patrick.net

No need to foreclose when you can't sell the asset. You have to measure everything with incentives. The banks have a cost to foreclose like $15K or more in legal fees I think. Why do it when you'll just be stuck with the falling asset. Better to leave it in the name of the delinquent and let him/her pay the taxes and maintenance. Bankers aren't stupid. That's why they manage your money.

Its already being covered in another thread: http://patrick.net/?p=403806

I was told more houses are coming onto market in, say, Orinda and prices are getting marginally better than a year ago (e.g. from 800K to 700K). Houses stay on the market for a long time in Lafayette which probably means people expect better prices in the future. But strangely enough in quite comparable Danville houses are sold almost within a week, at least those without HOA.

Now is what it is. Comparing now to YOY is deceiving since a year ago things were total shit.

Comparing 1 year from now to now is the interesting question.

Mortgage rates higher or lower? Will FHA, FRE, and FNM even be around???

Will there be a tiers 5, 6, 7 for the long-term unemployed or will they just be f---ed?

State and local government -- spending more or spending less?

Federal government --- doing better or fallen to the Teabag Insurrection taking their government back?

Peak reset and recast is next year, btw.

Troy says

Now is what it is. Comparing now to YOY is deceiving since a year ago things were total shit.
Comparing 1 year from now to now is the interesting question.
Mortgage rates higher or lower? Will FHA, FRE, and FNM even be around???
Will there be a tiers 5, 6, 7 for the long-term unemployed or will they just be f—ed?
State and local government — spending more or spending less?
Federal government — doing better or fallen to the Teabag Insurrection taking their government back?
Peak reset and recast is next year, btw.

Thanks for posting the chart. This is the latest info I've seen

It should be a law that people who say inflation should have to specify which they're talking about.

Monetary inflation? Producer price inflation? Wage inflation?

Senate couldn't get the UI extender passed this week, already. 4.8 million people are on tiers 1 through 4.

'conomy isn't going to be able to absorb these people this year, no way. 900,000 already abruptly to be soon pushed off the dole thanks to the continuing Senate fail, with another similar batch arriving every month. Gulf coast becoming a toxic mess at the start of the summer vacation season's not going to help employment, though I guess domestic tourism is something of a zero-sum so that will net out elsewhere.

As I argue here every day, it wouldn't surprise me to see gas go to $10/gallon. Milk at $5. I just fail to see how this price inflation is going to push up wages. In theory and past history, wage earners in pain go to the boss with ultimatums and get raises. That going to happen this decade???

http://research.stlouisfed.org/fred2/series/UNRATE

says otherwise, and that's WITH ZIRP

http://research.stlouisfed.org/fred2/series/FEDFUNDS

and high social spending

http://research.stlouisfed.org/fred2/series/A063RC1

and high overall spending

http://research.stlouisfed.org/fred2/series/AFEXPND

we're about where we were economically in 1982, but that was a Volcker recession, not the balance sheet recession we're in now.

Back then we had a better trade balance:

http://research.stlouisfed.org/fred2/series/BOPBCA?cid=125

and gov't spending as percent of GDP was 30% less, and gov't DEBT as percent of GDP was at a post-Depression low of ~30%, compared to 100% now.

I fail to see how anyone can be bullish on the present economy. The political system is beyond dysfunctional, FFS a Christian Dominionist /Tea Party twit is outpolling the majority leader in this election cycle.

Democratic control of the Senate is in doubt. Wouldn't surprise me if they lose it.

I see catastrophe down the road. Well, not right now, I'm now off to Yosemite to catch the sunrise. see yah!

E-man:

As those slides imply Extend & Pretend is not a long term "solution". You should also note that they've been trying Extend & Pretend for almost 2 years at least now.

How much longer do you think they can keep it up? 2 more years? 5 years? A decade? You know Japan tried the same thing and things still haven't recovered after over 20 years right?

Personally I think they've about reached the end of their rope as prices are declining in general once again despite absolutely incredible market support via the GSE's, rule bending, and straight up bail outs. Oh they can continue to slow the losses with more mortgage moratoriums (I personally don't see a bottom until 2015 or 2016), but stopping them is out of the question on either the high, mid, or low range homes.

It doesn't matter what the government tries to do, people can only afford to pay only so much given their wages. Wages are still declining while things are getting more expensive, while services are being cut, and while they're being taxed more. On top of that people in general are _overloaded_ with debt.

Did you know that DTI's of 40% are common these days on so called "prime" loans? This alone guarantees that we'll be seeing higher than normal levels of defaults for years to come.

You gotta be crazy if you think we've seen a bottom in an economic environment like that. We're looking at our own version of the Lost Decade, a low key but looong term Depression is the best we can hope for at this point.

