Wednesday, January 30, 2008

Dog Day Afternoons Within Foreclosed Homes

With home foreclosures increasing into the triple digits the last several months nationwide, leave it to CNN to provide the public a sensationalist story about the abandonment of pets in foreclosed homes.

It would appear that many homedebtors are not only financially inept, but they lack a moral compass as well.

It would be silly to conclude that a large number of foreclosing homedebtors are leaving their pets in the home and just turning in the keys. No where in the CNN article is anything mentioned about the number of foreclosed home with cats, dogs, birds or other pets. There have been a number of cases, yes, but it surely a large number of people.

That said, what on earth could have possibly prevented these homedebtors from simply taking their unwanted dogs/cats, etc. down to the local humane society shelter?

People like this simply do not deserve compassion from the taxpaying public nor the bloodsucking politicians in Washington D.C.

Why bail these jerks out? So they can just buy more overpriced homes with risky loans and leave their pets in them afterward to run around in their own fecal matter with no food, nor water.

Tuesday, January 29, 2008

Is this the part where we're surprised?

The FBI is finally starting to take an interest in the handywork of up to 14 different companies for mortgage fraud, accounting fraud, insider trading and other violations.

Holy Crap!

A conviction for mortgage fraud alone may be punishable by up to 30 years in prison or a $1,000,000 fine, or both.

Sunday, January 27, 2008

Realtors: "We believe that there's a psychological block".

Look, there is no housing crisis, because the National Association of Realtors says so.

Got it?

Don't make us send out the realtor clowns to convince you!

You just have a psychological mental block of some kind. You're just "verstopft". You've just eaten a bad slice of beef. Perhaps a bit of underdone potato.

Housing market crash? Bwahahaha-hell no! Just get out there and buy a house today! Now's a great time to buy and build long-term wealth!?

Come on, who's with us! Let's go!

This article by Ms. Alice Cuneo of get's it right.

Why can't the N.A.R. and it's members just tell it like it is?
I know the 6% is calling, but while they promote the potential of building long-term wealth by "owning" a home, why can't they focus on the long-term as an organization themselves? Do they really believe that the lies can continue with integrity and credibility intact?

CBS 60 Minutes Special Report: "A House of Cards"

The American mainstream media finally gets a clue about what's happened in the American housing market and reports it to the nation.

Gee, thanks CBS - for pulling your head out of your ass long enough to actually report something! I think you guys actually broke a network world record here in terms of story timeliness.

I just loved the question from the clueless homedebtor: "If we can't fix it, what do we do?"

You freaking rent, assholes! Just like everybody else!

There is no guarantee that the value of a home will go up. It may go down. It's just an adobe.

"That's OK as long as the home value goes up!"

No one can guarantee that home prices will always appreciate. You signed a home mortgage, not a guarantee nor an entitlement to housing appreciation and an easy-out low-payment re-fi.

Where do these people come from? Did they graduate from high-school? Did they ever take a mathematics or personal finance class? Are these college grads? If yes, Jesus Christ, this country is completely screwed!

You can't "fix it" because you had no business going into debt for a 2 bedroom $350,000 house in the first place!

If you had the mental capacity to consider the upside scenario of low monthly payments and appreciating home value, then what possibly would have prevented you from imagining the reverse scenario of higher interest rates (adjusted higher monthly payments) and depreciating home value?


Caveat emptor, people. Caveat-freaking-emptor.

I'm sorry. I cannot be kind about this.

Everyone works hard in this country. Everyone sacrifices more of their time for work and making money than they really should just to provide for their future and for their families. Americans everywhere are working themselves to death. (Just ask any European.) Contrary to what realtors may tell you, home values can and will go down - sometimes when values detach from fundamentals (like the median incomes of potential buyers), home values fall dramatically.

Americans are either in a position to weather such storms financially or they are not. What is new about that?

The only difference I can see is that these foreclosing homedebtors appear to be "surprised" that this could happen to them, or feel that they were lied to by unscrupulous realtors or mortgage brokers. At the very least, these individuals should have shelled out $300.00 to hire a lawyer to review the mortgage before they signed it.

