patrick.net

HARM,

So eventually it'll come down to a zombie movie-esque showdown between the young and the old? "Fuuunds.... fuuuuuuuunds!"

Excuse me... I gotta go stock up on shotgun shells.

DinOR,

@HARM,

While that always remains a distinct possibility the conventional wisdom is that it will be much tougher to go after Roth's. As you're aware they're done with after tax dollars so there was no "dual benefit" of reducing your pre-tax income as well as tax deferred growth to boot. The Roth 401K was in ways a means to appease younger voters/workers that had never really had the benefit of a "defined contribution plan".

When compared to a DCP (employer funded plan) the Roth still sucks. Taking away that little compensation would create quite a stir and require some type credit back for having reneged on their promise. Then again...?

DinOR

HARM definitely has a point. Look at all the wealth that was confiscated during the depression. They took peoples gold for crying out loud, and then paid them what they said it was worth. You know those $50 gold coins you can buy for $680 each. How much do you think they will pay you for them if things really get bad. My guesss... $50. Whose to say what they will do with ROTH IRA’s, or 401K plans. I foresee a solution to the Social Security problem if things get bad enough. Combine everyone’s retirement packages into Social Security, including IRA’s and 401K’s. Govt make these rules and can change them any time.

Randy,

When you say MV I assume you mean Mill Valley and not Mountain View.

(Because the Fortress never goes down. BTW, the Fortress has now an official name in the MSM - "Prestige Markets". Makes the buyer feel better.)

As said, Roth's are post-tax lock in, which *should* be harder than pre-tax deferments to "confiscate". Keep in mind that the government are expert at figuring out all kinds of ways to skin the proverbial cat. I actually highly doubt they will ever *directly* eliminate retirement deferments or lock-ins. Rather, I imagine they'll figure out ways to put in offsetting taxes that just happen to correlate real well to the amount they want to confiscate from your deferment. And they'll call it the "American Families Retirement and Security Relief Act of 2012" or something similarly patriotic.

Have I mentioned how much I hate non-direct, non-consumption taxation yet today? All taxes not directly tied to the actual consumption of product or service are de-optimizing, by definition, and should be eliminated.

@SFBB, :lol:

@KT,

Maybe I'm just being tin-foil hat paranoid, but I wouldn't put such a thing past a future government in seriously dire straits. Given that they can (and occasionally *do*) rewrite the rules as they see fit, I would prefer to take my tax deduction right here and now, while it's still available, thank you.

How many people 10 years ago would have guessed there would be a "means test" to individual (but not corporate) bankruptcy? Who could have forseen the Fed, GSEs and Congress would rig the mortgage market completely in favor of flippers and fraudsters? I have learned not to expect politicians or a frightened, greedy, ignorant public to do anything but make the worst possible choices at the most critical moments. If there's enough political will to confiscate, there's always a way.

@Patrick aka Admin aka Chief Great Leader

I'm setting up some racks at ColoServe in SF. Any thoughts on how reliable they are? I know you don't have a dedicated box, but I've been toying with setting up a shared blog server there for some other stuff for a while anyway...

StuckInBA,

I like the name "Prestige Markets" a lot. If you look back in the origin of the word (or watch the movie "The Prestige") you'll see that it means "illusion" in french.

Pretty much the bubble has (and is) a 'prestige' in that sense of the word.

DinOR,

@sfbubblebuyer,

Seriously, that is too funny!

I did a coin toss this weekend and rented "The Fountain" instead while massively hungover. I'll try to get it right this coming weekend!

Hi Randy,
I don't know how good ColoServe is. Sounds nice to have real control. How much do they charge? You can mail me direct at p@patrick.net.

I thought my DNS problems were over this morning, but apparently not. Many people still cannot see patrick.net today because their ISP's name server has not updated yet. Depressing.

Patrick

Holy crap, all my zip realty saved searches () have jumped 10-15% in inventory overnight. And these searches are all for the Frickin' Fortress (r). Not sure if inventory actually went up or if this was caused by a glitch in their search.

