patrick.net

Greedbag seniors to working-class peons:
"You can have my house when you pry it from my cold, dead hands! Which should be coming up rather soon, actually..."

Most seniors are nice people. We should be kind to them.

The mean ones are those who have money but not the understanding of money.

The old stickiness debate.
We talk about psychology but it seems to only resonate one way. To a seller, having a bunch of buyers wanting to buy their house is a natural cue that there is demand for the house. They may go into denial about what the house will actually sell for but it is different than no one expressing interest.
I don't know why, but it is irritating reading about how dumb someone thinks someone else is because they won't act the way they are expected to. I don't know why buyers act the way they do either, just wait until the listing prices fall and then buy a place. It is such a futile waste of energy trying to convince someone that they are overpriced when they have no pressure to move.

Peter P Says:
March 26th, 2008 at 4:16 pm
"Most seniors are nice people. We should be kind to them.
The mean ones are those who have money but not the understanding of money."

My life experience is that it is the broke ones who are the mean ones. They tend to be very bitter and resent people they perceive are doing better than they are or did. They make it very difficult to feel sorry for them.

My life experience is that it is the broke ones who are the mean ones.

But they are comically mean. :lol:

At least, they are not holding something you want.

They make it very difficult to feel sorry for them.

It takes a lot for me to feel sorry for anyone.

Peter P Says:
March 26th, 2008 at 4:30 pm
"At least, they are not holding something you want."

I just don't want to be pushed out of the way when I'm in line somewhere. These old farts are a disgrace. I never butt heads with Gen X or Ys, it is always some grotesque boomer.

Note to boomers - The latest queuing theory is that it is more efficient to have one line with individual stations taking the next in line. So please don't ask me which line I'm in, I'm the next in line period!

My feedback on the stickiness.

I mentioned about the exactly one offer we made in last week of Dec - whihc was rejected. The house is still listed - total DOM over 100 this time. The house was listed for 100K more last year and did not sell - don't know for how long it was listed.

Well, the price has been reduced ... drum rolls please ... by 10K ! Yes, that's like 1%. This was done more than a month ago.

I have no bitterness towards this seller :-) They will help keep the inventory high and pressure the really motivated sellers even more.

I think our offer at 15% below asking was way generous given what has happened since then. There is a fat chance that they will get anywhere close the asking. Most buyers will simply ignore such overpriced listings. Why bother ? Why waste time when there is so much else that is available ?

FormerAptBroker Says:
March 26th, 2008 at 2:17 pm
"I’m still waiting for more old people who own free and clear to realize that things will not bounce back as quickly this time and flood the market with homes before prices drop even further.
If prices keep falling at the same pace for another year I think it will “unstuck” many old people who cash in before prices fall even further."

Overall I think this is the most correct theory. The problem is that it is tough to say a house has fallen in value when the only comp is the one from the last year. I don't know about guessing timeframes, and of course there are other variables like the bank owned and the auctions to make the values suddenly apparent.

Honestly, if renting makes more sense then rent, when it makes sense to buy then buy. I don't get the emotionalism on either side.

StuckInBA Says:
March 26th, 2008 at 4:40 pm
"I think our offer at 15% below asking was way generous given what has happened since then. There is a fat chance that they will get anywhere close the asking. Most buyers will simply ignore such overpriced listings. Why bother ? Why waste time when there is so much else that is available ?"

Exactly, btw, if the seller came back to you today, would you take the house at the price you offered?

That's what is happening to some extent. All buyers know about the bubble burst. The only difference is the depth of the bust. So only houses seriously priced below comps are selling. That makes the unrealistic sellers look even more delusional.

Oh man ... sorry for the italics (2nd time in 2 days) ... and I was answering Malcom's question.

A bit OT.

Another big BA employer reports numbers that fail to delight the investors.

http://finance.yahoo.com/q?s=orcl

ORCL is down 8% AH.

One after another company has indicated that things are not at all rosy. It is actually within the realm of possibility that the super-smart BA techies might wonder about the temporariness of this buying opportunity. Just saying. OK. Not sure. Just saying.

Why would anyone wants to own a software company that is not Microsoft? :)

One after another company has indicated that things are not at all rosy.

How can things possibly be rosy when a large investment bank can go poof in a weekend?

Can social networking sites really save us all? Perhaps they can live entirely in a cartoon world.

2nd time in 2 days

Just one more time...

... and you have to buy me sushi.

Honestly, if renting makes more sense then rent, when it makes sense to buy then buy. I don’t get the emotionalism on either side.

