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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
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I really liked the thread a couple of weeks ago about what people think about living/working/raising families in other parts of the country (particularly transplanted Californians - and no I don’t mean the despised “equity locusts”) Maybe another go-around.
Why the bad rap on “equity locusts” from California. Born and have lived here my entire life, and yes, I will be leaving California and moving in a couple of years and bringing my equity to Texas (wifes side of the family). I would never leave this place but over the last 20+ years the “non-equity locust” from everywhere else have moved in and screwed it all up. Nobody ever mentions that! btw sold (10/5) and rent.
I can’t speak for all, but when I say “equity locust,” I refer to Californians who liberated equity (that is, borrowed against their primary residence) to buy investment properties elsewhere, on the premise that if the price is lower than for a comparable home in Santa Barbara, then it must be undervalued…
Those “equity locusts” have driven up prices EVERYWHERE. In Missouri we have had a mini-boom that is driven by people from CA moving to the hills and overpaying for property, but more power to the landowners and such for all I care. The good thing is that it will never be a huge influx like we see in Texas and Florida.
moman, Where are you in MO and what are you seeing in the RE market?
Just a part time MO resident. St. Louis is all but dead, there is going to be a fairly strong pullback of prices in that market, IMO. Lots of the other cities haven’t experienced a large run up.
Having been born here, I feel bad that you feel you must leave. I feel, myself, that what gave LA its bad reputation is not the Californians who have always been here but the ones who came here from other places to lead an “LA lifestyle.” I’ve met plenty of them.
Also, for those who have been pushed out - do people really believe that Californians want to pay higher prices on housing everywhere else? It’s like they think Californians go to Oregon and put a gun to Oregonian house sellers heads telling them “Raise the price of your house, Or else!” People from other states should blame themselves and their greedy neighbors for raising the prices of their own homes because they see a Californian coming.
Difference between micro and macro, baby. Most people (in America) think about themselves first, others (if at all) a distant second.
If someone offered me $70,000 for my car (probably worth 10), I’d give it to him today. Someone comes along with 700 grand for my house - which I happen to think is worth 150k - I’d give it to him today.
i totally concur with this statement.
I’ve mentioned that!
In response to Desmo regarding “non-equity” locusts from other parts of the country/world coming to CA. Unfair for us (Californians) to be blamed for everyone else’s woes when we’ve been dealing with the steady decline in QOL for decades due to too many moving here (and not enough resources for us to handle it!).
I was just looking around a foreclosure site . I noticed that, in Northern VA at least, most of the foreclosures list the ‘last sold’ date as last year sometime and a ‘previous sale’ price usually about half of the current selling price. Anyone have any other data sources?
By the way, for anyone interested in buying foreclosures, it looks like the time is definitely not ripe. Most were selling for only a few thousand off the peak price.
it’s way too early in the curve, money needs to dry up and the inventory needs to build at the lenders. when the board of directors start yelling to “dump the reo”, then it’s time to start looking. right now it’s catching a falling knife, imho.
I’ll put this bluntly.
I am 43,with 1000.00 in savings and a poor credit rating.
My rent is 750.00 a month,and that is about 38% of my takehome pay.
I want to buy a house,sometime,in the next few years.
What do I need to do to un-screw myself from the mess I have made?
And is there a time frame,I should try to work at?
Last,given the dreadful quality of the Bakersfield air,should I just rent here.and buy a retirement house in Morro Bay or Cambria?
Thanks.
We have condos in Manchester, NH for $80K and probably less in places away from Manchester. But I think that your numbers are tough. When you “own” a house, you have property taxes, insurance and the maintenance costs of home ownership which need to be factored in. Our property taxes have doubled in four years due to municipal and school costs. Could you deal with having to replace the roof? Or water damage problems?
Perhaps you could go with roomates to save more for a while. It is probably tempting to buy if someone is offering no-money-down
but it can be a nasty trap too.
don’t quite see how buying a house is possible for you…
I will respond bluntly.
You really have no business even considering taking on a large debt at this point in time. You should not even be considering buying a house.
You need to focus on repairing your credit rating and saving some money. You need to focus on increasing your take-home pay relative to your outlays. You need to learn how to manage your finances to build a downpayment.
Sorry, but you’re a long way away from being in a position where you could reasonably be expected to be able to service the debt required to “buy” a house.
Thanks!
You have confirmed my own thoughts.
