Open Thread

So I was at a Marin middle school today. The teacher in one class was lecturing to a classroom of mostly 13-year-olds. The topic was global warming and its anticipated effects -- loss of habitat, changing weather patterns, flooding, extinction of polar bears and other creatures, human diaspora, famine, disease, etc.

One of the students raised her hand and, after being called on, said "So your generation caused the problem and my generation has to deal with it?" The teacher was dumbstruck. God bless the honesty of children.

Needless to say my mind immediately started enumerating all the ways the generation currently in power has encouraged courses of action, laws, and policies that allow them to reap huge benefits/profits now, with little to no immediate cost to themselves, while passing the burden on to our children and our children's children.

How will the baby boomers be remembered?

This is my first "open thread". Talk about what you want.

December, 2007

Ok, so I am going to break my self-imposed rule (ok, guideline really) and comment on DataQuick's latest because, well, frankly, it's been a while since we've seen negative price changes in Marin. And besides, judging by the off-topic meanderings of the comment thread in that last post, I desperately need an excuse for a new post...

According to DataQuick, it appears that Marin and SFO have joined the rest of the Bay Area with not just hefty sales declines, but price declines as well in December, 2007:

Now, we've seen negative price "appreciation" in Marin before from DataQuick (e.g., here, here, here, and here). So it is presumptuous to get worked up over this. If a pattern forms, well, then all bets are off of course. But I will note that this is the largest single month year-over-year decline in Marin prices from DataQuick that I've seen since I started paying attention to their data.

I found this quote from DataQuick's press release interesting (to say the least):

"There's been a significant drop-off in home financing with so-called "jumbo" mortgages. Because homes are expensive in the Bay Area, this has had a much greater effect on the market there. It looks like most non-essential buying and selling activity has been put on hold until things settle down," said Marshall Prentice, DataQuick president.

Until things "settle down"? You're kidding, right?

And then...

The typical monthly mortgage payment that Bay Area buyers committed themselves to paying was $2,756 last month, down from $2,963 the previous month, and down from $2,828 a year ago. Adjusted for inflation, current payments are 5.5 percent above typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 16.9 percent below the current cycle's peak in June last year.

How can this be bad? People paying less, I mean. And the "typical" monthly payment is only 5.5% above that of Spring, 1989?! WTF is that? Eighteen years of (under reported) inflation and we are up only 5.5%?

Foreclosure activity is at record levels...

You don't say?

So what about sales? Below is a graph of the number of sales in Marin County for each month of December since 1994 (source: DataQuick archives):

Kinda reminds me of this:


So anyway, yes, that's right; December, 2007 Marin sales were the lowest they have ever been since DataQuick started collecting data.

Here is the historical view of the Marin Heat Index measuring sales activity (annotations are mine):

And what did the Marin IJ have to say... I don't care.

Ok, now it's your turn. What does it all mean? Or does it mean anything at all? Leave your comments at your leisure.

Sellers' Expectations

How true it is. And in Marin? Lots of sellers still asking, no expecting, no feeling entitled to prices from a year or two ago (emphasis mine):

During the recent boom, new housing got an even bigger price bump than existing ones because people often wanted the best, and, with a Icarian faith in the market’s eternal flight, buyers were willing to pay more and more to get the best. Now, with the downturn in the market, developers have scrambled to respond. The result? Some experts say that the price of a new house is now cheaper than an equivalent existing house.

“I think that’s true," says Joseph Perkins, president and chief executive officer of the Home Builders Association of Northern California. "New housing is a better deal for prospective home buyers because builders are responsive to the marketplace, whereas some sellers still haven’t responded to the marketplace and they’re trying to sell their homes for prices from two years ago...”

It was fairly clear as much as a year ago that the unwinding of the housing bubble would lead to recession. Never mind what the perma-bulls thought/said. Fast-forward to the present day: the housing bubble is unwinding around us and guess what? Merrill Lynch and Goldman Sachs are now on record as stating the obvious -- that we are heading to or maybe even currently in a recession. I guess not being an economist or paid to have a particular point of view is a good thing.

So I ask you: Say you are a renter who is looking to buy a house in the Bay Area or maybe you are relocating to the Bay Area (my advice: turn around and go back), would it be wise to "buy" a Marin cottage which is asking a price from year or two ago (say, around $900k) realizing that you might lose your job in the foreseeable future? Or what about buying the median $650K house in the Bay Area? Or is it wiser to rent for 1/3-1/2 the cost of "owning" (not to mention the freedom to move easily from a rental in the event of job loss) and waiting? Or does the ingrained sense of RE entitlement that so plagues the Bay Area short-circuit any such financial reasoning?

And assuming a recession leads to a serious decline in the stock markets (seems like a sure bet to me, but what do I know?), will that lead to a disproportionate number of job losses in cities like SFO and NY where investment-related business is so prevalent?

So what's a seller to do? Pull the listing and hope it all goes away by next Spring?

Money For Nothing

I found this video over at the most excellent The Mess That Greenspan Made blog. Because the video has such great potential to educate and the blogger does not add anything new to the topic, I thought it was well worth cross-posting.

It is lengthy (about 50 minutes); the first few seconds are blank so be patient and wait for the video to start.

After watching it, you can then understand why it is that savers and restrained consumers are so despised (and punished) in America today.

