patrick.net

One of the most fundamental problems I think this economy faces is a deep decay in business ethics. Especially with regard to Wall Street. You can't have a successful economy when everybody is just trying to take somebody else's money so they don't have to do an honest day's work.

Again, this is precisely the sort of thing that rate cuts and government bailouts don't address... and may well make worse.

FAB said:
If you have $1.5mm you can get an almost risk free return of about 5%/75K a year. The taxes. Insurance and maintenance on a $1.5mm home will be about $25K a year. Why buy a crappy $1.5mm home in the Bay Area when you can rent a much nicer multi-million dollar home and save money without any down side risk?

Preaching to the choir. What you say makes perfect sense, but there still are people who feel the need to build a 4000 sq.ft. McMansion with a Mission style roof on a Tuscan facade with Doric columns and Victorian details, for a couple and one kid to live in.

Dang, I had a friendly bet with a cow-orker (I will “buy” you a beer at the next Friday social) riding on the Dow falling under 13000 by the end of 2007.

The Dow below 13K is news. But for your coworkers and the rest of the Silly Valley, I think the more stress-inducing number is the 3.8% drop in NASDAQ today. It's pretty much near it's levels from 1 year ago.

Bay Area MSM getting bearish???

http://www.kcbs.com/Dismal-Outlook-for-Bay-Area-Housing-Market/1430686

Dismal Outlook for Bay Area Housing Market
SAN FRANCISCO (KCBS) - New numbers from an online tracking site don't exactly paint a rosy outlook for the Bay Area housing market in 2008. The number of properties languishing without bids is on the rise.

According to Movoto.com, more than half of all available homes in the Bay Area counties tracked last month were on the market for at least 60 days. "We think we're probably in the third or fourth inning of a pretty long game," explained Movoto.com spokesman Mark Brandemuehl. The way he sees it, many would-be sellers are staying on the sidelines for the time being. "People who have a choice in when to list their home are holding homes off the market."

In December, there was a decline in home prices in many of the Bay Area counties. "1 to 2% on the month-over-month basis is a pretty aggressive drop in prices," said Brandemuehl. "What that tells us is that sellers are kind of chasing, chasing the market down with their prices and trying to find a price at which their homes will sell." The sharpest decline was in San Mateo County. The average list price there was down 12% in December 2007, compared with November 2007.

there still are people who feel the need to build a 4000 sq.ft. McMansion with a Mission style roof on a Tuscan facade with Doric columns and Victorian details, for a couple and one kid to live in.

You just described about 80% of all the homes built within the last 5 years in Los Altos Hills!

Shrines to tackiness built into formerly pristine hillsides. McMansion doesn't seem to aptly describe these monstrosities - more like FrankenMansions, what with all the random, jarring and completely gaudy faux-elegant architectural "touches" they incorporate.

how were conditions at Sugarbowl?
I can't comment on Sugarbowl, but do follow South Lake Tahoe a bit. For reference purposes I have been tracking the asking prices on 1bed/1bath quarter share fractionals (not timeshares, those lose value!) at the Marrriott Grand Residence. Looks like a seller may need some cash (now!) and is undercutting everyone else with their price of $110k (previous low asking was around $120k). And on similar resale site a 1bed/2bath is showing up for $115k. For reference, another site that rents out their unit claims the orginal price from the developer was north of $200,000 (ouch!).
And this is going up across the street.
Oh wait, you meant ski conditions :-)

The end of big oil as we know it. Also my next car, I just put a deposit down to reserve one.

http://aptera.com/

skibum : You think like Howard Roark.

I was up at Tahoe during Christmas. I think I saw the ad that EBGuy is talking about. I remembered couple years back at Northstar some broker was trying to sell 1/7 share of NorthStar village condo for $200K, I wondered how much that had gone down.

When I was playing craps the stickman was saying how Horizon is hurting, wouldn't be surprised that they tear that place down and build even more condos. The Asian gamblers now all go to Indian casino near Sacto to avoid going up the mountains so I don't think south Tahoe can support all the casinos.

It's funny to see now how the resorts now have young visa workers from all over the world, I remembered reading about how they are more courteous than local seasonal workers (another way to get more cheap and more reliable labor).

