PAX Weekend Open Thread (2009-09-04)

PAX Weekend!

Here is your open thread for the weekend beginning Friday September 4th, 2009. 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!

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About 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. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

34 comments:

  1. 1
    The Tim says:

    FYI, I’m going to be at PAX all weekend, so if you post a comment that is awaiting moderation or for some reason goes into the spam bin, you’ll just have to wait until evening for me to fish it out.

    Also, I really hope the NWMLS doesn’t release their August numbers today. If they do, I will post the update late tonight.

    If you see me at PAX, say hi. I’ll be sporting a Pac-Man baseball cap and Woot Shirts all weekend: RAAAARR! on Friday, Gonna Make You Lunch on Saturday, and Mr. Toast on Sunday.

  2. 2
    see it clearly says:

    dammit The Tim how dare you have a life outside this site. Enjoy!

  3. 3
    huh says:

    What do you all think about the replacement of Carson by Albaugh at BCA? Do you think it will affect Boeing’s future in the Seattle region? I mean, it seems more and more, Boeing is pushing outsiders to run things over here, and pushing insiders to be workerbees elsewhere (or retire), and the loyalties to this area are dwindling. What specific functions does Boeing need to have done here in Seattle?

  4. 4

    RE: huh @ 3

    Good Point

    As the Baby Boomer Boeing folks retire, the experience base in Seattle vanishes.

    Alan Mulally got the heck out of Seattle and switched to Ford just before the 787 mess hit the fan, maybe a little birdy told him get out quick before you’re blamed…LOL

  5. 5
  6. 6
    Acerun says:

    What happens when the FHA goes broke????

    “The FHA’s aggressive lending programs have continued throughout the housing downturn, causing its market share of the mortgage industry to grow from 2% in 2005 to 23% today. … ”

    http://online.wsj.com/article/SB125202440174685297.html

    Ticking time bomb. Another prop to bogus stabilization in housing is going to go down in flames.
    What would you expect when a lender gets aggressive in a declining market. About 7% of FHA loans are delinquent and I wonder how many are under water?

    props to CR.
    http://www.calculatedriskblog.com/2009/09/fha-next-bailout.html

  7. 7
    Kary L. Krismer says:

    I think the NWMLS numbers are scheduled for today–I read that somewhere last weekend.

  8. 8
    Kary L. Krismer says:

    RE: Acerun @ 6 – I don’t know that I’d call the FHA’s programs aggressive. They’re really just stepping in to fill the hangover caused by the misguided use of 80/20 loans. Those loans didn’t have PMI, meaning the PMI insurers don’t have much income from the era loans such loans were common., which limits the business they’re willing to do now more than what it would if they had such revenue coming in.

    I believe right now PMI will only go up to 90%,. where in the past they’ve gone as high as 100%.

  9. 9
    David Losh says:

    FHA is another odd animal that has gotten off track and into an arena it was never intended for.

    The way I remember it is that FHA garuanteed a portion of the value of a Note up to say 35%. That way if there was a default on the Note the investor could get close to whole. Investors preferred to buy these Notes and it helped make them fully assumable. No one cared who was making the payments as long as the Notes were productive.

    There must have been some change some place because mortgage insurance was required on any loan above 80% of value and that’s how 80/20s got so popular. The 80% was covered and the 20% was not.

    I don’t track these things but I get the impression FHA fell into the same guidelines. Now that values are below 80% of face value of the Note I’m thinking the Insurance Industry again is asking for all of these bail outs.

    I wish I had an insurance company where I could write policies and when something happens and I don’t feel like paying I can go to the government and have them pay, make them the bad guy, or have them change laws to make my business more profitable.

    I think the mortgage company nonsense has to stop. Anyone taking out a loan, or refinancing is just making things worse for all of us. All loans ahould be fully assumable.

  10. 10
    Kary L. Krismer says:

    David, I’m not sure any of what you’re talking about has changed. What is “guaranteed” for investors has nothing to do with the amount of the loan–or at least doesn’t have to be the same. FHA just fell into disuse because of PMI and 80/20s. It wasn’t as good of an alternative. Now it is for most transactions with less than 10% down.

  11. 11
    Kary L. Krismer says:

    BTW, Google indexes this site as a news site. I just searched for “NMWLS Median” and clicked on the News link and this site popped up.

