patrick.net

Case in point: the reason we’ll never have tax reform is because less than half the people pay taxes. Not a troll; just an example.

Sorry, everyone pays taxes. Some more than others, but everyone pays. Who told you othewise?

Hey all,
The June existing home sales numbers are out:

http://www.realtor.org/PublicAffairsWeb.nsf/Pages/06JuneEHS

Nationally, sales volume down again, -1.3% compared to May 06, -8.9% compared to June 05. Median price is only up 0.9% ($2000) YoY.

In the West, sales volume was compared to May 06, and down -17.1% compared to June 05. Prices are completely flat compared to June 06.

Condos are dropping in price: "The median existing condo price was $226,900 in June, down 2.1 percent from a year earlier."

Nice.

A lot of good posts (in spite of a "rocky" start).

This is one of the most basic questions we have to ask ourselves as a society. Because defining "stupid behaviour" can be chore in and of itself there is a temptation to stand back and say "well, as long as they're not hurting anyone else". Here's a simple rule that has helped for years and still works today, it's called;

The Prudent Man Rule!

If you, as a stockbroker (where it all started) mortgage broker or realtor WOULDN'T DO IT, why would you advocate some else do it?

If I (in my own account) wouldn't buy a bond with a 1 pt. mark-up on the buy (and 1 pt. mark-down on the sell) dump the bond the instant it reaches a 2 pt. upside why would I expect someone else to do it?

This distills the situation down to basic economics and in fact is the cornerstone of many litigation cases. The next thing the atty. need do is establish "a pattern of abuse". Was this a "one time incident" or a regular occurence? Believe me, you're in enough trouble even if it only happened once, but if this was part of a pattern then you've got real trouble as financial professional. As you should.

Placing someone that is self employed (or with great potential for increased income) in an IO CAN be O.K! Putting a teacher (where they have to wait for someone else to die before they can advance) in an IO is a No-No! Simply go back to the "prospectus" (if you will) and re-examine the original charter and design of that particular financial product and wether it's in investments, loan originations or home purchases things should be pretty cut and dried as to who was duped and who is just plain stupid. Prosecute accordingly.

SFWoman,

I recall seeing similar articles and the basic gist is that for people earning below a certain threshold (varies by area) they get more in services (fire, police etc.) than they pay in the form of taxes.

Conor,

I can't believe with all that's been revealed over the last few weeks that Tom Stevens (NAR Pres.) would even try to put a "buyer's market" spin on this pig! That's not even consistent with LAY's statement of just a few days ago. How did we go from "soft landing" to "I'll have to get back to you" to "it's a buyer's market" again?

George,

In order to really get our arms around this thing we need to weigh a lot more than just "property values". It's everything. From the market caps of the homebuilders and suppliers, the 60 bil. in realtors comm. in 2005, the fees generated from mort. brokers AND the value of the housing inventory in 1997 and at market peak, say OCT 2005. Even this would not take into account the increase in property taxes paid (or not) by FB's.

Conor,

I really really do see where you're coming from. But in a society such as ours, the irresponsible behavior of others can cause consequences on the rest of us. A society with high bankruptcy rates will mean higher interest rates even for people who do not intend to default. Homeless people still get taken in by shelters and clinics for treatment and care. We're still building jails... So I do see collective goods at stake, and where there are collective goods, there's at least philosophical justification for intervention in the public interest.

George,

You have to do your own calculations. You can find a lot of raw data at http://www.bea.gov/beahome.html

I don't disagree with you and others that this particular asset bubble doesn't have the potential for some of the most "damage" of any historical bubble. I'd say it could possibly result in the 2nd worst post industrial fallout in US economic history.

The reason the housing asset bubble is nowhere near the worst is a function of the overwhelming size of US GDP. In the past, GDP was orders of magnitude smaller, thus resulting in past bubbles consuming a greater portion.

Download the Excel sheet 'Current-dollar and "real" GDP'.

1929 GDP was $103.6bn or $865.2 adjusted*
2005 GDP was $12,487.1bn or $11,134.8 adjusted*

The reason this bubble isn't the "biggest" is because the denominator is so overwhelming. 1929's bubble was bigger, because there was so much less economy for the bubble to consume.

*adjusted via 2000 chained dollars, so as to not agitate the inflationists.

