“There will be a soft landing…if it even goes down”
Remember when that is all you would hear from Real Estate professionals, mortgage brokers, the MEDIA, etc. Well, I guess it wasn’t true.
I know I haven’t posted here in a while. I have been very busy, and on the road for well over half the time since my last post. I started a business with a classmate of mine from the Naval Academy. We bootstrapped the whole thing and took out zero loans. It has been a lot of work, but it is definitely paying off.
As far as the blog goes, yes, a lot has happened, but I guess I figured that you can ‘read about it’ in a million different places. The difference is that this blog was saying the stuff BEFORE it all unfolded! I think I told the ‘important’ side of the story…when the DAMAGE could have been avoided or mitigated for people that read what I was saying. I still get e-mails from people thanking me for this blog. They are looking back 1, 2, 3 years and seeing how much reading my blog opened their eyes to the MATH behind what was going on. They decided to take a chance on the numbers I was putting out there and the data I was giving people. They took the ‘risk’ of waiting to buy, and for most (if not all) people, it paid off in spades! They either got their house for less money, or a lot more house for the same money, and many are STILL waiting patiently to see where housing prices end up.
I told you what was really going on behind the numbers, and each day that goes by, I am proved correct more and more. I told you that underwriting standards were tossed out the windows. I told you that once the adjustments came, there would be lots of foreclosures and lots of inventory on the market. I said that in 2008/2009 is when things would really start getting interesting. Trust me, there is more to come. We have seen the problems with ’subprime’ and some with Alt-A. Just wait until the wave of A-paper defaults starts coming in 2009/2010. Sure, a lot of A-paper borrowers have made it ’safely’ to a 30-year fixed mortgage, but there are a ton of people that can’t refi because the ‘value’ isn’t there.
We are just starting to see big problems with Fannie and Freddie. I haven’t had time to research all that is going on with those two companies at this time, but I can honestly say that not much will surprise me. Bloomberg is reporting that Fannie and Freddie need a 75 billion dollar infusion of capital to keep going. Will be interesting to see how that pans out. Not sure where they will get the money, maybe they can just ’sell out’ to another Middle Eastern investment group.
Here is another list of things we have seen or are seeing:
- We have seen our own government pass a 300 billion dollar ‘bailout’ to help people that cannot pay their mortgages. (don’t get me started on this one)
- Ghost towns in the Inland Empire Should that really come as a surprise? I know it was discussed here, and especially on Ben’s blog in great detail. So much speculation in an area where there is NO reason why ’starter’ homes were 400k+. It was all creative financing & speculation, and we are seeing how that is ending.
- Vegas is taking a ‘dive’ now that all that ‘easy’ RE money isn’t flowing in. Vegas has a 4-fold increase in bankruptcies and is a nation leader in foreclosures. To make matters worse, hotel occupancy rates are down from 95% to about 80%. Things are so bad that 3 gentleman’s clubs have had to close their doors.
- Wall Street is not doing so well as a whole either. They made their bucks ’selling’ MBS (mortgage backed securities) for a few years there, now it is time to pay the piper.
That said, I will continue to keep some sort of activity on this blog. I know that 4 months or whatever it was, was too long. That said, since this ‘housing bubble’ thing is no longer a secret, would people object to me talking about other things related to finance, business, money, etc., even if it isn’t about housing?
Thanks again to my loyal readers. I look forward to the responses and comments.
Stay tuned…
SoCalMtgGuy
July 8th, 2008 01:03
Hi! I am glad things are going well for you.
Count me among those who first learned of this mess through your blog. Thanks. Writing on other topics is fine, of course, this being your blog.
July 8th, 2008 03:59
Please *do* talk about other topics. You are very clear in your writing and it is great to have the various components of a large financial transaction like buying a house explained to those of us who aren’t experts.
July 8th, 2008 04:46
About time we heard from you (thank goodness for RSS - I would have given up checking this blog a long time ago).
I would love to hear your thoughts about other finance related topics (yes, we do hear about the housing bubble just about everywhere now).
Good luck with you business (tell us more about it).
July 8th, 2008 10:00
Great to hear from you. I’ve been devoting a lot of my time to real estate investing, but a different, safer, more patient approach over the last decade. I always find it alarming that people are so willing to buy buy probate or foreclosed property. How would buying something a Realtor and bank can’t sell be a sound investment!? I guess people’s senses are blinded by making that quick buck. I started a blog recently too so if you get a chance check it out at http://blog.tenpercentdown.com
July 8th, 2008 15:03
I said it before and I repeat it again WRIGHT A BOOK about all this. With your narrative it will be a pleasure to read it.
July 8th, 2008 22:29
Hi SCMG,
Good to hear you’ve taken the plunge. I hope to do likewise in the near future - but still vacillating & not able to “cut the umblical cord” of a fixed salary.
Please post some resources/ your own experiences on taking the plunge asap.
In addition to those who wish to do this voluntarily, I’m sure a lot of FB’s will also find it useful - ‘coz they’ll HAVE to get self-employed (few jobs, fewer well-paying ones; combined with ARM resets / increase in mortgage rates & tenors…).
Your blog readership will explode to include a much wider target audience
July 9th, 2008 06:37
The next topic of discussion might be bank runs..
Check out this story on IndyMac.
http://www.nytimes.com/2008/07/09/business/09lend.htm
July 10th, 2008 13:56
I check your site every couple of weeks hoping to find a new post, so thank you. Years ago (4) my husband had the “house buying bug†really bad. We went looking and I couldn’t believe this frantic attitude about buying now or be priced out forever. And then something just didn’t seem right when everyone could afford a $500K condo. Then I found your site! Thank you for all of your knowledge that you passed on to us. I very much appreciate it. Because of your site my husband and I are still waiting to buy that perfect place and are not looking at foreclosure. Please continue to post. I love to read your site. Hope to hear from you soon!
