Saturday, August 7, 2010

The Boss............Bobby Jean

I still can't believe we did not see this coming...........

Bill McBride takes a peek at Fannie Mae's inventory- here.

REO means 'real estate owned', which means the lender has
foreclosed, was the winning bidder at the Sheriff Sale auction,
and now has title to the property. (Or maybe the lender
accepted the deed in lieu of foreclosure- regardless the lender
now owns the real estate.)

Fannie Mae's REO inventory doubled between the second
quarter of 2009 and the second quarter of 2010.  For what
it is worth, it has quadrupled since 2007.

There is a whole bunch of taxpayer money tied up in this
REO.   But..............................

Before we get too upset with our government, it might be
useful to read Wikipedia's entry on Fannie Mae.  The relevant
section is here:

"The corporation's purpose is to expand the secondary mortgage
market by securitizing mortgages in the form of mortgage-
backed securities, allowing lenders to reinvest their assets into
more lending and in effect increasing the number of lenders in
the mortgage market by reducing the reliance on thrifts."

Fannie Mae has proven to be extraordinarily effective at
providing this core mission.  The ready availability of mortgage
money since the Savings and Loan Crisis of the late 1980's is a
testament to this effectiveness.

One could argue that it was foolish of the government to lower
lending standards in order to expand the pool of home buyers. 

We should just remember that it was that expanded pool of
home buyers that enabled the run up in housing prices in the first
seven years of the past decade.  And it was that run-up in
housing values that enabled so much of the consumer driven
economic growth of that same time period.

Fannie Mae et. al. threw a party.  Many of us experienced
considerable enjoyment at the party.  We just neglected to
remember that we would have to pay for the clean-up.

"The Next Hundred Million" revisited...........

Back in March I posted a review of Joel Kotkin's book,
The Next Hundred Million: America in 2050.

After a recent Economic Development Committee meeting at
our (Licking County) Chamber of Commerce, Rob O'Neill
sent around a different review of America in 2050.

Amazon get ready, another book order coming.

Kotkin opines that significant population growth is headed
our way, that this is a good thing, and that the growth will
NOT be in urban centers.  "Rather than be forced to cluster
in cities, Americans are likely to increasingly opt for
communities that blend the single-family housing patterns
of suburbia with basic urban amenities."  He also thinks
that the new prototypical city will be "'a dense network of
communities'  enabled by a 'multipolar, auto-dependent,
and geographically vast'  landscape, with a downtown
core whose importance 'will be cultural or symbolic more
than economic'."

He is describing our county,  Just need to hang on for another
forty years.

Kotkin "is betting on the United States" instead of China.
China " America's former great rival, Russia, lacks the
basic environmental protections, the reliable legal structures,
the favorable demographics, and the social resilience of
the United States".

"Social resilience".....I like that.

A few thoughts from Johann Wolfgang Von Goethe (1749-1832)

Let everyone sweep in front of his own door, and the whole
world will be clean.

He who moves not forward, goes backward.

Divide and rule, the politician cries; unite and lead, is
watchword of the wise.

Do not give in too much to feelings. A overly sensitive heart
is an unhappy possession on this shaky earth.

Each indecision brings its own delays and days are lost
lamenting over lost days.... What you can do or think you can
do, begin it.  For boldness has magic, power, and genius in it.

With wisdom grows doubt.

An unused life is an early death.

Dream no small dreams for they have no power to move
the hearts of men.

One ought, every day at least, to hear a little song, read a
good poem, see one exquisite picture, and, if it were possible,
to speak a few reasonable words.

Friday, August 6, 2010

If I had a million dollars................

Filmed on location: Inverlochlarig, Perthshire, Scotland....

The story of Johnnie Walker.

"Just a local farm boy, but there was something special about the
lad-  a glint in his eye-  a fire in his belly-  a spring in his step.

And one day he went for a walk..............."

Thanks to E. for leading me to Cathexis

I liked her even before she wrote this post..........

Megan McArdle explains her reasons for buying a home
now, here.

Out with the craziness of 2003-2006:

"So if we're not looking at our home as a sort of get-rich-
quick-scheme-with-attached garage, why would we want
to tie ourselves down?"

In with the sanity of 2010:

"A nearly perfect house became available. The house
we're buying is on a street that I fell in love with the first
time I saw it. It's located close to Big Bear Cafe, the
neighborhood's single biggest draw. Many of our friends
live nearby. The engineer said he loved the house. We
can live in it immediately and renovate as we have the
cash. And the price is in a range that we can afford."

Thanks Megan.

Oh, the irony of it all..........................

