Mid-Week Open Thread (2010-07-14)

Here is your open thread for the mid-week on July 14th, 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!

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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.

37 comments:

  1. 1
    Cheap South says:

    On the topic of foreigners buying Real Estate,

    http://www.marketwatch.com/story/foreign-buyers-focus-on-homes-in-four-states-2010-07-09

    “The survey found foreigners buying property in 39 states, but a bit more than half were in four states: Arizona, California, Florida and Texas.

    The buyers came from 53 countries, but the largest number was from Canada, at 23%. Mexico sent 10% of purchasers; the United Kingdom, 9%; China (including Hong Kong), 8%; Germany combined with France, 7%; and India, 5%, according to the NAR survey. ”

    But I really have a hard time believing that the Chinese buying in Seattle are not residing here already. Seattle is NOT an exotic location; anyone that has the cash to buy in Seattle can get more social status for their buck at home saying they own property in San Diego, L.A., Miami, or Hawaii. And as an investment, let’s face it, at this prices?! And as this country ages, population will continue to move South.

  2. 2

    RE: Cheap South @ 1

    Foreign Real Estate Purchases Go Both Directions, It’s a Moot Point

    Article in part:

    “….According to Canadian brokerage Royal LePage, U.S. residents are the main reason the average house in Whistler, B.C., has leaped to $650,000. In addition, Americans have purchased 50 percent of the new high-end waterfront condominiums sold in downtown Vancouver. In the east, Americans have been grabbing vacation properties in Nova Scotia and downtown condominiums in Montreal….”

    http://www.inman.com/buyers-sellers/columnists/americans-scramble-buy-canadas-real-estate

    And although the article above was wrote 2004 before the Repression, it’s slamdunk the buyers weren’t all mostly flippers anyway. Also, lately, the dollar is doing better than other world currencies anyway.

    On Mexico, article in part:

    “…Mexico used to ban foreigners from owning oceanfront property, but now Americans can buy homes right on the beach, and that’s sparked a boom in once-remote regions.

    In the state of Nayarit, on Mexico’s Pacific coast, breath-taking beaches are behind a boom that has many of the real estate signs in English….”

    Compared to horrifying waterfront American prices, Mexican prime real estate is a much better deal and the cost of living down there is much lower for retired Boomers to migrate to too.

  3. 3
    Blurtman says:

    WAMU, WAMU?

    The Federal Deposit Insurance Corp. (“FDIC”) has started laying a foundation for lawsuits against the senior executives and directors that the agency claims were responsible for their bank failing.

    Link: http://mandelman.ml-implode.com/2010/07/for-bankers-of-failed-financial-institutions%E2%80%A6-the-pain-is-not-over-yet/

    It would be great if we could see a summary of the $ contributions of WAMU to Washington state politicians.

  4. 4
    pfft says:

    Eriskine Bowles, who we talked about the other day, got his deficit figures way off.

    When the co-chairman of President Obama’s deficit commission gets his deficit numbers off by 100 percent, you would think this would be worth a little media attention.

    Bowling Alone? Erskine Bowles Goes Off the Deep End
    http://www.cepr.net/index.php/blogs/beat-the-press/bowling-alone-erskine-bowles-goes-off-the-deepend-on-deficit-warni

    following up on the CSX earnings. rail traffic was up YOY although a little down from the last few months. I guess that means compared to where we were we are doing a lot better but in the short-term we may be slowing. traffic was up 10.6% YOY.

    Rail Traffic softens further in June
    http://www.calculatedriskblog.com/2010/07/rail-traffic-softens-further-in-june.html

  5. 5
  6. 6
    Sniglet says:

    I have just posted the link for the recording of last night’s edition to my weekly “Optimistic Bear” radio show.

    In this episode a caller from North Carolina tells us that the economy hasn’t hit bottom there, and that from his perspective as a bank loan officer (with nation exposure) a double-dip recession is already baked into the cards. We also delve into the profits and pitfalls of tax lien investing.

    http://surkanstance.blogspot.com/2010/07/this-week-on-bear-radio-view-from-north.html

    We’re live every Tuesday at 9:00pm (Pacific). I look forward to hearing more Seattle fans call in.

