Hello All!
Just a quick note here before I post. I am on vacation starting tomorrow for a week. If I can hop on at some point and throw up a post I will. No promises though. Its time for some relaxation!
I want to thank everyone who continues to stop by and read the blog. The Housing Time Bomb is closing in on 20,000 visitors since its inception in February. I have learned a lot from all of your feedback and ideas, and I hope we can continue to steer our way through this difficult market.
I think we have done pretty well so far!
Back the the blog!
I thought I would throw up this article today. After reading this, I am glad I don't own a house in Tampa!
As you can see below, some areas of Tampa now have 42 year invetories based on current sales. Here is the link to the article . I will post the full article below:
"In its quest for financial health, the Tampa Bay area home building industry is grappling with a giant scab on the landscape: 31,900 vacant home sites waiting for buyers.
New-home closings in the region fell 42.6 percent this spring vs. the same time last year. But that's nothing compared to the glut of vacant lots, enough home sites to last builders 51/2 years at current sales rates.
Hillsborough County's supply is 49.6 months, or more than four years. Pasco and Pinellas counties have nearly five-year supplies. And Hernando County's lot supply is 136 months, or 11 years.
It gets worse: Citrus County has a 508-month supply. At current sales, it would take 42 years to burn off all its finished home sites.
Citrus' new-home market has fallen off a cliff, with only 95 homes starts in the past year amid a surplus of 4,018 developed home sites.
"It's too far a commute and the retirees are more nervous as a group, so they're not coming to buy in Citrus," said Tony Polito, who compiled the new-home report for housing consultant Metrostudy.
In a glimmer of good news on the lot front, developers have largely ceased paving former cow pastures, orange groves and forests. The industry delivered 915 lots in the second quarter of this year that ended June 30, far below the 3,813 lots delivered in the same period a year earlier.
"Hillsborough finally stopped adding lots this quarter," said Polito, who explained that a balanced market has an 18- to 24-month supply. "The other counties stopped adding lots months before that."
Builders also continue to suffer from declining year-over-year sales. New-home closings nosedived 42.6 percent, from 3,085 in the second quarter of 2007 to 1,772 in the second quarter of this year.
Local builders began construction on 1,401 houses in the quarter ending June 30. That's 28.7 percent below last year's pace of 1,965 housing starts. In many neighborhoods builders compete for sales against investors desperate to unload hardly lived-in homes bought during the boom.
Typical is Meadow Pointe in Pasco. Two years ago builders closed on 596 homes. Last year closings slumped to 349 and settled at 190 this year."
Final Take:
Notice that the builders have almost completely stopped building. Its about time! You would think that they would have stopped when inventories reached 30 year levels!
Its going to take decades for Tampa to recover from this. I guarantee you some of these developments will sell for .10 on the dollar at some point.
Keep in mind the housing bubble theories in 2006/07 were based on bad lending, ridiculously high housing prices, and rising inventories.
I originally thought at the worst we would see 20-50% drops in housing prices depending on the area. However, the declining economy, the disasterous response by the Fed, and the carnage in the banking system simply must to be added to the equation when trying to estimate how bad its going to get in areas like Tampa.
I am beginning to think that distressed asset sales may be the only way to dump this inventory in areas like the inland empire in Cali or parts of Florida.. This means some of these properties will sell for pennies on the dollar. I say this because I simply can't see anyone ever having the courage to buy homes in an area where everything is vacant.
Bottom Line
I have heard from a couple realtors that traffic has come to a complete stop in certian bubble areas that were hit hardest by the housing bubble.
Reality will soon set in on the sellers in these markets. Builders are going to start dumping these projects as the banks start pressuring them for payment. As a result, I predict you will start seeing distressed asset sales in certian areas within the next year.
This will be the time to start seriously looking. The foreclosure buying suckers are about done chasing the "deals of the century"(yeah right). If you live in an area like Stockton or Tampa get your checkbook ready. The carnage is taking its toll and desperation is about to set in.
Its already started with CDO's after Merrill's sale at .06 on the dollar to a firm in Texas.
Let the carnage begin!
I hope everyone has a great week with their investments.
