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Peter P
2005 Aug 12, 1:03pm
Could it be more people are selling at the top and renting while waiting for a crash??
That's what I had in mind. However, I am completely unsure.
@ Jack & AntiTroll,
You guys are NUTSO! I think you've taken this acronym IDEA thing way over the edge. It's almost a little emBAREASSSing really, but I will say, you both got some BALLS.
But if MORE people were truly selling at the top, why would sales volume be down? If the number of people selling is significant enough to make a noticeable dent in the soft rental market, then I would think that the sales volume would still look healthy too. You cant have it both ways! Or CAN you?
Do we have stats on Marin sales volume? I've also wondered about the rental glut in particular in Marin; do you think it's tied to investor activity? (I'd love to see stats on that one). A guy here who's pretty active in RE "investment" told me most desirable properties were already bought up. I'm not sure, but that could explain the glut of rentals and scarcity of properties for sale--for the time being...
pbass,
Now Encumbered With Leverage Yet Will Earn Dollars Soon?
NEWLYWEDS buy now with huge loans with the expectation of paying it off later.
pbass Says:
There needs to be a term for newlyweds or soon-to-bes who are crazy desperate to buy on any terms. This seems like a pretty big group, or at least I’ve run into a herd of ‘em in the recent past.
Ok, here I go again after ribbing Jack & AntiTroll --how hypocritical of me! ;-)
PIGEON
Panicked
Ignorant
Greenhorns
Enamored with
Owning
Nothing
AntiTroll's acronym is more hopeful, mine is more cynical --how appropriate!
According to the Sac Bee inventory is up 40% but if sellers are turning around and renting, that would be fewer buyers in the market. Not sure how to work out those stats.
I bought some TOL $45 March 06 puts for $4.20 today. They are already down to $4, so I have already lost 5% of my investment, lol.
This is my first time with options, so I am easing into it. We shall see how it goes.
Tons more listing in the rental market here. The prices don't seem to be increasing yet. Actually in Sac metro they seem to be coming down, at least on houses, because of all the volume. Other areas are a bit more expensive, but not even close to mortgage costs yet.
But if the sellers are turning around and renting in Sacramento, wouldnt the rental market show it?
Jack,
Patrick updates the rental market average rents & listings by city daily: patrick.net/cache/rankrent.html
It's not alphabetized, so search for "Sacramento" --there are 524 listings, current asking rent : $1427
Unfortunately his timeline graph only shows the historical trends for rents over the whole BA --it doesn't break it out by city:
patrick.net
inquiring mind Says:
How many hits is this site getting these days? And how does it compare to say one year ago when I found this site? Is is steadily increasing, decreasing, etc. Any info would be interesting.
HARM Says:
I’ll bet it’s increased dramatically (the fact we can get 200+ posts in 1 day vs. 1 week says something), but the only way to know for sure is to ask Patrick. Inquiring mind, would you mind emailing him about this?
inquiring mind Says:
HARM: Done!
HARM Says:
thanks, i m!
Patrick has graphed the numbers per inquiring mind's request under "Housing Bubble News Links" from the "Crash" homepage"
"Sat Aug 13 2005 Graph of number of distinct IP addresses reading this page" patrick.net/hitlog.gif
I think the timeline is supposed to say "05", not "01", but the trend is unmistakeable. If you draw a line through the middle of all the peaks/troughs, it's about doubled since March, from around 1500 to 3000 hits a day.
I hate to pinch material from Ben's site, but check out what Australian Reserve Bank governor Ian Macfarlane (Oz's counterpart to Alan Greenspan) said about the Sydney housing market:
'High Prices The Problem, Not The Solution'
"They are the new economic refugees, heeding the warning of Reserve Bank governor Ian Macfarlane and fleeing north, south or west. In his most trenchant comments yet on the state of the nation's biggest and most overpriced property market, Mr Macfarlane urged young Sydneysiders to leave the city if they wanted to find an affordable home."
"'In fact, I think it's so expensive that particularly for a lot of young people, it's in their interests to go elsewhere where the lifestyle is more affordable, he said."
"A greed-driven, unsustainable housing boom creates an illusion of wealth while eroding the basis for sustaining it. What young person wants to live in a city where hopes of home ownership must forever be postponed? Property owners, like all other citizens, need governments willing to disregard short-term pain and make decisions that enhance their prospects for the long term."
Can you even imagine Alan Greenspan saying anything REMOTELY as blunt and honest as this? How about a Congressman or Senator?
If a high-ranking U.S. politican were to utter similar words, the NAR, banking/mortgage industry and homebuilder lobbies would have that politician's head on a pike. S/he wouln't be able to run for local dog-catcher by the time they were through.
