Sunday, August 26, 2007

"It's Going To Be A Little Worse [in Marin] Than People Think"

Gee, ya think?

This really pisses me off. It looks like the Marin IJ and Marin realtors are reading this blog after all:

The Marin "REIC" is finally starting to admit (two years too late, it seems to me) that Marin's market is not immune and is starting to crack. Of course, you have to read past all the feel-good spin, reporting foreclosure rates during the quiet part of the season, the "we knew it all the time" revisionism, etc.

Anyway... first it was that comment in the SF Chronicle (I've somehow lost the link so if you have it please share it) by the Marin real estate agent who admitted the fallout from the housing bubble had crossed Marin's sacred borders and is hitting Novato and Terra Linda hard, and now it is this. Could it be that the Marin IJ is finally getting a clue? Of course, they still downplay the effects and assuage the fragile egos of anxious Marin sellers, but it is a huge improvement from this time last year (emphasis mine):
In Marin, the national mortgage meltdown has done lots more than just make buyers... anxious - it has cost hundreds of mortgage industry and other housing-related jobs, kept houses on the market longer and boosted the county's foreclosure rate.

The Marin real estate market is weathering the storm, although borrowers and home sellers are feeling the pinch, real estate and lending experts said.

"You're a very small elite market, so you're certainly not representative of the state as a whole," Leslie Appleton-Young, the chief economist for the California Association of Realtors, said of Marin. Still, she said: "No one is immune from what's happening in the marketplace right now. No one."

[Note: Leslie Appleton-Young is now back pedaling vis-à-vis Marin RE.]

At Charlie Christensen's Sausalito brokerage, CWC Financial, some clients are feeling the pressure... "It's very dicey out there - it's unprecedented," he said. "It's going to be tougher for people to qualify for new loans."

"It's touched us a lot," said Lee Aubry, a mortgage consultant with Wells Fargo Bank. "The bottom line is, cheap, easy loans are becoming very quickly a thing of the past. Lenders are basically going to be more conservative," This is going to take years. Now more than ever people will need down payments - they'll need good credit."

Houses are selling, he [Nick Cooper, a founding agent with Vision Real Estate in Corte Madera] said, especially at the higher end of the market. Proper pricing is key... [in other words, lower the price and keep lowering it until it sells...or don't sell at all.]

Hoping to help buyers caught in the crunch, some skittish sellers are putting up money, hoping to bridge the financial divide to close the deal. It's not something you see often in Marin, agents said. "We haven't seen seller financing in 10 years," said Kathy Schlegel of Lucas Valley Properties.

"It was so unrealistic to have the money so easily available," said Bill McKeon, a broker associate at Pacific Union Real Estate in Greenbrae. "That's what everyone's talking about. It was very common to have zero-down purchases a lot based on stated income, and that was bound to end. I think what's catching everyone by surprise is how abruptly it ended."

"We're kind of on an island here," he [Christensen] said of Marin. "It may not be as bad as it is in some other places, but I think it's going to be a little worse than people think unless the Fed steps in and takes some radical steps." "I think people need to take a deep breath and let this thing settle out," he [Christensen] said. "There's a correction occurring. Some people are going to lose their homes, some in Marin.
Unrestrained arrogance and hubris will get you every time.

And I really despise it when a news paper prints stuff like "Is it going to be biblical proportions? I don't think so [said Christensen]." Pose an absurd question as legitimate and then answer it. The answer is equally absurd. Correct me if I am wrong, but this is a false dichotomy and a form of argumentation you see all the time being spewed by those with a vested interest; it is common practice in the real estate industry during times like these. No, it won't be of "biblical proportions". Nothing ever is. Even the Great Depression was not of "biblical proportions". But it does not mean it won't be very, very painful for many people.

But yes, of course, the collapse starts in the weakest markets and works its way inward, towards the employment centers as has been said many times on this and other blogs. We, and markets like ours, will fall over but not until others have failed first. It just takes a little longer is all.

And it seems BusinessWeek is finally getting it in gear too. I especially like this quote regarding "toxic" loans (now, according to them, pretty much anything other than traditional fixed-rate loans with at least 20% down):
"The consumer has to be an idiot to take on those loans"...But since there were plenty of "idiots" out there, and legions of lenders eager to serve them,... hedge fund managers eagerly devoured the securities confected by investment banks from batches of dubious home loans."
And be sure to check out the "History of Hubris" where it starts off with:
As with the current subprime saga, past upheavals in the financial markets typically have been preceded by talk of new paradigms, perfect models, and fail-safe strategies — a "this time it's different" attitude. Here's a look at the egos and excess that ruled in recent boom periods and the inevitable fallout."
Ah yes, the sweet smell of revisionism and "we knew it all along"-ism.

