patrick.net

BTW - I still lurk a lot, but Mountain View/Los Altos - or at least the zip code(s) I would like to buy in are very disheartening, so i have been taking a rest from the bubble blogs until I have good news to report!

In a survey issued this week of Alt-A mortgages originated in 2006 and 2007 -- these are nonstandard mortgages often marketed to buyers with less-than-prime credit -- Fitch Inc. analysts found that a rise in delinquencies could still be traced to "borrowers who purchased a home they could not afford or those engaged in mortgage fraud for the purpose of property speculation." Legitimate homeowners, the analysts said, "rarely view the home as a short-term investment ... they do not default based solely on a drop in value."

Fitch has also found a high level of misrepresentation in loan applications "by borrowers, brokers, and other parties." When Fitch analysts subjected 45 sub-prime loans to detailed examination late last year, they found "the appearance of fraud or misrepresentation in almost every file," a situation they termed "disconcerting at best" in a report in November.

Some 66% involved "occupancy fraud" -- that is, the borrower misrepresented his or her intention to live in the home, rather than to buy it as an investment. That finding underscores the possibility that bankers are blaming owner-occupants for the more common, and not unexpected, phenomenon of "walking away" by real estate investors.

One source of walkaway "folklore" may be services that purport to help homeowners skip out on their mortgages without long-term harm to their credit ratings. Among them is San Diego-based You Walk Away, which launched a website in January offering to help homeowners "unshackle yourself from a losing investment and ... Walk Away."

Co-founder Jon Maddux acknowledged in an interview, however, that the firm's typical clients are people facing genuine financial stress, whether because they cannot make their current mortgage payments or know that an upcoming raise in their interest rate will make default all but inevitable.

"We do have a lot of people who cry to us on the phone," he said. "They're under stress and don't know what to do. A lot of these people should never have got the house."

Over last few days (3-4 weeks) I have been hearing slight rumblings about the hi-tech IT job market in BA getting colder. Very anecdotal. But some good people I know are not getting job offers as quickly.

Anyone experienced hearing something similar ?

There are very few big employers left in the valley now that so many mergers and acquisitions have happened. Many have hiring freeze. So this may be affecting the situation.

Start-up situation may not be good either. Even if it were, people are noticeably reluctant to join a startup now.

Have you heard these new terms lately, "affordable foreclosure" and "avoidable foreclosure"? Politicians and private foreclosure firms have been using these terms recently. They baffle me.

It seems to me a foreclosure is avoidable if you PAY YOUR MORTGAGE. There seems to be a trend to define some defaults as better than others. There is also some hair-splitting going on to figure out which mortgage owners are speculators (the awful, evil, predatory real estate investors who deserve total financial ruin) and which mortgage owners are innocent victims who have somehow, surprisingly, and by no fault of their own found themselves in default (the good people who deserve a bail-out and our sympathy).

Shawn Foogard wants to be in both categories. A private individual who chose to purchase 9 (yes NINE) mortgages on the delusion that he will be the next Donald Trump. He says "Everyone stumbles". Oh, is that what we're calling monumentally stupid decisions now? A "stumble"?

I'm so sick of this spin and the language that is perpetuated throughout the media to describe defaults and foreclosures. Any individual or corporation which has made a bad decision and willfully, knowingly signed loan papers is responsible for their own losses. I don't care who is the 'victim'. I lump them all in the same category of FB, and they deserve no sympathy, nor do they get to claim their foreclosure is avoidable/affordable. That's just a euphemism for "everyone else should pay for my 'stumble'". BS!

Can I get an "Amen" Patrick.net people?

