Monday, April 28, 2014

Living the alternate realty reality.

Normally you might have gotten cars from the Pacific Coast Dream Machines from this weekend, but I've been sick for a few days and I rented my place already. It took seven days. So, I'm still a slave to that house for a little longer sick or not. We were over working on the sprinkler system this weekend. Yes we are in a drought! Thankfully the new renters husband works for one of the water districts in one of the cities around me.  I wouldn't be surprised if he gets a water discount.

Down the block from my rental, a house is up for sale for 30 grand over what I listed my rental in 2007. Since I had to do a lot of shutting off of the water main in the front - I was able to see the traffic this place was getting because it just hit the market. I was pretty surprised honestly. There were an endless stream of cars. I know exactly when prices took a turn in this neighborhood. In 12 short months the prices have become eye widening. Especially after all the suffering of the previous 5 years.

One of the reasons I got caught so flat footed in the downturn was because what you see on the ground is much different than what you read. On the ground - things look normal and good. Unless you are scouring the data all of the time, you'd think bad times are behind us. Especially when you get headlines saying pending sales were up 3.4% in March. In the West this is still down 11% YOY. Here.

I suspect the slight bump in sales has more to do with the fact that interest rates are at a six month low than any real turn in sentiment. If you have good credit you have a slightly better than 50% chance of getting a rate that is lower than what I refi'd my house at six months ago at. This tells me that prices are really starting to get long in the tooth. It took rates to fall under 4.25 for a couple of weeks to get any signs of life. It isn't that hard to get a mortgage in the 4.15 range today.

My property manager who is also a realtor seems to think that house will get it's asking and more. If it does - I stand a good chance of getting PMI of my rental. The bank is requiring 30% equity since I only refi'd 12 months ago. I think the whole thing is crazy. Everyday you wake up and say to yourself - everyone is still playing along, so I guess I'll keep pretending too.

You don't know what the day will be. You only know that prices are actually rising faster than before the crisis. And it's weird that people don't seem to be bitching all that much about it.

Thursday, April 24, 2014

Expect the service sector to cave.

"Chipotle appears to have raised its menu prices by up to 17% in the Las Vegas region last week, around the same time the company announced a plan to gradually increase prices nationwide.

Las Vegas area locations began charging roughly 7% more for burritos, 14% more for guacamole and large drinks, and 17% more for chips, according to Rewardable, an app that collects restaurant pricing data." Here.

Wow. I know food inflation is going to be crazy this summer because of the drought, but the price increases even had my mouth agape. A 17% increase for chips!? And this is the first run. Inflation is too much money chasing too few products or services. The "too few" part only gets worse as summer gets deeper and dryer.

Those are substantial increases and people are going to cut back to compensate for them because they are so shocking.

It's gonna be a real nail biter.

Yesterday I was trying to figure out why absolutely no amount of bad news drags down the stock market. Then it dawned on me.

You don't want to take down the market right before a really important election stopping the gravy train, do you?

Today all I see are the articles about housing inventory rising. I swear half of the articles involve some sort of angina about housing. It's at the critical 6 month supply level. Six months is considered to be a healthy market. (manufactured or not) It was down to about 3 months.

Also - I guess jobless numbers just don't matter anymore. This morning I heard they spiked, but finding anyone that is talking about it is almost non-existent. And those that do all seem to be using these fluffy terms like - Jobless claims surprise on the upside. Or - New Jobless Claims come in Above Expectations. I watch this stuff and even I was asking myself - that means bad. Right? It is, yet it sounds like a nice fluffy cloud.

Wednesday, April 23, 2014

Me too!

Traders shocked that home sales didn't slam stocks.

People should have seen this coming. California had it most construction friendly/house hunting friendly winter in a lifetime. We are in a major drought!

When home sales started coming in weak here in the West, I knew we were headed for bad news. And for the life of me - I don't know how they are going to goose the system this time. Housing prices are almost at bubble top. Some areas I think they have started to exceed bubble top.

The real estate market is starting to become pretty illiquid between those low interest rates, and people just deciding to ride things out.

When my rental came vacant I thought about putting it up for sale - but I just had the feeling that by the time I got it sale ready the market was going to drop out. Every day you have your hand on the chair waiting for the music to stop.

This drought just got real.

People are eternally optimistic. That's why when you tell them we are in a critical water shortage - they say "oh, we have the Spring rainy season still".

Well, California is now at the stage that the air is so dry that if a small Spring shower might come - it evaporates before it hits the ground. The April showers bring May flowers optimism will be coming to an end very shortly. In a way that is sort of like hitting a wall.

This is the time of year where wildflowers are dotting the hills if you look close. But they took a huge turn in the last couple of days. I think by the end of the week the hills will be brown again. You can kinda see the high pressure bubble on this vapor loop. It's basically the dark area between Hawaii and Baja. All the storms are basically hitting it and going straight up to Washington/Alaska.

