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Aaron's thoughts on the bailout
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Mueller Community

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Aaron's thoughts on the bailout
by aaron on October 1st, 2008

Although this really isn't about Mueller as it's more about America, I would like to pass on this link of Lloyd Doggett's speech on the floor of the house of representatives.

I personally would like to see hard caps on executive pay, steep regulations on wall street and finance and govermental preferred stock, rather than warrants of stock. I'm glad Lloyd agrees with me.

Whether you agree with me or not. I encourage everyone to be informed of your representation and not rely on politcal campaign marketing for your November elections vote.
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Mueller Community

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Aaron's thoughts on the bailout
by MCCLOSKEY5 on October 1st, 2008

Thanks for posting this Aaron. I had read that Doggett voted no, but it's good to see what he had to say about it. You are dead on that we need to be plugged in to our representation. Thanks for helping us do that.
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Aaron's thoughts on the bailout
by langhugh on October 1st, 2008

Well, lookie here...a liitle bailout talk in our neighborhood forum. Now skip to the last sentence of this post before I get all curmudgeony...

As far as our national politicians and regulators go, they're a little late to start talking big about anything related to Main Street vs. Wall Street. Those were discussions that should have been held in 2005. Now they sound like Nero-Fiddlers. Besides the Main Street vs. Wall Street argument is the real false choice. No matter who you are, you have your feet squarely on both streets at all times. The credit crisis is a symptom, not the disease. Our national lesson should begin with a discussion about our embarassing use of leverage (debt) by all Americans, from government to corporation to individual, for the last 35 years. Last chance...skip to the last sentence of this ridiculous post...I can't fight the curmudgeon in me...arghhh, save yourselves.

As far as the current credit crisis goes:

1. This real estate bubble train to implosion could be seen for several years. So much residential real estate was built and sold without any conventional mortgage underwriting since the president uttered "Ownership Society" in 2003. Home Builders, Realtors, Mortgage Lenders, Appraisers, HGTV, complacent Federal Regulators, and Home Buyers were all equally complicit. I would tend to blame the Home Buyer the least because they had the whole industry telling them, "Can I get you in this house today? Maybe its a little pricey, but its got the American Dream you were asking about. With home prices appreciating, you'd be silly not to act today. It's a natural money-maker. How about 0% down and cash-back at closing? You like that? You can put it towards drapes. Don't worry about verifying income, we'll get you in this house." The result..median home prices when compared to median incomes rose about 30% over historic norms nationally, and in some markets like Las Vegas and much of Florida and California, the increase was often 80%-200% ahead of historic norms. Voila, you have seas of McMansions and the invention of the $1 million dollar mansion "exurb" in places like...Parker, TX, North Las Vegas, NV, Elk Grove, CA, and Cape Coral, FL. Option Adjustable Rate Mortgages became the only way to finance the inflated home-price for the income-strapped buyers...financing with little to no hope of equity capture and wealth creation. Regressing to historic norms in home price-to-income ratios would have resulted in in home price drops of 20% to 50% and the inability to any of the Option ARMS to refinance to conventional mortgages upon rate reset. Home buyers were way, way over leveraged in their homes, and the eventual crash should have been clear to anyone...unless your job was to delude yourself that leverage is not risky if you can "securitize it", in other words, you worked on Wall Street.

2. Wall Street suffers from delusions of greed. Securitization involves pooling a bunch of risky stuff together in a way that makes people think, "Heck, it can't all go to pot at once, can it? That would be crazy." Institutions bought pooled US mortgages as relatively safe investments. Sounds crazy if you read #1 above, but its true. The best thing about it was that they used leverage too to try and goose their investor's return. Basically, they hoped that they could take assets (our risky mortgages) that could reasonably be expected to return 3% and try to milk another 1-2% by buying more than their resources entitled them to. They made leveraged-bets on over-leveraged home buyers...Brilliant. The risk multiplied on all mortgages (particularly on subprime), but big investment banks had created "safe" securities to sell, their credit rating agencies told them so ($$$), and insurance agencies insured them ($$$). The securites could then be sold as investment-rated and default-insured. Again, "It can't all go to pot at once, that would be crazy." These are the shenanigans that have erased the assets of several large US Banks and with the potential to collapse global finance...a lesson that leverage works both ways and we are now slaves to it. Now, instead of "investment-rated collateralized-debt obligations", we just call them what they are..."toxic mortgages"

