patrick.net

Sorry, Mike,

Nice idea, but looks like someone beat ya' to it: http://www.expansionmanagement.com/emstatic/research/qualityoflife.asp

@DS,

This 2003 study pegged typical U.S. transaction costs at 9%:
http://www.ppionline.org/documents/Real_Estate_0303.pdf

Thanks Harm,

Good ideas are usually are not exclusive. By the way, I thought I was spelling the word quotient wrong.

I would ignore. Other people's plight will negatively affect my karma. Not that I'd weep for them. Their misfortune is largely the result of their own folly (i.e., greed or lack of a strong will).

They'll survive. People survived the Great Depression. So no need to feel pity for them. But I wouldn't recommend schadenfreud, either. It demotivates you from more positive undertakings, i.e., preparing yourself for taking over distressed properties or setting up businesses to employ the distressed folks at a much reduced labor cost. It does much good to yourself and the society at large.

yeah, HARM, i think The Economist article I read was also 2003, when they did a series on the housing boom -- (whcih was a bit TOO prescient back in 03) -- and it was a 'side-article' -- naturally, I can't find it now, and you need a subscription to access the full content online anyway. I remember noting the 7% and 12% marks in particular with some interest, as low and high water marks between the countries compared.

having met a mortgage broker in DC who gets 5% of the deal, i could see why it was high. IF you have to pay 2 agents 6%, AND a sub-prime mortgage broker 5%, that's 11% right away -- plus other settling costs like taxes and misc. fees. in Oz, you would pay 1 agent 2.5-3% and a broker less than 1% -- surely the differential will be 7% right away. YMMV -- e.g. 1 agent only, or a lower MB fee. in Oz, 'stamp duty' to govt for the transfer is 2-3% also. vendor pays the RE agent out of the sale, buyer usually pays all other costs.

admittedly, the vendor's RE agent fee of 3% is 'embedded' in the sale price, but it is included in all the treatments of transfer cost.

your article cites $13,500 for a $150,000 house, which is 9%. oh well, something has given way, given we just calculated 11%+ in one scenario. maybe prime (or sub-prime) lenders charge a lower fee on average? maybe lots of people don't use a buyer's agent in reality? i reckon the Oz buyer is still 4% better off, assuming other fees and taxes are roughly equal, which they may not be.

regardless, it raises a very interesting corollary: the LOWER the settling costs, the lower the barrier to entry as an investment class, and the higher the rate of speculation and investment to be expected. as per the forsakencraft site cited above, which shows the transfer costs are going to bury flippers -- share trading brokerage commissions are obviously a great deal less by comparison as an alternative investment vehicle.

the PPI article above suggests that computerising transfer functions will significantly lower transfer costs with a flow-on benefit to lower income homebuyers. i find this a little frightening in a market where pricing is uncapped, because the immediate effect will actually be to lower the barrier to entry of specuvestors as well. lowering transfer costs by themselves would be like greenspan lowering interest rates to 1% and keeping them there forever in terms of triggering a boom. some other balancing intervention would be required, such as legally preventing specuvesting, capping prices in the market, and so on (both practices which i endorse as policy suggestions anyhow).

Zometin pozitieve.

NIKKEI is up 3%.

just to clarify briefly, i fully understand that in US 2 agents split 6% two ways. the point is, there is virtually no such thing as a buyer's agent in Oz, they're not really a known concept. i've heard of one woman only who does it in sydney, and she is held up in the press as a sort of oddity. most people just look for their own places and make an offer, or go to the dodgy auctions and get fleeced... there was a buyer's agent concept at auctions lately, who intimidates the auctioneer and other bidders -- but auctions have declined in popularity since they legislated against fraudulent practices... it's a grand old world...

ajh, your allhomes.com site is only canberra, illawarra and SE NSW, which leaves out Sydney completely... and clearly not Vic etc -- you have to pay thru the nose for data from others, e.g. $39.95 for just 12 months data for 1 suburb... what I often need is to get the sales history of 1 particular property, which the councils won't provide anymore.... so, back to embarassing the pollies, i want to look into that...

