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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
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Is the Cyprus situation fully contained?
Cyprus sends rumbles through shaky banking system
BY DAVID McHUGH | March 29, 2013 06:36 AM EST | AP
FRANKFURT, Germany — This week’s deal to rescue Cyprus and its banks from financial collapse has renewed fears about Europe’s shaky financial system and where trouble might next appear.
Many banks across Europe have been struggling for more than three years as losses on government bonds and bad loans piled up. Some governments, meanwhile, have taken on more debt trying to prop up their lenders to the point where they have needed bailing out themselves.
In Cyprus’s case, its banking sector became much bigger than the country’s government could afford to rescue – seven times the size of the country’s economy. When the banks were hit by large losses and Cyprus could not afford to bail it out on its own, the country turned to the other 16 European Union countries that use the euro.
Rather than making Europe’s taxpayers foot the entire bill for bad banking, Cyprus and the other eurozone countries agreed to make the banks’ bondholders and big depositors contribute to the rescue. One bank, Laiki, is to be split up, with its nonperforming loans and toxic assets going into a “bad bank.” The healthy side will be absorbed into the Bank of Cyprus. Savers with more 100,000 euros in both Bank of Cyprus and Laiki will face big losses – possibly as much as 80 cents on the euro.
Daniel Gros, director of the Centre for European Policy Studies in Brussels, said the Cyprus deal “could be a strategic change.”
Depositors and investors have taken note of the Cyprus deal and are warily looking around at other countries where the financial sector appears too big or too unstable. The STOXX Europe 600 Banks index have fallen 7 percent since a first bailout deal, later rejected, was reached March 16.
Even some of the more financially disciplined countries in the eurozone can raise concerns: The Netherlands had to take over SNS Reaal, the country’s fourth-largest bank, after it suffered heavy losses. And in Germany there are banks under pressure from competition and losses on bad loans.
Here is a look at some countries whose banking sectors are gaining scrutiny in the aftermath of the Cyprus bailout.
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This sounds like a great future strategy for US banks. When greedy pigmen run the whole system into the ground with risky bets, steal the prudent savers money. Nice.
Business News
After Cyprus, Bond Markets See Slovenia Closer to Bailout
Published: Friday, 29 Mar 2013 | 9:00 AM ET
Michael Runkel | Robert Harding World Imagery | Getty Images
View over Lublijana, Slovenia.
Cyprus may be a “special case” in the eyes of European officials, but their handling of its bailout is taking a toll on another small euro zone member with an over-burdened banking sector - Slovenia.
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How Cyprus could be the next Detroit
March 27, 2013, 11:37 AM
OK, we get it. Cyprus had two major industries, banking and tourism, and one is about to get decimated.
But just how bad will it get for the Mediterranean island that is imposing capital controls after a bailout of its financial sector?
In a paper released Wednesday, economists Lubomir Mitov and Mikis Hadjimichael at the Institute of International Finance say the Cyprus economy may contract as much as 20% over the next three years.
How bad is that? To put it in perspective (and this analysis is MarketWatch’s, not IIF’s), Detroit’s economy contracted about 17% between 2007 and 2009, per Commerce Department data.
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“Cyprus had two major industries, banking and tourism and one is about to get decimated.”
And the other will soon follow.
“How Cyprus could be the next Detroit.”
How many tourists do you think put Detroit on the top of their list as places to visit?
Does anybody here think that if the economy of Cyprus shrinks 20% over the next three years that the crime rate for the place just might jump up a wee bit?
If you are a tourist would you want to visit a place where the economy is shrinking?
You would if the value of the home currency is shrinking. Cheap hotels etc..
How many tourists do you think put Detroit on the top of their list as places to visit ??
Interesting that you ask that because thats exactly what I am preparing to do this summer….I understand from a good friend that the central core of detroit is a pretty nice place…Take in a Tigers game and see the town…Maybe even venture with a car ride into the burbs to see the residential carnage…
…maybe re-enact Damnation Alley.
Cyprus is an interesting place with a great climate. Spent just a little time there but would love to go back. Not if it goes Detroit though. Hard to imagine based on my few days of visit.
Q. How does one avoid financial contagion?
A. With a cordon sanitaire, of course…
ft dot com
March 29, 2013 3:48 pm
Cyprus and a dog that did not bark
The curious incident of the market during the latest crisis
In the past three weeks, Cyprus and the eurozone have been to the gates of financial hell and back again. Capital controls section off a part of Europe’s monetary union. Every action that leaders had previously warned would lead to contagion has now been taken. Yet markets have kept calm.
There are exceptions. Bank stocks took a beating after Jeroen Dijsselbloem, president of the colloquium of eurozone finance ministers, said banks should be bailed in, not bailed out. That is as it should be: investors take risks and should bear the downside as they do the upside.
