patrick.net

Frank, a 28-year-old renter in Campbell who is looking to buy a first home with his parents and sister, said he and his family are still looking for the perfect home at the perfect price before making an offer.

Frank, who did not want his last name used for privacy reasons, said his parents are leaning toward buying a resale house in Fremont or Hayward for about $350,000, while his preference is to spend about $500,000 for a newly built townhouse in San Jose.

Volcker stressed the importance of international cooperation in creating a new regulatory framework, particularly for major banks that operate across national boundaries -- the reverse of what's happened in recent years.

"The more international agreement we have on where we want to get to, the better off we'll be," Volcker said.

And while major banks should be more tightly controlled and less able to make the sort of risky bets that led to their current debacle, Volcker said there should also be more oversight of some kind for hedge funds, equity funds and the remaining investment banks.

He scoffed at the notion that those entities must be free to innovate -- stating that financial "innovations" like asset backed securities and credit default swaps have brought few benefits. The most important "innovation" in banking for most people in the last 20 or 30 years, he maintained, is the automatic teller machine.

Patrick,

At some point we have to accept things we don't like. This might be one such case. The desire to have their own place is a big motivation of our ancestors to immigrate here from Europe back in the day and from places like Shanghai and Mumbai nowadays. Even though we all look different, coveting home ownership is a hard-coded gene that a lot of us who all look different share. Maybe it's recessive on some folks, but if it is, betcha it'll be expressed in your kids.

If we can accept that we live in a gene pool where that coveting of home ownership dominates, we can try to at least educate people and hope that the message gets through. Even if it gets through to only one person, you made a big difference in that person's life. Been there myself on that one. Of the several including my own sibling that I tried to talk out of buying a home in 2005-06, I actually got someone to read your blog and then start asking his own questions. So he waited it out. So you see Patrick, you had a positive effect on that person's life.

Another thing that you can do, we cannot stop the unstoppable gene-coded force, is to ride it to our own advantage. Lotsa people who posted on here have shared things they've done in that regard.

PermaRenter,

Listen to yourself. Do your own math. And instead of looking at spread sheets with standardized test scores, go to the high schools and see for yourself.

And then convince yourself that a 850K townhome in the municipality of San Jose, which for time being may come with the "privilege" of going to Monta Vista, is a good deal.

You guys should watch this:

http://www.cnbc.com/id/15840232?video=1040027101&play=1

You guys should watch this:

Only one idiot out of four... could this be a sign that the media is finally catching on?

Credit Suisse recently produced a graph showing a big peak in interest rate resets for Alt-A and Option Arm loans will happen in May, 2009 and an even bigger peak in May, 2010.

I wonder how many of those people have ballon payments coming due? I once had one, and it was $30k due in five years. Those people won't be refinancing, if they are under water.

There is NO MORE land ownership in the traditional sense any more anywhere in the world, unless you are one of those lucky folks who bought land in California prior to the 70s with next-to-nothing locked-down prop 13 property tax that will not even adjust 2% up each year. Or, if you own a large piece (100 acre up) of agricultural lot or land left to nature, and qualify for Williamson Act which exempts you from property tax, you are a true land owner.

Ownership is a particularly a joke in places like TX, where property tax is 3.x% and assessed according to market value each year, which means your land is NO longer your land in 33 years assuming no land value increase. Any other state with no locked-down property tax like prop 13 is also practicing a very watered down, compromised policy of land "ownership". In many other parts of the world, your social cost outlay on a piece of land can cost you as much as 1/20 of the land value each year.

So land ownership today only means prolonged tenancy, with a large part of the rent locked in, but the flexible part (property tax) goes up every year and occupies a larger and larger part of your rent as time goes by.

In that sense, CA is the most ideal place to own real estate (if you do not overpay). Prop 13 allows for the truest sense of land ownership in the traditional way, and if you are a libertarian or true conservative, this is probably the only piece of code that is worth fighting for.