It's going to be a crazy summer. Super crazy. I predict you get a lot of fire pictures this summer. Last year we only had two major fires in my area. And that was a good year.

Monday, April 21, 2014

They be throwing up road blocks left and right.

My last nerve is on my last nerve.

You know I've been on this mad tear to get my rental appraised so I can get PMI off. The bank is trying to make me go away because I only refi'd 12 months ago. I completed it in April 2013. And hold your breath for this.....the bank is requiring 30% equity to remove PMI.

This is an usual number. The normal requirement is 20%. If you put 20% down on a house - no PMI. A house you do not live in triggers a 25% equity requirement. And a house that you apparently only refinanced 12 months ago requires 30%. Got it? I'm askin' because the rest of this should scare the shit out of you.

I think if things don't flip tomorrow I might make it. And even then, people are so clueless I still might make it. Sales are down, but prices are up. Those two things don't make sense.

So, I call the bank today and tell them I want an appraisal. Which by the way I pay for. They clearly were not going to let me get one without a fight. So I had to pull out a technicality.

When they refi'd me they didn't send an appraiser to the rental. They took a verbal appraisal from me. I'm sure because this whole renter thing would have come to a head much sooner if I had an appraiser out. Just on the off chance you might think that I forgot about a really stressful event like an house appraisal.

Here's the kicker though. They actually charged me for one. I'm sure at the time I thought it was bullshit but just didn't care. Now though, I'm forcing them to produce the appraisal report. I get to wait 30 days for them to try and produce a report that I'm positive doesn't exist. All the while hoping that prices hold.

None of this is gloating, because I'm pretty freaked out about the real estate market right now. My rental has gone up probably 50% in a little over a year. That place was underwater by a great deal up until around Jan of 2013. Then prices steadily started to rise. A house on the block over from the rental just went in 13 days. That is height of the bubble selling time.

The thing is - nobody seems to be bitchin' all that much about that kind of a price rise. I'm sure it can't last. Although in an environment where the government prints endless money - you can't be sure of what you are sure about.

Sunday, April 20, 2014

Nom nom nom.

Weekend warrior victory.

One of the kitchen tiles in the rental had a big chip in it and I'm trying to make the place look the best so it can be appraised. And thankfully I'd already learned how to take tiles out from another project we did late last year. Turns out, once you get the grout out - the tile will come out fairly easily. Of course, you need to use one of these Oscillating Multi tools to remove the grout. Don't go cheap. There are a bunch of other tools that claim to do this. And maybe they do. But this thing is worth it's weight in gold. It cuts pretty much anything. It's saved my butt close to a handful of times already. I'd already cut out the grout line by the time I took this picture.

Start near a corner and hammer a chunk out, then you can start using a chisel to pry the pieces you break up.

After you get the tile out you have to chisel out all the mastic so you can lay the tile the same height as the rest of them. Now I just have to go back and grout. Looks like it almost never happened.

Thursday, April 17, 2014

News from the housing trenches.

I met with my property manager today and gave her the keys to the rental. You know all I want to do is grill her for information because I can't figure out the market at all. And that freaks me out because I don't believe any of the stories I read. I believe you have to be in the market to know what exactly is going on in the market. And well... joy! That's me. (said in the most sarcastic way)

I'm trying to figure out what is going on with prices because I need to get my house appraised so I can get PMI off. Prices to me looked to be sagging after last October. So I was really nervous. I didn't think I was going to have to do so much work. I'd planned to get it appraised the end of Feb., so every month I was feeling like it was less and less likely for my place to appraise well.

So, I'm asking her a lot of questions about the market. I have to tell her about my PMI because I'm signing a contract with her to rent it. She's also a realtor, and I'm asking question like I want to sell. And hell - maybe I do. But I've got that low interest rate now. It will be interesting to see what happens to the accidental landlord demo because of those low rates. Anyway...

Then she casually dropped a bombshell on me. She said - oh, and you've heard about the new loans? PMI never comes off. I was so shocked that I had to ask her again. You mean that once you get enough equity, they wont let you remove PMI? Yes - she confirms.

Holy shit people. You better start saving your  pennies for a 20% down payment. Paying PMI is one of those things that nags at you. It's like throwing money away every single month. You put up with it because you know if you pay the loan down enough, they will remove it eventually. If that doesn't happen anymore - that really sucks.

Wednesday, April 16, 2014

I've found my limit.

This whole journey started in January because I wanted to have my place inspected so I could get PMI off my rental. This caused my renter to immediately give me notice. Which I was pretty happy about at the time because I didn't have to evict him. I'd been putting up with him because I was trapped in that exploding mortgage. Now I understand the hasty notice. My place was pretty trashed.

