Sunday, September 30, 2007

Differing Perspectives

As Proposed:

As the architect envisioned:

As the Planning Dept insisted:

As the crew constructed:

As the Sales Dept described:

What the customer really wanted:

"There's a flood on the way."

Yesterday the issue of ethnic on ethnic predation came up. The local fishwrap this morning has a classic example along with some other bits of flotsam and jetsam. The pertainent tidbit: Jorge Hernandez was approached by the real estate agent who had helped his parents buy a home. Hernandez considered him a trusted friend.

This house at 260 Bedford Place in Thousand Oaks is listed as being in default under a deed of trust. At the time of the initial publication at the notice of sale, the unpaid balance, interest and other estimated costs added up to $637,447.39.

The agent asked if Hernandez could cosign a mortgage for a family with seven children. He explained that the family was constantly being evicted for having too many children, and that the loan would help get a place of their own. Hernandez said he was told he wouldn't be financially responsible for the house. Wanting to help, Hernandez cosigned. Two years later when the loan rate adjusted up, he was notified that a notice of default was filed against him.

The same article also chronicles the "tragedy" of an eviction in Oxnard: During a recent visit to a house on F Street in Oxnard, Wilson-Bolton spoke softly to five children and two women standing by the front door. One of the young boys translated the news in Spanish to the family: The homeowner, Hector Alvarado, was way behind on mortgage payments, and the bank was foreclosing.
...Alvarado said in a follow-up meeting that he'd probably pass on the $1,000 (vacate offer) from the bank if he could stay longer to find housing for his extended household of 12 people.

what was that I was saying about the MSM attempting to put a face on the events?

Saturday, September 29, 2007

LIFO and The Demographic Consequences

LIFO means last in first out. No one was complaining when the recent housing boom was bringing unprecedented numbers of minorities into the ranks of homeowners but you can bet that when they start losing "their" homes in equal proportions that the cries of racism will ring in the halls of government.
Nearby Oxnard will be one such ground zero. 66% of the population lists themselves as Hispanic. Oxnard is also infamous for its' insane development policies. Just another case of the perfect storm.

Friday, September 28, 2007

It's Not Just The Psychology Stupid

Mary Umberger at the Chicago Tribune thinks she's got it figured out:

...there's widespread agreement that traditional economic forecasting, based on previous downturns, is of limited use because this slump is unique. Mortgage rates are generally not at daunting levels, employment is relatively steady, and there's no national crisis sending buyers to the sidelines -- circumstances that have put the brakes on housing before.

To paraphrase an old political line, it's the psychology, stupid.

I've got news for you Ms. Umberger.
It's the prices, it's the credit markets, it's the future expectations, it's the demographics, it's the overbuilding, it's the cost of living, it's balance of payments, it's taxes, it's lagging salaries, it's consumer commercial and government debt and yes, it's the psychology.

Wednesday, September 26, 2007

Smoot & Hawley Were Visionary

The Smoot above isn't the same Smoot but according to urban legend is related.

What's going on? Bloomberg:The House Ways and Means Committee, seeking revenue to help homeowners in foreclosure, unanimously approved higher taxes on the sale of vacation homes.

The panel adopted a Democrat-drafted provision that would make it harder for people who sell their second homes to exclude as much as $500,000 in profit from capital-gains taxes. The provision would raise $2 billion in additional taxes over the next decade, according to an estimate by the congressional Joint Committee on Taxation.

Hardly seems the same on the surface. What do they share? An absolute inverse relationship between intent and results. Look, removing the tax benefits of selling are not going to raise tax revenues and they aren't going to free up the housing constipation. This is just random legislation that can only do harm.

Bonus points for identifying the Smoot in the picture.

Who's Next?

CFC has been fun and now Lennar is getting spanked. Interestingly I can't seem to tease out the the land writedown details. I can't be sure but it almost looks like when they optioned raw land they were putting the property onto the books at the purchase price. That wouldn't be right as they aren't carrying the associated balancing debt until they actually close. That would be a horrendously misleading effect on their asset totals. And surely they didn't have $850 million in options that expired or some combination of owned land being revalued and expiring options.

