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With the high land prices now there is no way that agricultural land for timber or livestock can be worth more than developing it. The present value of future cash flows from agricultural operations can't be worth the 20-50 grand per acre you see land going for in western Montana.
I agree with your underlying point, but just to establish a context, there is a lot of land in western Montana still priced at $4K to $6K per acre. Still higher than the return-on-investment for most agricultural purposes.
And I've been rattling along now like a broken bell since early last year, and some of you here know this, about the boom going bust.
Enter the current lending institution crisis.
Your 50k per parcel of land is going to dry up and blow down the road to the nearest cattle rancher for 2k... Mark my words. It's happening right now.
It's recession time folks. And your 1million dollar house is going to cost you, especially if you've got extra financing tied to the backend of it.
You'll be lucky to duck out from under it for 500k. (which most likey won't even cover the interest on a 30 year fixed)
There are some "resets" or adjustments about to be made that will put every 6 out of 10 home borrowers out on the streets. Those guys in Northern California that are making 90k per year will have to start suddenly making 125k a year just to keep their bare minimum monthly payment for their 1 million dollar home.
And land in Montana? Well, it will be worthless once again, just like it was before.
JoeJoeMan just might be able to get on with regular life again, and maybe pick up a piece that's been foreclosed on for only 10 cents on the dollar.
Just wait.... be patient.... Montana will return to normal just shortly.
And I've been rattling along now like a broken bell since early last year, and some of you here know this, about the boom going bust.
Enter the current lending institution crisis.
Your 50k per parcel of land is going to dry up and blow down the road to the nearest cattle rancher for 2k... Mark my words. It's happening right now.
It's recession time folks. And your 1million dollar house is going to cost you, especially if you've got extra financing tied to the backend of it.
You'll be lucky to duck out from under it for 500k. (which most likey won't even cover the interest on a 30 year fixed)
There are some "resets" or adjustments about to be made that will put every 6 out of 10 home borrowers out on the streets. Those guys in Northern California that are making 90k per year will have to start suddenly making 125k a year just to keep their bare minimum monthly payment for their 1 million dollar home.
And land in Montana? Well, it will be worthless once again, just like it was before.
JoeJoeMan just might be able to get on with regular life again, and maybe pick up a piece that's been foreclosed on for only 10 cents on the dollar.
Just wait.... be patient.... Montana will return to normal just shortly.
Let's assume for hypothetical purposes that your prediction of an economic Armageddon has some veracity. Do you really think that's going to restore Montana to "normalcy"? I have a friend in Northern California making $125K a MONTH, and he isn't over-extended. If foreclosures are rampant and land dips below $2K per acre, it isn't the typical cattle rancher that's going to benefit. Another 10,000 acres aren't going to do the cattle rancher any good because the price of meat will drop like a rock, and the loss of revenue will cause the State government to double your property tax to make up for the lost revenue, and the farmers that kept what's left of their farm going by selling off pieces of their land won't have any real estate market as a safety net.
It won't be just some idiot that over-borrowed for a million dollar home that gets hurt. Farmers and ranchers will be in foreclosure. In addition, many Montanans making a living in banking, real estate, title companies, construction, etc. will lose their jobs.
Then the guys in "Northern California" will come for you. They will bring more money from their Google stock options than 1000 Montanans will see in a lifetime. They will buy up North and South Dakota and rent out South Dakota.
You are probably right when you say, "It's recession time folks", but it's not going to hurt the power people and it isn't going to help return Montana to "the good old days". Be careful what you wish for.............
Pay Option ARMS, hybrid intermediate-term ARMS and Second Mortgages are beginning to blow-up in peoples faces (the industry prefers using the term "implode") ... and alot of these were once considered prime...
Folks "may appear" to be doing well now, but loans adjust.
The 3/1, 5/1, 7/1 and 10/1 hybrid interest-only ARMS are reseting "now".
Folks aren't going to be able to borrow any more money to float their score.
How's someone that bought a home for $1,400 dollars a month going to handle the jump from 4% to 8 1/4% overnight? and still eat and buy gas?
Not forgetting to mention the supposed assessed value from city, county or state for taxes.
They won't make it.
The market is already shifting downward, in that since banks quit being so creative with their lending practices, the real estate market has lost 90% of it's potential buyers. What's the real estate folks going to do with all of those houses?
Oh, and I'll go you one more... What's the bank going to do with all of that bad paper they wrote? Oh, and FYI?... All banks wrote that kind of paper by the way.
