Sunday, March 29, 2009

Sacramento Real Estate Market - March 2009 Water Cooler

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

87 comments:

patient renter said...

I saw a mention of that State's new home purchase tax credit the other day, and it's disappointing to say the least.

Weren't we just in the middle of a firestorm over whether or not to raise taxes? Supposedly there was not a dime to be spared anywhere, yet here we are giving away money to subsidize new home sales?

This, to me, says that the home builders, brokers, realtors, etc. are more important than taxpayers and anyone else whose job could have been spared with that money.

Diggin Deeper said...

The Fed and state can raise taxes all they want. As businesses, especially small ones, fail enmasse, the pool of taxpayers asked to foot the bill falls dramatically. When the country is made up of 2% of the taxpayers paying 40% of the tax load (with 50% of the pop paying no taxes at all), it's not wise to bite the hands that clothe and feed the US worker.

Then the question becomes, once all the job providers have been soaked, have quit providing those jobs, and tax revenues dwindle, do we then have to take it down a notch to the very people promised all the help??? There's still approximately 60% of total tax revenue that could be gleened from the workers...this will be an interesting saga to watch.

The powers that be just assume this 2% will just take one for the team. I highly doubt it without severe repercussions...job losses, lack of innovation, and business bankruptcies to name a few...

Jacob said...

Yea, at some point it just doesn't make any sense to work. Might as well give up and get in line for free $$.

Raising taxes actually lowers revenue. While lowering taxes would increase it. It's not that hard of a concept to grasp. If you raise taxes on businesses and they all move out of state then your revenue goes down.

If you lower taxes and draw businesses here it creates more jobs and thus more revenue for the state.

If you want to encourage a behavior you subsidize it, and if you want to discourage it you tax it.

And here we are taxing hard work and subsidizing lazyness...

I have no problem taking care of the elderly or truly disabled people. But so many people that are capable of paying taxes, even some, pay $0. So many people that already pay $0 in taxes get money back from credits. As far as I am concerned unless the state/fed is running a surplus there should be no refundable credits. And there should be a minimum tax, instead of $0, make it $50. Make everyone pay something.

Rich said...

"And there should be a minimum tax, instead of $0, make it $50. Make everyone pay something."

Not that I disagree, but keep in mind that there are lots of ways of paying taxes, with sales tax being the most obvious one that everyone pays. Most of us also either pay property tax, or pay rent to someone who does. I know, those aren't federal, but it's not like people who work min wage are getting a free ride tax wise.

What bugs me is how much of our budget is spent on maintaining a millitary that is almost as large (financially speaking) as THE REST OF THE WORLD COMBINED. That's a seriously big stick, and I don't think we can keep carrying it forever. We stopped walking softly a long time ago.

patient renter said...

The powers that be just assume this 2% will just take one for the team

And therein lies the rub. I suppose we still have a ways to go given that our tax burden isn't as great as in Western Europe, but of course they generally have much better social services than we have.

Husmanen said...

Here is some food for thought:

Leslie Appleton-Young's PowerPoint From March Main Meeting

http://www.sacrealtor.org/documents/events/03-03-09sacto.ppt

From the SacBee blog, Homefront:

"...In a nutshell, however, she said she sees prices firming in the Sacramento area and sales rising. Months of inventory - the time it would take at today's sales rates to sell every house on the market in Sacramento County and in West Sacramento - is under four months..."

Jacob said...

Months of inventory - the time it would take at today's sales rates to sell every house on the market in Sacramento County and in West Sacramento - is under four months..."

Only counting homes for sale. The banks have several years of inventory on deck.

Deflationary Jane said...

So much doesn't even hit the MLS anymore. Leslie knows this yet she is paid to spin and you know she has to be scared of loosing her job too.

I need to get some history on house to make sure it's ok to rent (beyond checking tax records and NOD listings). Something smells fishy and I need to find out who the owners are. Can anyone help with title records?

Jacob said...

If it is Sac county just send an email to assessor@saccounty.net with the address or parcel number and they will give you a print out of the property info which includes the owner's name.

For Placer county it is shown online.

http://www.placer.ca.gov/Departments/Assessor/Assessment%20Inquiry/Assessment%20Inquiry%20Iframe.aspx

You need the parcel number which you can lookup from the address here:

http://lis.placer.ca.gov/gis.asp?s=1332&h2=875

Diggin Deeper said...

http://news.yahoo.com/s/nm/20090304/bs_nm/us_usa_mortgages_study_5

One in five U.S. mortgage borrowers are underwater

"About 8.31 million properties had negative equity at the end of 2008, up 9 percent from 7.63 million at the end of September, according to the study, released Wednesday by First American CoreLogic. The percentage of "underwater" borrowers rose to 20 percent from 18 percent.

Another 2.16 million properties could go underwater if home prices fall another 5 percent, the study shows."

