Tuesday, September 30, 2008

The C.A.R. Makes It's Position Known On H.R. 3997

I don't think it would surprise anyone in America, let alone the state of California, to know that the 175,000 member-strong California Association of Realtors (C.A.R.) is pretty pissed off that Congress didn't ignore the opinions of millions of American taxpayers this week and just pass H.R. 3997, the so-called "Emergency Economic Stabilization Act of 2008" anyway.

Congresspeople received a barage of angry faxes, emails and voicemails, in some cases 200 to 1 against H.R. 3997.

For a response, here is the C.A.R.'s president, Mr. William E. Brown:

"We are extremely disappointed that the U.S. House of Representatives failed to pass the Emergency Economic Stabilization Act of 2008," said C.A.R. President William E. Brown. "The tenuous health of the financial system called for a swift yet thoughtful bipartisan response by our elected representatives."

"Now is the time for Congress to act, and renew its efforts to craft legislation amenable to both political parties that will calm the financial markets, address liquidity issues and begin to restore confidence in our financial system. Americans deserve nothing less," he said. "C.A.R. wants to be certain that the needs of Californians are addressed, and that housing's critical role is recognized in whatever legislation ultimately is proposed. We will continue to closely monitor the situation as it develops."

Mr. Brown appears fixated on today, because he says "now".

"Do it now!"

"No down payment until January 2010!"

It's 2008. The housing bubble has burst. The American taxpayers and so-called "homeowners" (actually homedebtors) are completely tapped out. They don't have any money. Banks are following their customers and going broke too.

Yet the sheer greed of the realtor racket is so strong and so pervasive, a state association actually has gone on record to support a continuation of irresponsible lending (this time asking taxpayers to foot the bill back to the banks), and for what?

Why is it OK for American taxpayers to reward banks and mortgage lenders for ignoring proven principles of finance and sound lending practices? Why is it OK and only now that an association of real estate professionals, whose industry is in a tailspin, finally voice up and say we need to do something?

Who the hell are you people, and where do you get off asking voters and taxpayers for more, more, more?

Is it so that Realtors in California and around the nation can continue to earn their 6% off a $600K plus single family home sale? It looks that way to me.

First of all, those days of $600K plus home sales are coming to a quick end this week. Americans don't need a yes vote on this bank bailout plan to eradicate their wealth. The housing crash, resulting stock market nose dive, and lack of Washington leadership will have accomplished that already ten-fold.

Oh I know the bailout plan will be approved. It will be. Congress must appear to have done something.

But I also know that the American financial system was broken years ago. Where was the C.A.R. or Mr. Brown or the 175,000 members then? They were very busy making their sales commissions, ignoring the underlying truth of real California incomes and true home affordability and selling Americans into overvalued homes that they could never afford. Yes, the mortage broker they worked with could have said "no", but the realtors didn't say "no" either, and both happily cashed their commission checks into Lexus's, Hummers, Armani Suits and Louis Vutton bags.

Well, thank you, California Association of Realtors. And thank you, Mr. Brown.

Disgraceful. Disingenuous. Yet somehow very amusing all the same.

Monday, September 29, 2008

To Realtors: I'm curious

First question, so how is business and how are YOU doing?

Second question, I went to the NAR website today and found the following item for sale.

As a realtor, can you help me understand why the national sales association you belong to would still be selling such material presumeably to you and to new members?

Are you buying this NAR-scripted sales schtick?

Are you USING such sales schtick?

Is it still working?

I'm just curious.

On the bailout: Laissez Faire Could Save Us In the End

I don't agree at all with the financial aid package proposed by Treasure Secretary Henry Paulson, President Bush, House Speaker Nancy Pelosi, and Chairman of the House Financial Services Committee, Barney Frank.

I don't support it. I seriously think it's bad legislation as it was written in first draft form by Paulson, as well as its second draft which was modified by House Democrats and Republicans.

Failing to pass this legislation immediately will no doubt cause massive panic in the financial sector. I also have NO illusions that, failing a U.S. government intervention and bailout of failing financial institutions, the following events will likely come to pass:

1.) a massive and global stock market crash, destroying the "American dream and way of life" as we once knew it.

2.) a global financial market meltdown, including failures/closings of multiple national and international banks

3.) Global economic nose dive into full-bore economic depression (the economic recession is actually over in the U.S. anyway)

4.) Increased unemployment across the US and the world in all business and government sectors, except perhaps law enforcement

5.) Massive reduction in American wealth (lost 401K, mutual fund, stock and home values)

6.) Record-breaking declarations of personal bankruptcy

7.) 6 to 18 months of severe, restricted access to financing for both businesses and individuals

8.) Widespread panic of people everywhere trying to turn their acquired "things" into cash just to make ends meet

9.) Continued headlong crash of national housing prices and increased number of home foreclosures due to ongoing option arm resets.

10.) Raging deflation (no credit available to buy items, so prices start crashing)

11.) Major contraction in federal and state government spending.

12.) An overloaded American healthcare system moves from crisis mode to panic (as hospitals now cannot pay its employees or keep operating)

That's quite a list, and most of it exruciatingly bad.

So if one is against government intervention, what's the alternative?
If saying "No" to offering a helping hand to banks that made poor business decisions means the above chain of events will likely occur, then how is that a good thing for individuals, businesses, families and the very fabric of the American republic?

The truth is, there isn't much good about it. It's all very, very bad and very, very real.

It's entirely possible, under the current economic circumstances as we know them today, September 2008, that the United States of America in which you may have been born or grew up will never be the same again. This month is perhaps another 9-11 blow to the American experience.

Given what we now know, our children and their children are less likely to share our current standard of American living. Their experience may be one of going without. Going without a clean environment. Going without a quality K-12 education. Going without college-level education. Going without quality healthcare. Going without a strong currency. Going without a medium- to high-wage earning capablity. Going without affordable homeownership. Going without SUVs, vacations to the Bahamas, and second homes in Scottsdale.