"People like [Robert] Shiller were very worried about the housing bubble. People like Steve Roach were worried about an economy based on asset bubbles leading to consumption bubbles that were unsustainable. People like Ken Rogoff talked about global imbalances in the current account deficit not being sustainable. Nassim Taleb has been worrying for a while about 'fat tail' events . . . . So lots of people signaled concern about things. I was one of those who put the dots together and thus gave a more fleshed-out picture."

To Mr. Roubini, the most interesting question isn't the one of who got it right. Instead, he asks why we "over and over again, get into these periods of irrational exuberance, when not only is there an asset bubble and a credit bubble, but people believe these are sustainable over a long time -- Wall Street, policy makers, rating agencies, academics, journalists . . . ."

Regarding the Rick Santelli "rant", Amen! Once again, just because the loan value was already five times the homeowner's income, tapping into imagined home equity to get those granite countertops, or move up from a Ford to a BMW, was a personal choice. I'm not certain why those of us that kept driving our Hondas and preparing dinner on "formica" (gasp!- perish the thought) should now be forced to pay for others' lifestyle decisions. I actually had a neighbor that was a "banker" around 2005- young girl who also tended bar on weekends (no lie)- that didn't understand such complex financial concepts as equity. Yes- she is a "victim", but being willfully stupid does not make one a victim, it makes them a fool.

As for the maturing ARMS, I have a balloon due in Summer 2010, and I am doing my best to pay it down until then. Of course, since I bought a house in 2003 at a mere 2.5 times my annual income and put 20% down and never refied despite a 50% increase in value at peak, I anticiapte a mortgage that will be down to roughly my annual income (assuming I still have a job). If we are blindly handing my neighbor $50K for his stupid decisions, I want my $50K too so that I can get my granite countertops and BMW- it's only fair (although giving me the $50K would actually help more since I will spend it).

For the 92% of Americans that pay mortgages timely (even those underwater since there are actually still penalties to foreclosure), we really need to both demand transparency and limit help to those that were truly defrauded, and make sure there are criminal charges to attach to each of these truly wronged cases. This would also force some of our excess lawyers to make an honest living- but that's another topic.

Yes- I am riled up on a Saturday morning.

Excellent!!! Have you read The Zurich Axioms by Max Gunther?

Not yet. I found it online and will check it out this weekend.

Anyways, back to the OP. I think the best way to fight the system is to simply not buy into it.

Here's what I've been doing so far.

First and foremost, *no personal debt*. Don't buy anything on credit. Consolidate any personal debt and pay it off. Either pay cash or defer purchases. Only buy used cars if you must, and again, only pay cash.

Keep a short list of high-volume, low-margin retail outlets and shop at them exclusively. I shop only @Costco, Target, Trader Joes, BevMo and DSW.

When making any big purchases, check craigslist first and buy used if possible. If you are buying new, *always* buy online and out of state when possible.

Buy produce at a Farmers Market.

Only eat at independent restaurants.

Don't keep a savings/checking account at a big commercial bank. Keep a small checking account with a credit union and keep your savings out of the country or in precious metals. I prefer both, my 'savings' account is the Central Fund of Canada, CEF. Gold and silver bullion. Do not contribute to either a 401k or 403b. Learn to manage your own money.

And finally, *refuse* to over-pay for real estate. I'll rent for my entire life before I put myself into a bad loan.

OO: if you've got 100 acres, a 3.3% property tax is probably nothing. That much land is only worthwhile as a productive asset, in which case you should be making considerable profit. And Texas has no income tax.

Of course, if your land produced nothing, then it should be assessed at almost no value...

Just out of curiosity, why do people keep talking about granite counter top? Are they expensive?

I know a few quality place that can refurbish a pretty decent-size kitchen (250-300 sqft) for granite counter top at ~$2000 total package. So why is it even a selling point in realty ads? I mean, if I am ready to spare a million dollars, does a $2K feature even catch my eye??

I have to agree. Stainless steel appliances, granite counters, and a big TV aren't really all that expensive today. Something like $5K - $6K should cover them. I'm not sure why they became a whipping-boy on the RE bubble blogs.

