The Housing Bubble

The only “bottom” central valley CA has found is in where the real estate ladies are getting their listing prices.

Sales? Well, no. Not so much.

Combo that’s true for us here in Salinas. Twelve miles from the coast, live in the hills to the north surrounded by fields of produce. It’s like having a vacation home as well as a city home. Don’t need the A/C of the central valley. It got to 70 degrees this week and while working in the yard I was wishing it was back to 59 degrees; that’s Tshirt weather for working outside for me.

In the summertime one gets to meet lots of visitors fleeing from the desert areas and in the wintertime one gets to meet lots of visitors fleeing from the snow belt.

Some of the snowbelt guys are really astonished at just how moderate the temperature is during, say December.

“Don’t need the A/C of the central valley. It got to 70 degrees this week and while working in the yard I was wishing it was back to 59 degrees; that’s Tshirt weather for working outside for me.”

Holy moly, is that why everyone moves to CA? I went to an outdoor wedding in FL yesterday and almost died (again).

Having been born and raised in SoCal, I know it is not all a bed of roses. Why? Because everyone wants to live there, and too many do. Traffic, pollution, and of course, high prices are just a few of the major draw backs.

I don’t know about born and raised in Socal but you certainly are a born and raised liar.

It got to 70 degrees this week ??

Yes, but 70 degrees on the northern pacific coast is “Hot” as you attest….I suspect it has something to do with sea-level & clean air…My perfect weather (Shorts & T-Shirt) in Pismo & Avila Beach is around 65 degrees…Even at that, you will break a darn good sweat if you are running or riding a bike…

One house fits all.

That’s true here in Seattle as well, combo.

We had a 90-degree day here Friday (which is rare); it never got hot in the house, and it cooled down enough by bedtime that there was a nice cool breeze across the bed for the night (coaxed via a simple window fan blowing out in one of the upstairs rooms.

Of course, the winter grey is enough to keep a lot of folks away.

make something happen darrell. you are making the right moves and will find fortune in your life.

Darrell, you don’t believe Jo, yet you insist that we do. Just because we find your story full of fish, doesn’t mean RAL has everyone hyptnotized.

You talk about your condo as if it is a sound investment, then backpedal. If your adult children cannot grow up, why not have them stay in their room at Daddy’s house? No, you are a speculator. You could stop talking to us about it, day after day after day. Just sayin.

“You could stop talking to us about it, day after day after day.”

What gives you that impression?

I take Darrell at his word. Having adult children, plus girlfriend/spouse/partner (not sure of the details there), plus grandchildren (Darrell definitely mentioned that his son has a child) living underfoot may be more than he wants to deal with. It’s more than I would want!

Blue Skye, I know that in the past, kids who were not able to move out and support themselves was a badge of shame. Keep in mind that this time really is different; I don’t think kids in the 25-year-old age range have ever had to enter the workforce in such a difficult employment situation. It is not necessarily a badge of shame as it was in the past, if the workforce climate that they are entering is beyond their control. Have you seen the unemployment data for kids that age? It’s staggering.

Making them live in your investment property is a shame.

Why? He is providing shelter for them, which is generally considered above-and-beyond when it comes to adult kids (ignoring the climate that they are currently struggling with).

Maybe he’s trying to give them some space to grow in. Maybe the son’s gf is someone that Darrell doesn’t want to live with. There are a multitude of possible explanations that would make sense.

Why are you so down on him allowing his kids to live in shelter he provides that is separate from his own house?

Making them live in your investment property

p.s. The “making them” bit makes it sound like they don’t want to live there. Remembering how I felt at that age (actually almost a decade younger), I would have been overjoyed to get out of the house; you would not have to force me.

Maybe it was my upbringing…Maybe I think you are not a man until you find your own way…maybe I don’t believe this guy is any smarter about raising kids (or preventing them from adulthood) than he is about basic economics…maybe his story doesn’t pass the smell test…

“You talk about your condo as if it is a sound investment,”

Except that I keep YELLING at people that use that word!

This is not an investment. It is an expense. An expense that is, at this time, in this market segment, cheaper than renting.

I do not insist that anyone believe Jo’s story that he’s up 50% over the last year.

I do not insist people believe that I’m making a good decision.

I will offer rebuttal to people that criticize my decision.

Once again….

I have a 25 y/o daughter that has a 6 month old baby. Her and Iraq war vet husband have made some poor decisions, including paying too much for some vehicles, walking from apartment leases, walking from a cell phone contract, trying to screw Uncle Sam with some misuse of a government credit card, etc.

