Wednesday Open Thread
This is your open thread for today. Please post random links and off-topic discussions here.
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36 comments:
As reported in the Seattle Time's Business Section:
Oil slides, but economy still slips
The interplay between energy and the economy, in the context of a real-estate slowdown, is likely to be a key issue at the Federal Reserve's interest-rate meeting today...
Schiff said the economy has grown in recent years despite soaring gasoline prices, thanks to historically low interest rates that made credit-card debt look cheap while fueling a housing boom that prompted many homeowners to take out home-equity loans.
According to the Federal Reserve, U.S. consumers owed $841 billion in credit-card and other revolving debts in July, compared with $804 billion a year earlier. Nonrevolving debt, which includes automobile and personal loans, totaled $1.51 trillion in July, compared with $1.46 trillion a year earlier.
But as adjustable rates on mortgages and credit cards rise, Schiff said, "all of a sudden, $2.50 a gallon might feel more expensive than $3..."
And as if any further confirmation of the housing market's woe was necessary, the Commerce Department reported Tuesday that construction of new homes dropped a bigger-than-expected 6 percent in August.
Home building futures outlook was also at a 30 today. So, only 30% of all RE builders believe RE is a worthy investment at this time... It's apparently the lowest since '02.
I still can't get to Ben's blog this morning. Anybody have any recon into what's happening there? Maybe an RE conspiracy? ;-)
Yeah, I haven't been able to get to Ben's site for a day now.
A post about Ben's blog on Bubble Meter:
Ben has a Money and Metals blog. If you look at his first comment on the latest post, you will see this:
-----
A lot of news today.
BTW, readers of my housing blog may note that the site is down. I am having to move it, again, due to traffic issues. It should be completed within 24 hours.
Monday is the release of existing home sales data.
I was just wondering what people think will happen as far as YOY increase/decrease.
I will go ahead and say that we will see at least a 10% increase from last Sept.
Anon 9:59-
10% sounds like a reasonable "guess" to me.
The number has been going down for the past several months, 17%,16%,15%, then last month the big jump down to 12%, so your 10% follows the pattern, albeit a bit on the high side considering the 3% drop last month.
We'll see if it's going to follow the established downward pattern and if so, by how much.
Fox has paid less attention to the housing bubble than the other cable news stations.
However, the most outrageous comment that I heard regarding the Bubble was on Fox cable.
It was months ago, some economist was being interviewed on the mortgage/credit bubble. He brought out all the stats then gave his prediction that it was a house of cards ready to implode.
The Fox guy asked: "So when this is all over, are we going to be collectively asking ourselves for generations, "What in the world were we THINKING???!!!"
His question pretty well summed it up for me.
I'm in the clueless club, but here is my take.
Just because the stock market seems not to be worried, that is no indication that it won't change direction.
Consumer spending, via the HELOC, is WAY, WAY down. Someone had on another thread a figure of -45%.
Second, there is still faith in the FED's ability to save us from ourselves - aka the Universal Put. When that vanishes, it will be a real roller coaster.
Third, the stock market doesn't tell us anything about itself. In 11/99, the stock market was telegraphing (if you buy into the forward looking premise) that the NAZ was going to 10000. The NAZ peaked in 3/00, and then lost 85% of its value. Obviously, the greatest point of bullishness was 3/00, and the first dirivative maximum was in 11/99. Anyone that went "all in" during that period was gutted like a fish.
I do think the FED runs itself on the applause meter, rather than the strength of the US$. Rest assured, the FED will cut when the housing and stock markets, and the economy at-large start to falter. Once people realize that it isn't doing any good, the real pain will begin.
There is no fear on the tape. Babyboomers are in a position that they MUST believe in an omnipotent/omnicient FED. It is in their collective best interest not to sell, but in their individual best interest to sell early in the process.
Will they all stand shoulder-to-shoulder, or will they hit the panic button?
Well, I'm a complete bear on the stock market. There is no way that the bear market that started in 2000 was complete in 2002, because the previous mania was the longest in history and every mania ends lower than it started and every major bear market in the last 100 years has ended with the yield of the major indexes being within about 2 of the PE ratio or higher than the PE ratio. In other words if the PE ratio of the Dow was 7 and the yield was 5 then the end might be near, but we never even came close in 2002. Because of this we can be sure that the bear market isn't over yet, in fact, it has a long way to go. I personally think we will be seeing serious downward pressure very soon, we may be at the top of this rally now as a matter of fact.
