Weekend Bits Bucket And Craigslist Finds
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
To donate by mail, or to otherwise contact this blogger, please send emails to: thehousingbubble@gmail.com
PayPal is a secure online payment method which accepts ALL major credit cards.
Links
-
November 2024 M T W T F S S « Sep 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Photo Submission: hbbphotos@gmail.com
View the HBB Photo Gallery *updated 4/13/2008
Please feel free to add expressions of grief to each of the 5 stages listed below.
THE 5 STAGES OF FB’s GRIEF.
1. Denial and Isolation:
“No, not me, this can’t be happening to me. RE never goes down, my neighborhood/area/city is different. There’s a shortage of land, David Lereah said so himself”
2. Anger:
“Why me? How dare you do this to me?! (either referring to a god, the buyer, a real estate broker, or themselves) I will not lower my price, I will hold out and get the price I deserve.”
3. Bargaining:
“OK.. so the housing market has stalled a bit, no big deal, it’ll be a soft landing and prices will soon start going back up… I’ll throw in a plasma tv, or I’ll just rent it out.”
4. Depression:
“Am I a FB? Have I really screwed this up? I’m going to loose my home(s), my retirement, and my black Hummer/Navigator/Jetski? I can’t bare to face going through this or putting my family through this. My god, what have I done… Mommy I’m scared!”
5. Acceptance:
“I don’t care anymore, I’m ready for whatever, here are the keys, just take the damned House/Hummer/Navigator/Jetski already. Please!?”
5. Acceptance:
“I don’t care anymore,” he said as his pants hit the floor and he assumed the position, “I’m ready for whatever, here are..OH MY GOD.. the keys, just take..OHHH..GOD..HELP.. ME..the damned..OWIEEE..OH MOMMA.. House/Hummer/Navigator/Jetski already. Please!?”
I think we should change this from “acceptance” to “ass-pounding” stage. It would more properly reflect the action associated with this part of the cycle.
yup, SQUEAL LIKE A PIG!
please don’t use that phrase. I’m going to Arkansas this coming weekend and I’m scared enough as it is…
Leave your horse behind, but definitely bring your ……. -
6. Insanity:
“I need to sell my house so I can buy the house down the street, it is nicer and cheaper than mine.
7. Hope to be raptured. If not go to step #8.
8. Arson.
9. Get Contract Law degree in prison.
3. Bargaining:
“Okay, please Mr. Bankerman please give me an extra month before foreclosing because I my Realtor told me sales are going to pick up in October. Please I’ll be able to make the payment from two months ago after I sell my plasma screen and time share on ebay.”
OMG— you mean that Erik Estrada’s gonna have to find a new job?
What’s a FB? I’ve been trying to figure this out for some time now. I did a search in google. The only thing I thought might fit is: “Fart Burner”?
FB = F***ed Buyer.
tap.. tap.. is this thing on? 2nd try at posting a reply.
Actually, I think it stands for “F***ed Borrower”. Term originated from the following site.
http://www.housingbubblecasualty.com/
Something I’ve been thinking about regarding the incentives the builders are using to artificially prop up prices:
The builders are doing this they don’t enrage the existing homeowner by undercutting the price of his house, but wait til Joe Existing Homeowner tries to sell his non-upgraded house with his formica and builder-grade appliances in the same development as the new house the builder is offering with thousands of dollars of “free” granite counter tops and jacuzzis and stainless steel appliances. Uh oh. Then we’ll see if prices are “the same.” That’s gonna be a rude awakening.
It depends on the time frame. I’d say after 10 years, the maintenance on the house matters as much or more than builder’s upgrades. But you’re right, for anyone thinking they’d use their house as a 2-year-tax-free-trade.
I generally agree, and have previously suggested here that the builders have a rational reason to offer cars with those houses, while individual homeowners who do so are just plain stupid. For builders, the strategy offers at least three potential advantages through posting sale prices $50K-$100K above the buyer’s effective purchase price:
1) It can fool rival sellers of comparable used homes into listing at a price where only the builder’s homes will sell;
2) It can result in a higher projected future revenue stream, to the extent projections neglect the cost of incentives;
3) It can enable the accountants to calculate a higher value of inventory, to the extent they conveniently ignore the cost of incentives in their valuation.
An honest accounting approach would take the cost of incentives into account, but something tells me that unless a plainly written rule exists which says to do it this way, then the cost of incentives is conveniently swept under the rug.
An honest accounting approach would take the cost of incentives into account, but something tells me that unless a plainly written rule exists which says to do it this way, then the cost of incentives is conveniently swept under the rug.
What if buyer decides to sell the new giveaway car? What is the tax base? Also on the incentives, how would a lender perceive giving a home loan that included a Hummer?
“[H]ouse-price inflation merely redistributes wealth, rather than creating it…the end of the real estate boom puts a new importance on other sectors, such as research, manufacturing and global trade.”
Oh, you mean we’re gonna have to like, figure out how to make some new stuff and then sell it if we want to make money? What a great idea!
http://www.philly.com/mld/philly/business/columnists/andrew_cassel/15354641.htm
The whole financial system redistributes wealth. If you took all the money in the world and divided it equally among all the people, I’ll bet within 3-5 years it would end up in the same hands in the same amounts that it started in.
Interesting. I guess that means I’ll have to invest really wisely for the 2-4 years that I have some.
Txchick,
Way back in the ’70s an older co-worker used that line except he said “within a generation.” Other than the amount of time it would take, the distribution would definitely return to what it is now.
I talked to someone I know last night, who settled on a house in Florida last month (market peak!) but who still has a year to work before retiring and moving from the house he owns in the DC area. Without my bringing up the current situation, he acknowledged the tough market in DC (Florida’s market never came up), and hoped things would turn around by next spring. I bit my tongue.
Imagine having to watch TWO houses lose much of their value!
I disagree with TxChick (but only modestly!)
A significant portion of the “developed nations” wealth is a product of colonialism. Now that the reverse is taking place, I wouldn’t be too sure about your above statement.
However, I do agree that it would be concentrated in “similar” hands within a generation (not the “same”.)
It’s probably true that much of the infrastructure (factories, financial institutions) would re-form in cheaper countries. But they would be in countries with a strong and equitable sense of law. Kleptocracy and thuggery in much of the 3rd world would still hold them back, and the “new” weath would flee, just like the old did.
Agreed!
The protection of “private property” is the basis of capitalism, all rhetoric aside.
Wrong. Colonialism was a net loss for European countries, and a net gain for their colonies. Having lived in the third-world, it is obvious they are poor due to their culture or wars or corruption and ALWAYS their government, not that they were a colony 50 years ago. Don’t blame whitey.
“Colonialism was a net loss for European countries, and a net gain for their colonies.”
That’s a joke, right?
No, stupidity.
Any fool economist can see that getting raw materials at near zero cost was the ultimate free lunch.
“Wrong. Colonialism was a net loss for European countries”
That is a ludicrous statement. Europe raped and pillaged their colonies for centuries.
Colonialism could have been a net gain for the countries they colonized, but often the pettiness of the colonizing country erased the effect. For instance in many countries when the colonizing country left they destroyed any thing they had made or helped make or plant that might have helped the colonized country such as poisoning all the wells they drilled and tearing out plantations of pineapple plants, just to make sure that the natives couldn’t use them anymore.
just look at all previous European empires and you can see they all quickly got filthy rich from colonialism, and lost most of their wealth (and power) as soon as they lost their colonies: Rome, Portugal, Spain, Netherlands, UK, France, etc.
I do agree however that some colonies were slightly better off after the colonists left, but maybe when left alone they would have done even better (although that would probably have taken much longer).
