Option ARM blow up. Unemployment rising. Inflation and interest rates rising. Tighter lending standards. No "move up" buyers. Bottom?!?! (Use Jim Mora's "Playoffs!?!, as the tone).
Until someone who calls in a bottom bothers to calculate income as it relates to housing prices, I don't give it much due. Just as much leverage was used in Manhattan Beach as Compton - just a longer reset time on the loan.
John, when the next population exodus in the bay area begins, this time around it will hit rents just like last time (2001.5 to 2004) It's going to take time, and we are just about to see the beginning. For now, peeps are still here, and rental owners are desperate to push up rents to get the yield they need, and previous home "owners" are now turning to renting. It can be done while the good times still last, but wait until the option arm reset wave comes in a few months, and the job losses really roll in. Then you'll see vacancies rise, and that will be it for rent growth and prices.
Eleven months ago I was panned for placing a bet with a colleague that bay area home prices would drop 20% from July 2007 to July 08. The July numbers are still two months away and I've already won my bet. Sweet.
DOw about to breach the 12,000 mark. Looks like the bear market is on again. Oh and first.
BTW I'd really look at the SPX or the Wilshire 5000 (WLSH) instead of the DOW (you can try the Russell 3000 too). The DOW is fun to talk about, but the way it's weighted makes it a poor choice for an overall market indicator.
"John, when the next population exodus in the bay area begins, this time around it will hit rents just like last time (2001.5 to 2004)"
And that was nothing compared to 1990-95, from my personal experience. In '95, one of my old apartments was still renting for 10-15 percent less than I paid for it in '88-'90.
Using Redfin, Bay Area mid-peninsula (from Millbrae to Palo Alto) asking prices are comparable to 2005. But it seems that this area only peaked about 10-15 months ago (mid 2007). Most properties purchased from mid-2005 to mid 2007 are asking price paid or less (sometimes substantially less). There are a few outliers (some sellers haven't gotten the memo) who want 30% over a 2006 price. But not too many.......
There are still MANY sellers that want anywhere from 50%-200% above price paid in 1999-2004 (e.g. paid $420k in 2001; want $1.1m today).
And for the conumdrum of the "high end still selling", many of the properties that have gone from $700k to $450K are small, old, places in marginal neighborhoods. That is, no bargain even at 30% off. Places that in "dryfly" country would sell for $90-110K
Personal anecdote about the Bay Area housing market:
We've been renting a house in Los Gatos for 3 years, a cozy home currently worth about $1.3M on Zillow. It was the landlord's personal residence prior to his purchase of another Los Gatos home.
He just gave us 2-month's notice, because he's decided to sell. He says he can't afford carrying the two homes. This guy is a doctor. I suspect his loans are getting less affordable.
Looking on Craigslist for another Los Gatos rental, I see a significant number of houses for rent that are obviously distressed rentals. Newly remodeled with granite countertops, etc... Outragous asking rents that reappear week after week, month after month. Lots of them are in neighborhoods with lots of pretty colors on the ForeclosureRadar.com website.
The strain is there in the upper-middle end of the market. Tick tock, tick tock.
A more significant Dow number, I believe, is a daily close below 11,740.15 (close of March 10, 2008) the lowest previous daily close after the October high.
sunset...correcto! Why do you think Thornberg left? It wasn't likely that it was completely voluntary.
Here's an amusing quote from Gary Shilling along those lines:
Second, most economic forecasters are
paid to be optimistic. I know firsthand.
While Merrill Lynchs first Chief
Economist, I correctly forecast the
1969-1970 recession, but that wasnt
being bullish on America, in Merrill
Lynch parlance. So Donald T. Regan
and I had a disagreement which he won
since he was running the firm. I took
my entire staff and left and ended up as
the Chief Economist of another Wall
Street firm, White Weld, with no idea
that Merrill Lynch would buy the firm
in 1978. So the story on Wall Street,
which was absolutely true, was that
Shilling was the only guy fired twice by
Don Regan.
From 2005 to 2007 there were three ways to buy in berkeley oakland, I know these three examples...
1) have the cash 1.2 Million for that particular house you love....
2) get a traditional loan for 500K and live in a very marginal area of oakland with a traditional loan and traditional downpayment, THe lot is kinda big, the house is 1000 square feet. oh and the house went for 90K only 7 years before
3) live in the hilsls on an 100% Option ARM interest only that resets in 5 years for a house that cost 750K
How does that look in 2008,
Person 1 is still really happy and not worried, but they are rare 1% of the population at best.
Person 2 has seen their down-payment disappear, their loan is more than the value of their house, I just saw a better house a block away for 300K. They also are stuck in their job at LBL and cannot leave for a better position because of the lost value in their house, their boss knows that of course.
Person 3 has stated that when the reset happens in 2010 she will go into foreclosure.
And that is the person who will set the prices for berkeley oakland in 2011.
eric...hilarious! I know person 2 and 3 as well. I feel most sorry for person 2, a good friend, who just was not able to be swayed from her bad decision.
The swollen Mississippi River ran over the top of at least 11 more levees on Wednesday as floodwaters swallowed up more U.S. farmland, adding to billion-dollar losses and feeding global food inflation fears.
NEW YORK (CNNMoney.com) -- Economic woes are expected to continue until at least mid-2009, and things may get worse before they get better, according to a quarterly survey of chief financial officers.
The quarterly Duke University/CFO Magazine Global Business Outlook study found 71% of more than 1,000 CFOs surveyed said the U.S. economy will not begin to rebound until 2009. And 54% think the turnaround will happen by next summer at the earliest.
"This could be the longest slowdown since the double dip recession of 1979-81," said John Graham, director of the survey.
There was some positive news from the survey: Overall, optimism rose slightly from the previous quarter.
Still, financial chiefs from a broad range of public and private companies hold a grim view of the economy and attribute their pessimism to a tough jobs market and rising inflation. Weak consumer demand and high fuel costs also topped their concerns.
People with brains will not speculate in homes, period!
