patrick.net

For those of you who don't want to register with the NY Times the piece can be reached here. Inflation adjusted Shiller graphs -- what will they think of next? :-)

I just added some notes on recourse vs. non-recourse mortgages on the tail of the previous thread.

What the heck caused that viewership spike on Monday, I wonder?

It is a case of Monday.

@HARM

Thanks. $3250 for a 4BR SFH in decent shape is on the low end of rents. Southern Marin, south of Sir Francis Drake, is an expensive rental market.

The spike in readership was because this link to the photo of eight for-sale signs in a row in Santa Clara County got posted on the front page of reddit.com.

I used to be skeptical of the utility of those social recommendation sites, but now I'm sold!

Ever think about adding a digg link or something like that so you get hits out of the blog-search engines?

I second the digg/reddit/fark/whatever submit link idea.

FAB

Maybe I am being naive, why can't these people with great income and great credit refinance to ARM? ARM is ridiculously low right now, isn't it?

And I bet Bernanke will keep it low (not FRM, but ARM rate) for as long as he is the Fed Chairman. I don't know any buyer with great income and great credit who took on an I/O loan that he couldn't handle. I think the I/O loan mess is more likely to implode in the lower-income quartile than the higher-income neighborhoods. Of course when that happens, this will drag down the higher income neighborhoods too, with a time lag.

Well, the engineered short-term bottom for USD is sure short-lived. We are back on slippery slope again. Tighten your seatbelt as we make new lows.

I took FAB's comment to mean that as long as the property was appreciating they didn't mind being on an IO. With little or no upside they'd rather bail than re-pay principal.

?

Well, the engineered short-term bottom for USD is sure short-lived. We are back on slippery slope again. Tighten your seatbelt as we make new lows.

Goldbugs (not me) were seriously worried last week.

Should we just laugh at anyone who says that "commodity prices plummet on dollar STRENGTH" ? :lol:

Peter P,

if you are in oil and food, there is nothing to worry about, I am pretty pessimistic on industrial metals. USD "strength" against oil my ass, soon we are going to enter a very interesting driving season with $5 dollar gas.

I think the I/O loan mess is more likely to implode in the lower-income quartile than the higher-income neighborhoods.

You will be surprised.

Then again, anyone who needs a mortgage is not making enough money. I am squarely in this group.

USD “strength” against oil my ass, soon we are going to enter a very interesting driving season with $5 dollar gas.

It is almost $4 now.

Do you consider silver an industrial metal?

Well I see that anti-bailout protesters have invaded and occupied the Bare Sterns headquarters building. http://biz.yahoo.com/rb/080326/bearstearns_protest.html

Shades of the 1960's anti-war protestors occupying the dean's office. ;)

Anyone here participate?

Patrick

Do you have any data on readership you might share? For instance, are there any organizations that are regular readers that would be of interest? Percentage of overseas vs bay area ect?

Thanks in advance. Simply curious as to who is reading this stuff.

I don’t know any buyer with great income and great credit who took on an I/O loan that he couldn’t handle.

That's not what I've heard. Everybody around here takes on the largest loan possible (at least that's been the trend in last 5 years or so). So it doesn't really matter how good your income is if you're still doing 12-15 x income for your mortgage and only being able to do so by implementation of lending alchemy.

I think refinancing into an ARM means paying out of pocket beaucoup $$. Before they reach that level of resignation, they list for wishing prices. That's why the reduction indicated by FAB seems gigantic - they probably listed way too high to begin with. Evetnually if their income holds up, they'll refi even if they have to throw in $100K+.

Thus I believe those with sustainably high incomes (> 200K), will continue to throw money into their house rather than their savings, until nominal prices come up to meet them again. It's a very very rare person who gets out in time, rents for a 3-5 years and then buys again in the same state.

HARM or whoever cleaned up my OP, thanks. I'm literally running 3 directions at once these days.

Silver is a cross, when gold goes through the sky, it is treated as PM (poor man's gold). When gold is in the toilet, it is an industrial metal.

Silver is now more like a 200% Beta gold. :)

...in the toilet...

I guess that is where toilet paper will eventually go. ;)

The new conforming limit takes effect 1st of next month. It will definitely increase inventory, mostly with wishing prices. Will the drop in YOU sales figure be lower ? I am very curious to see if conforming interest rates remain ow or increase due to mixing LFKAJ (copyright Tanta) with current conforming.

Randy H Says:
March 26th, 2008 at 10:27 am

Ever think about adding a digg link or something like that so you get hits out of the blog-search engines?

Thanks for the suggestion! How would that work? You mean put a digg link on this page, or on my main page? Or on a page like that for-sale sign page?

