patrick.net

I can't say this surprises me one iota. In fact, it's an entirely predictable response, given the recent flood of MSM coverage on the Housing Bubble (having only just recently woken up to the possibility that there IS one).

Also reinforces my theory that the Internet (i.e., more rapid speed and greater amount of data/information today) will NOT significantly speed up the rate of its eventual collapse.

Sturgeon's Law: 90% of everything is crap.

This applies to information obtained from the internet, newspapers, T.V., radio, from friends/co-workers, etc. We at Patrick.net are such a tiny, infinitesimally small part of the blogsphere, sometimes we forget that what we know to be true is not broadly known by the rest of the world. A substantial portion of the population is STILL unaware a bubble might even exist.

The crash/correction is going to be slow, painful and very drawn-out. Count on it.

Randy H,

Firstly anything I share with my clients in print form is considered "advertising". All of which would then be reviewed by our internal compliance and legal departments before it could be disseminated to EXISTING clients (let alone the general public). That requires NASD review and could take weeks if not months.

But this ain't Wall Street! So I guess anything goes. If this "marketing piece" wasn't such a last ditch effort and laughable I suppose I would be offended. Notice how Mr. Brick-Kicker works Wall St. "experts" in quotation marks (w/much contempt) not once but twice in the SAME paragraph!

I've just confirmed with my Wall Street "experts" that yes Randy, you are correct! 1/2 of 1% on 100K is indeed $500 and at $27.50 (net) would cover 1/3 of my cable bill. I'm feeling "flush" already.

DinOR,

It would be laughable if it weren't so pathetic. My fear is that agents running around sneeringly calling anyone with bad news Wall St. "experts" or "econo-babblers" might actually work with a lot of folks. After all, nobody likes a smarty-pants, and in today's culture folksy anger is more respected than actual facts.

And to the guy buying a $2.1M Marina Condo with 3% down and a NAAVLP on a 1HaHa income, those of us suggesting that he might want to reconsider for a moment are nothing more than party-poopers.

Uh oh, and the news keeps getting worse:

http://www.msnbc.msn.com/id/13071868/

I wonder if this will make the next issue of Daily Economic Insights...

By the way, before you think that The Financial News & Information Service is just some shoebox operation (well it might be judging from the quality of their content), a Google search quickly reveals that they are widely quoted as a source of both information and data in the mortgage industry.

Seems like this entire industry is just people making whatever shit up they want to sell homes.

Btw, was this the same guy I laid the “Bubblefucious” quote on last Sunday?

Yup, that's him. Wakey/Bakey, puff puff puff through out the day, and then the beddy-by-bowl.

I'll bet half my equity that the troll posts a SF PRIME property that went for _________ over asking withing the next 10 posts. Fuck it, I'm moving to Az to work for a start-up.

Randy H,

With comments like "Wall Street wants the housing market to flounder so investors will forsake income property and return to stocks and bonds. We are a very long way from that happening" it's hard for me to take serious!

I mean "income property"! Oh that's rich. Show me someone who's bought since 2003 and is generating positive cash flow from their "income property". Anybody? I mean positive cash flow IS still a requirement to be considered an income property, no? Well see? There you have it. A bona-fide party pooper.

"The sellers, who pay the charities a service fee, often recoup their money by charging a higher price for the homes -- usually 2 or 3 percent more, or an amount equal to the down payment"

The article doesn't even flinch at the redefined "down payment". Ugh.

OMG!

This scam has grown from 1.7% of FHA applicants in 2000 to 28% in 2006? OMG. I just don't know what to even say about that. Of course Mr. RE Perma-Bull probably made money on both ends (which is what RE is all about btw) in that he got a tax break for making a charitable contribution AND recovered all of it back and then some through the sale of his "real" property! Please Joe Schmoe do not take offense to this but the scam's "founder" Don Harris is an attorney AND a minister! I'm sorry but is this some kind of sick joke?

I mean “income property”! Oh that’s rich. Show me someone who’s bought since 2003 and is generating positive cash flow from their “income property”. Anybody? I mean positive cash flow IS still a requirement to be considered an income property, no? Well see? There you have it. A bona-fide party pooper.

DinOR I won't comment on your anti-Amerikan sentiment as your leftist leanings shine thru well enough on their own. Cash flow positive? Come on now, it's a new paradigm, why can't you accept that? Free money bro. Loans? You are still thinking of a loan as something that has to be paid back. This was your first mistake, loans never have to be paid back, they are actually gifts. Housing only goes up. Why our favorite contributor posted just yesterday a fine example of SF prime RE that went for $________ over asking. Is this not proof enough of the new paradigm? What's not to like? "Buy" a house for $________ wait two years and get your $________ *0.85 tax-free. It's your money, and like magic the "loan" turned into your money. Just as in office space when Jennifer's character says "so you're stealing", and Ron Livingston’s character replies, "it becomes our money". Perhaps you would be better served getting a second or third job and buying some RE rather than continually failing to grasp the realities of the new paradigm.