"A very nasty period is soon to be upon us--be prepared," he said, according to a report published in the Daily Telegraph newspaper on Wednesday. He advised that cash was the "key" safe haven. "If you have to be in credit, focus on quality, short durations, non-cyclical defensive names."
"Person 3 has stated that when the reset happens in 2010 she will go into foreclosure.
And that is the person who will set the prices for berkeley oakland in 2011."
eric... | 06.18.08 - 3:01 pm | #
Yep,this exact same scenario applies to just about all those areas with the nice big percentages of option arms from the other day...
It's been interesting watching prices remain way beyond reasonable as I watch more and more for sale signs sprout up like weeds in Santa Barbara. I keep having to reassure my fiancee that the prices are going to correct, no matter what the UCSB Economic Forecast says. I don't have the numbers to prove it, but my gut says that the lack of affordability here over the past few years means that there are going to be a LOT of Option ARM blowups over the next couple of years. In the meantime, I just keep piling money into savings for the down payment and live in my little 1 BR apartment down by the beach.
Person 2 has seen their down-payment disappear, their loan is more than the value of their house, I just saw a better house a block away for 300K. They also are stuck in their job at LBL and cannot leave for a better position because of the lost value in their house, their boss knows that of course.
What's sad is the person who did the historically "responsible" thing and saved up and made a down payment with their own hard-earned money is the person that's going to get most screwed over.
Instead of losing the banks money like the subprime lot, they're losing their own.
In the meantime, I just keep piling money into savings for the down payment and live in my little 1 BR apartment down by the beach.
paul_in_sb | 06.18.08 - 3:11 pm | #
paul,
Easy way to look at this. I looked at properties near my parents in the late 90's/early2k. Most nice homes were 1.5X my income. When I finally transferred nothing livable was available at even 3x income. Where did the wage increases come from to support this? Answer is...They didn't. Funny loans got us here. Normal loans will get us back to where we need to be. Just gonna take a bit.
Chris
P.S. - Prices on the low end stuff are undershooting 1999-2000 prices right now...
Don't know about you, but it seems pretty significant that the Wash. TIMES is saying we don't have enough regulators on the beat. If it were the Post saying we needed more staff at CFTC, the Administration could try to write if off as leftie drivel, but this is the TIMES here.
Being nosy, I picked up a bunch of those free real estate magazines last week when visiting the Bay Area. San Francisco is still very expensive, no less than Manhattan per square foot of living space. Outside SF, things are tumbling and every other page of the real estate magazine talks about REO or foreclosures - trying to whip up buyer excitement over this great opportunity. Yet, when provided, the asking prices of the properties still seem high for what you get. A lot aren't giving asking prices now - whatever that means. Many of the properties look less than spiffy, absent a proud seller.
U.S. money market funds may be forced to sell short-term municipal securities if troubled bond insurers are downgraded below "AA," potentially adding to banks' woes, according to a Bank of America report.
Bond insurance arms of MBIA Inc and Ambac Financial Group earlier this month finally lost their top "AAA" ratings from a major rating company because they had guaranteed massive amounts of troubled mortgage-backed debt.
Standard & Poor's cut the No 1. and No 2. companies in the business to "AA," but rival rating firm Moody's Investors Service said it may cut MBIA to the "single A" category, potentially spelling trouble for money market funds and banks.
Show you how spoiled these young whippersnappers are. A few foreclosures and a market correction is all it takes to make them fold like a cheap card table.
Where I live, there's a sign on every corner for Office Space to Lease - or other business/stripmall For Lease signs - as well as the +50% REO residential fire sale.
Yet prices are only down 25% (after 150% increase over the last 7 years).
Good school districts still seem to be hanging on. A few scattered REOs in "the bad part of town" and not many in the nicer areas. We need either Alt-A or public/private school arbitrage to take us the rest of the way... I did notice a couple of listings returning to the MLS from the winter time frame, but not any huge inventory bloat. At least there are now some listings for less than $500k (couldn't say that last year at this time.)
EBGuy, yes that is what I heard. Good school districts even see housing price increasing now. Education is the main force driving those markets. You got to give the parents the credits.
"The original 'lost generation' was brought about by WWI."
The Federal Reserve funded America in WWI. Then contracted credit in the Great Depression. Then funded America in WWII. Then funded America in Vietnam. Then funded America in Iraq. Soon to fund America in Iran.
Lost generations are part of the boom/bust endless war cycle.
At some point, new homes may become a luxury, discretionary purchase.
At one point in the recent past Buffett invested in a mobile home manufacturer. I think he has since sold. But mobile, or prefab homes may have another wave in the future. They are a lot cheaper, are they not?
Immediately found as if by magic (hat tip to D. Radcliffe) that Berkshire owns Clayton Homes, a prefab home builder, outright, 100%. Wonder how it is doing.
peAkcredit writes:
Janjuah's warning: "A very nasty period is soon to be upon us--be prepared," he said, according to a report published in the Daily Telegraph newspaper on Wednesday. He advised that cash was the "key" safe haven.
Well if cash is 'key' heading into what could become a serious economic decline, I'm going to keep track of two homeowner families, each with 10% current equity, and contrast how they are doing at the end of 12 months using 2 approaches:
Family 1 will become "stay-ins", saving the PI and tax payments (during the probable 12 month foreclosure process) for use as future rent or downpayment $ so they can walk away from their possibly unsaleable house, retaining the alternative to become current at the end of 10-11 months and stay if home prices are unchanged or slightly lower but heading up, while they heal their credit dent.
Family 2 will stay current, hoping that they won't be trapped in an underwater house at the end of 12 months.
We'll follow them along periodically and see who is doing better at the end of 11 months: The family with cash, a credit dent, and a house (or apartment) or the family staying current in their house.
I'll call family 1's plan PREP: the Personal Real Estate Put.
Referring to an earlier comment about Congressional hearings, I just love how so many people out there are wistfully blaming high oil prices on this mysterious set of beings called "speculators".
