The Housing Bubble

Rental Watch
Thank you. Mensch like reply!
We have hired a GC for the inspection, and already know about the caveats (more to come we know). Great bones.

The house and pool survived both the 1971 & 1994 earthquake. Actually did pretty good.Cut lot, reasonably newer roof, terrific floor plan, and an affordable price in this engineered nightmare micro bubble in So Ca. COE under 30 days.

Come on guys, even if you would not buy now, be happy for us. Hubby has Glaucoma. This is financial security for us.

“This is financial security for us.”

Sorry to seem dense and insensitive, but I just don’t get that.

Security is knowing what you will pay.

CIBT-
We just reduced our monthly nut by $1,700/mo. The LL just sold this complex. Rent increases are coming. Storage ain’t cheap either.

We will have the “pink slip”in 30 days, so to speak. It’s our toe-tag home.

“We just reduced our monthly nut by $1,700/mo.”

Sounds good. I was confused by your ‘money pit’ comment yesterday, but it sounds like you are locking in savings compared to your current rent. Congrats!

What is the current “opportunity cost” of the cash you are paying plus any expected extras? I suspect it is well below $1700 a month, but I would be curious to know.

Come on guys, even if you would not buy now, be happy for us. This is financial security for us.

I’m happy for you! Congrats.

We locked in our interest rate yesterday. Saved $2700 in closing costs and $20. month by waiting 24 hours until after the Fed minutes posted and rates went down overnight.

Now just waiting on the bank and the city to ok the loans. Jeez, this waiting is killing me. 20 days into escrow and it feels like 6 months have already gone by.

Our landlord has never returned a deposit (I’ve spoken with both previous tenants) and I am hoping to use our deposit for our last month’s rent. $3,000. ‘aint chicken scratch and we’re owed interest on that money since 1999. That’ll be a small claims deal, I’m sure.

Trying not to get too excited about this until I have the actual keys in my hand, but this is a toe-tag home for us, too.

Did I mention that the monthly PITI will be less than our rent? Looking forward to saying soyanara to the greedy bee-atchy LL and her nosy nose.

Be sure to document EVERYTHING about the condition of your rental as you leave. You should take dozens if not hundreds of pictures. You never know what she is going to claim was damaged/dirty.

Be sure to document EVERYTHING about the condition of your rental as you leave. You should take dozens if not hundreds of pictures. You never know what she is going to claim was damaged/dirty.

Good advice, Polly.

The rental is in better condition now than when we first moved in 14 years ago. But 14 years is a lot of daily wear and tear, especially on a bathroom and kitchen that haven’t been renovated since the early 70’s. The last inside paint job was done (by us) in 2002.

The overall shabbiness of living in a rental has taken its toll. If that had been my own house I would’ve knocked out a wall or two, gotten rid of the godawful pink 70’s bathroom tile, kicked the electric stove to the curb, and bought a dishwasher that didn’t break down every 6 months.

Our LL is a cheapskate and I don’t trust her further than I can spit to return even a dime of our 3K deposit.

$3,000. ‘aint chicken scratch and we’re owed interest on that money since 1999.

Why would she owe you interest? Not sure about CA, but I thought it was illegal for landlords to invest your deposit, and if they do (and you can prove it), the recourse is that THEN they owe you any interest earned.

At least that’s how I believe it to be in OR. For this reason, many investors use escrow accounts to hold the deposit.

Correction…I don’t think it’s illegal, but I think that unless they invest it, they don’t owe you any interest on it…

Different states have different requirements. In New Jersey there was a special type of account they had to put it in and I got a check every year. They weren’t even allowed to hold back the check to offset any new amount of deposit I was required to have in the account because of a rent increase.

In MD there doesn’t seem to be any such requirement, though I’m pretty sure my current deposit is miniscule. Or zero. There was something, but it may have been a move in or application fee.

Awaiting, congrats on the house!

Ya know….. this drama is over the top. It really is.

It’s the American Dream.

Congrats!

Least I say the best. Hope it works out for you.

Congratulations! I think I remember you’ll even get to see your nice piano again.

