February 28, 2007
Poor people should not live in big houses and drive nice cars. Debt is not wealth. A lesson will be learned.
It absolutely amazes me to read some of the comments from trolls on this blog - mocking people for saving, for being frugal, for clipping coupons, for driving 5-year-old cars, for living within their means, for buying things with cash versus credit.
Well, they don't pay for a lot of it.
Never before has credit flowed so freely and never before has so much debt accumulated. Never before has it been easier to buy a house. That is, if you don't mind non-traditional mortgage products where no money down is needed and not only can you avoid paying down the principle (interest-only), but you don't even have to pay all the interest due (pay-option).
Of course, as a long-term plan, this looks like it may not work out so well now that housing prices are falling and subprime lenders are falling even faster.
The younger set has been fearless when it comes to taking on new debt over the last ten years. This is likely to change in the next ten years - all part of the Alan Greenspan legacy.
It's too bad that Lemming suicide is a myth - it would have provided a fine analogy for the headlong rush by youngsters toward the dream of homeownership and sure riches. The trouble is that nontraditional mortgage products, subprime lending, short sales, and foreclosures are no myths.
Sales were down 20.1% compared with January 2006.
Fleck: The game is over. Subprime helped cause the housing price bubble, and it's over. The Great Unwinding is here.
Baby boomers have bet their entire retirement on their home's phantom equity, their company's pension, and their stock portfolio held 100% in dollars.
What happens if it all goes poof?
I fear for us. All of us.
Think it can't all go awry? Think the government will be there to take care of you? Anyone remember Katrina?
HP dedicates this to the Desperate Homedebtors, REIC employees and hedge funds. The housing bubble doesn't love you anymore
It's oooovvvveeeeerrrrr... It's oooovvvveeerrrrr...
Posted by blogger at 2/28/2007
Remember this HP post on Friday night?
PEOPLE OF THE WORLD, THE TIME IS NIGH.
THE GREAT HOUSING CRASH IS HERE. DUCK AND COVER. LIGHT FUSE AND GET AWAY.
YOU ONLY HAVE DAYS TO PREPARE.
THE EPIC HOUSING CRASH IS UNDERWAY.
THE GREAT UNWINDING IS HERE. THE BIGGEST BUBBLE, EL FINANCIAL MANIA GRANDE, IN HUMAN HISTORY HAS BEEN PIERCED.
IT HATH BEEN FORETOLD.PEACE OUT. GOOD LUCK. FULL STOP.
I hope many of you, not because of HP but because of reality, have made the moves in your lives to prepare not just for what's happening, but for what is to come. The Dow could go back up 500 points tomorrow (it won't), but that's not the issue. The issue is that The Great Unwinding is here. No more BS. No more spin. It's here. So get ready and deal with it.
Now I'm going to try to think of tomorrow's winning Lotto numbers. I'll let you know if I come up with anything.
February 27, 2007
Cheney almost bites it. China stocks drop 10%. Dow tanking. Subprime in meltdown. NAR puts out bogus report.
U.S. Vice President Dick Cheney was whisked into a bomb shelter immediately after a Taliban suicide bomber struck the main American military base he was visiting in Afghanistan on Tuesday.
At least 2.1 million vacant homes for sale in America, millions more on the way, and people are still calling "bottom"
Yup, looks like a bottom to me.
I don't get people who keep calling bottoms. Sure, you have The Corrupt David Lereah - he's paid to lie. But then you get the Lowes CEO this week saying that even though retail sales at his chain are plummeting, "We are encouraged by indications that our sales trends have bottomed."
Man, talk about missing the memo.
Even Bob Toll isn't calling bottom anymore, realizing he not only looked the fool last time he did that, but that there's this little thing called the SEC, and this little policy called Sarbanes Oxley, and you can't go out and just tell bald-face lies when you're the company's largest shareholder and CEO. No matter how much you want to pop your stock so you can keep unloading.
And finally, with those 2.1 million vacant homes, with millions more on the way, with nobody interested in buying them, my only questions are....
How fricking ugly will this get? And what year will we truly bottom?
