Factoring Food, Fuel, Insurance, Interest, and Property Tax inflation.....the average consumer is likely being hit with a $15K-$20K stealth tax since 2000 against a stagnant income.
Many were able to bridge with MEW...what is the bridge now.....foreclosure and bankruptcy?
What is happening the vicious circle has begun. Indivuals who are losing their jobs due to the mortgage crisis are joing the party. i.e. they can not make payments becuase of lack or income or the person has to move to another area of the country find work. I would not be surprised if the individuals were former financial services professionals who worked in the mortgage industry. O.C. was the epicenter of the mortgage industry.
That is a nasty looking chart, and the foreclosure rate is increasing. My house has been paid off for nine years now, and even I worry about its value over the next decade. Its a depreciating asset for the next few years though
PPI Tomorrow. Should be interesting. Consensus ? Oh, not bad. Only 1% m/m. 12% annualized. Nothing to worry about. Maybe the Fed can jawbone it down with toothless tiger rhetoric.
PPI Tomorrow. Should be interesting. Consensus ? Oh, not bad. Only 1% m/m. 12% annualized. Nothing to worry about. Maybe the Fed can jawbone it down with toothless tiger rhetoric.
If housing starts surprise high we should put a good 1500 points on the DOW and another 50 bps on mortgage rates.
Anecdotal, but we had our first foreclosure in the neighborhood. When the property went on the market, there was a bidding war for it. It is as in all things RE location, location, location.
The McClatchy Co., battered by declining profits and revenue, announced a 10 percent companywide cut in its work force Monday, including the Sacramento publisher's first-ever across-the-board layoffs. The decision will eliminate 1,400 jobs through a combination of layoffs, voluntary departures and attrition. The Bee, McClatchy's largest paper, announced it will eliminate 86 jobs, 46 by layoffs. The reduction will trim the paper's workforce by 8.1 percent...McClatchy is the largest public company in Sacramento and the third-largest newspaper chain in the country.
...
The economic downturn has been another big blow to publishers, particularly McClatchy. The company gets a third of its revenue from California and Florida, two of the states hit hardest by the crash in the housing market. For instance, The Bee's revenue fell 16.9 percent last year, or about twice as much as the company as a whole, according to Securities and Exchange Commission filings.
Say goodbye to the housing bailout. WSJ editorial exposing Dodd, Conrad.
I am still surprised CR has not covered this issue. If there were a Republican involved, would they have have been run out of the Senate by now?
The Countrywide Financial sweetheart loan scandal continues to grow, spreading to Senators and other Beltway potentates. We are about to find out if Congress's passion for investigating business ethics extends to conflicts of interest and cash that involve fellow Members.
Take Senator Kent Conrad, the North Dakota Democrat whose office issued a Friday statement saying that "I never met Angelo Mozilo." What he did not say then but admitted under later questioning by a Journal reporter is that, although he may not have had a face-to-face meeting with the Countrywide CEO, Mr. Conrad had called Mr. Mozilo and asked for a loan. The result was a discounted loan on his million-dollar beach house and a separate commercial loan of a type that residential lender Countrywide did not even offer to other customers, regardless of the rate.
Ah, JDSU, haven't thought about it in a long time. I missed that one, and Worldcomm, too.
But I caught Enron, Corning and Nortel! And I learned, I mean, really learned, the lesson 'don't try to catch a falling knife.'
All in good humor.
I get the feeling that this housing mess will be going deeper, spreading wider and lasting longer, than previously predicted.
And maybe the current financial services sector needs to be made over into a quasi-utility--heavily regulated, publicly guaranteed and (perish the thought) with a compensation structure geared towards the third and fourth quartiles of comparably trained cohorts.
Chicken Little asks "Can anyone explain how we avoid a depression????..Food, Fuel, Insurance, Interest, and Property Tax inflation"
The rising cost of food and fuel doesn't help many people, but falling home prices certainly helps a large number. Surprisingly, falling home prices even help many homeowners. In CA, you can get your assessed value for property taxes lowered if market value drops below assessed value. That creates savings for people who can pay their mortgage and don't want to move soon.
The really big advantages of dropping prices come in economic expansion, reduced inflation, and better use of time and money. If houses are all ridiculously expensive, people spend massive amounts of effort selling them, and building new ones. If the new ones are built for speculative demand and sit vacant, it is a big waste of resources, and eventually prices crash. The people who built and sold those houses or condos could have been doing something more productive with their time.
When housing prices are lower, it's easier to recruit and hire people who want to own homes. This has been a big disadvantage for CA employers recently. Two income college educated couples couldn't afford a home in a decent neighborhood, so they took job offers in other parts of the country. Note that people who would have rented regardless might still move to CA for jobs. College students aren't affected. Many low wage jobs aren't affected, because those people are looking at rent, rather than purchase prices.
When home prices come down, employers don't have to pay a California premium to get employees here, and whatever that employer makes or does can be less expensive. They can also expand more easily.
Once the cost of owning a home gets to be similar to renting, most of the economic advantages of further price reductions diminish. In an overbuilt area with declining population, there is no lower bound to home prices. Like ghost towns in silver mining areas, or certain parts of Detroit, they can become worthless. You might see this in some desert areas of CA, or FL condos.
With 5 months in a row of NOD's over 2000, why the big deal of foreclosures hitting 1000? 2000 is just around the corner.
This is wealth destruction at its finest. The REO's are offered at much lower prices than regular homesellers can compete with. That will bring down prices even more and it will force many current homesellers trying to get out into foreclosure. Which will then become another wave of REO's to compete with the future homesellers.