I was in your position 4 years ago, with $30,000 of debt too. I cut my expenses to bare bones. Have two roommates and pay less than $300/month in rent. No vacations, almost no movies, dinners ouy etc… My credit is very good now, my debt is gone and I have tens of thousands in savings but I’m still not even going to look at homes until ‘08. My take is right around yours if my math is right. Buying a house in the next couple of years for you is not possible but don’t despair because housing will be down and tehn flat for quite awhile. More inportantly for you, you need to start saving towards your retirement NOW. Keep it simple, 401K, IRA and put 10% away from every check. You can get it done, best of luck.
And here’s an attempt at a not-so-blunt reply:
I don’t know what life-situation got you to where you are today. Perhaps you had control over the situation (for example, you enjoyed living beyond your means — but had a good time!) or perhaps you had no control (for example, you met the man/woman of your dreams, and it turned out to be your nightmare!)
In either case, it looks like you found a worthwhile goal! Home ownership has been in good thing in the past. However, at this particular point in time, house prices are outta wack — which is great for you! because it give you time to repair your credit, put some money away into your mattress, and generally rebuild for the long term. When you’re ready, the housing prices will be more palatable.
If there is any way to 1. increase your take-home and 2. live more cheaply — take it! And then save the difference. #1 is going to be a possibly higher payoff than #2, but it is also a more difficult thing to pull off.
Good luck to you.
Can I assume your salary is ~ $32K? If so, I don’t think you’re entirely screwed out of buying ~ though I do believe you are in the current market. And you may be screwed in the area you live in. But it was only a few years ago that in my area (outside of Philly), you could find a very nice condo for $90,000. Of course now those are into the $200s, but we’re in the midst of madness.
My advice would be to spend the next two, three years saving more for a downpayment. Clean up your credit report as best as you can (including canceling accounts you no longer need or use).
You didn’t say if you had any debt. If you do, you need to work on paying that down. If you don’t, you just need a good plan to save some money. Which should be doable making $32K and paying $750/month in rent. (For those who think that’s not doable, you have a much more charmed life than I’ve ever had.)
I’m not a huge wage earner (currently low 40s), I’m a single mom paying $11,000/year in daycare payments (100% of child support goes towards that), I pay more in rent than you do, AND I manage to save money ($7K so far this year and counting). Go figure!
I am frugal with a capital F. I don’t own ridiculous, useless “toys”. Hell my t.v. is 14 years old! Won’t replace it until it stops working (or until I’m forced to go high def).
I utilize freecycle (a Yahoo group) for stuff here and there (got some great infant stuff on there like high chair, exersaucer, even spare car seats!) and I’m a big “trash-to-treasure” person. Most recently I found a headboard sitting out for trash and I painted it and turned it into a wonderful piece for my bedroom.
Point is - you can only make it work by saving money now and learning how to live frugally. My dream of owning is not dead. It’s hibernating, but not dead.
Good luck!
Great post eastcoaster. You sound like a good strong role model for your child…..a problem solver!
She sure does. God bless the single parents out there. It’s adifficult job and the ones that do it well are gold.
I concur. Single parents have one of the most challenging jobs in the world, IMHO. They deserve a lot of credit for what they do.
Thank you! I’m not a single mom by choice, but we can’t always plan our lives. It’s not without it’s difficulties, that’s for sure. But at the end of the day, I’m responsible for my own life and what I make of it. No victim here!
It will, however, break my heart if I am never able to get my awesome little boy a yard of his own some day. I know some people will say I don’t have to own a home to have a yard, but the house rentals around here are too expensive for my liking so I’m currently in a small complex with no area for kids to play. This is why I feel I have such a big stake in this whole bubble mess. A mere 5 years ago I could have bought a place with my current circumstances. Today? Forget it. We need to get back to the fundamentals that allow someone like me to be able to buy at least a small home. Some say those days are long gone. I don’t believe that. Guess we’ll see!…
My mom wasn’t a single mom by choice either. Take heart, I consider myself much more squared away than almost anyone growing up with two well-to-do parents. Not that I think these children are bad - they just don’t see the important things in life the way I see them. Like the beauty of a granny smith apple grated (with a cheese grater) over an open-faced pb sandwich. That, and mac n’ cheese (sometimes with a can of tuna added for volume) got use through about ten years.
Now? I turn 31 in 3 days, and my wife and I save $4,500 a month. Pardon me, now, while I go call my mom to thank her. Again.
IMO, the fact that my husband was brought up by a single mother is what makes him such a great husband. He was expected to help out around the house, and his mother didn’t have the “luxury” of catering to his every need. It was a great lesson on how to be independent, and created a very strong work ethic in him.
