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What is considered subprime territory in the Bay Area?
invite response
2007 Apr 9, 3:59am 17,991 views 244 comments
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Could life ever be really boring if you have a high speed internet connection and a postman?
I mean, the worst case scenario is that you buy a bunch of Linden$, date cartoon hookers and flip virtual real estate.
SP,
I bet the Other Place is pretty good by now. Somebody probably overthrew the old management, installed some air conditioners and built saunas to take advantage of the abundant geothermal energy.
Kind of like the new Las Vegas.
Malcolm
2007 Apr 10, 2:37am
I think I do it right. I have a plain simple house and I can just go explore those fun places when I want to. I like fishing also, in Cabo I caught a nice Mahi Mahi.
As long as they aren't bothering me, I don't care if people do drugs; meth and those other ones cause crime and decay, but some surfer smoking pot on a beach with his friends has absolutely no social impact on anyone.
Malcolm
2007 Apr 10, 2:38am
Some people could live on an island forever, I need a change of scenary.
Cambrian flip? Asking $764k - sales history:
11/30/2006: $646,000
03/03/2005: $660,000 -- Someone lost money on the '06 sale?
Malcolm
2007 Apr 10, 2:49am
Astrid, that is the other extreme. Idle consumption, the trademark of the baby boomers. People nowadays really do live like kings. I want that please send it to me, it is not even necessary to get out of bed. I think that is why most things that I have sold on Ebay go to someone in the Midwest.
Cambrian flip?
lunarpark,
I'd say based on the photos, most definitely! You have the low-end yet stainless steel appliances, crappy looking "travertine" marble kitchen tiles, fresh paint, no furniture, new bathroom mirrors but the same old toilet and sink. A tell-tale sign in the kitchen is the stove abutting the fridge. Now how do you suppose you can cook and wiggle your way around to get crap out of the fridge or freezer, when by opening the freezer door you block the stove?
"I have a plain and simple house"
Amen to that! Over the weekend I helped my daughter and son-in-law put up their new fence. They have a 1,600 s/f 60's ranch on a decent sized lot. Unlike the "high stakes" game of flipping and decorating upscale homes, the projects tend to be simple, effective and...fun!
My wife and I have not only ruled out any form of McAlbatross we've rediscovered the excitement of starting (and finishing) an entire project in just one weekend! My in-laws on the other hand are discovering just what a hassle undergound sprinklers can be. Uh, no thanks.
skibum,
You could tell the grout between the tiles hadn't fully hardened yet too! Good eye my man! Also please to note the the back deck is incorrectly done. While it does have more eye appeal to run planking the length of the deck it is structurally incorrect. Staggering the boards creates more stability and will last much longer without swaying and wandering.
(At least it takes your eye of the power lines in the backyard though)
Nice try flipmeister, you have fooled no one!
Nice try flipmeister, you have fooled no one!
Well, eventually some GF will take a hold of that flipped-out overpriced place and pour 50% of their gross income into the mortgage, so I don't feel for mr. flipmeister.
How can a people be so uneducated that they can’t see they are living in paradise? So ungrateful that 4 hours of your day aren’t adjudicated toward snow removal and grid-lock commute that you have to get HIGH? What a waste.
Whatever you "luxury" thing you are accustomed to having from birth just becomes an accepted part of the background scenery --i.e., nothing special. Island people may appreciate a good swim or surf now and then, but it's no big deal to them --kind of like gridlock, illegals and overpriced housing is to us :-) . Ditto for wealth. If you are born with it, you just take it for granted.
People do not appreciate the absence of problems they've never had in the first place, nor do they value luxuries they've always had (unless of course, they lose them). Just human nature I guess.
Here's a house in Willow Glen. Check out the kitchen, yee. Asking $619k. Sales history:
Sale History
04/26/2006: $582,600
08/02/2005: $645,000 - lost money on the '06 sale?
04/12/2002: $1,242,000 - has to be an error
Peter P
2007 Apr 10, 3:32am
They are European-style (exercise on expiration day only) cash-settled (no stocks change hands) options on the S&P 500 index.
The original SPX options are too large for many trades (each contract controls 145K worth of "stocks").
The new XSP options are 1/10th the size of SPX options.
Not investment advice.
Peter P,
The guys I know that trade the Mini's do so on "offshore" trading platforms where the leverage is HUGE! With like 5 grand you're trading 200k.
"gridlock, illegals and overpriced housing is to us"
HARM,
Remember, the only reason there are so many illegals in this country is because they are doing crimes Americans won't do themselves! :)
Here’s a house in Willow Glen. Check out the kitchen, yee. Asking $619k.
lunarpark,
Nice - trolling for flipper specials now, are you? Entertaining, nonetheless.
