Housing Rolling Along 2
- Thread starter Covertibility
- Start date
http://www.latimes.com/business/la-fi-taxbreak8oct08,0,1112971.story?coll=la-home-headlines
Tax Reformers Eye Breaks for Housing
Mortgage deductions and other benefits are costing more than forecast. With a rising federal budget deficit, they may be scaled back.
By David Streitfeld, Times Staff Writer
Just as the nation's housing boom appears to be slowing, debate is starting among policymakers about reining in one of the most sacred cows of American public policy: the mortgage-interest deduction and other generous tax benefits granted to homeowners.
A presidential commission on tax reform will take up the subject for the first time Tuesday. "Everything's on the table," said Charles Rossotti, a panel member who was commissioner of internal revenue from 1997 to 2002.
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The mortgage-interest deduction saved homeowners $61.5 billion last year. No one expects the commission to recommend its elimination.
Instead, the panel may consider scaling back the deduction for mortgage interest on second homes or home-equity loans, and changing the deduction for property taxes, among other things.
The stakes in such a discussion are huge.
Changing the tax benefits for homeowners, even if done slowly, could cause short-term convulsions in the market as buyers recalculate what they can afford. The tumult could be most pronounced for homeowners in states with the highest home prices, such as California. In the long term, housing could become more affordable as some of the stimulus that has sent prices soaring is removed.
Tax Reformers Eye Breaks for Housing
Mortgage deductions and other benefits are costing more than forecast. With a rising federal budget deficit, they may be scaled back.
By David Streitfeld, Times Staff Writer
Just as the nation's housing boom appears to be slowing, debate is starting among policymakers about reining in one of the most sacred cows of American public policy: the mortgage-interest deduction and other generous tax benefits granted to homeowners.
A presidential commission on tax reform will take up the subject for the first time Tuesday. "Everything's on the table," said Charles Rossotti, a panel member who was commissioner of internal revenue from 1997 to 2002.
ADVERTISEMENT
The mortgage-interest deduction saved homeowners $61.5 billion last year. No one expects the commission to recommend its elimination.
Instead, the panel may consider scaling back the deduction for mortgage interest on second homes or home-equity loans, and changing the deduction for property taxes, among other things.
The stakes in such a discussion are huge.
Changing the tax benefits for homeowners, even if done slowly, could cause short-term convulsions in the market as buyers recalculate what they can afford. The tumult could be most pronounced for homeowners in states with the highest home prices, such as California. In the long term, housing could become more affordable as some of the stimulus that has sent prices soaring is removed.
Quote from Covertibility:
But those looking for a crash, there is a problem:
Money is still cheap. [/B]
I guess you haven't been following along.
Fully 75%-85% of purchase money real estate loans, especially in the hottest most vulnerable markets are variable, option ARM, neg. am, etc. that are not the traditional 30 year fixed you have portrayed in your chart.
The people buying these inflated homes in the hot markets could never in a million years qualify for a 30 year fixed. They are using variable loans with even lower teaser starting rates to leverage themselves into huge expensive homes on the hope of future appreciation.
Loans worth in total trillions of dollars will soon be re-set to higher payments than the initial teaser rates...that is when the real sh!t hits. Their real mortgage payments will soon double.
The crash is real, it is coming, and there is nothing anyone can do about it. The small price reductions we are seeing now in many markets, typicially 5-10% is nothing compared to what is coming.
http://www.lewrockwell.com/orig5/duffy5.html
"A parabolic blow-off in homebuilding stocks (more than tripling in 3 years) has obscured the shutting down of key credit engines powering the urge to super-size consumption. Fannie Mae is contracting its balance sheet at double-digit rates and its stock is nearing an 8-year low; Citigroup, JPMorgan Chase, and Bank of America are quietly hitting 2-year lows. An estimated $1.4 trillion in adjustable-rate mortgage debt will be reset in the next two years at considerably higher rates, adding to already swelling unsold home inventories. In short, the marginal U.S. consumer and his charitable lender are facing a financial version of the perfect storm."
Oneway,
The lionshare of mortgages originated nationally have been fixed rates. Option arms have seen recent popularity in overvalued markets like Southern Cal, Southern FL, and a few others.
