Sacramento Land(ing)

Saturday, September 27, 2008

Sacramento Real Estate Market - September 2008 Water Cooler

Post off-topic links, observations, and stories about the Sacramento real estate market here. Please read the comment policy before posting.

77 comments:

Wadin' In said...: I came across an interesting family in South Placer County last week. They purchased a an 1800 SF house in 2006 for $550,000. They let it go into default about 8 months ago and banked about $15,000 to savings during this time.

They just purchased a 3100 SF foreclosed KB Home for $330,000, using 5% down ($15,000). They purchased it in the daughters name, since the parents credit was wrecked. Then they sent the jingle mail in on the old house.

So they purchased twice the house for half the money and screwed the pooch who lent them $550,000 in 2006.

It is an amazing world these days.; Monday, September 01, 2008 7:48:00 AM
wannabuy said...: It is an amazing world these days.

Yea... like Adam Smith noted, individuals will act in their own economic interest.

So they're foreclosure hopping... ;)

I wonder if they'll do one more swap. Time to get those down payments up...

Got Popcorn?
Neil; Monday, September 01, 2008 10:53:00 AM
HousingRealist said...: Adam Smith is right! Our Legislature screwed this up by reducing personal responsibiity that should go with buying a house by passing the anti-deficiency law here in CA allowing dead beats to not have to think critically about financial decisions before making them.; Monday, September 01, 2008 11:27:00 AM
Unknown said...: Does anyone have an idea if there is going to be a lot more inventory coming on the market?

I do not have a source to track pre-foreclosures at the moment.

Do you think The winter will be a good time to buy some distressed property?; Monday, September 01, 2008 11:39:00 AM
HousingRealist said...: I've heard on the Brent Gove Real Estate Report on kfbk, that Wells Fargo was going to be dumping 12K homes on the 4 county Sac. area.; Monday, September 01, 2008 12:22:00 PM
David said...: It's a secured debt, so if the bank want to lend you the money then they are assuming the risk.; Monday, September 01, 2008 3:39:00 PM
norcaljeff said...: They just purchased a 3100 SF foreclosed KB Home for $330,000, using 5% down ($15,000). They purchased it in the daughters name, since the parents credit was wrecked.

Sounds like fraud to me. This reminds of the the low income housing scam that goes on. I know a few neighbors who as couples made too much money to qualify for lower income housing assistance, so they just moved in together and only used one income for consideration. This pretty much screws the rest of us who make too much as a married couple or singles who make too much to qualify for the program but can't afford a "regularly" priced home on their own incomes.; Monday, September 01, 2008 4:06:00 PM
Tyrone said...: They just purchased a 3100 SF foreclosed KB Home for $330,000, using 5% down ($15,000).

Two-time losers.; Monday, September 01, 2008 5:20:00 PM
patient renter said...: Two-time losers.

Well put.; Monday, September 01, 2008 6:41:00 PM
2cents said...: Great chart from Credit Suisse posted at the LA Land blog of home price/income ratio from 1981 through the present and projected through 2010. I believe these are national averages, so we probably need to multiply by 2 to get the Sacramento picture. Looks like this ratio is about 50% above average now. CS expects it to fall to the historical average range by Sept 2009, and possibly undershoot the average going into 2010.

http://latimesblogs.latimes.com/laland/2008/09/credit-suisse-h.html; Wednesday, September 03, 2008 9:05:00 PM
patient renter said...: 1137, that is good stuff. Notable to me is that the equilibrium price to income ratio is 2.86, which we're obviously still far off from, despite the CAR's bogus increased affordability numbers.; Thursday, September 04, 2008 9:33:00 AM
HousingRealist said...: 1137, I pulled the data for Sacramento. Our average median price to median income multiple was about 3-3.2.; Saturday, September 06, 2008 9:05:00 PM
norcaljeff said...: Bobcats took over a foreclosed home. The comments are pretty funny but hey, this might be the sign of the bottom :)
http://tinyurl.com/5nc6sk; Saturday, September 06, 2008 10:56:00 PM
Diggin Deeper said...: This comment has been removed by the author.; Sunday, September 07, 2008 9:06:00 AM
Diggin Deeper said...: I'm beginning to wonder if all those financial banks, that took hundreds of $Billions in losses, due to toxic mortgage investment vehicles, are insignificant compared to the losses Fannie and Freddie will deliver.

