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Housing Bubble Pre-Flight Checklist


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2006 Apr 10, 7:44am   29,572 views  313 comments

by HARM   ➕follow (0)   💰tip   ignore  

1. Congress enacts/President signs new Tax Code into law (1997) subsidizing real estate speculation? Check.

2. Cabal of arrogant Fed bankers/Washington politicians/Brokerage firms ignore (or actively encourage) massive Dot.com stock bubble? Check.

3. Aforementioned stock bubble imploding in Fed's/Pol's faces (2000)? Check.

4. Extreme Fed/Pol fear of damage to the rest of the economy by ruptured stock bubble and willingness to flood economy with ultra-cheap credit (to inflate new bubble)? Check.

5. Massive GSEs market intervention, allowing private mortgage lenders to shift default risk from themselves onto taxpayers, FCBs & institutional investors (using the magic of MBS/CMOs)? Check

6. Complete erosion of lending standards, thanks to Fed's easy credit + GSE's MBS/CMO mortgage risk transfer? Check.

7. Cabal of arrogant Realt-whores enforcing monopoly MLS, gaming the numbers and lobbying for federal protection? Check.

8. Public's unshakable faith in the impregnability of real estate ("it never goes down")? Check.

9. Public's complete lack of historical memory, understanding of credit bubbles, the Fed/GSEs, business cycles, etc.? Check.

10. China/Japan underwriting much of our toxic MBS/CMO debt, while secretly hoping we fall on our asses? Check.

11. International carry-trade spawning RE bubbles all over the globe, thanks to ultra-cheap $USD ? Check.

HOUSING BUBBLE, YOU ARE CLEARED FOR TAXI

Discuss, enjoy...
HARM

#housing

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246   astrid   2006 Apr 11, 5:51am  

I think I'd have to be a Hollywood mini-mogul to afford one of these places. There's only a handful of those in existence.

The sad thing is that the original clients were just doctors and lawyers. Now normal doctors and lawyers can't even dream about living in one of those places.

247   Peter P   2006 Apr 11, 5:54am  

One other way to approach the high density housing problem is to look at how the Japanese deal with it. They build beautiful interior courtyards to let in light.

I rather have a few 40 story tower so that we can get more open space.

For example, 20 acres of land can accommodate 160 one-eighth-acre homesites. However, if we have just one 40 story tower with 4 "flats" on each level, everyone can share the open space!

248   Peter P   2006 Apr 11, 5:57am  

Most interesting! It’s refreshing to see someone actually following through with their design.

Very true. I saw her promoting the breezehouse in Menlo Park last year. She is genuine. We need more people like her.

Now that these are in actual production I’d be curious to know if there is franchise potential or dealership affiliations. This would sell well in OR particularly on our coast where exterior maint. is such an issue (and and eye sore)!

They definitely sell in OR. Their factories are all in the Pacific Northwest.

249   Allah   2006 Apr 11, 5:59am  

I just laugh alot about the overuse of the word "homeowner". If someone owes more than 50% on a house, they should be refered to as their rightful name homedeptor. I see so many signs all around "For Sale by Owner", because they can't afford to pay real estate commisions, these signs should read "For Sale by Homedeptor" instead!

Now the realthores are thinking about giving up part of their commision to the buyer (How nice of them!).


"Finding the house is probably 75 percent of the work," says Joe Fox, CEO of BuySide, one of those new, Web-based businesses. "Why not give [buyers] 75 percent of the commission?"

250   astrid   2006 Apr 11, 6:05am  

Peter P,

I like high density housing too. I used the Japanese example to highlight a solution to pre-existing sub-optimal building sites.

Though skyscrapers only really work in mountainous terrains or facing the ocean. Otherwise, they leave such a large footprint that they block out views and the sun for other buildings. The other concern is with natural light in such buildings.

251   astrid   2006 Apr 11, 6:06am  

"homedeptor"????

252   Peter P   2006 Apr 11, 6:09am  

Though skyscrapers only really work in mountainous terrains or facing the ocean. Otherwise, they leave such a large footprint that they block out views and the sun for other buildings. The other concern is with natural light in such buildings.

