Tuesday, December 22, 2009

Realtors' MLS Hides the Rancid Truth

Surprise!! MLS data are not accurate.

OK. So if real estate market conditions are local, and millions of Americans study local market housing conditions and even shop for homes on the internet at sites like Realtor.com and other MLS-linked database services, then why is the information therein so incomplete and inaccurate?

If "local" is the critical factor here for buyers and sellers alike, then why not make a concerted effort to clean up the slop?

ArrrghhhhH! When will we all stop asking such ridiculous questions!!!

Realtors declare "trusted advisor" status in their industry by fiat. Our first mistake would be to accept this preposterous claim and then understand it to have been supposedly earned sometime ago. They have NO claims to such authority. The colossal housing crash of California and the nation has thoroughly stripped realtors of any such authority.

This MLS problem really needs to be corrected. Not just because it's feeding consumers inaccurate and incomplete data. That can happen with any database. It should be corrected because of the massively incorrect inferences that can be, and are, regularly drawn from such "local" real estate market numbers.

See the excellent write up here by Dr. Housing Bubble Blog on the same subject.

Let's get it together people. First do the home work. Then you can maybe play princess in front of the mirror all you want. Declare yourselves empresses of the kingdom of ashes for all I care.

Sunday, December 20, 2009

Realtor.com: 4 Homes in Lake Forest Between $400-$500K

Why is it that there are only 4 single family homes (4 bed, 2 bath, 2250 sq feet) for sale listed on Realtor.com for Lake Forest in the price range of $400K and $500K?

Anyone want to submit a theory?

Man, you gotta love the locations shown here. If I only I were a nerd for trains.

California Realtors: 2010 to be "New Normal"

Ms. Leslie Appleton-Young of the California Association of Realtors:

"I think what we're going to be doing in 2010 is building a foundation for what will be called the new normal. The recession is probably over as measured by a decline in growth, negative growth if you will. But the recovery will be contingent upon additionally likely stimulus spending and doing more to facilitate job growth because I really feel that if we don't do more direct policy initiatives aimed at putting people to work, this is going to go on for quite some time."

Not bad. For a realtor.

I'm pinching myself. Did she just say..? I'm pleased to observe a realtor in California finally displaying some measure of honesty about the situation we are all in and the uphill battle that most certainly lies before us in this state and around the nation.

California real estate appreciation, including appreciation of home values Orange County California, was based on a lie. Reckless lending practices, duplicitous sales tactics by realtors all across the state, not to mention financially inept and credulous decisions made by home buyers (homedebtors) all poisoned the water we're now swimming in together. Only now that water has become raw sewage do we understand. Ms. Appleton-Young knows and must now admit that the government is broke and it's probably going to take a very long time indeed for all of the crap to settle to the bottom, and for the stench of lies to be blown away by the ocean breeze.

The one thing I must disagree with Ms. Appleton-Young on is the call for more stimulus spending.

We DO NOT, I repeat, WE DO NOT need more American taxpayer dollars appropriated to prop up an industry that was built on lies and questionable sales practices in the first place. The price crashes all around California and Orange County are a market correction. This is not in dispute. It has been long overdue and repeatedly obstructed by the stimulus spending initiatives and political action committees funded by the CAR and NAR. Americans would benefit significantly more over the long term from a thorough housing market correction, not less of one. Stabilized markets should be our destination of choice, not the cliff hanging of the last 10 years. Of course, realtors would rather have the clocks turned back to the imbalanced market, irrationally high prices, lax lending standards, poorly informed and credulous buyers, and other craziness so that their own felt pockets could be appropriately lined with sales commissions.

I don't know about anyone else, but I don't pay my state and federal income taxes to support the REIC and the financial livelihood of California realtors. As far as I'm concerned that money should be used on something far more productive than rewarding debt slavery among those least capable of ever paying back such debts.

Get a Job, Orange County

Don't look now but, uh, unemployment in Orange County California went down from 9.7% to 9.4%.

I guess this is the part where we all start to celebrate about the employment tax dollars that are going to start flowing back into state and local coffers.

Tuesday, July 14, 2009

Remember When It Was This Easy?

So You Want To Buy A SF Home In Lake Forest? Better Like Trains

I checked out Realtor.com today and searched for a home to buy given my annual income. I searched for a 4 bedroom 2 bath, any sq foot home in the $400,000 to $500,000 range.

Most of the homes for sale on Realtor.com in Lake Forest, California given such parameters are to be describes as - oh how shall I say this politely - pieces of shit. Most are run-down, poorly maintained short sales or foreclosures. And what's really amazing is how so few single family homes in Lake Forest have anything even closely resembling a backyard.

Anyway, I digress.

I found a whopping 21 listings on Realtor.com priced between $499,000 and $400,000.

One could decide to buy such a home at such a WTF price, but when I looked at the map I noticed something rather surprising. Most of the homes for sale were located very near to the Amtrak Train Line that runs right through Lake Forest on it's way northbound and southbound between Irvine and San Juan Capistrano.

Can you imagine paying between $400K and $500K to listen to this kind of nonsense day in and day out for 30 days, let alone 7 to 10 years?

Update Mid July 2009

Well, we're smack dab in the middle of summer. I've been busy as hell over the last several weeks both traveling and working on several major work-related projects.

Man, I hope everyone is hanging in there this summer. We are going to have a "very interesting" latter half of 2009. I feel it in my bones. Can you?

A lot's happened over the last month and half since my last post, but especially just recently:

$20 million in cuts for K-12 education in the Saddleback Valley Unified School District. If California ever gets to 47th rank nationally from 46th, do we send a gift basket to Governor Schwarzeneggar or to State Secretary of Education, Dr. Glen W. Thomas?

OC business and personal bankruptcy cases skyrocketed up to 62% in May 2009.

The California Association of Realtors shares with us that the median home price in Orange County is $474,110 (median family income in is $81,260), 6 times income.
Gee, one does wonder why Orange County is the riskiest housing market in the nation right now, or why foreclosures in California in July 2009 are up 24.7% year-on-year. Congratulations California and Orange County Realtors!

Dr. Housing Bubble shares with us another great, detailed post explaining how the FBI has found the state of California to be ranked No. 1 in the land in rampant mortgage fraud! Nice. First, a heaping helping of state-wide financial bankruptcy, followed by a tinge of moral bankruptcy for dessert. Dee-licious.

And in cas you want to know just why California is still issuing IOUs at Day 12 of the most embarrassing of state-wide budget crises, let me just clue you in. It is because:

a.) Each and every single California lawmaker in Sacramento is an incompetent, self-serving, cretinous dickhead. There are no exceptions.
b.) Californians voted these freaking idiots into office in the first place.

In other news that will probably shock readers of The Rancid Truth Blog to their very core, Realtors openly display their penchant for pathological lying.

I like Nick Gogerty's youtube video:

And finally, Lawrence Roberts at the Irvine Housing Blog, one of the finest educational resources you will ever find about the great housing crash (that is still ongoing to some degree at the nation-wide epicenter in Irvine), takes us back to a time of the last housing market bottom: 1997. Very informative read. Recommended.

