patrick.net

DinOR,

It looks like CME housing futures may be DOA. There has been no liquidity and very little interest at all. I realize that new products can take quite some time to become established. But wouldn't right now be exactly when the most interest should be seen in this market: a period of uncertainty? If there isn't enough liquidity to imply volatility during volatile times, then what will this market do during "normal" times?

http://www.humaneventsonline.com/article.php?id=15963

It looks like CME housing futures may be DOA. There has been no liquidity and very little interest at all. I realize that new products can take quite some time to become established.

It is so bad that there is no "market" price. It is much worse than HedgeStreet.

Randy H,

I must admit I haven't been tracking them all that closely but I felt they might be slow gaining traction out of the gate. I certainly felt there would be more interest but remember you still have major banks like Wells Fargo wanting to "get in" on the sub- prime lending market in a big way! Two years after the whole fannie/freddie thing has blown up and I'm just now seeing articles in Bankrate even acknowledging this HUGE event. So don't look for vision coming from the lenders until it becomes absolutely necessary! Most of us thought that Schiller may have rolled this out TOO late and couldn't visualize ANYONE wanting to take a long position!

SFWoman, I see that you go to socketsite.com.

Is Noe Valley as prime as Marina? What makes it prime? I am very ignorant about SF, so please forgive me.

Peter P,

That IS bad! But like I say when the lenders become more in tune with the gravity of their situation the liquidity will be there. Right now to take a sizeable short position would be like conceding defeat and no one wants to be the first (yet).

Right now to take a sizeable short position would be like conceding defeat and no one wants to be the first (yet).

I doubt it is even possible to take a short position at all in those futures markets. :(

After all, investors who’ve bought RE are still banking on more price growth. Only 1/3 people think there’s a housing bubble.

In this case, they should be going long on the contracts.

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Glen Says:
You may want to check out tejon.com.

i did. half their business is in real estate and property development of their land holdings. if you can't beat em, join em, i guess...

how they develop the land is up to them, zoning permits depending, but they will inevitably have to operate in a market where land prices are in a land speculation bubble, and their pricing patterns will follow suit. you are suggesting a market-based approach on an attempted risk management footing to bail yourself out of a land speculation bubble, and my 2c is that it ain't gonna work, and it's just trying to be 'clever' in a pure market mentality. of course, the received wisdom these days is that markets are everything.

However, I do not deceive myself into thinking that my abstention from purchasing defense contractors or tobacco companies will in any way hurt their businesses. Because for everyone like me who abstains from purchasing such stocks, someone else will be happy to step in to take the profits. Taxation and regulation are much more effective ways of policing the market than “ethical investing.”

the 'someone else will just do it' isn't really an argument for ethics. but do as you see fit.

risk of law suits is one thing. just trying to be ethical inasmuch as you can is another reason. they are two sides of the same coin -- the law suits come about from the legal system punishing unethical behaviour. sometimes the only way to convince people to do the right thing is to punish them financially, unfortunately.

i see our resident progressive who however dislikes corporate social responsibility and is a market neo-liberalist also thinks it's ok, and is anti-environmental and anti-sustainability to boot.

THIS WEBSITE OFFICIALLY SUCKS ASS
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I can understand your frustration (we discussed this at length in the "What Now?" thread), but, hey, none of the moderators here "owns" the site. That honor is reserved for the site founder, Patrick Killelea. If you have some constructive criticisms or suggestions, I recommend contacting him via his email (p@patrick.net). With the emphasis on CONSTRUCTIVE (and preferably polite) criticism.

skibum Says:
The funniest incident was this one: Santa Rita Ave, which by many accounts is the epicenter of the epicenter (Steve Jobs lives a block away, etc etc.) has a tiny bungalow on a tiny lot for $2.5M, DOM >60. This is the neighborhood where Google money buys adjacent lots, tears down beautiful old bungalows, and builds hideous manses with footprints covering 90% of the property. She proceeded to show us in excruciating detail the recent sales of similar lots for $3M, and how $2.5M is a steal after the “correction,” basically pointing out that the house doesn’t matter - it’s the property it’s sitting on for a teardown experience. She even hinted that the next door neighbors were old, and might kick the bucket soon…

good point. i think a lot of the speculation and the overpriced bungalows is meant to have an implicit redevelopment dividend -- after all, you might get a permit to build a 40 storey glass tower on it one day...

so you should buy it, then buy the place next door, coalesce the titles and build multi-residential to house google workers after you bribe the zoning authority to give you a permit! easy peasy.

the market got us into this mess, and, by golly, my faith is so great in markets that i'm going to find a way for the market to get me out of it... [dies in spent and frustrated old age trying...]

