Jacksonville Foreclosure impact Underestimated?

[whitey]

River...let's put our money where our mouth is.  that is the truest test of whether you really believe something about the economy or not, right?

my new investment dollars are going to cash, commodities and agriculture. 

yours must be going to real estate and financial stocks now, right? 

Commodities and agriculture are starting to mirror the housing bubble.  As soon as the Fed stops cutting interest rates, and there isn't that much more room to cut, those prices will fall back down as the dollar regains its strength.

As far as real estate and financial stocks, that is a great place to be, as long as you are smart about it.  The fundamentals of where people want to live have not changed, so a nicely reduced waterfront home would be an excellent investment.  And I'm not talking about that swampland that Eric Estrada sells on latenight infomercials.  Financials have been crushed lately, and that includes several good companies who have done nothing wrong but are simply guilty by association.  Once people see that, those companies will lead the market back up.  The first glimpse of who might come through this relatively unscathed might be during the next two weeks as a lot of financial companies are due to release their quarterly reports.

The best way to make money is to sell when everyone else is buying and buy when everyone else is selling.  Following the herd will most likely lead you to the slaughterhouse.

[Driven1]

so whitey, which financial and real estate falling knives are u buying right now?   

yes, OF COURSE, everyone knows what you said (buy when other sell, etc..) ...it's been repeated a billion times since Warren Buffet first said it a long time ago.  the problem is, there is still a LOT of bleeding left to go.

btw...you are wrong about commodity prices.  while i'm not saying there won't be a bubble, there definitely is not one currently.  the long-term fundamentals still support the technicals (esp after the recent correction) for most commodities.

and i'm willing to say i've put 40% of my own money in ag companies...the majority of that % in one company in particular, actually.  buy-in average price is $151/share.  i'll be more than willing to keep u updated through 2008 and 2009.  it's a long-term story that has absolutely nothing to do with what a hedge fund manager or wall street is doing.  people have to eat and the middle class around the world has swelled.

this will only continue to help the commodities (todays WSJ email alert)...

MARKET ALERT
from The Wall Street Journal.


March 13, 2008

The dollar fell below 100 Japanese yen for the first time since 1995 as worries over the U.S. economy continued, despite moves this week by the Federal Reserve and other central banks to pump extra cash into the ailing credit markets.

The dollar also sank to all-time lows of $1.5587 per euro and 1.0090 versus the Swiss Franc. Against the British pound, the U.S. currency fell to $2.0321 -- the lowest since Dec. 14, 2007.

http://online.wsj.com/article/SB120538653090633005.html?mod=djemalertMARKET

[second_pancake]

  And, dont forget, houses are still selling in numbers higher than they were even a few years ago in say 2000.

http://www.census.gov/const/newressales.pdf

http://www.census.gov/const/quarterly_sales.pdf

http://www.msnbc.msn.com/id/19953440/

I suggest you do some research before making blanket statements like that.  Btw, the condo market is even worse.  The NAR is reporting a 13 month supply of condos right now and in south FL it's expected to be at 21 months before the end of the year due to continued construction on condo projects started within the past year.

Facts:  New home sales are down significantly.  Condos are not selling and there is a huge surplus.  Existing home sales have significantly decreased, and while it's being project they will increase in 2009, the median sale price is projected to be much lower than 8 years ago.

Btw, the reason you don't see homes in the poverty level suffering is because many of them don't have mortgages on them and the ones that do, the contracts were entered into long before any of the special mortgage products were offered and the people living in the homes can afford their fixed payment.  The people living in mansions aren't affected because, well, they're rich.  Paying $5 a gallon for gas is merely an inconvience, and they pay extra money on their mortgage payment to pay down the principal each month so don't owe a hell of a lot on their houses, despite what they paid for them.  It will always be the middle class that feels the effects of a downturn market.  The middle class are the workers, the producers, the consistent consumers.  We're what the economy relies on to buy a pack of smokes every day at the Quicky-mart, fill up every week in our mid-sized economy car, be at work at 8, leave at 5, pay a gym membership, a mortgage, a car payment, weekly groceries, etc.  The poor either live off the government, non-profit organizations, or fend for themselves by walking, riding a bike, or growing their own food.  The rich could care less.  Like I said, merely an inconvience.

