« First « Previous Comments 84 - 123 of 226 Next » Last » Search these comments
OMG, I sent that picture to everyone I know who isn't sensitive to the F-bomb.
Prop 1A passed!
99.5% ( 25,318 of 25,423 ) precincts partially
or fully reporting as of Nov. 5, 2008, at 3:34 p.m.
State Ballot Measures
A - Safe, Reliable High-Speed Train Bond Act
YES: 5,053,442 52.2%
NO: 4,641,088 47.8%
http://vote.sos.ca.gov/props/index.html
Looks like high speed passenger train travel WILL become part of the USA experience, at least in a decade or two.
@Bap33
all the way back to the philipines... not a hunch, I know of several people that bought various houses as investments and would talk crap about not buying and how housing always goes up. One lady has or had 10 houses... I just giggle every time I see her.... Another older guy took his money from housing and moved back home to the philipines just in the nick of time, he was the only person I know that made any money off of it.
Congratulations, patricket.netters, at least in Ca. The champers must be flowing, schadenfreude freuding, etc. It remains to be seen what the new administration is going to do about the whole mess:
What a difference a year makes. In May of 2007 the median price for a California home was $595,000. Today the median price stands at $350,140, a drop of 41% from the peak. The drop in itself is stunning but what is more amazing is the speed in which this correction has occurred. The previous bubble which was seen in Southern California saw prices drop over a period of 6 years following a gradual trajectory. This time, that is not the case. There are many reasons why this correction has happened so quickly and in contrast to the other one, is very different even though it occurred in the same location.
Oh my goodness, I can't believe this story. Everyone knows that fine art only goes up in price.
www.nytimes.com/2008/11/06/arts/design/06auction.html?hp
"In a hushed salesroom at Christie’s on Wednesday night, works by a wide range of artists, from Manet, Cézanne and Renoir to Rothko and de Kooning, failed to sell, and prices for things that did find buyers often went for far less than what they would have a year ago. "
Peter P Says:
a minor Spring bounce is in the cards.
There is that little thing called "winter" to get through before you get to spring. :-)
What should we call this winter?
"The Underwater Winter"?
"The Winter of Dunk?"
"The Winter of Nowhere to Hide"?
I am wary of the claim that median prices are down 41%. With 50% + of home sales in CA coming from REO we are seeing desperate banks get what they can in the face of future losses.
Hmm, this article has forced me to look much more closely at the Case Shiller methodology. I can see problems. By not excluding REO and looking for resale pairs, we are specificially picking the most distresssed part of the current market. Notably, specuvesting homes that did not pan out.
I guess that leaves me back with the notion of:
1) down payment availability
2) interest rate
3) Multiple of household income
4) rent equivalency
Sorry to ramble here, but we may be seeing an intersting secular shft. Recent home price decline in CA may have been a pure function of RE as investmet smf the failure of exotic finance. Now we may be seeing the other inherent risk part of RE - job loss. People lose homes in recession and depressions for the simple reason that they have no income to make their payments. It is scary to think that part of the downturn is only starting.
This could get really ugly.
COULD get ugly? Dude, where have you been?!
It already is ugly. The data just hasn't fully captured how ugly it already is.
CA is teetering on the cliff. Another 5% drop in home prices will send it over. There is a good amount of people that will tolerate a "correction". But almost no one is going to tolerate a crash. Not when you have the next 20-30 years of your earnings tied up in that asset.
That next 5% will break almost all of the people that were willing to ride it out.
The good part about this is that I think it will happen fast. I believe CA will see the bottom before the end of 2009. That is of course assuming that our economy has not also fallen off a cliff.
Different Sean, that was a rare person to see lately. Welcome back, stick around for a while :-).
Duke,
Right observation. Including distressed sales could skew the data to downside. We might see the steepest decline when layoffs start.
SP:
What should we call this winter?
“The Underwater Winter�
“The Winter of Dunk?â€
“The Winter of Nowhere to Hide�
The Winter of Their Discontent
What should we call this winter?
Nuclear Winter: the fallout from ARMageddon
Fuzzy,
I coentend it is not that bad yet. We know a great many homes going to REO were failed flips, 0% down walk-aways, extract-the-cash-and-walk-aways, etc. The hurt wa real, but mostly the banks and thus by extension the pensions funds, foreign investors, etc.
But good 'ol misery is comin when it isn't that new $600k spec home in Sac or Los Banos. Bad is when Mtn' View drops from $1.1m to $500k and people lose that $400k of actual, real equity made out of 10 years of dual inome pumping dollars into mortgages.
