Thursday, August 31, 2006

Marin "Realtor"/Mortgage Broker Advocates Flipping

The twin suns of the Rigel Kentaurus system are truely lovely and I am getting tanned rather nicely as a result. As I was sipping a Kentaurian Mai-Tai and watching the youthful Kentaurian studs workout on the beach I decided to check out what was happening on my blog (not much). But I did find a comment by a reader of the Marin POS blog who found this Marin "realtor"/broker's (pictured at left) website and blog.

Thank you
reader because this is priceless.

Here is how he describes himself and his blog:
Welcome to personalized hands-on service for all of your Real Estate Buying, Selling and Financing needs. One call handles it all. I am both a Realtor and Mortgage Broker providing the best of both worlds with one point of contact, saving you time and money.

Born and raised in Marin County, I live with my wife, Laura, and two children in the house I personally built, utilizing hard work, preserverance and especially the creative mortgage management strategies I now advocate. I invite you to contact me anytime for real-world answers to your real estate questions. For excellent Home Loans and Realtor services in California...
Both "realtor" and mortgage broker all rolled into one package and who advocates "creative mortgage management". Hmmm...

Here are some of the loan types he advocates:
  • Hundreds of loan options to meet your individual needs.
  • Wholesale rates from top National Lenders.
  • Fast HARD MONEY loans for hard to finance properties.
  • The best High-Loan-To-Value Loans.
  • "No Income and No Asset" requirement loans.
  • Interest-Only and Cash-Flow Options.
  • No Money Down (100% financing)
  • Home Improvement/Remodel Loans.
  • Cash-out for Consolidation or Investments.
  • High LTV Construction Loans.
  • Cross-Collaterialization loans.
  • Loans for "Fixers" and First-time buyers.
  • Multiple Units & Income Properties.
  • Commercial & Apartment cash-flow management.
  • FREE Consultations and On-going Mortgage Management.
  • Here is what he says about this Marin POS I blogged about a while ago (underlining is mine):
    Here's a little dandy that just came on the market. $395,000 [Marinite: was $440,000 BTW] in a neighborhood of $800,000 to $1,000,000 homes. I'm sure the previous owners ran out of money and steam.... probably in that order. So, what does this picture tell us?: Hillside, no handrail, upsloping lot, possibly no garage or sidewalk. Color indicates 1950's original construction, probable knob and tube electrical. So, the hillside gives us the most concern: Hydrostatic pressure over the years plus originally crappy foundation will probably find this thing "racked" and un-square. I'm sure there is plenty of unfinished work. Therefore, without seeing it, I can already smell the must, mold and fresh cut doug fir. You'll need cash and hard money to finanace this. No traditional bank will touch it... hence, the price. This is where cash talks and experience gets the deal done. The right person can put $150,000 into this beaut and flip it back onto the market in 60 days for $800,000. And that's how we do it downtown. Got the experience, cash and moxy? Let's go see it.
    It sounds to me that he is advocating making some minor fixes and then flipping the house for roughly double the price. Whoever said there are no flippers in Marin?

    Anyway, after giving his website and blog a very extensive look-over I have come to a rather unflattering opinion but I must remain silent for fear of committing defamation. Share your thoughts.

    Ok, back to my tanning.

    Monday, August 28, 2006


    I'm going on a vacation for about a week. I'll be soaking up the rays on a beach in an archipelago on a small moon in the Rigil Kentaurus system. Housing affordability there is still around 80% as the yuppies haven't discovered it yet.

    Use this space to discuss bubble related issues if you want. Visit the excellent blogs listed in the right-hand margin.

    I'll leave you with this question: Given that house prices are flat to declining year-over-year, will new Bay Area buyers still be willing to spend 50-60% of their income on paying a mortgage? If so, why?

    Ok, one more thing then I'm outta here (yes, yes it should be logarithmic I'm sure [but inflation has been "factored out" so maybe not], but still...):

    Sunday, August 27, 2006

    Roubini Blog

    Check out this blog by the economist Nouriel Roubini. He is cut from the same cloth as Paul Krugman, Ed Leamer, Robert Shiller, and Jim Hamilton. The general theme of the blog seems to be to get past all the feel-good spin and BS that the main stream media, NAR, Fed, etc. feeds the slumbering populace.

    Friday, August 25, 2006

    Lereah Says "Hard Landing"

    Go check this post over at the Sacramento Land(ing) blog. Apparently, David Lereah (chief RE cheerleader for the National Association of know...'there is no bubble' Lereah, 'the market is like a ship' Lereah, 'it's a balloon not a bubble' Lereah, 'it'll be a soft-landing' Lereah, 'we've reached a permanently high plateau' Lereah) is now predicting a hard landing for those markets in California that achieved "nose-bleed" pricing levels.

    Hmm, judging by these POSs I'd say Marin is well lodged into "nose-bleed" territory.

    Lereah also said he expects prices to drop -5% nationally. That's huge and should be making front-page headlines as it will be the first time that has happened since the Great Depression.

    Update 08-26-2006:

    You can find Lereah's latest PowerPoint presentation here. To download the free PowerPoint Viewer, click here.

    For those of you who are not inclined to install the viewer, below are screen shots of the more interesting slides from Lereah's latest presentation (the Leadership Summit, Chicago presentation). Keep in mind that Lereah was talking about national trends. Notice that for the nation as a whole Lereah is still calling for a "soft landing" whereas for "nose-bleed" states like CA it's now a "hard landing".

    Click on any picture for a larger view:

    And don't you just love the bubbly backgrounds Lereah chose to use in the slides?

    NYT: San Rafael Seller Incentives

    People are getting so desperate to sell their obscenely overpriced houses that they have to offer all sorts of "incentives" to sell; anything but actually lowering the asking price to the point where it can sell in today's market. These sorts of "price reductions" never appear in official statistics (e.g., from the NAR, CAR, etc.) no doubt because it would take some effort to measure them and would make the real estate statistics look even worse than they already do.

    Previously these sorts of incentives only happened "over there"... in "armpit" locations (to use a common Marinism). You know, in Sacramento, San Diego (or Southern California in general), Vegas, etc. Never in Marin.

