Calculated Risk, if you don't read it already, never fails to inform with its pithy style.
This offering courtesy of CR.
He states the obvious, which went unsaid for the past almost forty years: A house is something you buy to live in, raise and enjoy the family in, and with a bit of good fortune, you get your inflation-adjusted money out of it, or maybe even make a few bucks.
To quote Elmer Fudd, that wisest of pundits: 'EbydyEbydyEbydy--That's All, Folks!'
And that is as it should be. There are no free lunches.
The realtors and the bankers and the politicians made out like bandits selling the idea of 'home as investment vehicle' or 'home as ATM machine'.
Shouldn't capital be directed toward enterprise? You know, activities that make stuff that people need or want(once basic needs are fulfilled). We've all tied up our family capital in these lovely things that don't produce anything of value for our fellow man. Sort of like 'investing' in Beanie Baby or Barbie Doll collections. It happens!
But if the politicians punish enterprise, and encourage borrowing to buy big houses, where's the money gonna flow? Especially if you guarantee those borrowings with the Treasury?
In 1969, my folks bought a small three-bedroom brick ranch, built in 1955 for $29,000(with some real trepidation). They borrowed part of the down payment from one of my father's sisters. House payment of $129, raised two boys and lived life. Long story short--it's unsaleable any time soon, and is now a rental. At the height of the bubble in '05-'06, it would have been a 'tear-down' for a McMansion, the lot alone worth 250K.
I was the unheeded younger son, quietly raising my hand and saying, 'Maybe now is the time to cash out, and live with your friends at (fill in the blank) Assisted Living Village? You are in your eighties, and Dad's health is failing.
'No, no, no, no, they replied. No need for that.'
Dad dies, Mom now lives in a tiny assisted living apartment, and the McMansions down the street aren't selling...haven't checked to see if the 'For Rent' signs have blossomed there yet.
Jim the Realtor, up close and personal.
Saturday, September 26, 2009
Friday, September 25, 2009
Green Shoots Award Nominee--Habitat for Humanity
This piece of happy news from Miller-McCune, about Habitat's program to renovate foreclosed houses for client families.
Good points include: They are buying the properties at about 60% discount to the foreclosed mortgage balance, i.e., at close to realistic prices, and forcing the haircut onto the lenders.
They rehabilitate, and sell to pre-qualified (as in, employed, non-drug culture) clients. Clients must invest substantial sweat equity into their homes, as well as show financial stability. No 'gimmees' here. Habitat holds the mortgage, and plows profits back in to the program.
It resembles the old-style Savings and Loan business model. Savers saved for the down payment, lived stable lives, and became known quantities to the S & L officers before a mortgage was written.
That way, everybody prospered! (Heavens, what a concept!!)
The foreclosure rate on Habitat homes is under 2%.
The only bit that gives pause is the use of Federal stimulus money. This good thing is fraught with moral hazard, as it could easily become a slush fund to bail out irresponsible crony lenders, or as a way to hand out political patronage to the politically connected. Were that to happen, it would eventually be exposed, devastate Habitat, and probably destroy it, as the charity relies upon legions of volunteers (mainly from churches) to provide labor and materials. Loss of credibility = demise.
Fingers crossed, and three cheers!
Good points include: They are buying the properties at about 60% discount to the foreclosed mortgage balance, i.e., at close to realistic prices, and forcing the haircut onto the lenders.
They rehabilitate, and sell to pre-qualified (as in, employed, non-drug culture) clients. Clients must invest substantial sweat equity into their homes, as well as show financial stability. No 'gimmees' here. Habitat holds the mortgage, and plows profits back in to the program.
It resembles the old-style Savings and Loan business model. Savers saved for the down payment, lived stable lives, and became known quantities to the S & L officers before a mortgage was written.
That way, everybody prospered! (Heavens, what a concept!!)
The foreclosure rate on Habitat homes is under 2%.