American taxpayers should be outraged at those in this country who think it's OK to be financially inept, it's OK to throw caution to the wind for free cash, it's OK to place their families into the the dire consequences of risky decisions (loss of home, foreclosure, homelessness, bankruptcy, poor credit rating, deeper debt).

Somebody explain to me why any of these people deserve a bailout by other taxpayers who used common sense and refused to buy into the realtor hype and Ponzi scheme?

I don't want people to suffer, but damn it somebody has to pay. Somebody has to learn a lesson, otherwise the stupidity carousel keeps going around and around and everyone is worse off.

Nancy Pelosi, Georgia Bush, Harry Reid all think it's OK to use government funds (i.e. your tax money, since the US government is bankrupt) to bail out the debts of people who have zero business owning such homes in the first place, or to bail out financial institutions who did not following basic financial lending guidelines and fundamental principles of finance.

This is wrong on so many levels.

But yeah, thanks CBS. You guys are real heroes with this one. It's better than nothing.

Tuesday, January 22, 2008

Everything that is wrong with Lake Forest real estate in one example.

An available apartment for sale on El Toro road in Lake Forest, California, 92630

Bedrooms: 1

Bathrooms: 1

Square Footage: 610

Appliances: Stove, dishwasher, sink

Interior Amenities: vaulted ceilings, attic
(WTF? I know there are no basements in California, but since when has an "attic" ever been considered an "amenity"?)

Building Amenities: Patio, swimming pool, guest parking, hot tub

Price: Wait for it..........$225,000!

A couple of things:

1.) Note the realtor sales pitch on this one. This is Classic Orange County:


Is this realtor yelling at us about a 1 bedroom apartment? And is that "$70,0000" somewhere between zero and "eleventy thousand dollars"? Is it close to fifty-eleven thousand dollars?

2.) The median income in Lake Forest is around $74,000. Therefore, this price is fucking perfect! Brilliant! Wait, did you say you have a family with children? Umm......hmmm...what are we going to do about that?

3.) Well if the blurry photos don't win them over, then why not upsell "El Toro Road"? You know you want to!

El Toro road, for those that have never visited this beautiful city in south Orange County, is just about the most congested, noisy and dangerous roadway you can frequent through Lake Forest. Yes indeed. There are 6 lanes of traffic and between 5:00 a.m and 1:00 a.m. it's pretty much packed from Laguna Niguel all the way to freaking Cook's Corner.

The state of California seems to consider El Toro some sort of speedway as the speed limit is set at 55 mph. You know what that means. Everyone's driving at 65 mph. And there are shitloads of traffic lights-like ever 100 meters. Prepare for this chorus to run through your brain while trying to sleep inside that lovely 1 bedroom adobe:

Brrrrrhhhhhuuum! ......Screech!.......Honk....Brrrrrrrruuuuuum!!!........Screech!

And thank goodness there's a Home Depot on El Toro road near the 5 freeway too, otherwise one would observe far fewer 18 wheel big rigs on this illustrious thoroughfare!

OK, enough slamming the apartment and it's location.

Let's just imagine for one second that there are some wonderful neighbors next door, a friendly staff at the front desk, and that the realtor is a very nice person. The single prospective buyer should be very happy. Plus there is a pool.

But that's really not the point. How is it possible that the market here could even consider a 1 bedroom, 1 bathroom 610 sq. feet apartment to be worth $225,000 or almost 3 times the median income here, and nobody asks why?

I mean, yes, 50% of the population in Lake Forest could afford this apartment, and rather easily. But most have the common sense not to be so high on drugs as to actually buy it.

And so it is also true that 50% of the population of Lake Forest cannot afford such an apartment because of their income.

This is an example of insanity. Of local home values, no matter how small the property, gone horribly awry. This is Orange County real estate.

There was a time, I suppose, when realtors stated $225,000 for a 1 bedroom, 1 bathroom apartment and did so with a straight face.

Not any more.

This is not serious.

Sooner or later this market will become sober again.

Wanna see something really scary?

Then click here.

Special thanks to Bubble Markets Inventory Tracking blog for posting this first!

And Holy crap!
Land of the free, home of the brave, rugged individualism, picking yourself up by your entrepreneurial bootstraps and just get-r-done!
But Goddamn!
What's next?

