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Any idea how the scale of the sub-prime meltdown compares to the savings and loan fiasco of the 80’s?

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Rich getting richer? Wealth-effect in action?

I have the feeling the sub-million dollar sales have been primarily sub-prime driven, whilst the million+ are more conventionally financed. I mean this in the most general of terms, however. I could also be totally wrong (and would love to be corrected).

Imagine all the FB’s taking out suicide loans, re-financing and HELOC’ing new cars, boats, kitchen remodels, etc. All that money has to go somewhere, i.e. local business. I’m sure the guy selling yellow hummer’s is doing great (for now).

So even if the FB’s foreclose and lose their toys the equity they pulled out is still going to be floating around the local economy. And since I don’t know too many folks using home equity to shop at the thrift store or buy big macs, its likely primarily going to end up in the pockets of the already very wealthy. This in turn creates a feed-forward mechanism that is further inflating prices in the high end.

Of course, this will all come grinding to a halt when the free money disappears and *everyone* feels the hurt. I have a hunch it will take a fair bit of time for this to percolate up into the high end, though. All those HELOC’s have created a massive equity cushion for the super-rich.

Maybe we can call this the ‘trickle up’ effect?

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You know, I get somewhat peeved whenever someone mentions the “X” factor for the high prices in SD.

I expect to pay a premium for the weather, nice city, good salary tech job, etc. Those are solid ‘fundamentals’.

They do not, however, explain the 100% appreciation in a few years. Its nothing but rampant speculation, easy credit and mortgage fraud.

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Meadandale,

I know full well about how crappy the off-shore stuff can be. A startup I worked for went under partially due to a garbage client written by our offshore coding group.

However, I’ve also worked places where India did 80-90% of the coding and a senior coder just cleaned it up and packaged it. This is a workable model and can produce just as good a product for less cost than using an all domestic staff.

I don’t remember exactly what I said (and am too lazy to look), but I will concur that there will always be a demand locally for top-talent. If you are a junior coder, fresh out of school, etc, its much harder these days to get an entry level gig. Again, its all perspective!

I telecommute when I want, make close enough to six figures (equiv. with bennies IMHO) and have a recession-proof gig, so I can’t really complain anyways.

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Hey, here’s an idea, buy a house for cash up front! Then its a 100% cheaper than renting on a monthly basis.

Except for the first month, that is.

Isn’t this really an apples and oranges type discussion?

I would think it makes sense to buy when the cost of renting is more than a monthly (non-toxic) mortgage payment, plus expenses, minus the tax break.

And we are a *long* way from that!

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“I recall the stats showed minimal deals that were 100% financed (but don’t hold me to that).”

Wow, if thats a case a soft landing is much more likely.

But, then again, it takes much more financial sense to accrue a million in cash vs. a million in credit, so I wonder if the smart money is really going to buy in so soon.

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There will always be buyers, indeed.

I’m curious if these are cash-wealthy folks sitting on a mountain of equity that just couldn’t wait (maybe even former owners who cashed out a year or so ago) or just a second round of greater-fools with the standard toxic loan products.

A scary thought is that there is a potential for a ‘soft-landing’ if there is an adequate supply of both of the above for the indefinite future.

Again, I think we really need to have some better statistics regarding how buyers are financing home purchases currently to have a better idea what can happen in the future.

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“It’s all program trading. When the market does something unexpected, the computers take over and start exiting positions.”

Yup! In fact the market has ‘breakers’ that are thrown when this happens to suspend/limit trading. I think that happened yesterday.

It gives all the professor Frink’s time to hit the reset button on their robot traders.

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“In comparison, the same Scripps poll found that 38% of Americans think the “federal government is withholding proof of the existence of intelligent life from others planets”

I call this the ‘trailer park effect’.

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Just discovered the beta of google finance…

This is neat!

http://finance.google.com/finance?cid=983582

Great use of ajax.

You can zoom right in and look at the dive. Given the slope it does indeed look technical in origin. But, you are correct, it will take a few weeks to see if this is the real deal or not.

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“Is there any consensus here about what will happen tomorrow?”

The news is reporting that supposedly a software “glitch” caused the DOW to drop a hundred points in a few minutes, which supposedly caused a panic.

If thats truly the case I can see some big gains tomorrow as traders rally to buy back in.

Unless, its a bunch of bullflop.

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What’s the harm in waiting a year? Unless you are hell-bent on watching 100K or so in equity vanish in the next 12 months.

Relax, do some traveling, have a garage sale and get rid of the stuff you don’t need. 2007 is the year of reckoning.

P.S. Did you see what happened in the stock market today?

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Um, my guess regarding gold is that since most folks are buying it via a market transaction it ends up on the chopping block when there is a crash, just like everything else. Don’t underestimate how much of trading is automated these days either; I doubt a computer program has much of an emotional involvement with a yellow metal.

The difference I would hope is that gold has a harder ‘bottom’ than most investments. Still doesn’t mean it can’t correct like everything else.

I’m starting to think everything is in its own bubble to some extent due to all the equity chasers out and about and we are going to see a major correction across the board.

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“Don’t you mean “the pool of un-qualified buyers who bought anyway would drop substantially”????”

I don’t know?

I mean it will potentially get *much* harder to get the loan to buy a house. Especially in SoCal!

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“The only thing to produce huge drops would be massive job lossses.”

Last I checked the biggest growth industry in SD country was all RE-related. But hey, I’m sure not many of those folks in the good family neighborhoods are realtors, builders, contractors, lending agents or flippers. Or owning/working in a local business that has been benefiting from the recent local boom.

Another very real “thing” that could produce huge drops would be a collapse of the sub-prime lending markets, as the pool of qualified buyers would drop substantially.

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