Marin Real Estate Bubble

Occupy Marin Anyone?

2011-10-26T22:45:00.001-07:00

Back in the early phases of this blog I speculated whether the inevitable collapse of the housing bubble would finally lead to much needed social unrest over the greed, corruption, crony capitalism, and deception (to name a few) that the housing bubble exposed and which continues today. So disgusted was I with Americans' complacency that I "ended" this blog with "Where Is the Outrage?". It's been nearly two years since that last post and it seems that finally, after numerous bailouts, an ongoing and much needed foreclosure "crisis", failed and misguided attempts to artifically inflate house prices, massive currency debasement, sovereign debt crises that span the world, numerous who-could-have-knowns?, etc., etc., etc. (too much time has passed to review all that has happened, I'm sorry) that it appears to finally have an answer (hopefully only an early answer): Occupy Wall Street.

What I don't get is "Occupy Oakland". Why Oakland? Wall Street I understand as it has been part of the problem. But Oakland? Really? Oakland has been a victim for crissakes. The protesters should be occupying the locales of "the 1%", not the locales of "the 99%". They should be in DC for certain but they aren't. And they should be in the leafy residential communities of the 1% such as, say, Marin, but not Oakland.

So I cordially invite all you protesters to come on over, en masse, smell the smug in our air and occupy Marin. We've tried so very, very hard over the years to discourage the "unclean" from visiting that it is long over due. So please, come on over and stir it up.

...Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security...

-- Adams, J., Adams, S., Bartlett, J., Braxton, C., Carroll, C., Chase, S., Clark, A., Clymer, G., Ellery, W., Floyd, W., Franklin, B., Gerry, E., Gwinnett, B., Hall, L., Hancock, J., Harrison, B., Hart, J., Hewes, J., Heyward, Jr., T., Hooper, W., Hopkins, S., Hopkinson, F., Huntington, S., Jefferson, T., Lee, F. L., Lee, R. H., Lewis, F., Livingston, P., Lynch, Jr., T., McKean, T., Middleton, A., Morris, L., Morris, R., Morton, J., Nelson, Jr., T., Paca, W., Paine, R., Penn, J., Read, G., Rodney, C., Ross, G., Rush, B., Rutledge, E., Sherman, R., Smith, J., Stockton, R., Stone, T., Taylor, G., Thornton, M., Walton, G., Whipple, W., Williams, W., Wilson, J., Witherspoon, J., Wolcott, O., Wythe, G. -- 1776

Where Is The Outrage?

2009-12-24T11:24:00.000-08:00

Take a look at this article:

Goldman Sachs creates CDOs (collateralized debt obligations), bundling bad debt with good (and linked to mortgage debt by credit-default swaps) during the most manic phase of the housing bubble.
Pension funds, insurance companies, and others bought them believing Goldman's hype that the housing market couldn't fail. Goldman didn't even let buyers short them.
All the while realtors, real estate agents, lenders, local papers where all fueling the buzz about how real estate can't fail, "buy now or be priced out forever".
Goldman Sachs then short their own CDOs well beyond what was justifiable for hedging risk.
The housing markets then predictably implode. Pension funds, insurance companies, mom and pop all bank huge losses.
Goldman Sachs pockets huge rewards.
You and I then bail out the losers.

"The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,” said Sylvain R. Raynes, an expert in structured finance at R & R Consulting in New York. “When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.”

Or a school bus mechanic taking out life insurance on all the kids who ride that bus. Or your doctor taking out life insurance on you before doing your heart surgery. Or airline mechanics taking out insurance on the passengers. Or ferris wheel mechanics...

Where is the outrage?

Unemployment By County

2009-12-20T13:36:00.001-08:00

It's been quiet. Too quiet.

I found this somewhere, I can't remember where. It's an animated display of the growing unemployment rate by county. It comes from the U.S. Department of Labor (so you know the real unemployment rates are much higher than what's shown below). [The graphic to the left shows the final slide.]

Look at little 'ol Marin in the map. It almost seems to try and hold off the waves of unemployment crashing against its borders, but in the end it succumbs. It ends up in the 7.0 - 9.9% unemployment range along with Sonoma County and all the other "we're immune, we're special" places.

I wonder what it could mean?

Then there are the reports (like this one, for example) of how the pricing in"luxury" markets is now getting pummeled whereas the "plebeian" markets, after having been oppressed, are benefiting somewhat from desperate attempts to prop them up with bailout and stimulus money provided by you and me, Mr. and Mrs. Tax-payer (so you just go ahead, pat yourself on the back).

And then there is the Marin IJ (so it must be worse than reported) pointing out that while the cheaper areas in the Bay Area are rising a little in price thanks to the bailouts and stimuli, Marin prices are still going down, over -12%, and are likely to get a whole lot worse.

And oh my but how many formerly for-sale houses are now for-lease or for-rent, at least here in Mill Valley! I guess all the Marin "FBs" are asking potential buyers for a personal bail-out while they wait for a return to a "normal" housing bubble.

Dec. 24 Update: Oh, and I forgot to mention that this POS in Mill Valley, the one accross the screet from the 7-11, is back on the market. I guess the "let's rent it" thing didn't work out so well for them. 'Such a shame, really; who could have known?' Anyway, I first noticed this POS back in December of 2005. So this place has been trying to sell for over four years or more than 1460 days at more or less the same asking price. More on the history of the posting on this POS can be found here.

Have a merry Christmas Marin!

Don't Cry Little Debt Baby

2009-10-12T20:05:00.000-07:00

Oh how sweet. A little debt baby! And getting started so early too. You are going to grow up to be such a good consumer. Oh yes you are!

Welcome to the world your daddy helped to create, honey! How? Why my dear, with his eager participation of course. That and a bit of denial and a large helping of self-justification. You see, your daddy, like so many others, realized that saving was hard work. Too damn hard, in fact. And let's face it, it takes a lot of self-discipline, sacrifice, and a modicum of modesty to actually save for retirement (and your future) and oh but those granite counter tops are just so expensive! And then of course he fell for the lie (not just once, but twice) that the stock market and even our houses could do the saving for us. Your daddy thought it was a new paradigm, a brave new world, that "it was different this time" -- he thought he could spend all of his earnings on frivolous things like vacations to exotic climes, a new BMW every couple of years (for use when your daddy wasn't driving the obligatory Prius that advertises oh-so-well his "concern" for the Earth and how environmentally responsible he was), all those nights out eating the ever so trendy Asian Fusion food, etc. You know, stuff that white people like.

So your daddy, like so many other people his age, believed what he wanted to believe. He took on more and more debt, spent more and more of his "trapped" equity, and believed, because it felt so good to do so, that there would be no consequences of the adverse type because, after all, everyone was doing it. And how else could he "keep up with the Joneses"? And now that the world your daddy helped to create is crumbling, Congress and the Fed and all the other spineless men who have their thumbs so deep in the pie that it's coming out their ears have further impoverished this country in a vain attempt to artificially prop up house prices, bail out the failed financial institutions that, to a great extent, enabled this problem and basically to keep the financial orgy going just a little bit longer because your daddy will be damned if he has to actually save for what he wants, and wants now.

But guess what, sweetheart? You will still get an inheritance! That's right... an inheritance! It's just that it won't be the sort of inheritance you were counting on. And what is that wonderful inheritance? Why, what you and your generation and the generations to come will inherit is your daddy's generation's debt of course. You get to pay for their lifestyle!... a lifestyle they couldn't afford themselves. And it will only cost you your livelihood and standard of living. Sure, you might not ever be able to afford a house without first selling your children off for slavery. You might not be able to afford the luxury of getting sick. But be confident that it will all be for a good cause -- it was the debt they needed (really) and that they were entitled to. And have no fear because it's all part of your daddy's plan, it's all well thought out. Believe me. Because even though the plan was devised by the corrupt men on Wall Street and in Congress and in the investment banks and even by Mr. "Yes We Can" (and Mrs. Yes You Will) and sold to the dumbed down and overly medicated American public as "a good thing", it's still your daddy's plan because he helped let it happen. Your daddy didn't so much as lift a finger to oppose the bailing out of the people and institutions that created this mess, he didn't object to the propping up of artificially inflated property values, he looked the other way when the American people were bribed by its own government to buy new cars and new houses, and he was busy that day when our so-called "free" markets were so manipulated that even a banana republic dictator would be impressed. No, for people like your daddy, it's just not practical to tell the truth in times like these.

So try not to be too harsh on us. When you are old enough to fully understand, please don't pee on your daddy's grave no matter how much you might want to... Yes, your daddy saw this coming a long time ago, there were plenty of warning signs and plenty of nay-sayers shouting to be heard over the din of delirium, but he just chose to ignore them because he was having just too much of a good time at your expense. You don't know it yet, but you will learn soon enough that it is easy for people like your daddy to believe what they want to believe; it is easy for us to only pay attention to the things that support our preconceived notions and to believe the things we most want to be true. So we find it easy to believe that what we've done is the right thing to do and you will too. When things get tough for you, just remember we were entitled to what we wanted now, pop an Abilify or three, or whatever the drug du jour is when you are an adult, and you too will soon be a believer.

Same as it Ever Was Pt. II

2009-08-29T15:12:00.000-07:00

William Cohan over at The Atlantic (I am really starting to like that magazine) has a nice article, entitled "An Offer He Couldn't Refuse" (but the online version is entitled "The Final Days of Merrill Lynch"), describing the events leading up to and during the purchase of Merrill Lynch by Bank of America; a transaction which was, for all intents and purposes, forced upon BofA by the thuggery of Bernanke and Paulson and, by extension, the Fed and U. S. Government (and, by extension, the U.S. citizenry -- you and me). I won't excerpt out the juicy bits for you, but this quote is central to the real issues of the legality and Constitutionality of what Bernanke and Paulson did:

"...it also sounds an awful lot like what happens in a banana republic or in Putin's Russia, when the captains of industry did favors for the government in exchange for economic subsidies. How do you stop from going down the slippery slope and becoming like Putin's Russia?"

There is decent discussion about the vast amount of "moral hazard" wrought by Bernanke and Paulson (not just with regard to the Merrill deal, but also the GM bail out, TARP, etc.), the sanctity of contracts, and how the markets can function properly if the rules can change whenever the Fed or government decides to change them or if big risk-takers can bet on being bailed-out.

PS - The graphic in the online version of the article is just part of the full graphic in the print version. The full graphic is priceless as it shows Lewis being forced into eating from a bowl of bubbling, green, malignant, toxic sludge.

Same as it Ever Was

2009-08-21T08:44:00.000-07:00

One thing that has angered me so much about the housing bubble was how something as basic and necessary as a home was now treated like an investment and a cash machine. This change in attitude towards such a basic need was, of course, all just one small part of an unfortunate transition towards a society where jobs are transitory, where people likely face having more than one "career", lost pension plans, layoffs, outsourcing, bankrupt social security and Medicare, and all the rest. In response we became a nation of self-proclaimed investors and traders. We allowed ourselves to be convinced that 401Ks, IRAs, ROTHs, stocks, bonds, REITs, etc. and, oh of course, houses were viable proxies for retirement savings. There was (almost) no risk because we were so willing to believe what we wanted to believe: it was "different this time", it was a "new era", stock market valuations no longer mattered, debt no longer mattered, the development of "wealth creation technology", "almost all if not all of those gains are here to stay", "Fifteen percent is pretty much in the bag", "buy now or be priced out [of the housing market] forever", etc, etc, etc. And it had the added benefit (some might say delusion) that we could "live it up" and spend 100% of our earnings since our houses and Wall Street were saving for us.

I have absolutely no problem with people who choose to invest or trade. But I think there are some things that are just too important to people, our communities, and society to risk being treated as an investment (and therefore prone to becoming a bubble or speculative mania) and housing is definately one of them.

You see, the problem with investing is that sometimes you lose. ~~It has to be so; there are always two sides of a trade; someone wins and someone loses.~~ We seem to have forgotten that inconvenient fact or, rather, we no longer take personal responsibility for that fact -- we are entitled to a profit don'tchyaknow. We seem to have allowed ourselves to believe all the hype and garbage that bankers, realtors, Wall Streeters, Fedsters, and everyone else with a vested interest, would like us to believe... that we can all be winners if only we bring "a bucket of money and a box of stupid" to the bargaining table. And what's worse is that The System has become so dependent on debt and investment dollars, the transition from a nation that produces to one that consumes has been so complete, that losses can no longer be tolerated and certain businesses are believed to be "too big to fail". Hence, massive bailouts of the very people and institutions that got us in to the current economic mess and a recession that has been called the "worst since [the] Great Depression".

Which (finally) leads me to my point (if I even have one): you would think that now, finally, we would understand the folly of our ways and, you know, try and fix things at least as far as housing is concerned. But you would be wrong. You see, the debt-based consumption economy in combination with the "too big to fail"/bailout mentality means that reckless risk-taking is officially encouraged by even the highest echelon of government. We are content to just pretend that everything is now fixed, everything is ok, and while no one is looking, conduct business as usual but just disguise it a bit and pretend it is a fix because, after all, if it blows up we can just bailout the system with taxpayer dollars and burden future generations with more of our debt... they won't mind:

Much to their dismay, Americans learned last year that they “owned” Fannie Mae and Freddie Mac. Well, meet their cousin, Ginnie Mae or the Government National Mortgage Association, which will soon join them as a trillion-dollar packager of subprime mortgages. American taxpayers own Ginnie too...

Herein lies the problem. The FHA’s standard insurance program today is notoriously lax. It backs low downpayment loans, to buyers who often have below-average to poor credit ratings, and with almost no oversight to protect against fraud. Sound familiar? This is called subprime lending—the same financial roulette that busted Fannie, Freddie and large mortgage houses like Countrywide Financial...

On June 18, HUD’s Inspector General issued a scathing report on the FHA’s lax insurance practices... The FHA’s reserve fund was found to have fallen in half, to 3% from 6.4% in 2007—meaning it now has a 33 to 1 leverage ratio, which is into Bear Stearns territory. The IG says the FHA may need a “Congressional appropriation intervention to make up the shortfall.”

...at the FHA, the [mortgage] down payment requirement remains a mere 3.5%. Other policies—such as allowing the buyer to finance closing costs and use the homebuyer tax credit to cover costs—can drive the down payment to below 2%.

Then there is the booming refinancing program that Congress has approved to move into the FHA hundreds of thousands of borrowers who can’t pay their mortgage, including many with subprime and other exotic loans...This program is intended to reduce foreclosures, but someone has to pick up the multibillion-dollar cost of the 30% loan forgiveness. That will be taxpayers.

In some cases, these owners are so overdue in their payments, and housing prices have fallen so dramatically, that the borrowers have a negative 25% equity in the home and they are still eligible for an FHA refi.

A few weeks ago a House committee approved legislation to keep the FHA’s loan limit in high-income states like California at $729,750. We wonder how many first-time home buyers purchase a $725,000 home. The Members must have missed the IG’s warning that higher loan limits may mean “much greater losses by FHA” and will make fraudsters “much more attracted to the product.”

...Is anyone on Capitol Hill or the White House paying attention? Evidently not, because on both sides of Pennsylvania Avenue policy makers are busy giving the FHA even more business while easing its already loosy-goosy underwriting standards.

Source.

When does We the People get fed up? Or are we just a nation of hypocrites who will tolerate any wrong as long as we think we can profit by it?

Take a Look in the Mirror

2009-07-19T15:38:00.000-07:00

As I am just catching up on reading the news from the last few weeks (I was traveling abroad), I saw this quote over on the Ben Jones blog:

If society just followed the advice of its grandparents, there wouldn't be an ongoing crisis with foreclosures that helped trigger the nation’s economic woes, according to the author of a new book. Shari Olefson, a Tampa, Fla., attorney…says simply blaming Wall Street, government regulations or predatory lenders — all who share culpability — is just shifting responsibility away from those who bought the homes.

I don't know how many times I got creamed by readers when I expressed that very same opinion on this blog.

If you want to know who is most to blame for this housing (and the ensuing economic) mess, just look in the mirror. You know who you are. You ignored that little cautionary voice in the back of your head, didn't stop to think for yourself, you let your friends/relatives/neighbors do the thinking for you when you said to yourself "everyone else is doing it, so..." and agreed to pay that stupid/ridiculous price for your house. Blame the enablers all you want, but at the end of the day the final responsibility rests on the shoulders of those who decided to "pull the trigger".

Fiscal Crisis Brings Prop 13 Up For Discussion (Again)

2009-06-29T19:47:00.000-07:00

Well, this is certainly blogworthy and so I am forced to break this hiatus.

It seems that the fiscal crisis in California -- Californians' long overdue day of reckoning -- is fueling discussion regarding the viability of Proposition 13.

