patrick.net

It seems like the Marin IJ needs to start printing disclaimers if they are going to quote parties that have a financial interest in driving real estate transactions

Newspapers and magazines' income comes solely from advertisement. Even when the market is turning for the worst, they don't want to offend and chase away the Realtors, who are (and will continue to be) their main sponsors.

I'd say the media should take some guts and ditch that defensive attitude. When the bubble bursts, and there are many homes on sale, Realtors will need the media to list their listings anyway. Sooner or later, the media will figure that out, and we'll have the fair and balanced news once again, maybe not on Fox, but on real estates in general.

many seller raised price after their houses have been sitting for the last few months

The question is would that make those houses move sooner? If not, then it's possible sellers are trying to change their strategies, and resort to the used car sale tactic: raising the price so high, even the bravest bargain hunter can only negotiate down to a price that's still 10% higher than what the seller wants.

I'm looking at a townhome in the South Bay that actually went up from $858k to $956k. 45 days have gone by, and no one bites the bait.

Actually I was told that only homes below 1M on the Peninsula seems to be moving. 1M is the psychological barrier, anything above that seems to be sitting forever. Some listings were pulled without getting sold.

Perhaps these are the long-time owners who would like to cash out at the top, they don't really have a need to sell, if they can get that price, fine, if not, they just stay.

I have no mortgage. Does this mean that if I had a mortgage, I would essentially be unable to deduct the interest?

I believe your mortgage is deductible under AMT. However, property tax is not deductible. Furthermore, if you make a lot of money, you may be hit by itemized deduction phaseout.

NOT TAX ADVICE

I'm hit by AMT, too, and so are some other colleagues of mine. Yes, that means you wouldn't get to deduct your mortgage interest. I do have a house in Houston, Texas, and yes, I couldn't deduct that money.

I think the government is letting more people getting hit by AMT so that they can make a point, and get their measures to abolish the AMT pass Congress.

Since abolishing the AMT means the government will have to get back the money somehow, if you read the news, the plan is to limit mortgage interest deduction to the first $300,000 owed. I say go for it! It'll deflate this stupid housing bubble in the coasts faster, and we can solve that pesky AMT problem once and for all.

It looks to me that everyone making six-figure salaries will get hit by AMT this year.

I have a suggestion for topic, flipper properties.

Here is one
http://www.mlslistings.com/common/properties/propertyDetail.asp?open=0&page=1&mls_number=608171&type=property&name=

Checked on Zillow, purchased in Oct 2005 for 1,495,000
Asking now for 1,630,000, comparables around him sold for 1.1-1.2M.

Buyers beware, make sure this guy lose his shirt. He is a flipper and he has a carrying cost, if you really want this home, buy at no higher than 1M.

Zillow is useful for digging up previous transactions, giving you an idea how much the current owner paid for his place. Information is power. If someone bought a home at 1.495M 4 months ago and wants out now, you know you are in a better position to nail him hard.

I believe your mortgage is deductible under AMT

Actually, no. I looked at my Turbo Tax summary, and it did wipe out my Houston mortgage interest.

I plan to settle down in the Bay Area, but with such an imbalance housing market, I'm sure if I can do that ever. That's why I still keep my Houston house, just in case I have to go back :-)

I’m sure if I can do that ever.
Make it "not sure".

Yes, that means you wouldn’t get to deduct your mortgage interest. I do have a house in Houston, Texas, and yes, I couldn’t deduct that money.

Are you sure? IRS has a clarification here:

http://tinyurl.com/anpmf

However, with AMT, mortgage interest deduction will reduce your tax by your AMT rate, not your ordinary tax marginal rate. So AMT does hurt.

Certain mortgage interest -- Interest on loans used to build, buy, or improve your principal residence is permitted under the AMT. Mortgage interest used for any other purpose -- such as a home equity loan -- is not allowed.

http://www.tiaa-cref.org/siteline/popups/amt_notallowed.html

Your Houston house is not your primary residence, so mortgage interest there may not be deductible under AMT.

I think there will be further disappointments from flippers when they learn that mortgage interest on their investment properties are not deductible under AMT. :)

Since abolishing the AMT means the government will have to get back the money somehow, if you read the news, the plan is to limit mortgage interest deduction to the first $300,000 owed. I say go for it! It’ll deflate this stupid housing bubble in the coasts faster, and we can solve that pesky AMT problem once and for all.

Tax reform, banzai!

I think Peter P is right. From reading the IRS publication, primary mortgage interest can be deductible under AMT after all. I'll have to revise my tax form. It's a good thing I haven't submitted it yet. I think I'll need professional help this year :-)

You can claim if you have one mortgage on your primary residence (second one disallowed, HELOC disallowed), no mortgage interest deduction for vacation home (I believe). If you own a home and did not occupy it fully (up to definition), you MAY be able to claim deduction.

The two parts that will kill long-time realty investors are:
1) no deduction for interest on mortgage for investment properties
2) no deduction for property tax

So high-income earners really should stay away from property flipping, taking advantage of the long-term capital gains by investing in stocks and mutual funds is a much better idea. Capital gains tax rate is the same under AMT.

Scott C.,

Man you are really cool. When I grow up I want to be cool and happy like you.

ScottC says, "This economy is growing. Innovation is all around. Money is being made. January just saw the highest number of new home starts in 32 years. It’s a great time to be an American."