Vacant Homes For Sale Cloud Economic Hopes
Amid brightening hopes that the U.S. housing market is stabilizing, some economists are zeroing in on a piece of data that could augur badly for the consensus view: the homeowner vacancy rate.
That figure, an often-overlooked measure of how many homes for sale in the country are empty, has climbed to its highest level since the Census Bureau began tracking it four decades ago. Last week, the bureau said that in the final three months of 2006 there were about 2.1 million vacant homes for sale.
That brought the national homeowner vacancy rate to 2.7%, up from 2.0% a year ago.
Without all the subprime loan buyers, without the no-down, no-doc, liars-loan crowd, without all the cash-back-at-closing scamsters, without all the flippers, without all the investors, and without all the people betting on future price appreciation, my question is:
Who the heck is gonna buy any of those millions and millions and millions and millions of homes for sale?
February 26, 2007
Posted by blogger at 2/26/2007
The problem (as the bag holders will now find out) is that they homedebtor who took out the loan actually put 0% down. He got a second or piggyback loan from another lender for the other 20%.
So Prime actually equals Subprime in many cases. Maybe the majority of cases.
My question is, why isn't this being reported, and why do "analysts" state that they don't expect the Subprime meltdown to spill over to Prime, when we all know that they're one and the same?
Analysts say the housing bust is pulling America into recession, citing a 14.4pc drop in housing starts
The effects of the Great Housing Crash will be enormous. Nearly every aspect of life around the globe will be effected in some way. When you have massive and historic worldwide speculation enabled by massive and historic leverage, and then the ponzi scheme ends, the unraveling will be epic.
WASHINGTON — Growing trouble in the subprime mortgage industry poses the greatest risk to financial markets right now, according to a survey of business economists to be released Monday.
More MSM coverage of the Great US Housing Crash over here in the British papers. A bit odd, considering England will suffer a far greater housing crash than even the US one day soon. I guess they want to show the idiots over here that yes, housing prices can fall, ponzi schemes can end.
February 25, 2007
Posted by blogger at 2/25/2007
Shopping at Wal-Mart is the most un-American, un-patriotic, selfish, hurtful and self-destructive thing you can do
I know intuitively Wal-Mart seems harmless. Low prices, efficiency, capitalism, low inflation. Those are all good things, right?
Nope. Not when taken to an extreme. Not when an unchecked monopoly overtakes a market.
Wal-Mart folks has destroyed America. You just don't realize it yet, because it sure is fun to get stuff for so much cheaper than it used to be. Especially when so many things are so much more than they used to be (healthcare, college, homes, day care, movies, etc). Wal-Mart seemed like the only way to stay ahead for most people.
What people don't realize though is that Wal-Mart has destroyed the middle class. Wal-Mart has destroyed the American manufacturing base, and tens of thousands of small to medium sized American businesses. Wal-Mart has killed the character of American towns. And Wal-Mart caused the housing bubble, by creating a massive trade imbalance which caused China to reinvest their reserves in US t-bills, thus deflating interest rates and inflating home prices.
Wal-Mart is evil. And people who shop at Wal-Mart need to see that they're hurting America every time they walk through those doors.
Here's an interesting take on the catch-22 caused by our addiction to low prices and Chinese crap.
“The China trade deficit really reflects the state of the global economy: China is the world’s factory and the U.S. is its supermarket,” Gereffi said. “It’s not caused by any nefarious Chinese strategy.” Gereffi said efforts to improve conditions in the U.S. by finding fault with China’s monetary or labor practices are misplaced. Answers to American challenges are best found at home, he said.
“Pressing China to let the yuan appreciate -- the current policy of the American government -- even if successful, would contribute only slightly to an already steady U.S. economy,” he said. “Far more fruitful would be addressing the anxieties of American workers about job security, retirement and health care with new ways of providing the social supports once found in pensions, lifelong employment, company health insurance, Social Security and Medicare.
“Cheap Chinese goods and labor have pitted the American consumer, in love with inexpensive goods, against the American worker, in fear of cheap labor,” Gereffi said. “Unfortunately, these are often two sides of the same coin: America’s workers are also its consumers. It’s time to stop fighting with ourselves on this front
Arizona housing bubble and mortgage fraud funder shut down by regulators, 75 offices closed, untold damage done
Regulators have shut down Mesa-based Eagle First Mortgage and its more than 75 Valley branches, citing illegal lending practices.The Arizona Department of Financial Institutions pulled the license of the mortgage firm and its broker, David Sanchez, last week.
