May 24, 2013

The Answer To Every Problem

It’s Friday desk clearing time for this blogger. “Is it a bubble? Not yet, say some Southern Nevada observers. ‘We may be building a foundation for what would become one [a speculative real estate bubble] in the future, but even the price increases we have seen would not bring us to parity,’ says Jack LeVine, a Southern Nevada real estate agent. By parity, he means the housing prices we would expect to see if we had continued a healthy, moderate growth rate of 2 or 3 percent from 2003 to the present.”

“It will take several years even at the startling rate of appreciation in today’s market to correct for the last six years of recession, he says. ‘We’re just undoing the extraordinary bust that happened,’ LeVine says. ‘The 30 percent increase in one year only reflects the rapid correction of an undersold market.’”

“John Restrepo, a Las Vegas financial analyst, says he doesn’t think we’re in a bubble — but he sees a few signs that it might be on its way. He says that we’ll know we’re in a real bubble when people get very excited, as they were in 2006. ‘There’s a lot of dust in the air right now. Just be careful. You start hearing the same type of hyperbole that you did in 2006 and 2007 — we should have learned, right?’”

“Even with buyers spending tens of thousands of dollars over the asking price, new numbers released show Austin home sales are up 32 percent compared to this time last year and prices are up eight percent. Houses are selling so fast some realtors like Theresa Bastian are putting personal letters in other homes in neighborhoods to appeal to other sellers. Bastian says ‘just making an offer on a house is not going to get you the house. There’s no time to look at the house and then talk to your mortgage lender. Those days are done. Whether you’re selling or buying, you need to be ready to do it, because if you take the time to think about it, the house is likely gone,’ she said.”

“If you’d rather not eat cat food in your retirement, you’d better invest in condos, according to Toronto-based real estate developer Brad J. Lamb. By buying, renting and re-selling urban condos in a market that, based on the past 30 years of real estate performance in Ottawa, Lamb believes has nowhere to go over the long term but up. Lamb, speaking to the Citizen after the workshop, was convinced he’s on the right track. ‘It annoys me our education system doesn’t teach (retirement planning). Also, it doesn’t hurt that I own properties, and some people (here) will buy some units.’”

“In Newtown, 27 registered bidders did battle for a three-bedroom property with rotten carpets, stained and peeling wallpaper and sunlight streaming through the upstairs ceiling, which had been marketed with price expectations of over $650,000. Zanita Morgan’s winning bid raised $800,000. She said she and her husband, who bought the house with friends, planned to renovate and on-sell.”

“Former London real estate agent and now host of Foxtel’s Selling Houses Australia Andrew Winter said within just a decade Sydney has appeared on the international property stage. ‘Years ago there was no comparing London and Sydney prices. But now despite what really is a minute population, Sydney is up there on the top 10 list of residential cities,’ he said.”

“Indonesia is still a long way from a housing bubble, even though property prices have risen by 100 percent over the past 18 months. But as prices continue to rise for houses occupied by middle-income as well as lower-income families, developers will have to boost supply to prevent an overheating market.”

“Residential rents are tumbling as a growing number of home owners balk at falling house prices and choose to lease their flats rather than sell. The head of research at Ricacorp Properties, Patrick Chow, said rents at Festival City in Tai Wai had fallen to between HK$18 and HK$20 per sq ft of gross floor area last month from HK$23 to HK$25 in January. He attributed the decline to an expected increase in supply once Riverpark, a nearby development, becomes due for occupation from this month.”

“A senior sales manager at Hong Kong Property’s Taikoo Shing branch, Rick Wan, said average rents at Taikoo Shing dropped 8 per cent to HK$34.50 per sq ft of saleable area, from last month’s HK$37.50 per sq ft. But he said it was insignificant in terms of total rent. ‘For instance, a unit rented at HK$20,000 monthly a month earlier and now cut to HK$18,000. The difference is only HK$2,000,’ he said.”

“Tens of thousands of homeowners will see their property taxes go up significantly this year as rising home values restore some or all of their homes’ lost equity, Santa Clara County Assessor Larry Stone said. Condos, and homes in areas hit by foreclosures and short sales, have seen the biggest investor activity, he said, helping fuel price increases. ‘It does add a short-term stability to the market, but long-term I think it presents substantial risks to the market. At some point, these folks are going to be bailing out of these investments,’ he said.”

“A new Florida Supreme Court ruling could reduce a huge backlog of homes stuck in pre-foreclosure. Many of those homes now sit empty and without a designated caretaker. George Griffith lives next to a home that hasn’t been lived in for three years. Griffith isn’t sure what the homeowner has planned for the home, but he does know that it’s condition is taking a toll on his own property value, which is already down nearly $200,000 in recent years due to the economy. ‘The trees haven’t been trimmed, the grass hasn’t been done. It’s a mess. Somebody drives by and they say, ‘Oh my gosh. I don’t want to live in this neighborhood. Look at that.’”

