sam writes:
let these guys feel the pain for a while. They were part of the problem. These buikders' mortgage companies are complicit in what is happening to our country. May they alll rot in hell
sam | 02.15.08 - 8:05 am | #

Bill writes:
The problem is 100% clear. Home prices underwent an unsustainable increase and there is no chance of recovery until prices at least start to approach normal ratios with incomes. Unfortunately, incomes have been very weak througout the entire Bush presidency. I wonder if any home builders agree with me.
Bill | 02.15.08 - 8:12 am | #

Mook writes:
Seiders now predicts a turnaround in the latter half of this year, but other less-optimistic economists see no improvement until 2009 or later.

Hasn't the turnaround been six months away for, oh, about 18 months now? Reminds me of that sign that reads "Free Beer Tomorrow" ...
Mook | 02.15.08 - 8:13 am | #

Sippn writes:
Its the builders who stayed home "perceiving" the problem.

Sam, don't dissagree with you but also look up the brain trust at the complicity.... FED saying
"we only have so many auditors" "these lenders aren't regulated by us" washing their hands... Wall Street "restructured financial instruments" AKA crap and the trusted ratings agencies.....
Sippn | 02.15.08 - 8:14 am | #

Sue writes:
Bill, that is a wonderfully succinct and truthful statement. I'd like to throw that out to all those financial and political chieftains and ask them to respond!
Sue | 02.15.08 - 8:15 am | #

dblwyo writes:
FWIW the humbuggers ETSs were up in the last 4 weeks more than any other category; you could have made a bundle. What were they thinking (smoking ?) - thank you Dirk Bentley.
What until the metastasizing credit mess finds another asset class (9,10, counting to blow up) and the rest of us will be perceptibly shocked and awed too.
Apre' tu, le Deluge.
dblwyo | Homepage | 02.15.08 - 8:16 am | #

hiker90 writes:
Two Citigroup funds have troubles: report
http://news.yahoo.com/s/nm/ 20080...roup_funds_dc_1
NEW YORK (Reuters) - Citigroup Inc (C.N) has barred investors in one of its hedge funds from withdrawing their money, and a new leveraged fund lost 52 percent in its first three months, the Wall Street Journal reported on Friday.
hiker90 | 02.15.08 - 8:17 am | #

Marcus Aurelius writes:
What the industry fails to understand is that we are in the turn-around right now. Where we are heading is back to normalcy.
Marcus Aurelius | 02.15.08 - 8:19 am | #

SPECTRE Of Deflation writes:
As you say, they haven't seen anything yet. Credit is being destroyed faster than it can be originated. It's called a deflationary spiral, and boy are we spinning or what.
SPECTRE Of Deflation | 02.15.08 - 8:21 am | #

SPECTRE Of Deflation writes:
Marcus Aurelius writes:
What the industry fails to understand is that we are in the turn-around right now. Where we are heading is back to normalcy.
Marcus Aurelius | 02.15.08 - 8:19 am | #


Turnaround? LOL! You might want to check out the credit markets before you make such a statement. It always starts in the credit markets which has been stated many times.
SPECTRE Of Deflation | 02.15.08 - 8:25 am | #

winjr writes:
Best Buy is providing fresh evidence today of a consumer slowdown: Weak January sales, and expected '08 same store growth of 2.5% - 3%, as opposed to 4% previously projected.
winjr | 02.15.08 - 8:27 am | #

crispy&cole writes:
CFC #'s are out - record foreclosures and deliquency per CNBC
crispy&cole | 02.15.08 - 8:31 am | #

Neal writes:
I'm not sure what kind of business people they are if they are so ignorant of business conditions at this point. It would almost have to be willful ignorance at this point.

I'm in construction and I look for news every day related to the construction industry and factors impacting it.

We stopped bidding on condo projects 2 years ago based on the facts in place at that point. It's nice to have work to do, but it's just an expensive hobby if you don't get paid.

On the last condo job we worked on (finished about 1-1/2 year ago), the developer didn't pay for months, until we threatened to file a lien. He said, "If you do that, you'll never get another job from me." I thought, "Why the hell would I want more work from you if you don't pay?"

We filed, we got our money when he had to clear the lien to sell a couple units. The other contractors on the project have yet to recieve the money owed them.

