A Frequent Target

Everyone here knows that the NAR is persona non-grata on this blog. I've regularly railed against them for their misuse of statistics. This next graph is no change from that modus operandiYou can clearly see how the NAR manufacturers some cheer.

Now we come to find that the NAR is lobbying against objective home appraisals. Business Week is running a piece that talks about their lobbying points. That’s fine, anyone and everyone is entitled to employ lobbyists to advance their cause in Washington. Its one of the great things about this country. However, don't stand there with a shocked look on your face and tell me that your innocent when I blame you for the current mess along with fools who signed for loans, Wall Street, 2 Presidents and a Congress who advanced a home ownership agenda that was at best faulty.

Here is a novel idea ... How about just letting values tank, find a true bottom and get on with the business of living life the way Americans have for decades, prior to the late 90s beginning of the real estate boom that has led us to ruin. It’s called taking your medicine.

Obama Sticks it to Renters ... Again

President Obama is going to let Fannie Mae and Freddie Mac refinance loans that are worth up to 125% of the collateral's value in an attempt to stem the tide of foreclosures according to an article on Bloomberg.

Other than sticking it to the third of the population who rents their homes in an effort to bail out the 10% who are over extended, President Obama tosses empathy under the bus for renters to save the fools who willingly over extended themselves.

Can anyone explain the logic in that? Anybody ... Bueller ... Bueller? Has anyone seen Ferris Bueller?

An Ounce of Common Courtsey Please?

So, I sent my Senator an email, expressing my rage at one of his potential votes. I used what he called a 3rd party website to send the email and this is the response that I got.

Unfortunately, due to the fact that your message was sent through an outside third party website, I will not be sending a detailed response. If you would like to receive a response, I would encourage you to visit my website at http://webb.senate.gov. By visiting my website directly, Virginians can request regular updates about my activities and positions on matters that are important to Virginia and our nation.

So, I went to his website, explained my position on the subject in a short email that used no big words and I closed by stating that I had emailed him previously and that I would be expecting a detailed and hopefully personal response. This is what I got back from Senator Webb.

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

If this looks like nothing, your seeing exactly what I got from Senator Webb and his staff. Nothing, which is roughly the odds that I will be voting for him when his job is up for reelection. As a pragmatic voter, I cross party lines voting for him in the last election, but I will not be making that mistake again.

Essentially what the man said to me was this ... I don't like getting spammed with messages that I don't like, so F you tax paying constituent. I don't like your message or view, but rather than just say that, I'll make your message appear unimportant because of the means of delivery. So, in response, I gave him what he asked for, a concise message submitted in a one off format. His response was nonexistent, because he couldn't find a logical or intelligent way to rebut my message. Thanks Senator Webb, I really enjoy paying you and your staff to not serve me. I look forward to voting you back to having to work for a living.

Terrific Michael Lewis Video

I'm Just Saying ...

Wasn't it George HW Bush who said, "read my lips, no new taxes? Wasn't it Barack Obama who said he wasn't going to tax health care benifits during his campaign? Look at how the ball is bouncing now. The senior George Bush was promptly voted out of office. I wonder how much coverage this comparison will get from the mainstream media. I am guessing little to none.

Option ARMs, Coming Home To Roost

As my regular readers know, this blogger has a big ego when it comes to big fat I told you so's. Mind you, I don’t think its funny for someone to end up homeless, but having to rent your home is completely different from being homeless.

Bloomberg is running a piece that says the option ARMs that are going to be recasting next year though late summer of 2011 will be a threat to the current housing recovery. Now, I dispute that we're in any kind of recovery, but I guess that’s semantics. Bottom line, I have been beating this drum since March of last year, that there would be no true recovery until at least 2012, once we're done with all the recasts. So, throw another log on the fire, we'll be torching another $750 billion for the pay option ARMs. Also, keep in mind, that $750 billion number does not include the pending Alt-A carnage.

Pay option ARMs are especially insidious, since the monthly payments started so low. Disgustingly low if you ask me. The article cites two cases, where payments started under $100 and will jump to over $3500. Once again, the ignorant consumer gets painted in a favorable light, but its high time the ignorant or foolish consumer get called out for their role in the current debacle. If people would have looked at these loan products as fools gold, instead of some get rich quick scheme, we might not be nearly the trouble we are in. We all learned at an early age that if something is too good to be true, it probably is. Home loans are no different, especially since its everyone's biggest expense and everything is handed to the loan recipient in black and white.