Because, a house isn't just house. It's the Amerikan Dream. And becoming a Loanowner confers higher social status. People will listen to you and respect your opinions, even on matters you clearly know nothing about. Renters, OTH, are permanently relegated to second-class citizenship, and must forever taste the bitter fruit of mortgage-envy. Our long-standing cutural bias against renting is so strong that even Shakespeare once made a reference to it: "neither a renter nor a landlord be"*.

*(not the actual quote)

You shouldn't care if homeowners drop the price or not. They are irrational. The banks will force the issue once they start dropping the prices on their krap houses.

At the end of the day, if they do drop prices, fine.
If they don't, fine.

The market sorts itself out.

If there are more sellers than buyers, then ADAM SMITH tells me the prices will HAVE to drop, all things being equal.

So if the sellers want to vaporize more of their own equity waiting, fine.

There's really nothing you can do.

And all the Fed can do is slow the coming of the "long term," and keep us in the short term turning the crank and installing zombies where there once was banks.

But the "long term" will come, and it will sting, unfortunately.

Now if the Fed could just delay the coming of the "long term" until I'm ready to retire, that would be fabulous.

NOT INVESTMENT ADVICE. YMMV.

The market sorts itself out.

Exactly.

In a sticky viscous market, nothing breaks through (except for a greasy slider hamburger in an unsuspecting bowel) like a few REO's setting their prices >30% below asking of the other properties and selling for even less.

I've seen these low priced REO's and I approve this message

Not investment advice.

And to think that maybe just maybe, the banks haven't even released all there REO's on the market?

Not investment advice! I don't know for sure!!

-there
+ their

Why can't ordinary people depreciate their home on their taxes?

I mean the maintenance etc. is incredible!

And the other thing that drives me nutty is not being able to deduct state income taxes and local property taxes to any significant degree because of AMT!

Please, just make the rules simpler and more transparent. I think many Americans would be more productive if that were the case.

Please, just make the rules simpler and more transparent. I think many Americans would be more productive if that were the case.

My answer: flat tax!

So Obama wants to raise tax AND bailout homeowners? Or is he just saying that to get votes?

http://www.usatoday.com/news/politics/election2008/2008-03-26-obama_N.htm

Tuesday, McCain warned that some proposals for government intervention in the housing crisis would rescue banks and borrowers who acted irresponsibly.

How can one not like McCain?

The duel between Clinton and Obama is becoming ever more entertaining. Come on, take off the gloves already! Time for some serious dirt-digging. :)

Meanwhile, former president Bill Clinton rejected the notion that Sen. Hillary Rodham Clinton might back away from the presidential race to prevent weakening the party's prospects in November.

I would be completely disappointed if Hillary backs out. She definitely still has a chance for the nomination. She just need to really work at it.

I would be completely disappointed if Hillary backs out. She definitely still has a chance for the nomination. She just need to really work at it.

The McCain election campaign by Surfer-X Esq.

First show Bill saying "depends on what your definition of is, is"
Flash to McCain on the USS Forestall.
Then show Bill saying "I did not have sex with that woman"
The flash the word Honor on the screen.
Then just list the Clinton facts.

Done. Stick a fucking fork in that cunt's ass cuz she's done. Elect McCain, and maybe, just fucking maybe we can be done with the boomer hoard.

Fuck you Dennis.

Randy

You are famous man. NYT article is currently charting 2nd most emailed story on the NYT website.

Lots of folks thinking hard about pricing I guess. :-)

And who the fuck names their fucking offspring Dennis? Marty and Flo? Thanks for proving my theory fucknob, every Dennis I have met has been an asshole. Hey man, how's you wifes ass doing? Is it two ax-handles wide yet? Mmmmm big tasty boomer ass.

Thanks StuckInBA, yours is a very interesting and I think somewhat typical situation. As the bubble crested I saw this from the sellers' standpoint. I saw two different parties finally accept offers at about the same amount as so-called "low ball" offers they had previously rejected.

I think what you will see happen is that as buyers you will soon be turning up your noses at prices you would have jumped at. If that happens the psychology will be lagging the trend but like Stuck's case the downward trend will outpace the sellers otherwise you may be tempted to jump in too soon.

revengeofaone Says:
March 26th, 2008 at 5:54 pm
"Why can’t ordinary people depreciate their home on their taxes?"

Don't go there...please....it can get ugly. Although eliminating MID in exchange for deductible improvements might be an interesting debate one day.

I don't understand the undertone of anger against sellers who won't lower their prices. Sellers can do what they want. Maybe they are content to ride this thing out, even if it takes 5 or more years. People who really want to sell or need to sell will lower their price; the others are free to ride it out.