It's about time! But don't get too excited. Talk like this has happened before following other crises, but there was always some new boom just around the corner to derail any serious reconsideration of Prop 13; the last one being the .com bubble. I can only hope that there won't be another boom anytime soon to distract determined discussion of at least seriously modifying Prop 13. But it'll never happen, of course; Californians form opinion using their pocketbooks and not their brains.

The Quiet Coup

2009-04-22T22:14:00.000-07:00

Please check out this article in The Atlantic by a former chief economist at the IMF.

Fellow Americans, you have been duped long enough. Considering to whom the government is giving your hard-earned money, how do you feel about having just paid your taxes? When do you finally say "enough is enough"? When you no longer have anything left to lose? By then it will be too late.

Summary:

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.

Open Thread

2009-04-12T09:48:00.000-07:00

We desperately need a new thread. Discuss what you want.

South Park: How the Financial System Really Works

2009-03-27T13:49:00.000-07:00

Dollar Devalued Yet Again

2009-03-22T11:55:00.000-07:00

Check out this post. Here's a summary (emphasis mine):

On Wednesday, right around the time the US markets were winding down, the Dollar was deliberately devalued. Everyone in the world watched it happen, except for Americans, who were outraged or offended by some manufactured distraction, as usual. The Federal Open Market Committee {FOMC] published an historic press release. Here's an excerpt:

"Job losses, declining equity and housing wealth, and tight credit conditions have weighed on consumer sentiment and spending. Weaker sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories and fixed investment. U.S. exports have slumped as a number of major trading partners have also fallen into recession...."

So what does that mean?...

It means the Federal Reserve is now printing its own money. It's a defacto devaluation of the U.S. Dollar, with a promise of more to come. The Federal Reserve is going to buy everything in America that's not nailed down, throwing another $1,150,000,000,000 lifeline at markets...

President Obama may have no other choice than to take this route as foreign investors grow wary about the capability of the USA to service its debts. We will see less participation in Treasury auctions, since sovereign wealth funds will likely decide that domestic investment is probably a better idea that depreciating Treasuries. For the time being gold investments will look like a safer place to hold wealth, along with oil, silver, and certain other commodities.

Maybe Ben Bernanke will be able to do what no central banker has ever done before: put in just the right amount of inflation... not too much, not too little.

[How successful will Bernanke be at 'quantitative easing'?] In the past, they tended to overdo it.

There are not many examples. France, England and America in the 18th century. Practically no examples we know of in the 19th century (they'd learned their lesson!). And in the 20th century - only marginal countries... or countries with nothing left to lose... engaged in 'quantitative easing.' Germany did it in the 1920s, because her war reparations burden was greater than she could sustain. Argentina did it in the 1980s, because it owed too much money to too many foreigners. And Zimbabwe did it in 2003-2009, for reasons of its own.

There are not many examples because the consequences of over-doing it are so horrible, central bankers have generally not done it at all. Quantitative easing was always a possibility... but it was always a last resort... like blowing up the powder and spiking the guns; it was something you did when you knew you'd lost the battle already.

While all this was happening, the American people were off gnashing their teeth over the relatively miniscule AIG bonuses. And then Obama went on Jay Leno, which had to be discussed, and then he spoke to Iran, which was a big deal. And then there's Limbaugh and Beck to bash. Plus, the Special Olympics. And so it went.

Want more? How about this post over at Seeking Alpha which probably should have been titled "The United States of America is Now a Banana Republic".

Anyway, I think it's pretty clear that the U.S. government doesn't need our money. I mean, if the Fed can manufacture money, any amount, at will, out of "thin air", whenever it feels like it, then the Federal government doesn't need nor deserve our hard-earned tax dollars. We might as well keep it for ourselves (to buy gold, as kindling for a fire, you know, for stuff of real value).

DataQuick, January, 2005 to Present

2009-02-20T13:02:00.001-08:00

(Click on picture for larger view)

As one commentor over at CalculatedRisk said, "it is nice to see marin get bitchslapped".

Source

Note: I forgot to mention that these data points are year-over-year percent (de)appreciation.

Update February 22, 2009: Due to the incredulity of one commentor regarding the previous chart, I made the following chart using the same DataQuick source:

(Click on picture for larger view)

For the Marin data series in the above chart, peak (June, 2007) to trough (January, 2009) is a -45.4% decline. For the Bay Area series, it's a -54.9% decline.

Foreclosure Is Part of the Solution, Not the Problem

2009-02-01T10:48:00.000-08:00

As the Obama Administration rushes to prove that it is just as clueless and fiscally irresponsible as the previous administration vis the "credit crisis", I found this Wall Street Journal article refreshing. Yes, foreclosure is a perfectly acceptable choice for people who find their precious house price is less than their mortgage -- that is precisely why the house is held as collateral. There is absolutely nothing wrong with "walking away", "jingle mail", or "mailing in the keys".

The cure for the current economic "illness" is not greater and greater amounts of what got the economy sick in the first place. It's not effectively 0% interest rates. It is not massively punishing savers. It's not more lax lending. It is not more artificial asset price inflation. It's not more housing tax incentives. It is not forcing tax payers to bail out failed businesses that deserve to be weeded out of the business "gene pool". It's not the Fed buying bad assets at ridiculously inflated prices or setting up bogus banks to hold the bad assets. And it most certainly is not preventing or delaying foreclosures.

How long will it be before the myopic, short-sighted, entrenched group-think in Washington is finally forced to admit or shamed into admitting this simple truth? How impoverished must our country become, how much crushing debt must we pile on to the younger generations before they understand this?

The cure for the current economic mess is what's been needed for the last decade or more: to allow the free-market to remove the excesses in the economy and to price assets based on what people earn for themselves. Foreclosure is the free-market in action doing exactly what it should be doing and what needs to be done.

Government and government-sponsored market interventions and manipulations are the exact opposite of what the markets need.

Preventing foreclosures has become a top priority of politicians, economists and regulators. In fact, allowing foreclosures to happen has merit as a free-market solution to the crisis.

If the intent is to help homeowners, then foreclosure is undoubtedly the best solution. Household balance sheets have been destroyed by taking on too much debt via the purchase of inflated assets. With so little savings, a household with negative equity almost implies negative net worth. Walking away from the mortgage immediately repairs the balance sheet.

Credit may be damaged, but homeowners can rebuild it. And by renting something they can afford, instead of the McMansion they cannot, homeowners are most likely to have some money left over each month that they can save toward a down payment on a house they can eventually afford.

If the intent is to help the credit markets, then foreclosure is undoubtedly the best solution. The securitization model has proven to be flawed...

...The intent of [loan] modification programs to date is to create a generation of mortgage slaves. Fortunately, mortgage slaves can free themselves via foreclosure, and the masses are choosing to do so.

Just In Case You Were Wondering

2009-01-09T10:42:00.001-08:00

I was out in west Marin the other day and drove past the boat-garage-pretending-to-be-a-desirable-Marin-abode. It's still for sale. I last blogged it in a post entitled Waiting for Mr. Market to Catch Up to Their Marin Wishing Prices. Apparently, the sellers are still waiting for a Mr. Right buyer to come along "with a bucket of money and a box of stupid".

I first blogged this POS back in November, 2005. So that makes its real DOM something in the neighborhood of 1130 days (give or take). They are currently asking the bubblicious, staggering price of $525K for this 1br, 1ba, 543 ft^2 boat garage (but to put things in to their proper context, $795K was the highest, delusional listing price I've seen for this POS). Three cheers for Marin seller obstinacy, wishful thinking, and denial!

Price Decline from Peak

2008-12-31T15:05:00.000-08:00

I found the following graphic over on Mish's blog. Please check it out for the whole story.

A -44.55% decline from the peak in single family residence prices in the San Francisco Bay area in just 18 months! Anathema!

November YOY Results for "Immune" Marin

2008-12-19T11:43:00.000-08:00

More year-over-year declines for Marin. Rather surprising considering we were supposed to have "dodged the subprime bullet". At least that's what the Marin IJ once quoted our esteemed local real estate industry as saying.

From the Marin IJ:

Another month of plummeting home sales in Marin included a price drop of nearly 30 percent from November 2007, as discounted foreclosure sales continued to drive the Bay Area market. The median price of a single-family home in Marin last month was $790,000, down from $975,000 last year, MDA DataQuick reported Thursday. In October, the median single-family home price in Marin was $850,000. Realtor Peter Harris in Novato said bank-owned properties and short sales have made up about 85 percent of his business over the past year. ‘Prices are half of what they were,’ Harris said. ‘Condos are selling in the low $100,000s. We haven’t seen this for a long time.’

From DataQuick:

By the way, the graphic for this post is from a May 16, 2007 IJ article. I saved it knowing this day would come.

This Thanksgiving I Give Thanks to All of You Who Made this All Possible

2008-11-28T15:59:00.000-08:00

This post over at the Mess That Greenspan Made blog is down right scary -- by some estimates the potential cost of the bailouts will reach $8.5 trillion. Can we survive that? No way that is going to get paid back. Or this at Calculated Risk showing that the current bear market is the worst ever (on a percentage basis).

It seems to me that the genesis of this "crisis" was in the 1980s, the rise of yuppiedom, and has gotten progressively worse by an ever growing populous that more and more chose to finance their lifestyle with debt vs. wealth earned until it reached the point where people willingly paid ludicrous prices for houses, a college education, etc. For kids who came of age during this 28-year span, living on debt has been the norm. I feel the most sorry for them, the unwinding will be the hardest on them as they don't know any better. But for the rest of us boomers who have witnessed, and in far too many cases gleefully participated in, the entire life-cycle of this debt-investment craze, I have little sympathy. Blame Wall St., bankers, financiers, etc. all you want but in the final analysis no one held a gun to your head, no one made you agree to pay a stupid price for your house.

Really, is cheaper housing such a bad thing? Maybe it is for you who listened to the self-interested persuasion of a realtor/agent, you who bought in to the ludicrous pricing and was hoping to retire on the sale of a house. But think past yourself (if you're able). Think about your kids and your grandkids. Do we really want a future where so few can afford something as simple and as basic as a house? Do we really want to live in a nation so impoverished by desperate attempts to prop up prices that we know in our heart of hearts are insane, even still? Besides, we have truly important things to worry about, like a world wracked by global warming, the solutions to which will require personal sacrifice on a scale we of the post-war generations can hardly imagine, and an ability to think beyond our own selfish wants and desires.

But at the very least let's not ever forget the people who got it right, early, when action could have made a difference:

I hope you all enjoyed your Thanksgiving.

It's Official

2008-11-20T18:55:00.000-08:00

I'm sure you all remember that classic April 10, 2007 Leslie Appleton-Young quote in the Marin IJ that went "When is the 30 percent decline in Marin County's [real estate] market going to happen? Not in my lifetime"? I promised you then in a post that I would be "keeping this link for future use so we can rub it in her face when the time comes". Well, that time has come:

Leslie Appleton-Young: Consider your face officially rubbed in it.

From DataQuick:

When will people finally stop giving credibility to realtors and RE agents (and all others paid to have a particular point of view) by asking for their opinion on real estate? When will the mainstream media stop quoting them?

Two Ways to Say the Same Thing

2008-11-08T17:14:00.000-08:00

Here are two ways of saying the same thing. The first in 2007 and the second in a letter written 1802.

“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

Thomas Jefferson, Letter to the Secretary of the Treasury Albert Gallatin (1802), 3rd president of US (1743 - 1826)

The reason why we are in this mess is credit -- too much of it, too cheap. That's why housing, tuition, etc. went through the roof. Now our country is desperately dependent upon it and doing everything it can to prop up these phoney prices.

Withdrawal's a bitch, ain't it? Price things based on what people actually earn for themselves and it would all be reasonably affordable and "the economy" would still be humming along nicely. Stop meddling in the market Mr. and Mrs. Congressperson, Mr. Bernanke, Mr. Paulson. Let the free markets work; let them discover the correct prices of assets. Yes, it would be painful in the short term but we'd all be better off for it in the end.

As credit tightens and the credit pendulum swings the other way, those of you who bought with borrowed dollars thinking the sky's the limit and those of you who are planning to do so now had better watch out.

Canadian L33t

2008-10-28T22:21:00.000-07:00

I've tried very hard not to get political on this blog, but....

I think I found a program that should appeal to Bay Arean ego in the unlikely event that the republican candidate for the US presidency is elected:

Where Are You?

2008-10-26T20:10:00.000-07:00

Starting with some quotes from someone who has been nothing but sober and sane (Robert Shiller) when the majority of people were drunk on the notion that houses were going to make us all rich and 20% per year appreciation was our God given right:

What have we learned from all this?

I think we've learned some very elementary lessons. Don't think that because something didn't happen for the last 30 years it won't happen. It's amazing how people thought home prices can only go up.

One thing people haven't learned very well is home prices can stay down for 30 years, too. I'm not saying it will. It certainly can happen. Most people still think this is just a temporary interruption and real estate prices are going to soar soon. The real estate market is not cheap yet. It's not to where this bubble started (in late 1998).

And one from another independent thinker:

"People are saying the reason prices are falling are because of all of the foreclosures, but the foreclosures are happening because the prices are falling.

They've got it backwards. The prices are falling because they're too freakin' high."

Chris Thornberg, August 27, 2008

Enough bad news. Now for the good news, care of our friends at DataQuick (these days I like using DataQuick's numbers because when the bubble was still in inflation mode here in Marin, Marin RE bulls liked to use it as proof-positive that real estate in Marin can only go up because we are so damn special): Marin real estate was down only 16% last month (so sales that were committed to in late summer, before the recent financial shister hit the fan):

I think it is now safe to say we have a trend here in Marin. I eagerly await the unambiguous cratering of South Marin. Only then can our arrogance and hubris be taken down a notch or two (I can hope, can't I?).

Oh, and lest I forget some choice quotes from our local rag that has been nothing but a flagrant cheerleader of the housing market when "things were good" and the Marin real estate industry's poodle. But first, the article's title:

"Condo sales buck up Marin home sales as prices continue to fall"

Since when do condo sales "buck up" real estate in Marin? Isn't that ars-backwards for us? What does that imply for single family residences? So bottom fishers are buying the cheapest properties. Isn't that a little like the floor dropping from under your feet?

Marin's home sales increased on the strength of condominium sales last month while prices continued to drop...

DeSalvo [a Coldwell Banker broker] said county foreclosures weren't [!!!] confined to condominiums or property sales in San Rafael or in Novato, where foreclosures and short sales make up 30 percent of the real estate market.

"Houses that were selling for $675,000 are on the market for less than $450,000," he said.

In Marin, foreclosure sales - homes sold in September that had been foreclosed on in the prior 12 months - accounted for 14.9 percent of total sales, continuing a steady increase from 13.5 percent in August and single digits a year ago.

"My personal opinion is until buyers' fears are allayed and the jumbo loan market is at equilibrium, we're going to continue to see uncertainty. We're going to see this for the next 18 months."

So where are the Marin RE bulls who used to visit this blog and try to explain how confused the rest of us were? RE Junkie? Where are you? Fredtobik, where are you? (For me, the two most memorable ones; perhaps you recall others.) You were all so (how do I put this politely?)... "adamant" about your opinions. And what about the legion of anonymous realtor cowards? Where are you? You can still wear your shorts in the winter and play golf; and it's still only a two hour drive to the slopes! All your self-serving justifications and rationales are still intact. Ok, so maybe the "gas prices are going up so people will want to live in South Marin" thing isn't working out for you at the moment. But where are you? And where's that fellow who fairly recently came on this blog explaining to us why CDOs and other financial wizardry were such great ideas and, despite what we thought, were here to stay? Where are you?

Look, others had the courage to start blogs saying "it's not necessarily so" at a time when house prices were doubling about every year or so; true mavericks like Patrick.net, BubbleMeter, The Mess Greenspan Made, Mish, Calculated Risk, just to name a few. Now is your best opportunity to show us what you're made of, to stand up for what you really believe. Lay it on us...

Just one rule, spare us the "things will get better, prices always go up eventually" line of reasoning. No one here will disagree with you as it is necessarily true given our inflationary system.

2008-10-10T13:01:00.000-07:00

Welcome Again to the "Ownership" Society

2008-10-10T10:24:00.000-07:00

No need to discuss recent events (of course, you may if you wish); they speak for themselves. Suffice it to say that Patrick.netters said it best: the American people got "owned" yet again.

I encourage you to re-read the U.S. Declaration of Independence (here to see the original) for inspiration. It's a beautiful document; it represents the founding spirit of our nation; read it with pride.

The following sentence represents the essential message of the document:

But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.

In other words, for those who have the means it is not just their right but their responsibility to effect change.

Recent events are the culmination of "a long train of abuses". The only real question now is what do we do about it?

"The Mother of All Bailouts"

2008-09-22T09:11:00.000-07:00

Nope. Housing prices make a whole lot of sense; completely justified. Yup. No housing bubble here.

