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Latest Comments494 Comments
Have Price Declines Solved Affordability Crisis? [Housing Tracker]
I couldn't have said that any better.
Earnings Preview: Zions Bancorp
Homebuilders Woo Back First-Time Homebuyers [Housing Tracker]
By the way, excellent compilation, as usual. Keep up the good work.
And for Jane, I tend to think that the government is doing the best it can with the resources it has. Unfortunately, it's not that good a job. All we can hope for is that the average American doesn't have his/her freedom truncated further.
Homebuilders Woo Back First-Time Homebuyers [Housing Tracker]
The same thing is happening here in Northern NV. Builders who were marketing $400,000 homes found that demand evaporated after exotic mortgages were no longer available. As the builders cut prices in their later phases, early purchasers saw their equity vanish as well. But now, new homes in the mid-$250,000 range are selling briskly, and the homes are considered 'good value for the money.'
As for the comment by hanson001, there isn't a 1:1 relationship between the size and cost of a home. Land and development costs have traditionally represented about one-third of a home's cost. But as builders saw the demand for larger and more elaborate homes, the costs to construct rose beyond that ratio, so that at the peak of the McMansion era, only about 20% of the cost was in the land and development. It's likely that the new homes mentioned in the link are hewing to the traditional ratio (it's been like that here for more than 20 years, except for the last 5). And since the exotic mortgage products were the primary driver for McMansions, it's reasonable to see the demand for those properties dry up like the mortgages that supported them in the first place.
I would venture to guess that if we had noticed the disconnect between the traditional cost breakdown, we would have been able to better anticipate the ensuing bubble bursting. But that's called 20-20 hindsight, which everyone shares to some degree.
Homebuilders Buying Land Again [Housing Tracker]
I tend to agree with you on the San Antonio piece. Although materials may have gotten cheaper because demand is way off, and suppliers are more willing to discount orders than in the past, just to move their products.
One thing has dropped in price: Building labor costs have crashed, because workers will take almost any job at any pay. Experienced journeyman plumbers here were used to making $25-$40/hour in the boom years. Now they'll take work on for $16/hour, just to get some business.
And that's for experienced people. General laborers can be enslaved for $50/day. Sometimes it's a 12 hour day, which works out to $4.35/hour with a 30 minute lunch.
Projects underway in Reno have huge signs on site saying "NO HIRING AT THIS JOBSITE."
So construction labor is getting squeezed all over the country. Yet the birth/death model the Department of Labor uses to gauge job creation is still showing jobs being added to construction related industries. To that I say, "BALDERDASH!!&quo...
Has Starbucks Bottomed? Not by a Long Shot
It's reasonable to think that it's a cut-loss strategy, but however you define it, the net result is lower costs.
Now, I'm not saying that cutting hours at all locations makes sense. For example, there are Starbucks in Las Vegas that are open 24/7, and for those locations, cutting back hours would truly hurt business. But for most neighborhood locations I'm familiar with, the sales revenue generated during the final hour isn't sufficient to pay the staffing necessary to keep the store open.
I think the company will need to look at every avenue to restore growth.
Have Price Declines Solved Affordability Crisis? [Housing Tracker]
And how do you propose a state provide affordable housing? That sounds suspiciously like subsidized housing to me, which appears to be a short step from socialized housing.
I'm not saying that some people don't need help. Those who haven't figured out the game in capitalist countries, those who are infirm, unable to work, or otherwise hampered should and do use social systems already in place for assistance. I question, however, the feeling that every American has the 'right' to affordable housing, and that that 'right' should be enforced by the government.
The more productive a person is in a society like this one, the more economic benefits accrue to that person. It's the productivity and subsequent earning capacity that determines where a person ends up, whether in a one-room walkup or a 50 room mansion.
Has Starbucks Bottomed? Not by a Long Shot
Fundamental changes are still needed, but I think the company is at least attempting to narrow its focus and become more efficient. 600 store closings isn't that significant in savings, because the lease termination costs will eat up any perceived savings the first year. Slowing the pace of opening new stores seems a better strategy to me.
June Retail Sales Disappoint
It's a reaction to reality on the ground. Spending hasn't changed; it's just that gasoline is taking more cash than ever.
June Retail Sales Disappoint
Have Price Declines Solved Affordability Crisis? [Housing Tracker]
I'm guessing that the more highly educated the worker, the more employment options you have. But a well-educated worker may wish to live in a higher cost area because of intangibles--recreatio... opportunities, cultural opportunities unavailable in lower wage areas, etc., which offset to a degree the higher cost of living.
As has been shown repeatedly, real estate is a local market. An affordable home in Northern NV by income is approximately $250,000. Oddly enough, that's just about the median sale price for homes here now. Just 2 years ago, the median sale price was $315,000, yet incomes were virtually the same.
Why the drop? Fewer exotic mortgage products, a glut of inventory, and a preponderance of bank-owned properties that have been sold this year are the primary drivers. Inventory has begun to work itself downward and builders are now recognizing that the McMansion phenomenon is over and pricing product appropriately. But until short sales and REO offloads cease to dominate the market, the median sale price here will continue to fall.
Meanwhile, incomes are stagnant, which places limits on appreciation going forward. Now, qualifying income is the principal determinant for affordability in Northern Nevada. I believe that trend is apparent nationwide.
Circuit City Heads Towards Zero
Spotting Banks In Danger
Non-accrual assets for banks include loans which for whatever reason have stopped earning interest. There are myriad reasons for loans to cease being earning assets, not just delinquency (though that's a primary cause). Sometimes the borrower files bankruptcy prior to the 90+ day delinquency, and the bank must place the loan on nonaccrual until the bankruptcy is settled; sometimes a borrower disappears (remember the phantom developers during the S & L crisis?). Other things can happen as well--natural disasters, etc., which can cause a loan to cease to perform even if it wasn't past due.
Conversely, some loans will have terms that on face may look risky, but are structured for a specific reason. Classically, construction loans fall into that category. Typical construction loans have maturities longer than one year and no specific repayment schedule except possibly a permanent mortgage at the completion of construction. In this case, the loan structure appears risky, but properly managed, a bank can reduce the risk with effective underwriting techniques.
The non-accrual designation provides a consistent method of determining the relative health of a loan portfolio. Generally speaking, the lower the non-accrual asset percentage, the better managed the portfolio.
Homebuilders Buying Land Again [Housing Tracker]
Thank you for this thread, a pleasure to read as always.
Another comment about the San Antonio article: I believe the builder's association was looking at appreciation in San Antonio during the bubble years, when they estimated the amount of 'equity growth' a homeowner could expect. With values falling, new homeowners will be lucky if their new investment appreciates at the headline inflation rate. Based on current trends, it probably won't rise at the fuel inflation rate (although that would be nice, wouldn't it?).
ForeclosureS.com: One Million Foreclosures By Year's End [Housing Tracker]
It depends. Usually, when a bank forecloses, the auction amount is set to capture what's owed on the property, plus any fees attendant to the transaction. What results is no material gain or loss because typically the auction amount is less than the appraised value of the property. I know of only a handful of cases where foreclosure sales resulted in gains, and those transactions took place when real estate was rising rapidly. More frequently, losses are the order of the day.
Foreclosures are never good for lending institutions. Banks are in the business of loaning money, not managing assets. Costs for carrying repossessed properties can amount to hundreds of dollars a month, and any loans that were made earn no interest.