patrick.net

WW2,

In Portland I've heard it referred to as "bleaching". Formerly all Black (and perfectly viable neighborhoods) are slowly being pressured out and young whites are moving back in. Salem (our Capitol) is becoming the new "N.E Portland". With older homes that were often partitioned out becoming SFH once again and prices skyrocketing working families have been forced out east or south.

Dinor,
The same is true in Memphis. My Aunt has been there for over 30 years. She lives in a predominantly black neighborhood. Memphis has a property tax system that increases as property values go up; the opposite of CA's Prop 13. So when "immigrants" from out of state come in and think 450k is a STEAL for a large victorian, her house goes from being a 45k house to a 150k house. She's not rich by any means, and she worries that eventually, Memphis will also become gentrified and she will have to move due to the property taxes.
Something seems wrong about the fact that these so-called undesireable areas; areas that people chose to live in because it worked with their finances are now being overtaken by the same people that pretty much ruined the regions that avoided due to the expense in the first place.

@WW2,

I fixed your URL above.

Harm,
Thank you for correcting my blunder!

One thing I wanted to mention is an idea I had over the weekend that could potentially make someone with intuition very wealthy. The idea is to create entire towns that serve as an investor's paradise. Nobody would actually live there. The houses would all be pretty much the same with the exception of the paint colors. The houses themselves would be made out of cast cement or plastic interlocking blocks. Inside, the kitchens would have countertops with tops that can easily be removed via a few handy levers. All a new investor has to do is remove the old countertop and replace it with the latest and most popular style, whether it be granite, marble, tile, or copper. These can be exhanged at large home remodeling shops that swap your old countertop for a new one for a small fee. Painting would be a snap too. The "paint" would actually be tearaway strips applied to the outer and inner walls. All one has to do is peel off an old layer to reveal a new color underneath. There are 20 layers, so there's plenty of remodeling to do for years of investors. The bathrooms are filled with plumbing that's just there for looks and to impress. The bathtub sits on rolling casters. The connections are via garden hoses conveniently hooked up out of site. Remodeling consists of rolling out the old fixtures and rolling in new ones, gotten from the same nearby remodeling store. The kitchen appliances are the same way.
Out in the yard, there is a handsome array of plastic grasses and exotic weatherproof silk flowers. No mowing ever needed! And what about that picket fence? well, these picket fences comes in large rolls. All you have to do is buy a few rolls and stick them in your yard.
When that's all done, investors can turn around and sell it. Easy! The best part is that since there are no pesky renters or homeowners, all one has to to do is resell it over and over again! It's like collecting comic books, except better!
Anyone else want in on my ingenious scheme?~!

WW2,

Anyone that has ever owned an older Victorian would know that they are not a bargain at ANY price. The attention to detail and charm translates into constant maintenance. Many of the "restorations" I've seen started in earnest and disintegrated into a flow blown "just git her done" job. Everyone may want one, but they are not for everyone. My wife and I have a term for them:

AFBAB: Another Failed Bed And Breakfast

WW2,

Where do I put plunk down my earnest money? Come to think of it we won't even need a source of water as no one ever stays there long enough to need a shower! Funny!

Dinor,
Probabl wouldn't need electricity either. The homes could be wired with a 12 volt truck battery. All you need are the lights because the appliances would be fake too. Maybe they could build these out in the desert. Then they would be preserved, like old WW2 airplanes for all eternity.

WW2,

Right. If the walk way lights are solar powered anyway and the appliances are there primarily for "staging" purposes an 8D CAT battery should provide ample current to test the security system that protects the "distance owner's" imaginary belongings. However a glass door wine chiller will be required so we can break out the bubbly to celebrate the multitude of transactions that will ensue! Ah! Here's to tax free money!

Actually they already have something pretty much like this that fulfills all of boomers needs. They are the same basic format only situated on wheels so you can take your wealth with you on a "road show" referred to by many as a "motor home". I hear they are quite popular.

Actually,
I had another great idea to lower the development costs of these masterpiece homes. Instead of having to outfit them with expensive fake appliances, why not just have applied giant stickers with interior photos attached to the windows? The dramatic effect would be houses that look like they have beautiful interiors, when in fact they're just hollow shells. Saves the trouble of having batteries at all. A single "sample" home would be at the end , and this one would have all the fake appliances and all. Investors simply choose a model of their liking and the contractor applies the stickers.

