June 16, 2013

Fed Study: Angeleños really did use houses as ATMs

In the latest installment of Formerly Middle Class People Deserved To Lose All Their Money, the Wall Street Journal informs us of a study from the Federal Reserve Board’s Steven Laufer. Not too surprisingly, the paper says these longer-term FBs would have been fine if they hadn’t kept taking equity out of their houses just because they could.

Study: How Using Homes as ATMs Fueled Foreclosures

130614-la-townhomesBy Nick Timiraos, The Wall Street Journal
May 28, 2013, 11:58 AM

The conventional wisdom of the housing crisis goes something like this: Too many people bought homes as the housing bubble inflated. Some were unlucky in their timing, while others overextended themselves by putting too little money down. All of these top-of-the-market purchases led to an explosion of foreclosures once home prices dropped sharply and the economy hit the skids.

Amid the current debate about whether a new bubble is forming in the housing market, it’s worth looking at a paper published in March that challenges conventional wisdom by showing that a significant share of foreclosures came from people who bought their homes before 2004.

So why did so many people who bought their homes before the housing bubble fully inflated end up losing their homes anyway?

20130614-la-freemoneyThe paper concludes that if only California had laws like Texas (which forbids borrowing more than 80% of home equity), not only would fewer FBs gotten F’ed, but homeowners (as opposed to homedebtors) would have had more money to spend because houses wouldn’t have cost so much.

Which is ridiculous, because why do you think these FBs borrowed all that equity in the first place? They sure as heck didn’t invest it in infrastructure.  Heck, no.  They spent it.  We’re cheered to see Larry Roberts (OC Housing News) agrees with us.

Then again, that study also says people defaulted because (among other reasons) they assumed their home prices would keep going down. This shows why the study was in Los Angeles instead of the Real Bay Area. Everyone knows in the RBA, prices only go up.

There’s also a very important reveal in the paper. Laufer’s model shows that home prices would be 14% lower if all that equity extraction hadn’t taken place. And as we know, the Real Estate industry will simply not allow that to happen.  They might as well throw away tax-deductibility of mortgage interest too.

Comments (4) -- Posted by: madhaus @ 5:02 am






May 12, 2013

How do we know SF Bay Area Real Estate is in a Bubble? Part 712

In today’s installment of Yes There Is Too a Bay Area Bubble 4.0, we present a few signs what it looks like when a region is not in a real estate bubble.  Notice that there is nothing like this in the Real Bay Area.  When we have a recession here, homeowners simply don’t list their properties at a loss from typical RBA overbidding.

Not so in the “Gateway to the Delta.”  Remember, you can’t spell Solano County without S-O-L.  Thanks very much to Burbed reader Tom Paine for shooting us this article.

9 Worst Recession Ghost Towns in America

The Fiscal Times (Slideshow)

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Rio Vista, CA

Once envisioned as an 855-home suburb with families populating the grid of freshly paved streets and sidewalks, now the only life you’ll see in this desert development are cows and eucalyptus shrubs. Thirteen abandoned model homes lie clustered in the center of the development, and streets like “Serenity Drive” stretch on past empty dirt lots into the barren distance. Construction was halted in November 2008 when developer Shea Homes abandoned the project.

Photo: Webecoist.com

These three photos below are from that link as well.  Truly stunning, spooky, and sad, these would make great material for Edgar Martins.

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Be sure to check out this older story from the Chronicle on this unsuccessful development.

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20130511-recession-riovista-statsThere’s more of the death of this development’s boosterism on the Rio Vista Wikipedia page.  The Census data for 2007 predicted the city’s population of 7,800 would swell to 20,000 by the year 2020.  The 2010 Census update mentions no such expected population surge.  Meanwhile, population dropped to 7,300.

This charming graph, courtesy of Zillow, gives you an idea of just what a “recovery” looks like far from the Real Bay Area. This shows the median sale price per square foot over the past ten years.

There are photos of other places on both sites further from exurban Bay Area.  California City (Not Anywhere Near the Bay Area, Hell, Not Even in Northern California) has huge areas that were platted out but never built on.

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Just wait until you get to the Florida pictures!

Comments (5) -- Posted by: madhaus @ 5:04 am

May 6, 2012

12 “facts” that “may” “surprise” you about the “housing bust”

While the parent company of the Wall Street Journal, News Corporation, is getting a proper punching across the pond, let’s see how Rupert Murdoch’s business-as-usual cheerleader reports on the causes of The Second Great Depression.

Twelve Facts That May Surprise You About the Housing Bust

By Nick Timiraos, The Wall Street Journal, May 4, 2012

120505-foreclosure-sign-wsjWhat if the conventional wisdom about the mortgage crisis is all wrong?

That’s the implication of a new paper from economists at the Federal Reserve Banks of Atlanta and Boston that’s bound to spark debate because, if their premises are correct, it sharply undercuts the justification for much of the new regulation that’s been erected over the past two years.

Three economists, Christopher Foote,Kristopher Gerardi, and Paul Willen, present two narratives of the financial crisis in trying to answer why so many people made so many dumb decisions.

