Something similar to this showed up in my inbox yesterday, I found it amusing and with a few alterations have decided to share it with you, enjoy . . .
On the first month of default my true love said to me…we lost all of our equity!
On the 2nd month of default my true love said to me… There’s 2 past due letters, and we lost all of our equity.
On the 3rd month of default my true love said to me… Our bank got a bailout, 4 past due letters and we lost all of our equity.
On the fourth month of default,
my true love said to me… We have 4 calling collectors,
the big banks got bailed out,
a dozen past due letters, and we lost all of our equity.
On the fifth month of default,
my true love said to me… we live in our house for free!, more calling collectors,
banks bailed out,
a dozen past due letters, and we lost all of our equity.
On the sixth month of default,
my true love said to me we now have
6 months of savings, we live in our house for free! ,
more calling collectors,
banks bailed out,
2 dozen past due letters, and we lost all of our equity
On the seventh month of default,
my true love said to me home prices keep a-fallin, 7 months of savings, we live in our house for free! ,
more calling collectors,
banks bailed out, 3
dozen past due letters,
and we lost all of our equity.
On the eighth month of default,
my true love said to me let’s go on vaction, prices keep a-fallin, 8 months of savings, we live in our house for free! ,
more calling collectors,
banks bailed out, 3
dozen past due letters,
and we lost all of our equity.
On the ninth month of default,
my true love said to me I
found some great new rentals, what a great vacation, prices keep a-fallin, 9 months of savings, we live in our house for free! ,
more calling collectors,
banks bailed out, 3
dozen past due letters,
and we lost all of our equity.
On the tenth month of default,
my true love said to me 10 days till auction,
found some great new rentals, what a great vacation, prices keep a-fallin, 10 months of savings, we live in our house for free! ,
more calling collectors,
banks bailed out, 4
dozen past due letters,
and we lost all of our equity.
On the eleventh month of default,
my true love said to me
the lender postponed the sale, 30 days till auction,
found some great new rentals, what a great vacation, prices keep a-fallin, 11 months of savings, we live in our house for free! ,
more calling collectors,
banks bailed out, 5
dozen past due letters,
and we lost all of our equity.
On the twelfth month of default my true love said to me house sold at auction, we need to vacate, cash for keys offer,
found a great new rental, we went on vacation, prices keep a-fallin, one year of savings, we lived in our house free! , no
more calling collectors,
we got bailed out, we will fix our credit,
and in 3 years we’ll buy a house cheap.
Want help? check out www.trghelp.com or info "help me" to info@trghelp.com Happy Holidays!
Thursday, December 17, 2009
Wednesday, December 9, 2009
Loan Modification Failures - And the hits just keep on coming . . .
10,000 permanent loan mods have been accomplished to date - that's it just 10,000!!!
In the last 90 days about 1,000,000 (that's one million) new people have entered the foreclosure process.
Even if all 10,000 of the successful loan mods were in the last 90 days that's still only 1%!!!
Q: What happens to the other 99+% who aren't receiving successful loan mods?
A: They become short sales or foreclosures
Q: What happens when all of those short sales and foreclosures enter the market over the next 5+ years?
A: Prices continue to correct. I wrote previously that prices nationally would return to levels last seen in 1996-1998. I am now thinking that they will most likely correct further. The only possible way that prices won't correct to those levels would be if our government and the Fed instead opt to create significant inflation. That would mean that values would stop dropping and could ultimately push prices up high enough that the projected 50+% of homes that will have be underwater* by end of 2011, might not actually realize that fate . . . of course the level of inflation needed to reach that point would also push a McDonald's value meal to a price of over $25!
If you think dropping values are a problem, PRAY that our government and the Fed don't choose to simply inflate their way out of one problem and into a far worse problem.
For details on the article click on title above or cut and paste link below.
For solutions to this situation please email a brief description of your situation to kirk@kirknace.com and simply raise your hand and ask for help.
http://finance.yahoo.com/news/Only-10000-permanent-loan-apf-1828618683.html?x=0&sec=topStories&pos=2&asset=&ccode=
*being underwater is the term used when an owner owes more against the property than the property is worth. Currently only about 1 out of every 4 US homeowners are suffering from this. HSBC recently released a study wherein they project that number to grow to 1 out of every 2!
In the last 90 days about 1,000,000 (that's one million) new people have entered the foreclosure process.
Even if all 10,000 of the successful loan mods were in the last 90 days that's still only 1%!!!
Q: What happens to the other 99+% who aren't receiving successful loan mods?
A: They become short sales or foreclosures
Q: What happens when all of those short sales and foreclosures enter the market over the next 5+ years?
A: Prices continue to correct. I wrote previously that prices nationally would return to levels last seen in 1996-1998. I am now thinking that they will most likely correct further. The only possible way that prices won't correct to those levels would be if our government and the Fed instead opt to create significant inflation. That would mean that values would stop dropping and could ultimately push prices up high enough that the projected 50+% of homes that will have be underwater* by end of 2011, might not actually realize that fate . . . of course the level of inflation needed to reach that point would also push a McDonald's value meal to a price of over $25!
If you think dropping values are a problem, PRAY that our government and the Fed don't choose to simply inflate their way out of one problem and into a far worse problem.
For details on the article click on title above or cut and paste link below.
For solutions to this situation please email a brief description of your situation to kirk@kirknace.com and simply raise your hand and ask for help.
http://finance.yahoo.com/news/Only-10000-permanent-loan-apf-1828618683.html?x=0&sec=topStories&pos=2&asset=&ccode=
*being underwater is the term used when an owner owes more against the property than the property is worth. Currently only about 1 out of every 4 US homeowners are suffering from this. HSBC recently released a study wherein they project that number to grow to 1 out of every 2!
Tuesday, December 8, 2009
From Russia with Love . . .
Take a minute and read what the rest of the world is thinking, writing and saying about us "Passive, hapless SHEEPLE" that's what we've become - Sheeple - it's a damn shame, read on and thank you to David Tanzer for sharing this.
American capitalism gone with a whimper
It must be said, that like the breaking of a great dam, the American descent into Marxism is happening with breath taking speed, against the back drop of a passive, hapless sheeple, excuse me dear reader, I meant people.
True, the situation has been well prepared on and off for the past century, especially the past twenty years. The initial testing ground was conducted upon our Holy Russia and a bloody test it was. But we Russians would not just roll over and give up our freedoms and our souls, no matter how much money Wall Street poured into the fists of the Marxists.
Those lessons were taken and used to properly prepare the American populace for the surrender of their freedoms and souls, to the whims of their elites and betters.
First, the population was dumbed down through a politicized and substandard education system based on pop culture, rather than the classics. Americans know more about their favorite TV dramas than the drama in DC that directly affects their lives. They care more for their "right" to choke down a McDonalds burger or a Burger King burger than for their constitutional rights. Then they turn around and lecture us about our rights and about our "democracy". Pride blinds the foolish.
Then their faith in God was destroyed, until their churches, all tens of thousands of different "branches and denominations" were for the most part little more than Sunday circuses and their televangelists and top Protestant mega preachers were more than happy to sell out their souls and flocks to be on the "winning" side of one pseudo Marxist politician or another. Their flocks may complain, but when explained that they would be on the "winning" side, their flocks were ever so quick to reject Christ in hopes for earthly power. Even our Holy Orthodox churches are scandalously liberalized ………in America.
The final collapse has come with the election of Barack Obama. His speed in the past three months has been truly impressive. His spending and money printing has been record setting, not just in America’s short history but in the world. If this keeps up for more than another year, and there is no sign that it will not, America at best will resemble the Weimar Republic, and at worst Zimbabwe.
These past two weeks have been the most breath taking of all. First came the announcement of a planned redesign of the American Byzantine tax system, by the very thieves who used it to bankroll their thefts, loses and swindles of hundreds of billions of dollars. These make our Russian oligarchs look little more than ordinary street thugs, in comparison. Yes, the Americans have beat our own thieves in the shear volumes. Should we congratulate them?
These men, of course, are not an elected panel but made up of appointees picked from the very financial oligarchs and their henchmen who are now gorging themselves on trillions of American dollars, in one bailout after another. They are also usurping the rights, duties and powers of the American congress. Again, congress has put up little more than a whimper to their masters.
Then came Barack Obama's command that GM's president step down from leadership of his company. That is correct, dear reader, in the land of "pure" free markets, the American president now has the power, the self given power, to fire CEOs and we can assume other employees of private companies, at will. Come hither, go dither, the centurion commands his minions.
So it should be no surprise that the American president has followed this up with a "bold" move of declaring that he and another group of unelected, chosen stooges will now redesign the entire automotive industry and will even be the guarantor of automobile policies. I am sure that if given the chance, they would happily try and redesign it for the whole of the world, too.
Prime Minister Putin, less than two months ago, warned Obama and UK 's Blair, not to follow the path to Marxism, it only leads to disaster. Apparently, even though we suffered 70 years of this Western sponsored horror show, we know nothing as foolish, drunken Russians, so let our "wise" Anglo-Saxon fools find out the folly of their own pride.
Again, the American public has taken this with barely a whimper...but a "freeman" whimper.
So, should it be any surprise to discover that the Democrat controlled Congress of America is working on passing new regulations that would give the American Treasury department the power to set "fair" maximum salaries, evaluate performance and control how private companies give out pay raises and bonuses? Senator Barney Frank, a social pervert basking in his homosexuality (of course, amongst the modern, enlightened American societal norm, as well as that of the general West, homosexuality is not only not a looked down upon life choice, but is often praised as a virtue) and his Marxist enlightenment, has led this effort. He stresses that this only affects companies that receive government monies, but it is retroactive and taken to a logical extreme, this would include any company or industry that has ever received a tax break or incentive.
The Russian owners of American companies and industries should look thoughtfully at this and the option of closing their facilities down and fleeing the land of the Red as fast as possible. In other words, divest while there is still value left. The proud American will go down into his slavery without a fight, beating his chest and proclaiming to the world, how free he really is. The world will only snicker.
(To meet our legal copyright obligation, the article was written by Stanislav Mishin 1999-2009 @ PRAVDA.Ru. When reproducing the materials in whole or in part, hyperlink to PRAVDA.Ru should be made. The opinions and views of the authors do not always coincide with the point of view of PRAVDA.Ru's editors.)
American capitalism gone with a whimper
It must be said, that like the breaking of a great dam, the American descent into Marxism is happening with breath taking speed, against the back drop of a passive, hapless sheeple, excuse me dear reader, I meant people.
True, the situation has been well prepared on and off for the past century, especially the past twenty years. The initial testing ground was conducted upon our Holy Russia and a bloody test it was. But we Russians would not just roll over and give up our freedoms and our souls, no matter how much money Wall Street poured into the fists of the Marxists.
Those lessons were taken and used to properly prepare the American populace for the surrender of their freedoms and souls, to the whims of their elites and betters.
First, the population was dumbed down through a politicized and substandard education system based on pop culture, rather than the classics. Americans know more about their favorite TV dramas than the drama in DC that directly affects their lives. They care more for their "right" to choke down a McDonalds burger or a Burger King burger than for their constitutional rights. Then they turn around and lecture us about our rights and about our "democracy". Pride blinds the foolish.
Then their faith in God was destroyed, until their churches, all tens of thousands of different "branches and denominations" were for the most part little more than Sunday circuses and their televangelists and top Protestant mega preachers were more than happy to sell out their souls and flocks to be on the "winning" side of one pseudo Marxist politician or another. Their flocks may complain, but when explained that they would be on the "winning" side, their flocks were ever so quick to reject Christ in hopes for earthly power. Even our Holy Orthodox churches are scandalously liberalized ………in America.
The final collapse has come with the election of Barack Obama. His speed in the past three months has been truly impressive. His spending and money printing has been record setting, not just in America’s short history but in the world. If this keeps up for more than another year, and there is no sign that it will not, America at best will resemble the Weimar Republic, and at worst Zimbabwe.
These past two weeks have been the most breath taking of all. First came the announcement of a planned redesign of the American Byzantine tax system, by the very thieves who used it to bankroll their thefts, loses and swindles of hundreds of billions of dollars. These make our Russian oligarchs look little more than ordinary street thugs, in comparison. Yes, the Americans have beat our own thieves in the shear volumes. Should we congratulate them?
These men, of course, are not an elected panel but made up of appointees picked from the very financial oligarchs and their henchmen who are now gorging themselves on trillions of American dollars, in one bailout after another. They are also usurping the rights, duties and powers of the American congress. Again, congress has put up little more than a whimper to their masters.
Then came Barack Obama's command that GM's president step down from leadership of his company. That is correct, dear reader, in the land of "pure" free markets, the American president now has the power, the self given power, to fire CEOs and we can assume other employees of private companies, at will. Come hither, go dither, the centurion commands his minions.
So it should be no surprise that the American president has followed this up with a "bold" move of declaring that he and another group of unelected, chosen stooges will now redesign the entire automotive industry and will even be the guarantor of automobile policies. I am sure that if given the chance, they would happily try and redesign it for the whole of the world, too.
Prime Minister Putin, less than two months ago, warned Obama and UK 's Blair, not to follow the path to Marxism, it only leads to disaster. Apparently, even though we suffered 70 years of this Western sponsored horror show, we know nothing as foolish, drunken Russians, so let our "wise" Anglo-Saxon fools find out the folly of their own pride.
Again, the American public has taken this with barely a whimper...but a "freeman" whimper.
So, should it be any surprise to discover that the Democrat controlled Congress of America is working on passing new regulations that would give the American Treasury department the power to set "fair" maximum salaries, evaluate performance and control how private companies give out pay raises and bonuses? Senator Barney Frank, a social pervert basking in his homosexuality (of course, amongst the modern, enlightened American societal norm, as well as that of the general West, homosexuality is not only not a looked down upon life choice, but is often praised as a virtue) and his Marxist enlightenment, has led this effort. He stresses that this only affects companies that receive government monies, but it is retroactive and taken to a logical extreme, this would include any company or industry that has ever received a tax break or incentive.
The Russian owners of American companies and industries should look thoughtfully at this and the option of closing their facilities down and fleeing the land of the Red as fast as possible. In other words, divest while there is still value left. The proud American will go down into his slavery without a fight, beating his chest and proclaiming to the world, how free he really is. The world will only snicker.
(To meet our legal copyright obligation, the article was written by Stanislav Mishin 1999-2009 @ PRAVDA.Ru. When reproducing the materials in whole or in part, hyperlink to PRAVDA.Ru should be made. The opinions and views of the authors do not always coincide with the point of view of PRAVDA.Ru's editors.)
Monday, November 30, 2009
Supply and Demand is a Law, not a suggestion
Whether you believe in the law of gravity or not, it impacts you. Similarly, whether you believe in the law of supply and demand it too has an absolute impact.
Let's start by looking at the supply side of the US Housing Market . . .
In the 3rd quarter of 2009 almost a million homes in the US entered the foreclosure process, an increase of over 22% from the same period in 2008. For your convenience we have provided website addresses for you to cut and paste into your browser to review ...
http://www.realtytrac.com/news/press/newsletter-articles.asp?a=b&itemid=7740&accnt=225575
This represents 1 out of every 136 homes in the country entering the foreclosure process during 3Q09, in some areas the number was as low as 1 in 20 homes entering the process during just this 3 month period!
During the same period, 3Q09, mortgage delinquencies across the country hit a new high ...
http://finance.yahoo.com/news/Mortgage-delinquencies-hit-apf-3335040402.html?x=0&sec=topStories&pos=1&asset=&ccode
having increased 58% from the same period in 2008! With unemployment continuing to rise, and maximum mortgage resets still not due for about another 2 years, which direction will this go?
Combined, this brings the total to almost 4 million homeowners who are either in foreclosure or at least 3 months behind ...
http://finance.yahoo.com/news/Foreclosures-hitting-more-apf-24626172.html?x=0&sec=topStories&pos=2&asset=&ccode
at the end of 3Q09.
Barry Sternlicht, CEO of Starwood Capital Group (who just cut a super sweet deal w/ the govt on distressed assets) stated recently that the total number of "Shadow inventory" could be as high as 12-15 million. While no one knows for certain exactly how many properties banks, financial institutions and investors are sitting on, we do know, for certain, that there are literally millions of people who have not made mortgage payments for months and in some cases for up to 3+ years without being foreclosed upon.
Ok, so what about demand?
According to The National Association of Realtors (notorious for misleading the public) the number of sales in 2010 should be approximately 5.3 million. This represents demand.
You do the math
With about 4 million homes 90+ days delinquent or currently in the foreclosure process, plus who knows how much shadow inventory, plus the rate of foreclosure filings and new delinquencies growing rapidly - what will happen to supply? for how long?
Even if we get to NAR's projected 5.3 million sales next year how will that level of demand even make a dent in the supply?
Bottom line:
US Housing Markets are at least another 5 years from a bottom and will return to price levels similar to those seen in 1996-1998.
Want to understand more about where we are and how we got here? visit www.smashedfeet.com
Now that you have been shaken and awakened, what are you going to do to improve your situation?
If you are considering disposing of real estate holdings I strongly encourage you to review www.6weeklistingstrategy.com and find an agent who understands how to use it.
Let's start by looking at the supply side of the US Housing Market . . .
In the 3rd quarter of 2009 almost a million homes in the US entered the foreclosure process, an increase of over 22% from the same period in 2008. For your convenience we have provided website addresses for you to cut and paste into your browser to review ...
http://www.realtytrac.com/news/press/newsletter-articles.asp?a=b&itemid=7740&accnt=225575
This represents 1 out of every 136 homes in the country entering the foreclosure process during 3Q09, in some areas the number was as low as 1 in 20 homes entering the process during just this 3 month period!
During the same period, 3Q09, mortgage delinquencies across the country hit a new high ...
http://finance.yahoo.com/news/Mortgage-delinquencies-hit-apf-3335040402.html?x=0&sec=topStories&pos=1&asset=&ccode
having increased 58% from the same period in 2008! With unemployment continuing to rise, and maximum mortgage resets still not due for about another 2 years, which direction will this go?
Combined, this brings the total to almost 4 million homeowners who are either in foreclosure or at least 3 months behind ...
http://finance.yahoo.com/news/Foreclosures-hitting-more-apf-24626172.html?x=0&sec=topStories&pos=2&asset=&ccode
at the end of 3Q09.
Barry Sternlicht, CEO of Starwood Capital Group (who just cut a super sweet deal w/ the govt on distressed assets) stated recently that the total number of "Shadow inventory" could be as high as 12-15 million. While no one knows for certain exactly how many properties banks, financial institutions and investors are sitting on, we do know, for certain, that there are literally millions of people who have not made mortgage payments for months and in some cases for up to 3+ years without being foreclosed upon.
Ok, so what about demand?
According to The National Association of Realtors (notorious for misleading the public) the number of sales in 2010 should be approximately 5.3 million. This represents demand.
You do the math
With about 4 million homes 90+ days delinquent or currently in the foreclosure process, plus who knows how much shadow inventory, plus the rate of foreclosure filings and new delinquencies growing rapidly - what will happen to supply? for how long?
Even if we get to NAR's projected 5.3 million sales next year how will that level of demand even make a dent in the supply?
Bottom line:
US Housing Markets are at least another 5 years from a bottom and will return to price levels similar to those seen in 1996-1998.
Want to understand more about where we are and how we got here? visit www.smashedfeet.com
Now that you have been shaken and awakened, what are you going to do to improve your situation?
