If I were in their shoes, I would go dormant. Just don't build for a few years. some investor guy | 01.19.09 - 1:26 pm | #
And just not pay their loans? These guys all levered up too - to buy land, build homes that are now cancellations and man their 'offices'. They got overhead to feed. Overhead that doesn't go away short of a BK.
Dryfly - I've had several conversations with various people about why the HBs don't merge, buyout, etc. The general consensus seems to be that they are all so deathly afraid of opening up their books that nobody will even enter into material discussions. And I'm guessing that their employees are all contracted and sub-contracted so I doubt there's much expense from that perspective.
Is anyone surprised at that statistic? Speed | 01.19.09 - 1:35 pm | #
Not really, and I would expect it to go higher. I'm surprised that there's any sales going on at all though. It's not like it's a big secret that prices are heading down.
"Can there be a velocity of pricing? Or, price velocity?
Barley"
Yes. Prices currently have a negative velocity (prices are dropping). Their acceleration is near zero. That implies that for the next few months they will keep dropping at the same rate as the prior few months.
sdtfs writes: It's not like it's a big secret that prices are heading down.
Many born and bred dopes are waiting with glittering, greedy little eyes for the promised second half recovery. The Bread and Circus nation will take a brief while to discover the way the world really works.
I sticking by my longstanding prediction that most housing will go for 2-10% of peak real prices by the time we hit bottom.
Probably still sounds crazy to most of you but the decline in house prices is only on the first leg down, the second comes when 99% of the people have no financing available...cash only housing. This could still be a while and will come after default/hyperinflation of the US dollar.
Dryfly said, "Maybe REO price is the market price now. If you want to sell then match that."
There's no maybe about it. Of COURSE these prices are market prices. Banks would sell their foreclosures for as high as a price as they could, right? Therefore, these sales are valid comps for how much people are able to pay.
And CR, I live in one of the most expensive areas of L.A., and I already see massive price chopping going on.
Went to a few open houses in Walnut Creek this weekend -- 3/2 ranchers, appx. 2200 - 2600 sq. ft., were still all around 1.1 million. They were nice houses on nice sized lots, but still. Makes me think I'll never afford a house here, even with the bust.
Why should they last? They need to fold consolidate to meet market demand of none. Seems like a business that can grow over night anywhere they are needed.
Joe Stalin writes: Bush finally did something right.
Yeah, nothing like pardoning some murderes 'cause they were in uniform at the time. Murder is much cooler if you're a cop. Then it's like cruise control for cool.
I was in Merced/Fresno counties, in northern CA, this weekend, measuring the real estate conditions in person.
Basically, the REO/short sales are the market, there is nothing selling otherwise.
you can pick up multiple unit buildings at 4-5 times rent roll. and single family homes at 7-8 times rent roll.
vacancy rates at ~ 20%.
from what i saw, there is still room for further declines, bc even with these prices, the real estate offices I had meetings in were completely empty on a Saturday and Sunday, usually not the case if there are transactions going on.
of course, i got the typical sales pitches, like "now is the time, must bid quickly to get properties", "the investors on the fence are now jumping in", etc...
but again from what i saw, my friend and I where investors looking to buy.
I hope others will share their experiences, if any, about other parts of California and the u.s. in general.
This is good news - Banks are in a heated competition to off load troubled assets. They are fighting head to head on a race to the bottom. Competition and free markets are the corner stone of our democracy.
I said there are houses selling in the five figures, and there are, but that's not the average . . . yet
Bargains draw first-time home buyers
January 12, 2009 - 3:54 PM
FROM STAFF REPORTS
"First-time home buyers jumped into the local real estate market in December, pushing sales of existing homes up by 17 percent for the month and 207 percent compared to a year ago, according to new figures.
"The big draw? More affordable homes as Victor Valley prices dipped 5.5 percent for the month, according to figures from the Victor Valley Multiple Listing Service compiled by Larry Trombley, an agent with Century 21 Rose Realty in Hesperia.
"The typical Victor Valley home sold in December was 1,905 square feet, 15 years old, selling for $140,596. In the past year, area home prices have fallen 39.6 percent and are now comparable to 2002 prices.
"In December 3,639 homes were for sale in the Victor Valley, with 513 closing escrow. That equates to a seven-month supply of homes.
There are some investors out there, Trombley said, but most of (the buyers) are first-time buyers who can qualify for a loan.
"Eighty-seven percent of homes sold in December were foreclosure properties. Because there are so many foreclosures, the rising pace of sales hasnt slowed declining prices."
Johnny Mustardseed writes: Do you think Alan Greenspan could get a commutation? I bet he hopes so.
I am waiting to see how the Pardon Express goes. It's either going to be "I pardon all 4,241 people listed on this Excel sheet for whatever they did, I'm not sure what." or he's going to hang all his handlers out to dry. I don't think there's a middle road.
It's a strange situation. The downward swing on prices has been swift and brutal.
But there is a huge difference between the areas like Riverside county where many of the homes are new-build, and the pricier areas of L.A. where many residents are long time homeowners who are not going anywhere due to crazy low property taxes.
"I sticking by my longstanding prediction that most housing will go for 2-10% of peak real prices by the time we hit bottom."
CashOnlyHousing | 01.19.09 - 1:44 pm
1 week ago I looked at a 3/2/2 here in Florida. It sold in 05 for 265K. The contractor who was looking at the same time as me put in a bid. 17K. They pulled the listing so I am guessing it sold.
The home was liveable. It needed a complete update inside and serious landscaping done. Had a new roof after Charlie.
I didn't bid on it because I would rather live in the country...I was just interested what a 40K listing price got ya...
They only shot a Mexican Drug Dealer and covered it up.
It is easy to forgive shooting Mexicans cause they come up here and steal those jobs us Americans are gonna wish we had.
And I'm guessing that their employees are all contracted and sub-contracted so I doubt there's much expense from that perspective. Mr. Sparkle | Homepage | 01.19.09 - 1:37 pm | #
The direct labor is all contract/subcontract... but the public HBs all have significant operational O/H besides the contractors... plus they have land & 'inventory' all of which is levered up. They can't just go 'underground' unless that is taken care of first [written down - but which lendor is going to be happy about that?]...
It is the classic and age old trade off of 'fixed cost' vs. 'variable cost'... nothing ever changes much wrt to people or business. It was the same trade off earliest hunter gathers made when going to herding & farming. Fixed vs. variable cost.
Chris
Cobradriver | 01.19.09 - 1:50 pm | #
Chris, I'm amazed at the prices you're seeing. How could a house on the sunny west coast of FL (which is much nicer than the east coast IMO) be lower than houses up here in the frozen tundra? I could put that $17K house on my credit card and still rent it out for a profit. Whoa.
What I see here in the town I watch (Los Gatos, South Bay Area) is that Jumbo houses are just sitting. By Jumbo houses, I mean houses that would require a jumbo loan, of course. You know, the loan types that charge the market-set interest rate, rather than the government-subsidized rate.
I see TONS of these high-end homes sitting, with very few lowering price to attractive levels yet. And if you take a browse through Craigslist rental section, you see some of these very plush houses being offered for rent at crazy rental rates (during the middle of our worst recession since god created the earth).
I believe these sellers will be forced to deal with reality by the end of this year. By the end of 2010, the Bay Area prime neighborhoods will be shown in Jim-the-Realtor videos.
While written about the EuroZone it is just as valid for the post. The part about Ireland and its civil servants is as true here.
Exporting as the path for survival. Not looking so good for the US.
Of course, the problem is if you get your salary cut it becomes harder to pay back the money you owe (loan defaults) and you can't spend as much on consumption (demand slump). And on top of this, as these first two lock-in, government revenue falls (less VAT) while expenditure rises (unemployment payments and bank bailouts), so we get fiscal deficit problems. So not only do you have banks lending less, households spending less, and companies investing less (as demand drops), we also have governments finally forced to cut back (at least in the more vulnerable economies), as the ratings agencies get to work. So you get a downward spiral of falling wages, and falling prices as GDP just comes down and down. And this process can become systematic (deflation) meaning that nominal GDP starts falling even faster than real GDP, making for a car that becomes increasingly "wobbly" and difficult to steer.
In this environment, there really is only one way to halt the spiral, and to jump start the economy, and that is to export, and to try and encourage export directed investment. But to get going with exports you need to recover competitiveness. You can achieve some of this restoration via productivity improvements, but not enough, and not quickly enough, especially if the distortion is large, and has been going on over a number of years (see the real exchange rate chart for Hungary above). So you can either do one of two things, devalue, or cut wages and prices. Neither is easy, but as we are now seeing the second is hardly universally popular either.
jmay writes:
It's a strange situation. The downward swing on prices has been swift and brutal.
But there is a huge difference between the areas like Riverside county where many of the homes are new-build, and the pricier areas of L.A. where many residents are long time homeowners who are not going anywhere due to crazy low property taxes
Prop 13 distorts the market and hamstrings the govt and makes the govt irresponsible, too.
Johnny Mustardseed writes: They only shot a Mexican Drug Dealer and covered it up.
I forgot, he was a Mexican, that makes it different.
Flash forward to a kangaroo court five years from now. They reluctantly bring the 16-17 y/o political shocktroopers in for smashing the nice Republican man's hands with sledgehammers and then lighting his wife on fire in front of him.
"Kids will be kids, stresses of the job, you know. How could they do their job if they were afraid of reprisal? You probably had it coming."
Then they fine the old man for swearing in court and have the baliff beat him while the rabble cheers.
Great stuff, looking forward to the tomorrow we're building brick by brick today.
Taken from the last post: And here's another: http://www.detnews.com/specialre.../2001/elmhurst/ \t Mr. Sparkle | \t \t \tHomepage | \t01.19.09 - 1:33 pm | # ----- I think this special report provides more anecdotal evidence to how Americans--humans in general?--tend to deal with many social problems. Instead of staying put to deal with problems of the State--community, city, state--the simplest or easier solution is to just move away. Many Americans moved West to escape problems in the East just as "new" Americans moved to America instead of working to improve their homeland.
Now, we all are facing an option of "Where do we go?" with many/most states suffering along with businesses, and now, we are even facing a long list of countries that are stumbling along in a zombified manner. What is the end play of this current act? Are we all going to be Okies when things get worse?
@dryfly- I think you have more awareness on this than me. Weren't there some stories posted here last year about HB's selling off land holdings for like 15 cents/$ that had already been graded and otherwise improved?
How long can those guys actually hold out wrt to taxes, etc?
dryfly - worth noting that larger (public) HBs often make concessions and or guarantees to municipalities for infastucture development. These obligations can often drag a companys ability to morph or reduce costs
Went to a few open houses in Walnut Creek this weekend -- 3/2 ranchers, appx. 2200 - 2600 sq. ft., were still all around 1.1 million. They were nice houses on nice sized lots, but still. Makes me think I'll never afford a house here, even with the bust. No Cal SC | 01.19.09 - 1:45 pm | #
I know I couldn't. Wouldn't even try if I lived in So Cal. I'd rent and go to the beach or the mountains - let somebody else worry about the 'asset valuations'. And I've owned out here in flyover ever since I graduated from college - my first home priced in at 1.25 times my income... 3/2 with nice backyard and short commute. On the other hand I'd have paid twice as much in rent there if I'd have rented the same place. Compare that to if I was in LA - I would have rented all of these years. Different locations dictate different strategies.
GAZ; Of course a 5x 'rent roll' and a 20% vacancy rate breaks even until the rents drop to 'afforadable'. I had an incredable job offer out there a year ago, the economy looked unsustanable at that time and I can't stand the heat so I said no.
@yagij- it was a fascinating article. It also makes me wonder which city we'll all be discussing in the same language that we discuss Detroit today. The rot takes time to set in and cities don't just implode overnight. I do believe that the potential exists in a few cities for similar implosion.
On Caliente drive, Palm Springs: a house 3000 SQF was 1.8M last year . Today in pre foreclosure 835K. Was sold in 1998 for 390K. Do you see the madness ?
