Monday Open Thread (2011-12-26)

Here is your open thread for Monday December 26th, 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.

17 comments:

  1. 1
    calvis says:

    I was reading some random business news this morning and this one caught my eye:

    http://articles.businessinsider.com/2011-12-24/home/30553800_1_swiss-banks-john-doe-slippery-slope

    In the comments section was a very a interesting comment about builders in which the commenter asked a group of builders a pointed question about their foreclosures and how they did not know that the crash was coming.

    I found it very intriguing to say the least. Here is the comment:

    “The IRS is right to be looking at real estate transactions. A couple of weeks ago, I sat down to breakfast with a group of local, long-time builders and developers, whom I thought had made property buying mistakes stupid enough to land them in the real estate buying hall of shame. They had all suffered some pretty high profile foreclosures, and were thought to be living from hand to mouth. I asked these good old boys how, with as much as they knew about their own market, they could have missed all the signs of the coming collapse. They informed me that I may possibly have underestimated their intelligence, because, not only had they seen the crash coming, but they had prepared themselves well for the even worse times they knew were to come.. They explained that they had borrowed serious amounts of money from banks to build new projects, and, instead of building anything, they had taken the borrowed money and paid off the properties they wanted to keep, and used a few other chunks of that bank money to buy boats and collector cars. So, as it turns out, they are now sitting on free and clear real estate (not in their own names), and have boats and collector cars sitting in storage sheds. Once they are sure that every last one of their creditors has come out of the woodwork, they plan to declare bankruptcy and then go back to living their lives with clean slates. As it turns out, they have also stashed quite a bit of cash and are actually living quite well. But, being local boys with creditors still lurking, they are not living in lifestyles that attract much curiosity or attention. When the dust clears, these guys want to start building motels. They say it’s a cash business. I think that the Indian “Patels” have already discovered this. There is a serious real estate driven underground economy out there, and, if the IRS wants to get some clawback, it should start by auditing big time RE bank loan defaulters and cash-buying motel buyers.”

    Maybe the builders and developers are much more smarter than we think?

  2. 2

    RE: calvis @ 1 – Anyone who commits fraud with real estate is a fool. All the transactions are recorded and publicly available.

    What they’re looking at is filing bankruptcy, losing all their non-exempt assets, and still owing all of their debts. Not really smart.

  3. 3
    Dirty Renter says:

    RE: calvis @ 1
    These are the very people who crushed the community and small regional banks, with bad loans. The article perfectly described the lot. Can you believe how gullible the community bankers were?
    I would add that the smaller, contract builders, who generally only have 1 spec house outstanding at any one time, are generally good credits.
    A newly constructed hotel pays for itself in 2-3 years, if well run.

  4. 4
    Dirty Renter says:

    By Kary L. Krismer @ 2:

    RE: calvis @ 1 – Anyone who commits fraud with real estate is a fool. All the transactions are recorded and publicly available.

    …like the Orangeman & Killlinger?
    Kary – you’re an optimist. :)

  5. 5
    David Losh says:

    RE: Kary L. Krismer @ 2

    Well, yes they are recorded, and it is all legal.

    The Calvin comment falls apart at the end, but yes, hotels, motels, and business opportunities, are cash businesses based on management.

    The way bankruptcy is set up there was never any need to try to hide assets. The money is gone, and assets can just sit there until some one contracts for the work to be done. The Notes will be discounted and some one else’s money will front the cost of construction.

    Other than that, well, yes, Real Estate is a business.

  6. 6
    Blurtman says:

    RE: Kary L. Krismer @ 2 – Find the assets.

  7. 7
    Blurtman says:

    RE: calvis @ 1 – Actually, this is what made America great – land thieves, genocidal murderers and swindlers, The essence of US capitalism. If you want to see what happens when backed into a corner, refer to the above – stolen assets, wars, and fraud.

  8. 8
    Blurtman says:

    Thieves and liars continue to blame federal programs and the poor for the financial crisis.

    Kill the bankers.

    NYTimes Takes on “The Big Lie”

    http://www.ritholtz.com/blog/2011/12/nytimes-takes-on-the-big-lie/

    I am please to report that calling out the Big Lie has now gone fully mainstream.

    Recall last month, I had two Big Lie columns in the Washington Post:

    • What caused the financial crisis? The Big Lie goes viral.

    • Examining the big lie: How the facts of the economic crisis stack up

    The first column was the most popular article on WashingtonPost.com for a full week. It generated nearly 1845 comments.