Add in to the equation Option Arm's, Interest only's that will become P&I payments, rates rising, inflation rising, unemployment rising, obtaining all forms of credit getting harder......should I go on?
some investor guy's @8:47 pm points are really good & I think accurate... especially in the long run. Having fewer incentives to 'invest' in housing, which is really consumption dressed up as an investment, is a good and long over due thing... but man is it gonna be painful for society in the short run.
"Surprisingly, falling home prices even help many homeowners. In CA, you can get your assessed value for property taxes lowered if market value drops below assessed value."
Are you kidding? What will that do to the tax base and city services?
OK, your right, the "assessed value" will come down. But what will happen next? The rate paid per hundred or thousand of assessed value will go up. Now you have a property assessed for less but paying the same in taxes.
Or they will have to close down schools, lay off policemen and firemen, etc. and create a real shitty town for the people who would stay.
The Sacramento Bee continues to blame the Internet for its coming demise. It refuses to give up its blind support of multiculturalism and liberalism, not to mention its refusal to print both sides of any story.
The national homebuilders are pushing a bill that's passed the house to give up to a 7500 tax credit to first time buyers or people that haven't bought a house in the last three years. 7500 dollars might be enough to push me off the fence and into a house.
CR
the option arm chart you link to says 500B... clearly overstated just by eyeballing the chart, I doubt it sums to more than half that value. Then, if 60% is indeed in CA, we are talking of around 150B here in CA... certainly a big hit, but not as bad as implied.
The national homebuilders are pushing a bill that's passed the house to give up to a 7500 tax credit to first time buyers or people that haven't bought a house in the last three years. 7500 dollars might be enough to push me off the fence and into a house.
Sebastian is that you? That should cover your property taxes for a year. No effect on sales in my opinion.
trafficed thru iowa all day...in cedar rapids as my trainee drives...
mostly dry and gorgeous from the black top...
no disrespect meant, but i think iowans will pull thru just fine.
Anonymous writes:
The national homebuilders are pushing a bill that's passed the house to give up to a 7500 tax credit to first time buyers or people that haven't bought a house in the last three years. 7500 dollars might be enough to push me off the fence and into a house.
Anonymous | 06.16.08 - 9:00 pm | #
Now if the tax credit works like EITC and applies to people who have no income & we get back to 100% LTV SISA/NINA financing - it just might work. Bet they sell almost as may houses as they did in say... 2006!
BigRig Driver writes:
trafficed thru iowa all day...in cedar rapids as my trainee drives...
mostly dry and gorgeous from the black top...
no disrespect meant, but i think iowans will pull thru just fine.
BigRig Driver | 06.16.08 - 9:11 pm | #
The difference between OC and the rest of the country is prices and lending. Even if OC prices have declined as much % as elsewhere, my lender friends tell me that 80% of the loans they submit there (LA/OC) are getting declined. NO LIQUIDITY to the RE market there. If it doesn't get fixed, the blood will be massive.
Here in Sac, the inventory is down below 4.5 months, as our low end is easily financed, 100% FHA or whatever. OC's low end is practically jumbo already. Sac's higher end is suffering from the same.
Hell this is during prime selling season wait till this winter. We are at 2087 forclosures for the year and we had a record 3557 last year in Colorado Springs.
In CA, you can get your assessed value for property taxes lowered if market value drops below assessed value."
Um, the "dark side" of Prop 13 is that your taxes could go UP even as the property declines.
Ex: Say your house "value" increased 100% from 2002-2007. But, your "assessment" for prop taxes only increased ~1.5% per year (per Prop 13).
Now, your house drops 25% from 2007 - 2008. You house value is still up 25%, but your "assessment" only increased ~9%. Thus, next year your assessment will grind higher.
Please correct me if I'm wrong, but housing prices would have to drop a long way to get back into line with Prop 13 increased assessments,
7500 tax credit to first time buyers or people that haven't bought a house in the last three years.
Adam sells a $7000 (+$500 closing) house to Barry who sells it to Charlie for $7000 (+$500 closing) to Darla who sells it to Adam. $2000 in transaction costs for the Realitter® and $30,000 in tax savings and an additional $2000 in deductions. The new real estate fraud.
Please correct me if I'm wrong, but housing prices would have to drop a long way to get back into line with Prop 13 increased assessments,
- badger boy
If you bought the median home Oct 2006 then your 2009 tax bill could be $2000 lower. Small consolation for watching $200k equity evaporate.
Badger Boy, if someone bought in 1995, their assessment has likely been rising by 2% per year, and will continue to do so for a while.
If they bought in 2005, and have gotten the assessed value reduced due to market value drops, they can continue asking for additional reductions as market value plummets. If market value should rise later, they could get big increases from year to year in assessments, until they get back to the purchase price +2% per year number.
"Adam sells a $7000 (+$500 closing) house to Barry who sells it to Charlie for $7000 (+$500 closing) to Darla who sells it to Adam. $2000 in transaction costs for the Realitter® and $30,000 in tax savings and an additional $2000 in deductions. The new real estate fraud."
This could be a substitution for student loan subsidies.