In that area prices have still ways to go...By end of thIs year it will be 500K.
By Jumbo houses, I mean houses that would require a jumbo loan, of course. You know, the loan types that charge the market-set interest rate, rather than the government-subsidized rate.
I'm starting to come to conclusion that the Fed's crackdown on subprime (esp. jumbo) and exotic mortgages was when the music stopped.
On related news, the nationalized british bank Northern Rock said today that it was lessening credit standards for mortgages.
@dryfly- I think you have more awareness on this than me. Weren't there some stories posted here last year about HB's selling off land holdings for like 15 cents/$ that had already been graded and otherwise improved? How long can those guys actually hold out wrt to taxes, etc? Mr. Sparkle | Homepage | 01.19.09 - 2:00 pm | #
Yes and CR mentioned some deals he knew of personally - it was all an effort to generate cash to cover immediate requirements - very ugly. Their cash burn had to have been terrible compared to actual follow through sales [as in close].
They can't last long without bailouts... we know that never happens.
"I could put that $17K house on my credit card and still rent it out for a profit. Whoa."
Outsider | 01.19.09 - 1:57 pm | #
Outsider,
This whole area here in Charlotte and Desoto counties has always been kinda "poor". Even the stuff on Gulf canals was afforadable to a scummy mechanic like me until this run up.
I keep harping on this...I make very good coin for the area. After I max my 401,pay the needed bills,I couldn't afford to buy a home here without creative financing. Fuck that.
I'll make this offer to anyone...You get to this area and I'll show you all the side streets and rural areas with empty homes...I lived in Socal during the last bust in the early nineties. This is really starting to scare the shit out of me because of how much worse it is...
...short of a BK. dryfly | 01.19.09 - 1:33 pm | # ---- What a novel concept. I guess we shouldn't blame Uncle Sam wanting to avoid this unpleasantness 'cause obvious the private sector doesn't want to do it either.
Mr. Sparkle writes: How long can those guys actually hold out wrt to taxes, etc?
I think they just have a tremendous pile of debt service, to be honest. I don't think individual projects were really funded on a per-project basis.
I think they leveraged up a debt pile (more like mountain) based on optimistic future revenue projections and then took a very sensible approach to servicing it -- grow or die. The company can implode, as long as you get your personal cash out. You won't even lose your personal houses 'cause you can stake all the lines of credit with that super-valuable real estate you are buying way in advance. Then once you get that set up, the bank will have to collude with you 'cause if they seize the assets, they'll be the ones that own them at dimes on the dollar.
The asset liquidations are a way to keep the salaries coming for another few months or a year, not a survival strategy for the company.
"The Union Tribune. Saying theyve been left out of the federal bailout package, about 50 home builders and construction workers marched outside three banks in downtown San Diego yesterday to protest foreclosures that halt construction work. The demonstrators, organized by a coalition of builders, called on lenders to modify distressed construction loans to allow builders to complete unfinished projects.
One of the marchers was Tom Dobron of Escondido, CEO of Innovative Communities. Dobron said his bank had declined to negotiate with him when he went into default on a $15 million construction loan a year ago. I had nearly 100 people working for me, Dobron said. I had to lay everyone off. Banks are not working with builders. I was forced out of business.
If Both Sides Did It, why is Bush only pardoning Right-wing operatives?
That's not the bipartisan spirit.
Surely, since Both Sides Did It, there must be a hefty list of progressives and liberals who are in need of pardon to stay out of jail?
No?
Are Conservative Republicans lying ... again? That can't be. If that were so, it means the entire Conservative Movement is a Lie Machine: lying on the way in, lying while in power, lying on the way out, with heavy covering lies laid down by and ignorant tools and greedy fucks talking their books.
When the costs incurred by the federal government and the District of Columbia are factored in, the total cost of Bush's 2005 inauguration was reportedly around $157 million...
So much for Bush's inauguration 'only' costing $40 million.
No Cal SC writes:
Went to a few open houses in Walnut Creek this weekend -- 3/2 ranchers, appx. 2200 - 2600 sq. ft., were still all around 1.1 million. They were nice houses on nice sized lots, but still. Makes me think I'll never afford a house here, even with the bust.
Be patient No Cal SC...
I'm in Danville (close to WC). High end prices are starting to fall faster. Financing has dried up and foreclosures are really starting to hit the million dollar neighborhoods. Let 90s pricing is still 50-70% lower than homes are selling for today in these high-end areas. 2009 should be bloody.
There is plenty of blame to go around. The politicians deregulated the system, the businessman pushed product that was entirely immoral and the consumers were dumb enough to buy the sales pitch.
Blame doesn't fall in any single place. If anyone is to blame moreso than others it's the greedy US consumer. No one forced them to buy those homes...I can dangle a $100 bill with 10% adjusted interest to it, but that doesn't mean you HAVE to take it from me.
Here's a personal anecdote to illustrate the state of Bay Area house prices:
We rented a small (1150 sq ft) Los Gatos home for 3 years at $2700/month. The landlord kicked us out this past July, choosing to sell it because due to concerns about his debt level (owning two houses in Los Gatos).
After a moderate remodel (roughly $100-150K), he put it on the market for over $1.1M. It sat. They dropped the price to $1M. Still it sits.
It recently showed up on Craigslist as available for rent for $3650/month. Thats about a 30% increase in rent from what we were paying, which is quite an ambitious bump in rent during the worst recession since the Great Depression! I guess they figure new renters will really love the updated kitchen!
So lets do a quick comparison to whether the housing bubble has popped in Los Gatos You can either pay:
$3,650/month to rent the house (they're smokin' dope with this asking price, IMHO)
or you can buy it for $999,000 and pay:
$6,500/month to own the house
This $6,500 number only includes the mortgage and property taxes, NOT insurance and maintenance costs. It assumes that you put 20% down for a Jumbo 30-year fixed-rate loan for 7.25%. (If you somehow got a Jumbo mortgage at 5.5%, the cost would go down to $5,500/month).
So you are essentially paying, up front, almost a 1/4 million dollars for the right to nearly double your monthly housing costs, compared to renting.
Think the bubble has finished deflating? I dont think so!
I'm in a position to buy for less than 1/2 of appraised value for rentals, but renting property is a full time job with upkeep and I'm not ready to go there..
Any candidates that people feel strongly about? Mr. Sparkle | Homepage | 01.19.09 - 2:02 pm | # ----- Candidates as in possible cities?
I would think that any city that fits into Detroit's mold would be a candidate. Influx of poor minorities and outflow of (upper)-middle class majority. Mix in a populist minority mayor and city counsel with a 'majority' population of minorities. It doesn't hurt when you have a city that has an unofficial tradition of "Devil's Night" fires.
(I'm trying to skirt the PC line, but the decline of Detroit as your article explains paints this kind of picture.)
Longhorn writes: So much for Bush's inauguration 'only' costing $40 million.
It has nothing to do with reality, it's just a figment for Republicans to fixate on to try to re-develop their lockstep rhetoric. Modern Republicanism is both profoundly irrationalist and profoundly anti-rationalist.
They want to have a Jessica Lynching. The real cost is irrelevant or what actually happened are irrelevant, the idea in the minds of the True Believers is what matters.
Lot's of FB's in Los Gatos - Check out this rental at <a href="http://www.redfin.com/CA/Los-Gatos/77- BROADWAY-95030/home/1310611">77 Broadway</a>: Purchase in 2001 for $1.8M, listed in 2009 for $1.8M, Will get half that in 2010 chasing Mr. Market all the way to the bottom.
Further, members of the BIS board of directors (for instance, Alan Greenspan) are individually granted special benefits:
*
immunity from arrest or imprisonment and immunity from seizure of their personal baggage, save in flagrant cases of criminal offence;
inviolability of all papers and documents;
*
immunity from jurisdiction, even after their mission has been accomplished, for acts carried out in the discharge of their duties, including words spoken and writings;
*
exemption for themselves, their spouses and children from any immigration restrictions, from any formalities concerning the registration of aliens and from any obligations relating to national service in Switzerland ;
*
the right to use codes in official communications or to receive or send documents or correspondence by means of couriers or diplomatic bags.[10]
Lastly, all remaining officials and employees of the BIS have the following immunities:
*
immunity from jurisdiction for acts accomplished in the discharge of their duties, including words spoken and writings, even after such persons have ceased to be Officials of the Bank;[bold emphasis added]
*
exemption from all Federal, cantonal and communal taxes on salaries, fees and allowances paid to them by the Bank
I don't care who's inauguration it is, it is obscene to engage in that kind of pageantry and expense. This isn't Royalty. The position of Presdident shouldn't be worshipped and idolized. There should be a swearing in gathering and a speech. That's it....then get the hell to work or get the hell out and let the CR Commentariat implement a plan....guns for everyone.
Murkiness in the NYMEX Pits As the Banks Hoard Oil
"Morgan Stanley hired an oil tanker to store crude oil in the Gulf of Mexico, joining Citigroup Inc. and Royal Dutch Shell Plc in trying to profit from the contango, two shipbrokers said in reports earlier today."
Is that your TARP money at work ?
What other TARPed banks stash oil ?
I was thinking about the 19 yo cop killer that was murdered in his solitary confinement cell. Did a google search to see where that investigation had gone. Zero information.
Shortcourage,
That owner in LG is living in 2004 to expect $3500 for 1150sqft--and just wait until the local economy goes south.
foreclosure resales accounted for 55.7 percent of December's resales activity
Pure brilliance--good luck. There must be a new crop of fools for those "flip that foreclosure" seminars. People are easy marks for the Rich Dad/Boomer Gospel dreck.
Here in Portland, Oregon, sellers have yet to receive the memo. Prices still high relative to incomes. Maybe it takes a lot of foreclosures to put the fear of God into these people. In the meantime, properties are just sitting.
Werner - They bought contracts but did not expect to take delivery. The huge price decline meant they sell at a steep loss or recieve oil(instead of lube).
unearthly writes:
Lot's of FB's in Los Gatos - Check out this rental
Is that house for rent, and if so for how much? BTW, did you see the appreciation that redfin shows for that house from Mar 26, 1993 (Sold $255,000) to Jan 03, 2001 (Sold $1,799,000)?
A nice whopping 28.6%/yr. I am sure it was a near teardown, and fancy newly constructed home, but still!
And I am sure in his mind, the current owner had extrapolated those gains forward! Bummer for him.
"Morgan Stanley hired an oil tanker to store crude oil in the Gulf of Mexico, joining Citigroup Inc. and Royal Dutch Shell Plc in trying to profit from the contango
I commented on this a few days ago.
Imo, Morgan and Citi got caught long in the face of a massive oil price bust. Now they either have to sell at a huge loss or take delivery.
When is my honeymoon over ? Tomorrow night ? maybe we can | Homepage | 01.19.09 - 2:34 pm | #
I'm guessing right about the time the markets open, ~ 3:30pm EST. He'll have just enough time after the speech to sell spoos. Unless he plans on REALLY tanking the market during the speech, in which case he'd best hit the pits in Chicago before putting his hand on the bible.
Morocco Bama writes: I don't care who's inauguration it is, it is obscene to engage in that kind of pageantry and expense.
Oh agreed; even as an Imperial Cult devotee, it's tremendously wasteful.
I think Obama would be wise to have trimmed it down, and I think he'd be wister still not to redecorate at all after Bush leaves, as a statement of austerity.
That doesn't change the fact that Republicans are trying to whip up a Jessica Lynching over the matter, as is their SOP.
The constantly rotating scandals give the Faithful something to chatter about amongst themselves and recinforce their groupthink by either weeding out or enforcing proper behavior in exchange for social acceptance. The people who best parrot the dinner speeches of the night before are rewarded, those who disagree are punished.
They are very good at this and it is no surprise to see them on parade.
Price does follow volume but volume is very weak. 5th worst December on record and only this "good" because distressed inventory are cutting prices to find a market. This isnt a normal market and sales are still very weak.
