Monday, March 31, 2008

Vacation House Sales Plummet

This was sent in from a reader on the other side of the GG bridge, in some place called San Francisco:
Second home sales have taken a direct hit in the current real estate market slowdown, according the National Association of Realtors’ (NAR) annual survey of investment and vacation home buyers.

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

In 2007, some 740,000 vacation homes were sold, down 31 percent from the 1.07 million sold in 2006...
Hmm, Marin has a few vacation homes. But of course, as we all know, what happens in the rest of the country, or even the state, doesn't apply to us.

Saturday, March 29, 2008

Irrational Obstinancy

I love how Marin County house sellers are being used in this New York Times article to epitomize irrational obstinacy (be aware: R.H., who is prominently mentioned in this article, is a housing blogger of some note):
In 2005, Randolph Harrison and his wife, Pamela, decided to move north from Silicon Valley, over the Golden Gate Bridge into wooded Marin County to be closer to her new job. They found a six-bedroom house that seemed ideal except for the price, $1.875 million. The current owner, they knew, had bought the house a year earlier for $1.475 million.

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

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

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

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

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

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

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

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

Often, this hurts no one so much as it hurts the would-be sellers. They stay in homes where they no longer want to live, rather than accepting their loss and moving on. Or they move but endure the hassle of renting out their old home, waiting, usually in vain, for the mythical buyer who understands its charms. All the while, their money is tied up in the house, and inflation is eating away at its real value.
So are we Marinites especially prone to hurt egos? Do we take "people often go to great lengths to avoid taking a loss — or simply having to acknowledge one" to the next level?

And you gotta love the comments about stubborn sellers made by the blogger who runs The Mess Greenspan Made blog:
That fact is clear to see in many neighborhoods as sellers sit and wait, either not knowing or not caring that they have little chance of getting anywhere close to what they're asking unless that one, dumb home buyer shows up who knows less about real estate market conditions than they do.

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

Friday, March 21, 2008

Discussion Forums

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

Monday, March 17, 2008

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

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

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

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

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

That email link goes here:

Sunday, March 16, 2008

Open Thread

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

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

This was supposed to be an open thread. Sorry.

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

Thursday, March 13, 2008

Are We There Yet?

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

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

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

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

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

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

6) $1000+/oz. gold.

7) $100+/barrel oil.

8) Increasing inflation.

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

10) Whole communities on the verge of bankruptcy.

11) Huge state budget cuts.

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

Oh, and let's not forget how:

13) Fannie Mae has changed its mission statement from 'helping low-, moderate, and middle-income familes to buy homes of their own' to "Our job is to help those who house America". Before:
At Fannie Mae, the home symbolizes who we are, too. Our public mission, and our defining goal, is to help more families achieve the American Dream of home ownership.

We do that by providing financial products and services that make it possible for low-, moderate-, and middle-income families to buy homes of their own.
We exist to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market.

Fannie Mae has a federal charter and operates in America’s secondary mortgage market to ensure that mortgage bankers and other lenders have enough funds to lend to home buyers at low rates. Our job is to help those who house America.
14) The California Association of Realtors (CAR) conveniently redefined what "affordability" means so that our abysmal affordability numbers don't look quite so bad. Unfortunately, I can no longer provide a link to the original announcement of the changed calculation of affordability because the CAR has taken the page down. After going to the Internet Archive Wayback Machine to see if I could find a cached version of the page I get this message:
"We're sorry, access to has been blocked by the site owner via robots.txt."
So the CAR has deliberately blocked access to that particular page (other pages from that period are still available). I wonder why? Perhaps the recent and ongoing massive increase in California foreclosures has unequivocally demonstrated just how ludicrous, self-serving, and flawed their then new-and-improved definition of affordability really is.

But no worries, here is a post from SocketSite where they talked about it back in August, 2007:
Earlier this morning, we referenced the Housing Affordability Index (HAI) which is published by the California Association of Realtors (C.A.R.). According to the last published index (February), the percentage of households that could afford to purchase a median-priced home in the Bay Area was 12% (and only 9% in San Francisco).

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

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

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

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

According to the new model, the percentage of first-time buyers able to afford a median-priced home in the Bay Area stands at 24% (16% in San Francisco). And while that’s more palatable than 12% and 9% respectively, keep in mind that based on this new model (which takes into account relaxed lending standards and the shift away from long-term, fixed-rate mortgages), affordability in San Francisco is down about 18% from a year ago, down 28% from two years ago, and down 35% from the second quarter of 2003. That's the market reality.
You can also visit's post on this too. (Let this be a lesson to me to always quote the relevant parts of web pages so that if the page is taken down we still have some record of it.)

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

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

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

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

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

Sunday, March 09, 2008

Million Dollar Camouflage

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

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

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

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

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

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

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

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

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

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

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

Please use these numbers if you find them useful.


P.S. The median numbers for regions with more than one city are bogus, because I just averaged the totals for each city. I did the best with the numbers I had.
And be sure to check out the new Marin Real Estate Bubble Blog Forum where you can create your own discussion threads.

Siren Song

Now this is something I didn't expect to ever see... realtors and the MSM wanting to advertise on this blog. Good luck with that, schmucks:
I would like to inquire about placing a small text link on your site. You can put it into a sponsors or supporters section. Would you be willing to do this? What would you charge for a year? What do you charge to be a site supporter?
I am a Mystic Ct Realtor and am only looking to improve my traffic. Thank you for your time

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Hello Marinite,

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

The main benefits of becoming a member include...
Heaven forbid if the Marin IJ ever comes knocking on my door.

Friday, March 07, 2008

New Forum!

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

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

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


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