"California had 1.9 million borrowers with negative equity at year-end, more than any other state, followed by Florida's 1.28 million. About three in 10 borrowers in both states were underwater."

Banks better open up a bigger warehouse because another flood of keys are going to end up under the doormat.

Deflationary Jane said...

Thanks Jacob

It's in Yolo of course. Someone at work trying to rent a place and she wanted to make sure the property management co (a realtor with photocopied lease apps) was legit. Too many crooks out there and they are wisely being cautious before handing out their presonal info.

Jacob said...

Looks like Yolo county makes it more difficult. You have to go to the assessor's office in person it seems.

http://www.yolocounty.org/Index.aspx?page=343


WHY YOU WON'T FIND NAME AND ADDRESS INFORMATION ON OUR SITE

Although roll data includes the name and address of property owners and is public information, making that information available over the internet has limitations. Current State Law forbids posting the home address or telephone number of any elected or appointed officials. California Government Code 6254.21

Privacy is an important issue with many taxpayers; therefore, the names of property owners are not available on the Assessor Inquiry screen.

The current roll information is available at our office from 8-5 Monday through Friday. Click for our address and directions.


They might give the info over the phone, but it doesn't say they will on the site...

anon1137 said...

When the country is made up of 2% of the taxpayers paying 40% of the tax load (with 50% of the pop paying no taxes at all), . . . .

Presumably this refers to income taxes? I'd be interested to see an analysis of the tax distribution, as % of income, for *all* taxes, including sales, property, income, payroll, etc. I think it's an extremely complicated picture. The tax code needs to be simplified, but I'm sure that is the ultimate can-o-worms.

Deflationary Jane said...

The kicker is that the Yolo co courthouse now shuts down without warning for budget reasons too. Do not go there without calling first to make sure they are even open. This place is run so badly, why would anyone buy here /sighs

Diggin Deeper said...

"I think it's an extremely complicated picture."

What's uncomplicated is there are too many doing too little and receiving too much. 10 years ago, the only person I knew who got any form of disability was my dad for a WW2 injury. It amounted to $60 per month. Today I know of at least 5 people on disability, each receiving a check per month, food stamps, housing assistance, and free medical care. 2 of those people are deserving (they actually are disabled!)while the others are just milking the system. They don't pay one dollar in income taxes...Forgive me, but I could care less if they're daily tax burden is out whack.

There are truly needy people that require assistance, but when government gets involved, the standards get so watered down, in the name of "fairness", those needy numbers just explode upward, and it's getting tougher for the rest of us to keep up...

Jacob said...

What is the deal on houses like 90015949? It is listed for $405k, I check out the last sold info at ziprealty and it shows $95k on 11/08.

So would that mean that the bank took it back and was only owed $95k on the loan (in which case why wouldn't the owner sell).

Or did the bank make a lowball bid of $95k on the courthouse steps just to get rid of it and nobody else bid?

patient renter said...

There are truly needy people that require assistance, but when government gets involved, the standards get so watered down, in the name of "fairness", those needy numbers just explode upward

And so to it goes with the housing bailout. I can't believe the amount of pro-bailout propaganda I'm reading everywhere, or the number of times I've been told that subsidizing my neighbor is better than the alternative (slate.com has an article along these lines right now).

anon1137 said...

Welfare/disability cheats are small potatoes compared to the fraud that goes on in the executive suites of our venerable corporations (Enron, Countrywide, Tyco) and the fraud that went on in the oval office for the past 8 years.

How much subsidized housing and food stamps could have been bought with what we wasted on the Iraq war (not to mention 10s or 100s of thousands of lives lost)? Accountability starts at the top.

Wadin' In said...

Christopher Thornberg was the featured speaker at a conference I attended the other day. He is amazing. First, he looks like a cross between a Baldwin Brother and Jack Black, only better looking at taller. I was expecting a computer nerd!

The basic take away from his presentation is that this recession is not a depression, the economic retrenching is working just as it is supposed to work and it is unlikely we will fall into a huge depression. The federal government gets the problem, is doing the right (but unpleasant and expensive) steps to mitigate damamges. The fundamentals are still healthy. People have to eat, sleep and be clothed. By the first quarter of 2010, jobs will be created for the unemployed.

The most fascinating statement he made: Housing prices are not falling because of all the foreclosures and funny money. Housing prices are falling because they are simply too high based on fundamentals. This factor creates the foreclosures, not vice versa. He also said there will be no house price bounce off the bottom. The prices will stay low and soft for many years. He encouraged us to realize low housing prices are good for the fundamentals of California. Productive home buying people will move back into the state, strengthening the economy.

The other take away was the financial entities are doomed. They have written down values by 20%, which is a joke. They ultimately will write down 40%!

He is fascinating. He (and Lander, Max & Ben Jones) basically kept me from buying an $840,000 house in Dec. 2005. I read his forecasts and cancelled the contract for the house, chosing to rent for 2 years. I purchased a better home in 11/07 for 450,000 less (though that home is worth $50,000 less today, but I love the home.)

patient renter said...