    I've already pointed out some instances where Marin sellers had to offer incentives (e.g., here, here, here, and who knows what else), but this one, featured front and center in The New York Times, has to take the cake:

    ...consider a three-bedroom house surrounded by oak and redwood trees, not far from the Golden Gate Bridge, in San Rafael, Calif. Reluctant to cut the price from its current listing of $1.54 million, its owners are instead offering a weeklong vacation time-share, every year for life, worth about $10,000, or an equal amount toward lease of a car.
    Apparently, one of the owners is being transferred to Atlanta and so there is some urgency to sell.

    With very little effort I was able to find this house listed at Here is a picture of it along with what the listing agent has to say:

    Constructed in 2004 in the exclusive baywood terrace estates. From the moment you step through the dramatic entryway onto the bamboo floors, the open floor plan will beacon you with luxury. The chefs kitchen and great room features custom cabinetry. The living room adjoins a cozy den, and adjacent deck and fireplace. All bedrooms are suites. A lower level family room opens on to a large deck and to the beautifully landscaped huge yard with spa.
    It's a nice house to be sure (I visited it when these houses were first made open to the public, but it's in a rather shabby area) but no mention of the vacation time-share for life thing in that write-up.

    The current owners purchased the house (new construction) on March 12, 2004 for $1,279,000. It's been on the market for 109 days. Here is the recent sales pricing history for this house:
    Price Reduced: 06/06/06 -- $1,695,000 to $1,649,000
    Price Reduced: 07/06/06 -- $1,649,000 to $1,625,000
    Price Reduced: 07/12/06 -- $1,625,000 to $1,575,000
    Price Reduced: 07/27/06 -- $1,575,000 to $1,535,000
    From the NYT article:
    But these discounts [incentives, e.g., time-shares, cars, etc.] are almost entirely missing from the statistics on new-home prices reported by the government and on existing-home prices reported by the National Association of Realtors. As a result, home prices may now be falling, despite what the official numbers show, many economists say.

    The use of rebates helps home builders and individual sellers by making the real estate market look healthier than it may truly be and by preventing a snowballing decline in home prices. It also keeps commissions for real estate agents higher than they would otherwise be.
    At some point these incentives won't work. Afterall, you are better off getting a price reduction, so as to lower the property tax you have to pay year after year after year, than these sorts of incentives.

    Let the "snowballing" begin. Here's how.

    Thursday, August 24, 2006

    Plausible Deniability

    Dear Reader,

    It seems the chess pieces are all moving into their defensive positions. So let's see if I got this right:
    1. The Department of Justice is dropping all charges against Fannie Mae for its accounting scandal. All it gets is the $400 million slap on the fannie. It seems that GSE is too big to fail. So the GSEs are shielded from a bubble collapse and thus they have implied plausible deniability. Check.

    2. The Fed has officially come out and denied that they had anything at all to do with the run-up in housing prices because 'prices are all based on sound fundamentals' they say. Loose lending standards, as enabled by the Fed, had nothing at all to do with the run-up in prices they say. Nope. Not us. No way. So the Fed has plausible deniability. Check.

    3. I'm sure the banking and lending institutions are shielded because they're also too big to fail; we learned about that one from the Great Depression. Check.

    4. And I bet, given their huge lobbying power, the National Association of Realtors and its minions are shielded as well. Check.
    So when the dust settles, guess who gets blamed? Who is left? Why, you get the blame of course. You, the home owner, gets blamed for 'taking out all those stupid loans, for paying stupid prices for your houses, for "buying" something that you could not really afford in the first place, for thinking you should have more than one house, and then for spending the equity that was never really yours'. That will be their justification for blaming you although maybe not in so many words.

    This just makes me so sick. I am so ashamed of America and its public servants. Whatever happened to accountability, responsibility, integrity, and the other basic lessons we learned in kindergarten? It makes me want to jump off the bridge.

    It was nice knowing you all.


    PS - You know, given how personal housing is to people (unlike stocks) and how hurt people could get by the collapse of this bubble, if there was anything that could dislodge Boobus Americanus out of his slumber and take up arms, I would think this would be it.

    Wednesday, August 23, 2006

    NPR Audio Files

    Here is National Public Radio's (NPR) August 23, 2006 Day to Day report "Marketplace Report: Housing 'Bubble' Popped?" (about four minutes long). In this one David Lereah (chief economist for the National Association of Realtors) actually blames sellers for the housing slowdown. And this too "New Home-Sales Data Confirms Market Slowdown" (about 3.5 minutes long). Lots of "we knew it all along; this was predicted" BS.

    Wow, David Lereah actually telling sellers they absolutely must lower the price of their houses even if it means taking a loss. The snowball has started rolling now and it's going to get bigger and bigger, faster and faster, and ultimately land with a big, fat, wet thud.

    Here is NPR's August 22, 2006 Talk of the Nation "Where Is the Housing Market Headed?" (long, about 45 minutes). The first two guest speakers are pretty much useless IMO and it doesn't get even remotely interesting until the last third. One point not to miss is the fact that places like the Bay Area ("glamour" areas) are particularly susceptible to boom/bust cycles.

    1. Lawrence Yun, senior economist with the National Association of Realtors

    2. Elizabeth Razzi, author of The Fearless Home Buyer: Razzi's Rules for Staying in Control of the Deal; real estate journalist

    3. Robert Shiller, author of Irrational Exuberance; professor of economics at Yale University

    If you want to skip the long program above, here is just one caller's (a Bay Area real estate broker's) comments about the local RE market as well as Robert Shiller's response.

    Final DataQuick Data for July, 2006

    Ok, I have to post this one.

    Here is the final tabulation of July, 2006's results according to DataQuick. Marin County's year-over-year "appreciation" was -6.61%. Napa and Sonoma counties came in at -1.32% and -1.82%, respectively. Adjust for inflation and it isn't pretty and not unexpected. I predict a cold winter this year, maybe even snow, then a "dead cat bounce" in spring, then final capitulation.

