THIS MODERN WORLD

…is it just this site, or are the blogads drying up all over? I’ve slashed prices considerably and still, nothing…sure, I could go down to ten or twenty bucks an ad, but at that rate, it’s just not worth cluttering up the site. (We’ve established what I am, we’re just haggling over the price — and I do have some standards.) Has blog advertising gone to the third world and/or Republican model — most of the money aggregated at the very top with a pittance left over for the rest? If things don’t pick up, I’m probably going to remove them from the site entirely, which is a pity — for a few months there, whenever I was in a “why do I bother with this?” mood, there was at least one tangible answer.

This really does not bode well:

OAKLAND — Rachael Herron’s new condo will ensure her financial salvation — unless it provokes her ruin.

Herron put no money down for her tidy one-bedroom, borrowing the entire purchase price of $211,000. To keep her monthly payments as low as possible, she got an adjustable-rate mortgage that won’t require her to pay any principal for three years.

Thanks to her “interest-only” loan, the 911 police dispatcher was able to afford, barely, her first home. She now has a stake in California’s sizzling real estate market. As her home increases in value, she plans to use some of that equity to pay down her credit cards.

But Herron is also setting herself up for a day of reckoning: Nov. 1, 2007.

That’s when she has to start paying off her loan principal. If interest rates are higher than when she bought her home last fall — something many economists consider probable if not inevitable — her monthly payment will increase by as much as a third.

“I don’t know what I’ll do,” said Herron, 32. “I’m already working overtime to pay my bills.”

Confronted with soaring home prices, Californians are adopting a “buy now, pay later” strategy on a massive scale. The boom in interest-only loans — nearly half the state’s home buyers used them last year, up from virtually none in 2001 — is the engine behind California’s surging home prices.

But all that borrowed money might be living on borrowed time. When higher bills start coming due, Herron and hundreds of thousands of other homeowners in the state will have to find ways to cope — or will have to sell.

In the most dire scenario, if they owe more on the home than it’s worth, they’ll simply walk away. Abundant foreclosures could spark a downturn in the entire housing market, leading to the long-feared bursting of what some call a housing bubble.

Interest-only loans, and other forms of so-called creative financing that are far riskier than the traditional 30-year fixed-rate mortgages, have allowed more people to afford homes in California even as prices have skyrocketed.

When the price of houses in California soared 17% in 2003 and 22% in 2004, a curious thing happened: Instead of home ownership decreasing because fewer people could afford houses, it rose to record levels.

During the last two years, according to U.S. Census Bureau data, home ownership in the state rose to 59.7% from 57.7%. The previous record was 58.4%, measured during the 1960 Census.

Although homeownership in California traditionally lags behind that in the rest of the nation — the U.S. rate in 2004 was 69% — the 2-percentage-point increase during the last two years was greater than in all but about a dozen states.

Rather than closing the door, lenders have apparently been opening it wider, inviting in people like Herron who would not have qualified for a mortgage under the more rigorous standards of an earlier generation.

“If you can fog a mirror, you can get a home loan,” said mortgage analyst Ralph DeFranco.

An interest-only loan offers the ability to defer for three, five or seven years any payment for the house itself. That allows a potential buyer to stretch to afford a place that otherwise would be out of reach.

Of course, everyone else using an interest-only loan can stretch too. The result is that prices keep rising. That, in turn, encourages still more people to use interest-only mortgages, which fuels still more appreciation.

In 2001, as the current housing boom got underway, fewer than 2% of California homes were bought with interest-only loans, according to an analysis done for The Times by LoanPerformance, a San Francisco mortgage research firm.

By last year, the level had risen to 48%. Nationally, LoanPerformance says, interest-only loans were used in about a third of all purchases.

What’s propelled the market up in California, some experts worry, could just as easily speed its descent.

“In the last few years, rates went down and values went up. It’s like you were paid to live in California,” said analyst DeFranco, who works for LoanPerformance. “People got so used to refinancing. They’d think, ‘No problem. My house will be worth twice what I paid, and I’ll refinance my way out of trouble.’ That’s not going to be a good approach going forward.”

Here’s how he thinks a collapse could occur: Rising interest rates put a brake on price appreciation and refinancings. People realize their interest-only period is coming to an end, raising their monthly payments substantially. Since they have no equity in the house, they choose to default.

“If housing prices go down or even are flat, heaven help us,” said DeFranco.

More. (Hat tip: Hitt, again.)

From today’s Meet the Press:

MR. RUSSERT: Dexter Filkins, your dispatches are so rich with detail and understanding of what you’re seeing and observing. Tell us about your life in Iraq. What do you do? Where do you live? How do you get up? How do you function as a reporter?

MR. FILKINS: Well, The New York Times has a huge operation there. It’s very expensive. But it’s…

MR. RUSSERT: Heavily guard?

MR. FILKINS: Very heavily guarded. We’ve got a couple of houses, we’ve got 20-foot-high concrete blast walls topped with barbed wire. There’s armed guards, there’s armored cars, searchlights, the whole thing.

MR. RUSSERT: How do you move around the city?

MR. FILKINS: You just try to do the best you can, you know. The — you go…

MR. RUSSERT: With guards?

