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Housing Bubble Pre-Flight Checklist


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2006 Apr 10, 7:44am   29,485 views  313 comments

by HARM   ➕follow (0)   💰tip   ignore  

1. Congress enacts/President signs new Tax Code into law (1997) subsidizing real estate speculation? Check.

2. Cabal of arrogant Fed bankers/Washington politicians/Brokerage firms ignore (or actively encourage) massive Dot.com stock bubble? Check.

3. Aforementioned stock bubble imploding in Fed's/Pol's faces (2000)? Check.

4. Extreme Fed/Pol fear of damage to the rest of the economy by ruptured stock bubble and willingness to flood economy with ultra-cheap credit (to inflate new bubble)? Check.

5. Massive GSEs market intervention, allowing private mortgage lenders to shift default risk from themselves onto taxpayers, FCBs & institutional investors (using the magic of MBS/CMOs)? Check

6. Complete erosion of lending standards, thanks to Fed's easy credit + GSE's MBS/CMO mortgage risk transfer? Check.

7. Cabal of arrogant Realt-whores enforcing monopoly MLS, gaming the numbers and lobbying for federal protection? Check.

8. Public's unshakable faith in the impregnability of real estate ("it never goes down")? Check.

9. Public's complete lack of historical memory, understanding of credit bubbles, the Fed/GSEs, business cycles, etc.? Check.

10. China/Japan underwriting much of our toxic MBS/CMO debt, while secretly hoping we fall on our asses? Check.

11. International carry-trade spawning RE bubbles all over the globe, thanks to ultra-cheap $USD ? Check.

HOUSING BUBBLE, YOU ARE CLEARED FOR TAXI

Discuss, enjoy...
HARM

#housing

« First        Comments 190 - 229 of 313       Last »     Search these comments

190   astrid   2006 Apr 11, 3:51am  

DinOR,

The Oregon coast is so pretty, especially the stretch just north of California's lost coast.

191   DinOR   2006 Apr 11, 3:53am  

nomadtoons2,

I guess in the end this has all been about what you can afford, not what's needed. Maybe that should read "what you can borrow".

192   astrid   2006 Apr 11, 3:53am  

nomadtoons2,

The problem is that the principle only works if you have 12 feet ceilings on a one floor house. Modern McMansions have all or most of their bedrooms on the second floor.

193   DinOR   2006 Apr 11, 3:57am  

astrid,

Pretty? Yes quite so. Pretty boring? Oh, most assuredly! They've tried to turn the entire place into some sort of "adult disneyland" with the tribal casinos and coffee shops and outlet malls. The ONLY jobs are service and tourism related. Uh, for about 200 years the Oregon Coast was about fishing and logging. Neither of which we tolerate any longer.

194   requiem   2006 Apr 11, 4:00am  

Arg! I just noticed this quote in the "Rising rates slow but don't stop ARMs race" article:

"In this town, where home prices are so high, people are looking for a low monthly payment that allows them to own a house."

Of course, I see skibum's post on the state-of-our-schools. *brain explodes* Argg!

I happen to like high ceilings, but I'm also one of those people who don't make use of heat or air conditioning. (Grew up in a stone house w/ hardwood floors and no heating to speak of.) There's something about building on a large scale that makes people fell... well, not oppressed, the way smaller cramped places do. Of course, the overall quality of a McMansion helps undo any such beneficial effects.

195   skibum   2006 Apr 11, 4:02am  

astrid Says:

For sheer absurdity of architecture, my vote would be for the Chinese Zhejiang countryside...a discordant overall imagery of Disneyland on acid.

PLEASE provide links to photos - this I've got to see!

196   DinOR   2006 Apr 11, 4:02am  

newsfreak,

Provided the story of the 250K over asking price (in DC of all places) is true please contact the Overvalued Blogspot for inclusion into America's Overvalued RE! If the buyer was properly exploited there is even an option to nominate the selling realtor for their "Hall of Shame".