But what is the alternative?

The alternative is our trusty but often rude and brutally honest friend from France called laissez-faire.

It no doubt makes the cynics sick to their stomachs, but if we open up our minds, our books and read of past experience, the dynamics of a capitalistic, market economy may actually save us in the end.

I know. But stay with me here.

It will not recover our losses.

It will not forgive our debts, nor greed nor financial ineptitude.

It will not even heed our prayers.

But if we let them be, over the long run, the markets could actually save us.

The financial institutions that Treasury Secretary Henry Paulson wishes to arbitrarily save are the same ones who greased the palms of Republican and Democratic representatives for years, demanding that they look the other way as they proceeded to sell high-risk, no money down, adjustable rate mortgages to millions of underqualified or completely unqualified Americans. Their greed was exhilarated as housing prices skyrocketed beyond common sense, real incomes and fundamental supply & demand. These same banks then repackaged these loans into CDOs and sold them at a profit to brokers on Wall Street who also flogged them off to unsuspecting investors in China, India, Russia, the E.U., the Middle East and even the United States. The CDOs were like sausages, machine mixed, filled with good loan bits and bad loan bits and gobs of artificial ingredients like AAA-ratings.

Many of these banks then could not continue to sell these loans off because the market's sweet tooth was soon satiated. Their balance sheets are now stuck with the worthless loans that will never be repaid by the signatory. Many banks face certain failure unless the American taxpayer agrees to buy up these worthless loans (with the Treasury Secretary's sole control and guidance) and thereby clear their bank balance sheets so that they can presumeably resume business with conventional lending practices, i.e. documented loans, 20% or more downpayment, full income verification, face-to-face client qualification meetings (no more of this online-loan-qualification bullshit).

The market, in general, desperately needs information. Good or bad. It needs to know the truth. It needs to know that these loans are good and will likely be repaid. Or it needs to know that they are actually not good at all and must be written off as losses by the banks. Banks must acknowledge the toxic sewage loans they wrote to their balance sheets over the last 10 years. And some of these banks must simply be allowed to fail for their careless lending practices.

The wealth will still be lost, and never completely recovered Unemployment will soar and market confidence will crumble. All over the short-term.

The difference will come in that the market will eventually react to accurate information. The lies will be over. Better capitalized, smaller and medium-sized banks may now be in a position step in and acquire the failed banks or their remnants. Lending may still be constricted, but over time, with conventional lending practices reinstated and appropriate oversight, they will begin making acceptable and affordable loans again. More banking options would become available to consumers, competition for financial services would increase significantly, industry costs would likely begin to fall, and the level of service and customer choice would likely increase and improve. New employment opportunities would arise as demand across sectors increase.

None of this would ever happen overnight. There WILL be considerable financial loss and emotional suffering by ill-positioned individuals and families who overextended themselves and have a zero or negative cash position.

But in the end, markets can and do adjust, whether its the financial sector with banks, savings and loans and credit unions, or manufacturers of cheese, paper products, steel, sports shoes or clothing. The market wants to find that market price and it wants that price-to-market. It will get there eventually. There will be a true-up, sooner or later.

Government intervention, as proposed by Mr. Paulson, not only goes against free market and capitalistic principles upon which the U.S. success story was written, but it undermines the market's ability to do what would otherwise come naturally - to correct itself, and to punish those that made unwise financial choices and to reward those that saved, invested wisely, did not panic, and did not overextend themselves with debt and irrational exhuberance.

There is a place for government intervention however. The legislative, and particularly, the executive branches of government, and I'll include the Federal Reserve Chairman, should use their oversight powers to ensure that banks are following conventional lending rules and pracitces, operating at a profit, providing full disclosure and perhaps most importantly holding adequate bank reserves. This has not been done in the past, but should be done going forward. It is not a difficult task to execute.

The one other example of government intervention in this case could be the Swedish example from the 1990s. During that time many Swedish banks were about to fail in collossal and panic-inducing fashion due to piss-poor management, and economic recession and stupid lending practices. The Swedish government isolated which were the strongest banks and which were the weakest, and destined-to-fail banks. The weak banks were allowed to fail. Period. The Swedish government then decided to temporarily purchase percentage ownerships of the stronger banks. Then, with management oversight, the Swedish government financial committee either bought up the assets of the smaller failed banks or merged them into the stronger banks. This process was painful. Major losses were fully realized. The band-aid was ripped off slowly. But the Swedish government informed the taxpayers, kept a full and open accounting of their deeds under these measures. After 4 to 5 years, with consumer and business confidence in the financial system restored, the Swedish government shares in the banks were sold back to private investors, so that the surviving banks were still strong, but now firmly under capitalist control. Quick Temporary. Procedure-driven. With full disclosure and oversight by parliament and the consituency. If you're going to intervene, that's one way to do it.

By contrast, Paulson wants tsar-like control over portions of the $700 billion all to himself so that he alone can decide which American banks survive and which ones die. He would also decide which sewage loans to buy up, but he would have no obligation to sell off these garbage-value loans later on at the best possible price to cover the collective asses of taxpayers like you and me. For all we know, Paulson could buy this shit at $3.00 instead of $10, hold it, then sell it off 2 or 3 years from now for $0.50 each!

This whole bill assumes that the American housing market is going to miraculously correct itself in 1 to 2 years and resume itself at the previous home prices that were based on irrational exhuberance, not reality, in the first place. Paulson is full of shit. So I am not in the least bit surprised the first round of the bailout failed to pass. The only thing that surprises me is that a portion of the elected Congress members might actually have understood the technical details as to why this bailout proposal royally sucks. I think most Congress people don't understand what's going on and just looked over the shoulders of the "smart kid" next to them. They all should be voted out in November, in my view.

Again, this whole situation is really going to hurt average Americans. It could take years for this entire mess to sort itself out in the market.

But know this: With congressional intervention the housing market will take even longer to correct because the inevitable (market value correction) would be delayed unnecessarily. Our financial suffering as a nation would only be prolonged by such typical fast food, short-term, quick fix American thinking.