The republican response from Bennie, George and the money printing rebublicans will have a long lasting effect on the market. This train is going to derail over years and will be measured in decades. You only need to look at the economic engineering Japan did in reponse to the 80's asset deflation. Republicans and democrats alike, anyone who supports monetary inflation will long for the days of monetary stability as they try to feed their children.
long time lurker in Sacramento, couldn't help remarking on McClatchy's problems
interesting that not many have identified the real problem: McClatchy, upon acquiring Knight-Ridder, kept the papers in bubble markets like Miami, and sold the ones in supposedly stagnant, non-bubble markets like Philadelphia and San Jose
and, yet, they still keep Pruitt on the job
look on the bright side, though, the new publisher of the Sacramento Bee, Cynthia Dell has ZERO journalism experience, she's from advertising
as for the housing bubble here, I check out zillow.com every now and then and see that my house loses about 500-1000 in value every couple of weeks, and I live in a stable central city neighborhood
we are still above water since our early 2004 purchase, but after the Pay Option ARM thing plays out, I expect that to disappear, it is going to play havoc in the coastal regions and more expensive neighborhoods here
good thing we have a fixed rate mortgage and stable employment
interesting that not many have identified the real problem: McClatchy, upon acquiring Knight-Ridder, kept the papers in bubble markets like Miami, and sold the ones in supposedly stagnant, non-bubble markets like Philadelphia and San Jose
It doesn't matter what newspapers they kept and which ones they sold.
Airlines aside, there is no biz in the U.S. that is more energy-intensive than putting a newspaper on your doorstep in the morning.
With oil where it is right now, there's hardly any print edition newspapers that have a future more than a few years long. The economics just don't work.
So, we'll see how many newspapers can successfully transition to the online world. But in any case, there's a lot of pain and profit and job loss ahead in newspapers.
dashingdwl, I couldn't think of anything to add to the Dodd mortgage revelations. I was hoping Tanta would let us know how common this is - I suppose it's really a gift or campaign contribution that needs to be reported properly.
some investor guy writes:
...In CA, you can get your assessed value for property taxes lowered if market value drops below assessed value. That creates savings for people who can pay their mortgage and don't want to move soon....
You make some very valid points concerning the benefits of affordable priced housing. Also, the notion that housing is a nonproductive use of resources (when utilized as an investment) is often overlooked by those adding up the losses. The one nit I have, and it may be strictly a state issue for me, is the potential decrease in cost of ownership derived through lowered property taxes.
Having built a home in late 1989 at the very tail end of the housing boom in New England and living there through the ensuing housing slump I can attest that getting a town to perform a property evaluation outside the normal cycle (every 5-7 years) is an exercise fraught with frustration (akin to pissin' in the wind). Assuming that enough folks are successful in obtaining lowered evaluations then the town will need to raise the tax rate to compensate for the decreased property tax revenue. In my case I ended up paying higher yearly property taxes based on a $200K evaluation than I was paying at $284K. This may not be the case in CA but NH has what could be called a 'monolithic tax base' primarily based on property tax and they will get it outta you one way or another.
Doom, police, schools and hospitals in CA are already on the chopping block. The state is $17 billion in the hole and we've already been thru several rounds of pink slips. I read in the paper that the town of Oceanside is planning to do away with school buses. (O-side is not exactly a soccer-mom kind of town... those parents are not going to be driving the kids to school. Maybe the unemployed teachers can get hired as truancy officers when the local businesses start screaming about the sudden influx of school-skipping unattended kids.)
Has the Governator managed to get his lottery sold yet? I can't imagine that the idea of selling a lottery to a Wall Street firm would be politically viable, given that the lottery is basically predatory lending in a different skin.
BigRig Driver writes:
just got rerouted 380 south. back to cedar rapids, east 30 to south 38 to west 80 ... headin to NJ
From the route you took, the only place you would really see a mess would be the short stretch where I-380 goes over the Cedar right in downtown Cedar Rapids (by the Quaker Oats plant & Five Seasons Ctr)... by the time you had gone through earlier today it would have already dropped 6-8 feet from the peak a couple days prior according to what I've read. 8 feet is a lot of water you would have missed.
But if you had gone through then you would have seen something like this...
At about 30 seconds you can see I 380 where it cross the river - even then, from I 80 you would see high water but doesn't show all the damage a few blocks away in the business district hidden by the buildings... big time losses. The camera shows that (but again from a few days earlier closer to high water mark).
The other crossing you took (on Hwy 30 going east to 38 then down to I-80) you wouldn't see much at all - not much there but corn fields, damage but not like downtown CR.
I can only imagine the damage to the Quaker Oats plant - that's food grade product - it will take along time & a lot of money to get it up & running & producing edible, salable product. River water contaminates everything.
To give you an idea of what a mess this is - the city of something like 200K lost 43 of their 44 wells. The city has no water. If this is like the 1993 floods it could take weeks to get that back.
the fields did'nt look that bad...
meant no harm in it, just that the crop outlook seemed exaggerated..
but what do i really know...
did think about the gen mills plant. could'nt get a good look, a little to far from the road.
at walcott for the night. been Real slow, they say.
BigRig Driver | 06.16.08 - 11:53 pm | #
I know Walcott real well... stopped at 'Iowa 80' a gazillion times.
BTW - we won't know if the corn is okay or drowned out for weeks... if the roots sit submerged for too many days the plant dies but doesn't look it right away. A lot of fields are close to 100% gone but don't show it yet. On top of that the crop was planted late to begin with so it was already behind even before all the cold damp weather.
Not good.
On the plus side I saw more tile going in last year than I've ever seen before... those folks should be okay IF they aren't too close to the river & flooded. The fields with tile should dry out pretty fast.
They need a string of 80 degree days to get the remaining crop caught up.