Monday, May 25, 2009

Foreclosures Are Not Like Death

Sometimes you read a newspaper article and don't quite understand....what.....they're trying to....Did they just..?

There was an article in the Orange County register today written by Greg Hardesty and Rashi Kesarwani about local foreclosures and the psychological and emotional toll it is taking on local citizens and their families.

I think I understand the underlying message that is trying to be conveyed here (i.e. foreclosures are an event worthy of mourning), but I don't believe the three case examples cited are very supportive to the main idea.

Mr. Palmer's story is a sad one, but in my view it serves best as a textbook example of how deplorable health care costs have become in the United States these days, not to mention the soul-devouring frustration of dealing with disingenous healthcare insurers. Mr. Palmer's case serves to remind us all that even with the highest morality and greatest intentions to fulfill our contractual obligations, we are all just one serious illness or two away from permanent "foreclosure" ourselves.

The case of the Brixey family is so far removed from Mr. Palmer's, I almost got lost. OK, so I'm sure the Brixeys are going through a ton of mental anguish right now, afterall it must be quite difficult for large families with children to lose everything and start anew. However, it's pretty easy to see that, of the three stories described, the Brixey's probably utilized the least common sense and financial restraint in their decision-making over the last several years. I'm not saying they deserve foreclosure. I'm just asking the question after reading "$700,000" and "2005" in the same sentence, is this the part where we're all supposed to be shocked? I'm glad they're getting the help from friends and the community. But it is a sad and frustrating truth about Orange County real estate that very few constructed family residences here - even those priced at $700,000 - are really suitable for familes of three children, let alone six.

Cue the melancholy music and cut to a psychologist name Sharon Gerstenzang, Ph.D., of Fountain Valley who specializes in high conflict, trauma and crisis:

"Some mental health experts liken the experience to grieving over a loved one's death. Being foreclosed upon can sometimes be more than like a death in the family."

Well, I'm going to have to disagree with the honorable doctor on this one.

OK, so losing one's home may indeed be a traumatic experience that makes people very sad.

But foreclosure is not death, nor is it a "death in the family". If people are really feeling this way, then we have an incredibly mentally sick American society.

Homes are lost in fires and floods and storms in the hundreds every year across America. Also, family members are killed in traffic accidents, home accidents and violent crime. Some families are shredded by divorce. Some children go missing and are never found again.

Those are real examples of painful, brain-searing loss, from which few ever fully recover.

Relatively speaking, home foreclosure, while traumatic, is temporary. It ends. You can pick up your shit, move away and live on in another place. You can go rent a house or an apartmen and estabish a new life for yourself and family. You don't have the previous roof over your head, but you have yourself. And you have your family.

Most of the foreclosures in Orange County today, I suspect, are rarely related to Mr. Palmer's harsh circumstances. Life-saving drugs were so expensive and his insurance coverage was so restrictive that he decided he had no other choice but to leverage himself into oblivion to just stay alive! How in the fuck can the Brixeys or the Tiffins be placed on equal footing with that?

They shouldn't be.

Foreclosure is more often than not the end result of when individuals buy more house than they could really afford and cannot meet their financial obligations under contract (the mortgage). Not always, but frequently foreclosures are often linked to risky financial decisions made years ago that have resulted in default. Low to no down payments, pick-a-payment mortgage programs, adjustable rate mortgages and buying at the housing peak.

These are events brought about by a human being's own cognitive thought process and own volition. All of us would be wise not to compare such events with the loss of homes to natural disaster, or to the death of a loved one.

Sure, Americans who live their lives as if it were a Lifetime Original television series entitled "Foreclosure" with Meredith Baxter Birney, might wish their foreclosure to be as traumatic as death. I can imagine that it might "seem like death" for some to find out just how incredibly naive, foolish and financially inept they really were.

But foreclosure is not like death.

In fact, let me close by saying that every single foreclosure and bank owned property that doesn't get marked to market is preventing the very economic recovery that this entire nation will soon desperately need. How ironic is it that ongoing taxpayer support for over-leveraged homedebtors may result in the death of economic viability for the United States of America?

Saturday, May 2, 2009

Botox profit down 58% in 2009

You may notice that your local Realtor may not be looking their "best" lately. This may be one reason why:

Allergan Inc., maker of the wrinkle-smoother Botox, reported Friday that its first-quarter profit fell 58% as the recession slowed sales of eye and beauty products.

California Association of Realtors Use Outlaw Josey Wales to Sell Homes in 2009

The California Association of Realtors have chosen to dump their advertising dollars this summer into some fairly lame radio spots.

The first one is so dumb, I hesitate to post the link here. Man, it royally sucks. Not that one should expect much creativity from the NAR/CAR dudes.


Listen, we radio listeners have had quite enough of ads portraying dumbass married couples making stupid financial choices in your "appeal to action" ads, thank you very much all the same. We don't need to be reminded how emotionally self-centered, irresponsible and carefree people have been when working "side by side" with Realtors on the biggest purchase of their lives! Look, Century21 sort of ruined this theme for everyone with the Suzanne Researched This ad. I mean who doesn't remember the classic bloodsucking Realtor line: "This listing is special John! You guys can do this!!"

The second radio ad from the CAR has a very different theme. It's called "Piece of Me". A little bit of Dirty Harry mixed in with some outlaw Josey Wales and some Pale Rider.

The final message of tha ad is: "The California Association of Realtors. For your piece of California. For your piece of mind".

Christ. How appropriate is it that Realtors can suggest that any of their actions are responsible for home consumer "piece of mind"? I'm trying to figure out for the life of me what they could possibly mean by that. Where were California's Realtors when the notices of default started flowing in from the subprime crisis? Did they hold "Piece of Mind" seminars to former clients? Did they give back a piece of their ill-earned commissions on such garbage sales?

And just where are the California Realtors going to be when the tidal-freaking-wave of Alt-A and Option ARM loans first come up for recast this summer?

Honestly, how does using a 6%er help me or my piece of mind in buying a house in the third most fucked up real estate market in the country, southern California?

Oh, it's going to be a fantastic summer in California real estate, you can tell.

Man if I'm Realtor, I'd sure keep some extra funds available for the dry cleaners:

Wednesday, April 29, 2009

California Alt-A Foreclosures: A Wave of Mutilation

cease to resist, giving my goodbye
drive my car into the ocean
you'll think i'm dead, but i sail away
on a wave of mutilation
a wave

i've kissed mermaids, rode the el nino
walked the sand with the crustaceans
could find my way to mariana
on a wave of mutilation,
wave of mutilation
wave of mutilation

wave of mutilation

Housing Ladder To Nowhere

I've posted a number of local, Lake Forest, Calfornia examples where, during the time frame of approximately 2004 to 2007, people really bought in to the irrational exhuberance over "owning a home" and paying top dollar. The housing ladder only went up and the number of rungs was believed to be unlimited.

The examples I've cited have been mainly single family homes, and typically with 4 bedrooms, 2 baths or more. I want to make this important distinction, because none of us should lose sight of the fact that families are involved here. The lives of parents and children are probably being turned royally upside down by these trying financial times.

