Sympathy? Mercy?

Sympathy? The buyers of overvalued homes have reduced national wealth, weakened international financial markets, raised everyones’ property taxes, on and on. Might as well feel sad for the drunk driver that sideswipes your car as they crash over the cliff and then mobilize a half million dollars of resuce efforts and then racks up millions in the hospital with no insurance only to go to jail at public expense where millions in public defender appeals tie up the courts for years. Sympathy? Their family should get the bill for the bullet.

I’ve no problem with people “wanting” to buy a house. People have wanted to own a house for centuries or longer. These people are not teenagers being handed the keys to the Ferrari. These are people who are lying and cheating and then stealing joyrides. They are signing documents they know to be false. Bank fraud costs me money. These people are distorting the markets causing overbulding and congestion and municipal expenditures. Those cost me time and money. It is a long list and these are not victimless crimes, never were. In the next few quarters we will see victims. Some complicit at first but more and more the innocent bystanders. Imagine your HOA fees skyrocketing in Thousand Oaks (the safest city in the US) because the board is carrying so many pre-foreclosures on former Countrywide employees and also defending itself from legal attacks as these same people get desperate.

No, $7-$9 trillion in asset valuation is evaporating because of this nonsense. These people deserve no more sympathy breaking into these houses because of their need to own than would a drunk breaking into a liquor store because he needed a drink. Neither could feed their addiction through legal means and they don’t care who they hurt.

An Oath

"With God as my witness I will never use a Realtor® again."

This is a two part oath. And is not a blanket condemnation. There will always be a need for Realtors® but just no longer for me. They are too expensive even though I fully expect their prices to permanently crater in the current correction. In the future they will be highly valued consultants for people too busy or transactions too complex.

Do day Numbers

Just bought a Civic. Paid cash. Stupid? Maybe. Let's do da math:

Price $20,000 In a 1 yr CD that would earn 5%: $85/month.

Old car; 17mpg. Civic 38 mpg.
$3.25/gallon 1100 miles per month. Old, $210. New, $94.
Difference $116/month.

There's more to owning a car including depreciation but 4 year old Honda Civics are selling used at 90%+ of retail new. I fully expect the price of a Civic to soar and used prices follow new prices up and down.

Update July 11th 2006

6 weeks and 3600 miles. We've been driving more than we thought and we've tried to put the miles on the Civic as well. So, repeating the calcualtion:

Price $20,000 In a 1 yr CD that would earn 5.4%: $92/month.

Old car; 17mpg. Civic 37 mpg.
$3.25/gallon 2400 miles per month. Old, $459. New, $210.
Difference $248/month.

Looks like a worthwhile deal.

That's Per Second Louie, Per Second...

Equity evaporation from US housing assets:

$115,740.74

Inflation erosion of US housing values:

$31,392.69

Does anyone recognize the picture?

"Flipper" is Our Friend

No, really. Stop laughing. Flippers really are our bestest friends in the whole wooooorld. Think about it. Who has houses they don't want? Flippers. Who have no or soon won't have emotional attachment to cloud a sale? Flippers. Who is going to drag comps to stygian depths? Flippers. Who is going to leave the mortgage markets starved for customers? Flippers.

Flipper/floppers are our friends.

Flat Money

I wasn't looking for this but when I saw it I wondered. Say you woke up today after five years in a coma. Which would have performed better , The NASDAQ, DOW or S&P? All exactly the same. Up 2%.

UPDATE Jun 13 '06 5 years flat money and a stock market as nervous as a long tailed cat.

Props 1A-1D

1a-1d bonds; insanity. The neighborhood bully has stolen your lunch money and is offering to loan it back to you at high rates as long as you buy what he “suggests.”

The HOV CTX Line

The Homebuilders did learn their lessons. They have engraved in their collective conciousness the disaster of last time. Of last time. Like generals, they are fighting the last war. They built more on contract, they covered exposure with commitments, they optioned land instead of purchasing/contracting land, they raised margins rather than pursue share, they sub-contracted construction duties, they bought into the revenue stream. Just the things to protect against the last downturn. The homebuilders have done everything necessary and Wall street agrees. The French once did the exact same thing, they called theirs the Maginot Line.

Real Time Migration Patterns

High Gas Prices = Good

http://www.npr.org/templates/story/story.php?storyId=5378487

Environmentalists having been saying exactly the same thing for 10 years as an infamous Sierra Club webpage so embarrassingly shows: http://www.sierraclub.org/sprawl/articles/subsidies.asp

The externalities they cost out are vague and unsupportable while at the same time they ignore every single positive externality no matter how well documented.

The true agenda is one of irrational and unreasoned hatered of the private moror vehicle. It is that simple and therefore that intractable. You see even the progess in the last few decades failed to sway the anti-auto crowd as there's is a conclusion based belief system.

To further reveal the true agenda, one need only examine what these self proclaimed environmentalists would do with the tax money. Invest in more efficient roads to reduce pollution? No. Invest in advanced technology to reduce the negative externalties? No. Institute by back programs for the worst polluters to purchase low emissions vehicles? No. Instead they want to spend money on public transit despite no evidence whatsoever that transit either saves energy or reduces externalites. Why then transit? Because transit allows a degree of control over individual lifestyles unattainable by any other means in a Western Democracy. Again, an agenda so hardheaded it resists rational discussion.

Prop 13

Here it is. Let loose the dogs of war.