At the same time, why would anyone need to HELOC in order to purchase these things. Shouldn't most home owners have that kind of money laying around in savings accounts?

I just bought a whole package of appliances, and they can get REAL expensive.

If you are not going for Frigidaire, Whirlpool, GE, you can easily spare $5-6K on a fridge if you like German (Gaggenau, Miele etc.), or American ($8-10K for subzero). I ended up with a middle-end Liebherr which is still more than I'd like to spend. If you are into cooking, the wall oven and range stuff can easily go over $3K a piece, stainless or not. But I agree, those who bought these appliances on debt are just plain dumb. If you buy it, you should be able to afford them with savings.

Btw, the appliance shopping experience sheds another light on how plastic our society is. The American brand, made-in-China "stainless steel" appliances all have a FACADE of stainless steel, the whole damn thing is wrapped in grey plastic except for the front, which has a stainless steel veneer. Inside, there is no design consideration, no thoughtful space configuration, just some cheap plastics slapped together. The German-made appliances are well thought out, sturdy, and if it is stainless steel, it is stainless steel throughout, you pay the real price, you get the real thing.

The downside is, I will need to get a geiger counter to see how radioactive these stainless steel is.

Knock the pins out from under the SYSTEM OF DEBT-SLAVERY:

1) Pull all funds from national megabanks, move to local bank preferably a credit union. Credit unions are operated like membership clubs there is no STOCK sales to turbocharge them so they run responsibly like a bank should.
2) Stop using credit cards. Carry cash for all incidental purchases use credit cards sparingly if at all. The "reward points" are actually funded by merchant fees which means you are paying a higher price for items in the first place.
3) Capital preservation is the rule of the day NOT speculation, that is what got us into this mess. Stop adding to your 401k/403b unless there is employer match and invest it yourself somewhere safe even simple long-term CD. This disaster proves that smart fund managers were not so smart as anyone's retirement account should prove right now. All your retirement fund was to them was another big pot of money that propped up the gambling casino in Manhattan.

You got me about granite- not terribly expensive, but often accompanied by the stainless steel appliances, new cabinets, etc. that were all the rage on HGTV, TLC, etc. Basically spending $20K to let people know how "successful" you are (without the good appliances). Fine if you got the money, or maybe even if you're kitchen was non functional, but kind of foolish if you did it all with debt. And to respond to the Original Bankster, yes most owners should have that in the bank, but, thanks to no money down liar loans with teaser rates, many owners couldn't fill the refrigerator, much less purchase one, without credit.

>> sybrib Says@February 21st, 2009 at 12:11 am
>>PermaRenter,

>>Listen to yourself.

Don't worry ... I am out of market for next 9 months ...

MENDOTA, Calif. — The country’s biggest agricultural engine, California’s sprawling Central Valley, is being battered by the recession like farmland most everywhere. But in an unlucky strike of nature, the downturn is being deepened by a severe drought that threatens to drive up joblessness, increase food prices and cripple farms and towns.

Across the valley, towns are already seeing some of the worst unemployment in the country, with rates three and four times the national average, as well as reported increases in all manner of social ills: drug use, excessive drinking and rises in hunger and domestic violence.

With fewer checks to cash, even check-cashing businesses have failed, as have thrift stores, ice cream parlors and hardware shops. The state has put the 2008 drought losses at more than $300 million, and economists predict that this year’s losses could swell past $2 billion, with as many as 80,000 jobs lost.

On SS appliances and perigraniteel: honestly, as a househunter in the market, I wish people wouldn't do that at the last minute before they move out. They try to recoup the full cost, but I would really prefer to pick my own setup. Save yourselves the trouble--give me a blank canvas at a reasonable price. Generally speaking, J6P's taste is eau de trailer. I'm not paying another $20K for crap.

Brand,

You got it.