July 10th, 2008 17:36
Write about whatever you want. You’ve earned it. You made the call early, and it was correct. IMO, you’re one of the heroes of the past two years; anyone who listened to you either made money or avoided a total wipeout.
July 10th, 2008 20:40
Thanks again for your help. Our family is still renting, in large part due to your blog. When ever I start to get the itch to buy, I go back and read your posts.
July 10th, 2008 22:32
Thanks for all the kind comments!
Marc…I hope you are going back and reading my posts and crunching the numbers for your situation. Be informed, do your research and due diligence, and you will know when you are getting a deal or the time is right. THAT is ultimately what counts.
I wish you and every reader of this blog all the best with you financial futures.
Stay tuned…
SoCalMtgGuy
July 12th, 2008 09:03
Please do post on other topics…
BTW, what year did graduate from the Academy?
July 12th, 2008 14:39
I can’t tell you how disgusted I am with the leadership of this country (not just Bush and company but all politicians and all the people running corporate america as well.) And no, I am not some liberal who likes to blame everything on Bush and big corporations. But it is basically greed (and financial liberalism, ironically)at every level of society that has gotten our country into this mess. I just hope our economy can recover from this because it is not looking good right now. I believe the only way we get out of this mess is to RAISE INTEREST RATES, not lower them. Give people a reason to save money and get value back in the American dollar. But as long as politicians are involved who make decisions based only on polls and popularity, we will be mired in this muck for a long time.
July 12th, 2008 21:00
Since the bubble has now become public knowledge, poking fun at the MSM, “experts” and “economists” isn’t as entertaining as it used to be.
The voices calling for a bottom in real estate prices are becoming fainter by the day.
So, yes. On to next “Extraordinary Popular Delusions and the Madness of Crowds” (Charles Mackay). Always look forward to reading your posts. So, please Sir, may I have some more?
July 12th, 2008 22:43
TresSher, you said:
The voices calling for a bottom in real estate prices are becoming fainter by the day.
I guess you didn’t see today’s Barrons:
>
SoCalMtgGuy — is Barrons right? Is this thing almost over? I don’t see how it can be with all the prime re-sets still to come but…
July 12th, 2008 22:44
Oops, some kind of glitch… Here’s Barron’s big cover story today:
Bottom’s Up: This Real-Estate Rout May Be Short-Lived by Jonathan R. Laing
This real-estate rout has been more painful than prior ones, but it may be shorter-lived. Indeed, there are early signs of recovery.
July 13th, 2008 12:03
Okay, I did say growing fainter. Six months ago anyone having anything to do with real estate was calling the bottom.
So, if you want to have an intellegent conversation, what does Laing base his opinion on?
Is he quoting Case Shiller? Does he know anything about Alt A or Option Arm loans? Does he see employment improving? Are people’s incomes rising?
With IndyMac, Freddie and Fannie tanking. Personally, don’t see it.
July 13th, 2008 22:01
Tres,
You misunderstood me. I’m on your side! I think it’s nuts for Barrons to be calling a bottom now — it’s boostering is what it is.
We’re close to a total shutdown of mortgage markets. I’m on the west side of L.A. — remarkably, things haven’t really dropped here yet. Maybe 10 percent. Maybe. Not like the 50 percent drop in the Antelope Valley that I read about in the L.A. Times.
I think if you remove the bottom of a house of cards, it’s pretty hard for the top level to survive, so it’s only a matter of time before L.A. gets slammed, but you won’t hear that from my neighbors, who are convinced “it won’t happen here.” I see things continuing to get worse through 2011 or 2012 as the re-set wave runs its course. And by then we could be looking at such serious inflation from all these bailouts that we could easily be back to 10 percent interest rates, or worse. Our economy might be more resilient than Japan’s — as I believe it to be — but that doesn’t mean other factors won’t lead us into a 20 year recession/depression like they’ve had. As Shiller likes to point out, real estate prices in Japan fell fifty percent, and stayed down fifty percent for a generation. People have spent their whole lives paying off a Tokyo apartment that is worth half what it was when they bought it.
That could be us. Might not be. But might.
July 15th, 2008 13:59
I always visit this site from time to time to see if new posts arise.
And this was actually one of the first blogs to begin talking about the housing bubble in detail. (Along with patrick’s site)
I wanted to commend you on having the forsight and prescience to speak of this issue at the same time that dipshits like David Lereah were touting their latest ponzi scheme book on CNBS. And to no one’s surprise, you were proven right.
So despite the absences, I still look forward to your posts. I hope you continue to keep us informed and entertained as time goes on.
July 16th, 2008 10:47
Well the really great thing was that early on, when many of us were looking at RE prices, scratching our heads and mumbling “That can’t be right,” you provided a window inside the insanity that was bubble financeing. You made it obvious that the prices based not upon “fundamentals,” but upon a mixture of optimism, blind faith, and fraud.
July 20th, 2008 16:32
Please keep posting blogs and talk about additional topics. Could you tell us a bit about your business startup?
I have been following your blog since Feb. 2006 and my husband and I were actually one of those that listened to your advice. We put a large down payment on our home and hope to have the house paid off soon. Thanks for all of your advice.
KC, Texas
July 22nd, 2008 05:02
When I read on this blog what kinds of things were going on in mortgage finance, I couldn’t believe it. But I guess it was all true. What were they thinking?
Perhaps that other people would end up paying for it.