Thank you. I try my best! (I had composed a lengthier reply to you, but it got lost in cyberspace I guess.)
Oh, there’s the reply above. (Honestly, it showed up after I reposted.)
save and cash will be king- in 08,09 you’ll see plenty of deals
I have to agree that owning a house may not be the best choice for you. Given your situation, you would probaby enjoy a better quality of life if you just continue renting.
But since you asked for suggestions on how to get to a situation where home ownership might be achievable –
You say that you pay $750 for rent — what happens to the other $1200? (You don’t mention whether you have to take care of kids or parents or anything…) Budgeting is of course extremely important. This includes planning meals, and giving yourself a limited allowance ($20/week total?) for toys, booze, and fun. A wild guess is that you could probably set aside $300-500 for savings each month (again, we don’t know any details of your life, so it could be more or less), which could make a nice down payment in just a few years. Forcing yourself to set aside savings each month, and only allowing yourself to spend a fixed amount on entertainment can go a long way. My wife and I were able to wipe out tens of thousands of dollars in debt (student loans, car payments, credit cards) in 2-3 years just by being more vigilant about our spending and saving. She hated it while it was happening, but eventually was glad to be free of the debt and to have adopted the new habits.
For a typical borrower, lenders want house payments to be no more than about 30% of your gross income. For your income level, that means you probably wouldn’t be able to borrow more than about $100K. It stinks, but it’s the way it is, and it’s almost certainly not going to get any better. Almost all places in CA will probably be out of reach for the foreseeable future, unfortunately.
Bankrate.com has a lot of good information on personal finance, including credit repair. You may want to check them out.
Best of luck to you.
Almost all places in CA will probably be out of reach for the foreseeable future, unfortunately.
———————–
Gotta disagree with you on this one. In 1998, I bought a 3/2 SFH in Oceanside (North SD County) in a mixed, working-class neighborhood. Price…less than $120,000 — AND it had been fixed up (new roof, paint, carpet, counter tops, linoleum flooring in kitchen & baths, etc.) by a HUD rehabber. Wonderful starter home with great neighbors. I was a single teacher making about $38,000 at the time.
It will happen again. All it takes is patience.
As to Thundereater’s question, I think your primary goal right now should be saving for retirement. You didn’t mention a separate retirement account, so I’m assuming you don’t have one. Do you have some sort of pension, or??? If not, you need to be saving a whole lot more for RETIREMENT. Forget the da@ned house. When you retire, you can move to a “flyover” state and buy a mobile home or something for a better price (on you own CHEAP land) or rent…
Focus on retirement savings NOW!!!
You have given him/her the best advice on this post screw the house focus on retirement and retirement only. Seen too many people underprepared for retirement.
Retirement, Retirement, Retirement
What do you do for a living? Can it be transplanted to a cheaper location?
I am pretty sure you should be able to find books at the library giving suggestions on how to save money in every area, probably written by mothers who wanted to be able to stay home with the kids who figured out how to have fun and do everything as cheaply as possible at the same time.
Lot’s of good suggestions here. I would also do a cost/benefit analysis and while doing so, consider that the “American Dream” of homeownership is a trap designed by social engineers to enslave you to the “system”. Consideration of this philosophy has given me the ability to have a take-it-or-leave it attitude when it comes to homeownership. I rent, am debt free, have great credit and a lot of money by most standards. It didn’t come easy.
(I posted this on a different thread earlier but it submerged - curious to hear thoughts by those who have been regularly shorting HB stocks)
Many have been wondering why home builder stocks keep rising in the face of bad news. Now we have at least one reason for why:
http://biz.yahoo.com/bizj/060802/1324795.html?.v=3
“Value Trust snapped up homebuilding stocks too early, Miller and Gay wrote. When investors began selling off the stocks late last year on real estate slowdown worries, the fund jumped in, expecting the sell-off to be followed by a return to strong performance. The managers still believe homebuilding stocks will rebound, but the stocks have dropped much more than they expected in the short term, they wrote.”
Well, if a stock has dropped its price by over 50% from where it was last August, then it must be a good value, right? Just look at how high pets.com is now…
P.S. Miller and Gay sound like the prototypical high-flying fund managers who
prosper during a bull run but ultimately “blow up,” as described in Nassim Nicholas Taleb’s book “Fooled by Randomness.”