Downtown Cedar Rapids.
Been there a couple of times. Being the waterfront=good downtown=better thinking type wondered why that was not much more desirable among residents (co workers or what ever you call a consultants minders).
After visiting the downtown and saw the factorys in a corner and the change in "scenery" going North from the four blocks of "culture".
Being a semi NYC wondered why more of the co-workers were not betting on a resurgence of the downtown.
I guess they knew better. Thats why anywhere in the world the "across the tracks" is low lying prone to floods or whatever.
dryfly,
I replied to your why (re Bubble in SL) in the earlier thread re mobility.
Had to run to get shuttle to NYC train in north NYC.
Used to travel (in an old 160K Chevy Celebrity) thru the midwest as a grad student going for Conferences.
Camped out at Scotts Bluff/Council Bluffs and a dusty old campsite by the Platte river in Nebraska.
Being a semi NYC wondered why more of the co-workers were not betting on a resurgence of the downtown.
I guess they knew better. Thats why anywhere in the world the "across the tracks" is low lying prone to floods or whatever.
sbarrkum | Homepage | 06.17.08 - 12:30 am | #
sbarrkum the flood is really extraordinary - you see the pictures of city hall & court house with water half way up the first floor... that is on an island that was way above the river... I used to live in CR about a mile and a half from there. I used to hang out on that bridge and watch old timers fish for catfish at night... the bridge was something like 30 ft above the water most of the time... it was all under water last Saturday. It never even got close to going under during the 'Great Flood' of '93.
The reason few live downtown is the smell... like living in a cereal box that close to Quaker... plus two corn wet mills... (Cargill & Penick). Even a mile and a half away where I lived the stench would knock your socks off if the wind was blowing in the right direction. You can wake up in the morning and just from the smell have a pretty good idea which direction the wind is coming from.
Anonymous, I haven't heard anything new about the Governator's lottery plans. Probably eclipsed by the screaming. Starting tomorrow gay marriage is legal here. Most people don't seem to care, but the few who do are making an unholy racket. What with that and medical marijuana and the perennial calls to ban all immigration, it would be hard for the Guv to be heard over all the noise.
Used to travel (in an old 160K Chevy Celebrity) thru the midwest as a grad student going for Conferences.
Camped out at Scotts Bluff/Council Bluffs and a dusty old campsite by the Platte river in Nebraska.
Good memories.
I've done them - my then 6 year old daughter insisted on hiking up Scott's Bluff on an especially hot summer day... we about roasted. That was a long walk for a six year old. It was a long walk for her 30 something father!
You could see the remnants of wheel ruts from the Oregon Trail - still there.
In the 92629 zip I have been checking foreclosure.com for some time doing a search for properties with NOD, foreclosure or bankruptcy. It stayed at 50 for a long time -- right through the sub prime last Feb, but about 45 days ago it made a jump to 75, today it hit 110. The 92629 is a beach front zip in Dana Point / Monarch Beach -- so this tells me the problem is creeping into those areas with higher priced housing.
The tide comes in, but then it definitely goes out....even the "we're different areas" will see this hit them....I just think, knowing what people make on average (I look at a lot of company payroll's in my job and honestly not that many people make the income that is really required to finance a 1 million plus home), that way too many people are living MEW to MEW.
dryfly | 06.17.08 - 12:52 am | #
Even a mile and a half away where I lived the stench would knock your socks off
Cant remember a smell/stench downtown ( do remember on the Highway though). But then i went downtown only after 7:00 p.m. being around Collins Road at other times.
Goes to having to hang around at least a year before buying. i.e If I had moved, to CR would have lived downtown near the river. !!
Dry,
Thank glod my ancestors made some of those ruts in the late 40' and early 50' headed for Oregon. Strong and/or stupid people. Don't know which. What the hell drove them to make that trek? Weather? Disease? Land Hunger? Just for the Hell of it?
It looks to be about 6 months from NOD to NOTS with a 50%+ rate of failure to correct.
If so, things are going to get even more interesting. I can barely stand it as it is!
Next problem will be the Pay Option Arms. Check out the chart from Dr. Housing Bubble.
http://www.doctorhousingbubble.com/wp-content/uploads/2008/06/0604_arm_reset1.jpg
Can anyone explain how we avoid a depression????
Factoring Food, Fuel, Insurance, Interest, and Property Tax inflation.....the average consumer is likely being hit with a $15K-$20K stealth tax since 2000 against a stagnant income.
Many were able to bridge with MEW...what is the bridge now.....foreclosure and bankruptcy?
2,000 FC BY this time next year... book it
The bars haven't gone off the chart yet, so clearly this is contained.
NODs are down so it muss till be contained, right?
What is happening the vicious circle has begun. Indivuals who are losing their jobs due to the mortgage crisis are joing the party. i.e. they can not make payments becuase of lack or income or the person has to move to another area of the country find work. I would not be surprised if the individuals were former financial services professionals who worked in the mortgage industry. O.C. was the epicenter of the mortgage industry.
That is a nasty looking chart, and the foreclosure rate is increasing. My house has been paid off for nine years now, and even I worry about its value over the next decade. Its a depreciating asset for the next few years though
still not over
PPI Tomorrow. Should be interesting. Consensus ? Oh, not bad. Only 1% m/m. 12% annualized. Nothing to worry about. Maybe the Fed can jawbone it down with toothless tiger rhetoric.
Econoday Reports - Consumer Price Index
June
13,
2008
Foreclosures Break 1000 per Month
And Ben talks about raising rates?