MR. FILKINS: Usually with guards. I mean, you know, none of that’s desirable. You want to be — as a reporter, you want to be as unintrusive as possible. You want to put people at ease. And — but that’s not really possible anymore. So you can — things have gotten a little better. I mean, Baghdad is not as tense and as angry as it was even six months ago. But doing something like getting out of your car and walking around a neighborhood and just talking to people on the street, you can’t really go that anymore. I mean you can do it for 20 minutes, you know, 25 minutes, and then get in your car and get out, because if you linger too long, you’re putting yourself in danger.

MR. RUSSERT: Have you had any close calls?

MR. FILKINS: More than I can count, yeah.

MR. MIKLASZEWSKI: Even when you’re accompanied by large numbers of American troops, if you’re in one place for longer than 10 minutes, they start to get nervous, and they say, “Let’s get this over with and move on,” because word gets out very quickly who’s where and how vulnerable they may be. So you really do, as Dexter said, have to keep moving.

MR. RUSSERT: There is a road, a highway from the airport to downtown Baghdad that’s called the Road of Death by many. I understand there’s a taxi service on that road to take someone from downtown to the airport.

MR. FILKINS: Yeah. There’s actually a company in Baghdad that does nothing except offer rides to the airport and back. They’ve got an armored cars and some guards. And they charge $35,000 for…

MR. RUSSERT: Thirty-five thousand dollars?

MR. FILKINS: …for a ride to the airport. And I think you know, if you miss your plane and you have to come back, it’s another $35,000. But…

MR. RUSSERT: How long — is it six miles?

MR. FILKINS: I think it’s about six miles, yeah. It’s not a happy six miles. So, you know, they earn their money.

* * *

MR. MIKLASZEWSKI: Again, I’ll go back to Fallujah, because I was just there for a couple of days last week. Nine thousand homes and buildings in Fallujah were destroyed when the Marines went in in November. There have been 32,000 claims against the government by homeowners and business owners. Of those 32,000 claims, only 2,400 have been paid off so far. And when you walk in and — let’s say your house is worth $10,000. They will only give you 20 percent of the amount of your claim for now. It’s because — and those funds are controlled by the Iraqi government. They’re husbanding those funds for use in the future. And as I stood next to the line of those claimants, all you have to do is ask them what their complaint is, and within seconds, their rage surfaces, so badly at one point the cameraman said to me, “Mik, we’re about to start a riot here. I think we’d better leave.”

And the current president of the temporary council, Sheik Khaled, admitted to me that the people in Fallujah are already growing impatient, and predicted it will take at least another year before reconstruction actually begins to take hold.

MR. FILKINS: If I could just jump in there — I mean, I think what’s happened here — you know, Congress allocated $18 billion for reconstruction. And what’s happened is, you know, it’s a lot easier to kick a barn down than it is to build one. And so, so much of this money has had to be diverted for security training, for just security on the projects. I mean, on any given construction project, as much as 35 percent of the money goes to protecting the workers who are working on it. So the problem is just — has been the violence, and it’s basically overwhelmed every attempt or most of the attempts to rebuild the country.

What’s striking about this is that if you read the entire transcript, both of these reporters actually seemed to think that things are generally improving in Iraq — proving once again that everything is relative…

Exactly right:

First of all, the “war for oil” argument has never been, “The U.S. only wants lots of oil.” That’s strawman-making with a vengeance. The charge — fully substantiated by the Bush gang’s own copious writings about their geopolitical ambitions (“Project for the New American Century,” et al) — is that a group of elite interests in the U.S. want to control access to world energy resources in order to maintain and expand their own power and privilege (which they equate with “American interests”), and to put the squeeze on any potential rivals for geopolitical predominance in the coming decades, such as China and India. Whoever has their hand on the oil spigot — or controls, by threats and bribes, those who do — can shape the future to their own ends. This power is what the Bushist elite wants, not just the actual black stuff under the ground.

Second, it’s ridiculous to imagine that Bush could have gone to Congress and the American people and asked for $280 billion to buy oil futures. And even if he had, what if Saddam, or OPEC, or Hugo Chavez, or Putin, had refused to sell them? Why on earth would any of them have mortgaged their futures and guaranteed their subservience by selling one country “all the world’s oil for the next 50 years”? This is a ludicrous assertion.

No, the only Bush way could grab such enormous loot from the public treasury for his cronies was by frightening and manipulating the American people into war. And McEwan’s strawman reductionism also overlooks the fact that war is not only profitable for Bush’s oil allies (who are now pulling in unfathomable profits), but also (as mentioned in the previous post), the arms manufacturers, giant construction and servicing cartels like Bechtel and Halliburton, the “private equity firms” and investment houses like Carlyle, and so on.

Which is, of course, why the U.S. is making plans to create the largest U.S. diplomatic mission in the world in Baghdad: we’re there for the long haul, and not by accident. Remember, this was all laid out by the Project for a New American Century back in 2000:

Indeed, the United States has for decades sought to play a more permanent role in Gulf regional security. While the unresolved conflict with Iraq provides the immediate justification, the need for a substantial American force presence in the Gulf transcends the issue of the regime of Saddam Hussein.

Another picture of the boys…