The federal government gets the problem, is doing the right...steps to mitigate damamges

Pumping money into companies and individuals that failed at the expense of those who didn't is the right thing? Don't think so.

Diggin Deeper said...

"How much subsidized housing and food stamps could have been bought with what we wasted on the Iraq war (not to mention 10s or 100s of thousands of lives lost)? Accountability starts at the top.

Contrary to some beliefs, America feeds (and is fed) on American business.

You can single out a few major companies making the headlines but you'd only be addressing a very small percentage of American businesses and their workers. There are millions of businesses that aren't fraudulent, pay their taxes, gainfully employ tens of millions of people, and innovate toward the future. They have a net positive affect on society in the way of our gross domestic product.

Conversely, government's growing supply of debt benefits to those in need are a net negative to our producing output. It's pretty simple...they borrow, handout, we pay. When those negatives outrun business positives, we're likely to be in this crisis for a very long time.

Imo, the truly needy deserve our help. The others don't including those teetering on bankruptcy. If we get it over with now, we're not saddled with it for generations

Lander said...

Here are slides [pdf] from Thornberg's recent Rancho Cordova presentation. He predicted economic growth (not housing) to return sometime in 2010.

Mike Lyon also spoke and I found it amusing/revealing that he displayed charts ripped directly from Calculated Risk. We're all bloggers now!

anon1137 said...

Sacbee's Home Front blog posted a preview excel spreadsheet of DQ data showing % of mortgages underwater in the Sac region by zip code:

http://www.sacbee.com/static/weblogs/real_estate/archives/020449.html

anon1137 said...

A Gloomy Outlook for Home Sales’ Big Season
http://www.nytimes.com/2009/03/07/business/economy/07home.html

norcaljeff said...

Dang I wish I knew Thornberg was in town, would have loved to see that in person. He's fun to listen to.

Wadin' In said...

"...and I found it amusing/revealing that he displayed charts ripped directly from Calculated Risk. We're all bloggers now!"

Lander, imitation is the most sincere from of flattery.

I will say this about Mike Lyon. While he is a RE industry champion, he is not bashful about calling trends as he sees them, even when they are counter to what the CAR wants to hear.

Diggin Deeper said...

Who got AIG's bailout billions?

http://news.yahoo.com/s/nm/20090308/bs_nm/us_aig_6

"Eric Dinallo, superintendent of New York State's Insurance Department, railed on Friday against AIG's failed business model, likening its insuring credit-default swaps as gambling with somebody else's money.

"It's like taking insurance on your neighbor's house and even maybe contributing to blowing it up," he said at a panel sponsored by New York University's Stern School of Business."

Do we keep pouring money onto a problem that's without solution? AIG is insolvent, bankrupt, and cannot survive it's future. Who are we kidding that any more money poured into these failed institutions will do any good, any time soon?

tim said...

I walk all over East Sac, Midtown, Curtis Park, etc. Most of the empty houses I see have no for sale sign. They have been empty for months and nothing. There is a huge backlog of houses, even in the "nice" areas.

anon1137 said...

Did everyone see the article in the Bee today on homebuyers walking away from their mortgages? I wonder if any our MLS accessible members could track down Ryan Jessup's situation and find out the details. How much did he pay? What kind of mortgage? How much did the house fetch in the short sale?

The listing agent was thus:
http://activerain.com/blogsview/973280/Setting-the-Record-Straight

paranoid renter said...

Just saw this on Mish's blog
http://www.dailymail.co.uk/news/worldnews/article-1159677/Pictured-The-credit-crunch-tent-city-returned-haunt-America.html

patient renter said...
This comment has been removed by the author.
patient renter said...

I was just going to post that. I don't think the article paints an accurate picture. It seems to imply that the "tent city" is a consequence of the current economic downturn, when in fact we've always had a sizeable homeless population, no?

paranoid renter said...

Patient,

Have we had the tent city all along? (I don't know...I was assuming this sprung up recently.)

patient renter said...

I don't live in or get to Sacramento all that often, so I'm not the best authority on the subject, but I've seen small tent "cities" around different parts for years. They move every so often as they get broken up by authorities.

anon1137 said...

This has sprung up within the past few months, maybe late last fall. These people aren't new, the rangers on the parkway just rounded them up from various areas on the parkway and told them to move here. I guess the thinking is that, at least this way the mess is all in one place and easier to manage. It's convenient for them because it's close to Loaves & Fishes and the social service agencies downtown. I read that the city is going to try to get it established as a designated homeless camp, either here or closer to old dump, which was supposed to become a new park.

wimpyVO2max said...

