patrick.net

Cult? What, the Reality Cult? The Cult of Being Informed? The Cult of reading the FT instead of the Lereah Newsletter?

Nice... thanks, SFWoman!

HARM,

Great review of some of CR's gems up in that mutha too!

Sold for 855K above asking! etc. etc.

FuzzyMath

I can't give you specific advice. Not because I'm not allowed to, but because I simply don't know.

I'd say this about rates. They'll go up, eventually. I tend to believe the Fed will ease more before hiking again, instead driving up inflation. But I wouldn't bet my family wealth on that feeling.

As someone else who's also been an entrepreneur/operator for many years, I'll repeat what dryfly said: 'shit happens'. You can't ever be completely ready for it, but it will. I've had surprise lawsuits, director defections, patents undermined, a domain name stolen, and of course the mother of all cycles in the "telecom nuclear winter". I even once narrowly avoided a nervous breakdown by disappearing to Germany for a while.

For these reasons we've always considered only my wife's income plus 20% of my averaged income in our affordability. Most of our loans were 15 or 20 year fixed. We started our first home with a 30yr and a piggy-back 10% of value loan. But I had the cash for that 10%, it just wasn't legally liquid yet. I paid that off (plus about 4% more) two months after closing.

***I had the cash for that 10%, it just wasn’t legally liquid yet.

And note this was _not_ stock options related. It was related to contractual payment for my cut of a major source code license "we"* sold.

*meaning, "I", but that's another story. Did I mention the near nervous breakdown?

SFGuy,

Last year I went to Bay Area. Before Team Patrick showed up, it was a happy place. They had flowery meadows and rainbow skies, and rivers made of chocolate, where the homedebtors danced and laughed and played with gumdrop smiles.

Now, there's fear in the air and the laughter is gone. People are whispering about unhappy things they'd never heard before, like "price reduced", "option-ARM reset" and "revert to the mean".

Who is to blame for this sea change in sentiment? The speculators? The Fed? The lenders who supplied them with all that easy money? No!

Blame Team Patrick. Their reckless disregard for homedebtor happiness brought on this malaise today. Team Patrick, the blood of the victims of Kalifornia is on your hands! [HARM looks at his hands]

@Harm and @Jon

Now, there’s fear in the air and the laughter is gone. People are whispering about unhappy things they’d never heard before, like “price reduced”, “option-ARM reset” and “revert to the mean”.

Their loan will reset but their neighbors won’t until six months later. So for quite some time (months) that person gets the feeling that something’s wrong, but no one else has started to panic really. So they’re still hanging on as the value drops and the payment goes up, thinking, “is this right, or…?”

If only Rod Serling could narrate the whole thing.

Hilarious stuff. Keep it coming.

hmm, just stopped by the ol' facing foreclosure site to marvel at the latest:

"Borrow 50 Grand to Stop Foreclosure and Sell My Houses Creatively

This is one of the burning thoughts that I came up with during the facing foreclosure fast: I really want to sell all those houses ASAP and stop foreclosure! I’m sick and tired of having all this non-performing inventory continue dragging me down for so long. I need to be moving forward towards my goals of becoming a successful real estate investor. [DS: emphasis mine]
...
That’s great because the lenders will not loose any money on me and the credit-challenged buyers will get their dream of home ownership. We have the makings of a WIN-WIN here.
...
Also, I should borrow a little bit of extra money so that I can invest into additional marketing. This way I will have more buyers to choose from and can pick “the cream of the crop” instead of acting out of desperation. Christmas is coming up and I need to get those houses MOVED!!
...
What do you think of my idea to borrow money, stop foreclosure and sell the houses creatively?"

it gets worse if you read the whole thing...

Can anyone guess where I cribbed my "Team Patrick" speech from?

Bryan said: Investors will figure out sooner or later that they can make more money on other investments

I am not so sure - most of the flippers who call themselves "investors" aren't really that sophisticated. Flipping a house was pretty much the only trick they knew. They will go back to their mcJobs when they figure out they are losing their shirts in RE, but I doubt they will have any other "investments".

