Lego-Style Apartment Gives Domestic Transformer A Run For Its Money

If you saw last week’s installment of the Creative Real Estate series, I have little doubt you were short of amazed. The owner, who was an architect in Hong Kong, had devised a 24 room configuration for his 330 square foot apartment (I know!!!).

Now, from Spain, we’re introduced to Christian Schallert, who has pulled it off with a 248 square foot home. His approach is not dissimilar, in that there’s a basic cube with highly customizable, versatile, and movable parts that can be configured in dozens of different ways. It’s referred to here as a lego house. You just have to see it – this is spectacular ingenuity.

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I think I like last week’s Domestic Transformer better. I find it a little more amazing. But, I’d rather live in Spain than Hong Kong, so … hmmm… dilemmas. I’d love to know if anybody in the Bay Area has done something this creative with a small living space. What’s your take? Which one do you like better?

Domestic Transformer – The Most Incredibly Flexible Living Space Ever?

This has to be the most incredible example of efficient use of living space of all time.

I lived on the outskirts of San Francisco’s Chinatown for about 6 years, and I did pick up an appreciation for some that neighborhood’s ability to effectively utilize space and resources in general. But this Hong Kong architect has taken the idea to an awesome extreme. If I said 330 square feet, and 24 rooms, does that make you kind of wonder?

You’ll simply need to watch this (4 minute) video. It’s our latest in the Creative Real Estate series.

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The oddest part about it is that it appears that Chang has a significant amount of the space allocated for shelves containing what I believe are CDs. I have to think that he could rip those artifacts onto a hard drive and consolidate the collection to something about the size of two or three CD cases.

Those are some tight quarters – do you think you could handle that kind of living arrangement?

“Half-There” Earth Home Featured In WSJ Luxury Real Estate

I’ve been to East Hampton, NY, and it’s quite a different world from here in the Bay Area, but this property struck me as something you’d be more likely to find here in the Bay Area than on the east coast. At the very least, it would fit in well enough. Here’s the latest in our Creative Real Estate series:

Earth Home

As a matter of fact, if you could find a place to build something like this, it would fit anywhere. Simply because one of the primary attributes is that the home blends into its surroundings discreetly.

A few years ago, I was approached about financing what was called an “Earth Home” here in the Bay Area. It was under development in the East Bay, and the owner was looking to secure a loan post-construction. In that case, a little more extreme than this one, the home was almost entirely subterranean, with windows essentially facing in one direction, like someone had cut a wedge into a hillside and shoved a house in there. The design was amazing, but it was really an outside the box approach. (Reminds me of what was probably my favorite ever scene from the series Lost…)

If you’ve ever been involved in trying to obtain creative mortgage financing for a quirky or unique home, you might recall that one of the frequent trip-ups is when there are a lack of ‘comparable’ properties for the appraiser to develop a sense of relative value. But I digress…. take a look at this feature on the East Hampton home pictured above from WSJ Online, and be sure to watch the video inserted into the page.

Ever seen an earth home in the Bay Area? Could you live in one? Ever tried to finance one? Share your thoughts below!

Creative Real Estate: Building Homes From Reclaimed Stuff

Dan Phillips has the distinction of being one of my heroes. I base it solely on this video – it’s all I know of him. But this video demonstrates such amazingly creative and interesting approaches to real estate construction. You have to watch it.

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Similar to the previous posts in our Creative Real Estate series, this has a strong “Green” component, which is just simply a huge deal in the Bay Area housing markets.

I am particularly fascinated by the social changes that would permit something like this, or make it appealing. Only during times of extreme household deleveraging would something like this strike an accord. Along these lines, I’ve categorized this post in the “Markets” category as well the typical “Unplugged” section of the site.

What do you think your neighbors would do if you built a new roof out of license plates? How about a beer tap in the bath tub? Which ideas are your favorite? Please weigh in by commenting below!

Happy Birthday, Mortgage Meltdown!

note to RSS and email readers: please forgive a prior send of this well before it’s final completion/edit…

It’s rather amazing what is going on in the markets four years after the events that catalyzed the Mortgage Meltdown, which seemed to reach it’s critical point on or around August 9, 2007. That’s four years ago today.

When people talk about things coming ‘full circle’, it’s usually suggestive of a journey that begins in a state of equilibrium – or at least normalcy – then confronts a challenge, then overcomes the challenge. Back to equilibrium. Full circle.

In 2005, deceleration in the housing market was beginning to undermine the financial world of homeowners at the fringe of mortgage qualification. Subprime lending was an unsustainable model without aggressive price appreciation, and as year over year housing gains turned from manic toward flat, capital flocked clumsily to the market, delivered on absurd terms to individual buyers. The subprime borrower, also clumsy if not careless – or at best, naive  to rely on the capitalist machine to govern for them in consumerism – didn’t stand a chance.

