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Housing Bubble Pre-Flight Checklist


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2006 Apr 10, 7:44am   29,604 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

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260   Peter P   2006 Apr 11, 6:21am  

They didn’t mention specifically where in the NW but even if it is BC shipping would be cheaper (I think) to OR.

I think they are in Vancouver, BC. Perhaps I should move to BC and get a glidehouse. :)

261   Peter P   2006 Apr 11, 6:23am  

In Oregon in the late 90’s the standard practice was for the manufacturer to pay for the first years space or park rent. So alot of people that had been renters (entry level buyers) here were suddenly able to afford “owning” and build equity. Well no sooner had the 1 Year Free Space Rent expired and all of these homes were simply abandoned and dumped back to the bank b/c the people could not afford the house payment PLUS the space rent.

I think you need to own the land for a modular house though.

But this is eerily similar to ...

262   astrid   2006 Apr 11, 6:24am  

skibum,

I like Eichler, that was certainly a better solution to street facing housing than garage faced McMansions.

I still haven't made it to Hong Kong. My family in Shanghai, who have been to Hong Kong, tell me that the zoning codes lead to some incongruous results - with brand new buildings next to absolutely decrepit ones. But overall, yeah, that's the idea, the impact of skyscrapers is a lot lower if it is built against a steep hillside or if it is facing the ocean on one side or more sides.

263   skibum   2006 Apr 11, 6:25am  

Peter P,

Man, I love Vancouver. So much good Asian food, and Whistler is 2 hrs drive. Pretty bubblicious, I hear. There's an example of a city with lots of vertical housing (downtown, at least). I wouldn't mind a cabin on Victoria Island, though.

264   Peter P   2006 Apr 11, 6:29am  

Man, I love Vancouver. So much good Asian food, and Whistler is 2 hrs drive. Pretty bubblicious, I hear. There’s an example of a city with lots of vertical housing (downtown, at least). I wouldn’t mind a cabin on Victoria Island, though.

I love Vancouver too. Victoria is actually more beautiful, but food is not as good. Man, colors look brighter there!

265   astrid   2006 Apr 11, 6:31am  

Peter P,

I think a lot of the stigma of multi-family housing can be taken out if builders just start using better sound insulation material. The standards cannot be all that high. I've never heard upstairs neighbors when I spent time in Shanghai, and this is just plain ole steel and concrete construction.

I was thinking of condo communities of 100-500 units, that's a good size to give everybody enough green space and provide some basic services (including the soon to be completely mocked high end gyms and conference rooms)

266   surfer-x   2006 Apr 11, 6:32am  

www.msnbc.msn.com/id/12269915/

Love the spin, be the spin, become the spin.

267   Peter P   2006 Apr 11, 6:36am  

I think a lot of the stigma of multi-family housing can be taken out if builders just start using better sound insulation material. The standards cannot be all that high. I’ve never heard upstairs neighbors when I spent time in Shanghai, and this is just plain ole steel and concrete construction.

Very true. High-rise buildings will be better because they have to be steel and concrete. Wood construction is completely unacceptable. We need at list 10 inches of concrete. Also, we need sound absorbing materials if anything other than thick carpet is used.

Builders need to see multi-family housing as the preferred solution, not a compromise.

268   DinOR   2006 Apr 11, 6:39am  

Peter P,

I noticed under their "Steps to Ownership" section that the Glide House folks mention land ownership as Step 1. I can't understand why anyone would want to live in a trailer park anyway? I just thought there were incredible parallels to what had happened in manufactured housing in the 90's as it tanked and what we are about to see.

The Glide House HAS to be a completely different animal b/c mobile homes simply would not support that much glass at the site (let alone in transit).

269   skibum   2006 Apr 11, 6:41am  

More on Eichler. Turns out one of his chief contractors was a patient of mine briefly. He told me this story about building the first few Eichlers in the BA. The house that may have been one of the first ones built in the area was originally built with some kind of crappy flammable insulation that was cheaper to manufacture (Eichler was not aware of this), and the house actually burnt to the ground within minutes when it caught on fire during the final stages of construction. Eichler supposedly made drastic changes to very high quality building materials which were used through the rest of the building period. Per this guy, this scenario showed him that first, Eichler was much more a designer than a developer, and second, he actually had principles and would not cheap out. Don't know if it's actually true, but interesting nonetheless.

270   Peter P   2006 Apr 11, 6:41am  

I can’t understand why anyone would want to live in a trailer park anyway?

Well, it is pseudo-ownership...