If there's one thing I've learned from this mini-Depression it's this: Private industry cannot be trusted. Deregulated business, culminating in this massive credit market abuse, unwinding and default, has done more to damage my net worth as a middle class guy than anything government has done to me since I was born. Yes, we need private industry, but we also need close government regulation -- otherwise we'll just have another runaway bubble driven by greed and fraud.

Conservatives say, get government out of the way and private industry will make everything better and money will trickle down from the sky. Yeah, Bush and his cronies let the financial industry have its way and look at what they did -- they started handing out no-doc, no-money down mortgages to anyone with a pulse. Then they fraudulently wrapped those bad mortgages inside of "AAA" CDS's and SIV's. People should be going to jail for this.

Sold in '05 said...

"If there's one thing I've learned from this mini-Depression it's this: Private industry cannot be trusted."

That's right, WheezyVox. BUT do not make the mistake of thinking that government is MORE trustworthy. That is the opposite swing of the same pendulum. There is just as much greed and even more of a hunger for power in government, not to mention institutionalized gross incompetence and inefficiency. The problem with government is that these darker aspects of human nature acquire the force of law and will not just pass away when the next crisis demands change. As bad as private avarice gets, it will never be as damaging to society as a powerful government with that same avarice not for money but for never ending power over people.

The real root of this problem with excess is that we have removed from our society both privately and governmentally the idea that there is a higher moral calling than ones own self satisfaction. No longer are we allowed to find fault with greed, blind ambition, gluttony, sloth, usury, or deceit as long as it is within the bounds of the law. Who are we to judge what one does with their freedom? This is the flaw in secular democracy; we have laws without morals or values. We are children with no one to answer to but ourselves. How can we convince a CEO that he should not beggar his workers in order to enrich himself beyond all reason? How can we convince our nation’s president that he should not create a government enslaved underclass that will vote for him out of fear of loss to entitlement? These are two sides of the same coin and make no mistake, ‘bama has far more ambition, wielding infinitely greater power than ANY corporate head in the world and even though he will look right into the camera and say he loves you, he really only cares about himself.

Things economic are not all that have failed in our society and I fear we will see much worse losses than just our retirement accounts before this is all over.

-CD

Diggin Deeper said...

Well said CD!

When one drills down to find that nearly 50% of the populus either works for, or is assisted in some way by the government, the power in this country is then centralized into an entity that takes away more than it delivers.

I can easily attest to those figures. As a small business owner, I pay enough in business (.50 on $1) and personal income taxes to feed and clothe at least two mid level government employees and their familes for a year. That's in addition to the two families I support in my business. I'd say that's more than fair. According to the new administration, it's not enough.

If it's not, then I may become one of millions of small business owners that might say "no more"... close our doors, and send our 2 employees home, along with the 2 public employees we've so graciously supported all these years. One decision eventually affects 4 families...

For all those that work in the public sector, it's easy to forget that someone else outside of government pays your wage. Without the support of American businesses, and their employees, those public sector jobs go away.

There's a point when the risks of staying in business are outweighed by the benefits of shutting it down. Pushing for higher taxes, unnecessary regulations, etc. will eventually make that decision a very simple one.

patient renter said...

Conservatives say, get government out of the way and private industry will make everything better and money will trickle down from the sky

Be careful not to confuse free market capitalism with corporate cronyism. We've had 8 (or more years) of the latter. Nothing in the last 2 decades has been remotely reminiscent of a free market.

Most regulation is in place to counter the unintended effects of other regulation or government interference. Housing is a perfect example of contradictory government interferences.

patient renter said...

we also need close government regulation -- otherwise we'll just have another runaway bubble driven by greed and fraud

I should point out that the bubble wasn't driven by a lack of government intervention, it was driven because of government intervention - the Fed, the GSEs, the housing agencies, etc.

Like I said above, government regulation/interference is usually just an attempt to compensate for other government regulation/interference.

Buying Time said...

"I should point out that the bubble wasn't driven by a lack of government intervention, it was driven because of government intervention - the Fed, the GSEs, the housing agencies, etc."

Come now PR....hybperbole at best.

The government did not create toxic loans, repackage them as "safe investments" then swap insurance back and forth. This happened because the loans did not meet the standards for governemnt purchase. Yes, the Fed may have been a little behind the curve in raising rates. Governments are traditionally slow to act. I'm sorry but the "blame government for all your troubles" is a cop-out argument.

Diggin Deeper said...

"This happened because the loans did not meet the standards for governemnt purchase"

Not true...enter Fannie Mae and Freddie Mac...these quasi governmental agencies were just as culpable. Even today, we can't get a good handle on how these two "agencies" cooked their books. This was pervasive throughout the private and public sectors. It's getting to be a "chicken and egg" discussion on where the blame really lies. If the government promotes and encourages banking to put as many people into homes as possible, and then provides the stimulus to do so , they can't wash their hands when the outcome doesn't meet their intentions.

CD hit the nail square.

Lander said...

anon1137 said...

