patrick.net

Bork Says:

> I wonder if someone can explain this to me. Friend of
> mine told me a story about his friend. This guy cannot
> afford a mortgage on a decent house in BA, so he,
> together with his relative, a mortgage broker(?) developed
> a schema which allows them to have “cheap mortgages”.
> They sign up the guy for a mortgage with options and low
> “teaser” rates which are valid for 3-6 months.

This is not only legal but very common in the residential lending industry since it is easy for a mortgage broker to make up to $50K per year in fees from idiots like your friend who do not understand that the total amount of money they owe keeps growing as the fees (and probably some negative amortization) keeps getting added to the loan balance to keep the “payment low”…

eburbed,

The only thing Matt Lanning is missing is pom-poms! :)

I mean his closing comment about "where are all the doom and gloomers" just b/c there is a lull in the growth of inventory? Unfortunately for him this stale mate DOES spell doom for realtors.

For any bubble observer (bull OR bear) to have any credibility w/me they really need to look at the big picture and THEN make market specific comments. Selectively ignoring the FL, LV, AZ and SD markets along w/a subprime meltdown b/c it doesn't fit your agenda isn't scoring any points.

eburbed Says:

> Anyone see Matt Lanning’s blog today?
> He had this to say today:
> The MLS hit its 2006 active inventory peak in October,
> and other than a couple of weeks of increases at the
> beginning of January 2007, we see yet another week of
> lower active inventory today.
> For comparison, today’s active inventory of 955 properties
> is lower than ANY WEEK in 2006 (other than the week after
> Christmas).
> What’s going on in SF?

The sellers of condos are not putting them in the MLS this year like they were last year (and the year before) when they were selling fast.

Below is the take from SocketSite as of February 12th 2007:

“As it stands, in addition to the roughly 325 San Francisco condominiums that are listed and available for sale on the San Francisco MLS, we estimate that there are approximately 350 new condominiums that are not listed, but are currently available for purchase and immediate occupancy. These condos include unlisted inventory in buildings ranging in size from The Glassworks to The Beacon.
We also estimate that there are currently an additional 1,050 available condominiums that are actively competing for the attention of buyers and accepting non-refundable deposits in sales offices throughout San Francisco (examples include The Infinity, Heritage on Fillmore, and Arterra). And within the next six months, we expect to see an additional 2,450 condominiums begin marketing, accepting deposits, and competing for sales as well (think The Potrero, Symphony Towers, and The Bay).
Looking forward to the second half of 2007, we see an additional 1,575 new condominiums that are likely to start marketing/selling before the end of the year (or relatively soon thereafter). And for 2008/2009, we see 4,000+ units that have a shot of making it to market (and 2,000+ that will likely fall by the wayside).”

Another reason is that the rules changed requiring a unit to be off the market (out of the MLS) for longer before it could go back in as a “HOT NEW LISTING”.

SF Realtors are still trying to sell hundreds of homes not in the MLS while waiting for the “Spring Bounce” when they will go back in to the MLS.

EBurbed...

This was the best part of his blog "Having worked in San Francisco real estate since 1998..."

Any realtor who's been in realestate in the bay area since 1988 I might be inclined to listen to for bottom calling. This guy has never seen a bust. He's never seen a dead cat bounce. He doesn't discuss if the homes being off the market is from sales or from people pulling them. Declining sales all last year and declining availables != fewer houses in the 'potiential' market, especially given the 'churn' of the last few years and the subprime problems that could be springing up. The 'spring market' where sellers expect more buyers to be in the market isn't here yet. Let's see what the availables look like over the next 3 months. The 1 trillion ARM reset of 2007 is just getting started.

Baxter, thanks for the excellent analysis.

Is it true that many Indian techies are savvy about Vedic Astrology? That must be an advantage because most native techies here do not believe in Astrology.

DinOR,

Loved "Real Financial Heroes"! Must have been done by someone who reads this blog. I loved the scene with Mr. & Mrs. FB eating Top Ramen on their granite countertops.

http://www.youtube.com/watch?v=TxylHPnoloI&NR

http://tinyurl.com/2r4vau

OK, I would definitely take this guy over Hilary. I hadn't seen much on his foreign policy stances, but he seems to have had a LOT more forsight than Ms. Clinton.

Nigel Swaby said:

I just hope the readers who are undecided, like the person whose comments started this thread, will be able to see the alternative points of view that I bring to the discussion.

I thought an opinion had to be somewhat unconventional/anti-mainstream in order to be considered "alternative". Virtually every mass circulation newspaper, magazine, cable news channel, radio show, not to mention Congress & the Fed, have all been spewing REIC propaganda --virtually unchallenged-- for as long as I can remember. In what universe could this viewpoint be considered "alternative"?

DinOR,

Oh man, eating the ramen off the granite counters made me laugh.