WASHINGTON (AP) — The Bush administration insisted Sunday that Congress must move quickly to approve what one lawmaker called the "mother of all bailouts" — a $700 billion proposal to buy a mountain of bad mortgage debt in an effort to unfreeze the nation's credit markets.

However, congressional leaders said the administration's spare three-page plan must be expanded to include help for people on Main Street as well as the big Wall Street financial firms who have lost billions of dollars through their bad investment decisions.

The plan the administration has developed with support from the Fed would have the government buy up to $700 billion of the bad loans, taking them off the books of financial firms... Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee, said the government's efforts would be the "mother of all bailouts" that could well cost $1 trillion when the cost of the government takeovers of Fannie, Freddie and AIG were included.

The whole congressional debate [on the bailout] is occurring just weeks before voters go to the polls.

And

(CBS) Treasury Secretary Henry Paulson defended the Bush administration's proposal to spend up to $700 billion to buy up bad debt of financial institutions struggling with illiquid assets (such as defaulted mortgages), saying not acting would have jeopardized the possibility of anyone getting a loan - and may have jeopardized Americans' savings and retirement funds.

Oh, and while we're at it, let's have the U.S. taxpayer bail out foreign financial institutions and governments too.

Of course, bailing out incompetence, failure, fraud, speculators, and the like (foreign or otherwise) is wrong as wrong can be. But for some reason that last quote from CBS really got to me... the one about how we have to save people's retirement accounts.

Don't get me wrong. Despite what you read on this blog, I don't like the idea of people losing their house and/or their retirement funds any more than the next gal. But come on! People gambled. People have been gambling with their retirement! That's what it means to pay obviously ridiculous prices for houses (and doing so as part of your retirement plan). That's what it means to put you retirement in the stock market (401K, mutual funds, what have you). It's gambling and no one can claim ignorance as people make a point of highlighting the risky nature of the markets even clear way back when the move to 401Ks first started and was viewed with some skepticism. The stock and bond markets (etc.) are inherently risky. It's little different than putting your entire retirement on red 99 (refer to the graphic for this post). Don't put your money into those markets if you cannot afford to lose it. That's rule numero uno in the investing world.

[Begin sarcasm]
But if we are going to bail out risk-takers who lost, then shouldn't we just bite the bullet and remove all risk from the stock market? Let's make it more like the housing market which is rigged to (almost) always go up. Let's say that it is now illegal (not just temporarily stopped) to short the market; no more puts. Let's say that you can only buy a stock as long as you are willing to only pay more than the last price paid for that stock. In fact, let's call it what it is and not call it a "market" anymore... certainly not a free and open one. Let's call it "Social Security 2.0".

I like kleptocracy*. You will like it too (not that you have any choice anymore). And besides, Paulson will make for a good king of America.

*"A kleptocracy (sometimes cleptocracy, occasionally kleptarchy) (root: klepto+kratein = rule by thieves) is a term applied to a government that extends the personal wealth and political power of government officials and the ruling class (collectively, kleptocrats) at the expense of the population.

The effects of a kleptocratic regime or government on a nation are typically adverse in regards to the faring of the state's economy, political affairs and civil rights. Kleptocracy in a government often results in a severe deficit of foreign investment prospect, and drastic weakenings in the market and exportation/importation affairs. As the kleptocracy often embezzles its money from its citizens by misusing funds derived from tax payments, or money laundering schemes, a kleptocractically structured political system can be degrading to the quality of life of the general populace. In addition, the stolen funds that kleptocrats take to their own gain is often removed from funds that were to go towards public improvements, such as the building of hospitals, schools, roads, parks and the like, bringing about yet further adverse effects on the quality of life of the citizens living under a kleptocracy."
[End sarcasm?]

Update: Mish has a convenient way for you to blast emails, all at once, to all senators with a single click of a link. Check it out.

August Results for Marin Care of DataQuick

2008-09-18T18:11:00.000-07:00

According to DataQuick, Marin prices were down -25% year-over-year in August; 13.5% of sales in Marin were foreclosures. Sheesh! Alt-A and Prime resets haven't even started yet.

"Mortgage money for homes above the half-million-dollar mark is hard to come by right now, even for well-qualified buyers..." said John Walsh, MDA DataQuick president.

The use of so-called jumbo mortgages, until recently defined as over $417,000, has plummeted since the credit crunch hit in August 2007, making jumbo loans more expensive and harder to obtain.

The typical monthly mortgage payment that Bay Area buyers committed themselves to paying was $2,121 last month, down from $2,218 the previous month, and down from $3,171 a year ago. Adjusted for inflation, current payments are 18.5 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle.

Foreclosure activity is at record levels, financing with adjustable-rate mortgages is near the all-time low, as is financing with multiple mortgages.

And if bailing out incompetence and failure right and left (at taxpayer expense) isn't enough of a show for you, well how about Paulson's latest grand scheme to set up an entity to buy all that toxic paper from the current bag holders at the lowest bidding price? Don't want to mark to market? We'll let you do it to each other! Since that cannot really be allowed to happen, because, you know, everyone has to be a winner and our rickety system cannot tolerate losses of any kind, you know there is going to be a lot of behind-the-scenes monkeying around. I can't wait.

Today is Your Day

2008-09-07T09:53:00.001-07:00

As anticipated a couple of years back, Fannie Mae and Freddie Mac have finally failed, are getting bailed out, and we are one big step closer to nationalizing the mortgage market; from here on out, you and I will be supporting the U.S. mortgage market. Welcome to what will likely be revealed to be the (second) largest public bailout in the history of the world (this might have been bigger)!

To those of you who argued that there was no housing bubble, that it was a New Paradigm, that property prices are justified because of blah, blah, blah bogus, mythical, because-my-realtor-said-so, wishful thinking sorts of reasons: your collective work has come to fruition. Aren't you proud to have contributed to it all? Aren't you happy to have been able to ignore all common sense, logic, and data to the contrary so as to so willingly and blindly pay such a patently stupid, ridiculous price for a house? Today is your day! Celebrate.

Generations to come will remember us all as the most callous, profligate, spoiled, narcissistic, and self-entitled generation in the history of America (or maybe even all of mankind). When thinking of their ancestors, your children, your grand children, and your great grand children will look back at you in their dusty old genealogy books and photo albums with hatred and disgust for strapping them with your crushing debt.

But you will be dead; so what do you care? Right?

Update 09/09/08: Here is what Jimmy Rogers had to say about the Fannie & Freddie bailout:

"America is more communist than China is right now. You can see that this [the F&F bailout] is welfare of the rich, it is socialism for the rich... it's just bailing out financial institutions."

You can hear him yourself by watching this video.

July, 2008 Results

2008-08-20T19:09:00.000-07:00

According to DataQuick Marin prices are down -13.2% this past July, year-over-year:

The following graphic, also from DataQuick, shows that Bay Area prices are down almost to the peak of the last, normal, housing cycle (2003-04 timeframe) from which the recent housing bubble launched prices to the stratosphere. So it seems reasonable to wager that we have much further to fall:

The SF Chronicle had this (and this) to say:

The percentage of households able to buy an entry-level residence in the state reached 48 percent during the second quarter, double the level from a year ago, according to the California Association of Realtors. The Bay Area remains the least affordable part of the state, but 32 percent of its households can now afford a first home, up from 18 percent during the second quarter of 2007, the report said.

Now is that affordability calculation based on the one using your new method (which is now invalid given that it depends on the existence of the loose lending standards which got us into this mess, almost nothing down, non-fixed rate loans; refer to item 14 in the linked-to post) or the traditional method?

Andrew LePage, an MDA DataQuick analyst, said he thinks the bottom is not imminent - and is unlikely to usher in a quick turnaround. "Recent history suggests you could be looking at at least two or three years of price stagnation," he said. "It’s looking like the bottom will feel more like a bog than something you just bounce off of."

"The bottom is not imminent"? Now there's a change of tune.

I know I should not give that hack, Leslie "over my dead body" Appleton-Young, any of my attention, but:

"People are off the sidelines, stepping in, trying to gauge the bottom of the market and feeling that, even if this isn’t quite the bottom, it’s looking great," said the group’s chief economist Leslie Appleton-Young. "They’re able to get into something they never thought was possible a year or two ago."

Sorry Leslie, at the moment those "knife catchers" are mostly in places like Napa where people are buying the discounted houses thus solidifying the new (lower) price structure:

Sonoma County’s summer home sales surge continued in July as buyers snapped up discounted properties shed by lenders and financially strapped homeowners.

And I hate to do it, but here is what the Marin IJ had to say (after weeding out their attempts at happy-talk and feel-good journalism):

In Marin, foreclosure resales were 11 percent of total sales. Valerie Castellana, an agent in Greenbrae and past president of the Marin Association of Realtors, said sellers need to be "really astute in their pricing strategy these days."

Yes, in other words sellers need to substantially lower prices if they hope to sell sooner rather than later.

Buyers remain anxious. "They want to make sure they’re not overpaying," she said. "Many of them are holding off because of that anxiety level."

Smart buyers.

He said such buyers are facing a more restricted market for home loans. "We’re in a knee-jerk reaction from where we were before," Hickman said. "The pendulum has gone back 180 degrees. It’s extremely difficult to get money right now."

I beg to differ. Lending is returning to what it was prior to the bubble and where it should be. We are not even close to where it was at the start of the last, normal, housing cycle. So the pendulum has swung only about 90 degrees; we have another 90 or so to go.

There is no way in hell anyone (other than sellers, of course) should want lending standards and practices to return to the way they were during the bubble. This is exactly the sort of false hope people like Hickman are trying to instill and is akin to the fear mongoring ("buy now or be priced out forever", etc) his industry routinely engaged in during the run-up. The fact is, Mr. and Mrs. Marin Seller, the only way bubble-level pricing can be maintained is to return to bubble-era lending practices. Of course, there are other ways to support your wishing prices, such as buyers suddenly getting a mass windfall, 300% raises, etc., but I wouldn't count on it.

Chronicle Chart

2008-08-06T20:56:00.000-07:00

The SF Chronicle's chart of our "immune" housing market:

The important columns to look at are the percent change in sales and price/ft^2.

This is just a "flesh wound" from the subprime bullet (that wasn't even aimed at us) and the resultant disintegration in the financial markets. What will this chart look like when the real problem, Alt-A loans, etc., soon begins to blow up I wonder?

Conflicts of Interest

2008-08-03T10:45:00.000-07:00

I saw this Glenn Beck video posted over at the Housing Panic blog (kudos). Very funny.

Takeaway message:

"If you want honest advice about your home, don't listen to the people who are trying to make a living selling them."

Lawrence Yun, Leslie Appleton-Young, David Lereah, and all you Marin six-percenters, take note.

Of course, the irony of all this is that people like me, who have spoken out against the biases and the inherent conflicts of interest in the real estate industry and who have tried to make the case that a real estate bust was likely, had to rely on data that came, for the most part, from the real estate industry (the "REIC") itself. This is sad for two reasons: 1) It indicates how much we need an unbiased, third-party source of real estate information; and 2) The "REIC's" own data, spun and massaged as it was by realtors and agents, still made the case for a real estate bust.

"Honey-poo, Why Is the Kitchen Glowing?"

2008-08-02T12:25:00.000-07:00

Granite countertops were all the rage and the latest brain dead, "must have", keep-up-with-the-Joneses housing accouterment here in Marin (and pretty much everywhere else in bubble markets). Well, it seems that if you are shopping for a trendy Marin house you would be wise to bring your Geiger counter with you.

Thanks to a reader for sending me this link.

Case-Shiller Index for May, 2008

2008-07-29T11:18:00.000-07:00

Here's the latest on the Case-Shiller Index.

Line up all those lying real estate "economists", realtors, and agents who said it couldn't happen here, it's different this time, a permanently high plateau, etc., and just cover them in tar and feathers and parade them around their neighborhoods (metaphorically speaking, of course). All they managed to do was to line their pockets with another 6% and screw a lot of people.

Where I've Been and Some Quick Thoughts

2008-07-28T15:20:00.000-07:00

Some people are wondering where I've been. I've been traveling. No internet. No laptop. No cell phone. So I have had little information regarding all things housing bubble.

Looking at recent past news, it seems prices in Marin went up ever so slightly (5.8%) back in May -- I bet the local housing bulls and the Marin real estate industry wet their collective pants over that. Too bad prices lost -12% the following month in June. No doubt the worthless Marin IJ made excuses.

I was not at all surprised to see the latest panic bail-out of Fannie Mae and Freddie Mac. No surprise there that these two GSEs went or, at the very least, were on the brink of insolvency. This bail-out represents the pinnacle of my disgust with the US government. Yes, letting the bubble self-correct would be painful. But it would not be disastrous; it would, in the medium to long term, be healthy. All the government has done is to prolong the inevitable and thereby, in the end, make it worse than it would otherwise be. But that will be a problem for another administration.

Oh, and runs on banks, here in the US. And more to come. We haven't seen those in a long while.

But really, this has been playing out as expected. And thanks to the ineptitude of the US government and its inability to identify and address the causes of the housing bubble (not to mention its refusal to take responsibility for its own role in this mess along with its systematic dismantling of what little of a free-market we have in housing) it's just going to take longer than it otherwise would.

I leave you with Ron Paul's comments on the recent bail-out and the changes now entered into law:

Does it really matter? And does anybody remember how many times we had to suffer through the imbecilic "it's different this time" mantra spewed by the real estate industry?

Affordable Housing, It's the Right Thing to Do

2008-06-10T17:59:00.000-07:00

Another opinion piece in the IJ about Marin's obstinate refusal to build its state mandated "fair share" of affordable housing. This time Sausalito, Fairfax, and Larkspur are put under the spotlight.

Like a spoiled and self-indulgent child, it seems that we have to be forced to do it.

This quote jumped out at me:

Over the years, [Marin] cities and towns have approved plans for sales-tax-rich shopping centers, revenue-generating hotels and business campuses, but they have shown less interest in providing housing for workers who fill the jobs created by those projects.

In other words, Marin has no problem whatsoever building property that generates lots and lots of sales tax and we don't seem to care one whit about its resulting increase in traffic. Yet when it comes to building affordable housing, of which roughly 58% of the occupants would work within 10 minutes of the jobs located on the sales-tax-rich property (according to the opinion piece), suddenly the increase in traffic argument kills the deal.

Another argument we Marinites like to pull out and dust off at times like these is The Environment... building affordable houses (but not unaffordable houses it seems) causes an increase in traffic, more pollution, loss of open space, etc. and therefore it is bad for the environment. But if we really were the environmentalists we like to think of ourselves as, then building affordable housing would be seen as the environmentally-friendly policy that it is due to the vastly shortened commutes to Marin and San Francisco jobs.

But of course, these sorts of argument are moot here in fantasy land. The real reason why Marinites are opposed to building the state mandated amount of affordable housing is their perceived loss in property values. Never mind the actual validity of such a concern as we all know that in Marin increased property value is our god-given right and we cannot do anything that might, no matter how improbable, threaten those property values.

And yes, I know Marin is not unique with regards to this form of hypocrisy; I don't pretend that it is. But that doesn't make it right and that does not mean we shouldn't bring public attention to it at every available opportunity.

Besides, given our proximity to San Francisco, a major employment center, it's the right thing to do.

Hypocrisy can only exist in a moral world. If we are not being hypocritical, does that mean we are an amoral county? Ok, now I am being weird; I admit existentialism isn't my thing; just a random, passing thought while closing this post.

What About the 'We're Rich' Argument?

2008-06-08T13:04:00.000-07:00

Rep. Laura Richardson (D-Long Beach)
Ed McMahon
Evander Holyfield
Michael Jackson
Letrell Sprewell
Aretha Franklin
Jose Conseco

All are very wealthy individuals, all are living in "special" places, all have multi-million dollar mortgages, and all are foreclosing. There will be more.

Wealthy individuals can buy more expensive houses and have more assets to draw from, but they can be just as "stretched" as any working class nine-to-fiver as they are just as susceptible to societal pressure to buy more than they need, to "keep up with the Joneses", to obtain bragging rights to their friends and family, etc.

At the very least my hope is that the pain from the housing bubble bust, and the public record provided by the housing bubble blogs, will finally and once and for all teach people to ignore all the easy, self-serving, "rational" sounding "explanations" realtors/agents, etc., peddle to the gullible masses to keep them buying and so mindlessly and willingly paying ridiculously high prices. My hope is that realtors/agents will finally and once and for all be discredited as definitive sources of real estate related information.

Map of Prime-Rated Loan Foreclosures

2008-06-02T17:46:00.000-07:00

sf jack spotted this graphic showing areas where prime loans are starting to blow up:

Yes, Marin is one of them. If you are having trouble seeing that our tiny county is one of many in the most distressed category, according to this analysis, here's a closer view:

'Prices Are Falling Because They Were... Ridiculously High'

2008-05-28T18:28:00.000-07:00

Updated 05-29-2008, see below.

