The Housing Bubble

Yikes, sorry for the missed words this morning. Businesses are in unspoken legal collusion where they SEE what competitors get away with.

Insurance, like “healthcare” is one of the most highly regulated businesses in the country. Do you think there may be some correlation between the lack of competitors (except where they are really just clones of each other) and the various lobbies that keep competition out of the the State you are living in?

For a while, I didn’t insure my house. Why?
I couldn’t get a “coverage” that I wanted and the rates were astronomical. Think 2004 and multiple hurricanes in Florida.
I wanted $100,000 property damage, with Fire coverage only.
I used to be able to get it. Fire insurance was relatively cheap.
No one was allowed to offer it here in Florida.
You had to buy the whole package, via Citizens, where they valued my $120,000 house at $224,000.
I HAD to have auxilliary building coverage, although a had no detached structures. I didn’t want it, but I would have to have it.
Insurance should be the most competitive market on the planet. You should be able to custom write they plan you want based on the coverage you think you need, just like life insurance. You can get 1k, 10k, 100k, or a million dollar coverage, depending on the “premium” you are willing to pay.
Try that with home or car insurance. or even health insurance.

I’ve also been shopping for car insurance, you know, to find that mythical “$500″ that drivers who switch to our company “save on average”.

Thing is, every quote I’ve received is within $10-20 per year of each other and our current policy.

Collusion?

What collusion?

Diogenese - What you say would be true if there were local companies providing insurance. As far as I can tell most insurance these days are large national chains. They are lobbying for one US regulator instead of individual states. My guess is that states are reluctant to give up control as they might find that insurance companies are not willing to make good. I had a friend who’s house burned to the ground due to a contractor error. He went through he11 to get the insurance company to pay him anything. He finally had to go to the state insurance commissioner. Now imagine if he had to go to DC.

Businesses love to rip us off when they get to call their own shots. Smart regulation is good.

I thought the wording was savings “up to $500″ not average of $500. That makes sense if your old insurance was written on an under 25 single male with a muscle car and for the new policy he is married, over 25 and insuring a mom-mobile. Same tricks as any sales person. The real issue is getting someone to even pick up the phone and get a quote for a new company, rather than just renewing with the old one. Of course, they will be disappointed when they don’t get to save that much (or anything), but you didn’t expect to get a sale on people who are fairly satified with their old coverage and are only going to save $20 a year.

The other trick is to show the savings for people who do switch. Well, duh. Only people who bother to switch are the ones who will save more.

You have to listen to the exact wording very carefully.

The cheapest auto insurance is from the companies that won’t pay out. That’s how they’re cheaper.

I just love the way you are now dinged for everyone’s else’s mistakes these days, not just your own.

Yet the corporations yell the loudest for “personal responsibility” without taking any themselves.

Let them eat cake.

Thats the basis of insurance Turkey.

Insurance companies pay out what they take in claims every year.

Steve, it used be your rates only went up if you made a claim.

Now they go up no matter what you do.

The other claims were “severe weather” related, meaning that we had an unsual number of hailstorms the past few years.

I actually had some roof damage, but it was minor and was only $500 to repair, so I didn’t file the claim.

Insurance rates are subdized by what is earned on the float. When the rate of return on the float is down then this subsidy begins to vanish so rates have to rise to compensate.

The lowering of the rate of return on the float is a deflationary event, but this deflationalry event is translated into rising rates. And these rising rates are interpreted as signs of inflation.

Inflation on necessities, deflation on toys.

Have you seen sticker prices on new cars and trucks lately? No deflation there…

New car prices are simply astounding. I doubt I’ll ever buy a new car again.

I’ve never bought one yet, and while I’m not morally opposed to it I’m having a hard time imagining the circumstances that would lead to it. Unless I needed a Honda economy car…those things just don’t depreciate enough to justify buying used.

I’ve never bought one yet, and while I’m not morally opposed to it I’m having a hard time imagining the circumstances that would lead to it

I bought a new car in 2004. Just because I always had clunkers and beaters and wanted to once in my life experience what it was like not buying a used car.

Not necessary to do it again.

Still driving that 04 Honda CRV and probably will keep it for another 8-10 years.

Stability is not a sustained mania. The mania still lives at the center (DC). The politicians there, and their minions, have never known anything else. They seem, so far, well insulated from everyone else’s pain.

Actually, this is a smart deal if the buyer can find a place that is less the rent they are paying now and the monthly TCO is less as well.

Even smarter if the state they live in has some kind of “homestead” tax exemption and they can meet the min number of years to live in to meet those requirements.

But most people aren’t that smart.

This is what we have been told; the govt has to “stabilize” housing or we’ll go into a depression. Critics like me have asked, is the answer to a mania characterized by low interest/down payment loans to high risk borrowers, to give out even more of these loans?

And are millions of additional families in foreclosure going to stabilizing anything? I’ve probably typed that dozens of times on this blog.

Politicians do what they do in order to increase their own revenue - tax and contributions. They use this revenue to maintain power.

http://www.dailymail.co.uk/news/article-2136547/Power-really-does-corrupt-scientists-claim-addictive-cocaine.html

Currently, Wall Street and politicians are doing just fine. All of what we see is being done to continue the game. What the politicians hope is that business as usual continues. So, they keep funneling money from the public treasury towards the FIRE sector, and get a portion of it back in contributions and other forms.

We’ve got government “Of the highest bidder, by the highest bidder, for the highest bidder.” For this to stop, or at least be temporarily restrained, Congress needs to be flushed this November.

If it’s not, the seeds of the next crash have already been sown. Moral hazard has been institutionalized. No credible reforms have been made. There’s been a lot of sound and fury about reform, but it is a “tale told by an idiot, signifying nothing.”

This is what we have been told; the govt has to “stabilize” housing or we’ll go into a depression.

GO INTO a depression? We’re already in one!

Once again, the only reason anyone in Washington is interested in “stabilizing” the housing market, is to save the banksters.

If they were really interested in the wretched refuse’s problems, they would be working on stabilizing the INCOMES of the wretched refuse.

Once you get your mind into the habit of thinking it’s about “Bankster Bailouts, 24/7/365″, all of this stuff makes more sense.

Once you get your mind into the habit of thinking it’s about “Bankster Bailouts, 24/7/365″, all of this stuff makes more sense.

Bingo! Bullseye! Right on!

“Critics like me have asked, is the answer to a mania characterized by low interest/down payment loans to high risk borrowers, to give out even more of these loans?”

Critics like me have noted the conceptual similarity of such policies to the hair-of-the-dog hangover cure, where the drunkard has a few more rounds of whatever caused his hangover to make the pain to away.

“Hair of the dog” stimulus can sometimes be followed by sudden death.

Is it? Because I’m one serious bargain hunter, and the absolute percentage of my income required for necessaries has indeed risen.

Shelter used to be 25% of most people’s monthly wages. Now it’s +/-50%, no matter what part of town you live in.

Yes it is…. dumb people.

And you’re stating the obvious. The massively inflated cost of shelter as a percentage of income is the entire reason we’re here discussing this.

Correction: “It’s the new normal for dumb people.”

Tell that to HP employees who had a 5% pay cut shoved down their throats a few years ago, followed by year after year of no salary increase.

Tell that to the 50% of college grads who can’t find work.