“Florida, has the second highest number of foreclosures. An estimated 1 million homes will be foreclosed on by 2016.”

“In the Classified section of Tuesday’s Arkansas Democrat Gazette, a reader could find 22 pages of foreclosure notices in the listings. ‘What we’re seeing come through now is that inventory that should have come through last year,’ said Ann Ball, president of Crye-Leike Realtors, REO branch in Little Rock. She works primarily with foreclosures. She describes this inventory as ‘considerably more’ than 12 months old because of the recent national moratorium on foreclosures. ‘Now we look for that to continue at least through this year. It will take at least through this year to clear out that inventory,’ Ball added.”

“RealtyTrac VP Daren Blomquist couldn’t put his finger on an exact reason the area’s foreclosure rate catapulted 66.45 percent. Todd Woodard, owner of SiteTech Systems, which keeps a close eye on the Grand Strand housing market, suggested that April’s statistics could have been swayed because a backlog of foreclosures are finally working their way through the court system. ‘The biggest challenge for the area is working through older foreclosure filings which were temporarily halted during the ‘robo signing’ investigation,’ he wrote in an email. ‘Of the (foreclosed) properties sold in 2013, almost 40 percent of them were filed prior to 2012. Additionally, approximately 61 percent of the active foreclosures were filed prior to 2012.’”

“Chancellor George Osborne really wants you to be able to buy a house. So here’s the question. Would you like him to help you do that by interfering with the market to ensure that you are offered a long-term loan you wouldn’t normally have been able to get? Or would you prefer that he didn’t interfere with the market at all, but prices fell to a level, relative to your income, that you could actually afford.”

“I’d go for the latter and I rather imagine most first-time buyers would too. Sadly it isn’t an offer Osborne is planning to make — for the next couple of years at least. Just in case there was anyone in the country who felt they might be deprived of the opportunity to spend their life in hock to a house, the state has introduced a variety of schemes to encourage them to overpay for property while simultaneously subsidising the housebuilders (win win!). On top of that, just to be sure, pressure has been put on the banks to hold off on repossessions.”

“It all sounds so stupid, doesn’t it? Why would you want to obstruct so completely the free operation of a vital market? We need to move away from attempting to create an economic recovery out of consumption, and work on increasing investment in productive areas.”

“All those people stuck and soon-to-be stuck with unnecessary debt aren’t, of course, the only losers from the ongoing policy of overstimulus. Savers, annuity purchasers and anyone on any kind of fixed income are hurting too. But homeowners are the only ones whom Osborne, in his apparent conviction that the answer to every problem is higher house prices, is quite so directly herding towards disaster.”

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Comment by Ben Jones
2013-05-24 05:51:34

Check out the photo of this “house” in the Sydney article.

‘Zanita Morgan and Daniel Tower celebrate their winning bid for the Newtown property they bought for $800,000.’

My, they are pleased with themselves.

On another note:

‘China’s growing level of local government and corporate debt has become a major issue for the nation’s financial system, and requires the authorities to work on solutions to reduce the risk of a hard landing, according to experts. Many companies are no longer able to deliver returns that can cover the interest on their debts due to misplaced resources, and their income growth will be increasingly surpassed by expanding debts, said Liu Yuhui, an economist with the Chinese Academy of Social Sciences.’

‘Liu added: “A comprehensive plan must be drawn up to deal with debts, which may include financial measures that help to realize asset swaps and push forward debt restructuring. It is dangerous to allow a huge amount of bad loans to remain in the banking system, which will tighten liquidity.’

‘A recent report from Barclays Capital said local governments used to rely on various channels to raise investment capital, from fee collection and land sales to borrowing via local government investment vehicles. ‘These are all gone or at least diminished significantly. During the past year, they raised some funds through bonds issued by local infrastructure development corporations, but we think this also may slow in 2013,’ added the report.’

‘In the first quarter of 2013, China saw a surging number of trust and entrusted loans, funding channels that are favored by many local governments. According to the People’s Bank of China, trust loans grew 360 percent year-on-year in the first quarter to 823 billion yuan ($134 billion), while entrusted loans grew 86.3 percent to 523.5 billion yuan. Earlier this month, the China Banking Regulatory Commission ordered banks to stop extending new loans to local government financing vehicles in 2013 amid concerns over increasing amount of bad loans.’

‘Many banks face the risk that a large amount of non-performing loans may emerge if local governments and enterprises are not performing well due to their previous unwise decisions to push forward some projects, many of which are infrastructure-related. We are not quite positive that the debts can be paid on time,’ said a source with the risk management department of a Beijing-based commercial bank.’