If you are considering disposing of real estate holdings I strongly encourage you to review www.6weeklistingstrategy.com and find an agent who understands how to use it.
Saturday, November 14, 2009
Prices continue falling in 123 out of 153 cities
Read the attached information put out by NAR a few days ago (click on article title above or cut and paste from below) Then please tell me how, with the huge (and ever growing) shadow inventory we could possibly see prices rise next year???
go back and reread: http://smashedfeet.blogspot.com/2009/11/why-isnt-there-class-action-lawsuit.html and let me know how the inconsistencies presented by NAR could ever be accepted by any sane, logical human being.
http://finance.yahoo.com/news/Median-home-prices-fell-apf-2299106760.html?x=0&sec=topStories&pos=2&asset=&ccode=
go back and reread: http://smashedfeet.blogspot.com/2009/11/why-isnt-there-class-action-lawsuit.html and let me know how the inconsistencies presented by NAR could ever be accepted by any sane, logical human being.
http://finance.yahoo.com/news/Median-home-prices-fell-apf-2299106760.html?x=0&sec=topStories&pos=2&asset=&ccode=
And the punch line is California . . .
I just came across a study showing how well, or poorly, each of the 50 states is AS COMPARED TO CALIFORNIA, the underlying assumption is things are so bad in CA that by comparing your state to CA you can gauge how bad things are in your state. Incredible. You can click on the title above, or cut and paste: http://downloads.pewcenteronthestates.org/Beyond_California_Appendix.pdf
either way enjoy
either way enjoy
Friday, November 13, 2009
Why isn't there a class action lawsuit against NAR
Click on the title above or cut and paste below.
Read the absolute total bullshit now being spouted by NAR
there is no way in hell prices are going to rise in the next year without an insane level of inflation, which would then lead to interest rates so high that no one will be able to purchase anyhow.
Why is it that NAR is allowed to consistently, blatantly lie to the public???
Someone please show me a single statement or projection that they have made over the past few years that was even remotely close to accurate, please.
This sickens me. Is it any wonder that 70% or more of the people who have been foreclosed on never even list their homes for sale? If that doesn't scream that the public doesn't believe in or trust Realtors, most of them bought their properties from one and have such little faith in the industry that they just loose their homes and don't even bother dealing with Realtors. Why? Because of things like the bullshit in the attached article!
It's getting cold here in the midwest, time to hibernate is around the corner, maybe when I wake up in the spring this will all have just been a bad dream.
http://finance.yahoo.com/news/Realtors-home-prices-to-rise-apf-935437126.html?x=0&sec=topStories&pos=2&asset=&ccode=
Read the absolute total bullshit now being spouted by NAR
there is no way in hell prices are going to rise in the next year without an insane level of inflation, which would then lead to interest rates so high that no one will be able to purchase anyhow.
Why is it that NAR is allowed to consistently, blatantly lie to the public???
Someone please show me a single statement or projection that they have made over the past few years that was even remotely close to accurate, please.
This sickens me. Is it any wonder that 70% or more of the people who have been foreclosed on never even list their homes for sale? If that doesn't scream that the public doesn't believe in or trust Realtors, most of them bought their properties from one and have such little faith in the industry that they just loose their homes and don't even bother dealing with Realtors. Why? Because of things like the bullshit in the attached article!
It's getting cold here in the midwest, time to hibernate is around the corner, maybe when I wake up in the spring this will all have just been a bad dream.
http://finance.yahoo.com/news/Realtors-home-prices-to-rise-apf-935437126.html?x=0&sec=topStories&pos=2&asset=&ccode=
Tuesday, November 3, 2009
Foreclosure pace heats up . . .
According to the article below (or click on title to this article from above) 1 out of every 136 homes in the US received a foreclosure notice during 3Q2009 , at that pace 1 out of every 39 homes in the US will receive one in the next year (pace is actually becoming more rapid and isn't likely to peak for another 2+ years!)
As scary as that sounds, it could be even uglier . . . 1 out of every 20 homes in Las Vegas received a notice in the past 3 months. Think about that, that means 1 out of 5 will receive a foreclosure notice within the next year! As we all know, there have already been tons of properties foreclosed on in that market, and it’s getting worse. Nevada, South FL, AZ and Southern CA are the worst in the country. The also tend to be (particularly S FL) the nation’s crystal ball. What happens there foretells what will be coming soon to an area near you.
http://www.realtytrac.com/news/press/newsletter-articles.asp?a=b&itemid=7740&accnt=225575
As scary as that sounds, it could be even uglier . . . 1 out of every 20 homes in Las Vegas received a notice in the past 3 months. Think about that, that means 1 out of 5 will receive a foreclosure notice within the next year! As we all know, there have already been tons of properties foreclosed on in that market, and it’s getting worse. Nevada, South FL, AZ and Southern CA are the worst in the country. The also tend to be (particularly S FL) the nation’s crystal ball. What happens there foretells what will be coming soon to an area near you.
http://www.realtytrac.com/news/press/newsletter-articles.asp?a=b&itemid=7740&accnt=225575
Wednesday, October 21, 2009
Home Prices to drop 2% per month according to CNN article
Click on the title or cut and paste from below. Southern CA, SW FL, AZ will see even greater drops. Gee, if only someone had shared this with readers of this and clients as far back as 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, etc
RESIDENTIAL REAL ESTATE VALUES IN THE US WILL NOT BOTTOM UNTIL AT LEAST THE LATTER PART OF 2014
THEY WILL APPROXIMATE VALUATIONS FOR SIMILAR PROPERTIES FROM APPROXIMATELY 1996
WE HAVE ONLY SEEN APPROX 50% OF THE PRICING CORRECTION AND APPROX 30% OF THE DURATION
ONCE WE DO REACH A BOTTOM WE WILL SEE DECADES OF LITTLE OR VERY MODEST APPRECIATION.
GO BACK THROUGH, READ AND ACTUALLY THINK SO YOU UNDERSTAND NOT ONLY HOW, BUT WHY THAT WILL HAPPEN.
http://finance.yahoo.com/news/Homes-About-to-get-much-cnnm-699910894.html?x=0
PS continue to PRAY that the above is accurate as alternatives are ALL far more painful
RESIDENTIAL REAL ESTATE VALUES IN THE US WILL NOT BOTTOM UNTIL AT LEAST THE LATTER PART OF 2014
THEY WILL APPROXIMATE VALUATIONS FOR SIMILAR PROPERTIES FROM APPROXIMATELY 1996
WE HAVE ONLY SEEN APPROX 50% OF THE PRICING CORRECTION AND APPROX 30% OF THE DURATION
ONCE WE DO REACH A BOTTOM WE WILL SEE DECADES OF LITTLE OR VERY MODEST APPRECIATION.
GO BACK THROUGH, READ AND ACTUALLY THINK SO YOU UNDERSTAND NOT ONLY HOW, BUT WHY THAT WILL HAPPEN.
http://finance.yahoo.com/news/Homes-About-to-get-much-cnnm-699910894.html?x=0
PS continue to PRAY that the above is accurate as alternatives are ALL far more painful
Monday, October 12, 2009
Anti Foreclosure programs are failing!
According to the recent article (click on title above or cut and paste from below)
The foreclosure programs we currently have in place in the US are failing. Couple the information from attached article with the fact, that according to Deutsche Bank over half of all US homeowners will be underwater by 2011 and then ask yourself, the people who are getting modifications today will be where by the time things are considerably worse in 2011, 2012, 2013 and so on?
http://finance.yahoo.com/news/Antiforeclosure-programs-are-rb-2222173672.html?x=0
The foreclosure programs we currently have in place in the US are failing. Couple the information from attached article with the fact, that according to Deutsche Bank over half of all US homeowners will be underwater by 2011 and then ask yourself, the people who are getting modifications today will be where by the time things are considerably worse in 2011, 2012, 2013 and so on?
http://finance.yahoo.com/news/Antiforeclosure-programs-are-rb-2222173672.html?x=0
Friday, October 9, 2009
An Obituary printed in the London Times -
This was just forwarded to me, thought you might appreciate it . . .
Today we mourn the passing of a beloved old friend, Common Sense, who has been with us for many years. No one knows for sure how old he was, since his birth records were long ago lost in bureaucratic red tape.
He will be remembered as having cultivated such valuable lessons as:
- Knowing when to come in out of the rain;
- Why the early bird gets the worm;
- Life isn't always fair;
- and maybe it was my fault.
Common Sense lived by simple, sound financial policies (don't spend more than you can earn) and reliable strategies (adults, not children, are in charge).
His health began to deteriorate rapidly when well-intentioned but overbearing regulations were set in place. Reports of a 6-year-old boy charged with sexual harassment for kissing a classmate; teens suspended from school for using mouthwash after lunch; and a teacher fired for reprimanding an unruly student, only worsened his condition.
Common Sense lost ground when parents attacked teachers for doing the job that they themselves had failed to do in disciplining their unruly children. It declined even further when schools were required to get parental consent to administer sun lotion or an aspirin to a student; but could not inform parents when a student became pregnant and wanted to have an abortion.
Common Sense lost the will to live as the churches became businesses; and criminals received better treatment than their victims. Common Sense took a beating when you couldn't defend yourself from a burglar in your own home and the burglar could sue you for assault.
Common Sense finally gave up the will to live, after a woman failed to realize that a steaming cup of coffee was hot. She spilled a little in her lap, and was promptly awarded a huge settlement. Common Sense was preceded in death, by his parents, Truth and Trust, by his wife, Discretion, by his daughter, Responsibility, and by his son, Reason.
He is survived by his 4 stepbrothers; I Know My Rights, I Want It Now, Someone Else Is To Blame, and I'm A Victim
Not many attended his funeral because so few realized he was gone. If you still remember him, pass this on. If not, join the majority and do nothing
Today we mourn the passing of a beloved old friend, Common Sense, who has been with us for many years. No one knows for sure how old he was, since his birth records were long ago lost in bureaucratic red tape.
He will be remembered as having cultivated such valuable lessons as:
- Knowing when to come in out of the rain;
- Why the early bird gets the worm;
- Life isn't always fair;
- and maybe it was my fault.
Common Sense lived by simple, sound financial policies (don't spend more than you can earn) and reliable strategies (adults, not children, are in charge).
His health began to deteriorate rapidly when well-intentioned but overbearing regulations were set in place. Reports of a 6-year-old boy charged with sexual harassment for kissing a classmate; teens suspended from school for using mouthwash after lunch; and a teacher fired for reprimanding an unruly student, only worsened his condition.
Common Sense lost ground when parents attacked teachers for doing the job that they themselves had failed to do in disciplining their unruly children. It declined even further when schools were required to get parental consent to administer sun lotion or an aspirin to a student; but could not inform parents when a student became pregnant and wanted to have an abortion.
Common Sense lost the will to live as the churches became businesses; and criminals received better treatment than their victims. Common Sense took a beating when you couldn't defend yourself from a burglar in your own home and the burglar could sue you for assault.
Common Sense finally gave up the will to live, after a woman failed to realize that a steaming cup of coffee was hot. She spilled a little in her lap, and was promptly awarded a huge settlement. Common Sense was preceded in death, by his parents, Truth and Trust, by his wife, Discretion, by his daughter, Responsibility, and by his son, Reason.
He is survived by his 4 stepbrothers; I Know My Rights, I Want It Now, Someone Else Is To Blame, and I'm A Victim
Not many attended his funeral because so few realized he was gone. If you still remember him, pass this on. If not, join the majority and do nothing
Thursday, October 8, 2009
Hope and pray for things to unfold as described by Ouch!
If you've read the article posted just prior to this and it concerns you - you better hope and pray he's right! If he's not you won't see prices fall, instead you will see prices rise because of out of control hyper inflation. Sure, your house would again be worth more than you owe, but lunch at a fast food joint will also cost you $200! I don't know for sure that this is coming, but it won't surprise me if it does.
Bottom my ass! No pun intended
According to the article below (or click on title above) you can see that the "shadow inventory" we have been reporting is not only real, it's staggering. Banks are already sitting on close to 17 months worth of housing inventory THAT THEY HAVEN'T EVEN PUT ON THE MARKET YET!!! With defaults growing daily and not expected to peak until at least 2012 how much more shadow inventory is going to be created?
One report I read recently suggested that perhaps banks are accumulating this inventory to play a high stakes game of chicken with the US Government. There are currently very, very few banks who have the capital necessary to sell these properties and realize the losses that until now they have not had to acknowledge. If in fact banks are waiting for our politicians to bail them out yet again and somehow allow them to never have to realize these losses, who will ultimately pay for that? Whether the banks are bailed out or not, what will happen to prices as this shadow inventory is ultimately disposed of? Even an elementary understanding of the law of supply and demand would allow you to clearly understand that active supply on the market today is large enough to cause prices to continue to fall.
Couple all of this with rising unemployment, rising skepticism from potential buyers, rising interest rates (yes Toto, you will again see fixed rates in the 9-10% range and possibly much much higher,) a falling dollar, a continuing shrinkage in the availability of credit, the shadow inventory and the rapidly approaching demise of the commercial real estate market and you have a recipe for prices to fall, nationally, another 30%+ from today's current levels. The bottom, nationally will not occur before 2014, at the absolute earliest. Are you prepared? Would you like to be? Raise your hand, ask for help and I will contact you to discuss options, simply comment to this article with your contact info and I will be in touch.
http://www.businessinsider.com/chart-of-the-day-housing-overhang-2009-9?utm_source=Triggermail&utm_medium=email&utm_campaign=Clusterstock%20Chart%20Of%20The%20Day%2C%20Tuesday%2C%209%2F29%2F09
One report I read recently suggested that perhaps banks are accumulating this inventory to play a high stakes game of chicken with the US Government. There are currently very, very few banks who have the capital necessary to sell these properties and realize the losses that until now they have not had to acknowledge. If in fact banks are waiting for our politicians to bail them out yet again and somehow allow them to never have to realize these losses, who will ultimately pay for that? Whether the banks are bailed out or not, what will happen to prices as this shadow inventory is ultimately disposed of? Even an elementary understanding of the law of supply and demand would allow you to clearly understand that active supply on the market today is large enough to cause prices to continue to fall.
Couple all of this with rising unemployment, rising skepticism from potential buyers, rising interest rates (yes Toto, you will again see fixed rates in the 9-10% range and possibly much much higher,) a falling dollar, a continuing shrinkage in the availability of credit, the shadow inventory and the rapidly approaching demise of the commercial real estate market and you have a recipe for prices to fall, nationally, another 30%+ from today's current levels. The bottom, nationally will not occur before 2014, at the absolute earliest. Are you prepared? Would you like to be? Raise your hand, ask for help and I will contact you to discuss options, simply comment to this article with your contact info and I will be in touch.
http://www.businessinsider.com/chart-of-the-day-housing-overhang-2009-9?utm_source=Triggermail&utm_medium=email&utm_campaign=Clusterstock%20Chart%20Of%20The%20Day%2C%20Tuesday%2C%209%2F29%2F09
Friday, September 18, 2009
How is rising unemployment good for real estate?
According to most politicians and The National Association of Realtors housing prices have hit a bottom, right?
And everyone knows that you can trust both politicians and Realtors, right?
So can someone explain to me how unemployment, which according to article below (cut and paste or click on title above) just rose in 42 states (isn't that most of them?) is good for housing prices???
Maybe you can explain to me how increasing unemployment rates will lead to fewer foreclosures?
Perhaps the fact that the number of people who have dropped out of the workforce and quit looking for employment growing will somehow help prices?
I also learned today that default rates on FHA loans is nearly 50% higher than non FHA loans. If FHA, and other government guaranteed loans now account for 80-90% of all loans in the country and we know that FHA buyers don't really have any "skin in the game," how likely is it that those defaults will not end in foreclosure?
I also learned that for the first time in it's 75 year history, FHA now is about to drop below it's required reserves for defaults. I wonder what that means for the future of foreclosures and housing prices???
Of course the politically appointed head of FHA said recently that "FHA will absolutely not require a tax payer bailout." That's probably true, right?
For many, many years I have been known as the "Dumb one" . . . that must be why I simply don't understand?!
http://finance.yahoo.com/news/42-states-lose-jobs-in-August-apf-1171568305.html?x=0&sec=topStories&pos=3&asset=&ccode=
And everyone knows that you can trust both politicians and Realtors, right?
So can someone explain to me how unemployment, which according to article below (cut and paste or click on title above) just rose in 42 states (isn't that most of them?) is good for housing prices???
Maybe you can explain to me how increasing unemployment rates will lead to fewer foreclosures?
Perhaps the fact that the number of people who have dropped out of the workforce and quit looking for employment growing will somehow help prices?
I also learned today that default rates on FHA loans is nearly 50% higher than non FHA loans. If FHA, and other government guaranteed loans now account for 80-90% of all loans in the country and we know that FHA buyers don't really have any "skin in the game," how likely is it that those defaults will not end in foreclosure?
I also learned that for the first time in it's 75 year history, FHA now is about to drop below it's required reserves for defaults. I wonder what that means for the future of foreclosures and housing prices???
Of course the politically appointed head of FHA said recently that "FHA will absolutely not require a tax payer bailout." That's probably true, right?
For many, many years I have been known as the "Dumb one" . . . that must be why I simply don't understand?!
http://finance.yahoo.com/news/42-states-lose-jobs-in-August-apf-1171568305.html?x=0&sec=topStories&pos=3&asset=&ccode=
Friday, September 11, 2009
Wake up and read this if you don't already know that the national real estate market is still at least 5 years from a bottom!!!
I just read where according to the head of Fannie Mae, 1 of every 25 homes in the US is currently in the foreclosure process, AND THE NUMBER OF FORECLOSURES WILL RISE FOR A FEW MORE YEARS!!!
As you have heard here and as I have been sharing for almost 5 years now, the largest wave of new defaults will begin in the 4Q 2011. How long will it take those defaults to turn into foreclosures? With today's smaller volume it is still almost 2 years from default until a property is foreclosed and comes back onto the market. IF lenders become more efficient and maintain that 2 year window with the higher volume (big IF!) that means that by 4Q 2013 we should see the maximum housing supply coming back into the marketplace. Assuming the government continues to use your tax dollars to encourage people with none of their own money invested to buy and demand stays at current levels (Probably will drop considerably) that would mean a market bottom would occur 6-12 months after the peak in supply, does that put us sometime late 2014? How many years from now is that? If we have thus far dropped 40% nationally since the peak 4 years ago, and we have 5 more years to go, how far down from today's levels is the bottom? Anyone want to bet that nationally housing prices have at least another 30%+ to go from today's levels before bottoming out? How about this bet, values in 2015 will be where they were, or lower, in 1998? Funny how no one ever wants to take those bets - hmmmm wonder what that says? Once we reach that bottom, do you expect people to rush back in or do you think they will be gun shy from the huge beatings they watched others take? Once we reach the bottom we will be flat for up to a decade, and then slowly (1-5%/yr) see an increase in prices. If you knew that prices peaked nationally in 1929 and didn't see those same levels again until 1954 (25 years later for those of you who are numerically challenged) and that correction from peak to bottom was less than one half of what we have seen already . . . how long do you think it will take to return to 2005/6 levels this time around?
