patrick.net

Fear is chi uncontrollably descending, and fright/shock causes it to scatter….

Good point! Are you really into chi and feng shui? I am actually learning to use dowsing rods to find energy lines.

I just realized I myself had been remiss in not posting a graphic for "Lies, Damned Lies, and the C.A.R." Rest assured, I have remedied the situation.

Unfortunately, whereas meditation can be used to overcome fear, shock and fright, it does little to stabilize prices.

Perhaps when the FBs are really tranced out they would see non-stop triple-digit appreciation. Mind is very powerful. :)

(As long as you can clearly “feel” the quality of what you are looking for in your mind/body)

I agree.

"Perhaps when the FBs are really tranced out they would see non-stop triple-digit appreciation. Mind is very powerful. "

I thought the point of meditation was to release yourself from material concerns.

I know some people who have recently sold homes in Pacific Heights and Presidio Heights and who are already renting in the Presidio. I think the Chronicle article today about SFH rents in the Presidio rapidly increasing will get more Town & Burke parents to think about cashing out and doing the same thing.

Some people like a childless couple I know were able to sell a home on Lake Street and rent a similar home a block away for less than the CD interest they are getting on their gain (the first $500K was tax free).

I know others who are scared that prices may have stopped going up 20% a year and are thinking about getting out from under a $3mm 1st mortgage (and many times also a 2nd) while they still can (my parents said the 30 something VC couple next to them are selling since they don't want to try and pay a $4mm mortgage with one salary)...

I am of the school of “feel it” feng shui - the other one (that uses the Lopan) is just too much like work for my liking!

The "feel" part is more important, IMO. I have problems trusting my intuition though. This is probably my biggest blockage.

But if you're a top level executive with good legal representation and a fawning board, you have nothing to fear.

http://www.slate.com/id/2148327/

““It does feel a little scary right now,” said Celia Chen, director of housing economics at Moody’s Economy.com. “I think these markets will correct. The price gains that they have seen have exceeded what can be supported by the economic and demographic fundamentals.’’

they don't seem to agree with that analysis in this country. so either the market can defy gravity, or they're simply liars and game players, fooling most of the people all of the time... the news services seem to think that the vast majority only want to hear the 'it's only going up' spiel...

@astrid,

Wow. Peter P & Randy were very prescient. Weren't they the first to suggest hedging intruments against the bubble for homedebtors (put options)? Way ahead of the curve guys.

I thought the point of meditation was to release yourself from material concerns.

It may depend on your personality. Some can be more detached from materialistic possessions. Some like to be pampered.

On a more general level, Fear is, of course, an innate human emotion. I think it drives more human behavior than we give it credit for. This is certainly true with mass hysteria type bubble phenomenon: fear of missing the boat, fear of being priced out forever, and on the downside, fear of losing everything, fear of catching a falling knife.

@SQT,

My pleasure! Just curious, is there any chance you can make it to $anta Barbara on the 3rd? It would be really cool if you were there.

spin: :x http://www.slate.com/id/2148197/

I’m not sure. I’d have to come down by myself and I’m not sure how well that’d work out. I’ll speak to my husband and see…

SQT, it would be really cool if you can join us. I know it is quite far for you...

Firstly, I just wanted to say the thread graphic hung in my elementary school hallway from K thru 6th grade. It freaks me out and pisses me off. It must have been in the vicinity of the principals office.

Anyway, much of the fear I've seen since tuning in to CNBC seems to come from the media! These guys are wetting their pants. All day long today, I couldn't believe it. Last night it was the LEAD story on regular network news. (That means even people with rabbit ears caught that one). The whole sense of urgency like FB could actually do a damn thing about it now?

I don't know, maybe that's why we graduated right to the fear factor. When the stock bubble busted everybody stood around in disbelief for a couple of months. This thing has easily surpassed that and then some. Fear? We've gone straight to panic mode!

DinOR,

I concur with your observation. It's like we went from denial to panic in less than two months. Now we just need the prices to fully reflect that panic and that's when it gets really interesting.

I think there will be multiple waves of panic. This first wave is the speculators that have multiple properties (most of the others are still in denial). The next is the overleveraged with a trigger or triggers that puts them over the edge (ARM reset, new tax bill, lost job,etc...) Then a third wave which is more of number 2 along with some foreclosures from the first two waves. Perhaps even a fourth wave which is just more of the same with heavier emphasis on the foreclosures. This thing could drag out for many years or even a decade.

Excuse me…what is FB?

Focaccia Bread

The first part of fear cycle has started even in BA. People are not buying as much as they were an year ago. The buyer are afraid of buying something that may loose value over next few months. The fear in sellers have just started. Barely.