It’s not just the semi-literate crowd anymore.

and the absolute percentage of my income required for necessaries has indeed risen.

Oh yes.

Everytime I go to the grocery store I see it. I’m doing more telecommuting to save on gas, even though I prefer to go into the office.

+1 Colorado…

Shelter used to be 25% of most people’s monthly wages. Now it’s +/-50%, no matter what part of town you live in.

The city of SF will give us 90K in interest-free down payment assistance. 40K forgivable after 10 years, 50K deferred repayment for 40 years.

But here’s the rub: in order to qualify (besides our middle class income for a family of 4) we have to spend 33% of our gross income per month on housing costs.

I’ve been chewing on this like a dog with a bone, trying to come up with all kinds of creative ways to NOT get locked into this high monthly nut for 30 years.

Here are some scenarios - please chime in if you have any ideas:
-put down 18 or 19% and pay mortgage insurance for 6-12 months
-take a higher interest rate (5%) and then refinance
-insist on a ridiculously high homeowner’s insurance (you have to prepay for the first year) then get a cheaper one

-Buy later, after prices crater.

Move to Oil City.

-Buy later, after prices crater.

The bubble is alive and well in select locations in the Bay Area.

The bubble is alive and well in select locations in the Bay Area.

Which means prices have a long way to fall in the Bay Area.

I’d like to buy a house before I retire.

SF renter, don’t recall your exact age, but there’s a big difference between buying a house before you retire, and paying a house OFF before you retire.

To be honest, that $90K in down payment “assistance” may have just locked you out of the housing market for good. Is that $90K for teachers only, or for other city employees too? I can envision city employees using that $90K to bid up housing, effectively forcing you to borrow that $90K just to compete with them. Even if you’re there for ten years and $40K is forgiven, you’re still $50K in the hole. What happens to that other $50K if you try to sell? Is it immediately due in full?

Are you sure you want to depend upon “refinicing later?”

Both of us closing in on 50 years old with 2 school-aged kids living at home.

The money from the city is a combo of “teacher next door” program (forgivable) and down payment assistance (15% shared appreciation if you sell before you pay it off).

Your salary has to be pretty low to qualify - we squeaked under because I work part-time and because we are a family of 4. I know a few teachers who have not used the teacher next door program because on their salaries they did not want to pay that much per month.

It’s not free money, I know, but it’s pretty close to it.

I do not know a single person who has bought here in the city who was able to do so without help from family. We just don’t have that as an option.

With our seniority in the school district, moving somewhere else and starting over (we’ve looked into this) just doesn’t make sense, esp. not with all the cuts in education.

Believe it or not, we make just about the average salary for San Franciscans, which is $62,500 year. Not everyone here is super wealthy, as you might think from the media and blogs like this one.

There are plenty of regular people here just living their lives and not striking it rich. The idea that anyone and everyone who is less than upper middle class should leave their home is fairly ridiculous, although I do hear that suggestion. In SF alone, that would mean several hundred thousand people should just clear out…

SF renter, don’t recall your exact age, but there’s a big difference between buying a house before you retire, and paying a house OFF before you retire.

Probably won’t pay it off before I die. But renting for another 30-40 years won’t be much fun (or cheap) either.

And puh-lease, don’t chime in about how great renting is. I’ve been doing it since I was 18 years old (almost 30 years) and it’s getting tiresome.

Chasing cheap rentals, plunking down thousands of dollars on security deposits that you have to go to small claims to get returned, finding places that want kids and dogs…

When I was 25 and moving was as simple as getting some boxes, borrowing a truck and bribing my pals with pizza and beer, yeah, no problem.

But none of my middle aged friends are interested in helping us move our piano and furniture for a family of four.

I hope you don’t think I was telling you how great renting was! In fact, more than once folks (you know who you are) have tried to throw me off the blog for NOT chiming in on how great renting is.

It just sounds as if you’re stuck between a rock and hard place. Renting sucks. Buying sucks less but it costs more. and you’re stuck if you do have to move. That’s SF, I don’t see any way around it.

I hope you don’t think I was telling you how great renting was! In fact, more than once folks (you know who you are) have tried to throw me off the blog for NOT chiming in on how great renting is.

I wake up every day, grateful that I no longer have to deal with the landlords and landladies I used to have.

I wake up every day, grateful that I no longer have to deal with the landlords and landladies I used to have.

I look forward to that morning.

I look forward to that morning.

Buyer’s remorse is also a strong emotion. Obligating yourself to a mortgage in an over-priced market while the economy is perched on the edge of a depression is a risky move, IMHO.

sfrenter
I’ve been reading this tread with interet. Renting sucks. We are so sick of having no roots, and you have an extra layer than us, 2 kids.

You have to face the reality that you live in a expensive area. If you wait, your quality of life suffers. If you buy now, and prices fall (which I doubt much up there) you’ll be pissed.

Oxide is right rock meet hard place. I say go for it. Life is too short not to enjoy it. What the hell.

I hear you on getting older and moving. Just carrying boxes will be a challenge.
btw, we own a conservatory grand player piano ourselves. It makes home buying a pita.

interest- old laptop/keyboard is shot

“The massively inflated cost of shelter as a percentage of income is the entire reason we’re here discussing this.”

Yep.

“Which means prices have a long way to fall in the Bay Area.”

Well played.

Thank you Nick.

“… where 1% control ALL the wealth.”

Interesting word “control”. I notice you did not use the word “own”.

One does not need to own wealth to live the life of a one percenter, he only needs to control wealth to live the life of a one percenter.

For example, if one can CONvince millions of people to buy shares of stock in a company of which he has control then he gets to run up the bills as it suits him and (snort) the owners get to pay them. And if he can get institutional investors to go along and have them garner over fifty-percent of the float then there is little chance of him being ousted.

And then there are the non-profits, i.e. charities such as United Way. And there are the labor unions. And the pension funds.

One does not need to own wealth to live the life of a one percenter

I agree. There’s a reason that biz schools are bursting at the seams while engineering schools are relative ghost towns (at least when compared to years past). The young pups want to join the managerial class, because that’s where the money is. Unfortunately for them while many will be called, few will be chosen.

Unfortunately for them while many will be called, few will be chosen.

You can say that again. I’m not even angry about it any more…it’s become more of an interesting case study to me, with myself as the subject. By the old 1945-1980 rules I’m golden…but obviously not now. Now everybody has an MBA and some talent and so it’s all about…something else.

I suspect that due to low growth there are probably very few positions opening up, and therefore the elite school graduates with connections are enough to fill them all. It’s not like I’ve missed out on a bunch of open positions…I’ve never even seen the openings. Every company I’ve worked at had pretty much the same managers when I left as when I got there.

The only way to move into management is to be groomed for it by a “mentor”. Credentials, while required, aren’t enough. Someone has to sponsor you.

Carly Fiorina married her mentor. I’ll bet that happens a lot.

Too many posters here are overlooking what is really happening: The conversion of the US into a 3rd world nation, with a tiny middle class and where the 1% control ALL the wealth.

20% down means less interest for the lenders. Why would they want that?

Keep housing prices high so that only the wealthy can buy with all cash.

Everyone else can either rent from them or pay interest to them for the rest of their lives.

