patrick.net

SP,

If only it were "just" a kick in the pants.

Even if rolling bubble markets suffer every bit as much as I've predicted the bottom line (where many spouses are concerned) is that YOU'VE deprived them of 1 or 2 or 3 years of having "their own" home!

Greatest % of vacanices since the Census started tracking this stuff 50 years ago:
http://interestrateroundup.blogspot.com/2007/01/empty-homes-everywhere.html

No cracks in the dam here, people, move along.

For those interested in a refresher on the whole "nesting instinct"/nagging spouse debate, check out Sex and Housing

And who could forget our beloved Suzanne?

HARM,

That is damaging. This mind you with low int. rates and "decent" employment numbers. I wonder though if the numbers might be skewed by "boomer destinations" like Las Vegas, Phoenix etc. where vacant specuvestment homes are lined up in droves?

I had tea today with a couple of friends, one of whom is a Hong Kong raised woman Realtor. She told me there is a tiny bit of Chinese money coming over to park it here. She said she had two clients in the past couple of years who wanted their money out of China because they were worried that the peasants were getting jealous of the new wealth and thought there might be another revolution in the future. There are the periodic wealthy Chinese who want pied-a-terres here, but no storm of Chinese buying investment or second homes.

She also told me that she had a friend of an acquaintance referred to her. She said it was a lovely Hispanic family, 30ish mother and father, a grandmother, and a toddler and baby. They had been pre-approved for (the apparently magic number) $600,000. She showed them around, they found a place, offer accepted. She was with them at closing and the father said he was so ecstatic that he could afford a house on the $50,000 he and his wife made on their combined jobs. My friend said she flipped and pulled the broker into the other room to ask him what was going on.

The broker had convinced them to get some toxic negative-am liar loan with a one year cheapo introductory rate. My friend said she said to the broker "Hey, they can't afford this after the first year, they'll lose the house.' The broker said 'So?' She then said 'They have two babies, you can't do this.'

His response to her was 'Hey, they signed.' She said she was so furious that she reported the broker. I had to run to a meeting so I didn't get to ask if either the deal was completed or to whom she reported the broker.

SFWoman, I do not blame the broker. As consumers, we must take personal responsibility in our choices. The broker did not force the purchase at gun point and the economics of a real estate transaction is public knowledge.

The story is very sad. But that is life.

I know most locals hate zillow but you might want to check out this graph from Lincoln Park in Chicago. I don't see any spring bounce last year and I don't think there will be one this year either.

Welcome back LILLL. It's been a while.

It may be too late though - most professions have become self-serving in the extreme. Even the f@cking barber tries to hawk ‘hair care products’ for a commission.

Or how one of the ophthalmologists at the eye clinic I go to now wears a flashing button that says "Ask me about botox!"

Jesus christ. Have you no self respect? :(

She said she had two clients in the past couple of years who wanted their money out of China because they were worried that the peasants were getting jealous of the new wealth and thought there might be another revolution in the future. There are the periodic wealthy Chinese who want pied-a-terres here, but no storm of Chinese buying investment or second homes.

I've heard that a lot about Cupertino...

Hey, at least that is something to be happy about ! I talked my wife out of buying (actually it’s an ongoing process, so I should say - I keep talking my wife out of buying) and still she doesn’t think very highly of my financial prowess.

I have a similar problem... but I don't really help my own cause by constantly talking about buying a new car. Oh BMW 328i - why are you so nice?

SFWoman Says:

> I had tea today with a couple of friends, one of whom
> is a Hong Kong raised woman Realtor.
> She told me that she had a friend of an acquaintance
> referred to her. She said it was a lovely Hispanic family,
> 30ish mother and father, a grandmother, and a toddler
> and baby. They had been pre-approved for (the apparently
> magic number) $600,000. She showed them around,
> they found a place, offer accepted. She was with them at
> closing and the father said he was so ecstatic that he could
> afford a house on the $50,000 he and his wife made on
> their combined jobs. My friend said she flipped and pulled
> the broker into the other room to ask him what was going on.

I don’t know how the honest Hong Kong Realtor got involved with these people since the typical plan is for some ethnic (usually Hispanic, Chinese, or Russian in SF and Pilipino in Daly City) person to buy a crappy house in a crappy part of town then use dishonest Realtors and Mortgage Brokers who lure recent immigrants in to buy the house for $100K more than it sold for weeks ago by structuring a loan with a start rate lower than their rent. The home seller, Realtor and Mortgage Broker will typically all speak the same language as the victims/buyers and tell them how lucky that they are to be buying such a wonderful home in a “great up and coming area” like Hunters Point and often even give a “special deal” (since they all speak the same language) of a low 10% Real Estate commission or 3% Loan commission.