True. But I rather live in a condo tower with 15+ acres surrounding open space than a house that is detached only by definition. :)

253   skibum   2006 Apr 11, 6:10am  

Peter P Says:

I rather have a few 40 story tower so that we can get more open space.

Sounds like Le Corbusier. Look where that's gotten the French these days! Speaking of Bauhaus, some of the other ideas w/ respect to architechture are very cool.

More practically speaking, though, for the BA what do people think about Eichlers? I personally like them aesthetically speaking, especially if they've been updated.

254   Peter P   2006 Apr 11, 6:14am  

More practically speaking, though, for the BA what do people think about Eichlers? I personally like them aesthetically speaking, especially if they’ve been updated.

Eichlers? The only problem is the exposed beams. It is a feng shui challenge. (I am a New Age guy)

I am a big fan of modular homes.

255   astrid   2006 Apr 11, 6:15am  

Peter P,

I think there's a good mid point between ultra modern skyscrapers and subdivision hell. There's some good designs for 4-5 floor high multifamily communities. With good landscape design, you'd get most of the open space as you would with taller buildings, but they they can be designed to look less out of place and have less of an impact on the overall cityscape.

256   Peter P   2006 Apr 11, 6:18am  

There’s some good designs for 4-5 floor high multifamily communities.

Perhaps. A 5-story building on 2 acres with 10 half-floor condos may work.

257   skibum   2006 Apr 11, 6:18am  

astrid Says:

Though skyscrapers only really work in mountainous terrains or facing the ocean.

You must love Hong Kong's architecture, then.

258   DinOR   2006 Apr 11, 6:18am  

Peter P,

They didn't mention specifically where in the NW but even if it is BC shipping would be cheaper (I think) to OR. What makes this so compelling is that the modular and "manufactured" housing industry has been trying to rebuild itself ever since the bottom fell out even before 2000. The primary reason that the industry fell apart was the same reason "stick built" residential RE is about to fall apart.

They were sold to the wrong crowd, for the wrong reasons with the wrong financing package! In Oregon in the late 90's the standard practice was for the manufacturer to pay for the first years space or park rent. So alot of people that had been renters (entry level buyers) here were suddenly able to afford "owning" and build equity. Well no sooner had the 1 Year Free Space Rent expired and all of these homes were simply abandoned and dumped back to the bank b/c the people could not afford the house payment PLUS the space rent.

Sound familiar?

259   Peter P   2006 Apr 11, 6:20am  

Clever condo design can eliminate shared walls. Also, a split-level, upside-down (bedrooms downstairs) floorplan can ensure that no neighbors are directly on top of you when you sleep.

260   Peter P   2006 Apr 11, 6:21am  

They didn’t mention specifically where in the NW but even if it is BC shipping would be cheaper (I think) to OR.

I think they are in Vancouver, BC. Perhaps I should move to BC and get a glidehouse. :)

261   Peter P   2006 Apr 11, 6:23am  

In Oregon in the late 90’s the standard practice was for the manufacturer to pay for the first years space or park rent. So alot of people that had been renters (entry level buyers) here were suddenly able to afford “owning” and build equity. Well no sooner had the 1 Year Free Space Rent expired and all of these homes were simply abandoned and dumped back to the bank b/c the people could not afford the house payment PLUS the space rent.

I think you need to own the land for a modular house though.

But this is eerily similar to ...

262   astrid   2006 Apr 11, 6:24am  

skibum,

I like Eichler, that was certainly a better solution to street facing housing than garage faced McMansions.

I still haven't made it to Hong Kong. My family in Shanghai, who have been to Hong Kong, tell me that the zoning codes lead to some incongruous results - with brand new buildings next to absolutely decrepit ones. But overall, yeah, that's the idea, the impact of skyscrapers is a lot lower if it is built against a steep hillside or if it is facing the ocean on one side or more sides.