Did everyone see the article in the Bee today on homebuyers walking away from their mortgages? I wonder if any our MLS accessible members could track down Ryan Jessup's situation and find out the details.


That's funny you ask because in your more bullish days here on the blog, I thought you (or Sippn) might be sacbee poster rjessup2mouse (aka Ryan Jessup).

Husmanen said...

Lander, I was thinking the same thing.

Deflationary Jane said...

ROFL! I was wondering if he was Sippin too. Or maybe Real? (don't say the name times now...)

Now to go read the long and lovely new post >; )

patient renter said...

The government did not create toxic loans

...they (the Fed) created the artificial credit that allowed toxic loans to exist. That's fact, not hyperbole.

As you said:

the Fed may have been a little behind the curve in raising rates

Absent the Fed artificially manipulating interest rates, the bubble wouldn't have happened. The funny money would not have existed.

Blaming the govt. doesn't buy me anything, but neither does failure to recognize contradiction in government policy. I'm not against regulation, I'm just against regulation or policy that creates unintended consequences which lead to further regulation, further consequences, further regulation, etc.

We simultaneously control prices, stimulate demand, inflate prices, control supply, perpetuate debt, expand supply, eliminate debt, redistribute capital, and create inflation. It's no surprise that out of this mess of contraditions, a lot of unintended consequences occur.

anon1137 said...

"That's funny you ask because in your more bullish days here on the blog, I thought you (or Sippn) might be sacbee poster rjessup2mouse (aka Ryan Jessup)."

You must have been tracking him for a long time. No, I'm not Ryan Jessup, and I think Sippn was a RE investor. I'll admit I've changed my perspective since I've been on this blog.

norcaljeff said...

Cool national foreclosure map: http://jeffnolan.com/wp/2009/03/11/foreclosure-map/

Diggin Deeper said...

China 'worried' about US Treasury holdings

http://news.yahoo.com/s/ap/20090313/ap_on_re_as/as_china_us_economy

Are they jawboning or will they take action and stop buying our debt? If they do quit buying, I hope they don't decide to sell those bonds back to us while we're trying to finance the $Trillions we've just taken on.

When our foreign creditors begin to lose confidence, in our ability to take on more debt, the tables will turn on interest rates (and mortgage rates).

Housing affordability is at stake and our leadership cannot afford another unintended consequence here.

norcaljeff said...

I was watching Fox 40 News tonight at 10PM and they were showing a protest in Fairfield and Sacramento about teachers being getting preliminary "pink slips" this week. One teacher was trying the sympathy card with the reporter by saying she has a mortgage and now might go into foreclosure. Now I sympathize more than anyone about people losing their job buy what's wrong with this picture?

A. Should she have planned for the worst before getting into a home she obviously can't afford now by saving for "rainy days"?

B. Should she expect to have a mortgage instead of renting a home or apartment, why can't she rent instead?

C. Should she already be complaining since the pink slip doesn't mean anything just yet?

D. She was wearing a wedding ring so why can't her husband/wife pay the bills? (For crying out loud she hasn't even lost her job yet, but I digress!)

E. Should she spent more wisely with her money before getting a pair of $300+ Dolce & Gabbana she was wearing at the protest? (Ok, so maybe now I see a pattern. She has an image to protect and that means living beyond her means by wearing $300+ designer sunglasses and living in a home she might lose if she lost her job because I guess laid off teachers, who haven't really been laid off yet, can't find other jobs.)

F. She's on a teachers salary so why does she have a pair of $300+ designer sunglasses on in the first place, or maybe she really does have a rich husband/wife so therefore why is she complaining in the first place, is this what rich, spoiled teachers do on school days instead of teaching kids and trying to save their jobs?

G. All of the above

Diggin Deeper said...

No sympathy here...one of the big offenders has been education...

Talk about excesses, the US has 14million empty homes!!! Enough to house nearly 45 million people. Our government spends $1 Billion PER HOUR to solve the problem. It becomes fairly simple...all it takes is 14-20 million new jobs to absorb 14 million homes (that's assuming there are enough people to occupy those homes)... all of these home in the midst of 2 million job losses last qtr?

The figures are staggering both in size and our ability to absorb the damage they're causing. So those $300 sunglasses are a simple reminder of where we've been, without a hint of where we're going.

Obama's chief economic advisor, Larry Summers, is calling on the world to further stimulate demand (translated- "hand out more money"). The G-7 is balking for good reason. It doesn't matter how much money you throw at the problem. Until the excess goes away, demand will not increase...until job losses stop, and until a good percentage of those 14 million homes have occupants, demand will not increase. Are you listening Larry?

If I have 100 apples and can only find buyers for 10, it's not long before I have 90 rotten apples

RV6Flyer said...

"Are they jawboning or will they take action and stop buying our debt?"

If they stop buying our debt, then it is mutually assured annihilation.

RV6Flyer said...