Oh, and in that IJ article, where the real estate agent suggests that everything is going to go to hell in Marin and elsewhere unless the Fed steps in to fix things,... I'm sorry, but the Fed is ultimately powerless (homework assignment: go read Mish's blog or the CalculatedRisk blog, search around, and learn why). But for now, BusinessWeek comes through again:
By cutting the largely symbolic discount rate on Aug. 17, the Federal Reserve hoped to calm nerves and return borrowing conditions to normal. Instead, conditions got worse. Terrified to hold anything but ultrasafe securities, investors stopped buying IOUs from corporations and poured their money into Treasuries. A reliable measure of panic—the difference in yields between safe and less-safe securities—widened to the biggest gap in more than 10 years. Five days later, markets remained severely impaired.

Why didn't Chairman Bernanke's script play as well as many hoped, at least in the early going? Simply put, the Federal Reserve did not—and cannot—fix the problem at the root of the market crisis.

Lenders know there are billions of dollars of weak assets out there, such as securities backed by foolish or fraudulent mortgages.

What they don't know is who holds those weak assets. So when borrowers come to them offering suspect securities as collateral for a loan, the safest thing to say is no. When everyone says no at once, the result is a credit crunch that, if unabated, could cause a recession.
And I fully agree with this reporter's words (hat tip goes to the Ben Jones blog for the link); let the greedy fools burn:
I know people are going to hate me for saying this, but I’m not sorry that foreclosures nearly doubled last month and are increasing every day.

I’m not sorry that real-estate prices are creeping down by the glut of desperate for sale signs all over Southern California.

I’m not sorry that all those developers building lofts downtown and in Hollywood and North Hollywood with no parking might have to eat their investment when they find they can’t get half a mil for the 400-square-foot corner of a former sweatshop.

I’m not sorry that people who kept taking the "free" home-equity money from the banks beyond all reason are now finding out how not free that money was.

I’m certainly not sorry that the huckster mortgage companies and banks that thought it was a good idea to make subprime loans to people with bad credit ratings are now taking a bath. I only wish it involved some sort of public humiliation involving glue, sand and glittery body paint.

I’m not even sorry that people will lose their homes and be forced to give up the Hummer they bought with a home-equity loan, and move into a one-bedroom apartment in Panorama City or, worse, in with the in-laws in Porter Ranch.

I tell people I am sorry, but I’m really not. I am, in fact, gleeful. And I’m not the only one.

Most everyone who is not employed by a mortgage company or is not a real-estate agent or is not trying to sell a house or can't pay the mortgage anymore feels the same. We are secretly dancing little happy jigs because it seems that the insanity is about to, finally, end and the snake-oil hucksters will fold up their tents, take their sleazy subprime offers and slink out of town.

Then maybe life can slowly come back to normal, and regular people with regular incomes can buy regular houses again without agreeing to loans so abusive they ought to be handed out of the back of gangster bars. We don't even care that it means our own property values will drop, if it means we might avoid another block of luxury lofts.

It’s a relief, too, because we all knew this was coming. Even people like me with math anxiety could work out that at some point the hot real-estate market, built in part on risky loan deals, was someday going to reach critical mass and start to crumble.

Well, here we are, and it’s beautiful. And that’s why I must implore all the well-meaning politicians proposing bailout measures to just go away and work on curing cancer, or something that will actually help humanity, not enable it to continue on its financially irresponsible path.
In the words of one esteemed reader "Somewhere, a crocodile has shed a tear."


Blogger Holland said...

I found a trader's comments posted on one subscribed trading site:

"Unfortunately, it's not really easy money. The Fed has built a wall around its people (the banks
that own the Fed, that is). Anyone outside the wall is doomed. It's the Great Depression all
over again. Remember, it was the Fed which engineered the Great Depression to eliminate
their competition (many banks weren't members before the depression and they went belly
up when the Fed pulled the rug out from under them).

Also, the Fed isn't going to inflate to let the US government out of their obligations. It's
deflating to wipe out the debtors, including the US government, completely."

Aug 26, 2007, 2:50:00 PM  
Blogger chiromancer said...

Yes, it appears the Marin IJ and the REIC prognosticators are beginning to reflect reality. I dont think this represents any change in agenda, only that the psychology and news is so damning to their previous position(s) that to cling to the few remaining shards of real estate boosterism is likely to destroy their projected aura of objectivity, thus the change/new tactic. Unfortunately, aside from the those who read blogs, people in general will not have seen how incredibly damning and wrong their previous prognostications and reporting have been. They are IMO part and parcel responsible for the pain and suffering which will now be inflicted upon Marin. Certainly not the "honest reporter without agenda" they imagine themseves to be

Aug 26, 2007, 5:05:00 PM  
Blogger Lisa said...