I think a whole bunch of people have to vote on the same day for a link. If the votes get distributed over many days, then it doesn't make it to the front page of digg or reddit, etc.

northernvirginiarenter Says:
March 26th, 2008 at 11:18 am

Patrick

Do you have any data on readership you might share? For instance, are there any organizations that are regular readers that would be of interest? Percentage of overseas vs bay area ect?

Thanks in advance. Simply curious as to who is reading this stuff.

All I have are the Apache log files. I make the user graph by counting the number of distinct IP addresses. I suppose I could do reverse DNS lookups on all the IP addresses and create a report broken down by domain name and country, but it's work, and I'm struggling to keep up with reading all the news links suggestions already.

Admin, our friend eburbed has those links on his site http://www.burbed.com/

Check it out!

Patrick

I don't know how to implement it in Wordpress. It really just amounts to a snip of html code you drop in that puts an icon on each article. Usually the icon appears where people comment, so they can click the "digg this" button/link and it submits that page into digg. I think you need to set up a digg account yourself to start things off.

I did this on my blog, and then wrote my own digg to start articles I wanted to push. My heaviest hits (like the Second Life stuff) all came because I got enough diggs to push me to the top for a while, and that's where people get stuff to reference from other major megablogs like slashdot, seekingalpha, etc.

I'm sure if you google it up you'll find how to implement it in Wordpress. I recommend making sure when users click the link they get a new browser window and don't navigate away from your blog page, otherwise you lose a lot of potential new readers who never come back.

Patrick:

http://wordpress.org/extend/plugins/sociable/#post-2865

Looks to be the solution

OO Says:

> FAB Maybe I am being naive, why can’t these people
> with great income and great credit refinance to ARM?
> ARM is ridiculously low right now, isn’t it?

You need equity to get a new loan and people that bought with little or no money down at the peak have no equity.

As an example:

“Kathy” (not her real name) one of my sister’s friends was in her mid 30’s in 2005 and since she realized that her dream of having a rich guy marry her was fading as she got older (and put on weight) so she decided to buy a nice condo in the city “before she was priced out forever”. Kathy makes about $100K in the HR department of a big company but since she spends so much on shoes and handbags she had very little savings. She paid about $800K for a one bedroom condo on Russian Hill (that sold for $220K in the mid 90’s) with a 80% IO 1st TD (that resets in 2008) and a 20% 2nd TD. I think that she would be lucky to get much more than $700K if she tried to sell today. After her IO period ends she will have four choices:
1. Pay the new payment that (along with the 2nd TD and HOA costs) will eat up almost all her take home pay so she will not have any money left over for trendy shoes and handbags (or her twice a month “mani-pedi”).
2. Sell the condo and write a check for ~$150K at closing (she does not have $150K).
3. Pay down the first TD buy about $100K (she does not have $100K) and get a new ARM.
4. Visit http://www.youwalkaway.com/

> And I bet Bernanke will keep it low (not FRM, but ARM rate) for as long
> as he is the Fed Chairman. I don’t know any buyer with great income
> and great credit who took on an I/O loan that he couldn’t handle.
> I think the I/O loan mess is more likely to implode in the lower-income
> quartile than the higher-income neighborhoods.

Nice neighborhoods have less turnover than lower-income neighborhoods so there are a lower overall “percentage” of people in trouble in the nice neighborhoods, but the IO resets will be a much “bigger” problem with Alt A loans in nice neighborhoods. With a $200K loan in San Leandro or Vallejo the 4% IO payment is $666 per month, the 6.5% 30 year am payment is $1,264 per month (still probably less than the rent in the area). With a $2mm loan in the Marina or Burlingame the 4% IO payment is $6,666 per month, the 6.5% 30 year am payment is $12,641 per month (about 4X the rent in the area). Even a low income couple can probably figure out a way to come up with an extra $598 a month (especially when you are still paying less than people renting in the area), but it will be tougher to come up with an extra $5,980 a month, even tougher when you are paying about $10K a month more than the renters in the area…

HARM or whoever cleaned up my OP, thanks. I’m literally running 3 directions at once these days.

Wasn't me. Patrick maybe?

Patrick

Thanks and negate the request if involves even light lifting. I'm not a fan of work. :-)

StuckinBA

How does the stickiness this time compares with stickiness in other downturns ? There may not be a metric, but seems like there is lot less stickiness in this downturn - this year at least.

I don't have any hard data on this either. Just conclusions drawn from data about previous cycles. One thing that stands out is how much more data is being tracked this time versus even the mid 80s-mid 90s correction. There is probably 10x more data now, and sadly a lot of that data is spun, marketing data meant to offset unhappy data. ie. NAR "economics".

My read is that this cycle was a bit *more* price sticky in the early phase, but is now showing signs of downward accelerating faster (less sticky) than last time. I think a lot of that is attributable to information differences plus exaggeratedly sensational media influence.