Comment by Housing Analyst
2013-05-24 07:03:03

LOL…..clueless mental cases.

Comment by In Colorado
2013-05-24 08:40:28

Check out the photo of this “house” in the Sydney article.

Holy Housing Bubble Batman! And I thought the Bay Area was pricey.

Comment by Ben Jones
2013-05-24 10:03:11

Yeah, this is the old, “we’ve just been recognized like London” line. Barstow is just catching up with the Inland Empire, etc.

Let’s say it’s gonna take $200k to “reno”. That gets it up to $1 million before they “sell-on”. Gotta have some profit, right? Ask maybe $1.2 million. Looking at the crummy cars parked on the street, it reminds me of something you’d see in downtown Matamoros Mexico.

Comment by United States of Moral Hazard
2013-05-24 13:37:22

I never understood “celebrating” a decision to pay more than anybody else for a product. In my life, I like to feel like I got a “deal.” I don’t care if it’s a house, car, appliance, or whatever. If I were making an offer on a house and found out others were exceeding my offer, I would immediately walk away. To me it is a sign there is something seriously distorted. Is it that fun for these people to throw money away? Or is it that borrowed money seems fake to them?

Comment by michael
2013-05-24 06:37:46

“We’re just undoing the extraordinary bust that happened”

yep…it was the “bust” that was extraordinary.

Comment by Whac-A-Bubble™
Comment by oxide
2013-05-24 06:40:09


And those two lucky winners of the bidding war look like they came straight outta Central Casting. Are you sure this isn’t Onion Down Under?

Comment by Ben Jones
2013-05-24 07:12:11

I can’t be sure it wasn’t staged. But they like this sort of thing in New Zealand and Australia. “look what this dump sold for!” The obvious suggestion is, if somebody paid that much for a tear down, imagine what your glorious house is worth.

We have seen these sorts of articles in the US and the UK too, BTW. Remember the Canadian article on how much some guy was asking for a sliver of land with a storage container on it?

Comment by Housing Analyst
2013-05-24 08:01:41

Can’t be sure but it certainly looks like your typical Banking and Mortgage Crime Syndicate charade. Ya know….. like the “retirement” stock photos of supposedly 60’s something couples that look 35 doing one handed backflips off 40′ diving boards into infinity pools.

Yup…. uh huh.

Comment by Whac-A-Bubble™
2013-05-24 07:00:48

“By parity, he means the housing prices we would expect to see if we had continued a healthy, moderate growth rate of 2 or 3 percent from 2003 to the present.”

The insanely bubblicious growth rate from 1997-2003 didn’t matter then?

Yeah right.

Comment by Ben Jones
2013-05-24 07:08:37

I see it more in the media comments all the time. Slowly warming up to the idea that the peak prices weren’t all that absurd. Maybe even a little low.

I made this point last week. As you get ever higher, the only rational is this is what it should be. And why would you pay so much? Because it’s going higher silly! It’s undervalued, we’re headed for parity. At the very top, it will be proclaimed by someone that houses will never be cheaper and you’re missing out if you don’t borrow every penny you can and buy houses. You don’t want to be eating cat food in your old age, do you?

Comment by Carl Morris
2013-05-24 07:50:11


If you’d rather not eat cat food in your retirement, you’d better invest in condos

There’s the money quote.

Comment by oxide
2013-05-24 08:17:49

Or the cat food quote.
The second coming of Casey?

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Comment by Al
2013-05-24 09:41:26

The funiest thing about the cat food quote is that it’s related to the Toronto Condo article. The Toronto condo market will likely the see the biggest drop in prices (percentage wise) than anywhere else in Canada. Vancouver will be close though, and the biggest drop in absolute terms.

Comment by Ben Jones
2013-05-24 09:48:19

‘Lamb’s strategy requires $20,000 to start. That’s your down payment on a small condo that is also your own residence. Using what he called conservative projections of four per cent annual growth in real estate values, he showed how you’re soon able to use the equity in your unit to buy a second one. You rent that out for enough to cover its mortgage, condo fees and other costs and eventually sell it for a profit.’

‘You continue buying, renting and re-selling units - all the while upgrading the one you live in - until you have a portfolio of five rental condos. That should take 12 years. Sit on the properties, with your tenants paying off your mortgages, for another 13 years and, a quarter-century after making your initial investment, you have enough assets to retire.’

‘Boomers in the audience looked a little crestfallen when they realized it takes 25 years to get rich.’

They were crestfallen! But solace could be found in the fact that Lamb would be getting rich in a much shorter period of time.

You know, I’m thinking Canadians are greedy.

