Markets woes- blame the scarity American consumer

[trendlover]

Quote from day7793:

Housing is a necessity. Having a shelter of your own where you can go every night and sleep is not something optional that you can forego for years while the Government whacks you with lots taxes from your paycheck. Its a sound investment that grows and appreciates over time.

But when ordinary citizens ( not professional real estate investors like me) become wild card speculators and get greedy they end up on the wrong side of the street. Things did become 5-10% cheaper but you couldn't get financing. Being cash strapped/ hand to mouth existence and having a poor credit and a poor knowledge of real estate, you are no match to many savvy landowners.

So what you are doing now ?

1. Sleeping under someone else's roof under their terms.
2. Getting whacked with taxes from your paychecks.
3. Your quality of existence is reduced to shits.
4. You have not acquired any bargains- cause you are cash poor
5. You will drool and your American dreams will be delayed years.

What you are suggesting is a cause and effect scenario, and you are taking the stance that ( becasue) people are not buying at the inflated prices, that (effect) home sales have become stagnant. That is not what has happened from waht I can see.
First: Home prices started to appreciate much faster (in a shorter time frame) than what is normal appreciation. At the same time credit became very easy to obtain....almost a no questions asked type of loan. People who were( ALREADY) cash strapped were approved for loans that they either couldn't afford OR loans that they would not be able to pay in the future due to ARM; adjustable rate morgages set to reset on a specific date where the payment would be much higher than original payment.
I am not soley blaming the lenders, some people were very greedy and couldn't resist taking a loan they otherwise would never have been approved for. Ok. This pattern of behavior continued for a few years and the real estate industry was booming as you probably know. I'm sure you were having some wonderful years during this time and making a killing. Not only was your commission higher becasue of rising home prices, but more people were buying too because of the easy credit.
The lenders of these loans took those loans and sold those debts for a profit....and then maybe some of those buyers of the loan sold that debt to someone else for a profit....and who knows where those debts are now...whos holding the bag? Now comes the defaults by the people whp could never afford the loan they originally took out...maybe they squeezed by for awhile but things finally caught up with them and they are strapped, or the arm reset and their payments jumped by hundreds of dollars and they just can't do it. Default time. People are losing their homes AND who ever or whatever institutions are holding those debts that were packaged and sold ,and packaged and sold again are holding a peice of paper they thought was worth something...and its not. The game is over. You cannot possibley believe the banks did not know waht they were doing when they originally made these loans. It is their business to know their risks. They didn't care becasue it was very profitable for them in the beginning. Profit by volume of loans.

 

[Smart Money]

Quote from EMRGLOBAL:

Pent up demand for housing builds up over few years. Just wait and see the game."


I play the game my friend. I play in the yard with the big boys, 2200 acres at 65 million and more. I play in the yard where the market was the hottest.

Pent up demand? 5 major land deals have fallen through in the past few months in the area. Builders of "Hotels" Multi family homes and developers have walked away from ripe land deals. They are nervous as hell. 1031 Exchanges have halted.

Major track builders have called for a complete, cut and run and PACFIC HOMES has decided to close shop for a while in San Antonio TX. The 7th largest city with FORBES rating it number 5 in the nation for a hot RE makret, LOL.

There will be zero demand as it will take decade to shake this flu. The meltdown has just started, has hardly touched the common folk's lives yet. The news you read of "SUB PRIME" is only the start.


Real Estate buyers of the last year are toast, they will be upside down in most areas. If you bought with in the last 3, i give you 50/50 chance that you will wash. Hopefully you did not buy in a development where construction has halted and your house is next to an empty lot.

Housing is finished. Raw land may still be a tool to hedge against the market, w/ portfolio managers looking for improved land to purchase, to hedge. Not REITS, they are toast.

Other than that.....keep believing in your RE as you punch that clock and pay your taxes. EVERYTHING WILL BE OK. Cough Cough Cough

Isn't pent up demand caused by Builders of "Hotels" Multi family homes and developers walking away from ripe land deals? Isn't it caused by major track builders calling for a complete, cut and run and closing shop for a while?

