The Housing Bubble

I think at this point almost all states have laws that allow you to drop off a very young baby (it may be a matter of days) at a hospital or a firestation with no questions asked. They were in response to some teenagers killing their newborns rather than bring a baby home to parents that would kick her out of the house if they knew she had been sexually active. Exactly how the parents missed the pregnancies in the first place, I don’t know, but that is what the justification for the laws were.

Don’t know what it’s like in the UK, but in the US you live and die by your “credit score”.

but in the US you live and die by your “credit score”.

That is only true if you play their game, and actually want their credit. I don’t.

That is only true if you play their game, and actually want their credit. I don’t.

And here I thought I was the only one. Solidarity, Prime_Is_Contained.

That is only true if you play their game, and actually want their credit.

Unfortunately, it also affects your ability to rent and to get insurance, and affects the price of that insurance.

That is only true if you play their game, and actually want their credit. I don’t.

It can affect how much you pay for auto insurance and some employers are screening out candidates with poor credit scores.

Plus try renting a car if you don’t have a CC.

The best thing to do is to get a credit card but only use it once a year for a plane ticket. It keeps up the credit rating, but doesn’t cost you much money.

While I value a cash-only lifestyle, and did it myself from about 2004-2007, you can’t predict everything. there are times I’ve really needed the credit.

Having credit doesn’t cost you money. In fact, the smartest thing you can do (assuming you have self control) is charge everything you buy to a credit card and pay it off every month. You pay no interest and collect the rewards that can be redeemed for cash. Just make sure you find one with no annual fee.

If you question whether you have the discipline to only buy what you can afford and would have bought anyway, stick with cash.

In fact, the smartest thing you can do (assuming you have self control) is charge everything you buy to a credit card and pay it off every month.

The formal operational stage begins at approximately age twelve to and lasts into adulthood. During this time, people develop the ability to think about abstract concepts. Skills such as logical thought, deductive reasoning, and systematic planning also emerge during this stage.

I’ve rented cars all over the Continental United States with a debit card - Enterprise for a fact will take one.

Putting that aside, why would you want to save for 15 or 30 years AND pay rent for 15 to 30 years when you can pay the same amount and buy now? If interest rates were 12% or something, then yeah there’s a case to be made for saving up and paying with cash. But when you can get a mortgage for 3% with practically nothing down, you really have to have your head examined if you’re going to forgo that and instead save up for 15 years <b<AND pay rent.

“But when you can get a mortgage for 3%”

Run like heck because when interest rates rise from multi-generational lows, its not like median income is going to rise, therefore sale prices will have to crater so the “how mucha month” crowd can continue to pay the same amount per month.

“If interest rates were 12% or something, then yeah there’s a case to be made for saving up and paying with cash”

Don’t understand that case at all. Isn’t 12% a historically well above average rate? Therefore you’re guaranteed a huge capital gain if you buy at a high rate/low price and sell at a more normal interest rate/higher price. If you “save up” on a historical average basis you’re very likely to end up buying at a lower interest rate, which is financial suicide.

I bought at 4% and if interest rates go to 10% it won’t bother me related to my purchase as I don’t intend to sell. It just means that my cash will grow at a higher rate (deferred) to more quickly pay off my loan.
For the sake of everybody else let’s hope that rates only go back to historical 6 to 8%.

“why would you want to save for 15 or 30 years AND pay rent for 15 to 30 years when you can pay the same amount and buy now?”

The point is that your basis is living beyond your means.

My Grampa Skye saved for three years to buy his modest home in 1940. I saved for three years to buy a modest home in 2012. What’s different between Skye math and yours?

“Run like heck because when interest rates rise from multi-generational lows, its not like median income is going to rise, therefore sale prices will have to crater so the “how mucha month” crowd can continue to pay the same amount per month.”

Option 1: Pay $2000/rent for 180 months. Save $1000 a month. You’ve spent $3000/month for 180 months and at the end you own $180K house outright.

Option 2: Buy $400K house today. Get 3% interest rate. Pay $3000 including tax/insurance a month for 180 months. You’ve spent $3000 for 180 months and the end you have a paid off house.

And my example assumes your rent stays at $2000 for the next 15 years which is highly unlikely. More realistically by year 10 your rent is at $3000.

Unless today’s $400K house drops in value to below $150K, 15 years from now, you’re worse off with your save and rent plan.

Mr. Truth is assuming that if everyone bought cash that prices would crater and you’d be able to buy a house for the price of a car. My experience in Mexico (see above) sort of disproves that.

What was the rate of inflation in Mexico back then?

Mr. Smithers, we’ll disagree on politics but I do agree with you on this. After over six years on this blog as a renter, I finally bought a house in March, and was lambasted for it. I used all the same arguments that you did. There’s even a NYT calculator figures in a lot of factors of the rent vs. buy equation. I came to the same conclusions that you did. That didn’t stop the lambasting from Truthy.

It’s almost as if he doesn’t understand that people have to pay money in the form of rent — that somehow renters live for free while they save up to pay cash. I guess he lives in Mom’s basement? — with the irony that mom probably owns the house due to an evil 30-year mortgage.

“I guess he lives in Mom’s basement?”

When you have no other means to defend yourself, you invoke realtor talk.

You’ve been awarded the RealTard of The Year Badge.

Congratulations.

Oxy, IIRC you didn’t get lambasted for buying a house, rather for some outrageous statements you made about how your house was going to make you rich and what idiots renters are. Oh and yes, for really bad fuzzy math.

‘we’ll disagree on politics but I do agree with you on this’

Home loanership makes for strange bedfellows.

Yes, we have quite the gaggle of ‘buyers’ here on the HBB these days. (Not sure about the gaggle. What do you call a group of borrowers? A chain gang?) Anyway, a contrarian’s dream indicator. And aren’t their shoulders sore from patting themselves on the back! Some of this reminds me of a person just back from a honeymoon saying how glad they are they got married.