It wasn’t until 2006 when the subprime mortgage market started to falter. Like an inflated balloon let loose into the room, subprime lending was moving faster and faster right until it sputtered into lifelessness. Despite warnings, banks were throwing money after more and more aggressive terms. A frustrated drunk at the blackjack table, on a cold streak, abandoning strategy and desperately pushing his remaining chips into a final bet.

Even as a few institutions began to fall out, those that remained just cranked it up, anxious to deploy capital and quickly sell the paper. Nowhere in history have so many grown adults joined together to play a game of hot potato.

Four years ago. August 2007. Federal Reserve Chairman Ben Bernanke was served on a plate with knife and fork the words uttered in preceding months, on numerous occasions, by various Fed members – and others – when describing the undulating caldera that subprime had become.

  • “Largely contained” (Secretary of Treasury Paulson 3/17/2007)
  • “Mostly contained” (Dallas Fed President Fisher 4/4/2007)
  • “Severe but contained” (Freddie Mac Treasurer Bitsberger 6/26/2007)
  • “Likely to be contained” (Federal Reserve Chairman Bernanke 3/28/2007)

Yeah ok.

Contained like Lardass Logan at a pie-eating contest. Get it? Seriously, don’t watch that; it’s disgusting.

Yesterday we had the 6th largest single day point decline on the Dow Jones Industrial Average. A credit downgrade by Standard and Poors, who (by the way thanks for nothing!) rated toxic waste mortgage debt like it was solid gold right up to and into the Mortgage Meltdown. It couldn’t be more confusing.

This mess has been going on for 4 years. We had brief moment of mild optimism, economically. Now we’ve come full circle. Back into panic and uncertainty, and most of us never had the chance to dust ourselves off.

The Chain Reaction

On August 6, 2007, a Friday, the subprime meltdown jumped the firebreak and defied containment when American Home Mortgage filed for bankruptcy. Earlier that week they failed to move a significant chunk of Alt-A mortgage paper, and in turn ran out of capital to make new loans. In the span of the week, they failed one sale, locked up, and went under. That’s how thin the ice was.

This was not subprime; it was Alt-A. A lot closer to prime than to subprime. There were no buyers at any price. The Wall Street backed mortgage market seized up, and everybody put their hands in their pockets and waited for somebody else to make a bid.

The very next Monday, August 9, 2007, BNP Paribas threw their hands in the air admitting that they couldn’t figure out how to value mortgage investments in the absence of market activity.

Just like that, it ceased being “contained to subprime”. By the next day, we had contagion. It spilled over into Alt-A, into other continents, began to infect Wall Street in and out, exposing and bringing to the public awareness the dizzying hierarchy of three letter acronym investment derivatives: CDOs, CLOs, CBOs, CMOs etc. There were bailouts and panics and takeovers, and the subprime problem turned Liquidity Crisis was now a Mortgage Meltdown. And on its way to becoming the Financial Crisis, and the Great Recession.

Reflecting From The Front Lines

That sequence of events ruined my business. Or put more objectively, my business was exposed to risk I didn’t see coming, and suffered. I chose to put my head down and plow through it, and for the most part had to restart and rebuild my business from day one. I consider this to be the completion of my fourth year in business, second tour of duty.

There was a good solid year, from the day American Home Mortgage shut their doors onward, where I was in a state of utter delusion. I can only see it looking back. Frantically trying to make sense of the markets. Trying to help clients make sense of how it affected them. There was a flurry of failed initiatives and bailout related programs for the mortgage industry, concocted by the White House, and that banks refused to participate in. Each one offered promise, and each one lead to false starts. Raised hopes for homeowners struggling to get out from under bad mortgages, and then nothing. Wasted energy. I was wrapped up in the panic as a homeowner, and as a business practitioner. Nothing to show for it. It took nearly a year of swimming upstream, before some life reemerged.

But at the same time, like so many who experience great tests, I can look back and appreciate the lessons. I’ve been forced into disciplines I never knew I needed. I’ve gained confidence in my ability to survive. And rather than give up on the trade, I’ve affirmed an interest in it. Despite the anxiety levels reached a few times, the frustration of constantly shifting regulations and guidelines, the drama, the strife, the windows into some distressful places people are in, despite all of that, I’ve enjoyed this time. There’s no question, I am stronger because of it.

So happy birthday, mortgage meltdown. I appreciate you and wish you good riddance all at once today.

Here’s A New Idea – Grow Your Home (Filed Under: Ideas That Make The National Association Of Home Builders Do A Facepalm)

Just think – you could have your very own “Meat House” (yeah, just what it sounds like) complete with sphincter doors and windows. In the latest installment of our Friday ‘Creative Real Estate‘ series, take a look at a few innovative ways we could literally grow our houses.