This is an 02 Economist article: House prices | Going through the roof | Economist.com, free to view...

points out how 20% transfer costs in belgium keep prices lower (although i can think of other ways of controlling prices):

"Stamp duty and other transaction charges tend to be higher in many continental European countries than in America or Britain. In Belgium, transaction taxes, and legal and estate-agent (realtor) fees amount to almost one-fifth of the average purchase price. As a result, Belgians tend to move less often, and view property simply as somewhere to live rather than as a speculative investment.

That may be one reason why property is much cheaper in Belgium. Chart 5 compares the price of a typical two-bedroom flat (100 square metres) in a smart central area in the 13 cities. New York, Tokyo and London are by far the most expensive; bargain hunters should head for Brussels. Sell your apartment in South Kensington and you could afford to buy one in each of Brussels, Stockholm and Amsterdam. "

Bailing people who got themselves into bad situations will just lead to more bad situations in the future. But if they can show they've really been humbled by their experience and learned something, then they may deserve help.

But I'm not going to be sympathetic towards the people who ran up the market flipping and snubbing renters. They just had it coming. They enjoyed the ride up, and they deserve the ride down.

early risers...

I loved the link that inspired this thread! Joe Dude (w/4 little mouths to feed) decides in JAN 06 no less to take (or is get taken) some RE "boot camp" dumps 77K of more borrowed money into upgrades and is now crying out for help?

This is a classic rookie mistake. Anytime money looks fast, loose and easy newbies figure they can not only play in that arena but that they can do it just by listening to tapes and w/o the direct guidance of professionals. I wonder just how much accountability flopper will get from Robert Allen (the guy that sold him "the course")?

How is this MY problem? Had Joe Dude opened a pizza parlor and utterly failed would there be cries of foul? People, it's b/c of the maternal connection that Americans have w/RE that we are EVEN considering any kind of leniency or bail-out. Let's make a quick distinction here. THIS WAS NOT DUDE's PRIMARY RESIDENCE! This was an investment (as in *Not FDIC Insured, may lose value). What's worse is that he JEOPARDIZED his *primary residence* to provide liquidity for this madness. Yes, it's the same thing as taking out a home equity loan to DAYTRADE!

Here's the big question. Will FB's be able to gain enough traction in congress to get them to consider an expansion of the cap. loss write off? I believe currently we sit at 3K per year. If they can accelerate the schedule they'll be able to write off the WHOLE loss in as little as 2-5 years and we'll ALL pay for their indiscretions! Don't let them do this! Let them f@cking DIE with cap. losses that can not be carried over into the next generation of FB's!

DinOr,

If farmers can get ag subsidies for growing food that we don't want (and using up tons of energy and water in the process, not to mention degrade the soil and increase erosion), then homeowners with half empty McMansions (and using up tons energy and water and money to run their homes, not to mention permanently taking the land plot out of agricultural use and increase congestion) certainly has a reason to feel the same.

Are you saying homeownership is not as American as tobacco farming? :)

If Joe Dude can "write off" his "abortion that lived" to the tune of 25K, 50K a 100K PER YEAR he essentially pays NO taxes that year! Meaning the Gov. has to get it somewhere else!

We didn't expand the cap. loss schedule for the stock market speculation gone bad, why should we expand it for this mess!

JUST SAY NO! (to capital loss acceleration)!

You bought it, you name it.

astrid,

LOL! Damn!

Sure, why not? We're letting them write off the int. on their "specuvestor home" why not subsidize them right down the old crapper?

The CFP Associations BEGGED the CPA affiliations to lobby congress to get the cap. loss sched. "stepped up" considering the magnitude of the stock market losses. The answer we got back was a FLAT NO! But, but these figures haven't been adjusted since the 1970's! NO. Next topic. Gee, thanks for going to bat for us guys!

