Monday Open Thread (2011-08-29)

Here is your open thread for Monday August 29th, 2011. You ay 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.


  1. 1
    David Losh says:

    Scotsman started some discussion that ended up talking about banking on the week end open thread. One comment opened a broader discussion:

    RE: Blurtman @ 21 –
    What do you know about the worst outcome? Have you ever been to a country that’s coming apart? It’s far more dramatic in life than watching it on CNN. Look at history of countries where banking system collapsed. You would not want to live it.

    This comment shows how entrenched the belief is that we can’t live without credit. We can’t buy houses or cars without credit. Credit makes businesses thrive. Credit is what brings goods to the market. All trade is based on the good credit of the companies doing business. Letters of credit are necessary for international trade.

    Without credit we are making a meager living.

    In Islam usary is against the law. Debts are forgiven every seven years. We call them camel jockies. In South America there is another left wing military president this month. The struggle there is against the banking systems that have, in a decade, doubled, and tripled the price of everything.

    It’s true that when a banking system unwinds it deflates the entire economy, but is that a bad thing?

  2. 2
  3. 3
    WillyNilly says:

    So David, are you generally in favor of the concept of credit or against it? How do you structure a competitive economy or business without using credit?

  4. 4

    RE: WillyNilly @ 3 – It depends on what you mean by “competitive economy.” It’s easy to have a competitive economy if that means one where you make money by selling gum on the street to foreigners who are seeing your country because it’s an inexpensive vacation spot. Anything more than that and you need banks and credit.

  5. 5

    Tacoma will be the strongest real estate market in the country by 2013?

    The problem with people who make a living predicting things? There’s no accountability. You can make the same wrong weather forecasts day after day and people will continue to watch and believe you. Same goes for stock market analysts and these geniuses now claiming that Tacoma is the place to invest. It doesn’t matter if you’re almost never right. Just spew out some BS and the media will report it as if you knew what you were talking about.

  6. 6

    RE: Ira Sacharoff @ 5 – Yep, predictions are worthless.

    One thing that should be obvious is that if the person was any good at actually making predictions, they wouldn’t be making public predictions for a living. And if the predictions had any value, they wouldn’t be given away for free in the press.

  7. 7
    Scotsman says:

    RE: Kary L. Krismer @ 6

    “One thing that should be obvious is that if the person was any good at actually making predictions, they wouldn’t be making public predictions for a living”

    Can you explain the logic of that overly broad statement?

  8. 8
  9. 9
    Cheap South says:

    RE: Scotsman @ 7

    You would use your predictions to enrich yourself instead of “sharing your expertise”.

  10. 10
    ChrisM says:

    Interesting story in the Oregonian over the weekend. Oregon is a non-judicial foreclosure state, but apparently if they go to court, lenders only have the to produce the original title (avoiding the chain of custody issue).

    It is rather an odd article.

    ‘Fannie Mae, in at least one case, also appears to be heading to court. In July, the mortgage giant and Northwest Trustee Services halted a foreclosure in Medford to avoid “the cost and uncertainty of litigation associated with the nonjudicial foreclosure,” said John Thomas, Fannie Mae’s attorney, in a court filing. ‘

  11. 11

    RE: Cheap South @ 9

    It Reminds Me of Snake Oil Salesmen Selling Their Cures

    Why reveal your magic and have it easily replicated if its real?

    Selling a book on “Get Rich Quick”….same scenario, why reveal your system to get rich if it takes selling a book on it to make real money? Charletons are everywhere: selling real estate, stocks, gold and anything to make them richer on the top of their pyramid scheme.

  12. 12

    RE: ChrisM @ 10

    The Whole Sanctuary States West Coast

    Has a nasty habit of ignoring laws they don’t like currently on the books, like foreclosure. We impeached President Nixon over stealing some Watergate papers….makes Nixon look like Mother Tersesa compared to the lawless Dem/Rep gangsters we’ve got today. Don’t get me wrong, they all haven’t gone bad, just a lion’s share of them.

  13. 13

    RE: David Losh @ 1

    Yes and Don’t Forget the Bible Too

    It condemns usary rates as a greedy sin against God.