WTF
PPI Tomorrow. Should be interesting. Consensus ? Oh, not bad. Only 1% m/m. 12% annualized. Nothing to worry about. Maybe the Fed can jawbone it down with toothless tiger rhetoric.
If housing starts surprise high we should put a good 1500 points on the DOW and another 50 bps on mortgage rates.
Anecdotal, but we had our first foreclosure in the neighborhood. When the property went on the market, there was a bidding war for it. It is as in all things RE location, location, location.
From the Sacramento Bee:
The McClatchy Co., battered by declining profits and revenue, announced a 10 percent companywide cut in its work force Monday, including the Sacramento publisher's first-ever across-the-board layoffs. The decision will eliminate 1,400 jobs through a combination of layoffs, voluntary departures and attrition. The Bee, McClatchy's largest paper, announced it will eliminate 86 jobs, 46 by layoffs. The reduction will trim the paper's workforce by 8.1 percent...McClatchy is the largest public company in Sacramento and the third-largest newspaper chain in the country.
...
The economic downturn has been another big blow to publishers, particularly McClatchy. The company gets a third of its revenue from California and Florida, two of the states hit hardest by the crash in the housing market. For instance, The Bee's revenue fell 16.9 percent last year, or about twice as much as the company as a whole, according to Securities and Exchange Commission filings.
From Landers site - Sacramento Land(ing) - Sacramento Real Estate Market Blog - Sacramento Housing Market News
Another nail in the coffin for Sac tow
"McClatchy is the largest public company in Sacramento"
Ouch!
I'm waiting for OC to go BK again.
Say goodbye to the housing bailout. WSJ editorial exposing Dodd, Conrad.
I am still surprised CR has not covered this issue. If there were a Republican involved, would they have have been run out of the Senate by now?
Beltwaywide Financial - WSJ.com
Beltwaywide Financial
June 16, 2008
The Countrywide Financial sweetheart loan scandal continues to grow, spreading to Senators and other Beltway potentates. We are about to find out if Congress's passion for investigating business ethics extends to conflicts of interest and cash that involve fellow Members.
Take Senator Kent Conrad, the North Dakota Democrat whose office issued a Friday statement saying that "I never met Angelo Mozilo." What he did not say then but admitted under later questioning by a Journal reporter is that, although he may not have had a face-to-face meeting with the Countrywide CEO, Mr. Conrad had called Mr. Mozilo and asked for a loan. The result was a discounted loan on his million-dollar beach house and a separate commercial loan of a type that residential lender Countrywide did not even offer to other customers, regardless of the rate.
Foreclosures hit an all time record in San Diego county last month, 1,700.
Set the start date to 1982 for a historical perspective.
The FC charts are starting to look like JDSU in late 1999...
Set the start date to 1982 for a historical perspective.
See if this link works for that.
would love to see a snippit of McClatchy articles 'selling' the boom.
no vested interest , of course
Ah, JDSU, haven't thought about it in a long time. I missed that one, and Worldcomm, too.
But I caught Enron, Corning and Nortel! And I learned, I mean, really learned, the lesson 'don't try to catch a falling knife.'
All in good humor.
I get the feeling that this housing mess will be going deeper, spreading wider and lasting longer, than previously predicted.
And maybe the current financial services sector needs to be made over into a quasi-utility--heavily regulated, publicly guaranteed and (perish the thought) with a compensation structure geared towards the third and fourth quartiles of comparably trained cohorts.
Chicken Little asks "Can anyone explain how we avoid a depression????..Food, Fuel, Insurance, Interest, and Property Tax inflation"
The rising cost of food and fuel doesn't help many people, but falling home prices certainly helps a large number. Surprisingly, falling home prices even help many homeowners. In CA, you can get your assessed value for property taxes lowered if market value drops below assessed value. That creates savings for people who can pay their mortgage and don't want to move soon.
The really big advantages of dropping prices come in economic expansion, reduced inflation, and better use of time and money. If houses are all ridiculously expensive, people spend massive amounts of effort selling them, and building new ones. If the new ones are built for speculative demand and sit vacant, it is a big waste of resources, and eventually prices crash. The people who built and sold those houses or condos could have been doing something more productive with their time.
When housing prices are lower, it's easier to recruit and hire people who want to own homes. This has been a big disadvantage for CA employers recently. Two income college educated couples couldn't afford a home in a decent neighborhood, so they took job offers in other parts of the country. Note that people who would have rented regardless might still move to CA for jobs. College students aren't affected. Many low wage jobs aren't affected, because those people are looking at rent, rather than purchase prices.
When home prices come down, employers don't have to pay a California premium to get employees here, and whatever that employer makes or does can be less expensive. They can also expand more easily.
Once the cost of owning a home gets to be similar to renting, most of the economic advantages of further price reductions diminish. In an overbuilt area with declining population, there is no lower bound to home prices. Like ghost towns in silver mining areas, or certain parts of Detroit, they can become worthless. You might see this in some desert areas of CA, or FL condos.
With 5 months in a row of NOD's over 2000, why the big deal of foreclosures hitting 1000? 2000 is just around the corner.
This is wealth destruction at its finest. The REO's are offered at much lower prices than regular homesellers can compete with. That will bring down prices even more and it will force many current homesellers trying to get out into foreclosure. Which will then become another wave of REO's to compete with the future homesellers.
