patrick.net

Ben won't get into the Volcker mode, he will be replaced by a Volcker.

I don't think 2007 will be the era of high interest rate, I actually see rate cut starting from end of 2006 or early 2007.

China needs us before the 2008 showdown time to show off to the rest of the world what a great country it has become. You cannot imagine how important this is to the face of PRC, and how far they will go to make sure not to mess things up.

So we will have the full support of China money before then, I will personally count on the China "growth" story and inflow of cash from China up till that point. After the showdown? I honestly don't know, but that is when it will get really interesting.

Whatever we buy from China before 2008 will get recycled right back to us for political reason, so the big crash will be after 2008 summer. That will tie in nicely with the upcoming election in this country too.

I think the fed halting the rates is kind of a mixed blessing for me and my situtation. The message to the RE industry and buyers alike is that the boom is now dead and phase one of the collapse is on it's way. The looming question is how long will it take to resume a normal appreciation cycle, if that will ever happen. Putting a pause on the rate hikes probably means a temporary slump where prices will not go up that much, but probably won't go down either.
This is a mixed blessing for me. It is good because there will perhaps be enough inventory activity to help the economy limp forward for the next year or so. This is good because that means the economy and job situation might still be solvent by the time I move. On the other hand, it is also bad because there seems to be a rather large number of people I either meet, read about, or know who are moving out of the state and flooding the aforementioned areas I am moving to.
I think the industry knows that there is still a considerable numbers of areas in the country that didn't experience the boom at all, and causing upward pressure on residents in California, New York, etc will cause a rush for these areas, as already seems to be happening. The indication is that the SE and Midwest could very well be seen as a potential for future economic growth that could counter the potential staggering that CA and NY might experience. This could be bad for me because an accelerated influx of people into this region will jack the prices.
if the rates were continually raised, home prices would probably fall, and priced out people might have felt like they could stick it out for a few more years, hence not flooding the SE and causing a vicious cycle to continue there as well. We will see.

But what are you trying to accomplish anyway?

I'm trying to buy a house as close to the utility/price intersection as possible. I think that South Marin will hit strong price support points on the way down, and I want to know where those are so I can buy at the optimal time -vs- cost point for myself.

Here, if left to the MLS, I won't know that information until 6 months after the fact, if ever.

Unrelated, I had to tell you guys this: While driving to the flea market this weekend, I saw 2 giant billboards, each only 1 mile apart, yet with totally opposing messages even though they were from the same company. The company is the Learning Annex. As you may have seen, the Learning Annex is responsible for most of the " Real Estate Wealth" conventions sweeping the country. They have had billboards all over the place, including flyers in newspaper stands that claim that you can "make a million in a weekend!" and so forth. The latest convention has all kinds of unrelated, yet famous people that can supposevly unlock the secrets of doing nothing, having no education, yet making millions off of... doing nothing except flipping houses. George Foreman, Al Gore, and a few RE industry specialists are all supposed to make appearances at this latest convention.

Anyhow, the first billboard said " Real Estate Wealth Expo!" ok.. I've seen these for years.

The 2nd one said: " profit from the Real Estate Shake up!".... woah! I read the bottom of the billboard which had a much smaller Learning annex logo. This is something I don't think I've seen before, which is one company simutaneously projecting totally contradictory messaging, one on how you can make money in RE, and the other about making money off of the very people that were according to the first billboard- supposevly making money off of RE, but lost their shirts. The 2nd billboard was very much leaning towards a RE fiasco. I'm sorry, but that's totally fucked up!

What's more is that I've recently been seeing TV ads for Ditech that have done a 360 degree switcharoo with the kinds of advertising they did just a few months ago. They used to say: " Get a 200k loan for only 800 a month!"

Now they say:" Are your payments rising because you took out an ARM or IO loan? Have Ditech turn your loan into a 30 year fixed for only "x" amount of dollars!" - Once again, a total reversal of a company's business plan. This actually kind of pisses me off because any homedebtor should see right through the bullshit and see how they've been taken for a ride, and now they are about to be taken by another.

Mortgage Brokers are foaming at the mouth visualizing a fresh wave of "re-fi's" (and attendant commissions) as FB's squirm to get out of the ARM's/Neg. Am's/"Pick a Payment/NAAVLP they JUST put FB in 24/18/6 months ago!