- - -

The latest Case-Shiller Index; perhaps the best authoritative measure of the housing markets (PDF can be obtained here):

SFGate.com had this to say:

In the San Francisco area, which Case-Shiller defines as the counties of San Francisco, Alameda, Contra Costa, Marin, San Francisco and San Mateo, the one-year price decline from March 2007 stood at 20.2 percent. The decline from February to March was 3.5 percent.

The Bay Area’s year-over-year price slump was the sixth steepest of 20 major metropolitan areas tracked by the index.

"Prices are falling because they were too high - ridiculously high," said Christopher Thornberg, principal of Beacon Economics in San Francisco. "They’re now in the process of going back to a more normal level. Frankly, that’s a good thing."

Thornberg said he thinks prices could return to year 2000 levels.

Here's what the Economist had to say (emphasis mine):

AS HOUSE prices in America continue their rapid descent, market-watchers are having to cast back ever further for gloomy comparisons. The latest S&P/Case-Shiller national house-price index, published this week, showed a slump of 14.1% in the year to the first quarter, the worst since the index began 20 years ago. Now Robert Shiller, an economist at Yale University and co-inventor of the index, has compiled a version that stretches back over a century. This shows that the latest fall in nominal prices is already much bigger than the 10.5% drop in 1932, the worst point of the Depression. And things are even worse than they look. In the deflationary 1930s house prices declined less in real terms. Today inflation is running at a brisk pace, so property prices have fallen by a staggering 18% in real terms over the past year.

DataQuick Results for April, 2008

2008-05-20T19:08:00.000-07:00

Here are the April, 2008 results from DataQuick:

The median price in Marin is down -13.5% year-over-year. Last month it was -4.5%, before that about -6.5%, and before that -5.5%. Marin is currently down about -29% from the peak.

I don't know about you, but I hope Leslie Appleton-Young is making regular trips to her doctor at least judging by this quote she made back in April, 2007:

"It's God's country, what can I say," Leslie Appleton-Young, chief economist for the California Association of Realtors, told an audience of agents Tuesday in Terra Linda. "When is the 30 percent decline in Marin County's market going to happen? Not in my lifetime."

And I can't let this, from the Marin IJ the other day, pass without some comment (emphasis mine; the graphic is from foreclosure.com -- this time last year the "preforeclosure" number for Marin was 168 compared to the 478 of today, and this time 2006 it was a paltry 35):

A crumbling Marin housing market is booming business for Coldwell Banker broker George DeSalvo. The veteran agent deals in real estate owned, or REO, properties that have gone through foreclosure and into bank ownership. DeSalvo described today’s market as the worst he’s seen. "I think this has close enough parity to foreclosures that took place during the Depression," said DeSalvo, a Novato resident who works out of Greenbrae.

Edward Segal, CEO of the Marin Association of Realtors, said he has seen "a big spike" in member requests for workshops on foreclosures, short sales and REOs over the past six months. One such session last month was standing-room only.

Realtor Vince Gramalia in San Rafael, has practiced real estate in Marin for more than 30 years but spends about 75 percent of his time dealing with REO properties these days.

"Being in the business for a while, I was aware of it since the early '70s," he said. "We went through a couple phases like this, and we saw this coming."

"Saw this coming"? What the...!? Not likely; this blog is testament to that. Your industry time and time again refused to deal honestly with the public. Your industry, and yes, I am also most certainly including the real estate industry in Marin, did nothing but engage in disinformation, overt manipulation, and general fear mongering to prop up buying activity and to line your own pockets with ever larger commissions. Need I remind you of incessant talk about how we are immune, we're "special", about how prices can only go up, about how Marin real estate will never lose value, "buy now or be priced out forever", distorted statistics, egregious propaganda sponsored by your industry in our local media? The list goes on and on and is documented to some extent here on this blog. Don't you dare now say "you saw this coming". Yes, we (the readers of this blog) saw this coming but probably not you and certainly not your industry. But if you did happen to foresee this, were you out actively warning your clients that they might be making the biggest financial mistake of their lives; that perhaps they would be better off postponing a purchase? I didn't think so.

Marin March Prices Off -23.33% from Peak

2008-05-08T12:06:00.000-07:00

While poking around the SFGate.com database, I ran across this:

When You're Hot, You're Hot...

2008-05-05T19:04:00.001-07:00

And when you're not, you're... 0.42 it seems:

"Crushing Hopes of an Imminent Turnaround"

2008-04-30T20:20:00.000-07:00

I decided to break in my new scanner with today's Chronicle's front page. You gotta love it... falling prices that is. After all, cheaper houses are a good thing; just like cheaper gas, food, cars, etc. are good things.

Here are some choice quotes from the print edition of the article:

Like a brick falling from the top of the Transamerica Pyramid, national and local home prices are rapidly accelerating on their way down, crushing hopes of an imminent turnaround.

The cost of a typical Bay Area home plunged 17.2 percent year-over-year in February, compared with 13.2 percent in January and 10.8 in December...

"Prices have a lot of room to fall," said Patrick Newport, an economist with Waltham, Mass., research firm Global Insight Inc. "We could see some really big drops."

Stephen Levy, senior economist at the Center for Continuing Study of the California Economy in Palo Alto, said the early, enormous price declines in areas like Stockton and Fresno are filtering into the Bay Area.

"Even though we don't have the high foreclosure rates, housing is a market and prices here are connected to prices in adjoining areas," he said.

Michael Carney, director of the Real Estate Research Council of Northern California, said he was "shocked" that the Bay Area number fell as far as it did, but echoed Newport in saying the accelerating decline means the worst is to come.

He was shocked, shocked!

LOL

No shock to us. So far it is, for the most part, going according to the script. And yes, the worst is yet to come... we are still waiting for Alt-A resets which are our time bombs. Furthermore, now that the "low end" is cratering there is room for that upper end to not just crack but cave.

And what about all those sellers who have taken their houses off the market, waiting for a better market environment? Unless you are willing to wait many years, you are missing out on the best it is going to get for a while.

Perhaps it is time to re-visit that prescient The Economist article from June 16, 2005. You remember, the one that featured this cover which seems so appropriate now:

And my thanks to reader Lisa for flagging this IJ article:

Marin Assessor Joan Thayer told county supervisors Monday her department could be overwhelmed if the number of residents seeking reassessment of their homes continues to rise. Thayer expects as many as 1,000 of Marin's 74,750 homeowners to request a reevaluation of their home's assessed value by the end of the fiscal year in June - a figure she said had "doubled and may have tripled" in the past year.

And I must say, isn't it about time that our local media stops with the 'well, at least it isn't as bad here as it is elsewhere' misdirection?

March Results

2008-04-18T19:28:00.000-07:00

March results (care of DataQuick) for Marin as reported by the Marin IJ:

The median price of a single-family home last month was $862,500, down from $965,000 a year earlier, and just 110 single-family homes were sold - about half as many as the 218 sold in March 2007, DataQuick reported. Sales totals ‘were easily the slowest March in Marin,’ said John Karevoll, a DataQuick analyst, who noted the research firm’s records date back to 1988.

"This is a pitifully low sales count is more of an illustration of what is not going on, rather than what is going on," Karevoll said, noting March figures were a record low for the Bay Area as well.

"Sellers are still trying to overprice their homes and nobody is falling for it any more," said real estate agent Celine von May.
The county’s inventory of 1,401 homes for sale is up from the 1,087 properties on the market at this time last year, said Levi Swift, president of the Marin Association of Realtors.

The 213 properties in default in March is up 14 percent from February and 167 percent from a year ago, according to ForeclosureRadar.

Marin's housing market is described as "pitiful". Check.

Marin sellers are still in denial. Check.

The median price of a Marin house in March, 2008 has fallen more than $100,000, or 11%, from what it was in March, 2007. Check.

There is nearly a 13 month supply of houses on the market in Marin. Check.

15% of the houses on the market in Marin are currently in default. Check.

50% reduction in sales as compared to last year. Check.

And the IJ poll does not suggest people think things are going to turn around any time soon:

And I think this point made by the Calculated Risk blog about the March Bay Area sales results, and made here before as well, is worth repeating:

This is why the Case-Shiller repeat home method is better than the median price method for calculating home price changes. Using the median price method, it appeared prices were holding up pretty well at the beginning of the housing bust simply because the mix changed - fewer low end homes were sold. Now it's the high end being hit. And finally ...

Income Needed to Buy vs. Median Household Income

2008-04-18T19:24:00.000-07:00

Interesting graphic over at Dr. Housing Bubble (annotation courtesy of yours truly):

Just Say "No"...

2008-04-12T15:22:00.000-07:00

... to mortgage bailouts. That's what the Heritage Foundation is saying.

And who pays for this bailout? Not ‘‘the government.’’ It’s all the responsible homeowners and renters who resisted the temptations of the housing boom, refused taking out a home equity loan to fund a vacation or new car, declined to buy a home with no down payment, ignored the low teaser rates dangled by shyster brokers. Meanwhile, the homeowners who yielded to temptation are offered an escape hatch. Who pays? In short, you pay - unless you’re getting a bailout.

Where does the bailout business stop? Simple. It stops at the beginning - by saying no to bailouts, subsidies and slush funds.

I am one of those responsible people; you probably are too. I absolutely do not want to pay bail out money to those people and organization who could not act responsibly; I doubt you do either. The thought of such bail outs is utterly infuriating, outrageous.

Please visit this site dedicated to stopping the mortgage bail outs.

Losers

2008-04-11T14:43:00.000-07:00

Those ex-Marinites, Vernon and Marty Ummel, were schooled yesterday on the meaning of the phrase "caveat emptor"; they lost. What a surprise. (Thanks to reader "w.c. varones" for spotting the article.)

Let this be a lesson to all current "owners" who have seen their house price drop and to all would-be buyers who might be worried about their soon-to-be-purchased house losing value.

It took a jury less than two hours Thursday afternoon to unanimously clear a real estate agent accused of failing in his duties to a couple he helped buy a tony Carlsbad home.

"The bottom line is that you (as a buyer) are responsible when you sign a contract and purchase something."

There's hope yet.

So if the buyer is responsible for the consequences of their signing a contract, why is the US government, the Fed, the state, bailing out failed flippers, "under water" mortgage holders, banks and lenders, et al. who made bad financial decisions/bets?

Greenspan's Latest CYA

2008-04-07T23:35:00.001-07:00

Greenspan's latest message to the world; here's the executive summary:

'There was nothing the Fed could have done to prevent the housing bubble so we didn't even bother to try.'

Marinites Elevated to Rank of "Poster Children"

2008-04-04T15:27:00.000-07:00

Here is the latest on that spoiled, entitled Marin couple (ok, ex-Marin), who I've blogged before, Marty and Vernon Ummel, who agreed to pay a stupid price for a house in San Diego (hey, they came from Marin where people pay stupid prices all the time; it's part of their culture) back in 2005 and now that their house has lost value they are suing the realtor; jury selection has begun:

Tomorrow, Vernon and Marty Ummel, who purchased a $1.2 million home in Carlsbad three years ago, will try to convince a jury that their real estate agent defrauded them when he failed to inform them that similar houses on the same block were selling for more than $100,000 less than what the Ummels had paid.

Jury selection is expected to begin tomorrow morning in the Vista courtroom of Superior Court Judge Lisa Guy-Schall.

Although legal experts say the case is intriguing, most doubt it will spawn a raft of lawsuits in which disgruntled buyers go after real estate agents alleging they were led astray.

Experts also question whether the Ummels will be able to prevail, recognizing that ultimately, the Ummels were the ones who decided to pay what they did in 2005 for their two-story, 3,700-square-foot tract home in a neighborhood just north of the Four Seasons Aviara golf course. In those days, prices throughout the county were still climbing.

“The plaintiffs are not victims of a subprime loan scheme, nor are they victims of the declining real estate market,” attorneys for the Re/Max agent wrote in court papers supporting their request for a delay. “Plaintiffs simply think they paid too much for their home when they purchased it. Nevertheless, plaintiffs have now painted themselves as the 'poster children' of the current crisis.”

Well, I certainly do not expect the Ummels to win, and I hope they don't because they agreed to pay a stupid price for their house and they should not be exploiting the legal system to make up for their poor financial decision-making.

Be that as it may, I do hope something good comes out of this: I hope agents will practice greater disclosure; I hope buyer's interests will be better represented during the housing sale process and that the inherent conflicts of interest baked into the process of buying/selling a house will be eliminated; I hope...

As one commentor said:

the laws of agency and the concept of fiduciary duty are in direct conflict with the manner in which agents are compensated. Thus, this scheme is designed to be a losing proposition for the buyer. Always.

If only that one conflict of interest were to be eliminated, if agent compensation was not tied to the final selling price of a house, then we would be that much closer to a free and open market for housing. It would not take us all the way there of course (have to get rid of all the government sponsorship, tax breaks, etc.), but it would be a significant step in the right direction.

Confidence? What Confidence?

2008-04-03T23:00:00.000-07:00

“Federal Reserve Chairman Ben Bernanke and the Bush administration on Thursday defended the decision to rescue Bear Stearns amid questions by lawmakers about why the government was helping Wall Street investment houses but not people on Main Street.”

I gagged when Ben Bernanke actually tried to defend the Bear Stearns bail-out by claiming a crisis in confidence. So exactly how confident are investors in the good 'ol US of A supposed to be now that the Fed has to bail out 80-something year-old investment firms?

Hey Ben, you want to restore confidence? Let the free markets work.

And does Bernanke even care about Americans or does he just care about those Americans who happen to work for Wall Street? Here's one reader's answer:

How do the Master Planners feel about the American household, about the little guy? Here's some of Bernanke's testimony today on the hill:

Mr. Kennedy (loud): "What's your recommendation? We have monetary and fiscal policy. You have responsibility in monetary, Congress does in fiscal policy. But you have to have some position in terms of the economic crisis that we're facing."

Mr. Bernanke (calm): "No sir."

Mr. Kennedy (louder): "You're not prepared to tell us, to try and provide help and assistance to the states . to try and help and assist families, working families?"

Mr. Bernanke: "I'm all in favor of assisting people, sir, but it's Congress' position."

Mr. Kennedy (at his loudest): "You don't have a recommendation?"

Mr. Bernanke: "No sir."

What they really meant:

Kennedy: "What are you going to do to bail out the American household, Ben?"

Bernanke: Nothing Ted. What are you going to do about it?

Kennedy: "I asked you first."

Bernanke: "Well, Ted, you ignorant sot, we bailed out Wall Street. That's good enough."

Kennedy: "That is not good enough, Ben, you pretentious pedagogue. You need to bail out the American household too."

Bernanke: "No, Ted, you do that."

Bernanke: "No Ben, you do that." "No, you do it." "No, you do it."

Angry yet?

Or is any despicable act justifiable if it means that there is even the very slightest chance of saving some of your precious housing loot?

Vacation House Sales Plummet

2008-03-31T20:38:00.000-07:00

This was sent in from a reader on the other side of the GG bridge, in some place called San Francisco:

Second home sales have taken a direct hit in the current real estate market slowdown, according the National Association of Realtors’ (NAR) annual survey of investment and vacation home buyers.

The realtors group, always eager to put a sunny spin on the real estate market, was frank in its assessment of sales of second homes, which include both vacation homes and investment properties. “Second homes are discretionary purchases and there is a natural tendency to pull back from big-ticket items in periods of uncertainty,” said Lawrence Yun, NAR’s chief economist.

In 2007, some 740,000 vacation homes were sold, down 31 percent from the 1.07 million sold in 2006...

Hmm, Marin has a few vacation homes. But of course, as we all know, what happens in the rest of the country, or even the state, doesn't apply to us.

Irrational Obstinancy

2008-03-29T11:28:00.001-07:00

I love how Marin County house sellers are being used in this New York Times article to epitomize irrational obstinacy (be aware: R.H., who is prominently mentioned in this article, is a housing blogger of some note):

In 2005, Randolph Harrison and his wife, Pamela, decided to move north from Silicon Valley, over the Golden Gate Bridge into wooded Marin County to be closer to her new job. They found a six-bedroom house that seemed ideal except for the price, $1.875 million. The current owner, they knew, had bought the house a year earlier for $1.475 million.

So the couple, who both have finance jobs in the technology industry, told their real estate agent that they wanted to offer $1.575 million. He told them that the owner wouldn’t even listen to such a low bid. The owner’s attitude was “we’ll just stay here until we sell it for 1.875,” the agent said, “even if it takes years.”

In most other areas of the economy, this combination of plummeting sales and stable prices would not happen. When demand for airline tickets drops, the airlines cut their prices until they have sold their seats. When stocks become less appealing, share prices fall, sometimes sharply.