In my view, people who work today in the real estate profession rarely if ever admit to the social impact of their recent handiwork. Realtors, mortgage lenders and bank CEOs will talk all day about new listings, median home prices, monthly sales numbers and perhaps notices of default, the new tools for their website, and a recent closing experience, etc. But they don't seem to fully appreciate that behind all of these astonishing numbers are people. People just like you and me. People with hopes and dreams. People with worries and loves.

The downturn in the California housing market has quantifiable ramifications to be sure: bankruptcies, business closings, lost state and federal revenues, lost tax dollars, federal and state budget crises, increased taxes, unemployment (housing related and other), budget-related degradation of public services, and reduction in funding to school districts. These are serious, quantifiable issues that we've only begun to come to terms with.

But the other side of the coin is equally blemished. The social price tag of this downturn may not be known for many years. The housing market bubble and crash has affected people personally and psychologically in terms of their daily stress, their overall health, as well as the cohesiveness and well being of families. It may be too that the crises brings people closer together than before, which would be a good thing. My posts on this blog have often been sarcastic and angry. However, I do feel badly for those who made honest mistakes and for those who suffer because of them, especially young kids who may not fully understand what's gone wrong.

Since I started The Rancid Truth Blog about Orange County Real Estate in 2005, I was pissed off. Really pissed off. I've worked very hard, traveled extensively and earned good money. I've paid more than my fair share of state and federal income taxes, yet I have been utterly priced out of the volatile housing market here. I should be paying more for the privalege of renting a single family home, but I'm not. It's cheaper to rent here. And we all know today that Orange County California home prices were fueled by snake oil sales people (liars), irresponsible lending, irresponsible borrowing (lying on mortgage qualification docs), and unabashed greed.

And I'm still pissed off about all of this.

Sure, I was the responsible one. I didn't take massive risks, yet my federal and state taxes are going up, my rent stays the same, yet I'm helping unqualified people stay in homes that they can't afford, and that I might otherwise have been in a position to buy myself (if prices where allowed to adjust) and assume all of the responsibility that this might entail, including paying local property taxes.

I'm convinced that I'm right to be angry about what's happened here (and still happening here), and to demand change. I don't want a medal for being financially prudent the last 4 years. But I do think that the housing market needs to be allowed to shake itself out and correct, fully understanding and appreciating that there will be significant financial and social casualties in the process. The sooner the market heals itself, the sooner it can recover.

On to today's example:

The setting is June of 2005, Lake Forest, California. The single family housing market is white-hot. Home buyers, lenders and Realtors are living the high life. Homes are selling like umbrellas during a rainstorm, and at stratospheric prices.

A lovely 4 bedroom, 3 bath single family home, 2,150 sq. feet and 10,800 sq foot lot (most of it on a useless backyard incline) located in the beautiful Bennett Ranch area, sold to a new owner for $680,500. That's $311/sq foot.

Fast forward 6 months later to January 2006. The home sold again, this time for $795,000! That's $370/sq ft!

It's now April 2009 and the home has shed it's toxic loan glamour and become a short sale offered at $445,000 ($207/sq ft).

25551 Glen Acres, Lake Forest, CA 92630

Glen Acres is the place to be.

Home Sales Up in Orange County. Mortgage Defaults Also Up.

Orange County median home prices rose 2.2% between February and March of 2009.

Meanwhile, Orange County home mortgage defaults increased 19% in Q1 of 2009 over Q1 2008.
So is it finally time to sing halleluja to an OC housing market recovery?

I don't know man. I've got a really bad feeling about this. And this.

I mean seriously, with all that we have experienced in the last 18 months within this state, do California residents now make the biggest procurement decisions of their lives when there is uncertainty about future employment?

In other news, if you live in OC, you're home is probably overvalued (overassessed) and you're probably paying more in property taxes than you should be. Many homedebtors in OC are now filing appeals with the county to adjust their home property tax bills. But less property tax revenues in OC is going to likely negate some drastic cuts in educational programs by OC school districts. These cuts included firing teachers, eliminating courses and closing down elementary schools.

Sunday, April 26, 2009

A Home Price Haircut - Apache Style

2005 must have been an interesting year in the Orange County housing market.

Very interesting.

I mean, could things have gone any better for homesellers, buyers and flippers at the same time? No way! College textbooks will no doubt include case studies about 2005 as the year of idiocy, of the seemingly unending, carefree, unregulated, real estate orgy.

15%+ appreciation on home sales. Skyrocketing home prices. Champagne and chocolate fountains. Hot hors d'oerves. And of course, parties around OC would not have been complete without the loud, depreciating jokes about foolish renters and housing market doomsayers.

"I just bought a new SF home for $700K last weekend! Guys, I'm so rich now!!!"

Four years later we can only look back at this period with our heads cocked to the side and a "WTF?" look of grimace on our faces.

That's all we can do. Because the damage is done. And like it not, we're all paying for it. Big time.

Today's example is 21892 Apache in Lake Forest. The location is appropriate. This is a beautiful 4 bedroom 3 bed, single family home with a massive backyard in lovely Lake Forest. The home is close to schools and far enough from the free way and the train to enjoy.

Now let's look at the ridiculous sales history that could only make sense to individuals in complete and utter denial, or in a drunken stupor of irrational exhuberance:

February 18, 2000: Sold $313,000

July 4, 2005: Sold for $700,000

November 14, 2005: Sold for $744,000

April 22, 2009: For Sale for $499,000

The greater fool asks: "So, uh...guys..like, where did my 15% per year home appreciation go?"

Oh, it's in our homedebtor bailout taxpayer checkbook. We'll go get it for you.

$499K for the same house that sold for 40% more before.

Now that's a home price haircut Apache-style.

Thanks again to the Orange County realtors, mortgage brokers, and financially inept borrowers for the greed and complete lack of integrity, and for all of those funny jokes.

Wednesday, April 8, 2009

Ready To Rumble?

Ahhh, late autumn 2005. All is right with the world. Single family homes are selling like hotcakes all over Orange County, California. 15 to 25% home price appreciation seemingly everywhere you look. OC realtors cashing those commission checks, buying H3 Hummers and brand new Lexuses, or just putting in their own little "cement pond" to celebrate the ongoing gravy train of success. Real estate house flippers are, well, flippin' out.

Good times. Good times.

One fine day, a nice little 5 bedroom, 2 bath single family home on Rumble Drive in Lake Forest comes up for sale for $725,000. Rumble Drive is located within earshot of the excruciatingly loud Amtrak train line between Irvine and San Diego, and the busiest and most treacherous roadway in Lake Forest: Six-lane El Toro Road.

This home last sold for $398K (little over half the original buy price) just 2 years before ($398K in 2003). But it's 2005 and dammit if prices for single family homes weren't hitting the stratosphere all over Lake Forest and all surrounding OC communities! I've gotta fix it and flip it, dudes! I gotta make some moves and be somebody. They all said it could be and should be done. Besides, Gary Watts and Connie de Groot are the smartest people in the whole wide world.

A year after the November 2005 purchase, the home is listed on the MLS in December 2006. Over a series of 2 1/2 years the home is listed, delisted and then relisted again with perfectly neurotic pricing changes. One can almost sense the frustration and disbelief. This can't be really happening. Or can it be?