Well, I’m off to work on a new foreclosure. When I was bidding this job, I saw a handwritten letter from the former ‘owner’ to the neighbors. It started off with ‘We’ll miss you so much!!’ Then it proceeded to tell them what junk they left behind the neighbors could have. I guess the neighbors left the letter behind after they had picked through the junk and took what they wanted. The moral of the story is, don’t get too attached to the people next door. Or if you do, make sure to get to their junk first!

What was the rate of inflation in Mexico back then?

It was about the same as inflation.

Some regular posters here (well, maybe just one) seem convinced by the Fed’s line that housing prices are set by market psychology, rather than fundamentals or government intervention to thwart them.

Government intervention is setting prices for now. Eventually, fundamentals will rise again as the determinant of housing prices.

“What do you call a group of borrowers?”

A lament of debtors

The problem is that prices are unlikely to fall enough so that even the prudent can afford to purchase a home for cash that is any kind of equivalent to that which they can afford to rent. In the markets with the greatest price declines (say, much of Florida) we’re already seeing that the bottom is NOT set by owner occupiers. Rather it is set by landlords. If the ROI is right people WITH money will buy and rent property out. Now I’m a big believer in downpayments and not signing up for payments that you can’t afford to make. And that just about everybody involved with teaser rate, pay option suicide loans is a variety idiot. But that doesn’t mean that all mortgages are a bad idea.

Home loanership makes for strange bedfellows.

I see a bad, sorry bi-partisanship bill coming soon.

Oxide,

I owned for a long time. When the bubble looked like it was about to pop, I sold and rented for a few years. Then when conditions became ripe for buying I bought again. And I’m sure some day in the future when the bubble returns I’ll sell and rent again when it looks advantageous.

To me it’s a math problem. I have two options, buy or rent. I have to live somewhere and I have to pay rent to someone. I can pay rent to a landlord or I can pay rent to a bank (and deduct a portion of that rent from my taxes). My only decision is which of the two options is better financially for me. The rest is noise.

To others here and elsewhere, it’s not about a financial decision. It’s a religion that renting is good and owning is bad. No matter what. 5000 sq ft houses in the best neighborhood could be had for $20K and people like Truth would be here saying buying at $20K is stupid. If you just rent for another 10 years the house will be had for $18K.

Some of this reminds me of a person just back from a honeymoon saying how glad they are they got married.

+1 LOL…a great way to start the day!

Blue, I don’t recall saying anything about a house making me “rich.” (others accused me of it) I do recall saying, repeatedly, that I wanted to own a home outright by the time I retire. I can’t do it by renting and saving up for an oil city house. Not if I want to live within 20 minutes of where I work.

“it’s a religion….”

That’s just argumentation by insult.

The pitfalls of living beyond one’s means and of being perpetually in debt are beyond your scope of vision. That’s all. Group Vision got us here.

Eventually, fundamentals will rise again as the determinant of housing prices.

On a long enough timeline, the survival rate for everyone drops to zero.

“because when interest rates rise from multi-generational lows, its not like median income is going to rise, therefore sale prices will have to crater”

If that happens, just walk away - its the American way.

To others here and elsewhere, it’s not about a financial decision.

You just don’t know what your’e talking about. It’s ALWAYS a financial decision first and foremost.

No matter what. 5000 sq ft houses in the best neighborhood could be had for $20K and people like Truth would be here saying buying at $20K is stupid. If you just rent for another 10 years the house will be had for $18K.

Again…. you’re shooting from the hip without the facts. You have no what I would say because you don’t know housing. You know as much as realtors have told you(which is glaringly false) combined with whatever experience you have thus far. And I’m certain that experience involved you getting bent over yet you don’t know it and couldn’t admit it even if you did know it.

“That’s just argumentation by insult.

The pitfalls of living beyond one’s means and of being perpetually in debt are beyond your scope of vision. That’s all. Group Vision got us here.”

You’ve just proved my point. In your views buying a house is de facto living perpetually in debt. The fact that owning - under any and all circumstances - equals debt slavery is a tenet of the religion. What is beyond your scope of vision is the possibility that owning can be a better deal in some cases.

Do what you feel is best for you. If you want to rent forever, go for it. But just don’t be here 5 years from now still complaining how unfair the world is because The Fed or eeevil 1%ers or even more eeeviler banks or cogress or the president or the NAR whomever is standing in the way of you buying something at a “reasonable” price.

“Oxy, IIRC you didn’t get lambasted for buying a house, rather for some outrageous statements you made about how your house was going to make you rich and what idiots renters are. Oh and yes, for really bad fuzzy math.”

I don’t recall Oxide claiming the house was going to make her rich. What she said was that prices had probably bottomed or wouldn’t go much lower (except for trashed places) in her particular target area. I don’t know exactly where she bought, but it is probably within 10 to 15 miles of where I am and I think it is a toss up. 40% off peak for an area with good access to professional jobs isn’t a bad price point. If the government gets out of backing most mortgages and we go to a real private money system, the analysis is wrong. If we somehow muddle along with continued government support, it might be correct.

What I don’t agree with is her assertion that you should compare PITI against rent. Interest is rent - renting money. The only savings you are doing while owning is in the pay off of the principle. Also, if prices are going up, you are “saving” the cost of not having to pay a higher price later.

Like I said, I’m not convinced we are finished with price declines in a lot of areas around DC. But accusing someone here of things she didn’t say is just unecessary.

40% off peak for an area with good access to professional jobs isn’t a bad price point.

I hate to see us psychologically anchor to peak prices to determine what’s a good deal. But at the same time if Boulder would ever fall to 40% off peak I’d probably be thinking about buying myself.