Let's just hypothetically assume they were putting land on the books at purchase price when they only had options. If they were doing it, who else? That's the question. Who's Next? Oh and for a laugh; one analyst revised his outlook for Lennar from $45 down to $31. So $23 is ia screaming buy? One can only guess how much he has in the portfolio.

Okay, recent high flyer, hasn't taken their turn at the guillotine, possible phantom landholdings, burning cash. NVR? Look at this chart. Pulte, Centex and Ryland are all similar and they're down a whole lot more. For real fun with charts put up Bank of America, Countrywide and a random Homebuilder. For years Countrywide traded with the banks and then this spring it started trading like a HB. Math is fun.

Tuesday, September 25, 2007

PPT Don't Scoff Too Soon

Gee, Case-Shiller comes out with the biggest y-o-y drop on record and predictably the HBs crater right? Well then what's up with the "technical" retracement to fill the gap? What happened since market opening and 11 AM Eastern that is causing people to pay more for some of these POS than they were willing to pay yesterday? I'm not a chartist and I don't believe in the plunge protection team but that doesn't mean I have no sense of smell. Something stinks here and it is an "upper decker" in a Hovnanian "Deal of The Century" model home.

Monday, September 24, 2007

Canaries In Wrightwood California

First DQNews reports sales for August:

WRIGHTWOOD 7 $235,000 $327,000 -28.13%

Then reports 169 properties for sale.

That's right, 2 years inventory. And no, this is not an artifact of strangely low sales. This is what happens and this is going to get worse, a lot worse. No, let me rephrase; a whole freaking helluva lot worse. There are about 2400 units in Wrightwood or 1 out of 15 for sale right now. Oh, and only about half are occupied. The rest are seasonal and/or vacation homes. Now look again at the DQ numbers you skimmed in this post. Yep, a median decline of 28%. Do you think some speculators missed the last lifeboat? Sure as heck they did. Do you think some people find themselves carrying debt that "no longer matches their lifestyle and long term life goals?" Don't laugh, that's what a former neighbor said to us 11 years ago when sending their house back to the bank.

Here's the cheapest offering: Classic Mountain Cabin. I don't know about you but $260/sf for "rustic" on a 3320sf lot is not my idea of classic.

More on Wrightwood soon as we discuss Realtors® drinking their own kool-aid and the new status of the investment property we sold there last April '06 when the inventory was 66 properties.

Dear Homeowner

Dear Homeowner,

As your friendly neighborhood banker (a Deleware, USA corp, servicing unit Mumbai, India) it has come to our attention that you recently attempted to sell your home. As the note holder of your oh, so very generous mortgage we watched with interest and then with some concern at your efforts. Then when you contacted us with the possibility of a short sale we grew truly alarmed. Seeing as the "best" offer you could garner at 75% of your previous purchase price fell through on appraisal we hate to pile onto your troubles but we have some bad news. If you look at our agreement you will notice that both rate and conditions depend upon a loan to value (LTV) of 80% or less. That is no longer the case. We can offer you either a limited range of new loans based on the new 105% LTV at today's current market rates for such products or we can arrange an impound account for private mortgage insurance (PMI) for your account until things improve.

Best Regards,
The Bank

P.S. When calling please take into consideration the time difference at out servicing unit in India. Thank you and look forward to hearing from you soon.

Saturday, September 22, 2007

China Makes Mattel Bendover

It worked. The Chicomms bluffed and Mattel folded their hand taking the rest of the US down with them. Next stop Taiwan "reunification." Things will never be the same.

US New & World Report:
In a high-profile meeting with Chinese business and political officials, the head of Mattel's global operations, Thomas Debrowski, said that the company "apologizes personally to you, the Chinese people, and all of our customers who received the toys."

An American apologizing to the Chinese? He must have had a gun to his head, right? Or be part of some big conspiracy that will ultimately lead China to world domination? "It would not be beyond the realm of possibility," one blogger fretted, "to think that the Chinese pressured Mattel into its statement."

So now the Chinese have become so powerful that they call the shots at America's biggest companies....