Thursday, August 14, 2008

Home sales fall to decade low

Bloomberg reports that the number of single-family and condo home sales fell nationally 16% - a ten year low, while median home prices fell 7.6% nationally.

How To Sell An $800,000 Home In Lake Forest California

Lake Forest, California!

Where it's sunny, dry and 75 degrees Fahrenheit almost every day. Nice, well-maintained neighborhoods. Low crime rate. No real lake. No forest either. But good schools. There are good schools.

And the homes. Did we tell you about the homes?

If you have a family and are looking for a lovely house near the lake (did we mention that our town is called "Lake Forest"?), then look no further. We have a the perfect home for you. Let us show you Yellowstone:

No, I mean take a look at 21917 Yellowstone Lane, Lake Forest, CA 92630.

It's got a Yellow Kitchen:

A Yellow Bedroom:

A depectively large Yellow Living Room:

There's a cute little Yellow Bathroom:

Hey, you've got a view of a Yellow Rainbow Lake Fountain!:

Why not take a dip into the local Yellow Pool!?:

Wait a minute! Yellow Pool? Uh, I'm not sure that's a good id...

Maybe we should just go for a workout in the Yellow Gym:

Or just shoot some buckets on the Yellow Court:

Why not have a Yellow Barbecue with friends:

Or just get married at the Yellow Chapel...what the..?

This 4 bedroom, 3 bath, 3,600 square foot home in Lake Forest, California can be all yours for just 12 times the Orange County median income, or $799,000.

All yours for just 20% down and 360 fixed payments of $3997.67!

Seriously, does it get any better than this? You've got to be Yellowstoned!

Monday, June 16, 2008

California's Crisis in Waiting: The 2008 Option Arm Implosion

Dr. Housing Bubble takes us all to school for an important lesson on the next phase of the greatest housing crash in American history: $500 billion of option ARM loans waiting to go *POOF* - 60% of which were signed for homes in sunny and delightful California.

True to form, most Americans (and Californians) apparently chose option 1: Minimum monthly payment.

Come on, think about it. How else can one afford the monthly payments to "own" that 7-times-your-annual-salary-home price?

A lot like making that minimum payment on your credit card every time, but not paying down the balance borrowed, so interest charges accrue into a 600 lbs. hungry and angry Silverback gorilla. Oh, nevermind that menacing figure in your rear view mirror. That's just your collossal unpaid loan balance waiting to destroy your future financial livelihood!

Man, I wish they would come out with auto loans structured like this! I would buy a fucking Ferrari!

Oh California! You thought you could have your state budget crisis cake, educational cuts, and housing crash too?

This is goddamned scary.

"The agent's interests come second"

"...the client's interest must always come first".

"Customers are owed the duty of honesty".

If only more had paid attention during their training/licensing program and after to Article 1 of the Realtor Code of Ethics.

It may be too late for some. Obviously Mr. Romero and many of his ilk weren't all too interested in any pathway or posted signage with the word "professionalism" on it.

Well, this seemingly forgotten code is now on Youtube, so Americans everywhere can rest assured that there will be no more lame ass excuses going forward, I suppose.

In my view, if any previous clients of a Realtor are now facing foreclosure, the Realtor should do something about it.

No. Realtors can't fix everything. And consumers of overpriced and overhyped real estate should have known better. Caveat emptor.

But Realtors can do something. I don't know what that something would be. Maybe Realtors could give back a portion of the commission they earned while selling certain clients down a river on the biggest, most important, most emotional - and ultimately most financially stupid and destructive purchase of their lives?

I don't know. With hundreds of thousands of families facing foreclosure right now across the nation, would that even be a fair solution? How much blame should a Realtor really receive? Perhaps none at all. These homedebtors were the ones buying into the "Get in now!", "Now's a great time to buy", and "You can always refinance!" sales pitches. They signed the freaking mortgage, not the Realtor.

So what would be a fair solution? Maybe the homebuilders and mortgage brokers might want to pitch in with the Realtors and send their foreclosing clients an "I'm Sorry." Hallmark card:

I'm really sorry. It won't ever happen again.

In my view, honesty is dead in the real estate profession in America. And Realtors - fancy reserved trademark and all - have helped kill it off.

For what it's worth, some ethics. Enjoy:

Sunday, June 15, 2008

Remax: OC First Market to Recover from Housing Crash?

Inland News reports from the C.A.R. that Orange County will likely be the first California locale to exit the housing slump.

Steve Thomas of ReMax in Aliso Viejo, CA is saying the same thing on the John Lansner Blog today. Demand for homes in Orange County is at it's highest level since 2005 as over 3,000 homes have recently been placed in pending escrow. Mr. Thomas also claims that "active" inventory of for sale homes in Orange County has declined below 15,000 for the first time since January 2008.

A sign that the Orange County market is turning around?


I noticed that the Bubble Markets Inventory Tracking Website, which looks at data from both ZipRealty and DataQuick sources indicates (as of 31 May 2008) approximately 17,000 homes for sales in Orange County, not 15,000.

I checked ZipRealty today (Sunday, June 15, 2008) for all homes available for sales in all Orange County communities and found 16,668 homes for sale.

While I'm as pleased as the next guy to see pent up housing demand in OC(due to 5 years of nose-bleed-home-pricing fueled by cotton candy mortgages) burning through 400 homes of foreclosures, and to see OC sellers asking for more money when selling their homes, please forgive me if I fail to be completely shocked and convinced at this stage of the collossal housing market collapse by the calling of bottom once again by representatives of that hot air balloon company.

Saturday, June 14, 2008

Buying a Home in '08? 3 out of 4 Blog Visitors Say "No".

My blogpoll closed today.

Are you going to buy a home in 2008?

36 respondents isn't exactly a scientific sampling, but basically 9 out of 10 Rancid Truth visitors responded as "no" or "are unsure". Not very encouraging news for sellers.

