Mid-Week Open Thread (2011-03-02)

Here is your open thread for the mid-week on March 2nd, 2011. 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.

44 comments:

  1. 1
    softwarengineer says:

    Oil Price Gun Shooting Seattle’s Spring/Summer Home Prices Down

    Article in part:

    “…”We’re taking a breather, waiting for the next foot to fall in the oil markets,” said Nicholas Colas, chief market strategist at the ConvergEx Group in New York. “The market is looking 3-4 months out, trying to figure out what these higher oil prices will do to consumer spending.”…”

    http://finance.yahoo.com/news/Wall-Street-gains-as-jobs-rb-1295984224.html?x=0&sec=topStories&pos=main&asset=&ccode=

    Oil prices just busted $100/bbl, just in time for Bubblehead travel plans. Here comes the next “staycation” summer, like 2009?

  2. 2
    Mel J. says:

    As both a commercial and residential landlord I am greatly concerned about rising gas prices.

    In one respect, I have a leading indicator I call local commercial tenant sentiment – I ask my commercial tenants. Most are fairly long term and are quite open in relaying recent consumer trends at their businesses. When times are good, they tell me, knowing I won’t raise rents aboves CPI + Prop tax increases. When times are bad, they tell me, frequently citing specific current revenue numbers.

    After perhaps nine months of positive responses from my tenants, the responses have begun to turn negative again. Unfortunately, in all their cases gas price rises compete with consumer traffic. All have seen a significant downturn for February. This scares the heck out of me.

    Last time I saw a downturn like this, I ended up having to carrry several of my tenants many months before the economic trends and cost cutting on their part allowed them to get caught up. It was a gamble on my part as I might have been stuck with some seriously negative shortfalls had any of them declared bankruptcy. And, at least one was quite close.

    To be clear, the banks are still absolutely refusing to lend to small businesses. The Fed has provided small business with no lifeline. You must be a major corporation or bank to qualify. The small entrepreneur is SOL.

    What concerns me more this time around is that I saw them institute all available cost cutting measures last time around. There is, quite simply, very little left to cut in the way of excessive expenses this time around. This time things are much more precarious.

    I have small commercial tenants that qualify for government health and food aid because their incomes have plummeted so much. They love their businesses and don’t want to give up. AND, as self employed small business people, they don’t qualify for unemployment.

    This most current round of gas price increases could be the straw that breaks the camel’s back.

    Tim, you menioned “staycation.” Yes, in light of the uncertainty being imposed on my tenants by rising gas prices and the potential shortfall I may personally experience, my family has cancelled our plans to travel and will not vacation until the cloud imposed by rising gas prices recedes.

    When it comes to paying my investment mortgage or taking a trip, I must protect my family’s future.

  3. 3
    BillE says:

    But rates are low and there’s all this pent up demand out there. I’ve also heard they’re not making any more land.

  4. 4
    Pegasus says:

    Big Banks Say MERS Mortgage Database Draws Probes

    Bank of America Corp., Citigroup Inc. and PNC Financial Services Group Inc. may face added costs or fines after investigators questioned the use of a mortgage database instead of original documents to justify foreclosures.

    Earnings at Bank of America, the largest U.S. lender, may suffer materially if using Mortgage Electronic Registration Systems or MERS is found to be invalid, according to a regulatory filing last week. Citigroup and PNC said fines or other penalties may result from investigations into MERS and allegations of faulty foreclosure practices.

    “They’re recognizing the writing on the wall, that there are serious problems associated with the basic business model and legal theories of the MERS system,” Christopher L. Peterson, a law professor at the University of Utah in Salt Lake City who has written articles on Reston, Virginia-based MERS, said yesterday.

    more: http://www.bloomberg.com/news/2011-03-02/bofa-citigroup-say-mortgage-database-draws-scrutiny-in-foreclosure-probe.html

  5. 5
    Kary L. Krismer says:

    RE: Pegasus @ 4 – You do realize that regulatory filings mention just about every conceivable adverse event which is in any way foreseeable, right?