The company's executive vice-president of worldwide operations, Thomas Debrowski, expressed remorse to Li Changjiang, the head of China's quality control agency, for the recent spate of product recalls (, 9/5/07). "Mattel takes full responsibility for these recalls and apologizes personally to you, the Chinese people, and all of our customers who received the toys," Debrowski said, according to media reports from China.


Your face will turn to alabaster when you find out the servant is your master.

Saturday Rock Comment

Saturday Morning Rock Comentary courtesy of Pulp Fiction and Lynyrd Skynyrd. Something sure stinks when the Fed unamimously votes 50bps, the stock market looks out 6 months and sees all time highs, the CRE market is following the residential market in double quick time. All is good. Stay calm. My only guess it that bonuses are computed at the end og the 3rd quarter in 10 days which could make for some very unhappy investors in December.

Friday, September 21, 2007

TTI Introduction

Yep, that time of year again. The Texas Transportation Institute at TAMU he released their annual Congestion Report. You've all seen the headlines; Eleventy Gazillion Hours/Gallons/Whatever Lost to Congestion! For the last 8-9 I've been publishing my response to this dreck and in the last few years it appears to be paying back. more and more people are looking at the report with a critical eye. It takes time to "analyse." At least this year the formulas are in the document and don't have to be tracked down in a file cabinet under the collapsed stairs behind a sign that says "Beware of the Leopard."

Oh, and the second picture is measured by the TTI RCI as freeflowing uncongested travel.

Wednesday, September 19, 2007

The Bendover Congress

House approves bill helping mortgage borrowers
By Robert Schroeder, MarketWatch
Last Update: 4:24 PM ET Sep 18, 2007
WASHINGTON (MarketWatch) -- Reaching out to hard-hit borrowers in the subprime-mortgage market, the House on Tuesday passed a bill that lowers down payments for borrowers, raises loan limits and boosts funds for housing counseling.
Passed by a vote of 348 to 72, the bill reforms the Federal Housing Administration and is the latest lifeline thrown to borrowers from Washington as the fallout in the mortgage market continues.
About two million loans are expected to reset to higher rates in the next two years, with defaults expected to follow. Congress and the White House have floated various proposals to stem the damage.
The bill directs up to $300 million a year into an affordable housing fund.

Hat Tip to Sweet Cashback who posted in the previous thread while i was preparing this post.

Tuesday, September 18, 2007


That third 50? The dollar v Euro rate soon. Welcome back stagflation. It took years of missteps to bring you back but now you can settle in for a long stay. Good news? Well I'll had to look around to find something good out of this but China is screwed even worse.

Monday, September 17, 2007

Hovnanian Declares Victory

The Financial Entertainment Network, CNBC has given the Hovnanian PR head a free commercial spot:
Homebuilder Hovnanian Enterprises said its weekend sales blitz on some of its hottest real estate properties was a clear success but exact figures are yet to be determined.

"It has been phenomenally successful," said Doug Fenichel, head of public relations for Hovnanian's Northeast region.

"The number of people visiting our centers was in the thousands, and that was just in New Jersey," he said. "We knew people were ready to buy and many people found deals they liked and are buying homes."

Okay. Now that the headline is out the bad news can trickle in over the next few weeks. Where is the media in this? The PR head says "clear success but has no figures to share? Bull. This jerk was up all night pouring over every update from every sales office all over the country. He knows how many lollipops were given out and what color. We need reporters who will call these liars on this crap.

Saturday, September 15, 2007

Math is Hard

John Lockwood is the gift that keeps on giving. Today we learn the forclosure ratio in Sacramento is not so bad. John dons his proffesorial robes and thus intones:
What’s the real [foreclosure] ratio?

To get an idea, let’s focus exclusively on single family homes for a moment. According to the 2006 Sacramento County General Plan, in 2006 there were 149,368 single family homes in Sacramento County. In 2005, 21,103 single family homes sold through the MLS in the county. In 2006, the number was down to 13,597. Averaging those two years, we get 17,350, which is 11.62% of the 149,368 homes. (Or put another way, a home turns over on average every 8.6 years).