The phrase of the year for 2010 will be negative amortization.

Negative amortization, occurs whenever the loan payment for any period is less than the interest charged over that period so that the outstanding balance of the loan increases. As an amortization method the shorted amount (difference between interest and repayment) is then added to the total amount owed to the lender. Such a practice would have to be agreed upon before shorting the payment so as to avoid default on payment.

I just wanted to add this little nugget of info, because I so, despise the NAR and the cost added, faux innocent acting, constituency they represent. The NAR was well aware of the likely cave ins with option ARMs and Alt-A when they started running commercials this spring saying that "now" was a great time to buy. I find that highly unethical and self serving, but what else do we expect from an organization that pulls the strings on Lawrence Yun.

Need Affordable Housing? Call Your Senator

If you’re like me, you chose to sit out the tail end of the real estate boom while fools rushed in. Now today, as the fools wait for their bad loans to come home to roost, our elected leadership continues to meddle in markets which they are in part responsible for fouling up. Rep. Maxine Waters (D-CA) and Rep. Elijah Cummings (D-MD) spent hours on the phone trying to help constituents renegotiate the mortgages which they signed for and now can't afford.

I'll sum that for you, like this ... As tax payers, your paying the salary of these Representatives so that they can try and enact bills like the one sponsored by Illinois Senator Dick Durban that would continue to artificially prop up home prices that use your tax dollars against you, while at the same time, they pretend to be mother hen to undeserving home owners on your dime.

If your an aspiring home owner, these types of actions and legislation only prolongs the time in which you can achieve your American dream. If you’re a responsible home owner who would like to sell a home at a reasonable profit, this meddling in the markets will only put off the time in which you can sell your home at decent and historically typical profit.

So, I urge you to use the links on your right to find the contact information for your Senators and Representative. Call them, write them and email them to tell them that you want them to stop using your tax dollars against you. Tell them to stop meddling in markets which are in dire need of a natural correction, not more artificial fixes. Artificial fixes got us in this mess in the first place. If you want to tell them why they need to stop meddling in the real estate markets, direct them here, read my past posts, they explain the rationale for not tinkering with the real estate markets very plainly. I even used a lot of pictures so that they will be able to understand why proping up home prices at even the presently depressed levels is still unsustainable.

Picking Up the Tab

The President went to Nevada to help raise funds for Harry Reid and pander to the good people of Nevada. I don't know what else the President did while he was in the great state of Nevada, but none of it was front page news, except the appearance at the fund raiser.

It seems to me, Senator Reid's campaign should be paying for thousands of dollars worth of jet fuel, security arraignments and whatever else it costs when the President travels. As a tax payer who has been on the short end of just about every proposal President Obama and Senator Reid have put forward in the last few months, I don't like the idea of picking up the tab on Senator Reid's re-election efforts. Someone other than the tax payers should be on the hook for the cost of the President campaigning. Ditto for his hollywood fund raiser. The man has to stop chasing celebs around.

This sounds like exactly the kind of waste, which the President has been speaking out against. This whole thing sounds very hypocritical in my opinion. I guess that’s the Obama double standard at work.

If It's Too Good To Be True ...

Grandma had a saying ... if its too good to be true, than it probably isn't. For the last few days Turbo Tax Timmy has been running around telling anyone who would listen, that the banks are healing. Perhaps this is one of those misuses of statistics that the NAR is so fond of.

Unless you have your head buried in the sand, there is no way you could possibly believe that we are in recovery. There is a massive wave of Alt-A and Option ARM resets just a few months away.Then there is commercial real estate, the proverbial "other shoe" that is just waiting to drop. Nobody who should have known bettter, could foresee the failures in residential real estate. Its stands to figure that same lack of foresight will be dogging commercial real estate. As everyone’s home equity piggy bank dries up, as company's lay people off there will be decreased demand for Abercrombie clothes, vacations, dining out, gourmet junk from stores like Williams Sonoma, Sony big screens and a whole host of other consumer goods, which as we have seen, has fed back on itself to perpetuate even more economic downturn. If those stores aren't making money, the chains will shut them down or the chains will just go out of business leaving real estate investments swinging in the breeze. The chart below shows that delinquencies are on the rise in all facets of commercial real estate. So, my question to the Secretary of the Treasury and his MA from Johns Hopkins is this ... Are things really turning around or are you just trying to will a recovery with a nice bouquet of flowers while whispering sweet nothings in everyone’s ear?

