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Texpat

Make your own luck.
Reap your own spoils.
Blaze your own path.

We'll make a good conservative out of you yet RC.

raycarey

i thought you were beyond such labels.

Texpat

You're right, I should have said, "We'll instill a sense of self-responsibility, self-determination, internal motivation and pride in you yet."

But of course, you're perfectly wlecome to whinge and moan and claim oppression and denounce others for any misfortune -- if you prefer..

raycarey

you seem pretty angry.

Texpat

No, quite happy actually. And I hope you haven't bought a mortgage recently.

bkkandrew

Back on topic:

Email from Auctioneers I detailed yesterday. Quite honest at the collapse in House Prices:

Good morning everyone.

Attached are the results of yesterdays sale.
<<Results 29 April 2008.doc>>
It was a difficult day to say the least. Whilst the room was incredibly full, upon speaking to people, it turned out that most people attending wanted to get a feel as to whether the market was suffering to the extent the press are saying it is.

In any event, most of our clients who didn't achieve a sale yesterday, are now looking at the situation differently this morning, and are open to offers, so contact xxxx xxxxxxxx on 0161 443 xxxx or xxxx.xxxxxxxxI love you Jesusedwardmellor.co.uk with your post auction bids and lets see if we can get you a bargain.

Regards,

xxxxx xxxxxxxx
Office Manager
Edward Mellor Auctions

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raycarey

bkkandrew, you seem very well informed on this issue, and i for one appreaciate your posts.

i'd be interested to know your thoughts on the alt-a mortgages and whether or not they're the next shoe to drop.....and if so, how bad do you think it will be.

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Jet Gorgon

^ Oh, Ray, so you have Alt-A loans? uh oh.

raycarey

how, pray tell, did you come to that conclusion?

btw, you've mentioned you work in the financial industry.....how's the mood around the office these days? one would imagine it's pretty grim.

bkkandrew

There is no question that alt-a are now in dire straights. Property valuation slumps move the goalposts of equity and essentially rewrite the terms of a loan.

There is going to a tsunami of defaults during 08/09, affecting even prime borrowers in the US, UK, Australia and parts of the Eurozone. During that time, the 'party' will move East (and in some places already has - see prior posts) to decimate 'value' here and in the region...

Hootad Binky

Sawmills are closing all over B.C., and hundreds of workers/loggers are being laid off from small towns (about 400 alone in Campbell river up-Island) due to lack of demand for B.C. forest products in U.S. homebuilding industry.

Shutdowns,layoffs hit largest West Coast forest company

Western Forest Products closes most of its logging operations as demand drops

April 30, 2008

The West Coast's largest forest company, Western Forest Products, announced Tuesday it is shutting down most of its logging operations and laying off more than 800 loggers and contractors as demand for wood products continues to tumble world-wide.

Logging is to shut down at the end of next week so the forest company can bring its log inventories in line with its lumber orders, Western's chief operating officer Duncan Kerr said Tuesday.

The reason is not just the U.S. housing collapse any more, Kerr said. Lumber that once fed U.S. homebuilders is now being diverted to other markets around the world, leading to a global erosion in demand.

Shutdowns,layoffs hit largest West Coast forest company

This is just one of many knock-on effects affecting various aspects of the global economy...

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bkkandrew

California Home Prices Drop 32% Amid Foreclosures, Realtors Say


By Dan Levy

May 23 (Bloomberg) -- California home prices tumbled 32 percent in April from a year earlier as ``distressed'' properties and a lack of financing cut demand, the state realtors group said.

The median existing home price fell to $403,870, the California Association of Realtors said in a statement today. Sales increased 2.5 percent, ending 30 months of consecutive year-on-year declines. Homes priced under $500,000 accounted for 64 percent of sales compared with 40 percent a year earlier.

California had the second-highest U.S. foreclosure rate in April, one for every 204 households, and the most foreclosure filings for the 16th consecutive month, RealtyTrac Inc., a seller of default data, reported on May 14. Sales increased in northern and southern California last month as buyers purchased discounted properties that had been in some stage of default, DataQuick Information Systems said this week.

