Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Thursday, June 29, 2006

Housing Jumps the Shark

I love that term Jumping the Shark. For anyone who hasn't heard of it before, you can find the definition here. It seems that more and more often the MSM seems to be jumping on the falling house price bandwagon. Some articles do hedge their bets a little by quoting a bubble..if it exists....sort of like my old Italian Nona using her evil eye protection, but the B-word is out there loud and proud.
On my way to the Sonoma Market for my regular shopping this afternoon my husband pointed out this article in the Sacramento Bee.

Study Says Area Home Prices At Risk of Falling
If you've got one of those mutant loans you're in for a bumpy ride according to the study.

In all, eight of the 13 riskiest U.S. markets were in California; the rest were in the New York-to-Boston corridor. All have seen homes appreciate greatly in recent years, far exceeding typical gains of 4 percent to 6 percent yearly.

Officials at PMI, which provides mortgage insurance to buyers making less than 20 percent down payments, refused to speculate about how far prices could fall or make projections beyond two years.

In other words quit calling us. We can't help. What are we mind readers???
Of course Bernankes' raising on the interest rates isn't helping the plummet

Higher rates will continue to put downward pressure on home prices by reducing the number of buyers, said Jeannine Cataldi, senior economist at Global Insight, a business forecasting firm.

Cataldi said despite rate hikes and her firm's 53 percent overvaluation calculation for the Sacramento market, she sees a period of "minimum growth or no growth" in the region's home prices, instead of a crash.

Milner and Cataldi declined to speculate how long it will take for local incomes to catch up to housing prices and spur the market. But one Sacramento contractor believes the area could see home values stagnate for some time.

Over at MSNBC they're using the F-word. Flipper. No longer King orf the sea, or the housing market. It's Farewell and Goodbye
Now that article was written about 2 weeks ago before the rise in interest rates. The part I found particularly amusing was something that reminded me of the old saw.."Remember, they're not making anymore land!" Oh. Really. Then why is this happening?

With land prices falling in some areas, Hovnanian has walked away from about $5.6 million of deposits on land parcels it had options to buy, lopping 5 cents a share off the company’s second-quarter earnings.

Buyers in some cooling markets know they’re in the driver’s seat.

I wouldn't exactly say that the smart buyers are already in the drivers seat. More like they're kicking the tires. The Road Test and the Independent Mechanics Check-Up hasn't even begun yet. This baby's not leaving the lot for a good 18 months at least.

Wednesday, June 28, 2006

Geeze, I Rode This RE Elevator All The Way Up. If I Jump Reeeally High Before It Crashes I'll Be Ok

Property values bracing for a fall
Home prices across Bay Area are likely to drop, study says

Homeowners across most of the Bay Area stand a 55 percent or greater chance that their property values will slip in the next two years, according to a quarterly study by a mortgage insurer.
That's a headline story in today's SF Gate. Does the public believe it? Afraid not. When polled a little further down in the story about 49% of those asked didn't think anything of the kind would happen.Not here in the Bay Area. Not here in the home of Twinkle Dust and Tinkerbell. Sure.

"Still, many industry insiders remain optimistic that the market will remain in positive territory.

"The reason prices go down is because job markets are hit," said Avram Goldman, president of Coldwell Banker of Northern California. "The market is transitioning -- but we've been in such a frenzied sellers' market for so long, people don't know what a regular market is like."

People don't know what a regular market is. People who just fell off the turnip truck that is...though of course this being Sonoma, maybe I should say the grape wagon. There are a whole group of buyers out there who don't remember the early ninties, or even further back to the early eighties. Either they were too young to be in the housing market, or they were busy working their first jobs, or going to school and renting to pay much attention to those who got their asses caught in the ringer that time. It's their turn in the barrel now. Of course the article goes on to mention how "creative" the loan industry is being, helping folks into 40 and 50 year mortgages trying to make things "affordable". TRhat to me is the same as clothing manufacturers who run the sizes up as high as say 20, then start all over again, at 2,4, 6 etc hoping people won't notice how big their pants are getting. "Hey, I'm just a 2 shoot me some more of that there pie" Maybe 49 and 50 year mortages are just part of the changing American size world. Extra large toilet seats, jumbo coffins, and great big fat mortgages. If you need any of them you might have a problem worth looking into.

Meanwhile crusing around Sonoma keeping my eyes and ears open. We were at dinner last night in one of our more popular watering holes seated near what turned out to be two RE women. One kept chanting to the other, "It's a Buyers market, it's a Buyers market, it's a Buyers market!" I guess those are todays talking points.

One final thing, I'd like to throw out there is the subject of something I've been reading about which is ReConveyance Scams. They seem to be particularly popular here in Northern Ca. As per the California Mortgage Law Blog:

Beware "Mortgage Elimination" Scams

Several of our clients have been harmed by "mortgage elimination" scams being promoted nationwide by two Northern California men, D. Scott Heineman and Kurt F. Johnson. The scheme has been marketed through Internet discussion groups,, e-mail, conference calls, conventions and dozens of web sites which claim that the entire federal banking and monetary systems are illegitimate. For a fee of between $1,000 and $3,000, promoters claim that they can eliminate a mortgage through an elaborate process by which they ultimately prepare and record fraudulent documents that purportedly release the lender's security interest. In some cases, they then obtain new mortgage loans and receive as much as 50% of the loan proceeds. Among the business names associated with scheme are Capital Creation Resource, The Dorean Group, Oxford Trust, Universal Trust and DTE Financial.

Usually, lenders don't discover the fraudulent reconveyance documents until several months later when their borrowers stop making payments and they try to start foreclosure. Litigation is then necessary to cancel the fraudulent reconveyance documents so that lenders can proceed with foreclosure.

State and federal law enforcement investigations led to Heineman's arrest on May 28, 2005 and to Johnson's arrest on July 21, 2005. Both men are facing felony charges in Salt Lake City, UT, and they have also been charged with wire fraud, bank fraud, mail fraud and money laundering in the U.S. District Court for the Northern District of California in San Francisco where U.S. District Court Judge William Alsup has recently issued a preliminary injunction prohibiting the defendants from further violating 18 U.S.C. § 1341 (Mail Fraud), 18 U.S.C. § 1343 (Wire Fraud), and 18 U.S.C. § 1344 (Bank Fraud) through their “mortgage elimination” program, and from alienating or disposing of property obtained as a result of said violations. However, acolytes of Heineman and Johnson are still operating many of the same websites that promote their "mortgage-elimination" scam despite these recent law enforcement actions.

You can obtain more information from the Sacramento Bee which has been following this story since earlier this year and from this story originally published by a reporter for Inman News.

I've been wondering how much of this re-conveyance junk is floating around town here. Sweetheart deals between agents and flippers. How much money is being sucked out of the local market and how much of that is partly responsible for the jacked up prices.

Speaking of jacked, my ex neighbor meanwhile is preparing to move into the new digs, which of course they're planning on flipping in 2 years. They paid over 650k for this dump, they're going to most likely put in another 50 to 100k in fixings I just don't see what's gonna happen in two years. My guess a RE picnic where they're bringing a basket of money to the closing, or the Sheriff at the door. They actually were at our house quoting Donald Trump to us this last week. Telling us how things were going up up up and Mr. Trump says so!! So there. Oh, by the way Donald Trump sent me an invitation to meet a group of actual live millionaires, and have a complimentary lunch, and attend a Trump Strategies for Real Estate seminar!! It was personally addressed to me...Resident. Ya gotta love The Donald.

Tuesday, June 20, 2006

Move Over Mr. Landlord and Mr. Flipper...Make Room for Mr. Foreclosure Bootcamp!

And no, I am not making this stuff up. Fiction is my business but here Truth is far far stranger. Mark Maupin, the creator of Mr. Lease/Option has come up with a new DVD, of course how his target audience is going to pay for it is another matter.

"Mark Maupin offers Foreclosure Bootcamp on DVD
( EMAILWIRE.COM, June 09, 2006 ) Livonia, MI -- Real estate expert, Mark Maupin, aka Mr. Lease Option, is now offering the highlights from his Foreclosure Bootcamp, presented earlier this year, on video DVD. The set of four DVDs presents a six-hour distillation of the workshop that peels back the myths and mysteries about what really goes on when a property slips into the foreclosure process. It also includes a bonus DVD containing the entire Powerpoint presentation.

Mr. Maupin has studied and profited from the foreclosure process for many years. The recent workshop was well received and he is very excited to be able to offer the DVD version to those who were unable to attend. He recently told an audience, Our new DVD set is designed for those who missed the learning experience about how to tap the foreclosure market for real estate investment.

Mr. Maupin also knows about foreclosure from personal experience and he isnt shy about sharing his own experiences. Nor were some of the workshop participants who share their own frustrating and sometime heart-wrenching stories. He went on to say, The DVDs also contain valuable information for those who might find themselves in a foreclosure situation it is an opportunity to learn the ins and outs of the foreclosure experience and perhaps a way to remedy your own situation.