Okay, well at least I got a link that time… As you can see I haven’t quite figured out the html coding here… :-S
Off the housing topic a bit, I just wanted to compliment you on the site. On top of doing a great job of rounding up the information on the housing situation, and providing worthwhile commentary, No other site I hit (and there are many) has a comment structure anywhere near as good. I don’t know if you own this design, but every blog should have a system like this.
It doesn’t hurt that the site also is the best housing blog on the net. Thanks for all of the work you put into it.
ot but worth reading
http://www.markettradersforum.com/forum1/1389.html
“rate increase worse than al kaida attack / australia”
from germany jmf
http://www.immobilienblasen.blogspot.com/
As far as weekend topics go, I think that the most important driver is the Federal Reserve. There’s pressure to raise a quarter given what has happened with other central bankers this week. And there is pressure to pause due to pressure on ARM folks. Which way do we go?
As a saver, I’d prefer a hike.
One more interest rate raise of 25bps on August 8th. Also, a statement basically saying that a pause is coming at the next meeting.
David
http://bubblemeter.blogspot.com
Since I beleive that a recession is nigh unavoidable, I’d rather see them fight inflation. Of course the market prediction has been “one more quarter point, they they’re done” for the past 6 meetings or so.
Track record of the FED is to put off the day of reckoning for another time. I’d like to see a couple more rate hikes, but believe that they are finished for the time being
Unfortunately, I am of the same opinion. I believe Paulsons comments earlier this week about a “strong dollar” have evaporated. China believes that it is now able to float the Yuan without impacting its export economy.
“So much manufacturing capacity has moved to China that foreign-owned firms now account for 51 percent of China’s trade surplus, up from 3 percent in 2000, according to Lehman Brothers.”
Trade surplus may defy orthodox currency cure
China daily
http://tinyurl.com/zty2b
Thundereater, if you can’t afford Bakersfield, what makes you think you could afford Morro Bay or Cambria. A 700 sq.ft house in need of repair in Cambria would run you over $400K. You need to bring up your income so you can put more into savings, perhaps take on a second job or pick up some college courses that would help advance you where you are.
People must be getting desperate in Tampa. This morning on my way to work, I saw a van wth the following written in shoe polish on the back window: “Spring Hill corner lot, need to sell!! Call (xxx) xxx-xxxx or (xxx) xxx-xxxx”
If that’s not desperation, I don’t know what is.
Spring Hill is probably more desperate than most of the Tampa area. They’ve had a MAJOR sinkhole problem there for years (even though they keep building there, go figure) and the only company insuring there is Citizens. If I had property in Spring Hill, I’d be desperate, too. Anyone who lives in the Tampa area and has seen the media coverage about the Spring Hill sinkholes knows better than to buy anything in that area. The only hope for sellers in Spring Hill is that they can find some out of state buyer who hasn’t seen the media coverage and hose them into a contract.
I’ve been to three foreclosures in the last couple months. At each one, the bidders offered reasonable offers, but the bank outbid them in the end. Usually at a ridiculous price.
Does anyone know what the bank then does with the home?
They sell it. Really, they hire an agent or have their own agent and fix any glaring defects, hire a gardener and put it in the MLS.
What an image. One guy at the bank managing all these unsold homes that are declining assests, making him sweat. And down the hall is another, signing off on new loans keeping the machine going.
They’d probably write the same loan on the same house with worse terms to a worse borrower to get the pig off the books. Banks are not in the business of real estate but loans. They’ll bend over to trade a property for a mortgage. That said neither one is sweating. They get paid second (the tax man is first). I’m considering being in this expanding business area by running a company that maintains neutron housing. Neutron Houses are where all the living things are dead/gone and only the building remains. We’d keep the electricity and water running and mow the lawn. Why would the banks hire us? Turnkey and lots of times these NHs are going to be in HOAs or covenant restricted. Cheaper to keep the place up than pay penalties for deteriorating appearance. I think about this stuff months and years ahead of when the issue comes up. I’m even thinking about renting families to the bank. Say a childless couple that agree to use the master suite and kitchen only in exchange for low rent and quick move outs and short notice showings.
Robert!
I like that. Talk about deflationary pressure. If you could get couples into vacant homes that would put even more pressure on rentals to stay down and therefore more pressure on home prices. I’m part of a couple and I’d pay to do that, as long as the rent was signifigantly less than my rent, maybe in the $200-$300 dollar range…down from our current $1,100 for an apartment that basically is just a bedroom and kitchen.