3. Main Street deludes themselves even further. Consumers have leveraged their finances farther than reason to stretch their discretionary income. We use Option ARMS, Home Equity Lines of Credit, Reverse Mortgages, 72-Month Auto Loans, Student Loans, and Sinister Webs of Credit Cards. As a nation, we've used all of these forms of credit to consume today and there are very few options to find that next discretionary dollar to spend. The period of reckoning may be upon us as consumption has decreased for 4 straight months (first time since 1991). We all may have to spend the next several years slavishly getting our personal balance sheets in order, and hope to heck that we can impress the same upon institutions we constitute.

The sunshine in our lives in the coming years will definitely NOT be conspicuous consumption, but it will likely to be the community bonds we make in our new neighborhood.

Yeah, Aaron, I'd love to come to movie in the Garden Court Saturday. :)

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Aaron's thoughts on the bailout
by paulsjv on October 2nd, 2008

Well said Dusty! I won't get into the details of what I personally think but I will say that I am glad Doggett voted against the bill. The one that came out of the senate I believe is even worse. I hope that Doggett won't succumb to the pressures of Washington and keep his vote no to this horrible piece of, well you know, that came from the senate.
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Aaron's thoughts on the bailout
by Brandon on October 2nd, 2008

Thanks for sharing your thoughts Dusty. Well said indeed. It helps explain the proverbial rectal exam that my lender performed to secure financing on our new home.

With the correction in the credit markets what are your thoughts on home value forecasts for Mueller? Seeing as we are closing in 3 weeks it has me more than a bit nervous.
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Aaron's thoughts on the bailout
by mrs aaron on October 2nd, 2008

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Aaron's thoughts on the bailout
by GarrethWilcock on October 3rd, 2008

With the correction in the credit markets what are your thoughts on home value forecasts for Mueller? Seeing as we are closing in 3 weeks it has me more than a bit nervous.

If you believe in the predictions at, you might think that house prices in the US in general might dip for a year or more. As Dusty says, these numbers include the vastly overvalued coastal markets, and the local picture is different.

PMI's analysis of major metropolitan area home price depreciation risk has Austin among the least likely Metropolitan areas to see home prices decrease over the next two year period.

Nationally, the US house price volatility is high, in Texas and Austin less so.

Home values at Mueller are somewhat regulated by the builder and developer for the next planned seven phases of development. What a home seller can achieve depends on supply and demand, and the builder / developer throttle most of the supply (any homeowners who are selling before development is complete have a smaller trickle of supply)

If you're trying to sell your new home at Mueller or anywhere that has no waiting list and no inflated appreciation within two years of buying, you wouldn't likely see all of your original outlay returned. This is in part due to transaction costs.

Mueller has many factors that draw people here, and many planned factors that will make it an even more attractive place to live. I like Dusty's point about the bonds that we build in the community and the lifestyle we create. The value of a home you continue to live in and enjoy is moot unless you want to get a HELOC or the like, but the value the community brings is what makes your quality of life better.

My 0.02

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Mueller Community

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Aaron's thoughts on the bailout
by langhugh on October 3rd, 2008

To predict the future of Mueller real estate from here is a fool's errand...which is why I'm about to try.

While I was signing my sales contract, I told my DW sales rep that I was pretty sure someone would buy my floorplan for less in the coming years than I was paying. Whether that will turn out to be right or wrong, we still went ahead and signed the papers. Why? On another thread, I spoke of consuming housing as a service as opposed to making an investment. In the long view, investment performance will follow the quality of the housing service, and getting into the Mueller Housing Service was something I didn't want to delay.

