patrick.net

From MSN-

"Bad news whacks stocks:
Two Bear Stearns hedge funds are now worth nearly nothing after having invested in subprime mortgages. Meanwhile, earnings from Pfizer, Intel and Yahoo disappoint. News Corp. moves one step closer to buying Dow Jones with approval from the newspaper company's board."

Patrick just put up some news stories...

Two of the links include a suicide apiece.

www.tickerforum.org/cgi-ticker/akcs-www?post=431&ref=patrick.net

http://thehousingbubbleblog.com/?p=3107#comment-799267

It's starting to look like 1929 all over again. Will FBs stage a bonus-marchers encampment in DC this time too?

What will deliver the greatest returns in the next 12 months?
U.S. Stocks 31%
International Stocks 51%
Cash 8%
Bonds 6%
Real estate 7%
74102 Votes to date

http://www.dqnews.com/RRBay0707.shtm

Bay Area DQ numbers are out.

After reading Steveoh's post and some of the responses to him I found myself wondering....?

I know under certain circumstances sub-leases are possible. What would it take to lowball a lease to the threshold of pain and then turn around and rent it out at a higher rate? If you're generating $250-$150-$50 (?) in positive cash flow that is infinitely better than what Mr. Ijustknowthingshavegottogetbetter is doing?

Now... true, Mr. Whataboutallthatupsidepotentialandtaxbenefits will ultimately be getting the "lion's share" but in the meantime can I be Mr. Fiftybucks-is-fiftybucks?

When a house is sold the new owner must more or less honor your rental agreement so long as it is legal, binding, and you don't live in an area with very weak renter protection bias. The lease agreement travels with the title.

But none of that really applies in a foreclosure. The bank effectively has the ability to invalidate the lease. In some areas they are required to honor some statutory obligations, but even then they'll just offer to buy out the lease if they want you out (and you'll take it or you'll be sorry you didn't). However, you still have a chance to work with the bank if you're a good renter. Just try to find out who to call and talk to them. They'll probably be happy to have a renter (mainly for reasons of security, not income) until they can sell the place.

You can't subordinate the title. That's out. There's no upside to a bank doing this, nor does the legal or administrative process exist to handle such a transaction. The 1-off cost of doing the deal is more costly than the value of the deal.

You can customize your lease with your landlord. I did. But there are a couple of big caveats:

1. You have to pay a lawyer. If you do it yourself you'll screw yourself. Leases are hard to get right, even though the boilerplates look simple.
2. You have to offer the landlord something compelling, or else there is no reason for him to do it. Just saying you'll pay his rent isn't compelling. He expects that. You have to give consideration, something like lots of rent $ forwarded or an extra long lease period, or you'll tend his bio-dynamic garden with a registered shaman and deliver his moldy tomatoes to his wife via Alpaca on a bi weekly basis.
3. You have to have a reason other than more easily mitigated risks. For example, if you're just afraid he'll go foreclosure, and you'll lose your deposit and have to move on short notice, it may be cheaper (given your situation) to just put a safety buffer of $ away in a CD for that eventuality than to pay a lawyer and provide something special in consideration of a complex escrow or some other protection. Think of it this way, even given all the FB's trying to rent out McMansions, the primary risk in any rental agreement is still by far the renter skipping out, not the landlord. I mean, what if he asked you to provide everything you're asking him to? Should he demand you pay 1 year rent to escrow or that you mitigate your future salary to him should you break the covenant?

The renter still actually has far more free market power than the landlord. This is one of the reasons that rent-control is such an abomination (among other reasons).

Just some thoughts.

The renter still actually has far more free market power than the landlord.

Not in extremely supply constrained markets, like NYC, SF, Berkeley, Santa Monica, etc.

Guess what cities in America have rent control?

Bap: Well, that would depend on how responsive the INS people are in your area, wouldn't it?

I don’t know there’s ever a “bad” time to go to Thailand? (Unless of course azrob is there throwing the positive cash flow from his numerous rentals around like sewer covers?)

Well aside from the currency thing - are they about to politically/socially destabilize or something? Whatever happened to that coup?

Randy said you’ll tend his bio-dynamic garden with a registered shaman and deliver his moldy tomatoes to his wife via Alpaca on a bi weekly basis.
That is a brilliant piece of writing (barely avoided coffee on the keyboard). For those of you wondering why Randy is writing with such fervor, some reading of the DQ report shows Marin's median rose 15.8% from $830,000 to $961,250. Nice.

It's the median, EBGuy. If the low-end volume is way down, the number skews upwards. That's a game every marketing department knows how to play. What's the average, and what are the comps' sqft prices compared to prior months?

you’ll tend his bio-dynamic garden with a registered shaman and deliver his moldy tomatoes to his wife via Alpaca on a bi weekly basis.

