Repost but I don't care: "I'm somewhat tired and amused by these "retirements" from Calculated Risk. "Everything has happened already." Bullsh*t, things are just heating up. Those pretenders will be back. Waiting for food shortages gets old fast. You can let them know I said that.
Elvis | 01.29.09 - 10:16 pm"
"As of December, 28% of option ARMs were delinquent or in foreclosure, according to LPS Applied Analytics ... An additional 7% involve properties that have already been taken back by the lenders. ... Just over half of subprime loans were delinquent, in foreclosure"
Sounds like just stuff unless there is historical context!
61% default rate? That is almost unbelievable.
You'd have a hard time deliberately setting something up to do that! The efficiency of failure represented there is off the charts.
"If 61% of the $750 billion in Option ARMs default, and with a 50% loss severity, the losses to lenders will be about $225 billion - far less than for subprime, but still a huge problem."
If housing were affordable, now and in the past, none of this might have happened. Gov't housing may be the answer. Reagan's spent 16 yrs in gov't housing. Clinton's 16 years. Bush's 16 years.
The key problem with Option ARMs is that they were used as affordability products
They are affordability products alrighty. They are going to make a bunch of shitty banks awfully affordable to the slightly better off banks that take them over.
The article requested is no longer available. BRUSSELS, Belgium The European Union warned Thursday it would protest provisions in President Barack Obama's economic stimulus plan that favour U.S. steelmakers ahead of imports from Europe or China.
The U.S. House of Representatives on Wednesday voted for a so-called "Buy America" provision that would call on major public works projects to favour U.S. steel over imports. The provision came despite objections from some business groups that such a measure would hamper free trade.
It looks like Harper might be growing a backbone now that Bush is gone, there is already talk of a NAFTA challenge. A lot of countries put up with steel, softwood, and other protectionism (ie Mexico was forced to accept toxic waste against local regulations for a landfill) from the USA while Bush literally refused to abide by NAFTA and WTO rulings.
These disputes take years upon years to make it through all the possible appeals, so there will be quick counter-tariffs as even politicians are anxious about preserving jobs
Not sure how far the protectionism goes. The US can eat a devaluation, but not if exports don't rise
Assuming normal market operations, I would agree, but I think the combination of bad bank + FDIC workouts + cramdown will lower the default rates. How much, not sure.
Sucks for the counterparties (e.g. taxpayers) that have to eat the losses.
Just wanted to clarify one thing CR. The quate said that $750 billion option arms were issued from 2004 to 2007, but Goldman Sachs says that 61% of those issued in 2007 will default. There was not $750 billion issued in 2007 - so the % issued in 2007 is likely a smaller number.
EvilHenryPaulson writes:
"http://www.google.com/hostednews...F0v8nnqZSgr- bIA
BRUSSELS, Belgium The European Union warned Thursday it would protest provisions in President Barack Obama's economic stimulus plan that favour U.S. steelmakers ahead of imports from Europe or China.
These disputes take years upon years to make it through all the possible appeals, so there will be quick counter-tariffs as even politicians are anxious about preserving jobs"
Ah! Now we're talking 1930s-style historical context--food fight!
"The reason that the default rate can be so high is that most of those houses are now underwater."
It's all about recast. Many of these mortgages recast to a payment 30% higher even if rates stay the same.
BTW The guy next door to me had an option-arm on an 800k house bought in 2006. NOD filed 9 months ago and family left 9 months ago and house is still empty and not foreclosed on.
When mortgage rates go to 10%+, what will happen to house prices and the banks then? How many trillions will the US Govt have to borrow to cover that problem?
Is it possible for the US Govt to simply print money (out of thin air) rather than borrowing it?
Lame metaphor of the minute: We're in a plane at 20k feet (its already fallen from 35k feet), and the engines won't restart. We're headed for an ending other than a smooth landing on the Hudson.
I was cleaning out my office today and came across a copy of the WSJ the day after the Dow crossed 10,000 the first time. I wonder how long it will be before that happens again...
Hearing about 70% loss severity rates in California as well for residential real estate when the bank finally gets the property off its books. That will punch a whole in any model
It's called a reset graph because the other components (subprime, Alt-A, etc.) have resets graphed, even thought the Option-ARM event is actually a recast..
"I thought the Bureau of Engraving falls under the Treasury's care ... like its evil twin the IRS ...."
I read about someone yanking an ATM out of a bank's wall. That could yield some cash, but an even bigger haul could be had by hijacking trucks leaving gov't printing office.
Sounds like your local owners need a refresher course in Supply & Default ...
Samdog | 01.29.09 - 10:34 pm | #
case in point: in 2005 I rented a house for $1350/month. Property values have now fallen
40% from their peak since then, and two of the same model houses in the same neighborhood now rent for $1400/month. They have been sitting empty for at least three months since the for rent signs went up.
FairEconomist writes:
Do you mean recast instead of reset?
It's called a reset graph because the other components (subprime, Alt-A, etc.) have resets graphed, even thought the Option-ARM event is actually a recast..
In all seriousness - pre-recast, Option ARMs are unbelievably generous. Payments are about half of what they will be after recast due to loan-to-value maximums and about 70% of a "normal" mortgage. These payments are about what people would pay at "normal" prices and yet we're seeing beaucoup defaults. That means either massive fraud or prices going below the "normal" pre-bubble level.
I repeat, things are bad and will get worse, but a bottom really is lurking down there in certain counties.
A halfway decent condo for 40k cash. Come on, that's 83 prices! My vulture friends who were out for so long getting back in? Prices going down enough so a new landlord can have a positive cash flow?
We may be 5 to 10 years from prices actually going up again, but we are--here in the counties I know about--actually close to a bottom. I've found some of these prices actually tempting, except for the travails of being a landlord, not something we were good at.
My mom has learned to do the Florida weather sneer already. You say it's cooold up in Balto, Father Lou? Henh, henh, it's a breezy 80 here!!!
it is amazing how some landlords will skip whole quarters of rent for the equivalent of an extra few days' worth a month
bgates | 01.29.09 - 10:39 pm | #
I am tempted to put my current landlord under pressure. If we leave, and he tries to get new tenants at what we were paying (and he must, he is way underwater), the house will sit vacant for who knows how long. Hate to do it, but ...
FairEconomist
Option ARMS are not generous at all. They're just stupid, barring 0.0001% of cases that we can get by fine ignoring -- and even then that generally implies a speculative nature about the house purchase
That is if it was assumed the mortgage would be paid off. However only people that can't afford a cheaper vanilla mortgage would go for them, which is the problem.
The unmentioned part of the option ARMS scheme was that the bank claimed as "income" the entire amount of a 'normal' payment, e.g. at 6%, even if the borrower made the much lower, neg-amort payment at say 4%
lawyerliz, I think a few are just in kind of shocked that everything came true just as predicted. Perhaps they didn't figure it would move so quickly. I think Hoops and crispy will be back.
"What's going to happen when all the million dollar homes start crashing towards the $417 line? "
when? it is happening - sellers just haven't accepted that, which is why some CA towns with 50K+ residents had less than a dozen units move in december.
anonymous writes:
Is it possible for the US Govt to simply print money (out of thin air) rather than borrowing it?
The USG doesn't print money, the Fed does
anonymous
anon:
Well I'll be damned. I stand corrected.
According to the Treasury's FAQ site, The Bureau of Engraving (under the Treasury) prints money, but the Fed is responsible for issuing it through (what used to be known as) the 'banking system.'
Elvis writes (rated swivel):
Repost but I don't care: "I'm somewhat tired and amused by these "retirements" from Calculated Risk."
Are the retirement benefits great?
I don't mean to be mean, but is mp leaving because he could be wrong? Like that old testament prophet who convinced everybody to be good for a while, and glod said, ok, good job, no smiting, and the prophet said, hey, now no one will believe I had the inside track?
Or, words to that effect.
Yeah, rates going up normally make house prices go down, it certainly happened just that way in the 80s, but we aren't in a normal state. There is hardly any financing for anybody, so where rates go is starting to matter less.
I wonder whether enough jumbo prices will drop into non-jumbo territory, just to sell, that it creates a tsunami of falling prices. reptillian | 01.29.09 - 10:48 pm | #
I think that is a safe bet. Did Cali not just ban Jumbos? Makes them kind of hard to sell.
why were the regulators going after the consumer.... especially the FDIC... EvilHenryPaulson | Homepage | 01.29.09 - 10:28 pm | #
That was not published by the FDIC and others, but only by the FRB and says: This information was prepared in consultation with the following agencies and organizations: Center for Responsible Lending Consumer Federation of America Consumer Mortgage Coalition Consumers Union Credit Union National Association Federal Deposit Insurance Corporation Federal Reserve Bank of New York Federal Trade Commission Financial Services Roundtable Freddie Mac National Consumers League Office of the Comptroller of the Currency Office of Thrift Supervision Rutgers Cooperative Extension University of Illinois Cooperative Extension Though he left earlier in 2006, Greenspan was certainly in favor of ARMs.
Yeah, 42, but there were relatively few jumbos. Yeah, prices reached for us stratospheric heights, but they were not in outer space like Cali.
And our Fla budget is in bad shape, but, Cali would kill to have it so good. It's fixable.
I'm telling you that 83 prices for some desperate sellers is really really low. Cash flow low. Real vulture not knife catcher low.
Hmmm, if rates go up maybe there will be more financing available so that the effects of higher rates will be less bad than otherwise???
I gather that some of you are in places where you could actually get a conventional loan if you had 20% down and good credit? Here, it has been basically impossible.
And I repeated, I would be surprised if 80% of these horrors didn't default. Some of the non defaultors will be people who paid more than the minimum. There were a few who did you know.
I'm thinking the Conjure Clock knows what is going to happen, but doesn't know when. I don't think the clock is too accurate for that reason. The depression is a given. Owning 3 gigantic freezers is beyond. If you disagree, mp, let me know. Otherwise, start a union when things get back to normal.
I wonder what the default and severity numbers will be when they close the books on these deals. I have a sense of what implied default and severity rates buyers are willing to pay for the senior-most paper in an Alt-A/Subprime/Option ARM RMBS, and they seem to be about as conservative as you can get.
I gather that some of you are in places where you could actually get a conventional loan if you had 20% down and good credit? Here, it has been basically impossible. lawyerliz | 01.29.09 - 10:58 pm | #
so what are the lenders looking for? 40, 50%? it sounds bad
sportsfan
You caught me red-handed, I knew it was a FRB publication but I just found it striking that the regulators were in a way a part of warning consumers as a way of protecting financial institutions
I gather the tourist/vacation business is not that bad. When we eat at someplace touristy, it is very busy in Brevard. Not so busy in local spots, but not dead either.
My out of business realtor/mtg broker who is selling cruises to live & still has his licenses said today he was starting to see some pick up. He was the one who didn't do any option arms or neg am loans except one for a person who insisted.
One of the retirement benefits is not having to get gob smacked by shite like the following while reading.