Ain't happening.

The "low hanging fruit" (re-fi time bomb) they VERY PURPOSEFULLY "built in" to their book of FB clients is NOT PAYING OUT!

FB's have taken a sudden interest in numbers. And they're not good. Even the guy that's not exactly "the sharpest tool in the shed" has figured out that all the fancy pants "shuckin' n jivin" financial maneuvering won't save his a$$ now!

What's the frickin' point of refinancing an asset you over paid for in the first place at this point in the game? Lower your payments? Pffft. Whatever. The goose is cooked, and FB knows it.

Every swinging dick (and his long lost brother) tells me "We're SELLING"/"We're going to "cash in"/"We're thinking about selling?/"I'm listing the place with my sister-in-law"/"We HOPE we can just sell it" yada yada yada! And all of this with disingenuous bravado.

I've heard ENOUGH for TWO lifetimes!

The Fed can do whatever it's going to do! I DON'T CARE (and neither should you).

As to getting an offer returned, unsigned:

I believe the law is that agents have to *present* every offer to their clients. There are two problems here. What constitutes "an offer" can sometimes be contested. In our case our offers are pretty bullet proof as we had our attorney prepare our first one and give us a script & the forms for preparing the rest. But, an agent might try to argue our offer is somehow lacking.

Secondly, what is "present". It could be calling their client over the phone, saying hey, this bozo wants to offer you 35% under your asking, and recommending rejecting it. Nothing is illegal about that.

When you get an offer returned unsigned that's just a rejection. The offer is returned to show they "presented" it. I'm skeptical there's anything here to sue or complain about. We've only had 1 case where the agent refused to even accept our offer, not because we were lowballing (she didn't know that yet) but because she said her client would only accept offers from licensed brokers. That might not be legal. But whatchya gonna do?

"Every swinging dick (and his long lost brother) tells me “We’re SELLING”/”We’re going to “cash in”/”We’re thinking about selling?/”I’m listing the place with my sister-in-law”/”We HOPE we can just sell it” yada yada yada! And all of this with disingenuous bravado."

Dinor- This last weekend I repaired and placed 2 rather nice mowers for sale on CL. I usually sell them within a day or sometimes an hour or so. I got no calls yesterday, which was perplexing. I was wondering what had happened and maybe I had placed them in the wrong category. A swift search on CL showed that there were pages and pages of lawn mowers. Most were either free or next to nothing. Brand new $400 lawn mowers for $50. I started reading many of them and on at least 70% of them, it was mentioned that they were selling because they were moving. On top of that, some even mentioned that they simply needed the money.There is around 50% more mowers on the site than just a few months ago.
While it's sort of annoying that there are this many cheap lawn mowers on the site, it is very telling about what is going on.I use it as a gauge. I can obviously see that there are tons of people either selling and getting out, or simply getting out period.One of the ads even had an open house sign in the background. It could also be that many of these FBs are selling whatever they can to scrape together cash. I've been recently looking for a older Corvette. A few years ago you'd be lucky to find just a few. Now there are pages of them, and some for as little as $3500 bucks.

Santa Clara County inventory seems to have reached a sort of plateau. Roughly 2 out 3 of the listings my agent sends me have some sort of price reduction. I used Zillow to look up the last two units that sold in my building. It looks like they both sold for just under the asking price earlier this year. I am also very glad I locked in my low rental rate - my lease expires next year and these rent increase stories are becoming more frequent. However we have been paying under the market rate for several years now - a good thing is not likely to go on forever. Oh, and as far as the Fed is concerned I have no idea or opinion.

SHTF,

Well we've ALL heard of the "Cardboard Box Index" so why NOT a "Desperately Advertising Anything For a Buck" Index?

JC!

The scrap iron weight ALONE has got to be worth FIFTY BUCKS!

"One time we had a hairball". Lit up the whole stinking hill! When it was over, not ONE stinking d@nk body! Not one. BUT THAT SMELL! That gasoline SMELL!

I'm OFFICIALLY changing the name of this web site to:

HOUSING APOCALYPSE NOW!

(It's a freakin' APOCALYPSE I tell you)!

"Everyone gets everything he wants". "I wanted a mission, and for my sins they gave me one". "When it's over, I never want another".

