The Housing Bubble

There will be no Recession, not now, not ever… well, not until it is used as a way to raise taxes, etc.

I think this time the fantasy market and government BS will decouple completely from reality for a while. We’ll see great stock market results and hear lots of good news from above even as the jobs vanish, the houses go into foreclosure, and lots of people are left without any path forward.

I disagree with this assertion in the short run… San Diego, for example, has seen a net outflow of people since 2001 - and the numbers I saw were from like 9 months ago… I would image more have fled since then…

Not a bit. I’m a buyer of land if I can find it at the right price.

Though one major difference: oil and wheat are fungible and real estate isn’t. If you have ever know anybody who bid on the oil spot market (I have, and they weren’t the oil equivalent of day traders. The petroleum spot market is dominated by refiners and end users. To see speculation ala most commodities, you have to look to the petroleum futures market, not the spot market). Most of the movement in oil prices is dominated by refiners and end users tossing money at producers- this is as close to a free market (and an insider trade market to boot) as you can get. What is really funny is to be privy to spot petroleum market trading- it’s a hoot. Basically, even while crude oil is filling the tanker in Saudi Arabia, people (usually refiners) are buying the tankerload. But while it is on its way to, say Texas, somebody in Rotterdam can go to the spot market, buy the whole tankerload and have it rerouted to Rotterdam! About 80+% of crude oil trading is through the spot markets nowadays (ever since the vertical ly integrated international oil companies were broken in the 70s).
Gold is a weird market. Basically only a small fraction of the accumulated world gold supply is consumed or produced (though here in Alaska, gold prospecting has ramped up considerably. You would be shocked at the steadily increasing technology in gold extraction to squeeze profit from more pathetically depauparate gold deposits- there will be a flood of new gold to the market with these high prices). Basically, most gold that has ever been mined is still available, and the threshold for profitable extraction has been dropping (I think it is about 0.5 ppm with cyanide extraction now), so reserves have been increasing.

LOL! Because that’s my bank!

I wonder what the stats are on drug-induced crime compared to drunk driving fatalities?

I’m assuming there are 100 drunk driving fatalities to every 1 drug induced murder/accident. I’m taking out drug deal murders/gang related BS.

I can see someone getting into a drunken rage and killing their wife.

Not so much if the guy is stoned out of his mind on pot–he’s more in danger of killing himself by eating too many Dorito’s than a danger to anyone else.

I somewhat agree. I’m not sure about legalizing things like Heroin, but legalize pot, and tax the hell out of it, using the proceeds to crack down on harder, far more addictive drugs, and drug education.

You have hit squarely on my favorite schtick….. I work parallen to law enforcement, and beyond drunk driving and violent domestics, you can add failed families with children suffering….

As for legalization, hell, it’s their body….let ‘em murder it if they want to. Three-strikes for drug charges is a crock. Only beneficiaries are privatized prisons….. who charge the states per bed. This is working well.

(Reaches in from off stage, turns the joke 90 degrees and disappears.)

Oh lawd! Jeebus cripus, what’s next?

Jokes about all the poles being on the right half of the social plane or something?

Wow, so many people here know the Laplace transform? I’m floored.

Some of us actually understand math.

Not the stuff the engineers think they understand but don’t really.

I don’t think there’s anywhere near enough current in the shock paddles they are using, to be able to stop the patient from flatlining…

The patients heart has almost stopped beating. It’s an irregular heartbeat. Yes, you want to shock the system back into a normal rythm. The best way to do it is do what the market does not expect. When it expects you to zig you zag. That is how you show the market who is boss.

What we have now is a classic case of the tail wagging the dog. The FED has absolutely no credibility whatsoever.

he probably drives 10 miles in an suv that gets 10 mpg

a real genius

He’ll gladly waste $6 in gas driving across town to save $3. There’s no point to reason with them - they also pay $4 for 16 oz of Starbucks Frappuccino and complained about $3 for 128 oz of gas.

