Unplugged | Bay Area Real Estate Finance

Mothball Fleet Revealed – Peek Behind The Curtain Of A Bay Area Icon

National Reserve Fleet, Suisun Bay, Calif. photo © 2009 NOAA’s National Ocean Service | more info (via: Wylio)If you remember when you were a kid taking family road trips up north, and at the crack of dawn as the family station wagon was crossing the Benicia/Martinez bridge, and your father pointed to his right and said “look kids, the Mothball Fleet” every time you made that trek, well then, just like me, the Mothball Fleet likely became a recurring family joke. I mean, we all had Griswald Family moments like that, right?

Maybe that doesn’t ring a bell. But if you’ve ever traveled over Suisun Bay on 680, you’ve likely looked out into the water and wondered what the dozens of idle Naval warships were doing there.

Well, folks, that collection of rusty, peeling-paint, barnacle-clad vessels is known around here as the “Mothball Fleet”. The Mothball Fleet is part of the US National Defense Reserve Fleet which has installations in several locations. This one is the largest in the Pacific. Apparently, despite the ghosty appearance, those bad boys are maintained and service-ready, and in fact two ships were called upon for transport as recently as the Gulf War.

If you’ve driven by, and not noticed, well, thanks for keeping your eyes on the road, I suppose. But if you’ve ever been intrigued by their appearance, you could always have taken a guided tour around the bay – I did it once. It was a birthday surprise with my family, for my father, who was utterly fascinated with the up-close inspection and historical insights given by the tour guides. (I’ll see if I can track down the contact info for that tour – good stuff.)

But now, you can get a peek behind the scenes at some of the inaccessible views of these ships, at a live showing of the work by some local photographers. It’s on May 7 at Workspace Limited in San Francisco. You can see all the details of the event on this page, as well as some intriguing historical background, sample images, and bio about the photographers.

Go check it out.

I love this kind of photography – abandoned, deserted, decrepit relics of commercial and industrial magnificence. A ways back, I pointed to a 100 photo collection of abandoned homes in Detroit MI. There are quite a few real estate related collections like this making their way around, and sometimes you just have to sit back and appreciate what you can about some of life’s less pleasant moments. Anyway – enjoy the scenery…

Freak Nasty Predicted This Real Estate Market In 1997 (proof)

Who knew back in 1997 that Freak Nasty was talking about a housing bubble?

Consider this quote as evidence – was it a clue?

“Drop down, double-up on those dips”

Following the release earlier this week of the Case-Shiller home price index, there has been a rash of articles about the Double-Dip in housing hitting the wires. While that conversation is a little big different than the much-debated Double-Dip in the broader economy – another downturn in housing will not help an economy that is struggling to recover from the last one.

Yikes. Kind of makes me feel like just throwing my hands up and dancing.

What say you, homeowner past-present-or-future? Case-Shiller looks at national figures, and 20 metro markets. But inside the Bay Area, there are hundreds of micro-hoods where different forces are at work. Even San Francisco proper has dozens. What’s going on in your neighborhood? Post your thoughts about your local market (or about Freak Nasty if that’s what you’d prefer).

Greed, Capitalism, Budget Debates and Bank Robberies – What’s Changed Since 1979?

There’s a lot of crazy in the air right now, with the impending threat of a United States Government shutdown. Politicians are in a deep, muddy ditch of negative public sentiment, and by the way: when you’re in a hole, you’re supposed to stop digging… Budget fighting is nothing new, but it seems the stakes are growing larger with ballooning federal debt, compounded by increasing fears of rising interest rates. This graphic from Planet Money helps put the dispute in perspective:

There are swelling fears about entitlement costs (crazy infographic on social security from visualeconomics.com).

There is anger over wall street titans getting rich (from Big Picture blog):

About That Shutdown and Mortgages

Anyway, this is a mortgage website. So it’s worth making a quick comment here about what a government shutdown would mean inside this space. The primary concern is with Federal Housing Administration (FHA) lending. FHA is under the US Department of Housing and Urban Development, considered a “non-essential service”, and therefore subject to some “lights out” time. If lenders cannot obtain FHA case numbers from FHA offices (part of the origination process), that will prevent forward progress on FHA transactions. Also, FHA will not be available to issue endorsements and mortgage insurance certificates. Banks seeking to make FHA loans are unlikely to do with a delay/block of this step in the process. Functionally, FHA lending could take a hiatus along with your elected representative. A shutdown in 1995 caused such a disruption with FHA lending, then a much less important sector of the Bay Area real estate marketplace. It won’t crush the marketplace, but it has the potential to stress a few people out.

What’s Changed?