Fuck All Conservative Republic writes:
I've watched you Rob Dawg, and you are just another example of a buried tick sucking off our corrupt financial system who pretends to be Above It All and so wise and sage-like ... or should we say "bipartisan."
While you wait for another chance to degrade our nation for your personal advantage.
The Right-wing Conservative Republican traitors let these "dawgs" out, but they just piddled on the rug and now are hiding under the couch.
Teh Daawwg is just another posing Pig.
You can't stop things like that but you can vote with your feet.
Props to bgates for posting exactly the same link I had ready to go. Drilling down to communities the median in Westlake is off $600,000.
lawyerliz, there is a bit of anticlimax certainly but there's also a bit of modesty in doing a job well and leaving the stage.
Mike in Long Island, sure. I've mentioned this in the comments several times - the depth will be worse than I thought earlier (how much I don't know), and I still think the problems will linger for some time (no change there)
FE: "pre-recast, Option ARMs are unbelievably generous...and yet we're seeing beaucoup defaults. That means either massive fraud or prices going below the "normal" pre-bubble level."
Or it means that a large portion of them are:
Being hit by (sometimes early) recasts due to the loan-to-value provisions in the contracts, ie declining house values and negative amortization triggering massive early recasts.
Being underwater and facing a recast soon (see 1 above) enticing people to just "walk away" and rent (now socially acceptable in California).
Job losses and reduced overtime/work hours causing those that were on the edge even with making the minimum payment ("working for the house") finally throw in the towel.
28% already is well ahead of the Credit Suisse reset graph. According to that, almost no Option ARMs should be at risk yet.
FairEconomist | Homepage | 01.29.09 - 10:26 pm | #
Falling housing prices can accelerate the recasts of option ARM's, somewhere in the copleat ubernerd section is a 50,000 word treatise on the subject
"I mean, it's already infintesimal to begin with."
it should be small in terms of relative volume - it's the fact that every other guy in the office from the VP to the tellers is trying the same thing that makes it a challenge. this is where teamwork helps, as long as you don't all go to the same latin american country.
a few million of discretely skimmed TARP cash and a plane ticket to chile \t bgates | \t \t \t \t01.29.09 - 11:03 pm | # bgates | 01.29.09 - 11:03 pm | #
Fair: There was an update to the CreditSuisse data. My blog has a copy of that graph. It still seems ahead of the curve but less so than the old CS graph. (From Ivy Zelman?)
Clay, they don't want to make loans at all. Some sellers still aren't facing reality, but now some are, and a title underwriter friend says the dam is breaking so far as lenders willing to do short sales.
So maybe the tarp is doing something.
Maybe the tarp money is giving them some space to cut prices.
As an ex-Catholic, I just love being heretical. People were rolling their eyes at me a year and a half ago, and now, they are (I presume) rolling their eyes here.
So, Clay, where we are at right now is all cash, so lending even at higher rates (as opposed to hard equity loans) is actually an improvement.
Yes, the bottom isn't quite here yet.
Yes, so many of my formerly well off clients are suffering.
But y'all do consider that housing, here at least, may deflate the most, first.
I just found it striking that the regulators were in a way a part of warning consumers as a way of protecting financial institutions EvilHenryPaulson | 01.29.09 - 11:02 pm | #
No doubt in the hope that they could avoid what we see today. Unfortunately, consumers weren't listening.
Here are other credit crisis indicators CR forgot to post in his previous thread:
Gun Sales Increase
Asheville Citizen-Times, NC
That fear, along with concern a depressed economy will increase crime, also is fueling firearm sales, law enforcement and gun dealers say.
Couple things to keep in mind about those recasts:
1) The principal owed at recast will likely be 10 to 25% higher than original. 2) The amortization period will be around 5 years shorter and at the full index+margin rate.
Rob Dawg writes:
"One of the retirement benefits is not having to get gob smacked by shite like the following while reading..."
Whoa, Dawg!
Sounds like some of Brad Delong's Berkeley blog-lizards have found you. Personally, I've always found your posts informative and (often) entertaining.
I don't understand why people feel like they have to get so disagreeable or insulting. lawyerliz | 01.29.09 - 11:14 pm | #
I don't understand why they insist on black & white in a world shaded in grays. There's plenty of blame to go around, so the vitriol serves little purpose.
"That fear, along with concern a depressed economy will increase crime, also is fueling firearm sales, law enforcement and gun dealers say.
friardaddy "
Who buys guns from gun dealers? I buy them from crack dealers. Really cheap and every bit as effective. No serial numbers to worry about as they are scratched out.
The neg am is important. The shorter amortization not so much.
When I bought my Miami house in 81, I ran my finger down the table and figured that the max we could afford was at 18 years. After that the payments went up a lot. So, since I represented the S & L (in a very junior way), I got my 18 year loan. 15 year loans didn't exist then. And by the time we sold, we had paid off about 2/3rds of the loan.
Of course, most of these people could afford the house at a 2% amortizing rate!!
even those who have been cackling from the sidelines with puts and gold during the past year often have friends and family getting flushed by the crappy economy.
the mounting number of empty stores, restaurants, offices, etc, has an effect.
"No serial numbers to worry about as they are scratched out."
Unfortunately, they now use a technique which sees compression variations in the metal where the SN# was stamped. Goes all the way through the guns metal.
Watch what happens when California gets there. We ain't seen nuthin yet! Comrade Bear (tj & the bear) | 01.29.09 - 11:11 pm | #
Agree California will fall further, but I expect the greatest fall from this point to be in the higher priced areas, especially anything over the conforming limit. The area where I live is already at $75/sf. Volume is brisk at that price level, but they are all foreclosure resales. The folks who want $200-$250/sf for admittedly nicer houses just have listings and no buyers.
"NOD filed 9 months ago and family left 9 months ago and house is still empty and not foreclosed on."
Someone in my hood left last summer. Foreclosure is in April based on records. Bought at the top, jumbo loan(s), didn't even bother to milk it. Strangely enough, the extensive landscaping continues to be maintained.
My fear is that the unrealized, total losses are many, many trillions.
One thing I've found, the Food Bank doesn't need volunteers, they get plenty of that through the unemployed, who get a free meal for helping. If you volunteer, you displace someone who needs the extra food more than you do. Also, they need protein foods like tuna far more than cheap carbs. And baby stuff, especially diapers. Whether you call it recession, depression, or just hard times, does not matter. Do as you would be done by, because you might be next.
That last one's a toughie. Thanks to this blog, all the contributions have been going into a MM fund, but after the Reserve fiasco, I'm paranoid about the whole damn thing. But it must be faced.
lawyerliz, I'm not rolling my eyes. If prices fall far enough, most housing will get used, especially in a country which still fetishizes housing. Actually I'm surprised 40K condos aren't getting snapped up. Even with a 10% hard equity loan that's pretty affordable, and you'll likely be able to refi soon enough.
However, even more significant is that JPMorgan's derivatives amount to 400 times its alleged assets. Talk about leverage. Which bookie allows you to bet 400 times what's in your wallet?
LL, didn't mean to attack you about Florida
Just really curious about states like Florida and Nevada whose appeal relies on niche taxation under threat
As for bottoming I'll be looking for a slashing of inventory (listings + REO + shadow inv. + mortgages that will default at recast or even reset) divided by sales going to 8 months
& local job growth (as a sign of decreased inventory build)
By shadow inventory I mean every house waiting to be sold 'when the market recovers'. Basically unoccupied dwellings
...it seems this past week the comments have been ruder than normal from some. I don't understand it - other than maybe it's nerves. Black Star Ranch | 01.29.09 - 11:18 pm | #
People are scared. The ones who aren't scared are fools.
I don't see why they don't hang on til they're kicked out. That's what we do in Fraudulent Florida. I even think it slows the house rot.
I worry about hurricanes.
You have to fight like hell to get insurance companies to pay claims if you are a homeowner. If you are a bank are you gonna call the insurance co 24 dozen times? I don't think so.
Nearly 61% of option ARMs originated in 2007 will eventually default, according to a recent analysis by Goldman Sachs ...
If 61% of the $750 billion in Option ARMs defaul'
It seems there is a discrepancy here as to the amount of option ARMS out there:
Unless defused by aggressive public and private foreclosure prevention programs, the bulk of these loans will explode to higher payments in 2009 and 2010.
The scope of the problem was highlighted in September in a study by Fitch Ratings, one of the bond rating agencies that assesses the risk of defaults on mortgage-backed investments. Of the $200 billion in option ARMs outstanding, Fitch estimates that some $29 billion will recast in 2009 and another $67 billion in 2010. That could cause delinquencies on these loans to more than double, Fitch said.
"That fear, along with concern a depressed economy will increase crime, also is fueling firearm sales, law enforcement and gun dealers say. friardaddy " Elvis | 01.29.09 - 11:17 pm | #
Yeah, 200+ million handguns just is not enough. There are still quite a few kindergarten toddlers with no guns whatsoever! WTF their mothers are thinking?! D-FENS!
Remember, owning that precious yellow 200D/W123 Mercedes-Benz (1979) is also really handy during beirut-like civil war in New York. No computer crap, it just works!
I've got to sharpen the hoe, ice the poached deer meat, and visit the pretty young real estate agent down the street (first). Good night now. Mine will undoubtedly be better.
sportsfan writes:
"Agree California will fall further, but I expect the greatest fall from this point to be in the higher priced areas, especially anything over the conforming limit."
If the Option ARMs situation is as bad as it looks, there could be hundreds of millions vaporized here in Santa Monica. I'm still seeing prices in the $800-$1100 per sq ft range. Lots of room to fall, and judging by the number of young families I see around the neighborhood, there are either lots of Option ARMs involved, or an awful lot of young families with insane amounts of money. My guess is that it's lots of option ARMs, many courtesy of our local ARMs merchant (First Federal) which was just neutered this week.
You can donate directly to the food bank at the checkout in my grocery (Raley/Nob Hill). All donations go directly to the food bank - no overhead. Maybe other grocers do something similar?
...it seems the more I prepare,
the more I realize I need to prepare.
...one thing I've started doing though. We are fine here. I have a brother who isn't. I've started sending him cans of Mountain House low moisture foods (#10 cans) the last one was dehydrated beef. They last forever. Told him all he has to do is store it for "me".
Everybody knew this would happen. Bear Stearns, Lehman Bros, World Savings, WAMU, etc---they ALL pushed option-arms as affordability products from the start. That message came from the top-down. The guys in secondary knew they needed to keep that stuff flying out the door because it would inevitably default.
Ridiculous that these guys are being rewarded for their malfeasance.
People are scared. The ones who aren't scared are fools.
sportsfan | 01.29.09 - 11:27 pm | #
I'm not scared...yet. But then i live in an almost perfect environ to weather any length of depression. The polar ice cap melting in the next 20 years is a far larger calamity about to happen.
The prospect of a black swan event, of the osamma order scares me a bit - but not much. Obama does not look belligerent, so war seems very unlikely.
When U3 hits 15% and U6 ten points higher, by say say 2011, i will start to worry. Until then its time to chill, sit back, watch and be as secure as possible. I bought a new generator this week. Weather is the worry.