The condition at heavenly was pretty bad when I was there, I got a $66 bad weather discount for one day of skiing ($81 regular). Lots of trails were closed or not groomed and the Nevada side was closed.

cb

I won't short a group of stocks. I buy puts on individual stocks in the particularly susceptible sectors, because I am worried that PPT may still do something to hold up the indices. They won't do anything for a particular company, especially that particular company is precariously positioned to handle recession.

I have puts in a bunch of retailers.

NOT INVESTMENT ADVICE

Who said the move-up market is dead or
When people with good credit do bad things.
According to Fiona Santos of Coldwell Banker Peninsula, neighborhoods like Ingleside and Ocean View have dipped as much as 15 percent, or the equivalent of $100,000 per property. "It's definitely a buyer's market," she told me, "And sellers are pretty desperate." She said that the desperation is not only emanating from those moving out of town or those who can't afford their mortgage, but those buyers who have already bought a more expensive home in San Francisco. "Some of my clients have already moved up. Now they can't sell their first home. These homeowners can't afford to carry two mortgages," she says. "So they are foreclosing on their first home."
Can't believe Ms. Llyod got a used home salesperson to actually say this on record. The end is near...

I have a feeling that many finer-defined sector short ETFs will come on market pretty soon.

You can always count on Wall Street's efficiency when they smell blood.

OO :

The PPT has been able to do Zilch till now. I fear the Fed coming to rescue at the worst possible moment when I am on the short side. They do not fear moral hazard and have shown that in their actions.

I also fear manipulation on the individual company level - like deliberately spreading rumor of a buyout by Buffet. It can start a nice short squeeze.

The broader indexes have been behaving quite predictably on the news. NOT all the time, but most of the time for last few weeks. Even the "Bad Report Bulls" - economy is bad, so Fed will cut, so buy-buy-buy - crowd has gone in hiding now.

But anytime - ANYTIME - now some bullish trigger would start another covering rally. That's what I remain mindful about.

* If anyone takes that as an advice of any kind, they deserve what happens to them.

EBGuy,
That link is amusing. I especially like that doofus Realtors pontification, "I predict the demand for this property offering is going to be legendary."

I for one agree with ptiemann, it's sad to see all the rathole motels going away. SLT was never a place for ski-town ambience, but it had its sketchy charm. Now it's slowing turning into every other over-developed plastic area.

The saving grace for me personally is that I usually avoid staying right in town - taking the gondola up bites - it takes too long to get to a crappy part of the mountain anyway.

THis was in moderation, so try again...

I was up at Tahoe during Christmas. I think I saw the ad that EBGuy is talking about. I remembered couple years back at Northstar some RW was trying to sell 1/7 share of NorthStar village condo for $200K, I wondered how much that had gone down.

When I was playing craps the stickman was saying how Horizon is hurting, wouldn’t be surprised that they tear that place down and build even more condos. The Asian gamblers now all go to Indian casino near Sacto to avoid going up the mountains so I don’t think south Tahoe can support all the casinos.

It’s funny to see now how the resorts now have young visa workers from all over the world, I remembered reading about how they are more courteous than local seasonal workers (another way to get more cheap and more reliable labor).

The condition at heavenly was pretty bad when I was there, I got a $66 bad weather discount for one day of skiing ($81 regular). Lots of trails were closed or not groomed and the Nevada side was closed.

Stuck,
I'd take that as a compliment. I'm a big fan of Howard Roark.

I was up in Tahoe last week, I tried to take my kids to the snow park, the Gondola agent told me everyting was opened except tubing, after we paid $80 to get to the snow park, the guy up there told me everything was closed. To add insult to injury, 2 gondolas were stuck together and nobody could get down, the line to get down was over an hour.

The day earlier I forked out $165 for one day of kids ski lessons, at the end the girl told me my kid can now enrolled in level 3, yeah right, like I would spend $1000 before she even get on a lift.

ptiemann,

I was in South Lake Tohoe 2 months ago at one of the Marriott Lodges, and while just waiting in the lobby, I wandered to the time-share sale office to check it out.

