Forum Replies Created
-
AuthorPosts
-
April 15, 2006 at 12:36 PM in reply to: Fed stablishes Newbank to mitigate risks to the financial system #24252
powayseller
ParticipantIt seems like no big deal. My brother heard about this back in the late 90’s when he was still working on Wall Street.
His reply:
The reason is there are only a couple private clearing banks for Federal securities and the Fed did not want to be dependent on them. I think the reason to have a backup was always related to risk management. It could be that the risk is now seen as larger so there was this extra push to get it done, but maybe it just took a while to get the bureaucractic work done. I am much more curious about why the Fed stopped publishing the M3 numbers . .powayseller
ParticipantAnother cause of foreclosures is job loss. The WSJ reports on tony Bloomfield Hills. Oakland County, where Bloomfield Hills is located, is the nation’s fourth-wealthiest county with a population of more than one million, according to the latest per capita income data from the Commerce Department. In Oakland County, 723 homes are in foreclosure, more than double the 334 in February 2004. Michigan now has twice as many homes in foreclosure as it did in February 2004, and the state’s current foreclosure rate is about two-and-a-half times as high as the national average.
Across Bloomfield Hills, residents are changing their lifestyles in ways large and small. The 325-member Forest Lake Country Club says it has a 20-person waiting list to get out of the club. (Last year, there were just four people on this list.) In order to get back a portion of their equity in the club, these members have to pay $540 a month in dues until new blood can be found to take their slots. To lure new members, the club has cut its initiation fee to $15,000 from $45,000. At Erhard BMW in Bloomfield Hills, sales are down 10% to 15% from last year. Stanford Krandall, who lives in Bloomfield Hills, is closing his family’s jewelry business, located nearby. Founded by his great-grandfather in 1911, Sidney Krandall & Sons catered to some of the area’s richest residents. But sales were down more than 25% since 2003.
Anna DiMaria, 65, ran beauty businesses in the area for nearly four decades. But last summer, she closed down her once-thriving Capelli Spa because she says at least 30% of her wealthy client base had cut back on visits or stopped coming. “Instead of getting facials every month, they’d get them every three months,” she says. “They’d say, ‘My husband and I have talked it over. We’re taking a cut in our luxuries.’ ”
Some clients were getting their false nails taken off to save the $70 monthly maintenance fee, says Ms. DiMaria. “They’d tell me, ‘I want to let my nails breath.’ They didn’t want to reveal it was an economic decision.”
In nearby West Bloomfield, Angelo’s Bistro lowered its prices almost 30% in January, and took away the tablecloths and upper-end menu items, such as pasta with lobster. It changed its name to Angelo’s Greek Restaurant. (Customers could afford the cheaper greek food.)
The ear-nose-throat physician expects his patient load to fall 10% in the year ahead, as patients skip appointments to cut down on health-care costs. Dr. Succar has been reevaluating his own finances. “I’m definitely cutting expenses,” he says. “We’re working on a budget now. We’re worrying about the future and what’s coming.”
powayseller
ParticipantThe Wall Street Journal (4/14/06) story writes the highest regional rates of foreclosures are in the entire “East North Central” region of the country, which includes Indiana, Ohio, Michigan, Illinois and Wisconsin.
And what the states hit hardest by mortgage foreclosures have in common is relatively low home-price appreciation (compared with the national average) over the past few years, typically combined with below-trend job growth.
North County Jim, I had wanted to post this topic for a while, so our dialogue the other day was my inspiration. Only time will tell how bad this recession will be. I could be way off base…
powayseller
ParticipantUSA Today has a story about effect of adjustable rate mortgages across middle America. There are many more articles like this…Let’s all be aware that the ARM and subprime lending problems are nationwide.
For 45 years, Robert and Lorraine Brown have lived in their ranch-style home in Florissant, Mo. When they refinanced their home two years ago to pay off some bills, Robert, now 78, was working as a deliveryman. But his employer went out of business last April. Now he and Lorraine, 72, a retired nurse, are both seeking work. The rate on their mortgage has jumped from 7% to 10.5%.
Already, in West Virginia, Alabama, Michigan, Missouri and Tennessee, about one in five homeowners with a high-interest (subprime) ARM was at least 30 days late at the end of last year, according to the Mortgage Bankers Association. After 90 days, the foreclosure clock starts ticking. Most of those foreclosures are related to job losses in auto and garment factories; higher mortgage payments were often the last straw.