Jack
I think the Sacramento area is in a state of flux. We've seen so much urban sprawl in the last 10 years that some areas have become virtually unrecongnizable. Because the area has grown so much, the rental activity in downtown Sac is very different from where I live. A lot of news stories have been popping up lately about the Natomas area, which is located by Arco Arena. Natomas seems to be the first area that's selling off (though Elk Grove seems to be having lots of activity too) and if you look at Craigslist, the most rentals pop up in Natomas and Elk Grove. The area I live in has not seen the increase in sales inventory at all; but it could be compared to Marin in that people around here consider it one of the more desireable areas. So the rents are totally schizophrenic right now, people are asking rents all over the board. I think rents will stabilize as we see which way the market finally decides to turn.
Peter P
2005 Aug 13, 3:41am
The most likely outcome in my mind is for the 10-yr to be range bound between 4%-5% for many many years, untill the inflation picture changes.
I belong to the "inflation is contained", "deflation is th enemy", and "housing will fall on its own weight" type of bubblehead. Actually, I see each fall in yield as a bearish sign.
Jack wrote:
Yeah, I think its obvious that the cheap money has sucked all the would be renters into the ownership pool, driving up prices and driving down rents. (Big news from Jack there, ay?) Thats why the P/ E ratios are such a bad argument for why real estate will crash. It may indeed correct, but it is easy to see what has happened with the ownership ranks swelling to 70 per cent. Of course the rental market is goiing to suck!
Hmmm...I'm not sure whether cheap money led to increased ownership--or increased speculation (the buy then rent for "cash flow" crowd) The CAR estimated something like 30% speculative purchasing over the last year in Bay Area. However, before I speculate, I want to see the Marin "investment" stats against overal stats. By purely anecdotal evidence (word of mouth), I'm guessing investor activity is high due to local wealth, the RE investor craze, and confidence in Marin's inherent value. A few other stats would be the job market (flat, upward, down?), and the inexplicate drop in Marin population--what is that about? Don't get me wrong--I love Marin, but since this RE "boom" is a widespread (and rather troubling) phenomenom--I suspect an overarching dynamic at work, rather than something special to Marin.
Just my suspicion--I need more data.
@MP,
The yield curve is already almost flat. One more quarter-point hike by the Fed in the short-term, and we're in inversion country. This has been a very reliable predictor of past recessions, because banks borrow short and lend long. If the yield curve inverts, this turns the whole equation upside-down. I don't see that as a situation that can last one year, much less several, but then I'm no economist. Maybe there are situations where this is possible --maybe you can enlighten us.
Yield curve & 10-year rates aside, I'm kind of with Peter as far as housing prices go. I don't think much higher 10-year rates are even necessary to pop the bubble (though they would help). To start with, the large majority of loans originated over the past 2 years are of the I/O-ARM and neg-am (option-ARM) variety. ARMs are not based on the 10-year bond rates anyway --they're based on the Fed short-term rate, and will start adjusting upward regardless of what the 10-year does (after the typical introductory 1-year "teaser" period is over).
These buyers will start hurting almost right away; however, I see the REAL watershed event being the estimated $2.3 Trillion in I/O & neg-ams set to convert to fully amortizing loans over the next 3 years ($300 billion in 2006 and $1 Trillion each in 2007 & 2008). Depending upon the exact type of loan, payments could more than double. If people are already overstretching to make they're current non-amortizing payments, look out below!
Yield-curve links:
CNN Money "Flattening yield curve squeezes banks"
tinyurl.com/77p92
Sacramento Business Journal:
"As yield curve flattens out, bank profits are squeezed"
tinyurl.com/c8nlz
MSNBC "What's up with Interest Rates?"
tinyurl.com/8sdbx
IO-ARMs and Option ARMs (neg-ams) links:
SFGate "Hazards of option-ARMs"
tinyurl.com/88crr
Forbes "Beware the Interest-Only Mortgage"
tinyurl.com/d5mse
NYTimes "The Trillion-dollar bet"
tinyurl.com/9ay8m
Was lurking around Ben's blog earlier and came across a popular new thread that seems to be getting lots of quality posts: "Do You Remember The Last Bubble?"
Some of us have already shared anecdotal information and personal stories about the last CA housing bubble (which peaked in 1989 and troughed in 1996) in previous threads. You don't need to be a mini-economist to make your point, either --something that will no doubt appeal to the research/statistics-averse among us.
If you like this idea, let me know.
When the two “collideâ€, one will show up stronger than the other. But it still plays out much like a hedge bet in a downturn. Marin is not immune, but I am sure it will look good by comparison to many other locations.
Well, I really do hope it does provide some hedge against equity loss, because even here I'm guessing a many people have over-extended credit. Case in point is a coworker, who leveraged all these properties, thenbought a brand-new Range Rover then a new BMW M5, because as he says "baby--it's only going up from here". Yikes.
(What do you think Kurt, will Marin go flatter than a pancake or whether the storm?