The number of foreclosures is rising every month, but let’s take stock of where we are now, as of September 14, 2007. How many unsold, foreclosed single family homes are inventory right now? The answer the MLS gives is 1,724 for bank-owned single family homes in Sacramento County. Dividing our 1,724 bank owned single family homes by our total number, 149,368, gives us 1.15%


Alright, alright. Settle down, stop laughing. Math innumeracy is not funny even when it happens to a realtor. Should we all chip in and get John a clue of should we let him keep on keeping on for our continued amusement?

Focus on 92397

Wrightwood is a great little village deep in the San Bernardino Mountains. With 165 homes for sale and only 10 selling last month they are experiencing the same slowdown we see nationwide. When we sold one of our rentals in Apr '06 there were 63 for sale and sales rates in the 20s. Those 10 that sold last month went for a median $315k. Of the 165 for sale only 18 are below that price. Sloppy statistics I know but it looks like 5 of the 18 and 5 of the remaining 147 can expect to sell this month.

For you net addicts there is a nifty you-control camera downtown here.

Friday, September 14, 2007

Y-O-Y Comparisons

In case you missed it DQNews said in Feb '07:

Change in Statistics Methodology

February 14, 2007

Note to the news media and others:

We have made a couple of changes in the way we generate our sales counts and median sale prices. These changes, which reflect the use of new tools that allow us to provide the best data possible, will take effect starting with our published January 2007 sales statistics.

The highlights:

Sales counts: Changes in our methodology to determine the number of sales transactions have resulted in a roughly 10 percent increase, on average, in our historical monthly sales totals. In most cases this has little if any impact on the year-over-year increase or decline in sales.
How do those 2007 vs 1992 comparisons look now?

410 Avocado New Price Point

Talk about wasting my time. Countrywide is still trying to sell my Koi Farm (w/free house). Unfortunately they are still pricing like it is 2005. The latest ploy? An online "auction." Auction kinda sorta. Opening bid is still $200k above my eventual purchase price and there's a reserve price. WTF is this sale technique? I can go to the listing agent and submit my $450k offer with no muss, no fuss and a quick answer. Instead they want me to submit a blind bid againsy a reserve price and wait to see if I am outbid or rejected in two weeks? Note to CFC: I have money, you don't. This is not your game, it is mine and you had damn well better get a whole lot smarter real fast or you won't even have a seat at the table in a few months.
Auction here. Decription provided: Great potential for this this property located in exclusive area of Camarillo known as Las Posas Estates. Country feel, but close to shopping, 101 fwy and coast. Just under 1 acre of flat, usable land on a private drive lined with mature eucalyptus trees. Could be $$$ estate!

Could indeed be a $$$ estate. too bad they are asking $$$$$. Oh and their "private drive is a "shared" driveway with the neighbor.

This is my canary in the coal mine for CFC prospects. When we first looked it was because it was one of the highest priced holdings on their REO list. Then we laughed at the condition and price. Then we noted that CFC was not paying attention. We applauded when they cleaned up the place and secured it and lowered the price. Obviously somebody "up the hill" got the word and made this a priority. Now after a hopeful burst we see the slide back into the old business practices. Obviously the disposal team at CFC is not yet operating in the best interests of the stockholders. I understand. They are overworked and cannot get enough staff up to speed fast enough to stay ahead of last months 15.4% m-o-m increase in FCs in the portfolio nevermind have enough already for the 176% y-o-y increase. Still the shareholders need more cash and fewer houses on the balance sheet and this puppy sticks out for several reasons. Cut $150k now and $2k per day until there is interest. $2000 per day? Yes, you have to understand that prices in the area went up $1000/day every day for several years. They need to get out in front of the great unwinding. FCB and Legion can discuss the trading potential. Anything breaching the low 20s is going to make nearly whole a lot of speculators who are now nervous seein how low it can go. I was fascinated by the Oct 15.00 and 17.50 puts and particularly the low price of the 15s. Not investment advice, never is but...

Thursday, September 13, 2007

Timeline 2007-08

Oct '07: "Honey, we got the notice that out homeloan is going to reset next month. Can you call Ditech next week and have them put us into that lower rate re-fi they promised us back in Aug '05?"

Nov '07: "Wow, I knew it would go up but I didn't think... No matter. It's only for a month. Did the new guy at Ditech or the others you called at Countrywide or IndyMac call back yet?