263   skibum   2006 Apr 11, 6:25am  

Peter P,

Man, I love Vancouver. So much good Asian food, and Whistler is 2 hrs drive. Pretty bubblicious, I hear. There's an example of a city with lots of vertical housing (downtown, at least). I wouldn't mind a cabin on Victoria Island, though.

264   Peter P   2006 Apr 11, 6:29am  

Man, I love Vancouver. So much good Asian food, and Whistler is 2 hrs drive. Pretty bubblicious, I hear. There’s an example of a city with lots of vertical housing (downtown, at least). I wouldn’t mind a cabin on Victoria Island, though.

I love Vancouver too. Victoria is actually more beautiful, but food is not as good. Man, colors look brighter there!

265   astrid   2006 Apr 11, 6:31am  

Peter P,

I think a lot of the stigma of multi-family housing can be taken out if builders just start using better sound insulation material. The standards cannot be all that high. I've never heard upstairs neighbors when I spent time in Shanghai, and this is just plain ole steel and concrete construction.

I was thinking of condo communities of 100-500 units, that's a good size to give everybody enough green space and provide some basic services (including the soon to be completely mocked high end gyms and conference rooms)

266   surfer-x   2006 Apr 11, 6:32am  

www.msnbc.msn.com/id/12269915/

Love the spin, be the spin, become the spin.

267   Peter P   2006 Apr 11, 6:36am  

I think a lot of the stigma of multi-family housing can be taken out if builders just start using better sound insulation material. The standards cannot be all that high. I’ve never heard upstairs neighbors when I spent time in Shanghai, and this is just plain ole steel and concrete construction.

Very true. High-rise buildings will be better because they have to be steel and concrete. Wood construction is completely unacceptable. We need at list 10 inches of concrete. Also, we need sound absorbing materials if anything other than thick carpet is used.

Builders need to see multi-family housing as the preferred solution, not a compromise.

268   DinOR   2006 Apr 11, 6:39am  

Peter P,

I noticed under their "Steps to Ownership" section that the Glide House folks mention land ownership as Step 1. I can't understand why anyone would want to live in a trailer park anyway? I just thought there were incredible parallels to what had happened in manufactured housing in the 90's as it tanked and what we are about to see.

The Glide House HAS to be a completely different animal b/c mobile homes simply would not support that much glass at the site (let alone in transit).

269   skibum   2006 Apr 11, 6:41am  

More on Eichler. Turns out one of his chief contractors was a patient of mine briefly. He told me this story about building the first few Eichlers in the BA. The house that may have been one of the first ones built in the area was originally built with some kind of crappy flammable insulation that was cheaper to manufacture (Eichler was not aware of this), and the house actually burnt to the ground within minutes when it caught on fire during the final stages of construction. Eichler supposedly made drastic changes to very high quality building materials which were used through the rest of the building period. Per this guy, this scenario showed him that first, Eichler was much more a designer than a developer, and second, he actually had principles and would not cheap out. Don't know if it's actually true, but interesting nonetheless.

270   Peter P   2006 Apr 11, 6:41am  

I can’t understand why anyone would want to live in a trailer park anyway?

Well, it is pseudo-ownership...

To me, I rather own the land and rent the structure. People do not get the appreciation/depreciation part correctly.

271   Peter P   2006 Apr 11, 6:47am  

I like Eichler's high-rise in SF:

http://www.emporis.com/en/wm/bu/?id=118841

272   astrid   2006 Apr 11, 6:52am  

I don't get the economics of suburban trailer parks. Trailers make sense for poor people or people seeking temporary housing in rural areas. But once you have enough population density to support apartments, wouldn't apartments be a more optimal solution compared to trailer parks? - this way you're dealing with one layer of ownership, standard utility lines, better space use and better insulation.

273   Peter P   2006 Apr 11, 6:53am  

The mindset towards multi-family housing needs to change.

