Weekend Open Thread (2012-07-06)

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Here is your open thread for the weekend beginning Friday July 6th, 2012. 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.

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NOTICE: If you have comments to make about politics or economics that do not somehow directly relate to Seattle-area real estate, they may be posted in the current Politics & Economics Open Thread. If you post such comments here, they will be moved 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.

33 comments:

  1. 1
    Pegasus says:

    The Tim gets a mention:

    For one, the mix of homes that are selling has shifted. In February bank-owned houses — usually lower priced — accounted for nearly 23 percent of all single-family sales in King County, according to online brokerage Redfin.

    Last month? Less than 10 percent.

    “You take out what has been a large part of the low end of the market, and of course the median price is going to go up,” said blogger Tim Ellis of Seattlebubble.com.

    But he doesn’t expect a flood of repossessed houses will hit the market and push prices down anytime soon. Fewer houses have been entering the foreclosure pipeline, he said, so it’s not surprising the number exiting would also decline.

    Gain, Crellin and Ellis all said they expect sales should remain strong, and prices should keep rising, for the next few months.

    “It seems like the driving factor is, the Seattle economy’s really picking up,” Ellis said.

    http://seattletimes.nwsource.com/html/businesstechnology/2018609970_homesales06.html

  2. 2
    Scotsman says:

    We need WA to follow CA’s lead in creative bastardization of existing law. This sounds like a win for everyone:

    http://hotair.com/archives/2012/07/06/great-news-cities-to-apply-kelo-to-mortgages/

  3. 3
    ChrisM says:

    On oil/gas/energy manipulation, I haven’t been following Kary/Pegasus closely, but thought this might be of interest:

    http://www.ferc.gov/enforcement/civil-penalties/civil-penalty-action.asp

    Clearly, Constellation Energy, Conoco and others have been caught with their hands in the cookie jar.

  4. 4
    Scotsman says:

    RE: ChrisM @ 3

    Enough is enough- we should just nationalize all energy companies. They’ve been bleeding the public for years now. Just because we have some of the lowest energy costs now doesn’t mean we can’t do better. Like health care, energy should be available to all at a reasonable cost. Perhaps we could put energy pricing under the control of TSA since they seem to be doing a great job of keeping our airports and flights safe- one of the few true government success stories.

  5. 5

    RE: Scotsman @ 4
    Awesome idea. Just having the TSA do the daily body cavity searches on oil company executives would make it all worthwhile.

  6. 6
    ChrisM says:

    RE: Scotsman @ 4 – Adam Smith agrees with you:

    People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.

    http://bit.ly/NbpvV4

    For me, I prefer enforcement of laws. I think the term is the Rule of Law.

  7. 7
    ChrisM says:

    Can’t cure stupid:

    http://www.consumerfinance.gov/pressreleases/consumer-financial-protection-bureau-report-finds-confusion-in-reverse-mortgage-market/

    “Reverse mortgages require no monthly mortgage payments, but borrowers are still responsible for property taxes and homeowner’s insurance. Nearly 10 percent of reverse mortgage borrowers are at risk of foreclosure because they have failed to pay taxes and insurance. “

  8. 8
    Pegasus says:

    RE: ChrisM @ 7 – Those reverse mortgages are for the most part just another banking scam. If you run the numbers sometime there should be a point where you realize that there ought to be laws against the sale of these.

  9. 9
    Pegasus says:

    For those LIBOR (LIE-MORE) rate scandal fans it appears that the word is finally spreading about how large and widespread this scam was. If you financed anything in the past 5 to 10 years like a mortgage, car, boat, etc. you can probably thank your friendly banker for conspiring to overcharge you on interest rates by the manipulating the LIBOR rate. Don’t worry they did not limit their criminal behavior to just Mom and Pop. They also raked it in on about 350 trillion dollars worth of credit rate derivative swaps.

    Your bankers at work……..http://www.youtube.com/watch?v=0oV2mI0IYp8

  10. 10
    Scotsman says:

    RE: Ira Sacharoff @ 5

    Touche’

    We’ll need someone to observe in case there’s a legal challenge after. Do we have a volunteer?

    Lower! Faster! Deeper! Let the drill’n begin!

  11. 11

    RE: Pegasus @ 1

    Let’s Take a Close Look at Foreclosure History in the Seattle Area

    How about May 2012’s Foreclosure Shadow Inventory Dissipation?