First off, I'm not sure Marin will hedge any better than comporable areas, such as portions of Berkeley, SF, or the peninsula. There's a certain mob psychology behind the thought that "it can only go higher", and it fuels desperate purchasing "before it's too late". I think this is particularly true in Marin, where people simply want to own a home--and almost at any cost. I think the same is true for speculators; they saw more opportunity here and other high profile areas. I think that explains some of the stratospheric gains in places like Palo Alto, Los Altos, Santa Barbara, Berkeley, Coastal CA. But, will Marin "flatten"? You're asking a guy that hasn't lived here long, but what the hey... I don't see really see homeowners leaving, unless they're forced to. What could touch it off is an investor panic, leading to a property glut, homes impossible to sell at "perceived value", and an eventual downward spiral. Marin's median price has certainly jumped (240% since '99), and if buyers shy away, it's bound to correct--over several years. (Just guessing by my gut...I really hope there's no huge economic fallout)
The ubiquitous phrases bubble heads use to describe home buyers such as “it can only go up and up metality†and “leverage your home for a Range Rover and Beemer†are not mind sets that I see at all in the 35 and up age range in my community. If your younger cohorts are indeed acting in such a manner, well, they will just have to get their faces ripped off now, won’t they?
WTF***???
Mr. Right, either you're living in a very conservative neighborhood of unusually frugal people, or I want some of whatever you're smoking. The national savings rate is now at zero and most people have been using their homes as ATMs for the last 5 years, which is one of the reasons why equity as a share of home prices has dropped to it's lowest point since they've been tracking it: 55% tinyurl.com/bff54. Even pre-existing homeowners have gotten into the game via cash-out refis & HELOCs.
As far as the demographics go, I don't think this sort of foolishness is wholly contained to one group or another. I see plenty of people in my own generation (Gen-X) and echo boomers funding current conspicuous consumption with their home ATMs, as well as tons of boomers.
Peter P
2005 Aug 13, 11:39am
1) July YoY prices will be up, and 2005 will be up over 2004 for median.
2) 10-yr yield will not breach 5% this year, and will not break 5.5% for the next 3+ years.
3) The yield curve will not be inverted this year or the next, or for the next several years for that matter.
(1) is a no-brainer. Y/Y prices in Bay Area will *not* turn negative this year
(2) I think 10-yr yield will briefly breach 5% this year, but it will stay under 5.5% for the next 3 years
(3) The yield curve will be inverted late this year or early next year
What are we betting on? ;)
How about a modest meal?
@MP,
Anyhoo, how can the yield curve be inverted? It has sure flattened a little, but there’s no inversion. Fed funds is at 3.5%, and the 10yr is a 4.24% and the 30-yr is at 4.65%ish.. there’s no inversion there folks.
According to the WSJ & CNNMoney, the yield curve "spread" is now .27%:
tinyurl.com/77p92
"Flattening yield curve squeezes banks"
As the Federal Reserve tries to temper inflation, banks feel pressure from narrowing rate gap. August 9, 2005: 10:17 AM EDT
NEW YORK (CNN/Money) - The Federal Reserve's moves to keep inflation under control has put pressure on banks and Wall Street firms as the yield curve flattens, according to a report in The Wall Street Journal.
A flattening yield curve -- the difference between short- and long-term rates -- is generally an issue of concern for banks that borrow money at low short-term rates and lend it to consumers and corporations at higher long-term rates. As the spread between long- and short-term rates fall, banks are struggling to replace the loss of income. If market watchers' predictions prove accurate, the yield curve could disappear by the end of the year.
The Fed is expected to raise rates for the tenth time in 14 months, bringing the short-term interest rate to 3.5%. But long-term rates are still dramatically low, and according to a poll by the Bond Market Association, 12 big Wall Street banks and securities dealers forecast that the spread between long- and short-term rates could fall to 0.15 percent by then end of 2005.
As of yesterday, the spread fell to about 0.27 percent."
Now, I don't know exactly which "long-term" rate they're using to calculate the yield spread, but as you pointed out, it doesn't seem to be the 10-year Treasury (which is used as the basis for fixed-rate mortgages). Perhaps it's the 6-month LIBOR?, not sure. Any bankers/economists out there?
As far as the demographics go, I don’t think this sort of foolishness is wholly contained to one group or another. I see plenty of people in my own generation (Gen-X) and echo boomers funding current conspicuous consumption with their home ATMs, as well as tons of boomers.
Right. I'm thinking of friends/family that used all their savings to buy homes of questionable value (such as cr@ppy slab-floor eichlers for $900K), then promptly filled these homes with digital TVs, Ligne Roset, Viking/Miele/Deep Freeze kitchens, etc. Not just here in SF Bay--all over the country. The same give me blank stares when I offer a cautionary note on the "bubble". Well, I'm through cautioning people: I'm now studying this for myself.
1) July YoY prices will be up, and 2005 will be up over 2004 for median.
2) 10-yr yield will not breach 5% this year, and will not break 5.5% for the next 3+ years.
3) The yield curve will not be inverted this year or the next, or for the next several years for that matter.
1) I agree with Peter and you on this. The RE market is glacial compared to stocks and is only now showing signs of starting to flatten in some markets. We have a very long way to go. You'll note I am *not* in the "-50% by next June" camp.