In the Atlanta area, credit counselors for The Impact Group say 85% of their calls are now related to ARM or interest-only loans.
In Liburn, GA, Susan Cambero is going to lose her house. She got into trouble after she took out an equity line of credit on her home to pay off her car and other bills.
“Within the last year, I would say 60% to 70% of calls to our hotlines are issues related to ARM (adjustable-rate mortgage) loans,” says Chris Krehmeyer, executive director of Beyond Housing, a non-profit group that offers homeownership support services in St. Louis. “That’s significantly higher than in years past, because the ARMs are coming home to roost.”
powayseller
Participant🙂 Funny…
powayseller
ParticipantAnd the lower property and earthquake insurance.
Another reason: say you want to sell your house before prices ratchet back up to today’s levels, so within the next 15 – 20 years. If you wish to leave San Diego for your big job opportunity, you could find yourself upside down on the mortgage.
Interest rates would have to double to 12% before you reach a payment equivalent to today’s payment. Assume a $950K house at 6% today, vs. a post-bubble $475K house at 12% interest. Both have annual interest of $57,000 in the first year.
Against that, weigh the interest you’re earning on your nice savings (hey, good job on saving that much!). Do you think it’s likely that interest rates get that high, to 12%? They could, so that’s a definite consideration.
Some folks may not want to wait until the last dollars are eked out of this bubble. Perhaps you will wait 2 or 3 years to get in. You will come out ahead by waiting.
By summer, everyone will know the spring rally didn’t happen.
I spoke w/ a realtor today about his listing that shows a Trustee Sale on RealtyTrac.com. His listing is on my friend’s street, and she and I discussed taking our kids on a fieldtrip to the courthouse next week to see the auction. It turns out they just got an offer on the house, and asked the bank to withdraw the Trustee Sale and accept the offer. The realtor told me the foreclosures are just starting. He sees 100-200 every day (week?) on RealtyTrac, and knew years ago, when exotic loans were popular, that this would be the result. He told me there will be a huge wave of foreclosures later this year, as more people lose their homes because of these loans.
My husband is dreaming of buying a house near the beach. By 2010, I am sure our money will buy a house on the beach.
April 14, 2006 at 1:21 PM in reply to: “Obvious Guy” sez a price correction by “Soft Landing” will still suck. #24231powayseller
ParticipantThanks lostkitty.
I couldn’t remember offending anyone at all, so I did a Search on RightSide, and looked at all his posts, and whether I had given responses. We had exchanged ideas a few times, and it was very friendly each time. I am really surprised that he is so upset with me. I know he is moving from Seattle to San Diego, and hopes to purchase a house this summer/fall. Perhaps my forum topics on Sell Now have offended him, as he feels I judge people who are buying right now.
While I and most on this forum believe that buying now will result in lost money, I would not wish him away from this forum just because he disagrees with that. I had hoped to show him that renting is a viable alternative.
This forum would be boring if everone felt the same way. I am open to learning from all who come here. I’m always so happy when I see a new name in the forums, and a new idea is presented, even if it goes against what I thought was true. Case in point: I was so against gold, and then 4plexowner got me thinking, and I ended up buying GLD this week. Probably I’ll regret it, buying at the top 🙂
Anyway, diverse opinions and outlooks enrich us all. We’re learning from each other.
April 14, 2006 at 12:58 PM in reply to: “Obvious Guy” sez a price correction by “Soft Landing” will still suck. #24227powayseller
ParticipantRightSide, I thought Rich asked us to play nice. I also wonder which of my views seem to offend. The nice thing about the forums is that folks can read those responses they like, and can skip over mine if they wish.
I actually have a lot of valuable insights and information to add. Fortunately, I have time to read, and instead of keeping this all to myself, like to share it with the community that comes here.
April 14, 2006 at 12:29 PM in reply to: “Obvious Guy” sez a price correction by “Soft Landing” will still suck. #24225powayseller
ParticipantI’m starting a new forum topic for the reply, and will post it after server access is restored.
April 14, 2006 at 10:08 AM in reply to: “Obvious Guy” sez a price correction by “Soft Landing” will still suck. #24219powayseller
ParticipantThe economy is strong because of housing. Most jobs in the last years are housing-related, either directly via construction and sales, or indirectly, via purchases made through refis and HELOCs. Economists state that 2/3 of our economic growth is from consumer spending. Thus, if you take away half of consumer spending, the economy will take a hit.
In addition, the Fed has to inject money into the system to pay the promised entitlement benefits, and service the national debt.