Nothing being the operative word. This blogger is not buying this idea that we're in recovery or even some contrived pre-recovery phase. Best case, the carnage is taking a break, because there are tens of thousands of homes which are due to be foreclosed. The only reason they haven't been foreclosed is because the President imposed a moratorium on foreclosures which just ended. The banks are hiding somewhere in the region of 600,000 homes. That’s six hundred thousand homes that banks will need to liquidate, thus adding additional inventory to the already bloated inventory of homes on the market. As noted above, there will be more foreclosures starting later this year and all through next year as the holders of shifty loans on homes they can't afford begin to face the music of a rate recast with few options for refinancing. Lastly, there is that other shoe. There are some people placing that the bank's exposure to commercial real estate losses as high as $1.8 trillion. Somehow, I don't think the bankers had the foresight to get coverage on their commercial real estate holdings from AIG, like they did with their residential real estate. There will be no intermediary to help the government backstop the commercial real estate losses, like there was with the residential real estate paper that went bad. It was easy for banks to report profits with billions in TARP dollars backstopping them. What are they going to do when the commercial paper goes bad?

You Can't Handle the Truth

Somebody better press Col. Nathan Jessup's dress blues and see if we can squeeze Jack Nicholson into them, because that’s what needs to happen, pretty much every where across the country.

The shortest distance between two points is a straight line. Right now we are at a point where our economy is sadly broken. We want to be at a point where our economy functions normally and predictably. So, how do we get there? I'll tell you how, we take our medicine, we let the mechanisms within our economy function normally, as they have for generations. We stop undercutting contract and bankruptcy law with artificial "fixes" that will only prolong our slump and make a more bitter pill to swallow when we're forced to do so.

There is no pretty way to say it. You don't need a JD from Harvard or an MA from Johns Hopkins to figure it out. Its time to stop meddling with the complex economic machinery that drives entire world, we no longer have the power to just makes things happen like we did 20 years ago. Its time for real leadership. Leadership that realizes that the needs of the many vastly out weigh the needs of the feeble minded few who willingly and with great vim and vigor over extended themselves. Over extended home owners, I am sorry, its time to line up a rental and drop the keys at the bank. Mr. Banker, you leveraged everything but the door knobs, its time for a margin call. Put up or sell out, your short sighted profit mongering has come to an end. The people who didn't share in your gains certainly do not want to share in your losses. I used to say save the banks, we all rely on them. I was wrong, they can't be saved.

Its sink or swim time. Those with the anvil strapped to their backs are going to the bottom. A regular poster here, likened the current situation to forest fire. It was such an apropos analogy. Before man learned how to fight fires, forest fires were nature's way of renewing. The flora and fauna that was burnt died, but its nutrients were returned to the soil. Soon after the fire ended, new species began to sprout up and life began a new.

The Wall St Journal is Even on Board

Yesterdays WSJ piece closed with some really interesting comments. I'd like to say that those comments were an original sentiment, but I have been standing on top of the hill waving my arms like a mad man and screaming the exact same things. The closing comments of the article were also rather chilling for the "its almost over" crowd.

I looked at Case-Shiller's index back to 1987 and compared it to federal data on average earnings. The result, rebased to 100 in January 1987, can be seen here. And it's alarming. By this (admittedly very simple) measure, today's home prices are actually more expensive, in relation to average earnings, than at the peak of the 1989 property bubble.

Equally noteworthy is that when the last property bubble burst, it took about eight years before the market showed really strong signs of revival. This bubble was far, far bigger

A New Foundation? I am Not Buying it.

President Obama touted a new foundation for growth in his 100 day press conference. He blamed an economy built on sand for our current economic condition. Those were good analogies, courtesy of his speech writer. However, upon even distant observation, it’s obvious to anyone with an ounce of common sense, that the continued individual home owner bailouts, $75 billion at last count, are nothing more than adding more sand to the pile.