I am sitting here in S California writing this and reading that over 50% of all mortgages in California in 2004 were interest only, many of which had 5 year resets at which time they may become fully amortized. I wonder what that means for the CA real estate market as those loans reset and payments increase significantly? Oh wait, what if there is no reset and only a refi option? Can those owners who have seen valuations drop drastically refi today? Uh no. They didn't qualify for a loan legitimately 5 years ago and damn sure don't qualify today! Buckle up CA you are in for a fun ride!
want more info, read the attached by clicking on title above or cut and pasting below
http://www.foreclosure-support.com/wp/foreclosure-homes/foreclosed-home-numbers-will-rise-due-to-interest-only-loans-09111007.html
As you have heard here and as I have been sharing for almost 5 years now, the largest wave of new defaults will begin in the 4Q 2011. How long will it take those defaults to turn into foreclosures? With today's smaller volume it is still almost 2 years from default until a property is foreclosed and comes back onto the market. IF lenders become more efficient and maintain that 2 year window with the higher volume (big IF!) that means that by 4Q 2013 we should see the maximum housing supply coming back into the marketplace. Assuming the government continues to use your tax dollars to encourage people with none of their own money invested to buy and demand stays at current levels (Probably will drop considerably) that would mean a market bottom would occur 6-12 months after the peak in supply, does that put us sometime late 2014? How many years from now is that? If we have thus far dropped 40% nationally since the peak 4 years ago, and we have 5 more years to go, how far down from today's levels is the bottom? Anyone want to bet that nationally housing prices have at least another 30%+ to go from today's levels before bottoming out? How about this bet, values in 2015 will be where they were, or lower, in 1998? Funny how no one ever wants to take those bets - hmmmm wonder what that says? Once we reach that bottom, do you expect people to rush back in or do you think they will be gun shy from the huge beatings they watched others take? Once we reach the bottom we will be flat for up to a decade, and then slowly (1-5%/yr) see an increase in prices. If you knew that prices peaked nationally in 1929 and didn't see those same levels again until 1954 (25 years later for those of you who are numerically challenged) and that correction from peak to bottom was less than one half of what we have seen already . . . how long do you think it will take to return to 2005/6 levels this time around?
I am sitting here in S California writing this and reading that over 50% of all mortgages in California in 2004 were interest only, many of which had 5 year resets at which time they may become fully amortized. I wonder what that means for the CA real estate market as those loans reset and payments increase significantly? Oh wait, what if there is no reset and only a refi option? Can those owners who have seen valuations drop drastically refi today? Uh no. They didn't qualify for a loan legitimately 5 years ago and damn sure don't qualify today! Buckle up CA you are in for a fun ride!
want more info, read the attached by clicking on title above or cut and pasting below
http://www.foreclosure-support.com/wp/foreclosure-homes/foreclosed-home-numbers-will-rise-due-to-interest-only-loans-09111007.html
Wednesday, September 9, 2009
Recession is over . . .
According to our government, the recession is over. Don't believe me? check out this article by clicking on title above or cut and pasting below . . .
http://finance.yahoo.com/news/Fed-survey-shows-US-recession-apf-3623088148.html?x=0
Think about it, we live in a country where our politicians agree to represent us and act in our best interest. So what they tell us must be real, valid, and accurate right? I mean come on, just because you know 100 people who are worse off financially today than they were 1,3 or even 5 years ago, for every 1 person you know who is better off, that doesn't really mean things aren't getting better . . . does it?
http://finance.yahoo.com/news/Fed-survey-shows-US-recession-apf-3623088148.html?x=0
Think about it, we live in a country where our politicians agree to represent us and act in our best interest. So what they tell us must be real, valid, and accurate right? I mean come on, just because you know 100 people who are worse off financially today than they were 1,3 or even 5 years ago, for every 1 person you know who is better off, that doesn't really mean things aren't getting better . . . does it?
Saturday, August 22, 2009
We're "Leveling Out?"
Well it looks like the recession is over or at least heading in that direction. Apparently there is no need to worry about a deeper recession and certainly not a Depression. We are out of the woods. Never mind the trillions of dollars of debt we have incurred over the past year as a country. Let’s just forget about the fact that companies all over the country are still closing their doors, unemployment continues to rise, and foreclosures are at an all time high. Forget about all that, we are safe! We are now moving towards more prosperity and better times. Well, of course, that is if you believe our Fed Chairman Ben Bernanke. If you believe the Washington Zealots and the special interests groups that helped put us in our current situation.
At a speech at the annual Fed conference (I wonder how much that cost us tax payers?!?) Bernanke says we are now “leveling out.” We are now seeing signs that growth is in the near future. On the surface this looks like great news. To the lay person this would give hope and reduce the pain and stress they have been enduring since the economy collapsed, but ask yourself this: is this type of news going to help or hurt our country in the near future? If people think we really are getting out of this economic disaster and the truth comes out that it’s still getting worse, could this actually hurt us more than help? What if the recession isn’t over, but that down the road we will experience hyper-inflation, further unemployment and a complete collapse of our dollar? If he is wrong, which I believe he is, couldn’t this further hurt the citizens of the Republic? If people believe good times are coming, is it reasonable to believe that they will lower their guard and not save, conserve and be frugal with their money and their spending habits? With these types of lies, could Ben Bernanke and our government be risking each citizen’s ability to prepare for an even worse economic disaster?
If you believe that this type of false information could further cripple the economy how can you help? How can you as an individual help and how can you structure your business to assist people in the future?
In the article, linked below, Bernanke gives no examples or evidence that the economy is on the rebound. He seems to forget that states like California and Michigan are virtually bankrupt. He seems to have amnesia about the idea that we have incurred trillions and trillions of dollars of debt just in the past 8 months. It also appears as though his brain cannot rationalize the dominion effect that results from business shutting down, employees being laid off and property being foreclosed. With less businesses operating, there will be less workers working causing more homes to be foreclosed. With this perpetual cycle showing no signs of restraint, do you honestly believe our Fed Chairman is telling the truth? As a quick side note, think about the impact Cap and Trade and adding 47 million more people to our health care system will have on our debt and our economy. With this administration it seems like they do and believe the opposite of what they say. Do you think these comments might be a distraction in order to boost the Obama Administrations objectives and popularity in the public?
http://www.foxnews.com/politics/2009/08/21/bernanke-economy-cusp-recovery/
At a speech at the annual Fed conference (I wonder how much that cost us tax payers?!?) Bernanke says we are now “leveling out.” We are now seeing signs that growth is in the near future. On the surface this looks like great news. To the lay person this would give hope and reduce the pain and stress they have been enduring since the economy collapsed, but ask yourself this: is this type of news going to help or hurt our country in the near future? If people think we really are getting out of this economic disaster and the truth comes out that it’s still getting worse, could this actually hurt us more than help? What if the recession isn’t over, but that down the road we will experience hyper-inflation, further unemployment and a complete collapse of our dollar? If he is wrong, which I believe he is, couldn’t this further hurt the citizens of the Republic? If people believe good times are coming, is it reasonable to believe that they will lower their guard and not save, conserve and be frugal with their money and their spending habits? With these types of lies, could Ben Bernanke and our government be risking each citizen’s ability to prepare for an even worse economic disaster?
If you believe that this type of false information could further cripple the economy how can you help? How can you as an individual help and how can you structure your business to assist people in the future?
In the article, linked below, Bernanke gives no examples or evidence that the economy is on the rebound. He seems to forget that states like California and Michigan are virtually bankrupt. He seems to have amnesia about the idea that we have incurred trillions and trillions of dollars of debt just in the past 8 months. It also appears as though his brain cannot rationalize the dominion effect that results from business shutting down, employees being laid off and property being foreclosed. With less businesses operating, there will be less workers working causing more homes to be foreclosed. With this perpetual cycle showing no signs of restraint, do you honestly believe our Fed Chairman is telling the truth? As a quick side note, think about the impact Cap and Trade and adding 47 million more people to our health care system will have on our debt and our economy. With this administration it seems like they do and believe the opposite of what they say. Do you think these comments might be a distraction in order to boost the Obama Administrations objectives and popularity in the public?
http://www.foxnews.com/politics/2009/08/21/bernanke-economy-cusp-recovery/
Friday, August 21, 2009
How about of dose of reality?
short thoughts on a big slap in the face . . .
Dow 6500 or lower by end of year
serious/major discussions of how to prop up the US dollar as it collapses by the end of the year
50% + of the US population ready to admit they are hurting and need help by the end of the year
anyone willing to wager that these predictions are wrong? let me know
click on title above or cut and paste below:
http://finance.yahoo.com/news/Is-This-Rally-The-Final-Kiss-etfguide-3572165417.html?x=0&sec=topStories&pos=5&asset=&ccode=
Dow 6500 or lower by end of year
serious/major discussions of how to prop up the US dollar as it collapses by the end of the year
50% + of the US population ready to admit they are hurting and need help by the end of the year
anyone willing to wager that these predictions are wrong? let me know
click on title above or cut and paste below:
http://finance.yahoo.com/news/Is-This-Rally-The-Final-Kiss-etfguide-3572165417.html?x=0&sec=topStories&pos=5&asset=&ccode=
Thursday, August 20, 2009
Dangers to our Economy
Is anyone concerned about what the media, the politicians and the average American are not currently focused on? Have any of you noticed that this month the debate is about Health Care Reform and last month it was about Cap and Trade and the month before that it revolved around Card Check? Have you noticed a trend that as we focus on what the flavor of the month may be, there is another government/media hand conducting business on another issue?
As we debate about Health Care Reform this month, don't forget about these other issues, as well as, topics that have yet to be deeply discussed. The Czars that the Obama Administration has chosen to run wild in our Republic add a scary element to this avalanche style government project to overhall our country.
Other big issues with huge implications for our future and our freedom include:
The regulation of conservative talk radio. If Obama's FCC Czar has his way he will require more frequent licensing renewals for radio stations and will require that more local and diverse parties share their views on the radio. The reason for this is obvious, where the "left" have a voice in the print media, the "right" have theirs' with the radio waves. If the government can silence their voice, people like Rush Limbaugh, Glenn Beck and Sean Hannity, what do you think they can do to you? How would they be able to regulate your freedoms, your "freedom" of speech, and your ability to earn an income and how can you protect against that government infiltration?
Another huge and very unknown threat to our freedoms is the current use of Shariah Law in our financial industry. Shariah Law, a law that governs the extremist of the Muslim faith allows for men to beat their wives, the stoning death of rape victims and the complete brutal rule of man over women. Shariah Law also requires that Muslims pay no interest on investments and requires any investment to fit their requirements under this law. That means, these investments can not include the pork industry, the alcohol industry and many other industries. The problem with this, is the fact that companies like HSBC, DowJones and others have hired a board of Muslim extremist, self proclaimed terrorist sympathizers and activits, to run and over see these investments. The money used in these investments is linked to terror groups all over the world and the more we allow Shariah Law to infilitrate our financial industry the more control these terrorists will have over our economy and ultimately our freedom. What do you think will happen to companies like HSBC and others the worse the ecomony gets? Will they reject these Muslim groups on the premise of what is moral and right, or will these greedy companies chase this money in order to make a buck in this struggling economy? Please also understand that state governments are starting to support this principle of allowing Sharia Law to dictate investing. In Minnesota, the government has authorized the use of "special" Shariah endorsed mortgages that allow Muslims to buy homes without paying interest. How scary? **important side note, the governor of Minnesota is Tim Pawlenty and he will probably run for president in 2012 for the Republicans. Can we really afford to have someone who supports this conduct to be our next president?
Other important issues, not including the Health Care debate is Cap and Tax, I mean Cap and Trade. Also Card Check, the desire for the government to reduce defense spending and the belief system of these Liberal Progressives. I strongly encourage you to read books, such as, Catastrophe by Dick Morris, American Progressivism by Ronald Pestritto, and most importantly the Declaration of Independence and the Constitution. Get to know your history, your rights, and what this Republic is all about. Be a voice and do not allow the corruption on both sides of the isle distract you from the truth and real issues that we face today. When the government is talking health care reform, or Cap and Trade, with their right hand look to see what their left hand is doing. See through the distraction, because if government truly wanted to create "change" they would not make everything so complicated.
Think about it. I can fit the entire Constitution and Declaration of Independence in my back pocket. The creation of our whole Republic, a very daunting and complicated task, can easily be read and understood in a matter of hours or at least days. Why? Was it because they were not articulate and educate or was it rather because they wanted every American to easily understand what freedoms and rights they had? Why do you think a single bill these days is over 1000 pages and 5 to 10 pounds in weight? If the two documents that provided our Freedom and Rights on Earth can be so simply written, why can't they all? Don't you think if the government truly cared about the people, they would simplify the process? And more importantly, are we as Americans and as the boss of these Congressmen and Senators going to continue to allow this to happen? I used to be a party guy, not a wild party animal but a supporter of the GOP, now I label myself as conservatively independent. I have chosen to support what is right and who follows the Constitution. Are you going to continue to be a "party" person or are you finally going to focus on what is best for the Republic regardless of which party or individual endorses or invents the idea?
As we debate about Health Care Reform this month, don't forget about these other issues, as well as, topics that have yet to be deeply discussed. The Czars that the Obama Administration has chosen to run wild in our Republic add a scary element to this avalanche style government project to overhall our country.
Other big issues with huge implications for our future and our freedom include:
The regulation of conservative talk radio. If Obama's FCC Czar has his way he will require more frequent licensing renewals for radio stations and will require that more local and diverse parties share their views on the radio. The reason for this is obvious, where the "left" have a voice in the print media, the "right" have theirs' with the radio waves. If the government can silence their voice, people like Rush Limbaugh, Glenn Beck and Sean Hannity, what do you think they can do to you? How would they be able to regulate your freedoms, your "freedom" of speech, and your ability to earn an income and how can you protect against that government infiltration?
Another huge and very unknown threat to our freedoms is the current use of Shariah Law in our financial industry. Shariah Law, a law that governs the extremist of the Muslim faith allows for men to beat their wives, the stoning death of rape victims and the complete brutal rule of man over women. Shariah Law also requires that Muslims pay no interest on investments and requires any investment to fit their requirements under this law. That means, these investments can not include the pork industry, the alcohol industry and many other industries. The problem with this, is the fact that companies like HSBC, DowJones and others have hired a board of Muslim extremist, self proclaimed terrorist sympathizers and activits, to run and over see these investments. The money used in these investments is linked to terror groups all over the world and the more we allow Shariah Law to infilitrate our financial industry the more control these terrorists will have over our economy and ultimately our freedom. What do you think will happen to companies like HSBC and others the worse the ecomony gets? Will they reject these Muslim groups on the premise of what is moral and right, or will these greedy companies chase this money in order to make a buck in this struggling economy? Please also understand that state governments are starting to support this principle of allowing Sharia Law to dictate investing. In Minnesota, the government has authorized the use of "special" Shariah endorsed mortgages that allow Muslims to buy homes without paying interest. How scary? **important side note, the governor of Minnesota is Tim Pawlenty and he will probably run for president in 2012 for the Republicans. Can we really afford to have someone who supports this conduct to be our next president?
Other important issues, not including the Health Care debate is Cap and Tax, I mean Cap and Trade. Also Card Check, the desire for the government to reduce defense spending and the belief system of these Liberal Progressives. I strongly encourage you to read books, such as, Catastrophe by Dick Morris, American Progressivism by Ronald Pestritto, and most importantly the Declaration of Independence and the Constitution. Get to know your history, your rights, and what this Republic is all about. Be a voice and do not allow the corruption on both sides of the isle distract you from the truth and real issues that we face today. When the government is talking health care reform, or Cap and Trade, with their right hand look to see what their left hand is doing. See through the distraction, because if government truly wanted to create "change" they would not make everything so complicated.
Think about it. I can fit the entire Constitution and Declaration of Independence in my back pocket. The creation of our whole Republic, a very daunting and complicated task, can easily be read and understood in a matter of hours or at least days. Why? Was it because they were not articulate and educate or was it rather because they wanted every American to easily understand what freedoms and rights they had? Why do you think a single bill these days is over 1000 pages and 5 to 10 pounds in weight? If the two documents that provided our Freedom and Rights on Earth can be so simply written, why can't they all? Don't you think if the government truly cared about the people, they would simplify the process? And more importantly, are we as Americans and as the boss of these Congressmen and Senators going to continue to allow this to happen? I used to be a party guy, not a wild party animal but a supporter of the GOP, now I label myself as conservatively independent. I have chosen to support what is right and who follows the Constitution. Are you going to continue to be a "party" person or are you finally going to focus on what is best for the Republic regardless of which party or individual endorses or invents the idea?
Which one is worse - Politicians and Leaders who lie or who are just plain stupid?
Mortgage delinquencies now at record highs . . . wonder why everyone is saying that the housing market has bottomed if we are now seeing delinquencies at record highs? You don’t think NAR and our elected officials would lie to us do you? It certainly must be that they are simply really stupid, huh? Which one is worse?
as always click on title of this piece or cut and paste from below:
http://finance.yahoo.com/news/Mortgage-delinquencies-hit-apf-1442009590.html?x=0&sec=topStories&pos=1&asset=&ccode=
as always click on title of this piece or cut and paste from below:
http://finance.yahoo.com/news/Mortgage-delinquencies-hit-apf-1442009590.html?x=0&sec=topStories&pos=1&asset=&ccode=
Thursday, August 13, 2009
With the S&P 500 well above 1000 and the Dow gaining on 9500, many investors are finding it difficult to hold on to cash and/or fixed income investments. While it is clear most of the growth we see are results of unsustainable factors (inventory accumulation, car production increases, just to name a few), we are caught in a "greater fool" market. Which is to say that irrational markets can seemingly always get just a bit more irrational. In this market, many of us foolishly buy overvalued stock and sell them at even more overvalued prices, on the theory that there's always a "greater fool" to buy them. Of course, the danger is in being the greatest fool of all, and be left holding too much when the bubble pops.
Long term, its excruciating clear that our economy is not out of the woods and growth will come at a painstaking slow pace. Even if the US grow by 6% during the 3rd quarter of this year, the 3-quarter growth rate will still be negative. And contrary to popular belief, having a positive growth quarter does not signal the end of the recession.
Furthermore, investments that have provided a safe haven to equity and fixed income markets in the past (such as real estate, commodities, etc) have suffered in some cases more than the equities market. Investors are stuck in a no-win situation in a world where volatility has tripled and market timing is next to impossible - many have simply decided to stay in cash and cover their eyes.
While there is no perfect solution, its become increasingly clear that a well developed asset allocation which moderates volatility and provides the best risk-adjusted return is still the way to go. With the flexibility to be nimble and to make tactical adjustments you can accomplish both capital preservation and derive relatively attractive returns.
One might ask what an asset allocation model will look like in today's world. The response is that it depends on specific risk tolerance and return goals. But in general, it will work on a core / satellite model. The core investments will be the primary driver of achieving return and/or income goals. while satellite investments will seek to moderate risk, lower volatility and generate uncorrelated returns to the core portfolio(s).
Its a traders' market. But its also a market where asset allocators can truly shine.
Long term, its excruciating clear that our economy is not out of the woods and growth will come at a painstaking slow pace. Even if the US grow by 6% during the 3rd quarter of this year, the 3-quarter growth rate will still be negative. And contrary to popular belief, having a positive growth quarter does not signal the end of the recession.
Furthermore, investments that have provided a safe haven to equity and fixed income markets in the past (such as real estate, commodities, etc) have suffered in some cases more than the equities market. Investors are stuck in a no-win situation in a world where volatility has tripled and market timing is next to impossible - many have simply decided to stay in cash and cover their eyes.
While there is no perfect solution, its become increasingly clear that a well developed asset allocation which moderates volatility and provides the best risk-adjusted return is still the way to go. With the flexibility to be nimble and to make tactical adjustments you can accomplish both capital preservation and derive relatively attractive returns.