Saturday, August 2, 2008
Friday, August 1, 2008
Unemployment rises to 5.7%/Market Update
Hello all!
Things continue to worsen in the markets as the unemployment rose to 5.7%. This was the highest rate in four years.
"Aug. 1 (Bloomberg) -- The U.S. unemployment rate rose to the highest level in more than four years as employers cut jobs again in July, increasing the threat of a deeper economic slowdown.
Payrolls fell by 51,000, less than forecast, the Labor Department said today in Washington. The jobless rate rose to 5.7 percent, from 5.5 percent the prior month. As recently as April, it was 5 percent. A separate report showed that manufacturing stagnated in July as companies were hit by rising raw-materials costs and slower spending.
``This is further evidence the economy is in a recession, probably a shallow recession,'' said Nariman Behravesh, chief economist at Global Insight Inc. in Lexington, Massachusetts, referring to rising joblessness. ``It will be a major drag on consumer spending.''
The last time the unemployment climbed so much in three months was at the end of the last U.S. recession in 2001. Payroll cuts combined with decreasing property values, stricter lending rules and near-record energy prices to send consumer confidence levels close to the weakest in 16 years in July."
Final Take/Rant:
Stocks did not react well to the news. Stocks were down as much as triple digits on the DOW. I don't really know what to say here folks. We are in deep trouble. The news continues to get worse each day.
The strapped consumer is now starting to lose their job at a time when they are up to their eyeballs in debt. This combination is frightening because it leaves you with zero options.
When you have zero cash and no job, saving the house will be the last of their concerns. Finding their next meal is going to become priority number one. I can't stress to you how dangerous this situation is becoming.
The government has to wake the hell up and start making tough decisions. Going on TV daily and attempting to calm the masses simply isn't cutting it anymore. Things are not OK! They are deteriorating by the week. A serious economic downturn/collapse is waiting in the wings if things do not change.
The focus of the government and Treasury must switch towards trying to save America versus trying to save Wall St. Interest rates must rise in order to protect the consumer from inflation. Housing must be fall to affordable levels. Financial institutions must take their losses and start failing versus sucking up all of our tax money via government bailouts.
The stimulus didn't work so its time to change our economic policies. Shut down the discount window. If financial institutions fail then they fail. They made bad bets. Thats how capitalism works. I would rather see the Fed temporarily nationalize the banks versus Fannie/Freddie if that is whats needed to be done in order to save the financial system. Take the money that is wasted at the discount window and start trying to create jobs with it. Its our money and we are suffering!
The liquidity and stimulus from the Fed has done nothing but postpone the losses that must be taken by both the homeowner and the financials. The longer we wait the worst this economic downturn will be.
I mean look at GM today.
"Aug. 1 (Bloomberg) -- General Motors Corp. reported a second-quarter loss of $15.5 billion, the third biggest in its 100-year history, because of plunging U.S. sales and the declining value of truck leases. The shares fell as much as 11 percent.
The deficit of $27.33 a share compares with a profit of $891 million, or $1.56, a year earlier. Excluding costs GM considers one-time, the per-share loss was 4 times bigger than analysts projected. Labor strikes contributed to a $9.9 billion drop in North American revenue, and sales worldwide tumbled 18 percent to $38.2 billion."
Continued
Look at those numbers. The company lost $15 billion in 1 quarter. $15 billion!!! What does this tell you about the health of the consumer. From what I have heard, car sales have virtually disappeared in the last month. Leases are now pretty much gone. No car has any resale value when the dealer gets it back so they have no desire to do leases anymore. Borrowing the money for them has also gotten expensive so leases make no sense from this standpoint either.
These losses are becoming fricking ridiculous. Banks like Merrill, Wachovia, and Washington Mutual continue to puke up billions in losses quarter after quarter. How many bad quarters is it going to take before we realize that some or all of these institutions are insolvent.
I mean Merrill announces a $10 billion quarterly loss and then comes out days later and announces another $5.7 billion dollar loss. This is insane. This tells me they don't even know what they have on their books because housing is deteriorating at such a fast pace. They obviously would have preferred to announce these losses all at once.