I'm looking for some advice from those predicting a recession. I have quite a bit of cash savings at this point, but I'm also putting heavily into my 401k. If we do enter a recession, it sounds like my 401k is toast. What should I do? I can't just pull money out without a huge penalty, right? Should I stop contributing until this blows over and just keep cash reserves? What about the company match, should I at least put in enough to get that?
I realize you all aren't financial advisors. Just looking for som input. Thanks.
anon 1102,
Well put.
I think the stock market, housing market, and the dollar are all one trade. Once one begins to crack (housing), the rest won't be far behind.
We will plumb depths that were previously thought impossible.
btw, if you actually have something intelligent to say (and apparently you do), get a blogger name so the rest of us can look for you. It is the one-off, idiot trolls that need the anon handle.
I believe I am correct when I say that 8 out of the 10 biggest "up" days on the NAZ were on the backside of the 3/00 peak, and prior to the lows in '02.
I'm not personally into the bunker paranoia.
But, although I used to live in-city and REALLY miss my great neighborhood, I do feel safer being out in the 'burbs right now.
And this is from someone who HATES 'burb living.
I just don't feel as vulnerable out here should the sh%t really hit the fan. It's the ONLY upside to living out here that I can think of and I've got to say, I feel like it's a huge advantage.
I remember the various Seattle neighborhoods during and after WTO and how ballistic things went.
Are the 'burbs the new bunkers?
I remember the various Seattle neighborhoods during and after WTO and how ballistic things went.
Umm, you mean parts of downtown and a little up Capitol Hill? I was running around WTO, and there was still traffic going up and down 1st and 2nd. The majority of the fun was around 4,5,6 and Pike/Pine. Pls.
You haven't seen riots until the German Polizei starts rolling out the water cannons. ( I was running around Germany in the '80s )
CNBC just interviewed Mike Perry on the tube. He is CEO of Indy Mac, one the the country's largest lenders and he was interviewed from Seattle. Our escrow office has closed plenty of Indy Mac financed deals. Most of the deals brokered to Indy Mac were not traditional fixed rate programs.
His sense was the the FED was going to be dropping rates next year and that he felt that Indy Mac's portfolio was sound. He goes on to say Indy Mac "only has roughly 25% of it's mortgage business in Option ARM's. and a good portion of the overall portfolio was sold on the 2ndary market." Only!??
Further, the credit scores of most these borrowers are over 700, he says, implying that these folks are in no danger of default. He goes on to state that homeowners have huge equity positions in their homes and can refinance into fixed rates or sell. At that point I rolled my eyes.
Brief Analysis: who in their right mind with over 700 FICO scores, assuming those with mid to high 700's or greater scores MAY be more financially saavy than those with poor scores, would KNOWINGLY get a short term 6mos, 1yr or derivative of an OPTION ARM program? Probably very very few.
Will those borrowers with existing ARM's and Option ARM's have the financial income to move to a fixed rate when they purchased with 5% or little to nothing down? Can they handle a 20% or more increase in payment a fixed rate mortgage requires? In a slowing market? In an environment where lending standards are "theoretically" going to tighten?
Seems like a lot to overcome. Possible? Yes. Probable? Not in my opinion.
octopus with a fez-
Not talking about the riots and severe unrest of Cap Hill and downtown.
I'm talking about the general pent up violent mood that prevailed in other neighborhoods that led to increased vandalism and "anti-social" mood.
If you didn't notice the tension and "acting out" that spread out around Seattle at that time, you're lucky.
All I'm saying is that, if that could happen during an incident that directly affected relatively few people in the city, what will happen when our economy hits the skids or something major happens that affects more people?
I'd rather be in the 'burbs for that one.
S Crow-
The Indy Mac guy is living in a dream world.
Friends of mine tried to refi into a fixed last year (before all this brewhahha started) and could not.
He works at Microsoft and she at UW.
There are a LOT of financially clueless rich people out there.
I wonder what the 2006 data would look like:
Residential Finance Data for 2001, compiled by U.S. Census Bureau
An exciting new boom is headed your way, and there is simply no stopping it.
