patrick.net

t’s unbelievable. These people have no clue about the reality of the real estate market. No understanding of platting, planning and zoning, subdivision restrictions. Absolutely no knowledge of land values. They want what does not exist–subdivided, developed real estate, with utilities, sewage, phone, and cable, with a fully functional well-built home, cheap.

Sounds like frustration to me....... Like your stuck in low-ball hell :lol: I have a feeling we are going to start seeing more and more realtors writing to this blog. :)

There is no cheap real estate of any value. That’s all I know.

This statement is a self-evident truth. :)

However, applying the statement to the real world requires the interpretation of "cheap" and "value", which are up for discussion.

Allah, please do not be too harsh on ScottC. There is quite some truth in many of his comments.

*sniff* (_tears welling up_) If I can help prevent just ONE senseless act of financial suicide, then it was all worth it…

HARM, you should really start a "financial suicide" hotline. :lol:

I don’t think it is completely the RE agents fault. I believe it is much bigger than that. I believe we are in a massive credit bubble, with the real estate bubble being an after effect. Someone had to be foolish enough to loan 800k to someone for a 199K shi*box, no?

Your right, it's not just their fault....It also has to do with appraisers, mortgage brokers and the like......but in a way, they are kind of forced into it....as I've posted before, if you make a living selling houses and you know they are overpriced, you can't tell your clients they are because you will not sell anything.... The ones I really blame are the ones who became RE agents and Mortgage brokers just because of the boom; These are the ones who will be the first to lose their jobs, because they don't have the experience of what a real market is.......It's easy to sell houses when they sell themselves! .......but they don't anymore :)

allah,

"financial suicide hotline" LOL. Hopefully, they will call me BEFORE they've sign on the dotted line, or I'll never make enough money to operate it. ;-)

It’s unbelievable. These people have no clue about the reality of the real estate market. No understanding of platting, planning and zoning, subdivision restrictions. Absolutely no knowledge of land values. They want what does not exist–subdivided, developed real estate, with utilities, sewage, phone, and cable, with a fully functional well-built home, cheap.

There is no cheap real estate of any value. That’s all I know

ScottC,

I'm not about to argue over the cluelessness/ignorance of the average consumer in ANY market, or that developed RE is a relatively expensive commodity. As Peter P said, "This statement is a self-evident truth."

Please pay attention to his next statement:
However, applying the statement to the real world requires the interpretation of “cheap” and “value”, which are up for discussion.

We're not debating whether or not RE is usually/generally "expensive" when compared to say, food or clothing. We're debating whether or not we're in the middle of an unsustainable cheap credit-fueled bubble right now, and whether or not the fundamentals (rents, incomes. population growth, supply, etc.) justifies current valuations.

“financial suicide hotline” LOL. Hopefully, they will call me BEFORE they’ve sign on the dotted line, or I’ll never make enough money to operate it. ;-)

Yeah....I think it would be a great idea....just think, if someone is married and they don't want to buy because of the bubble but their spouse has his/her (notice how I said his/her to protect me from being called a sexist again) mind fixed on buying regardless,.................. they can call "HARM's financial suicide hotline"......before the do any HARM to themselves financially. :)

Would we really have a housing boom if it was actually difficult to get a mortgage?

I'm totally with you on this one............the problem is the banks sell the note to fannie so the banks aren't in danger........fannie takes a lot of the notes and sells them to investors (mostly chinese) as MBS. This is why they can lend such huge amounts of money....the lenders know a lot of them will default, but they don't have to worry..........the chinese are the ones who should be worried, but they seem to not care......so far! :twisted:

By the way, look at fannies stock http://tinyurl.com/9k92y try going to 5 year view, looks like a downward trend to me....what do you think?

Ah, but there is the rub. If china were to get burned bad enough on defaulted mortgage paper, would they continue to support our economy by loaning us even more money? I doubt it. (once bitten, twice shy) When they stop loaning, how constricted would credit become? Is it possible we could go back to the dark days when lenders required 20% down, a spotless credit record and an actual accurate appraisal?