I was told that that 2-bedders were completely sold out, and studio starts from $480K, with 3-month allocation each year (why do I need to stay there for 3 months out of a year??). On top of that, I need to pay 1/4 of the property tax ($480K x 1%), 1/4 of the annual maintenance and hotel management (about $300 a month).

I was like, that means my annual outlay even if I only get to use my place for 2 weeks is at least $5K, ignoring the $480K I need to shell out and the interest expense. $5K over 2 weeks is $357 a night, I think I have plenty of choices with that price range especially if I use Luxurylink auctions if I want to splurge. Why do I have to confine myself to a Marriott studio??

This was in moderation, so try again...

When I was playing craps in Tahoe last week the stickman was saying how Horizon is hurting, wouldn’t be surprised that they tear that place down and build even more condos. The Asian gamblers now all go to Indian casino near Sacto to avoid going up the mountains so I don’t think south Tahoe can support all the casinos. So there will be more land...

Because the price will go up.

Btw, it is a steal to go to Lake Tahoe in summer, it's much quieter, pretty in a different way, and you get to stay at the same posh condos or lodges for 1/3 of the peak price. We used to go there only in summer because we are not big skiers.

Well, the true reason is we are just cheap deal seekers.

I wish more people will buy aptera and other EVs so that the prices for the gas and good cars (BMW) won't go up that fast. I'm looking to replace my current one (already 6 years old) in 3-5 years.

OO,
Thanks for some new data points. So it looks like a studio quarter share at the Marriott Grand Residence is going for $120k from the developer. This site shows resale studios at the same place priced starting at $65k. Again, an almost 50% discount! Not to defend this product, but a per night charge amortizing ~$5k (maintenance + prop. taxes) over 13 weeks is a reasonable $55 per night. I know there are numerous SpecUvestors who bought these places and rent them out (~$150 per night compared to ~$200 per night charged by Marriott) when they are not being used. Unfortunately for them, I think they were banking on price appreciation (its a fractional!) instead of a near 50% decline.

RE: the time shares at the Marriott and other similar entities, keep in mind that there are a couple of other issues that come into play. First, there is the "cost amelioration" of subletting. Most of these types of things allow the "owners" to rent out units, which usually is managed by the site management. This can, as you might imagine, significantly cut into the overall costs, while on the other hand, times people want to rent units are usually the same times of year that you yourself as an owner want to use it. Second, I wonder what the time allocation of these 4 month blocks are. Is it contiguous? If so, the guy stuck with the summer block, or worse yet, the fall block is hosed. Why bother in that case?

EBGuy,

yep, that was exactly where I stayed. I paid $120 a night for Oct rate, and got $50 gift certificate for wines as part of the promo.

Well, the thing is, where do I find 13 weeks of holiday to stay there? It is not like I am retired and have nothing else to do. A more reasonable expectation would be 2 full weeks as the base case scenario, 3 full weeks as the optimum scenario. At base scenario, $357 is just too much to pay if I have to confine myself to a Marriott branded resort.

When I was there in summer and fall, the place was DEAD. I stayed over the Oct weekend, and based on the lights at the complex at night, it was probably 15% full. I don't think the fractional owner can get much rental revenue to justify the "investment".

skibum,

The rule for this Marriott thingy is, you get 3 months with 2 contiguous weeks in the peak season every 4 years so as to fair with all the other owners. Marriott assigns you a home base for time share, in this case, the Marriott Grand Residence, so the peak season is obviously the ski season. If your home base is in a summer retreat, the peak season will be summer.

Now what do you do with the other 9 weeks that are off the peak season? Or you want to stay there during peak season? Marriott will let you negotiate with the other owners on an "exchange system", so that you can give the other owner, say 5 weeks of your share for 2 weeks of peak season for your own enjoyment etc. You are just guaranteed the slot of 9 weeks, and it is allocated randomly.

My problem is, I definitely have no use of 13 weeks (I wish I did), and even if I do, I need to negotiate with Marriott owners around the world to see who want to take my weeks and what weeks I want to give for their properties. This is too much of a hassle for me, I would rather just pay the $357 rate and be done with it, plus I open myself up to a much wider array of choice.

Candidate for quote-of-the-week:

“If you’re riding a unicycle and you lose a wheel, you’re in trouble."
--John Kriz, head of Moody’s Investors Service’s real-estate finance arm, on subprime-mortgage lending.