There’s a reason that biz schools are bursting at the seams while engineering schools are relative ghost towns

It also doesn’t help that engineering is a lot harder than biz. Engineering now is even a lot harder than the heyday in the 60’s when they sent men to the moon with a slide rule. With advent of computers and software to do the “easier” computational plug and chug, you’re expected to do the thinky-work as fast as you can type.

It also doesn’t help that engineering is a lot harder than biz.

Preach it!

And it’s not like collegiate business majors couldn’t be made, ahem, more challenging. To me, it appears that the students get to work on a lot of group projects, and you know how those turn out. One or two people do the work and the rest of the group coasts.

Not to mention the math. I’m of the mind that if you’re going to be admitted to a collegiate business degree program, you need at least a semester of calculus. I don’t think that a lot of business schools have this requirement.

Why? Because calculus is the mathematics of change. Of trends. That’s what analysis of business problems is about. Seeing trends and reacting to them.

It also doesn’t help that engineering is a lot harder than biz.

Plus you’ll be put out to pasture in your 40’s.

you’re expected to do the thinky-work as fast as you can type.

Oh yes. Which explains why so much tech is half baked these days.

One or two people do the work and the rest of the group coasts.

Sounds like good preparation for how the business world works.

Which means prices have a long way to fall in the Bay Area.

I hate to say this, but I have lost faith in that ever happening, at least in Silly Valley. East Bay? Maybe.

Plus you’ll be put out to pasture in your 40’s.

Except as you said all the young people don’t do Engineering anymore so who will replace me ?

They could out source this type of work I do which is mostly PCB design

the tools are getting better and better

Since we’re going to have to listen to you rationalize for the next five years, can you at least tell us at what point you will walk away?

Muggy, my hope is that you find a stable job in a location where you can buy a house for 3x your income on a fixed-rate loan. That’s really the crux of the matter. Most of the articles on HBB cite anecdotes of people who either lost their job, or bought a house on an I/O ARM type mortgage where the payment goes up. If you buy with a fixed payment and keep your job, going underwater doesn’t matter.

HBB asked about my walking several weeks ago. Unlike the deadbeats and flippers, I bought a house to live in and enjoy. Of course, if there is a major life change (long-term job loss, medical, marriage (ha) etc.) I would probably sell and take a hit. But I would not walk solely because I am underwater. Besides, there is nowhere to walk TO. Even if rents dropped 10% they would still be higher than my PITI.

“going underwater doesn’t matter.”

Really? REALLY?

And the fact that anyone who bought a house in the last 12 years is in fact underwater(including you) completely destroys the conventional wisdom(stupidity) that housing always goes up.

“If you buy with a fixed payment and keep your job, going underwater doesn’t matter.”

You should meet all of my teacher friends that bought in 2005-2007 (most paid in the 180k range, and most comps in their ‘hoods are now in the $90k range).

I have no doubt you can pay and stay, but how are you going to feel in 5 years when someone pays a fraction of what you paid, and they’re closer to work than you?

I’ll say this and I’ll leave it alone: I think you bought looking in the rearview mirror.

If you buy with a fixed payment and keep your job, going underwater doesn’t matter.

It would matter to me. That’s why we’ve waited for 13 years. I just really don’t know when it will make sense to stop waiting. I’d like to buy a house before I retire.

You should meet all of my teacher friends that bought in 2005-2007

I just checked my calendar and it says 2012. When your teacher friends were buying in 2005-2007, I was here on HBB advocating NOT buying. Prices have dropped considerably since 2007. Also note that the DC bubble and the Florida bubble are not the same.

And the fact that anyone who bought a house in the last 12 years is in fact underwater(including you)

I am not underwater, at least not in the classic sense of owing more than the house is worth. Nor is anyone who bought in 2003 or earlier.* If you wholly remove the years 2003-2011 or so, housing HAS gone always gone up, at least in DC. As long as you didn’t buy during 2003-2011, you are still on the roughly increasing continuum.

how are you going to feel in 5 years when someone pays a fraction of what you paid, and they’re closer to work than you?

Housing would have to drop an additional 30% in those 5 years, on top of the 38% off peak they dropped already, in order to make a dent in my psyche. That’s how much I would have spent in 5 years of rent payments.** Also, the house would have to be in good condition. How many good-condition houses do you expect me to find after this five-year feeding frenzy of FHA buyers, low interest rates, and investor landlords?

As for closer to work, I’m already close to work. I could have bought even closer to work for about the same cost, but those houses were smaller, on smaller pieces of land, and near the railroad tracks.

———-
*As long as they didn’t HELOC, which is effectively IS buying a house 2005-2007.
**And again, it seems that the HBB renters live in some magical kingdom where PITI costs a million bucks and renting costs 0 bucks. How many times do I have to repeat that my PITI is LESS than my rent?

I am not underwater, at least not in the classic sense of owing more than the house is worth. Nor is anyone who bought in 2003 or earlier.* If you wholly remove the years 2003-2011 or so, housing HAS gone always gone up, at least in DC. As long as you didn’t buy during 2003-2011, you are still on the roughly increasing continuum.

-You better believe you’re underwater already. You may not know it or realize it but you’re underwater.

-And you’re DEAD wrong. Housing has NEVER “always gone up”. In fact, housing ALWAYS goes down. ALWAYS.

I’d really like to hear your motivation for being here. Truthfully….. I can only speculate you’re seeking some type of positive confirmation for your decision. You’re not going to get here because the truth is, housing prices are falling. In fact DC is just entering it’s price decline phase.

Oxide, what about this scenario: houses in your neighborhood drop in price an additional 40% over the next 2 years. Would you :
a) continue paying with no change
b) stop paying, default, and buy an equivalent house at 40% off
c) attempt to re-base you property tax base to lower your tax bill
d) suicide (j/k)
e) other

To be fair, I’m with oxide in that buying a house that he likes and paying less than equivalent rent is the way to go. The wife and I drove through Clairemont Mesa yesterday since it is nearby our current location and house payments are slightly less than our current rent (University City). Problem was, those houses are about 400k for equivalent rent and as my wife puts it, “This place is a dump!” . Paint is peeling off houses, beater cars lining the streets, garage doors peeling off veneer and falling off hinges, open garages full of trash everywhere you look, weeds 2 feet tall in yards with cars parked on them…

I don’t get it, the neighborhood is 5 minutes from the beach and the houses are 400-700k. How are they filled with such trashy people? Even if prices go down though, I don’t think neighborhoods like that will get flushed out of the trash. All part of what makes it so frustrating. High prices in the trashy neighborhoods are keeping prices high in the nice neighborhoods and keeping me as a renter. Can’t afford 600k to live in a neighborhood where people will do basic maintenance on their house.

Oxide, what about this scenario: houses in your neighborhood drop in price an additional 40% over the next 2 years.

Why are you guys so hell bent in having her default? Is it some sort of need to always be right? Not everyone is cut from the same cloth as you are.

“All part of what makes it so frustrating. High prices in the trashy neighborhoods are keeping prices high in the nice neighborhoods and keeping me as a renter. ”

Quit complaining and teach surf lessons or something.

“I just checked my calendar and it says 2012.”

Exactly Oxide. Your lens is pointed backward. You’re only looking at where we’ve been and we were are.

Please be sure to update me in 2017.