Power, yes, but not wealth. All of these countries are much wealthier by any definition now than they were when they were colonial powers. Do you think a typical Portuguese wants to go back to his living standard of 1975, when it still held Angola? That the average Frenchman is worse off now than in the 1950s, or 1920s?
to David B:
all of these countries quickly lost a lot of wealth and power when they lost their colonies, I’m very sure about that. A typical Dutchman was much better off in the 17th century than someone in the 18th/19th century. Empires throw loads of money at very unproductive things; but some money is usually invested wisely and that still gives a nice payoff in the future (compared to other countries that had no colonies). Regarding Portugal and France, I was talking about their real world empires of more than 500 / 200 years ago.
Countries “lost most of their wealth (and power) as soon as they lost their colonies: Rome, Portugal, Spain, Netherlands, UK, France, etc.”
I’d write it differently. Countries lost most of their colonies when they lost their power. Then the lost their wealth.
Is the US at the edge of this effect?
How true.
Painful, but the power of the US today is just another empire, to become a footnote in history.
And spare me any so-called “patriotic” flaming. I’m not interested unless you have real arguments to back it up like a turnaround in the trade deficit, or how the natural resources per head of population make up for all the debt.
Loafer
“Painful, but the power of the US today is just another empire, to become a footnote in history.
And spare me any so-called “patriotic” flaming. I’m not interested unless you have real arguments to back it up like a turnaround in the trade deficit, or how the natural resources per head of population make up for all the debt.
Sadly we are less of a “Country” than a place to make money.
Kevin Phillips draws historical correlations between countries/empires which moved from production to finance to economic stagnation or worse…. The U.S. is merely the most recent/most massive “empire” to follow this route. Be interesting to watch whether the historical precedent holds. Appears to me to be heading in that direction………and at a faster pace than previously…
“just look at all previous European empires and you can see they all quickly got filthy rich from colonialism, and lost most of their wealth (and power) as soon as they lost their colonies: Rome, Portugal, Spain, Netherlands, UK, France, etc…
I do agree however that some colonies were slightly better off after the colonists left, but maybe when left alone they would have done even better (although that would probably have taken much longer). ”
Spain certainly attained great wealth and power during the 16th century from the gold and silver extracted from her Latin American Colonies. Her power did fade at the end of that century to be replaced by Britain and france in the seventeenth century. There is no evidence that Great Britain extracted great wealth from the original 13 colonies (now the USA), though she no doubt gained commercial monopoly rights.
The aquisiton and aquiring of colonies during the great age of European colonialism in the nineteenth
century involved vast expentitures of state financial/ military resourses(Military Campaines drained their treasuries). Whether the colonies gave back net returns is debatable in many cases. Did the Belgians profit from their mining operations in the Congo? Maybe. Did france rake in the dough fron their ruthless running of slave labor agriculture plantations in indochina? Perhaps.
Colonies were a drain upon all european colonizing nations due to expensive colonial military campaines and the huge administative costs. Often these colonies weere aquired more out of ambition.national pride and Martial glory, as well as for ruthless capitalist extraction/trade.
Britain did well out of India not so much because india was profitable for Britain but because india provided an outlet and colonial positions for the British upper classes, as well as an outlet for Brtish exports.
Britian invested in the 13 original colonies for strategic reasons. She needed a beachead from which to compete with Spain, and she desperately needed timber, without which the British navy would not have been sustainable.
The settler colonialism of the 17th century became a problem in the 18th century, but until then those colonies played an important role in the whole system.
Upon the establishment of power in the East and over the seas the shift was to mercantile control, through East Indies and West Indian trade systems. When those systems stopped being profitable at the end of the 19th century the Empire was contuing mainly for sentimental reasons.
-
“You could give a billion dollars to the poor and it wouldn’t solve poverty. The poor would eventually become poor again. Money only magnifies what you already are. You give a person that’s on drugs more money, they’ll do more drugs. A gambler, they’re going to gamble more. Money magnifies what you already are.” - Bishop E. Bernard Jordan
-
“Take a self made rich man. Take away his money and let him start over. He will have his riches back in half the time.”
Provided that the rules are the same as when he made his moneys the first time. “I earn money the old fashioned way, I steal it.”
Some non-western countries that weren’t colonized: Ethiopia, Turkey, Thailand, Japan. Of course Japan and Turkey were colonizers. Between Thailand and Ethiopia I think there is little evidence that colonization is bad or good. How about some former colonies. Take Chad, Niger, and Sierra Leone or Hong Kong or Singapore, Malaysia… Or Latin America that mostly became independent in the early 19th century. Some have done much better than others. Colonization per se isn’t much of an explanation of anything.
Ethiopia was invaded by Italy in the late 1890’s. It was colonized by Italy in the 1930’s.
My favorite was always… “Make a rich man poor and he will be rich again; make a poor man rich and he will be poor again.” Don’t know who said it.
A couple of caveats. It would take a timespan of a career and while the distribution would return it wouldn’t be to the exact same people. There really is inequality of opportunity out there. Also it should be noted that wealth distribution is currently at historic extremes so the subsequent redistribution wouldn’t be as radical.
I have to agree with Robert. Take a rich and make him poor. He’ll make back his wealth because you haven’t taken away the opportunities he was given while growing up….the education, the connections, the proper way to interact with people…..IMHO if you gave the poor money and the same background/knowledge/connections…that would be interesting. IE Trading Places (Eddie Murphy/Dan Ackroyd)
This old chestnut is just silly. The Cubans had a redistribution of wealth, and the money never settled back into the same old hands. The history of the world is full of examples of redistribution schemes that never returned to the way things had been.
Oh, come on! You’re holding Cuba up as an example of economic liberty? If you want to make this point, at least cite ancient Greece or something.
“You’re holding Cuba up as an example of economic liberty?”
no, i think knock is holding it up as an example of “equality.” and for those who value “equality” most highly, “liberty” is just a major inconvenience.
does Cuba actually have any legal tender? I thought they had an underground dollar but, if they are truly communist, they shouldn’t have money at all.
Through Income Tax and the New Deal this country redistributed wealth and created the largest middle class in history.
It is reversing now because Conservatives are changing the system to favor the rich.
In the Netherlands over the last 20 years the economic system has been changed by politics to be similar to the USA (for our conservative ruling class the US is the example of economic and social paradise). In that same period, the difference between the average wage and the top wages for the best paid managers increased from 18x to 420x. It is very clear how ‘redistribution of wealth’ works in this system.
“Through Income Tax and the New Deal this country redistributed wealth and created the largest middle class in history.”
i agree. but even a medicine can kill you in overdose (90% tax rates, etc.) republicans were wise to moderate this excess in taxation.
“It is reversing now because Conservatives are changing the system to favor the rich.”
few conservatives would say that they’ve had much control over spending or taxing for the past 6 years. or any control over the forces of globalization either, which is primarily responsible for the troubles of the middle class.
and this crop of republicans has been as guilty as any democrats when it comes to the spending side. our leaders on both sides of the aisle have been all to happy to break the bank, if they think it will get them re-elected.
someone said (i paraphrase) “democracies only last about 200 years. once different constituencies realize they can totally control the government’s expenditures by electing those that will subsidize them, it’s game over.”
Wealth is redistributed AWAY FROM the middle class (to the rich via government spending and to the poor via direct services). The health of the middle class is HARMED by the New Deal.
We did have a big middle class, but that was unrelated to government services provided by the New Deal. It would have been a bigger middle class without that.
“Republicans were wise to moderate this excess in taxation”
Agree. But there was no follow though by cutting spending to match. By cutting taxes and increasing spending they are worse than spendthrift Dems.