2) If the Fed keeps raising short-term rates and overall inflation shows signs of picking up (watch oil prices), 5% is very possible by end of year, but not a "sure thing". It will go higher than it is now, though.
3) An inverted yield curve is a virtual certainty unless the Fed immediately halts rate hikes --not likely.
but I couldn’t find the equity to home price ratio you referenced. Could you copy it over here?
"Widespread Mortgage Fraud Threatens Homeowners"
The report highlights several worrying undercurrents beneath an apparently rosy homeownership picture. For example, adjustable rate mortgages account for 34% of loans in 2004, leaving borrowers dangerously vulnerable to a rise in interest rates. Also, even though homeownership today stands at a record 69%, Americans actually own less of their homes than they did 30 years ago due to the drop in homeowner equity that fell from 68% in the early 1970s to 55% in 2004."
The US has always been a 0.something% savings culture, in good times or bad, and existing home owners have been tapping into equity lines of credit for decades, does the current trend indicate looming disaster? You may have more experience and foresight than I to know the answere, although your “WTF***???†and “whatever your smoking†comment would indicate otherwise, no?
Sorry if I was a little over the top there, Mr. Right, but your statement about over-35 homeowners/buyers not being in the over-leveraged and high consumption mind set really floored me.
It's true that Americans have not been good savers for quite some time (under 5% since I can recall), but it hasn't dropped to zero since the Great Depression.
Here's an SFGate graph showing U.S. savings rate from 1960 to present:
tinyurl.com/cqewu
Therefore what?
Homeowners have been extracting billions in equity from cash-out refis & HELOCs in recent years. Unfortunately, rather than using that money to pay off high-interest debt (a good idea), a substantial % are using it to fund current consumption, or even to speculate on more housing.
Mr Right,
That graph is too simplistic and hence a bit misleading. Personal savings rates are constantly fluctuating as this shows a bit better.
Does the savings rate include forced savings i.e. pension funds?
Even better CNN Money article on the subject:
http://tinyurl.com/74b9j
Homeowners: Upside-down is no way to be
"As more and more people have rushed to be homeowners, they actually own less of their homes than they have in decades...adding another risk factor to the overheated real estate market.
On average, homeowners have 56.3 percent equity in their homes, according to Demos, a public-interest research group. In 1973, equity averaged 68.3 percent; in the 1950s, it was upwards of 80 percent.
Two main factors are at work:
Homeowners are starting off further behind. In the past, the standard downpayment was 20 percent. A 2003 National Association of Realtors survey reported than less than half of all home buyers now put that much down; many obtain 100 percent, even 103 percent, financing.
Homeowners are yanking out cash. From 2001 through 2004, Americans took $330 billion in equity out of their homes, according Freddie Mac. In 2005 alone, they'll pull out as much as $160 billion.
Maybe an inverted yield curve may not matter. Particularly if the banks lend using ARM,s. They may make their margin latter, with short term profit made in establishment fees. (Probably wrong, but just a thought)
In any case, the question still begs: Therefore what?
By itself, few statistics say much. In the broader context of home debt-fueled consumption, record Federal & trade deficits and overall consumer indebtedness, I think it speaks pretty loudly: We are becoming a nation of debtaholics who are betting on asian banks & ever-loosening credit to fund our consumption.
I don't see this as being sustainable forever. Whether this means a relatively brief shallow recession/correction, followed by a more sustainable pattern of growth in business investment and savings, or a prolonged deep recession, I don't know.
Thank you, Mr. Right!
Well, I've got plans, so I have to sign off for tonight.
Btw, did anyone see my idea for a new thread above (3:46 pm)? Like it/hate it?
@MP, I'm not 100% sure about bet#2 (10-year breaking above 5% by end of 2005). Not saying it won't, but I'm not sure it will either.
Peter P
2005 Aug 13, 4:48pm
A small meal will be tough Peter P!
What do you mean? I like to eat many small meals.
Peter P
2005 Aug 13, 4:53pm
If someone would buy that house now with 100% financing, then that’s a different story. But she’s got some serious equity.
I assumed someone buying now with 90% financing.
Peter P
2005 Aug 13, 5:26pm
ptiemann, actually your girlfriend can afford to "gamble" because cashflow is positive. This cannot be said of investors who are late to the game though.
I mentioned earlier that the Sac market is in a state of flux, and it really is strange. I saw something in a local paper yesterday that illustrates the difference between the towns around here. Where I live (Granite Bay) is considered a "prime" area by locals. This area has been totally flat for the last year. There has been almost no increase in sales volume or inventory, and the prices have been very flat too. But if you look at Sacramento the volume has increased 40% in the last year, but prices have still increased, albeit more slowly. That leads me to think that "prime" areas may very well weather a downturn better. There is also a huge increase in rental inventory in Sacramento and Elk Grove. But not in Granite Bay or any other areas nearby that are considered more attractive. There is so much obvious activity downtown that I think we are going to see some significant changes in those areas (at least) over the next couple of years.