"The river snaked through the war like a main circuit cable, plugged me straight into Lereah"

Sorry for the long post!

There are 2 recent interesting WSJ articles relevant to this thread. The first is from this past Saturday, in part posted below (I think WSJ online is subscription only, so sorry for the long post). I tried to cut out irrelevant parts. The article is depressing. It probably explains in part why rents are going up. It's interesting though, that the profiled family can't sell their DC house to buy into the SV housing market insanity.

The second is from today, which speculates that CPI will be altered slightly, to be published out to 3 decimal points instead of the current 1 decimal point. I wonder if the "higher ups" are concerned that small fluctuations in CPI are going to push the Fed to overreact one way or another.

Boomtown Redux:
Job Market Heats Up
In Silicon Valley

Mr. Odell calls the move stressful. "Being without family has been tough, and working at a start-up, the hours are crazy," he says. Sling co-founder Jason Krikorian says he has taken Mr. Odell out to sing karaoke and given him a Starbucks card. "When I have an individual who's uprooting to join us, I think a lot about" what the person has to go through, Mr. Krikorian says.

SQT,

The guy who sold you that train table may not be a FBer at all, but someone going through that mandatory great purge stage of life. I know when we hit that wall we took advantage of a move to just unload everything we could at any price, asap; the rest getting donated and the residual going to the landfill.

skibum,

The scene:

Dimly lit smokey tavern (complete with 8 year old pickled eggs in a jar of 40 year old of vinegar) AND...... it's Karaoke Friday Night!

Mr. DinOR (who's been here since the close of the market) is now visibly, blatantly and obviously.......... stinky.

As he careens wrecklessly (and unapologetically) through the crowd of largely sober patrons he teeters toward the DJ's "sound system".

Brushing this two bit punk aside he clutches the "mic" like a salty, veteran performer. DVD's spill out on to the "dance floor" and he spies something from "back in the day".

Fumbling, (and after flailing and awkward length) he manages to get the damn thing to work. He squints hard to glean the words scrolling across the elevated screen.

This The End,

My o......nly friend, The End

(Always cheers me up)

The Fed, when it was created, was created for the ostensible purpose of keeping the dollar strong. Considering how miserably it has failed to do that since its creation, why would we expect it to do any better now?

It was, is and will be, a political tool. The Fed will do whatever its masters think is best for them.

Yes. Much as I would like to see Bendover pull a Volcker and raise rates to the sky to pop this thing quickly, I am far too congnizant of the Fed's politically-driven past behavior to expect he will do anything but obey his political masters.

It doesn't matter which corrupt, fossilized party of the moneyed elite gets "elected" this year or in 2008. Nothing will change the fact that politicians and their prime benefactors (banks, CC companies, HBs, etc.) stand to lose far more if rates are raised vs. lowered. I expect there will only be a short pause, then they will resume slashing --to zero if necessary.

Downsides of raising rates (from the Fed/Congress/Administration's perspective):

1. Could trigger a severe recession. FBs don't like severe recessions. FBs tend to vote regularly and tend to punish incumbents who favor taking away the punchbowl.

2. Could trigger broad-based deflation. This will strengthen the USD and make dollars repaid (to foreigners) on our $9 Trillion National Debt more expensive in real terms. This is bad for both taxpayers and our balance of payments.

3. Deflation --or even just LOW inflation-- would also gigantically increase the real cost of future Medicare/SS obligations promised to retirees (which are indexed to the CPI). Thanks to hedonics or just plain leaving shit out, the CPI currently does a brilliant job of UNDERstating very rampant true inflation, which means USDs being paid to current retirees are LOSING real value with each passing day. Reversing this carefully constructed arrangement would be a very bad thing (for the government).

Don’t mince words HARM, tell us how you really feel.
:lol: my pleasure!

As an agent, I can tell you being in the middle of the lowball buyer/unrealistic seller menage et tois is pretty uncomfortable. So is the swelling the morning after your seller let’s you have it for bringing him a “ridiculous” offer you are under every obligation to bring.

George, given that you're about the last honest FL agent left standing, I totoally symnpathize with you. Again, I place the blame for any pain or "swelling" on the greedy unrealistic FB, not you. If they don't understand the law (or price to sell), it should not be your problem.

