Archives
March 2008
Mar. 31, 2008 - Does Anyone Need a Free Widget That Keeps Your Web Visitors Up To Date On Mortgage Rates - Or How I Wasted My Last Several Weekends
A while ago I set out with a mission. Kind of like when james bond has a mission and climbs on a plane in midflight to stop someone from blowing up the world. Anyway my mission was a little more boring. Basically I wanted to automatically post updated mortgage rates on my website. I thought it would take a few hours. I ended up getting way to obsessed with it and spent way too much time on it. Anyway in the spirit of active rain, which I think is about sharing ideas and thought, I figured this would be my contribution and anyone that needs the mortgage rates widget is free to use it. Here is a page I set up that describes how people can post mortgage interest rates tool on their website.
I posted about it last week over here http://activerain.com/blogsview/444644/Does-Anyone-Need-a.
Anyway I wanted to post an update. First off, after ignoring my wife for several weekends, while my obsession with mortgage rates grew I did indeed take the advice of rainers and finally took a break and take her out. Definitely good advice. And we saw a few friends we had not seen in awhile.
Anyway after that I posted some small updates to the tool and wanted to see what people thought.
Here is the old widget
Here is the new one
Basically I put in lines so it was easier to read the graph. I also made the lines a little thicker because that seemed to look a little better. I also took out the text at the bottom. Anyway I was wondering if people liked the old version better or the new version.
Ki is a realtor in Austin. He has written two little widgets. A free mortgage calculator and a Mortgage rates widget. When he is not doing all of that he is helping people interested in Austin Real Estate
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Mar. 29, 2008 - East Austin Studio Tour
With East Austin’s affordable housing prices and close proximity to downtown, it’s long been a hub for Austin’s musicians and artists. Over the years the different artists in East Austin started to work and collaborate with each other. Over time this has turned into an event called the East Austin Studio Tour. This allows for artists to see what other people are working on and a chance for people to purchase art directly from the creator, in addition to seeing the studio where the pieces are created. It also allows the artists to get their work viewed by a large audience of interested people and potential buyers. This kind of grass roots endeavor is one more way Austin attempts to keep true to its slogan of “Keep Austin Weird”.
One weekend in November each year, artists open their studios to the public during the East Austin Studio Tour. Each year, over 100 studios, and more than local 200 artists, will be participating on November 17th and 18th. There’s a wide variety of people, styles and mediums on display.
The Bearded Lady and Obsolete Industries have been providing silk screened delights to the Austin community for years. Album art to gig posters, t-shirts to wrapping paper, these businesses do it with flair.
Mark Macek and Brian David Johnson, two members of the splinter group coop, are master woodworkers. Macek now teaches Woodworking and Furniture Design at The University of Texas School of Architecture, and Johnson sells his uniquely designed tables at the local upscale design store, IF+D.
If it comes giant sized, Blue Genie Art Industries is likely behind the project. They’ve painted murals that cover the entire building of the Austin Children’s Museum, as well as creating an 8 foot tall black-eyed pea for “First Night, an Austin’s New Year’s Eve event.
The Austin Metal Authority cranks out iron and steel the old fashioned way- with fire, an anvil and a sledgehammer. Hand forged headboards, iron gates, and swords pour out of their shop.
Touted as a “Must See Flagship Venue”, the Pump Project Art Complex is a collective of over 30 artists. Along with hawking their wares, artists will explain their artistic techniques, demonstrate tools used in creating the art, and discuss their recent works. The Austin Figurative Gallery also houses a wide variety of local artists, skilled in painting, illustration and a variety of mixed media.
The East Austin Studio Tour lists all the studios and their locations in the weeks leading up to the tour, along with the most bike-friendly routes to take (a highly encouraged mode of transportation between studios). Picking up a piece or two straight from the artists themselves, not only helps out the local art community in Austin continue to thrive, it’s also a great way to get more insight on a unique piece of art that a store purchase just can’t provide. Its also a great way to be exposed to a number of different Austin artists and to view the projects they are working.
Ki is a realtor in Austin. He runs a site with a search for homes in the Austin MLS along with providing information on Austin real estate. He posts updated monthly stats on the market on his Austin real estate blog.
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Mar. 29, 2008 - Does Anyone Need a Free Widget That Keeps Your Web Visitors Up To Date On Mortgage Rates - Or How I Wasted My Last Several Weekends
It started off simply enough. I had been updating site by hand to keep mortgage rates up to date. So I wanted to create a widget that would automatically update my website with current mortgage rates. Sounds easy enough right? But once I got started I just kept going. As long as I was putting in 30 year mortgages why not put in 15 year and 5 year and 1 year arms. I mean as long as I was doing it.
Then I discovered I could graph rates. How cool was that!
Not very cool according to my wife. And every new instance of "oh look at this" was meeted with "I thought you were finished with that last weekend". Anyway once I discovered I could graph rates why not create a tool so I could look at historical mortgage rates then I could look at rates back until the 1970's. Sweet. I mean it wouldn't take that much longer? Right? Ok well maybe it did take that much longer. But it was kind of cool. And then as long as I had a tool why not put in toggles so you could look at mortgage rates over the last few years but you could also switch the graph to see what the mortgage would be on a 200k loan for the last few years. I mean thats kind of interesting?
About this time I had realized this was all getting kind of ridiculous. And my wife was kind of doing ok considering I was ignoring her for a mortgage rate graph but I wash kind of pushing my luck.
So anyway now I have a little widget on my homepage that automatically updates each week with current mortgage rates. So to justify my time if any Active Rain members want a widget on their page with updated mortgage rates I wrote a page here Mortgage interest rates that gives details on how to install it on your site.
Ki is an Austin realtor. He helps buyers interested in Austin real estate and provides a free search of the Austin MLS along with information on his Austin real estate blog
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Mar. 28, 2008 - Why as a Listing Agent I Prefer to Work With Buyers With Buyers Agents
More times than I can remember I had a buyer interested in a property think that I would be thrilled when I found out they didn't have a buyers agents. I'm not excited. In fact I would prefer that they had a buyers’ agent. Here are the reasons why:
1) Liability - There is more liability for me if the buyer doesn’t have a buyers’ agent. While some agents prey on unrepresented buyers knowing that they don't deal with home transactions on a full time basis, I don’t think that is the best way to do business. But without a buyers’ agent, there is still a greater chance that the buyers won’t understand aspects of their new home. And unrepresented buyers are more likely to be miss important details that they will get angry about later on.