I meant to say Sacramento has had a 40% increase in inventory not volume.
Btw, I don't think MP can have it both ways. If the fed keeps raising short term interest rates an inverted yield curve is almost a sure thing unless long term rates go up, right? Or am I not understanding something here?
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There have often been requests for defining acronyms and RE jargon that not all readers are familiar with. There have also been quite a few gems made up along the way by bloggers. Here are some of the most frequently requested or re-used terms, along with their anti-spin translations. Perhaps you have a few of your own? Discuss, enjoy...
HARM
Homedebtor (a.k.a. “recent homebuyerâ€): Perpetual debtor/serf who will probably never own the home outright, thanks to cyclical refinancing (used to fund conspicuous consumption) and property taxes.
FB/AFB (“Another F@cked Borrowerâ€): Colorful synonym for homedebtor, coined by "SoCalMtgGuy".
Serial Refinancer: A Homedebtor/FB who is as addicted to mortgage refinancing, as a street addict is to crack. This type of FB typically refinances several times a year, almost always for the purpose of "liberating" more equity gains to purchase such life essentials as European vacations, plasma TVs, HumVees, and bling.
Loanowner: Another synonym for homedebtor or FB, that more accurately describes what a FB really "owns". Bap33 coined the derivative "Loanership", or the state of possessing a mortgage.
Jealous Bitter Renter/JBR: Originally a term used by housing bulls to disparage bearish non-homedebtors. Has since been co-opted by bears and is now used ironically. Technical definition: Someone who pays a homedebtor for the right to live in his home, at a huge discount and with no downside risk of falling property prices, rising property taxes or maintenance nightmares.
Jealous Bitter Owner/JBO: HelloKitty's complete 180 on "JBR". Basically a FB who must now watch as his/her home is dropping in value, even while their option-ARM rate ratchets up and negative equity swells. Soon-to-be a foreclosure statistic. Views happy, solvent care-free renters with growing bitterness and envy. Variants include JBH (Jealous Bitter Homedebtor) and JBL (Jealous Bitter Loanowner).
Sheeple/Sheople: Derogatory term for the vast, clueless, herd-following mass of homedebtors, who are unaware of the Bubble's existence, believe what MSM tells them, and have no idea of the ass-pounding they're about to receive.
Alligator: Term recently popularized by that media whore and self-help spruiker himself, Robert Kiyosaki. Refers to any unsuccessful investment that "eats" far more income than it generates, such as a neg-am financed Florida condo purchased anytime in the last 2-3 years for example. May be his only useful contribution to the world of finance.
McAlbatross: Term coined by skibum; a creative synonym for "alligator" (see definition) as well as a play on McMansion. FBs who are owned by their McAlbatross and cannot sell them for enough to cover mortgage, HELOCs, back taxes, etc. can be described as living “under house arrest†(see Coté-isms section).
Accidental landlord: A flopper who cannot sell his flip-house for either the wishing-price, or enough to cover the existing mortgage, so finds himself in the position of becoming an unintentional landlord. This type of landlord is easy to spot: he usually has simultaneous 'for rent' and 'for sale' listings on Craigslist for the same house. Accidental landlords are typically easy to bargain with, as they are usually underwater and cash-starved, which gives the renter plenty of leverage. However, renting from them also carries greater risk: if they sell the place, or the place goes into foreclosure, the new owner may not honor the prior rental agreement.
I/O (Interest-Only): Exotic mortgage loan product designed to attract more homedebtors by keeping initial payments marginally lower, while ensuring the homedebtor never builds any equity (except by perpetual appreciation).
Neg-Am (Negative Amortization, a.k.a. “Option ARMSâ€): Exotic mortgage loan product even more toxic than an I/O, in that the homedebtor falls even further into debt each month. Ending up upside-down is virtually guaranteed unless prices appreciate very quickly.
No-Doc (aka "Stated Income", "NINA"): Exotic mortgage loan product designed to get around federal/state lending requirements with regard to LTV ratio and borrower credit-worthiness, by allowing the borrower to declare “stated income/assets†without proof.
Stated-Outcome (aka "Liar-Loan"): A No-Doc loan where the lender deliberately inflates the buyer's income to whatever level is needed to “qualify†them for the loan amount.
NINJA (No Income, No Job, no Assets): Variants include "NINA". Also see "NAAVLP", "No-Doc", "Alligator" and "Stated Outcome".
NAAVLP™ (Negative Amortization Anal-Voodoo Loan Product): Term coined by the legendary Surfer-X to satirically encapsulate all exotic loans varieties (above). He is a Patrick.net "old-timer" who’s acerbic, anti-Boomer rants added much color to the early threads. An alternate definition was provided by Peter P, another blog "old-timer": National Association for the Advancement of Very Leveraged People.
Viable: Any mortgage capable of generating a commission for a mortgage broker. Redefined by "Thomas" from thehousingbubbleblog.com.