More interesting is the fact that much bank debt held up well. Clearly bond investors know where to be: in well-capitalised banks shareholders can cushion more of the losses.
The euro has also been sliding throughout the Cyprus crisis. The single currency is at a four-month low. But this is a welcome correction after a period of unnatural strength. A weaker currency is what the eurozone needs, mired as its growth prospects are by uncertainty, weak banks and austerity.
Beyond those risks, however, market observers could be forgiven for thinking that Cyprus had a functioning banking system and Italy a functioning government. The costs of borrowing for Spain and Italy have risen slightly but back to February levels only: they actually fell during the worst Cyprus indecision. Stock markets are buoyant: the S&P 500 broke a record high on Thursday. Even in Europe, broad equity indices were stable; those that suffered could attribute their losses largely to the drop in bank share prices.
What has happened? A year or two ago, markets were alert for signs that the single currency was unravelling. A problem anywhere, it was thought, could create self-fulfilling market panics. So far, however, it seems there is nothing inevitable about contagion. For the Cyprus situation, the cordon sanitaire is working.
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Does anyone besides me find the U.S. stock market non-reaction to the Cyprus “Lehman moment” more than a little odd? Is it that U.S. investors are truly oblivious to the global economic picture, or more like top-down intervention was used to neutralize any spillover panic into U.S. equities?
The stock market only goes up.
I haven’t been on this site much in last few days. Did you already discuss that Canada had written into its legislation pre-Cyprus event that it was legal to seize deposits in time of crisis?
Has the U.S. economy fully decoupled from the rest of the world?
asset manipulation will carry us to the glory land.
” Is the law of accelerating issue and depreciation in play.”
Bigger Than A New Dow Record… U.S. Stock ETFs ‘Decouple’ From Foreign Stock ETFs
Mar 5 2013, 21:53
Prior to the 2007-2009 financial meltdown in the U.S., risk-takers thoroughly embraced the idea that emerging markets would regularly trounce the developed economies. At times, this simply meant that emerging market stocks would outperform on the upside. At other times, this referred to the ability of “emergers” to hold on to gains… even if U.S. stocks were faltering.
The investing idea that one region’s equity markets could move independently from another’s market had been dubbed “decoupling.” In fact, the term received so much attention, it has been used to describe unanticipated moves between other types of risk assets. For example, high yield bonds are supposed to behave more like stocks. At the start of 2013, however, rate sensitivity had caused the class to dip with investment grade bonds, and “decouple” from the rising stock
market.
As the media celebrate record highs for the Dow Jones Industrials, you won’t find much about the decoupling that has occurred in 2013. Vanguard Value (VTV) has jumped roughly 7.5%. In complete contrast, Vanguard Europe (VGK) is flat, and Vanguard Emerging Markets (VWO) is down -4%.
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Have you noticed any real estate ‘flash sales’ in your area?
On the Money
Real estate ‘flash sales’ are sign of times
SAN DIEGO – If you’re looking to sell your home, the timing could not be better, as home prices are up in San Diego and demand is at its highest.
Joe Bertocchini of the University of San Diego’s Burnham-Moores Center for Real Estate said the lack of supply in the current market is a contributing factor. The acceleration in the housing market has coined has even coined the term “Flash Sales.”
“We’re seeing homes that are flying off the shelves so to speak, in matter of hours,” said Bertocchini. “Sometimes even within a day, less than 24 hours. We’re pretty stunned by what’s going on out there.”
The housing boom is mainly being fueled by foreign investors with cash ready to spend, according to Bertocchini.
“It’s good investment. They see the value, they see appreciation for future years and they want to be a part of it,” said Bertocchini.
Joseph Lerner is a partner with Keller Williams Realty in Mission Valley said he had a client from China who just bought a Rancho Penasquitos home without seeing it.
home for sale sign“We’re doing more Skype now so people can actually see what you look like. They buy the properties sight unseen,” Lerner said. “Within the week, they’re going to see three, four, five, 10 offers. I had one agent who had 31 offers last week.”
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The term “housing boom” does not ring true here. I always looked at a boom as some event happening where the supply was short but the economy behind it was roaring; something akin to a large oil strike, plenty of jobs and not enough housing for the workers.
The current ” boom” is no more than a panic, greed or both. Some think they can make a quick financial killing, others want to protect what money they have and are in a state of panic. Looks as though the end game is fast approaching.
the end game is fast approaching ??
Not sure were close yet but the “end game” IMO will be higher interest rates…
Around the world (including ours) the currencies are being debased…For this reason prices in many hard asset classes are spiking up in the few countries considered safe…
That’s not inflation my friend.
I give up, I don’t even know what the definition of inflation is anymore, textbook, practical, or otherwise.