So, based on your comments regarding how you don't see too big a deal with the real-estate market and how you continue to buy multi-family housing, you must fall into the 'inconvient' category.  I suppose you have all the time in the world to sit on a property for 2+ years with a sign in the yard and an ad in the paper.  Good for you.  As for me, I have 2 mortgages to pay, 1 of which is on a house that's been vacant for almost a year with not a single call to even come look at it.  Both houses are worth less than the assesment done 4 years ago, and my husband is out of the 2nd job he's had in the last year due to the companies closing their doors.

And if after talk about government involvement in regulating the origination of loans (loosening restrictions, opening funds, insuring all loans with taxpayer money), you're still saying it's going to get better "soon", then you are truely in denial.

[Driven1]

i'm with 2nd pancake, but yikes!  be careful of quoting the NAR on anything having to do with the housing market...

want a good analogy?  watch King Arthur & The Black Knight (from Monty Python)...

the NAR is the black knight and the housing market is King Arthur...

http://youtube.com/watch?v=2eMkth8FWno

[Driven1]

Wachovia: Housing Woes Are Far From Over

"...said Wednesday the downturn in the nation's housing market is nowhere near over.  Speaking to analysts on a Deutsche Bank Securities Inc. conference call, Don Truslow said, "It feels like we have a ways to go."

Using a baseball analogy, Truslow said he didn't know if the downturn was in the third, fourth or fifth inning. He added "we're still before the seventh inning stretch."

And if the economy gets worse, "we could find ourselves right now in very early innings of the credit cycle," Truslow said."

http://biz.yahoo.com/ap/080312/wachovia_housing.html

[RiversideGator]

River...let's put our money where our mouth is.  that is the truest test of whether you really believe something about the economy or not, right?

my new investment dollars are going to cash, commodities and agriculture. 

yours must be going to real estate and financial stocks now, right? 

There are a lot of tremendous deals out there in financial stocks, now that you mention it although I do not own any.  As for real estate, I do have my money where my mouth is but it is a long term thing for me, not a quick buck.  And, getting rates of return below the inflation rate doesnt bother me since I dont pay cash for the properties.  If you buy a $1 million apartment building, for example, and put down 15% and inflation is 4% while the average annual appreciation rate over 10 years (setting aside the issue of increasing rents) is maybe 3%, you are still appreciating at the annual rate of $30,000 (not counting the compounding effects) or $300,000 for the decade.  Not too bad on an initial investment of $150,000.  Add to this the tax benefits and the fact that rents have gone up probably 40-50% since 2000 and you have a pretty good little business if you stick with it.  Now, real estate is certainly not for everyone and it must be approached from a long term perspective but those are some pretty good returns.

BTW, looking historically at US home values going back from 1940 to 2000, nominal increases in home values have been tremendous.  Looking at these, it looks like there is a "bubble" every decade but it kept going up.  Most of this is inflation but, again, this doesnt matter because the gains are still real and are obtained by using borrowed money.

                          2000      1990      1980      1970     1960     1950    1940

United States     $119,600   $79,100   $47,200   $17,000  $11,900   $7,354  $2,938

Florida           $105,500   $77,100   $45,100   $15,000  $11,800   $6,612  $2,218

http://www.census.gov/hhes/www/housing/census/historic/values.html

[RiversideGator]

  And, dont forget, houses are still selling in numbers higher than they were even a few years ago in say 2000.

http://www.census.gov/const/newressales.pdf

http://www.census.gov/const/quarterly_sales.pdf

http://www.msnbc.msn.com/id/19953440/

I suggest you do some research before making blanket statements like that.  Btw, the condo market is even worse.  The NAR is reporting a 13 month supply of condos right now and in south FL it's expected to be at 21 months before the end of the year due to continued construction on condo projects started within the past year.

I suggest you read your own links before attempting to use them to disprove what I said.  Links 1 and 2 only contain figures going back to 2004 or 2005.  And, link 3 supports my statement.  From the msnbc report:

The National Association of Realtors reported Wednesday that sales of existing homes dropped by 3.8 percent in June to a seasonally adjusted annual rate of 5.75 million units. That is the slowest sales pace since November 2002 and the decline was about twice what had been expected.

So, sales in June, 2007 were on an annual rate of 5.75 million which is the same amount sold in just November, 2002.  So, homes were selling in June, 2007 at a decent rate, just not at nearly the overheated rates of 2005 and 2006.

Facts:  New home sales are down significantly.  Condos are not selling and there is a huge surplus.  Existing home sales have significantly decreased, and while it's being project they will increase in 2009, the median sale price is projected to be much lower than 8 years ago.

