Thursday, December 14, 2006
Time to draw that line between idiocy and personal responsiblity.
When you sign the dotted line, that's it.
It's assumed you've read the small print.
Home realtors who touted that real estate never goes down and duplicitous mortgage brokers that pushed false affordability over true risk will never be viewed the same way again.
Sunday, December 10, 2006
High-risk loan defaults on the rise and thousands of Americans are getting behind on their mortgages.
And gee, if I'm not mistaken, it's now Christmas time too.
What are you gonna do? Can't disappoint the kiddies now.
Just whip out the plastic and everything will be right with the world again.
Don't worry about it.
Wednesday, December 6, 2006
Thursday, November 30, 2006
For this reason, we can all expect another 13 months of needless roadway deaths, delays and general traffic mayhem in Orange County, California due to the insistence and "positive me-enforcement" of Orange County's finest and most selfish of citizens and their failure to keep their fucking eyes on the road.
Let's all grasp the truth of the following equation:
Cell phones + Driving = Death and Destruction
Hey dumbass, put down your goddamned cell-phone and drive!
The Human Factors and Ergonomical Society claims that 2,600 deaths and over 330,000 injuries are caused by cell phone using drivers in the U.S. each year.
Why is it that the upright-walking citizens of the United States seem to be the last to "get it"?
Most nations around the world have wisely banned the use of cell phones while driving all together.
In the progressive, cutting-edge, forward-thinking, United States of America, however, only 4 out of 50 states have legal bans on cell phones, and several states have tried to introduce legislation only to fail to get the votes:
California (starting in January 1, 2008)
District of Columbia
Can somebody please explain to me - as if I were a 4 year old - why gasoline prices in Orange County declined from June 8, 2006 at a high of $3.17 per gallon by a total of $0.89 cents per gallon to a low of $2.28 per gallon on November 5, 2006, and have since that date risen back to $2.40 per gallon (rise of $0.12 in just 25 days)?
Wednesday, November 22, 2006
Like we really need reports from the California Building Industry Association to tell us these things, but OK, here it is. California is the state with the second least affordable housing.
Of the total housing on offer in Orange County, only 3.8% is considered "afforable".
Now, let's see... I'd like a single-family, 3 bedroom, 2 1/2 bathroom house with a front and backyard, and two car garage in Orange County, California.
Well, how much should I expect to fork over?
Depending on the area and age of the house, prepare yourself to cough up anywhere between US$650,000 to US$775,000!
And before you start thinking to yourself: "Jeeze, that must be a mansion"!, forget about it!
You'll have to sift through a long inventory list of tiny stucco shitboxes with no basements. You put the same OC home on the market in Indianapolis, Indiana your talking $115,000 tops!
Think I'm joking? Well alright, go ahead. I challenge you to find one cheaper.
Wednesday, November 15, 2006
- The Republican has lost majority in the U.S. Congress. Time to say goodbye to sensible border control and immigration reform. Amnesty for all awaits.
- The war in Iraq has degenerated into a full scale civil war, American casualties are mounting, and the military OSTs (Objective, Strategy, Tactics) are seemingly unknown.
- The U.S. housing market is imploding.
- 2006 Inflation in the United States remains unchecked - CPI at 202.9.
- Nuclear proliferation by North Korea and Iran remains unchecked and unconfronted.
- Gasoline prices just increased by $0.07 per gallon since the Nov. 7th elections (OC, Southern California)
- Terrorist are gaining strength and attacking NATO in Afghanistan. Women still wearing burkahs.
- 5 years after September 11, 2001 - Osama Bin Laden is still on the loose.
- At posting time, the U.S. National Debt has risen to $8,608,413,824,530.00. George, just ask each American citizen to write a $28,700 check and get it over with.
- At posting time, the September 2006 U.S. Trade Deficit has risen to $64.4 Billion U.S. Dollars.
Tuesday, October 24, 2006
Thank you to John Lansner of the Orange County Register for bringing to light what many in the southern California real estate establishment were too cocky (and to afraid) to admit.
What can we learn from this poll? Well, the housing market sentiment in Orange County is shitty. Really shitty. And it's only going to get shittier and shittier.
Hell, I live here and I considered myself somewhat bullish by voting into the 35th percent column!
As of October 24, 2006 here are some of the poll results:
Which way will O.C. home prices go in 2007?
