patrick.net

Has anyone previously suggested minting "REIC Dollars"? I mean since the REIC has basically been printing their own currency over the last several years why not let them have it? Would it be possible to insulate the broader economy from the debacle of their choosing by having RE transact in a separate (but unequal) currency?

Since most RE is easily 4 to 5 times what it should be priced at we can start them off at... 5 "REIC's" to the dollar? They're backed by the ABX and your full faith and credit in overpriced POS, but can not be exchanged for anything other than pergraniteel. That way these lame bastards can, buy! sell! trade! themselves to death without dragging the rest of us down?

How different is it really from Randy H's fantasy world over at Second Life? Why were these people ever allowed to exchange their REIC dollars for real dollars?

Just a thought.

Uh... that didn't come out right. Should read "the fantasy world Randy H exposed" at Second Life.

I really can’t believe the stats published yesterday.

Why does that bother you? Everything points to a spring bounce. Save yourselves from being priced out! :)

One thing: I suppose inventory data is immediate while median price data is lagged by at least a month. Don't you see an anomaly?

Inventory drop should precede CONTRACT price increase, right?

When I got a C in Calculus, I was so sure the data must be wrong...

Bruce Says:

> I wonder what part money laundering played in big
> coastal towns’ RE bubbles. And if they’ll exit.
> Why would they?

I was just talking to a kid I grew up with about our plans for Historic Weekend at the end of the summer and he mentioned something that I had never really thought of before.

Much if the “appreciation” in Bay Area homes over the past few years was due to the massive amount of capX that flippers put in to the homes.

Classic Car buyers and sellers keep track of “restoration” cost (so the guy that owns an old unrestored Camaro will not ask $30K just because some restored Camaros sold for $30K)

In the past it was not possible to “flip” a home and make any money (people used to fix up homes after they bought them and sell when they were worn out), but over the past few years the people with older crappy unrenovated homes are asking as much as the “area comps” that may have been ripped down to the studs and have all new electrical, plumbing and fixtures…

FAB,

Sound as Barrett-Jackson Dollar!

Why does that bother you? Everything points to a spring bounce. Save yourselves from being priced out! :)

I thought the definition of spring bounce was that a heap of properties would come on the market, depressing the median prices.

but over the past few years the people with older crappy unrenovated homes are asking as much as the “area comps”

Oh, you mean like this one?

http://www.burbed.com/2007/03/20/1mil-open-house-house-not-included/

eburbed - There are two housing tracker sites. The other site shows an increase:

http://www.housingtracker.net/old_housingtracker/location/California/SanJose/

The numbers on this site are more consistent with my own, which show YOY:

2006 - 3666
2007 - 4324

eburbed,

The Portland Metro area has seen an EIGHTY % increase in listings over Feb '06. What makes that laughable is that like no other population on THIS planet Portlanders are at the core of DIY crowd. (Meaning we've always had an active FSBO market). Factor that in and you've got an exploding inventory.

I can’t say it’s a direct result of NINJA Loans but now when you go to C/L for formerly “hot” markets (like Phoenix and LV) most of the RE postings are “Save your home from foreclosure” and “We buy distressed properties”. And of course the inevitable “How to profit from…. distressed/foreclosed etc. etc.”

Those "formerly 'hot' markets" are now just hot. Phoenix and LV are miserable places. I can't imagine wanting to live in one of those blazing infernos--especially with global warming on the horizon. These markets are still way overpriced. I would much rather live in Detroit. At least Detroit has a native fresh water supply and liveable weather (winter in Detroit is more liveable than summer in Phoenix, IMO). Houses in Detroit are $30k - $100K. In Phoenix and LV, most homes are still over $200K. That's a long way to fall.

@ eburbed,

They were talking R E I C dollars!