Really? Is it just that we are saying it in 2012 and not 2007? Because that’s exactly what happened in 2007. I’m not saying oxide’s decision is bad.. just asking if prices drop 40%, what will she do? Obviously if prices stay flat or rise she will just continue as now… don’t need to ask her to understand that…

in Colorado, they’ve been far too trained by the anecdotal evidence in the news to realize that there are people who actually don’t default, that there are people who do keep jobs, that there are people who didn’t HELOC. Their brains are too lazy to distinguish one situation from another. Look at my posts — I’m pretty liberal (ha ha) with my advice, but I at least am looking at individual situations.

mathguy, what if I say no I wouldn’t walk at 40%? You would just say, ok, what about 50%, 65%… trying to get me to walk in some impossible situation, just so you can accuse of being a potential deadbeat and so you can “be right.”

Muggy, in a post below, I used Microsoft Excel to point my lens at future increases in rent.

just asking if prices drop 40%, what will she do?

Why are you so obsessed about that? If she screwed up, walks away and has her credit ruined that will be her problem.

This is Maryland. Full recourse. No walking away unless you are bankrupt (outside of retirement plans).

oxide,

no. I’m not calling you names, I’m not walking you into some situation where I’m right. I even said I agree with you that buying a house that is lower than equivalent rent is the better thing to do. 40% is a bit arbitrary, but it seems like house prices nationwide went up approximately 250% on average. They’ve come down about 35% (1/3) it seems like about another 1/3 off that would get us about 55% off total (5/9ths) which gets us back to a bit over inflation adjusted 1994-98 prices. So 35-40% off is the slightly harder downside from this point that seems likely. Your neighborhood might be a bit different.

I’m asking the question because I’m thinking about buying a house also in the next 6-12 months. At 350k, 35-40% is about 125k in “lost” equity. If that happened after I bought, I might do a strategic default and buy something else to “reclaim” my $125k. Thinking about this might be a good reason to put 3% down instead of 20%. So if prices do drop, what are you going to do..? Why? Your input informs me on my possible courses. Maybe you have options I haven’t thought about. My credit score matters to me very little other than by giving me the ability to get a better APR. The rules of the game say defaulting is a possibility. Since I pay my taxes without cheating and the taxman says those are the rules, and they want to back up the banks, I agree to play by them.

Why are you so obsessed about that? If she screwed up, walks away and has her credit ruined that will be her problem.

Seriously? Why is a newly minted home-debtor and future strategic defaulter here on the HBB looking affirmation from people who know better?

Get real.

I’m thinking about buying a house also in the next 6-12 months.

Traitor. Maybe they’ll run you off the blog too.

We need people like Oxide around. We’ll see in a few years if they made the right decision or not. No need to run them off, for thinking that now is a reasonable time for them to buy. Think of them as real-life experiments in progress. I want to see how it turns out.

I think Oxide in particular has earned her bona fides here over the years. She’s no troll.

No one is running you off this blog oxide. Everyone please keep the discussion civil.

Hey, oxide! I think the idea of your buying a house that needs work is pretty cool.

If I’m ever in your neck of the woods and you need someone to help you with the fixup work, I’ll be ready, willing and able. BTW, I also do cleanup.

If I’m ever in your neck of the woods and you need someone to help you with the fixup work, I’ll be ready, willing and able. BTW, I also do cleanup.

Hey Slim, head on over to SF (after we find our fixer upper). This is an amazing city and we’re a pretty fun bunch.

Hey Slim, head on over to SF (after we find our fixer upper). This is an amazing city and we’re a pretty fun bunch.

I’m coming as soon as you find it. And we’ll have ourselves an HBB meetup.

oxide: THx, maybe we can be traitors together.. Still. My threshold of pain is about 50k vs 3 years. I will take up to a 50k “loss” to buy something I like 3 years earlier. Right now it feels like in my price range, in my area, there is still about another 125k loss coming over the next 2 years, so if I wait about 6-12 months more I can avoid a good portion of that. My question to you is just; if you miscalculate and do take a 40% “loss”, what will you do?

“I will take up to a 50k “loss” to buy something I like 3 years earlier. ”

Disclaimer: I am not trying to run anyone off.

You guys are discrediting the psychology of the whole thing. You’re saying RIGHT NOW you won’t care if you lose $50k. How about right then, or right after? It will feel pretty bad…

This reminds me of people that used to say things like, “I don’t care if I get lung cancer, I love smoking and the last ten years are going to suck anyway…”

These people have a very different perspective later on.

mathguy, I don’t think it will hurt too much to wait a little bit, but keep an eye out. What pushed me was seeing house go into contract rather quickly…and that was in January/February, supposedly the slow season. You are probably in a higher price range than I am, so $125K loss is not impossible.

Muggy, I wasn’t referring to you. I do, however, think it pretty ironic that you tell me I’m looking backwards, while you invite me to meet your friends who bought in 2005. That’s kinda backwards.

I wasn’t thinking about how bad it would feel to lose $50K in 2017. I was thinking about how feel to be 66, have little to no income, and still have to pay increasing rent. I think that would be REALLY bad.

“I do, however, think it pretty ironic that you tell me I’m looking backwards, while you invite me to meet your friends who bought in 2005. That’s kinda backwards.”

You’re deliberately misinterpreting my posts, which is really lame.

“I don’t get it, the neighborhood is 5 minutes from the beach and the houses are 400-700k. How are they filled with such trashy people? Even if prices go down though, I don’t think neighborhoods like that will get flushed out of the trash. All part of what makes it so frustrating. High prices in the trashy neighborhoods are keeping prices high in the nice neighborhoods and keeping me as a renter. Can’t afford 600k to live in a neighborhood where people will do basic maintenance on their house.”

You pretty much nailed why we are San Diego renters…

Muggy,

I quote “loss” because a loss is realized when you sell. I invest in the stock market also. My stocks and bonds pay dividends. Sometimes the price of those stocks and bonds fluctuate. I’m ok with taking a “loss” of price on some of those investments also without selling them assuming I have been holding them for some time and they are continuing to pay a dividend. Sometimes though, I have to eat my loss. But sometimes the prices recover. It’s a risk.

If you are able to quantify the amount of risk you are comfortable with and have a plan in place for dealing with that risk, I think it can help you be a better investor. Although there are more factors than strictly being an investment, housing does qualify as an investment. To me the upside of owning a long term place to live over the next 20-30 years is worth the chance that the going price could decline up to 50k in the medium term 3-7 years. That’s a very specific number unique to my circumstances. Others with a higher or lower income and savings should have their own numbers unique to them.

Of course, I don’t *want* to “lose” 50k. I, just like the rest of you, want prices to normalize now. But as a wise man once said, want in one hand and cr4p in the other and see which fills up first. A 50k loss realized over 20-30 years that I expect to own the house I’m buying translates to about 1.5 - 2.5k /yr .. Nothing to sneeze at, but not a catastrophe in my particular financial plan.

“You have just lived in just part of the greatest expansion of credit in history.”

And this credit expansion is what drove the economy; It allowed people to buy what they couldn’t afford, it allowed them to spend money they didn’t have.

Now people are getting to the point where they can only buy what they can afford, can only spend money that they have.

We are getting to this point, but we are not there yet. People can still spend money they don’t have but it’s getting a lot tougher - and a lot more expensive - to do so.