Specifically, the DVD set covers:

· Terminology
· Public Records
· Order of Priority
· Lien Position
· How Bankruptcy affects foreclosure
· Foreclosure Process
· Legal News
· Negotiating Foreclosures
· Buying Foreclosures

Mr. Maupins considerable knowledge of real estate covers every aspect from marketing and finance to construction and remodeling. His grasp of the potential of real estate, has enabled him to develop innovative marketing and business concepts for his organization. As one of the founders of the National Real Estate Network (, he continues to further his education and learning whenever possible and encourages other investors to so.

You can obtain more information at Mr. Maupins website:"

Of course when I tried the url , this is what I got.

Bad Request (Invalid Hostname)

I was curious about just who Mark Maupin aka Mr. Lease Option was..well, I found out from this Detroit Free Press article

"RISKY BUSINESS: Wheeler-dealer's pitches leave some empty-handed

He's bankrupt; novices regret lending him cash


He usually has a rumpled look as he scouts Detroit and its suburbs in his car, always searching for his next real estate deal, a cell phone ringing constantly in his hand.

Wallets get fat from donated real estate

Behind Mark Maupin's unassuming demeanor, however, is a man with a high-profile reputation -- not all good -- in the real estate game.

He teaches real estate seminars for investors.

He dispenses advice through "Mark's Corner," a Web column at www .detroitinvest menthomes .com, which touts properties for sale in Michigan.

Maupin has even figured out creative ways to make money in the charity business, working with associates to establish a donation-for-tax-deduction company known as Donate Real Estate.

Over the years, he has persuaded dozens of metro Detroiters to lend him money to finance real estate deals. But now, some accuse Maupin of taking advantage of them.

"He's a master at selling hope," said Jim Olson of Lathrup Village, who lent money to Maupin, thinking it would be used to buy and fix a Pontiac home. In reality, Olson said, the house wound up on a city demolition list and he does not believe Maupin ever owned it.

Today, Maupin is in bankruptcy. And state and federal authorities are investigating Donate Real Estate, a state-licensed fund-raiser that Maupin helped form six years ago to sell properties on behalf of charities.

Maupin declined through representatives to be interviewed. In a letter to the Free Press, Donate Real Estate lawyer Richard White said Maupin had probably invested alone or with partners in thousands of "bottom of heap" properties.

"Given the risky nature of this type of investment, profits were not earned on every investment," White said. "In fact, some were losses. Not everyone he has worked" with "has been happy with the results. Sometimes there was litigation based on these disappointments."

Maupin, whose full name is Ralph Marcus Maupin Jr., filed for bankruptcy protection last September. He listed debts of $2.44 million, most unsecured. He also claimed assets of $496,970 and an interest in 17 companies. He lives in a $330,000 Highland Township home and told creditors he drives a 2000 Chevy Lumina.

In a Jan. 23 deposition in the bankruptcy case, Maupin testified that he couldn't recall much about his financial or real estate dealings -- not even what he earned last year.

"You don't have any idea?" he was asked.

The answer: "No, not off the top of my head."

Maupin, when asked about $365,000 in loans from one creditor, said he couldn't remember what he bought with the money.

He acknowledged that he failed, in another instance, to repay $140,000 in loans because some of the properties he bought were demolished.

Maupin has claimed that he has purchased more than 2,600 single-family homes, along with multifamily, commercial and industrial properties in the United States and internationally. At his peak, Maupin said, he sold 80 houses a month.

Maupin also said his decision to sell 80 properties a month led him into bankruptcy.

In one of his Mark's Corner commentaries, Maupin described how a single event shaped him:

In kindergarten, he was the class fire marshal. One day, the alarm sounded. Maupin said he pulled "a retarded girl named Marsha" off the toilet in an effort to get everyone out of the room. "There was a mess made, and the teacher screamed at me," he wrote on April 16.

From that day on, Maupin said, he decided that he would be careful not to be the official person in charge, but rather, the person who would come in at the last minute and "save the day."

Maupin said of himself in the column: "What I can be counted on for is to make a difference to humanity, to charities, and to real estate investors discovering their gifts. . . ."

Novice real estate investors who've done business with Maupin described him quite differently.

They said they met Maupin at seminars or meetings of the Real Estate Investors Association of Oakland, a networking group that gets together the second Thursday of the month at a Knights of Columbus Hall in Clawson.

Some investors said they were taken in after hearing Maupin speak.

Ramesh Patel, an engineer who lives in White Lake Township, said he met Maupin at an investors association meeting and thought Maupin was knowledgeable about the business.

At first, he lent Maupin money, with interest, and got it back. He said he began to trust Maupin and didn't check to make sure his interests were protected in loans he was making to Maupin to buy and restore eight to 10 houses in Detroit, Pontiac and Auburn Hills.

"Once you put the trust in, you don't go into details," Patel said.

After the first year of their partnership, Patel said, things started to sour. Maupin reassured Patel that the situation would get better, telling him, "I'll get you the money, I'll get you the money," Patel said.

According to his bankruptcy petition, Maupin owes Patel $316,927. Patel said most of the money he is owed is interest.

Jim Olson has wrangled with Maupin for three years over business dealings and sued him in Oakland County in November 2002.

Olson, who also met Maupin at an investors association meeting, said he was persuaded to lend Maupin money after Maupin told him he had "many more deals" than he had money.

Olson's company, Prairie & Pacific Group, lent Maupin $27,700 in November 2000 to fix a tattered house in Pontiac. Maupin was supposed to repay him in six weeks, after he fixed the house and resold it, Olson said.

Instead, Maupin used the money to finance other deals, Olson said, and didn't repay Prairie & Pacific.

Maupin then asked Olson for more money -- and Olson said he paid $12,595 directly to the contractor who was supposed to be renovating the house. Maupin again promised to repay him, with interest, Olson said.

But not all of the work was done, and Olson said he wasn't paid. The city condemned the house and tore it down, Olson said.

In the meantime, one of Maupin's companies mortgaged the property to someone else -- for $5,000, according to court and property records. And, according to Olson's suit, Maupin never even owned the house; it was actually owned by another company connected to Maupin's wife.

On Dec. 18, 2002, Oakland County Circuit Judge Edward Sosnick granted Olson a $54,294.66 judgment against Maupin. Sosnick also dismissed a lawsuit that Maupin had filed against Prairie & Pacific.

"For everyone who gets involved with him, the damage can be unbelievable," Olson said. "It's not only in the money, but the stomach acid, the feeling of hopelessness, the attorneys -- they have to get paid, and you get a bill every 30 days.

"All he wants is a little piece of what you've got," Olson said of Maupin. "Once he gets your money, it's over. The deals all come to a screeching halt."

Contact JENNIFER DIXON at 313-223-4410 or

Meanwhile, back in the reality based community, one would think sanity would prevail, wouldn't one?

What are they saying over at Market Watch? .....not so much Foreclosures are...what? Down!? No wonder guys like Maupin can still squeeze a buck out of the suckers.

Elsewhere in FBer Land.....
You know all those Turkey Hotlines that are open around Thanksgiving to help people cook their bird? Well, think a different kind of turkey, who's getting their goose cooked but good. Forget about dialing for American Idol, they're burning up the phone lines in Ohio for Foreclosure Help

"More than 1,500 Ohioans facing foreclosure called a new statewide hot line in its first six weeks of existence, according to the agency sponsoring the new counseling service.
Nearly one-fourth -- 23 percent -- of the homeowners were calling from area codes in Northeast Ohio, statistics show."

Wonder how frothy things have been up in that corner of the Heartland the last few years?

Deep in the heart of Texas Foreclosures are up too

"(CBS 11 News) NORTH TEXAS The number of residential foreclosures is up in north Texas. Comparing to this time last year foreclosures are up 44 percent and experts do not see a drop in sight."

And this lightbulb that went off in the head of George Roddy of the Foreclosure Listing Service

"Lots of people that are buying these houses certainly can’t afford them,” said George Roddy, Foreclosure Listing Service."

The Pittsburgh Trib Has this Headline
Layoffs, debt boost foreclosures
the article is here

The Pittsburgh Post describes the exotic mortgages that so many have fallen for as though they were exotic beasts
Hybrid adjustable mortgages stalk homeowners
Next time your local neighborhood Realtor tells you that things are going up up up...just say yes, up on the auction block!

Sunday, June 18, 2006

Move Over Sims....Meet Mr. Landlord and Mr. Flipper!

Just when you thought the world of flippping couldn't get any weirder, two new products have come to this bloggers attention.
the Mr. Landlord advisor and his companion. Mr. Flipper, and I'm not talking dolphins here. I'm talking Mr. Flipper and Mr. Landlord opposed to amateur maybe? Sure, why wouldn't I trust my hard earned ..oops! most likely fradulently borrowed bucks to a freaking computer program.
Some quotes from some satisfied FBers...

"I'm a mortgage broker & real estate investor, and this software is exactly what I've been looking for. Your software will help me evaluate properties by showing me if I have a positive or negative cash flow."

Charles, San Diego, CA

Gee wonder how Charles in SD is doing now. Wonder if the program is gonna help him move all those vacant condos he bought with a Neg?AM IO loan? Ask him. He's probably up on the roof of one of those vacant towers with a rifle

"In my research, programs like this cost well over a hundred dollars so although I was impressed with the price, I was also skeptical about why it was so cheap. I downloaded the software to see how functional, easy to use and well written it was. Hours later (I became quite engrossed!), I was so impressed that I contacted the creator, negotiated a discount special for my newsletter subscribers and decided to endorse it as the product of the month."