BTW, don't worry too much about explaining how 20% drop after a 300% gain is a 60% fall when denominated by the original, unappreciated value. We get it, and most of the regulars already have discussed it before.

SP

Kudlow is a partisan in rationalist clothing.

I say pull his show, cut that other sound effects clown back to a half hour, and put on Maria for an extra 90 minutes a day.

@SFGuy --you got it!
I just slightly padded & re-phrased two monologues given by Team America's 'Sean Penn' & 'Alec Baldwin'.

oops, should've [sic]ced the 'loose'... next time, there's always next time...

funny treatment of the gurus here, i can't resist, then i've gotta stop avoiding writing a submission concerning corruption in state planning...

"Then the ultimate, Casey doing a parody of a guru RE investment seminar.

SNL cast members make up the audience. Our young hero RUNS onstage to thunderous cheers.

Casey: Welcome everyone, who’s ready to do some sweet deals? I can’t hear you. Who is ready to do some sweeeeeeet real estate deals?

The crowd erupts. Casey runs around the stage pumping up the innocent deer who await their fate. He points at the screen behind him and clicks his remote.

A single wide trailer shows on screen.

Casey: Who wants to live in this house? Who wants to buy this house?
Crowd: Booooooooooooo!
Casey: I don’t either. But let me tell you what’s inside that house. Pure gold. No, there are not real gold bars in there. It’s a little thing I like to call cash out.
The crowd roars.
Casey reaches behind a podium and pulls out a hammer.
Casey: Who can tell me what this is?
Man in Crowd: A hammer.
Casey: True, but it’s not just a hammer. It’s the key to unlock the gold. I like to call it my sweet deal tool kit.
He clicks his remote. A gleaming version of the Taj Mahal shows on screen.
Casey: With this hammer, I turned that dump into this majestic castle. In FOUR days.
The crowd roars. Another click of the remote. A huge pile of cash.
He reaches behind the podium and pulls out a Starbucks.
Casey: You can buy a lot of these with that kind of sweet deal.
Click of the remote. Several hot strippers on screen.
Casey: And a lot of these.
More remote clicks. A homeless guy sitting in his new Mercedes. A dog sitting in a fancy dog house.
Casey: Even a dog can do it.
Lady in the crowd: You are a fake! You ripped off my grandma with this trash!
She pulls a gun. At that minute, the Feds bust in, guns blazing. Our hero is mowed down on stage.

Flash to Casey in a limo: That should get the blog traffic going again. "

MMMMMMM sweet delicious hate, although I do feel a bit dirty when SFWoman drinks from the delicious hate fountain.

Whose favorite stock was Yahoo ? Confused Realtor ?

Well, the most prominent news on Yahoo's page today is about risnig defaults and foreclosures. Check it out.

I like Yahoo.

I could be wrong though, since I never saw F-911.

i suppose you don't have to see it to appreciate that MM is a kind of clown in a performing sense. conversely, i haven't seen TA yet, i have to confess... but i lifted the GWB talking to his dogs quotes in the last thread from the screenplay to F-911 sitting on the desk right here next to me (as distinct from the F-111 fighter bomber)

Jon said:
Their loan will reset but their neighbors won’t until six months later.

Unless one is in the mortgage biz, it is probably impossible to get reliable data on the trend and magnitude of loan resets. MSM sob stories about fucked borrowers lag by a few months.

But is there a reliable way to find out current stats about Notices of Default? There are now sporadic news reports of spikes in the numbers of these being sent out. Since these are legal notices, the data should be publicly accessible - does anyone know of a site which tracks this?

SP

Speaking of Marin, I'm becoming so annoyed by the average denizens of this enclave that I've taken to toting around my new Sony HDR-SR1* everywhere so I can document their lunacy for later blog publication.

