patrick.net

Neutron,

I guess that you were looking at the Firts Time Buyers Credit, only.

I was talking about the forgivness re-fi into FHA when I opened my trap.
Sorry, two different things.

>> To any who now see the homes you have hoped to buy, count on putting 20% down and losing 100% of that equity over the next 2 years. This means on a $700k home, you will put down $140k and lose all of it.

I thought so ... means buying now is complete stupidity.

Perma,

Dunno. Many would begin to compare the cost of edcating kids privately from k-12 against the backdrop of the equity loss as a trade.

The bay area also had a run up around 1997-1998, the 2000 prices was already up by 30 - 40% compared to 1997.

I see the stock market is up today despite the latest news on house prices. I guess the logic is just too tough for Wall Street speculators to figure out so I'll help:
1) 70+% of GDP comes from consumption
2) Consumption has been supported by debt from home 'equity' loans
3) Home 'equity' is disappearing and rapidly going NEGATIVE in many cases
4) Consumption will fall as home 'equity' becomes unavailable
5) A recession, at least, is inevitable
6) Recessions are BAD for the stock market
I shake my head every day as people manage to ignore these, and many other, basic facts.

The Bay Area run-up lasted just about 10 years to be exact (1996/97-2006/07) with a brief and mild Silicon Valley-only respite in 2001-2002 due to the dot-com collapse (which the rest of the Bay Area did not experience). And the run-up, by all accounts, was tremendous and unabated for just about that entire time.

Stop debating about the next 1-term Hoover candidate, one of them may not even finish the term.

There are sure very smart (and selfish) Americans around. The fact that we are reduced to choosing between McCain and Obama means that the truly wise and big picture guys are hiding out to aim for the white house AFTER the blowup.

I can't help chuckling when I see the press talking about the "strong dollar".

Strong what? Exactly one year ago, Euro was at 1.38, AUD at 0.88, JPY at 121, oil at $76, gold at $680...

And now we have a strong dollar?

Yea - the "we already factored that in 'cause we are looking 6 months out" is getting pretty old.
Wall Streets '6 months out' is like that 50 pounds a dieter just knows they will lose in 6 months.
Simple truth: stocks AND bonds are an over valued asset class. We need the credit contraction becuase there is too much money in the system making too much stuff too dear. Stocks should represnt the real ability to provide a good or service to a consumer WHO CAN ACTUALLY PAY FOR IT

"(Sec. 603) Allows a one-time tax credit of up to $7,000 of the purchase price of a single-family principal residence in foreclosure."

It doesn't sound like it needs to be paid back. I read it as being basically an incentive to buy from a bank over a private seller. Sounds like a bank bailout to me.

I don't know if the article is misrepresenting the bill or if some of you are discussing another provision. Normally when I read "a one time tax credit" it seems to me it is a dollar for dollar reduction in tax liability which doesn't get repaid.

Honestly, I don't mind the $7000 credit to the qualifying families.

Australia has a straight handout of $7000 in many states to first time buyers of a house below a certain amount (non-luxury home category), period. Many states also have stamp duty exemption which amounts to more than $10K. In many other countries with active government encouragement of home ownership, you don't need to buy a "foreclosure" home to get the incentives.

Ask yourself, do you really want to live in a foreclosure-laden area? What is the worth of $7000 US peso in the grand scheme of things? If someone is so brave to jump into a foreclosure home from now till 2009, I salute him, and I don't envy his $7000 at all.

The Bay Area run-up lasted just about 10 years to be exact (1996/97-2006/07)
The SF Case/Shiller Index (Excel alert) also agrees with your assessment. It is worth noting that absolute bottom was hit in Feb. 1994 (65.79) and then we scraped along the bottom until March 1996 (65.92). During that two year period there were a couple of times that it looked like we had turned the corner, only to be confronted with a low during the off season. Peak was May 2006 (218.37). That's 230% over 10 years...

From East Bay Prime: If you build it, they will default.
This appears to be a section of the Berkeley Hills that was burned out during the Oakland Hills fire. Empty lots were purchased and new homes were built. Enter a buyer not quite up to the task of home ownership.
7151 Buckingham Blvd - taken back by WaMu for $1,057,604. Currently listed at $868,900.
7157 Buckingham Blvd - fully financed for $979,000; now for sale at $775,000.
This is an area of $1million+ homes. Uh-oh, there goes the neighborhood.