Well, it seems even the bewildered herd knows something is wrong, after reading the posts today.
Some rudimentary understanding of Thermodynamics and Evolutionary Biology will dispel most of the illusions about our current condition.
EvilHenryPaulson writes:
"What kind of insurance do banks carry on their empty homes?"
I don't know, but my guess is that they self-insure. In the normal course of operations, this would make sense, and how likely is it that they have changed that procedure?
Are you telling me the gov't could throw me the first bone of my life?
I'm no mortgage expert, but IIRC, as part of the housing bill last summer, they removed the income limits and increased the eligible loan amounts for various zones.
Has anyone else run into condo associations limiting the percent of units that can be rented? They started getting strict about that this last year. I wonder when they will realize that those rules discourage potential buyers (investors).
My understanding is that very many middle class and upper middle class people have a warped understanding of what being "poor" means.
Only having a 2100 sq. ft. house doesn't mean poor. Having your children share a bedroom doesn't mean poor. Having only two cars, and both of them are older than 3 years old doesn't mean poor. Renting a house or condo doesn't mean poor.
This is not going to be pretty. sm_landlord | 01.29.09 - 11:31 pm | #
SM has always been pricey, but there is a premium for being near the water. Lived there for a few years as a renter in the early 1970s and thoroughly enjoyed the life. But prices there have become so unrealistic that I don't even understand it anymore. Why would anyone buy a million dollar teardown in order to get a small lot in marginal walking distance from the beach?
People are scared. The ones who aren't scared are fools. sportsfan | 01.29.09 - 11:27 pm | #
Yeah, it's getting real for a great number of people that figured the future was nothing but roses. We've been here talking about this for a while, so we've had the chance to prepare ourselves (especially mentally).
Some places make sense in the TCs as well at current rents. I just worry that current rents are greater than future rents. The inventory is just daunting, especially in the condo/TH space. I would need a good return (25% annual) to take the risk and headache.
Are you telling me the gov't could throw me the first bone of my life? change, my ass | 01.29.09 - 11:26 pm | #
You know, I was going to say something along the lines of "the bone the gov't going to give you, they're not going to throw", but I thought better of it.
You won't see the rules changing any time soon. They exist for several reasons. Partly because the turnover involved with rental units is felt in a very different way in Condos than in SFR neighborhoods, and it tends to degrade the owner occupied experience in a big way. The other problem is maintenance. Investors do not have the same pride of ownership, and are far less willing to contribute to the shared maintenance/upgrade expenses.
Both of those are big deals. Oh yeah, the last part is lending restrictions. FHA, Fannie/Freddie all have guidelines which limit the percentage of non-owner occupied in any given condo project, and once it exceeds that number, no new loans. Period.
sm_landlord
Well they sure wouldn't want to increase carrying costs by paying a premium to someone else to cover the huge risks on a property vacant for months
The govt will have to pay so much above market price to buy mortgages for empty homes, otherwise delaying foreclosure just fraudulently hides the losses from the balance sheet and there are no private investors taking that risk
Maybe the govt told them to hold the empty homes in hopes of a more politically pallatable subsidy structure
You can donate directly to the food bank at the checkout in my grocery (Raley/Nob Hill). All donations go directly to the food bank - no overhead. Maybe other grocers do something similar?
theotherdeb
.
The grocery stores here donate food that's just at the sell-by date to the food bank. Anything that doesn't get used there goes to the farmers' pigs. Oregon still has that agricultural 'waste not, want not' habit. But they are also glad to get fresh fruits and veggies, as long as they don't need to be cooked. So a 'victory garden' will not go wanting, I deem.
sm_landlord:"If the Option ARMs situation is as bad as it looks, there could be hundreds of millions vaporized here in Santa Monica....there are either lots of Option ARMs involved, or an awful lot of young families with insane amounts of money..."
From what I hear, the movie and TV industry is stating to take employment hits...it will be interesting to see how long the "how much a month" millionaires in some of the tonier places in LA will be able to keep up appearances by living life on the edge (zero savings).
What kind of insurance do banks carry on their empty homes? EvilHenryPaulson | 01.29.09 - 11:37 pm | #
It varies of course by area and by bank, but one with which I'm familiar is basic fire, theft, vandalism through CUNA and the policy is purchased when the NOD is filed.
"I'm still seeing prices in the $800-$1100 per sq ft range. Lots of room to fall, and judging by the number of young families I see around the neighborhood, there are either lots of Option ARMs involved, or an awful lot of young families with insane amounts of money."
Same here in the WEHO, Grove, Hancock Park area. The local "wisdom" is that everyone is rich. I've looked at the census data, I'm not so sure about that. . .
I moved to CA during the last boom; couldn't fathom the prices THEN. Nonetheless, years later I warmed up to the idea of spending upwards of 500K for something nicer & newer in a better outlying hood. That was then, of course, this is now, and those same houses more than doubled since.
I'm sorry, I just don't see it.
Given current circumstances, there's no way we don't fly back past those 90's prices. I'm expecting to get much more for less in the not-so-distant future.
"They started getting strict about that this last year. I wonder when they will realize that those rules discourage potential buyers (investors)."
Barn door, meet empty barn.
These rules are designed to keep specs out. Bit late now. My CC&R's have them since I bought in '99. HOA board willfully ignored them from '04 to present. We have 73REO's in a 300 unit complex...and the banks ain't paying their dues on the REO.
Yen/USD going south again. And NIKKEI is deep red, sporting a 7 handle again. Doesn't look like there are a lot of buyers ahead of the GDP horror show.
"the movie and TV industry is stating to take employment hits"
i think showbiz-related employment is an overrated component of the LA economy, with the possible exception of the burbank/studiocity/universal/n. h'wood area.
real estate is an underrated component - it has been the absolute foundation of the town's economy at every phase going back to the 1880s, with only the mid-century aviation boom offering competition.
bgates writes:
"What's going to happen when all the million dollar homes start crashing towards the $417 line? "
when? it is happening - sellers just haven't accepted that, which is why some CA towns with 50K+ residents had less than a dozen units move in december.
It's happening in plain sight right here in IE 92270 CA, 569 homes listed at $875k ave. with recent sales price average at $417k. Where did that $417k figure come from, and where are those 875k offers headed?
Most of the defaults already took place. The full rates on that paper are at 4.25% to 5.5% and going lower. For loans from 2005 minimum payment in many cases covers interest and repays small portion of principal, the same for 2006 and 2007 paper since 12-MTA and 6-mo Libor are very low.
There will be some defaults due to job losses, for certain. But 61% is about as likely as $200 oil.
"AUSTIN -- The state should reimburse El Paso law enforcement for providing increased security at Thomason Hospital, which has been forced to treat victims of the raging violence in Juárez, local lawmakers said Wednesday. "You've got citizens who are in fear of going to that hospital because they're treating victims of this drug war," said state Rep. Joe Pickett, D-El Paso. "We have to worry about places like Thomason Hospital, where we take victims of cartel shootings out of Juárez."Last year about 1,600 people died in the bloody drug battle in Juárez. And nearly 50 people wounded in the violence were taken to Thomason for treatment at a cost of about $1.4 million.State Sen. Eliot Shapleigh, D-El Paso, said Juárez victims should be taken to Beaumont Army Medical Center, the military hospital, so that local taxpayers don't have to pay.
"That's the appropriate place to provide the treatment and the security," he said. McCraw said he had proposed that idea to military officials but was unable to make an arrangement for patients to go to Beaumont. Until or unless that happens, McCraw said, the state would "absolutely" help with the cost of providing security at Thomason."
Your tax dollars paying for medical care for Mexican nationals, shot in Mexico. Interesting scenario...
real estate is an underrated component - it has been the absolute foundation of the town's economy at every phase going back to the 1880s, with only the mid-century aviation boom offering competition. bgates | 01.29.09 - 11:57 pm | #
All that accumulated equity -- gone. This place won't be the same for a looooonnngg time.
"This place won't be the same for a looooonnngg time."
You mean people pretending they live like rock starts? I disagree. The price paid and the quantities of geegaws and grimwracks required for the fascade will decline however...if that's what you mean.
Elvis writes:
I'm gonna quit postin' 'cause I'm drinkin' moonshine and nut'in' is bet'r than moonshine. mp. c&c, and broward.
Elvis | 01.29.09 - 10:42 pm | #
I've never enjoyed drinking as much as I have the last few months. I get the sense that's becoming generally true.
Huh, what's Diageo's stock at? I got some cash looking for a parking place...
You mean people pretending they live like rock starts? Comrade Misean is Dope | Homepage | 01.30.09 - 12:06 am | #
Naw, that'll go on forever.
There will always be money in this town making a show of things, and wayyyy too many pretenders. Just won't be nearly as many of them as has been recent decades.
MEXICO'S BAZAAR OF VIOLENCE"The most likely existential security threat to the United States isn't likely to originate from southwest Asian terrorists or a conventional war with China. Instead, it will originate from Mexico's open source insurgency ...Jerez, a town of 60,000 a few miles northwest of Felipe Angeles in Zacatecas, was until recently a calm place, largely untouched by organized crime, said Abel Márquez Haro, a grocery wholesaler. But recently, scores of men driving Chevrolet Suburbans and carrying automatic rifles established a menacing presence, threatening residents on the street and extorting businesspeople. The identities of the men remain a mystery, but many people in the town say they assume they are traffickers who have abandoned another Mexican state, perhaps to avoid an army crackdown."
Iraq is sitting on our doorstep, just in disguise. Luckily for me, I live near our northern border, which is much quieter.
"Just won't be nearly as many of them as has been recent decades."
hollywood proper and currently posh parts of SF both had VERY seedy elements in large quantities only 20 years ago. not much of a stretch to see that returning, hard as it might be for some to visualize.
"Tonier and LA will be a contradiction in terms. Gonna be a spectacular collapse. Guaranteed."
Agreed. But from where I sit, in a "tonier" part of LA (90048), list prices are just as stupid as they were a year ago, avg. sales prices (stuff still sells, though slower) has been +/- 900k for the last year or so. Hordes of 20 somethings still fill Joans and Toast. No capitulation yet. I assume it's the same in the hills and farther west in SM/Venice etc. When it goes, it'll be epic.
I also post comments to an irc channel as they appear on haloscan. Click for a web irc interface: Mibbit IRC client widget (Or join the irc server directly: irc.realize.org:9996 #calculatedrisk)
What others have said about CRBot: Gary writes: This CRbot is pretty nifty. EvilHenryPaulson writes: CRBot is great on mobiles Loudocracy writes:
Thank god CRbot spared me from that dead thread. Hoopajoops writes: Posting a test message from the IRC Channel... THIS THING ROCKS
CRBot: Killing dead threads deader since last week.