1 % Up dramatically (10%+)
12% Up a bit (2-10%)
10% Essentially flat (-2% to 2%)
35% Down a bit (-2% to -10%)
42 % Down dramatically (-10% or more)
The sky is falling. The sky is falling. Falling is the sky.
Friday, October 13, 2006
- Free Barbecue at Open Houses
- Cute High School Cheerleaders Delivering Home Flyers
- Mexican Mariachi Bands
- Free Moving Trucks
- Paying Closing Costs and Homeowner Association Dues
- $5000 Cash To Find Home Buyers
These are some of the new creative incentives being offered by Orange County California realtors to the public in order to drum up interest in the over-priced, $500,000 plus stucco shitbox homes in the area.
Orange County real estate agents, who have grown rich and fat over the last 5 to 10 years by overhyping the financial infallibility of the local housing market and earning 6% commissions on the sale of six figure homes, are finally discovering what it feels like to actually put in a full days work, even if they remain corrupt and overtly duplicitous while doing so.
Let's hope for their sake that home sales pick up.
Thursday, October 5, 2006
Wednesday, October 4, 2006
They apologize and say how very sorry they are, but then shortly afterward do the same damn thing again?
Now consider the United States banking and mortgage lending industry. In the mid to late 1980s hundreds of savings and loan banks throughout the country went out of business and were eventually bailed out by the U.S. government (in other words bailed out by U.S. taxpayers!) for making shady loans to unqualified, poor credit rated customers.
Around 1999 began a never-before-seen period of fantastic appreciation rates in housing nationwide. Incomes were quickly outpaced by the rate of appreciation. In order for new home buyers to afford the high market value of homes, lending institutions found creative loan instruments to help people stretch their budgets, dive in comfortably into homeownership. Buy now, pay later and watch your "investment" grow!
So here we find ourselves in 2006 facing a similar situation. Many people who bought their homes in 1999 or 2000 using these "creative" interest-only or adjustable rate mortgages, face the impossibility of meeting increased monthly home payments as a result of the rate adjustments.
Only now is the Federal Government issuing to banks tighter guidelines to instruct borrowers of the high risks of using such loans, and forcing banks to follow strict criteria in order for customers to even qualify for such loans.
As usual, such government regulation of the lending industry may be too late. The housing market is now crashing and burning in many areas of the United States. Tens of thousands of Americans may be facing foreclosure or financial ruin as a result of their financial ignorance and "pie in the sky" optimism for real estate.
Once again, we will hear senate and congressional hearings on Fox, CNN and the national networks to determine what went wrong, why and by whom. In a market-based capitalist society and economy, the laissez-faire approach certainly has its merits. But as proven time and time again, the money lending industry, and now members of the real estate sales community - have proven that they cannot be trusted. They have implemented business strategies with fail-safe tactics. When the foreclosures come and the bank fails, the U.S. taxpayer will help us pick up the pieces.
The U.S. government must shield itself from the powers of politics and special interest groups and start over to regulate the banking and real estate sales communities to higher and more strict standards.
Now, with that said, take your hands of the mousepad. Everyone take you our wallets out and prepare yourself mentally to foot the bill for these financially inept morons...
But hey, it's a free country. Do what you want! Just don't bring the rest of us down with you, OK?
Holy crap! This is not good news, but it's worth reading. Definitely not a local issue, but a national one.
Why in the world would home values in lovely Orange County fall by as much as 10% in 2007? That would mean that, for example, a Lake Forest, California home valued today at $685,000 (not unreasonable, just check out homes listed under ZipRealty.com) could potentially stumble to as low as $616,000!
One reason why this may occur is because housing speculators, or "flippers" are getting the hell out of the market while they can, selling off the homes and condos they purchased in order to salvage a make a small profit, at least break-even or not lose their financial ass completely.
Check out OCFlipTrack's website and you'll see exactly what I mean.
Oh, what a tangled web we weave!
In fact, the desperation of these housing investors, facing impending financial ruin should they hold on to these "assets", I mean liabilities, while they decline in value, is leading many to slash sale prices aggressively each week, creating greater pressure on all sellers in an area to lower their own sale prices to attract buyers. Despite these efforts to cut prices and unload half-million dollar property investments, buyers in Orange County remain cautious, reluctant to make any moves just yet, as evidenced by increased inventories in single family homes and condominimums in the area in September.
