Wednesday, April 30, 2008

"Crushing Hopes of an Imminent Turnaround"

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

Here are some choice quotes from the print edition of the article:
Like a brick falling from the top of the Transamerica Pyramid, national and local home prices are rapidly accelerating on their way down, crushing hopes of an imminent turnaround.

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

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

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

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

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


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

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

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

And my thanks to reader Lisa for flagging this IJ article:
Marin Assessor Joan Thayer told county supervisors Monday her department could be overwhelmed if the number of residents seeking reassessment of their homes continues to rise. Thayer expects as many as 1,000 of Marin's 74,750 homeowners to request a reevaluation of their home's assessed value by the end of the fiscal year in June - a figure she said had "doubled and may have tripled" in the past year.
And I must say, isn't it about time that our local media stops with the 'well, at least it isn't as bad here as it is elsewhere' misdirection?

Friday, April 18, 2008

March Results

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

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

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

The 213 properties in default in March is up 14 percent from February and 167 percent from a year ago, according to ForeclosureRadar.
  • Marin's housing market is described as "pitiful". Check.
  • Marin sellers are still in denial. Check.
  • The median price of a Marin house in March, 2008 has fallen more than $100,000, or 11%, from what it was in March, 2007. Check.
  • There is nearly a 13 month supply of houses on the market in Marin. Check.
  • 15% of the houses on the market in Marin are currently in default. Check.
  • 50% reduction in sales as compared to last year. Check.
And the IJ poll does not suggest people think things are going to turn around any time soon:

And I think this point made by the Calculated Risk blog about the March Bay Area sales results, and made here before as well, is worth repeating:
This is why the Case-Shiller repeat home method is better than the median price method for calculating home price changes. Using the median price method, it appeared prices were holding up pretty well at the beginning of the housing bust simply because the mix changed - fewer low end homes were sold. Now it's the high end being hit. And finally ...

Income Needed to Buy vs. Median Household Income

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

Saturday, April 12, 2008

Just Say "No"...

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

Where does the bailout business stop? Simple. It stops at the beginning - by saying no to bailouts, subsidies and slush funds.
I am one of those responsible people; you probably are too. I absolutely do not want to pay bail out money to those people and organization who could not act responsibly; I doubt you do either. The thought of such bail outs is utterly infuriating, outrageous.

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

Friday, April 11, 2008


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

Let this be a lesson to all current "owners" who have seen their house price drop and to all would-be buyers who might be worried about their soon-to-be-purchased house losing value.
It took a jury less than two hours Thursday afternoon to unanimously clear a real estate agent accused of failing in his duties to a couple he helped buy a tony Carlsbad home.

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

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

Monday, April 07, 2008

Greenspan's Latest CYA

Greenspan's latest message to the world; here's the executive summary:
'There was nothing the Fed could have done to prevent the housing bubble so we didn't even bother to try.'

Friday, April 04, 2008

Marinites Elevated to Rank of "Poster Children"

Here is the latest on that spoiled, entitled Marin couple (ok, ex-Marin), who I've blogged before, Marty and Vernon Ummel, who agreed to pay a stupid price for a house in San Diego (hey, they came from Marin where people pay stupid prices all the time; it's part of their culture) back in 2005 and now that their house has lost value they are suing the realtor; jury selection has begun:
Tomorrow, Vernon and Marty Ummel, who purchased a $1.2 million home in Carlsbad three years ago, will try to convince a jury that their real estate agent defrauded them when he failed to inform them that similar houses on the same block were selling for more than $100,000 less than what the Ummels had paid.

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

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

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

“The plaintiffs are not victims of a subprime loan scheme, nor are they victims of the declining real estate market,” attorneys for the Re/Max agent wrote in court papers supporting their request for a delay. “Plaintiffs simply think they paid too much for their home when they purchased it. Nevertheless, plaintiffs have now painted themselves as the 'poster children' of the current crisis.”
Well, I certainly do not expect the Ummels to win, and I hope they don't because they agreed to pay a stupid price for their house and they should not be exploiting the legal system to make up for their poor financial decision-making.

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

As one commentor said:
the laws of agency and the concept of fiduciary duty are in direct conflict with the manner in which agents are compensated. Thus, this scheme is designed to be a losing proposition for the buyer. Always.
If only that one conflict of interest were to be eliminated, if agent compensation was not tied to the final selling price of a house, then we would be that much closer to a free and open market for housing. It would not take us all the way there of course (have to get rid of all the government sponsorship, tax breaks, etc.), but it would be a significant step in the right direction.

Thursday, April 03, 2008

Confidence? What Confidence?

“Federal Reserve Chairman Ben Bernanke and the Bush administration on Thursday defended the decision to rescue Bear Stearns amid questions by lawmakers about why the government was helping Wall Street investment houses but not people on Main Street.”
I gagged when Ben Bernanke actually tried to defend the Bear Stearns bail-out by claiming a crisis in confidence. So exactly how confident are investors in the good 'ol US of A supposed to be now that the Fed has to bail out 80-something year-old investment firms?

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

And does Bernanke even care about Americans or does he just care about those Americans who happen to work for Wall Street? Here's one reader's answer:
How do the Master Planners feel about the American household, about the little guy? Here's some of Bernanke's testimony today on the hill:

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

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

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

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

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

Mr. Bernanke: "No sir."

What they really meant:

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

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

Kennedy: "I asked you first."

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

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

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

Bernanke: "No Ben, you do that." "No, you do it." "No, you do it."
Angry yet?

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