Man, next you'll hear Bernanke admit that the Fed pumped up money supply and liquidity in order to create a massive housing bubble, which was used to drive consumer spending so as to placate and confuse an American population who had lost their manufacturing base and world competitive position.
February 23, 2007
THE GREAT HOUSING CRASH IS HERE. DUCK AND COVER. LIGHT FUSE AND GET AWAY. YOU ONLY HAVE DAYS TO PREPARE.
THE EPIC HOUSING CRASH IS UNDERWAY. THE GREAT UNWINDING IS HERE. THE BIGGEST BUBBLE, EL FINANCIAL MANIA GRANDE, IN HUMAN HISTORY HAS BEEN PIERCED.
IT HATH BEEN FORETOLD.
PEACE OUT. GOOD LUCK. FULL STOP.
Posted by blogger at 2/23/2007
Post "Great Unwinding" article highlights and tinyurls, talk about random stuff, have a good chat, keep it clean...
Posted by blogger at 2/23/2007
What's the bigger, more predictable, more spectacular meltdown happening in America today - Housing or Britney?
There are millions of unwanted, for-sale, wildly overpriced homes in America today. Many are in foreclosure. Many are owned by flippers and fraudsters. Many are sitting empty. Many are owned by regular folks just trying to get out, or into a new home.
In addition, sub-prime has completely melted down, severely limiting the buyer pool (including the fraudsters).
And every sane person in America knows there was a housing bubble, which ended in 2005, and that we're in a housing crash or "correction" now.
So my question, my simple question is...
Who is going to buy all those damn homes?
Oh dear god is this going to end badly.
February 22, 2007
Hey, someone woke up a writer at Time magazine this week! They actually ran a housing bubble story - go figure. And a really really poor one at that. But hey, it's a start.
We're still waiting (and waiting, and waiting) for that make-good cover. . After all, the housing crash is the biggest story in the country today, and did win the AP business story of 2006. But I guess Time didn't notice that.
"Our bad - you shouldn't have gone ga-ga for real estate. Sorry!"
"The Great Housing Ponzi Scheme Has Ended"
Here's Time's naive silly little story today (thanks HP'ers for the tip):
Will The Housing Bubble Burst in 2007?
I can't stand the guy, I think he all about publicity and selling books, but damn, he's spot-on here. Just like he is about the entitlements disaster awaiting America, and some other great points. Don't throw the baby out with the bathwater they say. And if Mr. Real Estate, Mr. Donald Trump Buddy, says get to gold and cash, well, there's something there...
I wonder if he told The Donald?
Throwing Good Money After Bad - All booms eventually go bust.
We all remember the stock market crash of 2000, and most of us remember the real estate crash after the implementation of the 1986 Tax Reform Act. Today, many people are anticipating another real estate crash.
Unfortunately, despite our understanding of booms and inevitable busts, it's always near the top of a boom that "dumb money" buys in. Currently, this has set the scene for a potential market bust of which few people are aware.
About a year ago, I wrote a Yahoo! Finance column warning readers that the real estate boom was over. How did I forecast the end of the boom? I got my hot tip from the cashier at my local Safeway supermarket.
While she was tallying the cost of my apples, broccoli, and steaks, she handed me her new real estate agent's card and invited me to call her for my next real estate investment. Moments later, I was home writing that column. As my rich dad used to say, "When dumb money chases smart money, the party's over." Needless to say, many real estate agents and investors wrote me nasty notes.
For the next two years, I'm cautioning people to watch their ratios between good debt and bad debt, and keep liquid reserves such as cash, gold, or silver.
Good debt is debt that makes you rich. An example of good debt is the debt on the apartment houses I own. That debt is good only as long as there are tenants to pay my mortgages. If tenants stop paying their rent, my good debt turns into bad debt.
Most people don't have good debt -- all they have is bad debt. Bad debt is debt that makes you poorer. I count the mortgage on my home as bad debt, because I'm the one paying on it. Other forms of bad debt are car payments, credit card balances, or other consumer loans.