197   astrid   2006 Apr 11, 4:02am  

newsfreak,

And thank you in return. I may still be quite young, but I've learnt that a big name alma mater is no guarantee of brain activity. In fact, some of the smartest people I've met have gone to land grant schools (esp. for undergrad) and a few of the dumbest/inanimate ones come with big name university Ph.Ds.

198   astrid   2006 Apr 11, 4:11am  

Dinor,

some of the pictures on this page come close, but I've seen much more absurd examples - including one with a glass tile wall section running 4 floors tall.

http://www.skyscrapercity.com/showthread.php?t=332782&page=2&pp=20

199   DinOR   2006 Apr 11, 4:16am  

Requiem,

Yeah, by March in Oregon it's pretty easy to become overwhelmed with cabin fever and a vaulted room to escape to can help when it's 37 degrees out and raining for the sixth consecutive week. Like I say, we "walled it off" during the winter and only bothered to heat a few hours during the weekends. Not that I'm some kind of conservationist (just cheap).

200   skibum   2006 Apr 11, 4:20am  

re: the bimbo reporter, is that Melissa Francis (is she on MSNBC or CNBC)? Man, she is CUTE.

201   astrid   2006 Apr 11, 4:22am  

DinOR,

How does that compare to your experience in the Philippines? I had a friend who was half Philippino and she said she packs her bags there with Spam. Unfortunately, that's about all I know about the Phillippines.

Anon,

Thanks for the clarification. I haven't seen the show so I maybe I shouldn't jump to judge her. But her credentials alone means very little to me. I find it's the person and what they're able to create that really matters.

202   Peter P   2006 Apr 11, 4:22am  

Yeah, by March in Oregon it’s pretty easy to become overwhelmed with cabin fever and a vaulted room to escape to can help when it’s 37 degrees out and raining for the sixth consecutive week.

And the Bay Area has been raining for how many consecutive weeks now? Didn't we make a March record?

I do not mind rain and I like overcast. However, it was pouring on 101 yesterday.

203   astrid   2006 Apr 11, 4:25am  

"And the Bay Area has been raining for how many consecutive weeks now? Didn’t we make a March record?"

Did I mention that D.C. has been enjoying a beautiful March and April? March was so dry the Washington Post was giving advice about droughtproofing the garden.

204   edvard   2006 Apr 11, 4:25am  

Dinor....
If it rains one more week... I am going to go NUTS! Seriously, it has rained for almost 60 days in a row. If the so called PDO cycle is ligitimate as NASA claims, then mother nature alone may body slam those prices in the Bay Area quicker than anything, because if it is going to rain 6 months out of the year for the next 10 years, then that defeats most of the reason people choose to live here.

205   DinOR   2006 Apr 11, 4:27am  

astrid,

That stuff was da bomb! I thought I had seen over the top in the P.I but that it just plain insane. My wife's cousin worked for years in Ohio for an auto parts supplier. She worked hard and saved her money and built what I like to call a "P.I Peso Palace". Good for her, she earned it. But it looks ridiculous. There are bamboo huts, fishing boats and swaying palm trees and then there's her cousin's monstrosity in the middle of all this tranquility. Oh, and she has a "mini dish" bolted to the side so she won't miss TV for the two weeks every other year she visits. When sge was "fishing" for a compliment from my wife, Mrs. DinOR asked her why she didn't build a hospital instead. That kind of took the wind out her sails.

206   skibum   2006 Apr 11, 4:29am  

DinOR Says:

When sge was “fishing” for a compliment from my wife, Mrs. DinOR asked her why she didn’t build a hospital instead. That kind of took the wind out her sails.

That is f-ing hilarious! Sounds like a line from a Filipino version of Pride and Prejudice, or something.

207   astrid   2006 Apr 11, 4:33am  

The other pictures on the thread are also very nice, some of them illustrate what Chinese countryside used to look like. Decrepit, but quite picturesque.

208   astrid   2006 Apr 11, 4:34am  

"Mrs. DinOR asked her why she didn’t build a hospital instead"

Mrs. DinOR rocks!