No no no! It has to be something that people can actually drive to. Investors and boomers have nothing to do these days except drive around in their Bimmer SUVs and look at open houses. This planned development will give them reasons to go out on the weekends. Heck- I bet you could even have mechanical "open house" signs that can be raised out of a slot in the yard. Even better- maybe your idea for the virtual house would work this way: As mentioned before, the peel-away stickers, countertops, and applicances could be remotely controlled via an interactive web site custom made for each investor. So all an investor has to do is make a few Havana sidecars, click a few buttons, click the " open house" button and wallah! instant open houses! Sort of like a fun video game.
I wonder what the commercials are like? " ever wonder what happened to Don Knots on the Andy Grifith show? Well... he's dead, but if he were alive, he'd probably live in investoville- the best place to stash all your investment dollars!

Jackie Mason once quipped:

"Why spend a billion dollars on a "stealth" airplane nobody can see"? Couldn't we just tell the Russians we built one?

I know a guy back in Chicago that sells a (I'm not kidding here) staging franchise! He does it too! Manses don't sell well when empty. I don't know why. Maybe people think there is something wrong with it. If it's such a wonderful "manse" why isn't someone jumping all over it? If you don't want to buy a "franchise" and your lifestyle permits, you can become an occupant and pay about HALF of what rent would be. So basically you would be paying about 1/4 of what the mortgage payment would be. This, right in alignment with "family for hire" for your open house leads me to believe that reality and RE are taking seperate paths.

WW2,

It sounds just crazy enough to work --I want to buy shares in Investoville! Or is that Flippertown?... Specuvestor City?...

SP,

If they live in Dissaisfaction Junction which street are they on?

"Empty Feeling Drive"

"I wish I woulda Circle"

"Lamenting Lane"

Surfer-X, HARM, Linda,

The party was a lot of fun and I was glad to have met everyone, from the gracious Surfer-X, to the lovely Linda, to the deboinaire HARM.

I am sorry that we did not get more of a chance to chat, but the Lil' Schmoes took up most of our time, although a lot of people, particularly Mrs. X (who, I have to say, is HOT!), were kind enough to play with them. Incidentally, the Lil' Schmoes had a great time at the party; I wasn't sure how they would take to it, but they were happy as clams.

The party was most excellent, a great time was had by all and I hope that there will be more get-togethers in the future.

An interesting concept was posted at Ben's blog this morning and I was wondering what you guys think of it:

Comment by salinasron
2006-05-31 08:07:11

"...Smart buyer’s group would pool their funding and buy the first house. Second step, flip it to another in your group at a very, very low ball price (let all neighbors know) and then start purchasing the others at bargain basement prices that will generate a positive cash flow when rented."

Think about it --price collusion in reverse. The mirror opposite of collusion between Realt-whores, phantom bidders, shill appraisers, look-the-other-way lenders, etc. It might be considered unethical, but I doubt it's illegal, given that no "fraud" is involved, just willing parties cooperating to push down comps. The government has shown it has no intention of passing --much less enforcing-- any significant anti-collusion RE/mortgage regulations (NAR's "in the bag" comments, monopoly MLS & "liar loans", etc. are proof of that), so why not?

Looks like an ALL WHITE PARTY — no ethnic diversity ……

I'm 1/2 Mexican and retarded. If I am recalling correctly (difficult thru the alcoholic haze) there were 3 other persons of latio decent there also. Besides there was a full on mariachi party next door. Tenative SoCal Blog Party II on July 4th weekend. This one comes with surfing lesson.

Schmend, no worries, thanks for the link.

@Joe Schmoe,

Ditto --it was great meeting you, Clara & the kids. I'm sorry we didn't get more time to chat one-on-one, but hey, we only live a mile away.

@Surfer-X,

fyi: I've deleted most of the offending comments (from the point where it turned nasty). I think Schmend Rick was just joking, but just went a little too far.

Joe Schmoe, you and your well behaved Lil’ Schmoes did nothing for my "try to keep Surfer-X's pathetic rental baby free" plan. Next time can you make sure they are sufficiently cranky? Perhaps holding them out the car window on the ride up?;)

@HARM. dude you rock!

Funny,
tinyurl.com/nk6aj

Surfer-X,

LOL! If it is any consolation, they only cry between the hours of 2:00 and 5:00 a.m.

The Lil' Schmoes are actually 1/2 Hispanic as well, and Mrs. Schmoe is 1/2 Mexican and 1/2 Nicaraguan.