    Its not Christian in my book to pick and choose the Bible verses that please us and ignore the rest.

  14. 14

    By Scotsman @ 7:

    RE: Kary L. Krismer @ 6

    “One thing that should be obvious is that if the person was any good at actually making predictions, they wouldnâ��t be making public predictions for a living”

    Can you explain the logic of that overly broad statement?

    They would be very wealthy as a result of their abilities to predict and not messing around with such things. They would be living in Tahiti or some other great place.

  15. 15

    By Cheap South @ 8:

    So RE agents are loaded!!!

    If you read that, the average gross income is about $45,000, using either the median price times the number of transactions or the average sales volume, and that assumes every transaction is 3%, which it isn’t.

  16. 16
    David Losh says:

    RE: WillyNilly @ 3

    Banks got too big. Finance got ahead of itself. The computer allowed for complex financial calculations.

    What we ended up with is a huge ponzi scheme based on the promise to pay.

    So you would have to define economy.

  17. 17
    ricklind says:

    For the last hours of today’s forum:

    Interesting gent whose site I have read for many years. He has been very accurate. Highly recommended.

    President Obama’s Administration addresses the housing crisis: (did not see this on this site yet).
    I just won’t say anything much right now but just the article. And one comment: where are these nervous buyers supposed to get income from to buy these houses if they are out of work and credit requirements are way high. Catch 22.



    U.S. May Back Refinance Plan for Mortgages


    Published: August 24, 2011

    The Obama administration is considering further actions to strengthen the housing market, but the bar is high: plans must help a broad swath of homeowners, stimulate the economy and cost next to nothing.

    One proposal would allow millions of homeowners with government-backed mortgages to refinance them at today’s lower interest rates, about 4 percent, according to two people briefed on the administration’s discussions who asked not to be identified because they were not allowed to talk about the information.

    A wave of refinancing could be a strong stimulus to the economy, because it would lower consumers’ mortgage bills right away and allow them to spend elsewhere. But such a sweeping change could face opposition from the regulator who oversees Fannie Mae and Freddie Mac, and from investors in government-backed mortgage bonds.

    Administration officials said on Wednesday that they were weighing a range of proposals, including changes to its previous refinancing programs to increase the number of homeowners taking part. They are also working on a home rental program that would try to shore up housing prices by preventing hundreds of thousands of foreclosed homes from flooding the market. That program is further along — the administration requested ideas for execution from the private sector earlier this month.

    But refinancing could have far greater breadth, saving homeowners, by one estimate, $85 billion a year. Despite record low interest rates, many homeowners have been unable to refinance their loans either because they owe more than their houses are now worth or because their credit is tarnished.

    Exactly how a refinancing plan might work is still under discussion. It is unclear, for example, whether people who are delinquent on their mortgages would be eligible or whether lenders would administer it. Federal officials have consistently overestimated the number of households that would be helped by their various housing assistance programs.

    A working group of housing experts across several federal agencies could recommend one or both proposals, or come up with new ones. Or it might decide to do nothing.

    Investors may suspect a plan is in the works. Fannie and Freddie mortgage bonds had been trading well above their face value because so few people were refinancing, keeping returns on the bonds high. But those bond prices dropped sharply this week.

    Administration discussions about housing proposals have taken on added urgency this summer because the housing market is continuing to deteriorate. On Wednesday, the government said that prices of homes with government-backed mortgages fell 5.9 percent in the second quarter from a year earlier, the biggest decline since 2009. More than one in five homeowners with mortgages owe more than their homes are worth. Some analysts are now predicting waves of foreclosures and a continuing slide in home prices.

    There is not much time to help the market before the 2012 election, and given Congressional resistance to other types of stimulus, housing may be the only economic fix in reach. Federal programs to assist homeowners have been regarded as ineffective so far, and they are complex.

    “We are looking at trying to encourage more participation in all of the programs, including those that help with refinancing,” said Phyllis Caldwell, who oversees housing policy at the Treasury Department.

