patrick.net

Peter P Says:

- condo
+ coin

LOL.

Are you also suggesting 50:50 odds of a hard landing? I call "tails" on the condo.

The secondary MBS market is very likely to turn later this year.

Our biggest bagholder, China, is going for a generous pay hike for their civil servants by Oct, paid out of their own pocket of course. No details are given, but this is the general directive from the central. Now keep in mind their civil service employs far far more percentage of the labor force. This is an attempt to stimulate internal demand to soak up their own excess housing inventory, and more important, to put their enormous U$ paper reserve to a better use than holding the bag. Increasing their internal money supply is also a way to fend off Yuan appreciation. Chinese money supply is growing at 15%+ per year, at a higher rate than us, uhh, till end of March, 2006 of course since we have no idea of what happens beyond then.

In the beginning of 2006, their speed of adding on U$ treasury has already gone down, Japan even started reducing slightly. But for the increased demand from the Arabs (well, our recent stance behind Israel is not going to please too many moneyed Arabs), and Brits (what the hell are they buying our treasury for??), the excess supply of our treasury would have ended up with no buyers.

The party of course is going to end. I'd say the steps taken by the Chinese bagholders will be gradual and calculated, so expect no big moves there, although they are definitely moving in a direction unfavorable to our housing market.

Will our politicians get tough even AFTER the election? I am not sure. If Republicans secure their current representation, there is absolutely no chance of them poo pooing the party in light of the 2008 election. If the Democrats win, maybe, but they certainly don't want to be the scapegoat in triggering any crash events cos' they have the same election do deal with 2 years down the road.

My only optimistic hope of a fast and furious correction comes down to a major earthquake, for which California is overdue. That will be one hell of a trigger event, but I hope at least I can survive that quake when that happens.

As long as someone is still buying the MBS at an acceptable price, don't expect the mortgage lender to care about fraud. They wash their hands off the entire thing the moment the loan package is sold.

Unfortunately it does take a serious crash to wipe out the fraudulent practices in the RE related industry. The crash has to come first, not after.

ptiemann,

If your friend does agree to go through with the cash-back scheme, please forward his/her name and the name of the buyer to me so I can report them to the authorities and have the MLS sale price properly rolled back. Nothing would give me greater satisfaction than sending crooks and liars to prison, while simultaneously helping to expose mortgage fraud.

"Have you considered the impending global calamity, MBS-China catrastophe, or gold fiat trilateral arguments? How about the impact of Mel Gibson’s arrest on the international credit markets? Just wondering…"

So what's the Elders of Zion's position on the global credit bubble? (And hurry it up with the weather machines, okay?)

How about the impact of Mel Gibson’s arrest on the international credit markets? Just wondering…

If you drink, you cannot drive. It is as simple as that.

If your friend does agree to go through with the cash-back scheme, please forward his/her name and the name of the buyer to me so I can report them to the authorities and have the MLS sale price properly rolled back. Nothing would give me greater satisfaction than sending crooks and liars to prison, while simultaneously helping to expose mortgage fraud.

HARM, forget about it. I know you are angry, but the market will fall on its own weight. How much mortgage fraud are you willing to expose?

My only optimistic hope of a fast and furious correction comes down to a major earthquake, for which California is overdue. That will be one hell of a trigger event, but I hope at least I can survive that quake when that happens.

Please do not wish for that.

Those of you who were around back then and posted predictions can click here to see how your forecasts compared to actual results. I will post my own here to get things started:

Maybe next year... ;)

Peter P,

I am not wishing for the earthquake, it will happen regardless of what we wish for. We are long overdue for a big one per consensus by many scientists.

In history, natural disaster typically serves as the trigger event for some major changes, e.g. weather-induced famine leading up to the French revolution, tbe Russian revoution, a prolonged drought in China triggering the overthrowing of the Ming Dynasty...

In history, natural disaster typically serves as the trigger event for some major changes, e.g. weather-induced famine leading up to the French revolution, tbe Russian revoution, a prolonged drought in China triggering the overthrowing of the Ming Dynasty…

Or it can cause the FED to lower interest rate all the way down to 0.25%.

In history, natural disaster typically serves as the trigger event for some major changes, e.g. weather-induced famine leading up to the French revolution, tbe Russian revoution, a prolonged drought in China triggering the overthrowing of the Ming Dynasty…

Natural disasters may be associated with astrological patterns that also cause instability though.

Anyone know if Saturn and/or Jupiter are retrograde for the USA atm?

