patrick.net

Dinor,

I can say with complete confidence that the most regulated industry in the United States of America is the nuclear industry. I work at a nuclear power plant and I can't take a dump without having the paper I used to wipe looked over for mistakes. A tree must die before I can perform the simplest tasks such as turning a light on! I can't blame the government for the oversight. Making a mistake could cost hundreds of billions of dollars (lawsuits).

http://portland.craigslist.org/mlt/apa/219826329.html

Took 3 minutes to find this McAlbatross for under 2K a month. I could dredge up more but what's the point?

nuttyneutron,

Well pardon the sh@t out of me! I stand corrected. O.K, I'm in the SECOND most regulated industry.

Just kidding, (most of us here definitely appreciate what you do and I'd say overall we're pretty pro nuke/innovation here. The difference is the worst thing that can possibly happen to you (besides exposure to radiation that will leave your corpse horridly disfigured) is that you'll get fired. You'll still get your last paycheck.

We don't necessarily have to be found guilty of anything to be drummed out of the industry in disgrace, shackled for life w/legal fees you can never hope to recover, barred for life oh..... and fined more than you've ever made. When the NASD is done w/you exposure to lethal levels of radiation is starting to look pretty f@ckin' good. Other than that we're pretty lenient.

Jon,

At the risk of sounding very vulgar, I suggest we hire Mr. and Mrs. Serin for your production, along with Casey's former cellmate - white power Mike. You can be Tek Jansen.

Last line of the video, Mrs. Serin swoons in your arm and say "Tek, I bet you've had hundreds of girlfriends!"

As a matter of fact (and I can't believe I forgot this nutty) if you're under ANY kind of investigation whatsoever you're considered "radioactive". As in no one wants to be in the same lobby w/you let alone give you a job.

No matter your client connections or how much you've made over the years! You're damaged goods and good luck in your new career.

Dinor,

I only slightly glow in the dark:) I was not trying to goad you. I started work 18 months ago and am still amazed at the complete crap I have to deal with. I have been observing the RE industry and am confident that we are in a long slide. I will try and stay out of trouble with a new house, which I am looking for. I just can't find one at a reasonable price.

You are right about the whole "radioactive" part if under investigation, hell I have to report traffic tickets within 48 hours to my security department for them to reevaluate my status for "unescorted access". God what did I get myself into!

Allah,

I gave Randy an example of one place where it is not sticky (click here)….and although this is NOT the only non-sticky area, it was just easily available to prove my point, and since I don’t see Randy answering back, I can only assume that I’ve made my point.

Yes, you've made your point. You don't understand the difference between sticky prices and hard landing. I feel confident categorically stating that real estate (both residential and commercial) are sticky, as the term applies to economics.

That is simply because real estate is _not_ an example of a *perfectly competitive* market. You invoked Economics 101 earlier. Perhaps a refresher is in line. Only perfectly competitive markets can have efficient prices (in other words, not-sticky).

(And apologies to anyone who thinks I'm being too harsh or that I am merely being baited again.)

DinOR,

You are the man! The fool posted the message on a board and I'm using your link to bait the sucker.....then slap him like a 419 scammer. LOL
Thanks, I'll let you know if he "bites".

HITB,

I thought it was more like; wok-a, wok-a, wah?

Personally I find the thought of casey in an adult film revolting. And it’s not
because I’m particularly down on adult films. (Bow-chika-bow-wow).

Sounds like someones been watching Red vs. Blue

Doug H,

Were you talking about the Craigslist poster in Portland with a 4,600+ sq. ft. house (just reduced 64k btw) that is for rent/sale/lease/?

Allah,

Were are arguing semantics. Sticky is a specific economic term, and it is not what you are describing. You can reference any intro micro economic text to find the specific definition of sticky. It's no different this time than any other time. What may be different this time is the scale, scope, and psychology that affects the RE market. But I assure you basic micro economic mechanics will remain nicely intact.

Randy,

I am lost as well. I am illiterate in economy, so I may be wrong.

Sticky to me meant "slow speed of change". Just now I checked Wikipedia and it defines it as "a variable that is resistant to change".