Shannyn Flory
WayPoint Management Group Boise, ID

And of course who wouldn't trust some one who doesn't even know how to spell Shannon right.
Here's one of the cute little PDFS they include in the package. I'll bet those flippers wish these were the stats they were seeing every month instead of reality.


Just saw this article in Realty Times, so you know it's gotta be true! It seems that now that the horse is out of the RE barn, it's time to pass some new Anti-Flipper Laws. ain't that always the way it goes?!
Often the end purchaser of the flipped property was not financially qualified, and used fraudulent income, employment and assets information to obtain the FHA loan. Then the buyer quickly defaulted, leaving FHA with insurance losses and a house that was worth nowhere near its appraisal valuation. The flipper, meanwhile, pocketed all the sales proceeds financed with the FHA mortgage.

Hey, why change the rules in the middle of the game? Oh, it's not the middle of the game? It's the end of the game? As a matter of fact the curtain's down, and the FBer has sung his/her last encore and left the building..(to the bank). Of course, now's the time to get serious with these fraudulent loans. Sure thing dude. Mos def.

And speaking of weird and strange financing in our little town. My ex-neighbor, as I've commented before, closed on his over-priced sh**box. So we were invited to join in a little celebration. Champagne and crow. I sort of felt like the murderer who watches the victims funeral from across the street, but then I remembered, we warned him and had nothing to do with this toxic paper. As a matter if fact we'd heard just two days before that there were "problems" with the lender. I'm sure there were. Anyone looking at the overall picture there would surely have some problems, but in the end insanity triumphed and the loan was granted.

There was much glee and toasting by the principals in this enterprise. I asked how soon he'd be moving in and was told that they couldn't move in yet, as it wasn't quite "livable". Only in Sonoma could one go into hock for almost 700k and not be "livable". The Flippers were also driving a brand new car, no wonder there were "problems" with the lender. The evening ended with our neighbor leaning over to my husband in a celebratory glow and moaning, "ooooooh, we're really in debt now!"
To bad those new laws seem to be too little and far too late.

Thursday, June 15, 2006

When is Beige, Not Soothing?

Hey kids, the new Beige Book is out and RE received a big kapowie right on the snoot. For anyone who doesn't know, the Beige Book is not Martha Stewarts' latest creation , but rather a report posted by the Federal Reserve on the state of the nations' economy. Of course, the thing that my eager eyes sought out quickly was, what was up with Real Estate. Not so much according to the report compilers.
Construction and Real Estate
Residential real estate markets continued to cool across much of the country--with most Districts reporting slower homebuilding and sales of existing homes. In contrast, commercial real estate activity continued to strengthen in most Districts. A few reports noted concern about too much building.

Gee, d'yah think?

Some softening of the market for existing homes was reported by ten Districts--Chicago, Cleveland, Dallas, Kansas City, Philadelphia, Minneapolis, New York, Richmond, St. Louis, and San Francisco. Dallas and Richmond noted that activity remained quite strong, and Chicago reported slowing from high levels. San Francisco reports hot housing markets in Utah and parts of the Pacific Northwest. Several Districts said sales had weakened for some of the most expensive homes, except in the Dallas District where demand for lower-priced homes "had dipped noticeably." Atlanta reported that residential sales were near year-ago levels in most parts of the District, but that sales weakened and inventories increased in Florida. The Philadelphia District said sales of homes in resort areas have declined sharply. The New York District reports a sharp deceleration in prices in the suburbs around New York City, but a tightening of the Manhattan rental markets.

Homebuilding slowed in most Districts--Chicago, Cleveland, Dallas, Kansas City, New York, Philadelphia, St. Louis, and San Francisco. The New York District reported that some homebuilders in New Jersey are withdrawing from the authorization process and allowing their options to build to expire, noting that increases in fuel and materials costs are pinching profits. Homebuilders in the Atlanta District reported that single-family home construction was near year-ago levels in most parts of the District, except in Florida, where sales slowed. The Atlanta District also reported that Florida condominium sales continued to weaken and several projects were cancelled.

Commercial real estate activity strengthened in nearly all Districts, with mostly positive reports about office markets. Commercial building "improved" in the Cleveland District. Office markets were steady or stronger in the New York City metro area, with scattered signs of accelerating rents. The Philadelphia District said vacancy rates have continued to decline in the region's office markets. The Richmond District reported "fairly strong" office markets. Demand for office space "edged up at a steady pace" in the Dallas District. Office vacancy rates fell and rental rates rose in most major markets in the San Francisco District.

Boston reported that downtown office real estate markets were improving but mostly at the expense of suburban markets. Demand for commercial real estate in the Chicago District continued to expand, but the pace of new commercial construction slowed, according to contacts, who said rents were too low to justify new construction.

The Kansas City District reported that commercial construction remained strong, but received a few reports that high material costs were resulting in the scaling down or postponement of some projects. Construction firms in the Philadelphia District reported that rising costs have caused some construction projects to be rebid or redesigned to reduce the amount of costly materials used. Some builders in the San Francisco District continued to face cost increases and minor project delays as a result of tight availability of skilled workers and selected materials, such as steel and cement.

The Philadelphia District reported growing demand for industrial space and an increase in construction of industrial buildings both on a speculative and build-to-suit basis. Demand for industrial properties was said to be gradually improving in the Dallas District. The Richmond District also reported growth in commercial leasing in the industrial sector.

Contacts in the Boston, Chicago, and Dallas Districts expressed concern about the level of investment in some portions of the real estate market. The Boston District reported that New England--and Boston in particular--continues to attract large volumes of commercial real estate investment, resulting in price increases that require "ambitious assumptions" to justify the transaction. The Dallas District noted growing concern about overbuilding of condominiums and town homes in Dallas, and contacts "fear that it will end badly." A contact in the Chicago District expressed concern about the potential for overbuilding of large distribution centers in Indiana.

What, overbuilding you say?! Harrumph!
Also while all this declining is going on , what about the poor FB that's bought one of those new houses in a new development? Well, it's not just the toxic loan that's out to get him/her. It seems there's a little matter of just how exactly their property tax works
This little item was found in the Austin American Statesman
the interesting part was this:
Central Texas foreclosures decline

The number of homes posted for foreclosure in the Austin area is down 5 percent from the first ten months of 2004, and postings for the Oct. 4 auction were down 2 percent from last October, according to Foreclosure Listing Service. Bastrop County is the only Central Texas county with an increase in year-to-date postings. Its postings are up 12 percent from 2004.

Peter Sajovich, owner of ReMax Austin Advantage, said the robust Austin market, which is driving up home prices, is helping "borrowers who would normally go into foreclosure . . . to try to sell the home and get out."

Although foreclosures have declined in the past year, they are still high by historical standards. So far this year Travis County has had 3,266 houses posted for auction, and Williamson County has had 2,282 postings.

Sajovich says that aggressive lending practices, in which buyers can get loans regardless of credit history or proof of the ability to make payments and with little or no money down, are contributing to foreclosures.

Sometimes property taxes are based on unimproved lot values. When the property is reassessed payments go up, and the homeowners can no longer afford the home, Sajovich says.

Of course in the spirit of all good RE articles the next paragraph dealt with making RE loans easier to get. Yep, bring out the pongee sticks and start digging that pit.
There's lots of good reading out there this morning.
From the The New Jersey Star Ledger..just a taste
Senate President Richard Codey and Assembly Speaker Jo seph Roberts said yesterday they hope to enact laws to ease New Jersey's highest-in-nation property taxes by the end of the year, and will begin that effort with hearings over the summer.

Tuesday, June 13, 2006

The Amateur vs. The Alligator

My money is on the 'gator... Where's yours?

Kiyosaki rubs his hands together and drools just a bit over the coming feast of slow roasted Effed Borrowers.

"All over the U.S. there are stories of a rise in real estate foreclosures. Many people who took those exotic mortgages -- borrowing 125% of home value or choosing adjustable-rate mortgages -- are struggling to make their payments, and some aren't making it."

"The people who are in the most trouble are flippers -- people who aim to buy low and sell high within a short space of time."

"In the coming months, I predict we'll see an increase in people dumping real estate they can't afford. They'll be forced to sell because they'll be eaten alive by a phenomenon known as negative cash flow. Investment properties that you have to feed money to every month are fondly known as alligators -- if you can't afford to feed the property every month, it eats you."

"I know of one so-called real estate investor (and I prefer to call people like him speculators rather than investors) who has three homes he thought he could flip for a profit -- but he priced them too high."

"Now, $7,500 comes out of his pocket every month to feed the negative-cash-flow alligators. The problem is, he and his wife don't earn that much a month. Their three alligators are literally eating them out of house and home, consuming the profits they made from other flips -- and their savings."

"To add more pain to the misery, they still have to pay the capital-gain taxes they made from their previous successful flips. They're toast. The alligators are eating them alive. They can't afford to feed them, and they can't afford to sell them because the prices they paid for these alligators are more than they're worth today."

