Part 2 of the interview with the anonymous authors of Real Cville – Charlottesville’s real estate bubble blog. Part 1 is here.
What are your predictions for the market? When do you hope/expect the market to turn?
Our answer to when a turn might take place would have been more ambiguous before the month of July. But things have taken such a turn since thenâ€”Banks failing, the Fannie/ Freddie Bailout (which we think is a sure thing), Citi writing down and selling off CDOs, Wachovia ceasing wholesale mortgage lending, the car companies with their giant losses, unemployment rising, etc. And now there’s the latest news about Alt-As and Prime loansâ€”the forthcoming wave of defaults and foreclosures that will start rolling higher in the next few years.
And we have venerable economists such as Nouriel Roubini and analysts such as Meredith Whitney projecting the decline of house values 33% or more nationwide. (Roubini link, which includes a video) Roubini also thinks 1 Trillion is needed to solve the crisis. Whitney also, in this link, comments on what’s coming for credit card holdersâ€”having open credit lines cut because banks will be concerned about defaults. (Whitney link)
It’s bad, and we think it’s going to continue being bad, and get worse, for a while. We’re hoping the market stabilizes and starts going back up, at a sane pace, by 3Q 201.
We think there’s going to be more pain locally, and nationally. Locally, we think there will be more rentals available as people pull their houses off the market. If they want to hit the coming school year, they have to do this now. We’ve actually seen a few rentals on Craigslist, over the past few days, that were recently for sale. The longer one has owned a house, the lower the rent can be, but if someone is trying to make their current mortgage, it’s going to be a toughie. Part of the issue is where a lot of the houses will beâ€”further out than the walking distance to UVa or downtown that the university’s giant pool of renters might prefer. We think there will be more foreclosures. We think there will, unfortunately, be more sellers who realize that they’re going to have to take a loss, perhaps a significant one, to get the property off their handsâ€”so they don’t incur an even larger loss by holding on even longer.
What are your names? What are your respective backgrounds? How long have you been in the C’ville area?
Our names are Jane Doe, John Doe, and Snarky Doe.
One of us is a native. We all went to UVa in some capacity, either as undergraduates or for graduate school. A variety of disciplines. We’ve lived here and in large metropolitan areasâ€”DC, NYC, Chicago. We’ve worked in the arts, for a major corporation, in retail, in politics, for a federal agency, and as a state employee. At least two of us have jobs w/serious time commitments, in which we’re heavily involvedâ€”otherwise, we’d post more often. One of us has lived here continuously for the past 15 years; the other two, for five and seven years.
Is this your first blog?
For one of us, it’s the first. Our galpal (which, by the way, is her term of choice; she says it’s so PI that it’s PC) contributes to several blogs. The third of us has contributed posts to other blogs, on sports and politics, but never maintained one
What have you learned since you started blogging?
We’ve learned a lot about the blogosphere, which has a different “feel” when you’re blogging vs. reading vs. commenting. It’s huge, people have specific agendas, very specific ways of communicating, and it’s a 24 hour world/ existence unlike and separate but vaguely linked to “reality.”
We’ve learned that blogs and blogging can be fairly addicting. We recently read in the NYTimes that 11% of female internet users maintain blogs, and 14% of men do so. In terms of content, we’ve learned about the extraordinary number of people out there who are seriously pissed off about the housing marketâ€”owners and non-owners alike. That there are equal numbers people whose greed got them into a bad position as there are people whose lack of education hurt them. And that there were lots of people making money off buyers. It’s hard to believe there haven’t been more criminal prosecutions. Perhaps there will be. Or more civil suits. This is probably the coming waveâ€”the civil suit against banks, mortgage brokers, etc.
We’ve also learned how little we actually knew about money, investing, and the housing market. And this, after years of owning houses (for at least one of us) and investing in the stock market and having various retirement accounts set up through employment and on our own. Most importantly, we’ve also learned more than we ever thought we would about neighborhoods and houses in Charlottesville. There’s a serious problem here. It’s not just what is usually referred to as “Affordable Housing”â€”making owning possible for the working poor. There’s a big problem of affordability for middle-class and upper-middle class future owners, as well. Prices have gotten so high that you need gobs of money to own a home. As Habitat C’ville points out, if you don’t already own a home, you need to make at least $80K annually before you even have a hope of owning something “modest.”
What this does to middle class families (without the benefit of serious investment income or family money) is force the need to either live on credit, or to have two incomes. And we’re traditional enough to think that having both parents away from children when they’re very young is a big mistake. Day Care is not the same as a parent or member of the extended family (very controversial to assert this, nowadays). Yet that’s typically what happensâ€”both parents have to work in order to purchase, or keep, a house.
If you had the proverbial magic want, what would you do to sort out the current market?
To start with, we’d go back in time. We’d get rid of Alan Greenspan early in his tenure. We would somehow have prevented the previous Bubble, the Internet lunacy, from ever happening. This primed expectations for lots of money fast. We would never have allowed the FOUR TRILLION DOLLARS of money, based on nothing, TO BE PRINTED. We would have instituted serious regulations all over the financial markets. We would have leaned on or strangled all of the Rating companies that gave sub-prime CDOs high marks so they could be bought. We’d put Warren Buffet and George Soros in control of the Fed and the Treasury. Better yet, we’d make them co-presidents. If we had control of banks and mortgages right now, we’d freeze every mortgage in default and foreclosure, for 90 days.
We’d hire lots of the finance folk from Wall Street who have gotten the axe in the past year to come on board at the banks and mortgage lenders and get every single mortgage loan in peril sorted and back on track. Meaning cutting the amount owed to a more “realistic” valuation, fixing a lower interest rate, getting rid of ridiculous fees and usurious add-ons. This would take less money, we believe, than the BILLIONS in bailouts that are going to come from the wreckage already in the pipeline. If private companies and GSEs can be bailed out with taxpayer money, we think the taypayer should be bailed out this way. There should be emergency sessions of Congress on this.
And “moral hazard”–? Nobody’s ever going to make mistakes like these againâ€”at least not for the next 75 years. We’d turn all unfinished “new construction” here in C’ville/Albemarle into “affordable housing” and “arts housing.”
Anything else you’d like to add?
We may seem callous at times on the blog, but we are actually sorry for the pain the market has caused and will continue to cause. Besides homeowners losing money, there are all sorts of people related to the housing industry who are suffering financially, many of whom have or will lose their jobs. It’s a turn of events that could and should have been avoided. Some people “deserve” whatever pain they have; many don’t. On a different topic, we think the Breedens are the luckiest folk in the county, having received hefty $ for their property. We don’t think the planned development of Biscuit Run will ever be built to the scale of the original plansâ€”which is a good thing. We think that this is a great time for a new housing paradigm to emerge in C’ville, and we hope people become more activist. We encourage everybody we know to register for and actually vote. This is a crucial election, and every voice really does count, especially in the Commonwealth, which will be a serious “player” in November.
* Ed. Note: Most of the links were added by me
Editor’s note: Contrary to rumors, I’m not the bubble blogger.