Compared to the beginning of the year, inventory is up 191%. Here is the data.

1/1/2006 ------ 60 %
8/1/2006 ------ 314 %
1/1/2007 ------ 100 %

rats, there was a less-than symbol in my post.

Here are the numbers again:
1/1/2007 35 100

1/1/2006 ------ 60 %
8/1/2006 ------ 314 %
1/1/2007 ------ 100% (baseline)
2/1/2007 ------ 145 %
3/1/2007 ------ 154 %
4/1/2007 ------ 157 %
5/1/2007 ------ 157 %
6/1/2007 ------ 151 %
6/20/2007 ----- 191 %

SP

HARM,

I suppose when the revolution really comes, anything can happen. I was born in a country where the parents' pre-1949 landlord/capitalist status can destroy the career prospect of their children/grandchildren. No point in saving money in that case.

As Randy said, direct confiscation is extremely unlikely. The creeping confiscation via denial of benefits is more likely, though I hope to be out of the country by that point.

DinOR,

"completely in favor of flippers and fraudsters?"

That would be about the size of it. When you put it that way maybe a bird in the hand...? I guess the only reason I have any faith left is that it really does seem like the Fed is frantically scrambling to get some standards back into lending standards? At least they haven't lowered rates (yet) under immense REIC pressure.

The "special commission" that met last fall did make comments regarding some of the preferential tax treatment and the fact that there was at least some debate about subprime/predatory lending was encouraging (if not misguided).

Patrick, I had a friend today "who has no interest in housing, or bubbles, or econimics, etc", ask me today what blogs I read. She had read about patrick.net in a BA newspaper article this weekend and had been reading your site feverishly. I did not see the article, but it made me wonder if that is generating a bunch of traffic to this site causing some of these problems.

I'm not sure what econimics is, but I bet it's interesting.

I fully expect Social Security to fail. I say this because more and more people in their 20s-40s don't expect it to exist by the time they retire. I pretty much assume SS is wasted money for me at this point, and as we get older and more cynical, I see us actually having the numbers to oppose the NAARP's voting block and start phasing out SS. I'd LOVE to see SS taxes be gradually phased out over the next ten to twenty years along with SS benefits.

So DinOR is now Apache66 ?

Yes, "Apache66" = DinOR. Which is really odd, because "DinOR" is already a registered account with authoring privileges.

DinOR, what's up with the name change?

It's interesting that I haven't seen any of the local MSM outlets report this:

http://phx.corporate-ir.net/phoenix.zhtml?c=63356&p=irol-newsArticle&ID=1017129&highlight

PMI, the folks who insure our mortgages, reports on the risk of price declines in major RE markets in the US. Near the top are Oakland, SF, SJ; ie, the entire Bay Area. As I read the report, basically these three locales have an estimated 57%, 41% and 49% chance of price declines during the next 2 years.

HARM,

I think he screwed up the registration somehow and can't log in as DinOR.

DinOR, let me know if you need your password reset. If that fails I could try to delete and re-create that username.

Mill Valley is definitely dropping again on the higher end of things. But there is a lot of "funny businesses" going on too. Cripes. Seems impossible to win the real estate game. Apparently, so I've heard from 2 agents now (who were trying to get my to bid-up), once hitting the $2mm + level nicer homes in MV often have "agency offers" on them, which are in essence purchase options for some long-dated future date, with a significant (but not exorbitant) cancellation feel. Say something like a $2.0mm home is sitting for sale, and an agency says they'll buy it for $2.19mm on 1/09, with a $65K cancellation fee and a right of refusal to match any other offers that come in during the interim. I wouldn't make this shit up. I've heard it on 2 properties from 2 different agents from 2 different agencies now. It's kind of like realtor-price-protection collusion, as best I can figure. It makes it so sellers simply won't bring themselves to sell "below asking" even though they're basically saying they'd rather have the $65K fee in 1.5 years than the delta of price drops they risk losing by not taking a $200K hair cut.