Not only will there be a "glut" in the housing market, there will also be all of those foreclosures out there that no one will want to pick the note up on, because most are buried behind a second mortgage.
It's a bigger mess than most think.
You aren't ever going to get, what you signed on for in the beginning for your house. They aren't going to be worth much.
It'll be just like paying $12,000 dollars for a beat up old '64 ford truck.
Your 325k home will be worth, oh... lets say.... 110k.... if you're lucky...
That's how bad this is.
Your neighbor will default, and then his neighbor next to him... and so it goes.
All it takes is one foreclosed home on your block to lower the property value of the neighborhood by 10%.
Most folks don't know this.
In New York, there are streets with 12 house on them with 5 of them in foreclosure, right now, for loans that were "once" considered "prime".
5 houses out of 12... I'll leave you to do the math.
As far as recession? Well, I'm not going to sweat it much. I lived through the 70's, "in Montana" and I did just fine. There isn't anything at all wrong with living within your means. I wasn't solvent in the 70's either, but I am now... so blowing through this next recession isn't going to be too difficult for me.
As far as Californians cashing in on their stock options with Google? Well, I guess they could do that. Just remember, recession affects everyone, and I don't think Google can be at all immune to it.
If someone from Cali wanted to be able to afford the gas to drive clear up here when recession strikes, they'ld best cash out those options early, because Google may not have enough to go around after a while of recession.
Sure, Google will make it through it, only after they lay off half of their tech/developer staff. They'll cut their overhead off at the pockets just to stay in business.
Farmers don't have much to worry about. All across the west, the Fed subsidises them with cash, every year. I don't see the farm/cattle deal as an issue at all. Maybe if they turned the cows out on some of that well watered sud division grass, they'ld make a little more money.... or not.
Last edited by GiftShoppeGuy; 12-16-2007 at 03:21 AM..
Well there are good points all to the above economic scenarios but I would also add that a lot of RE is local.In my area the prices are up 9% year over year, and there are few homes for sale, none on my block. Further I suspect my area does not have the sub-prime, no qualifying, no documentation type of loans. Inland, areas that boomed in past 5 years have the meltdown in process I am told. That should bode well for a few cycles of ebb and flow.
The Google millionaires? Some huge % of our successful companies make money from international sources. Can international economies meltdon? of course. But there are huge markets of people with unsatisfied needs and wants and hard working younger populations to fuel the supply if we don't.
In the end the economic vitality and viability of an area has to be driven by the productivity of it's workers, or perhaps selling them mountain views.
And I've been rattling along now like a broken bell since early last year...
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According to your own post, you continue to "rattle on like a broken bell", and you missed my point. I don't dispute the premise that a significant economic downturn is in process. My point is that I don't see how this benefits Montana, nor do I understand how this will return Montana to "normal".
Quote:
Originally Posted by GiftShoppeGuy
This is so much deeper than sub-prime.
Pay Option ARMS, hybrid intermediate-term ARMS and Second Mortgages are beginning to blow-up in peoples faces (the industry prefers using the term "implode") ... and alot of these were once considered prime...
Folks "may appear" to be doing well now, but loans adjust.
The 3/1, 5/1, 7/1 and 10/1 hybrid interest-only ARMS are reseting "now".
Folks aren't going to be able to borrow any more money to float their score.
How's someone that bought a home for $1,400 dollars a month going to handle the jump from 4% to 8 1/4% overnight? and still eat and buy gas?
Not forgetting to mention the supposed assessed value from city, county or state for taxes.
They won't make it.
The market is already shifting downward, in that since banks quit being so creative with their lending practices, the real estate market has lost 90% of it's potential buyers. What's the real estate folks going to do with all of those houses?
Oh, and I'll go you one more... What's the bank going to do with all of that bad paper they wrote? Oh, and FYI?... All banks wrote that kind of paper by the way.
Not only will there be a "glut" in the housing market, there will also be all of those foreclosures out there that no one will want to pick the note up on, because most are buried behind a second mortgage.
It's a bigger mess than most think.
You aren't ever going to get, what you signed on for in the beginning for your house. They aren't going to be worth much.
It'll be just like paying $12,000 dollars for a beat up old '64 ford truck.
Your 325k home will be worth, oh... lets say.... 110k.... if you're lucky...
That's how bad this is.
Your neighbor will default, and then his neighbor next to him... and so it goes.