Add in to the equation Option Arm's, Interest only's that will become P&I payments, rates rising, inflation rising, unemployment rising, obtaining all forms of credit getting harder......should I go on?
OT- where is Seb and O-Joe?
San Diego Source | San Diego Daily Transcript ">
San Diego also beats OC on notices of default last month (3,500 vs 2,500)
To paraphrase Roy Scheider from "Jaws" - You're gonna need a bigger chart.
some investor guy's @8:47 pm points are really good & I think accurate... especially in the long run. Having fewer incentives to 'invest' in housing, which is really consumption dressed up as an investment, is a good and long over due thing... but man is it gonna be painful for society in the short run.
touche writes:
San Diego also beats OC on notices of default last month (3,500 vs 2,500)
touche | 06.16.08 - 8:52 pm | #
So is this the foreclosure equivalent of a pissing match? What does the winner win?
"Surprisingly, falling home prices even help many homeowners. In CA, you can get your assessed value for property taxes lowered if market value drops below assessed value."
Are you kidding? What will that do to the tax base and city services?
OK, your right, the "assessed value" will come down. But what will happen next? The rate paid per hundred or thousand of assessed value will go up. Now you have a property assessed for less but paying the same in taxes.
Or they will have to close down schools, lay off policemen and firemen, etc. and create a real shitty town for the people who would stay.
Either way, NOT good news.
The Sacramento Bee continues to blame the Internet for its coming demise. It refuses to give up its blind support of multiculturalism and liberalism, not to mention its refusal to print both sides of any story.
The national homebuilders are pushing a bill that's passed the house to give up to a 7500 tax credit to first time buyers or people that haven't bought a house in the last three years. 7500 dollars might be enough to push me off the fence and into a house.
Hope Now before someone gets hurt!
CR
the option arm chart you link to says 500B... clearly overstated just by eyeballing the chart, I doubt it sums to more than half that value. Then, if 60% is indeed in CA, we are talking of around 150B here in CA... certainly a big hit, but not as bad as implied.
The national homebuilders are pushing a bill that's passed the house to give up to a 7500 tax credit to first time buyers or people that haven't bought a house in the last three years. 7500 dollars might be enough to push me off the fence and into a house.
Sebastian is that you? That should cover your property taxes for a year. No effect on sales in my opinion.
maybe they got foreclosed on, and as a result, no longer have an internet connection.
trafficed thru iowa all day...in cedar rapids as my trainee drives...
mostly dry and gorgeous from the black top...
no disrespect meant, but i think iowans will pull thru just fine.
Anonymous writes:
The national homebuilders are pushing a bill that's passed the house to give up to a 7500 tax credit to first time buyers or people that haven't bought a house in the last three years. 7500 dollars might be enough to push me off the fence and into a house.
Anonymous | 06.16.08 - 9:00 pm | #
Now if the tax credit works like EITC and applies to people who have no income & we get back to 100% LTV SISA/NINA financing - it just might work. Bet they sell almost as may houses as they did in say... 2006!
Hey CR --
You should do these housing posts more often. They are much more interesting than the stuff you usually cover...
BigRig Driver writes:
trafficed thru iowa all day...in cedar rapids as my trainee drives...
mostly dry and gorgeous from the black top...
no disrespect meant, but i think iowans will pull thru just fine.
BigRig Driver | 06.16.08 - 9:11 pm | #
What road?
ps: cattle prices 20+year hi
fuel prices cited; diesel and cor
The difference between OC and the rest of the country is prices and lending. Even if OC prices have declined as much % as elsewhere, my lender friends tell me that 80% of the loans they submit there (LA/OC) are getting declined. NO LIQUIDITY to the RE market there. If it doesn't get fixed, the blood will be massive.
Here in Sac, the inventory is down below 4.5 months, as our low end is easily financed, 100% FHA or whatever. OC's low end is practically jumbo already. Sac's higher end is suffering from the same.
just got rerouted 380 south. back to cedar rapids, east 30 to south 38 to west 80 ... headin to NJ
argghhh..
they always put signs in the worst places. been told it was clear going.
Iowa DOT Travel Information Service been delayed all day.
Hell this is during prime selling season wait till this winter. We are at 2087 forclosures for the year and we had a record 3557 last year in Colorado Springs.
In CA, you can get your assessed value for property taxes lowered if market value drops below assessed value."
Um, the "dark side" of Prop 13 is that your taxes could go UP even as the property declines.
Ex: Say your house "value" increased 100% from 2002-2007. But, your "assessment" for prop taxes only increased ~1.5% per year (per Prop 13).
Now, your house drops 25% from 2007 - 2008. You house value is still up 25%, but your "assessment" only increased ~9%. Thus, next year your assessment will grind higher.
Please correct me if I'm wrong, but housing prices would have to drop a long way to get back into line with Prop 13 increased assessments,
7500 tax credit to first time buyers or people that haven't bought a house in the last three years.
Adam sells a $7000 (+$500 closing) house to Barry who sells it to Charlie for $7000 (+$500 closing) to Darla who sells it to Adam. $2000 in transaction costs for the Realitter® and $30,000 in tax savings and an additional $2000 in deductions. The new real estate fraud.
"the "assessed value" will come down. But what will happen next? The rate paid per hundred or thousand of assessed value will go up."
Actually Doom, California's prop 13 prevents an increase in the assessment rate. Assessed value can rise a maximum of 2% per year, and the maximum rate is 1% of assessed value. See Los Angeles County Assessor's Office - Real Property Assessments
The result is, many CA public entities have looked for other types of revenues, and can still face bad property tax cycles.