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This is in line with last week’s look at Building Green. In fact, I think it’s more green than anybody had in mind, even around here in the San Francisco Bay Area real estate world.

I might be up for the tree house idea, but… thoughts? Share below!

How Often Do Mortgage Rates Change? July 2011 Update

How often do mortgage rates change these days?
About every 3.1 hours.

I’ll admit, July seemed to be a lot more volatile than a review of the tape is indicating. Perhaps that’s because most of the turbulence was in the last week of the month.  We had an abysmal GDP report last week, and then of course the craziness over the debt ceiling and budget debates. On the final day of July, mortgage bonds – the instruments that loan originators monitor to keep a pulse on rate movement – wound up at their best levels of the month. In fact, it was their best level of the year.

Mortgage rates still have some catching up to do, as Friday’s move was so sudden and far, that the lenders seemed to have trouble keeping pace with the momentum. That’s typical when rates should be improving – not when they’re going up. “Up like a rocket, down like a feather” (I have no idea who said that first, but that’s how it plays out).

In July, on average, rates changed 2.25 times per day.

Mortgage rates volatility index
Frequency of lenders' mortgage rate changes per day in July

Technically, volatility was down slightly from June. But the number of rate changes does not tell you the whole story. Some of the rate changes were bigger than others, and in July, we had some big overnight moves. To conclude that July was less volatile than June would be misguided.

Rates Changed 45 Times During the 20 Trading Days in July

If you had a 30 day escrow during the month of July, that means there were potentially 45 different pricing results that you could have obtained based just on the timing of your rate lock. The average duration of a rate sheet issued by lenders was about 3.1 hours. That is up from 3.0 hours hours in June.

What About this Debt Ceiling Issue?

There are some rules of thumb in the markets that are relevant here:

  • Mortgage rates improve when bond investments are in favor.
  • Mortgage bonds often follow the direction of Treasury notes.
  • Bonds are often in favor when stocks are out of favor.
  • Both markets hate uncertainty.

None of these is universal (well, maybe the last one). In the lead up to Sunday’s debt ceiling agreement, uncertainty had become ‘priced in’ to the market values of investment securities. This includes stocks and bonds. In many regards, we are in such uncharted territory with the economy, there’s no way to predict what will come next.

For example, economists in and out of the mortgage industry thought mortgage rates would jump in March of 2010 after the Federal Reserve ended Quantitative Easing. Instead, rates fell off the ledge and hit all-time lows within 3 months. The experts are all over the map, and more are wrong than right with this stuff.

As I write this on Sunday evening, the markets appear poised for a stock market rally (a fairly significant one) and a more mild bond market sell-off. This would be consistent with the last two bullet points above. It addresses the typical relationship between stocks and bonds. And with near-term uncertainty removed from the markets they are set to react.

Could this be a good thing for mortgage rates?

There are a few reasons why mortgage rates may not really care all that much about this right now. For one, at the core of the debate is the essence of our economy – it’s kind of the pits right now. That reality is going to keep rates low across the board for a while.

Two, I’m not sure anybody really thought this debate was anything more than a game of political chicken. Everyone knew what was on the line; nobody was going to let it break down fatally. If this stock market rally doesn’t gain traction over the next few days/weeks, that’s a sign that the ‘uncertainty factor’ wasn’t really all that real.

On the flip side of this, if there was true market anxiety over the debt ceiling issue, the traditional bond/stock lever wasn’t fully intact here. Nervous money moves from stocks to bonds, but panic money moves to the sidelines, away from both. To cash, hard assets, gold, etc. We may see some relief buying in both stocks and bonds, and that will also serve as a force helping keep rates down low.

One more facet of the “good for mortgage rates” argument is that the whole ordeal with the debt ceiling, and the threat of credit downgrades for the US has direct implications for Treasury securities. Mortgage bonds are a step removed from these instruments, and while they often move in a similar fashion, the markets were getting a nervous twitch about Treasury debt, not mortgage debt.

I am sure that I’m overlooking some key variables here. Perhaps guilty of wishful thinking. I guess we’re about to find out…

How to Make the Most of it

If you speak to someone who suggests they can get you the perfect lock, that’s probably a bad sign. Market prediction on that level is impossible. Especially in the face of a market in as unique a place as ours is right now.

Similarly, you shouldn’t expect to catch the market at it’s absolute low – it’s not a realistic expectation. But a professional who can explain the market context you’re transacting in, and show you which calendared events have potential to introduce risk or opportunity to your strategy, is probably more valuable as a resource than anything else when trying to maximize your rate lock.