Misery is when: AMD, EBAY, Yahoo, startups, etc employees lose their jobs, cannot find another, cannot meet their debts and slowly watch their home slide away.
I guess what I am saying is, bad is when resonsible people who understood risk lose their home because of a really bad economy. As opposed to people who lost their mad money on second homes becuase RE was the can't miss investment of the early 21st century.
I guess what I am saying is, bad is when resonsible people who understood risk lose their home because of a really bad economy.
Well said.
Over the past few years, people who understood risks were not reasonable people, judging by societal standards.
Bad is when Mtn’ View drops from $1.1m to $500k and people lose that $400k of actual, real equity made out of 10 years of dual inome pumping dollars into mortgages.
You predict that Mtn View prices will fall to 1998 levels? I presume you means a $900k mortgage started in 1998 that has been paid on for ten years. In that case, only about $156k in "real" equity would be paid off (at 6%).
Or did you mean a $500k house in 1998, rising to $1.1 million, "ought" to be $900k (your $500k + $400k), that will fall back to $500k?
Interesting. Fortune magazine now describes deflation as the "new" threat: http://money.cnn.com/2008/11/06/news/deflation.fortune/index.htm
New to whom?
500 jobs get axed at AMD, mostly in Sunnyvale.
100 jobs gone at Serena, Redwood Shores.
Also, layoffs at LinkedIn, Mountain View.
Forced "holidays" for Christmas at several companies.
Wild arsed rumors about many other big name tech and software companies.
Could the BA go back to 1998 valuations?
I don't think so.
But.
It could.
Almost every job is very vulnerable.
Other web sites disclose how Health Care is a bubble industry.
Tech is 'good enough' that people can easily delay the next best thing.
Biotech has such deep startup costs that remind us that even good and proftiable ideas are shelved in bad times.
All BA work can be performed more cheaply in, say, Vegas. We already had tech flight once before when the Motorolas (4 pahse, Zilog, etc) of the area left.
So, my guess is no. But it could. . .
Wait, please distinguish asset deflation from monetary deflation.
We can have a combination of asset deflation AND monetary inflation, in midst of wage disinflation and attempted reflation.
http://www.mercurynews.com/ci_10916051?source=most_viewed
And he claims to be a Republican?
To balance the state budget, the best way is to downsize the government and cut services. We need more tax incentives to keep businesses here not tax hikes to drive them away.
California always runs into problem in tough times because its taxes are too dependent on growth.
Why can't McClintock become the next governor?
It is so gloomy. :(
If we have deflation, this will result in an default on the national debt.
When when our debt is denominated in dollars and we own the only printing press!
When when our debt is denominated in dollars and we own the only printing press!
The Federal Reserve owns the printing press. We do not own the Federal Reserve.
The Federal Reserve owns the printing press. We do not own the Federal Reserve.
Exactly. The Federal Reserve will print new money to satisfy our foreign creditors while the nations FB'ers spend the rest of their lives in debtors prisons.
# The Original Bankster Says:
your country is the worlds biggest debtor. If we have deflation, this will result in an default on the national debt.
In case of monetary deflation, interest rates are going to be low. So what is going to stop the government from simply 'refinancing' our government debt at 0% interest?
I am serious - is there a reason why the government can't do this?
We can have a combination of asset deflation AND monetary inflation, in midst of wage disinflation and attempted reflation.
The re-inflation is not likely to be sucessful. The proof will come when federal/state COLAs go negative. That is, when Cost of Living Increases are replaced by Cost of Living Decreases. Military and Civil Service pensions will get % decreases rather than the accustomed annual increases.
I am serious - is there a reason why the government can’t do this?
Sell Treasuries at 0%, and use the proceedes tp pay off high interest debt?
Or unilaterally declare the all outstanding debt to be 0%? Maybe add to it it a "principle reduction" based on the deflation rate. If the deflation rate averages -3% APR for a given year, just decrease year end principle balance by 3% in addition to what was paid off.
how can you have deflation and low interest rates?
Huh? Please explain. I thought low-to-zero interest rates go hand in hand with deflation.
The highlight of the Fed's H.4.1 report (at least for me) was the $185 billion increase in the Commercial Paper Funding Facility -- I almost thought they had resorted to electronic "printing" as there was not a commensurate increase from the Treasury injections (aka. the supplementary financing account). Then I noticed the $233 billion increase in "Reserve balances with Federal Reserve Banks". Still sterilized, and the Fed holds any "risk" inherent in the Commercial Paper -- nice. BTW, the Fed recalculated the interest rate on balances kept with it by member banks.
You can have all the money in the world at 0% and if no one can afford to borrow it because prices are too high or doesn't want to borrow it, you have deflation. Just a thought.