The Case Shiller Index for Phoenix shows there's still *a lot* of pain yet to come there. San Francisco is notably _lower_ than Phoenix on the CSI, which makes sense when you consider the relative percentage bubble-prices versus historical trendline.

mmmmm....Globals....[drools]

eburbed - There are two housing tracker sites. The other site shows an increase:

But that page says that it's the old page, and that the new page has better data.

On creating a separate currency for REIC, we'll call them REIC dollars (R$):

You cannot do this by law in the US. It is illegal to mint and distribute a currency within the US (or most other nations for that matter).

"But wait a minute!" you say. How do these giant computer games that call themselves "virtual worlds" with bajillions of "residents" get away with it? How does Second Life get away printing Linden dollars (L$)?

The answer is not that complex:

a) No one has stopped them yet because its something new, and still relatively small. There aren't really bajillions of players, just a couple hundred thousand, even if there were bajillions of looky loos.

b) No one reads the License Agreement or Terms of Service agreement when they install the game. Just like you don't when you install MS Word. I mean, there's like dozens of pages and the font is really tiny.

c) If they did read the legalese they'd realize that they don't even own their L$. The game makers owns all the L$. They just let the players use it "as if" they owned it, and promise to always be nice and not steal their hard earned L$.

There's all kinds of sordid details on my blog. But most here won't really care. If the REIC tried to mint R$, they'd need to trick everyone with legal agreements they wouldn't read. That's actually probably possible. And lots of dumb people would believe the benevolent NAR would always be good guys and not steal their R$, and let them use their R$ "as if" it were real.

But the flaw is too many people actually give a shit about real real estate (versus "virtual" cartoon real estate). So as soon as the first guy lost some R$, even due to his own stupidity, he'd be interviewing trail lawyers to determine which he's going to award the prize of suing the shit out of the REIC.

Obviously the new page does not have better data since it's not even close to my own numbers, which I trust more than some random site on the internet.

"we'll call them REIC Dollars (R$)"

And why...NOT!

Backed 100% by cubic zirconia, they have the look, feel and smell of REAL money!

@eburbed et, al-

Santa Clara county is definitely rebounding, at least as far as the specific homes of interest I've tracked. I'm at a crossroads of whether to keep my '01-06 housing dollars in CA, raise our son here, and not move back "home" to live mortgage free.

T - 1 year and counting to so long and thanks for all the fish.

The answer from the Realtor was no. Due to high income and tech industry, prices would not fall and yes…BA is different.

It's not really clear to me what the consensus of this forum is - there seems to be some who expect 20% drops, and there seems to be some who expect the price to simply be "stuck" for the next 10 years (which is a drop in itself).

Glen,

You're absolutely right! The only reason I've ever considered Las Vegas is as a reprieve from Oregon's drab winters. Of course had we become empty nesters just a few years earlier I'd either be rolling aound in "big fat stacks" (or sending in some "jingle mail")

Now that I'm at a crossroads in life where a vacation home might actually make sense the market is totally f@#$&*! Probably at least 2 years out from being able to seriously consider it.

eburbed,

I think one of the biggest reasons for there being no consensus here is inflation. There's just no way to predict how many dollars the government is willing to print to keep housing, thus the economy, afloat over the next 5-10 years.

“It’s not really clear to me what the consensus …”

My 8-ball says no crash.

FAB:

Some of the same goes on here.

The people I actually feel for locally are the ones who've done a beautiful job restoring '20s bungalows to LIVE in and are nearing retirement now. I suppose they'll have to stay on now. Change of plans.

I just did a quick search. Homes that we are interested in seems to be cheaper than last year. Or perhaps they are trying to incite bidding wars?

BTW, we are looking at newer townhouses or condos in okay areas. We do not give a shit about school districts.

NV,

I'm hardly an expert where BA RE is concerned but with postings like eburbed's $1,048,000 Palo Alto "Open Lot" showing, how can there NOT be room for a meaningful correction?

Like he said, why the "Open Lot" showing? Just have a link for people to have an aerial view on Google Maps!

Since subprime lenders have their credit line cut off after two unprofitable quarters, June will be important as this entire distribution channel is shut down completely.