There has been a pick up in single family sales activity in Lake Forest in April and still greater foreclosure activity here than most other OC communities. Realtors I've visited with keep saying it's a good time to buy. Some at open houses I've visited have gone so far as to call bottom this summer!

I'm heading out again tomorrow to visit some open houses. Should be interesting to observe and record the local realtor schtick once again.

Thanks to everyone for contributing to the blogpoll.

Palms of Senators Dodd and Conrad Greased by Mozilo

Senator Christopher Dodd (D-CT) and Senator Kent Conrad (D-N.D.) have been caught with greasy palms thanks to the Great Orange One from Orange County.

So what is it exactly that prevents everyone else from being members of Angelo's VIP club?

And how many more Washington politico dolts will be exposed a la Dodd and Conrad?

Chris, Kent, - Way to go guys! Nice job representing your taxpaying consitutuents.
Look, I don't care how you get your palms greased with easy money in Washington. You have to make a living. Just don't try and screw the rest of us tax paying American with stupid policies like the mortgage prevention act and sure-to-come federal income tax hike.

Who will pick up the Tim Russert baton?

No American journalist in existence today does the same extent of research and preparation for key interviews of representatives in Washington who try to double-talk and double-cross the American taxpayer. No one has the commitment. No one has the tenacity.

Tim Russert had all of that. And now he's gone.

Here is John McCain getting absolutely owned on National Television:

Russert Inteviews Hillary Clinton and makes here look like flip-flopping-for-dollars-and-votes dope:

Russert catching Hillary Clinton flip flopping better than the International House of Pancakes regarding NAFTA:

Russert slamming into Dick Cheney about Iraq:

Unfortunately, we will now never see Tim Russert hammering away at Angelo Mozilo, Barney Frank, Christopher Dodd, Hillary Clinton or Barrack Obama for their assinine support of the mortgage bailout.

Who will pick up Tim Russert's baton going forward?

Who will ask the tough questions?

Who will cut through the lies, expose duplicitousness, and insist that the truth be told?

Unless some or many step up, grow a pair and do their jobs in the American press corps, more muck, deceit, lies and ruin surely await us all.

Mr. Russert, you are already terribly missed. May peace be upon you and your family.

"Correct Pricing Is The Only Answer"

A call from this LA Times article by Lew Sichelman to price homes to market.

In 2008?

Well, OK. Where the hell have these reporters been the last 2 years? Last 5 years?

Welcome back. Had enough of the cool-aid, heh?

Hmmm. This is all good advice for realtors, you know.
Make sure homesellers set the right price to begin with.

Howard Brinton, a sales trainer from Boulder, Colo., says too many agents let the market control them, instead of the other way around. An agent, he says, needs to be a counselor and educator as well as a salesperson.

"Pricing, specifically correct pricing, is the only answer for today's changing market and the most important thing a Realtor can do for his client," Brinton said.

But how ironic is it that only 18 months ago we had realtors and the N.A.R. prodding Americans to buy homes at higher and higher prices and they didn't see anything wrong or false about their counsel or educational acumen then?

But what do you expect when the earnings of a realtor is based up on either the sales value of the selling house or nothing at all?

Consumers must expect to get the shaft on the way up and now on the lovely way down.

If I want to build a new deck on my house, I might do it myself, but I might also decide to pay someone to do the work for me. I'll pay them for all the materials and the labor hours required to complete the construction, and I will review the work so that it meets the agreed specifications.

I could never imagine paying a contractor a percentage of the transaction or total value of the completed deck. No. I pay him directly an hourly rate for the work performed and for the wood, nails, glue, cement and treatment.

So it should be with home realtors.

I would pay a realtor $40 to $50/hr for the work they would do to find me a home to purchase in Lake Forest, California. But the idea that I as a consumer must pay a realtor $12,000 when buying a home purchase at $400,000 in value, but $22,500 for buying a $750,000 house just doesn't make any sense whatsoever. What on earth justifies the $10,500 additional commission? Are realtors using sales flyers made of platinum for the $750K house or something?

No. It doesn't make sense. Nothing does. And that's the problem.

I wouldn't pay the contractor more per hour to build a larger, more expensive deck, would I? No, I'd pay him his labor rate and for materials, but that's it.

I can't begin to imagine the anger that those who bought into the b.s. of realtors when the market was growing (unrealistically) at 15% in 2004 and now when selling have to take it up the tailpipe on "correctly" pricing the home they bought. Those that are foreclosing, wow, they've got to be really pissed off.

The advice above is sage. Want the housing crisis to be over tomorrow?

Buckle your seatbelt and then price your home to market. Then get ready for a wild ride.

So You Drive an SUV?!

If you drive an SUV, ok you do look cool. But you are getting absolutely hosed right now in a big way, aren't you.


Today, gasoline in Lake Forest, California is now $4.55 per gallon (87 octane)!
In Orange County, the average price is $4.58 per gallon (87 octane)!
A week ago? $.4.40
A month ago? $3.89
A year ago? $3.19

Man, it must really suck. But since SUV drivers really want to look cool, but prefer the Bill Clinton era fuel prices, yet still don't want to crimp their OC lifestyles, why not go electric with your next vehicle?
Being OC-cool and going alternative power with your wheels are no longer mutually exclusive concepts. Check out the 2008 Tesla Roadster from Tesla Motors of California. You can order one today.

100% Electric powered
o to 60 mph in 3.9 (would blow the doors off most SUVs)
13,000 rpm redline
135 mph (It's OK. You can cry.)
220 mile range per charge (requires 3 hours to charge in normal electric socket) ($0.02 per mile).