Please correct me if I'm wrong, but housing prices would have to drop a long way to get back into line with Prop 13 increased assessments,
- badger boy
If you bought the median home Oct 2006 then your 2009 tax bill could be $2000 lower. Small consolation for watching $200k equity evaporate.
Badger Boy, if someone bought in 1995, their assessment has likely been rising by 2% per year, and will continue to do so for a while.
If they bought in 2005, and have gotten the assessed value reduced due to market value drops, they can continue asking for additional reductions as market value plummets. If market value should rise later, they could get big increases from year to year in assessments, until they get back to the purchase price +2% per year number.
I once own a house in the O.C...
"Adam sells a $7000 (+$500 closing) house to Barry who sells it to Charlie for $7000 (+$500 closing) to Darla who sells it to Adam. $2000 in transaction costs for the Realitter® and $30,000 in tax savings and an additional $2000 in deductions. The new real estate fraud."
The republican response from Bennie, George and the money printing rebublicans will have a long lasting effect on the market. This train is going to derail over years and will be measured in decades. You only need to look at the economic engineering Japan did in reponse to the 80's asset deflation. Republicans and democrats alike, anyone who supports monetary inflation will long for the days of monetary stability as they try to feed their children.
long time lurker in Sacramento, couldn't help remarking on McClatchy's problems
interesting that not many have identified the real problem: McClatchy, upon acquiring Knight-Ridder, kept the papers in bubble markets like Miami, and sold the ones in supposedly stagnant, non-bubble markets like Philadelphia and San Jose
and, yet, they still keep Pruitt on the job
look on the bright side, though, the new publisher of the Sacramento Bee, Cynthia Dell has ZERO journalism experience, she's from advertising
as for the housing bubble here, I check out zillow.com every now and then and see that my house loses about 500-1000 in value every couple of weeks, and I live in a stable central city neighborhood
we are still above water since our early 2004 purchase, but after the Pay Option ARM thing plays out, I expect that to disappear, it is going to play havoc in the coastal regions and more expensive neighborhoods here
good thing we have a fixed rate mortgage and stable employment
some investor guy,
Ooops, my bad. I'm from Jersey. We're screwed here no matter what.
How about the social services though. Wouldn't some be cut if there is not enough revenue generated? Schools, police, garbage disposal, etc.
It doesn't matter what newspapers they kept and which ones they sold.
Airlines aside, there is no biz in the U.S. that is more energy-intensive than putting a newspaper on your doorstep in the morning.
With oil where it is right now, there's hardly any print edition newspapers that have a future more than a few years long. The economics just don't work.
So, we'll see how many newspapers can successfully transition to the online world. But in any case, there's a lot of pain and profit and job loss ahead in newspapers.
dashingdwl, I couldn't think of anything to add to the Dodd mortgage revelations. I was hoping Tanta would let us know how common this is - I suppose it's really a gift or campaign contribution that needs to be reported properly.
Best to all.
some investor guy writes:
...In CA, you can get your assessed value for property taxes lowered if market value drops below assessed value. That creates savings for people who can pay their mortgage and don't want to move soon....
You make some very valid points concerning the benefits of affordable priced housing. Also, the notion that housing is a nonproductive use of resources (when utilized as an investment) is often overlooked by those adding up the losses. The one nit I have, and it may be strictly a state issue for me, is the potential decrease in cost of ownership derived through lowered property taxes.
Having built a home in late 1989 at the very tail end of the housing boom in New England and living there through the ensuing housing slump I can attest that getting a town to perform a property evaluation outside the normal cycle (every 5-7 years) is an exercise fraught with frustration (akin to pissin' in the wind). Assuming that enough folks are successful in obtaining lowered evaluations then the town will need to raise the tax rate to compensate for the decreased property tax revenue. In my case I ended up paying higher yearly property taxes based on a $200K evaluation than I was paying at $284K. This may not be the case in CA but NH has what could be called a 'monolithic tax base' primarily based on property tax and they will get it outta you one way or another.
Doom, police, schools and hospitals in CA are already on the chopping block. The state is $17 billion in the hole and we've already been thru several rounds of pink slips. I read in the paper that the town of Oceanside is planning to do away with school buses. (O-side is not exactly a soccer-mom kind of town... those parents are not going to be driving the kids to school. Maybe the unemployed teachers can get hired as truancy officers when the local businesses start screaming about the sudden influx of school-skipping unattended kids.)
Jes:
Has the Governator managed to get his lottery sold yet? I can't imagine that the idea of selling a lottery to a Wall Street firm would be politically viable, given that the lottery is basically predatory lending in a different skin.
BigRig Driver writes:
just got rerouted 380 south. back to cedar rapids, east 30 to south 38 to west 80 ... headin to NJ
From the route you took, the only place you would really see a mess would be the short stretch where I-380 goes over the Cedar right in downtown Cedar Rapids (by the Quaker Oats plant & Five Seasons Ctr)... by the time you had gone through earlier today it would have already dropped 6-8 feet from the peak a couple days prior according to what I've read. 8 feet is a lot of water you would have missed.
But if you had gone through then you would have seen something like this...
Roof Cam...
At about 30 seconds you can see I 380 where it cross the river - even then, from I 80 you would see high water but doesn't show all the damage a few blocks away in the business district hidden by the buildings... big time losses. The camera shows that (but again from a few days earlier closer to high water mark).
