The Housing Bubble

Pimp Watch
So, are you saying different reasons for buying or timing isn’t OK? I was under the impression we’re not a ” group think” circle of contributors. We have a special set of circumstances in our family. Don’t be so judgmental. We are paying multiple rents and my husband could go blind. Owning free and clear is a must. We’re bleeding our hard earned money. This is our final home. Walk a mile in our shoes. It isn’t a picnic. Lighten up.

Some of us are glad you are here, Awaiting! Please don’t let RAL run you off…

Thinking about Awaiting’s situation, it just occurred to me that their purchase decision is a fine example of Bernanke successfully pushing people out of cash and into riskier assets.

Awaiting, if your cash-waiting-for-purchase were earning a reasonable rate of return, and the returns that it was producing were easily covering your rents, then I’m guessing that you would not be feeling nearly the compulsion to buy. I’m not second-guessing your decision—it has to be really hard to watch that cash being eroded by rents in a way that makes owning a depreciating asset seem like the “safe” route. But it does strike me that this is an example of Bernanke winning.

Riggggggggggght…..

Look. it’s a documentary screenplay called “Raped By A Realtor”.

How many times do you need to watch it?

This is our final home.

Everyone’s (financial and personal) situation is different.

In our case: if we buy, we assume it will be our final home. Our rent keeps going up, and if we get another rent increase we won’t be able to save very much. Buying now means renting and PITI are equal. We have seniority in our (yes, public union) jobs and we love where we live.

All that said, we are proceeding extremely cautiously. Refuse to get caught up in any bidding wars, have a serious limit (no more than $2153.00 month PITI) to what we can spend (as set by the city’s Teacher-Next-Door-Program that is giving us some DP assistance), and even though we are going to an up-and-coming neighborhood, won’t buy unless we find a house we love.

So we may wait a while for it to happen, and in that time frame, sheesh, anything could happen, right? Euro collapses, massive inflation, large earthquake in SF, whatever.

Cannot predict the future, but we need a place to live as sure as we need food.

Remain calm and carry on.

With secure jobs in a location where you love to live, I can certainly see locking in future housing costs if it were roughly equal to rental costs. Doing so would remove a lot of risk of future housing cost increases, which are certainly possible/likely if you were to rent for the rest of your life. It would also reduce the odds of you having to move due to landlords.

‘Everyone’s (financial and personal) situation is different.’

Sound familiar folks?

Thinking about Awaiting’s situation, it just occurred to me that their purchase decision is a fine example of Bernanke successfully pushing people out of cash and into riskier assets.

A few weeks ago, what should I hear but a-knocking on my door. It was a friend who was sitting on a lot of cash. And she was asking me about a nearby house for sale. She wanted to purchase it as a rental.

I did everything I could, including raising my voice, to try to keep her from buying the place. I don’t know whether my efforts were successful, but at least I tried.

It would also reduce the odds of you having to move due to landlords.

I hate moving. I also really dislike my landlady. And we like dogs a lot (have two, and one is a Rottie). Try renting with 2 kids and a 100 pound dog.

Prime
Thank you. I’ve been taking beating on this blog lately. You are right. Our sizable house fund and additional pad should be making us $30K annual interest minimum. We are actually losing money. I only wish Bernanke and the rest of TBTP get their comeuppance.

But in reality, we need our stuff in one place. Life is flying by, and one day it will be our last day. We would like to live a better life. Isn’t that what helped drive oxide’s decision to find her place.

Thank you again Prime and also Bad Chile. It’s lonely on this island.

What are u waiting for?

“I hate moving. I also really dislike my landlady. And we like dogs a lot (have two, and one is a Rottie). Try renting with 2 kids and a 100 pound dog.”

I have 2 dogs and a cat. FWIW, the two houses I rented in between owning both initially said no pets allowed on the ads. I called them up and the landlords both changed their mind when they got to know who the renters would be. Worst thing that happens if you see a rental you like that says no pets and you call….they say no to the pets. Doesn’t hurt to ask.