The trade deficit is large and unsustainable. The GSEs pose systemic financial risk (both facts are per Greenspan). The dollar is on shaky ground, and our deficit is sustainable ONLY as long as foreigners keep buying our dollars. China has hinted that they want to diversify, and judging by the rising yield curve, it appears they have started.
America was once the world’s largest producer of goods. We are now the world’s largest debtor nation, the largest consumer of goods. We get away with this because we have the reserve currency. But, as in housing, all excesses correct.
Where do you see a bright future in that, North County Jim? What did I miss?
April 14, 2006 at 9:05 AM in reply to: “Obvious Guy” sez a price correction by “Soft Landing” will still suck. #24217powayseller
ParticipantLook at China. Their downturn was “softened” by government policy intervention, yet thousands of brokerages closed, realtor income is down 2/3, and many are upside down on their mortgages. And yes, the banks are suffering. Their upside: a high savings rate, so the pop didn’t wipe out their economy. The US won’t be able to handle it as well.
The only thing soft will be the sound of shoppers driving to the mall.
You won’t hear them, and you won’t see them.
And that will be the beginning of the end of the strong economy.
powayseller
ParticipantHow could I resist with smooth talk like that 🙂
There was a housing bubble, but the government has been straight up in telling people about it, issued bubble busting policies and is purchasing/converting unfinished condo buildings.
If you want more details, read on.
The housing bubble, in which prices doubled in 3 years, was mainly confined to Shanghai and other large cities. Speculators purchased about 40% of condos. As prices rose, the government stepped in with policies to squash the fevor. They initiated a flipper 5% capital gains tax, a 5.5% capital gains tax on profits, increased down payment requirements from 20% to 30%, and raised the mortgage rate from 5% to 5.5%. The 121 policy requires developers to have 30% of their own money in the project (China Daily article). Now, with prices down about 30%, many people are upside down on their mortgages, and suing the developers! Since spring, 3000 brokerage offices closed. Houses did not see the run-up of condoes, and have not been impacted in the downturn. Concerns remain for the fallout in the banking sector. Unlike the US, many Chinese economists admit the bubble and the extent of the fallout. Three years ago, a senior economist Justin Lin warned that a RE bubble supported by bank loans may turn into a banking crisis. How’s that for straight talk?
In the island province Hainan, the government purchased half of the of the 165-million-sq-ft of unfinished condo units, and will convert them to low-income housing. This will burst the housing bubble, provide social assistance, and reduce the blight of unfinished construction.
China’s housing market cooled off somewhat after government policy which constrained financing. Still, only 30% of urban households can afford a condo. In March, the lower-end housing heated up, and the government has not tried to stop it. The policy shift is because they hope the RE industry can stimulate domestic consumption. At the same time, they remain concerned about bad loans, which tripled last year to $194million. So they are walking a tightrope in their policy. But unlike the US, they are actively managing RE pricing.
Chongqing’s property market right now is a lot like Hangzhou’s five or six years ago, only without the same kind of bubble Hangzhou went through,Hangzhou, and its close neighbor Shanghai, came under the spotlight for rampant property speculation that sent prices soaring. Beijing responded with a raft of cooling steps, including levying capital gains taxes on homes resold within a short period and higher down payment requirements. Ye thinks Chongqing will be spared a similar fate because its market took off after the lessons from Shanghai had been learned.
powayseller
ParticipantAre services rising fast? Anything wage-related is stagnant, if you believe the stuff about real wages being constant/down over the last 20 years.
I’ve not heard the comment about inflation in bonds. So if bond prices are overvalued, the yield would be too low. Is that it?
I’m seriously eyeing commodities not just as a way to get inflation protection, but also because there is a supply-demand imbalance. And remember there is a difference between buying commodities, and holding stocks of the companies which mine them, produce them, or make the equipment for the activities. The companies are subject to many more variations, whereas the price of the commodity itself is only subject to the actual demand-supply imbalance.
powayseller
ParticipantDo you think the cessation of M3 reporting has anything to do with firing up the printing presses? The government prints money to pay for entitlements and debt payments, and it’s not noticed because M3 is not printed.
Since inflation is really much higher than the government states (look at commodities going up like crazy), is that the real reason behind the consistent Fed rate hikes? After all, if inflation is really only 2.x%, the Fed could stop raising interest rates.
Assuming inflation is really 8% or 12%, what proof can we find in our daily lives? Wages are not rising, but what should be rising, that we purchase, aside from the items already listed.
-
AuthorPosts