P.S.
However, when people feel secure again or wages catch up....LOOK OUT! Inflation will explode. It might be a while, but will happen under the current setting.
Inflation != printing. So long as demand for money is increasing faster than supply, we will experience deflation. It is simply a special case of the general S/D curve for asset classes, because typically everything else is priced relative to currency. Whenever money increases in value, that is effective deflation. It took me a while to understand that, but Randy finally got me through to daylight. That's why the stock market, treasuries and commodities all appeared to fall simultaneously---they weren't falling so much as U.S. dollars (the asset class) was rising. Right now, cash has become king, largely because so many debts that must be paid off are denominated in dollars. Demand for U.S. dollars has actually spiked.
Headset, the near-zero interest rates are a result of governments trying to combat deflation. Thus they tend to occur together but are not directly cause-and-effect. Governments will cut the interest rate close to zero in an attempt to spur lending (and thus growth). The lack of lending causes a liquidity freeze, which is largely a result of hoarding currency due to perceived market risks. Deflation encourages hoarding on the personal level because the currency is getting more valuable every day, and on the banking level because deflation tends to happen during serious economic crisis.
The problem comes when the banks feel that not borrowing ZIRP money is actually less risky than taking "free" money to make dangerous loans that might not get paid back. Japan ended up pushing on a rope; we are now experiencing the same thing. Instead of lending out money borrowed from the Fed, the banks are just holding that cash, which effectively drops their leverage ratios. Even at ZIRP, deleveraging is a guarantee (holding cash reserves automatically deleverages a bank), whereas lending can still be risky. Even if the Fed accepts crap as collateral, that crap still has a higher real value than a defaulted loan.
It is a huge danger to get into this situation. The only way out seems to be through sustained growth. Until growth kicks in, the deflation and lending risk can become a vicious cycle, where banks only lend to people who don't need it, and the government loses its most powerful tool (interest rates) to influence currency velocity. This is an asymptote that we didn't want to cross... but given the earlier upwards insanity, we had to overshoot into territory that not even Uncle Sam can control. It was like throwing an anvil off the peak; this is going to take a long, long time to fix.
Of course, we have the new American motto. "What do you mean I have to pay it back?"
low interest rates = cheap money = expansion of credit = expansion of money supply = inflation
Japan.
wait, what?
low interest rates = cheap money = expansion of credit = expansion of money supply = inflation.
am i missing something here?
You are missing expansion of credit = expansion of debt.
Debt can either be repaid or defaulted on; both of which are deflationary. Defaults decrease money supply (M), repayments decrease liquidity/velocity of money (V).
The 'printing' that is going on is not inflationary because its replacing dollars destroyed by debt defaults. If the fed prints a $20 bill, a bank loans it to me and I eat it, that's deflationary. If the fed prints *two* twenty dollar bills to replace it, that's inflationary. If they just print another $20 its a wash.
There is way, way more debt out there than can ever be paid back if everyone living and their children worked to be 100 years old. The only possible alternative/solution is deflation. It *has* to happen at this point; the only other choice is hyper-inflation which would be much worse.
« First « Previous Comments 84 - 123 of 226 Next » Last » Search these comments
Hello,
I just read an article in the NYTimes that was disconcerting and even frightening.
http://www.nytimes.com/2008/11/02/business/02global.html"> http://www.nytimes.com/2008/11/02/business/02global.html
According to the article, school districts, municipalities, and just about every governmental entity that either has money to invest or borrows money could potentially end up getting sucked into the credit crisis. That means that there could be countless ticking time bombs across the United States in the form of pending financial shortfalls and bankruptcies that will further depress home values in towns and cities across the country.
Imagine buying a home at what seems like a bargain price, only to find that the local school district or government is on the hook for a couple hundred million dollars in losses because a few unsophisticated board members fell for what's turned out to be a global investment scam. Once the word gets out, the town's home values will nose dive. After all, it's the local tax payers who will eventually have to pay the pipers.
The Wisconsin school board in the article might not only lose the $35 million dollars earmarked for teachers' pensions, they're liable for an additional $165 million that the board borrowed on their behalf. Where does a town that can't afford to lose $35 million in the first place come up with another $165 million? What happens to the teachers who lose their pensions? Who wants to buy a home in an area where the schools are forced to lay off teachers, cut programs, and cant afford to purchase books or supplies?
Is there any way to find out what municipalities and school boards are in potential trouble? Can a potential home buyer request relevant information from a town or city? Is there a website that contains this type of information?
As a prospective home buyer I'd have to say that this concern belongs at the top of the list of reasons to postpone buying a home in this market.
Charles