When I prepped my Cambrian Park house for sale in early 2006, I was very careful to spend as little as possible to make the place look decent. Most appliances were less than 10 years old, so I just got a decent "almond color" new dishwasher to replace the circa-1987 one. Same with the garage door: the old plywood tilt-up was replaced with a Home Despot metal rollup I installed myself. I ripped up and disposed of the old carpets and just cleaned up the hardwood floors without refinishing them. Who knew if the buyer wanted new carpet or not?

Here's a good article for Patrick for Monday.

http://www.cnn.com/2009/WORLD/asiapcf/02/20/china.economy.family/index.html

The stuff hasn't hit the fan here anywhere near as bad as in China.

Richard Florida, the author of The Atlantic article that I posted earlier, was on NPR this morning.
"Renting may make sense not just for people who can't afford to buy a house, but for people whose careers require flexibility — and for an economy that's built on our flexibility, single family-owned housing may be a bit inflexible," he says.

Capital preservation is the rule of the day NOT speculation, that is what got us into this mess.

I postulate that capital preservation is IMPOSSIBLE without some speculation.

Just ask anyone who tried to preservation their wealth with AAA-rated mortgage papers.

I mean, if I am ready to spare a million dollars, does a $2K feature even catch my eye??

But those moron sellers think buyers nowadays are dumb.

BTW, I love Gaggenau. :)

But those moron sellers think buyers nowadays are dumb.

The "buyers" have not become smarter as a whole, they just no longer have access to easy credit. The remaining "buyers" - those with cash or credit access - are being a bit more responsible.

Note that the government wants to fluff up demand for houses, and is working to ease credit to the irresponsible buyers as the main method.

As prices soar and personal finances sour, Californians are selling off their old jewelry to generate extra cash.

Juggling glasses of white wine and baggies filled with baubles, dozens of women descended on a well-appointed Orange County home this week to trade in their old golden treasures for hefty checks.

There were earrings from ex-boyfriends, ring settings with missing stones and chain bracelets from sorority sisters. One woman brought in her husband's wedding ring -- from a previous marriage.

Julia Geivet, 39, had hopes of selling an "embarrassing" Italian horn bauble she had owned since eighth grade and a few other small trinkets, which she thought might get her $30.

"I figured I'd come get a little money and socialize and chat," said Geivet, who was recently laid off as a manager at Verizon Communications Inc. "It might not come out to a lot, but right now, every little bit helps."

She left with a check for $302.92.

Stanford’s life — brash, cash, a dash of flash
Texan left his roots behind for a knighthood and a world of wealth

Stanford made a point of living life hand-in-hand with an exclamation point.

With a net worth north of $2 billion, he owns glitzy homes in and around Miami, the Virgin Islands and Antigua, and in them he has entertained powerful American politicians from both sides of the aisle.

He has an estranged wife, a girlfriend, former girlfriends and at least six children by four women. The monthly tab to support them all runs upward of $200,000, according to court records.

More startups winding down

Silicon Valley startups call people like Rich Brenner when it’s time to “turn out the lights,” a euphemism for winding down operations.

Brenner and others like him say they are very, very busy these days.

If you asked Brenner in the third quarter of 2008 what portion of The Brenner Group’s business was devoted to consulting so-called “strategically stalled” and distressed companies, he’d answer about 15 percent to 20 percent. Today it’s more than 60 percent, he said, and more than half of those companies are winding down.

“Business for us is definitely picking up in that area,” said Brenner, president and CEO of the Cupertino-based consultancy. “Silicon Valley has a lot of companies that are very distressed, some of them that are OK companies that won’t get any more money. A lot of the companies are getting the lights turned out.”

Every con starts with a tapestry of believable lies, and the tale of Stanford Financial Group seems to follow the pattern.

With the Houston-based investment firm thrown into receivership last week and facing civil fraud charges by the Securities and Exchange Commission, Stanford has become a reminder of the gullibility and desperation that too often guides investment decisions.

As investors, we want to believe we can get a great return for little risk. That’s why investment schemes, from Charles Ponzi to Bernie Madoff, work time and again. And it’s why investors need to learn to look for the little lies, those minor inconsistencies that can be the first clue to bigger problems.

