patrick.net

Remember Jon Markman ? From MSN INvestor ? Last year he was asking us to buy homebuilder stocks, because the housing market was at bottom. Seems like he has taken the time to educate himself.

His recent article is based on his talk with Satyajit Das. There are some very nice snippets here. I highly recommend that you read it. Very sobering.

Are we headed for an epic bear market?
...
I started by asking the Calcutta-born Australian whetherthe credit crisis was in what Americans would call the "third inning." This was pretty amusing, it seemed, judging from the laughter. So I tried again. "Second inning?" More laughter. "First?"

Still too optimistic. Das, who knows as much about global money flows as anyone in the world, stopped chuckling long enough to suggest that we're actually still in the middle of the national anthem before a game destined to go into extra innings. And it won't end well for the global economy.
...
Like an ex-mobster turning state's witness, Das has turned his back on his old pals in the derivatives biz to warn anyone who will listen -- mostly banks and hedge funds that pay him consulting fees -- that the jig is up.
...
Bankers figured out how to strip money out of existing assets to do so, much as a homeowner might strip equity from his house to buy another house.
...
These triple-borrowed assets were then in turn increasingly used as collateral for commercial paper -- the short-term borrowings of banks and corporations -- which was purchased by supposedly low-risk money market funds. According to Das' figures, up to 53% of the $2.2 trillion commercial paper in the U.S. market is now asset-backed, with about 50% of that in mortgages.
...
Now it may seem hard to believe, but much of the past few years' advance in the stock market was underwritten by CDO-type instruments which go under the heading of "structured finance."

"Bay Area is relatively unattractive to foreigners."
or...
"BA is very attractive to foreigners."

Who exactly are we talking about--"foreigners" who get paid local wages, or those sheiks and tycoons that buy prime metro properties? I'm sure a few foreigners "invested" in BA RE in recent years, but outside of short-term speculative gains, how do those BA "intangibles" compare against what draws money to London, Paris, Milan, and cultural centers in Asia? Besides, people of that level of wealth are a tiny segment of demand for local RE. They're interested in a very narrow luxury segment. I really doubt they're grabbing up 30 yr old suburb tract homes to become jet-setting landlords for the middle class. Nor, are they willing to catch that falling knife if they have any clue as what's going on. Europe's property boom appears to be weakening as well.

StuckInBA'

I read that article earlier today and didn't realize Jon was advocating the HB's back then? Talk about a 180!? Das does have some good points and he definitely knows that end of the market.

Right now the GSE geniuses are describing the MBS Market as "The" market and really contorting priorities. If someone would've told me 6-7 years ago that MBS "market" would become "The" market and the cornerstone of all our conversations I think I would have laughed at the guy. When was the last time we talked about a company?

A question for the loan experts here.

Are there 15yr fixed or 30yr fixed Jumbo loan products out there? I went to yahoo to see if there were any movements on jumbo rates, all the jumbo loan products I could find were 5/1 7/1 Jumbo. Was FRM Jumbo ever offered?

My question may sound stupid, since I have only dealt with FRM or ARM in my life. What are 5/1 7/1?

Re. fixed-rate jumbos, yes they have in the past offered 15-, 20-, and 30-year fixed. I have one, 15-year fixed. I'm planning to pay it back in cheap dollars...just kidding...well, sort-of. 5/1 and 7/1 are ARMs - the rate is fixed for 5 (or 7) years and then resets, I think annually. Those are "conventional" ARMs, or ARMs done right if you will. It's those ARMs AG had in mind when he was touting them years ago.

Some elite worker bee elites can also enjoy a claim of their own, but the majority of people working in London have to travel far on train to work, including the highly paid bankers.

Worker bee elites? That is such is an oxymoron.

BA is very attractive to foreigners.

Perhaps foreign "worker bee elites."

BA is so infested with NIMBYism that it will never be attractive to the foreign rich.

And that is on top of the outrageous tax policy over worldwide income.

The newest trend in wealth appears to show that natural resources is the place. Most fast-growing tycoons are in that area.

Ok, guys and gals I'm trying to gather infomation on foreclosures. I have a family member who will be a first time home buyer in the East Bay (sf) area. He would like to pick up a home in the near future. I tired to share with him some of the info you have been posting on this blog, and could really use some help understanding forclosures and all the stages it must go though prior to it being placed on the auction block. Can you direct me towards some good sites to get started on this journey? I would like to arm him with as much info as possible so, when the time is right, he can hopefully get that mcmansion I've always wanted! Thanks, CUgal aka culady!