Shmend,

There's "thrifty" and then there's just plain nuts! Most of us were able to see and do as much as we wanted without having slept in the bushes or peeing in an empty Gatorade (TM) bottle? What a nutcase.

HARM,

We are looking at numbers and historical trends, inverted yield curves, income:housing cost ratios, etc. The REIC is looking at a Goldilocks economy based on a credit bubble and are using emotion as a driver. We are a Reality Based blog, therefore REIC spew would be a minority viewpoint here.

"Remember, if you don't buy a house you are helping Al-Queda".- Dick Cheney

In what universe could this viewpoint be considered “alternative”?

Patrick.net, Housing Panic, Global Economic Analysis…

Ok, then. For the .0001% of the blog-o-sphere devoted to being critical of the housing/easy-credit bubble, then, yes, Nigel's POV is "alternative".

SFBubbleBuyer,

Yeah, and thanks to HARM for posting the link, it's a must see!

With lines like:

"You just had no idea how dinky your old furniture was going to look in your new mansion"

"GOOD-BYE futon"

and of course:

"FIVE different flavors" (Top Ramen)

you just gotta' love it! :)

Baxter, I was somewhat serious. I believe many systems of astrology (Western, Vedic, Chinese, etc) are more or less comparably useful, although I think the Western system is a bit less fatalistic.

Bork,

With that kind of "built-in" serial re-buyer it wouldn't surprise me to find he isn't getting some kind of a kick back from the MB to boot. Hey maybe they've stumbled onto something here?

Make portion of house payments from kick back from re-fi! Quick! (Somebody call Tom Vu!)

Bork,

Yes, I see. Perhaps we can discuss "this thing of ours". Geez, we've had so many discussions here about FICO's etc. and I just can't believe the Great and Powerful Oz can't see through this? Isn't it obvious that without this financial "crutch" there's NFW this guy could afford the payments?

Oh, but don't late on your car payment! What a joke. Can we do away w/this already?

Ouch... NovaStar just keeps taking it in the shorts!

So, their stock is down something like 85% from the peak, and down over 50% from 5 days ago... and now they're getting sued by shareholders for lying about their potiential downside.

How long before they throw in the towel, do you think?

Personally, I think the shareholders should suck it up. I've bought stock that suffered huge losses. I've bought stock that went through the roof. But most of my stock is of a non-volitile nature. They bought a boom stock and didn't get off the ride in time. Boo hoo.

Peter P :

Baxter, thanks for the excellent analysis.

Yes, I agree with most of baxter's analysis. Indian mind - generally speaking - cannot fathom that RE prices can go down, because they have never seen it happening.

Now it has happened in India, in Bombay and near Delhi of all the places. In Bombay prices were stagnant for a number of years starting in early 90s. And with inflation running at 10% stagnant prices for so long is a crash but since nominally they didn't crash, people don't remember it as a crash. Near Delhi - in Gurgaon for example, there was tremendous over construction and prices went lower or stayed same for many years in late 90s to early this decade. The outsourcing boom has now masked that completely and the some.

Is it true that many Indian techies are savvy about Vedic Astrology?
No, it's not true. Forget being savvy, many don't even believe in it. I do not believe in ANY form of astrology. God plays dice. A perfectly random dice.

A perfectly random dice.

Is a "perfectly random" dice something that is perfectly predictable? ;)

eburbed,

Couldn't you just do mail order from some store in Houston?

When I was living in Paris I met this gorgeous African-American woman in a clothing store. She couldn't find clothes to fit her. She was thin but quite curvy, probably a curvy size 6. She said 'All the clothes in France are too small for me, but I do swear, I am the thinnest woman in Houston!"

There are exceptions, but they are a minority. I guess the same would hold true for any immigrant community who are yet to establish an “institutional memory” in the new country.

Sounds like the thread a few posts ago about Chinese First Gen Immigrants. :(

Not surprising though... almost everyone I saw who went to this Open House was Indian, Chinese, or otherwise Asian - and they all looked pretty First Gen:

http://www.burbed.com/2007/01/29/spring-bounce-is-here-people-lining-up-for-open-house/

Prices are going down…slowly….tell that to all the Yentas I see
at Waldbaums jabbering away about their houses…

Oye vei. Any more of that and I'll plotz.

The next line in that piece was:

According to Walters, no more than 40 percent of your gross income should go toward a house payment (including principal, interest, home insurance and property taxes).

40% of gross income.

The old standard was 28% - but was that gross income or net?

If you're making the median ($97.1k) or more [which is likely if you're interested in buying], 40% isn't actually all that much. You'd still have a bunch left over to avoid eating ramen.

PAR, that article is horrifying!

Amanda Stipe turned to the next best person, her father, when she bought her 800-square-foot, junior one-bedroom condominium in San Francisco's lower Pacific Heights.