"The government did not create toxic loans, repackage them as "safe investments" then swap insurance back and forth. This happened because the loans did not meet the standards for governemnt purchase."

Quick free market response: Purchasers of those assets learned a hard lesson and they will find a way to self regulate in the future without government help.

I am still holding totally illiquid auction rate securities because I didn't take the time to read the prospectus or understand what I was buying. You can bet millions of investors will be much cautious about what they buy for the next couple of decades.

Christina said...

Should she spent more wisely with her money before getting a pair of $300+ Dolce & Gabbana she was wearing at the protest?

When my husband worked for the state, benefits would cover two pairs of designer sunglasses for me every year. I got quite the collection in those days... Thank you, dear taxpayers!

Diggin Deeper said...
This comment has been removed by the author.
Diggin Deeper said...

RV6flyer....nice to have you back!

TIC report from the Treasury has been horrible with regard to net debt purchase by foreigners.. Clearly, there's been a breakdown that started 8 months ago or so. Net purchases per month for the 4th qtr '08 averaged $2.9B. In good times that would have been $180-190B over the quarter or about $50-60B average per month. For a normal year we would see $600-700B... enough to finance our deficits for the year...

When you add in the credit downgrade of Berkshire Hathaway last week, it doesn't help with the world's confidence in our "safe debt" status.

Last week Geithner, Summers, and Clinton publically called for countries to keep buying... The January report should be out tomorrow, and with all the noise, the Treasury has already seen the results, and they're likely to show another bad month.

While we tout our strength as an economy, holding the world's safest debt, we really don't hold the trump cards here.

RV6Flyer said...

DD

The 30 year auction last week had surprisingly strong foreign interest at 42%.

I guess I should say China can't afford to sell our debt. Japan, holding something like 600 billion in US debt, could be the wild card.

patient renter said...

Re: the stuff about the teachers:

I agree, complaining about a mortgage is pointless. Having a few friends who are teachers that were pinkslipped, I can say in theory they're not against the idea of being laid off. Stuff happens. In practice though, many teachers are axed as a consequence of administrators having pillaged their budgets for personal gain, similar to how we've seen things go down in the corporate world.

Rich said...

Corporate meltdown leaves renters in limbo

http://www.msnbc.msn.com/id/29697413/

"As panicked renters in Arizona began holding public meetings to explore whether they could walk away from leases, recoup security deposits or sue, it became clear that the scale of the mess was far larger than they had realized. Companies under the Bethany umbrella owned at least 60 — and possibly many more — large residential complexes across the nation, all of which are now believed to be in bankruptcy or receivership, potentially affecting tens of thousands of renters."

"Nicholle Krause, the Alante resident, found that out the hard way. She threatened to withhold her March rent when her complaints about the poor condition of the property were ignored. That prompted the complex manager to threaten her with eviction, which would make it harder for her to rent elsewhere. She backed down, and paid.

She then sent the manager a letter stating that she would move out in 10 days because of the landlord had not fulfilled its obligations to keep the property in livable condition. But an attorney for the company responded that her letter did not meet legal requirements for breaking the lease."

Diggin Deeper said...

RV6Flyer

42% is a good indicator and it really has to continue or we could face some consequences we're not counting on.

Just a followup, January's TIC report, today, gives us the January results and confirms why we're seeing all the high level pleading...Last 4 months include -$43B in January, +34.7B in December, -25.6B in November, and -.1B in October. 4 month total reveals net selling of -$34B by foreign concerns or a -8.5B per month average over the period. That basically means foreigners have sold our treasuries over a 4 month period. ...not a good sign.

This is not something that's on the media's "big splash" radar, CBS won't be reporting on it tonight, but it's very important to our Washington leadership.

Why does all this matter? IF the trend continues, interest rates and mortgage rates must rise, enticing these net sellers to again become net buyers. If they don't buy then we self consume the debt to make up for the loss. As rates respond higher, affordability diminishes, and possibility causing further home price decreases to compensate, not to mention what it would do to the purchasing power of the dollar.

Husmanen said...

Went by the Elliot Mira Monte model homes in Folsom last weekend. They are selling their models and will NOT be building out the remaining lots "... until the market improves..."

There is one house all by itself in the corner of Iron Point and Empire Ranch, has to be 45-50 empty lots surrounding the home. With the asbestos and ground cover issues here this may be a hard sell.

BTW, there was no talk of any price reductions or offers, basically a price list. Not good as there are repos in Mira Monte selling for more than 25% less than Elliot is asking. And the market pressure is pushing it down even further.

BottomFeeder said...

Went by the condos at Pavillions near Fair Oaks Blvd and Howe. They are now selling for $540k. Still overpriced but way down from the $800k they were asking just a year ago. Original builder is gone and project is not finished. Has already been at least one foreclosure. Wrong product in that location. Original developers Kip Skidmore, Sixells, Ravell, Rasmussen were all greedily trying to milk the market without regard for the viability of what they were building. They will eventually lose their shirts.