Thanks for the responses about privatization. I'm still not clear how it fixes all ills, or how it works, but I'm learning. I especially appreciate Bap's comments. I'm one of those atheist Liberal types who is applauding today's ruling on same-sex marriage in CA (cuz it doesn't cost me a darn thing) and yet I believe that discussing God in public schools is as much a part of a child's education as reading, writing and math. If privatization opens that option, I'm more in favor of it. Good values are good values, no matter which denomination (or lack thereof) is preaching it. Discipline is cherished even by the Pagans and the atheists of the world, a conception that I endeavor to promote in my daily, God-less life. Good family values, sound economics, and liberty for all are not owned by any religious group. Not talking about these topics with our school children however is a tremendous dis-service to all of us, and not what our founders intended.

Weird how this site creates some strange alliances (not to imply that Bap is gleeful for same-sex couples).

There are very few big employers left in the valley

The valley has plenty of small companies that are still hiring.

Remember, the freer the market, the freer its people.

Chindians, whether we like to admit it or not, are often times better educated than our own, native work force. And they're cheaper, because they're not trying to pay off massive credit card debt and buy a house that is 4 to 10 times their yearly income. This condition exists even in light of our ever-declining US dollar value.

It's no mystery why a real estate bubble blog such as Patrick.net routinely brings up the H1-B visa issue (or as we affectionately call it, the "Chindian" problem). There is a real and causal relationship between the two.

Here's an idea for Nancy Pelosi and all representatives: let's stop spending our grandchildren's income on educating Iraqi's about democracy and teach our children a marketable skill instead, lest we endeavor to hire cheap and educated Iraqi's to also take our jobs.

San Francisco is doing just fine, thank you:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/05/15/BA2110LPHB.DTL

10,000 new jobs, 12,000 new residents, population at an all time high.

Sorry to disappoint all the gloom-and-doom'ers but the economy here is zooming right along.

Education is not the problem. The will to get education is more important. This is why I think education ought to be optional.

Of course, we need a viable career path for the uneducated so that they can make a living without resorting to welfare. An early vocational training program may warrant some considerations.

Jimbo -- Please tell our Governor. He apparently did not get that memo about our zooming economy and is axing our budget to bits as we speak.

:)

I'm totally kidding. I think our jobs are fine here in the Bay Area, for domestic and foreigner workers alike. The national jobs numbers were good today as well.

I just relish any opportunity to point to the never-ending debt that we are encurring as a result of Bush's war. Forgive my indulgence.

Here here Peter P. We've lost our love of learning in the US. I say scrap all the Shakespeare's literature study and history courses, etc., and face facts: some of us won't become CEO's or white-collar professionals. So let's just teach them some marketable skills. There's no shame in that. Certainly less shame than getting welfare for contributing absolutely nothing to the overall welfare of our economy.

On this, we agree.

Certainly less shame than getting welfare for contributing absolutely nothing to the overall welfare of our economy.

Absolutely. This is one of the many examples in which any attempt to "level the playing field" will hurt the society.

The world needs all kinds of people.

Apartment starts are up!! Woot Woot!!

Sorry to disappoint all the gloom-and-doom’ers but the economy here is zooming right along.

You will never disappoint me Jimbo when it comes to being defensive about Bay Area.

Can you please remind again us how the depression we have been so desperately yearning to have has not materialized and how your predictions have been spot on ?

Or maybe some new straw-man this time ? The more ways in which you equate us with HousingPanic - easier it is for you.

I wouldn't put too much faith in what the sfgate publishes. This was published just a few days before their current article on the SF economy:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/05/13/BUL810KU54.DTL&hw=commercial&sn=046&sc=178

SF is the "upper crust" of this country. It's like the ritzy suburb of the town of USA. It'll only falter when the ghettos (ie. flyover country) have hit bottom for good.

(An opinion from the "ghetto")

I think it is funny that you think posting positive news about the area is "being defensive." Boosterism? Sure! Defensive? No, I don't think so.

Here are some predictions from before you used to post:

http://patrick.net/wp/?p=55#comments

Peter P predicted a 40-50% downturn in Santa Clara and San Mateo home prices.