Based upon the above, I don't understand your response to concrete32 on another thread:
Quote:
Originally Posted by GiftShoppeGuy
Stamp and color and exposed and acid and etched is definitely where it's at, that is for certain.
One thing you might want to keep in the back of your mind though;
And that is, during the winter, the boys from Bozeman/Belgrade all come piling into Great Falls for work.
We get warmer weather and less snow during the winter, and it lets us work closer to year round as a result.
Here is a Montanan with a successful business in Utah wanting to come home and looking for advice on whether to risk moving his business. If you really believe all the "doom & gloom" how can you encourage him? Who do you think is going to be buying his decorative color stamped concrete, the cattle ranchers? Maybe this guy will think twice if he reads your response to me:
Quote:
Originally Posted by GiftShoppeGuy
Maybe if they turned the cows out on some of that well watered sud division grass, they'ld make a little more money.... or not.
Cow paths of stamped colored concrete in the subdivisions while the cows are grazing. That's an economic opportunity for a returning Montanan!
Quote:
Originally Posted by GiftShoppeGuy
As far as recession? Well, I'm not going to sweat it much....... so blowing through this next recession isn't going to be too difficult for me.
Congratulations, but perhaps all Montanans don't share your good fortune.
Quote:
Originally Posted by GiftShoppeGuy
As far as Californians cashing in on their stock options with Google? Well, I guess they could do that. Just remember, recession affects everyone, and I don't think Google can be at all immune to it.
If someone from Cali wanted to be able to afford the gas to drive clear up here when recession strikes, they'ld best cash out those options early, because Google may not have enough to go around after a while of recession.
Sure, Google will make it through it, only after they lay off half of their tech/developer staff. They'll cut their overhead off at the pockets just to stay in business.
.
Again, I think you missed my point. I was speaking metaphorically. In a depression, the people in power will not suffer proportionately compared to average Montanans. When the dust clears, you will not have a "normal' Montana. You will have a few very rich people, even more than you have now, that will buy up large tracts of land for amusement, not to improve the economy.
Quote:
Originally Posted by GiftShoppeGuy
Farmers don't have much to worry about..... I don't see the farm/cattle deal as an issue at all.
.
My gut tells me you are wrong on this, but I don't have any hard data to dispute you. I hope someone who owns a ranch or farm will add to this thread. Maybe we can get some first hand knowledge on how they perceive the downturn. Anyone out there who will lose their ranch if they can't continue to sell off pieces of it? Any farm or ranch hands that have lost their job in the past year? Probably most of you guys are out there hustling rather than sitting at a computer to answer. Anyone have data on how many family farms have gone under in the past year?
In conclusion, GiftShoppeGuy, I'm not trying to start an argument, and I certainly don't have any empathy for the greedy people who have "gamed" the system. I just don't think there will be any justice in how the retribution is apportioned, and I certainly don't see how a national economic collapse is going to return Montana to "normal"
And land in Montana? Well, it will be worthless once again, just like it was before.
JoeJoeMan just might be able to get on with regular life again, and maybe pick up a piece that's been foreclosed on for only 10 cents on the dollar.
Well I'd love for you to be right ! I just hope it happens in my life time...
That fact that we had/have a housing bubble and sub-prime mortgage mess shows the lengths that the business/banking industry and our government are willing to go to keep our economy afloat. In essence it was a way to create a new industry and inject money into a shaky economy.
We now have an economy where no body does anything of any significant importance anymore (we're all turning into life style consultants and the like) and there are large amount of money sloshing around in the system. And uncle sam, will just inject more at will, it will basically just start giving it (money) away if need be, and that is exactly what it plans to do with the sub-prime mess.
You were an idiot and got in on a bad mortgage - No problem, the taxpayers will bail you out for being an idiot, not to mention you wouldn't be losing anything if you did lose your house, you never put anything down on it to begin with, or else you spent all the refi money you took out of it.... now we'll baid you out - GREAT, the prudent people pay for the idiots.....
Remember Bush's advice after 9/11 - "Go out borrow and spend" - what he was thinking but didn't say was - "**** if you can't pay it back - we'll pay it for you - with other people's money or we'll just borrow and print more up outta' thin air and if the inflation of doings so ruins some wise people's savings - screw 'em" - Yup it's the new global economy - borrow and spend...
So I'd like to beleive that the chickens all do come home to roost, but I think uncle sam in this case is perfectly willing to shoot them before they even get close -
The dirty little government secret is that there is no economy left any more in America, we gave it away and automated ourselves out of it.....we let millions flood into our country just to get the body count up.