    Two Great Blogs 'n Stuff

    I'm really busy again. No time to blog. But check out these new blogs (well, one is new and one has been around and linked to over in the right hand margin for a while but I never pointed it out):
    This blog covers Bainbridge Island, WA -- "The point of this blog is to deflate the stuffy, provincial, self-congratulatory mystique that permeates Bainbridge Island. It also tracks the real estate bubble in the Westsound region, with a particular focus on Bainbridge Island." Sound familiar? They must be "special" too. Oh, and it's been invaded by Californian equity locusts so it ties in.

    This blog covers the Bay Area. Now I can retire.
    And go check out the quotes that can be found in some of the latest posts over at the Ben Jones blog. Priceless. This goose is so cooked.

    Oh, yeah, and the Fed isn't done raising interest rates. Did you really think they were?

    Monday, August 21, 2006

    History Lesson

    It's time for a history lesson. I originally posted this listing of news headlines almost a year ago and I've noticed that lately it's been making the rounds over at Ben's place. Where are we today? Seems like the later part of 1989.

    No 'Soft Landing' or 'Permanently High Plateau' for Australia

    The real estate market in Australia is very similar to ours. They have had the relaxed lending standards, low interest rates, "toxic" loans, flippers, "specuvestors", the "real estate only goes up; everyone wants to live here; we're special; it will be a soft landing; we are at a permanently high plateau" wishful thinking that we have been dealing with here. Despite all of that housing prices in parts of Australia are collapsing by more than 40% in some cases.

    Some choice quotes:
    A three bedroom house in St Clair sold for just $260,000 at the weekend, down about 42 per cent from its last sale at $450,000 in 2003...

    ...a townhouse that sold for $257,000 in 2003 was resold by mortgagees for $156,500, reflecting a roughly 40 per cent fall.

    ...a four-bedroom house that sold for $330,000 in 2003 resold at $255,000 in another mortgagee sale. Four of the seven registered buyers put in bids before the... house sold at an approximate 22 per cent discount to the property-boom price.

    Auction clearance rates are hovering around 48 per cent since the recent interest rate rise, but plummeting property prices have meant many vendors are confronting negative equity, where they owe more on the property than it is worth.

    The Herald checked 16 properties in south-western and western suburbs listed at the weekend and found 60 per cent had prices or had attracted offers at a discount to their last sale price.

    Given it has been 16 years since the last recession, long-time estate agents fear the fate of a generation of owners who had not experienced having a loan when times were tough. St Marys agent, Michael Beatty said: ‘There was a wave of people punting on the expectation of constant price rises until well into 2004, even after the three interest rate rises of late 2003. There has been significant price deflation and many now have negative equity in their homes.’
    Update: as mentioned by Shiller in the longer audio file of this post, Australia is supposed to be a case study for what is going to happen to us!

    Sunday, August 20, 2006

    "Greedy Investors Who Have Taken Hostage the Prices of American Homes for the Average American Family"

    I found this quote in the comment section of this blog:
    It occurs to me that the U.S. should put similar restrictions in place as China and South Korea [to prevent foreign investment in US houses].

    Not only do such restrictions help avoid bubbles that are troublesome to the economy, but they keep at bay greedy investors who have taken hostage the prices of American homes for the average American family.

    How many American families are dangerously in debt, bankrupt, or cramped in apartments, all because of an artificially high-priced home market, thanks to greedy real estate investors? Meanwhile, countless of homes in Phoenix, and around the country, sit empty….

    I for one will not shed a single tear for those real estate “investors”, those that have chosen to buy a second, third, fourth home and helped inflate prices artificially (to the detriment of the average American family)… I will not shed a tear for those that lose their shirts in the coming bubble meltdown. They deserve it.
    It strikes at the crux of the matter for me. The phrase "greedy investors who have taken hostage the prices of American homes for the average American family" sums it up pretty well. Yes, how many American families who normally could have afforded a house to raise their children in are now forced to live in an apartment because of the actions of greedy housing "investors" who have purchased two or more houses that they don't really need?

    The only solution that I can see is to prevent speculation in housing or at least make it extremely difficult. There are certain asset classes that should be exempt from speculation and housing is one.

    Tiny Houses - A Natural Consequence of Overpriced Housing

    Years from now each of us will look back at this extraordinary period of history and reflect on how we behaved during it and the things we said. Some will be laughing at themselves for their denial, their cognitive dissonance, and for just thinking that there was no bubble and that it was all justifiable even if the most lame of intangibility-based arguments had to be made. (Fortunately this and other blogs are here to record some of it.) But no one will be surprised by these tiny houses and how they were a tragically sad reaction by some people to the insanity of house prices of today and the utter corruption of our monetary policy makers who made it all possible. My thanks to the reader who sent me the link.

    Saturday, August 19, 2006

    It's Time for a Buyer's Revolution

    Do you want to see this housing bubble come to an end sooner rather than later? So does Catherine Hockmuth of the Voice of San Diego. She is calling for an outright revolution to be carried out by potential buyers. Play "low-ball" she says. I agree.

    Here's how:

    1. First, realize that you buyers have the money and so the power. Furthermore, realize that the fearmongering of the real estate industry -- "buy now or be priced out forever" -- is history and is being proven incorrect every day now. Real estate agents know this and so want you to believe that it is a buyer's market (wrong: it's a "waiter's market"...the longer you wait, the cheaper you will get the house) and that there is "never a better time to buy" (wrong: it is always better to buy at reduced prices if for no other reason than the property tax you have to cough up year after year will be less). No, what they really mean is that it is always a good time for them for you to buy now.

    2. Figure out how much that Marin house you are interested in cost five years ago when Marin was just as special as it is now, when the sky over Marin was just as blue, the beach was just as close, people wanted to live here just as much as now, the constraints of "no more land" was just as constraining as now, the weather was just as nice as it is now, the intangibles were just as intangible, and incomes were about what they are now.

    3. Adjust that price from five years ago by +25% to take into account five years of inflation. Add another 2% for good measure. The result is how much you should pay for that house, no more, no less.