EBGuy,

is Berkeley Hill and Oakland Hill the same thing?

Are the Berkeley Hills and the Oakland Hills the same thing
Yes... and no. I changed the city name to emphasize that the homes I was referring to are in Berkeley (as the fire is normally referred to as the Oakland Hills Firestorm of 1991). FYI, there is another home on Buckingham that I saw on Craigslist (or the MLS) recently, but I could seem to find the listing. I remember it was also going for "less than market value". Amazing how little new construction you need to bring FBers out of the woodwork.

This little gem was transcribed from a Discover Card ad the other day that showed happy consumers and their big screen TVs, designer sunglasses, iPods, and all sorts of other consumer items that are now considered an essential part of modern life.

==============================
We are a nation of consumers ... and there's nothing wrong with that.

The trouble is, there's so much cool stuff, that it's easy to get a little carried away.

But what if more credit card companies were like Discover Card?

What if they actually helped us spend smarter?

Maybe then we could have a better quality of life and be in a better financial position while we're living in it.

Discover Card. Brighter.
==============================

The business model of all modern banks is to collect interest and fees while sticking someone else (i.e. taxpayers, or currency holders to be more accurate) with the default risk. They can't make money if they do not lend. This will continue to the extent that somebody is willing to assume that risk. Legislation is one way out. Exchanging paper for gold is another. Best not to wait for human nature to prevail.

Did anyone else see that Bennigan's and Steak & Ale are gone? They just filed chapter 7 bankruptcy.

http://www.mlive.com/businessreview/tricities/index.ssf/2008/07/as_bennigans_corporate_files_c.html

LOS ANGELES — A moderately strong earthquake shook Southern California on Tuesday, swaying buildings and tossing food off grocery store shelves for about 20 seconds. There were no immediate reports of major injuries or structural damage.

The quake, estimated at 5.4 magnitude (reduced from an initial estimate of 5.8), was centered 35 east of downtown Los Angeles in Chino Hills, just south of Pomona in San Bernardino county. It was felt as far east as Las Vegas and as far south as San Diego.

Hi OO,
My problem with it is that now the government is subsidizing a buyer who buys from a bank instead of the regular market. We all might like the obvious result which is the regular market has to drop the price by that amount to remain competitive with the bank.

I hate being lied to. This is so clearly a bank bailout and not a homeowner assistance plan. I like the results and the plan helps the solar industry but I think we have to be very vigilant about cheering when the government screws one group or another. It will eventually come back to haunt you when you tolerate a society that sacrifices one group out of convenience for a larger or more powerful group.

This is so clearly a bank bailout and not a homeowner assistance plan.
What?! You like foreclosures/REOs on your street driving down prices... Unintended consequences?! Clearly you are an ungrateful taxpayer :-)

Ironically this will drive down prices more :)

It will be fun to watch sellers dropping the price by $7000 adding more foreclosures to the books as more people find themselves even more upside down. Not to mention, even more foreclosures as sellers try in vain to compete with a desperate bank who can match their lowest sales price and always be $7,000 ahead.

I was wondering when the revolutionary talk would start...

Got Gun?

And just to get you more in the mood...

http://www.marketoracle.co.uk/Article5678.html

@Steveoh,

Prices of guns are going up *rolls eyes* buy now or be priced out forever :)

TOB,

Patrick had a link to an article there, a while back and I saved the bookmark for future visits. Their links list is interesting too.

This writeup just caught my eye today. The author, Darryl Robert Schoon is also selling a book he wrote, at this link:

http://www.survivethecrisis.com/

Bush Signs Law Boosting Taxes on Vacation-Home Sales
An interesting twist in the Freddie/Fannie Bailout Act of 2008:
The new law would let only a portion of the profit on a vacation home be excluded from tax, depending on how long the property has been owned rather than lived in.

For example, a married couple buys a vacation home for $400,000 in 2009. If they make it their principal residence in 2011 and sell it for $700,000 in 2014, only 60 percent of their profit, or $180,000, can be excluded under the $500,000 allowance. The rest, or $120,000, is taxable at the 15 percent rate, meaning they will owe $18,000.

The 15% capital gains rate... oh, the humanity...

After reading articles like Chinese Government is Top Foreign Holder of Fannie Mae, Freddie Mac Bonds and U.S. Taxpayer Bailout of China Over Fannie Mae, I couldn't help but wonder, How Big Is China's Debt?