Price? $100,000

OK, scoff if you want. Our grandchildren will be laughing at our silly asses for driving carbon-fueled SUVs, much like you laughed at your own parents/grandparents for using a typewriter at their 1970s and 1980s office job.
Besides, we need to develop a sense of humor about all this because, $6.00/gallon gas is exactly the two-by-four-across-the-face that we Americans need to wake up, innovate, lead the world, and unlock our economy's full growth potential. If you based your small business or your household budget on the availability of cheap gasoline, you better be ready to embrace change or be Darwinized. The idea that must continue down the same course with our energy policy because that's the way it's always been done is ludicrous and insanity defined. We've followed the innovative spirits of BP and Exxon and GM and Ford long enough. They've given us $5.00/gallon gasoline, the Ford Mustang, and the Chevy Tahoe SUV. GM and Ford will both be bankrupt by 2010 and so will we, if we don't change.

The GDP of the United States has been shackled by poor government policy in Washington, lack of innovation in the hearland, and economic dependency on foreign nations for our energy. These foreign nations want to destroy us due to our infidelic way of life which is unlike there own, and now wish to exploit America's Achilles' heel to the fullest.
And here's the best part.

We let them.

We must become independent of other nations to secure future economicy prosperity.
America should start to retrofit it's vehicles and engines to clean power sources now and not wait.
Will it be painful? Yes.

Will there be numerous job losses? Very likely.
There could be numerous new jobs and professions as well that cannot be outsourced.
The losses might be no different than what happened to all of the coopers, buggy whip salesmen and blacksmiths.
Let the prices of oil climb to $10.00 per gallon. It should. By 2028 the oil for gasoline be gone.
The price of sand and glass is going to eventually plummet.

RealtyTrac: California Foreclosures Up 81% in May 2008

Holy Crap!

According to RealtyTrac, approximately 72,000 Californians foreclosed on their home mortgages in May 2008, up 81% from May 2007. This constitutes an 11% increase in foreclosures between April and May 2008.

And this is just the beginning!

Sunday, June 8, 2008

Almost there Orange County! Almost There!

Today a gallon of gasoline in Lake Forest, CA was priced at $4.41!

Man, we are a few nanoliters away from that $5.00 per gallon milestone.

Just remember that once we reach that summit, we'll all have to remember who to thank.

By the way, just who should we thank?

Countrywide CEO Mozilo Greasing the Skids

Reuters news agency cites that apparently Countrywide CEO/Douchebag Angelo Mozilo didn't think there was anything wrong with the idea of providing certain customers, so called "Friends of Angelo", special help with mortgage loans. Some of these customers may very well have been executives of Fannie Mae.

Way to go, Tangelo. Keep it up. You're doing good. A few more hits like these and you'll make the cover of Time Magazine for sure.

Discretionary Sellers? They're On The Fence Too.

John Lansner's blog article today highlights an important point that the inventory of available homes (aside from distressed property sales and foreclosures) has jumped only 2% (326 additional homes) since the beginning of 2008. This is largely due to the fact that, like prospective home buyers, so-called discretionary home sellers are sitting on the fence too. They know that now is not the right time to sell their homes.

Discretionary home sellers intend to to wait it out until all of you fence-sitting, NAR-scarred, prospective buyers play it out.

A Weekend With The Realtors

I visited some open houses (5 single family homes) over the past weekend in Lake Forest, California.

Many of the homes I viewed were completely and utterly outside my realm of affordability - which pretty much sums up all single family homes for sale in Lake Forest today, despite numerous foreclosures and a certain degree of home price corrections as a result. But hey, I thought it would be interesting to view a few of the local homes that were for sale in the nose-bleed pricing stratosphere ($700 - $900K) and also find out what some of the realtors or maybe some homedebtors had to say.

Here are a couple of observations (since a realtor was present inside each home during the open house). There were no homedebtors present from what I could tell.:

-All 5 homes were single family's in Lake Forest with 4 bedrooms and 2.5 baths or more. All had been on the market for 1 month or more. All had been subjected to price reductions of varying degrees.

-4 of the 5 realtors mentioned "increased local sales activity in Lake Forest" and "all-time low prices for the area" for single family homes. One agent used the phrase "there are some great bargains out there".

- 4 of 5 realtors mentioned that "now is a great time to buy". 2 said that phrase exactly to me. When I asked why they thought it was a good time to buy, they cited the historic high appreciation of home values here, good schools of Saddleback School District, access to local convenience stores, no mello roos in Lake Forest, and the recent price declines.

One realtor told me an interesting story suggesting that in Orange County the trend is that "we always have 5 years of an up market and 3 years of a down market".

- One realtor promised that the home he was selling for $899,000 today (marked down from $900K) would be worth $1.4 million in another 4 years.

- 3 of the 5 realtors expressed their opinion that the "the market has bottomed out" or probably has bottomed out.

- 2 of the 5 realtors said the market would bottom out this summer. One then back-pedaled and said "it'll bottom out by around September 15 at least.....but don't hold me to it."

- At one of the open houses, the realtor mentioned to me that he would cut his sales commission by one-third of a percent (but that he would have to clear it with his partner first). That owuld be 0.33%. Given the sale price of the home ($799K), this would be about $2,600 in potential commission savings for the buyer.

- One realtor acknowledged my entrance into the home but decided to continue a loud and boisterous converation with another client about her failure to convince her lender to "make a deal" about the new rate on her condo ARM loan. He then proceeded to explain to her what a short sale was and that he had a visitor and would need to call her back later.

When the above realtor got off the phone, he introduced himself and then told me about his clients' problem (did not mention her name), an elderly woman who can't afford the "new payments" on her condo. The realtor proceeded to say that he didn't understand why lenders don't work a solution out with their customers on these ARM loans. Then he decided to ridicule his client referring to her by saying "some people are just stupid".

- One beautiful 4 bed single family home I visited was for sale for $899,000 in a lovely Lake Forest cul de sac. Really terrific home. Was previously placed on the market for $915,000. Even though I stated to the realtor that I was just perusing and not serious about buying right now, the realtor said he was very sure he could talk the owners down to $879,000 but that the sellers would not go below $840,000!

