By The Tim on May 12, 2010
Here is your open thread for the mid-week on May 12th, 2010. You may post random links and off-topic discussions here. Also, if you have an idea or a topic you’d like to see covered in an article, please make it known.
Be sure to also check out the forums, and get your word in the user-driven discussions there!
Posted in Open Thread | Tagged open_thread
Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.
Speaking of ethics, when a real estate agent comes across what they think is fraud, is it their obligation to report the behavior?
There’s a short sale that has an offer that hasn’t gone through and the prospective new investor/owner who doesn’t own the house yet is soliciting higher offers on the same listing that he is in the process of buying short. It doesn’t make a whole lot of sense to me, but I just wonder at how the listing agent can be so upfront about what is going on and not be worried about being reported.
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The misguided ethics thread is completely off target in many ways. It takes a micro view of a global problem. I had thought that I was doing the right thing by selling properties in 2006 and 2007. It was my intention to move to Spain. I want to retire in Morocco.
My first indication something was wrong was in Trulillo Peru. In 2003 you could buy a house there for $35K, condos in city were about the same. Today $90K is more normal, but there are very few jobs that pay that kind of money. Loans are a new thing since 1998.
In Spain, while loans have always been around few qualified. Condos that sold for $60K are now $180K. Again, jobs are scarce and pay lower than qualification.
The promise that technology would bring better paying jobs never materialized. High finance seemed to be the money maker, and when the money was made, the jobs were gone. Construction stopped and the economies went back to normal.
So for all the people who bought, or invested world wide what will be the future? All those profits you see today, what will they be worth when the global economy stalls because people have to pay off these mortgages?
What about the people who bought this past year, here, in the United States, with good FICO scores and 20% down? Those people are stuck for many, many years to come while the global Real Estate market place winds down.
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By D. in Ballard @ 1:
My guess is that they were taught in a clock hour course (or perhaps a presentation at their broker’s office) that such practices are okay, and they erroneously think that it is okay. I wrote a piece once on the difference between the quality of teaching at real estate “clock hour” courses and attorney “continuing legal eduction” courses. The amount of bad information taught at clock hour courses is amazing, and that’s part of the reason why I go off on real estate agents giving legal advice.
That said, I’m not sure there’s a duty to disclose the fraud, but clearly there’s a duty not to participate in it.
BTW, some of the bank sale contracts have provisions that say the buyer won’t resell for X months, but the last one I saw the X was not filled in so it wasn’t applicable. But that they have such provisions clearly indicates they’re aware of that issue in the context of their direct sales.
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Anyone who wasn’t able to tune in to my economics radio show last night can listen to the recording.
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we know why tax collections are so low.
Tax bills in 2009 at lowest level since 1950
http://www.usatoday.com/money/perfi/taxes/2010-05-10-taxes_N.htm
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UK Reacts Way Too Slow to Fix Their Economy
Just like America. Article in part:
“….- Cap on non-EU immigration.
The coalition adopted Conservative plans to cut 6 billion pounds ($8.96 billion) of spending this financial year, earlier than the Liberal Democrats wanted.
“There is going to be a significant acceleration in the reduction of the structural budget deficit,” new finance minister George Osborne told reporters….”
http://news.yahoo.com/s/nm/20100512/ts_nm/us_britain_election
Now they see the light….LOL
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By softwarengineer @ 6:
yes, reducing demand coming out of a recessions is probably a great thing to do. that means less people will be employed. isn’t employment your big thing?
would you rather have a job or a 5% budget deficit?
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RE: pfft @ 7 –
Pfft, It Doesn’t Matter What You or Even I Believe
Incumbants all over the planet earth are Toast right now….it’s a pragmatic fact and wishing for more fairy tale spending to create more unsustainable debt and possibly some dinky-sized short term employment [mostly more government hiring] is not what most voters want right now.
Ask ‘em.
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By softwarengineer @ 8:
it’s a real easy question.
a job.
a lower deficit.
pick one. the fact that you didn’t just shows you’d chose job but won’t say it. it’s not fairy tale spending. I don’t think you even know why the government deficit spends or why mainstream economists do. you don’t even get that it’s supposed to be fairy tale spending.