If prices follows volume then volume is telling you prices will still fall.
Imo, Morgan and Citi got caught long in the face of a massive oil price bust. Now they either have to sell at a huge loss or take delivery. Angry Saver | 01.19.09 - 2:35 pm | #
And they don't have the cash to take the loss - unless Uncle Ben comes to the rescue again. I wonder if next years bonuses will be 'payment in kind'... a fuel truck shows up at workers homes and tries to 'unload' crude... "So Mr. Smith where you want us to put your 'bonus'? Got a swimming pool?"
The listing remarks says 'Tenant Occupied' which I assume means renter; otherwise I would have expected 'Owner Occupied'. I doubt rent covers much more than the $21k in property taxes (tax valuation is $2M).
Barley/dryfly- if MS does manage to contract out a tanker at decent rates, that huge contango spread might help them out. Over $23/bbl over 1 year. Not bad.
maybe we can writes:
It's gonna be just like my marriage. The apex will be just before I say "I DO". Downhill right after the celebration winds down. wheeeeeee!
I understand. I want him to fail as much as you do. That way I'll feel smug and superior.
They only shot a Mexican Drug Dealer and covered it up. Johnny Mustardseed | 01.19.09 - 1:51 pm | #
They didn't cover it up. Their Goddamn supervisor was right there when it happenned. They were tried for not filing a report with their Goddamn supervisor telling him about the shooting which he saw with his own two eyes.
Some Credit Suisse Group bankers were left reeling after the bank said it would pay a substantial percentage of their 2008 compensation with an illiquid group of junk bonds, mortgage-backed securities and corporate loans.
Barley/dryfly- if MS does manage to contract out a tanker at decent rates, that huge contango spread might help them out. Over $23/bbl over 1 year. Not bad. Mr. Sparkle | Homepage | 01.19.09 - 2:43 pm | #
I hope it works out for them - seriously - because we know what their Plan B is... Ben on speed dial.
I don't understand why there are so many empty homes? Where has everyone gone? Was there that much overbuilding or do you know of any one who has gone missing latley?
Wear tinfoil and never ever look up
Here's another Los Gatos gem at 23 Loma Alta. It's been relisted and on the Market for 140+ days. I count 4-refi's since the last purchase not including any HELOC's taken out; the last of which was a $630k ARM taken out in 2001. Hard tell how levered these folks are...
Besides shuttering 24 plants, the company has also let go of 600 workers in Spain. It plans to shutter 67 facilities in the US. Job cuts reached 280 in Thailand.
I don't understand why there are so many empty homes? Where has everyone gone? Was there that much overbuilding or do you know of any one who has gone missing latley?
Wear tinfoil and never ever look up
comrade tin foil hat
People are moving back in with relatives or friends. I know several that have done that already. Also, tent cities are popping up everywhere and rescue missions and food banks are overwhelmed...Do a google search if you are truly interested where they went.
I hope the bonuses are leveraged illiquid group of junk bonds, mortgage-backed securities and corporate loans, so the people can lose more money quickly if they continue to go down in value.
"Until the rest of SoCal realizes that it ain't so special"
there are two california housing markets - the ones in school districts where SAT scores and the such are at the top 25th percentile or so, and everywhere else.
a good school district is worth an additional 150K. a great one can be worth 300K, or even more. most of them are worth nothing.
Here in Portland, Oregon, sellers have yet to receive the memo.
Most likely because many bagholders live down here in CA--who aren't exactly clued into economic reality. I know a few who were brilliantly tipped to buy in "progressive Portland", because they think it's just like San Francisco. Smart, eh?
I don't understand why there are so many empty homes? Where has everyone gone? Was there that much overbuilding or do you know of any one who has gone missing latley?
Wear tinfoil and never ever look up
comrade tin foil hat
Disappointing holiday season in which revenue dropped 24.2 percent over last year in stores that have been open at least one year. In the eight weeks ending Dec. 28, the operator of the Williams-Sonoma and Pottery Barn brands said its total revenue sank 23 percent to $729.4 million, as retail revenue and catalog sales both declined sharply.
I thought many people in the Bay Area made large amounts through stock options, dual six-figure incomes etc. making them different.
See the number of families with average income over $200K, over $500K, etc. - in towns like Woodside, Portola Valley, Atherton, Menlo Park, Palo Alto, ... it's truly astounding.
on cement. Sorry no link (in an email I received). Headline of email was "a complicated transaction". Subsequent thread comments were that it pertains both to Chinese stimulus package and, of course, connections. Larger picture is foreign investment in China for an infrastructure project, as well pacing of Chicom intentions to ramp up internal construction leading to, theoretically, internal consumption.
Lafarge-Shui On secures 80% of Shuangma Cement By Daniel Inman | 12 January 2009
The $410 million transaction is the first example of a foreign investor increasing its stake in an A-share company via a restructuring.
The board of Sichuan Shuangma Cement has approved the acquisition of a 50% equity stake in Dujiangyan Cement. Shuangma will pay for the stake through the issuance of Rmb2.8 billion ($410 million) worth of new shares to Lafarge China Offshore Holding Company, which is the controlling shareholder of both the seller and the buyer.
The deal will be subject to approval of Shuangma's shareholders at an interim shareholders' meeting to be held later this month, as well as approval from China Securities Regulatory Commission (CSRC) and the Ministry of Finance and Commerce.
Lafarge China is a wholly-owned subsidiary of Lafarge-Shui On Ltd, which is a joint venture between French cement giant Lafarge SA (which owns 55%) and Hong Kong-listed Shui On Construction and Materials. Before this transaction, Lafarge China owned 57% of Shenzhen-listed Shuangma and 75% of Dujiangyan Cement. The other 25% of Dujiangyan Cement was owned by Dujiangyan Construction Materials. The deal is the first instance of a foreign investor increasing its stake in an A-share listed company through a restructuring.
"This sort of deal is indicative of growing MNC (multinational corporation) interest in the A-share market - a market that they have had access to since 2006, but where corporate valuations haven't helped deals get done. The A-share market gives MNCs potential access to a wide range of strong industrial companies," says Chris Brooks, CLSA's head of M&A.
CLSA acted as a financial advisor for Shuangma through China Euro Securities, a sino-foreign joint venture between CLSA and Fortune Securities Company.
Lafarge China acquired its controlling interest in Shuangma in 2007. The injection of a 50% equity stake of Dujiangyan Cement into Shuangma is expected to take place before July this year, and fits into Lafarge China's plan to boost Shuangma's ailing business and market position through new technology. Once the new shares have been transferred, Lafarge China will own approximately 80% of Shuangma.
"The asset injection facilitates technology transfer, allowing Shuangma to benefit over time from production efficiencies -which gives it a positive outlook, especially given the growth prospects for cement in Sichuan," says Brooks.
Dujiangyan Cement is a major cement producer in Sichuan, with an annual production capacity of 3.2 million tonnes. Construction is a significant growth industry in the southwestern Chinese province. Sichuan lies at the centre of China's "Go West" policy, a plan to correct imbalances in the country's economic development by placing more of a focus on inland provinces that have experienced growth at a slower rate than those on the coast. Furthermore, Sichuan was at the very centre of the devastating earthquake in May last year and the substantial reconstruction needed since then has meant that demand for construction materials far exceeds the supply.
Shuangma's shares finished at Rmb7.4 on Friday, up 3.8% from the previous day, but significantly down from its Rmb18.40 high in May last year, immediately after the earthquake.
This is the first significant M&A deal that China Euro Securities has worked on since it was granted an A-share broking license by the CSRC in June last year.
They are selling their jet...Are they looking for TARP money?
Williams-Sonoma, Inc. is planning a 15-20% reduction of their corporate workforce. If true, with approximately 39,000 employees nationwide, such a reduction would mean the elimination of around 6,000-8,000 jobs
This news follows a disappointing holiday season in which revenue dropped 24.2 percent over last year in stores that have been open at least one year. In the eight weeks ending Dec. 28, the operator of the Williams-Sonoma and Pottery Barn brands said its total revenue sank 23 percent to $729.4 million
Williams Sonoma sold its Bombardier Global Express jet for approximately $47 million in cash, resulting in a pre-tax gain of about $16 million. To address the travel needs of CEO W. Howard Lester, the company entered into an aircraft lease agreement
Usually when you are the sucker you don't know it until later. Like they say, if you look around the poker table and can't figure out who the sucker is - it you. Unfortunately with the bailouts we all know we are the bagholders/suckers - but we can't do anything about it.
I hope the bonuses are leveraged illiquid group of junk bonds, mortgage-backed securities and corporate loans, so the people can lose more money quickly if they continue to go down in value. Elvis | 01.19.09 - 2:56 pm | #
Just long as it is fully taxable as ordinary income and listed on their W-2 forms at the bank's inflated carrying value.
I agree that the bulk of sales being foreclosure resales skews the median lower but this is not a positive. I view this as a leading indicator of where the middle and upper end go as their enter their respective 'mortgage default crisis' which is happening now. Remember, 90% of all foreclosed homes came from Subprime defaults because the foreclosure timeline is 9-12 months.
In the past nine months we have seen Subprime defaults become the minority with the Alt-A, Pay Option, Jumbo Prime and Prime collectively overtaking them. As these defaults move into foreclosures two things will happen - a) the headfake of all time will occur as prices stabalize due to higher priced home being foreclosed upon and reselling b) the middle and upper end will have its feet kicked out from under it and fall uncontrollably moving the number of underwater or near-underwater households from 60% at present to closer to 80%.
We are already seeing significant price compression upper to lower. On a macro level when you take that middle to upper end earner out of the picture and make him feel poor as you have with the Subprime folks, the broader economic crisis will enter an entirely new phase - one that $500 or $1000 tax breaks and building new highways and brides is impotent against.
you are absolutely right, however, I don't expect rents to fall much in merced/fresno, bc they are based on ag economy and that is not being hit as hard, we all gotta eat.
also, the rents have stayed the same as they were at the bubble peaks, everything there rents for $700-1000 per month, regardless of how big and nice it is or how old and run down it is.
again, i expect lower prices in the next couple of months, but at some point with all the stimulus, the economy will re-inflate and before our cash becomes worthless, we need to put it to work.
ironically, you'll hear cocktail party chatter in places like south pasadena and palo alto where parents talk about private schools as being a refuge from an academic environment that's too competitive.
Modine Manufacturing Co. announced today it will reduce its workforce in its Racine headquarters by approximately 25 percent, resulting in the elimination of about 170 jobs lost.
Wood Pelet Stoves are in Style. Six Dollars a Day 1500sq/ft +/-
I think the next housing market to go bust big time (50% plus, peak to trough) will be in Richistan. Richistan is wherever a working person would need a jumbo mortgage to finance a home purchase.
It's not about school districts anymore. The rent-to-buy comparison is the new driver. And greed (gotta get on the escalator with as much house as I can bite off) has been completely replaced by fear (OMG, if we buy, we'll be stuck here forever, what if one of us loses his job?, etc.)
A real estate agent in Portland Oregon told me last Sunday that 'you'd have to be crazy to buy a house in this market'. My wife wondered how she could do what she does for a living, feel that way, and look at herself in the mirror. I don't think my wife would have what it takes to be a real estate professional.
I am extremely happy we went private school. My kids got a different look at life then the company line I hear all over everyday. Sad what passes for thinking now days. Choice is only as good as the person choosing.
"Economist Moe Howard 3SU writes:
I am extremely happy we went private school. My kids got a different look at life then the company line I hear all over everyday."
And bonus points for not be burdened with raising them on a day-to-day basis.
"How are your kids?"
"Good now that they are in private boarding school."
Mr. Sparkle writes: Williams-Sonoma owned a private jet? I'm stunned.
And I mean it! The banks, industrials, etc. having private jets is not surprising. But these guys? Seriously?
Look at the deal they put in to replace it!
