As is becoming tradition, I would like to share with you some interesting blog posts I read this week at The Housing Chronicles Blog, and at the site of local realtor, Shevy Akason, who has been profiling OC properties at or below rental parity.

Apartment renters now getting caught up in foreclosures

Why is mortgage fraud still a problem?

Fannie Mae tightens rules on mortgages for new condos

Shevy’s deals:

Canyon Hills

Laguna Hills

In other news, IrvineRenter was mentioned on Portfolio.com on Wednesday: Six Bloggers of the Apocalypse.

Welcome to the Jungle — Guns n Roses

Welcome to the jungle
We got fun ‘n’ games
We got everything you want
Honey we know the names
We are the people that can find
Whatever you may need
If you got the money honey
We got your disease

In the jungle
Welcome to the jungle
Watch it bring you to your knees, knees
I wanna watch you bleed

I know I am not the only one who is thrilled to see the government move to tax the recipients of AIG bonuses. Welcome to the Jungle, baby. I get a schadenfreude overdose from that story.

What ever happened to performance bonuses being linked to good performance? The AIG bonuses were justified by the idea that the people who made this mess are the only ones who understand it, so we need to keep them around. Doesn’t this entrench incompetence? Have you ever worked with someone who developed a way of doing things only they could understand because they thought it gave them job security? I have, and it doesn’t.

{book2}

Since I reviewed another Stick Figure book this weekend, I thought it might be interesting to see where stick figures went wrong…

In unrelated personal news, close personal friends of mine have been on an emotional rollercoaster ride for the last year. Their baby was born at 17 ounces. He has survived the whole year, and it looks like he is going to make it. Check this out: Tiny survivor defies the odds, inspires others

And finally…

Six Bloggers of the Apocalypse

If you spend enough time surfing the Web, you might think Nouriel Roubini, the pessimistic economist profiled in the April issue of Condé Nast Portfolio, is taking a walk on the sunny side of the street. There are bloggers who have been forecasting much worse for several years.

While bankers were still ordering $1,000 bottles of wine in trendy
Manhattan restaurants, these internet Sybils of the impending economic
apocalypse were already prophesizing food shortages and endless gas
lines.

Some are on the right side of the political spectrum,
others on the far left, but they all share one thing—traffic on their
sites has increased exponentially since Wall Street began to implode
last fall.

We caught up with a few of the more provocative
doommongers to see what they think is coming next. Hint: Before reading
further, you may want to uncork your most expensive bottle of wine.
You’ll need it.

Clusterfuck Nation

James Howard Kunstler

Novelist
and journalist James Howard Kunstler is the leading popular voice of
peak oil, the theory that says we have gone through more than half the
world’s supply of this much-needed resource. Kunstler’s regular Monday
morning posts foretell a world beset by oil shortages, which he
believes will lead to everything from financial shenanigans (sound
familiar?) to food riots, not to mention attacks on the wealthy,
abandoned suburban housing developments and a forced return to
small-town living.

Prediction: High potential for civil unrest and violence. “It won’t be good for your health to be a conspicuous consumer.”

The Trends Research Institute

Gerald Celente

Not
a blogger per se, trends researcher Gerald Celente publishes his
predictions for the future in a quarterly journal. In December 2007, he
called “The Panic of ’08,” featuring “failing banks, busted brokerages,
toppled corporate giants, bankrupt cities, states in default…. When
the giant firms fall, they’ll crush the man on the street.” The journal
is by paid subscription only, but Celente makes frequent radio
appearances, which his many fans record and post online.

Prediction: The current economic crisis will be worse than the Great Depression,
with a rise in alternative living arrangements. He’s thinking
self-storage units. “People are going to self-store themselves.” FYI,
Roubini’s offices just happen to be located in the same building as a
Manhattan Mini Storage facility. Coincidence? You decide.

Speaking Truth to Power

Carolyn Baker

The
site run by Carolyn Baker, an adjunct professor of history in Vermont,
is structured her site like an Utne Reader of global collapse lit, with
links to sites ranging from the very mainstream Marketwatch.com to some
of the bloggers on our list. Her goal is to connect the dots between
peak oil, global climate change, financial collapse and other ongoing
trends and debates. The common thread: Our way of life cannot be
sustained. And it will all end badly.

Prediction: “It’s not going to be like falling off a cliff but a slow descent with
tipping points. There are going to be different kinds of Katrinas,
economic crises, natural disasters, and nuclear exchanges—but I really
hope I am wrong about that.”

