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NEW -> Contingent Buyer Assistance Program
U.S. Economy: Sales of New Homes Tumble 9% to 12-Year Low

http://www.bloomberg.com/apps/news?pid=20601087&sid=a07XiAPBo7SY&refer=home

Purchases dropped 9 percent to an annual pace of 647,000 and October sales were revised lower, the Commerce Department said today in Washington. Last month's sales were weaker than the lowest forecast in a Bloomberg News survey of economists.
 
There is some dispute as to the accuracy, but there is an article on Lansner's blog:

O.C. had 29.5 months of inventory in November, Realtors say

Geez! 29 months? Outstanding!
 
I dispute that there is 11.95 months of inventory I see in the OC.

From bubbletracking:

11/30: 18,731 (1,567)___11/2006: 15,188 (2,867)

That is not to say we will not see 29 months but we are not there currently.
 
New cars that are fully loaded -- with debt

Americans are rolling over loans, often ending up owing more for the vehicle than it's worth.

http://www.latimes.com/business/la-fi-autoloans30dec30,0,4315064.story?coll=la-home-center

Faced with car payments that exceed her monthly mortgage, she tried to trade in the pair for a single vehicle. But with so much unpaid principal on the vehicle loans, the only offer she got from the dealer was to trade in one truck on yet another new vehicle -- and increase her debt by another $25,000.

...

It's not just individual consumers who are at financial risk. Nationwide, an estimated $575 billion in new and used auto loans are written every year by auto manufacturers, banks, credit unions and other lenders. About 30% of the loans that are originated by banks, and 100% of those issued by automaker financiers, are, like mortgages, repackaged and sold as securities, according to the Consumer Bankers Assn.

Analysts warn that just as investors didn't comprehend the risk inherent in some of the more exotic home mortgages in recent years, they aren't considering how risky these car loans are. If longer loan terms allow debt on the loans to grow too large, many drivers may simply default, leading to expensive repossessions.
 
Bishie,

You used inventory at a fixed point in time, divided by closed sales over a one month cycle. You forgot to factor in new listing on the market for that 30 day period. The formula for net absorption should be Closed Sales (30 days) less New Listings (30 days).

The formula for Inventory (used in the CAR study) is Total Listings (at a fixed point) / (Closed sales 30 days - New listings 30 days)

The absorption rate is approx. 600 units, thus the 31 month figure.
 
Gold within striking distance of record

Gold rose to within striking distance of its record high on the last trading day of 2007, helped by safe haven buying prompted by concerns about the deteriorating political situation in Pakistan following the assassination of Benazir Bhutto on Thursday.

Gold reached a session high of $843.20 a troy ounce on Monday, the highest level since January 1980, when bullion reached a record $850 during a period of intense geo-political tensions including the US hostage crisis in Iran and the Soviet Union’s invasion of Afghanistan.

Dealers said thin trading conditions were contributing to price volatility for precious metals and that there was a reluctance to go short (bet on price weakness) ahead of the New Year break as the situation in Pakistan was so unstable.
 
Everything I ever wanted to know about why housing busts take so long to play out:

pigeons_rats_humans.GIF
 
There's a Sacramento Flippers in Trouble blog, that makes any losses posted on IHB look like small potatoes. Incredible losses, especially when you consider the drops have further to go..

Did something extra awful happen in Sacramento?
 
I want to sign up this guy as my financial advisor:

Sell tech (especially Apple and Google) and buy home builders. I think that is right. Anyone has a bridge I can buy?

www.cnbc.com/id/15840232

"People are still going to buy housing in the future."

Lawyerliz. . .nothing "awful" happen in Sac-town except it is Sacramento. The Central Valley is to San Franciscon Bay Area as the Inland Empire is to LA/OC (I want this to be an analogy question on the SAT). It is not a great place to live: High crime, bad weather, and far away from everything but cheap prices. So it got pumped up and now it is crashing. Similar problems in Stockton and Fresno.
 
Gold is over $100 a barrel and CFC is in the 8s again.

A blogger over at Calculated Risk made a good point that oil is the ultimate currency, more significant than gold.
 
Danger ahead: The prospect of recession again confronts America

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At the heart of the problems is the bursting of the housing bubble that helped to power American growth since this economic cycle started six years ago. The end of the bubble has brought a brutal slide in home construction, house price falls that threaten to undermine household wealth and consumer spending, and turmoil in the credit markets that are used to finance housing.

The US has endured financial crises before with little or no effect on the real economy – for example, in 1987 and 1998. But these were autonomous financial crises with little connection to the underlying US economy. This financial crisis is different. It is defined by the bursting of twin bubbles in housing and the credit markets – bubbles that were deeply interconnected.

Easy money and the collapse of discipline in the credit markets helped push house prices to unsustainable levels. But when the residential property bubble finally burst it took the credit market bubble with it – decimating the value of hundreds of billions of dollars of securities linked to subprime loans that were safe only as long as house prices kept going up.

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“It is not all subprime,” says Jeff Frankel, a professor at Harvard. “Even without that, the magnitude of the fall in house prices itself is a prime candidate to cause a recession – [through] what it has done to the construction industry and household finances. Then there is oil.” The high price of oil and food is putting additional strains on consumer spending, reducing disposable income and eating away at real wage gains. Richard Berner, chief economist at Morgan Stanley, says the rise in energy and food prices between June and December alone “drained about $45bn or 0.4 per cent from consumer discretionary income”.



Traditionally, economists would expect the price of oil to fall when the US economy is weak, freeing up some disposable income and acting as a natural stabiliser. But strong demand in China and India plus geopolitical tensions in the Middle East are keeping oil hot – compounding the housing and credit problems.
 
My wife and I were watching a show about expensive homes and the show previewed the portobello mushroom house in Corona del Mar. And guess who shows up toward the end of the preview to explain the asking price of $75,000,000? None other than John McMonigle. "The portobello mushroom house is built on three premium ocean front lots and the tear down lot next door just sold for $18,000,000."

Better hurry. This one won't last.
 
From http://www.realestatejournal.com/buysell/markettrends/20080103-frangos.html?mod=RSS_Real_Estate_Journal&rejrss=frontpage&rejpartner=wsj_hpp

20080103-frangos.gif
 
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