Stung by problem loans and the real estate slump, Arizona’s largest locally-based bank was closed by regulators Friday.
Scottsdale-based First National Bank becomes the sixth bank failure of 2008 and the first involving an Arizona institution since 2002.
http://www.azcentral.com/12news/news/articles/2008/07/26/20080726biz-FNBA-ON-CP.html
This is “good news” for the realtors and wall street who said the housing market would lock up if this wasn’t passed. FRM and FNM stocks were in free fall. Happy days are here again for the irresponsible lenders and their stockholders. For the US dollar and the taxpayers, happy days, not so much.
The House of Representatives approved a bailout for Fanny Mae and Freddy Mac on Wednesday. The senate now has to vote, but apparently it’s all but a done deal.
http://www.bloomberg.com/apps/news?pid=20601103&sid=aEUQ4aE8D2HI&refer=news
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There is a video on this page put up by Fed Up USA, regarding the bailout. (I can’t watch the video on Firefox but it works on IE)
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This has the tape from Senator Bunning blasting the fed about the bill that was passed by the house today. It’s located on the bottom of the page, just click on it to play.
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And Senator Bunning’s June speech from the Senate floor regarding the bill.
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Cramer also spoke about this bill. He said it was absolutely a necessity. He said it will stop home depreciation and keep the lenders investments worth more. In other words, help his wall street buddies who gambled and are losing.
This is my opinion of the GV/Kingman Bubble. I’m sure I missed some of the reasons the realtors think our bubble was justified, but at the bottom are the ones I hear most along with my opinion on each. The majority are things that are unchanged and are the same now as prior to the bubble.
Kingman was popular with retirees. They liked the low priced homes, the larger lots than Bullhead, the cooler weather than the river and the small town feeling. A lot of retirees moved here from the mid-west where prices were comparable and not out of their reach.
Now many who purchased prior to the bubble are having trouble paying their increasing property taxes based on all the speculation shooting their property “values” up by leaps and bounds. Especially with huge increases in utilities, gas and food and the decrease in any interest they may earn or the downward trend of any stocks they own.
Golden Valley was a place where people who couldn’t afford to live in Bullhead moved or people who wanted an acre or more of land to build on moved. Many worked in Laughlin and GV was a reasonable commute with much lower prices. They could buy property for a few thousand dollars and put an older trailer on it and live inexpensively. Or they could buy the same inexpensive acreage and build a nice house and not have to live in the city. They were willing to give up the benefits of living in Bullhead or Kingman for the acreage and/or the low costs. The pluses far out weighed the inconveniences and lack of infrastructure.
That is primarily what drove the increasing population of Golden Valley up to 2005, inexpensive living on acreage.
Then a builder decided that hundreds of thousands of people were chomping at the bit to move to Golden Valley and Kingman and live on 2000′-6000′ lots in cookie cutter houses with “rules” to keep the riff-raff out. He thought GV/Kingman would be a perfect bedroom community for LV. He borrowed millions and millions of dollars and started buying up thousands of acres in both Kingman and GV.
Then other speculators got wind of the plans and jumped in. They started saying that Golden Valley was the new Palm Springs (not sure what’s wrong with the old one, but whatever). They also borrowed millions of dollars from “no-rules” lenders or “willing to carry back paper” sellers and purchased the left over land and then moved on to every house available.
According to those “in the know”, hundreds of thousands of rich baby boomers from across the country were practically knocking down others to get their spot in Utopia (Golden Valley) or if not there, then Kingman. Kingman’s population was going to shoot up to as much as 1.5 million according to an article in the local paper and become the 3rd largest metropolitan area in the state.
Houses jumped 100% or more, mostly between 2004 & 2005. Land prices went up 2000% in GV in some cases and in all cases they went up many multiples of the early 2000’s prices.
Unfortunately the people buying the land and the houses were not, in most cases, the rich baby boomers. They were speculators and/or flippers. Most from out of state and many buying 5-10 houses each.
Why not, people were seeing houses sold and then resold weeks later for 100k profits. People were doubling, tripling and quadrupling their money by holding land only a couple of months or less. Lenders didn’t care whether you could pay them back or not. No credit, no money, no job, no problem was common in the lender ads at the time. All the old lending rules were thrown out the window as being “old fashioned”.
TV commercials and spokesman on national news shows were urging people to liberate the “free” equity in their homes. Take it out and use it for all the things you want and can’t afford. It’s your money, put it to use. Paying off your home was an extremely bad investment strategy, according to “experts” quoted in the media. You should never leave that “free” equity in your home.
Never once did I hear anyone say that this “free” money was not really “free”. It came with a high price. It was not your money, it was never your money. People were flocking to lenders to get their free money. It was a loan, just like putting the toys on a credit card. A loan that had to be paid back and unlike credit cards they could take your house if you didn’t pay them back.
People borrowed on their house to “pay off” credit cards, buy toys, take vacations, even pay for everyday living expenses. After all it was their money. Many said they were using their equity to “pay off” their debts. Huh?? For the math challenged, that is only exchanging one debt for another, more dangerous, kind of debt. Not “paying off” your debt. Oops, so much for “free” money.
A local realtor made a statement a few months ago that people should get all the equity out of their home that they could, so that they could “invest” in the deals that were showing up. Call me crazy, but borrowing money from your home to “invest” in the real estate market is less than smart.
