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Bob

SoWal Insider
Nov 16, 2004
10,463
1,344
O'Wal
SHELLY said:
>>Is this ludicrous or plausable?<<

Yes...no


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WARNING: WEAK COMEBACK AHEAD
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>>Shelley, you need a vacation, or a move from the panhandle, because hurricanes are in your future.<<

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RESUME SPEED
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>>BTW, I just heard on the news that Greenspan is going to halt raising interest rates until we recover from this disaster. Good for the market? Should be.<<

All the human suffering and destruction of Katrina aside, the economics of the situation is yet to be realized--especially due to the current trend of the areas' over leveraged homeowners who tragically lost their homes. The recent trend of diversifying risk by bundling and selling mortgages and equity loans to investors and the effect of their subsequent defaults or early pay-backs will play out in the months to come. But that won't concern Greenspan in the short time he's got left.

Greenie "claims" he'll only dink with the interest rates to keep inflation in check. He raises Fed fund rates to slow down the economy headed for inflation or lower rates to ramp up the economy when heading for recession. He started cranking down rates after the "tech bubble burst" and then after "9-11" to keep the economy moving. As a result of cheap money, the focus switched from the "Tech Bubble Weenies" trading on margin to "Real Estate Vultures" leveraging real estate (same greed, different melody).

With corporate profits moving up in the past couple of years (believe it or not) he started raising the rate (measured of course) to keep inflation in check. Additionally, he needed to continue to raise rates because at 1% to 2% the Fed had no cushion to rely on should there be another major economic catastrophe. By raising the Fed funds rate, he was counting on the long-term interest rates to increase (that's what Economics textbooks say they should do)--but that didn't happen (a conundrum) and the yield curve flattened. So to this day he keeps increasing the rate hoping the long-term rates will cry "uncle."

With the high gas prices, the cost of everything will start going up (retailers and manufacturers can't keep eating the costs forever) and we'll experience inflation--just the kind of thing Greenie wants to avoid.

If Greenie sticks by his guns, he should continue to raise interest rates to keep inflation in check. He may skip the next interest rate increase to make Bush look like a hero in the face of his administration's screw-up in the New Orleans, but those rate hikes have gotta start moving the long-term rates (which drive the mortgage rates). Of course if the long-term rates continue to stay low (or worse, fall) we will find ourselves in a recession which isn't good for the economy either.

My guess is Greenie wants to stick to his guns and continue his increases. If he does stop, he'll identify a reason like some "lower than expected X-economic indicator..blah..blah..blah." But with the 10-year yield down to 4.03% today, I don't any reason for him to stop raising the rates.
Either way, some investors may find it prudent to think about putting their money into the "Bank of Serta" until the economy settles.
Shelley, what kind of guns will "Greenie" be using to make oil go back to $25 barrel.
 

Robert

Beach Comber
Aug 30, 2005
42
0
56
Athens, GA
Just heard on the radio that Baton Rouge is in the middle of a real estate boom and shortage. According to the reporter, the population went from 300,000 to to 400,000 overnight. We may get some but I don't know how many.
 

Smiling JOe

SoWal Expert
Nov 18, 2004
31,648
1,773
Robert said:
Just heard on the radio that Baton Rouge is in the middle of a real estate boom and shortage. According to the reporter, the population went from 300,000 to to 400,000 overnight. We may get some but I don't know how many.

See the thread and post by Fox.
 

SHELLY

SoWal Insider
Jun 13, 2005
5,775
802
Smiling JOe said:
I believe I follow you. I have a question, though. With the forthcoming increase of the price of construction materials, due to the upcoming demand in materials and cost of fuel, if interest rates go up to keep inflation in check, do you think that people will stop building altogether? After all, you have suggested that property values will be decreasing in the near future. It seems to me that if construction stops, there will be less supply, thereby increasing demand and prices, even with increased interest rates.

There will indeed be a shortage of construction materials/labor with a subsequent raise in the cost of new housing--believe it or not, a vast number of people will stop buying new housing until prices fall again to a level where they can afford it.