It is still playing out like a script. Panic won't set in sellers till ARM resets hit them. Right now it's just an idea for them. When it becomes reality .... we will see fear on both sides dictating the market.

Peter P, always the class clown ;-).

FB=F@cked Borrower. See Housing Bubble Glossary

Robert Cote,

I had the same observation watching CNBC today. The way they were covering it you'd think they were covering the Hindenberg crash! It shore was weird. It seemed like every angle covered was as it pertained to the housing debacle.

From the DQ report on July numbers.

Around 30% of Santa Clara county zip codes are showing -ve YOY median prices. About 20% are showing -ve YOY per sqft rates.

For Alameda county around 40% of zip codes are showing -ve YOY median prices. About 45% are showing -ve YOY per sqft rates.

I have been waiting for the median to become -ve YOY, just to get a nice headline in local MSM. It will shock a lot of people. Before year end. Seems pretty sure now.

I think the real fun will begin on the lower Peninsula when the specu-builders start getting desperate. Do an MLS search on Los Altos or Los Altos Hills. There is a lot of discrepancy on the prices. There is a total tear down listed for $2.95M below a really nice 4BR for $2.5M in a better location.

But the builders who bought tear downs and built McMansions without a buyer lined up will really be f*cked soon.

That said, a 3/2 a couple of doors away from my place just sold in 4 weeks for $788K ($1K under asking). So there is still a lot of demand here. The young widow who sold it probably wasn't interested in waiting for a better offer, but I think she still could have gotten one. The open houses were packed.

Paul,

I absolutely have to agree with you! That just about sums up the "mechanics of fear". Kind of like The Pit and the Pendelum. What a classic eh? The "triggers" you describe are dead on. One you may have missed though (and this may sound mean spirited) is the loss of OVERTIME! For so many of these people just being cut back on OT will be enough to send them over the edge.

How difficult is it to imagine some sleazebag mortgage broker looking at these guys W-2's seeing a lot of OT and "qualifying" them "for all the house they can afford". We could well lump this into the overall category of mortgage fraud (which it is) but the way it plays out will put it squarely on the FB's shoulders.

Here is my favorite listing:

http://tinyurl.com/evtvs

It is on a relatively busy street and in the flood zone. It has been on the market (new and empty) for over three years. I think it was flipped a few times. But there are a bunch of builders out there with multiple projects with a lot of money invested. I think they will experience some fear soon.

At what point does a house built in 2001 stop being "new" if it hasn't been used as living space? I said a few years, but I did some more research and http://tinyurl.com/evtvs was built in 2001. The listing says "new". It is not new. Termites don't care. Appliance warranties don't care.

I noticed that CNBC has been gathering bubble bear steam all week. Pretty much only Kudlow & that sound effects clown are still in denial (during the hours I watch). But all the main anchors are getting very bold about challenging cheerleaders; and they usually have on some actual economists and wealth managers now, instead of just some clueless 29 year old analyst the permabulls can ridicule.

The best was yesterday. They had on a HSBC economist debating with some mortgage industry shill. The HSBC guy started getting annoyed and said something like "all you have to do is look at the first and second derivatives of the curve on that graph you just put up and see that housing prices are crashing". Her response. [Deer in headlights]. She had no idea what a derivative was.

rent a similar home a block away for less than the CD interest they are getting on their gain (the first $500K was tax free).

We've been earning just under 3X our rent in monthly returns the last 1.5 years since we sold out, also largely tax free (the rest carefully tax managed). This is also about 2X the average reported returns on housing prices during that period. I figure that at worst, we're even, and that assumes inflation is understated by about half.

I did engineer a portfolio out of Vanguard funds a bit more risky than a CD/MMkt: about .3 of market with a small portion in non USD returns.

We had about 60% equity in our place when we rang the register. My dream is that amount covers 100% in our next place and leaves some extra to reallocate to conservative future income-producing investments. In a perfect world, there's enough left over for a nice new computer too. This POS is starting to piss me off.

OT: Fear is a basic human instinct. I'm sure it was essential to the survival of our species at some point in our evolution. I imagine that many of those not scared of the dark got eaten by cats with big sharp teeth. We're stuck with it, and it is so primal that it can be manipulated and get out of control, becoming quite destructive. But even now, fear still has it's purpose.

Let me propose a different spin on fear. Perhaps all the FBs didn't have enough fear. The feared being "priced out", sure. But they weren't fearful enough as the storm gathered. Perhaps many of us are now out (or didn't get in) because we were healthily fearful of what was coming. Maybe we heard the thunder and scurried for cover while the rest of the herd just stood there, believing that someone would protect them from the lightning bolts.

