One of the articles I already posted, had a nefarious tidbit that I missed the first time around. Here's the article from the LA Times again: A loan that'll get ugly fast
In 2003, only about 8 of every 1,000 people buying a home or refinancing a mortgage in California got a pay option loan, according to San Francisco-based data tracking company First American LoanPerformance.
Last year, 1 in 5 loan applicants got one.
In the first eight months of 2006, even as the real estate market began to weaken amid fears of a downturn, the appeal increased again. Nearly 1 in 3 California loan applicants are now choosing them. The state boasts about 580,000 active pay option mortgages, about half the U.S. total.
First, let us examine what a "pay option" loan is. Effectively, you are allowed to pay much less than the principal+interest on the loan. What happens to the difference? It gets tacked back onto the loan increasing the loan value (and naturally, you have to pay interest on that in the future.) Also, typically the rates reset to fixed ones after 3 years.
Why would you take such a loan?
Effectively, you are betting on the fact that interest rates will be lower in the future, or that you will make a lot more income in the future.
Please note emphatically that you're not betting that inflation will be higher in the future because the market will discount that in the form of higher interest rates in the future as well, and your loan will "reset" to include that!
Firstly, rates are at generational lows. I wouldn't bet on them going much lower.
Secondly, with globalization, there is no way in hell that the incomes of all of these people will be higher. Some will succeed, no doubt, but definitely not all of them.
Now, let's examine the statistics one more time:
2003: 0.8%
2005: 20%
2006: 33%
You should be able to smell the epic disaster looming in 2007, 2008, and 2009.
There is further evidence of the pain that is going to be felt:
California taxes both individuals and businesses at a very high rate. There is considerable evidence that in spite of population growth, California is losing both people and businesses. Evidence is provided below.
What this is telling me is that more and more Californians are taking on high-risk loans, and stretching to make the payments in order to maintain a lifestyle, rather than doing the rational thing, and rapidly downgrading it in the face of diminishing opportunities, and lower wages.
Back to the evidence of out-migration:
Here's a link to the data.
According to the California Department of Finance, the state recorded a net loss of about 29,000 people in 2005.
Please note that that is a loss after population growth!
The only "high tech" state that is doing considerably worse than California is Massachusetts (same high-tax problem) which is losing young workers at some abnormal rate. Currently, 20% of Boston (and surroundings) comprises of students. Yep, 20%.
Which begs the question, as to who's going to pay the piper in the future when businesses refuse to set up shop because of the taxes, and high-income earners leave the state?
California recently passed a law preventing either budgetary caps, or raising taxes, and issued new bonds that just pass the problem on to the next generation.
Spend all you like, don't increase the incoming revenue, and pass the buck along.
What would you expect the end result to be?
Every single one of my friends, anecdotally, who has set up a high-tech startup has done so outside of California or Massachusetts. Even New York is more desirable as a possible location than either of the above two. (That's simply astounding!)
If you think it can't happen, look at Maine. They have had their industry decimated for years, and nobody in their right mind would set up shop there.
Here's a typical example of a company that is planning to leave town. From the San Diego Union Tribune: SAIC is moving some of its brass east.
For some employees at SAIC's corporate headquarters in San Diego, recent weeks have been filled with anxiety over something that begins with a seemingly innocent telephone call.
“I received a phone call that was an invitation to manage my staff from our offices in McLean,” said one mid-level employee, referring to SAIC's facilities near Tyson's Corner, Va. “After some discussion, it was clear that it was more than an invitation. It was an announcement that my position was going there – with or without me.”
SAIC was founded in San Diego in 1969 and currently employs close to 5,000 people here. But the homegrown company, which specializes in complex engineering and technology programs for U.S. military and intelligence agencies, has more than 16,000 employees at its campus in McLean.
SAIC's eastward migration is logical to Wall Street analysts such as Peter Arment of JSA Research in Newport, R.I., who began covering SAIC after the company's initial public stock offering in October.
It only makes sense for a company that derives more than 90 percent of its business from the federal government to locate most of its operations close to Washington, D.C., Arment said in November.
It should be noted that for every defense job that leaves California, one or two "vendor" jobs will also leave for the same destination. Additionally, if the number of employees falls below some critical threshold, they will just move their entire operations to the other location. (It's cheaper to fly people to CA than have them live there.)
This is a non-linearity that very few analysts account for in their models.
Here's another company, Countrywide Financial that fired its employees in CA to move to Chandler, AZ (older news): Countrywide's Arizona Gold Rush: 2,000 New Jobs Phoenix-Bound.
Fast-growing Countrywide Financial Corporation (www.countrywide.com), accelerating its own sort of rewind of the California Gold Rush, has decided to add 2,000-plus new jobs in Chandler, Ariz.
"We are particularly excited about the opportunity to expand our presence in Chandler," said Patrick Benton, the company's executive vice president of administration. "As Countrywide has searched for new office locations in business-friendly areas outside of California, we have placed a good deal of focus on Arizona.
Please note unambiguously what "business friendly" means in these cases. It means "tax friendly".
So what does this have to do with careers, you may ask?
Folks, the rules of the game have changed. You are no longer guaranteed a job for any length of time. Secondly, the job may move, and either you move with it, or you get eliminated.
Anecdotally, I've changed my career once, and my job twice in the last five years, and I'm pretty much typical.
I'll go out on a limb and say that anyone who takes a 30-year mortgage is pretty much screwed. And screwed big time!
There are no guarantees for 30 years, and to argue that you're going to be in the same geographic location for even 10 is folly, in my opinion. Flexibility and nimbleness seem to be the order of the day.
After buying a house, you might as well put a giant tattoo on your forehead that your corporation and your boss can clearly see: "I'm a giant sucker. Please abuse me, and make me your bitch!"
Not having a care in the world automatically translates to higher salaries. You can aggressively negotiate for better projects and better terms, and there's not a thing that they can do about it!
This is clearly something that people carrying a white elephant of a house simply cannot afford to do.
Obviously, for people who have long-term careers (tenured faculty, or even nurses come to mind,) the argument would not apply.
Also, great careers are made by taking great risks. You can't possibly expect to succeed working for a large company. You need to work for startups, or start your own company. If you're going to take great risks career-wise, you might as well minimize any other forms of financial risk in your life.
This should be a rather simple argument to swallow!
Tuesday, December 12, 2006
Monday, December 11, 2006
Use your brains, beyatch!
From CNN Finance, we have Les Christie writing about Help! Home for sale - the Williamses.
Karen and Jerod Williams do not act rashly especially when buying houses. They tried to minimize their financial risks. And they live in one of the most affordable housing markets in the country, which, again, decreases their risk.
They bought a new home early this year, at a time when the housing market in Huntington, Indiana, their home town, was purring along, slow but steady. They then listed their old home for sale, but shortly afterward the market stalled and they haven't found a buyer. It's been nine months.
So now, the family, burdened with the work and expense of two homes, are at the limits of their budget, even though they both make good salaries. He's a machinist and she a manufacturing engineer.
"We didn't think it would ever take this long," says Karen. "If we had, we would not have bought the new house."
They have three young children Darcy, 4, Sloane, 3 and Nolan, 5 months, to support and school debt and motor vehicles to pay for. At the end of the month, there's nothing extra.
"Any emergency may lead to bankruptcy," says Karen.
The family has already suffered through one such crisis; an emergency c-section needed when Nolan was born last July. Karen had scheduled a six-week maternity leave but she needed a full eight weeks to recover.
"I hadn't planned for the extra two weeks and it really set us back," she says.
What kind of idiots are these that two extra weeks can push them into bankruptcy?
And why did they buy a new house without selling the first, or having a contingency clause on the contract?
Most importantly, if they are so hard up, why are they still breeding like rabbits?
And why is CNN wasting time on these losers?
Inquiring minds need to know!
Karen and Jerod Williams do not act rashly especially when buying houses. They tried to minimize their financial risks. And they live in one of the most affordable housing markets in the country, which, again, decreases their risk.
They bought a new home early this year, at a time when the housing market in Huntington, Indiana, their home town, was purring along, slow but steady. They then listed their old home for sale, but shortly afterward the market stalled and they haven't found a buyer. It's been nine months.
So now, the family, burdened with the work and expense of two homes, are at the limits of their budget, even though they both make good salaries. He's a machinist and she a manufacturing engineer.
"We didn't think it would ever take this long," says Karen. "If we had, we would not have bought the new house."
They have three young children Darcy, 4, Sloane, 3 and Nolan, 5 months, to support and school debt and motor vehicles to pay for. At the end of the month, there's nothing extra.
"Any emergency may lead to bankruptcy," says Karen.
The family has already suffered through one such crisis; an emergency c-section needed when Nolan was born last July. Karen had scheduled a six-week maternity leave but she needed a full eight weeks to recover.
"I hadn't planned for the extra two weeks and it really set us back," she says.
What kind of idiots are these that two extra weeks can push them into bankruptcy?
And why did they buy a new house without selling the first, or having a contingency clause on the contract?
Most importantly, if they are so hard up, why are they still breeding like rabbits?
And why is CNN wasting time on these losers?
Inquiring minds need to know!
How not to lead your life!
From the LA Times, we have David Streitfeld writing a typical melodramatic tear-jerker: A loan that'll get ugly fast.
Every day, Will Hertzberg owns a little less of his three-bedroom house in Corona.
Like hundreds of thousands of other homeowners around the state, Hertzberg has a mortgage that lets him choose how much he pays each month.
Like many of them, he always chooses to pay as little as possible.
For the moment, this allows the 56-year-old Hertzberg to continue living in his tract home despite being only marginally employed. But his debt is swelling, and his mortgage company controls his fate.
Hertzberg could sell now, but his lender would charge him an $11,034 prepayment penalty — money he doesn't have. Yet if he stays, the housing market may tank, vaporizing what little equity he has left.
"I made choices, and they happened to be the wrong choices," said Hertzberg, a big guy who lives alone amid the clutter of decades of memorabilia.
One of his options is to pay $2,513 a month. That would cover the principal and interest as if it were a traditional 30-year loan.
A second possibility is to pay $2,279, which would cover only the interest.
But each month he always takes the cheapest option: paying $1,106 and promising to make up the shortfall later.
Hertzberg bought his house 11 years ago for $129,995, immediately after his second divorce. (He has no children.) Since then, Corona and the Inland Empire have boomed.
Comparable homes in his neighborhood fetch more than $400,000. With fresh paint and a few repairs, Hertzberg could probably sell his place for $275,000 more than he paid.
He would see little of that, however, because he's already seen so much. Over the years he has taken out $190,000 in cash through refinancings.
Hertzberg's home equity paid off his credit cards, financed trips around the world that allowed him to indulge his passion for photography, bought a $32,000 Toyota Avalon and enabled some lousy investments. He bought dot-com stocks and lost money. To recoup those losses, he bought commodities — and lost money faster.
"Free money always has the unfortunate effect of making people go overboard," said Hertzberg, whose living room is strewn with financial publications including American Cash Flow Journal and Donald Trump's "How to Get Rich." "You'd be surprised how fast $190,000 can go."
The money wasn't really free, of course. It just seemed that way, the result of a radical shift during the last decade in how people view their homes.
"Homeownership has become like auto leasing, where the price of the car doesn't matter," said Rick Soukoulis, chief executive of LoanCity, a San Jose lender that funded $7 billion in mortgages in 2005. "All that matters is the size of your monthly payment."
Lenders say these new loans are all about payment choice, but Hertzberg is far from the only borrower who invariably chooses the smallest payment option. Washington Mutual Inc., which has one of the nation's largest portfolios of pay option loans, said 47% of its borrowers in this category last December took the minimum option.
Few people intend to become deeper in debt every month. Hertzberg certainly didn't.
"I assumed my future and my retirement would be taken care of by the company I worked for," he said. "I trusted corporate America."
He used to make a six-figure income selling vacation packages to corporations that would use them as customer incentives and employee bonuses. After the 9/11 terrorist attacks, the business soured.
His current sources of income include selling comic books on EBay and freelance photos to golf and travel publications. "Once you're over 55, what employer wants to hire you?" he asked. "I'm a dinosaur."
Last fall, he went to a mortgage broker and refinanced again to make his payments easier to bear. He thought he would have a five-year window before the principal started coming due.
But the day of reckoning is arriving early. By paying the minimum, Hertzberg has increased the size of his loan in a little over a year from $320,000 to $332,616. His lender, Calabasas-based Countrywide Financial Corp., recently sent him a letter warning that when his loan hits 115% of its original size he'll run out of credit with the company.
That will happen in about two years if he continues to take the smallest payment option. Then his minimum payment will automatically go up 150%, to $2,848 a month.
"If I could afford that," he said, "I wouldn't have needed this loan in the first place."
"I am rather screwed," he said.
Yes, you are!
If Hertzberg is living on borrowed time, there's small comfort in the home finance industry's endless inventiveness. It's certainly trying to tempt him. Several times a week, he gets a refinancing offer in the mail.
The latest one suggested a certain unfamiliarity with basic English, proclaiming, "Economic forecast suggests you Interest Rate will increase 1.00% every six months." But its central message was clear: "We can solve your problem in 15 minutes over the phone."
Hertzberg always looks at these fliers, hopeful in spite of himself. "I'm waiting for a 100-year loan," he said. "My heirs can worry about paying it off."
Why would your heirs work hard to bail you out of your bad decisions?
Every day, Will Hertzberg owns a little less of his three-bedroom house in Corona.
Like hundreds of thousands of other homeowners around the state, Hertzberg has a mortgage that lets him choose how much he pays each month.
Like many of them, he always chooses to pay as little as possible.
For the moment, this allows the 56-year-old Hertzberg to continue living in his tract home despite being only marginally employed. But his debt is swelling, and his mortgage company controls his fate.
Hertzberg could sell now, but his lender would charge him an $11,034 prepayment penalty — money he doesn't have. Yet if he stays, the housing market may tank, vaporizing what little equity he has left.
"I made choices, and they happened to be the wrong choices," said Hertzberg, a big guy who lives alone amid the clutter of decades of memorabilia.
One of his options is to pay $2,513 a month. That would cover the principal and interest as if it were a traditional 30-year loan.
A second possibility is to pay $2,279, which would cover only the interest.
But each month he always takes the cheapest option: paying $1,106 and promising to make up the shortfall later.
Hertzberg bought his house 11 years ago for $129,995, immediately after his second divorce. (He has no children.) Since then, Corona and the Inland Empire have boomed.
Comparable homes in his neighborhood fetch more than $400,000. With fresh paint and a few repairs, Hertzberg could probably sell his place for $275,000 more than he paid.
He would see little of that, however, because he's already seen so much. Over the years he has taken out $190,000 in cash through refinancings.
Hertzberg's home equity paid off his credit cards, financed trips around the world that allowed him to indulge his passion for photography, bought a $32,000 Toyota Avalon and enabled some lousy investments. He bought dot-com stocks and lost money. To recoup those losses, he bought commodities — and lost money faster.
"Free money always has the unfortunate effect of making people go overboard," said Hertzberg, whose living room is strewn with financial publications including American Cash Flow Journal and Donald Trump's "How to Get Rich." "You'd be surprised how fast $190,000 can go."
The money wasn't really free, of course. It just seemed that way, the result of a radical shift during the last decade in how people view their homes.
"Homeownership has become like auto leasing, where the price of the car doesn't matter," said Rick Soukoulis, chief executive of LoanCity, a San Jose lender that funded $7 billion in mortgages in 2005. "All that matters is the size of your monthly payment."
Lenders say these new loans are all about payment choice, but Hertzberg is far from the only borrower who invariably chooses the smallest payment option. Washington Mutual Inc., which has one of the nation's largest portfolios of pay option loans, said 47% of its borrowers in this category last December took the minimum option.
Few people intend to become deeper in debt every month. Hertzberg certainly didn't.
"I assumed my future and my retirement would be taken care of by the company I worked for," he said. "I trusted corporate America."
He used to make a six-figure income selling vacation packages to corporations that would use them as customer incentives and employee bonuses. After the 9/11 terrorist attacks, the business soured.
His current sources of income include selling comic books on EBay and freelance photos to golf and travel publications. "Once you're over 55, what employer wants to hire you?" he asked. "I'm a dinosaur."
Last fall, he went to a mortgage broker and refinanced again to make his payments easier to bear. He thought he would have a five-year window before the principal started coming due.
But the day of reckoning is arriving early. By paying the minimum, Hertzberg has increased the size of his loan in a little over a year from $320,000 to $332,616. His lender, Calabasas-based Countrywide Financial Corp., recently sent him a letter warning that when his loan hits 115% of its original size he'll run out of credit with the company.