  6. 6
    Snigliastic says:

    As for de minimus price changes: would this be one subjecting the listing agent to sanctions?:
    http://www.redfin.com/WA/Edmonds/16910-73rd-Pl-W-98026/home/2809044

  7. 7
    David Losh says:

    RE: Snigliastic @ 6

    It’s 1%, you take what you can get from the seller. $500 is something different.

  8. 8
    Pegasus says:

    By Kary L. Krismer @ 5:

    RE: Pegasus @ 4 – You do realize that regulatory filings mention just about every conceivable adverse event which is in any way foreseeable, right?

    This is a shift from not mentioning and downplaying the risks in prior filings to starting to acknowledge some of their risks. it is a major change. Maybe the regulators told them to stop lying in their filings as the public was on to their scams?

  9. 9
    gxar says:

    RE: Snigliastic @ 6

    We have been following the seattle housing market closely for well over a year using redfin as our primary information source with their daily email updates. The type of situation you describe is not uncommon. Here is a recent one:

    http://www.redfin.com/WA/Seattle/1113-15th-Ave-98122/home/144077

    a 0.77% price drop on 2/28/2011. My all time favorite is:

    http://www.redfin.com/WA/Seattle/913-14th-Ave-E-98112/home/135287

    a 0.099% price drop on 9/20/2010 followed soon thereafter by two price reductions of approximately 1%. This strategy does not seem to have worked out too well when you observe the more significant reductions that followed and the fact the property has not sold yet.

    I have often wondered what effect this has on the interest of potential buyers. Seems very counter productive to me. Is this material for a new seattle bubble feature?

  10. 10
    ChrisM says:

    RE: gxar @ 9 – I would very much appreciate hearing what the MLS penalties are for:

    1. insignificant price reductions
    2. incorrect description of lot size (how hard can this be?)
    3. incorrect description of number of bedrooms (specifically, basement rooms that are not legal bedrooms due to lack of egress)

    I would really also like to hear from Realtors ™ about what the proper representation for a property would be, given gross violations of Code. The Tim had a great example of dangerous wiring — what is the listing agent’s responsibility when a property has some sort of major code violation?

  11. 11
    The Tim says:

    By gxar @ 9:

    Is this material for a new seattle bubble feature?

    You mean something like this? Price Games Hall of Shame

  12. 12
    Kary L. Krismer says:

    By Pegasus @ 8:

    By Kary L. Krismer @ 5:

    RE: Pegasus @ 4 – You do realize that regulatory filings mention just about every conceivable adverse event which is in any way foreseeable, right?

    This is a shift from not mentioning and downplaying the risks in prior filings to starting to acknowledge some of their risks. it is a major change. Maybe the regulators told them to stop lying in their filings as the public was on to their scams?

    It’s not a change, unless maybe you’re talking about from some period over 20 years ago.

  13. 13
    Kary L. Krismer says:

    RE: ChrisM @ 10 – The automatic fines are relatively low, because they’re intended as warnings. So it’s $250 for the price change thing, and only $50 for late reporting a sale (which is probably why there are so many of those). There are no automatic fines for the other items you mention, in part because they would require some sort of hearing.

    The fines for things that are not automatic can be rather large, although they seemingly have been cut back with the economy. Five years ago I would regularly see $5,000 fines, some of which might be suspended. Now they’re often only $2,000.

    As to the code violation (which we didn’t really establish), I don’t think there’s anything that pertains to that, other than it may need to be disclosed in Form 17 depending on what it is. Lots of properties are sold that are not up to code in one way or another, and neither agents or inspectors are experts in code (e.g. what’s grandfathered, what isn’t, etc.). In a perfect world the client would fix such things prior to marketing the property, but that is not always possible.

  14. 14
    ChrisM says:

    My Redfin update this morning had three houses that went pending. All were on the market less than 30 days — one was on the market for just three days, another one nine.