It’s like multiplication with negative numbers:
wise*wise=wise
wise*stupid=stupid
stupid*stupid=stupid
The bust of the housing market will send us into recession. The fact that the gov has used up most of their ammo elsewhere will deepen and prolong it.
stupid*stupid=The Sheeple
When it gets bad enough, a new set of ‘leaders’ ambitious and ruthless enough to scramble up and stay on top for a while will get their shot. (That is, if we can scream and complain our way to a fair election — see Ukraine, Mexico, etc etc) Of course, those leaders better know what time it is, or they’ll GET shot. (see JFK, Ghandi, MLK, etc etc)
Americans are woefully ignorant and short-sighted and spoiled and fearful. Not all — but enough. The Reckoning that History Brings at the End of Empire has invariably been very harsh. Don’t see why this should be any different…the whole Nuke/Rapture/PsychoticCheney thing makes it different, I guess.
The New Deal was a failure. Why keep repeating the same old lies? Oh, yeah, your comrade Lenin knew: the simpletons out there eventually believe the lies.
The New Deal was a failure.
Not to the people that were able to eat again.
The New Deal looks okay now because a huge government debt has been acquired to pay for it, which isn’t our problem… generation of he future will have to take care of it right? I’m sure they won’t mind paying for their ancestors debt and will hail it as a great success.
“Oh, yeah, your comrade Lenin knew: the simpletons out there eventually believe the lies.”
What time capsule are you blogging from? America has moved on to a new ideological war.
“I’m sure they won’t mind paying for their ancestors debt…”
Social Security and Medicare no doubt are in need of reform. But how about debt incurred as a result of an increasingly paranoid and militaristic world view. The price of bringing “democracy” to Iraq? Five billion per month.
The welfare/warfare state that FDR helped create is still relevant; in fact, it’s the most important issue in most people’s lives, for good or ill (mostly ill, if you pay more in taxes than you receive in “entitlements”.)
The US has gone from freedom to fascism because of the likes of Manraygun and other flag worshippers.
The New deal did result in at that time novel concepts of Gov’t economic ands socual engineering(active gov’t intervention to stimulate the economy). Sort of like a half-way point between pure laissez=faire economy and the totalitalrian state-command and control economy of tne USSR in the 30’s. Actiually activst Gov’t intervention of the US econmomy was initiated during Herbert Hoovers Presodency.
The US really did not get out of the depression till WWII, which created enormous demand for US goods. Yes. the US under Roosevelt during WWIIran huge deficits and practiced wartime socialism/capitalist enginneering, sort of like the Facist states it was warring against.
Difference between Communism and fascism at that time were slight-The facist states(Germany, iTal, Japan) permitted private property and capaitalism to flourish while the communist USSR imposed state control over Capitalism. Other wise the two systems were equally totalitarian in their ruthless supression of Parliamentary/democratic insititutions.
The New Deal is not/would not be sustainable forever. It ultimately implodes if things do not remain constant - which theycan’t… the demographic changes alone have essentially done it in- imho…
Through Income Tax and the New Deal this country redistributed wealth and created the largest middle class in history.
Wrong again. Get a clue. Wealth and income are not distributed, they are earned. Economics 101; try and read it sometime.
Wrong again. Get a clue. Wealth and income are not distributed, they are earned. Economics 101; try and read it sometime.
————————-
Wrong again. Wealth and income are won by those with power over productivity and resultant money flows. He who is in power controls where the money goes. He who has money, has power.
Be not mistaken. Wealth is made by controling the productivity of (and benefits derived from) the working people. Productive people tend not to be wealthy. It is the people who control them, and the fruits of their labor, who are truly wealthy.
Wrong again. Wealth and income are won by those with power over productivity and resultant money flows. He who is in power controls where the money goes. He who has money, has power.
Be not mistaken. Wealth is made by controling the productivity of (and benefits derived from) the working people. Productive people tend not to be wealthy. It is the people who control them, and the fruits of their labor, who are truly wealthy.
Your ignorance speaks volumes. I don’t know if you ever studied economics in college, but if you did, may I suggest politely that you ask for your money back.
Try explaining your point, and I will explain mine. You don’t exactly win debating points by making juvenile comments like, “get a clue, and “your ignorance speaks volumes.” Try going into a more detailed explanation as to why you think I’m wrong and you’re right. Maybe then someone can respect your supposed “intelligence”.
The redistribution of wealth is Communism.
“Through Income Tax and the New Deal this country redistributed wealth and created the largest middle class in history.
It is reversing now because Conservatives are changing the system to favor the rich.”
The origins of the American middle class have their roots as far as the original Puritan Settlers, and the cosequent settling of New Emgland by prosperous merchants, artisans and skilled craftsman. Throughout the entire immigration and settement of the American Colonies/USA during the first 300 years, vast numbers of Scotch-Irish, English. German, Dutch, swedes,ect fanned out and hacked out their own plots in the Wilderness, and became indepoendent Yeoman Yankee farmers.landowers, shopowners,traders,ect(think presidents Andrew Jackson or Abraham Lincoln). There was never a Landed established gentry to block settlers from obtaining cheap land, only Indians to clear out.
I am talking about settlemnet in the NewEngland and the old Northwest, praire states, and the northwest territories, not the old south which became a feudal baronial slaveocracy.
the biggest advance toward creating a Middle class was the Homestead Act of 1862, which granted free farms of 160 acres to anyone, including non-citizens, who occupied and improved the land for five years.
Not all classes od Americans shared in this bountie: Blacks,indians,and certain religeous gropus were excluded.
“Oh, you mean we’re gonna have to like, figure out how to make some new stuff and then sell it if we want to make money? What a great idea!”
ahhhh, THERE is john galt.
Another Scotsman? The irony of it all!
How long do you suppose it takes the average lottery winner to “dispose” of the entire windfall? My guess is 2 years from receipt.
-
8 lottery winners who lost their millions
Having piles of cash only compounds problems for some people. Here are sad tales of foolishness, hit men, greedy relatives and dreams dashed.
http://articles.moneycentral.msn.com/SavingandDebt/SaveMoney/8lotteryWinnersWhoLostTheirMillions.aspx
Of course many lottery winners do OK to as research shows. Strange though that we never hear their stories
Do okay? BOH-ring!
I have family members still living off of the millions they inherited (from an aunt not a parent) over 30 years ago. It is invested and they live off the proceeds. I’d call that a windfall, wouldn’t you?
The latest study I’d heard about indicated that 93% of windfall recipients were better off for their windfall. The other 7% were losers. Which are you?
In Austrian economics, ALL intervention of the free market by government serves to benefit one group of citizens at a cost to others.
In other news… if the cost of maintaining colonies outweighed the almost free resources acquired from them, then in theory it’s possible that colonialism is more costly than beneficial. For example, that is exactly what is happening in Iraq today. The oil revenues sorry to say are not funding the war and occupation. However, on the face of things, it seems ludicrous to say that of Europe in the 1800s.
Hey, Ben, read this ad. Can you believe the arrogance of these people? I’ll bet this place is still empty come January 1.
http://flagstaff.craigslist.org/apa/197446666.html
They want someone to pay 2k per month for a 2 bedroom house in a town where probably very few can afford that - and then to top it off, leave a room open for them to use when they feel like it?
UFB!
Heh, but proximity to DQ is really enticing.
Thats was my thought…Close to excellent dinning…
that was my thought too - I cannot imagine the mentality of the person who thinks that is a selling point!!!
I saw a rental in HB that was offering a similar deal.
Except for they wanted the tenant to move out on the Summer Holiday weekends (Memorial, 4th and Labor day).
I don’t think it ever rented.
