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davelj
Participant[quote=wildta][quote=barnaby33]Do mean that Vantage point is solely, or even mostly responsible for a glut of units for sale? That doesn’t seem to be a realistic statement, because buyers there would seemingly be very different than buyers at BOSA or something more westerly.[/quote]
I concur. I live in the marina district and would never buy in the area of where vantage is located.[/quote]
I have no real opinion on Vantage Point or the area that surrounds it, but… those units are no longer for sale. Sam Zell’s company bought the whole project and they are now apartments. He paid what I thought was an outrageous $340/sq ft.; nevertheless, that’s 679 units off the for sale market and into the rental pool.
Generically, I think downtown prices are still about 20% too high (when comparing the cost of ownership versus renting) and I think that will correct over the next three years. The excess supply is slowly being absorbed and most, but not all, of the specuvesters have been wiped out and foreclosed on. But there are still a lot of short sales going on and there’s still a lot of new, never-lived-in inventory. But there will be zero newly completed units coming on the market for at least the next five years, and so long as interest rates remain low and prices don’t increase (which is unlikely) most of this inventory will get sucked up.
While I still think downtown is generically overpriced there are pockets of value here and there. I just bought a west-facing penthouse unit in a mid-quality mid-rise (built in ’05) with 18 ft. ceilings and a view of the bay and downtown for $270/sq ft. (includes renovation costs). HOA is $328/mo. and includes a decent gym (but no pool). The original buyer paid a whopping $640/sq ft. While not a “steal,” that seems pretty reasonable to me. And there’s plenty of stuff like that if you have the patience to keep at it.
Participant[quote=wildta][quote=barnaby33]Do mean that Vantage point is solely, or even mostly responsible for a glut of units for sale? That doesn’t seem to be a realistic statement, because buyers there would seemingly be very different than buyers at BOSA or something more westerly.[/quote]
I concur. I live in the marina district and would never buy in the area of where vantage is located.[/quote]
I have no real opinion on Vantage Point or the area that surrounds it, but… those units are no longer for sale. Sam Zell’s company bought the whole project and they are now apartments. He paid what I thought was an outrageous $340/sq ft.; nevertheless, that’s 679 units off the for sale market and into the rental pool.
Generically, I think downtown prices are still about 20% too high (when comparing the cost of ownership versus renting) and I think that will correct over the next three years. The excess supply is slowly being absorbed and most, but not all, of the specuvesters have been wiped out and foreclosed on. But there are still a lot of short sales going on and there’s still a lot of new, never-lived-in inventory. But there will be zero newly completed units coming on the market for at least the next five years, and so long as interest rates remain low and prices don’t increase (which is unlikely) most of this inventory will get sucked up.
While I still think downtown is generically overpriced there are pockets of value here and there. I just bought a west-facing penthouse unit in a mid-quality mid-rise (built in ’05) with 18 ft. ceilings and a view of the bay and downtown for $270/sq ft. (includes renovation costs). HOA is $328/mo. and includes a decent gym (but no pool). The original buyer paid a whopping $640/sq ft. While not a “steal,” that seems pretty reasonable to me. And there’s plenty of stuff like that if you have the patience to keep at it.
Participant[quote=wildta][quote=barnaby33]Do mean that Vantage point is solely, or even mostly responsible for a glut of units for sale? That doesn’t seem to be a realistic statement, because buyers there would seemingly be very different than buyers at BOSA or something more westerly.[/quote]
I concur. I live in the marina district and would never buy in the area of where vantage is located.[/quote]
I have no real opinion on Vantage Point or the area that surrounds it, but… those units are no longer for sale. Sam Zell’s company bought the whole project and they are now apartments. He paid what I thought was an outrageous $340/sq ft.; nevertheless, that’s 679 units off the for sale market and into the rental pool.
Generically, I think downtown prices are still about 20% too high (when comparing the cost of ownership versus renting) and I think that will correct over the next three years. The excess supply is slowly being absorbed and most, but not all, of the specuvesters have been wiped out and foreclosed on. But there are still a lot of short sales going on and there’s still a lot of new, never-lived-in inventory. But there will be zero newly completed units coming on the market for at least the next five years, and so long as interest rates remain low and prices don’t increase (which is unlikely) most of this inventory will get sucked up.
While I still think downtown is generically overpriced there are pockets of value here and there. I just bought a west-facing penthouse unit in a mid-quality mid-rise (built in ’05) with 18 ft. ceilings and a view of the bay and downtown for $270/sq ft. (includes renovation costs). HOA is $328/mo. and includes a decent gym (but no pool). The original buyer paid a whopping $640/sq ft. While not a “steal,” that seems pretty reasonable to me. And there’s plenty of stuff like that if you have the patience to keep at it.