So no, I don't need to go to Housing Panic at all. Peter was hardly the most bearish of the crowd back then either.

Yang rallies Yahoo staff against Icahn challenge

In an email to employees written in his signature lower-case type, Yang urged his staff to keep working: "i ask all of you to put aside the rumours and speculation and stay focused on the business at hand and what we do best."

I have worked for Yahoo ... voluntarily resigned after five months ... I wish Carl Ichann can fire the board and management.

Claire,

At least the inventory in MTV an LAS are up, in fact WAY up the last few weeks.

SIBA, Jimbo. A bit of linguistics to fan the flames :-)

What's wrong with being defensive? I think "defensive" has been co-opted as having the meaning "you're wrong but still defending your errant position". I'm not so certain that is the what the word really means.

I dislike when these pyscho-babble terms are pressed into service as assorted put-downs. Here's an example that contains a 2-in-1 put down:

Person A: "You are just being defensive about your low self-esteem"
Person B: ????
Person B': No, I stopped beating my low self-esteem a long time ago...

I'm curious that there doesn't seem to be an uproar over Fannie Mae changing their rules about downpayments in declining areas. Anybody read the WSJ article? The NAR and NAHB were key lobbyists to alter the guideline.

Fannie Is Poised to Scrap Policy Over Down Payments
By JAMES R. HAGERTY
May 16, 2008; Page A3

Fannie Mae is expected to announce Friday that it is scrapping a policy requiring higher down payments on home mortgages in areas where house prices are falling.

The change comes in response to protests from vital political allies of the government-sponsored provider of funding for mortgages, including the National Association of Realtors, the National Association of Home Builders and organizations that promote affordable housing for low-income people.

Those various groups have said the policy is hurting an already feeble housing market by shutting out too many potential buyers.

The current policy, adopted in December and now due to end June 1, limits loan amounts in areas with declining home prices, including most of the densely populated parts of the country.

For instance, if a loan program normally allows people to borrow up to 100% of the estimated property value, the maximum is cut to 95% in "declining markets."

Under the new policy that is taking effect next month, Fannie will have the same maximum loan percentages across the country for people purchasing single-family homes that they intend to occupy, according to people familiar with the plan.

For borrowers approved by Fannie's automated underwriting program, the maximum generally will be 97%. For those approved by other means, the maximum will be 95%. (Fannie also has some loan programs, typically offered through state or local housing agencies or nonprofit groups, that allow certain borrowers to make no down payment.)

Fannie is expected to continue to have variable down-payment requirements on mortgages considered riskier, such as those used to buy investment or vacation homes.

Fannie and its main rival, Freddie Mac, own or guarantee the bulk of U.S. home mortgages and so set nationwide standards for lenders. Freddie also has a policy requiring higher down payments in declining markets. But Freddie earlier this month said it wouldn't require lenders to drop below 95% of the estimated value.

In a letter to the Realtors last week, Freddie also said that it is applying the policy flexibly. For instance, if appraisers can demonstrate that home prices in a given neighborhood are stable or rising even though values are falling in the wider metropolitan area, the declining-markets policy doesn't apply.

By softening the down-payment policies, Fannie and Freddie are taking more risks.

Borrowers who put just 3% to 5% down in many areas are likely to find within a year that they owe more than the homes are worth because prices have fallen, a situation known as being underwater.

In some cases, deeply underwater borrowers are choosing to walk away from their homes rather than trying to find a way to keep on paying, Patricia Cook, Freddie's chief business officer, told analysts this week.

But Fannie officials have argued that they have tightened lending standards in other ways -- for instance, insisting on higher credit scores for people who make small down payments -- to reduce default risk. Officials have also argued that underwater borrowers don't necessarily choose to walk away.

The concessions from Fannie and Freddie illustrate the conflicting pressures that they are facing. Many critics say they are taking far too many risks, increasing the danger that taxpayers may end up having to bail them out.