The good news is that during deflationary times, smart money reenters the market, so crashes are great for smart people with smart money. Instead of listening to the optimistic economists, then, you should eliminate bad debt and improve your debt-to-equity ratios on good debt.
February 21, 2007
As I said, all of these problems have been hiding in plain sight. But the fact that folks want to pretend the problems don't matter -- and push out the moment in time when they react -- doesn't change the reality that the risks are extraordinarily high these days. Pretending will only make the dislocation bigger.
FLASH: Novastar blows up - the latest subprime casualty. So when does Countrywide pre-announce it's disaster?
* My cousin Joey just made some money selling his home
* Hey, my neighbor is putting his house up for sale for way more than we both paid
* Oh, man, I'm rich! My home just went up in value 20%!
* Maybe I should buy some investment property
* Another house just sold down the block for 100% more than the guy paid
* Hello, Cheap Mortgages with No Money Down? I'd like to take out a loan on an investment condo
* Everyone is getting rich buying and selling homes! It's so easy! Why work for a living
* Yes, you're right Mr. New Home Sales Guy, why buy one when I can buy two! Let's do it
* You're right, Mr. Cheap Mortgages with No Money Down, I should take advantage of that no-doc, no-down, option-ARM thing you're recommending. Are you sure I can lie about my income? Cool! I'll buy five of those new condos, not two!
* Grandma, you gotta buy another condo in Florida! We're all getting rich rich rich rich!!!!!
* Hmmm.. I wonder if being $4 million in debt is OK, after all I only make $40,000 a year. But it must be if the bank would lend me that kind of money
* OK, I've closed on all my new condos, time to flip them for massive profits!
* Hmmm... it's been 30 days and no offers. And it is strange that nobody actually LIVES here in this new condo building. I wonder why that is.
* It's the damn realtor's fault, why can't they sell my units. I'm gonna fire 'em and get a new one! One that knows the market!
* OK, it's been six months, and still no buyers, and I'm out $30,000 in carrying costs so far. Hmmm... That's more than I bring home in a year. My credit cards are getting closed to maxed out. Oh well, it's OK, I'll just drop the price a bit and still be rich rich rich rich!
* OK, it's been a year. I can't make the payments anymore, still no offers, I'm on my tenth realtor, still nobody lives in this damn condo building and what happened? My realtor and mortgage broker and appraiser and David Lereah and everyone said I was going to be rich! It's their fault.
* I can't believe I just got foreclosed on. I've lost everything. Oh well, it wasn't my money after all and in a few years my record will be clean and I'll try again! I do wonder though who did take the loss on all my condos, since it wasn't me? Hmmm...
February 20, 2007
House Appreciation (real)
Commission and fees
Total Cash (Owning)
Equivalent Rental Costs
Returned Security Deposit Value
Net Savings (See details)
Total Cash (Renting)
If you buy a home today vs. renting, you are a fool. Renting is significantly cheaper on a monthly basis than "owning", and if you "buy" you'll lose not only the extra monthly cash flow vs. renting, but more importantly you'll also the negative depreciation to deal with. In addition, you'll have the transaction costs of buying and selling, and you'll likely be locked into the home or a significant loss for years, unable to move for a new job when you lose your current one or are offered a better one during the upcoming recession.
If you "own" a home you "bought" pre-bubble, you're doing fine (unless you did equity-extraction). "Owning" your home today is likely at a similar monthly cost to renting, if you bought pre-bubble. The only issue you have to sleep on is that you'll be losing some of your possible equity every day now that homes are depreciating vs. appreciating. However, if you took out HELOC's, you screwed yourself.
The smartest financial play for "owners" would have been to sell at the peak, over a year ago, cash in, put the money to work, and rent. Then when prices stopped falling, buy again.
The smartest financial play for renters who've never "owned" would have been to buy a home pre-bubble, then sell at the peak and rent again. If you've always rented and didn't buy and sell, you missed an opportunity to make some money off the stupidity of your fellow man during the greatest ponzi scheme the world has ever seen.
