patrick.net

President Bush disagrees with the bailout plan:

The president said he would veto the Democrats’ broad housing rescue plan, saying it would reward speculators and lenders. Bush also called on Congress to renew tax cuts that will expire, and to pass legislation renewing the government’s authority to listen in on conversations of suspected terrorists.

http://tinyurl.com/5924j9

Let’s be real. The Iraq War might have been mismanaged, but Bush seems to be capable of making sensible decisions in tax and housing.

- Peter P

The other bubble bloggers and I are looking for slogans that will catch on and help defeat a bailout, letting prices come back down to fair levels.

Here are some of the ones we’ve come up with so far:

• Where is the discount window for taxpayers?
• I saved prudently and all I got was my neighbor’s lousy mortgage.
• Regulation - yes, bailout - no!
• Why save when you can be bailed out?
• Why pay your mortgage?
• Can you spare a few thousand dollars to pay somebody else’s mortgage?

Patrick

Anyone following the market for foreclosures quickly notices that the banks are not offering any good deals. Why is that? Don’t the banks want to get these depreciating assets off their books?

One answer is that if the banks were to really sell their foreclosures for what they’re worth in the open market, that would devalue the collateral they hold on all their other mortgages, rendering the banks instantly insolvent.

The other part to the answer, contributed by reader Jacob F., is that banks are collecting mortgage insurance (PMI) on the defaulted loans every month, covering the expenses of leaving these houses empty.

As PMI and the other mortgage insurers inevitably go under from the sheer number of foreclosures, that will end, and the banks may at last hold the fire sale that responsible buyers have been waiting for.

Patrick

Dennis has a plan, and it is the fairest one I’ve heard:

My bail-out plan would be for the bankers/government to facilitate downsizing the homedebtors into a house they could really afford. Say homedebtor Joe is facing foreclosure in a “D” tranch house, but upon investigation it is determined Joe could actually afford a (smaller and cheaper) “H” tranch house. Since there would be numerous “H” tranch houses in Joes area, he would be offered to pick one, move in, and assume the loan.

I know the last thread has some discussion of this idea already, but it’s such a neat idea that it deserves its own thread.

Patrick

Saver: I’d really like lower house prices instead of “affordability” programs that just tell me to get deeply into debt.

Government: How about the nice mortgage debt interest deduction? The more you borrow, the more you save! But if you have no debt, then no tax break. Sorry.

Saver: You’re not listening. I don’t want debt. I just want your debt-mongering programs to go away, so I won’t have to bid against people committing financial suicide with debt. No saver can bid as much for a house as foolish borrowers can, borrowers who don’t care about their future bankruptcy.

Government: Say, have you considered what Fannie Mae can do for you? You can get a slightly lower interest rate on your debt since we have taxpayers on the hook in case of your default.

Saver: I still don’t want any debt.

Government: OK, we’ll increase the Fannie Mae conforming limit, so you can get whopping jumbo loans in California, and we’ll make Midwestern taxpayers cover it! Then you get hella deep into debt and the banks will be safe in case you default.

Saver: NO! I still don’t want any debt.

Government: You’re a tough nut to crack. OK, I’m going to hand you cash and say you borrowed it.

Saver: But I don’t want to borrow money!

Government: Too late, I just added your “stimulus” payment to your part of the national debt. Ha! Gotcha.

How can we get the press to stop reporting lower prices as bad news?

Lower food prices = good.
Lower gas prices = good.
Lower house prices = GOOD.

Why don’t we see the good news story of lower prices in the press?

Patrick

I tried to reply to a spam mail Congresswoman Anna Eshoo sent me, but my reply bounced because communication with our “representatives” is apparently one-way only, so I’ll post my reply here. I hope it helps her lose a lot of votes in the next election.

From: Patrick Killelea p@patrick.net
Date: April 10, 2008 4:50:51 PM PDT
To: ca14ima .pub@mail.house.gov
Subject: Re: Message From Rep. Anna G. Eshoo

NO NO NO!

STOP IT. STOP keeping housing UNaffordable.

We want CHEAPER houses, not more debt! Are you listening?

Do a poll. Everyone I meet wants cheaper housing. No one wants more debt!

That means you should do everything you can to REDUCE conforming loan limits.

Are you listening?

