"The money feels good
And your life you like it well
But surely your time will come
As in heaven, as in hell."
I just sat down to write this and since I just saw my fellow duplex dwellers leave our small building, I put on the Clash nice and loud. It sure seems like the perfect music for the topic, which today is real estate finance.
In all of the other parallel universes, this topic is as dull as it sounds, but unfortunately in our very bizarre universe, this topic is so important that some normal people are actually starting to notice it. According to the mainstream media (aka MSM in blog speak), here in California, 57,158 families noticed because their dwelling was the object of a foreclosure filing. Folks, that's almost half a percent of all residences in the state in one month!
I really hate being interested in the real estate market, I really do. Although there should be nothing wrong with it, real estate is where con men, realtors, and other punks get their rich quick.
In the last week, I've been reading a geometrically increasing amount about the housing situation. It's weird to see the MSM suddenly realize what for years should have been patently obvious to anyone smart enough to fog a mirror: the housing market is in serious deep shit. The shit is so serious and so deep that if the damage was merely contained to recent home buyers becoming indentured servants to Saudi princes, we'd be getting off lucky.
When I first arrived in SD in around 2000, I wasn't really concerned about real estate. I couldn't have afforded it and I figured that when the time came and I could, that I would be at least as well off as normal people and it wouldn't be a problem. Turns out that was wrong in two ways. When I finally had a credible amount of capital, I learned that, one, I still couldn't properly afford real estate and, two, which is much more bizarre, that it didn't matter. Nobody could afford California real estate so banks were basically buying houses for people to take care of. This investment was justified with the unassailable logic that house prices never go down. I suppose mortgage lenders are not very bright, are mostly criminals, or both. This is one of those times where I was happy to have the ability to empirically size up the situation and determine that just because everybody else seemed to be doing something stupid, was actually evidence that everybody else was indeed stupid.
I was sitting on plenty of cash by the end of 2005. I'd roughly noticed some house prices without too much research. Things seemed crazy, but I wasn't really paying attention. By the beginning of 2006, I felt that things must have cooled down a bit and I'd go out and see what was what. I went and looked at a lot of houses. For such an expensive market, San Diego has some spectacularly awful real estate. Always the feeling I got was, first, I could only barely stand to live here, and second, what kinds of millionaires wanted to live here? I was not oblivious to the median income here which led me to believe that the only people who could afford the houses I was looking at were bank presidents, movie stars, real estate con men, etc.
Since I'm a "do the math" kind of guy, I calculated exactly how the typical home would affect my day to day finances. It looked like it was vaguely possible, perhaps, for me to pull it off, but there was one problem. What if real estate didn't "always go up"? Of course the real estate agents must have a special laugh they practice designed to convey, "Good one! Ha ha! That's hilarious because real estate prices never go down. Ha ha!"
This actual quote is taken from "www.realtor.org".
"Know What to Say
Get scripts on how to respond to prospective clients' most common objections, from those pesky questions over a sour housing market to FSBOs who think they don't need you."
You know what other profession uses and practices scripts to allay their victims' misgivings? Con artists. I guess that probably pushes nervous thoughts from the minds of most buyers, but I am highly suspicious of these clowns and when they insinuate something like this, I start imagining prices changing levels as they've done in the last 10 years, but going the other way. I started realizing that even small fluctuations of a few percent could wind up being financially ruinous at these overblown prices. These real estate agents are sending families to their dooms.
1 comment:
Definitely a problem that is far from over - On the other hand there are players in this game that deserve more of your vitriol than the realtors. Realtors are just pawns -- like used car salesmen. They don't create anything and don't 'cause' anything - they're just out there trying to make a buck and reacting to the market like anyone else. The real problem are the financial geniuses (genii?) that created the unstable financing systems and then sold the crappy mortgages to investors around the world. It's encourages predatory lending - basically you lend to someone on terms that they can't possibly repay, and then you foreclose on the appreciated asset. Sweet. Ohio has a big problem with this. Bit a shame if the asset doesn't appreciate when it's supposed to.
Then of course the other big problems are the greedy, economically illiterate people that were suckered into the deals believing that free lunches were on offer whenever hunger symptoms occurred. How much these 'folks' now should be protected is a matter for legitimate debate, but I say let them sink. How else will society learn the lesson that there are not even any free snacks. Apparently the training is offered only once or twice per century, so it needs to be a bit sternly administered - even if it tanks the economy for a few quarters. Another suitable Bush legacy I'd say.
These latter villains of the piece actually come in at least two flavors. There's the one's described above, and probably a bigger group - the millions of middle class 'folks' that used their home equity as an ATM and now are substantially over-mortgaged. Pity the fools. But I don't favor bailing them out either. And that was absolutely nothing to do with realtors, yet may be a bigger problem than sub-prime.
As for Armageddon, be careful - There was a report yesterday to suggest that the SD real estate market is bottoming out and starting to come back up - so watch out ( -- and buyer beware!) It will happen one day, but is unlikely to be announced on the six-o-clock news until several months later.
And for the record, I've actually worked with two realtors that I really liked and didn't begrudge them their fee. Both were guys - the women do tend to be terrible - they knew their stuff and added value to the project. This shake-out in housing will thin their ranks considerably and the worthless ones will get squeezed out. We can hope.
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