Before that, 20% down wouldn’t get you a house. You couldn’t buy what you couldn’t pay for.

Bull. People borrowed from individual investors and banks. Borrowing to buy a house isn’t some recent invention. Down payment requirements varied wildly depending on who you were dealing with. Borrowing to enjoy now and pay tomorrow has been going on since biblical times, probably earlier.

Now people are getting to the point where they can only buy what they can afford, can only spend money that they have.

And in some cases just avoiding borrowing altogether. Student Loans are perhaps the #1 exception to this rule.

Which got me to wondering, what will happen if tuition keeps rising at say a 10% per year? How much will college cost for today’s newborns?

Let’s start with State U tuition rates, which seem to be hovering around $8K per year.

In 18 years that $8K will be $44,000.

This is of course unsustainable. Students would have to borrow 200K just to attend state and we all know that can’t pay that back, not on the “new normal” wages they will be paid. Heck, they can’t pay back what they are borrowing today.

It will be interesting to see this unwind. A lot of second tier and below private schools are going to disappear.

How will State U’s adjust to keep prices down? Will they cut costs, allowing landscaping to languish, maintenance to be deferred, clsoing student centers, cancelling athletic programs? Part of their problem is their costly infrastructure. American colleges have vast campuses that are costly to maintain. Contrast this with colleges in foreign countries, which are often located in low cost business parks.

We were talking about the 2 students per employee ratio the other day. That will have to go. The schools will kick and scream about changing that, but there will be no other way to deal with it.

Tuition has been rising, on avg, 8% per year for the last 20 years.

What’s happens is the student loan bubble.

A friend with a 1 year old was told by Baylor that they anticipate tuition to be $400k for a four year degree in 18 years.

Contrast this with colleges in foreign countries, which are often located in low cost business parks.

I spent a summer at Universidad de Valencia in Spain. Its facilities were pretty bare-bones.

A friend with a 1 year old was told by Baylor that they anticipate tuition to be $400k for a four year degree in 18 years.

In that case, use the money to buy your kid a McDonalds. The ROI will blow away what they’ll get for their degree.

In Colorado
I once audited a marketing class at Pepperdine, since our firm’s (REIT) VP of Marketing taught the class at night. He spent a lot of time on franchises, and I told him it was called “buying a job”. He loved my analysis of it. I had to understand franchise operations to lease out our shopping center spaces.

Great point, but not all locations are created equal. I have had to re-lease many failed franchises.

True, plus most of the “good” locations probably already have a Mickey D’s.

$400k for a four year degree in 18 years ??

Chump change if you have a grandpa named Mitt….

” friend with a 1 year old was told by Baylor that they anticipate tuition to be $400k for a four year degree in 18 years.”

better buy now!

or be priced out forever!

“A friend with a 1 year old was told by Baylor that they anticipate tuition to be $400k for a four year degree in 18 years.”

At that rate, I expect to see failure of state section 529 plans. And even at In Colorado’s 200K. I think the section 529 plans are not prepared for that.

“A friend with a 1 year old was told by Baylor that they anticipate tuition to be $400k for a four year degree in 18 years.”

At that rate, I expect to see failure of state section 529 plans. And even at In Colorado’s 200K, I think the section 529 plans are not prepared.

Reply to incolorado:
Do you realize the amount of waste at universities? It is pretty amazing. There is a sense that if the full budget is not used by current fiscal year, next year the budget would be less or even non existent! So departments tend to purchase redundant things like computers and other hardware even if it not required and spend the money.
I think that it is time that the highly paid admin staff at the universities, starting with the chancellor, should be held accountable for “waste performance”. What that means is independent audits of affairs to see if waste was committed. The incompetent personnel admin or academic need to be weeded out of these institutions.

I think that it is time that the highly paid admin staff at the universities, starting with the chancellor, should be held accountable for “waste performance”. What that means is independent audits of affairs to see if waste was committed. The incompetent personnel admin or academic need to be weeded out of these institutions.

Having worked at universities for more than eight years, I saw this waste first-hand. And you’ll be pleased to know that you have a kindred spirit in me and the EduBubble blogger.

“A friend with a 1 year old was told by Baylor that they anticipate tuition to be $400k for a four year degree in 18 years.”

I think I would take my chances on the streets. Eff that.

72 million people in this country, or basically half the workforce, cannot afford a “lifestyle.”

I make more than that group and even I can’t afford a “lifestyle”.

No hobbies. No vacations. No new anything unless something breaks. No saving because recent inflation has destroyed it. No retirement because decades of recessions has destroyed that as well. No medical insurance for the same reasons.

Yet I still make more money that half the workforce population.

I make more than that group and even I can’t afford a “lifestyle”.

Testify! We were thinking of a vacation this year, until I added up all the costs and came up with a $4k+ total.

It’s gonna be another staycation this year.

My “hobby” consists of buying used comic books and graphic novels. And that can add up fast. Unfortunately, the selection at the local public library is pretty weak.

I’m just responding where the first “reply here’ is available, not specifically to Colorado.

It’s interesting that my comment drew reaction to the mention of lifestyle which was merely an afterthought, I kind of wish I never added that last item because it took the limelight away from my main point, that the entire range of cost of living expendiures have gone to the crazy side.

I wonder why that is. Have people not yet fully realized that as pain of the system collapsing reaches the PTB they’re going to just get crazier and crazier about what they try to extract from us to keep themselves in the life they’re used to? I think what people don’t realize is even if Americans all received a sweeping 5% increase in pay, they wouldn’t see any improvements in their life. The ceiling on the costs would all simply rise and absorb it. So who ultimately would benefit from that pay increase?

Americans can’t save 20% because the pay redistribution has been on full tilt for quite a while now. I wouldn’t expect things to get better. The pressure for this leveraging of our labor for their profit will only increase from here on in.

Americans can’t save 20% because the pay redistribution has been on full tilt for quite a while now. I wouldn’t expect things to get better. The pressure for this leveraging of our labor for their profit will only increase from here on in.

And I think they understand it, as they enabled the 0% down NINJA loan environment.

I can’t help but feel that we will see that madness again, very soon, maybe even coupled with 2% interest rates. How else can they reinflate the bubble?

Sorry, I didn’t mean to take away form your main point, Carrie Ann, just enhance it, but your subsequent explanation did it better at what I was trying to say.

Because a house is a physical good like any other. Its price is supported by wages.

One edit: The price of a house is supported by wages AND the amount one can borrow.

Please consider the deliverability of pre election promises ??

Exactly…

with the proceeds from selling his previous house……..your key phrase here.
the boom created ‘equity’ as a form of income.
This is not “savings”. He did not plunk down savings, he simply transferred money he had gained from one property to another property.
It was a bad choice, as you seem to indicate, however he probably should have kept the case. but then, when the prices are moving so high, so fast, it’s hard to resist the call of even bigger equity gains. Ask a Realtor. they’ll tell you about “your biggest investment”.

‘plunked down 20%…today, he’s underwater’

It’s not important what any one person does. It’s very important what millions of people do, especially if there are large amounts of public funds involved.

It’s one thing to say the govt should back 90% of the housing loans. It’s another to say they will allow 0-4% down. And another to do this right after the highest housing prices in history. Now layer this with the govt allowed shadow inventory, govt backed no doc loans.