274   edvard   2006 Apr 11, 6:59am  

Why would anyone live in a trailer park? Well for one thing, the trailers are only 10-14k new for a small unit, and as little as 5k for a used one. Even if you don't own the land, you won't have to pay rent. The land use fees are usually very low as well. Not everyone wants to live in a highrise. I know I don't. Trailers take up less room than houses, and believe it or not, some of them are actually pretty nice. I fancied a vintage 50's trailer with mahogany veneer on the interior walls. My parents started out in one just like this. It had the little wall sconces with the ship steering wheel on the rosette and all! They paid $500 for it at the time. They make total sense for anyone in a low income bracket that wants a degree of indepence and the ability to save some money. Some of the trailer parks I've seen around here are actually pretty nice. Hell- I'd move into one if I knew for a fact that I would be staying here forever. It's the only real affordable living situation left.

275   skibum   2006 Apr 11, 7:05am  

nomad, Peter, astrid,

RE: trailer parks, all is not well in the BA. A couple of weeks ago their was a piece on "30 minutes: Bay Area" (I think that's the name - looked like a local spinoff of 60 minutes) about how one of the major landowners of trailer parks in the BA (I think one of the parks was in San Leandro) was asserting his right to raise the F$%K out of the land rents. This was forcing many "owners" to sell b/c of unaffordability, but this led to a catch-22, b/c, who the hell wants to buy a trailer on a piece of rented land with a landlord raising rents like there's no tomorrow? I felt really bad for these people, until one of them complained, "this was my nest egg for retirement." Again, a home of any kind - a nest egg? NOT!

276   LILLL   2006 Apr 11, 7:08am  

A friend of mine has gotten RICH in the trailer park biz. He's not a flipper either. Owns the parks...some right by the beach...not bad.
My dream is a straw bale house. Thick insulated walls, recycled rough hewn beams, tile floors...MMMmmmmm....

277   Peter P   2006 Apr 11, 7:14am  

No bubble in District 7.

I think prime SF is not necessarily in a bubble.

However, prime locations have their own cyclical nature. Caveat emptor.

278   edvard   2006 Apr 11, 7:19am  

Gotta be careful with those straw houses. They CANNOT EVER leak. Hay has a rapid decomposition reaction to water, and once a leak causes water to wick into the walls, it will eventually ignite. That's why you don't see them anywhere that gets large amounts of precipitation. Pretty cool building material though. There are some of these that are over 100 years old.

279   skibum   2006 Apr 11, 7:22am  

Linda-in LA-LA-LAND Says:

My dream is a straw bale house. Thick insulated walls, recycled rough hewn beams, tile floors…MMMmmmmm….

Does that mean you have to watch out for the big bad wolf?

280   Peter P   2006 Apr 11, 7:23am  

Does that mean you have to watch out for the big bad wolf?

Probably. Bricks are better! Watch the chimney though.

281   LILLL   2006 Apr 11, 7:25am  

Straw house ignite? I've never heard of that before. It was my understanding that they DON'T burn. Besides...I'm talking about straw bales rather than hay bales. I understood that they were packed so tight that they don't burn well...but yes, I wouldn't want a leak . I hate leaks. Leaks are my pet peave.

282   LILLL   2006 Apr 11, 7:26am  

Skibum...Actually I am married to the big, bad wolfe. :)

283   LILLL   2006 Apr 11, 7:27am  

And yes, I have to watch out for him. :twisted:

284   requiem   2006 Apr 11, 7:27am  

Wow... that's good to know about hay. (Seemed counterintuitive, so I went online and found: http://www.montana.edu/wwwpb/ag/hayfire.html )

High moisture hay stacks can have chemical reactions that build heat. Hay insulates, so the larger the haystack, the less cooling there is to offset the heat.
When the internal temperature of hay rises above 130 degrees Fahrenheit (55 degrees C), a chemical reaction begins to produce flammable gas that can ignite if the temperature goes high enough.

Also scary is the preservative treated hay that produces hydrogen cyanide gas at high temps.

285   LILLL   2006 Apr 11, 7:35am  

SFWoman
Yes, the tweakers have presented a problem for my friend in the trailer park biz.(or mbile home parks, as he calls them)
GWs"past" alcoholism??? I believe alcoholism is a disease that has no cure.

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