*which I can afford without barely cause for concern because I don't pay 3.5X my current rent for a shitty McMansion on stilts with no yard, no garage, and pissy ass trust fund baby neighbors who like to brag about the $1.2M POS they just bought next door, which wishes it was a McMansion. Kind of a WalMansion. Literally, 2 tiny homes illegally "glued" together with a little covered walkway hall. That, some granite, and idiots with money gets you $1.2M in Marin.

At least these people don't know how to drive and are aggressive about it. On Monday some guy rolled down the window of his S-Class and yelled that he would sue me if I didn't quit filming him, because he was a lawyer. Camera $1500, Starbucks hot Chi $5, some shithead making an ass of himself for me in public: Priceless.

...I've gotta quit drinking what X is serving.

Randy, I detect stress in you. Go have some sushi.

Not a bad idea. It feels like a Sushi Ran night.

On Monday some guy rolled down the window of his S-Class and yelled that he would sue me if I didn’t quit filming him, because he was a lawyer.

wow, must have something to hide... thinks you're a PI the missus hired for his frequent 'lunch' rendezvouses with his 'research assistant'...

good to see you've got a headstart on the patrick housing mockumentary tho, didn't know we were in production yet!? i can see it already, patrick-michael moore associates presents: 'dude, where's my equity?' (creative financing provided by executive producer casey serin, who provided 'a little bit of cash for the deal' and 'gave some sweet clickthrough juice' to the patrick website in the process)

Not a bad idea. It feels like a Sushi Ran night.

Well, it has one Michelin star...

groupthink ... Krugman

The best thing the NYTimes ever did for me was lock Krugman up behind a pay wall. IMO he is the consummate idiot columnist. He checks all his academic credentials at the door when sitting down to write a column for the Gray Lady and produces, no matter what the subject, a nonsensical partisan rant with an "It's all Dubya's fault" subtext.

Lots of things are Dubya's fault. Arguably the worst president in the last hundred years, he has botched things so badly that there is a good chance history will consider him the worst president of the 21st century. That's a bold prediction given that he's the only one so far and the political pool of possible successors contains 99.94% slime as usual, but I'd bet money.

I digress. I don't want to talk about Dubya. I want to talk about Krugman.

Am I a victim of housing bubble groupthink? Maybe. What would I accept as an indication that I've taken the wrong side and need to rethink? Krugman talking up the bubble and why it has to burst. Krugman is an almost perfect contrary indicator. If he says white, you can be sure the truth is black, and vice versa. If Krugman says house prices have to fall (I guarantee you it will be Dubya's fault somehow), then I would look seriously at revising my position. I know this is faulty reasoning - an argument from (negative) authority - but having Krugman on my side would make me start questioning my judgment.

On a vaguely related matter, i.e. idiots with a media slot, take a look at http://www.cramerwatch.org/ and LYAO.

Randy H Says:

> Speaking of Marin, I’m becoming so annoyed by the
> average denizens of this enclave that I’ve taken to
> toting around my new Sony HDR-SR1* everywhere
> so I can document their lunacy for later blog publication.
> On Monday some guy rolled down the window of his
> S-Class and yelled that he would sue me if I didn’t quit
> filming him, because he was a lawyer.

How about posting to YouTube and posting the link here (I’m wondering if it might be a Marin atty. I know that has a black S Class (and a yellow 996 TT)…

I’m amazed at the quality of the video that my little digital camera (smaller than a deck of cards) will take.

edog :

Bookmark the following site. Inventory and median "asking" price information.

http://www.housingtracker.net/askingprices/California/SanJose-Sunnyvale-SantaClara/

The best thing the NYTimes ever did for me was lock Krugman up behind a pay wall.... no matter what the subject, a nonsensical partisan rant with an “It’s all Dubya’s fault” subtext etc.

Ok easy there. He's a hero of mine, so I'm slightly biased. If you really agree with his view of G.W.B. (worst president ever), his stuff should be like nectar. He's been a MIT Professor, still counts as Princeton Professor I believe, and is up for a Nobel Prize one of these days if he hasn't spoiled it with his very public political views. He's a smart egg, like it or not, but he's rankles some people. Oh well. You're not going to change the opinion of his fans.