That will happen in about two years if he continues to take the smallest payment option. Then his minimum payment will automatically go up 150%, to $2,848 a month.
"If I could afford that," he said, "I wouldn't have needed this loan in the first place."
"I am rather screwed," he said.
Yes, you are!
If Hertzberg is living on borrowed time, there's small comfort in the home finance industry's endless inventiveness. It's certainly trying to tempt him. Several times a week, he gets a refinancing offer in the mail.
The latest one suggested a certain unfamiliarity with basic English, proclaiming, "Economic forecast suggests you Interest Rate will increase 1.00% every six months." But its central message was clear: "We can solve your problem in 15 minutes over the phone."
Hertzberg always looks at these fliers, hopeful in spite of himself. "I'm waiting for a 100-year loan," he said. "My heirs can worry about paying it off."
Why would your heirs work hard to bail you out of your bad decisions?
Sunday, December 10, 2006
Controversial Calculations
From the "paper of record", the New York Times, we have Christine Haughney write about Women Unafraid of Condo Commitment.
In the last five months, single women spent more than $30 million out of the $100 million or so in sales in the 299-unit condominium. In fact, single women bought 72 of the first 165 apartments sold. Spending by these women far surpassed that of single men, who accounted for $19 million. Married couples accounted for about $45 million in sales, and investors $5 million.
Brokers say that women are betting that even if they buy in a declining market, the values won’t drop as much as they would have spent on rent. They’re more comfortable buying in the same neighborhoods and buildings as their friends do. By purchasing condominiums that they could eventually rent out if they needed to move, they’re also hoping that they can hold on to these properties until the market improves.
“A woman will say, ‘I’m still saving money in the long term.’ ” said JoAnn Schwimmer, an associate real estate broker at DJK Residential. “They’re able to see the bigger picture, while a guy says, ‘I have to get the best deal.’ ” She said that her female clients who bought four years ago have male friends still waiting for prices to drop.
These women are retards!
They have never run an Excel spreadsheet about buy v/s rent, and are too busy living their "Sex and the City" dream.
They also haven't figured out that the "wasted" rent is implicitly embedded in their purchase price (in the form of interest, taxes, insurance, and maintenance.) Just because it isn't explicit doesn't mean that it has magically disappeared.
Also, the broker is implicitly rebuking them. If there is a "better deal", then there is no "bigger picture" to consider. The "better deal" is the "bigger picture".
This article is full of little gems:
Jen Lee, a 36-year-old director of sales for the Developers Group, bought a one-bedroom in Williamsburg for $440,000 the first day the building at 345 Union Avenue opened for sales in October 2005.
She raved to friends about how her apartment, built by Grand Union Private Development and marketed by her company, had nearly 10-foot-high ceilings, a private roof terrace and lots of closet space. Women have bought four of the building’s 10 units — translating into $2 million in sales, Ms. Lee said. Asked if she was buying at the wrong time, Ms. Lee said she was more excited that she had bought at all. “I wanted to invest in something, and that’s what I’ve done,” she said. “It will always be mine.”
Yep, it will "always" be yours unless you can't pay the debt in which case the big, bad bankers will take it away.
Some women said that they felt their friends were better market indicators than any statistics that point to a downturn.
Yes, why let facts get in the way of your pre-determined conclusions?
From personal anecdote, I'll go out on a limb, and say that I've never ever met a woman who was rational about finance.
NEVER! EVER!!!
I find it completely amazing that all these absurdly intelligent women I know, the ones who speak multiple languages, can argue about art, music and literature at length, and who are successful professionals in everything from engineering to medicine, have a complete meltdown when it comes to money and finance!
Color me surprised!
Here's what I've observed:
Women (at least the ones I've known) first make up their mind, and then go about finding reasons to confirm them.
This is the exact opposite of the "scientific method". Find something, and then go about finding reasons to contradict your conclusion, not the other way around! If you find these contradictions, you were wrong, and should abandon the conclusion; and if you don't find them, then you will end up finding a "deeper" reason to support your argument.
In case you think I'm being sexist, here's what the FDIC has to say on the subject: link.
Scroll down to table 1, and note the percentage of single women needing basic financial knowledge (41%) v/s single men (16%). Such a large difference can hardly be accidental.
Still not convinced?
Here's an article from Realtor Magazine.
While the number of unmarried men and women purchasing their own homes was virtually even 25 years ago, single females have pulled way ahead of their male counterparts in recent years.
In 2005, they bought 20 percent of all U.S. homes sold — about 1.5 million properties, or more than double the 9 percent purchased by single males. Changes in the mortgage lending industry have contributed largely to the shift in home buying demographics.
Once again, 20% v/s 9% at the tail end of a mania can hardly be accidental. The marketeers are very good at getting into the "settle down" part of the female brain.
And only in this country can a company run a television ad like this!
I pity the fools that marry these women.
I pity the fool, I pity the fool!
In the last five months, single women spent more than $30 million out of the $100 million or so in sales in the 299-unit condominium. In fact, single women bought 72 of the first 165 apartments sold. Spending by these women far surpassed that of single men, who accounted for $19 million. Married couples accounted for about $45 million in sales, and investors $5 million.
Brokers say that women are betting that even if they buy in a declining market, the values won’t drop as much as they would have spent on rent. They’re more comfortable buying in the same neighborhoods and buildings as their friends do. By purchasing condominiums that they could eventually rent out if they needed to move, they’re also hoping that they can hold on to these properties until the market improves.
“A woman will say, ‘I’m still saving money in the long term.’ ” said JoAnn Schwimmer, an associate real estate broker at DJK Residential. “They’re able to see the bigger picture, while a guy says, ‘I have to get the best deal.’ ” She said that her female clients who bought four years ago have male friends still waiting for prices to drop.
These women are retards!
They have never run an Excel spreadsheet about buy v/s rent, and are too busy living their "Sex and the City" dream.
They also haven't figured out that the "wasted" rent is implicitly embedded in their purchase price (in the form of interest, taxes, insurance, and maintenance.) Just because it isn't explicit doesn't mean that it has magically disappeared.
Also, the broker is implicitly rebuking them. If there is a "better deal", then there is no "bigger picture" to consider. The "better deal" is the "bigger picture".
This article is full of little gems:
Jen Lee, a 36-year-old director of sales for the Developers Group, bought a one-bedroom in Williamsburg for $440,000 the first day the building at 345 Union Avenue opened for sales in October 2005.
She raved to friends about how her apartment, built by Grand Union Private Development and marketed by her company, had nearly 10-foot-high ceilings, a private roof terrace and lots of closet space. Women have bought four of the building’s 10 units — translating into $2 million in sales, Ms. Lee said. Asked if she was buying at the wrong time, Ms. Lee said she was more excited that she had bought at all. “I wanted to invest in something, and that’s what I’ve done,” she said. “It will always be mine.”
Yep, it will "always" be yours unless you can't pay the debt in which case the big, bad bankers will take it away.
Some women said that they felt their friends were better market indicators than any statistics that point to a downturn.
Yes, why let facts get in the way of your pre-determined conclusions?
From personal anecdote, I'll go out on a limb, and say that I've never ever met a woman who was rational about finance.
NEVER! EVER!!!
I find it completely amazing that all these absurdly intelligent women I know, the ones who speak multiple languages, can argue about art, music and literature at length, and who are successful professionals in everything from engineering to medicine, have a complete meltdown when it comes to money and finance!
Color me surprised!
Here's what I've observed:
Women (at least the ones I've known) first make up their mind, and then go about finding reasons to confirm them.
This is the exact opposite of the "scientific method". Find something, and then go about finding reasons to contradict your conclusion, not the other way around! If you find these contradictions, you were wrong, and should abandon the conclusion; and if you don't find them, then you will end up finding a "deeper" reason to support your argument.
In case you think I'm being sexist, here's what the FDIC has to say on the subject: link.
Scroll down to table 1, and note the percentage of single women needing basic financial knowledge (41%) v/s single men (16%). Such a large difference can hardly be accidental.
Still not convinced?
Here's an article from Realtor Magazine.
While the number of unmarried men and women purchasing their own homes was virtually even 25 years ago, single females have pulled way ahead of their male counterparts in recent years.
In 2005, they bought 20 percent of all U.S. homes sold — about 1.5 million properties, or more than double the 9 percent purchased by single males. Changes in the mortgage lending industry have contributed largely to the shift in home buying demographics.
Once again, 20% v/s 9% at the tail end of a mania can hardly be accidental. The marketeers are very good at getting into the "settle down" part of the female brain.
And only in this country can a company run a television ad like this!
I pity the fools that marry these women.
I pity the fool, I pity the fool!
Friday, December 08, 2006
I want a house, and I want it now!
From the Modesto Bee, we have Ben van der Meer writing about Couple sue over real estate nightmare.
Salida couple is suing a group that offers real estate deals at a Ceres flea market, claiming that the company didn't deliver on promises to sell their home and get them a better one.
Instead, say Manuel and Marbella Salas, they have a new house with construction defects, haven't sold their old home and have learned that the man who arranged the deals doesn't have a real estate license.
I always buy houses at a flea market. Where do you buy?
Marbella Salas said she's afraid that others are getting questionable real estate deals with Singh and the company, adding that he still was set up at the flea market as recently as a few weeks ago.
"He didn't care about us," she said. "He only cared about his commission."
No shit!
Salida couple is suing a group that offers real estate deals at a Ceres flea market, claiming that the company didn't deliver on promises to sell their home and get them a better one.
Instead, say Manuel and Marbella Salas, they have a new house with construction defects, haven't sold their old home and have learned that the man who arranged the deals doesn't have a real estate license.
I always buy houses at a flea market. Where do you buy?
Marbella Salas said she's afraid that others are getting questionable real estate deals with Singh and the company, adding that he still was set up at the flea market as recently as a few weeks ago.
"He didn't care about us," she said. "He only cared about his commission."
No shit!
Bartender, buy these men some clues!
From the Las Vegas Review Journal, we have Tempers flare at USA Capital session.
Investors who bought short-term mortgage loans brokered by USA Capital are shouting mad and divided over the best strategy for recovering some of their assets.
USA Capital controlled $962 million in investor assets in April when it became insolvent and filed for Chapter 11 bankruptcy protection, which would allow it to reorganize. The company solicited money from investors to make short-term loans to developers in return for double-digit interest rates. About 6,000 investors around the country entrusted money to USA Capital.
Since the bankruptcy filing, "we have been brown mushrooms, kept in the dark and fed nothing," said investor Howard Connell, referring to the secrecy that has surrounded negotiations by investor committees. "We are having stuff shoved down our throats at the 11th hour. We should have the right to say something."
Connell said he would be "destitute within the next six months" because of losses at USA Capital.
What kind of retard puts all his money in one venture which may result in him being "destitute in the next six months"?
But, it gets better!
Doris Stevenson said she invested both in USA Capital loans and loans brokered by another failed private lender, Global Express Capital.
Stevenson suggested USA Capital investors may do relatively well compared to those who bought loans through Global Express. Stevenson said she had $170,000 invested with Global Express, has recovered $20,000 and is awaiting one last small payment three years after a federal judge put Global Express into receivership.
This is un-fucking-believable!
Read carefully, and you'll see that she "invested" $170K in a company that failed three years ago, and instead of learning from her mistake, went on to lose money in another company that failed in the same sector.
As I said, un-fucking-believable!
But, it's not over yet...
Bill Bullard, Direct Lender Committee chairman and investment chief for the private investment company of Fertitta Enterprises, recommended investors vote for the reorganization plan. But Morris Mansell, an investor with the Lender Protection Group, opposed the plan for several reasons.
Mansell said investors whose money was stolen should be repaid before lawyers get paid.
Umm, yes, those lawyers are going to work for free (and for a bankrupt company at that!)
Yessir, that's definitely going to fly!
Investors who bought short-term mortgage loans brokered by USA Capital are shouting mad and divided over the best strategy for recovering some of their assets.
USA Capital controlled $962 million in investor assets in April when it became insolvent and filed for Chapter 11 bankruptcy protection, which would allow it to reorganize. The company solicited money from investors to make short-term loans to developers in return for double-digit interest rates. About 6,000 investors around the country entrusted money to USA Capital.
Since the bankruptcy filing, "we have been brown mushrooms, kept in the dark and fed nothing," said investor Howard Connell, referring to the secrecy that has surrounded negotiations by investor committees. "We are having stuff shoved down our throats at the 11th hour. We should have the right to say something."
Connell said he would be "destitute within the next six months" because of losses at USA Capital.
What kind of retard puts all his money in one venture which may result in him being "destitute in the next six months"?
But, it gets better!
Doris Stevenson said she invested both in USA Capital loans and loans brokered by another failed private lender, Global Express Capital.
Stevenson suggested USA Capital investors may do relatively well compared to those who bought loans through Global Express. Stevenson said she had $170,000 invested with Global Express, has recovered $20,000 and is awaiting one last small payment three years after a federal judge put Global Express into receivership.
This is un-fucking-believable!
Read carefully, and you'll see that she "invested" $170K in a company that failed three years ago, and instead of learning from her mistake, went on to lose money in another company that failed in the same sector.
As I said, un-fucking-believable!
But, it's not over yet...
Bill Bullard, Direct Lender Committee chairman and investment chief for the private investment company of Fertitta Enterprises, recommended investors vote for the reorganization plan. But Morris Mansell, an investor with the Lender Protection Group, opposed the plan for several reasons.
Mansell said investors whose money was stolen should be repaid before lawyers get paid.
Umm, yes, those lawyers are going to work for free (and for a bankrupt company at that!)
Yessir, that's definitely going to fly!
Thursday, December 07, 2006
Holy smokes, Batman!
From the Arkansas Times, we have Warwick Sabin writing about Suddenly, the NW Ark. real estate market isn't so hot.
Northwest Arkansas has grown faster than anyone could have anticipated. Sleepy pastureland overnight became subdivisions, office parks and strip malls. Traffic backs up amid road construction and snarls at rush hour on a freeway not yet 10 years old. Internet map sites like Mapquest can’t update Benton County quick enough to keep up with all of the new local streets.
The lure of easy money proved irresistible to would-be developers.
The dizzying pace of expansion was as evident in the pages of new society magazines as in the economic statistics. Ambitious developers joined with start-up bank executives to unveil high-profile projects at glitzy functions.
Now, the hangover from the big party has set in. Despite a steady population increase of about 1,100 people a month, there’s a serious oversupply of residential and commercial property. One economist estimates 112.9 months of housing inventory — more than nine years’ worth — at the current rates of absorption.
Nine years of inventory?!? In Benton County, home of Walmart?!?
Sweet suffering surfeit!
Northwest Arkansas has grown faster than anyone could have anticipated. Sleepy pastureland overnight became subdivisions, office parks and strip malls. Traffic backs up amid road construction and snarls at rush hour on a freeway not yet 10 years old. Internet map sites like Mapquest can’t update Benton County quick enough to keep up with all of the new local streets.
The lure of easy money proved irresistible to would-be developers.
The dizzying pace of expansion was as evident in the pages of new society magazines as in the economic statistics. Ambitious developers joined with start-up bank executives to unveil high-profile projects at glitzy functions.
Now, the hangover from the big party has set in. Despite a steady population increase of about 1,100 people a month, there’s a serious oversupply of residential and commercial property. One economist estimates 112.9 months of housing inventory — more than nine years’ worth — at the current rates of absorption.
Nine years of inventory?!? In Benton County, home of Walmart?!?
Sweet suffering surfeit!
Wednesday, December 06, 2006
Editors of the World, Unite!
From the Star Bulletin in sunny Hawaii, we have Allison Schaefers writing about: Home price climb finally over.
Scott Higashi, vice president of sales for Prudential Locations LLC on Oahu, agreed: "We're still nowhere near a monumental fall in value. During this cycle, we don't expect to see any double-digit rises or falls."
Further on, in the same article:
The median price paid for a single-family home on Kauai fell 14.43 percent to $590,000, a decline of $99,500 from November 2005.
It's one thing to do no research; it's a completely different thing to have an article that contradicts itself!
This is just fucking embarassing!
Scott Higashi, vice president of sales for Prudential Locations LLC on Oahu, agreed: "We're still nowhere near a monumental fall in value. During this cycle, we don't expect to see any double-digit rises or falls."
Further on, in the same article:
The median price paid for a single-family home on Kauai fell 14.43 percent to $590,000, a decline of $99,500 from November 2005.
It's one thing to do no research; it's a completely different thing to have an article that contradicts itself!
This is just fucking embarassing!
Sunday, December 03, 2006
One of those Homer Simpson Moments
From the self-congratulatory New York Times, we have Andrew Ross Serkin talking about: Beat the Clock (and Get a Double Bonus).