Dec '07: "I'm sure glad we didn't go overboard on Black Thursday. These gas prices don't help either and are you sure there's no more overtime at the shop?"

Jan '08: "Honeybear. I've been looking at the bills coming in. Did you know that our decision to start making just the minimums like we've been doing while we get the mortgage mess straightened out allows them to bump our interest rate?"

"Okay. I think I've got it. We'll pay off this one card that went to 18.49% and shuffle these two with that transfer offer. Then we'll just ignore the mortgage because that Angelo guy working the phones at Countrywide said we can wrap up the whole re-fi thing next month anyway."

Feb '08: "What? What do you mean nobody is bringing their BMWs for airdams, Recarros and metallic paint anymore? They can't lay you off, you are one of their highest paid employees! Bad timing too as the loan against 401k program at my office was suspended under some silly reserve requirement rule. We'll just make due with the cashout re-fi until this all blows over next month."

Mar '08: "I don't care what your records indicate! We paid that last month."

Apr '08: "Hon. Sweetie. Do you think with all the time you have you could fix up the place? Between all the work we've put into it and having owned it for almost three years we could sell for enough to cover everything, get a fresh start and maybe even have a little left over for a vacation... Honey? Have you been drinking your breakfast again?"

May '08: "The realtor tells me we can't get what we paid nevermind the 30% appreciation that's happened since we bought. What should we do? Ask 25% over purchase and forget the vacation or go to Help-U-Sell?"

#1 Again

None of these namby-pamby 100-200-300% increases in foreclosure activity. Ventura County is #1 with a bullet.

Ventura County Star:
Anyone wondering just how many Ventura County properties are being lost in the battered real estate market need only look at the foreclosure sales from the first half of 2007.

With 548 tallied through the second quarter, foreclosure sales have increased 784 percent compared with 62 in the first half of 2006.

It was the largest upswing among seven counties in the Southland region. Santa Barbara County's foreclosure sales rose 768 percent and Los Angeles County's jumped 675 percent.


Okay, 62 FCs in a population of 815,000 is just plain old noise it is so low but equally more than 1000/yr already is very alarming. I don't think a statue of St. Joesph buried in the yard is gonna get this job done. Time to go back to the olde religions. Anybody gotta spare realtor we can burn in the Wicca man?

Wednesday, September 12, 2007

410 Avocado New Dress and Lipstick

Everbody remembers this diamond in the rough [1, 2, 3]. A few days after blogging about this Countrywide REO somebody got "the word." A clean team rushed in and cleaned up all the crap and mostly secured the property. And now the property is off the Countrywide REO site and offered by Coldwell Banker at an amazing $250,000 reduction. So, when you read about Countrywide cleaning up their balance sheet you've got to wonder what's really going on. Was on their books a bit under $1m and suddenly not on their books but still apparently for sale. Makes me wonder about their balance sheet claims in general. Here's the description:

REDUCED $250,000 [$949,900]. Los Posas Estate that needs help! Great location, large lot, pool, spa, and two story house with a garage that opens to the backyard. So much potential here. Has the remains of a Koi farm with separate breading pools on the right side of property in the back. Check with the HOA regarding the use. Could be a fabulous estate with a lot of TLC.

"Separate breading pools" eh? That way when it comes whiskey and gunpowder time you can grow and prepare your own private fish fry.

UPDATE: The house has "reappeared" on the Countrywide list

Monday, September 10, 2007

Square Feet and Hedonics

Highlights of Annual 2006 Characteristics of New Housing

Please note that the estimates shown here are based on sample surveys and subject to sampling variability as well as nonsampling error.

In 2006:

· The average single-family house completed had 2,469 square feet, 769 more square feet than in 1976.

· 78% of all new single-family homes completed were speculatively-built (house and land are sold together as part of the same transaction), up from 65% in 1986.

· 39% of new single-family homes completed have four or more bedrooms, almost double the rate of just 20 years ago.

· 26% of new single-family homes sold have 3 or more bathrooms, almost triple the rate from 1986.

· Half of all single-family homes were completed in the South region, up 10 percentage points from 1976.

