patrick.net

What would a psychic say about the housing market?

Patrick Killelea says, "US housing crash continues."

http://patrick.net/housing/crash.html

The thing that really ticks me off is that drivers in some country are aggressive because of the way they value human lives.

Should we allow the importation of such value system?

PAR Posted a URL that said:

> the East Bay's optional-payment ARMs jumped from 0.9
> percent in December 2003 to 39 percent of all refinance
> loans in December 2006

And

> A $500,000 option-ARM, monthly payments would be
> $1,608 for the minimum, $3,454 for interest-only,
> $3,770 for the 30-year equivalent and $4,862 for
> the 15-year equivalent.

I heard that many people that got the “option-ARMs” didn’t read the fine print to find out that they will not have the “option” to pay the minimum payment for long. I have heard that most of the loans will end the borrowers “option” to pick a payment and go to a 25-28 year amortized payment as the new minimum once they hit 110% of the original loan amount.

Since few people in the northern part of SF have a mortgage of under $1mm let’s look at a typical happy FB couple living in a Cow Hollow condo picking the “minimum” payment (doubling the numbers from PARs Link) on their $1mm loan of $3,216. They are happy to “own” a home and after the tax advantage are only paying about $1K a month after taxes then their friends in the area. What most FBs forget about is that whey they “pick the low payment for a year” they have “added” almost 60K to what they owe.

The “happy” FB will become F’d FBs after about a year and a half of “picking” the minimum payment when the neg am low pick your payment of $3,216 will end (the day the loan balance hits $1.1mm or 110% of what they borrowed) and the new 25 year am payment of $8,128 per month begins…

There should be more training programs so that the road is safe.

How do you stop value systems from being imported?

Hopefully education will help.

Peter P Says:

> I just had a scary drive on 101 back from SF.
> I do not know why Taxi drivers are so aggressive
> in America. Their counterparts in Japan are always
> much more polite and safety-conscious.

I have no idea how much money taxi drivers in other countries make but in SF due to the corrupt “medallion” system (that the SF Weekly has recently wrote about) some of the poor guys actually take home less than minimum wage per hour at the end of a shift (even is the work their ass of and drive like maniacs)…

P.S. Since the wages are so low I can’t remember the last time I had a taxi driver in SF that was born in America…

I have no idea how much money taxi drivers in other countries make but in SF due to the corrupt “medallion” system (that the SF Weekly has recently wrote about) some of the poor guys actually take home less than minimum wage per hour at the end of a shift (even is the work their ass of and drive like maniacs)…

That does not mean that we should allow roadway safety to be compromised.

RE: “medallion” system

See, another distortion caused by market control.

Somehow I find it funny that SF and capitalism appear in the same sentence.

PAR, you may want to work with a good agent, one that will give you honest opinions.

Well, I did say “supposedly”.

Very well.

PAR, a watched kettle never boils. :)

"I am trying to use my mind to make the market crash…"

It is called manifesting. Beware, having too much negative thoughts may backfire on you.

Robert Kyosaki tries to explain macroeconomics and the housing bubble:

http://finance.yahoo.com/expert/article/richricher/25748

This guy is really clueless. Oh well, at least he is not pumping real estate anymore.

Peter P, please tell me you don't believe in magical thinking.

LurkinLeech,

I predict a lot of that kind of looney legislation is going to get proposed (or worse yet, passed) before this bust is over.

We should study the psychology of economists...

Many taxi drivers here make only $8 an hour on average. They pay the license owner $100 a day for 'borrowing' the cab, and they keep whatever's left over -- after fuel...

London cab drivers have to pass tests on the 'The Knowledge' -- thus, some sort of regulation and accreditation is necessary to make sure drivers are competent. Although, there is a big unlicensed grey market of private vehicles in London also that used to hang around Heathrow and so on...

Does a 'perfect free market' imply that no-one needs to be accredited, regulated or even trained any more? cool... what does this amazing perfect free market look like? I might hang out a brain surgeon shingle tomorrow...

Peter P,

Nope, that condo is advertised as a 5 bdrm, 3 bathroom place, and there were vague references to other rooms as well.

I would personally pay more for 2 bdrm 2000 sq ft places than 5 bdrm 2000 sq ft places. The latter usually means tiny rooms that need to be combined.

$1.99/minute is pretty good work, but how do we keep the foolz on the line for 30 minutes?

Peter P.,

I had a cab driver (Russian) who ran a red light and almost hit a pedestrian (the pedestrian fell trying to get out of the way) crossing the street and was almost T-boned while doing that. I forced him to stop and I got out (At night on Pine Street in that funky 'lower Nob Hill' area). I had his name, the cab number, the time, etc. but I couldn't find anyone to complain to. The cab company, the commission, (I called someone else but can't remember who) all said that the cab driver was an independent contractor over whom they had no authority.