But I agree that people are saying screw this to watching electron holes fly around the world. But they want stuff, real stuff. Chinese want safehouses, Russians want “gas exploration” on Cyprus (wonder if that necessitates a military base). A friend was telling me that Somali immigrants coming to the US will shack up and work 3 jobs each to buy a house because property is that important to them. I asked: I guess they aren’t interested in buying a f*!ing floating box of air, right? She answered nope. They want the land.
They “want the land”?
There is a globe full of “land” and 95% of it goes undeveloped.
“It’s good investment. They see the value, they see appreciation for future years and they want to be a part of it,”
I got a flyer in the mail with some recent solds this week. They had no price. I googled a couple of the properties checking to see on what they sold for.
one property was bought for 250k in december 2012. It is back on the market this month and pending sale at 325k. I couldn’t see where any work had been done.
$250K is chump change for a Chinese oligarch turned all-cash U.S. real estate speculator.
chump change for a Chinese oligarch turned all-cash U.S. real estate speculator ??
Or, South America, Russian, India and all the other ports of call…I start to get the feeling that this foreign buyer stuff is much bigger than we all would suspect…Like you said, $250,000. is chump change for some of these oligarch’s seeking perceived safety…
It also says the oligarchs don’t expect any widescale increases in U.S. unemployment. Or maybe everything else just looks so darn ugly they’ll take their chances.
Just because these buyers have enough money to pay cash I guess that makes them valued ‘guests’ and not illegal aliens? Our property ownership laws encourage this type of immigration.
Here we see Jefferson’s warning coming true:
“”If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered.”
No politician or pigman wants to admit it. They’re too blinded by greed.
Yes, house across from me I thought would sit a very long time. It went to contract in less than a month and close soon after (all cash). The guy liked the neighborhood and the location (owns a restaurant/crab pier in Canton) and will rehab everything with cash.
Everything here that isn’t FUBAR or ridiculously priced has been selling. The caveat is, there is a lot of shadow inventory hiding, if I dig around a bit I can find it but it’s not really obvious, the houses don’t look like crack dens and it’s not something people are talking about (which shows that most people are sheep).
Acadiana was full last night at 5pm when I left. Also full at 9:15 pm on Wednesday night when I left. And the sandwich shop next to GAO was full of obnoxious college basketball ruffians when I stopped in yesterday for lunch.
Since the bubble popped in 2007, home prices have come back down in line with local incomes in many parts of the U.S., BUT NOT EVERYWHERE.
Have home prices realigned with local incomes in your area?
No bubble here, folks…just a little frenzied froth.
San Diego Housing Market Ranks 4th Most Expensive in Nation
Friday, March 22, 2013
San Diego’s housing market was ranked the fourth most expensive in the nation, trailing only Washington, D.C., Brooklyn, N.Y., and the Bay Area in California, according to a recent report from Emeryville-based ZipRealty.
The Los Angeles housing market was ranked fifth most expensive, and Orange County was seventh most expensive on the same list.
The report compared median home prices in 30 metropolitan areas to median household income levels in those cities.
According to ZipRealty, the median priced home in San Diego requires 13.6 times the area’s median income to purchase.
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According to ZipRealty, the median priced home in San Diego requires 13.6 times the area’s median income to purchase.
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Yet a new one is 3x.
There are going to be alot of tears over the coming years.
“Have home prices realigned with local incomes in your area?”
No. They were on there way, but in 2009 some mysterious force stopped them from dropping. That mysterious force is still working today and has driven prices artificially up. The chart in this link seems to agree with me.
Hong Kong is a trip.
Global house prices: Location, location, location | The Economist
http://www.economist.com/blogs/dailychart/2011/11/global-house-prices - 174k - Cached - Similar pages
3 days ago …
No. They were on there way, but in 2009 some mysterious force stopped them from dropping. That mysterious force is still working today and has driven prices artificially up.
And now those who aren’t suspicious of such things are certain that it’s time to buy or be priced out forever.
DC area, and no. Just a few weeks ago we were talking about how bad the sequester was going to hit the local economy. Defense Contractors and lawyers being interviewed on the local news about how a double digit percentage paycut were going to kill the local economy. Car dealerships couldn’t sell high end cars, restaurants at dinner time were vacant and just like that …….BOOM…….houses are selling like hot cakes. I just can’t see how with lingering paycuts and furloughs around the area you could even think of buying now.
There’s a lot of people out there that made money during the boom, and they are desperate to do so again. They’ll see what they want to see and jump, and there are enough to create an echo bubble (for lack of a better term.)
But you’re right, with the cuts in spending coming there’s going to be a lot of businesses (and housing investors) learn the meaning of deflationary spiral.
California’s unemployment rate is still at a recession-level 9.6%, several years after the Great Recession officially ended. But that hasn’t stopped the housing market from prematurely roaring back to bubble-era price appreciation rates.