    “…Foreclosure starts rose in May from a year earlier for the first time in more than two years after the largest U.S. loan servicers settled with states over faulty documentation. An increasing share of those distressed homes are being disposed of through short sales, in which owners sell their properties for less than they owe to avoid repossession, Blomquist said….”

    http://www.bloomberg.com/news/2012-06-14/home-shadow-inventory-falls-to-lowest-since-2008.html

    Having said that, MSM documents short sales smoother sailing adding to sales….what it doesn’t mention is the 2012 federal income tax owed on this by the seller. This economic time bomb is an effect that only a tax consultant may be able to partially ferret out before Congress changes the 2012 tax rules. Ask a real estate attorney and I’d bet money they all shrug.

    How about pending home sales?

    “…Contracts to buy previously owned homes in the United States neared a two-year high in January, an industry group said on Monday, further evidence the housing market was slowly turning the corner….”

    http://www.nytimes.com/2012/02/28/business/economy/pending-home-sales-in-us-near-a-two-year-high.html

    But is 2010 a good year to quote improved conditions from?

    “….Foreclosed homes reduced the median home price in Seattle by 19% to $269,000. This is still higher than the national average of $165,000. In 2008,the number of foreclosures in Seattle increased 108%. The average price of a foreclosed home was $248,000….”

    http://seattlehomesite.wordpress.com/category/seattle-foreclosed-homes/

    I’ll let you SB bloggers ferret it out, albeit be careful with the sellers’ data….sellers’ optimism is buyers’ pessimism and vice versa….

  12. 12

    By Pegasus @ 8:

    RE: ChrisM @ 7 – Those reverse mortgages are for the most part just another banking scam. If you run the numbers sometime there should be a point where you realize that there ought to be laws against the sale of these.

    They are actually very good options for some people, but like anything else they can be abused. Banning them would be bad.

  13. 13
    Tatiana Kalashnikov says:

    RE: Pegasus @ 9

    There seems to be so much bank bashing here. Why isn’t there more discussion about theft and fraud in the real estate field? I believe that every business has bad behavior caused by greed. Banking is no different than anything else.

  14. 14
    David Losh says:

    RE: Pegasus @ 9

    This will be a very over looked form of theft, even though most people have paid for it.

    It is hard to get people to comprehend that banks will fudge a half of a per cent here or there, and make millions, or in this case Billions of dollars.

    I heard this afternoon there is speculation that manipulation of the LIBOR cost the consumers, or made bank profits of $300 Trillion.

  15. 15
    Pegasus says:

    RE: Tatiana Kalashnikov @ 13 – The real estate industry types are just wantabe banksters? No sense watching the minnows when the sharks are circling…..

  16. 16
    S-crow says:

    Attended the Foreclosure Auction up at Sno Co. this morning as I put my hat in the ring on a property but was unsuccessful after a terrifying 20 minutes of frenzied bidding rivaling that of Storage Wars. However my loss and defeat (and calling Mrs. S-Crow to let her know her husband was a loser) on the bright side I just gained a GREAT new owner to my immediate neighborhood and congratulated them on winning a superb property awaiting them and their horses.

    Have a great weekend everyone and enjoy the weather while it lasts and don’t forget to write up those sales and close at our office in Everett. Just saw a 3.270 30 yr Fixed come across my desk. How low will rates go? I was asking that two years ago. ;)

    S-Crow

  17. 17
    Pegasus says:

    RE: Kary L. Krismer @ 12 – Hehehe, I put that in my comment especially for you….

  18. 18
    Sparky says:

    RE: David Losh @ 14 – That doesn’t seem to pencil out to me. That’d be about $42k for every person on Earth, or about 5 times the world’s GDP.

  19. 19
    David Losh says:

    RE: Sparky @ 18

    The LIBOR has been an industry standard since World Savings made inroads here for loans in the 1980s. They ended up being a part of Wachovia.

    It is a whopping amount of money that has been in play for thirty, or forty years.

  20. 20
    2kt says:

    RE: David Losh @ 14

    Nonsense, Dave.

    Your numbers never make any sense.

  21. 21

    By Sparky @ 18:

    RE: David Losh @ 14 – That doesn’t seem to pencil out to me. That’d be about $42k for every person on Earth, or about 5 times the world’s GDP.

    Well in addition to the Libor thing, what the banks do is convince someone to sell them something for $1, and then a few months later they sell it for $35,000. Now you only have to account for the remaining $7,000. ;-)

  22. 22

    By Tatiana Kalashnikov @ 13:

    There seems to be so much bank bashing here. Why isn’t there more discussion about theft and fraud in the real estate field? I believe that every business has bad behavior caused by greed. Banking is no different than anything else.