I would argue EVERY problem the goverment pretends to 'solve' has opposite effect. Subsidies create more of what you subsidize.

war on drugs=we now have more drugs(meth is cheap and ez to make yourself. weaker older drugs are more expensive)

war on poverty=creates lifetime welfare queens

war on terrorism=making new terrorists daily in Iraq by killing parents, relatives, etc.

housing affordability=creates less affordable housing by known programs.

One interesting note about the famous Shiller housing price graph going back to 1890 is that he did NOT factor in 'goverment subsidies' which artificially inflate housing OR the NIMBYism which are both new (last 30 years?). I'm not sure how to quantify those or if they can be.

DJM,

thanks for the explanation. Are they not offering FRM Jumbo any more? How come I can't find any FRM Jumbo? Is it a recent development?

I would argue EVERY problem the goverment pretends to ’solve’ has opposite effect. Subsidies create more of what you subsidize.

Yeah. Government is there only for the noise.

More regulations would only mean more bureaucrats. Is that what we want?

More regulations would only mean more bureaucrats. Is that what we want?

There is a HUGE difference between government "regulation" (aka "policing" and some basic, sensible free market ground-rules) vs. government subsidies (aka pork, political payoffs, picking market winners & losers, etc.).

When it comes to preventing the reckless asshats who have driven prices into to the statosphere from making or accepting WMD loans, then, yes, 'we' DO want some regulation.

Btw, we covered this topic before:

"Why some market regulation is good and necessary for the economy"

When it comes to preventing the reckless asshats who have driven prices into to the statosphere from making or accepting WMD loans, then, yes, ‘we’ DO want some regulation.

Those asshats who had driven prices into the stratosphere did so only because they knew the government would create new regulations to bail them out.

OO:

According to this you can still get a fixed-rate jumbo:

http://www.mortgageloan.com/Rates/fixed-mortgage-rates

The spread has gotten wider, though; 6.55% for a 30-year fixed, versus 5.85%. Historically, 5.85% is pretty low. I think it's highly likely that the jumbo threshold will jump due to congressional action. In fact, it's likely to be raised enough that my mortgage would no longer be a jumbo. In the unlikely event that rates on conforming loans drop below my present fixed rate, I will seriously consider a refi. In fact, the present situation is exactly why I took out the mortgage in the first place - if inflation and long interest rates soar, I'll have a nice, low fixed rate. If they tank, I'll refi. If the short-rate tanks while the long-rate stays where it is now, I can pay down the mortgage as my CD ladder unwinds.

Take a look who joined the housing bulls.

Well, the good news about FED's recent rate cut is that I know now who I am going to vote for in 2008: http://www.minyanville.com/articles/bernanke-ron+paul-testimony-wall-street-america-dollar/index/a/14185

Here is a video: http://www.youtube.com/watch?v=A4kxTkhwR_Q&mode=related&search

DJM,

how high is the current conforming limit being proposed? Is it going to be sufficient for the Bay Area market?

Allah,

it is very easy for anyone to pose as Randy. I trust Randy has better use of his time than posting on a stupid site infested with realtors. It doesn't bother me that it is infested with realtors, I like anyone, realtors inclusive, who is intelligent and learned so that I can benefit from his experience, like lots of regulars here such as FAB, Randy, Stuck, skibum, SP, SFWoman, astrid, etc. I don't like wasting my time on a site full of dumb realtors, because I frankly don't like to be around dumb people.

If you like hanging around dumb people, why don't you just park there full time instead of invoking fights here and there? Time is money, don't treat your time as if it was worth nothing.

Now that we have reached parity with the CA$, how long before we reach parity with Aus $ ? Then we can move onto reaching parity with Yuan, then Indian Rupee and finally settling down with Yen.

it is very easy for anyone to pose as Randy. I trust Randy has better use of his time than posting on a stupid site infested with realtors.

That IS Randy! How could you not tell? No one writes the way he does.

It doesn’t bother me that it is infested with realtors, I like anyone, realtors inclusive, who is intelligent and learned so that I can benefit from his experience, like lots of regulars here such as FAB, Randy, Stuck, skibum, SP, SFWoman, astrid, etc. I don’t like wasting my time on a site full of dumb realtors, because I frankly don’t like to be around dumb people. If you like hanging around dumb people, why don’t you just park there full time instead of invoking fights here and there? Time is money, don’t treat your time as if it was worth nothing.

They're not all dumb over there. I like to see things from other perspectives. Starting fights is not my thing; I just wanted to show you what your wonderful Randy thinks of you all. Randy has denounced patrick.net ; just thought you would all want to know!

When AUD was in its pegged era, it was trading at 1.2 vs. USD. Given that it traded at 0.9x at a freely floating rate in 1983, it will not be unreasonable for AUD to trade at par with us, soon. By soon I mean another 12 months.