    Some economists say that with housing prices and interest rates at affordable levels, only fear is keeping consumers out of the market. Frank E. Nothaft, the chief economist at Freddie Mac, said the federal action could instill confidence.

    “It almost seems to me you want to have some type of announcement or policy, program or something from the federal government that provides that clear signal that we are here supporting the housing market and this is indeed a good time to really consider buying,” Mr. Nothaft said.

    The refinancing idea has been around since at least 2008, but proponents say the recent drop in interest rates to below 4 percent may breathe new life into the plan.

    “This is the best stimulus out there because it doesn’t increase the deficit, it accomplishes monetary policy, and it reduces defaults in housing,” said Christopher J. Mayer, an economist at the Columbia Business School. “So I think this is low-hanging fruit.” Mr. Mayer and a colleague, Glenn Hubbard, who was chairman of the Council of Economic Advisers under President George W. Bush, proposed an early version of the plan.

  18. 18
    2kt says:

    RE: David Losh @ 16

    What a gubbledygook.

  19. 19
    David Losh says:

    RE: 2kt @ 18


    What happened is that every one got credit. All at once, all over the world, every one got credit. International banking allowed spreading the risks, and profits. Banks were allowed to cross collateralize financial instruments, then insured those gains against loss.

    Boom, the entire global economy expands. Each little corner of the world thinks the economy they have is doing great. The reality is that the economy is growing based on all these little promises to pay.

    The price of housing is going up, globally. It went up much more in Europe, and I suspect in Asia, than it did here. Mexico, and through South America the price of housing is continuing to go up. Those mortgages are the basis of the securities markets. That new found credit is the basis for the profits in emerging markets. Never mind that in most new credit markets they live on now $2 per day.

    What’s going on here, in the United States, is nothing compared to the hardships they have in Europe. Asia is another domino, as is South America. In the mean time banks do business as usual.

    I can explain what a collapse looks like. It’s actually pretty painless. Some one said that here. When you have nothing you have nothing to lose. The people reaping the benefits from this current scheme might get hurt, but I doubt it.

    The part no one wants to see is that governments will have to pick up where corporations left off.

  20. 20

    RE: ricklind @ 17 – Unless the government backed mortgages are still owned by the government, I don’t see how they could adjust the rate on them, without paying the difference to the owner. It’s not like the government can just say that a contract between X and Y which calls for 5% interest now only calls for 4% interest (unless you live in a world where you think the government can force everyone to buy health insurance).

  21. 21
    David S says:

    Almost the end of Q3 and the big daddy can get back to doing what I like best which is presenting the stats. No personalities. No emotions. No personal attacks. Just the facts.

  22. 22
    johnnybigspenda says:

    calculated risk says we are back to 1999/ 2000 in real (inflation adjusted) terms in many measures of home valuations…

    good stuff!

  23. 23
    Haybaler says:

    RE: ChrisM @ 10

    Chris, thanks for posting this link.

    Kary, a couple months back, I posted a link to an Oregon judges’ ruling against non-judicial foreclosure and I made a statement that it “bodes ill” for non-judicial everywhere.

    You asked me what I meant. This is what I meant….It has become too risky and expensive for lenders to use non -judicial. The industry will move to Judicial foreclosure.

  24. 24
    Haybaler says:

    RE: Kary L. Krismer @ 20
    Actually, I’ve wondered why I haven’t received my letter in the mailbox yet stating that I’ve won the mortgage lottery and my mortgage interest rate has been reduced to 4% retroactive to January 1 and attached please find my refund check.

  25. 25
    Dirty_Renter says:

    RE: Kary L. Krismer @ 20
    The gov is talking about a refi, not a loan modification, so the current noteholder has no say in the matter.
    It’s mindboggling, to this simpleton, that the conversation goes from dismantling Fannie & Freddie one week, which would effectively be the end of the 30 year fixed rate mortgage, imo….and the next week, to bigging up F & F to superman status.
    That said…do some research on NLY and invest accordingly…there could be an opportunity here.