    Very good point. There’s fraud in virtually every business. There’s fraud in medicine. There’s fraud in groceries. There’s fraud in the construction trades. There’s fraud in automobiles.

    But some hear of allegations of fraud and think that’s proof of fraud. Some hear of proven fraud, and think everyone in that particular industry is guilty of the fraud. Doing that is foolish and naive.

  23. 23
    David Losh says:

    RE: Sparky @ 18

    You’re right:

    “Gillian Tett, an editor with the Financial Times, says that $350 trillion worth of contracts have been made that refer to LIBOR.

    So literally hundreds of trillions of dollars around the world, all these deals, are based on this number. Now we find out this number might be a lie. At least one bank was tampering with that number for their own profit.”

    http://www.npr.org/blogs/money/2012/07/06/156371620/rigging-libor-banking-scandal-hits-home-literally

    It was on NPR and I wasn’t really paying attention.

    What is interesting is my original point will prove to be valid:

    “This will be a very over looked form of theft, even though most people have paid for it.”

  24. 24
    Pegasus says:

    RE: Tatiana Kalashnikov @ 13 – This Is Why Corporate Fraud Continues

    The LIBOR rate certainly has lots to do with real estate and mortgage yields……

    “On the understandings specified below, the United States Department of Justice, CriminalDivision, Fraud Section (“Fraud Section”) will not criminally prosecute Barclays Bank PLC andits parent, subsidiaries and affiliates (collectively, “Barclays”) for any crimes (except forcriminal tax violations, as to which the Fraud Section cannot and does not make any agreement)related to Barclays’s submissions of benchmark interest rates, including the London InterBankOffered Rate (known as LIBOR) and the Euro Interbank Offered Rate (known as EURIBOR), asdescribed in the attached Appendix A, which is incorporated by reference to this Agreement”

    There are only two effective means of punishment for corporate crimes.

    Prison. For the individuals, including the executives, of the firm(s) involved.

    Imprisonment for the corporation. That is, the suspension or revocation of the firm’s corporate certificate, thereby either barring it from operating as a corporation for some period of time (as with a prison sentence) or permanently (as would be the case for a “life term”.) The latter is certainly appropriate under a “three strikes” rule.

    http://market-ticker.org/akcs-www?singlepost=2978528

  25. 25
    Pegasus says:

    Mumbai’s Boom Turns Renters Into Millionaires

    Mea Kadwani, 78, has lived in the same apartment in the Mukund Mansion in Mumbai since he was a toddler. Thanks to rent control laws, he paid less than $20 a month for decades, and $23 a month recently, for a 2,600-square-foot space in the upscale Nepean Sea Road neighborhood, where rents typically top $2,000 a month. Now he’s moving on: After three years of negotiations, he and his wife pocketed $2.5 million from Orbit, a real estate developer planning to turn the building into a garage for residents of its 29-story Villa Orb tower under construction next door.

    http://finance.yahoo.com/news/mumbais-boom-turns-renters-millionaires-152305336.html

  26. 26

    RE: Tatiana Kalashnikov @ 13
    Capitalism is a wonderful thing, but not when it’s unrestrained. The reason there’s more bashing of banks has to do with the amount of money they took via either fraud or unethical behavior. God knows there’s plenty of hucksters in the real estate industry, but almost all the money comes from the banks, they’re the ones who were practically promoting fraud, happily loaning money so that fraud could be perpetuated. I’m not defending the real estate industry. I’ve dealt with slimy salesmen, hucksters, and the just plain stupid.
    But banks and bankers have done much more outrageous acts, and it just doesn’t seem to end, now with the LIBOR scandal. We’re not talking about swindling some poor schmuck to pay more for a house than he ought to. Or to fill out a seller’s disclosure form that he just “doesn’t know” about anything wrong with the house when he goes to sell it. We’re talking trillions of dollars here, the kind of activity that in a fairer world would result in jail time. But the amounts are so high, and the influence so big that big time criminals went free and are continuing to perpetuate the same crimes.

  27. 27
    Blurtman says:

    RE: Pegasus @ 24 – The DOJ’s fraud division chief who signed off on this wrist-slap settlelment for Barclay’s is part of the problem. He revolves between defending banksters at “white shoe” legal firms and working at the government protecting his colleagues. It’s like Al Capone getting one of his guys to run the Untouchables.