The financials are diversified across many different entities, serving multiple markets, with mortgages and real estate being just one. If a small percentage of a major financial institution's portfolio can cause the kind of damage it has, what kind of damage will be revealed in the two GSE's that have guaranteed half the mortgages across the board?

The GSE's, on the other hand, serve ONLY the mortgage market and hold half of all the mortgages in the country. It's been clear for years that accountants using modern accounting methods, can't come up with a plausible bottomline for either "company". To think they played it straight and did not reach for yield by slicing and dicing risk into products that now plague those that bought them is foolish thinking.

Let's connect some dots. Here's an article on the Fannie/Freddie bailout with an exerpt to follow:

http://news.yahoo.com/s/ap/2008090/ap_on_bi_ge/mortgage_giants_what_went_wrong_5

"On Friday, the Mortgage Bankers Association said that more than 4 million American homeowners with a mortgage, a record 9 percent, were either behind on their payments or in foreclosure at the end of June"

Now if Fannie and Freddie hold half those loans they COULD see 4.5% of them fail (and that supposes they didn't leverage a single failing mortgage!!)...Once again, do the math against a $5.3 Trillion number to find that the $25B bailout path we're being lead down, can't be true.; Sunday, September 07, 2008 9:13:00 AM
inpd said...: Big Picture Please!

This site is great, but sometimes
its difficult to get the big picture.

So what is it?

I don't want predictions (except
for the one below), just facts
as best as what we can discern.

I'm particularly interested in a
prediction
if home prices in areas like Davis,
East Sac, Lands Park (which have barely budged) will significantly drop.; Monday, September 08, 2008 5:06:00 AM
Deflationary Jane said...: They're already dropping Davis and have all year. They just haven't dropped as much as other areas - yet.; Monday, September 08, 2008 8:43:00 AM
Diggin Deeper said...: Attended an open house in East Sac. 1900 sq. ft. On the market for over a year and priced at $599,000. Ok home with potential but still won't move at this price level. Apparently an offer at $500K would work according to the agent.

That's a 16% drop off the asking. Prices are starting to fall in these neighborhoods and will be further pressured by area problems.

I continue to believe that these higher end areas will move lower and faster than the areas that have already experienced the greatest price declines.

If all your neighbors are sick, you're likely to get what's going around.; Monday, September 08, 2008 8:57:00 AM
smf said...: One thing that is forgotten about the higher end areas:

In the quest for profits, plenty of these areas suffered from an even worse excess of building.

Find in the MLS how many new mansions in the metro area have been built since 2003.

The percentage is absolutely staggering.

So someone with money has plenty of houses to choose from.

I think this is what happened to CC Myers. When he started Winchester there wasn't many options for those with the $$. But then the options opened up and his possible client base diluted to a fatal #.

Not much was relatively built in these high end ares, but it doesn't mean that their market was not grossly overshot.

At the same time, those with money (of which I personally know an example) are loathe to lose a lot of money, since they actually HAD it in the 1st place.

If you bought a house with 100% financing, you are not loosing any real money, and hence are willing to part with it quick.

But if you spent $300K of your own money in RE 'investments', taking a loss really means that you are taking a loss. And because you DO have the means, and your credit is actually worth something, facing reality is that much harder to do.; Monday, September 08, 2008 9:07:00 AM
Diggin Deeper said...: smf...couldn't agree more with your statement.

Several open houses I've visited, over the last couple of weeks in East Sac, have been on the market from 6 months to over a year. Pure and simple the prices on those homes are out of touch with the market and are begging for 15,20, 30% discounts before they'll sell. The problem is there are so few of them, past comps are not really relevent and woefully outdated when considering today's environment. So they sit and sit until the light goes on and the prices come down.

