patrick.net

Hey, and if the whole Hari Seldon angle doesn't put you on edge, imagine what could happen if a "Housing Mule" shows up! Imagine someone with the power to mentally manipulate real estate prices all over the galaxy at will.

Think about it... 8O

Jon,

You know I'm being ironic with this whole post, right?

The Mule's power is a lot more limited. He can only create the power of undying loyalty by personally modifying a person. -- Much like Suzanne's *research* for future FBs.

@CB,

That's not such a bad idea --and thanks for the compliment!

HARM,

For David Lereah and other realtors--it's obvious that their job creates a huge conflict of interest (per your Upton Sinclair quote).

But beyond them I take part of your question quite literally. For so many economists like Greenspan and and other university academics whose career and lifestyle are secure bubble or no, the conflict of interest is not so clear.

I am not as cynical as some who believe Greenspan knew there was a bubble and didn't care. Rather, I believe he and many others truly believed prices were sustainable.

Finding the reasons these economists kept their head in the sand (ulterior motives or not) interests me greatly.

Boston Transplant,

I agree that the "ivory tower"/academic bubble syndrome can be very real, as others have already discussed. Even so, I seriously doubt that one of the Chief Bubble Architects: Greenspan himself, was somehow unaware of the effects his actions were having on the RE market. Remember how he was publicly pimping option-ARMs after he slashed Fed Funds rate to 1%? Coincidence? Hardly...

I would also argue that AG was not a truly disinterested academic with no conflict of interest. Rather, he was an old supply-side political hack who had a vested interest in pleasing his political masters in order to keep his job (whomever they happened to be at the time --Dems or Republicans). Not to mention all those lucrative private sector engagements he wanted for post-retirement.

OTH, I'm sure there were plenty of self-deluded academics who managed to convince themselves of a New Paradigm, just as many had during the first tech bubble.

Greenspan praising ARMS did confuse me. I don't have a good explanation for it.

Your theory could be correct, but in my opinion he was already too rich and secure for keeping his job to be his sole motivation. At that point in one's career, I think "being right" becomes important...

If applying common sense to an obviously distorted market is genius, then they are geniuses!

Now, this house is still for sale! The cheapest (and smallest) 5 bedroom in Pac. Heights. I do see that there is a seismic disclosure. I wouldn't think there would be one in that location.
http://tinyurl.com/2hbwus

For the record, I think Ben and Patrick are very talented, smart and courageous no-BS kind of guys. However, it doesn't take a psychic or super-genius to see that 1 + 1 does not = 11.

The idea that all the so-called "experts" that the press constantly trotted out as credible sources --with no challenges whatsoever-- could somehow have been oblivious to the bubble up til now just strains belief... to say the least.

OT, did you see this news on Bernanke's remarks?
He's putting pressure on Freddie and Fannie to bailout the subprime loans. I was just discussing this with a couple of coworkers yesterday and this is the worst that I thought could happen. Yet somehow I already "knew" it would.
I am just so discouraged that Ben might still be able to prolong the bubble.

http://tinyurl.com/3xsblp

The Federal Reserve Board believes that the GSEs' investment portfolios should be firmly anchored to a measurable public purpose, such as the promotion of affordable housing," Bernanke said in remarks prepared for delivery to the convention.

On the other hand, he said, purchases by the companies of affordable housing products "might add significant liquidity to the secondary markets for such assets, thereby reducing costs and increasing credit availability to prospective home purchasers."

@SFWoman,

"In the land of the blind, the one-eyed man is king."
--Erasmus

"it doesn’t take a psychic or super-genius to see that 1 + 1 does not = 11."

I can't wait for DS's take down of that Eurocentric assertion!

SFWoman,

That 5 bdrm condo could fit into Peter P's dream bathroom.

It's a very funny listing -- I particularly liked the "Add a garage???" suggestion.

Patrick and Ben have special triple-wound DNA with 3 times the genetic material and intelligence and other as yet undiscovered powers. People like David Lereah and Alan Greenspan, with their mere single winding of DNA never stood a chance... How can they possibly compete with that, even with higher degrees in economics and spending all day watching markets?

You jokers. Everybody knows that 1+1 = 10. You need 1+1+1 to get 11.

In the land of the blind the one eyed man will have his eye put out by the jealous leaders who cannot see.

Cycle excesses are standard and very foreseeable. The cycle repeats again and again. There is nothing remarkable in recognizing this. The genius is in getting the timing right - very right, and doing something to benefit from it.