I thought to myself, holy shit, the sellers may be screwed as it is with the fucked up housing situation of OC, but the realtor they've decided to hire is feeling footloose and fancy free about leaving plenty of cash on the table. If there is a case to be made for people to pay realtors an hourly wage instead of a flat % off the sales price, this realtor was poster material.

I left the last home really hungry and thinking about stopping by a local Pollo Loco restaurant for some lunch.

I then decided no. What I really needed was to take another shower.

Wednesday, June 4, 2008

Mortgage Apps Down 20%

Mortgage applications fell in May 2008 by 20% compared to the same period 2007.

Hmmmm. That's a mystery.

I can't believe mortgage lenders now have the audacity to question the veracity of my claims when applying to borrow money! And what's with all this "we need a copy of W-2, copy of 2 months of paystubs and copies of my bank cash holdings and investments"? Look, if I want a financial intervention, I'll ask for it.
What a bunch of jerks!

Lake Forest May Sales in Positive Territory

Despite the 18.3% decline in home sales in Orange County and the 22% year to date decline in home prices in OC, Lake Forest, California (92630) home sales ventured into positive territory in May 2008 by growing 37% over May 2007.

The median home price for Lake Forest in May 2008 was still 19% down over May 2007 - down to $490,000. This includes all home types: condominiums, single family homes, etc.

Is this a just a temporary sales spike, or is this the beginning of the end of the great housing crash in Lake Forest?

Sunday, June 1, 2008

Realtors Weep As Consumers Win

The real estate market might finally be taking the long-awaited nanometer long steps toward greater efficiency and increased competition following Friday's agreement between the U.S. Justice Department and the National Association of Realtors that would allow internet and discount real estate brokers full access to the MLS service without discrimination and without the NAR blocking web listings.

One school of thought is that this agreement will create downward pressure on the 3% to 6% sales commission that homesellers and homebuyers have had to pay to realtors.

From the NY Times article from 28 May 2008:

Norman Hawker, a business professor at Western Michigan University who organized a symposium on the Justice Department litigation as a senior fellow for the American Antitrust Institute, predicted that the settlement would ultimately mean a drop in sales commissions of 25 percent to 50 percent as a result of increased competition.

“It’s pretty clear that there was an enormous amount of discrimination against brokers who were trying to use innovative business models,” including discounted fees and virtual offices on the Internet, he said. “There are lots of entrepreneurs who have been looking for a green light in the form of this order to begin offering discounted rates. It has the potential to be a big step forward for consumers.”

Just what the doctor ordered. Higher mortgage rates.

30 year fixed rate mortgage rates from Freddie Mac are now raised to over 6%, which will offer more downward pressure on housing prices as prospective buyers double-check their bank accounts and monthly budgets for enough cash to make the required month-to-month mortgage payments.

Low mortgage rates have been a critical factor fueling OC home affordability and home sales turnover. With OC area housing prices still out of reach for many in relation to real take home incomes, new higher mortgage rates may only accelerate the recent declines in home prices.

Another variable that is certainly not helping homesellers maintain value when selling their homes is inflation. Gasoline is $4.18 per gallon today (June 1) if you have a membership at Costco.

With hurricane season just around the corner oil prices are bound to keep going higher. Fuel and food are taking a bigger bite out of the OC resident's wallet affecting the ability of many to stay in the homes they have or for new buyers to enter the world of homedebtorship.

125 Days Later: Lake Forest Home Still Won't Sell

125 days on the market is really not that much time.

It's only two (correction FOUR) months.

It's now May and homebuying season should be in full swing for families dying to quit renting and start "owning".

And so it is that a 4 bedroom, 3 bath single family home is put up for sale in little old Lake Forest town. Close to the main thoroughfare for which the area was once known (El Toro Road), close to shops, but nestled tightly into a typical OC suburban tract.

22612 Auburn Dale Dr., Lake Forest, CA, 92630
Asking price: $564,900
Asking price/ sq ft: $309
Income requirement: God only knows. Let's divide by 4 and say $140,000 per anum.
Purchase price: $721,000 (holy hell!)
Purchase date: 6/13/06
Size: 4 beds, 3 baths, 1,829 sq ft (built in 1977)
MLS: P619632 (126 days on Redfin)
Zillow Zestimate: $548,500
2007 property tax: $2,187
HOA dues: unknown
Type: Contemporary
Stories: 2 Levels
The Listing: Great price to purchase in 'pride of ownership' Sunwood tract! Priced for a quick sale. Oversized backyard offers room for a pool and possible RV parking too! New roof was installed in 2006. Home has a wonderful flowing floorplan with vaulted ceilings in living & dining room & spacious family room with fireplace. Concrete and covered patio for family fun and weekend entertainment. Large master suite. Free Lawn service for 12 months. Don't be shy.. write it up.

I'm not sure what "pride of ownership" refers to when we're witnessing the current owners vacating the the adobe an entire 9 months after purchase. But OK.

"Don't be shy". I doubt shyness has anything to do with the original $721K price tag or the $156K sales discount in 2008 on this home.

Man, thankfully by now we're all fluent in "Realtor speak" around here.

Love the bit on room for "possible RV parking too!". And with an exclamation mark! These homes on Auburn Dale Drive are situated pretty close together as it is. But, I mean, if you really want to win friends and influence your new neighbors, yeah, go ahead. Park that gas-guzzling vehicular monstrosity of yours in the skinny alleyway right next to your new house (and theirs). The neighbors will just love you for that I'm sure.

And how about "Priced for a quick sale." Well, maybe.

This home was purchased in June 2006 during the sub-prime, no doc hay day for a logic defying $721,000. I will surmise that back in those days nobody in Lake Forest, California even thought twice about a.) leveraging themselves to the freaking hilt, b.) following realtor bullshit lies like "get in now while you still can " and just "refinance later", and c.) paying $394.00 per square foot for a 30 year old single-family home.

But then here we are today, after 2 months on Redfin, and this ideal home for a young family is priced with a $156,100 discount off the original buy price. That's a lot of dough, isn't it? Not if one considers that this home was criminally overvalued in the first place when it was purchased 2 years ago-as were most OC homes.