They live in Reno and would like to relocate to Phoenix. I would like them to be closer so I can see my daughter and grand baby more. He works at the WalMart distribution center in Reno, and can transfer to the one here in Phoenix (buckeye).

I was going to help them with moving expenses and rent. Then I started looking at price/rent rations, what I could qualify to buy, the fact that I have 3 more kids (21, 18 and 14) that may need a hand up as well….

For me, it made more sense to buy something for $40K-$50K, then to rent for $600-700.

When looking, I saw places that were selling for about $40K, that needed $10K in work. I found a place for $49.9K that was move-in ready. When the appraisal came in at $40K, I renegotiated the price down to $48.4K, and the seller is replacing the out of date breaker panels for another $1K.

We expected to have to get a short-sale, and that it would take 3-4 months minimum to close. So, we started looking in the summer rather than waiting until the SIL finishes up his current college semester (GI Bill funded).

Well, we actually found a place that is a regular sell and could close in 30 days. So, I’m moving the 18 y/o son in for 5-6 months until my daughter and SIL can move here from Reno.

The son will be paying the HOA ($120) and the utilities while he is living there, with me covering PITI.

My daughter has tentatively stated her intention to live in this townhouse for 3 years or so. That is enough time to pay off debt, save a down, her husband to finish his government paid for bachelors.

She will be paying me my full cost of owning… about $450 a month. I’ll be putting aside that money to cover any repairs, and then give the balance back to her when she moves out.

If the 21 y/o or the 18 y/o gets married in the time my daughter is living in the townhouse, and asks me for help to get on their feet (in addition to paying his tuition at the junior college), then I may end up buying yet another townhouse.

What is so fishy about that story?

You don’t believe I’m buying a nice place for $48.4K? That rents would be like $650-700? That I don’t expect to get rich on this?

I assure you, for me, this is the lesser of two expenses, NOT a way to make money.

And… just maybe… a time will come in the future when I do not want a 3 bedroom, 1800 sqft on a big lot with a pool, and would rather live in 1000 sqft with someone else taking care of the pool and landscaping, in exchange for a small HOA fee. When that time comes, I’ll be happy if I have a paid off townhouse.

Maybe I think you are not a man until you find your own way…

I totally agree with you there, Blue. There is something about knowing that you are totally responsible for the effects of your choices—including whether you stand on your own feet or fall trying—to give you a new perspective on life.

I remember that feeling well. I left home at 16, and never asked my parents for any cash thereafter (though I think they did give me a POS car a year later to ease transportation between school and work, and maybe provided the insurance for a while. Not sure on that last bit.).

s/year/few years/

With those variables, it makes good sense to me, Darrell.

BTW, is the return of her payments something that your daughter is expecting, or is that a little bonus you have in mind that you have not informed her of yet?

I hope the latter. I think it would be valuable for them to feel that they are paying their own way in life, and then discover that they have a nest-egg. Dependence breeds dependence.

She has no clue that I’ll be putting her payments into an account to refund to her when she moves out.

“Making them live in your investment property is a shame.”

There is no obligation on anyone to live in it, and it is not an investment. It is an expense that is cheaper than rent.

Blue Sky, why are you so obsessed with my decision to purchase a place to house my kids in?

Why are you so aggressively attempting to call me a liar with this “fishy” and “smell test” BS?

Now you are attacking my kids for having the poor timing of becoming adults during the worst economy in 50 years?

And yeah, my daughter has made some not so great choices. I’m trying to help her get back on track.

“Maybe the son’s gf is someone that Darrell doesn’t want to live with.”

Maybe the son’s gf is someone that Darrell’s $80k/yr wife doesn’t want to live with?

You’re a proven liar Darryl.

And yes…. Housing ALWAYS depreciates…. always.

“And yes…. Housing ALWAYS depreciates…. always.”

And rent is money in the bank?

Darryl The Liar… You’re a pathological liar and serial misrepresenter.

Darrell,

It keeps getting better. Do you get GI Bill benefits after a DD???

I’m sure this doesn’t help you, but the story started with what a great deal you were getting on a Condo in Phoenix, and you were excited about the numbers. Really excited. Now you are locking in $70 or $80K in case your 14 year old needs a “hand up” in a decade or so.

This is the room over the garage.

I am sorry, but $70K is not cheaper than $700 less $450 per month for three years. So, it doesn’t pass the smell test. Neither does the back pedaling. Neither does displays of wealth from one so heavily in debt.

BTW, I’ve a handicapped daughter as old as two of your kids put together, and three others that have gotten into a pinch along the way. So far, from what you say, you are still a piker.

I am going to try really hard to stop reading. I am going to try. Really hard. Maybe I can manage to keep my responses to one word if the above proves impossible.