Harm,

Yes, I can relate and understand the underlying reasons people want to own a 'home.' I still believe one has to look at it rationally. Just as you won't hear me disagreeing with your reason I am seeing all sorts of people I know being made miserable by the current downturn. I know someone who literally went from being untouchable because he was a loan broker working directly for a developer humbled and now commuting to the OC on a daily basis from N San Diego. He now has one house losing $200 per month and a new house which by my estimate has lost $50,000.

I disagree with the notion that someone has a right to something they want at a price they think is fair. The POV seems one-sided and it is not rational to get emotional because someone has something that they want but can't have at that moment. I say let the babby choke on his bottle, if the price is high the house will still be there, the seller is taking care of the buyer's house. That's how I look at it. If the house isn't still there, then the buyer was wrong about the price being too high. Patience is a virtue.

northernvirginiarenter Says:
March 26th, 2008 at 7:23 pm
Randy
"You are famous man. NYT article is currently charting 2nd most emailed story on the NYT website. "

That's so cool!

HARM Says:
March 26th, 2008 at 3:12 pm
"Greedbag seniors to working-class peons:
“You can have my house when you pry it from my cold, dead hands! Which should be coming up rather soon, actually…”"

Don't joke, you would be dearly missed.

NYT article is currently charting 2nd most emailed story on the NYT website.

Where do you find that on their site?

Correction

Apologies, on revisting I had not realized NYT tracks each section. Article is charting 2nd in Business section of NYT website, not the entire site.

Article is currently #20 most emailed on entire site. I imagine if everyone hits it and emails out to a few friends we might give it a bump up.

As for "being angry" at sellers who won't drop their price...

It's not anger so much as frustration. It is frustrating because it is not an action without consequence. The realtor's common practice of "market comps" is polluted with all this false inventory of wishing-price homes. It's very hard as a seller to willingly undercut a dozen comps by $300K (as in our seller's example from the article). The seller may know their price is too high, but price discovery mechanisms aren't working, so they're rightfully worried they might be leaving too much on the table at $300K down. Maybe they'll only go $50K down instead, and see how that hangs. Then, when that doesn't move, they get frustrated and delist. It could well have been that in a more fluid market they would have been more psychologically accepting of a price closer to market-clearing.

Also, the "market sorts itself out" arguments are flawed. Markets do not ever sort themselves out in the face of government intervention. This situation is inviting -- no ensuring -- intense government intervention.

Martin Wolf, Today's FT. Read it if you haven't.

Randy H Says:

> Isn’t fear of death enough? That’s what I don’t get. I would
> think seniors would eventually, as FAB proposes, want to
> get out of their houses sooner than later because they have
> a limited amount of “later” left in their lives.

I think there is a big difference between the many “Boomers ® ” who planned on using home equity to fund their retirement and older people (like my parents in their 70’s) who don’t ever plan on cashing out. I know that if someone gave my parents (or most of their friends) $5 million tomorrow that their lives would not change (my Dad would probably give it all to charity) while most Boomers ® would spend it all…

The rescue of Bear Stearns marks liberalisation’s limit
By Martin Wolf

Published: March 25 2008 19:06 | Last updated: March 25 2008 19:06

Remember Friday March 14 2008: it was the day the dream of global free- market capitalism died. For three decades we have moved towards market-driven financial systems. By its decision to rescue Bear Stearns, the Federal Reserve, the institution responsible for monetary policy in the US, chief protagonist of free-market capitalism, declared this era over. It showed in deeds its agreement with the remark by Josef Ackermann, chief executive of Deutsche Bank, that “I no longer believe in the market’s self-healing power”. Deregulation has reached its limits.

EDITOR’S CHOICE
Economists’ forum - Nov-16
Every week, 50 of the world’s most influential economists discuss Martin Wolf’s articles on FT.com
Mine is not a judgment on whether the Fed was right to rescue Bear Stearns from bankruptcy. I do not know whether the risks justified the decisions not only to act as lender of last resort to an investment bank but to take credit risk on the Fed’s books. But the officials involved are serious people. They must have had reasons for their decisions. They can surely point to the dangers of the times – a crisis that Alan Greenspan, former chairman of the Federal Reserve, calls “the most wrenching since the end of the second world war” – and the role of Bear Stearns in these fragile markets.

Mine is more a judgment on the implications of the Fed’s decision. Put simply, Bear Stearns was deemed too systemically important to fail. This view was, it is true, reached in haste, at a time of crisis. But times of crisis are when new functions emerge, notably the practices associated with the lender-of-last-resort function of central banks, in the 19th century.

The implications of this decision are evident: there will have to be far greater regulation of such institutions. The Fed has provided a valuable form of insurance to the investment banks. Indeed, that is already evident from what has happened in the stock market since the rescue: the other big investment banks have enjoyed sizeable jumps in their share prices (see chart below). This is moral hazard made visible. The Fed decided that a money market “strike” against investment banks is the equivalent of a run on deposits in a commercial bank. It concluded that it must, for this reason, open the monetary spigots in favour of such institutions. Greater regulation must be on the way.