By Definition, What You Do In A Capital Market Is Speculation.
Maybe just a bunch of people looked at the Chinese on one hand, and the oil reserves on the other, and then "speculated" that oil is worth $130/bbl and rising.
Well when things turn sour you have to blame somebody. It isn't satisfying to blame a whole society or chance or whatever. You have to find demons, so they do. I am surprised that the oil companies haven't been more demonized than they have. Isn't some group filing suit vs. OPEC for "overcharging."
You are right, I should clarify. I am complaining that too many SFR in desirable locations (schools/bart) are still asking 2005 unaffordable price.
Tiny condos next to highways/railroads are asking 2003 prices.
Summary: there are bargains, but not good bargains.
When do you expect the higher end to get more significant price pressure as well?
O-Joe
In Phoenix, the high end is getting murdered, especially in N. Scottsdale/ Kierland, while there's been a few FC auctions on Camelback mountain.
The same yayhoos I knew who got killed on margin calls in the tech bust are the same yayhoos who borrowed on no down NINJA loans and now are $400k upside down on their $1.2mm houses.
But there's plenty of crap available for a measly $550K -- hard to believe that this sold less than a year ago for $810K. And you non Bay Area folks should especially look at this one (don't miss the photo of the granite countertop.
I'm currently looking to buy in San Francisco (been renting in SF for the past 2 years) and am a young newly-married whippersnapper.
The majority of affordable housing (
Your should not overlook person 4. That's the guy who can do math, and realized that renting was the way to go. For a monthly stroke equal to that of a mortgage on a $250K house in the ghetto...he can live in the $800K house. Oh wait...that's me.
"Prices going down" in Bay Area is very similar to "Me and Bill Gates have 60B$ together".
There are places where the price went down more than 50% - but a reasonable person (who could now get a loan) would not live there, in a house with granite countertop kitchen and freeway view. But for good neighborhoods the price is not going down.
A month ago checked the property in our neighborhood. Asking price was 829K. Talked to listing agent, thought it should sell at least 100K lower - this one was smaller than ours, same street, corner lot, and we paid ~750K. He said, no way. Was sold on May 25th for 835K. WTF?
Neuman Homes goes broke, and it's not just a few crack houses nearby, but people living in a completely unfinished subdivision with piles of dirt and wrapped houses. They can barely get the roads plowed in the winter.
I'm guessing that will come to some very large losses by the owners... and the banks as well. They let this go on until there was no unencumbered equity.
"To me[Neuman]," he answers, "bankrupt meant that you don't have any money."
Ed S,
the one in Belmont shouldn't have been sold in 1998 for $223k. i think the transaction should be a refinance. I notice something like this before for $100k, doesn't make much sense as sale price.
I think the one in San Mateo won't sell, they just put a low price to get a bid, then negotiate with bank.
The most telling one is the bank owned. That shows why price is sticky.
No longer in the Bay Area. Still listen to traffic hell on the satelite radio though, laugh my buns off. Quality of life in the Bay Area is vastly overated.
DOw about to breach the 12,000 mark. Looks like the bear market is on again. Oh and first.
With 300billion (about 600k houses) financed with OptionARM mortgages, I expect the high end will get unstuck in the next couple of years. After all 80% of those are being paid with minimum payment leading both to NegAM and huge payment shock down the road.
What's up with Haloscan today? It not only pops-up (what it supposed to do), but takes the main screen to the comments.
Weird.
Best to all.
CR,
When do you expect the higher end to get more significant price pressure as well?
O-Joe
in the washington times today an article indicating that futures trading is PART of the driver behind high oil prices (not to take anything away from those who also point to dollar destruction)
"Sen. Richard J. Durbin, Illinois Democrat, applauded the commission's moves to more-closely regulate oil speculators, and said the appropriations subcommittee that he chairs will add to the agency's budget and staff so it can more rigorously pursue possible wrongdoing in the huge and complex futures and derivatives markets for oil.
"Just how much oil prices are being driven by speculation became clearer yesterday as regulators revealed that Wall Street dealers, hedge funds, pension funds and other speculators hold 70 percent of the leading oil futures contracts traded in New York."
snip
"Mr. Durbin and other senators have drafted legislation that would close the so-called "London loophole," which allows investors who route their orders through London to escape the commission's scrutiny.
snip
"CTFC simply doesn´t have enough cops on the beat," he said, noting the agency can monitor only the fraction of oil trading that occurs on U.S. exchanges.
"Trading in commodity markets has exploded, from nearly 500 million trades in 2000 to over 3 billion trades in 2007," while the commission's staff levels dropped by 21 percent, he said."
Hello darkness, my old friend,
Ive come to talk with you again,
Because a vision softly creeping,
Left its seeds while I was sleeping,
And the vision that was planted in my brain
Still remains
Within the sound of silence.
In restless dreams I walked alone
Narrow streets of cobblestone,
neath the halo of a street lamp,
I turned my collar to the cold and damp
When my eyes were stabbed by the flash of
A neon light
That split the night
And touched the sound of silence.
Weird.
Just halo being halo...
I had some surprises with it earlier too. In other news - I understand the Pope is still Catholic.
RBS issues global stock and credit crash alert
"The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks. "A very nasty period is soon to be upon us - be prepared," said Bob Janjuah, the bank's credit strategist."
RBS issues global stock and credit crash alert - Telegraph
We urgently need congress to step in and replace all those deadbeat California homeowners with rich, educated, responsible people that form a labor-force that's competitive on the global markets, comes with pre-stocked 401k retirement accounts, and requires a minimal amounts of health care for ultra-low insurance premiums.
Quick guys, get out the pen and paper and stroke some new laws and spending bills before the Fed steps in and upstages you by "cleaning up the mess" first!
dryfly, Halo will be history before long - I'm working on a solution that I think everyone will like.
Optimistic-Joe, I think we are starting to see more and more foreclosure activity at the high and middle end. Although prices are already falling in these areas - I expect the foreclosure activity will push down prices more over the next couple of years.