EVER wonder why there is a torrent of multibillion takeovers and mergers at the end of every year?
Nah. Here’s a dirty little secret: The urge to merge may be influenced by bonuses for all involved in the deal, especially the bankers. Corporate America’s biggest cheerleaders and boosters need to get paid.
Well, duh!
In case you didn't get it, I'll say it again: DUH!!!
DUHHHHHHHHHHHHH!
Honeypie, we live in a capitalist society, so it's every person for themselves.
The bankers only care about their bonus because that's the way things are set up. If you want them to actually care about the companies involved, there should be some incentive involved. No incentive, no reason to play nice.
In a bad merger, everyone makes out like bandits. The CEO, the board, the bankers. Naturally, someone must get screwed. Typically, it's the shareholders (although on occasion, it can be the bondholders too.)
Actually, the beauty of modern finance is that you can decide what percentage you want to screw the shareholders vis a vis the bondholders.
Ain't that just peachy?!?
Wow! these journalists are both naive and clueless!
EVER wonder why there is a torrent of multibillion takeovers and mergers at the end of every year?
Nah. Here’s a dirty little secret: The urge to merge may be influenced by bonuses for all involved in the deal, especially the bankers. Corporate America’s biggest cheerleaders and boosters need to get paid.
Well, duh!
In case you didn't get it, I'll say it again: DUH!!!
DUHHHHHHHHHHHHH!
Honeypie, we live in a capitalist society, so it's every person for themselves.
The bankers only care about their bonus because that's the way things are set up. If you want them to actually care about the companies involved, there should be some incentive involved. No incentive, no reason to play nice.
In a bad merger, everyone makes out like bandits. The CEO, the board, the bankers. Naturally, someone must get screwed. Typically, it's the shareholders (although on occasion, it can be the bondholders too.)
Actually, the beauty of modern finance is that you can decide what percentage you want to screw the shareholders vis a vis the bondholders.
Ain't that just peachy?!?
Wow! these journalists are both naive and clueless!
Friday, December 01, 2006
$hitloads of trouble
From Floriday Today, we have Scott Blake writing about Sluggish housing market showing mixed results.
On the Space Coast, reduced prices since last year have enabled some buyers to enter the market -- people such as Kanishka Perera, who was renting in Palm Bay before he bought a two-bedroom townhouse in Melbourne last month for about $176,000. Perera said the builder -- Mercedes Homes -- gave him incentives to buy, requiring only a 5 percent down payment and paying $5,000 of the closing costs.
"I always wanted to own a home. I just couldn't afford it earlier," Perera said.
Hint, babe: You still can't afford it; you've just lost your 5%; you still don't know it, and won't for a few more years.
To stimulate the local housing market, builders and others are hoping to persuade county commissioners to delay a scheduled increase in a county transportation impact fee on each new single-family home. The fee -- which applies to unincorporated areas of Brevard and most local municipalities -- is to increase from $1,414 to $4,353 on Dec. 31.
The delay could help the market, which already is burdened by higher property taxes and insurance rates, said Dave Armstrong, treasurer of the Florida Homebuilders Association and a local home builder.
"Right now, the animal is wounded and we don't want to kill it," Armstrong said about the housing market.
The animal is not only wounded but also dead with its guts spilling out, and the diseased carcass has started to rot in the rain. The smell is giving you the clue that anyone with half a brain would've figured out a long time ago.
I really doubt that $3000 is going to change anything in an area which has seen inventory that accounts for population growth for 10+ years.
However, we all need to be periodically reminded about the wisdom of Motoko Rich of the New York Times about all of this: "South Florida is working off of a totally new economic model than any of us have ever experienced in the past.".
On the Space Coast, reduced prices since last year have enabled some buyers to enter the market -- people such as Kanishka Perera, who was renting in Palm Bay before he bought a two-bedroom townhouse in Melbourne last month for about $176,000. Perera said the builder -- Mercedes Homes -- gave him incentives to buy, requiring only a 5 percent down payment and paying $5,000 of the closing costs.
"I always wanted to own a home. I just couldn't afford it earlier," Perera said.
Hint, babe: You still can't afford it; you've just lost your 5%; you still don't know it, and won't for a few more years.
To stimulate the local housing market, builders and others are hoping to persuade county commissioners to delay a scheduled increase in a county transportation impact fee on each new single-family home. The fee -- which applies to unincorporated areas of Brevard and most local municipalities -- is to increase from $1,414 to $4,353 on Dec. 31.
The delay could help the market, which already is burdened by higher property taxes and insurance rates, said Dave Armstrong, treasurer of the Florida Homebuilders Association and a local home builder.
"Right now, the animal is wounded and we don't want to kill it," Armstrong said about the housing market.
The animal is not only wounded but also dead with its guts spilling out, and the diseased carcass has started to rot in the rain. The smell is giving you the clue that anyone with half a brain would've figured out a long time ago.
I really doubt that $3000 is going to change anything in an area which has seen inventory that accounts for population growth for 10+ years.
However, we all need to be periodically reminded about the wisdom of Motoko Rich of the New York Times about all of this: "South Florida is working off of a totally new economic model than any of us have ever experienced in the past.".
Thursday, November 30, 2006
Pimp my life!
From CNN Finance, we have an unusual kind of article: College kid tries to sell his future on eBay.
In August, Steen put himself on eBay (Charts) to pay for his college education, offering 2 percent of all future earnings to the highest bidder, with a minimum $100,000 bid.
"I am the real deal" and "a very intelligent guy," he wrote on eBay.
He says that he expects to earn "way more" than $125,000 a year until he turns 65, at which point his investor would break even on a $100,000 investment. (Steen would have to average more than $1.5 million a year to match an investment that yielded a 6 percent return, compounded annually over the same period.)
Here's a link to the PDF of the actual auction. (EBay cancelled the auction, and he got no bids.)
Firstly, I should say flat out that this is, in principle, an excellent idea. After all, exchanging future income for a lump-sum up front is precisely what a bond really is.
Secondly, if enough people did this, you could statistically estimate their future earnings, and price them competitively. (Think of it as an insurance policy on education. The future "investment bankers" are subsidizing the future "secretaries", etc.)
So why is it really stupid?
Several reasons.
Firstly, let's examine the reasons as to what can go wrong. Perhaps, he will renege on the contract, die or get dismembered before 40 years, or simply not make as much money as he thinks he's going to make.
Now let's work through these assumptions. We'll do all the calculations in "future dollars" so we have to include the effects of inflation. If he's really good at what he does, his wages will be above inflation each year by let's say 1-2%. Let's also assume he makes $100K (highly unlikely, but still.) Let's assume inflation runs at a fixed 3%.
You'd get paid between $190K (4% assumption) to $240K (6%).
Take the same $100K and buy 30 year US treasuries, and you'll get roughly $138K of coupons at current yields, plus your original $100K back, plus any interest that you pick up by reinvesting these coupons! Add in interest for an extra 10 years (at the same rate) you get an extra $46K. (That's $284K.)
So this kid is shit out of luck even under the most optimistic assumptions. You don't have to be a genius to figure out if you assume more realistic assumptions, you'd be really stupid to invest in this kid.
I mean, if the kid can't even do these calculations, there's no chance of him making "way more" than $125K.
So what did he really do wrong, theoretically speaking? Obviously, 2% of your income is too little. Up it to 10%, and the numbers would change.
The other alternative would've been not to demand a minimum of $100K, but let the market determine what they're willing to risk on you.
(Incidentally, Robert Shiller has written extensively about this in his book: The New Financial Order.)
In August, Steen put himself on eBay (Charts) to pay for his college education, offering 2 percent of all future earnings to the highest bidder, with a minimum $100,000 bid.
"I am the real deal" and "a very intelligent guy," he wrote on eBay.
He says that he expects to earn "way more" than $125,000 a year until he turns 65, at which point his investor would break even on a $100,000 investment. (Steen would have to average more than $1.5 million a year to match an investment that yielded a 6 percent return, compounded annually over the same period.)
Here's a link to the PDF of the actual auction. (EBay cancelled the auction, and he got no bids.)
Firstly, I should say flat out that this is, in principle, an excellent idea. After all, exchanging future income for a lump-sum up front is precisely what a bond really is.
Secondly, if enough people did this, you could statistically estimate their future earnings, and price them competitively. (Think of it as an insurance policy on education. The future "investment bankers" are subsidizing the future "secretaries", etc.)
So why is it really stupid?
Several reasons.
Firstly, let's examine the reasons as to what can go wrong. Perhaps, he will renege on the contract, die or get dismembered before 40 years, or simply not make as much money as he thinks he's going to make.
Now let's work through these assumptions. We'll do all the calculations in "future dollars" so we have to include the effects of inflation. If he's really good at what he does, his wages will be above inflation each year by let's say 1-2%. Let's also assume he makes $100K (highly unlikely, but still.) Let's assume inflation runs at a fixed 3%.
You'd get paid between $190K (4% assumption) to $240K (6%).
Take the same $100K and buy 30 year US treasuries, and you'll get roughly $138K of coupons at current yields, plus your original $100K back, plus any interest that you pick up by reinvesting these coupons! Add in interest for an extra 10 years (at the same rate) you get an extra $46K. (That's $284K.)
So this kid is shit out of luck even under the most optimistic assumptions. You don't have to be a genius to figure out if you assume more realistic assumptions, you'd be really stupid to invest in this kid.
I mean, if the kid can't even do these calculations, there's no chance of him making "way more" than $125K.
So what did he really do wrong, theoretically speaking? Obviously, 2% of your income is too little. Up it to 10%, and the numbers would change.
The other alternative would've been not to demand a minimum of $100K, but let the market determine what they're willing to risk on you.
(Incidentally, Robert Shiller has written extensively about this in his book: The New Financial Order.)
Tuesday, November 28, 2006
Sucka-paloozah
From the San Diego Union Tribune, we have Plan for second tower irks El Cortez owners.
El Cortez condo owners feel cheated. They bought homes in the historic hotel with luxury in mind, but their sinks back up, their homeowners association is broke and there's no doorman to welcome them at the end of the day.
The fact that developer Peter Janopaul – who along with business partner Anthony Block renovated the 1927 hotel – is now planning to build a new condominium tower where their pool and parking is, well, that's just one more slap in the face.
Janopaul declined to be interviewed for this article, but Michael Zucchet, the vice president of Janopaul's development company, said a handful of homeowners at the El Cortez are making Janopaul a scapegoat for problems he had nothing to do with.
“Didn't read your disclosure documents? Blame the developer,” Zucchet said. “Developer's right to build getting vindicated at every turn? . . . Argue that the developer is actually a mean guy. Condo market heading south two years after you bought your unit? Sue the developer.
Residents concede they signed documents acknowledging that another building could be constructed just 40 feet away, but many say they were told it wouldn't happen for a long time. They say construction could damage their home values, their building's foundation and the historic character of the El Cortez.
Janopaul's company also is suing contractors for plumbing defects that include leaking pipes and backups, and lawsuits have been combined. But residents should not be surprised, said Janopaul attorney Tomas Morales. He noted that buyers signed detailed disclosures.
“Before they gave their money to the developer, they had to sign some very direct documents that said a building is coming (next door) and they were buying a unit built in 1927 and it would be unreasonable to expect it would operate like a building built in 2004,” Morales said.
Oooh, this is like front-row tickets to the "shear the sheep" finals!
Developers are smart cookies, particularly the crooked ones. If you signed a contract, there's absolutely nothing you can do about it!
So long, suckahs!
El Cortez condo owners feel cheated. They bought homes in the historic hotel with luxury in mind, but their sinks back up, their homeowners association is broke and there's no doorman to welcome them at the end of the day.
The fact that developer Peter Janopaul – who along with business partner Anthony Block renovated the 1927 hotel – is now planning to build a new condominium tower where their pool and parking is, well, that's just one more slap in the face.
Janopaul declined to be interviewed for this article, but Michael Zucchet, the vice president of Janopaul's development company, said a handful of homeowners at the El Cortez are making Janopaul a scapegoat for problems he had nothing to do with.
“Didn't read your disclosure documents? Blame the developer,” Zucchet said. “Developer's right to build getting vindicated at every turn? . . . Argue that the developer is actually a mean guy. Condo market heading south two years after you bought your unit? Sue the developer.
Residents concede they signed documents acknowledging that another building could be constructed just 40 feet away, but many say they were told it wouldn't happen for a long time. They say construction could damage their home values, their building's foundation and the historic character of the El Cortez.
Janopaul's company also is suing contractors for plumbing defects that include leaking pipes and backups, and lawsuits have been combined. But residents should not be surprised, said Janopaul attorney Tomas Morales. He noted that buyers signed detailed disclosures.
“Before they gave their money to the developer, they had to sign some very direct documents that said a building is coming (next door) and they were buying a unit built in 1927 and it would be unreasonable to expect it would operate like a building built in 2004,” Morales said.
Oooh, this is like front-row tickets to the "shear the sheep" finals!
Developers are smart cookies, particularly the crooked ones. If you signed a contract, there's absolutely nothing you can do about it!
So long, suckahs!
Monday, November 27, 2006
Economics, Ethics and Morality
To give a break from the stunningly single-minded (according to some of you) economic stupidity in the housing market, we'll get back to the Editorial from the New York Times: When Don’t Smoke Means Do.
Philip Morris has adopted the role of good citizen these days. Its Web site brims with information on the dangers of smoking, and it has mounted a campaign of television spots that urge parents, oh so earnestly, to warn their children against smoking. That follows an earlier $100 million campaign warning young people to “Think. Don’t Smoke,” analogous to the “just say no” admonitions against drugs.
Just why the costly advertising campaigns produce no health benefits is a rich subject for exploration. The ads are fuzzy-warm, which could actually generate favorable feelings for the tobacco industry and, by extension, its products. And their theme — that adults should tell young people not to smoke mostly because they are young people — is exactly the sort of message that would make many teenagers feel like lighting up.
Philip Morris says it has spent more than $1 billion on its youth smoking prevention programs since 1998 and that it devised its current advertising campaign on the advice of experts who deem parental influence extremely important. But the company has done only the skimpiest research on how the campaign is working. It cites June 2006 data indicating that 37 percent of parents with children age 10 to 17 were both aware of its ads and spoke to their children about not smoking. How the children reacted has not been explored. And somehow the company forgot to tell the parents, as role models, to stop smoking themselves.
Philip Morris, the industry’s biggest and most influential company, is renowned for its marketing savvy. If it really wanted to prevent youth smoking — and cut off new recruits to its death-dealing products — it could surely mount a more effective campaign to do so.
Let me bluntly say that I abhor smoking. I'm terribly allergic to it, and have hated it since I was a child. My parents can tell you that I have, flat out, at age 7 told my grandfather that I'm going to leave the room while he was smoking, and will come back when he was finished (and followed up on that for the next 8+ years or so.)
I have also worked in the theater for 15+ years through graduate school, and those of you have some experience in the theater will know what I mean when I say "everyone" in the theater smokes, and I have put up with it, and pretty damned patiently at that.
However, all of these are personal opinions not "economic" or "rational" ones.
Let's go to the economic stupidity which is, after all, the point of this blog.
Firstly, there is quite literally, no incentive for a company to do something against its own interests.
The real question is not "would you?" but if you were the steward of a company with a given mandate, "would you?"
Please note that we're talking about the subtle distinction between ethics and morals here!
Secondly, the blunt economic truth is that governments can never ban anything that people genuinely want to do. At best, they can act as traffic policemen.
Ask yourself, how well has the "war on drugs" really performed? Which major American city can you not buy marijuana at any hour of the day or night? Hell! There's home delivery for the product!
Please note the argument for precisely what it is. I neither care for drugs nor cigarettes. Nor do I care for a nanny state. But then, nor do I care for free healthcare (if "you" can't pay, and the state is paying for "your" healthcare, then the state can and should ban cigarettes for "you", not for the people willing to pay.)
And, negative incentives do actually work. The trifecta of higher taxes, banning cigarettes in bars and restaurants, and free nicotine patches in New York has transformed the "Paris of the US" into a non-smoking paradise.
So if you want to disincentivize something, ask the Federal Government to behave like New York City, not the company to act against in its own self-interest.
Which brings us to the stupidity part, which is what the Editorial is being accused of!
Fair Disclosure: I used to own stock in Altria, and was forced to dispose it for professional reasons. (If not, I would've hung on to it!)
Philip Morris has adopted the role of good citizen these days. Its Web site brims with information on the dangers of smoking, and it has mounted a campaign of television spots that urge parents, oh so earnestly, to warn their children against smoking. That follows an earlier $100 million campaign warning young people to “Think. Don’t Smoke,” analogous to the “just say no” admonitions against drugs.
