patrick.net

From Escaped:
"Has anybody heard the French guy’s comments on Greenspan."

Hmmm...seems like one of those things that could become really big news & blown out of all proportion, or really no news....
Just found this brief story on it:
http://tinyurl.com/aa9pw

lol A senior official from the Treasury responded:
“Things can get lost in translation.”
Pretty quick (if futile) damage control, I'd say.

If you are confident about the inflation scenario, it may not hurt to prepay your rent 1-2 years up front negotiating for a better rate, and locking in a longer rental contract. I don’t know if you have already rented, but if you haven’t, try to look for a recently bought landlord who is desperate for rental cashflow.

I'm renting from such a landlord now who built a new "investment home" in Mill Valley (unincorporated) and thought he'd rent it out for a nice cashflow in excess of his mortgage. I rented it in April after he'd gone over 24 months with only 1 rentor, who skipped town after 2 months. I prepaid 1 year and negotiated him down so hard that he whines every time I see him ("you aren't paying half my mortgage!", etc.).

Maybe prepaying another year or even 2 would be wise in this environment, but the downside is that, once prepaid, it takes nothing short of Our Lady of Fatima to get any repairs done. A bigger question is whether I could sub-lease if necessary, thereby increasing my flexibility options.

Also, having not been a rentor for almost 20 years and never having rented in CA, what risk am I exposed to if he sells during my lease? I have a friend who warns me that many leases are notoriously full of loop-holes which can allow a new owner to boot the tenants, especially in unincorporated districts where there are few to no rentor protections. Can this guy sell and a new owner nullify or otherwise criple our lease?

One easy flag to tell if a home is the proverbial $hitbox:

If there are metal window frames set directly against a stucco wall, and water has begun to cause brown rust stains to run down the side of the wall at the corners of the window. Nothing infuriates me more than seeing this. It is the aesthetic equivalent of child-abuse.

When I am made emperor-lord-protector, I can assure you that the people responsible for these monstrosities will be the first ones up against the wall.

cheers,
prat

In other news...

http://tinyurl.com/ctael

D'OH!

Cheers,
prat

the $hitbox defined:

Something like this, you go to look at a rental and as you're walking through it you think "my god what a piece of shit". Now imagine that rental selling for $750K. $hitbox can also extend to new boomer McMansions with crappy construction, these are in a special class of $hitbox. The "I can't believe you paid 1.2 mil for that" $hitbox. These are typically defined by a "great room", French doors, a gigantic bathroom (I guess to accommodate their gigantic asses), at least a 3 car garage and/or a gigantic staircase. Other tells on this class of $hitbox are the zero plot line, that is, the house extends right to the fence. Expect your neighbors $hitbox to just about touch yours. I often wonder what those in this class of $hitbox do with their matching corgi’s? Do they have Pinar walk them after she gives Kaitlyn and Aidan their Ritalin?

"I have a friend who warns me that many leases are notoriously full of loop-holes which can allow a new owner to boot the tenants, especially in unincorporated districts where there are few to no rentor protections. Can this guy sell and a new owner nullify or otherwise criple our lease?"

Off hand, without seeing your agreement, I'd say the new Landlord cannot change a preexisting agreement if that agreement "runs with the land," (see assignments by landlords).

The general rule and how it works (I think) is:

Right to assign - L/L may assign rents and other covenants that run with the land, which is usually done by deed from the L/L to the new owner. A covenant is an agreement on how the land will be used, and usually includes what manner rents will be paid.

Rights of assignee (new owner) against Tenants (T) - once T is given reasonable notice of an assignment, T is now legally obligated to pay rent to the new owner, (attornment).

Liabilities of Assignee (new owner) to T - The assignee is liable to T for performance of all covenants that run with the land. A covenant will run with the land if it "touches and concerns" the land, meaning that each party shares a burden concerning the land for which the agreement has been made. In other words, you have a duty to pay rent, L/L gives immediate right to possession. Each side has a burden, and the agreement concerns the land. Therefore, the burdens of those covenants run with the landlord's estate and become the burdens of the new landlord. The original landlord also remains liable on all covenants made on the lease.

I think the only way these rules don't apply is if T agrees that upon assignment (sale of the property), the covenants or agreements between the original parties will become null and void with respect to the new owner. At such time, new covenants and agreemenst shall be made. Also, these agreements that last longer then a year and concern property need to be in WRITTING, (see Satute of Frauds) in order to be enforceable, but there are exceptions.