  7. 7
    Sniglet says:

    When most people think of bear markets they tend to imagine a relatively short-term affair that reaches a bottom, over a year or two, and then recovers for many years (or even decades) in the future. Bear markets, in short, are just temporary blips as stock markets (and economies) move on to ever greater heights. Japan’s experience with a bear market that is over 20 years old shows that these simplistic assumptions regarding bear markets don’t always hold true.

    http://surkanstance.blogspot.com/2010/07/japan-picture-of-multi-decade-bear.html

  8. 8
    Sara says:

    I also posted this on today’s topic but I thought it should have been here.

    I have a Seattle bubble story to tell. It involves me, a regular lurker here and a little bank owned property I now call home, but to begin we must go back in time to 2007… fades to past….
    In 2007 I was 28 and decided It was about time to buy my first home. My partner was game and everyone was buzzing about real estate. Our friends were crowing about how easy it was to get approved and we thought if they can do it so can we. So off to the bank we when and lo and behold we were approved for $350000. Huh! I am a numbers geek so I went home and figured out that payment and said no way. We had a combined income of $70000.00 so I thought that the bank was crazy. First warning sign. I came up with a payment I was comfortable with and set my own ceiling at 200000 and went shopping. Now we live in Tacoma so this is possible, but the places they were showing us were dumps. We moved on to less desirable neighborhoods and did find something we liked in a decent place. By now however I was starting to suspect something was wrong. We made more than the average income for the area and yet all we could find was a 2 bedroom on the wrong side of town. My Realtor tried to talk me into moving my purchase point up to the maximum but I started searching the web for more information. In my search I found this website, Seattle Bubble and I started reading. I read every post for the last 6 months I swear and when I looked up I knew I had my answer. Canceled my shopping trips, fired my Realtor and sat down to wait. And wait. And wait; well at least it felt that way. Fast forward to 2010, two raises, one baby and one Mom tired of waiting for her fenced backyard. We decided to start looking again. First day in we put in an offer on a 2 bedroom bank-owned property. Listed at $85000 it went to multiple bids and sold for $80000.00. The multiple bids scared us so we pulled out and waited and watched Redfin. A few months later another two bedroom came on the market listed at 94900. We were ready and put in an offer immediately. It also went to multiple bids and we put in what we were comfortable with 95000. We won the bidding war and we were under contract. I put these examples in to show you that just because there are multiple bids does not mean they are high bids. Both houses had over 5 offers and we would have won either with a full price offer. Now a history of the house. http://www.redfin.com/WA/Tacoma/1410-S-43rd-St-98418/home/2940086. It is a 2 bedroom one bath 1906 Victorian remodeled in 2006 before it’s last sale at sale price 192800. Updated plumbing and electrical with no major problems found during the inspection. The bank fixed a busted pipe in the bathroom and painted one exterior wall without any hassles about bank will do no repairs. Funny things is despite our income growing to 90000 a year this time our original loan application with BECU was rejected! We are both post-grads with student loans up to our ears. So we had to go, you guessed it FHA, the new sub prime. All in All it all went smoothly, we closed on June 25th in time to get the $8000.00 tax credit for a final home price of 87000 and have moved in. The house is comfortable, I have mowed the 4 foot grass and painted some walls bit other than that It was move in ready. So that is my Seattle Bubble, REO story. Finding this website and waiting 3 years saved me $105800. Prices may still decline but for now I am now longer in an apartment and renting this same house would be 900. Our payment is 740. So I guess Ray is right, there are gems out there and Thank you Tim for me at least you made a big difference in my life.

