patrick.net

HARM
So you say retirees are “forced out into the street”, eh? They cannot just “sell their expensive city house” and move to another house in a cheaper area (they way people used to do before prop. 13)? And if they insist on keeping that expensive city house (near the jobs they no longer need to commute to), they cannot get a reverse mortgage to help pay the taxes and upkeep? I am somewhat skeptical about this claim.

Great, so someone worked their whole life paid their house off, is in retirement, and because HARM's agenda is not in line with theirs they have the joy of leaving their house to move. Way to promote the disposable society. Thank God it was an initiative that would take a super majority to overturn.

HARM Says:
April 10th, 2007 at 6:58 pm
Funny how the two states with Prop. 13 laws on the books are the ones most associated with the housing bubble.

What is your deal with this? This is almost self answering since living in those states past retirement would be miserable with volatility forcing you out of your house. Most impartial people would have to agree that we don't want public policy which says too bad to someone who has been in their house for what you determine to be too long. This sort of class envy is really distasteful. They had to pay the assessed rate when they bought, if you think it is too high at the present then don't buy. You don't get to just change the laws when you want to.
Also, if you are so solid on your argument, you would have to agree that a tax that penalizes new buyers more than the old ones puts DOWNWARD pressure on prices. You're shooting yourself in the foot for the sake of ....what?

What’s worse is that Jack Guttentag (Mtg. Prof.) has already said that the MB’s are fighting disclosure on YSP (yield spread premiums) tooth and nail!

My sub-prime MB mate in DC gets something like 5% commission for landing a loan, in one up-front payment, I don't believe they get trailing commissions. The 5% is a mix of YSP and borrower charge. They also have a couple of other bloated fees for credit checks and so on. Maybe that's why they clear $250K a year in the business, while working from home and never having to commute or answer to a boss... It's a hard life...

My only issue with prop 13 is that Mr&Mrs McDebtor do not have their property tax re-adjusted when they refi their McChateau. If you refi your McChateau you are actually selling it to yourself. Why not tax them at the higher rate?

No they are getting a loan and using the house as collateral. We can be as figurative as you want but you getting a cash advance on your credit cards would have sales tax if you followed that logic. Also, why do you even care what an FB does. You're smarter than them, just sit back and let them hang themselves, then come in and clean up.

News story last night said that inflation in food is significantly outstripping CPI...

Inflation in food could be due to higher freight costs from oil price rises, or it could also partly be a spin-off effect from the housing boom.

Ironically, the CPI is calculated on the cost of a 'basket of goods' -- so how long is it before this flows through to a CPI/inflation level of say 8%? The 'basket of goods' includes rents but not mortgage payments, interestingly.

So now we are seeing higher fuel prices, higher rents, and higher food prices. Apart from higher mortgages. What happens next?

For those that are wanting all of these reforms to punish people for whatever reason, keep in mind that you are limiting your own potential gains when you regulate a system to the point that it doesn't produce any wealth. I've said it before, the fundamental reasons for home ownership are sound. It provides stability over the long haul as a hedge to increasing rents, it becomes an asset with equity to sell, and when it is yours it is a very secure source of shelter for retirement.

DS - are the numbers really showing increasing rents?

News story last night said that inflation in food is significantly outstripping CPI…

Corn has doubled in price to $4 thanks to the ethanol boom. Corn serves as feedstock for cows and pigs, provides corn syrup for everything that Americans drink, yields corn starch for mass-manufactured munchies, and has byproducts used in a lot of agricultural applications. I'll bet corn is behind at least some of the food inflation.

btw, Malcom, it's rather confusing reading your posts sometimes. When quoting others, please start using either quotes ("") or italics to denote when you're quoting other people. It also helps to indicate the person being quoted, ex.: Peter P says: The government should abolish the property tax and give us free sushi.

Let's see if the escape characters come out right for the italics tags:

Italics. <I> to open italics, </I> to close italics.

The inflation in food and rents is in Australia. However, the oil price shocks of the 70s showed that increases flow into just about every type of commodity due to 1) increased freight costs and 2) the fact that many many things are petroleum byproducts including plastics. Our entire experience of modern living depends somewhat upon oil.

Rents are up partly due to this:
Who's raising the rent?

The irony is that as house prices flag and fall, rents go up. I think it's just a flow-on effect -- the REI wants to keep the party going, so they decide the strategy is to pump rents at the tail-end of the boom to justify ongoing high purchase prices. Further, all the underwater recent specuvestors have to make their places pay somehow, so they decide en masse they will crank rents -- if enough of them do it, then it creates a new market high point for rents, and investors who bought ages ago and are not in any trouble say "what the heck, I may as well follow suit and cash in, that's why I bought an investment property 15 years ago" as well...

FAB

The link's dead now, although I did get a chance to read the Second Life part earlier before my Comcast decided to die for the day. If you find another link please post it. I'm thinking of sending Gross my SL research, longshot though it may be.