Hold on tight, people!

Bernanke's Unwise Intervention & A Better Path

Cutting the federal funds rate 0.75% did nothing to prevent the sell off today. The DJ industrial fell 128 points. The S&P500 also finished down, but not by that much - only 15 points. The worst is really yet to come later this year as more earnings information is released and confidence in recovery starts to dwindle.

It'd be different if employment figures were robust and the dollar was maintaining its value compared to other global currencies.

The Fed policy has cheapened the dollar even more, which for a country trillions of dollars in debt to foreign government, borrowing $10.00 but paying back only $5.00 is actually a good thing in the short-term. Just stop borrowing $10.00. Save more and borrow less.

No way. Not good enough for Americans.

We have to consume and consume or the economy just doesn't go. We need fast access to fund and we need credit as fuel to get where we want to be.

Bernanke's early morning rate cut certainly helps out those individuals with massive HELOCs, credit card debts and auto loan payments.

But is this really the kind of intervention the U.S. economy needs?

Wouldn't it be more prudent to save the dollar and prevent inflation from raging (which it now most certainly will)?

The rate cut is like giving the cocaine addict more cocaine with no strings attached, no consequences.

Strangely, this time around it might not be good enough. Even by rewarding the most financially destructive behaviors, it probably will not be enough to protect the U.S. dollar or build confidence in the US economy.

Remember that investors in the US economy are not all Americans. The entire world has vested interest in the U.S. economy and insist on it's health and financial good-standing in order to earn its funds.

But what do foreign investors see?

The US currency has been crashed into a tree. The trade defecit if represented as a stack of paper would almost reach Uranus. Employment is declining. The national debt has reached unsustainable levels and continues to be completeld ignored by American politicians and citizens alike. There is virtually no remaining manufacturing base that would demonstrate national production of goods, create jobs and contributed to GDP and community wealth. The U.S. remains at war with no end in sight and with unclear objectives, strategy and tactics.
There also awaits a massive future liability ahead in terms tax increases on individuals and businesses in order to fund social security and medicare and not completely bankrupt the government.

Why should I put my hard-earned money into a machine that is broken down or soon will be? Someone tell me why?

Keep spending, my fellow Americans. Enjoy those few extra percentage points of salvation on your monthly credit card balance that you never manage to clear.
Spend on your credit cards until you drop on the ground flailing about. But note this: What you are doing is destroying the country and and your ways cannot be sustained. There will be dire consequences.



1.) Save your money.

2.) Pay off your debts completely.

3.) Cut up all of your credit cards.

4.) Setup and emergency fund of up to $5,000 or more, if you can (rainy day money).

5.) Reduce your spending (stop eating out, stop the frivolous trips in the car, reduce water, heating & AC use, stop the shopping sprees at Target and TJ Maxx!)

6.) Maintain a balanced your monthly budget. Account for revenue coming in, expenses going out and don't forget to set money aside as savings. Pay yourself first.

7.) Splurge once a month on something nice (food, clothes, etc.). Just make sure you've accured for it (i.e. you've planned or set money aside for it).

8.) Hold off on any big purchases (cars, boats, motorcycles). And don't take out any new loans.

9.) If you're not using it, sell it.

10.) Update your resume and network with colleagues and contacts. The United States is entering a recession, make no mistake. Conventional wisdom says that when you're neighbor loses his/her job, it's a recession. But when you lose your job, it's a depression. Don't get depressed. Don't be the last one to know that you've been fiyaahd! Be prepared.

11.) Enjoy and celebrate life. Spend time with your family, spouse and children. Teach them to appreciate what you have right now. It's ok to get by on less.

12.) Write a letter to George W. Bush, Barbara Boxer and Dianne Feinstein and tell them "no thanks." The tax cut stimulus package of providing $800.00 does nothing to address the root problem of a balanced budget: a stronger US currency, a stronger production base in the US to create jobs and GDP, the horrific US trade defecit. Such a stimulus measure also makes the national debt even worse and does not instil confidence in those who might invest in our country or its assets.