It’s two apartments in a house. They are willing to rent one or two together if you push them. Maybe their rent is too high but it isn’t like they want to stay in the apartment they are renting.
Oh the arrogance!
Even NYC merchants don’t come that close.
Imagine if this concept took hold.
http://biz.yahoo.com/weekend/bighouse_1.html
“Meanwhile, we’ll peg your home’s price appreciation at 5% a year, versus 3% for inflation. That two-percentage-point annual real return is right in line with the historical average. ”
the ‘concept’ that mcmansions will be even less of a good ‘ investment’ is even more convincing than the article alleges. considering its cluelessly upbeat projected appreciation, and considering we’re 1 year past the peak. we’re likely headed down, down, down for the next 10 years, and it will probably be 15 to 20 yrs before we recover from those losses, adjusted for inflation.
the 2% appreciation above inflation is not in line with the historical average; in most countries historically it was just 0.5-0.75% above inflation (so if you add taxes and maintenance cost it is a sure loss).
The last 20 years or so in the housing market were without any historical precedent, so it would be wise not to use them for future projections (also, inflation calculations for the last 20 years are totally incomparable with previous periods …).
“the 2% appreciation above inflation is not in line with the historical average; in most countries historically it was just 0.5-0.75% above inflation (so if you add taxes and maintenance cost it is a sure loss).”
that makes my point even more persuasively!
Still it is one of the sanest articles in the mainstream electronic media that I have seen on housing.
Theoretical example…few live in the same house for 30 years or anywhere close to that long.
Then there are the real estate crashes and booms, stock market crashes and booms, income tax rate changes (likely increases coming post 2009), job losses, bonanzas (less common, like stock option win, etc…), health issues.
One should buy where they want to live and how they want to live within their means and contribute to 401K, etc…
I’d also argue the the $400K house in Bum F’d Egypt Exurb is going to be a much worse investment than the $600K-$900K house that is less than 5 miles to everything in a major city, great neighborhood, schools, etc…
Army No. Va.
Excellent article in WSJ this week by Joe Clements, where he did the math on how it is better to buy a small house as apposed to buying “the most house you can afford”. Basically he says that with all variables, the small house people will have a more comfortable retirement.
I wish he would have also included a note that the boomer gen will all be trying to unload their Mcmonstrosities at the same time. If they have not unloaded yet it is probably too late.
“Theoretical example…few live in the same house for 30 years or anywhere close to that long.”
Though 53% of U.S. millionaires have been in their current homes for 10 years or more.
Moving incurs substantial time and monetary costs and loss of productivity as you have to learn the area. When you live in the same place for a long time, you learn where the good places to shop are (whether for price, quality, convenience or service), know where to go for your banking, cleaning, maintenance services, auto services and entertainment. You know the best routes to get to work. And the backup routes should there be traffic.
53% of U.S. millionaires is a very small part of the population. Usually doctors or lawyers or local business owners. If you work in industry as an employee you are likely not in this category. If you are an exec in many industries and you have money (or maybe just high income), you are likely moving around quite a bit.
The point is not to say that “they’re rich, so they’re different,” but rather, “what should I do so that I become rich like them?”
The lesson here is to live in your house for 10+ years.
On a typical 20%-down, 30-year mortgage, if you move at the median 7-year timeframe, about 92% of your payments have been towards interest. This isn’t a problem in a rising market, but if your home has lost 8% over 7 years (a mere 1.35% per year), then the difference between rents and your mortgage payments is what you’re out. Add closing costs, listing charges, and moving expenses, and it’s clearly a losing proposition. The rich don’t pay these ‘taxes’ because they aren’t moving; that’s the lesson to learn.
I think that what’s in that article most her intuitively know. But that this strategy existed in the first place was a surprise to me. I didn’t know that this was actually a thought-out strategy. Some things that the article didn’t mention:
- You need to furnish the place. Unless you want to live in a million-dollar home and sleep on the dining-room table.
- If you can afford that mortgage, then you’re probably going to be in the zone for deduction phaseouts so that mortgage deduction may not be worth what you think it’s worth. If they’ve changed the laws on mortgage deductions, I might be wrong. I haven’t had once since the 1990s.
- Cleaning costs go way up.
- You have to sell the furniture when you downsize.
- You have to buy upscale cars to maintain the appearance. And those upscale cars will cost more to fuel and maintain and insure.
- Your kids will expect the upscale toys that the rest of the kids in the neighborhood get from their parents.
It would be nice to see a bar chart of three houses in various parts of a city and what their total costs of ownership are.
A message from the HBB Ministries Outreach Program:
Let’s spread the gospel this weekend. There are still many, many who haven’t the slightest clue about the housing bubble. You know some of these people at work or maybe they are your friends. They need to be ’saved.’ Imagine the power of each of us spreading the word to just a few people.
HBB Ministries asks that you tell 3 people about HBB this weekend. Refer them to this blog and tell them to read it for one week. Salvation for everyone!
And don’t forget to tithe!
I often print copies of compelling articles, to give to people I know. I find that people seem to find the information more credible when it’s printed, even if I told them verbally exactly what the article said.
Best to take it from someone with inside information, and who would be better qualified than the chief economist of the NAR? (Sorry to repeat this post, but I don’t want anyone to miss out
)
http://paper-money.blogspot.com/2006/08/lereah-mea-culpa.html
OMG! David has been reading over here! He’s now saying what we’ve been saying for the past year!
“Comrade Lenin knew: the simpletons out there eventually believe the lies”
In this case, repeated often enough, the simpleton learns the truth!
I think that presentation shows that David Lereah is no simpleton. It strikes a delicate balance between claiming that very ugly data do not imply a hard crash landing on the way, and twisting the Fed’s ARM to respike the punchbowl under the threat of otherwise blaming them for causing a hard landing.
Too little, too late. Much too late.
Too good.
http://tampa.craigslist.org/rfs/192780993.html
Maybe when it goes thru its fifth foreclosure in 12 years.
So … he’s giving away $400,000 in equity? Tell you what — just send me $200,000 and you can keep the home and the “equity” to share with someone else. I’m not greedy.
What’s funny is that he doesn’t even describe the property.
Of course he doesn’t. He’s just a spammer trying to harvest email addresses.
I live in DC and would like to buy a home in the next year or so, but now you are telling me that RE prices are going to fall for the next several years? What an inconvenience this housing bubble is causing. I am not a fortune teller, so I can only conclude that I would follow a similar pattern as most americans which would be to move in about 4-7 years after purchasing, so don’t give me that “RE is a long term investment” BS. I am either stuck renting , or have to move to a non-bubble area. When will a house be a house again?
When people don’t plan to use house flipping to a) earn more than a real job and b) permit them to retire in comfort before age 30.
you’re real lucky to have found this blog.
LOL he sure is. Waiting– grab a couple brews, kick your feet up, and enjoy the show– and enjoy your rental. If you really need a nicer place then *rent* a nicer place. Everything you’ve heard of the material advantages of buying over renting is just Realtor propaganda and is without a shred of truth today. Of course, there are still emotional advantages to buying, but I’ll guess all reasonable people now will just have to suck that up for at least a couple years.
And the question is how much are those emotional advantages worth? $1000/mo? $2000/mo? $200,000 over the next 2-3 years?
“…or have to move to a non-bubble area.”
And these “non-bubble areas”, where are they specifically?
Owning is its own reward. Go ahead and buy a house if you need to own. The benefit you’ll be paying for is owning your own home. If you want to invest your money, then invest it and rent. When this market corrects, home owning will go back to what it was: A place to live, not an investment product. The roof over your head is the return on your investment, not year on year appreciation.