Peter P,

That sushi date will have to wait a bit longer. Thanks for offering :)

DS,

I've already explained time and again why I don't like government subsidies except in cases of market failures. As for corporations, I don't think it's the job of corporations to worry about responsible behavior. What they should do is have inspired leadership and long term thinking. A lot of what you call social responsibility is just smart long term thinking.

Social responsibility is best governed via proper government oversight. A perfect government needs to be able to be disinterested and lay down laws that avoid moral hazards by corporations and individuals. This is the polar opposite of the current government, where everybody is shouting for their own piece of pie.

I understand government oversight is imperfect, and figuring out the right level is a difficult matter. However, I can say with certainty that the current American system is FUBAR.

I don't believe problems can simply be solved by throwing money at problems. If that means I sound unprogressive to you, then I think I'm just going to have to live in the shadow of your disapproval.

As for corporations, I don’t think it’s the job of corporations to worry about responsible behavior.

I agree. Same for individuals.

However, corporations or individuals who put serving the world ahead of pure profit tend to do better.

DS said:
i see our resident progressive who however dislikes corporate social responsibility and is a market neo-liberalist also thinks it’s ok, and is anti-environmental and anti-sustainability to boot.

Sean,
It sounds like you are accusing me of hypocrisy. I would respond, except that I find your comment completely incomprehensible and nonsensical.

As for anti-environmental and anti-sustainable.

Can you back that up? Just because I'm not willing to support every harebrained "environmental" initiative out there doesn't make me anti-environmental. I don't even know where you got the impression I'm anti-sustainablity. I might be pessimistic about humanity's odds of surviving past the next 500 years (rapidly accelerating and powerful technology advances, backward and superstitutious thinking - maybe we can beat it, and global climate change, and diseases, and crazed zealots, and our exponentially ballooning population...)

This society is still in denial over the most fundamental issues of sustainablity. We, on this blog, are still talking as if population growth is the proper response to an aging population, rather than see if we can support the aging population with a smaller (thus more sustainable) population. Americans are governed by a political leadership who believe God has created Earth for humanity's benefit and provided just enough resources for the duration of our occupation. Can we even seriously talk conservation or sustainability when these people believe they'll be raptured up before all the oil is out of the ground?

Glen, astrid,

C'mon, social engineering & government paternalism is "for the children", remember? You... do.. like children... don't you?

Peter P,

Yeah, I just don't understand why, outside of bad government policies (esp. tax policy) and shortsighted corporate faddism, why environmentalism runs opposite to the financials.

HARM,

I've compared child rearing to pet parenthood here. I think I'm already totally screwed on that account :) Nah, I get along with pets and small children, I'm just not ready to commit to either.

Global climate change is the last thing we should worry about.

Yeah, I just don’t understand why, outside of bad government policies (esp. tax policy) and shortsighted corporate faddism, why environmentalism runs opposite to the financials.

Environmentalism is the reversal of cost-socialization.

The world will better if we respect each other. As simple as that.

Peter P said:
Environmentalism is the reversal of cost-socialization.

When you say cost-socialization, are you talking about the imposition of negative externalities by market actors? If so, then I would agree that good environmental policy can force market actors to internalize negative externalities (like pollution).

The best way to do this is through the creation of market mechanisms which incentivize less environmentally destructive practices (eg the creation of a market for pollution credits) not through direct intervention in the market (eg: subsidies for "clean energy research").

Market is not everything and cannot solve every human problem.

Government policies are never efficient, judged by the market's criteria.

But mixing the market and the government will most likely create new problems worse than the ones the mixture is designed to solve.

When you say cost-socialization, are you talking about the imposition of negative externalities by market actors?

Yes.

The best way to do this is through the creation of market mechanisms which incentivize less environmentally destructive practices (eg the creation of a market for pollution credits) not through direct intervention in the market (eg: subsidies for “clean energy research”).

I would love to see that. But I really doubt it will happen.

Market is not everything and cannot solve every human problem.

Only because humanity is the problem.

GC,

Governments are successful when they achieve the highest possible level of overall social utility. Markets are successful when they achieve the highest dollar amount. However, achieving those dollar amounts (even ignoring the problems of monopolies and monopsonies) may lead to human misery and short lived societies. I think the property role of government is to mitigate the problems and unsolved issues from a free market.

Things always get a bit more iffy when government gets its hands in too many things and end up on both sides of any economic transaction.