In my eyes and others, Merril did this for one of two reasons. Either they were about to get downgraded by the ratings agencies if they didn't do something, or they were hurting for cash so they decided to get what $$ they could by selling some of their CDO garbage.
Bottom Line
Housing continues to worsen and Wall St.'s balance sheets live in die by housing prices. If housing continues to plummet, so will Wall St.
Because of this, continuing to inject stimulus into failed companies is a waste of time and money. We all know that houses will drop because they are still unaffordable. People are out of work and suffering from serious inflation and high gas prices. Fed policy must make the American consumer its number one priority.
I love America and to see it being destroyed like this truly breaks my heart.
Its time for change and its not too late! If we take the right steps we can turn this around.
Things continue to worsen in the markets as the unemployment rose to 5.7%. This was the highest rate in four years.
"Aug. 1 (Bloomberg) -- The U.S. unemployment rate rose to the highest level in more than four years as employers cut jobs again in July, increasing the threat of a deeper economic slowdown.
Payrolls fell by 51,000, less than forecast, the Labor Department said today in Washington. The jobless rate rose to 5.7 percent, from 5.5 percent the prior month. As recently as April, it was 5 percent. A separate report showed that manufacturing stagnated in July as companies were hit by rising raw-materials costs and slower spending.
``This is further evidence the economy is in a recession, probably a shallow recession,'' said Nariman Behravesh, chief economist at Global Insight Inc. in Lexington, Massachusetts, referring to rising joblessness. ``It will be a major drag on consumer spending.''
The last time the unemployment climbed so much in three months was at the end of the last U.S. recession in 2001. Payroll cuts combined with decreasing property values, stricter lending rules and near-record energy prices to send consumer confidence levels close to the weakest in 16 years in July."
Final Take/Rant:
Stocks did not react well to the news. Stocks were down as much as triple digits on the DOW. I don't really know what to say here folks. We are in deep trouble. The news continues to get worse each day.
The strapped consumer is now starting to lose their job at a time when they are up to their eyeballs in debt. This combination is frightening because it leaves you with zero options.
When you have zero cash and no job, saving the house will be the last of their concerns. Finding their next meal is going to become priority number one. I can't stress to you how dangerous this situation is becoming.
The government has to wake the hell up and start making tough decisions. Going on TV daily and attempting to calm the masses simply isn't cutting it anymore. Things are not OK! They are deteriorating by the week. A serious economic downturn/collapse is waiting in the wings if things do not change.
The focus of the government and Treasury must switch towards trying to save America versus trying to save Wall St. Interest rates must rise in order to protect the consumer from inflation. Housing must be fall to affordable levels. Financial institutions must take their losses and start failing versus sucking up all of our tax money via government bailouts.
The stimulus didn't work so its time to change our economic policies. Shut down the discount window. If financial institutions fail then they fail. They made bad bets. Thats how capitalism works. I would rather see the Fed temporarily nationalize the banks versus Fannie/Freddie if that is whats needed to be done in order to save the financial system. Take the money that is wasted at the discount window and start trying to create jobs with it. Its our money and we are suffering!
The liquidity and stimulus from the Fed has done nothing but postpone the losses that must be taken by both the homeowner and the financials. The longer we wait the worst this economic downturn will be.
I mean look at GM today.
"Aug. 1 (Bloomberg) -- General Motors Corp. reported a second-quarter loss of $15.5 billion, the third biggest in its 100-year history, because of plunging U.S. sales and the declining value of truck leases. The shares fell as much as 11 percent.
The deficit of $27.33 a share compares with a profit of $891 million, or $1.56, a year earlier. Excluding costs GM considers one-time, the per-share loss was 4 times bigger than analysts projected. Labor strikes contributed to a $9.9 billion drop in North American revenue, and sales worldwide tumbled 18 percent to $38.2 billion."
Continued
Look at those numbers. The company lost $15 billion in 1 quarter. $15 billion!!! What does this tell you about the health of the consumer. From what I have heard, car sales have virtually disappeared in the last month. Leases are now pretty much gone. No car has any resale value when the dealer gets it back so they have no desire to do leases anymore. Borrowing the money for them has also gotten expensive so leases make no sense from this standpoint either.