“Go ahead and buy a house if you need to own.”
i would suggest therapy if you “need” to own. but if you don’t mind your house being worth considerably less in 4-7 years than it is now, and money is no object, them by all means buy now.
i would be extremely leary of taking financial advice from anyone who points to cuba as an example of a “successful” or healthy redistribution of wealth. for all its inequality of wealth pre-castro, it was still the gem of the caribbean. not it is an economic basket case.
I know a guy who visited Cuba. I asked him what it was like. His reply: “The whole damned place needs a paint job”.
I agree Kwurst;….Who decedied that a personal residence is a investment ???
It’s all things. It’s a place to live. It’s a rite of passage in our culture. It’s also an investment. It happens to be a very bad investment at this time.
Both intangible emotional AND material investment considerations have to be weighed into your personal valuation of property and decision to buy.
Rent for at least a year. Then reassess. Whatever happens, DC’s housing market is likely to get hurt more than the national average over the next 12 months. On 8/26/07 your buying power relative to today will be huge. If you like your job, renting is like having a second job. Besides the fact that renting is a lot cheaper than buying, you’re making an additional $1000+/wk. just in the increase in your homebuying power. You’re in the same position as homeowners were in up until 2005. Blow off the small annoyances of renting and enjoy your financial windfall!
Godot - if you are talking about a house to live in, all you have to do is wait for monthly rental cost parity. You don’t have to wait for the bottom. Repeat after me,
Rental parity
Rental parity
Rental parity
When your (fixed) mortgage and property taxes are at about that level, you will be fine.
“When will a house be a house again?”
When people stop saying that they are investments.
… when everybody knows someone who has lost a fortune by flipping a home, investing in vacation/investment properties or buying too much home for their income. That will take many years but we have to start somewhere.
“…would like to buy in the next year or so.”
I would be surprised if in the next year or so you will still feel like buying.
Try a lease-option-to-buy?
oops. “NOW” it is an economic basket case.
Going, Going, Gone:
http://www.xanga.com/home.aspx?user=russwinter&nextdate=8%2f26%2f2006+23%3a59%3a59.999
Good one Russ;….I just read a day or two ago about “net” checking account balances have fell dramatically
over the last 6 months or so…
Shows that the Fed tightening is real despite everything that goldbugs etc. say about “printing money”. Don’t know what to make of the massive commercial short in bonds. It doesn’t fit the rest of the picture.
The bond market thinks the yield inversion has to end.
Are they shorting the price or the yield?
Whoops, it’s obvious.
could someone please eloborate on this.
Are you implying the long end of the bond market will correct upwards?
Yes. Assuming that the commercial traders know what they’re talking about, it goes like this:
Long bonds are currently charging too little in interest for the risk that is being incurred. As soon as some defaults start occuring in MBS, buyers of long bonds will demand a better interest rate, which drives the prices down. COT is showing that a bunch of people are anticipating this drop in price, and are trying to profit from it.
One item is not clear in my mind though: Can the large short position be the result of a hedge somewhere?
OT to Russ: nice find. Wish the comments on your blog didn’t require an account. I have enough crap to remember…
If we go into a recession, which I believe will happen in the next 1-2 months (not quarters), the demand for money from individuals and corporations falls, driving down the price of money (interest rates). In the short run, this also drives down the money supply (the Fed determines the monetary base, but not the money supply), putting a dampening effect on inflation, which feeds into the loop, thus continuing to drive rates (and I’m thinking here mainly of long rates) lower. Think of interest rates as being made up of two parts, a “real” part and an inflationary part.
Countervailinig to this is the fact that government spending may increase, due to such things as automatic transfer payments (think unemployment benefits and the like) which increases the budget deficit, thus increasing the supply of bonds (demand for money), helping to drive interest rates up.
Eventually, if the pain becomes too severe, the Fed will lower short rates by providing more reserves to the banking system, which in the long run increases money supply and inflation, but only if banks are willing to take this monetary stimulus and monetize it by making loans. - Sometimes an increase in the monetary base does not result in an increase in the money supply, as the economy is too shellshocked to take on new investment.
This is a very rough and dirty analysis, but everything is evolving super-quick and so I see the following stages: (1) long bond falls another 50 basis points to approx. 100 basis points (1%) below the current fed funds rate of 5 1/4, which is consistent with recessions, (2) wailing and gnashing of teeth as the recession becomes apparent by October, especially as mid-term elections approach, (3) tremendous political pressure on Bernanke to “do something”, and (4) eventual capitulation by the Fed to begin lowering short rates. This all happens within about 4 months.
The key market event for me is not when the Fed lowers rates, but as soon as it *signals* that it is worried about the economy and gives off talking about any inflation threat. As soon as that happens, I want to be out of bonds and into more gold or even high-quality, dividend-paying stocks.
Contrary to what the Fed-bashers on this blog write, the last 25 years have seen a generally strong, steady, non-inflationary Fed policy which has served this country very well, much better than the 60s and 70s. That may eventually come to an end, but it hasn’t yet, which is why bonds continue to rally.
Yes, eventually, permabear Schiff’s hyperinflation may come, but it is still too early to make money on that scenario and meanwhile there is still some money left to be made in bonds, methinks.
Great summary, although one factor you haven’t included is that whilst interest rates may decline (s.t. inflation) in a recession, credit spreads will widen, softening the effect.
Clearly not so relevant to US Govt Bonds, but it is to the wider credit market.
Regards,
Loafer
“Contrary to what the Fed-bashers on this blog write, the last 25 years have seen a generally strong, steady, non-inflationary Fed policy which has served this country very well, much better than the 60s and 70s.”
I agree.
I don’t.
Good policy ended with Volcker in 1987. Ever since, “Bubbles” Greenspan has never met a crisis he couldn’t solve with more liquidity. If it weren’t for several factors outside his control — USD as reserve currency, USD as “petrodollar” and the heavily disinflationary effects of globalization — he’d have reduced us to banana republic status by the early 90’s. The cumulative impact of his incompetence, amplified by the idiocy rampant in DC, heralds a greater depression than 1929.
I don’t.
Good Fed policy departed with Volcker in 1987.
Alan “Bubbles” Greenspan never met a crisis he couldn’t fix with massive injections of liquidity. If it weren’t for various factors outside his control — USD as reserve currency & sole petrodollar, the highly disinflationary effects of globalization and illegal immigration, etc. — he’d have reduced us to banana republic status by the early 90’s.
As it is his cumulative incompetency, amplified by the idiocy rampant in DC, heralds the greatest depression this country has yet to experience.
I don’t.
Good Fed policy departed with Volcker in 1987.
Alan “Bubbles” Greenspan never met a crisis he couldn’t fix with massive injections of liquidity. If it weren’t for various factors outside his control — USD as reserve currency & sole petrodollar, the highly disinflationary effects of globalization and illegal immigration, etc. — he’d have reduced us to banana republic status by the early 90’s.
As it is his collective incompetency, amplified by the idiocy rampant in DC, heralds the greatest depression this country has yet to experience.
p.s.: Apologies if variations on this post appear more than once.
Dang! Must be that “word filter”. Tried posting twice with the word “cumulative” and lost both, only to see them show up hours later after I was successful with “collective”. Oh well.
Sorry again!
Can anyone comment on the possibility that the short position is the result of a swap hedge?
Best not to forget that the Fed is a private bank that profits from lending money to the government. If we followed the constitution, we wouldn’t have to borrow from the Fed. We would issue our own currency. And it would be gold and silver based.
And in case you didn’t remember, the Fed is the third central bank installed in this country. The first two were thrown out.