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no recovery here. move along(on the rails which have more goods on them).
Rail Traffic “Recovering at moderate pace”
http://www.calculatedriskblog.com/2010/05/rail-traffic-recovering-at-moderate.html
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Booyah, Jim! Mortgage applications down 9.5% with the end of the tax credit:
http://hotair.com/archives/2010/05/12/mortgage-applications-drop-9-5-after-end-of-tax-credit/
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By Scotsman @ 11:
I think that was expected.
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RE: pfft @ 9 –
Our Mainstream Economists, Not All, But Most
Don’t recognize “overpopulation” in their vocabulary.
Think there’s an engineering shortage when engineering graduates and laid off ones can’t find work.
Consider unemployment an inconvenient truth with the lagging indicator excuse that “brainlessly” goes on for decades.
Need I say more?
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By softwarengineer @ 13:
oh, you’re one of those overpopulation people.
do you realize we are adding jobs? we are. oh that’s right, it’s the stimulus or the census or the senseless or restocking or tarp or the housing credit or whatever the moving goal post excuse of the day is.
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Booyah, Jim! April budget deficit (federal) doubles expectations, 40th consecutive month, largest on record. Pfft claims recovery gaining strength! Market surges!
http://www.reuters.com/article/idUSTRE64B53W20100512
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RE: Scotsman @ 15 – Seems like the White House do not agree with pfft’s assessment that a Greece comparison is that far fetched.
“White House budget director Peter Orszag told Reuters Insider in an interview on Wednesday that the United States must tackle its deficits quickly to avoid the kind of debt crisis that hit Greece.”
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By Scotsman @ 15:
I guess you didn’t read that we had a recession and now we have the lowest tax rats since 1950. I posted that in one of the early comments. I don’t claim recovery, the numbers do.
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By patient @ 16:
the WH wants to convey that they are serious about cutting the deficit.
mr krugman disagrees.
Greece Is the New France
http://krugman.blogs.nytimes.com/2010/05/10/greece-is-the-new-france/
Are We Greece?
http://krugman.blogs.nytimes.com/2010/05/12/are-we-greece/
Greece’s deficit projections are unbelievable. the US’ is manageable.
at least nobody is saying we are the next iceland or argentina now.
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RE: patient @ 16 –
Greece is old news- now G.B. is on deck. The French finance minister is on record as saying “no one will come to Britain’s rescue” since they didn’t step up to help out in the euro/Greece bailout. Not that it matters given the reality that ALL of them are broke. The blind leading the blind. That should be interesting.
What I’m watching is “The Arnold” and CA- he claims to have a “severe” budget coming up that closes an $18B gap with no new tax increases. I’m curious to see whether such a budget can actually be passed. If so, there might be hope. Watching California deal with the need for heavy cuts will be instructive for all.
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RE: pfft @ 17 –
I was going to respond to that post but decided it wasn’t worth the effort. Clearly you don’t understand even basic math. We don’t have the “lowest tax rats” (rates?) as the article suggests. We have deficit funded “rebates” of taxes that never got paid, falling sales tax revenues because of falling sales, and people making less income so they have moved down the marginal rate scales. No tax rates have been cut or reduced. The link even says/suggests this. . . at the end. What a piece of crap journalism.
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By Scotsman @ 19:
where is you link for that? the UK did help out with the Euro bailout. the UK doesn’t need one because they have their own currency. I don’t know what the growth forecasts are for the UK but they must be better than Greece’s.
Fed, Bank of England help Europe bailout
http://marketplace.publicradio.org/display/web/2010/05/10/am-fed-bank-of-england-help-europe-bailout/
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By Scotsman @ 20:
it wasn’t the obama tax cuts? most people got a giant tax cut if they made under a certain amount.
“falling sales tax revenues because of falling sales, and people making less income so they have moved down the marginal rate scales.”
which I addressed.
“I guess you didn’t read that we had a recession”
maybe you should make the effort to read? tax rates have basically been falling for 10 years.
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RE: Scotsman @ 19 – Scotsman – I think you underestimate the power of printing presses. HP produces nice ones. They can print and get rid of deficit even.