The first view is that the financial crisis was an “inside job” where various industry players, from the mortgage lenders to mortgage traders, took advantage of unsophisticated rubes, from homeowners to mortgage investors.

They largely discard that view for a second one—the “bubble theory” where delusional attitudes about home prices, not distorted incentives, fueled poor decision making.

120505-mcmansion-broken-windowsThis is the Wall Street Journal.  Does anyone think for a New York minute that they’d get behind the Inside Job view of the housing debacle?  Of course not.  It was obviously the fault of strawberry pickers, the Community Redevelopment Act of 1977, Barney Frank, and undeserving minorities who never should have been allowed to own property ever ever ever.  (Uppity rabble might then expect the vote, too.)

And as for the origin of this paper?  The Boston Federal Reserve?  Everyone working there is hoping to get hired by one of those market manipulators, so don’t look for their facts to bear much relation to what really happened.

Here’s the authors’ abstract of the excuse for wrecking the whole economy report:

This paper presents 12 facts about the mortgage market. The authors argue that the facts refute the popular story that the crisis resulted from financial industry insiders deceiving uninformed mortgage borrowers and investors. Instead, they argue that borrowers and investors made decisions that were rational and logical given their ex post overly optimistic beliefs about house prices. The authors then show that neither institutional features of the mortgage market nor financial innovations are any more likely to explain those distorted beliefs than they are to explain the Dutch tulip bubble 400 years ago. Economists should acknowledge the limits of our understanding of asset price bubbles and design policies accordingly.

Translation: if we blame the meltdown on irrational exuberance, then none of our friends will have to give up their bonuses. Or their freedom.

120505-fed-theoriesThe above diagram is from the research paper, and it neatly blames the victims for believing housing prices only go up.  Notice who’s missing from the picture?  Realtards.  You know, the people who tell you that housing prices only go up.

Fact 1: Resets of adjustable-rate mortgages did not cause the foreclosure crisis.

120505-mortgage-ratesBanks weren’t wrong for issuing adjustable rate loans, borrowers are the problem for having crap credit.  Bad credit meant those borrowers could have an adjustable loan or remain renters. 

Hey, what do you expect when you loan to a bunch of deadbeats?

We’ve got 11 more of these delightful “facts” waiting for you after the break.

(more…)

Comments (16) -- Posted by: madhaus @ 5:15 am

November 12, 2011

Edgar Martins, Artist or Real Estate Professional?

A while back, we featured this home with WYSIWYG photography that didn’t pretty up a thing.  Remember this place in East San Jose with the really inspired photography (if by inspired I really meant WTF)?

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This was the home where most of the photos were of the floor and the bottom third of the walls.  At the time I said that the agent was a misunderstood artist, and the opposite of Edgar Martins.  You were probably imagewondering who Edgar Martins was.  Today, you’re going to find out why this Portuguese-born Macau-raised fine-arts photographer is just like a realtard.

Edgar Martins was commissioned in 2008 for a very high-profile New York Times Magazine photo essay on the physical results of the mortgage meltdown.  There was some resentment from American photographers over this gig being given to a European, but Martins certainly had a gift for the compelling image.

Then someone worked out why they were so intriguing.  His photos weren’t what he claimed they were.

imageMartins has always said that he didn’t do any post-production of his work at all, that there was no digital manipulation. Looking at his work now, it’s screamingly obvious everything was mirrored, cloned, and shopped out the yinyang. For years all the fine arts types believed him until Adam Gurno (unixrat) on MetaFilter called shenanigans, and as a result, the New York Times yanked his photo essay.

Martins’ response was of course his stuff is manipulated, you stupid idiots. That was the whole POINT, and none of you saw it because I told you it wasn’t there, you ignorant fools.

To be honest, he said the above more like this:

This work explores the concept of ‘home’ as an idea and a form, and summons a disquieting conjunction of reality, hyper-reality, fantasy and fiction.

And he justifies lying to his fans, his clients, his curators, and his employers with this PoMo putrescence:

“It is my view that there was a clear misunderstanding concerning the values and rights associated to the creative process which made a renown publication like The New York Times Magazine, commission a fine-artist, such as myself, to depict a very specific view of reality without taking all the necessary measures to ensure that I was aware of its journalistic parameters and limits. On the other hand I did not see these as a valid boundary. . . . Whilst I welcome some of the debate that is taking place, I did not envisage that it would be mostly centered on polarities such as ethical/unethical, right/wrong, real/unreal.”

imageYou see, that’s what selling homes is all about. It’s telling people there’s no downside, there’s no time to lose, there’s nothing that can go wrong as long as you BUY NOW. The TIME to BUY is NOW.

