Monday, June 25, 2007

Insurance v. Housing

But "insurance" is such a nice word. Why would something nice be at odds with the housing market? Depends on what kind of insurance we are talking about, whether it is mandatory and most important whether it is priced correctly. Seems like everything in the housing industry is insured and suddenly it is becoming clear that a lot of it is not priced to risk. Wholesale it is hedge funds that are imploding. Retail, the homebuilders are entering a cash crunch and at the consumer level casualty rates are skyrocketing to make up for past miscalculations and to cover the value of inflated replacement equivalents. Anecdotaly my mom who owns a couple "hurricane magnets" on the Gulf Coast of Florida tells me that her neighbors are seeing 50-80% increases on top of dubling and trebling in last years' wind damage insurance rates. [She self insures so it doesn't matter to her.] Thing is they cannot as they have mortgages and must carry insurance. Ouch.

Anyway, the concept of "total cost of ownership" is familiar to us all. What has happened is that way too many people haven't done the math for the conditions we now face. Adjustables adjusting up, refi opportunities closing down, insurance increases and inflation impacting misc carrying costs. Have we indentured a generation of house slaves? Notice I haven't even gotten around to the 300lb gorilla of runaway taxes. That will be another thread.

46 comments:

Gordon Sanders said...

murstnessfirstness

Gordon Sanders said...

and think about this, I refi'ed my house and had to take out more insurance because the price of land is SO HIGH relative to the cost of the house. Damn banks :-)

(Ex) Train Wreck Watcher said...

Breaking News:

Home Sales Hit Slowest Pace in 4 Years

No way to spin the data this time; it's bad, bad, and bad. HBB is going to be abuzz over this one . . .

Rob Dawg said...

Yes, ex-tww this was what we were waiting for thins morning. Two points; this is existing home sales, new home sales tomorrow and second, wait for the revisions and look carefully at previous month's revisions. The model is being very bad at catching falling sales rates. Also note that the MSM leads with the month over month data because the year over year looks even worse.

serinitis said...

Insurance coming in line with risks is a good thing. But government still subsidizes flood insurance and the politically organized will get the government to covertheir losses.

As far as it being the slowest pace in 4 years. didn't our boom start in 2001/2002. This means sales are still a little above average.

Rob Dawg said...

5.99 million annual sales rate is in the 2002-03 range but in the intervening 4-5 years the housing stock has exploded. supply and/or population adjusted and we are already below long term averages.

serinitis said...

In a troubling sign for the future, the inventory of unsold homes rose by 5 percent to 4.43 million units in May, a level that would take 8.9 months to clear out at the May sales pace. That is the highest inventory level since the last deep slump in housing in 1992.

Now this one paragraph in the otherwise rosy(to me) article says we are going to have real trouble ahead.

(Ex) Train Wreck Watcher said...

Sales pace is still a bit high, but that's due to a number of effects. The bubble is still going strong in a few areas--Long Island (thanks to huge Wall Street bonuses), Utah (although cracks starting to appear), Montana, Texas, a few other regions. Also, there are still some criminal rings that are driving sales, selling houses to each other at inflated prices for fraudulent cashback; the Fed is only just beginning to catch on to those people.

Bear in mind that the World's Most Hated Flipper is ahead of the curve (in just this one aspect, mind you), in that he went bust before the rest of the flippers--the housing "slowdown" (read: bust) is still far from its climax. The peak of the rate resets will hit this summer, the foreclosures from that will only start to show up in the fall . . .

NoVa Sideliner said...

MSM leads with the month over month data because the year over year looks even worse

So true, but what worthlessness comparing April to March, then May against April.

I want to see if they keep up that month-over month comparison once we hit the autumn NOT-selling season. There'll be no place to hide.

World's Most Hated Flipper is ahead of the curve (in just this one aspect, mind you)

You can count on him leading the way if it's the path to FAILURE.

Rob Dawg said...

The NAR are masters of slipping in the big news. Lawrence Yun, NAR senior economist, said ... “Household formation has slowed dramatically since late 2006,...

This must be vindication week here at EN. We blogged this demographic shift last fall. This is also huge.

Anonymous said...

This must be vindication week here at EN. We blogged this demographic shift last fall. This is also huge.

Next time you go to a party, all the blowhard chuckleheads who were making fun of your "Chicken Little pessimism" last year will be now claiming that "I saw this coming a mile off and called it last year." The fact that you were in fact one of the few voices of sanity crying out in the wilderness will be totally lost on everyone, as people retroactively edit their memories to create a rosy artificial picture of themselves as wise and sagacious.

bluto said...