``Both tighter underwriting standards and the ongoing effects of the credit/liquidity crunch continue to constrain sales,'' William Brown, president of the association, said in the statement.

http://www.bloomberg.com/apps/news?pid=20601206&sid=aeST4ALMGYeY&refer=realestat e

bkkandrew

A Housing Depression, without a Depression

by Michael Pollaro | June 16, 2008


"They” said it couldn’t happen, but it has. Home prices are falling at rates not seen since the Great Depression. From peak to March 2008:

• New Home Median Prices -13%
• Existing Home Median Prices -13%
• Case Shiller US National Index -16%

So what are “They” saying now? That’s right, “the bottom’s in”. I say, not so fast. To quote Fred Hickey, proprietor of The High-Tech Strategist and frequent participant in Barron’s Round tables:

This is the biggest housing collapse in this country’s history, and it’s happened before widespread job losses hit the economy. I can’t imagine how bad the housing market could get as the job losses mount.

In other words, what we have here is a housing depression without even a recession!

I’m no expert, but isn’t this what traditional housing busts are about – rising unemployment and falling incomes result in more home supply, less home demand and eventually lower home prices. You know, a recession. So what if a recession is in the offing? May I suggest a whole heap of trouble for housing prices. In fact, 2 to 3 more years of declining home prices is a real possibility.

How about an analog to defend my view? Have a look at the table at the end of this missive, where I compare the Savings and Loan (S&L) Crisis, arguably the largest housing crisis since the Great Depression, to our current Sub-Prime Crisis.

The S&L Crisis ended on traditional housing bust dynamics: rising unemployment and falling real incomes. Home supply overwhelmed demand and rising prices eventually turned into outright declines.

Our Sub-Prime Crisis, 2 plus years old now, is looking very ugly vs. the S&L analog. Home prices are already down 15% from the top. Inventories are at historic highs and likely set to rise on mortgage resets alone. The consumer is in horrible financial shape, sitting with a huge debt load and near zero savings in the face of an exploding cost of living. More defaults and foreclosures loom. Current vs. 1989 analogs are illuminating and suggest that home prices are extremely vulnerable to a recession:

• Months Home Inventory at 11 months sales in May is 1.5x the 1989 analog. Home Vacancy Rate is a record and 1.8x the 1989 analog.

• And talk about a supply pipeline, Foreclosure Rates are already 3.4x the 1989 analog. Despite this, builders are still adding to supply, albeit at a decelerating rate.

• As was true in the S&L analog, the Unemployment Rate is now trending up, spiking to 5.5% in May. Considering the BLS’s Birth/Death model is skewing employment to the upside, the unemployment rate is probably much worse.

• Consumers’ Cost of Living, as measured by John Williams’ reconstituted CPI, is growing 2.4x faster than Disposable Income vs. near flat on the 1989 analog.

• Personal Savings Rates are essentially ZERO (and have been for several years now) vs. 7% on the 1989 analog.

• Household Debt to Income at 133% in March is 1.5x larger than the 1989 analog.

The consumer is in no position to buy at current home prices and is more likely to HAVE TO sell, even without a recession. As the analog suggests, if a recession is directly ahead, expect even lower home prices, with a bottom not to be found until 2010?

Now, a recession is more than a rhetorical question. Despite assurances to the contrary, by notables like Hank Paulsen and Ben Bernanke, recession may be a forgone conclusion, as what drove our recent economic expansion, housing, is what will bring it down. Bill Fleckenstein, proprietor of Fleckenstein Capital and co-author of Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve:

We bailed out an equity bubble with a real-estate bubble. The bulk of GDP growth in the 2003-2007 "up cycle" was a function of mortgage-equity extraction, and 30%-40% of jobs were created in real-estate-related industries. Now that is gone, with the financial industry imploding at the same time. What's left are debts that people can't service (due to living beyond their means) -- further exacerbated by the inflation that's squeezing everyone's paychecks.

When thinking about all that, it's understandable how the financial system could be in the worst crisis since the Depression, as has been noted often, even in the mainstream press.) What makes no sense is to think that the worst has been discounted or that we'll experience just a drive-by recession. Tough times lie ahead, and thinking otherwise will not help anyone.

But things could get even worse. What if mortgage rates rise, as they are indeed doing now? Declining mortgage rates likely mitigated home price declines during the S&L Crises’ final plunge. Recession PLUS rising mortgage rates is the last thing housing needs.

Again, this is not just a rhetorical question. A strong case can be made that the 25 year secular decline in interest rates is over and mortgage rates will be heading higher, not only on continued risk aversion by lenders, but increasingly on rising price inflation and a falling dollar. Certainly, it is a fact that the Fed and its foreign central bank partners have had about ZERO impact on bringing down mortgage rates. If anything, it’s been the other way around. If mortgage rates are heading higher, much lower home prices are a given.