So the cab companies own all the taxi medallions, keep the cab supply artificially low (try to get a cab on a rainy night), gouge the drivers, but have zero responsibility. I can see why they want no change.

LurkinLeech,

Thanks for the link. It's hard to say for sure (not being psychic and all) but it appears that the realtwhores in ID timed their charge just about perfectly!

Being at the tail end of the rolling bubble I imagine people are still feeling pretty good about RE in your area. By getting these "minimum service" pieces of legislation passed post haste by the time people figure out RE is a crappy investment they'll be forever saddled w/6% commissions!

Oh btw I'd read just yesterday that yet another lumber mill is shutting down up there! (Due to the slowdown in the demand of course) so by the time these people get laid off they'll all be able to get jobs as 6% realtors! That's how it's supposed to work, right? :)

"If they float they must burn"

alien, that is so funny you would bring that up! Of late I've kind of visualized the few remaining RE perma-bulls not unlike "The Flagellants" during the plague going from town to town beating themselves to a bloody pulp trying to "cast out" evil!

More leeches!

Different Sean Says:

> London cab drivers have to pass tests on the
> ‘The Knowledge’ — thus, some sort of regulation
> and accreditation is necessary to make sure
> drivers are competent.

We don’t have any test in SF. Last year I was going to a dinner at the Slanted Door and told the driver of a cab I on Sacramento Street to take me to the “Ferry Building” and the driver (who looked like he just got here from Africa) asked me (in a thick accent) how to get to the “Berry Building”…

> Although, there is a big unlicensed grey market of
> private vehicles in London also that used to hang
> around Heathrow and so on…

A tip I learned years ago in NY is to try and make a deal with limo drivers that are waiting around the hotel. You want to make sure the cab drivers don’t figure out what you are doing since they will get mad. Most of the guys are happy to earn an extra $20 and it’s fun to end a night out when you call your “driver” on his cell phone to take you and your friends home…

> Does a ‘perfect free market’ imply that no-one needs to
> be accredited, regulated or even trained any more? cool…
> what does this amazing perfect free market look like?
> I might hang out a brain surgeon shingle tomorrow…

The “free market” has “restrictions” but not “prohibitions”. In San Francisco there is nothing “prohibiting” me from going to med school and owning a medical practice there I do brain surgery, but in San Francisco I am “prohibited” from owning and operating my own cab in the city…

P.S. When we were in High School we used to make extra money driving drunk people home Tahoe City bars in the winter…

Peter P - after my husband experienced a few trips with taxi's from SF airport (i.e had to hold the door closed because it didn't shut properly, scary driving), our next door neighbor recommended a good guy to use for airport runs and we have used him several times - I could post the contact details if you would like them - can't remember his rates though.

Peter P, please tell me you don’t believe in magical thinking.

Huh? Magic or Magick? They are different, you know.

Peter P - after my husband experienced a few trips with taxi’s from SF airport (i.e had to hold the door closed because it didn’t shut properly, scary driving), our next door neighbor recommended a good guy to use for airport runs and we have used him several times - I could post the contact details if you would like them - can’t remember his rates though.

Thanks Claire. We also found out that limo/sedan companies charge not much more but they are much better than taxis.

Just for clarification, we were driving on the freeway and had a scary episode with a cab near SFO. We were not sitting in a cab.

I would personally pay more for 2 bdrm 2000 sq ft places than 5 bdrm 2000 sq ft places. The latter usually means tiny rooms that need to be combined.

Exactly, although you may want to get a 2000 sqft 9bed/1bath house in the Central Valley. :-P

NOT INVESTMENT ADVICE

Drivers in some parts of Japan are the meanest I’ve ever seen.

Really? But they are stop to let me cross the road.

I have no problem driving in the Bay Area, but would NEVER CONSIDER driving in Japan.

I was in my friend's car and he was going 120mph on the highway. That was scary. Other than that, it just seems that most Japanese drivers drive like me. :)

If you ever try to enforce your pedestrian rights in Tokyo, you’ll become another traffic statistic.

Well you were born there. Can't argue with you.

trader :

What set Patrick/Ben apart is that they were able to say it publicly. That really saved a few.

Count me in. No I would not have bought a house even if I had never found out this site. It saved me from losing confidence in my financial sense.

This very forum is testament to the fact that we all seek affirmation from others.

It was true that in 2006 this was like my support group. Now I don't the affirmation or the "fix" as much. I come here for sound opinions and smart discussions. I like hanging around with this bunch. Even if they disagree with my views.

Now my predictions about housing could all be wrong, but what has happened in last 18 months in RE market has at least proved one thing to me. I was not stupid to refrain from buying. Now I am at peace with myself.