    4. Don't worry about angry or so-called "insulted" sellers or even an embarrassed agent. Who cares? There are plenty of other agents to choose from (and they are getting hungrier). And with today's inventory there are plenty of other options. And don't fall for the old tear-jerker "Oh, but I can't sell for less than this because otherwise I take a loss". Too bad. It's not your, the buyer's, fault that the seller overpaid. Why should you make the same mistake now? This is business after all; it's not personal. Or maybe the seller HELOCed out most or all of their equity and so cannot sell for less. Again, too bad. Why should you the buyer pay for their "lifestyle choices", pay for the things that they bought with that unrealized equity?

    Some choice quotes:
    But I didn't write this column to analyze how much every home in San Diego would cost in monthly payments if buyers agreed to pay the ridiculous prices sellers are slapping on their homes. And slap is the most accurate term to apply to a market in which sellers routinely list homes with $100,000 price ranges.

    What further evidence do we need that pricing is purely arbitrary?

    Take a look around your own neighborhood and you'll likely find numerous comparable homes listed at wildly disparate prices even after upgrades have been factored into the equation.

    Why are prices so arbitrary? Because the real estate market is so uncertain that sellers have no idea what their property is worth.

    So you tell them.

    If this is indeed a buyer's market why are buyers standing on the sidewalks anxiously hoping for a fire sale? Were investors passive about driving up prices in the first place? No, they were sharks who changed the market for everyone by marching up to the front doors of homes that weren't even for sale and throwing cash around.

    So stop being passive. Be a shark. It's a buyer's market. If this bubble is going to burst, let us bring out the needles.

    I'm calling on all buyers and wannabe buyers to join forces in a boycott against overpriced homes. That means stop monitoring price reductions and start marching right up to the front door and setting your price. Chances are good that they're not getting many other offers.

    I'm talking low ball.

    You know that house you've been eyeing. The three-bedroom, 1,200 square foot, 1920s house listed for $700,000 -- the one that's been on the market for five months. Offer $500,000. $400,000 if it needs a facelift. $350,000 if it needs major reconstructive surgery.

    Or, figure out what the house was worth five years ago and tack on 25 percent -- 5 percent appreciation for each of the last five years, or what a normal market would have paid if investors and cheap money hadn't screwed everything up. If it was worth $300,000 five years ago. It's worth approximately $364,000 now. Offer that.

    What's the worst that could happen? They say no and slam the door in your face? They get insulted? Your agent is embarrassed to be seen with you?

    Who cares? You're the one paying the mortgage. Offer what you think the house is worth. As Gregory Smith said, it's a buyer's market. That means we set the price.
    Take strength in that the N.A.R., C.A.R., etc. are scared. So scared that they've been pressuring the Fed to stop its regimen of interest rate hikes; they are fighting the much needed tightening of GSE (Fannie and Freddie) oversight and any tightening of current lending standards; they are preparing for impending lawsuits; they are redefining what "affordability" means so as to justify today's obscene house prices.

    Friday, August 18, 2006


    Why are rising house prices considered a good thing when rising prices in almost everything else (oil, food, gasoline, books, movie tickets, cars, health care, insurance, etc., etc., etc.) are considered a bad thing?

    Why is everyone hoping for eternal double-digit growth in house prices when it results in more and more people having no choice but to make use of "toxic" loans, go deeper in debt, stop saving, and never being able to really own a house?

    Why does our culture judge a debt-financed lifestyle a good thing when it results in massive borrowing from the bank as well as from future generations (i.e., our children and grandchildren)?

    And why does no one seem to worry about how and who will pay back all the debt?

    Why do people in the Bay Area consider the pricing-out of the housing market of young families a good thing?

    Why do people think that the obscene rise in housing prices is a good thing when it is forcing people to migrate out of state?

    Why do people in the Bay Area consider outrageous house prices a good thing when it forces people to live so far away from the major employment center that they have to commute for hours just to get to work?

    Why do people here seem to think that a bifurcated society of "haves" and "have nots" is a good thing?

    Why does our culture place more of a premium on investing as opposed to working and producing something?

    Why do our communities tolerate a situation where children who grew up in the community cannot afford to buy a house and raise a family in that community and so live near their parents; their children near their grandparents?

    Why don't more people ask "why"?

    Thursday, August 17, 2006

    “Descending the Wall of Hope”

    I enjoyed this article:

    Looking back [at the Depression], it’s easy to think, “But, that was 1929 to 1932; everyone should’ve known where the market was headed.” Prechter writes:
    “Emotionally removed historians sometimes decry the lack of prescience among a population prior to a long-ago financial crisis. Yet unless one is there it is hard to imagine the social pressure to go along with the trend of the day.”

    Add to this, the fact that, “Most people get virtually all of their ideas about financial markets from other people, through newspapers, television, tipsters and analysts, without checking a thing,” and we have a recipe for disaster.

    In the last 3 months, we have all witnessed some rather questionable investment advice. Yet, because of creeping normalcy and landscape amnesia...we do not always recognize unsound (or sound) advice. So, let’s look at a scenario together and see if the advice given by a nationally syndicated columnist measures up.

    A 70 year-old gentleman is looking for a way to access more money to loosen up his budget so he can travel. He questions the “expert” on the use of a reverse mortgage as a way to access the desired money. The gentleman has $200,000 in financial assets and receives $26,000 a year from Social Security, retirement, and interest.

    The expert suggests that rather than a reverse mortgage, the gentleman consider taking out a home equity loan for $25,000. This would allow for $5,000 a year in extra spending, allowing him to travel, and though (at 7 percent) the loan would accrue an additional $5,250 in interest payments, if he assumes his house will go up in value 2 percent a year, he could pay off the principal and his interest when he sells his home in 5 years.

    Now, what’s wrong with this line of reasoning? We see two main issues. One is a substantial change, over the last few generations, in the way our society views debt. The other is our human tendency to extrapolate “conservative” long-term returns, rather than realizing that markets (and economies, and a great many other things) move in cycles and searching for data that would signal a transition.