This is really going to bite the politicians big time. We’re seeing an increasingly frightened and angry voting public. And all those elderly voters, who always show up at the polls, are the ones taking the early hits, as their fixed incomes from SS will not get a COLA raise, as food and gas are not factored in…courtesy of the Clinton admin.

Saw a road sign today outside a local tavern - “It finally happened - Beer is cheaper than gas!!!”

I was listening to an el lay NPR station a few days ago, and it gets a more learned audience generally, and they had people calling in to describe how food & energy costs was taking it’s toll.

One guy said he was getting up an hour earlier and driving to work, w/o stop & go traffic and he went from 280 miles per tankful, to 410.

A lady with a balloon business said her sales were off $20k in the 1st quarter.

What he is telling the world is that not only is his time worth nothing, but in fact it has negative value.

“I was listening to an el lay NPR station a few days ago, and it gets a more learned audience generally. . .”

Well, an audience that incessantly imagines itself more learned, on the basis of diplomas and ridiculous titles. The smartest people I know got that way from living.

Negotiating the angle of repose is a tightrope act.

They most likely have and it probably scared them to death.

with all the fraud on Wall Street, that is the one thing you think they would have known about. It’s actually kind of funny that the slick scam artists got scammed by a bunch of dolts.

I don’t know if wall street got scammed by dolts, or if they are involved in a long-con where they take down the entire economy in order to gain more power. When you control the printing presses “money” is “worthless” to you and so you seek power.

They didn’t get scammed, the CEO’s all got their bonus. They allowed the fraud because they knew it would make them rich. Yes the stock holders and the tax payers get kicked in the balls but so what.

So far. If they don’t rescue this pig, the lawyers will get busy. Think Bernie Ebbers, Jeff Skilling.

Saying the missed the fraud in their models is the same difference as saying they didn’t do anything wrong and got suckered. It’s just a slightly indirect route to deflecting blame from themselves. I’d like to see what they did include in their model. People living housepoor, always on the edge of the cliff while sending their mostly/entirely interest mortgage payment every month. If that was in their model, they had more than one problem.

as I said at the time, all they had to do was hire a $10/hour high school student to read Craigslist and they would have gotten an eyeful.

How about spending more than 1 day reviewing the packaged loans and actually pulling a few loan files for audit? A random sample of 50 or so might have woken them up a bit.

But the thing is, everybody working on Wall Street is a Manly Man. Far too manly to do anything as silly as work an 8 hour day, go home, relax, and find out what the rest of the world is up to.

No, no, 12 hours a day minimum for these idiots. 14 or 16 at a crunch. You can’t drive a truck for that length of time, but you can drive the economy. With about the same results.

That’s funny. A Manly Man who usually gets manicures and wears nail polishe, gets his chest waxed and wouldn’t be able to identify a car battery if they lifted the hood of their car. That ain’t my definition of a man.

tx: yeah that happened to me once. finally we managed to locate the battery - under the rear seat. stupid German car.

So long as it wasn’t one of the OLD 6 volt beetles. Try getting a jump start on one of those.

Or an old English car with RED as negative! George Lucas the prince of darkness.

Had an electrical fire under the cowling of a TR-7 once… My mechanic phoned me to come see what looked like a huge pot of scorched spaghetti tossed against the firewall. He had to buy a book and re-wire the whole car. Thankfully, my insurance paid for it….car fire.

Without the fraud, the game would have been over in around 2002 or so. So, they introduced new loans and more BS that was either outright fraud - “liar loans” and cash-back tricks - or near-fraud, where you sell a guy making $15,000 a year a $750,000 house with no money down and then say that since he can make a few months payments, it is all fine. Fraud was needed to keep the game going and the bonuses rolling. Now that it is all falling apart, we’re hearing the usual “who coodadnode?” nonsense.

“It seems the whole scheme relied on everincreasing prices.”