Any fall out will be seen on a region by region basis where we see alot of speculators (many of which are classified second home buyers)
The lionshare of mortgages originated nationally have been fixed rates. Option arms have seen recent popularity in overvalued markets like Southern Cal, Southern FL, and a few others.
Any fall out will be seen on a region by region basis where we see alot of speculators (many of which are classified second home buyers)
I believe you are quite correct. Nationwide of recent, option arms and other mortgages that are going to reset are running about 25%, on average. This is because in huge areas of the nation there is not really much of a bubble at all.
But in ALL the areas where there has been breathtaking appreciation, including California, Mass, Fl, NY, Las Vegas, etc these adjustables with low teasers run as high as 85%.
There is no doubt fallout will occur on a regional basis. I expect no really big "event" in states like South Dakota, Nebraska, etc. I would bet that in states like the two I just mentioned there is not much, if any, speculative activity that would lead to a bubble blow-out. In some "intermediate" cities, like Boise , Minneapolis, Spokane, etc, there could be a bit of a fallout from quite a bit of speculation, but I expect the most of the extreme pain in cities like San Diego, Los Angeles, Boston, Las Vegas, where things are going to be very interesting.
Things are just starting to get interesting...
This story reports that the active real estate listings in Las Vegas is now the highest ever in history as more speculators move toward the exits.
http://www.klas-tv.com/Global/story.asp?S=3952396
First year over year declines reported in Las Vegas. Speculators and weak pockets squeezed.
"We bought a home in North Las Vegas almost one year ago. A realtor this week advised me this home would now list for $5,000 less than we paid. After realtor fees, that is a substantial financial loss in a year's time. I've seen homes in our beautiful gated community sit for months at a time, followed by several price reductions. Neighbors who have leveraged equity to buy new construction now cannot sell their homes for the appraisal figure given to them several months ago to cover costs."
http://www.reviewjournal.com/lvrj_home/2005/Oct-08-Sat-2005/opinion/3691951.html
Dominion Homes guides downward, will likely miss earnings in a big way next month. The stock is already down almost 38% from the July peak. I guess wall street IS all knowing!
Could biggies Toll and Hovnanian be far behind in missing too? Guess Bruce Toll is not so stupid for cashing out hundreds of millions of his stock!
"Due to lower than anticipated home sales and deliveries during the third quarter of 2005, the Company's earnings will be lower than analyst's expectations."
http://biz.yahoo.com/bw/051007/75537.html?.v=1
Peter Schiff, writer for Forbes and The Wall Street Journal writes...
"On the denial front, most still maintain that when the real estate bubble busts house prices will not decline in the same manner stock prices did when that bubble burst. If such assertions prove correct, it will most likely be because real estate prices collapse even more. The main argument advanced by those so confident that real estate prices will hold steady is that people live in their houses, and will therefore not dump them as investors did stocks. Aside from the fact that in cases of âinvestmentâ and vacation properties homeowners do not reside in their properties, only a small fraction of homeowners need sell to cause prices to collapse. As home values are a function of comparable sales, even if most ride out the decline, those few who do not, in many cases due to foreclosure or other forced sales, will determine prices for the entire market. It also seems the height of folly to deny that prices that have doubled in less than three years could not drop just as significantly in half the time."
"Also, when the stock market bubble burst, most investors did not sell either. They simply refused to open their statements, and âheld for the long term.â Yet prices collapse anyway because those few who did sell did so to an ever diminishing pool of buyers. While a small number of dot-com âinvestorsâ were able to get out with profits, far fewer homeowners will be so lucky. That is because in the real estate market there are no bids for sellers to hit, and stock market speculators did not have to make mortgage payments on their portfolios."
http://www.howestreet.com/story.php?ArticleId=1603
Bankruptcy filing rise to set new record levels. These are the smart ones filing now, the dumb money will not know what blindsides them later.
"Debt-ridden Americans in every state are trying to file for protection from creditors before the laws change. Filings climbed to an unprecedented average of 13,000 a day last week."
http://www.gazette.com/display.php?id=1311071&secid=1
This story reports that the active real estate listings in Las Vegas is now the highest ever in history as more speculators move toward the exits.
http://www.klas-tv.com/Global/story.asp?S=3952396
First year over year declines reported in Las Vegas. Speculators and weak pockets squeezed.