I know, that is why I don't think another "Great Depression" is out of the question.....I would love to see lenders go back to traditional lending practices and I'm sure they will when all the dust settles. Remember, these interest only loans aren't new, they were used before the "Great Depression" and they weren't used again since then for good reason................until now!

H.Z., we welcome all perspectives here, bullish, bearish or otherwise (as long as people keep it relatively civil).

To say that "there is no national RE market. All RE markets are local" is partly true, but also partly false. As allah mentioned above, the secondary mortgage markets have securitized mortgage risk in the form of MBSs, which are sold to central banks/pension funds/REITs all over the workd. These markets, which were a relatively tiny portion of the overall mortgage finance market just 10-15 years ago, have grown into the proverbial 800-pound gorilla.

How many lenders/banks today still hold the paper they issue, especially the "exotic" IO/NAAVLP stuff?

Let me propose something more meaningful.

Here we've got a bunch of renters who'd like to buy cheap. The best thing you can help this market turn is through facts. As an owneroccupier I'd like to see the market tank as well since I got in so early so unless the market tanks 2/3, I will be able to upgrade much easily.

So here's the proposal. Every other week or so, we collect data on the houses that have dropped and not sold/pending, like what I did with the Los Gatos 95033 zip code area. Quote the address (just the name of the road is sufficient), and state dropped how much, didn't sell for how long. This way, you talk with data. And those people who are seeing their homes talked about on blogs as homes that are NOT moving will start to panic and perhaps drop even more. Let's help out a bit on this downward process so we can all personally benefit from the bust.

H.Z.,
I'm no expert either, and yes, it's true that the GSEs (FNM, FRE, GNM) cannot securitize "non-conforming" loans, which excludes a lot of the exotic stuff. However, it's quite a leap to say that credit/default is still not a significant risk to GSE-issued MBS paper. If the market really tanks and takes much of the economy/jobs with it, recent buyers with zero to negative equity are going to get squeezed everywhere, even ones with conventional ARMs and fixed-rate mortgages. Obviously, this will pale in comparison to what will happen to Subprime securitizers.

As far as the GSE "guarantee" goes, ultimately, I fear it's the taxpayer (read: you & me) who will be on the hook for all this paper (regardless of what AG says publicly). Think of it as S&L bailout, part II... on steroids.

Our mortgage was sold 3X in Nevada.

newsfreak,

I'm curious, what's the time frame here? I know lots of people who have bought in the last 5-10 years or so, who are seeing their mortgages traded like baseball cards. I know two couples who ended up making payments to the wrong company because their mortgage was traded without them even being notified.

Courts will not overlook the implication.

And what's more, voters will not overlook the implication, either ;-).

H.Z., I have to admit, I wasn't aware that the government takes money from the GSEs to fund other programs. I'd like to learn more about that --do you have any links? Thanks.

He is full of wishful thinking. There is a bubble in Texas. The man that wants 20 acres square will get it. The man that wants a small horsefarm in South Texas for $150k will have it if he keeps on looking. Don’t be mad because the potential customer is not stupid.

$150K for 20 developed acres with a ranch house and a stable? Unless we plunge into a financial dark age and a financial ice age at the same time... I think we will fall into one of them, but not both.

Thanks, H.Z. Hmmm... I wonder what sort of 'benevolent' government housing programs all those GSE windfall profits will get spent on? (chuckle, chuckle...).

Jack, sorry, dude --wasn't trying to beat up on you. Just highlighting a point we disagree on. Btw, I never said I expected the bubble to unwind in a matter of weeks or months. I've always said it will probably take several years. I believe we are past the crest, and that slowly (but steadily) building inventory and time on market are leading indicators of this. When we start seeing YOY falling prices statewide, then it will get more "interesting". :-)

I plead for a little more exploration of the grey areas and a little less cheerleading.

Bubble, Bubble, Sis-Boom-Bah!
Gimme a "P"
Gimme an "O"
Gimme a "P"
What does it spell...? :mrgreen:

I am not even trying to say that this one week year over year snapshot of Marin is a significan enough sampling to draw any conclusions from, but before we generalize ourselves into a frenzied state, at least agree that this does not have crash written all over it, let alone a sharp correction.