In Stanford’s case, one of the first signs was the investment itself — certificates of deposits, a favored haven of the retired and the risk-averse, offered at a rate far higher than other banks were paying.

Note how the reality — the safety and familiarity of CDs — is woven with the incredulous — an eye-popping return.

>> He has an estranged wife, a girlfriend, former girlfriends and at least six children by four women.

So the fradulent rich is living healthy long life full of orgasm ... whereas the middle class is dedicating their life and labor holding overpriced assets ...

Microsoft wants refund from some laid off workers

Microsoft says it made an accounting error when it laid off some employees last month and now feels the best way to correct the error is with what will likely add up to a public relations blunder.

The software giant, which recently laid off 1,400 employees, sent letters (see image below) this week to some of those former workers letting them know that their severance payouts were a bit too "generous" and respectfully requested that the former employees pay back that money, according to a report Saturday on TechCrunch.

"An inadvertent administrative error occurred that resulted in an overpayment in severance pay by Microsoft," the letter states. "We ask that you repay the overpayment and sincerely apologize for any inconvenience to you."

A Microsoft spokesperson confirmed that the authenticity of a letter posted on TechCrunch, but declined further comment, saying it was "a private matter between the company and the affected people."

The company declined to specify how many of these letters were sent out, and it's unknown how much the overpayments total, but it did indicate that some laid off employees were also undercompensated.

The letter failed to provide an explanation for the accounting error but did manage to add--with underlined emphasis--a veiled threat of monetary punishment if the money wasn't repaid, at least in the form of a tax impact.

http://www.techcrunch.com/2009/02/21/oops-microsoft-asks-some-laid-off-workers-to-send-back-part-of-their-severance/

Introducing the Toll Brothers Mortgage Protection Plan...
We'll pay your mortgage if you lose your job!

When you buy a new Toll Brothers home... peace of mind is on the house! Now you can take advantage of fabulous deals in this buyer's market, worry-free.

The Toll Brothers Mortgage Protection Plan gives you:

2 years of job loss protection

Up to 6 months of monthly mortgage and real estate tax payments made for you

Payments of up to $2,500 per month

Stop by your Toll Brothers community of choice or visit TollBrothers.com. For more details on this very special offer click here. Do it today, and make your dream come true!

http://www.tbimortgage.com/Mortgage_Protection_Plan/

Toll Brothers is now HYUNDAI brothers.

PermaRenter: Nobody is forcing middle class people to hold "overpriced" assets. They are free to hold physical assets or productive assets.

Nobody is forcing middle class people to hold “overpriced” assets. They are free to hold physical assets or productive assets.

Exactly. It is sad that many of my friends still think 201K is the holy grail.

>> Nobody is forcing middle class people to hold “overpriced” assets.

The Barrack Obama administration is ... otherwise they would have recognized that let the foreclosure take its courese would have been the best course. Look the government is owned by the rich ... and the middle class is desperate trying to be rich ... and politicians are feeding to this with a message of "change and hope" -- sound familiar??

The Barrack Obama admin, is simply following the destined path of Hoover. Anyone in that situation, even including you PermaRenter, has only one option left, or you will be kicked out of the office the next day, or have a bullet in your head.

Btw, as an independent thinking middle class, you are not *required* to buy house at high multiples of your salary, and you are not required to buy a house at all. You can even find ways to go along with the admin and profit from it. That is probably the only merit of the residual capitalism we have left in this country.

Most middle class, 99% of us, are destined to NOT become rich, or everyone would have become rich then "being rich" will be completely meaningless. So it is perfectly ok that the system screws the 99% of the middle class and rewards the very few who have the brains and opportunities to rise above.

The Barrack Obama admin, is simply following the destined path of Hoover. Anyone in that situation, even including you PermaRenter, has only one option left, or you will be kicked out of the office the next day, or have a bullet in your head.

Sadly I have to agree with this. He simply does not have a choice other than to make an appearance of doing something.