As for the McMansions, they'll lead the market to the overall 50%off peak for the very reasons smf stated....No skin, no problem.; Monday, September 08, 2008 11:25:00 AM
RV6Flyer said...: 1022 44th just sold for $1.675 million. Wasn't this the asking price?; Monday, September 08, 2008 11:55:00 AM
smf said...: Zillow notes that the house was sold for $1.695K in 2007.; Monday, September 08, 2008 12:26:00 PM
Diggin Deeper said...: James

I'll give you the fact that there are some homes in East Sac that are going to sell no matter what the market. But there are average homes and bungalows in the same neighborhood that are riding the backs of those one-of-a-kind properties. And there prices won't stand up at $300+ per sq ft. as evidenced by how long those properties have been sitting. They sit for extended periods of time because they aren't priced right to begin with.

Your upper end buyer who's willing to spend $1.5 million plus is not interested in the 3/2/2 home down the street for $650K. I think its in this sector that the breakdown is beginning to occur. And most likely the you home you referenced was price right at the outset.; Monday, September 08, 2008 12:28:00 PM
Jacob said...: damb, thats a lot. Well if you want a home in a desirable area that isn't building more homes, you gotta pay.

I gotta agree with dd and smf, higher end, cookie cutter mcmansions prices will crumble.

If the prices of homes aren't appreciating then people will be forced to treat it as a home and not an investment. As an invesment, who cares about mello roos, hoa, energy costs, maintenance costs, doesn't matter cause everyone is making money, party.

But now that isn't happening. So I expect demand for mcmansions to continue to erode. Maintenance and energy costs have to be really high for such large homes, and people will realize they dont need that much house anyway.

Read over on housing panic that foreclosures are now at 9%... What is the historic norm? Around 1%? If someone knows let me know, I am curious about how out of whack we are.

And foreclosures have not peaked...; Monday, September 08, 2008 12:29:00 PM
smf said...: Look at what was considered a 'mansion' not too long ago, a 3500 sq.ft. home.

How easy is it now to find bigger homes and 'mansions'?

This is perhaps a grand example to show how overdone this bubble was.

Very few wealthy individuals are looking for really large homes.; Monday, September 08, 2008 1:02:00 PM
RV6Flyer said...: DD,

There are some houses here in East Sac that have been sitting for a long time, but for the most part, the new listings seem to move pretty fast. 95819 has some really crappy areas and streets that I would put on par with Oak Park, but for the nice streets, $300 sq ft seems to get buyers lining up. There are always exceptions. A 1900 sq ft 3/2 can be priced anywhere from $200 sq ft to $440 sq ft. It really depends on the home itself. I will also agree that there are some people trying to pawn off an original 1932 home as the same thing as a completely remodeled house, those will just sit and never sell. This is what makes looking at comps so deceiving and hard to figure out how much of a price decline has actually happened. My personal observations show the lower end homes in 95819 taking a considerable hit.
It is also very hard to compare the same house based upon previous sales price since a good number of homes have had $100,000+ remodels done to them. Since so many homes were significantly upgraded during the boom using home equity. My house for example was once a 2/1 that the previous owner purchased for $160,000 in 1998. The house was "torn down" and rebuilt into a 4/3 and triple the sq ft. Zillow though, shows the original sale, then 10 years later a sale price significantly higher. This gets counted as appreciation, but in reality it is not all true appreciation.
My hunch is quite a few homes, while not ground up rebuilds, are not the same homes there were a decade ago and there should be some adjustment to the numbers. If you think my house will fall in value to its 1998 price, then I would have to laugh. Now if you took the value of a 3200 sq ft house in 1998 with the same amenities, then you might have an argument for falling to that adjusted price.; Monday, September 08, 2008 1:17:00 PM
smf said...: The price that you pay for a move up home is directly related to the price you get for your prior home.; Monday, September 08, 2008 1:39:00 PM
Diggin Deeper said...: "If you think my house will fall in value to its 1998 price, then I would have to laugh. Now if you took the value of a 3200 sq ft house in 1998 with the same amenities, then you might have an argument for falling to that adjusted price."