Doesn’t hurt to ask.

True. Helped us. Our landlord was so tired of knucklehead after knucklehead trying to rent her pad she accepted our dog as a small price to pay to have good stable renters who would treat the place as if we owned it. We put throw rugs down to protect the floors and we keep it to “Pottery Barn catalog” levels of no clutter and cleanliness.

Awaiting, I’m going to be blunt.

IMO, I don’t think you don’t have the right to complain about “bleeding” your hard-earned money, when just yesterday you put in a too-high offer on a house which needed an additional $50K of repair!

I tried to walk in your shoes a few months ago. You have a substantial cash cushion. You have a medical situation. You have the prospect of losing most of your income very soon. You have a few options:

1. Continue to rent and bleed and piss that cash away.

2. Spend that entire $400K on a house in California. You will have a house, but you will have nothing else. Do you think you can survive 20 more years on a house and nothing else? With very little income, a disabled spouse, and in a state that is financially and geologically broke?

3. Spend $120K on a nearly IDENTICAL house someplace else in the country, near medium-sized city with a top-notch medical center. You will have a house, but you will also have $300K left over. You could use that cash to live, to help pay for medical, to invest in decreasing your expenses, to stabilize your situation, and to generally lower your stress so you and Mr. Awaiting can enjoy each other’s company.

oxide
Thanks for the post. If Mr. Glaucoma
(hubby) can work some, we’ll be OK.

I am not upset with you, my dear oxide.
I appreciate your input. Cyber-hug

I hope you do well, Awaiting, but I do ask you to at least consider your options.

I’m afraid of two things:

1. You are focusing too hard on buying a house, any house, just to get a house, that you’re liable to bid away your last dime. You might buy something you don’t want, can’t afford, and will regret later, just to “win.”

2. You’re losing bid after bid in CA, I would take that as a sign. “Hubby can work some” in many parts of the country. And with a paid off house and cash cushion, you could get by on Lucky Ducky jobs even if Hubby can’t work some. That’s what I’m thinking of — what if Hubby can’t work some? Then you’d be stuck.

RAL/Pimp is a tough guy to be with on this blog. He seems to think that all houses locations jobs etc are the same nationwide. Brings out the worst in us , don’t it?

oxide
I went to the U-San Diego after my initial education and got certified in my sector of Commercial R E.
We have house $ and other $. We will not be broke if this deal goes through and we win this OK home (I’m not drooling), just no dream car in my future.

I appreciate the concern. I like ya and will use your bullet points as a data point.

Say, did you redo the kitchen yet?

Heavens no! No kitchen. There’s electrical and plumbing and insulation that I would like to do first. I’m “living within my means” and only getting stuff done when I’ve saved up the cash.

The only bad things about the kitchen are the 70’s flooring and a fridge that might conk any minute. I could fix both with under a thou if I need to. But the kitchen is more than a quick redo. It will be part of a much larger project. That’s the only thing I’d go into HELOC debt for, years from now, maybe.

Please don’t think of getting the house as “winning.” You may want it and that is fine. You may consider it your best option and that is fine too. But getting the right to pay more for an item than anyone else is willing to pay is purchasing that item, not winning it.

“RAL/Pimp is a tough guy to be with on this blog. He seems to think that all houses locations jobs etc are the same nationwide. Brings out the worst in us , don’t it?”

Considering Neuromance’s post yesterday. You’re not getting it Oxy.

————————————————————————
Comment by Neuromance
2012-07-05 09:16:51
Creative Destruction.

It is a concept we are forced to accept when businesses restructure, jobs disappear, communities die out. The working classes in the US have been dealing with creative destruction for many decades. It’s an unpleasant but necessary part of life.

