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

A Chronology for Those with Short Attention Spans

Source: NY Times (original pic here):

(Click on image for larger view)

Somewhere A Crocodile Sheds a Tear

From today's SF Chronicle:

Israel Medina admits he got too gung ho about the idea of getting rich by flipping Bay Area real estate. Medina...has seen not one, but 11, of his Northern California properties move into foreclosure in the past year. "I was a real estate tycoon; I had everything," said Medina. "Now I have nothing."

These real estate gamblers are hardly the struggling home buyers often portrayed as victims of the Bay Area's and nation's foreclosure crisis. Some bought houses as often as other people buy shoes, rarely putting down any money. More than one-fifth of 6,557 Bay Area properties that fell into foreclosure from January through September this year were owned by investors, according to a Chronicle analysis of public records compiled by DataQuick Information Systems. Of properties repossessed by lenders, 1 in 6 had been owned by people who had two or more foreclosures in their names. Eighteen Bay Area investors had five or more foreclosures.

Easy money through no-questions-asked subprime mortgages allowed almost anyone to become a real estate speculator. The flood of investors and first-time home buyers into the market helped to fuel the Bay Area's double-digit price appreciation in recent years.

A Marin resident [Rose Hodges] invested $1 million in four properties that a construction company owner told her he would fix up and flip; she lost all the money, her good credit and her own home. [Hodges] said she attended Marin investment clubs and met many people like herself who wanted to learn how to invest in real estate. "All these Baby Boomers started inheriting money from their parents and looking for ways to invest it. And the real estate market was booming," said Hodges, who learned the hard way that such investments can have a big downside. "It's crazy out there and people ought to know."

It's widely known that get-rich-quick real estate speculators flooded markets such as Las Vegas or Miami over the past few years. The Bay Area was presumed to have been relatively free of speculation because real estate here is so expensive... Why would investors buy multiple properties in a pricey market where their carrying costs - mortgage payments, taxes, insurance - would certainly eclipse the potential rents? Flipping and fraud appear to be the primary motives.

"It was a really, really bad investment," said Medina, who said he lost hundreds of thousands of dollars of his own money that he had invested in the homes. "I should have bought fewer homes. I never should have gone so crazy."

Too bad these speculators didn't lose more of their own money. Too bad the rest of us have to also pay the price of their greed. Too bad Hodges didn't read (or didn't outright dismiss) this and other such blogs. Too bad the real estate industry is a propagandist cartel. Too bad the Bay Area really isn't "special" vis-à-vis real estate; too bad it isn't "different here". Too bad so many people believed the commission-based lies, manipulations, and fear-mongering of local realtors/agents.

IndyMac's Picture of the U.S. Housing Bubble

IndyMac Bancorp has a PDF out with their housing price correction predictions. I am reproducing the following graphic from that PDF below as it provides a nice picture of the U.S. housing bubble and includes Marin as one of the "high risk" areas (click on the image to get a larger view):

I found this PDF first referenced over on the Calculated Risk blog so please go there to get the analysis (in the post itself as well as the informative comment section) and why the very conservative predicted -10% drop in prices is off by a factor of three or so (hey, IndyMac wouldn't want to scare the investors, right?).

A Real Estate "Titan" Comes Clean

Did you see this in the LA Times?

Speaking to a gathering of industry professionals Friday, longtime California real estate titan Fred C. Sands called the housing market "pathetic" and said some agents needed to start looking for other work...

In the short term, the local real estate market "is not going to get better," Sands said...

He added that he could speak with candor because he was no longer in the home-selling business...

Such frank remarks are rare at gatherings of famously upbeat real estate agents, but Sands said those in the business needed to remember the last slump and realize "the last five or six years were not normal."...

The soaring market of a few years ago will be followed by a correspondingly sharp decline, he said: "The longer the up cycle, the more excess there is, and the worse it is for what follows." ...

But wealthy areas won't escape unscathed, Sand said...