Generational Dynamics

John Xenakis

Xenakis,
a computer consultant, analyzes previous and current generations in
American history to predict catastrophe to come. He believes the exit
of the Greatest Generation from the workforce in the 1990s set the
stage for disaster as Baby Boomers, who are uncomfortable with
authority, fell prey to the amoral Gen Xer’s right behind them. The two
groups combined to bring us the current financial crisis as the Baby
Boomers want money badly enough not to ask many questions about its
provenance, while the equally greedy Gen Xer’s are nihilistic enough to
do what it takes to get it.

Prediction: The
misbegotten combination of the Boomers and the Gen Xers will continue
to cause trouble for several more decades, leading to complete
financial collapse and war before Xers are able to turn things around
in their old age. Says Xenakis, “I don’t expect to live through it.”

Itulip

Eric Janszen

Janszen,
an investor and analyst, first started Itulip at the height of the tech
bubble. The tulip is, of course, a reference to the infamous Dutch
tulip bubble of the 17th century. He retired the site when the Internet
bubble burst, only to return in 2006, when he saw a housing bubble
developing. Janszen predicted it would end badly, with a mass deflation
leading to a multi-year economic crash. Parts of the site—including its
many reader forums—are subscription only.

Prediction: The United States will, over time, right itself, but will first have to
survive a period where one million folks will be added to the
unemployment rolls every month by the end of 2009.

Irvine Housing Blog

Larry Roberts

Many
bloggers are writing about the housing bust but perhaps Larry Roberts,
a.k.a. IrvineRenter, has found the best way to demonstrate how everyone
from the lowliest buyer to the highest paid financier was implicated in
the bubble. Almost daily, he posts a house for sale in Irvine,
California, taking readers on a journey through the home’s recent
financial history. He reveals the price the home was originally
purchased for, how much money was taken out of the home during various
re-financings, and what the potential loss to the bank is if the house
sale goes thru. Needless to say, sardonic comments abound.

Prediction: Roberts is the cockeyed optimist of our bunch. He plans to change his
handle to IrvineHomeowner in 2011, when he believes the housing market
will bottom out.

{book4}

The Skinny on Credit Cards is a wonderful new book explaining the functional basics of credit cards. Jim Randel does a fantastic job of taking a complex subject and reducing it to its simplest form. He unmasks some of the most egregious practices of the industry and shows how “revolvers” get addicted to credit in college and often never get off the merry-go-round. I recommend the book to anyone who uses credit and wants to learn how to use it more judiciously.

In their own words…

Stick People Books

Welcome to a new series of publications entitled stick people books™, a progression of drawings (stick people), dialogue and text intended to convey information in a concise fashion.

Most nonfiction books are 200 pages or more. Why? Because that is what worked 100 years ago. The problem is that people have less time to read than they did 100 years ago, and there is a lot more to read than there was 100 years ago.

The real substance in most nonfiction books can be conveyed in far fewer pages. We believe that less is more. As first said by French scholar Blaise Pascal in the 17th century when writing to an associate: “Sorry for the length of this letter, it would have been much shorter had I had more time.”

We invest the time for you. We do all the reading.We then summarize and synthesize it for you.

In learning any subject, there are hundreds, maybe thousands of bits of information you need to absorb. In writing our books, we address the most important points a reader needs to learn about a given topic. Once you have read a “skinny” book, you will have a good understanding of a specific subject. Our bibliography identifies suggestions for further reading, if you are so inclined.

Although minimalist in design, drawing and verbiage, we take our message very seriously. Please do not confuse format with content. The time you invest reading our book will be paid back to you many times over.

I was going to describe the book, but the section above from the front matter of the book is very good, and it typifies the writing therein. It is a quick read, and most will complete it in 2 hours or less, but the brevity of the work is not indicative of its content; the information is in there. The reader is spared the brain damage of a typical author’s flower prose. I highly recommend this book.

My soapbox

As many of know, I am not a fan of the credit card industry. Personally I think this industry is on par with drug dealers, or perhaps the somewhat more respectable tobacco or alcohol industries. I make this analogy because credit cards do not provide anything other than a short-lived pleasure of immediate consumption. There is no “product” produced by this industry, and if the entire industry disappeared tomorrow, nothing would be lost. It can be argued they provide a “service,” and this would be true to a point. They provide a pool of savings for people who do not have the self-discipline to save for themselves.