2) Workload - Dealing with another agent lowers the workload on me substantially. I am dealing with someone that knows the contract process and the expected behavior. When I have to deal with an unrepresented buyer, I have to spend a lot of time explaining the process to them. It’s more difficult because unlike my seller the buyer typically doesn’t trust me because I am working for the seller. And because some listing agents prey on unrepresented buyers, it makes sense they don’t trust me. So I usually end up spending much more time explaining the process to a wary buyer, especially when he / she bought a house in a different state or has not bought a property in a few years. In this case, any differences between what I am doing and what they experienced previously are met with suspicion.
3) Likelihood of the Deal working Out - In my experience, deals with unrepresented buyers are much less likely to work out. During the inspection a good buyers’ agent can explain the difference between serious issues that need to be fixed vs issues that are normal. Unrepresented buyers typically get a list from an inspector and become overwhelmed and back out of the contract. Or they expect the seller to fix everything on the inspectors list because they don’t understand what is important. And in this case, the seller usually refuses and the deal falls apart.
So when I get two offers for the same price I usually tell my seller that the offer with the buyers’ agent is more likely to end up closing. The obvious question is why don't I favor the offer without a buyers’ agent considering I will make more money? While this is true, my view is that I will have to do substantially more work, with more liability, and the deal is more likely to fall apart, meaning I did all this work for nothing and I am back where I started out - a house on the market with no offer. So it’s generally better for me and my client to accept an offer with an experienced buyers’ agent working on the other side of the transaction.
Ki is a realtor in Austin. His site has a search of the Austin MLS and provides information for buyers on the Austin Texas Real Estate market. He also provides updated real estate statistics on his blog about Austin real estate.
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Mar. 26, 2008 - Filmmaking in Austin
For a long time, Austin has been considered the “Third Coast” in the film industry, with more filmmakers on the rise in Austin, and more Hollywood types coming to Austin to shoot their movies.
One of the biggest proponents of the up and coming filmmakers is UT’s Radio-Television-Film department. Though the film courses are a challenge to get into, with many vying for a slot and low numbers of students per class, many consider the red tape worth it, as UT has become a highly regarded film school, comparable to UCLA or NYU.
Though UT’s film school is on the rise, Austin is still not the heart of the movie industry, but some graduate students have taken it upon themselves to get UT’s student films in from of Hollywood big shots, and created their own film festival called CinemaTexas. The award winners of the UT student film festival, with help from prominent UT alumni, get their movies screened before the Director’s Guild in Los Angeles, solidifying CinemaTexas as a true festival.
In 2003, the University of Texas Film Institute (UTFI) was set up. Not only does it help students keep up with the newest film technologies, but it is also partnered with Burnt Orange Productions, allowing students to participate directly on feature length big budget independent films.
Some local budding filmmakers looking to gain some skills, but not deal with UT’s bureaucracy find themselves enrolling at Austin FilmWorks. Their 14 week-long course is taught by former UT professor, Steve Mims. When Robert Rodriguez couldn’t get into UT’s film school due to a low GPA, he turned to Mims’ classes for insight, and considers him a crucial influence on his filmmaking skills.
In the mid 1980s, local filmmaker and creator of cult hit Slacker Richard Linklater, helped create the Austin Film Society as a non-profit educational organization. Though the organization began strictly as a film appreciation group, today the Austin Film Society holds their own filmmaking camps for Austin’s youth, has discussion panels with experts in different aspects of moviemaking, and offers an internship program.
In 1999, Richard Linklater, Robert Rodriguez, and other movie making heavy hitters approached the Austin City council explaining that Austin was becoming a moviemaking hotbed which could lead to several million dollars for the city. Linklater and Rodriguez went on to point out that office and studio space was hard to come by, due to Austin’s constant popularity and the tech boom of the time. In November of 2000, the Austin Film Society leased the old Robert Mueller airport from the city for a mere 100 dollars a year, and has turned the old hangars into official sound stages called Austin Studios.
Sandra Bullock was the first to bring Hollywood to town with her Warner Brothers movie “Miss Congeniality” which used two stages for 5 months. Since then, several feature length movies have been shot at the studios, as well as documentaries, television commercials, music videos, and photo shoots. With over 100,000 square feet of production space, and a tolerance for productions at any budget level, the Austin Studios have become popular among multimillion dollar blockbusters and local low budget creations alike.
With the variety of filmmaking options to local Austinites, and the amount of high end productions coming into town, the possibility of becoming a filmmaker, or running into a Hollywood movie star, are ever increasing.
Ki is a real estate agent in Austin. His site has a free search of the Austin MLS along with background information on Austin real estate and downtown Austin condos
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Mar. 26, 2008 - Bear Stearns and the New Federal Reserve
On March 14th, Bear Stearns, the fifth-largest investment bank in the United States, entered a period of insolvency. As growing lack of confidence in the firm's subprime exposure grew, other banks eventually refused to lend to the stricken company, which has existed for over 85 years. Were Bear Stearns a commercial bank, (i.e. institutions that loan money to people or businesses) it would be able to, as a last resort, take advantage of the Federal Reserve's so-called "discount window," thus receiving a government loan at the lowest available interest rate. The reasoning behind making loans to private businesses is sound, because overall confidence in banks is much stronger. But for equally obvious reasons, the discount window cannot by definition extend to institutions that take on risk as their business because they have less or no accountability to taxpayers.
However, after Bear Stearns seemed on the brink of collapse, everything changed. Bear Stearns shares began to falter as investors took flight. The Federal Reserve took decisive action to save the beleaguered bank by guaranteeing a $30 billion loan to their biggest competitor, JPMorgan Chase, so they could buy BS without fear of acquiring more dangerous subprime mortgage-related debt. In effect the government has now bought a troubled investment bank for pennies on the dollar, (their first offer was $2 a share, when BS traded at a high of $170 a year ago) knowing that taxpayers might have to foot the entire bill themselves. At the same time, the Bush administration has maintained that no government bailouts would extend to the financial sector. Moreover, wealthy BS shareholders balked so much at the firesale of their investments that the Fed, under pressure from potential litigation, increased the bid for BS by five times, to $10 a share. This means that, while the potential losses will be felt by millions of taxpayers (many of whom are in danger of losing their homes to foreclosure), while profits will most certainly be reaped by the corporate executives at JPMorgan.