"We bought a home in North Las Vegas almost one year ago. A realtor this week advised me this home would now list for $5,000 less than we paid. After realtor fees, that is a substantial financial loss in a year's time. I've seen homes in our beautiful gated community sit for months at a time, followed by several price reductions. Neighbors who have leveraged equity to buy new construction now cannot sell their homes for the appraisal figure given to them several months ago to cover costs."
http://www.reviewjournal.com/lvrj_home/2005/Oct-08-Sat-2005/opinion/3691951.html
Dominion Homes guides downward, will likely miss earnings in a big way next month. The stock is already down almost 38% from the July peak. I guess wall street IS all knowing!
Could biggies Toll and Hovnanian be far behind in missing too? Guess Bruce Toll is not so stupid for cashing out hundreds of millions of his stock!"Due to lower than anticipated home sales and deliveries during the third quarter of 2005, the Company's earnings will be lower than analyst's expectations."
http://biz.yahoo.com/bw/051007/75537.html?.v=1
Peter Schiff, writer for Forbes and The Wall Street Journal writes...
"On the denial front, most still maintain that when the real estate bubble busts house prices will not decline in the same manner stock prices did when that bubble burst. If such assertions prove correct, it will most likely be because real estate prices collapse even more. The main argument advanced by those so confident that real estate prices will hold steady is that people live in their houses, and will therefore not dump them as investors did stocks. Aside from the fact that in cases of âinvestmentâ and vacation properties homeowners do not reside in their properties, only a small fraction of homeowners need sell to cause prices to collapse. As home values are a function of comparable sales, even if most ride out the decline, those few who do not, in many cases due to foreclosure or other forced sales, will determine prices for the entire market. It also seems the height of folly to deny that prices that have doubled in less than three years could not drop just as significantly in half the time."
"Also, when the stock market bubble burst, most investors did not sell either. They simply refused to open their statements, and âheld for the long term.â Yet prices collapse anyway because those few who did sell did so to an ever diminishing pool of buyers. While a small number of dot-com âinvestorsâ were able to get out with profits, far fewer homeowners will be so lucky. That is because in the real estate market there are no bids for sellers to hit, and stock market speculators did not have to make mortgage payments on their portfolios."
http://www.howestreet.com/story.php?ArticleId=1603
Bankruptcy filing rise to set new record levels. These are the smart ones filing now, the dumb money will not know what blindsides them later.
"Debt-ridden Americans in every state are trying to file for protection from creditors before the laws change. Filings climbed to an unprecedented average of 13,000 a day last week."
http://www.gazette.com/display.php?id=1311071&secid=1
novice question:
In the markets, a 'crash' is usually unexpected, when everybody is leveraged to the hilt and people think it'll go up forever. When alot of people are expecting a crash, it doesn't always happen.
Seems like anybody who's anybody knows about the impending real estate bubble burst....any thoughts on the implications there?
In the markets, a 'crash' is usually unexpected, when everybody is leveraged to the hilt and people think it'll go up forever. When alot of people are expecting a crash, it doesn't always happen.
Seems like anybody who's anybody knows about the impending real estate bubble burst....any thoughts on the implications there?
Knowing about the probability of something:
- doesnt stop a trader trading (u just hedge or cover quickly)
- doesnt stop a fool buying
- doesnt stop someone emotionally attached to a postion holding the position.
So, often, irrationality keeps extending (don't tell me that the NASDAQ wasn't overextended in 1998 or 1999) --- until it stops and nobody but the emotionally attached can deny it. Then the market falls in a jagged and somewhat unpredicable pattern.
I have friends who were buying Cisco in its last peak (in fact I recall one claiming to have got the top price). Some of those friends held it from 80 to 8 despite the traders amongst us telling them about stop losses etc.
- doesnt stop a trader trading (u just hedge or cover quickly)
- doesnt stop a fool buying
- doesnt stop someone emotionally attached to a postion holding the position.
So, often, irrationality keeps extending (don't tell me that the NASDAQ wasn't overextended in 1998 or 1999) --- until it stops and nobody but the emotionally attached can deny it. Then the market falls in a jagged and somewhat unpredicable pattern.
I have friends who were buying Cisco in its last peak (in fact I recall one claiming to have got the top price). Some of those friends held it from 80 to 8 despite the traders amongst us telling them about stop losses etc.