True enough. But after the runup depleted the honest money it had to introduce fraud into the transactions to keep prices climbing.

“But eventually, you’ve got to do some check for reasonableness.”

Bingo.

KInda like someone punching the gas, and seeing sure enough the spedometer spikes up to 150 and figures “Woo hoo! I’m burnin’ it!” - but doesn’t look out the window to realize their car is up on blocks and in reality they’re going nowhere.

In this case - the fact that home prices were going *way* above historical norms was the check for reasonableness that got ignored.

“…they simply don’t have the bandwidth to question the voracity of the underlying loans …”

I think you meant “veracity” … but then again, maybe not.

Hunger vs. Truthfulness. Hmmmmm…….

Wikipedia is wrong.

People live longer. 2 per female is not solely replacement. My wife and I have 2 kids, one girl, and one boy (making 4 total). The girl has two kids. My wife and I are still alive to see our grandchildren born.

If my wife and I were required to kill ourselves immediately after our kids were born, that would make 2 per woman=replacement. But, since it is VERY common for there to be such a thing as grandparents, 2 per woman is far greater growth than replacement.

Replacement math according to Wikipedia is that 2 adults and “2 kids per woman replacement math” means that in 40 years, the 2 twenty-somethings have become 6 people–seems like growth to me.

China had a 1 child per couple rule for how long? How has their population done? Clearly it must have shrunk from the only 50% of replacement pace of births, right?

The applicable phrase for what I describe above is “population momentum”.

‘Replacement math according to Wikipedia is that 2 adults and “2 kids per woman replacement math” means that in 40 years, the 2 twenty-somethings have become 6 people–seems like growth to me.’

Your math is wrong, because you are ignoring the 20-somethings of 60 years ago whose children and grandchildren have subsequently been added to the population, but who themselves will sadly soon leave the population.

Yeah. I’m wrong….

But you can have replacement level birth rates, and population growth at the same time. This is where the US is now, and how you get to 1/3 population growth by 2050. That’s the point…

best compiment Ive heard stucco give chick in some time.

here here!

damn. $5 more if I had shorted it. Should have taken my own advice.

Well, let me start you off with one.

I’d love to see that trainwreck. lmao.

You didn’t build it. The GC did. Why would you have to pay subs when they work for the GC?

The GC was essentially working as my agent much like any other employee might (except on a contract basis in this case). It was my project, I owned it, and he provided his expertise with regard to scheduling subs, ensuring work is completed correctly, etc for a fee. If I didn’t pay, they would put a lien on my house, not the GC’s. I think in this case anyway, it might be more appropriate to say the subs worked for the project not necessarily worked for the GC. As long as they got paid for their work on this project they didn’t care where it came from.

Correct me if I’m wrong, but haven’t we seen cases during this whole housing debacle where people have ended up with partially built houses and loans with their name on it where some portion of those funds were directed elsewhere to the builders other projects? I don’t recall specific examples, but what I describe above I think helps to avoid that. I think I recall some cases of this in Florida I read from this blog…

I believe (right or wrong) that the two most common ways the builder(GC)/homebuyer relationship (around here anyway) is either that the builder does everything (gets the loan, manages everything, etc) and essentially sells the property to the buyer at a predetermined price. Like a spec house with a gauranteed buyer.

The other way is that the buyer gets the loan and pays a fee usually amounting to nearly the difference between the cost and the appraised value of the finished property.

I don’t know how the cash flow typically works in the latter case (the former case is easy since it’s all contained by the builder and he just sells the house), but there is no way I’m putting my name on a loan in which the cash flow is managed by someone else.

I’m sure builders like the former arrangement better, they can essentially keep all efficiencies they create through their relationships and expertise (those efficiencies manifest as savings in the building cost of the house relative to market value). As this housing thing unwinds and builders get hungrier, I suspect the other type of relationship will be a pretty good way (for the buyer) to have a house built by negotiating a larger portion of those savings into the buyers pocket.