Dear Awaiting,

Probably more than anyone else on this blog I sympathize with your situation. Going blind is seriously sucky and requires a stable environment. Here’s what I would do in your situation:

Find the area you want to live in and pinpoint a few houses that aren’t listed but which appeal to you. Then–

Put an ad in the local throw-away paper, on supermarket billboards, in church bulletins,on Craig’s list, in area student papers, ANYWHERE that’s not on the MLS, stating that you’re cash buyers looking for a home, that you don’t want to go through a realtor, and here’s what you’re looking for and willing to pay.
-”Are you thinking about selling your house but don’t want to deal with a realtor?”
-”Tired of the games?”
-”Realtors are Liars. We’re not.”

Then plaster the neighborhood with fliers, handouts, half-page ads, bulk mailings, index cards on door steps, etc. Stress that you’re not looking to make a buck, that you and your husband need to find a home, and that you’ve sterling financial and personal references if the potential sellers are on the level. I’m betting that someone in the area will contact you and offer to work something out. I know I sure would if I were thinking about moving elsewhere….

Oxide said: “Awaiting, I’m going to be blunt.”

Good luck with that line of thought, Oxide. You’ll get nowhere with it.

The “Oil City Plan” is just a rhetorical device. Few people want to do that. Such areas are pretty much confined to the Midwest, in which I live. The poster “Awaiting” can get a house here, easy, for $60K. We have pretty good medical facilities here. But she won’t do it. Because this is the “flyover”. Anyone willing to plop down $400K for a house, now, automatically considers Oil City to be an impossible option. If you’re paying $400K for housing, you’re on the coasts. With culture. And jobs. And diversity. And real government. Few people want to give all that up.

So Awaiting’s not going to do it. You’re wasting your breath.

My personal theory is that the housing bubble got so extreme on the coasts is because those coasties were used to expensive housing in the first place. Selling a maroon on 10x income housing, is a lot easier when housing around him was commonly 4-5x income. Awaiting is merely acting out that bias. $400K on a house is normal for her. And she looks around and sees all the things she probably likes, like culture, jobs, government, etc.

I used to live in New England for a time and so I can compare here and there. There’s just no comparison. Sure, I know there’s a life in the Midwest, but that’s invisible from New England, and one might say, impossible to conceive of. Hence the term “flyover”. About the only thing that New Englanders know about the middle of the country (i.e. anything “Westa Woosta”, up to the valleys of California) is that it’s a big barrier that has to be flown over at 500mph for many hours to “get anywhere”.

I don’t hold any of this against Awaiting. It’s cultural programming and no mere discussion will overcome that.

Living on the same peninsula as RW gives me an insight as to what he says about our locale is true, at least for the moment.

Everybody knows that in a free market, a truly free market, home prices would seek their natural equilibrium. Which in almost every case, if not every case, means down.

As long as we give control of OUR money supply to someone else we get what we get. Deserved or not.

You’re joking right?

Ya know what…… just go sign up for a million dollar note and buy a house. DO IT!

I think Obama campaign had started a truth squad some time ago. I am sure they pay.

Hey SF hows brooklyn??????

Hey SF hows brooklyn??????

Friggin’ hot. We’re wilting. If it hits 80 degrees in SF everyone starts freaking out that we’re having a heat wave.

NYC Triathlon in 2 days. Swim in the Hudson, woohoo! It’ll be my 3rd time doing this race, and while it’s super fun (ride your bike on the West Side Highway up to Riverdale and back and through the tollbooth!) I am usually dying from the heat and the humidity when it’s time to run.

But you can’t beat the NYC spirit and cheering as you run down the middle of 72nd Street.

Not just meow-mix, meow-mix-meth…

I wish they had left out the guy’s first name. Wasn’t there a cat food that used a cat called Morris in its commecials?

Yeah…the bane of my childhood.

I think they don’t have the monthly plan system that we have in US. All they do it buy a phone and keep adding money to the SIM card. Moreover, incoming calls are free and are charged only for outgoing calls.

In many developing countries, mobile phones are not only significantly cheaper than land lines,

And they should be—the infrastructure is DRAMATICALLY cheaper to roll out. Rather than poles and wires run down every block, all you need is a tower every few miles. WAY cheaper.