Ya know….. this drama is over the top. It really is.

Pimp watch,

Quit being a miserable wretch. Try watching some sunsets or rainbows or something like that.

There was a giant rainbow in the eastern sky as I left work on Tuesday. I’m not sure I’d seen a real one since my last trip to Hawaii.

((double rainbow))

“It’s so beautiful!!!”

sniff.

When I lived in the Midwest I saw an entire rainbow. The whole curve from ground to ground. Wow.

Good luck Awaiting. At least you don’t have to worry about rents going up anymore. It was amazing how quickly I forgot about LL’s.

Quit being a miserable wretch. Try watching some sunsets or rainbows or something like that.

Personally, I like to kick some squirrels for fun.

Also decapitate puppies.

Pimpy, let’s watch a rainbow together and slit a puppy.

…… let’s!

I’m ol’-fashioned, Pimpy, I am!

You need to put a ring on the decapitated puppy’s tail and buy me a house before I put out!

U got it.

-Da’Pimp

Darling Pimpy,

How do the sunsets and rainbows pay next month’s bills?

And you don’t own the house either. You just rent it from the bank.

– Vaguely-Dissapointed

“How do the sunsets and rainbows pay next month’s bills?”

Dude — stop harshing on the HBB’s newest Ownership Society member’s mellow.

Of course it is believable. It requires a mania to lock into a mortgage. Euphoria follows.

You haven’t been following. They are cash buyers. There is no mortgage.

You haven’t been following. Nobody here except you pimps buy into this charade.

cash…the “monthly nut” comment threw me of of that.

Taxes and homeowners insurance are a monthly nut too, though, of course, you may be paying them annually or quarterly or whatever.

” We can pay back friends for all their invites, while we lived in a tenement.”

Know the feeling. It’s been 10 years since I had a guest room and a nice enough home to invite anyone over. Now I can’t invite very many people over (it’s small) but at least I can have a few over and enjoy it.

It was really hard for me to pull the trigger and I have little doubt that prices still have a ways to fall in my wee town in flyover country. And I’ll admit to a few sleepless nights before closing. But the last 27 nights I’ve slept fine with no gunshots, no motorcycles, no drunken bully neighbors threatening my dogs, and no murders one block away.

I am not at all pimping real estate, and there are places I wouldn’t touch it yet - San Diego being a big one. And I have little doubt there is another big economic downturn coming soon. And there’s a good chance I’ll lose money unless I retire here. (But hey, can’t lose more than 93k :D) And retiring here is a possibility. Or, if I have my mom’s life expectancy I have 7 years left and won’t care in 8 anyway. In the meantime I have a friend coming in from GA in October, and friends from TX and OH and hopefully CA coming in December. And I’m looking forward to sharing my dollhouse with them.

Buying right now is not the right decision for everyone, and there are places that are still massively overpriced. And some that are slightly overpriced. And all will be affected when interest rates rise. But if HBBer’s are aware of the risks and aren’t buying thinking their house is going to appreciate 35% a year, I don’t think we’re in the same place we were in 2005.

I’m not sure why there’s so much venom against those of us who have recently bought. Yes, there is some pimping going on - I don’t understand the people who think the worst is over and come here to pimp real estate. Clearly doom and gloom are close by. But it always will be. Each of us has to evaluate our situation and determine the right choice for us. I agree absolutely with PB not to buy in SD right now. It’s still crazy high. But that’s why I moved somewhere where I could buy a very nice place for under $100k and less than 2x’s income.

And yes, I know I have debt now and I didn’t before. And I know I am not nearly as financially safe and mobile as I was. And I understand my neighbor could get as bad as the one I left and I could be screwed. But I can’t move easily and finding a decent rental is a no-go with 5 [now four - just lost my 16y-o lab] dogs. (And please don’t say get rid of the dogs - those are your values, not mine. I keep a pet for life and stand beside her when it’s time for the last trip to the vet’s.) So I bought. And yes, financially I am worse off. But physically I am much, much safer in my new neighborhood than I was in my old one and that has a value. And I’m much happier. Things could go very wrong, but even in a rental I could face major medical bills, a job loss, a severe disability, or even a tornado. Fortunately the new place has a basement.