Something about this market doesn’t smell right.
The unemployment rate is less relevant, you need to consider the absolute level of jobs/housing units.
The number of jobs per housing unit in CA is approximately 1.05 to 1 (13.8MM housing units, total employment as of last month is 14.57MM). This is estimated as of now.
Pick another bubble state with much lower unemployment rate…Arizona at 7.9%. As of the 2010 Census, they had 2.844MM housing units, and 2.38MM jobs…even now, they only have about 2.5 million jobs. About 0.88 jobs/ housing unit…if you assume they built 0 homes over the past few years.
AZ has an unemployment rate of 7.9%, CA is at 9.6%, but given the numbers above, which has the better housing/jobs balance?
When considering jobs/housing balance, you need to consider the starting point.
Have you seen any signs of recurring frenzied froth in your local housing market?
The housing market
Frenzied froth
More evidence that the housing market has lost touch with reality
May 26th 2005 | Washington, DC |From the print edition
Framing the problem
A PLAYBOY playmate wants to junk modelling and become a property investor. A 22-year-old Nevada property entrepreneur gets lost driving to one of his eight houses. The number of property investment clubs has quadrupled since 2002. California’s Department of Real Estate, which administers the test taken by would-be estate agents, has doubled the number of test centres to deal with the surge of people who want to sell houses.
Some sceptics, including this newspaper, have long argued that America suffers from a housing bubble. Now most analysts accept that there is indeed a bubble at least in some areas, notably southern California, Florida and the north-east. Opinions differ, however, on just how big and widespread the bubble is.
Central bankers have clearly become more worried. Alan Greenspan still argues that the large and diversified nature of the housing markets makes a national bubble unlikely, though he admits to “froth” in some places. In a speech on May 25th, Jack Guynn, head of the Atlanta Fed, said he was “uncomfortable” with residential speculation in some markets.
The latest statistics certainly suggest frothiness. In the month of April, sales of existing homes rose 4.5% to a record 7.18m, at an annual rate, while prices soared. The cost of a median single-family home rose 15% in the year to April, topping $200,000 for the first time, while the price of a condominium went up 18%. These rates of increase haven’t been seen since the 1970s.
These trends are clearly not sustainable. For a start, the pace of home building is running far ahead of demography. As economists at Goldman Sachs point out, residential investment, at 5.75% of GDP, is at the top end of its range over the past four decades, while the trend growth rate in the number of new households being formed has slowed to 1%. Although the baby-boomers’ penchant for second homes explains part of the difference, it plays a small role. According to the Census Bureau, second homes account for only 5% of America’s housing stock. There are, as yet, few signs of oversupply—with housing inventory levels at near-record lows—but that may be a sign of speculative frenzy more than a real shortage of homes.
Thanks to those rising prices, houses are now far more expensive in relation to incomes. Until the late 1990s median house prices were 2.75 times median income. That ratio has risen to 3.4. Arguably, lower mortgage rates justify some of this rise. But even if you look at mortgage payments in relation to household income, many people look stretched.
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Now that the housing bubble is behind us, in what asset class do you think the next bubble might occur?
The Next Real Estate Bubble: Farmland
By Blake Hurst Friday, March 29, 2013
Filed under: Economic Policy
Farmers have been taking on mounting debt, creating an unsustainable increase in land prices and risking a crash that would ripple through our economy.
Eeyore should have been a farmer. It’s almost impossible to find a farmer happy about his situation. The weather’s too hot, cold, wet, or dry, and prices are too low or too high, depending on whether we’re buying or selling. We can’t, at least in front of our peers, admit to prosperity or even the chance of prosperity. Although we’d never admit it at the local coffee shop, the last few years have been good, at least for Midwestern grain farmers. Prices have been strong — strong enough to make up for much of the production lost to last year’s drought. That’s terrible news for livestock producers, who’ve been faced with drought-damaged pastures and high feed costs, but for farmers producing corn and soybeans, it has been a profitable few years.
Farmers have cash, and nowhere to invest it but farmland. Farmers largely ignore equities, as they tend to balance the inherent risk in farming by investing in what they perceive as less risky places. We aren’t dumb, however, and have figured out that it’s a losing game to invest in bonds or CDs at rates less than inflation while we’re in tax brackets we never even knew existed.
So, farmland prices are booming. Land prices in the heart of the Corn Belt have increased at a double-digit rate in six of the last seven years. According to Federal Reserve studies, farmland prices were up 15 percent last year in the most productive part of the Corn Belt, and 26 percent in the western Corn Belt and high plains. Closer to home, a neighbor planning his estate had an appraisal done in 2010 and again in late 2012. In that two-year period, the value of his farm had doubled. According to Iowa State economist Mike Duffy, Iowa land selling for $2,275 per acre a decade ago is now at $8,700 per acre. A farm recently sold in Iowa for $21,900 per acre.