It's just a hobby if you don't get paid.
Neal | 02.15.08 - 8:32 am | #

firsttopanic writes:
CR and Tanta,

We discussed problems in housing and economy for a longtime. best buy (BBY) guided down just now.

My question, is it possible for you to do a write-up as to what the solutions to end the housing mess.

Thanks as always
Father of Panic
firsttopanic | Homepage | 02.15.08 - 8:33 am | #

crispy&cole writes:
UGLY numbers just came out on Empire index - 100 bps cut any minute
crispy&cole | 02.15.08 - 8:36 am | #

Neal writes:
Solutions to the housing mess?

Price--drive down prices so time, decay and demographics clears the unsold inventory.

Income--construct an economy where people have an annual income 1/3 the price of the houses.

Since there is little or no hope of income rising to meet price, price must fall to meet income. This means smaller houses, smaller lots, fewer toys. The house of the 50's returns.

But it's just not housing anymore--the entire financial underpinnings of the country were skewed (and screwed)by "financial innovation."

The barn door is open, but the biggest step would be to prohibit the private, essentially unregulated, securitization of mortgages.
Neal | 02.15.08 - 8:47 am | #

energyecon writes:
crispy,

What was the print on the Empire index, in line with the way the ISM service numbers came out?
energyecon | 02.15.08 - 8:48 am | #

crispy&cole writes:
Only info was headline was down 11%. While prices were up 1.5%
crispy&cole | 02.15.08 - 8:49 am | #

01/20/2009 end of an error writes:
-11.7 on the Empire Manufactureing Index now that is Fugly. Import prices up 1.7%
01/20/2009 end of an error | 02.15.08 - 8:50 am | #

energyecon writes:
Got it, -11.7 expected was 5 to 7 from the previous value of 9...yah that is FUGLY

And lines up with the ISM services reading wouldn't you say?
energyecon | 02.15.08 - 8:51 am | #

crispy&cole writes:
Lines up! Although futures went down a lot, which means maybe not.
crispy&cole | 02.15.08 - 8:54 am | #

01/20/2009 end of an error writes:
Energyecon,

Its nice when all the numbers agree.
01/20/2009 end of an error | 02.15.08 - 8:54 am | #

rich writes:
You have to remember Best Buy is the consolidator in a shrinking consumer electronics retail space. They are getting share from smaller chains going out of business and the incredible shrinking Circuit City. So for them to be guiding down is bad.
rich | 02.15.08 - 8:57 am | #

eh writes:
Hasn't the turnaround been six months away for, oh, about 18 months now? Reminds me of that sign that reads "Free Beer Tomorrow" ...

Good one.

The think about the NAHB is...they'll be right eventually. Consistency is apparently the key in PR, as well as investing.
eh | 02.15.08 - 8:58 am | #

Billy Shears writes:
With import prices up 13% yoy, how can the Fed cut rates any further? At this point, I would think any further cuts would have a negative impact on the market....and the applause meter would go down.
Billy Shears | 02.15.08 - 8:59 am | #

charlie writes:
Bad news on an option expiration day. The market cannot be allowed to go down today. I wonder what the surpise announcement will be today.
charlie | 02.15.08 - 9:02 am | #

Anonymous writes:
The talk of "improvement" never sounds credible to me for reasons discussed ad nauseum on this blog.
Anonymous | 02.15.08 - 9:08 am | #

sterlingerl writes:
OT but oh, well - you know, if I were an American being lied to by Bernanke and Paulson day after day I would be very angry. Yesterday they actually said that the US could avoid a recession in 2008, when it is perfectly obvious that the US is already in one. Why does no one call them on this? Nobody in the US except a few bloggers seems to understand how bad things are in the credit markets. Paulson stutters and sweats through his obvious lies and nobody confronts him. Where is the SEC? Accounting standards bodies? Surely somebody in the media would like to be first with the story of the century? What is going on over there. (End of rant...)

Another OT - Citigroup back in the news after closing one of its London hedge funds to withdrawals. This business of funds (real estate, hedge funds, whatever) refusing redemptions seems to be a weekly event.

http:// business.timesonline.co.u...icle3373670.ece
sterlingerl | 02.15.08 - 9:11 am | #

Marcus Aurelius writes:
SPECTRE Of Deflation | 02.15.08 - 8:25 am | #

SPECTRE: I think you missed my point (or I missed yours).