"A Word of Advice During a Housing Slump: Rent"

Very good article just posted an hour ago on NYTimes.com on renting vs. buying

http://www.nytimes.com/2007/04/11/realestate/11leonhardt.html?em&ex=1176350400&en=486f3bd57a817724&ei=5087%0A

Randy H Says:

> FAB The (pimco) link’s dead now.

It looks like the pimco.com site is down tonight so try the tiny URL tomorrow.

the REI wants to keep the party going, so they decide the strategy is to pump rents at the tail-end of the boom to justify ongoing high purchase prices. Further, all the underwater recent specuvestors have to make their places pay somehow, so they decide en masse they will crank rents — if enough of them do it, then it creates a new market high point for rents,

But you can't believe there is some entity pricing rents according to some agenda, and given an oversupply of a commodity it can't matter what the high point is.

Sorry tried the italics and it didn't work.

The government should abolish the property tax and give us free sushi.

Did I say that? I would be happy enough if there was no sales tax for sushi. :)

It did, just not noticeable on large paragraph, thanks for the tip.

Peter, you've got to see the key lime pie I brought back to the hotel room. Man the people out here know how to eat.

Peter, you’ve got to see the key lime pie I brought back to the hotel room. Man the people out here know how to eat.

Key lime pie? :-D

Out here in NM things are a little outdated, many things are broken, lots of abandoned properties, but the people are really friendly and I haven't had a bad meal.

I can say one good thing about the loan sharks of the mortgage industry. If you don't pay the loan back, I highly doubt that they will break your knee caps with a sledge hammer. They may ruin your life forever, but they will let you keep the ability to walk.

I read this article earlier today and thought to myself, "this is the stupidest shit i have ever heard." How can the bond holder be responsible? If I go online to my brokerage account right now and buy a company bond, say ford, then why not farking toss me in jail if the company does some illegal business with the loan i just gave them...

Not to mention that even the threat of this law would end the collatorization market, and there goes cheap home loans at all ends from subprime to prime. In fact, there goes homeloans almost completely, and get ready for 30% of all homes to foreclose when they are worth less than half of today's prices.

This proposal is orders of magnitude stupider then any of the bailout ideas floating around, which I had thought had hit congress' maximum level of stupidity.

To tell the truth, the housing problem will get very serious over the next few years, but F it up too much on the government or FED side, and it could bring USA down as a first world economic power, and drop us into second tier status.

Ok, what does this mean?

http://www.movoto.com/real-estate/homes-for-sale/CA/Redwood-City/5th-Ave-100_717959.htm

Family 3/1/2+ home. Great bones, needs TLC, bring contractor/handy homeowner. Original 3 BR altho cty records say 2BR . Investors-tenant wishes to stay. View property after 4 PM weekdays, all day weekends. Please call 1st to notify

Investors-tenant wishes to stay?

I don't get it. Are they trying to sell this or not?

Out here in NM things are a little outdated, many things are broken, lots of abandoned properties, but the people are really friendly and I haven’t had a bad meal.

One of my friends went to NM for a week for business. When he came back, he rambled on about cheap food and groceries were there. As if he had just gotten back from Vietnam or Thailand.

I guess as a California lifer, it would never occur to him that maybe it's that things are -expensive- here.

Eburbed, you should send in an offer of 325k.

It's obviously somebody who is totally screwed. They bought it to flip, realized they didn't have the money to fix it, moved in, realized they didn't have the money to make the payments, and now wants somebody to

1) Buy it.
2) Fix it.
3) Rent it to them cheap.

Either that, or they rented it out instead of renovating waiting for the appreciation, and realize the rent can't possibly keep up with the outflow, and the market is stalled.

Either way, it's a f'd flipper, which is worse than a FB. :D

Malcolm Says:

"the REI wants to keep the party going, so they decide the strategy is to pump rents at the tail-end of the boom to justify ongoing high purchase prices. Further, all the underwater recent specuvestors have to make their places pay somehow, so they decide en masse they will crank rents — if enough of them do it, then it creates a new market high point for rents,"

But you can’t believe there is some entity pricing rents according to some agenda, and given an oversupply of a commodity it can’t matter what the high point is.

Yes, there is, actually, if you follow that Media Watch story that I linked to, which cites and links to a fax sent out by the REI (Real Estate Institute) to encourage all rental rates to be increasesd 5-7% to all managing agents across the state. The REI is an umbrella body in all states to which most real estate agents belong, along with some private landlords.

Further, there is supposed not to be an oversupply of apartments here, which is one of the reasons they recommend cranking rents. They also had an agenda to try to oppose state land taxes on investment properties right before a state election. "I'm a landlord, and I vote"

So, Malcolm you want to give a massive tax break to the richest segment of our society, the homeowners. Who do you expect to pick up the taxes required to run the schools, pave the roads and staff the hospitals in their stead?

That is what really makes me sick about the Prop 13 defenders: they don't care who else suffers, they just want to make sure they don't have to pay taxes. Guess what? Civil society requires taxes. It is only fair that those who benefit the most, property owners, pay the most to maintain their communities.

California basically passed this law to screw anyone coming into the state. It has not done a very good job as discouraging immigration, but it has lowered the quality of life for those of us who decided to stay. It is kind of telling that you are NM, Malcolm. What prompted you to leave?