P.S. A 30 year fixed rate fully am $600K loan at 6% will have an annual payment of $46,168 (with impounds for taxes and insurance the annual payment would be $55,000.

P.P.S. It was not that long ago (less than 8 years) when friends were buying nice homes in Kentfield and Hillsborough for $600K

Yes, welcome, LILLL!

SFWoman, I do not blame the broker. As consumers, we must take personal responsibility in our choices.

Peter P,

I thought we already covered this under "The Limits of Caveat Emptor" thread? As SP so succinctly put it, "even a fool cannot hang himself without a rope".

Most consumers are not numerate/intelligent enough to figure out on their own that a neg-am mortgage is really, really bad idea for about 99.9% of the population. And most sub-prime fly-by-night mortgage brokers are not about to "educate" their customers on the risks (and jeopardize losing a fat commission check in the process).

Even worse, when the neg-am idiot gets foreclosed on, he's not the one who takes the hit --it's the GSE/MBS investors and --very likely-- the taxpayer who will be on the hook. And idiots like this are the ones who have been "winning" all the bidding wars and setting the comps for the last 7 years --and fucking it up for the rest of us.

Let me see, we have the tiny 0.01% of the population that's wealthy and financially savvy enough to use a neg-am loan to their advantage vs. the 99.9% who are playing Russian Roulette. Except the gun has 6 bullets instead of 1. Hmm.... that's a tough one, but I'll have to come down on the side of banning that shit!

This sort of thing is EXACTLY what regulation was invented for. It's why we had (until recently) usury laws. Oh, and mortgage brokers should be licensed like stockbrokers --and treated as legal fiduciary principals with their own "Series 7" style exam.

To critique the "Big-L" Libertarian worldview...

I agree that IF the massive moral hazards resulting from GSE/MBSs and other taxpayer subsidies (mtg interest deduction, cap gains 24-month club, etc.) were magically revoked (not holding my breath), then rational risk premiums might actually return "some day". In such a fantasy-world, we might see neg-am loans requiring 20% down, a gross DTI ratio of no more than 33%, full documentation & verified incomes/assets, and interest rates approaching 4-5% ABOVE prime.

However, until such a government moral hazard-free RE market somehow magically re-emerges, I see little public benefit in keeping these loans legal. Meanwhile, the public downside risks (cross-cascading defaults, economic implosion, taxpayer bailouts) are pretty goddamn huge.

@ HARM,

The vacant house stats are quite telling.

I'm intrigued by a couple of the scenarios that cause the vacant house. One is the couple that decides they can't afford the current house so they go buy another "cheaper" house before selling the one they can't afford - WTF are they thinking???

Another is something I have observed more than a couple times in my neighborhood. A Million dollar plus house sits on the market for a long period of time like 6 months to a year. It then sells and sits empty, no move in, no renter - nothing!

Who buys a house to have it sit empty? The only one I can think of is the Exchange Stabilization Fund, oops my tin foil hat just fell off my head!

Actually, I know that not to be the case with the one across the street. The next door neighbour who paid 3.5M for his house bought the one that sits empty after paying 1M. He did move a desk into the front room - but that is all. A block away the same thing happened with a house on the market for 8 months or so. It sells around 1M and now sits empty. I'm starting to guess that there are some people with really deep pockets that will not the comps show a decline if they have anything to say about it. Although that theory still doesn't explain why there wouldn't even be a renter living in it.

semperfi,

I would urge you to seriously try living in NZ first, especially in the winter months, because very likely you will regret your choice. I know NZ and Oz very well, have family and friends at these two places. Check out the biggest source of immigrants for Oz, it is.....yep, you got it, NZ.

Just do yourself a favor, spend 6 months there, and make sure you check out the variety of veggies and fruit in NZ, oh, make sure you check the price, especially the ratio to the local pay. If you are a meat eater, I hope you like mutton.

Everyone I know who moved to NZ from somewhere else end up leaving, no exceptions, I hope you will stick it out.

I feel for the Hispanic family.

Peter P, I know that a lot of info is public, but some people have an easier time accessing that info than others. I have a computer, I have a college education with some mathematical emphasis, my birth language is English, I have been close to several real estate transactions in my life, and I do not trust people. I can find information more easily than someone who does not have a computer, has perhaps a high school or community college education, thinks in a different language from most documentation, or has no experience with mortgage finance. I have more motivation to find information than good folks who believe that people are good and that the nice man behind the desk wants to help them get their house.

Also, I have seen enough ads for neg am loans to know that they are presented in a slick and shiny way, and it sounds as though the broker might have been less than clear with the actual contract when he asked them to sign.

Seriously, if we don't keep a few rules around to protect the lambs from the predators, society will get seriously f**ked up.