Best to all.
zillow says high end BA areas have a lot more sales than low end areas.
In the declining market like today, I truly miss someone in this blog. I can use some optimisitc view now.
mock turtle writes:
in the washington times today an article indicating that futures trading is PART of the driver behind high oil prices (not to take anything away from those who also point to dollar destruction)
Mock: yes it's the sum of parts but the main factor is the price of oil is demand driven, if am not mistaken crude numbers have fallen by about 10m in the last few weeks, although it fell less today(implying maybe demand destruction is happening) However, the emerging economies are still growing.
On another note, look at gold today
End of the quarter is almost upon us. Watch the banks try to twiddle their quarterly numbers to look better than they should.
Anonymous writes:
Hello darkness, my old friend..
YouTube - sound of silence
Sen. Joe Lieberman, a Connecticut independent, revealed Wednesday the drafts of three bills that would sharply curtail the activities of financial investors in the commodities markets. The most extreme proposal would prohibit private and public pension funds with more than $500 million in assets from investing in agricultural and energy commodities traded on a U.S. futures exchange, foreign exchange or over-the-counter, according to materials provided by Lieberman's office.
Found this interesting:
"According to Rep Peter DeFazio (D-Or), the entity that owns the most oil in the United States right now is not ExxonMobil or Chevron or Valero: its Morgan Stanley. So whats Morgan Stanley doing with all that oil? Speculating on the petrofraud bonanza."
321energy :: June is Bustin’ Oil All Over! :: Michael Fox
Cheers,
But Leamer and his crooked bunch of Realwhore-funded pseudo-economists at UCLA have declared that CA housing has passed the bottom and is moving up.
Ed Leamer truly deserves no respect ever again, as his clearly biased incorrect prognoses have proven his allegiance to the slime.
Leamer is just another whore.
um, best musical advice regarding the economy... Iron maiden
Run for the hills. Run for you life.
If indeed prime option arms are supporting higher-priced areas, I expect things to change in the better neighborhoods around the Bay Area next year.
Sure, some of these high-end buyers have the scratch to make a big down and hang tight. But as I never stop hearing around this blog, prices are set at the margins.
At least if Morgan Stanley's bet goes bad on oil, the Fed can backstop them.
Does anybody know a good foreign exchange to move the commodity trading for my $600 million dollar pension fund to?
badger boy writes:
um, best musical advice regarding the economy... Iron maiden
I prefer dylan's , slow train :-
YouTube -
I'm perpetually annoyed to see the Dataquick press release language about
the slowest pace for a [month] in over 20 years
They do typically later state the reality more accurately, such as:
Last month was the slowest May in DataQuick's statistics, which go back to 1988.
Maybe this is a small quibble, but I think there's a huge public perception difference b/t newspaper coverage that says "this is the worst Feb/March/May/whatever in 20 years" and "this is the worst month ever for the 20 years we have data" b/c certainly on a population-adjusted or housing-stock-adjusted basis out here in California that means these are the worst months ever. Ever.
The 20 years stuff makes it sound like this might be some somewhat normal cyclical issue we're dealing with so that the turnaround might be right around the next corner.
Or perhaps I'm making a mountain out of the proverbial molehill.
ac writes:
Does anybody know a good foreign exchange to move the commodity trading for my $600 million dollar pension fund to?
Dubai is open for business.
It will be interesting to see how this story unfolds. In the central valley and lower priced areas of the state, the cost to produce a new home, without land and profit is as follows
Site dev - 40K
Building - 140K (2000 SF, base cost)
Fees - 50K (varies by City)
Indirects - 60K (int, selling, etc)
Minimum - 290K wo land/profit
Indirects can be higher with low sales rates and resales are priced under cost of new, so it will be interesting to see how this unfolds.
At some point, new homes may become a luxury, discretionary purchase.
Calculated Risk said: "What's up with Haloscan today?"
Working fine on my end.
Firefox 3.0
Criticizing Leamer and UCLA Anderson forecast as sellouts to the realtors is hilarious.
UCLA was one of the first mainstream sources to call a housing bubble. Go tilt at another windmill "anonymous."
Or perhaps I'm making a mountain out of the proverbial molehill.
Price Stout | 06.18.08 - 2:16 pm | #
Yup. But we in the comments section like molehill... MORE MOLEHILL!!!
At some point, new homes may become a luxury, discretionary purchase.
CA Builder | 06.18.08 - 2:16 pm | #
Like in the rest of the country where you can buy an 'adequate' existing structure for half what new housing costs... and they all aren't in ghettos or the Mississippi River flood plain (but luckily for local builders some are!!!)
If it wasn't for floods, tornadoes & arson there'd be no new houses here at all.
CA Builder writes:
It will be interesting to see how this story unfolds. In the central valley and lower priced areas of the state, the cost to produce a new home, without land and profit is as follows
Site dev - 40K
Building - 140K (2000 SF, base cost)
Fees - 50K (varies by City)
Indirects - 60K (int, selling, etc)
Minimum - 290K wo land/profit
A couple of observations, keeping in mind that I agree it is getting really interesting out here.
careful folks, dow 12k hull breach imminent. Captain! We're losing containment...shields at 10% and dropping!
Calculated Risk writes:
dryfly, Halo will be history before long - I'm working on a solution that I think everyone will like.
Don't do it! The odds of getting caught and jail time aren't worth it. Violence never solved anything. But if you need an alibi I'm available.
Price Stout:
you are incorrect on the history of UCLA Anderson Forecast.
They called the housing bubble when Thornberg was there.
Thornberg left and their forecasts got a lot kinder to the REIC with Leamer at the helm.
sunset...correcto! Why do you think Thornberg left? It wasn't likely that it was completely voluntary.
We urgently need congress to step in and replace all those deadbeat California homeowners with rich, educated, responsible people that form a labor-force that's competitive on the global markets, comes with pre-stocked 401k retirement accounts, and requires a minimal amounts of health care for ultra-low insurance premiums.