The reason is simple:
Despite the high oil prices…despite the slowing economy…despite faltering home prices, the Fed’s decision today to leave interest rates alone for a second straight meeting is laying the groundwork for the unthinkable:
An interest rate cutting frenzy the likes of which we haven’t seen since 2001. That’s when the Federal Reserve cut the Fed Funds rate 13 times to stave off a recession and the stock market finally began to recover from the popping of the Internet bubble.
I realize that the thought of a rate cut now—even a small one—may be too hard to believe. Especially when you think of the relentless Fed interest rate increases we’ve seen over the past two years.
But you know that the Fed’s rate increases are finally over, and the economic fallout will make the next two years your most profitable of all. Prepare for a new bubble!
Latest on the Fed Funds Rate:
WASHINGTON – The Federal Reserve left a key interest rate unchanged today as falling energy prices helped to restrain inflation pressures.
Federal Reserve Chairman Ben Bernanke and his colleagues issued a brief announcement saying they would leave the federal funds rate, the interest that banks charge each other, at 5.25 percent.
...the Fed continued to signal concerns about inflation, repeating a phrase it had used last time — that the Fed's rate setting panel "judges that some inflation risks remain."
Larry, if you are going to troll, at least put your picture back up. Did you used to work at a mortuary or did all the years in the RE trenches wear you down?
S, you know the Phoenix RE market must have already crashed (on another site he claims to be a commercial RE broker), as 1) Larry had enough free time to write this book that he's hocking (how many good RE agents have had ANY free time over the past 5 years), and 2) He is now trying to make a living as a 'get rich quick' author (apparently not making enough $ selling RE), which is one step below Used Car Salesperson IMO.
An exciting new boom is headed your way, and there is simply no stopping it.
In the spirt of Woodstock 69', I have one thing to say to this "stay off the brown acid man...."
Here's the latest from Atlos:
16 Zip Codes Facing Bubble Risk
Here's a look at 16 zip-codes showing mounting pressure from the slowing housing market. We looked at Northern California and Seattle area zip codes with greater than 40% of the properties with price reductions. We also filtered for decreasing demand trends (measured by our Market Action Index), sufficient inventory, and median days on market (at least 7 weeks).
The result is one way to identify some at-risk bubble markets:
The only zip in Washington that is in trouble is Redmond (98053).
I don't know much about the Eastside....is Redmond tanking?
But they do say:
Inclusion on this list does not imply market rout. In fact prices for these markets are UP an average of 2% year-to-date.
Here's he detailed Seattle report from Atlos:
Real-time Market Profile for SEATTLE
Interesting that this week they show prices going up, inventory down, a days on the market flatenning. Doesn't seem right to me...but who knows.
That's clearly off, inventory continues to climb daily. Other than a brief leveling over the labor day weekend, inventory has been on a steady upwards path since May...
"thehousingbubbleblog" is back up.
Looks like CA. is going down for the count.
Another couple of months of this and there'll be nobody left in the US who thinks it's a "good time to buy RE".
Back to fundamentals.
Back to houses as places to live instead of an "investment". Who the heck ever came up with that bad idea anyhow?
Here is a list of all the zip codes facing bubble risk in USA.
XXXXX
Euro-Pacific Capital's Chief Global strategist, Peter Schiff, predicts recession in '07 and "All of the home appreciation of the past 5 or 6 years will be erased".
(link at Marin Real Estate Blog") It's from a Bloomberg video.
Anyone else been noticing that, over the past year, these economists have stretched their "fall-back" dates farter and farther back.
Last Fall people were predicting a lot less depreciation than they are now. It just gets more and more spectacular.
So sit back and wait...that's the message.
Zillow just updated their zestimates...my house is now valued at $484K...last week it was $476. Their price graph for 98117 is showing that after very slow appreciation for the last few months, neighborhood prices are spiking. Especially the last few weeks. Interesting...
It's also now showing that my house appreciated $101,597 since I bought it in 4/2005.
People who spend so much of their time checking in on their home price appreciation really ought to start thinking about selling that home.
Happy homeowners do not glue their nose to this kind of worthless information, especially in markets that a poised for a dump.
I'm sure it makes you feel good to see your home's appreciated Meshugy. How is going to make you feel when it starts going the other way?
You bought at the top. Face it. One of these days your going to look at the Zillow estimate and it's going to say 453K, then 447K, then 420K, ad nauseum.
These Seattle homes that are going for 450K now were going for 180-200K just a few years ago.
Think about that. Seriously. Not with pie in the sky "I'm getting rich" glasses on but coldly. Take a cold hard look and ask yourself if it makes sense.