What’s a DD? And why did you claim Darrell has one of those?

What’s a DD? And why did you claim Darrell has one of those?

I think it’s dishonorable discharge and Blue is psosibly talking about SIL???

Her and Iraq war vet husband have made some poor decisions,…….trying to screw Uncle Sam with some misuse of a government credit card, etc.

yes

He did not get a dishonorable discharge. He got an honorable discharge. The government gave him a credit card to use for his moving expenses from his last base in Colorado to his home of record which was Reno.

The credit card had a max allowable limit, but they did the move for less than the limit. They then charged some additional things that they thought they would be able to “sneak into” the claim.

And when their charges were audited, they got sent a bill for the invalid charges. When they didn’t pay right away, the government put a collection notice on their credit reports. Then, come tax time, the government took the money from their tax refund. The collection had been lifted, but it still is on their record.

I have NO idea what the $70K not being the difference between $700 and $450 is about.

She gives me $450 a month, x12, x3 = 16K. That is more than enough to get settled in a new place. Especially since they can buy with $0 down with his VA loan eligibility, because he didn’t get a Big Chicken Dinner (military lingo for BCD… Bad conduct discharge.)

“Not unless it’s at a Justin Bieber concert.”

Are you trying to get Darryl to call you insulting names?

Next time you are passing through Phoenix, let me know. You can stop by and look at the transcripts and pay stubs anytime you want.

602slash548slash2630.

I linked to the zillow of my house above.

you can look up the tax records to get my full name. (hint: Darrell Shimel)

I’ll also show you my 1520 SAT, my Navy records that show I scored 99 percentile on the ASVAB, my 78 out of 80 on the nuke power school test, that I was kicked out of nukes because of color vision, then was a computer programmer instead, that I made E6 in 5 years and that the average is 9.5 years to make that rank.

Then, while you are here, we can sit down at my kitchen table and take IQ tests, and publish the results here at HBB. That should to be fun.

Definitely. That should “to be” fun!

PS. One doesn’t take legitimate IQ tests at one’s kitchen table.

“One doesn’t take legitimate IQ tests at one’s kitchen table.”

It’s different in Phoenix.

Not to take a position on this “debate,” but one can convert SAT test scores to IQ points. (PS — I do things like this for a living, don’t come back at me if you don’t like the results).

The following charts are available for public consumption:

http://www.iqcomparisonsite.com/oldSATIQ.aspx
Darrell scores a 137.78. Assuming he took his SAT tests before they re-centered (i.e., made it easier) in 1995, he is rounding up. I’ll leave it to others to claim that insecure people always round up.

http://www.sq.4mg.com/IQ-SATchart.htm
If he took the re-centered test he scores a 146 and some change. So, now he is rounding down, if this is his situation. I’ll leave it to others to claim that secure people always round down.

The gap between the estimates is enough for Darrell and anti-Darrell to keep at it ad infinitum. Sorry, everyone.

However, please don’t come back at me, I am just reporting the numbers. Even Darrell’s re-centered result is lower than my tested IQ, so, all of you, and I know enough about these tests to know tested IQ is a crock of s**t. So, please don’t come back at me if you don’t like either result. You’ll probably like what happens next even less.

IAT

Darryl proven a liar once again.

Respondent spoke too soon. I used the 1320 score the first link. A 1520 score is higher than 146 (152 I think). It’s the going back and forth to web-sites that introduced the error, so I leave it to you to check the links this time.

More good evidence why IQ scores are a CoS (the first site also has interesting CoS evidence by calculating the IQs of recent presidential candidates. Hint: They look much smarter than their behavior and decisions indicate they are).

IAT

IAT–
Didn’t SAT recalibrate in the early 1970’s as well?

I’m pretty sure that when I took the test in 1968 it was written so a “perfect” score was 1400, (though achieving a perfect 700 was not possible on the language section, hence no one got a perfect score.) Moreover, you could only take the test once and that is what was automatically sent with your transcripts.

I do recall that if you had a 1250 or higher you were guaranteed a spot in one of the UC campuses regardless of your GPA (which didn’t weight honors classes as it does now), and that score put you in the top 6.5% of all graduating high school seniors in the State.

I believe the SAT Achievement tests (the subject specific ones in history, foreign language, biological science, etc.) were structured on 800 points possible, and it wasn’t until around 1974(?) that the SAT itself was rewritten so you could get a total of 1600 points on the main test.

Do you have any corroborating info on this, or am I just going senile?
Thanks.

I don’t know when the re calibrations were, but when I took it in 1984 (class of ‘85) the max on each section was 800 with 1600 being the max.