Housing markets are not like stock markets, but people still need houses to live in. And they don't want apartments.

The interesting thing about the American consumer compared to the Japanese consumer is that American's strive to drive a Lexus and live in a big house to "show" that they are rich, whereas that is not the Japenese culture. Joe Blow might even lose his house, but he's still going to try to drive the newest, shiniest truck, have the biggest television, and if he has to...he will rent the nicest place he can find for his family. Put the money in the bank? pshaw!

Oh, and punching the timeclock and investing in real estate is how most people become millionaires. And those that do it right pay little tax, BTW.

SM

 

[PAPA ROACH]

Are you Carlton Sheets?

Quote from Smart Money:

Isn't pent up demand caused by Builders of "Hotels" Multi family homes and developers walking away from ripe land deals? Isn't it caused by major track builders calling for a complete, cut and run and closing shop for a while?

Housing markets are not like stock markets, but people still need houses to live in. And they don't want apartments.

The interesting thing about the American consumer compared to the Japanese consumer is that American's strive to drive a Lexus and live in a big house to "show" that they are rich, whereas that is not the Japenese culture. Joe Blow might even lose his house, but he's still going to try to drive the newest, shiniest truck, have the biggest television, and if he has to...he will rent the nicest place he can find for his family. Put the money in the bank? pshaw!

Oh, and punching the timeclock and investing in real estate is how most people become millionaires. And those that do it right pay little tax, BTW.

SM

 

[Smart Money]

Heh. No. Carlton's advice is kind of vague, and you need to delve into the specifics of it to get anything out of it. The funny thing is he is often the first image of who a real estate investor is. But often, it is muligenerational corporations that buy shopping centers or subsidiaries of insurance companies looking for safe long-term investors.


SM

 

[der_kommissar]

"People need a place to live in". Fine and dandy, but they don't need 3, 4, 5 places to live in. The BIG problem that the R.E. bulls have and will continue to have is that the "supply" of properties continued to grow at historic rates. A constant build out of real estate in markets already flooded with unmarketable properties is not exactly a bull item. If you could have kept the supply constant and/or shrunk the supply (Maybe a few more hurricanes), then maybe this argument would have some weight.

The other problem is that you guys cannot put your finger on how many of these properties are owned by the aspiring "Carlton Sheet's" of the world. If you have one guy with his own private holding company holding title to 27 properties, it doesn't exactly fit the bill of "everybody needs a place to live in".

This whole mountain of fraud, deceit and credit expansion at all costs will kill the 25 year asset bubble.

 

[indahook]

Perhaps the American consumer has stopped spending because they are saving? Including our household we know of 8 out of about 10 friends/family that have stopped using credit cards/closed the accounts and payed them off in the last 2 years. The only debt really held in our circle is a mortage..and we are all "middle class"...no new cars..no latest and greatest TV`s. Just hunkering down for some hard times that may happen

You will always have the big spenders that need the latest and greatest. But I beleive Americans are learning this time from mortgage and credit froth. The smarts ones at least.

Time to let Chinese citizens start piling up the debt

Just my observation

 

[der_kommissar]

Quote from indahook:

Perhaps the American consumer has stopped spending because they are saving? Including our household we know of 8 out of about 10 friends/family that have stopped using credit cards/closed the accounts and payed them off in the last 2 years. The only debt really held in our circle is a mortage..and we are all "middle class"...no new cars..no latest and greatest TV`s. Just hunkering down for some hard times that may happen

You will always have the big spenders that need the latest and greatest. But I beleive Americans are learning this time from mortgage and credit froth. The smarts ones at least.

Time to let Chinese citizens start piling up the debt

Just my observation

Only problem is your observations aren't supported by the recent data. Credit card debt is growing exponentially. Auto loans are also going delinquent at a rapid clip.