Still, $565,000 might be a good sale price if one considers comparable homes of similar size and configuration sold over the past 3 months in the area.

But clearly this home is another textbook example of buying at the market peak in Lake Forest, California, well before the certain-to-come market correction. Now prospective homebuyers/fence sitters in Lake forest continue to ponder in amazement as to just when the eerie doppler-effect-effect-distorted, ice-cream-truck-like music might stop.

Friday, May 30, 2008

Inflation Will Eat Your Raise

Inflation has been under reported the last 3 years by the U.S. government.

It's now eating our lunch.

Fuel prices, food prices will continue to skyrocket.

Morgan over at Blown Mortgage Blog has a compelling post on this subject, which I highly recommend.

No tax rebate check is going to change the fact that inflation is starting to destroy the American economy.

Inflation will only cause greater pause for those in Orange County California with a high debt ratio and tight household budgets.

Should they get out of renting and buy into a condo or single family home now under current economic conditions and the impact of inflation?

And now for something really scary: $5.00 per gallon gas

Yes, we are approaching $5.00/gallon gas.

Don't think it won't happen, Orange County. Don't think it won't happen.

It's the end of May. Summer is here.

Glad I've got my motorcycle. 55 miles per gallon city! Wooo hooo!

Got SUV? Then you must be loving life these days! Enjoy!
Just put the cellphone down and try not to kill me, K?

So you want to buy a house in OC? Yeah right!

Be my guest.
Get off that fence! Get out there and buy a home! It's summer! Other buyers are coming out of the woodwork in OC and attending open houses.
Now is a great time to buy a home in Orange County, California.
What? Don't believe me?
Aww, come on! 2010 is just around the corner!
Pretty please with sugar on it, come out of your caves and buy these over-priced homes!

Monday, April 28, 2008

Saturday, March 29, 2008

Bank of America to Pay Countrywide's Mozillo $10 million, Sambol $9 million

The AP is reporting that next week Countrywide CEO Angelo Mozilo will receive a payout from Bank of America of over $10 million in stock, while Countrywide President David Sambol will receive $9 million in stock, all part of the $4 billion takeover of Countrywide by BofA.



Sambol will be paid $28 million to stay on at BofA and run the consumer lending organization.

Politicians and homedebtor bailout champions like Senator Charles Shumer of NY are publicly expressing outrage at such payouts, but it does seem quite real, and it all comes too damn late to matter. Where was the congressional disgust 1 year ago, 2 years ago, 5 years ago? Nobody pretended to know or care then.

Millions of Americans will either lose their homes, go bankrupt, lose their jobs and/or be otherwise negatively affected by the greatest housing market crash ever recorded in U.S. and world history, yet the business leaders who concocted, presided over, pumped and encouraged the biggest credit Ponzi scheme in history will be rewarded with millions of dollars for their efforts.

Where is the FBI? Where is the SEC? Where is the U.S. Attorney General?

The plot appears to be officially lost.

Can this nation of supposedly united, federated and free states be possibly any more fucked up?

God help us all.

What? Homedebtors Mad As Hell? Hmm, wonder why.

The Wall Street Journal reports on the "Cash for Keys" concept underway in Las Vegas, NV to prevent desperate, foreclosed and incredibly pissed off homedebtors from pouring cement down their toilets and in other ways trashing their lost homes.

Step 1: Get a wheel barrow.
Step 2: Buy a bag of Ready Mix cement (Home Depot probably has it on sale right now).
Step 3: Pour in some water and mix together well in the wheel barrow with a garden hoe.
Step 4: Pour away before it hardens.

America, Wake the F&*# Up!

Put down the cable TV remote.

Stop watching American Idol, Comedy Central and Dateline: To Catch A Predator just long enough to read what the Secretary of the Treasury Henry Paulsen, minion of the Bush Administration, is proposing! Click Here.

"I believe that banking institutions are more dangerous than standing armies... If the american people ever allow private banks to control the issue of currency... the banks and corporations that will grow up around them will deprive the people of there property until their children wake up homeless on the continent their father conquered"

- Thomas Jefferson, President and Ambassador, United States of America, b.1743-d.1826

This pig created by Paulsen should never fly. But given past American political complacency, it just might.

Mullin It Over in Lake Forest

It's spring time 2006 and I can really see myself buying into the market hype fueled by the classic realtor sales pitches of the era:

"Get in now while you still can!"

"Oh, you can always refinance in the future!"

"Prices in OC will never be this low again!"

"Rates have never been lower. It's a great time to buy!"

So I go ahead and by a 4 bedroom, 3 bath single family in lovely Lake Forest for $670,000, nevermind that the previous owner paid only $230,000 for it back in 1999. This is OC my friends. It doesn't get any better than this. Residential real estate never goes down, these prices are justified and this real estate expert guy named Gary was quoted in the newspaper, promising 15% annual appreciation! No brainer dude! Look at my home price! What more proof do you need?

2 years later I have to sell. Nevermind why. I just have to sell, alright?!
The assessors says the house is worth $684,000.
But I paid $670,000.

I mean I gotta sell this thing. And screw convention and the comps! I'm going for the jugular. No more Mullin it over.

I'm going to flog this baby on the market for $399,900!

Am I Ok with losing $270,000? Apparently so.

What's wrong with residential real estate in Orange County these days?


Lansner: California Home Prices Down 20%

John Lansner delivers more glorious California housing market news.

If it was ok for California realtors to cheerlead the entire real estate market to its euphoric price highs, is it now OK to stare with gaping mouth amazement at the collossal and historic housing crash now underway?

Yeah go ahead, it's ok. As long as you don't block traffic.

2 Bed, 2 Bath Aliso Viejo Condo Awaits You. Just $430,000!

Aliso Viejo is a lovely Orange County community positioned south of Lake Forest and north of Mission Viejo, California.