At that time I scored a 770 math and mid-600 in language.

I joined the Navy and did 4 years on ships. When I got to shore duty in Hawaii, it had been more than 5 years since the SAT, and HPU wanted me to retake it for placement.

Having not been in a math class in half a decade, my math score dipped slightly. Something like 720… 730. Don’t recall exactly. However, while on ship at sea I’d done a lot of reading and that brought up my language score into the 700s.

And, it is this “learning the test” aspect of the SAT that makes me doubt it as anything more than a “general guestimate” measure for IQ.

The 140 I cite for IQ comes from just out of the Navy and College. I applied to MCI through their college recruitment program. Since I didn’t graduate from a school that was “in the program”, they had me take several tests ranging from a basic IQ to more specific CompSci tests.

One out of 1000 people in a room would require you to be in the 99.9th percentile, not the 99th. SATs aren’t really calibrated to get to that level. I do recall that there was a high IQ society (called triple nine) that took its membership from the top tenth of a percent. They included certain scores on the GREs for proof, but I doubt they would have taken SATs.

602slash548slash2630.

you can look up the tax records to get my full name. (hint: Darrell Shimel)

Darrell, gotta say I was surprised when you posted the zillow. And surprised by the above.

Don’t you value your privacy even a little? And don’t you worry at least a little that RAL has been sounding a touch unhinged?

Speaking of personal information, if you’re willing to post a phone number, how about an email address? I googled you but all the addresses for you online were outdated.

“The gap between the estimates is enough for Darrell and anti-Darrell to keep at it ad infinitum. Sorry, everyone.”

Yegads! Strawman arguments are bad enough, but strawmen arguing against each other? Heaven help us…

Can someone look back in the archives for what Darrell first claimed his IQ was? I don’t know how to do this. I seem to recall that it placed him as one in 16. His smartest person in the room thing was part of that screed too.

While we are all a bit rabid here at times, I think what we are witnessing is a classic lack of insight, which some of us know cannot be scratched with presentations of reality.

I got an IQ test when I was a teen. Scored pretty high too. I don’t think it means much and I did not keep the report, nor did I keep my school report cards. I kept the polaroid of my first girlfriend though, hehe.

“I kept the polaroid of my first girlfriend though, hehe.”

I have a thing or two around to help remember old girlfriends; photos, cards, etc.

“Speaking of personal information, if you’re willing to post a phone number, how about an email address?”

dshimel hotmail

“Don’t you value your privacy even a little?”

It isn’t like I posted a credit card number or SSN.

Aww come on…that’s what made it funny :-).

Carl is correct. Sorry RAL; but too easy to pass up.

Of course it’s too easy… You didn’t have *think*.

Yes indeed.. not much thinking involved. But.. you gotta admit. It was kinda funny!

LOL… You are hilarious.

C’mon now. Put up.

Truth, you were the one positing that it is the same everywhere.

Shouldn’t you prove that?

Refute it then.

RAL won’t prove anything, because RAL makes stuff up.

I live under a bridge myself. The cabin is on a lower level than the bridge. Works for me.

Blue when do you go back and live on dry land?

Any old location will do will it RAL? Been to Detroit lately?

Do people who are not in debt have to live in the basement?

“…you will be a success why they are still living in the basement.”

They gonna be living in the basement with their grammar.

“They” grammar. And her cats.

Sorry. Since my IQ isn’t as high as Darryl’s, I’m no expert in Ebonics grammar.

And the Ivory Tower snob descends to sneer at us once again…

“some are at market value but many (most?) are still quite overvalued based on incomes, not rental rates. Rental rates are in a bubble now, but that’s leaking too”

I’ve been honest about the rents. Yes, rents in Phoenix are falling. Yes, I expect them to continue to fall. How far? Well, I do expect there to be a bottom in rents based on incomes. Rents get cheap enough, and those kids that moved back home with mom will move out.

As for prices not low enough for incomes… if you are talking $100K condos and $300K houses in Scottsdale or near ASU in Tempe, with a target market of $30K-millionaires, I do not disagree.

On the flip side, a $48.4K townhouse is 3x a full-time minimum wage job.

Even if rents fall from the current $650-700 a month to, say, $500, I’m still ahead of my costs.

Darryl The Liar,

You haven’t been honest about anything.

You are a bonafide pathological liar.

Please review the term ‘alias’.

I do value my privacy (and so I don’t use my legal name), but on this board, I’ve used just one name.

You’re conflating lies with “ideas”.

When lies are posted, we will expose them.