This is a really interesting snippet of an interview of famed economist Milton Friedman by Phil Donahue in 1979. Phil questions the philosophy of capitalism, core to the spirit and foundation of the United States of America. As we sit here approaching 2 and a half centuries as a nation, and our fearless leaders are bickering over ideologies and the near-term direction of our teetering economy, this conversation from a different time and a different social and political and economic context is really, really interesting.

Craziness. It’s in the air today, isn’t it? What do you think about it all? Welcoming (encouraging) comments below…

SF Supervisor Sends The Bank “Jingle Mail”, Oakland Mayor Takes A Pay Cut

door key photo © 2010 woodley wonderworks | more info (via: Wylio)What do you make of this? San Francisco Supervisor Malia Cohen has entered strategic default, allowing her home to be foreclosed on not necessarily because of hardship with making the payments. It’s referred to as “jingle mail” to euphemistically represent the idea of sending your keys back to the bank by mail. The article doesn’t mention whether she demonstrated that level of courtesy.

I am sensitive to the times we live in. There is financial wreckage all around us, I understand survival instincts, and am sympathetic to the many who have been screwed, whipsawed, and browbeaten by the markets. There’s a million places to point the blaming fingers. At the end of the day, there is damage, on a wide scale and at the individual level.

But there’s also a spectrum here. And some people are in dire straits, losing their homes. And there are others who are financially stable, but are letting go of investments that didn’t work out. These cases introduce an interesting moral quandary in a paradoxical situation: what’s good for the individual is not good for the collective.

Meaning, at the individual level, default makes sense when you’re upside down. Or at least it might. We do the math, sometimes it says let go, sometimes it doesn’t. But strategic default isn’t just about you and some big evil corporation. It affects your neighbors. And neighborhoods. And collectively, the entire fabric of the US housing market. And then the broader economy. There’s a ripple effect here. More defaults lead to more defaults, when you think it through.

So what moral obligation does one have when addressing this equation individually? I first wondered about the fading social stigma associated with strategic default back in December of 2009.

What if that individual is in a position of public service, like a city supervisor? Does it change? What do you think? As an interesting juxtaposition, the first link under the article is to a story about Oakland mayor Jean Quan, another public servant across The Bay, and how she took a massive pay cut.

I’m going to leave it at that. I only wish to introduce the topic. Tell me what you think?

Guy With The Most Toys In The Sandbox Says To Buy Real Estate

John Paulson, who recently gained notoriety for making a mint betting against real estate before the bubble burst, has come out with a not-so-vague recommendation on real estate: Buy.

“If you don’t own a home, buy one. If you own one home, buy another one, and if you own two homes, buy at third and lend your relatives the money to buy a home.”

Wow. That’s fairly aggressive. I have no doubt that at some point in the not so distant future, many of us will look back on this environment and wish we bought more, bought bigger, bought a vacation or investment home, etc. Many today are parallyzed by fear, and others are restricted by tight access to OPM (other people’s money, aka financing). Or, in the case of many, they simply don’t have the resource after being roughed up by that recession that is supposedly over with.

But, I have to wonder, is Paulson the most credible real estate market guy around? Should we be listening? Or, was he lucky before, and now feeling pressure to announce it before the real estate recovery happens?

When it comes to investing, being early is the same as being wrong. So this type of statement kind of freaks me out a little.

That said, if you’re hovering over the market, waiting for it to look better, what happens if you miss the turnaround? What does it cost to wait a better condition, especially if it never materializes? The affordability index is near it’s peak. Rates are still extremely low, prices at/near their bottom. Hesitating can be really frustrating…

What’s That? You’ve Always Wondered What It Would Be Like To Have Emerged From An Egg?

Well you’re in luck, pal. Some chap in Beijing has decided to build himself – and live in – an egg.

More to the point, a house that is shaped like an egg. And to be honest, it kind of looks like about as much living space as say, a baby chicken might have, just before hatching. Yowsa!

But a few things about this are fascinating to me:

This is a clever, creative solution to the problem that many people have – access to affordable and/or ecological housing.
The design elements are incredible – it looks pretty darn cozy in there! Not sure it has plumbing, but it beats the heck out of sleeping under a freeway overpass.
Imagine being born anew each and every day, emerging from an egg. Ok – that’s a stretch. But still…

Truly outside the box housing.

The photos and story came from:

Beijing’s incredible, inedible egg house
Matt Hickman
Mother Naure Network Dec 14 2010
http://www.mnn.com/your-home/green-building-remodeling/blogs/beijings-incredible-inedible-egg-house

Economists Give Each Other Wet Blankets For Christmas

Even though I’m no economist, my brain is definitely wired that way. But sometimes the drab, dry, robotic formula-crunching path to every decision about every choice you have to make is a real buzzkill.

Take the Christmas holiday, and the associated tradition of gift giving for example. This week, three like-minded stories came into view, all very interesting, and each picking apart the economics of gift-giving to the extent that a sympathetic ear would be ready to just give up and quit.