A debt-to-asset ratio of 30 percent can enter dangerous territory with a land price drop of 50 percent, which sounds like a lot, until you remember that is a price level last seen only 24 months ago in much of the Midwest.
Although much of the increase in land prices has been driven by well-financed farmers and outside investors (many paying a large portion of the purchase price in cash), there are disturbing trends occurring on farm balance sheets. The Kansas Farm Management Association reports that debt-to-equity ratios are highest in large farms, which have over a million dollars in sales. Although the debt-to-asset ratio is low even in the largest farms in Kansas, it’s higher than it was in 1979, shortly before the farmland crash of the eighties. As former home owners in Las Vegas and Southern California can attest, equity can melt away in a hurry. A debt-to-asset ratio of 30 percent can enter dangerous territory with a land price drop of 50 percent, which sounds like a lot, until you remember that is a price level last seen only 24 months ago in much of the Midwest.
The number of farmers in the Kansas survey with a 40 percent debt-to-asset ratio is higher now than it was in 1979, and those farms with a debt-to-asset ratio of over 70 percent are three times as numerous today.
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This will end well, I’m sure…
Thank Bernanke and Wall St. for the farmland bubble. Commodities will crash, it’s just a matter of time.
Now that Fannie Mae and Freddie Mac are back on their feet, is talk of winding down these recently bankrupt and bailed out institutions to restore private mortgage securitization long forgotten?
Fannie Mae and Freddie Mac among elite ‘triple digit’ gainers in first quarter: Bespoke
March 29, 2013, 11:28 AM
A bankrupt airline and a couple of mortgage repackaging giants in receivership were among the best performing stocks in the S&P 500 during the first quarter, Bespoke Investment Group points out.
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Is the long-heralded end of the bull market for bonds finally at hand?
March 29, 2013, 8:32 a.m. EDT
Why bond funds and ETFs are breaking
End of an era? Bond portfolios, investor hopes show wear and tear
By Rachel Koning Beals
CHICAGO (MarketWatch) — Bond investors continued to sweat out the most challenging climate they’ve faced in years, as managers squeezed modest first-quarter gains by adding riskier corporate debt and avoiding government bonds.
A tougher road likely lies ahead for holders of U.S. bond mutual funds and index-tracking exchange traded funds. Bond-fund skippers are being pushed into micro management — confronted with low yields, a stay-put Fed, and just a hint of pro-Treasury bond underpinnings from European bailout worries.
U.S. stock funds have rallied, but international stock funds and bond funds face stiff headwinds. MarketWatch’s Jonathan Burton reports. (Photo: Getty Images)
“There’s a bit more risk-taking in the corporate arena, with some lower credits outperforming, but even there caution prevails,” said Matt Duch, who runs taxable fixed-income portfolios at Calvert Investments. “You can’t get yield from credit plays this year like in the past, so it’s really about getting the duration right — favoring neutral to short — clipping your coupon for some income, and avoiding any credit blow-ups.”
In other words, for bond investors the coming period may be more about ducking their heads, remaining flexible, and reworking expectations cemented in place from a long bond bull market.
“The one thing that we can be fairly confident about is that the next 10 years of bond returns aren’t going to be what the last 10 years have been, when the broad bond market returned about 5% a year,” said Vanguard Chairman and CEO Bill McNabb, in a commentary. “It’s almost mathematically impossible because yields are currently so low.”
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Two weeks ago on the local news radio station they interview a local hot shot broker. He was gushing over home sales and how great of a summer it was going to be, but what struck me most is he said “81 percent of buyers in 2013 are move up buyers who already own a house”. I was shocked it was that high. First off using his numbers in theory you should put back 81 houses on the MLS for every 100 houses sold (excluding rental property) with new houses rounding out the other 19 percent. Second, in my area I wouldn’t necessarily label them as ‘move up’ as to say get a better or bigger house, I’d label them as ‘move out’ as in get out of the McMansion and move to a cheaper place. I’ve seen more higher end homes on the market in my area than lower end homes. Buyers who realize how bad of an idea it was to buy that big place, plus if you were a 2005 buyer with 8 and 6 year old kids, those kids are now 16 and 14. College and empty nesting are just around the corner. Selling now to get out of your bad investment sounds pretty damn good now. Only question is: What happens when everyone in your neighborhood has the same idea?
Consider the source. Anything stated by nar-scum can never be trusted. Ever.
What happens when everyone in your neighborhood has the same idea?
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This is true and it goes for a lot of things. The “first mover effect” would tell you that the first people to do it get a disproportionate amount of the advantages.
Moreover, many ideas that are good in the abstract are terrible and even fatal if everyone is doing them.