More importantly, even those of European descent celebrated the rich diversity of foreign cultures by drinking lots of tequila and eating Laurent's quiche.

HARM,

I had read that comment as well and must admit it got me thinking. Provided the entity structuring was sufficiently prepared like an LLC or even a Sub "S" it would be difficult for any regulating body to determine that there had been any wrongdoing. Say for instance we buy (w/full knowledge it's an overpriced sh#tbox) sell the property at a loss to a subsidiary and drive comps down as we go. The question quickly becomes one of "burn rate" where we would have to determine if we had deep enough pockets to weather our self induced downturn before creating the proper backdrop on a road toward profitability?

Think of it this way: You and I are founders of a company we took public. We later decided that we no longer want to be publicly traded and contemplate a "share buy-back" or "share re-purchase" to take the company private. Do we do this when the stock is at the 52 week high? Hell no! We do it at the 52 week low. But what if the stock shows stubborn price persistence? Well...... nothing a few strategic "leaks" couldn't cure! Happens every day! We want the company back (tired of all the SEC Compliance and whiny shareholders) so we set a disaster prone course, shareholders get wind we have a nightmare aquisition underway, bail, stock price drops and we (out of concern for the employees) agree to come out of retirement and take one for the team. Aquisition (or spin off rumor squelched) we resume our profitable ways!

@Surfer-X,
Right back at'cha!

@DinOR,
The question quickly becomes one of “burn rate” where we would have to determine if we had deep enough pockets to weather our self induced downturn before creating the proper backdrop on a road toward profitability?

Yes, you've raised two big potential roadblocks with this approach: (1) having enough people and $$ to eat the costs during the initial buy-in phase (at inflated current-market prices), and (2) making enough low-ball "flips" to have a significant statistical impact on local comps/prices.

On problem #1, obviously, the larger and better funded the pool, the better. Problem #2 can be solved by concentrating on a relatively small city or isolated neighborhood, where the comps can be set by relatively few sales. The deflating bubble would also work in our favor in that sales are already dropping like a rock just about everywhere, which magnifies the impact of each sale that goes through.

HARM,

Good points! Just remember we aren't as much concerned with "scuttling" comps as we are with making money. Comps will be driven down but this is a positive "side effect" not the primary objective. If it creates better entry points for working families so much the better. I know it works b/c I've seen one particular company do it several times over the last decade or so. They're known as "the junk mail kings" in San Antonio.

DinOR,

You and I are founders of a company we took public. We later decided that we no longer want to be publicly traded and contemplate a “share buy-back” or “share re-purchase” to take the company private. …… nothing a few strategic “leaks” couldn’t cure! Happens every day! ... (tired of all the SEC Compliance and whiny shareholders) so we set a disaster prone course,

I'm sure this has happened, and occasionally still happens. A few points of practicality--especially in today's environment--make it unlikely.

* The real moral hazard for managers is that they put the company on a course such that they can keep their jobs and/or exercise golden parachutes. They are seeking to maximize their own position.

* Taking a company private is seldom ever done by the company itself. It usually involves a lot of private equity, often a massive LBO, and lots of new commanders walking into the shop. As such, existing management almost never keep their jobs in such a maneuver (although they may get a nice payout).

* The IB/PE/LBO folks determine the buyback parameters, not the management. In fact, it is the Board that must approve the action.

* The Board is held to fiduciary responsibility to the shareholders and can (and often is) sued in class action if they fail to abide by the Business Judgement Doctrine.

* Anyone making strategic leaks of any type, whether true or not, will almost certainly get investigated under SEC 10b and 14e (and maybe others). The SEC isn't very nice about such violations at present.

* Unless your company is small enough to avoid raising the interest of Hedge Funds, your share price will be seriously arbitraged by Merger Arb funds and such. This makes the market efficient, and shines a spotlight on any funny-business. Hedge funds love to raise holy hell when they don't like what management is doing.

SP, Randy H,

Yeah, I don't think I was referring to S+P 500 companies with 38 analysts covering the stock being able to pull this off. When I say it happens everyday it does, just on the "pink sheets" which the NASD, NYSE and the SEC has told us we shouldn't play with anyway. No top tier wirehouse is actively recommending penny stocks to their clients. The point is (and I feel like I just went through a compliance audit so I've lost track myself) that price manipulation to the downside can be effected as well as to the upside.

