Posted by: The Tim

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.

18 responses to “Weekly Twitter Digest (Link Roundup) for 2012-10-26”

  1. Kary L. Krismer

    You’re going to have to be nicer to NAR!

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  2. David Losh

    Banks are evil, and they will need to have some sort of debt forgiveness to become whole again.

    I don’t care about the protest, but it is pretty well recognized that the amount of debt the world has will be a burden for decades to come without debt reorganization. Is that a better word?

    Our foreclosure system is broken, and the secondary market is awash in bad, really bad, paper that has questionable value, so to me our banking system is broken also.

    Now people can talk about being responsible, and putting 20% down? 20% down on a family home? Come on, that alone freezes the Real Estate market. Your buyer pool is shrinking with every loan being made.

    Move up buyers aren’t happening, because we are still paying off the last round of mortgage debt, while taking on more.

    Maybe you’ll notice the markets that are doing well are very high end that pay with cash. Lower tier is symied by price point realities, but the upper end, the rich, have no limits. Cash is king, and we’ll need to get more of the market place closer to cash pricing.

    So, yeah, debt forgiveness, renegotiating terms, or allowing the home owner a free pass to get caught up is what will need to happen.

    Otherwise we have millions of housing units no one wants, or needs.

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  3. karl
  4. Pegasus

    RE: karl @ 3 – We are also starting to see articles like this: One of the first big hedge funds to try to profit from a rebound in the U.S. housing market by investing in foreclosed homes is looking to cash out, even as other institutional investors are still getting in.

    http://www.reuters.com/article/2012/10/17/us-foreclosed-hedgefunds-idUSBRE89G1TE20121017

    Seems that managing SFH properties in mass may not be cost effective.

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  5. David Losh

    RE: Pegasus @ 4

    It was called Real Estate wholesaling after the Savings, and Loan scandal, and the rise of REITs. It sounded good to recover investment rental income, but it didn’t last long.

    Property managers are set up to make money, and renters are scum. Sorry, but that’s what happens when you are looking for a profit margin, you get the lower end of the renter scale who will pay the most.

    We are in for another leg down after the election settles in, no matter who wins.

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  6. gardener1

    Hard to believe that Mastro wasn’t bright enough to go to a country that didn’t have an extradition treaty with the US.

    France? What was he thinking?

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  7. Kary L. Krismer

    RE: Pegasus @ 4 – Locally, those caveman “we buy ugly houses” billboards are back. I forget the company behind that, but it’s national as I recall.

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  8. Kary L. Krismer

    By gardener1 @ 6:

    Hard to believe that Mastro wasn’t bright enough to go to a country that didn’t have an extradition treaty with the US.

    France? What was he thinking?

    He was probably worried that if in such a country, President Obama would send in Seal Team Six.

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  9. 2kt

    RE: David Losh @ 2

    Dave, if anything, mortgage paper rose in price, note gains by Fed and Treasury on AIG and Bear Stearns bonds that were once called worthless. Banks are in a decent shape and wrote off majority of the losses from 06-07 loans (perhaps with exception of BofA). As to millions of homes that nobody wants, inventory levels don’t seem to support that claim.

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  10. David Losh

    RE: 2kt @ 9

    Bernanke is promising to buy paper. Banks are in great shape, and getting stronger, that’s why they can dictate the terms of the loans on over priced properties.

    20% down payment is the new normal.

    As far as inventory, the Real Estate market is broader than urban centers, and there are millions of properties already built with thousands more coming on the market. It’s a simple process of taking out bank loans, taking the 10% development fee, and bankrupting the corporation if things don’t work out.

    All of those housing units across the country were built with bank money, corporations made profits, and we are stuck with the paper. It’s in your 401(k).

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  11. Kary L. Krismer

    By David Losh @ 10:

    20% down payment is the new normal.

    As far as inventory, the Real Estate market is broader than urban centers,

    What are you talking about on the 20%? Not that many buyers put down 20%, so 20% is not normal now.

    As to inventory, you’re right that it is broader than the urban centers, but outside urban centers there was not such a run up in prices.

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  12. David Losh

    RE: Kary L. Krismer @ 11

    For God’s sakes, how many times have you heard the 20% down figure thrown around? It used to only be used for non owner occupied. Now people think it’s smart to get past the mortgage insurance payments.

    and then to follow your first statement with the broader market didn’t have the run up in pricing is sheer insanity. Houses were built in Billings Montana for $1 Million. Where is that video?

    Henderson Nevada, Hialeah Park Florida, Cheyenne Wyoming, and everything surround Raliegh North Carolina, are all over built at those construction cost prices, and then some, in most cases, a lot more.

    That doesn’t take into account the global market place, that also has mortgages.

    All that paper is out there being bought, sold, and traded on a daily basis with no hope of finding equilibrium without debt forgiveness.

    The only thing propping up paper is government debt that is buying bad debt. We are going to all pay one way or the other.

    My vote is we let banks fail, enough is enough.

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  13. Kary L. Krismer

    By David Losh @ 12:

    RE: Kary L. Krismer @ 11 – For God’s sakes, how many times have you heard the 20% down figure thrown around?

    By people who know what they’re talking about? Almost never.

    I’m not sure why you would call it the new normal. It’s not normal now, it wasn’t normal for at least the past three decades, so how could it be the new normal?

    Not sure what the rest of your post has to do with that question.

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  14. David Losh

    RE: Kary L. Krismer @ 13

    OK, let’s say that everybody is getting an FHA loan, with 5% down, tops.

    That would be more bad paper chasing the other bad paper because the value isn’t there.

    It only adds to the fact we will need more debt forgiveness, or at the very least reorganization of debt, by banks, by lenders, and by investors,

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  15. Kary L. Krismer

    RE: David Losh @ 14 – FHA is 3.5, but whatever. Whether the value is there may depend on whether or not Obama is re-elected, and high unemployment continuing. If jobs come back, then the value will likely be there.

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  16. David Losh

    RE: Kary L. Krismer @ 15

    It won’t be there, any more than it is there today.

    We’re rich here in Seattle, and San Fransisco. We have good paying jobs, in growth industries. We are in the minority.

    The secondary mortgage market takes in all the mortgages that are worthless.

    The point is that we may make some good loans today, with better standards, but it is only delaying the inevitable crash of the secondary mortgage market.

    I’m thinking that Bernanke is making the whole mess worse by buying paper, it’s a false sense of security.

    No matter what, the market place will need to find an equilibrium, and that equilibrium will be in cash, just like it is for the very rich.

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  17. 2kt

    RE: David Losh @ 16

    There is usual absence of logic in your post, Dave. Good loans do not crash markets.

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  18. David Losh

    RE: 2kt @ 17

    You can’t wipe a decade of bad loans by promising to be good today.

    I believe housing is way over priced. It makes no difference about the promise to pay, or the ability to pay, it has to do with the value of the under lying asset. So, those good loans today are just waiting to be renegotiated, and that is here in this country. In Europe, Asia, or South America, where there is no way any one is going to pay, or want to pay, or have the ability to pay, those loans will need debt forgiveness.

    We already saw it with Japan’s lost decade, or two.

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