That's the problem with East Sac. From block to block, it's spotty with regard to overall affluence and appeal. My only point is that one can't use the same parameters pricing their home just because an exceptional property 4 doors down sold for $375-400 per sq. ft. If the "average" home in the neighborhood doesn't sell in a reasonable amount of time it's simply overpriced. When it does sell, it sells at a value which appears to be well below that of the exceptional home...and that certainly won't help prop up the exeptional home's value.

One thing the area has going for it...There's no room to build anything but remods. But done right (period restoration) some of those homes are worth a reasonable premium.; Monday, September 08, 2008 2:08:00 PM
patient renter said...: "more than 4 million American homeowners with a mortgage, a record 9 percent, were either behind on their payments or in foreclosure at the end of June"

Yea I saw that headline over the weekend. It's pretty incredible, hard to believe really.; Monday, September 08, 2008 2:51:00 PM
RV6Flyer said...: "The price that you pay for a move up home is directly related to the price you get for your prior home."

Or how much debt you take on. Perhaps you get married and have a second income and can now afford a $430,000 mortage v. a $230,000 previously. Perhaps you just finished with grad school and got a new job with a large bump in salary. Perhaps rates went down due to a bail out of GSE's and money got cheaper.; Monday, September 08, 2008 3:59:00 PM
Jacob said...: Well I poked around google and realtytrack and found some foreclosure numbers.

These are national.

2005 - 846k -
2006 - 1.259k - +49%
2007 - 2.203k - +75%
2008 - 1.662k (Through July)

So maybe 2008 will be the peak, looks like we are on pace to come in over 2007 by a few 100k.

But even if it levels off in 09, we are still at a high level. And they may start accellerating, who knows.

CA was even worse

2005 - 71k -
2006 - 202k - +187%
2007 - 481k - +138%
2008 - Couldn't find anything; Monday, September 08, 2008 4:03:00 PM
RV6Flyer said...: So do you think foreclosures will lessen with pressure being put on FNM and FRE to modify loans rather than foreclose? Also, fed futures are pointing to another rate cut. Will this help with resetting arms?
Could these two things together lessen the Alt A blow?; Thursday, September 11, 2008 3:01:00 PM
Diggin Deeper said...: Rv6flyer...

Kind of doubt it. A rate cut by the Fed would only take the wind out of the dollar's sails and fuel inflation further. Modifying the loans would most likely be a temporary assist. If the market prices do not stabilize, even if you could pay the note, you're watching negative equity pile up, and it might be better to let the house go.

There's so much on the financial table right now it's really difficult to even guess where things are going from here.

WaMu, Wachovia, Merrill, Lehman, AIG, and ??? Just seems like things are coming on so fast that BB and Paulson can't put enough fingers in the dyke to keep the next "event" from happening.

Key foreign debt holder's cannot be gaining much confidence in the US with all the money being laid down to cover the problems. Now the Germans want the Fed to step in for Lehman before markets open in Asia on Sunday...They like the Chinese, Russians, Japanese, and other US agency debt holders are desperate to protect their bond investments.

Even if we get a rate cut, if we can't establish a true confidence our ability to solve these financial problems, rates will be more likely to rise rather than fall.

It should be an intersting week ahead....; Saturday, September 13, 2008 2:07:00 PM
norcaljeff said...: No rates cuts, that's just not on the table. I see rate increases to get the credit spreads higher for the financials, but not until after Nov 4.; Saturday, September 13, 2008 3:00:00 PM
Anonymous said...: I bet we'll see another cut before we see a raise in fed rates.

unemployment trumps dollar strength.; Saturday, September 13, 2008 3:22:00 PM
wannabuy said...: unemployment trumps dollar strength.
I would argue that they are not mutually exclusive. We need to attract back foreign capital.

Got Popcorn?
Neil; Saturday, September 13, 2008 8:00:00 PM
Anonymous said...: Neil - can you expand ? I don't get the correlation.; Saturday, September 13, 2008 9:07:00 PM
Diggin Deeper said...: "I would argue that they are not mutually exclusive. We need to attract back foreign capital."

Wouldn't a rate cut be counter productive to foreign investment as a weaker dollar would offset bond price increases?

In order to attract bond investors you'd have to make yields more attractive...and that would have a negative effect on mortgage rates and the financials.