The only bit that gives pause is the use of Federal stimulus money. This good thing is fraught with moral hazard, as it could easily become a slush fund to bail out irresponsible crony lenders, or as a way to hand out political patronage to the politically connected. Were that to happen, it would eventually be exposed, devastate Habitat, and probably destroy it, as the charity relies upon legions of volunteers (mainly from churches) to provide labor and materials. Loss of credibility = demise.
Fingers crossed, and three cheers!
Robert Reich Tells The Truth--Again
Thanks again to Robert Reich, now an official 'must read' for one and all.
His take on the current behaviour of The People In Charge is scathing. The White House must hate him, but what are they gonna do? He was a Clinton cabinet member, a major part of the Obama administration team, and teaches at UC Berkley. Are they going to call him a tin-foil-hat looney racist as well?
Undoubtedly, he's probably now being shunned, but there are worse fates than not being seen publicly with these people, off the party invitation lists, and not getting phone calls returned.
He asks the obvious question: The economy is a shambles, and Wall Street is soaring, with the usual cast of characters making money hand over fist. How could this be?
I've included one the final of paragraphs, but urge the whole essay be read.
In other words, the Dow is up despite the biggest consumer retreat from the market since the Great Depression because of the very thing so many executives are complaining about, which is government’s expansion. And regardless of what you call it – Keynesianism, socialism, or just pragmatism – it’s doing wonders for business, especially big business and Wall Street. Consumer spending is falling back to 60 to 65 percent of the economy, as government spending expands to fill the gap. The problem is, our newly expanded government isn't doing much for average working Americans who continue to lose their jobs and whose belts continue to tighten, and who are getting almost nothing out of the rising Dow because they own few if any shares of stock. Despite the happy Dow and notwithstanding the upbeat corporate earnings, most corporations are still shedding workers and slashing payrolls. And the big banks still aren't lending to Main Street.
It isn't like we aren't being completely forewarned about tomorrow's dangers sourced in today's corruption.
The culture shapes the economy.
Ethics matter.
Main Street matters more than Wall Street.
God, and history, and mathematics, are not mocked.
His take on the current behaviour of The People In Charge is scathing. The White House must hate him, but what are they gonna do? He was a Clinton cabinet member, a major part of the Obama administration team, and teaches at UC Berkley. Are they going to call him a tin-foil-hat looney racist as well?
Undoubtedly, he's probably now being shunned, but there are worse fates than not being seen publicly with these people, off the party invitation lists, and not getting phone calls returned.
He asks the obvious question: The economy is a shambles, and Wall Street is soaring, with the usual cast of characters making money hand over fist. How could this be?
I've included one the final of paragraphs, but urge the whole essay be read.
In other words, the Dow is up despite the biggest consumer retreat from the market since the Great Depression because of the very thing so many executives are complaining about, which is government’s expansion. And regardless of what you call it – Keynesianism, socialism, or just pragmatism – it’s doing wonders for business, especially big business and Wall Street. Consumer spending is falling back to 60 to 65 percent of the economy, as government spending expands to fill the gap. The problem is, our newly expanded government isn't doing much for average working Americans who continue to lose their jobs and whose belts continue to tighten, and who are getting almost nothing out of the rising Dow because they own few if any shares of stock. Despite the happy Dow and notwithstanding the upbeat corporate earnings, most corporations are still shedding workers and slashing payrolls. And the big banks still aren't lending to Main Street.
It isn't like we aren't being completely forewarned about tomorrow's dangers sourced in today's corruption.
The culture shapes the economy.
Ethics matter.
Main Street matters more than Wall Street.
God, and history, and mathematics, are not mocked.
My Very Own 'Jim The Realtor' Moment
Today's calendar featured a meeting with clients in academia, after which I was once again overcome with a sense of relief that Providence spared me a career in academia. Can you say, 'Major on the minors!'?
I knew you could!
Feeling both self-pitying and self-indulgent, I headed for my favorite Greek comfort-food haunt in Nashville. Taking a short-cut around the traffic, the Fickle Finger of Fate led me to the auction of a house, underway in an older South Nashville neighborhood.