February 19, 2007
Remember this dimwitted real-estate-clerk-Apprentice-winner-Donald-Trump-spawned "bubbles are for bathtubs" idiot, Kendra Todd?
Ah, let's all revisit the sage advice of little-girl-playing-grown-up-real-estate-investor Kendra Todd, from September 2006. Too bad people can't sue her, or Yahoo for giving her this platform.
But it is nice to know Donald Trump will be declaring bankruptcy soon.
Is the Real Estate Market in Bubble Trouble?
By Kendra Todd, winner of "The Apprentice 3"September 26, 2006
You can't go anywhere without hearing people talk about "the real estate bubble." Such talk drives me to distraction, and I'll tell you why. It's because there is no real estate bubble. Bubbles are for bathtubs.
Despite a thousand articles in Sunday newspaper real estate sections, the bubble is a myth. The real estate markets in many areas are going through a normal correction cycle. I'm going to tell you how to recognize the signs of a correction in your market, how you can avoid getting sucked into "bubble trouble" and how you can even benefit from the current environment.
A bubble is a market in which the value of the key asset is inflated based on speculation and psychology. Because of this, true bubble markets can burst overnight when something happens to shatter the perception of value.
That's why the Internet boom of the late 1990s was a true bubble; people suddenly realized that ninety percent of the dotcoms were companies with no way to make money. Talking about a bubble implies a sudden burst, and real estate does not work that way. You don't go to sleep one night with your house worth half a million dollars and wake up to find it's lost half its value.
Happy President's Day America. Question: How do you celebrate living under the worst president in the history of the United States?
Pat Buchanan (R): "Iraq is the worst strategic blunder in our lifetime. And for it, George W. Bush, his War Cabinet, and the neoconservatives who plotted and planned this war for a decade bear full responsibility."
Helen Thomas (AP): “This is the worst President ever. He [George W. Bush] is the worst President in all of American history.”
Sen. Chuck Hagel (R): "I think this speech given last night by this president represents the most dangerous foreign policy blunder in this country since Vietnam if it's carried out."
Fred Dattolo (author): "When it starts to unravel, it will likely lead to the biggest bubble bust in world history, hurtling the U.S. economy into chaos, reminiscent of the Great Depression—or worse."
January 2007 AP/AOL poll: Two-thirds of Americans, 66 percent, think the country is on the wrong track.
GAO Report 2006 recapped: The US is insolvent. There is simply no way for our national bills to be paid under current levels of taxation and promised benefits. Our combined federal deficits now total more than 400% of GDP.
Iamfacingforeclosure.com's Casey, even though it's all going to hell in a handbasket, sure has a good sense of humor
February 18, 2007
You know what HP's all about. So hit us with some good stuff to check out.
HSBC moved $10 billion from the "denial" column straight to "capitulation" the other day.
The entire subprime industry, which fell off a cliff in the past few weeks, went from "euphoria" to "despondency" overnight it seems. And the contagion will spread. It always does during a the mania unwinding stage.
1.9 million American homes currently listed in foreclosure are in "desperation" stage.
2.2 million Americans who took out toxic loans and are expected to default, well, they've gotta be in "fear" stage now if they're paying attention.
Millions of REIC employees / contractors / commission hungry sharks are in "fear" stage today, wondering when the axe will fall, and how long they'll have to eat ramen.
The 2.1 million homedebtors with an empty home on the market and no buyers in sight have gotta be in some stage of "fear", "desperation" and yes, "panic" today.
One would-be real estate mogul who is now selling off his portfolio of failure and days away from bankruptcy and a knock from the FBI, well, even he's evidently moving past denial lately.
HP'ers, you'd have to be insane, clueless, corrupt, stupid and seriously the greatest fool on earth if you're still in "euphoria" or "anxiety" stage. Man, the train left the station, a long, long time ago. When will Americans (and the world) finally get on board? Or are they?
View from England: How do you know when it's a housing mania? When people with jobs can't afford a home anymore.
Mortgage costs for many at over 3/4 of their take-home pay.
Home prices 24 times average incomes.
Soaring foreclosures and insolvencies nationwide.
Yup. Ponzi Scheme. Executed perfectly here in England. A country that thought soaring home prices were a good thing for society, that everyone could get rich, that property prices can only go up and up and up and up, and that inflation has nothing to do with housing costs - thems are savin's after all ma!