209   brightc   2006 Apr 11, 4:35am  

NAR's desperate spin: Check.

http://tinyurl.com/fb9af

Some highlights:

But based on those projections for 2006, both the new home and existing home sectors would see their third-best year, following the booming markets of 2005 and 2004, the trade group said.

Wow. "Third best". Is that the NAR's way of saying "sequential decline"? :-)

"Economic growth and job creation are providing a favorable backdrop for the housing market, but rising interest rates have an offsetting effect," David Lereah, NAR's chief economist, said.

Oh shit. Damn the rising interest rate poking on the bubble. Poking -- it sounds just so violent. Sometimes I wish it were more like a souffle. Delicious.

But don't worry. Although your ARM will adjust from 4% to 7%, you can still handle the $900 increase in your monthly mortgage payment. After all, with commodity cost increases and the flatline salary and stock market, we'll get over it just fine.

Houses in the Bay Area will go up another 10% this year! (25% if not for the soft-landing).

210   DinOR   2006 Apr 11, 4:37am  

nomadtoons2,

Going nuts? Oh, I'm there man! An old friend just moved to LV (with no intention of buying anytime soon) and he gives me a daily update on their weather. Bastard. I had no idea though that NASA had confirmed the possibility of the PDO! I'll have to check NOAA's ? website. As far as I knew it was the weather guessers at "U Dub" (Univ. of WA) that had made the observation. Years back I had a client that was a hydrologist? and he said that in effect LA had been turned from a desert into an oasis b/c of Mullholland and this may have changed weather patterns there.

211   requiem   2006 Apr 11, 4:39am  

newsfreak, (re: 2-story living rooms)

I know! you could put platforms at different levels, with stairs going up and down, like those 3D Star Trek chess sets.

(Would be intersting to see, though it'd be of more use for parties than for anything else.)

212   astrid   2006 Apr 11, 4:39am  

"Economic growth...are providing a favorable backdrop for the housing market"

BrightC, good point. What does direct economic growth even have to do with the housing market? I understand if economic growth can be linked to higher household income, but otherwise, there's no reason why economic growth would lead to higher property value. And you're absolutely right, what higher economic growth does directly contribute to is a rising commodities market.

213   astrid   2006 Apr 11, 4:42am  

DinOR,

How did you even close off your two floor living room? At least for McMansions, the 2 floor foyers and 2 floor living rooms are arranged in a manner that make it impossible to isolate from the rest of the house.

214   DinOR   2006 Apr 11, 4:45am  

Thanks all!

I think Mrs. DinOR rocks too! It's just that we have seen so many of the "ex-patriots" return with an ugly display of wealth when what is really needed is at the very least a clinic. Many of their relatives are all hunky dory (healthwise) and then they just keel over b/c they have NEVER been seen by a medical professional of any sort in their lives. It's only after they are "critical" that these long term issues surface. If there was some sort of way to tell these people that they had diabetes or high blood pressure (or whatever) then at least the family could make some home health care preparations rather than pumping money into what SFWoman describes as the 1/3 of health care dollars being spent in the last 30 days of life. You know, basic preventative stuff.

215   edvard   2006 Apr 11, 4:46am  

I'm usually very antimate about keeping my beautiful 1996 toyota pizza delivery model truck nice and sqeaky clean. I haven't cleaned it since December because there hasn't been any point. It'lll take me all day to scrape all the accumulated grime off. NASA hasn't definantly confirmed the PDO, but all the evidence and info they gave matches the patterns from this and last year's unusual patterns. It pisses me off to talk to my folks. It was in the 60's most of the winter, and they actually had a drought. I will say that with all the rain, our yard looks amazing. I haven't been able to get grass to grow in the back since I've lived there. Now I can't keep up with it and my lawn mower gets clogged with the thatch. Amazing!

216   astrid   2006 Apr 11, 4:49am  

"McMansioneers"

I have a great idea. Let's sell 2 floor tall rock climbing walls into these 2 floor living rooms. Come on, it'll be a great conversation piece and I bet the Jones don't have it yet!