The pay-as-you-go (PAYGo) system is common in Europe, too. When I lived in Prague few had landlines, but most had cellphones, and most were PAYGo. The PAYGo system has lots of advantages, not least of which is that under that system companies have an incentive to provide service because no one is LOCKED into long-term contracts.

IAT

Bush’s fault!

Stimulus works. Until it doesn’t.

I’ll add that it’s fascinating to watch people complain about stimulus while ignoring that of the 80s and 00s while touting the same time periods as examples of success. If anything, the 00s “stimulused” us out.

Bush’s fault!

He did hand over an economy that was hemorrhaging 700K jobs per month with rising deficits. Considering that when Bush took office, there was a budget surplus and unemployment was at a 31 year low, I’d say it was his fault.

So yeah, he rolled the car into a ditch and tried to blame someone else.

Considering that when Bush took office, there was a budget surplus and unemployment was at a 31 year low, I’d say it was his fault.

Wasn’t Bush also handed a dotcom bust and sure to follow recession when Clinton left office?

Wasn’t Bush also handed a dotcom bust and sure to follow recession when Clinton left office?

What did his two wars cost us?

$3.7 trillion (with a ‘T’) and counting…

It is easy to sell stimulus to our Congress when it is for a war.

It is easy to sell stimulus to our Congress when it is for a war.

Some will take their stimulus no other way.

“My mother’s experience of trying to break into public education in the 70’s”

Baby bust.

Based on the other things he was able to do, there’s no way that he was unable to perform some sort of useful job function.

I’m sure that’s true. The problem is the cases where “some sort of useful job function” isn’t exactly the same as their old job. They probably aren’t going to be able to get hired at something else…

i know someone that’s literally been just hanging out the past 30 years.

he loves golf, cooking, and his two beautifully restored anitque automobiles.

he was a cop and injured his shoulder when he was 40.

he is also a staunch republican.

“he is also a staunch republican.”

You guys kill me.

eustance on the new show mountain men on history channel says he lives on 2 grand a year.He sells firewood and lumber for his land. he is a hardcore survivalist though. grows his own food, hunts deer, cuts his own lumber etc.

…and I know people who live under bridges.

But is that what we want for society? That standard of living is generally considered to be 3rd world.

i know quite a few people that live on that…or even less.

one in particular is a very talented artist. hasn’t pai a dime in taxes…cept for maybe on some wages here and there he earned doing construction or working on the river boat from time to time.

you people really should get out more.

If you think everyone can live on less that 1200 a month for long periods of time, YOU should get out more often.

I’ve seen far too many people DIE from being poor. Personally seen them.

If you collect a gov check as your income, then you’re not tied to an office or a commute, and you can live in the backwoods no problem.

The EEOC was gutted by years, er, DECADES of Republican obstruction.

Spent it on Afghanistan? What about the withdraw from Iraq? Or did that war just suddenly cease to have ever existed?

As his oldest kid approached 18 he started expressing interest in getting back into the work force.

Think of the work-ethic that these kids grew up witnessing. Wonder how that will work out for them.

Don’t even get me started on the Mormons and Hasidim with 10+ kids and everyone on public assistance. There’s some insanity.

http://www.thedailybeast.com/articles/2012/06/13/welfare-reform-not-for-the-orthodox.html

The dude who I lived across the street from for a few years who was getting federal disability payments, he had 2 kids and had recieved a settlement from a workers comp. case. He was a big bike rider, pretty good at playing ball with his kids and working on his boat.

Why didn’t you take some pictures, send them in, and bust him?

You know nothing about how government bennies are handled do you? There are plenty of people in jail who think the administration agencies don’t think of these things either.

You REALLY need to experience this to understand. I sincerely hope you get your turn. You have a 60% chance, you know.

I sincerely hope you get your turn. You have a 60% chance, you know.