An investment property is an risky leveraged expense, not a home. Doesn’t matter if you are a high roller or a lowlife. A specuvestor jumping on the wagon right in the middle of the biggest crash in history is either a fortune telling genius or an idiot. You keep telling us you are a genius. We don’t all belive that is obvious.

“You keep telling us you are a genius. We don’t all belive that is obvious.”

I believe it takes considerably more candlepower to see beyond short-term price and inventory movements to where the long-term outcome is headed.

That’s why I wish FPSS would enlighten us about how he can be so confident that another leg down awaits, rather than merely deriding those who don’t see it coming as ‘insane’ (not that I disagree with him…).

CIBT, are you saying that you aren’t sure another leg down awaits?

It sure seems likely to me. My primary reason is that I can’t see a reason (based on fundamentals) that the inventory fell off a cliff this year.

If banks are closing the spigots intentionally (which I think is likely but no one will ever prove), then the market effects of that are clear: prices will stay higher than fundamentals should suggest (and they have been seen trending up in many areas, though only for the peak season and winter will be more interesting).

If prices stay higher than they should, and supply&demand are not in balance, then builders will build at those prices—and we are also seeing an uptick there.

If builders build in an economic condition where we already have 10-20yrs of excess supply (let’s not argue about it, and just agree that it is a big number), then inventory will remain out of balance for a long time. To me, that says that prices will remain under pressure for a long time.

p.s. Darrell, the Zestimate curve for your house is very strange; any idea why is flat-lined for several years, and doesn’t track the rest of PHX?

“CIBT, are you saying that you aren’t sure another leg down awaits?”

I see the fundamental reasons for another leg down, and I see the extend-and-pretend policies in place to never allow it to happen.

What I don’t see is what would trigger either a politically-driven end to or a fundamentally-driven failure of extend-and-pretend policy which is needed to precipitate the next leg down.

I’m interested in any plausible scenarios for how this resolves, as my crystal ball is cloudy.

PB, I think you have described the classic “between a rock (fundamentals) and hard place (extend-and-pretend policies).”

My crystal ball says that this resolves “badly”. But mine is quite cloudy on details at this time as well.

But as with trees not growing to the moon, I don’t think this game can go on forever either.

“But as with trees not growing to the moon, I don’t think this game can go on forever either.”

But at current construction rates, which are well below normal demographic household formation and replacement rates, the supply of excess houses is not increasing.

Now, I have argued that 700K housing units is still too much construction, but not “that” bad. It is certainly a lot better then 2 million plus.

We all hear stories of old crud shacks being torn down. GOOD! That works off the excess.

We’re at , what? 140 C-S? That is heck-a better than 206 of 6 years ago, no?

Median household income is up 20% (non inflation adjusted, which matched the C-S not being inflation adjusted). So, we’re… what? 20% over income adjusted?

Sorry, but I just don’t see the current market as “trees growing to the sky”.

What could trigger a huge leg down from here? Well, if we actually do slash government spending and we spike unemployment… if we reinstate FASB157 and bring back the margin calls, put every bank through liquidation, end the 3.5% down FHA loans, eliminate Freddie and Fannie and bring back 50% down, 10-year max length loans with 20% interest rates….. Of course, such action would crash house prices to the point that we rip the legs out from under the debt that is our monetary supply.

In short… The only thing I see crashing home prices from here (I don’t mean slowly drifting down another 10-20%, I mean another crash like the (206-141)/206 = 32% we’ve already lost) is full blown cascade debt default into depression. Not sure which would trigger which, I’m just sure they would go hand-in-hand.

You’re lying to the public Darryl The Liar.

Why are you lying?

“p.s. Darrell, the Zestimate curve for your house is very strange; any idea why is flat-lined for several years, and doesn’t track the rest of PHX?”

It is pretty ridiculous.

All I can figure is that the Realtwhores made Zillow count list prices very heavily. After all, who wants to try to sell a house for a price significantly over the zestimate.

The only thing I can think of that is different between my house and the others around me is that I listed it for sell, then pulled it off the market.

This is also seen in the condo I am buying. The owner tired to sell it last year in really bad condition after a renter had trashed it. It didn’t sell for $30K. Now Zillow says it is worth $30K, even though the real appraisal was $40K and I’m paying $48.4K.

BTW: Zillow saying the house has been worth that much all this time is BS too. If you went and looked at Zillow 2 years ago it would have said my place was worth like $120K.

“After all, who wants to try to sell a house for a price significantly over the zestimate.”

My HS tennis coast loved his cliches. One of his favorites was, ‘It is better to keep your mouth and appear dumb, then to open it and remove all doubt.’