"And this is only one story -- out of who knows how many. Over the next couple of years, keep your eyes open for some great bargains."

"Now is not the time to be an amateur."

"It's the amateurs who jump in when the market is hot."

"Amateurs who come late to the party --(and you know who you are...) eventually donate their money back to the professionals."

"Many were buying condominiums off the plans, which means the projects were yet to be built, in the hopes that when the homes were completed, they would sell for a tidy profit. The trouble is many of these flippers, lured into the market by stories of people making a huge killing earlier with a similar strategy, are now the ones to be slaughtered."

"If you recall, the same thing happened around the year 2000 as amateurs jumped into the stock market, buying up tech stocks or any IPO with a dot-com after the company name."

"A year ago, I sent out a warning to investors, especially flippers, to cash out quickly. I received a lot of irate e-mails from people who thought I was turning on them. They thought I was spreading bad news."

"Little did they know that by forecasting a real estate downturn, I was spreading good news -- good news for real investors and bad news for amateur alligator wrestlers."

And this just in....

This is quite a shift for our friend Leslie...

Leslie Appleton-Young, chief economist for the California Association of Realtors, said she no longer uses the term ’soft landing’ to describe the state of the housing market, but has yet to found a way to characterize current conditions."

US News & World Reports is having the same conversation, this is a regular talk of the town topic...

“‘The fact that this number of metro areas, representing such a large percent of the total single family market–is extremely overvalued should be a cause for concern,’ said Richard DeKaser, chief economist for National City.”

“Real estate prices eventually correct themselves. And unfortunately for homeowners, it often takes years before home prices start to rise again, especially after a big run up. ‘ the average duration of these adjustments is 3.5 years,’ says DeKaser.”

“So what about families who recently bought into one of these ‘extremely overvalued’ markets in hopes of turning a fast buck? ‘I extend them my deepest sympathies,’ says DeKaser.”

Extremely Overvalued... That's Us.

Official News

The PD reports: "Sonoma County ranked 37th among the 71 metropolitan areas identified as "extremely overvalued" in the first quarter. The study concluded home prices in Sonoma County were 52 percent overvalued, based on historical prices, incomes, population density and mortgage rates."

"More than a third of the homes in the United States are "extremely overvalued" and are concentrated in markets in California and Florida at the greatest risk of falling prices, according to a study issued Monday."

"Napa County was ranked 16th in the study. Home prices in Napa County were 63.5 percent overvalued in the first quarter."

"When prices do fall from overvalued levels, they typically fall by about half the overvaluation, said Richard DeKaser, chief economist at National City Corp. The correction usually takes three and a half years."

"Prices in Sonoma County have leveled as sales have dropped, compared with a year ago.
Economists projected the slowdown. But they have said prices likely would not decline significantly in Sonoma County unless the region was hit by a recession and significant job losses, which is not forecast."

"The study used the most recent sales-price data from the Office of Federal Housing Enterprise Oversight."

'"Price appreciation is slowing but it continues at a historically high rate, boosted by especially strong increases in already overvalued markets," DeKaser said. The most overvalued markets continue to have the highest price appreciation, he said."

"Homes in Naples, Fla., were deemed to be 102 percent overvalued, the economists said. Other highly overvalued markets in California included Salinas, Merced, Stockton, Santa Barbara, Madera and Riverside."

"Among other big cities, Miami was overvalued by 64 percent, Los Angeles by 61 percent, Oakland by 47 percent, San Jose by 44 percent, Nassau and Suffolk counties in New York by 44 percent, and Phoenix by 43 percent."

Thursday, June 08, 2006

To Put it Mildly...We Have Too Much Supply

This bubble crash update brought to you by Marketwatch...

"The slowdown in the housing market is being driven by growing inventories of homes from overbuilding and by speculators leaving the market, Toll Brothers Inc. Chief Executive Robert Toll said Thursday."

'"The housing market is experiencing an oversupply, to put it mildly," Toll said during the luxury-home builder's annual analyst conference."

'"The supply is coming from speculators who bought in 2004 and 2005 who are now sellers, and to make matters worse aren't buyers anymore," he added, noting that many homes built by more aggressive builders also are sitting unsold now."

"As a result, there is uncertainty about the market's direction, and potential buyers are remaining on the sidelines to see how things shake out."

Uncertaintly? Who's uncertain about where this train goes?

'"Since the early 1990s, there hasn't been one straight boom for housing, but instead high market volatility," commented Fred Cooper, Toll's senior vice president of finance. Housing starts have dropped several years during that period, and the Federal Reserve has been raising interest rates partly in response to housing-bubble jitters."

'"We recognize we're in a bumpy time right now in the market," Cooper added."

"So far this quarter, Toll Brothers has repurchased about 1.65 million shares through Wednesday. About a quarter of the firm's shares are held by insiders, executives said."

'"We've been using excess cash flow to repurchase stock, and will continue to opportunistically buy back more," said Joel Rassman, chief financial officer."

Wednesday, June 07, 2006

Buyers Don't Like Over-Priced Crappy Houses

It always throws me off when too many things come up and interrupt my lounging around and research routine. So this news is a bit late...

This past weekend's real estate section in the Sonoma Index Tribune, had another article of some interest by a local realtor.

The topic of the commentary is on finding and keeping buyers, and keeping them happy. Starts off with:

"This should be easy- right? With many qualified buyers in the wings and still excellent interest rates, surely your home will make one of them happy at a price that makes you happy. But if you really want that qualified buyer to stay in the transaction clear through to the closing, it may help to understand a bit more of the stress issues for buyers these days."

(I guess she didn't see Lereah on his knees today groveling to Ben Bernanke while Ben showed him horns.)

David- “‘Experiencing a slowing from a hot market is a good thing because we need a solid housing sector to provide an underlying base to the economy, and slower appreciation will help to preserve long-term affordability,’ said David Lereah, the group’s chief economist.”

“‘But this is a time for the Fed to pause on rate hikes because we have some interest-sensitive housing markets that have become vulnerable,’ he said.”

Ben- “...vowed to combat the recent ‘unwelcome’ pickup in inflation, even as he told an international bankers’ conference that an economic slowdown ’seems now to be underway.’

‘He came right out and said we’re worried about inflation,’ said market analyst Arthur Hogan.” Stocks plunged.

Back to my commentary on the realtor’s commentary....

With all the "many qualified buyers" why have sales dropped so steeply?

And about those interest rates…apparently David Lereah’s concern is of no concern to this realtor. It must be different here. But just for the record the interest rate is of less interest at this time than the price.

The prices are at all time bizarre and bubbly highs. Sonoma really didn't get more valuable in five years. Sonoma became a target for speculation in the last five years with estimates (from a handful of real estate agents) that 30-40% of purchases in the last few years being speculative "investors."

Excess speculation drove the prices to ridiculous heights... One would be better off buying a house for $300k at 15% interest than buying a $600k house for 6% interest. The 15% will come down over time. The 6% will go up over time. Do the math.

Back to the realtor's thoughts....

"First- on the skirts of an overheated, (she got that right) rapidly appreciated market, (she means unsustainable, specuvestor driven bubble market) dismay reigns supreme among most buyers.” (Right, most buyers don't want to pay more for something that isn't really worth more)

“They come looking for a dream home and discover that after paying taxes on the great sale in other parts of California or across the nation, they do not have as much cash as they had expected.”

(wait... here comes my favorite part...) …”AND they really did not realize how universal is the remarkable increase in property values we have seen throughout California in the last few years.”

bwahahahahahaha... good lord! Are you kidding me? This is the lamest shameless appeal begging to legitimize the erroneous bubble prices by calling them UNIVERSAL!!!! bwahahahaha... universal?

Do I really need to say this? The specuvestor craze certainly has hit California, as well as areas all across the country, and prices have reflected the greedy appetites of those foolish enough to jump into the pyramid scheme, however VALUE has not increased, and most certainly there is no universal value appreciation.

She gets a biscuit though for coming up with such a creative assertion and making me laugh out loud.

"Plus many buyers from urban areas have little notion of the added value more land brings to a property. So looking at limited inventory with higher prices than they had imagined, with the continuing possibility of being in a multiple offer scenario on places that do not quite meet the "dream" standards can become very discouraging.”

Translation... people who sold nice houses in areas closer to jobs that pay salaries that perhaps can justify the housing prices, are shocked and disgusted that people in Sonoma with their fixer-upper crapholes with a brown lawn and cracked linoleum, warped walls, dry rot and termites, are pricing their houses, as if everyone wants to live here.

There is no limited inventory situation in Sonoma County, and as far as that multiple offer scenario...
WAKE up honey! You are dreaming again.

This isn't 2003 with specuvestors lining up to outbid each other.

We are in June of 2006 and it’s all over honey.
All Over.

Even A.G. Edwards' analyst Greg Gieber said today: The Soft- Landing Theory is Dead.

Well, it was always dead, but those employed by the real estate/lending/building industries have tried to make that dead bird fly anyway.

It’s dead. Stop playing with it. You killed it.

Just like my cat when he plays with the bird too long and it dies, and no longer creates that fun game where it flies away from him and he catches it again, and he throws it up in the air trying to make it fly again. It’s dead. It is really, really dead.