George,

Agreed. Just attempting to wrap your mind around the enormity of this thing leaves me staggering. That's why I couldn't understand why Randy H would even want to take this thing on. It's a bubble BEYOND measure. BEYOND quantifying. When it's said and done we'll be a lot more concerned with measuring the "fall-out". The defaults, the short sales, the foreclosures.

You can also download this HSBC research for reasonably granular historical national home prices and comparisons to real income, debt loads, etc.

Conor,

You might be able to find reasonably accurate 1929 debt data. I know that the 30s-40s debt data is very dubious and estimates of the true debt vary widely (especially during the war years). Things like lend-lease weren't on the books. Even in the early 30s there was lots of arms sales related debt that wasn't being booked.

In due course I suppose I could make "measuring the bubble's girth" my life's work (and who knows) someone will write about, why not me? For the time being though it seems to make about as much sense as arguing how long it would take your face to melt off in a "ground zero" detonation (vice being at the fringe of the blast zone). Dead is dead.

Huh? Didn't this used to be a free country? Don't we still pretend to be one? Freedom includes the freedom to do stupid things. Also, points to consider:
1. Who decides what is stupid and what is not? The government? That would be the case of a soot-covered pot called the kettle black...
2. Entrepreunership is all about doing things that look stupid to most people initially (otherwise, they would have done it themselves!) and without stupidity, there will be no progress. Actually, this is the biggestpractical argument against a big, nanny state - something that liberals never seem to understand.

Sriram Gopalan,

O.K, o.k I can go with that. When you're doing it with YOUR OWN money! When this thing shakes out we'll find (as we're already seeing) that much of the "bail-out" involves borrowers with NO skin in the game falsifying loan applications (with the coaxing of MB's to "get in the game". Someone is going to get stuck with that bill.

I agree though, making money involves risk. If you don't have the stomach for risk pull the covers over your head and go back to bed! Willingness to take on risk or calculated risk doesn't mean abandonment of principles. FB's will need to own up.

LILLL,

You know there's a certain amount of truth to what you say! I remember as a kid visiting aunts and grandmas in Chicago where the furniture was covered in plastic and the overly ornate candy dish had EXACTLY as much lame ass candy in it as the last time you visited. These people KNEW they were the epitome of "good taste" and no one could tell them different.

Oh and don't forget the mismatched toaster they got for opening a $50 savings account!

How could I forget the mass produced art in the hallways? Usually the same f@cking ballerina or better yet the clown holding a flower and a tear rolling down his face smearing his clown make up. Yeah, people got real good taste.

So, has anyone seen this? It's "officially a buyer's market"

http://money.cnn.com/2006/07/25/news/economy/homesales/index.htm?cnn=yes

When will those NAR folks say "It's officially not a soft landing"? I'm guessing sometime mid 2007.

By the way, DinOR ~ I would have posted that article in the latimes for you in that thread a while ago, but someone beat me to it by a long margin.

SFWoman,

I'm flabbergasted! I had NO IDEA that many folks were "under the radar". The first few years I had my own practice (under non-compete agreements etc.) there were a lot of expenses and not a lot of income. Ah, those were the days! You can only work a schedule C just so much. (They are now more than making up for it) and if it weren't for the medical benefits Mrs. DinOR would be looking to exit the workforce.

What we see a lot here in Oregon is folks that operate entirely on a "cash basis". They brag endlessly about how stupid the rest of us are but every time I see them, the car is a little junkier, their clothes a little rattier and well frankly they're still HERE! Why not Vegas? Why not Cabo? If stiffing the government was so damn lucrative why are you asking me to buy you a beer! I just have to put them under either "struggling with the basics" or "bailing on society" crowd.

Scott J,

Yes I had noticed it's now a buyers market! The problem is there aren't any qualified buyers left. Yes, even by the most generous of lending "standards". No worries about the article. I brought it up, I should have linked it. Believe me, I take way more away from this blog than I contribute!

I am stupid, therefore I can not get a job that pays well.
Since I can't get a high paying job, I'm gonna complain about not having enough
Since I don't have enough, I will blame others for my unhappiness
Since I am unhappy, I am entitled
Now give me my top sirloin and BMW!

Unfortunately, a lot of people in the USA t think those thoughts without any sarcasm.

