From Should to Must
A big thanks to Gwyn for holding down the fort while I was out.
From CBS 13:
It is about the busiest Stephen Koonce has seen business in 25 years as a bankruptcy lawyer...The high price of paying for necessities are a major contributor but a bigger factor is the housing market.From the Merced Sun-Star (hat tip Brian):
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Mom and pop business that got into loans they can't afford are being forced to file. However, the hardest hit is anything having to do with the housing industry itself. "A lot of real estate business have been hit. We all know what's going on in the sub prime all the way down to sales people. There is no business for them so they are closing their doors," said Koonce.
Unfortunately, it looks like the situation in Sacramento may get worse before it gets better. "It hasn't reached the floor yet where it stabilizes. I see the market going down for a while yet," said Koonce.
Statewide, the number of homeowners behind on their mortgage payments reached a 10-year high in the first quarter of this year. The Central Valley is on the verge of becoming Ground Zero in the foreclosure stakes.From the Sacramento Bee:
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Nobody is immune. Even people who worked — and thrived — in real estate during the boom that preceded the opening of UC Merced find themselves losing their houses. Among them is a 28-year-old former loan processor who bought a house in Merced for $220,000 in January 2006, hoping to flip it after a couple of years. Months later, he lost his job, and his silent partner bailed. He hasn't made a $2,000 monthly mortgage payment since November. He didn't want his name used because he hopes to work in real estate again. "It's a lucrative business," he explained.
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[A] local business owner bought [a North Merced house] in 2000 for $135,000. As his home's value nearly tripled, he refinanced several times and now owes $365,000. [H]e offered plenty of theories on why so many Merced homeowners took out loans they couldn't afford. "A lot of people here are tired of living check to check and they say, 'My house has doubled in value and there's a chunk of change just sitting there. I could take it and for once have a little money in my pocket,'" he said. "You see a lot of people driving Hummers around town and they probably make $15 an hour. That money came from their house."
Every year in Rocklin, Placer County's most successful real estate agents share their tactics with others in the business...In July 2006, the tone suggested a real estate slowdown that was deepening but might be short-lived. At last week's annual roundtables, the talk was different. Foreclosures, short sales, tightened credit and the immense competition of too many houses for sale dominated the discussions. "Last year we talked about things you should do. This year they're must do," said Lisa Morris and Stacy Moffat, agents who sell and stage houses together.From KCRA (also video):
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This year the duo added a couple of new anecdotes. One was about being chased by wasps and bees after opening the door of a vacant for-sale house. The other was brown lawns. "If you have that foreclosure, maybe you should water it," Morris said.
Experts said the weakening California housing market has created all kinds of problems, including an increased risk of West Nile virus...The Sacramento-Yolo Mosquito and Vector Control District said abandoned pools can produce mosquitoes at alarming rates...[O]fficials said they have taken a record number of complaints this year -- up 300 percent over last year.From the Lodi News-Sentinel:
Planes are set to spray pesticide over Lodi between 7:30 p.m. tonight and 12:30 a.m. early Sunday morning to reduce the risk of West Nile Virus...One of the reasons behind the spraying is because of a large number of swimming pools that have been neglected and provide an ideal habitat for mosquitoes. These dirty or "green" pools are often found at houses that have been foreclosed on or are unoccupied as their owners try to sell them in a sluggish real estate market.
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While aerial spraying has become routine in other parts of the county and region, this would mark the first time the city of Lodi has been sprayed by planes. Devencenzi said the San Joaquin County Mosquito and Vector Control District is dealing with hundreds of neglected pools in the backyards of homes that have been unoccupied because of foreclosure or because the owners can't sell the properties. He said the district received reports of 101 such pools countywide in June and 206 in July. "That's why we're seeing such mosquito activity in the urban areas," he said.
18 comments:
Let them burn. If they took the equity they have to replqace it before the foreclosure or they are common thieves. Owned a home for years, tapped the equity to put yourself in a precarious position just so you can drive a Hummer? thieves and liars all of them.
We all want more. The difference is some of us didn't steal it with a second mortgage to buy toys.
http://money.cnn.com has some pretty interesting stories on the state of the economy. The "bad things" are finally gaining momentum. Another Bear Stearns fund that was heavily invested in real-estate backed bonds is in trouble. Only a matter of time before things get so bad that the truth cannot be held back by Wall Street and the fed. That's when the stock market will take a huge beating and 6 months later we'll officially be in recession.
"A big thanks to Gwyn for holding down the fort while I was out"
Hoowoo! does this mean I can go back to being bitter and spiteful again? >; )
"You see a lot of people driving Hummers around town and they probably make $15 an hour. That money came from their house."
It's really nice to see this in print. We all knew what was happening but I'm glad to see it's outthere getting air-time.
WB, Lander.
I have to say that this week, I have become convinced that it isn't just me (because I am a notorious tin foil hat type on economic issues) and that there is going to be a very bad recession.
I felt so bad yesterday, that I remarked to my daughter on the drive home from visiting my son's family in Marysville, that all I had wanted was for housing to drop so that I could afford to buy a house. That I was angry when I realized 2 years ago that I could not afford a house, despite working hard for my education and making a good income. I just wanted houses to become places that people lived in again, and prices to go back to historic norms.
