Monday, July 10, 2006

The Blame Game


You cannot talk a bubble down, it is an irrational exuberance. You cannot do something to deliberately pop a bubble. If bubbles were subject to rational forces they wouldn't become bubble. Therefor whatever popped the bubble was accidental/incidental and emotionally based. Therefor it was the Democrats who in their disgust with the state of current politics have tried to inflame the passions of Americans by trash talking the entire nation until some people here and abroad actually started believing their rhetoric. Yup, it was the Dems and their lapdog mainstream media buddies.

Alright you didn't like that one. How about:
The markets are busy finding the best use of capital. The stranglehold the Republicans have on the Federal govt has allowed the normal checks and balances to go unattended. The Reps caused the bubble so in effect the Reps are responsible for the bubble popping.

Personally, its all those damn Libertarians on their blogs. Speaking in calm clear rational terms, they have managed to dislodge the emotional content from housing with the enevitable result that people have woken up and are pricing rationally now.

Nope, it was big oil. Think about it. Who is raking in the big bucks? Who was getting $15 and now gets $75 for the same damn thing? Who isn't being blamed for the whole mess? Yep, big oil.

Nina Flipped that House. Palm Springs Sells!

Nina and her partners have closed escrow. She has a.... ummm.... "general" accounting of her profits. Unfortunately she's turned off by some criticism she's received in the past so she has turned on blog approval. If you have comments then this is the place. Personally I'm offended by the unwilliness to admit to the loss. Sure as heck come next April 15th she's going to list this little misadventure as a loss to the IRS, why not now? Anyway I'd like to hear your unmoderated comments on the saga and the responses we've seen. Her post: http://sittingprettyfinancially.blogspot.com/

Here is the final installment. We sold it and I’m pleased to report that we closed escrow last Friday. Here is the final tally:

$613,000 Sales Price – July 2006
$475,000 Original Purchase Price – August 2005
$138,000 Subtotal

Minus Costs:
$75,000 Improvements
$31,000 Agent commissions
$32,000 Total Proceeds

The monthly carrying costs (mortgage, taxes, insurance, utilities) are not included in these numbers. If you factor in these then you can call it a “break-even” venture. But we used the house & pool on the weekends so we maximized our dollars and enjoyed the time in Palm Springs.

Sunday, July 09, 2006

Shine Mister?


Joseph Kennedy, the SEC’s first chairman and father of President John F. Kennedy, reputedly told colleagues that he sold most of his stock prior to the 1929 Crash after his shoe-shine boy started giving him stock tips. He reasoned that if his shoe-shine boy knew something he didn’t, something had gone seriously awry with the markets.

Read more from a SEC transcript: http://www.sec.gov/news/speech/spch120105et.htm

Friday, July 07, 2006

To ARMs, the NURBs are Attacking!



http://money.cnn.com/2006/07/07/technology/newvillages.biz2/index.htm

Or as SunsetBeachGuy says:

Oh man, don’t get Robert Cote started on that one. We have already beaten the pedestrian friendly development pattern vs. the car friendly development pattern. I prefer people to cars. Click on Robert Cote’s name and go discuss over there. Just one little poke at Robert, I thought that the market had thoroughly repudiated this development pattern?
----

Thursday, July 06, 2006

The Politics of AGW

"If a long-term coherent energy plan were formed, there'd be little need to be distracted by fads or arguing the impact of CO2." - Anon from the previous thread drift

CO2 is the flavor of the month because it most easily fits the warmist agenda. It is easy to measure, corellated with economic production and simplistic for the masses. As soon as you realize why China is exempt and what they are doing with that exemption you know everything you need to know about why CO2 is the stalking horse of socialism.

There, did I offend everyone? If not, give me another chance in the comments.

Tuesday, June 13, 2006

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.

Friday, June 09, 2006

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.

Friday, May 26, 2006

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.

Wednesday, May 24, 2006

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.

Friday, May 12, 2006

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.”

Monday, May 08, 2006

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


Thursday, May 04, 2006

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.

Monday, April 24, 2006

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.

Saturday, April 22, 2006

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.

Thursday, April 20, 2006

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.

Wednesday, April 19, 2006

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.

Monday, April 17, 2006

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.

Sunday, April 16, 2006

Saturday, April 15, 2006

Friday, April 14, 2006

What's another name for asticky illiquid?


Stickiness -used- to apply because real estate -used- to be illiquid. Just like every other economic function liquidity brings volatility. There’s absolutley no reason prices cannot fall at least as fast as they have risen. The real issue with fast rises (and declines) is that all property is priced at the margin. Just as not every property had to sell at the top for all property to be valued at the top, the cheapest house that manages to sell takes out the comps. There’s a double danger in a declining market. Not all the comparable transactions will be “arms length sales.” In a rising market there’s little doubt the highest and best price is a market transaction but if you are either trying to transfer assets or you are in financial trouble the possibility of the “sales price” being lower than the honest price increases. Back to velocity. Lenders are far less likely to delay action given their exposure. They can’t be patient as the borrower tries to catch up because there is no equity cushion for the borrower to deplete. Thus as 1.7 trillion with a "t" dollars in exotic mortgages reset in the next 18 months we can expect more letters like that form our friends at Ownyourdebt Mortgage Services below.

Thursday, April 13, 2006

SmUGGIE - Oxnard (again, sigh)

Here it is, the ghost town of the future:



http://www.riverparklife.com/

Don’t let anyone tell you Ventura County is a slow growth anti-development area. We are screaming DENSITY! on this one. 2800 dwelling units on "700 acres." Well... not really but 4DU/ac sounds so innocuous whilst the reality of 250 acres of "open space" aka unbuildable floodplain and surface runoff retention basins and "pocket parks" changes the calculation. But that's not all, there's a commercial componet and a town square and a wine garden. All told we are talking effectively 16DU/ac as normally reckoned. 1800 "homes" and 1000 apartment type units are planned. So big and so risky RiverPark SFRS will be built by Shea Homes, Centex Homes, and Standard Pacific Homes.

Talk about your perfect storms. Peak of a multi-decadal market cycle, rising construction financing costs, illegal immigration blowback, tightened lending standards, demographics, California, Oxnard and more. Wait until you drill down at the website for the prices. Townhomes and triplexes from the "Low $500,000s." Zero lot line SFRs with postage stamp yards from the "High $700,000s" and up. Way up. Lots of 3 car garages and now look at this map:



Okay, 3 exiting streets and 10,000 people. The standard for the area is about 10vpd/person. Nice round number one hundred thousand vpd. Another standard; peak morning/evening hour load 14% of vpd. In one hour they are expecting to push about 8,000 vph. A primary collector arterial lane can possibly handle 1,800 vph so they'd need 5 lanes in each direction. They got three. Welcome to Oxnard.

Important Information About Your Home Loan



Dear Mortgagee:

We here at Ownyourdebt Mortgage Services (We put the "vice" in Service since 2001) have been happy to be your leinholder of choice these last 2 years. It is therefor with deepest regret that we inform you that your old loan is hereby and immediately rescinded. If you look at your note, page 42, para III, section 9.2.1 you will see that failure to pay property taxes on time is grounds for rescision. Now we here at OMS know times are tough and all so while we no longer offer a product similar to your 30yr fixed 5.25% no holdback loan that you just lost we are pleased to announce a new product; the Tax,n'Spend Megareset Home Loan. This 6.95% (intro rate) product is seriously the best you can qualify for under the new tighter lending standards so we suggest you take it. Since we have your credit and know everything about you we took the liberty of checking. If you "chose" to go to another lending institution against our advice we will be regrettably forced to report both the tax default and rescinded loan. Good luck with that.