Again, this just my understanding of the general law. Hope this helps though.

Marinite, I concur with all your comments. There is definitely a lot of monkey business going on in Marin--South Marin at least; I don't know if these practices are so common in Novato, which appears to really be coming down right now.

Adding to the problem is that there are a lot of empty houses and "rental" houses (which are often empty) sitting around. These are often not listed for sale and are being sold by Realtors(tm) on a word-of-mouth basis apparently to maintain price stability. I don't know how you could get that data short of comprehensively studying County records over a long-term period.

I'd be very happy to pool data resources in a public forum. The only hitch I see is that this would encompass a lot of work, and we'd be at risk of being accused of skewing our data. It's a tough mission to counter the incumbant "official" data, even though we both know it's being manipulated. But that is hard to prove short of doing our own, massive, transparent survey based on an independent source like title transfer records.

In my own "folder" of 12 homes I can testifiy that no less than 5 of those have become empty, unlisted homes; one after being relisted 3 times at a lower price. It was in Corte Madera, had easment problems, a ton of land, and out-of-code improvements. This thing started at 1.5, was relisted over and over down to 1.15, and is now empty and unlisted. This is my worry about Marin: lots of owners can sit on empty, unproductive properties for some time because they are wealthy enough to try to wait out the cycle (or they think this at least). This makes prices sticky, at least in Marin.

And my own experiences with agents echos yours. We were working with an agent a couple months ago who was "plugged in" to the game in South Marin. She was only showing us unlisted properties, all of which I passed on because they're obscenely overpriced. All but 1 were empty and the owners rarely even lived in CA (according to her, at least).

Thanks Raiderjeff! That is all very helpful.

I also have a friend who is a realtor in Marin and she tells me, privately and sworn to secrecy of course, that some realtors swap like-priced houses to keep prices stable. I don’t know how well that works; I guess it depends on the scope of this practice. But it is dispicable IMO.

This practice, if it is indeed going on, would be extremely effective at manipulating prices in the smaller micromarkets where there is narrow inventory even in normal times. Take >1M homes in Larkspur, for example. There are so few of these on the market at any given time that just 1 or 2 swaps would be effective at fixing prices. This would also be true in Ross, Kentfield, Fairfax, etc. I'm a bit more skeptical about how effective swapping would be in Mill Valley or San Rafael, but if there's enough collusion, anything is possible.

BTW, if this could be proven it is explicitly illegal, as is all form of price fixing. Not that hard to prove either if direct-communication collusion is going on. I wonder what it would take to get the state Attorney General to take an interest. Anyone know if this has ever been looked into or prosecuted in an CA county before?

You know, I hate monopolies and skullduggery.

Somebody needs to sue the Realtors to compel them to release their prices and to make the whole process more open. I don't know what the cause of action would be, but I'm sure a clever lawyer could come up with a half dozen grounds.

NOT LEGAL ADVICE

With regard to the lease, be cautious. The law is a very tricky thing. While I agree with one poster that many attorneys are worthless, many are not. If you have a lot to lose by getting booted by a new landlord, then I'd be cautious about making any legal conclusions unless you are versed in the law. That might seem obvious, but don't be tempted to trust what you read online. Further, just because it's written in the lease doesn't make it so. There are some rights, both landlord and tenant, that I'd guess cannot be waived. Good luck with that.

NOT LEGAL ADVICE.

Now this my friends purty much sums it all up.....

http://tinyurl.com/9fgom

I just caught this item on Bloomberg:

Greenspan Says Speculation Having `Greater Role' in Home Prices
Sept. 26 (Bloomberg) --The jump in sales of second homes suggests the recent surge in housing prices is being driven more by speculation than it has in the past, Federal Reserve Chairman Alan Greenspan said.

Sales of vacation houses, or homes that aren't always occupied by owners, are ``arguably at historically unprecedented levels,'' Greenspan said in the text of his remarks to the American Bankers Association annual convention in Palm Desert, California. ``This suggests that speculative activity may have had a greater role in generating the recent price increases than it customarily has had in the past.''

http://tinyurl.com/dtd4r

Randy, you should find somebody to run this down . . .
"Anyone know if this has ever been looked into or prosecuted in an CA county before?"

What is "swapping?" A sale from one Realtor to another at a set price to artificially boost numbers?

This will be evident in the deed record, no? That's public. If you suspect a property has been subjected to this, go to town hall and pull the deed records. If you see a recent swap from a Realtor to a Realtor, that, to me, is a prima facie conspiracy to defraud, suppress competition, Sherman Act, and so on and so forth, the party of the third part.