Properties, condos and land in coastal resort areas are mainly being purchased as second or vacation homes, vacation rentals, or speculative investment purchases as there are no high-paying jobs in the area to support the sky-high purchase prices (even with "exotic financing"). There are vulture capitalist (arbitrageurs) with deep pockets and L-O-N-G investment horizons who have sold these properties previously to "bigger fools" patiently waiting in the wings for the prices to come down below what they originally sold them for previously. These people are richer and smarter than the current speculators who cluelessly think they will turn these properties over in the next year or two with a 30-50% return--a return they've already baked into their financial situation which, when in fails to materialize, will send them straight to the poorhouse. The arbitrageurs' time to pounce may have been shortened due to Katrina.

St Joe Company's (JOE) stock price is down almost 16 smackers off it's 52-week high. JOE has had a pretty good run (putting it mildly) after Ivan, But this time it is very different. Investors are spooked and taking their profits hand over fist--as the price begins to tumble, it kicks off stop-loss orders and down and down the price goes. The words "Florida and Gulf Coast" don't drum up the same idyllic thoughts in the minds of investors as they did prior to Katrina. JOE's CEO is gonna have to fall back on a lot of "Disney Magic" from his bygone days to get out of this one. His post-Katrina dividend increase announcement was unable to stop the bleeding. (Maybe JOE should consider reverting back to timber production to keep the excutives' and their families fed.)

There may be increasing demand for existing housing in the wake of Katrina, but I will bet my farm in Iowa it won't be $2.5 million beach houses or $500,000 postage-stamp sized lots on the coast of Florida.
 
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SHELLY

SoWal Insider
Jun 13, 2005
5,775
802
Bob said:
Shelley, what kind of guns will "Greenie" be using to make oil go back to $25 barrel.

I understand he's proposing to sink a few oil wells off the coast of Seaside and Grayton Beach. :cool:
 

Smiling JOe

SoWal Expert
Nov 18, 2004
31,648
1,773
SHELLY said:
There will indeed be a shortage of construction materials/labor with a subsequent raise in the cost of new housing--believe it or not, a vast number of people will stop buying new housing until prices fall again to a level where they can afford it.

So they are going to be buying what around here? There are not that many existing homes, and the ones that are on the market are often priced higher than the ones under construction.
 

SHELLY

SoWal Insider
Jun 13, 2005
5,775
802
Smiling JOe said:
So they are going to be buying what around here? There are not that many existing homes, and the ones that are on the market are often priced higher than the ones under construction.


The point is...they're not going to be buying around "here."

Texas, Louisiana, & Mississippi--all of whom have cheaper land and labor--are going to benefit. Company execs are gonna want to stay close to the action as their properties are being re-built or moved further inland with access to the transportation, deep water port systems and lucrative reconstruction contacts NOLA offers--Florida is too far removed from the "action" and has gotten far too expensive. Although I do expect JOE will be kissin' arse offering them some sweet deals to move their way, JOE may be a bit slow off the mark since I heard displaced corporations are this very minute snapping up real estate as close to NOLA as possible.

I suspect a broken down warehouse in Baton Rouge will be selling for twice the price of SoWal waterfront by the end of next week. How many "speculators" saw that one coming?? :blink:
 

Camp Creek Kid

Christini Zambini
Feb 20, 2005
1,271
118
50
Seacrest Beach
Shelly, are the biting flies getting to you? Why are you so negative about South Walton? You seem almost gleeful as you predict oil rigs off the coast of Seaside and a crash of the housing market.

What are you trying to accomplish with all of these posts? What you are telling us about the housing market isn't exactly news to any of us. All of us locals have lives and jobs that are, in some way connected to housing and/or tourism and, we are all intelligent enough to understand the "market."

At the end of the day though we still have the sunsets and the sand (yes, there is still sand). We've got stars in the sky and best of all, we've got lots of friends and neighbors in the community who care for and support each other.

If you can't say something nice . . .
 
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