  12. 12
    Kary L. Krismer says:

    The numbers are out. $456,585 mean, 375,000 median, 1609 volume. That takes us back to May on the median, but not the mean, and has volume below June, but well above May. I don’t usually follow this, but the pending volume was 2311.

    Since Tim’s gone, I’ll do the graphing below.

    . (Zoom to view.)

  13. 13

    RE: Acerun @ 6

    Great Articles Acerun

    I sent them out to a friend. The same old same old subprime borrowing for uncontrolled growth is not the cure for our economic mess IMO, its just gonna make it far worse.

  14. 14
    Lake Hills Renter says:

    Not sure if this affects SB, but -posting just to be sure: WordPress Hack Warning

  15. 15
    patient says:

    “I don’t know that I’d call the FHA’s programs aggressive”

    But I do. A program that offers 3.5% down with a national YoY price decline of about 15% according to the latest c/s composite 20 index is not only aggressive, it’s insane and more than likely headed for disaster and more waste of tax payer dollars.

  16. 16
    Kary L. Krismer says:

    RE: patient @ 15 – I think you need to balance supporting the housing market against an over-reaction against the total collapse of the banking and financial system.

    I view markets as being over-reaction followed by over-reaction, and thus view FHA as just preventing over-reaction the downside.

    And again, it’s not like it’s a new program. It was 3% on the way up, so they’ve wound it back only slightly, but it’s not like it was 10% and they changed it to 3.5.

  17. 17
    patient says:

    RE: Kary L. Krismer @ 16

    Scare words/tactics invented and promoted by bankers, hedgies and the NAR/NAHB. I have not seen any convincing theory that a quick housing correction will be worse than a loooooooooong one. Btw, Re-agents are probably the ones that will loose the most in a long correction since volume is more important than price.

  18. 18
    Kary L. Krismer says:

    RE: patient @ 17 – I was actually focusing more on the fact that financial entities had so many instruments secured by real estate–not the real estate market directly. But for that, you’re right it really wouldn’t make a great deal of difference to agents (assuming banks actually processed short sales). If the real estate market dropped another 20% across the county it wouldn’t be a big deal for most people, but it probably would be a big deal for a lot of financial entities.

  19. 19
    Kary L. Krismer says:

    Well, Tim will have a lot of material for his reporting roundup. At least two entities focused on the increase in pending sales. The Times at least mentioned that number being questionable, but didn’t state the precise reason, probably because they don’t have direct access to the data.

  20. 20
    patient says:

    RE: Kary L. Krismer @ 18

    ” but it probably would be a big deal for a lot of financial entities”
    No doubt but I’m far from convinced that using tax payer money to put more people under water with 3.5% down mortgages is better for the economy as a whole then letting many of the banks crash and burn and support the survivors and new banks instead.

  21. 21
    Kary L. Krismer says:

    I’m of the opinion that a massive collapse of the banks would be a bad thing. As I was saying 10 to 11 months ago, I wasn’t afraid of ending up on the streets as much as finding out that there were no streets.

    On this topic, I was watching a Ch 9 “History Detectives” show the other night, and they were going through this plan in the late 20s to have trans-Atlantic flights by having a bunch of floating platforms with hotels scattered across the ocean. What killed it was lack of financing during the early 30s. It sort of relates to what I’ve spoken of before–the effect of this financial crisis on technological research. Anyway, while that floating platform company never did produce anything past the first very basic prototype, the design is very similar to the floating oil well platforms used today. And as it turned out, the length of flight for commercial airlines was greatly increasing at the time, meaning it probably would have lost money if they had obtained financing. Apparently Charles Lindberg (sp?) went from a supporter of the project to a critic for just that reason. Finally, I think the military is still considering such platforms for airplane use by planes that are too large for aircraft carriers.

  22. 22
    patient says:

    You’r a politicians dream citizen Kary, you bought the propaganda.

  23. 23
    Kary L. Krismer says:

    RE: patient @ 22 – I’ve been to places where they don’t have much, including financial systems. Without a banking system, there is no economy. The stuff we know would all be gone.