If we could telecommute with our jobs, we’d be able to travel to the hardest hit areas…
Robert-
Just FYI banks typically do not lend on their R.E.O.’s and I say typically because it’s done but it’s very very rare. Most try to avoid it like the plague
There are variations on everything. I have heard of banks *requiring* that buyers go through them first when a REO is sold. But I think the reason has more to do with being able to decide if the buyer is really qualified or just wasting their time, more than the opportunity to continue doing business.
Robert Cote, seems like I can remember something similar from Houston in the 80’s crash. Classified ads for housesitters who owned fabulous furniture, worked for brokers, living in vacant homes til they sold to prevent vandalism.
No disrespect, but if you don’t understand the role of the foreclosing lender, I hope you are not participating in foresclosure sales.
Lenders generally bid the amount they have into the property. Very rarely, they will bid higher, but only if there are no other bidders and the lender is concerned that a too-low bid will not be approved by the court.
Foreclosure procedures vary greatly from state to state. Be careful.
huh???? In N.C. (and I suspect most states) the lender cannot bid more than they are owed, due to “predatory lending” legislation.
The lender can bid less, however. They usually don’t go below 80% of retail value, however in order to demonstrate to the PMI company that there really was no bidding interest.
10 below 5% - interest rates are no longer an excuse- the recession has started but not everyone has recieved the memo
Many on the blog have commented that after July 4th panic would set in. Ben has wonderfully provided us with many examples of the change of tone in the media and in statements made by various representatives of the housing industries.
We’ve heard many anecdotal stories told in recent reports, but has anyone seen wide scale seller panic reflected in a jump in price reductions?
Not in my area.
Definitely not in Newton, MA where idiots are still paying 1m for 1950’s ranches and colonials. Gosh! The endless supply of GF is simply mind boggling. When will this madness ends?
In this thread, someone notes that the panic might start with the release of August’s numbers (from the NAR?)
MjM
Nothing wide scale, but a definite softening in prices in the last month or so - so, some signs of seller capitulation.
Here’s my return question: is inventory in your areas still rising? Some people have predicted a decline in inventory due to disappointed sellers taking properties off the market. But — after an early July dip (clearing off old dead listings, I think), inventory has continued its relentless rise in the area (SE VA) I track.
For the zip codes I follow (SD, north county), inventory has basically plateaued in July. It’s actually been going down the past few days. Not sure if it’s permanent, though, as inventory usually climbs through late September/October. Still keeping an eye on it.
I AM seeing more of the following in listing comments:
“desperate to sell”
“priced below comps (or appraised value)”
“foreclosuer imminent”
“bank/lender owned”
“will take any offer”
“owner NEEDS to sell!”
Definitely seeing people selling for less than 2004 prices (and some still selling for more). Remember, SD prices have basically not moved much since mid-2004 because we reached the “affordability ceiling” even with exotic loans.
foreclosuer = foreclosure
EDIT button!!!
as always comparisons to the 1990’s - we know whats happening now- what helps predict the future
I’d like to get opinions on what to do with retirement savings - i.e. should we be switching our 401k’s out of stocks and into money market now (we still have a good 35 yrs. until retirement)?
You are only 50 eh? 35 years is a stock market no brainer at that time frameIf you want to actively trade then sure, 5.75% for a year sitting in cash makes sense (personally a whole lot of sense but you may be different). The markets reward long term however but dodging a plunge makes thet return even sweeter. Just make sure no matter what your portfolio that you are not exposed to HBs (homebuilder stocks) or FBs (risky MBSecs).
Don’t most money markets invest lots of their assets in Fannie Mae MBSs?
You can lose money in a MM account, so be sure you know what it is invested in. There are Treasury MM accounts, but you will make a higher interest if you buy Treasuries direct because the MM accounts deduct fees.
“You are only 50 eh? ”
lol - good point, in 35 years few people will probably be able to retire at 60, 65, 70… actually, judging by the older folks I see working retail, people can’t even do it today. sad.
thanks for all the advice/comments, that’s what keeps me coming back to this site over all the other bubble blogs out there. keep up the great work ben!
People are not aware of the fact, “Nine of every ten foilks over the age of 65 have are negitive debt to assets ratio excluding Gov’t employees in the last decade.” Fed. Dept of commerce reference.
I’m no expert (and I’m ultra-conservative), but I’d say not yet. My plan is to make that switch if the market becomes too “uncomfortable” for my liking. But it’s not there yet. Just kind of watching it for now.