So now I’m at this house. I see at the end of the letter it says:

‘HOPE you have boxes and energy’

BTW, almost everything on the list is still here.

“Again…. you’re shooting from the hip without the facts. You have no what I would say because you don’t know housing. You know as much as realtors have told you(which is glaringly false) combined with whatever experience you have thus far. And I’m certain that experience involved you getting bent over yet you don’t know it and couldn’t admit it even if you did know it.”

You’re right. You know everything, nobody else knows anything.

So now I’m at this house. I see at the end of the letter it says:

BTW, almost everything on the list is still here.

So, Ben, should I take the above to mean that the current neighbors didn’t want their former (and foreclosed) neighbors’ stuff?

You’re right. You know everything, nobody else knows anything.

I couldn’t care less who is “right”. The truth is housing is still massively overinflated and falling.

I would contend that renters are perpetually in debt almost as much as owners. If you don’t agree, well then fine. Don’t pay the rent, and you will find out very quickly that you don’t live for free.

Polly, I agree it’s a toss up. However, I should add to this: “If … we go to a real private money system, the analysis is wrong.”

The analysis is only wrong if we go to a real private money system within the next three years or so. If it takes longer than three years, then it doesn’t matter what money system it is, because I’ve already saved enough by buying vs. rent to make up for a price fall.

Also keep in mind that the private money system will entail MUCH higher interest rates. Will prices crater? Probably, but only long enough for landlords to buy and lease out the houses. They won’t care about the high interest if they pay cash.

I can see why one would not want to compare principle to rent, but I see nothing wrong with comparing PITI to rent. My monthly “rent” to the bank is included in the comparison.

Carl, I didn’t anchor to the 40% off peak price. I anchored to my price being a 2001 price adjusting for inflation. At least according to Zestimates, 2001 was pre-bubble. Was my price the absolute pendulum swing bottom? Probably not, but it wasn’t far off from pre-bubble “normal.”

In your views buying a house is de facto living perpetually in debt. The fact that owning - under any and all circumstances - equals debt slavery is a tenet of the religion.

Once again, you’re misrepresenting someones words. I think that’s YOUR religion.

Paying the current inflated asking prices of resale housing is perpetual debt for all intents and purposes. Why? Because most have to borrow for 30 years to pay that inflated price.

If you don’t believe prices will continue to fall to levels where a house can be financed with a 5 or 10 year note with a 20% down payment, you’re going to be stunned. It’s going to be new experience for you….. and many others.

Yeah… it’s the price. Let stop detracting from that fundamental point. mmmmmkay?

‘the current neighbors didn’t want their former (and foreclosed) neighbors’ stuff’

That’s right, they couldn’t (in a twist on an old HBB theme) give it away!

You didn’t comment on the example I have between option 1 and 2. Only way you win is if prices in 15 years from now are 60% lower than today. Is that part of your “truth”?

And you’re ducking and weaving from the price issue and continuing to mischaracterize the words of others.

That is your truth.

“Yeah… it’s the price. Let stop detracting from that fundamental point. mmmmmkay?”

There’s more than one price in a housing calculation. Price of the house, price of rent, price of insurance, price of taxes, price of borrowing money, price of lending money, etc. Add in the dynamic of time and things get very complicated.

“If you don’t believe prices will continue to fall to levels where a house can be financed with a 5 or 10 year note with a 20% down payment, you’re going to be stunned.”

A lot of people with average incomes are going to be willing to step in with a 15 year amortization and outbid you.

“To others here and elsewhere, it’s not about a financial decision. It’s a religion that renting is good and owning is bad.”

Ignore the strawman troll.

“What do you call a group of borrowers?”

A shackle of debtors.

A lot of people with average incomes are going to be willing to step in with a 15 year amortization and outbid you.

“Outbid” me? lmao

Friend…. housing demand is at 15 year lows and falling.

“What do you call a group of borrowers?”

HowMuchAMonth?

Polly–”Like I said, I’m not convinced we are finished with price declines in a lot of areas around DC. But accusing someone here of things she didn’t say is just unecessary.”

As another living in the DC area, I’d say that was highly dependent on market segment. In College Park a mostly working class nabe in PG county prices are down ~50% and very close in nominal terms to what they were when I bought in ‘99. In Bethesda, not so much. I would argue that the bubble flew the highest (proportionately) and crashed the fastest in cheaper areas. The first was because the worst of the bubble was fueled by the explosion in subprime loans and the latter because the overextended poor simply have little ability to hold on and hope.

So I wouldn’t presume to know enough about the market somewhere else and whether IT is near bottom. Keep in mind that “near bottom” is near enough. Because trying to buy at the exact bottom is as much of a fools game as trying to sell at the exact peak.

“What do you call a group of borrowers?”

an indenture of debtors?

an upsnap of FBs?

a fleece of foreign buyers?

http://realestate.yahoo.com/calculators/rent_vs_own.html

I owned for a long time. When the bubble looked like it was about to pop, I sold and rented for a few years. Then when conditions became ripe for buying I bought again. And I’m sure some day in the future when the bubble returns I’ll sell and rent again when it looks advantageous.

No family, no kids in school, right?

If that happens, just walk away - its the American way.

A great number of debtors deserve a good shagging with a Joshua tree that has been dipped in Tabasco sauce.

I owned for a long time. When the bubble looked like it was about to pop, I sold and rented for a few years. Then when conditions became ripe for buying I bought again. And I’m sure some day in the future when the bubble returns I’ll sell and rent again when it looks advantageous.

To me it’s a math problem. I have two options, buy or rent. I have to live somewhere and I have to pay rent to someone. I can pay rent to a landlord or I can pay rent to a bank (and deduct a portion of that rent from my taxes). My only decision is which of the two options is better financially for me. The rest is noise.”

Sounds good to me.