My comments: this is a subprime to Alt-A flip! They clearly added granite countertops to existing 1950-1960's style hardwood cabinets, the kind without rollers on the drawers (which I find a pain in the a$$ to use). I'm not even sure they replaced the hardware fixtures based on the pics. Is that tile or linoleum on the kitchen floors? They cheaped out to the point where they just extended the flooring from the kitchen into the livingroom!
New FP mantle, fresh paint on the exterior stucco, and a half-hearted staging job with the shower curtain, towels on the toilet, and non-descript paintings above the toilet round things out. To top it all off, check out the pic of the bathroom with the new granite counter - they didn't even finish the paint job around the window for the photo shoot!
Gotta get the place listed before the next mortgage payment is due! Gotta love it!
"Nice - trolling for flipper specials now, are you?"
Guilty as charged. :)
Another thing about this house - it's a "snout" house. There's a funny picture book/glossary for all things sprawl called "A Field Guide to Sprawl" that has some funny aerial pics and accompanying descriptions. A "snout" house is one where all you see from the front is the garage, so that it looks like a resting pig from above.
It also fails the "trick-or-treat" test of home design, where a kid (or most people for that matter) can't find the front door when visiting.
"the kind without rollers on the drawers"
I'm sure it was their intent to "retain as much of the original charm" as possible. That and $119.90 vanity from Flip Depot (TM) was beyond their budget.
It isn't so much that roller-less drawers don't work. They just don't work when they have an extra 1/4" of still tacky paint on them from the 3rd flip in 4 years.
It also fails the “trick-or-treat†test of home design, where a kid (or most people for that matter) can’t find the front door when visiting.
One of my Cali lifer friends tells me that his mom would drive him from home to home for trick-or-treat.
But then again he told me he had never seen a school bus.
My east coast parents were dumbfounded.
From: http://www.theconnection.org/features/sprawl/sprawl2.asp
Privatopia
A community-of-interest development (CID) where residents are legally bound to obey the covenants, conditions, and restrictions (CC&Rs) of a homeowner association may be called a privatopia. Author Evan McKenzie coined the term to emphasize how these associations assume many of the powers of private governments, providing such basic services as police, fire, or trash collection. They may use CC&Rs to regulate paint colors, landscaping, and tenant behavior. Some are gated communities, where all persons entering must pass a security gate. Privatopias appeal to many different income groups. According to planners Edward J. Blakely and Mary Gail Snyder, lifestyle communities focus on retirement and leisure with amenities such as golf courses. Elite communities protect social status. Security zone communities are composed of worried inner-city residents fearful of crime. The gated homes in the photograph of Littleton, Colorado, comprise an elite community, and the golf condos in Palm Desert, California, form a lifestyle community.
Personally I think this is the future. We'll get rid of public schools, police, firefighters, and then it will be everyone for yourself - or live in a privatopia.
This must be a libertarian's dream.
Peter P
2007 Apr 10, 4:06am
The guys I know that trade the Mini’s do so on “offshore†trading platforms where the leverage is HUGE! With like 5 grand you’re trading 200k.
Offshore?
BTW, regulated futures and options here already have many times more leverage than I will even use.
I think the daytrading margin on ES is very generous.
You all may or may not have seen, but DR Horton's Q1 report looks very, very bad:
http://money.cnn.com/2007/04/10/news/economy/drhorton_warning/index.htm?postversion=2007041009
California is the worst for them:
"The worst declines were in California, where volume was down 59 percent, and value of the homes sold fell 56.8 percent."
I went to their website (not posting to avoid moderation), but they don't have a whole lot of housing stock in the Bay Area, but there are pockets: the new condos on El Camino at the old Hyatt Rickey's, a couple in the East Bay, and bunch in the Delta. Other than the PA development, it sort of mirrors the "subprime" geography, doesn't it? Besides, who the F wants to live on El Camino? I guess it's convenient for getting to Fry's or Compadres.
Peter P
2007 Apr 10, 4:17am
Other than the PA development, it sort of mirrors the “subprime†geography, doesn’t it?
What is the attraction in that part of PA? Fuki Sushi? Trader Vic?
OO says,
Almost all the professional couples I know who got into a home in the last few years locked in fixed rates, so higher rates won’t affect them.
I know of 5 co-workers in the past year and a half who bought new houses. They are the prototypical 200K dual income first time first-gen buyers. All 5 of them took ARM or IO loans. Higher rates will have an effect but luckily job market's been good and companies have been paying bonuses.
I told one engineer that I have a fixed rate mortgage and his response was "why, most people don't stay there for more than 7 or 8 years". I guess he is a poster child of the engineer that doesn't have a clue.