One might ask what an asset allocation model will look like in today's world. The response is that it depends on specific risk tolerance and return goals. But in general, it will work on a core / satellite model. The core investments will be the primary driver of achieving return and/or income goals. while satellite investments will seek to moderate risk, lower volatility and generate uncorrelated returns to the core portfolio(s).
Its a traders' market. But its also a market where asset allocators can truly shine.
Thursday, August 6, 2009
Half of the nation will be underwater by 2011 -
I recently ran a search of all homeowners in Naples that were at least 30 percent underwater. Think the Naples market is protected? Think again... There were more than 20,000 home owners in one zip code that were totally upside with their first mortgage.
More and more, I realize how many homeowners will need the help of experienced, qualified agents who can effectively negotiate a settlement of their mortgage through a short sale.
The banks need to shorten the approval timelines and work with us to get these homes sold.
Sellers need a clearly defined strategy to determine whether a loan modification, short sale or other foreclosure avoidance plan will work for them.
This article clearly shows where we are headed... Buckle up ya'll. It's going to get much worse before it gets better.
Please feel free to contact us for a free consultation on how we can help. lgottesman@topproducer.com 239-898-1463
More and more, I realize how many homeowners will need the help of experienced, qualified agents who can effectively negotiate a settlement of their mortgage through a short sale.
The banks need to shorten the approval timelines and work with us to get these homes sold.
Sellers need a clearly defined strategy to determine whether a loan modification, short sale or other foreclosure avoidance plan will work for them.
This article clearly shows where we are headed... Buckle up ya'll. It's going to get much worse before it gets better.
Please feel free to contact us for a free consultation on how we can help. lgottesman@topproducer.com 239-898-1463
Wednesday, August 5, 2009
Yeah the market's hit a bottom and things are getting better . . . If you are an IDIOT you might believe that!
Take a look at the data provided by the nation's top foreclosure data collection service (click on article title above or cut and paste http://www.realtytrac.com/news/Press/newsletter-articles.asp?a=b&ItemId=6959&accnt=216648 ) It clearly states the following:
One out of every 380 households in the entire United States received a foreclosure notice in just the month of June 2009! If you divide the 380 by 12 months you will quickly see (1 out of every 32) how many households we are now on pace to have receive notices over the next year. If you are an average American, you know at least 300+ people. That means YOU know someone who received a notice last month, someone who will receive one this month and every month for the next several years. When will it be your turn?
Nationwide foreclosure filings were up 5% in June 2009 over May 2009. A 5% increase in just one month!
Nationwide foreclosure filings were up 33% over the same period in 2008 - simple math tells us that we have averaged less than a 3% per month increase to total 33% over the course of the past year - if the past month is 5%, isn't that more than 3%? doesn't that mean the rate of foreclosure filings is INCREASING? Rapidly?
Overstating the obvious and asking questions:
Over 2/3 of the homes already foreclosed on by banks have not yet come back on the market, what impact have the less than 1/3 already had on pricing?
If 2/3 haven't come back on and 1/3 has, does that mean that the impact on pricing created by this 2/3 will be twice the impact of the first 1/3? Or is 2/3 not twice 1/3? (Reality is the impact will be far more than twice, but I don't have the patience to explain why right now, I'm too irritated by the lying politicians and Realtors blowing sunshine up everyone's asses telling them all is wonderful!)
If the rate of foreclosure filings is increasing, is there any way a sane individual with any more than rocks in their head could reasonably think that, as our government's leaders and the liars at NAR would have us believe "we have hit a bottom?"
If we know that on average it is taking well over a year for properties entering the foreclosure process to actually go through the process and come back on the market, when will these new filings actually add to the already staggering supply currently available? Or will they simply be put on the shelf w/ all the other shadow inventory being held by lenders? Do you really expect them to hold the properties forever? Is it possible that a handful of individuals could actually profit beyond anything we could fathom by using this shadow inventory to push prices down?
If we realistically expect foreclosure filings to peak in the later half of 2012 (see previous entries at www.smashedfeet.com) when will the peak of distressed home supply actually hit the market?
How long after that will demand increase at a sufficient enough pace to start putting a dent in the enormous supply?
If we know that once supply has peaked and demand is not falling we will hit a market bottom within 6-12 months, when will that occur?
Once we reach that market bottom, will buyers, lenders and others magically forget what happened to get us there and start diving back into the real estate market throwing caution to the wind or will the bottom be extended with an eventual slow and careful re entry by the lenders and buyers?
If we can realistically assume inventory won't peak until late 2013 at the earliest, and a bottom won't be reached until most likely at least 2015, how long will that bottom last?
How many years will it take to get back to today's levels?
How many baby boomers will still be around, let alone buying at that point?
How many lenders will still be around, let alone lending at that point?
When our government, NAR, etc all start insisting that things are turning around, almost jumping up and down shouting that it's getting better . . . what is the one thing you know it's not getting?
Or are you one of the sheep who believes what our politicians and Realtors tell you?
More questions to consider:
What happens when the rest of the world, led by Brazil, Russia, India and China no longer permit the US Dollar to be artificially propped up?
What happens when no one wants to lend $ to the US?
What happens when the US can't even afford to make interest payments on the debt owed to the rest of the world?
What happens when US citizens realize that the money they were told was available for their pensions and retirements really isn't there?
What happens when all the sheep stop being fed?
Hmmmm . . .
The most important question:
What are you doing to position yourself and those you care about to help as many others as possible through the stress, chaos and turmoil that exists today and the unavoidable future pain already guaranteed by asinine irresponsible choices over the past 60+ years?
One out of every 380 households in the entire United States received a foreclosure notice in just the month of June 2009! If you divide the 380 by 12 months you will quickly see (1 out of every 32) how many households we are now on pace to have receive notices over the next year. If you are an average American, you know at least 300+ people. That means YOU know someone who received a notice last month, someone who will receive one this month and every month for the next several years. When will it be your turn?
Nationwide foreclosure filings were up 5% in June 2009 over May 2009. A 5% increase in just one month!
Nationwide foreclosure filings were up 33% over the same period in 2008 - simple math tells us that we have averaged less than a 3% per month increase to total 33% over the course of the past year - if the past month is 5%, isn't that more than 3%? doesn't that mean the rate of foreclosure filings is INCREASING? Rapidly?
Overstating the obvious and asking questions:
Over 2/3 of the homes already foreclosed on by banks have not yet come back on the market, what impact have the less than 1/3 already had on pricing?
If 2/3 haven't come back on and 1/3 has, does that mean that the impact on pricing created by this 2/3 will be twice the impact of the first 1/3? Or is 2/3 not twice 1/3? (Reality is the impact will be far more than twice, but I don't have the patience to explain why right now, I'm too irritated by the lying politicians and Realtors blowing sunshine up everyone's asses telling them all is wonderful!)
If the rate of foreclosure filings is increasing, is there any way a sane individual with any more than rocks in their head could reasonably think that, as our government's leaders and the liars at NAR would have us believe "we have hit a bottom?"
If we know that on average it is taking well over a year for properties entering the foreclosure process to actually go through the process and come back on the market, when will these new filings actually add to the already staggering supply currently available? Or will they simply be put on the shelf w/ all the other shadow inventory being held by lenders? Do you really expect them to hold the properties forever? Is it possible that a handful of individuals could actually profit beyond anything we could fathom by using this shadow inventory to push prices down?
If we realistically expect foreclosure filings to peak in the later half of 2012 (see previous entries at www.smashedfeet.com) when will the peak of distressed home supply actually hit the market?
How long after that will demand increase at a sufficient enough pace to start putting a dent in the enormous supply?
If we know that once supply has peaked and demand is not falling we will hit a market bottom within 6-12 months, when will that occur?
Once we reach that market bottom, will buyers, lenders and others magically forget what happened to get us there and start diving back into the real estate market throwing caution to the wind or will the bottom be extended with an eventual slow and careful re entry by the lenders and buyers?
If we can realistically assume inventory won't peak until late 2013 at the earliest, and a bottom won't be reached until most likely at least 2015, how long will that bottom last?
How many years will it take to get back to today's levels?
How many baby boomers will still be around, let alone buying at that point?
How many lenders will still be around, let alone lending at that point?
When our government, NAR, etc all start insisting that things are turning around, almost jumping up and down shouting that it's getting better . . . what is the one thing you know it's not getting?
Or are you one of the sheep who believes what our politicians and Realtors tell you?
More questions to consider:
What happens when the rest of the world, led by Brazil, Russia, India and China no longer permit the US Dollar to be artificially propped up?
What happens when no one wants to lend $ to the US?
What happens when the US can't even afford to make interest payments on the debt owed to the rest of the world?
What happens when US citizens realize that the money they were told was available for their pensions and retirements really isn't there?
What happens when all the sheep stop being fed?
Hmmmm . . .
The most important question:
What are you doing to position yourself and those you care about to help as many others as possible through the stress, chaos and turmoil that exists today and the unavoidable future pain already guaranteed by asinine irresponsible choices over the past 60+ years?
Tuesday, August 4, 2009
Here it comes, health care and the tip of the tax increase iceberg . . .
Taxes won't go up for 95% of Americans. Remember a year ago when we were all promised this?
How about improved health care system promises?
check out:
http://finance.yahoo.com/tech-ticker/article/294876/Despite-Obama%E2%80%99s-Promise-Higher-Taxes-Needed-for-Health-Care-Reform-Top-Economist-Stiglitz-Says?tickers=%5Edji,%5EGSPC,unh,ihf,AET,WLP,CI&sec=topStories&pos=9&asset=&ccode=
or click on title above to see if you like the track we are on . . .
I don't
While certainly a capable economist, Joseph Stiglitz, can't really beleive that raising taxes now will EVER result in lower taxes later!
How about improved health care system promises?
check out:
http://finance.yahoo.com/tech-ticker/article/294876/Despite-Obama%E2%80%99s-Promise-Higher-Taxes-Needed-for-Health-Care-Reform-Top-Economist-Stiglitz-Says?tickers=%5Edji,%5EGSPC,unh,ihf,AET,WLP,CI&sec=topStories&pos=9&asset=&ccode=
or click on title above to see if you like the track we are on . . .
I don't
While certainly a capable economist, Joseph Stiglitz, can't really beleive that raising taxes now will EVER result in lower taxes later!
Geithner - funny, but not really!
Mike Morgan recently wrote the following, this is why I respect him, click on title above or cut and paste link below for a funny, yet sad clip:
Hank Paulson was devious, corrupt and an outright criminal that far exceeded anything Madoff did. But he's a Goldman Sachs untouchable.
Tim Geithner is also devious, corrupt and an outright criminal, but he is also dumb as a box of rocks. Then again, maybe he is sly as a fox and just continuing the masterful fraud that Hank Paulson started.
Below is a link to a clip everyone should watch. Here is Tim the Tax Cheat telling us AGAIN that the recession is over AND the housing crisis is over . . . but he can't sell his old house!
http://www.thedailyshow.com/watch/wed-july-29-2009/home-crisis-investigation
Let me assure you, the housing crisis is NOT over. In fact, it is going to get much worse as unemployment rises and the banks are eventually forced to release the foreclosed homes on their books.
As a Florida real estate broker working with banks and asset managers, I can definitively state that there are a flood of foreclosures backing up in the system. Moreover, when they do come on the market, here in Florida we have a thing called mold. Since the banks are not properly managing these properties, many of the homes we see come on the foreclosure market have had no air conditioning for months . . . which means they are full of toxic mold. Sometimes these properties are given a quick white wash.
Basically, banks are not in the real estate business. Most of them hire inept asset managers that destroy value by ignoring what needs to be done to manage these properties. We don't work with them, but we see the results of their inattention every day. The asset managers we work with demand perfection, and this means clean the homes up and turn on all utilities. Beware if you are buying a foreclosed home, and beware of the flood of foreclosures yet to hit the markets.
The Housing Crisis is not over. Think of it like a drowning person that comes up for yet one more breath of air before sinking to the bottom.
Hank Paulson was devious, corrupt and an outright criminal that far exceeded anything Madoff did. But he's a Goldman Sachs untouchable.
Tim Geithner is also devious, corrupt and an outright criminal, but he is also dumb as a box of rocks. Then again, maybe he is sly as a fox and just continuing the masterful fraud that Hank Paulson started.
Below is a link to a clip everyone should watch. Here is Tim the Tax Cheat telling us AGAIN that the recession is over AND the housing crisis is over . . . but he can't sell his old house!
http://www.thedailyshow.com/watch/wed-july-29-2009/home-crisis-investigation
Let me assure you, the housing crisis is NOT over. In fact, it is going to get much worse as unemployment rises and the banks are eventually forced to release the foreclosed homes on their books.
As a Florida real estate broker working with banks and asset managers, I can definitively state that there are a flood of foreclosures backing up in the system. Moreover, when they do come on the market, here in Florida we have a thing called mold. Since the banks are not properly managing these properties, many of the homes we see come on the foreclosure market have had no air conditioning for months . . . which means they are full of toxic mold. Sometimes these properties are given a quick white wash.
Basically, banks are not in the real estate business. Most of them hire inept asset managers that destroy value by ignoring what needs to be done to manage these properties. We don't work with them, but we see the results of their inattention every day. The asset managers we work with demand perfection, and this means clean the homes up and turn on all utilities. Beware if you are buying a foreclosed home, and beware of the flood of foreclosures yet to hit the markets.
The Housing Crisis is not over. Think of it like a drowning person that comes up for yet one more breath of air before sinking to the bottom.
Saturday, July 25, 2009
Shadow inventory
Take a few minutes and consider the comments made recently by Robert Shiller. "People have gotten very speculative in their attitudes towards housing . . . " wasn't speculation what got us into the mess in the first place? Are you prepared for the housing market languishing for many, many years? There are literally years of inventory not yet on the market, being held by banks who have foreclosed, or intentionally stalled foreclosure proceedings, which will at some point need to be liquidated. This is going to very ugly for many many years.
Click on link above or cut and paste below.
http://finance.yahoo.com/tech-ticker/article/278952/%E2%80%9CAnother-Bubble%E2%80%9D-In-Housing-It-Could-Happen-Says-Yale%E2%80%99s-Robert-Shiller?tickers=UMM,DMM,XHB,DHI,KBH,LEN,PHM&sec=topStories&pos=8&asset=&ccode=
Click on link above or cut and paste below.
http://finance.yahoo.com/tech-ticker/article/278952/%E2%80%9CAnother-Bubble%E2%80%9D-In-Housing-It-Could-Happen-Says-Yale%E2%80%99s-Robert-Shiller?tickers=UMM,DMM,XHB,DHI,KBH,LEN,PHM&sec=topStories&pos=8&asset=&ccode=
Wednesday, July 22, 2009
Paulson = Satan???
As you may recall I am a Mike Morgan fan, his website http://www.Goldmansachs666.com
is great. Below is something he forwarded recently, Paulson starts to face the music, unfortunately it doesn't change the fact the Paulson and his colleagues have literally stolen TRILLIONS of dollars. As usual, click on title above or cut and paste link below.
http://www.youtube.com/watch?v=4MH_oz9f1E4&eurl=http%3A%2F%2Fzerohedge%2Eblogspot%2Ecom%2F2009%2F07%2Fpaulson%2Dpwned%2Ehtml&feature=player_embedded
is great. Below is something he forwarded recently, Paulson starts to face the music, unfortunately it doesn't change the fact the Paulson and his colleagues have literally stolen TRILLIONS of dollars. As usual, click on title above or cut and paste link below.
http://www.youtube.com/watch?v=4MH_oz9f1E4&eurl=http%3A%2F%2Fzerohedge%2Eblogspot%2Ecom%2F2009%2F07%2Fpaulson%2Dpwned%2Ehtml&feature=player_embedded
Saturday, July 18, 2009
CalPERS loses $60 billion last year alone
$60 BILLION
That's a lot of money!
So now according to the attached (click on title above or cut and paste from below) article CalPERS is suing the ratings agencies who claimed the crap that CalPERS bought was actually AAA. Why are they only suing for $1Billion???
According to US Census Bureau there are almost 37 million people in the state of CA, that would be a little less than $2,000/person.
Also according to US Census Bureau, only 11% of those people are 65 or older. That's just a little over 3 Million people, meaning that CalPERS lost close to $20,000 per person aged 65 and over in the state last year.
I don't know how many of those people are drawing from CalPERS, I think I read that they have about 1.6 Million members. So if my math is right, that's a loss of almost $40,000/person last year alone!
I wonder how much the average CalPERS pension recipient was actually paid last year?
Oh well, at least it's in CA where there is plenty of money and the State Government is rolling in the dough!
http://finance.yahoo.com/tech-ticker/article/284859/CalPERS-Lawsuit-%22Just-the-Tip-of-the-Iceberg%22-for-Rating-Agencies-Wall-St.-Alpert-Says?tickers=mco,mhp,gs,xlf,fas,skf,faz
That's a lot of money!
So now according to the attached (click on title above or cut and paste from below) article CalPERS is suing the ratings agencies who claimed the crap that CalPERS bought was actually AAA. Why are they only suing for $1Billion???
According to US Census Bureau there are almost 37 million people in the state of CA, that would be a little less than $2,000/person.
Also according to US Census Bureau, only 11% of those people are 65 or older. That's just a little over 3 Million people, meaning that CalPERS lost close to $20,000 per person aged 65 and over in the state last year.
I don't know how many of those people are drawing from CalPERS, I think I read that they have about 1.6 Million members. So if my math is right, that's a loss of almost $40,000/person last year alone!
I wonder how much the average CalPERS pension recipient was actually paid last year?
Oh well, at least it's in CA where there is plenty of money and the State Government is rolling in the dough!
http://finance.yahoo.com/tech-ticker/article/284859/CalPERS-Lawsuit-%22Just-the-Tip-of-the-Iceberg%22-for-Rating-Agencies-Wall-St.-Alpert-Says?tickers=mco,mhp,gs,xlf,fas,skf,faz
Wednesday, July 15, 2009
Harry Dent call, US Dollar, US real estate, illiquidity
Last evening I had the opportunity to attend a conference call with Harry Dent. I left the call absolutely certain that the single most effective way to tie oneself to the US dollar is by owning US real estate debt free. Illiquid, impossible to trade in other currencies, devaluing rapidly over the next several years - both the dollar and the real estate, so by combining them you have the opportunity to leverage your stupidity!
Why vacant land is worse than worthless . . .
The attached article describes a very real situation, click on the title above or cut and past http://www.dailywealth.com/archive/2009/Jul/2009_Jul_15.asp?printdoc=print into your browser.
Here's the sad but true reality I have shared with many clients, and others with whom I have consulted over the past several years . . .
Take a typical property built in your community over the past 5-10 years. Let's assume a 2400 sq ft home on a .25 acre lot
Now look at the cost of labor, materials, and permits to build that property.
Next add in the cost of having your money tied up while the house is built.
The total of these items is in most cases already (and in other cases/areas soon will be) MORE THAN the cost to buy the 5-10 yr old home on the .25 acre lot already built, sold and probably foreclosed on.
So if the cost to build the home is higher than what it could possibly sell for, and we haven't added anything in for acquiring the land (paying the taxes on it etc) what is the land worth?
let's look:
2400 sq ft home
materials @ $50/sq ft = $120,000
labor @ $50/sq ft = $120,000
permits = $5,000
interest on money = $5,000
Total to build the house = $250,000
3 year old finished home (in some markets never even lived in) on a lot can be bought for $200,000.