Randy H,

True, in the post S-O world leaks are becoming more rare and justice is swift and severe (as it should be). However, with smaller OTC issues (where no one really understands the business model anyway) who's to say what is detrimental? I can't tell. Have you ever spoke w/some of those Investor Relations people from a start up? Btw, you're right. I mean anytime a stock swings dramtically the NASD looks at who would benefit from such a move? On of the most clear cut cases I can think of is when a short seller (of an ISP most people hate) couldn't get the market to see things his way there was a leak. Now to my knowledge it was never proven however the NASD censured said individual all the same. Kind of "we can't prove it but we know it was you". He's still in business btw.

Sun cutting 5000 jobs as predicted...

http://tinyurl.com/n3aax

expect to see much much more of this

tinyurl.com/qt7ks

DinOR,

For some reason, my comment didn't post on Ben's blog, but I saw Robert & your comments on the speed of the current correction being unexpectedly rapid vs. previous ones. I must respectfully disagree on this point --at least as far as CA is concerned.

Most cities/counties have yet to even post YoY median price declines (and yes, I know the median can be skewed by better quality homes selling for same price vs. crappy homes a year ago --not to mention outright CAR/NAR data manipulation). Even so, the RE market here has not exactly turned on a dime, and is tracking at roughly the same pace as the last crash (1990-96).

I see no reason --yet-- to expect it will hit bottom any faster than last time. Yes, we have the Internet, and as the saying goes, "garbage in, garbage out". Most people I know who are interested in buying are not aware of this or any other anti-Bubble sites (unless I tell them about it). The Sheeple get the same crap/Realt-whore propaganda from Industry-controlled sites on the Internet that they used to get from newspapers & TV.

Net result: same. I expect the market to hit bottom sometime between 2008-2012, no sooner.

HARM, it might take that long to hit bottom, but I expect big drops by next year anyway.

The Japanese market dropped fast, then languished lower, back in the late 80s early 90s.

Expect the same in the US, this time around.

The drop in the Canadian market should follow around a year later, but not as far. There aren't any interest only/no doc type lenders here, but variable rates are still going to inflict some pain, and my observation of the local MLS shows a steady increase in single family properties from January to the end of May - not what would be expected in a good market for the sellers.

Mind you, they have recently introduced the 30 year mortgage amortization, and zero down options. Last gasp in my opinion.

Looking for significantly lower prices in Victoria by 2008.

Cheers.

*not investment advice*

@tsusiat,

There aren’t any interest only/no doc type lenders here...
...Mind you, they have recently introduced the 30 year mortgage amortization, and zero down options.

Uh, oh. Looks like there's PLENTY of room for Canadians to keep the bubble going with U.S.-style toxic financing. If your central bankers/regulators are anywhere near as corrupt and pro-bubble as ours, Canada RE may have quite a while to go before it finally hits its peak.

Does anyone out there know what happened to "America's Overvalued Real Estate" blog? I just checked it and the old site (with hilarious examples of insanely overpriced crap) was replaced with a commercial real estate site: http://overvalued.blogspot.com/

:?: Hmmm... the conspiracist in me wonders what's going on here. 8O

SP,

Yeah, I didn't mean to get side tracked with a discussion about SEC reporting requirements and if people only knew just how much the cost of compliance really was I wonder if we'd all be as gung ho. The original observation was addressing a leveling of the playing field b/c perma-bulls have their well oiled machine in place wouldn't it be great to have a mechanism (legal) to bring SOME balance to the equation? Maybe the "if I play badly enough they'll want to trade me" wasn't the best way to go about it but think about it. The "flipper revolution" really was grass roots. It wasn't until way late in the game that guys like "Condoflipper.com" arrived on the scene. Wouldn't it be great to have some on-line equivalent to Don Lapre telling people how to make millions from "their tiny one bedroom rented apartment" by driving RE prices down?

This is a couple months old, did everybody already watch this? Not too doom and gloom, maybe he fears for his life.

http://video.google.com/videoplay?docid=-2640239019877885520

Fyi: Just in case anyone was under the illusion that "Boomtime" was a normal poster, I checked his IP --it matches "CuriousCat" and "WoopAss".

How many times do we get to see that same old Marina overpriced listing as evidence that the boom is still on?

I've got an inside angle on some WebVan stock too. Here's an analyst report: http://news.morningstar.com/article/article.asp?id=847