  9. 9
    TJ_98370 says:

    I haven’t checked in for awhile and I haven’t been paying much attention to real estate lately, but I scoped out my neighborhood in Kitsap-land the last couple of days. Wow! Things have really changed from the way they were a couple of years ago. One place near where I live went up for sale at $650k two years ago and did not sell. Now it is on the market again for $425k and is still not selling (nice house, high bank waterfront). Another place is on the market for 14% less than what it was a year ago. There are other places that are on the market for less than what the current owner paid within the last two years. When I do the MLS map for my area, I am shocked at how many places are on the market. There has been a definite tangible change – Old news to you Seattlites?

  10. 10
    Scotsman says:

    A picture’s worth a thousand words- here are some eye-popping charts for home sales, mortgage/property value ratios, etc:

    http://housingstory.net/2010/07/08/pending-homes-sales-crash-in-a-record-fall-to-a-record-low-as-tax-break-expires/

  11. 11
    patient says:

    RE: Scotsman @ 10 – Bah, it’s hardly tapering off and btw it’s not a demand issue it’s a supply issue. There were no new homes built a year ago and the available homes are not for sale so count on an explosion in home price appreciation the second half of this year. Buy now or be priced out f o r e v e r

  12. 12
    The Tim says:

    RE: Sara @ 8 – Wow Sara, that is an amazing story. Thanks so much for sharing! I love hearing reader feedback like this!

  13. 13
    Everett_Tom says:

    RE: Sara @ 8 – I nominate this for the “feel good post of the day”.

    Thanks for sharing Sarah. It’s nice to have a story that clearly illustrates that posters (or lurkers) are not just anti-housing crazy renters, but folks who want something a little more reasonable for their money.

  14. 14
    Scotsman says:

    RE: patient @ 11

    Heh. This is my favorite, and probably Ray’s too- that’s a lot of debt that now has no or little equity support:

    http://thenewmortgagecompany.files.wordpress.com/2010/07/10-key-charts-mortgage-bubble-vs-property-bubble-by-newobservations-net.jpg?w=600&h=454

  15. 15
    pfft says:

    unemployment benefits have been in the news lately. here is an interesting fact.

    Here’s something most people don’t know about unemployment benefits: They’re not flat across the country. The federal funding is tied to the unemployment rate. To get funds for 99 weeks of unemployment, a state’s unemployment rate has to be higher than 8 percent. Nebraska, with its low unemployment rate, isn’t eligible. Nevada, which is near 15 percent, is.

    Abandoning the long-term unemployed
    http://voices.washingtonpost.com/ezra-klein/2010/07/abandoning_the_long-term_unemp.html

    for every job opening there are 5 unemployed people.

  16. 16
    Scotsman says:

    RE: pfft @ 15

    “for every job opening there are 5 unemployed people”

    Well that’s bullish. Just think about all that consumer buying power that will be unleashed once those guys get jobs! I mean, once those guys get more unemployment benefits. I mean once they just go on welfare. Or something.

  17. 17
    Sniglet says:

    RE: Scotsman @ 14

    This is my favorite, and probably Ray’s too- that’s a lot of debt that now has no or little equity support:

    De-leveraging is no myth. You just have to remember that much of the “de-leveraging” (i.e. the erasure of debt obligatios) is occuring through defaults and/or banktrupcy. Paying off your creditors isn’t the only way to eliminate your debt obligations.

  18. 18
    wreckingbull says:

    RE: Sara @ 8 – I like it, Sara. I think many of us had similar initial reactions while looking at homes during the bubble. Sometimes that voice in the back of your head is the best financial advisor you can find. When he/she screams “Are you f’ing kidding me?!?”, it is prudent to listen.

  19. 19
    Trigger says:

    RE: Scotsman @ 16 – I think a tax credit for everybody would help. A 10K tax credit for every American. Most would effectively not pay any taxes.

    Or a rebate of 10K.

    And then every year we could repeat the same thing.

    What do you think Scotsman?

  20. 20
    Trigger says:

    RE: Trigger @ 19 – I think the key is to employ some people who love financial engineering and they would be able to re engineer the crisis – so it is not painful to anybody. The key is not to make people upset. People do not like being upset.

