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Loser!
Thursday, August 02, 2007
You don't truly understand the psychology behind the housing bubble until you see how dopey some of the participants are and, more surprisingly, how willing they are to share their stories with millions of people.
It's one thing to lose your shirt, it's another thing to tell your story to a national television audience.
Admittedly, Casey Serin of the now defunct iamfacingforeclosure.com has set the bar quite high, but Bruce Helmprobst turned in a stellar performance on last night's ABC Evening News, providing another sad example of what happens when our "fifteen minutes of fame" culture in the YouTube era meets up with the latest financial bubble.
The text version above, with just a few "uhs" included fails to capture the mood of young Mr. Helmprobst - if anyone finds a YouTube version of this, let me know and it will be posted here without delay.
Charles Gibson: One reason for the volatility in the market these days are the concerns about the mortgage market. Home foreclosure notices were filed against 573,000 homes in the first half of the year, an increase of 58 percent over last year - devastating for some, opportunity for others. ABC's Miguel Marquez takes a closer look.
Miquel Marquez: In a sign of how low the housing market here has sunk, Joyce Essex used to make most of her money selling homes. Now, 90 percent of her business comes from handling foreclosures.
Joyce Essex (Realtor, Coldwell Banker): Basically, up to this point, the banks have been able to sell the properties for real retail prices, but just recently, they're starting to get so many properties that they have to get them off their books.
Marquez: In all of last year, Essex handled 16 foreclosures, now she's handling about one a day.
Professor Frank Alexander (Emory University): The foreclosures are occurring across all neighborhoods and across all income brackets.
Marquez: In the first six months of this year, foreclosures have skyrocketed. In California, one in 124 homes have been in foreclosure, in Ohio it's one in 112 homes. In Nevada, the hardest hit state, one in 69 homes this year have been in foreclosure.
Rick Sharga (Marketing VP, RealtyTrac): A big part of the issue we're seeing right now is the percentage of people who tried to buy real estate as investments. A lot of these people took out high risk loans on what would have been risky purchases in the first place and when the market slowed down, it left them holding the bag.
Marquez: In the once red-hot housing market of Las Vegas, investors like Bruce Helmprobst hoped to cash in. He purchased seven homes - three are now in foreclosure, others are on the brink. What once appeared to be can't-miss deals are now dragging him toward bankruptcy.
Bruce Helmprobst (Real estate investor/bag holder): This has just really drained me emotionally and, uh, I have a lot of bills and a lot of mortgages that I can't pay and, uh, banks are calling me every day.
Marquez: Banks are calling thousands of homeowners every day - the foreclosure crisis that most economists expect will continue for at least the next year.
The wavering, sometimes cracking, voice to go along with a general "deer in the headlights" expression and defeatist tone are important in many ways - not just for the schadenfreude, but as a clear indication that the bag holder still doesn't really understand what has happened to him.
As mentioned here before on a number of occasions, if the U.S. economy is going to continue to be just one financial bubble after another, policymakers in this country should really consider making one of the many books about financial bubbles mandatory reading in high school so that, at the very least, future Mr. Helmprobsts might not appear so clueless when they are interviewed on national television.
They could start with just the first hundred pages of "Extraordinary Popular Delusions and the Madness of Crowds" written back in 1841 - John Law and the Mississippi Scheme, the South Sea Bubble, and TulipMania.
Financial bubbles are nothing new - they just happen a lot more frequently now.
Lost in all the attention given to young Bruce is the growing realization by the mainstream news media that the problems in housing are getting worse, not better - something that, in itself, will make the problem worse still.
------------------------
UPDATE: Friday, August 3rd, 10:30 AM
Max has located the video at ABC News - here's the link.
9 comments:
Financial bubbles are nothing new - they just happen a lot more frequently now.
Back when I was doing grad work, a classmate and I had a discussion of how "eras" and styles in the arts came and went a lot more quickly than they used to. For example, you can refer to the entire 19th century as the "Romantic age" but just try to settle on one term to describe any given art in the 20th century.
Our working theory for this is that improved communications allowed new styles to be disseminated across regions and continents much more efficiently than in the past. You no longer had to physically go to Vienna to see and hear what was going on there, or wait for someone to come back and tell you about it. Our theory seemed to hold in the internet age, with popular music genres exhibiting obvious and rapid changes.
That being said, I can't honestly say I am surprised that the new ways of real estate ownership (whether owner occupied or "investment" property) have rapidly spread across the country before the long term consequences could be fully appreciated. Nor am I shocked to see that news of a "hot investment" that turns out to be a bubble can burn across the internet like wildfire.
Clearly we can communicate faster than we can actually think.
they should have booked bernanke for the show so he could explain how well contained the issue is and furthermore, how there are no signs the turmoil in the mortgage market is effecting the overall economy.
Or, they could have paraded hank out there to give us another 'bottom' call.
Just curious Tim: Do you suppose "uh" drives a H2 (or Mercedes, BMW, Lexus) or a Prius?
Our economy is a series of bubbles - then what might be the next bubble? I was also thinking this a.m. that it is interesting that bankruptcy laws were modified in favor of lenders just before the Sh*t hit the fan. ... Now in addition to a series of bubbles, we are going to have a class of citizens who are mired in debt servitude. ...
The video is linked from the ABC News front page:
http://abcnews.go.com/WN/
Click on the "Broadcast" tab. The video is labeled "Mortgage Market on Wall Street"
Thanks Max - I posted a link in the original post.
Anon 12:21 - I don't know what he drives but if you Google him he shows up as a sound mixer for the Siegfried and Roy show.
He was pretty young. How did he think he could afford 7 homes?
Miami is a modern, urban version of the great depression dustbowl midwest. I talked to a guy who cuts the grass down the street--in addition to his mortgage he re-fied(his term for refinancing-it's so common here there's a hip slang for it) for another 185,000 a year. He's actually resorted to following people in his landscaping truck to look for business--meanwhile thousands of illegals here will cut it for pennies--you see tons of people spending re-fi money on luxury cars--but condos and townhouses have in reality been down for at least two years. My first year here (2005) I separately met two school teachers--both had bought investment condos and townhouses in late 2004-early 2005. Both had been and are still trying to flip--niether has had even one offer!
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