Why do you spend so much time and energy trying to remove all doubt?

“Why do you spend so much time and energy trying to remove all doubt?”

I presume you are asking that of yourself.

When house prices first started to crash here in AZ 5 years ago, the Realtwhores got the state to go after Zillow, filing cease and desist against them for issuing estimates without a license.

The issue was resolved when Zillow agreed to make changes to their “zestimate” calculations. The speculation among many was that Zillow agreed to exclude distressed sales, and count a list price as a sell for zestimate purposes.

in this way, Realtors didn’t have to worry about people looking up listed houses in Zillow and seeing a zestimate way below the list price.

I’m truly sorry that you are too stupid to understand what I was saying.

You really should stop trying so hard to remove all doubt.

Another Leg down ahead

NEW YORK (Reuters) - At the start of the historically weakest month for equities, there are plenty of reasons to believe stocks may be just about reaching a top - at least in the short term.

The S&P 500 has surged 14 percent this year and is at its highest level in more than four years. Not counting 2009 when equities rebounded from crisis lows, this could be the best year for stocks since 2003 - nearly a decade.”

I don’t know…some spicy Mexican?

How can you can see the bubble all the way across the Pacific in China, yet miss the one right under your nose in Phoenix?

I was sure that China’s house price increases could continue forever.

Considering how command-and-control their economy is, I’m not convinced that it can’t continue forever—or at least until there is a major political regime change.

“How can you can see the bubble all the way across the Pacific in China, yet miss the one right under your nose in Phoenix?”

My gawd you are an ignorant arse face.

In china, the median income of $5K is about 1/100th the median sell price of the median 1000 sqft condo in one of the large cities. That means that the median income would get you 10 sqft. In more common terms, price/income is 100 in China.

In Phoenix, the median income is $50K. When the median house was $250K, or p/i of 5, we were in a bubble, since our historic normal is more like 2.5. 5 is a bubble, but it is a LONG way short of 100.

A year ago, we were down around $120K median house price. That’s pretty darn close to our historic norm. And, we’re still pretty darn close to that historic norm p/i ratio!

In Phoenix, a year’s median income gets you 1000 sqft.

So, yeah…. I can see that China’s P/I of 100 is a bubble when a year’s income will only buy 10 sqft. And yeah, a 2.5 p/i in Phoenix looks like less of a bubble when a year’s income gets you 1000 sqft.

Perhaps it is you that is wrong about Phoenix’s sub 2.5 p/i is a bubble? Maybe?

And people challenge my intelligence? Why? Because I can do basic arithmetic? Since when is ability to do math a sure sign of low IQ?

Oh, right…. When the math provides an answer that you don’t like.

If you are so convinced that the Phoenix town house market is still in a bubble, how about you provide some data, math, cogent arguments as to why that is?

I’m going to assume you are either too dumb to do the math, or the math doesn’t support the conclusion you are pushing. (I’d bet the latter.)

“My gawd you are an ignorant arse face.”

You misspelled ass.

“I’m going to assume you are either too dumb to do the math, or the math doesn’t support the conclusion you are pushing. (I’d bet the latter.)”

Stop projecting. I did no math. I merely offered a one-line comment that inspired a multi-paragraph rant.

You should carefully review your decision, if the slightest doubt about it triggers a tirade.

“So, yeah…. I can see that China’s P/I of 100 is a bubble when a year’s income will only buy 10 sqft. And yeah, a 2.5 p/i in Phoenix looks like less of a bubble when a year’s income gets you 1000 sqft.”

What you are really saying is that All Real Estate is Local, and it’s different in Phoenix, right?

” I did no math”

Exactly, and that is MY POINT!

Either you are too stupid to do the math, or the math doesn’t support you belief.

“Slightest doubt”

You, without doing any math or attempting to provide any data, ignorantly call the current Phoenix town house market a bubble, then indirectly insult my intelligence by suggesting it is there but I’m just not smart enough to see it….

So yeah, when you attempt to use your ignorance as proof that I’m stupid, I’ll rant back in your face with actual data…..

Because unlike you, I can do math, and allow that math to determine my beliefs.

Serious question for the HBB brain trust:

Is Darryl/Darrell/josap/RAL is Al Queda etc a cover for a Phoenix real estate investor or investing ring? Because I cannot imagine any real person wasting so much HBB band width bragging about a $50,000 investment in a Phoenix town house. A more plausible theory is that this individual or group has infiltrated the HBB to trick FBs to borrow money in order to take Phoenix town homes off investors’ hands at above-market prices.

I am Darrell and RAL is Al Queda, not joasp.