“Smithers, release the hounds!”

Mr. Smithers, you forgot the Earned Income Tax Credit!

Let’s review the income guidelines from IRS Pub 596. In 2011, to qualify for the maximum EIC of $5,751, a married filing jointly taxpayer with three children must have an income of $12,750 to $21,800. A single or head of household taxpayer must have an income of $12,750 to $16,700 to qualify for the maximum EIC of $5,751.

Life must be pretty grand when you’re making under $16,700 or $21,800?

^ Edit: single or head of household taxpayer with three children

“I sincerely hope you get your turn. You have a 60% chance, you know.”

If your people get their way, we will all get a turn.

The reason I distrust them is because I can’t be sure that what they’re recommending is as good for my health as it is for their income. After all, they get paid for doing things. Whether those things are good is often beside the point.

I can’t be sure that what they’re recommending is as good for my health as it is for their income.

The inherent problem of the for-profit health care system.

MD’s will put you under the knife when you don’t need it. They do it all the time.

And American College Grads will serve coffee to Asian American Engineers, Doctors and Scientists.

…who will be paid half of what the position paid the previous generation.

“who will be paid half of what the position paid the previous generation.”

We’re already getting close. The H1-B program has been Corporate America’s good friend, as 10+ years of stagnant wages in tech will bear witness,

Close? We’re WAY past that point.

At the last place I worked, several years ago, many of people I met there were already making half of what they had been making 10 years previously.

We neighborhood activists think that they were.

Maybe. I suspect that at Walmart they are more concerned if you will show up on time for your shift.

…and sober.

Bring it on! Now that we’re below triple-digits, it seems like a splendid time to get out and about!

Cool. Let’s do it. Here’s a linky-doo that you can use for getting in touch with me.

If it can possibly wait until early next month, that would be good. For the rest of this month, I’m being held hostage by a certain radio station. You know the one.

The only place cash will give you an advantage is a place that needs so much structural or other major work that only a cash buyer can consider it since you need cash to make repairs. If people can get financing for major repairs, then cash doesn’t give you an advantage at all.

“The only place cash will give you an advantage is a place that needs so much structural or other major work that only a cash buyer can consider it since you need cash to make repairs. If people can get financing for major repairs, then cash doesn’t give you an advantage at all.”

Which is an excellent way to go if you’ve got the time and $$. You will have remodeled it to suit your own tastes.

Easier said than done though.

I would never move to CA no matter how rich I was. Oregon and Washington are far more appealing.

It’s amazing the number of Califonrnians that move up to Washington only to head back after a few winters. I told my housemate (from Flagstaff) “don’t worry, it gets a little easier after the second or third winter here.” She assured me there wasn’t going to be a second winter.

And for what it’s worth, homes sell upwards of $200/sf her with a median hourly wage of $18/hour. But at least the temperature has finally hit the seventies.

“It’s amazing the number of Califonrnians that move up to Washington only to head back after a few winters.”

Same here. Which has led to my admittedly not very positive thoughts of “Just go away” every time I see another CA plate here. Although they’re not the only ones. There’s no doubt in my mind this transient population has distorted many markets up here. Can’t tell you how many houses I’ve followed that have been bought then sold two years later by out of staters.

Same here. Which has led to my admittedly not very positive thoughts of “Just go away” every time I see another CA plate here.

We say the same things here in Arizona. To the point where, whenever I see a CA licensed car making a turn toward the west, I say “Yup, I-10’s that way. Keep going!”

It’s not really the Californians, per se, that I oppose. But it’s the ones that expect the exact same lifestyle (generic subdivisions, strip malls, pavement) that they ran away from.

it’s the ones that expect the exact same lifestyle (generic subdivisions, strip malls, pavement) that they ran away from.

I thought they were running away from high taxes and high prices?

“It’s not really the Californians, per se, that I oppose. But it’s the ones that expect the exact same lifestyle (generic subdivisions, strip malls, pavement) that they ran away from.”