Throw in Mercury Rx too - lots of bad communication out there at the moment

Have you considered the impending global calamity, MBS-China catrastophe, or gold fiat trilateral arguments? How about the impact of Mel Gibson’s arrest on the international credit markets? Just wondering…

You may be onto something with the Mel Gibson angle...

Natural Disaster induced ZIRP policy. Now that is a theory I can buy into.

Where can I buy those puts?

is the $10,000 bonus higher quality fittings, etc? that's just an agreement with the developer, and gets listed on the sale price -- you could, i suppose, argue with a valuer that your place is worth 10K more than you paid, but that's immaterial.

developers who offer quiet 'rebates' are looked at askance by the banks, and are at risk of suffering action for incomplete disclosure of the whole deal.

the point is, the bank wants to know exactly what your exposure is. not telling them is tantamount to fraud in their eyes, and the courts agree. the whole thing boils down to a system where the banks, first and foremost, are protecting themselves. if you do the builder's rebate trick and therefore borrow 80% of an inflated figure which then becomes 100% of the true final figure, the bank has just lent you 100% (on the real imputed 'value' of the property in the market) rather than their intended 80% with 20% breathing space for them to foreclose on you later without losing a cent if you can't meet the repayments. it's their risk management, not yours. there's not really much 'morality' in it, the banks don't really care if you live or die, except that they need someone to gouge interest from to get rich...

http://quake.wr.usgs.gov/recenteqs/Quakes/nc40187964.html

Funny thread, considering I just felt a disconcerting little earthquake up here in Marin.

Well I was on 3rd floor of this rented McMansion built in 1994 (I think). If this is up to code I'm a postmodernist. People on floor one felt minor shaking. I was almost bounced off my chair sitting up here.

Magnitude 4.4 - regional moment magnitude (Mw)
Time Wednesday, August 2, 2006 at 8:08:12 PM (PDT)
Thursday, August 3, 2006 at 3:08:12 (UTC)
Distance from Glen Ellen, CA - 5 km (3 miles) W (268 degrees)
Rohnert Park, CA - 9 km (6 miles) E (79 degrees)
Cotati, CA - 11 km (7 miles) ENE (69 degrees)
Santa Rosa, CA - 14 km (9 miles) SE (133 degrees)
San Francisco City Hall, CA - 67 km (42 miles) NNW (347 degrees)
Coordinates 38 deg. 21.8 min. N (38.363N), 122 deg. 35.4 min. W (122.589W)
Depth 9.1 km (5.7 miles)

SQT

You're not making me feel better, lol. Maybe I'll be moving out of this McMansion earlier than originally planned.

Guys,

Disclaimer: I have nothing, absolutely NOTHING to do with the earthquake that just happened on August 2, 2006 at 8:08:12 PM (PDT).

We just had a 5.x down here a month ago centered in east Morgan Hill which was felt throughout southern SJ area.

SQT,

Kobe quake ended in ~4500 deaths, most buildings that collapsed were built before the adoption of new earthquake-resilient building codes. Therefore, houses in Japan built before a certain year (I believe it to be 1982) are worth next to nothing because that was the year that a much stricter set of building codes were established.

Randy,

you should be fine, your McMansion was built in 1994 when the memory of the big one was still fresh. I wouldn't be too comfortable living in a McMansion built after 2002 tho.

F***ed Borrower

Anyone know if Saturn and/or Jupiter are retrograde for the USA atm?

I think Jupiter, Pluto, Neptune, Uranus, Mercury are retrograde.

I have no idea what that means.

http://www.astrologyclub.org/articles/retrogrades/retro.htm

Sorry, I read from the wrong chart. Mercury and Jupiter are not in retrograde.

California Foreclosure Activity Hits Three-Year High

Aside from providing more evidence that the housing market is transitioning from boom to crash, this report was notable for two quotes:

"We hear a lot of talk about rising payments on adjustable-rate loans triggering borrower distress," Prentice continued. "While there's no doubt some of that is going on, as far as we can tell the spike in defaults is mainly the result of slowing price appreciation. It makes it harder for people behind on their mortgage to sell their homes and pay off the lender."

Intriguing. According to all the perma-bulls (incl. DQ spokesmen) over the last few years, the boom was driven mainly by equity-rich buyers and solid economic fundamentals, not reckless speculation fueled by cheap credit. Prentice seems to be implying that people currently in default (a) were counting on perpetual appreciation, and (b) either had no existing equity to begin with or have spent it all.