Please provide evidence to support your blanket statements.

Btw, the reason you don't see homes in the poverty level suffering is because many of them don't have mortgages on them and the ones that do, the contracts were entered into long before any of the special mortgage products were offered and the people living in the homes can afford their fixed payment.  The people living in mansions aren't affected because, well, they're rich.  Paying $5 a gallon for gas is merely an inconvience, and they pay extra money on their mortgage payment to pay down the principal each month so don't owe a hell of a lot on their houses, despite what they paid for them.  It will always be the middle class that feels the effects of a downturn market.  The middle class are the workers, the producers, the consistent consumers.  We're what the economy relies on to buy a pack of smokes every day at the Quicky-mart, fill up every week in our mid-sized economy car, be at work at 8, leave at 5, pay a gym membership, a mortgage, a car payment, weekly groceries, etc.  The poor either live off the government, non-profit organizations, or fend for themselves by walking, riding a bike, or growing their own food.  The rich could care less.  Like I said, merely an inconvience.

So, based on your comments regarding how you don't see too big a deal with the real-estate market and how you continue to buy multi-family housing, you must fall into the 'inconvient' category.  I suppose you have all the time in the world to sit on a property for 2+ years with a sign in the yard and an ad in the paper.  Good for you.  As for me, I have 2 mortgages to pay, 1 of which is on a house that's been vacant for almost a year with not a single call to even come look at it.  Both houses are worth less than the assesment done 4 years ago, and my husband is out of the 2nd job he's had in the last year due to the companies closing their doors.

I am not "rich".  I merely aspire to be rich.  I have taken risks with real estate too and could be burned in the future.  This is the nature of the free market.  Some succeed and some fail.  How I will end up, no one knows now.  So, I dont mean to appear arrogant because no one has a crystal ball, and certainly not me.  All I do is look at historic patterns and try to extrapolate the future from those. 

As for your vacant home, I would recommend taking it off the market and renting it for a year.  Dont sell in this market.  Try craigslist.  It is an excellent place for free rental advertising.  Alternatively, lower the price significantly (if you have sufficient equity) to get it to move.  The buyers are out there at the right price.

Also, many people have been hurt who were working in some facet of the real estate (developers, contractors, mortgage brokers, etc) and who were also speculating in real estate.  So, when things slowed down, they were hit with a double whammy because their income from their primary job was reduced while their real estate investments declined in value and were tougher to sell.  I certainly feel for them and I represent a large number of them.  This should be a cautionary tale for us all not to put out eggs all in one basket.

[Driven1]

River...new money, where is your NEW money going?  buy some financial stocks or local apartment buildings.  either way, you stand to lose at least 15% over the next year or so.  ah, my friend, history is a fancy subject to study.  look at the case-shiller index while you are at it.  show me ONE housing "bubble" like the 2000-2006 bubble.  it doesn't exist.  there were very small jumps up in the past, but things always reverted back to the mean within a year or two.

again, for every bubble, there has to be an equal bust - and then (this is the scary part) a flat market for at least a few years after the correction.  we still have at LEAST 15% more to drop in housing.  and then housing prices will be generally flat until around 2012, 2013.  housing is a capital market...works like all the others, just in a bit longer cycles generally.

the property you paid $300k for 3 years ago and go up to $400k is now back to $300k.  it will be $225k before things are done bleeding.  and then it will be relatively flat for at least a few years.   eventually it will get back up to what you (and I) paid for it.

i'm like u - pretty heavily invested in RE myself here locally.  i think i have just been a bit quicker to recognize what the future holds for us.  i'm also putting the aforementioned NEW $$$ in better places.

here is some case-shiller for ya!!  

(notice where we are on the graph now - let's all revert back to the mean!!!)

[second_pancake]

RG, there are too many sources and sites to list or quote.  Just Google "condo surplus", "housing market statiscs" and/or "housing sale statistics."  You can also go to the MBA's site, www.mortagebrokersassociation.com to read more info.  If you have a subscription, which my company does, you can also read National Mortgage News that further validate all the points I made.

I work for a mortgage servicing company so we're not in trouble...yet.  But we are owned by a major buyer of mortgage-back securities, who also owns a fairly well-known subprime mortgage lender that hasn't underwritten a new mortgage since Oct. of 2007.  Everyone is holding their breath.