"Thanks Raiderjeff! That is all very helpful."

No problem Randy. And thanks for your posts, they've been really insightful, even though it's been very tough for me to keep up with you guys and gals, (I'm not very knowledgeable on most of the topics covered on this board). But I'm trying to learn.

Escaped from DC, surely you can't be suggesting that realtors have been engaging in less that ethical behavior. I thought that their code of conduct prohibited this. The data from the realtor boards clearly suggests a robust housing market buoyed by historically low interest rates and a vigorously rebounding, job creating, economy. Sir, I suggest you review your data before you slander a group with such an outstanding history of public service as the realtors.

I am so full of crap I make myself sick, I should be shot ;)

Surfer-X, is this what caught your eye in that article?

For most families, the best borrowing for emergencies comes in two forms: credit cards and home equity lines of credit (HELOC). That's because these two kinds of credit are:

• Readily accessible. ...If you've already got your HELOC in place, you can start writing checks against it immediately.
• Unlikely to disappear overnight. Stocks or bonds can quickly lose value, but you'll typically only lose access to your credit if you misuse it.
• Relatively inexpensive to have and to use. HELOCs typically cost nothing to set up, and most have relatively low annual fees ($50 to $75 is typical). The interest rate is low, and you don't have to pay any principal during the first 10 years or so you have the line. So if your interest rate is 7%, you can take about $70 of every $1,000 you borrow and use it to make your payments until the crunch passes.

First, she gives the reader a false sense of security, then attempts to "cash out"
This reads like a thinly-disquised sales pitch from the credit industry.

Escaped from DC,

I'm not sure what they're ALLEGEDLY doing is prima facie collusion and price fixing. If I were to HYPOTHETICALLY try to construct a mechanism to do swaps to fix prices:

* It would work best with 100% owned properties, or properties financed unconventially (like callable loans, or non-bank "mortgages", etc.)
* It would involve the owners, who aren't the Realtors(tm) doing 1031 exchanges at a non-market bearing high price...the ALLEGED price fixing...arranged by the Realtors(tm)
* The Realtors(tm) wouldn't earn their commission on this transaction, but would receive other consideration, like the trading of agent contract assignments. Maybe they'd get other quid pro quo, but not cash commission.
* There would need to be a business justification that was plausible. I can see agents and owners arguing that they are simply swapping because "our agent is an expert in West Corte Madera, and we only trust our agent, so we're willing to reinvest from East Corte Madera to West...or something like that.

After a couple of these swaps in narrow markets, the data would reveal sales that were not market bearing, skewing prices higher. The owners would gain/lose nothing but the transaction costs, assumedly made up for in the higher drift of prices, and the agents keep themselves busy and employed.

Unfortunately, probably the only way to prove collusion and conspiracy is to actually catch agents committing the collusive acts, probably by wire-tapping, etc. I'm guessing this is why they could ALLEGEDLY get away with the practice: it's pretty tough to initiate that degree of investigation by authorities because it involves a lot of resources, time, and personnel.

***NOT ADVICE ON HOW TO COLLUDE OR OTHERWISE VIOLATE THE SHERMAN ACT OF 1890, OR OTHER RELEVANT LAWS***

Kurt S, exactly. I love it when the media does this bull$hit, borrow fools borrow more, buy more, don't worry about saving, saving is so old hat.

It would be really nice if we Marin residents pooled our resources/data together and shared it via a web site. Not to prove the current real estate establishment wrong or anything, but to just put some valid data out there for public consumption. Let the reader decide.

Marinite, great idea. When things slow down for me too, I'll consider how I can contribute.

I often wonder what those in this class of $hitbox do with their matching corgi’s? Do they have Pinar walk them after she gives Kaitlyn and Aidan their Ritalin?

LMAO!
This almost perfectly describes more than few McMansion-dwelling Boomer couples I know.

***NOT ADVICE ON HOW TO COLLUDE OR OTHERWISE VIOLATE THE SHERMAN ACT OF 1890, OR OTHER RELEVANT LAWS***

Randy H --nice disclaimer!

Reason, as stated prior, it's a combination of a robust, job creating, economy, historically low interest rates, profoundly good service by the realtors, and just a plain lack of enough housing. Pure market economics at their finest.

LOL surfer-x.