Can someone, anyone, please explain to me, how artificially supporting home prices will truly, in the long run, do anything to relieve the economic conditions which grip this country? Reworked mortgages are still failing nationwide. Banks are still holding billions, perhaps a trillion dollars worth of toxic paper that rides on top of hundreds of thousands of bad mortgages. It was a set of artificial conditions which got us in this mess and more artificial "fixes" will only prolong this mess as well as drive up the cost of fixing it. Einstein defined insanity as "doing the same thing over and over again and expecting different results".

The very best short term case is that this mortgage bailout plan supports prices for a short time and stalls our economic slide. It may even stall the slide long enough to get President Obama reelected. That’s the best case, with probably the poorest possible outcome as the slide at the end of any artificial stall will be far more precipitous than we are currently experiencing. In short, its good for him and bad for us. This is what we get, because we have allowed our politician's focus to become staying in office, rather than best serving the people.

Another Interesting NAR Tidbit

These guys are masters of misusing statistics. I was reading the Wall St Journal this morning when I came across this little nugget of information.

The NAR has been touting decent sales numbers over the last month, 360,000 sales versus 375,000 sales in the same month last year. Its the truth, but here is the real catch according to the WSJ piece ... Over half of those homes sold last month were foreclosures and short sales, while that number was under 20% a year ago.

Lies, damn lies and statistics.

Keeping Track

A lot of Republicans were drummed out of office, in some cases for lesser offences, yet the main stream media continues to provide obscene amounts of top cover. Where is the outrage?

Pennsylvania Rep. Jack Murtha - Faces allegations of steering defense spending to the consulting firm his brother works for and another firm that a former staffer founded.

New York Rep. Charlie Rangel - Currently faces no fewer than 4 House Ethics Committee investigations.

California Rep. Jane Harman - Is fighting allegations that she offered to help seek reduced charges for two pro-Israel lobbyists suspected of espionage in exchange for help from a pro-Israel donor, also suspected Israeli agent.

California Sen. Dianne Feinstein - Is accused of devising legislation that helped her husband get a federal contract to sell foreclosed properties at compensation rates higher than the industry norms. Her defense is that the legislation never became law.

Connecticut Sen. Chris Dodd - Continues to stonewall information requests in relation to allegations that he was the recipient of VIP loans from disgraced subprime lender, Countrywide.

North Dakota Sen. Kent Conrad - Continues to hide in Chris Dodd's shadow while he fights off the same allegations.

President Barack Hussein Obama - Continues to avoid scrutiny regarding the preferential treatment he received from TARP recipient Northern Trust Bank in negotiating a loan and purchasing his Chicago area home for beyond lowball discount of 15% under market prices at the height of this nations real estate boom.

So Which is it Timmy?

This morning, yesterday morning, by the time most of you get around to reading this post, I was perusing Bloomberg and I came across this article where Secretary of the Treasury, Timothy Geithner states, in testimony to Congress no less, that, “Currently, the vast majority of banks have more capital than they need to be considered well capitalized by their regulators,”. At no time did he question the levels which the regulators might use to yard stick these banks and their assets & liabilities. He goes on to state that lending is beginning to thaw. Thaw being his word not mine. Then, this evening I come across this gem on USAToday, recapping Turbo Tax Timmy's testimony in front of Congress. In this article titled, "Geithner: Toxic assets hinder banks' lending", our vacant Secretary of the Treasury says that toxic assets are still a problem for the banks and are preventing banks from lending to their fullest ability. Geithner's statements from this afternoon seem to be in conflict with his testimony earlier today.

So, I put it to you Timmy, which is it? The former or the later? It can’t possibly be both.

People used to complain about the Byzantine statements and testimony of Alan Greenspan, but he pales in comparison to Tim Geithner who stagers about with a blank, dog ate my homework look on his face whenever he is pressed on a challenging topic. A few months ago I questioned his intelligence and moral turpitude to hold the office of Secretary of the Treasury. Today, I am calling for his resignation. Its clear that he is not capable of holding the leash on the largest economy in the history of man, let alone guide it though the most troubled waters we have ever seen.

Have We Reached the Beginning of the End?

China is clearly trying to reduce its exposure to the dollar. I can't fathom that the Federal Reserve will be able to pick up the slack. I wonder if this is what it was like in Argentina before they defaulted.