Just why the costly advertising campaigns produce no health benefits is a rich subject for exploration. The ads are fuzzy-warm, which could actually generate favorable feelings for the tobacco industry and, by extension, its products. And their theme — that adults should tell young people not to smoke mostly because they are young people — is exactly the sort of message that would make many teenagers feel like lighting up.
Philip Morris says it has spent more than $1 billion on its youth smoking prevention programs since 1998 and that it devised its current advertising campaign on the advice of experts who deem parental influence extremely important. But the company has done only the skimpiest research on how the campaign is working. It cites June 2006 data indicating that 37 percent of parents with children age 10 to 17 were both aware of its ads and spoke to their children about not smoking. How the children reacted has not been explored. And somehow the company forgot to tell the parents, as role models, to stop smoking themselves.
Philip Morris, the industry’s biggest and most influential company, is renowned for its marketing savvy. If it really wanted to prevent youth smoking — and cut off new recruits to its death-dealing products — it could surely mount a more effective campaign to do so.
Let me bluntly say that I abhor smoking. I'm terribly allergic to it, and have hated it since I was a child. My parents can tell you that I have, flat out, at age 7 told my grandfather that I'm going to leave the room while he was smoking, and will come back when he was finished (and followed up on that for the next 8+ years or so.)
I have also worked in the theater for 15+ years through graduate school, and those of you have some experience in the theater will know what I mean when I say "everyone" in the theater smokes, and I have put up with it, and pretty damned patiently at that.
However, all of these are personal opinions not "economic" or "rational" ones.
Let's go to the economic stupidity which is, after all, the point of this blog.
Firstly, there is quite literally, no incentive for a company to do something against its own interests.
The real question is not "would you?" but if you were the steward of a company with a given mandate, "would you?"
Please note that we're talking about the subtle distinction between ethics and morals here!
Secondly, the blunt economic truth is that governments can never ban anything that people genuinely want to do. At best, they can act as traffic policemen.
Ask yourself, how well has the "war on drugs" really performed? Which major American city can you not buy marijuana at any hour of the day or night? Hell! There's home delivery for the product!
Please note the argument for precisely what it is. I neither care for drugs nor cigarettes. Nor do I care for a nanny state. But then, nor do I care for free healthcare (if "you" can't pay, and the state is paying for "your" healthcare, then the state can and should ban cigarettes for "you", not for the people willing to pay.)
And, negative incentives do actually work. The trifecta of higher taxes, banning cigarettes in bars and restaurants, and free nicotine patches in New York has transformed the "Paris of the US" into a non-smoking paradise.
So if you want to disincentivize something, ask the Federal Government to behave like New York City, not the company to act against in its own self-interest.
Which brings us to the stupidity part, which is what the Editorial is being accused of!
Fair Disclosure: I used to own stock in Altria, and was forced to dispose it for professional reasons. (If not, I would've hung on to it!)
Sunday, November 26, 2006
Eyes Wide Shut
Just to make sure that stupidity is a trait shared by all humans, we have Tony Levene writing for the UK Guardian: Landbanking flop ends field of dreams.
One of Britain's biggest landbankers has gone bust, leaving investors who paid a total of £7m for tiny slices of farmland, wondering where their money went. Land Heritage (UK) Ltd told 700 land purchasers this week it was going into liquidation on the "advice" of accountants PricewaterhouseCoopers (PWC).
It told them to direct future correspondence towards PWC. But when Guardian Money contacted the accountancy firm, it said it had never heard of Land Heritage (UK) Ltd.
"Whatever LHUK says, we have not been instructed by this company and will not be. We have not provided any formal advice and we have not billed the company for anything. We shall not be handling any liquidation - we have no relationship whatsoever with it," PWC says.
Whoever acts as liquidator, the end of LHUK destroys what slim hopes investors had of the firm turning their minuscule plots into potentially valuable housebuilding sites - or of getting any refund.
"I fully expected 20% annual returns over the next decade - multiplying my money up to eight times. I know that's a lot but I did not go into this investment with my eyes closed," says one Kent investor who asked for anonymity.
Now all he has is title to a plot of land in the middle of a field which is unlikely ever to gain planning permission.
Wow, this is stunning in its sheer panoramic scope.
A worthless piece of land in the middle of nowhere, no planning permission ergo no way to access your own piece of land. The land is literally worthless! You could probably plant vegetables on it, if you got air-dropped or something.
A company that PWC has never even heard of, and an investor who was multiplying his "mental money" by "up to eight times".
Stupendous, just absolutely stupendous!
One of Britain's biggest landbankers has gone bust, leaving investors who paid a total of £7m for tiny slices of farmland, wondering where their money went. Land Heritage (UK) Ltd told 700 land purchasers this week it was going into liquidation on the "advice" of accountants PricewaterhouseCoopers (PWC).
It told them to direct future correspondence towards PWC. But when Guardian Money contacted the accountancy firm, it said it had never heard of Land Heritage (UK) Ltd.
"Whatever LHUK says, we have not been instructed by this company and will not be. We have not provided any formal advice and we have not billed the company for anything. We shall not be handling any liquidation - we have no relationship whatsoever with it," PWC says.
Whoever acts as liquidator, the end of LHUK destroys what slim hopes investors had of the firm turning their minuscule plots into potentially valuable housebuilding sites - or of getting any refund.
"I fully expected 20% annual returns over the next decade - multiplying my money up to eight times. I know that's a lot but I did not go into this investment with my eyes closed," says one Kent investor who asked for anonymity.
Now all he has is title to a plot of land in the middle of a field which is unlikely ever to gain planning permission.
Wow, this is stunning in its sheer panoramic scope.
A worthless piece of land in the middle of nowhere, no planning permission ergo no way to access your own piece of land. The land is literally worthless! You could probably plant vegetables on it, if you got air-dropped or something.
A company that PWC has never even heard of, and an investor who was multiplying his "mental money" by "up to eight times".
Stupendous, just absolutely stupendous!
Tuesday, November 21, 2006
Starlight, starbright...
From the Detroit Free Press, we have a "Free Press Staff" write about Detroit-area home prices plunge 10.5% compared with year ago.
"And for sellers, it's almost a nightmare," he says. "A property can be marketed with every kind of tool you can think of, and unless there are really, really great incentives that make the property 20% below what the market price should be, they're just sitting there."
I have news for you, sunshine!
There is no "should be" in the market. What the market says is precisely what the market is.
If a piece of property sells for 20% less than what you think it "should be" then that's what the market thinks the property is worth. Everything else is what we call "wishing prices".
In the words of Yoda, "Is or is not. There is no should."
"And for sellers, it's almost a nightmare," he says. "A property can be marketed with every kind of tool you can think of, and unless there are really, really great incentives that make the property 20% below what the market price should be, they're just sitting there."
I have news for you, sunshine!
There is no "should be" in the market. What the market says is precisely what the market is.
If a piece of property sells for 20% less than what you think it "should be" then that's what the market thinks the property is worth. Everything else is what we call "wishing prices".
In the words of Yoda, "Is or is not. There is no should."
Monday, November 20, 2006
That sickening feeling...
From the St. Petersburg Times in sunny Tampa Bay, FL, we have the holy trinity of James Thorner, Scott Barancik, and Matthew Waite writing about Bay's home boom suddenly belly-up.
The fun time has ended for Leonard and Joyce Sondheimer. In October 2005, the Bradenton couple bought a $338,900 MiraBay townhome on Aberdeen Pond Drive. The bayside investment home with stone counters, hardwood floors and stainless steel appliances was sure to appreciate to half a million dollars. Or so the Sondheimers thought.
After a year on the market, no one has nibbled. Their Realtor chopped the price to break even. The tax bill alone on that single investment -— $8,900 a year — is draining the Sondheimer’s nest egg.
“I was retired and now I’ve had to go back to work. I’ve got to pay all these bills,” Leonard Sondheimer, 68, said of his new job as a mattress salesman. “It’s getting sickening.”
It was sure to appreciate to half a million, eh?
Well, it didn't, so I guess you're working off a different meaning of "sure" than the rest of the world.
You've made your mattress, now I suppose you're going to have to lie in it!
The fun time has ended for Leonard and Joyce Sondheimer. In October 2005, the Bradenton couple bought a $338,900 MiraBay townhome on Aberdeen Pond Drive. The bayside investment home with stone counters, hardwood floors and stainless steel appliances was sure to appreciate to half a million dollars. Or so the Sondheimers thought.
After a year on the market, no one has nibbled. Their Realtor chopped the price to break even. The tax bill alone on that single investment -— $8,900 a year — is draining the Sondheimer’s nest egg.
“I was retired and now I’ve had to go back to work. I’ve got to pay all these bills,” Leonard Sondheimer, 68, said of his new job as a mattress salesman. “It’s getting sickening.”
It was sure to appreciate to half a million, eh?
Well, it didn't, so I guess you're working off a different meaning of "sure" than the rest of the world.
You've made your mattress, now I suppose you're going to have to lie in it!
Sunday, November 19, 2006
"Daddy, buy me a condo!"
From the Minneapolis Star Tribune, we have Jackie Crosby writing about Option ARMS right for you?
In April, Marie Senn found the home of her dreams, a condo that hadn't even gone on the market yet. Then she fell into a nightmare of a mortgage -- a type of adjustable-rate mortgage known as an option ARM.
"I was a young buyer," said Senn, 24, who said she wasn't told that she could qualify for low-interest loans targeted at first-time homeowners.
"I'd never heard of this loan," she said. "There are so many things that I wish I knew then."
That's where Senn was headed. Her payments eventually would have tripled from a low payment that came with her option ARM if she hadn't just refinanced into a fixed-rate mortgage, which still leaves her strapped with higher monthly payments than she had planned.
"I want to put this behind me," she said.
It is behind you, honey, it is totally behind you.
Open up wide, baby, daddy's coming home!
In April, Marie Senn found the home of her dreams, a condo that hadn't even gone on the market yet. Then she fell into a nightmare of a mortgage -- a type of adjustable-rate mortgage known as an option ARM.
"I was a young buyer," said Senn, 24, who said she wasn't told that she could qualify for low-interest loans targeted at first-time homeowners.
"I'd never heard of this loan," she said. "There are so many things that I wish I knew then."
That's where Senn was headed. Her payments eventually would have tripled from a low payment that came with her option ARM if she hadn't just refinanced into a fixed-rate mortgage, which still leaves her strapped with higher monthly payments than she had planned.
"I want to put this behind me," she said.
It is behind you, honey, it is totally behind you.
Open up wide, baby, daddy's coming home!
Tuesday, November 14, 2006
Orwell Lives!
From CBS Marketwatch, we have John Spence reporting on D.R. Horton's quarterly net slips 51%.
"This decline was due primarily to core margin deterioration resulting from a lack of pricing power and increased use of sales incentives relative to last year," said Chief Financial Officer Bill Wheat. The company is focusing on further scaling back its inventory, the CFO added.
Say what?
Let's work through the gobbledy-gook:
"core margin deterioration" = "our sales margin is shrinking"
"lack of pricing power" = "no buyers are showing up"
"increased use of sales incentive" = "we're cutting prices"
"scaling back inventory" = "having trouble selling, cutting prices to sell stuff"
I think he means, "Our ass is toast!"
"This decline was due primarily to core margin deterioration resulting from a lack of pricing power and increased use of sales incentives relative to last year," said Chief Financial Officer Bill Wheat. The company is focusing on further scaling back its inventory, the CFO added.
Say what?
Let's work through the gobbledy-gook:
"core margin deterioration" = "our sales margin is shrinking"
"lack of pricing power" = "no buyers are showing up"
"increased use of sales incentive" = "we're cutting prices"
"scaling back inventory" = "having trouble selling, cutting prices to sell stuff"
I think he means, "Our ass is toast!"
Monday, November 13, 2006
Living the American Dream
From the New Jersey Herald News we have A bitter ending.
The Maldonados, like many other homeowners, faced financial difficulties and refinanced with a nontraditional mortgage -- the kind of adjustable-rate loan that has inundated the market over the past few years, promising quick cash or low interest rates.
Now, mortgage payments eat up Maldonado's entire monthly income.
Oooh, good, a payment more than your entire monthly income. This is definitely going to end well.
But the same year Maldonado bought his home, his wife had started racking up thousands of dollars in credit card debt while out of work.
In May 2005, creditors placed a $15,000 lien against the house on $80,000 of unpaid debt. The Maldonados panicked. But the house had grown in value, so they refinanced, using the equity to pay the debt. Their monthly mortgage payments grew by $800 -- tight but manageable for the family.
Then earlier this year, they discovered additional credit card bills.
His wife racked up $80K in debt while out of work. $80K?!?
The sum total of all the money I have spent in the last 10 years barely adds up to $80K. (and yes! I actually pulled out the spreadsheet.)
What the fuck?!?
And they, "discovered" additional bills. Please note that this is the same usage as in Lavoisier discovered oxygen, Newton discovered gravity, and Columbus discovered America.
It was totally unexpected, of course. The bills were just "discovered".
While Maldonado toyed with selling the house, daughter Wanda Perez began looking for alternatives.
She found Equity Source Home Loans, a Morganville-based company catering to those with damaged credit. Equity Source said the value of the Maldonado's home had grown to $345,000. They offered the family a $230,000 adjustable rate mortgage, with monthly payments of $2,330 -- more than Maldonado's take-home pay.
More than the pay. Yippee-skippee!
But Equity Source verbally promised them that they could refinance again in six months, when their bills were paid off, the Maldonados said. With better credit, they'd get a lower interest rate and smaller monthly payments, Equity Source told them.
If it ain't in a written contract, it ain't worth shit!
The Maldonados devote more than 53 percent of their gross income to the Equity Source mortgage, according to the loan documents. There are no legal limits to debt-to-income ratios.
But the mortgage documents don't list the Maldonados' actual income. According to documentation the Maldonados provided, the family pays 63 percent of its income to its monthly mortgage.
Ooh, the documents say that they only pay 63% but, in reality, they have to pay more than their income.
Can you say "fraud"? I knew you could!
Hurrah for the American consumer!
Hurrah for the American dream!
The Maldonados, like many other homeowners, faced financial difficulties and refinanced with a nontraditional mortgage -- the kind of adjustable-rate loan that has inundated the market over the past few years, promising quick cash or low interest rates.
Now, mortgage payments eat up Maldonado's entire monthly income.
Oooh, good, a payment more than your entire monthly income. This is definitely going to end well.
But the same year Maldonado bought his home, his wife had started racking up thousands of dollars in credit card debt while out of work.
In May 2005, creditors placed a $15,000 lien against the house on $80,000 of unpaid debt. The Maldonados panicked. But the house had grown in value, so they refinanced, using the equity to pay the debt. Their monthly mortgage payments grew by $800 -- tight but manageable for the family.
Then earlier this year, they discovered additional credit card bills.
His wife racked up $80K in debt while out of work. $80K?!?
The sum total of all the money I have spent in the last 10 years barely adds up to $80K. (and yes! I actually pulled out the spreadsheet.)
What the fuck?!?
And they, "discovered" additional bills. Please note that this is the same usage as in Lavoisier discovered oxygen, Newton discovered gravity, and Columbus discovered America.
It was totally unexpected, of course. The bills were just "discovered".
While Maldonado toyed with selling the house, daughter Wanda Perez began looking for alternatives.
She found Equity Source Home Loans, a Morganville-based company catering to those with damaged credit. Equity Source said the value of the Maldonado's home had grown to $345,000. They offered the family a $230,000 adjustable rate mortgage, with monthly payments of $2,330 -- more than Maldonado's take-home pay.
More than the pay. Yippee-skippee!
But Equity Source verbally promised them that they could refinance again in six months, when their bills were paid off, the Maldonados said. With better credit, they'd get a lower interest rate and smaller monthly payments, Equity Source told them.
If it ain't in a written contract, it ain't worth shit!
The Maldonados devote more than 53 percent of their gross income to the Equity Source mortgage, according to the loan documents. There are no legal limits to debt-to-income ratios.
But the mortgage documents don't list the Maldonados' actual income. According to documentation the Maldonados provided, the family pays 63 percent of its income to its monthly mortgage.
Ooh, the documents say that they only pay 63% but, in reality, they have to pay more than their income.
Can you say "fraud"? I knew you could!
Hurrah for the American consumer!
Hurrah for the American dream!
Melodrama
From the Press Democrat, we have a lovely little Spanish soap-opera The Pachecos.
Neil Pacheco just about gave up hope after five months of shopping for a home.
The monthly payments seemed prohibitive on the $484,000 house he was eyeing on a cul-de-sac in Windsor.