    Today, it seems that debt is always the solution. Politicians, central banks, and businesses have certainly set the example, but the problem is more likely our own human nature. The problem with the advice given, and the gentleman receiving it, is that neither party wants to accept limitations. And, in our current cultural mindset, that makes sense. Swept along by the current debt mania, the expert doesn’t realize the irrationality of his advice, and the gentleman, it seems, has not properly assessed his risk to achieve a less-than-necessary goal.

    Additionally, regarding future returns, homes, like any other asset, offer no guarantees. Like stocks they can become historically overvalued and then decline quite sharply in value. Consider the following comments regarding the housing market and how this data could warn this 70 year-old gentleman’s that what looks like a walk in the park might turn out to be wandering into quicksand. speaking of Florida real estate speculation, Dr. John Kenneth Galbraith states:

    “The first manifestation of the euphoric mood of the 1920s was seen not on Wall Street but in Florida – the great Florida real estate boom of the middle of that decade. Each wave of purchases then stimulated the next. As speculation got fully under way, prices could be expected to double in a matter of weeks. Who need worry about a debt that would so quickly be extinguished?

    In 1926 came the inevitable collapse. The supply of new buyers needed to sustain the upward thrust dried up; there was a futile rush to get out. In 1925, bank clearings in Miami were $1,066,528,000; in 1928, they were down to $143,364,000.”

    If consumer spending comprises more than two-thirds of our GDP, and this run-up in house prices has sustained consumption, what will happen to our economy and markets when the housing bubble bursts? Will we finally achieve the ever-elusive “soft landing?”

    Investors who do little research will find many reasons to rationalize their investment decisions. However, other investors, who are willing to look at information like the data from the IMF or the Center for Economic and Policy Research, will likely conclude that they shouldn’t expect a market rally, that is dependent on real estate appreciation and consumer spending from ever-expanding consumer debts, to continue.

    In many ways, we’ve been here before, and it wasn’t even that long ago. As 2000 to 2002 unfolded, investor’s clung to the stocks-for-the-long-term, buy-and-hold mantra. Lacking knowledge of other options, there was little else they could do. Ignoring the cognitive dissonance, we dismissed all of our nagging concerns and followed the crowd. Yet... this period was not a time when we were climbing the wall of worry, but rather (borrowing a phrase from Jim Dines) a time when we were “descending the wall of hope.”

    Nota Bene

    Ron Parks of the Vision Real Estate Group emailed me today saying that he noticed that I was using their tabulated data when I reported the July, 2006 results. He felt that I did not give credit to them (or maybe he felt that the credit was not obvious). I did give credit to them but I can see now how it might not be sufficiently obvious. I always give credit to sources unless they ask that their identity be kept anonymous or if it can reasonably be assumed that they want their identity kept anonymous; that's my pact with anyone who wants to share information on this blog.

    Anyway, I added a more explicit reference to the Vision RE group in that post and I just want to take this opportunity to be sure that everyone who is now reading this post knows that table of data was compiled by Ronald Parks at the Vision Real Estate Group. Furthermore, my apologies go out to Ron Parks if he felt slighted in any way; that was most certainly not my intent.

    The IJ's Spin on DataQuick's Numbers

    In the past I have slammed the Marin Independent Journal for its lazy reporting, its ceaseless and almost blind cheerleading of real estate, and its ignoring of the facts as they relate to real estate. In my opinion the IJ chose to "follow the money" and side with their vested interests and abandon their journalistic responsibility to objective reporting and informing the public of what has been driving this real estate market to obscene levels and the risks that entails. Hence, this blog (which, incidentally, I know for a fact they read). So naturally, I was anticipating the IJ to put a significant amount of spin on the latest DataQuick figures. Well, they did put a lot of spin on them with an abundance of feel-good quotes from real estate agents. But nevertheless, for the IJ this is a fairly sobering article.
    Median home prices fell in Marin County last month as sales dropped to their lowest level in 11 years. Marin's median home price was $900,000 in July, down from $971,500 in June and down from $910,000 in July 2005. Sales for both homes and condominiums totaled 286 in July, the lowest sales volume since July 1995, when 205 residences sold, according to DataQuick Information Systems, a real estate information service in La Jolla. July home sales were down nearly 30 percent from July 2005, when 408 sold. In Marin, 204 single-family homes were sold last month, down 30 percent from June when 292 were sold and down 25.5 percent from July 2005 when 274 were sold.

    "Marin was no exception [to the rest of the Bay Area] as the decline year to year was very similar to the Bay Area," DataQuick analyst Andrew LePage noted. "The slowdown under way for many months was just more pronounced in July and we are not sure if it is an anomaly or the beginning of a more similar slowdown. By fall we will know."

    "It is almost certain the next stage will be that prices begin to drop," said Stephen Levy, director of the Palo Alto-based Center for the Continuing Study of the California Economy. "I think the more expensive homes over $1 million are more vulnerable at this time."

    "The July closing numbers are actually sales that occurred in June and the real estate market in Marin is traditionally slow during summer months," Cohn [Real estate broker Patty Cohn, of the Frank Howard Allen Greenbrae office] said [Marinite: uh, that's not true and agents in the past have been quick to point out that a big reason why the summer months are often a good time to sell is that people are out buying houses to relocate before school starts].

    "Buyers see homes are not getting snapped up like hotcakes and want to know whether a house they might buy for $1 million will be worth more or less in five years."

    Levy cited two types of buyers leaving the market. "The first set is folks who can only buy a house with an exotic mortgage - a very low-rate mortgage or a mortgage where the principle payments were deferred," Levy said. "The second group that left is buyers who were speculating or flipping homes, investors who were not buying to own. When prices stop rising that does not work anymore.

    "Prices have stopped rising."

    Wednesday, August 16, 2006

    Results for July, 2006

    DataQuick has their July, 2006 results for the Bay Area:
    Home sales in the Bay Area slowed to their lowest level in ten years as prices increased at their slowest pace since spring 2003, a real estate information service reported.

    Last month was the slowest July since 1996 when 7,682 homes were sold. The average July sales count since 1988 is 9,158.