Think about how credit cards work. Let’s say you make enough money that you could afford to put $500 a month into savings; unfortunately, you do not have the discipline. You spend the money… and then some. After a few irresponsible spending sprees, the monthly bills start coming in from the credit card company, and you dutifully make the $500 minimum payment. What just happened? The credit card bill forced the discipline on you that you were unable to muster on your own. However, there is one very big difference: instead of earning interest on you money, you are paying it instead. Over the long term, this will sharply curtail spending power. The rich can spend like rich people because they are on the good side of compound interest; debt slaves are not.

The credit card industry addicts people to their product at a very young age (they start at 18 once people reach adulthood and are bound by their contracts). Once addicted, they drain them of every available resource through high fees, high interest rates and endless promotions of the sophisticated life credit cards enable. I know this through my own personal experience.

I managed to stay away from credit until I was about 22. By the time I was finished with graduate school, I had $2,500 in credit card debt. Then, I did something really, really stupid; I discovered Ponzi Scheme borrowing. Right out of school, I tried to begin a venture with an established businessman in Texas. While we were trying to get the venture off the ground, I needed a way to support myself, so I would use cash advance checks from one credit card issuer to pay another. For about 6 months, it worked. It worked so well that I had $10,000 in credit card debt by the time we gave up on the venture. That debt lingered for a long time.

I am not some morally superior person lecturing about a subject about which I have no experience; on the contrary, I know all too well what credit card addition can do. We use the term alcoholism to describe the alcohol addicted, perhaps we should use the term creditism to describe the credit card addicted. Getting over credit card addiction is much like being a recovering alcoholic; it is a daily struggle. I have not carried a revolving balance in over 5 years. I hope to make 50 more.

Kool aid intoxication is very strong because homeowners were so richly rewarded during the bubble. Will the crash cause mass detoxification?

Today’s featured property is a WTF award winner in Quail Hill–$444/SF is so 2006.

Asking Price: $1,375,000

Address: 132 Treehouse, Irvine, CA 92603

Ain’t That Just the Way — Lutricia McNeal

Ain’t that just the way that life goes
Down, down, down, down
Movin’ way too fast or much too slow
Gettin’ up, gettin’ high, gettin’ down
Gettin’ no, no, nowhere

I always find it interesting when I have a conversation about the real estate market with people who have no idea what my hobby is. I get to hear their untainted opinion about what is going on. Sometimes I get the “Joe Six-pack” version, but sometimes I hear the opinions of professionals with access to data I do not have.

I recently had a conversation with a title officer from a major title company. Title officers are the guys who handle real estate closings. There is no profession that has greater insight into the process. This gentleman told me the following:

Prices in Orange County are going to crash very hard due to the adjustable rate mortgages. Since the vast majority of properties in OC were not conforming loans, they are not going to be eligible for the government’s loan modification program. When these borrowers need to refinance when their loans recast, they will not be able to, and most will end up in foreclosure. Even if these borrowers had enough equity to qualify, very few of them have the income. People added so much to their mortgage debt that they do not have the income to support it. Also, since many ARMs were being written up until the credit crunch in August of 2007, and these ARMs have 3. 5. 7 and 10 year terms, the foreclosure problem is going to be with use until 2017. Don’t expect any meaningful appreciation until then.

As he was telling me this, I felt like I was reading from the IHB. When I asked him if he read blogs, he said he didn’t. Although, he did say he reads many closing documents.

{book1}

Asking Price: $1,375,000

Income Requirement: $343,750

Downpayment Needed: $275,000

Monthly Equity Burn: $11,458

Purchase Price: $901,500

Purchase Date: 11/24/2003

Address: 132 Treehouse, Irvine, CA 92603

When I first perused this description, I read “for that prick buyer who wants it all.” Only after I reread it did I see what was actually written.

A dream kitchen with dark espresso cabinets and
Seafoam Green Granite Counters. Are the color descriptors really necessary? dark espresso? Seafoam Green? This screams of pretentious poppycock (isn’t poppycock a cool word?)

liivingroom?

Today’s featured property interested me not only because it is
ridiculously priced but because it reveals how kool aid pickles the
brains of people in our real estate market.

• This property was purchased on 11/24/2003 for $901,500. The owners used a $650,000 first mortgage, a $161,000 second mortgage, and a $90,500 downpayment.
• On 1/10/2005 they opened a HELOC for $175,000.
• On 8/29/2006 they refinanced with a $837,500 first mortgage.

These people were not major HELOC abusers, but they did take out $26,500 for whatever. They did not pay down their mortgage while occupying this house.