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RE: pfft @ 21 –
Oh boy. After the deal is done then “the Federal Reserve and Bank of England. . .” pledged their support.” Yup, sounds like they’re right on the front lines. I pledge my support to you dear Pfft. Can you take it to the bank?
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RE: pfft @ 21 -
Oh, and this, regarding bailouts for GB: “the UK doesn’t need one because they have their own currency.”
Good gawd, It has nothing to do with currency, and it can’t be “fixed” through currency valuations. I don’t care what your currency is, you can’t spend more than you make or eventually you go bankrupt. How hard is this to grasp?
I’m not going to respond to this nonsense any more. No, really. Cheers!
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I’ve been telling my poor brother for years…’Either we control our deficit spending, on our terms, or the bond vigilantes will control it for us, and trust me, you don’t want that to happen.’
He finally connected the dots when he saw the Greek riots.
Since he is retiring next week and has to do sumpin w/ his deferred comp and is also considering a regular to Roth IRA conversion, he seems to take his little brother’s rants a little more seriously as of late. Poor guy.
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Senate Passes Merkley-Klobuchar Amendment to Protect Homeowners from Deceptive Mortgage Practices
http://merkley.senate.gov/newsroom/press/release/?id=1FC10C29-1DFE-46AD-8760-F3FEEB01240E
and read what some LOs are saying about it….found this via google.
http://mortgagegrapevine.com/thread/?thread=585887
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“Senators Merkley and Klobuchar’s amendment will ban mortgage lenders and loan originators from accepting payments based on the interest rate or other terms of the loans. In addition, it will require lenders to document income and other underwriting standards to ensure that borrowers’ can repay their loans. This will end the damaging and deceptive practice of “no doc†and “liar loans.â€
it passed with a wide margin.
This will ban YSP as well as overages used by bank LOs to put borrowers into a higher cost loan and will force LO compensation to a flat fee model.
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By Scotsman @ 25:
If you can inflate, you can push the day of reckoning much further out. Especially if you’re a major currency. Especially if you’re the world’s primary reserve currency. Greece has to deal with it now, which in some ways makes them better off in the long run. Unfortunately, for US, action must come from either the politicians or the bond vigilantes — and my (devalued) money is on the latter.
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RE: Ross Jordan @ 29 –
“If you can inflate, you can push the day of reckoning much further out”
You can probably push it out some, but not nearly as far as the vast majority believe. The problem lies in the fact that most governments are in trouble because of entitlements, and those entitlements have COLAs or inflation adjustments built in which keep the benefits even with the newly devalued currency so inflation gains you very little. A second issue is the sheer size of the problem. You basically can’t inflate fast enough to cancel the debt impact without seriously devaluing the currency and escalating interest rates at the same time.
Think about it. The idea of inflating our way out has been on the table for years. If it was a truly viable option, and as easy as most would like to believe, don’t you think it would already be in play? Truth is it’s not a viable option. We’ve been having enough trouble just keeping up with the shrinking asset base/money supply without worrying about inflation. Sometimes we have trouble seeing the truths that are right in front of our faces.
Inflation would help some with the national debt but do little for the budget problems. And in the longer run budget issue dwarf the debt.
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RE: Jillayne @ 28 –
This could be significant if there’s an enforcement mechanism that works. The compensation changes for LOs will be huge. Any idea what the percentage impact on commission income may be?
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I share this to make all of you laugh at me. This is intentional. It gives me great satisfaction to see an individual become like a rockhard erection before it gets cleanly sliced off by a Shogun blade. I am a big advocate of trial by fire. Have at it ;-)
April 2010: Bilderberg hopes to keep the global recession going for at least a year, according to an international financial consultant who deals personally with many of them. This is because, among several reasons, Bilderberg still hopes to create a global “treasury department†under the United Nations. Bilderberg first undertook this mission at its meeting last spring in Greece, but the effort was blocked by nationalists in Europe and the United States. Nationalists objected to surrendering sovereignty to the UN.
The global elite are conspiring to send oil prices crashing through the $200 dollar a barrel mark as part of an organized agenda to hike profits, bring about a global economic crash and torpedo the middle class, and they’re not afraid to attack Iran as a means of achieving their goal.
