patrick.net

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