Monday, January 21, 2008

Rent in 2008

I don't care what the Wall Street Journal says about rents across the nation going down, there are still enough people out here in Orange County, California who are in complete denial about the marketplace conditions and the housing crash.

Some of those people happen to be landlords.

Typically when facing times of almost certain and severe economic recession, given the choice between earning top dollar rent from occupants and just maintaining occupancy, most reasonable landlords will choose the latter. It's much better to keep what you have rather than hold on to an empty home and go through the painstaking rigamarole of finding a new occupant who has acceptable references, doesn't have cats or dogs, pays on time, doesn't disrupt the neighborhood and, in general, doesn't fuck the place up royally.

My own monthly rent is up for review this month. I'm not confident at all there won't be an increase this year.

In my case, I suppose my landlord should get down on his knees and thank Christ or Zeus that I'm not an aspiring rap-artist with late night jacuzzi parties, or that I'm not a "hobby realtor", or worse, that I haven't lost my job after working for some fucked up national mortgage business like Countrywide. Actually, those are all things for which to be very thankful.

Last year? No increase in the rent. In fact, I convince the landlord to pony up some dough for a new sprinkler system for the lawn

But dammit, from what I can see online, the Lake Forest, CA market is not exactly flooded with single family homes for rent.

I'll remain cautious and post the developments following negotiations with said landlord. It should be interesting to observe, in microcosm at least, how the landlordial view of the world may have changed in little old Lake Forest, CA.

Lake Forest California Housing Market: Pictures Worth 1,000 Words

Let the truth be spoken with graphs. Data and visuals courtesy of

"I thought a Realtor would work hard".

The Orange County Register picks up an excellent story today "Humbled Homesellers" of two very frustrated homesellers in Tustin and Laguna Hills.
Months and months of open houses, advertising, changes in realtors and even changes in sales tactics.

Nothing. Not a bite. Not even a serious nibble. Just frustration and more waiting.

One cannot help but wonder at this stage of the collossal housing market meltdown in southern California, how many more families are out there in Orange County who find themselves in similar dire straits like Ms. Freeman or Mr. Beyer?

A combination of "bad luck" and "bad timing".


Could it also be an example of everyday Americans - knowingly or unknowingly -caught up in the hype of the Orange County housing market? Only now, in the end, do people begin to understand. The OC housing market, pumped up by the N.A.R., local Realtors and carefree lending practices was but a massive "house of cards".

It's foundation?

A stack of thin paper. Easy-access, high-risk, undocumented mortgage financing, appraisers colluding with savings and loan institutions, realtors refraining "it's a great time to buy" and "real estate prices are not going down", "Get in now-they're not making real estate anymore", "Monthly payments will adjust on this house, but you can always refinance" - that sent the values of homes in Orange County to all-time highs at a scorching rate of incline that few had ever seen before.

It all seemed perfectly normal for a time. Surely, it must be all be based on sound economic principles and conditions. You buy a home for $500,000. You sell it later for $750,000. Easy as pie! I mean, that's what the realtor said all along. No problem. That's what the Jones' across the street did too. And they have an SUV, a boat in Newport Beach harbour, and damn it if they didn't just put in a new granite countertop kitchen in their new home with a HELOC.

No. Peel the onion. It was all a huge lie.

These homes aren't worth $750,000. Hell, they weren't even worth $500,000. It's not a mutual fund or a stock or a company or a business that produces shit, sells it to the market, and has a balance sheet. It's a freaking house. It's a place to live. Somehow people have forgotten that. But more importantly, we seem to have forgotten what makes common sense in terms of home financing and home prices. Millions of Americans are in denial as to what they can really afford. If they had that common sense in the first place, then the number of Americans carrying a credit card balance of $5000.00 or more would be the exception. It is not.

The average resident of Orange County, given his/her median income of around $68,000, can only afford at maximum a $350,000 using financially sound mortgages without a serious risk to his/her personal budget. How does this jive with a single family home, 3 bed, and 2.5 bath market that is asking for $500,000 in Tustin, Lake Forest, Irvine or Laguna Niguel?

It's all well and good to be in debt for that house and to listen to Realtors who say "we'll put it out there at $750K".