I was tickled pink when I saw the IJ's screaming headline today "Credit Crunch Comes to Marin." Marin! Our own oh-so-special part of the world.

Still, there's a lot of dancing around the core issue...without voodoo financing, there is nothing, absolutely nothing, to prop up these prices. Say bye-bye to those dreams of equity and early retirement.

And I am sick of people calling this "unprecedented." We are merely going back to standards that were in place just 10 years ago - downpayments, proof of income & assets, strong FICO, etc.

We're about to find out that if you actually have to PROVE you can afford the house, there are going to be a whole lot fewer buyers. Bring it on.

Aug 26, 2007, 5:20:00 PM  
Blogger marine_explorer said...

"It was so unrealistic to have the money so easily available"

Well, I'll give Bill McKeon the benefit of the doubt, but generally sound financial advice wasn't part of the average realtor pitch these past few years. Where were these guys when they could make a difference?

"...I think it's going to be a little worse than people think"

Ya think? Guess what--I'll wager it could get just as bad in Marin as those "armpit" zipcodes people deride over cocktails. And here's why: Take a little provincial self-delusion about the "bust-proof" security of Marin, combine that with your insanely overleveraged "Marin lifestyle" (including those "investment properties" on credit) and you have a good chance at real "trailer trash" destitution that's roundly despised in these parts. But who knows…if you hold out long enough, perhaps someone will buy that $1M 2BR/BA cottage reno. of yours and save the day?

Aug 26, 2007, 7:09:00 PM  
Blogger mountainwatcher said...


Excellent presentation!
Thanks for your hard work on wrangling all this info.

I'm amazed that the IJ is finally reporting facts.
Shame on them for misleading for so long.

I'm very happy that prices are going down.
Let's put the "real" back into real estate.

Aug 27, 2007, 12:04:00 AM  
Blogger Matthew said...

So sorry, it's going to be a lot worse than the average Marin resident thinks before this one is over... There will be a lot of spilled latte’s in the coming months around here you can be sure of that…

I’m also sure that the local RE machine reads your blog Marinite as they have little else to do at the present given the .45 heat index and all. (That index is warped still to the high side by the way due to all the distressed sales going on)..

Marinite, I think I'm in agreement with you on each of your observations or opinions regarding what you do and don't have sympathy over. However, the vast, vast majority of my feelings on this are still tied and directed towards the Fed, the profiteers and the RE machine who created and then juiced and hyped this whole mess into oblivion.. They can all rot first...

Regarding the IJ... It's still a RE owned and hyped newspaper. I dropped my subscription several years ago because of this. I hope their business is suffering as well... I’m sure it is, but they helped plant the seed of their own business difficulties if you ask me…. deserves them right for helping fuel this bubble. It amazes me still that the RE machine thinks 15-20+% price appreciation is a good thing for their industry and our communities... bunch of greedy, short term mentality jack asses, the lot of them…

However, knowing the IJ and their history of doing the RE machine’s pumping, I'm sure they have already written the article and headline declaring "We've hit the bottom" or "Median home prices again are on the rise".

Nobody, not even the sleaziest of the sleazy inside the Marin RE machine can shake the fact that a mortgage is a form of debt and must be repaid at some point in the future. What has been paying back all those mortgages in the past was an appreciating RE market. Oops, now what ?

Well, I’ll tell you what, now, those mortgages must be paid back through wages the way it’s always been... so sorry, those are the facts... deal with it and celebrate it because that is a very good thing... This needed change will again reward education, hard work and savings... someone please let me know if that is a problem???

I have no idea what the Fed's next move will be, but I think I'm in the camp of "who cares really at this point".. They've about killed the dollar and inflated this economy so incredibly irresponsibly for so long to the benefit of their banking and Wall Street buds, that they can all go to hell as far as I'm concerned. I’m doing my best to profit from their recklessness by shorting stocks here and there that I know will eventually crumble due to the fact that the average Joe consumer is maxed out and not that bright to begin with…

No matter they do or don't do, in the end, housing prices and rents will be tied to wages with a premium paid on location... just as it's always been.. An no, Marin doesn't rate a 200% premium..

I see also that Leslie Appleton Young chickee is also doing some back peddling on Marin’s market… geeze, what a surprise…


Aug 27, 2007, 4:52:00 AM  
Blogger Eric Weise said...