“If you don’t believe prices will continue to fall to levels where a house can be financed with a 5 or 10 year note with a 20% down payment, you’re going to be stunned. It’s going to be new experience for you….. and many others.”

There are few posters here that claim to be 100% certain about anything. However, Truth claims to be 100% certain of his position. Maybe we need to have a discussion about how Truth can benefit financially from his position that prices are 100% certain to fall substantially further? Doesn’t S&P have some vehicles that allow you to bet on the price of housing in certain markets? Seems like an “all in” short bet is in order. Heck you might as well lever up since there is zero chance that you’re wrong! I’ve never been 100% certain about anything, but if I ever do in the future, I’m damn sure gonna put my money where my mouth is and profit from it.

Housing prices are falling. I’m a 100% certain of that.

Am I advising you to buy anything? Notta chance. Nice try though.

“Friend…. housing demand is at 15 year lows and falling.”

True, but will it fall to the point where the average income can buy with a 5-10 year amortization? Many people who were willing to buy a house with a 30 year fixed were being outbid by people going IO or other questionable mortgages. Now we’re getting to the point were a 30 year fixed can buy, but people are hesitant. But will they still be hesitant when they can buy in 20 years? 15 years? If an adequate size of the population is willing to pay the interest associated with a 15 year amortization, then housing demand will level off.

And then there are the investors. If prices fall to the point where the average income can buy in 15 years, there’s a good chance that properties will cash flow as rentals. That can represent a lot of demand.

“Housing prices are falling. I’m a 100% certain of that.

Am I advising you to buy anything? Notta chance. Nice try though.”

Huh? I don’t follow. If you’re 100% certain prices are falling, why wouldn’t you profit from that view? I’m sure there are lots of ways you can bet that housing prices will drop. Especially since you’re certain that they’ll not only drop, they’ll drop substantially. I suggested the S&P CME housing futures and options.

You can express your opinion verbally as you do on here and you can express your opinion financially as well. Sure, not buying a house is sort of an expression of your view, but you could express it much more strongly by actually betting against those that are buying houses. Seems like that would be of interest to you.

“I suggested the S&P CME housing futures and options.”

Then step up and strike. What are you waiting for?

“The truth is housing is still massively overinflated and falling.”

Tell that to my colleagues in Silicon Valley. They are wringing their hands, losing bidding wars for 500K condos.

Color,

So you’re offering that as a refutation?

“Then step up and strike. What are you waiting for?”

I am not 100% certain that prices will drop substantially from here so I have no interest in expressing that view financially. Instead, I expressed my view that owning a house is financially prudent for my situation when compared to renting by buying a house last year. I don’t come on here and scream “everyone should buy!” and then sit on the sidelines and not buy. I’m merely suggesting that if you feel so strongly as to come here every day repeating your view over and over that housing is 100% certain to drop substantially further then why not express that extremely strong opinion financially as well by betting against housing? Or are you saying that a position of inaction better reflects your view on housing? In other words, you’re reasonably certain that housing will continue to drop, but you’re not certain enough to actually put any of your own money behind that view.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-06-26 10:44:09

Ignore the strawman troll.

Troll as defined by you: anyone who doesn’t think exactly like you. Yawn.

Comment by rms
2012-06-26 11:22:41

No family, no kids in school, right?

Family, but kids still not in school.

I am not 100% certain that prices will drop substantially from here so I have no interest in expressing that view financially.

Prices are falling. Do you want a phone call from God too?

It may be a surprise to many on this blog, but not everyone looks at housing purely as an economic issue. I just moved into a home that I had custom built. And yes, just like the immediate loss one incurs when driving a new car off of the lot, the house would probably resell tomorrow for $200k less than the cost to build it.

But houses aren’t necessarily commodities (although in a large complex they can be virtual commodities). I have the house I want, where I want it. And that is worth something…to me, it was worth the “loss”.

As far as long term costs of those buying now, in my opinion anyone who wants a home, and is in a position to live in that home for a minimum 15 years, should buy one they can afford now. At some point inflation will return, and a 30 year mortgage at 4% or less will be repaid in worth-less dollars.

“Troll as defined by you: anyone who doesn’t think exactly like you. Yawn.”

Troll alert

“What do you call a group of borrowers?”

a julius of fools

a rush of fools

a pity of fools

a cabinet of fools

a bunch of fools

a party of fools

a cheney of fools

an armaggedon of fools

a ship of fools

a parliament of fools

a confederacy of dunces

a Joshua tree forest of FBs

troll alert

Drawing them out bigtime today. Realt-liars attempting to dominate once again.

“Prices are falling. Do you want a phone call from God too?”

Sigh. You’re either incapable of understanding my point or choose not to. I’m not arguing prices are going up, down, or sideways. I’m merely questioning why someone who feels as strongly as you isn’t attempting to profit from that view. I give up. Best of luck to you.

anyone who wants a home, and is in a position to live in that home for a minimum 15 years, should buy one they can afford now.

So you’re advising the public to buy when housing prices and interest rates are falling if they’re going to live in it for a “minimum 15″ years?

What does duration have to do with the losses?

“It’s a religion that renting is good and owning is bad.”

Unlike ‘real estate always goes up’?

(For the record, Smitty-boy, I’m a two-time former homeowner…)

So you’re offering that as a refutation?

Just saying that if I were to share your “wisdom” with them, they would burst out laughing.

Anyway, Canada and Oz were able to reinflate their bubbles. Not saying that it won’t end badly, but it could happen here too.

You’ve also been yammering about prices cratering. Other than in a select markets (the ones without jobs), it hasn’t happened. FWIW, you come across as a crank, repeating yourself over and over.

“I owned for a long time. When the bubble looked like it was about to pop, I sold and rented for a few years. Then when conditions became ripe for buying I bought again. And I’m sure some day in the future when the bubble returns I’ll sell and rent again when it looks advantageous.