"hollywood proper and currently posh parts of SF both had VERY seedy elements in large quantities only 20 years ago"
Yep, moved here (LA) in 91. much different place seedy-wise. I'm sure some of the upscale-ing will stick around. But a lot of places are gonna go back to seed I think. Too bad, there are some really nice houses in 90019.
it is amazing how some landlords will skip whole quarters of rent for the equivalent of an extra few days' worth a month
when? it is happening - sellers just haven't accepted that, which is why some CA towns with 50K+ residents had less than a dozen units move in december.
You know, I think it's the fear that's really demoralizing people. I've been poor in the past, along with my family, since the Depression. It's not as bad as people think, as long as you have medical care, beans, and music. I, personally, would prefer socialism to seeing children starving in the streets, or selling themselves for a meal.
I remember LA and OC in the late 70s to the early 90s very well though we're talking from grade school onward. I rented a huge loft built in 1924 (gorgeous brick building) for less then $.30 sqft. in 91 to 93. I hate to think what they'd ask for that place now. It would be totally unjustified.
According to the Treasury's FAQ site, The Bureau of Engraving (under the Treasury) prints money, but the Fed is responsible for issuing it through (what used to be known as) the 'banking system.'
Can we both claim partial credit on this?
Samdog
Yes, the Bureau of Engraving and Printing prints the paper money and sells it to the Federal Reserve (at the cost of printing). They probably have exclusive rights.
On the other hand, the US Mint mints all the coins and also sells them to the Federal Reserve. BUT, the US Mint also sells coins to the general public via their website. For example, you can buy a box of 250 $1.00 coins for $250.00 (free shipping).
So the Treasury can definitely create money out of cheap metal and cut the Federal Reserve completely out of the picture. It would also probably be the one single way to get the dollar coin into wide circulation (long overdue, in my opinion).
Your tax dollars paying for medical care for Mexican nationals, shot in Mexico. Interesting scenario... citizen Kung Fu Panda | Homepage | 01.29.09 - 11:58 pm | #
No Country for Old Men... You have to watch it twice though, like most Coen movies.
so we've had the chance to prepare ourselves (especially mentally). Comrade Bear (tj & the bear) | 01.29.09 - 11:44 pm | #
The level of denial and wishful thinking is have seen in my travels this year astound me. The U.S.A. has not EVEN begun to come to grips with the potential fate that awaits us. Mental preparedness and flexible minds will serve the CR community in picking a bottom, while the rest of the U.S.A. is in the throes of dispair.
As I recall a chart that was posted on this site back on Oct 22,2007 the sub prime amounts kick down 20 billion mark thru 2012. The OAR loans kick in at 20 billion (that is the resets) in 2010 and max out at 40 billion in 2011. The end of these toxic loans won't end till the middle of 2012. Hold on to your hats this won't be over anytime soon. Hmmm just in time for the election.
The USG doesn't print money, the Fed does. Well of course technically, the money is PRINTED by the Bureau of Engraving and Printing, a part of the Treasury department. And in the past, the U.S. Government HAS issued currency directly, as opposed to through the Federal Reserve Banks. They're calle U.S. NOTES --
"If 61% of the $750 billion in Option ARMs default, and with a 50% loss severity, the losses to lenders will be about $225 billion - far less than for subprime, but still a huge problem."
Doesn't that depend on where the 750 figure came from?
If the original principal was 750, and borrowers are paying the minimum payment, the principal is going up; 750B in originated Option ARM loans becomes more like 1T the way the accounting is done. If I am mistaken, please correct/flame me.
Yep, option ARM borrowers will be screwed by the pooch. Most are in negative equity, can't afford to refinance, their jobs are in jeopardy. My advice is to deleverage now. The banks are getting the bailouts, and the people deserve some relief too. If Washington won't send it, they need to deleverage.
Thanks CR.
Wow, everything old is new again.
Nostrovia,
CR have you revisited your outlook regarding the severity of the recession?
I'm surprised that ANY of these horrors are still current.
That $400B bad bank's going to be a tad bit short. Oh that's right, it's supposed to be 10X leverage.
Repost but I don't care: "I'm somewhat tired and amused by these "retirements" from Calculated Risk. "Everything has happened already." Bullsh*t, things are just heating up. Those pretenders will be back. Waiting for food shortages gets old fast. You can let them know I said that.
Elvis | 01.29.09 - 10:16 pm"
Here we go...the financially sophisticated set...
It's all coming apart.
"As of December, 28% of option ARMs were delinquent or in foreclosure, according to LPS Applied Analytics ... An additional 7% involve properties that have already been taken back by the lenders. ... Just over half of subprime loans were delinquent, in foreclosure"
Sounds like just stuff unless there is historical context!
@Mike - the Big Day today, 40, eh?
61% default rate? That is almost unbelievable.
You'd have a hard time deliberately setting something up to do that! The efficiency of failure represented there is off the charts.
Those pretenders will be back.
Elvis | 01.29.09 - 10:17 pm | #
Go Elvis! Yeah, I'm thinking the apocalyptic stuff is a little overblown...more like quiet desperation...I guess we're all English now
"If 61% of the $750 billion in Option ARMs default, and with a 50% loss severity, the losses to lenders will be about $225 billion - far less than for subprime, but still a huge problem."
That is a big "if." I'm thinking 85%.
If housing were affordable, now and in the past, none of this might have happened. Gov't housing may be the answer. Reagan's spent 16 yrs in gov't housing. Clinton's 16 years. Bush's 16 years.
Whocoodhadnode!
Barley
Soon enough, don't rush it. A few more months and I'll be there.
Have the subprime losses worked all the way through the system?
The key problem with Option ARMs is that they were used as affordability products
They are affordability products alrighty. They are going to make a bunch of shitty banks awfully affordable to the slightly better off banks that take them over.
The reason that the default rate can be so high is that most of those houses are now underwater.
Soon enough, don't rush it. A few more months and I'll be there.
Mike in Long Island
Wel let us know I'll create a little jib-jab for ya!
The article requested is no longer available.
BRUSSELS, Belgium The European Union warned Thursday it would protest provisions in President Barack Obama's economic stimulus plan that favour U.S. steelmakers ahead of imports from Europe or China.
The U.S. House of Representatives on Wednesday voted for a so-called "Buy America" provision that would call on major public works projects to favour U.S. steel over imports. The provision came despite objections from some business groups that such a measure would hamper free trade.
It looks like Harper might be growing a backbone now that Bush is gone, there is already talk of a NAFTA challenge. A lot of countries put up with steel, softwood, and other protectionism (ie Mexico was forced to accept toxic waste against local regulations for a landfill) from the USA while Bush literally refused to abide by NAFTA and WTO rulings.
These disputes take years upon years to make it through all the possible appeals, so there will be quick counter-tariffs as even politicians are anxious about preserving jobs
Not sure how far the protectionism goes. The US can eat a devaluation, but not if exports don't rise
Barley writes:
Sounds like just stuff unless there is historical context!
To put it in historical context: there is none...
That is a big "if." I'm thinking 85%.
Assuming normal market operations, I would agree, but I think the combination of bad bank + FDIC workouts + cramdown will lower the default rates. How much, not sure.
Sucks for the counterparties (e.g. taxpayers) that have to eat the losses.
The loss is inconsequential as the issuing banks are already broke.
Just wanted to clarify one thing CR. The quate said that $750 billion option arms were issued from 2004 to 2007, but Goldman Sachs says that 61% of those issued in 2007 will default. There was not $750 billion issued in 2007 - so the % issued in 2007 is likely a smaller number.
The loss is inconsequential as the issuing banks are already broke.
The losses don't disappear into the ether. Someone is on the other side of it.
Thread music...thanks to Scott...
YouTube - Time - Pink Floyd + Lyrics
Nostrovia,
28% already is well ahead of the Credit Suisse reset graph. According to that, almost no Option ARMs should be at risk yet.
A ponzi scheme is only as strong as its weakest link!
It will all come down.
EvilHenryPaulson writes:
"http://www.google.com/hostednews...F0v8nnqZSgr- bIA
BRUSSELS, Belgium The European Union warned Thursday it would protest provisions in President Barack Obama's economic stimulus plan that favour U.S. steelmakers ahead of imports from Europe or China.
These disputes take years upon years to make it through all the possible appeals, so there will be quick counter-tariffs as even politicians are anxious about preserving jobs"
Ah! Now we're talking 1930s-style historical context--food fight!
"The reason that the default rate can be so high is that most of those houses are now underwater."
It's all about recast. Many of these mortgages recast to a payment 30% higher even if rates stay the same.
BTW The guy next door to me had an option-arm on an 800k house bought in 2006. NOD filed 9 months ago and family left 9 months ago and house is still empty and not foreclosed on.
28% already is well ahead of the Credit Suisse reset graph
Do you mean recast instead of reset?
November 2006
Interest-Only Mortgage
Payments and
Payment-Option ARMs
Are They for You?
published by
FRB / FDIC / NCUA / OCC / OTS
why were the regulators going after the consumer.... especially the FDIC...
Ah! Now we're talking 1930s-style historical context--food fight!
Samdog
We came out ok in the last food fight.
When mortgage rates go to 10%+, what will happen to house prices and the banks then? How many trillions will the US Govt have to borrow to cover that problem?
Is it possible for the US Govt to simply print money (out of thin air) rather than borrowing it?
Lame metaphor of the minute: We're in a plane at 20k feet (its already fallen from 35k feet), and the engines won't restart. We're headed for an ending other than a smooth landing on the Hudson.
Is it possible for the US Govt to simply print money (out of thin air) rather than borrowing it?
The USG doesn't print money, the Fed does
I was cleaning out my office today and came across a copy of the WSJ the day after the Dow crossed 10,000 the first time. I wonder how long it will be before that happens again...
stockdog42 writes:
Ah! Now we're talking 1930s-style historical context--food fight!
Samdog
We came out ok in the last food fight.
Yeah, but half the fun is gettin' there....
I think rents are going up in my area in an attempt to cover the potential losses of the owners.
Pilgrim:
Sovereign default imminent
Yes
Hearing about 70% loss severity rates in California as well for residential real estate when the bank finally gets the property off its books. That will punch a whole in any model
"We came out ok in the last food fight."
Sorry, that time we were a net creditor. Know Mandarin?
Fair,
"28% already is well ahead of the Credit Suisse reset graph. According to that, almost no Option ARMs should be at risk yet."
Pull on that thread to hard, for too long and other things start to....unwind.
Nostrovia,
high-end RE is screwed document #45E
hole rather..maybe I should have said smash to smithereens
anonymous writes:
Is it possible for the US Govt to simply print money (out of thin air) rather than borrowing it?
The USG doesn't print money, the Fed does
anonymous
Are you sure about that?
I thought the Bureau of Engraving falls under the Treasury's care ... like its evil twin the IRS ....
Sovereign default imminent
Will that vaporize all debt by any chance?
If we're gonna start at ground zero, we might as well make it complete.
Do you mean recast instead of reset?
It's called a reset graph
because the other components (subprime, Alt-A, etc.) have resets graphed, even thought the Option-ARM event is actually a recast..
Comrade Tiberius writes:
I think rents are going up in my area in an attempt to cover the potential losses of the owners.