Tuesday, October 3, 2006
Foreclosures up nationally 50% year on year and up 24% between July and August 2006.
"Gee honey, I thought you said we could afford this $650,000 house....
and the Ford Mustang convertible,
and the boat,
and the new leather furniture,
and the camper,
and the remodeled kitchen.... "
Wednesday, September 20, 2006
Nevermind the fact that the owner could never afford to buy the home himself at the sale price.
So what is it exactly that makes an Orange County homeowner rationalize their right to a $260,000 profit on a tiny 4 bedroom home, built before the Reagan presidency, with no backyard?
a.) "My realtor said that's how much the house is worth."
b.) "Everyone else is doin' it and getting away with it!"
c.) "The great sunny weather, mild temperatures and family community of Lake Forest contribute to the home value and justify the $600K asking price.
d.) "My neighbor sold his larger home for $650K. My home is comparable."
Well, which is it?
This may be what sellers are thinking. But more and more prospective buyers are deciding to hold their horses and wait on the sidelines. Things are starting to get ugly for the real estate market... and potentially very interesting.
Sales of homes in Orange County are on the decline. Foreclosures are on the rise by 75% year-to-date 2006. Median home prices in OC remain high at $633,000, over 10 times the median family income. Now may not be the right time to buy a home.
Since no one up to this point has had the balls to say or doing anything about it, the big, bad state of California is suing the ass off of Ford Motor Corp., General Motors Corp. and Toyota because it claims that the emissions of the vehicles manufactured and sold are costing millions of dollars to the state.
Before anyone scoffs at this news, ask yourself whether you have been to Southern California recently? Next time you come, look around you and then toward the horizon at sunset.
Yeah, see that brownish-blue shit in the horizon!? We're all breathing in that crap!
I'm not sure the rage is appropriately placed with the auto manufacturers, since they are all simply following the emission standards of the Federal Government.
So here's an idea for the California state attorney general:
1.) Since smog is such a costly problem for the state, re-set statewide California emissions standards to a stricter level. Force manufacturers to comply.
2.) Let the most fuel efficient, least polluting manufacturer win the market.
3.) Form a coalition of other states that would agree to the same standards and have them follow suit.
More frightening news regarding the national real estate market. And it's only going to get worse. "Underwater" homeowners trying to sell their homes may only encounter more frustration, since home sales are declining nationally.
Meanwhile potential home buyers, receiving a steady diet of real estate value warnings from the national and financial media, will likely wait as long as it takes until the market hits bottom.
Wednesday, September 13, 2006
So drink up, Orange County Ford Exploder and Cadillac Escalade drivers!
Also, it's not too late to remove the "fore sale" sign off that extended cab pickup or 20 foot speed boat you own either.
Poor Bob Toll.
According to him, if it weren't for all the greed and speculation of buyers and sellers in the U.S. housing market, happy days would be here again!
Come on Bob, what about the famous line of the character Gordon Gekko in the 1987 classic film "Wallstreet"?
After all, "Greed is good."
Well, maybe it's just me, but it I find it curious that Bob Toll and the real estate industrial complex, including realtors, homebuilders and mortgage brokers would consider themselves so overqualified an authority to preach to the market and the American public about the vice of greed.
What's that classic Old English adage: "The pot calling the kettle black"?
(Bob Toll is the CEO of Toll Brothers, Inc., which designs, builds, markets and arranges financing for single-family detached and attached homes in luxury residential communities.)
Saturday, August 19, 2006
Ever want to take a look into the financial future of the United States of America?
Then read what U.S. Comptroller David Walker has to say (article 1, article 2).
If you think the U.S. government is going to take care of you when the next recession hits, forget about it. Prepare yourself now. Revise your household budget, cut your expenses, reduce your debts, sell useless or declining-value assets (boats, extra cars, etc.), and SAVE AS MUCH MONEY AS YOU CAN in safe investments and financial instruments!
Thursday, August 17, 2006
You've got to feel sorry for Orange Country home realtors who in the past have been pulling down huge commission checks for selling over-valued, over-priced homes the last several years. Now they've got to actually do some work to "earn" that undeserved cash.
