Most e-mailed article in the New York Times today ..

Home Prices Seem Far From Bottom.

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Peter Schiff warnings from August 2006 ..

Too bad more people didn't listen to him. He talks about over-spending, over-borrowing, the real estate bubble bursting and the consequences of the collapse of all that "phony" wealth. What he describes is essentially what we are staring right in the face two years later. According to the video he will also be appearing for the full hour of the Glenn Beck show this evening. I'm sure he'll have plenty more to say then about how we get out of this mess so tune in to see what he has to say and perhaps even educate yourself just a bit.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

Someone else willing to tell the truth, Jim Rogers from July 2008 ..

Watch the video and ignore the poster's spelling.

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While crisis looms and foreclosures and short sales abound ..

your neighborly Deep Creek real estate agents are still shamelessly promoting no money down buying. In my opinion, it's time for these agents to stop misleading people and getting us into crisis situations like the one we find ourselves in right now.

If you'll recall, I basically wondered out loud how it could be that they were still promoting these wreckless loans back in early June. Given all that has happened since then you have to wonder if they even understand what is going on.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

Another Garrett County/Deep Creek Lake short sale contributing to the pain being felt on Wall Street and Main Street ..

Since the sale price listed here is well below the $400,000 loan amount from May 2007 we can assume that M&T Bank (or whoever they sold the mortgage to) took a significant loss on the sale of this property. The really sad thing is that sales like this one are robbing banks and financial institutions of the necessary capital they need to make loans for hard-working folks and small businesses who are responsible enough to repay any loans they might receive. Maybe in the new bailout bill Congress can ask the CEO of the company who approved this loan in the first place, the real estate agent who made a large commission from this sale and the previous homeowners who basically got a gift from the bank to contribute a portion of those proceeds towards the roughly $1trillion that might be necessary to fix this mess. That sure makes a lot more sense to me.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

Whose fault is it anyway?

I saw this morning that Bush's approval rating is at 28% and the approval rating of Congress is at 18%. Obviously Bush is on the way out the door, but too bad we couldn't throw 82% of these bums in Congress out in the street too. And if you are curious why the approval rating of Congress is so low look no further than this shining example from 2003 in the NY Times.

''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

And to think Barney Frank is blaming Bush for all of this. What a clown! How much do you think Fannie and Freddie were paying him to block efforts to regulate them? Affordable housing? As if going deeply in debt overpaying for a house but getting a short-term teaser rate that later doubles is somehow "affordable" to anyone? Mr. Frank if you want to blame someone for all these poor people being kicked out in the street you should look in the mirror and consider if any of your efforts actually make anything more affordable to anyone! Mr. Frank is certainly not alone either. Throw all the bums out in the street is what I say.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

Bailout bill voted down in the House ..

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Ever wonder why J.P. Morgan is one of the few banks able to buy up troubled financial companies at fire sale prices?

It's certainly no coincidence. Jamie Dimon, like some of the others I've mentioned, saw it all coming. The writing was on the wall as they say. The following is an excerpt from a recent Fortune article detailing how Mr. Dimon helped J.P. Morgan beat the credit crisis:

It was the second week of October 2006. William King, then J.P. Morgan's chief of securitized products, was vacationing in Rwanda, visiting remote coffee plantations he was helping to finance. One evening CEO Jamie Dimon tracked him down to fire a red alert. "Billy, I really want you to watch out for subprime!" Dimon's voice crackled over King's hotel phone. "We need to sell a lot of our positions. I've seen it before. This stuff could go up in smoke!"

Don't forget to check back to Dan's Deep Creek Blog for future updates.

I was searching my e-mails when I found this one from March 2007 ..

After reading this story from Fortune I sent it to a friend with whom I had been discussing home price appreciation around that same time and added the following comments:

"An hourly employee at Target got a loan for $696k!!! Wow, now I'm really certain housing prices aren't going up any time soon!!

Basically during the last five years there was someone out there who would give anyone a loan if they wanted it. Now a bunch of those people are going to end up homeless and the people who gave them the loans and going to be looking for jobs doing something else. That's the whole story in a nutshell. And to make up for the lost money the other banks will charge you more to do business with them (as if it wasn't bad enough already)."