Comrade:
Sounds like your local owners need a refresher course in Supply & Default ...
Comrade Misean is dope writes:
Know Mandarin?
Only the bad words
The USG doesn't print money, the Fed does
anonymous | 01.29.09 - 10:30 pm | #
Until they dont!
EHP,
"Only the bad words"
TILT!
Nostrovia,
"I thought the Bureau of Engraving falls under the Treasury's care ... like its evil twin the IRS ...."
I read about someone yanking an ATM out of a bank's wall. That could yield some cash, but an even bigger haul could be had by hijacking trucks leaving gov't printing office.
Outsider,
I would say not exactly. Look at South Korea, Russia, and others who went through the worst.
The rich remain rich, or the rich that remain are 10x richer than they were before. Call it oligarch or chaebol, they always turn up.
Sounds like your local owners need a refresher course in Supply & Default ...
Samdog | 01.29.09 - 10:34 pm | #
case in point: in 2005 I rented a house for $1350/month. Property values have now fallen
40% from their peak since then, and two of the same model houses in the same neighborhood now rent for $1400/month. They have been sitting empty for at least three months since the for rent signs went up.
Lies and damned lies and then idiots using misinformation to cause chaos!
FairEconomist writes:
Do you mean recast instead of reset?
It's called a reset graph because the other components (subprime, Alt-A, etc.) have resets graphed, even thought the Option-ARM event is actually a recast..
Thanks for setting me straight on that.
"They have been sitting empty "
it is amazing how some landlords will skip whole quarters of rent for the equivalent of an extra few days' worth a month
good night.
Misean - I HATE loose threads. Yank, yank.
In all seriousness - pre-recast, Option ARMs are unbelievably generous. Payments are about half of what they will be after recast due to loan-to-value maximums and about 70% of a "normal" mortgage. These payments are about what people would pay at "normal" prices and yet we're seeing beaucoup defaults. That means either massive fraud or prices going below the "normal" pre-bubble level.
"it is amazing how some landlords will skip whole quarters of rent for the equivalent of an extra few days' worth a month"
Accidental landlords, perhaps.
Flipper is as flipper does, my momma used to always say.
Nostrovia,
See Sweden 1994 and $4 Trillion bailout; who cares mate?
I repeat, things are bad and will get worse, but a bottom really is lurking down there in certain counties.
A halfway decent condo for 40k cash. Come on, that's 83 prices! My vulture friends who were out for so long getting back in? Prices going down enough so a new landlord can have a positive cash flow?
We may be 5 to 10 years from prices actually going up again, but we are--here in the counties I know about--actually close to a bottom. I've found some of these prices actually tempting, except for the travails of being a landlord, not something we were good at.
My mom has learned to do the Florida weather sneer already. You say it's cooold up in Balto, Father Lou? Henh, henh, it's a breezy 80 here!!!
The rich remain rich, or the rich that remain are 10x richer than they were before. Call it oligarch or chaebol, they always turn up.
I was thinking more French 1780's, guilliotein and such.
I'm gonna quit postin' 'cause I'm drinkin' moonshine and nut'in' is bet'r than moonshine. mp. c&c, and broward.
it is amazing how some landlords will skip whole quarters of rent for the equivalent of an extra few days' worth a month
bgates | 01.29.09 - 10:39 pm | #
I am tempted to put my current landlord under pressure. If we leave, and he tries to get new tenants at what we were paying (and he must, he is way underwater), the house will sit vacant for who knows how long. Hate to do it, but ...
I repeat, things are bad and will get worse, but a bottom really is lurking down there in certain counties.
lawyerliz | 01.29.09 - 10:41 pm | #
I think bonds and interest rates have to finish blowing up before we get there.
I dunno, lots of former rich out there. Also former solid upper middle class. Now lower class in money anyhow.
I doubt hoops could resist coming back to post again. Too addictive.
Also c&c, why's s/he leaving?
"under pressure"
it will probably just sit for months. most small-time LLs can't process the kind of weakness that most markets are seeing. so it sits. and sits.
"lawyerliz writes:
I repeat, things are bad and will get worse, but a bottom really is lurking down there in certain counties."
I don't doubt you. However, the problem with FL is the holding costs. They almost always make it a bad investment unless you live in it.
FairEconomist
Option ARMS are not generous at all. They're just stupid, barring 0.0001% of cases that we can get by fine ignoring -- and even then that generally implies a speculative nature about the house purchase
That is if it was assumed the mortgage would be paid off. However only people that can't afford a cheaper vanilla mortgage would go for them, which is the problem.
ll,
"I repeat, things are bad and will get worse, but a bottom really is lurking down there in certain counties."
No doubt. I am looking at paying cash in Crispy's neck of the woods for a place (SFR) with renters paying $600/mo.
I'm just not optomistic yet.
Nostrovia,
The unmentioned part of the option ARMS scheme was that the bank claimed as "income"
the entire amount of a 'normal' payment, e.g. at 6%, even if the borrower made the much lower,
neg-amort payment at say 4%
A halfway decent condo for 40k cash. Come on, that's 83 prices!
What's going to happen when all the million dollar homes start crashing towards the $417 line? More downward pressure...
lawyerliz, I think a few are just in kind of shocked that everything came true just as predicted. Perhaps they didn't figure it would move so quickly. I think Hoops and crispy will be back.
lawyerliz writes:
I repeat, things are bad and will get worse, but a bottom really is lurking down there in certain counties.
You've got to be kidding. Liz your in Flordia now, and you ain't seen nothin yet dorothy.
"What's going to happen when all the million dollar homes start crashing towards the $417 line? "
when? it is happening - sellers just haven't accepted that, which is why some CA towns with 50K+ residents had less than a dozen units move in december.
I wonder whether enough jumbo prices will drop into non-jumbo territory, just to sell, that it creates a tsunami of falling prices.
anonymous writes:
Is it possible for the US Govt to simply print money (out of thin air) rather than borrowing it?
The USG doesn't print money, the Fed does
anonymous
anon:
Well I'll be damned. I stand corrected.
According to the Treasury's FAQ site, The Bureau of Engraving (under the Treasury) prints money, but the Fed is responsible for issuing it through (what used to be known as) the 'banking system.'
Can we both claim partial credit on this?
Samdog
Is it late nite yet? Sex will soon cost a cup of rice. I've hoarded a lot of rice.
"I wonder whether enough jumbo prices will drop into non-jumbo territory, just to sell, that it creates a tsunami of falling prices.
reptillian"
I've got the future library card and the book says "yes." No more wondering.
"nonjumbo" territory = Miami Flordia
Elvis writes (rated swivel):
Repost but I don't care: "I'm somewhat tired and amused by these "retirements" from Calculated Risk."
Are the retirement benefits great?
"I wonder whether enough jumbo prices will drop into non-jumbo territory"
Ventura County 839 $335,000 $525,000 -36.19%
DQNews - California Home Sale Price Medians by County and City
I don't mean to be mean, but is mp leaving because he could be wrong? Like that old testament prophet who convinced everybody to be good for a while, and glod said, ok, good job, no smiting, and the prophet said, hey, now no one will believe I had the inside track?
Or, words to that effect.
Yeah, rates going up normally make house prices go down, it certainly happened just that way in the 80s, but we aren't in a normal state. There is hardly any financing for anybody, so where rates go is starting to matter less.
Stock market will go up:
YouTube - Puppy vs. Cat
lawyerliz
What are the big job industries in Florida, or is there some resource cash cow for the state?
Tourism, theme parks, vacations ...
Retirement villages, second homes,...
Oranges, grapefruits, lemons, tangerines, ...
Phospate mining, law schools, NASA, hurricane recovery...
I would be worried about the state needing to repeal the age old property tax law, or bring in an income tax
No more construction, a lot of retirees got hit in the first stockmarket downleg, and other negatives...
"Are the retirement benefits great?
irreverent"
No, they are boredom and anticipation. Typically, commenters see the future 6 months early. Ping pong anyone?
None of this thread will matter twenty minutes from now!
I wonder whether enough jumbo prices will drop into non-jumbo territory, just to sell, that it creates a tsunami of falling prices.
reptillian | 01.29.09 - 10:48 pm | #
I think that is a safe bet. Did Cali not just ban Jumbos? Makes them kind of hard to sell.
Who are the big employers in Vancouver? Never mind S
why were the regulators going after the consumer.... especially the FDIC...
EvilHenryPaulson | Homepage | 01.29.09 - 10:28 pm | #
That was not published by the FDIC and others, but only by the FRB and says:
This information was prepared in consultation with the following agencies and organizations: Center for Responsible Lending
Consumer Federation of America
Consumer Mortgage Coalition
Consumers Union
Credit Union National Association
Federal Deposit Insurance Corporation
Federal Reserve Bank of New York
Federal Trade Commission
Financial Services Roundtable
Freddie Mac
National Consumers League
Office of the Comptroller of the Currency
Office of Thrift Supervision
Rutgers Cooperative Extension
University of Illinois Cooperative Extension Though he left earlier in 2006, Greenspan was certainly in favor of ARMs.
There is hardly any financing for anybody, so where rates go is starting to matter less.
lawyerliz | 01.29.09 - 10:51 pm | #
If the only people who can buy a house are those with cash in hand, housing is REALLY in for a crunch.
Yeah, 42, but there were relatively few jumbos. Yeah, prices reached for us stratospheric heights, but they were not in outer space like Cali.
And our Fla budget is in bad shape, but, Cali would kill to have it so good. It's fixable.
I'm telling you that 83 prices for some desperate sellers is really really low. Cash flow low. Real vulture not knife catcher low.
Hmmm, if rates go up maybe there will be more financing available so that the effects of higher rates will be less bad than otherwise???
I gather that some of you are in places where you could actually get a conventional loan if you had 20% down and good credit? Here, it has been basically impossible.
And I repeated, I would be surprised if 80% of these horrors didn't default. Some of the non defaultors will be people who paid more than the minimum. There were a few who did you know.
I'm thinking the Conjure Clock knows what is going to happen, but doesn't know when. I don't think the clock is too accurate for that reason. The depression is a given. Owning 3 gigantic freezers is beyond. If you disagree, mp, let me know. Otherwise, start a union when things get back to normal.
The weird thing with the jumbo move is that many neighborhoods that didn't benefit from the bubble upward will get crowded out on the way down.
I wonder what the default and severity numbers will be when they close the books on these deals. I have a sense of what implied default and severity rates buyers are willing to pay for the senior-most paper in an Alt-A/Subprime/Option ARM RMBS, and they seem to be about as conservative as you can get.
I guess we're all English now
Scott | 01.29.09 - 10:19 pm | #
Except for the Brits, they are Icelandic now.
Let the offer on a previous thread, just before it died, but if anyone wants a copy of my January Strategy report, e-mail me at dhvd_2004@yahoo.com.