    Since then, both Bloomberg.com and Reuters each have picked up the Big Lie theme. (Columbia Journalism Review as well). In today’s NYT, Joe Nocera does too, once again calling out those who are pushing the false narrative for political or ideological reasons in a column simply called “The Big Lie“.

    Nocera details exactly how its done:

    “So this is how the Big Lie works.

    You begin with a hypothesis that has a certain surface plausibility. You find an ally whose background suggests that he’s an “expert”; out of thin air, he devises “data.” You write articles in sympathetic publications, repeating the data endlessly; in time, some of these publications make your cause their own. Like-minded congressmen pick up your mantra and invite you to testify at hearings.

    You’re chosen for an investigative panel related to your topic. When other panel members, after inspecting your evidence, reject your thesis, you claim that they did so for ideological reasons. This, too, is repeated by your allies. Soon, the echo chamber you created drowns out dissenting views; even presidential candidates begin repeating the Big Lie.

    Thus has Peter Wallison, a resident scholar at the American Enterprise Institute, and a former member of the Financial Crisis Inquiry Commission, almost single-handedly created the myth that Fannie Mae and Freddie Mac caused the financial crisis. His partner in crime is another A.E.I. scholar, Edward Pinto, who a very long time ago was Fannie’s chief credit officer.”

    Ed Pinto has taken a different approach to trying to deflect the blame from the blameworthy. He has continually thrown shit against the barn wall to see what will stick. Originally, it was the fault of the CRA. When that argument failed, he blamed Acorn. And now its the GSEs. Wallison and Pinto have had their greatest success with this — its now a talking point amongst many of the GOP contenders for the Republican niomination for President.

  9. 9
    Cheap South says:

    Not sure if this has been posted already

    http://seattletimes.nwsource.com/ABPub/2011/12/25/2017096102.gif

  10. 10

    By Blurtman @ 6:

    RE: Kary L. Krismer @ 2 – Find the assets.

    That’s what bankruptcy trustees (and creditors) try to do, and when they find them they then go after the debtor’s discharge so that they end up still owing everything they owed before bankruptcy.

  11. 11

    By Cheap South @ 9:

    Not sure if this has been posted already

    http://seattletimes.nwsource.com/ABPub/2011/12/25/2017096102.gif

    Is that something about NAR’s data? ;-)

    I came here to post something on a similar topic–the nationwide stats on percentage of homeowners, apartment construction and vacancy rates for rentals, etc.

    http://www.msnbc.msn.com/id/45795076/ns/business-real_estate/#.TvnbXTXOXcE

    65% home ownership still seems high to me. It would be interesting to see how that number stacks up against the national C-S number.

    BTW, I like the caption on the photo. Apparently a few years of data indicate that an entire generation is doomed to be a generation of renters! /sarc

  12. 12

    The October C-S is out. For Seattle it dropped from 135.59 to 134.22, which is a significant drop, but nothing compared to what the KC median did that month. C-S though is basically a 3 month moving average. I’ll need to see how that stacks up if I get a chance.

  13. 13
    Cheap South says:

    RE: Kary L. Krismer @ 11

    Sorry, I left the article out. Here is the piece.

    “Building boom for Seattle apartments may be overdone”

    http://seattletimes.nwsource.com/html/businesstechnology/2017096149_apartments26.html

  14. 14

    RE: Cheap South @ 13 – It wouldn’t be too surprising that it’s being overdone. That’s one of the risks of capitalism, where individuals make decisions. It’s especially true where the lead time is over two years.

  15. 15

    RE: Cheap South @ 13

    I Was Thinking About That This Weekend

    I saw apartments in Mexico City listed for like $150/mo, where our’s are like $800/mo….hey that $8/hr in Seattle looks like $2/hr in Mexico….its all relative.

    Then I also imagined 2 bdrm $800/mo apartments being rented out in Kent, only to be filled to the brim with gypsies destroying the unit…..makes $800/mo reasonable then, they’ll need the high profit margin for remodelling costs after they evict the gypsies….then the next gypsie group moves in, etc, etc….

  16. 16
    Blurtman says:

    The market is on a roll. All is well. The Dow may hit the magic pre-crash 14,000 level. The children rejoice, and Obama is re-elected. Just don’t hold past the election for too long, hee, hee.

    Under the heading of better to be lucky than good, my two biotech stock plicks, ELN and MITI, are doing well.

  17. 17
    searayman says:

    Ran across the foreclosure deal of the century.
    Check out the pics. http://www.wsbtv.com/news/entertainment/50-million-foreclosed-estate-sells-115-million/nDzpt/

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