Now don't take it like that. You aren't without options and you certainly should consider yourself lucky. We don't do this for everybody. That Schmoe Gary down the street for instance. You know the one youlaughed at for overleveraging. He didn't pay on time either but he's already in our "special clients" stable paying an adjustable 7.5% with impound and service fees. He's so upside down we don't dare use the vice (in Service since 2001) on him, he might walk. No, you are lucky. If the new rates are not to your liking OMS is prepared to offer you a very generous severance package. We'll miss you (each and every month on the 1st) but if you want "out" your house and difficulties your house being worth $800k with our mortgage only $250k (due immediately) you are indeed fortunate. We here at OMS are ready to give you 30 whole days AND $100k in addition to FULL loan forgiveness to help you start your new life as a landless renter. No messy distress selling, no middleman. Now, put down that hammer. I told you we know everything. Any damage wil come out off your severance package. Think about it, get back to us. SOON.

Looking forward to hearing from you in the next several hours.

Kindest Regards,
Your OMS Representative

P.S. Loan forgiveness is a taxable event at the full income rate and will be reported. - OMS

P.P.S. Don't forget to recommend us to all your friends!

Important Announcement


Heeeello US Homedebtors. Dr. Evil here. This is my son Scott, Number 2, various henchment, yadda yadda… I’m interupting your tedious blogging act-tiv-ities to explain my latest Evil® plot. It seems you people have foolishly played into my hands. Those papers you signed? Those loans are {air finger quotes} a-just-able. OooohOoooohOoooh, heeeeheee… cough, cough, hem. Excuse me. Now; These “a-just-able” loans are not the innocent shortcuts to no effort prosperity you were led to believe. Noooo, these a-just-ables are an Evil® international conspiracy designed to enslave you! If you are hearing my voice it is already too late! ALL YOUR Bases... er EQUITY ARE BELLONGING TO ME! Now for the good part, I am holding your mortgages hostage and you will pay me MORE. Yes, every month I will extort dozens of extra dollars. OooohOoooohOoooh, heeeeheee… cough, cough, hem. And who are we? This Evil® international conspiracy? {air finger quotes} “We” are your parents, your neighbors, your government. “We” be using your money to make sure you never get ahead ever again.

_pinky to corner of mouth, fade to black. We now return you to your regularly unfettered blogging.

Wednesday, April 12, 2006

Goin' Skiing


Yes, skiing in SoCal in April. Anyway I'll try to get to all the comments and I usually manage to "steal" local unprotected bandwidth "apres ski" so I might catch up in the evenings. Return on Friday.
[photo: The cabin in the mountains and the big trees all around.]

Quote-O-Note


"Stocks have reached what looks like a permanently high plateau." --Irving Fisher, professor of economics at Yale University, October 17, 1929

[photo: Yosemite 2005]

Tuesday, April 11, 2006

Quote-O-Note


"You don't know who's swimming naked until the tide goes out" - Warren Buffett

This is why the reporting delays at Freddie Mac worry me. Someone appears to be shovelling against the tide in order to conceal the naked. [photo Rockport, MA 2005]

A thread of its own


Dean asks;
"Those who didn't buy in 2002: could anyone knowledgeable/clued in enough to understand that prices were crazy then, have guessed how much more insane they would get, without being an insider? As to the folks over at patrick's and their entitlement feelings: are you saying a well educated American is asking too much when he/she imagines that a home with income at multiples of the national average *ought* to be able to afford a home?"

Nobody predicted 2000-2005. We know why now and many of us have that mountain of data as a reasonable indication of what will happen 2006-2010. Indeed the Gen Xers did the right thing and got punished for it. The houses they had worked for were stolen by undeserving people too stupid to realise what they were doing. There were market forces that worked against them as well such as the uncomfortable fact that their parents and grandparents just wouldn't die like they used to. Not only were they selfishly hanging onto the mortal coil they were hanging onto their homes as well.

As we've seen the entitlement problem is an emotional one. I don't know how to examine it without a lot of misunderstanding. They surely should be able to afford a home, thay appear to be more deserving, smarter, etc. I just don't know how to enfoce fairness. Everytime I'm aware of an effort has backfired miserably. It doen't help that I re-read Vonnegut's "Harrison Bergeron" last night. [I'm a voracious Si-Fi reader.] Fodder for another day another post.

Monday, April 10, 2006

Say Hi



It's quiet and one reason I saw was a statistic that enabling those silly "type in 8 distorted letters" to post boxes discouraged legitimate comments by 60%. So, they are turned off and let's see.

Say hi, ask a question or as I suspect; let rip.

Extra points for admiring my photography which I plan on using as visual headers henceforth.

A Simple Question


If all these illegal immigrants are good for our economy why isn't Mexico trying desperately to keep them in?

Why are home prices still going higher?



This 19th Century Japanese print is ubiquitous. So much so that we don't really look at it but there's something about the current housing market to be learn from it. Notice that the highest points are those with no support underneath. This explains rising prices with declining volume. Notice that there are more than one crest and not all at the same time or at the same level of development. Even so the little waves are about to be obscured by the larger swell. Thus the ripple effects when the major markets turn down. LA/OC will causes boats to overturn in Las Vegas and Tuscon. Finally, the bulk of the wave is behind the crest, this is analogous to my prediction that after the crest crashes there will be a storng continued orderly decline. There's more to read in the picture so I won't spoil the fun by pontificating further.

Saturday, April 08, 2006

The No-Drop Drop in Housing Prices

Let's say you missed the boat. You didn't jump at the $450k starter home in Camarillo two years ago. Here's those numbers:

$450,000 @ 5% and $50,000 downpayment: $2147.29/mo plus taxes.

But you were "smart." Even as prices ran up to $600,000 you knew sanity would eventually return. So, what do prices need to be to get the same deal when rates are $7.5%? Ans: $320,000. How's your patience? That's only to get back to the deal you didn't like 4 years ago. Gonna look better the second time around? Where ya been livin' these last 4-5 years? In order for your patience to be rewarded do you really think we'll see $600,000 houses going for $250,000?

NURBs Infect Camarillo

http://www.venturacountystar.com/vcs/ca/article/0,1375,VCS_165_4606751,00.html

Any changes would not come overnight. Planners expected initial changes probably would take as long as five years, and it would be from 15 to 20 years before the single-story strip malls and huge parking lots were transformed into pedestrian paseos, wide sidewalks, cafes, stores and homes sitting on top of office and commercial spaces.

The only problem? The owners and shopkeepers don't want this. The bigger problem? The City has spent millions for something that will end up cost the city more millions all for private benefit.

Thursday, April 06, 2006

A Modest First Step

In the spirit of "do unto others..." my near boundless compassion for the plight of illegals here in the US compells me to advocate the promulgation of some of their homeland rules. Now obviously I'm not suggesting the human rights violating rules all too common within the bounds of our neighbors to the south, just a few of the reasonable ones. In that spirit I suggest the first rule:

Non-residents may not be allowed to own property witihin 50km (31 miles) of the US Coastline. Just like Mexico. In order to facilitate this transition period to a set of laws they understand a special government unit shall be formed to "resolve" any problems. The Resolving Trusts Corp will purchase back any properties illegally transacted prior to Jan 1 1996 at the full orginal purchase price and at a sliding scale based on Jan 1 1996 values for illegal purchases made since then.

Wednesday, April 05, 2006

It's What You Say...

A man awoke one evening to discover illegal aliens camped out in his storage shed. He called the police, gave the address, and reported the intrusion. The officer asked "Are they in your house?" They were not, only in the shed out back. The phone officer said there were no cars available at that time. The man thanked the officer and 30 seconds called again. "I just called about illegal aliens. Don't worry, as I just shot them all dead!" Within seconds there were 3 police cars, an ambulance and fire engine at the scene. After capturing the intruders the policemen approached the caller, "You said you had shot them all?" The man answered, "And I thought you said there were no police available."

Socioligists and Economists agree on one thing; Broken Window Theory.

2007 Story

A man wakes up with a throbbing head. Disoriented, he wakes up enough to look around at a shabby room and a hideous hag slumped in a seat near the bed. His arm is trapped under the head of a pretty young thing next to him. Gathering what few wits God gave him he asks "oh my my God, what happened?" She looks up and says; "Don't ask me mister, I am only the bridesmaid."

Did I say his ARM was trapped?

Aesops Fables

The scorpion and the frog.

The monkey and the jar.