Even with its exceptional exposure to subprime securities, BS is still worth well over a billion dollars. Profit-taking was the name of the game on the heels of the announcement, as day traders bought up huge amounts of BS stock at $2 or $3 a share and sold after the bid increased. By taking responsibility for the BS takeover, the Fed has changed the course of America's financial future. By guaranteeing the discount rate to BS, they implicitly must be able to do so for other investment banks in trouble in the future, which implies continued taxpayer absorption of Wall Street failures without any corresponding kickback from banks. Unless the Fed intend to rein in on banks more as the economy struggles through the recession, this policy clearly demonstrates a dramatically different view of finance than the Federal Reserve of 1913, when there was a real discount window you could use to keep your bank alive. Now, it seems, the most secure economically secure institutions are those most separated from average American lives. Politicians who recognize the increasing resonance of populist messages in the present climate are sure to turn this takeover into a major issue.
Ki works and lives in Austin Texas. As a realtor he helps investors interested in Austin real estate. His site provides a search of the Austin MLS for visitors along with a Austin real estate blog to keep people up to date on the market.
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Mar. 24, 2008 - A History of Some of Austin's Oldest Hotels
Many of the historic buildings in Austin are either privately owned, have been turned into modern-day businesses, or are open to the public in the form of museums. Luckily for those looking to actually live in such a building, even if for just one night, both the Driskill hotel and the Stephen F. Austin hotel are waiting downtown.
In 1886, cattle baron Jesse Driskill purchased the land, and built the Romanesque Driskill hotel in the heart of downtown Austin. Driskill, who had provided beef to the confederate army throughout the civil war, found himself fairly wealthy, and spent $350,000 on the building, and an additional $50,000 on furnishing his upscale hotel. Unfortunately for Driskill, the $2.50 to $5.00 per night charge was out of reach for most staying in town, and well over the 50 cents per night fee that most other hotels were charging at the time. A year after opening the hotel, Driskill had a cattle-killing drought which wiped out most of his savings, and he sold the hotel to his brother-in-law Doc Day in 1888 (though rumor has it the hotel was lost in a poker match).
The hotel went through a variety of owners throughout the 20th century, and in 1969 when a large renovation fell through, most of the hotel’s furnishings were sold, and the hotel was scheduled for demolition. Austin, being a city to stand behind a good cause, ended up raising $2 million dollars to save the historic hotel, and Braniff International Hotels purchased the building in 1973. In 2005, Lowe Enterprises purchased the Driskill for a reported $55 million dollars, and currently runs the hotel.
For Austinites, and those visiting Austin, staying at the Driskill is a treat, with many old furnishings, and its original upscale opulence still intact. With suite rates hovering around $2500, some might opt to take in the Driskill’s beauty while sipping on a cocktail in the lounge or with a nice dinner at the Driskill Grill. The Driskill is also considered one of Austin’s most haunted places. Though the current owners don’t like to advertise this fact, a quick check in with the concierge will get the curious a list of supernatural tales about the old building.
Just a few blocks from the Driskill lies another of Austin’s grand hotels, the Stephen F. Austin, at the corner of East 7th Street and Congress Avenue. This landmark hotel opened in 1924 to bring more lodging to town. What started as an 11 story hotel quickly grew to 16 stories on the site of the old G.A. Bahn Optical and Diamond Co. and the Keystone Hotel. Much like the Driskill’s elegance, the Stephen F. Austin was decked out in granite floors and marble staircases, oriental rugs and Italian chairs.
Though the hotel has had its share of owners over the years, the hotel still holds many of its original features, though each owner has added their own flair. In 1997, the hotel’s owners Highgate Holdings, brought the Stephen F. Austin back to its original opulent state by following the original architectural plans of the building. Now the hotel is a mix of turn-of-the-century charm, and state of the art amenities, drawing a similar elite crowd as the Driskill.
Today, a table at the second floor veranda overlooking Congress Avenue is hard to come by, and was once the area where oil and cattle deals were made. Also the hotel’s restaurant directly below the veranda, the Roaring Fork, adds their own Texan twist to many upscale menu items, such as grilled jalapeno shrimp and green chile macaroni.
Both the Driskill and the Stephen F. Austin provide a chance to relive the ritzy past of the city, whether staying in a room or just stopping in for a drink or a bite to eat.
Escapeso Realty works in Austin and helps buyers interested in the Austin real estate market. Their site has a free search of the Austin MLS along for a tool that provides current mortgage interest rates
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Mar. 24, 2008 - Austin real estate Statistics for February
The statistics have been released for the Austin real estate market. It looks like prices are basically flat compared to last year which is better than most parts of the country.
Here is a breakdown of the statistics for the last few years.
Ki a realtor in Austin. He runs a site with information on the Austin real estate market which has a search of the Austin MLS. He posts up to date Mortgage Interest Rates on his website.
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Mar. 22, 2008 - Why the FED is Having Less Influence over Mortgage Interest Rates
In the past when the Federal Reserve cut the discount rate it translated into lower mortgage interest rates for home buyers. This was a convenient way for the Federal Reserve to stimulate the economy during economic slowdowns. By making it easier for people to get loans more cash was pushed into the economy.
But the recent discount rate cuts have failed to have a similar effect. In fact the spread between mortgage interest rates and the discount rate is the greatest in 20 years. Although the Fed has cut rates 3 time in 2008, going from 4.25 to 2.25, if we look at a mortgage rates graph over the same time period we have failed to see much of a change. Two explanations have been put forth to explain why our current situation differs from what we have seen in the past. The first explanation is that the banks are facing almost 200 billion in losses from their misplaced bets on subprime mortgages, and are sticking with high interest rates to offset some of these losses. The other explanation is that banks still see a downside in the real estate market and are attempting to limit their exposure.
Considering that the mortgage industry is comprised of 1000's of people I doubt either of the views is completely accurate. Additionally, considered how short sighted the mortgage industry was in their foolish bets on subprime mortgages during the boom time I think partially the mortgage industry is simply reacting. During the boom time the mortgage industry reacted by competing with each other to create more and more bizarre loan products to allow people with poor credit to receive loans, in order to gain market share. Now that the real estate market is doing poorly the mortgage industry is spooked and is reacting by limiting access to loans.