The true geniuses are those who saw the bubble coming, bought property at the right time before the run-up at low prices, and then sold at the top.

Would it cause an uproar if I suggested that an infinite amount of bears, typing on an infinite amount of blogs, would eventually reach the conclusion of a liquidity bubble? Because let's face it, although it looks like the long slide has begun, in a year we could see that this was all some minor hiccup in the Bay Area economy.

I choose to believe that Patrick and Ben applied common sense about bubbles to Bay Area home prices. But maybe that's because I agree with them. :)

ethnocentric...?

SP says :
Picture a frat party. One guy drives up in a pickup with kegs in the back. The other guy calls in the cops at 1am. Which one do you think will be more popular?

It's obvious by now, but I will say it once more. This SP guy comes up with really good analogies.

What are they going to refinance into, a 100 year loan? Some of these jokers couldn't even afford the interest payments on a fixed-rate IO loan!

They need to let the FB's get F'd in their Bs.

What? I meant banks!

In the land of the kings, the one-eyed jack's a joke.

In the land of the broke, the one-eyed homeowner's a genius!

In the land of the F'd Borrower Jackasses,
the man with half a brain is gifted!

I knew you were going to talk about my psychic powers, of course.

Alas, I'm no genius.

Patrick

I would rather be a psychic than a genius. Lucky is always way better than smart. :)

There you have it, folks: we are all part of Patrick's Psychic Friends network. :-)

Are we going to start charging people $1.99/minute to listen to our vague predictions?

My system would be all sunshine and flowers...

Really nothing special about jacking up the rates 17 times, he is just staying the course. He would have been stupid not to jack up rates when the economy "looked" good.

I am pretty confident that the last rate hike was the last under Ben until the next Fed Chairman comes along. The most he can do at this point is to keep the rate where it is, but I don't think he can defy cutting rates that long.

When Darth Lereah said :

"Im am your father Patrick, Join the Dark side and i will complete your training"

then I knew Patric was on to something.

Gyges,

Welcome aboard. Have you been introduced to Surfer-X?

per Par article...

$500,000 option-ARM, monthly payments would be $1,608 for the minimum, $3,454 for interest-only, $3,770 for the 30-year equivalent and $4,862 for the 15-year equivalent.

LOL my rent is only 1/3 of 30yr. at best I could upgrade at 1600 for Condo/TH
but that doesnt include association fees. Man .. Im better off renting and saving the difference.

A 2000 sqft 5 bedroom condo? Does it mean 5 room?

I just had a scary drive on 101 back from SF. I do not know why Taxi drivers are so aggressive in America. Their counterparts in Japan are always much more polite and safety-conscious.

Peter, try taking a cab in Mexico or Brazil sometime…

I will not attempt that, thank you very much. I think we should make driver's licenses more difficult to obtain.

What would a psychic say about the housing market?

Patrick Killelea says, "US housing crash continues."

http://patrick.net/housing/crash.html

The thing that really ticks me off is that drivers in some country are aggressive because of the way they value human lives.

Should we allow the importation of such value system?

PAR Posted a URL that said:

> the East Bay's optional-payment ARMs jumped from 0.9
> percent in December 2003 to 39 percent of all refinance
> loans in December 2006

And

> A $500,000 option-ARM, monthly payments would be
> $1,608 for the minimum, $3,454 for interest-only,
> $3,770 for the 30-year equivalent and $4,862 for
> the 15-year equivalent.

I heard that many people that got the “option-ARMs” didn’t read the fine print to find out that they will not have the “option” to pay the minimum payment for long. I have heard that most of the loans will end the borrowers “option” to pick a payment and go to a 25-28 year amortized payment as the new minimum once they hit 110% of the original loan amount.

Since few people in the northern part of SF have a mortgage of under $1mm let’s look at a typical happy FB couple living in a Cow Hollow condo picking the “minimum” payment (doubling the numbers from PARs Link) on their $1mm loan of $3,216. They are happy to “own” a home and after the tax advantage are only paying about $1K a month after taxes then their friends in the area. What most FBs forget about is that whey they “pick the low payment for a year” they have “added” almost 60K to what they owe.

The “happy” FB will become F’d FBs after about a year and a half of “picking” the minimum payment when the neg am low pick your payment of $3,216 will end (the day the loan balance hits $1.1mm or 110% of what they borrowed) and the new 25 year am payment of $8,128 per month begins…

There should be more training programs so that the road is safe.