[TheBreeze]

Sure it could happen … and monkeys could fly out of my butt. The S&P 500 PE is only around 15 or 16. I realize that many people here think that the entire worldwide economy is built upon the Southern California housing bubble, but I just don’t see it. Not everyone is using their house as an ATM. Some of us still draw a salary that stems from helping to make useful products.

I think the Iraq war is more likely to lead to a recession than the popping of the housing bubble. I read somewhere that the total cost of that debacle was around $2.6 trillion already (including several hundred billion in direct costs and the costs of taking care of the permanently maimed). Luckily, the Democrats are in charge of Congress now and can provide President Bush with some much needed adult supervision. If our economy can survive the next two years with that idiot in charge, our economy can survive anything.

[TheBreeze]

I wouldn’t be concerned about a food shortage any time soon. The U.S. government, through the Conservation Reserve Program (CRP), pays many, many farmers to hold their land in reserve. This land can only be used to grow diffeent types of grasses. No livestock can graze on the grass and the grass cannot be cut and fed to livestock.

I’m from the Midwest and know several people that participate in this plan. I would estimate that there are at least 1000 acres of this land within a 10 square-mile radius of my parents’ house — and that’s just the CRP land that I know about. I don’t know how many acres are in the CRP plan, but I wouldn’t doubt if it is in the millions. Couple the CRP land with the fact that most fatass Americans eat about 3x as much as they should, and you have a population that is a long way from facing a food shortage.

By the way, things may seem crowded here, but in the rural Midwest, things are a little different. You can drive miles on I-70 in Kansas and not see a house. In many places, if you exit the interstate, you end up on a dirt road in short order. If you want space, move to the Midwest.

[TheBreeze]

Perry, you sound like a misguided liberal. The U.S. already has a guest-worker program. This isn’t about not having enough guest workers. It’s about not having enough cheap labor. Business owners don’t want to pay a living wage for these jobs and that’s why many Americans don’t want to do these jobs. It has nothing to do with the type of work, rather, it’s all about getting cheap labor and pushing benefits like retirement (SS) and medical care for these cheap laborers onto the taxpayers.

Do you realize that as we let more impoverished people into the U.S., that wages continue to go down and more and more Americans go on welfare and unemployment? How does that help our country? Would you support a guest worker program that requires the employers to pay a wage rate based on the prevailing union wage and for the employers to provide health insurance? I could accept something like that, but that is not what this is about. It’s not about paying living wages and supporting these laborers, but is all about foisting the real expense of a cheap laborer onto American taxpayers.

As far as Social Security Totalization, America should do it the same way Mexico does it. Right now, America requires that a taxpayer pay into the system for only 10 years before that taxpayer vests. Poor Social Security payers in America also get much more back compared to what they put into the Social Security. Mexico on the other hand requires 24 years worth of payments for vesting and only provides a benefit equal to the amount someone paid in plus interest. For this to be fair to citizens in both countries, the U.S. should provide the same benefit to Mexicans that Mexico provides to Americans — 24 years vesting then only pay back what was put in + simple interest. Right now, this totalization program would provide a huge benefit to illegal aliens that America cannot afford:

http://www.cis.org/articles/2004/back904.html

[TheBreeze]

Stan, I think your multiple offer idea is brilliant. Sellers need to be punished for their insolence. It’s the only way they’ll learn.

[TheBreeze]

It doesn’t matter how many listings there are. Sellers need to wake the hell up and smell the coffee. I hope you are doing your part to bring some reality to these sellers. They need to know that if they sell today for 10% under list that they won’t have to worry about selling six months from now when prices are 20% under list. A responsible real estate agent would get these dreamers to face the realities of the current market so that they don’t end up taking a worse bath further down the line.

[TheBreeze]

It’s good to see that we are importing poverty at an ever increasing rate.

[TheBreeze]

Thanks for linking to that site, MOM. Lots of good stuff there, including this thread which provides a little more detail on the MLN situation:

http://forum.brokeroutpost.com/loans/forum/topic.asp?TOPIC_ID=81847&whichpage=1

[TheBreeze]

Thanks for the extra data points, Poway. Your posts always contain excellent info.

[TheBreeze]

Steve, what you do and what “usually” happens are two different things entirely. Stop trying to put lipstick on this pig. The appraisal in this instance was fraudulent and whoever did it should end up in jail.

[TheBreeze]

Thanks for the link, poway. I had no idea that 20% of mortgages havewould reset over a 20-month period beginning in March 2006. I was thinking that 5% resetting every year would be a lot. 20% over 20 months is a huuuuge number. This should certainly hasten housing price declines.

Of the mortgages that reset in 2006, is there any way to know how many resets led to a default?

[TheBreeze]

“Husing busts are worse than stock market busts.”

Do you have any statistics to back up this assertion? The Great Depression was preceded by a stock market bust. Has there been a housing bust that led to something worse than the Great Depression?

“Fifth, 25% of all mortgages are resetting to higher interest rates next year and millions of people will lose their homes in foreclosure and become renters (or tenants with Mom and Dad).”

You got a cite for this, poway? This statistic is hard for me to believe.

I admire your use of statistics and would note that poster “Rimpy” from the Motely Fool message boards had tons and tons of statistics to back up his stock-market bubble prediction beginning with his first post in 1997. Today, his “Bubble Port” is 4% higher than it was when he first started it in 1998. A very bad return on investment, but not a disaster by any means.

I agree that home prices are very likley to decrease, but counting on total economic destruction as a result of the housing bubble is unreasonable in my opinion.