To address the travel needs of CEO W. Howard Lester, the company entered into an aircraft lease agreement with a limited liability company owned by Lester for use of a Bombardier Global 5000. Williams Sonoma will pay the LLC $375,000/month for each of the 36 months of the lease term through 2011, in addition to all use-related costs, including crew salaries and benefits insurance and hangar costs, fuel, and all direct operating costs.
Gee, what a deal. I wonder if the jet is the one they used to own.
school districts aren't just about status. when the public school district is as good or better than the private alternative, and that alternative costs 20K/year, the economics matter.
but this discussion is somewhat limited to 'richistan' and to immigrants that may not be wealthy but value educational quality to an extreme degree.
"See the number of families with average income over $200K, over $500K, etc."
A good example of what drives seller psychology in the SF Bay. That is, until you look at closely at median income figures against house prices. Palo Alto, Woodside, Atherton, Bel-Tib, etc. are a tiny percentage of population. So of course those areas are wealthy, but then again--here in Marin co., the median income is only $97K, a place not noted for its crushing poverty.
"immigrants that may not be wealthy but value educational quality to an extreme degree."
Then why do schools they dominate have gang problems? If the parent is smart enough to value education then they should value the discipline to go with it. Most really want a permanent green card (citizenship). It is about the money.
Public schools are rarely as good as elite private schools in the same area; unless they are test-in schools or are in university towns. Top public high schools in CA are all average schools if they were located in NJ; thank Prop-13 for that...
true. of course, the same point could be made about new jersey higher education, which is generally a wasteland except for princeton. which also has an excellent law school, of course.
Hymns for the Lord writes:
I thought many people in the Bay Area made large amounts through stock options, dual six-figure incomes etc. making them different.
Even if that was the driving factor in the past (IMHO, it wasn't), do you see a lot of folks getting rich on stock options today or in the near future? And what happens when those dual six-figure incomes become a single income, plus unemployment check?
And again, IMHO, it wasn't tech riches that drove the bubble here in the Bay Area. Like everywhere else, it was stupid lending and borrowing, and a gamble on future appreciation. The types of loans used in Silicon Valley's nicest neighborhoods are ample evidence. And the high end has seen that supply of funds be cut off even worse than the low end market.
CA has a horrible, under-funded public school system; 46th or so when adjusted for cost of living. It's nothing to be proud of and not even close to as good as NJ which has the highest per pupil spending.
"unless you consider the engineering frat at UC and stanford to be a gang, that's not quite what i'm talking about. are you in california, Moe?"
Nope I left CA in 78. Left Denver when the left coast mentality moved there. Now in the High Plains and here the immigrants are now coming as well. Had enough of immigrants and their gang culture and the looks of things they are not better.
Sure there are exceptions, I learn more about being an American from a German Hitler youth immigrant then I ever learned in school. There is a reason the folks around here leave their keys in the ignition still. Sad it will change here soon. That was America.
unearthly writes:
CA has a horrible, under-funded public school system; 46th or so when adjusted for cost of living. It's nothing to be proud of and not even close to as good as NJ which has the highest per pupil spending.
"They are grown and never went to "boarding school" Home at night and even went on the road racing during the summer. We have a tight family.
Economist Moe Howard 3SU"
Good to know. And, by the way, I was just justing joking around. A few of my better friends went to boarding school, and they loved it.
I don't understand why there are so many empty homes? Where has everyone gone? Was there that much overbuilding or do you know of any one who has gone missing latley?
Wear tinfoil and never ever look up
comrade tin foil hat
Some people bought multiple homes. "Can't lose investment," and all that.
I'm cool. Nothing learned without challenge. That is why I want vouchers. The Union controls the public education and has done a piss poor job. Simply look at our economic mess. It says a lot. Education is where a curious mind will hunt and find the answers.
Went to the National Association of Homebuilders Convention back in January of 2006. Their own economist was predicting a 15% drop in unit volume for the industry that year. Meanwhile in all but a very few areas (which were already seeing some erosion in the market), practically all the builders were busy trying to figure out how to double or triple their production capacity.
"Me too. As long as they can only be used at public schools."
Why not private if properly accredited or give home school some funds if they have to meet the same standards as Public? What difference would there be?
Why is it assumed that low prices are skewing the median now? Maybe it was the high prices that skewed the median before. Maybe it's supposed to take a while to sell an expensive home.
Yes, price does follow volume in the high end markets. On the Westside of Los Angeles, sales are few and far between. A few at relatively high prices, but how much longer can that last? Prime Santa Monica Lot Values have begun to shrink, as builders are struggling. Same is true in Malibu, Beverly Hills, Pacific Palisades and Brentwood. Very little if anything is moving.
Wouldn't it be easier to identify who was NOT to blame and fashion policy to reward those people? Here is my short list:
Renters
Savers
To help these patriots, I propose a very simple "bailout" that will increase revenue to the savers and lower costs for the renters: raise interest rates!
Please Please stay away from California, Northern part.! Gangs, bad weather, sickness, high house prices, bad people, bad kids, bad habits, high cost of living, bad schools; you name it and we are the first place of bad. Oh, and by the way we are running out of water so we all stink.
If enough of you stay away or move, then maybe we can buy a nice house in San Mateo county, in a neighborhood we like, and ride our horses off into the sunset. Damn this place is awful. Just like it has been all my life and that is the way I like it.
Helloooo jumbo prime market!
Nostrovia,
So that means we're at a bottom, right?
First?
Still wondering about the other 45 percent who paid "market rate" for their homes.
Builders had the worst December ever. - CR
How long can they last?
I will be able to get a place in Palm Springs for under $50k by year end. Probably something built after 2002.
"How long can they last?"
If I were in their shoes, I would go dormant. Just don't build for a few years.
Well, at least people are buying.
first
censeo Bank Shareholders esse delendam
Always a good time to foreclose on a house.
The builders will last as long as their protection money(lobbying fund) does.
Congress has already refunded any and all taxes for what the last 5 years?
CR writes:
Significant price declines are probably coming in the more expensive areas. (price follows volume).
Absolutely true. Foreclosure resales are down to five figures in parts of the so-called Inland Empire.
Until the rest of SoCal realizes that it ain't so special, volume will remain low. We're going well past replacement cost and the land adds nothing.
Still wondering about the other 45 percent who paid "market rate" for their homes.
sdtfs | 01.19.09 - 1:23 pm | #
Maybe REO price is the market price now. If you want to sell then match that.
Don't worry. Barney Frank will save your mortgage!
If I were in their shoes, I would go dormant. Just don't build for a few years.
some investor guy | 01.19.09 - 1:26 pm | #
And just not pay their loans? These guys all levered up too - to buy land, build homes that are now cancellations and man their 'offices'. They got overhead to feed. Overhead that doesn't go away short of a BK.
On the last thread, commenter Jes linked an article from the North (San Diego} County Times entitled:
HOUSING: Handful of brokers linked to glut of local foreclosures
http://www.nctimes.com/articles/2009/01/17/business/zd6ec264889f5ef44882575270011e969.txt
I didn't see any replies on the subject other than my own.
The article is a great exposition of a part of the fraud that caused SoCal house prices to reach ridiculous levels.
There's more downside to come as there's a lot of crap that still needs to flow through the pipes.
Is anyone surprised at that statistic?
There has never been a better time to buy or sell houses (on the courthouse steps).
Dryfly - I've had several conversations with various people about why the HBs don't merge, buyout, etc. The general consensus seems to be that they are all so deathly afraid of opening up their books that nobody will even enter into material discussions. And I'm guessing that their employees are all contracted and sub-contracted so I doubt there's much expense from that perspective.
CR - Do you mean volume pricing?
Is this the same as velocity of money? Can there be a velocity of pricing? Or, price velocity?
OT: On the bright side. If you would have bought RBS stock 5 years ago you would stll have 2.8% of your original investment left
How many of your man-angers have prescribed 'stretch goals' to save the team?
Is anyone surprised at that statistic?
Speed | 01.19.09 - 1:35 pm | #
Not really, and I would expect it to go higher. I'm surprised that there's any sales going on at all though. It's not like it's a big secret that prices are heading down.
"Can there be a velocity of pricing? Or, price velocity?
Barley"
Yes. Prices currently have a negative velocity (prices are dropping). Their acceleration is near zero. That implies that for the next few months they will keep dropping at the same rate as the prior few months.
sdtfs writes:
It's not like it's a big secret that prices are heading down.
Many born and bred dopes are waiting with glittering, greedy little eyes for the promised second half recovery. The Bread and Circus nation will take a brief while to discover the way the world really works.
I sticking by my longstanding prediction that most housing will go for 2-10% of peak real prices by the time we hit bottom.
Probably still sounds crazy to most of you but the decline in house prices is only on the first leg down, the second comes when 99% of the people have no financing available...cash only housing. This could still be a while and will come after default/hyperinflation of the US dollar.
Dryfly said, "Maybe REO price is the market price now. If you want to sell then match that."
There's no maybe about it. Of COURSE these prices are market prices. Banks would sell their foreclosures for as high as a price as they could, right? Therefore, these sales are valid comps for how much people are able to pay.
And CR, I live in one of the most expensive areas of L.A., and I already see massive price chopping going on.
Many born and bred dopes are waiting with glittering, greedy little eyes for the promised second half recovery.
As long as my employer is one of those bbds, im cool wit it ;p
Barley - FYI, I put up a new earnings table yesterday.
Bloomberg:Bush Commutes Terms of Ex-Border Agents Convicted in Shooting
Went to a few open houses in Walnut Creek this weekend -- 3/2 ranchers, appx. 2200 - 2600 sq. ft., were still all around 1.1 million. They were nice houses on nice sized lots, but still. Makes me think I'll never afford a house here, even with the bust.
Bush finally did something right.
"Builders had the worst December ever. - CR
How long can they last?"
Why should they last? They need to fold consolidate to meet market demand of none. Seems like a business that can grow over night anywhere they are needed.
Do you think Alan Greenspan could get a commutation? I bet he hopes so.
Joe Stalin writes:
Bush finally did something right.
Yeah, nothing like pardoning some murderes 'cause they were in uniform at the time. Murder is much cooler if you're a cop. Then it's like cruise control for cool.
guitar solo
I was in Merced/Fresno counties, in northern CA, this weekend, measuring the real estate conditions in person.
Basically, the REO/short sales are the market, there is nothing selling otherwise.
you can pick up multiple unit buildings at 4-5 times rent roll. and single family homes at 7-8 times rent roll.
vacancy rates at ~ 20%.
from what i saw, there is still room for further declines, bc even with these prices, the real estate offices I had meetings in were completely empty on a Saturday and Sunday, usually not the case if there are transactions going on.
of course, i got the typical sales pitches, like "now is the time, must bid quickly to get properties", "the investors on the fence are now jumping in", etc...
but again from what i saw, my friend and I where investors looking to buy.
I hope others will share their experiences, if any, about other parts of California and the u.s. in general.
GAZ
This is good news - Banks are in a heated competition to off load troubled assets. They are fighting head to head on a race to the bottom. Competition and free markets are the corner stone of our democracy.
I said there are houses selling in the five figures, and there are, but that's not the average . . . yet
Bargains draw first-time home buyers
January 12, 2009 - 3:54 PM
FROM STAFF REPORTS
"First-time home buyers jumped into the local real estate market in December, pushing sales of existing homes up by 17 percent for the month and 207 percent compared to a year ago, according to new figures.
"The big draw? More affordable homes as Victor Valley prices dipped 5.5 percent for the month, according to figures from the Victor Valley Multiple Listing Service compiled by Larry Trombley, an agent with Century 21 Rose Realty in Hesperia.
"The typical Victor Valley home sold in December was 1,905 square feet, 15 years old, selling for $140,596. In the past year, area home prices have fallen 39.6 percent and are now comparable to 2002 prices.
"In December 3,639 homes were for sale in the Victor Valley, with 513 closing escrow. That equates to a seven-month supply of homes.
There are some investors out there, Trombley said, but most of (the buyers) are first-time buyers who can qualify for a loan.
"Eighty-seven percent of homes sold in December were foreclosure properties. Because there are so many foreclosures, the rising pace of sales hasnt slowed declining prices."