I was really thankful I hadn't fixed up the yards previously. Putting in a lawn is a pain you will not soon forget and having it wind up like the below pictures after that would have made me fighting mad. So while this crap is annoying, I'd still have had to doze the yard to get it flat so I could put in new sod. The neighborhood is cuter now. It deserves a cuter lawn. And really - I guess selling it is now my backup plan. Renting it used to be my backup plan while I was trying to sell it. You have to be flexible in the world we live in today.

The back was so overgrown that when they dozed it - I realized I had a giant tree I didn't even know was mine. I also realized this yard was much bigger than I thought it was.

Anyway. Three pallets of lawn later - the place is looking loved again. It's the biggest lawn we've ever put in ourselves. Three pallets is my limit. That takes you past your first, second, and third winds. It takes everything you've got. Everything.

After we got back to the house after putting the sod in Mr S. says to me - You know, I don't think we would have done this ten years ago. Which really surprised me. This is our third lawn. One day Mr S. went to work and I put in our front lawn by myself in four hours. He said - when you are younger you are stronger, but your mind is weak and I think we would have just given up.

All I know is that before I owned a house I had to find work out plans. When you own a house - you don't need a gym membership anymore. Your house will give you the work out of your life. This is how the guy left my place. He'd keep the front short so if you drive by, it didn't look that bad. My rental had a nasty mullet in the back though.

This chick means business.

You know if someone walks through your neighborhood with a three foot pipe with the end caps on - you'd take notice. Last year some old woman was carrying around a golf club for protection. I blogged about it here. It was just odd because I live in a really good neighborhood. I'm sure its to crack open the heads of dogs if she were to be attacked - but still - she makes a bold statement. And there is just something about it that makes me smile. Rock on sistergirl.

Friday, April 11, 2014

Another reason for low inventory.

I've been talking recently on the new psychology of the housing and rental market, Well, tonight I heard a strange new rumor. I've only heard it once, but it's really an unusual if true.

People who've had their houses on the market - and have gotten offers! -are now removing the listings because they fear they will become homeless because they can't find a new place to live. I've never heard that of that before. Housing and rental inventory is just that low. Read : Low interest rates will alter the housing market for decades.

It's really a surreal moment. The stock market is obviously starting to reverse, finally. Which will lock the market right the hell up. Banks really have their balls in a vice. I guess you can lead a horse to manufactured equity, but you can't force them to sell.

Pictures I should have posted.

I got this a couple of weeks ago in Los Gatos.

Thursday, April 10, 2014

I'm having a lawn baby.

Don't expect anything from me until Tuesday. I still haven't finished my taxes and my lawn baby comes on Monday. I'm not really ready - but the lawn comes no matter if I'm ready or not. And three pallets of lawn is going to really hurt. Really going to hurt.

Tuesday, April 08, 2014

Will Twerk for Food Stamps.

This is how sad our country has become. Saw this on the side of a boy scout bus filled with boys. Obviously! Even though I found it funny, guys twerking kinda gives me the queebies. There is all this side junk we all want to forget exists. I'm talking about your balls guys. No one wants to see that. Or maybe they have a stash of hundred dollar food stamps to make it rain should the opportunity arise. I don't even object to twerking. I just think in about 10 years you will look back and be mortified. It isn't going to exactly be your proudest moment.

Sunday, April 06, 2014

Napa Chalk Festival.

Today we took a break from all of our responsibilities and went to the Napa Chalk fest. I thought it would be amazing. It's Napa! It was more like Martinez, or Berkeley. Just so so. The picture above was really the best. The camera does it complete justice because it didn't have that depth in real life.

Hopefully these pictures will keep you entertained for a minute because I don't know what you are going to get this week. I haven't finished my taxes. I'm suppose to hand over my rental to the prop manager on tax day. And I decided to stick in a lawn. Thankfully I have two large tress that shade the yard. But this will be my third lawn and that will kick your ass. I'm pretty fully dreading it.

So - you might get nothing. I might freak out. (shrug) I'm sure it will be a surprise to everyone including me.

Every once in a while you see the simple chalk outline at these things. Mr S. wanted to go big on that and make a whole crime scene. Which does sound dark, but also funny. You could sketch out spent magazine rounds, and the little police cones they stick near them. It's totally inappropriate obviously. Tons of kids go to these things. But if I saw that - I would laugh.

Friday, April 04, 2014

Low interest rates will alter the housing market for decades.

Over the past couple of days I've been reading article after article asking "Where are the sellers"? This sends me into a bit of exasperation. I can tell immediately these writers have almost certainly never owned a house. Houses are a number on a screen. They don't understand the psychology of the market now. I am not confused at all why sellers are well... not selling. The only thing that confuses me is how this will turn out in the end.