Jack, thanks for posting those numbers, albeit from our local RE cheerleader, no? I found the list/sell average interesting. As I've been tracking price reductions too (but for current MLS listings), I'm looking forward to seeing how Oct/Nov data stacks up.

Again, I see your point on the LOCAL angle. In fact, I say we track some individual prices, starting at the initial listing, following through on reductions/increases. Specificity is good data, no?

albeit from our local RE cheerleader, no?

Jack-
And I didn't mean you, but the IJ...

H.Z “MBS does not work the way you think.”

Care to enlighten us

Yes...What have I said that is wrong?...because what I said was not opinionated, unless the half dozen articles that I read describing what I had originally said are all opinionated and wrong. H.Z. If anything that I said seems wrong to you can you please tell me the parts that are and why they are wrong....because I like to believe the many articles I read are not bullshit. The fact is (according to what I read) that these GSE's are the main flow of liquidity that allowed banks to defer their risks and write more mortgages than otherwise possible....the statement "MBS doesn't work that way" doesn't explain how it does work. I know banks will not hold a mortgage that is from a marginal, risky buyer, but they would be happy to give him/her a mortgage and sell the note to fannie.

As far as location, location, location is concerned, the better areas within the bubble areas (the coasts) will be more overinflated due to demand and easy access to money, and I don't see any reason why these areas won't crash more than other areas.

"You havent a clue if you think someone will buy a bad area when they can get a good area for anywhere NEAR the same price."

What if we did so just to spite you?

Did you ever consider that? Ever plug that little eventuality into your computer models? Eh? Hmm? Ever set "x" to that value as you solved your differential equation of life? What's that? I'm sorry? Eh?

I didn't think so.

Cheers,
prat

Wow, guys dressed up in cheerleader outfits tonight! Blog's in rare form.

Wow, guys dressed up in cheerleader outfits tonight!

Whatev. I ain't no holla back girl.

Cheers,
prat

“You havent a clue if you think someone will buy a bad area when they can get a good area for anywhere NEAR the same price.”

What if we did so just to spite you?

LOL - Prat, you crack me up!

I must concede Jack's point. All real estate is LOCAL:

Leveraged
Opportunists
Counting on
Appreciation
Lasting forever

It is not that difficult to get a pulse of the local sentiment.

First, get the sale price of these properties. I have a list of sale price that I constantly receive from the realtors, and I keep track of the numbers published at the SJMN.

Then, track the MLS to see if these properties are listed at a price in line with recent transactions. In any case, nobody wants a reduction after a few months because buyers tend to see reductions quite negatively. If you have a full array of "price reduced"properties, it doesn't look good locally.

Then, publish them, let more people know about these reductions and help out on the gloomy side of the market. Buyer sentiment will definitely be swayed in a rate-hike environment amidst a flurry of price reductions. The more buyers who hold off, the more the reductions, which is a self-feeding cycle, the key is to get potential buyers into this cycle first.

Then comes the spiral down that will take years to climb out, as you sit on the sideline, pick and choose your prey at a price you want.

upon the assumption that the property was fairly priced to begin with, and how do you know that?

Well, sure a lot about real estate may assumed, and what is a "fair" price anyways? That seems to be one big question this blog is asking. Obviously, there's many assumptions about which way the market is headed, everything from those "educated guesses" to emotional responses. Should we listen to Lereah or Shiller? Unless we want to reduce the market to some undecipherable, relativistic mush, what can be said about price levels? I tend to think that sales history, inventory, DOM, and other data can show trends, and something can be learned.

So, if future conditions no longer support (or support higher prices) than today, careful study of data should indicate that--a testable hypothesis. Studying data is the only way I can get reality ahead of my expectations.