A lot of listings in the nicer nabes here in North OC seem like bargains. Many have pink, yellow, or green bathtubs, countertops, and tile.
Assisted living or bought the farm? Who knows? Kids or elders don’t appear to have the cash or desire to update the house. Still in good shape; just not currently fashionable.
They move quickly.
We were up in The OC a couple of nights ago — ate at a Panera Bread restaurant in Irvine, just east of I-5. The surrounding area was a sea of newly-built, partially-built, or soon-to-be-built condos which stretched to the horizon. I guess there must be lots of folks in the OC who are looking for brand spanking new condos to invest in?
“Second, in my area I wouldn’t necessarily label them as ‘move up’ as to say get a better or bigger house…”
My ‘move up’ house was a 1200 square foot bungalow, up from my 900 square foot 1.5 story. For some of us, ‘move up’ doesn’t have to be much.
Weekend topic:
My kiddo is entering K next year, and we hit the “lotto,” getting accepted into the feeder-pattern that allows us to live anywhere we’d like within the county.
A. When should I buy?
B. Should I ever buy?
I can’t tell if we’re going to live here until our kiddos graduate. There’s a good chance of that now that we can predict schools, and we have a solid family root here.
So, as not to be too selfish and narcissistic (it’s so hard!), the real question is:
What impact does having a child have on your decision?
Until your kids reach middle/high school age, minimal. Surely you and/or Mrs. Resistor can educate them at least as well as some PMS-harried school marm? Look at their time in public classrooms as babysitting and “socialization”, and use your family time together for teaching them actual facts, figures, and facilitations. (They’re going to be assigned so much home/busywork it’s a de facto syllabus; why not take advantage of it?)
“Good” school districts are basically for goosing the parents business and social contact list anyway, not the kids’.
More perversely, if you live in a genuinely crappy school district your little Resistors may well profit from the “diversity” factor when it comes time to apply to colleges. (Mine did.) There’s nothing like being the high achiever in a non-achieving school to warm the hearts of admissions committees. And the anthropological perspective your kids gain from learning to be comfortable in a wide variety of subcultures is invaluable when it comes time to tweak the admissions “mix”.
Help me out, though, IIRC you own, yes?
I mean, you have a “this is it” type of place, yes?
We were thinking along similar lines.
I found a place I loved and built the house I wanted for cash (no mortgage). My kid was incidental to the decision because:
1. I figured that he was young enough thus versatile enough to deal with and adapt to the fairly minimal change in lifestyle.
2. I’m a firm believer in the old adage, “If Mama ain’t happy, ain’t nobody happy.”
As compensation, I approached the project as a partnership, put the place in trust for him and let him know from the start that what we were planting, building, creating now would be his when he came into the trust a few years down the road.
Over the years, all major decisions affecting the property have been made with his input, and there’s something viscerally satisfying about surveying our mature orchards, gardens, groves and buildings now that they’re established and productive twenty years later. All those blisters and sore backs, pets born, died, buried, post holes dug and hard miles hauled are right there before us every time a new season rolls around or crop is harvested.
Granted, not every nine-year-old has the equanimity to deal with this sort of thing, but for us the shared adventure has been well worth it and the property is now the sort of prideful thing that gets passed down through the generations. (And oh the stories!)
If you’re going to set down roots, make SURE your wife is onboard with whatever you decide to do and then don’t worry about the kids. If you two are engaged and happy with your family, they’ll be engaged and happy too. And if they’re not, tough. There are a lot of miserable kids living in the affluent suburbs, too.
Thank you for the detailed response. I’ll have to respond tonight after my, let’s call them capacitors for now (they can become resistors in about 10 years), go to bed.
“Good” school districts are basically for goosing the parents business and social contact list anyway, not the kids’.
I never even thought of that. You don’t learn these things in a small town.
Be thankful.
It reduces the amount of your disposable income available to allocate to housing, which is a bit unfortunate, as kids increase the need for space.
This probably is not a big deal if you are gainfully employed, unless you aren’t super rich but live in a place like San Diego, where the median home price stands at 13.6 times median household income.
Congrats Resistor on earning a position where you have such flexibility.
I don’t know if you can tell at this point whether or not those choices will matter. By 4th/5th grade however you’ll know if (s)he needs anything the current district doesn’t/can’t/refuses to offer.
I agreed with a lot of what ahansen said but some kids could do well anywhere and other kids will respond better to more specific environments. If your district believes in a one size fits all style of teaching and their style isn’t a good mix w/your child’s needs, it might be good to find a place where teachers are more open to trying to meet different learning styles. (Easier, of course, with smaller classrooms full of brighter kids.)