So what's the point? The point is there have been a lot of warning signs leading up to this crisis and too many people chose to ignore them or explained them away for their own convenient reasons. Obviously real estate agents, politicians and bankers all had motivation to try to keep the good times rolling and to push aside warnings from people like Warren Buffett and Peter Schiff or even horror stories like this one from Fortune. Not long ago, I also talked to a friend who was considering buying a house last summer and called me to ask if the numbers "made sense." The numbers didn't make sense in my opinion and in the end this person ended up renting, so I asked if they were glad they decided not to buy that house. The response I got was "Oh dear God, yes!!!" Maybe I should start a testimonials section here on this site.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

Peter Schiff tried to warn people a year ago ..

This one is from 9-22-2007. He and I agree to a large extent and I'm somewhat surprised I had not previously realized that he was out there telling the story as well. You'll notice a lot of what he is saying is what I have been saying here on this blog. We are in a lot of trouble and the only thing that is going to correct it now is a perfect combination of time, luck and hard work. I'm going to have to read his book when I get a chance.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

Who was right, Peter Schiff or the real estate agent?

Since it may not be clear to everyone this was aired in January 2008. The comments on the YouTube site are overwhelmingly brutal on the real estate agent and deservedly so in my opinion. Before you go read those comments yourself be aware that some do contain inappropriate language. That being said, as some of the comments there indicated, she was lucky they mercifully ended it when they did. And she's not trying to sell you anything? I laughed. I really did.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

Peter Schiff tells it like it is 9-18-2007 ..

A lot of professionals you might hire don't have half the foresight of people like Peter Schiff, Meredith Whitney or Warren Buffett who I mentioned yesterday. Who do you want to take real estate or other investment advice from, people who are right or people you are paying?

Don't forget to check back to Dan's Deep Creek Blog for future updates.

Yesterday we witnessed the largest bank failure in the history of the United States ..

In case you missed it Washington Mutual, a savings and loan with over $300billion in assets, was taken over by the FDIC. This is certainly a stark contrast to what we were hearing from some of the Realtors in the Deep Creek area back in May when the crisis was over and there were nothing but clear skies on the horizon. I believe "well and improving daily" was the phrase used to describe the local market by another agent. If you happened to see the August 2008 average sales price decline in the Garrett County market compared to August 2007 and believe that this is somehow related to the value of your own home you might disagree with that as well. Even a real estate agent can't find a way to put enough lipstick on that pig to cover up the fact that things are not well and improving daily.

In May, at the time of the linked posting above, I questioned, on this blogger's own site, whether this was good advice to be giving and subsequently questioned whether this posting was a violation of copyright laws since as you notice has been copied directly from the Wall Street Journal. Those posts were blocked and/or removed from the other site, but through this feed I was able to retrieve at least one of those comments which was approved by the moderator (see quoted text below). As many long-time readers already know the censoring of these comments also led to the creation of this blog.

"Jim Cramer was a hedge fund guy from Goldman Sachs, a firm which by most accounts has a significantly better reputation than Morgan Stanley, and he goes on TV every evening showing just how un-credible his resume makes him to predict the future. If you've ever tuned into his show Mad Money and followed even a handful of his suggestions you know exactly what I mean.

And let me ask you this, if these Wall Street firms and hedge fund guys know so much about the housing market why are they all writing down billions of dollars in losses related to subprime mortgages right now?

There's another guy out there who likes to give his opinion on things every year at his annual meeting which is often referred to as Woodstock for Capitalists. He's made a rather large fortune by buying at the bottom and being right about things like this. He also happens to be the richest man in the world so his record of being "right" about things kind of speaks for itself. Do you have any idea what he said about the credit crisis just in the last week? Or what he has said about the housing market? Or the warnings he was freely giving to folks like you and I in 2005 and 2006 when he said there was "a lot of dumb money out there in housing"?

You can make a lot of people seem credible but few earn it with results in my opinion."