How can this be?? :lol:
And here's the other "money quote":

"This is an important trend to watch but doesn't strike us as ominous,"

This must be an "important trend" indeed if they feel comfortable dropping the obligatory "indicators of market distress are still largely absent" refrain.

Shaping up to be a loooong brutal summer. And I'm not talkin' about the hot weather.

You are all just JBRs. The prices are not going down, they are going UP. And not just median. Same house prices.

If you don't believe me, see this house. They INCREASED the asking price 2-3 days ago.

http://tinyurl.com/rnp2x

(Go to ZipRealty, search by MLS, and see price change for yourself).

Better buy before they increase the price further. This time it's only 6K increase. Next time, it will be far more.

StuckInBA (formerly 'To BA Or Not To BA')

Stuck - Cupertino, Mountain View, Palo Alto, - when will the insanity end!

Peter P Says:

I think Jupiter, Pluto, Neptune, Uranus, Mercury are retrograde.

Sheesh...even without Jupiter and Mercury, its still enough to put a kink in your day. Thanks - I'd have looked it up myself but my last Ephemeris ran out in 2000.

Doesn't it strike anyone else as a little weird that between MBA's, Money Managers, (CFA in training) and techies OTA NOT ONE of us can define "mortgage fraud"?

Folks, the reason this stuff is allowed to go on is b/c residential RE operates in "gray world". Is leaving the old fridge behind as a concession to the buyer fraud? No, probably not. Is giving back 85K at closing fraud? That's something I aim to answer before C.O.B today! This "bag money" is totally obscuring the picture and making the measurement of the crash all the more difficult. I believe this would be covered under RESPA regs?

SFWoman,

I'm pretty sure any time you are working "off the books" you are setting yourself up for some serious liability. The tax man would have a field day with these guys. They are chumping the county out of 13 mil. in potential tax liability. I don't understand why people like this don't just MOVE "offshore" entirely? I freak out about overdue library books let alone a can of worms like this.

I just read we had a 3.8 quake up in Battleground, WA (about 20 miles N. of Portland). Must have slept right through it.

Things are going to start accelerating when the money tap is turned completely off along with the ARM resets. There is only so many loans going bad before a lender stops lending. Cut off the money supply to these homedebtors and it is going to be rather expensive just to keep their house. Couple that with the recession that we are most certainly heading into and those houses are going to be about as sticky as WD40!

When the fact that prices have significantly dropped in such a short time reaches the front page of all the local papers and people realize that yes, it can happen here, I think there is going to be a panic selloff for those who still have a decent amount of equity in their house. When people realize that their gains can disappear just as rapidly and significantly as they can increase, it is natural human instinct to save as much of their gains as possible. For those that don't, they will be walking away with some serious lumps on their heads.

I think most people know not to buy at this point, but like I say, there are still some sheeple out there that have no idea of what is going on. They just decide they want to buy, call a realtwhore and the realtwhore says "NOW IS THE TIME TO BUY!", "IT'S A BUYERS MARKET!". The poor bastard contracts AEDS and winds up in foreclosure.

I'm just a hibernating bear waiting for the big feast. One mans loss is another mans gain. It's just survival of the financially fittest.

BTW

AEDS = Acquired Equity Deficiency Syndrome

George,

I suspect it's not just greed at work. These people might have some hidden debts and really need all of that $25K!

George,

I definitely agree with the sentiment. I personally have trouble understanding why anyone, in these credit loose times, could have substantial equity in a place but face foreclosure. Like you, I don't understand how these people could give up a certain gain when they have so much to lose. The only thing I can think of is that they're on the brink of bankruptcy.

Or they could be really greedy and shortsighted...sigh...there may come the day when good agents screen sellers so they don't end up with such unsellable listings.

SFWoman,

The top agency that generally handles about 90% of the $5M+ homes -- especially in SF -- recently issued an internal memo warning to its agents about the dramatic rise in just such off-the-books tactics. Usually it's not a difference they are dodging, but a "settlement" they make with the agents in lieu of cutting them out entirely. Basically, they are using the premier agents to introduce the deal, then they go negotiate the real deal in private (probably involving all kinds of tax dodges and foreign accounts). They go back to the agents and say it's 2.5% of $7M or $0, take your choice. This is because they can always walk away from the txn, then do a private "land contract" with one another in a way which makes it excessively hard for the agency to sue over. Anyway, premier agencies aren't in the business of suing their handful of prospective rich clients.

(I have a close contact in this segment of the industry...but on the agent/broker side of things)

***but not on the agent/broker side of things***