Back to the realtor commentary:

“Next- in a certain state of desperation after having lost out on several properties, a buyer bids aggressively on a wonderful new listing, determined to the "bride" in this transaction and not just another "bridesmaid" in back-up position. Suddenly they find themselves in a frenzy of paying for a number of relatively expensive inspections. Most buyers understand that this is good money to spend on a property valued at hundreds of thousands of dollars. Still when the tabs pass the $1,000 plus range, it does give a buyer pause.”

Multiple buyers? Not right now sweetheart. Maybe in areas that still have deaf, dumb and blind specuvestors still roaming about... but she is right about what it looks like when buyers start coming to their senses in the middle of a transaction, when they realize they are about to mortgage their souls and pay more than double the cost of renting the same crappy house just for the pleasure of renting it from the bank indefinitely.

"Finally, reports are received noting extensive termite damage, the gutters rusted and leaking, significant dry rot under two of the bathrooms, a faulty electrical system- and that's before they discover the well water has to be treated. It is easy to see panic set in.”

ya think? bwahahahaha... good lord!

"Here is this very expensive property which is now going to cost an additional $25,000 to $50,000- or more- to bring it up to buyers' expectations. Who wouldn't feel discouraged and experience some definite remorse?" You got that right. Talk about a neon sign flashing telling the great big fat fool that they are the great big fat fool. "To add to the devastation, the seller has insisted on having the buyer sign an "As-is" addendum, making it very clear that they do not wish to spend another dollar on the property."

bwahahahahahahahahaha.... the greedy scammers!

Tea almost came out my nose reading that one.

These absurd sellers were taught this behavior by the realtors in the first place, blowing sunshine up their butts- with their cheerleading mantras of:
"everyone wants to live here," "real estate only goes up," "you can't lose," "someone will pay for it, even if it is falling down, because it is different here."

Merde like this has lined quite a few pockets in the last few years.

"The buyer now has several choices: walk away from the deal: (my advice is run... run like wind before you become the biggest fattest fool in the valley, and MV and I have to point and laugh when we walk by your house) close the transaction knowing that large sums of money will be required to bring the home to their standards or approach the seller through the listing agent with a counter proposal for sharing in the "surprise" costs."

"No surprise- none of those choices feel really good. Frequently, the last one will seem the best and taking a deep breath, the buyer says cautiously: 'Do you think they would negotiate on the roof repairs?'"

"The truth is the agent receiving such an inquiry rarely has an answer.” (No kidding) “Even the seller, who was so firm about not participating in any repairs, may be uncertain of what he/she wants to do.”

That’s because they were told their craphole was worth tons of dough simply because it is right here in magical Tinkerbelle blessed Sonoma. They believed their realtor friends who told them this and therefore, they are entitled to their over inflated price and should not actually have to do anything to earn it. It is the thing to do to live like slum renters and make profits like investment bankers. (thank you Dinor)

"Keeping the request clean and simple is the bet way for all parties to determine what position works for them."

Well isn't that diplomatic? Is that a subtle way of telling the buyer not to say that they want nothing to do with this overpriced chithole to the seller's face?

I think it is probably best to go ahead and tell the truth. If you find yourself looking at a house with dry rot, cracked foundation, faulty wiring, rotting floorboards, peeling paint, etc... Just go ahead and grab your midsection, double over while holding the pricing flyer and laugh out loud... no, no...
I love that word... just give a big long GUFFAW
right in front of the realtor, even better if the owner is nearby.
Don't bother putting in an offer. Don't bother even considering undertaking the expensive inspections... you can see what is coming by looking about at the open house... Just GUFFAW... loudly... and bring someone with you, as guffawing is contagious and it will get uproariously funny when multiple lookie loos join in on the fun. I think the realtors and the sellers demanding improper gains will get the point much more effectively this way.

"A buyer is well advised to wait until all reports are received. (nah, don't even bother getting them... try the advice above... much cheaper I promise.)

"Coming to the seller after the pest inspection, then again after the roof inspection and yet again after the contractor's inspection will not sit well."

bwahahahahahaha... At this point the seller is the one who should be embarrassed, and as Dinor says... if the offer you give to a seller doesn't embarrass you, then you are offering too much. This is investment advice. The rule is buy low, and sell high.... It is a rule for a reason. Don't break it.

"Once all the information is in, sit down with your agent and draft an addendum detailing you concerns and making specific requests for participation by the seller. Sellers can participate in the form of a credit back to the buyer in escrow, completing the problematic repair, or adjusting the price."

More investment advice: Always make them adjust the price. You always want the lowest price... buy low... buy low... buy low!

"The form of cooperation that works for one may not work for another, but the idea is to acknowledge that no one really wants the transaction to fall apart for a few thousand dollars."

bwahahahaha.... Translation: The seller, realtor and mortgage broker really, really want your money. Please don't start using your head now.

... and it is NOT just a few thousand dollars. I realize when prices are speculation driven high and above the half million dollar mark... $25,000 and $50,000, and another $100,000 in repairs and renovations may seem like a few thousand... but it is big money that you will OWE.

At these prices you should be seeing a bunch of great big flashing red lights and fire engine sirens going off telling you that this is a BAD IDEA!!! Listen to the sirens and heed the flashing lights. Use the force Luke!

"What is true is that most sellers have a real pride of ownership in the property they are marketing.”

Translation: Sellers are emotionally attached to their property and feel entitled to perverse gains because they have been drinking the "its different here" kool-aid.

Advice to buyers... don't drink the kool-aid. It doesn't always go up, and you really can lose.

"Often it has been their home for a number of years and reports of the deferred maintenance and repairs takes them by surprise."

What? houses need to be maintained? What? they need new roofs and electrical inspections? What do you mean? Like I said… living like renters wanting profits like investment bankers.

"Buyers are living on a thin edge today. Elevated (read: speculation driven highly inflated) prices and uncertain economic times mean that most of them are stretching mightily to make this transfer work. And many sellers are receiving unheard of gains (read: preposterous gains) for their homes.”

“So be a little generous, sellers... pitch in and help make the transaction work if you have a good buyer working hard to stay happy with his/her choice. Remember, you are not the adversary of your buyer. You both want the same thing: a successful transfer of ownership where no one feels "ripped off".”

LOL... well if anyone is buying a chithole in Sonoma for today's prices... they are getting ripped off. Investment reminder: If you are not embarrassed by the offer you make, then you are offering too much.

Now here is some decent advice from the realtor:

"And when all else fails, try a price adjustment! There is little that is sacrosanct about today's prices - and price really does overcome all objections."

Tuesday, June 06, 2006

NAR's Faustian Moment

Marinite brought up in a comment that today being 6/06/06 ...if ever there was a Faustian moment in the making, today is the day.

Personally, speak the devil's name and you give him power and I believe in no such supernatural force. The closest thing to something bedeviled I can think of is oh... a talking head for NAR.

Speaking of Faustian moments... Did y'all hear that NAR is begging the Fed to stop raising rates because of housing market vulnerability?

“The National Association of Realtors on Tuesday lowered its forecast for U.S. home sales in 2006 and called on the Federal Reserve to stop raising interest rates because parts of the housing market are ‘vulnerable.’”

bwahaahhahahaha!!! But I thought there WAS no bubble? I thought we heard the gains in the last 5 years were justifiable because they aren't making any more land, and there is simply not enough housing to meet demand, and everyone wants to live here? And everyone who took out a suicide loan, or lifetime indentured servitude loan, or heaven forbid the negative amortizing take it in the butt loan were fully qualfied and will have no problem making their payments? The lenders researched this! How can there be vulnerability?

“‘Experiencing a slowing from a hot market is a good thing because we need a solid housing sector to provide an underlying base to the economy, and slower appreciation will help to preserve long-term affordability,’ said David Lereah, the group’s chief economist.”

“‘But this is a time for the Fed to pause on rate hikes because we have some interest-sensitive housing markets that have become vulnerable,’ he said.”

But according to that Coldwell Banker Asshat...Rates are still at an all time low. Rates haven't been this low since Kennedy was in the White House. That's what he said. He has been in the business for 25 years. He has researched this!

Why would NAR want to hit the interest rate panic button?

I mean back in the day... in the 80's people had 15% & 18% interest rates. Sheesh... we aren't even anywhere near those numbers for those with qualifying income and good credit. What's the big deal? (insert snide laughter here)

Oh my stars!!!... What's this?... Have prices risen to unsustainable levels? Are they in danger of plummeting because there is no sustainable market that can keep these artifically, specuvestor inflated prices propped up? Good heavens!!! What will become of the realtors?

"The U.S. housing market has been steadily cooling down after a five-year run that shattered sales and construction records. (this is what we call an asset bubble my friends) The market began to slow last year as mortgage rates started to climb."

“‘Historically, home prices rise 1.5 to 2 percentage points faster than the rate of inflation, so the rise we anticipate in existing home prices this year is actually a little above the high end of historic norms,’ Lereah said.”

But here in Sonoma County, housing prices DOUBLED in 5 years time. That certainly is not 1.5% to 2% above inflation.