Reason,

That data is national data. No one (at least most of us here) do not contend that there is a mega-nationwide RE bubble. But, even the Fed (reference sr218, Federal Reserve Bank of New York Staff Reports, Assessing High House Prices: Bubbles, Fundamentals, and Misperceptions. Charles Himmelberg et. al.; September 2005) acknowledges regional bubbles, the Bay Area being one.

So, "all the datapoints" do not "continue to prove otherwise". Didn't someone once say that 'all real-estate is local'?

I’m confused, b/c this board is so negative, and all the datapoints continue to prove otherwise.

Just curious--why does the "negativity" bother you? Does all this bubble talk put your RE investments in peril? If the market is sound, then no worries!

Could someone discuss today’s surprising 2% rise in home re-sales today for August? It looks like the number was unexpected, and the median price rose 15.8% to a record $220,000.

Hello MarinaPrime.

Peter P, who is MarinaPrime?

Just someone I would like to have sushi with.

TWIT is back!

Surveys are lies compounded by statistics

Surveys are lies made half-truths by statistics.

The average human has about one breast and one testicle

LOL! The average human is half the man of what I am. ;)

Anybody think this is a false statistic? Everybody is stretching on I/O loans and are close to bankruptcy?

Exotic loans have the tendency to reduce current loan obligations by means of lower payment requirements. However, when the obligations balloon in the future, there will be a surge in delinquency related to these loans.

Anybody think this is a false statistic? Everybody is stretching on I/O loans and are close to bankruptcy?

It depends upon the borrower's ability to pay in the future. The worry is that many borrowers are using IO loans or RA or worse to reduce their current obligations, as Peter P says. There are (and I know some) folk who are using IO loans specifically as a mechanism to exploit low rates in the short term. The people I know have sufficient ability to support a 30 or 15 year fixed, even at a higher rate, so they're just playing a timing game. Probably a good strategy if they really keep an eye on rate rises and refi into a fixed before too much movement occurs. There are also people who know--with high certainty--that they'll be moving in 1-3 years, so an ARM, IO, etc. make sense for them, especially if they're planning on leaving the BA.

I think there will be plenty of traditional loan folks who'll get forclosed too if times get harsh enough. It's all about ability to service the current debt obligation, which I think is more about the percentage of equity owned and the income-to-PITI burden.

Anybody think this is a false statistic?

No, but this statistic is a false prophet.

But that may only be true up to NOW. Perhaps sooner than we think, this easy way out option may vaporize like the fine grey mist of a Marina morning.

Jack, you have never failed to amaze me.

But are you amazed by my real estate knowledge?

Your knowledge, your objectivity, your humor.

I do wonder how you guys felt about the market one year ago? two years ago?

One year ago: the housing bubble will burst in 3-5 years
Two years ago: housing is expensive but not crazy

...if someone has to bail out, they can still sell at a profit because of the recent run up in prices.

Jack, that's an interesting observation! This option may be more viable for those who bought 2-3 years ago, but might recent buyers have far less of a hedge? How much of a loss will people be willing to take? This could get really dicey if RE drops, and "homeowners" get seriously upside-down.

People are typically more loss averse.

This is actually quite well studied. On average, people experience losses at twice the percieved magnitude to gains of equal objective amounts. This can be, and is well understood and manipulated by many companies and institutions.

This is actually quite well studied. On average, people experience losses at twice the percieved magnitude to gains of equal objective amounts. This can be, and is well understood and manipulated by many companies and institutions.

Yes, fear is about twice as powerful as greed. We should manipulate this fact to the fullest extent as well.

By the way, Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing by Hersh Shefrin is a pretty good read.

"Could someone discuss today’s surprising 2% rise in home re-sales today for August"

Sales are a lagging indicator. I'll wager 2 large against any takers that this same number will be lower in September, October, November, and December.

I'll further wager another large that 8 of the top 10 markets including 2 or 3 in Cali, Nova, and NY, all crash out at least 10% by end of spring 06.

If prices roll back to two years ago level, would you buy at that level?

The decision is path dependent. It is not about a particular price level. If it drops back to that level with momentum, it may not be prudent to catch the proverbial falling knife. But if it levels off at that level with improving fundamental, the decision may be different.

What about in real terms (so 7% nominal appreciation, say)?

In a stagflationary environment, it is very difficult to measure asset prices in real terms especially because the benchmarks will not be representative.

What if mortgage interest rate goes up to 7 or 8%?

It depends if it is stable at 8% or going up with momentum. It is better to buy in a falling interest rate environment. Absolute level is less relevant.