“They are cash buyers. There is no mortgage.”

No better way to watch you cash go poof than to put it all into an overpriced 40 year old home.

So what ??? they will be dead and the only losers will be the kids and grandkids inheritances…

Especially if it’s your “last home”.

How many rent checks can there be at that point?

And the Wall Street shills standing near the edge reassure the bovine herd, “Jumping is great fun!”

being a contrarion takes a lot of effort.

i am easily annoyed by people who argue with me; that have not put forth any additional effort beyond the 24 hour news media.

i have learned to just let them be, remain silent, and calmly sip my bud light.

“i am easily annoyed by people who argue with me; that have not put forth any additional effort beyond the 24 hour news media.

i have learned to just let them be, remain silent, and calmly sip my bud light.”

“Answer not a fool according to his folly, lest thou also be like unto him.”

This is my fave Far Side ever:

http://comedycontinent.blogspot.com/2011/01/mountain-goat-in-cloud-bank.html

As with the lemmings, it’s also an appropriate metaphor for our times…

remain silent, and calmly sip my bud light.

You should try bud light lime with a cucumber spear!

Sure, about as fun as watching Studio Wrestling.

“There is something more going on than just spillover from the “War on Drugs” and being at war for 11 years”

Maybe some of those spouting second amendment solutions are doing more than just spouting. I knew a guy who worked for the FBI who was tracking militia groups. Perhaps there has been an uptick recently.

There are certainly more civilians trained in war than there were 10 years ago. News reports of the recent Sikh shooting noted that white supremacist organizations had encouraged members to join the army and get military training. They also noted that there was recruitment going on in the military itself.

This is not to say that only far right groups are planning for insurrection. The recent shooting at the Family Research Council shows that people of all stripes are willing to take up arms. Still, most militia groups seem to be on the far right now.

I recall there being speculation about dentention camps during the Bush years and rumors that he would not step down at the end of his term. I expect Obama to honor the outcome of the election if it goes against him.

There is something more going on than just spillover from the “War on Drugs”

Kooks

Local Republican Party Newsletter Suggests ‘Armed Revolution’ If President Obama Is Reelected

http://thinkprogress.org/justice/2012/05/09/481018/local-republican-party-newsletter-suggests-armed-revolution-if-president-obama-is-reelected/

The Greene County Republican Committee’s March 2012 Newsletter
The Republican Party of Greene County in Virginia published their monthly newsletter in March and in it, the editor suggested an “armed revolution” will be necessary if President Obama is reelected in November:

We have before us a challenge to remove an ideologue unlike anything world history has ever witnessed or recognized. . . . The ultimate task for the people is to remain vigilant and aware ~ that the government, their government is out of control, and this moment, this opportunity, must not be forsaken, must not escape us, for we shall not have any coarse[sic] but armed revolution should we fail with the power of the vote in November.

unlike anything world history has ever witnessed or recognized

Wow, wow, wow. Well, wait. No. Not wow. Now that I think about it, I know several people that believe this. I’m more afraid of their brains than I am of this “idealogue.”

If you drove a car, I can assure you that you did.

Yes, if you stay in your house and don’t venture outside, you can probably stay totally on the right side of the law. But.. If you go into public… Very little chance of making it an entire day without breaking at least a few laws (J-walking, traffic laws, etc).

Darrell is lying unless he does not drive.

We’ve too many laws, too many lawmakers, and too many lawyers.

Your post presumes the Fed has the means to continue buying down the rate indefinitely.

If something cannot go on forever, it will stop.

– Herbert Stein

There is a big difference between “forever” and indefinitely. The Fed can hold down the rates indefinitely, but we will risk losing reserve currency status or even worse we may set off inflation such as the type which was recently seen in Zimbabwe where money did become worthless.

Dan, if you believe that you should load up on debt as fast as possible.

It is the reason I have a mortgage. That said, I do not advocate that anyone take on more debt than they can pay back with their available cash flow.