That was 87% foreclosure resales.
Johnny Mustardseed writes:
Do you think Alan Greenspan could get a commutation? I bet he hopes so.
I am waiting to see how the Pardon Express goes. It's either going to be "I pardon all 4,241 people listed on this Excel sheet for whatever they did, I'm not sure what." or he's going to hang all his handlers out to dry. I don't think there's a middle road.
It's a strange situation. The downward swing on prices has been swift and brutal.
But there is a huge difference between the areas like Riverside county where many of the homes are new-build, and the pricier areas of L.A. where many residents are long time homeowners who are not going anywhere due to crazy low property taxes.
"I sticking by my longstanding prediction that most housing will go for 2-10% of peak real prices by the time we hit bottom."
CashOnlyHousing | 01.19.09 - 1:44 pm
1 week ago I looked at a 3/2/2 here in Florida. It sold in 05 for 265K. The contractor who was looking at the same time as me put in a bid. 17K. They pulled the listing so I am guessing it sold.
The home was liveable. It needed a complete update inside and serious landscaping done. Had a new roof after Charlie.
I didn't bid on it because I would rather live in the country...I was just interested what a 40K listing price got ya...
Chris
Bloomberg:Bush Commutes Terms of Ex-Border Agents Convicted in Shooting
Johnny Mustardseed
My take as well - He did do something right! Goes out on a high note.
Mr. Sparkle, thanks
The_Littlest_Mandarin
They only shot a Mexican Drug Dealer and covered it up.
It is easy to forgive shooting Mexicans cause they come up here and steal those jobs us Americans are gonna wish we had.
Can there be a velocity of pricing?
Barley | 01.19.09 - 1:39 pm | #
Rate of descent.
Rate of descent.
Comrade Terry | 01.19.09 - 1:51 pm | #
Pull Up... Terrain. Pull Up.... Terrain.....
I agree with Sparkle - homebuilders' books are cooked.
@ Comrade Terry
Pull Up... Terrain. Pull Up.... Terrain.....
Eric
Geese! Geese! Geese!
And I'm guessing that their employees are all contracted and sub-contracted so I doubt there's much expense from that perspective.
Mr. Sparkle | Homepage | 01.19.09 - 1:37 pm | #
The direct labor is all contract/subcontract... but the public HBs all have significant operational O/H besides the contractors... plus they have land & 'inventory' all of which is levered up. They can't just go 'underground' unless that is taken care of first [written down - but which lendor is going to be happy about that?]...
It is the classic and age old trade off of 'fixed cost' vs. 'variable cost'... nothing ever changes much wrt to people or business. It was the same trade off earliest hunter gathers made when going to herding & farming. Fixed vs. variable cost.
Chris
Cobradriver | 01.19.09 - 1:50 pm | #
Chris, I'm amazed at the prices you're seeing. How could a house on the sunny west coast of FL (which is much nicer than the east coast IMO) be lower than houses up here in the frozen tundra? I could put that $17K house on my credit card and still rent it out for a profit. Whoa.
Posted this last night....more on topic here:
What I see here in the town I watch (Los Gatos, South Bay Area) is that Jumbo houses are just sitting. By Jumbo houses, I mean houses that would require a jumbo loan, of course. You know, the loan types that charge the market-set interest rate, rather than the government-subsidized rate.
I see TONS of these high-end homes sitting, with very few lowering price to attractive levels yet. And if you take a browse through Craigslist rental section, you see some of these very plush houses being offered for rent at crazy rental rates (during the middle of our worst recession since god created the earth).
I believe these sellers will be forced to deal with reality by the end of this year. By the end of 2010, the Bay Area prime neighborhoods will be shown in Jim-the-Realtor videos.
Source: Euro Watch
While written about the EuroZone it is just as valid for the post. The part about Ireland and its civil servants is as true here.
Exporting as the path for survival. Not looking so good for the US.
Of course, the problem is if you get your salary cut it becomes harder to pay back the money you owe (loan defaults) and you can't spend as much on consumption (demand slump). And on top of this, as these first two lock-in, government revenue falls (less VAT) while expenditure rises (unemployment payments and bank bailouts), so we get fiscal deficit problems. So not only do you have banks lending less, households spending less, and companies investing less (as demand drops), we also have governments finally forced to cut back (at least in the more vulnerable economies), as the ratings agencies get to work. So you get a downward spiral of falling wages, and falling prices as GDP just comes down and down. And this process can become systematic (deflation) meaning that nominal GDP starts falling even faster than real GDP, making for a car that becomes increasingly "wobbly" and difficult to steer.
In this environment, there really is only one way to halt the spiral, and to jump start the economy, and that is to export, and to try and encourage export directed investment. But to get going with exports you need to recover competitiveness. You can achieve some of this restoration via productivity improvements, but not enough, and not quickly enough, especially if the distortion is large, and has been going on over a number of years (see the real exchange rate chart for Hungary above). So you can either do one of two things, devalue, or cut wages and prices. Neither is easy, but as we are now seeing the second is hardly universally popular either.
jmay writes:
It's a strange situation. The downward swing on prices has been swift and brutal.
But there is a huge difference between the areas like Riverside county where many of the homes are new-build, and the pricier areas of L.A. where many residents are long time homeowners who are not going anywhere due to crazy low property taxes
Prop 13 distorts the market and hamstrings the govt and makes the govt irresponsible, too.
plus they have land & 'inventory' all of which is levered up.
Yes, and don't forget money they had to borrow to finance all of the stock repurchases.
Johnny Mustardseed writes:
They only shot a Mexican Drug Dealer and covered it up.
I forgot, he was a Mexican, that makes it different.
Flash forward to a kangaroo court five years from now. They reluctantly bring the 16-17 y/o political shocktroopers in for smashing the nice Republican man's hands with sledgehammers and then lighting his wife on fire in front of him.
"Kids will be kids, stresses of the job, you know. How could they do their job if they were afraid of reprisal? You probably had it coming."
Then they fine the old man for swearing in court and have the baliff beat him while the rabble cheers.
Great stuff, looking forward to the tomorrow we're building brick by brick today.
Taken from the last post:
And here's another: http://www.detnews.com/specialre.../2001/elmhurst/
\t Mr. Sparkle | \t \t \tHomepage | \t01.19.09 - 1:33 pm | #
-----
I think this special report provides more anecdotal evidence to how Americans--humans in general?--tend to deal with many social problems. Instead of staying put to deal with problems of the State--community, city, state--the simplest or easier solution is to just move away. Many Americans moved West to escape problems in the East just as "new" Americans moved to America instead of working to improve their homeland.
Now, we all are facing an option of "Where do we go?" with many/most states suffering along with businesses, and now, we are even facing a long list of countries that are stumbling along in a zombified manner. What is the end play of this current act? Are we all going to be Okies when things get worse?
@dryfly- I think you have more awareness on this than me. Weren't there some stories posted here last year about HB's selling off land holdings for like 15 cents/$ that had already been graded and otherwise improved?
How long can those guys actually hold out wrt to taxes, etc?
dryfly - worth noting that larger (public) HBs often make concessions and or guarantees to municipalities for infastucture development. These obligations can often drag a companys ability to morph or reduce costs
Where do we go?
move back to mom and dads house
Went to a few open houses in Walnut Creek this weekend -- 3/2 ranchers, appx. 2200 - 2600 sq. ft., were still all around 1.1 million. They were nice houses on nice sized lots, but still. Makes me think I'll never afford a house here, even with the bust.
No Cal SC | 01.19.09 - 1:45 pm | #
I know I couldn't. Wouldn't even try if I lived in So Cal. I'd rent and go to the beach or the mountains - let somebody else worry about the 'asset valuations'. And I've owned out here in flyover ever since I graduated from college - my first home priced in at 1.25 times my income... 3/2 with nice backyard and short commute. On the other hand I'd have paid twice as much in rent there if I'd have rented the same place. Compare that to if I was in LA - I would have rented all of these years. Different locations dictate different strategies.
GAZ; Of course a 5x 'rent roll' and a 20% vacancy rate breaks even until the rents drop to 'afforadable'. I had an incredable job offer out there a year ago, the economy looked unsustanable at that time and I can't stand the heat so I said no.
Instead of staying put to deal with problems of the State--community, city, state--the simplest or easier solution is to just move away.
Not Walt Kowalski...
@yagij- it was a fascinating article. It also makes me wonder which city we'll all be discussing in the same language that we discuss Detroit today. The rot takes time to set in and cities don't just implode overnight. I do believe that the potential exists in a few cities for similar implosion.
Any candidates that people feel strongly about?
"price follows volume"
Does that mean that increasing volume with price decreasing may foretell lower prices?
???
On Caliente drive, Palm Springs: a house 3000 SQF was 1.8M last year . Today in pre foreclosure 835K. Was sold in 1998 for 390K. Do you see the madness ?
In that area prices have still ways to go...By end of thIs year it will be 500K.
By Jumbo houses, I mean houses that would require a jumbo loan, of course. You know, the loan types that charge the market-set interest rate, rather than the government-subsidized rate.
I'm starting to come to conclusion that the Fed's crackdown on subprime (esp. jumbo) and exotic mortgages was when the music stopped.
On related news, the nationalized british bank Northern Rock said today that it was lessening credit standards for mortgages.
@dryfly- I think you have more awareness on this than me. Weren't there some stories posted here last year about HB's selling off land holdings for like 15 cents/$ that had already been graded and otherwise improved?
How long can those guys actually hold out wrt to taxes, etc?
Mr. Sparkle | Homepage | 01.19.09 - 2:00 pm | #
Yes and CR mentioned some deals he knew of personally - it was all an effort to generate cash to cover immediate requirements - very ugly. Their cash burn had to have been terrible compared to actual follow through sales [as in close].
They can't last long without bailouts... we know that never happens.
"I could put that $17K house on my credit card and still rent it out for a profit. Whoa."
Outsider | 01.19.09 - 1:57 pm | #
Outsider,
This whole area here in Charlotte and Desoto counties has always been kinda "poor". Even the stuff on Gulf canals was afforadable to a scummy mechanic like me until this run up.
I keep harping on this...I make very good coin for the area. After I max my 401,pay the needed bills,I couldn't afford to buy a home here without creative financing. Fuck that.
I'll make this offer to anyone...You get to this area and I'll show you all the side streets and rural areas with empty homes...I lived in Socal during the last bust in the early nineties. This is really starting to scare the shit out of me because of how much worse it is...
Chris
On related news, the nationalized british bank Northern Rock said today that it was lessening credit standards for mortgages.
anonymous
Which is what will eventually happen here. They'll refinance the toxic loans to a reasonable fixed rate, probably with cramdowns before it's all over.
For Ventura County and the San Fernando Valley Foreclosures and short sales are approaching or exceeding 70% of closed sales:
Effective Demand: Short Sale & Foreclosure for San Fernando Valley & Ventura County - December 2008
You can see the percentage of inventory that is distressed relative to the percentage of pendins that are distressed here:
Effective Demand: Weekly Active/Pending counts SFV & Ventura - 01/17/09
...short of a BK.
dryfly | 01.19.09 - 1:33 pm | #
----
What a novel concept. I guess we shouldn't blame Uncle Sam wanting to avoid this unpleasantness 'cause obvious the private sector doesn't want to do it either.
Mr. Sparkle writes:
How long can those guys actually hold out wrt to taxes, etc?
I think they just have a tremendous pile of debt service, to be honest. I don't think individual projects were really funded on a per-project basis.
I think they leveraged up a debt pile (more like mountain) based on optimistic future revenue projections and then took a very sensible approach to servicing it -- grow or die. The company can implode, as long as you get your personal cash out. You won't even lose your personal houses 'cause you can stake all the lines of credit with that super-valuable real estate you are buying way in advance. Then once you get that set up, the bank will have to collude with you 'cause if they seize the assets, they'll be the ones that own them at dimes on the dollar.