But politicians and the housing industry are pushing them to do more to prop up the housing market.

In a recent letter sent to Fannie and Freddie, the Realtors reminded the companies that the trade group in recent years helped them fend off Bush administration attempts to impose tighter regulatory constraints.

Fannie and Freddie may need the Realtors' lobbying support in the weeks ahead as Congress seeks to give final approval to long stalled legislation designed to improve regulation of the two companies.

Brand
does going from 95% to 97% really make that much of a difference?

justme - I have also noticed that quite a few are selling for about 5 % under asking price - which used to NEVER happen - however, it is still taking too long for my liking!

>>apparently not for Chindians:

>>http://sify.com/news/fullstory.php?id=14653636

Not sure about the Chinese, but Indians are not dependent on H1B anymore. Check out the little brother of H1B, the L1 Visa, which is basically a giant backdoor (as big as the Fed window if not bigger) where there is no labor clearance, no quota, no prevailing wage requirement, and it is a "blanket" visa.

So an Indian sweatshop can (and they do) get a 1000 of those visas in a jiffy. And get this - the dependents (L2) get a work permit. Since being an H1 dependent (H4) does not allow the spouses to work, even the Indians prefer L1 over H1. They get paid less, but hey the wifey can work too.

With the independence, ease, cheapness, unlimited availability and flexibility of L1, who needs H1B. Google it, plenty of people are p*ssed about L1 abuse.

justme :

I am no expert when it comes to this crazy and fantastic language. So I will be more verbose than that single word. :-)

Jimbo is our resident "Bay-area-is-so-so-special" guy. I love this area too, hence I am stuck here :-) (by choice). But I am willing to see both sides. As much as I know about the great employment opportunities here I also know first hand how stretched these seemingly upper middle class folks are.

This area is not infallible. We might not see the real effects of this madness for some time. We have yet to see the effect of higher interest rates in the Fortress because higher interest rates have not happened. We have yet to see the effects of entire paycheck going to the mortgage company, because no significant job recession has happened.

Who knows what happens in future ? We will see. It's too early to call one side wrong. That's it. That's what I meant.

Here are some predictions from before you used to post:

Peter P predicted a 40-50% downturn in Santa Clara and San Mateo home prices.

OK. So we are reusing the old tactic now ?

The bears got it wrong. They predicted X% decline and got only Y%. What a bunch of stupid doomers !

Let's not mention that the bulls predicted that the gains are permanent. From Garry Watts (15% in the bag) to Toll CEO who said that prices will appreciate forever and our children will not be able to afford houses and will have to live with their parents.

But they were not talking about Bay Area. And especially the newly rezoned bay area. I am glad we got rid of Morgan Hill and Dublin out of this perfect area. Oh, even that San Jose with 2 years of inventory is kicked out. Good riddance. Including the white collar pockets like Evergreen where inventory is reaching 600 as we speak. So what if they have a good school and newer houses ! It's freaking 10 miles from Great America Parkway and the offices of Silicon Valley icons. Who wants to commute 10 miles ? And those Rivermark condos that still haven't completely sold for last 2+ years - next to the same iconic offices ? Oh common, that's condos, who cares !

The real thing to remember is bears got it wrong. They said X% and got only Y% . And BTW, nothing in Marina - let's be clear on that.

The bulls didn't even get the direction right, let alone the extent. They said Bay Area prices never go down. Not in this area. Everyone wants to live here. People make too much money here. But that's them other bulls. Not Jimbo, who's prediction was spot on.

The bears may turn out to be wrong. But the bulls are already "wornger" by an incomparable magnitude.

The bulls didn’t even get the direction right, let alone the extent. They said Bay Area prices never go down

I am pretty sure that is called the "beating the Straw Man to death" argument. Can you even find one poster who, non-facetiously, stated that "Bay Area prices never go down?"

Okay, maybe Marina Prime did that, or at least insinuated that. But he was a troll from the start.