It started out pretty simply. I mentioned my wife and I were thinking about buying a townhouse to house our kids in, because prices are now low enough that it is cheaper to buy than rent.

Boom, everyone that wants a total wipeout of the housing market starts jumping on me as if I’m on a Christian web site and I’m declaring Jesus not really the son of God.

If people stop calling me a liar and stupid for buying a cheap freakin’ townhouse for my kids….

If people stop calling an expense, an investment….

If people stop claiming Phoenix is still in a bubble, even though prices are off like 1/2 to 2/3rds depending on area and type and are below traditional price/rent and price/income levels….

If people stop talking out their arses….

… then maybe, just maybe I could get back to talking about how fiat money is borrowed into existence and how trade imbalances lead to unsustainable debt growth. That the housing bubble, and the stock bubble before that, the junk bond bubble before that, were all just symptoms of underlying economic troubles that come from us embracing free trade and flatter tax.

Oh, that would be so great.

Why do you consider buying a place for his kid and her family to live an investment? I questioned him on this early on when he was still looking. He explained his reason for doing it, and it makes sense within the parameters he has given us. He has 4 kids. I think three still live at home. The house is 1800 square feet. Would you want to add another two adults and a baby to that situation? I wouldn’t.

Darrell,

It is not different in Phoenix, there was a bit of a run up this year, that’s it, its done. All that little run up did was bring housing back to historically unaffordable levels speaking in terms of the price of the house not the howmuchamonth value.

I live in metro Phoenix, my eyes are open, I see the closed business, high food prices, high energy prices and low paying jobs. You are playing a fools game, the only readers you convince are the other stuck buyers and want-to-be investors. I would have to join with RAL/PW in asking why do you insist on pushing REIC propaganda?

“If people stop talking out their arses….

… then maybe, just maybe I could get back to talking about how fiat money is borrowed into existence and how trade imbalances lead to unsustainable debt growth.”

Please demonstrate just one more time how to talk out your arse, and I promise to keep it up. Anything to forestall the next rant about how fiat money is borrowed into existence and how trade imbalances lead to unsustainable debt growth.

Wait a minute, I think I am starting to get the hang of it…

“Why do you consider buying a place for his kid and her family to live an investment?”

1) He used leverage, which makes it a risky investment. For instance, his entire downpayment assuming he made one) could get wiped out in the next leg down in the Phoenix town house market.

2) He never stops talking about it, which I guess indicates how convinced he is of his real estate investing savvy.

“arse face” ?

Leverage means he risks losing the down payment? You always risk losing either the down payment and the carrying costs for the length of the mortgage (if you can’t short sale) or the entire amount of the purchase price (if you buy for cash). In the first case you also can lose the amount of interest you pay on the loan and opportunity cost of the down payment. In the second case, you also lose the opportunity cost of the purchase price.

Since the first scenario involves payments for borrowing money and those payments are likely more than the opportunity cost of the purchase price, the first risks losing a bit more money.

But all the comparison of how much money is spent/lost if the house goes to zero is irrelevant if he needs the thing now and not 5 years from now when maybe he could have saved enough money to buy for cash. I originally questioned the need to provide a place for his kid and her family to live. But he wants to do it. Again, why do you care about the comparative costs/risks of doing it with borrowed money or not? It doesn’t impact you and he wants to help his kid at a time when he doesn’t have the cash. Whet

“It is not different in Phoenix,”

Agree. Market fundamentals will rule here, just like everywhere else. Price/rent and price/income will eventually dominate other market forces.

“there was a bit of a run up this year, that’s it, its done.”

I agree.

“All that little run up did was bring housing back to historically unaffordable levels”

median house being 2x median income is not unaffordable.

“speaking in terms of the price of the house not the howmuchamonth value.”

If you plan on owning the place for a long time, as I do, then how-much-a-month is exactly the way to look at it, if the alternate rent is also measured in how-much-a-month.

I’m doing 15 year mortgage, not 30, and will likely have it paid off long before that.

When I count the expense, I’m counting the rent on the money.

“I live in metro Phoenix, my eyes are open, I see the closed business, high food prices, high energy prices and low paying jobs.”

$48.4K. 3x a full-timer minimum wage job. We’re not talking a $500K McMansion on a Scottsdale golf club here.

“You are playing a fools game, the only readers you convince are the other stuck buyers and want-to-be investors.”

I’m neither stuck nor an investor. I’m spending money on a house as a cheaper alternative to rent.

” I would have to join with RAL/PW in asking why do you insist on pushing REIC propaganda?”

I’m not pushing REIC propaganda. I simply mentioned that I’m buying a cheap place to house my kids. I’m not saying that real estate always goes up, that a house is an investment, that a house is a sure way to riches….