The jackall, the ass, the snake, the leech and the realtor but I repeat myself.

Wurd-O-Day, Disintermediation

Disintermediation:
2006 Realtors® split 6%
2010 house sellers fight over scraps

Quote-O-Note

"This is the biggest real estate bubble I have ever lived through." - Kiyosaki

He hasn't lived through it yet.

Son of George

I am not a "Georgist" but I see his theories as part of a more comprehensive and fair system of property taxation. Call me Son of George. I've long thought about this.

The basis for property taxation should be a very low flat base fee plus
an area based fee plus a very low flat base fee for any buliding plus
a building area based fee with (the kicker) a multiplier based on the
ratio of built area to lot area.

How did I dream this up? Easy, I back calculated from what a property
"costs" its municipality based on the properties' character.

Every lot costs a small amount regradless of size. Call it a management
fee.

Bigger lots consume some municipal services at a rate roughly equal to area.

Buildings likewise encumber greater external costs for both factors.

Finally, there needs to be a density penalty. If you are interested I'll
explain but I'd want to hear general comments before dredging up the
flammable compounds.

Monday, April 03, 2006

How Long Must We sing This Song?

I know past bubbles have taken a very long time. Stock market 1, 12 yrs. Housing bubble 1, 6 yrs. Stock market 2, 5 yrs. I think this will be fast and brutal because so much of the housing market has been liquified. Facing a declining market the note holders will be extraordinarilly impatient. Facing a loss of equity owners will leverage to free up cash leaving no or more often negative equity for the note holder. Institutionals often have little choice about patience, they have to dump non performing assets. Past housing bubbles were stretched out due to the illiquid nature of housing. This time it isn't the housing market but the mortgage backed security market that will drive the correction. It won't take very long at all to correct these portfolios. For simplicity; say a speculator buys a bundle of mortgages at a 50% discount in expectation that half will not perform. When they end up with houses instead of paper paying them interest and principle the last thing they'll want is an actual property with taxes and management issues. They've already zeroed out the cost so as long as they get the transaction costs out of dumping the house they're good. That's extreme, the reality will be somewhere in between but the point is the paper will be priced such that even early foreclosure sales will be phenomenally lower prices. Speed trumps best price. That's the push. The pull is that anyone buying in this environment is by definition a sophisticated and/or well qualified buyer and they are going to insist on rational prices, say rent parity. I just don't see very many people buying on the way down due to a lack of competetion and the new psychology of expected return sans appreciation.

Sunday, April 02, 2006

UGB Primer

I'm a proponent of real UGBs. Not Oregon's Metro mutation nor Maryland's BANANA rules. Real UGBs neither prohibit nor direct growth. Real UGBs establish limits to local government to permit/prohibit or direct natural growth patterns.

Got that? Real UGBs limit government not development. Examples include Napa and Ventura Counties in California.

I am constantly battling the misperceptions of Venturas process. SOAR only changes the venue of land use change approval
from the Board/Council to a public majority vote. Serious proposals are likely to be Santa Paula Canyons and Moorpark again. The last Moorpark attempt to expand and urbanize was fully supported by the city council who smuggly proclaimed that the people they represented were behind the proposal. Lost 3 to 1 despite being outspent 15 to 1.

I do, however, resent any Smart Urban Growth (SmUG) parallel advocacy claim. SOAR is in no way an UGB. SOAR does nothing in the way of Nurbanist rezoning agendas. I would separate the causal truism that SOAR prevents outward urbanization from the unassociated effect that the urbanization -must- turn inward. NURBs would like that to be the case but it is not part nor intent of the SOAR plan.

No deep thoughts here. Just that the methods of land use and zoning adopted in Oregon have been hijacked by politicians and planners. Of course they like the old status quo where politicians could pick winners in the land use lottery and planners could use zoning to force their preferred development patterns.

Oregon does not have the best record, it merely has the most controlled process. Napa and Ventura Counties in California have had far better success at achieving the stated goals of anti-sprawl. I say "stated goals" because anyone familiar with Oregon in practice will tell you there is an anti-mobility agenda that really drives their development processes.

My favorite example of Oregon's failings is the UGB. Urban Growth Boundary that in fact merely allows existing central cities to prohibit any exurban competition. It gives cities control over land that isn't expected to become urban for as much as 20 years and by exclusion prevents anyplace outside their sphere to develop as well.

We'll examine the differences in subsequent posts.

Thursday, March 30, 2006

Lenders Digging In

Two words; “lenders nervous.” Truth be told; lenders scared. Not coincidentally I had two friends call yesterday both complaining about their financing falling through. First one paid $5500 for the banks’ appraiser on a small commercial property and when it made the numbers the bank suddenly added new conditions. Conditions based upon the banls’ intimate knowledge of their position designed to make them balk. She told them straight out, you just don’t want to make this loan right? They admitted it off the record. Second in a house sharing arrangement for a dozen years, executor and a tragic roommate death. The bank just said no at the last minute. I told them both the banks are slowing the velocity of lending and building warchests against the flood of defaults. The agreed from their frontline observation points.