[RiversideGator]

River...new money, where is your NEW money going?  buy some financial stocks or local apartment buildings.  either way, you stand to lose at least 15% over the next year or so.  ah, my friend, history is a fancy subject to study.  look at the case-shiller index while you are at it.  show me ONE housing "bubble" like the 2000-2006 bubble.  it doesn't exist.  there were very small jumps up in the past, but things always reverted back to the mean within a year or two.

again, for every bubble, there has to be an equal bust - and then (this is the scary part) a flat market for at least a few years after the correction.  we still have at LEAST 15% more to drop in housing.  and then housing prices will be generally flat until around 2012, 2013.  housing is a capital market...works like all the others, just in a bit longer cycles generally.

the property you paid $300k for 3 years ago and go up to $400k is now back to $300k.  it will be $225k before things are done bleeding.  and then it will be relatively flat for at least a few years.   eventually it will get back up to what you (and I) paid for it.

i'm like u - pretty heavily invested in RE myself here locally.  i think i have just been a bit quicker to recognize what the future holds for us.  i'm also putting the aforementioned NEW $$$ in better places.

here is some case-shiller for ya!! 

(notice where we are on the graph now - let's all revert back to the mean!!!)

1)  The Case-Shiller index measures real property values, i.e. adjusted for inflation.  As I stated before, I dont care if the returns outpace inflation as long as they are positive over a 10 year period.  Obviously, I would prefer higher returns than now, but on average things always seem to work out.  This is why I posted the historic data from the US Census.

2)  Robert Shiller is a real estate bear who hates real estate apparently.  Other indexes dont show similar declines, such as the index from the Office of Federal Housing Enterprise Oversight.  The OFHEO shows that nationally housing price appreciation just stopped in 4Q 2007 and was just barely negative in the 4th Quarter.



Some states obviously fared worse than others with Florida doing worse than most other states.  But, we gained more in the previous 5 years too.  There is a state by state chart here:
http://www.ofheo.gov/HPI.aspx

In any event, the housing "bubble" like the commodities bubble and inflation today are monetary phenomena.  There was a fairly large expansion of the money supply between 2000 and 2005.  If there is more money chasing the same number of goods, the prices will rise.  This is basic economics.  This is mostly what happened and now the returns are coming down to earth.  But, houses will not be worth significantly less, barring calamity, because most people will just not sell until things improve and inflation will continue, people will make more, more households will form, etc, etc, over time.  So, it just takes time to work things out.

3)  Rents rise with inflation and for multi-family properties, values are based more on their potential rents, just like a stock price is based on business income.  Rents are not going down nationwide to my knowledge.  I am sure that, if they were, the negative news lovers in the press would have published this fact.

4)  Houses purchased in 2000 are still up significantly from 2000 prices.  Homes bought in 2005 or 2006 are probably not up much if any.  This is why you should take the long view.

[buyamerican101]

Why we can afford our home we are losing jobs here. Did you know that a local company is moving jobs to China? Biomet in Warsaw, IN and Biomet - Microfixation located in the Airport Industrial Park, 1520 Tradeport Drive Jacksonville is moving jobs to China. All Biomet companies are moving work we Americans make to China. The company sites labor costs as the reason. Will the quality of these products be compromised? Have you read lately of China’s quality problems? What about the toys with lead and tainted baby’s milk? They are letting good people go that even mention words about China. Now the company is being pressed to rapidly move their products there before new laws will regulate.

[Lunican]

Mortgage delinquencies soar in the U.S.
Tue Apr 7, 2009 9:54am EDT

NEW YORK (Reuters) - More U.S. consumers are falling behind on their mortgages, an indication that the housing market has yet to hit bottom, a top credit bureau executive told Reuters.

Dann Adams, president of U.S. Information Systems for Equifax Inc, reported that 7 percent of homeowners with mortgages were at least 30 days late on their loans in February, an increase of more than 50 percent from a year earlier.

He also said 39.8 percent of subprime borrowers were at least 30 days behind on their home mortgage loans, up 23.7 percent from last year.

"I'm trying to find optimism in these numbers, but I'm pretty hard pressed to do that," Adams said, despite a recent burst of relatively positive news that has fueled hope that the U.S. housing market has turned a corner.

Full Article:
http://www.reuters.com/article/newsOne/idUSTRE5363EV20090407

[mtraininjax]

ity Council members Jack Webb and Glorious Johnson should be commended for their efforts to try to find a way to somehow slow down the rising number of foreclosures here in Jacksonville.

Wonderful, where can I line up for my relief check? Will President Bush be there to hand it to me? AIU got there's, now where is mine?