The Fed is the source of the inflation we have suffered as it prints more and more dollars. During Greenspan’s reign, the purchasing power of the dollar fell 50%. Why we don’t rebel against the Fed, I don’t know. Maybe it is because so few understand what it is and what it does to us.
“It is well enough that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
— Henry Ford
Commercials think that the bonds are about to turn radioactive? Not a bad guess if backed by questionable collateral.
Commercials are hedgers by definition in this market. But they are particularly worried about a fall in price and rise in yield.
From todays LA Times:
http://www.latimes.com/business/la-fi-petruno27aug27,0,3083624.column?coll=la-home-business
Those were some gut-clenching charts. Talk about facing the abyss….
Thank you. Excellent dataq.
russ, you really need a primer for your website. I don’t know if I’m a brazilian pigman or riskloving joe soccer mom.
Wow, this is nice. You folks in SoCal, is this still grossly overpriced?
http://sandiego.craigslist.org/rfs/198771318.html
It’s really hard to say. There is a whole lot of undeveloped land for sale in Malibu, and prices are all over the map. On realtor.com there are a bunch of 0.25 acre parcels for $200k, and a 20 acre parcel for $350k. FWIW, my gut level reaction is that this particular one is not outrageously overpriced.
I have been looking at houses near there, to buy once this whole thing bursts. The houses in the Santa Monica Mountains often have quite a bit of acreage, at least by LA standards. I have seen modest SFH’s in that area on half-acre lots for $800k (today’s price.) There are quite a few places on 2, 3, and 4 acre lots.
I would think that developing one of those vacant plots would cost quite a bit. There are undoubtedly extremely onerous environmental restrictions (probably some of the most onerous anywhere), and I’m sure you’d have to pay to for your own water, power, and sewage lines. There are always mudslides and fires in that area, and I’m sure you’d have to get some kind of special survey to certify that your house won’t collapse in the rain (some of the listings on Realtor.com list “completed geology survey” among the selling points.)
We go to the beach near there quite a bit; that whole strech of Malibu is extremely undeveloped. GIven that it is some of the nicest real estate anywhere, and that developers have managed to cover every OTHER hillside in CA with tract homes, my guess is that are probably all kinds of impediments in addititon to the ones listed above. I.e. you buy the property, get plans all drawn up, obtain a building permit, pour the foundation — and then one of your rich neighbors files a lawsuit against you, claiming that your proposed septic system will create a public nuisance. You have to spend $250,000 on attorneys’ fees and litigate for three years before construction can resume, etc.
There are also quite a few parcels without direct road access. It might have easement access or dirt roads (up steep hills with a lot of erosion). Many possible downsides to that, IMHO. Beautiful country, though. Used to hike there a few times a week back when I lived around there.
My guess is that it’s at least 100% overpriced, but it’s really hard to say without knowing exactly where it is. Malibu is about 27 miles long and averages only few miles deep, so this property is probably not in the city of, since it’s 4 miles inland. There are several areas (inland towards the SF Valley) that claim to be Malibu but are not.
The posters above have pointed out many of the problems, but I should also mention fire danger - annual brush clearance costs on five acres could be meaningful depending on the terrain. If the area does not have city water, you would want your own water tower for fire protection.
I notice that the listing does not state what percentage of the property is level. If you need to do any grading on the property, the greenies will have you in court for years. So it’s likely that building on this property would be a five to ten year project. Everyone I know that has tried to build in Malibu has bled lots of money for a long time. Which is probably why this property has nothing on it.
Overpriced. Not for the newest newly-minted hollywood teen singing sensation or an NBA superstar. Have been to some of the mountaintown estates deep in the Santa Monica mountains. Very few and far between, owned by reclusive filthy rich holywood entertainment moguls.
Your posted plot has to be somewhere off Decker rd/Westlake blvd/hwy23, about halfway between Westalke village and PCH and the coast. Fantastic open state parkland with ample hiking and horse trails. Have done the backbone trail. Don’t know how these folks got a Coastal permit to built: had to be difficult with the restrictions imposed by The Santa Monic Mmts Conservancy as well as the coastal commission. Very tough to for RE develpers to built in Snta MOnica mts.
I still think some rich Hollywood type will snap this up: it is about 1.5 to 2 hrs from this area to west LA in Average traffic conditions, from either PCH or 101.
Wow, I did not know that the adjacent places are not within Malibu city limits.
Here is the important question, though — are they in the Malibu/Santa Monica school district? Living within Malibu city limits is not important to me, but the school district is very important.
I think the school district includes the surrounding unincorporated areas, but not if you’re too far over the hill towards the Valley. Yes, it’s a good school district, especially now that they have HS and JC programs at the Malibu Park campus, so you kids would not have to travel all the way to Santa Monica for school after junior high.
We may be neighbors in a few years, I’m looking out that way myself - but I’m planning on buying something that someone else has built - and needs to sell
i’m just back from a week in the sierra’s.the bubble has burst in Markleeville,with 50% of for sale home with price reductions.spoke to a sharp old guy in south lake tahoe who told me values for prime properties in south lake tahoe were down 20% since spring.also lots of radio ads from jts builders announcing a “half off”sale in lincoln,$1m homes now from the low $500 thousands…the fishing was good,mostl brrokies and browns.gs at $4.68 a gallon in kirkwood.
Tom;…..Markleeville,
Please don’t expose one of my favorite fishing spots….
Interesting about the “For Sale” signs though…I was up there a year ago and could not find one….I looked at some lots up the mountain toward to hot springs but they wanted 250K and up…Just crazy…
Hopper;…Have you fished here ???
I sold a home in North Lake Tahoe (incline village) summer 04. I just checked it on Zillow. The ONE WEEK decline in value?
(drum roll) $55,000!!!!! Holy Sh*t!
Just came back from Placerville, looking at property. Still way too high. I want to move up there, (family) maybe in 6mos or so, but even the rents are high. Drove through El Dorado Hills. Tracts and tracts of HUGE houses. Gotta be commuters for Sac. The only other thing in El Dorado is the usual Bed Bath, Target, Ross strip mall.
Nope. But planning to around Bishop in 1-2 wks.
Ben, can we make this one a top post?
http://www.msnbc.msn.com/id/14504791/site/newsweek/
Looks like the MSM is f.i.n.a.l.l.y l.e.a.r.n.i.n.g t.o. c.o.n.n.e.c.t t.h.e d.o.ts
Robert Samuelson’s column is well written, but a lagging indicator of economic conditions, as he takes a conservative “trickle down” approach to reporting new developments in the economic picture. Now that he has converted to the bubble believer camp and started to spread the gospel to middle America, this bubble is SO toasted!
Perhaps Greenspan was correct. People cannot identify a bubble until it’s burst! Seems to be true for the MSM.
Of course, there are those rare individuals with a keen sense of the obvious who can spot bubbles as they are forming.
Ben is the leader of the ‘Bubblespotters”
Niceeeeeeee Post Mozo;….Little bit of history on the credir card….
It makes me feel good to read that and know that I do not owe a penny to anyone. ANYONE. Well, the IRS thinks I owe them but I’m hotly contesting that
He skipped over what happened to those who borrowed on credit in the 1920s during the Depression.
The cult of the home. A house as an investment tool, as a atm machine, as a retirement savings account, the nest egg that never loses value, the place to put money on re-hab and get all your money back, the tax advantages, the list goes on and on. How about the house as a place to live and over time, build some equity, a place to live where people can afford to have a life and have house payments also. But no,you need more than one house, you need two, a vacation house, or perhaps three will do. An investment house. This is not crazy? All of the problems with the housing boom have been building up for years. The tide seems to be turning and I’m glad. Reversion to the mean.
