A look back at one of our favorite cheerleaders
Chuck Ponzi January 13th, 2009
Some of you who are long time readers of this blog and other bubble blogs remember the zeitgest of mid-2006. There was a lot of angst in the air about what was happening with the residential housing market, and quite a few financial idiots posting on and on ad nauseum about how housing was a fantastic investment and how you should leverage yourself up to the hilt just to get in. One of my favorite examples was Darren Mead of Victory Lending. Yes, the homeless boy turned bodybuilder, turned finance expert. Perhaps it would be best to turn to one of his gems of wisdom, quoted on Yahoo’s answer site in response to a user question posted in July 2006. Yes, the height of the bubble:
Darren gave a long-winded answer:
Congratulations of thinking of buying a new home.
Is there a “bubble”? The simple answer is “no”. Even if interest rates move a bit higher, it won’t be enough to cause a nationwide slide in home prices. The key to a healthy housing market is the job market. If the payment on a new home might be slightly higher due to increased interest rates, it generally won’t stop someone from purchasing the home of their dreams…but if they feel their job is in jeopardy, it might be enough to stop them from making a move. So with the currently low levels of unemployment and the beefy gains in job creations, it looks like the housing market will remain vibrant. Although it will be difficult to sustain the double-digit gains that much of the country has seen, price declines are highly unlikely. Expect a more moderate rate of appreciation, perhaps closer to the historical 6-7% range, which is still very good.
The post goes on for nearly 2 more pages of bubblespeak. It’s an interesting read on what was going on at the time. The most choice example:
Don’t be victimized by the bubble hype. Buying a home is a big step, but it is almost always one in the right direction.
Darren was also quoted on housing doom and felt required to issue a long-winded discussion of the merits of buying a house, leveraging it to the hilt and other such nonsense. I also at the time replied (when I was writing under the pseudonym John Doe) to his crazy thoughts:
Hello Everyone -
My name is Darren Meade, and I’ve noted you have chosen to comment on a few artciles I’ve written.
First the advice is that the great appreciation in Real Estate has cooled. Given a moderate decline of appreciation across the country, now might be the time to reposition your equity.
There’s an excellent book on some repositioning strategies called ‘Missed Fortune 101′ by Doug Andrews.
I believe that everyone should benefit and earn money in the same manner the banks operate on the principleof arbitrage.
This of course depends on your overall financial plan. Often people do not realize or think about the simple fact that the largest financial asset they have is their home.
It is my belief that you should manage this asset in an overall financial plan. In regards to Home Equity Lines of Credit, I actually do not favor those as I believe the cost is to high.
Additionally, most HELOC’s can be canceled by the Bank at anytime. Many of my clients in
New Orleans found this out after Katrina. Many thought they planned ahead, but the notes were canceled and they had to borrower at an even higher interest rate.I note John Doe said :
“When I sold my L.A. home in 04, an acquaintance of mine was adamant that I should not sell it, just leverage every last penny of it (basically the same strategy). [separated quote for clarity, JM]Darren: Actually this is not the same strategy. I’m advising people who have made a good amount of appreciation in their home, to take that money out since home prices declined Nationally. I suggest this because as a country we have the worst savings rate. Housing Inventory has also increased, some people like yourself cannot afford to pay the mortgage on their home if they try to rent it. They may then try to sell, but in many markets home sit for 4-6 months. The Realtors often do not disclose such. Desperate, I then receive calls where people now want to try and refinance. However because the home is listed for sale, many of the lenders will not allow them to refinance. Then these poor people wind up having to get a hard money loan.
When I told him that housing prices might go down, he told me not to worry, that would be the bank’s problem. [small fix, JM] I observed that I couldn’t cover the monthly nut with the rent on the place if I rented it. He said, no worry, just let the bank take it back, you now have your “equity”.”
Darren: Between 04-06 even with the decline, in my local market you would have made a 38% appreciation on your home. I am sorry you could not afford to hold on long enough to make that profit. I’d ask though, what other investment do you feel will provide a safer yield than Real Estate?
Also, you gain that appreciation figure based on the value of the home. Often you have secured this investment with 10-20% of the value of the home.
Best Regards,
Darren Meade
I kinda wish we had a behind the music rendition of where is he now?
Anything worth saying to Darren after the bubble popped?
No, there’s nothing worse saying because a geek such as meade would just toss more hype-speak at you about the how the opportunities were never better…
You get the idea.
The very best, and sadly least likely, thing we can hope for is that all the bad agents in this game would be flushed out of the system and end up working at Del Taco.
Who says I can’t dream?
This guy Meade sounds like that boob John Karevoll from Dataquick. I lived in LA until 2006, and I can’t tell you how many articles he was quoted in with arrogant statements about how the socal market is different and would not experience major declines.
I wonder if recalls his ridiculous positions now that the markets are off 40-50% in some places.