There is nothing magical about 20%. After the Texas bust in the 80’s, it wasn’t uncommon to see 30-40% down-payment requirements. Why was that? The lender demanded that because house prices were falling. Another thing that’s important about this period; these loans weren’t securitized.

You’ll hear a lot from certain quarters about securitization ‘causing’ the housing bubble. But I don’t hear many talk about doing away with it.

Like I said to those who applaud the current policy of govt backed loans and central bank intervention; you own this mess shaping up. Because it was made in DC, with the full knowledge that this is repeating the mistakes of the 90’s and through 2008.

“with the proceeds from selling his previous house……..your key phrase here.”

He owned it for 10 years and it appreciated from 120K to 170K in that time. He also had a temporary rental for a few months, while they house hunted and then waited for it to be built.

Meanwhile it was hard cold cash in the bank. Curiously, the reason he gave me for taking the plunge was that his employer was paying his closing costs. I told him he would be sorry, and to his credit he has admitted to me that I was right.

Your friend is an imbecile.

“Your friend is an imbecile.”

I wouldn’t go so far as to say that. He made a mistake, believing that the bust would only be in places like Vegas or Florida.

It’s no big deal. I have imbeciles for friends and I still like them. They’re just imbeciles. One of my brothers is an imbecile. A harmless one…. rather he’s harmful to himself…… because he’s an imbecile.

‘The government did not “interfere in the market.’

Oh really? So they back 90% of current loans and that’s not interfering?

IMO, the politicians are responsible for just about every foreclosure that comes from loans made after the GSE’s went broke.

I’m saying they did not just decide one day to so on their own initiative. They were lobbied by business to do so.

So ultimately, it was the FIRE sector USING government to create favorable conditions, rescind laws, create news ones and then be the scapegoat when it all blew up.

…and it worked.

And yet people keep advocating that we place gov’t in charge of larger and larger parts of the economy.. I don’t think people get the principle that it’s not gov’t per say that we think is bad, it’s the terrible policy that comes out of having people in it be influenced by money and lobbying. I’m fine with having gov’t regulate. We just need to shrink the corruption money available to any single dept/branch by. In my very humble opinion which MANY of you disagree with, we do this by pushing as many public services possible back to the county and state level, along with the tax revenues. Yes I would include the military in this. It is my humble belief that our national military should be a federally directed aggregation of state militias funded by the states. No federal income tax. If the feds want money, they should lobby the state governments for it or collect it via import/export taxes or other interstate or international commerce taxes. If the states are screwing up on civil rights, education, social safety nets, etc, the feds should step in with fines to the state and put programs in receivership etc… The feds should be there for oversight and compatibility, not for operations.

Like there isn’t any bribery or corruption at the state level???

In terms of money, we are, no doubt, THE most corrupt empire in the history of mankind!

USA! We’re number one! YAY!

Like there isn’t any bribery or corruption at the state level???

There’s more.

“But to use first time buyers as a debt based mechanism for propping up house prices is just sick.”

These guys were the first line of defense against falling home prices. Unfortunately, the first line of defense often has higher than average casualty rates.

Everyone needs a place to live, but you don’t have to invest in bonds

Rents are the equivalent of bond-interest payments. For most, they live in the property, so they receive no rents (interest), but the do receive use, or rent-equivalence.

Here, again, is the problem. Just because you use the property, doesn’t absolve yourself from looking at it as the investment that it is. I would argue, in fact, that too many real-estate purchases have ignored rental-equivalence, and the premium over which buyers were willing to pay for the property because they were going to live in it and not rent it.

We are in a time that you can not evaluate situation with conventional wisdom.
Like buying stock, who cares yields or PE ratio. Same thing happens for housing price and rent, also nowadays people do not borrow the money from other people’s saving for the most part, they borrow money out of thin air, thus the low interest rate. I am no expert on economics like Bernanke, he surly thinks he understands it better.

So when the bill comes due for these bad loans of the past 2 years, the IRS won’t expect me to pay my share? I’m relieved!

You and I both know that the bill will be paid by borrowing and printing, not by direct taxation. This country hasn’t seen a “balanced budget” in 12+ years, and there is nothing coming from D.C. that says politicians are ready to increase taxes to the levels necessary to create one. They only have to look at Europe, specifically Greece to see where that will get us.

I suppose you can also reassure me that following in Japans path won’t mire us in recession for the next 20 years?

Nope. I’ve said it before, we have taken the exact playbook from Japan, including creating “zombie banks”. Inflate or default, that is the only way… and inflation will eventually lead to default. Bond holders will only take so much.

Because if that’s what happens, it’s gonna hurt a lot more than a few million FBs losing a house ??

Spot on Ben….

So you are saying we should bail out all the people who end up losing money on gold because there was a false threat of hyperinflation? How about all the people who end up losing money on the dollar because there was a false threat of “insufficient commodity backed currency” that made us have to create a FIAT? Anyone can spin a story to play the “vicitm”. This is why the term CAVEAT EMPTOR was coined. This is why we need to let FB’s lose the house and let the banks fail. This is why even if you think gold/silver is in a bubble, you should still have like $1000 in physical commodity currency minimum in case FIAT hyperinflates (probably more like 5% net worth minimum).

This is why we need to let FB’s lose the house and let the banks fail.

How would this affect pensions and retirements? On principle, I totally agree. But now that my mother has finally retired this year (at 74!), I really don’t have another room in our rental to take her in if the banks fail, the stock market collapses, and she loses her retirement.

I really don’t have another room in our rental to take her in if the banks fail, the stock market collapses, and she loses her retirement.

Therein lies the rub.

“Yes, I agree that’s too bad for them and they really ought to be smarter. But they aren’t and people who take advantage of that ARE predators.”

If someone from high up in government decides to hand each predation victim with an underwater mortgage who is luckily in the qualified pool the tidy sum $51,000 (on average) in unearned principle writedowns, won’t that be too bad for you and me? Will it be safe in this case to say that you and I ought to be smarter?

The worst thing is that given how tight the rental market is, they generally have little incentive to do anything other than the bare minimum in terms of improvements.

Good luck. The challenge getting the banks to sell before listing is often times they need to demonstrate that they marketed the property. How hard they market the property is a judgement call. We’ve seen some commercial properties that were lightly marketed to a few known players–that has made them officially “marketed”, but not widely so.

Perhaps the way to go is to find someone who has bought from the bank before…they may be able to help you with some credibility, which might given the bank some latitude to do something other than list fully.

You may need to be prepared to go light on reps/warranties from seller…they’ll need a reason to act outside the normal course.

Don’t you feel safer now ??

And yet the auto industry has had to be dragged, kicking and screaming, into providing safety features and mpgs we have come to expect from our cars.

As for the Ford wagon that can’t be sold here, my guess is that it’s because of its diesel engine. FWIW, Euro and USA safety standards are pretty close already as are gasoline engine emissions. It’s diesels that have been the show stopper for Euros in the USA, but their next gen engines are getting cleaner.

All residential construction must have fire sprinklers!!?? Are you kidding me? This is almost the dumbest thing ever. You wouldn’t happen to have a link to this, would you?

$30k? Really?

How can they build houses in North Carolina for $100k? Did houses really increase in price by $30k when North Carolina passed the same law?