    "One of the questions being asked is how much future activity was drawn into the present in 2004 and 2005 when interest rates were at their lowest levels in decades. How much of today's demand has already been met? If the market is indeed going into a lull, expect low sales and flat prices through fall and on into next year," said Marshall Prentice, DataQuick president.

    The median price paid for a Bay Area home was $627,000 last month. That was down 2.6 percent from June's record $644,000, and up 3.5 percent from $606,000 for July a year ago. Last month's year-over- year increase was the lowest since May 2003 when the $427,000 median was up 3.4 percent.
    Here is DataQuick's tabulated data; for Marin, the year-over-year percent sales continues to be negative at -29.9% and price "appreciation" comes in at -2.1%:

    The following graph shows year-over-year price appreciation for the Bay Area and Marin:

    Here is what Vision RE has to say about Marin markets (don't you just love how they use exciting adjectives like "soaring", "rocketing" etc. when describing even small increases but when the results turn negative it is de-emphasized?):
    After posting record highs in June, prices for re-sale single-family homes gave back most of those gains in July. The median price of single-family homes in Marin County posted a 12.6% decrease to $940,000. The average price for homes dropped 8.3% to $1,267,585.

    Sales of single-family homes took a nose-dive, down 27.8% from the month before. Year-over-year sales were off 24%.

    There are a lot of minus signs in the above tables (which were compiled by Ron Parks of the Vision Real Estate Group).

    And while I'm at it, here is the current Marin Market HEAT Index broken down by price range and for the whole county (keep in mind that the HEAT Index represents what the market is like now whereas the rest of the data shown in this post represent sales that closed in July and so contracts were signed in May and June):

    Recall that the HEAT Index scale is like so:

    And you know, since this is turning in to a Marin-real-estate-agents'-tabulated-data post, why not show this one too? I've never seen "Extreme Buyers" applied to Marin before:

    On Obtaining the Pricing/Lending History for a Property

    Some of my more recent posts have prompted a flood of email from people asking me how they can find out for themselves the pricing history of a property. I think sharing this "secret and arcane" (as one writer put it, LOL!) information would provide an invaluable service as anyone who is thinking of buying a house should be informed of all the relevant facts about the house before they can even hope to make a rational and wise financial decision. And lord knows most real estate agents cannot be counted on to provide this information in a completely unbiased fashion; we must do it ourselves (which begs the question regarding the utility of real estate agents).

    It's been a while since I last purchased a house, but here is what I did regarding my more recent posts on this blog. Please, anyone who can add to the following please do so in the comments section.
    1. If you are friends with someone who is a real estate agent, then hit them up for the relevant info. Otherwise, read on...
    2. Some real estate agencies publish an on-line monthly listing of which properties sold and by how much along with other relevant information. For Marin, I use the "recent sales" listing published by Vision RE. Theirs is not a complete listing of everything that sold in Marin but it is better than nothing and it's free. If you are looking for property elsewhere, then you will need to do a bit of hunting/asking around on your own to determine whether such a listing exists for your area.
    3., despite all its faults, sometimes lists the pricing history of a property. To find the pricing history this is what you do: (A) enter the street address and city in the spaces provided and click "Go", (B) on the next page is an aerial photo showing the location of the address you entered; above it is a link labeled like "Showing 123 Somewhere St, Some City,Some State 12345"; click on that link, (C) the next page shows you more information and somewhere there is a link that reads "See more graphs & data"; click on that link, (D) on the next page (you might have to do the security validation thingy first), near the bottom, will be the pricing history (if available) and tax summary. I found that Zillow rarely had the information I wanted probably because the site is still so new; I expect it will get better as it matures.
    4. The subscription access to DataQuick will allow you to get a Word document that lists the loan history (amount of loan by date, type of loan, the borrower's name, etc.) for any property.
    5. For Marin, if you know the borrower's name (say, via item #4, above), you can use the borrower's name to see trust deeds, reconveyances, etc. via the Marin Assessor-Recorder's office.
    6. can also be used to get information on a property.
    7. Obviously, the current asking price and recent price reductions can easily be had via the MLS,, etc.
    I am sure that there are other resources available on-line that can be used, many of them for free. Please, if you have any other sources/methods for getting this information, please share it.

    Tuesday, August 15, 2006

    Thornberg Going Independent

    According to this article, real estate economist Christopher Thornberg has left The UCLA Anderson Forecast to start his own business. Does this mean he will be more free to speak his mind vis-à-vis the housing bubble affecting much of California? He has already proven himself to be one to "call it the way he sees it"; just check out this video. Is Christopher Thornberg to the housing bubble what Robert Shiller was to the tech stock bubble?

    Some choice quotes:
    Bearish real estate economist Christopher Thornberg, who says the Southern California housing market is a bubble beginning to pop, has left UCLA Anderson Forecast to strike out on his own.

    "I wanted to start my own business and do things I wasn't able to do before," said Thornberg.

    His new consulting firm, Los Angeles-based Beacon Economics, will prepare forecasts for regions he thinks are underserved, perhaps including San Diego, the Inland Empire, the Bay Area and Sacramento, Thornberg said. His partner at Beacon is San Francisco economist Jon D. Haveman of the Public Policy Institute of California.

    Thornberg was one of the first economists to declare that the housing market was peaking. He did so in September...

    Other market observers now agree that the market is cooling but are uncertain about whether it will result in a "soft landing" that won't disrupt the economy. Thornberg said his expectations are growing more gloomy.

    Thornberg... insists that the real estate market is dangerously puffed up... "Look at what your house was valued at three years ago and what it is now. Is it really worth 70% more? The answer is no," he said. "There is no way you can justify the math."

    "My guess is we're going to have a hard landing," he said. "It's ugly out there."

    There has been large-scale overbuilding of homes and condominiums nationwide, he said. "And here in Southern California we have had this massive price appreciation that is just not justifiable by any kind of standards of reasonable economics," he said.

    With interest rates rising in recent months and sales declining, "the bubble is popping, just like a bubble is supposed to," he said.