The Screw Turns

Lots of people have wondered about how we can possibly unwind the housing mess. I just got one of those pit of the stomach sinking feelings. Ponder the following and please talk me out of it.

As F@cked Borrower after FB starts to falter the banks will need to do something. I always thought it would be the old fashioned foreclosure but now I'm not so sure. Banks like money, the more the better. If they foreclose they won't make any money, they lose. Instead the banks are going to do the unthinkable, they'll renegotiate the loans lower. The logical goes like this; instead of 3-6 months of no payments and then 60 cents on the dollar the banks will turn their $500k, ARMs into $400k fixeds. Better $2000/mo for the next 29 years than the alternative. And who gets screwed? The people that were smart enough to not get in the scam. My investment income goes lower, my opportunites to buy low are fewer and even my home is devalued by this process. The same b@stards that caused this mess benefit.

$5/gal Nonsense

Gas, energy, gas, energy, yadda, yadda, yadda. No insult intended but there isn’t anyone that can connect the dots with a housing bubble. Let’s give it a rest shall we? I am certain the sun will come up tomorrow a little earlier than yesterday and I’m almost certain housing prices will be a little lower. Come this fall I’m certain the sun will come up a little later and housing prices will be a lot lower. Lots of people spend more on lattes and mineral water than gas but no one ever tries to draw that connection. Transit fares are skyrocketing yet…

You want to try price corellations? How about the cost of lumber and labor making it expensive to upgrade exisitng homes causing people to buy up rather than remodel? A perfectly fair and logical conclusion except that it doesn’t fit the bubble model so it is chucked. See my point? No, I can see out the on your puzzled faces, people don’t. Try this then; the high price of gas will cause people to stay home thus increasing their willingness to spend more for the place they spend more time and increasing their willingness to improve their homes for energy efficiency and their willingness to hit the housing ATM for the costs andthese expenditures will stimulate the economy and raise the average price of homes. Perfectly logical and totally unacceptable if you are one of the energy prices will kill conventional housing clarions.

FRESH! FRESH! FRESH!

Hurry! New shipment, new listing! Only 2 Days On Market.

Look, if you did it with fruit you'd go to jail. This is a call to action. Let's insist our District Attorneys prosecute the blatantly misleading DOM figures in the MLS.

Diconvergence?

2 Years Tol v WY



6 Months



Amazing what a little shift in perspective can accomplish.

A Real MFer

Imagine those mile upon mile tracts in Palmdale, Riverside and Phoenix when the first REO breaks down values 40%. The other banks won’t care that 40% off of the highest price only compares to a few of all homes and they won’t care that interest rates also ate 20% of the equivalent price. What they’ll care is that on the books every single mortgage in the entire development is seriously underwater. I’m going to embark on a new career; Mortgage Falcon, MF if you prefer . I will circle overhead watching the lemmings. I’ll visit the County Recorders Office and Assesors Office making sure there aren’t any liens or tax arears. I’ll fly over the houses, looking for garage conversions and cable disconnections and brown lawns. I’ll look for the signs of “going out in style,” the New Tundra and LS450 in the driveway, moving vans, Garage Sales, FSBO ads. And every week I’ll circle down and land on the arm of a banker and wisper in his ear. He’ll reward me with a chunk of flesh from the latest kill. It’ll get so I’m famous. The neighbors will see me and call out in appreciation “Hey! MF! (Mortgage Falcon)” and I’ll continue my patrol, keeping the worlds financial system safe for all mankind.

Worth Overdoing

The 2006 New American Home 10,023 square feet.
The 2005 New American Home 5,950 square feet.
The 2004 New American Home 5,172 square feet.

Push/Pull Immigration

Illegal immigration is a push product not a pull product. We should be harvesting Christmas trees and strawberries with robots run by technicians, designed by engineers, programmed by SW and GIS scientists from technology developed at UC Davis and Texas A&M and controlled by satellite. Why should farmers invest in technology like every other industry has when there's huge publically subsidized exploitable labor class available?

Supposedly this is going to mean our housekeepers and gardeners and even bookkeepers are going to be "lost" and we idle rich will be helpless. Quite the opposite. Instead we will buy Roombas, Rainbirds and Quicken thereby employing robotocists, Landscape Architects, electrical engineers and software programmers who can afford to live here. This IMHO is "A Good Thing."

Let's not mistake a push market where the jobs attract illegals for the actual case of a pull market where a pool of exploitable workers preserves an otherwise antiquated system. One need only ask why we still grow strawberries the same way we did 100 years ago but we wouldn't dream of making cars by hand as we did that same 100 years ago. The only reason there are still crummy jobs in the workplace is BECAUSE there are potential workers available for exploitation.

Please try to remain focused on the illegal part of illegal immigration. This is not an immigration issue any more than bank robbery is about financial regulation.

Inland Empire: Where the L.A. Dream Landed

I don't usually do this but who can resist an article that includes:

"Say you're 35 years old, well-educated, with a family. If you buy the house in Orange County, Los Angeles or San Diego that you think you deserve, you're broke."

http://www.latimes.com/news/printedition/la-fi-inland16apr16,0,931676,full.story?coll=la-travel-headlines

The bubble denialists can call it it a Dream Landing but I'll reserve judgement for a few months.

Somebody 'Splain This to Me

What did the guy mean when he said "Head and shoulders top?"