Hard / soft landing to me means "how much of a change".

So if prices are sticky it will take a while to reach hard landing, if at all. Low speed, lot of distance and hence more time. But Sacto seems to be heading towards a hard landing pretty fast. So at least there, it is not sticky.

Rest of the country and BA in particular, could be a completely different story. The job market in BA seems to have more strength then most RE bears think. Even then, I don't think it is going to be as sticky as it was during early nineties. I actually think once it's done, most people won't be calling it as sticky behavior at all. But that's speculation from my part.

Unless, sticky means less volatility. So the change may happen fast, but the slope will be much smoother than daily gyrations of the stock market.

Different people have different definitions of soft/ hard landings/ crash/ correction etc. Maybe we all are saying the same thing, but using different words due to different levels of theoretical knowledge.

StuckInBA,

shouldn't you be the expert in stickiness? :P

sticky means that prices may take months or years to descend (or ascend i suppose), unlike the stock market, where valuations change in a matter of hours or days... houses also tend to be unable to lose as much value as stocks, barring natural catastrophes, due to inherent value of land and land use. for this reason, many ordinary people are drawn to residential property as an investment vehicle after being wiped out or duped in stocks, as they can 'understand' it, they live in one, and they believe it can't lose much value (limited downside, unlike shares/derivatives), and even 'that it can only go up (at 10% a year indefinitely)', because somebody told them, and there's a graph to prove it over the last 100 years... hence the saying 'safe as houses'

DinOR said:
"Were you talking about the Craigslist poster in Portland with a 4,600+ sq. ft. house (just reduced 64k btw) that is for rent/sale/lease/?"

He didn't say....just posted what I quoted. I'm waiting in the bushes for his reponse and will slap him with your link to the 4,600 bad boy if he gives me a chance. Hell, I think I'll slap him anyway....for being stupid.

I know nothing about the rental market in the Rose City and only what BA folks have posted here but it seemed TOTALLY out of the question for anyone to get that kind of rent up there.

More to come if he takes the bait......

Doug H,

Oh that's right. The original source of the "rental folly" was the guy that thought renting his Portland, OR home for 3K was like some kind of lay-up! LOL! I've got to be honest here. I'm just shocked by the accelerated pace with which our local market fundamentals are falling apart.

I swear just about every third posting is "rent to own/lease to own" challenged credit OK, just out of bankruptcy OK, pets OK etc. Two years ago this entire concept only existed (if it all) on commercial properties etc.

Then again OR has the highest per capita of self employed people in the country and as I've said before flipping is an "idea junkie's" dream! No regulatory body to report to and you can change your business model every day if you want to! I'll have to call Michael Anderson (our Bend, OR "insurgent") for some local updates. I owe him a call anyway.

Allah and everyone else,

Sorry to about all this. I've already emailed patrick with a request to strike down my offending comments. I really have no intention of starting a flame war with LILLL. (though I'm quite willing to participate in ones involving Hilary Clinton's running for the presidency or the right temperature to serve Brie)

Allah,

I tried your link from the post above and wasn't able to connect but tell me, is it the interview w/ Suzie Assad from Bloomberg? If so I HAVE heard each and every gut wrenching moment of that and Peter is totally unapologetic in his assesment of what lies ahead for RE! Suzie (normally bearish) and calling out HB (home builder/housing bubble cheerleaders, your option) was actually forced into a role of contrarian just to have a two sided conversation! Normally I agree w/most everything Randy H has to share (but "stickiness" ain't one of 'em).

LILLL,

When it comes to MEW (Mortgage Equity Withdrawal) the sky is the only limit! My problem with this (and my father always told me) is that doing the "work" is the easy part of the job, collecting? Now that's the tough part!

Saying I'll pay you from my house is like saying "eff off"! The guy's telling you he's going to pay you out of his house?! C'mon, I wasn't aware that houses were a liquid commodity! Tell this assclown to up and sh@t the money today (he can recover that expense from his "cash out re-fi" on his own time!) Right now, he needs to do what's right. He needs to pay you what's right. If you want (and I'm just that kinda guy) give me the invoice and the guy's phone number and I'LL call him!

astrid and LILLL are two of my favorite posters here. Not, "among the gals". Two of my favorites, period! Seeing you's two go at it is tearing my heart out (what little I have left). Please guys, please.