To me it’s a math problem. I have two options, buy or rent. I have to live somewhere and I have to pay rent to someone. I can pay rent to a landlord or I can pay rent to a bank (and deduct a portion of that rent from my taxes). My only decision is which of the two options is better financially for me. The rest is noise.”

There are several factors that have not been accounted for in this equation. One is the expense and hassle of moving when you switch from one option to another. I expect Smithers has accounted for the expense. The hassle of moving will create more pain for one person than another and may tip the balance in favor of staying put.

Usually, you can choose to stay in a purchased house. Although there are people who have been forced to move prematurely due to eminent domain or other factors. You are probably more likely to be forced out of a rental due to a sale thant to be forced to move from a purchased house. For those that favor stability, purchasing is usually a better option.

Another factor is the ability to continue to work within a reasonable distance of your residence. If you are in a stable job or in a large city, those factors favor purchasing. But not always. Auto workers in the Detroit area probably thought they were in a good situation for purchasing in the 70s. That didn’t work out so well.

Another consideration is how closely you want to watch housing to determine the right time to execute a move from one option to the other. And how long does the optimal period to exercise that option last? If it lasts less than 3 months, you may miss it even if you act at the first inkling of the change.

Well it would seem your silicon valley “friends” would agree with the fact that prices are massively inflated would they not????

Secondly, Canada isn’t reflating. Canada is falling with the exception of Toronto. There is no “re-flation”.

Thirdly, you can characterize falling prices in whatever way suits you. Prices are falling in EVERY single state in the country yet oddly, you characterize the 3 or 4 small areas where speculators are driving up prices as the broad trend.

Why is that?

There are several factors that have not been accounted for in this equation. One is the expense and hassle of moving when you switch from one option to another. I expect Smithers has accounted for the expense. The hassle of moving will create more pain for one person than another and may tip the balance in favor of staying put.

You’re right about that. Moving sucks. I read it’s the 3rd most stressful event in a person’s life.

Show of hands, who else has stopped reading “Truth’s” posts?

Show of hands, who thinks Gadzooks is a coward hiding behind an alternate username?

‘the house would probably resell tomorrow for $200k less than the cost to build it’

‘not everyone looks at housing purely as an economic issue’

I guess not.

Ah Slim is thinking like a DJ…i love it!!!!!!

Ah Slim is thinking like a DJ…i love it!!!!!!

Thank you!

And this week, Deejay Slim is taking a break from all things radio. I need it. Did three different shifts last week, and I’m a bit fried.

I also need to do some thinking about how the station trains its new deejays. To put it politely, I think the current system leaves a great deal to be desired. I’m weighing my words very carefully because I don’t think that management will welcome everything that I have to say.

Slim.

Training should include writing down what do you want to get out of this?

Some may want to be the next big talk show host, or just love to play music and want to find a way to get paid for it. Some it maybe just a hobby, but that can be expensive.

There are so many reasons to be “on the air” Lots of businesses will do brokered shows since they have already committed to spending money on advertising, they try hosting their own radio show..and some are really good at it and they get a very good ROI.

But college/ community radio is a training ground, and people need to critique their podcasts, and you need to stress those kids who were so desperate to be “indie” well they got their wish its all DIY indie America you do all the work…and you need to get your own customers, listeners, 5000 FB friends…strong social media…you want people to listen and download your shows..so you can get paid..or people will contribute $$ to your show during your fundraising time……or else you have no show.

And stress you are very, very lucky to get an over the air slot….because it still brings credibility to your resume, far better then just being an internet radio host.

Thanks for the kind thoughts, NYCdj.

I’ve made my own notes on what I want to get out of the deejay training I’ve been undertaking/enjoying/suffering through. (Yes, I’ve experienced all of those states. And many more.)

I don’t consider community radio to be my final destination. And, yes, at this particular station, there are people who’ve been volunteer deejays for decades. From my perch, it seems as if more than a few of them have bogged down there.

I can think of at least two of the long-timers who’d be good enough to do professional voiceover work. I even suggested this to the wife of one of them. So far, no progress to report.

Me? I want to use the training as part of a larger DIY course. Call it Improving My Presentation Skills So I Can Get Paid For Them.

In the past year, I’ve spoken at local storytelling and Ignite events. Feedback was pretty good.

For some strange reason, I find that getting up in front of a live audience is much more relaxing than being on the radio. Don’t ask me why. I think it’s because I have more experience going live than I do with handling a mixing board, microphone, and multiple CD players.

As mentioned yesterday, I’m in the very early stages of working on a book project that may have a co-author.

Could live performances be in the future? I hope so. I have plenty of bicycling around America stories and photos. Perhaps those could be used in a live show with the co-author. I don’t know what her photo inventory is like. We haven’t discussed that yet.

Its the immediate feedback, same thing for djing a wedding or party you know right away what you said or the song you played just bombed.

Thats why they invented cue cards, one liners ,promos. To ease the transitions.

And yes the old timers do bog down the station, and take slots away from people who care and have a goal. Only a very local show should be on for 20 years…You would be known as Mr or Ms Tuscon…Tuscon live music …Tuscon talk..

And yup it does take some co-ordination to run a board/mics all by yourself.

For some strange reason, I find that getting up in front of a live audience is much more relaxing than being on the radio.

“If you have to borrow money for 15 or 30 years to buy a house, you can’t afford it and you’re paying far too much.”

Or you understand what the word INFLATION means.

I think Truth is stuck in a time warp and thinks it’s 1981 and interest rates are 15%.

I think you’ve got yourself stuck in a mire that you didn’t plan for.

Welcome to The Housing Bubble Blog.

It sounds to me like you’re saying you don’t think it can happen again.