Talk about flawed statistics! Don't rely on headlines - always get the whole story behind the numbers. Read 'Seasonally Mal-Adjusted' by Morgan Stanley's Head Global Economist Steven Roach for an interesting insight into that housing starts number...

http://tinyurl.com/dv5j

The Financial Times? Please. I had to subscribe to FT for an economics course I took several years ago. I read it, and I let my subscription expire. I didn’t read anything in FT that impressed me, then or online now.

I almost pity you people, perpetual pessimists you are. But I’m to busy working, making money, having fun, and making love to care. --ScottC

So many statements in your diatribe are false that it's hardly worth responding. I never attacked Bernake, thinking him quite capable of the job before him. He is a neo-classic economist, and many accomplished, credentialed, more experienced economists disagree with him--quite a few with Nobel designations. You do know, ScottC, that he was 2nd choice for the job don't you? Perhaps if you'd actually read FT, WSJ or Economist you'd know who was the first pick and why he turned down the post.

And if you cannot find anything worth while in the FT then that speaks more to your failures, not theirs. Somehow it doesn't suprise me that you mistake free-market libertarians with progressives. Perhaps it is the fact that both camps are capable of open minded debate and exchange that confounds you so.

On second thought, don't change a thing. It will be better for the rest of us if you just blindly march on in your self-made dystopia while the FTC and DoJ remove the anticompetitve barriers that your industry has created protecting your undeserved profits and opening you up to the true face of free market competition that the rest of us face on a daily basis.

(I think at some point I'm going to parse the past threads and compile a tome of all ScottC's self-contridictions, ignorant misstatements, and factual errors. I remind others that it is he who incites these arguments because it is *always* he who resorts to attacks ad hominem and non sequiturs when he can't defend his position factually.)

On why food and energy are omitted from CPI:

I agree that *for an individual*, the CPI isn't very useful because essentials are left out, like food and energy.

But the problem is that CPI has morphed into an aggregate indicator used to index inflation for things like pensions, labor contracts, and government obligations. There was a legitimate issue with including inelastic/sticky things along with elastic/non-sticky things. There was another problem with "supply chain" effect.

The problem is that we've overloaded CPI with multiple meanings today. There are better indicators to use personally, though, which an easy Google search will reveal.

“find the trend whose premise is false and bet against it” George Soros.

Soros is my childhood and current hero. However, I do not necessarily agree with his political views. His quest to dethrone Bush was way over the top, I have to say.

Nevertheless, he is my favorite speculator role model.

The Financial Times? Please. I had to subscribe to FT for an economics course I took several years ago. I read it, and I let my subscription expire. I didn’t read anything in FT that impressed me, then or online now.

How could you resist pink?

New thread: Death of inflation?

auger-inn,

I don't disagree with most of your observations. In fact, since they are personal observations, they are to be taken at face value. What many economists are trying to do is figure out how to explain these very real phenomena with models and emperical econometrics. We all know gravity makes things fall, but it is still useful to understand the mathematics and physics responsible for the fall, so that we might avoid falling when unnecessary.

The global and national economies are orders of magnitude more complex today than even 30 years ago, and they're only getting moreso with time. As with all complex systems--especially those we endeavor to manipulate like the economy--it is very important to suffer through all the discovery of models and emperical testing, as well as the failures, if we are to ever have any degree of sustainable success.

Peter P wrote:

> I am eagerly looking forward to 100-year mortgage in Bay Area soon.
> Quick fact: I was pre-qualified for a 40-year loan just for the fun of it.
> Honestly, I doubt a 50-year loan can save much over a 30-year loan.

If you borrow $750,000 the monthly payments at 6.5% will be:

30 year am $4,740
40 year am $4,390
75 year am $4,094
100 year am $4,068
Interest Only $4,063

FormerAptBroker

I am getting mixed signals. Just talked to a friend who is looking for a home up in the Peninsula, he said inventory is going down while buying is up, and many seller raised price after their houses have been sitting for the last few months. Anyone from the Peninsula?

Well, I used to live in Los Altos/work in Palo Alto, and this is purely anecdotal, but I've thought many pen. towns have the highest amount of exuberant optimism in all the SF Bay. Think of all those dot-com seed companies and VCs. Scads of self-delusional entrepreneurial genius, now transfered to real estate. They'll be the last ones holding the bag (IMO).

I am getting mixed signals. Just talked to a friend who is looking for a home up in the Peninsula, he said inventory is going down while buying is up, and many seller raised price after their houses have been sitting for the last few months.

He is probably just giving in to fear. Just go to viewfromsiliconvalley.com, they have weekly sale stats for San Mateo county.

I am not from the Peninsula, but South Bay (Sunnyvale). Prices seem to be holding up well so far, much better than I would have thought. A comparable house just sold within 5k of asking, and asking price was not what I would call low. The asking price was only 6% less than what a much nicer home on the street sold for at the "peak" in October. The nicer home had been almost completely gutted and redone whereas the latest sale was an "as-is" with over $30k in plumbing repairs needed. Floorplans and square footage were the exact same- these are cracker jack 1950's ranch places, as is mine.

I just put my house on the market last week and had the first open house over the weekend. Something over 35 groups came through. I will report what develops. Wish me luck. Hopefully, I will be looking for a rental soon.