Is there a light at the end of this tunnel? It's hard to tell. The latest Fed cut from 3 to 2.25 received a positive response from the market as interest rates fell from 6.13 to 5.87 the following week. But its anyone's guess of whether this is a temporary blip or a sign that the mortgage industry is comfortable with the current spread between mortgage interest rates and the Fed's discount rate. If the later is the case future rate cuts should have a more favorable affect on pushing down mortgage rates. While this won't cure the current woes in the real estate market it should help alleviate some of the problems.
One thing that does seem more likely is that if the real estate market continues to suffer the Fed will continue to cut rates. The current Fed Ben Bernanke chairman gave a speech before the subprime crisis detailing out how the Fed failed to respond strongly enough during the events which led to the great depression and seems determined to not make the same mistakes. In fact, in an unprecedented move the Fed injected over 200 billion in the credit markets last week its clear the Fed is committed to doing whatever it can to cure the credit/mortgage crisis. If the banks start reacting to the rate cuts the Fed might be able to succeed in their mission to take a stronger role in preventing an economic recession.
Ki is a realtor in Austin and runs a site with information about Austin Tx real estate. He also wrote a mortgage rates html for websites to keep visitors up to date on mortgage rates trends along with a free mortgage calculator
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Mar. 22, 2008 - Mortgage Interest Rates Fall
autoupdating mortgage rates widget
Mortgage rates fell this week. 30 Year mortgages fell from 6.13 to 5.87. 15 Year rates fell from 5.6 to 5.27. It looks like lenders are trying to stay away from ARMS due to the heavy losses they are taking from ARM's from foreclosures. Although rates did not fall as much as the .75 points the FED cut the discount rate by last week but its encouraging that rates did fall somewhat as the last few FED cuts in 2008 failed to push mortgage rates down.
Ki is a realtor in Austin. He runs a site with information on the Austin real estate market. He also writes a Austin real estate blog. He also recently wrote a Mortgage Interest Rates Widget
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Mar. 21, 2008 - Why I Hate 40 Year Loans
During the subprime crisis we saw the advent of numerous bizarre loan products. In general the new loan products were designed to get people into houses they could not normally afford. As people started to default on their mortgages banks realized many of these loan products were not a good idea. During the subprime crisis we saw most of these new loan programs fall to the wayside. I think in most cases this is a good thing. Many of these new loan products reduced the chances that individuals could gain equity in their homes by paying off principle. When difficult times arose for people they were in a difficult position because although they had made years of payments their loan balance had not changed. The worst of the new loan products had "teaser rates" so that individuals made low payments for a few years until the rate and their mortgage shot up. Its a wonder why banks are surprised by the number of foreclosures.
The one product that has seemed to survive the subprime meltdown is the 40 year loan. I am not a fan of the 40 year loan. Mostly because the savings are minimal. Lets look at the current mortgage interest rates from Wells Fargo for a 40 year, 30 year and 15 year loan.
40 Year Loan = 6.375
30 Year Loan = 5.75
15 Year Loan = 5.125
Now using a mortgage calculator lets look at the mortgage payments on a 200k house.
40 Year Loan = 1153.14
30 Year Loan = 1167.14
15 Year Loan = 1594.64
While the difference between a 30 year loan and a 15 year is substantial, $441.50, the difference between a 40 year loan and a 15 year loan is only $14 per month. A little savings but is it really worth adding a whole extra 10 years to your mortgage. So over 30 years $14 dollars a month amounts to $5040. On the other hand an extra 10 years of mortgage payments comes out to $138,377. To run the numbers a different way by putting down a mere $2400 on your 30 year loan you would get the same mortgage payment as you would on a 40 year loan.
Obviously everyone's situation is different and in a small number of cases a 40 year loan might be warranted. But in general the 40 year loan adds extra years to a person's loan for a minimal benefit.
Ki works as a realtor in the Austin real estate market. He provides updated stats on the market on his Austin real estate blog along with a free search of the Austin MLS.
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Mar. 21, 2008 - Subprime Woes Reach New Heights
As the sub-prime mortgage crisis continues to unfold, new figures emerge from the Mortgage Banker's Association: A record .83. That means that, in three months, almost one out of one hundred homeowners have been foreclosed on. Because of America's size and diverse population, the statistics are somewhat skewed: In many places like Austin, Texas and New England, growth remains steady and house prices remain strong. However, in placed like Cleveland, Ohio and other pockets throughout the Midwest, foreclosures are much higher. One in every three mortgages has defaulted recently in these smaller, white-collar towns due in large part to predatory lending, as well as increasing energy costs.
But the other half of the subprime crisis plays out on Wall Street. As investment banks like big player Bear Stearns fail and the credit crisis remains, markets are pinched for investors in sub-prime securities, which have worked their way into the larger economy through such complex financial instruments as Structured Investment Vehicles, or SIVS. These entities don't consist of money per se, but "commercial paper," and therefore aren't reflected on a balance sheet, making them difficult to track.
As the Federal Reserve continues to slash discount rates, mortgage interest rates remains stubbornly above historical levels, meaning that credit is not available to banks in quantities that can allow cheaper home loans. By hoarding cash, banks are less likely to spook investors or lose needed capital. But by doing so, they exacerbate the problem, leaving central banks responsible for massive injections of liquidity to keep the cogs moving. In addition, the Fed has taken the unprecedented step of offering its "discount window" to investment banks in addition to commercial ones. Such behavior represents a fundamental break in policy for both the central bank and the president. There may be good reason for them getting their hands dirty. The extent of this credit crunch has been recently compared to the Great Depression, painfully reminding America of its most desperate moments.
Faced with the twin serpent of financial market volatility and increasing consumer pressure, it is no wonder investors are reeling. As the economy has cooled, oil prices have maintained record highs, peaking above $110 a barrel. While crude futures have reflected speculation more than lack of supply, recent falls suggest that investors may be recognizing a slow in oil demand. This also reverses the dollar's lurching fall, thus absorbing some lost profits to oil-producing countries, who peg their currency to the dollar. However, this reflects the exception rather than the rule.