What is the lot worth?
if the difference between the 2 properties is one has a lot and sells for $200,000 and the other has no lot and sells for $250,000 and you set aside your emotions and actually apply logic the value of the lot, as you will quickly realize is NEGATIVE $50,000 - but wait, it's worse. If you own the lot and aren't building on it to sell it and make it go away, you simply have the privilege of dipping into your pocket to pay taxes, fees, etc for something with a negative value! Woo Hoo! Sign me up for a dozen!!! Idiots, if you think that's a great deal how about you just give me the money for the taxes, fees etc and I won't even make you take something with a negative value, how much further ahead would you be then? (of course I would be too!)
If this isn't yet the case in your market . . . it will be. Thinking of investing in REITS, TICS, Home Builders, Developers etc? Why not take your cash, set it on fire and heat your home with it, at least you'll get something for you money!
Here's the sad but true reality I have shared with many clients, and others with whom I have consulted over the past several years . . .
Take a typical property built in your community over the past 5-10 years. Let's assume a 2400 sq ft home on a .25 acre lot
Now look at the cost of labor, materials, and permits to build that property.
Next add in the cost of having your money tied up while the house is built.
The total of these items is in most cases already (and in other cases/areas soon will be) MORE THAN the cost to buy the 5-10 yr old home on the .25 acre lot already built, sold and probably foreclosed on.
So if the cost to build the home is higher than what it could possibly sell for, and we haven't added anything in for acquiring the land (paying the taxes on it etc) what is the land worth?
let's look:
2400 sq ft home
materials @ $50/sq ft = $120,000
labor @ $50/sq ft = $120,000
permits = $5,000
interest on money = $5,000
Total to build the house = $250,000
3 year old finished home (in some markets never even lived in) on a lot can be bought for $200,000.
What is the lot worth?
if the difference between the 2 properties is one has a lot and sells for $200,000 and the other has no lot and sells for $250,000 and you set aside your emotions and actually apply logic the value of the lot, as you will quickly realize is NEGATIVE $50,000 - but wait, it's worse. If you own the lot and aren't building on it to sell it and make it go away, you simply have the privilege of dipping into your pocket to pay taxes, fees, etc for something with a negative value! Woo Hoo! Sign me up for a dozen!!! Idiots, if you think that's a great deal how about you just give me the money for the taxes, fees etc and I won't even make you take something with a negative value, how much further ahead would you be then? (of course I would be too!)
If this isn't yet the case in your market . . . it will be. Thinking of investing in REITS, TICS, Home Builders, Developers etc? Why not take your cash, set it on fire and heat your home with it, at least you'll get something for you money!
Monday, July 13, 2009
Here they come . . . Commercial mortgage defaults increase - ALOT!
According to the article below (or click on title above for direct link)
Commercial Mortgage Backed Security default rates were only 1.62% in the 4th quarter of 2008 and then jumped to 2.25% in the 1st quarter of 2009. I know we midwesterners are slow, but if my math is correct that represents a 38.9% increase from one quarter to the next. Holy Shit that's huge! Scary thing is there is no way that any of those numbers are accurate, I would bet the whole damn ranch that real numbers are in excess of 10% of these CMBS's being in default. You watch, it's coming. Be smart and stay out of the way, don't get sucked down with the sinking ship!
http://www.costar.com/News/Article.aspx?id=563521C73456CCABB61C92BFA4DB2DDC&ref=1&src=rss
Commercial Mortgage Backed Security default rates were only 1.62% in the 4th quarter of 2008 and then jumped to 2.25% in the 1st quarter of 2009. I know we midwesterners are slow, but if my math is correct that represents a 38.9% increase from one quarter to the next. Holy Shit that's huge! Scary thing is there is no way that any of those numbers are accurate, I would bet the whole damn ranch that real numbers are in excess of 10% of these CMBS's being in default. You watch, it's coming. Be smart and stay out of the way, don't get sucked down with the sinking ship!
http://www.costar.com/News/Article.aspx?id=563521C73456CCABB61C92BFA4DB2DDC&ref=1&src=rss
Tuesday, July 7, 2009
California leads the way . . . right?
I just read this, if CA leads the way, what do the rest of us have to look forward to?
If You Live in California, Here's What You Do... By Dr. Steve Sjuggerud
Would you lend money to someone who is completely broke and in a mountain of debt... and only demand 3.75% interest? That's what California is forcing many people to do today. California is out of money. But it still must pay people. So it's paying in "IOUs" instead of cash. By the end of this month, California will have handed out over $3 billion in IOUs. These IOUs are only supposed to last for a few months. And they pay a 3.75% annual interest rate.
How will this end? Some investors are getting excited – they earn interest AND can potentially buy these IOUs at a discount to face value in exchange for cash. Me? I have no interest in these things. I've seen this exact game before... It happened in Argentina in 2001. The lesson was this: You don't want to lend money for a tiny bit of interest to a broke state that has no problem changing its laws on you. In 2001, the province of Buenos Aires ran out of money. So it started issuing IOUs called "patacones" that paid 7% interest. What's a patacon? It looked like money, but it matured a year in the future. The man on the street was confused... Many merchants flat-out refused to accept patacones (though McDonald's offered a special "Pata-Combo"). "One peso buys a cup of coffee or a newspaper... but what will you be able to buy with one Patacon?" an Argentine woman asked the Wall Street Journal in 2001. She had no idea how prophetic her words were... Long story short, a U.S. dollar's worth of patacones held in late 2001 were worth about 30 U.S. cents a year later at maturity, after the Argentine peso crashed. And that's much better than money issued by other Argentine states... For example, the "federal" issued by the province of Entre Rios north of Buenos Aires was worth maybe 10 cents on the U.S. dollar a year later. Now, I don't expect a repeat of Argentina's crisis in the States. I don't expect the California IOUs to fall to 30 cents on the dollar. At the same time, I'm not interested in giving cash today for a patacon, er, a California IOU that promises to pay me back at some future date with only a small amount of promised interest for my troubles. The government of California is broke. If you're unfortunate enough to receive California "patacones" try to get rid of them. Use them to pay your taxes, sell them to the knuckleheads on Craigslist... do whatever you can.
These Tax-Free Bonds Are Still a Great Buy
This Country Is the World's Most Likely Candidate for Hyperinflation
But don't hold them. The historical record of broke governments issuing IOUs doesn't offer much promise. The "reward" of 3.75% interest versus the risk simply isn't worth it. Get rid of your California "patacones" if you get 'em... Good investing, Steve P.S. These IOUs are different than municipal bonds. Some California municipal bonds actually could do just fine – particularly "revenue" bonds, which pay you back directly from the project the bonds financed, like a toll road.
If You Live in California, Here's What You Do... By Dr. Steve Sjuggerud
Would you lend money to someone who is completely broke and in a mountain of debt... and only demand 3.75% interest? That's what California is forcing many people to do today. California is out of money. But it still must pay people. So it's paying in "IOUs" instead of cash. By the end of this month, California will have handed out over $3 billion in IOUs. These IOUs are only supposed to last for a few months. And they pay a 3.75% annual interest rate.
How will this end? Some investors are getting excited – they earn interest AND can potentially buy these IOUs at a discount to face value in exchange for cash. Me? I have no interest in these things. I've seen this exact game before... It happened in Argentina in 2001. The lesson was this: You don't want to lend money for a tiny bit of interest to a broke state that has no problem changing its laws on you. In 2001, the province of Buenos Aires ran out of money. So it started issuing IOUs called "patacones" that paid 7% interest. What's a patacon? It looked like money, but it matured a year in the future. The man on the street was confused... Many merchants flat-out refused to accept patacones (though McDonald's offered a special "Pata-Combo"). "One peso buys a cup of coffee or a newspaper... but what will you be able to buy with one Patacon?" an Argentine woman asked the Wall Street Journal in 2001. She had no idea how prophetic her words were... Long story short, a U.S. dollar's worth of patacones held in late 2001 were worth about 30 U.S. cents a year later at maturity, after the Argentine peso crashed. And that's much better than money issued by other Argentine states... For example, the "federal" issued by the province of Entre Rios north of Buenos Aires was worth maybe 10 cents on the U.S. dollar a year later. Now, I don't expect a repeat of Argentina's crisis in the States. I don't expect the California IOUs to fall to 30 cents on the dollar. At the same time, I'm not interested in giving cash today for a patacon, er, a California IOU that promises to pay me back at some future date with only a small amount of promised interest for my troubles. The government of California is broke. If you're unfortunate enough to receive California "patacones" try to get rid of them. Use them to pay your taxes, sell them to the knuckleheads on Craigslist... do whatever you can.
These Tax-Free Bonds Are Still a Great Buy
This Country Is the World's Most Likely Candidate for Hyperinflation
But don't hold them. The historical record of broke governments issuing IOUs doesn't offer much promise. The "reward" of 3.75% interest versus the risk simply isn't worth it. Get rid of your California "patacones" if you get 'em... Good investing, Steve P.S. These IOUs are different than municipal bonds. Some California municipal bonds actually could do just fine – particularly "revenue" bonds, which pay you back directly from the project the bonds financed, like a toll road.
Russian Perspective . . .
Russia has 2 primary periodicals, one is primarily propaganda, the other tends to be far more realistic. Pravda, the non propaganda periodical ran the following article a couple of months ago. I had lunch recently with a Sr Professor of Accounting and Finance at Pepperdine University. He shared this article with me and asked for my perspective. I commented that I felt it was probably a very fair and reasonable perspective of what is, has been and will be occurring here in the United States. He concurred. I suppose this will provide even more material for one of my future books “I remember when the States of America were United.” I found it ironic that a country half a world away, who has themselves recently gone through revolution and economic collapse, can so clearly see what we here in the United States refuse to see. Fortunately, for Dr Kinsman’s students, there are still a small handful of people in this country who actually think for themselves . . . are you one of them?
To access the article click on title above or cut and paste below
http://english.pravda.ru/opinion/columnists/27-04-2009/107459-american_capitalism-0
To access the article click on title above or cut and paste below
http://english.pravda.ru/opinion/columnists/27-04-2009/107459-american_capitalism-0
Tuesday, June 30, 2009
Soros says inflation and higher rates are coming . . .
who are you listening to? George Soros one of the most successful investors in the world, and President Obama have both said publicly that higher interest rates are coming. Only Realtors, Financial Advisors, and other thieves and liars say that it's not happening. Write this down, 12-15% mortgage interest rates by the end of 2011!
http://finance.yahoo.com/news/Soros-predicts-stopgo-economy-rb-3788173021.html?x=0&sec=topStories&pos=4&asset=&ccode=
http://finance.yahoo.com/news/Soros-predicts-stopgo-economy-rb-3788173021.html?x=0&sec=topStories&pos=4&asset=&ccode=
High end, get ready your turn is next . . .
Click on article title or cut and paste link below to see new article discussing where the high end markets are headed.
As the low and mid range markets continue their respective corrections, the high end is just now getting into gear. In some higher end markets we have seen prices drop 25% or more just in the last month as lenders have apparently raised all the capital necessary to meet federal requirements and are poised to begin dumping higher end assets. (Gee, I wonder who shared with clients that once mark to market was suspended so that capital could be raised based on totally fraudulent balance sheets, we would then see lenders dump assets thereby driving down their own share values as well as real estate values?!? What would have happened if some of this newly raised capital was used to short the very financial institutions that are now dumping assets? hmmmmm)
Commercial real estate values are just starting what will prove to be a 50-60%+ correction from the peak. Residential markets will most likely approach a bottom between late 2014 and mid 2015. Commercial markets on the other hand are more likely to bottom closer to 2018.
http://finance.yahoo.com/tech-ticker/article/271957/Next-Segment-of-the-Housing-Market-to-Crash-1-Million-McMansions?tickers=dia,spy,hd,len,kbh&sec=topStories&pos=7&asset=&ccode=
As the low and mid range markets continue their respective corrections, the high end is just now getting into gear. In some higher end markets we have seen prices drop 25% or more just in the last month as lenders have apparently raised all the capital necessary to meet federal requirements and are poised to begin dumping higher end assets. (Gee, I wonder who shared with clients that once mark to market was suspended so that capital could be raised based on totally fraudulent balance sheets, we would then see lenders dump assets thereby driving down their own share values as well as real estate values?!? What would have happened if some of this newly raised capital was used to short the very financial institutions that are now dumping assets? hmmmmm)
Commercial real estate values are just starting what will prove to be a 50-60%+ correction from the peak. Residential markets will most likely approach a bottom between late 2014 and mid 2015. Commercial markets on the other hand are more likely to bottom closer to 2018.
http://finance.yahoo.com/tech-ticker/article/271957/Next-Segment-of-the-Housing-Market-to-Crash-1-Million-McMansions?tickers=dia,spy,hd,len,kbh&sec=topStories&pos=7&asset=&ccode=
Monday, June 29, 2009
It's different here . . . Mercedes v Kia
Every time I start working with a new consulting or coaching client I hear the same old story, "You don't understand it's different here . . . blah, blah, blah." Having lived, worked, coached and consulted people in every conceivable market in the US and many in Canada, I have always believed that if your market had houses and people, it was EXACTLY like every other market.
I was wrong, it is different here. I now accept that the higher end markets are filled with people who have significantly larger egos. Those egos repeatedly get in the way of making logical, sound, even savvy business decisions. I constantly hear "I can afford to _____________ ." Yeah that's great, and at 6+ ft tall, approx 225 lbs in decent shape, I can afford to get in the ring with Mike Tyson. I may even last a round or two (assuming I don't lose an ear!) But just because I can "afford" to do it, would you recomend that I do it? Or would you be far more likely to tell me it's stupid? Doing something just because you can afford to is usually stupid. Egos cause people to do stupid things. What stupid things are you doing right now?
In discussing this point with a client in Laguna Beach CA recently, we discussed the differences between Mercedes and Kia. My contention was that Kia was more popular. Upon researching sales figures we found that not only does Kia outsell Mercedes, significantly. We also learned that many Kia dealers are having record sales, right now in 2009 while Mercedes sales are off by staggering amounts. Hmmm, I wonder . . . what does that tell us about high end vs low end???
I was wrong, it is different here. I now accept that the higher end markets are filled with people who have significantly larger egos. Those egos repeatedly get in the way of making logical, sound, even savvy business decisions. I constantly hear "I can afford to _____________ ." Yeah that's great, and at 6+ ft tall, approx 225 lbs in decent shape, I can afford to get in the ring with Mike Tyson. I may even last a round or two (assuming I don't lose an ear!) But just because I can "afford" to do it, would you recomend that I do it? Or would you be far more likely to tell me it's stupid? Doing something just because you can afford to is usually stupid. Egos cause people to do stupid things. What stupid things are you doing right now?
In discussing this point with a client in Laguna Beach CA recently, we discussed the differences between Mercedes and Kia. My contention was that Kia was more popular. Upon researching sales figures we found that not only does Kia outsell Mercedes, significantly. We also learned that many Kia dealers are having record sales, right now in 2009 while Mercedes sales are off by staggering amounts. Hmmm, I wonder . . . what does that tell us about high end vs low end???
Wednesday, June 24, 2009
The market keeps falling why should I buy now?
Over the past few weeks we have seen interest rates (read this as “the cost to borrow money”) increase on all sorts of loans. For comparison sake, let’s look at a 30 year fixed rate loan. Less than a month ago you could lock in a rate in the mid to upper 4% range. Today that same loan is over 6%. Now 6% is obviously still a GREAT rate historically! But let’s take a look for a minute at what this means to an “average” US home buyer. Sellers read on - there is information for you too!
Let’s use a loan amount of $200k
@ 4.625% your monthly P&I (principal and interest) would be $1028.28
@ 6.125% your monthly P&I has now jumped to $1215.22
This is an increase of $186.94 or 18.2% in your payment (did housing prices in your marketplace drop 18.2% over just the past few weeks?)
This means you will pay an extra $2,243.28/yr or an extra $67,298.40 over the life of the 30 year loan
Well, maybe we should wait for rates to come back down . . .Ok, that might make sense. Let’s take a look at what we know about interest rates . . .
Interest rates are the reward or return and investor/lender receives for the risks associated with making a loan. How do you think most lenders are feeling about the risks associated with mortgages right now as each month the # of defaulting loans goes up and up?
If you don’t remember what has happened in the past when unemployment rates rose, when there was trouble in the financial markets, when prices on commodities (things like oil) rose, and when there was global political unrest. Ask someone where interest rates went in the later parts of the 1970’s and 1980’s (I’ll give you a hint: mortgage rates hit double digits and the first digit wasn’t a “1”). Do we have any of those factors happening today?
So what is the lowest mortgage rate you have ever heard of? I’ve heard of fixed rates down into the high 3’s and low 4’s.
So what is the highest mortgage rate you have ever heard of?
Based on your answers to the last 2 questions, which direction can rates move more?
When do you think you should be locking in a rate and buying???
Ok sellers, it’s your turn.
Let’s assume your house was the one we used in the example above with the $200k mortgage. If no one was willing to buy it when the payment was $1028.28/mo how likely are they to buy it with a higher monthly payment (read this as “less affordable?”)
How much do you think the payment would have to drop to get someone interested?
Let’s pretend you said that you thought a 10% drop would be enough, ok?
$1028.28/mo – 10% ($102.83) = $925.45
In order to get to the $925.45/mo payment that someone might actually be willing to commit to for your house, with rates now at 6.125% they would now only be able to borrow $152,309.74 – Can you say OUCH?!?
Want to know the even worse part?
Let’s assume that when you sell you are moving up to a home where you will have a $300,000 mortgage payment. If you had sold and bought when rates were at 4.625% your payment would have been $1,549.42. BUT you didn’t, so now if you adjust your price, get it sold and lock in rates at 6.125% your payment will only be $1,822.83 or $273.41/mo higher.
Of course that’s only $98,428.18 over the life of that 30 year loan – Can you OUCH and then OUCH again?!?
I’m curious, which do you think is more likely to happen over the next year as the world no longer is willing to accept the risk associated with buying the USA’s debt, interest rate go from 6 to 9% (a 50% increase in the cost of money?) or prices drop another 35-50% ???
Let’s use a loan amount of $200k
@ 4.625% your monthly P&I (principal and interest) would be $1028.28
@ 6.125% your monthly P&I has now jumped to $1215.22
This is an increase of $186.94 or 18.2% in your payment (did housing prices in your marketplace drop 18.2% over just the past few weeks?)
This means you will pay an extra $2,243.28/yr or an extra $67,298.40 over the life of the 30 year loan
Well, maybe we should wait for rates to come back down . . .Ok, that might make sense. Let’s take a look at what we know about interest rates . . .
Interest rates are the reward or return and investor/lender receives for the risks associated with making a loan. How do you think most lenders are feeling about the risks associated with mortgages right now as each month the # of defaulting loans goes up and up?
If you don’t remember what has happened in the past when unemployment rates rose, when there was trouble in the financial markets, when prices on commodities (things like oil) rose, and when there was global political unrest. Ask someone where interest rates went in the later parts of the 1970’s and 1980’s (I’ll give you a hint: mortgage rates hit double digits and the first digit wasn’t a “1”). Do we have any of those factors happening today?
So what is the lowest mortgage rate you have ever heard of? I’ve heard of fixed rates down into the high 3’s and low 4’s.
So what is the highest mortgage rate you have ever heard of?
Based on your answers to the last 2 questions, which direction can rates move more?
When do you think you should be locking in a rate and buying???