It was a brick house of crumbling exterior, on a corner lot across from a Missionary Baptist Church. The auctioneer was doing his old-school Southern best to whip the handful of bidders into a lather, standing in the bed of a red pick-up truck, alternately encouraging and browbeating the assembly.
As you can see from the postures of the folks in the picture, he was not having a great day. He was trying to cheer the crowds on to $225,000 for this prize property...
I arrived as he was about to drop the hammer for $170,000. WTF??? I internally exclaimed. Morbid curiosity took over, and I found myself, hands firmly in my pockets, watching the proceedings. One of the old auction assistants came over, and said 'Wanna bid?', to which I politely demurred. In $500 increments, the auctioneer hectored it up toward 175k, and the assistant came around again: 'Wanna bid?
'No', I blurt out, 'cuz it's an $85,000 house!' The old guy's face lit up with that 'I know, and you know, and you know that I know' smile. Wish I had the camera up at that moment, but it took us both by surprise. I walked back to my truck, as the bid approached 177k.
I hope the purchaser paid in cash, 'cuz otherwise, we'll back at the auction block within two years. I also hope the purchaser has the patience of Job, the courage of Daniel, an alarm system to install, and a gun handy at all times. I drove away, and one block later was in the midst of one of the largest and most drug ridden public housing projects in the city, a lot of it dating from FDR's days. I decided against stopping to take a picture of the project, as there were a number of idle young men hanging around in front, who probably would object to a middle-aged white guy in a pick-up stopping to snap photos of them...
It was a true Jim the Realtor moment.
One would think, given the carnage of the past two years, some lessons would have been learned.
Not!
Wednesday, September 23, 2009
Sunshine Is The Best Disinfectant
HT to Cranmer, who never fails to thoughtfully inform on matters of Christian faith in a post-Christian world.
A Christian couple who own a small hotel are under prosecution by the state authorities in the UK, supposedly because they offended a Muslim guest who repeatedly tried to engage them in some sort of religious debate.
Under their own roof, on their own property, in private.
This smells like a set-up, does it not?
OldSouth has no doubt that this nonsense is well on its way to the shores of his beloved United States. (He is grateful to live in Tennessee, whose legislature has already passed a resolution informing Obama's minions that they regard state's rights as supreme, and plan to defend them.)
This is a time to speak up, and to open our wallets.
The link to contribute to their legal defense is here.
We can be sure that if this prosecution is successful, there will be repeat performances here. The Left always watches to see how it's done. They take notes.
Free speech, even behind closed doors, is the constant threat.
On the other hand, if it is a spectacular and humiliating failure(complete with known support from the US), we'll slow them down a bit.
These people operate in the dark. Sunshine is the best disinfectant.
A Christian couple who own a small hotel are under prosecution by the state authorities in the UK, supposedly because they offended a Muslim guest who repeatedly tried to engage them in some sort of religious debate.
Under their own roof, on their own property, in private.
This smells like a set-up, does it not?
OldSouth has no doubt that this nonsense is well on its way to the shores of his beloved United States. (He is grateful to live in Tennessee, whose legislature has already passed a resolution informing Obama's minions that they regard state's rights as supreme, and plan to defend them.)
This is a time to speak up, and to open our wallets.
The link to contribute to their legal defense is here.
We can be sure that if this prosecution is successful, there will be repeat performances here. The Left always watches to see how it's done. They take notes.
Free speech, even behind closed doors, is the constant threat.
On the other hand, if it is a spectacular and humiliating failure(complete with known support from the US), we'll slow them down a bit.
These people operate in the dark. Sunshine is the best disinfectant.
Monday, September 21, 2009
On The Ground In Joliet
Since The Economic Crisis began to break, I've invested serious time attempting to read and learn about these events and times. Charts, numbers, arcane stats...all important to have learned. It's helped as we navigate the waters as a family.
I'm also interested in what happens on the ground, in the everyday.