In general, this cycle is self-reinforcing until a new equilibrium is reached, which cannot happen until the full extent of sub-prime exposure is known. This factor depends on the number of foreclosures on sub-prime borrowers, a mechanism for resolving both the individual defaults (necessarily a lengthy process) and subsequently assessing the potential devaluation of all its reinvested components. Until then, the economy remains like a proverbial deer in headlights, unable to understand how much risk it has taken on but running out of time.
Ki helps buyers and sellers navigate the Austin Texas real estate market. His web site has a free search for Austin Homes along with information on Austin Foreclosures
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Mar. 19, 2008 - Bear Stearns and the Free Market
The recent government-sponsored bailout of Bear Stearns, one of the top five lenders in the United States, has shocked traders and left investors cold. Despite the chilly reaction on Wall Street, secretly many are breathing a sigh of relief. While Bear Stearns was mismanaged from its upper echelons, its subprime exposure grew until their recent $30 billion-plus losses had to be reported.
Once that happened, their course took a turn for the worse. As their ability to shore up capital faltered, JPMorgan Chase stepped in with a buyout worth a bargain $2 a share, valuing a company worth $3.5 billion down to $236 million. Quite a savvy deal, if obviously designed to ensure continued security in the market more than pure profit (after last year's hedge funds collapses, Bear Stearn's lawyers have been busy with sub-prime exposure-related litigation). With the impact of derivative investments and more sophisticated financial instruments, the notational impact of a Bear Stearns collapse comes at a staggering $10 trillion. Moreover, even at a share price that attractive, the Bear Stearns rival wouldn't have bought them unless a fundamental shift in monetary and fiscal policy hadn't occurred: The Federal Reserve's liquidity offers to commercial banks, which have been numerous in recent months in the wake of the credit crunch, have been offered to Bear Stearns for the purpose of covering billions in frothy investments.
This sets a dangerous precedent against the continued function of American markets by using taxpayer dollars to bail out what is an entirely market-related mistake. By covering bad investments with taxpayer money, the Federal Reserve reverses sixty years of capitalist policy in favor of blatantly socialist takeovers. This could be the worst way to introduce Americans to this form of quasi-socialist government ever conceived.
No one put a gun to Bear Stearn's collective head and made them spread risk ineffectively and invest in sketchy sub-prime mortgage securities. They did it all by themselves. Yet here we see a government-backed takeover to shore up confidence in a financial system that seems unable to take care of itself. Laissez-faire? Quite the opposite, it appears. What kind of message does this send to other financial institutions? Can they now expect similar access to the "discount window" that had been reserved for institutions that work with taxpayers, not investors?
We now have the dubious half-promise that the Fed will rein in on Wall Street during boom times, but isn't it a lack of regulation in loaning standards and a subsequent rise in "predatory loaning" what got them into this mess in the first place? And how many more Bear Stearns get the Fed rescue while millions of Americans face foreclosure? The Fed haven't received much criticism thus far, as their responses have taken a course they have helped the economy weather in past recessions. However, their break from past precedent will likely draw some flags. Even if no one else will tell the emperor that his clothes are slipping off one piece at a time, hopefully the Presidential candidates will pounce on this new opportunity to compare traditional economic goals with the present shift in policy.
Ki lives in Austin and writes a Austin real estate blog. His site is filled with information about Austin real estate and includes a free search of the Austin MLS.
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Mar. 18, 2008 - Is the Democratic Primary Destroying the Democrats?
I usually write about real estate. But every so often I like to throw in something completely different. So now for something different
Two months ago the Democrats were looking at numerous positive signals for their chances in the November election. First the polls of a generic Democrat versus a generic Republican showed Democrats leading by a spread of over 10 points. The leader of the Democratic field, Barack Obama, enjoyed a substantial lead over the presumptive Republican nominee John McCain.
To make matters better for the Democrats the Republicans were going through an ideological schism. The conservative wing of the Republican Party was split over two nominees Huckabee and Romney allowing for a moderate, John McCain, to take control of the primary. And the right wing of the Republican Party was uneasy with John McCain over his moderate political views and a perception that he thumbed his nose at the party on occasion. Uneasy might be an understatement considering Republican voice pieces like Rush Limbaugh were issuing almost daily attacks on McCain who had all but wrapped up the nomination.
On the opposite side of the aisle Democrats for the most part seemed relatively happy with their two choices of Barack Obama or Hillary Clinton. Their were some in the party that talked of a dream ticket with Barack and Hillary running as president and vice president the only question was who would be at the top of the ticket.
Fast forward a few months. John McCain has secured the nomination. While the conservatives have not fallen in love with John McCain the heated exchanges have lessoned. On the other hand the contest between the former Democratic dream team of Clinton and Obama has turned into a bare knuckle fight. While pleasantries still exist they are simply the occasion respite from an increasing acrimonious fight. To make matters worse the primary fight is increasing drawn along race, gender and income lines. Women and poorer Democrats are going with Clinton. More affluent democrats and African Americans are siding with Barack. Many woman feel Obama is a johnny come lately smooth talking guy that is stealing the title role from a woman that has worked long and hard. Which in some cases parallel feelings they have about what has happened to them in the workplace in real life.
On the other hand suggestions by people in the Clinton campaign that Obama has gotten a free ride because of his race has certainly turned off many potential voters. Also if Clinton wins the nomination its likely she will do so by winning more superdelgates but losing in the race for delegates that are elected by popular election. Leading democratic primary voters to feel they elected Obama but the party elite ignored their voice and put Clinton into the driver’s seat instead. In addition, there are problems with two states that will play an important part in the general election, Michigan and Florida. The Democratic Party is not counting their primary results because they violated rules and held their elections early. Now the primary is so close some voters in those states feel that their votes are being ignored. All of this is to say that many voters in the Democratic primary election might not go with the eventual nominee either because they might have hard feelings against the party or the eventual nominee.
To make matters worse the two candidates are ripping each other to shreds and providing sound bites and lines of attack for the Republicans to use in the general election. In fact we are already seeing this reflected in the polls. The CNN Poll conducted on 2/1/08 had Obama leading McCain 52 to 44. The CNN Poll conducted on 3/14/2008 had Obama leading 47 to 46. All of this has happened while Clinton and Obama are spending money hand over foot and McCain is quietly raising money.