It can’t. As FPSS is fond of saying, and I agree, the trip from 15% to 0% was a 1-way trip. Think I’m wrong? Prove it. Here’s my proof: ZIRP in Japan for the last 20 years and no end in sight…

The market can remain irrational longer than you can remain solvent. If you’re betting on interest rates rising and fundamentals to matter again anytime soon, than you’re on the wrong side of the bet. Don’t fight the FED. They run the show when it comes to monetary policy. They manipulate all asset classes, from interest rates and bonds, to stocks and commodities. They will continue to do so right up until the US dollar loses reserve currency status and monetary inflation in the US is out of control. And what will people be running for to protect themselves from the ravages of out-of-control inflation? Hard assets like commodities and housing.

And what will people be running for to protect themselves from the ravages of out-of-control inflation? Hard assets like commodities and housing.

That is exactly what I saw in Mexico City in the late 70s and early 80s. If you had spare cash, you spent it ASAP on a hard asset. It could be anything: a pile of rebar, bags of cement, a case of booze. My dad’s injection molding business often made more money selling bags of granular plastic he bought and stockpiled 6 months earlier when he had extra cash than actually selling molded output.

It can’t. As FPSS is fond of saying, and I agree, the trip from 15% to 0% was a 1-way trip. Think I’m wrong? Prove it. Here’s my proof: ZIRP in Japan for the last 20 years and no end in sight…

And they will continue this game to prop up house prices and the stock market. They will continue to sit on foreclosed houses as their carrying costs are minimal.

Yesterday, over lunch, the young pups were blathering about how there is “no inventory” in Denver and that the local real estate market is in a “healthy recovery”. I mentioned the shadow inventory and received multiple “deer in the headlights” looks. Most people have no clue of what’s going on.

As FPSS is fond of saying, and I agree, the trip from 15% to 0% was a 1-way trip.

I don’t think my statement means what you think I mean.

Yes, ZIRP in Japan and no end in sight. Also, falling prices in Japan and no end in sight. (You missed that part!)

Anyway, demographics and student loans are a serious bee-yatch!

Remember the golden rule when facing a bear - I don’t need to run fast; I just need to run faster than you!

I haven’t seen anything nice like that for < 450K in AG next to SLO.

+1 SLO has a long way to fall, IMHO, because middle-class incomes are difficult in the area.

If your property drops in value, no bank is going to come knocking, looking for a margin call to bring your account back to even…

Because it’s not your property, it’s the banks. Stop payment for 90 days and your’e going to find out how fast the bank comes knocking.

My point was really just that there is friction in every asset purchase. My gold bullion dealer marks up gold from spot, putting me in the hole immediately. My stock broker charges me commissions on stock and options purchases, putting me in the hole immediately. My realtor charges me 6% when I buy a house, putting me in the hole. It’s part of the game. People have to learn to adjust their calculations to account for it.

I think the real debate should be on why realtwhores are still paid 6% commission and why sites like Ziprealty, which do commission rebates aren’t making in-roads into breaking the monopoly.

Because it’s not your property, it’s the banks. Stop payment for 90 days and your’e going to find out how fast the bank comes knocking.

Well…that’s how it’s supposed to work, anyway :-).

“Where the renters come out ahead is on not having to pay for major repairs and upgrades. I have no equivalent out.”

And that washes out with the tax deduction on interest and taxes over the long run for some people. Depends on the amount of interest paid, the amount of tax paid and income of course.

On what planet are you paying $2 for every dollar borrowed when interest rate is 3%? Do you really not understand how amortization works?

On what planet are their 3% 30 year notes?

Nice try Liar.

Truth,

You’re losing it buddy. You’re the one who parrots if you have to borrow for 15 years you can’t afford it daily. And now all of sudden when it’s pointed out that you can have a 3% (even lower) 15 year mortgage you ask where can you get a 3% 30 year mortgage.

Come on man, try to focus here. It’s not that hard.

There is nothing to lose my friend.

There isn’t a 3% 30 year note available and you know it and so do we. Why lie about?

The repayment amount on a $1 at 4% over 30 years is $1.72.

That’s right. 2 per 1 is close enough.

And consider the expense to taxpayers of this one little “adventure”. Costs of law enforcement, criminal justice, incarceration, not to mention the care of the one guy’s lady friend and son. And of course the damage done to the citizens. Over time, millions of dollars.

Not that many people give a flying crap. Most are willing to be the Eloi to the Morlochs.

Where I live, illegals are responsible for the majority of drunk driving accidents.

No idea what the Virginia law allows, but the federal one allows claims for negligence of employees. Sounds like the one you described might fall under that.

If you think about it, prioritizing the deportation of illegal imigrants who are also criminals (being here illegally is a civil violation, not a criminal one) is the government doing its best to prevent crimes committed by illegals. Who is more likely to commit a crime in the future? Someone who hasn’t committed one before or someone who has?

Mr. Smithers-LOL
Yep, anything factual is racist.

“They’re just children” is always the response for anything regarding correcting behaviors. I call our complex “Wild Animal Park”.

Cash & Close better be soon!

I don’t see them as invaders but as victims of 2 large families;

1. The need for new voters for one family.
2. The need for cheap labor for another family.

If a cat has its kittens in a dog kennel, would that make them pups?

“Our govt is treasonous.”

I don’t think it is “our” government. It’s some sort of occupation regime government.

“If a cat has its kittens in a dog kennel, would that make them pups?”

Awesome. I’m gonna use that one.

Blue
Great analogy!

palmetto-
well stated:
“It’s some sort of occupation regime government.”

Here’s the future of the US, barring some miracle.

http://worldnews.msnbc.msn.com/_news/2012/06/26/12410611-travelers-run-for-cover-as-cops-kill-cops-at-mexico-city-airport?lite

’nuff said.

If the legal definition of being a puppy was being born in a dog kennel, then they would be.

Being an American isn’t a matter of genetics.