· Approximately 90% of all single-family homes completed have air conditioning!

· Approximately 95% of new single-family homes sold have at least a 1-car garage or carport.

· In the Northeast and Midwest (75%) of the homes completed have a basement, but in the West only 20% have a basement and that drops to 10% in the South.

· Across the country, over half (53%) of all single-family homes sold have at least 1 fireplace.

· 25% of new single-family homes completed have a deck, down from 34% in 1996.

· Almost 70% of all new single-family homes sold use gas as the primary source of heating fuel and approximately 30% use electricity as the primary source.

· Attached single-family homes account for nearly 15% of all new single-family homes sold, up from 11% in 1996.

· Currently vinyl siding is the most common principal exterior material at 30% of new single-family homes sold. In 1996 wood was 22% of the share. It has now reduced to 5% in 2006. Regionally the exterior wall material of preference is: Vinyl - Northeast (86%), and Midwest (67%); Brick - South (41%) and Stucco - West (62%).

· The average sales price of new single-family homes sold (including land) was $305,900. In 1996, the average sales price was $166,400. This is an increase of over 84%!

· The average price per square foot for new single-family homes sold was $91.99, up from $64.38 in 1996. Regionally, it is most expensive to build in the West at $120.66 and least expensive to build in the South at $80.32.

· Over a tenth (12%) of all new single-family homes sold were built on lots of at least 22,000 square feet (approximately a half an acre); this is virtually unchanged from 1986 and 1996.
Historical Census of Housing Tables
Plumbing Facilities
In 1990, only 1 percent of our homes lacked complete plumbing facilities. But, things were much different in 1940, when nearly half lacked complete plumbing. Then, about ten States had rates approaching or exceeding 70 percent. In succeeding decades, the proportion of homes lacking complete plumbing dropped dramatically, falling to about one-third in 1950 and one- sixth in 1960. It is interesting to note the States with the lowest percent- age of such homes in 1940 were higher than Alaska, which topped the 1990 list.

Complete plumbing facilities are defined as hot and cold piped water, a bath- tub or shower, and a flush toilet. In earlier censuses, these facilities must have been for exclusive use of a housing unit's inhabitants; this requirement was dropped in 1990.

This is not exactly scientific as it compounds too many factors and makes assumptions about the distribution of housing stock age but it seems that adjusting for true inflation and hedonics does a lot to explain the "hockey stick."

Shadow Inflation Replacement

Using John Williams' Shadow Government Statistics to compare CPI-U to the way inflation was measured in the early 80s I was able to back out the inflation bias at the right end of the Shiller graph.

Date CPI-U Shadow 1980 Difference
1890 $3.56 28.09 $1.45 69.13 1.46
1900 $3.60 27.78 $1.46 68.36 1.46
1910 $4.57 21.88 $1.86 53.85 1.46
1920 $8.57 11.67 $3.48 28.72 1.46
1930 $8.47 11.81 $3.44 29.06 1.46
1940 $6.89 14.51 $2.80 35.72 1.46
1950 $11.80 8.47 $4.79 20.86 1.46
1960 $14.43 6.93 $5.86 17.05 1.46
1970 $18.20 5.49 $7.40 13.52 1.46
1980 $35.98 2.78 $14.62 6.84 1.46
1990 $61.43 1.63 $28.17 3.55 1.18
2000 $82.60 1.21 $54.35 1.84 0.52
2007 $100.00 1.00 $100.00 1.00 0.00

Now that's not so scary, is it?

Sunday, September 09, 2007

Schiller, Inflation and Hedonics

You've all seen "The Graph," done the double take and decided we are totally screwed. In a rare break with the bears let me go into a little of my reasoning why "The Graph" is wrong. There are 4 general adjustments I will make to "The Graph":
• vertical scale 0-200 rather than 60-200
• inflation using the old metric rather than the BLS CPI as adjusted
• hedonics
• date range

Then for something completely different, a look at housing prices as a percentage of monthly income (two ways, regular income and regular + investment income).
For today however The same graph with a true vertical scale:

Depending on chores I may get the shadow inflation graph discussion up this afternoon, or not.

