I think one of the best ways to measure if your blog writing is effective, are the nature of the comments that result. When it gets to the point that the conversations within the comments becomes more thought-provoking, engaging, and stimulating than your original article, you know you've struck a chord!
I help maintain an outside blog, SOUNDBITEBLOG, that I co-author with fellow-Rainer, Mark Flanders. I recently posted an article that has attracted some healthy interaction, including a visit by a fairly well-known 'Bubble' blogger here in the Seattle area. I thought I would share an excerpt of our dialogue:
Official SBB Devil's Advocate wrote @ January 13th, 2008 at 2:36 am
Watch the banks.
People overpaid for homes for several years, and the banks enabled this. The securitization of mortgages is going to end up as a stick-figure of it's former 600# self, because the banking industry will experience the consequences for not doing its due dilligence and promoting wholesale fraud.
Homes are worth what people can pay and thier expectations of financial return. When banks have an endless supply of money to throw at housing, and people have a high expectation of tremendous financial return, home prices go up dramatically.
If the banks can no longer securitize, and they demand 20-30% cash down payments, while people reasonably expect home prices to continue to fall 10-20%/year, home prices will fall dramatically.
No place is special or immune from these phenomena. Kitsap is a middle-class community, and home prices need to reflect that. Pretending that we are immune from economic reality will only make those who participate in that fantasy unexpectedly poor and destitute.
Countrywide was "saved" to prevent the actual market value of securitized mortgages from having price discovery. Had that occurred, securitization would have ended immediately, and the chain-reaction of cross-current financial defaults in the US banking system would have reached critical mass.
Yes, that is how depressions start. This is, by no means, over.
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Sparky wrote @ January 13th, 2008 at 11:07 am
Devil's Advocate: We've missed you! I agree with several of your points. But I'm curious...is your whole purpose of existence to simply sit back and tell everyone "I told you so" when the financial world eventually implodes? What exactly do you expect the common home consumer to do? Live in their cars and pray for a quick end? My whole point to this article was to provide some measure of balance to what the media naysayers are promoting. Kitsap County is NOT immune, but it's NOT Florida, Stockton or Detroit.
I would imagine that you probably own a bomb shelter and regularly require your family to conduct ‘duck & cover' drills?
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Official SBB Devil's Advocate wrote @ January 13th, 2008 at 9:28 pm
Sparky,
It is nice to be missed. My point is not to come over here and shake the cage for my personal amusement, but to help provide some balance to people that have never considered that real estate might be a financial millstone in their lives.
No, I am not interested in any "I told you so" vindications. If we get what I think we will get, people will not be interested in anyone doing a victory lap. The hardest part of going against the crowd is learning to bite your tongue more than letting it fly.
My goals are to provide for my family while avoiding unnecessary risks and trendy hazards.
What do I expect the common home consumer to do?
The time for prudence is starting to pass. I live in Kitsap with a family and I seem to get by just fine without owning a home. We don't live in our van. I've got 2 acres on the beach and it costs me about 1/3 of what it would cost me if I rented by using the intermediary of a mortgage. Why the living options seem to fall into the binary possibility of "owning" or being homeless is something that I just don't have the sophistication to understand. I seriously question the wisdom of Kitsap homeowners who are pressing their bets on a turnaround in residential real estate. My guess is they will be ruined if they can't continue to meet the payment structure of their mortgage. Those that can will be taking paper-profit losses in the neighborhood of 60-80%. Yes, you read that correctly.
Also, there is absolutely nothing the government can do to amelioriate the situation. Economic reality is just that - reality.
Yes, the informal financial caste system we have established puts me on the verge of being an "untouchable," but I seem to be just fine. That extra $3500/mo that I save, along with sidestepping the capital depreciation of "my largest investment" makes me sleep very well. Not having a 7% transaction cost is also a plus. By the way, that $3500/mo is tax-free.
While we are not Florida, Stockton, or Detroit, we could still lose a huge amount on the homes we all own. Incomes in this area are low. Even Bainbridge incomes don't justify homes at half the price they are currently selling. One thing we all need to keep in mind is that Florida, Stockton, and Detroit all use the same banking system we do to finance our homes. Be careful before you look down your nose at other parts of the nation. Stockton has many foreclosures because it is severely overpriced...just like us. Don't confuse timing with immunity.
Regarding the "measure of balance," to what the national media is saying about our housing market and finance system...
I can assure you that the national media is being extremely dovish and is not reporting 90% of what is really happening. There are many reasons for this. The most obvious is that most Americans are preoccupied with their personal amusements and don't have time to follow dry subjects like finance. Also, those that write the news don't want to confront the realities of their own endangerment, and finally we like to always believe in a better tomorrow. After all, who likes for people to think of them as digging bomb shelters?
I do enjoy the avuncular nature of your blog, and the fact you have given me an informal "official" status here.
All the best,
OSBBDA
I find it interesting that this person doesn't own his home, but I bet someone does... Has he thought about that? If everyone followed his advice and rented and never bought, well, what would we be renting?
Also, where does this person get the idea that you need 20 to 30% down these days? Not true. Owner occupied with decent credit can still get 100% loan to values, and 95% loan to value mortgages are easy to come by, even for non-owner occupied homes. Does this person actually follow our market?
I'll hop over to Soundbite shortly..... :)
Rich,
OSBBDA certainly is rather eloquent in the way he expresses his contrarian views!!! I hope he becomes a 'first time homebuyer'! Thanks, Fran
Rich - One of my favorite things about Blogging is the threads and conversation that goes on thereafter. A good exchange is fun to watch.
Rich, I liked the initial blog. I would have not used the term Banks but something that encompassed all financial enitites that like to lend. Pressure was applied all the way up to the Feds to allow the type of financing that allowed home prices to outpace income. Those entities that were willing to take a higher risk lost in the end when the house of cards started to fall. And yes, in general terms, we all stepped on the band wagon; the guick return by investing in property. Personally, I am not sure the purchase of Countrywide was a good idea. This will create a giant in the banking/mortgage industry. On the other side, for those who are heading for forclouser, maybe Bank of America's deep pockets can help prevent this loss.
You are right about how to asses the effectiveness of a Blog. When people discuss, evaluate, disect topics, ideas, etc. we all learn. In any discussion, we need to know not only are views but all views.
question. how do you reply to all the blog comments? do you just keep track of the comments and write a new comment?
Rich:
Are you sure there are no "stupid questions?" ... cause this raises more questions for me than it produces answers. Then again... to question is a good thing, I think, rather than continuing uninformed and in the dark without a clue. Thanks for the interesting post.
Interesting exchange Rich. I too remain uncertain about the BoA purchase but I welcome the healthy discussion of things. The more I read the better informed I am and it makes me wonder about all those doing business now who have buried their heads in the sand and just don't want to know.
-Colleen
Hi Rich,
I like the way your commenter writes, and what he says should be seriously considered. If rents are that far below mortgage payments in the area he would seem to have a point. I can't imagine that there is that much difference however.
I don't believe that buying is for everyone. We need to give people sound advice and part of it should be that it may not be good for certain people to buy. It depends on the stability of their income, their future in the area and their comfort level with debt.
I better go over to the soundbitblog and take a look.
I really wna appretiate this guy for what he has done. He has provided a good collection of threads. all of them are my favourites.
johnrocks
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