RE: contraindicator, Krugman and The Economist have been predicting a housing pop for a long time now (~2002-2003 for both I believe). The problem with smart people in a bubble is not that they're behind the curve, it's that they're too far ahead to be believable. They see the approaching tsuanmi from their lookout and shout "Tsuanmi!" to the people on the beach. The masses shout back "what? Not only isn't there a wave, but the sea is receeding. See, I'll walk out on this sandbar to prove it to you!"

That's kind of how most of us here feel too, even to the point that last year we we're beginning to wonder if we should take a looky-see down on the beach just to see what's going on. "Hey, this shack is pretty cute. $800K you say?"

WHAM!

He’s not a contrarian this time, he’s an opportunist.

Not true - check the record.

edog Says:
I know that I’ve seen charts showing historical and current inventory levels for BA housing, but I can’t find them today. Can any of you fine ladies and gents groupthink me in the right direction? My parents were just told by a realtor that inventories are back to “normal” levels and I want to show them the facts. Thanks much,

Here is one: bubbletracking.blogspot.com
For example, here is inventory for San Jose/Santa Clara County
Nov 05: 3,403
Dec 05: 2,638
11/30/06: 4,402

And another: www.viewfromsiliconvalley.com/id264.html

And one more: www.housingtracker.net/old_housingtracker/
With the numbers for SanJose/SantaClara coming in at:
YOY Inventory: +24.8%

Hope this helps,
SP

Face Reality :

If you are still around, can you please look up MLS number 666792 on Zip Realty. It has reduced asking price by around 90K.

Guess where it is ? Not in Sacramento/Phoenix/las Vegas. This is in Lincoln / Monta Vista school area. Most people I know consider it to be a sacred area where the fountain of home equity wealth runs perpetually.

Randy, since X isn't here, I'll say it:

MMMMMMM sweet delicious hate... Drink, drink from the Hate Fountain. Give in to the Dark Side. Good, gooooood...!

I think Krugman is just jumping on a giant ball that’s already starting to roll down a hill so he can look back at his legacy as having presciently reported on the upcoming housing bubble collapse. He’s not a contrarian this time, he’s an opportunist.

we called it first. and who are we? nobody. where's our paid column, emeritus professorship and fat salary? :cry:

edog said:
My parents were just told by a realtor that inventories are back to “normal” levels

Isn't that kind of like a Used Car Salesman telling you that this 1989 Ford Tempo was owned and driven exclusively by one very careful nun?

The funny thing is that you don't buy ANY other thing just because the vendor has high inventory. "Oooh look ma, this furniture shop has a lot of unsold chairs - let's hurry up and buy it at asking price."

SP

The High Price of Mobility: Take Three
I still think a large benefit to home ownership is seen once the mortgage is paid off (around retirement time -- take the "almost free" money when you are working along with the generous mortgage deduction). This is also the reason that boomers who have withdrawn a lot of their equity are going to be hosed.
An example: if Fuzzy Math has bought a pine box (will die in the house), his purchase may actually start to be more reasonable -- in the very, very long run.
Exercise:
Assume rents rise with inflation (also assume he finds a 30 year fixed mortgage!) :-)
Scenario 1: lives in home 10 years after mortgage is paid off
$2500/month rent * 12 * 10 years = $300,000 in todays dollars
Scenario 2: lives in home 20 years after mortgage is paid off
$2500/month rent * 12 * 20 years = $600,000 in todays dollars

Okay, admittedly, I left out maintenance, insurance and property taxes which will diminish the benefit.

This example also drives home the point that if you are renting, you need to be putting the difference into your piggy bank (which better offer decent returns), unless you like the idea of living in a senior subsidized studio apartment (This, to paraphrase a little old lady I know, "sucks". Welcome to my living... I mean my bedroom... I mean my kitchen).