    Monday, August 14, 2006

    Marin IJ Advert

    One reader had this to say about a recent full-page color ad in the Marin Independent Journal:
    I was blown away by a full page Coldwell Banker ad in the Sunday IJ. Did anybody else notice anything interesting about this ad? I have never, ever seen anything like this before in the real estate section. The full page color piece did not list a single house for sale--- not one! On the contrary, they were advertising their BUYERS! "We have buyers," they bragged, "call us if you are thinking of selling." Has anybody ever seen this tactic before? I have not, and think that this is a certain sign that things are about to get very ugly...
    Another reader kindly scanned the ad (thank you), shown below (click on the image for a larger view):

    What, if anything, does it mean?

    "Price Reduced" Signs Give Buyers the "Wrong" Message

    I'm really busy with the stuff that pays my bills. But please do check out this excellent post over at the SoCal Real Estate Bubble Crash blog. It points out some of the sleazy marketing practices that real estate agents are currently being encouraged to follow. And click on the blogger's recently added ads and help him make a few pennies to justify his time and effort.

    Here are some tidbits from the post to whet your appetite:
    Listing Agent Advice
    1. Price Reductions:
    Please do not put a “price reduced” banner on your listings, and if you have one up, please take it down. It “falsely” advertises to the neighborhood that prices in the area are going down. What is more true is that sellers are lowering their expectations and becoming realistic. Plus: For we who show property, it does not instill confidence in our potential buyers.

    Sold Signs: When the listing goes into escrow, please put an “in escrow” or “sold” banner on the sign! The days of a panicked buyer, desperately looking on their own for a home, are long gone. Once again, we are advertising to the neighborhood the wrong information.
    Plus: Imagine how potential buyers feel seeing all those for sale signs. Do you really think you’re helping them enter the market?
    Signs: If you have a listing where there are other (or many) for sale signs nearby, I would recommend that you call the other agents and see how many of them will remove their signs from their listings. At the very worst, rotate your signs until one (or more) of the listings sell, then make sure it has a sold sign on it!

    Sunday, August 13, 2006

    Weekend Observations

    I was up in Novato again. Driving through Hamilton, one of Marin's "specuvestor" havens, it's clear the place is up for sale -- in this photograph (I remembered to bring a decent camera with me this time) you can see no fewer than 12 "for sale" signs and one garage sale sign; I've never seen so many at one intersection.

    Do you have any weekend observations to share? Pictures? Open house experiences? This would be a good place to share them.

    Saturday, August 12, 2006

    Three Meters of Sea Level Rise in Marin

    A reader found this site and kindly shared it with me. It is an interactive map of the earth with elevation data provided by NASA (Shuttle Radar Topography Mission). You can zoom in to any part of our world and set sea level rise to be whatever you want (0 to 14 meters).

    Below is a map of part of Marin that I cobbled together; it shows just three meters of sea level rise (click on the image for a larger view):

    Friday, August 11, 2006

    "A Bucket of Money and a Box of Stupid"

    This POS was featured on the Marin POS blog and can be viewed by clicking here. It points out that it is not just the poor peons of Marin who are starting to deal with price declines.
    Price Reduced: 07/10/06 -- $5,900,000 to $4,950,000 (-17.2%)
    Days on market: 297's "zestimate": $1,687,970
    I don't know what the last purchase price was and I don't really care; I am sure the owners will make money if they sell. But what surprised me was the $1 mill price drop.

    And it also points out what some Marin sellers are doing now... "testing the water". Some Marin sellers are clearly not seriously putting their property on the market as evidenced by the fact that their asking prices are at peak bubble pricing of around August, 2005. They are hoping to catch that one last FB fish out there or as one RE/MAX Equity Group broker put it: waiting for a buyer "with a bucket of money and a box of stupid".

    Shoreline Change

    Ok, the "cooling-off" period is over...literally...

    On this blog we've talked about which areas in Marin are most at risk to earthquakes and liquefaction. What about global warming? Global warming is obviously happening. By some accounts we are very close to if not already passed the "point of no return". Glaciers are retreating at a rapid rate. Antarctic ice shelves are disintegrating. Sea level rise and shoreline change are inevitable. How will this affect Marin and, more to the point, which overpriced Marin POSs are most at risk?

    Well, I have yet to find anything on this topic specific to Marin or that shows the information in the way I'd like for the Bay Area. But try these on for size:
    • Here is an animation showing the effects on New York city of just one meter of sea level rise. Pretty shocking. You can find other such animations here.
    • Here is an animation showing flooding in the Bay Area due to just one meter of sea level rise. Unfortunately, you can only barely see Marin at the top.
    • Here is a series of maps showing the amount of coastal flooding on the East Coast that can be expected from sea level rise (also shown below). Would the West Coast be any different?
    The point is that the most densely populated areas in Marin County (and some of the most expensive -- Belvedere lagoon, Stinson, etc.) are barely above sea level; they will become inundated. Property will become worthless. In their questionable wisdom, our lending institutions have made available 40-year loans; 50- or even 100-year loans are not out of the question. Anyone who buys property in Marin and intends to hold for the long term or even bequeath property to their heirs must take into consideration whether said property will be underwater in the future and how accessible it will be to contiguous areas of the remaining dry land.

    And just for "fun", here is what the world will look like after 100 meters of sea level rise.

    Thursday, August 10, 2006

    Cooling-Off Period

    I've clearly touched a raw nerve with some of my more recent posts. Some really, really good points are being raised in the comment sections of these posts. I've spent a lot of time responding to some people's comments. I think we need a cooling-off period for a while; at least I do. Keep posting comments however. I'm just going to hold-off on publishing new posts for a little while until certain issues get worked out to my satisfaction.

    Wednesday, August 09, 2006

    Facing Reality in Novato

    Update (8/14/06): This house is now in "sale pending" mode. See? This is how houses are being sold now -- if you want to sell your house you need to mark it down to more realistic levels.