Now these people want the $473,500 that is their due for owning Irvine real estate for five years. WTF? At least they are waiting until they sell the property to spend that free bubble money.

This is typical of a pattern I see in how Irvine homeowners manage their finances. They buy a house, extract some equity for spending money as prices wildly appreciate, and then they want to take a big pile of money with them when they leave. Many of the houses I profile show this behavior in previous owners who were lucky enough to sell out in 2005 or 2006. Of course, many of those fortunate sellers “doubled down” on their next house and lost it all. Why wouldn’t they? The free money was going to keep coming in forever, right?

The people who behaved that way are not bad people. Many of the routine security measures we encounter in our daily lives are there to keep the honest person honest. If you make it ridiculously easy for people to steal, they will. The lenders made it too easy to spend too much money. Although we chastise these people for their lack of self control, the lenders do bear some responsibility for the problem. Both parties are suffering; people are losing their homes, and our banking system is insolvent.

Despite the fact that house prices are
crashing, most California residents remember how much free money came
through home ownership. Most of these people do not realize that the
rules have changed. After losing a trillion dollars, lenders are not
going to hand out HELOCs
like ecstasy at a rave. Until it becomes common knowledge that the free
money associated with home ownership is not going to be there, the
psychology of kool aid will keep an addicted population high on real
estate. We will not bottom until this kool aid is purged from our
system.

I write much about the change in psychology associated with a bust, but it has been happening slower here in Irvine than it has in other communities. As you can see from today’s post, the kool aid is very strong. I was thinking about how difficult it is to reason with the kool aid intoxicated, and the following video came to mind. Enjoy.

{book6}

Now he’s in another place and I can’t reach him
And I feel as though I’m guilty of a crime
I took all he had to give and gave him nothin’
And all it would have taken was some time

Gettin’ up, gettin’ high, gettin’ down
Gettin’ no, no, nowhere
Gettin’ up, gettin’ high, gettin’ down
Gettin’ no, no, nowhere
Gettin’ up, gettin’ high, gettin’ down
Gettin’ no, no, nowhere
Gettin’ up, gettin’ high, gettin’ down
Gettin’ no, no, nowhere

Ain’t That Just the Way — Lutricia McNeal

I would like to share with you some interesting blog posts I read this week at The Housing Chronicles Blog, and at the site of local realtor, Shevy Akason, who has been profiling OC properties at or below rental parity.

Home builders now competing mostly against foreclosures

Should economists be ranked on their correct calls?

“Dr. Doom” Roubini says ‘break every mortgage contract.’

Shevy Akason Property profiles:

Lake Elsinore Investment

Deal of the Week

The Bailout Rap

I am surprised none of the proposed or passed bailouts included a
round of “stimulus” checks. I thought this would be a political
no-brainer. Who is going to complain about getting money from the
government?

One of the results of the last round of stimulus checks was that
people saved the money and our savings rate went up. It isn’t what they
tried to accomplish, but increasing the savings rate is a necessary
component of getting people to spend money again. I think failing to
provide a “Savings Stumulus” is a mistake. Besides, I would like to get
some free money…

{book7}

I received my copy of HousingWire Magazine this week. They ran a review of The Great Housing Bubble. Unfortunately, it is not online.

I want to thank Paul Jackson publicly for the review. It is greatly appreciated.

There is one more thing I want to share with you…

My Writer’s Journey

When I began writing for the Irvine Housing Blog two years ago, I did not envision I would still be writing today. I had something to express, and I imagined I would lose interest after I expressed it. I was wrong. The book that followed, The Great Housing Bubble, was an afterthought evoked when I had nearly written a book in the sum of my analysis posts. I never set out to write on a daily basis or become an author. But here I am; I do write every day, and I am an author.

I did not enjoy studying English or Literature in school. I suffered through those classes, and I did not learn the mechanics of grammar. I was fortunate to have grown up in a household where English is spoken well, so I have a natural understanding of the language, nevertheless my technical skills are lacking. For the last two years you, my readers, have had to dig through my carelessly constructed sentences, incorrect punctuation, and recurring written muddle to see the ideas buried beneath. I hope to change that.

My weakness as a writer, particularly as a grammarian, often causes me to change the presentation of my ideas because I am unsure of the correct way to construct and punctuate the sentence. My vague vocabulary often compels me to use the imprecise and expedient word when the exact word that expresses my idea exists, but I am too ignorant to identify it and too lazy to locate it. I don’t use big words to impress, but sometimes an esoteric term is an excellent one.