We are headed down, way down. Housing will return to it's traditional place in the economy, and so will everything related to housing. Ancillary things that got out of whack during the housing bubble will also pay the price: credit, equity, etc...

What I'm saying, is that when someone from the housing industry talks about things “getting back to normal,” they think “normal” means the bubble.
Marcus Aurelius | 02.15.08 - 9:12 am | #

Big ? writes:
Rumors of Energy fund being trouble
Big ? | 02.15.08 - 9:16 am | #

RacerX writes:
I have a friend who is a carpenter in Atlanta. He was recently stiffed by a builder for $30K worth of work. He's filed a lien but he's not sure if he'll ever recoup the money.
RacerX | 02.15.08 - 9:17 am | #

Big ? writes:
Whoops - accidentally previous without link...

OT - Rumors of Energy fund being trouble

Don't think anyone previously posted

http://dealbreaker.com/2008/02/ a...und_failing.php
Big ? | 02.15.08 - 9:17 am | #

jim a writes:
From neal: "Why the hell would I want more work from you if you don't pay?" I'm reminded of the stories about contractors retroactivly lowering the amounts they were paying their subs. The threat was the basicly same: "Take a cut in the payment for the work that you've already done or we won't give you any more work." I'd have to think long and hard before agreeing.
jim a | 02.15.08 - 9:24 am | #

lama writes:
If an industry expert tells a reporter things will turnaround, why wouldn't the reporter ask "Why?"?
lama | 02.15.08 - 9:24 am | #

SPECTRE Of Deflation writes:
Marcus Aurelius writes:
SPECTRE Of Deflation | 02.15.08 - 8:25 am | #

SPECTRE: I think you missed my point (or I missed yours).

We are headed down, way down. Housing will return to it's traditional place in the economy, and so will everything related to housing. Ancillary things that got out of whack during the housing bubble will also pay the price: credit, equity, etc...

What I'm saying, is that when someone from the housing industry talks about things “getting back to normal,” they think “normal” means the bubble.
Marcus Aurelius | 02.15.08 - 9:12 am | #


M.A.
My bad! Now I got ya, and agree 1000%.
SPECTRE Of Deflation | 02.15.08 - 9:24 am | #

smurf writes:
Someone should start writing a book of quotes out of this mess

"house builders are frankly bewildered"

Mike Perry "we were not greedy nor stupid"

AMBACs guy "bailout is a word foreign to our organization"

Bernanke " my baseline outlook involves a period of sluggish growth, followed by a somewhat stronger pace of growth starting later this year as the effects of monetary and fiscal stimulus begin to be felt"

" UBS determined that the super duper senior Alt-A hybrids offer great value relative to prime jumbo super senior hybrids"

And that's just this week!
smurf | Homepage | 02.15.08 - 9:27 am | #

Tanta writes:
My question, is it possible for you to do a write-up as to what the solutions to end the housing mess.

I am not especially convinced there are any "solutions."

There are possible interventions. Most of them fail to impress me because they don't get nearly enough purchase on the problem for the price tag they present. Not the dollars--in most cases the dollars are not that big an issue in the grand scheme of things. It's the maintenance of moral hazard for lenders and builders that they represent. I am less concerned with the moral hazard to homeowners than many other people are because I don't happen to be convinced that borrowers really understood that they were taking excessive risk in the first place. It isn't moral hazard if your speedometer is broken and you think you're driving the speed limit. It's a problem, yes, but it's a different problem.

So the interventions I have been most interested in are 1) cram-downs for principal residences and, to a lesser extent, 2) tax exemption for debt forgiveness, although I would prefer to see that limited to FC/short sale, with deferral only (not outright exemption) for modifications. I think these balance the moral hazard problems and, in the case of BK law changes, help prevent a recurrence of this nightmare (if lenders know they can be crammed down, they should behave rather more rationally when they make the loan). These interventions ease the stress on financially floundering borrowers without attempting to prop up home prices in bubble markets.

But I do not present that as a "solution," because it isn't. We are just going to have to live through it. People need income that can keep up with housing prices (or housing prices that limit themselves to available income) and lenders need to make some kind of profitable capital investments for some purpose other than exclusively residential mortgages. Until that macro-economic problem gets addressed, nothing is going to stop a long RE bust/credit crunch.