Actually, I've misreported the fax slightly, but if you follow the link you will work it out. The central body for owners and agents in NSW is the REINSW, in Victoria, the REIV, and so on, with their own resource website, etc etc...

HARM/DinOR,

There's a thread today at calculatedrisk on this topic, and Tanta the resident banking expert is (vigorously) defending the concept, somewhat to my surprise.

Maybe I'm missing something, because at first glance this legislation to me seems insane ...

Maybe a thread devoted to zombie home owners AKA upside-down people. Will they run for it? If so, when?

Jimbo Says:
That is what really makes me sick about the Prop 13 defenders: they don’t care who else suffers, they just want to make sure they don’t have to pay taxes. Guess what? Civil society requires taxes. It is only fair that those who benefit the most, property owners, pay the most to maintain their communities.

Your point sounds good, let's look at it in detail. First, get one thing straight, renters are the end payers of property taxes not the landlords. Property tax is is just an operating expense to us, and we pass the costs onto you. Next, the argument higher taxes are needed to fund schools is propaganda. The lottery was supposed to fix all of that it's failure is proof of what happens when you tax for the sake of taxing. Next, every few years we have bond measures which promise to be a cureall for schools, and when they pass it almost becomes a free for all, the following election there are even more bond measures.

HelloKitty Says:

> I had to re-read the topic, it REALLY IS CRAZY
> sounding. You can’t make this stuff up.
> I think its an attorney’s dream though. Everyone is
> potentially liable so they can file lawsuits just to get
> people to settle out of court anytime they want!
> It used to be all the discrimination and sexual
> harassment laws/lawsuits would have seemed ‘crazy’
> (1955?) but we accept them as normal now.

I did a Google search trying to find the details on a recent SF lawsuit where a painter in the SF housing projects claimed “harassment” and got a huge settlement but I could only find where the article below that mentions the harassment case along with a million dollar settlement attorneys got when someone dropped a crack pipe and started a fire.

http://tinyurl.com/ysttq3

> I wonder if even the fact that this type of legislation
> COULD be passed will have an impact on the
> availability of funding to lend?

The goal of legislation like this is to get more money. Barney Frank may not have been smart enough to notice that his gay hooker roommate/boyfriend was running a prostitution ring out of his apartment but he is smart enough to know that legislation like this will help to get cash from not only the trial lawyers that want it but the investment banks that oppose it.

Then KT Says:

> The Trial Lawyers are skimming off the entire fiasco
> and many of them will become our future politicians.
> See.. It will all work out just fine.?

You bet they are many are probably hoping to make enough lawsuit cash so they can run for office at a younger age so they won’t have to deal with an almost 60 year old wife with cancer (who knew that having a kid at 49 and another kid 51 increases the risk of cancer since if god wanted 51 year old ladies to have kids at he would not make them buy eggs from college students)…

Or zombie home equity, zombie homes, zombie HELOC, zombie realtors, etc.

Palo
1. These loans are sold to institutions, not individuals. They are not traded in the same sense that ford bonds are traded. You CAN’T buy one. 2. Nobody is going to jail. The liability is limited to $

From the way it is described, the law is still trying to expand the liability from the shady broker to the actual fund that had nothing to do with anything except took over the holding of the actual notes. That is what people find unacceptable, and they are just using examples of stock investors to illustrate what a bad idea it is. The argument that it is just $s not actually jail time is bad. That's like me robbing you and saying, hey, I'm not going to kill you, I'm just taking your car.

PaloAltoRenter (PAR) (who should spend some time on the Pimco web site learning about bonds) Says:

> 1. These loans are sold to institutions, not individuals.

Many “individuals” own mortgage backed securities (just like they own Ford bonds).

> You CAN’T buy one.

Have you ever tried?

> I give up on this topic. It’s clearly way over people’s heads.

I’m not joking about the Pinco web site (that is still down for some strange reason) there is a lot of great information and you (and others) will learn a lot about bonds.

PAR,

It IS frustrating. Endlessly frustrating, and complicated. I happen to think there was a pretty good exchange of ideas and I actually learned a lot. We're in uncharted waters here so I don't believe the Enron analogies are necessarily applicable.

Since I'm in retail, I tend to look at things from a retail perspective but forcing the issue by pushing the blame to the end user (in my mind) only serves to cloud the issue. If we assume that (as always) it's the evil-doers on Wall Street that are solely to blame, that works for most people.

But please consider this, they would have needed willing accomplices. Any firm worth it's salt isn't just going to turn over it's book of clients to a "pedophile". Many of the now laughable former firms listed on the Mortgage-Implodo-Meter once had a loyal client base that trusted them! For a price, they willing allowed themselves (and by proxy) their clients to be exploited. Had there been any semblance of responsibility on the part of the MB's much or possibly none of this would have happened.

TOS
May I just say that it is very important to remember that many REVOLUTIONARY ideas that looked SENSIBLE ON PAPER resulted in great carnage (Communism, Fascism, the cultural revolution…)