And how do I get to be one of the 44 million who don't pay any tax? I've paid taxes since I got my first job and I was barely making $20k a year when I got out of college.

Just saw Kathleen Hayes interview DL on Bloombergs and he was more demonstrative than I've EVER seen him. He discussed an "affordability crisis" in CA and acknowledged that people are "voting with their feet" by moving to NV, AZ and NM. He became quite animated when asked about interest rates basically IMPLORING the Fed not to raise rates any further and concluded by saying that if we go into a reccession (created by oil prices, the Fed and closing the ATM spigot of course) that ALL BETS ARE OFF!

"Believe me, I take way more away from this blog than I contribute!"

I think a lot of us feel the same way, DinOR. It's what makes this blog so great!

Dang it, I put my previous post with "" tags and they got swallowed up.

--- start sarcasm ---
I am stupid, therefore I can not get a job that pays well.
Since I can’t get a high paying job, I’m gonna complain about not having enough
Since I don’t have enough, I will blame others for my unhappiness
Since I am unhappy, I am entitled
Now give me my top sirloin and BMW!
--- end sarcasm ---

When asked to identify the 3 most overpriced markets and also the 3 best value markets he basically said CA!, CA! and CA! and then added that TX had really not participated in the boom so there are some good values in San Antonio etc. There is a decided change in his tone and it's clear that he fully intends to deflect blame to the admin. and the Fed.

but I have never seen anyone advocate for dishonestly fleecing someone.

I do advocate the legalization of gambling, online or otherwise. Some may choose to see that as "dishonestly fleecing someone". :)

Scott J,

Well at least there's "some" comfort in knowing that I'm not the only person that feels he/she learns more than they teach!

What we've basically done in this economy is say "Look if you want a bimmer but can't afford it on the same terms as people that really can afford the terms, well then we'll just have to adjust the terms so that you CAN afford it"! We've now moved from the 72 month car loan to a 40 year mortgage.

Most of us are in the middle, not real smart, but not that dumb either (unless it suits our immediate needs). What I usually find (and I don't speak for anyone else here) is that it's not so much that people are THAT stupid, on the contrary, they're too smart to want to accrue wealth through traditional channels and anything resembling CONFORMITY! They know if that "put the tie on" they could afford everything you enjoy. But they're not "kiss asses" so they go about inventing ways to get everything in life huslters have (but without the hustle or hassle). I fear this is where altogether too many Americans fall into.

We just don’t think people who buy and flip houses and then complain about the turning market ought to be given some loophole after the fact. What exactly is wrong with that?

Fraud is never okay. However, coveat emptor is an important concept.

I thought that the last thing wimpy, insecure people, and men who had lost their manhood, want is for others to know about it!

They may be too stupid to link that with insecurity.

I am very insecure, I want big cars, and I do not care how other people see me.

I have to agree with SQT and SFWoman on their stance regarding "fleecing a sucker". I really don't think people on this blog advocate taking people for a ride just to make a buck. But there are some who definitely talk about "embracing the dark side" or schadenfreud. It's just harmless venting since there are a lot of folks out there who enjoy smearing things in your face no matter what the topic of conversation is.

I've got a car ~ "oh yeah, well I've got a Benz"
I've got a house ~ "so what, mine is bigger"
I went to ---blank--- school ~ "And? I went to Harvard"
I rent ~ "Man, what kind of cretin are you? You're not worthy"

What happened to the pursuit of happiness?

I know I've said this before but it might appropriate to bring it out one last time:

This is what's bugged me sooooo much about the bubble. Short cuts!

Never mind that I can't afford to live here.

Never mind that I don't deserve to live here.

Never mind that I contribute ZILCH to my ret. acct.

Never mind that I can't afford the gas or the H2 payments.

I'M HERE! Whatcha gonna do bout it?

Anybody remember Anna Ayala? The gal with her like 14th lawsuit against a fast food chain and the finger in the Wendy's Chili? When the media went out to her house (I think it was in LV) the place was freakin HUGE! Her boyfriend (or whatever) came out and started shoving camera men around (which I always love in my neighborhood) so you didn't get a long look but the place was HUGE! And brand spanking new. How does someone as unemployable as her (with a boyfriend that works on a loading dock) afford a place like that? Oh, btw that's where the finger in question came from. One of BF's co-workers had it cut off and b/c co-worker "owed" Anna's BF his first impulse was to stick it in some fast food.