So what should the Democratic Party do to stop the bleeding? First they need to hold rehold primaries in Florida and Michigan. Howard Dean has said they need to save money for the general election. But if the primaries are not held they risk annoying voters in two states that will have very important roles in the 2008 general election. Second the super delegates need to switch to Obama and end the primary. This is not to endorse the policies or leadership ability of either candidate. But simply that at this point its very unlikely Clinton can win the primary. Although Obama lead is not huge at this late stage its probably insurmountable. Even though Clinton has more super delegates she needs to win 58.8 percent of the remaining delegates to secure the nomination while Obama only needs to win 43.5 of the remaining delegates. Adding to the fact that Obama has won more delegates in 13 of the last 15 contests. Otherwise the Democratic Party will keep damaging itself before the general election.
Escapeso Realty is a small realty company helping buyers and sellers in Austin real estate market. Their website provides monthly real estate statistics on their Austin Real Estate Blog along with a free search of the Austin MLS.
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Mar. 17, 2008 - Bear Stearns from 20 Billion to 236 Million and Beyond
What a difference a year makes. Last year at this time Bear Stearns had a high flying stock price of $150 a share and a market valuation of 20 Billion. Having been founded in 1923 they were considered one of Wall Streets most venerable investment houses.
Going back to 2005 Bear Stearns was selected as "Most Admired" securities company in Fortunes annual survey a distinction they retained until 2007. During this time period many of the decisions that would lead to their eventual downfall were being made. In the middle of 2007 the armor of Bear Stearns started to crack. The subprime problems were beginning to explode. Basically it was becoming clear to the financial industry that many of the subprime loans that had been given out over the last few years were not going to be repaid.
One of Bear Stearns funds, the "High-Grade Structured Credit Fund", started to falter. In a sign of things to come when Merrill Lynch acquired 850 million of the collateral for the fund they were only able to auction it off for 100 million.
A problem started to develop with two of Bear Stearns funds that operated as hedge funds. The interesting word here is hedge fund. Hedge funds basically operate under the philosophy that by investing in a large number of loans that are somewhat risky you minimize the risk. While a few individuals might go into foreclosure the investor is protected because they have invested in a high number of loans. The problem the financial industry started to realize in mid 2007 was that a large number of these were going into foreclosure. In July these two hedge funds had lost nearly all of their value.
By August lawsuits had started flying as angry investors started to sue over their losses alleging that Bear Stearns had not property disclosed their exposure to hedge funds. A few months later Bear Stearns declared write down of 1.2 billion on their securities.
2008 brought more problems for Bear Stearns. Rumors started to circulate that Bear Stearns was having cash problems. JP Morgan started to provide emergency funding to Bear Stearns but it did not seem to stop Bear Stearns slide into financial chaos. This led to the final offer of 240 million for Bear Stearns. Not only was this substantially less than the 20 billion Bear Stearns was worth a year ago, but it was less than the value of Bear Stearns headquarters in New York which is valued at 1.2 billion. The fact that the purchase price is lower than the value of the real estate owned by Bear Stearns is seen as a sign that many of the financial assets Bear Stearns owns have a negative value.
Another interesting point is comparing Bear Stearns to Countrywide. Both were large institutions with exposure to the subprime real estate market. But Countrywide was seen as a free wheeling company that almost ignored risk and rose fast and feel fast. In contrast Bear Stearns was seen as an older company that had weathered through multiple recessions. But in the end the same market brought both these companies to their knees. Basically spreading out risk among many subprime borrowers does not help if the real estate market weakens resulting in a large percentage of borrowers going into default. Hopefully the collapse of Bear Stearns will serve as a warning lesson for future companies. And the warning lesson hopefully will not only be remembered only in bad times, when it is frequently too late, but in good times when the seeds are sown for future financial turmoil.
Ki is a real estate agent in Austin Texas. He works with buyers interested in investing in the Austin real estate market. His site provides a free search of the Austin MLS as well as a graph of recent mortgage interest rates.
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Mar. 16, 2008 - Austin Neighborhood Profiles : Travis Heights
Lying just west of IH-35 and south of Riverside Drive is one of Austin’s most appealing neighborhoods, Travis Heights. Its rolling hills and winding roads have long been a haven for a diverse culture, with a mixture of housing to match: perfectly kept bungalows, a few large estates and smattering of shabby cottages.
Housing in South Austin began later than other centrally located neighborhoods due to difficulty getting supplies across the Colorado river. Once a stone pier bridge was built on Congress avenue in 1883, the area began to flourish.
General William Harwood Stacy, along with partner Charles Newning, began the Travis Heights development in 1913. Newning had some luck in developing Victorian homes on large lots south of the river before the turn of the century with his development known as Fair View Park, but Travis Heights was the most promoted subdivision of its time. Stacy set up the area with grid streets, and curvy roads, and a variety of lot sizes to maximize his potential buyer pool. He also set up a trolley car to run clients from the capitol building to Travis Heights before it was even developed, and gave away Ford Touring cars as well.
Stacy dedicated an area along Blunn Creek, and cliffs that drop down to Town Lake, to be set aside as public park land. Later Stacy’s sons added more land to the area, and it’s now known as Stacy Park, and still very popular today with Travis Heights residents who take good care of the land set aside for them.
Today many of the original houses from Stacy’s development still stand, as well as some from Newning’s earlier turn of the century push. Some houses, such as the Gullet House and the Red-Purcell house built in 1885, have been deemed historic landmarks by the city of Austin. The Miller-Crocket house was originally built by Newning for Henry W. Dodge in 1888, and was purchased in 1901 by Eugene Miller at a courthouse auction for $1,800. Currently the two-story slat roofed house is owned by Kathleen Mooney and run as the Miller-Crockett Bed and Breakfast.
Mary and Joe Lawrence purchased the 1914 house owned by Joe Steiner, whose brother Buck owned the land Steiner Ranch sits on now. Steiner was long cared for by Sister Madeline Sophie Weber, who began the nonprofit Faith in Action Caregivers. Steiner left Weber the house after his death, wanting the profit from its sale to go towards the nonprofit’s cause. The Lawrences bought the home from “Sister Sophie” and saved the classic revival style house, and its carriage house in the back, that had fallen in disrepair, and reused as much of the building material as possible, with its original Doric columns and pilasters still intact.