    Here's a newly constructed (2003) Novato house that the listing agent is claiming is asking less than what the owner's paid for including the cost of upgrades -- "$86K price REDUCTION! Now below orig purch $$ plus aft mrkt upgrades". The low-down:
    • 4 br 3 ba
    • Built 2003
    • 2924 sq ft
    Original Asking Price: $985,000
    Current Asking Price: $899,000 (-9%)
    Days on market: 106
    With the help of a reader (see comments section) it appears that the current owners owe a total of $969,568 on this house; they refinanced twice; they are using variable rate loans. After closing costs and agent commission it looks like these folks are going to lose in the ball park of $133,500.

    Tuesday, August 08, 2006

    No Sure Thing

    More proof that even in Marin real estate is not a sure thing:
    • 3 br 2 ba
    • 2041 sq ft
    • Built 1988
    Days on Market: 133

    Price Reduced: 05/30/06 -- $925,000 to $918,000 (-0.8%)
    Price Reduced: 06/21/06 -- $918,000 to $909,950 (-1.0%)
    Price Reduced: 07/13/06 -- $909,950 to $888,000 (-2.4%)

    Total price reduction: -4%

    Last sold: 08/27/2004 for $800,000
    Assuming 7% for closing costs (plus commission) these folks are looking at maybe $20,000 profit. After factoring in the remodeling costs I bet they lose money.

    126 Days and Six Price Reductions Later

    3 br 2 ba, 1879 sq ft, built in 1949 in San Anselmo. Frenetic price reductions over the course of 126 days on market:
    Price Reduced: 04/13/06 -- $1,089,000 to $1,059,000 (-2.8%)
    Price Reduced: 04/18/06 -- $1,059,000 to $1,049,000 (-1.0%)
    Price Reduced: 05/08/06 -- $1,049,000 to $995,000 (-5.1%)
    Price Reduced: 06/06/06 -- $995,000 to $895,000 (-10%)
    Price Reduced: 06/22/06 -- $895,000 to $885,000 (-1.2%)
    Price Reduced: 08/08/06 -- $885,000 to $875,000 (-1.1%)
    Total price reduction of -20%. Unfortunately, I could not find the last sell date and purchase price.

    San Rafael Flippers

    These San Rafael flippers have yet to reach the break even point. Here's the shake-down:
    • 3 br 2 ba
    • 1325 sq ft
    • Built 1954
    Price Reduced: 06/27/06 -- $859,888 to $849,000 (-2.3%)
    Price Reduced: 07/19/06 -- $849,000 to $829,000 (-2.4%)

    Total price reduction (so far): -3.6%

    Last sold: December 8, 2005 for $602,500's "Zestimate": $701,142
    Assuming $58,030 for closing costs (7% of sales price, includes standard agent commission) they stand to make $168,470 for "owning" this house for eight months. Well see...

    Sad But True

    I found this gem over at; sad but true:

    Affiliate Membership

    Every blogger worth their salt arrives at the point when someone offers them a way to make a little money on the side. Well, it seems that my time has come.

    As you all know (or should know) I have made a point of not having any advertisements or other promotional material on this blog. This blog is a service and since I would be doing this anyway for myself, why not share it? At the same time it would be nice to make a little money as a reward for my time authoring this blog and after all it seems like some people have received some value from this blog.

    With that said, I recently received the following email from the folks over at the Elliott Wave site. It seems that the fact that I have posted some of their more relevant articles (relevant to housing that is) on this blog attracted their interest. They are extending to me an invitation to become an affiliate. What that means (if I understand this correctly) is that I could add a link to their site from mine (like I do for a lot of blogs over in the right hand margin of this blog). Anyone who clicked on that link and ended up buying one of their books or something would generate a little revenue for me. I don't think I would go so far as to add the banner graphic though.

    I don't want to do this if it alienates any readers especially since we are probably talking about a few pennies in profits. So below you will find a poll. Please vote your thoughts.

    Here's the email:
    My name is Andrew Jordan, and I am a part of the affiliate team at Elliott Wave International (EWI). I have recently reviewed, and I would like to propose an affiliation between our sites. The EWI Affiliate Program offers you Free Auto-Updating Market Commentary, EWI Bookstore links to Robert Prechter's best selling books, Education content and more. Earning 56% commission, I believe you may find this beneficial for you and your site viewers.

    First, here's a little about our company. EWI has provided investors with world-leading, independent technical analysis since 1979. We sell our analysis to individual and institutional investors throughout the world. Our staff of writers also maintain a number of free content programs, including market analysis and interesting articles. These articles aren't your usual recap of today's market activity. They give investors insight into market and economic events that they simply can't read anywhere else.

    We offer this content to qualified sites, at no cost, to help fill out their site. We also offer above-average commissions for traffic that originated from the site at 56% (on most products and services) -- the commission for our most popular service is $100.

    To make sure that you have the very latest articles on your site, we offer JavaScript, which updates the content on your site as soon as our writers post to our site. Over all, it's a turnkey way to get unique content added to your site and earn commissions too.

    We also have a Traffic Rewards Program. Currently, you would earn free books for traffic. You in turn can sell them, give them away, use them to promote your site, donate them to the local university library, etc.

    Terms of Use: The purpose of the Marin Real Estate Bubble weblog (located at URL and henceforth referred to as “MREB” or “this site”) is to present and discuss information relating to real estate and the real estate industry in general (locally, state-wide, nationally, and internationally) as it pertains to the thesis that recent real estate related activity is properly characterized as a “speculative mania” or a “bubble”. MREB is a non-profit, community site that depends on community participation and feedback. While MREB administrators do strive to confirm all information presented here and qualify all doubtful items, the information presented at MREB is neither definitive nor should it be construed as professional advice. All information published on MREB is provided “as is” without warranty of any kind and the administrators of this site shall not be liable for any direct or indirect damages arising out of use of this site. This site is moderated by MREB administrators and the MREB administrators reserve the right to edit, remove, or refuse postings that are off-topic, defamatory, libelous, offensive, or otherwise deemed inappropriate by MREB administrators. You should consult a finance professional before making any decisions based on information found on this site.

    The contributors to this site may, from time to time, hold short (or long) positions in mentioned and related companies.