Not only should some of these homedebtors that got in up to their eyeballs in mortgage troubles be deserving a nice humble pie, but so too should all those snake oil salesman that lured people ( stupid people) into flipping homes on TV. For almost a year, when I've turned on the TV at either early Sunday or a Saturday afternoon, there are at least a few of these "flipper" TV shows where smiling RE agents sit in front of a rolling screen of homes that according to them were "bought" for as little as $1500 and flipped for an instant 60K profit. The show goes on to show yappy-happy pudgy working Joe couples that made a bundle, telling the audience of their incredible sucess.
I have no sympathy for anyone that bought one of those shoddily constructed fake mediteranian looking condos that now create an endless sea of eyesores across the state. I'm also sticking with my original thought that these condos will be the first to plummet in price and head towards becoming slums and turn all those recently gentrified industrial areas right back into ghettos.
I DO feel for families that bought because they have kids. It was their decision, and they are ultimatly responsible, but their kids shouldn't have to pay for their parent's sucess. SF has chased out most of the families. It would be ashame to lose the rest.

+ parent’s failure
- parent’s sucess

SFwoman,
As a designer, I actually like a lot of the ads that are produced for Hummer. Some are pretty unique and stylish. My dad said that back home the things are selling like hot cakes, which is perplexing since the only one that gets somewhat decent fuel economy, the H3( 22 mpg) is seemingly their worst seller while the H2 is flying off the lots.

The new Hummer ads are hysterical. It's just crying out "if you're a Hummer owner, then you're inadequate somewhere."

SHTF,

I'm not too surprised. If H2 cries out the fact that the owner feels inadequate, H3 cries out that not only is the owner feeling inadequate, but salved their inadequacies with an inadequate vehicle.

The new Hummer ads are about as anti-social as those new VW commercials. It's not even making a pretense about Hummers being outdoorsy and all that. It's all about intimidating the other people on the road.

This sort of FU mentality is just sick. It's the equivalent of a tobacco ad that says "blow some smoke into that non-smoking wuss's face."

This really is an accounting question. (And one I'd love to have Randy H and the likes weigh in on).

Everybody and their long lost brother knows that there are no cap. gains paid in IRA's/401K's. No revelation there. Controversely; there is no provision to "write off" cap. losses within same said IRA.

Now that we've created an environment where we've had NOTHING BUT UPSIDE since the 1997 legislation passed we now have to "test" the system on the downside! Plenty of folks were gleefully NOT paying taxes on their primary residence (or any 2 of the last 5 years) how will the take it when they're told their 100/200/500K loss on a property CAN be written off (but to the tune of 3K per year)!?

Folks, even with the 3K limit we have an uneven playing field, a "preferred" asset class already! As FB's grow in number will the cries be loud enough to FURTHER tip the scales? Can you see how this is already having your cake and eating it too?

You can have up to 500K in cap gain free money, but; if it doesn't work out NO BIG, just write off 3K per year until you've recouped your losses! That doesn't strike any one as a little strange? Using that logic we'd all be writing off losses in our 401K's at work or our own IRA's from March of 2000 on! This has to be the very definition of madness.

SFwoman,
The fact that the H1 and H2 are entirely diffrent is a mystery to me- a mystery only in that people that buy the H2 equate it with the H1. The H1 is a true military machine with catepillar industrial diesel engines, a reinforced frame, and lightweight body. The original doesn't even have doors. The H2 is simply a large box with a conventional Duramax Chevy truck engine. The things are stupid and would never make it off road.
If people really wanted to go off road, they'd get an old Jeep. My cousin has a 47' Jeep that has 3 speeds, goes 40 MPH max, a little 4 cylinder engine, and crank up windshield wipers. That said, it'll go anywhere. Probably more places than an H2 for sure.
The other odd thing is that apparently the biggest buyers off SUVs aren't men, but women. Something likee 70% of all SUV drivers are females- often women that previously drove minivans. if I had a car company, all I would produce were ads that showed babies in the back seat with torrential rain or snow, and a stern, concerned mom at the wheel. " for the love of god, save the kids... buy an SUV!" I'd beat the crap out of the competition.

SHTF,

Well, why do middle age white men go crazy for Harleys when they're very expensive and not that fast (since they're so big and heavy)?

I never saw a Hummer going offroad while I was in the Southwest. Their wheelbase is too long and they're way too expensive to get trashed up. If anyone actually cared about going offroad, a beater small truck or jeep is certainly top choice. My choice would certainly either be a jeep or a small Toyota truck or SUV. Those things are reliable and have the short wheelbase for sticky situations.

DinOR,

I don't think it'll matter. Most of these specuvestors are so strapped that a 50K loss would be enough to send them to bankruptcy court.