OO,

I have no plans to move there in the near future. What I now have is a "bolt hole" to run to in case I need to. I also have enough assets to not have to really work in NZ owing to the timely sale of my overpriced Silicon Valley home last year. My kids are 3 and 7 and I will be g0dd*mned if I allow them to grow up in the cesspool that may result from the mother of all bubble blow-ups.

Semper Fi

SQT,

I envy you. You live in a different world. Or may be should I say the dreaded "The BA is different" ?

I certainly expect the number of sales to pick up a bit in the Spring/Summer here. People are already salivating at the concept of not having to pay 20% more than last year and not having to go through bidding wars. It's a great time to buy !

That is an unfortunate reality of BA. People do earn more here, although the "more" part is often greatly exaggerated. But the immigrant herd mentality is also very much to blame. The desperation to own and willingness to accept sh1tboxes as homes, is PERHAPS more for immigrants. And since most of these techie folks arrived here in later part of 90s, they do not believe that RE can go down, and stay down. In their experience RE always went up in India (every downturn was short and followed by a swift roaring upturn).

There are hardly any parallels between India and US as far as RE goes. But these are super smart engineers and hence very poor at investment math. I am no Warren Buffet, but still, even I can see that the numbers don't make sense. I simply share the URL to Randy's bubbilzer whenever I can, but since most these folks think I am an idiot, I really don't say much.

We're talking Spring Bounce like a Dead Cat Bounce, right? The REIC will do anything to spin that sales are exploding at an exponential rate. There will be statistics like, "In the middle 19 days of March, sales surged 114% compared to the prior 19 day period." All advantage will be taken of quarterly homebuilder reports and other easy twisted news. Geographic lines will get conviniently redrawn with all sorts of exceptions. "With the exception of Greeley, the overall Larimer and Weld county real estate market median price is up 11% compared to the third quarter of 2006, when NAR chief economist David Lereah called the bottom."

If litigation happens over the crazy loans, here is what FB's truly deserve. They should get back all the monthly payments they've made, minus taxes. The bank should get the keys to the house. It's ridiculous to think that someone should be allowed to keep an $700,000 house "for free" after suing a mortgage broker. If you are compensated for the damages, then you have to give up the ill-gotten loot, too. And the bank or MBS purchaser should have to suffer through the REO because of its completely shitty underwriting and securities research practices. If you buy junk paper, then you should deal with the consequences.

-easy twisted
+easily twisted

Paul, Punchbowl,

Check out BlockShopper.com!

This guy has ALL the skinny on exclusive homes in that area along with some really "juicy" commentary! Since most of the guys I know here in the Portland area worked CME or CBOE I'm guessing the Monday following Superbowl will be....... a painful experience. Go Bears! (and ignore that Vegas line!)

Forsaken,

Thanks for the Schiff vs. Liereah TKO! (Technical Knock-Out).

What's funny is that in the previous thread HARM linked a USAToday article about the explosion in 2nd home sales over the last several years and DL openly admits that the cap gains exemption provided the catalyst for it all! I just wish Peter would have brought that up.

When Liereah implores Schiff to *not compare us (NAR) to the stock market it was dual in purpose. Firstly houses aren't going to implode like dotcom's AND we (NAR) are not prone to the corruption that lead to the stock market's meltdown! DL (as usual) was wrong on both accounts.

SQT Says:

"I think we’re on the front lines of a big bust."
_____

But how can that be? Financial guru/talk-host Bob Brinker says everything is fine with housing and if you're a housing bubble advocate, you're tantamount to a paranoid wingnut or simpleton.

And whatever Bob says, I believe.

Why, if he said snow was black, I'd drink the Kool-Aid and swallow it hook, line and Brinker, I mean sinker. After all, he's the mighthy fricken Bob Brinker who called the market when no one else could find their economic
a-- from a hole in the ground!

Then, on second thought, what if SQT is right?

SQT,

Your husband's friend seems to be suffering from a severe case of "leveragitis"? I've had friends in that "cat bird seat" where every SB in their region is "feeding" them clients big time. From what you've shared your husband doesn't strike me as one of those guys that would actually enjoy the supreme irony of this guys situation? Can we here suggest that he lighten up and live a little?

Think of it this way. During "The Great Re-Fi Craze" this MB was making "big fat stacks" GIVING away borrowed money at 4-5%! Guys like Mr. SQT (and myself) were trying to get by SELLING a 4-5% return!

So...... getting paid 2 points on "borrowed money" at rates so low you had to go back to the 1950's for a comparison OR feeling fortunate to get 1 pt. on "after tax" investable assets makes perfect sense? Sure! Sounds right to me.