Today the home is up for sale again on Redfin, his time for a brutal sale price of $499K as of March 29th. More price declines may be in the offing.

Bought for $725K shortly after market peak. Today the home is for sale for $499K at over $225K less than that 2005 purchase price.

22901 Rumble Drive, Lake Forest, CA 92630

Wednesday, March 25, 2009

What would you do-Oo-Oo, for a Klondike Condo??

Some person might indeed be willing to brave blistering winds and scorching, uncontrollable, wildfires for an opportunity to own and occupy this beautiful 3 bedroom, 3 bath condo in the Trabuco Canyon (Lake Forest) area.

I remember fondly back to a time in early 2005 when I first moved to Orange County and started renting, when a local Realtor, after listening to my confusion about local single family home prices here, proceeded to admonish me about my expectations. He said that I needed to set my "sights a little lower" than a single-family home, and "consider buying a small condo instead". "Work you're way up" the rungs of the home ownership ladder to achieve your dream of Orange County single family home ownership!

In other words, "Ride that bubble, dude!...Don't worry, everybody's doin' it!".

This lovely condo was purchased back in November 2004 at a perfect, Hubba Bubba Bubble Gum price of $435,000!

Today's 2009 Asking Price: $350,000 (a pre-approved, packaged short sale)

Address: 28496 Klondike, Trabuco Canyon, CA 92679

Sunday, March 22, 2009

A Trillion Dollars Looks Something Like This

If you enjoy a good fright, then you'll love this.

By the way, the Federal Reserve Bank of the United States is printing up about $1.2 trillion more US dollars this week. Thanks Ben!

The United States federal budget deficit is estimated to be $1.845 Trillion!.

Not to be outdone, President Barrack Obama's multi-year federal budget proposal is $3.6 trillion!

My fellow Americans, prepare for the spending power of whatever few dollars you do earn and have saved to be utterly and completely destroyed by rampant inflation. The tools to stop it are broken.

Thank you, incompetent and greedy homedebtors and real estate investors everywhere. Thank you mortgage brokers. Thank you realtors. Hope it was all worth it.

Schiff hits it out of the park. Again.

Peter Schiff is the greatest.

Saturday, March 21, 2009

A Little Condo Price Battle

There may be a friendly neighborhood price battle brewing for 2 similar condos on Calle de Paseo in Lake Forest, CA.

21093 Calle de Paseo
3 bedroom, 3 bath Condo, 1606 sq feet, purchased just over 4 years ago for $480,000.
Asking Price: $399,000 ($248/sq foot)
Days on Redfin: 304

21143 Calle de Paseo
Another 3 bedroom, 3 bath condo, 1623 sq feet, purchased March 2007 only a few months from OC market peak at a breathtaking $530,000.
Asking Price: $379,000 ($234/sq foot)
Days on Redfin: 8

According to Redfin, both are short sales.

There remains yet a third condo for sale on the same street:

21123 Calle de Paseo
2 bed, 3 bath, 1441 sq feet priced quite differently.
Asking price: $429,900 ($298)
Days on Redfin: 491

21143 must have seen the writing on the wall and gone for the jugular with the $20K under comp (21093) asking price.

Even if a potential buyer were to come on the scene for any of these condos located in the same lovely area, short sales can take an awful long time to shake out.

Down on the Corner

A lovely 4 bedroom, 3 bath, single family home purchased on a hot August day in 2006 for $715,000. 2,000 square feet and a 5,984 sq ft lot.

Fast forward almost three years later and this corner abode is one of the lowest priced short sale single family homes in all of Lake Forest, California.

$715,000, which is almost 7 times the median income here in Lake Forest (approx $99K per anum), must have seemed like the "price is right" back in 2006. Nevermind the home's location being nestled almost equidistant from both the Amtrak train line and the 5 Freeway.

Asking Price: $399,999

Address: 24191 Hurst, Lake Forest, CA 92630

Creedence Clearwater Revival - "Down on the Corner"

This can't be happening

So you buy a beautiful home in 2006 for $975,000. I mean, why not? Jacuzzi, swimming pool, massive backyard, lovely Saddleback mountain area.
You've got the means. You've got the financing. Home prices appreciating everywhere you look by double-digits. Now's the time. Get in, or be priced out forever.

A few years later things go pear-shaped financially. Foreclosure. Short sale. And suddenly all the granite in the world no longer justifies the scenario where the asking price means double-digit appreciation over the previous buy price.

Asking Price: $749,900

Address: 8 Puerto Nuevo, Foothill Ranch (Lake Forest),CA 92610

Using Fear to Earn Real Estate Commissions: "Housing Prices Going UP in Orange County!"

I am searching for a home to buy in Lake Forest, California and surrounding communities. I wanted to share with you a recent real estate flyer I received via e-mail from a rather well-respected, highly experienced realtor in the area. I've removed the names to protect the shameless (except for those quoted in the flyer).

Read it. What do you think?

Housing Prices Going UP in Orange County! So Consider Buying NOW.
In case you forgot, you first contacted me through my web site at www.xxxxxxxxxxxxx.com and started searching there for homes. You have been getting your requested emailed updates from me since then.

If you are waiting for housing prices to hit rock bottom before you buy a home to live in or rent out, wait no longer.

Orange County home prices last month ACTUALLY ROSE for the first time since June, according to DataQuick.

The median selling price was $375,000 — up $5,000 from January but still down 27.9% from a year ago.

For calendar month February 2009, Orange County saw:

$375,000 median selling price that is 42% below June 2007’s peak of $645,000.
Single family homes sell for 41% less than their peak pricing (June ‘07) while condos sell 46% below their peak in March 2006. Builder prices for new homes are 42% below their February ‘05 top.

Home prices usually rise in February vs. January. Last time they fell in this period? 1999!

January was the 7th straight month of sales gains vs. the year-ago period. That follows 33 consecutive months where sales failed to beat the previous year’s pace

Delores Conway, a real estate economist at the University of Southern California, says home prices have come down 40 % in Los Angeles and Orange County since the mid decade peak.

She notes that those prices, coupled with record low interest rates, mean today’s buyers can secure the same monthly payments home buyers enjoyed six years ago."

This is marketing from a Realtor. This person is trying to earn my trust.

Look, I understand as well as the next person that even Orange County California Realtors have to earn to eat.

What I don't agree with is cherry picking recent 2 month MLS and DataQuick numbers, throwing down a fear hypothesis (prices going up) in an e-mail piece with zero supportive evidence, all in order to cajole people to buy a home and promote a self-serving, commission-paying agenda.

We've all seen this film before. And it sucks.

If I'm of just average intelligence and I read the above Realtor pamphlet with the stated 41% drop in single family home prices, I'd be asking myself "why did that happen?". "What factors could cause such a major drop?", and then determine whether this drop might continue down to 50% or 60% or more?

50%! You're crazy!! NO! NEVER! That can't happen. This is Orange County, California!

No, you've got to BUY NOW or....*yawn* you'll be priced out of the market forever you no-buying-fence-sitting-wastes-of-space!!!!!