  21. 21
  22. 22
    Scotsman says:

    RE: Racket @ 21

    Estimates of as many as 18-19 million vacant homes in the U.S. are common so Tyler’s numbers may be a bit off, but it’s no secret China has significant structural issues of its own looming on the horizon. Fun times ahead!

  23. 23
    Scotsman says:

    When demand falls (further) and supply is already overly abundant, prices will fall- right?

    “Demand for loans to purchase U.S. homes sank to a 13-year low last week, and refinancing demand also slid despite near record-low mortgage rates, the Mortgage Bankers Association said on Wednesday.

    Requests for loans to buy homes dropped 3.1 percent in the week ended July 9, after adjusting for the Independence Day holiday, to the lowest level since December 1996, the industry group said.”

    http://www.msnbc.msn.com/id/38240385/ns/business-real_estate/

  24. 24

    By Scotsman @ 22:

    Estimates of as many as 18-19 million vacant homes in the U.S. are common so Tyler’s numbers may be a bit off, but it’s no secret China has significant structural issues of its own looming on the horizon. Fun times ahead!

    I assume you don’t mean building structural issues, but they also have those too!

    And on that topic, having seen how they build those condos in Cabo, I’d hate to be there if there were a major earthquake (unless maybe I was at the pool).

  25. 25
    pfft says:

    By Scotsman @ 16:

    RE: pfft @ 15

    “for every job opening there are 5 unemployed people”

    Well that’s bullish. Just think about all that consumer buying power that will be unleashed once those guys get jobs! I mean, once those guys get more unemployment benefits. I mean once they just go on welfare. Or something.

    how many times do I have to say lagging indicator?

  26. 26
    pfft says:

    By Sniglet @ 17:

    RE: Scotsman @ 14

    This is my favorite, and probably Ray�s too- that�s a lot of debt that now has no or little equity support:

    De-leveraging is no myth. You just have to remember that much of the “de-leveraging” (i.e. the erasure of debt obligatios) is occuring through defaults and/or banktrupcy. Paying off your creditors isn’t the only way to eliminate your debt obligations.

    link please.

  27. 27
    Scotsman says:

    RE: pfft @ 26

    “link please”

    OMG. Sorry, junior- there is no google link to how to think. Some stuff you just have to reason through. Let us know how that goes.

  28. 28
    Sniglet says:

    RE: pfft @ 26

    link please.

    Just look at articles about how foreclosures and bankruptcies have been rising for years. To my knowledge no one is disputing this. My only point is that a foreclosure results in a write-off of a debt obligation. This has the same effect on money supply statistics go this as if someone paid off the debt. Money has just vanished from the system.

    This is what de-leveraging is all about. My only point is that de-leveraging (i.e. the expunging of debt obligations) can occur as a result of defaults too.

  29. 29
    Sniglet says:

    I have a technical question about foreclosures. How are all the interests of multiple creditors, and their liens, dealt with?

    Does the buyer of a foreclosed home become responsible for making good on all the outstanding liabilities of the home (e.g. property taxes, second mortgages, etc)? Or does a foreclosure sale automatically infer a clear title?

    I am pretty sure that foreclosures don’t automatically eliminate all obligations. For example, I have heard of cases where HOAs foreclose on a home due to unpaid assocation dues and that the bank’s rights still aren’t expunged.

    Can anyone offer more insights on how this works?

  30. 30

    RE: Sniglet @ 29 – This is a rather complicated topic, but in general the interests wiped out are those that were created after the deed for trust being foreclosed was recorded. So any judgments or deeds of trust recorded after would be wiped out, ASSUMING that the judgment or deed of trust creditor received proper notice of the foreclosure sale, and that the sale process was properly conducted.

    Then there are some other issues. IRS liens might or might not follow the first in time rule exactly, and the IRS might have some type of redemption rights. HOAs might have some limited priority (e.g. 6 months)–I really don’t remember Washington’s rules on that. And a foreclosure will not wipe out a lis pendens. It will not wipe out any unpaid real estate taxes. There are probably a few other exceptions that have not popped into my head.