That's irrelevant. It doesn't matter what home you have or what you paid for it. All that matters now is that it can be sold and whether there is a bigger fool out there to buy it.

Most of those "fools", or financial inepts, as I like to call them, are still out there. Yes, they CAN BE FOUND! Because if subprime loans where still available, these fools would make use of as many of them as possible. They don't bother to read any fine print or judiciously review their personal budget. They want a house. But like scared sheep, now these fools know something is happening, and that for some reasoning still incomprehensible to them, it just isn't a good time to buy a home. All the same, this pause is action to buy is devastating for desperate homesellers and probably the Hobby Realtors out there as well.

There are people like me, who are renting right now in Orange County, who would love to buy a home. It does makes sense long-term to buy a home. But the price has to be right. The house has to fit. The financing instrument has to make sense. I want to make my mortgage payments ever month forever. I don't want to foreclose or pass the obligation or declare bankruptcy. If I have a family, I want to watch my monthly budget and try to have money left over that I can save or use to finance other things like education, vacations, etc.

It is of no consolation to Ms. Freeman or Mr. Beyer that they are not alone in Orange County in trying to offload their American nightmare.
The comment by Mr. Beyer of Laguna Hills was particularly noteworthy. Mr. Beyer, who after months of frustration, is now left with no option but to try to auction off his beautiful million dollar Orange Couty home: "I thought a Realtor would work hard".
At this stage of the market, there isn't much a Realtor can do.

Friday, January 18, 2008

Realtors Say Mainstream Media Unfair to N.A.R.

Realty Times yesterday posted a tear-jerking story about how difficult the battle has been for the N.A.R. (National Association of Realtors) against an apparent smear campaign by the American mainstream media. The MSM, Realtors say, has been suggesting that the N.A.R. is a self-serving organization.

Not so, says Realty Times.
Here's the truth according to Realtors:
1.) If it weren't for the N.A.R. and realtors everywhere, wreckless politicians in Washington would simply remove the mortgage interest tax deduction, which would force American homeowners to pay income taxes on interest payments made on their mortgages.
2.) For the past 30 years, the median price of existing homes has increased an average of more than 6 percent every year, and home values nearly double every 10 years.
3.) Home prices typically beat inflation by one or two percentage points.
4.) Housing sales in 2007 are expected to be the fifth-best on record.

Realty Times elaborates further comparing the merits of owning a home to the big SUV you may (or may not) have parked in your drive way. (Do all realtors assume that homeowners are wealthy and therefore "own" an SUV?. I'd be willing to bet that the majority of those homeowners are actually "homedebtors" and therefore "SUV-debtors" too. And many are probably pissed off that they are in debt for either):

"So if your Chevy Tahoe doesn't have your panties in a twist, housing
shouldn't either. Especially when it's expected to go up 3.1 percent in
2009, which I guarantee, your SUV won't do."

Yes, that's a pretty safe guarantee. But sort of an irrelevant analogy.

What most realtors like to leave out in these tirades is that home values can and do go down too, and sometimes (like now) rather dramatically and that it can fuck up your life in big ways.

Realtors don't view themselves as having been guilty of pumping up real estate the last 10 years "getting in now" and "buy now while rates are low" and "it's high priced now, but you can always re-finance". This is where the Realtor and N.A.R. credibility started to go down the tubes.
It's like the CEO who gets paid $16,000,000 in compensation and takes all the credit for when the company's revenues grow and it's stock price sky-rockets. It's all attributable to his leadership.
"My compensation is well-deserved. Just look at the stock price!", says the CEO.
Then when that same company tanks in the market (Gee, Citicorp, Merrill Lynch, CountryWide come to mind now, don't they?) but the CEO still believes he is entitled to the $16,000,000 compensation package plus benefits.

Didn't he just say that the growth of the company was "attributable to his leadership"?

Well, logically then would not the downfall of the company's stock price and value also be attributable to his leadership??
The answer is yes.
Unfortunately, few if any such CEOs payout any equalization back to the company as to their compensation at the end of their tenure. Most are even paid more money - a golden parachute -despite a collossal failure to run the business appropriately.
And so it is with realtors and the N.A.R.