So the real issue is that many in the real estate, mortgage lending and construction industries are in danger of being out of work if they can't keep selling overpriced chitboxes to the terminally indebted who no longer even want to own a house or ever pay off a mortgage, but just want the pleasure of renting from the bank indefinitely!

Monday, June 05, 2006

Speculative Craze is Crashing

Commentary from Gary Shilling

A. Gary Shilling is president of A. Gary Shilling & Co., economic consultants and investment advisers. Visit his homepage at

"The speculative housing craze is crashing from its own excesses, not Federal Reserve action."

"This is the first nationwide housing bubble since the 1920s, and it's driven by three nationwide forces: low interest rates, loose lending practices and the desperate search for a stock substitute after the 2000--02 debacle."

"Previous real estate bubbles were regional, spurred by economic cycles like the rise and fall of the oil patch in the 1970s and 1980s, and southern California's aerospace leap in the late 1980s during the Reagan defense buildup, ending with the Cold War's demise."

"If you still don't believe there's a massive housing bubble that is beginning to deflate, look no further than Toll Brothers. Toll orders fell 32% from a year earlier. The company blames the fall on cancelations by speculators."

"With dreams of huge appreciation dancing in their heads, speculators indeed drove the housing frenzy in the high end. Now that prices are flagging, they are fleeing. These investors and vacation-home buyers accounted for 40% of house sales last year, up from 36% in 2004."

"A lot of these investors rent out the properties. Despite low-payment interest-only mortgages, they cannot cover their cash outlays with rents, which are depressed by the proliferation of spec houses."

"To reduce monthly payments lenders have extended mortgages to 45 years. In 2005's second half 25% of new fixed-rate mortgages were interest-only (meaning the payback of principal is delayed) versus 5% a year earlier."

"And to buoy the subprime market, the U.S. Housing & Urban Development Department has proposed that Federal Housing Authority-insured mortgages eliminate the current 3% minimum down payment. The scheme is supposed to keep housing affordable in the face of leaping prices. But they're not leaping anymore."

"None of this will be sufficient to offset the mass exit by speculators and the hesitation of builders to slash production in the face of falling sales."

"Toll Brothers (nyse: TOL - news - people ) shows, cancelations are starting to be a problem for them. Moreover, this is an industry where small contractors dominate. These guys, who are often one pickup truck away from insolvency, will get slammed when spec houses don't sell or buyers cancel."

"The ten biggest home builders account for 25% of output, up from 10% five years ago, yet that leaves a whole bunch of small fry. Further sales drops are anticipated by the index of home builder sentiment--now at 45, down from the 72 peak last June."

"With inventories high and sales falling, the ratio of inventory to sales flow is rising. Nationwide median prices will probably fall at least 20% before the break is over. It will take a 35% fall to return prices to their long-run link to the Consumer Price Index; markets overshoot on the downside as well as the up."

"Even a 20% price decline will be devastating for many homeowners. On average, those with mortgages have 37% equity in their abodes. Of those who borrowed or refinanced in 2005, 29% have zero or negative equity, calculates First American Real Estate Solutions."

"A house-price collapse will be far worse than the 2000--02 bear market on Wall Street and will bring a serious global recession. Half of households own stocks or mutual funds, but 69% own homes. The resulting unemployment will kill many subprime borrowers' ability to make payments. Both Toll Brothers at the high end and dr Horton in the starter market will suffer."

"You can short-sell the bunch through the SPDR Homebuilders Index Fund (XHB ). Building suppliers and mortgage lenders are suspect. Golden West, the king of option mortgages that permit negative amortization (that is, your principal grows), timed its recent sale to Wachovia (nyse: WB - news - people ) brilliantly. Home appliance makers and do-it-yourself retailers are also vulnerable. Wait to remodel until contractors are hungry."

Why Do You Make Me Be Mean?

In today's exciting news the president and COO of Coldwell Banker, Avram Goldman, has an editorial published in the Real Estate section of the Sonoma Index Tribune.

He has titled it: "Bursting the "housing bubble" myth.

He says in his introduction that we have been seeing warnings making the rounds for the past three years and we are still waiting for that "bubble" to burst.

He asks the astute reader why it hasn't happened yet and shouldn't they be concerned that it will?

Then he answers his own rhetorical questions but clearly his answers would insult the intelligence of anyone who has intelligence in the first place.

His first assertion is to say:

The "bubble" theory is fundamentally flawed. He then gives several reasons why...

He says the term "bubble" as in the " bubble" is catchy as a metaphor, but it's inaccurate to compare homes with tech stocks as an investment.

He then asks if anyone believes the value fo their house- on average will plummet nearly 80% in a year's time and that some home values will actually go to $0?

He says that is what happened on the stock market when the tech market crashed... and proclaims THAT to be a bubble bursting.

Well Mr. Goldman, that is definitely an example of ONE bubble bursting. While the pricing and buying and selling patterns of the stock market and the housing market ARE can indeed make some comparisons.

In the stock market one can at least sell immediately and you don't have monthly costs associated with your asset, so your purchase is immediate, and your loss is immediate.

The housing market has more risk associated with the costs if you are measuring on how immediately you can buy and sell. A mortgaged house has monthly payments and you cannot stop the loss by a quick sale. You have continuing loss until that magical moment when a greater fool steps in and takes the white elephant off your hands. THAT can be much more risky for an investor who is over-extended and speculating on price appreciation.

All markets can take on bubble behavior, and just because each market has unique qualities does not mean it is bubble proof.

Tech stock prices were overvalued and based on hype, good PR and buyer foolishness also called "Irrational Exuberance."

Housing prices are also overvalued, based on hype, Real Estate Industry PR and buyer foolishness.

The tech market crashed precisely BECAUSE the values were priced based on hype and speculation and not because of actual evidence of value. Investors believed a new paradigm had been created... and the old measurements of investment soundness and profitability or even having business plans were all out of touch with the new internet economy... and the prices would never go down, and get in before you miss out.... yadda yadda yadda.

oops... and yes that bubble crashed because the market was inflated with hot air.

Lets do a little history lesson courtesy of

"In 1972, the (technology) dinosaurs were replaced by warm and fuzzy mammals: the Personal Computers. The new stage of evolution was "a stand-alone computer on the desk, used by an individual." Throughout the 70s and 80s, the computer consumer market was based on the idea of one person, one computer, alone. This included many species of mammals: DOS, Amiga, Atari, Apple, and so on, but they were all mammals: personal, isolated computers.

This offered many new possibilities and new companies were created, which meant lots of jobs. But eventually, people began to feel that "everything had been invented." People felt there was no more room for expansion or innovation. Companies stopped investing resources and people. A few companies (WordPerfect, Adobe, Corel, Novell, and so on) owned the DOS market.

That led to a slowdown by the end of the 80s and a two-year recession in 1991. Thousands of managers and engineers were fired.

California lost population very fast.

There was a six-month waiting period for U-Haul trailers for those leaving California. People with real skills and years of experience found it extremely hard to keep a job or get a new job in computers. Those with little skills or experience had no chance at all.

In 1993, Microsoft released Windows 3.0 and this opened a new market, with lots of new possibilities and opportunities. Take a successful but old DOS program, convert it to Windows, and sell the upgrade!

New companies were created, people were hired, and so on. This peaked in late 1995, when Microsoft released Windows 95 with the largest media event ever for a software package: the Rolling Stones, the Empire State Building in Microsoft colors, months of press coverage, and general global hysteria.

The Age of the Web
Remember how IBM didn't notice the little PCs? A few weeks before the glory of the Windows 95 release, a little company named Netscape did their IPO and earned two billion dollars in one day.

Jim Clark's $12 million dollar investment turned into a $800 million profit. That kicked off the shark feeding frenzy of all time as VCs (venture capitalists) began to pump billions of dollars per month into anything that had a web site.

Here was the next new stage of computer evolution: the networking of personal computers. All of those tens of millions of computers were quickly brought online and connected to each other with the web, modems, and browsers. Information flowed from one computer to hundreds of computers, and onwards to tens of thousands of computers, across a vast web of computers.

Five years later, April 2000, once again every possible web idea had been explored and tested. VCs had seen hundreds of business ideas every day. Millions of commercial sites were created. There were some 30 million web sites. Over 1.5 billion web pages were written in five years.

For every viable business idea, there were dozens of identical competitors (,,,,, and so on.)

VCs thought they could simply pour money into the web: all they needed was ten million dollars to buy a business plan, a logo, a Superbowl ad, a TV actor spokesman, a cute handpuppet, a nationwide brand, and several million users.

Some projects burnt up hundreds of millions of dollars and never made any money at all. Webvan burnt nearly a billion dollars and died.

In April 2000, Wall Street analysts and CMGI's VC newsletter (CMGI is the largest VC firm) wrote that the web boom was over.

Throughout Summer 2000, NASDAQ went into a long decline. By the end of the year, it was 40% lower than the start of the year. $2.5 trillion dollars in market cap value had evaporated."

The important sameness to remember between the tech bubble and the housing bubble, is the hot air, industry hype, investor foolishnes and flat out lies.

There is no new paradigm at work here. Land did not get more scarce, the value of a house does not magically double in 5 years. You really can lose, and house prices really do fall.