I hope that doesn't sound like a cop-out, but the reason I have been jumping up and down over this for the last several years is because bubbles like this create unsolvable problems. I wouldn't have been so frightened if I thought there had always been a way to put this genie back into the bottle.

I can think of a number of long-term regulatory changes that would in my view improve the state of mortgage lending/selling/servicing, keep the industry much healthier in the long haul, and make it less prone to future bubbles. I'm not even sure it's worth trying to talk about that right now. Everyone is focussed on "solving" this particular "mess" to think in terms of the long horizon. I come from the "kick them while they're down" school of regulatory politics that says you'll never have a better chance of pushing through responsible regulation than when they're collapsed at your feet begging for mercy. If you focus simply on shoring them up, without demanding a regulatory regime in exchange for it, you'll never get your regulatory changes, because if it works, they become strong and healthy again and will defeat any attempt to add "burdens" to their business. In that regard, anything you do to juice up the players, absent tougher regulation with teeth, is just going to come back to haunt you.

It is however an election year, so I might as well talk to my credenza.
Tanta | Homepage | 02.15.08 - 9:28 am | #

SPECTRE Of Deflation writes:
Big ? writes:
Whoops - accidentally previous without link...

OT - Rumors of Energy fund being trouble

Don't think anyone previously posted

http://dealbreaker.com/2008/02/ a...und_failing.php
Big ? | 02.15.08 - 9:17 am | #


Nothing will escape this credit contraction. It is the closest thing to a Black Hole we will ever witness. All asset classes were/are highly inflated. This has been changing already but seems to be picking up steam. Welcome to a deflationary spiral.
SPECTRE Of Deflation | 02.15.08 - 9:28 am | #

SPECTRE Of Deflation writes:
Tanta writes:
My question, is it possible for you to do a write-up as to what the solutions to end the housing mess.

I am not especially convinced there are any "solutions."

Bingo, and thank you TANTA for stating it thusly. The only real solution we can hang our hats on is deflation of hugely overpriced assets of all kinds and time for it to happen. Beyond those observations, it's the Wild West kids!
SPECTRE Of Deflation | 02.15.08 - 9:32 am | #

Tanta writes:
"Why the hell would I want more work from you if you don't pay?"

An informant of mine who is an observer of the mortgage insurance business tells me there has been some real debate at the MIs about how hard to push on investigation of claims/recission of policies for fraud. There is this idea, you see, that the MIs may not get any business in the future from these lenders whom they have just busted for fraud. It's not just the MIs; that kind of debate kept warehouse lines in place for failing REITs for far too long.

This is the story of my industry. I can remember years ago a dustup with an account executive who was just insistent we had to offer some incredibly stupid loan program because our competitors were offering it. My response, then and now, was that nothing made me happier than the thought that all that trash was going to my competitors, not me.

We're still a long way from figuring out which shell the pea is under.
Tanta | Homepage | 02.15.08 - 9:34 am | #

calmo writes:
Bernanke " my baseline outlook involves a period of sluggish growth, followed by a somewhat stronger pace of growth starting later this year as the effects of monetary and fiscal stimulus begin to be felt"
...a good script to a video of some cathartic event...like your toddler filling his diaper.
Real growth in the pants.
calmo | 02.15.08 - 9:41 am | #

doug writes:
Frankly, I hope the HBs keep building. It will help build inventory and drive down prices faster and further.

In fact, I'm not only hoping...I'm betting on it, as I recently made the decision to rent for at least another year instead of buy. The numbers just don't make any sense right now. After a few days research of the NJ housing market I've concluded that the sellers are on drugs. All the list prices are by any judge 25% overvalued. But you can't tell the owners that. Ohh noes.

OT but did anyone watch Cramer last night? Was flipping through the channels and the first thing I heard him say that the "government MUST give us lower interest rates", bail out the banks and other stupid things. Then he did a skit of a guy dressed up in a red bull's uniform carrying a big heart down to Washington to ask them for help. The guard turned the guy away. Smart guard. Maybe we should give him a job in Congress.

Ya know, I wish I could say that Cramer is a moron and doesn't "get it", but I'm afraid he does...all too well in fact. He'll say and do anything to protect his cronies and this ridiculously overpriced residential RE market.
doug | 02.15.08 - 9:41 am | #

bZb writes:
I am not especially convinced there are any "solutions."