Maybe the covered bond approach is the answer for RE. It's done all over europe and is the preferred source of mortgage capital.

It's pretty tough to be without options and this group of bureaucrats has painted the US into a corner.; Sunday, September 14, 2008 7:29:00 AM
patient renter said...: Any Lehman predictions?

I'm guessing that Paulson's early tough talk about now allowing taxpayer funds to be put at risk is not going to matter.; Sunday, September 14, 2008 11:11:00 AM
Jacob said...: My prediction is lehman goes into BK, shareholders get $0, everyone else gets maybe 50 cents on the dollar since they debt exceeds their assets probably by quite a bit.

The FED can't bail them out. There is no belief that the assets might cover the debt. And Paulson still have Wachovia and WM to worry about.

Losses must be taken, and Lehman won't be the last firm to go under.; Sunday, September 14, 2008 12:01:00 PM
Diggin Deeper said...: Barclays and B of A have now backed out. My guess is that the Fed's wouldn't back up any deal with funds.

Feds need credibility and a sacrificial lamb to show they won't bail out the world...saying that, I also think they go down...If they do they risk toppling over more firms along with agency debt held by foreign outsiders.

Watch the 10 year next week to see if rates start moving higher due to all the turmoil.; Sunday, September 14, 2008 2:00:00 PM
norcaljeff said...: BofA just took out Merrill. LB will probably be toast sometime by Wed. I couldn't imgine bottom fishing in this sea. The market sure isn't looking good. http://tinyurl.com/6nxpya; Sunday, September 14, 2008 7:36:00 PM
Diggin Deeper said...: Lehman filed for Chapter 11 last night. AIG is dangling and looks to be next(who's willing to refinance them with their $40B needs) WaMu probably gets a bid from JP Morgan. Merrill and BofA won't show a profit for at least 2-3 years.

The weight of the RE / credit crisis is beginning to wash out big names and big money. Wall St scrambling to prop derivative markets:

http://news.yahoo.com/s/ap/20080915/ap_on_bi_ge/financial_meltdown_38

"Ten banks — Bank of America, Barclays, Citibank, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Merrill Lynch, Morgan Stanley and UBS — each agreed to provide $7 billion "to help enhance liquidity and mitigate the unprecedented volatility and other challenges affecting global equity and debt markets."

The Federal Reserve also chipped in with more largesse in its emergency lending program for investment banks. The central bank announced late Sunday that it was broadening the types of collateral that financial institutions can use to obtain loans from the Fed."; Monday, September 15, 2008 6:26:00 AM
patient renter said...: Mish brought up an interesting point, that the Federal Reserve is in direct violation of the Federal Reserve Act by allowing equities to be traded for cash.

It's obviously not the first time the Fed has crossed the line, but perhaps it's the most blatant example. I look forward to the day they die off.; Monday, September 15, 2008 9:30:00 AM
Diggin Deeper said...: There are no more rules or laws that can prevent desperate measures from being taken to blunt these events. Dollar intervention, market manipulation, short selling, and other heavy handed strategies are being employed to dampen the blow.

We're witnessing a broken down financial system, and it's all damage control from here to hold confidence in place long enough to find the bottom.

I hope we find it soon before the rest of the world decides "No Mas"....; Monday, September 15, 2008 10:08:00 AM
patient renter said...: There are no more rules or laws that can prevent desperate measures from being taken to blunt these events

Yea. So it goes as always throughout history. Crisis begets power grabs. That's essentially how the Fed was created in the first place.

What's disappointing though is that the media is completely missing the big story here - the fact that the institution currently going nuts in a frantic attempt to contain everything (the Fed) is the very institution that helped create this mess in the first place.

The NYT is quoting Greenspan who says this is the worst crisis in half a century, but amazingly, it doesn't cross their mind to interrogate him about his role in creating the very crisis that they're seeking his comments on.

Freakin idiots, the media. Worthless, incompetent, idiots.; Monday, September 15, 2008 10:33:00 AM
Anonymous said...: "Freakin idiots, the media. Worthless, incompetent, idiots."

Calling someone an idiot is the easy way out. They clearly are not idiots, they are just motivated by something other than what you assume.