But then the slowing housing market turned in his favor. The seller, who had lowered the price by almost $6,000, knocked another $8,500 off the price tag - and then agreed to pay $10,000 toward closing costs.
Add in some creative lending help, and Pacheco, 26, and his wife, Graciela, 27, got the house off Los Amigos Road in the Lakewood Glen subdivision.
Ooh, "creative" lending. Sounds a bit ominous.
Pacheco works as a food server at River Rock Casino and runs his own landscaping business. Graciela works full time as a cook.
Slightly more than half of their combined income will go toward their $3,100-per-month house payment. And that doesn't cover insurance or property taxes.
A "food server" and a "cook" bought a $460K piece of property. More than half their combined income will go towards the mortgage, and that doesn't include insurance, property taxes, or maintenance.
How can this not end badly?
It gets better:
Their monthly payment is more than three times the $1,000 rent they were paying for a two-bedroom apartment.
Three times the rent must mean that they are three times richer, right? Right? RIGHT?
And then comes the grand finale:
"We know that we can do it," said Pacheco of the relatively steep house payments. "We want to work hard for this. We were working hard before."
Wish in one hand, and shit in the other. See which one fills up first, Pacheco!
Neil Pacheco just about gave up hope after five months of shopping for a home.
The monthly payments seemed prohibitive on the $484,000 house he was eyeing on a cul-de-sac in Windsor.
But then the slowing housing market turned in his favor. The seller, who had lowered the price by almost $6,000, knocked another $8,500 off the price tag - and then agreed to pay $10,000 toward closing costs.
Add in some creative lending help, and Pacheco, 26, and his wife, Graciela, 27, got the house off Los Amigos Road in the Lakewood Glen subdivision.
Ooh, "creative" lending. Sounds a bit ominous.
Pacheco works as a food server at River Rock Casino and runs his own landscaping business. Graciela works full time as a cook.
Slightly more than half of their combined income will go toward their $3,100-per-month house payment. And that doesn't cover insurance or property taxes.
A "food server" and a "cook" bought a $460K piece of property. More than half their combined income will go towards the mortgage, and that doesn't include insurance, property taxes, or maintenance.
How can this not end badly?
It gets better:
Their monthly payment is more than three times the $1,000 rent they were paying for a two-bedroom apartment.
Three times the rent must mean that they are three times richer, right? Right? RIGHT?
And then comes the grand finale:
"We know that we can do it," said Pacheco of the relatively steep house payments. "We want to work hard for this. We were working hard before."
Wish in one hand, and shit in the other. See which one fills up first, Pacheco!
Tuesday, November 07, 2006
Popeye, the Sailor Man
From the Orlando Sentinel, we have Jack Snyder (what a name!) writing about Savings of 100 at risk in investment flap.
Like at least 100 other investors, Ralph was told he could buy a newly converted condominium unit for as little as $150,000 -- but make no mortgage payments for two years. Main Street USA, in addition to paying the loan for 24 months, promised to use some of his unit's rental income to renovate the property inside and out. And some of his cash was to be placed in a real-estate-investment trust paying double-digit returns.
Anthony and Evette Cortes of Orlando dug deep into their savings to make a $14,900 down payment on a condo unit in The Villas at Waldengreen. Main Street USA made two mortgage payments, then stopped.
The couple has been making the payments since then, but they say it isn't easy coming up with $1,128 each month in the hope of keeping their investment alive.
"It's tough," said Cortes, an aircraft technician. "I'm working a lot of overtime trying to make ends meet."
Aah, good ol' fashioned counterparty risk.
It comes back to bite with a vengeance. And in this case, it's indistinguishable from fraud, and the FBI is involved.
What's with the subject line, eh?
Remember Wimpy?
"I will gladly pay you Tuesday for a hamburger today."
Caveat emptor!
Like at least 100 other investors, Ralph was told he could buy a newly converted condominium unit for as little as $150,000 -- but make no mortgage payments for two years. Main Street USA, in addition to paying the loan for 24 months, promised to use some of his unit's rental income to renovate the property inside and out. And some of his cash was to be placed in a real-estate-investment trust paying double-digit returns.
Anthony and Evette Cortes of Orlando dug deep into their savings to make a $14,900 down payment on a condo unit in The Villas at Waldengreen. Main Street USA made two mortgage payments, then stopped.
The couple has been making the payments since then, but they say it isn't easy coming up with $1,128 each month in the hope of keeping their investment alive.
"It's tough," said Cortes, an aircraft technician. "I'm working a lot of overtime trying to make ends meet."
Aah, good ol' fashioned counterparty risk.
It comes back to bite with a vengeance. And in this case, it's indistinguishable from fraud, and the FBI is involved.
What's with the subject line, eh?
Remember Wimpy?
"I will gladly pay you Tuesday for a hamburger today."
Caveat emptor!
New York, New York
From New York Magazine, we have S. Jhoanna Robledo writing about This Isn't Their Moment.
Few jobs are as irregular as acting. Which may be why Jeremy Kushnier waited until last year to buy his one-bedroom in Morningside Heights. “I just got tired of paying rent,” says Kushnier, who coincidentally had been playing Roger in the Broadway musical Rent. “I was lucky enough to get great jobs in the past few years, and I wanted to build some equity.” So much for that: Sixteen months later, Kushnier’s selling his place and moving to Los Angeles to join his actress girlfriend. If he gets his price—$509,000—he’ll do slightly better than break even. But a little negotiation could wipe out his profit altogether.
Let's see what's wrong with this picture. He's an actor - the ultimate temp job, if ever there was one. Most actors wait tables in New York, and even those working on Broadway don't actually make that much money.
He bought a one-bedroom for half a million dollars. An actor buying a half a million dollar condo!
And in Morningside Heights!!!
For those not familiar with Manhattan, this is technically on the island but so far away from any amenities that it might as well not be.
Also, anyone who makes the kind of dough to cover that mortgage will not live in Morningside Heights, flat out! (This "actor" probably has an interest-only or neg-am loan.)
But the best is yet to come:
Kushnier’s co-op doesn’t allow sublets so soon after an owner moves in—ruling out that option—and the expenses are piling up. “It’s a financial burden,” he says.
Can't rent it out. Can't pay for it either. Trying to move to LA to get a job.
I bet he's shitting ice-cold bricks right now!
Few jobs are as irregular as acting. Which may be why Jeremy Kushnier waited until last year to buy his one-bedroom in Morningside Heights. “I just got tired of paying rent,” says Kushnier, who coincidentally had been playing Roger in the Broadway musical Rent. “I was lucky enough to get great jobs in the past few years, and I wanted to build some equity.” So much for that: Sixteen months later, Kushnier’s selling his place and moving to Los Angeles to join his actress girlfriend. If he gets his price—$509,000—he’ll do slightly better than break even. But a little negotiation could wipe out his profit altogether.
Let's see what's wrong with this picture. He's an actor - the ultimate temp job, if ever there was one. Most actors wait tables in New York, and even those working on Broadway don't actually make that much money.
He bought a one-bedroom for half a million dollars. An actor buying a half a million dollar condo!
And in Morningside Heights!!!
For those not familiar with Manhattan, this is technically on the island but so far away from any amenities that it might as well not be.
Also, anyone who makes the kind of dough to cover that mortgage will not live in Morningside Heights, flat out! (This "actor" probably has an interest-only or neg-am loan.)
But the best is yet to come:
Kushnier’s co-op doesn’t allow sublets so soon after an owner moves in—ruling out that option—and the expenses are piling up. “It’s a financial burden,” he says.
Can't rent it out. Can't pay for it either. Trying to move to LA to get a job.
I bet he's shitting ice-cold bricks right now!
The "Experts" Weigh In
From AZCentral, we have Catherine Reagor writing about Experts weigh in on market in Phoenix.
The number of local and national real estate gurus tracking the Valley's housing market has grown with the amount of money made and lost in the industry recently.
Demand for unreasonably priced homes or homes far from jobs is "abysmal" now. That's what national real estate analyst John Burns writes in his recent newsletter.
As opposed to what, Einstein?
Demand for unreasonably priced homes should soar? Have a meteoric rise?
You should ask for a refund on your college tuition!
The number of local and national real estate gurus tracking the Valley's housing market has grown with the amount of money made and lost in the industry recently.
Demand for unreasonably priced homes or homes far from jobs is "abysmal" now. That's what national real estate analyst John Burns writes in his recent newsletter.
As opposed to what, Einstein?
Demand for unreasonably priced homes should soar? Have a meteoric rise?
You should ask for a refund on your college tuition!
Ghost Towns
Perhaps more appropriate for Halloween, but here's a report from In Business, Las Vegas: Las Vegas growth and location will lure plants.
Larry Murphy of SalesTraq and Steve Bottfeld, who monitor housing trends in the Las Vegas Valley, handed out their latest predictions at their quarterly Crystal Ball seminar.
Bottfeld and Murphy used the presentation to debunk what they said are myths about the Las Vegas housing industry.
Bottfeld criticized national media publications for its portrayal of the Las Vegas housing industry as having falling prices and resembling a ghost town. He said there's nothing wrong with having so many homes vacant.
Yep, what's wrong with having so many homes vacant?
While we're at it, why don't we build some factories. We'll leave those vacant too. After that we'll build vacant ports, vacant parking lots. In fact, we'll build an entire city which we will leave vacant too, and there's really no problem with all of that. Just build, build, build, and we'll leave it all vacant.
The really vacant part is the space inside your cranium!
Larry Murphy of SalesTraq and Steve Bottfeld, who monitor housing trends in the Las Vegas Valley, handed out their latest predictions at their quarterly Crystal Ball seminar.
Bottfeld and Murphy used the presentation to debunk what they said are myths about the Las Vegas housing industry.
Bottfeld criticized national media publications for its portrayal of the Las Vegas housing industry as having falling prices and resembling a ghost town. He said there's nothing wrong with having so many homes vacant.
Yep, what's wrong with having so many homes vacant?
While we're at it, why don't we build some factories. We'll leave those vacant too. After that we'll build vacant ports, vacant parking lots. In fact, we'll build an entire city which we will leave vacant too, and there's really no problem with all of that. Just build, build, build, and we'll leave it all vacant.
The really vacant part is the space inside your cranium!
Monday, November 06, 2006
Realtor Rubbish
From the Baltimore Sun, we have Lorraine Mirabella writing about Realtor ads for slower market.
That's the point of a more than $40 million advertising blitz launched yesterday by the National Association of Realtors.
Market conditions have never aligned so perfectly as they are right now, the trade group says in full-page newspaper ads running the next two weekends.
"It's a great time to buy or sell a home," proclaim the ads.
Wow! This is priceless.
It's a great time to buy, AND a great time to sell?
That's mathematically impossible. All transactions are zero-sum. One party must lose financially because in the outcome following the transaction either prices go up or down.
In fact it's worse. It's actually negative-sum because of transaction costs. (Think brokerage fee for stocks, or realtors commissions for real-estate.)
And, since Realtors(TM) survive on transactions, it's in their interest to have as many as possible. What's more they are experiencing extreme competition from online sources, and just like travel agents (remember them?) they are going to go the way of the dodo.
No wonder they're urging on the Greatest Fools.
If you want to see the stupid AD, here it is: link. (Warning: Large PDF.)
This is a flat out sign of extreme desperation!
That's the point of a more than $40 million advertising blitz launched yesterday by the National Association of Realtors.
Market conditions have never aligned so perfectly as they are right now, the trade group says in full-page newspaper ads running the next two weekends.
"It's a great time to buy or sell a home," proclaim the ads.
Wow! This is priceless.
It's a great time to buy, AND a great time to sell?
That's mathematically impossible. All transactions are zero-sum. One party must lose financially because in the outcome following the transaction either prices go up or down.
In fact it's worse. It's actually negative-sum because of transaction costs. (Think brokerage fee for stocks, or realtors commissions for real-estate.)
And, since Realtors(TM) survive on transactions, it's in their interest to have as many as possible. What's more they are experiencing extreme competition from online sources, and just like travel agents (remember them?) they are going to go the way of the dodo.
No wonder they're urging on the Greatest Fools.
If you want to see the stupid AD, here it is: link. (Warning: Large PDF.)
This is a flat out sign of extreme desperation!
Sunday, November 05, 2006
Not too bright
From the Tribune in Colorado, we have Maria St. Louis-Sanchez writing about The soft housing market affects everyone.
"A soft housing market it not good for anybody," said Matt Revitte, a broker associate with Pro Realty Inc. in Greeley. "I would say a lot of people will be affected by this slow down."
Oy!
"Not good for anybody"?!?
It's definitely good for the buyers.
Matt must be a product of the public school system!
"A soft housing market it not good for anybody," said Matt Revitte, a broker associate with Pro Realty Inc. in Greeley. "I would say a lot of people will be affected by this slow down."
Oy!
"Not good for anybody"?!?
It's definitely good for the buyers.
Matt must be a product of the public school system!
Friday, November 03, 2006
A Bucketful of Stupid
From CNN Money, we have Slow-market crisis: Stuck with two homes.
When Chicagoans John and Judy Peeler decided to move to Philadelphia last spring, they blithely assumed they'd get more space for their money. Indeed, the couple quickly found a 2,500-square-foot, four-bedroom colonial in a well-regarded school district for $440,000, just about what they figured their 2,000-square-foot Windy City condo would fetch.
Perfect. Or so they thought.
Since then the seemingly ideal move has devastated their finances. The Peelers' Chicago condo has generated little interest, even after they dropped the price - twice - to its current $389,000. And it has been four months since they relocated, which means they've been carrying two mortgages and a home-equity line of credit at a cost of $4,000 a month.
Having depleted their savings to pay for this, they've had to seriously cut back on spending. They went without air conditioning this past summer, despite sweltering heat and the fact that Judy was eight months pregnant.
They've also put off fixing the brakes of their second car, which the mechanic says should be replaced soon. "We don't spend money on anything that isn't critical," says Judy. "Everything goes toward the mortgages."
No air-conditioning while being pregnant. No brakes. "Everything goes towards the mortgages".
WTF?!?
Do you own the houses, or do the houses own you?
FB? You bet!
When Chicagoans John and Judy Peeler decided to move to Philadelphia last spring, they blithely assumed they'd get more space for their money. Indeed, the couple quickly found a 2,500-square-foot, four-bedroom colonial in a well-regarded school district for $440,000, just about what they figured their 2,000-square-foot Windy City condo would fetch.
Perfect. Or so they thought.
Since then the seemingly ideal move has devastated their finances. The Peelers' Chicago condo has generated little interest, even after they dropped the price - twice - to its current $389,000. And it has been four months since they relocated, which means they've been carrying two mortgages and a home-equity line of credit at a cost of $4,000 a month.
Having depleted their savings to pay for this, they've had to seriously cut back on spending. They went without air conditioning this past summer, despite sweltering heat and the fact that Judy was eight months pregnant.
They've also put off fixing the brakes of their second car, which the mechanic says should be replaced soon. "We don't spend money on anything that isn't critical," says Judy. "Everything goes toward the mortgages."
No air-conditioning while being pregnant. No brakes. "Everything goes towards the mortgages".
WTF?!?
Do you own the houses, or do the houses own you?
FB? You bet!
Thursday, November 02, 2006
Tossing Coins
From the OC Register, we have Mathew Padilla talking about As buyers balk, builders carry on.
There's a 50-50 chance the market will still be in the doldrums in 2008, said Edward Leamer, director of the UCLA Anderson School of Management's annual economic and housing-market forecast.
50-50?
You might as well have shut your fucking pie-hole, and said nothing, O Fucktard of an Economist!
I should explain further since this is something I do for a living.
It's not enough to get something 50% right for events with a binary outcome. Even a random coin toss can achieve that.
Either a stock will go up or down. Either the economy will have a recession in 2008 or it won't.
Your models need to have a slight edge, say being right 51% of the time.
(Mathematicians call it being right "1/2 + epsilon" of the time, and gamblers call it the "edge".)
In short, an inanimate coin can and probably should do this loser's job!
There's a 50-50 chance the market will still be in the doldrums in 2008, said Edward Leamer, director of the UCLA Anderson School of Management's annual economic and housing-market forecast.
50-50?
You might as well have shut your fucking pie-hole, and said nothing, O Fucktard of an Economist!
I should explain further since this is something I do for a living.
It's not enough to get something 50% right for events with a binary outcome. Even a random coin toss can achieve that.
Either a stock will go up or down. Either the economy will have a recession in 2008 or it won't.
Your models need to have a slight edge, say being right 51% of the time.
(Mathematicians call it being right "1/2 + epsilon" of the time, and gamblers call it the "edge".)
In short, an inanimate coin can and probably should do this loser's job!
