patrick.net

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!

...and a 'ungry Mob is an Angry Mob!

How long you think unemployment benefits should last? 30,60,90 days, a year, two, indefinitely?

jkingeek says

How long you think unemployment benefits should last? 30,60,90 days, a year, two, indefinitely?

I think the present system is about right. Six months when the economy is not in recession, one year in recession, two years when in depression.

If you can't get your act together in two years then no amount of UE is going to help you.

Note that UE is about 25-40% of one's previous paycheck. The 66% COBRA subsidy was actually a much bigger deal this cycle, and that's been terminated regardless of whether the Republican filibuster on UE and income tax fixes is broken.

Tenouncetrout says

…and a ‘ungry Mob is an Angry Mob!

Very curious political struggle. So far the Dems are going to make the Republicans walk their talk about no tax increases and spending cutbacks in a recession.

Tho they did cave and give a six month reprieve on the medicare doc fix. There's still tens and tens of billions of other spending in this bill, medicaid, the annual tax extenders, and the $35B for people on extended UI benefits.

The Republicans said "pay for the stuff" and so the Dems put in fixes to the S-Corp pass-thru (for people avoiding payroll taxes by taking divies out of their professional S-Corps), and of course the carried interest fix (for equity managers taking dividends on risk capital that is not their own).

Class warfare at its finest. Dunno which way the public is going to break on this. Both sides are pretty entrenched. Complicating matter is not 1 in 100 people could tell you what an S-Corp is.

Troy says

If you can’t get your act together in two years then no amount of UE is going to help you.

Yea - but it still sucks if it's you. People didn't plan for this deep of a recession, nor did they realize that they couldn't maintain their standard of living forever.

simchaland says

Umm, who has the cash to pay for a house outright here in the Bay Area? It most certainly isn’t anyone who is in the working class here. 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.

The average salary for an Oakland Police Office is $180k/year w/ nearly 100% pension. Starting pay is $100k (starting pay for a cop in NYC is $44k). So there are plenty of wealthy "working class" people who can afford expensive houses. Not that I think 760 OPD officers can move the Bay Area housing market, but it's not just "IT Professionals" that are bidding up house prices. Thankfully Oakland (and many other cities) are bankrupt so hopefully those salaries will start to come down.

grywlfbg says

The average salary for an Oakland Police Office is $180

Are you sure about this? I remember seeing the signs from the freeway few years ago "starting at 70,000". I am sure there is overtime abuse, but that can't be the average.

On another note. The city of Alameda is about to close 1/2 their schools. And yet you read about firefighters with base salaries over 100,000 and 90000 in overtime. (No verification of accuracy)

http://spreadsheets.google.com/pub?key=rTunTmsQHa5re6Rh5bk_SXA

After a year of unemployment, you're going to have to accept that you will never find a job that pays as well as the one that you lost.

The fact of the matter is that there were a lot of jobs that were grossly overpaying people in the real estate and financial service industries for decades. These jobs will never pay that well again.

If you're unemployed for two years, the smart thing to do would have been to go back to school and work on a degree in a useful industry.

lyoungblood says

If Bernanke dropped the rate to 0%, the banks would all of a sudden need to start lending the money to anyone with a pulse again

No, it's not the banks' cash in the excess reserves with the Fed, it's their customers' cash.

thunderlips11 says

Japan kept their interest rates at near zero for more than 15 years, and they are still in a funk.
Another parallel, their sideways slump was also preceded by a huge real estate bubble.

This is NOT an accident. Real Estate is the source and sink of ALL wealth, at least until some genius invents sustainable technologies to mine everything from the sea and sky.

Henry George nailed the root problem 130 years ago:

http://en.wikipedia.org/wiki/Progress_and_Poverty

The pols are now getting worried about our debt. No problem. Just print more money. With the depressed economy being what it is, I don't think we need to worry about inflation for a long time.

Kevin says

After a year of unemployment, you’re going to have to accept that you will never find a job that pays as well as the one that you lost.

I do believe that it was much more than that. There are so many jobs that have gone away (see dailyjobcuts.com) that many people couldn't get jobs at walmart as greeters. In the place where I work, we get hundreds of applications for laundry jobs. It's gotten better but it's scary out there still.

Unemployment helped people not starve to death but that's about it.