There are possible interventions...

This short piece by Tanta makes more sense than all the "solutions" offered by various groups and parties to this mess; it should be published somewhere, outside of the blogosphere.
bZb | 02.15.08 - 9:42 am | #

Trainwreck writes:
FGIC wants to be split into two companies

http://www.marketwatch.com/news/...D& dist=hplatest
Trainwreck | 02.15.08 - 9:45 am | #

RacerX writes:
...I don't happen to be convinced that borrowers really understood that they were taking excessive risk.

This part I understand. Both the Donald Trump wannabe speculator/flipper and starry eyed over-reaching mcmansion buyer undervalued the risk of the transaction the were entering into. What I am having difficulty with is how lenders and IBs undervalued this risk as well. Fundamentally ineffective regulation and greed played a big role but there's a component of utter incompetence that is just puzzling and a little depressing.
RacerX | 02.15.08 - 9:47 am | #

jim a writes:
from Tanta:
It isn't moral hazard if your speedometer is broken and you think you're driving the speed limit. It's a problem, yes, but it's a different problem.
Yes, but somebody who's just had an accident certainly has a different view of what a "reasonable and prudent," speed is.

I hope that doesn't sound like a cop-out, but the reason I have been jumping up and down over this for the last several years is because bubbles like this create unsolvable problems.
Yep. "Son, if you want to get to the town of stable market from here you have to go through precipitous decline. If you didn't want to do that, you should never have come to bubble heights in the first place."

It is however an election year, so I might as well talk to my credenza.
Or a bunch of us tin-foil hatted commenters. Like a credenza that talks back, but still never takes out the garbage.
jim a | 02.15.08 - 9:56 am | #

RacerX writes:
...there has been some real debate at the MIs about how hard to push on investigation of claims/recission of policies for fraud

I've heard the same thing. What's interesting is that we used contract UWs from MI companies extensively in some offices. If the contract UW made a mistake (even if it was glaring) it was like pulling teeth to get them to pay up. The reps and warrants for the contract UW were weaker than I would have imagined. My bet is that there is a lot of liability that the MI companies could walk away from if they needed to.
RacerX | 02.15.08 - 10:00 am | #

Elvis writes:
"With housing sales foundering, inventory way up and the future of the industry hazy, the show, with 1,900 exhibitors and nearly 100,000 attendees, is more angst-ridden as builders look for ways to stay afloat until there's a turnaround. Attendance is expected to be down about 5 percent."

Why is attendance down this year? It should be up. They have nothing better to do...unless they are in the garage with the motor running...
Elvis | 02.15.08 - 10:01 am | #

Queequeg writes:
I'm at the Builders Show. The booths with the biggest crowds yesterday were:

Any booth in which a chef is cooking something that is then given away (sauteed shrimp, for example);

The Kohler stage, which featured a dance troup of young men and women in tight leotards;

And the two booths that offered "simulated golf." Guys lined up in long queues to get a chance to wack at a golf ball in front of a screen.

It all seemed rather pathetic, although there was this one cutie in a leotard...
Queequeg | Homepage | 02.15.08 - 10:12 am | #

brewster writes:
Tanta,

Your Wish coming true?

Housing Wire reports that

A hotly-contested bankruptcy reform provision that would allow judges to modify principal amounts of mortgages on primary residences was included in a new housing reform package unveiled Thursday by Senate Democrats.

And did you say election year?

“If you’re a financial services company that wants to derail this bill, you need to be very nervous,” said Jaret Seiberg, an analyst with Stanford Group Co. “This has a lot of provisions that play very well to voters, and you have a lot of members up for re-election, and in such a situation, bills that should be dead on arrival find themselves enacted into law.
brewster | 02.15.08 - 10:16 am | #

Broker writes:
You see my dear civilians, that`s what happens when mortgage brokers don`t have a fiduciary relationship with their borrowers.(AKA the Berlin Wall syndrom)
Broker | 02.15.08 - 10:16 am | #

gn writes:
Tanta-

Thanks for the succinct summary of the apparent options. Agree completely with your rundown of how well (or not well) these solutions will work.