This week's Chicago trip was enlightening. The destination was Joliet, the far suburb to the south and west, bounded by the junction of I-80 and I-55.
Notable was the warehouse space going begging. Most notably, one closest to the junction was a million-square-foot facility, standing empty. A Ryder facility in Joliet itself stands empty, no takers for a long time now. The auto dealers are parking the cars sideways in the lots, to give the appearance of large inventories.
A true bright spot was Friday evening's dinner at Barolo. No hint of a recession here, tables filled and staff cheerful. Likewise on the journey up and back, the Cracker Barrel Old Country Store all had full parking lots, traffic in the gift shops, happy diners, happy staff.
Both places share a common trait: Food is actually cooked in the kitchen, good value for the fare offered, attentive staff. Nothing is fussy, actually avoiding the trendy, evoking a sense of comfort and familiarity. Cracker Barrel has mastered the art of merchandising Americana to its clientele, even to the point of branding releases of country and gospel music on CD in its own displays. This month's offering is a collection of George Jones' hits, for example. I studied the display: George Jones is selling, as is Dolly Parton, Bill Gaither, Fats Domino, Waylon Jennings. Only one CD was going untouched, that of The Allman Brothers. Wrong product in the wrong location, as they are seen as part of the Counter-Culture, and Cracker Barrel customers want nothing to do with that.
Joliet, the old steel foundry town, has remade itself a few times, recently with casinos. Parts are truly lovely, and the people encountered are friendly and gracious, in that true Midwestern way. Tree-lined streets, modest houses, well-tended yards, sidewalks, new firehouses and an enviable public library building.
What causes disquiet is the phenomenon of the new housing developments planted on the prairie, mainly zero-lot-line structures, one indistinguishable from the other, treeless, rapidly constructed, offered at lower prices with each passing quarter. These aren't neighborhoods, like Joliet knows neighborhoods. They are more like vast dormitories, where people lay their heads at night between commutes to and from work.
Only they have mortgages on them, just like the warehouses.
What will it be like to spend one's childhood here, in sight of I-55, in a treeless world where all houses look alike, all cars look alike, riding the bus to the county's schools?
What becomes of the children of The Bubble?
I'm also interested in what happens on the ground, in the everyday.
This week's Chicago trip was enlightening. The destination was Joliet, the far suburb to the south and west, bounded by the junction of I-80 and I-55.
Notable was the warehouse space going begging. Most notably, one closest to the junction was a million-square-foot facility, standing empty. A Ryder facility in Joliet itself stands empty, no takers for a long time now. The auto dealers are parking the cars sideways in the lots, to give the appearance of large inventories.
A true bright spot was Friday evening's dinner at Barolo. No hint of a recession here, tables filled and staff cheerful. Likewise on the journey up and back, the Cracker Barrel Old Country Store all had full parking lots, traffic in the gift shops, happy diners, happy staff.
Both places share a common trait: Food is actually cooked in the kitchen, good value for the fare offered, attentive staff. Nothing is fussy, actually avoiding the trendy, evoking a sense of comfort and familiarity. Cracker Barrel has mastered the art of merchandising Americana to its clientele, even to the point of branding releases of country and gospel music on CD in its own displays. This month's offering is a collection of George Jones' hits, for example. I studied the display: George Jones is selling, as is Dolly Parton, Bill Gaither, Fats Domino, Waylon Jennings. Only one CD was going untouched, that of The Allman Brothers. Wrong product in the wrong location, as they are seen as part of the Counter-Culture, and Cracker Barrel customers want nothing to do with that.
Joliet, the old steel foundry town, has remade itself a few times, recently with casinos. Parts are truly lovely, and the people encountered are friendly and gracious, in that true Midwestern way. Tree-lined streets, modest houses, well-tended yards, sidewalks, new firehouses and an enviable public library building.