In 1987 people had _less_ information about the downturn they had entered, and less was being fed through a less sensational media. It was still apparent, but perhaps easier for people to ignore or assume didn't affect them. So they were sticky until the early/mid 90s in many cases.

Contrast 2005 when people were deluged with information, most of it showcased in glittery point-counterpoint type of duels. My theory is that because the media had to always present "balance" instead of fact, they paralyzed a lot of sellers into "wait and see". Plus, the media kept reassuring us this would all be short. The bottom was just around the corner, month after month. Sort of information overload coupled with lack of credibility.

And like deer in the headlights, they're getting hit by surprise, and so we see dramatic price cuts scattered amid stubborn, blank stares.

Stickiness is also related to the collective stubbornness and snobbishness of a neighborhood.

The availability of information says nothing because it is all about the willingness to accept unfavorable information.

Here be a good one that might get some blood boiling around here. I know demolishing houses as method of reducing inventory and halting price slide has been discussed here, but I don't think seriously.

The Wall Street Journal, esteemed rag of the capitalists (lesser caps than Peter P anyway) and banksters, editorial page has a piece arguing for this very thing. Its the government cheese debacle all over again. It would not surprise me if this sentiment picked up a head of steam from all stakeholders who might benefit. These stakeholders being about all homeowners and bankers.

Wow.

Scary.

WSJ editorial "demolish houses"

Excerpt

Let us step back. A great deal of housing debt was created in the last few years to give speculative buyers nominal title to homes that they no longer want. Any postmortem will also show that too much government subsidy for the creation of housing debt was an original sin at the root of today’s mess. The result is not unlike pollution — a market “externality” that imposes unfair costs on others as a result of some people’s over-speculation in now decaying, market-depressing, neighborhood-degrading housing.

When politicians understand this, they may finally have something useful to contribute. The shortest road back from this perdition, as improbable as it may sound, would be to foreclose on and demolish some of the least-wanted houses, with taxpayer money if necessary.

WSJ editorial demolish houses

Apologies, mistype on tag for link above.

"they paralyzed a lot of sellers into "wait and see"

Seen enough?

There was a case at the Bend Bulletin where a reporter was canned for not "cleaning it up and giving it a happy ending". Another case of 'collateral damage'. Maybe this guy can become a "MEW Dad" and live of his... nevermind.

Demolishing houses would theoretically work, but it's terribly inefficient. There are better ways for the government to stimulate the same outcomes much more usefully and efficiently.

Divert the "demolish houses" to "demolish bridges", then rebuild them so they don't fall down in a light breeze. That would cause capital replacement (the macro goal of the entire exercise), and would take government spending and circulate it directly into the economy short term (pay for labor, materials, and services related to the projects) and amplify growth in the long term (better infrastructure produces more efficient long run growth).

But we don't solve problems anymore in our country, do we? We just dodge the sniper fire and gift away our treasure to whichever squeaky wheel interest group owns a block of swing votes. Meanwhile our bridges crumble our levies fail, our dams crack, our power grid goes brown, and our education level falls.

The Wall Street Journal, esteemed rag of the capitalists (lesser caps than Peter P anyway) and banksters, editorial page has a piece arguing for this very thing.

There are Free Market Capitalists and Successful Moneyed Capital Socialists.

I belong to the first camp. Anyone know how I can join the second group?

DinOR

I have to give you credit. I was entirely wrong about something I argued with you about years ago: how older, equity rich retirees would react to selling in a down market.

I argued that they had a low cost basis, and would be fine selling a home for say $385K instead of $450K because they only paid $90K for it decades earlier, and owned 100% of their equity.

Well, seems even for those who do still own 100% equity (those who didn't reverse out) they are incredibly stubborn about selling for even $1 less than their retired neighbor down the street got in 2005-2006.

Anecdotally, I came across a house recently where the owner was a recent widow, bought with her husband in the early 60s, paid under $40K, and was listing the place for $1.4875mm (a very precise number). Her daughters were pleading with her to sell for anything over $1mm since it hadn't been updated since 1981 and needed a ton of work (you know, the entire yard was green gravel and concrete by that point).

This old lady was just intractable. She was not going to take a penny less because her neighbor, "who she never cared for", got that amount and "her house wasn't even as nice".

It's still listed at that price, by the same no-name realtor who's picture on the sign looks like some fossil from the Jurassic period, closing in on it's 400th day on market.

The owner will have to die before that price unsticks.

The owner will have to die before that price unsticks.

Anything we can do to help accelerate this process? :twisted:

But we don’t solve problems anymore in our country, do we? We just dodge the sniper fire and gift away our treasure to whichever squeaky wheel interest group owns a block of swing votes. Meanwhile our bridges crumble our levies fail, our dams crack, our power grid goes brown, and our education level falls.

Ahhh... sweet, delicious anger...

Remember that a owner ought to have the absolute right to sell or not. This is an important pillar of property rights.