The Dems are the best at this during an election, and continually call the American public ignorant. That's no way to win an election. Even if you're right, I've never met someone that can be won over by calling them ignorant.; Monday, September 15, 2008 11:50:00 AM
mopar777 said...: Have you noticed the term "subprime" mentioned as the cause of all this in the meltdown coverage this morning? I guess they don't want us to start worrying about the pay option loans that will blow up after the next administration gets in office. My prediction: public confidence in these institutions (WAMU, Wachovia, AIG, etc.)will be shorn up with lots of promises and fluff talk by treasury until after the election. Then they'll let 'em fall like dominoes.; Monday, September 15, 2008 12:13:00 PM
Rich said...: "The Dems are the best at this during an election, and continually call the American public ignorant. That's no way to win an election. Even if you're right, I've never met someone that can be won over by calling them ignorant."

'The Dems' are roughly half of the population. Be careful who you accuse of calling people ignorant. I've seen about equal insults from both sides. Funny, we'd never consider calling our neighbor ignorant, or a religious freak, or a baby killer, or an America hating teorrist lover, but when it comes to politics, for some reason we all get nasty.; Monday, September 15, 2008 12:53:00 PM
Diggin Deeper said...: Mopar....Agree. We don't want to get the electorate too upset..They might actually go out and vote this year...; Monday, September 15, 2008 1:01:00 PM
Jacob said...: LEH is BK, AIG down 50%, DOW down 500 points. WM and Wachovia to fail or be bought out very soon.

Deliquency rates for option arms and now even for Prime loans are rising. The subprime mess is virtually over with, but it was just the tip of the iceberg...; Monday, September 15, 2008 1:17:00 PM
Diggin Deeper said...: Jacob...I sure hope you're wrong on that...

Lehman/Merrill failures are but smatter to what will be faced if AIG goes down...They have a $T balance sheet, they're loaded with leverage through derivatives, and the collateral damage will be on a worldwide basis.

Events are accelerating as confidence dwindles.; Monday, September 15, 2008 1:37:00 PM
patient renter said...: they are just motivated by something other than what you assume

Actually, no. Clearly some of the media is directly motivated not to get at the story when it's contrary to their interests. It would be nice if the media had no interests, but unfortunately we know that tends not to be true. It is not because the media is clueless that they are idiots (though I'm sure they often are clueless), it is because they believe it serves the greater interest (their own?) to let false motivations influence their reporting.

Example: How much better off could the country be today if the housing bubble never happened? Fannie and Freddie might be whole, so would Countrywide, BSC?, Lehman? Unemployment would likely still be low, cities wouldn't be suffering through a foreclosure crisis, local and state governments likely wouldn't have record budget shortfalls, etc., etc.

The media gave voice to the rhetoric and the cheerleaders that created the bubble while choosing to ignore the experts who were sounding the alarm bells. For whatever reason they chose to do this, the resulting damage has caused more harm to them and everyone else than the benefits that it brough during the boom years. For this they are idiots.; Monday, September 15, 2008 1:37:00 PM
Jacob said...: Well the DOW cracked the 11k barrier, next is 10k. Will it bottom at 9k or 5k?

FED meets tomorrow. They really can't cut anymore. But if they don't the market will continue down, if they do, it will stabalize for a day (maybe) then head down because there will be no more cuts to come.

It is amazing to me how many huge companies are this bad off. None of them saw any of this coming? None of them realized that as leveraged as they were that some investments would go to $0 if there was even a 5% decline in their assets.

The FED and Treasury are working so hard to keep the whole thing from unravelling before the elections, will they be able to do it?; Monday, September 15, 2008 2:25:00 PM
Diggin Deeper said...: "FED meets tomorrow. They really can't cut anymore."

Sure they can. Some are calling for a 50 basis point cut tomorrow. Since they didn't have to go into the coffers over the weekend, and with commodities (oil) falling, they've got room to move again. A 500 pt drop in the market has gotten BB's attention, and there's so much risk of further fallout, they might be forced to cut just to smooth out what's coming.; Monday, September 15, 2008 3:16:00 PM
Jacob said...: Yea but I don't think a cut helps, cause then there is less chance of another cut later when it might be needed.

