What does ‘08 have in store for our economy and the housing market??
I hope everybody had a Merry Christmas and is looking forward to fun New Year’s celebrations with friends and family.
For those of you that have been reading this blog since 2005, you know that my feelings regarding housing and the economy were not very positive as a whole. You cannot have hundreds of billions of dollars lent out to people that have no ability or inclination to make their ‘adjusted’ payment. Well, it seems there are a few more people that agree with me now…they just happen to be much ’smarter’ and have a much larger reading audience.
Here are 3 good articles to carry you through to the new year. Funny how these 3 articles were together on the front page of the Drudgereport.
Home prices post record annual drop… (duh…we knew THAT was coming!)
PAPER: Housing foreclosures largest since Great Depression… (I have asked people many times: when was the last time that Interest Only mortgages were popular? It was the late 1920’s…right before the Great Depression!!)
CHEER: Ambrose Evans-Pritchard: Bank Crisis may make ‘29 look ‘walk in park’… (Hmmmm… 1929 eh? See the previous sentence.
Stay tuned for more in 2008!
SoCalMtgGuy
December 26th, 2007 18:03
This question goes out to everyone and anyone. Based on SoCalMtgGuy’s latest blog citing the potential for global financial ruin (which is starting to sound more possible with every passing day), what is one to do with his/her money now to minimize the effects of such a possible collapse?
A) buy gold bars
B) whorde as much cash as you can and bury it in your back yard
C) buy more real estate (just kidding)
D) any ideas?
December 26th, 2007 19:18
Hi SoCal
Great to hear from you. Looks like it’s all down hill from here
Happy New Year to you and your family
December 26th, 2007 20:52
Dear Brownie:
Your choice “C” made me laugh.
December 27th, 2007 00:03
Brownie said:
“This question … what is one to do with his/her money now to minimize the effects of such a possible collapse?”
That’s a damn good question.
I don’t foresee Global financial ruin…per se. I do see a continuing “changing of the guard”. Where the US Dollar becomes less and less valuable as the Global standard.
As I write this, 1.00 EUR = 1.45013 USD. I think this time next year, 1.00 EUR will = 1.7xx USD. A 15% or so gain. Also, Energy & Health care are generally recession resistant.
So, exchange US dollars for Euro’s [ASAP], buy (with Euro’s) a major European Pharma or biotechnology stock, that’s traded on a European exchange. Repeat with a major European energy company.
If the dollar continues its slide (which it will have to because we don’t produce anything and we owe everybody), and you can get a marginal 7% - 9% return on these stocks…you may see a 25% overall net/net gain.
December 27th, 2007 15:10
Merry Christmas and a Happy New Year to you, too, SoCalMtgGuy. The housing market will continue to tank in real terms, that much is certain. The future of the dollar is more in doubt: On one side, there are trillions of dollars on earth that, would they be spent at once, destroy any buying power left to the dollar; additionally, the Fed will have to reduce their fund rate further to rescue banks from insolvency. On the other side, the trade deficit is finally turning, Euroland hates a euro above 1.50 dollar, a pain limit for many European export companies, and the dollar has traditionally done well in crises, and crises is what we’ll get. My guess: 1.50 dollar or less per euro even at the end of 2008.
December 27th, 2007 23:27
Brownie,
being that my entire industry was gutted and sent to china over the last 7 years there’s no money for me to invest anywhere.
i’m still trying to pay off a major software purchase that was supposed to attract new clients only to have all those clients leave for china.
December 28th, 2007 10:25
Glad to hear from you socal.I’m watching this collapse just as we all predicted.
Brownie,
I have to say that the secret to successful investing is to buy when everyone else is panicing and then sell into the next boom.Things will get tough but that is normal.Things tend to go in cycles.Stay diversified with your assets for sure.If you had real estate you should have sold into the strenth in 2005.I am not a gold bug and prefer real estate and stocks.You should look into emerging markets for sure.I do not see the world comeing to an end any time soon.Stay in the game.
December 28th, 2007 15:00
Good to see you post every once in a while. It was about two and a half years ago when I was told I had to buy and I just couldn’t get the numbers to pencil out. Looked at buying and it just smelled funny. That is when I found your blog and everyone has told me over the last two years, even as late as four months ago, that I didn’t get it. My wifes cousin upgraded to a larger Mcmansion this last summer, for the kids, and we were not welcome, as we did not take their advice to purchase a home and were ostracized. My wifes cousin is now strapped for cash and is having a very, very, difficult Christmas and is headed for a long period of buyers remorse as they can not afford what they bought, nor can they sell without taking a blood bath. Today I am way cash positive, just got back from a week in the Caribbean and have great recession proof jobs for myself and my wife and renting well below market value.
Finally, I think we are headed into a very difficult recession, and we are transitioning into a truly global economy. It is going to be a great opportunity for some, and a very scary time for others.