Tuesday, March 28, 2006

More On Affordable

One reason we are so very expensive is because we have stricter "anti-sprawl" rules than even Portland, Oregon. Our problem is that to relax the rules would flood the place until it looked like the San Fernando Valley or Orange County. In FAct 40 years ago Orange and Ventura Counties were nearly identical yet today Orange has 4 times the population, higher prices, and a clearly worse quality of life so i don't feel bad about our chosen path. I do feel bad for those that cannot afford to live here but I also own waaaay out in San Bernardino rental property that I lease at reasonable rates. The issue is building where there is already buildings. RPPI says in #320;
"The real problem is government restrictions on supply. Supply has not kept up with demand due to these artificial restrictions. One recent study found that 90 percent of the difference between physical construction costs and the market price of new homes can be attributed to land use regulation.
The solution is to allow more construction."
There already exists a market mechanism to address affordable housing. When housing becomes unaffordable, prices fall and time on market increases. What RPPI proposes -instead- is that government not only get out of the business of manipulating the market but that government also get out of their actions regulating for an orderly market abandoning supply and demand in exchange for demand only markets. This, in my opinion, ignores the reality that zoning and land use regulation needs to exist for the protection of -existing- land uses and land owners. Turning this on its' head to become a tool of potential owners or uses is antithetical to the usual positions of RPPI.
Housing is more affordable than ever since ownership is at all time highs and demand is the highest in two generations. Were housing unaffordable prices would be falling and vacancies high and ownership low.
There is a unique and transitory demographic effect that distorts the picture. Robert explains it all and then some: People living longer means taking longer to roll over -used- housing. I say -used- not -older- because the two are recently divorced. Trust me, there are 20 houses in Massachusetts, stretching from Pittsfield to P-town owned by friends and mostly family that have an average owners' age of 65 plus. In the past these would be on their way to the first time buyer market. Sorry, mom still plans on "commuting" twice a year between golf and tomatoes in Longmeadow, MA Memorial Day to Labor Day and golf with sailing the rest of the year in Venice, FL. Aunt Debby is tri-locating, Framingham, Maine, FL. Uncle Jimmy, Framingham, Newport, RI, extensive travel. Aunt Kathy, Worcester, Waterville Valley (NH), Falmouth, whim (I think). Uncle Dick, West Springfield and Venice FL.
Affordable housing initiatives have only one outcome; less, more expensive housing.
Planners will NEVER understand that people don't want to live and work in the same place.
"The quest for a strong regional authority has been the Holy Grail for planners." Says it all.
" As traffic gets worse, I would venture to say that closer in locations get better [more attractive]." Crap.
"The mortgage deduction certainly discourages renting." More crap.
Sometimes it seems to me that people don't want to understand these issues.
The American Dream is a constantly evolving ideal that in practice nearly always requires compromise. The premise of PTAD is that there be no structural impediments to those goals. A pure "free market" does not and should not exist in the public realm of community land use delineation.
"Affordable Housing" has become the bogeyman of the NUTSo and SmUGLers (New Urbanist/Transit Supporters, Smart Urban Growth Lovers) because sprawl has been effectively negated as a threatening term. Sprawl has been defanged in no small part by several members of this list.
"Affordable Housing" is going to be especially difficult to unmask as nothing more than the latest anti-suburban, high density, Pyonyang Transit scheme. There's a subtle tinge of racism that makes it the third rail of planning. Housing is seen as more of a right than transportation. "Affordable" is not as easily ridiculed as "Smart Growth" for instance. The secret worldwide urban cabal is also getting more sophisticated in their presentations. Every time we beat them back with logic and facts and democracy they try another tactic. They only need to slip one measure past us. Eternal vigilance is the burden of freedom.
There is a NUTSo -theory- that affordable housing reduces the need for poorer people to commute long distances to their jobs. Bull. If that's all that was necessary then mixed income housing would be able to have narrower streets and less parking and less transit service, etc. Lowering the price only causes people to buy as much as they can afford fueling the rise in larger homes. You will notice also that mixed income is never mentioned by the NUTSos. This is because Neo Trad/New Urb is very expensive and even at very expensive the municipal costs are not covered by the higher taxable basis. "Affordable Housing" for the SmUGler crowd means subsidized housing. Urban Planners want to do for housing what they did to transit. Transit was profitable and private until the affordable transit crowd tried to impose unrealistic pricing schemes borne on the back of the private industry and public purse. See the similarity? That's a real way to scare the crowd.
People deserve -a- place to live BUT people do not have a right to live -any- place.
We do this a lot. We select based on economics, safety, concern for the environment, and undue burden on other people. We are an empty nation and most of the nation is emptying out even more. The problem we face is that we cannot (yes, cannot) accommodate everyone who want to live in places like SoCal because the people who want to move here will not (yes, will not) pay their share of the costs of their accommodation. There is no affordable housing crisis for instance, there is a surplus of people who are unwilling to pay for the housing they think they deserve. There are similar parallels in transit and roads funding. I think we need to increase gas excise taxes to prepare for the upcomming round of urban highways that we've already filled up with demand before adding capacity.
Some on this list can tell stories about what I think of planning as a "profession." Planners are not familiar with the scientific process or if they are they reject it as too inconvienient. The word science is tacked on to lots of things like boxing and planning. In Boxing, where the word is appropriate, one can set up a hypothesis and perform experiments and enumerably compare results with known constants and variables and margins of error. Planning cannot do any of these things in a putatively free society so they revert to chicken guts and portents as interpreted by shamans. They have shown themselves to be resistant to introducing science into the processes so important to us all.
Real science starts with hypotheses and collects data and produces conclusions. Planning is the Church, professionalism is Gallileo.
Planning is to science what astrology is to astronomy.
Limiting housing can be neither onerous nor coercive. Zoning density restrictions enjoy a long acceptance in this country. Economic hurdles to more residences in a neighborhood than the existing owners are willing to accept are even more respected for both their legitimacy and efficacy.
We are not talking about buying an empty lot in a residential area and building a house. We are talking about public funds buying an empty lot in a residential area and allowing a zoning change and building an apartment building.
We are not talking about buying an empty lot in a residential area and building a house. We are talking about buying an empty lot in a residential area and being allowed a zoning change and building a an affordable house with public subsidies.
I fail to see why residence location should be any different from any other "investment." I use "investment" in quotes to highlight that this means far more than money. When one buys into any system there is a reasonable expectation that the rules that restrict will also protect. In the last 40 years that has changed so that now they only restrict.
I've mentioned before that my neighborhood is massively protected by money and many layers of interlocking laws. The population is most certainly limited and affordable housing is not going to happen here. The difference is that those constraints are neither onerous nor coercive nor arbitrary.
This is a case of swamping the lifeboat. What in the heck is wrong with saying "use the next boat." The answer is obvious and odious. "We don't want that -same- as what you've got, we want what you have. If we cannot have it at the price -we- like then -we- will drag you down." Of course I'm talking about Sec 8 and affordable housing and "fair share", upzoning, etc.
The largest threats to the US historically high homeownership rates are in the following order:
Government intervention. Bias towards urban solutions. Using housing to address social justice or social equity issues. The false assumption that sprawl is an anti-affordable factor.
Govt intervention, with all good intentions doesn't permit affordable and profitable housing anymore than it permits adequate but unencumbered roads or transit sited for apolitical technical reasons. We don't let safe, decent shelters be built. We insist on massive public dedications of land, very high construction standards, etc. There may be good reasons for these things, strict fire codes for instance, make a home cost more but saves the municipality fire dept expenses. Same thing when the front yard is "taken" for wide tertiary streets, greenstrips, sidewalk and now the new taking, underground utility rows that don't lay in the "public" row.
Affordable housing is easy. Lay down some streets and stand back. But like I said affordable housing is only the wedge issue urban agendaists are using to force social changes to their liking.

Equity Evaporation Phase I


The 42% of recent buyers who put no money down when buying their homes have no equity.

They wish. If they bought a used home they paid 7-11% in transaction costs. If they bought new they are facing new homes 60, 80, $120,000 cheaper. Taxes due in 2 weeks and their home is a year older. Upside down, underwater... pick your phrase. Personally I favor; Tango Uniform. [If you have to ask you don't want to know. If you already know you are laughing too hard to reply anyway.]

Monday, March 27, 2006

Theme Song 2007

That’s great, it starts with an earthquake, birds and
Mortgages, a housing bubble and David Leareh is not afraid
Eye of a hurricane, listen to your flip churn - world
Serves it’s own needs, dummy serve your own needs. feed
It off a HELOC, grunt, no, strength, climb the property ladder
Start to clatter with fear fight down from the heights. wire
In a fire, representing seven games, a government
For hire and a condo site. left of west and coming in
A hurry with the foreclosures breathing down your neck. team
By team realtors baffled, trumped, tethered cropped
Look at that huge inventory! fine, then. uh oh,
Overflow, population slows, common areas, but it’ll do. save
Yourself, serve yourself. world serves it’s own needs,
Listen to your equity bleed dummy with the rapture and
The revered and the right, right. you vitriolic,
Patriotic, slam, fight, bright light, feeling pretty
Psyched

It’s the end of the world as we know it
It’s the end of the world as we know it
It’s the end of the world as we know it and I feel fine

Six o’clock - tv hour. don’t get caught in co-op
Towers. slash and burn, return, listen to your ARM
Churn. locking in, uniforming, book burning, blood
Letting. every motive escalate. automotive sales decimate
Light a candle, light a votive. step down, step down
Watch your heel crush, crushed, uh-oh, this means no
Fear cavalier. renegade steer clear! a spring pop,
Tournament, a tournament of lies. offer me solutions,
Offer me alternatives and I decline

(chorus)
It’s the end of the world as we know it (it’s time I had some time alone)
It’s the end of the world as we know it (it’s time I had some time alone)
It’s the end of the world as we know it and I feel fine (it’s time I had some time alone)

I feel fine

(repeat chorus)

An Administrative Solution

"Freeze! Police! You're under arrest for bank robbery."
"But officer, I'm merely making and undocumented withdrawl."
[perplexed] "Well, um... you are under arrest for that weapon. Put down the knife and put up your hands."
"But officer, this folding letter opener is necessary for self defense because I come from a poor neighborhood."
"Okay, wiseass then you are under arrest for tresspassing."
"You know better than to ask about my immigration status officer."
"Damn, you are correct. Is that your car in the handicap spot then?"
"Technically it isn't my car as I just borrowed it for an undocumented test drive but yes, I parked there."
"Then I'm gonna write one huge ticket."
"Unfortunately officer I have an undocumented disability..."

The Moral Imperative

It is profoundly immoral for the US to continue to tolerate the constant dimunition of the very best, brightest and most productive human capital our neighbors to the south can offer. By allowing these people to contribute their efforts to our quality of life we are condemning yet another generation in the lands they leave behind to lives of squallor and oppression. The only moral thing to do is to say no to these illegal activities and help prevent these people from making things worse in their homelands.