“legal definition”

Meh. Meaningless. Depends on what the definition of “is”, is.

Not at all. A citizen is defined by law. It isn’t a feeling. In the US, it isn’t genetics. You are a citizen or not based on what the law says. And it can change.

Pretending that the definition of dog and cat is the same as the definition of citizen and non-citizen is stupid.

Can a dog marry a cat?

“Can a dog marry a cat?”

Not in Mississippi… or Utah.

“Not at all. A citizen is defined by law. It isn’t a feeling. In the US, it isn’t genetics. You are a citizen or not based on what the law says. And it can change.

Pretending that the definition of dog and cat is the same as the definition of citizen and non-citizen is stupid.”

I love you polly. We need more people that make arguments based on unemotional facts. Saying things in clever ways and/or with lots of emotion doesn’t make them any more or less true.

We need more people that make arguments based on unemotional facts.

A former manager used to say that. His recommendation to us was that, in any disagreement or when an issue popped up, to state the facts of what happened and to do it without emotion and to not make any assumptions or judgements on anyone’s possible motive.

The issue, of course, is what constitutes a “fact” but I’ve always remembered and tried to follow that advice.

“Sure, there are criminals. Just like there are American criminals.”

Fer cryin’ out loud, Slimmie. What in the frig does that even mean? That we want to add foreign criminals to our citizen criminals?

Why don’t you send those comforting words to the two ladies in Apollo Beach? I’m sure it will make them feel better.

“There, there, now. It could have been a gang of three American toughs that raped ya. Think what a culturally enriching experience you had.”

I thought Arizona tried to come down hard on the employers previously and the SCOUS over turned that so this time they angled to make it illegal to look for work if you were not here legally. Now that was just overturned. (if I am to believe what I heard on talk radio driving home from work last night)

I thought Arizona tried to come down hard on the employers previously and the SCOUS over turned that so this time they angled to make it illegal to look for work if you were not here legally.

The Arizona employer verification law was signed into law by then-Governor Janet Napolitano in late 2007. It went into effect in early 2008. It has since been upheld by the Ninth Circuit Court of Appeals and the U.S. Supreme Court.

I must have misunderstood….so it is illegal to hire an illegal in Arizona? Why are they just not enforcing that? If it is already on the books it seems they could accomplish much of what they want by enforcing an existing law.

One of the issues is that our (AZ) immigration verification system isn’t 100% reliable - and a lot of people don’t want to be liable for NOT hiring someone that is legally eligible to work in the US. Kind of a clusterfunk.

http://www.reuters.com/article/2010/09/28/us-usa-democrats-offshore-idUSTRE68R40I20100928

Which?

http://www.reuters.com/article/2010/09/28/us-usa-democrats-offshore-idUSTRE68R40I20100928

If you want to “secure the border” then you have to get Congress to throw a lot of money at doing it. A lot of money. Tons of money. In addition, if we were “fully funded” for deporting all illegal immigrants, then the administration wouldn’t be able to use prosecutorial discretion to decide to prioritize deporting the criminals over deporting the high school students. Please feel free to start a letter writing campaign to your representatives to ask them to allocate a lot more money to those two functions (securing and deporting).

Good luck.

Estimates of the cost of illegal immigration range in the $10-20B a year range in everything from health care costs to prison for gangs to education for the kids of illegals.

The fence was estimated to cost $1M/mile. The non-river border is about 1000 miles.

If you want to “secure the border” then you have to get Congress to throw a lot of money at doing it.

So are you saying the reason the border isn’t secure and that the Obama administration is selectively choosing which laws to uphold in regards to illegal immigration is because of cost? I, for one, have never heard the argument that securing our national borders from illegal immigration, criminals, and terrorists was too costly.

In fact, given what we spend today on “Homeland Security”, war in Afghanistan, the war and continued occupation of Iraq, CIA drones in Yemen and Pakistan, US Special Forces in Uganda, etc., I’m quite sure if it was a priority, we would find the money. Securing the “Homeland” by securing the borders would be far cheaper than our foreign wars and occupations. Additionally, maybe if Homeland Security would stop purchasing license-plate readers for every police department in the country, they might just find the funds to build additional fence along our southern border and hire additional border guards.

So I say again, Cui bono?

Cui bono?

Mainly business owners.

I’m saying that Congress has purse power and if they really wanted to deport 10 to 12 million people over the course of a very short amount of time, they could pass a law requiring it, figure out how much it would cost and provide funding limited to exactly that function. Same thing for the fence. Anything less than that, you get to live with the discretion of the executive branch to decide what is the highest priority they can accomplish with the money they have and the restrictions already in the budget. A lot of homeland security stuff can’t be diverted from where it already is because it is directed to providing SWAT training to cops in [put your preferred example of a place where the the cops don't really need SWAT training here].

Congress leaves that kind of detail out of the budget and the laws ON PURPOSE. They don’t want to be held responsible for that level of detail (except for certain earmarks). Seriously. They don’t. That is politics.

Estimates of the cost of illegal immigration range in the $10-20B a year range in everything from health care costs to prison for gangs to education for the kids of illegals.

There are more costs involved than just building a fence. Once it is built, it would be necessary to increase the size of the Border Patrol to monitor it. The saying is “build a 20-foot high fence and they’ll find a 20-foot high ladder to get over it.”

Of course, that’s not saying it’s a bad idea. It could be worth spending many billions of dollars to get control of that border.

And would someone please explain to me why a river is an equivalent barrier. I’ve seen the Rio Grand. It didn’t look that uncrossable to me.

“And would someone please explain to me why a river is an equivalent barrier. I’ve seen the Rio Grand. It didn’t look that uncrossable to me.”

Who said that?