DinOR:

I've tried to relocate a chart I saw online last week but I can't. It showed ARM resets, stacked, for subprime, Alt-A and prime, by month through all of 2007 and 2008. There was a very large wave of resets in all categories beginning in May '07 which peaked in July.

I'll go looking again. Anyone else see it?

Here's an illiterate FB rambling, ranting.

Bruce,

Are you referring to that little gem structured like an "organization chart"? The one showing where Alt-A is "half a notch" above sub? I believe that link was provided by either PAR or allah. Let me see what I can do.

allah,

Hmm, how fortunate. (Nice FB rant btw). Do recall a few days ago a really great break-down of the MBS market? Started w/prime paper and works it's way down through all the ARM's neg. am's etc?

DinOR:

Not the same chart. It was a bar chart showing the value of loans resetting each month from Jan 07 to Dec 08.

Each bar was stacked prime (white) over alt-a (red) over subprime (black) so you could see how much debt was resetting cumulatively by month.

It may have been at Calculated Risk but, at least on my browser, I can only get the current page and archives from Feb and earlier. No way to look at last week.

NV,

I tend to think most builders view us as lotto tix regardless of locale? Then again, why not? For about a decade now we were willing to throw money at just about any liveable structure including converted chicken coops in Alameda. I'm going to track that on eburbed's site just for a goof.

All this time we've been told "but houses don't 'trade' like stocks". Really? Then why do PA sellers get more brazen w/every GOOG uptick?

Bruce,

Now I would have remembered seeing something like that! If you find, please link! TIA

DinOR

Bruce/Dinor:

Is this what you are looking for?:

http://www.autodogmatic.com/viewtopic.php?p=1226#1226

Bear in mind we have more ARM loans in BA than any other Metro in the nation. Somethings got to give.

More than San Diego?

I find that hard to believe.

Glen:

Thanks! Yes! That's the one.

Allah,

Digging back through her blog, you'll find that she and her parents have been refinancing their houses to pay off credit card debt. Despite not being able to pay their bills, they took a long trip to meet "The Wiggles" after they got their credit cards paid off from the last refi.

Now they're trying to refi again and find that they can't.

Whoops!

NV Says:

> Yesterday on KQED FM they spoke about subprime
> lending. A caller asked if prices would fall in BA.
> The answer from the Realtor was no. Due to high
> income and tech industry, prices would not fall and
> yes…BA is different.
> Over the past 10 years.

> Rent has gone up 35%

Let’s look at some actual examples:

Rent of a 1BR/1BA on Scott Street in the Marina w/ parking:
1997 $2,100 2007 $2,300 (up 9.5%)

Rent of a nice home west of El Camino in San Mateo:
1997: $1,900 2007 $2,200 (up 15.8%) (was up over 20% from ’97 in ’00)

Rent on a 1BR/1BA in Santa Clara I worked on back in ’96:
1997: $1,270 2007 $1,440 (up 13.4%)

> Home prices up 315%

Home on Easton in Burlingame

1997: $532K 2006: $1.78mm (up 335%)

Tiny home (just barely) in Sea Cliff:
1998: $420K 2006: $1.1mm (up 261%)

eBurbed, charts:
http://flickr.com/photos/7409273@N03/

Someone also asked for the "timebomb" graphic of resets in the pipeline. That's also posted here...

Allah,

More on the FB rant... if you read FAR enough back, you'll find that they bought that house in 2001. Currently, they can't sell it for more than the mortgage is worth.

They ATM'd themselves out of a house.

Glen,

Thanks. I haven't seen that accurate a breakdown since we started talking about this topic. Up until now it's been pretty vague (mostly numbers for the year) and no delineation between credit grades.

Some of the comments below were like "this is going to take forever to play out" and that's fine but I can't think of any other point in our history w/rapidly declining values and at least 15 to 30 bil in subprime ARM's re-setting per month. Kind of unprecedented.