The high cost of mobility title refers to not buying into the buy upgrade buy NAR merryground (that nets a 6% tarriff each time). Finding a place and staying in it has some significant long term benefits. If you need to be mobile, then run the Bubblizer! Please note, I am not endorsing buying at this time. Okay, be gentle.

EBGuy said:
The high cost of mobility title refers to not buying into the buy upgrade buy NAR merryground (that nets a 6% tarriff each time). Finding a place and staying in it has some significant long term benefits. If you need to be mobile, then run the Bubblizer! Please note, I am not endorsing buying at this time. Okay, be gentle.

:-) What, you don't like being cleverly insulted?

Actually, I don't think anyone here would disagree with you for suggesting that buying a place, paying it off, and LIVING in it is not a bad thing. Sure, you can run the numbers and "prove" that there is opportunity cost to the capital, but there is more to life than maximizing ROI.

The problem is with the suggestion (which you didn't make) that it is a good idea to "creatively finance" the purchase of an overpriced shitbox using a loan which eats up over 35% of your income. Or that this is preferable to renting an equivalent place for 60% of that. Or that prices will never go down because some idiot FB can't afford for it to go down. Or that it will go down "everywhere but here".

Like the woman I met in the cafeteria* today who thinks her Rivermark rowhouse (bought in 2005) will never drop. And she "knows" this because six comparable houses are on the market for $25K more than she paid. (Think about what it means for a minute.)

(*Dungeness crab. Oysters. Sautee'd prawns with Garlic & Brandy)
SP

I now declare Face Reality “not a troll”.

Ok, ok... I agree that providing a provide a concrete, testable definition of "crash" is progress, but let's not get ahead of ourselves here. I'd also point out that he didn't provided a timeframe. My guess is, he would require the 20% nominal drop to take place over no more than 6 months, or it doesn't "qualify" ;-) .

Like the woman I met in the cafeteria* today who thinks her Rivermark rowhouse (bought in 2005) will never drop. And she “knows” this because six comparable houses are on the market for $25K more than she paid. (Think about what it means for a minute.)
For those of you who need a clue stick (which I sometimes do), goto:
http://www.rivermark.net/homes.html
You will note that all the developments are "Sold Out". Hmmm.... maybe they got job transfers out of state :-)

there is more to life than maximizing ROI.
Hey, if someone wants to be a lifetime renter, go for it... not sure I would trust anyone (say, except Randy or dinOR) to be disciplined enough to save enough to come out ahead in the end. Also, lots of boomers have HELOC'ed themselves out of ever retiring.
Just to be clear, I wouldn't be buying any time soon, though.

So here’s the bottom line: yes, northern Virginia, there is a housing bubble.

shouldn't that read: 'Yes, Virginia, there is a housing bubble. Your little friends are wrong...'

Okay guys, I'm busy working today (no time to check out the blog), and it looks like I missed out on some fun here! FuzzyMath is a bit combative, but I really do think he is scared and concerned about his housing situation. He's a trooper for taking it from us and sticking it out. He seems to me someone who only very very recently realized what's been happening to the housing market - a true FB who somehow broke out of the real estate opium fog and looked around to see how far up $hit's creek he and other FB's are.

BTW, the greates idea posted today was Randy H's:

Kudlow is a partisan in rationalist clothing.

I say pull his show, cut that other sound effects clown back to a half hour, and put on Maria for an extra 90 minutes a day.

I'll second that! mmmmm Maria B....

the bio-sequestration of CO2 looks like a good idea - and kind of repeats the process of creation of the fossil fuels in the first place... My Green Party mates don't like the thought of geo-sequestration at all -- what goes down, must come up, in their estimation...

FAB,

How about posting to YouTube and posting the link here

I have plans for this footage I'm getting, but I'll most likely adopt some relatively anonymous front when I post it. I'll be sure to send you an email though.

SFWoman,

It's been my own personal experience that the annoying, arrogant lawyer types think that no one else could possibly comprehend the law but them. Same with doctors, computer programmers and indian chiefs.