I gather that some of you are in places where you could actually get a conventional loan if you had 20% down and good credit? Here, it has been basically impossible.
lawyerliz | 01.29.09 - 10:58 pm | #
so what are the lenders looking for? 40, 50%? it sounds bad
sportsfan
You caught me red-handed, I knew it was a FRB publication but I just found it striking that the regulators were in a way a part of warning consumers as a way of protecting financial institutions
" and they seem to be about as conservative as you can get.
MinniRenter"
Said the go-go dancer to the whore.
"many neighborhoods that didn't benefit"
if your 'hood is over $300 sq/ft, it IS overpriced, and it almost certainly DID benefit from the bubble, insofar as 'benefit' means higher prices
I gather the tourist/vacation business is not that bad. When we eat at someplace touristy, it is very busy in Brevard. Not so busy in local spots, but not dead either.
My out of business realtor/mtg broker who is selling cruises to live & still has his licenses said today he was starting to see some pick up. He was the one who didn't do any option arms or neg am loans except one for a person who insisted.
"so what are the lenders looking for"
a few million of discretely skimmed TARP cash and a plane ticket to chile
What are the peeps going to do once it becomes common knowledge that the banks are insolvent and headed south?
It seems to get uglier every day. Once the backstops tumble, it's over. Over means devaluation for us.
One of the retirement benefits is not having to get gob smacked by shite like the following while reading.
Fuck All Conservative Republic writes:
I've watched you Rob Dawg, and you are just another example of a buried tick sucking off our corrupt financial system who pretends to be Above It All and so wise and sage-like ... or should we say "bipartisan."
While you wait for another chance to degrade our nation for your personal advantage.
The Right-wing Conservative Republican traitors let these "dawgs" out, but they just piddled on the rug and now are hiding under the couch.
Teh Daawwg is just another posing Pig.
You can't stop things like that but you can vote with your feet.
Props to bgates for posting exactly the same link I had ready to go. Drilling down to communities the median in Westlake is off $600,000.
lawyerliz, there is a bit of anticlimax certainly but there's also a bit of modesty in doing a job well and leaving the stage.
I gather that some of you are in places where you could actually get a conventional loan if you had 20% down and good credit?
Mortgage records for my neighborhood in DC NE shows 1/2 of the mortgages now are 3% FHA (up to 635K). First time buyers only though.
Mike in Long Island, sure. I've mentioned this in the comments several times - the depth will be worse than I thought earlier (how much I don't know), and I still think the problems will linger for some time (no change there)
best wishes.
FE: "pre-recast, Option ARMs are unbelievably generous...and yet we're seeing beaucoup defaults. That means either massive fraud or prices going below the "normal" pre-bubble level."
Or it means that a large portion of them are:
bgates,
"a few million of discretely skimmed TARP cash"
Discreetly skimmed?!?!?!?!?!?!
How do you discreetly skim 1/750,000 of something? I mean, it's already infintesimal to begin with.
Nostrovia,
"Nearly 61% of option ARMs originated in 2007 will eventually default."
I thought the crisis was all contained to sub-prime?
"losses to lenders will be about $225 billion - far less than for subprime."
Hmm. Why does that smell fishy?
28% already is well ahead of the Credit Suisse reset graph. According to that, almost no Option ARMs should be at risk yet.
FairEconomist | Homepage | 01.29.09 - 10:26 pm | #
Falling housing prices can accelerate the recasts of option ARM's, somewhere in the copleat ubernerd section is a 50,000 word treatise on the subject
"exactly the same link I had ready to go"
the december bay area zipcode breakdown is out on dq, btw
"I mean, it's already infintesimal to begin with."
it should be small in terms of relative volume - it's the fact that every other guy in the office from the VP to the tellers is trying the same thing that makes it a challenge. this is where teamwork helps, as long as you don't all go to the same latin american country.
"so what are the lenders looking for"
a few million of discretely skimmed TARP cash and a plane ticket to chile
\t bgates | \t \t \t \t01.29.09 - 11:03 pm | #
bgates | 01.29.09 - 11:03 pm | #
heh, let me help them with their arrival in Chile
Fair: There was an update to the CreditSuisse data. My blog has a copy
of that graph.
It still seems ahead of the curve but less so than the old CS graph. (From Ivy Zelman?)
And people are apparently buying the cruises too.
Clay, they don't want to make loans at all. Some sellers still aren't facing reality, but now some are, and a title underwriter friend says the dam is breaking so far as lenders willing to do short sales.
So maybe the tarp is doing something.
Maybe the tarp money is giving them some space to cut prices.
As an ex-Catholic, I just love being heretical. People were rolling their eyes at me a year and a half ago, and now, they are (I presume) rolling their eyes here.
So, Clay, where we are at right now is all cash, so lending even at higher rates (as opposed to hard equity loans) is actually an improvement.
Yes, the bottom isn't quite here yet.
Yes, so many of my formerly well off clients are suffering.
But y'all do consider that housing, here at least, may deflate the most, first.
Come on, that's 83 prices!
lawyerliz | 01.29.09 - 10:41 pm | #
Watch what happens when California gets there. We ain't seen nuthin yet!
"May 24, 1626 in History. Event: Peter Minuet buys Manhattan from Indians for trinkets, valued at $24"
May 24, 2016: Total value of Manhattan: $24. By 2026 it is even less.
I just found it striking that the regulators were in a way a part of warning consumers as a way of protecting financial institutions
EvilHenryPaulson | 01.29.09 - 11:02 pm | #
No doubt in the hope that they could avoid what we see today. Unfortunately, consumers weren't listening.
May 24, 2016: Total value of Manhattan: $24. By 2026 it is even less.
supafly73 | 01.29.09 - 11:11 pm
"Or it means that a large portion of them are:"
you forgot 4,5,6,7,8 and 9
fraud, fraud, fraud, fraud, fraud, and fraud
Here are other credit crisis indicators CR forgot to post in his previous thread:
Gun Sales Increase
Asheville Citizen-Times, NC
That fear, along with concern a depressed economy will increase crime, also is fueling firearm sales, law enforcement and gun dealers say.
Couple things to keep in mind about those recasts:
1) The principal owed at recast will likely be 10 to 25% higher than original.
2) The amortization period will be around 5 years shorter and at the full index+margin rate.
Dawg, I often disagree with you, but so what?
I don't understand why people feel like they have to get so disagreeable or insulting.
Except for Jas. And he wants to be insulted.
Rob Dawg writes:
"One of the retirement benefits is not having to get gob smacked by shite like the following while reading..."
Whoa, Dawg!
Sounds like some of Brad Delong's Berkeley blog-lizards have found you. Personally, I've always found your posts informative and (often) entertaining.
I don't understand why people feel like they have to get so disagreeable or insulting.
lawyerliz | 01.29.09 - 11:14 pm | #
I don't understand why they insist on black & white in a world shaded in grays. There's plenty of blame to go around, so the vitriol serves little purpose.
"That fear, along with concern a depressed economy will increase crime, also is fueling firearm sales, law enforcement and gun dealers say.
friardaddy "
Who buys guns from gun dealers? I buy them from crack dealers. Really cheap and every bit as effective. No serial numbers to worry about as they are scratched out.
....it seems this past week the comments have been ruder than normal from some. I don't understand it - other than maybe it's nerves.
And, RE: "3. Job losses and reduced overtime/work hours":
LA Times
Court OKs furloughs for state workers
"Governor's bid to save money by forcing unpaid days off is cleared by superior court judge..."
"Dawg, I often disagree with you, but so what?"
I often don't agree with myself. We've agreed to keep the weapons locked up.
"I don't understand why people feel like they have to get so disagreeable or insulting."
Devotion to the religion of Utopia on earth.
Nostrovia,
The neg am is important. The shorter amortization not so much.
When I bought my Miami house in 81, I ran my finger down the table and figured that the max we could afford was at 18 years. After that the payments went up a lot. So, since I represented the S & L (in a very junior way), I got my 18 year loan. 15 year loans didn't exist then. And by the time we sold, we had paid off about 2/3rds of the loan.
Of course, most of these people could afford the house at a 2% amortizing rate!!
@liz
no loans at all, or all cash. My condolences, that sounds unreal
"other than maybe it's nerves"
even those who have been cackling from the sidelines with puts and gold during the past year often have friends and family getting flushed by the crappy economy.
the mounting number of empty stores, restaurants, offices, etc, has an effect.
That is, could NOT.
Elvis,
"No serial numbers to worry about as they are scratched out."
Unfortunately, they now use a technique which sees compression variations in the metal where the SN# was stamped. Goes all the way through the guns metal.
Nostrovia,
more like quiet desperation...I guess we're all English now,...
I think Pink Floyd got it from Thoreau.
The mass of men lead lives of quiet desperation. Henry David Thoreau, "Walden", 1854
Yeah, I had a usually cheerful client tell me today, that suicide had crossed his mind. Then he sez, he shoved the thought right back out again.
I think I believe he shoved the thought out. I told him being poor wasn't so bad, and being alive was good.
I am a lawyer, not a shrink!!!
My house is paid for. We have an extremely small stash of cash, a bit of pms (hard, not paper), a little extra cash, and a small veggie garden.
But listening to all these stories gets me down.
Watch what happens when California gets there. We ain't seen nuthin yet!
Comrade Bear (tj & the bear) | 01.29.09 - 11:11 pm | #
Agree California will fall further, but I expect the greatest fall from this point to be in the higher priced areas, especially anything over the conforming limit. The area where I live is already at $75/sf. Volume is brisk at that price level, but they are all foreclosure resales. The folks who want $200-$250/sf for admittedly nicer houses just have listings and no buyers.
"NOD filed 9 months ago and family left 9 months ago and house is still empty and not foreclosed on."
Someone in my hood left last summer. Foreclosure is in April based on records. Bought at the top, jumbo loan(s), didn't even bother to milk it. Strangely enough, the extensive landscaping continues to be maintained.
My fear is that the unrealized, total losses are many, many trillions.
sdtfs,
Yes, but HDT doesn't have a youtube video.
Nostrovia,
To Do List:
One thing I've found, the Food Bank doesn't need volunteers, they get plenty of that through the unemployed, who get a free meal for helping. If you volunteer, you displace someone who needs the extra food more than you do. Also, they need protein foods like tuna far more than cheap carbs. And baby stuff, especially diapers. Whether you call it recession, depression, or just hard times, does not matter. Do as you would be done by, because you might be next.
That last one's a toughie. Thanks to this blog, all the contributions have been going into a MM fund, but after the Reserve fiasco, I'm paranoid about the whole damn thing. But it must be faced.
lawyerliz, I'm not rolling my eyes. If prices fall far enough, most housing will get used, especially in a country which still fetishizes housing. Actually I'm surprised 40K condos aren't getting snapped up. Even with a 10% hard equity loan that's pretty affordable, and you'll likely be able to refi soon enough.
However, even more significant is that JPMorgan's derivatives amount to 400 times its alleged assets. Talk about leverage. Which bookie allows you to bet 400 times what's in your wallet?