Allah,

Oh.... I gotcha. I'll check it out. I wasn't aware that Peter had time for a radio show? Michael Holliday and I are kind of working on that same concept. An "FB Hour" where John and Jill McDebtor call in and ask why their overpriced POS isn't selling! Michael and I kind of agreed that if we don't do it, someone else will! Do you have anything on where I can catch Peter's radio show too?

LILLL,

ALL these guys act like they ain't got the money! (And they're using yours!) When someone tells me they'll have to sell something to pay me it's like saying "I really am in a jam here, please take pity on me". I'm not buying it (and neither should you). They'll tell you they really are sucking it up to get you covered, then you see their car parked at the golf course. They're just buying time so they can deal w/other creditors that are more seasoned and not buying their cr@p. Please, please let me call this clown!

DinOR,

I'll do my best to stay out of trouble.

(Funny, I thought you handed your heart over to Randy H for trading on the futures market. That's what I did, I got $50 and stopped noticing panhandlers.

Dude, did I just start a flame war with my favorite Oregonian? ;) )

While various studies generally agree that some of the biggest risks of declines are in California and Florida, there are striking differences, reflecting different forecasting methods. For instance, a recent "risk index" study published by PMI Mortgage Insurance Co. ranks the Boston metro area as the seventh-riskiest in the nation in terms of the likelihood of price declines over the next two years. But Economy.com says that home prices in Boston likely bottomed out in this year's third quarter after a modest 2.2% decline.

Glad to see that Boston has bottomed out? Economy.com? WTF?

Allah,

Great radio clip! Peter is so funny! I love the way he was just slapping the caller (not so much around) but back into to reality? I also loved his comments about the home he rented in CT that he moved out of 6 months ago (it's still empty btw and being offered at 15% below what he rented it for 2 years ago!) Freaking hysterical.

The amount of money that I've paid over the years to financial web-sites/ subscriptions (Morningstar at 500 bucks a month?) is staggering! I'm telling you, not just "anyone" makes it into my "favorites"! With that one WAV file Peter (who I've always liked anyway) has just shot to the top of my list!

Thank you Allah! (insert cheesy smile while prominently displaying product here).

I should have noted that the previous post was an excerpt from and article on yahoo finance

SeattleStooge,

Hey, while were on the topic of lending standards (and I really do rec. Allah's WAV clip of Peter Schiff btw) he discusses the "drying up" of liquidity for mortgages at some length. One of the things I found interesting was an interview with the former CFO of GMAC where he discussed FICO scores and how the industry has it all wrong!

I'll see if I can locate it but what he discussed was the fact that someone that has (and has had) a really great FICO for a really long time is actually MORE of a credit risk (in many, not all cases) than someone that's at the lower end of the spectrum actually trying to improve their fico score! I thought what he called "mining predicitive data" very interesting. Basically he attributes really enviable fico's to an incredible run of "good luck". Steady employment w/growing income, no health issues, no marital issues etc. What his new service tries to define is those that either well merit those great fico's, those that are on the rise (and those that are best steered clear of). I'll do my best to learn about his "new model" and share where I can.

We all know that no one can be lucky (or unlucky) forever. The sun even shines on a dog's @ss some days!

Sticky to me meant “slow speed of change”. Just now I checked Wikipedia and it defines it as “a variable that is resistant to change”.

So if prices are sticky it will take a while to reach hard landing, if at all. Low speed, lot of distance and hence more time

Sticky just means that prices are NOT EFFICIENT. Thus the "variable that resistant to change".

It DOES NOT mean that prices cannot change fast. Actually, the contrary. It means that prices won't react smoothly, but in fits and starts.

Think of dragging a yo-yo covered with fly paper. It will follow you, it has no choice. But it won't do so in a straight line or smoothly.

I really don't know why everyone gets all worked up about this. Real estate prices are sticky BY DEFINITION. Wheat and crude oil are effectively *not* sticky, BY DEFINITION.