I have seen some computations around saying that Yen's fair price should be 80. I will be conservative. I think betting on Yen breaking 100 is a reasonable risk to take.

Yuan will first appreciate, then depreciate against USD. The end game for Yuan is depreciation by 2009/2010.

Brent Says:

Exactly how much of an over simplification is this? Don’t people on fixed income tend to vote?

Wages have not kept pace with inflation near as I can tell. I don't expect them to start doing so anytime soon. We might get a bunch of low end jobs out of the deal.

Allah,

Why would I care what some anonymous person on the internet thinks of me? Is he controlling my wealth, my sex life or my happiness? Obviously not.

You should not obsess over how other people think of you or others either. Grow up.

I only care about my own feelings. If I think somebody is stupid, I don't give a fuck about what he thinks about me.

Why would I care what some anonymous person on the internet thinks of me? Is he controlling my wealth, my sex life or my happiness? Obviously not.

It is not an anonymous poster...It's Randy!

Whatever.......don't believe it!

Allah,
I just took a look at the zillow link you posted. I would venture to guess the poster calling him/herself "Randy H" is not the Randall we know. Unless he made a transformation and/or is trying his darndest to write differently than he used to write here, the writing is way too plain, vernacular, and basically talking out of his ass. There is speculation, little data to support that poster's arguments, and it is likely an imposter.

The poster is clearly either a lurker or poster here, as he/she knows some details about Randall's story to make it seem realistic, but it's not him, IMO

And to be honest, your attacking him on that blog makes you and patrick.net look petty and only hurts the credibility of data-driven and reasoned posters here.

Allah,

there is a Chinese proverb I'd like to share with you:

Those who lurk around to invoke fights and spread rumors are exactly the source of such nuisances.

Do something productive please.

Skibum,

I didn't just pop on zillow, I've been here for a few days. Look at this thread; if this doesn't convince you, nothing will!

http://www.zillow.com/site/ViewThread.htm?tid=6597

Allah said:

[quote]They’re not all dumb over there. I like to see things from other perspectives. Starting fights is not my thing; I just wanted to show you what your wonderful Randy thinks of you all. Randy has denounced patrick.net ; just thought you would all want to know![/quote]

I read what he wrote over there and what you just wrote above. I didn't see him denounce this whole site. He denounced trolls and perma-doomsayers. Anyone that thinks this site doesn't have its fair share is as blind as the 30k/yr guy signing the 250k ARM.

I happen to agree with him (to a point). While this site is extremely helpful I do recall the incident where a regular purchased a home and a lot of people jumped on him "just because."

I will also say that regardless of that, the signal to noise ratio is still very good here. I think if you spend too much time anywhere you'll find a reason to get pissed off.

The unfortunate side of most communities is the cults they so easily spawn. People put agreement with the herd above their individual thinking, or rational thinking in general. I've seen plenty of examples of that around here over the last 2.5 years or so I've been reading the site.

It's a strangely ironic twist in that the same herd instinct had a lot to do with how housing got f*cked up.

Allah says: They’re not all dumb over there. I like to see things from other perspectives. Starting fights is not my thing; I just wanted to show you what your wonderful Randy thinks of you all. Randy has denounced patrick.net ; just thought you would all want to know!

Allah, starting fights is only your thing. I've seen your work on other forums; it's not educated or thought-provoking, it's just in-your-face harassment. Anyone reading that Zillow thread can see your trollish behavior. You go to RE bull sites with the sole intent of pissing them off. Now you're stalking Randy across blogspace because he thinks you're an asshole.

Randy didn't "denounce" patrick.net, he said he stopped participating here because you and a handful of others are perpetual trolls. And as a matter of fact, I don't recall that Randy got banned, like you accuse in your post on Zillow: "You get yourself banned because you had some kind of a mental collapse on patricks site because I said the word "Sticky"!"

So did Randy get banned from patrick.net or not? Because if he didn't, you certainly appear to be full of shit... like that's going to be a surprise.

Allah, starting fights is only your thing. I’ve seen your work on other forums; it’s not educated or thought-provoking, it’s just in-your-face harassment. Anyone reading that Zillow thread can see your trollish behavior. You go to RE bull sites with the sole intent of pissing them off. Now you’re stalking Randy across blogspace because he thinks you’re an asshole.

Go take a look around over there; I haven't started any fights with anyone. I have even got along with some of the realtors there. The first day I was there; Randy attacked me trying to get me pissed off so they would bann me. He told everyone that I got him kicked from here; go back to his last thread to refresh your memory. I'm not starting with anyone; he follows me around and in half of his posts you can see him sneak in some hostility against me. HE is stalking ME!