The asset liquidations are a way to keep the salaries coming for another few months or a year, not a survival strategy for the company.
"The Union Tribune. Saying theyve been left out of the federal bailout package, about 50 home builders and construction workers marched outside three banks in downtown San Diego yesterday to protest foreclosures that halt construction work. The demonstrators, organized by a coalition of builders, called on lenders to modify distressed construction loans to allow builders to complete unfinished projects.
One of the marchers was Tom Dobron of Escondido, CEO of Innovative Communities. Dobron said his bank had declined to negotiate with him when he went into default on a $15 million construction loan a year ago. I had nearly 100 people working for me, Dobron said. I had to lay everyone off. Banks are not working with builders. I was forced out of business.
Boo hoo! Welcome to the club, chump...
If Both Sides Did It, why is Bush only pardoning Right-wing operatives?
That's not the bipartisan spirit.
Surely, since Both Sides Did It, there must be a hefty list of progressives and liberals who are in need of pardon to stay out of jail?
No?
Are Conservative Republicans lying ... again? That can't be. If that were so, it means the entire Conservative Movement is a Lie Machine: lying on the way in, lying while in power, lying on the way out, with heavy covering lies laid down by and ignorant tools and greedy fucks talking their books.
BOTH SIDES DID IT! (tm)
When the costs incurred by the federal government and the District of Columbia are factored in, the total cost of Bush's 2005 inauguration was reportedly around $157 million...
So much for Bush's inauguration 'only' costing $40 million.
No Cal SC writes:
Went to a few open houses in Walnut Creek this weekend -- 3/2 ranchers, appx. 2200 - 2600 sq. ft., were still all around 1.1 million. They were nice houses on nice sized lots, but still. Makes me think I'll never afford a house here, even with the bust.
Be patient No Cal SC...
I'm in Danville (close to WC). High end prices are starting to fall faster. Financing has dried up and foreclosures are really starting to hit the million dollar neighborhoods. Let 90s pricing is still 50-70% lower than homes are selling for today in these high-end areas. 2009 should be bloody.
There is plenty of blame to go around. The politicians deregulated the system, the businessman pushed product that was entirely immoral and the consumers were dumb enough to buy the sales pitch.
Blame doesn't fall in any single place. If anyone is to blame moreso than others it's the greedy US consumer. No one forced them to buy those homes...I can dangle a $100 bill with 10% adjusted interest to it, but that doesn't mean you HAVE to take it from me.
Here's a personal anecdote to illustrate the state of Bay Area house prices:
We rented a small (1150 sq ft) Los Gatos home for 3 years at $2700/month. The landlord kicked us out this past July, choosing to sell it because due to concerns about his debt level (owning two houses in Los Gatos).
After a moderate remodel (roughly $100-150K), he put it on the market for over $1.1M. It sat. They dropped the price to $1M. Still it sits.
It recently showed up on Craigslist as available for rent for $3650/month. Thats about a 30% increase in rent from what we were paying, which is quite an ambitious bump in rent during the worst recession since the Great Depression! I guess they figure new renters will really love the updated kitchen!
So lets do a quick comparison to whether the housing bubble has popped in Los Gatos You can either pay:
$3,650/month to rent the house (they're smokin' dope with this asking price, IMHO)
or you can buy it for $999,000 and pay:
$6,500/month to own the house
This $6,500 number only includes the mortgage and property taxes, NOT insurance and maintenance costs. It assumes that you put 20% down for a Jumbo 30-year fixed-rate loan for 7.25%. (If you somehow got a Jumbo mortgage at 5.5%, the cost would go down to $5,500/month).
So you are essentially paying, up front, almost a 1/4 million dollars for the right to nearly double your monthly housing costs, compared to renting.
Think the bubble has finished deflating? I dont think so!
The_Littlest_Mandarin
I don't think you got my sarcasm. I agree, what they did is terrible
(Side not to all: Apparently there is a wicked virus going around (MS vulnerable) so update, update your protection.)
I'm in a position to buy for less than 1/2 of appraised value for rentals, but renting property is a full time job with upkeep and I'm not ready to go there..
Any candidates that people feel strongly about?
Mr. Sparkle | Homepage | 01.19.09 - 2:02 pm | #
-----
Candidates as in possible cities?
I would think that any city that fits into Detroit's mold would be a candidate. Influx of poor minorities and outflow of (upper)-middle class majority. Mix in a populist minority mayor and city counsel with a 'majority' population of minorities. It doesn't hurt when you have a city that has an unofficial tradition of "Devil's Night" fires.
(I'm trying to skirt the PC line, but the decline of Detroit as your article explains paints this kind of picture.)
Longhorn writes:
So much for Bush's inauguration 'only' costing $40 million.
It has nothing to do with reality, it's just a figment for Republicans to fixate on to try to re-develop their lockstep rhetoric. Modern Republicanism is both profoundly irrationalist and profoundly anti-rationalist.
They want to have a Jessica Lynching. The real cost is irrelevant or what actually happened are irrelevant, the idea in the minds of the True Believers is what matters.
"price follows volume"
Does that mean that increasing volume with price decreasing may foretell lower prices?
???
reptillian | 01.19.09 - 2:04 pm
Think price declines follow a drop in sales volume.
Lot's of FB's in Los Gatos - Check out this rental at <a href="http://www.redfin.com/CA/Los-Gatos/77- BROADWAY-95030/home/1310611">77 Broadway</a>: Purchase in 2001 for $1.8M, listed in 2009 for $1.8M, Will get half that in 2010 chasing Mr. Market all the way to the bottom.
Johnny Mustardseed writes:
I don't think you got my sarcasm. I agree, what they did is terrible
No, I'm just running alongside the bus, throwing rocks, too.
Link to FB: 77 Broadway, Los Gatos, CA 95030
Think price declines follow a drop in sales volume.
Doc at the Radar Station | 01.19.09 - 2:24 pm | #
Exactly - prices won't begin to rise until volume picks up and the inventory clears some.
Do you think Alan Greenspan could get a commutation? I bet he hopes so.
Johnny Mustardseed | 01.19.09 - 1:47 pm | #
He ain't worried. He got immunity
Patrick Wood -- Global Banking: The Bank for International Settlements, Part 1
Further, members of the BIS board of directors (for instance, Alan Greenspan) are individually granted special benefits:
*
immunity from arrest or imprisonment and immunity from seizure of their personal baggage, save in flagrant cases of criminal offence;
inviolability of all papers and documents;
*
immunity from jurisdiction, even after their mission has been accomplished, for acts carried out in the discharge of their duties, including words spoken and writings;
*
exemption for themselves, their spouses and children from any immigration restrictions, from any formalities concerning the registration of aliens and from any obligations relating to national service in Switzerland ;
*
the right to use codes in official communications or to receive or send documents or correspondence by means of couriers or diplomatic bags.[10]
Lastly, all remaining officials and employees of the BIS have the following immunities:
*
immunity from jurisdiction for acts accomplished in the discharge of their duties, including words spoken and writings, even after such persons have ceased to be Officials of the Bank;[bold emphasis added]
*
exemption from all Federal, cantonal and communal taxes on salaries, fees and allowances paid to them by the Bank
The markets will be action packed tomorrow. Can't wait. Dramamine(sp) needed.
Do you think Alan Greenspan could get a commutation? I bet he hopes so.
Johnny Mustardseed
He's married to Andrea Mitchell. That old man probably wants to go to priso
I don't care who's inauguration it is, it is obscene to engage in that kind of pageantry and expense. This isn't Royalty. The position of Presdident shouldn't be worshipped and idolized. There should be a swearing in gathering and a speech. That's it....then get the hell to work or get the hell out and let the CR Commentariat implement a plan....guns for everyone.
O/T from Jesse's Cafe :
Jesse's Café Américain
Murkiness in the NYMEX Pits As the Banks Hoard Oil
"Morgan Stanley hired an oil tanker to store crude oil in the Gulf of Mexico, joining Citigroup Inc. and Royal Dutch Shell Plc in trying to profit from the contango, two shipbrokers said in reports earlier today."
Is that your TARP money at work ?
What other TARPed banks stash oil ?
The_Littlest_Mandarin | 01.19.09 - 1:47 pm | #
Come on. No video means no crime.
I was thinking about the 19 yo cop killer that was murdered in his solitary confinement cell. Did a google search to see where that investigation had gone. Zero information.
Blue Wall Of Silence Develops In Suspect's Death : NPR
Werner :
MS pulled out of the tanker deal...
Looks like it'll be too risky after all.
Shortcourage,
That owner in LG is living in 2004 to expect $3500 for 1150sqft--and just wait until the local economy goes south.
foreclosure resales accounted for 55.7 percent of December's resales activity
Pure brilliance--good luck. There must be a new crop of fools for those "flip that foreclosure" seminars. People are easy marks for the Rich Dad/Boomer Gospel dreck.
Morocco Bama | 01.19.09 - 2:29 pm | #
You know what the problem with expectations is don't you?
Disappointment.
Anonymous- MS had been in a tanker deal in May of 08, just before oil bubble popped. I was kind of curious how that one worked out.
When is my honeymoon over ? Tomorrow night ?
Here in Portland, Oregon, sellers have yet to receive the memo. Prices still high relative to incomes. Maybe it takes a lot of foreclosures to put the fear of God into these people. In the meantime, properties are just sitting.
Werner - They bought contracts but did not expect to take delivery. The huge price decline meant they sell at a steep loss or recieve oil(instead of lube).
unearthly writes:
Lot's of FB's in Los Gatos - Check out this rental
Is that house for rent, and if so for how much? BTW, did you see the appreciation that redfin shows for that house from Mar 26, 1993 (Sold $255,000) to Jan 03, 2001 (Sold $1,799,000)?
A nice whopping 28.6%/yr. I am sure it was a near teardown, and fancy newly constructed home, but still!
And I am sure in his mind, the current owner had extrapolated those gains forward! Bummer for him.
"Morgan Stanley hired an oil tanker to store crude oil in the Gulf of Mexico, joining Citigroup Inc. and Royal Dutch Shell Plc in trying to profit from the contango
I commented on this a few days ago.
Imo, Morgan and Citi got caught long in the face of a massive oil price bust. Now they either have to sell at a huge loss or take delivery.
Morgan & Citi are bagholders/suckers.
A new truism: Dumb as a bag of bankers!
When is my honeymoon over ? Tomorrow night ?
maybe we can | Homepage | 01.19.09 - 2:34 pm | #
I'm guessing right about the time the markets open, ~ 3:30pm EST. He'll have just enough time after the speech to sell spoos. Unless he plans on REALLY tanking the market during the speech, in which case he'd best hit the pits in Chicago before putting his hand on the bible.
Morgan & Citi are bagholders/suckers.
No, Angry Saver, you are the bagholder/sucker.
Morocco Bama writes:
I don't care who's inauguration it is, it is obscene to engage in that kind of pageantry and expense.
Oh agreed; even as an Imperial Cult devotee, it's tremendously wasteful.
I think Obama would be wise to have trimmed it down, and I think he'd be wister still not to redecorate at all after Bush leaves, as a statement of austerity.
That doesn't change the fact that Republicans are trying to whip up a Jessica Lynching over the matter, as is their SOP.
The constantly rotating scandals give the Faithful something to chatter about amongst themselves and recinforce their groupthink by either weeding out or enforcing proper behavior in exchange for social acceptance. The people who best parrot the dinner speeches of the night before are rewarded, those who disagree are punished.
They are very good at this and it is no surprise to see them on parade.
Price does follow volume but volume is very weak. 5th worst December on record and only this "good" because distressed inventory are cutting prices to find a market. This isnt a normal market and sales are still very weak.
If prices follows volume then volume is telling you prices will still fall.
We're all bagholders/suckers now! Well it's just not very catchy..
Morgan & Citi are bagholders/suckers.
Angry Saver
I think the taxpayer is the bagholder
Maybe REO price is the market price now. If you want to sell then match that.
dryfly | 01.19.09 - 1:30 pm | #
I've observed exactly that in a number of instances in Vegas areas that I monitor. Those that need to sell have to adapt to the market.
