Mrcauser’s Weblog

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Imagine trying do this for a living…..

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I sold real estate during the early 90’s. It was tough enough. Imagine when no one can qualify for a loan. This is along post but should be read to get an idea of the extent of the problem.

The California economy is the third largest in the world and depends mostly on the housing industry.

Which has disappeared.

What really hurts is that the worst hits in 2009. I got out just in time. Unemployment in Riverside is now close to 10% and climbing. My niece  lost her house a couple of months ago after taking in her mother who had ended up homeless.

My daughter’s husband is a union carpenter working commercial real estate projects still under contract. These contracts will probably disappear as who will need new office space. Maybe government as they will be the only ones hiring.

Laborers are now dime a dozen with plenty of Mexicans still to be nationalized by Ob’s new administration putting even greater pressure on what few jobs there are. So much for the coming minimum wage hikes, right?

Xmas sales will be over in a week or so and who needs clerks in empty stores. Business has to empty their warehouses because excess inventory costs money and is taxed. Sales taxes will collapse putting even greater strain on local authorities to cope.

Firemen have to be paid or we completely wipe out whats left of the insurance companies . Literally thousands more will then become homeless. Democrats then lose their cushy jobs.

You get the idea.

Expect to see the new government under OB to hire everybody to build bridges and highways but this takes time. Be probably 6 months or so. Count on a big stimulus checks and big tax credits first.

One interesting idea I’ve come up with is for the banks give everyone a a new credit card wiping out much of the old balances. All that bank stimulus money has to end up in our hands as debt in order to crank up the consumers. Therefor, other forms of the essential credit moratorium will be instituted as  this will become necessary to save the system.

Count on measures to do so.

The stock market will rise if not boom here as Europe and Asia ships their money to our stock market looking for safety. Still have to get global shipping moving to save China’s economy from collapsing. China needs to sell us everything we need and continue to buy our national debt. They also need the worlds commodities. We have become so intertwined on a global scale that all bailouts are universal now.

Read the above carefully. That’s right. Broke dicks can’t buy squat. We is broke.

Good luck, President OB.

I would expect a huge increase in crime. Up here in “Redneck Heaven” Idaho we just hunker down. Stock up on canned food and polish our hunting rifles. Have more deer and fish than dollars. I expect the job market to disappear for awhile. I’m warning my friends to hang on at Wally World  because things could get nasty. The local jobs, saw mills and such no longer exist. Empty stores don’t need clerks. People with out money aren’t  buying gas. Etc etc.

I guess we just wait for the new Messiah, OB to save us.

California Housing Fiscal Emergency Part Deux: California Housing and Economic Dynamics in Massive Recession. » Dr. Housing Bubble Blog

The L.A. median home price topped out at $550,000 in August of 2007. I know that it seems like a lot longer ago but only a year ago, were we sitting at the mountaintop. Now, the median home price for the county is $355,000. A drop of nearly $200,000 in one year. How would you feel if you bought at that $550,000 peak and now knew your home was only able to fetch $355,000 (if that) on the open market? I can tell you how many are feeling. Many are simply walking away from their homes. When I say walking away I don’t mean that they leave on their first miss payment. In fact, idiotic legislation like SB 1137 simply kicks the shiny empty Coke can down the road a few more months and allows many people to stay rent free in a home they clearly cannot afford. They will walk in droves next year. I’ve talked with a few contacts in the industry and they are telling me that if you have a 720 credit score and 25% down you can get a loan at 5.25% up to $725,000. Yet the traffic is not there. Why? Because how many people today have $181,000 sitting around for a down payment on a home? Also, you have to have debt-to-income ratios that keep you under 37% so let us take that $725,000 home and run the numbers:

Down payment: $181,000

Mortgage 30-year fixed (5.25%): $3,003 (Principal and Interest)

Taxes and Insurance: $755

Total monthly payment (PITI): $3,758

Needed net monthly income: $10,156

You will need a monthly net income of $10,156 to afford this home even after putting $181,000 down if we want to keep the 37% DTI ratio with net income. Yes, you’ll have tax deductions but keep in mind that monthly nut of $3,758 comes out of your monthly cash flow stream. You reap the rewards when you do your taxes. But let us not get caught up in missing the bigger picture. There is such a tiny amount of people in California that fall within this range that it is comical. That is why sales have fallen. People are missing the point. It is all about income and jobs. It always was about this. If the median U.S. income was $100,000 I assure you we wouldn’t be having this discussion. But the fact of the matter is the median income is only $46,000.

Many are now losing even that median income job. That’ll depress wages and home prices further. And California had this incestuous relationship with housing. That is, many of the high paying jobs simply existed as a leech to the bubble. Now that the host is gone the vector can no longer survive in the current ecological system. That is simply a fact.

Even with all these foreclosure moratoriums and hackneyed responses to the bubble, the foreclosure rate is still through the roof:

Nationwide foreclosures

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Written by mrcauser

December 3, 2008 at 9:32 pm

Posted in Uncategorized

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