By pushing peak oil theories and tying them in with the man-made global warming fraud, Bilderberg seeks to jack up oil prices to the point where the living standards of the middle class become unsustainable and the west is lowered into second world status while elitists reap the financial and political bounty.
A military attack on Iran is also essential for the globalists to kick-start an economic collapse coupled with a massive hike in oil prices. French Foreign Minister Bernard Kouchner told a French TV station yesterday that the world should prepare for war with Iran as rhetoric around the possibility of conflict grows bellicose.
Experts have predicted that should an attack occur, Iran would immediately cease oil exports, pushing the price per barrel well beyond $100 almost immediately, inflating gasoline prices and kicking off a worldwide energy crisis and a recession.
From June 2009: Depression or a prolonged stagnation? (Stated as such in the pre-meeting booklet sent out to attendees.) Bilderberg is looking at two options: Either a prolonged, agonizing depression that dooms the world to decades of stagnation, decline, and poverty … or an intense-but-shorter depression that paves the way for a new sustainable economic world order, with less sovereignty but more efficiency.
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By Scotsman @ 30:
most governments are in trouble because there is was a massive bubble that popped. period.
The Deficit Problem Is Not “We, the People,†It is “You, the Incompetent Eliteâ€
http://www.cepr.net/index.php/blogs/beat-the-press/the-deficit-problem-is-not-we-the-people-it-is-you-the-incompetent-elite/
the other reason for our huge deficits is that bush turned a clinton surplus into a bush deficit. he added $5 trillion to the national debt. he also made the conscious decision to have a giant unfunded tax cut for the rich. not pay for two wars and have another huge unfunded liability called medicare part d.
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Krugman dashes the bear’s hopes.
“those tax receipts that reflect the current state of the economy — payroll, withheld income, and corporate — are all rising.”
http://krugman.blogs.nytimes.com/2010/05/12/april-isnt-the-cruelest-month/
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By Scotsman @ 25:
here is how you recovery. your currency plunges. your economy is in tatters. the economy recovers faster than anyone thought because you exported your way out of it. look at Argentina and the Asian Tigers. I’ve already given those examples many many times. maybe I shouldn’t respond to this nonsense?
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By Dirty_Renter @ 26:
it’s not that easy. the UK has almost the same deficits. however, it will probably grow at least some measure. greece’s projected deficits are huge because it isn’t going to grow. I think they don’t predict growth in Greece until 2012.
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Depression 2010? Robert Samuelson details similarities between now and 1929:
http://www.realclearpolitics.com/articles/2010/05/12/depression_2010_105530.html
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By Ross Jordan @ 29:
there doesn’t have to be a day of reckoning. you can just have an economy that grows at a slower rate than would be w/o deficits or stimulus. there are deficits around the world because of a massive financial crisis. budget deficits need to be brought under control but long term what needs to happen is that the national debt needs to stabilize. it doesn’t need to go away.
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By Scotsman @ 36:
dean baker beats up on samuelson almost daily! I would post samuelson’s greatest strikeouts but I don’t fell like using the google.
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the yield on greek bonds at the height was something like 20% on the 2 year. the yield on british 2 years right now? 1.05% the yield on the 30 year is 4.47%
http://www.bloomberg.com/markets/rates/uk.html
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RE: pfft @ 40 –
I agree it sounds like good news Pfft, but as the Zen monk said, “We’ll see.” The bad news in those numbers is the market’s fear that there is still a real risk of deflation.
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RE: Scotsman @ 36 –
I pretty much agree with the entirety of Samuelson’s article. And I’ve been telling friends for a while now that I think the key to a political solution on the debt is to get a compromise to freeze all COLA’s. It’s tough to cut pensions and entitlements, but it might be possible to cut their growth and let a little 2.5% CPI termite do the dirty work. I think there are potential state (and perhaps federal) constitutional and/or contractual issues that may need to be resolved with regard to public pensions. If either political party or a third party had any stones they would set up a task force to research the major entitlement programs and public pension programs to see what it would take and begin drafting the appropriate legislation to use as part of their platform.
I’m still a little concerned that I might be gauging public sentiment incorrectly on this issue. It seems like about half of my friends and relatives, including the fiscal conservatives, draw (or will draw) some form of public pension. Neither my wife nor I have a public pension so we may be unrepresentative of true public feeling. In any event, if the Big Bama doesn’t step up to the plate on the issue by this time next year, I’ll be joining those who label him as a danger to himself and others.