I’m in a similar position-30 years to go and already have a good deal saved in 401K. I think the stock market is going to continue to be where money is made. Companies are going to continue to be more productive, taking advantage of technologies like the internet. New customers are continually entering the marketplace in China and India.
A good read is Todd G. Buchholz, “New Ideas from Dead Economists”. Economists have always predicted ‘the end is near’ for stocks, society, whatever-and they were always wrong.
Companies have the flexibility to cut costs and increase profits. Houses don’t.
AOL just announced they are laying of 5,000 workers. You think the high cost of housing in Loudon County (the company headquarters) had anything to do with that?
I think inventory in Loudon is about to go off the charts:
http://www.virginiamls.com/charts/Loudoun.htm
The housing bubble screws American workers. They lose jobs to regions of the world where the cost of living is cheaper.
Fidelity, a large Massachusetts employer, announced they are opening a new building down in N.C. About 6 years ago State Street Bank, a huge Massachusetts emloyer, looked at the feasibility of moving all operations down to N.C. It wasn’t feasible then. I wonder what they are thinking now?
It’s this kind of activity that could create huge shifts in the geography of the economy. This is where the bubble get those of us that have waited patiently.
Companies became more productive during the early 30’s, too. More productive doens’t always mean higher stock prices. Look at this chart:
http://mutualfunds.about.com/cs/history/l/bl1929graph.htm
Someone who invested in stocks at the first blip past the top of the short recovery would have broken even in only 25 years, so anyone who had 30 years would have been OK. Right?
LIrenter, you might want to read “Conquer the Crash” by Robert Prechter. In 1978 he co-authored a book to tell everyone that a gigantic bull market in the stock market was coming. In 1982 he was ridiculed for saying that the Dow would go past 3000, but then he started predicting the end of the bull market too early after the crash in 1987 and he wrote a book about the coming bear market in 1995, but I believe than even though he was early in predicting WHEN the bull market would end he is right about WHAT will happen- a bear market that will bring the Dow back down lower than most people think could be possible. You should at least consider the possibility in your decision about what to do with your retirement.
You’re telling me the people trading stocks in 1930 were thinking about earning-per-share and debt-to-equity and income statements and balance sheets?
apples and oranges
This time is different, thanks to the liquidity flood post-dot com and post-9/11, which pushed interest rates down to negative real levels and sent housing inflation into high gear. I believe this is why the S&P 500 chart appears to have hit a permanently high plateau since 2000, unlike the plunge it took post-1929. Unless the Fed comes up with a new bubble soon (and I am not 100% sure they haven’t or won’t), then the other shoe is yet to drop on the tech stock collapse. Fundamental reality has not changed, and imbalances (such as massive overinvestment in the housing sector) actually accumulate when price manipulation distorts incentives.
This time is slightly different, in that the short recovery has been a long one, but the end result will not be different, but maybe that is what you are trying to say. The market correction isn’t over.
“the other shoe is yet to drop on the tech stock collapse”
= “The market correction isn’t over”
“I’d like to get opinions on what to do with retirement savings - i.e. should we be switching our 401k’s out of stocks and into money market now (we still have a good 35 yrs. until retirement)?”
I’m 47 and my 401ks and IRAs are all in stock equities. 20% of that is international mutual funds. I hope to work until I’m 70. None of that boring retirement stuff. I like keeping an active mind. There has been no 23 year period in the United States where stocks ended lower at the end than at the beginning. And that accounts for inflation. So for 35 years, why be conservative? I invest very conservatively outside my tax deferred plans. I am going to go for the Roth 401ks if my company starts offering them. When you get closer to retirement, Roth 401ks are better than traditional ones because you can pull your money out tax free. The money you put in is taxed already, so you could not deduct that amount from your gross income.
I thought you could just open a Roth with any brokerage, so long as your income is not too high - less than $95,000 - $110,000 for a single person.
You are talking Roth IRAs. I’m talking Roth 401ks. I didn’t know about those until recently. I think one of the tax bills (pushed by the president that everybody hates) that passed recently established Roth 401ks.
How about buying LEAP puts in Apple stock? It seems to be undergoing a massive crash, punctuated by highly volatile dead cat bounces, but the general direction seems to be back down towards the ground…
http://tinyurl.com/s8k5b
Be careful with Apple. That stock has Steve Job’s “Reality Disfunction” around it. It has a strong and growing stronger product line. The downturn is largely connected to delays in next generation iPods and some problems with stock options. Once both of those are cleared it has a lot going for it.