16 Alicante
1,496 square feet in size ($287/sq foot)
2 bedrooms
2 bath
2 car garage
Price: $430,000
Last Buy Price: April 1993, $125,000

Assuming you can scrounge up $86,000 for the 20% down payment, you can finance the remaining $344,000 with a fixed rate 30 year mortgage. Monthly mortgage payment at a 6.13% mortgage rate from the local bank and presto: A monthly mortage payment of just $2,091.29. That was easy!

But wait a second. What do we see just down the road nearby?
Another 2 bedroom, 2 bath condo, slightly smaller in size, for $390,000!
A $40,000 difference!

87 Pamplona
1,213 square feet in size ($322.00/sq foot - WTF?)
2 bedrooms
2 bath
2 car garage
Price: $390,000 as of Feb 18 (holy crap!)
Original Buy Price: November 2006, $421,172 (holy crap again!)
Days on Market: 137 days (yikes!)

And dammit if both condos don't have brand new gas stoves!

Aarrrrghhh! Runaway!

Come on people! Let's get with the program, shall we!
The temporarily increased loan limits are starting to make no sense at all if people keep dropping their pants on price!

OC Realtors Said It Would Never Happen. Yet It's Happening Right Now.

L.A. Times is reporting that Orange County, San Diego County and LA County collectively showing a 17% price decline between January 2007 and January 2008. Only Las Vegas and Miami are worse.

The C.A.R. reported an increase in the rate of home sales in February by 10% over the previous month,but this still constitutes a 29% decline from February 2007 sales.

CNN: Irvine is a Subprime "Ghost Town"

CNN finally pulls its head out long enough to notice the obvious. "Hey, something must have happened over there in ahh...Irvane...Irving...Irvine, CA or something. Let's go find out what it was and then report on it."

"Honestly, some people are still sitting here with their jaws dropping, saying 'How did it happen?' It was just so fast," said Jacquie Ellis, CEO of the Irvine Chamber of Commerce. "Typically when you have a downturn, it's a slow decline.
That's not what happened here."

Friday, March 14, 2008

Got food?

Housing values crashing around the state? Affirmative, Captain.

Home foreclosures in California increasing? Holy mother of God, yes! Do you even have to ask?

Increased loss of jobs? Yes

Consumer confidence falling? Yes

Cost of oil rising? Yes, and damn you hybrid drivers all to hell!

Cost of grain for food rising? Yes. And yes again.

And what about food!? This might be considered somewhat off-topic in terms of the housing market crash and smoldering ruins all around us. But it is important. And why? Because of how it fits into a family's monthly household budget. Housing expenditures make up the lion's share of any household budget, whether you're renting or in debt with a mortgage. For a family with 2 children in Lake Forest, California, households may be paying anywhere from $1500 to $4500 per month to put a roof over their heads from the most basic to the more elaborate. With the cost of gasoline and the cost of food rising, this will place added strain on household budgets in the coming months and perhaps years. A $400.00 grocery bill that now becomes a $500 to $550 monthly grocery bill can strain already tightening family budgets.

Given the ongoing national and state budget deficit crises, the likelihood that both federal and state income taxes will be raised over the next 4 years is quite high. The current rate of government borrowing can no longer sustain itself as the cost of money steadily increases.
Higher income taxes too will subtract less from the top line of household budgets.

In the housing market, something has got to give here. Home price corrections, such as the one underway in Orange County, California, typically take years, not months, to play out completely. And real estate is local, so some areas will correct faster than others.

Even if customer confidence were to soar overnight for some explicable reason, the fundamental problem remains the same.

What is the take home pay of median (the majority) of families in Orange County, California? And after monthly budgeted expenditures for groceries, gasoline, clothing, insurance for vehicles, maintenance expenditures and savings, is there enough money left over to purchase a house and meet the monthly mortgage payment obligation? Is there enough money left over to pay the rent? And finally, what is the delta between what I would pay to rent a house versus pay to "own" a house?

The answer to these questions right now is not encouraging for the majority of Orange County residents. And this is why the brutal housing market correction we are witnessing has still a long way to go in Orange County.

Monday, March 10, 2008

1 out of 5 bought a car or went on vacation

More Americans are now walking away from their legal obligation to payback money they borrowed from financial institutions to buy their homes. Many homedebtors want, and quite frankly are expecting, a full bailout from Uncle Sam or Tio Samuel to get them out of this financial quagmire.

But for thousands who desperate need help, it will never come:

"One-third of people who are delinquent should be in foreclosure. It's the best alternative," he says. "They don't have the money. They shouldn't have (gotten the loan) to begin with."

Millions of American homedebtors completely mismanaged their debts. They simply aren't earning enough money on a monthly basis to afford the homes they now reside in. Thousands have decided to give up on making payments to a home that is now worth less and less money each day they stay. They're handing over the keys, and flipping the bird to their mortgage lender.

And not all of these home losers had shitty credit ratings. Some had great credit ratings and pulled down the average annual earnings in Orange County, California, for example: $75,000 per anum. Unfortunately, families earning such "chickenfeed", still had no business purchasing homes 7 or even 10 times their annual gross earnings.

Many homedebtors remain in complete and utter shock, that a home, the highest value purchase they've ever made in their lives, could actually decline so dramatically in value in such a short time:

"As home prices fall from coast to coast, 8.8 million homeowners will have mortgage balances equal to or greater than the value of their property by the end of the month, Moody's Economy.com. predicts.

That could come as a shock to consumers who thought property values would always rise, and it helps explain the attitudes lenders are seeing among their troubled customers, Goodman says.

"If you buy a car and it depreciates," Goodman says, "you don't expect the automobile dealer to write off your loan. There's a sense of entitlement (among homeowners) that is just unbelievable."

Goodman, whose firm specializes in home equity credit lines, says the
main reasons people took out the loans were for home improvement, debt
consolidation and medical expenses. But he estimates that about 20% used the
cash to go on vacation or buy a new car."

And yet some felt it prudent to buy second and third cars, motorycles and to blow the dough on vacations.