I’ll I’m saying is that town houses in my part of town are selling at a price that makes it cheaper to buy than rent.

“Leverage means he risks losing the down payment? You always risk losing either the down payment and the carrying costs for the length of the mortgage (if you can’t short sale) or the entire amount of the purchase price (if you buy for cash).”

You’re missing my point about how leverage adds risk to Darrell’s condo investment, so let me throw out a couple of scenarios to try go get the point across.

1) Darrell makes $50,000 all-cash investment, sells after child’s use of town house ends for $45,000, after transaction costs. Investment loss = $5000 (10%).

2) Darrell’s investment is limited to a $5000 down payment. He later sells for $45,000, after transaction costs. Investment loss = $5000 (100%).

I am ignoring details (PITI, etc) to focus on the effect of leverage to amplify investing losses in case of further price declines. Leverage is a two-way streetcar named desire.

So you seriously care if a man who is trying to help out his kids loses all of $5000 or 10% of $50,000 which is also equal to $5000? Really? Why?

The whole leverage thing is important because a small loss can lose you all your investment is vital when you take all your capital and leverage it so you can make more investments. In other words, if you put all your money into a hedge fund using 90% leverage or whatever. Yeah, you can lose all your investment. This is a guy who has decided that he wants one town house for his kid now, and maybe for other kids later and maybe for himself and his wife after that. I seriously doubt that he doesn’t have other money in retirement accounts or whatever.

And I still don’t see why you care at all.

“It is not different in Phoenix…”

So it’s identical to the rest of….?

If I had known I was going to receive a lecture on why I shouldn’t care about Darrell’s town house investment for posting an example on leverage, I wouldn’t have offered the example. You seem to have missed the point, anyway.

Yes, everyone please stop dogpiling on RAL, so we can get another boring lecture from CIBT. No, really, I’m not snoring when you’re posting, I have allergies.

Borrowers are not permitted to take out another home equity loan for at least five years, unless it’s to pay for necessary upkeep on the home.

Ha, that’s funny. Who’s going to enforce that, again?

…and it’s hard to save when you get laid off every 6 years.

+1 I’ll buy that line.

would you loan your money to someone for< 2% return for 10 years?

And when the 1%’ers switch to treasuries what is their tax liability with people screaming tax the rich? They have more ability to preserve their capital then I do.

“would you loan your money to someone for< 2% return for 10 years?”

You just described my 401k account; the measly gains go to fund managers. I don’t have enough money to fully capitalize any ventures, so I sit tight. I’m likely not alone. On the flip side, I’m debt free and enjoying it.

“You’ll have to go to their local language newspapers to read the pity-party stories.”

The great thing about living in the internet age is that we can look forward to using Google to hunt them down and post them here.

And you get ticked at me for wanting the average person to get $3000.

$2 mil x 35% equals gawd almighty

No. I get ticked at you for refusing to acknowledge that your program is impossible to administer. It simply can’t be done. The other money giveaways were related to tax rebates so they had some hope of being carried out (though I’m sure there were plenty of problems). You just want the government to somehow be able to identify every unique citizen in the country and hand them a debit card. Impossible.

Also, there are vanishingly few people who would ever qualify for $2 million of excluded income, so why get upset over it? Your proposal, in addition to being impossible, would cost much, much more money.

No, it doesn’t. If you are buying a place to live while doing a four year degree, there is an almost inevitable assumption that you will want to live elsewhere when you graduate. You can’t begin to count on being able to sell for enough to cover the remaining loan amount in four years. All that is doing it putting off the time when you have to pay up and risking it being a heck of a lot more than the extra $100 or $200 bucks a month added together. High transaction cost purchases in a changing market over a short period of time are stupid.

“High transaction cost purchases in a changing market over a short period of time are stupid.”

You just identified another reason why buying a town home for your college student to live in is a high-risk investment.

Jeeze — how could I forget such a simple rule!

The other ones may not be that sharp, either, but the marginal voters in those states are irrelevant.

I’m sure that’s being arranged as we speak :-).

Interesting theory, Darrell.

So while all the homeowners out there are grieving the loss of their phantom value, some here may be grieving the loss of their anticipated opportunity…

I can related a little to that myself, to be honest. I don’t really have any desire to be a slumlord, but I did think there would be some real investing opportunities at some point—else I would have locked up my money in long-term bonds and really enjoyed the ride down in yields.

Those opportunities really haven’t materialized, other than briefly in the stock market (when I thought it wasn’t really time yet).

If that was a rule, then you would have been banned a long time ago.