The other crossing you took (on Hwy 30 going east to 38 then down to I-80) you wouldn't see much at all - not much there but corn fields, damage but not like downtown CR.
I can only imagine the damage to the Quaker Oats plant - that's food grade product - it will take along time & a lot of money to get it up & running & producing edible, salable product. River water contaminates everything.
To give you an idea of what a mess this is - the city of something like 200K lost 43 of their 44 wells. The city has no water. If this is like the 1993 floods it could take weeks to get that back.
It isn't Katrina but its a mess.
the fields did'nt look that bad...
meant no harm in it, just that the crop outlook seemed exaggerated..
but what do i really know...
did think about the gen mills plant. could'nt get a good look, a little to far from the road.
at walcott for the night. been Real slow, they say.
the fields did'nt look that bad...
meant no harm in it, just that the crop outlook seemed exaggerated..
but what do i really know...
did think about the gen mills plant. could'nt get a good look, a little to far from the road.
at walcott for the night. been Real slow, they say.
BigRig Driver | 06.16.08 - 11:53 pm | #
I know Walcott real well... stopped at 'Iowa 80' a gazillion times.
BTW - we won't know if the corn is okay or drowned out for weeks... if the roots sit submerged for too many days the plant dies but doesn't look it right away. A lot of fields are close to 100% gone but don't show it yet. On top of that the crop was planted late to begin with so it was already behind even before all the cold damp weather.
Not good.
On the plus side I saw more tile going in last year than I've ever seen before... those folks should be okay IF they aren't too close to the river & flooded. The fields with tile should dry out pretty fast.
They need a string of 80 degree days to get the remaining crop caught up.
Downtown Cedar Rapids.
Been there a couple of times. Being the waterfront=good downtown=better thinking type wondered why that was not much more desirable among residents (co workers or what ever you call a consultants minders).
After visiting the downtown and saw the factorys in a corner and the change in "scenery" going North from the four blocks of "culture".
Being a semi NYC wondered why more of the co-workers were not betting on a resurgence of the downtown.
I guess they knew better. Thats why anywhere in the world the "across the tracks" is low lying prone to floods or whatever.
dryfly,
I replied to your why (re Bubble in SL) in the earlier thread re mobility.
Had to run to get shuttle to NYC train in north NYC.
Used to travel (in an old 160K Chevy Celebrity) thru the midwest as a grad student going for Conferences.
Camped out at Scotts Bluff/Council Bluffs and a dusty old campsite by the Platte river in Nebraska.
Good memories.
Being a semi NYC wondered why more of the co-workers were not betting on a resurgence of the downtown.
I guess they knew better. Thats why anywhere in the world the "across the tracks" is low lying prone to floods or whatever.
sbarrkum | Homepage | 06.17.08 - 12:30 am | #
sbarrkum the flood is really extraordinary - you see the pictures of city hall & court house with water half way up the first floor... that is on an island that was way above the river... I used to live in CR about a mile and a half from there. I used to hang out on that bridge and watch old timers fish for catfish at night... the bridge was something like 30 ft above the water most of the time... it was all under water last Saturday. It never even got close to going under during the 'Great Flood' of '93.
The reason few live downtown is the smell... like living in a cereal box that close to Quaker... plus two corn wet mills... (Cargill & Penick). Even a mile and a half away where I lived the stench would knock your socks off if the wind was blowing in the right direction. You can wake up in the morning and just from the smell have a pretty good idea which direction the wind is coming from.
Otherwise, pretty nice little city...
Anonymous, I haven't heard anything new about the Governator's lottery plans. Probably eclipsed by the screaming. Starting tomorrow gay marriage is legal here. Most people don't seem to care, but the few who do are making an unholy racket. What with that and medical marijuana and the perennial calls to ban all immigration, it would be hard for the Guv to be heard over all the noise.
Used to travel (in an old 160K Chevy Celebrity) thru the midwest as a grad student going for Conferences.
Camped out at Scotts Bluff/Council Bluffs and a dusty old campsite by the Platte river in Nebraska.
Good memories.
I've done them - my then 6 year old daughter insisted on hiking up Scott's Bluff on an especially hot summer day... we about roasted. That was a long walk for a six year old. It was a long walk for her 30 something father!
You could see the remnants of wheel ruts from the Oregon Trail - still there.
I have good memories there too.
In the 92629 zip I have been checking foreclosure.com for some time doing a search for properties with NOD, foreclosure or bankruptcy. It stayed at 50 for a long time -- right through the sub prime last Feb, but about 45 days ago it made a jump to 75, today it hit 110. The 92629 is a beach front zip in Dana Point / Monarch Beach -- so this tells me the problem is creeping into those areas with higher priced housing.
The tide comes in, but then it definitely goes out....even the "we're different areas" will see this hit them....I just think, knowing what people make on average (I look at a lot of company payroll's in my job and honestly not that many people make the income that is really required to finance a 1 million plus home), that way too many people are living MEW to MEW.
dryfly | 06.17.08 - 12:52 am | #
Even a mile and a half away where I lived the stench would knock your socks off
Cant remember a smell/stench downtown ( do remember on the Highway though). But then i went downtown only after 7:00 p.m. being around Collins Road at other times.
Goes to having to hang around at least a year before buying. i.e If I had moved, to CR would have lived downtown near the river. !!
Dry,
Thank glod my ancestors made some of those ruts in the late 40' and early 50' headed for Oregon. Strong and/or stupid people. Don't know which. What the hell drove them to make that trek? Weather? Disease? Land Hunger? Just for the Hell of it?