The resistance is in the transactional friction.

As to Allah's insistence on a new paradigm: fine. It will all be different this time. You could be right. Well, then quit trying to cherry pick micro economics to prove your case while simultaneously dismissing anything that you don't like as "not part of the new paradigm".

I'm only asking for consistency.

By the way, Allah. If you believe your stickiness position, then you're free to disprove my analyses. I'd love to hear your proofs.

SP,

What's up man! I actually listened to the interview several days ago and was fully intending to do a little research before I even shared the concept here. It just seemed like an appropriate time to insert it. I was pretty much prepared to take a "rath" from those w/excellent fico's and it really shouldn't be that way. The individual I'm paraphrasing worked at Equifax for years as well as GMAC. I'd like to think after 30 years he's learned a thing or two about the extension of credit?

I've had three conversations in the past week with people insisting that now is a great time to buy in the Bay Area. People think we are crazy not to buy right now since prices are declining a little. Is anyone else experiencing this with their peers? People are applying maximum pressure right now.

*unlurks*

Last thing lurkers like are watching the regulars have a mini-flame war. LILLL the said "ill-fated comments" are no where to be seen, just the verbal scuffles that resulted from it. Astrid, you're one of my favourite posters (along with most of the regulars). I have no idea what you said (just as well) but watch yourself! I hate it when my favourite posters get into arguments. that said I"ll go investigate your food blog now.

Only problem with a separate food blog is that I have to go elsewhere for those interesting discussions instead of getting them mixed in with the usual house bubble fare....

Thanks to SP for the tip on Mozilla (which I use) but I'll get the Adsense filter. Too bad I can't use Mozilla on my work machine.

Regarding the cat allergy questions from yesterday...
1) I don't have a cat, yet
2) We kept a lost cat for a week. Days to allergy symptoms: 7 days (no, I didn't let it sleep with us even though it wanted to. I was glad to give it back, even if it was cute and well behaved.
3) My husband desperately wants a cat. We've identified Birmans and Devon Rex as being somewhat hypoallergenic. Visited someone once who had a Birman and stayed in their house for 3 hours -- playing, snuffling the cat, holding it. No symptoms.
4) Worry is that we get a Birman and then the allergy symptoms develop after say, a month. So I need to figure out how to acclimatize (though hopefully, with said breed, it won't be necessary).

Well, we shall see!

Getting back OT we're finally seeing some lovely exotic mortgages in the Great White North. Oh yes... the 0% down.... the interest only's... haven't seen the NAALVP's....yet.... of course, pour some oil (make that oil sands?) into the fire and you have the conflagration known as the Alberta housing market.

*relurks*

Allah Says:

October 12th, 2006 at 8:50 pm
Awful,

What area are you talkng about? Where are these prices going up?

Alamo, Blackhawk, Clayton, Concord/Clyde, Danville, Diablo, Lafayette, Martinez/Pacheco, Moraga, Orinda, Pleasant Hill, Rossmoor, San Ramon, Walnut Creek.

I did not re-type all those cities because I listed them multiple times in my previous posts when I quoted statistics for them. I figured since I referenced them in my reply to you, you would take the time to read my previous posts.

In August, average prices did not go up - average sales price was down 3% for those cities. But as astrid pointed out, this could reflect buyers getting more for their buck, etc., so prices might have effectively gone down much more. Also, that 3% is not adjusted for inflation. Also, it doesn't take into account kickbacks after the sale. So average sale price can't be considered in a vacuam.

BUT, in the approximately 18 months prior to August, average sales price did go up YOY in every month except one AT THE SAME TIME that inventory was basically skyrocketing.

So what do we have. Was demand really increasing at the same rate of supply, keeping price appreciation going up? If consumers were really aware of how quickly inventory was building, would so many of them have rushed in and kept the bidding war going? In other words, buyers had less than perfect information (an element that creates sticky pricing).

No offense, just reading your posts, I think you may be thinking that when people say prices are sticky that they won't go down. That's not what sticky means. It means as supply/demand changes, how slow or fast is price affected.