Travis Heights continues to draw homeowners to the neighborhood with its winding streets, rolling hills and large trees. Its close proximity to downtown, IH-35, and the newly revamped South Congress shops, clubs and eateries also make it a desirable area to live. Others enjoy the diversity of the people in the neighborhood, since the crowd is a mix of families, downtown business professionals, artists, and musicians, all of whom feel a strong sense of community. The neighbors recently took initiative and put on a concert in Stacy Park to raise money for the pool there. As WH Stacy stated in his original Travis Heights newspaper advertisement, “It’s a real residence community. One with a soul; the realization of a purpose, where homes are homes, not mere houses."
Ki works as an Austin real estate agent. He writes an Austin real estate blog to help investors keep up with the Austin market along with a free search of the Austin MLS.
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Mar. 13, 2008 - Agave Development in Austin Real Estate
Modern housing is on the rise in Austin, making it easier for the modernist to move into a brand new home, instead of waiting for a mid century A.D. Stenger to come on the market. Six miles east on Martin Luther King Blvd, the Agave residential development is finishing up its first round of homes. Touted as “Austin’s premier contemporary residential development,” all of Agave’s 160 homes will be built with a modern flair.
Agave is actually the third phase of Sendero Hills, with the first two set up for low to middle income homeowners, with Agave geared towards the middle class. In so doing, Agave has qualified for the city’s S.M.A.R.T. (Safe, Mixed-income, Accessible, Reasonably-priced, Transit-oriented) housing policy, which includes meeting the city’s Green Building standards, and energy efficiency for their customers, with amenities such as low E windows and tankless hot water heaters.
Possibly the biggest draw for homeowners to the Agave Development is the chance to own a home designed and built by some of the city’s top Architects, without having to pay top dollar for the exact same house in the heart of the city. The list of architects includes Emily Little who has recently won the Austin Chronicle’s Readers’ Poll for “Best Architect”, and has been designing and preserving some of Austin’s best structures for the last twenty years. Also, KRDB has a set of homes going up after quickly becoming one of the hottest design/build firms in the city, with their Cedar Avenue houses gracing the cover of Dwell Magazine. The Casa Bella Architects have been in business since 1989, and also have their hat in the ring, after many environmentally friendly, and beautifully modern buildings, such as the award-winning Ullrich WaterTreatment Plant, and Austin’s soon-to-come recycling center.
Though the concrete and cedar siding homes, with their bamboo floors, European designed kitchens, and CAT-5 telephone wiring are large draws for some new homeowners, Agave is not without its downsides. Though relatively close to downtown, there aren’t many amenities along MLK, such as a grocery store. And though East Austin is in a state of transition, low-income housing still makes up most of the region, and to some spending $300,000 on a home in the area may be a gamble. For those families with young children, the public schools would also be a concern, with the elementary schools not ranking as high as other parts of the city. And though each home will be professionally landscaped by Floribunda, the development is void of large, mature trees.
Vincia Development, who created Agave, is about to begin a new project called Fiore just down the road from Agave. Fiore should be a fine compliment to Agave, as it will be the nation’s first 5 star-rated green community. For those Austinites looking for cutting edge architecture, and an environmentally sound community, head East.
Ki is a realtor in Austin. He runs an Austin real estate blog covering current events in Austin. He also provides a free search of the Austin MLS to allow buyers to search the Austin real estate market online.
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Mar. 13, 2008 - Crestview
Just north of Austin’s urban center lies the Crestview neighborhood, bordered by Anderson Lane to the north, Justin Lane to the south, North Lamar Boulevard to the east and Burnet Road to the west. In 1948, developer A.B. Beddow began building the Crestview homes on what was originally an old cotton field.
The majority of the homes in Crestview were built in the 1950s with a very utilitarian style, mostly 2 and 3 bedroom cottages ranging around 1100 to 1200 square feet, suitable for the postwar boom of the time. Many residents of Crestview have lived in the area since its inception, not willing to leave the tranquil surroundings and friendly neighbors they’ve grown close to over the years.
It's this same reason more Austinites want to move to the neighborhood, as it’s still considered a great place to raise a family 60 years later. Crestview is also highly desirable to those seeking an older home that is centrally located, but cannot afford to pay the higher house cost and property taxes of neighborhoods such as Hyde Park (which also has a high UT student population, upping the possibility of a loud and rowdy neighbor.) Also, those on the hunt for a mid century modern home can find success in Crestview houses built in the 50s.
Though the Beverly Sheffield Park draws a crowd with its public pool, playground and barbeque grills, it’s the Crestview Shopping Center that would be considered the heart of the neighborhood. Built in 1952, the Crestview Shopping Center has maintained its original state, like many of its surrounding homes. The Crestview barber shop has been in the same location since it arrived in the shopping center in 1954. The landlord of the shopping center is 72-year-old J.D. Harper, who runs the Crestview Pharmacy, which he purchased from the center’s founder Ray Yates in 1964. Ronnie Prellop owns the shopping center’s independent grocery store, Minimax. The Prellop family has operated the store since 1953. Lucretia Doyer runs the Little Deli, which yields lines out the door during lunch hour. Her family ran the cleaners in the shopping center since the late 50s, until it was sold in 2006. It’s this kind of time warp that makes the Crestview residents refer to their area as a “modern day Mayberry.”
Early this month, construction began on what will be called Crestview station. Located west of Lamar between Justin Street and St. John's where the Huntsman Corporation sat from 1949 to 2005, Crestview station will be the first big transit-oriented development along the Metrorail track which will provide a train service from downtown Austin to Leander. Crestview station will be a mix of retail, office space, and residence space. The first phase will include around 800 apartments, with 400 single-family “row style” homes slated afterwards, bringing a newly built residential region to Crestview, something not easily achieved in most centrally located Austin neighborhoods.
Many new suburbs pop up around Austin constantly, where neighbors pass by without even making eye contact. Crestview is the complete opposite- a neighborhood where neighbors share their front door keys in case of emergencies, and suggest the daily specials at the deli. This kind of neighborly bond is hard to come by these days.
Ki is a realtor helping clients investigating the Austin Texas real estate market. His site has a free search for Austin homes for sale. He also provides an Austin real estate blog to help people keep up to date on the Austin market.
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Mar. 13, 2008 - Helping Your Clients to Understand the Importance of Interest Rates Drops
Real Estate buyers are usually highly focused on the purchase price of a property. This is a legitimate concern. The purchase price is one of the most important considerations in a real estate transaction. But at the same time home buyers too frequently treat interest rates as a secondary concern. Many buyers will stress over $300 or $400 in negotiations over purchase price. But when told that interest rates dropped half a point, home buyers will often respond with a shrug.