Did anyone question this? Did anyone say what possible reason could these properties increase in value so quickly when nothing fundamental had changed at all? Did everyone’s salary go up a 100% or more? Did several big employers move here, paying 100k salaries to all? Did we suddenly move to a location closer to a big city? Did the national news media announce that Kingman/GV was the place everyone should move?
So now here we are. There was absolutely no fundamental reason for the price increases. Not here, and not in the rest of the country that experienced this “bubble”.
Now the prices have started falling and will no doubt continue to fall back to where they make sense for the salaries of the local population. Do the real estate professions or speculators accept this? No, they blame RAID(Residents Against Irresponsible Growth), a local reporter, the local newspaper, seniors, retirees, voters and anyone who dares question them.
They still think the increases were justified. They have lots of reasons…
1…A bypass over the Hoover Dam is just a couple of years away.
I think this is one of the weakest reasons of all. The bypass will allow truck traffic, which is now restricted. It does not shorten the miles to LV just makes the crossing of the actual river a little faster. LV will still be over a 100 miles away. And you will have the increased traffic because of the 18 wheelers.
2…Las Vegas and California are too expensive.
Obviously they haven’t paid attention to the falling home prices and land prices in both Cali and LV, we’re aready more expensive than many areas of Cali on a per square foot basis. And no matter what anyone says, our prices should not be compared to large metropolitan areas.
3…LV workers will live here because they can get more for their money.
Ok, even if this was true and I don’t think it is anymore, I fail to see the logic in this. Why would someone drive three hours or more each day to and from a job? Even ignoring the huge gas expense, that’s 3 hours a day out of your life on the road.
Why would someone work in Nevada (income tax free) and live in Arizona (income tax to pay)? Why would someone work in LV and then on the weekends, when they have time to shop and play, choose to do it in Kingman/GV instead of the entertainment capital of Nevada?
4…Hundreds of thousands of baby boomers are coming.
This is almost laughable, thousands of other small towns across the country are also saying this. Most retirees I know either stayed in their town when they retired or moved to a state where their children lived. Those who retired to Florida and/or Arizona usually did it because of the low cost of living. Without that, many retirees are moving out of those states and/or not moving in. Unless baby boomers are a new breed, I doubt they are all going to set out and move to a new state when they retire. And if they do, it will still not increase the houses needed. Most will sell in one place and buy in another. The increased inventory when they start selling will not make prices go up.
5…Businesses will relocate here from California because of the low prices and low taxes.
This is a myth perpetuated by retelling. If realtors and speculators would check the actual numbers they would find the truth. California commercial prices do not bubble like residential does. Commercial prices here bubbled even more than residential. Land and commercial rentals here are higher than many areas in California.
We have imposed huge impact and building permit fees as if we were a big city. Commercial property taxes here are ridiculously high compared to California and there is no protection against them doubling or more year after year as there is in California. I don’t know what workers comp rates are in Arizona but I would guess they are lower than Cali. That is a cost that is out of control in Cali and could likely be the main thing cheaper here. Businesses move for profit. If the cost of doing business continues to climb in Arizona, businesses will bypass us for greener pastures. Phoenix is already losing businesses because of escalating taxes.
6…Kingman has both the 40 and 93 freeways and will attract companies based on this prime location.
Once again, did Kingman move? As far as I know we’ve had the 40 running through Kingman for as long as the 40 has existed. We were always a prime location for businesses who need the 40 for transport to and from Cali. In fact, we were probably a much more prime location in the past before the land prices escalated. Higher land prices will decrease the interested businesses not increase them. Businesses cannot afford to have their property values and corresponding taxes increase every year. That is not a plus.
7…We have perfect weather.
Although I like the weather here, a lot of people feel it is too hot in the summer and too cold in the winter. And more importantly, the weather hasn’t changed. We had the same weather when our home and land prices were cheaper. Prices don’t go to the moon over night because of weather.
I said months ago that there would be be bank failures from this fiasco. If anyone has any money, they need to be sure it is in an insured account and this includes retirement accounts. This is the biggest so far, but others are on the same banana peel. Wachovia and Wamu are two other large banks that are in danger.
Latest victim of mortgage crisis, IndyMac taken over
By Jonathan Burton & John Letzing, MarketWatch
Last update: 8:31 p.m. EDT July 11, 2008
Comments: 438
SAN FRANCISCO (MarketWatch)– IndyMac Bancorp Inc. became the biggest casualty of the subprime mortgage crisis on Friday, as federal regulators shut down the troubled Pasadena, Calif.-based savings bank in one of the largest U.S. bank failures ever.
The Federal Deposit Insurance Corp. said in a statement it will take over operations of IndyMac
, which will open for business on Monday as IndyMac Federal Bank. The thrift had total assets of $32.01 billion as of March 31.
Regulators seize IndyMac Bank
Updated 55m ago | Comments113 | Recommend16
LOS ANGELES (AP)— IndyMac Bank’s assets were seized by federal regulators on Friday after the mortgage lender succumbed to the pressures of tighter credit, tumbling home prices and rising foreclosures.
The bank is the largest regulated thrift to fail and the second largest financial institution to close in U.S. history, regulators said.
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….And the importance of being sure you are covered……………………
“Some 10,000 depositors had funds in excess of the insured limit, for a total of $1 billion in potentially uninsured funds, the FDIC said.”