I'm just an idiot renter here. But do we really need this? I mean, given all that's happened over the last 2 years in Orange County residential real estate, at what point do we conclude: "Hey, we should really stop ourselves with all the shameless bullshit!"?

Here's a message to Realtors from a prospective buyer: Drop the fear tactics, and do what you can to start instilling some confidence instead.

Renting in Orange County. No Ball and Chain.

I'm still renting a single family house here in Lake Forest, California, paying way less than it would otherwise costs me to go into debt to live in a similarly-sized home per month here including mortgage, insurance, taxes and upkeep, particularly when one considers the economic situation and unemployment risks in this state. I mean, if I lose my job in the coming months, I have flexibility to pick up and go elsewhere. Look Mom! No strings!

I've said all along that this is wrong. It should be a privilege to rent and have this kind of freedom to get up and freaking leave. I should be charged a freaking premium to live this way and have no real obligations other than the monthly rent and utilities, especially right now.

But Orange County, California, and I presume many parts of the United States of America, have had it wrong all along. Instead, homeownership (homedebtorship) has been marketed at the premium, partly due to narcotic-like liar loan products since 2002, the resulting run up in single family home prices, and the incessant industry lies about "home appreciation" that everyone and their dog was suppose to "take to the bank". Come on. Who doesn't remember the famous Orange County, California adage: "15% is in the bag!". Jesus, who in their right mind isn't for 15% appreciation on their money?

But I've been renting. And I've been saving.

Like a mad dog.

I can't say I'm way, way ahead. Indeed, I've even lost money on investments over the last 12 to 18 months. But I have no ball and chain to me. I'm still throwing money into savings accounts and retirement accounts. I've cut my expenditures where I can. I started to grow a garden in my back yard, and I'm not eating out as much. Driving my car less and my motorcycle way more.

That all said, I would love to "own" (or actually go into debt for a home) here. I have been looking too. Carefully so. Homedebtorship definitely makes sense under certain circumstances. But not under all circumstances, and certainly not at any price.

We are now witnessing record home sales in Orange County the last few months.
And local realtors have claimed that these transactions have occurred either at or above the asking price! So these buyers either have a lot of down payment cash available, or their willing to continue borrow large amounts of money to live in a house. That's their choice. They must have awesome job security and a dependable income too, or maybe they won the lottery and inherited some serious dough.
More power to them.

Single family home prices are coming down now and mortgage rates too. Maybe the time is now to buy, or at least may be quickly approaching?

Not in my view. Not yet because home sales prices are still not congruent with local incomes in Orange County. Not yet because renting is cheaper, and it shouldn't be. Landlords can't rake renters over the coals. They certainly want to, and there time will soon come. Also, as I have stated numerous times on this blog, I do believe more housing trouble is on the way in the form of the shamefully under-reported Alt-A prime loans.
Sunny times are not necessarily guaranteed, nor is it "full-steam ahead" for California housing market.

Friday, March 13, 2009

2009 Realtors Say: "Fence-sitters, Your Wait May Be Over!"

Realtors have no shame. They are completely out of touch with reality.

"It's a great time to buy a house!"

Yeah, but not because it's right for me or a good future investment. It's always as great time to buy a home (even as prices fall like a rock) because that's when you get your 6% commission check.

"They said we should wait."

Millions of Americans were convinced to buy a home in order to "get in now while you still can", "there not making any more land", "buy now, you can always refinance". Realtors continued to find greater and greater fools as the Ponzi scheme built itself up higher and higher. They cashed their commission checks and still managed to face themselves in the mirror every morning.

"I want one, Mom!".

Jesus Christ! Trillions of dollars of paper wealth have been destroyed forever in either home values, or 401Ks in just 18 short months. One might think that the National Association of Realtors could propose something a little less along the lines of "childish greed" in their television commercials.

We have enough overgrown children already who have proven incapable of reading their own signed mortgage contracts, thanks very much all the same.

No, the NAR wants you to get off that fence and buy, buy, buy?

Why? For future investment wealth?

No. Because they want their 6%.

The sooner the investigations begin, the better off we will all be.

Lake Forest California in Home Price Nose Dive

Well, this is interesting:

That must be the sound of Lake Forest home debtors saying something to the effect of:

"AARRRRRRrrghhhhhhh, Oh MY GOD! Oh my GOD! My House Is Worth What???? WhoaaaaaAAARRRRIGGHHHHHH!"

Then there is the sound of crickets.

Or maybe it's just fence-sitters who don't trust realtors, or prospective buyers who just can't find the $100,000 down payment required to secure the $650,000 worth of mortgage financing:

And then there's the bone-crushing Alt-A Prime mortgage recasts ready to come on the scene in May and June 2009!

Are we hitting bottom in Lake Forest, California home prices?

(Graph pics from Altos Research website)

You're A Fly On The Wall: Mortgage Broker Sales Meeting

Get out there and sell! Always Be Closing!!!

Another South OC School Bites the Dust

Well, this sucks.

Another outstanding Orange County elementary school scheduled to be shut down thanks to California's embarrassing budget crisis. Saddleback Valley School District itself faces a massive $10 million budget shortfall.

Back in January I posted about the end of La Tierra Elementary Elementary in Lake Forest, California. Got a great school? Into the trash can with it!

This month it's O'Neill Elementary in Mission Viejo, California just to the south of Lake Forest. A very good elementary school. And parents are right to be pissed off. 400 O'Neill students will be reassigned to other schools, engorging classroom sizes even further.

Let me remind readers that California's national rank in elementary education is a bona fide national disgrace. I don't know how Schwarzeneggar and Villagairosa sleep at night, but when your state's elementary school system is ranked just above Alabama, Louisiana, Mississippi and New Mexico, you should step down from office. I'm being completely serious. You either make it happen yourself, or you step aside and let somebody else come in and make it happen.

Orange County has been historically regarded as a "special case" where the schools are some of the finest in the state. This remains to be the case. But these cuts are devastating and will impact the state and the nation dramatically in years to come.

This is what happens when voting constituents choose to live their lives as if it were a freaking movie.

Everyone wants to live here in OC. And the schools? - Why, they're all so fantastic!

Not anymore.

Thursday, March 12, 2009

OC Realtor Commissions Down 50% from 2005 Peak

Jeff Collins posted an excellent piece on the Lanser On Real Estate Blog today that realtor commissions nationally fell by 34% since market peak in 2005. Orange County realtors, it would appear, are really getting the shaft on commission earnings as estimates indicate a 50% drop since the 2005 peak.

Realtors across the nation no doubt earned well as the home buying market soared to stratospheric heights. But let's not forget that they earn well on the way down as well, particularly in Orange County where single family home prices have fallen dramatically over the last 18 months, but in my view still remain hopelessly out of alignment with real take home incomes here and the reality of current financing opportunities.

I mean, we are still observing idiots being advised by local realtors to put their 4 bedroom, 2.5 bath P.O.S homes up for sale at borderline $650,000.
When will these people finally get a clue that their house is not worth this much money anymore? I completely understand why realtors around these parts do what they do. Their payday is dependent upon the home sales price, so let's do all we can to make the transaction attractive, and get paid our 6%.