ARM (Adjustable-Rate Mortgage): Designed to keep the lender covered while interest rates shoot back up. Often used in conjunction with the “exotic†loan products above.
MEW (Mortgage Equity Withdrawal): Any form of additional debt/leverage on top of your original mortgage, using your house as collateral. Typically refers to cash-out refinancing, HELOCs and home equity loans (second mortgages), the use of which has skyrocketed in recent years. Designed to bury homedebtors even deeper and further fuel spending on frivolous bling and other nonessential consumption. Also see "Serial Refinancer" and "Equity Liberation".
Liberated Equity: An Orwellian industry-friendly euphemism for MEW originally coined by CAR Vice President and Chief Economist, Leslie Appleton-Young.
Monopoly Money (aka "funny money"): The anti-spin term for MEW or NAAVLP-derived debt. Used to counter RE industry Orwellian terminology like "liberated equity".
Appreciation: Debt & speculation-fueled inflation of real estate prices.
CPI: Government price index that only tracks goods and services that consumers don’t actually use or need, such as Chinese-made plastic lawn furniture.
Credit Score: Easily manipulated number allowing lenders to underwrite "exotic" loans to anyone with a pulse. Scratch "with a pulse" --made to ANYONE, period.
Real Estate Appraiser: A person who lies for a fee.
Unemployed Real Estate Appraiser: A person who refuses to lie for a fee.
Realtor® (aka "Realt-Whore®"): On either coast, a person who just recently used to be an Internet VC “entrepreneur†or a tech stock day-trader.
Speculator/Flipper: See "Realtor®". Popular variants include "Specuvestor" and "Investulator". Coined by OC Renter and Marinite.
Spruiker: Australian term for huckster, con-man or any slick showy (and presumably dishonest) salesman. Introduced to Patrick.net by Different Sean.
Heli-Ben (aka "B52-Ben", "Helicopter Ben"): Nickname for incoming Fed chief Benjamin Bernanke. Specifically lampoons a speech where he said the Fed could, as a last resort, drop cash from helicopters in order to fight deflation. “Bendover Bernanke†is another creative variant coined by NARB.
MIRAGE (Moneyed Immigrants, Rich Ancestors, Generous Expatriates): Acronym coined by HARM to lampoon the bulls’ argument that housing demand is being supported by cash-rich immigrants, wealthy parents and transplants from other states.
ILLUSION (Irrational Lending Lax Underwriting Speculative Investing Ownership Nonsense): Acronym coined by Dipanjan to describe what bears believe is really driving housing demand.
CHUMPS (Cunning Hard-eyed Ultra-savvy Market ProfessionalS): Acronym coined by HARM to lampoon the bulls’ argument that most recent buyers who used exotic loan products are market-savvy professionals who fully understand the downside risks and are financially prepared for them.
AEDS (Acquired Equity Deficiency Syndrome): Very un-PC acronym coined by Allah to describe underwater borrowers with falling equity as the RE market downturn gets underway.
Chewbacca (short for “Chewbacca defenseâ€): A legal strategy first used by the fictionalized Johnny Cochran during a South Park episode. A favorite of Praetorian’s, it refers to any argument based on non sequiturs and/or circular logic for the purpose of confusing one’s opponent into submission.
Pergraniteelâ„¢: Pergo fake wood floors, granite countertops, and steel appliances. Coined by SJ_Jim, an amalgamation of today's most popular home "improvements", which supposedly allows sellers to command a 200% premium above what they paid for the place.
ASSHOLES (Arrogant Self-Serving Highly Over-Leveraged Egotistical Speculators): Not-so-subtle acronym coined by motorcityjim. Self explanatory.
Schadenfreude: Delighting in other’s misfortune, such as feeling joy while watching over-leveraged specuvestors crash and burn.
Torschlusspanik: The panic a crowd has of a door slamming in it’s face (or of not getting on board a movement or opportunity on time). Prospective homedebtors/sheeple have this feeling very frequently.
REdarwinism: The study of the survival of the fittest in the real estate market. Coined by SFWoman.
NEOs (Negative Equity "Owners"): Homedebtors who owe the bank more than what their property is worth. Also see: FBs, Homedebtors, Speculator/Flippers, Sheeple. Coined by Owneroccupier.
Buyer-User: Industry term, coined by Mike Dwight of Frontier Homes, for someone who buys a home to actually (*gasp*) live in it. An increasingly rare and endangered species in California.
Buyer's Market: When used by a Realt-Whore®, this means a housing market with exploding inventory, plunging sales and sellers that refuse to negotiate on price.
Repartments: Condo conversions that have been converted right back to apartments, leaving recent buyers completely screwed (and surrounded by JBRs). Term coined by Sacramento Bee reporter, Molly Dugan.
Jingle Mail: Term coined by early bubble prognosticator Bill Fleckenstein, referring to homeowners who have "mailed in the keys because they can't make the payments and no longer have any equity in their homes". Bound to become a popular trend in the very near future.