Palmy:

Here is sanford floriddah this year……

http://www.jammiewf.com/2012/three-shot-including-pregnant-woman-in-sanford-fl-drive-by-shooting/

http://violenceagainstwhites.wordpress.com/2012/04/21/white-man-corey-rose-defends-himself-against-belligerant-racist-black-man-white-man-faces-charges/

I am no fan of George Zimmerman, for example. As far as I can tell he is probably the kind of knuckle-dragging dork who has always thrown his weight around when he thought he could get away with it.

I think the big question as to whether it bounces up and down is if builders add a bunch of supply. If builders add a bunch of supply in a consistent manner at today’s prices, then I think we are at a long, multi-year bottom (with values trending up from today, roughly with inflation).

If builders are unable to add supply on a consistent basis at today’s prices, then I think there will be a move up in prices until it is economic to build starting from raw land, at which point prices will flatten and then only trend roughly with inflation from that point.

Keep your eyes peeled for earthmovers grading new lots in greater Phoenix for this point…

I agree generally.

However, the Case Schiller numbers are a bit better in that regard since they take a 3-month moving average, so the monthly data is a bit less volatile.

Never-the-less…as I noted above, I pay much more attention to year-on-year than month-to-month.

With 10% down, a 30 year mortgage at 4.5% your mortgage payment would be $660 + taxes + ins. I drove by and asked one of the new buyers/landlords what they were asking for rent, $1400 per month.

There you have it. A situation where it may be cheaper to buy than rent.

Those metrics are consistent with what we have seen recently in So Cal…a $150k home actually rented for $1,400 per month (not an ask, an actual lease).

The real question is whether the asking rent is ever achieved in Phoenix.

Regardless, if you run the sensitivity analysis on the mortgage payment (I’m going to run 100% financing), you get:

4.5% - $760
5.5% - $850
6.5% - $948
7.5% - $1,049

At 4.5%, if you paid the asking rental rate on your home on your mortgage, you would pay off the mortgage in about 11.5 years.

This is the math the investors are seeing when trying to figure out the exit values for the homes they are buying. These deep pocket investors aren’t dumb, they also look at the effect of interest rates on the the mortgage payment as compared to rental rates.

The net result is this–interest rates can rise by a few percentage points, and it is still cheaper to own the home than rent it.

If rates rise by 250 basis points, the home price can go from $150k to $180k (a 20% move), and the payment is $1,200.

When you add the assumption that the environment that would see a 250 bp increase in rates is also an environment that is economically stronger and/or with higher inflation, it is likely that the same environment is going to see rents higher than today.

This is why investors are buying, and why would-be renters don’t want to rent if they can find a place to buy.

It will take a big move down in rents, up in prices, or up in interest rates to narrow this gap (making it more attractive to rent vs. own, and less attractive to buy as an investment).

The Fed has already telegraphed keeping rates low until at least 2015 (I think they recently pushed out that date from 2014).

So, do rents fall? Or prices rise?

Watch the builder activity for the answer.

Rents will fall if builders can consistently add new supply at today’s prices (developing new tracts of land into homes), and thus people will flood out of the rental pool given the difference in the rent vs. own math. Prices will rise if builders cannot.

Look for the earthmovers for your answer. If you are seeing no new lots being developed, I think the near term (the next year or two) will see further price increases. If you see new lots being developed, any near term price increases will be muted.

BTW, landowners aren’t stupid either…they’ll know what rents are, what the going home price is, what it costs to build, etc. and price their land accordingly. The more savvy landowners will NOT be selling land at values that allow the builders to build for yesterday’s home prices…they’ll be making builders assume some continued appreciation in determining the price for their dirt.

And even if many builders are not willing to make that assumption, it only takes one builder to be willing to make that price appreciation assumption to drive the value of land higher.

Rents seem to be pretty high and I am seeing the bulldozers moving all over the Phoenix Metro area. IMO this is mainly due to the fact that the “hidden inventory” continues to be held out of the market and people are tired to getting over bid when they find the house of their dreams.

Once the hidden inventory starts to come out, I think the new homes will quit selling so much.

And even if the hidden inventory is trickled out, the new supply should keep a lid on prices.

I have to laugh when I hear people say government should stay out of the way business.

Without government, there would not be HALF the business there is today.

Oh, they don’t mind when the gov’t spends other people’s money to the benefit of their business.

I just love the idiocy of thinking that providing a loan gurantee has no cost (and therefore no place in a budget). It has an expected value. The expected value changes from year to year, but it has one.

How did the bond people find politicians who actually believed them when they said that guaranteeing the bonds would lower the cost of the bonds to the special purpose entity and not cost the town/city/whatever anything? Yeah, there is a chance it could have all worked out. But never a 100% chance.

No such thing as a free lunch.

From census 2010

Median All Households: $49,445
Median Family: $61,544
Median Family with married couple: $72,751

In your example, the FB buying the house was a married family household I presume?

Which was my point. Saying the median household income is $40K and then using that $40K for a $500K house example is wrong. The more accurate median would be $72.7K for a married family household, since that is typically who buys a $500K house, not a single person.

Would someone please pull the numbers for Las Vegas.

500k is still waaaaaayyy too much for someone making 72k to pay for a house, no?

Even at 3% interest, it would be steep, especially in a high property tax locale.

72k should NEVER being buying a 500k house.

We need to upgrade the grid a lot to make best use of this, though I suppose the big users being their own producers would help alleviate the need.

I still weep that a massive power grid upgrade wasn’t the reaction to 911. One time in history when we could have gotten a buy in to it. Even the “not my view of the ocean” people would have kept their mouths shut in the first few months after 911.

There are three other factors - demographics, student loans, global wage arbitrage.

The first two are killers. Who are the boomers going to sell to collectively?

The indentured student-loan slaves?

Don’t make me laugh. This is going to end very very very badly for the end users.

This is going to end very very very badly for the end users.

Precisely where the greater fool theory ends and reality begins.