Houseowners Who Won’t Cut the Price


By Randy H   Follow   Wed, 26 Mar 2008, 6:20am   6,388 views   271 comments
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case shiller

It's been quite a while since I authored any threads. I've been very busy lately and have fallen behind on most of my blogging. Damned need to make a living!

Anyway, I thought some of you might find this NYT article today interesting: Be It Ever So Illogical: Homeowners Who Won’t Cut the Price

--Randy H

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  1. HeadSet


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    Hampton, VA

    232   4:24pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    I think the best earthquake-proof house is a boat house

    Or a rental

  2. OO


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    233   4:25pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    HeadSet,

    hold that thought. Arson has already been tried by many desperate Californian homeowners.

  3. Peter P


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    234   4:29pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    Hopefully arson investigators will follow the money and catch all of them.

    The good will prevail.

  4. HeadSet


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    235   4:32pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    I was thinking that the Insurance Industry would have taken some preventative measures, such as pushing legislation to allow Insurers to unilaterally lower coverage/premiums in areas where house prices have plunged. After all, if they can push mortgage companies to forgive principle.....

  5. EBGuy


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    236   4:34pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    I wonder if this was a blog party?
    Actually, that WAS my inspiration. The idea being, though, that if the police did get called they would be less likely to arrest a bunch of sedate thirty or forty somethings sipping wine and "evaluating" the property. I suppose it would also be helpful to have you around with your RE license.

    @OO, TAF (increase of $20 billion, no surprise) plus primary dealer credit, that'll leave a mark. The fact that it all shows about in nonborrowed reserves in H3 is a bit disquieting; I've always had this theory that this is where deleveraging occurs. When the money evaporates (loan is written off), a small percentage of it essentially disappears from the reserves. Not totally straight forward, but my naive interpretation is that banks rely on principal and interest to keep up the reserves as part of ordinary operations. When enough loans go bad, the reserves need to be replenished. And of course interbank lending has gone to pot...
    The Maginot Line? Oh, give him some credit. Let's see though, this year the Fed sold off $138 billion ($740 - $612) of Treasures. At that rate, we have a little more than a year before the Fed has to start selling off its gold (and still be "sterilizing" the credit supply).

  6. HeadSet


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    237   4:45pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    I was not really thinking of the arson angle. I was thinking that lower insurance coverage may help unstick prices.

    1. The fact that the insurance company "devalues" his house may be the straw that convinces a seller to lower his price

    2. A buyer will not be able to get a loan for more than the insurance company will cover on the house (may be considered along with appraisal)

  7. Peter P


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    238   4:49pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    If that anti-market mechanism called Prop 13 did not exist people would be rushing to get their assessed values reduced.

  8. Peter P


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    239   4:52pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    Instead of Prop 13, I propose the abolishment of property tax. It is outrageous that taxes can be levied against properties.

  9. HeadSet


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    240   4:58pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    At that rate, we have a little more than a year before the Fed has to start selling off its gold (and still be “sterilizing” the credit supply).

    LOL!!

    After the Fed burns $740 billion, it will save the day with its "reserve" of less than $20 billion in gold.

  10. OO


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    241   5:12pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    A data point on the silver shortage situation.

    I placed an order with Perth Mint before Easter on x ounces of silver. I was told by the dealer that the transaction went through but I never got a confirmation, which is very unusual. He was always very prompt with confirmation. So I went through the Easter Holiday without knowing whether my silver transaction went through. Then market opens, I called my dealer again, who told me that he just pulled an all-nighty, and still couldn't give me a confirmation on my silver. He promised he would do his best to confirm before the end of day. Then I kept calling for the next 2 days because I still didn't see my confirmation. My dealer sounded very apologetic and tired, told me that they were dealing with unusually high volume so my confirmation would have to wait until they execute other clients' orders.

    Eventually TODAY, I got a confirmation of my order, which I placed on 20th, with an execution date of 3/28 (they are a day ahead of us). Of course I am to pay the spot price of ~$18 USD today as opposed to the ~$16 SLV when silver was still beaten down.

    So I don't know if Perth Mint did run out of physical silver at some point, but my experience suggests that they were having troubles filling order in the last week. It is also comforting to know that they did have the trouble, because that means my order is truly backed by physical supply. If they were just filling SLV orders, they could fill it any time.

  11. Peter P


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    242   5:15pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    Of course I am to pay the spot price of ~$18 USD today as opposed to the ~$16 SLV when silver was still beaten down.

    OO, couldn't you have used COMEX silver contracts to hedge temporarily before the confirmation?

  12. Peter P


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    243   5:17pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    Gold seems to be hitting a little roadblock at around $950.

  13. Peter P


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    244   5:19pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    Strange, gold is down today but silver is up a little bit.