  28. 28

    China acts to limit increases in housing prices, including limiting speculation.

    http://www.cnbc.com/id/48108799

  29. 29
    One Eyed Man says:

    RE: David Losh @ 23RE: Pegasus @ 9

    If you know something different, let me know, but its my understanding that if Barclays fraud affected lending rates, its believed to have benefited borrowers at the cost of lenders and traders who had bet Libor rates would rise. From what I read and heard that the Barclay’s fraud was supposed to have manipulated Libor down, not up, and would have benefited borrowers to the detriment of lenders. It wasn’t done to make money by collecting more interest on Libor indexed loans. It was done for the benefit of traders who would profit if Libor went in a certain direction and the articles I read said that that direction was down. The victims in the Libor fraud, if any, were traders who had bet that Libor would go up. According to PBS and the Wall Street Journal European Banking Editor:

    “First of all, banks in general were submitting data that reflect — that suggested that they had lowered borrowing costs than they really did.
    . . . As you said at the outset, the LIBOR rate is the benchmark for trillions of dollars of loans to anyone from individual homeowners to big corporations. And there’s not evidence at the moment that those people were hurt. And if anything, actually, the way the banks were manipulating this, it had the effect of at least marginally reducing the interest rates that these people were paying.”

    http://www.pbs.org/newshour/bb/business/july-dec12/bank_07-06.html

  30. 30
    Pegasus says:

    RE: One Eyed Man @ 29 – I think they did it both ways depending on what they wanted to accomplish. Remember there were 16 banks involved, not just one, and it can’t be done alone. Many pay rates on money are based on the LIBOR rate. If you are a municipality that just did a 100 million bond offering and you will only need that money sparingly over eight years you would be investing that money somewhere with a bank and chances are pretty good that the LIBOR that was underbid lowered the interest rate that they would pay you on your own money. Someone loses and someone wins whether the rate is set artificially high or low. It is just stealing. There are 350 trillion in credit derivatives that are affected by this manipulation. Also remember that rates change constantly and many contracts have predictable dates for reset that can easily manipulated around. Also most contracts have a spread over the LIBOR. If you manipulate the rate lower by a 1/4 point and raise the margin by 3/8 on interest charged to a borrower, who won? The fools chase that they lowered rates and benefited everyone is exactly that, being spread around to try to divert what actually happened. The manipulation of the LIBOR has been going on for decades. They have been stealing on a global massive scale. I expect you and Kary now to declare there is “no proof” , “no fraud”, “this will amount to nothing”, etc.

  31. 31
    David Losh says:

    RE: One Eyed Man @ 29

    It’s too bad this is the end of the week end, and this will be gone tomorrow.

    The manipulation is significant to the consumer because the LIBOR was used in ARMs for as long as I knew there was such a thing.

    It’s thirty years of a market manipulation.

    The LIBOR itself may not be that significant, but the fact the financial markets, interest rates, profits, and losses can be so easily manipulated is.

  32. 32
    One Eyed Man says:

    RE: David Losh @ 31

    Just to be clear David, I didn’t say that it wasn’t significant to the consumer. I said the articles I’ve seen said the evidence of manipulation showed only downward manipulation by Barclays that would hurt lenders and help borrowers. Furthermore, I don’t disagree with the the common sense substance of your comment or Pegasus’s. But if this were a court room and you represented borrowers in a class action and I represented Barclay’s, my trump card would be “Objection, speculation, argumentative and no foundation, move to strike.”

    If the PBS story quoting the European Banking Editor of the Wall Street Journal is correct, the evidence currently available only concerned Barclays fraudulently pushing Libor down. As unlikely as it may be from a practical stand point that Barclays didn’t manipulate Libor in both directions, that isn’t what the articles I’ve seen said the evidence shows. My speculation is the same as both yours and Pegasus’, but I haven’t seen any factual report saying that they found evidence to confirm upward manipulation. Maybe it just hasn’t come out yet, but I haven’t heard about it and I can’t explain why.

    My question and comment wasn’t whether we think there is probably a smoking gun on upward manipulation, but whether anyone has found it and reported its being found. Its just odd that if manipulation happened so often and in both directions, why isn’t there the same type of easy to find email trail available for upward manipulation. Maybe there’s a conspiracy between the British government and Barclays as part of their settlement to protect banks from a class action by borrowers for all I know, but that’s tin foil hat territory. But the lack of evidence of upward manipulation makes no sense in this case and leaves me saying WTF?

  33. 33
    David Losh says:

    RE: One Eyed Man @ 32

    The interest rates don’t need to be manipulated up.

    If you make an adjustable rate loan you want the rates to be lower going in. The rates will rise by themselves.

    The fact traders helped themselves to profits is the smoking gun, but the body of the victim has been hauled away, and the crime scene sanitized.

    There is going to be no way, or interest in investigating what the LIBOR manipulation means. I personally think it’s a very small cog in a broader market.

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