Friday, September 07, 2007

Quote O'Note

"So what if prices fall another 10% - if you plan on holding on to the house for five years or so, you will still walk away with a nice profit, tax-free." - Purva Brown for John Lockwood, Realtor® Elite Properties wesite.

Well give ole John the benefit of the doubt that it was an oversight to say "will" rather than "could" and of course it goes without saying that Realtortalk® is not investment advice no matter how much it looks like investment advice. Especially since were this investment advice it is collosaly bad.

Update: Purva wrote the article for John's website. John is the broker of record and responsible for the content.

Math innumeracy is a sorry thing to see.

37 Months Inventory

I love the Inland Empire. The name, the weather. Classic California hype. Now everybody's favorite Realtormadam Leslie Appleton-Young is giving the IE Real Estaters some advice. Get this; refuse to list some homes. "Sex"ceprts from the Press Enterprise:
"The best thing you as a real estate professional can do in this market is to encourage sellers who are not serious about selling their homes not to list. Don't take a listing from someone on a hope," Leslie Appleton-Young told a group of Inland mortgage brokers and agents in Rancho Cucamonga.
"The problem is there are no buyers," said Bayer, who attended the meeting with Appleton-Young sponsored by the Citrus Valley Realtors Association and the Inland Chapter of the California Association of Mortgage Brokers.

Bayer said in Moreno Valley, 59 homes in the multiple listings sold last month, while there are 2,200 homes on the market. She figures at that rate, it will take three years to sell all the houses now for sale.

Do the math.

Nouveau Riche In The News

Money CNN has a great 1-2-3 bubble story. Our old friend NRU is back in the news. Excerpt:

"I was going nowhere," she recalls. "How was I going to find my fortune?" Then a girlfriend introduced her to Nouveau Riche University.

Not exactly a university, Nouveau Riche offers real estate investment classes -and a host of related products and services - to would-be tycoons. In April, Cuevas plunked down tuition of $16,000 and attended a weeklong program in Phoenix. Two weeks later, emboldened by her instructors and an advisor assigned by the university, she refinanced her home, taking out $200,000 - a large share of her equity. She used the money for down payments to buy - sight unseen in one case - three investment properties through a real estate agency controlled by Nouveau Riche. By midsummer Cuevas' portfolio of investments had grown to include a condo in Colorado, three acres of undeveloped land in the Smoky Mountains, and a three-bedroom house in San Antonio. Her debt load has grown too, thanks to the hundreds of thousands of dollars in loans she took out on the properties, but she doesn't worry. "I learned how to be bold at Nouveau Riche," Cuevas says. "They're the market experts, so I trust them to help me buy. I can't wait to make my next purchase!"
Cough, sputter...

Thursday, September 06, 2007

Fed Easing?

If you think with stock indicies within 1/2% of all time highs and oil at $77/bbl and inflation 40% above channel and the LIBOR spread widening to the upside that the FEd will ease you are krazy.

Tuesday, September 04, 2007

Countrywide Crimes with Local Repercussions

The Arizona Republic reports:
Countrywide's layoffs hit Chandler facility
Luci Scott
The Arizona Republic
Aug. 31, 2007 10:07 AM

Nearly 50 people lost their jobs at Countrywide Financial Corp. in Chandler in the recent nationwide layoff of 500, company spokesman Rick Simon said.

"There were something shy of 50 positions at the facilities in Chandler in the reduction in force," Simon wrote in an e-mail Thursday. No one lost a job in the company's operation in Tempe, he said.

The largest group to lose jobs was about 100 people in Richardson, Texas. "All the rest were smaller groups due to the closure, consolidation or resizing of 16 stand-alone branches in 10 states across the country," Simon said.

He left open the possibility of more layoffs as the mortgage lender, the nation's largest, tries to weather the credit crunch.
Read that last part again from 5 days ago. Several people have reported a rumor that 7,000 may be the next to fall. This has the potential to take 20% off Thousand Oaks/Moorpark/Simi Valley home prices overnight by essentially doubling the sub-regional for sale inventory. We'll be following this story.