I know you try hard to convince yourself and everyone else that, against all odds, these prices make sense.
But REALLY think rationally about it and you might find that, just possibly, it makes no sense at all.
If you can handle watching the zestimates go down week by week, then keep the house.
If not, sell it and get out with your 50K profit or whatever's left once you pay the mortgage off.
good luck to you.
anon 339 (aka Larry) - Thanks to Synthetik for outing Larry...
Since I am the self-appointed Larry-welcome wagon for Seattle Bubble, I just thought I would take the time to point out just how deluded you are.
You need to know how bubbles work.
Rule #1. Bubbles go up and down faster than you anticipate - especially down. Herd mentality is powerful and changes on a dime at a time that, by definition, causes the most pain to the most people. Risk is the piper and the piper always gets paid.
Rule #2. Bubbles do not reinflate. This has the FED scared shitless. Once people realize that real estate CAN AND DOES AND IS GOING DOWN, and the stories of people losing everything because their timing sucked, the Lumpenvestoriat won't rush back in. Take you pick of your favorite late 90s era tech stock.
Rule #3. Normal economic theory gets distorted around the peaks of bubbles. Bubbles are to economics what black holes are to physics - the normal rules don't apply.
Rule #4. People ALWAYS, and I mean ALWAYS, find themselves worse off after a bubble, than they would have been had it never occured. They ALWAYS wonder what they were thinking in the bubble (JNPR at $225/share? I'll take some of that!)
Rule #5. There is no cure for bubbles. Prevention is the only cure.
I've saved a post from an economic thread from the stock bubble. It is geared for the stock mania, but the general tenor can easily translate to the housing bubble. I didn't write it (honestly), but I wish I had. If I could only adopt this and call it my own.
Here it is, Larry. Try to learn something.
Retard:
You don't think we were in a boom?
21 year olds running fortune 1000 firms from their dorm rooms
25 year olds retiring
VC's funding "Recipie of the day" websites with $20 mil
Studio apartments renting for $3000/mo.
Coffee latte's selling for $6
Depression, and other "yuppie" diseases and their (coincidentally) expensive cures
Do you think the past few years were typical of an economic cycle?
Stocks of fake companies trading for BILLIONS in marketcap?
DOTCOM BUST, tons of stocks getting delisted after trading for $300 a share
People quitting jobs to trade stocks
CEO's getting paid BILLLIONS indirectly from insane paper wealth of stocks
Firms recording pension surplusses as income
Companies reporting FAKE $#%#% EARNINGS
Bankrupcies of MAJOR companies
MASSIVE insider trading
Wall St. IPO allocation fraud
Securities analysts being exposed as conflicted interest paid-shills
50000 Buy ratings, 1 sell rating
Record number of mutual funds,
Record percentage of households invested in stocks
You can't possibly be serious, idiot. This was a once in a lifetime financial
scam of historic proportions. You are just too self-centered to see it. Go get your MBA
so you can get your $125k job that your brother-in-law (barely) has. Stupid idiot,
these firms won't even EXIST by the time you get your joke of a degree, let alone have
a vacancy waiting for you. Enjoy your student loans and burger-flipping job,
sucker-chump-latecomer-carperbagger lemming
PS:
Fret for your figure and
Fret for your latte and
Fret for your lawsuit and
Fret for your hairpiece and
Fret for your prozac and
Fret for your pilot and
Fret for your contract and
Fret for your car. - It's a
Bull shit three ring cir cus side show of...
Freaks!
Larry,
Are you the same guy that posted that he lives in a shared apartment, pockets $5K/mo, gets stock returns that would make Buffet stand up and notice, and thinks he will go on the Supermodel Sex Safari by the time he is 34?
Excellent! The song "Aenima" by Tool truly is a work of art isn't it? Don't forget:
"Learn to Swim"
I couldn't give anybody who buy's Larry's drivel any better advice.
Eleua quoted...
Fret for your figure and
Fret for your latte and
etc...
I must admit that I'm not up to speed on my 'Tool' lyrics.
Does part of my favorite tech-stock-bubble rant quote a song by the group?
Yeah. It's the title track on the Aenima album; track 13 I believe. Great song. It's specifically about being sick of the fake lives of people in LA, but the message applies here too.
It was funny reading it because it fit the situation perfectly. The author of that little rant was really "on" when composing that...
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