Randy,

But are those 'free range' Alpacas? Smug Boomer navel-gazers must have their moldy biodynamic tomatoes 'cruelty free', you know.

Well, they might say they want them cruelty free until they compare the cost. Nothing is too good for a boomer when someone else is paying for it, or if it can be broken down into E-Z payments.

Brand, EB, if you click on the link I posted above, the realtors are now even admiting the median phenomenon.

July 17th, 2007 at 9:21 pm

Liquidity crunch already affecting attempts to raise private equity.
http://www.berkshireeagle.com/ci_6373725

Thought this would be interesting because a couple of threads back, we were speculating on when this would hit startups.

SP

sawasdee krup dinor, sabai dee ru krup? dinor glad you remembered me. Yes i am in chiang mai thailand; not throwing too much of my rental cashflow around though, i rented a $300 month apartment, and bought a $600 motorbike, (honda dream 125) Just improving my thai language skills, rock climbing and working out... by the way I dont care what overwait balding sex-pats here think of my lifestyle...We dont hang out in the same places anyways as I dont drink and am a devout buhdist...

Though many startups are bank funded, most of those rely on the creditworthiness of the founders. Venture capitalists fund the larger startups, and they act independently, raising money from their investment pools. There is still plenty of private equity money to place, and there is always funding for promising business plans. I would not get particularly alarmed by this. The tech and dot com busts had more impact on private equity than the institutional reactions of the present time will.

Brand asks: What’s the average, and what are the comps’ sqft prices compared to prior months?
DataQuick will be releasing the comprehensive Chronicle chart in a day or two so we can get a city by city breakdown (and those sq. footage numbers). Hear me know or believe me later, it won't be pretty in the fortress. I am getting close to capitulating as it is just insane out here...

HARM, Malcolm, EBGuy

Thanks for understanding my Aengst.

I may be the local skeptics' skeptic; but I feel the same pain. And I only pick fights with HARM because I feel like he's an old friend at this point.

We need a North + South blog event...

Malcolm

/agree

Don't make fun of local grown tomatoes. They're infinitely better than what's available at the local supermarket, though some greenhouse tomatoes are catching up.

(Now if mine would just hurry up and ripen...)

I believe that would be... buddhist? Then again, who cares what I think (I'm overwait?)

Ex-pats (that can do math) deplore big spenders of all stripes, they drive up prices and set false and unrealistic expectations from the locals. Having "just enough" political instability is actually a good thing (regardless of lifestyle choices).

Prices still going up in PHX?

Just checking in after reading an article in the Chron this morning that says:

“In Marin County, usually the most expensive county in the region…the median for both houses and condos jumped 15.8 percent to $961,250.”

“Solano County, which boasts the lowest median price in the Bay Area, at $475,000 -- down 11.7 percent from the same month last year”

"It's a tale of two markets," said Rick Turley, president of the San Francisco and Peninsula offices of Coldwell Banker. “

I had a flashback to 2000 when B2C dot com stocks started dropping and everyone said the “B2B stocks are different, it’s a tale of two markets, B2B dot com stocks are fine”…

FAB,

Where you been btw? Great analogy! I had an earful of that "flight to quality" last go round thankyouverymuch.

"Oh, I'm not concerned in the least about the sell-off in the NASDAQ, I own "quality" issues like ____!"

I've been emailing the authors of the late-wave of "look at fortress Marin" articles. The NYT piece claimed that prices are steeply rising in Mill Valley.

My response was along the lines of "would it have killed you to actually do something so radical as checking facts, or is a phone call with one realtor enough?"

FAB one of the addresses you researched for me is looking like it's heading into foreclosure eventually. If you recall the owners paid $2mm with very very very little down 2 years ago. They tried to list at $2.3mm and gave up at $1.9 & change and pulled the listing. I asked the agent if they were being foreclosed and she wouldn't say now, only that they were considering options and looking for lease-option renters now. I asked how much and she said "blah blah blah executive housing, $9,000/mo...". The conversation ended when I asked if they've received a NOD yet.

But, prices are steeply rising in Mill Valley, right? Such bullshit. The media should be ashamed of themselves. I mean wretchedly ashamed. I'm of the opinion that since the media is primarily just a big paid placement regurgitation machine the whole mess can be offshored for 1/10 the price to big Indian media processing centers.

>> I’m of the opinion that since the media is primarily just a big paid placement regurgitation machine the whole mess can be offshored for 1/10 the price to big Indian media processing centers.

Randy ... I admire you for such an wonderful idea! Will this happen?

Randy H,

Funny you should bring up offshored "journalism". The Portland Housing Blog implied exactly that when "all is well in Lane County" was proclaimed after ONE call to a local realtor!