The lobbies of Wall Street will, it is true, resist onerous regulation of capital requirements or liquidity, after this crisis is over. They may succeed. But, intellectually, their position is now untenable. Systemically important institutions must pay for any official protection they receive. Their ability to enjoy the upside on the risks they run, while shifting parts of the downside on to society at large, must be restricted. This is not just a matter of simple justice (although it is that, too). It is also a matter of efficiency. An unregulated, but subsidised, casino will not allocate resources well. Moreover, that subsidisation does not now apply only to shareholders, but to all creditors. Its effect is to make the costs of funds unreasonably cheap. These grossly misaligned incentives must be tackled.

I greatly regret the fact that the Fed thought it necessary to take this step. Once upon a time, I had hoped that securitisation would shift a substantial part of the risk-bearing outside the regulated banking system, where governments would no longer need to intervene. That has proved a delusion. A vast amount of risky, if not downright fraudulent, lending, promoted by equally risky finance, has made securitised markets highly risky. This has damaged institutions, notably Bear Stearns, that operated intensively in these markets.

Yet the extension of the Fed’s safety net to investment banks is not the only reason this crisis must mark a turning-point in attitudes to financial liberalisation. So, too, is the mess in the US (and perhaps quite soon several other developed countries’) housing markets. Ben Bernanke, Fed chairman, famously understated, described much of the subprime mortgage lending of recent years as “neither responsible nor prudent” in a speech whose details make one’s hair stand on end.* This is Fed-speak for “criminal and crazy”. Again, this must not happen again, particularly since the losses imposed on the financial system by such lending could yet prove enormous. The collapse in house prices, rising defaults and foreclosures will affect millions of voters. Politicians will not ignore their plight, even if the result is a costly bail-out of the imprudent. But the aftermath will surely be much more regulation than today’s.

If the US itself has passed the high water mark of financial deregulation, this will have wide global implications. Until recently, it was possible to tell the Chinese, the Indians or those who suffered significant financial crises in the past two decades that there existed a financial system both free and robust. That is the case no longer. It will be hard, indeed, to persuade such countries that the market failures revealed in the US and other high-income countries are not a dire warning. If the US, with its vast experience and resources, was unable to avoid these traps, why, they will ask, should we expect to do better?

These longer-term implications for attitudes to deregulated financial markets are far from the only reason the present turmoil is so significant. We still have to get through the immediate crisis. A collapse in financial profits (so significant in the US economy), a house-price crash and a big rise in commodity prices are a combination likely to generate a long and deep recession. To tackle this danger the Fed has already slashed short-term rates to 2.25 per cent. Meanwhile, the Fed also clearly risks a global flight from dollar- denominated liabilities and a resurgence in inflation. It is hard to see a reason for yields on long-term Treasuries being so low, other than a desire to hold the liabilities of the US Treasury, safest issuer of dollar- denominated securities.

“Some say the world will end in fire, Some say in ice.” Harvard’s Kenneth Rogoff recently quoted Robert Frost’s words in describing the dangers of financial ruin (fire) and inflation (ice) confronting us.** These are perilous times. They are also historic times. The US is showing the limits of deregulation. Managing this unavoidable shift, without throwing away what has been gained in the past three decades, is a huge challenge. So is getting through the deleveraging ahead in anything like one piece. But we must start in the right place, by recognising that even the recent past is a foreign country.

Someone Says:

> Honestly, if renting makes more sense then rent, when it
> makes sense to buy then buy. I don’t get the emotionalism
> on either side.

Then HARM Says:

> Because, a house isn’t just house. It’s the Amerikan Dream.
> And becoming a Loanowner confers higher social status.
> People will listen to you and respect your opinions, even
> on matters you clearly know nothing about. Renters, OTH,
> are permanently relegated to second-class citizenship, and
> must forever taste the bitter fruit of mortgage-envy.

HARM is correct that a large number of Americans feel that they “need” to own a home (just like they feel that they “need” to own a nice car or designer clothes). I was once one of those people… As a poor kid growing up around rich people I tried to fit in with fancy cars and fancy clothes, but it was about the time that I sold my Home in Burlingame (in my late 30’s) when I realized that I had about $1mm in liquid assets that I didn’t care any more… My fiancée was a rich kid that grew up in a rich area and never felt the need to fit in with fancy clothes or cars (her car is worth less than her bike and her most recent clothing purchase was at the Colma Target). We don’t have any mortgage envy and don’t feel like “second-class citizens” since we can buy 90% of the homes in the Bay Area for cash…