What causes disquiet is the phenomenon of the new housing developments planted on the prairie, mainly zero-lot-line structures, one indistinguishable from the other, treeless, rapidly constructed, offered at lower prices with each passing quarter. These aren't neighborhoods, like Joliet knows neighborhoods. They are more like vast dormitories, where people lay their heads at night between commutes to and from work.
Only they have mortgages on them, just like the warehouses.
What will it be like to spend one's childhood here, in sight of I-55, in a treeless world where all houses look alike, all cars look alike, riding the bus to the county's schools?
What becomes of the children of The Bubble?
Flip This Shameless Fraud
Apart from episodes of Gordon Ramsay's Kitchen Nightmares, I avoid reality TV. Gordon's a special case, and has become a hero of the household, but that's a tale for another time.
But yesterday in Chicago, packing up to check out of the hotel room, I surfed over to A&E Network's Flip This House, about twenty minutes into the episode. I confess I didn't know what show I was watching, just observing some guys in Hartford trying to bring a house back to life they had bought, hoping to rehabilitate and resell.
The bees nested in the ceiling and windows were one challenge. After about five minutes, morbid curiosity took over, sensing that much worse was to follow.
It did.
The plumber arrived.
He went to the bathroom, and turned on the bathtub faucet.
No water. Because the fixtures were cosmetic only, not attached to any plumbing anywhere. The previous owner had cosmetically rigged the house to get past a lazy (or perhaps corrupt?) appraiser for a refi, to pull cash from the property.
Mortgage Fraud 101.
Someone should go to jail, but they won't. Complaining to the local prosecutor will get them the response, 'This is a civil matter', and the state prosecutor will tell them he's too busy--and likely he thinks he is. But just once, with a case this blatant, and professionally filmed, it would seem worthwhile to round up the owner, the appraiser, the realtor, and the mortgage broker, and at least perp-walk them for the local evening news.
Now, our intrepid remodelers don't get off that cleanly in my mind. They had a duty to inspect before buying. Betcha they will the next time!
But that in no way excuses or lessens the stench of a transaction based upon a lie.
Myself, I've got a Mercedes in the driveway I should have asked a few more questions about. Exhilarating to drive, but the previous owner didn't mention its need of a new head gasket. Shame on me, but more shame on him. I was gullible, he was duplicitous. I still would have bought the car with all the facts on the table, at a bit lower price.
There will be no recovery of the economy without a recovery of ethics.
But yesterday in Chicago, packing up to check out of the hotel room, I surfed over to A&E Network's Flip This House, about twenty minutes into the episode. I confess I didn't know what show I was watching, just observing some guys in Hartford trying to bring a house back to life they had bought, hoping to rehabilitate and resell.
The bees nested in the ceiling and windows were one challenge. After about five minutes, morbid curiosity took over, sensing that much worse was to follow.
It did.
The plumber arrived.
He went to the bathroom, and turned on the bathtub faucet.
No water. Because the fixtures were cosmetic only, not attached to any plumbing anywhere. The previous owner had cosmetically rigged the house to get past a lazy (or perhaps corrupt?) appraiser for a refi, to pull cash from the property.
Mortgage Fraud 101.
Someone should go to jail, but they won't. Complaining to the local prosecutor will get them the response, 'This is a civil matter', and the state prosecutor will tell them he's too busy--and likely he thinks he is. But just once, with a case this blatant, and professionally filmed, it would seem worthwhile to round up the owner, the appraiser, the realtor, and the mortgage broker, and at least perp-walk them for the local evening news.
Now, our intrepid remodelers don't get off that cleanly in my mind. They had a duty to inspect before buying. Betcha they will the next time!
But that in no way excuses or lessens the stench of a transaction based upon a lie.
Myself, I've got a Mercedes in the driveway I should have asked a few more questions about. Exhilarating to drive, but the previous owner didn't mention its need of a new head gasket. Shame on me, but more shame on him. I was gullible, he was duplicitous. I still would have bought the car with all the facts on the table, at a bit lower price.
There will be no recovery of the economy without a recovery of ethics.
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