My weakness as a speller is perplexing. I went astray in spelling rules as a pre-teen, and I have been a shameful speller ever since. I never imagined myself ridiculing other people for their erroneous spelling; although, I also never imagined I would see peddlers getting paid a King’s ransom put their dreadful spelling on public display. I can read and use a spell checker; so should they.

Despite these weaknesses, readers stop by. There are between 3,000 and 3,500 unique daily visitors to the Irvine Housing Blog. If that many onlookers feel the thoughts shrouded in my limited writing abilities are worth unveiling, then I owe it to them to improve my skills. Plus, I am eager to write another book. I have been incubating my ideas for a book on House Spenders for months now. Between daily writing for the IHB and ambitious book projects, it is apparent to me I need to learn how to write.

I am an advocate of lifelong learning. I reached a point in life when good grades no longer came easily and excuses no longer soothed my ego; I found the motivation to learn how to learn. When I want to master a new subject, I take massive action: I assemble the available data, I immerse myself in the topic, I study in bursts, and I review frequently. This process burns the information deeply into my mind and allows time for the associations to form with other topics. I find this process broadens my knowledge and improves my recall. I have learned much about a number of subjects using this technique.

My favorite tool for accelerated learning is mind mapping, and I use a program called MindManager. Mind mapping allows you to freely associate concepts and organize them into coherent patterns. For problem solving (which is the essence of non-fiction writing), it is much faster and more efficient than writing by hand or outlining in a word processor. Armed with my tools, supplied with abundant data, and determined to become a better writer, I immersed myself in grammar, vocabulary, spelling, style and usage.

Words are coming alive for me. When I see a sentence, I see subjects and predicates, phrases and clauses, and various grammatical nuances that previously escaped my notice. I know to judiciously split my infinitives and not to dangle my participles (Dangling Participles sounds like a title for a gay porn flick or a Chippendale’s dance number, doesn’t it?) I still make errors, and there are probably several in this writing; however (conjunctive adverb), I endeavor to improve, and I strive to prevent my mistakes from obscuring any illuminating ideas.

Good writing is good thinking. I have noticed an increased clarity of thought as I work on my writing. The plaque that accumulates in my written work originates in my own mind. By scraping the barnacles from my sentences, the thoughts sail cleanly and quickly through my mind. Clarity of thought provides meaningful insights and new material–at least I hope so. We will see.

Good writing is having the courage to write. Good writing does not hedge; it takes a stand and makes no excuses. I express myself without caring what others might think. Undoubtedly, many realtors, mortgage brokers and delusional homedebtors despise me. I bear them no antipathy, but I am apathetic about their attitudes. I do not write for fear of the other’s opinions; if something is bullshit, I am going to say so. Most writing about the housing market is malignant malarkey, and those who believe it contract a fiscal cancer. Fortunately, some writers are willing to present an unbiased analysis. Without a few real estate bloggers and academics, nobody’s representations of the real estate market would be reflective of reality. It is plain that those players leeching loot from the closing are more concerned with compensation than they are with candor. But I digress…

Good writing is entertaining. There is plenty of informative writing on the web, and if you can keep your eyes open long enough to endure it, you can learn much. Non-fiction writing does not need to be dull. There is humor in the absurd, and the housing bubble has no shortage of absurdity. I harass hapless homedebtors and realtors for one simple reason: it is funny. If these people were simply vacuous, I might feel sad for them; however, when people are both stupid and smug, it is natural to gloat in their misfortune. Schadenfreude may not be spiritually stirring, but it is eternally entertaining.

Why did I write this? Am I looking for affirmation from my grammar teachers from 25 years ago? I hope not. Am I looking for kudos and comments telling me how great a writer I am? I hope I am not that pathetic. Does this mean I have “arrived?” It is easy to arrive when there is no itinerary. Life is a journey, not a destination. Perhaps it is like painting graffiti on a signpost or etching your name in a gas station restroom; you just need to let everyone know you were there. I have spent the last several weeks immersed in writing. If this drivel were my final exam, it would probably fail. The writing is too labored, and it looks like a thesaurus bomb blew up sprinkling unusual words like shrapnel throughout the essay. I doubt I will spend as much time choosing words in future writings. I want to have a life.

Despite its shortcomings, this writing emerged from a womblike place inside. I am pregnant with this baby, and it is time to birth it. I wish I could remember its conception; I must have been dangling my participle.

Was it good for you? I am going to have a cigarette…