  14. OO


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    245   5:22pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    Peter P,

    It would be too much of a hassle, and I just got out of SLV, so I was hoping for a quick straight swap. This has actually never happened before, I was always able to get confirmation within 2 hours of each trade prior to that.

    The Mint never lets you set a limit price, you just buy at spot hoping that your order get executed at the right time of the day. That's why it is not a great place to start building a position. GLD, IAU and SLV are great tools for building a position, and you can always swap out later.

  15. Peter P


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    246   5:27pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    GLD, IAU and SLV are great tools for building a position, and you can always swap out later.

    True.

    May I ask how much Perth is charging you for storing silver? I guess it must be a non-trivial amount.

  16. Peter P


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    247   5:31pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    I afraid gold is not completely out of the woods yet. The uptrend seems to slowing down at the 38% retracement level of that big drop. It is entirely possible that it may still go down for the short term.

    Not investment advice.

  17. Peter P


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    248   5:38pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    Even the top-of-the-top-end suffers from price declines:

    Ellison's home decline in value is shocking in an area that boasts very expensive real estate thanks to the Googleaires, people who made their fortune at Google and invested in big homes locally. The reason for the dip in value is essentially that Ellison created a home that no one else would want to buy

    http://www.luxist.com/2008/03/27/larry-ellisons-3-million-tax-rebate/

  18. OO


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    249   5:41pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    I went for the unallocated pool, which is nothing if your account is above $250K. If your account value is lower than that, then they charge you 2% entry and 1% exit.

    If you go for allocated, they charge you storage which is about 1.5% a year for gold and 2.5% for silver, that also includes insurance. They also slap a small fabrication charge on bars, which is about $50-200 per bar depending on how big it is.

    The difference between unallocated and allocated is, the former allows Perth Mint to act as if it were the owner of my PM to fund its work-in-progress. It specifies very clearly that it does not support leasing/lending of its physical inventory for derivatives or short selling. The catch is of course, when we are in a huge crisis mode, it will take some time for me to take delivery and that is a big uncertainty. But for the cost savings, I am willing to deal with that uncertainty for now. Plus, it will be really hard for a silver investor to take delivery :-)

  19. Peter P


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    250   5:44pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    Plus, it will be really hard for a silver investor to take delivery

    Silver is still easier than copper to handle. :)

  20. OO


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    251   5:50pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    I have a question for Fed's gold certificate account value.

    How come its value stays stagnant at 11,037 throughout the years, even though gold price has quadrupled in the last 7 years. This number never changed.

    How did they do that?

  21. Peter P


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    252   6:01pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    May be the certificate indicates ownership of 11037 Krugerrands. :lol:

  22. EBGuy


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    253   6:16pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    This number never changed.
    Pretty funny. I remember looking at that number when I first posted the H.4.1 historic data and going, oh, so the Fed hasn't sold any gold over this time period. WTF was I thinking. Hey Headset, maybe they hold $40 billion of gold, we're saved! Yes :-) , I do think that "sterilization" of credit will cease much before the Fed is down to its last Krugerrand. And as our resident deflationista, I would think that may worry you! Well, the point of looking at the Fed's Treasury redemption/sell off "run rate" was to see how long we could last. If it continues, they'll obviously have to fire up the printing presses soon. Will be interesting to see how popular the TSLF is and if it takes the pressure off other lines of credit.

  23. justme


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    254   8:44pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    Peter P,

    I have to say it, your view of global warming appears to be nothing other than a weak excuse for *wanting* to do nothing. Dismissing solid science out of hand just is not a rational argument.

  24. justme


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    255   8:48pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    DinOR,

    Curbing totally unnecessary waste of any resource is so exactly my cup of tea.

    I'm so NOT willing to wait for the free market to decide that it can suddenly "preserve" a "suddenly" scarce resource by squeezing me for obscene profits, after first wasting same resource to high heaven, also in the name of profit.

  25. justme


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    256   8:57pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    Peter P,

    I find it very ironic that some of the same types that are all for wasting oil seem to think that fresh water is suddenly a scarce resource that needs to be monetized to the tune of stock plays such as PHO and the like.

    There really is plenty of fresh water to go around, we just need to stop wasting it. For oil, on the contrary, when the waste stops there will be very little remaining to go around.

    Fresh water is distilled by solar energy every day. Even the proverbial television game-show 5th grader knows this. Once we stop wasting and restricting, water will be plentiful. Fresh water is a renewable resource, and oil is not. So lets stop being foolish. Preserve oil, fight CO2 emissions and be effective about water use. That will be a good start.

  26. StuckInBA


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    257   9:00pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    This is something I had not noticed in a long long time.

    A Reduced price listing in Cupertino
    Search MLS 784116 on Zip Realty.