Rich said...

Check out http://www.socalbubble.com/2009/03/still-think-theres-no-conspiracy.html

Mind blowing.

Diggin Deeper said...

Jobless claims reported today up 646,000. Fed steps in yesterday with another $1.3 Trillion to buy longer dated T Bonds, mortgage backed securities, and other debt.

Simply amazing...As bad as deflation is, reflation gone wild is worse! Immediately the dollar falls 3% while oil, commodity, and precious metal markets spike higher in response.

Get it while you can...low rates for all. Might even put a temporary floor under our real estate market here in Sacto. Trouble is dollar devaluation probably indicates higher prices elsewhere in order to make up the difference.

RV6Flyer said...

"Trouble is dollar devaluation probably indicates higher prices elsewhere in order to make up the difference."

Yep, its basically a zero sum game. Our government has put almost the exact same amount of stimulus in the economy as its citizens have lost in wealth. Do you call that a transfer of assets?

norcaljeff said...

Elliot is known for being over priced and doesn't take down prices. They bought up a ton of land decades ago at pennies on the dollar and will sit on inventory for eternity. If you're looking for a deal, look elsewhere.

Diggin Deeper said...

When BB unloaded this quantitative easing plan, people believe they're going to get a deal on mortgage rates, be able to refinance their way out of trouble, buy homes, and get easier credit. That's the purpose, that's intent. But drill down and look at the options the Fed had available. Imo, this plan was THE last resort. It was an option NOT to be used unless there were no others left. That's why it's coming so late in the game and it looks like "hail Mary" to me.

When the government agrees to buy the debt its creating, by creating more debt to cover it, in Washington they call that a stimulus. Outside the beltway, when the fog lifts, it's called insolvency.

Maybe buying a home in this market isn't so bad. At least you fix your costs in today's dollars at rates you'll likely never see again. If we keep this debt covering debt ruse going, someday everyone might be making $250K per year, and more worried about paying the tax bill than the mortgage...

Let the presses roll on......

Jacob said...

I don't even understand how the Fed can do this. the Treasury sells treasuries to raise money for the Fed, so the Fed is buying treasuries with money they will get from the Treasury and give that money (which never existed) back to the Treasury for treasuries...

I don't get it.

Diggin Deeper said...

Jacob...

The government has to have buyers for the $2-3 Trillion scheduled for auction this year, or it ceases to function and folds. Since our foreign friends are falling behind, and the citizenry in the US is basically broke, somebody's got to step up...So the only way that's going to happen is for the government to buy from itself. The treasury takes government's debt and creates bonds and T-bills to cover it. Then it gets the Fed buy those bills and bonds by printing up enough money to complete the transaction...

A few more dollars chasing the same goods and services isn't a problem. But when you're adding in $Trillions, you can imagine what that does to the dollar's purchasing power.

Plus the word's out on the Obama budget that he's a tad shy on the actual deficits that are being created. Looks like, after the OMB's further review, his overall deficits have grown by another $2+ Trillion. Either the Obama team got the math wrong, or this spending mania is taking on a life of its own.

Jacob said...

Yea and I think that 2 trillion deficit is based on revenue projections that assume revenue will grow...

Diggin Deeper said...

Dead cat bounce?

February existing home sales rise by 5.1 percent

http://news.yahoo.com/s/ap/20090323/ap_on_bi_ge/home_sales_3

"The National Association of Realtors said Monday that sales of existing homes grew 5.1 percent to an annual rate of 4.72 million last month, from 4.49 million units in January. It was the largest sales jump since July 2003."
...and...
"About 45 percent of sales nationwide are foreclosures or other distressed property sales, according to the Realtors group. Those properties typically sell for about 20 percent less than non-distressed homes."

Husmanen said...

This is a great video about the Crisis of Credit, that I originally found on Calculated Risk:

http://vimeo.com/3261363

Short, direct, clear and concise.

Husmanen said...

Opps not Calculated Risk, I found the video on SoCalbubble

http://www.socalbubble.com/

Sold in '05 said...

DD,

"February existing home sales rise by 5.1 percent"

This was TOTAL B.S. spin reporting. The story was actually "Existing Home Sales Rise by 5.1% in Feb. As Compared to Jan... Just Like They Do Every Year!"

No one in the mainstream mentioned that existing home sales FELL year over year, AGAIN.

http://www.calculatedriskblog.com/2009/03/more-on-existing-home-sales.html

The mainstream reporting on this story was outright fraud. The only real positive was that the year over year loss this Feb. was less than the previous years gap.

-CD

Diggin Deeper said...

Here's one heck of a deal for the American taxpayer.

The Geithner toxic (now called legacy)asset plan basically is as follows.

The Treasury will put up to $1 Trillion to buy/guarantee toxic assets from the banks.