Governments are successful when they achieve the highest possible level of overall social utility.

Absolutely true. As a utilitarian, I also link utility to morality.

I just want to point out the difficiencies in each. Both socialists and Adam Smiths are wrong.

Governments are successful when they achieve the highest possible level of overall social utility. Markets are successful when they achieve the highest dollar amount.

It also follows that the "best" set of rules should cause market and social utility to converge.

The 2M+ market has been dead since last winter. I've been tracking properties in Saratoga and LAH in that range, and most (90%) of the listings there have been around for at least 6 months. The DOM data is just not accurate cos' they keep getting resurrected as "NEW LISTINGS".

However, the 1M+ sub1.5M market seems to be still doing quite well (comparatively speaking). If this segment doesn't soften up, we won't see the 2M+ slashing prices by a meaningful margin. The 1M+ market has been strong becaue banks are still giving out toxic loans left and right.

I need to see a few 2M+ properties coming down to 1.5-2M range to declare it an initial success. All these barely 2M properties were just around 1.2M 5 years ago, and the shitter the property is, the bigger the spike, which is frustrating.

OO,

i.e. the $150K-300K/yr families with school age children are the last to capitulate. Or also the $70K-150K/yr families looking to move up?

Are you monitoring any close-in houses selling for 500K-1M? If both are equally strong, then we might see a fall off in the $1-1.5M when the investor owned 500K-1M suboptimal houses get tossed on the market.

I think the property role of government is to mitigate the problems and unsolved issues from a free market.

I agree. Government should be the umpire, not a player. Government also should not attempt to rewrite the rules to favor certain teams. Unfortunately, this is an ideal which is seldom realized.

Governments are successful when they achieve the highest possible level of overall social utility.

not necessarily. sometimes (always?) they have to meet individual obligations of citizenship, and respect basic human rights of personhood. this is very clear in all expressed and implemented policy. (although the repubs do their level best to turn it on their head, and there is a certain disregard for the plight of the poor in the US.) the highest possible level of overall social utility might be to pay judge dredd death squads to annihilate anyone addicted to drugs, the poor, the homeless, etc, but fortunately they are informed by a different ethic. you won't find the mission statement 'we achieve the highest possible level of overall social utility' in any govt dept or at the white house, although they certainly want to be efficient in carrying out their charter -- that's just a layman's misconception as informed by hazy neoliberal 'ideas in the air'.

i.e. the $150K-300K/yr families with school age children are the last to capitulate. Or also the $70K-150K/yr families looking to move up?

There is no way a 150K family can afford a 1M house even with 30% down.

On the other hand, banks will put a brake on toxic loans only after the wave of foreclosure, not before.

astrid,

I think condo is dead. But unfortunately a dead condo market is not helping out (or destroying) the trading-up process, at least as of now. Most condos are sold to first time buyers by developers, not homeowners.

If, IF, the first time buyers are still buying, since they are not buying new condos, they must be buying SFHs or townhomes from existing homeowners, which is actually helping the homeowners to upgrade, hence the support for 1M-1.5M market. Transaction volume is much lighter, but still happening.

The key to slowdown is really shutting down the stupid toxic loans. People will eventually choke on their toxic loans, but the lack of action from banks and government will just lengthen this process.

Peter P,

actually in sort of good school districts today, anything below 1M goes real fast, still. 1.2M seems to be the acceptable price point, and pushing beyond 1.5M is almost impossible.

I don't think these $150-300K families are first time buyers. They must have bought before and are just rolling their equity from the cashed out property into the traded-up house.

DS,

I'm not particularly fond of the Anglo-Saxon individual determinism or the Anglo-Saxon moral/ethics systems. It's a false dichotomy that muddies the real issues, hard decisions that have to made if our society is to continue.

Just to clarify, do you believe governments should arbitrarily enforce certain values in favor of others? Acting with taxpayer money, against the individual taxpayers' interests?

Away from social utility prespective -- how are you finding those values worth enforcing? through ethics "discovered" by a dead white male elite??

I don’t think these $150-300K families are first time buyers. They must have bought before and are just rolling their equity from the cashed out property into the traded-up house.

I believe people usually trade from 750K to 1.2M. How is the 750K townhouse market doing?

OO,

So basically, in nice areas, there's nothing but condos for under $1M? Ouch! Any townhouses or people trading up from slightly more marginal areas?

So basically, in nice areas, there’s nothing but condos for under $1M? Ouch! Any townhouses or people trading up from slightly more marginal areas?

Not really. There are quite a few townhouses under 800K in acceptable neighborhoods.