You shouldn't take "the conversation ended" as a personal slight. Bringing up NOD's is pretty much off limits w/realtors everywhere.

Randy:

Back when I was a broker we had a service that mailed us a list of all the Notices of Default (NODs) filed in the County each month. I'm sure that you can ask around and find a similar service today. If you know that a guy is not making payments you can often work with him and the bank do a short sale.

DinOR Says:

> FAB, Where you been btw?

Working more and blogging less…

> Great analogy!

I have another one…

This weekend my Mom told me that few more homes on the Peninsula sold last month for more than $100K over list (all three bought by kids that grew up on the Peninsula with “help” from their parents).

I told this to a friend (from business school who works on Sand Hill Road and rents a few blocks away from me).

My friend (who grew up in Portola Valley) said he just heard that his parent’s neighbors gave their daughter and her husband $1mm in cash to “help” them buy a home in West Menlo.

He said that the Real Estate Bubble reminds him of the Dot Com Bubble where everyone’s parents were happy to give the kids cash to invest in pre IPO shares since they saw it as a “sure thing” investment.

Once the crowd at the Circus Club and Sharon Heights learned (the hard way) that pre IPO dot com stocks was not a “sure thing” the cash flow to pre IPO stocks ended (and they started giving the kids cash to buy Peninsula Real Estate)…

We need a North + South blog event…

That would be great, but given the distance, we may have to settle for short-commute local affairs for now. The next time you guys are planning an NCal get together, please let me know. If it's possible (like over a holiday weekend), I'll attend.

FAB,

Excellent story. In the late 90's a lot of recent grads would stay at home and just day-trade their graduation money! Then, uh... reality set in. I can't speak for others but "a little help" in most cases means hitting the old man up for 500 bucks? Tell ya' what "pops"! What say you just give me the mil. and we skip the house thing? Oops, too late.

Homes in the desirable neighborhoods in San Francisco are still going up in price. In the less desirable neighborhoods, home prices are flat, as they are in the more desirable neighborhoods in Berkeley.

That is all I am tracking. We shall see what DQ says when it comes out, but that is what I am seeing.

I'm renting a 3/2 SFH in Menlo Park (the area that goes to Redwood City schools) for 2550 a month. A house a block a way just went up on the market, it's a 3/2 SFH, and they're listing at 850k.

At today's interest rates (6.75ish) that's 5500k a month in just PI. Taxes are an additional 1k a month, and we'll wash insurance out with the tax savings.

Absolutely no way will we buy right now.

A bit OT, but this news story caught my eye this morning:

Ex-Broadcom exec alleged to have sex, drug lair

Yet *another* prime example of that wonderful "economy-stimulating" and "jobs creating" type of behavior so typical among our elite class (I guess the prostitutes who actually got paid are grateful, anyways).

But for goodness sakes, whatever happens, don't TAX THOSE POOR RICH PEOPLE! Forcible "redistribution of wealth" is evil, right? Unless, of course, the tax happens to apply to the earnings of regular middle and working-class schmucks (then it's perfectly ok).

... And from the same SF Chronicle article FAB cited:
Although home sales slumped more than 10 percent from last year in the city, the median price increased by 4.4 percent. In fact, DataQuick found the median price paid per square foot for a home in San Francisco hit $673 -- a record. Prince Prospero says party on.... (although there were rumors of an unwelcome guest, Nod, traveling through Marin).

@HARM,

The story would've been funny (if not pathetic) had it not been for the death threats to lowly construction workers just trying to get paid? Was this guy around the bend or what? Drugs, sure. Hookers, maybe but what is up with the need for a "secret lair"? Dude... just get a divorce and get it over with!

It looks like the only time he was coherent enough, long enough was to give himself favorable dating on his stock options, and then back to the party!

To be fair, everybody wants a secret lair.

When they're eight. And then it's to pretend to be Batman, not for hookers and blow.

Now, now, DinOR --careful with those "around the bend" type comments.

Remember: rich people are "special" and have extraordinary superhuman abilities none of us 'W-2 loosers' have. That's why they can command 430X (or is it 500X nowadays?) the salaries of their lowest paid employees.

After all, the "market" sets the price of labor, right? I mean it's not like the Board of Directors happens to be packed with the CEO's buddies or CEOs from other companies (who regularly collude with each other re: compensation voting). It's not as if executive pay is determined by some cartel-esque, mutual-aid, back-scratching society or anything, right?

To imply otherwise, might get one branded a "Socia1ist". :roll:

If you guys want something to cheer you up, look at the stock ticker for AHM. It is imploding as we speak.

RandyH, you were right on this one. I got stopped out ages ago, but I should have listened to you in the first place.