Anecdotal Evidence

Relying on anecdotal evidence, The Washington Post is running a piece that is suggesting that the real estate markets are bottoming and the light at the end of the tunnel is not a freight train. This piece of cheerleading fluff does nothing but further erode the declining credibility of what was once one of the nation's leading news outlets.

The math and historical trends show that the bottom is no where in site, but why pay attention to the math, when you have anecdotal evidence? The article even seems to pay lip service to the recently received March housing statistics before dismissing them in lieu of anecdotal evidence.

Overall, I find this headline, "Housing Data Could Signal If Bust Is Over", from the Washington Post to be highly irresponsible.

Its Not Over By A Long Shot

Read this chart, understand it, analyze it. If you come to the conclusion that we anywhere, but a long way from the end of the road, please post your rationale here. While some, mostly in the Obama White House and from the National Association of Realtors think that we're coming out of this slump and now is the time to buy a new home. I differ, in examining this data from Robert Shiller, I conclude that most markets have a very long way to fall before they reach a proper parity. At present, the market is no where near approaching recovery and thus a real buying opportunity does not exist at this time. Ignore those pleas from the NAR on your local radio stations, telling you that now is a great time to buy because affordability is at a recent low.

Harvard Student Takes on Barney Frank

Link

How it is

The Washington Post is running a piece talking about how aid to lenders isn't helping reduce or prevent foreclosures. I find the theme of the article misplaced, but in lock step with our government.

It’s of course unfortunate when someone loses their home. I feel for the people who have done things the right way and because of the economic downturn are facing foreclosure due to unemployment or illness. However, in every downturn, there are casualties. You hope that you can avoid the bullet, but it is a fairly indiscriminate executioner.

I feel for the people who bought homes they could afford with traditional mortgages they could afford. They typically made sacrifices with respect to size, amenities and location. Now, those people are stuck in homes which have lost a lot of value and are perhaps even under water on their loans. I feel for them, because they did things the right way and their plans of upsizing in a normal progression are severely impacted. Their only mistake was allowing themselves to be over sold on the American dream by our media, realtors and the general hardwiring that makes us Americans.

I feel for the renters who were priced out of the market. Perhaps they wouldn't or couldn't sacrifice on location and couldn't stomach the reality of buying in close to the city. Renters are essentially having their tax dollars used against by any plan to bail out troubled debtors.

The people I do not feel for are the ones who over bought and are now being squeezed by a recasting ARM. Those people took a gamble, they have lost. I do not see how saving that <10% slice of the population is equitible, smart or a good idea, especially when such a high number of reworked loans are still defaulting. Its the bottom that needs to be found, not a false top or even middle that should be preserved.

There was no bailout for millions of tech workers when Bill Clinton's dot com bubble burst. Billions of dollars in unrealized equity gains were wiped out. People's lives, plans and aspirations were wiped out and there was no grand call to prop them up. There should not have been then, nor should there be today.

A little under a third of this country rents. Another 30% owns within their means and a similar number owns their home outright, without a loan. If the 10% are displaced, so be it, there are plenty of willing an able potential owners among the third who rent, provided the market is properly corrected.

The American Dream is Dead

80% of respondants in a USAToday poll think that the American dream is unattainable.

The question posed was this, "Are people who work hard and play by the rules being treated fairly as we try to fix the economic crisis?" 80% of respondants said no, 15% said yes (although there was no attention paid to what plant they were voting from) and 5% did not know.

Wake up Mr. President, stop meddling in complex economic systems about which neither you nor your advisors know anything about.

An April Fools Prank

An April fools prank got me thinking. Its a simple thought, so I will keep it short. Car & Driver ran a prank story that Obama was going to force Chevy and Dodge give up their NASCAR sponsorships, because they received so much government bailout money. That got me thinking, the banks have been pressed to give up their stadium and event sponsorships, because they took so much government money. In that light, I have to wonder why people aren't protesting out front of NASCAR tracks protesting against Chevy and Dodge's sponsorship.

What Does 4 in 10 Mean?

ABC News performed a poll and found that 42% of the US population believes that President Obama has the country headed in the right direction. They even made this sound like a good thing, knowing that the lemmings who read the news with a closed mind will not do the math and realize that this means 6 in 10, a majority for those of you who can't do the math, do not think we're headed in the right direction. I guess this is what you get when you call 52% of the popular vote a mandate.