Some more reductions in 95120 neighborhood (Almaden Valley, the "prime" part of San Jose)

Almaden Road, from 1,000,000 to 899,000
Redmond Avenue, from 868,888 to 838,888
Vegas Drive, from 939,000 to 919,000
Almaden Road, 1,050,000 to 950,000, then to 899,500
Cross Spring Court, 1,295,990 to 1,195,990
Hillcrest Drive, 1,939,000 to 1,785,000

This is definitely a non-exhaustive list, I just didn't track this area so closely, so my database didn't show most of the reductions.

More reductions on prime neighborhoods, Los Altos

Del Monte, 1,050,000 reduced to 990,000 and pending

Pine Lane, 1,279,000 reduced to 1,195,000

Selig Lane, 1,545,000 reduced to 1,450,000

University Avenue, 1,575,000 reduced to 1,499,000 and pending

Edge Lane, 1,749,000 reduced to 1,688,880

Manresa Lane, 2,195,000 reduced to 1,950,000

Alicia Way, 2,795,000 reduced to 2,595,000

The point is securitizers keep most of the credit risk on their own books. GSEs in particular keep almost all of the credit risk. - H.Z.

I cannot get anymore down to earth than this:
http://money.howstuffworks.com/mortgage21.htm

Here is a snip:

They purchase mortgages from lenders and then sell them as securities in the bond market. This provides lenders with the money to make more mortgages. These mortgage-backed securities (MBS) offer investors a good return.

Just like I said.

Can someone explain to me the effects on rental rates in the event that the housing bubble pops? It would seem to me, that they would go up. More people in the rental pool due to increased defaults — I have zero data…just curiosity.

This was already discussed....there is a thread on this particular subject.

In order for houses to drop in price people are banking on foreclosures. In order for that to happen interest rates are going to have to go up (more), right? And if that’s the case home prices are going to have to go down substantially before someone holding out will bite. Is there any data from previous crashes that show where these two (interest rate and market decline) meet?

House prices don't have to drop much for the avalanche to accelerate. There are so many people who bought with no money down unlike any other time in history. These people only need a drop of 5% to be underwater. If you want to compare previous crashes, you have to go back to the Great Depression to find something that looks close to what we have.

Actually you are wrong about the good areas going up at a higher percentage than the bad areas.

Well you know your territory better than I.

LOL This is what I feel like saying to you after reading EVERY post you have ever left on this blog!

Thanks for the insult Jack, .......maybe you need to read them over slowly so that you understand what I was really saying.

I do think our readers, and I am one, do not want doublespeak. They come here seeking info or sources for info. Even ScottC gives plain advice.

Sometimes you have to repeat yourself because some people didn't understand the first time or weren't there to begin with (new members)...........You know what I can't stand? Bogus chit-chat....read the first 100 or so posts of the "Tangent thread".....I rest my case!

And thank YOU likewise for YOUR insult!

That was no insult.....it was bogus chit-chat, it didn't have anything topic-worthy as was self evident....................but thanks again for an even bigger insult it only shows what kind of a person you are!

More reductions on prime neighborhoods, Los Altos

Owneroccupier--
Good to see those figures, which illustrate how there have been price reductions in "prime" areas as well. I've tracked price reductions on par or greater in Marin. Of course, we could say all these homes were priced "unrealistically" to start, but I suspect the truth is more complex than that. Perhaps someone who knows can chime in here, but I've read that homes are typically priced to comporable home sales. So, if the market cools/inventory increases, those prices will no longer be supported by the market, and will need to be reduced to generate interest. Hence, all the "price reduced" I've seen on MLS. I'll maintain that market reductions can be seen in the data.

Regarding "price compression": what I've seen is not so much the "prime" areas stabilizing, but homes in specific price points have inflated just a bit more than others. Since the majority of the market are buying homes under $1.5M, I've tracked slightly higher increases in this range. Then again, the homes I've seen at $2-$5M have a pretty small market (perhaps since 11% in Marin can only "afford" median--$950K). These homes are pretty much dead in the water (8 months sitting), so I wonder if they're priced "realistically" as well?

I do think our readers, and I am one, do not want doublespeak.

Go to the Tangent thread..............do a search for "speculator".....keep on searching.....you can do the same in the previous thread "Anecdotal Reports....".