These losses are becoming fricking ridiculous. Banks like Merrill, Wachovia, and Washington Mutual continue to puke up billions in losses quarter after quarter. How many bad quarters is it going to take before we realize that some or all of these institutions are insolvent.
I mean Merrill announces a $10 billion quarterly loss and then comes out days later and announces another $5.7 billion dollar loss. This is insane. This tells me they don't even know what they have on their books because housing is deteriorating at such a fast pace. They obviously would have preferred to announce these losses all at once.
In my eyes and others, Merril did this for one of two reasons. Either they were about to get downgraded by the ratings agencies if they didn't do something, or they were hurting for cash so they decided to get what $$ they could by selling some of their CDO garbage.
Bottom Line
Housing continues to worsen and Wall St.'s balance sheets live in die by housing prices. If housing continues to plummet, so will Wall St.
Because of this, continuing to inject stimulus into failed companies is a waste of time and money. We all know that houses will drop because they are still unaffordable. People are out of work and suffering from serious inflation and high gas prices. Fed policy must make the American consumer its number one priority.
I love America and to see it being destroyed like this truly breaks my heart.
Its time for change and its not too late! If we take the right steps we can turn this around.
Thursday, July 31, 2008
Main St. Storms DC in Protest of the Bailout
I thought this deserved a mentioning today. Congrats to FEDUPUSA.ORG for putting together a successful protest. They were right in Paulsons face as he left the building when he was done with his speech. I will drop some pics on here today throughout as I write the blog.
Congrats to anyone who participated. You are great Americans!
Watching Paulson was sickening today. We got the old "everything is OK" spin. I think I have heard this speech about ten times by now.
Greenspan Doesn't think everything is ok!
This shook the markets late in the day.
"July 31 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said falling U.S. home prices are ``nowhere near the bottom'' and the resulting market turmoil isn't showing signs of abating.
While the odds of a recession are 50-50, achieving stable markets will ``take a while,'' Greenspan said today in a CNBC interview.
`Major Accident'
Fannie Mae and Freddie Mac, the largest sources of money for U.S. home loans, are a ``major accident waiting to happen,'' Greenspan said. ``The solution'' is the ``nationalization'' of the companies, a restructuring involving an infusion of taxpayer money and eventual sale back to the market as ``five or 10 separate entities,'' he said.
Washington-based Fannie Mae dropped 71 cents, or 5.8 percent, to $11.50 in New York Stock Exchange composite trading. Freddie Mac, based in McLean, Virginia, fell 56 cents, or 6.4 percent, to $8.17.
``It's important that we focus on stabilizing the financial system,'' Greenspan said.
Policy makers also need to reconcile slowing economic growth with rising prices, he said. The U.S. faces ``a very substantial change in the balance between growth and inflation.''
The Fed had to open up lending to securities firms to curb turmoil in financial markets, he said. ``You have to do the backstop because once you get to that point your particular choices are very limited.''
Still, Greenspan said he was ``uncomfortable'' with aspects of the Bear Stearns Cos. rescue. ``That is a fiscal policy operation, essentially something which should be set up in the Treasury Department."
My Take:
It looks to me like Greenspan sounds a little worried. I love how the guy who created this is now trying to throw stones. Ohh the irony!
So Hank says everything is fine while Greenspan looks like a deer in the headlights. Who do you believe? You know my answer.
The jobless claims # went through the roof today hitting a 5 year high:
"Jobs Concern
The S&P 500 trimmed its rebound from an almost three-year low on July 15 to 4.3 percent. The 448,000 increase in jobless claims weighed on stocks as investors await tomorrow's government report forecast to show the nation lost 75,000 jobs in July."
Uh oh!
Be afraid whenever you see the jobless claims get above 400,000. How can people pay their bills when they aren't working?
Feel free to yell at Paulson below if all of this makes you angry! Better yet, show up at the next protest! Here he is avoiding protestors as he walked to his truck.
If things keep going the way they are, there may be several thousand people at his next speech.
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