The private sector puts up 1/6th of the of the money invested, the Treasury matches that amount, and guarantees the rest. Both participate in 50% of the profits.

I risk $17 on a $100 investment, and the investment grows to $150. I get $17 back plus a profit $25. The treasury puts up $17 and gains the same $25 profit and $100original investment is retired.

However, when I risk $17 on that same $100 investment, and it fails, I lose $17. The Treasury loses it's $17 and an additional $66 because it guaranteed $83 of the original investment.

The Treasury is basically leveraging toxic assets at a 6 to 1 ratio. So we're leveraging 6 to 1 on assets that are leveraged at say 10 to 1, and making an assumption that the outcomes will be different... ie, a floor in real estate prices, the halt of foreclosures, job losses that quickly abate, and an economy that returns to growth.

What a deal...the best we can hope for is a 50% split in profits over cost, while worst case is that we eat 83% of total invested dollars based on the same assumptions that troubled these assets in the first place.

You can get better odds at a craps table in Reno...

Jacob said...

So if the plan fails then my tax dollars go to pay for failed investments, and if it succeeds that that means homes will be more expensive than they should be do to artificial demand.

Sounds like a great idea to me...

Instead of this, why can they loan money to people to buy owner occupied homes.

Must be first time buyer (no home owned in 3 years), must be owner occupied, must be under conforming loan limits.

Then you put up 15% cold hard cash and the government will give you a 30 year non recourse loan at 4%.

If you sell in 2 years the government shares in the profits 50/50.

Diggin Deeper said...
This comment has been removed by the author.
Diggin Deeper said...

Jacob

Way too simple for airheads to understand. Makes perfect sense, but you're not bailing out our banking buddies.

I'd buy it over this pyramid scheme anyday

Jacob said...

Sure we would be helping the banks. An owner occupant buys a home, government takes the loan, bank gets the asset off their books.

Of course we are only able to help the banks directly and hope the the little guy gets some trickle down help. Instead we should help the little guy and the banks and credit companies will benefit indirectly...

Husmanen said...

You guys will love the PPIP write up on Dr. Housing Bubble:

http://www.doctorhousingbubble.com/

Enjoy!

Diggin Deeper said...

Husmanen...worse than I thought when you consider the leverage offered on that blog...I did an "Oh s**t" when I read it. What's really going to be interesting is trying find the pee under the right shell. With all these 4 letter programs intertwining cash, it'll be like taking an Accounting 101 class as offered by Fannie and Freddie

sacramentia said...
This comment has been removed by the author.
sacramentia said...

Jacob,

Another point to make is that first time buyers are a small percentage the population like the Bankers. I'm neither, pay taxes, and therefore wouldn't care either way.

I'd really like to see subsidized jumbo mortgages that have rates on par with conforming. The same group that pays a huge amount of the income taxes (not all taxes) are getting no help at all on housing. Instead, the administration is threatening to cut back on the home interest deduction. Like it or not, the paredo principle applies to consumer spending too, so this type of policy doesn't help an economy that is/was 70% consumer spending.

Diggin Deeper said...

Obama's Toxic-Asset Plan: End-Run Around Congress?

http://www.cnbc.com/id/29863145

“This is an end-run around Democracy,” Rep. Brad Sherman (D-Calif.) told CNBC.com. “No one even imagined we would see trillions of dollars shifted from Washington to Wall Street that no member of Congress ever voted for.”

"The FDIC will participate in the funding of the program and also “provide oversight for the formation, funding and operations” of these funds."

Actually, the FDIC becomes the guarantor of the funds supplied by PPIP program so any losses would be absorbed by them.

The question becomes...Where's the FDIC going to get the money when a portion of these toxic assets fail????

Imo, it won't take long before Sheila Bair is sitting before Congress pleading for additional $T's to cover FDIC losses.

Three words to describe the situation...

OUT OF CONTROL

patient renter said...

OUT OF CONTROL

While this is now becoming painfully aware to Congress and all of the supporters of bailouts to date, it's unfortunately beyond their comprehension that the solution could be anything other than more bailouts.

When looking at the big picture, bailouts always fail.

Diggin Deeper said...

What some fail to realize is that for every toxic asset bought by this program, banks will take a loss on their original value. If it takes $300B to buy $1 Trillion in bad assets, the banks lose $700Billion. That would render some if not all the major banks insolvent. But that's not going to happen as our government will step in and refinance with enough public debt to cover those losses.

Out the front door and in the back door...that's why all the spin about profitting on these assets is bulls**t. It's takes 10 times the losses to produce profits on small percentage of toxic assets that will perform.

Jacob said...

Well I think the bottom is approaching now. Just saw a commercial for a new HGTV show called For Rent. Looks like House Hunters except people are renting.

So all we need now are the remaining flipping shows to get canceled and for job losses to stop increasing and I think the bottom will follow soon after.