This is frequently because it is easy to understand the difference between paying 200k and 195k for a house. But it's harder to appreciate the difference between an interest rate of 6.5% and 6.0% for a house. But interest rates can have a large influence on mortgage payments. Using our mortgage calculator first let’s look at the difference between the mortgage on a 200k and the mortgage on a 195k house assuming a 6.5 percent interest rate.
200k (6.5%) Mortgage $1264.13 per month
195k (6.5%) Mortgage $1232.53 per month
The difference ends up being $31.60 a month.
Now let's look at the difference between an interest rate of 6.5% and 6.0% on a 200k house.
200k (6.5%) Mortgage 1264.13 per month
200k (6.0%) Mortgage 1199.10 per month
The difference ends up being $65.03 a month or $780.36 a year. A simple half point drop lowered the mortgage payment by 5.4 percent.
Interest rate changes are not that uncommon. We wrote a tool that graphs Mortgage rates over time based on the interest rates provided by Freddie Mac. In the middle of 2007 we saw interest rates of 6.7%. At the beginning of 2008, interest rates were down to 5.75%. What is a little more interesting is when we switch the toggle on our tool to showing the mortgage on a 200k house based on the interest rate for that date instead of the actual interest rates (Figure 1). From the middle of 2007 to the beginning of 2008, we saw a drop in the monthly mortgage on a 200k house drop from $1270 a month to $1170, a difference of 9.3 percent. This is why when buyers say they are waiting for prices to drop 5%, it might be a good idea to tell them that the actual mortgage they would get on a house has already dropped by more than 5 percent.
(Figure 1)
In light of all the mortgage issues over the last few years, it highlights why home buyers should shop around for interest rates. All too frequently home buyers will go with the first mortgage person they meet under the assumption that everyone has roughly the same rates and that a half point isn't really that big of a difference. As we have seen above, a half point can make a non trivial difference in mortgage someone pays.
To make matters worse for those buyers that don't shop around, some mortgage brokers over the last few years charged industry rates that were out of whack with what was standard at the time. If potential buyers had simply made a few calls they would have discovered the problem. But riding under the assumption that it wasn't worth their time to call around and that interest rates where just one of those mundane details they didn't really need to be concerned about, they ended up with interest rates substantially higher than what they should have been. If buyers had a better understanding of interest rates, it could have significantly cut down on mortgage fraud over the last few years.
In summary, home buyers should still focus on price because it will always be an important part of the real estate transaction. But if home buyers start to look at interest rates more closely, they will end up with more success in their real estate purchases and lower mortgage payments.
Ki is a realtor in Austin. His site has a free tool that graphs mortgage interest rates, that webmasters can incorporate into their site to keep visitors up to date on interest rates. He also wrote a real estate calculator webmasters can incorporate into their websites. Ki works with Escapeso Austin real estate.
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Mar. 8, 2008 - The Live Theater Scene in Austin
With the different varieties and styles of live theaters in Austin, a night at the theater could be wild and rambunctious, or a beautiful and classy affair. On the east side of town, one can find small, arty theaters such as the Salvage Vanguard, while downtown patrons can take in the ballet, or a family-friendly show at the Zach Scott.
In 1932, the Zach Scott Theatre got its start as the Austin Civic Theatre, and is central Texas’s oldest resident theater. Zachary Thompson Scott Jr. was born in 1914, son of Zachary Thompson Scott, one of Austin’s premiere surgeons. Zach Scott was raised in Sweetbrush, the family estate off Windsor Road. Scott Jr. dashed his father’s hopes of following in his footsteps when he graduated UT as an actor, moved to Hollywood, and enjoyed a successful film career. In 1972, an 8,000-square-foot theater facility with a 200-seat thrust stage was built, and the Austin Civic Theatre officially changed its name to Zachary Scott Theatre, after the Scott family provided the final funding for the facility.
Today Zach Scott Theatre has roughly 10 productions every season, with shows such as Shear Madness, and David Sedaris’ Santaland Diaries, coming back season after season due to their high popularity. Currently the theatre is running Speeding Motorcycle inspired by legendary off-the-wall Austin musician and artist, Daniel Johnston.
Zach Scott also appeals to Austin’s young crowd by offering the Project Discovery program which offers ticket prices under 5 dollars to school-aged children. Project Interact, Zach’s professional youth company, has run for over 2 decades performing original shows for central Texas schools.
For those looking for some edgier theater, Salvage Vanguard Theater has been providing new original material since 1994. The theater’s founder, Jason Neulander, has been very involved in the local theater scene, and began the “Independent Theatre Conspiracy” which brought together 8 small local theaters in hopes of cross promotion. Neulander is also a founding member of Austin’s Performing Arts Research Coalition group, which is part of a national initiative to study the performing arts’ impact on communities.
Several local writers came together to produce Salvage Vanguard’s runaway hit “Intergalactic Nemesis”, read in the style of an old radio play, including live sound effects. The buzz grew, and now the show tours nationally. When the theater isn’t putting on a local production, they are hosting music or film nights, and providing space as an art gallery during business hours.
Founded in 1956 as the Austin Ballet Society, Ballet Austin has since grown into a professional company and puts on 5 different productions every season. Stephen Mills has been with Ballet Austin for over 20 years, and is the company’s current artistic director. Mills draws inspiration from many contemporary music composers, and has even choreographed ballets to pieces created by local musicians, such as local pianist Glover Gill.
Recently, Ballet Austin relocated to the Butler Dance Education Center and Community School in downtown Austin. Ballet Austin Academy is the official ballet school of Ballet Austin, which steers its students into professional careers in dance. Also, the Butler Community School is open to the public offering a wide variety of classes from yoga and pilates to hula and (obviously) ballet.
Though Ballet Austin has put on their productions at UT’s Bass Hall for the past 20 years, all future productions will be performed at the newly finished Long Center for the Performing Arts, which will dazzle crowds with not only the fine production value of the performance, but also the beautiful new architectural surroundings.
Ki is a realtor in Austin. His website provides information about Austin real estate along with a free search of the Austin MLS for Austin area homes. You can also keep up to date on the market through his Austin real estate blog.
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