In the General Conditions of a construction contract, you are “the owner”, the GC is “The contractor”. He is/was not your employee or agent. Both parties have a signed contract based on bid documents including specifications and drawings. Did the subs get paid by a guy named “The Project”? No. The subs have a written contract with the GC to provide a complete working system based upon the specs and drawings. He has the same relationship with the GC as the GC does with you.

The GC delivered a retail product based on a contract that included specs and dwgs and you paid him the money.

Did the subs get paid by a guy named “The Project”?

I was just trying to convey the circumstances in this case by using an analogy. I didn’t mean that literally. They got paid by the guy with the money, me.

The GC mostly delivered to me his time and experience more than he delivered a product, as was our agreement, but I think in this case the differences between those two view points become small. In fact, I even did some of the work, so I could save money. If I didn’t do that work, the GC wouldn’t have paid any more, I would have. It was my project.

He is/was not your employee or agent.

I’m not a lawyer, I have had one single college course regarding business law. In that course, we learned about the concept of agency. I use the term “agent” here in the sense I understand that legal term. I think my understanding and use of that term is pretty accurate but if you know better I’m sure you will correct me. If the GC had told a sub to do something other than what I wanted, I wouldn’t have had cause to come down on the sub and would still owe him money, since the GC was speaking on my behalf.

“They got paid by the guy with the money, me.”

No they didn’t. They got paid by the GC. They don’t/didn’t work for you and you nor anyone else can impinge on their work or their contractual obligations with the GC unless compensated through a change order through the GC or the GC will pay liquidated damages, Not you.

“I think my understanding and use of that term is pretty accurate”

It’s not. He is “the contractor” who has a written contract with you. The subs have ZERO obligation to you, “the owner”. Wordsmithing, wrangling and backing up can’t/won’t change construction law or contracts.

“The GC mostly delivered to me his time and experience more than he delivered a product”

The GC or “the contractor” delivered to you, “the owner” a retail product for a price indicated in the contract.

I thought about it more, you are right. The subs had a contract with the GC to do work. Me paying the subs is ok contractually speaking as there is nothing that prevents a third party from fulfilling a contract on a person’s behalf.

That arrangement worked out well for me as it helped to reduce the possibility of mismanagement of funds a la that situation in Fla (Coast bank?). It worked out well for him as he didn’t have to take on some risk with regard to the loan and such (i.e. he didn’t own the whole project and any risk that goes along with it). And I got a good price on the GC fee.

Buying a house from a GC like I described way above (GC owns the lot, gets the loan and owns the house until it is complete and then sells it to the buyer) might be ok in many situations like buying a fat-girl-on-a-barstool lookalike in subdivision #87373298, but what happens when you already own land (e.g. family or a large acreage) that you want to build on? If the house isn’t built correctly or whatever, the buyer can’t just walk away. So there has to be some way for the buyer to exert more control over the project than just paying for the end result. Controlling the purse strings seems like a pretty good way to do that.

No they didn’t. They got paid by the GC.

Dude, I wrote the checks. I know who paid the bills. I mailed or hand-delivered the checks to the subs. I paid for everything. Including the GC’s services.

“Me paying the subs is ok contractually speaking as there is nothing that prevents a third party from fulfilling a contract on a person’s behalf.”

I suppose if one cares to pay twice for the same product it’s ok.

“So there has to be some way for the buyer to exert more control over the project than just paying for the end result. Controlling the purse strings seems like a pretty good way to do that.”

You owe what you owe per the general conditions of the contract. You nor the GC can deviate from the terms of the contract unless a change order is excuted. Subcontractors have no obligation to you the owner. The owner has no right to interfere or impede subcontractors work. He works at the direction of the GC, not the owner.

“but what happens when you already own land (e.g. family or a large acreage) that you want to build on?”

What does that have to do with the price of diamonds on puto?

“Me paying the subs is ok contractually speaking as there is nothing that prevents a third party from fulfilling a contract on a person’s behalf.”