To me, I rather own the land and rent the structure. People do not get the appreciation/depreciation part correctly.

271   Peter P   2006 Apr 11, 6:47am  

I like Eichler's high-rise in SF:

http://www.emporis.com/en/wm/bu/?id=118841

272   astrid   2006 Apr 11, 6:52am  

I don't get the economics of suburban trailer parks. Trailers make sense for poor people or people seeking temporary housing in rural areas. But once you have enough population density to support apartments, wouldn't apartments be a more optimal solution compared to trailer parks? - this way you're dealing with one layer of ownership, standard utility lines, better space use and better insulation.

273   Peter P   2006 Apr 11, 6:53am  

The mindset towards multi-family housing needs to change.

274   edvard   2006 Apr 11, 6:59am  

Why would anyone live in a trailer park? Well for one thing, the trailers are only 10-14k new for a small unit, and as little as 5k for a used one. Even if you don't own the land, you won't have to pay rent. The land use fees are usually very low as well. Not everyone wants to live in a highrise. I know I don't. Trailers take up less room than houses, and believe it or not, some of them are actually pretty nice. I fancied a vintage 50's trailer with mahogany veneer on the interior walls. My parents started out in one just like this. It had the little wall sconces with the ship steering wheel on the rosette and all! They paid $500 for it at the time. They make total sense for anyone in a low income bracket that wants a degree of indepence and the ability to save some money. Some of the trailer parks I've seen around here are actually pretty nice. Hell- I'd move into one if I knew for a fact that I would be staying here forever. It's the only real affordable living situation left.

275   skibum   2006 Apr 11, 7:05am  

nomad, Peter, astrid,

RE: trailer parks, all is not well in the BA. A couple of weeks ago their was a piece on "30 minutes: Bay Area" (I think that's the name - looked like a local spinoff of 60 minutes) about how one of the major landowners of trailer parks in the BA (I think one of the parks was in San Leandro) was asserting his right to raise the F$%K out of the land rents. This was forcing many "owners" to sell b/c of unaffordability, but this led to a catch-22, b/c, who the hell wants to buy a trailer on a piece of rented land with a landlord raising rents like there's no tomorrow? I felt really bad for these people, until one of them complained, "this was my nest egg for retirement." Again, a home of any kind - a nest egg? NOT!

276   LILLL   2006 Apr 11, 7:08am  

A friend of mine has gotten RICH in the trailer park biz. He's not a flipper either. Owns the parks...some right by the beach...not bad.
My dream is a straw bale house. Thick insulated walls, recycled rough hewn beams, tile floors...MMMmmmmm....

277   Peter P   2006 Apr 11, 7:14am  

No bubble in District 7.

I think prime SF is not necessarily in a bubble.

However, prime locations have their own cyclical nature. Caveat emptor.

278   edvard   2006 Apr 11, 7:19am  

Gotta be careful with those straw houses. They CANNOT EVER leak. Hay has a rapid decomposition reaction to water, and once a leak causes water to wick into the walls, it will eventually ignite. That's why you don't see them anywhere that gets large amounts of precipitation. Pretty cool building material though. There are some of these that are over 100 years old.

279   skibum   2006 Apr 11, 7:22am  

Linda-in LA-LA-LAND Says:

My dream is a straw bale house. Thick insulated walls, recycled rough hewn beams, tile floors…MMMmmmmm….

Does that mean you have to watch out for the big bad wolf?

280   Peter P   2006 Apr 11, 7:23am  

Does that mean you have to watch out for the big bad wolf?

Probably. Bricks are better! Watch the chimney though.

281   LILLL   2006 Apr 11, 7:25am  

Straw house ignite? I've never heard of that before. It was my understanding that they DON'T burn. Besides...I'm talking about straw bales rather than hay bales. I understood that they were packed so tight that they don't burn well...but yes, I wouldn't want a leak . I hate leaks. Leaks are my pet peave.

282   LILLL   2006 Apr 11, 7:26am  

Skibum...Actually I am married to the big, bad wolfe. :)

283   LILLL   2006 Apr 11, 7:27am  

And yes, I have to watch out for him. :twisted:

284   requiem   2006 Apr 11, 7:27am  

Wow... that's good to know about hay. (Seemed counterintuitive, so I went online and found: http://www.montana.edu/wwwpb/ag/hayfire.html )

High moisture hay stacks can have chemical reactions that build heat. Hay insulates, so the larger the haystack, the less cooling there is to offset the heat.
When the internal temperature of hay rises above 130 degrees Fahrenheit (55 degrees C), a chemical reaction begins to produce flammable gas that can ignite if the temperature goes high enough.