Ok sellers, it’s your turn.
Let’s assume your house was the one we used in the example above with the $200k mortgage. If no one was willing to buy it when the payment was $1028.28/mo how likely are they to buy it with a higher monthly payment (read this as “less affordable?”)
How much do you think the payment would have to drop to get someone interested?
Let’s pretend you said that you thought a 10% drop would be enough, ok?
$1028.28/mo – 10% ($102.83) = $925.45
In order to get to the $925.45/mo payment that someone might actually be willing to commit to for your house, with rates now at 6.125% they would now only be able to borrow $152,309.74 – Can you say OUCH?!?
Want to know the even worse part?
Let’s assume that when you sell you are moving up to a home where you will have a $300,000 mortgage payment. If you had sold and bought when rates were at 4.625% your payment would have been $1,549.42. BUT you didn’t, so now if you adjust your price, get it sold and lock in rates at 6.125% your payment will only be $1,822.83 or $273.41/mo higher.
Of course that’s only $98,428.18 over the life of that 30 year loan – Can you OUCH and then OUCH again?!?
I’m curious, which do you think is more likely to happen over the next year as the world no longer is willing to accept the risk associated with buying the USA’s debt, interest rate go from 6 to 9% (a 50% increase in the cost of money?) or prices drop another 35-50% ???
Tuesday, June 23, 2009
future of interest rates . . .
What happens when unemployment goes up, the economy is weak, commodity (oil etc) prices go up and there is global political unrest? Not sure . . .look at the late 70’s and late 80’s want a chart showing 30-Year FRM Rates 1971 - 2009? email kirk@kirknace.com and request the visual
Keeping it simple . . .
"At the end of the day, there are four things about people that
drive our economy. How many people there are, what age they
are, what they are buying, and where they live or are moving."
— Harry S. Dent, Jr.
drive our economy. How many people there are, what age they
are, what they are buying, and where they live or are moving."
— Harry S. Dent, Jr.
Friday, June 19, 2009
Business Week tells us what our houses will be worth in 2012
The people at Business Week believe they know where prices will be 3 years from now. So take a look by clicking on title above or cutting and pasting this link:
http://images.businessweek.com/ss/09/06/0618_house_worth_2012/1.htm
While these are the most realistic projections I have seen thus far from main stream media, I disagree greatly with their assertion that these levels will be reached partially due to a rebound in 2012. By 2012 we will begin to see the peak of the foreclosures starting to come back on the market, this massive distressed supply will lead to greater downward pricing pressure for at least a few years beyond 2012. So while this is more realistic than most, it stills leaves a lot to be desired.
http://images.businessweek.com/ss/09/06/0618_house_worth_2012/1.htm
While these are the most realistic projections I have seen thus far from main stream media, I disagree greatly with their assertion that these levels will be reached partially due to a rebound in 2012. By 2012 we will begin to see the peak of the foreclosures starting to come back on the market, this massive distressed supply will lead to greater downward pricing pressure for at least a few years beyond 2012. So while this is more realistic than most, it stills leaves a lot to be desired.
Thursday, June 18, 2009
Everything is all better, right?
The "experts" say it's over, we are done with the challenging economy and by the end of the year things will have turned around. Maybe . . . NOT!
take a look at these charts by clicking on title above or cut and pasting link below. Then you decide.
http://www.businessinsider.com/henry-blodget-tracking-the-second-great-depression-2009-6/tracking-the-depressions-world-output-1
take a look at these charts by clicking on title above or cut and pasting link below. Then you decide.
http://www.businessinsider.com/henry-blodget-tracking-the-second-great-depression-2009-6/tracking-the-depressions-world-output-1
Wednesday, June 17, 2009
That whole idea of supply and demand, good thing it's not a law!
what happens to the price of something when more and more of that thing are available (higher supply) and no one needs any more?
what happens to the price of something when a constant amount of it is available and people need less and less (lower demand) of that something?
what happens when supply goes up and demand goes down at the same time?
does this only apply when we want it to and in some areas, or is it a universal law, kinda like gravity?
in 1946 baby boomers started being born, by 1970 they were saving (investing) for retirement in all sorts of methods, means and manners. Stocks, bonds, real estate, you name it. for about 40 years lots of people have been buying investment products in one form or another.
by sometime in 2011 we will see the amount of money going into these retirement/investment vehicles be exceeded each month by the amount being withdrawn for "the golden years." what will happen to prices of all these things when more people want to sell than want to buy?
obviously, as the prices drop individuals will be forced to sell more and more of these things (stocks, bonds, real estate, etc) to continue receiving the same amount of income each month. as they sell more and more what will continue to happen to prices?
Ok so you get the law of supply and demand, now take a look at the attached article by clicking on the title above or cutting and pasting the link below. ask yourself . . . "where are we headed?"
http://finance.yahoo.com/retirement/article/107201/supply-and-demand?sec=topStories&pos=8&asset=&ccode=
what happens to the price of something when a constant amount of it is available and people need less and less (lower demand) of that something?
what happens when supply goes up and demand goes down at the same time?
does this only apply when we want it to and in some areas, or is it a universal law, kinda like gravity?
in 1946 baby boomers started being born, by 1970 they were saving (investing) for retirement in all sorts of methods, means and manners. Stocks, bonds, real estate, you name it. for about 40 years lots of people have been buying investment products in one form or another.
by sometime in 2011 we will see the amount of money going into these retirement/investment vehicles be exceeded each month by the amount being withdrawn for "the golden years." what will happen to prices of all these things when more people want to sell than want to buy?
obviously, as the prices drop individuals will be forced to sell more and more of these things (stocks, bonds, real estate, etc) to continue receiving the same amount of income each month. as they sell more and more what will continue to happen to prices?
Ok so you get the law of supply and demand, now take a look at the attached article by clicking on the title above or cutting and pasting the link below. ask yourself . . . "where are we headed?"
http://finance.yahoo.com/retirement/article/107201/supply-and-demand?sec=topStories&pos=8&asset=&ccode=
Tuesday, June 16, 2009
Inspiring thought and a question
I receive lots of quotes and daily inspirations from numerous sources. I read one today on, of all places, Facebook. It was on a friends page, I am assuming Kirk is Kirk Nace, it sounds like him. Seldom do I find something quoting 2 of my favorite thinkers in the same place, I hope you enjoy it . . .
"We must reset our sails to take advantage of these changing winds and prosper as a business and individual. You can make the most of this downturn and position yourself for the next boom that's going to follow." — Harry S. Dent, Jr.
“Have you accepted the changing winds or are you still battling them? What if you focused everyday on helping others?” --Kirk
"We must reset our sails to take advantage of these changing winds and prosper as a business and individual. You can make the most of this downturn and position yourself for the next boom that's going to follow." — Harry S. Dent, Jr.
“Have you accepted the changing winds or are you still battling them? What if you focused everyday on helping others?” --Kirk
Tuesday, June 9, 2009
Schiller sees housing prices falling through 2010 . . .
Click on article title above or cut and paste below into your browser. The most accurate high profile economist to date on the housing correction recently wrote the attached article for The New York Times. We stand by our projections from June 2 article found at www.smashedfeet.com. BOTTOM OF THE US HOUSING MARKET WILL OCCUR NO EARLIER THAN LATE 2013 - MID 2015, BOTTOM WILL BE EXTENDED AND REAL ESTATE VALUES WILL INCREASE ONLY SLIGHTLY FOR A FULL DECADE FOLLOWING THE BOTTOM
http://finance.yahoo.com/real-estate/article/107163/Why-Home-Prices-May-Keep-Falling?mod=realestate-buy
http://finance.yahoo.com/real-estate/article/107163/Why-Home-Prices-May-Keep-Falling?mod=realestate-buy
Tuesday, June 2, 2009
NAR - could you be any less honest?
NAR reported today that pending home sales have increased at a record pace. Of course, they include all short sale offers in that number. Everyone in the real estate business knows that all short sale offers eventually close right?
Is it any wonder that the public views Realtors as having no credibility, no integrity and no professionalism when the organization itself consistently publishes false and/or misleading information.
Nationally, the market is a minimum of 20-30% from a bottom price wise and that bottom is at least 4+ years out.
If you are a seller, get out sooner rather than later.
If you are a buyer and are financing it makes more sense to buy now at the currently available financing terms than wait for the cost of your money to continue to escalate.
If you don't understand why, post a response and we will address it for you!
Is it any wonder that the public views Realtors as having no credibility, no integrity and no professionalism when the organization itself consistently publishes false and/or misleading information.
Nationally, the market is a minimum of 20-30% from a bottom price wise and that bottom is at least 4+ years out.
If you are a seller, get out sooner rather than later.
If you are a buyer and are financing it makes more sense to buy now at the currently available financing terms than wait for the cost of your money to continue to escalate.
If you don't understand why, post a response and we will address it for you!
Wednesday, May 27, 2009
The 2nd wave is on the horizon . . .
take a look at the charts from the attached site (click on article name above or paste below into your browser) then ask yourself, when is the bottom of the housing market likely to occur?
http://www.agorafinancial.com/5min/the-second-wave-of-the-housing-crisis-profiting-from-carbon-caps-us-is-out-of-money-lunch-with-ron-paul-and-more/
http://www.agorafinancial.com/5min/the-second-wave-of-the-housing-crisis-profiting-from-carbon-caps-us-is-out-of-money-lunch-with-ron-paul-and-more/
Tuesday, May 26, 2009
1st quarter 2009 home prices fall at fastest pace on record!
talk of a bottom is insane! Last quarter saw prices fall faster than during any quarter in history! click on title above or paste address below into your browser.
http://finance.yahoo.com/news/SampP-Home-prices-fall-by-apf-15345580.html?sec=topStories&pos=2&asset=&ccode=
http://finance.yahoo.com/news/SampP-Home-prices-fall-by-apf-15345580.html?sec=topStories&pos=2&asset=&ccode=
Monday, May 25, 2009
What if you knew . . .
What if you knew, with absolute certainty, that the real estate correction we have seen nationwide thus far has not yet reached the midpoint?
What if you knew that prices would drop an additional 30%+ nationally from today's levels?
What if you knew that the powers that be on both Wall Street and Pennsylvania Avenue were running out of bullets, and that the bandaids they have used thus far simply aren't helping anything?
What if you really, truly wanted to help as many people as possible to not be crushed by this rapidly approaching reality?
What would you do?
How would you do it?
When would you start?
Why?
For many years I have had the privilege of working with some of the greatest real estate minds in N. America. Sad truth is even most of them have been unwilling to acknowledge this simple truth. So here it is, again, REAL ESTATE CORRECTION WILL CONTINUE NATIONWIDE UNTIL AT LEAST 2015, POSSIBLY LONGER. THE BOTTOM WILL THEREFORE OCCUR 6-12 MONTHS THEREAFTER AND WILL EXTEND FOR SEVERAL YEARS PRIOR TO A VERY SLOW AND CAUTIOUS RETURN TO APPRECIATION STARTING AROUND 2022/3.
You can continue to dismiss this, as many have for years. Unfortunately, all of those who have are now significantly worse off financially and more importantly they have harmed many of those they claim to care about, from friends and family to clients. Who are you harming by ignoring reality?
What if you knew that prices would drop an additional 30%+ nationally from today's levels?
What if you knew that the powers that be on both Wall Street and Pennsylvania Avenue were running out of bullets, and that the bandaids they have used thus far simply aren't helping anything?
What if you really, truly wanted to help as many people as possible to not be crushed by this rapidly approaching reality?
What would you do?
How would you do it?
When would you start?
Why?
For many years I have had the privilege of working with some of the greatest real estate minds in N. America. Sad truth is even most of them have been unwilling to acknowledge this simple truth. So here it is, again, REAL ESTATE CORRECTION WILL CONTINUE NATIONWIDE UNTIL AT LEAST 2015, POSSIBLY LONGER. THE BOTTOM WILL THEREFORE OCCUR 6-12 MONTHS THEREAFTER AND WILL EXTEND FOR SEVERAL YEARS PRIOR TO A VERY SLOW AND CAUTIOUS RETURN TO APPRECIATION STARTING AROUND 2022/3.
You can continue to dismiss this, as many have for years. Unfortunately, all of those who have are now significantly worse off financially and more importantly they have harmed many of those they claim to care about, from friends and family to clients. Who are you harming by ignoring reality?
Eye of the Hurricane . . .
Remember back on March 24 of this year I listed a group of people who simply make sense? Well Barron's agrees, in fact here is something they have just published (click title of this article or cut and paste from below.)
According to Mike Morgan, we have only thus far seen the front half of the housing hurricane in FL, and as anyone with a bit of sense - yeah I know that's not many - knows FL has been the nation's crystal ball when it comes to real estate for almost the past decade.
http://online.barrons.com/article/SB124303112018248371.html
According to Mike Morgan, we have only thus far seen the front half of the housing hurricane in FL, and as anyone with a bit of sense - yeah I know that's not many - knows FL has been the nation's crystal ball when it comes to real estate for almost the past decade.
http://online.barrons.com/article/SB124303112018248371.html
Friday, May 15, 2009
President points towards inevitable higher interest rates and higher tax rates . . .
click on title or paste below into your browser for full details . . .
http://www.businessinsider.com/obama-warns-of-unsustainable-deficits-and-spiraling-interest-rates-2009-5
Higher interest and higher tax rates coming, bet that helps home buyer demand!
http://www.businessinsider.com/obama-warns-of-unsustainable-deficits-and-spiraling-interest-rates-2009-5
Higher interest and higher tax rates coming, bet that helps home buyer demand!
Thursday, May 14, 2009
It's getting better if you believe reports . . . you can't really be that stupid can you?
Last month more homes entered into the foreclosure process than during any month in history, up 32% nationwide from a year earlier. Here is the article, paste it into your browser. http://news.yahoo.com/s/ap/20090513/ap_on_bi_ge/us_foreclosure_rates
In one SW FL area one of every 57 homes went into foreclosure, just during the last month - OUCH! As we have seen time and again, South Florida has repeatedly proven to be a crystal ball throughout this ordeal, wonder what that means for the rest of us? Sad truth is that although both foreclosure notices and foreclosures themselves have been on the rise, quite significant rise at that, we are still routinely seeing borrowers across the country get to a point of being 6-36 months delinquent prior to lenders even beginning the process. Even with this reality approximately 70% of the properties foreclosed on nationwide over the past 12 months have not come back on the market yet as there are large incentives to lenders to not realize the inevitable losses (ie suspension of mark to market also apparently allows lenders to claim the $1M loan they foreclosed on was actually secured by a $1M property and they hold that property on their balance sheets as a $1M asset – HAHA!)
Rest assured, many more of your tax dollars will be wasted before market forces are allowed to run their course. I suppose reality is they aren’t really your tax dollars, we are waaaaay beyond that. They are actually your children’s, your grandchildren’s and your great grandchildren’s tax dollars, so why worry we’re Americans, nothing can harm us right?
Well, except for maybe the increasing interest rates our President expressed concerns about being inevitable recently. Hmmm, perhaps we should just keep on plugging along operating as we always have because the same approaches and strategies should work in this market and economy as in the past right? I mean do we really want or need to adjust our approach just because everything around us has changed?
PS with new initiative just announced to encourage more short sales and the enormous shadow inventory being held in limbo by lenders, what will happen as all that distressed property hits the market with ever increasing interest rates, stiffer loan qualification requirements, potential buyers worries about increasing tax rates, decreasing job security and the like? Oh nevermind, we're America nothing can harm us. Suppose I should just resume my Midwestern, good ole boy way of life, huh?
In one SW FL area one of every 57 homes went into foreclosure, just during the last month - OUCH! As we have seen time and again, South Florida has repeatedly proven to be a crystal ball throughout this ordeal, wonder what that means for the rest of us? Sad truth is that although both foreclosure notices and foreclosures themselves have been on the rise, quite significant rise at that, we are still routinely seeing borrowers across the country get to a point of being 6-36 months delinquent prior to lenders even beginning the process. Even with this reality approximately 70% of the properties foreclosed on nationwide over the past 12 months have not come back on the market yet as there are large incentives to lenders to not realize the inevitable losses (ie suspension of mark to market also apparently allows lenders to claim the $1M loan they foreclosed on was actually secured by a $1M property and they hold that property on their balance sheets as a $1M asset – HAHA!)
Rest assured, many more of your tax dollars will be wasted before market forces are allowed to run their course. I suppose reality is they aren’t really your tax dollars, we are waaaaay beyond that. They are actually your children’s, your grandchildren’s and your great grandchildren’s tax dollars, so why worry we’re Americans, nothing can harm us right?
Well, except for maybe the increasing interest rates our President expressed concerns about being inevitable recently. Hmmm, perhaps we should just keep on plugging along operating as we always have because the same approaches and strategies should work in this market and economy as in the past right? I mean do we really want or need to adjust our approach just because everything around us has changed?
PS with new initiative just announced to encourage more short sales and the enormous shadow inventory being held in limbo by lenders, what will happen as all that distressed property hits the market with ever increasing interest rates, stiffer loan qualification requirements, potential buyers worries about increasing tax rates, decreasing job security and the like? Oh nevermind, we're America nothing can harm us. Suppose I should just resume my Midwestern, good ole boy way of life, huh?
sad but true entertaining commentary on American economy
click on title above or cut and paste link below
tune back soon for more!
http://www.newsday.com/media/flash/2009-04/46217527.swf
tune back soon for more!
http://www.newsday.com/media/flash/2009-04/46217527.swf
Monday, April 20, 2009
Send your check, only $184,000 per US citizen
something to think about . . . click on title above or cut and paste this link into your browser . . .
http://owenandpayne.com/payne.php
Bloomberg estimated the total bill for the U.S. bailout at $9.7 trillion. In just one month, that number has ballooned to $12.8 trillion, which is close to the size of our entire economy. Put another way, the government is spending everything both it and private businesses combined spent last year to correct the problems with our nation.
Clusterstock says it differently: $1 trillion is about what the U.S. collects in taxes in a year. So to pay for this recovery, the government would have to raise our taxes nearly 13x. Either that or pass it onto future generations.
and now instead of being repaid for the billions given to banks, we are just accepting their stock. I wonder . . .would you have voted for your tax dollars to be spent on stock in companies run that poorly?
http://owenandpayne.com/payne.php
Bloomberg estimated the total bill for the U.S. bailout at $9.7 trillion. In just one month, that number has ballooned to $12.8 trillion, which is close to the size of our entire economy. Put another way, the government is spending everything both it and private businesses combined spent last year to correct the problems with our nation.
Clusterstock says it differently: $1 trillion is about what the U.S. collects in taxes in a year. So to pay for this recovery, the government would have to raise our taxes nearly 13x. Either that or pass it onto future generations.
and now instead of being repaid for the billions given to banks, we are just accepting their stock. I wonder . . .would you have voted for your tax dollars to be spent on stock in companies run that poorly?
Wednesday, April 1, 2009
I.O.USA SHORT VERSION
If you haven't watched this, take 30 minutes and do so, be part of the 1-3% of Americans who are not part of the uninformed masses (or is it asses?) REMEMBER - THIS WAS FROM SUMMER 2008, BEFORE ALL THE BAILOUT TRILLIONS WERE SPENT!!!
cut and paste into your browser or click on article title "I.O.USA short version" above
http://www.youtube.com/watch?v=O_TjBNjc9Bo&feature=channel_page
cut and paste into your browser or click on article title "I.O.USA short version" above
http://www.youtube.com/watch?v=O_TjBNjc9Bo&feature=channel_page
Monday, March 30, 2009
National Mortgage Independence Day
233 years ago there was a revolution, a revolution to become free of unfair laws and taxation. Throughout history (see www.smashedfeet.com article from September 5, 2008) the world’s greatest civilizations have averaged about 200 years. Has the time come for change? Real change initiated by the people, not promised by politicians?