  26. 26

    RE: Dirty_Renter @ 25

    One Question

    Why should the government replace private enterprise banking where the banks and the borrowers suffer from risk alike; without Freddie and Fannie government backed entities, where legal citizens like me, who aren’t in debt, have to bail the gangsters and dummies out?

    A caveat: the only ones that believe chronic overpopulation helps an economy grow and doesn’t destroy it, are the pig-headed “economists” and those who haven’t a clue on understanding basic demography science in America.

  27. 27
    Blurtman says:

    RE: David Losh @ 1 – I am not sure our banking system would have collapsed. Recall arch criminal Hank Paulson’s threat that there would be “tanks in the street” if no bailout. What Hank left out was that the tanks would be driven by employees of bankrupt Goldman Sachs.

    The US is much bigger than bankrupt investment banks. Why is the well being of the USA dependent on a healthy Goldman Sachs? Answer: It isn’t. Quite the opposite, actually.

    And if you believe it is, perhaps you can ask why the system is so dependent on fraud, crime, and transactions that steal real value from the economy.

  28. 28
    One Eyed Man says:

    RE: Blurtman @ 27

    Two points:

    First, the bail out was insurance. You buy it even though you probably won’t have a claim.

    Second, the establishment politicians (especially free market republicans) can’t afford the embarrassment of having the major bastion of capitalism being forced to nationalize its financial system to avoid potential economic collapse. The last thing W wanted by his name in the history books is for it to say “the US President who nationalized the financial system.” That’s a little too left-wing for W to swallow, even if he was on his knees with his mouth round in exclamation of shock while bowing before the stick of shame.

  29. 29

    Unemployment Chronically Worsening From Last Spring to July 2011

    U6 BLS Data:

    U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force
    16.8 16.4 16.3 16.5 15.7 15.9 15.8 16.2 16.1

  30. 30

    By Haybaler @ 23:

    You asked me what I meant. This is what I meant….It has become too risky and expensive for lenders to use non -judicial. The industry will move to Judicial foreclosure.

    In Washington the non-judicial time is now about 11 months, so a judicial wouldn’t be that much more of a time-hit. And they Could get a deficiency judgment to boot! I think they’d likely waive that on an owner-occupied homestead, but it could make a huge difference to investors.

  31. 31

    By Dirty_Renter @ 25:

    RE: Kary L. Krismer @ 20 – The gov is talking about a refi, not a loan modification, so the current noteholder has no say in the matter.

    If they’re going to do that without regard to value of the value of the property, then that would be a huge bailout of the current noteholder, unless perhaps it’s the owner’s credit that it hampering a refinance. Just about everyone with equity and good credit has probably already refinanced.

  32. 32
    David Losh says:

    RE: One Eyed Man @ 28RE: Blurtman @ 27

    Little George did the bailing of the banks on his way out. Obama should have left it that. Obama was talking doom, and gloom until brother Bill Clinton suggested Obama put on a happy face.

    The banking system can collapse. It’s no big deal. There is plenty of money. There are tons of cash reserves. The entire global system is awash with money. A few trillion here, a few trillion there, and after a while we will be talking about real money.

    Does anyone remember when Reagan first introduced the concept of a trillion dollars? Do remember how mind boggling that idea was? Do you remember when Howard Hughes had a billion dollars? A billion!!!

    Now we have a couple of guys here with tens of billions, and couple of guys over there with tens of billions, and some guy who owns Telephonica who is based in Mexico, I think, I don’t really know, but he is somewhere South of the Border with tens of billions of dollars.

    We have billions of dollars floating around looking for the next Microsoft opportunity.

    The banking system, as we know it, can collapse.

    We could go back to the olden days of when governments supplied money.

  33. 33
    2kt says:

    RE: David Losh @ 32

    I am not sure what entertains me the most, the ease with which you make statements on economy and finance, both being the subjects that are clearly not your domain, or the confidence you have while doing so, Dave.

    You are right that those that nothing to lose, end up losing nothing. You forgot about many millions of people who have a lot to lose.

  34. 34
    David Losh says:

    RE: 2kt @ 33

    I haven’t forgotten that there are billions of people in the world, and millions will suffer horredous losses. Those financial losses won’t kill them.

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