You can't claim to be the Trusted Advisor, the only line of defense against tax-dollar-hungry politicians in Washington, then pump up home prices, and pump up that idea that real estate never goes down, without losing credibility when the market sours.

The Housing Crash of 2007-2008 will be long and painful. It will not end quickly. The realtor playground will not, in my opinion, rebound in 2009 either. I guarantee you that the N.A.R. has no empirical evidence to suggest such a 2009 rebound is even remotely possible given the state of play in the market surrounding cost per square feet, inventory, crashing prices, foreclosures, bankrupt credit institutions, limited access to financing, and most important - median incomes in America.
It doesn't matter, Realty Times, what the median value or historical median price of the home is or was. That's just bullshit pie-in-the-sky talk. What matters are three things: 1.) today, not yesterday, 2.) what the price of the home is when it is being sold (affordability) and 3.) whether or not the buyer has the financial means and funding to buy it (access to financing).
Indeed, purchasing a home can be a good long-term investment as long as the price of the home is in alignment with a homedebtor's real income (not a lie) and the mortgage instrument used to fund it is conventional and not subject to dramatic changes that affect affordability.
The N.A.R.s argument here against the mainstream media wouldn't be such an uphill battle if realtors would have the balls to tell prospective clients the following:
"I'm going to level with you, Mr. Prospective Buyer. Now is not a good time to buy a home. Prices are too high and are set to fall. If you can wait 6 to 12 months, rent a home in the meantime, then do it. Access to financing is starting to tighten up. Your will need to evaluate your real take home income and align that with the sale price of the homes you wish to buy. Buying a home is a good investment long-term, but short-term or long-term, the value of homes can and do go up and down dramatically over time. This is the biggest, most important purchase you will make in your lifetime. It would behoove you not to fuck it up."

Monday, January 14, 2008

What? Pay Property Taxes? Let's Not And Say We Did!

It appears that a significantly greater number of Orange County California homeowners are displaying to the OC county treasurer and tax collector a big fat middle finger.

Sure. They know they should pay their property taxes. But conventional wisdom when trying to catch razor-sharp falling daggers is probably telling them to find ways to make the mortgage payment first (or lose their house).

Skipping out on the property taxes? Meh, they can charge all the interest and penalties they want until the wildfires return. At least the homeowner still has the keys to the castle.

Now. Was it the credit card-charged family vacation to Hawai'i over Christmas? Maybe it's that huge ass Cadillac SUV in the drive way? Maybe it was deciding to send the kid to Berkeley instead of locally to UC-Irvine? And what about little Suzy's birthday next month? I don't think a "poster of a pony" is what she had in mind, dear.

Dammit! We were rolling in the dough only 12 months ago! What the f*&% happened?

According to John Lansner's blog $147 million dollars in 2007 went uncollected on December 10th compared to $99 million one year ago - a jump from 4.72% to 6.44% of total due. Indeed there will be hefty one time late fees and interest charges for all delinquents.

Defaults up 128% in 2007. Foreclosures up 568%!

With fewer property tax dollars flowing into Orange County, one might conclude that California's state ranking of the 47th "smartest state", - a damning indictment on the efficacy of the current public education here - is "safe as houses" too.

Fell of the face of the earth?

No. Actually, I didn't.

I'm back again.

I do apologize to faithful readers and new visitors alike of the Rancid Truth blog for the complete lack of posts over the last 4 months. Family-related health issues combined with time-sensitive projects at work over the last four months slammed me from two sides at once. I decided to concentrate on the immediate, more important and pressing tasks and deadlines first. Posting to this blog took a major backseat - like the last backseat on a full-length school bus.

I am now, however, more or less caught up and can again dedicate some of my time to the critical observation of the economic nightmare unfolding before our dry, cracked and weary eyes - the Great American Housing Market Crash and the impending economic recession of 2008.
I intend to post at least once a day, but more if time permits.

So indeed I now walk the face of the earth once again! A little bit like Cain, a little bit like Dr. Evil, a little bit like David Banner, but not at all like Brittany Spears.

Eyes are wide open again.

Obsessed with seeking the truth, no matter how rancid the dank and haunted pits in which it may reside.