Allowing our neigbors to dump, excuse me, export, their social unrest institutionalizes their dysfunctional governance and economy. The only morally supportable course of action is stop out current exploitive worker policies and complicity in propping up corrupt international practices.

Our moral course is clear but there exist powerful undercurrents of racism that wish to allow the current situation to persist.

Got that? Not only is tacit support for the current illegal immigration situation a crime, it is immoral. Let the Cardinal excommunicate me.

http://volokh.com/posts/1142130901.shtml
http://www.reason.com/hitandrun/2005/12/new_at_reason_922.shtml
http://housingbubblecasualty.com/?p=29

Sunday, March 26, 2006

Illegal immigrants rights..

You have the right to remain silent and refuse to answer questions. Do you understand?
Anything you do say may be used against you in a court of law. Do you understand?
You have the right to consult an attorney before speaking to the police and to have an attorney present during questioning now or in the future. Do you understand?
If you cannot afford an attorney, one will be appointed for you before any questioning if you wish. Do you understand?
If you decide to answer questions now without an attorney present you will still have the right to stop answering at any time until you talk to an attorney. Do you understand?
Knowing and understanding your rights as I have explained them to you, are you willing to answer my questions without an attorney present?

Friday, March 24, 2006

Theme Song 2006

I can’t believe the news today
Oh, The NAR can't close our eyes and make it go away
How long...
How long before we sell this house?
How long? how long...

’cause tonight...we pay two mortgages for one
Tonight...

Broken promises at our children’s feet
HELOCs strewn across the dead end street
But I won’t heed the battle call
It puts my loan up
Puts my loan up against the wall

Sale day, bloody sales day
Sale day, bloody sales day
Sale day, bloody sell day (Sale day, bloody sell day...)
(allright lets sell!)

And the resets have just begun
There’s many lost, but tell me who has won
The trench is dug around our flips
And mothers, children, brothers, sisters torn apart

Sale day, bloody sale day
Sale day, bloody sale day

How long...
How long must we market this pig?
How long? how long...

’cause tonight...we can be as one
Tonight...
Tonight...

Sale day, $200k off sale day (tonight)
Tonight
Sale day, $250k off sale day (tonight)
(come get some!)

Wipe the buyers fears from your eyes
Wipe your FICA fears away
Wipe your bubble tears away
I wipe your fears away
(Sell day, bloody sell day)
I wipe your blood shot eyes
(Sell day, bloody sell day)

Sell day, bloody sell day (Sell day, bloody sales day)
Sell day, bloody sell day (Sell day, bloody sales day)
(here I come!)

And it’s true we are immune
When fact is fiction and tv reality
And today the millions cry
We flip and flop while tomorrow they die

The real battle yet begun (Sell day, bloody sales day)
To claim the victory Lereah has won (Sell day, bloody sell day)
On...

Saturday, March 18, 2006

Blockbuster Movie Title 2006

"I Know What You paid Last Summer."

It's Discount Transit Month!

"PAY ONLY YOUR OPERATING COSTS MONTH"
Here's how it works. All infrastructure investment/expansion and
operating subsides (if any) are suspended on the first day of this
theoretical month. Likewise operating charges are adjusted to
accurately reflect operating costs only. There are, of course, a
few "gray areas." This is only a thought experiment so we can wing
it. Feel free to make changes and rerun the test if you wish.
Examples: The electricity to run traffic signals is a cost outside
of strict operating costs. So are police services that patrol
highways, etc. For bus comparison this is a wash, but for a subway
or airport/airline or private r-o-w rail system they generally pay
for the electricity and the security as part of their operating
expenses.

What would happen? Well, for one thing every transit ticket price
in the US increases anywhere from 13% to 1000%. For another, the
cost of fuel drops from $1.50/gal to around $0.95/gal. Tolls drop to
essentially zero. It would probably be more expensive to collect
most tolls than to just "eat" that miniscule portion that goes to
operating costs. For ferry boats and critical path bridges, etc. it is
probably still a good idea.
Oh, by the way, that car payment? Skip it. After all in this
experiment we aren't going to pay capital costs for the month.
Transit riders? Sorry, you don't pay for your train/LR/Bus/whatever
-now- so you don't get anything in the experiment either. Remember
this is a theoretical attempt to compares apples-apples. Wait for
the other 11 months in the year when the current system returns and
you get your free trains/LR/buses/whatever.
So, day two. How are we doing? Well the NY subway system shouldn't be
too badly affected. Its only raised fares 13%. But wait, all the
feeder systems from busses to commuter rail have raised ticket
prices. Let's guess that greater NYC transit operates at twice the
national average farebox recovery? That is 2 x 20% or 40% farebox
of operating costs. Their fares are raised 150%. Any guesses as to
systemwide ridership? Down, way down and only the second day. The
much vaunted 87% farebox recovery of NYC subways relies on far less
financially solvent sources for its ridership. Besides almost 2 billion of
NYCTAs farebox revenue is bridge tolls. Oh, and for auto
drivers, the tolls are free and the car payment is in their pocket
and gas is at 95cents/gal. [They're going to Disneyworld!] Actually
they are clogging the streets. Regionwide gridlock. You thought
this was going to be a one-sided experiment. Obviously, even those
who don't use transit benefit from the subsidy they pay to support
it. The point of this experiment is to make is absolutely obvious
to anyone that beyond question private surface road travelers pay
MORE than their operating costs AND subsidize the operating costs of
public transit.
What about government? Very interesting. Since we aren't working
on any infrastructure, using the county roads employees as overpass
footings is out of the question. I'll let someone else
prognosticate. Tax revenues will shift dramatically but so will
expenditures.
What about marginalized transit users? Well for one there will be
a lot of people who can (this month only) afford private auto travel
without the expense of car payments and with 95 cent gas and minimal
tolls and of course the much cheaper cost of goods delivered by
truck. Goods delivered by truck is just about everything so the
consumer price index should look pretty good this month. What about
the others? Tremendous inconvenience at the very least. Luckily
this is only an experiment. We owe it to the least advantaged in
society to provide a minimum of services and currently public
transit is how we provide mobility. Same goes for ADA riders. At
first I thought of charging them the breakout cost of their portion
of public transit operating cost but reconsidered. One, disability
is not a criteria for separate treatment anymore than race or gender
is. Second, this is an operating cost experiment. If anything
disabled ridership, although an expensive capital investment, is
probably cheaper to serve because of their time and destination
patterns.
Air travel? Again a gray area appears, air traffic controllers are
their version of traffic signals. But again their portion of
operating cost is vanishingly small. Some 40% of aircraft total
expenses is fuel. Their taxes are not as high as at the pump but
still considerable. I'd guess that removing fuel taxes would
translate to 8% ticket price reductions, if passed on. Oh, and that
nasty little ticket tax? Score another 10% for the air traveler.
Would these be passed on? In a month when the airlines can skip
their purchase payments and lease payments, I suspect they would
feel at least that generous. Don't forget the hated PFC charges,
they all go to infrastructure so this month they are gone.
Obviously this cannot go on very long. Air travel has tremendous
capital costs and unlike transit, the government doesn't pick up the
airlines' tab for new vehicles. Autos, busses and trucks are very
hard on their r-o-ws. The need for ongoing capital maintenance and
investment is a necessity for every mode to remain at peak
effectiveness, indeed operational.
The point of the experiment, however, should stay around for good
reasons. I know it won't be but it should be clear that it is a
canard to talk about operating costs when discussing transit. The
honest number is total cost. After all, it should be clear from
this experiment that the operating cost of personal autos is vastly
cheaper and more efficient. Operating costs vs. operating costs
comparisons that is...
And remember a month without transit subsidies is a month without
transit.