Jimbo :

I don't think you are able to comprehend. Not just this time, but even our past exchanges were similar. You just don't seem to get what I am saying or you purposely avoid inconvenient questions. So stop whining about straw-man arguments.

No matter what I point out, you always find a flimsy reason to dismiss it. For example, bulls who were making confident predictions are now dismissed as trolls ? I am pretty sure everyone here has heard "BA prices never go down" in their real life from people around them. And you want me to search the archives and find you a link ? Give me a break.

But you ignored the more important point of my post. Let me repeat it.

Bears as of now are definitely wrong about the extent of the downturn in many areas - including the Fortress. But the bulls didn't even get the direction correct.

Of course you are not one of "those" bulls. But do you have anything to say to above ? Or the way you redefined bay area (by eliminating San Ramon/Dublin) - you are now going to redefine the bulls ?

If people put enough qualifiers around what they said in the past, no one will ever be proven wrong.

Bears as of now are definitely wrong about the extent of the downturn in many areas - including the Fortress. But the bulls didn’t even get the direction correct.

No, I certainly agree with you there. In general, I think it is pointless to have an "Amen chorus" but if that is what you are looking for, here it is:

Hallelujah Amen! Sing it out brother!

It is nice to be vindicated, especially after trying to stop my father and father-in-law from committing financial suicide and failing. At least my little brother listened to me a bit and diversified into the stock market. But unless prices drop a bunch more in my neighborhood, it is not really going to have much of an impact on my life, since I still can't afford the bigger house I want.

One other thing:

I am pretty sure everyone here has heard “BA prices never go down” in their real life from people around them.

I know that I certainly have never heard anyone say such thing. If someone said this, they would have to colossally ignorant of history, since prices have declined at least three times in the Bay Area during last 50 years, most recently during the early 90s. And these are just the nominal declines.

But unless prices drop a bunch more in my neighborhood, it is not really going to have much of an impact on my life, since I still can’t afford the bigger house I want.
My wife was at the playground and a couple was leaving to checkout a 2bed/1bath bungalow for $700k -- WTF. While the marginal areas are getting foreclosures and the price drops (think near Oakland border), they are still putting something in the water in Fortress [insert your favorite Bay Area region]. Enough for me to give a second thought to selling...

I found this video from CNN rather disturbing, on several levels. We are now seeing parking lots in middle class CA reserved specifically for, and filling up with, people sleeping in their SUV's. A modern day version of the Joads and the beginnings of the new American depression taking shape.

Incarnated as mobile homes, if this trend continues, our Exxon Mobil Detroit cabal induced SUV fleet may actually help in offsetting foreclosure induced rental demand. Maybe a bit of a stretch, but those empty retail parking lots and oil gobbling monsters may be put to a new use.

http://money.cnn.com/video/#/video/news/2008/05/15/news.gutierrez.parking.cnnmoney

Agreed original thread topic is tin foil, but here is a recent supporting piece on cash starved state governments being a little over aggressive in their seizure of "abandoned property".

It appears that safe deposit boxes are getting drilled and emptied. And the State government of California appears particularly out of bounds.

http://abcnews.go.com/print?id=4832471

nvr,

Interesting stuff. Did you also see the recent article (?WSJ) discussing the idea gaining traction to "infill" some of these vast parking lots used for suburban corporate campuses with housing. The idea is that this would reduce commuting, add character to a soulless landscape, and best of all, much of the infrastructure (electricity, plumbing, etc) are already in place.

Seems like an idea even Kunstler would approve of.

On Federal Reserve, we need some sort of revolution like French Revolution ... otherwise situation is unlikely to change. Infalationary loot will continue to go on. We are being bought with our own money and we can not do anything.

We are not the French. If we want to emulate the French, let's start with the cuisine.

We should only accept peaceful, market-driven changes.

Maybe a food revolution. I thought the organic food movement is going already.