How about some "think-outside-the-box" options. This is the same government that has confiscated gold, enacted wage and price controls, and continuously over-taxes its most productive citizens in the name of the greater good. They are capable of anything!

Be creative! Imagine panicky law makers with "wormtongue" types whispering in their ears. What else MIGHT they do? Immediate mandatory wage hikes? Immediate mandatory mortgage debt reductions based on LTV and income? Dollar revaluing for everything but debts?

Anything is possible, IMO.
gn | 02.15.08 - 10:18 am | #

Jason Elton writes:
OT but did anyone watch Cramer last night? Was flipping through the channels and the first thing I heard him say that the "government MUST give us lower interest rates", bail out the banks and other stupid things. Then he did a skit of a guy dressed up in a red bull's uniform carrying a big heart down to Washington to ask them for help. The guard turned the guy away. Smart guard. Maybe we should give him a job in Congress.

Ya know, I wish I could say that Cramer is a moron and doesn't "get it", but I'm afraid he does...all too well in fact. He'll say and do anything to protect his cronies and this ridiculously overpriced residential RE market.



After the fed cut 1.25% in 8 days didn't Cramer state there was gonna be a housing shortage by the end of the year.
Jason Elton | 02.15.08 - 10:22 am | #

bcpas writes:
I am also at the IBS show and I heard from an exhibitor telling me that this years attendance is around 60,000 ~ 70,000 people. The show organizers were expecting about 90,000. Last year, there were over 100,000 attendees.
bcpas | 02.15.08 - 10:22 am | #

Rob Dawg writes:
tanta intones with wisdom; I am not especially convinced there are any "solutions."

There are possible interventions...

Let's be especially clear on this. Intervention means punishing the innocent and bailing out the guilty. All the mechanisms are in place right now without intervention for the bagholders to actually be left holding the bag.

But more important: It is however an election year, so I might as well talk to my credenza.

Tanta, you are just jealous that the credenza and hat rack talk only to me. ;-)

It'll be tough to decide this fall. One has direct experience covering up banking scandal, one trading scandal and the last land swap scandal. Or is that last all three?
Rob Dawg | Homepage | 02.15.08 - 10:23 am | #

Fair Economist writes:
Tanta, could you be Secretary of the Treasury? Please?

Do you have any suggestions to handle the capital loss for bank/quasibank institutions?

On a different topic, that rumored energy fund bust has nothing to do with the credit crunch. Some idiot hedgie bet the bank on red and it came up black. Might create some counterparty issues, but it doesn't sound like the kind of deal a big fund would bet the bank on.
Fair Economist | 02.15.08 - 10:28 am | #

Tanta writes:
This is the same government that has confiscated gold, enacted wage and price controls, and continuously over-taxes its most productive citizens in the name of the greater good.

You and I don't live on the same planet.
Tanta | Homepage | 02.15.08 - 10:29 am | #

Index Shenanigans writes:
CFC #'s are out - record foreclosures and deliquency per CNBC
crispy&cole


and it's going to be part of the DOW 30
Index Shenanigans | 02.15.08 - 10:34 am | #

Aheadofthecurve writes:
How about a windfall profit tax on those who had windfall profits from the housing bubble? Those who have lost it back in the last year, like banks could deduct their losses against the gains.

Let's remember that dollar wise the largest beneficiaries were those who sold their houses between 2002 and 2006. Tax them on all gains beyond normal appreciation (follow Case-Schiller index since 1900) with a cost basis adjustment for actual improvements made to the property.
Aheadofthecurve | 02.15.08 - 10:43 am | #

sportsfan writes:
AOTC,

You want to retroactively tax homeowners who sold years ago in what were essentially tax-free transactions in the first place?
sportsfan | 02.15.08 - 10:47 am | #

halbhh writes:
BUILDERS COULD RECOVER RIGHT NOW

IF

They would simply entirely 100% throw out the old model of building most of their houses for the top 1/4 of buyers where the market is over saturated, and start building in remaining growing markets for the *middle* home buyer, with price points closer to $140-150K and not above $160K in most places, as crazy as that sounds compared to business as usual that everyone has been accustomed to. If you can't build at a profit at $150K in Texas for example, you probably need to shut down and forget it.
halbhh | 02.15.08 - 10:50 am | #

Average Joe writes:
AheadoftheCurve,

Great Idea.