BTW, congress. Make sure the new Californians are better looking than the old ones.
Talk about false advertising. Sheesh.
--
Not to worry, CRers, June will show a spike in sales, both in SoCal and BayArea, led by foreskineds.
Jas
Any types of bans on commodity speculation are smoke-and-mirrors.
Thornberg left and their forecasts got a lot kinder to the REIC with Leamer at the helm.
sunsetbeachguy | 06.18.08 - 2:27 pm | #
As the worlds greatest political pundit, Deep Throat, once said: "Follow the money".
Price Stout, go back to your Anderson cubicle, jackass.
Hmmh, take a historic housing bubble, record commodity prices (on a real basis), rising unemployment, and add a rapidly rising Yuan (aka where Walmart gets its goods from) and a sharp stock market decline, and you have the recipe for a real real bad Christmas 2008.
kis writes:
Any types of bans on commodity speculation are smoke-and-mirrors.
Here we go...the PPT will need to work overtime today. I think we could lose 200+ on the DOW today...
any reasonably good areas are still averaging 2005 level asking price. I dont see any good bargains in Fremont/Milpitas/Pleasanton. I dare not look at the prices in Santa Clara or Palo Alto. The only bargains are in Hayward area, but i wouldn't call those good bargains.
Sticky prices............
3. Did they not get the memo that the Fed is encouraging this activity by lending the money to do it?
1987 Stock Market Crash ->
Federal Reserve Bailout ->
Hedge Fund Industry Explosion ->
LTCM Crash ->
Federal Reserve Bailout ->
DOT.COM Bubble ->
DOT.COM Crash ->
Federal Reserve Bailout ->
Housing Bubble ->
Housing Crash ->
Federal Reserve Bailout ->
Commodity Bubble...
Hmm .. Crude is up 2 bucks and DOW went below 12k. Damn speculators!
Crispy...did you see how fast they swung into action when we dipped to 11999? It was amazing.
Seems like a great time for investors to get into the Bay Area real estate market what with this fact, 'slowest pace for a May in over 20 years'.
In the past few months there's been a lot of talk about rents shooting up in the San Francisco area: Investment Properties Info - Property Financing
Ed Leamer one of the first to call the bubble? Really? When, in 2007? C'mon. Chris Thornburg was a dissenting vote to Leamer who thought housing only went up. He went over to Beacon and has been far more accurate. He called the bust too early, but he had the right idea (underestimated how irresponsible everyone could get). Leamer begrudgingly came around a little after looking in the rear view mirror.
I have a hard time listening to "the bottom is here" talk from the people who never saw this train wreck coming.
Bottom?!?! Option ARM blow up. Unemployment rising. Inflation and interest rates rising. Tighter lending standards. No "move up" buyers. Bottom?!?! (Use Jim Mora's "Playoffs!?!, as the tone).
Until someone who calls in a bottom bothers to calculate income as it relates to housing prices, I don't give it much due. Just as much leverage was used in Manhattan Beach as Compton - just a longer reset time on the loan.
Ed Leamer one of the first to call the bubble? Really?
LOL.
Ed "the Heart Says there's no Business Cycle" Leamer.
John, when the next population exodus in the bay area begins, this time around it will hit rents just like last time (2001.5 to 2004) It's going to take time, and we are just about to see the beginning. For now, peeps are still here, and rental owners are desperate to push up rents to get the yield they need, and previous home "owners" are now turning to renting. It can be done while the good times still last, but wait until the option arm reset wave comes in a few months, and the job losses really roll in. Then you'll see vacancies rise, and that will be it for rent growth and prices.
Eleven months ago I was panned for placing a bet with a colleague that bay area home prices would drop 20% from July 2007 to July 08. The July numbers are still two months away and I've already won my bet. Sweet.
No doubt the PPT is afraid of a close below 12000, that would prove all the bottom callers wrong.
Can't have truth and justice, now, can we?
John
Get in line behind Sebastian and the other fools for your award.
DOw about to breach the 12,000 mark. Looks like the bear market is on again. Oh and first.
BTW I'd really look at the SPX or the Wilshire 5000 (WLSH) instead of the DOW (you can try the Russell 3000 too). The DOW is fun to talk about, but the way it's weighted makes it a poor choice for an overall market indicator.
ac writes:
The DOW is fun to talk about,
Exactly, real fun , especially when there's that 12,000 level about to be breached!
Exactly, real fun , especially when there's that 12,000 level about to be breached!
I'm just sayin... the broad market is still quite a bit above its lows for the year.
Moreso if you factor in the NASDAQ.
"John, when the next population exodus in the bay area begins, this time around it will hit rents just like last time (2001.5 to 2004)"
And that was nothing compared to 1990-95, from my personal experience. In '95, one of my old apartments was still renting for 10-15 percent less than I paid for it in '88-'90.
Oh boy, this is going to get really nasty according to RBS of Scotland.
RBS issues global stock and credit crash alert - Telegraph
Jack,
Using Redfin, Bay Area mid-peninsula (from Millbrae to Palo Alto) asking prices are comparable to 2005. But it seems that this area only peaked about 10-15 months ago (mid 2007). Most properties purchased from mid-2005 to mid 2007 are asking price paid or less (sometimes substantially less). There are a few outliers (some sellers haven't gotten the memo) who want 30% over a 2006 price. But not too many.......
There are still MANY sellers that want anywhere from 50%-200% above price paid in 1999-2004 (e.g. paid $420k in 2001; want $1.1m today).
And for the conumdrum of the "high end still selling", many of the properties that have gone from $700k to $450K are small, old, places in marginal neighborhoods. That is, no bargain even at 30% off. Places that in "dryfly" country would sell for $90-110K
Personal anecdote about the Bay Area housing market:
We've been renting a house in Los Gatos for 3 years, a cozy home currently worth about $1.3M on Zillow. It was the landlord's personal residence prior to his purchase of another Los Gatos home.
He just gave us 2-month's notice, because he's decided to sell. He says he can't afford carrying the two homes. This guy is a doctor. I suspect his loans are getting less affordable.
