Realtors?
Mortgage brokers?
Builders?
Appraisers?
Mexicans?
Flippers?
Average Joe?
Renters?
New buyers?
The mainstream media?
Republicans in Congress?
Bankers?
Generation X & Y?
Baby Boomers?
Foreigners?
Bond holders?
Stock holders?
Osman?
Home Depot workers?
May 16, 2006
HP'ers question of the day: Who is going to get hurt the most during the housing meltdown?
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28 comments:
Everyone
Realtors
Mortgage brokers
Builders
Appraisers
Mexicans
Flippers
Average Joe
New buyers
Baby Boomers
Foreigners
Stock holders
Home Depot workers
It's going to be interesting to see how aggresive Home Depot/Loews gets once the slowdown really hits.
I just shorted 200 shares of Loews 5 minutes ago...
(1) flippers and young homebuyers
(2) local governments
(3) leveraged condo developers
(4) Banks owning foreclosed flipper properties
But for #3 and #4, this is only corporate bankruptcy. THe people making the decisions will be quite wealthy thanks to their salaries and their assets shielded by corporate liability laws.
Shareholders will be screwed.
Not everyone who bought a second home did it as an "investment." Some bought out of fear - like my folks - they were convinced they would be priced out forever if they did not buy their retirement home last year.
Everyone will be affected in some way.
nyc, when I did the math, 2 one hundredths of 1% of the money invested in the stock market was in gold
meanwhile, 70% of households own houses (and on leverage no less)
anon - I forgot local governments who are now addicted to the tax revenues from appreciated homes. Will they take down the tax bills now - reappraise downward? That'll be VERY interesting
my bet is iranian ragtops. when this thing blows, W will unleash the dawgs of war to take the sheoples minds off the paper loss and blame the $200 oil price on those sandcrabs.
Where do you get these great pics?
A better question is who deserved to get hurt and in what order. Here you go:
1. Flippers - may they lose their shirt
2. Realtors - may they be confined to work at Burger King forever
3. New buyers - ignorance will not be bliss this time
4. Mortgage brokers - fraud indictments coming, no more weekend trips to Vegas
5. Appraisers - fraud indictments coming your way too
6. Republicans in Congress - let the liberals have a turn to screw things up now
7. The mainstream media - further degregation of trust
8. Baby Boomers - only thinking about themselves
9. Builders - at least they admit a downturn
10. Average Joe - because my name is always being used for silly terms like this one
I just shorted 200 shares of Loews 5 minutes ago...
And why would you do that and what has it to do with the HP? Loews is the commercial property causlty insurer. Hopefully you shorted Lowes, the home improvement retailer.
WRT gold, the market for physical gold is miniscule. Regarding mass-public participation and evidence of a potential bubble, one must look at public proxies for gold, such as ETFs, funds, and shares. Also, look at the trajectory of prices. Clearly, the price of gold and many of its share proxies have turned "faster-than-exponential" or asymptotic, a classic bubble trajectory. Bubbles ALWAYS reach terminal velocity, abruptly reverse, and commence a breathtaking (and confidence-shattering) decline right back to the point at which the manic or terminal phase commenced. For the price of gold (POG), I estimate the price diverged from gold as a hedge or as "money" at about $400-$450. Although I expect gold and most other commodities to outperform paper assets (including leveraged real estate) for years to come, I also suspect that a commodities price crash is dead ahead, the bottoming process of which might last for much longer than goldbugs and latecomers to the commodities patch can imagine at this point. Still, gold below $500 is a "golden" buy for the long term. Moreover, during a crash, many of the small gold shares will evaporate, i.e., a la dot.bomb bubble shares, whereas I can't rule out the $HUI index losing 70-80% of its value at some point.
EXTREME caution in warranted in the commodities markets.
Out of all the great pictures posted on this site, this one came damn close to making me spit up some coffee. All of the sudden my problems don't seem so bad.
...and the answer is all of the above, except hopefully renters and Home Depot workers(these poor saps already took the wrong path at the fork in the road of life)
autofx wrote: 'So, what's gonna happen? The US budget and trade deficits are gonna suddenly start to shrink? Big Ben is gonna stop printing dollars like there's no tomorrow and USD will regain strength against EUR, GBP and JPY? The housing market will have a soft landing in the face of further interest rate hikes?