Let's do it right though. I think we should expand it and tax anyone who made a profit on any investments and give it to those who lost money on investments. That way we'd all be even, equal, the same. We would love each other since no one had more than anyone else. We could all hold hands and live in peace forever too.

You are ahead of the curve.
Average Joe | 02.15.08 - 10:51 am | #

Aheadofthecurve writes:
Well, frankly, Sportsfan, it doesn't make a lot of sense that an investment in a non-productive asset is rewarded by being tax-free, while if you start a business or invest in a company that finds a new cancer drug that is taxed. Maybe that is part of the reason why there has been such an over-investment in residential real estate.
Aheadofthecurve | 02.15.08 - 10:52 am | #

lama writes:
RacerX,
Not to one up you, but:
I had a perpetual small leaking problem in a building with a flat roof. Two weeks ago I had a roofer go up to give an estimate. The next day the tenant was complaining of some really bad leaks. The next day someone else went up to take a look and told me someone had cut up the roof with a utility knife. I had some temporary patches done.

I did some research (Angie's List) and found a roofer with a decent reputation. Guess what? This guy is still busy with work. Honest people in the construction industry always do well. The rest have utility knives for a marketing department.
lama | 02.15.08 - 10:54 am | #

Aheadofthecurve writes:
Joe-I have news for you. All other profits ARE taxed-stocks, bonds, businesses, items you sell on E-Bay, van Goghs, you name it. Only 1- houses are exempted. And people wonder why their prices went through the roof.
Aheadofthecurve | 02.15.08 - 10:55 am | #

six percent solution writes:
troll alert
six percent solution | 02.15.08 - 10:55 am | #

Cobradriver writes:
halbhh | 02.15.08 - 10:50 am |

That will work in places. Where I am median is roughly 33k year. The buliders are building at 140k and can't get rid of em...

How bad is it ? I can buy a lot for 5k. The development fees the county charges are just shy of 16k. Septic will run 10k/same to hook to county sewer. Water well 5k. All this before the house is even started. Unless commodities fall some I don't see builders able to get prices to 3 times let alone 2 times income...

Chris
Cobradriver | 02.15.08 - 10:59 am | #

jim a writes:
Lama, flat roofs are a case of faith in technology overiding a basic grasp in the law of gravity.
jim a | 02.15.08 - 10:59 am | #

Broker writes:
lama, why don`t you just "freeze" the rent for 5 years and forget about the roof?
Broker | 02.15.08 - 11:08 am | #

lama writes:
jim a,
Yes, and I'm here in New England; not a place for a flat roof. I've been in old barns where you can look up and see pinholes of light in the roof, but no rain comes in due to the pitch of the roof.
Maybe the flat roof needs a bubble so it can defy gravity? Anyway, I'm about to dole out 9 months of rent for a new roof.
lama | 02.15.08 - 11:10 am | #

halbhh writes:
Ahead-- How about a windfall profit tax on those who had windfall profits from the housing bubble? Those who have lost it back in the last year, like banks could deduct their losses against the gains.

Let's remember that dollar wise the largest beneficiaries were those who sold their houses between 2002 and 2006. Tax them on all gains beyond normal appreciation (follow Case-Schiller index since 1900) with a cost basis adjustment for actual improvements made to the property.

Darn, you are actually talking about "justice" here.....that is ambitious.

Just because it would be fair, and even right, doesn't mean we can ever do it. In a winner take all economy that would be one heck of a shock to the system.

Just for mental exercise, perhaps we should imagine some very specific limited ways to do this kinda, so that a modest portion of the gambling winnings can be returned to the public (thru taxes).
halbhh | 02.15.08 - 11:12 am | #

halbhh writes:
heh can't get the italics to work, guess it needs a slash at the end??

But Aheadofthecurve--sure it does make sense that it's about the tax exemption and simply making it more precise yes? So what would be the precise way to do it? Or would you say eliminate it in all cases -- if so what about just a normal family trying to move into a larger home for the extra new kids?
halbhh | 02.15.08 - 11:16 am | #

Aheadofthecurve writes:
hal-I realize there are legal issues why this probably won't fly in the real world. I'm just seeing a whole lot of blaming of bankers and other crooks. Certainly there's plenty of blame there. But let's all acknowledge that public policies in the US have long favored over-investment in housing vs other more productive activities. That's all I'm sayin'...
Aheadofthecurve | 02.15.08 - 11:19 am | #

halbhh writes:
Cobradriver -- yes, certainly it's specific to income in a location. I just used a general example for Texas, which is a good market to build in still I think, if the builder is careful where and what they are doing, and pays attention to the specific supply at that location, etc caveats.

