Tuesday, July 08, 2008

"There will be a soft landing...if it even goes down"

FB logoRemember 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...



Blogger Unknown said...

The beginning of the end, and the end of the beginning. There's a lot more to this story as we'll find out. Thank you for raising the red flag early, with concrete examples to back it up.

7/08/2008 11:22 AM  
Anonymous Anonymous said...

Good to hear you're doing alright. For me this site was definitely THE eye-opener. I was already reading Ben's blog and HPC (UK site), but your postings convinced me that this bubble would be the mother of all bubbles. You provided a fantastic insight on the micro level, which made it very easy to connect the dots to the macro level.

7/10/2008 4:37 AM  
Anonymous Anonymous said...

Ditto. Your story of the fellow living off his refi money really opened my eyes. Thank you. And today's news - Indy Mac - ah, still surprising to folks only nibbling at the MSM fare. Insightful financial market commentary is hard to find - I'd definitely still read you for that. You've already proven you have the ability to add 1+1 accurately - an enormous accomplishment among most Americans anymore, it seems. Especially those involved in real estate (ha-ha). Thanks, dude. Keep up the good work.

7/11/2008 10:47 PM  

It looks like a very hard landing to me.

1/14/2013 2:19 PM  

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