Real estate, though, is different. For both economic and psychological reasons, there is no asset more conducive to hopeful overvaluation. That means real estate slumps tend to grind on for years, until sellers submit to reality and reduce their prices.

In many ways, it would be better if the housing correction would happen more swiftly and sharply. The pain might be worse, but it would be over quickly. We seem to understand this principle when we’re removing a bandage. Why, then, is it so much harder with housing?

For starters, people have an obvious emotional connection to their house. After you have raised a family or enjoyed long meals with friends there, you are naturally going to place a higher value on it than a dispassionate buyer would. It’s your home.

“People say, ‘I don’t care about the market — my home is still worth what I paid for it in 2006,’ ” Mr. Glinert [a real estate agent] told me. “And I say, ‘To you. Only to you.’ ”

Doing what Mr. Glinert is asking sellers to do — dropping the asking price below their purchase price — is especially difficult. It’s tantamount to admitting defeat.

David Laibson, a leading behavioral economist, categorizes this sort of behavior under the heading of “the principle of the matter.” His point is that people often go to great lengths to avoid taking a loss — or simply having to acknowledge one. “Even a small loss evokes a sense of frustration,” said Mr. Laibson, a professor at Harvard. “There’s something magical about ‘at least breaking even.’ ”

Often, this hurts no one so much as it hurts the would-be sellers. They stay in homes where they no longer want to live, rather than accepting their loss and moving on. Or they move but endure the hassle of renting out their old home, waiting, usually in vain, for the mythical buyer who understands its charms. All the while, their money is tied up in the house, and inflation is eating away at its real value.

So are we Marinites especially prone to hurt egos? Do we take "people often go to great lengths to avoid taking a loss — or simply having to acknowledge one" to the next level?

And you gotta love the comments about stubborn sellers made by the blogger who runs The Mess Greenspan Made blog:

That fact is clear to see in many neighborhoods as sellers sit and wait, either not knowing or not caring that they have little chance of getting anywhere close to what they're asking unless that one, dumb home buyer shows up who knows less about real estate market conditions than they do.

* * *

And please participate in the Marin Bubble Blog forums. As this blog winds down, the forums are where the action can be, but only if you make it happen.

Discussion Forums

2008-03-21T23:04:00.001-07:00

Please check out the Marin Real Estate Bubble Blog Forums (MREBBFs?). These are discussion forums in which you have a lot more control -- start your own threads about realtors/agents, specific properties, POSs, whatever you want. If you would like to see a forum dedicated to something not already provided, just send me an email.

Marin Market Heat Index Will Now Cost You $799/Year

2008-03-17T18:35:00.000-07:00

The picture that you see above is the Marin Market Heat Index from January, 2008 (at that time the Index was around 0.41 which was essentially where it was at the end of last week). It is probably the last time you will ever be able to see it for free. You see, over this past weekend or so the Marin Heat Index became a paid service; if you want to know what the Heat Index is as of today or on any other future day, you or your realtor will have to fork over $799/year to see it.

This is what real estate agents do to remain relevant and to manipulate the general public -- they covet and restrict access to real estate information. The fact that the Heat Index was free and open to the public was the main reason why I endorsed Nate Sumner and his agents as they seemed to value the free exchange of information. Clearly, I was mistaken about them -- Nate and his crew are no better than all the rest of the real estate shills.

Why did they do this? Who knows? But given that the Index has been free since around the year 2002 and only now, at the collapse of the largest real estate bubble in history, the timing of this is rather suspicious... maybe not Eliot Spitzer suspicious (the feds just happen to be cracking down on the call girl service that the "Scourge of Wall Street" just happened to use), but suspicious none-the-less. Maybe their business is so slow that they thought that they could get some extra income by charging for the Heat Index? Maybe they just don't want the general public knowing how bad our market is and is becoming. Or maybe the last six years of free access has just been a "test the waters" sort of thing and going for-fee is all part of The Plan.

Well, if you are like me and feel that if your real estate market is ever to be even close to an open, free market, then please use the contact info that they provide on their web site to express your opinion. Who knows? Maybe we can convince them that they are doing a better service for people by letting the Heat Index remain free and open. Here is the contact info in case you don't want to look it up:

That email link goes here: info@marketheatindex.com

Open Thread

2008-03-16T22:15:00.000-07:00

As we watch the Fed and Paulson desperately try to either nationalize Bear Stearns or get it merged, I am led to wonder why it is that main stream media articles keep avoiding a basic, fundamental truth about the housing bubble – they keep trying to insist that bubblicious housing prices are somehow justified, that sellers are somehow entitled to peak bubble prices and are justified in their expectation of receiving such prices, and that the only reason why housing prices are currently being threatened is because of a lack of credit. Ha! What about that 800 lb elephant sitting in the middle of the editor's office; what about income? What about the fact that the only way people could "afford" bubble pricing was with NINJA loans and the like? Why isn't income-based affordability ever given any serious consideration?

Besides, credit really isn't all that threatened especially now that the GSE conforming loan limits have been raised to absurd levels (at least here in California). Sure you can get credit; it's available to anyone who can make a hefty down payment, can prove their income, and who doesn't spend more than about a third of their gross income on the mortgage (or no more than about 40% or so on all debt combined). What's the problem? Seems perfectly reasonable to me. The "problem", of course, is that since bubble-inflated prices are based on the exact opposite of these more traditional lending criteria, bubblicious prices cannot be supported unless one of two things occurs: 1) prices come way down or 2) everyone gets a 100%+ raise. Personally, I would prefer the latter but I am not counting on it.

This was supposed to be an open thread. Sorry.

[And please be sure to check out the Marin Bubble Forum where you can create your own discussion threads.]

Are We There Yet?

2008-03-13T13:02:00.000-07:00

Some of the fall-out from the mess that is the housing markets, in no particular order:

1) $15,000 rebate checks (bribes) given to people if they buy a house.

2) The Fed giving $200 billion dollars to banks in exchange for their "toxic" mortgages that they still have not "marked to market" because they are out of money and know if they mark to market then their bottom lines will collapse.

3) Raising the GSE conforming loan limit to insane levels.

4) The Fed falling all over itself, in full panic mode, with countless short term interest rate drops and no doubt more to come.

5) An ever more worthless U.S. dollar.

6) $1000+/oz. gold.

7) $100+/barrel oil.

8) Increasing inflation.

9) Other bail outs, mortgage debt forgiveness, mortgage interest rate freezes, etc. that are so numerous that I have not been able to keep track of them all but they are all ultimately designed in the end to save failed housing gamblers, speculators, banks, lenders, the real estate industry, Wall Street; all to be paid for by tax payers, including the prudent people who save, who didn't play the housing gambling game, who knew this housing market was a farce, who just want a place to live and raise a family.

10) Whole communities on the verge of bankruptcy.

11) Huge state budget cuts.

12) A massive increase in foreclosures which is far from over (just one of many).

Oh, and let's not forget how:

13) Fannie Mae has changed its mission statement from 'helping low-, moderate, and middle-income familes to buy homes of their own' to "Our job is to help those who house America". Before:

At Fannie Mae, the home symbolizes who we are, too. Our public mission, and our defining goal, is to help more families achieve the American Dream of home ownership.

We do that by providing financial products and services that make it possible for low-, moderate-, and middle-income families to buy homes of their own.

after:

We exist to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market.

Fannie Mae has a federal charter and operates in America’s secondary mortgage market to ensure that mortgage bankers and other lenders have enough funds to lend to home buyers at low rates. Our job is to help those who house America.

14) The California Association of Realtors (CAR) conveniently redefined what "affordability" means so that our abysmal affordability numbers don't look quite so bad. Unfortunately, I can no longer provide a link to the original announcement of the changed calculation of affordability because the CAR has taken the page down. After going to the Internet Archive Wayback Machine to see if I could find a cached version of the page I get this message:

"We're sorry, access to http://www.car.org/index.php?id=MzA1MDU= has been blocked by the site owner via robots.txt."

So the CAR has deliberately blocked access to that particular page (other pages from that period are still available). I wonder why? Perhaps the recent and ongoing massive increase in California foreclosures has unequivocally demonstrated just how ludicrous, self-serving, and flawed their then new-and-improved definition of affordability really is.

But no worries, here is a post from SocketSite where they talked about it back in August, 2007:

Earlier this morning, we referenced the Housing Affordability Index (HAI) which is published by the California Association of Realtors (C.A.R.). According to the last published index (February), the percentage of households that could afford to purchase a median-priced home in the Bay Area was 12% (and only 9% in San Francisco).

Almost right on cue, C.A.R. released a new First-time Buyer Housing Affordability Index (FTB-HAI) this afternoon:

"C.A.R. began producing its Housing Affordability Index (HAI) in 1984. At that time, fixed-rate mortgages were the prevailing form of financing a home purchase, while the calculations used to produce the HAI reflected a 20 percent down payment. The methodology also assumed a monthly payment for principal, interest, taxes and insurance that was no more than 30 percent of a household’s income.

In the more than two decades since the CALIFORNIA ASSOCIATION OF REALTORS® first conceived the HAI, the mortgage finance landscape has changed dramatically. The range of mortgage products available to buyers as well as underwriting criteria has changed.

C.A.R. developed the new index measuring affordability for first-time home buyers to better reflect the realities of today’s real estate market."

According to the new model, the percentage of first-time buyers able to afford a median-priced home in the Bay Area stands at 24% (16% in San Francisco). And while that’s more palatable than 12% and 9% respectively, keep in mind that based on this new model (which takes into account relaxed lending standards and the shift away from long-term, fixed-rate mortgages), affordability in San Francisco is down about 18% from a year ago, down 28% from two years ago, and down 35% from the second quarter of 2003. That's the market reality.

You can also visit Patrick.net's post on this too. (Let this be a lesson to me to always quote the relevant parts of web pages so that if the page is taken down we still have some record of it.)

15) There is an all but official policy in this country to privatize profits and socialize losses.

16) An incestuous collusion among many realtors, appraisers, inspectors, lenders...

All this because we insist that houses should only ever go up in price. Cars and other assets... that's ok if they go down in value. But houses; the things central to our communities and families? No way!

Welcome to the mess we helped to create by agreeing to pay stupid prices for houses, by lending unearned money to "anyone with a pulse", by letting people lie on loan applications, by approving measures that serve to artificially prop up our property values, laws and tax breaks that encourage speculation, or by tacitly supporting it all via our indifference and inaction.

When will the apathy end? How bad does the situation have to get before it trumps personal greed? What I have listed above is just the tip of the iceberg for crissakes! How much more pain must people suffer, how much more corruption must we endure, and how much more of our hard-earned money do we tax payers have to pay before people finally say enough is enough, pull out the metaphorical pitchforks and torches, and out-right rebel?

Million Dollar Camouflage

2008-03-09T19:42:00.000-07:00

I have been trying to figure out how best to share a submission made by a reader. He sent me three spreadsheets of data that he gleaned from the Marin County Assessor's web site. He has independently concluded what I have found and have been saying here for quite a few months now... that the reason why so many houses in Marin can sell for discounts relative to their bubble peak while at the same time the county median/average can go up is because the higher-end is selling and the lower end is not, relatively speaking. In a market like ours today every single house can sell at a steep discount but the county median can still go up if the mix of houses that sell shifts towards the higher end. It's always nice to get independent confirmation.

I do not know how I can share the three spreadsheets with you all. I guess it would probably be ok with the author to email them to anyone who requests them. But for now, here is the contents of his email:

Marinite,

I don't know if you've posted something like this before, but if you have not please use the following in any way you wish.

I've put some numbers together from the Marin County Home Sales page, located here:

http://www.co.marin.ca.us/depts/AR/main/sales2007/Salesannual.cfm

The attached spreadsheet crunches the numbers. It has three tabs:

1. 'Yearly Total - Marin County' just tabulates the numbers. I've divided the county into regions (e.g., the city of Novato is one region, the cities of Belvedere, Mill Valley, Sausalito, Tiburon another region called 'Southern').

2. 'Summary' tabulates the numbers above into a more succinct table. The key numbers to me are '% Sales - Region / County Total' (e.g., # Novato Sales / # Marin County Sales) and 'YOY Median Change'.

3. 'Highlights' breaks down only the years 2004-2007 for 'Novato' and 'Southern'.

The key to me is that in Tab 3 you see Novato going from 863 sales in 2004 down to 345 sales in 2007, or put another way, Novato had 25% of Marin County sales in 2004 but only 16% in 2007.

Conversely, the 'Southern' region (Belvedere, Mill Valley, Sausalito, Tiburon) went from 462 sales in 2004 to 364 sales in 2007. Their share of Marin County sales increased from 14% in 2004 to 17 % in 2007.

This, of course, goes to the question of why Marin County median prices are holding up. Well, if you have a smaller percentage of Novato houses selling at a median of $750,750 and a greater percentage of 'Southern' houses selling at a median of $1,859,063, it's no mystery.

Please use these numbers if you find them useful.

Thanks

P.S. The median numbers for regions with more than one city are bogus, because I just averaged the totals for each city. I did the best with the numbers I had.

And be sure to check out the new Marin Real Estate Bubble Blog Forum where you can create your own discussion threads.

Siren Song

2008-03-09T19:29:00.000-07:00

Now this is something I didn't expect to ever see... realtors and the MSM wanting to advertise on this blog. Good luck with that, schmucks:

Hello,
I would like to inquire about placing a small text link on your site. You can put it into a sponsors or supporters section. Would you be willing to do this? What would you charge for a year? What do you charge to be a site supporter?
I am a Mystic Ct Realtor and am only looking to improve my traffic. Thank you for your time

XXXXXXXXXXXX
RE/MAX

* * *

Hello Marinite,

I want to introduce the CBS 5 San Francisco/Bay Area network, a network of local sites that cover San Francisco/Bay Area news, sports, lifestyle, politics, arts and culture and invite you to apply for membership. WBZTV.com has partnered with Pulse 360 to help build this network.

The main benefits of becoming a member include...

Heaven forbid if the Marin IJ ever comes knocking on my door.

New Forum!

2008-03-07T13:24:00.001-08:00

I am pleased to announce a new Marin Real Estate Bubble Blog forum. At present, there are three forums at the new site. I am more than willing to add more... just suggest the topic.

The forum hosting service I went with is a very popular one and so it will hopefully work out well for us. Some of the things I like about it is I can create an unlimited number of forums and I have the ability to ban abusive users.

Please create an account, sign in, and begin posting and creating discussion threads.

Enjoy!

Oh, and please do not forget about this humble blog. I will be posting from time to time.

Open Thread

2008-02-29T18:18:00.000-08:00

By request. Post whatever you want (just keep it clean and relevant). Let the graphic be your inspiration.

The Absurdity That Is Marin RE

2008-02-24T12:32:00.001-08:00

Do you remember this POS in Forest Knolls (also blogged here)? It was first listed for $449,000 at least as far back as February, 2006 (when I first blogged it). It then dropped price to $399,000 in March, 2007. No surprise, it is still on the market. Here is some info from the current listing (click on the image for a larger view):

What I find amusing about this is:

A) The sellers raised the price to $425,000 hoping to reel in a last brain-dead Marin wannabe and finally had to lower the price back down to the mid-$300Ks and yet the "price reduction" still did not convince a buyer to pull the trigger;

B) the agent and/or seller decided "staging" it, in this case putting some cheap furniture in this shack, would somehow make it more appealing (here is the interior shot from back in February, 2006 for comparison).

Note to realtor: a turd is still a turd no matter how much you polish it (and even if it is in Marin).

* * *

And how do you like this price reduction? It sure made my day (thanks to a reader for sending this in):

Do you know of any humorous Marin RE listings that should be featured on this blog? Do you have any juicy Marin RE stories to tell? Send them in!

Coming to Terms?

2008-02-11T14:07:00.001-08:00

I can't believe my eyes. Does this mean we are not as "special" as we thought we were?

From the Marin IJ:

As our economy falters because of the housing bubble and the erosion of the dollar’s value, there is less faith in this country’s economic soundness by our creditor nations.

A clear lesson is that we have for too long been living far beyond our means as a people and as a nation. We can no longer consume so much more in value than we produce.

Many in Marin are lamenting that real estate prices are skidding. We are ‘losing money.’ If we’re honest, we know that much of the equity in our overvalued real estate is ‘funny money’ based not on real values but on the speculative furor of the past decade.

Losing some of our shaky home equity is not the medicine we want. But perhaps it’s needed. It’s as true as ever that it’s better to live within our means and not go too much in debt - especially if it’s for all the wrong reasons.

And this in the Sonoma Press Democrat:

"The entire real estate debacle is the fault of everybody that was involved. And it was all about greed and speed... The brokers wanted their commission. The lenders wanted their premiums. The borrowers wanted their homes."

A Scam to Benefit the Wealthy

2008-02-05T00:48:00.001-08:00

This from our own SF Chronicle.