But now, this thing really is spreading, and on top of the increased costs of food and energy, it is going to be bad. When you toss in some other factors, like health care issues due to people losing jobs and benefits....
Here comes the tin foil hat: I can accept that there is a "shadow government", but I'd always assumed that it consisted of people much smarter than myself. Now, I have to believe that it consists of total idiots who are so far divorced from reality that they can't see that the bread is going stale and the circuses have all left town.
"Now, I have to believe that it consists of total idiots who are so far divorced from reality that they can't see that the bread is going stale and the circuses have all left town."
I'd say they're idiots only insomuch as they're blinded by greed. It didn't take a genius to predict all of this, as many economists (such as Dean Baker) saw it coming a long ways off. When you're too busy reaping the rewards of inflated assets though, you're living in the moment and don't really care what comes after.
This idea extends perfectly to all Cramer's buddies on Wall Street who he was flipping out about on the air the other day. Sure they're crying and begging for help (from Bernanke) now, but why should we care? They're the ones who made out like bandits over the last few years. Now their funds and their companies are in trouble, but it's their own damn fault for not being more vigilant.
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They're the ones who made out like bandits over the last few years. Now their funds and their companies are in trouble, but it's their own damn fault for not being more vigilant.
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Those who made out like bandits are not going to suffer at all. They have risen above the average person and are now part of the upper class. Their funds/companies may go bust, but they will have big cash bank balances - so big and so diversified that they would have to be foolish & unlucky (both at the same time) to be in any kind of trouble.
The people who will suffer are middle/lower classes. They have just transferred a chunk of their wealth to the wealthy folks and are now going to be slowly impoverished. Those who save will see the value of their savings drop (because of the falling dollar). Those that don't save will need to do things like foreclose/declare bankruptcy, etc.
It's still better to save (overall pain is less, but so is overall pleasure!!), but until one transitions to being part of the wealthy class (doesn't matter how one does it), or there is a significant change in public policy, the lower and middle classes will feel increasing pain no matter what.
"Those who made out like bandits are not going to suffer at all. They have risen above the average person and are now part of the upper class. Their funds/companies may go bust, but they will have big cash bank balances - so big and so diversified that they would have to be foolish & unlucky (both at the same time) to be in any kind of trouble."
I'd disagree to an extent. I think that the many of the big investors/funds really were so dumb (blinded by greed) that they didn't have the common sense to step of the tracks before the train hit them. This is evident in the Bear Stearns funds blowing up, and appears to be evident in Cramer's on-air freak out. Sure some insiders (CEOs of Countrywide and Beazer, for example) were dumping stock like it was the thing to do, but I think there are plenty who benefited and are still setup for a big fall. Why else would Cramer care? Certainly not for the middle class...
"I'd disagree to an extent."
I agree as well. We can go back to the dot.com bubble as well, where there were plenty of millionaires made. These people then invested their millions into further bubble companies, and eventually lost most of their money.
Same here with housing. A lot of the Realtors used their windfall to purchase 'investment' homes. A lot of flippers did the same, and from just watching the TV shows, most flippers stated that they were ready for their next flip.
At the same time, I would safely guess that a lot of the involved individuals made a lot of money, and increased their expenses by a similar rate. Now that their income has come down to 'normal' levels, their expenses (big house, car payments, etc.) do not decrease by the same level.
There will be plenty of high flyer who are hurting now (What about Crisp?). Very few were smart enough to save for a rainy day, and keep their expenses low enough to tide them over.
It looks like the inventory on housing tracker shows that the numbers for 8/2007 are not much different than the numbers for 8/2006. Something weird is going on. Based on April's numbers, they should be way higher by now.
I personally know a lot of people that made it big during the dot com boom and they are doing quite well now. They exited high tech somewhere around the peak of the boom and got into real estate and other stuff.
Most of the folks that got screwed by the bust were the rank and file engineers who lost their jobs and were never able to find comparable employment. Many switched fields altogether and were forced to go back to school. The VCs did OK (there were a few that went totally bust, but it's not like they have to work to support themselves even now). The CEOs/executives all did OK. Sure they don't have jobs paying 7 figure salaries now, but they have enough cash from the boom that putting food on the table isn't really a cause for concern.
The rank and file tech jobs are going overseas.
Database consulting programmers charge 80 to 125 per hour in the US.
Indian database programmers from their top universities charge about $15 per hour.
"Database consulting programmers charge 80 to 125 per hour in the US.
Indian database programmers from their top universities charge about $15 per hour."
Yep, although I've seen the work of engineers from their "top universities" firsthand and it aint always pretty. Still, it's no savior given the giant wage disparity.
Anyone seen this today:
"China threatens 'nuclear option' of dollar sales"
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/08/07/bcnchina107a.xml
"The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation."
Great, so now begins the blackmail resulting from us being a debtor nation.
SC,
These thing I know about personally. I used to work as a bus analyst and tech writer. Data warehousing in a PL/SQL environment. I went from $55 hr salary to $15 just to keep food on the table. That's how bad it was. Those jobs started going over in 01' and haven't slowed down since though it might be turning around.
QC while the vendor or even your own staff is overseas is tough and some shops are beginning to migrating back very very slowly.
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