___________
Sarcasm filter off.

Surfer X,

LOL!

Yes, yes. Those "leftist leanings". I'll have to get on board with that new paradigm damn it! Those "new rules" for money I read about at Borders, yes, yes.

My favorite scenes from Office Space were when the geek dude is listening to rap music and getting down and then he sees a few "people of color" and frantically rolls up his window! Yeah, you're a bad ass dude!

The "copier demolition" scene is dear to me b/c when myself and two other guys went independent we came up with the scheme to "steal" the banks clients while at the Portland Grill. About $180 into the bar tab we were raiding the office (just across the street, had keys) by printing up the client data base and carrying it off in cardboard boxes! But it's O.K! I can talk about. Settled out of court and everything. We agreed to stop stealing from them just as soon as they agreed to stop stealing from us! Everyone was mutually dissatisfied. Pretty typical in brokerage firms.

If you think that Charity downpayment scam is bad, look what is going through congress:

At a Housing and Community Opportunity Subcommittee hearing held two days before H.R. 5121 was filed, FHA Commissioner Brian Montgomery pitched the administration's FHA Modernization Act, which he said would enable FHA to reach deeper into the pool of prospective homebuyers

This bill has the support of builders, bankers, NAR, etc. This FHA Modernization Act wants to "modernize" the FHA so the FHA can also use no downpayment, neg am type loans. Plus raise the limits.

I guess they just can't stand the fact that there are a few people (especially low income) out there who are not FB'd.

I guess they just can’t stand the fact that there are a few people (especially low income) out there who are not FB’d.

I guess they just can't stand the fact that certain people have no business in homeownership and should be left alone (behind) completely. Do these communists even believe in the free market?

Peter P,

Did you "sit" for this exam cycle, or are waiting for the next? If so how'd it go?

Headset,

I can't believe we're even contemplating this. If we're giving away "free money" to illegals and people with FICO's below 500 who's gonna rent all that "income property'?

Did you “sit” for this exam cycle, or are waiting for the next? If so how’d it go?

CFA Exam Tomorrow... :(

My chance of passing is about the same as a RE soft landing.

Peter P,

Not by any means to put you in a negative mindset but most folks don't pass the exam the first time. So, no big either way. But you'll do well (especially b/c you're already have your CBA under your belt!) Used to be if you sat for CFP you could pass portions and retake the others next cycle. Last I heard it's an all or nothing deal.

DinOR,

Sadly enough, the renters in the near future will be the defaultees who bought during the bubble. The rent will be cheap alright, since the landlords will be guys with cash who will be able to buy those homes at post bubble pop prices.

I have seen this happen in Texas after the oil glut, and in Denver in 1990. It may be happening again in Denver now, that city has the biggest real estate price sine-wave anywhere.

Headset,

Whoa! Yeah I hear ya, Denver's economy just seems to be detached from the rest of the country and I'm not sure why. I'm sure you meant it in jest but I just don't see a lot of "cash flush" investors waiting in line to impale themselves swooping in to pick up bargains. Especially apartments. Somehow between the condo conversions and the conversion back to apartments and the lawsuits that are sure to ensue most of the well healed will likely steer clear of what is certain to be a mess. IMHO.

DinOR,

I was thinking SFH, I never thought about apartments. Now that you mentioned them, I agree with you 100% on apartments.

But if there is a a glut of homes on the market (and if the prices fall), and a large mass of people looking to rent, it seems that a business opportunity comes into play for those with cash. (Horrible thought, what if they are a Chinese PLA investment group).

@Red Whine,

Yet another brilliant rant --thanks! My favorite part:
It’s called NEGATIVE cashflow because the only people who might suffer from it are NEGATIVE people who are AFRAID to liberate equity.

This is totally O.T., but I remember a discussion a while back about penny arbitrage (selling pennies for scrap metal when the cost of the metal used to make them --mostly zinc-- exceeds the value of the coin itself.

Check this out:
http://money.cnn.com/2006/06/01/news/newsmakers/penny/index.htm

Anyone know if public scrap metal/recycling yards are willing to buy pennies?

Red Whine,

All those years of crunching numbers to calculate a bond's taxable equivelant yield have been wasted! I now see that. I see that I have been worshipping "false gods" and am ready to submit myself to total understanding, total devotion to the new paradigm! What a fool I've been.

HARM,

I didn't realize there was a "penny lover's club". Also interesting to note that Zinc producing companies are charter members. I'd heard when I was a kid that a lot of the old gangsters had some of their money in gold bars which they kept in the "upper tank" of the commode in case there was a fire? Then there's the "fence post bank".

Let me see:

Selling FSBO - FOOL!

Renting Home - FOOL!

Paying off Mortgage - FOOL'S FOOL

Seems like Congress will have to enact a FOOL TAX. Only the FOOLS will have money.