Here ya go;

Sprinkler Systems Now Required In New Homes
February 18, 2011 - FireFightingNews
United States (California) - Starting this year, homes built in Inland Southern California and throughout the state will be sold with a virtual firefighter in every room, on duty 24 hours a day to save lives. That is the way fire marshals describe California building code amendments that now require every single-family home and duplex built anywhere in the state to be equipped with a fire sprinkler system. Read full story.

$30k? Really ??

Really yes….In fact is was a little more than that….Installation of the required 2 inch water meter was $16,000. by itself…

It will get cheaper as it becomes more common. I’d love to have a sprinkled house, bet it makes your insurance cheaper.

Sprinklers required for new homes is becoming common across the nation. Seems smart to me. Unless you live right around the corner from the fire station, you’re house could burn down before they get there. In fact, urban firefighting is more about containment and not about saving the structure.

Diesel? Got nothing to do with emissions and everything to do with market protection. The big three CAN’T build a diesel car because they don’t know how and WILL get their lunch ate if those cars are allowed to be sold here.

IIRC, they actually CAN be sold here, but the import tariff prevents it.

“Can’t get that car here”

Ford has tried, on numerous occasions, to import cars from Ford of Europe for sale in the US market. Very few, if any, have done well in the US market.

Different markets, different cars. Although US transportation and economic policy seems to be designed, going forward, to cram us all into $50K $hitboxes, whether we like it or not.

So far I have seen water, glycerine / glycol ( to -20 degrees F ) and glycerine to -40 for non-residential.

The water system that I saw was very inexpensive where the glycerine system cost much more than $30k in an expensive house.

I think failures are priced at $30k for damage so impact on home insurance will be huge. I recently insulated a home with a new glycerine system that needed to comply with a lot of new local code. I found dozens of potential failure points due to failure to comply with code yet the work passed inspection by the guy that wrote the local code. He had 1 requirement and his fixed was non-compliant.

There will be a meaningful amount of damage due to failures. I heard from the local fire department that the reason the glycerine levels are limited to -20 in residential is that the discharge is explosive and can decapitate a person.

Charlie, I tried sending an e-mail to the address you gave last week. No reply. Was it the correct address?

Seems smart to me ??

Seems stupid to me, well, unless you are the beneficiary off all the work…All the work I might add that is very expensive for basically glueing plastic pipe together…

There will be a meaningful amount of damage due to failures ??

Even if it does not fail, the water damage will far exceed the damage that the fire would have caused…Ever see what “Service Pro” charges for their emergency response on a water damage…

Slim,

here is my personal: ed.cesnalis @ mammothlakesinsulation.com

I have looked and asked staff but have not seen your Email

Aw, drat! Looks like my message got snatched by the e-mail vultures. Happens now and then. I just sent you another one, Charlie.

It will get cheaper ??

Yeah right…We are in the worst housing construction cycle ever so the environment is about as competitive as it can get…Ask any contractor…

as it becomes more common ??

Huh…Scratching my head…How much more common can it be given 100% need to be sprinklered….

Oh and this; bet it makes your insurance cheaper ??

You will be happy to know Mr. & Mrs homebuyer that the extra $30,000. you are paying for your house has saved you $200. per year on your insurance…Besides, As I mentioned above, the water causes more damage than the fire so I doubt there will be any insurance saving at all…

I’ll take a drowned house over smoke inhalation ANY day.

smoke inhalation ANY day ??

Ever heard of a smoke detector ??

Ever heard of a smoke detector ??

I sure have! Likewise, carbon monoxide detectors.

Also, just to be sure that you know when your detector is about to bite the dust for good, it starts chirping. And chirping. And chirping.

Only way to stop it is to remove the battery. And go to the hardware store to buy a new one.

So, it’s not like these things don’t work.

And yet the auto industry has had to be dragged, kicking and screaming, into providing safety features and mpgs we have come to expect from our cars.

And speaking of safety features ….

When I was a kid my mother’s brother rolled his car. He was trapped in it and burned to death. Apparently he took a beating in the car and was too hurt to get out in time.

Fast fowrard to last December: My son rolled his car (it was totalled). After reading him the riot act we took him to the ER just to be safe. They said he was 100% unharmed.

Apparently he took a beating in the car and was too hurt to get out in time.

Oh god, he was CONSCIOUS??!?

Likewise, carbon monoxide detectors ??

Mandatory now also in the state of California….

Only way to stop it is to remove the battery ??

I am guessing but I would say mandatory “hard wire” smoke detectors were required in any new construction or additions in California going back maybe twenty years…They still have a battery “back-up” in the event you lose power…

The one you have is not hard wired so its driven solely on the battery and yes, they are very annoying when the battery gets low…So much so, I see people routinely remove the battery just to stop the Sum-a-beach from constantly chirping… Problem is they forget to replace the battery leaving them unprotected during sleeping time…

Next up for our collective brains in Sacramento is a point of sale requirement on any transfer of title to real estate a requirement for low water use toilets & shower heads…In other words, mandatory removal & replacement prior to closing with a certification that it was completed…Plumbing contractors & and fixture manufacturers are “salivating” waiting for that to become law…

Next up for our collective brains in Sacramento is a point of sale requirement on any transfer of title to real estate a requirement for low water use toilets & shower heads…In other words, mandatory removal & replacement prior to closing with a certification that it was completed…Plumbing contractors & and fixture manufacturers are “salivating” waiting for that to become law…

I can see the point for this one. Like it or not, the western United States is in a long-term drought. So, we need to save water any way we can.

IMHO, I think it’s time for graywater toilets like the ones that are used in prisons. You’ve probably seen them. the sink and the toilet are one unit made of stainless steel. There’s also a Japanese version that’s sold for residential use.

Sprinklers are mandatory in most commercial buildings, I don’t often hear stories about them flooding the places. In fact, I never do.

“Like it or not, the western United States is in a long-term drought. So, we need to save water any way we can.”

Agreed, but here in the Sac Valley, 80% of our water goes to agriculture.

Toyota Camry has the most domestic content, followed by the Honda Accord, then the Chevy Malibu, according to carsdotcom. Here’s the top ten:

http://www.cars.com/go/advice/Story.jsp?section=top&subject=ami&story=amMade0611

Since the Camry is made about 15 miles from me, it would surely be the most local choice for me, given that the employees’ wages are mostly spent in the area, as is whatever tax revenue we get from them and their affiliated industries.

Sony, like everyone else, subs out to Hon Hai.

You blame the consumer too much……

As usual, it’s the suits. Nothing I buy seemed to get any cheaper, once manufacturing was moved to China. All of that money saved by replacing $8/hour people with $8/day people went to the bank accounts of the multinationals, and bonuses to their “irreplacable, valuable” management.

Exactly.

Consumers really don’t have true choices. Just a bunch of false ones between different varieties of crap.

In my area, the best example is in grocery stores. There is a brand of food I like that offers many different varieties, but only at some store. At other stores, the choice is less than one third of what they make and the nearest store that carries the full product is several miles away.

And this happens for EVERYTHING sold in the grocery stores whether same company or the competitor.

Never mind the reason, the result is… I really don’t have serious choices without going out of my way to the extent it no longer makes economic sense for me to seek out the other choices.