I absolutely am a fan of the idea that if the parent(s) is/are happy, things really do fall into place. Confidence comes easier w/less stress in the home. With greater confidence, peer pressure is not their main guide. (I have teenagers.) With confidence, they aren’t afraid to try new skills, new ideas,….dream, reach.
I hear the term “It’s a good investment” . So just what is a good investment? Baseball cards or beanie babies or cars or antiques (what is quality here) or art or sculpture or violins or PM’s or stamps or ? What is their premium to buy or sell or house or insure or can be freely move in bad times or?
Just remember that one man’s garbage is another man’s banquet. What I find of interest since my youth is that market makers have conned people into believing something is a ‘good investment’ when truly it isn’t. Fools and their money are soon parted and that is why we will always have wealth distributed unequally.
When will we again see a 5% yield on a CD?
Quit yer complaining and buy some stocks and houses.
If CDs pay 5%, then governments around the world will fail. They can only survive in a 1% world with the current debt loads. So the answer is akin to “when hell freezes over.”
uh huh. And when the Fed had the smarts to throttle the snot out of the housing fraud by raising rates in 2005 resulting in 5.5% CD rates in 2006, did hell freeze over then?
Nope, but things have changed. Let’s use the US for an example.
2005 debt: 7,932,709,661,723.50
2012 debt: 16,066,241,407,385.89
Search for ‘historical debt outstanding’ and you’ll find numbers. I’m assuming you have the mathematical skill to figure this one out.
As a percent of GDP, nothing has changed.
“…did hell freeze over then?”
To the extent the subprime lending industry was a version of hell, yes, hell did freeze over then. And after that, it sunk to the bottom of the sea.
I need advice:
I used to be “agitated in sd” because I had a really evil Carlsbad landlord. I’ve been in a new rental since 10/2008. everything is fine, except there have been three floor leaks. Total restoration, etc. I was asking about renters insurance and AAA said my name came up as the claimant. How is that possible? The property manager is scared to ask the landlord, but do I need a lawyer to get my name removed? Was this an honest mistake or was the landlord playing dirty? Prop manager is unhelpful for two months!
Sounds like either a mistake, something I don’t understand about the insurance world, or insurance fraud.
I’d contact the state insurance commissioner’s office and see if they can give you any guidance.
Thank you RW. Am i the only one who hates making phone calls: on hold, wrong department, sorry we can’t help you. im sure it will be all day. If I go to AAA office im sure i will get escorted out so i’ll give the statists a try!
My cousin had a rare form of cancer…her insurance company tried to deny her an expensive, very aggressive (and very successful) treatment regimen.
The only way she forced the insurance company to act was through her state’s insurance commissioner.
She got the treatment, and now she is something like 5+ years cancer free, and ready to live the rest of her (hopefully quite long) life.
And no, you’re not the only one who hates making phone calls…I despise the process.
Is California’s Wild Housing Market a Sign of a Bubble?
By Graham Wood | Posted Mar 28th 2013 8:00AM
Housing bubble: California may be the site of a new one.California is the comeback kid of the housing recovery. Though home prices are making annual gains not seen since 2006, The Golden State sticks out as one where they are on a startlingly dramatic swing upward. California prices have posted double-digit hikes on a year-over-year basis for eight consecutive months. In other words, they’re rising fast — very fast.
And now California is sweeping the top cities where home list prices are rising the fastest. Six of the top seven cities — which all saw list prices jump more than 20 percent year-over-year in February — are in California, according to Realtor.com. That’s great, but perhaps a little scary.
As some experts have been warning recently, housing conditions like California’s could be an early sign that we’re headed into another housing bubble. Buyers all over the state are getting into bidding wars, home prices are on a steep incline that some say is unsustainable, and open houses are once again attracting a frenzy of house hunters. This is what we saw in 2005 and 2006.
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As I’ve stated many times. California has done a crappy job at building enough homes for their population for the past 20+ years. The 90’s were a disaster (4 million population growth, 1 million homes built). They didn’t catch up in the 00’s, and so far in the 10’s we are building even less than we were in the 90’s.
This shows up most clearly in vacancy rates (which are among the lowest in the US).
It is my belief that the move is in large part (indisputably at least in some part) due to this fundamental housing/population imbalance. We don’t have enough physical homes for our population.
You’ve got to build more. Or kick people out of the state. Those are the only two solutions.
In watching the judicial vs. non-judicial divergence, my biggest fear is:
1. While non-judicial states clear their inventory, judicial delay. And, in the process, the Fed’s ZIRP will cause non-judicial states to have massive price increases (AZ, and now CA), while judicial states take longer to clear their distress;
2. The Fed’s ZIRP will go on for too long relative to the CA housing market, and another bubble is quickly formed and popped here.
You’ve got to build more. Or kick people out of the state. Those are the only two solutions.