  24. 24
    Kary L. Krismer says:

    By patient @ 15:

    “I don’t know that I’d call the FHA’s programs aggressive”

    But I do. A program that offers 3.5% down with a national YoY price decline of about 15% according to the latest c/s composite 20 index is not only aggressive, it’s insane and more than likely headed for disaster and more waste of tax payer dollars.

    BTW, this sort of connects up with some of the comments in the ban short sale thread, but the 15% a year is really over-stated, if you use medians rather than CS. The median number reported includes short sales and REO properties. If the median was reported without those sales the total drop from peak two years ago would be about 20%. And the peak probably had few short sales and REOs, so that would probably be a fairer comparison. And keep in mind the peak here was relatively short-lived. There were only 7 months at 435,000 or above. So realistically, very few loans were made at values based on our highest prices.

    But the point is this. 100% loans were made knowing that the foreclosure process only recovers about 80% of value at the sale (and that ignores lost interest). The median being reported includes roughly 250 short sale and REO properties, properties receiving on average less than 20% of the value of normal sales. That drags down the median–changes the mix.

    As I’ve said before, you really need to do a CMA on a property to determine value, but if you are going to look at county wide medians to extrapolate your value, you would use non-distressed property medians if you’re a non-distressed property, and short sale medians (which would be at least 20% lower) if you’re a short sale property. The only case that can be made for using the reported median is it’s the only number reported!

  25. 25
    deejayoh says:

    This article says over 30% of construction loans in Seattle are delinquent. Highest in the nation by a longshot

    http://www.nytimes.com/imagepages/2009/09/04/business/20090905_CHARTS_GRAPHIC.html

    The chart is kind of hard to read – but the green bar is the 2009 rate as of 6/30

    Ruh roh scooby. Look for some condo deals coming … more auctions on the way.

  26. 26
    softwarengineer says:

    RE: deejayoh @ 25

    Great URL Deejayoh

    I sent it to my friend too :-)

    Add to your commericial loan mess documented is the unemployment three headed monster [reducing consumer spending], getting bigger and bigger everyday, and an 85% spike in unemployment affecting college degreed professionals earlier this year alone:

    States in part:

    “…Electrical Engineers Experience Record Job Losses
    The unemployment rage for electrical engineers doubled during the second quarter of 2009….”

    the rest of the URL:

    http://www.cio.com/article/496960/Electrical_Engineers_Experience_Record_Job_Losses

    More degreed unemployment news in part:

    “…The total number of unemployed increased by more than 50 percent from January 2008 through last month, but the number of jobless Americans 55 or older jumped 70 percent, according to new Labor Department numbers released Friday.

    And for people with college degrees, the number rose even more sharply, by nearly 85 percent.

    The numbers confirmed a trend that job cuts are moving up the age and educational ladders, said Andrew Stettner, deputy director of the National Employment Law Project….”

    the rest of the URL:

    http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2009/02/06/national/a152330S41.DTL

    How about nursing? In part:

    “….More hospitals have recorded mass layoffs in 2008 than in any year in the past decade. More than 9,700 hospital employees will have filed initial claims for unemployment compensation in 2008 as a result of mass layoffs. That would be highest such number since 2005, which saw nearly 13,300 laid off, and 28% more than the 10-year average. The news comes despite the relative optimism in healthcare as compared to the rest of the economy, where most other major sectors of employment have posted net losses of jobs for the year….”

    The rest of the URL:

    http://www.uannurse.org/research/pdfs/The-Hospital-Industry-2009.pdf

    I’d add most of the layoffs are related to overpopulation and the surge in Uncompensated care, see surge chart in article above. The article above also states in part:

    “…Uncompensated care is defined as the overall measure of hospital care provided for which no payment was received from the patient or employer. It is the sum of a hospital’s “bad debt” and the charity care it provides. Uncompensated care excludes other unfunded costs of care, such as underpayment from Medicaid and Medicare…”

    How about teachers? See the California news and believe me, its coming to a theater near you too very soon:

    “….California law requires local school districts to inform teachers, counselors, nurses and other school employees by March 15 that they could be laid off at the end of the school semester. The across-the-board budget cuts have pushed districts to issue layoff notices to more than 26,000 teachers….”

    The rest of the URL:

    http://www.cftl.org/centerviews/april09.html

    I’d add

    etc, etc….

