patrick.net

At work I just saw a poster promoting homeownership and dispelling some nasty “anti-homeownership myths”.

When something is so actively promoted, that something must have something wrong in it.

Lisa,

Yeah, that article made me want to vomit. Those shills at the Chronicle really turned on the spin machine, didn't they! I wonder how much "pressure" they got from the REIC ad sponsors to write that piece (of $hit). Did you also notice that their explanation for the "sizzling hot" high-end market is the so-called "wealth effect?" Not once did they mention that a HUGE portion of those purchases in the past several years were done on funky mortgage products. IE, the "wealth effect" is in large part the "loose credit" effect. Let's see how this article holds up after a year or two of tightened credit and ARM resets...

From the sfgate article:

"Local home prices are still going through the roof"

Um, according to DQ: San Francisco 591 568 -3.9% $779,000 $790,000 1.4%

1.4%? Yeah, "through the roof"

DinOR,

http://blogs.ocregister.com/mortgage/archives/2007/05/guest_blogger_pushes_solution_1.html

I seem to recall reading a post here (maybe even two or three ;)) from your good self making the same point about loan suitability tests, and using somewhat more vigorous language.

"if home values rose at the avg. rate they have over the last 30 years"

More REIC cherry picked data. On the surface it sounds generous enough but if it's all the same to you (Mr. Instant Millionaire) can we run the same data from 1966 to 1996? When you take 1996-2006 out of the mix (total abberation) does the hypothetical still look like a no-brainer?

What amazes me is that the "Dummies" book publishers hasn't come out with "Statistics for Realtors" yet.

1. When the sample size is *decreasing* from sample-to-sample, the median or mean values can *increase* even while internal samples are exhibiting a downward trend.

2. That means less homes are selling on the bottom end, and only more expensive homers are selling. And even those homes are coming *down* in price. But compared to the previous month, the average/median price is higher.

3. WTF do Realtors actually get tested on? How to park a Lexus?

4. The media? ugh. Journalism is dead.

@SP,

What does "FITE" stand for?

@ozajh,

Thanks so much for that informative link! Really, think about it. What good would it do to implement some sort of "suitability standard" for mortgage brokers interfacing with the public when there are basically NO barriers to entry? In many cases, zero licensing requirements!

It just goes to show how far lenders have to go to reign in "bad actors" b/c in a lot of cases we don't even know who the actors are? How do you enforce "suitabilty" when we can't even monitor who is allowed to write loans? Man... that IS pathetic. Good observations from their guest blogger though!

"WTF do realtors actually get tested on? How to park a Lexus?" LOL! :)

Freaking hysterical! Evidently it's a higher criteria than becoming a mortgage broker!

At first, I didn't think that SF Chronicle story was so bad by typical "rah-rah" MSM cheerleading standards. It did have this bit:

"The Bay Area numbers come with some caveats, however. The median price is skewed by strong activity at the upper end. Real estate in the region is composed of numerous micro-markets, which vary tremendously. In fact, affluent Bay Area housing markets are getting stronger, while poorer areas are softening.

"The volume (of sales) being low tells you that we've lost the bottom 20 to 30 percent of the market that can't qualify for mortgages," Rosen said. Banks have tightened lending standards in recent months since numerous homeowners started defaulting on subprime loans. Subprimes are higher-cost mortgages sold to people with poor credit."

And then I read this:

"It's safe to say that the more expensive the neighborhood, the more likely it appears to at least temporarily be stabilizing now," LePage said.

"I feel our market is immune to decreases in value," he said. "We might slow down a little and just hover, but then it picks up again."

WTF do Realtors actually get tested on? How to park a Lexus?

Nah. Lexus parks itself nowadays. :)

HARM,
Honestly, for the casual observer, the banner front page headline that reads, "Bay Area's housing prices buck national trend" emblazoned just below the masthead should have been a dead giveaway that this was a spin job.

To GC

I think you are going through hell. You are so bright and yet your energy is being wasted.

I don't pretend to be an expert but this is just my take on how to have a more productive, peaceful life. It is not based on anything scientific except my instincts and working with people as a Nurse Practitioner for the last 30 years.

If you want to win the battle in your mind there are short term and long term solutions.

Short term:
Psych meds
hormonal treatments
sex change operation
counseling

Long term:
meditation and action focusing on positive aspects of life
homeopathy by a super skilled practitioner
Entity removal techniques
The Bible

Just my two cents.

Good luck to you and I wish you well.

meditation and action focusing on positive aspects of life

That is probably the best one.

I would also recommend:

* Traveling to pretty places
* Writing a novel
* Painting

The most important aspect of life is to appreciate.

I thing the only thing that will cure GC is castration. can we ban this asshat already and get back on topic?

I think GC is far more interested in provoking/trolling than in sexual perversions. He may indeed have genuine issues, but I suspect they have little to do with his interest in sex. If he was interested in sex, there would be millions of websites that would offer better picking for sexual perversion.