$120 was what I paid Marriott for the low season, I believe if the fractional owner were to rent it out, it could go lower, $80-100 perhaps?

oo,
Well, it's becoming clear that (as gc said), the primary motivation for getting sucked into one of these deals is the hope for price appreciation. Otherwise, why not skip the hassle and just rent a nice room from one of these fractional owners when you want to stay there? I've always been under the impression that time shares as an investment vehicle were almost never a good idea. I don't see how that would be different here, even though it's in a (relatively) nice spot.

is this what we've come to, selling time shares?

Oops I can't subtract, it should be 11 weeks instead of 9 weeks of off-peak time.

I hope we get another topic started to have something to work on over the weekend.....

Selling time shares..... mutter mutter mumble...

ptiemann Says:

> And only idiots “buy” timeshares.

Smart people (with no morals) “sell” them…

You can sell a unit by the week for many times more than you can get for selling the entire unit.
Timeshare developers then hit the “owners” with high fees and capital costs so most “owners” will “give” them back and allow them to sell than again (timeshare weeks that owe back fees and capital costs are almost worthless on the secondary market)…

P.S. Last week the snow was not very good, but it should be great after these storms...

Just to clarify, with the pure quarter shares at the Marriott Grand Residence you get one week of time every four weeks. Every year the rotation is staggered by a week so that each owner gets 2 weeks at Xmas&New Years every four years.
A savvy developer staff member pointed out they could probably get more $$ if they changed this scheme so they also sold some units for 5 week intervals at winter peak time, 5 week intervals at summer peak time, and 3 week intervals for the spring/fall period. Indeed, if you check the resale prices your can see that the 5 week periods sell for around $20k/week while the 13 week quarter shares go for around $10k/week.
The quarter shares probably aren't a bad gig (at the resale price) if you like Lake Tahoe, plan to go up once a month for a long weekend, and like the convenience of not having to prep a cabin. I can't imagine there are too many folks who fall into that category. Also, the Grand Residence places you within walking distance of food/shopping/gambling and at the base of the mountain.
BTW, here is a guy who owns three studios and a 1bed/1bath unit. I keep waiting for his site to going down, but he so far seems to have avoided foreclosure. I have used his site to reference orginal developer asking prices as he has noted them on his For Sale page. Also, notice what he is trying to sell a studio for versus the resale price at the site I posted previously.
An interesting footnote to the RE bubble is that it provided a window of opportunity for high end fractionals to be marketed as a product different than timeshares. When the rubber hits the road (and specUvestors got involved), its clear that they may share at least one attribute -- price depreciation. I am curious to see when they bottom out and if they will appreciate from their resale lows.

EBGuy,

I remembered some Northstar condo in the new village was selling for 200K for 1/7 share, any ideas what they are worth now?

OO says,

I have puts in a bunch of retailers

I can see that coming when retailers drop like a rock, too bad Crate and Barrel isn't public...

I must say it was a great week with tech taking a spanking. Also, Standard Pacific homes called me today to say the townhouse my wife and I looked at a month ago in Fremont has been lowered from 625 to 569. I told him I just lost my job becasue I worked for a real estate company. He said I guess it's happening everywhere, because SP just closed their South Bay office and laid off all accounting and administration.
Also, A house built in 1991 in Fremont just closed for 670 after originally being listed for 759, the same price that the house next door closed for in May. Both houses are identical models and lot sizes (with identical kitchen remodels using the same contractor only difference was granite color). Sucks to be the neighbor that listed his house 2 days after his neighbors went pending.

Timeshares are the classic boomer product.

Anyone watch the TV show King Of The HIll? The one where Cotton Hill almost buys a timeshare is a good one.

But yeah, while Cotton's a WWII vet who killed fitty men, timeshares are the classic Boomer product.

FAB said:

>I bet the average guy in the Bay Area that makes $250K has a nicer home >and car than the average guy in the Bay Area that is worth $25mm…

This really, really struck home. I am worth $x million (small profitable private company, no debt) but I never think of the my net worth. I make about 1.4 HaHa in income, and that is the _only_ think I count. I just cannot stomach the thought of buying in the fortress.