-8:15
That's why once you learn a few things you keep your predictions to yourself or someone who pays you for them.

Rob Dawg said...

bluto,
that's one of the paradoxes. Those of us who have been correct for the last year and a half are the very last people to be listened to even now. Blogging is closing that gap however as it allows those silent predictions to be archived.

mejustme said...

There was a case here in San Diego -- and I don't remember the particulars -- but some homeowners sued their insurance company because they *thought* their policies covered mudslides or earthquakes or whatever calamity befell them, even though it wasn't in the policy (usually the earth moving has to be covered by a specific policy or rider, not just generic homeowner's). They won, and their claims were paid.

A few years later, similar calamities befell another group of homeowners who similarly lacked the specific coverage, and they sued again. What was different was that, thanks to the previous case, their policies specifically stated that this calamity was not covered.

And the cases were brought by the very same lawyer.

So he originally said, we didn't know we weren't covered because your policy wasn't clear. So THE SAME ATTY sued again because they didn't know they weren't covered because the policy wasn't clear even after insurance companies reworded their policies to his liking.

I don't know what ever happened to the case.

Speaking of insurance, I wonder how much Snowflake got billed when his bank took out a policy for his homes (he commended them for being so smart!). Would he still be liable for it once they got foreclosed?

Mouse And Pencil said...

I've stopped trying to be "right" and focused on being safe - reading Ben Jone's blog, and to some extent here, really opened my eyes - I was almost one of the flock, I had mortage brokers promising me the sky and moon as far as mortages go, and looking back, I started pondering buying 8 months before the peak.

Yikes!

As i put to someone making fun of me for not buying back then (social decorum is lost during booms - I had blowhards laugh in my face when i said I rented, and was called stupid, cheap, etc...), I'm not willing to make a $500K bet on black - are you?

I had very simple questions: who were buying these 6-800K houses, and how?

That led me to Ben Jones, and knowledge.

Now? Honestly? I'm scared shitless. It's going to hurt, the only question is how much. A bunch of complese assholes in this country threw one hell of a party, and we're ALL going to have to clean it up.

walt526 said...

I'll second the appreciation for Ben Jones. His blog saved my wife and me from making a horrible financial mistake last year. We wouldn't have gotten involved in a toxic mortgage, but we very likely would have bought a home that we could afford but would depreciate 25-50% during our first five years of ownership. It might not have destroyed us financially, but it would have been a major, major setback.

Now, we're still renting, paying down debt, and saving. And what we eventually buy in 2009-10 will be much, much better than the starter home that we would have been able to afford in Fall 2006 in a so-so area with crappy schools and in a high-risk flood zone. Thanks Ben and all the great posters at HBB!

Rob Dawg said...

I used to post a lot at HBB. Ben deserves top billing for shouting what many of us were thinking.

call me clem said...

Gee, I'd like to have had a mom who was wealthy enough to self-insure some homes on the coast. I might have not had to work three jobs to pay for college. No offense intended, though, I appreciate and accept your rich overlord status.

Alabama_Swamp_Donkey said...

Ben Jones? You are, of course, refering to TV's Cooter from The Dukes of Hazard?

Sharky said...

Watch the Feds step in to "fix" this catastrophe for the financial industry.

Hate to see it happen, but if history is any guide, (Chrysler, Savings & Loan), there'll be a great big fat bailout.

Of course, if the various Federal "Affordable Housing" initiatives had actually done what they were supposed to, would folks have been doing business with the shuck and jive artists?

Rob Dawg said...

My parents were poor and frugal. They also worked very hard and saved and invested. Also note, I said "hurricane magnets" as in manufactured homes. We aren't talking hob nobbing with the W Palm Beach crowd here.

Alabama_Swamp_Donkey said...

Rob, I second that, I can't tell you how many times we had to leave the wheels on the house in case we had to pull it away from a tornado or hurricane.

Duane LeGate said...

Gang, I hate to go off topic here, and I will discuss why I need this later, but can someone - anyone give me a list of all the "haterz" sites out there??

This is time sensitive and important.

Thanks.

The Dude said...

Duane,

I've been trying to put one together myself....any responses from the World Of Haterz?

Alabama_Swamp_Donkey said...

Duane,

I was in your neck of the woods the other day actually. Here is a good starting place. I'll see what I can find in the mean time.

http://www.caseypedia.com/wiki/Category:Haterz%E2%84%A2

Also www.freegalina.com and www.caseyserin.info point here.