Why should tax payers pay for a mortgage interest rate break (resulting from the proposed increase of the loan limits for Fannie Mae and Freddie Mac) that will benefit only the wealthy minority of this country? Why should "fly over" states be required to pay their tax dollars to support mortgages for our over-priced houses here on the West Coast? As much as the proposed increase in loan limits will personally benefit me, the fact is that I chose to live in an expensive area of America; it is neither right nor fair that people who do not live in crazy-stupid expensive areas should subsidize my choice. If anything, it is those of us who live along the west and east coasts, who have these high mortgages, and who will benefit from the proposed increase in loan limits who should be paying an increased tax and who should bear the responsibility of bailing out Freddie and Fannie when they ultimately fail due to assuming such a massive increase in risky loans.

Here in California such words fall on deaf ears. It is a sad fact that most people support (vote for) that which benefits themselves and not what benefits the general public or what is generally considered good (unless, of course, there is no significant cost to them by voting their conscience). Thus, I fully expect the majority of Californians to support the increase in the GSEs' loan limits as it will benefit most Californians' pocket books (at least in the short term). But what about the rest of America that does not live along one of the two coasts? Why would you support this proposal and why would you be willing to pay your hard earned money to ensure our ridiculously high mortgages?

We don't have to let it happen. We the citizens of this country could stop it if we really wanted to. Now more than ever politicians are listening to the populace. Make yourselves heard.

Congress is about to sell us the biggest fraud in American history... Congress is set to rush through an increase in the mortgage loan limits for Fannie Mae and Freddie Mac (and Federal Housing Administration insurance, too) - from $417,000 to $729,750 - the first step toward a massive financial disaster in which taxpayers will end up paying through the nose.

Contrary to popular myth, Fannie holds a lot of subprime debt, option ARM debt and other dodgy securities... Expansion of Fannie and Freddie's reckless lending is exactly what Congress wants because it's plausibly deniable. Teary-eyed lawmakers can take to the airwaves a year from now and declare: "We had no idea Fannie could go under, but we can't cut and run now. We have to bail out Fannie and Freddie for the good of America! It's going to be a tough slog, but you're getting used to those, no?"

Those same lawmakers won't mention the fact that they get paid far more by real estate lobbyists than they do from our Treasury.

I've spoken with borrowers who stopped making mortgage payments seven or more months ago. None has received a default notice. Defaults may be much higher than banks are letting on. The data lags are growing suspiciously long. Nobody knows what's going on. Seven months without making a single payment! Will Fannie guarantee those loans because they aren't in formal default yet? Nobody wants to know, because if they know, they might be called to testify next year. That's why lawmakers want to raise the limits now and ask questions later.

In support of the economic stimulus bill, Bush will have to face "working American families" and explain that some of their tax money is going to be spent guaranteeing $730,000 mortgages on $1 million homes. It's like some sort of upside-down communism where the poor pay the rich welfare. Why should taxes from families earning $48,000 a year be used to support expensive mortgages in New York, Los Angeles and San Francisco? Welfare for the hungry and homeless is evil, but welfare for million-dollar homeowners facing a tough refi ... well, that's called "helping the economy."

I can imagine the president's radio address playing in the heartland: "We have some families with million-dollar homes on the coasts who are really hurting and so we need you, the working families of America, to stand together with them and help them avoid the kind of home price depreciation that might leave them without a new Lexus for years."

I guess Congress' hope is that median-income families will be too busy using their rebates to buy much-needed groceries to notice that the rich folk are getting way with a new scam.

Don't let me down, my fellow Americans. Let's vote out anyone0 who dares to vote for this scam.

BusinessWeek Says Back To Trend-line

2008-02-01T18:38:00.000-08:00

After all their shameless boosterism, BusinessWeek comes out with this. You boys are way behind the curve on this one. But still... this is the most bearish I've seen BusinessWeek in a long time.

So a return to trend-line for housing, a reversal to the mean?! No... really? Who would have thought that? And these guys have Ph.D.s for chrisakes! We're in the wrong career.

Brace yourself: Home prices could sink an additional 25% over the next two or three years, returning values to their 2000 levels in inflation-adjusted terms. That's even with the Federal Reserve's half-percentage-point rate cut on Jan. 30.

While a 25% decline is unprecedented in modern times, some economists are beginning to talk about it. "We now see potential for another 25% to 30% downside over the next two years," says David A. Rosenberg, North American economist for Merrill Lynch (MER), who until recently had expected a much smaller slide.

Shocking though it might seem, a decline of 25% from here would merely reverse the market's spectacular appreciation during the boom. It would put the national price level right back on its long-term growth trend line, a surprisingly modest 0.4% a year after inflation.

Why might housing prices plunge violently from here? Remember the two powerful forces that pushed them up: lax lending standards and the conviction that housing is a fail-safe investment. Now both are working in reverse, depressing demand for housing faster than homebuilders can rein in supply. By reinstituting safeguards such as down payments and proof of income, lenders have disqualified thousands of potential buyers. And many people who do qualify have lost the desire to buy.

War on Affordable Housing Bill

2008-01-31T17:58:00.000-08:00

Here it is, the War on Affordable Housing bill that is currently in Congress (pdf).

Open Thread

2008-01-30T18:02:00.000-08:00

They're BaaAAaack!

2008-01-28T18:36:00.000-08:00

So I am skimming over the Ben Jones housing bubble blog and I notice the name "Marty Ummel" mentioned in one of the posts and I say to myself, "Hey, I know that name". I remember that name from a Marin IJ article that I almost chose to blog. I was unable to find the original IJ article in their archives (it was back in late 2005 or early 2006 if I remember correctly) but as I recall these were the folks who (for reasons that I find hard to believe) actually left God's Country (aka Marin County) for that "armpit" Southern California. As I recall they lived in the Dominican Hills area and Vernon and Marty Ummel were fund raisers for Dominican ~~College~~ University at the time.

Well, the Ummels are back in the news (you can see the video here). Apparently, the Ummels feel they paid too much for their SoCal house, they are watching it fall in value, and, naturally, are suing someone and that someone is their real estate agent:

CARLSBAD, Calif. - A North County woman who says she paid too much for her home, which she bought at the height of the housing boom, is taking her case to court.

In 2005, Marty Ummel and her husband bought a four-bedroom house in Carlsbad for $1.2 million. The Ummels say their agent was dishonest about the price of other homes in the neighborhood, and then rushed them to close the deal before the Ummels found out comparable houses on the same street sold for as much as $175,000 less.

She has now filed suit against her real estate agent, claiming fraud.

""We feel that we were misled. We feel disappointed. We do feel angry," she said... We've worked hard and to think that we've done that our whole lives -- and then for a realtor not to tell us about the biggest purchase of our lives -- that there was a house selling for much less," she said.

But in a deposition, an expert witness hired by the defense said of the Ummels: "They simply didn't do what is expected of a knowledgeable sophisticated buyer, and are now looking for someone other than themselves to take responsibility.'"

The defendant in this case, Mike Little of Remax Associates, told the New York Times the case is quote "ridiculous."

"There are a lot of folks out there who are in a desperate situation right now with their homes and they're simply looking for someone to blame," said Diana Olick of CNBC.

"If they have information that is pertinent to their purchaser they should disclose it, but at the end of the day, the buyer is responsible for their own actions," said Robert DeLeonardis, the former president of the Manhattan Association of Realtors.

People in the real estate industry are calling this a "landmark lawsuit."

Now, don't get me wrong, I don't mind seeing the real estate industry being sued; I don't mind that at all. And I am sure there are a lot more law suits to come. But seriously, how many of you are actually going to tell me that the Ummels didn't buy with the full expectation that "houses only go up in price" and "now is [always] a good time to buy" so it doesn't matter if you willingly pay a stupid price for a house? These are former Marin residents after all and that makes them "special"; as the Marin RE bulls were frequently telling us "bubbleheads" early in the history of this blog, Marin residents are all rich, all financially savvy.

So what do you think? Do the Ummels have a legitimate gripe (listen to the reasons Marty Ummel lists in the video)? Is this case truly a "landmark" case? Will we be seeing more upside-down buyers suing their real estate agents? Or are the Ummels just more spoiled, whining Marinites who didn't get their way? And what does this portend for the future?

On Raising the GSEs' Limits

2008-01-26T14:42:00.000-08:00

“This would be absolutely, phenomenally excellent news for home buyers and sellers because it will help so many more people to qualify for loans that they can afford,” said Lori Staehling, president of the San Diego Association of Realtors.

* * *
“Because the proposed change would make their houses more affordable to buyers, their houses might sell more quickly and for a higher price,” he [Matt Colonell, mortgage broker with Obispo Mortgage in San Luis Obispo] said.

* * *
NAR President Richard Gaylord, a RE/MAX broker in Long Beach, Calif., said that raising the loan limit on conventional financing is urgently needed. "The most effective way to stimulate housing and minimize the potential for a recession is for lawmakers to raise the limit on conforming mortgages to $625,000, which would open safe and affordable financing to buyers in high-cost areas," he said. "It is grossly unfair that some Americans do not have access to low-interest rate loans..."

* * *
The idea behind the higher limits is to stoke demand for homes in high-priced housing markets such as the East Bay and other parts of the Bay Area. "It will be as if interest rates are on sale. You could create urgency..." [said Vickie Nyland, president of the Bay Area division of Taylor Morrison, a homebuilder]

* * *
“Increasing the conforming loan limit will help homebuyers in the Los Angeles area at no cost to the taxpayer. If local banks can sell the loans they extend to Fannie Mae and Freddie Mac, the interest rates on those loans will be roughly ¼% lower.

* * *
The proposal would also allow buyers in the market, looking to finance a property with a loan of $729,950 or less, to make the purchase more affordable than it otherwise would have been under the current law.

* * *
Leslie Appleton-Young, chief economist for CAR, said decreases in the statewide median prices seen in recent months were the result of difficulties in obtaining jumbo loans.

[California governor] Schwarzenegger maintains that moderate- and low-income families in high-cost housing markets are "hit hardest" by the conforming loan limit, because it restricts their access to lower-cost, lower-down-payment, fixed-rate loans. "Lifting the GSE loan limit ... would help put affordable home purchase and refinancing options within their reach," the governor said...

* * *
The proposed new limit for mortgages with the most attractive interest rates would be, for costly markets such as the Bay Area...

"The changes would offer the stability needed to offer more home loan products," said Terry Francisco, a Bank of America spokesman. "If we and other lenders can offer more products, that will increase competition..."

And the list goes on.

So according to the real estate industry, the current "problem" with the housing market is a lack of affordable loans, not a lack of affordable house prices. As if a self-serving redefinition of affordability wasn't enough. We again need more "affordability products".

I cannot help but laugh at the depravity of the real estate industry and its political lackeys. So we are now back to the "affordability loan" thing. Clearly, the NAR, the CAR, and real estate agents have not learned a damn thing by the carnage they have helped to create all in the name of their 6% commission. Clearly, they have no qualms (moral or otherwise) about using the devastation currently being suffered by the hoards of "FBs" (which they helped to create) to push a feckless and foolhardy policy that they have been lusting after for many, many years; the real estate industry has no scruples over trying to re-inflate the housing bubble for just a little while longer even if it means extending the pool of FBs. Apparently, all that matters to them is the 6% commission; the people they claim to serve can all go to hell.

If this futile proposal to raise the conforming loan limit becomes law (and we all know it will be permanent) and when the inevitable backlash arrives, when the legion of FBs finally realize that the real estate industry's attempt to keep their dream of easy real estate riches alive was nothing more than a shameful attempt to continue to line their pockets at the expense of buyers for just a little longer, you, Mr. and Mrs. Real Estate Industry, will be "reminded" of your support. The collaborators will be named. The law suits will fly. A lot of eyes are watching, a lot of blogs are recording what you say and what you do. You can't hide. The tar and feathers are waiting for you.

Using people's current suffering to make a desperate, last minute, and short-sighted attempt at re-fueling unsustainable and unaffordable house prices via GSE loan limit increases is plain and simply wrong.

Do the right thing: Let the housing markets correct and heal themselves.

But then again, now that the NAR has gotten its way and Fannie Mae has changed its mission from helping poor and middle class families buy homes to helping mortgage bankers and lenders make money, why am I surprised? Sick. Just sick.

More December, 2007 Quick DataQuick Data for Marin

2008-01-24T21:51:00.000-08:00

More December, 2007 data from DataQuick:

"Just a Horrible, Normal Cycle"

2008-01-23T18:10:00.000-08:00

Update 01/27/08: Added DataQuick's bar chart of defaults.

Well, by now you are probably all aware that DataQuick has their foreclosure data out for the Golden State. Needless to say, foreclosures for 2007Q4 are way up over 2006Q4. Here's DataQuick's chart of NODs:

Marin NODs are up 122% which is not the lowest for the Bay Area. That must be a mistake because we all know that Marin is immune, everyone here is rich and financially savvy, we are only two hours from skiing, and you can wear your shorts in the winter.

And what's this? The increase in NODs for the Bay Area is greater than that "armpit", SoCal? Anathema! That must be a mistake too.

Here is what the Marin IJ had to say (emphasis mine):

Home foreclosures quadrupled in Marin in 2007, reaching record levels, and will continue to rise this year, it was reported Tuesday.

Last year, a record 133 foreclosures were reported, up from 29 in 2006, according to La Jolla-based DataQuick Information Systems. Last year's total was the highest since DataQuick began tracking foreclosure figures in 1988.

The number of default notices issued - the beginning of the foreclosure process - climbed in 2007 to 632. In 1992, a record 645 notices were issued.

"It shows that Marin is not immune from these larger forces out there,"said DataQuick analyst Andrew LePage... "Marin has grown less than most counties, so it actually means a little more to be back at record levels," LePage said. "Counties like Contra Costa and Riverside have grown tremendously, so you would expect more."

And then:

In Marin, the median price peaked in June at $1.12 million but has dropped to $836,000.

"I think even this county is being affected by the slowdown in the housing industry," said Jim Chapman of First Security Loan in San Rafael. "I'm not sure this isn't just a horrible, normal cycle."

Did the IJ just say that prices are down 25% in Marin? Well, most of that is seasonal I suppose.

And "just a horrible, normal cycle"? You're kidding, right? If you want to see just how horrible and not normal this cycle is, trek on over to Calculated Risk and feast your eyes upon this graphic. That aint normal.

And what are some home "owners" doing in response to the inevitable consequences of this horrible, not-so-normal cycle? Why, they are suing real estate agents of course. (Marin agents, take note.) Not that I think they are suing the right people. But when did Boobus Americanus ever think straight? All that Boobus knows is that he is angry and someone else has got to pay for his stupid financial decision making. That's the American Way after all.

And I found this article somehow relevant. I guess what caught my eye was the line “Many previously considered ‘prime’ customers who took on 80+% LTVs are performing closer to sub-prime loans” Are we getting primed for the Alt-A bomb?

The private mortgage insurance industry is under severe pressure from rising delinquencies and mounting losses. Now questions are swirling about how a potential blow-up in that sector will affect Fannie Mae.

Fannie Mae… operates with the understanding that the insurers will pay it back. If one of these insurers takes a massive hit, then Fannie Mae’s underwriting standards may come under scrutiny, and the firm may be forced into buying fewer high-LTV mortgages in the future.

In a recent research note, CIBC analysts said the ‘highest losses will be driven by LTVs, not FICO scores.’ “Today, as a higher percentage of people own homes and many of them have taken on “too much house” or high LTV loans, things are different,” CIBC analyst Meredith Whitney wrote. “Many previously considered ‘prime’ customers who took on 80+% LTVs are performing closer to sub-prime loans.”

Remember back when people were justifying the housing bubble with "this time it's different", "we're special", "wealth creation technology", "financial dark matter", "fundamentals don't matter", etc? If any of that was true, if it wasn't just a ruse to disguise our own greed, then why are people losing their homes to foreclosure at an accelerating rate, why is the Fed in panic mode with an unprecedented 75 bp cut, why will the GSEs' conforming loan limits be raised to $650k, why is the Federal government going to mail out $600 checks to every tax paying citizen in the United States?

There is nothing normal about this cycle.

Riddle Me This

2008-01-20T22:31:00.000-08:00

Why is the real estate industry compensated for the value of the properties it sells and not the value of the service its agents provide?

Open Thread

2008-01-18T18:17:00.000-08:00

So I was at a Marin middle school today. The teacher in one class was lecturing to a classroom of mostly 13-year-olds. The topic was global warming and its anticipated effects -- loss of habitat, changing weather patterns, flooding, extinction of polar bears and other creatures, human diaspora, famine, disease, etc.

One of the students raised her hand and, after being called on, said "So your generation caused the problem and my generation has to deal with it?" The teacher was dumbstruck. God bless the honesty of children.