LL, didn't mean to attack you about Florida
Just really curious about states like Florida and Nevada whose appeal relies on niche taxation under threat
As for bottoming I'll be looking for a slashing of inventory (listings + REO + shadow inv. + mortgages that will default at recast or even reset) divided by sales going to 8 months
& local job growth (as a sign of decreased inventory build)
By shadow inventory I mean every house waiting to be sold 'when the market recovers'. Basically unoccupied dwellings
Basel too: FHA loans at 3% down, up to 650K, must be first time buyer? So they have incomes at 200K?
Are you kidding. I'm mid 40's, have that sorta income(could pay cash if I wanted), and have never bought a house.
Are you telling me the gov't could throw me the first bone of my life?
...it seems this past week the comments have been ruder than normal from some. I don't understand it - other than maybe it's nerves.
Black Star Ranch | 01.29.09 - 11:18 pm | #
People are scared. The ones who aren't scared are fools.
I don't see why they don't hang on til they're kicked out. That's what we do in Fraudulent Florida. I even think it slows the house rot.
I worry about hurricanes.
You have to fight like hell to get insurance companies to pay claims if you are a homeowner. If you are a bank are you gonna call the insurance co 24 dozen times? I don't think so.
Except for Jas. And he wants to be insulted.
lawyerliz | 01.29.09 - 11:14 pm
I think it might run deeper than that. Just guessing..
Text needs correcting!
Nearly 61% of option ARMs originated in 2007 will eventually default, according to a recent analysis by Goldman Sachs ...
If 61% of the $750 billion in Option ARMs defaul'
The 750 is 2004 to 2007 incl, not just 07
Nitey-nite.
It seems there is a discrepancy here as to the amount of option ARMS out there:
Unless defused by aggressive public and private foreclosure prevention programs, the bulk of these loans will explode to higher payments in 2009 and 2010.
The scope of the problem was highlighted in September in a study by Fitch Ratings, one of the bond rating agencies that assesses the risk of defaults on mortgage-backed investments. Of the $200 billion in option ARMs outstanding, Fitch estimates that some $29 billion will recast in 2009 and another $67 billion in 2010. That could cause delinquencies on these loans to more than double, Fitch said.
'Pay option' loans could swell defaults - Mortgage Mess- msnbc.com
"That fear, along with concern a depressed economy will increase crime, also is fueling firearm sales, law enforcement and gun dealers say.
friardaddy "
Elvis | 01.29.09 - 11:17 pm | #
Yeah, 200+ million handguns just is not enough. There are still quite a few kindergarten toddlers with no guns whatsoever! WTF their mothers are thinking?! D-FENS!
Remember, owning that precious yellow 200D/W123 Mercedes-Benz (1979) is also really handy during beirut-like civil war in New York. No computer crap, it just works!
I've got to sharpen the hoe, ice the poached deer meat, and visit the pretty young real estate agent down the street (first). Good night now. Mine will undoubtedly be better.
sportsfan writes:
"Agree California will fall further, but I expect the greatest fall from this point to be in the higher priced areas, especially anything over the conforming limit."
If the Option ARMs situation is as bad as it looks, there could be hundreds of millions vaporized here in Santa Monica. I'm still seeing prices in the $800-$1100 per sq ft range. Lots of room to fall, and judging by the number of young families I see around the neighborhood, there are either lots of Option ARMs involved, or an awful lot of young families with insane amounts of money. My guess is that it's lots of option ARMs, many courtesy of our local ARMs merchant (First Federal) which was just neutered this week.
This is not going to be pretty.
.
People are scared. The ones who aren't scared are fools.
sportsfan | 01.29.09 - 11:27 pm | #
Maybe as long as folks are venting on forums such as this, it will forestall the rioting for a few months. Not so much in France, though.
"2. Donation to Food Bank"
You can donate directly to the food bank at the checkout in my grocery (Raley/Nob Hill). All donations go directly to the food bank - no overhead. Maybe other grocers do something similar?
...it seems the more I prepare,
the more I realize I need to prepare.
...one thing I've started doing though. We are fine here. I have a brother who isn't. I've started sending him cans of Mountain House low moisture foods (#10 cans) the last one was dehydrated beef. They last forever. Told him all he has to do is store it for "me".
Everybody knew this would happen. Bear Stearns, Lehman Bros, World Savings, WAMU, etc---they ALL pushed option-arms as affordability products from the start. That message came from the top-down. The guys in secondary knew they needed to keep that stuff flying out the door because it would inevitably default.
Ridiculous that these guys are being rewarded for their malfeasance.
"I've got to sharpen the hoe...and visit the pretty young real estate agent down the street"
Two in one night E? Well I guess the second one is giving a discount these days.
Nostrovia,
Lawyerliz: Seeing the same thing up in the West. subs of Chi. RE is showing some life and rentals at these prices do pencil.
People are scared. The ones who aren't scared are fools.
sportsfan | 01.29.09 - 11:27 pm | #
I'm not scared...yet. But then i live in an almost perfect environ to weather any length of depression. The polar ice cap melting in the next 20 years is a far larger calamity about to happen.
The prospect of a black swan event, of the osamma order scares me a bit - but not much. Obama does not look belligerent, so war seems very unlikely.
When U3 hits 15% and U6 ten points higher, by say say 2011, i will start to worry. Until then its time to chill, sit back, watch and be as secure as possible. I bought a new generator this week. Weather is the worry.
What kind of insurance do banks carry on their empty homes?
Is it through whatever local real estate subcontractor?
That message came from the top-down.
Nuh-uh, it was Clinton and the CRA.
Had someone tell me that just today on another board.
Well, it seems even the bewildered herd knows something is wrong, after reading the posts today.
Some rudimentary understanding of Thermodynamics and Evolutionary Biology will dispel most of the illusions about our current condition.
EvilHenryPaulson writes:
"What kind of insurance do banks carry on their empty homes?"
I don't know, but my guess is that they self-insure. In the normal course of operations, this would make sense, and how likely is it that they have changed that procedure?
Are you telling me the gov't could throw me the first bone of my life?
I'm no mortgage expert, but IIRC, as part of the housing bill last summer, they removed the income limits and increased the eligible loan amounts for various zones.
Has anyone else run into condo associations limiting the percent of units that can be rented? They started getting strict about that this last year. I wonder when they will realize that those rules discourage potential buyers (investors).
"I told him being poor wasn't so bad"
My understanding is that very many middle class and upper middle class people have a warped understanding of what being "poor" means.
Only having a 2100 sq. ft. house doesn't mean poor. Having your children share a bedroom doesn't mean poor. Having only two cars, and both of them are older than 3 years old doesn't mean poor. Renting a house or condo doesn't mean poor.
This is not going to be pretty.
sm_landlord | 01.29.09 - 11:31 pm | #
SM has always been pricey, but there is a premium for being near the water. Lived there for a few years as a renter in the early 1970s and thoroughly enjoyed the life. But prices there have become so unrealistic that I don't even understand it anymore. Why would anyone buy a million dollar teardown in order to get a small lot in marginal walking distance from the beach?
People are scared. The ones who aren't scared are fools.
sportsfan | 01.29.09 - 11:27 pm | #
Yeah, it's getting real for a great number of people that figured the future was nothing but roses. We've been here talking about this for a while, so we've had the chance to prepare ourselves (especially mentally).
Graingod:
Some places make sense in the TCs as well at current rents. I just worry that current rents are greater than future rents. The inventory is just daunting, especially in the condo/TH space. I would need a good return (25% annual) to take the risk and headache.
Are you telling me the gov't could throw me the first bone of my life?
change, my ass | 01.29.09 - 11:26 pm | #
You know, I was going to say something along the lines of "the bone the gov't going to give you, they're not going to throw", but I thought better of it.
You won't see the rules changing any time soon. They exist for several reasons. Partly because the turnover involved with rental units is felt in a very different way in Condos than in SFR neighborhoods, and it tends to degrade the owner occupied experience in a big way. The other problem is maintenance. Investors do not have the same pride of ownership, and are far less willing to contribute to the shared maintenance/upgrade expenses.
Both of those are big deals. Oh yeah, the last part is lending restrictions. FHA, Fannie/Freddie all have guidelines which limit the percentage of non-owner occupied in any given condo project, and once it exceeds that number, no new loans. Period.
minirenter, I agree
sm_landlord
Well they sure wouldn't want to increase carrying costs by paying a premium to someone else to cover the huge risks on a property vacant for months
The govt will have to pay so much above market price to buy mortgages for empty homes, otherwise delaying foreclosure just fraudulently hides the losses from the balance sheet and there are no private investors taking that risk
Maybe the govt told them to hold the empty homes in hopes of a more politically pallatable subsidy structure
Where's the "banker dome" again? I need directions ....
"2. Donation to Food Bank"
You can donate directly to the food bank at the checkout in my grocery (Raley/Nob Hill). All donations go directly to the food bank - no overhead. Maybe other grocers do something similar?
theotherdeb
.
The grocery stores here donate food that's just at the sell-by date to the food bank. Anything that doesn't get used there goes to the farmers' pigs. Oregon still has that agricultural 'waste not, want not' habit. But they are also glad to get fresh fruits and veggies, as long as they don't need to be cooked. So a 'victory garden' will not go wanting, I deem.
Adornosghost: Yes.
sm_landlord:"If the Option ARMs situation is as bad as it looks, there could be hundreds of millions vaporized here in Santa Monica....there are either lots of Option ARMs involved, or an awful lot of young families with insane amounts of money..."
From what I hear, the movie and TV industry is stating to take employment hits...it will be interesting to see how long the "how much a month" millionaires in some of the tonier places in LA will be able to keep up appearances by living life on the edge (zero savings).
What kind of insurance do banks carry on their empty homes?
EvilHenryPaulson | 01.29.09 - 11:37 pm | #
It varies of course by area and by bank, but one with which I'm familiar is basic fire, theft, vandalism through CUNA and the policy is purchased when the NOD is filed.
norma writes:
Where's the "banker dome" again? I need directions ....
Rumor has it the secret forum includes GPS coordinates as well as tips on hiking boots.
Personally, the bankerdome is where you make it.
"I'm still seeing prices in the $800-$1100 per sq ft range. Lots of room to fall, and judging by the number of young families I see around the neighborhood, there are either lots of Option ARMs involved, or an awful lot of young families with insane amounts of money."
Same here in the WEHO, Grove, Hancock Park area. The local "wisdom" is that everyone is rich. I've looked at the census data, I'm not so sure about that. . .
sm_landlord, sportsfan,
I moved to CA during the last boom; couldn't fathom the prices THEN. Nonetheless, years later I warmed up to the idea of spending upwards of 500K for something nicer & newer in a better outlying hood. That was then, of course, this is now, and those same houses more than doubled since.
I'm sorry, I just don't see it.
Given current circumstances, there's no way we don't fly back past those 90's prices. I'm expecting to get much more for less in the not-so-distant future.
Personally, the bankerdome is where you make it.
Rob Dawg
.
Two men enter, one man leaves.
but I thought better of it.
sdtfs | 01.29.09 - 11:46 pm | #
I was going to ROFLMAO about that one, but I thought better of it, too.