Alabama_Swamp_Donkey said...

http://donthatecasey.blogspot.com
http://12yearsofbeingannoyedbychloesevigny.blogspot.com
http://www.caseypedia.com
http://jeepgirlj.blogspot.com/

Alabama_Swamp_Donkey said...

whatcaseymeans.blogspot.com/
www.belowthecrowd.com

Jean Valjean said...

I'll second that.. especially Aspeth's site.

And I'll add:

http://whatcaseymeans.blogspot.com/

NRU_is_a_scam said...

Another NRU sucker;


http://www.prosper.com/lend/listing.aspx?listingID=157293

Gustavia said...

http://iamnotfacingforeclosure.com/

http://12yearsofbeingannoyedbychloesevigny.blogspot.com/

http://whatcaseymeans.blogspot.com/

http://timelineguy.blogspot.com/

Alabama_Swamp_Donkey said...

www.iamnotfacingforeclosure.com

Anonymous said...

https://www.tdnam.com/trpItemListing.aspx?&miid=7719233

seems like we have to have a shortsale since there were no takers

Sputnik_the_Cat said...

NRU:

aack! Meant to tell y'all that I was in Las Vegas recently. Driving around town, I found myself behind one of them huge Cadillac SUV's - and painted on the back was: "Call me if you don't make at least $50,000 per month" - and some phone number.

When the car made a left in front of me, I could see painted along the side the NRU logo...

Fucking MLM scammers make me sick.

thppt!!

S_t_C

walt526 said...

"
http://www.prosper.com/lend/listing.aspx?listingID=157293"

Wow. What a loser. No way that guy could make $1000/month.

I've been looking at Prosper.com (as a lender), it just seems that 95% of the loan requests are bad loans (like that one). And the few "good" ones have rates below what would be necessary for me to justify a loan. Essentially, it's the adage: "anyone worthy of a loan doesn't need it." I was thinking it might be an interesting way to increase the yields a bit, but IMHO there's too much risk involved for far too little return.

Jean Valjean said...

Duane, putting 'em all together:


http://12yearsofbeingannoyedbychloesevigny.blogspot.com
http://www.caseypedia.com
http://jeepgirlj.blogspot.com/
http://whatcaseymeans.blogspot.com/
http://donthatecasey.blogspot.com
http://www.belowthecrowd.com
http://iamnotfacingforeclosure.com/
http://timelineguy.blogspot.com/

-JVJ

call me clem said...

just rattling your cage a bit, no hard feelings, more power to your mom if she is able to own homes on the coast.

Anonymous said...

It looks like NRU is directing people to Prosper to fund their "tuition". I have yet to see one funded.

The guy in the listing above is obviously deluded. No real income. A grown man living with his parent(s). Etc, etc yet he wants to blow 20k on NRU?

I agree that 95% of Prosper loan requests are a sad joke. Even if you put a lot of time into it and are careful selecting only prime loans you'd be lucky to clear a 10% return on your investment. Most lenders are making less or have lost money.

Anonymous said...

http://blogs.wsj.com/economics/2007/06/25/rising-inventories-increase-pressure-on-housing-market/

Mouse And Pencil said...

Note to self: when begging on Prosper.com, don't post a picture shirtless, looking like I rolled out of bed (in mom and dad's house).

Rob Dawg said...

Clem,
No prob. If you've been here any length of time you know it takes a lot to rattle my cage and when that happens I rattle back real loud.

it's one of those cases of how rich people get rich. It isn't the caseyway that's for sure.

Duane LeGate said...

maybe I need to expand what I am looking for...

all haterz sites
any website that mentions Casey and is not a supporter
all media references such as Declans article that shows Casey for the true scammer he is

Duane LeGate said...

and thanks to the people so far that have left blogs...

thanks!

Duane LeGate said...

HousingPanic??

Rob Dawg said...

Duane, I put up a special post dedicated to your request. Ask there. Regards.

Mouse And Pencil said...

@Duane

I think the Scotsman article was the first press that did'nt do a puff piece on him.

Camp Idiot had threads on his invovement with Zewg

Ben's Bubble Blog mentions him on a frequent basis: http://thehousingbubbleblog.com/

Casey used to post RSS feed mentions of sites that talked about him, you might want to dig into some of the older threads.

Anonymous said...

Sydney Mornng Herald,
The German mag he blogged about,
the SDCIA forums
search on caseypedia