Mathew Ferrara, whose stuff I really like, has an interesting post
today about real estate brokers who still want home buyers
(lookers) to register their name before being able to receive
specific information from their web site.  He calls them
"dinosaurs".   Full essay here.

Excerpt here:

"Not hard to believe from an industry that for years held the
keys to the castle. When confronted with an era of information
openness, the last vestiges of mercantile thinking tried anything
to force consumers to “need” them. So they hid vital listing
information behind a registration page, requiring consumers to
trade personal information for product information. No
registration, no information. Nah-ne-nah-nah-nah."

Mathew's web site indicated he recently posted a video about
Understanding Recessions and Change. Since I want to do
that, I clicked here.

Not only do I have to register, but I have to pay.

I have to admit I laughed out loud.  Oh well, I still like his free

Yippee........Real Estate still matters!

Kevin Kelly disputes the notion that "geography is dead", here.

"Place still matters, and will for a long time to come. However,
the new economy operates in a "space" rather than a place,
and over time more and more economic transactions will
migrate to this new space.

Geography and real estate, however, will remain, well...real.
Cities will flourish, and the value of a distinctive place, such
as a wilderness area, or a charming hill village, will only

It will be interesting, especially since we have a vested
interest in the outcome, watching land use evolve over the next
few decades.  I suspect the growing power of the Internet,
combined with some recent, and rather serious, over-building in
most sectors of the real estate market, will make the coming years
vastly different from the past two decades. 

Wish my crystal ball a bit less cloudy.

Thursday, August 5, 2010

The Band................

A better education?

In a month or so my young son will begin his sophomore year
at The Ohio State University. 

His father's mantra while in school was, 'never let book
learning get in the way of your education'.  His father's parents,
paying for all that 'book learning', struggled a bit with that
philosophy.  Interestingly enough, within five years after
graduation, they commented that they were pleased with the
return on their tuition investment.

A few days ago, I printed out one of Nicholas Bate's check
lists, here, and left it on my desk.  My young son found it,
read it, liked it, and wanted a copy of it.  Mmmm, indeed.

After reading this, I'm thinking maybe the University of
Bate might be a valuable educational alternative.  Check
these.  See if you agree.  Here, here, here, here, and
here.  (It could go on and on, but you get the picture.)

Here is an interesting approach......................

"Which is why smart REALTORS need to to kick their buyers in
the butts.

In case anybody hadn’t noticed, now is probably the best
time to buy a home since the invention of wood. Mortgage
rates at historic lows, home prices reset back almost a decade,
and a weak economy pushing down the costs of buying (moving,
inspecting, repairing, etc). It’s simply the perfect example of a
classic “low” in a commodity market."

Full pep talk from Mathew Ferrara, here

He concludes with:

"Agents can help their buyers move forward in two ways:
First, stop talking to them in investment speak, about prices
in a future you cannot possibly predict. Second, gently point
towards their buyer’s car, shoes, smartphone and kid’s’
college education: Remind them that they were perfectly
happy losing money on those purchases.

Why stop when it comes to buying their home?"

Sounds like the "tough love" approach to selling. 

The psychology of buying and selling is interesting and ever
changing.  I remember  my parents telling me that in 1960,
when they sold the home they bought in 1953, they were
happy to have gained enough appreciation over those seven
years to cover the real estate commission.  Their home was
shelter and a place to raise a family.  The investment
potential of owning a home never entered the equation.

We may be re-visiting those days of yore.

Ain't it the truth......................

Thanks Leah

The power of facing problems head-on.........

Our friends at Keeping Current Matters re-posted Steve
Harney's "open letter" about facing foreclosure.

Over the years I've noticed that some of the most difficult
sellers were those in the deepest financial trouble. Seems a bit
counter-intuitive, or perhaps it was just me.  Regardless,
Harney's letter offers some first hand wisdom on confronting
and solving problems.

Thanks Steve.

Wednesday, August 4, 2010

Louis Armstrong (1901-1971), an American hero...

.....was born this day in 1901.  We are all richer for it.

I always learn something interesting.............

from Patrick.  Latest installment here.

High expectations for a surge.................

A major California home builder is preparing for an expected
surge in new residential construction in 2014.  Story here.

My partner has recently been pondering the impact, over
the next few years, of "pent up demand" for new home
building.  I agree an increase in housing starts is in our future.

Standard Pacific Corp., the California home builder featured
in the story, sees a future with 850,000 annual housing starts.

According to the chart accompanying the article, between 1985
and 2006 we averaged nationally 809,045 housing starts per
year.  I suspect 809,045 is one of those statistical numbers that,
if you put too much credence in it, will lead you astray.  If you
look at the chart you will notice that new home construction in
the four years between 2003 and 2006 were significantly high
enough to skew the average upward.   All the evidence of the
past three years would indicate that, in 2005 and 2006 anyway,
the production builders were building for market that did not
really exist.