  27. 27
    Kary L. Krismer says:

    I forget what thread I mentioned the fixed up REO properties in Snohomish, but I was in another one today. It was a Freddie or Fannie (I forget) and had new carpet, paint and kitchen and bath flooring. But I went into another one (F or F) that was a mess. So maybe they’re just fixing up some, or fixing them up as they can.

  28. 28
    patient says:

    Kary there are many ways to skin a cat, to pour tax payer money into setting up more people for failure is one that I don’t agree with. And just because many of the current banks would go belly up do not mean that banking will disappear. It’s profitable business even if you don’t make risky stuff and there will always be takers. You bough the scare propaganda and so have many others ( as they did with wmds in Iraq ) so you are far from alone but there are skeprtics like me as well.

  29. 29
    david losh says:

    RE: Kary L. Krismer @ 27

    I have a contractors coffe clatch I go to on Tuesday mornings and another source of foreclosed properties. As I understand it some of these third party vendors for short sales and foreclosure do work on properties for resale.

    We did one last year for a Real Estate agent who had some control of the property, but the bank was the owner. All I know is that we did the work and got paid only after sending a bill to escrow. If it was not paid we would lien the property.

    In other words my impression is, from other stories I’ve been told, that some how there are Real Estate agents who collect some side money from the bank for fixing up properties.

    I’d like to learn more about that, so I keep asking.

  30. 30
    Kary L. Krismer says:

    By patient @ 28:

    Kary there are many ways to skin a cat, to pour tax payer money into setting up more people for failure is one that I don’t agree with. And just because many of the current banks would go belly up do not mean that banking will disappear. It’s profitable business even if you don’t make risky stuff and there will always be takers. You bough the scare propaganda and so have many others ( as they did with wmds in Iraq ) so you are far from alone but there are skeprtics like me as well.

    Your reference to scare tactics is rather odd. Do you really not think that multiple financial entities would have failed but for the trillions of dollars put into saving them? Do you really think that if multiple large financial entities had failed that the system would not have collapsed? Do you know of an example in history at any point in time where a financial system collapsed and the results were not horrible? Just what do you think was the deception?

    I know a lot of people like to point to Japan for the concept that it’s better to let things fail, but the fact that Japan hasn’t done well over the past 10+ years doesn’t mean that it would be in a better position now if more of their banks had failed earlier, or that a different strategy to save them wouldn’t have lead to better results today.

    Oh, and on the point in hand, I don’t know how anyone could argue that spending 5k to get an extra 20k isn’t a good thing, especially if that money comes faster. If anything, it’s probably actionable not to do that if you can on the individual bank level. And on the entire market level, REOs if done that way wouldn’t be such a huge drag on the market.

  31. 31
    patient says:

    Kary, FDIC could have seized the banks as they failed and kept the staff and operations going. The investors would have been wiped out and the management removed. Banking would have continued. It’s just one possibility. This was scare tactics to save Paulson’s buddies. And to stimulate consumers going into more long term debt is questionable at this point.

  32. 32
    softwarengineer says:

    RE: patient @ 28

    I’m with you Patient

    If Australia could bite the interest rate bullet and raise mortgages [lower or mitigate prices] and thrive, so can America. Its just the broke RE investors that have a bone to chew with us.

    Banks will thrive better with more interest income and lower RE prices too, a five year old could figure that one out. Yet FHA still is trying the method that killed our economy in the first place, IMO.

  33. 33
    Scotsman says:

    KD has done a great job of summing up the big picture- why there is no way out. Put out some effort, do the work- take 15 minutes to read through this and you’ll understand more than just about anyone you know.

    http://market-ticker.org/archives/1414-2009-Labor-Day-Ponderings…..html

  34. 34
    Scotsman says:

    (Realtor) Boemio specializes in short selling, in a particularly Vegas way. Basically, she finds clients who owe more on their house than the house is worth (and that’s about 60% of homeowners in Las Vegas) and sells them a new house similar to the one they’ve been living in at half the price they paid for their old house. Then she tells them to stop paying the mortgage on their old place until the bank becomes so fed up that it’s willing to let the owner sell the house at a huge loss rather than dragging everyone through foreclosure. Since that takes about nine months, many of the owners even rent out their old house in the interim, pocketing a profit.

    http://www.oftwominds.com/blogaug09/housing-pareto08-09.html

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