A cut will give a small bounce for a day, maybe two, after that it will be back down below where it is today.

I think the DOW will crach 10k before the elections, nothing the FED can do. Everything is overvalued. No prices are based on actual dividents, only on future growth. Down we go.; Monday, September 15, 2008 3:45:00 PM
patient renter said...: then there is less chance of another cut later when it might be needed.

Exactly, but the name of the game is screw tomorrow, just make it better today!; Monday, September 15, 2008 3:57:00 PM
2cents said...: I think the Fed will keep cutting interest rates and keep the money supply high. Nothing is better for a nation of debtors, or a debtor nation, than a good dose of inflation.; Monday, September 15, 2008 6:03:00 PM
mopar777 said...: Were any of you listening to the Clark Howard show this morning on KSTE? He had a special market crash edition going. People were calling in and worrying out loud about their investments in WAMU and AIG. He reassured them that these companies are "too big to fail." HA! Why don't we just have the government run the whole banking system, like in Mexico.; Monday, September 15, 2008 8:29:00 PM
Jacob said...: Well we will see tomorrow. If they cut, they can't just cut 25 they need to cut 50 and probably 75 basis points. That doesn't leave them much ammo left for when AIG goes BK which will happen one way or the other.

And WaMu and Wachovia still need a buyout from someone, but does any other company want them? Maybe Bank of America can trade some of their worthless stock for those two companies and really become too big to fail.; Monday, September 15, 2008 9:12:00 PM
Diggin Deeper said...: "they can't just cut 25 they need to cut 50 and probably 75 basis points."

They push the panic button if they cut more than 25 basis points and they're not likely to do that. In fact, just guessing they probably don't cut rates this meeting. They are however doing massive cash infusions into the banking system... upwards of $50-100B today and more if necessary to keep everyone "greened up.; Tuesday, September 16, 2008 5:49:00 AM
Diggin Deeper said...: Looks like Feds just can't resist. AIG is really too big a problem to lay on the world right now. The dominos could fall across the country and the rest of the world. Ratings agencies downgraded their debt two levels requiring even more cash to remain solvent.

http://news.yahoo.com/s/ap/20080916/ap_on_bi_st_ma_re/wall_street; Tuesday, September 16, 2008 8:52:00 AM
patient renter said...: upwards of $50-100B today and more if necessary to keep everyone "greened up.

Yea, on the way in to work I hear it being reported, $70 billion was "injected". The details about how and where must not be considered important because they weren't given. It's left to one's imagination, helipcopters and such..; Tuesday, September 16, 2008 10:42:00 AM
patient renter said...: Just for kicks, any AIG predictions?

I'm calling bailout. Nobody but the Fed has that kind of money. It'll be interesting how they try to sugar coat it as not being a bailout though.; Tuesday, September 16, 2008 11:16:00 AM
patient renter said...: This comment has been removed by the author.; Tuesday, September 16, 2008 11:33:00 AM
Diggin Deeper said...: You heard of the "bridge to nowhere"? The Fed's going to give AIG a "bridge loan" to nowhere.

If they go down, Warren Buffet stands to gain big time...; Tuesday, September 16, 2008 12:12:00 PM
2cents said...: Good call, PR.

Did everyone see this?

Some Seek Agency to Buy Bad Debt as Long-Term Answer
http://www.nytimes.com/2008/09/17/business/17resolution.html

Since the investors and financial companies won't price these securities low enough to sell them, they want to create a government agency that will buy them at the price they select. It could be called the Dept. of Socialized Losses.

There's something seriously wrong with this country.; Tuesday, September 16, 2008 7:13:00 PM
Diggin Deeper said...: Now USA Inc. owns 3 losers. What the bailout of AIG assumes is that their leveraged invesments will now be stabilized and insulated from further losses...Wrong. Their investments are no better off today then they were yesterday. And while the failure of Lehman continues to unwind, it puts even more pressure on AIG.

Wall St is not buying the BS. AIG is bound to fail or go back to the Govt for more (much more) funding long before the note comes due in 2 years.