    Tim — I wonder if there’s some way to do a little graph that shows properly priced houses move really quickly?

  15. 15
    Kary L. Krismer says:

    RE: ChrisM @ 14 – I haven’t looked at this for a several months, but in the past roughly 1/3rd of houses listed have sold within 30 days, and that held true through the decline. The new Matrix system doesn’t seem to give me that same information, even though it is supposed to. I’ll report it and see what happens.

  16. 16
    David S says:

    RE: ChrisM @ 14 – Don’t forget there is the catch and release side of the Active to Pending to Active to Pending to Active game. It’s not always because the buyer failed to qualify. Pend them quick and then review the property, i.e., land it, measure, weigh, take the pictures then put it in the creel or back in the river. This has been mentioned before but if you know your fishing the analogy becomes clear.

  17. 17
    Blurtman says:

    RE: Kary L. Krismer @ 5 – Not really. Just research Ken Lewis lack of disclosure when at BAC.

  18. 18
    Pegasus says:

    By Kary L. Krismer @ 12:

    By Pegasus @ 8:

    By Kary L. Krismer @ 5:

    RE: Pegasus @ 4 – You do realize that regulatory filings mention just about every conceivable adverse event which is in any way foreseeable, right?

    This is a shift from not mentioning and downplaying the risks in prior filings to starting to acknowledge some of their risks. it is a major change. Maybe the regulators told them to stop lying in their filings as the public was on to their scams?

    It’s not a change, unless maybe you’re talking about from some period over 20 years ago.

    Don’t need to go back 20 years…just go back to last quarter and the one before and the one before……they are all fabrications……

  19. 19
    Kary L. Krismer says:

    RE: Blurtman @ 17 – This pertains also to your comments about fraud. Just because I say something doesn’t mean the opposite doesn’t ever exist.

    Thus with fraud, just because I say something isn’t fraud, because it doesn’t begin to meet the legal definition of fraud, that doesn’t mean that we went through the past 20 years without a single example of fraud occurring.

    Here, just because I say that a company’s financial disclosures disclosures will mention just about every conceivable remotely foreseeable adverse event, that doesn’t mean that there aren’t examples where that hasn’t occurred. But you did catch me being a bad lawyer. I should have used the word “should” or “typically”, etc. in post 5. ;-)

  20. 20
    Kary L. Krismer says:

    Tim, the edit function removes the paragraph structure of posts (using FF). You have to recreate it. That’s new.

  21. 21
    Dirty Renter says:

    Bill Gross…..he gets into the more serious matter of the looming end of QEII on June 30, 2011. He calls that day D-Day for investors and here’s why.

    In short, Gross makes the point that the Fed has been buying up 70% of the Treasury debt issued and now that this is over, they will be hard pressed to find enough T-bond buyers in the private market. Result: interest rates will soar and the current bull market’s legs will be taken out.

    Get out of long bonds and for stocks, be very selective.

    Forbes, March 3, 2011

  22. 22
    mojo says:

    I was just talking to a coworker who picked up a nice ~3000 SF home at an auction for ~50% of the previous sales price. He said he was working this a special broker that dealt only in auctioned homes. This broker helped him find the properties, handled the auction bidding, and provided a bridge loan for the period between the cash purchase of the house at auction and his mortgage approval. It sounded like a good way to find a good deal on some property.

    My question is – can you work through a regular realtor to buy an auction home, or is it better to work through one of these specialty brokers? Do you have to make a decision before you start looking on which way you’re going to pursue a home – buy at auction or buy through the conventional process?

    Thanks!

  23. 23
    Kary L. Krismer says:

    RE: mojo @ 22 – I would say specialty broker because those sales have a lot of risks other transactions don’t have, and hopefully they are better suited toward dealing with those risks. I would make sure that they are actually a licensed broker though, and not just a different form of loan officer.

    Your decision to go that way would be more dependent on how risk adverse you are than anything else, so yes you’d make that decision first.