They also want to import the same twisted brand of progressive politics that made California the toilet it is today.

Funny. That’s how I feel about all the out-of-staters who come here to CA and bring their asinine politics and expectations with them. Fifth generation here, like it just fine. Please stay out?

I lived in Santa Barbara for Seven Years and the Bay area for two, been there and done that. You can have it. I notice you don’t live around all of the carnage your political allies have created in the golden state. It’s easy to preach from high upon the mountain…What’s the saying? “Not in my back yard!”

“My political allies?” And who might those be, nick? I’m about as far right and as far left as it’s possible to be in this state and still be called upon to serve on either State party committee. I’ve friends on both sides and all peripheries of the political aisle…all based on political practicalities.

Over the years I’ve left Laguna, Malibu, Palos Verdes, upper Bev Hills and Mammoth Lakes because of nouveau riche rednecks with too much money and too little appreciation for what they were effing up. Never had that problem with the true conservationists and the creative community that’s lived here for generations– only the folks who come here and think they have a clue because they’ve “been there and done that” for a few years.

As for my “back yard” it’s so redneck that even the rednecks are afraid to come up here and get all rednecky. So take your assumptions and well, keep them out of my state.

I will agree with you on the Rednecks, they do have a way of ruining things for the rest of us.

Big Sur has some bad assed weather. I lived with my sister there for one summer back in the very early 80’s and the memory of the weather has stuck with me all these years. Nites are perfect sleep weather. Dry, cool. Then day after day of perfect 70-75 degree days, not a cloud in the sky….. endless perfect weather.

“It was 350 miles. And everything boxed/packed properly, as I am fortunate to have some nicer items”

It was 350 miles by weight or up front price? Worked for over the road movers in my early twenties out of a North American agency. They would have the guys they hired locally get out of the truck for the weigh in before the truck was loaded and have us stay in the truck for the weigh in after the truck was loaded. They got paid by lbs. x miles.

“I am fortunate to have some nicer items”

A couple of years before I worked at that North American agency they broke a Ming vase. It was something the guys in the yard and on the trucks joked about but it was not something the people in the office joked about.

Maybe we shouldn’t have gotten that piano. Moving a piano is easily $300.

$10 is real min wage and $15 is just barely above it. $18hr is just barely able to live on your own, no roommates, not have dumpster furniture (but still used/2nd hand) and save some money if you’re frugal. (I said frugal, not monk)

$20+ and you’re starting to move into lower middles class.

For reference, please see: http://www.halfhill.com/inflation.html

Half of this country’s workforce make less than $500/week.

The future belongs to Lucky Ducky

Unfortunately, $15/hr is the new norm as we continue to evolve into a service economy in a race to the bottom. Get used to it.

I do without the newest iPhones, televisions, shiny cars, expensive hobbies, and live quite comfortably on modest means. Most of my contemporaries couldn’t fathom it though.

“10- 15 bucks an hour a bright spot?”

If I found myself unemployed, I would not be above working for that amount, and if I could get my wife to to the same, we would survive just fine.

On that fine day when I got the call from the hospital, the following happened:

My mother was successfully operated on for her hip and wrist breaks. She went to rehab shortly thereafter.

My dad couldn’t remember how to drive back home. (He forgot the route.) So, the hospital social worker and I found a neighbor who could get him back to the house.

Neighbor found the key to the gun closet and locked it. He took the key back to his house. I think he still has it. When I came back here, I left my mother to take care of that detail.

She also told me that she wanted the guns out of the house, and I gave her the name of a nearby shop that buys collections. The rest was up to her, and she hasn’t said what she did. Reason: When she’s on the phone, my father’s usually hovering nearby.

I forget…where are they? I think I remember you saying they were back east, but if they are in AZ I have a relative with a gun shop in Sun City if that would ever be useful information to you…

I forget…where are they? I think I remember you saying they were back east…

Thanks for asking, Carl. My folks are in eastern PA.