I've been looking for about a year and half to buy and I've noticed prices going down in San Rafael but not in San Anselmo where I'm interested in buying. I hope things will change in the next 6 months because I'm getting a lot of pressure from my wife to buy.

Aug 27, 2007, 9:20:00 AM  
Blogger marinite2 said...

This comment has been removed by the author.

Aug 27, 2007, 9:58:00 AM  
Blogger marinite2 said...


Show her the "Suzanne Researched It" video. And then play for her a real-life follow up. I briefly posted on it a couple posts back.

Aug 27, 2007, 9:59:00 AM  
Blogger marinite2 said...

This needed change will again reward education, hard work and savings... someone please let me know if that is a problem???

Some will see it as a problem because today we live in a state, if not the whole dang country, where the "big score" is what makes or breaks a family's financial livelihood, not a career, not wages, not salary, not work. Everyone is looking for the big score... lottery, stocks, RE, or whatever the current fad is.

Aug 27, 2007, 10:00:00 AM  
Blogger marinite2 said...

Looks like a good article on the front page of the Chronicle today. I saw it as I walked by the caffeteria but I can't spare the time to read it (just make pithy comments on this blog). Anyone care to summarize it? Or is it just sappy "let's all feel sorry for the people who cannot sell for big $$$ or get their wishing prices and it's so humane to bail them out"?

Aug 27, 2007, 10:07:00 AM  
Blogger cajun100 said...


I agree completely and sadly about the "Big Score" mentality you mention above. I am in the midst of trying to convince my 20-year-old son that there still is something to say for getting a decent education, ethics and a decent career.

And in my MV neighborhood those who seemed to see life that way are being rapidly replaced by "Big Score" success stories and/or wannabees.

Aug 27, 2007, 10:38:00 AM  
Blogger marinite2 said...


I wonder if people who came of age during the Era of the Big Score can survive in a world where work, saving, long-term horizons, and some personal sacrifice is required? Or are we going to have to hold their hands and get all "parental" on them?

Aug 27, 2007, 10:53:00 AM  
Blogger Eric Weise said...


Show her the "Suzanne Researched It" video. And then play for her a real-life follow up. I briefly posted on it a couple posts back."

I'll check it out. Thanks marinite

Aug 27, 2007, 12:50:00 PM  
Blogger Lisa said...

Re: today's "Mortgage Meltdown" article in the Chronicle, I emailed the writer this morning after almost gagging over the article:
Good morning Carolyn!

Thanks for the article this morning!

I must say I was tinkled pink moving from the 1st page of the article..." move up from renting and onto the equity ladder" and "the accumulation of wealth and the peace of mind surrounding homeownership" the four stories presented.

Take the first story about the couple in Antioch. They reference a neighbor who paid $575K for a comparable house just in January, when the couple in the story now can't sell their house for $475K. That's $100K less in 7 months. Hmmm.....would you say that neighbor is "accumulating wealth" and "enjoying the peace of mind surrounding homeownership"?

And the baby engineer who now has to juggle roommates to afford a TIC but is certain he'll make money in 5 years? That doesn't sound all that peaceful either.

And to suggest that homeownership is by nature a "move up" from renting, let me just say.....I sold my house in '04, have a monster bank account and love working part time for a change. You couldn't pay me to buy another house right now. And I do not consider myself a second class citizen because I choose to rent. There are times it makes sense to own, and there are times it makes sense to rent.

I look forward to an article someday about people "throwing away money" on mortgage interest & property taxes & repairs & insurance on an asset that is declining in value as lending standards continue to tighten. If they are lucky enough to sell, they call always "move up" to renting -);



Aug 27, 2007, 3:56:00 PM  
Blogger marinite2 said...



Aug 27, 2007, 4:37:00 PM  
Blogger Matthew said...

Well done and very well said Lisa !!!

Aug 27, 2007, 8:47:00 PM  
Blogger Circus Act said...


Did Carolyn respond to your note? I think she's farily new at the Chron. Kathleen Pender is usually good for a response.

Aug 27, 2007, 10:59:00 PM  
Blogger Lisa said...

Circus Act - I've emailed Carolyn before on housing articles, and she does email back. I'll post her response when/if I get one.

I thought her article yesterday bordered on irresponsible....on one hand, lots of standard fluff about how smart & satisfying it is to be a homeowner, then 4 sob stories from buyers and sellers.

Aug 28, 2007, 7:53:00 AM  
Blogger marine_explorer said...

"...they call always "move up" to renting"

It's rather incredible the Chron is still cheerleading RE at this stage. But I suppose SF is the "specialest place of all", and too much is riding on local business and speculators from afar to give up the hype completely?

