Tuesday, November 06, 2007

IndyMac's Picture of the U.S. Housing Bubble

IndyMac Bancorp has a PDF out with their housing price correction predictions. I am reproducing the following graphic from that PDF below as it provides a nice picture of the U.S. housing bubble and includes Marin as one of the "high risk" areas (click on the image to get a larger view):

I found this PDF first referenced over on the Calculated Risk blog so please go there to get the analysis (in the post itself as well as the informative comment section) and why the very conservative predicted -10% drop in prices is off by a factor of three or so (hey, IndyMac wouldn't want to scare the investors, right?).

Monday, November 05, 2007

A Real Estate "Titan" Comes Clean

Did you see this in the LA Times?
Speaking to a gathering of industry professionals Friday, longtime California real estate titan Fred C. Sands called the housing market "pathetic" and said some agents needed to start looking for other work...

In the short term, the local real estate market "is not going to get better," Sands said...

He added that he could speak with candor because he was no longer in the home-selling business...

Such frank remarks are rare at gatherings of famously upbeat real estate agents, but Sands said those in the business needed to remember the last slump and realize "the last five or six years were not normal."...

The soaring market of a few years ago will be followed by a correspondingly sharp decline, he said: "The longer the up cycle, the more excess there is, and the worse it is for what follows." ...

But wealthy areas won't escape unscathed, Sand said...

"We saw 25-year-old guys buying $3-million houses," he said of the questionable mortgage practices of recent years. "Someone who makes $100,000 a year can't afford a $2-million house, but that's what's been going on," Sands said...

"The idea that everyone is supposed to own a home is baloney," he added...

Sands counseled agents that property prices must be cut drastically to "get in front of the crisis." Otherwise, agents will "follow it down like a dope" and get even less for the properties, if they can sell them at all, he said...

Long [president of the Southern California region of Sotheby's International Realty Inc.] counseled agents to drop sellers who aren't willing to lower prices. "Let go of the fear another agent will take over and sell it -- they won't," he said...

Agents should "go with the flow" by using the downturn to prod buyers, he said. "We are salespeople. We have to be positive."...

That remark prompted Sands to interject: "But if you go too far, you lose credibility. People need to know what's happening."...
Sorry that I have to be the one to break the news to you boys, but you and your industry lost credibility a long time ago.

Why? You said it yourself Mr. Sands: you can now "speak with candor" because you are "no longer in the home-selling business".

Coming clean now is all well and good, but buyers needed that candor a long time ago. So you are still on the tar-and-feathering list.

Is there anybody out there who still believes what a realtor/agent says? Anyone?

Sunday, November 04, 2007

More Marin Foreclosures

I thought you might be interested in the attached map showing the foreclosure activity near Marin. The data comes from ForeclosureRadar, a fee based service. There are over 300 foreclosures in all of Marin County, and 200 (the most the service will show at once, they are reporting 212) on the attached map.

Red pins are bank owned homes.
Blue pines are auction homes.
Green pins are in default.

Perplexing IJ Article

So this fool in Mill Valley is like so many other Marinites it seems. He lives in the house he grew up in and no doubt owns it now. Yet he is foreclosing. How can that be? I mean, thanks to Prop. 13 he has certainly inherited a ridiculously low property tax based on when the house was last purchased, probably in the 1950s. So how can this guy be foreclosing? By now you would think he owns his house outright. But no. He must have drunk deeply from the HELOC/equity extraction/refinance teat and now he is whining about its consequences:
Wealthy Marin not immune to foreclosure crisis

Ian Minto isn't exactly homeless, but he sure doesn't have his home.

The 58-year-old former banker lost his job and, last fall, began falling behind on mortgage payments on the Mill Valley house he grew up in on East Manor Drive.

Desperate, he sold the home - appraised at $1.2 million - for about $300,000 less than it was worth.

"(I felt) like I wanted to kill somebody or jump off the bridge," said Minto, who just took a job at Radio Shack to help cover the cost of a $600-a-month windowless room he is moving into on Fourth Street in San Rafael.
After that fool's story, the next third of the article is all about calming our fears and assuaging our hurt egos... about how special we are, about how we have fewer foreclosures, etc., compared to other counties (never mind that our population is far, far smaller than most and so of course our absolute numbers of foreclosures are smaller, but they are not smaller on a percentage basis (see here and here for recent action); and dang but the IJ is really pushing that message recently, isn't it?), and that if you factor out Novato and San Rafael, then there is not too much of a foreclosure problem in Marin (hear that Novato and San Rafael? The Marin IJ has just kicked you out of Marin).