Agreed with many here. The only sucker in these oil deals is the taxpayer. Who else is paying these guys' bills?
Imo, Morgan and Citi got caught long in the face of a massive oil price bust. Now they either have to sell at a huge loss or take delivery.
Angry Saver | 01.19.09 - 2:35 pm | #
And they don't have the cash to take the loss - unless Uncle Ben comes to the rescue again. I wonder if next years bonuses will be 'payment in kind'... a fuel truck shows up at workers homes and tries to 'unload' crude... "So Mr. Smith where you want us to put your 'bonus'? Got a swimming pool?"
Barley writes:
...Werner - They bought contracts but did not expect to take delivery...
Of course, did you think the suits at the banks know anything but to dabble in "paper" (and preferably bilk someone out of his money)?
Maybe Robert Gates will be our new President.
No, Angry Saver, you are the bagholder/sucker.
Huh? You lost me.
Angry Saver writes:
...I commented on this a few days ago...
Sorry, was not aware of that.
Just saw it at Jesse's.
cool blog, Mr. Sparkle.
Angry Saver writes:
Huh? You lost me.
ZOMG! Vast Losses! How Will They Ever Pay?
Three Guesses, First Two Don't Count.
@ ShortCourage
The listing remarks says 'Tenant Occupied' which I assume means renter; otherwise I would have expected 'Owner Occupied'. I doubt rent covers much more than the $21k in property taxes (tax valuation is $2M).
Barley/dryfly- if MS does manage to contract out a tanker at decent rates, that huge contango spread might help them out. Over $23/bbl over 1 year. Not bad.
It's gonna be just like my marriage. The apex will be just before I say "I DO". Downhill right after the celebration winds down. wheeeeeee!
Huh? You lost me.
Angry Saver | 01.19.09 - 2:41 pm | #
He's sayin' WE THE TAX PAYERS will own the oil via TARP so WE are the bag holders - stuck holding another big ol' bag of 'banker'.
Energyecon - Russian prices for Ukraine are reported to start at $360 in early 2009, then decline to $145 by the end of 2009 with the average of $235
maybe we can writes:
It's gonna be just like my marriage. The apex will be just before I say "I DO". Downhill right after the celebration winds down. wheeeeeee!
I understand. I want him to fail as much as you do. That way I'll feel smug and superior.
I really like the idea of bonuses in kind!
They only shot a Mexican Drug Dealer and covered it up.
Johnny Mustardseed | 01.19.09 - 1:51 pm | #
They didn't cover it up. Their Goddamn supervisor was right there when it happenned. They were tried for not filing a report with their Goddamn supervisor telling him about the shooting which he saw with his own two eyes.
Barley writes:
I really like the idea of bonuses in kind!
Some Credit Suisse Group bankers were left reeling after the bank said it would pay a substantial percentage of their 2008 compensation with an illiquid group of junk bonds, mortgage-backed securities and corporate loans.
Some Credit Suisse Bankers Livid Over New Bonus Plan - Deal Journal - WSJ
Barley/dryfly- if MS does manage to contract out a tanker at decent rates, that huge contango spread might help them out. Over $23/bbl over 1 year. Not bad.
Mr. Sparkle | Homepage | 01.19.09 - 2:43 pm | #
I hope it works out for them - seriously - because we know what their Plan B is... Ben on speed dial.
@dryfly- I'm thinking this has a lot of potential for the old-school "tar & feather" treatment.
A guy can dream, right?
I hope it works out for them - seriously - because we know what their Plan B is... Ben on speed dial.
So we either pay higher gas prices or higher taxes... Sweet, sign me up!
I don't understand why there are so many empty homes? Where has everyone gone? Was there that much overbuilding or do you know of any one who has gone missing latley?
Wear tinfoil and never ever look up
Here's another Los Gatos gem at 23 Loma Alta. It's been relisted and on the Market for 140+ days. I count 4-refi's since the last purchase not including any HELOC's taken out; the last of which was a $630k ARM taken out in 2001. Hard tell how levered these folks are...
The market for cement:
Besides shuttering 24 plants, the company has also let go of 600 workers in Spain. It plans to shutter 67 facilities in the US. Job cuts reached 280 in Thailand.
Holcim closes Misamis Oriental facility without cutting jobs - Business - GMANews.TV - Official Website of GMA News and Public Affairs - Latest Philippine News
Then they fine the old man for swearing in court and have the baliff beat him while the rabble cheers.
Great stuff, looking forward to the tomorrow we're building brick by brick today.
The_Littlest_Mandarin | 01.19.09 - 1:59 pm | #
Has that eerie feeling of the late 20s early 30s Germany to it. Some people seem to love it... and so it starts...
dryfly writes:
...I wonder if next years bonuses will be 'payment in kind'...
Hihi. Nice idea!
I don't understand why there are so many empty homes? Where has everyone gone? Was there that much overbuilding or do you know of any one who has gone missing latley?
Wear tinfoil and never ever look up
comrade tin foil hat
People are moving back in with relatives or friends. I know several that have done that already. Also, tent cities are popping up everywhere and rescue missions and food banks are overwhelmed...Do a google search if you are truly interested where they went.
anonymous | 01.19.09 - 2:47 pm |
Awesome!! Really Awesome!
There really is a Santa
Barley writes:
Awesome!! Really Awesome!
There really is a Santa
If we did that at all banks, we'd get some real prudent lending!
I hope the bonuses are leveraged illiquid group of junk bonds, mortgage-backed securities and corporate loans, so the people can lose more money quickly if they continue to go down in value.
unearthly writes:
Here's another Los Gatos gem at 23 Loma Alta.
Love the description:
"Bungalow home located on a spacious corner lot."
The lot is 5500 sf.
The bungalow itself is for sale at $800/sf.
Can't imagine why it hasn't sold yet.
"Until the rest of SoCal realizes that it ain't so special"
there are two california housing markets - the ones in school districts where SAT scores and the such are at the top 25th percentile or so, and everywhere else.
a good school district is worth an additional 150K. a great one can be worth 300K, or even more. most of them are worth nothing.
Here in Portland, Oregon, sellers have yet to receive the memo.
Most likely because many bagholders live down here in CA--who aren't exactly clued into economic reality. I know a few who were brilliantly tipped to buy in "progressive Portland", because they think it's just like San Francisco. Smart, eh?
I don't understand why there are so many empty homes? Where has everyone gone? Was there that much overbuilding or do you know of any one who has gone missing latley?
Wear tinfoil and never ever look up
comrade tin foil hat
Think Phantasm.
Foreclosed home comps should be market comps for at least the next two years.
Williams Sonoma Layoffs: 6,000 Jobs to Be Cut?
Disappointing holiday season in which revenue dropped 24.2 percent over last year in stores that have been open at least one year. In the eight weeks ending Dec. 28, the operator of the Williams-Sonoma and Pottery Barn brands said its total revenue sank 23 percent to $729.4 million, as retail revenue and catalog sales both declined sharply.
Page not found | The Daily Anchor
This is one of the fun places to shop...
Morgan & Citi are bagholders/suckers.
Angry Saver | 01.19.09 - 2:35 pm | #
Hey, the tax payer is funding them.
"a good school district is worth an additional 150K. a great one can be worth 300K, or even more. most of them are worth nothing.
bgates"
Just get an apartment in the district instead.
"Just get an apartment in the district instead.
Elvis"
Can bando's kids go to the same district the squatted house is in?
Morgan & Citi are bagholders/suckers.
Angry Saver
I think the taxpayer is the bagholder
Barley | 01.19.09 - 2:37 pm | #
Barly was faster than me.
Can I get a Contained!?!?!
Ready? On three,
One,
Two,
......
"a good school district is worth an additional 150K. a great one can be worth 300K, or even more. most of them are worth nothing."
Hmmm...and I always thought incomes are what drove prices? I guess if your kids are pulling in an extra $100K, then OK...
ShortCourage,
I thought many people in the Bay Area made large amounts through stock options, dual six-figure incomes etc. making them different.
See the number of families with average income over $200K, over $500K, etc. - in towns like Woodside, Portola Valley, Atherton, Menlo Park, Palo Alto, ... it's truly astounding.
"Just get an apartment in the district instead."
2 brs get a nice valuation bump is said districts too.
places without room for kids, not so much.
Barley,
on cement. Sorry no link (in an email I received). Headline of email was "a complicated transaction". Subsequent thread comments were that it pertains both to Chinese stimulus package and, of course, connections. Larger picture is foreign investment in China for an infrastructure project, as well pacing of Chicom intentions to ramp up internal construction leading to, theoretically, internal consumption.
Lafarge-Shui On secures 80% of Shuangma Cement By Daniel Inman | 12
January 2009
The $410 million transaction is the first example of a foreign investor
increasing its stake in an A-share company via a restructuring.
The board of Sichuan Shuangma Cement has approved the acquisition of a 50%
equity stake in Dujiangyan Cement. Shuangma will pay for the stake through
the issuance of Rmb2.8 billion ($410 million) worth of new shares to Lafarge
China Offshore Holding Company, which is the controlling shareholder of both
the seller and the buyer.
The deal will be subject to approval of Shuangma's shareholders at an
interim shareholders' meeting to be held later this month, as well as
approval from China Securities Regulatory Commission (CSRC) and the Ministry
of Finance and Commerce.
Lafarge China is a wholly-owned subsidiary of Lafarge-Shui On Ltd, which is
a joint venture between French cement giant Lafarge SA (which owns 55%) and
Hong Kong-listed Shui On Construction and Materials.
Before this transaction, Lafarge China owned 57% of Shenzhen-listed Shuangma
and 75% of Dujiangyan Cement. The other 25% of Dujiangyan Cement was owned
by Dujiangyan Construction Materials. The deal is the first instance of a
foreign investor increasing its stake in an A-share listed company through a
restructuring.
"This sort of deal is indicative of growing MNC (multinational
corporation) interest in the A-share market - a market that they have had
access to since 2006, but where corporate valuations haven't helped deals
get done. The A-share market gives MNCs potential access to a wide range of
strong industrial companies," says Chris Brooks, CLSA's head of M&A.
CLSA acted as a financial advisor for Shuangma through China Euro
Securities, a sino-foreign joint venture between CLSA and Fortune Securities
Company.
Lafarge China acquired its controlling interest in Shuangma in 2007.
The injection of a 50% equity stake of Dujiangyan Cement into Shuangma is
expected to take place before July this year, and fits into Lafarge China's
plan to boost Shuangma's ailing business and market position through new
technology. Once the new shares have been transferred, Lafarge China will
own approximately 80% of Shuangma.
"The asset injection facilitates technology transfer, allowing Shuangma to
benefit over time from production efficiencies -which gives it a positive
outlook, especially given the growth prospects for cement in Sichuan," says
Brooks.
Dujiangyan Cement is a major cement producer in Sichuan, with an annual
production capacity of 3.2 million tonnes. Construction is a significant
growth industry in the southwestern Chinese province.
Sichuan lies at the centre of China's "Go West" policy, a plan to correct
imbalances in the country's economic development by placing more of a focus
on inland provinces that have experienced growth at a slower rate than those
on the coast. Furthermore, Sichuan was at the very centre of the devastating
earthquake in May last year and the substantial reconstruction needed since
then has meant that demand for construction materials far exceeds the
supply.
Shuangma's shares finished at Rmb7.4 on Friday, up 3.8% from the previous
day, but significantly down from its Rmb18.40 high in May last year,
immediately after the earthquake.
This is the first significant M&A deal that China Euro Securities has worked
on since it was granted an A-share broking license by the CSRC in June last
year.
(c) Haymarket Media Limited. All rights reserved.
They are selling their jet...Are they looking for TARP money?