But damn those potential buyers in Orange County! They are now turning into a patient lot! They are not as easily convinced as before to buy in to deep-end financing schemes for a lousy 3 bedroom, 2.5 bath matchbox house in the illustrious OC! This OC Register article claims that home sellers are equally patient.
But the patience level of home buyers may not be as variable as that of a motivated home seller. Not all sellers find themselves in the same financial situation. Some are sitting pretty financially and not worried about a thing. But there are many real estate speculators (home flippers) and over-leveraged homeowners in OC as well. What happens when an over-leveraged, motivated seller who's adjustable-rate mortgage rolls-over to the higher rate? Re-financing doesn't make sense because the value of the home has declined. He tries to price the home aggressively (but within his mortgage bank's pricing guidelines) to get rid of the property, but still can't sell due to buyer patience and a fear of rising rates come September?
We may soon find out the answer. Inventories in Orange Country continue to climb and home sales remain slow in August, perhaps the last "hot summer sales month".
Tuesday, August 8, 2006
No interest rate hikes this period following a 9-to-1 decision from the Federal Open Market Committee, which means the streak of the past 17 consecutive interest rate hikes to slow down the U.S. economy and control inflation officially comes to an end today. The federal funds rate, which is the rate at which the Federal Reserve Bank lends US dollars out to fellow banks, will remain at 5.25%.
So how did markets respond? All of the key U.S. market exchanges ended down today and inflation remains a huge worry for investors.
A rate hike would have tightened the U.S. money supply and have further controlled an already high rate of inflation in the country, as measured by the consumer price index or CPI (the CIP is just one tool used by economists to measure inflation) of 4% in 2006 year on year. Typically the U.S. CPI (rate of inflation) has averaged around 2.7% per year since 2000.
What does the FOMC pause mean to the average American consumer? It means that loan and mortgage rates will not rise in the short term, but that prices for everyday goods and services, including energy and food, will likely rise in the coming months. It will also mean that the US dollar's value will gradually decline even more, and hence the value of US dollar-based investments will decline, and the purchasing power of the U.S. dollar to buy foreign goods will likely also decline.
This tactic to cheapen the U.S. dollar's value plays well when one considers the massive debt that is accruing by the U.S. government and only slowly being paid down.
The brilliant plan of borrowing $5.00 on Monday, but paying back only $3.50 on Friday makes good financial sense for as long as you can get away with it.
In the short term, that tactic appears to work like magic. But eventually global investors in U.S. dollars will catch on to this idea and quickly tire of getting the shaft. If the dollar devaluation strategy continues, the U.S. dollar may eventually lose its magical luster as investors decide to place their assets in other currencies and investment vehicles to achieve their desired returns.
Federal Reserve Chairman, Ben Bernanke, and the Federal Open Market Committee reconvene on September 20 to determine whether rates will be paused again or possibly increased. Based on today's comments statement by the FOMC, the door for future rate hikes has been left wide open.
Monday, August 7, 2006
Ben Bernanke and colleagues at the Federal Reserve Commission may be wringing their hands tonight as to whether to raise interest rates a record 18 consecutive times - or to pause and do nothing. The fact is, it won't really matter to most Americans. We are all on a collision course with recession:
Housing sales are slowing down, home building and related industries feeling a crunch.
Consumer confidence waning, demand for durable goods in decline
Corporate financing for equipment has declined
Energy prices are already at an all-time high, and with news today of the BP/Alaska Oil Pipeline fiasco, a $100/barrel of oil is no longer an impossibility
More American families than ever before are "über-leveraged": having financed overvalued homes with adjustable rate loans, driving expensive inefficient vehicles for transportation, and at the same time trying to afford the sky-rocketing price of continued education for their children - all with a weakening U.S. dollar.
The rate of savings for the average American family remains at a negative, "minus 1% of disposable personal income" - from James Altucher column, The Underlevered American Household
We should take our medicine now, Mr. Bernanke. It's a big shit sandwich and everyone will have to take a bite!
Tuesday, August 1, 2006
Sometimes the business of life and pre-occupation with our work and family hides a terrifying truth that lies before us. The slow, certain detioration of accumulated, perhaps speculated, wealth.
If you're a home realtor or a mortgage banker these days, now's the time to take that 6 month vacation and perhaps leave the country. In a about 3 to 6 months, a large part of your rolodex of 6 digit home buyers is going to want to off you.