PAR, that's classic.

Honestly.... I'm thinking about taking the 2 week class and getting my license. Not to become a Realtor, but to document what exactly it is that they get 'taught' and how that makes them qualified to give any financial advice.

BearCat,

I'll agree, it doesn't exactly take a genius to have put this together. At least not in 2007! :) The truth is, for quite some time there were no overt signs other than things being hunky dory and that WE were missing the boat!

Now w/FB's defaulting left and right (unimaginable 18 mos. ago) and subprime lenders going under by the day, it all looks so obvious. What I especially enjoy is that almost each passing day a whole NEW swath of people that bought in at or near the peak are seeing their "equity cushion" erode! :) The number of people that never in a million years thought pilfering their own home would ever catch up w/them is growing as we speak!

A lot of them WILL be surprised to learn that housing blogs go back as far as 2003? and that there WERE everyday people no more qualified than themselves predicting the mess they can not find their way out of.

Perhaps Patrick and Ben are Super-psychic-geniuses.

"It saved me from losing confidence in my financial sense"

Amen to that brother! While I can't say that "fix" describes my motivations any more it's still great to have some troll parade the ol' "time machine" around from time to time!

I don't know if anyone else was offended by it by Caroline Baum of Bloomberg (whom I normally respect) was off the mark when she described ALL subprime borrowers as "dead beats". Evidently this is the way the market portrays this end of debt paper so we can all feel better about ourselves?

Perhaps NAR and Wall Steet would be infinitely happier if everyone that didn't qualify as "A" paper sat around and rented until A) prices come way down or B) they actually qualify for a traditional mortgage complete w/20% down. (That'll keep the REIC rolling along!)

PAR said:
FAB, the really interesting part is when they go to refi out of their toxic loan (into another reset toxic loan, of course) and the appraisal comes in at 97% of their original purchase price but they owe 110%… This is the surprise that nobody sees coming.
But it just gets better, the real surprise is that the originator will refi the loan... then when that loan drives them to the poor house the lender says "Oh sorry, you lost your original purchase money, non-recourse loan when you refied. We own you".

BearCat,

I was really just kidding. Someone recently mentioned that DL went from not seeing a bubble to calling the bottom all in the span of 3 months! I recognize you as one of the long time posters and SoCalmtguy and I have already hashed out our differences on "tastes great/less filling" (cheap money vs. tax code) long ago!

For anyone late to the party it's all too tempting to say that the bubble is "solely" cheap money driven. For old time believers, all it facilitated was a way for long time owners w/solid equity and the builders to cash in on both ends of the deal. At the GF's expense of course!

"....all said that the cab driver was an independent contractor over whom they had no authority.

So the cab companies own all the taxi medallions, keep the cab supply artificially low (try to get a cab on a rainy night), gouge the drivers, but have zero responsibility. I can see why they want no change."

SFWoman, I manage a company that has over 250 cabs so let me add here.

The medallion concept is a holdover from the New York style political boss days. Originally, the medallians that sold in New York were only $100 apiece, but last time I looked, the cost was up to $275,000. This means a New York cabbie must pay off this medallian mortgage (or pay thousands to rent a medallian), pay to lease his cab, pay to maintain his cab, and pay for credit card services while being restricted in how much he can charge. Not all cities run cabs like New York, but the independent leasee driver / company medallions model is the most common. Thus to make money, cabbies must pick up as many passengers as possible and as many long trips as possible. This is why they drive so fast and ignore pickups (such as in Harlem) that do not usually go far. And yes, the cabbie is an "independent contractor" who gets no benefits, must pay both ends of his SS and his own taxes, and has no workman's comp.

This is a business that would do well with less gov control. I can see that the city would inspect cabs for safety and cleanliness, and perhaps tax for business use of roads, but the medallion concept is just a method of insuring campaign contributions from the medallion holders. And highly regulated businesses must make campaign contributions. If you request to see your local official about his proposed legislation requiring taxis to pick up the elderly for free, he will flip through his rollodex to see if you made a contribution. If you did not, you ain't seeing him.

The "they" that want no change are the city officials and their select business croneys. Remove the city meddling and the businessmen would have to compete with price/quality for both drivers and riders.

I have found Washington DC to be a great place to ride a cab. The market is not regulated, and drivers own thier cabs. They use zone pricing, so the expense of meters is eliminated. Every cab I took there was well kept and clean. Any vehicle type can be a cab there, I have seen everything from sedans to 4x4 trucks.

They are not making any more medallion.

There should be no price control on taxi services. Drivers should be able to charge whatever he feels like so long as the fee schedule is known before the trip.

I have answered this before, FB = Focaccia Bread.

Or F*cked Borrower.