Patrick

Here’s her spam to me:

On Apr 10, 2008, at 9:49 AM, ca14ima.pub@mail.house.gov wrote:

April 10, 2008

Dear Mr. Killelea,

On February 8th, the House and Senate passed an economic package designed to help stimulate the economy by assisting millions of Americans who are struggling in this downturn. This bill provides for tax rebates to 130 million households, including seniors and the disabled, along with tax deductions to help small businesses, and an increase in conforming loan limits for home mortgages to bolster the housing market. The legislation is a bipartisan effort and will specifically target those who need the resources most. Only those who have social security numbers and file their 2008 taxes will receive rebate checks. This leaves no loop-holes for undocumented immigrants to qualify.

The legislation has been sent to the President for his signature.

The following are important specifics of the bill.
(blather about giving away tax dollars what-a-good-girl-I-am deleted)

Housing Provisions
oThe package would boost the size of mortgage loans that the Federal Housing Administration could insure and that Fannie Mae and Freddie Mac could purchase.
oThe FHA loan limit would be permanently increased to a maximum of $720,750 from $362,000.
oFannie and Freddie’s conforming loan limits would be increased for one year only to a maximum of $729,750 from $417,000.

This stimulus package is timely, targeted and temporary and represents an important first step toward stimulating the economy.

Sincerely,
Anna G. Eshoo
Member of Congress

A reader named John sent me a bunch of data on foreclosures, which I posted here:

http://patrick.net/housing/contrib/foreclosures_percent.html

The data says that there are 74 houses in some stage of foreclosure in Palo Alto, or 55% of all the houses for sale.

Another reader, named Carl, object that:

The foreclosure lister at sfgate.com doesn’t correlate this at all, it suggests a single foreclosure in 94301/94306 for all of 2007. The issue may be that whoever calculated your page included Palo Alto in San Mateo county, generally known as East Palo Alto, which has a huge foreclosure rate.

I forwarded the objection to John, who replied:

Hi Patrick,

I love the fact that it’s “acceptable/normal” for a home to increase its value by 100% during a five-year time frame, but it’s “unreasonable/impossible” for a home to decrease it’s value by 30-40% during a similar time frame. It’s yet another symptom of how off-kilter and in denial most (especially in this area are).

Don’t get me wrong, I enjoy the Chronicle and I enjoy sfgate.com, but I’m always curious as to how much of their advertising dollars derive from the NAR, homebuilders, realtors in general, etc. Please forward confirmation of the numbers below:

Palo Alto “Proper,” CA: 150 total homes for sale, of which 74 (49%) are in various stages of the foreclosure process (the range is from lenders who have filed a Notice of Foreclosure at the recorder’s office to REO properties).

East Palo Alto, CA: 189 total homes for sale, of which 106 (56%) are in various stages of the foreclosure process (the range is from lenders who have filed a Notice of Foreclosure at the recorder’s office to REO properties).

I completely understand why anyone (especially someone living in one of these areas) might have some doubt and a hard time swallowing it. With that said, we always encourage individuals who have a similar stance to physically go to their Recorder’s office and ask for all the data. We have even had some literally go from street to street to count the number of homes for sale within a specific area (that was a bit extreme, but it’s what some people need to do to extract the “truth”).

I don’t want to exacerbate anyone during what is obviously a very difficult time for many, so all I simply say is “this is my resource and if you have doubts about the data, you should absolutely go there yourself.” At that point they have no legitimate response other “okay, I will” or “no” (because they’re too lazy/unmotivated) to go.

From a reader:

Americans now own less than 50% of their home for the first time in many years. What I did not hear in the press is that this percentage was reported AFTER home values had increased astronomically. That is, as home prices shot upward, many Americans chased those zooming home prices by adding debt, not by rejoicing that they now owned a larger fraction of their home. To me, the story is not that Americans now own less than 50% of their home, but that this is true after home prices have skyrocketed in recent years, outstripped by debt rising even more rapidly. Consider the implications to baby boomers who hoped to retire soon, but who have already extracted a large fraction of the true equity in their homes and spent it.

This is pretty amazing. After the biggest runup in prices ever, owners managed to blow all of that equity, and then some. And now they’ve got rapidly declining prices on top of that.

Patrick

A reader writes:

Word from the IRS is that they are auditing people based on refiances on their house. If you refied and pulled money out of the house and use for other purposes than home improvement you can not claim that as Mortgage Deduction, needs to be claimed as Interest expense. Guess what, they want proof of home improvements… Just wait — how many toys people bought using their house as a ATM machine will be for sale on CraigsList?

Anyone know if this is true? And what’s the difference between the mortgage interest deduction and interest expense?

Patrick