Stick a fork in it!
From the Bend Bulletin, we have David Fisher writing about Signs of a slowdown.
The market looked great when he sunk his life's savings into his brand-new company, Yelas Developments Inc., in December, after 10 years of doing project management for larger production developers in Portland and then Bend.
The company's first few homes sold easily in the spring, Yelas said, so he quickly plowed the money into new in-fill lots around Bend, paying $145,000 to $220,000 per lot just for the dirt - about the top of the market.
Suddenly, sometime in May, the lights went out on rapid real estate sales "just like someone flipped a switch," he said. Now he's sitting on the three finished east Bend homes off Boyd Acres Road while he and his subcontractors work to complete more in various locations on the west and east sides.
Yelas said he's gotten to the point where he'd be happy to break even on the east Bend homes, just to free up some cash flow and cut some holding costs before winter arrives in earnest. Next spring, he's counting on sales as a whole to loosen up.
"The market has bottomed," he said, pointing out the maple flooring, the knotty alder cabinets, and the view from his Freedom Place house. "This is as bottom as it's gonna get. I mean, look at our stupid signs on the fence.
Yep, look at your stupid signs! And what do your stupid signs have to do with the market bottoming?
Let's look at the fundamentals. You paid roughly $200K for just the parcel of land. Chances are your building costs were roughly $200K which brings the price of the product up to $400K.
The median income in Bend, OR is roughly $40K. Who the fuck can afford to pay you $400K when they're making $40K? (The rule of thumb is 3X your income.)
Who's looking stupid now?
The market looked great when he sunk his life's savings into his brand-new company, Yelas Developments Inc., in December, after 10 years of doing project management for larger production developers in Portland and then Bend.
The company's first few homes sold easily in the spring, Yelas said, so he quickly plowed the money into new in-fill lots around Bend, paying $145,000 to $220,000 per lot just for the dirt - about the top of the market.
Suddenly, sometime in May, the lights went out on rapid real estate sales "just like someone flipped a switch," he said. Now he's sitting on the three finished east Bend homes off Boyd Acres Road while he and his subcontractors work to complete more in various locations on the west and east sides.
Yelas said he's gotten to the point where he'd be happy to break even on the east Bend homes, just to free up some cash flow and cut some holding costs before winter arrives in earnest. Next spring, he's counting on sales as a whole to loosen up.
"The market has bottomed," he said, pointing out the maple flooring, the knotty alder cabinets, and the view from his Freedom Place house. "This is as bottom as it's gonna get. I mean, look at our stupid signs on the fence.
Yep, look at your stupid signs! And what do your stupid signs have to do with the market bottoming?
Let's look at the fundamentals. You paid roughly $200K for just the parcel of land. Chances are your building costs were roughly $200K which brings the price of the product up to $400K.
The median income in Bend, OR is roughly $40K. Who the fuck can afford to pay you $400K when they're making $40K? (The rule of thumb is 3X your income.)
Who's looking stupid now?
Tuesday, October 31, 2006
Halloween
From the Times Online in Pennsylvania, we have Kristen Garrett writing about Home sales in county sputter.
When Lisa Kusko put her house up for sale last year, she never dreamed she would still own it more than a year later.
"I had no idea at all it would take this long to sell. I knew it wouldn't be instant. ... I just didn't think I would own it at this time, this year," Kusko said.
The decline in sales is something Sally Heimbrook, a real estate agent with Prudential in Beaver, knows all too well.
"We're pretty much seeing a pretty down market, and it's difficult to keep saying it because we don't want to discourage people," Heimbrook said. "But there are many, many, many more houses out there than there are buyers."
Denial, right before anger, bargaining, depression, and capitulance.
O, Great Pumpkin, where are you?
When Lisa Kusko put her house up for sale last year, she never dreamed she would still own it more than a year later.
"I had no idea at all it would take this long to sell. I knew it wouldn't be instant. ... I just didn't think I would own it at this time, this year," Kusko said.
The decline in sales is something Sally Heimbrook, a real estate agent with Prudential in Beaver, knows all too well.
"We're pretty much seeing a pretty down market, and it's difficult to keep saying it because we don't want to discourage people," Heimbrook said. "But there are many, many, many more houses out there than there are buyers."
Denial, right before anger, bargaining, depression, and capitulance.
O, Great Pumpkin, where are you?
Monday, October 30, 2006
Wake up and smell the coffins!
From the St. Petersburg Times in Florida, we have: Some temptations for wavering buyers.
Here are the latest attempts by builders, in these slow times on the housing front, to persuade nervous buyers to sign a contract now.
If you sell at a loss, we'll make up the difference.
Hannah Bartoletta Homes makes this offer to buyers who resell their homes: If the final selling price is less than the original home price, Hannah Bartoletta will pay the sellers the difference between the two: up to 10 percent of the original price or $100,000, whichever is lower.
The offer is good only for owner-occupants who have lived in the house at least 18 months, and there are some other time limits and restrictions.
I think we can make three safe conclusions from this absurd offer:
Prices are definitely going down, otherwise the builder would not have made this ridiculous offer. Why not just cut the price by 10%? (Because they know that that's not going to make the inventory move.)
The builders think that prices are going down more than 10% in 18 months. That's why you have the 10% guarantee, and 18 month clause. Trying to get the last suckers in.
If Hannah Homes goes bankrupt in less than 18 months, you won't be getting a single fucking penny. It's called counterparty risk, sweethearts!
Go on, suckers! You can be an FB too!
Here are the latest attempts by builders, in these slow times on the housing front, to persuade nervous buyers to sign a contract now.
If you sell at a loss, we'll make up the difference.
Hannah Bartoletta Homes makes this offer to buyers who resell their homes: If the final selling price is less than the original home price, Hannah Bartoletta will pay the sellers the difference between the two: up to 10 percent of the original price or $100,000, whichever is lower.
The offer is good only for owner-occupants who have lived in the house at least 18 months, and there are some other time limits and restrictions.
I think we can make three safe conclusions from this absurd offer:
Go on, suckers! You can be an FB too!
Friday, October 27, 2006
Economists say the darndest things!
From the Wellesley Townsman, we have Anne-Marie Smolski talking about Sales of Mass. homes continue to drop.
According to Wellesley resident Karl Case, a nationally known real estate expert who teaches economics at Wellesley College, the decline in demand is being matched by seller resistance, and the sellers are holding out for what they think the property is worth. Furthermore, he said, the market is close to becoming illiquid, that is, properties are just not trading hands like they were.
I have news for you, bubba!
Housing (along with art, collectibles, etc.) is the ultimate illiquid market. Always has been, always will be.
An asset is said to be liquid based on how fast it can be converted into cash (or cash equivalents.) This is the "textbook" definition.
By this measure, stocks, bonds, futures, etc. are quite liquid because you can easily sell them on the market.
Let us understand why they can be sold quickly, and the rest of the argument will be utterly obvious.
The first and most important point is that they are fungible. One common share of Microsoft is the same as any other common share of Microsoft. Secondly, there's an actively traded market so you can easily determine the current price of Microsoft. Lastly, if you want to sell your shares of Microsoft, since there's no God-given right that a buyer must exist, you need a mechanism to trade it. Enter the "market-maker" who will be happy to take the shares off your hand (for a premium, of course!)
It is these market-makers that provide liquidity to the market. (And let me state that even in these so-called liquid markets, liquidity can dry up quickly if no market-maker is willing to take something off your hand. In short, liquidity is a dynamic thing not some static thing that exists independent of the object.)
Compare that to housing : totally non-fungible (each house is unique,) no mark-to-market mechanism, and definitely no market-makers. (Same goes for a Van Gogh painting, or the first edition of James Joyce's "Ulysses" -- although there are market-makers for the latter.)
Also, it should be noted that providing liquidity is a function of the price level. At a low enough price, everything becomes liquid. I will happily take any Van Gogh painting anywhere in the world, sight unseen, and pay for shipping and insurance for under $10,000.
Economists have a long history of saying stupid things, or blaming bad events on the lack of liquidity. "If only liquidity existed, things would not be thus", etc. etc.
I have news for these economists.
Market-makers exist to make money. They will not take on positions that they are likely to lose money on. Boom! That's why the liquidity spigot can be shut off at a moment's notice.
As a trader in the real world, this abrupt shutting off of liquidity is something that we definitely take into account in our models.
Mr. Case is a famous economist but ignorant of the real world to the point of spewing garbage.
According to Wellesley resident Karl Case, a nationally known real estate expert who teaches economics at Wellesley College, the decline in demand is being matched by seller resistance, and the sellers are holding out for what they think the property is worth. Furthermore, he said, the market is close to becoming illiquid, that is, properties are just not trading hands like they were.
I have news for you, bubba!
Housing (along with art, collectibles, etc.) is the ultimate illiquid market. Always has been, always will be.
An asset is said to be liquid based on how fast it can be converted into cash (or cash equivalents.) This is the "textbook" definition.
By this measure, stocks, bonds, futures, etc. are quite liquid because you can easily sell them on the market.
Let us understand why they can be sold quickly, and the rest of the argument will be utterly obvious.
The first and most important point is that they are fungible. One common share of Microsoft is the same as any other common share of Microsoft. Secondly, there's an actively traded market so you can easily determine the current price of Microsoft. Lastly, if you want to sell your shares of Microsoft, since there's no God-given right that a buyer must exist, you need a mechanism to trade it. Enter the "market-maker" who will be happy to take the shares off your hand (for a premium, of course!)
It is these market-makers that provide liquidity to the market. (And let me state that even in these so-called liquid markets, liquidity can dry up quickly if no market-maker is willing to take something off your hand. In short, liquidity is a dynamic thing not some static thing that exists independent of the object.)
Compare that to housing : totally non-fungible (each house is unique,) no mark-to-market mechanism, and definitely no market-makers. (Same goes for a Van Gogh painting, or the first edition of James Joyce's "Ulysses" -- although there are market-makers for the latter.)
Also, it should be noted that providing liquidity is a function of the price level. At a low enough price, everything becomes liquid. I will happily take any Van Gogh painting anywhere in the world, sight unseen, and pay for shipping and insurance for under $10,000.
Economists have a long history of saying stupid things, or blaming bad events on the lack of liquidity. "If only liquidity existed, things would not be thus", etc. etc.
I have news for these economists.
Market-makers exist to make money. They will not take on positions that they are likely to lose money on. Boom! That's why the liquidity spigot can be shut off at a moment's notice.
As a trader in the real world, this abrupt shutting off of liquidity is something that we definitely take into account in our models.
Mr. Case is a famous economist but ignorant of the real world to the point of spewing garbage.
Thursday, October 26, 2006
Smorgasbord of Stupidity
From America's daily paper, USA Today, we have Noelle Knox giving examples of lessons learnt in the School of Hard Knocks: Sellers sing the blues as price drop sets record.
In 2004, Derderian bought a house in Las Vegas as an investment for $281,000. He found tenants, but he kicked them out after 10 months because their rent was always late.
He listed the house in the summer for $305,000. Having owned real estate only during boom years, he assumed it would sell in about a week. After a month, he cut the price to $289,900. Another week went by. He offered to pay nearly $9,000 toward a buyer's closing costs.
Then along came Johnson, a 38-year-old truck driver, who snapped up the house and boasts, "I got a great deal."
Derderian, meantime, lost about $25,000 from paying the mortgage on an empty home.
Oopsie! It's called carrying costs, sweetheart!
That's what's hurting Bryan Rauch. In January, he bought a home in Anthem, Ariz., where Pulte Homes is offering a slew of incentives, including advice from re-sale experts to help buyers fix up and sell their current homes.
"The plan was to renovate it and flip it," says Rauch, 37, a nurse-turned-real estate-investor.
Nurse turned real-estate investor. How can it not end badly?
He put the home back on the market in February, at $284,000, then lowered the price repeatedly until he hit $270,000. Still no buyers. After six months, he rented it out at a $500-a-month loss.
"The problem is the builder is giving away homes," Rauch says. "Properties like this are now selling for the low $200s."
Ummm, no, douchebag.
The builder is not "giving away" homes. He's fucking you over. He can cut prices deeply, and still make a profit. And if you think he gives a crap about you, you're gonna learn a serious lesson.
But Rauch needs to cut his losses. So he's putting the home back on the market at $260,000 and crossing his fingers like a lot of other sellers around the country.
Yep, "faith-based" initiatives. That's definitely what makes this country so great.
Wow, it's raining idiots out there. I'm having trouble keeping up!
In 2004, Derderian bought a house in Las Vegas as an investment for $281,000. He found tenants, but he kicked them out after 10 months because their rent was always late.
He listed the house in the summer for $305,000. Having owned real estate only during boom years, he assumed it would sell in about a week. After a month, he cut the price to $289,900. Another week went by. He offered to pay nearly $9,000 toward a buyer's closing costs.
Then along came Johnson, a 38-year-old truck driver, who snapped up the house and boasts, "I got a great deal."
Derderian, meantime, lost about $25,000 from paying the mortgage on an empty home.
Oopsie! It's called carrying costs, sweetheart!
That's what's hurting Bryan Rauch. In January, he bought a home in Anthem, Ariz., where Pulte Homes is offering a slew of incentives, including advice from re-sale experts to help buyers fix up and sell their current homes.
"The plan was to renovate it and flip it," says Rauch, 37, a nurse-turned-real estate-investor.
Nurse turned real-estate investor. How can it not end badly?
He put the home back on the market in February, at $284,000, then lowered the price repeatedly until he hit $270,000. Still no buyers. After six months, he rented it out at a $500-a-month loss.
"The problem is the builder is giving away homes," Rauch says. "Properties like this are now selling for the low $200s."
Ummm, no, douchebag.
The builder is not "giving away" homes. He's fucking you over. He can cut prices deeply, and still make a profit. And if you think he gives a crap about you, you're gonna learn a serious lesson.
But Rauch needs to cut his losses. So he's putting the home back on the market at $260,000 and crossing his fingers like a lot of other sellers around the country.
Yep, "faith-based" initiatives. That's definitely what makes this country so great.
Wow, it's raining idiots out there. I'm having trouble keeping up!
I know a genius when I see one
We've met Kirsten Downey before. She's the unsung financial luminary writing for the Washington Post.
She has decided to give us some more of her pearls of wisdom in A Record Drop In Home Prices.
One reason prices are dropping is that sellers are having a harder time finding buyers.
What did I tell you? She's a fucking financial genius!
I mean look at the sheer uncanny brilliance in that comment. What insight into finance! Why, oh why is the Economics community neglecting to laud her with laurels?
Mine eyes have seen the glory!
She has decided to give us some more of her pearls of wisdom in A Record Drop In Home Prices.
One reason prices are dropping is that sellers are having a harder time finding buyers.
What did I tell you? She's a fucking financial genius!
I mean look at the sheer uncanny brilliance in that comment. What insight into finance! Why, oh why is the Economics community neglecting to laud her with laurels?
Mine eyes have seen the glory!
Always Watch the Inventory
More news from Florida from the Palm Beach Post: Prices, sales continue downward spiral.
The slowdown has caused an astounding 49-month supply of existing homes for sale in Palm Beach County, Regional Multiple Listing Service records show.
"The market is not in balance, and as long as that is the case, you will continue to see reductions in price," said Homekeys.net President Manuel Iraola. "Have we reached the bottom? Probably not, but we are getting closer. And most importantly, the descent has been relatively soft."
49 months of inventory? That's not a slowdown, that's a fucking disaster!
And "we are getting closer" to the bottom? Hahahahahaahahah. When you have roughly 3-6 months of inventory, that's when you'll be at the bottom, Bumblejack!
I hope my readers haven't forgetten what Motoko Rich, the dumb bimbo from the New York Times had to say: "South Florida is working off of a totally new economic model than any of us have ever experienced in the past.".
I really really love that quote!
The slowdown has caused an astounding 49-month supply of existing homes for sale in Palm Beach County, Regional Multiple Listing Service records show.
"The market is not in balance, and as long as that is the case, you will continue to see reductions in price," said Homekeys.net President Manuel Iraola. "Have we reached the bottom? Probably not, but we are getting closer. And most importantly, the descent has been relatively soft."
49 months of inventory? That's not a slowdown, that's a fucking disaster!
And "we are getting closer" to the bottom? Hahahahahaahahah. When you have roughly 3-6 months of inventory, that's when you'll be at the bottom, Bumblejack!
I hope my readers haven't forgetten what Motoko Rich, the dumb bimbo from the New York Times had to say: "South Florida is working off of a totally new economic model than any of us have ever experienced in the past.".
I really really love that quote!
Tarte Tatin : The Principle of Inversion
Jeff Collins from the OC Register writes about Auctions help sellers move on.