"Commodities price crash is dead ahead"...wow, what're you smokin', pal?'
----
First, I don't smoke, and can we wait awhile before we become so pally? ;-)
I was early to the commodities turn in the late '90s, as "things" became deeply discounted fundamentally to bubbly paper assets. I anticipated the Fed deeply cutting rates (and I expect them to do it again and keep the funds rate at or below 1%) and the onset of the secular bear market for stocks and a secular bull market for commodities. What I missed was the extent to which the property bubble has run, but I also anticipated that "at some point" gold would turn bubbly from excess liquidity and a weaker currency. Well, it happened, and there is a speculative atmosphere in the trading pits, funds, and hedge funds. That the metals markets are so small and SO MUCH LEVERAGE IS USED, it is much easier to create volatility and then a bubble or witness a crash once prices go asymptotic, as we have seen.
Yes, the trade deficit is quite likely to contract, as the foreign supranationals repatriate dollars back from Asia (primarily) when the US economy and, therefore, the Asian economies downshift. The US$ is likely to AT LEAST stop decelerating in such a situation, even as the monetary base soars but M2 slows and even contracts over a protracted period as a result of mortgage defaults, rising loan-loss reserves, bank insolvencies, etc.
I expect demographic factors to force a rise in the savings rate and slowing of growth of personal consumption expenditures from high-multiplier sectors such as autos, housing, child rearing, and consumer discretionary to Boomers spending a far larger share of lower income on low-GDP-multiplier spending, such as property taxes, medical co-pays, insurance and medications, and end-of-life care. Most of the growth of low-mult. spending dominating the economy going forward will not be supplied by cheap imports but by captive spending and drawing down on accumulated wealth/capital of the past 20-25 years. This is not bullish for China or Asia or for continuing rapid growth of demand for commodities.
There is even emerging the risk of Asian Crisis II with falling Asian currencies from hot money being yanked out of Asian countries. Overall, this is potentially bullish for the US$ and Treasury prices. I expect US Treasuries will easily outperform the SPX, including capital appreciation as the 10-year yield dips from 5.1% to below 3% by decade's end.
Check the precedent of the early to mid'90s in the US during the last Kuznets Cycle wipeout and in Japan since '94-'95. We could see the US post-bubble trend rate of nominal GDP slow from ~5% (7% historical avg.) to below 4% in the years ahead, with the real GDP post-bubble trend rate slowing from 2.6% to 2% or below.
None of this is bullish for commodities in the intermediate term, particularly with the US AND China set to slow from the bursting of the housing bubble AROUND THE WORLD, including Shanghai. What I sense most in recent weeks and months is the EXTREME confidence of goldbugs that gold is headed for $800, $1000, $3000, or to the Moon. Rarely does one hear a counterargument. There is too much one-way groupthink among goldbugs and not a small amount of ridicule and anger directed at anyone who would offer a reasonable case in dissent. Be careful, all.
Cheers!
Hi all.
I just read that San Diego just hit 60% increase in Mortgage-Default notices. The artical stated that the most ever issued was in 1992. That number was 2149.
Does anyone want to guess what the number is for today? 1533!
I'd like to see some guesses as to when we'll tie that number?
Mexican won't be hurt -- even the deepest recession here will seem like a fiesta compared to the hellhole they left. Realtors/appraisers/brokers will see their ranks thinned -- good riddance. Builders and flippers deserve a special place in hell, and many will get a reserved seat courtesy of the new bankruptcy law.
Average Joe and new buyers will have to stop spending money on crap, and use it to buy food and gas. Retail in this economy is going to suffer big time.
Gold is currently transforming from a commodity to a monetary instrument. To think of Gold as just a commodity is missing the boat.
Keith,
What about the drop in big screen TVs, 20"+ bling wheels, furniture, and other unnecessary things to blow the re-fi money on?