The tech bubble casualties were real and they felt the pain of the loss in value of an asset they speculated on, and the casualties of the housing bubble will visit that same vortex of pain.

Just like VC's thought they could invest money in anything on the web and they couldn't lose. Today's greater fools thought they could pour money into anything with walls and they couldn't lose. How's that working for those FB's on the foreclosure list?

I like this particular part of's analysis...

"How can you tell if your company is steaming straight at the iceberg? Look over the side and see if captain and his officers are getting into the life boats.

If the CEO, the VPs, engineering directors, CTO, CFO, or the hardcore engineers leave, then quietly take a life jacket. Ignore the PR and HR people who say that the company is doing fine. They are just playing dance band music."

Substitute CEO, VPs, engineering directors, CTO and CFO for Mortgage company executives, Industry Insiders, Builders, Speculators, Real Estate Agents selling their "investments" and Lenders consolidating, etc...

So it should read like this for the housing bubble....

If the Housing Industry Insiders (builders, mortgage co., lenders, speculators, real estate agents) start dumping their stocks, dumping their assets, renting and consolidating their assets and trimming their staff, quietly take a life jacket and get the phuck out! Do not take out a suicide loan. Do not give in to the industry's irrational appeal for you to keep feeding into the hype and their greed.

Ignore the PR and other talking heads who say the housing market is doing fine. They are just playing dance band music.

Back to the thick and pungent merde being spread on this toasted market...

Avram Goldman goes on to say that even the worst case scenarios by the most pessimistic economists have predicted prices may drop 15-20%.... after a run-up of 40-50% or more in recent years.

Oh yes... he cites the run-up. Does he mean the run-up that is based on speculation, loose lending standards and the fed bottoming out the interest rates...? ...and as far the % of price declines ...

Better check the price reduced lists...

Further, losing 20% of the value of your house when you have little to no equity is a pretty big deal to a seller who is financially strapped.

"A full 29 percent of people who took out mortgages or refinanced in 2005 have no equity or negative equity in their homes, according to Christopher Cagan of First American Real Estate Solutions, a data provider."

"That's a shocking figure, compared with 10.6 percent of people who took out mortgages in 2004. "I would not want to be one of those people," says Mr. Cagan."


"The economic research group said the US property market was crumbling, taking away the key prop of the consumer boom."

"The real US hard landing starts now," said Charles Dumas, the chief global economist. "It's going to be a long grind for two or three years, not as bad as Japan but going in that direction."

"Americans withdrew over $600billion in equity from their homes last year, according to a Fed study, giving them a windfall to help pay fuel bills and keep the malls humming. A property slide will bring the process to a halt, while many buyers are saddled with negative equity."

"The price of new houses in the US has been tumbling for five months at an annualised rate of 18.4%, while mortgage applications are down 20%."

'"There's been a huge jump in inventories, which are now at the highest level since 1996 and it is only going to get worse with a surge of homes built in the first quarter," said Mr Dumas."

"Household balance sheets have been trashed in the process, and now there isn't anything left to trash," he said. "America cannot stabilise both growth and debt levels at the same time. One of them has to give."

"House prices have been falling hard for five months and all the guidance from builders points to a continued fall. You cannot ignore the threat," said Bernard Connolly, chief global strategist.

While the value of a house may not reach ZERO there is a big likelihood the bank balance of an F'd Borrower will see ZERO.

When that happens it will be just like the tech market crash in that if a person lost all value of their asset and ended up with zero money ... it is equal to the situation of an F'd Borrower who finds they have no equity, and their costs exceed their income and then they have to bring money to a closing.

When a person spends more than they have in the bank, they end up in the negative numbers in their bank account. So perhaps this is even worse than losing it all in the stock market. At least in the stock market your losses stop at zero. In the housing market your losses can continue below zero. Not a good situation.

Here's what the Consumer Federation of America has to say about today's sophisticated and savvy consumers....

"While the lending industry has characterized nontraditional borrowers as financially sophisticated and savvy consumers, the truth is that many are far from affluent and could be betting the house on their mortgage," says Allen Fishbein, director of credit and housing policy at the Consumer Federation of America. "Because homeownership is so critically important in financial security, these Americans are unwittingly putting their entire financial livelihood at risk."

"The federation analyzed certain borrower and loan characteristics of more than 100,000 mortgages originated between January 2005 and October 2005. Their findings show that more than one-third of interest-only borrowers earned below $70,000 annually; about 1 in 6 earned less than $48,000. Some 35% of borrowers with the option to make a payment or not earned under $70,000; 1 in 8 earned less than $48,000."

"Truth is, an option ARM is appropriate for a very small part of the population," says Steve Habetz, president of Threshold Mortgage in Westport, Conn. "Think of a doctor just out of medical school, maybe with kids, and who wants a home in a desired school district and so is maybe going after more house. Negative amortization is worth it in this case because ultimately, that doctor's income will pick up and he's cut out transaction costs of moving up in house soon after that income kicks in."'

"Adds Habetz: "But that's not who [this loan] is being sold to. It's sold as this great cash-flow thing, eating up equity."'

Back to Mr. Goldman's pontification...

His second rebuttal is to say: the "bubble" theory ignores the basic law of supply and demand. He claims we simply have more demand for housing than we have supply of homes for sale.

Really? Here are the numbers:

Sonoma County listings progression
3/20/06 = 1742
3/26/06 = 1766
4/03/06 = 1888
4/19/06 = 2828
4/25/06 = 2868
4/30/06 = 2898
5/07/06 = 3052
5/13/06 = 3187
5/18/06 = 3310
5/25/06 = 3412
6/04/06 = 3489

Bareis norcalmls

Price Reduced (last 30 days) = 949

Sonoma Valley listing progression
2/14/06 = 172
2/14/06 = 183
2/24/06 = 193
2/25/06 = 200
2/27/06 = 214
3/01/06 = 219
3/04/06 = 220
3/12/06 = 230
3/20/06 = 236
3/26/06 = 238
4/03/06 = 268
4/19/06 = 291
4/25/06 = 305
4/30/06 = 315
5/07/06 = 328
5/13/06 = 346
5/18/06 = 363
5/25/06 = 372
06/04/06 = 380


Price Reduced (last 30 days) = 99

As for price data... until the Real Estate Industry has to track the original price, the actual days on the market and how many times the price was reduced and also account for any concessions or additional reductions at the time of purchase, their current drivel about minimal price reductions amounts to nothing more than shit in shit out data entry.

Just because the real estate & lending industries act as if it is appropriate to LIE in print when they report data, doesn't make a lie any closer to truth.

He says in the past decade, population growth has outstripped the supply of housing units by 100,000 every year. He adds that even if the population growth were to come to a halt it would take a while just to work through the existing pent-up demands for homes from those people already here.

LOL... population growth does NOT automatically equate to demand for buying a house. If that were the case, then there would be no wait time to sell a house. Last month's data says it is taking 85+ days in this county. In Sonoma it is taking 100 days to sell a house. Where are the barbarians at the gate who can't wait to buy a house here?

Additionally, when incomes grow THEN you might see a correlation with demand, provided the incomes are high enough to be able to afford to buy a house. We have already established in Sonoma County that is NOT the case, and the large influx of population here has been attributed to birth rates and the legal and illegal immigrant population.

The immigrants from Mexico according to county data regarding wages would make a claim of immigrants demanding to buy houses laughable at best. Take the income and housing affordability data for the rest of the county and you are forced to keep on laughing.

His third assertion is to say: the Northern California economic base is stronger and considerably more diverse than it was in the late 80s and early 90s and he mentions these were the last downturns of any significance in the housing maket.

ooh... and I suppose that those who lost their jobs and their houses and filed bankruptcy due to those downturns didn't feel it was a BIT similar to the tech bubble where foolish investors lost their asses?

Here's how Herb Sandler, Founder of Golden West characterized the 90's housing crash in California when unemployment reached 10% and housing prices plummeted all over the state...

'"What you had was a deep, deep real-estate depression. I emphasize depression," says Mr. Sandler."

However, Avram Goldman says... that Silicon Valley is still the heart of the nation's tech sector and technology has certainly rebounded quite well from its worst of 2001 and 2002. He says our economy is sound and expanding.

ummm.... Sonoma County? How many of you work in Silicon Valley and make Silicon Valley salaries? What has Silicon Valley done for you lately?

Last time I checked:

* Employment peaked in Sonoma County in 2001 at the end of the tech boom.

* By 2003, the economic downturn had wiped out 7,600 of the tech jobs, based on average annual employment.

* Through 2005 the number of jobs in the county is still 6,500 jobs, below 2001.

* In Sonoma County, the average wage is $42,171

* The Press Democrat study found that 58 percent of the new jobs created between 2003 and 2005 paid below the average wage.

* It is estimated that 60% of the new jobs added between 2001 and 2003 were lower-paying service jobs that are below the county’s average wage of $42,171 per year.

* Fifty-eight percent of new jobs between 2003 and 2005 paid below the average wage.

** Per-capita income fell 2.6 percent in 2005.

*Adjusted for inflation, per-capita income in 2006 will increase 1.9 percent, to $29,113.

* Only 7 percent of households could afford a median-priced home in Sonoma County at year's end 2005 compared with 12 percent a year ago.