Looking on Craigslist for another Los Gatos rental, I see a significant number of houses for rent that are obviously distressed rentals. Newly remodeled with granite countertops, etc... Outragous asking rents that reappear week after week, month after month. Lots of them are in neighborhoods with lots of pretty colors on the ForeclosureRadar.com website.
The strain is there in the upper-middle end of the market. Tick tock, tick tock.
A more significant Dow number, I believe, is a daily close below 11,740.15 (close of March 10, 2008) the lowest previous daily close after the October high.
Well, Lieberman really showed 'em today:
July crude closes at $136.68/brl, up $2.67, or 2%
July crude closes at $136.68/brl, up $2.67, or 2%
Darn manipuspectors!
"John, when the next population exodus in the bay area begins, this time around it will hit rents just like last time (2001.5 to 2004)"
I suspect that "leverage" is now a dirty word at the cocktail parties, and that the hosts are putting cheap booze in expensive bottles.
sunset...correcto! Why do you think Thornberg left? It wasn't likely that it was completely voluntary.
Here's an amusing quote from Gary Shilling along those lines:
Second, most economic forecasters are
paid to be optimistic. I know firsthand.
While Merrill Lynchs first Chief
Economist, I correctly forecast the
1969-1970 recession, but that wasnt
being bullish on America, in Merrill
Lynch parlance. So Donald T. Regan
and I had a disagreement which he won
since he was running the firm. I took
my entire staff and left and ended up as
the Chief Economist of another Wall
Street firm, White Weld, with no idea
that Merrill Lynch would buy the firm
in 1978. So the story on Wall Street,
which was absolutely true, was that
Shilling was the only guy fired twice by
Don Regan.
From 2005 to 2007 there were three ways to buy in berkeley oakland, I know these three examples...
1) have the cash 1.2 Million for that particular house you love....
2) get a traditional loan for 500K and live in a very marginal area of oakland with a traditional loan and traditional downpayment, THe lot is kinda big, the house is 1000 square feet. oh and the house went for 90K only 7 years before
3) live in the hilsls on an 100% Option ARM interest only that resets in 5 years for a house that cost 750K
How does that look in 2008,
Person 1 is still really happy and not worried, but they are rare 1% of the population at best.
Person 2 has seen their down-payment disappear, their loan is more than the value of their house, I just saw a better house a block away for 300K. They also are stuck in their job at LBL and cannot leave for a better position because of the lost value in their house, their boss knows that of course.
Person 3 has stated that when the reset happens in 2010 she will go into foreclosure.
And that is the person who will set the prices for berkeley oakland in 2011.
eric...hilarious! I know person 2 and 3 as well. I feel most sorry for person 2, a good friend, who just was not able to be swayed from her bad decision.
Person 1 is caspar. Person 3 Ive always snickered at.
The swollen Mississippi River ran over the top of at least 11 more levees on Wednesday as floodwaters swallowed up more U.S. farmland, adding to billion-dollar losses and feeding global food inflation fears.
WRAPUP 6-Mississippi overflows levees, crops threatened
| Reuters
The great cornholio.
NEW YORK (CNNMoney.com) -- Economic woes are expected to continue until at least mid-2009, and things may get worse before they get better, according to a quarterly survey of chief financial officers.
The quarterly Duke University/CFO Magazine Global Business Outlook study found 71% of more than 1,000 CFOs surveyed said the U.S. economy will not begin to rebound until 2009. And 54% think the turnaround will happen by next summer at the earliest.
"This could be the longest slowdown since the double dip recession of 1979-81," said John Graham, director of the survey.
There was some positive news from the survey: Overall, optimism rose slightly from the previous quarter.
Still, financial chiefs from a broad range of public and private companies hold a grim view of the economy and attribute their pessimism to a tough jobs market and rising inflation. Weak consumer demand and high fuel costs also topped their concerns.
People with brains will not speculate in homes, period!
"A very nasty period is soon to be upon us--be prepared," he said, according to a report published in the Daily Telegraph newspaper on Wednesday. He advised that cash was the "key" safe haven. "If you have to be in credit, focus on quality, short durations, non-cyclical defensive names."
I also really feel for 2, they just got married and I guess that they though that they just had to buy a house else they would never be able to...
I did get "bitter renter" from 2 and 3 so while I may have empathy for their situations I don't have much sympathy...
Yep Caspar is # 1, but they are just lovely people...
"Person 3 has stated that when the reset happens in 2010 she will go into foreclosure.
And that is the person who will set the prices for berkeley oakland in 2011."
eric... | 06.18.08 - 3:01 pm | #
Yep,this exact same scenario applies to just about all those areas with the nice big percentages of option arms from the other day...
Chris
Stocks making 3rd rally attempt now at 307pm, with oil up 2.57 to 136.58/bbl.
"If you can keep your wits about you, when everyone else is losing theirs, maybe you haven't heard the news".
It's been interesting watching prices remain way beyond reasonable as I watch more and more for sale signs sprout up like weeds in Santa Barbara. I keep having to reassure my fiancee that the prices are going to correct, no matter what the UCSB Economic Forecast says. I don't have the numbers to prove it, but my gut says that the lack of affordability here over the past few years means that there are going to be a LOT of Option ARM blowups over the next couple of years. In the meantime, I just keep piling money into savings for the down payment and live in my little 1 BR apartment down by the beach.
Person 2 has seen their down-payment disappear, their loan is more than the value of their house, I just saw a better house a block away for 300K. They also are stuck in their job at LBL and cannot leave for a better position because of the lost value in their house, their boss knows that of course.
What's sad is the person who did the historically "responsible" thing and saved up and made a down payment with their own hard-earned money is the person that's going to get most screwed over.
Instead of losing the banks money like the subprime lot, they're losing their own.
