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A Modest Proposal

By someone else follow someone else   2008 Jan 24, 12:55am 27,622 views   323 comments   watch   nsfw   quote   share    

out of reach

How about some legislation with the express intent to LOWER house prices, unlike the crap legislation we're getting from Pelosi and Barney Frank designed to make housing less affordable?

We should completely eliminate Fannie Mae, and after that, the mortgage interest income deduction.

Here are some more ideas from Steve, a patrick.net reader:

the goals should be something like to promote home ownership by
discouraging flipping and owning multiple residences

promote homeownership but discourage multiple residences:
- remove the mortgage rate deduction for all but the primary residence.
- second home/first investment property/ vacation property will have
no mortage deduction and no additional tax
- third home will carry a 10% annual tax
- fourth home will carry a 20% annual tax
- fifth home 30% tax
- sixth home 40% tax
- etc

discourage flipping:
- 35% tax on sale of property held for less then 6 months
- for property held less 6 months to 1 year will prorate down to 0%

i'm not sure what the legal issues are in putting something on the
ballet, i'm a tech person like yourself, maybe you can ask on your
site for someone with experience in that? or a section of your site
for brainstorming this?


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284   StuckInBA   ignore (0)   2008 Jan 25, 9:50am     ↓ dislike (0)   quote   flag        

I like this one from Mish.

Throwing Away Money
Remember the catchphrase "throwing away money on rent"? The bottom will come when people start bragging about the day they stopped "throwing away money on an overpriced house".

285   Peter P   ignore (0)   2008 Jan 25, 9:51am     ↓ dislike (0)   quote   flag        

but the amount of lead in the hands of law-abiding citizens probably does contribute to a causal relationship to lower crime here.

Yes. I don't know why most democrats want to ban guns.

Also, I think colder regions have lower crime rate.

286   Peter P   ignore (0)   2008 Jan 25, 9:52am     ↓ dislike (0)   quote   flag        

Dennis, from statistics, it seems that Coeur D'Alene has higher crime rate than Boise. Do you have an explanation? (Other than the fact that CdA is on a lower elevation?)

287   SP   ignore (0)   2008 Jan 25, 10:05am     ↓ dislike (0)   quote   flag        

OO Says:
Maybe I sound stupid, why not commute to Santa Cruz? Isn’t Santa Cruz at least along the coast and a resort town?

Ex-colleagues started up a company there, it was fine when they were a six- to eight-person shop. After that, it was a pain to hire people - either they had to pick from the small local crowd (mostly Borland refugees) or the even smaller set of people insane enough to consider commuting on Hwy 17. They are now moving the operation to Campbell.

288   Randy H   ignore (0)   2008 Jan 25, 12:12pm     ↓ dislike (0)   quote   flag        

On Half Moon Bay:

I second Skibum. Sorry. A colleague of mine has a beautiful house in El Granada, up the hill. Striking views. Ocean air. Lots of fog, though.

Ask him about his commute every winter after Devil's Slide falls into the ocean yet again. And 84 ain't gonna work either. It takes forever unless you plan on riding a Ducati and wearing Teflon body armor.

289   OO   ignore (0)   2008 Jan 25, 12:27pm     ↓ dislike (0)   quote   flag        

From a mortgage broker:

Hello! I wanted to pass along the good news from Washington today! A
component of the government's tentative economic stimulus package announced on Thursday would give an immediate lift to buyers and sellers in higher-priced housing markets. Apparently, the bill would temporarily increase the limit on mortgages Fannie Mae and Freddie Mac may securitize from $417k to up to $730k. In addition, the bill would increase the limit on loans the Federal Housing Administration (FHA) may insure from $362k to $625k. This should help to reduce spreads in the jumbo mortgage market!

One estimate mentioned that as many as $400-500 billion in loans could qualify for refinancing. As these loans refinance, it could ease pressure on capital-constrained bank balance sheets. And temporary items like this are difficult to rescind after a year, which would also be good news for originators.

Here in California Gov. Arnold Schwarzenegger wants Congress to raise the Fannie Mae and Freddie Mac lending limit from $417,000 to at least $625,000 as part of the economic stimulus package. State Assemblyman Ted Lieu is pushing for a bill that requires mortgage lenders to tighten up already strict guidelines to make sure homebuyers can afford their basic monthly bills before qualifying for a mortgage loan. This bill would also ban certain designer mortgage loans such as the option arm mortgage. The option arm mortgage, also known as the pay option arm, allows borrowers to pay less than the interest that is due by adding the unpaid interest to the balance of the mortgage loan.The bill would also allow some homeowners to refinance their homes without being responsible for any penalties or unnecessary fees. The package, agreed upon by Democratic and Republican members of the House, would allow government-sponsored Fannie Mae and Freddie Mac to buy mortgages at least 50 percent more expensive than the current $417,000 limit. The Senate and White House still must sign off on the proposed stimulus plan, which also includes tax rebates for Americans. House Speaker Nancy Pelosi and Republican Leader John Boehner of Ohio announced the deal in a press conference Thursday.

