The Deadman Night Rider

A forum for evening students of the SMU Dedman School of Law and other outlaws..

Saturday, March 29, 2008

Exactly what I've been wondering lately

From the Opinion section of this weekend's Wall Street Journal:

Mr. Frank and Senate Banking Committee Chairman Christopher Dodd are planning more schemes to move the risk to the taxpayers from those who made bad decisions, such as buying mortgages that are now in default. As a result, ordinary citizens will ask themselves: Why should I pay my mortgage if my neighbors can get theirs reduced?

I heard my new favorite "dream home" story on NPR this week: first-time homebuyer (single income, with children) buys dream home for $249K on a sub-prime ARM. The reporter made the obligatory mention that with a mid-600s credit score, the buyer could have qualified for a traditional mortgage (but of course failed to mention that it wouldn't have been enough for the price range our intrepid home buyer was looking at--only smart to get all the house you can get, right? After all this is your home, your wealth builder!).

Two months ago, the ARM reset, which doubled the mortgage payment. Of course, home buyer claims that he never saw this coming. Here's the best part--when they finally(!) had the home appraised as he was looking to get out from under it, it came in at a whopping $180K, leaving Ace an almost $100K deficiency if he sells. He's waiting for foreclosure to see what the bank can get out of it. If he can hang on long enough, though, this is the kind of guy who stands to reap a huge windfall if any of the 'solutions' to the housing crisis being batted around right now actually comes to pass.

UPDATE: watching CNN program that claims that on the average (pre-meltdown), people stayed in a house for only nine years--a medium-term investment by rational, i.e., not residential real estate, standards. Compare that with the statistics about how many times the average person today can expect to change careers (not just jobs) in their lifetime, and you'll see what I mean that the demographics simply do not favor the home market long term.

Friday, March 21, 2008

Why we have the 2nd Amendment

And why Heller is so important:

Check out this story about a California woman who was shot to death by a burglar while on the phone with 911.

Via Instapundit.

Sanity returns??

I heard the most amazing thing on TV whiile I was getting ready for work this morning. The Today show had a financial planner on to answer e-mailed questions about retirement, family financial planning, etc. A couple wrote in that they were relocating to a new town for work, where they planned to be for no more than five years or so--they wanted some advice on the best financing tools for buying a new house there. You could have knocked me over with a feather when the lady said this: if you're only planning on being there for five years, I would seriously consider renting over buying.

What rank heresy is this?!? Did I just hear sound advice about residential real estate on the TV?

It seems that reality is starting to set in at all levels about just how foolishly we've acted for the last several years. Here's a snippet from one of today's op-eds in the Dallas Morning News about the housing market:

Who's to blame?

Who's not to blame? The mortgage brokers were out of control. Regulators were asleep. Homebuyers thought they were entitled to Corian counters and a two-story great room. Everybody from Norwegian town elders to financial geniuses decided that house prices would always go up. This was an episode of mass idiocy.

The writer (David Brooks) lists some stats:

Housing prices are off about 10 percent from their peak, and experts expect them to drop another 20 percent or so. Without policy changes, several million households will default on their mortgages over the next few years. Roughly 14 million homeowners will owe more than their houses are worth.

That means 14 million homeowners are going to learn a fundamental lesson: when you're upside down, you don't own the house--the house owns you.

While it's good to see commentators finally take a sober look at this situation, there are still a couple of conclusions that the articles I have seen so far have studiously avoiding facing:

1. We have sold houses to too many people who shouldn't have been in a house--any house--to begin with. We've got to shake this sentimental attitude that home ownership is some kind of silver bullet. It's not right for everybody, and if you look at the demographics, the number of people that it IS right for is declining every year.

2. As a result of #1, we have built too many houses. Even more than how we deal with the sub-prime mess, how badly we are overbuilt is what is ultimately going to determine if and when the housing market recovers.

Friday, March 14, 2008

And yet "Flip This House" has been picked up for another season...

The sickness of houses threatens to swallow Bear Stearns, and if we're lucky, will stop there (though I doubt it).