Wishing Price: Another Robert Cote original. A fine companion for the more commonly used "needs-based pricing"; referring to seller's unrealistic/absurd asking prices based on greed/need, and their failure to recognize the new reality of a changed/declining market.
SILSIH (Suck It Long, Suck It Hard): Not-so-subtle acronym expressing defiance against housing perma-bulls and trolls, coined by the legendary Surfer-X who also coined NAAVLPâ„¢.
Karmic Bubble Correction (KBC): Term coined by newsfreak to characterize pain caused by the Housing Bubble's inevitable collapse in terms of Karmic causality. Those who are driven by negative, destructive emotions (fear & greed) are ultimately undone by it, which is karmic-ally just.
Bubble Battle Fatigue (BBF): Term coined by yours truly to characterize the cumulative psychological damage caused by constantly doing battle with housing perma-bulls, trolls and unrepentant specuvestors. May result in sporadic grouchiness, ennui, and the tendency to mumble aloud about "cap rates", "rent vs. buy" & "ain't feedin' no damn squirrels" at inappropriate moments. If left untreated, extreme cases may result in total bear capitulation, where the subject assumes the identity of the trolls he's fighting and may even begin to recklessly speculate in RE.
Prodigal Parents: Term coined by astrid (or perhaps credit should go to Sinclair Lewis?) to describe spendthrift hedonistic Boomer/SilentGen parents who have no concept of thrift, saving for the future, deferred gratification, etc., and therefore end up being supported (and financial burden on) their Gen-X/Y children.
UnBoomers: Term coined by LILLL to describe those who are technically Baby Boomers by birth (1946-1964), but share few of the dominant values and characteristics of that generation: self-serving narcissism, hedonism, greed, smugness, sense of entitlement, grossly inflated self esteem, lack of compassion for others, condescending attitude towards later generations, etc. "UnBoomers" include virtually every regular poster on Patrick.net who falls within this birth date range.
Potemkin American Work Ethic: Term coined by Jimmy Jazz of Ben Jones' Housingbubbleblog. Defined by Jimmy as "all style, no substance, instant gratification".
Dark Towers of Financial Doom: Term coined by ajh referring to a failed condo development in Australia, later generalised by DinOR to cover any High-rise condo tower that has been sold almost exclusively to flippers pre-construction, and which is now completed but basically uninhabited. Credit also due to Voice of San Diego reporter Will Careless, for his May, 2005 article "Downtown's Dark Towers".
"Any two will do": Term coined by DinOR of Patrick.net. Refers to the current ('relaxed' to put it mildly) standard that Congress applies to establishing "primary residency" for a particular house in order to qualify for the $250k/500k capital gains exemption. "Any two will do" means that, if Mr. Specuvestor claims to have lived in the house for any 2 years out of a 5 year period, he can get the full exemption. In practice, nobody bothers to check anyway, so your typical Specuvestor can have 300 "primary residences" for all the government cares.
HaHa: Patrick.net's monetary base unit of measure. As defined by Randy H:
Inflation: Standard macroeconomic definition: The erosion of the purchasing power of one's currency over time, due to an increase in the aggregate money supply. As defined by the Fed & BLS:
Price of stuff regular people need goes up = NOT inflation
Price of stuff regular people DON’T need goes up = inflation
Real-Estate-Industrial-Complex (REIC): Variant of Eisenhower's Military-Industrial Complex, referring to the banking/mortgage/Realtor/NAR-dominated crime syndicate that currently constitutes the Shadow Government behind the public government behind the Fed behind the cannibalistic aliens who are hell-bent on turning the human race into perma-debtors and/or meat popsicles. Coined by... possibly one of the guys over at Ben's blog. There are other close variants in circulation, such as RMIC (Realtor-Mortgage Industrial Complex). Still not convinced? Then clearly, you must be one of "them".
Banksters: Members of the powerful REIC cabal of corrupt mortgage lenders and central bankers who are hard at work, bankrupting the middle and working classes. Banker + gangster = bankster. Get it?
Escalation of Commitment: (from Wikipedia) "the phenomenon where people increase their investment in a decision despite new evidence suggesting that the decision was probably wrong." As applied specifically to the housing bubble, the concept that as f@cked borrowers dig themselves deeper and deeper into debt, their financial commitment to (futilely) trying to "save" their failed investment grows exponentially, along with desperation. Practical upshot: you do not want to be a: (a) friend, or (b) tenant of such a person, because they will most likely try to (a) borrow money from you (which you will never see again), or (b) jack up your rent to cover their mounting losses.
Mental Accounting: (thanks to Randy H for much input) Concept referring to the powerful role of seller and buyer psychology in promoting rapid price inflation, but working against rapid price DE-flation (hence the term, "sticky on the way down").