Tell me about it. Housing is an expense, for crying out loud. No free lunch.
There was a time when the whole point of buying was to eventually burn the mortgage and thus drastically reduce one’s housing expense. Even then, it never went away - there will always be taxes and maintenance. You can spend all day in the bushes looking for that free lunch if you like - good luck.
It is not an expense when prices are going up by over 20% YOY, like they “always have and will continue to do” in The OC
“Housing is an expense..”
Absolutely correct and from any reasonable view housing is a liability not an asset. Assets generate income.
How is the U.S. going to compete when a house costs $500,000+ in America and costs a fraction of that in emerging countries with an educated workforce?
Either housing prices fall or we price ourselves out of jobs.
There ought to be a billboard on CA-101 in Silicon Valley iterating just what you say above - only maybe then the Bay Area’s financially self-delusional will finally “get it.”
Tropical storm Ernesto was just featured on the Weather Channel. The trajectory appears squarely targeted for NOLA. I cringe at the thought of another Katrina-like storm so soon after last year’s debacle. The good news is that lightning seldom strikes twice in short succession. The bad news is that NOAA’s long-term outlook suggests that we are currently in the high end of the range of hurricane risk in a multi-decade cycle.
Hopefully, this time Mother Nature will finish the job (and take Mayor Ray Nagin with her).
Oh really….tell that to Orlando folks…..3 in a row in the same year….badaboom
I’m happy to report that for the first time one of the Dutch newspapers mentions that the US housing bubble is in trouble (but the only number they give is that appreciation slowed to 0.9% yoy). They also say that the EU market will look at the US for direction. But the Dutch realtors organisation says appreciation is still 5% yoy over here and the market is very healthy, so no reason to worry.
Also, for the first time in many years I’m seeing a few new homes offered as rental properties directly from the builder (usually they just sit empty on the market until a buyer is found, because yearly appreciation is usually far higher than the rent you could possibly collect).
maybe it’s a first start of a return to sanity…
I sure hope you’re right. This credit/housing bubble needs to pop in order for us to get on with our lives (productive work). Please keep us updated!
Wanna see something funny? RE for Sale in London. First page, Arizona, Florida, Califonia, New York. Only one in London. LOL
http://london.craigslist.org/rfs/
This one is nice:
http://london.craigslist.org/rfs/196859183.html
That’s ’cause we don’t use Craigslist - we think it’s just for dodgy encounters in car parks…
It is a reflection of weekly detailed articles in major UK press about what a good idea it is to be buying in Florida, Canada, etc.
Unfortunately, me shouting at the newspaper doesn’t seem to change anything…
Regards,
Loafer
My foreclosed neighbor sends jingle mail:
http://louminatti.blogspot.com/2006/08/my-foreclosed-neighbor-sends-jingle.html
San Diego City to fire 500 government workers!
Mayor Jerry Sanders has pledged to spend at least $45 million and cut more than 500 city jobs in an effort to restore the city’s credit rating - and its ability to borrow money on the public bond market.
[...]
The report offers one of the most detailed accounts of how San Diego created a $1.4 billion pension shortfall that has crippled its ability to borrow money.
$1.4 billion dollars! That’s just for one city of 1.2 Million.
How many other cities have this problem? If this is multiplied to hundreds and thousands of smaller [or larger?] cities, what will that mean to the economy [in conjunction with mortgage and contruction problems]…
How many other cities have this problem?
All of them! Counties and states, too.
Mauldin discussed this at length in his book “Bulls Eye Investing”.
Just as the RE bubble is unwinding, will all those municipalities in the hock confess at the same time, exasperating the weakened economy? How would MSB defaults magnify this problem to the retirees?
Just when government employees AND retirees thought their incomes were “safe,” it may come crashing down on them all at once: ARM resets, higher credit card minimums/interest rates, higher property taxes, higher insurance premiums, higher HOA dues, higher energy bills, higher food bills, and now reduced or no income/pension…
I’ve been wondering about the issue of debt held by cities and local governments. They must’ve had a big jump in tax revenue during this real estate boom. Based on what I’ve seen in local towns, there was no provision made for rainy days; local governments acted like the big property tax revenues would always be there. For instance, the state of New Hampshire is actually seeing a decline in the school age population, yet many school districts have built big new schools with the surplus tax revenues.
Now that the gravy train has run out of steam there will have to be cuts somewhere. And of course the various groups who feed from the public trough will fight tooth and claw to avoid cuts in their departments, claiming that their services are indispensible, etc.
What? Real estate doesn’t always go up? You mean government can’t over promise and under deliver? [grin]
Unlike the Fed, municipalities can’t print dollars on a whim and, if San Diego is of any reminder, they won’t be able to borrow much either….
I think the whole point of the Kroll report and Sanders’ housecleaning exercise is to create the impression that San Diego has turned the page on its sordid past, and is now credit-worthy once again. I think Sanders is doing the best he can to play the difficult hand he was dealt.
But at a gut level, I agree with City Attorney Mike Aguirre, who argues the Kroll report was a sham — a wrist slap to those who executed the backroom deal which put the SD city pension $1.4 billion into the hole, rather than bringing those at fault to their rightful karmic and legal destinies. Hence we have a political situation where corruption goes unpunished and the whole in the city balance sheet goes unrepaired.
“hole” not “whole” (never try to spell before drinking the second cup of coffee)
Being a NH girl, born and raised, I actually see some insight to building those schools now. Most New England school buildings I’ve been in in ME, NH and MA were built in the 60s or earlier. I believe it’s long term thinking to build now when the taxes coffers are overflowing than wait to do your upgrades after the economy is slumping badly.
If there is a state that thinks ahead in its governmental institutions it is New Hampshire, so there may be some validity to what you speak of. Still it seems crazy to me to build schools much bigger and with much better facilities than the previous ones while school enrollments decline.
Since there’s a lot of Washington-area posts today — I’d like to add this from today’s Washington Post (free, but registrations required)
Crisfield
“Developers hungry for waterfront land at reasonable prices discovered the quiet town of Crisfield nearly three years ago, and the best-kept real-estate secret on the Eastern Shore quickly spread across the region. Investors from Washington, Baltimore and Philadelphia are flocking to Maryland’s southernmost town, bringing newcomers and changes to the tight-knit community.”
“The city’s jagged coast is now lined with about 250 units of condominiums and town houses, some selling for nearly $1 million. Three buildings are under construction with nine more in the works, which will add another 300 units in the next two years.”
I’ve always wanted to check out Crisfield — I’d heard it was the last real waterman’s town on the Eastern Shore. I’m sure it’s unique place to vacation/retire to — but, million dollar condos seem awfully overheated for a struggling town. Wow.
Now they’ve done in Crisfield. Sad, it was such a nice place.
A postscript from Paul Krugman on his Housing Bust editorial the other day:
“Paul Krugman: Just a wonkish note about how bad the macroeconomics of all this could be:
If you look at the most leading of the indicators on housing, stuff like new home sales and applications for permits, they’re off more than 20 percent from a year ago. If that translates into an equivalent fall in residential investment, we’re talking about a fall from 6 percent of the G.D.P. to 4.8 percent. And this may be only the beginning; I wouldn’t be surprised to see housing investment drop below its pre-bubble norm of 4 percent of G.D.P., at least for a while.
Add to this the likely effect of a housing bust on consumer spending and you’ve got a direct hit to G.D.P. of, say, 2.5 percent or more. That’s bigger than the slump in business investment that led to the 2001 recession. And the main reason the 2001 recession wasn’t as deep as some feared was that the Fed was able to engineer… a housing boom. What will the Fed do this time?