“I do not advocate that anyone take on more debt than they can pay back with their available cash flow.”

In a global recession, cash flow can slow to a trickle pretty quickly. Many found that out after the housing bubble popped.

Is a mortgage a hyper-inflationary hedge? Given the uncertainty between hyper-inflation and depression, might the best play be to get a mortgage and have cash on hand to pay it off? Hedge your bets in both directions.

might the best play be to get a mortgage and have cash on hand to pay it off

The number of people that can do this is very limited. This requires having a decent job and good credit to get a mortgage AND a pile of cash on hand.

I would follow your plan, if I could, but without a pile of cash, it’s not an option.

“Is a mortgage a hyper-inflationary hedge? Given the uncertainty between hyper-inflation and depression, might the best play be to get a mortgage and have cash on hand to pay it off? Hedge your bets in both directions.”

very interesting…would love to hear others comments regarding this…hypothetically speaking of course.

“Hedge your bets in both directions”

So if it is hyperinflation your money is worthless but you can pay off the loan with that worthless money and have your house.

If depression, you lose your job but you can lower your monthly living expenses by using the very valuable money (money is valuable when jobs are scarce) to pay off the loan and have your house.

How is this a hedge? Having a paid off place to live is a good thing whether jobs are scarce or rents are sky rocketing. The mechanics of it are identical in both situations - you use the money to pay off the loan. Why rent from the bank in the first place?

“I would follow your plan, if I could, but without a pile of cash, it’s not an option.”

This is my problem as well.

“If depression, you lose your job but you can lower your monthly living expenses by using the very valuable money (money is valuable when jobs are scarce) to pay off the loan and have your house.”

Theoretically, in a depression, all prices fall. You still have the option of paying off the mortgage over time, if you need to preserve cash or if you want to buy deflated assets.

Having a paid off place to live is a good thing when jobs are scarce all over, but not so good if jobs are plentiful elsewhere and scarce where you live.

Having cash on hand gives you options. People get stucco when the cost of moving exceeds cash on hand. This is also true for renters, although at a lower amount.

It is only a winning strategy if you can abandon the loan and keep the money in the depression scenario. Some of you may live in nonrecourse states, but I don’t so I don’t think that way. I assume the bank will be able to sue me for the cash and since getting sued is expensive, paying up is the only option. Actually I would assume that even if I did live in a nonrecourse state. Things can change in a financial crisis.

Well, you’re right about that and there are plenty of other negatives. But the thought of four more years of Obama is equally disquieting.

I welcome four more years of Obama if the alternative is Romney. I’ll never vote for that phony, narcissistic windbag.

“I welcome four more years of Obama if the alternative is Romney. I’ll never vote for that phony, narcissistic windbag.”

If Obama is a phony, narcissistc windbag, at least he is also a good actor. Romney is not able to hide it.

Is this a good criteria for choosing a President? Should our President be able to hold his cards close to his chest in meetings with other countries’ leaders?

Two totally different highs. Pot could be licit but illicit meth would still sell.

“Two totally different highs. Pot could be licit but illicit meth would still sell.”

Too true. Legal alcohol does not eliminate the use of other drugs

“and demand prisoners gain 50-75 lbs of fat before release…slow their fat azz down if they think of committing a crime”

Just in case you aren’t kidding, this would affect their job prospects (such as they are) once getting out, so in that sense, yes, I expect the ACLU would be on it.

Pete they say if you dont commit a crime in the first 6-9 months you have a very good chance of staying out of jail for a long time…so maybe 50lbs of fat will help lower the recidivism rate…..you can be fat at a car wash or a janitor…

If it walks like a duck and quacks like a duck…

… then it must be Occam’s razor.

(yeah, I mixed ‘em. so sue me )

If it was truly an act of charity, it wouldn’t be claimed as a tax deduction, now would it? And therein is the problem Rental suggested we address.

