Irvine Housing Blog

Looks like Schiff agrees with my prediction that OC house prices will average $200,000 in the next few years.

I’m looking forward to seeing realtor signs with electronic price displays that slowly spin lower, perhaps $1,000/day.

That would be the opposite of the US Debt Clock, always going higher.

loads of cabinets

Dewd - I’m like a tewtilly professional realtor, man.  You should see this killer house with sh_t-loads of cabinets in it.  Far out.

room for pool

Paul Volcker was interviewed on Charlie Rose last nite. Some quotes:

- Glass/Steagal is 2 lines. The Volcker Rule is 35 pages. These are not complicated to understand. Pick one or the other and enforce it.
- 1 trillion euros ... wow, that’s the first time I ever had to say that.
- in 2008, the shadow or non-banks such as mutual funds actually had their money in European banks. Can you imagine what would have happened if the Greek crisis was exposed in 2008 and there was a run on our mutual funds? That’s why I think mutual fund deposits should be in regulated banks.
- Japan’s real estate and stock market values fell 70% during their crisis. You can’t just press a button and fix that type of economic problem.
- executives say that capital requirements and restrictions on proprietary trading will hurt growth. I say that type of financial engineering is secondary to real economic growth.
- adding a tax on stock market trades will only be possible if other countries do that as well, which won’t happen
- we’re deleveraging the mortgage market through foreclosure, which is a very painful process
- why was there $60 trillion in swaps protecting against $6 trillion in risk? what does that even mean?
- we have deleveraged maybe 25% of swaps. It’s a start, but still high compared to 15 years ago.
- the middle class has not improved economically in 10 or 20 years. OWS should have happened sooner.

I really like Paul Volcker

To his comments about what Wall Street says to him:

...[Wall Street] executives say that capital requirements and restrictions on proprietary trading will hurt growth…

1) We don’t have growth now, so how can such restrictions hurt?

2) We had great growth in the 50’s and 60’s before high speed computers and networks made proprietary trading possible.

All this talk of dismantling Freddie, Fannie, etc and abolishing the income tax is nothing but talk because the financial industry writes the laws that govern these institutions thru their lobbyists. I’d love to see a 5-page tax code and no government involvement in real estate but we’d have to completely remove special interests from the equation first. Good luck with that! In the meantime I’ll be holed up in my OC bunker with my guns, canned food, bottled water and stacks of gold coins waiting to protect my family from bands of hyperinflation marauders terrorizing the neighborhood in their luxury SUVs.

I look forward to seeing Schiff in November.
If you haven’t seen his testimony to Congress from September 2011 on youtube, then you really should. The best (and simultaneously worst) part are the incredulous looks and clearly worried follow up questions that expose just how poorly informed and educated today’s American congressmen and women are on these critical issues of national debt, government intervention and taxes.  They obviously have no clue what they are doing wrong and are getting tons of horrible advice.

Schiff was right about the housing crash and the 2009 financial crisis. Now he’s more bearish and foreboding than ever, mainly because all of the policies enacted by Congress and the Executive branch since 2000 have been a series of tragic, colossal and likely irreversible mistakes.

Schiff slams Obama’s administration for not addressing the issues early on. Instead, more borrowing and govt intervention has made matters worse. The interesting thing though is that Schiff’s criticism really goes back to the Clinton Adminstration. Also, Schiff doles out punches for Bush & Co. in equal measure.

I like him because he’s a fiscal conservative and old school Repubplican minus the holy roller, intelligent design charade.

It gets funnier by the Day…

From the WSJ:

“The main subsidiary of mortgage insurer PMI Group Inc. has been seized by insurance regulators in Arizona, and will begin paying just 50% of claims beginning Monday, according to its website.

The remainder of each claim will be deferred, the company said.

PMI becomes the second mortgage insurer since the housing-bubble burst to be subject to restrictions on payments, as fallout from the bursting of the housing bubble takes another turn for the worse. The insurer joins smaller rival Triad Guaranty Inc., where policyholders since 2009 have gotten 60% of their claims paid in cash with the balance deferred.

According to an order from an Arizona Superior Court judge posted on the company’s website, the Arizona Department of Insurance now has “full and exclusive power of management and control of PMI.”

The elderly, stripped of interest income as a result of rock bottom interest rates ...

Not much pisses me off these days, but this particular consequence of kissing banker and homedebtor ass year after year is infuriating.

If you want low interest rates for a couple of years, then be a good lil’ monetarist and do the deed: slash ‘em for a while. Treasury holders aren’t entitled to great returns all the time.

But this seemingly endless period of low rates is punishing people who did not play the Big Casino with all their money. Everyone must live with risk, but no one should have been shafted the way savers have been since the late 1990s.

“IHB: It would also dramatically lower prices and cause the bankruptcy of most of America’s banks. I love it.”

Be careful what you wish for. U.S. economy is not competitive. If most banks die unexpectedly, shutdown will be inevitable. It is point of no return. Do not expect any recovery, because China and others will capture international markets.

Banks are like terrorists these days. They have a bomb - big one. They demand money from taxpayers and expect to give nothing in return.

IR - Reading the above posts, do you think gold is in a bubble?

Schiff is a radical right person with abolish the income tax. In otherwords, he is a nut case. Things will not be near as bad as he proclaims.

Some simple truths that are touched on but ignored by the MSM and at times, economists:  First, in persistent high unemployment, local real estate values deflate or plummet (rents and home values both); schools empty, young people especially move, government also cuts back employment.  Second, what is different this time is that in California and Nevada with obscene rates of underemployment/unemployment, one would expect 5% or more of the younger family population to LEAVE for greener pastures.  They haven’t, apparently.  When they do leave the state, as now it is clear the jobs aren’t there, won’t be there, then see “First” above. To reduce California unemployment to 6%, 6% of the workers have to leave, with their families; in Nevada, it is more like 8% have to leave.  Either they don’t leave, or more and more are laid off as some also leave.  Now factor that into your housing future value predictions, say three million Californians leave, think that may have an impact?

I won’t buy a house again until interest rates have normalized at the 50 year long term average.  This may not happen in my life time and I am now 40.  This said, people must understand that people - for the most part - only care about their monthly cost of ownership.  With interest rates artificially low monthly costs of ownership don’t look too bad…but, not if but when rates rise dramatically we will see monthly costs of ownership skyrocket and consequently a tremendous loss of housing prices. 

Only if you plan to live in the house for the term of the loan or until death does this make sense.  You can buy a 1M dollar house with 20% down at 4% today but, what happens when you sell the house 20 years from now at a simple 8% rate???  The result is that all of the equity you have accumulated in 20 years is whipped out…because monthly carrying costs are double and in 20 years of a 30 year term you still have only built 50% equity!! This is amortization and leverage!!! 

I live in a house that costs my landlord 8K a month and my rent is 4500.  Stupid.  Good luck to people calling a bottom in prices.  These will grind lower as rates rise.  And if rates don’t rise???  Pobre Si!  That means the economy is soo weak that we will be in and out of recession for the next 20 years - every 4 years. 

My .02

BD

My .02

Re: Schiff

And I quote

“abolish Freddie Mac, Fannie Mae, and the FHA”

“abolish the mortgage interest deduction”

“abolish the income tax”

Gee, what a surprise, typical OC John Birch (or is it John Wayne?) type of conservative nonsense in an OC blog.

The above are of course all GREAT policies that served the country and the economy well until they fell into the hands of W. Bush who undecided to unregulate EVERYTHING.

Duh.

What a croc.