Comment by Robin
2013-05-24 11:47:06

Or maybe invest in cat food futures.

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Comment by In Colorado
2013-05-24 08:42:19

I made this point last week. As you get ever higher, the only rational is this is what it should be. And why would you pay so much? Because it’s going higher silly!

The whole world has been conditioned to believe that housing is supposed to be utterly unaffordable.

Comment by Ben Jones
2013-05-24 09:38:59

Sometimes the significance of these articles can be missed:

‘Indonesia is still a long way from a housing bubble, even though property prices have risen by 100 percent over the past 18 months.’

‘It has 34 provinces with over 238 million people, and is the world’s fourth most populous country’

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Comment by snake charmer
2013-05-24 07:10:19

The world is on a suicidal trajectory.

For my fellow Floridians needing a laugh, the paper this morning reported that the buyer of former baseball player Gary Sheffield’s “aging party mansion” in St. Petersburg is attempting to flip it. From the Tampa Bay Times:

When Gary Sheffield, once one of baseball’s highest-paid players, built his multimillion-dollar party mansion in Pinellas Point in 1997, he aimed for that special tier of excess few but pro athletes can afford.

The master suite’s California king bed was laid on black marble near what look like the highest-end speakerphones, stereos and VCRs the late ’90s had to offer. A few steps past stained-glass windows, the master bathroom was adorned with a gold-accented hot tub.

Dr. Joseph “Doc” Sena, who said he frequently partied at the mansion before buying it in December, laughed Thursday afternoon as he shuffled past the shower, which looked big enough for half a dozen bathers.

In 2002, Sheffield sold the home for $2.8 million to infomercial mogul Kevin Harrington, a judge on ABC’s Shark Tank. But soon enough, Harrington also wanted to downsize, and by 2008 he was seeking to sell the gaudy estate.

In December, unable to find a buyer, Harrington sold it for about half what he paid to Sena, who listed it for sale a month later at $3.3 million. Sena will host an open house for bidders and looky-loos on June 16 before the auction June 22.

Comment by oxide
2013-05-24 07:59:26

Another side-splitter from the article:

“God says you’re supposed to live well. He didn’t say you were supposed to be poor,” Sheffield told Ebony magazine in 1999.

Guess no one told him that Testament 1.0 was recently updated?

Comment by oxide
2013-05-24 08:03:12

Oh, my bad, missed this:

“But in 2000, after clearing dozens of trees and outraging his neighbors, Sheffield told reporters he wanted a “simpler life,” and listed the custom mansion for sale. He had just married DeLeon Sheffield, a gospel singer, and proclaimed the home “too much for two people.”"

Looks like he got the memo a year too late? :grin:

Comment by snake charmer
2013-05-24 10:49:17

Prosperity gospel was huge here back then. Jesus rode into Jerusalem in a Bentley and all that.

Comment by Dave of the North
2013-05-24 08:04:31

“If you’d rather not eat cat food in your retirement, you’d better invest in condos, according to Toronto-based real estate developer Brad J. Lamb. By buying, renting and re-selling urban condos in a market that, based on the past 30 years of real estate performance in Ottawa, Lamb believes has nowhere to go over the long term but up.”

There was a show on HGTV called Big City Realtor that starred Brad. It was somewhat even-handed in that not every sale went through, it showed a lot of the bumps along the way for condo dev’t. It would be interesting if HGTV did a follow up on some of the people on the show.

Comment by Ben Jones
2013-05-24 08:04:46

I’ve mentioned this REIT before:

‘this chart depicts the average price paid per property in each market. This amount does not take into account property size, condition, location, etc.; it is simply the average price paid for a property including land and structure. We can see a couple of outliers in the data; Tucson has very inexpensive properties and Northern California is quite costly relative to the other markets where SBY operates.’

‘Now that we have an idea of the cost of these properties, we can take a look at another very important metric, the age of the houses that are being purchased.’

‘This chart shows more unfortunate data for SBY shareholders…SBY’s weighted average age of its properties at 25 years currently, the company is on the hook for some potentially crippling repairs on its portfolio before even considering upgrading the house to be suitable for a renter. In my view, the age of the company’s portfolio is a big red flag for expenses that will be incurred in order to stabilize the company’s properties. In addition, markets like Northern California, Tucson and Southern California sport average ages of 40 years or more.’

‘Basically, if you are long SBY, you are betting management can pick the right houses across the country, by the thousands, in order to take advantage of a rising housing market. In the meantime, the company will struggle to break even and will almost certainly issue more shares or debt in order to keep the lights on while it prays for housing price recoveries in its markets. Does this seem like a competent business strategy to you?’

‘Given the concentration of SBY’s portfolio in perhaps the most volatile and unpredictable market in the country, Phoenix, it is my belief that this is exactly what management is betting on.’