    This is the type of thing that there are a lot of court cases addressing the issues on, and where small changes in fact can change the result.

    And obviously, you should get your own personal legal advice prior to buying at such a sale.

  31. 31

    RE: Sniglet @ 29 – BTW, my prior answer was addressing buying at a foreclosure sale, not buying an REO. Buying at an REO is pretty much the same as buying a normal property when it comes to title issues. You mainly need to check the preliminary commitment from the title company.

  32. 32
    Pegasus says:

    Cantwell, Murray vote aye on worthless watered down Wall Street regulation bill. Vote these clowns out of office. They done enough damage already. For years they ignored the frauds on Wall Street. Today they voted to pretend to do something about it.

    http://blog.thenewstribune.com/politics/2010/07/15/roll-call-cantwell-murray-vote-aye-on-wall-street-regulation-bill/

  33. 33
    pfft says:

    By Sniglet @ 28:

    RE: pfft @ 26

    link please.

    Just look at articles about how foreclosures and bankruptcies have been rising for years. To my knowledge no one is disputing this. My only point is that a foreclosure results in a write-off of a debt obligation. This has the same effect on money supply statistics go this as if someone paid off the debt. Money has just vanished from the system.

    This is what de-leveraging is all about. My only point is that de-leveraging (i.e. the expunging of debt obligations) can occur as a result of defaults too.

    that wasn’t your point. you point was that we weren’t delevering we were just defaulted leading us to believe that even more pain will happen as people outright deleverage. I know it’s common sense, but I’d wouldn’t mine some actual figures. it’s easy to think something is common sense and be proven wrong, especially with economic data.

  34. 34
    Sniglet says:

    RE: pfft @ 33

    you point was that we weren’t delevering we were just defaulted leading us to believe that even more pain will happen as people outright deleverage.

    Sorry. You lost me. It’s all de-leveraging, regardless of whether someone is defaulting or paying off their loan with cash. I don’t see any difference in the over-all economic impact either way. De-leveraging is a deflationary force, regardless of whic form it takes.

  35. 35
    David Losh says:

    RE: Sniglet @ 34

    It’s different in that a default is a swap, or a per centage of the loss. Paying off is a velocity of money. I make money, I pay debt, the lender has money to invest.

  36. 36
    Ross Jordan says:

    By softwarengineer @ 2:

    RE: Cheap South @ 1

    Foreign Real Estate Purchases Go Both Directions, It’s a Moot Point

    Article in part:

    “….According to Canadian brokerage Royal LePage, U.S. residents are the main reason the average house in Whistler, B.C., has leaped to $650,000. In addition, Americans have purchased 50 percent of the new high-end waterfront condominiums sold in downtown Vancouver. In the east, Americans have been grabbing vacation properties in Nova Scotia and downtown condominiums in Montreal….”

    http://www.inman.com/buyers-sellers/columnists/americans-scramble-buy-canadas-real-estate

    And although the article above was wrote 2004 before the Repression, it’s slamdunk the buyers weren’t all mostly flippers anyway. Also, lately, the dollar is doing better than other world currencies anyway.

    In 2004, 1USD bought approx 1.6CAD. Today, they are nearly even. So a CAD$1M whistler property cost only USD$625,000. Now that’s a good return on real estate (or a bad return on the dollar). Anyways, I’d suspect Americans are more likely to be selling Canadian real estate these days than buying it.

  37. 37
    pfft says:

    By Sniglet @ 34:

    RE: pfft @ 33

    you point was that we weren�t delevering we were just defaulted leading us to believe that even more pain will happen as people outright deleverage.

    Sorry. You lost me. It’s all de-leveraging, regardless of whether someone is defaulting or paying off their loan with cash. I don’t see any difference in the over-all economic impact either way. De-leveraging is a deflationary force, regardless of whic form it takes.

    the economy is growing even as deleveraging is happening.

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