Peter P
2007 Apr 10, 4:20am
They are the prototypical 200K dual income first time first-gen buyers. All 5 of them took ARM or IO loans. Higher rates will have an effect but luckily job market’s been good and companies have been paying bonuses.
What is their price range? Does 200K dual income mean 2x 100K or 2x 200K?
Also, there was a discussion here yesterday about whether or not the subprime disaster is spreading to Alt-A. Well, there is a NYT piece today about this very subject:
http://www.nytimes.com/2007/04/10/business/10lend.html?_r=2&oref=slogin&oref=slogin
Login is needed, but here are key excerpts:
Defaults Rise in Next Level of Mortgages
By VIKAS BAJAJ
Published: April 10, 2007
Some of the problems afflicting mortgages sold to borrowers with weak, or subprime, credit increasingly appear to be cropping up in loans made to homeowners who were thought to be less risky.
Since the subprime mortgage market began deteriorating late last year, investors and analysts have kept a close watch on Alt-A loans, worrying that problems in higher-grade loans would prove to be a greater threat to the housing market and the economy.
...
Alt-A loans are made to borrowers with credit ratings that fall between prime and subprime, or to homeowners who have prime credit but are seeking a somewhat riskier loan.
Such loans made up about 10 percent of all mortgages outstanding at the end of 2006 and made up about 18 percent of home loans written last year, according to Moody’s Economy.com.
Together, subprime and Alt-A loans account for about 21 percent of loans outstanding and 39 percent of mortgages made in 2006.
The delinquency rate for Alt-A mortgages remains much lower than the rate for subprime mortgages, but it has been rising. In February, 2.6 percent of Alt-A loans were delinquent by 60 or more days, up from 1.22 percent a year before, according to FirstAmerican LoanPerformance. By comparison, 12.44 percent of subprime loans were delinquent by more than two months, up from 7.84 percent.
With regards to what will be effected - how about vacations? Will people be scaling back or giving them up as their mortgages reset and they can't tap the HELOC's anymore?
When will it be reasonable to get some discount flights to Europe - or do you think that prices will actually go up as airlines need to cover the cost of the flights?
Peter P
2007 Apr 10, 4:27am
Do you know where I can find a good summary of advanced option-trading methods that quant people use?
I thought they often trade exotic OTC options that are not available to retail customers.
GC,
Peter P is more informed to provide an opinion where options are concerned. FWIW I'm in the, 90% of all options expire worthless crowd. :(
I told one engineer that I have a fixed rate mortgage and his response was “why, most people don’t stay there for more than 7 or 8 yearsâ€. I guess he is a poster child of the engineer that doesn’t have a clue.
I have a single income friend who did something like that. But I think he had a pretty smart plan: he got a 30 year fixed with the first 10 years being Interest Only.
It seems to me like a good idea - lock in the low interest rate now, and assume that inflation will make the mortgage more affordable later. And maybe he'll have a second income too.
With regards to what will be effected - how about vacations?
Haven't you heard? Living in the Bay Area is so great it means you can save money by never having to go on vacation again.
http://www.burbed.com/2006/05/05/thinking-of-vacation-not-if-you-live-in-silicon-valley/
"-how about vacations?"
How about food and gas for your car to get to work?
It's hard to say which way these crazy carriers will go? They measure their market by ASRM (available seat revenue miles) so it's obvious they view this as a commodity. With any luck, resets, sub/Alt-A woes will grow as world peace breaks out and you'll have the plane to yourself! :)
Peter P
2007 Apr 10, 4:34am
I am NOT an options expert. But I can say that most books on options are simple descriptions of canned strategies and they are of little help.
Find a book that offers insight. If you see a book that focuses on payoff diagrams at expiration (hockey sticks), throw it away. You want a book that drills into gamma and vega. You want something that tells real-life stories of how traders fucked up in the past.
I am reading Options Trading: The Hidden Reality right now.
I glanced through Dynamic Hedging: Managing Vanilla and Exotic Options, which also seemed to be an interesting book.
Peter P
2007 Apr 10, 4:35am
Where can I get data on options? Data such as historical volatility, implied volatility, etc..
Try ivolatility.com. It is free.
You may also need software on option analytics.
I see concepts like “Saving for a Rainy Day†and “Living within your means†making a strong come back soon.
What country do you live in Lurker?
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Now that the subprime storm is making landfall, we should forecast the damages it is about the cause.
In the Bay Area, what is considered subprime?
Is a brand-new, 750K townhouse susceptible to this first wave of credit contraction? How about a 700K, circa 1950 spec house?
Or is subprime more defined in terms of location? Which county should be worried? Will the gentrification of East Palo Alto and East San Jose continue?
Peter P