December 28th, 2007 15:08
Forgot to share one little story. My wifes mother was cornered at work to put money in a collection for a family that was loosing their home. Both the Mother and the father have decent paying jobs, and there was no major finical incident, no hospital bills, no nothing. They had simply spent everything they had and expected someone else to help them out. I have nothing wrong with helping out a family that is out due to hospital bills, death in family not a problem, but someone who well just happens to have spent everything they had on a house they could not afford give me a break! They deserve to be homeless.
December 28th, 2007 20:49
> someone who well just happens to have spent everything they had on a house they could not afford give me a break! They deserve to be homeless.
I think you judge too hard. They can join us renters instead - loosing a house is NOT equal to homelessness.
Thinking about your story - what meaningful collection could be made at a workplace to save a house from foreclosure? I mean I give some money for girl scout cookies or birthday presents, but not hundred dollar bills.
December 29th, 2007 09:11
I concur. 2008 is going to be uglier than hell for the real estate market. However, there will be one ’slight’ difference between 1929 and now.. The guvment will be cranking up the printing presses in order to bail out the banks!
December 31st, 2007 10:30
I predict:
If 2007 was the year of the subprime collapse, 2008 will be the year of the option ARM collapse. I figured 5 years max before borrowers have to make the real P&I payment. 2003 is when these loans got rolling and 2006 was when they hit their peak. I have seen the margins on some of these things and they were in the mid 3’s. Even with lower short term rates, you are still looking at resets in the low to mid 7% range not to mention having to make the full payment. Good luck to mortgage company foreclosing when the home value is less than the loan amount. Good luck to the borrower who could barely make the teaser payment to begin with. I wonder if these folks will want to have their teaser rates freezed like the subprime borrowers did?
January 11th, 2008 14:26
The stock market seems to have made up “its mind” by now about what is in store for our economy 2008. It ain’t pretty - a housing induced recession. How long and deep will it be? Two quarter, four quarters, or even into 2009? The last doesn’t sound so unlikely, considering how far house prices have to go down before hitting their historic bottom line again that they left around 1997.
January 11th, 2008 18:37
There would be no sub-prime mortgage problem if the people who made those loans would simply make their payments, right?
January 11th, 2008 22:48
Hi Brownie:
I liked your choice “A” as the gold rates are increasing day by day.
January 12th, 2008 00:53
Wish we could hear from you more often. Since you have quite a dedicated following, including myself, have you thought of expanding the blog (again) and making $ off the advertising? Perhaps you could delegate the management of it to a willing 3rd party if you don’t have time. Best wishes and happy new year. Oh, yeah, and I’d love to hear you take on recent events.
January 12th, 2008 13:30
Do NOT buy Euros!
The Euro is ridiculously overvalued against the dollar already (yes, it could get worse). Europe has far greater structural problems than the U.S., and I would bet the bank that ten years from now, the Euro will have fallen back below 1.20 USD.
Yes, the dollar will continue losing importance (and value, against the Asian currencies, and against gold). If you wan’t to get out of dollars, look to Singapore, South Korea, or Taiwan, and not to Europe (with the possible exception of Norway).
January 15th, 2008 23:05
Nomansland,
I do apologize…I have been very busy with the new company. That said, I will try to get something up by weeks end.
Thanks for reading my blog…I know it is tough when the posts are not as frequent. That said, when the mortgage market started taking a dive, so did the advertising dollars for online advertising. So there isn’t even much ad revenue anymore.
Thanks!
SoCalMtgGuy
January 16th, 2008 10:58
Thanks for taking the time to post - however infrequent. I haven’t posted since early 2006. Sold last house in Dec 2005 and still renting with all cash in money markets - even that is a challenge with fewer banks and federal reserve rate decline. I never thought they would continue to do it “again” and decimate the dollar.
Look forward to your predictions for the next few years. I was just looking at predictions from a few years ago with hopes for prices declining 30% by now - too bad still a long way to go. Prices truly are “sticky on the way down” here in SoCal - at least in a reasonably “good” area. Sure am tired of renting and waiting, waiting - so your blog has always been some encouragement. Thanks!
February 6th, 2008 19:12
Hi Socal:
I see you have been doing some posts lately. How have you been. I havent posted in a while, but am still lurking.
Like socalmvr above, I have been lucky enough to get the wife to resist buying and am still sitting waiting.
I have seen several homes now that were bought in 2006 / 2007 for over a million now in the 700’s and 800’s.
The only homes selling seem to be Short sales and REOs now.
Have you seen anything new last couple of weeks?
February 20th, 2008 04:21
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February 20th, 2008 23:54
information on debt consolidation…
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March 11th, 2008 17:59
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April 25th, 2008 23:52
I am a realtor and I am seeing sales starting to pick up on condos and in real estate in general. I feel that we are at the bottom. I know only time will tell but I think we will see prices level off this year and climb in 09.
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