My view is that realtors in the United States of America, if paid at all, should be paid a flat fee for their services. Those services may have value for people who want to buy or sell real estate, but don't want to deal with all of the hassles themselves. I will admit that there might be some value there that consumers would be willing to pay for. But regardless of a realtor's efforts, overhead costs, etc. they are performing the same sales services regardless of the value of the home. I mean, realtors cannot demonstrate that they do more work or incur more costs when selling a $640,000 piece of crap house than they would selling a $900,000 piece of crap house. So why should I as a seller (or buyer) pay a fee that is a relational function of the transaction value? That kind of arrangement makes no f&%king sense!

Everytime I complain about this real estate commission ridiculousness, do you know what the response is from realtors?

Don't blame us. The brokerage house makes us do it.

Yeah, whatever.

Just explain to me like I'm 4 years old, what on earth should convince me that what Realtors do is worth 6% of a Lake Forest, California single family home price?

I didn't think so either.

Monday, March 9, 2009

Karatz Dangling And The Countdown to Clockwork Orangeman

Now that the country's financial system has been officially laid waste by greedy banks, mortgage brokers, realtors, greased palms in Washington, and most importantly by financially inept homebuyers, one thing left to observe with interest will be the plethoa perp walks.

That's right. While 80% of Americans are too stupid to be outraged and realize just what happened to their 401K's and home values, the remaining 20% are grabbing their torches and pitchforks.

And the SEC and new administration needs to at least look like their doing something, right?

Let's start with Mr. Karatz, ex-CEO of KB Homes, one of America's largest home builders. Mr. Karatz has been accused of stock option fraud. We'll soon see how this one ends. An arrest or two perhaps?

Then there's the Countdown to a Clockwork Orange: The Investigation of Angelo Mozilo, former CEO of Countrywide. Mr. Mozilo, perhaps the greatest poster boy of the epic housing crash. Mr. Mozilo is no doubt a hero for all Realtors across the country, for without Angelo, there would never have been so many ridiculous home purchases the last 7 years and never so many ill-earned commissions that have jeopardize the very foundation and future of the American nation. Some people believe there might even be an arrest of Mr. Mozilo. Well, you have to first collect some evidence that the guy knew what he was doing. That shouldn't be too hard, but then again, it's not illegal to be a greedy bastard. Just look at the enrollment of the National Association of Realtors and their stance on issues like the housing bailout, the extension of jumbo loans to prop up pie-in-the-freaking-sky home prices, and demands that new tax policies not in any way discourage "homedebtorship".

Personally, I don't believe Mr. Mozilo will be arrested, nor any of his colleagues.
Besides, it's too late anyway.

Sunday, March 8, 2009

Mortgage Loan Resets to Explode in April and May. And Just In Time For Summer Home Selling Season!

I simply can't wait for the April and May spring flowers to bloom.

And for the next wave of ARM mortgage resets to go KABOOM!!!

Sweet mother of god, look at April and May 2009 for mortgage loan resets!

Weeeee, this is going to be an the "funnest" summer ever!

Agents of Change And The Foreshadowing of Divorce

Irvine Renter Takes Us To School: "Why Did Home Prices Fall?"


And as for "writing in anger", I'm so there with you dude.


You are a homedebtor, not a homeowner!

Stop arguing! If you live in a $750,000 home and you owe $750,000 or less in a mortgage loan for that same home, then you don't own that home, ok?

You are homedebtor, not a homeowner.

If you live in a $750,000 home and you owe nothing (i.e. it's bought and paid for through either blood, sweat and years, a massive inheritance or through ill-gotten gains), then you are a homeowner.

See the difference?

Don't let these SUV-driving, cell-phone toting, reserve trademarked Realtors in the area tell you any differently.

You owe. You do NOT own.

We need to change the conversation in this country about real estate on so many levels, because people who purchase homes in this country using leverage do not technically own the home until the mortgage is paid off.

The same is true when I buy a car via an auto loan. Sure, I'll drive the car off the lot and all around the town. I'll fill it up with gas, and spill some Diet Coke on the floor. I might even unknowingly drive right into a demolition derby contest at the Orange County Fair and obtain a few "minor scratches" in the process. But unless I paid for that vehicle in full from the start, it's not freaking mine! I may even possess the title for the car in a neat little folder in a desk drawer where I live, but the car is not paid for. It's not my car!!!!

So can the American public, the American media, and our elected officials in Washington pretty please with freaking sugar on it, STOP CALLING PEOPLE "HOMEOWNERS", UNLESS THE OWN THE HOME OUTRIGHT AND HAVE NO DEBT AGAINST IT?!!!

In otherwords, let's be a litte more specific going forward before we bailout the patheticly stupid, greedy and illiterate, shall we? I mean, that's not asking too much, is it?

People who are upside down on their freaking mortgages right now, in the state of California, are NOT HOMEOWNERS!!!! They are mistaken HOMEDEBTORS that, under normal lending standards and rational financial principles and without Realtor malfeasance, would otherwise be, and actually SHOULD BE RENTING a home, or condo, or apartment to live in.

But no.

The American media would prefer for us to all stop what were doing and hold a candlelight vigil to save the precious so-called "underwater" and irresponsible debt-freaks and use the term "Homeowner" to best describe their emotional plight!

I don't doubt that these people are in anguish over their circumstances. I don't doubt that families with young kids are under stress as a result of this. But America, and California in particular is, today chock full of imbecilic, overgrown children who have the attention span of a gnat, and cannot read a freaking mortgage contract, let alone hire an attorney to have it read to them. The responsibility is theirs to carry. They need to foreclose. They need to move to an apartment or condo, pay off their outstanding debts or get them forgiven and start over.

Since when are we obligated to pay for the misfortunes of others?

I get all that Judeo-Christian B.S. about the "Good Samaritan". I understand the "come on, help a brother out" speak.

My parents just lost half of their savings in their 401k.

They are over the retirement age. They both worked and saved since they were 18.

Who is going to bail them out?


My point is, you can't force people to be "good samaritans". My parents started saving late and put money in risky investments in their 401K plan. They've paid the price.

What we are doing, what President Barrack Obama is doing, what House Speaker Nancy Pelosi is doing, is perpetuating the problem of irresponsibility, financial illiteracy and not allowing individuals to pay or benefit from the consequences of their actions.

We are praising a nation of spoiled, overgrown, childish debtfiles, while their children are watching.

You are homedebtors, not homeowners!

Monday, March 2, 2009

Making It Crystal Clear For The Real Estate Consumer


Do you believe real estate consumers are being served optimally? Do we have all we need to make informed decisions? Are we being told the truth?

When we reflect on just the last 24 months of real estate market news, obviously many Americans did not use good judgement. Many Americans listened to the wrong people. Many listened to individuals who were in reality more preoccupied with protecting themselves and lacing their own pocketbooks than in ensuring that the biggest financial outlay of their customer's lives would work, and make sense longer term.

I really like both of Crystal Cox's blogs The Real Estate Industry Whistleblower and Savvybroker.com. If you've enjoyed The Rancid Truth over the past few years, then I think you might enjoy both of hers.