Maybe rising business investment and a declining trade deficit will soften the blow. But it’s remarkably easy, playing with the numbers, to come up with scenarios in which the unemployment rate rises above 6 percent by the end of 2007. That’s not a prediction, but it’s well within the range of possibility.”
HMMM…Paul’s been reading here, too.
I find it more interesting that by ‘playing with the numbers,’ I find it ‘remarkably’ hard to come up with a scenario where we DON’T get a recession and unemployment above 6%.
around 2001 the Netherlands went into a recession because the yearly gain in home prices dropped from double-digit to single- digit. Within a year or so, the Dutch economy (that had been one of the top three performers in the EU for many years) became the worst performer of all 25 EU member states. The OECD made an alarming report about this, but instead of taking the lessons to heart politicians decided to prop up the housing bubble with even more incentives (which worked for a few years, also thanks to more easy money from the ECB).
Regarding importance of RE for the economy (personal spending), equity takeouts, personal debt etc. the Netherlands is a bit similar to the US lately. If just a slowing of appreciation rate can cause such troubles, imagine what a real depreciation of home equity will do.
Here’s a doozie: (doozy? sp?)
http://lasvegas.craigslist.org/rfs/195618280.html
Halfway through August — cutting the price A THIRD.
How is Xmas going to be this year? *shudder
Doozy, is slang for Dusenberg from when the automaker was admire for superlative quality/performancee.
Anyway, Ben. 156 posts already in this thread. Pls start weekend bucket “b.”
I saw someone on Craigslist trying to sell a $350 Williams-Sonoma gift card (wedding gift) for $300. I offered $150. Accepted.
Expecting a lot more of this type thing.
Poor bride. Why didn’t they just give her $350 cash? Sounds like she could have actually used that.
I don’t understand why people give gift cards. Why not just write a check? So much more useful.
http://www.thestreet.com/_tscana/markets/economics/10305903_2.html
Is the U.S. bankrupt?
In a study published earlier this month, economist Lawrence Kotlikoff pointed out that the U.S. is responsible for $80 trillion in future entitlement promises — a figure about six times larger than the U.S. economy. To make good on those promises, future workers would have to pay tax rates ranging from 55% to 80% of their incomes!
The same week that Kotlikoff’s study ran in the Federal Reserve Bank of St. Louis bulletin, the comptroller general of the U.S. said, “Current fiscal policy is not sustainable, and hard choices must be made … we’re mortgaging the future of our children and grandchildren and creating a shameful legacy.”
Finally, some knowledgeable and authoritative people are starting to bring this national crisis to the attention of the public.
Fiscal Wake-Up Tour
The comptroller general, David Walker, is on a national “Fiscal Responsibility Wake-Up Tour” — a nonpartisan effort to educate the public to the crisis that looms, not only in the next few years, but as baby boomers retire.
Walker, who is in the midst of a 15-year term, is being supported by both political liberals and conservatives in his efforts to shine a light on the budget problems that are approaching. Here are some of the facts that he pointed out in a presentation last week:
About 60% of our federal spending is now mandatory, primarily because of Medicare and Social Security obligations and interest on the national debt.
While the 2005 budget deficit was widely reported at $318 billion, if it is calculated on an operating basis like one that most companies use, the year’s deficit was easily double that amount.
We finance our deficits by borrowing — and 50% of our public debt is currently owned by foreigners.
Interest on the national debt is expected to be about $200 billion this year — around the same amount that we spend on Medicare.
We currently have a $46 trillion liability for Medicare and Social Security obligations — and the new drug bill will easily add another $8 trillion in promises.
Over the next 25 years, Medicare spending will grow at nearly five times the rate of GDP growth.
Every newborn arrives with an immediate debt of $156,000 — which constitutes fiscal child abuse!
Walker’s presentation is on the General Accountability Office’s Web site. You should see the data for yourself because a picture is worth a thousand bullet points!
These are MEGO numbers. That stands for “My Eyes Glaze Over.” And that’s why our huge and growing financial disaster doesn’t stand much chance of gaining attention, especially in a world dominated by reality television shows and news headlines about perverts. When more people take the time to vote for dancing partners or dubious singing talent than vote for the president or their own congressional representatives, then we have only ourselves to blame.
Or we could say that we are setting ourselves up for the blame that our children will heap on us for being the first generation to leave this country worse off than we found it.
Walker points out that time is working against us, so we have to act now. Since we’re in a period of economic growth, with relatively low interest rates, it’s the perfect time to get our financial house in order. (That’s the same advice I’ve been giving to consumers!)
The real problem is the exponential increase of the deficit 20 years down the line, when boomer retirees will be dependent on promised payments from government. This will implode the system.
Spending Solutions
Tough choices must be made, according to Walker.
Among his first targets is the out-of-control growth in health care spending. He calls on the country to debate the issue of what type of “basic and essential health care” the government should provide citizens vs. what people should pay for themselves.
He challenges Congress to assert greater control over the budgetary process, and urges the authorization of a line-item “rescission” that would allow the president to cut individual items from the budget. A 50% vote of Congress would be required to restore any cuts, leading to more transparency in spending. Overall, he says, the challenge is to re-engineer and transform our government into a 21st-century operation.
If we don’t immediately start dealing with our financial problems, says the comptroller, we risk the fate of the Roman empire, once the most powerful on the face of the globe. Perhaps someone should have shouted out that the emperor wasn’t wearing any clothes! And that’s The Savage Truth.
decided to look up why people are selling in Queens, NYC. Went to Craigslist and ACRIS which is the NYC online property records system. Found all listings with an address and looked up in ACRIS. Out of 10 - 15 listings I looked up only 2 seemed to be crazy people who bought in the last 2-3 years and trying to sell for an 80% gain. Most are people that bought 30 years ago and selling to cash out and downsize. A lot of people also bought in 1998 or so for around $230,000.
The asking prices for homes in Queens are way outside any bounds of reality. Homes selling for $450,000 3 years ago are being listed for around $700,000 depending on area. A lot of the people selling also have a long way to go downward in price since they owe nothing on the home.
Apologies if this has been posted, but it’s such a great chart it should be seen by everyone.
Robert Shiller’s inflation-adjusted existing home prices, 1890 to present:
http://graphics8.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
Realtors (TM) line: “Housing prices have trended up continuously for the past sixty years.”
Reality check: Nominal prices trended up since 1948, but real housing prices oscilated around a flat level from 1948 through 1998, then took off like a rocket in what has been by far the greatest real housing price increase in US real estate history.
$2.7m condotels, anyone? (I could not figure out whether the headline meant the condos were “popping up” or the condo bubble had popped “up at Hotel Del”)
————————————————————————————————–
Condos pop up at Hotel Del
Part-time residences are part of 15-year plan to upgrade S.D.’s historic Hotel del Coronado
By Janine Zúñiga
STAFF WRITER
August 27, 2006
CORONADO – For $2.7 million, you, too, can own a piece of the Hotel del Coronado.
That’s the starting price on the most affordable of 35 luxury-built beachfront cottages and villas under construction at the 118-year-old hotel. The drawback is that owners can use the condos for only 90 days a year. Then they go back into the rental pool with the hotel’s other 679 rooms.
The condos, ranging in size from 1,230 square feet to 2,030 square feet, will initially be priced from $2.7 million to just under $4 million. The first eight villas, which are the smaller condos, are expected to go on the market in mid-September.
http://www.signonsandiego.com/uniontrib/20060827/news_1m27delcondo.html
Interesting. We just came back from MACY’s at Tysons Corner, VA. I started talking to the saleslady and she told me that in the last few weeks business has just died. Not the gone on vacation type but an almost scary lack of business where the entire store is empty with just a few sales peope around.