Of course my biggest fear is that I'm wrong about all that.

JBR east bay Says:

> Say, does anyone remember this article from last year
> about these numnut flippers:

http://money.cnn.com/magazines/fortune/fortune_archive/2005/05/30/8261260/index.htm

> It would be interesting to try to do a case study and track
> some of them down and see what their current status is

It looks like Zareh Tahmassebian the 22 (now probably 23) year old son of Armenian immigrants is upside down on at least one home. He only owns just a single home in his name in Maricopa County, but he owes more than he paid at the top of the bubble:

Owner(s): TAHMASSEBIAN ZAREH
4162 E PALM BEACH DR CHANDLER, AZ 85249-7397
Recording Date: 09/30/2005
Sale Price: $464,117.00
Loan Amt 1 St: $348,000.00
Loan Amt Other: $116,000.00

Wow, a job that pays a 22 year old high school graduate with no training $250K a year. Where was this job all my life?

Paul Krugman was one of the very few MSM columnists to call the Bubble several months ago, and I'll bet he took plenty of flak for it at the time. He deserves our respect and gratitude.

SF Woman posted about 2266 Vallejo Street, SF 94123 that was on the markert for $12.9mm

It looks like the owners has a little more equity than the flipper in AZ:
Owner(s): DAVENPORT WILLIAM L
Recording Date: 06/14/2000
Sale Price: $3,950,000.00
Loan Amt 1 St: N/A

Even if he lowers the price by almost three million he will still walk away with about a million a year in appreciation. I can't tell you how many otherwise intelligent people have just ignored me over the past few years when I tell that "one million per year in appreciation is not sustainable". It is going to get ugly in 94123, 94115 and 94118 when people get scared and all try and run for the doors at the same time...

astrid Says:

> Wow, a job that pays a 22 year old high school graduate
> with no training $250K a year. Where was this job all my life?

Any sales job will pay $250K if you sell enough. All you need to know to do well in sales is how to "overcome objections and close for the sale".

Some young naive people make the best sales people since they really do think that it is a good idea to buy "another three homes to flip and pay two points for each firs loan and three points each for the three seconds"...

"since they really do think that it is a good idea to buy “another three homes to flip and pay two points for each firs loan and three points each for the three seconds”…"

Well, damn me for knowing better... I'm still quite impressed. $250K is quite a lot of commission for a 22 yr old broker (presumably one who does not have an assistant and must pay a large portion of his commission to his office).

spike66 said :
I’d suggest besides greed, that wanting to feel sophisticated and financially savvy made her easy prey for a “creative mortgage” especially if it came with a complicated spiel that emphasized shrewdness in choosing this option.

Quite true. Great observation. This cannot be the sole reason, but people do things because they do not want to look dumb. They want to be as smart as the guy next cubicle.

I have been a silent listener to so many discussions on which ARM is the best. "I took a 3/1", "No, I just went for a 5/1" and which mortgage broker gives back part of his commission to the FB and so on. Then how the refinanced cash-out is to be used for which remodelling, and how it increases the value of the home at the same time giving a better standard of living. The ones who did it gave authoritative advice to others, and those wanting to do it had this awe and respect in their eyes for the "elders".

It was exactly a replica of the dot-com stock market discussions. Day traders used to boast, and wannabes looked up to them in awe. Houses are not stocks, but this mania is no different.

From RealtyTimes for Cupertino : (emphasis mine)

For sellers, it is getting dicey out there. Comparative sales don't mean much in this market. What's important, if you really want to sell your home, is your competition. What are they priced at? If you want to sell, you need to price your home below theirs, otherwise all you'll be doing is selling their house for them.

Amazing. Amazing.

Is FaceReality around ?

A lady I work with has a brother who's a mortgage broker. She phoned him to ask for financial help with their mother, who just went into assisted living. He literally yelled at her that he did not have a cent to give her. He is really shaken up by the RE downturn.

I may try to talk to my family, but I never give financial advice to friends.

Spike,

I learned my lesson the hard way on this. In '04 a friend of mine asked me to review papers for a condo he wanted to buy for $400K. I told him that aside from the actual contents of the deal, $400K seemed like an awful lot to pay for a condo in my opinion and that I was very wary about the market. I told him that of course it was his decision, but if it were me, I wouldn't do it. I suggested he may want to wait a couple of years. He waited. A year later, with a baby in tow, his wife finally convinced him that they really couldn't wait any longer to buy. They bought a condo for $570K in summer '05.

On the plus side, I guess, is that I convinced my brother in law he should sell in '04. Although prices continued to go up in '05, it now seems likely that he will be able to re-enter at his exit price.