"We saw 25-year-old guys buying $3-million houses," he said of the questionable mortgage practices of recent years. "Someone who makes $100,000 a year can't afford a $2-million house, but that's what's been going on," Sands said...

"The idea that everyone is supposed to own a home is baloney," he added...

Sands counseled agents that property prices must be cut drastically to "get in front of the crisis." Otherwise, agents will "follow it down like a dope" and get even less for the properties, if they can sell them at all, he said...

Long [president of the Southern California region of Sotheby's International Realty Inc.] counseled agents to drop sellers who aren't willing to lower prices. "Let go of the fear another agent will take over and sell it -- they won't," he said...

Agents should "go with the flow" by using the downturn to prod buyers, he said. "We are salespeople. We have to be positive."...

That remark prompted Sands to interject: "But if you go too far, you lose credibility. People need to know what's happening."...

Sorry that I have to be the one to break the news to you boys, but you and your industry lost credibility a long time ago.

Why? You said it yourself Mr. Sands: you can now "speak with candor" because you are "no longer in the home-selling business".

Coming clean now is all well and good, but buyers needed that candor a long time ago. So you are still on the tar-and-feathering list.

Is there anybody out there who still believes what a realtor/agent says? Anyone?

More Marin Foreclosures

I thought you might be interested in the attached map showing the foreclosure activity near Marin. The data comes from ForeclosureRadar, a fee based service. There are over 300 foreclosures in all of Marin County, and 200 (the most the service will show at once, they are reporting 212) on the attached map.

Red pins are bank owned homes.
Blue pines are auction homes.
Green pins are in default.

Perplexing IJ Article

So this fool in Mill Valley is like so many other Marinites it seems. He lives in the house he grew up in and no doubt owns it now. Yet he is foreclosing. How can that be? I mean, thanks to Prop. 13 he has certainly inherited a ridiculously low property tax based on when the house was last purchased, probably in the 1950s. So how can this guy be foreclosing? By now you would think he owns his house outright. But no. He must have drunk deeply from the HELOC/equity extraction/refinance teat and now he is whining about its consequences:

Wealthy Marin not immune to foreclosure crisis

Ian Minto isn't exactly homeless, but he sure doesn't have his home.

The 58-year-old former banker lost his job and, last fall, began falling behind on mortgage payments on the Mill Valley house he grew up in on East Manor Drive.

Desperate, he sold the home - appraised at $1.2 million - for about $300,000 less than it was worth.

"(I felt) like I wanted to kill somebody or jump off the bridge," said Minto, who just took a job at Radio Shack to help cover the cost of a $600-a-month windowless room he is moving into on Fourth Street in San Rafael.

After that fool's story, the next third of the article is all about calming our fears and assuaging our hurt egos... about how special we are, about how we have fewer foreclosures, etc., compared to other counties (never mind that our population is far, far smaller than most and so of course our absolute numbers of foreclosures are smaller, but they are not smaller on a percentage basis (see here and here for recent action); and dang but the IJ is really pushing that message recently, isn't it?), and that if you factor out Novato and San Rafael, then there is not too much of a foreclosure problem in Marin (hear that Novato and San Rafael? The Marin IJ has just kicked you out of Marin).

Yet then, strangely, the article focuses on Marin realtors getting trained to deal with short-sales and foreclosures:

"We started beefing up the agents' education," he said [Steve Dickason, vice president and managing broker at Pacific Union in Greenbrae]. "This year it's more short-sale activity than we've seen in many years. The signs were there that it was coming. There was a lot creative financing with the lenders."

Teaching these classes is Paul Hickman, president of California Land Title Co. of Marin. He said it is vital that realty agents stay active in a foreclosure or short sale, as most clients are not equipped with the skills to close the deal.

Hickman, who started teaching the classes last year, expects to be at it for awhile.

Why would Marin realtors/agents need special training in short-sales and foreclosures?

This IJ article is just plain perplexing. Are we special or not?