Friday, March 17, 2006

California Gasoline

The BTS uses 124,700BTU/gallon of regular (unleaded) gasoline in its' national energy calculations. [N.B. Lead is immaterial
regards energy content.] Unfortunately, Kalifornia with our 13% of the entire population and over 15% transportation share doesn't get "real" gas. We get liberal gas. Pun intended. You know why Kalifornia gas generates 10% less pollution? Yep,
because Kalifornia gas has 13% less energy content. Rocket science. The difference is made up with oxygenates and nonenergy content additives. For the less technical, oxygenates are air. Yep, what grocery stores do to ice cream, Kalifornia does to gasoline; fluff it up with air. Do this with ice cream and the District Attorney prosecutes. Do this with gasoline and you get to charge EXTRA for the effort involved. This does reduce certain bad byproducts such as NOx but it also increases the two major greenhouse gases H2O and CO2. Diesel is not affected by the Kalifornia oxygenate regulations. The BTS does not prorate but uses the FTA, APTA, FHWA and other sources for diesel.

The result is; were we to prorate for actual Kalifornia efficiency rather than the assumed efficiency would be another 15% advantage to POV autos over others on specific energy consumption.

Tuesday, March 14, 2006

Cantrell II

There's no discussing this with peak oilers. They not only won't listen, they've been defensive about being so wrong for so long that they can't even keep a civil tongue. We've extracted more oil since 1975 than was known to exist in 1975 and still have as many years left as we had in 1975. Being wrong for three decades has done to them what slot machines do to gambling addicts. They think they are "due."

The peak oliers have been saying that there have been no significant discoveries for many years and just this morning we find out about the discovery of what might be the worlds second largest oil field and the reaction is "yeah, but..." There's just no pleasing them. It is a religion, their gods are Campbell and Hubbert. It's only been a half a day since the worlds supply of oil has been extended by more than the wildest maximum undiscovered oil possible according to the peak oilers and they are already calling everyone who has been absolutely correct since 1855 idiots. It's 2006. The die we toss once a year now has 152 sides and only on pip. Someday the peak oilers will be correct. When that time comes we may have a few as 75 years to move away from oil dependency. I'm not going to hold my breath waiting for that that day and I'm certainly not going to sell my SUVs and move back into a 4 story cold water walkup tenement high density crime crib rabbit warren when it does. Get real. Better yet, get civil.

Energy and the Built Environment

Kunstler the Hustler continues his march to the "long emergency" repeating the mantra that the suburbs are held together with subsides, secret zoning and most of all unsustainably low energy prices. I've always thought of hima as the crazy cousin who is fun to have over and listen to his wacky stories every once in a great while but lately he's become shrill and repetitive and increasingly immune to correction.

Rather than Kunstler's prediction of Ottoman Empire in decline, energy prices will collapse back to long term trends not with new capacity but with even a modest drop in demand. Right now the refineries are near capacity but there are massive structural impediments to expanding gapacity. The oil refiners know that the cartel can drop oil to $25 any time they wish so they have to base investment decisions, $10s of billions on that price. THe Us and other 1st world nations impose monster regulations as well. Several OPEC nations are getting into the business "upchain" building refineries themselves and planning to ship finished product instead of crude. Who would go up against that market? Besides when you are a refiner with capacity constrains you can charge more, much more. Regardless of the potential investment returns expanding capacity REDUCES your profitability. Nope, increases in renining capacity are not going to happen beyond the long term trend in demand and based on the economics of $25 oil. We need a demand side solution to this usurious sitituation.

This from a US Army Corps of Engineers report dated Sept 2005 "Domestic production of both oil and natural gas are past their peak and world petroleum production is nearing its peak."

Gee, now where have we heard this before? Oh yes:

* "Hurry, before this wonderful product is depleted from Nature's
laboratory!"--advertisement for "Kier's Rock Oil," 1855

* ". . . the United States [has] enough petroleum to keep its kerosene
lamps burning for only four years . . . "
--Pennsylvania State Geologist Wrigley, 1874

* ". . . although an estimated two-thirds of our reserve is still
in the ground, . . . the peak of [U.S.] production will soon be
passed--possibly within three years."
--David White, Chief Geologist, USGS, 1919

* " . . . it is unsafe to rest in the assurance that plenty of
Petroleum will be found in the future merely because it has been in the
past." --L. Snider and B. Brooks, AAPG Bulletin, 1936

$60 oil has gone on this long because the consuming economies have been so strong that they haven't tipped into recession. That's all. No other reason. None. We aren't "running out of oil" and everyone who says that $60 oil is their evidence of scarcity had damn well better be ready to shout from the rooftops that trillions of barrels will be generated spontaneously should the price revert back to $40 because it is the same argument.

Fannie & Freddie; Give It a Rest, Let's Move On

“The Debt Securities, together with interest thereon,
are not guaranteed by the United States and do not
constitute a debt or obligation of the United States
or of any agency or instrumentality thereof other
than Fannie Mae.”

Fannie Mae, “Universal Debt Facility Offering Circular,” January 22, 2002.
www.fanniemae.com/markets/debt/pdf/udf_012202.pdf?p=Debt+Securities.

Okay, can we deal with reality and not tinfoilhat stuff?

Realtor® Phrases in 2006

"The Sacramento Bee reports the worse numbers they can find."

"If you understood what you were saying the first time around, why didn’t you say it?"

"Lucky you, someone’s losing equity, and some of my colleagues are struggling in their business."

- John Lockwood, Realtor@, Buddhist®

Now, That's Just Not Right

'Landscraper' going up near Platte

...An ambitious, multiphase, 15-acre riverfront development that encompasses residential, office and retail in the emerging River North neighborhood. Heavy equipment operators are scraping the site to make way for a sleek, 550-foot-long, four-story "landscraper" that will hug the ground and play off the diagonal of the Platte River. Had it been built vertically as a skyscraper, the building would have climbed 55 stories. Read more at; http://www.bizjournals.com/denver/stories/2006/03/13/story1.html?i=32309

This is what happens when planner fads get out of control. Laugh? Cry? Throw up your hands or just plain old throw up?

Not Intended As Investment Advice ;-)

A fellow blogger at http://flip-this.blogspot.com/ asks semi-rhetorically:
Pretend you inherited a laundry mat (a prosaic, non-glamorous, business) that was losing $6,000 per month and that couldn’t be fixed. How long would it be before YOU shut it down?

Shut it down!? Heck, this is a great investment opportunity. Everyone has to wash their clotes somewhere and they aren't making any more water you know. Laundos®! That's the ticket. Instead of renting each machine, I'll sell them individually to investors. Each machine owner will pay for the mechanism and I'll charge a monthly Laundo Associaton Fee (LAF) for common area expenses and management. Owners can optionally contract with me to sublease their machines, subject to blackout dates in a LaundoTel® type arrangement!

Wednesday, March 08, 2006

Realtor® Phrases in 2010

"Tell you what, you buy the fries AND the chili and I'll cover the cost of the cheese."

Future Realtor® Job Prospects

"I used to be a Las Vegas Realtor®... Now I'm a Private Party Hostess®." {giggle, giggle} "Wanna invest in some inflationary assets?" {giggle, giggle} "I know, you must be one of those guys that expects a Soft Landing. That's extra, you'll have to talk to my Broker®." {giggle, giggle} "Wanna go back to my place and go over some escrow papers?" {giggle, giggle} "Act now before the price goes up." {giggle, giggle} "There are other interested parties you know. Why just this morning there was a nice young couple that was very interested."

Fungible

Repeat after me; "All energy is fungible." Is there any discussion on this point? Every joule that comes from nuclear or solar or gains in efficiency or deep sea hydrates or room temperature superconduction or regenerative interial recovery is a joule less of whatever is the most expensive energy alternative. When we stop using oil and natgas for super inefficient electric point source generation those geopetrol commodities are freed up to provide transportation fuels. Sempra Energy has a standby natgas powered peak load generator about 30km from my home. It only comes on line durring peak demand periods which in Southern California are also the brightest sunny summer days when my 50m^2 rooftop cells would be most useful. That's why I commented that it would be in the local electric companies' best interests to subsidize my solar array. Like I said, fungible. See Dilbert:
http://tinyurl.com/b7vug

I think people miss the point of my tedious repetions of the timeworn examples of Maltus, Erlich, Club of Rome Hubbert, et al. Point being; THEY'VE ALWAYS BEEN WRONG. And every time it was because of events/circumstances they never envisioned. Given 3 centuries of uniformly unbroken failure of the limits crowd it is a suckers bet to think they finally got this one right. My personal bets for their "I never thought of that" excuses are RTSC, amorphous solar, monopoles and Fullerenes. Physics has no limits. I met Buckminster Fuller once, second or third smartest man I've ever met. They just don't operate on the same plane as we mere mortals. I've no doubt that were he around to comment on global warming he'd recommend patience.