DinOR,

This is SO TRUE "they’re too smart to want to accrue wealth through traditional channels and anything resembling CONFORMITY!... so they go about inventing ways to get everything in life huslters have (but without the hustle or hassle). I fear this is where altogether too many Americans fall into."

Some of my smartest friends are constantly trying to figure out low maintenance ways of getting rich as fast as possible. They say "I need to find a scam so that I won't have to work and make a lot of money"

I am the first to admit, I love it when I get a momment to be lazy! But I won't try to get something for nothing.

SQT,

That is hysterical! I've never been able to link to their on going "saga" before so that was a real treat! What exactly is it that they want again? In all the descriptions of their "plight" (vomiting blood, aw c'mon) and dead pets I kind of lost track of what it is they are seeking. Unless it's an entry for "the best of C/L"?

Wow.

I'm guessing from the subject that they want a real estate agent to help them "buy" a new place. (As opposed to selling the current, given that they posted incomes and scores.)

*sigh*

but I have never seen anyone advocate for dishonestly fleecing someone.

I do advocate the legalization of gambling, online or otherwise. Some may choose to see that as “dishonestly fleecing someone”. :)

I advocate and heartily encourage the exploitation of those who ignore, deny or dispute game theory and basic human nature. Some may choose to see that as "dishonestly fleecing someone" also. Then again, I contend that most people don't realize just how much they actually dislike capitalism and free market competition. Meritocracies are a bitch; especially if you're stupid, a pollyanna, or a stupid pollyanna.

SQT,

That Wikipedia is something ain't it? Man they got everything! I especially liked they way they described her as "an American Criminal". Right off the bat! I took a little risk in sharing that as an "extreme example" of the sense of entitlement that many among us practice on a regular basis but hey! With her "credentials" is there a better case study?

SQT,

I'm guessing they are actively seeking a low life realtor that will over look not only their modest incomes and "ID theft" driven FICO's but also the fact that they fully intend to walk away from their obligation.

P.S

To also find them financing before the the inevitable late payments and foreclosure show up on their already shaky credit scores.

Just a guess.

Bubba,

Now that interest rates are rising these are the suckers that we on the blog lose little sleep over.

From George ~ "We put it on our credit cards, paid it off with our HELOC, and then rolled it over when we did our re-fi."

But we do feel bad for people who are conned, because all of us at one point or another have been conned. As you said "A con is when a risk is presented as no-risk, or less risk - i.e some information about possible outcomes is suppressed or the probability of some outcomes is distorted. One party is taking advantage of the other."

I don't think the snearing mass of "blue pill" popping H2 drivers were being conned when they re-fied for the 3rd time to keep their monthly payments low and to "be in debt" for another vacation.

I advocate and heartily encourage the exploitation of those who ignore, deny or dispute game theory and basic human nature.

Same.

Then again, I contend that most people don’t realize just how much they actually dislike capitalism and free market competition.

I totally agree.

I remember going to a group discussion about corporate responsibilities and most people described social-ism as the ideal mode of operation without knowing it. Basically, they want freedom to empower themselves and themselves only.

Perhaps people are just too naive and idealistic.

I’m guessing they are actively seeking a low life realtor that will over look not only their modest incomes and “ID theft” driven FICO’s but also the fact that they fully intend to walk away from their obligation.

Too bad, I doubt it is possible for any potential greatest fool to get a mortgage on a repartment with widely-publicized toxic mold problems.

Ryno73,

Right on! A state should be able to set even higher standards but at least this way we wouldn't have people getting out of prison on Friday and starting a mortgage company on Monday (as is the case in CO) and several other states.

You're right, in many cases it can be years before we'll know if our inv. decisions have panned out. When we look at the "flippers in trouble" web site we see a tremendous amount of activity. Bought/Sold, Bought/Sold, reduced, reduced etc. etc. There were warning signs and much debate. Perhaps many of these people suspected things were coming to an end but "easy money" is hard to say no to.

Is that sacramento C/L thing for real? OMG, why would these folks post what looks to be lower end FICO scores on the internet in the hopes of getting a realtor?

I really shouldn't be surprised. This is kali-FOR-niah.