Archives For recession

three months, almost to the day since i last posted here. how things have changed, there was once a time where i’d posted twice, sometimes three times a day. i suppose that’s life, when you reveal that much for that long, there will come a time when you really don’t have that much to say any more. 

i think i do still have a contribution to make. there are a lot of things that have been on my mind lately –  there is an election cycle in progress, my experiences with my new job, developments on the home front and of course the elephant in the room – the state of the global economy.

there have been a couple of milestones in the interim, the beginning of the month of march marked my fourth anniversary in the us and the end of the march marked our first anniversary as homeowners. as the subprime mortgage and equity markets continue to implode i watch in fascination. i understand chasing the dream, but to what ends?

when we decided that we were going to buy a house we worked out how much we were paying in rent and utilities, what size home would keep our utility bills in the same relative bracket and what we could afford if one or both of us  were unemployed for a  prolonged period. and there was one other major stipulation, no exotic loans. we wanted a standard 30 year mortgage, with a fixed interest rate.

even without a degree in economics or an accounting background, the details of these loans were insane and based on an assumption that the value of your house was guaranteed to go up. isn’t the concept of value based on demand and availability? basically this collapse was inevitable and like any good pyramid scheme only the people at the top got paid. i’d posted before about the similarities between the housing crisis and the s&l crisis and the inability of the middle class to provide a bailout. i stand by that statement, but based on the bear sterns bailout, i think we’re going to be forced to pay for it, whether we like it or not.

we approached the mortgage company with our info and asked for the magic number. with the number in hand we then started looking in earnest at houses. to most people it appeared as though we found a house in less than a month, but we’d been looking on and off for about six months with my usual degree of obsessive compulsiveness. in the two weeks before we found the house we’re in now, i think we looked at least 10 houses with a variety of flaws; too far, zero lot lines, too many koi ponds – long story, rotting floors, smoky. and at first blush, vic wasn’t sold on the house. it was only when we got a chance to go in that she was sold and it’s a good thing we acted as quickly as we did, we discovered at the closing that someone else put a cash offer about the same time as the fax with our offer was coming in.

our house was a realtor flip and going over the closing documents, by the time the realtors paid their cost and what the owed to the bank the made less than $10k. i don’t know if i’m not looking at the big picture but that seems a really small profit margin and with the markets being what they are now, how much smaller are the margins? how many flips do you have to sell to break even? or does the commission on selling the house help? looking at the nashville market, there has been a slowdown but now as drastic as the rest of the country, however it looks like the majority of houses still being sold are older homes and remodels.

the foreclosures and abandonments are reminiscent of trinidad in the late 80s after the ‘money is no problem’ era ended. in 88-89 just before my grandmother moved to trinidad we started looking for a house and with the market being what it was the banks were more than happy to provide their foreclosure lists. we saw a lot of house that still had furniture in them as people just walked away from mortgages they could no longer afford. all the precursors to the recession then are visible here, now and what’s worse is that in this case it’s going to be global. the mortgage crisis is going to continue to ripple out, food and transportation costs are already rising while wages remain stagnant, the value of a dollar decreases every time the federal reserve tries to shore up the economy. greed put us in this situation and it’s going to be interesting to see how we get out of it.