I can only comment on the Tucson purchases; if they are paying just under $80k for an average of 40 year old houses in Tucson, they are overpaying.

Comment by Housing Analyst
2013-05-24 08:13:21

They’ll be crushed by carrying costs. This is what happens when you buy a 20 year old house.

Comment by Ben Jones
2013-05-24 08:25:06

This writer ran the numbers at 100% occupancy and their model doesn’t justify the stock price. IMO, it’s more proof these REITs are only going to work if prices rise substantially. Which suggests they will sell, not hold and rent. And that will be true if prices rise, are flat or fall. Because if prices are even just flat, stockholders will run for the hills and they won’t have the cash to carry these houses.

Comment by Rental Watch
2013-05-24 15:01:26

I’m surprised someone wrote such a long article without actually reading the notes of their financial statements:

SBY is sucking the company dry through fees to related parties that could go on forever. These expenses are not typical property related or management expenses, and currently represent a significant percentage of gross rents.

From Note 6 of their 10-Q:

“In conjunction with the Formation Transactions, the Company and the Manager entered into a new advisory management agreement, whereby the Manager will design and implement the Company’s business strategy and administer its business activities and day-to-day operations, subject to oversight by its board of directors. In exchange for these services, the Manager will earn a fee equal to 1.5% per annum, or 0.375% per quarter, of the Company’s daily average fully diluted market capitalization, as defined by the agreement, calculated and payable quarterly in arrears….The initial term of the advisory management agreement expires on December 19, 2015 and will be automatically renewed for a one year term at the end of the initial term and each anniversary thereafter unless terminated.”

This fee last quarter was 37% of the gross revenue.

The termination fee is 3x a one-year fee. Wanna get out of this agreement? Give us 1 year of revenue.

Also: “In conjunction with the Formation Transactions, the Company entered into a new property management and acquisition services agreement with the Manager’s operating subsidiary. Under this agreement, the Manager’s operating subsidiary will acquire additional single-family properties on the Company’s behalf and manage the properties owned by the Company in select target markets. For these services, the Company will reimburse the Manager’s operating subsidiary for all direct expenses incurred in the operation of its business, including the compensation of its employees….During the three months ended March 31, 2013, the Company accrued direct expense reimbursements of $1,908 and the 5% property management fee of $146″

This contract is also perpetual. This means that the non-rent-based fee to the related party is significantly more than what the fee would be in a more traditional property management role (which would only be the 5% property management fee).

This total fee was 32% of gross revenues.

So, nearly 70% of revenues are being siphoned away to a related party for services that are either a) highly questionable, or b) completely unnecessary if you are not trying to significantly grow the portfolio.

Of course the numbers look bad when you include these costs.

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Comment by Ben Jones
2013-05-24 16:25:49

The numbers operationally are bad without the fee. They are paying too much for the notes.

‘the Manager will earn a fee equal to 1.5% per annum, or 0.375% per quarter, of the Company’s daily average fully diluted market capitalization’

So if the rents aren’t going to pay enough, and the compensation is tied to market cap, it looks like somebody is counting on higher market values of the houses themselves.

Comment by Rental Watch
2013-05-24 16:47:21

The market cap isn’t tied to the value of the houses, but what the public thinks the rental pool is worth. With other REITs, they often trade at a premium (or discount) to the sum total of the value of the underlying assets.

My point is simply that if you take away these fees (equal to 70% of revenue), the numbers don’t look nearly as bad…certainly not so bad that you would expect the company to fail.

And this subsidiary fee arrangement is like that of a parasite. If to keep the business as a going concern, they need to reduce their fees such that the company generates more free cash flow, it is their interest to do so, rather than simply kill the host.

The real question is how these portfolios will look as compared to apartment REITs (cash flow/earnings vs. capital invested). While we can all agree that apartments are more efficient to manage and maintain (100 units at one address as opposed to 100 units at 100 addresses), there are some expenses for apartments that don’t exist for the home rentals. Among other things, you don’t need on-site managers and you don’t need to pay for utilities of common areas (in some cases, landlord also pays for the tenant’s water costs, water-heating costs with some apartments that have common boilers, etc.).

I’ve heard some claim that the expense side of the equation is approximately the same between apartments and the single-family strategy (the differences end up being a wash)…although I’ve yet to see any good operational data to prove this is the case.

In any event, ultimately whether these companies have overpaid will really depend on the total capital invested relative to cash flow/earnings generated as compared to apartments.

Waypoint just filed their S-11…lots of good data on operations (they split operational data between the fully renovated and leased portfolio, and homes that are still in the renovation process), but I haven’t had a chance to completely wade through it, other than to note their total level of leverage is approximately 55% of cost.