If you're renting and thinking about buying a home today, don't. It's probably the worst financial decision you could possibly ever make at this moment in time.
And if you're already a homeowner and have overextended yourself financially, now would be a good time to cut back on discretionary expenditures and to seek professional financial, and perhaps legal assistance to weather the upcoming shit storm that will take all of your money. The next great American housing crash and biggest economic recession since 2001 is upon us.
Wednesday, July 19, 2006
Surfs up, dude!
Monday, July 17, 2006
Monday, July 3, 2006
1.) A ridiculously massive shortage of housing
Whether it was a lack of vision, utter stupidity, or just human negligence, no one anticipated the population explosion in this part of California, because if they did, they would have build more homes here. A lot more homes. There may have been tremendous policital pressure also to prevent housing construction on protected land. Hence, reason number 2:
2.) A shortage of space
There's ocean and protected land to the west of highway 5 (basically a north-south freeway) and mountains and protected land to the east of Orange County. The whole Lake Forest area in the 1960s and 70s, supposedly, was just fertile farm land and dirt roads as far as the eye could see. Now it's a concrete jungle with carefully planned strip malls, gas stations, apartments, small condominiums, and 2-to-3 bedroom single family homes. That's pretty much it. The Marine air station on Irvine Blvd. has been closed for some time and perhaps homes will eventually be built there in the future? There are also a number of condominium construction plans in Irvine, but affordability is a major challenge (see reason number 4).
3.) Orange County is a desirable place to live
The weather is perfect in Lake Forest, California. I mean, it is awesome. I grew up in Michigan and Wisconsin. This place rocks, in terms of weather. It's sunny every day except for a few days in early June and January/February-time frame. Other than that, it's 75 degrees F and lovely. Evenings and mornings are cool and pleasant - around 55 to 65 degrees F.
So who wouldn't want to live under those conditions essentially guaranteed 24/7 ?
4.) Lack of Home Affordability: Monthly mortgage payment vs. Rent payment
Unless you are already wealthy, or your parents gave you a massive downpayment for your home, or you already bought a home back when prices were in the $300K range, you are likely a renter in Orange County.
In Lake Forest, I consider myself lucky - for now anyway. I pay about $2500 for a 4 bedroom 2.5 bath single family home. Rent will be reviewed next spring and I know it will definitely go up substantially, perhaps to $2600/month or more.
Anywhere else in the USA, $2300 a month would buy you a damn fine house. Not in Orange County. In Lake Forest, you won't find even a 3 bedroom 2 bath single family home for less than $625,000. And even if you did, you wouldn't bother to buy it because the home quality (construction, interior, neighborhood) would be way too screwed up to justify the price. No way. If you want a quality, single family home, you have to be ready for cough up between $625K to $700K (July 2006). The $625,000 house would translate to a monthly mortgage payment of around $3500 to $4000. Now granted, there are a crap-load of creative, half-baked financing schemes by local banks and lending institutions offering adjustable rate mortgages (ARMs) and interest-only mortgage loans in order to cajole people into purchasing an asset for a price they know in their gut doesn't make any sense. I'm not even sure why I call it "half-baked". I mean, when you step inside these homes and you consider that they are priced at over half a million US dollars (not considering the recent inflation numbers since 2002), you will wonder why I use the term "half-baked". Anywhere else in the continental US most of these homes would be worth is $180,000 or $250,000 max. Yet people go into perpetual serfdom regardless. That fact alone is too f-ed up for words.
These four reasons are why there are thousands of renters in Orange County. Few can afford to buy a home at such inflated prices. Right now (summer of 2006) there are indications that the inventory of houses in the OC are going up substantially and that home prices could take a downturn in 2007 and 2008. Unfortunately, few if any affordable (less than $400K) homes are being built here. Even if prices go down, we all see that mortgage interest rates are on the rise. Unless the war stops tomorrow, the Fed miraculously reverses the damage of the last three years of inflation, and we start paying down the national debt, interest rates will continue to climb. That $625K house may only cost $575K next year, but the interest rates will be higher in 2007 and 2008 and the monthly payment will still kick your teeth in.
Monday, June 26, 2006
The same pep-filled gallon of unleaded gasoline cost around $2.46 per gallon in 2005.