Be wary of the bottom caller. Falling knives can be fatal.

http://financialsense.com/fsu/editorials/2008/0616.html

bkkandrew

Tent City growing

Ontario's homeless enclave becomes regional haven
By Andrea Bennett, Staff Writer
Article Created: 02/15/2008 09:55:59 PM PST


ONTARIO - Nobody knows the exact population of Tent City, but the area has swelled beyond expectations.


The dusty, undeveloped city-owned parcel at Cucamonga Avenue and Jefferson Street is filled with tents, campers and makeshift shelters.

"It took on a life of its own," Mayor Paul Leon said. "It didn't occur to us it would grow to this size this fast, which reflects the need."

The area, just west of L.A./Ontario International Airport, was created in July as a haven for the city's homeless.

It has grown to include 300 to 400 people from throughout the region.

"It's growing and it's growing," said Carlos Villalobos, a Tent City resident the past four months. "And I haven't seen nobody leave."



Gloria Marin and Efren Gradillas live in Ontario s Tent City just west of L.A./Ontario International Airport. City officials say the encampment has grown to become a regional destination for the homeless and that a regional approach is needed. (Photos by Mediha Fejzagic DiMartino/Staff Photographer)


Villalobos said the encampment is popular because police, for the most part, leave people there alone. Police would typically harass homeless sleeping on the streets, he said.

The city also provides water and bathrooms, and picks up trash. Churches regularly provide food, Villalobos said.

Word spread quickly after a few dozen people who lived by the Amtrak station settled in, along with up to 100 people identified as homeless by Ontario officials.

Tent City then went from a symbol of municipal humanitarianism to a testament to the shortage of resources in the area.

Some people said they initially learned about Tent City in the paper or online. Most reportedly heard about it from friends, police in other cities, or San Bernardino County parole officers.

Timothy Frazier said he arrived Thursday night to join his friend, Monroe Emmanuel Lee III. They met at the California Rehabilitation Center in Norco.

Initially, Frazier said he thought the encampment was a joke.

"I was pretty amazed. It really is like a city," said Frazier, who indicated he is from Compton, as he sat early Friday with Lee by a fire pit.

"Apparently, they need some kind of shelters out here. In L.A., there's all kinds of shelters."

Ontario was lauded by some people for giving its homeless a place to stay, rather than chasing them out of town or ignoring them.

But some Ontario residents are upset about the arrangement.

"I understand something needs to be done for these people, but I don't think the answer is Tent City," said Antoinette Hernandez, a 30-year resident. "You're just asking for sickness, violence or other problems."

City officials said they have to do something about the encampment, which has created public health and safety concerns due to its concentration of people and lack of organization.

Leon said he has met with county Supervisor Gary Ovitt and plans to have a meeting with other mayors to bring other cities into the discussion to find a solution.

"We've pledged to help in any way we can when the city figures out how it will handle things," Ovitt said. "It is an unfair burden to Ontario."

Councilman Jason Anderson said the property was always considered a temporary refuge for the homeless until the city's emergency shelter with Mercy House is up and running.

Tent City's population explosion is evidence that people are streaming in from all over the region, Anderson said.

"Certainly, there are going to be efforts to regulate who is there," he said. "People who do have residency in Ontario should be there. Otherwise, it's unfair to our own city population."

Leon said the city can't go it alone when it comes to the homeless.

"We've always been willing to accept responsibility for the homeless in Ontario, but we cannot take on the burden of all the homeless of San Bernardino County," Leon said.

http://www.dailybulletin.com/ci_8277825

Milkman

Nice BKKAndrew.

Here is a link to a lengthy but quick-read article about how the housing boom and bust affected a bank and even a public employee fund. It's too long to cut and paste but click it if you want to read it:

Recession fears after housing bubble burst - Washington Post - MSNBC.com

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bkkandrew

^Yes good article. I actually had posted on the subject in early February:

(A note of caution for those with deposits in US Banks)http://teakdoor.com/us-domestic-issues/24495-note-caution-those-deposits-us-banks.html#post530913

At that stage, people didn't seem to connect credit crunch with real people not getting their salary cheques...

bkkandrew

A snip from the following article:

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/18/cnrbs118.xml

Its going to get much, much worse...

Texpat

I love it.

I hope those young, smart guys I worked with in Los Angeles who bought $600,000 homes with flimsy terms are living in cardboard boxes under the 405 Freeway. I recall with great pleasure their smugness and certainty that you can't lose with real estate. They cited the value increases over the past few years -- as proof.

Unfortunately, I plugged my old zipcode (90278) into a Calif real estate calculator the other day and saw the area was only down ~5%
I think the big losses are out in Orange County and south toward San Diego.