Presumably these writers think that as soon as people are not in negative equity they will choose to sell. But why would they? The 20% who are still deeply underwater have now been paying on their houses for at least 6 years. They had to have had pretty stellar credit and enough resources to keep paying their mortgages through arguably one of the most financially terrifying times in their lives. I know one guy who is still paying close to 7% interest. A couple of days ago he told me that he just got his house appraised. So, I know he is finally getting to go through the process. I'm not sure yet when he bought. It had to have been between 2004-2007. I've been watching this guy through the whole recession. Hoping he would make it. He wasn't speculating. He borrowed money from his house to build a commercial building for his business. Something that people have done as long as I've been alive. A very normal thing people do to get ahead in life.

I knew when the banks finally refinanced him home prices would be very nearly the top. Which we are. Some neighborhoods are skirting the top. My house is still "effectively" underwater. Which means I would still lose money, but I have equity.

Now, why would someone who's been paying 7% interest suddenly sell because he's magically not underwater anymore? Especially when he's gone through hell just trying to get refinanced for the house he has now? I can assure you - there are a lot of people who are too raw to take on the risk of buying a new house. He's been living that risk for 6-7 years! He's just gotten to the point where he probably feels like he isn't going to lose his properties. At least the place he has now - he apparently has equity or the banks wouldn't touch him. You know that guy has been fighting for his financial life. He is dead tired.

I  also suspected he was one of the people The Motley Fool wrote about in this article: Citigroup Will Soon Be Haunted by $19 Billion.

"Just when you thought the financial crisis was in the rearview mirror, a final aftershock is about to hit the nation's third largest bank by assets. According to Citigroup's (NYSE: C ) recent annual filing, nearly $19 billion of potentionally toxic home equity lines of credit, or HELOCs, dating back to the housing bubble will soon begin coming due. "

I couldn't just ask him. It's a really sensitive topic. But given his circumstances I was sure he was facing a reset soon. I was facing one in 2016. I had two years left. A couple of days ago he admitted that next year his HELOC was resetting. We were in the market about at the same time. No matter how good your credit was - it was impossible to get a loan that didn't reset. Impossible. It was all they offered. I'm sure because I don't take risks with loans. Even I wound up with a 10 year reset. I've always preferred a fixed rate.

Bright side is - hopefully since this guy is getting refi'ed, maybe the risk to the banks is not as severe as what people write about. They obviously know how this turns out. But no matter - prices still need to go up for them to refi you. Period. Which is going to be tricky. This segment is going to be risk adverse for a very long time. When you have a reset - every single day feels out of control because you don't know when interest rates are going to skyrocket. And you see how the banks treat their best risks. Every single day you are aware you could be shut out of the market even though you are a stellar risk. I was only paying slightly over 6% interest. That guy ... when you are paying 7% and almost everyone else is paying 4% - it burns like the surface of the sun. I assure you.

Now onto the segment of the market who's finally been able to refi. The 4%ers. Well... consider that market almost dead. I newly fit into this category. I have wanderlust for houses. But now that I'm in a low interest rate loan - it changes how you feel about moving. I hope it doesn't stick too long with me. But it can forever take a house out of rotation. Mr S's mom bought a house in 65 before interest rates spiked in the 70's. She never moved because she wouldn't have been able to afford a higher interest rate. And I believe a big segment of the refi group will never sell their houses. I know if I have this impulse, other people have it more.

In some ways the market is worse off than before. You have large swaths of the market that are in stasis now because the attitude of moving has changed quite dramatically. More people are choosing to be "happy where they are". Yet with economic growth pretty paltry considering how much the government spent- you have to wonder how they will stimulate the economy when the inevitable comes. Interest rates can almost not get any lower. Plus, you don't think the stock market goes up forever. Do you?

And then.... there are those pesky inventory rises. For the past few days I've been seeing articles that report that Sacramento has had an almost 90% side in housing inventory since the beginning of the year. Which is quite dramatic for three months. So, it's going to be quite the nail biter to see if those 20% underwater and HELOCs can make it before the market reverses. Sacramento doesn't seem to be alone. Las Vegas has had a 92% increase in inventory. The article was written from the buyers standpoint, because rising inventory means lower prices for buyers. But rising inventories are a worrisome trend for the overall economy. Really worrisome.

Thursday, April 03, 2014

Everything is fine. Look over there!

The health care segment makes up about 6% of the US economy. During the boom years, housing also made up about 6.3% of the economy. Source. 

I'm sure this isn't going to be as painful as that. I mean, at least you could escape that it you wanted by defaulting. Sure it took down the whole economy. We just don't know exactly in what way this too will take down the whole economy. If that really matters.

Tuesday, April 01, 2014

Ferrari jumps shark. Sadly not literally.

Seriously. My heart was not into getting glamour shots of this car. I think if you are rich enough to own a Ferrari, you can buy another car to haul around your spawn or groceries. And it definitely should not be used for hauling your grandparents around. Google it.