And, what a great comeback lol, especially with your timely personal example. Many of us have written to the IJ or Chron over the past year + with our concerns, often rebuffed by reporters who put more stock in realtors' vested "expertise" than any cautionary observation of the markets. After all, we can't possibly know more than the average realtor or RE columnist, can we?

Now, look at the current liquidity fiasco--how many reporters predicted that? They must have been busily comparing notes on how sub-prime volatility won't drag us down. Once again, they're late to the party! It shows how rather worthless newspapers have become against the blogsphere of shared information. Lisa's wry humor is well-deserved.

Aug 28, 2007, 11:09:00 AM  
Blogger marinite2 said...

Heat Index at 0.42 today. I think that is the lowest I have ever seen it.

Aug 28, 2007, 2:47:00 PM  
Blogger Lisa said...

I'm guessing some of these journalists are homeowners, and maybe recent homeowners. No one likes to admit that the biggest "investment" of their life may not turn out so peachy after all. And I know plenty of people who really aren't able to save for anything else...6 months "emergency" fund, retirement, etc. Their housing expense sucks them dry every month.

It's still going to take time, but if exotic financing really is going by the wayside, prices have to start coming down, and I don't mean little 2% or 3% reductions.

Aug 28, 2007, 4:52:00 PM  
Blogger Matthew said...

.42 ain't the bottom there Marinite, you can be sure of that.. I predicted we'd see .4 by the end of Octoboer way back in March... looks like we'll be there sooner than later.. I still don't trust any data coming out of the Marin RE machine however.. I'd cut any heat index by 10-15% to eliminate their shenanigans and BS..

This market is toast... right along with the average Joe consumer..

Watched the last 1/2 hour of trading today and then listened to Kudlow the pumper try and rationalize why housing should continue to rise very soon... It's amazing what knuckleheads are on TV nowadays and looked on as experts.. He cut off the only rationale guy (name escapes me) who was trying to say "hey, it really doesn't matter much what the Fed does at this point, the consumer is tapped out"... of course, Kudlow blew him off, like he's got the pulse of the land...

Hey, is there any way we can collect excerpts from all these shows and BS artists and put it in a time capsule for future historians who will be studying the demise of the U.S. ??

Aug 28, 2007, 7:32:00 PM  
Blogger Matthew said...

I have to requote a very funny observation made by popcorn Neil over on Ben's blog about 6 or so months ago..

He said (I'm paraphrasing)...

"What's funny about this Mexican standoff is that it's all in the mind's of the sellers.. Any would be buyers are all inside enjoying a nice dinner with their families while the sellers are outside pancing around ready to draw their toy 45's at the first twitch or sign of life"..

Exactly... let those empty houses rot..


Aug 28, 2007, 7:42:00 PM  
Blogger mountainwatcher said...

Matt said.... "Exactly... let those empty houses rot.. "

I hope you didn't mean this little beauty....

It was a Melissa Bradley offering, not so long ago.

Any bets on what it will sell for?

Aug 29, 2007, 12:48:00 AM  
Blogger Matthew said...


I'm sure we're just not seeing the value in that beauty... it's hard to set a price on peeling paint and cracked / warped foundations, let alone the sprawling 680 ft2 of living space...

I heard or read that Melissa and some of her inner circle hypsters were buying properties left and right because home values never decrease in Marin... Well, at least she's drinking the same punch she's spiking.. Go Melissa go!!


Aug 29, 2007, 5:57:00 AM  
Blogger marine_explorer said...

"...buying properties left and right because home values never decrease in Marin"

I do hope one of them owns that swampy garage conversion that's listed in Inverness. Has that sold yet?

Aug 29, 2007, 7:44:00 AM  
Blogger Marinite said...

I hope you didn't mean this little beauty....

That's my all time fave. It's been on the market over 1.5 years. It is now marketed by Vision RE. The current owners cannot drop the price significantly because they are at their "break even" loan amount but considering 1.5 years worth of carrying costs you would think they are well into loss territory by now.

RE the Inverness Boat Garage Converted to Marin POS Shack, I dunno if it is still on the market or not. We have a reader here who lives out that way and maybe could give us an update? Hint, hint. Or I could drive out there one of these days.

You want an overpriced cracked paint, mold, and a maintenance nightmare in Marin? Well look no further than this beut:

668 sq ft, $659,990 (that's $988/sq ft). It's in Stinson so the recurring maintenance work will be considerable. And love that kitchen! Especially the shade of puke green they chose. Go ahead, make an offer, make some aging hippie's day.

Aug 29, 2007, 8:42:00 AM  

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