I know this goes against your professional interests, but I'd personally want the same treatment for investment income as for wage income. They should be exactly the same. There's no reason why financial capital should be rewarded with more favorable tax policies compared to labor capital.

Most folks that take the bother to file "Schedule A" (which is a lower percentage than most might think) have NEVER had to take a cap. loss. Certainly not one that exceeded the 3K limit, and rarely one that had to be carried over year after year. Now faced with the potential for SUBSTANTIAL cap. losses how will FB's respond? Never mind them, how will WE respond?

astrid,

I'm sure you don't mean that each time you're paid a dividend that:

STITW,
FICA
SS

etc. etc. be with held? You're kidding right? We already paid tax on it once.

Astrid,
what;s funny is that a while back, I went to Death Valley in my 2 wheel drive small toyota truck with a camper top. A lot of the roads were unpaved and sometimes very rough and heavily rutted. The truck actually did very well. Offroading is more about the ability off the driver and less the vehicle.
The harley thing bothers me. There are so damned many of them now. I wonder if any of the fat slobby 50-something men that drive them realize that they look like a sack off dog food sitting on those things.

DinOR,

I'm not in favor of the current payroll tax system either. I think we'd all be better served if we treat medicare and SSI costs like the rest of the budget. I would like to see their scope dramatically reduced and means tested. I want the means testing to be so stringent and the payments so low that it only the truly desperate would seek it.

I don't see either of my ideas flying, but I would like taxation on all incomes. (though I think we should exempt taxation on the portion of the capital income that falls below the real rate of inflation). It's a system that overwhelmingly favors the rich and the elderly, at the cost of younger workers.

Think of it this way,

Not all of us are W-2 employees (although I was for years).

Our tax code by it's very charter will ALWAYS favor self employment and investment. There's NFW that inv. cap. and wages should or even could be treated the same. If this were true NO ONE would EVER be able to leave the work force to pursue start ups or even their own career or interests. What I'm pleading here is that ALL investments be treated with SOME measure of parity.

Finally, IT DOES MATTER. FB's that can't find relief in BK Court WILL seek "other remidies". Their path to financial recovery will be contingent on "broadened legislation" that will allow them to write off those losses in ever bigger ways. This could in essence provide FB's with a built in tax shelter for years to come. It matters.

SHTF,

LOL! I know what you mean. Those guys think they're so out there when they're complete conformists. They always dress the same, eat at the same places, hang out in packs. Personally, I couldn't be paid enough to be a bike-bitch and deal with the heat and noise and the stifling wardrob choices, and I've seriously considered getting a scouter once I'm in the BA.

I find that whenever it snows or if there's other bad weather conditions, it's always the SUVs that skid to the side of the road or fall into the ditches. I am intrigued by this 2WD offroading that you speak of. Which roads did you take?

astrid,

Don't get me wrong here. I'm hardly pro tax. In 1997 we had no way of knowing that not even 10 years later we would have reduced what is many Americans most valuable asset to nothing more than a ponzi scheme. But here we are. We've allowed folks like the guy that was the inspiration for this thread to paint themselves into a corner by giving him "training wheels" and now we want them back! If cries for help are coming this soon in the cycle how far are we away from outright debtor amnesty?

DinOR,

From a utility stand point, I see where you're going with a government policy that encourages overcapitalization, since that leads to greater job creation and lower unemployment rates. So on second thought, I'd probably prefer a government to encourage higher amount of capital investment than would be the case if the market was left on its own.

However, there's nothing inherently wealth building about a bunch of people trading AT&T stocks back and forth. Support for bonds and small businesses seems like a better way to support capital investment.

DinOR,

Yes, I believe you've described our worst nightmare here --Congress vastly stepping up cap loss write-offs while sucking the rest of us dry for the next 20 years. Basically legalized theft from the virtuous and responsible to subsidize the stupid and reckless. If this actually comes to pass, may be time to consider a move elsewhere. Hope it never comes to pass, cause I don't speak Australian ;-) .

Peter P,

How come you removed the photo? It looked great and I thought you like it?

DinOR,

I'm not anti-tax, by any means. However, like you, I'm not comfortable with the government using tax policy to support their social hobby horses.