The savers have become the minority since there exists only a small percentage of people who were alive and/or learned the lessons of The Great Depression.

 

[gnome]

Quote from der_kommissar:

"People need a place to live in". Fine and dandy, but they don't need 3, 4, 5 places to live in. The BIG problem that the R.E. bulls have and will continue to have is that the "supply" of properties continued to grow at historic rates. A constant build out of real estate in markets already flooded with unmarketable properties is not exactly a bull item. If you could have kept the supply constant and/or shrunk the supply (Maybe a few more hurricanes), then maybe this argument would have some weight.

The other problem is that you guys cannot put your finger on how many of these properties are owned by the aspiring "Carlton Sheet's" of the world. If you have one guy with his own private holding company holding title to 27 properties, it doesn't exactly fit the bill of "everybody needs a place to live in".

This whole mountain of fraud, deceit and credit expansion at all costs will kill the 25 year asset bubble.

Spot on! "25 year asset bubble"?... well, it was in 1982 when the Fed went on the money-pump rampage. Hence, 25 years of inflation (which is often referred to as "growth").

Thanks to this greed and foolishness, hyper-inflation, loss of buying power in Americans' money, and likely a SEVERE recession/deflation* are in our future.

*probably the BIG inflation first, then deflation

 

[indahook]

Quote from der_kommissar:

Only problem is your observations aren't supported by the recent data. Credit card debt is growing exponentially. Auto loans are also going delinquent at a rapid clip.

The savers have become the minority since there exists only a small percentage of people who were alive and/or learned the lessons of The Great Depression.

True.

As I said..the smart ones are saving for bad times. Smart and minority are one in the same.

 

[S2007S]

Quote from day7793:

American consumer is a scarity cat.

Fearful, unsure, running at the slightest noise and a total wimp. American consumer does not have balls, its a soft baby with pink feet and a fragile ego. Slightest of adversity spooks the be juses out of him. Having grown up with a silver spoon and golden parachute of welfare system attached to its umblical cord he cannot face life when it get rough or when the rough gets going.

What does the American consumer do at the slightest dark cloud on the horizon? He freezes like a deer in the headlights. He is sacred to death about horrible consequences that hardly materialize. He stops SPENDING MONEY and sulks in a corner waiting for a green signal that all is well and he can cross the street. American consumer's habits beguile and frustrate everyone, from realtors,bankers, lawyers, landscapers to construction workers.

What happened in the real estate market is prime example of this behavior since late 2005. The American consumers saw dark clouds on the horizon for some reason and froze in its tracks. He immediately stopped buying real estate with bit of greed set in his eyes for bargain. Instead he sought security in renting 1 bed shacks and passing the night under someone else's roof. The magnitude of such a move killed the fledging real estate market and than the banking and mortgage lifeline attached to it.

Things started going worse and he became ever more fearful and scared. Pretty soon lenders had no business, they started going belly up and than the sub prime mess shit hit the fan in the summer of 2007. Since than it started effecting changes in the equities market and stock markets responded negatively and the overall general economy started get threatened by it. But since market has responded accordingly as expected, the neurotic consumer is now fully convinced that sky is about to fall and a talk about recession and obsession with doom gloom has taken hold of him. He is convinced and he is holding back spending on big ticket items like homes and cars etc.

If this scarity cats stops spending totally and tightens its belt further than I can bet the whole economy will be shattered and a recession will knock the winds out of the sails in America. And that is how American recessions usually start.

Lets hope our Government can coax this cat out of its hole into spending money and convince his fragile ego its Ok to come out and its not as dangerous as you have imagined. Lets hope he starts buying real estate and supported businesses starts spurting.

This is where the truth lies. How to deal with the American consumer ?

You can always take the horse to the water, but you can't make him drink. Hope we are wrong and the horse starts drinking.

with a negative savings rate its hard to agree with the consumer being a "scarity cat".

The consumer is totally tapped out, once those big piggy banks stopped giving and credit started to tighten what is left for a consumer to do, use cash.....