  24. 24
    Kary L. Krismer says:

    RE: Kary L. Krismer @ 15RE: ChrisM @ 14 – Fast action out of the NWMLS. They checked and confirmed the error, suggested a work around, it didn’t give correct results, and now they have a fix in the works, but it’s not released yet (still testing). They promised to let me know when it’s up.

  25. 25
    jffj says:

    Japan’s “lost decade” has been a frequent topic around here. Read here for an alternate view.
    http://www.theatlantic.com/international/archive/2011/02/the-myth-of-japans-lost-decades/71741/

  26. 26
    The Tim says:

    Well, looks like the NWMLS is releasing their February numbers today. SInce I’m at the BarCamp all day I guess the post will have to wait until tomorrow.

    [Update: Here’s their press release: February housing activity yields “reason for optimism”. 1,003 closed SFH sales in King Co., median price $334,000, which is down $22k from January, and $39k from last year (-10%).]

  27. 27
    softwarengineer says:

    RE: Dirty Renter @ 21

    Just Like Today’s Stock Surge

    Stock market Volume was low and the mood was lack-luster, today’s article in part [during a good DOW increase day]:

    “…However, volume continued to be below average on days when the market rallies, causing some traders to be skeptical about the durability of the rally…”

    http://finance.yahoo.com/news/Wall-Street-rises-1-percent-rb-3544369270.html?x=0&sec=topStories&pos=main&asset=&ccode=

    LOL, low stock market volume on good DOW days tells me the fed’s sneaking in gas in the empty tank, while the tractor lays idle anyway. Wait until the QE2 party ends in a few months.

  28. 28
    Kary L. Krismer says:

    RE: softwarengineer @ 27 – I think a lot of the weakness is due to uncertainty in the middle east, rather than any assessment of our own economy. If Iran or SA go off-line for oil production, things will get messy. Look how much it’s reacting to the turmoil in the 15th largest producer.

  29. 29
    pfft says:

    By jffj @ 25:

    Japan’s “lost decade” has been a frequent topic around here. Read here for an alternate view.
    http://www.theatlantic.com/international/archive/2011/02/the-myth-of-japans-lost-decades/71741/

    what I’ve notice is that when we talk about the rest of the world the first impression(which often confirms our already held views)persists.

    europe is in constant slow growth. japan is in a persistent lost decade. it takes awhile for new information to reach us and even then if it goes against our previously held views(which are often political)we just don’t get it.

  30. 30
    Pegasus says:

    By pfft @ 29:

    By jffj @ 25:

    Japan’s “lost decade” has been a frequent topic around here. Read here for an alternate view.
    http://www.theatlantic.com/international/archive/2011/02/the-myth-of-japans-lost-decades/71741/

    what I’ve notice is that when we talk about the rest of the world the first impression(which often confirms our already held views)persists.

    europe is in constant slow growth. japan is in a persistent lost decade. it takes awhile for new information to reach us and even then if it goes against our previously held views(which are often political)we just don’t get it.

    Speak for yourself. YOU don’t get it. You never have and you never will.

  31. 31
    whatsmyname says:

    RE: Pegasus @ 30
    No worries pfft. I’m sure EconE will be here momentarily to defend you for trying to join a two sided conversation rather than posting links and soundbites.

    Won’t he?

  32. 32
    Kary L. Krismer says:

    RE: The Tim @ 26 – In the P-I they’re reporting the countywide median without the distressed sales as being about $390,000. I’m actually showing it higher than that, but that’s because I’m not including the late reported sales, which drug down both medians by about 10k! Between bank owned and short sales, they made up close to 50% of the volume last month.

    Numbers from NWMLS sources, but not compiled or guaranteed by the NWMLS.

  33. 33
    Scotsman says:

    Epic fail! The number of Chevy Volts sold last month? 281. Yes, that’s two hundred and eighty one. Total number sold so far? Are you sitting down? 928. So much for saving the planet, one pollution shifting electric car at a time.