Nice try, but I doubt it makes any difference in the end.; Wednesday, September 17, 2008 7:27:00 AM
patient renter said...: From that NYT article:

In concept, the proposal would resemble the Resolution Trust Corporation, which disposed of bad assets held by hundreds of crippled savings institutions

By disposed of, they mean heaped onto taxpayers. Why can't the NYT just tell it like it is?

All that a modern day RTC would do is make it more convenient for the government to assume the maximum amount of private losses... just what we need. Worst. Idea. Ever. But what else would we expect from Washington when nearly every pol's top contributions come from big banks or Wall Street.; Wednesday, September 17, 2008 1:07:00 PM
patient renter said...: I cannot believe this RTC thing is gaining traction. I guess that's because my interests are different than those of Secretary Paulson.

As bad as the Bear bailout was, and the housing bailout was, and the Fannie/Freddie bailout was, and the AIG bailout was, nothing imaginable could possibly ever be worse than reviving a Resolution Trust Corp entity.

The sole purpose of such an entity it to make it as easy as humanly possible for debt to be taken off the hands of private corporations and heaped onto taxpayers. This is every taxpayers nightmare, and every indebted company's most fantastic dream, as the stock market rally shows.; Thursday, September 18, 2008 1:33:00 PM
CPAone said...: Hey everyone...I finished my novel (inspired by Lander and other bubble bloggers) and am having the first booksigning in Auburn on October 4--check it out.

http://www.youtube.com/watch?v=PGw_BZ15dG0

(Lander hope you don't mind me hijacking some of your blog space).

Thanks
Jeff; Saturday, September 20, 2008 2:03:00 PM
patient renter said...: Good luck on the book release Jeff.; Saturday, September 20, 2008 6:15:00 PM
Diggin Deeper said...: Here are some intersting facts regarding our RE bubble and credit/financial crisis.

A must read....

http://www.investors.com/editorial/IBDArticles.asp?artsec=16&artnum=1&issue=20080918; Sunday, September 21, 2008 8:51:00 AM
Cmyst said...: Diggin, I read it.
Here's the response:
http://tinyurl.com/44553s; Tuesday, September 23, 2008 11:36:00 PM
Diggin Deeper said...: Cmyst... thanks for the reading.

What a difference a week makes! This morning banks all over Europe are in trouble. WaMu went under, Wachovia on sale, Goldman teetering, etc.

The bailout proposed assumes that toxic CDO's, SIV's, and other mortgage instruments can be corraled, set aside, auctioned off, and then redeemed at some later date for value. The baliout neglects to assess the damage that occurs when these instruments do fail or have failed already...and it appears that many have and will. At face value the problem may look like a $700B problem. But when you look at leveraged (notional) value and it's impact on each failure, the problem magnifies by the factor of leverage held. If I have a $1 and I package that dollar up into a $30investment, if that investment fails, I don't just lose my $1, I lose the full value of the $30 investment. Multiply a simple analogy by $100's of Billions and one can easily see that it becomes a $Trillions problem.

The bailout cannot stop the failure of poor investments, crafted by greed, and packaged in deceipt. The markets will have their way until all the trash is piled up and disposed of. And that's going to washout many more financial institutions in the process.

Throwing money at this problem, is an arrogant display of ignorance. It might delay the inevitable, but it won't delay the outcome.; Monday, September 29, 2008 5:53:00 AM
Anonymous said...: If the prices of homes aren't appreciating then people will be forced to treat it as a home and not an investment. As an invesment, who cares about mello roos, hoa, energy costs, maintenance costs, doesn't matter cause everyone is making money, party.
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chris
Link Building; Tuesday, September 30, 2008 1:51:00 PM
Deflationary Jane said...: As a fun aside, did anyone catch last night's Colbert Report that briefly covered the hispanic national outmigration issue?

http://www.comedycentral.com/colbertreport/full-episodes/index.jhtml?episodeId=186524

It starts at about 13:00 - The whole rant is wonderful. Hell the whole show was fab.

And y'all thought I was making it up >; ); Wednesday, October 01, 2008 8:58:00 PM