Participant[quote=briansd1]Good explanation, davelj.
The current income statement losses are “filled-in” by the taxpayers (numbers reported by the press) who end up owning assets which, over the long run, will pay back.
I guess it’s like owning a house. You overpaid for your house and you are upside down. You can’t pay your mortage and your uncle, because he’s a nice generous guy, buys the mortgage note.
No mater that you overpaid for the house or your uncle overpaid for the mortgage note, after enough time, your uncle, who bailed you out, will get his money back, at least in nomimal terms. It just might take a long time.
Don’t we all wish we had an uncle to bail us out? Oh, wait, we do. Uncle Sam.[/quote]
That’s an imperfect but reasonably good analogy.
And the Uncle Sam that’s bailing us out is… Us. And the specific “Us” that’s bailing us out is principally comprised of taxpayers in the top 10% of income earners, who collectively pay 70% of all federal income taxes (including SS and Medicare). And federal income taxes + SS + Medicare + corporate taxes comprise over 95% of all federal revenue. Now, I’m not complaining about this, I’m merely pointing out that it’s principally the top income earners who are financing this bail out. Which in many ways makes sense as arguably they – collectively – are the principal beneficiaries.
Participant[quote=briansd1]Good explanation, davelj.
The current income statement losses are “filled-in” by the taxpayers (numbers reported by the press) who end up owning assets which, over the long run, will pay back.
I guess it’s like owning a house. You overpaid for your house and you are upside down. You can’t pay your mortage and your uncle, because he’s a nice generous guy, buys the mortgage note.
No mater that you overpaid for the house or your uncle overpaid for the mortgage note, after enough time, your uncle, who bailed you out, will get his money back, at least in nomimal terms. It just might take a long time.
Don’t we all wish we had an uncle to bail us out? Oh, wait, we do. Uncle Sam.[/quote]
That’s an imperfect but reasonably good analogy.
And the Uncle Sam that’s bailing us out is… Us. And the specific “Us” that’s bailing us out is principally comprised of taxpayers in the top 10% of income earners, who collectively pay 70% of all federal income taxes (including SS and Medicare). And federal income taxes + SS + Medicare + corporate taxes comprise over 95% of all federal revenue. Now, I’m not complaining about this, I’m merely pointing out that it’s principally the top income earners who are financing this bail out. Which in many ways makes sense as arguably they – collectively – are the principal beneficiaries.
Participant[quote=briansd1]Good explanation, davelj.
The current income statement losses are “filled-in” by the taxpayers (numbers reported by the press) who end up owning assets which, over the long run, will pay back.
I guess it’s like owning a house. You overpaid for your house and you are upside down. You can’t pay your mortage and your uncle, because he’s a nice generous guy, buys the mortgage note.
No mater that you overpaid for the house or your uncle overpaid for the mortgage note, after enough time, your uncle, who bailed you out, will get his money back, at least in nomimal terms. It just might take a long time.
Don’t we all wish we had an uncle to bail us out? Oh, wait, we do. Uncle Sam.[/quote]
That’s an imperfect but reasonably good analogy.
And the Uncle Sam that’s bailing us out is… Us. And the specific “Us” that’s bailing us out is principally comprised of taxpayers in the top 10% of income earners, who collectively pay 70% of all federal income taxes (including SS and Medicare). And federal income taxes + SS + Medicare + corporate taxes comprise over 95% of all federal revenue. Now, I’m not complaining about this, I’m merely pointing out that it’s principally the top income earners who are financing this bail out. Which in many ways makes sense as arguably they – collectively – are the principal beneficiaries.
Participant[quote=briansd1]Good explanation, davelj.
The current income statement losses are “filled-in” by the taxpayers (numbers reported by the press) who end up owning assets which, over the long run, will pay back.
I guess it’s like owning a house. You overpaid for your house and you are upside down. You can’t pay your mortage and your uncle, because he’s a nice generous guy, buys the mortgage note.
No mater that you overpaid for the house or your uncle overpaid for the mortgage note, after enough time, your uncle, who bailed you out, will get his money back, at least in nomimal terms. It just might take a long time.
Don’t we all wish we had an uncle to bail us out? Oh, wait, we do. Uncle Sam.[/quote]
That’s an imperfect but reasonably good analogy.