    Actually, this is good news since Government Motors loses money on each one sold.

    http://hotair.com/archives/2011/03/03/good-news-gm-sold-281-chevy-volts-last-month/

  34. 34
    Blake says:

    Great piece by Barry Ritholz today about the banks and mortgages:
    http://www.ritholtz.com/blog/2011/03/extend-pretend-bank-practices-attracting/
    -snip- Rather than go Swedish, and force a shorter painful pre-packaged bankruptcy process, we have opted to take the long slow route:
    1) Banks are slowly rebuilding their capital by borrowing from one branch of government and lending to another. This is a slow process, but its less well unerstood (and hence more politically acceptable) than merely giving Banks capital outright.
    2) FASB 157 allows banks to carry all of these structured products made of bad mortgages on their books indefinitely.
    3) Banks are carrying lots of housing inventory waiting for a better residential market to emerge 5 or 10 years down the road.

    Under normal circumstances, the bad mortgage process goes Delinquency (late payments) Default (90 days behind), Foreclosure (legal proceedings to enforce the note).

    Once a home goes into foreclosure, the accounting changes: It is now a loss that must be written down immediately. That hits the banks capital levels. Consider what the next 3-5 million foreclosures will do to banks’s capital cushions.

    Once a foreclosure occurs, not only does the capital write down take place, but the local property tax liability accrues to the bank; prior to foreclosure, the liability is to the nominal home owner and/or property. Once the bank takes possession, its on them.

    Hence, you can see why “Extend & Pretend” is so attractive to the large institutions sitting on massive REO inventory, enormous bad loans and CDOs, and huge future local tax obligations.

  35. 35
    Blake says:

    RE: jffj @ 25
    Re: “Japan’s “lost decade”’
    Yes, I read that a few days ago… fascinating. I have several friends living in Japan and others who teach there off-n-on and they tell me that the Japanese stagnation is overstated and their standard of living is way up since 1990. (In the Atlantic piece the author argues that the Japanese govt purposely understates their GDP and growth figures…)
    A very interesting piece.

  36. 36
    pfft says:

    By Pegasus @ 30:

    By pfft @ 29:

    By jffj @ 25:

    Japan’s “lost decade” has been a frequent topic around here. Read here for an alternate view.
    http://www.theatlantic.com/international/archive/2011/02/the-myth-of-japans-lost-decades/71741/

    what I’ve notice is that when we talk about the rest of the world the first impression(which often confirms our already held views)persists.

    europe is in constant slow growth. japan is in a persistent lost decade. it takes awhile for new information to reach us and even then if it goes against our previously held views(which are often political)we just don’t get it.

    Speak for yourself. YOU don’t get it. You never have and you never will.

    ok.

  37. 37
    pfft says:

    By Scotsman @ 33:

    Epic fail! The number of Chevy Volts sold last month? 281. Yes, that’s two hundred and eighty one. Total number sold so far? Are you sitting down? 928. So much for saving the planet, one pollution shifting electric car at a time.

    Actually, this is good news since Government Motors loses money on each one sold.

    http://hotair.com/archives/2011/03/03/good-news-gm-sold-281-chevy-volts-last-month/

    big deal. as more are sold the costs will come down. nobody thought the Prius would make it. my friend who is a big gearhead laughed and said it’d never sell the Prius is toyota’s most popular selling car. more popular than the corolla. you just have to give it time. it’s a new technology.

    “one pollution shifting electric car at a time.”

    it doesn’t shift pollution. study up son.

  38. 38
    Kary L. Krismer says:

    RE: Scotsman @ 33 – Those numbers don’t really mean much without inventory numbers. If there are 2,000 Volts sitting on dealer lots then those numbers means something, but without that, they mean nothing.

    I know Chevy was planning on ramping up rather slowly, by their standards, with less than 10,000 the first year, and making dealers qualify to sell them, etc.