In the last 2 years, the bottom feeders have entered the mortgage industry. A business near my office looks like it is full of people that stopped in to work just before they left go to the river (sorry to insult the river crowd). It has a very “boiler room” feel to it. Has there been any investigative reporting on boiler room/predatory lending in the mortgage industry?
Time for the knock down drag out last one standing free for all about the coming cities vs. suburbs war?
I don’t know, I enjoy the prop 13 wars more.
BTW…I’ll be in camarillo Saturday for a wedding, I think I’ll stay with you instead of the Hampton, please be at the airport around 9ish, look for a green/ white 172 w/ a frog emblem. Please have air freshener and plunger in your bathroom…
Funny! Though if you can’t flush it, don’t eat it!!!
How many wet hours in exchange for a bedroom? (I used to work for a guy named Burt Rutan, you may have heard of him.)
If we ever meet, remind me to show you a few items that are sitting in a hanger at Camarillo airport.
LOL!!!
Also enjoy the Prop 13 debates!
Have you guys heard of Prop 60 or Prop 90. It’s a little known loophole that makes Prop 13 work even if you are moving!
Here is a summary:
http://www.wwlaw.com/prop60.htm
Crispy,
Thanks for the link! Yes, I’ve heard about the Prop 13 transfer for seniors, but didn’t know the actual Prop #s. Thank you!
My sister (roommate) told me the other day that our complex in Ahwatukee (off of Ray Road) is going to reduce rents. There are more apartments in our complex available now. This is a reversal of the notice we got 2 weeks ago which said our rents are going up. Perhaps in the Chandler / Ahwatukee / Tempe area the glut of speculator houses that are now being rented out is having an effect on existing apartments. It may be too early to tell. But it’s good news. A friend of ours moved from her two bedroom apartment to a 3 bedroom house (she is renting) about 3 miles from us. She pays just about $100 more per month.
JOBS- wonder how many mort/RE agetns w no income lately are counted ?
when they go to a 20k reail W-2 job is it an increase in the stats?
Unemployment rate hits five-month high
Hiring slowed in July as employers added just 113,000 new jobs, propelling the unemployment rate to a five-month high of 4.8 percent and providing fresh evidence that companies are growing cautious amid high energy prices.
http://www.msnbc.msn.com/id/14183758/
I agree flatffplan. I’d enjoy a thread on jobs.
The government releases number of jobs created but am I understanding it correctly when I assume that number is not balanced with loss numbers?
What would happen if that was a net instead of a gross number and layoffs were deducted from that number? I’m sort of wondering if I should start keeping track of layoff numbers. Anyone already doing this?
My opinion is that the picture is much worse than the publicized stats show (referring to my link above). So if it seems even a little bleak on the surface, rest assured it’s worse than that.
I’ve been suspicious of fedral employment figures since they recategorized burger flippers into “manufacturing.”
Forbes says: Employment in sectors dependent upon housing, real estate sales and mortgage finance has accounted for nearly 30% of all job growth since 2002.
Yes. Jobs.
Unemployment is traditionally the final domino of an emerging recession.
I do think we have a large number of under-employed right now. Contractors looking for their next gig, plus all those Realtors getting antsy to see the next check.
Any thoughts on why residential REITs are so hot? You would think that, with all of the overbuilding going on supply would pressure rents on the downside not the upside.
Look at Equity Residential with its meager divident. Personally, I think this baby is setting itself up for a fall. Thoughts?
Too funny! I rent from an ER complex.
My guess, contrary to what many think here, is that multifamily properties will see rising rents, at least for the short-term. I am definitely hearing more people talking about selling-to-rent. Rents are rising in my part of San Diego. Also think a lot of these REITS will swoop in like vultures when the see blood in the condo conversions. Believe we’ll be seeing lots of defaults here, and REITS are well-poised to buy at a fraction of former sales price (all fixed up now, as well), IMHO. I’ve even thought of investing in MF residential REITS for the time-being.
For those that believe the collapse will be short with only a 30% drop from todays news:
“…The land price per square meter in front of the station is 230,000 yen, sharply down from 1.4 million yen in 1993. The price has fallen for 13 years.”
Friday, Aug. 4, 2006
http://tinyurl.com/kepmc
Gap in real estate prices between big, small cities continues to widen
Japan Times
there is no wikipedia entry for housing bust or housing burst, we should get a few here to write one.
what would you include in an entry on the housing bust?
http://en.wikipedia.org/wiki/Housing_bubble
http://en.wikipedia.org/wiki/United_States_housing_bubble
we are no longer in a bubble, the housing bubble has turned to bust. that’s why we need a housing bust entry!