Platinum or Palladium? I expect if we run short we'll whip up a few geneticaly modified blue-green algae to extract what we need from seawater. Problem is I don't think we have enough expertise to target valuable materials and there will most likely also be collected tons of junk metals like Gold and Wolfram.

Wide Open Vistas

Microsoft Windows Vista Enhanced Professional Edition 1.0 SP2 (2007 hopefully) equals OS X 10.1 (2001) except for security, ease of use, size, price and speed.

Amazingly, OS X with every new version (3) has become faster and faster and can run on smaller and smaller machines. Contrast that with the Cray-like computer that will be needed to run Vista.

Vista is just like OS X except for adding restrictive DRM, undocumented backdoors, propietary networking protocols, backwards compatibility, reduced documentation, administrative overhead. Oh, I give up. People either know this already or don't wish to know. My clients with mixed environments always make sure there is a machine running Windows 2000 Professional so that they can always be sure of at least one mission critical Windows workstation.

Alternative Energy

Phil asks; "Robert ...add up the arable land, give us your best efficiency of conversion from your best net primary productivity - does it add up?" I'm not sure why arable land is necessary to generate electricity from solar. Indeed, I'm more inclined to use wasted space. My rambling 1960s sunny Southern California home could go "off the grid," generate more than it consumes with about 50 M^2 of cells unfortunately that would also cost about 400 times what the typical monthly enegy bill runs so it doesn't make sense. I won't go into the egregious public policies that forbid one from going off the grid as well. At the current rate I expect the costs to halve in about a decade so I expect the crossover point for western residential energy installations to occur 6-8 years from now. Even sooner if source point electricity utilities get smart and agree to subsidies in exchange for peak demand capacity sharing. Then there's the future of GM crops and animals. Drought resistant corn that can be used to produce some plastics comes to mind as a way to both reduce oil dependency and increase the amount of arable land by putting marginal areas to better use. Fuel cells do indeed currently need special metals but I thought that complaint was dealt with decades ago with the famous bet. In 1980, economist Julian Simon and biologist Paul Ehrlich decided to put their money where their predictions were. Ehrlich had been predicting massive shortages in various natural resources for decades, while Simon claimed natural resources were infinite. Simon offered Ehrlich a bet centered on the market price of metals. Ehrlich would pick a quantity of any five metals he liked worth $1,000 in 1980. If the 1990 value of the metals, after adjusting for inflation, was more than $1,000 (i.e. the metals became more scarce), Ehrlich would win. If, however, the value of the metals after inflation was less than $1,000 (i.e. the metals became less scare), Simon would win. The loser would mail the winner a check for the change in price. Ehrlich agreed to the bet and chose copper, chrome, nickel, tin and tungsten. By 1990, all five metal were below their real price level in 1970. Ehrlich lost the bet and sent Simon a check for $576.07. Prices of the metals chosen fell so much that Simon would have won the bet even if the prices hadn't been adjusted for inflation. Remember when we were going to run out of platinum because of catylitic converters for automobiles? Does anyone remember that the Club of Rome in 1975 said in no uncertain terms that we would be absolutely out of gold by 1997? That was before they even knew about the explosion in commercial consumption for electronics. Phil, you are right that we don't have enough land to say grow material for bio-diesel to replace what we now extract from the ground but we don't need to, we just need to price alternatives at the margin. At current prices we have some 37 years of proven extractable worldwide reserves. At the low end of the 35-45 year range that we've maintained since 1920. Interesting eh? In 1920 we had exactly the same world oil supply balance we have today. We've consumed more oil since 1970 than was proven to exist at that time. Someday the peak oil theory might be right about finiteness of the resource but even then the theory will be completely wrong as to the consequences.

Tuesday, March 07, 2006

Sic Transit...

At the risk of starting an ideological war I'd like to pose a serious but hypothetical policy question:

Subsidies are not bad. They've done some great things. Velcro, Teflon, binary nerve agents. Okay, maybe not Velcro. Point being there's subsidies and there's investments. Some investments are surely not going to pay off and there are some that only collectively make sense, water and sewers as examples. The problem is transit has fallen far below sewers in public import and worse still it has entirely divorced itself from any prospect of ever having a payback. $6 gasoline isn't going to send people back to living in 6 story apartments and waiting for hand scheduled department store deliveries just so transit makes sense again.

The question I pose:
Does anyone claim transit is more important than clean universally available water?
Why then do we subsidize the former and tax the later?

[the rest is just discussion about this question]

Transit can't seem to make up its' mind. Is it a public utility? Is it a public service? Is it assisting a right of mobility? Is it ...?

I know what a public utility looks like. How long would you keep the head of the Department of Water and Power if he acted like your transit chief?

I know what a social safety net looks like. How long would you keep the Director of Welfare Services if he operated like a transit agency?

I know what a public service looks like. How long would the fire chief keep his job if he answered alarms the way the buses operate?

I vociferously support, nee advocate for transit solutions. Mine is a difference of opinion as to what constitutes a solution.

I have said that transit is unique among the things that we as a society choose to subsidize in that it is not
means tested and is not a utility and is not a public service. Transit is not like highway travel because there is no massive subsidization. [There is probably a little but it isn't policy as it is in transit.] Highways are indeed means tested. Try
to drive on the freeway without paying the appropriate fees and taxes. If you cannot afford the registration and the gas tax, you cannot use the highway system. You can ride a bike for free because of the kind of piddling subsidy leakage I mentioned earlier as long as you have the means to get a safe bicycle and agree to operate it safely. If you lack the means to do this you are not allowed to use the roads even on a bicycle.

Transit as a transportation choice is not a public service of the same class as clean water, sanitary sewers or safe home heating. If you don't pay your water and sewer bill, the DWP will cut you off. They don't offer monthly passes and they don't do any means testing. Does anyone claim transit is more important than clean water and the public health issues of sewerage? When was transit promoted to greater importance? Was this a Proposition or Legislative law?

In the context of a public agency that loses money on every passenger, attempts to build ridership and foster dependency looks a lot like empire building by bureaucrats and social engineering by transit planners. We arrest peopple for fostering drug dependency on streetcorners and we subsidize people fostering mobility dependency on the very same corners.

Even welfare as a public service is based on demonstrated need. Transit does not require demonstrate need.

When I use the term transit math I am referring to practices such as calling maintenance a capital expense. The deliberate use of the term boarding to make service figures appear larger. The depreciation of capital assets that were acquired for free. Those kinds of things.

In as much as transit is an urban land use tool, it should not be funded by transportation funds. Second I think people try to vote with their feet (butts) and their dollars, I find it immoral to be an advocate for a transportation mode without demonstrating a willingness to "vote" with your seat, feet and your own money.