Churches operate as corporations and de facto PAC’s, but get taxed as non-profit and charitable entities.

http://news.yahoo.com/bain-documents-romney-offshore-investments-used-blockers-avoid-185957445–abc-news-topstories.html

Google Republican Party platform 2012, you’ll get a number of links with the platform’s content.

Here’s what IBT.com had to say:

“Audit the Federal Reserve. The pet cause of Rep. Ron Paul has now been embraced by GOP leaders. For the first time, the platform calls for an annual audit of the Federal Reserve.”

Here’s another link from Reuters on the Republican review for a gold-backed dollar as part of the party platform:

US Republican platform said to eye return to gold standard

Also posted a Reuters link to a “Review of gold-backed dollar part of Republican platform”… hasn’t shown up yet.

All the founding fathers were hard money cranks. They understood what “not worth a continental” meant. They knew that sound money was essential to prosperity.

They all learned from hard experience when the scrip issued during the revolutionary war was worthless…

You can’t print gold, and as the recent violence in South Africa shows, digging it out of the ground is not as easy as it sounds.

This is why starting a new war is so important.

All of those inconvenient campaign promises can be put on the back burner.

Any information about how they would handle the transition? Do my current dollars become “commodity basket” backed dollars, or is there some other process involved?

While I’m no expert, Bretton Woods dictated that currency debts would be convertible into gold, so foreign debts denominated in dollars could be repaid in gold. I would expect something similar.

From a valuation perspective, I would suspect given the amount of government debt outstanding, the gold conversion rate would be quite a bit higher than what the market currently prices gold at. I would expect to see a 3-4X increase in gold vs dollars to make that happen: $4-6,000/oz from the current spot price around $1,600.

You won’t lose dollars per say, but dollars would be devalued as compared to gold.

All of those inconvenient campaign promises can be put on the back burner.

Now that you mention it, part of the 2012 Republican platform is “No new taxes with the exception of a new war”.

I’m sure war with Iran would count as a “new war”… and you know damn well that Israel will be let off their leash after November.

“US Republican platform said to eye return to gold standard
WASHINGTON | Fri Aug 24, 2012 6:06am IST”

Forty years and 98 percent in relative dollar devaluation too late…

Barn door left open
All the horses ran away
Hurry, shut the door!

+1

So, before we go on a gold standard….

Tariffs to eliminate international trade deficit? End free trade?

Much steeper income tax to double tax revenues to plug the hole called the national deficit?

We could have just kept the debt monster in the bottle and done those things back in 1981. Regan put us on a different path.

No. Just implement tariffs at the pre-1913 level and abolish the income tax, corporate ax, capital gains tax, and dividend taxes. They did not exist before 1913 (except the one-time income ax during the civil war and abolished in 1870). Taxes are anti-American.

Why change a winning formula?

Each one of the sheeple have within them the power to stop the shearing; They have always had the power but they choose not to exercise it.

They might start by just saying “no” now and then.

The One-Percenters spend millions of dollars persuading the sheeple to bleat out a “yes” on command and invariably a “yes” is what the One-Percenters end up with.

Spend millions, get billions. Like chumming for fish.

Libya is done.

He did not start Afghanistan.

Do we have troops in Pakistan?

Dead-cat bounce.

Because of official policy, ironically. The latter part should be p00-inducingly scary.

There are very very few that understand all the brilliant and horrible consequences of “mv = pq” but I assure you the Fed is definitely playing that game to the very edge.

Simple micro will win. Debt that can’t be paid won’t be paid. No salaries, no payment.

It’s really as simple as that.

“Dead-cat bounce.

Because of official policy, ironically. The latter part should be p00-inducingly scary.”

That has been my assumption all along, too, though I have doubted my own judgment at points, due to the glacial pace of adjustment.

That said, what makes you think that extraordinary intervention won’t be attempted again and again to thwart anything that resembles adjustment to fundamentals? Or do you surmise that serial housing stimulus will eventually self-destruct? I have a hard time imagining how the artificial price supports will eventually crumble in the face of an overwhelming fundamental gravitational force, even though we saw it on Wall Street after the Lehman Brothers collapse.

I wrote the answer above. You just failed to read it.