Comment by Ben Jones
2013-05-24 17:01:37

‘the numbers don’t look nearly as bad’

Even with 100% occupancy and no tenant destruction, they yield 4% on market cap before the fees. Why would you buy this stock? And if it’s a good deal, why bother having publicly traded stock at all? Is this IPO thing like the dotcom model? I’m just saying it looks like a flip/dotcom strategy, not a rental investment.

Comment by Rental Watch
2013-05-24 17:10:38

I wouldn’t buy it at a 4% cap. That’s nuts. But I think you answered your question as to “why go public” in your math.

From what I’ve seen, the yield on cost for these portfolios is greater than 4%.

So, if you can build up a portfolio and generate a 6-7% cash yield on your investment as a private enterprise, but the world views the investment as being worth a 4% yield (public investors get some of the inflation protection of real assets with the liquidity of a stock), then it makes sense for these guys to go public.

Think of it this way, you invest $100 to generate annual NOI of $6.50, the world values this at $162.50.

Investing $100, and getting $160 is not too bad…a bit light for the hassle, but not bad.

Now, if you used 55% leverage (like Waypoint), the income should cover the cost of the debt while you are putting together the portfolio, and now your $45 becomes $107. A bit over a 2x multiple–now that’s better.

I’m not saying it’s good for the retail investor, I wouldn’t buy at a 4% cap. But it could be a good deal for the institutions putting together the portfolios if they are doing so at a higher than 4% cap.

Comment by Housing Analyst
2013-05-24 17:20:56

They paid far too much……. just like you and the DebtJunky Army.

Comment by Ben Jones
2013-05-24 20:40:50

‘Investing $100, and getting $160 is not too bad…a bit light for the hassle, but not bad.’

Sounds like guys at a bar when it’s about to close.

Comment by mmrtnt
2013-05-24 12:22:35

Don’t know if this helps, but I sold a house in Tucson for $90k in 1994. It was built in 1972.

Comment by Arizona Slim
2013-05-24 12:58:13

That’s about how much the houses here are worth today. Especially the 1970s vintage.

Comment by Ben Jones
2013-05-24 13:36:01

Yeah, but we’re talking about foreclosures. I’ve been inside a couple hundred Tucson foreclosures and that area has the worst vandalism and copper theft I’ve seen. These guys are buying notes, so they probably haven’t been inside these houses. To pay that much for a Tucson foreclosure is nuts.

Then there are the illegal additions. These older Tucson houses have been added to about half the time, from what I saw. That means shoddy construction, non-professional plumbing and electrical. If you have to pull a permit and there’s illegal stuff present, they may make you re-do everything.

80k should get you a newer than 70’s house in Midvale that doesn’t need much work.

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Comment by Arizona Slim
2013-05-24 14:10:26

I’ve been inside a couple hundred Tucson foreclosures and that area has the worst vandalism and copper theft I’ve seen.

Happened down the street and around the corner from me.

Foreclosed place was stripped of its copper. The subsequent buyer had quite the fixup adventure.

Comment by mmrtnt
2013-05-24 15:13:55

80k should get you a newer than 70’s house in Midvale that doesn’t need much work.

Midvale, ick.

I lived in Tucson from ‘83 until ‘05. I remember when they built Midvale along with a dozen other hideous stucco canyons.

What a waste of desert.

Comment by 2banana
2013-05-24 08:22:19

The Answer To Every Problem… is bigger and bigger government, more and more bailouts, higher and higher taxes and more and more Free Sh*t Army Voters.


America’s Bubble Economy Is Going To Become An Economic Black Hole
Economic Collapse | 21 May 2013 | Michael

What is going to happen when the greatest economic bubble in the history of the world pops? The mainstream media never talks about that. They are much too busy covering the latest dogfights in Washington and what Justin Bieber has been up to. And most Americans seem to think that if the Dow keeps setting new all-time highs that everything must be okay. Sadly, that is not the case at all. Right now, the U.S. economy is exhibiting all of the classic symptoms of a bubble economy. You can see this when you step back and take a longer-term view of things. Over the past decade, we have added more than 10 trillion dollars to the national debt. But most Americans have shown very little concern as the balance on our national credit card has soared from 6 trillion dollars to nearly 17 trillion dollars. Meanwhile, Wall Street has been transformed into the biggest casino on the planet, and much of the new money that the Federal Reserve has been recklessly printing up has gone into stocks. But the Dow does not keep setting new records because the underlying economic fundamentals are good. Rather, the reckless euphoria that we are seeing in the financial markets right now reminds me very much of 1929. Margin debt is absolutely soaring, and every time that happens a crash rapidly follows. But this time when a crash happens it could very well be unlike anything that we have ever seen before. The top 25 U.S. banks have more than 212 trillion dollars of exposure to derivatives combined, and when that house of cards comes crashing down there is no way that anyone will be able to prop it back up. After all, U.S. GDP for an entire year is only a bit more than 15 trillion dollars.