Also scary is the preservative treated hay that produces hydrogen cyanide gas at high temps.

285   LILLL   2006 Apr 11, 7:35am  

SFWoman
Yes, the tweakers have presented a problem for my friend in the trailer park biz.(or mbile home parks, as he calls them)
GWs"past" alcoholism??? I believe alcoholism is a disease that has no cure.

286   Peter P   2006 Apr 11, 7:36am  

I walked to the end of the hall to open the door - and it was fake. There was just a door, no room. All for show.

Perhaps the door is for spirits only. I have seen doors leading to nowhere in the Winchester House.

287   edvard   2006 Apr 11, 7:37am  

Linda,
Usually if you have them sealed up in walls there isn't near the risk,because it isn't getting a huge amount of oxygen. But indeed- if you take a bale of straw and place it in a puddle of water, it can spontaneously ignite after a few weeks.Compost can get up to 18o degrees in the center when it decomposes. That's what mushroom soil is made of, and the heat "cooks" all the germs out. That's why my uncle was antimate about getting them into the barns as soon as they were baled. The bigger threat would be the walls rotting if there was a leak. Straw can last forever. I saw a lot of straw roofs in England, and if they are properly binded, they can last for almost 60 years. Not cheap though.

288   LILLL   2006 Apr 11, 7:42am  

Nomad
Thanks for the info. I had no idea...I'll have to look into it in more depth.

I like the idea of buying a small house in a place ...maybe New Mexico and addig a large straw bale room as a family/living/party room. Give the whole structure a mission flair. There's something about thick walls that feels more permanent.
I would never fair well in a McMansion.

289   Peter P   2006 Apr 11, 7:43am  

There’s something about thick walls that feels more permanent.

How about 10 feet of concrete? You can have your own nuke bunker.

290   LILLL   2006 Apr 11, 7:45am  

Peter P
No thanks...that's a liiiiiiitle too thick. :)

291   LILLL   2006 Apr 11, 7:46am  

I like walls just thick enough to make a natural window seat!

292   requiem   2006 Apr 11, 7:47am  

I guess posting links is ungood. Nomadtoons, I was curious about the hay fire hazard, then found a link explaining. Learn something new every day.

(Wondering if that's how early man got started with fire; it seems more probable than relying on lightning.)

293   LILLL   2006 Apr 11, 7:49am  

Requiem
Please post link!

294   requiem   2006 Apr 11, 7:50am  

Linda: it's awaiting moderation...

296   astrid   2006 Apr 11, 8:30am  

Nomad,

Please notice that I specifically exempted people like your parents, who own their own land. I was thinking about the overall economics of apartments vs. economics of trailers. It seems to me that in suburban areas, apartments are more cost efficient to run than trailers. I wasn’t railing out against trailer dwellers, I just can’t see how suburban trailer parks made any sense unless the costs are very low.

Incidentally, my boyfriend and I were contemplating about buying a used RV to live in. Apparently, there are some free parking areas in the BA and some people on fatwallets.com claim this was the cheapest way to live in the BA. I’d say all the benefits of trailer living and you can move your home if someone kicks you out. It was finally dismissed for being a little too absurdist.

Skibum,

I remember last summer there were a crop of million dollar trailer stories. These were in Malibu trailer parks owned by someone else. I laughed my ass off.

Re: straw houses, HARM kindly provided some links that I’m reposting:

http://www.dsaarch.com/
http://www.strawbuilding.org/
http://www.buildinggreen.com/auth/article.cfm?fileName=040301a.xml
http://www.skillful-means.com/menupages/strawbaletips.html

From what I read, straw houses do not burn easily. They are less likely to burn than all but concrete, adobe, and metal shelled houses. Straw is high in silica, which is a flame suppressant. Tightly packed straw doesn’t have enough oxygen to cause a problem.

SFWoman,

They should try selling your example Tuscan McVilla to Chinese investors, there will be takers :P

297   astrid   2006 Apr 11, 8:37am  

Linda,

Have you considered adobe as an alternative to straw? It might be a bit more expensive to build, but it has similar good insulation qualities and there's no question of combustibility

298   astrid   2006 Apr 11, 8:39am  

SQT,

Thanks, I guess wordpress thought I had too many links for one post.

299   requiem   2006 Apr 11, 8:39am  

SQT: I think it had gotten approved before then, as it now appears back on the page. (Same link that Linda came up with, actually.)

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