Given that everybody and his dog is treating houses like investments, maybe front doors should come with this warning: "The price growth rate between 1996 and 2006 are abnormal. Past price performance is no guarantee of similar future returns. Home ownership requires payment of mortgage, property insurance, property taxes, and HOA fees. If you do not promptly pay any of these costs, you can face foreclosure and lose this house."

If politicians absolutely *must* provide some "relief" to greedy, stupid asshats (to stay in power), I'd much rather it come in the form of removing the new Chap. 7 BK restrictions or some type of debt forgiveness/short sale arrangements with the lenders. This isn't great in that it lets them off too easy for making collossally stupid decisions --and therefore may not provide the kind of "never again" pain required to prevent this mess from recurring-- but it sure beats stepped-up cap loss write-offs.

SHTF re:Death Valley

Heheh...I went to Death Valley in my Nissan Sentra. OK, there were a few places that it could't go, but most of it is accessble in a 4 door compact. Most of the inaccessable places it more a question of clearance than road quality. I'm with you - its more to do with the skill of the driver and less to do with the vehicle you're driving.

On the H2: the H2 just seems to be a Weekend Warriors version of the real thing. The original Humvees are awesone vehicles - in the right gear you can litrally crawl up the side of a building. However they get about 5 miles to the gallon, and only go about 50mpg flat out. And there's that irritating central axle... and no cup holders. What's a suburban communter to do?

H2 are All About The Bling. They have none, literally none of the things that make Humvees so amazing. They're just Status Symbols On Wheels.

My jaw dropped when I saw those adverts. They are ads for Keeping Up With The Joneses With Some Road Rage for added value.

Veeerrry Interesting to note that they've come out since the price of oil has skyrocketed. Advertising at its best (or worst, depending on how you look at it).

The husband has a link showing an aerial view of a parking lot somewhere out here in the West, and all you can see for miles are row upon row of new H2s... Now that people are starting to realise that they're just too expensive to run, no ones buying them and there's a huge glut of them, already made, waiting for the remaining suckers to put their money down.
Hence the ads. They're playing on human's most basic instincts in their desperaton to unload all those unbought H2s. Once the husband is awake I'll try and get the link.

HARM,

I don't see it happening. The FBs would only be able to exercise the option after they sell, and I don't see many people who can take that kind of one time loss and still stay solvent to collect any tax benefits(which will only be in 15% of the loss anyways). It's not like the stockmarket where you're using your own money and the stocks are easily liquidated.

Astrid,
There were a lot of roads that went to ghost towns all over the park. We were not very sure how bad some of them would be. A few were over 20 miles long and extremely rough, as in boulders in the road and the occasional 100 foot drop on one side with no guardrails. It was an awful lot of fun, but I probably wouldn't have done it in a car. You do need some clearance or you could crack a tranny case or oil pan.

“Foreclosure Prevention Program” which allows 0% interest loans to those that qualify.

Nice. Yes, let's reward all the idiots, while responsible borrowers pay full market rate. No moral hazards here! And who's paying to subsidize this wonderful social experiment, I wonder?

SHTF,

Hmm, that doesn't sound too bad. It seems like 4WD is mainly important in deep sand situations where 2WD might get trapped. Renting a 2WD SUV is a lot cheaper than renting a 4WD one, so it's nice to know where high clearance alone is enough.

Let's look at this from a practical national viewpoint. Ok, so let's say that uncle sam says oh well to all those folks that played the game. The game was their plan anyhow. But... people got a little carried away and the "plam" totally backfired and Uncle Sam is now in worse shape than ever.
What this little experiment proved was that if you have a sagging economy, the best way to prop it up is find something people will buy even if they are willing to almost kill themselves trying to find ways- any way- to buy it. it sure isn't cars, boom boxes, or laptops. it's housess. Yes- a house for everyone in the "american dream".
So Uncle sam is up shit creek without a paddle. What to do? Should all those folks with debt out their ears be saved? The answer the govmint' will give you is yes. Why? Because this event proved that there is an enormous supply of people with a lack of fiscal responsibility. if they can be counted on to make idiotic decisions, then they can be bailed out and reused in the next little scheme. Just you watch- those people will get off scott clean and we'll have to sit and watch.