Seth Godin, a best selling author, and Kirk Nace, a business coach and percontator extraordinaire, have helped many to see the value in questioning the status quo, so here are a few questions to consider . . .
Other than Wall St, who has benefitted more from the crazy economy including the real estate and credit market expansions of the past decade, and truly several decades leading up to this one?
While they have been benefitting, what has happened to our national debt, you know the amount of money that each and every citizen is ultimately responsible for?
Where was our government of the people by the people, supposedly for the people, while all of this was going on?
Do you know, for certain, that your social security, your pension, your retirement money will be there when you need it?
If it is still there, will the dollars be so de valued as to be almost worthless?
How secure are you in your job?
Are you sick and tired of writing a check for your mortgage each month to the same exact Wall Street big boys that are also receiving billions and soon to be trillions of dollars of your dollars in assistance from the government?
How, other than more money out of your pocket via taxes, will those bailouts be re paid?
Does, pay my mortgage + watch my house value drop + pay more taxes + not have a secure job and/or retirement make sense to you?
Is there a better way to get politician’s attention than through a revolution?
Is there a better way to get Wall Street’s attention than by stopping the flow of money into their pockets?
What would happen if we all revolted and decided that on National Mortgage Independence Day (July 4th sounds like a great day) we were no longer going to support this non sense?
What if everyone simply stopped making their mortgage payments?
Non owners unhappy with how any “assistance” is directed at owners?
What if everyone stopped paying any and all loans to Wall St big boys, credit cards, student loans, etc?
What if no one resumed making those payments until their mortgage balance had been cut in half?
Would that “even the score” a bit?
Would real change happen, and quickly?
If we have in fact run our course (200+ years as a great civilization) and our time has come, why not be a phoenix re born from the ashes of a meaningful revolution?
Think about this, share it with those you know and care about. We have become enslaved to our politicians and the mega powers on Wall St, how long will you take it?
Seth Godin, a best selling author, and Kirk Nace, a business coach and percontator extraordinaire, have helped many to see the value in questioning the status quo, so here are a few questions to consider . . .
Other than Wall St, who has benefitted more from the crazy economy including the real estate and credit market expansions of the past decade, and truly several decades leading up to this one?
While they have been benefitting, what has happened to our national debt, you know the amount of money that each and every citizen is ultimately responsible for?
Where was our government of the people by the people, supposedly for the people, while all of this was going on?
Do you know, for certain, that your social security, your pension, your retirement money will be there when you need it?
If it is still there, will the dollars be so de valued as to be almost worthless?
How secure are you in your job?
Are you sick and tired of writing a check for your mortgage each month to the same exact Wall Street big boys that are also receiving billions and soon to be trillions of dollars of your dollars in assistance from the government?
How, other than more money out of your pocket via taxes, will those bailouts be re paid?
Does, pay my mortgage + watch my house value drop + pay more taxes + not have a secure job and/or retirement make sense to you?
Is there a better way to get politician’s attention than through a revolution?
Is there a better way to get Wall Street’s attention than by stopping the flow of money into their pockets?
What would happen if we all revolted and decided that on National Mortgage Independence Day (July 4th sounds like a great day) we were no longer going to support this non sense?
What if everyone simply stopped making their mortgage payments?
Non owners unhappy with how any “assistance” is directed at owners?
What if everyone stopped paying any and all loans to Wall St big boys, credit cards, student loans, etc?
What if no one resumed making those payments until their mortgage balance had been cut in half?
Would that “even the score” a bit?
Would real change happen, and quickly?
If we have in fact run our course (200+ years as a great civilization) and our time has come, why not be a phoenix re born from the ashes of a meaningful revolution?
Think about this, share it with those you know and care about. We have become enslaved to our politicians and the mega powers on Wall St, how long will you take it?
Sunday, March 29, 2009
additions to the list . . .
I recently read a list here on this site of people you can look to for pretty good guidance on the economy, our future and the like. I would propose that you might also want to see what the following have to share as I have found each of them to also offer information of value:
Harry Dent www.hsdent.com Author and economist with lots of thought provoking material
Peter G. Peterson Foundation www.pgpf.org An organization committed to making US citizens aware of exactly what their financial situation is as a country. They help wade through the rhetoric.
In addition to the above and those listed in the previous article, the following people may also be able to provide thought provoking material of value for you and those you care about:
Ross Perot; Ron Paul; Stuart Wilde; et al
Harry Dent www.hsdent.com Author and economist with lots of thought provoking material
Peter G. Peterson Foundation www.pgpf.org An organization committed to making US citizens aware of exactly what their financial situation is as a country. They help wade through the rhetoric.
In addition to the above and those listed in the previous article, the following people may also be able to provide thought provoking material of value for you and those you care about:
Ross Perot; Ron Paul; Stuart Wilde; et al
Tuesday, March 24, 2009
People who make sense . . .
In watching this economic event unfold over the years, I have come to rely on the opinions, research and ideas of a small handful of people who tell it like it is, make sense and appear to be genuinely concerned about others. In finding this group of people I have ruled out those who have any sort of agenda. Instead, I read, listen and pay attention to those who aren't trying to sell me an investment idea or product. Below is a list of people I have found to be logical, rationale and full of good information:
John Mauldin http://www.johnmauldin.com/
Timely advice from a wide ranging variety of economic and political experts.
Porter Stansberry http://www.stansberryresearch.com/
Similar to Mauldin, different spin, more product offerings.
Mike Morgan http://www.morgan-florida.org/
A true wild man with no holds barred comments on the economy, our political leaders and potential future realities.
Kirk Nace http://www.theresultsgrouponline.com/
Looking for thought provoking questions intended to help you think your way through any situation? This is your guy.
David Tanzer http://www.davidtanzer.com/
Global asset protection strategies are Tanzer's niche
Robert Schiller www.econ.yale.edu/~shiller/
Somewhat mainstream, but tends to tell it like it is and his projections on the economy are generally more accurate than any other well known economist.
Sandy Botkin www.taxreductioninstitute.com/
Best tax advice available, period
I am sure there are lots of others, who I am unaware of, but studying any/all of these people will most certainly allow you to see through the political self serving BS all around us so that you can make more informed decisions. If you have any other suggestions, I would appreciate your posting them here for all to benefit from.
John Mauldin http://www.johnmauldin.com/
Timely advice from a wide ranging variety of economic and political experts.
Porter Stansberry http://www.stansberryresearch.com/
Similar to Mauldin, different spin, more product offerings.
Mike Morgan http://www.morgan-florida.org/
A true wild man with no holds barred comments on the economy, our political leaders and potential future realities.
Kirk Nace http://www.theresultsgrouponline.com/
Looking for thought provoking questions intended to help you think your way through any situation? This is your guy.
David Tanzer http://www.davidtanzer.com/
Global asset protection strategies are Tanzer's niche
Robert Schiller www.econ.yale.edu/~shiller/
Somewhat mainstream, but tends to tell it like it is and his projections on the economy are generally more accurate than any other well known economist.
Sandy Botkin www.taxreductioninstitute.com/
Best tax advice available, period
I am sure there are lots of others, who I am unaware of, but studying any/all of these people will most certainly allow you to see through the political self serving BS all around us so that you can make more informed decisions. If you have any other suggestions, I would appreciate your posting them here for all to benefit from.
Monday, March 23, 2009
Future of US housing market . . .
The following article from John Mauldin is certainly worth a read. Notice that it indicates prices will drop another 20% IF foreclosures don’t increase, then read on to where it says over ½ of all borrowers will be upside down. Gee, think about it, fear of economy, lack of employment, over ½ the borrowers upside down, I wonder how many will walk away??? Foreclosures ARE going to increase, period. Anyone willing to bet that the US housing market bottoms around 4th quarter 2016 with a median price of under $120,000??? Think that's too long to continue to endure this pain and torture? Ask your elected officials to stop trying to make it better, bandaids have never healed anything and they are using some mighty expensive bandaids! Don't think your elected officials will hear you? Check out upcoming article on US Mortgage Independence Day! read on . . .
This last Tuesday the Wall Street Journal published an op-ed by my friend Gary Shilling and Richard LeFrak. They offer a simple solution for the housing crisis: give foreigners who will come to the US and buy a home resident status (green cards). This is a very important proposal and one that deserves national attention and action. Gary was kind enough to send me two lengthier white papers offering more facts. In this week's letter we are going to look at this proposal in more detail than the small space that an op-ed can offer. And while this letter will be somewhat controversial in some circles, I ask that you read it through, giving me the time to make the case. I will also add a few thoughts as to why this could not only help solve the housing crisis, but help put the nation back into growth mode.
Long-time readers know that I have been growing more and more bearish of late. I have been writing for a long time that we are in for a long period of slow Muddle Through growth as the twin crises of the housing bubble and credit bubbles require time to heal. Today we look at a serious proposal for cutting the time to healing for at least one of those bubbles (housing), and at least keep the other (credit) from getting worse. This is the most serious idea I have seen that could actually make a real positive contribution to the economy and help put us back on a growth path.
I will post Gary's papers and a link to the actual op-ed piece for those who want to do further research, but let me make one point at the beginning that he did not emphasize: the US is already allowing roughly 1 million immigrants a year into the country (which for a variety of reasons I and most serious economists of all stripes believe is a very good thing). We are suggesting that we simply change the nature of what constitutes the conditions for acceptance, so as to jump start the housing industry and the economy. We are not suggesting additional immigrants, although nothing would be wrong with that. I will also post a link for you to send this e-letter to your congressmen and senators.
Let me put up front a few benefits of a program that would allow legal status to immigrants buying a home. Housing values would stabilize and in many cases rise. The massive losses because of bad loans that are being subsidized by US taxpayers would be stemmed, saving many hundreds of billions, if not a trillion or more dollars. The excess inventory of homes would quickly disappear and the millions of jobs that were lost as home construction fell into a deep depression would come back. If housing values rise, many families would be able to refinance their homes at lower rates and have more income left over after paying their mortgages. $12 billion in commissions would end up in real estate agents' pockets, helping a very battered and bruised group. Hundreds of billions will flow into local businesses, as these new immigrants will need to furnish their homes. This could mean as much as a half trillion dollars in sorely needed stimulus in the next few years, without one penny of taxpayer money and actually adding taxes back to governments from local to national. And we are not bringing in 1 million foreigners, we are attracting 1 million mostly middle-class new Americans, which, if we are smart in how we do this, will result in more jobs for all Americans. So let's jump right in and look at the details.
Housing Could Drop Another 20% in Pricing
Let's review the situation as it will be if we do nothing. Shilling shows that we built 6.7 million more homes in this country between 1996-2005 than the normal trend would have projected, partially because we underbuilt the decade before that. New housing starts average about 1.5 million in normal times but have fallen to 500,000 recently, and could fall further as unemployment rises and demand declines. Even so, Shilling estimates that we still have about 2.4 million excess homes.
This compares rather well with estimates by independent analyst John Burns, which I cited in the e-letter early last year. What they both agree on is that it will take at least until 2012 to work through this excess inventory, and that assumes that foreclosures do not increase as housing prices drop.
Excess supply of anything means lower and continuously falling prices, and that has certainly been the case in housing. Here is what Shilling writes:
"We believe that if nothing is done to eliminate surplus housing, prices will fall another 20% between now and the end of 2010 for a total peak-to-trough decline of 37% (Chart 1 below). The resulting further negative effects on the economy will be devastating. At that point, almost 25 million homeowners, or almost half the 51 million total with mortgages, will be underwater… That's also a third of the 75 million total homeowners, with the remaining 24 million owning their houses free and clear. It would take a little over $1 trillion to reduce their mortgages to the value of their houses, compared to $449 billion for the almost 14 million currently underwater."
This is not inconsistent with similar projections by other acknowledged experts and independent analysts like John Burns and Professor Robert Shiller of Yale. If nothing happens to stimulate buying, there is a great deal more pain ahead for American homeowners.
For the great majority of Americans, their homes represent the largest portion of their assets. This is particularly true of Americans of more modest means, who have been hit the hardest. Watching their single biggest assert drop another 20% will be devastating and for many will mean they will not be able to retire as they had planned. More Americans own homes (68%) than own stocks (50%). This helps explain a recent poll which shows more Americans are worried about house prices than about the decline in stock prices.
Falling home prices means that consumers have to save more for retirement, which results in lower consumer spending, which translates into lost jobs and more homeowners coming under stress -- a vicious spiral that is increasing unemployment. Realistic estimates of unemployment rising to over 10% within the year abound.
Two years ago I and a few others foresaw the current housing crisis (and an accompanying credit crisis), predicting a protracted recession and a slow, multi-year Muddle Through recovery. Sadly, I was right about the housing crisis. Without some intervention, there is little to suggest that the prediction of a long, protracted recovery will not come true.
Lowering rates, as is being discussed in various circles, will help homeowners who can make their payments, but it does nothing to really bite into excessive inventory. Until we reduce the inventory, housing prices in many neighborhoods all across America are going to continue to come under pressure. And as Barry Habib points out, while the Fed may be lowering rates for securitized packages of loans, those low rates are not available to the average home buyer. The cost of packaging and securitization adds considerable cost.
Shilling discusses the "traditional" options for reducing home inventories, but in the end there is no real solution other than time, or massive amounts (read trillions) in taxpayer money being given to homeowners, which will be very unpopular, as homeowners who were responsible and are paying their mortgages would get no benefits. Waiting another two and a half years for the excessive inventory to sell will keep this country in a very slow or no-growth economy, and devastate the wealth of millions of homeowners.
But there is a solution. There are millions of foreigners throughout the world who would like to come to live in the US. In 2006, there were 1.1 million immigrants allowed into the US, some 63% of whom were allowed in simply because they already had relatives here. Only 13% of visas were granted to people because of their skills. While allowing relatives of current residents to come to the US may be a humane and reasonable policy, it does nothing to assure they bring more than that relationship to help them make their way in the US.
Buy A Home, Get a Green Card
What if we changed the rules for a few years? Starting as soon as possible, we should allow anyone to come into the country who would buy a home. They would be given a temporary visa which would become permanent if they had no problems after, say, five years.
While Gary proposes that they be allowed to borrow against the value of their homes, I lean toward suggesting that initially we take those who buy their homes outright (with a few exceptions). That means they have enough capital to purchase a home to begin with, which probably means they are educated and have skills. In fact, if they have enough cash to buy a home, that means they would have more actual savings than most US citizens. We would be attracting future citizens with the capital to invest in job-creating businesses and/or who have useful skills to assist in the recovery of the US economy.
Of course, there should be some rules that go along with this proposal. Background checks and references should be required. The home could not be rented for a period of time (at least two years), to help reduce the supply of available housing, and could not be resold for at least two years unless another home was purchased. There should be a minimal price, which could be somewhat different for various regions, but $100,000 would seem to be a good minimum for most areas, with higher minimums in certain areas.
The immigrant should demonstrate the ability to support himself and his family for a period of time (at least one year, preferably two), including the purchase of health insurance. Cash or letters of credit or other guaranteed commitments would be required. Only immediate family members (spouse and children) would be allowed to come with the immigrant. Cousins and siblings must buy their own homes. The permanent visa should be contingent on not having gone on welfare or public assistance at any time in the past five years. We are trying to solve a housing problem, not looking to create others.
I would make an exception in having 100% financing for immigrants with advanced degrees or special skills, especially those who did their schooling in the United States. If the US is to remain competitive in an increasingly technological world, we need more scientists and engineers. But getting permission to stay is becoming increasingly difficult. We are seeing a brain drain of those who would like to stay and create new jobs and technologies (and buy houses) here in the US. Shilling and Le Frak write:
"The authors of this report believe that a number of people have given up waiting for those visas or don't want to put up with the hassle and are leaving the country. This "brain drain" is unfortunate since many of these foreigners are highly productive. In 2006, foreign nationals residing in the U.S. were named as inventors or co-inventors on 25.6% of the 42,019 international patent applications filed from this country, up from 7.6% in 1998. Studies of the authorship of academic papers show the same trend.
"U.S. educational institutions are considered the best in the world by many and are magnets for foreign students, especially at the graduate level. Many of them are inclined to settle and work in this country after completing their studies, if they can obtain permanent resident status.
"The Council of Graduate Schools survey revealed that in the fall of 2007, 241,095 non-U.S. citizens were enrolled in graduate programs. Technological progress and the productivity it generates depends on people educated in biological sciences, engineering and physical sciences, but only 16% of U.S. citizen graduate enrollment was in these three disciplines. In contrast, 55% of total non-U.S. citizen enrollment was in those fields. Conversely, 53% of graduate enrollment by Americans was in education, business and health sciences while those three fields accounted for only 24% of foreign graduate students."
(There is a great deal more background detail in the second white paper. See link below.)
Much can be learned from similar programs already in place in immigrant-hungry countries such as Canada, Australia, and New Zealand. The United Kingdom has recently added new programs. Many countries realize that in the coming years there is going to be increasing competition for the best and brightest of the world. Again, there are more details in the white papers, but let's turn to the effects that would result from such a program.
A Real Stimulus Package
First, upon Congressional approval, it would almost immediately stop the seemingly inexorable slide in house prices, as initial demand would be significant. Let's assume one million new immigrants would buy homes. At an average price of almost $200,000, that would be $200 billion injected into the economy. And each of those homes has to be furnished, food has to be bought, clothing will be needed, local taxes will be paid. Airplane tickets to research potential areas, hotels needed during the interim period, and other related expenditures would add up. Over two years, this could easily be another $100 billion.
Couple 1 million new buyers with current US demand, and the excess inventory would be worked through within a year, and possibly faster. This puts a floor under the housing market, and home values could once again to begin to rise in line with a growing economy.
Such a program would have a salutary effect on the value of the dollar, as not only the initial purchases of homes and materials would need to be converted to dollars, but it is likely that immigrants would bring even more capital into the country.
By stemming the fall of home values, it would decrease the likelihood of foreclosures and help homeowners get refinancing at lower rates. Refinancing now is difficult because most lenders want a substantial slice of equity to go along with any new mortgage. If your home value has dropped 20% and is likely to fall another 20%, it is hard to have enough equity to qualify for a new mortgage. Stopping the fall in prices is critically important; and maybe if prices rise in some areas, homeowners will be able to refinance at better rates, giving them more cash each month to save or spend.
As I have written in previous letters, the psyche of the American consumer is permanently scarred. We are on our way back to a savings rates that will look more like 1987 than 2007, when it was almost zero. Just a few decades ago, we saved 7-10%. Consumer spending was only 64% of US GDP in 1987. It was 71% in 2007. It is on its way back to that lower level.
Lower consumer spending will be a drag on growth for years. But bringing in 1 million already middle-class new immigrant families will help make up for a lot of that reduced spending. If you can spend $200,000 on a home, you are likely skilled at something and well-educated. You will find a job, or create one, as many immigrants do, and then you will add to our total consumer spending.
If you are a real estate agent, you should love this proposal, as it would result in an additional $12 billion in commissions.
If you are a home builder, what a great way to reduce inventory and get back to the conditions where there is a demand for your product. This would help put back to work those who have lost their jobs in the home construction collapse. Home Depot and Lowe's and local stores? It would help them to increase sales, which leads to more jobs.