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RE: Jillayne @ 28 –
Jillayne, I always assumed that conforming loan regulations required that conforming loans had to be full documentation loans. When I looked a few years ago to see if that was the case, I couldn’t find anything through an internet search. Do you know if conforming loans always required full verification of income and assets? Its my understanding that they may have bought MBS’s which included no doc loans, but I didn’t think that freddie and fannie were buying and securitizing no doc loans.
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RE: One Eyed Man @ 42 –
I’ll leave to pfft nonsense alone because it’s really out of control. Daily mantras of “it’s getting better all the time” are like Trigger taking a hike and not stressing. Not bad ideas mind you, it’s just so unrealistic, which brings us to:
You can’t start messing with COLAs because too much of the economy is based on them. We are an inflation fixes all society.
You’ve made a compelling, logical argument, then pointed out how many people you know who depend on the pensions.
More to the point about the global economies is that many pension plans are the Institutional Investors I refer to constantly. I’d like to see where the pension plans end up when many of the investments they hold are based on inflated asset prices, rather than actual value.
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RE: One Eyed Man @ 42 –
Freezing COLAs would certainly help. But like you, I think too many people have their fingers in the pie to fully support the idea. We’ll see- both in Ca which will be dealing with some of these issues starting 5-15 with the release of Arnold’s budget, and in GB which will have to tackle the same issues almost immediately if they are to survive. Both are perhaps a bit more liberal than the U.S. as a whole, so if either of them can pull it off there’s a decent chance the U.S. can make similar progress. Interesting times for a political/economic junkie.
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The Tim, do you know if the inventory tracker is reliable after the nwmls changes? I saw some comments from agents of changes in the possibilities to count listings.
The KC SFH tracker is now showing 10400+ listings. The tracker peaked out at ~10200 May 2009. Have we already gone positive in YoY inventory or is the tracker confused or counting differently after the nwmls changes?
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By pfft @ 38:
There doesn’t have to be a day of reckoning — but there will be if nothing is done with the current deficit levels and debt. We’re around .9 debt/gdp ratio this year, and perhaps .8 or so after a recovery. That’s a bad place to be either way. Healtcare makes things worse. Fighting multiple wars makes things worse. Government needs to cut spending AND raise taxes — and I’m not convinced the political will exists to do it. The US, with its strong economy can do some tricks — inflation of the dollar transfers some of the burden to our creditors (causing us to lose some creditors). We’re still the “safe heaven” investment choice when things go bad. We can artificially keep rates down longer. But we’re slowly but surely blowing our reputation as being a country with a sound and conservative financial system (that we built up during the last century). There’s no free lunch.
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anecdote
From Diana Olick at CNBC: Home Buyer Tax Credit Takes its Toll
From one of our own CNBC producers, Andrea Mantia:
“I’ve been househunting for a few months now…we totally got caught up in the “tax credit frenzy”….thank God we took a deep breath and relaxed…EVERY SINGLE HOME we had our eye on dropped in price this week…and this is in Bergen Co (NJ) where prices weren’t budging!”
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For Kary who intimated that we might see housing prices rise after the expiration of the tax credit because of investors tired of waiting …….
http://www.cnbc.com/id/37106639
One full week after the tax credit’s expiration, mortgage applications fell 9.5 percent; this as mortgage interest rates dropped below 5 percent.
Sure, refis jumped, but that doesn’t help us much with the currently bloated inventory of homes on the market.
Another report today from Trulia.com showed home sellers losing that little bit of ground they had recently gained in pricing. The number of properties on the market as of May 1st that saw at least one price cut rose 10 percent.
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By Pegasus @ 49:
I could be mistaken here – but I think the argument was that the median might rise because there would be fewer low-end buyers in the market looking to take advantage of the tax credit. That makes sense to me.
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RE: pfft @ 14 –
One of Those “Overpopulation People”
LOL…now you’re going to call me an “environmental terrorist” type for supporting a scientific limit to resources and population. Actaully Pfft, the term “overpopulation” isn’t a four letter word for you to shrug off. Ask most of the youth today, they totally agree with me. I was taught “overpopulation” when we had public highschools with a brain. They recently took it out of today’s public school curriculum….our schools sound like extremists nuts, not me.