@SQT "I wonder if they’re afraid that if they don’t buy they’ll be priced out or if they’re afraid they’ll lose money on recent purchases?"

Two of the conversations were with current owners (one bought in 2000, the other in 2003). The other one was with a guy who rents and is about to fork over 7-8x income on a place that is an hour commute for him.

@ SP “Just smile and wave, boys. Just Smile and Wave.”-

LOL! That is what I tell my husband when this topic comes up with peers! However, I just made the mistake of participating in an email conversation with a friend who says you just can't "loose" with real estate. I think I made this person upset judging on their defensive attitude. Also, this person told me that real estate is still going up in the Bay Area, just not as fast, and that it cannot come down. Odd since I'm seeing price reductions all over the place. Oh well.

*unlurks*

@ Jon

*rolling on the floor laughing*

*relurks*

New thread: Has hell finally frozen over?

@ lunarpark - its not just BA, its here in L.A too. I've given up talking about housing for the sake of friendship. People get cross and uncomfortable, so, rather than maing them crosser and more uncomforable, I come here and talk about it.

One friend, who I worry about the most, is the most uncomfortable with 'doom-and-gloom'
: sold last year for a ridiculous amount, bought up for an equally ridiculous amount and got an I/O loan to do it. Taking $X00K out on HELOC to upgrade the house. I know he's financially savvy and prudent (as he makes more in investments earnings than the amount of the I/O, and pays a small amount of principal a month), and earns a double-median salary, but I still worry that he'll be OK.
Still, as he's given me a lot of sensible investment advice in the past, and I really am a newbie lookyloo in both RE and investments, I don't really think its my place to piss on his chips, when he says 'prices will flatten and rise slolwy in spring 2007'.
I just hope he's savvy enough to survive if what he says doesn't come about.

SP,

LOL! No, no need for a flame war here. I don't even know enough yet to about this "new model" to get emotional about it. I just thought it went hand in glove with say a "Monte Carlo" scenario that has been used w/some success to predict certain types of events. Like the White Sox potential to "repeat" this year? Since they were still in contention up until the last week of the season, they had a lot of it right.

Paul Allen (also owns the TrailBlazers) has looked into a software program to quantify potential draft picks "intangibles" and look beyond the "stats". We'll soon see how well the application worked out. Some could argue that as lowly as they've been the last few seasons a yellow dog could've made better draft picks?

I realize these are not perfect analogies. Quantifying human potential is a sketchier art than predicting the stock market! Some would argue that Frank (The Big Hurt) Thomas was past his prime, as they would have said about Jim Thome (and look what a season he had!)

While there is something to be said for financial discipline, what can we say about how some guy/gal/couple that have lead a "charmed life" will conduct themselves when "mom got sick and the mule died?" Conventional wisdom lead us to believe that homeowners would "do anything" to stay current on their mortgages no matter what! Well, now with even the slightest stress we're starting to see that might not be the case as evidenced by the growth in defaults.

It is such a comfort to know that at least I can come to this blog and post my real opinion on the real estate market. My RE friend has not responded to my last email. I should have counted to ten before sending it, though I was being logical and not argumentative from my POV.

For any Cupertino watchers out there - I'm seeing healthy price reductions in the condo market. Like this one:

http://www.mlslistings.com/common/properties/propertyDetail.asp?open=0&page=1&mls_number=641524&type=property&name=

Recent comps:
20680 Celeste $572k 6/15/06
20692 Celeste $560k 4/26/06

DinOR said:
"Then again OR has the highest per capita of self employed people in the country"

I wonder how many of those screwy mortgages in OR and WA have the following:

a) Self Employed? Y
b) Type Of Work? Meth Lab
c) Reason For Loan? Expansion of operation to Gresham
d) Is This Your Only Mortage, if not how many and where? I have multiple houses in Amboy, Ridgefield, and Scappouse
e) What Terms Do You Desire? Doesn't matter, I'll have enough cash in a month to pay in full
f) Amount and type of downpayment? Will a ki of BC bud be enough?

Lending standards????

Here's what a real life bank lawyer thinks:

http://www.banklawyersblog.com/3_bank_lawyers/mortgage_banking/index.html