Crystal has posted numerous, informative vlogs on her website about the current state of the American real estate industry. Most importantly she does so in the context of what is important to the real estate consumer. She's identified several key areas of concern that most prospective consumers either don't know about at all, or tend to dismiss entirely.

According to Crystal, a former realtor and broker owner, the American real estate "system" is broken. And seriously so.

I really like, for example, the way Crystal highlights some of the common pitfalls within the real estate transaction process itself, including agency, home inspections, appraisals, "E and O insurance" (in other words, "Ethics and Omissions insurance" for real estate transactions, which mainly protect Realtors to the full extent of the law, but too often leave real estate consumers holding the bag when things go wrong, and then wondering just what the hell happened to them). She touches upon other interesting topics too, such as selling without a realtor, "the emotions associated with real estate", and even thee oxymoronic subject of "realtor ethics".

And as you might expect, Realtors around the country are apparently either pissed or completely shocked.

I'm sure there are some good intentioned realtors out there working really hard to make a living these days. But every realtor in America has to admit on some level (even secretly to themselves) that, following arguably the most spectular collapse of the housing market in modern history, and the global economic repercussions of irrational exhuberance over home value, WHICH REALTORS FREAKING CHAMPIONED UNAPOLOGETICALLY FOR 8 YEARS, might a little intellectual honesty be in order when it comes to the Realtor profession?

I believe so.

This Just In: Housing Prices Actually Linked to Income, Jobs and Mortgage Rates

Holy cow! I mean, if you had been listending to a Realtor the last 8 years, you might never have suspected this 2x4 of obviousness across the face. But it's true.

Wait a minute, you mean, income, jobs and mortgage rates determine..... Yep, there's this complicated thing called "fundamentals".

This is a fantastic article by Susanne Trimbath which restates the critical success factors for prospective homebuyers.

1.) Do I have enough income (take home after expenses and debts) to purchase a home at the market prices?

2.) Will I have a job in 6 months?

3.) How do current and future mortgage rates coincide with local home prices and my monthly take home budget?

This is the part where our hall monitor Realtor friends step in and remind us, in that I-never-sold-anyone-into-foreclosure-ever condescending manner, "real estate is local".


But so too are jobs and incomes.

And last Friday, California and Orange County got some interesting news:

California, the worlds' 9th largest economy according to GDP numbers, has an unemployment rate of 10.1%.

Orange County California's unemployment has reached an all-time high since 1993 of 6.5%

So why is it that a 4 bedroom, 2.5 bath, single family home in Lake Forest, CA is priced at $650,000, or 6 times the median income here of approximately $100,000 per family?

If you were to go to Redfin, Trulia, RealtyTrac, or Zeus forbid, Realtor.com, you'd be surprised as to the homes available for sale in Lake Forest.

And you would be far from impressed.

In a word, almost all single-family homes in Lake Forest, California are over-priced pieces of crap. I'm dead serious here. Most of the homes for sale right now in February 2009 in Lake Forest are foreclosures, or trashed out short sale properties. Nobody who doesn't have to sell is trying to sell their home right now. The availability of quality homes for families with children, for example, to consider purchasing are few and far between. Most fence-sitters must not only cope with still unbelievable home prices (between $450,000 and $750,000), but also the reality that the home they might buy will be riddled with defects and necessary repairs. It's just a fact. And this I'm reporting AFTER the housing crash has supposedly occurred.

Paseo Verdura, Lake Forest, California, 350 days later, still $650,000.
Bank get's an A for stubborness, and an F for creativity.

I submit that parts of Orange County are still living in a dream world in terms of their asking prices.


Well, because the local real estate market is screwed up. Yes, Orange County is a nice place to live. A beautiful place. Perfect weather, oceans nearby, mountains nearby. I mean OC living has its' merits, and those should be priced at a premium of some measure. But single-family homes remain overpriced.

Earned incomes in OC are higher than the rest of the country. However, I suspect that job market uncertainty combined with ridiculous home prices that bear no relation to incomes will keep many on the sidelines through a difficult 2009.

Get it? Got It? Good.

Mr. Jonathan Jarvis, great job! Excellent work!

I just wished you would have come on the scene and delivered this dumbed-down, 6th-grade-reading-comprehension-leveled, ILM-esque, eye-candied, explanation to the horrifically inept American public 7 years ago. Well, now that I think about it, even then you probably would have never saved 90% of us from ourselves - or from Connie de Groot, or from rockstar and SoulGlo connoisseur Tom Adkins, or from "What-artifical-lending-standards-are-you-talking-about?" Mike Norman.

Awesome explanation. Detailed. And disturbing on so many levels.

My only critique: You forgot to include the vital role played by Realtors(R). They provided a sense of false security and false legitimacy to the run up in home values. This cannot be overstated.

Mr. Jarvis, take us to school:

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo

The very idea that American tax payers dollars - money that should otherwise be used to build schools, improve national infrastructure, educate our next generation of taxpayers, and regulate corporate malfeasance - is being used to bail out these greed-driven Gordon Geckos and commission-paid sales people is a travesty. This is a national disgrace.

There have always been market charlatans. Carpetbaggers. Salespersons of magical elixirs, and today realtors. The greatest irony may very be that millions of Joe Sixpack American homedebtors played out their role in the disgusting performance perfectly.

I will close to say only this: We cannot fathom what these developments are going to mean to this country. You are probably hoping that this will all blow over in 6 to 12 months. But I think it wise to consider the alternative and prepare accordingly. The United States of America is no longer a nation of law and order, nor of justice.

Until you start to witness indictments and arrests on all major networks, we should all be afraid.

I hope realtors, mortgage lenders and brokers are satisfied and proud that they played such a prominent role in the destruction of our country as we knew it.

Tuesday, February 17, 2009

$8,000 tax credit for California Home Buyers Puts Frown on the Clowns?

Realtors have got to be pissed. I mean paying dues to the NAR is just not paying off these days. $30 million dollars donated to political campaigns and all Realtors get is a lousy $8,000 tax credit?

Is this supposed to serve as the thousand watt jolt upon the asses of all of those "fence sitters" in Orange County, charging them to "get out there and be somebody" and buy a home?

Here's the bottom line:

The average listing price for a home in California is $633K. Take home incomes across the state simply do not support this pie-in-the-sky ridiculousness. The cotton candy mortgages are gone. There is nothing left. Most Californians are completely tapped out and do not have money. And even if they were smart, and do have money, they are certainly not going to dump it into homes that everyone with any common sense knows are still horrendously overpriced. The state of California, the world's 9th largest economy, has discovered itself to indeed be the awful financial train wreck it always knew it was. One for the record books.

$8,000 certainly isn't motivating my Lake Forest, California-based ass to do anything but hunker down, pull out a bowl of Orville Redenbacher popcorn, and observe the upcoming Alt-A mortgage loan disaster in Orange County California slowly unfold before our eyes!

Weeee! Bwahahahaha! It's circus time!