    Price Reduced: 03/27/08 -- $939,000 to $899,999 On Market: 15 days

    Only 600 per sqft for a townhome. Sounds like a deal ;-)

  27. justme


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    258   9:16pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    Bap33,

    I don't believe it, and I think it is a defeatist attitude.

  28. OO


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    259   9:26pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    I somehow feel that the h3 number will cease to be published very soon...

  29. Peter P


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    260   9:44pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    justme, you can certainly try.

    Perhaps you will be buying carbon credits from me someday. ;)

  30. SP


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    261   10:44pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    northernvirginiarenter Says:
    Statewide, median sales prices fell by a stunning 26% from year-ago levels in February, with home prices dropping at a rate of nearly $3,000 a week

    $3000 a week - nice way of looking at it. I suddenly have an urge to call my friend, the JBO (tm) (Jealous Broke Owner)

  31. SP


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    262   10:45pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    StuckInBA Says:
    To mitigate the risk of lending, 25% dp is now required for buying in the “fortress”.

    Excuse my French, but this means that the “Fortress is f*cked”.

    F*cked doesn't quite describe it. You could say the Fortress is DP'd.

  32. SP


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    263   11:13pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    DennisN Says:
    It’s really sad about agriculture in Santa Clara county. What was once the nation’s premier orchard fruit producer has been paved over

    Testify, brotha! I am a curious sort of chap, and soon after I bought my house I was driven by an urge to learn the history of the area. I found that this tract and a few others surrounding it used to be one of the world's largest apricot farms. Now the place is full of arseholes and SUVs and shitboxes...

  33. justme


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    264   11:30pm Thu 27 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    Peter P,

    >>justme, you can certainly try.

    Try what? Make you believe in the obvious? I have long since given up on that. I'm just responding to preserve some sense of balance and rationality, in case there are impressionable youngsters listening in.

    >>Perhaps you will be buying carbon credits from me someday. ;)

    About carbon credits: What a scam. This is yet another example of private corporations worldwide being rewarded for their wastefulness. Carbon credits means they are now given the right to privately TAX (yes TAX) everyone who was not previously wasteful enough or powerful enough to be given a quota on their own. Carbon quotas will pretty much ensure that carbon emissions stay high. I can see it now, some dickhead from the WSJ
    will advocate burning off excess quotas rather than selling at less than the wishing price (I hope you see the analogy here).

    Net result: just as much CO2, only now you have to pay for it.

    What is needed is an across-the-board public carbon tax on all carbon-emitting activities. Kind of like a flat carbon tax -- that ought to play well ;->.

  34. DennisN


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    265   12:59am Fri 28 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    SP,
    There hasn't been many historical works published on SC country, but try the library for Stephen Payne's 1987 book "Santa Clara County - Harvest of Change." The older history is well presented although there is needless chamber-of-commerce boosterism once you get past the 1950's. In particular the evil caused by political boss AP "Dutch" Hamann is glossed over.

  35. surfer-x


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    266   1:36am Fri 28 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    Isn’t he the guy that bought a house recently at the peak of the market?

    Nope, shaved 30% right the fuck off the top, even with current down, we're still good. We didn't buy for investment, rather a place to live. Takes 1/3 of take home pay. Not too bad, wife doesn't work. And have cash left over for sushi.

    Hey man 0% down, CalHfa.

  36. lunarpark


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    267   6:33am Fri 28 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    http://www.mercurynews.com/ci_8726073

    Scant loan relief in valley
    NEW MORTGAGE LIMITS, NOT-MUCH-LOWER RATES

  37. DinOR


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    268   6:46am Fri 28 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    "How many different trailer parks have you lived in?"

    Jimbo, ....I think you could be missing the point. My dad owned his own business. They made laminate counter tops in Chicago. Some years were good, others were lean. Even though my dad was 2nd generation (he might as well have been fresh-off-the-boat)

    When other kids were splurging at record shops or wherever, I would walk in, feign interest, and quickly wait outside. Even when I was old enough to date my father urged (pffftt, insisted) that "throwing money around" attracts the wrong kind of women.

    It's a million little things that I'm still trying to understand but no, you needn't have been evicted to have been "brought up poor". IMHO

  38. Peter P


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    269   9:52am Fri 28 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    What is needed is an across-the-board public carbon tax on all carbon-emitting activities.

    More tax?

    I may consider it if you agree to also levying a carbon tax on all new born children anywhere in the world.

  39. justme


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    270   8:56pm Fri 28 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    Peter P,

    I think it would be enough to tax the children's carbon usage, just like anyone else's. I would prefer to keep it simple. No need to make up complex rules that ties into other activities. That is how we end up with the US tax system.

  40. Peter P


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    271   10:52pm Fri 28 Mar 2008   Share   Quote   Permalink   Like   Dislike  

    No, I think Birth Tax has more simplicity. It is the carbon tax equivalent of flat tax. :)

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