Yet then, strangely, the article focuses on Marin realtors getting trained to deal with short-sales and foreclosures:
"We started beefing up the agents' education," he said [Steve Dickason, vice president and managing broker at Pacific Union in Greenbrae]. "This year it's more short-sale activity than we've seen in many years. The signs were there that it was coming. There was a lot creative financing with the lenders."

Teaching these classes is Paul Hickman, president of California Land Title Co. of Marin. He said it is vital that realty agents stay active in a foreclosure or short sale, as most clients are not equipped with the skills to close the deal.

Hickman, who started teaching the classes last year, expects to be at it for awhile.
Why would Marin realtors/agents need special training in short-sales and foreclosures?

This IJ article is just plain perplexing. Are we special or not?

Thursday, November 01, 2007

Lies, All Lies

We live in a country of lies, deception, and denial. Why? The longer we keep the American consumer believing all is well, the longer Boobus Americanus will continue charging his credit card for stuff. The longer we keep the wool over his head the longer we (the elected officials) will retain power and be allowed to keep playing our games of self-enrichment (and I'm not talking about becoming a better person).

Lies and deception are ingrained in the system and further worsening that greatest of American mass denial -- our own version of "End of Empire" (while looking for a half-way decent link to the definition of "end of empire", I stumbled upon this tasty morsel).

As a poignant and timely example of this deceit, Peter Schiff explains how the Powers that Be come up with the all important (e.g., which drives the calculation of GDP, "justifies" Fed action on interest rates, etc.), yet bogus, inflation statistics:
Yesterday, as the dollar fell to new record lows and oil and gold prices surged to new highs, Wall Street remained fixated on wholly meaningless government data that managed to report the lowest inflation in the last half century. These bizarre numbers were integral in allowing the Commerce Department to report 3.9% annualized GDP growth in the third quarter, which was heralded by the bulls as evidence that a resilient U.S. economy had shrugged off the problems in the housing and mortgage markets. However, the government’s ability to make “economic growth” magically appear is based purely on statistical finesse.

To arrive at this rate, the government had to assume that inflation during the quarter ran at an annualized rate of .8% (that’s less than 1%). That is the lowest rate of inflation used to calculate U.S. GDP since the Eisenhower administration. With oil priced at almost $100 per barrel, gold futures trading over $800 per ounce, the dollar hitting record lows, and the Fed printing money like it is going out of style, the government has the nerve to claim that current inflation is the lowest it has been in half a century. Unbelievable!

The consensus estimate for 3rd quarter GDP growth was 3.4%. The reason we beat that number was that the government adjusted the nominal 4.7% gain by a mere .8%. Had the government assumed a higher rate of inflation, say 2.6% (identical to the rate used to deflate second quarter GDP,) the 3rd quarter gain would have been only 2.1%, well shy of the consensus forecast. My guess is that inflation is actually running at an annualized rate closer to 10%. Therefore using a more honest deflator, the U.S. economy is actually contracting...
A nation of financial lies. Heck, just recently Charles Hugh Smith (whom I admire greatly) wrote:
Alas, parodying these princes of the Empire of Lies [the United States] is impossible; they are self-parodying in the extreme. Where else but the Empire of Lies does a CEO (of Countrywide) pillage his company to the tune of $1 billion as it loses 2/3 of its value, and the shareholders don't run him out of town?
And then there is Merril Lynch's writing off of $8 billion in assets (due to the mortgage mess) and resultant firing of their CEO... all not too terribly controversial except for the fact that the firing was accompanied with a big, fat $161.5 million wet kiss. Hey Merril or any other investment house out there -- I'll take the blame for whatever loss you want and I'll only require $10 million in compensation for it.

This is, of course, only some of the more recent financial lies and deceptions glossed-over in the news today (can we really count anymore on the MSM uncovering the deceptions; actually doing investigative journalism?). There is so very much more which I am sure you are all already aware of and which I hope has not yet been eclipsed by the latest celebrity frivolity or brain-dead must-see TV episode. This has been going on forever but it hasn't really been to such absurd levels until the last ten years or so.

So are you sick of it? Are you ready to do more than just give lip-service? Do you want people who make stupid, greedy, and ultimately financially devastating mistakes to be held accountable for said mistakes and punished accordingly instead of being rewarded for it? As a tax payer, are you sick of bearing the costs of this corruption; after all, you don't get a windfall when you make a financial mistake, why should they?

I mean, if lenders of today had been held accountable for the loans they made (like in the "good 'ol days" of yore), do you think we would have the mortgage mess we have today and the current housing affordability crisis? No way.

Well then, I suggest you sign this petition (also linked to in the right-hand margin of this blog). And then write your representatives (as a personal letter carries a lot more weight).

And give Ron Paul another look.
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