Its all the more incentive to qualify your sellers ahead of time. It they are stuck with little or no equity, have unrealistic expectations, and aren’t truly willing to bend over backwards to make the sale, then it isn’t worth my time. Let some other schlub deal with them.

I think you've hit upon the ideal solution, my friend!

-totoally symnpathize
+totally sympathize

George (and all other decent, reputable realtors),

While writing "lowball offers" (which is a misnomer as I'll explain), I recommend the following common sense:

1. Make sure you actually *want the house you're bidding on*. You should have the attitude, "if I could get that house for X, or a little bit more, then I'd happily buy it today and never look back (even if prices fall further)".

2. Be professional and courteous to the selling agent. Sometimes you won't get the same treatment in response. But you can't go wrong taking the high road. A surprising number of agents are professional and will say something like "Thank you for the offer. I think your offer is a bit/lot low for this seller. My client isn't interested in couteroffering at this time, but I'll contact you if that changes in the future".

3. The offer shouldn't be a "lowball" at all, but what you as the buyer really truly think the house is worth. I like anchoring in negotiations, but in this case prices are already so ridiculously high that simply offering the true value of the home is a massive low end anchor. I'd personally be happy to pay a *reasonable* premium over my guess at the house true value for the privilege of not waiting for the absolute bottom. I think that's a reasonable attitude.

My current formula is actual or best guess at 2002 home value minus 10%-20% depending upon school district, condition of home, and how much my wife likes it.

Newsfreak --very sorry to hear about your job. But, at least you're not an over-leveraged flopper and are in a cash-strong position. You have options most FBs can only only dream of.

The offer shouldn’t be a “lowball” at all, but what you as the buyer really truly think the house is worth.

Sad, but I'm 100% sure that pretty much every BA seller at this point will regard a fair-priced offer as an insulting “lowball” offer. Kind of like the perma-bull Orwellian definition of "buyer's market" (tons of inventory, sky-high asking prices, no significant negotiations to be had on price).

Give it a couple more years, and it will be a different story.

Santa Clara County inventory seems to have reached a sort of plateau.

If inventory has reached a plateau at this time, perhaps the market will live another year. Median price is leveling off though. So there is no urgency to buy. However, there is no urgency to sell either.

However, there is no urgency to sell either.

There is if you're an underwater FB who's already spent all that guaranteed "equity" and is now seeing your "flexible payment" option-ARM adjust for the first time (but not the last).

China needs us before the 2008 showdown time to show off to the rest of the world what a great country it has become. You cannot imagine how important this is to the face of PRC, and how far they will go to make sure not to mess things up.

When is the 2008 Olympics again? Pluto will enter Capricorn in late 2008. And Capricorn is associated with snob.

How many weeks until the mid-term elections?

Not too many. But it will be 17 years before pluto enters the Aquarius New Age.

While it’s sort of annoying that there are this many cheap lawn mowers on the site, it is very telling about what is going on.

... That people have finally realized how inane it is to spend so much time/money/resources on a lawn? :)

So much water, so much fertilizer, so much pesticides... for what?

"If inventory has reached a plateau at this time, perhaps the market will live another year."

I just looked back at the inventory numbers I logged last year. It looks like August 2005 inventory fluctuated between 3700-3900. Inventory hit 4000 in early September and continued a slow climb to 4347 by October 21st. Inventory went down from that point and did not come back up until May 8th of this year when inventory was 4349. Current inventory stands at 5521 (SFH/condos combined, SC County, source: mlslistings.com). I wonder if we will see a similar inventory climb this September/October. Only time will tell, obviously.

MA,

Thanks for the Bend link and update. What a joke. To hear people in that area talk you'd think there were 99 Californians A DAY moving there! Well that certainly would explain 400% appreciation over the last 5 years would it not?

Up in PDX there was an accident with an Isuzu Rodeo and a Tri-Met bus and this poor guy was actually EJECTED out of the vehicle w/life threatening injuries and this 66 year old guy heists his wallet as he's laying in the street! www.katu.com. Is this pathetic or WHAT!

eburbed says
… That people have finally realized how inane it is to spend so much time/money/resources on a lawn?

i hear you.

Here in LA's sunny San Fernando Valley (river basin/desert) green lawns are de rigeur - and so are the $500 DWP bills every month.