MiniRenter,
"They started getting strict about that this last year. I wonder when they will realize that those rules discourage potential buyers (investors)."
Barn door, meet empty barn.
These rules are designed to keep specs out. Bit late now. My CC&R's have them since I bought in '99. HOA board willfully ignored them from '04 to present. We have 73REO's in a 300 unit complex...and the banks ain't paying their dues on the REO.
Regardless, that is the reason.
Nostrovia,
Yen/USD going south again. And NIKKEI is deep red, sporting a 7 handle again. Doesn't look like there are a lot of buyers ahead of the GDP horror show.
Might go long in the AM...
"the movie and TV industry is stating to take employment hits"
i think showbiz-related employment is an overrated component of the LA economy, with the possible exception of the burbank/studiocity/universal/n. h'wood area.
real estate is an underrated component - it has been the absolute foundation of the town's economy at every phase going back to the 1880s, with only the mid-century aviation boom offering competition.
EvilHenryPaulson writes:
"What kind of insurance do banks carry on their empty homes?"
The same folks that sell force-placed insurance also sell property insurance for foreclosed/REO properties.
bgates writes:
"What's going to happen when all the million dollar homes start crashing towards the $417 line? "
when? it is happening - sellers just haven't accepted that, which is why some CA towns with 50K+ residents had less than a dozen units move in december.
It's happening in plain sight right here in IE 92270 CA, 569 homes listed at $875k ave. with recent sales price average at $417k. Where did that $417k figure come from, and where are those 875k offers headed?
Most of the defaults already took place. The full rates on that paper are at 4.25% to 5.5% and going lower. For loans from 2005 minimum payment in many cases covers interest and repays small portion of principal, the same for 2006 and 2007 paper since 12-MTA and 6-mo Libor are very low.
There will be some defaults due to job losses, for certain. But 61% is about as likely as $200 oil.
Drug war spillover discussed
"AUSTIN -- The state should reimburse El Paso law enforcement for providing increased security at Thomason Hospital, which has been forced to treat victims of the raging violence in Juárez, local lawmakers said Wednesday. "You've got citizens who are in fear of going to that hospital because they're treating victims of this drug war," said state Rep. Joe Pickett, D-El Paso. "We have to worry about places like Thomason Hospital, where we take victims of cartel shootings out of Juárez."Last year about 1,600 people died in the bloody drug battle in Juárez. And nearly 50 people wounded in the violence were taken to Thomason for treatment at a cost of about $1.4 million.State Sen. Eliot Shapleigh, D-El Paso, said Juárez victims should be taken to Beaumont Army Medical Center, the military hospital, so that local taxpayers don't have to pay.
"That's the appropriate place to provide the treatment and the security," he said. McCraw said he had proposed that idea to military officials but was unable to make an arrangement for patients to go to Beaumont. Until or unless that happens, McCraw said, the state would "absolutely" help with the cost of providing security at Thomason."
Your tax dollars paying for medical care for Mexican nationals, shot in Mexico. Interesting scenario...
scone,
"Two men enter, one man leaves."
I'm not sure Banker had that in mind...But it does give one an interesting visual.
Nostrovia,
[it will be interesting to see how long the "how much a month" millionaires in some of the tonier places in LA will be able to keep up appearances ]
Tonier and LA will be a contradiction in terms. Gonna be a spectacular collapse. Guaranteed.
real estate is an underrated component - it has been the absolute foundation of the town's economy at every phase going back to the 1880s, with only the mid-century aviation boom offering competition.
bgates | 01.29.09 - 11:57 pm | #
All that accumulated equity -- gone. This place won't be the same for a looooonnngg time.
tj,
"This place won't be the same for a looooonnngg time."
You mean people pretending they live like rock starts? I disagree. The price paid and the quantities of geegaws and grimwracks required for the fascade will decline however...if that's what you mean.
Anywho...
Nytol.
Nostrovia,
Gonna be a spectacular collapse. Guaranteed.
The thing makes this time around different has got to be the supply.
My home town MSA is about 630K residents, but has 435 $1M listings.
Which bookie allows you to bet 400 times what's in your wallet?
adornosghost
The Fed!
Elvis writes:
I'm gonna quit postin' 'cause I'm drinkin' moonshine and nut'in' is bet'r than moonshine. mp. c&c, and broward.
Elvis | 01.29.09 - 10:42 pm | #
I've never enjoyed drinking as much as I have the last few months. I get the sense that's becoming generally true.
Huh, what's Diageo's stock at? I got some cash looking for a parking place...
You mean people pretending they live like rock starts?
Comrade Misean is Dope | Homepage | 01.30.09 - 12:06 am | #
Naw, that'll go on forever.
There will always be money in this town making a show of things, and wayyyy too many pretenders. Just won't be nearly as many of them as has been recent decades.
MEXICO'S BAZAAR OF VIOLENCE"The most likely existential security threat to the United States isn't likely to originate from southwest Asian terrorists or a conventional war with China. Instead, it will originate from Mexico's open source insurgency ...Jerez, a town of 60,000 a few miles northwest of Felipe Angeles in Zacatecas, was until recently a calm place, largely untouched by organized crime, said Abel Márquez Haro, a grocery wholesaler. But recently, scores of men driving Chevrolet Suburbans and carrying automatic rifles established a menacing presence, threatening residents on the street and extorting businesspeople. The identities of the men remain a mystery, but many people in the town say they assume they are traffickers who have abandoned another Mexican state, perhaps to avoid an army crackdown."
Iraq is sitting on our doorstep, just in disguise. Luckily for me, I live near our northern border, which is much quieter.
"Just won't be nearly as many of them as has been recent decades."
hollywood proper and currently posh parts of SF both had VERY seedy elements in large quantities only 20 years ago. not much of a stretch to see that returning, hard as it might be for some to visualize.
"Tonier and LA will be a contradiction in terms. Gonna be a spectacular collapse. Guaranteed."
Agreed. But from where I sit, in a "tonier" part of LA (90048), list prices are just as stupid as they were a year ago, avg. sales prices (stuff still sells, though slower) has been +/- 900k for the last year or so. Hordes of 20 somethings still fill Joans and Toast. No capitulation yet. I assume it's the same in the hills and farther west in SM/Venice etc. When it goes, it'll be epic.
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Sales at $417k IE preview fine, then won't link, but are at Redfin 92270/ Rancho Mirage.
90048 -
8 units sold in december in a zip with over 21,000 residents. funny how that works.
"hollywood proper and currently posh parts of SF both had VERY seedy elements in large quantities only 20 years ago"
Yep, moved here (LA) in 91. much different place seedy-wise. I'm sure some of the upscale-ing will stick around. But a lot of places are gonna go back to seed I think. Too bad, there are some really nice houses in 90019.
it is amazing how some landlords will skip whole quarters of rent for the equivalent of an extra few days' worth a month
when? it is happening - sellers just haven't accepted that, which is why some CA towns with 50K+ residents had less than a dozen units move in december.
bgates | 01.29.09 - 10:39 pm | #
Sounds like my town.
"8 units sold in december in a zip with over 21,000 residents. funny how that works."
Yep.
gotta love melissadata. But still, what's selling is, IMHO, way overpriced. These places were 2-400k a decade ago. Nuts.
You know, I think it's the fear that's really demoralizing people. I've been poor in the past, along with my family, since the Depression. It's not as bad as people think, as long as you have medical care, beans, and music. I, personally, would prefer socialism to seeing children starving in the streets, or selling themselves for a meal.
I remember LA and OC in the late 70s to the early 90s very well though we're talking from grade school onward. I rented a huge loft built in 1924 (gorgeous brick building) for less then $.30 sqft. in 91 to 93. I hate to think what they'd ask for that place now. It would be totally unjustified.
Well I'll be damned. I stand corrected.
According to the Treasury's FAQ site, The Bureau of Engraving (under the Treasury) prints money, but the Fed is responsible for issuing it through (what used to be known as) the 'banking system.'
Can we both claim partial credit on this?
Samdog
Yes, the Bureau of Engraving and Printing prints the paper money and sells it to the Federal Reserve (at the cost of printing). They probably have exclusive rights.
On the other hand, the US Mint mints all the coins and also sells them to the Federal Reserve. BUT, the US Mint also sells coins to the general public via their website. For example, you can buy a box of 250 $1.00 coins for $250.00 (free shipping).
So the Treasury can definitely create money out of cheap metal and cut the Federal Reserve completely out of the picture. It would also probably be the one single way to get the dollar coin into wide circulation (long overdue, in my opinion).
On the other hand, the US Mint mints all the coins and also sells them to the Federal Reserve.
America! | 01.30.09 - 12:32 am | #
Co
Night, doomers-- do not despair.
Your tax dollars paying for medical care for Mexican nationals, shot in Mexico. Interesting scenario...
citizen Kung Fu Panda | Homepage | 01.29.09 - 11:58 pm | #
No Country for Old Men... You have to watch it twice though, like most Coen movies.
so we've had the chance to prepare ourselves (especially mentally).
Comrade Bear (tj & the bear) | 01.29.09 - 11:44 pm | #
The level of denial and wishful thinking is have seen in my travels this year astound me. The U.S.A. has not EVEN begun to come to grips with the potential fate that awaits us. Mental preparedness and flexible minds will serve the CR community in picking a bottom, while the rest of the U.S.A. is in the throes of dispair.
Nuh-uh, it was Clinton and the CRA.
Markel | 01.29.09 - 11:37 pm | #
The denial is strong in this one...
As I recall a chart that was posted on this site back on Oct 22,2007 the sub prime amounts kick down 20 billion mark thru 2012. The OAR loans kick in at 20 billion (that is the resets) in 2010 and max out at 40 billion in 2011. The end of these toxic loans won't end till the middle of 2012. Hold on to your hats this won't be over anytime soon. Hmmm just in time for the election.
The USG doesn't print money, the Fed does. Well of course technically, the money is PRINTED by the Bureau of Engraving and Printing, a part of the Treasury department. And in the past, the U.S. Government HAS issued currency directly, as opposed to through the Federal Reserve Banks. They're calle U.S. NOTES --
http://en.wikipedia.org/wiki/File:US-Series-1953-$2-Obverse.png
Notice the lack of any indication of WHICH federal reserve bank issued the note, because it wasn't issued by a federal reserve bank.
"The USG doesn't print money, the Fed does"
Guys operating out of storefront mortgage shops do.
"If 61% of the $750 billion in Option ARMs default, and with a 50% loss severity, the losses to lenders will be about $225 billion - far less than for subprime, but still a huge problem."
Doesn't that depend on where the 750 figure came from?
If the original principal was 750, and borrowers are paying the minimum payment, the principal is going up; 750B in originated Option ARM loans becomes more like 1T the way the accounting is done. If I am mistaken, please correct/flame me.
Yep, option ARM borrowers will be screwed by the pooch. Most are in negative equity, can't afford to refinance, their jobs are in jeopardy. My advice is to deleverage now. The banks are getting the bailouts, and the people deserve some relief too. If Washington won't send it, they need to deleverage.