And the Uncle Sam that’s bailing us out is… Us. And the specific “Us” that’s bailing us out is principally comprised of taxpayers in the top 10% of income earners, who collectively pay 70% of all federal income taxes (including SS and Medicare). And federal income taxes + SS + Medicare + corporate taxes comprise over 95% of all federal revenue. Now, I’m not complaining about this, I’m merely pointing out that it’s principally the top income earners who are financing this bail out. Which in many ways makes sense as arguably they – collectively – are the principal beneficiaries.
Participant[quote=briansd1]Good explanation, davelj.
The current income statement losses are “filled-in” by the taxpayers (numbers reported by the press) who end up owning assets which, over the long run, will pay back.
I guess it’s like owning a house. You overpaid for your house and you are upside down. You can’t pay your mortage and your uncle, because he’s a nice generous guy, buys the mortgage note.
No mater that you overpaid for the house or your uncle overpaid for the mortgage note, after enough time, your uncle, who bailed you out, will get his money back, at least in nomimal terms. It just might take a long time.
Don’t we all wish we had an uncle to bail us out? Oh, wait, we do. Uncle Sam.[/quote]
That’s an imperfect but reasonably good analogy.
And the Uncle Sam that’s bailing us out is… Us. And the specific “Us” that’s bailing us out is principally comprised of taxpayers in the top 10% of income earners, who collectively pay 70% of all federal income taxes (including SS and Medicare). And federal income taxes + SS + Medicare + corporate taxes comprise over 95% of all federal revenue. Now, I’m not complaining about this, I’m merely pointing out that it’s principally the top income earners who are financing this bail out. Which in many ways makes sense as arguably they – collectively – are the principal beneficiaries.
Participant[quote=briansd1][quote=Diego Mamani]Yeah dude, cut back!
Anyways, the $13B pales in comparison to the money that we (taxpayers) will lose with Fannie and Freddie. We’ve already lost close to $150 BILLION, and we stand to lose another $160 billion to $1 trillion, according to conservative estimates:
True enough.
FHA will also likely cost taxpayers $100 billion.
Funny thing is that Fan/Fred and FHA sprang into action after the financial crisis to save the market.
But certain uninformed people who just don’t understand the chain of events accuse the GSEs of CAUSING the crisis.[/quote]
How many times I have to explain this I just don’t know (this is may be the fifth time). As I wrote back in December 2009:
[quote=davelj]
I think the Fannie/Freddie (F&F) TARP [in addition to accumulated losses] will also get paid back, but over a much longer time horizon. Spread lenders, almost no matter how bad off they are, can always fill a hole, the only issue being how long it takes. And it’s going to take F&F a long time. To use an example, lets say that F&F charge off 10% of their portfolio (which would be a big number). Further, let’s say the average yield on the remaining 90% of their book is 5.5% and their funding costs (now borrowing at govt rates) are 2.5%. Add in 100 bps of operating expenses and you have a 200 bp spread. Here, it takes F&F 5.5 years to fill its hole (from losses) with spread income from the performing portfolio. If you assume that F&F’s losses are going to be 20% of its book, it takes them 11 years to fill the hole, and so on. So, while we’re hearing about the big “losses” coming out of F&F – which are real losses – we will get that money back… eventually… but it could be many years. We will lose in real (that is, inflation-adjusted) terms for sure.[/quote]The point here is that F&F’s “losses” are an income statement item and are meaningless absent a discussion of the balance sheet. We, the US Taxpayers, now own a huge pile of mortgage assets (along with corresponding debt that funds them). The losses will stop eventually – likely in a few years – and the spread income will fill the hole (think of it as accumulated negative retained earnings in accounting terms) and eventually yield a net profit. But… this is in nominal dollars and down the road many years. So, again, there will be a loss in real dollars, but that loss will be a small fraction of the “current losses” that are reported in the MSM. To be clear, I don’t give a rat’s ass about F&F – I just want folks to understand the difference between (1) temporary losses and permanent losses of capital, and (2) income statements and balance sheets.
Participant[quote=briansd1][quote=Diego Mamani]Yeah dude, cut back!
Anyways, the $13B pales in comparison to the money that we (taxpayers) will lose with Fannie and Freddie. We’ve already lost close to $150 BILLION, and we stand to lose another $160 billion to $1 trillion, according to conservative estimates:
True enough.
FHA will also likely cost taxpayers $100 billion.
Funny thing is that Fan/Fred and FHA sprang into action after the financial crisis to save the market.