I suppose if one cares to pay twice for the same product it’s ok.

lol. You have no idea what you are talking about. I paid the subs once for their work and the gc once for his. There is nothing that prevents (in most cases) a third party from fulfilling the terms of a contract on behalf of one of the participants. But that only applies to the legal mumbo jumbo of the subs relationship to the gc. The work being done was for my benefit. I paid for it.

You owe what you owe per the general conditions of the contract. You nor the GC can deviate from the terms of the contract unless a change order is excuted.

Which is great as long as the contract is followed. But that statement doesn’t help anyone with regard to how to protect one’s self from either the contract not being followed or with how to make sure it’s followed. In my question if the sub doesn’t get paid b/c of gc malfeasance, the owner is ultimately responsible (by way of lien on the property).

I think the disconnect here is that you can’t imagine anything being done other than the way you do it. There are better ways and my original point to replying in this thread was to suggest to Dan some better ways of doing business that don’t allow gc’s to run off with your money and allow one to not have to pay retail. GC’s that operate like you suggest will go the way of the realtor soon. The hungry ones will still be working.

“You have no idea what you are talking about. ”

Actually I do. Construction Contract Administration has been my stock in trade since 1988. It’s clear to me and everyone else here that you don’t understand the various roles of generals, primes, subs, architects, designers, owners reps and CM’s. And the suggestion that GC firms such as Bechtel, CH2MHill, Kiewit, Jacobs and Gilbane will go the way of realtors speaks directly to your lack of knowledge but keep entertaining.

Exeter,

Perhaps I’m not fully understanding the dispute here, but isn’t it possible for the owner to hire a contractor to **assist** the owner in building a house, as opposed to controlling the job?

For example, we’d like to build our own house on our own property (to be bought in the future). We have a few GC friends & relatives. We’d like them to help us oversee the job, but we want to control all aspects of the job. Two (the only two we’ve approached so far) do not have any problem with this.

IOW, we will pay them to make sure the blueprints are done right for what we want, and they can help us with the general process. We would get bids from the subs and handle all the money. We would also do a lot of the work ourselves.

Why would that not work?

exeter: You just seem unable to comprehend what bluprint is saying. He is saying he didn’t do it the traditional way and hired a guy who is qualified to be a GC as a consultant. But that bluprint himself acted as a private GC (built the house himself).

geehs, it isn’t that complicated. And all your nonsense about contracts - people work without contracts and lawyers all the time. Lawyers and their full employment act bullshit of “get a lawyer to talk to a lawyer’ (both sides at $200/hour) doesn’t promise you get good results. Lawyers are often lazy and make mistakes too.

I’m not suggesting it won’t work. But the previous goofball first said, “I built a house”. Then it was “I acted as GC” which then turned into “I worked with a GC”. The truth is, he paid retail price for GC tasks and then performed some of those tasks on his own dime. Basically paying twice.

CA…. if you plan to GC the place yourself, why would you contract with a GC? It makes zero sense. I’m in strong agreement that the contract should not include tasks that you’re certain and capable of performing that coordinates with the construction schedule. If you backpedal on those and cause delays, the GC can and should go after you for delay claims. I know I would. If you decide to perform those tasks after the contract is signed, the GC will offer a net credit to the contract but it will be pennies on the dollar. Either you have the ability to perform those task and do so without impinging on the GC’s schedule or you don’t. Is it worth the risk?

Look… face it.. It’s a damn stick built shack we’re talking about here. Not really “construction”. I do heavy construction contracts between 40million and 200million. Theres huge risks and reward in it and little details like what we’re talking about here can make or break a GC or a prime in the case of contracts in NY. I know contractors and their means to make money and if they can offload tasks on you for pennies on the dollar, they can and will do it.

I never said I acted as a GC. My second sentence was:

I built a house and got the loan myself but didn’t do the GC work.