Lowes and Home Depot will still sell materials. Heck, I may finally build my house on my (now paid in full) land once I can get the builders and sub contractors to answer the phone and give me quotes. It took the designer 9 months to draw my plans las tyear after he heard I wasn't gonna break ground in 2 weeks. Things slow down it is good. that being said, there are three custom homes being built around the corner from me - one on 21 ac horse farm, one on a 30 ac horse ranch, and one on land that I bet is a spec house by a flipper since it is now moving verrry slowly. Things are not bad everywhere.
Down 25% from 2005 peak median nationwide mostly because the economy tanks and people got to sell out unless they have a very secure job (and so does their wife if both work).
RENTERS
TAXPAYERS
DECENT PEOPLE, IN GENERAL
Wonder what the real story is in Brazil.. They've nearly got a full insurgency going amongst their underclass 'gang' aka rebels.
As I suggested to autofx, BCA Research sees "gold mania" phase, with the bullish consensus not just bullish but excessively so: http://tinyurl.com/gmsx4.
Consider that the $HUI index is up 10 times since '00 or more than 2 orders of exponential magnitude (nearly 40%/yr.) in JUST OVER 5 YEARS. This is MORE THAN THE NASDAQ BUBBLE from '95 to '00 when the index rose more than 6 times or more than 1 3/4 orders of exp. mag. (~37%/yr.).
I've invested in and been a student of economic and finanical markets history for more than two decades. The classic bubble trajectory is a quintupling of prices in ~5 years or a little more than 30%/yr. Thereafter, the Law of Large Numbers ALWAYS comes into play, pushing prices to unsustainable heights, only to have prices commence a sickening plunge.
Housing and metals stocks have followed the bubble script and then some, owing to once-in-a-lifetime demographic effects and torrents of credit-money supply. Bank stocks are also high risk at this point. Insurance stocks, too, as they are likely to suffer from pathetically low ROA from VERY LOW Treasury yields hereafter.
The critical point, gentlemen, is that we've already had the move in metals and their proxy, the metal shares. Prices are discounting years' worth of earnings to the gold shares. If the move is not done, it is nearly so.
Stepping back from metals on rallies is prudent, I strongly suspect. Don't get caught up in the emotion of the manic phase of the move.
When the crash comes, it will be spectacular in one respect and just plain tragic otherwise.
You won't be able to say that you were not warned ahead of time.
Here's a link to the video of her hitting her face on the board.
I remember reading that she broke her nose and had a nasty cut on it as well.
http://www.dumpalink.com/media/1122541851/That_is_going_to_hurt
OUCH!
Not mortgage brokers. They'll be as busy as ever in another year or two as all the 3/1 and 5/1 ARMs come due for their first adjustment, not to mention the people trying to escape their "option ARMs" that are now adjusting to 8%. I do real estate closings as a side gig and the refi business is slow now, but the HELOC business is as hot as ever. Here in the DC area people still have TONS of equity they haven't spent yet.
I thought Loews was a movie theater chain? Maybe people will be so poor that they can no longer afford to buy the $5 cokes and $7 popcorn with their $9 movie tickets.
Loews, Lowes, what does it matter, you apparently missed the point.
NYC Cop said:"I have a question for everyone. It seems that the MSM is reporting that there is a "bubble" in the precious metals market and that further corrections are ahead. My question is as follows? How can a "bubble" exist without the participation of the masses? There is not a single person that I work with that is aware that gold is hitting new highs. At work, everyone is still dicussing how "you can't go wrong with real estate" (as I chuckle to myself). How can this "bubble" in gold exist if the general public isn't involved as they are with real estate. Don't get me wrong, I do believe that eventually, like real estate fools will bid gold up to the sky once a mania takes hold of the general public, but I don't see that happening yet. Am I failing to see something that the MSM sees?"
I totally agree with you NYC. None of my friends discuss gold at all. They only say its too volatile for them. I do agree, however, I feel there is alot more of an upside in gold before it turns into a bubble investment.
MSN is trying to scare investors into selling their positions of gold. last year at this time there was another "correction" in gold- nothing out of the ordinary. Don't let anyone try to "scare" you into selling gold shares. I read here awhile back that any investment on the upside has volatility, where as a declining asset is slow and steady going down to instill hope that it will return. I think this is what we are seeing right now both, in RE and gold.
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