“Hosuing bubble” is as name much more widespread than “housing bust” (3.3M Google hits versus 0.06M). The MSM are now using that term, too, even if they quote someone in denial: “There is no housing bubble.” Wouldn’t it be better to add a paragraph about the “housing bust” into the Wikipedia entry of “housing bubble”?
perhaps
“housing bust: see U.S. real estate decline of 2006-2021″
does 15 years sound about right?
Predictions of 15 years have little persuasive power. Previous housing busts took about 6 years (I some graph about San Diego once). This time is might take more or less time: more, because this bubble was bigger; less, because information is faster now. I wouldn’t make prediction past 1011.
Refer to :
http://en.wikipedia.org/wiki/Housing_bubble
Topic Suggestion
How far down is down? Stated in terms like this - return to 2004 prices, 1997 prices, 1985 + 20% prices for your local market.
My own opinion, based on observing a couple of downturns here in Australia.
“Soft Landing” - Average real price falls (either mean or median)
“Hard Landing” - Average nominal price falls
“Crash” - Average nominal price falls more than 10%
SD ziprealty inventory seems to have stalled out on a permanently high plateau just north of 23K? Is this as high as it goes, or is this a mid-summer lull in the SD inventory correction? Or is there some sort of spin going on here?
Assuming a rate pause next week by the FED, any thoughts on a possible “Echo Boom” resulting?
I like this topic. Our poster “nhz” gives some good insight as to how this actually may come to pass. It is naive of us to think there are no alternatives to a severe crash (in nominal terms). It’s the whole inflation/deflation argument again. It’s the $64 billion-dollar question. If we could acurately predict the outcome, we’d all be rich!
People sure can be screwed up about the “kids and a yard” thing. When I was a child living at an apartment complex, I often had other kids to play with on the swingsets, in the sand boxes, etc.
Then when I was 8 my parents moved to exurbia. The neighbors all were either retired/no kids/teenagers and I basically had no childhood friends (other than when at school.)
The treasury yield curve inversion is looking serious enough to make me feel personally depressed — 30-yr yield 15bps below the 6-mo. Does the bond market know something the mainstream financial press conveniently chooses to ignore?
http://www.bloomberg.com/markets/rates/index.html
Check out the bizarre price action on the 30-year Treasury yield today, after the initial free fall. Can this instantaneous dessication of volatility occur without intervention?
http://tinyurl.com/aemkc
Thanks for the responses to my “Blunt” question.
About me. I suppose a little more info would help. I work for a major Nat’l Oil Company in a low level service job. The chances for advancement are slim,but not impossible. I am married,but at this time the sole provider.
I am returning to college,in the fall.I’d prefer to stay with this Company at least long enough for my retirement plan to ‘vest’.
(and Yes,I do freecycle)
Anybody know a good fnancial planner? I want to get things fixed back up,but reading books and seeing the (so-called) Tips in said books, does not always cut it. Besides,like many people,part of this is just ‘hand-holding’ along with knowing what to do.
Thundereater,
Not sure why your wife doesn’t work (kids, disability, etc.), but suggest she try to get a job if she is able. Even a waitressing job (I know Bakersfield doesn’t have a great job market — my Dad lived there), anything to bring in more money. I think your job at the oil company should be good for the time-being. One thing I’ve learned in my various jobs is to look for things which aren’t done, but should be. Take it upon yourself to find a system which could make the company more profitable and efficient. Some ideas:
-creating reports which add more timely info and transparency for the higher-ups
-even cleaning the office/workplace, and trying to maintain a better, more pleasant environment
-finding redundant processes (double entry of data by hand or computer, or physical movements…can they be made shorter/easier?) and streamlining
-safety concerns…is there something which causes workers to get injured? How can that be made better? Can you do it in a cost-efficient way?
Just look around for problems or slow spots in how the company operates & try to think up solutions. Then, create some kind of report (can be a simple memo) and present it to the right people.
IMHO, this is a good way to get recognized and the PTB will consider you a valuable asset to the company. Good way to move up and earn more money. Post ideas here to see what some of the posters think. This blog has an above-average collective IQ, IMO. Great resource.
Best of luck!
Some believe you need a new bubble to fully burst the old one … probably this is main reason why we dont see “panic” selling, yet.