The Norris Group, founded by Riverside real estate investor and forecaster Bruce Norris, is launching a home auction business Nov. 19 at a Cal Poly Pomona auditorium, hawking 19 vacant, investor-owned homes.
"These are investors who are in strong positions, and they think things are getting worse, and they'd rather come to an end sooner rather than later," explained Norris' son, Greg, a project manager for the group. "People are getting to the point where they cannot afford to hold on to properties anymore."
If they "cannot afford to hold on", then they're not in a "strong position", are they now?
Weak is strong, and down is up, and round and round and round we go...
The Norris Group, founded by Riverside real estate investor and forecaster Bruce Norris, is launching a home auction business Nov. 19 at a Cal Poly Pomona auditorium, hawking 19 vacant, investor-owned homes.
"These are investors who are in strong positions, and they think things are getting worse, and they'd rather come to an end sooner rather than later," explained Norris' son, Greg, a project manager for the group. "People are getting to the point where they cannot afford to hold on to properties anymore."
If they "cannot afford to hold on", then they're not in a "strong position", are they now?
Weak is strong, and down is up, and round and round and round we go...
Wednesday, October 25, 2006
The Law of Unintended Consequences
From the Miami Herald, we have Beatrice A. Garcia reporting on Citizens insurance to drop some properties.
The state-run insurance pool is getting ready to move second homes, vacation homes and most investment properties off its books.
If owners of non-homestead properties can't find coverage from another insurer, they can stay with Citizens. However, they will be charged a 25 percent surcharge.
Let's see if we can analyze what the consequences of this policy are likely to be.
Firstly, let's talk about whether the government should act as an insurer of last resort. By law, Citizen's must charge above the market rate. (This means that every insurer will dump their "crap" onto the government. Wouldn't you?)
Also, that means that everyone who gets dumped will see massive increases in the rates for coverage.
The government has decided that second homes which can't get coverage will be charged a 25% surcharge over the going rate. If they can't afford it, they will sell their property.
Now let's ask the important question : who is likely to own a second home?
The answer : either rich people, or speculators.
The former didn't get rich by pissing money away, and the latter are notoriously skittish. Both are likely to cut their losses, and run. Effectively, this policy puts a cap on the price of houses in Florida, and even worse, causes people to want to sell their houses (putting severe downward pressure on what is already the most over-inflated bubble in history.)
We've been here before.
Florida had a massive bubble in 1926. Prices didn't recover in inflation-adjusted terms till the mid-80's. (Yep! you read that right.)
Lastly, if you don't get insurance coverage in hurricane-prone Florida, you're not very likely to buy a vacation home there. This is going to fuck up Florida's "business model" completely.
Do you believe that the politicians thought through these "unintended consequences"?
If so, I have a bridge in New York I want to sell to you!
The state-run insurance pool is getting ready to move second homes, vacation homes and most investment properties off its books.
If owners of non-homestead properties can't find coverage from another insurer, they can stay with Citizens. However, they will be charged a 25 percent surcharge.
Let's see if we can analyze what the consequences of this policy are likely to be.
Firstly, let's talk about whether the government should act as an insurer of last resort. By law, Citizen's must charge above the market rate. (This means that every insurer will dump their "crap" onto the government. Wouldn't you?)
Also, that means that everyone who gets dumped will see massive increases in the rates for coverage.
The government has decided that second homes which can't get coverage will be charged a 25% surcharge over the going rate. If they can't afford it, they will sell their property.
Now let's ask the important question : who is likely to own a second home?
The answer : either rich people, or speculators.
The former didn't get rich by pissing money away, and the latter are notoriously skittish. Both are likely to cut their losses, and run. Effectively, this policy puts a cap on the price of houses in Florida, and even worse, causes people to want to sell their houses (putting severe downward pressure on what is already the most over-inflated bubble in history.)
We've been here before.
Florida had a massive bubble in 1926. Prices didn't recover in inflation-adjusted terms till the mid-80's. (Yep! you read that right.)
Lastly, if you don't get insurance coverage in hurricane-prone Florida, you're not very likely to buy a vacation home there. This is going to fuck up Florida's "business model" completely.
Do you believe that the politicians thought through these "unintended consequences"?
If so, I have a bridge in New York I want to sell to you!
Fauq-uieah
From the Fauquier Times Democrat, we have Centex Abandons Arrington.
In a two-page letter dated Oct. 10, Centex Homes Division president Robert K. Davis notified Mayor George Fitch that the Dallas-based company "will not move forward and complete the purchase" of about 385 acres for a gated subdivision on U.S. 29 at the town's southwestern edge.
Centex wanted to build 298 single-family homes, which would have started at $900,000 apiece, according to the company.
The senior citizens-only project would have protected 200 or so acres from further development and put $23.2 million in Centex cash in government coffers.
298 houses in the middle of Virginia starting at $900K for senior citizens?
How many retired people who can afford $900K are willing to live in a place with no redeeming features?
Which dumbass originally conceived this project?
In a two-page letter dated Oct. 10, Centex Homes Division president Robert K. Davis notified Mayor George Fitch that the Dallas-based company "will not move forward and complete the purchase" of about 385 acres for a gated subdivision on U.S. 29 at the town's southwestern edge.
Centex wanted to build 298 single-family homes, which would have started at $900,000 apiece, according to the company.
The senior citizens-only project would have protected 200 or so acres from further development and put $23.2 million in Centex cash in government coffers.
298 houses in the middle of Virginia starting at $900K for senior citizens?
How many retired people who can afford $900K are willing to live in a place with no redeeming features?
Which dumbass originally conceived this project?
Caveat emptor
From CNN's "Business 2.0" section, we have Top 10 cities: Where to Buy Now.
The interstate highway system bypasses it, and the runway at the local airport isn't long enough to support anything beyond regional jets.
"Panama City is an economy waiting to break out," says Steven Cochrane, chief regional economist for Moody's Economy.com. Other factors increasing demand: Property prices are still low by Florida standards, and the local market has already absorbed a price correction after peaking last year.
Janet Roan, a Century 21 agent in Panama City, notes that two-bedroom beachfront condos are going for as little as $330,000 - down by more than $100,000 from 2005.
CAUTION: Local politicians, notoriously cozy with builders, have green-lighted several master-plan communities for future development. If supply gets out of hand, prices will stall.
Wow! Prices have already dropped by roughly 25% (how's that for a stall?), politicians are "cozy" with builders, there's no connectivity by road or air, the per-capita income will barely rise from $31K to $40K by 2011, but the economy is "waiting to break out"?
I think it's going to be "waiting" a long time!
The interstate highway system bypasses it, and the runway at the local airport isn't long enough to support anything beyond regional jets.
"Panama City is an economy waiting to break out," says Steven Cochrane, chief regional economist for Moody's Economy.com. Other factors increasing demand: Property prices are still low by Florida standards, and the local market has already absorbed a price correction after peaking last year.
Janet Roan, a Century 21 agent in Panama City, notes that two-bedroom beachfront condos are going for as little as $330,000 - down by more than $100,000 from 2005.
CAUTION: Local politicians, notoriously cozy with builders, have green-lighted several master-plan communities for future development. If supply gets out of hand, prices will stall.
Wow! Prices have already dropped by roughly 25% (how's that for a stall?), politicians are "cozy" with builders, there's no connectivity by road or air, the per-capita income will barely rise from $31K to $40K by 2011, but the economy is "waiting to break out"?
I think it's going to be "waiting" a long time!
Tuesday, October 24, 2006
Of traitors and turncoats
From the Southwest Florida News Press, we have Pedro Morales writing about Classes can help workers buy new home.
A banker is offering financial literacy classes to a work force it hopes will take advantage of a new affordable housing community in Naples.
"Nobody has the patience to educate workerbees on how they can be financed," said Kelly Capolino, a Realtor with Coldwell Banker Real Estate. "We want to teach them, don't go and buy the new truck now, buy the home first."
A banker is offering lessons in financial responsibility? A banker?!?
Hahahahahhahah! He's a traitor to the profession.
Bankers make their money by loaning money to people not by having them be "financially responsible".
What's next? Hookers in Las Vegas offering classes on celibacy?
A banker is offering financial literacy classes to a work force it hopes will take advantage of a new affordable housing community in Naples.
"Nobody has the patience to educate workerbees on how they can be financed," said Kelly Capolino, a Realtor with Coldwell Banker Real Estate. "We want to teach them, don't go and buy the new truck now, buy the home first."
A banker is offering lessons in financial responsibility? A banker?!?
Hahahahahhahah! He's a traitor to the profession.
Bankers make their money by loaning money to people not by having them be "financially responsible".
What's next? Hookers in Las Vegas offering classes on celibacy?
Saturday, October 21, 2006
Bad statistics meets worse journalism
From the OC Register, we have Jonathan Lansner talking about Novel mortgages blamed.
Cagan tracked everything including purchase prices, kinds of loans used and fresh valuations of homes. Then he estimated how many owners will get into deep trouble as their monthly payments increase when they have little or no equity left in their home.
Yes, Cagan sees 18,601 O.C. mortgages going bad through 2011.
18,601 exactly? Not 18,602, or 18,603? Heaven forbid, it should be 18,599. Oh, the horror!
And a forecast out to 2011, eh? That's pretty gutsy. Cagan is a wondrous beacon of light boldly looking out into the mists of time.
Since I do stuff like this for a living, I should explain. Economic analysis (when done well) generally reveals a range of possibilities (a distribution, formally.) While, I can talk about the most likely outcome (mean or median, whatever is most appropriate), the chances of hitting that mean exactly are about as likely as a politician telling the truth. Which is to say, not a fucking chance in hell!
However, newspaper reporting can't deal with such subtleties as a range of outcomes. They want to know crude things like, "will it go up, or will it go down?", and I would probably answer, "That depends on whether you're taking Viagra or not!" (but that's why they don't interview me.)
Secondly, most models have an error associated with them. The error compounds geometrically as you iterate the model (which is to say the model becomes pretty darn useless after a few iterations.) Our amateur statistician has fallen into the above trap by projecting out the model for 5 years. I've even seen professors of statistics from famous schools (which shall remain unnamed) fall into the above trap so it seems to be an endemic arrogance of the profession.
Lastly, all models (particularly economic) are conceived with certain assumptions in mind (either overtly or implicitly.) However, events that are outside these assumptions can radically alter the distribution, and the outcome (the "fat tail" phenomenon.) How many airline profit-projection models took into account the possibility of two planes crashing into two tall towers?
You can never account for all possibilities, but good traders make sure they are protected against these, as yet unknown, "fat tails".
I would like to add that in the light of the above paragraph, the following quote of Donald Rumsfeld (which he took a lot of flak for) makes perfect sense:
"Reports that say that something hasn't happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns -- the ones we don't know we don't know."
The "fat tails" are the unknown unknowns, and thinking about them is absolutely crucial to developing trading models (which is what I do for a living.)
I'm sure the journalist doesn't understand "standard errors", "geometric compounding of errors", or "fat tails". He's just a parrot repeating stuff without any clear understanding of the concepts.
As for the unknown unknowns, fuggedaboutit!
Cagan tracked everything including purchase prices, kinds of loans used and fresh valuations of homes. Then he estimated how many owners will get into deep trouble as their monthly payments increase when they have little or no equity left in their home.
Yes, Cagan sees 18,601 O.C. mortgages going bad through 2011.
18,601 exactly? Not 18,602, or 18,603? Heaven forbid, it should be 18,599. Oh, the horror!
And a forecast out to 2011, eh? That's pretty gutsy. Cagan is a wondrous beacon of light boldly looking out into the mists of time.
Since I do stuff like this for a living, I should explain. Economic analysis (when done well) generally reveals a range of possibilities (a distribution, formally.) While, I can talk about the most likely outcome (mean or median, whatever is most appropriate), the chances of hitting that mean exactly are about as likely as a politician telling the truth. Which is to say, not a fucking chance in hell!
However, newspaper reporting can't deal with such subtleties as a range of outcomes. They want to know crude things like, "will it go up, or will it go down?", and I would probably answer, "That depends on whether you're taking Viagra or not!" (but that's why they don't interview me.)
Secondly, most models have an error associated with them. The error compounds geometrically as you iterate the model (which is to say the model becomes pretty darn useless after a few iterations.) Our amateur statistician has fallen into the above trap by projecting out the model for 5 years. I've even seen professors of statistics from famous schools (which shall remain unnamed) fall into the above trap so it seems to be an endemic arrogance of the profession.
Lastly, all models (particularly economic) are conceived with certain assumptions in mind (either overtly or implicitly.) However, events that are outside these assumptions can radically alter the distribution, and the outcome (the "fat tail" phenomenon.) How many airline profit-projection models took into account the possibility of two planes crashing into two tall towers?
You can never account for all possibilities, but good traders make sure they are protected against these, as yet unknown, "fat tails".
I would like to add that in the light of the above paragraph, the following quote of Donald Rumsfeld (which he took a lot of flak for) makes perfect sense:
"Reports that say that something hasn't happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns -- the ones we don't know we don't know."
The "fat tails" are the unknown unknowns, and thinking about them is absolutely crucial to developing trading models (which is what I do for a living.)
I'm sure the journalist doesn't understand "standard errors", "geometric compounding of errors", or "fat tails". He's just a parrot repeating stuff without any clear understanding of the concepts.
As for the unknown unknowns, fuggedaboutit!
Friday, October 20, 2006
Bread and Circuses
From Bloomberg, we have World Series Fever Grips Detroit as Tigers Help Trump Job Woes.
Witness Michael Weiss, a 12-year assembly line worker at a Ford Motor Co. truck plant. While Ford's troubles deepened this year and Weiss, 37, contemplated a buyout offer, he and his wife stopped taking vacations and switched to smaller vehicles.
Yet this week the Livonia, Michigan, couple paid $137 for Detroit Tigers souvenirs as their baseball team prepared for its first World Series since 1984.
"The Tigers give us something to watch," says Kendra Weiss, 37. "They give us something to do."
The hard part will come after the Series, says Boyle.
"This year's ride has been wonderful, but it won't reverse the decline of the U.S. auto industry."
Let's not forget that 21% of Detroit is unemployed. Yep, 21% (you read that right!)
Give them bread & circuses, who needs an economy?
Witness Michael Weiss, a 12-year assembly line worker at a Ford Motor Co. truck plant. While Ford's troubles deepened this year and Weiss, 37, contemplated a buyout offer, he and his wife stopped taking vacations and switched to smaller vehicles.
Yet this week the Livonia, Michigan, couple paid $137 for Detroit Tigers souvenirs as their baseball team prepared for its first World Series since 1984.
"The Tigers give us something to watch," says Kendra Weiss, 37. "They give us something to do."
The hard part will come after the Series, says Boyle.
"This year's ride has been wonderful, but it won't reverse the decline of the U.S. auto industry."
Let's not forget that 21% of Detroit is unemployed. Yep, 21% (you read that right!)
Give them bread & circuses, who needs an economy?
Risky Business
From the AP in San Diego, we have Troops' debt a growing security concern.
Thousands of U.S. troops are being barred from overseas duty because they are so deep in debt they are considered security risks, according to an Associated Press review of military records.
Data supplied to the AP by the Navy, Marines and Air Force show that the number of clearances revoked for financial reasons rose every year between 2002 and 2005, climbing ninefold from 284 at the start of the period to 2,654 last year. Partial numbers from this year suggest the trend continues.
Do you see the problem?
Thousands of U.S. troops are being barred from overseas duty because they are so deep in debt they are considered security risks, according to an Associated Press review of military records.
Data supplied to the AP by the Navy, Marines and Air Force show that the number of clearances revoked for financial reasons rose every year between 2002 and 2005, climbing ninefold from 284 at the start of the period to 2,654 last year. Partial numbers from this year suggest the trend continues.
Do you see the problem?
Humpty Dumpty
From the Andover Townsman, we have Judy "Sleepy" Wakefield writing about: Housing: What a difference a year makes.
"It's stabilization," local realtor J.B. Doherty said of the current local real estate scene, with which he has been involved for the past 33 years.
"There's not much appreciation if you just got into the housing market," he said. "It's more like depreciation."
It's stabilization!
There's not much appreciation!
It's more like depreciation!
All within a few sentences.
"When I use a word," Humpty Dumpty said, in rather a scornful tone, "it means just what I choose it to mean -- neither more nor less."
"The question is," said Alice, "whether you can make words mean so many different things."
"The question is," said Humpty Dumpty, "which is to be master -- that's all."
"It's stabilization," local realtor J.B. Doherty said of the current local real estate scene, with which he has been involved for the past 33 years.