But most Americans are only focused on the short-term because the mainstream media is only focused on the short-term. Things are good this week and things were good last week, so there is nothing to worry about, right?

Unfortunately, economic reality is not going to change even if all of us try to ignore it. Those that are willing to take an honest look at what is coming down the road are very troubled. For example, Bill Gross of PIMCO says that his firm sees “bubbles everywhere”…

Comment by PeakHubris
2013-05-24 09:19:52

How come you never made so much as a peep while the Patriot Act was crammed down your throat?

Comment by AmazingRuss
2013-05-24 09:57:50

Because his soundbite sources didn’t tell him to.

Comment by Michael Viking
2013-05-25 09:15:03

How come you never made so much as a peep while the Patriot Act was crammed down your throat?

Wow, this blog and its readers were around a lot longer than I thought! I had no idea you were all readin’ and writin’ on here in 2001 when the patriot act was crammed down our throats…Otherwise how would you know whether or not he peeped?

Comment by (Neo-) Jetfixr
2013-05-24 08:24:19

Thanks Ben, for the daily examples of how nobody can fix our kind of stupid.

Comment by In Colorado
2013-05-24 08:43:19

Especially when the foreign kind of stupid eclipses our own.

Comment by Patrick
2013-05-24 08:44:18


Agree. This economy is worldwide, reckless, and cannot be sustained.

Unless the Fed prints 215 Trillion -

Their intrusion has been useless, has contributed to this worldwide mess, and we now have 10 banks handling more than 50% of world GDP !

In 2009 if a couple more had failed it could have been handled - a bloody mess but it could have been done.

Now not one of them going down could be survived with any semblance of a recoverable economy. Not a single economy has the ability to finance it.

Comment by AmazingRuss
2013-05-24 10:42:24

Time for World War III!

Comment by 2banana
2013-05-24 13:52:30

File under “There is no free lunch”

And cross reference under

Hope and Change.


Low interest rates are the final straw for many company pensions

Washington Post | May 24, 2013 | By Michael A. Fletcher

In INDIANAPOLIS — It was no small matter for the ILM Group’s executives when they froze the pension plan that has provided retirement security for the firm’s employees since 1947. The financial pressure of maintaining the plan had been mounting on the small insurer for years. But until March, ILM had not given in, even as tens of thousands of other employers did. It held on when the Sept. 11, 2001, terrorist attacks rocked the economy, flat-lining the stocks that fund the pension payments. It also kept the plan intact when the Great Recession shrank its holdings by 29 percent.

So when interest rates go down, the projected obligations go up, requiring the firms to set aside more cash today to pay retirees in the future. For ILM, that meant funneling more than $2 million — roughly 22 percent of its payroll — into its pension fund over the past two years. The expense was too high to keep it up, the company decided.

Comment by United States of Moral Hazard
2013-05-24 14:16:01

“File under “There is no free lunch”

And cross reference under

Hope and Change.”

File under: TROLL

Comment by Mr. Smithers
2013-05-24 14:12:57

“‘The trees haven’t been trimmed, the grass hasn’t been done. It’s a mess. Somebody drives by and they say, ‘Oh my gosh. I don’t want to live in this neighborhood. Look at that.’”

Get a couple of neighbors together and go trim the trees and cut the grass. Not that hard really.

Comment by Ben Jones
2013-05-24 14:24:26

I’ve been working on these for years and I’ve never seen that happen.

Comment by Mr. Smithers
2013-05-24 14:51:37

It’s odd that it doesn’t. If you’re that worried about the foreclosure next door killing your property value because of an unkept lawn, start keeping the damn lawn. Seems like the logical thing to do.

Comment by AmazingRuss
2013-05-24 15:11:12

Maybe they’re not trying to sell, just complaining in general.

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Comment by non-conformist
2013-05-24 15:33:58

This dude cut the grass and cleaned the pool.

Acreage squatter arrested, claims adverse possession on 3,400-square-foot home

Posted: 5:14 p.m. Friday, May 24, 2013

Jason Friedman cleaned the putrid pool, paid thousands of dollars for a new fence, changed the locks and moved his family into a 3,400-square-foot Acreage home that wasn’t his.

Claiming adverse possession — the same antiquated Florida law used unsuccessfully this year by the infamous Boca Raton mansion squatter — Friedman hoped to make the vacant home his own.

But the home’s owner of record, West Palm Beach resident Devon Anderson, wasn’t ready to hand him the keys. Instead, he called law enforcement.