The long-term fundamentals aren't all that great, but in a way they sort of understate how bad the short term may really be: the only thing keeping overall housing prices flat or just barely negative (especially here in Dallas) is the high-end market. But here's a snippet from an article in the Atlantic this month:

Arthur C. Nelson, director of the Metropolitan Institute at Virginia Tech, has looked carefully at trends in American demographics, construction, house prices, and consumer preferences. In 2006, using recent consumer research, housing supply data, and population growth rates, he modeled future demand for various types of housing. The results were bracing: Nelson forecasts a likely surplus of 22 million large-lot homes (houses built on a sixth of an acre or more) by 2025—that’s roughly 40 percent of the large-lot homes in existence today. (my emphasis)

Friday fun

"There are more things in heaven and earth, Horatio,
Than are dreamt of in your philosophy.

Hamlet, Act I, Scene 5

As proof of that, Exhibit 1--a massive dance routine staged by Filipino prisoners to Soulja Boy and Can't Touch This:


If you don't believe this is real, Google up "Filipino prisoners dance" or something similar. It's really a pretty interesting story.

Shocked, shocked to find gambling in Casablanca

In the aftermath of the Spitzer flame-out, we're getting alot of misty-eyed sympathy for poor little Ashley Alexandra Dupre, who evidently--with the classic "if I can make it there, I can make it anywhere" spirit--just came to the Big Apple to launch a singing career. It doesn't look like they're going to be making a sequel to Pretty Woman out of this one, though. Since motivational speaker Matt Foley (who once noted of an aspiring young writer "Brian, from what I've heard, you're using your paper, not for writing, but for rolling doobies!!") is unavailable, I will simply say that she apparently wasn't using her lips for voice lessons (ahem):

She's been hanging around the night-life scene for a few years," said one well-connected club source. "She's definitely a party girl. She was out four, five nights a week and was a staple. She danced on tables and had fun.

Here's what her former employers had to say about her motivations:

"Like all of them, she wanted to hang out with guys with money," a source said.

For the club owners, it's all coming together:

Now it makes sense where her Cartier watch, her Louis Vuitton bathing suit and her trips to St.-Tropez came from.

Fascinating--who would have thought that a prostitute would have been motivated by money?

Sunday, March 09, 2008

Why I'll never do labor law

From a story on efforts to improve the physical fitness of Chicago police officers:

The police union opposes mandating a physical fitness regime, and argues consideration must be given for the stress and irregular hours of the job.

Thank God the Marines aren't a union shop.

Now here's a strategy with legs!

How many times have I said it myself--I should have listened to my wife:

Clinton has often said that not acting in Rwanda was one of his biggest regrets. It's a decision, he said, for which he continues to try to make amends. Had he listened to his wife, Clinton said, things might have been different.

"I believe if I had moved we might have saved at least a third of those lives," he said. "I think she clearly would have done that."

He went on to explain how America, which did intervene in the former Yugoslavia, could only take on so much at once. But not acting in Rwanda, he suggested, was a mistake his wife wouldn't make.

Here's a thorough run-down of why this can't possibly be true in the conventional, non-Clintonian sense of the word.

Aside from the trivial matter of veracity, though, this could be a killer campaign strategy--if Hillary starts claiming she was right on all the things Bill was wrong on, she's can dip into a very deep well of talking points indeed.

Tuesday, March 04, 2008

Note to self

Default on house payment next month. (I wonder if it's too late to put a stop order on this month's check...)


``Efforts by both government and private-sector entities to reduce unnecessary foreclosures are helping, but more can, and should, be done,'' Bernanke said in a speech to bankers in Orlando, Florida, today. ``Principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure.''

That's the Federal Reserve Chairman talking, not some wingnut with a general grievance toward the free market system. I am not joking or exaggerating when I say that there is a danger here of wrecking the housing industry for the next 20 years. Based on what both Democrats and Republicans are proposing, there's really no reason for anyone to send their lender one dollar more than they feel like from now on. The last thing the banks want to do now is foreclose (even if they're not under a federally-mandated injunction from doing it), and if you're stubborn enough, maybe they'll just knock your principal balance down to wipe out the deficiency.

This sickness of houses just goes on and on.