... "denial" ....... "floats your boat" ..... lmao, where is Mikey on this one?!

Troy says

It should be a law that people who say inflation should have to specify which they’re talking about.
Monetary inflation? Producer price inflation? Wage inflation?
Senate couldn’t get the UI extender passed this week, already. 4.8 million people are on tiers 1 through 4.

Sorry Troy, Buth these same people havent a clue regarding push-pull inflation.

The Truth is out now. The FED colluded with the banks to keep inventory off the market, while they goosed up the bank reserves. Any talk of any kind of a recovery in the house market, is just plain silly, and equivalent to a boxer who has just been KO's, still waving his gloves in the air:

http://truthiscontagious.com/2010/06/16/the-next-housing-crisis-2?source=patrick.net

I personally think it's already a bottom for real estate as well. Prices will always be a mortgage with the same payments (excluding property taxes) as renting, with a 20% down payment or so.

In other words, I agree that low interest rates will cause higher home prices. The only thing that prospective buyers would need to worry about are rent prices.

Cash buyers (or flippers I should say) need to be careful that they are not in the process of flipping when interest rates rise.

They also need to be aware that their potential buyers are all the prospects that they have beat out with their cash offers (or not) on that property. You can be sure as hell that once the properties get relisted after renovation, that there will be negative comments from both buyers and buyer agents.

Interest rates will not rise. Kondratieff winter clearly states:

Rates fall, then they rise again, then they fall much lower:

The FED can no longer lower rates, they ran out of ammunition to prevent K-Winter. But they cannot raise them either.

> Do you realize that people invested in bonds VERY NEARLY lost every penny they had in 2008?

You must be talking about MBS bonds, not the T-bills. People who had T-bills (those are the savers that I am talking about), actually made money. The MBS bond holders should have lost every penny they invested. Instead the FED transferred their losses to the tax-payers, in fact just delaying the inevitable dooms day. You speculators got a great present from the FED in 2009, you got one last chance to get out, lick your wounds, and start all over. But, since you are a greedy SOB that you are, you will not take this chance. You learned nothing in this crash of '08, and you will be paying the piper for a long time to come.

Corporations and municipalities are speculators too. In fact most of municipalities were themselves investing in MBS's. All of these bond holders should have lost all their money, but, instead the FED saved them, at the expense of the tax payers, and the responsible people. Everybody was drinking from this RE punch bowl, except the savers, and the renters. But, when the entire sovereigns start to drop out like flies, they won't be anybody to save them.

The kondratieff wheel clearly shows you that the inflation cycle is 1/2 of the k-cycle. 70/2 = 35.

But, amazingly that didn't happen. Precisely because the k-winter must continue.

Again, like I said, forget the $USD. The $USD itself is a manipulated commodity. Oil prices, stock markets are all subject to FED manipulation. But manipulation can not last long. Eventually all prices fall back to what they should be, according to the k-cycle.

The fact that you can still borrow $1 million is, again, a sign that the BOTTOM is nowhere in sight.

Nomograph - I am afraid that it is you who is full of nonsense. FED is buying T-bills & stocks (ever heard of the plunge protection team - that's synonymous with the FED). The banks are buying T-bills because they are playing the carry-trade game with FED's money.

Factual information actually runs right along with my hypothesis. Sales are down 35% ever since FED stopped propping up the housing market. Case-Shiller is already showing prices falling:

http://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa-cashpidff--p-us----

> Even Case-Shiller admits that the winter quarter decline is seasonal. T

That I didn't hear. I did hear them admitting, however, that their season-adjusted formula is broken because we had a declining market for the last 3 years.

Also, a 35% reduction in sales is nothing to scoff at. This is a huge blow to the housing market, and will, just like it did in 2007, result in a huge price declines down the road.

http://www.calculatedriskblog.com/2010/06/mba-mortgage-purchase-applications_09.html?utm_source=patrick.net

Nomo has waxed eloquent. He's not blowing smoke, peeps. Yeah, he's a keeper all right. I knew he could wing it.
But I do wonder why San Diego didn't call out the SWAT team?

That was a real on the fly humdinger but what's nest?

Ohhh beehave!

Like a ship without an anchor
Like a slave without a chain
Just the thought of that RE market without credit
Sends a shiver through my veins

Yes, but prior to the last decade, Argentina has had a housing collapse which makes Las Vegas look like a child's play.

When Bay Area prices drop like Argentina in the 80's, whoever is left to pick up the rubble, will be paying cash too.

Those countries which never had any credit, never enjoyed any house bubbles like the US did. As soon as any country introduced credit, house prices took off.

Nomograph says

I wore my yellow jacket to the Hornets game in the New Orleans metropropolis area, but I stick out as a WASP.

You spelled it all correctly, c-o-r-r-e-c-t-l-y, correctly.