Friedman, 37, was arrested May 14 by Palm Beach County Sheriff’s deputies on charges that include residential burglary, theft under $300 and resisting arrest without violence. He moved into the home in the 12000 block of 54th Street North on May 1 with his three children and wife, according to his attorney Robert Norvell.

“(Friedman) thought he was doing the right thing in that he found the property abandoned and contacted the lender. No one wanted to work with him,” Norvell said. “He was under the impression that once he was in the home, the lender would have to deal with him.”

The home has been in foreclosure since May of last year, according to court records.

The Acreage home was vacant and overgrown, but ownership was a public record.

According to the police report, Friedman offered Anderson $10,000 to sign the home’s deed over to him, but Anderson refused. In an email to Norvell, Friedman says he paid Anderson $400 when Anderson demanded $2,000 after finding Friedman and his family had moved into the home. Friedman also has receipts for 430 feet of fencing, which cost $2,737, and proof that the electricity was turned on in his name.

“All of our furniture and possessions are in the property, we sent in an adverse possession form notarized and filled out to the county tax appraiser’s office and we called the office several times to confirm the steps that we were taking were correct,” Friedman said in the email.

Norvell said Friedman was looking for a new home because the one he was renting went into foreclosure. After the arrest, Norvell said Friedman moved back into that home.

Comment by 2banana
2013-05-24 17:49:57

The Free Sh*t Army are not dummies…

Comment by AmazingRuss
2013-05-24 18:57:50

And they’re after your lucky charms!

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Comment by azdude
2013-05-24 18:00:54

give him the house, he earned it.

Comment by chilidoggg
2013-05-25 05:35:27

So Florida’s adverse possession law allows someone to claim it in less than one year?

Comment by Jason Friedman
2013-05-26 17:01:15

A few facts that you may not have been privvy to, Mr. Anderson told the next door neighbors that we would be his new neighbors…..leaving everyone including us the impression that he would be working out an arrangement. He contacted me at around 7:00 p.m. the next day and demanded I pay him $2, 000.00 in cash for good faith. I explained that I could not withdraw that much money after business hours and offered to pay him what I thought I could withdraw from the ATM $400.00 ….I was only able to take $300 as that was my banks limit….so when he got agitated I wrote him a check for the difference. We agreed to the quit claim deed scenario because, I pointed out that he had neglected to hire an attorney to fight the foreclosure, neglected to pay his taxes, which I was prepared to do before I was arrested…I had the money set aside in an account, and I was concerned he would do the same thing he has been doing, ignore the bank and not deal with the foreclosure, if we just paid rent, then I would be out in a matter of months from the banks foreclosure, additionally I believe it is against the law for him to collect rent while the property is in foreclosure. I also reminded him all the work including replumbing the well, the purchase of a water system and having the system installed. on top of the fencing, pool and landscaping.Theproperty was open when we took possesion, I never broke in, and Mr. Anderson did not have access as due to his neglect and abandonment, the bank, who did not own the property hired safeguard properties, (who deemed the property vacant and abandoned) to check in because of complaints that the property was not being maintained. My wife qualifies for a VA loan, and we were told by freddie Mac earlier this year when we tried to purchase a property that we liked from them, “if you were already in the house we would have to work with you, in that scenario we would sell you the property” I figured if we established adverse possession or obtained a quitclaim deed, when a final foreclosure came through eventually, the bank would let us buy the house. We contacted the lender and advised them of what we were doing and gave them our contact info. Please feel free to contact me if you want some additional clarification, like how devon anderson had been telling us and everyone else he is a police officer(he was a DOC deputy that was fired in 2003) and how the police that showed up would not listen to anything we had to say, did not look at our evidence told me shut the f up or I will taze you, then threw me in the back of the police car…..and admitted he did not know the law for adverse possesion. Which should have been a civil matter, which was reiterated by the deputy that helped us get our property back….he kept saying that the whole time….and the Anderson’s stole 3 televisions from us, which is in the supplemental report that the deputy who assisted us wrote.

Comment by Prime_Is_Contained
2013-05-27 09:13:56

Awesome response—thanks for showing up to share your side of the story, Jason!

Comment by Prime_Is_Contained
2013-05-27 09:21:15

Hey Jason, I posted a mention on a more recent thread (5/27) that you had stopped by to comment on the story, so that others would be aware you were posting here. Without that, most people don’t tend to read the older comment threads on the blog.

Please stop back by to respond if you see this… Thanks!

Comment by Prime_Is_Contained
2013-05-27 09:24:00

A question for you, Jason: what first inspired you to attempt the adverse possession claim? And what was it that brought this particular property to your attention? Thanks for any response.

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