Why don't you read some of the threads over there before you throw shit in my face!

Randy didn’t “denounce” patrick.net, he said he stopped participating here because you and a handful of others are perpetual trolls. And as a matter of fact, I don’t recall that Randy got banned, like you accuse in your post on Zillow: “You get yourself banned because you had some kind of a mental collapse on patricks site because I said the word “Sticky! You go to RE bull sites with the sole intent of pissing them off. Now you’re stalking Randy across blogspace because he thinks you’re an asshole.

I am not stalking Randy! He stalks me; I try to ignore him usually, but then after a while it builds up and I shoot right back at him in defense; could you blame me?

So did Randy get banned from patrick.net or not? Because if he didn’t, you certainly appear to be full of shit… like that’s going to be a surprise.

Why don’t you tell me?

http://www.zillow.com/site/ViewThread.htm?tid=6113

I just lose patience with persistent, inflexible blog bullying from guys like him, what with his offensive, in your face "sheeple" insults and all. He thinks I'm a realtor or something and got me booted from another forum where I wrote for a long time, so I'm just a bit chuffed by him lately.

"The deductibility of mortgage interest increasese the amount that buyers can borrow, and again drives up the cost of housing."

More than that, the mortgage interest deduction encourages people to pay more of a premium to buy vs rent because they think the entire mortgage payment is deductable. Accountants do not seem to want to enlighten their clients in this area.

We may have hope. What happened to that movement to remove the mortgage interest deduction for houses over 3,000 sqft?

So has Randy been banned here, or not? Not that it matters from his perspective, since he seemed fed up with the place anyway.

This was Rany's last post:

Retirement

This will be my last thread article. I trust that everyone will be happier with Allah and my other “haterz” of late than with I. I think I’ve offended a few readers and thereby caused too many complaints. For myself, life is too short to waste precious cycles. Anyone interested save for the Trolls are welcome to visit my blog from time to time.

Best of luck and regards,

Randy H

Headset asks: We may have hope. What happened to that movement to remove the mortgage interest deduction for houses over 3,000 sqft?

It probably died because it sounded great on paper, but it's impossible to implement fairly*. People want to punish McMansions, but what about farms with huge loafing sheds and barns (1000's of unfinished square feet)? What about families with 10 kids?

* "Fairly" being very subjective here, as owners of larger homes don't necessarily warrant specific punishment in my book.

Brand,

True. Maybe it would be "fair" to just do away with all home mortgage deductions.

Brand,

Nice to see you over here too! :)

My understanding is that no, Randy was NEVER banned here. He got fed up after the most recent tiff between him and allah. He then proclaimed he would stop posting articles here, and we haven't heard from him since here on patrick.net.

I'll reiterate. While we can debate who is "at fault" for the beef between allah and Randy, the end result is a shame. Randy doesn't post here anymore, they seem to have merely taken the beef to another forum. And to be honest, IMO allah's posts over there just feed the beliefs of RE bulls that RE bears are merely fringe element nutjobs who have "issues." "Their" impression of "us" is no better than "our" impression is of "them."

Think about FR, MP, TOS, etc. We see them as trolls because they just come on the board and make unsubstantiated statements and refuse to debate on reasonable grounds. Going over to a site like zillow and provoking is no better. Allah, just some constructive advice - if you want to try and "win over" anyone over there, measured debate will go a lot farther than simple provocation.

on topic:

I don't really understand this particular article. Aren't most of you Bay Area folks holding off on a purchase because you think prices will take a huge fall? It didn't seem like we have many posts who outright can't afford a house. That's a different problem.

It isn't the government's job to make houses affordable in every single U.S. market. That would probably be outright impossible without destroying the free market principles at work. Some places like Manhattan and Silicon Valley will inherently squeeze out lower earners because those areas are geographically bounded, densely populated and dominated by businesses staffed with highly paid employees.

However, it is the government's job to stabilize the economy from time to time. If housing jeapordizes the economy by endangering huge amounts of homeowners, then I think it's appropriate for the government to take action. I don't think we're in that situation right now though (despite the ridiculous perceptions in MSM).

The Fed has proved many times over that it can't predict bubbles or deflate them gently once recognized. You can't blame the Fed for high prices in certain areas, nor is it reasonable to say that the government's intention here is to protect prices. They are trying to stop a primary economic effect, and if that causes undesired secondary effects that are inconvinient to us, so be it.

And before anyone asks, yes, I think Greenspan was right to lower the rates so far after the tech bust. He quite likely fended off a recession, and I'm willing to take some wild fluctuations in highly specific housing markets as the price for maintaining low unemployment and moderate growth.

skibum: Well said. Hey, haven't I seen you somewhere before? :o