Fortunately, her father offered to help out financially. That allowed Stipe, who is in her 20s, to increase her down payment, which meant a lower, more affordable loan. In March, she bought her place, one of 36 units in a seven-story 1920s building, with a 20 percent down payment. Even with her father's initial contribution, she still took on a roommate to help offset monthly expenses.

Seriously, what the heck? Why in the world would you want to buy a 1 bed junior condo that you had to get a roommate and a loan from daddy in order to afford?

Check out her realtor :

Stipe's real estate agent, David Reeves of TRI/Coldwell Banker in San Francisco, said receiving financial help from family is common for many first-time home buyers, even in today's "post-bubble" housing market.

Ooooh. The bubble is over! We're post-bubble now! THAT'S why you'd want to buy that condo! Because prices are going to skyrocket again!

austingal, congrats on the purchase.

It’s crazy when people make over 100k a year, and can’t afford a house.

Based on some napkin math I was doing at lunch, if you're making $100k, were single, and interest rates stay at 6.5% - it looks like you could finance a $500k mortgage fairly easily. Throw in another $100k for a downpay - and you could afford a house.

It might be a house in East San Jose though.

Austingal,

Hey, a sweet house on a nice piece of land that you got in foreclosure is probably a good thing. Just consider the mobile cost and 'rent' for the land it's on as schooling costs. You sound like you want the house for the 'long run' so overpaying a little isn't likely to be a huge deal for you guys.

Why in the world would you want to buy a 1 bed junior condo that you had to get a roommate and a loan from daddy in order to afford?

HAH! I posted the exact same comment a few hours ago:

http://www.burbed.com/2007/02/26/bay-area-is-1-in-median-home-prices-again/

That said, I bet her dad begged her to do this.

Why in the world would you want to buy a 1 bed junior condo that you had to get a roommate and a loan from daddy in order to afford?

A roommate in a 1 bed junior condo? :-~

Based on some napkin math I was doing at lunch, if you’re making $100k, were single, and interest rates stay at 6.5% - it looks like you could finance a $500k mortgage fairly easily. Throw in another $100k for a downpay - and you could afford a house.

Huh?

28% of 100K ~= 2333/month PITI. That ain't no 500K mortgage.

Oh, I was using 40%.

$100k - 40k goes to PITI. That's about $2900 a month. Which... hm... isn't a $500k. Only about $475k.

Scratch that.

eburbed,

Does your $100k person pay taxes, eat, have insurance payments, save for retirement, ever need clothing? Get haircuts, buy soap, do laundry?

I think 40% of gross would be near impossible to manage.

Does your $100k person pay taxes, eat, have insurance payments, save for retirement, ever need clothing? Get haircuts, buy soap, do laundry?

My napkin math:

$100k income
-40k for PITI
-30k for Taxes
+12k for Interest Deduction
-15.5k for 401k

That leaves about $26k disposable. That's about $2160 a month, or about $500 a week.

You'd never be able to go on vacation - but you can definitely afford the basics with that number.

Did I miss something big?

Not surprising though… almost everyone I saw who went to this Open House was Indian, Chinese, or otherwise Asian - and they all looked pretty First Gen:

Did you at least see some white guy with a Asian wife or girlfriend? Serves them right to be a FB for stealing our women :)

Did you at least see some white guy with a Asian wife or girlfriend? Serves them right to be a FB for stealing our women :)

No I did not. I think they were too busy walking down University Ave in Palo Alto, or being featured on the cover of magazines (I think AAA recently had one)

eburbed,

I think vacations are essential. I need to swim in a warm sea or go to the mountains or to great cities every now and then. I think it's good for the soul, and more important than owning stuff.

Your calculations would probably work for someone who had employer covered health and dental insurance and didn't go for much long distance travel.

Just to do some more math:

$26k disposable income
-1k for car insurance
-5k for car payments
-1k for DSL/Cell phone
-1k for new clothes

That's still 18k left ($347 week) in disposable income.

For a single person, that's not too bad. And, amazingly, this includes $15,500 in 401k savings - which probably puts the person in the Top 5% of savers in this country. :)

Your calculations would probably work for someone who had employer covered health and dental insurance and didn’t go for much long distance travel.

Oh... well.. yeah. I was thinking of an Apple/Yahoo/Intel/Cisco/Google/Tech Startup employee.

As for vacations - most of my California native friends only go to Tahoe or Vegas. I think it's believed that if you go too far from California, you'll die or something. (Unless it's Taiwan/Mumbai for family reasons.)

How’s the bubble unfolding there?

Suds, it's correcting in real time, especially in Ventura where I'll like buy. $B kind of actually sucks, the people here are icky.

CB wrote,

"Did you at least see some white guy with a Asian wife or girlfriend? Serves them right to be a FB for stealing our women"

Well, if that is what happened, at least you cannot accuse the guy of marrying his way into a green card after positioning himself with a Canadian residency. Could accuse the Asian wife of doing it maybe, but not the guy.