[TheBreeze]

Bubbles can take a long time to unwind and can go on for longer than anyone would reasonably expect. All one needs to do is look at the stock market bubble that popped in 2000. There were several people calling it a bubble in 1997, 1998, 1999, and early 2000. Take a look at this chart of the Nasdaq 100 ETF. If you shorted this tracking index in 1999, just a year before the bubble popped, you had to withstand a near 50% price increase before the top in April 2000. Don’t think that calling tops and bottoms are easy and that they will always be obvious. If it were easy, we would all be rich.

To get some perspective on how long these things can take, read this story about poster “Rimpy” from the Motley Fool message boards. He believed that the stock market was in a bubble back in 1997. I was on the Motely Fool boards back in those days and Rimpy had to endure tons of ridicule. He was one of the few bears amongst a herd of bulls who were making money hand over fist. Internet stocks would double and triple in a matter of months and then, amazingly, double again in a few more months. People thought stocks would go up forever back in those days. Of course, stocks eventually came down, but now before an amazing run that virtually no one predicted.

You can also see from the Nasdaq 100 chart that the value of that index went from 120 in 2000 to 20 in 2003. I don’t think even the most ardent bear on this board is looking for an 83% decrease in housing prices, so that bubble was much more pronounced than the current housing bubble. The collapse of that bubble didn’t lead to a collapse in our economy, so I doubt that the popping of the housing bubble will destroy our economy either.

Another thing that is going to temper the drop in prices is the lack of liquidity in the housing market. Stock markets are much more subject to emotion than housing markets due to the liquidity. It’s easy for most anyone to buy and sell a stock — not so easy to do with a house. Plus, houses have value above and beyond their economic return. Many people will pay more to buy a house than they would pay in rent just so they can have the stability of ownership and can fix up their place the way they want.

Additionally, you would be amazed at the number of people that have no idea how to value a house. I was talking to a colleague the other day and she told me that even if she decided to move out of her condo, that it would provide good rental income. Equivalent condos near her are renting for about half of her ownership costs. It’s so obvious that this would make a terrible rental property given her carrying costs, but she has been brainwashed to think that owning is always better than buying.

Finally, there are several owners that will do whatever they can to hold onto their houses. Their dream is to be a home owner, so they will get a second job or cut back on other expenses in order to afford their mortgages. The extra work and cutbacks will go towards salvaging a terrible investment, but they won’t care. They are just desperate to be home owners.

[TheBreeze]

I’m not up with the lingo. What is a GF? A gargantuanly-effed borrower?

[TheBreeze]

I’m with ya’, greekfire. Something doesn’t add up here. If a member of our community with no stake in this deal can see the obvious fraud here, how can a lender who is loaning out 3/4 of a million dollars not see it? I’m thinking this loss gets thrown back on the public somehow — possibly in the form of a package of mortgage-backed securities that are then sold to pension funds.

I’d like to know who the lender was for this transaction and what they did with the loan. I would especially like to know if they sold the loan and who the ultimate (bag) holder is.

This type of activity really pisses me off. It distorts the market and keeps honest, hard-working, fiscally responsible folks like ourselves from owning homes because the prices are jacked up beyond all reason through fraudulent activity like this.

[TheBreeze]

Are rents really going up? Do we have actual proof of this? Here in UTC, it doesn’t seem that apartment rents are going up (not sure about houses). Craigslist shows several places with reduced rents or with rent rebates. In fact, it appears that there is a lot of competition for renters in this area.

As near as I can tell, there appear to be three groups competing with each other for apartment renters with another group coming online soon. The first group is the apartment complex owners. Many of these guys appear to be offering rent rebates in a desperate attempt to prop up the market value of their apartments. For example, a complex might have a two-bedroom listed for $1600 with a one-month rebate on a one-year lease. I’m assuming this rebate allows the complex to report the market rental value of the apartment as $1600, when in actuality it is only $1467.

The next group is the owners of the complexes that became failed condo conversions — places like The Venetian, The Verano, and Villa Vicenza/Nobel Court. The owners of these complexes jumped on the condo conversion craze at the top of the market. They assumed that they would be able to flip the entire complex one unit at a time to greater fools. Wrong. Now these guys are having to rent out the units that didn’t sell. I wasn’t in the market for a rental before these condos were converted, so I’m not sure what the rent was back then. However, I would be surprised if the rent has gone up enough to account for inflation and the value of the upgrades. An example of would-be converters now being forced to rent out can be found here.

The next group is the greater fools who bought the individual converted units as an “investment.” Many of these people had planned to flip, but are now forced to rent out their unit so that they can pay a small part (maybe half if they’re lucky) of their mortgage + taxes + HOA fees + other ownership costs. These poor fools are competing for renters not only with other apartment complexes, but many times with the condo converter they bought their unit from. That would really suck. If you are trying to rent out your failed flipper unit at the Verano, you are forced to come in under the rental price that the Verano condo converters themselves are advertising for similar units.

The next group is coming online now: La Jolla Crossroads. These are new apartment complexes that are currently being built right next to I-5. I’m not sure how many units are coming online there, but it looks like a ton. This added supply will further act to decrease rents in the UTC area. I believe the next batch of these units is coming on the market in April with more to come after that.

So, at least in the UTC area, I don’t see prices for apartment rentals going up. Not only is there a lot of new capacity coming on the market, many of the failed flips/conversions are coming back on the rental market and should continue to drive rents down.

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