In the meantime, I just keep piling money into savings for the down payment and live in my little 1 BR apartment down by the beach.
paul_in_sb | 06.18.08 - 3:11 pm | #
paul,
Easy way to look at this. I looked at properties near my parents in the late 90's/early2k. Most nice homes were 1.5X my income. When I finally transferred nothing livable was available at even 3x income. Where did the wage increases come from to support this? Answer is...They didn't. Funny loans got us here. Normal loans will get us back to where we need to be. Just gonna take a bit.
Chris
P.S. - Prices on the low end stuff are undershooting 1999-2000 prices right now...
What is the jerk and lift record for a pile of SPX futures on the PPT? Whamo fifty points in the blink of an eye.
Damn you, ppt!
What is the jerk and lift record for a pile of SPX futures on the PPT? Whamo fifty points in the blink of an eye.
Same as the record for borrowing and selling enough Yen to drive the price down 50bps.
It's tough to pump an equity market with a slow leak
Ben is very creative. One has to wonder what else is up his sleeve? Or is he cornered?
"Ben is very creative. One has to wonder what else is up his sleeve?"
A lost decade.
A lost decade.
Anonymous | 06.18.08 - 3:36 pm | #
We wish.
A lost generation is more likely.
Mock turtle,
Don't know about you, but it seems pretty significant that the Wash. TIMES is saying we don't have enough regulators on the beat. If it were the Post saying we needed more staff at CFTC, the Administration could try to write if off as leftie drivel, but this is the TIMES here.
Being nosy, I picked up a bunch of those free real estate magazines last week when visiting the Bay Area. San Francisco is still very expensive, no less than Manhattan per square foot of living space. Outside SF, things are tumbling and every other page of the real estate magazine talks about REO or foreclosures - trying to whip up buyer excitement over this great opportunity. Yet, when provided, the asking prices of the properties still seem high for what you get. A lot aren't giving asking prices now - whatever that means. Many of the properties look less than spiffy, absent a proud seller.
The California sunshine is still great of course.
Interesting Times writes:
A lost generation is more likely.
Seattle Post-Intelligencer: David Horsey
BB- lol Fantastic.
My son is 6 months old now... that fits perfectly with my image of his future.
U.S. money market funds may be forced to sell short-term municipal securities if troubled bond insurers are downgraded below "AA," potentially adding to banks' woes, according to a Bank of America report.
Bond insurance arms of MBIA Inc and Ambac Financial Group earlier this month finally lost their top "AAA" ratings from a major rating company because they had guaranteed massive amounts of troubled mortgage-backed debt.
Standard & Poor's cut the No 1. and No 2. companies in the business to "AA," but rival rating firm Moody's Investors Service said it may cut MBIA to the "single A" category, potentially spelling trouble for money market funds and banks.
Bond insurer cuts below AA risky for munis, banks-BofA
| Reuters
Think we saw this movie before. It's all priced in.
... that fits perfectly with my image of his future.
Ah an optimist
Interesting Times said: "We wish.
A lost generation is more likely."
Major new multi-year maudlin low hit this afternoon.
The original "Lost Generation" was brought about by WWI. This one was brought about by sharply-falling housing prices in Southern California.
When you consider the difference, doesn't all this gloomy talk get just a bit much?
))
Sebastian
Show you how spoiled these young whippersnappers are. A few foreclosures and a market correction is all it takes to make them fold like a cheap card table.
Ambac Financial to Terminate Fitch Ratings Contract.
Ambac Financial to Terminate Fitch Ratings Contract (Update3) - Bloomberg.com
Ambac Financial Group Inc., the second-largest bond insurer, is terminating its ratings contract with Fitch Ratings.
When you're losing, change the rules.
Who said there would be a recovery in the 2nd half?
Will the leeves hold... for the the 12,000 DOW that is.
I really like pick-a-payment, you get the right ratio of caramels to coconut candies. Oh, sorry that's Brachs pick-a-mix. Easy to get those confused.
I like the personal anecdotes, ShortCourage.
Where I live, there's a sign on every corner for Office Space to Lease - or other business/stripmall For Lease signs - as well as the +50% REO residential fire sale.
Yet prices are only down 25% (after 150% increase over the last 7 years).
What the........oh nevermind, a couple of bulls showed their heads so thought PPT hit the hammer, all is cool.....
More butter please...........
Good school districts still seem to be hanging on. A few scattered REOs in "the bad part of town" and not many in the nicer areas. We need either Alt-A or public/private school arbitrage to take us the rest of the way... I did notice a couple of listings returning to the MLS from the winter time frame, but not any huge inventory bloat. At least there are now some listings for less than $500k (couldn't say that last year at this time.)
Nice to see you, Sebastian. I can use a bit upside talk now. Is it a big bottom now that we should jump in for the once in lifetime opportunity?
EBGuy, yes that is what I heard. Good school districts even see housing price increasing now. Education is the main force driving those markets. You got to give the parents the credits.
jin, you missed the bottom at 14k - according to Sebastian last year.
"Is it a big bottom now that we should jump in for the once in lifetime opportunity?"
Some like big bottoms, some don't. It's a matter of personal preference really.
"The original 'lost generation' was brought about by WWI."
The Federal Reserve funded America in WWI. Then contracted credit in the Great Depression. Then funded America in WWII. Then funded America in Vietnam. Then funded America in Iraq. Soon to fund America in Iran.
Lost generations are part of the boom/bust endless war cycle.
At some point, new homes may become a luxury, discretionary purchase.
At one point in the recent past Buffett invested in a mobile home manufacturer. I think he has since sold. But mobile, or prefab homes may have another wave in the future. They are a lot cheaper, are they not?
Immediately found as if by magic (hat tip to D. Radcliffe) that Berkshire owns Clayton Homes, a prefab home builder, outright, 100%. Wonder how it is doing.
peAkcredit writes:
Janjuah's warning: "A very nasty period is soon to be upon us--be prepared," he said, according to a report published in the Daily Telegraph newspaper on Wednesday. He advised that cash was the "key" safe haven.
