patrick.net

SQT,

Just doing my part to spread the good word about Crash City! I realize that I can be a little snide but so many of the articles I've read over the last few weeks seem to have this "anatomy of a crash" tone about them it just seemed appropriate. Gone are the days of spirited debate regarding the validty of a bubble, we've moved suprisingly swiftly to "what will the crash mean to you" phase. Notice though that mainstream articles always distance the sinner from the sin. "Some people that got IO mortgages". "Some people that overpaid" etc. etc.

That should read, "You people that got pay option ARMs". "You people that "won" the bidding war". I suppose though that the authors prefer to leave well enough alone b/c "those" people know who "they" are.

My cleanoffer account is generating between 5-12 new listings per week for my narrow search set (Mill Valley/Corte Madera/Larkspur). This time last year the new inventory rate was perhaps 1-3 new listings per week.

Prices are coming down slightly for the upper part of the range, but there are a surprising number of lease-options now that I look at it. And a lot of price-reduced (but I take this with a grain of salt, they're "reduced" from what they thought they should have appreciated to, which is still too high).

Excuse my ignorance, but is it possible for a buyer to refinance every couple of years to get a “teaser rate”? Never paying the note off.

Eventually the buyer would be in excess of loan-to-value unless the home appreciates faster than the transaction costs associated with the refis. These costs would include penalties associated with early repayment (which happens in refis) that usually accompany teaser-rate deals. The lenders aren't quite all that stupid.

Randy H/George,

That's my quandry. Prices have gotten so out of whack just saying "reduced" isn't necessarily descriptive. Reduced? Reduced from what? Reduced from "make mine a dream retirement" to "I'm o.k with playing at a public course retirement"? Who was it that said, "Making someone elses retirement, one mortgage payment at a time". Classic!

goober,

The hard reality that Randy H describes doesn't mean there aren't those that haven't tried! They're called "serial re-financers" and we can joke about it but it's one (of many) reasons I dumped my mortgage backed securities.

George,

I've seen desperate pleas on Criagslist where a homedebtor will advertise their situation by saying "I need to re-fi and skip two mortgage payments" with regularity so at least they think of it as some sort of temporary fix.

George,

While not nearly as dramatic we've seen similar builder/investor discrepancies here as well. I noticed over the weekend a DR Horton ad that showed some new floorplans at BELOW $100/sq. ft! For those specuvestors who's cost basis is significantly higher there really can be no exit strategy.

George,

Is it possible that our "recipe" for the crash was flawed from inception? Nearly everyone all along has said *interest rates*. Rates this, rates that banging on the drum until our ears were ringing. Since we were given very region or even neighborhood specific excuses as to why each area was "special" could it not be that each crash is "tailored" or personalized for each area?

George,

"if this were just a normal market with excess inventory"

You seem to imply that it's anything but "normal". So in your mind interest rates aren't near the factor that they've been played up to be? I agree! Besides how many people really qualified for the mid 4's anyway? Or timed it that well? Just the "bait" was enough to draw borrowers out of the woodwork just to see if they had a shot at those rates! We all have friends that are at whatever the rock bottom 30 yr. fixed is at that day anyway. I'd love to see data that shows what percentage of U.S mortgages are at 4%! FIXED that is.

I believe our region specific "recipe for disaster" is as follows:

1. Undeniable dependence on CA markets state of health.

2. Major employers leaving and not being replaced.

3. Erosion of employee benefits ultimately impacting "affordability"

4. Overbuilding

5. Buyer/Consumer faitgue

6. Interest rates

George,

My point exactly! Where are the "bragging rights" of having a 3.875% 30 year fixed if you overpaid for your home by 30-50%? As Patrick is fond of saying, "You can always renegotiate your loan package, you can't renogotiate the price". So for many, it's just too late. In Boston, DC and FL "just listing the damn thing" isn't looking like a very viable option either.

One of the issues you address in your comments is that the builders seem to be just fine putting the same floorplan for on the market for $121,215 cheaper than some investor. Undoubtedly investor greed is a large part of that formula but it does shoot holes in the "it's the materials" and "it's the land" song and dance we've been fed the last 5 years doesn't it?

Before we sold to become bubblesitters in spring 2004, we had a 30-year fixed at 4.25%, with about 60% equity in the home. We could have stayed there forever with that payment had we not needed to move for other reasons. We refi'd quite a lot, but we always did so with zero or trivial fees and only when we could put even more equity in during the refi. (We were always careful to only take classic, standard, no-penalty fixed-rate loans) I wasn't bubble-aware really at that point so I didn't realize that most people were doing the opposite -- taking equity out. When we sold the buyer overpaid and his mortgage was about double what we were paying, yet I doubt his income was much different.

George,

HARM has been focusing on the "it's a land bubble" for some time. I agree! In the end I guess a 2 x 4 costs what a 2 x 4 costs so I have no real issue with the legitimate explanation of concrete facts as they apply to building expenses. I don't grudge a builder a reasonable profit for a lot of hard work. From what you've described though regarding the "tippity top" of the market I refuse to be held accountable as a buyer b/c the builder has grossly overpaid for his lots! Some of the lots in one of our "up scale" subdivisions can go from 90K to 200K. That's a land bubble.

Randy H,

Well that's your basic conservative mid-western upbringing showing again! Imagine that, putting equity INTO a home. What a novel concept. I will say (we sold DEC 2003) that we were very bubble aware. Perhaps regular and enviable appreciation are the norm in the BA, certainly not for Oregon! For our home to have doubled in value during our 10 years there (much of it since 1998/99) was a total aberration. With mill closings and a growing environmental movement home values had actually been on a steady decline since the mid/late 1980's.

newsfreak,

Yes, I believe that the bigger builders buy on a national contract and that prices are well negotiated in advance. I've had a number of clients and friends that were lumber brokers over the years. However; smaller players probably wouldn't have access to this end of the distribution chain.

New Thread: Shiller’s Prediction (1 year on)

George,

Can you copy & paste your last comment to the next thread. It is directly on-topic for that discussion.

Thanks George, and your very sapient comment is well placed at the beginning of the thread where everyone will read it.

John Haverty Says:

Haiku on the Asian Self Hater:

Racist self loathing
Oriental Cheetah man
A stealth troll is he

________

Ha, haaaaaaaaaaaaa! That's friggen' outrageous!

Oh, man.

Dude!

newsfreak,

I checked zillow and the current tax on this house is under 2K a year, that means it was bought for 10-15% of its current price. There's plenty of concessions to wring out of the greedy selller yet.

Owneroccupier,

Thanks for your Andy Xie rec, he has some very interesting things to say.

shaoyu,

you're talking out of your ass, which is kind of hilarious

Peter P.:

http://www.craigslist.org/cgi-bin/search?areaID=1&subAreaID=4&query=&catAbbreviation=apa&minAsk=min&maxAsk=max&bedrooms=2&neighborhood=76

What? You don't want to live in EPA? That is the only place that fits your requirements.