Maybe I just have the jitters, but I would be a lot more
comfortable if the big players in the residential construction
business were thinking about what a "sustainable" number of
annual new housing starts might be.  Based on recent history,
that number looks a lot lower than 850,000 to me.

In 2009 there were about 375,000 new housing starts.  HUD
and the Census Bureau believe we are on track for 450,000
single family housing starts in 2010.

I'm willing to bet a quarter that the number of single family
housing starts in 2014 will be closer to 750,000 than 850,000.

If I am wrong, I will cheerfully pay my debt.

The economy - keeping score.........a primer

Jeff Thredgold tries to make it all understandable, here.


Seeking Alpha offers some insight into the world of
"underwater" mortgages and its impact on the
economy as a whole  here.  Not a very pretty picture.

While the article provides some valuable information, I'm
having a hard time swallowing part of the story; specifically:

"People just a little bit under are not that likely to let the house go
back to the bank. It simply is not worth it in terms of family
disruptions, credit ratings and the personal sense of honor in
paying your debts even if you are not legally obligated to do so
(most mortgages are non-recourse, meaning if you don’t pay, you
lose the house, but that’s as far as your legal obligations go).
People who are deeply under are downright stupid if they don’t."

It is a bit painful to read that having, and following, a personal
sense of honor may be situationally stupid.

Maybe we do things differently in this part of Ohio.  I agree
that mortgages are non-recourse.  The mortgage is simply the
pledge of the property as collateral for the loan.  However,
I've never seen a residential mortgage that was not
accompanied by a note that requires the borrower's
signature.  It is this note that contains the promise to repay the
debt.  The language in the promise to repay is heavily weighted
in favor of the lender, giving them all sorts of recourse against
me if I default.

It is a long article with charts, graphs, and big numbers.   I still
found it interesting.  I'd have liked it a whole lot more if the
author had not included the paragraph quoted above.

Tuesday, August 3, 2010

Dave Koz.........................

Blogito ergo sum...............?

Have I told you lately that...................

...........I'm rooting for inflation.  Krugman explains- here
and here and here.

According to my last electric bill, Newark, Ohio is warming up much faster than everywhere else too......

Tom Nelson collects a list of everywhere that it is warming
up faster than everywhere else- here

It is a wonder that I'm not more confused than I already am.

Never in a million years did I figure on posting..........

......something from Diddy.  I need to keep opening my mind.
Turns out he has an inspirational blog- here, and his ten ways
to success- here.

Thanks to our friends at finerminds for pointing the way.

Monday, August 2, 2010

Randy, Randi, Randee

E. has been on vacation, otherwise I'm sure.............

he would have noted Fred's latest: an analysis of Wikileaks,
and America at war, here.

Rules of Thumb weighs in on the disconnect.......

While he doesn't do it with Fred's flair, or slant, Alan Webber
seconds his emotion..............

"Americans have little connection with this war.  There is no
draft. Taxes haven't gone up to pay for it. We're just putting
it on our national credit card."
"There's no national dialog about it, no conversation as to
why we're there, what the price is we're willing to pay, or who
has to pay that price."

"The disconnect is almost total, except for the young people
we send over to do the fighting and the killing and the dying.
Today, America is at war. And if you don't go to the movies to
see a documentary, you'd hardly know it here at home.
And that's a real tragedy"

George Carlin covers all his bases

Kelo v New Haven.....................

A little more than five years ago the Supreme Court ruled that
a municipality could exercise its right of eminent domain to
make land available for private development projects.  There
was significant backlash to that decision. provides a video explaining that backlash

I still have mixed feelings about the whole issue.  It would have
been nice if somewhere in the video they had mentioned that
eminent domain proceedings require the taker to compensate
the takee.

I do know that in recent eminent domain takings by the Ohio
Department of Transportation for roadway expansions in our
neck of the woods, the amount of compensation originally
offered the affected property owners seemed on the stingy
side.  Agreed the State has the right to acquire your property,
but they should not add injury to the insult by offering less than
fair and reasonable, or even generous, compensation.

Sunday, August 1, 2010

The Hallelujah Chorus...............

Sunday's Verse.........

Quickly I come
To those who offer me
Every action,
Worship me only,
Their dearest delight,
With devotion undaunted.

Because they love me
These are my bondsmen
And I shall save them
From mortal sorrow
And all the waves
Of Life's deathly ocean.

Be absorbed in me,
Lodge your mind in me;
Thus you shall dwell in me,
Do not doubt it,
Here and hereafter.

-Bhagavad-Gita   Chapter XII