If you didn't notice in my reply to this blogger I was talking about Warren Buffett who is once again in the news this week for his savy investment in Goldman Sachs and just sort of has a knack for being right. As I implied above you don't get to be the richest man in the world (or second right now) without some understanding of how the world works. Or as the UBS analyst quoted in the Goldman Sachs link said, "Warren Buffett is the ultimate stamp of approval." Of course the blogger's reply was that sometimes free advice is the worst advice, basically trying to tell me that he knows more than Warren Buffett because he is a real estate professional. I laughed. I really did.

"You should hire a professional and take their advice. The worst advice is often free advice." - Deep Creek Real Estate Blogger, May 2008

After seeing so much misleading information out there urging consumers to risk their own future so that someone else could profit I felt compelled to create this website and offer an alternative to what I felt was a constant stream of bad or misleading information. Today, much less misinformation is finding its way online in Garrett County, so in that respect this blog has been a far greater success than I initally imagined. Thank you all for continuing to keep tabs on what is posted here and for sharing your own thoughts as well.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

Here's an idea ..

In the Financial Times Raghuram Rajan, Professor of Finance at the University of Chicago’s Graduate School of Business, proposes that the government force banks to raise capital from within (i.e. from shareholders) instead of simply throwing taxpayer money into a bottomless pit. His position is that there is too little capital (and by the same token too much debt) in the financial system and that simply trading their worst assets for government money and thereby passing the debt onto the government still does not go far enough to prevent more problems from popping up. Interesting idea to say the least.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

Should we really be surprised at where the economy is today?

A Yahoo! Personal Finance piece from Laura Rowley in February 2006.

"Mostly, we can't help wondering if the lending and spending free-for-all of recent history will end badly -- for all of us. Imagine interest rates continuing to rise amid an employment downturn. The option ARM holders and other over-leveraged consumers put their homes on the market, or hand the keys to their lenders. The housing market experiences a sharp decline. Commercial banks, Fannie Mae, and Freddie Mac require a taxpayer bailout (a la the early 1990s) -- increasing either the current or future tax liability."

Don't forget to check back to Dan's Deep Creek Blog for future updates.

The credit crisis rears its ugly head again ..

Months after one of the local real estate blogs pronounced the credit crisis to be over, Lehman Brothers faces bankruptcy, Merrill Lynch faces a likely sale to Bank of America, AIG faces a huge asset fire sale and stock futures plummet over concerns about the health of the entire financial system. Hold on tight, this ride is far from over despite what some would try to tell you. In fact, Reuters calls today's events a potentially "unprecedented shake-up."


Don't forget to check back to Dan's Deep Creek Blog for future updates.

Underestimating the fallout from the housing crisis?

A new update to a Deep Creek real estate blog notes that "Bad decisions and bad loans have cost banks millions of dollars in losses but life must go on." Well, this is not exactly the honest and forthright type of analysis I was looking for when I made my comments about how a specific listing seemed to be in conflict with what I was reading on some of the real estate blogs. But back to the point here, the point is they are dramatically underestimating the total losses suffered by banks and other institutions as a result of the housing bubble and subsequent credit crisis. Right now the losses are well into the BILLIONS (with a "B" not a "m" as they have indicated) and many, the IMF, Bill Gross of PIMCO and others, estimate that the final tally will be at or near $1TRILLION (10,000x greater than $100million, 100,000x greater than $10million, 1,000,000x greater than $1million).

Once people start telling the truth about the housing bubble and the credit crisis maybe people will change their behaviors and begin buying again. Until then we are faced with the CEO of Bear Stearns telling us they have ample liquidity, real estate agents telling us things are well and improving daily and others dramatically understating the fallout from the crisis. A few days ago when Merrill Lynch finally threw in the towel and started selling off mortgage-backed securities for 22cents on the dollar it gave the market significant hope that the bottom was near and firms were finally recognizing the drastic measures that were necessary to deal with the fallout from this crisis. Instead of downplaying the crisis they are facing up to their mistakes and instead of hoping and wishing that things will get better, they are taking actions to secure their own future and restore their own credibility.