Williams-Sonoma, Inc. is planning a 15-20% reduction of their corporate workforce. If true, with approximately 39,000 employees nationwide, such a reduction would mean the elimination of around 6,000-8,000 jobs
This news follows a disappointing holiday season in which revenue dropped 24.2 percent over last year in stores that have been open at least one year. In the eight weeks ending Dec. 28, the operator of the Williams-Sonoma and Pottery Barn brands said its total revenue sank 23 percent to $729.4 million
Williams Sonoma sold its Bombardier Global Express jet for approximately $47 million in cash, resulting in a pre-tax gain of about $16 million. To address the travel needs of CEO W. Howard Lester, the company entered into an aircraft lease agreement
Usually when you are the sucker you don't know it until later. Like they say, if you look around the poker table and can't figure out who the sucker is - it you. Unfortunately with the bailouts we all know we are the bagholders/suckers - but we can't do anything about it.
I hope the bonuses are leveraged illiquid group of junk bonds, mortgage-backed securities and corporate loans, so the people can lose more money quickly if they continue to go down in value.
Elvis | 01.19.09 - 2:56 pm | #
Just long as it is fully taxable as ordinary income and listed on their W-2 forms at the bank's inflated carrying value.
I agree that the bulk of sales being foreclosure resales skews the median lower but this is not a positive. I view this as a leading indicator of where the middle and upper end go as their enter their respective 'mortgage default crisis' which is happening now. Remember, 90% of all foreclosed homes came from Subprime defaults because the foreclosure timeline is 9-12 months.
In the past nine months we have seen Subprime defaults become the minority with the Alt-A, Pay Option, Jumbo Prime and Prime collectively overtaking them. As these defaults move into foreclosures two things will happen - a) the headfake of all time will occur as prices stabalize due to higher priced home being foreclosed upon and reselling b) the middle and upper end will have its feet kicked out from under it and fall uncontrollably moving the number of underwater or near-underwater households from 60% at present to closer to 80%.
We are already seeing significant price compression upper to lower. On a macro level when you take that middle to upper end earner out of the picture and make him feel poor as you have with the Subprime folks, the broader economic crisis will enter an entirely new phase - one that $500 or $1000 tax breaks and building new highways and brides is impotent against.
"a good school district is worth an additional 150K. a great one can be worth 300K, or even more. most of them are worth nothing."
I would invest in a good private school first.
comrade tin foil hat | 01.19.09 - 2:50 pm | #
The mothership is collecting people but only if your credit score is under 600.
jk. Multigenerational housing is making a big comeback.
Williams-Sonoma owned a private jet? I'm stunned.
And I mean it! The banks, industrials, etc. having private jets is not surprising. But these guys? Seriously?
Uffish Thought,
you are absolutely right, however, I don't expect rents to fall much in merced/fresno, bc they are based on ag economy and that is not being hit as hard, we all gotta eat.
also, the rents have stayed the same as they were at the bubble peaks, everything there rents for $700-1000 per month, regardless of how big and nice it is or how old and run down it is.
again, i expect lower prices in the next couple of months, but at some point with all the stimulus, the economy will re-inflate and before our cash becomes worthless, we need to put it to work.
best,
GAZ
"I would invest in a good private school first."
ironically, you'll hear cocktail party chatter in places like south pasadena and palo alto where parents talk about private schools as being a refuge from an academic environment that's too competitive.
ah, the golden state.
Unfortunately with the bailouts we all know we are the bagholders/suckers - but we can't do anything about it.
So true. It's infuriating.
"I would invest in a good private school first.
Economist Moe Howard 3SU"
Especially if you don't want to have to see your kids. Private school is a great excuse.
Coldest Winter on Record...
Modine Manufacturing Co. announced today it will reduce its workforce in its Racine headquarters by approximately 25 percent, resulting in the elimination of about 170 jobs lost.
Wood Pelet Stoves are in Style. Six Dollars a Day 1500sq/ft +/-
I think the next housing market to go bust big time (50% plus, peak to trough) will be in Richistan. Richistan is wherever a working person would need a jumbo mortgage to finance a home purchase.
It's not about school districts anymore. The rent-to-buy comparison is the new driver. And greed (gotta get on the escalator with as much house as I can bite off) has been completely replaced by fear (OMG, if we buy, we'll be stuck here forever, what if one of us loses his job?, etc.)
A real estate agent in Portland Oregon told me last Sunday that 'you'd have to be crazy to buy a house in this market'. My wife wondered how she could do what she does for a living, feel that way, and look at herself in the mirror. I don't think my wife would have what it takes to be a real estate professional.
I am extremely happy we went private school. My kids got a different look at life then the company line I hear all over everyday. Sad what passes for thinking now days. Choice is only as good as the person choosing.
"Economist Moe Howard 3SU writes:
I am extremely happy we went private school. My kids got a different look at life then the company line I hear all over everyday."
And bonus points for not be burdened with raising them on a day-to-day basis.
"How are your kids?"
"Good now that they are in private boarding school."
"Good now that they are in private boarding school."
They are grown and never went to "boarding school" Home at night and even went on the road racing during the summer. We have a tight family.
Mr. Sparkle writes:
Williams-Sonoma owned a private jet? I'm stunned.
And I mean it! The banks, industrials, etc. having private jets is not surprising. But these guys? Seriously?
Look at the deal they put in to replace it!
To address the travel needs of CEO W. Howard Lester, the company entered into an aircraft lease agreement with a limited liability company owned by Lester for use of a Bombardier Global 5000. Williams Sonoma will pay the LLC $375,000/month for each of the 36 months of the lease term through 2011, in addition to all use-related costs, including crew salaries and benefits insurance and hangar costs, fuel, and all direct operating costs.
Gee, what a deal. I wonder if the jet is the one they used to own.
"Portland is like San Francisco used to be" was the line...remember Herb Caen?"Baghdad by the Bay" will take on a new meaning soon.
"It's not about school districts anymore."
school districts aren't just about status. when the public school district is as good or better than the private alternative, and that alternative costs 20K/year, the economics matter.
but this discussion is somewhat limited to 'richistan' and to immigrants that may not be wealthy but value educational quality to an extreme degree.
"See the number of families with average income over $200K, over $500K, etc."
A good example of what drives seller psychology in the SF Bay. That is, until you look at closely at median income figures against house prices. Palo Alto, Woodside, Atherton, Bel-Tib, etc. are a tiny percentage of population. So of course those areas are wealthy, but then again--here in Marin co., the median income is only $97K, a place not noted for its crushing poverty.
"immigrants that may not be wealthy but value educational quality to an extreme degree."
Then why do schools they dominate have gang problems? If the parent is smart enough to value education then they should value the discipline to go with it. Most really want a permanent green card (citizenship). It is about the money.
Mr Sparkle: I do believe that the potential exists in a few cities for similar implosion {like Detroit}.
Any candidates that people feel strongly about?
I nominate San Bernardino CA, Gary IN, and Buffalo NY.
"Then why do schools they dominate have gang problems?"
unless you consider the engineering frat at UC and stanford to be a gang, that's not quite what i'm talking about. are you in california, Moe?
Public schools are rarely as good as elite private schools in the same area; unless they are test-in schools or are in university towns. Top public high schools in CA are all average schools if they were located in NJ; thank Prop-13 for that...
List of Top High Schools
" or are in university towns"
true. of course, the same point could be made about new jersey higher education, which is generally a wasteland except for princeton. which also has an excellent law school, of course.
A new truism: Dumb as a bag of bankers!
The proper term for a group of bankers is a 'kite'.
Hymns for the Lord writes:
I thought many people in the Bay Area made large amounts through stock options, dual six-figure incomes etc. making them different.
Even if that was the driving factor in the past (IMHO, it wasn't), do you see a lot of folks getting rich on stock options today or in the near future? And what happens when those dual six-figure incomes become a single income, plus unemployment check?
And again, IMHO, it wasn't tech riches that drove the bubble here in the Bay Area. Like everywhere else, it was stupid lending and borrowing, and a gamble on future appreciation. The types of loans used in Silicon Valley's nicest neighborhoods are ample evidence. And the high end has seen that supply of funds be cut off even worse than the low end market.
CA has a horrible, under-funded public school system; 46th or so when adjusted for cost of living. It's nothing to be proud of and not even close to as good as NJ which has the highest per pupil spending.
Methinks the decline of Pottery Barn, along with the decline of Starbucks, is a marker of sorts.
"unless you consider the engineering frat at UC and stanford to be a gang, that's not quite what i'm talking about. are you in california, Moe?"
Nope I left CA in 78. Left Denver when the left coast mentality moved there. Now in the High Plains and here the immigrants are now coming as well. Had enough of immigrants and their gang culture and the looks of things they are not better.
Sure there are exceptions, I learn more about being an American from a German Hitler youth immigrant then I ever learned in school. There is a reason the folks around here leave their keys in the ignition still. Sad it will change here soon. That was America.
unearthly writes:
CA has a horrible, under-funded public school system; 46th or so when adjusted for cost of living. It's nothing to be proud of and not even close to as good as NJ which has the highest per pupil spending.
True enough. But California is #1 in prisons!
"They are grown and never went to "boarding school" Home at night and even went on the road racing during the summer. We have a tight family.
Economist Moe Howard 3SU"
Good to know. And, by the way, I was just justing joking around. A few of my better friends went to boarding school, and they loved it.
True enough. But California is #1 in prisons!
We're #1, We're #1!
I don't understand why there are so many empty homes? Where has everyone gone? Was there that much overbuilding or do you know of any one who has gone missing latley?
Wear tinfoil and never ever look up
comrade tin foil hat
Some people bought multiple homes. "Can't lose investment," and all that.
Elvis,
I'm cool. Nothing learned without challenge. That is why I want vouchers. The Union controls the public education and has done a piss poor job. Simply look at our economic mess. It says a lot. Education is where a curious mind will hunt and find the answers.
Went to the National Association of Homebuilders Convention back in January of 2006. Their own economist was predicting a 15% drop in unit volume for the industry that year. Meanwhile in all but a very few areas (which were already seeing some erosion in the market), practically all the builders were busy trying to figure out how to double or triple their production capacity.
That is why I want vouchers.
Economist Moe Howard 3SU | 01.19.09 - 4:21 pm | #
Me too. As long as they can only be used at public schools.
"Me too. As long as they can only be used at public schools."
Why not private if properly accredited or give home school some funds if they have to meet the same standards as Public? What difference would there be?
Why is it assumed that low prices are skewing the median now? Maybe it was the high prices that skewed the median before. Maybe it's supposed to take a while to sell an expensive home.
Yes, price does follow volume in the high end markets. On the Westside of Los Angeles, sales are few and far between. A few at relatively high prices, but how much longer can that last? Prime Santa Monica Lot Values have begun to shrink, as builders are struggling. Same is true in Malibu, Beverly Hills, Pacific Palisades and Brentwood. Very little if anything is moving.
Big price declines are in store for 2009...
Santa Monica Meltdown, The "90402"
WestsideREmeltdown
going through spoo withdrawal here..... come on, market open!
Wouldn't it be easier to identify who was NOT to blame and fashion policy to reward those people? Here is my short list:
To help these patriots, I propose a very simple "bailout" that will increase revenue to the savers and lower costs for the renters: raise interest rates!
"Had enough of immigrants and their gang culture and the looks of things they are not better."
I hear ya--like all those Chinese math gangs in Cupertino. There's nothing quite like a group of brainy thugs intimidating you with calculus.
Please Please stay away from California, Northern part.! Gangs, bad weather, sickness, high house prices, bad people, bad kids, bad habits, high cost of living, bad schools; you name it and we are the first place of bad. Oh, and by the way we are running out of water so we all stink.
If enough of you stay away or move, then maybe we can buy a nice house in San Mateo county, in a neighborhood we like, and ride our horses off into the sunset.
Damn this place is awful. Just like it has been all my life and that is the way I like it.
Love reading these posts as I sit in my new home in Wisconsin I bought last year after selling my CA home in 2007.
It really sucked selling for $690K and buying the same home out here for $150K. I really miss the gangs and lack of diversity of so cal.
Terrain ...pull up...pul up.....lol