You'd think that the Astroturf people would have marketed a new brand - something longer, lusher and greener than the stuff that they sell for sports - specifically designed to cover the average 5,000 ft lot.

No water, no pesticides, no mowing. And it would look a lot better and cost have less maintenence than the real thing.

eburbed,

My problem with this strange "cult" called Home Despot is that the latest trend is to have so many freaking gazeebos, koi ponds, decks and landscaping there's no damn room for kids to even play!

Hmm. Imagine that, a yard for.........kids? One indirect result of the bubble is the amount of money that has gotten dumped into these useless projects! Drive around and see how many people are actually getting ANY utility out of these albatrosses. Now I could see when it was well over a hundred degrees out but by and large the patio furniture etc. goes unused. What waste. I guess FB's feel the need for all of this crap b/c it's become the "standard".

"You're trying to sell your overpriced sh@tbox and you DON'T have "expansive decks" and a koi pond"?! No "extensive landscaping"? You're in trouble Mister!

So there's a house down the road that just sold over asking for $1,215,000, asking 1,198,000 listed on June 28th, sold July 11th - sounds bad for us until I tell you that it was originally listed April 13th for 1,358,000 - or at least that's when I first came across it.

Still not good for me as I can't afford that kind of price, but I can afford to rent :-)

DinOR,
Thanks for the inspiring Karaoke image - maybe you could follow it up with a rendition of "End of the World as We Know It" (REM).!

Here's a question I pose to everyone: it seems the general consensus is that the Fed SHOULD raise rates to combat inflation, but it probably won't because of political pressures. What happens if it doesn't, and even drops rates? Of course the obvious answer is rampant inflation, but what I'm wondering is what about down the road? How long will the average FB, Congress, the next President tolerate runaway inflation? Look what happened to Carter, for example.

I’m ashamed to call myself a conservative anymore. The fiscal policies of this administration and Republican Congress have been nothing short of shameful.

I still consider myself conservative (fiscally, at least). The current Republican administration is not fiscally conservative at all, so you shouldn't be ashamed of calling yourself conservative.

George,

From the excellent Volcker article you linked,

A wise observer of the economic scene once commented that "what can be left to later, usually is -- and then, alas, it's too late." I don't want to let that stand as the epitaph of what has been an unparalleled period of success for the American economy and of enormous potential for the world at large.

Sadly, this is exactly what the Fed and the current administration appear to be doing right now.

Randy H,

Just a thought on lowball offers. Why can't we just take out an ad or even use C/L and simply say;

Wanted: Reasonably priced home in the 92XXX zip code. Prefer 4 bd. 2 1/2 bath on larger lot. Older home o.k. Potential buyer is qualified to XXX,XXX. Please call (415) 555-5555.

and just see what happens? Or just use your trash e-mail and only call back the ones that are mostly sober. I'm sure you'd get some real winners responding but you only need ONE, right?

BayBear, excellent analysis.

1. Get a new, temporary phone number - like a disposable prepay cell phone. Also, a temporary Hotmail address wouldn’t hurt.

I know, I know - this is just plain cruel. So if you do this, please choose deserving targets :-)

Better yet, go to the open house wearing some really expensive clothing. Eat their food, drink, light up a nice thick smelly cigar (they probably won't stop you because you look like you are a potential sheep who has money), when you have the place just about clouded with smoke, offer them (with a straight face) 50% of the asking price and ONLY if they throw in a new BMW and a years supply of gas. Sometimes I have evil thoughts :twisted:

The first time I heard about alligators referring to housing.

I don't believe Kiosaki was the first one to use the term, but it's certainly come back into vogue in recent months (for obvious reasons) and is bound to get even more popular. Here's a good fresh post on the subject over at Mish's:

http://globaleconomicanalysis.blogspot.com/2006/08/beware-of-alligators.html

I don’t believe Kiosaki was the first one to use the term,

Who was it then?

I don’t believe Kiosaki was the first one to use the term,

Who was it then?

Though it pains me to give a shameless, self-promoting confabulator like Kiyosaki any credit, I suppose he could be credited with popularizing the "equity alligator" term. It would not surprise me, though, if it goes back years or decades --even possibly to the previous Florida real estate bubble of the 1920s. If I had an membership to the online O.E.D. or access to a good etymologist, I could probably find out.