And consider these quotes from the video and the power they imply for us peons:

"The people who actually produce all the real wealth in the world are in debt to those who merely lend out the money that represents the wealth."

"If there is no debt there'd be no money."

'If all debts were paid off, then there would be no money at all and it would destroy the financial system and the country.'

Some November, 2007 Data

The following is November, 2007 data that was sent to me by a Marin RE agent. I added the columns in red since for some reason that I cannot fathom they were missing from the original. I'm sure it was just an oversight on her part.

(Click on image for larger view)

Awakening From My Slacker Slumber?

The Implode-o-Meter suit has been settled and has been dismissed. The last paragraph of the statement made by the Implode-o-Meter's author re-inspired me somewhat:

We feel that the outcome of this suit represents only a partial victory for bloggers and internet-based public forums in general. The judge in our suit did agree that the site was indeed fundamentally focused on an important topic of public discourse. However, almost incomprehensibly to us, he did not dismiss the suit in line with the letter and intent of the CDA (section 230) and California's "anti-SLAPP" law. We strongly believe this was a grave mistake.

As is made clear by the costs we faced in the suit, providing a forum for whistleblowing and debate on critical contemporary issues remains a risky and expensive proposition. It is virtually "death upon challenge" for any individual or small-scale operation. It is thus unclear to us why anyone would ever get involved in such an enterprise if they truly understood the peril they were placing themselves in. We certainly would not have, if we knew then what we know now.

At a time when the internet's promise of lower communication barriers for average citizens is becoming a reality, the legal system remains the greatest threat to the public's receiving the benefit of this gift. Now, more than ever, we need to provide mechanisms which enable regular people to organize and fight back against entrenched corporate and government interests which have deeply corrupted our economy and society. This starts with, and relies centrally upon grassroots communication. So-called anti-SLAPP laws, such as California's law that we attempted to invoke, seem to be more of a fig leaf put out by these interests rather than a genuine attempt at reform. Sadly, this seems to be the state of affairs across the country, and the entire country is worse-off for it.

* * *

Someone over at the Sonoma Bubble blog left a comment that lamented my taking yet another break from blogging and stated that I have a responsibility to continue blogging. Responsibility? I beg to differ. But I understand the sentiment. The fact is that now that the housing bubble is widely recognized to have been just that, the bubble as manifested here and elsewhere has lost much of its interest for me. In fact, I've barley kept up with the news vis the housing bubble these last couple of months. This bubble blog was a lot more fun when the existence of the bubble was hotly debated.

So I am not sure what to do with this blog. I've asked for help from readers but have received no commitments. I suppose I could shift gears and start focusing on the real estate industry itself as it is sorely in need of reform and frankly the NAR and its lobbying power should be outright destroyed. But perhaps they will self-reform (yeah, sure): One thing I found potentially inspiring was this statement from the owner of Marin's Vision RE newsletter:

I have not calculated the average days on market for this summary for one reason and one reason alone. The average days on market (DOM) per the Marin Multiple Listing Service (BAREIS) is NOT calculated correctly. It does not take into account a property that has been on the market with multiple brokers and those that have been removed for 30 days and then relisted. Once this is done it starts the days on market to ZERO. I will be doing an individual report on the actual DOM per community but it is very time intensive as the only way to accurately calculate the number is to look at the property history on each individual property. Since we have 659 single family homes on the market that will take a while. I promise to get you that information for the yearend report.

You mean like these Marin POSs? That one shack in Mill Valley has been trying to sell since at least mid-December, 2005 (currently also trying to rent) but because these flippers (they first tried selling five months after purchasing) are unwilling to drop the price to what the market says its worth and instead are listing for what they owe on the dump, it can't sell and it doesn't rent and so they bleed cash month after month. Great Marin investment guys.

So Vision RE is going to start reporting more realistic DOMs. If so, kudos to them. Is it possible that perhaps, just maybe, this and other similar blogs are having some effect? I mean I know I've ranted on more than one occasion about the bogus nature of the DOM statistic as commonly calculated. Can the real estate industry be reformed? It so badly needs it. One can only hope. Next stop for them is to make it clear that the bottom has fallen out here in Marin and current statistics are dominated by sales in the upper end. Furthermore, they should be making it clear that the paltry number of sales (140 or so in November, 2007) in Marin make the county statistics next to useless (and forget about being able to conclude anything based on statistics calculated for any individual town... yeah, only one house sold in Belvedere and it sold for $2 mill and Vision RE reports the town average/median is $2 mill? Give me a friggin' break already. See the problem folks? You cannot calculate meaningful statistics on a small sample size and expect to be able to generalize it to the entire population. You just can't. But that won't stop salesmen from trying).

But I digress...

Anyway, I turned comments back on so let me know what you think. Should this blog continue? What should we talk about? The bubble is old news now. Or has everyone given up on this blog in disgust with its blogger?

Because I am so very busy with work and family matters, I am more pressed for time now than I was before so please do not hesitate to email me content and let me know if you want to be acknowledged or not for said content.

PS - Please take note of the Terms of Use I added to the end of the page. I wrote it myself and because I am no lawyer I am not sure if it matters in a legal sense. If there are any lawyer readers out there who would be willing to write something better for me free-of-charge I would be most sincerely grateful.

Quote

"What can be added to the happiness of a man
who is in health, out of debt, and has a clear conscience?"

- Adam Smith, 1763