217   edvard   2006 Apr 11, 4:51am  

I kind of wonder how many deaths have been attributed to people accidentally falling from upstairs railings down to the first floow in some of the open air high ceiling models.

218   skibum   2006 Apr 11, 4:53am  

Robert, DinOR (and others),

RE: McMansions, what's pathetic is these structures are built so close together that if your neighbor farts, you can smell it. It would be that much more energy efficient to build side-by-side, town house style residences instead, but builders are merely satisfying these people's need to feel like they actually have a single, detached house.

219   DinOR   2006 Apr 11, 4:54am  

astrid,

For us to be able to "close off" our vaulted living room was actually fairly easy. It had been added as an "after thought" some years before so it was already segregated except for a "bi-fold" door to the dining room which was simple enough to tighten up and then a door was installed toward the back bedroom entrance. The plants seemed to love it so just left well enough alone. This was not standard by any means so I'm not sure how one would make it work in today's McMansion.

220   edvard   2006 Apr 11, 5:02am  

Anyone driven through Sacremento lately? I was in Lincoln, right outside of Sac about 2 months ago.Looks like a weird alien planet. There are THOUSANDS of these hige houses, right next to each other, all the same style, size, color, and all. Even the gas stations, wal-mart, Mcdonalds and other shopping centers around it are styled in the same spanish villa tera cota roof style. It was really odd.
As for me, I want a log cabin. A real one. There are companies in NC that will sell you a kit to make your own.Apparently the resale value is bad. So what. That's what I like.

221   Peter P   2006 Apr 11, 5:02am  

Wow. “Third best”. Is that the NAR’s way of saying “sequential decline”?

Wait until they say 57th best since 1950.

222   Peter P   2006 Apr 11, 5:05am  

As for me, I want a log cabin. A real one. There are companies in NC that will sell you a kit to make your own.Apparently the resale value is bad. So what. That’s what I like.

I want a glide house from Michelle Kaufmann.

To me, the view is more important than the house. I must feel comfortable where I am located.

223   DinOR   2006 Apr 11, 5:07am  

newsfreak,

Thank you and it just goes to show you that everything is "in bounds" here! One of the many reasons we sold our old place was that the vault created what the MANY roofers that came to bid described as a "dead valley" We always had problems with that area of the roof and I don't want to tell you how much extra we paid to correct that. It was a mess.

224   astrid   2006 Apr 11, 5:09am  

Nomadtoons2,

Depending on how real you want to get, log homes are fairly easy to build with wood cords and insulation. They'll last forever and the main problem is that most people don't know how to take care of them properly.

225   skibum   2006 Apr 11, 5:11am  

astrid, newsfreak, and others,

The vaulted living room climbing wall idea won't fly - those walls probably won't be able to hold up a normal rock climber's weight, much less that of a fat FB and their fat kids.

226   astrid   2006 Apr 11, 5:11am  

Peter P,

Have you looked into recycled shipping container structures? You can fit a lot of floor length windows into one and there's no termite problems.

227   astrid   2006 Apr 11, 5:12am  

skibum,

I was thinking of one of those climbing rocks like you'd find at REI...unless the poorly poured foundation won't support that either...

228   skibum   2006 Apr 11, 5:13am  

nomad,
Instead of a log cabin (a little to Abe Lincoln for my tastes), have you ever considered a post-and-beam home? These can be do-it-yourself setups too, and they are NICE. Probably along the lines of what I'd do if I could ever custom build a home someday. That, or complete modern w/ all the energy efficiency stuff built in. I'm torn between the two.

229   edvard   2006 Apr 11, 5:13am  

Actually, the coolest thing I saw recently was a company in NC buying up retired passenger jets, gutting the innards, engines, etc, and offering for around 250k to deliver it to your property. You have to do the interior, but can you imagine? Those planes have a lot of interior space, plus being made of alluminum, the maintence would be zilch. You could freak out the neighbors too.

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