Well if cash is 'key' heading into what could become a serious economic decline, I'm going to keep track of two homeowner families, each with 10% current equity, and contrast how they are doing at the end of 12 months using 2 approaches:
Family 1 will become "stay-ins", saving the PI and tax payments (during the probable 12 month foreclosure process) for use as future rent or downpayment $ so they can walk away from their possibly unsaleable house, retaining the alternative to become current at the end of 10-11 months and stay if home prices are unchanged or slightly lower but heading up, while they heal their credit dent.
Family 2 will stay current, hoping that they won't be trapped in an underwater house at the end of 12 months.
We'll follow them along periodically and see who is doing better at the end of 11 months: The family with cash, a credit dent, and a house (or apartment) or the family staying current in their house.
I'll call family 1's plan PREP: the Personal Real Estate Put.
San Mateo (Bay Area Peninsula) anecdotal:
Coworker buys:
08/31/2006: $685,000
Coworker figures out it's time to leave:
03/03/2008: listed at $709,000
Coworker attempts short sale:
05/23/2008: listed at $579,000
If you believe Zillow (ha ha), it's down in the area of Jan 2004 prices. This is not some place out in the edges of the East Bay, either.
I take it prices have still not fallen in the "real bay area?" But that the real bay area is shrinking?
"San Mateo (Bay Area Peninsula) anecdotal:"
Is that in nice-quiet-neighborhood San Mateo or down-by-101-with-barred-windows San Mateo?
Referring to an earlier comment about Congressional hearings, I just love how so many people out there are wistfully blaming high oil prices on this mysterious set of beings called "speculators".
By Definition, What You Do In A Capital Market Is Speculation.
Maybe just a bunch of people looked at the Chinese on one hand, and the oil reserves on the other, and then "speculated" that oil is worth $130/bbl and rising.
Just sayin.
Well when things turn sour you have to blame somebody. It isn't satisfying to blame a whole society or chance or whatever. You have to find demons, so they do. I am surprised that the oil companies haven't been more demonized than they have. Isn't some group filing suit vs. OPEC for "overcharging."
I blame myself. Sorry people. The whole economic problem is Elvis' fault. Damn that feels good to get off my chest.
Ed S,
You are right, I should clarify. I am complaining that too many SFR in desirable locations (schools/bart) are still asking 2005 unaffordable price.
Tiny condos next to highways/railroads are asking 2003 prices.
Summary: there are bargains, but not good bargains.
When do you expect the higher end to get more significant price pressure as well?
O-Joe
In Phoenix, the high end is getting murdered, especially in N. Scottsdale/ Kierland, while there's been a few FC auctions on Camelback mountain.
The same yayhoos I knew who got killed on margin calls in the tech bust are the same yayhoos who borrowed on no down NINJA loans and now are $400k upside down on their $1.2mm houses.
I wish I could get a NINJA loan. I'd actually get five and then have them fight Chuck Norris to see who would win. My bet would be on Chuck.
Elvis, when did you get out of jail?
Still in, but, as soon as I get out, I'm going to apply for some NINJA loans.
Didn't you hear? You don't have to wait anymore.
Jack,
Absolutely.
There are just too many sellers who can't believe that the going price isn't 5X what they paid in 1998.
e.g. This one sold for $223k in 1998
2827 HALLMARK Dr, Belmont, CA 94002 | MLS# 80904136
I think we still have a ways to go in the Bay Area
Even the banks want a piece of the action -- this one sold in January for $730k; current asking is $925K
430 PORT ROYAL Ave, Foster City, CA 94404 | MLS# 80815996
But there's plenty of crap available for a measly $550K -- hard to believe that this sold less than a year ago for $810K. And you non Bay Area folks should especially look at this one (don't miss the photo of the granite countertop.
1680 TAYLOR St, San Mateo, CA 94403 | MLS# 80774629
"Is that in nice-quiet-neighborhood San Mateo or down-by-101-with-barred-windows San Mateo?"
It's a block from the Hillsdale Caltrain Station, on the wrong side of El Camino. No bars on windows.
Anywhere but California I'd say it was worth about $80k.
I'm currently looking to buy in San Francisco (been renting in SF for the past 2 years) and am a young newly-married whippersnapper.
The majority of affordable housing (
Eric,
Your should not overlook person 4. That's the guy who can do math, and realized that renting was the way to go. For a monthly stroke equal to that of a mortgage on a $250K house in the ghetto...he can live in the $800K house. Oh wait...that's me.
"Prices going down" in Bay Area is very similar to "Me and Bill Gates have 60B$ together".
There are places where the price went down more than 50% - but a reasonable person (who could now get a loan) would not live there, in a house with granite countertop kitchen and freeway view. But for good neighborhoods the price is not going down.
A month ago checked the property in our neighborhood. Asking price was 829K. Talked to listing agent, thought it should sell at least 100K lower - this one was smaller than ours, same street, corner lot, and we paid ~750K. He said, no way. Was sold on May 25th for 835K. WTF?
When builders go broke...
Yahoo! 404 - Page Not Found
More anecdotal ugliness.
Neuman Homes goes broke, and it's not just a few crack houses nearby, but people living in a completely unfinished subdivision with piles of dirt and wrapped houses. They can barely get the roads plowed in the winter.
I'm guessing that will come to some very large losses by the owners... and the banks as well. They let this go on until there was no unencumbered equity.
"To me[Neuman]," he answers, "bankrupt meant that you don't have any money."
Ed S,
the one in Belmont shouldn't have been sold in 1998 for $223k. i think the transaction should be a refinance. I notice something like this before for $100k, doesn't make much sense as sale price.
I think the one in San Mateo won't sell, they just put a low price to get a bid, then negotiate with bank.
The most telling one is the bank owned. That shows why price is sticky.
No longer in the Bay Area. Still listen to traffic hell on the satelite radio though, laugh my buns off. Quality of life in the Bay Area is vastly overated.
hey... Margin Call of Cthulhu
regarding your observation about the washington times
agreed..unusual for them to criticize even tangentially, this administration...must be bad