"our market is immune to decreases in value"

Statements like these make it really difficult to feel any empathy for these people.

1. Thank your lucky stars you aren't a realtor in the other 99% of the country where prices hovered (then crashed) rather than "pick up again".

2. You have absolutely NO investment in your clients beyond the transaction itself. When this thing ultimately blows up in your face (and it will) you can simply walk away with whatever money you've managed to rat hole and not have to live for one minute with totally dissatisfied "clients".

3. The "tricks of the trade" you've learned here will help you in all your future scam-deavors.

LOL. Having seen how they park, I would suspect this isn’t part of the test. I have seen one realtor whose LexUV had knocked over her own open-home sign and trapped it under the rear bumper.

SP,
LOL. I hate to be borderline (if not frankly) racist/sexist, but was this Realtor an Asian female? I've been nearly run off the road numerous times by Asian female drivers on 280, El Camino, etc. who appear to be just chugging along, oblivious to the world around them.

"how will they cope with the loss of their high-maintenance lifestyles?"

Uh, not my problem. That's why I've largely pooh-pooh'd the drama of "how will the economy absorb all these "displaced" REIC employees?"

To say that they are "displaced" tends to imply that they had a "place" (or function) to begin with?

Exactly what sector of the economy has the capacity to absorb these generally unproductive and mostly unskilled workers? And how will they cope with the loss of their high-maintenance lifestyles?

I predict the next area of "growth" for these easy-money nomads will be in the upcoming boom in Boomer-related personal services. The immense wealth of the retiring Boomers will lead to a need for:

1) personal assistants: who will help them keep track of all of their golf tee times, Hummer car wash appointments, botox injection appointments, etc? Who will help procure their dime bags when they need their "medically prescribed" therapeutic Mary Janes?

2) personal financial managers: how are Boomers going to manage their portfolio of multiple investment and vacation properties?

3) health care: there will be a wave of aging, sick Boomers. They will need at-home aides to change bedpans, etc.

4) Bankruptcy counselors: who will be there to help them through the difficult process of bankruptcy when they realize (a) that negative savings rate wasn't a great idea after all, and (b) their retirement "nest egg" aka their McAlbatross can't sell because every other frickin' Boomer has put their exurban McAlbatross on the market in hopes of cashing out and sailing into the sunset?

skibum,

You forgot a few:

5. The repo industry. Lots of HELOC/refinanced Hummers, Lexi, boats & RVs will be "returned to sender" in the coming years, so lots of job opportunities there.

6. Gambling, alcohol/drugs and prostitution. Once FBs hit bottom, they will predictably turn to the traditional age-old crutches/distractions to their financial woes. Boomers also have less self-control and less tolerance for pain than any previous generation, so these will undoubtedly be "boom" industries.

7. Law enforcement and private security. The increase in FB-related petty crimes and domestic violence will be as predictable as #6.

8. Get-rich quick/MLM/Ponzi scaminars. The more desperate and innumerate the FB, the greater their susceptibility to the lure of "sweet deals".

8. Get-rich quick/MLM/Ponzi scaminars. The more desperate and innumerate the FB, the greater their susceptibility to the lure of “sweet deals”.

Perhaps it is time to write a book... :)

Get Rich Quick With Your Own Get Rich Quick Seminars

Peter P,

You may be on to something there.

"help them keep track of all their golf tee times"

As funny as some of these suggestions have been I don't think they're too far from the truth. I ran into a realtor friend a few weeks back and she said biz has never been better and starts telling me about the 8 or 10 pre-foreclosures she's worked in the last year!

If you want to fancy yourself as a savvy RE investor don't let me spoil that for you but the truth is that working short sales etc. has a hell of a lot more to do w/ debt counseling than it does w/ RE. It's almost as ridiculous as a drug counselor saying I'm a real "party animal"!

Golf business idea: buying used ladies' shafts and re-marketing them as "stiff" :)

Huh?

Just toured a condo complex at lunch (had to see the roof top deck). Chit-chatted a bit with the Realtor(s). You will be glad to know she brought up the SF Chronicle when I tried to get a bit negative (up 6%, life is good she says). I was not about to get into it with her but in hindsight I should have at least brought out the Shiller graph from my wallet to show the younger Realtor (as she probably has never seen down times -- the older Realtor, though, bought her first house when mortgages rates were in the double digits). Oh, and the prices: around $600k+ for 800+ sq. ft (2bed/2bath). There were only 4 units left. Like I said, we got intangibles over here :-)

I like traveling and painting. Writing a novel must be postponed until my travel is done.

You can do both at the same time. You have a Tablet PC, right?

Randy,

thanks for the tips on Belmont, I was driving close to where you mentioned around Ralston, houses do get bigger and newer in that direction, the new Belmont library looks cool, perhaps my expectation was too high based on hearsay. San Carlos, of course, lives up to its reputation.