E-man,
do you have a link to that presentation?

rmm221 says

Aka the top 1% who actually have enough money to matter!

I keep reading time and time again how this so called 1% keeps going broke. Sports athletes, hollywood movie stars and now some locals. Today is another example you may have read about. Just how do you burn $200M in under 10 years ? Ever pay for a $6M pussy cat.. seems this guy did.

On the Eve of an IPO, Tesla Founder Elon Musk Claims He's Broke
Musk, who co-founded PayPal and cashed out for $200 million, says he invested his last $35 million in Tesla Motors -- just as the company prepares to go public.

http://smallbusiness.aol.com/2010/06/22/on-the-eve-of-an-ipo-tesla-founder-elon-musk-claims-hes-broke/

As part of his divorce proceedings, Musk reported he had just $8,255 in monthly income and $650,000 in liquid assets, with $200,000 per month in expenses.

Elon Musk, eh?

Now there sounds like a real fine upstanding nose to the grindstone EdwardsDeming kinda American Gothic work ethic that a conservative Japanese company like Toyota would really like to partner with, ya think?

This was a killer topic. Now I'm in the mood to pollinate.

Earlier in this thread, Vain said:
"In other words, I agree that low interest rates will cause higher home prices. The only thing that prospective buyers would need to worry about are rent prices.
Cash buyers (or flippers I should say) need to be careful that they are not in the process of flipping when interest rates rise."
I am a prospective buyer and agree with this. I am considering purchasing a condo that, when monthly HOA and bank loan are taken into account, would be less than the cost of renting. Seems to me that the worst-case scenario would be that, if the market went down and I didn't want to live there, I would have to hold it and rent it.
I would appreciate if somebody could provide another perspective.

ltemma74 says

I am considering purchasing a condo that, when monthly HOA and bank loan are taken into account, would be less than the cost of renting. Seems to me that the worst-case scenario would be that, if the market went down and I didn’t want to live there, I would have to hold it and rent it.

I would appreciate if somebody could provide another perspective.

If you were talking about a single-family home purchased with a fixed-rate loan I might agree with you. However, the worst case scenario for condos with HOAs is much worse than you suggest. Many of your neighbors could be underwater on their mortgages, stop paying their HOA dues, and you'll be on the hook for "special assessments" to cover their shortfall even as these deadbeats cause your property values to drop. This is happening to many people around the country right now: they are being totally screwed by the deadbeat squatters in their HOA. The banks won't foreclose on the squatters because then the banks would be liable for the HOA fees, and when the foreclosure or short sale finally does occur the HOA doesn't get a cent unless the bank gets 100% of their money back which isn't going to happen because people without negative equity generally don't go into foreclosure.

simchaland says

Maybe it’s all those thousands upon thousands of IT professionals people keep talking about in Silly Valley who make $150k or more per year currently and are constantly making lateral moves increasing their incomes by 30% or more with these moves these days.

In the mid to late 90's, it was very much like this (I'm one of them).

Nowadays, not so much.

CrazyMan says

simchaland says

Maybe it’s all those thousands upon thousands of IT professionals people keep talking about in Silly Valley who make $150k or more per year currently and are constantly making lateral moves increasing their incomes by 30% or more with these moves these days.

In the mid to late 90’s, it was very much like this (I’m one of them).
Nowadays, not so much.

But wait, I've been told countless times around here that most people in the Bay Area are making $150k or more and that IT professionals especially can make lateral moves right now and increase their incomes by 30% for each move.

You mean to say that none of this is true? You don't say...

simchaland says

You mean to say that none of this is true? You don’t say…

lol, fair enough. Yeah, it's all BS.

There's plenty of people here with plenty of money. IMHO, no where enough to support the current market. Not even close.

ns says

ltemma74 says

I am considering purchasing a condo that, when monthly HOA and bank loan are taken into account, would be less than the cost of renting. Seems to me that the worst-case scenario would be that, if the market went down and I didn’t want to live there, I would have to hold it and rent it.
I would appreciate if somebody could provide another perspective.

If you were talking about a single-family home purchased with a fixed-rate loan I might agree with you. However, the worst case scenario for condos with HOAs is much worse than you suggest. Many of your neighbors could be underwater on their mortgages, stop paying their HOA dues, and you’ll be on the hook for “special assessments” to cover their shortfall even as these deadbeats cause your property values to drop. This is happening to many people around the country right now: they are being totally screwed by the deadbeat squatters in their HOA. The banks won’t foreclose on the squatters because then the banks would be liable for the HOA fees, and when the foreclosure or short sale finally does occur the HOA doesn’t get a cent unless the bank gets 100% of their money back which isn’t going to happen because people without negative equity generally don’t go into foreclosure.

Thank you ns. Very good point!