Needless to say my mind immediately started enumerating all the ways the generation currently in power has encouraged courses of action, laws, and policies that allow them to reap huge benefits/profits now, with little to no immediate cost to themselves, while passing the burden on to our children and our children's children.

How will the baby boomers be remembered?

This is my first "open thread". Talk about what you want.

December, 2007

2008-01-17T18:54:00.000-08:00

Ok, so I am going to break my self-imposed rule (ok, guideline really) and comment on DataQuick's latest because, well, frankly, it's been a while since we've seen negative price changes in Marin. And besides, judging by the off-topic meanderings of the comment thread in that last post, I desperately need an excuse for a new post...

According to DataQuick, it appears that Marin and SFO have joined the rest of the Bay Area with not just hefty sales declines, but price declines as well in December, 2007:

Now, we've seen negative price "appreciation" in Marin before from DataQuick (e.g., here, here, here, and here). So it is presumptuous to get worked up over this. If a pattern forms, well, then all bets are off of course. But I will note that this is the largest single month year-over-year decline in Marin prices from DataQuick that I've seen since I started paying attention to their data.

I found this quote from DataQuick's press release interesting (to say the least):

"There's been a significant drop-off in home financing with so-called "jumbo" mortgages. Because homes are expensive in the Bay Area, this has had a much greater effect on the market there. It looks like most non-essential buying and selling activity has been put on hold until things settle down," said Marshall Prentice, DataQuick president.

Until things "settle down"? You're kidding, right?

And then...

The typical monthly mortgage payment that Bay Area buyers committed themselves to paying was $2,756 last month, down from $2,963 the previous month, and down from $2,828 a year ago. Adjusted for inflation, current payments are 5.5 percent above typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 16.9 percent below the current cycle's peak in June last year.

How can this be bad? People paying less, I mean. And the "typical" monthly payment is only 5.5% above that of Spring, 1989?! WTF is that? Eighteen years of (under reported) inflation and we are up only 5.5%?

Foreclosure activity is at record levels...

You don't say?

So what about sales? Below is a graph of the number of sales in Marin County for each month of December since 1994 (source: DataQuick archives):

Kinda reminds me of this:

So anyway, yes, that's right; December, 2007 Marin sales were the lowest they have ever been since DataQuick started collecting data.

Here is the historical view of the Marin Heat Index measuring sales activity (annotations are mine):

And what did the Marin IJ have to say... I don't care.

Ok, now it's your turn. What does it all mean? Or does it mean anything at all? Leave your comments at your leisure.

Sellers' Expectations

2008-01-11T13:43:00.000-08:00

How true it is. And in Marin? Lots of sellers still asking, no expecting, no feeling entitled to prices from a year or two ago (emphasis mine):

During the recent boom, new housing got an even bigger price bump than existing ones because people often wanted the best, and, with a Icarian faith in the market’s eternal flight, buyers were willing to pay more and more to get the best. Now, with the downturn in the market, developers have scrambled to respond. The result? Some experts say that the price of a new house is now cheaper than an equivalent existing house.

“I think that’s true," says Joseph Perkins, president and chief executive officer of the Home Builders Association of Northern California. "New housing is a better deal for prospective home buyers because builders are responsive to the marketplace, whereas some sellers still haven’t responded to the marketplace and they’re trying to sell their homes for prices from two years ago...”

It was fairly clear as much as a year ago that the unwinding of the housing bubble would lead to recession. Never mind what the perma-bulls thought/said. Fast-forward to the present day: the housing bubble is unwinding around us and guess what? Merrill Lynch and Goldman Sachs are now on record as stating the obvious -- that we are heading to or maybe even currently in a recession. I guess not being an economist or paid to have a particular point of view is a good thing.

So I ask you: Say you are a renter who is looking to buy a house in the Bay Area or maybe you are relocating to the Bay Area (my advice: turn around and go back), would it be wise to "buy" a Marin cottage which is asking a price from year or two ago (say, around $900k) realizing that you might lose your job in the foreseeable future? Or what about buying the median $650K house in the Bay Area? Or is it wiser to rent for 1/3-1/2 the cost of "owning" (not to mention the freedom to move easily from a rental in the event of job loss) and waiting? Or does the ingrained sense of RE entitlement that so plagues the Bay Area short-circuit any such financial reasoning?

And assuming a recession leads to a serious decline in the stock markets (seems like a sure bet to me, but what do I know?), will that lead to a disproportionate number of job losses in cities like SFO and NY where investment-related business is so prevalent?

So what's a seller to do? Pull the listing and hope it all goes away by next Spring?

Money For Nothing

2008-01-08T18:42:00.000-08:00

I found this video over at the most excellent The Mess That Greenspan Made blog. Because the video has such great potential to educate and the blogger does not add anything new to the topic, I thought it was well worth cross-posting.

It is lengthy (about 50 minutes); the first few seconds are blank so be patient and wait for the video to start.

After watching it, you can then understand why it is that savers and restrained consumers are so despised (and punished) in America today.

And consider these quotes from the video and the power they imply for us peons:

"The people who actually produce all the real wealth in the world are in debt to those who merely lend out the money that represents the wealth."

"If there is no debt there'd be no money."

'If all debts were paid off, then there would be no money at all and it would destroy the financial system and the country.'

Some November, 2007 Data

2008-01-06T22:47:00.001-08:00

The following is November, 2007 data that was sent to me by a Marin RE agent. I added the columns in red since for some reason that I cannot fathom they were missing from the original. I'm sure it was just an oversight on her part.

(Click on image for larger view)

Awakening From My Slacker Slumber?

2008-01-03T13:43:00.000-08:00

The Implode-o-Meter suit has been settled and has been dismissed. The last paragraph of the statement made by the Implode-o-Meter's author re-inspired me somewhat:

We feel that the outcome of this suit represents only a partial victory for bloggers and internet-based public forums in general. The judge in our suit did agree that the site was indeed fundamentally focused on an important topic of public discourse. However, almost incomprehensibly to us, he did not dismiss the suit in line with the letter and intent of the CDA (section 230) and California's "anti-SLAPP" law. We strongly believe this was a grave mistake.

As is made clear by the costs we faced in the suit, providing a forum for whistleblowing and debate on critical contemporary issues remains a risky and expensive proposition. It is virtually "death upon challenge" for any individual or small-scale operation. It is thus unclear to us why anyone would ever get involved in such an enterprise if they truly understood the peril they were placing themselves in. We certainly would not have, if we knew then what we know now.

At a time when the internet's promise of lower communication barriers for average citizens is becoming a reality, the legal system remains the greatest threat to the public's receiving the benefit of this gift. Now, more than ever, we need to provide mechanisms which enable regular people to organize and fight back against entrenched corporate and government interests which have deeply corrupted our economy and society. This starts with, and relies centrally upon grassroots communication. So-called anti-SLAPP laws, such as California's law that we attempted to invoke, seem to be more of a fig leaf put out by these interests rather than a genuine attempt at reform. Sadly, this seems to be the state of affairs across the country, and the entire country is worse-off for it.

* * *

Someone over at the Sonoma Bubble blog left a comment that lamented my taking yet another break from blogging and stated that I have a responsibility to continue blogging. Responsibility? I beg to differ. But I understand the sentiment. The fact is that now that the housing bubble is widely recognized to have been just that, the bubble as manifested here and elsewhere has lost much of its interest for me. In fact, I've barley kept up with the news vis the housing bubble these last couple of months. This bubble blog was a lot more fun when the existence of the bubble was hotly debated.

So I am not sure what to do with this blog. I've asked for help from readers but have received no commitments. I suppose I could shift gears and start focusing on the real estate industry itself as it is sorely in need of reform and frankly the NAR and its lobbying power should be outright destroyed. But perhaps they will self-reform (yeah, sure): One thing I found potentially inspiring was this statement from the owner of Marin's Vision RE newsletter:

I have not calculated the average days on market for this summary for one reason and one reason alone. The average days on market (DOM) per the Marin Multiple Listing Service (BAREIS) is NOT calculated correctly. It does not take into account a property that has been on the market with multiple brokers and those that have been removed for 30 days and then relisted. Once this is done it starts the days on market to ZERO. I will be doing an individual report on the actual DOM per community but it is very time intensive as the only way to accurately calculate the number is to look at the property history on each individual property. Since we have 659 single family homes on the market that will take a while. I promise to get you that information for the yearend report.

You mean like these Marin POSs? That one shack in Mill Valley has been trying to sell since at least mid-December, 2005 (currently also trying to rent) but because these flippers (they first tried selling five months after purchasing) are unwilling to drop the price to what the market says its worth and instead are listing for what they owe on the dump, it can't sell and it doesn't rent and so they bleed cash month after month. Great Marin investment guys.

So Vision RE is going to start reporting more realistic DOMs. If so, kudos to them. Is it possible that perhaps, just maybe, this and other similar blogs are having some effect? I mean I know I've ranted on more than one occasion about the bogus nature of the DOM statistic as commonly calculated. Can the real estate industry be reformed? It so badly needs it. One can only hope. Next stop for them is to make it clear that the bottom has fallen out here in Marin and current statistics are dominated by sales in the upper end. Furthermore, they should be making it clear that the paltry number of sales (140 or so in November, 2007) in Marin make the county statistics next to useless (and forget about being able to conclude anything based on statistics calculated for any individual town... yeah, only one house sold in Belvedere and it sold for $2 mill and Vision RE reports the town average/median is $2 mill? Give me a friggin' break already. See the problem folks? You cannot calculate meaningful statistics on a small sample size and expect to be able to generalize it to the entire population. You just can't. But that won't stop salesmen from trying).

But I digress...

Anyway, I turned comments back on so let me know what you think. Should this blog continue? What should we talk about? The bubble is old news now. Or has everyone given up on this blog in disgust with its blogger?

Because I am so very busy with work and family matters, I am more pressed for time now than I was before so please do not hesitate to email me content and let me know if you want to be acknowledged or not for said content.

PS - Please take note of the Terms of Use I added to the end of the page. I wrote it myself and because I am no lawyer I am not sure if it matters in a legal sense. If there are any lawyer readers out there who would be willing to write something better for me free-of-charge I would be most sincerely grateful.

Quote

2007-12-27T21:25:00.000-08:00

"What can be added to the happiness of a man
who is in health, out of debt, and has a clear conscience?"

- Adam Smith, 1763

A Chronology for Those with Short Attention Spans

2007-12-25T13:31:00.000-08:00

Source: NY Times (original pic here):

(Click on image for larger view)

Somewhere A Crocodile Sheds a Tear

2007-12-17T13:41:00.000-08:00

From today's SF Chronicle:

Israel Medina admits he got too gung ho about the idea of getting rich by flipping Bay Area real estate. Medina...has seen not one, but 11, of his Northern California properties move into foreclosure in the past year. "I was a real estate tycoon; I had everything," said Medina. "Now I have nothing."

These real estate gamblers are hardly the struggling home buyers often portrayed as victims of the Bay Area's and nation's foreclosure crisis. Some bought houses as often as other people buy shoes, rarely putting down any money. More than one-fifth of 6,557 Bay Area properties that fell into foreclosure from January through September this year were owned by investors, according to a Chronicle analysis of public records compiled by DataQuick Information Systems. Of properties repossessed by lenders, 1 in 6 had been owned by people who had two or more foreclosures in their names. Eighteen Bay Area investors had five or more foreclosures.

Easy money through no-questions-asked subprime mortgages allowed almost anyone to become a real estate speculator. The flood of investors and first-time home buyers into the market helped to fuel the Bay Area's double-digit price appreciation in recent years.

A Marin resident [Rose Hodges] invested $1 million in four properties that a construction company owner told her he would fix up and flip; she lost all the money, her good credit and her own home. [Hodges] said she attended Marin investment clubs and met many people like herself who wanted to learn how to invest in real estate. "All these Baby Boomers started inheriting money from their parents and looking for ways to invest it. And the real estate market was booming," said Hodges, who learned the hard way that such investments can have a big downside. "It's crazy out there and people ought to know."

It's widely known that get-rich-quick real estate speculators flooded markets such as Las Vegas or Miami over the past few years. The Bay Area was presumed to have been relatively free of speculation because real estate here is so expensive... Why would investors buy multiple properties in a pricey market where their carrying costs - mortgage payments, taxes, insurance - would certainly eclipse the potential rents? Flipping and fraud appear to be the primary motives.

"It was a really, really bad investment," said Medina, who said he lost hundreds of thousands of dollars of his own money that he had invested in the homes. "I should have bought fewer homes. I never should have gone so crazy."

Too bad these speculators didn't lose more of their own money. Too bad the rest of us have to also pay the price of their greed. Too bad Hodges didn't read (or didn't outright dismiss) this and other such blogs. Too bad the real estate industry is a propagandist cartel. Too bad the Bay Area really isn't "special" vis-à-vis real estate; too bad it isn't "different here". Too bad so many people believed the commission-based lies, manipulations, and fear-mongering of local realtors/agents.

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

2007-11-06T12:58:00.000-08:00

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?).

A Real Estate "Titan" Comes Clean

2007-11-05T17:47:00.000-08:00

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?

More Marin Foreclosures

2007-11-04T21:05:00.000-08:00

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

2007-11-04T10:52:00.000-08:00

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?

Lies, All Lies

2007-11-01T15:09:00.000-07:00

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.

Boo!

2007-10-31T00:38:00.001-07:00

'It's Just a Flesh Wound'

2007-10-29T14:03:00.000-07:00

The extraordinary level of housing denial documented here in Marin has attracted the attention of at least one SoCal blogger.

Again, why do I even bother? It's fanaticism, plain and simple.

Third Date

2007-10-28T13:59:00.000-07:00

Bond-based funding of what we want now but can't afford, Prop 13, the housing bubble, a debt-based economy, housing prices that are only ever allowed to go up... is this what our children have to look forward to?

Better Start Stockpiling the Kool Aid

2007-10-26T19:32:00.001-07:00

Let's see. Home owners in Marin are getting their property re-assessed at a record rate so as to lower their property taxes (when was the last time you could do that?). Foreclosures and defaults in Marin are "spiking" even in our strongest and most "immune" market of Tib\Bel. Price drops and ridiculously long days-on-market statistics are common. Sales are the lowest they've been in the last 12 years. The housing markets are getting "exponentially worse"; the current down-turn is already worse than it was in the 1990s (oh, but we are only just getting started...and don't forget that the economy is doing just dandy according to the official spinmeisters; my realtor said so!). And did you notice? A real estate agency cannot hide a disturbing fact: the median sales price and the average have diverged, at the very least confirming what we here have known for many, many moons:

What could it all mean?

And what about this:

And here is a glimpse into your housing future and that you have no doubt already seen somewhere else on the net:

Why do I even bother?

"These aren't the droids you're looking for... move along."

Sick

2007-10-22T22:24:00.000-07:00

A reader sent me this:

"Roger guesses the house is worth 10 percent less than it cost to build--and he's worried its fall has just begun. "I have personal angst," Elliott says. "Yes, I built this fantastic house. My wife loves it. Everybody in the neighborhood thinks it's great." But it was a house built for appreciation. Now that prices are falling, he wishes he'd built something far more modest."

story: http://www.newsweek.com/id/52608/

And, check out this journalist following her house price like a stock:

This summer New York Times columnist Michelle Slatalla described how she had begun checking the value of her Bay Area home (using sites like Zillow and Cyberhome) every few hours. In a recent two-month period, the Web suggested her home had lost $92,248 in value. "I really, really need every tiny bit of information I can get about managing my biggest investment,"

Sick. Just sick. Houses are places to live and raise a family, not investments, not to be treated like stocks, or at least they shouldn't be. I know I am naive. But I feel terrible for all the people who just wanted a decent place to call home, a place to raise the kids, and yet who have been priced out and/or over-extended with crushing debt due to the aggregate behavior of these sick, greedy specuvestors. This is why investment in houses should be curtailed in my naive point of view.

DOJ vs. the NAR Moving Right Along

2007-10-21T14:16:00.001-07:00

I blogged this before. But oh, God! I am beaming from ear to ear. When I saw this mentioned over at Keith's blog I couldn't help myself. The US Department of Justice (DOJ) investigation of the National Association of Realtors (NAR), vis-à-vis their anti-competitive, monopolistic control over the MLS, is moving along quite nicely. Here's the anti-trust complaint (pdf). You can find a list of links with the NAR's asinine rebuttal over at the realtor.org site.

In my opinion, any and all listings should be equally available to every prospective buyer whether they use an agent or not, whether they use the internet to search or not. Ownership of such a listing should not be claimed by anyone. The bulk of the realtor's argument seems to center around the idea that the MLS consists of their (the realtor's/agent's) listings and as such they should have the right to control who has access to their listings. I think it is about time that realtors/agents remind themselves of who it is that they actually work for. If I was a seller I would want to be 100% confident that my listing is fully available to everyone and not just a network of traditional agents.

