"Credit Events", Home "ATM" Worry Wall Street
A reader recommended this video interview between Kim Parlee of Market Wrap and Tim Mulholland, executive director, Melamed & Associates. The second half gets into "credit events" and overstretched borrowers. It's the 4:20 PM clip, about 4 minutes long.
10 Comments:
I live in the Bay Area and have owned there for several years. Both my wife and I worked and made good money. Recently, I had a baby. Boy does that change everything!
First of all, you think housing is overpriced? The average nanny around here costs $15/hour, and they want paid vacation and sick days, and some want more benefits.
Wanna try a day care? Well get in line, because most day cares that take infants have over a six-month waiting list; in San Francisco the waiting lists are up to two years long! Then you have to pay about $1,800/month for the privilege of dropping your kid off with a bunch of people that you can't ever fire!
We own a smaller house in California, but now we also need a bigger house... We'd really like four bedrooms, but that costs over 1 million bucks in any decent suburban neighborhood in these parts!
And that's just asking prices, because once you are interested, get ready to bid... because you can be guaranteed there is going to be a bidding war, and the house is going to go for way over asking. EVERY SINGLE TIME.
The real-estate market is showing absolutely no signs of softening up around these parts, if anything, the frenzy has intensified to levels that I have not seen EVER. The market is hotter than ever.
I have no idea what's going to happen... but I do know that it's a great time to sell, not a good time to buy.
So, I decided that my wife is going to quit her job, we are going to sell our house, and we are going to take a nice long sabbatical somewhere else... Denver. We are going to enjoy our baby, and the nannies and overpriced real estate can just SHOVE IT!
two articles from today are an example of what a financial sense online columnist called influenza.
("I don't balk at $500 for a pair of shoes," explained Ms. Leonard, who was shopping last month at Atrium, a boutique on Lower Broadway that is to premium denim what Barney Greengrass is to lox. "Why should I balk at that price for jeans that are special. ")
niche has become very popular
http://www.nytimes.com/2005/04/21/fashion/thursdaystyles/21denim.html?
(You have the 42,000-square-foot house; so does the guy next door. You have the dedicated home theater; so does the guy next door. Which is why, according to the head of sales of Cuvée Storage Systems, a builder of custom wine cellars, old growth timber that has been lying at the bottom of a lake for 100 years or more has been such a boon.)
http://www.nytimes.com/2005/04/21/garden/21wood.html
it's top your neighbor to the extreme. it's afflueza! you can see it in our worship of celebrities. mtv cribs, it's good to be, the lifestyles of paris hilton. everyone tries to buy something rich and exclusive.
look at these quotes:
(Your neighbor has an 1,800-bottle wine cellar? Well, yours is made out of 800-year-old wood, maybe 1,500-year-old wood. It's like an instant antique.)
("But I would just as soon have something that everybody up and down the block doesn't have.")
(But I wear two pairs every day, and I'd much rather go out and find something unique that you're not going to see on every girl in New York.")
("Every consumer decision now carries with it class and status implications in a way it didn't used to,")
I realize some of these people are rich, but I bet many trying to be like them have rung up big debts and have gotten used to a lifestyle they can't afford.
The real-estate market is showing absolutely no signs of softening up around these parts, if anything, the frenzy has intensified to levels that I have not seen EVER. The market is hotter than ever.
Hmm...what does that remind me of? Wait! I know...the NASDAQ market in early 2000! Everybody was piling in and buying tech stocks...NASDAQ hit 5000 and kept going....
Until the bubble burst in March 2000. Today, five years later, the NASDAQ is at 1962.
What you are describing is panic buying, and you have made a rational decision in not participating. The last ones in will be the most sorry later.
God bless you. Enjoy every minute with your baby. Our priorities have gotten so screwed up in this country. Give me a smaller house, not so much "stuff", not so many dinners out... and time to enjoy my kids. They are only little for a little while.
My husband and I halved our income so I could stay home. We could afford all kinds of neat stuff if I still worked, but what for? We also sold our house to wait out this insanity.
"The real-estate market is showing absolutely no signs of softening up around these parts, if anything, the frenzy has intensified to levels that I have not seen EVER. The market is hotter than ever."
I would disagree. There is definitely more skepticism in newspaper articles about the housing market here. And the number of articles citing a bubble continues to grow. The "demand" that's out there now consists entirely of speculators and the over-extended. The types of loans people are taking out are guaranteed not to be re-paid. We're definitely running out of suckers in this market. In a sentiment driven mania it can end in a flash. Just as anecdotal evidence, I have a friend at work who is, well, not the brightest (during a trivia contest she thought that Italy was our ally in WW2). Her mother recently died and she inherited the house they both lived in in East Palo Alto, a known bad neighborhood. The house had termites but she sold it for $550K. She refused to buy a new house with her windfall, citing a bubble in house prices! She now rents an apartment. And this was after several friends at work told her to "not throw money away on rent". Even the clueless are getting a clue.
Who are these people who haven't read and article about "the bubble"? Do they ever pick up a newspaper? All the press surrounding the release of Shiller's new book should have been enough to make someone think twice. It makes me question my firm belief that this is an enormous bubble, akin to the major historical speculative manias. The market continues dispite mountains of evidence that people are not acting rationally. I can't believe that all the press of late has not tempered enthusiasm.
Like the previous poster said, perhaps they are all speculators and the marginally qualified. I am amazed every day as the market in my area (outside LA) continues at a fevered pace.
I can't believe that all the press of late has not tempered enthusiasm.
Obviously we haven't reached the tippoing point yet. The way I see it, there will first be a drop in one the the markets where there is more investors like the condo market in florida. But that won't change people's behaviour immediately. I remember it took like 6 months between the dot com bubble sell off and the time people really started thinking differently. For a while, people thought the stocks had popped but that VC would keep funding, startups would keep hiring and that the future would remain bright. Then everything stopped at once.
So, may be florida will pop first. Even if it happens soon, households in other part of the country won't immediately change their plans and their mindset. It'll take a few months. But I wouldn't be surprised if the change is sudden and profound.
I also live in the Bay area.
A little anecdote for you.
I live in a "development" of almost identical houses built circa 1995. Last year they were selling for 1.2M.
House down the street on sale now for 4 weeks at 1.150M
Hmmm!! wonder whats going on here?
(it took like 6 months between the dot com bubble sell off and the time people really started thinking differently)
I agree. Then 6 to 9 months later Business Week had the infamous "everybody knew it was a bubble" story. It's a lot easier to identify in hindsight.
Post a Comment
<< Home