"There's not much appreciation if you just got into the housing market," he said. "It's more like depreciation."
It's stabilization!
There's not much appreciation!
It's more like depreciation!
All within a few sentences.
"When I use a word," Humpty Dumpty said, in rather a scornful tone, "it means just what I choose it to mean -- neither more nor less."
"The question is," said Alice, "whether you can make words mean so many different things."
"The question is," said Humpty Dumpty, "which is to be master -- that's all."
Tuesday, October 17, 2006
Rambling Realtors
From the LA Daily News, we have Alex Dobuzinskis setting new records of journalistic lows in Sales hit 8-year low for condos.
Young potential first-time buyers are waiting, perhaps expecting prices to plummet, said RE/MAX Realtor Mike Lebecki.
"They're very cautious, and I don't think they're thinking their caution through necessarily," he said. "If all their friends are being cautious and not thinking it through, then they're all doing the same thing, and they're going to continue to ... buy BMWs and pay rent."
Can somebody explain what this above rambling actually means?
I think it means that Mike Lebecki isn't making any money selling houses, and has resorted to smoking Meth.
And what's the problem with being a "Beemer owning loser renter"? Sounds good to me if you can afford it.
As for the journalist reporting this, well...
Young potential first-time buyers are waiting, perhaps expecting prices to plummet, said RE/MAX Realtor Mike Lebecki.
"They're very cautious, and I don't think they're thinking their caution through necessarily," he said. "If all their friends are being cautious and not thinking it through, then they're all doing the same thing, and they're going to continue to ... buy BMWs and pay rent."
Can somebody explain what this above rambling actually means?
I think it means that Mike Lebecki isn't making any money selling houses, and has resorted to smoking Meth.
And what's the problem with being a "Beemer owning loser renter"? Sounds good to me if you can afford it.
As for the journalist reporting this, well...
Monday, October 16, 2006
Quack, quack!
From the San Diego Union Tribune, we have Diane "Bimbo" Bell writing about Duck duds draw honks but no sale.
Why was Angel McCormick standing at a busy intersection dressed in a duck costume the other day?
If sign-spinning youngsters can get the attention of motorists for housing development sales, McCormick figured she could do the same for her four-bedroom house in Murrieta.
She held her “For Sale” sign while wearing the bright yellow duck outfit for nearly 11 hours over four days on various well-traveled streets near her home. It brought her lots of smiles and waves, one unappreciated hand gesture, three requests for fliers, three phone queries and one house tour by a couple who followed her home. Despite McCormick's ingenuity and a few low-ball offers, however, her house remains on the market.
She has dropped her price range to $535,000-$547,000, even though a slightly smaller home nearby sold early last month for $595,000.
Are Americans so stupid that a lame-ass duck costume will induce you to buy a half a million+ dollar house?
Don't answer that question. Thanks!
Why was Angel McCormick standing at a busy intersection dressed in a duck costume the other day?
If sign-spinning youngsters can get the attention of motorists for housing development sales, McCormick figured she could do the same for her four-bedroom house in Murrieta.
She held her “For Sale” sign while wearing the bright yellow duck outfit for nearly 11 hours over four days on various well-traveled streets near her home. It brought her lots of smiles and waves, one unappreciated hand gesture, three requests for fliers, three phone queries and one house tour by a couple who followed her home. Despite McCormick's ingenuity and a few low-ball offers, however, her house remains on the market.
She has dropped her price range to $535,000-$547,000, even though a slightly smaller home nearby sold early last month for $595,000.
Are Americans so stupid that a lame-ass duck costume will induce you to buy a half a million+ dollar house?
Don't answer that question. Thanks!
Friday, October 06, 2006
Read the fine print...
From the Asbury Park Press in New Jersey, we have Housing Bust.
Kara Homes Inc., one of the biggest home builders in Monmouth and Ocean counties, has filed for protection from creditors under the bankruptcy laws.
Middletown resident Gina Haspilaire and her husband, Richard, have been waiting to move into their home at Cottage Gate at Navesink in Middletown since March 2005. The home's delivery date kept being delayed, Gina Haspilaire said.
Now the couple want Kara to return their deposit, which is about $125,000, she said. The couple used money saved for their son's college education to pay for the downpayment, figuring they would replace it with money from the sale of their existing home.
"When we did this, my son had two more years to finish high school," Haspilaire said. "Now we can't sell our house, and they won't give us back the money."
They don't want the house, which is completed but without a certificate of occupancy. She said she believes the contract was voided because the home wasn't delivered on time.
Wow, so much stupidity, so little time...
You gambled with your son's college fund two years before he starts?
Secondly, you can "believe" that the contract is voided but chances are it's not. Any smart builder will have builtin contingency clauses (and remember! the "crooked" builders are always smart.)
Also, that's precisely the risk in pre-construction. You takes your chances, and you pays the price.
Yep, this may be a housing bust but it's a full-blown bull market in stupidity!
Kara Homes Inc., one of the biggest home builders in Monmouth and Ocean counties, has filed for protection from creditors under the bankruptcy laws.
Middletown resident Gina Haspilaire and her husband, Richard, have been waiting to move into their home at Cottage Gate at Navesink in Middletown since March 2005. The home's delivery date kept being delayed, Gina Haspilaire said.
Now the couple want Kara to return their deposit, which is about $125,000, she said. The couple used money saved for their son's college education to pay for the downpayment, figuring they would replace it with money from the sale of their existing home.
"When we did this, my son had two more years to finish high school," Haspilaire said. "Now we can't sell our house, and they won't give us back the money."
They don't want the house, which is completed but without a certificate of occupancy. She said she believes the contract was voided because the home wasn't delivered on time.
Wow, so much stupidity, so little time...
You gambled with your son's college fund two years before he starts?
Secondly, you can "believe" that the contract is voided but chances are it's not. Any smart builder will have builtin contingency clauses (and remember! the "crooked" builders are always smart.)
Also, that's precisely the risk in pre-construction. You takes your chances, and you pays the price.
Yep, this may be a housing bust but it's a full-blown bull market in stupidity!
My Mommy made me do it!
From The Capital Times in Madison, WI, we have Mike Ivey reporting on: The big chill for home sellers.
In 1996, Marc Loy and Ron Becker bought a four-bedroom, two-bath brick home near Tenney Park for $160,000 and over the past 10 years have watched its assessed value more than double.
Loy and Becker are moving to Cincinnati in January for a job commitment and have already purchased another home there. They aren't sure what to do if they can't sell their Madison home soon.
"We can't afford to pay two mortgages," said Loy.
Then, why did you get two mortgages, O Great Fucktard?
In 1996, Marc Loy and Ron Becker bought a four-bedroom, two-bath brick home near Tenney Park for $160,000 and over the past 10 years have watched its assessed value more than double.
Loy and Becker are moving to Cincinnati in January for a job commitment and have already purchased another home there. They aren't sure what to do if they can't sell their Madison home soon.
"We can't afford to pay two mortgages," said Loy.
Then, why did you get two mortgages, O Great Fucktard?
Thursday, October 05, 2006
The Rise of "Non-Traditional" Loans
From the FDIC, we have a detailed report on housing.
For those not familiar with interest-only (I/O) loans, basically you're only paying the interest on the loan, not paying back part of the principal (as you would with just about any loan.)
How, you ask, is this possible?
The answer is that it's not. There is always a reset clause (say 3 years) when you have to pay back the principal in full. Needless to say, most people will not be able to so they will need to refinance into a different loan.
I/O loans make sense in very specific contexts (say you need financing because you plan to get a large payment a year from now, etc.) It makes ZERO sense for the "average" person. Basically, you're just renting from the bank except that you're on the hook if the value of the asset actually falls.
Do you see the fucking problem?
For those not familiar with interest-only (I/O) loans, basically you're only paying the interest on the loan, not paying back part of the principal (as you would with just about any loan.)
How, you ask, is this possible?
The answer is that it's not. There is always a reset clause (say 3 years) when you have to pay back the principal in full. Needless to say, most people will not be able to so they will need to refinance into a different loan.
I/O loans make sense in very specific contexts (say you need financing because you plan to get a large payment a year from now, etc.) It makes ZERO sense for the "average" person. Basically, you're just renting from the bank except that you're on the hook if the value of the asset actually falls.
Do you see the fucking problem?
Tuesday, October 03, 2006
Why did the chicken cross the road?
From the Sun Sentinel in Palm Beach, FL, we have a pair of dueling banjos, Tal Abbady and Robin Benedick singing a song about: Palm Beach County housing expenses pummel paychecks.
"I've had to tighten my belt. We don't go out much. We don't live extravagantly," said retiree Ed Fuller, 65, who bought his house west of West Palm Beach three years ago.
"At least we've got the ocean down here to look at," he added of his outings to the beach.
The retired Anheuser-Busch dispatcher has a $2,200 monthly mortgage payment, about $100 more than his monthly income. He draws from his 401(k) account to make ends meet, but knows that money will dry up before his mortgage is paid off.
Why would a retiree on a fixed income buy a house that costs more than his income?
All together now: speculation!
I have news for you, Ed.
You're an FB!
The B stands for "borrower", and you can work out the effin' F for yourself!
"I've had to tighten my belt. We don't go out much. We don't live extravagantly," said retiree Ed Fuller, 65, who bought his house west of West Palm Beach three years ago.
"At least we've got the ocean down here to look at," he added of his outings to the beach.
The retired Anheuser-Busch dispatcher has a $2,200 monthly mortgage payment, about $100 more than his monthly income. He draws from his 401(k) account to make ends meet, but knows that money will dry up before his mortgage is paid off.
Why would a retiree on a fixed income buy a house that costs more than his income?
All together now: speculation!
I have news for you, Ed.
You're an FB!
The B stands for "borrower", and you can work out the effin' F for yourself!
Can you hear yourself speaking?
From the Virginia Daily Press, we have Novelda Summers writing about: Report cites economic decline.
The slowdown in the region's economy -and particularly in the Defense Department's efforts to help military members buy homes off base - will drive push deceleration in the region's housing market. That market currently sees homes overvalued by about 20 percent - twice as overvalued as last year at this time.
That doesn't mean prices are due to fall, Koch said. It means sellers won't make as much of a profit as they might have expected, and homes will stay on the market longer. A house listed at $400,000 might fetch $350,000, or sellers might find themselves offering incentives such as closing costs.
Prices are "not due to fall", but a "house listed at $400,000 might fetch $350,000."
Illegal drugs, or stupidity? You decide.
The slowdown in the region's economy -and particularly in the Defense Department's efforts to help military members buy homes off base - will drive push deceleration in the region's housing market. That market currently sees homes overvalued by about 20 percent - twice as overvalued as last year at this time.
That doesn't mean prices are due to fall, Koch said. It means sellers won't make as much of a profit as they might have expected, and homes will stay on the market longer. A house listed at $400,000 might fetch $350,000, or sellers might find themselves offering incentives such as closing costs.
Prices are "not due to fall", but a "house listed at $400,000 might fetch $350,000."
Illegal drugs, or stupidity? You decide.
How to Fail Economics
From the "general economics reporter" of the Boston Herald, Jay Fitzgerald, we have: Gas price drop balm to housing bite.
Pump prices for a regular gallon of gas have taken a big fall in recent days and weeks, hitting an average of $2.30 this past weekend in Massachusetts, far below even the most optimistic recent projections of possible price declines, according to new AAA Southern New England data.
In August, gas prices were hovering in the $3.05 range.
Sara Johnson, an economist at Lexington’s Global Insight, a research firm, said falling fuel prices could “strengthen households’ purchasing power,” as well as encourage people to drive more to restaurants and shops.
The extra spending will help offset housing woes - but not completely, she said.
Let's say this "average family" drives a lot, and spends $200 on gas a month. How much money are they saving?
(1 - 2.30/3.05) * 200 = $49.18
A whole whoppin' $50 a month. That's $600 a year.
Yessirree, bob! That's definitely going to save the housing market.
Pump prices for a regular gallon of gas have taken a big fall in recent days and weeks, hitting an average of $2.30 this past weekend in Massachusetts, far below even the most optimistic recent projections of possible price declines, according to new AAA Southern New England data.
In August, gas prices were hovering in the $3.05 range.
Sara Johnson, an economist at Lexington’s Global Insight, a research firm, said falling fuel prices could “strengthen households’ purchasing power,” as well as encourage people to drive more to restaurants and shops.
The extra spending will help offset housing woes - but not completely, she said.
Let's say this "average family" drives a lot, and spends $200 on gas a month. How much money are they saving?
A whole whoppin' $50 a month. That's $600 a year.
Yessirree, bob! That's definitely going to save the housing market.
The Shearing of the Sheep
From the OC Register, we have Jeff Collins writing about: Housing's Hail Mary.
But after two months without a buyer, Toranto hoped to enlist a higher authority in her sales campaign, entreating St. Joseph – patron saint of home seekers – to help sell her tidy two-bedroom unit at the back of a quiet complex.
On a recent weekday morning, she dug a 6-inch hole in the brick planter next to her front door, then buried a 3-inch plastic statue of St. Joseph head-first into the dirt.
"Usually, I'm skeptical about these things," said Toranto, 71, an interior designer. "But the times we're in, the market being as slow as it is ... I figured I'd give it a try."
Doesn't the lord help those who help themselves, and lower the price, or some such?
"I believe he's the patron for all us Realtors," said Century 21 agent Lourdes Carroll of La Palma. "When I go and sell a house, I take the statue and I ask the seller to ask St. Joseph for his help. … It's great to have heavenly friends."
Isn't it ever?!?
Kathy Lopez, a Washington Mutual loan consultant, said St. Joseph helped her sell her home at the height of the housing slowdown in the mid- 1990s although she did end up taking less than she paid.
And sometimes the lord giveth less than what she paid...
Way to go, St. Joe! MISSION ACCOMPLISHED!
But after two months without a buyer, Toranto hoped to enlist a higher authority in her sales campaign, entreating St. Joseph – patron saint of home seekers – to help sell her tidy two-bedroom unit at the back of a quiet complex.
On a recent weekday morning, she dug a 6-inch hole in the brick planter next to her front door, then buried a 3-inch plastic statue of St. Joseph head-first into the dirt.
"Usually, I'm skeptical about these things," said Toranto, 71, an interior designer. "But the times we're in, the market being as slow as it is ... I figured I'd give it a try."
Doesn't the lord help those who help themselves, and lower the price, or some such?
"I believe he's the patron for all us Realtors," said Century 21 agent Lourdes Carroll of La Palma. "When I go and sell a house, I take the statue and I ask the seller to ask St. Joseph for his help. … It's great to have heavenly friends."
Isn't it ever?!?
Kathy Lopez, a Washington Mutual loan consultant, said St. Joseph helped her sell her home at the height of the housing slowdown in the mid- 1990s although she did end up taking less than she paid.
And sometimes the lord giveth less than what she paid...
Way to go, St. Joe! MISSION ACCOMPLISHED!
Sunday, October 01, 2006
The Chickens Rebel Against the Guards
From CBS Marketwatch, we have: Lenders gone wild.
Countrywide Financial, the nation's largest residential mortgage lender, argued against new rules. "Interest-only and payment option adjustable mortgages have been tested in previous economic cycles and are fundamentally sound loan products," Countrywide wrote in its official comment on the proposed guidelines. Requiring lenders to qualify borrowers on the true cost of a loan, the company said, "would tend to defeat the intended function of the loan and would significantly reduce the number of borrowers that could qualify."
See if you can read through this thoroughly Orwellian argument!
The Fed regulators have taken the proverbial punchbowl away. The tide has receded, and only now can one see who's been swimming naked (Thanks, Mr. Buffett, for that wondrous metaphor!)
After all, why should lenders worry about the "true cost of a loan"?
Need additional evidence?
Mr. Mozilo and his cronies have been dumping the shares of CFC like pimps dumping a syphilitic whore from their roster.
Countrywide Financial, the nation's largest residential mortgage lender, argued against new rules. "Interest-only and payment option adjustable mortgages have been tested in previous economic cycles and are fundamentally sound loan products," Countrywide wrote in its official comment on the proposed guidelines. Requiring lenders to qualify borrowers on the true cost of a loan, the company said, "would tend to defeat the intended function of the loan and would significantly reduce the number of borrowers that could qualify."
See if you can read through this thoroughly Orwellian argument!
The Fed regulators have taken the proverbial punchbowl away. The tide has receded, and only now can one see who's been swimming naked (Thanks, Mr. Buffett, for that wondrous metaphor!)
After all, why should lenders worry about the "true cost of a loan"?
Need additional evidence?
Mr. Mozilo and his cronies have been dumping the shares of CFC like pimps dumping a syphilitic whore from their roster.
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