Like one agent said:

[the] NAR better be careful and change its curmudgeonly ways or it will be thwarted and become even more irrelevant than it already is.

So the lying, manipulating, unethical, lobbying, monopolist, commissioned scum at the NAR are going to get their due. And I hope it trickles down to every agent in America. The closer we get to returning the RE market to an open and free market, the better.

Here's to Your Depreciating Pied-à-Terre

2007-10-20T12:36:00.000-07:00

DataQuick's September, 2007 Results

2007-10-18T19:39:00.000-07:00

By now those of you who care already know just how bad the sales results were for Marin for September, 2007 according to DataQuick. If not, you can see their chart here.

And in case you don't appreciate just how anemic sales were this past September, I refer you to the following chart of DataQuick sales data for all Septembers in Marin since the go-go, heady days of 1995:

You can see from the above chart that September sales in Marin peaked in 2003, held steady until 2005, and then fell off a cliff. In fact, sales this past September were the lowest they have ever been since DataQuick started reporting data. And we are only just getting started with this bubble blow-off...

What happened in 1998 you might ask? Good question. I have no idea. That data is missing from DataQuick's site and the WayBack machine didn't have it cached either. So I guess September, 1998 never existed although I seem to distinctly remember it.

What Rob Dawg said:

Another thing for potential sellers to consider. This isn't polite and it isn't easy to hear and it isn't good news. It is almost a sure thing that the buying person and their agent are smarter than you and your sales agent. All the stupid people already have houses. Any stupid people left houseless or just not stupid merely newly in the market to buy are not going to be qualified buyers for a long long time.

These are hard truths. If you as a seller today knew then what you know now you would have sold in Spring '06 right? Okay, you accept that you aren't the smartest guy in the room. Now, anybody who can buy today was certainly able to buy in Spring '06 right? See the problem? The only way you can sell to the people who are buying now is to give them a deal that is homage to their skills.

But, But...

2007-10-16T19:17:00.000-07:00

This quote from a recent SF Chronicle article is just too good to pass up:

But even in expensive areas like Marin County the crisis is beginning to be felt. One of the Bay Area's highest-priced ZIP codes, 94920, in the tony Belvedere/Tiburon area, was home to nine foreclosures - including a $1.3 million "Bel-Aire tract home" with "floor-to-ceiling windows ... and French doors leading to the pool."

In "tony Belvedere/Tiburon" I count at present:

1 bankruptcy
7 preforeclosures
7 foreclosures
55 tax liens

I thought this couldn't happen in Marin, certainly not in south Marin, because, as we are told, everyone here is wealthy and making big bank. You know, because we are so wealthy we don't need to take risky mortgages. But Belvedere/Tiburon? One of the most excusive if not the most exclusive and strongest real estate market in Marin? Say it isn't so! If the local real estate mythology is true, if my realtor/agent says so, if she researched it, how can there be any distress there at all?

Bel/Tib: you are not part of Marin 2.0. So sorry.

A Couple of My Favorite Marin 1.0 Houses

2007-10-13T12:04:00.000-07:00

I love watching the "selling" activity of the above San Rafael house. The highest official listing price I have seen for this house was $884,000 in mid-2006 (yes, it's real DOM is that long). So if it were to sell at its current asking price that would be a price reduction of 33%. However, I am fairly confident that at the bubble peak this house could have sold in the low $900Ks and so the true price drop is probably greater than 33%.

* * *

And by the way, this lame 2 br, 1 ba, 699 sq ft, built 1923 POS in Mill Valley has changed listing agents once again and is now listed as "For Sale with Lease Option" (click the link to see the posting history of this house on this blog). This one is a classic Marin flip that flopped -- bought, remodeled, and then put back on the market all within a 5 month span. It is currently listed at $575,000 and it's DOM has been reset to just 4 days. So that is a 23% drop in asking price and a real DOM of about 660 days.

When I first came across this listing on December 18, 2005 the sellers were asking $745,000 or $1066/ft^2. Many price drops later it then languished on the market (seemingly forever) at about $639,000 which is roughly the owner's break-even point (about what they owe; I dug up their loan info). So I wonder what has changed to allow them to drop the price significantly below their debt level? Are they now in the process of capitulation? Or do they think the "lease option" significantly changes the financial situation for them? Would you buy or lease this house at its current wishing price?

This house is in one of the worst locations in south Marin -- it's in Tam Junction, right across the street from a 7-11. Every winter a large pool of water forms in front of the one car garage which can only be accessed by driving around the block on the other side of Shoreline Hwy and then crossing over Shoreline so as to achieve the proper angle to enter the garage. Furthermore, when leaving the garage you then have to back out on to Shoreline and pray you don't get hit by a maniac speeding down the road. Given this, the garage is really nothing more than a storage shed; I guess you can always park at the 7-11.

The sad fact is that during the bubble people really were willing to pay stupid prices for crappy houses like this one. It is somewhat comforting to know that mindset has changed, even in south Marin.

* * *

Many of Marin's housing markets are suffering and houses are in the process of being "marked to market". Since people who like to believe that the real Marin is special and immune to market forces ("marked to myth" as Warren Buffett recently said), I think it is time to divide Marin up into "Marin 1.0" and "Marin 2.0" (obviously, I'm referring to the farcical "Web 2.0/God-let-there-be-another-internet-bubble"). Most of Marin is now or on its way to becoming Marin 1.0. But places like Tiburon/Belvedere, south Sausalito, certain parts of Mill Valley, Ross and Kentfield are still doing pretty well and so are properly classified as Marin 2.0. Or perhaps it is simply sufficient to say that the luxury home market, regardless of its actual location, is Marin 2.0 and everything else is not. What do you think?

Cows to the Slaughter

2007-10-12T14:03:00.001-07:00

The SF Chronicle ran this story in today's business section about the tripling of Bay Area foreclosures:

Foreclosure filings across the United States nearly doubled last month compared with September 2006...

Foreclosure filings in the Bay Area tripled in September compared with a year ago.

The data for the following chart came from the Chronicle's graphic for the above mentioned article; I just added some info:

(Click on the image to get a larger view.)

You might think that a tripling of foreclosures is big news. What did the Marin IJ run on the front page of their web site today? Why, an article entitled "Here's the beef: Marin's best hamburgers".

* * *

Update 10-13-2007: I saw this in the Marin IJ today (a day late and a dollar short):
The number of foreclosures is rising in Marin, with defaults almost quadrupling in September over a year ago, but the number of properties in distress remains relatively small. The same isn’t true for counties like Alameda and Contra Costa, where the numbers are significant...

Valerie Castellana, president of the Marin Association of Realtors, said she expects to see increases in defaults and foreclosures in Marin but added, "We are blessed to have the default and foreclosure numbers so low compared to other Bay Area counties."
Uh, Valerie, according to the 2000 census Alameda has a population of about 1.4 million and Contra Costa is at roughly 950K; Marin's population is about 250K. So of course Alameda and Contra Costa's absolute numbers of NODs/foreclosures, etc. are higher than Marin's. That's why you look at rates of change, percentages, etc... to factor out population differences when comparing across counties. When you do that you find that Marin is really no different than any other Bay Area county, which of course is the point. (Also I should mention that what really matters when comparing is not the county population per se but the number of houses that are actually for sale in that county.)

What spinmeisters are Marin real estate agents/realtors and what a tool is the Marin IJ.

Some September, 2007 Data

2007-10-10T23:38:00.000-07:00

Insanely busy at work.

I recently received some data from a realtor acquaintance of mine. According to her, for SFRs in September, 2007:

Needless to say (so I'll say it anyway), a year ago and more the percentage of SFRs selling below the asking price was essentially 0%.

Marin Market Heat Index stuck at a pathetic 0.33.

Recall that the Index is interpreted as so:

Home Owner Temper Tantrum

2007-10-06T15:27:00.000-07:00

I first saw this Inside Bay Area article over at Ben's blog and was aghast at how spoiled and entitled some home owners are; it reminds me so much of the motivations behind much of Marin's NIMBYist ways -- to protect property values at any and all costs.

Apparently, some Greater Fools who bought houses in a prestigious housing complex are staging protests against the developer and demanding that the developer pay each of the current owners a $20,000 rebate. Why? Because the developer is unable to sell any more of the houses for bubblicious prices and so are auctioning them off for whatever price they can get. As a result of the auction, the current owners expect the values of their houses to drop by "hundreds of thousands of dollars."

So in other words, the people who already bought these overpriced luxury homes expect, no, demand that prices can only go up and if they don't go up, then they were "obviously" misled and so are victims and thus entitled to compensation. Give me a break!

For perhaps the first time ever, I am in agreement with a developer who in this case refuses to pay the rebates and reasons that if the houses had spiked in value before the current owners had finished escrow on their houses, would they be willing to pay the developer an additional fee to compensate the developer for the increase in values? No, of course not.

Look, if you leverage yourself to "buy" a house with any expectations at all on the future price movement of the property, if you even so much as care or make plans based on what the future price movements of the house will be, then you are an investor and/or a speculator. Investments are not guaranteed to appreciate; by investing you are taking on the responsibility of the inherent risk and implicitly acknowledge that risk the instant you sign the contract. Buyers are not obligated to bail you out of your expensive lifestyle choices, your debts, or your poor financial decisions.

Here are some choice quotes from the article:

Despite an initial setback, outraged homeowners in the upscale Paseo West subdivision plan to continue their informal protest against a developer planning to auction off 34 brand-new homes.

Upon learning of the auction, the subdivision's 26 owners became infuriated — upset that the auction would lower property values and turn the neighborhood into a rental community... The consensus from homeowners is that the auction will undercut property values by hundreds of thousands of dollars and that the current tight credit situation will mean only investors will participate in the auction, and would rent out the homes.

Following a meeting last Friday with Barton, homeowners crafted a letter asking Anderson Homes for a $20,000 per owner rebate for their property.

On Wednesday, homeowner Dave Cantrell — the de facto leader of the protest — received a response. In a letter via e-mail, Anderson Homes president andowner Larry W. Anderson said he was "perplexed" by the rebate request.

"In nearly 25 years of building homes, I have not asked a homeowner to pay more for a house when the value increased," he wrote. "Housing is cyclical and values will fluctuate as history tells us. Housing has been hit especially hard this cycle due to the financial market crisis and large number of foreclosures."

Owners Face Selling at a "Loss" Now that the Housing Bubble has Burst

2007-10-02T18:46:00.001-07:00

Nothing but boring and utterly predictable news in the world of housing these days. Hence, no posts. So I guess I have to post this, now old, article from the SF Chronicle.

These poor saps buy a house in American Canyon, in south Napa, for $424,000 and find that they cannot sell now for their wishing price of $925,000. So they have to "sell for a loss" at $868,000. Sheesh! I'm sorry, but selling for $444,000 above your original purchase price is hardly selling for a "loss". Now, they did put in "upgrades" but I seriously doubt said upgrades totaled anywhere near the $444K. Of course, like idiots they could have also HELOCed out their phantom equity and so may in fact be SOL.

At least the article mentions the fact that, with the possible exception of during the unusual years of the housing bubble, you don't normally get back in the sale price what you paid out for upgrades... a point that most sellers would do well to remember:

The trouble is, upgrades for one family are renovations waiting to happen for another family..."Upgrades are very difficult to value," Barker said. "So much of what people do to their homes they won't get a return on."

I fully agree with this reader's comments on this ridiculous couple's situation:

What's amazing to me about this article is what it reveals about people's perception of a "loss." If you read the article, you learn the couple paid $424,000 in 2001, and now they're bracing themselves for a "loss" when they sell for $825K-$868K. The couple "declined to say" how much they spent on upgrades.

Either of the two ways they're defining this to be a "loss" is nonsensical. It seems like their perceived loss is the fact that, at best, they will be selling for $100K less than they could have sold a year ago. No loss there. As far as the upgrades, that's silly as well. If you spend money on maintaining a car, the amount of money spent is not simply added to the value of the car. Ditto for granite countertops, or most other expenditures on a home, other than those that add square footage.

It just boggles my mind. If people are whining about "losses" now, think how psychologically ill-prepared people will be when they face real losses, i.e., selling their home for less than they paid. We've got a long way to go.

Look, it's not going to get any better any time soon; only worse. There is no way a significant majority of people are going to pay (let alone be able to pay) the fantasy pricing we've "enjoyed" over the last few years now that easy credit is history. Not now, not when significant down payments, documented income, mortgage payments at 30% or so of income, etc. become the norm again. Hoping for the days of easy credit to return is just wishful thinking. And don't even get me started on the rising interest rates on mortgage loans. So deal with it. The sooner you do, the less your "loss". Or take your over priced POS off the market and give those who are serious about selling a break.

Or, you could be like the following Mill Valley sap who has been trying to sell his house for essentially two years (it's amazing that they never bothered to play the relist game and get that DOM reset; either they are very arrogant or very respectable). My guess, knowing a lot of South Mariners, is that they are arrogant and feel entitled to getting near that bubble peak price. It will be fun watching this house over the years:

Looking at that above house, it seems really nice. The write-up (not shown) certainly sounds wonderful (but don't they all?). You would think that this house would sell in a heartbeat as it's a South Marin wannabe's wet-dream-come-true. So what's wrong with it? Must be the price. But given that the sellers seem to be willing to knock $100K or so off the wishing price each year, it should be marked to market in, oh, about five years.

Clearly, we are still in the denial phase. Sad. So very sad.

Thanks to the reader for sending me the link to the Chronicle article (I had seen it before) and kicking my lazy arse back into blogging.

PS - By the way, I'll share an anecdote with you all. I was up at the Novato Target the other day (because I am too cheap to pay South Marin prices if I don't have to) and guess who I saw working at a cash register? A former Marin real estate agent acquaintance of mine. How sweet it is! I didn't have the heart to ask if she still had the leased Lexus.

What the Future Holds in Store

2007-09-25T20:40:00.000-07:00

Check this out over at the Seeking Alpha site.

Earlier this week, the Chicago Mercantile Exchange (CME) extended the futures market on the S&P Case-Shiller Home Prices Indexes from one to five years. Now, futures investors can make bets on where home prices will be as far out as 2011.

For all of you who think a 15-25% pullback in the real estate market can't happen, I suggest you take a look at the CME pricing Web site.

The market is new and illiquid, so price discovery may be imperfect. But futures traders are putting real money on a major pullback in real estate prices. The table below shows the estimated percentage change in real estate prices in 10 cities based on the most recent futures sale on the CME. The data starts with the November 2007 contract and runs annually through November 2011.

NAR Pushes for Increases in FRE and FNM Portfolio Caps

2007-09-23T21:00:00.001-07:00

Update: And make sure you read this. If the financial raping and pillaging of the American people doesn't inspire you to revolution, nothing will.

* * *

First the National Association of Realtors (NAR) pushed for exotic loans to keep prices rising. Then they redefined the way affordability is calculated so that housing looks more affordable than it really is. Then they demanded that the Fed lower interest rates. Then they backed the asinine Bush housing bail-out proposal. And now they are pushing for raising Freddie Mac's and Fannie Mae's portfolio caps:

After working overtime to initiate Bush's preposterous mortgage bailout, the NAR (National Association of Realtors) asked themselves what else they could do to artificially prop up overblown home prices. And then it hit them: why not ask the OFHEO (Office of Federal Housing Enterprise Oversight) to increase portfolio caps for Freddie Mac and Fannie Mae.

Under current caps, Freddie and Fannie can only buy mortgages valued at less than $417,000. Proposals are floating around to increase the size of the mortgages the two companies are allowed to buy and sell. Freddie and Fannie each hold more than $700 billion worth of mortgages in their respective investment portfolios already. The new proposals would allow the companies to expand their portfolios to dangerous proportions.

...In our demoralized world, we allow real estate agents to push a personal profit agenda and influence the decisions of policymakers. The NAR is not a trusted authority on banking and risk, yet they are allowed to personally address and pressure Congress and the Director of the OFHEO.

Does anyone else see something wrong with this picture?!

Although not unexpected, it still sickens me nonetheless. When will We The People take back America from special interests?

Write to your representatives. Get out on the street and make some noise.

Some Charts

2007-09-23T18:11:00.001-07:00

The Bureau of Economic Analysis updated some of their data (and revised some data points) so I decided to update one of my favorite charts in response.

Here is the average price of a Marin single family residence (SFR) divided by average per capita income for the years spanning 1969 to 2005. The data has been normalized to 1969.

Here is the same data as above except expressed as a percentage deviation from the base trend line (not shown).

Here is the average price of a Marin SFR in terms of the number of ounces of gold you could get in exchange for it for the years spanning 1969 to 2007 (the 2007 data point is based on today's spot price whereas all the others are the average for the year).