And yes, banks are still lending, just not as much as they were previously, which a big part of the reason why home prices are falling across the country. Without cheap and easy credit, buyers can no longer drive prices higher and higher with absolutely no connection to underlying value. At some point, however, the market will correct itself and prices and incomes will once again realign and we will see a market functioning as it should. In many areas (particularly those that have not yet seen fire-sale foreclosure sales), home prices relative to personal income, however, are still historically high and some believe we would need to see an additional 10-20% decline in national home prices to bring things back in line with historical norms. It won't happen overnight (see 1979-1984 period in Figure 6 on page 6 linked here) or may not happen at all but over time these things do manage to work themselves out which in this case could even mean that meager income growth will exceed home price appreciation so that a balance can be reached again. Anyway you get there, such a balance is estimated by the Wachovia Economics Group to occur sometime between the middle of 2009 and middle of 2010 if you read the full report linked above in this paragraph. This report goes into great detail about not only the present market but also puts things in historical perspective and is much more thorough and informative than saying prices have fallen and interest rates are relatively low as some have done.

I feel like I should also address this whole interest rate fallacy too. Lower rates lead to higher prices and higher rates generally lead to lower prices. So as an educated buyer when you would rather buy? Assuming you were always in the market to buy a home, you'd be best suited to buy a home when interest rates were at their peak because you have fewer people competing with you to buy the same property, will likely pay less and therefore take on less debt. If you look back at the last 25 years the people who made the most from real estate investments bought when rates were relatively high and the people who bought when rates were low got in bidding wars with countless others, paid more and went into more debt. Something to think about and not what you hear from the people trying to sell you a house on cheap credit and put you deeper in debt. Then again, I am more likely to think like the cash buyer than the person with no savings and a low credit score.

I think Warren Buffett and Ben Graham would advise others to do the same, but then again they are/were just simple, conservative guys who never took risks that could ruin them financially. It certainly seems to have worked out much better from them than those who went out and speculated on overpriced homes paid for with no-money-down loans! In 2006, Buffett himself warned of "significant downward adjustments" in the real estate market and today I'm sure there are many who wish they would have taken his free advice! Read what he said about mortgage financing too and ask yourself who would you trust to give you financial advice, Mr. Buffett? A lender? A realtor? I'll take Mr. Buffett's free advice any day!

It's hard to deny that the people who benefited greatly from the housing bubble were the buyers who years earlier bought at higher rates while those who lost out in a big way overpaid because they thought they were getting such a low interest rate when in reality they were simply fooled into taking on more debt than they could handle. Buyer beware.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

Yet another sign that consumers of all stripes are struggling ..

"American Express Posts Profit of 56 Cents a Share, Well Below Estimates. Stock Down Sharply After-Hours."

This breaking news headline comes from CNBC.com and gives a pretty big jolt to those who feel or felt that upper-end consumers (most American Express cardholders for example) are somehow insulated from the economic conditions of the past several months. While I would not consider myself a high-end consumer, I've been doing my part and paying my AmEx bill each and every month but apparently that is not the case across the board as they are seeing higher delinquency rates on issued cards.

While things will likely turnaround at some point, things are clearly not as they were just a short time ago. And unlike the early 1980s, for example, it's hard to imagine how we could have 25 years of declining tax and interest rates ahead of us.

"What's getting people nervous is seeing this downturn affect their top super prime customers," said Paul Hickey, co-founder of Bespoke Investment Group. "While it is not surprising that no one is insulated from the crisis, everyone is really concentrating on how even the best of the best aren't doing so hot. It makes people a little weary."

Don't forget to check back to Dan's Deep Creek Blog for future updates.

Contrary to something I read on a Deep Creek real estate blog at the end of May ..

The credit crisis is still with us.

After reading that particular comment in May, I knew something had to be done to prevent such misinformation from being distributed as if it were truth. I will continue to do just that. It seems there are others out there longing for the truth as well based on some of the e-mails I have received, the number of hits I have been getting on this blog and also a recent letter to the editor from Dr. Judith Weller(scroll to the bottom). Thank you for the letter Dr. Weller and know that I will continue to ask questions.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

Don't fall into the trap ..

Everyone out there telling you to live large and borrow more has something to gain from you ending up in the same financial hardships as these folks. Caveat emptor.

As Warren Buffett himself suggested, there could be more shoes to drop.

Don't forget to check back to Dan's Deep Creek Blog for future updates.