"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."