Nope there are other choices. The one I like the best is letting the price of California housing go to infinity - and beyond! No price is too high to pay for living in the best place in the Universe.
Does anyone remember posts by the likes of LA_Investor and Faster, Pussy Cat, Sell, Sell a few years back that suggested that eventually bubble prices will give way to affordable purchase options for those who wait out the bubble?
My question is whether the myriad levels of federal government housing market intervention, such as the Fed’s QE3 MBS purchases, have so completely cancelled out normal cyclical market dynamics that no capitulation is likely to ever occur, and home prices will continue with their recent rapid ascent forever more?
Hi Bear, if I read between the lines a little, you and me, along with a few others, probably thought this would be over and we’d be moving on by now.
In the early days, some of us also frequented Patrick (I later abandoned that site since it is mostly for San Francisco) — If you recall, Randy H, who I think was a software engineer, was very adamant about price stickiness on the way down. I don’t think he ever articulated the mechanism (maybe he did, I missed it), but he was sure that the ride up was going to look very different than the ride down. Another Patrick regular, (and hilarious Boomer-flamer) was Surfer-x, who was in a situation very similar to ours, ultimately did buy (maybe 2008?) because he also believed that housing would take forever to reach “historical” mean.
Knowing what I know RIGHT NOW, I should have bought the house I am living in 2010. It will probably take until 2016-17 to see those prices again. Whether or not current prices are supported by fundamentals no longer matters. Banks and gov. are clearly colluding to restrict supply.
We have a choice: buy now and lose some money over the years. Rent forever. This is the big shit sandwich we all have to eat.
This is neither what we planned for, nor is it fair… it is clear to me that there is no winning ticket for calling the bubble, other than a few “I told you sos.”
The house next to me, arguably a tear-down, went for $200k at auction. I was hoping to buy my current place (in good shape) for $180k.
The feds effectively put the brakes on this whole thing.
Know this: politicians love banks and real estate. Plan accordingly.
Don’t do it.
Everything you’ve read in the media about housing is a misrepresentation. Time and again, I, others and the blog owner have discussed at length about their not being any reliable information out there about housing.
Here’s what we know.
-Mortgage apps have been flat for 3 years. You have to have rising sales for a recovery. It hasn’t happened, thus what recovery?
-Inventory hasn’t changed. You see it all around you. Of all places, FL in particular. It’s everywhere, it’s empty, it’s defaulted. Millions of them.
-Prices weren’t allowed to correct. They’re still massively inflated at 2004 levels. And remember, prices began inflating rapidly in early 1998.
-Prices of new versus resales are inverted to an extreme. This reality hasn’t dawned on most…. yet.
These are just a few reasons to proceed with caution. The risk is extremely high and has been since year 2000.
I’m not going to buy, at least not this year. I just don’t know what to do.
Maybe if I lived in a stable renting market I’d be more comfortable with renting. Finding a stable rental in Florida, with a responsible landlord, that is safe and affordable, and so on… is very, very hard. I have that right now, so I am not going anywhere.
I’ve been thinking about Allena’s post above. It appears that building her place from the ground up was entirely about her child; the house, the land, the trust, everything. Otherwise, why do it?
I’m dead serious when I say I could easily do the Blue Plan. I really could live out of a tent, but I have kids and a wife now. I think the *ONLY* reason to buy at this point in the bubble would be if you had kids/jobs and planned to stay put for 10-20 years.
It’s hard for me to see through the noise, because every freaking day there is a Canadian or Michigander stalking our streets for a house. It’s maddening.
Are there any lurkers living in downtown St. Pete (Old NE, Crescent Lake, Coffee Pot, etc.)? Now that we have a school plan, we can live anywhere. It would be nice to live in a bike-able, artsy ‘hood.
The beach is cool, too, but I am afraid we will not be able to compete with pensioners and their post WWII loot.
There is a side of me that wants to really cut loose - take my international education chops abroad, and run either Cambridge or IB schools worldwide (Europe, Africa, South America, wherever…)
“-Inventory hasn’t changed. You see it all around you. Of all places, FL in particular. It’s everywhere, it’s empty, it’s defaulted. Millions of them.”
This is the part where they got us.
You can get into those, I can’t either… that’s where the correction is sitting.
I sure remember in 2007 waiting for 2011 to buy. of course we were entering socialized everything and none of us could ever fight wealth distributions and OWS. My brother lives in a fancy part of atlanta, he loves it but says i won’t fit into the bible belt set. I’ll never fit in anywhere but I sure like san diego coastal!
Well give it time because at last count there was something like 8,000 REO’s in SD.
Well give it time, such as, the rest of your life plus 10 years.
No. The wall of a mess that is housing isn’t ten years out. It’s right in front of us if you chose to acknowledge it.
Ben, did I say something wrong in my other post?
Of course, there it is! LOL