* In 2005 a Sonoma County household needed a minimum income of $152,595 to buy the typical home, based on prevailing interest rates for a 30-year mortgage.

* In 2004, the minimum income needed was $124,650.

* Adjustable-rate mortgages accounted for 69 percent of loans to buy Sonoma County homes last year. In 2004 more than 30% were ARMs

* Buyers had to increasingly stretch financially to purchase homes. A majority turned to interest-only and other adjustable-rate loans, often making little or no down payment when purchasing homes. Local mortgage lenders estimate 80% of their clientele have opted for some form of variable payment negative amortizing take it in the butt loan products.

* As interest rates rise, and there are conversions from adjustable rate mortgages to fixed, defaults are likely to rise.

* Default notices are rising, signaling business instability and consumer insolvency.

According to the notice I received today:

Foreclosure Properties active in Sonoma County = 509

Reasons foreclosure rates have increased:

* Banks relaxed lending standards to make it easier for people to purchase homes; however, for some of those homeowners, once they have an unexpected financial hardship, such as medical bills, a lost job or necessary car repairs, they stop making mortgage payments.

* Many homeowners put little to no money down when they bought their homes and currently have little or even no equity in their home and thus nothing to fall back on. And in some cases, these homeowners then took out home equity loans or lines of credit and now owe even more.

* Homeowners have relied on the recent double-digit increases in home prices to build up equity in their home instead of paying down more in principal. As housing prices increase more slowly, many homeowners will not be able to rely on high home values to cover their debt loads.

From a previously posted article:

'"The slowdown appears to have taken hold in the North Bay and across California, said Gary Zimmerman, regional economist with the Federal Reserve Bank of San Francisco."

April Sales Data

"Home prices could level off, Zimmerman said at conference on North Bay real estate trends. ... the housing market should hold its own unless there are major job losses and a flood of homes hit the market, Zimmerman said."

Even the sponsor for the Press Democrat's printed real estate informercials says this: (from a previously posted article)

"Increasingly, sellers must reduce their prices to attract buyers, agents and brokers said."Last year people got more than their asking price. This year it doesn't look like that and people need to price accordingly," said Rick Laws, Santa Rosa manager for Coldwell Banker, which prepares the monthly Press Democrat home sales report."

A bit of a scoop from Sonoma Housing Bubble reader, Bluzer tells us that....

"A reliable source informed that it seems there is a very good chance that Cisco and/or Alcatel are in the process of moving out there operations from Petaluma. Both moving to Texas. Alcatel and Cisco employ over 800 folks - and these are good solid (many of them 100K+) jobs. Should either of these companies leave Petaluma think of what it does to the average wage - and affordability. To say nothing of the many more houses that will doubtless enter the market. A nightmare scenario indeed - but one with a very high probability of coming to pass. You heard it here first."

Additionally, from my own sources Cisco (from the Cerent group) did a round about 8 months ago that was very quiet...


* Sonoma County Employment Development Dept. showed the county lost 600 jobs between February and March 2006.

* High-tech manufacturing, lost more than 300 jobs

* OCLI has done some layoffs, and Agilent is planning to drop jobs by end of this year.

* Real Estate represented 50% of jobs created in the State of California 2004-2006

* In Sonoma County since March 2005 the construction industry added 1,300 construction jobs

* Construction-related industries and temporary labor agencies, added nearly 1,500 jobs

* Construction jobs now account for one out of every 10 jobs in the county

* Tourism, added 800 jobs

242,800 Sonoma County residents are working, including those who work in other counties.

Some 10,700 residents are looking for work, resulting in the 4.2 percent unemployment rate.

These numbers do not include people who are no longer looking for a job or are working fewer hours than they would like.

Net job growth for the county has been: 2900 jobs

So help me out here... Construction added 1300 jobs, and construction related industry added another 15oo jobs and real estate was half of the job growth for the past 2 years... What do y'all think is going to happen next?

Where do those real estate jobs go when housing sales diminish like what we have seen lately?

Where do the construction jobs go?

Where do the construction related jobs go?

Looks to me like wiping out just the construction and real estate jobs added in the last year would take us to a net job loss situation. How does that make for a fundamentally sound and expanding economy?

How many of these people bought houses during the bubble?

How many left secure and lucrative careers to enter into the construction and real estate industries? (don't laugh!)

Goldman's last and final blow is that mortgage rates may go up a bit, but they're still a relative bargain. He encourages stupidity by reminding the foolish among us that the current mortgage rates are at the lowest levels since President Kennedy was in the White House.

Mortgage rates may be a bargain, but over-inflated housing prices are NOT. You are better off with a $300k mortgage at 15% than a $600k mortgage at 6%. Don't be foolish enough to fall for this flimsy argument. Houses do not magically double in sustainable value over 5 years. You are better off with double the interest rate rather than double the price.

He says that while some believe in the "housing bubble" most people who have followed real estate over the years aren't particularly concerned.

Judging by the math abilities, faulty reasoning and lack of required education of clerks and professional wannabes flocking to the industry, it is perfectly understandable why they aren't concerned.

Makes you feel a little compassion for those RE professionals who are intelligent when they get lumped in with those who are dumb as a bag of hair that represent their profession.

Mr. Goldman makes an attempt to throw in some statistics to convince the reader of his position... He cites that according to California Association of Realtors, over the last 35 years the median sales price of homes in Californa has decreased 7 times. 6 of those 7 times he says the drop was under 3.7%, and one time it was 4.5%.

He says the reason for this is that people want to live here for all of the financial and quality of life issues that brought most of us to the Golden state and to Silicon Valley.

bwahahahahahahahahaha!!! Let me ask again... Sonoma County, what has Silicon Valley done for YOU lately? Where are your Silicon Valley jobs? Where are your Silicon Valley salaries?

Secondly,- CAR subscribes to the fudged numbers, shit in shit out data entry practice. This is a source that does not meet the credibility smell test. They are not required to maintain nor report accurate data. Their industry depends on manipulation in order to separate a fool and his money... they have everything to gain by massaging their data for their benefit, and there is no oversight group that forces them to maintain the integrity of their data.

Further, if real estate markets are local as these assclowns keep telling us, then why use averaged, adjusted, and massaged numbers spread out over the state to shore up his flimsy arguments?

Does every city/town/hamlet in California appreciate and depreciate simultaneously?

Are all areas created equal?

Is each area equally desirable?

Why are prices different from one county to another?

Do you remember the 90's?

Do you remember in the 90's when real estate crashed and in hard hit areas houses were selling for LESS than they were selling for in the 80's?

Oh right... he didn't mention that data to you.

Here is one example....

In 1991, California entered one of the severest recessions in the history of the state and stayed in this prolonged recession from 1991 through 1995. Housing prices fell sharply in many areas.

During this five-year period, the decline in property values was significant and widespread, with home values falling as much as 30 percent in many locations, and 40% and more in some. The decline was sharper in urban areas and in the commercial sector and particularly hard hit in Southern California.

The decline in Los Angeles was greater than in other areas of the state.

Los Angeles County is the largest in California, and accounts for approximately 30 percent of the assessed value of property/housing in the state, and it experienced some of the sharpest declines in real estate values within the state.

From their peak in the first quarter of 1990 through the first quarter of 1995, housing prices fell throughout the county by 27.5 percent. This was the first significant decline in
housing prices since the passage of Proposition 13.

Remember this from the Los Angeles Times...?

"1993: It’s definitely a buyer’s market. Some people are saddened by the fact that current prices are 50% of what they were in the 1980’s."

"The housing bust in Southern California is clearly negatively impacting the California economy and the national economy at large. Sellers are desperate to sell (and some peopletaking extreme measures like putting huge “for sale”signs on their lawns for passing planes to see). Folks who waited out the boom to buy at the bottom are being handsomely rewarded for their patience."

And these...

A sad Westside story: Home prices have declined up to 50% since late 1980s
Myers, David W; Los Angeles Times; May 28, 1993;D; pg. 1

Couple Put Up a Big Sign of the Real Estate Slump Housing: They write `For Sale’ in huge letters ontheir lawn, hoping to attract attention frompassengers in planes and jets on flight path to LAX.
DICK WAGNER; Los Angeles Times Apr 29,1993; pg. 8

1995: Some parts of the Southland are recovering others are not. People with “negative equity” are in despair.

Study of Homeowners Finds `Negative Equity’ a Problem Real estate: Nearly 5% owe more than homes areworth. Impact hinders the state’s economy, experts say.
DEBORA VRANA; Los Angeles Times; Jul 6, 1995; pg. 1

Back to us...

I zillowed a friend's house in Sonoma just for fun to see the price history...

The house was sold in 1993 for a price under 200k.

In 1997, just 4 years later the house was sold again for $52,000 LESS.

In 1998 but only 4 months after the previous sale the house was sold for $30k more, but still a net loss of $22,000 from the 1993 price.

Over a five year period this house lost value.

Now... in 2004, at the almost peak of the bubble this same house was sold again, and this time the sales price was well more than double the 1998 price and the 1993 price.

Does this sound rational to you?

Mr. Goldman's closing comments are that he doesn't lose any sleep about whether his home will plummet in price.

My Zimbio
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