I was driving on the surface road from Belmont to South Bay so that I could see a bit more of the peninsula, which I never got to know much about throughout my time in BA. The upside surprise was actually western Redwood City around Alameda de Las Pulgas, tons of update, and quite a few new housing developments are sprouting up between Alameda and 280 (still Redwood City I guess). I've always wondered why so few houses have been built along these hills off 280, it seems like a nice setting.

OO

A lot of the nice parts of Belmont are kind of hidden because they are in the hills. The hills in Belmont are more wooded than those above RWC.

Some of that area of RWC is Emerald Hills which (used to be at least) unincorporated RWC. I haven't kept up, but that was a big political football 7-8 years ago. I'm not sure about the Farm Hill area. I think that's unincorporated, but there are some nice homes up by 280. When I lived in RWC we were in the flat, by ADLP, in Mt. Carmel. It's a very nice older neighborhood, which used to be starter homes and retirees. Of course now they all go for $1m, which is unconscionable. Those homes will probably be selling in the high $7s to mid $8s in a couple years. The high school there is notorious and horrific. And private schooling is hyper competitive accordingly. I knew people who drove their kids to Mtn View or SF so they could have a decent education.

Randy H Says:

> A lot of the nice parts of Belmont are kind of hidden
> because they are in the hills. The hills in Belmont are
> more wooded than those above RWC.

There are some nice areas in the hills of Belmont, but make sure to talk to long time residents about the micro-climates before buying.

Just like Sausalito (near the bridge) and Mill Valley (near Tennessee Valley) where parts of the town gets blasted with fog most nights Belmont has some areas (near the top of the hill and the “Belmont Gap”) that get blasted with fog on a regular basis.

EBGuy Says:

> I was not about to get into it with her but in hindsight
> I should have at least brought out the Shiller graph
> from my wallet to show the younger Realtor

I thought I was the only one who had a copy of the Schiller graph in my wallet…

So Morningstar trys to explain the
Subprime Shake-Out: Where Do We Go from Here?

They admit New Century had a 5-star Morningstar Rating for stocks during its collapse.

Later they say
In our eyes, firms that maintain a strong balance sheet with plenty of liquidity and a diversified business are the way to go.
Three names pop into our head almost immediately, two of which are trading at or near 5-star territory right now.
Countrywide Financial (NYSE:CFC - News)
Washington Mutual (NYSE:WM - News)
Wells Fargo (NYSE:WFC - News)

I have been contemplating puts on WaMu. It would seem that now would be the time to buy them (if you believe in the coming Alt-A storm). I hate to go through all this misery and only end up with the T-shirt that says "The housing bubble collapsed and I got was a decimated S&P 500 index fund." Then again, those puts are in specu-vesting territory. As they say, look before you LEAP.

As they say, look before you LEAP.

How far out do you buy?

Beware that long-term options are very sensitive to changes in implied volatilities.

Not investment advice

Interesting Slate article; one particular statement caught my eye:

Think Negative!
Oprah, it's time to come clean about The Secret.

"Cerulo argues we have a lot to learn from two groups of people who have emancipated themselves from the pressure to think positively. She points out that medical workers and computer technicians—the professional troubleshooters of the world—keep our bodies and mainframes running by being paragons of pessimism. When doctors and IT workers take up a case, they begin by dispassionately assuming the worst and then move up from there. Their protocols demand precise and evolving definitions of the most severe maladies and malfunctions, while they tend to have fuzzy and almost absentminded definitions of health, well-being, and normal function. That's the opposite of The Secret. While this may sometimes make doctors and techies a drag, it also helped them avert worldwide disasters like the SARS outbreak and the Y2K bug."

Many people have pointed out that this blog's readership tends to be skewed heavily in favor of IT and medical professionals. Perhaps this has something to do with this blog having a strongly contrarian/skeptical POV.

Today's Headlines:

San Jose Mercury News
PRICIER HOMES HOTTEST SELLERS

San Francisco Chronicle
BAY AREA HOUSING PRICES BUCK NATIONAL TREND

Contra Costa Times Business Section
EAST BAY HOMES HIT 12 YEAR LOW
In small print, it says "median price is up 4.3 %, but
that's because there are fewer starter homes sold"

The realtors need to boycott the Contra Costa Times until it understands how to lie.

Honestly, a dose of skepticism is always healthy, but it is hard to be successful without being a positive thinker.

Ah yes, "Alameda de las Pulgas", which translates into "Avenue of the fleas".

There can't be any development west of 280 since that's a government preserve for watershed. You can't even hike or boat on Crystal Springs Reservoirs - people are banned.

Honestly, a dose of skepticism is always healthy, but it is hard to be successful without being a positive thinker.

True. I suppose it's better to be Pollyanna than Cassandra.

BTW, doctors are positive thinkers. They believe they can cure people.