Seller example: Sellers tend to set their mental "fair market" value of their own house based on the highest comps they've heard about in their neighborhood. If comps begin to fall, they are often very reluctant to lower their price, even if doing so would still mean realizing a huge profit over what they paid only a few years ago --and getting out early enough to prevent suffering an even greater loss of value in the future. Most sellers also do not mentally "book" the erosion of the value of their house due to cumulative inflation. Even though selling a house 10 years later for what you originally paid for it would mean a substantial loss of wealth due to inflation, most sellers do not view it this way. This thinking process is clearly non-rational, but quite natural.
Buyer example: A buyer prepared to spend $4,000/mo on mortgage (buyers don’t even think in PITI, though they should) is still prepared to spend $4,000/mo no matter how much homes drop in price (all else being equal). Unless the buyer loses a job or takes a pay cut, they’ll just buy a higher-valued home which drops into their target price range. They won’t go buy the home they wanted in 2004 for 30% less. In fact, they may have even saved up more $ thinking that they’d need more to buy into a rising market. The fact the market is dipping only means they get an extra bedroom, a hot tub, or a nice yard. This also explains why many buyers do not understand or question the terms of their own mortgages --they only care about the monthly payment and do not "sweat" the fine print. Hence, the dramatic rise of NAAVLPs and "Joe Howmuchamonth".
This explains a lot of the “anomalies†people intuitively feel about the current statistics, particulary the recent phenomemenon of rising median sales prices in the face of plunging sales volume and exploding inventory.
Phantom Inventory: Per Randy H, a phenomenon where unrealistic sellers try to list an asset for a price far above its market value. This phenomenon exists in all markets to some extent, but becomes especially pronounced in declining bubble markets (such as housing right now) and such phantom sellers may eclipse all other sellers. Phantom Inventory is very much related to sticky-price action and "mental accounting" (see section above). Per Randy:
Pocket Listing: In general, refers to an insider deal, where the seller works directly with a Realtor or mortgage broker and does not list the house in the MLS or internet/newspapers. Per FormerApartmentBroker, "“pocket listing†can describe both an actual exclusive listing agreement that “was still in our pocket and not yet in the system†(the most common use of the term) and a verbal agreement with an owner that he will look at offers and pay us a fee if we sell his property even though the property is not actually listed." Corrupt Realtors are known to use pocket listings to set aside the best properties for themselves and their friends/cronies ("cherry-picking") in order to purchase them for well below market value. Per Randy H, this corrupt practice is common in Marin County.
Coté-isms: Satirical acronyms or terms coined and/or popularized by the talented Robert Coté. Targeted squarely at hypocritical NIMBYists and self-serving left-leaning activists with an anti-development and/or anti-automobile ideological agenda. This agenda is often (mis-)represented to the public as environmentalism or as a "cure" for urban sprawl and/or foreign oil dependence.
SmUG = Smart Urban Growth
SmUGLers = Smart Urban Growth Lovers
NUTS = New Urbanist Transit Supporter
TODLers = Transit Only Development Lovers
FOAMers = Forces Of Anti-Mobility
TROGlodytes = Transit Only Groupies
PEVERT = Promoting Exclusion of Vehicles Except Regional Transit
OPAC = Obsolete Pre-Automotive Cities (credit Prog JF Scott)
CLODs = Chicken-Little Oil Depletionists
TPVs = Transit Potemkin Villages
NURB = New Urbanism
"wishing price" : Robert's tongue-in-cheek response to homedebtor's absurd asking prices.
"under house arrest" : Robert's tongue-in-cheek description for FBs holding McAlbatrosses they cannot sell for wishing price.
"Housing Pustule": It isn’t a “bubble.†Bubbles are cute , they float along on lasy summer breezes. Little children, green lawns. Bubble baths, exotic models, smooth skin. No, this is a housing pustule and it is time we call it that.
The pustule has ruptured.
The puss is oozing.
The festering boil has necrotized.
The canker has ulcerated.
Magick Golden Wonka Housing Ticket: Metaphor for the highly cyclical and volatile housing market, that is increasingly being driven by wildly fluctuating credit expansion, the international carry-trade and mass mortgage securitization. Coined by HARM. This puts the “traditional†homebuyer (who intends to *gasp* actually live in the property) at an extreme disadvantage during the “up†market cycles vs. risk-loving speculators and flippers, who are awash in easy credit during these periods. This RE market model (â€new paradigmâ€?) contrasts with the more conservative housing market of previous generations, when mortgage credit expansions were generally not as extreme (Roaring 20’s excepted), and when housing prices mostly tracked overall inflation.
ass-hat: Speculative asset that generates no income or positive revenue stream; the "investment" value thereof derives entirely from anticipated ongoing price appreciation. Coined by Peter P.
credit crunch n [Latin creditum krisis] 1: general situation where grant of monetary loans are withheld from persons without the income based ability to repay 2: period of re-instated prudent lending policies following period of prosmiscuous loan grants; esp : loans formerly granted based on presumed perpetual appreciation of mortgaged asset, and the ability of the lender to divest collection responsibility through favorable sale of receivables. Definition courtesy of HeadSet.
#housing