  39. 39
    pfft says:

    By Kary L. Krismer @ 38:

    RE: Scotsman @ 33 – Those numbers don’t really mean much without inventory numbers. If there are 2,000 Volts sitting on dealer lots then those numbers means something, but without that, they mean nothing.

    I know Chevy was planning on ramping up rather slowly, by their standards, with less than 10,000 the first year, and making dealers qualify to sell them, etc.

    good answer. I didn’t think of that.

    The Volt will be sold initially only in California, Washington Metropolitan Area, Michigan, Texas, New York, New Jersey and Connecticut.[21][23] The first cars will be available in Washington D.C., the New York City metropolitan region, California, and Austin, Texas. During the first quarter of 2011 the market will expand to Michigan, the rest of Texas and to all of New York, New Jersey and Connecticut.[112] The restricted roll-out is due to limited production, as GM planned production for 2011 is only 10,000 units.

    http://en.wikipedia.org/wiki/Chevrolet_Volt#United_States

    so basically the Volt is not fully launched yet and I don’t even think it’s car buying time yet.

    if you want to dump on the Volt you could have posted the bad report from Consumer Reports.

  40. 40
    Drshort says:

    RE: Scotsman @ 33

    My understanding of the Volt is that much of the complexity is in the software — deciding when the charge the battery based on location, trip patterns, etc..

    If true, they probably want to release a small number of vehicles into the general public and test performance before ramping up.

  41. 41
    Scotsman says:

    Or it could be that no one wants to pay $40,000 for a car that gets worse mileage than many others in its’ class and performs poorly as a solely electric car.And yes, all electric cars do in the majority of markets- think southern Ca – is shift pollution from the area where the car is driven to the area where the electricity is generated. In the case of southern Ca that’s Wyoming and coal fired generating plants. Not to mention the batteries, etc. Most modern gas cars and even many diesels burn so clean you can’t even asphyxiate yourself with the exhaust anymore. But don’t let the facts get in the way of a good democratic big government intervention.

  42. 42
    Kary L. Krismer says:

    RE: pfft @ 39 – Much of the mainstream media does little to present unbiased reports, but many of the sites people link to here they seemingly go out of their way to present a one-sided story 60 Minutes style. So I’m often skeptical of them.

    I don’t think the material you posted proves that’s what happened here. I’d still like to see unsold inventory numbers.

    BTW, I did read today that the Nissan Leaf has a waiting list, but I think it’s a much cheaper car.

  43. 43
    Kary L. Krismer says:

    RE: Scotsman @ 41 – You keep repeating that “worst mileage” BS. The car is designed to be driven primarily on shorter trips, where the gas engine is not needed at all. So the typical mileage is infinite, because it won’t use any gas. The car is not really designed to go on extended trips, like say the Prius is. In essence, it’s designed to be a second car.

    I agree with you on the pollution shifting and battery issues. What I don’t understand is why the manufacturers are so slow to expand the use of liquefied natural gas. Both GM and Honda have been producing such vehicles for a couple of years now, but they are not expanding that despite the fact that the technology behind that is rather simple. You can even convert existing cars. The pollution is very low and to the extent natural gas is imported, it’s mainly from Canada.

  44. 44
    One Eyed Man says:

    RE: Scotsman @ 33 -Haven’t you heard? They’re like razors and blades. You lose money on the car and you make your profit on the batteries.

    A couple years ago a guy tried to sell me a Tahoe hybrid while my car was being serviced. It was 8 to 10K more than the comparable non-hybrid. I asked him when you’d need to replace the batteries and he said they were guaranteed for 8 yrs. I asked him what it cost to replace the battery bank and he told me about 8K. That’s the approximate blue book on an 8 yr old Tahoe and probably about the same as the gas savings over the 8 yrs even at $4/gallon. I didn’t need a cocktail napkin to do the math and I’d have to be drinking right from the bottle to buy the car.

    But even thou I wouldn’t buy one, I’d rather put defense dollars into R & D for alternative energy technology than into another floating 4 acres of sovereign US territory to defend middle eastern oil fields and shipping lanes.

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