We live in socialism, an economy run by our government - want proof - look around you, start counting everyone around you, ask yourself what they do for a living and where their money comes from, directly or indirectly - I'll bet 7 out of ten are tied to the government trough - teacher, forest service worker, social security recipent, welfare case, state worker, etc, and there is a host of other people getting grant monies for a whole host of things from running radio ads to promote diversity to studying global warming....and the other 3 out of ten people not doing that, well they work at the resturant to feed the other 7 as such they are living indirectly off government money.
We live in a socialist system like it or not and the government will just printing more money any time it needs to and create more meaningless jobs where one citizen minds the buisness of another (ie social workers rating you out for spanking your kid, diversity programs, deptpartment of no smoking or eating) - Say good night America - at least we got to be free for a little while, nothing good last for ever.
I feel in part like I'm on a rocket ship being trust up into the air, pushed ever so hard by the fuel and hard work of those before me - the great generation; and now with all of that fuel finally having been spent the ship is on its last little bit of upward motion before it inevitably arcs, hovers and then begins heading back down to earth once again. And with an attitude befitting our generation we care not how or who will be on the ship when it finally does crash back to earth again.
Where the first generation's sacrifice creates the wealth, the second generation's self gratificaiton wastes it and the third generation is left only to lament it.
Last edited by JoeJoeMan; 12-16-2007 at 05:33 PM..
..... we now have an economy based on eating up our surrounds.....
I think you hit the mother lode with that one.
Our economy during the entire Bush administration (and perhaps even before) has been based on borrowing money and building houses for ourselves. That's because globalism (embraced by our politicians) has destroyed most of our real industrial base, leaving us with a house of cards.
Now with the housing bust upon us, the government is in panic mode trying to spur the "economy". It's not going to work. Out of necessity, banks have finally put some common sense back into the home lending process, so far fewer people will be able to get loans. There will be a recession, and this country will have to find a new industry to spur the economy.
"Free trade" is an ironic label for the self-created instrument of our economic destruction.
I guess one person's "do nothing of importance job" is anothers high tech economy. When I started in my profession, strategy consulting primarily to manufacturing and distribution companies, things were a lot diffferent, at least regarding the labor component and what was done. I'd go into giant forging press plants and find 270 work stations (approx 1000 machines) staffed by maybe 1800 guys and 200 office people. They made little or no profit.
I now call on, for example, clients make tiny, tiny seals for medical devices where 10 people in a clean room lab make the entire companies product in a few hours per day. A few hundred engineers with degrees in materials, optics, and statistics keep an eye on these 10 people making a product that can scarcely be seen with the naked eye. They are enormously profitable outfitting nearly every pacemaker, dental drill, camera, automobile, aircraft, etc in the world.
The USA % GNP from manufacturing is just about exactly the same as it was in America's mfg. heyday. It just takes 10% or so as much DIRECT labor. We are world #1 or #2 in 10 of the 14 mfg or distribution sectors. Read that again. 4% of the world's people lead in most of the measurable economic areas. Why in the world would anyone American have a thing to complain about? What exactly should the other 96% of humanity do while we just breezed along like no one else mattered?
Regarding RE. Bush administration made a concerted effort to increase the number of families owning homes from 60% to 70%. It got to 68%. Please tell me the dark, insiduous, evil, hateful part of that? When 500,000 loans go bad, perhaps the homeowning % will fall back temporarily to 67%. And that is bad why?
I used to wonder what would happen one day if them gomer commie Soviets and Chinese ever stopped spending themselves into an arms race they could not win, and beat their swords into plowshares and competed economically with us, if the American people could tolerate actually having some full-on economic rivalry...well you guys are proof you'd rather be working in a steel mill with 20,000 nukes pointed at us than compete in a world market with products that are clean, safe, high value added and the envy of the world.
Folks realize one thing, developers and city planners are in bed whether we want to accept it or not. Growth will continue from the california shores to the landlocked parcels of Montana. Netiher you or I will be able to change that, developers contribute huge amounts of cash to city planners and elected officials. Some planners will vote indifferently to projects that are not financially viable to the jurisdiction but will overwhelmingly vote in favor of high density apartments and cookie cutter residential tracts. It is reality and either we accept it or go along with the program. Ask any planning director or planning commissioner about their votes for certain developers and you're in for a mixed bag of excuses. Whether it is Montana or Kansas, it is about the money and not the constituents.
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