Cripes.

Randy,

That's absurd! I cannot imagine the hubris that goes into making an offer like that to a seller. I wonder if it's only the ones they think are likely to capitulate that they make such an offer to, and it smacks of racketeering.

Randy,

Who is making these "agency offers" - RE outfits? If so, which specific ones have you seen do this? I've never heard of this before. It's almost like a "guarantee we'll sell your place or else we'll buy it from you" (for a hefty fee) from the Realtor.

So...these sellers must therefore be "test the waters" types, since they seem to have no urgency to sell. Clearly this is not the type of seller one ideally wants to buy from (ie, no pressure to negotiate down).

I wonder if these sales factor into DOM, as they will tend to stay on market longer, or if the Realtors (TM) have some way of doctoring the stats so that the date of the signing of the "agency offer" is used as the sale date? Wouldn't surprise me if they did.

Is such a contract even legally enforcable?

Test

Wait a second. I'm trying to parse what the "agency offer' really means. I think it simply means that your listing is locked in with the agent until 2009, because practically speaking, nobody is going to want to wait that long (2 years) before they sell.

The whole scheme is just a roundabout way of extending the listing contract period by some huge and non-standard amount. Once 2009 rolls around, maybe the agent/agency can get out of the contract because they have an inspection contingency, a loan contingency or some such. That makes the offer at 2.19M (or whatever) not worth the paper on which it is written,

I don't think it is a coincidence that 3% of 2.19M is 65k. Basically, the listing broker is locking up their rights to a sale commission for 2 years.

Am I wrong?

Justme,

Randy's description sounds like an option that makes absolutely no economic sense outside of collusion and attempted price fixing to guarantee a price floor. I'm not even sure how it could make sense if it was an effort at price fixing.

Possibilities as I noodle through it:

1. The agents are making it up, but have colluded on some common storyline.

2. Some agencies/firms also do investments. I had written about this like 2 years ago on Patrick.net, not too long after moving up to Marin from the Peninsula. There are definitely agencies here that do some horse swapping. That wouldn't be illegal as far as I know, just unseemly.

3. These could be investment groups, probably with various brokers and richer agents participating, that speculate on properties.

4. These could be legitimate investors buying up residential real estate properties. I've never lived in a place like Southern Marin, but I do recall from a previous life in Chicago that the exclusive areas were often prone to professional investment activities. Not flippers, but actual portfolio investment companies that would buy, rent & hold, and then sell residential real estate including SFHs in high value areas.

5. I could be having a bad dream and I'll wake up back on the mid peninsula, somehow magically having been transformed into an owner of my dream home mini-ranch in Woodside.

I could be having a bad dream and I’ll wake up back on the mid peninsula, somehow magically having been transformed into an owner of my dream home mini-ranch in Woodside.

Randy, I see the Google ads on this page are calling to you. :) I vote for the 30-year Fixed Rate Loan: "Great Rates. Less paperwork. No Lender Fee. Approval in Minutes." It's not quite as good as the ruby slippers, but since when have ruby slippers ever given you cash back? Huh? That's what you get for wearing gem-encrusted footwear from a housing casualty. If Dorothy had a brain, she could have flipped that crashed fixer-upper and snapped up some prime Main Street property in Munchkin Land.

Munchkin Land is sort of like Oakland, except the gang members carry lolipops instead of 9mm handguns. And you see how property values keep climbing in Oakland!

This is depressing. The optimal capital-gains tax rate should be 0%. Why would they want to raise it? 15% is already too high. Do we want to end up like Europe?

Hopefully, enough of middle class homeowners will feel threatened enough to make this tax hike a political third rail.

It is clear that the budget should be balanced through privatization, not taxation.

My dream of a flat tax system is fading. :(

I just can't see the agent actually following through and buying the property. It doesn't make any sense for them to buy something that nobody else wanted, and at a higher price. Realtwhores may be scum, but they are not that stupid, at least not with their own money.