They do call it the "Property Ladder" over here, and you know nobody every goes down the ladder - only up! Right? Right?
MORTGAGE COSTS ARE CRIPPLING
Daily Express (UK)
Home owners are having to fork out crippling mortgage payments which eat up as much as three-quarters of their take-home pay. Millions struggling with record utility bills and rising interest rates are paying an average of 51 per cent of their net income.
But, with some parts of the country seeing house prices rocket to 24 times the average salary for the area, many are being forced to pay up to 71 per cent of their wages to put a roof over their heads.
The figures were revealed in a report which makes clear the shocking financial burden being shouldered by hard-working families because of soaring property prices.
The grim report reveals that the property boom pushed average house prices to more than six-and-a-half times salaries last year – up a formidable seven per cent from the previous year’s figure. It led experts to warn that while rising prices are felt by many to be positive, any significant increase in interest rates could have a damaging impact on households.
Rob McPherson, of management consultants Hay Group which produced the study, titled Home Truths: Pay and Property 2006, said: “Rising house prices are outstripping take-home pay, placing enormous pressure on home owners.“Increased house values may make consumers feel more wealthy, but the truth is that the buying power of wages has taken a serious hit when it comes to property.
Citizens Advice policy officer Peter Tutton said: “We are already seeing a rapidly growing number of people falling behind with mortgage payments and in some cases threatened with repossession.
“We know that some people are taking on mortgages that stretch them to the limit. Increases in interest rates could spell disaster.”
February 17, 2007
Glengarry Glen Ross is a 1992 movie, based on the 1984 Pulitzer Prize and Tony-winning play of the same name by David Mamet, who adapted it into a screenplay for the film. The film shows parts of two days in the lives of four desperate real estate agents (Pacino, Lemmon, Harris and Arkin) who are prepared to engage in any number of unethical and/or illegal acts (from lies and flattery to bribery, threats and intimidation to burglary) in order to sell undesirable real estate to unwilling prospective buyers ("leads") while the put upon office manager (Spacey) awaits for them to make their sale after the hardnosed corporate boss (Baldwin) gives marching orders to do their jobs.
Posted by blogger at 2/17/2007
Phoenix real estate clerk: "You look out on the street and see five to ten houses for sale, but many people still don't believe things have changed"
I think someone needs to tell all the other Phoenix real estate clerks that things have changed. All those big dreams, those millions and millions you were going to make in real estate?
Specializing in a planned community near Scottsdale, Barry lords over his territory in a canary-yellow Porsche Boxster whose vanity plate reads SAYSOLD. "It's a realtor thing," he says, half apologizing for, half drawing attention to his chariot. Locals tell me today is the coldest day of the year in Phoenix, but that doesn't dampen Barry's enthusiasm. "Let's put the top down!" he calls out as we get in the sports car for a tour of his domain.
Barry is skeptical of Zillow's valuations, especially in a market like Phoenix, where so many properties are languishing. If the Zestimates are based on sales, then Zillow is missing a whole lot of data. He points at a stack of pages from the MLS (for Multiple Listing Service, the nationwide database of properties for sale). "Look, 213 days, 353 days, 529 days," he says, referring to how long each house has been available. "There's a lot of fat in the market. Prices are still too high."
For any homeowner looking to sell, it's a gloomy message: These are the worst of times. Not long ago, Phoenix was the nation's fastest-growing market. The median price rose 55 percent in 2005. Agents were closing deals on the hoods of cars; investors flipped homes without ever moving in.
Fast-forward to early 2007: Throw a rock in any direction, and it'll bounce off a FOR SALE sign. "There are 45,000 listings in the Phoenix MLS, and that number hasn't changed in six months," Barry says as we cruise among lookalike stucco homes. With every passing week, the number of houses on the market rises, increasing the downward pricing pressure. "It's like a freeway pileup."
"You look out on the street and see five to ten houses for sale, but many people still don't believe things have changed," he says, shaking his head at a dirty carpet. "The average seller says, 'I need to get this much out of our house to move up.' But the market doesn't care."
Posted by blogger at 2/17/2007