We Need a New Fed Board

"Keeping families in their homes is a matter of great importance to the Federal Reserve," said Kroszner, one of the Fed board members who has taken the lead in dealing with the current mortgage crisis.
This lovely quote from a Yahoo Business story.

No, here is the Fed's Mission:

The Federal Reserve System is the central bank of the United States. It was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system. Over the years, its role in banking and the economy has expanded.

Today, the Federal Reserve’s duties fall into four general areas:

• conducting the nation’s monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates
• supervising and regulating banking institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers
• maintaining the stability of the financial system and containing systemic risk that may arise in financial markets
• providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation’s payments system
Anybody see anything about "keeping families in their homes?"

Buckets of Our Money

I thought "no bailout crowd" was in the minority but even the LATimes seems to be getting it. The smart people already know the system isn't fair. What the politicos and big money types never counted on was the visceral reaction to having that rubbed in our faces. There also seems to be some forgetfulness as to an old concept called "consent of the governed."

Is America really pro-bailout?
Politicians are sorely misreading public opinion of imperiled homeowners who bought into the bubble.
By Peter Viles

September 4, 2007

President Bush announced his intention last week to reach out a hand to the "many Americans" who "may have been misled" in the sub-prime mortgage market. Two days earlier, presidential hopeful Barack Obama called for fining "predatory lenders" to bail out "hoodwinked" families. L.A. City Councilman Richard Alarcon wants a $5-million revolving fund to "help homeowners on the verge of foreclosure." The news media report on families losing homes, disabled owners facing foreclosure and newlyweds being tossed into the street.

Here's one tale of sub-prime woe you may not have heard. Casey Serin, a twentysomething real estate investor in Sacramento, bought eight houses in four states with little or no money down, couldn't sell them and couldn't pay the mortgages, and so naturally began losing them to foreclosure. He then began keeping a self-pitying online diary he called

Serin hasn't drawn much notice from politicians or the media, but real estate bloggers have so vilified him that CNet's granted him the title "world's most hated blogger." And cases like his help explain the disconnect between public opinion and bailout-happy politicians and the elite media: According to a recent Fox News poll conducted by Opinion Dynamics, there's 70% opposition to a taxpayer sub-prime bailout.

"It is amazing all the sympathy we are seeing from politicians for people who knowingly took out loans they couldn't afford, often lying on their applications to do so," commenter "srl" posted at the LA Land blog I write for the Los Angeles Times....
You can find thousands of similar comments on scores of "housing bubble" blogs. I asked Patrick Killelea, whose blog ( has long predicted the current housing crisis, to quantify his readers' feelings about a bailout. "It is easy to quantify," he replied. "100% against."

How can these people oppose helping out their fellow Americans? Easy. Many or most of them saw this crisis coming years ago -- not through any real estate wizardry but by observing the signs that have been in front of us through most of this decade. In large parts of the United States -- and in all of Southern California -- the housing market turned into an obsession, a mania. So when the mortgage industry nearly collapsed this summer, Americans were fully versed in 100% financing, "liar loans," "teaser rates" and "flippers." There was no mystery here, no unforeseen "perfect storm."
But it's striking how little attention the views of the anti-bailout bears have gotten. Politicians, by rushing to the defense of recent home buyers, give the appearance of endorsing price stability at historically high levels. This makes little sense in Los Angeles, which ranks among the least affordable markets in America when housing prices are matched against income levels. Why should government favor today's owners over tomorrow's buyers?

A blog commenter on the edge may not sound very menacing, but this point of view is widespread, well supported and worth listening to as we deal with the remains of the housing bubble.

Sunday, September 02, 2007

Unsafe at Any Rating


Watching the rating cuts trickle out of the derivatives forest is akin to searching for elephant dung on a path to try and work out how many pachyderms are in the jungle. There's clearly a herd in there. And it's probably much bigger than the ordure you have seen so far would suggest.

Choice excerpt:
`The vehicles are not structured to forcibly liquidate assets in times of crisis,'' Moody's said.

The reason AAA instruments are historically safe is because they get reclassified CCC- before collapsing.

Saturday, September 01, 2007

September Rockblogging

September already. Gauranteed to blow your mind apart. So come inside, come inside.