Make sure you get your rate quotes in the same vintage. This means that any lender who isn’t quick to reply to your inquiry isn’t really helping out. Then, make sure your lender is tuned in to the economic calendar, so that you can be aware of what days are more or less likely to be volatile ones. The market gets little economic data points or events to digest just about every day. It’s important to know which ones carry greater risk at any given time, as their significance can change with the greater context of the marketplace. The last thing you want to do is leave your rate lock open when the risk is greater than the potential reward.

Working with your lender to create a lock and pricing strategy suitable for your transaction will probably shed some light on who you’re working with, and serve you far better in the long run than comparing apples and gooseberries.

Need help with a rate lock strategy? Contact me below and tell me how I can help.

 

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    How To Build Green – Inspiring Approach and Solutions

    If you’re interested in the Green Movement, a hot topic in and around Bay Area real estate circles, I think you’ll find this video (~6 minutes) fascinating. I really like the economic approach behind the planning; there are all kinds of cost/benefit evaluations. From this angle, costs are viewed, at least in part, in terms of energy and resource consumption; the basis for “Green” thinking and planning.

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    If you have a story about green style home improvements, construction, or planning in general, we’d love to hear about it below.

    How To Chagrin A News Reporter 101

    I love Martin Andelman. I read his column Mandelman Matters periodically – not religiously, because his posts can be long. But they are so tempting – he’s a skilled wordsmith.

    Biggest Consumer Advocate In Mortgage Modifications?

    I admire his hard-core protectiveness of the consumers’ interests. At times, a bit brash, I get the idea that every once in a while, he’s in the midst of over-selling his point just for the sake of good writing. That said, I do believe he has unbridled passion for the consumer.

    He is devoutly defensive on their behalf when it comes to the core area of his focus (as far as I am aware) which is banks screwing people in the mortgage space. But often when he lets loose, there are many notes of sarcasm that serve to underscore the absurdity of the situation he’s riled up about. That’s the part I really enjoy… he is a talented writer.

    Many of his articles are about loan modification absurdities. Oh there are absurdities. But “Mandelman” doesn’t take this marketplace sitting down. He’s a crusader, persistently vocal, demanding better human-to-human interaction than what typically gets reported in the nastiest corners of this housing market turmoil. I admire that.

    “Oppression Can Only Survive Through Silence” (Monteflores)

    He recently took Carolyn Said of the San Francisco Chronicle to task for an article about homeowners who have overcome foreclosure challenges. I’ve said it before, and I’ll repeat it here – there is no shortage of tragedy in this marketplace.

    His basic gripe is that Said is far too casual in her portrayal of the bank each case. But you have to read his words. There were portions that made me feel that the reporter was getting more of a beating than she deserved. But, I’ll go back to what I said before – If Andelman wants to over-sell the point to ensure that it is clearly laid on the table, I’m fine with that.

    Got my attention.

    Follow the money, they say. It’s always good to remember who’s doing the talking and what might be in their agenda. I’m not so sure it’s as cut and dry as he makes it out to be, but he certainly got me thinking about it.

    I’ll be interested to know if there’s a follow-up.

    Is This Helping?

    Just thinkin
    Just thinking out loud...

    A recent survey conducted at Zillow has provided some eye-popping insights into the consumer’s mortgage brain trust. In short, they are wildly un-slash-mis-informed about mortgages.

    Blame The System, Not The Consumer

    It’s a full time job for me to understand this business, the marketplace, the regulatory elements, and the general process of navigating a home financing transaction. It’s nothing short of complicated. And to be fair, it’s rather boring unless you’re at that point in life where you need to go through the process – one that happens a handful of times at best in our lives (even then, to call it an enticing area of study would be a sham…). So there’s not a lot of incentive to stay “fresh”.

    I certainly cannot blame the consumer for being lost.

    However, some of the misunderstandings are notable. Most of my clients appreciate the time I take to sit down and educate them about the process so that they can make well-informed decisions. It’s not what everyone I work with wants, but my objective is to be as available to them as desired in this capacity. So these misunderstandings are notable, to me, as one who educates others about the process.

    Sometimes I get too complex, too deep, or grind over details that are not ultimately of concern to my clients. I’ve seen their eyelids get kind of heavy on a few occasions. But I’d rather be at fault for over-explaining than under-explaining something.

    Why I Do This

    This survey reminds me not to gloss over even the most basic of concepts on the assumption that they’re already understood. Much of this site’s mission is about sharing information and helping to educate the consumer when in need of guidance. Sometimes I’m here just to blow off a little steam. From the basic mechanics of mortgage borrowing to the subjective and contextual  facets of the journey each individual consumer embarks upon when exploring the idea of borrowing money, everyone is in search of slightly different information. I hope to have a little something for everyone.

    What brought you here? Are you finding what you’re looking for?