But regarding falling to 2x income, sure that is possible in some places no doubt.
halbhh | 02.15.08 - 11:19 am | #

Aheadofthecurve writes:
hal-Sorry I didn't see your post. One option is to adjust cap gains for the holding period. If I buy a stock and hold it ten years, then the tax on the gains would be spread out over the 10 years. Houses the same. The issue I have, is why treat housing differently?
Aheadofthecurve | 02.15.08 - 11:24 am | #

halbhh writes:
Ahead--sounds like a very good idea to me.
halbhh | 02.15.08 - 11:28 am | #

sdtfs writes:
Lama, flat roofs are a case of faith in technology overiding a basic grasp in the law of gravity.

What a wonderful sight to be up on top of a big box store (Home Depot for one)and see the vernal pool on the roof. Sure there's a drain, but it's usual plugged with debris.

BTW- Lama, it's possible the first roofer cut the roof to check out the extent of the leaks and damage., not just to do more damage. Of course he should have been prepared to do a patch job afterwards. Currently we're poring that KoolCoat (? TM) latex stuff over the roof and it seems to work for a couple years at a time.
We've built false roofs over a flat roof garage to be done with the problem.
sdtfs | 02.15.08 - 11:40 am | #

lama writes:
sdtfs,
Thanks for the info.
I can't chance it. The location stinks, the tenant is a national chain store I'm afraid to lose and I need to sleep at night.
The first roofer's work was definitely sabotage. I'll wand everyone before they go up from now on to check for box cutters and the like.
lama | 02.15.08 - 11:46 am | #

halbhh writes:
Re my All Cap header on that post above: the irony is while many builders are on the ropes, and no doubt it's too late for some, it's still true that many others could do ok just by making some radical mental adjustments now and quickly changing their plans. It's not enough to just build the same kinds of houses you were 2 years ago and just fewer of them. That's a dead end I think.
halbhh | 02.15.08 - 11:47 am | #

Kett82 writes:
Can't we use some leaky pond sealant to contain this thing?
Kett82 | 02.15.08 - 4:23 pm | #

Unsympathetic writes:
Tanta!

I've got a fantastic idea!

It could remove all this loss of faith, this lack of any belief in the future solvency of this building business!

If only there was a person who could accurately estimate the risk a given loan could default. Where would I find such a person?

More to the point, how could I possibly be lucky enough to employ such a mythical god-like being?
Unsympathetic | 02.15.08 - 4:57 pm | #

mjc writes:
Possible solution to many of these problems:

In case you haven't heard, the Bush administration is building a number of concentration camps throughout the country and has issued an executive order allowing it to declare martial law if something bad happens (like a Democrat being elected President).

So, how many American citizens do you think will be in these camps in 2010?

Sure will solve some of our problems!
mjc | 02.15.08 - 5:13 pm | #

Yukoner writes:
Neal:
the developer didn't pay for months, until we threatened to file a lien. He said, "If you do that, you'll never get another job from me." I thought, "Why the hell would I want more work from you if you don't pay?"

Thanks for that Neal, it brings back memories! I'm a carpenter and when I first got into contracting an older and much more experienced fellow gave me some very good advice:
1. You don't have any money so start small and structure every contract so that progress payments leave you even or a little ahead (except your own labour).
2. When you have some money, bid bigger jobs but only if you have enough available to finish the job, paying all of your suppliers, subs and employees (of course) in full while waiting for the effects of the lien you put on the building to take hold.
3. If a customer or general contractor is 30 days late on a payment, slap a lien on NOW. Don't wait, negotiate after the lien is in place.

I followed his advice and never got stiffed.
Yukoner | 02.15.08 - 8:12 pm | #

majec writes:
I wish I could say that Cramer is a moron and doesn't "get it", but I'm afraid he does...
rc helicopter
Tactical Flashlights
video game
majec | Homepage | 06.24.08 - 4:03 am | #