But certain uninformed people who just don’t understand the chain of events accuse the GSEs of CAUSING the crisis.[/quote]
How many times I have to explain this I just don’t know (this is may be the fifth time). As I wrote back in December 2009:
[quote=davelj]
I think the Fannie/Freddie (F&F) TARP [in addition to accumulated losses] will also get paid back, but over a much longer time horizon. Spread lenders, almost no matter how bad off they are, can always fill a hole, the only issue being how long it takes. And it’s going to take F&F a long time. To use an example, lets say that F&F charge off 10% of their portfolio (which would be a big number). Further, let’s say the average yield on the remaining 90% of their book is 5.5% and their funding costs (now borrowing at govt rates) are 2.5%. Add in 100 bps of operating expenses and you have a 200 bp spread. Here, it takes F&F 5.5 years to fill its hole (from losses) with spread income from the performing portfolio. If you assume that F&F’s losses are going to be 20% of its book, it takes them 11 years to fill the hole, and so on. So, while we’re hearing about the big “losses” coming out of F&F – which are real losses – we will get that money back… eventually… but it could be many years. We will lose in real (that is, inflation-adjusted) terms for sure.[/quote]The point here is that F&F’s “losses” are an income statement item and are meaningless absent a discussion of the balance sheet. We, the US Taxpayers, now own a huge pile of mortgage assets (along with corresponding debt that funds them). The losses will stop eventually – likely in a few years – and the spread income will fill the hole (think of it as accumulated negative retained earnings in accounting terms) and eventually yield a net profit. But… this is in nominal dollars and down the road many years. So, again, there will be a loss in real dollars, but that loss will be a small fraction of the “current losses” that are reported in the MSM. To be clear, I don’t give a rat’s ass about F&F – I just want folks to understand the difference between (1) temporary losses and permanent losses of capital, and (2) income statements and balance sheets.
Participant[quote=briansd1][quote=Diego Mamani]Yeah dude, cut back!
Anyways, the $13B pales in comparison to the money that we (taxpayers) will lose with Fannie and Freddie. We’ve already lost close to $150 BILLION, and we stand to lose another $160 billion to $1 trillion, according to conservative estimates:
True enough.
FHA will also likely cost taxpayers $100 billion.
Funny thing is that Fan/Fred and FHA sprang into action after the financial crisis to save the market.
But certain uninformed people who just don’t understand the chain of events accuse the GSEs of CAUSING the crisis.[/quote]
How many times I have to explain this I just don’t know (this is may be the fifth time). As I wrote back in December 2009:
[quote=davelj]
I think the Fannie/Freddie (F&F) TARP [in addition to accumulated losses] will also get paid back, but over a much longer time horizon. Spread lenders, almost no matter how bad off they are, can always fill a hole, the only issue being how long it takes. And it’s going to take F&F a long time. To use an example, lets say that F&F charge off 10% of their portfolio (which would be a big number). Further, let’s say the average yield on the remaining 90% of their book is 5.5% and their funding costs (now borrowing at govt rates) are 2.5%. Add in 100 bps of operating expenses and you have a 200 bp spread. Here, it takes F&F 5.5 years to fill its hole (from losses) with spread income from the performing portfolio. If you assume that F&F’s losses are going to be 20% of its book, it takes them 11 years to fill the hole, and so on. So, while we’re hearing about the big “losses” coming out of F&F – which are real losses – we will get that money back… eventually… but it could be many years. We will lose in real (that is, inflation-adjusted) terms for sure.[/quote]The point here is that F&F’s “losses” are an income statement item and are meaningless absent a discussion of the balance sheet. We, the US Taxpayers, now own a huge pile of mortgage assets (along with corresponding debt that funds them). The losses will stop eventually – likely in a few years – and the spread income will fill the hole (think of it as accumulated negative retained earnings in accounting terms) and eventually yield a net profit. But… this is in nominal dollars and down the road many years. So, again, there will be a loss in real dollars, but that loss will be a small fraction of the “current losses” that are reported in the MSM. To be clear, I don’t give a rat’s ass about F&F – I just want folks to understand the difference between (1) temporary losses and permanent losses of capital, and (2) income statements and balance sheets.
Participant[quote=briansd1][quote=Diego Mamani]Yeah dude, cut back!
Anyways, the $13B pales in comparison to the money that we (taxpayers) will lose with Fannie and Freddie. We’ve already lost close to $150 BILLION, and we stand to lose another $160 billion to $1 trillion, according to conservative estimates:
True enough.
FHA will also likely cost taxpayers $100 billion.
Funny thing is that Fan/Fred and FHA sprang into action after the financial crisis to save the market.