You wanted it? You got it, along with Pelosi, Reid, Dodd, Waters and Frank.

Land of the Free to Whine

And home of the over entitled. So, our President, in his entire web enabled glory, invited us, his loyal subjects to the White House website to submit questions on a variety of subjects. Obviously the one that most interests and concerns us, was his housing forum. The range of the questions was pretty narrow and most questions came in a few different forms, but the overall theme of the questions was sadly narrow.

Krysty from Corsicana, TX asks

Instead of bailing out banks, why can't we pay off the mortgages in foreclosure so banks would still get the $$ AND people can keep their homes? If we can give away $$ to huge corporations, why can't we give it to the American people who pay for it?

Well, Krysty with an extra 'y', its like this. You’re proposing a massive welfare state, which this country just isn't quite ready for, in spite of the socialist leanings of our President. Besides, how long will it be before someone like you is whining that someone down the street or around the corner got their bigger house paid for by this magical program you’re suggesting? I think it will take less than 5 minutes. Corporate welfare isn't optimal, but far more people depend on the big banks and the infrastructure they provide, than depend on the individuals staying in their over priced ill financed homes. This problem is far bigger than many people truely comprehend. Then there is this fool...

Jenn from Honolulu, Hawaii states

My husband and I work FOUR jobs to stay current on our mortgage. I was forced into an ARM and am afraid of my mortgage adjusting. No one will refinance our loan and I would need to default for loan modification. What options are available?

Well Jenn, I admire your aggressive effort and willingness to work FOUR jobs, but nobody forced anyone into an ARM, most people ran head long into an ARM, as they irrationally pursued homeownership with all the trimmings. The only option that should be available is foreclosure and a market correction to more normal pricing. The American Dream, as the cliché of homeownership has become is really a privilege, not a right. Same goes for refinancing.

Alan McVickers from Hagerstown, MD, not far from our nations capitol seems to think otherwise

We pay our house on time (bought in 2007), have great FICO but can't refinance due to housing loan to value issues (economy based). What plan is there for people like us to get a lower rate without points, more cash down and no mortgage insurance?

Sorry Alan, if you couldn't afford it, you shouldn't have bought it.

I appologise Alan, it was incorrect of me to assume you couldn't afford the home.

What I should have said is that a refi is simply not a right guaranteed to everyone. Yes, if you could refi along with millions of other home owners, you would have money to put into the economy, however, based on your comments for this posting, you haven't read any of my blog. If you had, you would understand that a correction, of epic proportions is absolutly necessary for our ecomomy to begin functioning normally again. Forestalling that correction only prevents a natural recovery, which at this point is our only option. We've over spent for 2 decades, our credit is maxed out. Furthermore, I think you over estimate the impact of the resulting spending if everyone were able to refi.

Then there are the people who will be most shafted by any bailout of our nations irresponsible borrowers.

Keesha from Valley, AL asks the real question, which I doubt our President will answer.

Is there are way to stop holding up home ownership as a banner for the American dream? Do you have a plan to give renters the same attention and opportunities for tax credits that homeowners get?

In fact, I will send an apology to the White House and post it here, if President Obama goes on national TV an answers this question or one in the same vein, in forth coming and believable manor. I'll be even more shocked if they answer my question.

Mr. President, I get the impression that your plans are essentially using my tax dollars against me, by using public funds to put a floor under troubled home owners. Whats in this for me, besides paying the freight on the death of my American dream?

The question length was limited, or I would have added that the feeble tax credits that put forward as part of this bailout, for first time buyers are a drop in the ocean, considering current price levels.

UPDATE:
The President didn't take any tough questions. Mostly, he appeared to take questions which allowed him to further present his favorite issues and agenda. You can read the recap here. Like a good lawyer, he didn't allow any questions to be asked which he wasn't prepared to answer. Disappointing, eventually we'll see the emperor isn't wearing any clothes.

Stop Pouring Money Down the Drain

Look at this chart. All this money down the drain in a vain effort to stem the tide of mortgage failures. As I have said so often on this blog, you can only hold the tides back for so long. Eventually nature runs its course and frequently, its a far more angry course when we have meddled with its processes.