Thursday, March 02, 2006

Ask not for Whom the Bob Tolls he Tolls for Himself

Robert I Toll of Toll Brothers practices the time honored tradition of do what I say not what I do.

http://www.insidercow.com/history/company.jsp?company=TOL

2003-06-18 14:43:49 100,000 $31.40 $3,139,930.00 5,534,760 14.78%
2005-07-13 09:54:03 70,000 $52.56 $3,679,400.00 5,290,710 4.80%
2005-07-12 10:02:51 165,080 $103.49 $1.70834E7 2,680,360 52.88%
2005-07-12 10:02:51 100,000 $103.49 $1.03486E7 0 52.88%
2005-07-08 14:34:13 110,820 $102.11 $1.13159E7 6,244,300 50.10%
2005-07-01 12:06:48 55,700 $102.68 $5,719,240.00 6,355,120 46.03%
2005-06-29 16:33:38 85,800 $102.11 $8,761,000.00 100,000 44.49%
2005-06-29 16:33:38 33,400 $102.11 $3,410,460.00 6,410,820 44.49%
2004-12-14 14:28:57 120,000 $64.17 $7,700,540.00 5,555,710 -9.04%
2004-12-14 14:28:57 868,700 $64.17 $5.57455E7 5,195,440 -9.04%
2004-12-14 14:28:57 250,000 $62.95 $1.57381E7 4,945,440 -15.40%
2005-02-28 13:18:59 777,500 $87.74 $6.82192E7 4,167,940 11.93%
2005-03-01 12:10:05 472,500 $88.60 $4.1863E7 3,695,440 12.79%
2005-06-24 15:03:11 100,000 $102.07 $1.02069E7 2,845,440 44.16%
2005-06-24 15:03:11 45,500 $102.07 $4,644,140.00 185,800 44.16%
2005-06-23 12:28:28 18,700 $101.02 $1,889,080.00 231,300 44.24%
2005-07-25 15:31:19 193,700 $57.09 $1.10582E7 5,097,010 15.50%
2005-07-25 15:31:19 673,300 $57.12 $3.84623E7 4,423,710 15.15%

Someone Recognizes a Risk Premium?



Who's right? Good question but as more and more people have opted away from the traditional 30 yr conforming loan the consumer advantage of the ARM appears to be eroding.

Sunday, February 19, 2006

Condotel California

Welcome to the Condotel California?

IMO however the biggest problems with the current housing situation are in the subprime mortgage market. First, the vast majority of sub borrowers are stupid. They aren't able to deal rationally with what's coming. They'll stop all other saving, investment, whatever and run up any consumer credit they have BEFORE they see a problem. By then it will far too late. A maxed out consumer that has been ignoring routine mantainence, scrimping on healthcare and insurance, has a now old car with still sizable balance and nearly maxed credit cards is going to miss their property tax payment or something and then just stop paying everything, thinking they are hoarding against the inevitable losing their "stuff" and starting out clean all over again. Like I said, stupid.

The real stupidity is the lenders. They have been counting neg-am balance accruals as current income and when late pays and those penalties start to pile up they'll call those current income as well. By the time they realize they have nowhere near the reserves against loses it'll be too late for them as well. Like the stupid borrower the banks will wish to prop up shareholder value until the elephant in the corner is too big. The write-downs and stock hits are going to be frightening.

Tuesday, February 14, 2006

Pain Is...

For fun. People are telling us what pain is in the real estate world. After enough posts I'll start a retrospective of what Joy is.

To start:

Las Vegas pain; you keep your lawn green while others' are brown while your kid wears his sister's sneakers.

Los Angeles pain; Roy Lichenstien, "Oh my God, I forgot to accrue equity!"

Ventura pain; "So close to LA yet so far from its' troubles."

Santa Barbara pain; "But the other shack sold for more. My shack is nicer."

Cambria [and Wrightwood] pain; "Everyplace else should have crashed first."

San Diego pain; "Nice doesn't go down."

Boston pain; "Snow? Not at all, that is ambiance."

NYC pain; "As goes the financials so goes NYC."

SoCalMtgGuy, this is fun. I'm starting a thread just to collect these. Unless you object it is:

Thursday, February 09, 2006

Measuring #2: Rents

Heck the bubble popping means rents will crater as well, right?

Don't be so quick. Rents are driven up by costs and down by competition. There are going to be a lot, lot more familes looking for rental housing, there isn't going to be another two sticks nailed together for more rental housing for a long, long time. The tax, energy and other components of providing rental housing are very very inflationary. There's going to be a lot of pressure on rent prices.

Interesting story. About 10 years ago the voters of San Bernardino approved a small parcel tax to fund libraries or law inforcement or something so I raised the rent an equivalent amount. My renter was dumbfounded, the tax was on property owners not renters she said. Some peoples iz so stupid.

Anyway, there's so much froth in the total housing market I wouldn't even try to guess what will go on with rents in the short term. Not just banks being reluctant landlords but boomer second homes becoming boomerang children's homes that won't relect market rents and the impending spate of divorces and houshold dissolution. there's also going to a rush of inexperienced landlords who won't correctly price their products. It's going to be amateur fire department hour as the neighborhood burns. That said, in the long term rents have to go up.

This is bad for inflation. The CPI includes 23% as owners equivalent rent. OER is a construct put together to undereport inflation. It assumes that even as you actually pay $3500 in PITI monthly you are only paying $2000, the amount the same property would rent on the open market. I fully expect the Fed to change the OER just in time to catch the slide in housing and thus continue to underreport inflation.

Wednesday, February 08, 2006

Measuring: TCO Housing

The measure of productivity is indeed tricky. Just like inflation is tricky. Even measuring bubbles is tricky. I'll concentrate on bubbles.

The big elephant in the corner: What about California has always made it more expensive to own a home? Ans: It isn't more expensive and more importantly hasn't always been as expensive as it appears today.

What are homeownership costs? And equally important, what are homeownership benefits? A fixed rate mortgage in CA is the ultimate in financial predictability. Your mortgage is the same and your property taxes are limited to 2% increases (maximum) annually. Contrast that last with FLA where people are experiencing doubling and tripling of property taxes. And insurance; forget the earthquake stuff, no one has earthquake insurance, it is designed to not be a good deal. So ex earthquakes CA is a good place to write a policy. No hurricanes, no ice storms, no frozen pipes bursting, floods and fires are predictable. Then there's ongoing costs. Roofs last 60 years, paint 15, driveways many many decades. And then there's no snow days and no shovelling and no winterizing. Those are all time and effort and money that doesn't happen here. Your car literally lasts as long as you want. A smaller home can really be a bigger living space when the utility of the outside is factored in. I grill on the patio year round. The alternative would be a $4000 indoor grill oven/stove taking up an extra 6 square feet of the floor plan. 2 Car garage rather than 3, as leaving an auto in the driveway doesn't kill resale value. Then there's utilities. Sure gas. water, electricity are getting steep on a unit basis and the idjits trying to grow Bermuda grass on Riverside are insane but my home has no central heating and no A/C at all. This has been a normal winter and the wall heater in one room has been turned on 3-4 times for a few hours for the entire house.

So, what does this all mean? It means that California can be a very cheap place to live. The perception comes from the rest of the nation hearing about $800k tract homes in Moreno Valley with $150 winter heating and $300 summer cooling and $200 water and $300 HOA and $750 taxes (all per month figures). The other 7/10ths of the iceberg are cool and safe under the water while those unusual examples above roast in the glare.

TCO is total cost of ownership. While not anything like all the price of California housing is justified, a lot more than other places does indeed have a basis in reality.

Friday, February 03, 2006

Raising the Dead

Thumbing through my copy of "The Necronomicon" (at midnight by the light of a black flame), it warns that the consequences of bringing the housing market back from the dead will be far more dangerous than letting it rot in the stygian depths to which it has fallen. The extent of those depths in the dark days ahead will not be known until the spectre of Cthulu awakens and (re)posses those things most dear to the doomed minions souls. Namely the holy speed boat, the most reverent Harley-Davidson, those objects of all desire the SUV, RV and ATV. Only then when all hope is lost and the scavengers are finished picking the bodies on the bloody battlefield clean of all that is valuable will the lamentations of the children, resigned to public schools and community college be heard. Only then as the wives cry out to the darkness, "Maui, Cancun wherefor art thou" will the true nature of the beast variously known to mere humans as the House ATM, the great equity withdrawl, the very HELOC himself so powerful that he is CAPITALIZED be revealed as a vampire sucking the lifeblood of guilty and innocent alike. Listen now, quiet, in the distance. The sound, the smell, the desperation. Those who thought an easy death, bankruptcy itself will be denied. No one gets off that easy. The laws of the gods of light and dark are no match for the US courts system. Ameriquest will eat their livers every dawn and peck out their eyes every sunset only to keep them barely alive to feed again on the morrow. And at night, where will they sleep? Not in their own beds, that's for sure.