Monday, February 16, 2009

California is $42 Billion in the Hole

California Realtors might want to rethink that "great schools around the corner" bit within their age-old home sales pitch. By now the whole nation knows that the state of California is fucking broke. You know, for being the 9th largest economy in the world, California's education system is already national disgrace. And this 2009 budget deficit is not going to improve things in this regard. There are no quick fixes. Any resolution will be a painful, drawn-out process because we Americans are seemingly incapable of making difficult decisions.

California must cut jobs and must cut services, or raise income, gas and property taxes to unbearable levels that nobody can afford to make a decent living here. Even without the current budget crisis, California real estate values outgrew incomes at ridiculous rates between 2001 and 2007. Realtors, mortgage brokers and their self-congratulating enablers on Wall Street all applauded the intoxicating run up.

But now here we are.

Any sale today is likely linked to a foreclosure or the threat of a foreclosure. Counties in California will struggle to earn the same property tax remittances they did in years past. Schools will suffer even further. Home prices may continue to fall dramatically in 2009 as Alt-A loans reset. The national and global economic downturn and fear of job loss will continue to restrict discretionary spending. The recent US bailout will require the printing of money. Unless interest rates are soon raised, inflation will roar across the nation. There is also every reason to believe that oil prices will begin a steady incline once again because the economies of China and India have returned to the bar. And they're fucking thirsty. And finally let me just conclude by asking this question:

Where will the riots begin?

Oh California. You really thought you could have your $700,000 single family home, a HELOC from hell, granite countertops, a new fountain swimming pool, and a new white mustang for your Oprah-watching Mrs., didn't you!? Didn't you!?


Monday, January 12, 2009

David Lereah: Only Following Orders

Read Nancy Keates article in the Wall Street Journal about former NAR lead economist, David Lereah, as he comes to Jesus about the housing market crash and the impact of NAR advice on hundreds of thousands of Americans.

Is this the part where Americans are supposed to be "shocked" by such a story?

I guess so.


"Mr. Lereah, who says he left NAR voluntarily, says he was pressured by executives to issue optimistic forecasts -- then was left to shoulder the blame when things went sour. "I was there for seven years doing everything they wanted me to," he said, looking out his window to his tree-filled yard in this Washington suburb. Mr. Lereah now works at home, trying to rebuild his career and saddled with a sagging portfolio of real-estate investments."

Really? "Optimistic forecasts?"

Gee, whatever do you mean, David?

Realtors across the country willingly pay dues to this same association, the National Association of Realtors (NAR), which, in exchange for the cash, provides ethics training for its members (*ugh*), housing market statistics and kool-aid flavored commentary to the prospective home-buying American public, usually in the form of bullish messaging, like "Buy now!", "Rates have never been this low!", "Get in now while you still can!", and that all-time real estate agent favorite: "It's a great time to buy a home!".

And that messaging worked.

The WSJ article does not close without first appealing to our sensibilities. Afterall, Mr. Lereah has lost out as well. He's apparently lost hundreds of thousands of dollars on his own personal housing investments too. And more importantly, he may have lost credibility as an renowned economist.

Intentionally painting a rosy picture of a unsustainable housing market situation is not what housing economists are normally paid to do. They're usually paid to be objective, factual and to interpret the incoming data with great care, because Americans consumers often make financial decisions based upon those interpretations and trends. Mr. Lereah had an important responsiblity.

So it must be a steep challenge indeed for one to re-establish credibility in the shadow of intentionally misrepresenting data all in the name of satisfying an employer's crooked business objectives, or for that juicy six figure paycheck.

This is all such a huge joke.

As long as we have Realtor sales commissions directly tied to the value of home sales prices, American consumers will face a conflict of interest. The business relationship is sort of damned from the start.

Even if we choose to assume that Realtors provide a valuable service, and that this service should be paid for by consumers (for all the marketing materials, providing professional consultancy on local real estate conditions, negotiating pricing and terms on behalf of the buyer, etc.), there is no way such Realtor services should be a a function of the home sale price.

This would all go away if Realtor sales commissions were instead tied to a fixed fee not at all linked to the sales price of the house and more a function of the value of the consultancy provided (i.e. a measure of the consumer's risk in choosing the wrong home, or paying the wrong price, among other variables).

Change is needed, because otherwise we will continue to see Realtor-funded organizations like the NAR, and state-based versions thereof, do everything they can to preserve high home prices, preserve low interest rates, etc., and for what?

For their own personal gain.

Consider that right now that the best thing for our anemic American economy (and for a speedier recovery from the housing downturn) might just be the opposite of what American Realtors want:

- stronger enforcement of fundamental mortgage lending standards (documented lending processes) and borrower qualifications.

- strict adherence to realtor code of conduct

- higher bank and mortgage interest rates, increased motives to save money and a strong US dollar currency.

- lower (and more affordable) single family home prices that reflect market fundamentals like real take home earnings of prospective buyers

- 25-30% downpayment requirements

- open access for consumers (prospective home buyers) to all home listings

If Americans wish to know how we got into this financial mess, they may not need look further then their local real estate agents who cheerleaded hundreds of people to buy homes that they could otherwise never really afford, homes that "never go down in value", who tapped the shoulders of local mortgage buddies around the corner who suggestively sold poor quality, adjustable rate mortgage instruments, that the consumer could (in theory) "always refinance".

If college textbooks ever get around to printing a few case studies on the Great Housing Crash of 2006, they might mention that there was an even greater problem than David Lereah, the NAR, the Fed, the SEC, and Realtors themselves. It was the laziness of the American media and complete lack of investigative journalism.

From CBS's "60 Minutes" to CNN to Fox to even the LA Times. Media outlets continue (even today) to turn to discredited NAR and CAR representatives for interpretations of the housing market data, as if they are "trusted advisors" for the real estate industry, when that claim must instead be officially surrendered for all time or until the real estate industry reforms for the better.

In the meantime, fixed rates for realtor services, full and free access to market information for consumers, and then let us allow the market shake itself out. It always does.

And as for Mr. Lereah, if that consultancy gig doesn't work out, I suppose he can always become a Realtor.

Sunday, January 11, 2009

Refinance?! With what equity, dude?

Excellent article by Leslie Berkman of the Press-Enterprise regarding desperate attempts of current homedebtors to refinance their home mortgage loans, with 75% of them unable to qualify because they bought at market peak prices and never had any "skin in the game" when they did.


"We can help about 25 percent of those who call, because a lot of the people who want to refinance bought their homes since 2005 and therefore don't have equity. They didn't put much, if any, money down and the house has fallen in value".

- Brian Weide, owner of SunStar Mortgage in Ontario, California, president-elect of the Inland Empire Chapter of the California Association of Mortgage Bankers.

Verily I say to you that the next generation of Americans will look back on the current generation of financially inept, I-want-to-have-it-nows with utter contempt and disdain.

How can there not be a generation war in the United States of America between those that played the system and those left with the bill?

It seems inevitable to me.

If I'm between the ages of 20 and 45 right now, my degree of confidence that the next generation of Americans will look at kindly at me and then the state of the American nation and then sufficiently fund of our elderly pet projects like, oh, social security - well, it's just about null.

When today's children in America finally grow up, man, they are going to be majorly pissed at mom and dad, grandma and grandpa for their lack of vision and for messing up this country royally.