Did you see that? I specifically said I didn’t do the GC work. I did do some of the construction, I didn’t do all of it, so maybe I misspoke saying “I built a house” but it seems you are the only one confused by that.

I paid a gc to do what gc’s do, except I paid the bills directly, got the loan and owned the project entirely myself (i.e. the gc never owned the lot or the house or any part of the house and never had access to any of the funds except his fee). It’s pretty simple for everyone else.

“You have no idea what you are talking about. ”

Actually I do.

Actually you don’t. We are not arguing about how construction is commonly done. In fact, I even deffered to you with regard to the degree to which what I’m doing might go against convention. I don’t claim to know that and in at least one or two cases proposed those as questions.

We are arguing about whether I paid the bills or not, which you could not possibly know. In fact, I’ve gathered from previous posts that you have some experience in construction (I guessed commercial/industrial not residential) which is why I proposed a different way of doing things to you for your consideration. But it’s apparent you are either incapable of comprehending things being done other than the way you do it or are confused by other ways of doing things.

To everyone else (CA), it can be done differently. Especially if you have the problem of some special land which can’t just be walked away from, I would encourage you not to blindly trust a contractor. Control the money, lest you end up with an unfinished place, a bankrupt contractor and a lien. All are issues I have mentioned in this thread and all issues which exeter has curiously neglected to address.

You didn’t build anything. The contractor did.

If it were me and I wanted to stay in the house, I’d get a copy of the MTLS and see if the docs attached will pass muster. If not, hell, why not try to intervene and show the court that the lender can’t even prove it owns the note.

That is if the debtor’s counsel isn’t doing the same thing.

I’d do it.

Great idea…

If your LL has already filed bankruptcy, file a “Notice of Appearance and Request for Service of Copies” stating you are a party in interest. You should be able to find one on the net; if not, email me and I’ll send you one. That way, you will get notice of all proceedings. A lot of debtor lawyers who do high volume don’t contest motions to lift stay on houses where there is no equity but I think I saw one case in the San Diego bankruptcy court where the judge whacked the bank for insufficient proveup without the debtor even asking them to.

Thanks again TX, got one off the net, invaluable advice.

That appears to be progress LIU although still a bit high but I’m not familiar with your parts. 20 years from now spend $3k, subdivide into .5-1 acre plots and peel them off cheaply and still make money.

Great idea, Ex, wanna go in on it with me??? Bank 1k now and by then it’ll be worth the price of the property. I’ll keep a good eye on it for you and anyone else interested. We’ll start our own company. We’ll call it the John Lee REIC

(John Lee was a devout Mormon pioneer who built up big holdings and lost everything and was executed as a scapegoat for the Mountain Meadows Massacre - Google it).

I am currently involved in an intellectual property case (as the defendant). I’m very happy to have an attorney to represent me.

Whoops, meant to say as the one being stolen FROM, whatever…I’m the plaintiff…I didn’t steal anything from them, is what I’m trying to say here. See, I NEED a lawyer just to understand the terms!

“This is not in the contract.”

You are correct, it’s not in the contract because it doesn’t have to be. It’s stated in the law, and an implied condition, since the contract is enforced under the laws of that state.

Sometimes you are protected by the law, and sometimes existing laws bite you in the ass. Banks know very well the laws under which they operate (which is why they provided only a certain level of disclosure and not more, etc.). Borrowers generally do not. Attorneys help level the playing field.

Sometimes in-place laws suck, but without the system of laws, civilization would collapse far faster than your elimination of “moral definitions”.

For our next topic, let’s discuss the morality of Prop 13 in CA, and whether people who own second homes in CA at a low property tax basis, and therefore don’t pay their fair share of the services that keep their house from being robbed or burnt down are stealing those services. Discuss.

I agree 100%. The key is to find such an individual at the Junior College level. To be honest, I would prefer a high school instructor who is not worried about his next research paper or book, and wants to teach students how to think! G@d, obviously, that came out wrong!