I think the "agency offer" is made when they realize that the sellers wishing price is too high, it will take > 3 months for the seller to come to his senses, and they intend to lock the listing/commission up for longer than that.

Meanwhile, in the unlikely event of a sudden market turnaround, they have a "call option" to buy the house at a discount and flip it. If the market continues to go south until the option expires, they will invoke some contingency and get off the hook.

If the realtor *really* wanted to buy the house, they would buy it NOW for 2M, maybe discount heir commission to beat out other buyers. I don't think price collusion has anything to do with it. They want a transaction to happen, they don't care about the price. They only care about increasing the prices when it helps them to create panic buying, (read: more transactions).

They also want to do something to keep the listing active, I would think. In areas like MV they are fighting "toe-dipping" sellers. In both cases, the homes in question have been on and off the market for from 1 to 2 years. The sellers tend to list a wishing price, sit on it for a while then either get a low ball or agent pressure to drop the price, so they yank it and wait a while. A few months back they're on MLS again with a different agency. So this is a way the agent both locks up commission and keeps the listing active in the hope a fool will stumble upon it. After all, homes not on the market don't get sold.

The whole "agency offer" discussion also brings up the question of of how to deal with "insider transactions", and transparency in general.

I think there ought to be much stricter rules about reporting of real-estate transactions, and equally strict associated penalties for those who break the rules.

What is needed is

--rules about accurate reporting of sales and prices
--rules about open disclosure of all bids, to prevent fake bids
--mandatory reporting of "industry insider" selling and buying activity
--reporting of "off-market" transactions
--auctions should have published minimum bids

Total transparency is the goal. The stock market is much more transparent, although there is plenty of loopholes and shenanigans still going on there.

Social security is not going away. First of all it is financially solvent, at least through 2040, and even after that it is 80% solvent, meaning they could drop benefits 20% and it would be fine. Secondly, there are more elderly than ever and they vote.

Medicare is the thing that is going to bust the federal budget and I fully expect it to go away. Medical costs will end up bankrupting most of us before we die.

somewhat OT questions: is there a way to roll my 401k from a previous company into a Roth IRA? what are the tax implications?

also, when I read this blog from my Treo, each post is numbered, how come the post numbers don't show up when I use Firefox?

We recently had a tragic shooting in the BA.
A father's despair over money problems at a family-owned skin-care clinic in the East Bay led him to shoot his wife and their two children to death before turning the gun on himself, police said Tuesday.
So their business was having problems, but do you think this also had anything to do with it? The PropertyShark knows all.
Their house in Berkeley was bought on 3/21/05 for $640,000 with 100% financing from Impac Lending Group. The first mortgage for $512,000 shows up as variable. The second at $128000 is fixed. If the first was a 2/28 ARM, resets would have happened in March of this year. He registered his gun in April. Heartbreaking.

Do we want to end up like Europe?

Golly, "ending up like Europe" sounds awful. Far less unequal distribution of wealth and poverty. Cradle-to-grave healthcare coverage for all citizens. Fully or near-fully subsidized higher education. 2-3 months of mandatory paid vacation per year. Clean cities comparatively free of crime, gang violence, and graffiti. Strict immigration controls that ensure plenty of demand for a skilled and well compensated labor pool, even among the lowest tiers.

Sounds horrible. Where do I sign up? ;-)

Honestly, Peter, I'm not aching to have my own taxes raised, but if a capital gains tax-hike is one of your biggest concerns, then you must be doing rather well, no?

Worrying about how the mostly well off are going to pay (relatively modest) taxes on passively accumulated wealth is not really one of those things that keeps me up at night. I have substantial m. fund and 401k holdings and it doesn't even register on my 'big picture' radar. Losing my job to outsourcing or cheap foreign labor, or losing my medical coverage and being bankrupted by healthcare costs are a little higher up the priorities chain for me.

Just sayin'...