1. Location: If the real estate adage is "location, location, location", then Austin in general and Mueller in particular have "location" in spades. Austin, Texas speaks for itself with the number of high placements on all manners of Top City lists. Beyond its obvious geographic location benefits, Mueller, on paper looks very promising. But when you work with the people who are working on Mueller, you realize that it has "location" as well as location. Case in point, at the Town Center Town Hall, I laughed when they asked what I thought about a museum in Town Center. I said, "You mean a gallery or a studio? Those would be great." They said, "No, a museum." That helped me realize that Mueller would be a "location" on a level above what I was considering. Then when the Austin Children's Museum annouced intentions to move to Mueller, I understood that it wasn't just talk. Mueller should be a "location" among "locations". Not "Allandale, Bouldin Creek, Mueller", but "SoCo, Sixth Street, Mueller". Dig? If Muellerfollows other example of residential New Urban developments across the country, it will better protect its value during downturns and appreciate faster than surrounding real estate.

2. Shelter: A 5-star GBP Streetman home anywhere in the city will be a highly-sought after shelter and provide the benefit of both a luxurious and energy-efficient Housing Service.

3. Community: Much has been said about here about our nascent community-building efforts. I would describe many of the early resident as being community pro-activists, or conscious of the fact that the community foundation we lay will reverberate into the future. We are all trying create our little version of a neighborhood utopia. That can't hurt your Housing Service.

4. Lifestyle/Amenities: Mueller's design is about as master-planned as it gets, and since its process is so public and collaborative, the amenity structure at Mueller is, and will continue to be, off-the-charts. Again, the potential Children's museum move is a prime example.

5. Schools: This is an admitted leap of faith as far as the public schools are concerned, but there is, again, a sense that our first wave of pro-active parents care about the success of our local public schools and will stay involved in our childrens' schools. As an aside, while I don't think AISD's school-transfer policy helps the schools, I do think that it enhances the value of the Mueller Housing Service.

Regarding anxiety over recent market events, I hope I've shown that the long-term home buyer (more than 5 years) will both benefit from an enhanced housing service and an appreciating investment. Being a "little" nervous when buying a new home is a good thing, and a better thing if you know you can afford the first monthly payment in your budget (even if it is a strech). If you can budget for the payment in year one, the real price of the housing service declines every year inflation rises. Not a bad deal.

So unless your other best option is to move back in with your parents, then you're making a smart financial decision in Mueller. Beyond the financial realm, it has just about everything a family would want.


PS: I like how we've not changed the subject and it still looks like all of these are Aaron's thoughts
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Aaron's thoughts on the bailout
by Noelfil on October 5th, 2008

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Aaron's thoughts on the bailout
by SleeperService on October 6th, 2008

I think Noelfil you have missed important things that dusty said... and to be honest it behooves the media to be more honest about the reasons behind this financial problem.

While you are certainly correct some of the blame lies with the american consumer of mortgage products. There is a significant portion of blame to be placed on the people who were asleep at the switch -- these products should have been regulated as soon as it became possible to gather these debt obligations into CDO's and CMO's an enormous agency problem was created. In that the person selling debt of any type ( including bonds and other non mort debt ) -- had absolutely no interest in making sure that this debt could paid back. Once that was in place -- we were in a death spiral...

We are finally here -- with the creation of third level CDO's ( were a CDO is created from a group of CDO's which in tern was created from another group of CDO's ) -- it is extremely difficult to understand the instrument -- and thus extremely difficult to estimate the risks involved... that makes things bad with a capital B.

While the number of foreclosures is serious and esp if you are the one being foreclosed on its a tragedy -- the amount is simply not enough in and of itself to bring the market to its knees... if it was not possible to be so highly leveraged we would be just fine....

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