Person,

Depends on the environment. Back in the early 90's (with sterling credit) our mortgage WAS at 8%! This is the corner the REIC has painted themselves into. The buying public has been acclimated to believe that 5-6% 30 yr. FRM IS the "standard". As per my post above see how much fun it is to "sell" 8-9% money in a market of declining home values.

Yeah, it'd be a lot like that.

"A Harris poll conducted last year that ranked occupations in terms of prestige placed real estate brokers at the very bottom of a list of 23 professions. (Firefighters and doctors were at the top.)

Brokers themselves seem well aware that their business isn’t always held in very high regard. The National Association of Realtors has an advertising campaign called “Someone You Can Trust,” which stresses that Realtors are subject to mandatory ethics training. “Not many professionals can claim that on their résumé,” the ads read."

http://www.nytimes.com/2007/01/28/realestate/28cover.html?_r=2&ref=realestate&oref=slogin&oref=slogin

It's funny, the three people I know who are Realtors are all nice and quite honest people, but I did encounter a couple of scumbags when I first moved here and was looking for a place. I looked at one of the Painted Ladies on Alamo Square (famous in postcards, has gentrified a bit, but still rough) and the Realtor kept telling me it was a great, 'prestige' neighborhood. "Then why does everyone around look like a Blood or a Crip?"

I also have a friend who bought a gorgeous house in the city, and has discovered over $1 million in undisclosed dry rot and water and termite damage. Apparently the seller's agent has two lawsuits against him at this moment for not disclosing known defects.

Is there anywhere where you can find out about dishonest Realtors?

I wonder how sticky the prices will be on these houses?

also, I wonder how there is going to be a spring bounce when foreclosures are at a 52 year high, sub-prime lenders are going under and lending standards tightening up. Seems like a lot of different $hit is hitting the fan at the same time; what a mess!

New thread: The Sci-fi Housing Bubble Future

SP,

Just like sibling rivalry, you can only stop your wife's behavior if you start acting exactly the same way, except worse. When she calls you out on the behavior, call her out and hopefully you can establish a truce.

WARNING: While this may constitute advice, it may go horribly wrong and result in cold dinner, nights on the sofa, and in extreme cases, divorce and/or dismemberment. Proceed at your own risk.

When she calls you out on the behavior, call her out and hopefully you can establish a truce.

That can't get no truce.

People are still a little scared about not buying in if they haven’t yet, but foreclosures are going through the roof.

They have to be very scared about buying for the bubble to really burst. Foreclosure is an indicator that future psychological shock is building up.

Trust me, by the time the bubble burst, many people on this blog will have lost interest in buying.

Realtors are getting mighty desperate

SQT:

I wasn't quoting Brinker, just giving the gist of his remarks.

I think Brinkers words were "Cassandras," in regard to the housing bubble implosion advocates.

He cited some stats that sounded more like a dead-cat-bounce, than a bonafide base being set on prices.

All in all, Brinker seemed irritated at housing bubble believers.

Oh, well. Whatever. Nevermind.

SQT,

Then you definitely married a CLASS GUY! I realize they are friends and all but the quickest way to no longer be "my" friend is to pretend to be oblivious to your good fortune!

If you're knocking down major bucks in a down cycle (whatever the industry) you've got genuine bragging rights! Having a horse shoe in your back pocket b/c the Fed took rates to 1% and you happen to have a "free money" placard on your desk does *not constitute "skills".

SP,

Oops. Next thing I know, I get slapped with a libel suit from Mrs. SP...

But yeah, so I've been told (hey, maybe I could start my own libel case -- KIDDING!). Well, it works(kind of), with my mom...until she forgets and starts all over again.

I do practice the behavior you described everytime my dad gets too cocky about his investment portfolio.

Hi_There,

Aren't those the NAHB's numbers?

I am reposting this here as well as in the latest thread
*****************************************************
The numbers that Hi_there posted are from the just released CME Case-Shiller Indices for November 2006 (please attribute your numbers in the future!). The numbers (with month to month percentages for the past two months and a year to year percentage) are at:
http://www.macromarkets.com/recent_news/articles/2007/01302007_S&P.pdf
Check out Boston… pure ugliness for the past year.
I think the Las Vegas numbers are looking so good as they haven’t had much of a chance to get “arms length” transaction numbers. New contruction isn’t included in the Case-Shiller CME Indexes. The SF Bay Area Index (which includes Alameda and Contra Costa counties) is showing increasing declines over the past two months of data (Sept/Oct, Oct/Nov).

DinOr,

Thanks - I posted that link a couple threads ago. Clearly when I was looking for work in '02 I should have been spending my time borrowing bucks and buying memberships at CME and CBOT. Oh well.

Bears got it - no worries!

Paul