But certain uninformed people who just don’t understand the chain of events accuse the GSEs of CAUSING the crisis.[/quote]
How many times I have to explain this I just don’t know (this is may be the fifth time). As I wrote back in December 2009:
[quote=davelj]
I think the Fannie/Freddie (F&F) TARP [in addition to accumulated losses] will also get paid back, but over a much longer time horizon. Spread lenders, almost no matter how bad off they are, can always fill a hole, the only issue being how long it takes. And it’s going to take F&F a long time. To use an example, lets say that F&F charge off 10% of their portfolio (which would be a big number). Further, let’s say the average yield on the remaining 90% of their book is 5.5% and their funding costs (now borrowing at govt rates) are 2.5%. Add in 100 bps of operating expenses and you have a 200 bp spread. Here, it takes F&F 5.5 years to fill its hole (from losses) with spread income from the performing portfolio. If you assume that F&F’s losses are going to be 20% of its book, it takes them 11 years to fill the hole, and so on. So, while we’re hearing about the big “losses” coming out of F&F – which are real losses – we will get that money back… eventually… but it could be many years. We will lose in real (that is, inflation-adjusted) terms for sure.[/quote]The point here is that F&F’s “losses” are an income statement item and are meaningless absent a discussion of the balance sheet. We, the US Taxpayers, now own a huge pile of mortgage assets (along with corresponding debt that funds them). The losses will stop eventually – likely in a few years – and the spread income will fill the hole (think of it as accumulated negative retained earnings in accounting terms) and eventually yield a net profit. But… this is in nominal dollars and down the road many years. So, again, there will be a loss in real dollars, but that loss will be a small fraction of the “current losses” that are reported in the MSM. To be clear, I don’t give a rat’s ass about F&F – I just want folks to understand the difference between (1) temporary losses and permanent losses of capital, and (2) income statements and balance sheets.
Participant[quote=briansd1][quote=Diego Mamani]Yeah dude, cut back!
Anyways, the $13B pales in comparison to the money that we (taxpayers) will lose with Fannie and Freddie. We’ve already lost close to $150 BILLION, and we stand to lose another $160 billion to $1 trillion, according to conservative estimates:
True enough.
FHA will also likely cost taxpayers $100 billion.
Funny thing is that Fan/Fred and FHA sprang into action after the financial crisis to save the market.
But certain uninformed people who just don’t understand the chain of events accuse the GSEs of CAUSING the crisis.[/quote]
How many times I have to explain this I just don’t know (this is may be the fifth time). As I wrote back in December 2009:
[quote=davelj]
I think the Fannie/Freddie (F&F) TARP [in addition to accumulated losses] will also get paid back, but over a much longer time horizon. Spread lenders, almost no matter how bad off they are, can always fill a hole, the only issue being how long it takes. And it’s going to take F&F a long time. To use an example, lets say that F&F charge off 10% of their portfolio (which would be a big number). Further, let’s say the average yield on the remaining 90% of their book is 5.5% and their funding costs (now borrowing at govt rates) are 2.5%. Add in 100 bps of operating expenses and you have a 200 bp spread. Here, it takes F&F 5.5 years to fill its hole (from losses) with spread income from the performing portfolio. If you assume that F&F’s losses are going to be 20% of its book, it takes them 11 years to fill the hole, and so on. So, while we’re hearing about the big “losses” coming out of F&F – which are real losses – we will get that money back… eventually… but it could be many years. We will lose in real (that is, inflation-adjusted) terms for sure.[/quote]The point here is that F&F’s “losses” are an income statement item and are meaningless absent a discussion of the balance sheet. We, the US Taxpayers, now own a huge pile of mortgage assets (along with corresponding debt that funds them). The losses will stop eventually – likely in a few years – and the spread income will fill the hole (think of it as accumulated negative retained earnings in accounting terms) and eventually yield a net profit. But… this is in nominal dollars and down the road many years. So, again, there will be a loss in real dollars, but that loss will be a small fraction of the “current losses” that are reported in the MSM. To be clear, I don’t give a rat’s ass about F&F – I just want folks to understand the difference between (1) temporary losses and permanent losses of capital, and (2) income statements and balance sheets.
ParticipantI defer to Jeremy Grantham on issues of macro-market valuation issues because his logic is always impeccable on these matters. If you normalize profit margins (“if profits don’t mean-revert then capitalism is broken”) and mean-revert valuations (along with interest rates), the S&P’s fair value is about 900 right now. A certain group of folks will always try to come up with justifications for higher valuations during a bull market but these justifications will prove faulty… eventually. Doug Short does a lot of Grantham-like mean reversion work on his website: dshort.com.
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