Bah. Humbug!

Here’s a link to and description of each piece from the “boo-hiss” crowd:

Ric Edelman – Teaches you how to keep your Christmas shopping budget under control. I love Ric, and it’s his job to teach consumers to be smarter about their money. I get it. But people need to have a little fun too. While he’s charismatic for a money & numbers guy, he’s admittedly not where you go to get advice on fun ways to burn through cash. Fine. But … brrr you wouldn’t have a more frigid Christmas if you ran out of firewood last week.
WePay infographic on Mashable.com I don’t know WePay. I gather they’re an outfit that aims to teach you how to be smart with your money. Cool, fine. I really like this view of the gift “Missgivings” – they really do hit on several aspects of the holiday gift frenzy that generally get people to that Scroogy disposition. Very economic. Looking at opportunity costs, and beyond. There’s a lot of waste – your time, your money, the crowds at the stores, and the odds that you find a gift for somebody who would pay the same amount for that item – slim to none, right? Fine. But BORING!
Joel Waldfogel & the Planet Money team on NPR – devise a very clever experiment to address the situation the WePay infographic illustrates so well. It’s actually quite amazing what happens. You should listen. Waldfogel is author of Scroogenomics: Why You Shouldn’t Buy Presents For The Holidays. I have not read it, but it does sound pretty interesting (it’s that econ brain wiring, sorry). Bottom line, go ahead it if you’re looking to make excuses for not giving loved ones gifts. Booo!

The problem is, as much as I get the logic, I hate it. Gift giving is a sport I enjoy, and as much as I love to receive gifts (email me for my address, ha!) I truly prefer to give them (In this regard, I fancy myself a lot more Jack Donaghy than Liz Lemon). But only when there’s a good reason, and a good gift to match the person. Not a forced, have-to-dont-really-wanna-but-its-a-holiday thing. That’s weak.

My recipe for success with gift-giving:

Do your Christmas shopping all year. Keep mindful of people you care about, and you’ll stumble into great things that will be fun to give as gifts. Or, the reverse: Stumble into something you think is cool, and think about who would appreciate it the most.
Buy it, or bookmark it. A true economist would never pay early for something they didn’t need until later (see time value of money). And a true miser would scour the internet for every possible discount or free shipping code (takes one to know one). Whatever floats your boat. But this way you’re not left scratching your head, elevating your heart rate, or worse – not giving gifts to people on Christmas.
That whole crowded mall in mid-December thing takes on a whole different appeal if you can go and just walk around with a big wool jacket and a hot peppermint mocha. No shopping, just soaking it in, watching people ice skate, listening to the Vince Guaraldi tunes leaking out from the department stores, or playing in the square, whatever whatever. This is how you consume the season. Trust me.

This way, you don’t waste, you don’t give crappy gifts, and you don’t freak out at the malls and ruin the spirit of the season. Plus, if you actually pay for gifts a little here and a little there, you’re not going to have a credit card hangover in January…

… wishing you a merry Christmas

Quote – Got Me Thinking…

I came across this quote in a recent investment newsletter (you can read it here). It’s worth pausing on to consider the relevance in today’s environment. Not making a political statement; I’m more optimistic than this…. just waxing philosophical… let me know what you think.

“A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy…”

– Alexnder Fraser Tytler, Scottish lawyer and writer, 1770

White Collar Thuggery – "Give me your Breitling! And the Rolex!"

Financial ruin isn’t pretty. No question, the burst bubbles of the credit and real estate industries have put more than a few people out on the street. The ugly, sputtering, desperate last spasms of a business persona failing to cling on is exemplified by this story from the Boston Globe. I love the juxtaposition of the behavior – shake downs, threats, extortion – with the high class imagery of designer watches and fancy restaurants.

Another Piece of Evidence to Support the ‘Evil Banks’ Argument

Wow. This is pretty ugly. Caught on tape, here is a conversation between a real estate agent trying to facilitate a short-sale, where there are two lenders on the property.

Bank one is going to accept partial payoff, meaning they will not recover 100% of the loan out on the property. But they do get 100% of the proceeds of the sale.

Bank two doesn’t get a dime. Therefore, they have zero incentive to approve the sale, and in fact, they have an incentive not to – it helps them avoid digesting the loss on their current balance sheet.

So how do these deals get done? Well one way, as in this recording, is for the 2nd lender to bribe the real estate agent and demand that they pay them privately. Which is a violation of federal real estate settlement practice laws.

In a good showing for real estate agents, this one is clearly aware of and concerned about the conflict and the related ethical issues. Listen to how the bank administrator tries to bully them into complying.

Not pretty. Watch for more of this to bubble up to the surface and hit the news. There’s a lot of murmuring about this practice going on right now.