Evidently the bid-to-cover of over 2 in last week's TSLF auction got someone's attention at the Fed. How about adding $50billion in options to the $200billion limit on the TSLF. See
here for the sordid details. Will be interesting to see who takes advantage of the Fed... I mean avails themselves to the new credit facility.
Also, this just in... the credit crisis may last a little longer than we thought. TAF to remain capped at $150billion, but now $50 billion will be auctioned with 7 week terms (instead of 4 weeks).

Guns are still cheap. Get yourself a type 03 "curio and relic" FFL and you can shop at places like www.aimsurplus.com . They are selling nice 1891/30 Mosin Nagants for $70 full kit (cleaning stuff, bayonet, etc.).

Yeah, well... I don't own a gun myself, but I'm glad that a lot of Americans do.

I forget who said, "When the people fear government, there is tyranny; when the government fears the people, there is liberty."

China's debt is just like Japan's debt, or American debt, it is all issued in local currency, so these government crooks can just print as much as possible. Of course nobody has our power to issue debt to foreigners in OUR currency.

Two more days to Friday, I am always very excited on Friday lately waiting to see which banks bite the dust. Kinda disappointed that Wamu has not folded yet.

Btw, Gordon Chang is not a very credible commentator on China, he has a personal agenda and is quite biased in his assessment.

I may share his hatred, but not his bias. There is no use just wishing ill will on China, it has never proven to work. Objectively assessing its strength and weakness will be more profitable. What will bring down China is not its debt, or lack of democracy, or whatnot, but rampant inflation accompanied by food crisis. If we are lucky, we will see it before 2010. Henry C. K. Liu is a far more credible and insightful commentator than Gordon Chang.

OT

Some really major price reduction on land from foothills of S. San Jose to Morgan Hill. For the sellers that want to "meet the market", the reduction range is about 20-30% compared to a year ago, almost half off from 05 top. Further away, Gilroy has crashed (but you still won't be interested). All those Gilroy serviced flat lots advertised for $350K-400K an acre need to come down at least 2/3 to make sense, if Gilroy can make it through the surging crime rate in the recessionary cycle though.

The fortress land is still asking for a wishful price tag, but there are signs of softening.

Study: Illegal residents decline
USA TODAY

The number of illegal immigrants in the USA has fallen sharply as state and federal officials intensify a crackdown on undocumented migrants and jobs grow scarce in the faltering economy, according to a report Wednesday by a group that advocates reduced immigration.

Using Census data, the Center for Immigration Studies (CIS) estimates that the illegal immigrant population dropped by 10% to 11.2 million from August 2007 through May.

"Illegal immigrants are responding to changing conditions and leaving the country in significant numbers," says Steven Camarota, director of research at CIS.

His study found that the number of legal immigrants rose from 26.6 million to 27.6 million over the same period.

"It doesn't seem like America is more unpleasant for immigrants," he says. "It seems more unpleasant for illegal immigrants."

Mortgage professionals flooding temp agencies

The pop of the housing bubble has hit few groups harder than those from the mortgage industry.

Many who were making six-figures at the height of the housing boom are now taking whatever they can to pay the bills.

"They're now grateful to receive a sales position with a base salary of $40,000 a year with a commission plan," said Sherri Mitchell, president and CEO of All About People staffing agency in Phoenix.

"You have a lot of small companies that have really just disappeared, but nobody knew they existed in the first place," said Jay Butler, director of the realty studies group at ASU.

Mortgage companies that concentrated on subprime and no-documentation loans began closing their doors as early as late 2006, and with the housing market still near its bottom, mortgage players continue to feel the pressure.

Check out this video by Jim "the Realtor" Klinge, on his website, Bubbleinfo.com
or here:

http://tinyurl.com/6kmsxe

Nice truck Jim!

Steveoh,

Nice! But what was his point in making it? Certainly not to sell the house.

That truck could be classic if were to be restored.

Headset,

I guess this realtor is known for his videos and pithy comments on his blog about his own industry. He has managed to attract a following and prabably produced that for them.

I see the California is trying to get its budget in order by cutting the pay of 200,000 state workers.

http://www.cbsnews.com/stories/2008/07/28/politics/uwire/main4301396.shtml

This can't go over well. People do act funny when you involve their money. How many people will lose their sympathy for these state workers if they discover their taxes will have to go up inorder to meet these obligations?