We are on the cusp of the Baby Boomers beginning a huge wave of retirement, both in the US and elsewhere in the developed world. There is going to be a need for skilled workers to replace those Boomers, as well to provide services to the retirees. Further, the promised Social Security and Medicare expenditures are going to start increasing at a significant rate. We are going to need immigrants to help pay for those benefits. Given the controversy over immigration, we will look back with some irony in ten years when we find we are in a serious competition with other nations to attract skilled immigrants. We should start now. I think the concept is, let's not waste a good crisis.
Let's look at some of the potential critics of this proposal. I was on Yahoo Tech Ticker yesterday talking about this, and got a few irate emails and phone calls.
"Why," I was asked, "do I hate American workers? Isn't there enough unemployment? Why do we need more immigrants taking American jobs?" And there was considerable angst about illegal immigrants.
First, I am suggesting we transform the already existing legal immigrant flow, which is going to happen anyway, into a form which helps us solve a major crisis. I am not talking about adding another 1 million immigrants on top of the current legal inflow. Just change the nature of that inflow until the excess housing inventory is settled, and then we can go back to the current program, if that is what is wanted (more on that below).
Second, I am not suggesting we bring in or condone illegal immigrants. That is another issue altogether, for another debate at another time.
If we do nothing, unemployment is going to rise to at least 10%. That is certainly not good for the American worker. Home values are going to continue to fall. That is certainly not good for the American worker. The economy is likely to be stagnant for an extended period of time, which means job growth in a Muddle Through recovery will be slow and stagnant. That is not good for the American worker.
Hundreds of billions more of taxpayer dollars will have to go to banks to keep them solvent as falling home prices and increasing unemployment increase foreclosures. That is not good for the American worker and taxpayer.
And further, I am not talking about bringing 1 million foreigners to this country. I am talking about bringing 1 million future Americans, who want to work hard and live the American dream.
Let me say a few words to those who are opposed to immigration -- and I have heard from you. With few exceptions, US citizens reading this have an immigrant in their genealogies. Some of mine go back to the 1600s. Some of mine were not exactly considered welcome. "No Irish and Dogs allowed" read the signs. But immigrants and their children have been the driver for growth in this country for generations. It is hard-working immigrants who leave their homes for the dream of being Americans that have been the backbone of the building of the nation -- the hewers and shapers, if you will.
It is precisely that melting pot of human diversity that is the strength of the American idea. Each new wave of immigrants has been viewed with trepidation or scorn, yet within one generation they have become American. And in turn, their children's children forget that their forebears had to deal with discrimination.
America -- the US -- is not so much a country as it is an idea, the idea that anyone, regardless of race or religion or gender, can come here and with hard work and determination make their own way. Some end up owning the local deli, and some end up founding Google. Some 25% of Silicon Valley start-ups, I am told, are by immigrants, creating jobs at the bleeding edge of technology. They see the US as a land of opportunity. That is why so many want to come and that is why we can attract a new generation of affluent, self-reliant immigrants who can help us solve a problem that we created.
I can see no downside to changing our immigration policy for a few years. We solve the housing crisis, stabilize home values, brings hundreds of billions in stimulus to the US, and with no taxpayer outlay. For a short time, we substitute one class of immigrant for another, to solve a serious crisis. It is not a matter of immigrants or no immigrants, just which immigrants
So which do you want? 10% unemployment and a decade of lower home values and increasing foreclosures, with a slow, Muddle Through, jobless recovery, or a stable housing market and home construction back to trend?
If you agree with me, I suggest you contact your Congressman. You can go to http://www.visi.com/juan/congress/ (selected at random from many such sites) and type in your address and get the name of your congressperson and senators. Just tell them you like this idea, and cut and paste the link where you read this into the letter. And tell them to get into gear! I would like to point out that this proposal is not Republican or Democrat, it is just common sense. I hope we can get broad bipartisan support.
The link to the Wall Street Journal editorial is: http://online.wsj.com/article/SB123725421857750565.html
The links to the white papers are:
http://www.frontlinethoughts.com/pdf/Housing_Whitepaper_1.pdf
http://www.frontlinethoughts.com/pdf/Housing_Whitepaper_2.pdf
This last Tuesday the Wall Street Journal published an op-ed by my friend Gary Shilling and Richard LeFrak. They offer a simple solution for the housing crisis: give foreigners who will come to the US and buy a home resident status (green cards). This is a very important proposal and one that deserves national attention and action. Gary was kind enough to send me two lengthier white papers offering more facts. In this week's letter we are going to look at this proposal in more detail than the small space that an op-ed can offer. And while this letter will be somewhat controversial in some circles, I ask that you read it through, giving me the time to make the case. I will also add a few thoughts as to why this could not only help solve the housing crisis, but help put the nation back into growth mode.
Long-time readers know that I have been growing more and more bearish of late. I have been writing for a long time that we are in for a long period of slow Muddle Through growth as the twin crises of the housing bubble and credit bubbles require time to heal. Today we look at a serious proposal for cutting the time to healing for at least one of those bubbles (housing), and at least keep the other (credit) from getting worse. This is the most serious idea I have seen that could actually make a real positive contribution to the economy and help put us back on a growth path.
I will post Gary's papers and a link to the actual op-ed piece for those who want to do further research, but let me make one point at the beginning that he did not emphasize: the US is already allowing roughly 1 million immigrants a year into the country (which for a variety of reasons I and most serious economists of all stripes believe is a very good thing). We are suggesting that we simply change the nature of what constitutes the conditions for acceptance, so as to jump start the housing industry and the economy. We are not suggesting additional immigrants, although nothing would be wrong with that. I will also post a link for you to send this e-letter to your congressmen and senators.
Let me put up front a few benefits of a program that would allow legal status to immigrants buying a home. Housing values would stabilize and in many cases rise. The massive losses because of bad loans that are being subsidized by US taxpayers would be stemmed, saving many hundreds of billions, if not a trillion or more dollars. The excess inventory of homes would quickly disappear and the millions of jobs that were lost as home construction fell into a deep depression would come back. If housing values rise, many families would be able to refinance their homes at lower rates and have more income left over after paying their mortgages. $12 billion in commissions would end up in real estate agents' pockets, helping a very battered and bruised group. Hundreds of billions will flow into local businesses, as these new immigrants will need to furnish their homes. This could mean as much as a half trillion dollars in sorely needed stimulus in the next few years, without one penny of taxpayer money and actually adding taxes back to governments from local to national. And we are not bringing in 1 million foreigners, we are attracting 1 million mostly middle-class new Americans, which, if we are smart in how we do this, will result in more jobs for all Americans. So let's jump right in and look at the details.
Housing Could Drop Another 20% in Pricing
Let's review the situation as it will be if we do nothing. Shilling shows that we built 6.7 million more homes in this country between 1996-2005 than the normal trend would have projected, partially because we underbuilt the decade before that. New housing starts average about 1.5 million in normal times but have fallen to 500,000 recently, and could fall further as unemployment rises and demand declines. Even so, Shilling estimates that we still have about 2.4 million excess homes.
This compares rather well with estimates by independent analyst John Burns, which I cited in the e-letter early last year. What they both agree on is that it will take at least until 2012 to work through this excess inventory, and that assumes that foreclosures do not increase as housing prices drop.
Excess supply of anything means lower and continuously falling prices, and that has certainly been the case in housing. Here is what Shilling writes:
"We believe that if nothing is done to eliminate surplus housing, prices will fall another 20% between now and the end of 2010 for a total peak-to-trough decline of 37% (Chart 1 below). The resulting further negative effects on the economy will be devastating. At that point, almost 25 million homeowners, or almost half the 51 million total with mortgages, will be underwater… That's also a third of the 75 million total homeowners, with the remaining 24 million owning their houses free and clear. It would take a little over $1 trillion to reduce their mortgages to the value of their houses, compared to $449 billion for the almost 14 million currently underwater."
This is not inconsistent with similar projections by other acknowledged experts and independent analysts like John Burns and Professor Robert Shiller of Yale. If nothing happens to stimulate buying, there is a great deal more pain ahead for American homeowners.
For the great majority of Americans, their homes represent the largest portion of their assets. This is particularly true of Americans of more modest means, who have been hit the hardest. Watching their single biggest assert drop another 20% will be devastating and for many will mean they will not be able to retire as they had planned. More Americans own homes (68%) than own stocks (50%). This helps explain a recent poll which shows more Americans are worried about house prices than about the decline in stock prices.
Falling home prices means that consumers have to save more for retirement, which results in lower consumer spending, which translates into lost jobs and more homeowners coming under stress -- a vicious spiral that is increasing unemployment. Realistic estimates of unemployment rising to over 10% within the year abound.
Two years ago I and a few others foresaw the current housing crisis (and an accompanying credit crisis), predicting a protracted recession and a slow, multi-year Muddle Through recovery. Sadly, I was right about the housing crisis. Without some intervention, there is little to suggest that the prediction of a long, protracted recovery will not come true.
Lowering rates, as is being discussed in various circles, will help homeowners who can make their payments, but it does nothing to really bite into excessive inventory. Until we reduce the inventory, housing prices in many neighborhoods all across America are going to continue to come under pressure. And as Barry Habib points out, while the Fed may be lowering rates for securitized packages of loans, those low rates are not available to the average home buyer. The cost of packaging and securitization adds considerable cost.
Shilling discusses the "traditional" options for reducing home inventories, but in the end there is no real solution other than time, or massive amounts (read trillions) in taxpayer money being given to homeowners, which will be very unpopular, as homeowners who were responsible and are paying their mortgages would get no benefits. Waiting another two and a half years for the excessive inventory to sell will keep this country in a very slow or no-growth economy, and devastate the wealth of millions of homeowners.
But there is a solution. There are millions of foreigners throughout the world who would like to come to live in the US. In 2006, there were 1.1 million immigrants allowed into the US, some 63% of whom were allowed in simply because they already had relatives here. Only 13% of visas were granted to people because of their skills. While allowing relatives of current residents to come to the US may be a humane and reasonable policy, it does nothing to assure they bring more than that relationship to help them make their way in the US.
Buy A Home, Get a Green Card
What if we changed the rules for a few years? Starting as soon as possible, we should allow anyone to come into the country who would buy a home. They would be given a temporary visa which would become permanent if they had no problems after, say, five years.
While Gary proposes that they be allowed to borrow against the value of their homes, I lean toward suggesting that initially we take those who buy their homes outright (with a few exceptions). That means they have enough capital to purchase a home to begin with, which probably means they are educated and have skills. In fact, if they have enough cash to buy a home, that means they would have more actual savings than most US citizens. We would be attracting future citizens with the capital to invest in job-creating businesses and/or who have useful skills to assist in the recovery of the US economy.
Of course, there should be some rules that go along with this proposal. Background checks and references should be required. The home could not be rented for a period of time (at least two years), to help reduce the supply of available housing, and could not be resold for at least two years unless another home was purchased. There should be a minimal price, which could be somewhat different for various regions, but $100,000 would seem to be a good minimum for most areas, with higher minimums in certain areas.
The immigrant should demonstrate the ability to support himself and his family for a period of time (at least one year, preferably two), including the purchase of health insurance. Cash or letters of credit or other guaranteed commitments would be required. Only immediate family members (spouse and children) would be allowed to come with the immigrant. Cousins and siblings must buy their own homes. The permanent visa should be contingent on not having gone on welfare or public assistance at any time in the past five years. We are trying to solve a housing problem, not looking to create others.
I would make an exception in having 100% financing for immigrants with advanced degrees or special skills, especially those who did their schooling in the United States. If the US is to remain competitive in an increasingly technological world, we need more scientists and engineers. But getting permission to stay is becoming increasingly difficult. We are seeing a brain drain of those who would like to stay and create new jobs and technologies (and buy houses) here in the US. Shilling and Le Frak write:
"The authors of this report believe that a number of people have given up waiting for those visas or don't want to put up with the hassle and are leaving the country. This "brain drain" is unfortunate since many of these foreigners are highly productive. In 2006, foreign nationals residing in the U.S. were named as inventors or co-inventors on 25.6% of the 42,019 international patent applications filed from this country, up from 7.6% in 1998. Studies of the authorship of academic papers show the same trend.
"U.S. educational institutions are considered the best in the world by many and are magnets for foreign students, especially at the graduate level. Many of them are inclined to settle and work in this country after completing their studies, if they can obtain permanent resident status.
"The Council of Graduate Schools survey revealed that in the fall of 2007, 241,095 non-U.S. citizens were enrolled in graduate programs. Technological progress and the productivity it generates depends on people educated in biological sciences, engineering and physical sciences, but only 16% of U.S. citizen graduate enrollment was in these three disciplines. In contrast, 55% of total non-U.S. citizen enrollment was in those fields. Conversely, 53% of graduate enrollment by Americans was in education, business and health sciences while those three fields accounted for only 24% of foreign graduate students."
(There is a great deal more background detail in the second white paper. See link below.)
Much can be learned from similar programs already in place in immigrant-hungry countries such as Canada, Australia, and New Zealand. The United Kingdom has recently added new programs. Many countries realize that in the coming years there is going to be increasing competition for the best and brightest of the world. Again, there are more details in the white papers, but let's turn to the effects that would result from such a program.
A Real Stimulus Package
First, upon Congressional approval, it would almost immediately stop the seemingly inexorable slide in house prices, as initial demand would be significant. Let's assume one million new immigrants would buy homes. At an average price of almost $200,000, that would be $200 billion injected into the economy. And each of those homes has to be furnished, food has to be bought, clothing will be needed, local taxes will be paid. Airplane tickets to research potential areas, hotels needed during the interim period, and other related expenditures would add up. Over two years, this could easily be another $100 billion.
Couple 1 million new buyers with current US demand, and the excess inventory would be worked through within a year, and possibly faster. This puts a floor under the housing market, and home values could once again to begin to rise in line with a growing economy.
Such a program would have a salutary effect on the value of the dollar, as not only the initial purchases of homes and materials would need to be converted to dollars, but it is likely that immigrants would bring even more capital into the country.
By stemming the fall of home values, it would decrease the likelihood of foreclosures and help homeowners get refinancing at lower rates. Refinancing now is difficult because most lenders want a substantial slice of equity to go along with any new mortgage. If your home value has dropped 20% and is likely to fall another 20%, it is hard to have enough equity to qualify for a new mortgage. Stopping the fall in prices is critically important; and maybe if prices rise in some areas, homeowners will be able to refinance at better rates, giving them more cash each month to save or spend.
As I have written in previous letters, the psyche of the American consumer is permanently scarred. We are on our way back to a savings rates that will look more like 1987 than 2007, when it was almost zero. Just a few decades ago, we saved 7-10%. Consumer spending was only 64% of US GDP in 1987. It was 71% in 2007. It is on its way back to that lower level.
Lower consumer spending will be a drag on growth for years. But bringing in 1 million already middle-class new immigrant families will help make up for a lot of that reduced spending. If you can spend $200,000 on a home, you are likely skilled at something and well-educated. You will find a job, or create one, as many immigrants do, and then you will add to our total consumer spending.
If you are a real estate agent, you should love this proposal, as it would result in an additional $12 billion in commissions.
If you are a home builder, what a great way to reduce inventory and get back to the conditions where there is a demand for your product. This would help put back to work those who have lost their jobs in the home construction collapse. Home Depot and Lowe's and local stores? It would help them to increase sales, which leads to more jobs.
We are on the cusp of the Baby Boomers beginning a huge wave of retirement, both in the US and elsewhere in the developed world. There is going to be a need for skilled workers to replace those Boomers, as well to provide services to the retirees. Further, the promised Social Security and Medicare expenditures are going to start increasing at a significant rate. We are going to need immigrants to help pay for those benefits. Given the controversy over immigration, we will look back with some irony in ten years when we find we are in a serious competition with other nations to attract skilled immigrants. We should start now. I think the concept is, let's not waste a good crisis.
Let's look at some of the potential critics of this proposal. I was on Yahoo Tech Ticker yesterday talking about this, and got a few irate emails and phone calls.
"Why," I was asked, "do I hate American workers? Isn't there enough unemployment? Why do we need more immigrants taking American jobs?" And there was considerable angst about illegal immigrants.
First, I am suggesting we transform the already existing legal immigrant flow, which is going to happen anyway, into a form which helps us solve a major crisis. I am not talking about adding another 1 million immigrants on top of the current legal inflow. Just change the nature of that inflow until the excess housing inventory is settled, and then we can go back to the current program, if that is what is wanted (more on that below).
Second, I am not suggesting we bring in or condone illegal immigrants. That is another issue altogether, for another debate at another time.
If we do nothing, unemployment is going to rise to at least 10%. That is certainly not good for the American worker. Home values are going to continue to fall. That is certainly not good for the American worker. The economy is likely to be stagnant for an extended period of time, which means job growth in a Muddle Through recovery will be slow and stagnant. That is not good for the American worker.
Hundreds of billions more of taxpayer dollars will have to go to banks to keep them solvent as falling home prices and increasing unemployment increase foreclosures. That is not good for the American worker and taxpayer.
And further, I am not talking about bringing 1 million foreigners to this country. I am talking about bringing 1 million future Americans, who want to work hard and live the American dream.
Let me say a few words to those who are opposed to immigration -- and I have heard from you. With few exceptions, US citizens reading this have an immigrant in their genealogies. Some of mine go back to the 1600s. Some of mine were not exactly considered welcome. "No Irish and Dogs allowed" read the signs. But immigrants and their children have been the driver for growth in this country for generations. It is hard-working immigrants who leave their homes for the dream of being Americans that have been the backbone of the building of the nation -- the hewers and shapers, if you will.
It is precisely that melting pot of human diversity that is the strength of the American idea. Each new wave of immigrants has been viewed with trepidation or scorn, yet within one generation they have become American. And in turn, their children's children forget that their forebears had to deal with discrimination.
America -- the US -- is not so much a country as it is an idea, the idea that anyone, regardless of race or religion or gender, can come here and with hard work and determination make their own way. Some end up owning the local deli, and some end up founding Google. Some 25% of Silicon Valley start-ups, I am told, are by immigrants, creating jobs at the bleeding edge of technology. They see the US as a land of opportunity. That is why so many want to come and that is why we can attract a new generation of affluent, self-reliant immigrants who can help us solve a problem that we created.
I can see no downside to changing our immigration policy for a few years. We solve the housing crisis, stabilize home values, brings hundreds of billions in stimulus to the US, and with no taxpayer outlay. For a short time, we substitute one class of immigrant for another, to solve a serious crisis. It is not a matter of immigrants or no immigrants, just which immigrants
So which do you want? 10% unemployment and a decade of lower home values and increasing foreclosures, with a slow, Muddle Through, jobless recovery, or a stable housing market and home construction back to trend?
If you agree with me, I suggest you contact your Congressman. You can go to http://www.visi.com/juan/congress/ (selected at random from many such sites) and type in your address and get the name of your congressperson and senators. Just tell them you like this idea, and cut and paste the link where you read this into the letter. And tell them to get into gear! I would like to point out that this proposal is not Republican or Democrat, it is just common sense. I hope we can get broad bipartisan support.
The link to the Wall Street Journal editorial is: http://online.wsj.com/article/SB123725421857750565.html
The links to the white papers are:
http://www.frontlinethoughts.com/pdf/Housing_Whitepaper_1.pdf
http://www.frontlinethoughts.com/pdf/Housing_Whitepaper_2.pdf
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