I’d heard when I was a kid that a lot of the old gangsters had some of their money in gold bars which they kept in the “upper tank” of the commode in case there was a fire? Then there’s the “fence post bank”.

Wow, better let Surfer-X know about this. He should check for that before he performs his next "upper-tanker"!

If the zinc in pennies costs 40% more than the penny itself is worth, then why shouldn't I convert all my available cash to pennies and sell them to a local scrap metal dealer? Rinse, cycle, repeat.

I should become a zinc millionaire in no time, right??

Headset!

Haven't you learned what Red Whine has so graciously shared with us (and you and I no more to he than Adam?)

Oh, my favorite psalm:

"Even underaged minors and vagrants"

Look for these to become part of our daily language shortly.

"Oh, I don't look at me home as in investment" or,

"We've never looked on our home as our retirement" or,

"I view my home as an investment in my lifestyle" With added emphasis on "lifestyle" as in, you wouldn't get it (low life). Translation?

We are so screwed.

HARM,

After you've hung around X for awhile you'll never look at an upper tank the same way again!

Harm,
What's facsinating to me is that there are numerous instances of California and New York local publications scoffing at some of the what they view as "conflicting" information. I've even seen a few claim that reports of jobs leaving California, wages unable to support housing prices, and the expected decline in sales as nothing but the conservative media trying to basically attempt to topple poltical ( liberal) influence. I'm dead serious and thought it was strange because it is usually the conservative media blaming liberal medias for being inacurate. It's almost like the opponents of anything negative in CA economic futures are viewed as those who can't possibly be right since California is unfallable.

Look at the Google Ads!

"Your own easy-to-manage real estate web site."

Perhaps we should become RE agents. 1 for every 52 Californians is not too bad. I can easily see a world in which there are 1 agent per person!

Perhaps I should skip CFA tomorrow and start taking RE classes.

Peter P,

No! Don't do it!

Interesting NYTimes article on the Economic Zeitgeist...

http://tinyurl.com/lem5g

"A conviction of fairness..."

Lottery Ticket Baby Boomer: What's not fair about betting $500K of the bank's money and winning $300K? Oh you were too afraid to play? Sorry to hear that, but keep working at that job though - you'll make it up in 10-20 years at which point we'll tax the hell out of it to pay for my retirement...

Bah.

I just stopped working on my revised Black-Litterman model and instead began working on my Realtor(r) website.

To think, I wasted all this time learning computer science, business, finance, economics, math and statistics. All along I could have just been selling houses and making an easy living. And with a leased Lexus, to boot!

I just stopped working on my revised Black-Litterman model and instead began working on my Realtor(r) website.

How about a Randy-Peter model that shows that housing value cannot go down? We can start selling NAAVLPs to underaged minors. Can't afford that new playstation? We give you a loan!

I just got a letter saying that I have been pre-approved for a HELOC. Looks like actually owning a home is no longer required for that.

Yea, I get those still too even though we sold over a year ago. The funny thing is that my credit rating is apparently improving given that the last one I got was for 120% of the value of my last home. LOL.

Don't laugh about selling NAAVLPs to minors. I was thinking we could create a financial instrument, which we'll call a collective savings account to avoid NASD and all that unpleasantness, by which people can invest in the groups total return. The fund will be used to pay for 1%-3% down payments so people can get NAAVLPs on nice condos and starter homes. Then a their returns when they sell will go back to re-compensate the fund for future down payments. In just a few years everyone participating will own over 100% of their home's value. This will work perfectly because it always goes up.

You just have to recruit new members all the time, as your payout is based upon the number of people you recruit, and they recruit, and so on. Pure genius.

Jon,

But to say that realtors are evil for putting a self-serving spin on the facts is like handing out speeding tickets at the Indy 500 or asking someone not to smoke in a burning building.

I am all about caveat emptor, and agree with your observations but for one important distinction in this particular case:

Realtors are making forward looking statements about something they are "selling" as an investment.

We have rules about such things, which everyone else selling investments has to abide by or risk fines and jail time. Realtors are selling "investments" much larger than most people will encounter anywhere else in their entire lives. Why do they get to make shit up when your stockbroker cannot?

I'm a free-market biased person. But consistency wins out over free market ideals. Either turn all investments loose on everyone with no regulation or bring Realtors under the same controls we have in place for everything else.*

If they want to sell a home to live in, raise your kids, and plant your garden. Fine. They can say anything they want. But the minute they start giving out financial advice they cross the line into territory that should be regulated.

--

*In reality I do not think investments and finances should be unregulated. The simple fact is that, like nuclear reactors and aircraft engines, financial instruments are complicated beasts which are truly understood only by people who study long and hard at learning lots of theories and skills. For this reason, asking someone to caveat emptor about investments is unrealistic.

Why don’t we just put up a very fancy looking Center on Economics and Housing Trends and Policies website (unless that name is taken) and write our own articles?

How about...

National Association for the Advancement of Very Leveraged People (NAAVLP)

I love it. I'll see if i can register some domains this weekend.