After a one year lease expires you go month to month. I did that here for eight years!

The lease goes with the sale of the house….if either of the owners want you to move they would have to pay you to break the lease……could be a good bargaining point…

Nope. Can’t do that when there is a lease contract.

The lease goes with the sale of the house….if either of the owners want you to move they would have to pay you to break the lease……could be a good bargaining point…

Nope. Can’t do that when there is a lease contract.

Here it’s called “owner occupied eviction” (in local parlance, being “Ellis acted”). During the boom it happened A LOT.

Good friend is in negotiations over her apartment as we speak: she lived there for 10 years, building got sold, new owner wants to move into her flat. The owner’s can only owner occupy one flat and have to stay in it for at least 3 years.

Problem is, even with the anticipated 10K settlement for her and her partner (the evicted renters), they cannot find another affordable rental. They’re looking at the possibility of an hour long commute.

I’ve been owner-occupied evicted two times since 1989.

Sounds almost the same as NYC in rent controlled or stabilized apartments….if they dont live in it for 3 years you can sue to get the apartment back at your last rent price…and damages..

—–
The owner’s can only owner occupy one flat and have to stay in it for at least 3 years.

“comfortable entry point”

I think this may never exist for me.

“I think this may never exist for me.”

Suppose you found what you like at $100-$120/sq ft; would you change your mind?

(I would…)

What the hell is that supposed to mean?

Well, the previous owner was a young man… so I guess that counts as the home itself getting a sex change.

As for warnings, I have a Q:

1. You read numerous articles about “national” house prices dropping “on average.”
2. You get a notice in your mail that your rent is about to spike 20%.

Which warning would you heed?

Salinasron keeps calling oxide a he. I assume butters was referrring to that.

Oxide, I think you have to consider that your financial turning point happend now because your comparison points were a town house and an apartment walkable to the metro. I understand wanting more space, but I don’t understand why you are talking as if renting a townhouse (family housing in a country with excellent public schools) and renting near the metro (when you have implied that your commute is easier by car) were your only options. Did you look for a large one bedroom (not competing with families) that isn’t walkable to the Metro (not competing with people who don’t want a car)? I don’t know if they are even out there as large one bedrooms seem to only be in older buildigns, but did you even consider looking for one?

lOL, I just read your post and oxide’s. Me bad, for some reason I did think oxide was a he. Thanks for the correction and my apology to oxide!

Polly, yes, I did give it a cursory look. A good 1-bedroom apartment in Germantown is still $1100-$1200 a month. That rent is hundreds less than my PITI, but it’s a good 25-minute drive from work. But it’s doable. I’m going to assume I pay $1200 a month, and save every penny between the rent and my PITI for 30 years, and use that cash to buy an Oil City house.

If my rent stays at $1200 a month (0% increase) for all 30 years, I’m sitting pretty. I will have saved up $178K, plus lots of compound interest. I have money for Oil City and then some. But let’s say my rent rises 7% each year.

oops, hit the “reply” too fast.

If my rent rises 7% each year, then the rent for a 1-bed will rise to equal my PITI within 7 years. I will have saved $21,500. That won’t stretch far, AND, it’s likely that my house would have appreciated $21500 in those seven years.

7% sounds like a drastic jump, but that’s what my rent had been doing that past two years. However, let’s say rent goes up 5% a year, reasonable. Now my equivalent point is 8 years and $29K saved.

Even at the Montgomery County recommended 3% a year, the equivlence point is $45K after 13 years.

Unlike HBB posters, Microsoft Excel doesn’t lie. Sure, renting looks great…. for the first couple of years. I’d build me a nice pile of $$… for about 5 years. After that, the pile stops growing, and washes away and turns into a hole fast.

Odd that you would call us HBB posters liars for suggesting that you might not be guaranteed the outcome of the spreadsheet you did up.

Your heart is where your money went I suppose.

Interesting. I had no idea that $1200 was standard for a one bedroom in Germantown. That is a very flat distribution of rent prices (high even in a place I would call semi-boonies). I guess because there are still jobs further out. Sounds like your PITI is pretty comparable to my rent.

And I think when people accuse you of being a walk-away waiting to happen, you have to remind them that you plan on having savings and MD is a recourse state. Changes the whole analysis as there is no walking away from the debt. I think a lot of people forget that.

Skye, which is more guaranteed? Hypothetical 5% rent increases or hypothetical 40% price drops?

I’m predicting about a 10-15% drop on good housing. But then, I think pricing will level off and bounce for a long time as investors buy the shadow inventory as it is slowly bled out. Price drops after that will only be on dumpy housing, while everything else follows inflation upward, slowly. That scenario would put me about 5% underwater, maybe 10%, but it’s still ahead of renting, and way ahead of renting if I plan to retire with a paid-off house.

Polly, I’m sure I’m could find a decent one-bed for less, but I only gave it a cursory look online. And rental prices are pretty high — as a friend said, it goes up about hundred bucks per metro station closer to downtown. You probably got a very good deal.

way ahead of renting if I plan to retire with a paid-off house

+1

I’ve been renting for 30 years, and have no intention to do it for another 30. Or even another 10.

“Did the sex change operation come with the home, Oxide?”

I believe the technical name for that procedure is an “adacoctomy”

Well Dale, I do intend to install a secret passage in the house.

That’s not a joke, by the way. The house has the structure for a secret passage.

a secret passage.

To where? It would make a good safe room though.

Class action suit? We’d love one! Where do we sign up?

“Class action suit? We’d love one! Where do we sign up?”

Ask 60 minutes Robo queen LYNN. She took a million $ cash out refi money, lived in her castle and didn`t pay for 4 years and got $18 million. You should be able to get a couple of billion $ for your parents cause they actually got screwed.

And don’t forgot every single bribe soliciting senator and congressmen. That would be all of them.

There are fairly significant differences between us and Japan. First and foremost, Japan now has a shrinking population, not simply an aging one.

http://www.bloomberg.com/news/2012-04-17/japan-s-population-declined-by-largest-ever-0-2-last-year-1-.html

In 1989, the Japanese population was only growing at 0.4%, and it’s continued to trend downward ever since (turning negative a couple of years ago).

http://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&met_y=sp_pop_grow&idim=country:JPN&dl=en&hl=en&q=japanese+population+growth

Kind of hard to mop up excess supply created by a bubble when you don’t have a whole lot more people around to utilize the excess supply of housing.

And the most recent decade was the slowest growing decade in the US.

‘Japan is 17 years in and no bottom yet? WTF I`m GD 52 years old’

I’ve mentioned this on radio and in print, but I don’t think it sinks in to most what this means. If we go toward the Japan scenario, we’ll be in a bad spot how many years from now? It should be noted that we have no way of knowing if our experience will be worse or better. It could be 40 years or more because the global housing bubble is without precedent. Why don’t we see any discussion of the relative risks with policy choices?

“Why don’t we see any discussion of the relative risks with policy choices?”

Given that we are in uncharted territory, both with respect to the magnitude of the post-housing-bubble-collapse financial market dislocation and the extremity of the policies that have been fashioned to cope with it, who can pretend with conviction to have a clue about how this all pans out?

We are in the unknown unknown zone.

There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know.

– Donald Rumsfeld

Rumsfeld doesn’t know that he doesn’t know.