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RE: deejayoh @ 50 – It strikes me as a much more complicated calculation than that. Maybe it’ll happen that way, but I’d imagine that most of those sellers turned around and bought a new house, and a lot of those purchases were for more expensive houses. I mean, I don’t know anyone who spent a million dollars on their first house. So, I think it likely that the credit lifted all boats, not just the low end, but we shall see.
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By Ross @ 47:
the US 30 year is near 5%. there are no worries about the US. interest rates plunged during the crisis. some short-term debt briefly went negative. the market is not worried about the US paying anyone back. of course we can’t run huge deficits.
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I saw that a few days ago the inventory tracker crested 10,000 for the first time this year, and it seems to still be racing it’s way up. 10 K also exceeds any of the monthly inventory stats for 2009. Any bets on where it will top out this year?
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By pfft @ 53:
Yeah, agree that for now we’re ok and there’s no immediate panic. Though, arguably, part of the reason rates are so low is because of manipulation by the Fed (or indirect manipulation by debt swaps with other central banks). But once you have debt/GDP > 1, things start to get challenging, and we may fall into a debt trap where servicing costs become too high to make a significant dent in the debt.
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deejayoh @ 50
No I had wondered how far prices would drop, whether it would just be around $8000 or more since these mortgages are leveraged and taking $8000 equity out of the transaction might produce a larger drop based on the leverage. Kary countered with his real estate mind and legal prowess that perhaps we would see the reverse due to investors that had been waiting for the expiration would jam the market up afterwards thus pricing everyone waiting out forever……
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By Masaba @ 54:
I wonder if the inventory tracker is not experiencing some issues. The clip at which units are added is a bit extreme. We have added about 200 King Co. SFHs the last 24h.
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By softwarengineer @ 51:
when people talk about overpopulation most of the time they aren’t really concerned about overpopulation. they seem to have some agenda. authoritarianism. some people just hate society and want to see it break down. some people don’t won’t to be the rugged individual who everyone depends on to ride out the storm. some people just can’t comprehend how big the world is and 9 billion is a really big and really scary number. usually the discussion is more about the person than about the actual subject of overpopulation.
can we also stop blaming the schools for everything? I have no confidence in your ability to know that schools don’t teach overpopulation.
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By Ross @ 55:
our servicing costs are lower than they were in the 1990s. people have been saying that interest rates are going to skyrocket. they’ve been saying it for years. I’ve thought that for years. look up RRPIX or RYJUX and see how good that has gone for people. I never thought we’d run a 9% deficit and bonds would be so quiet. clearly there is something going on that I and many other people can’t comprehend. just look at japan for an example. until interest rates go higher I’ll put myself down as someone who doesn’t understand the bond market. I don’t have to waste time making excuses that way!
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RE: pfft @ 59 – RE: pfft @ 58 –
You don’t understand, and that’s OK. In my opinion most of us look at the world with blinders on. You and Scotsman are talking about the same things, many times from two points of view. He takes one part out of context, and you take another. It’s OK.
China is a good example. One person can be concerned that China is buying United States debt, and another can point out that China has between 200 and 400 million people starving to death. Then some one else uses China’s statistic that only 34 million people are starving to death.
China says there are only 34 million people starving to death in their country and they are using that as a statistic to indicate how well they are actually doing.
OK? because that’s just China. More than 852 million people — about 13 percent of the world population — do not have enough food each day to sustain a healthy life, according to the Rome-based Food and Agriculture organization (FAO).
2008 had the best harvest ever, but the problem is distribution.
So while we talk about who has more money, or the rich, and poor, people starve to death.
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RE: Pegasus @ 49 – If that’s just a week to week stat, I would have expected the drop to be even greater. It was amazing how many people waited to the end.
That said, it’s possible that the drop could be further because those making applications that week could have been in contract the week before, and thus still able to get the credit.
In any case, I’d look more toward actual sales when dealing with volume issues, in part because I don’t think you can get local stats for loan applications, and in part because I’m not sure how accurate such stats are likely to be.
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