And we should have known from the get-go that they’re ALL lying.  And if we didn’t, then being tricked out of hundreds of thousands of dollars is just part of the context of representational imagery and the insubstantiality of happiness from material things.  Let’s not debate pointless polarities such as true/false, positive/negative, gain/loss, permitted/unpermitted, yours/mine, or signed/forged.

imageI do recommend you look at his “This is Not a House” set of photos on his website, and his photography book of the same title has just been released.  Note there is no more bluster about his images being unprocessed or unaltered.  Now “his interest is in summoning a disquieting conjunction of realism and fiction by ‘cutting into the real’.”

imageThe book description for This is Not a House also says it was a commission for the NYT, but neglects to mention his rather public firing for misrepresenting his artistic process.  As fine art critique of bubble building and bust, it is indeed powerful stuff. Most of it also looks shopped. I can tell by the pixels.

And as realtard speak, it’s obvious fiction stubbornly insisting it’s 100% factual.  Home prices never go down!  Yes it’s affordable!  Buy now or be priced out forever!  The rules of the market don’t apply here!  The TIME to BUY is NOW.

Comments (6) -- Posted by: madhaus @ 5:00 am

June 6, 2009

Busted: Life Inside the Great Mortgage Meltdown

Busted: Life Inside the Great Mortgage Meltdown

The fiasco that sank millions of Americans, including one journalist, who thought he knew better. A veteran New York Times economics reporter, Edmund L. Andrews was intimately aware of the dangers posed by easy mortgages from fast-buck lenders. But, eager to buy a home and start a new life, he gave in to temptation and began a surreal adventure into the mortgage mayhem that nearly wrecked our economy. Busted weaves together the author’s own ride to the edge of bankruptcy with the tragicomic stories of his lenders, the Wall Street pros behind them, and the policymakers in Washington who were oblivious until it was too late. The story takes Andrews to the offices of Alan Greenspan, the mansions of subprime-mortgage millionaires in southern California, a despondent deal makers’ convention in Las Vegas, and Wall Street. Rich with on-the-ground reporting, Busted is a darkly humorous exploration of the cynicism and self-destructive judgment that led to America’s biggest economic calamity in generations.

It’s Saturday and that means it is time for Burbed’s book of the week. This week I selected this book because I think it is a must read. The reviews that is. You must read the reviews. And buy the book.

The reviews slam this book for being incomplete.

The fact is that this book highlights the pitfalls of buying real estate… in places that are not the Real Bay Area.

It serves this elitest, New York Times (which is no match for our SF Chronicle, San Jose Mercury News, or Mountain View Voice btw) writer to end up being financially wrecked by not buying in a place where real estate values double every 10 years on average.

Tough luck dude. Better start reading start reading this blog instead!

Comments (6) -- Posted by: burbed @ 5:17 am

September 22, 2006

Home Sales Dropping | The Onion

Time for some Friday fun!

Home Sales Dropping | The Onion – America’s Finest News Source
Home Sales Dropping

September 20, 2006 | Issue 42•38

For the third straight month, sales on preexisting homes dropped, leading realtors to call it a “buyer’s market.” Here are some strategies sellers are using to entice buyers:

* Dropping price by 50 bucks
* Carrying around wad of money; acting like owning this house got them that money
* Pointing out dishwasher several times
* Explaining to potential buyers how fulfilling it is to make mortgage payment on time
* Telling long, touching story about how grandmother needs $312,500 for kidney operation
* Letting third blouse button go
* Drowning out sound of noisy furnace with soulful vocals of Michael McDonald
* Reassuring buyers that people purchase things they can’t afford all the time

Click here to post a comment -- Posted by: burbed @ 6:54 am

September 17, 2006

As seen in Cupertino…

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I think there are some condos for sale here. Just remember, the places here used to rent for $2550 a month for a 2br – and now some of them are listed at $829,000.

Click here to post a comment -- Posted by: burbed @ 1:12 pm

September 8, 2006

"Silicon Valley Homes Lose $50,000 In Two Months"

Realty Times – Real Estate News and Advice
Silicon Valley Homes Lose $50,000 In Two Months
by Broderick Perkins

Silicon Valley’s median home price dropped 6.1 percent in the past two months, the largest such decline in three years, but when it comes to the dollar amount, the $50,000 loss over the two month period was the largest ever.

Granted, percentage-wise, a $50,000 drop from $800,000 is the same as a $25,000 drop from $400,000, but the dollar figures reveals that the higher prices go, the more room that have to fall.

The median price for single-family home prices came in at $770,000 in August, down $35,000 from July, which reflected a $15,000 drop from June, according to Richard Calhoun, real estate broker with Creekside Realty in San Jose and publisher of the Bay Area Real Estate Market Newsletter.

This can be explained by only one thing: they’ve started making more land in Silicon Vallley.

Click here to post a comment -- Posted by: burbed @ 8:46 am

August 26, 2006

*NEWSFLASH*: "Reality Check" Presentation from Realtors!

A number of blogs are linking to this slide deck by David Lereah, the Chief Economist for the National Association of REALTORS. I found the link through this blog: Paper Money – A US Real Estate Bubble Blog: Lereah Mea Culpa?

Here are some key slides that you may be interested in:

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Go download the deck to see all 60 slides!
Fortunately for us, none of these things will apply – Silicon Valley is special ;)

Click here to post a comment -- Posted by: burbed @ 5:44 am