A higher cap, to apply for one year, would breathe life into housing markets in New York, California and other expensive markets because lenders would feel more comfortable knowing Fannie and Freddie can
buy and package the loans into securities that investors consider to be
relatively safe. Hopefully we will see some progress as early as mid-

290   OO   ignore (0)   2008 Jan 25, 12:35pm     ↓ dislike (0)   quote   flag        


can you please start a new thread on how bubble sitters should protect their asset as waves of bail-out hit the street? I am pretty sure that this won't be the last, if the Dems get elected, count on more ass-savingt packages.

I know that some of you may say that the effect of such package will be short-lived, nevertheless, it is still going to cost an extra, or extra couple of years of my life watching the paint dry. I'd like to explore more ways to profit from the freebie handed out to FBs (which we are not) while watching.

291   Unalloyed   ignore (0)   2008 Jan 25, 12:54pm     ↓ dislike (0)   quote   flag        

The first bank failure of the year will cost the FDIC a mere $5.6 mil.


Kramer was yacking (at that guy who hosts High Net Worth) tonight about how we will learn some months from now that a too big to fail bank went to the Fed and declared insolvency. I try not to take entertainers too seriously, but it does drag my mind back to last summer... Wells Fargo ATM system mysteriously down 2 days nationwide, Bear Stearns hedge mess, Bernanke staying up all night talking to bank CEOs and fund managers. I've moved 95% of my deposits to several of the too big to fail banks. But I am worried. Not willing to put it back into real estate yet...What the hell will life be like in the U.S. if large banks are allowed to go under? Somebody tell me it won't be allowed to happen.

And RandyH glad to see you back.

292   FormerAptBroker   ignore (0)   2008 Jan 25, 1:03pm     ↓ dislike (0)   quote   flag        

Peter P Says:

> Dennis, from statistics, it seems that Coeur D’Alene
> has higher crime rate than Boise. Do you have an
> explanation? (Other than the fact that CdA is on a
> lower elevation?)

Boise has a lot more Mormons than CdA. Anywhere that has a lot of devote Mormons will have low crime…

293   FormerAptBroker   ignore (0)   2008 Jan 25, 1:05pm     ↓ dislike (0)   quote   flag        

Randy H Says:

> On Half Moon Bay:
> Ask him about his commute every winter after
> Devil’s Slide falls into the ocean yet again.

I just heard on the Radio that Highway 1 is closed in both directions at Devil's Slide...

294   OO   ignore (0)   2008 Jan 25, 1:06pm     ↓ dislike (0)   quote   flag        

Notice the spike of banking failures around 90 when the last housing bubble popped? Guess what it will be like this time?


I would really like to see a thread of how we protect our asset amidst all these turmoils. I don't care about any bank going down since I have decisively less than $100K sitting in USD cash anywhere, but I do mind my daily expense management getting disrupted if Citi/BOA/WellsFargo bite the dust. I am also worried about MM account going poof at brokerages.

295   someone else   ignore (0)   2008 Jan 25, 1:34pm     ↓ dislike (0)   quote   flag        

> Maybe Patrick can set up the anti-z with a “make me buy” tag?

As noted, I did try the buyer "dating service" idea a while ago (still running here) but I love that "make me buy" idea for specific addresses. I hadn't thought of that.

I think there is some untried forumula that will work, just haven't found it yet.

@OO: OK, I'll start a new thread on asset protection, probably tomorrow. Unless one of the users with posting ability wants to do it first. We've talked about it before, but I still don't have any clear conception of a reliable way to protect savings.

296   HelloKitty   ignore (0)   2008 Jan 25, 2:18pm     ↓ dislike (0)   quote   flag        

Here's an old bank failure story my Dad told me supposedly during the early 1930's a bank went under in the old home town in appalachia.

They shut the bank down and said no money for anyone. So this one hillbilly fella goes to the bankers house, takes out a 18 inch knife and says 'you better go back into that house and get my $1500 or im gonna cut yer throat' so the banker goes in, and comes out with the $1500. End of story. That was A LOT of money in the 30's.... I'm pretty sure thousands of bankers left town in a huge hurry after the bank closed.

FDIC is a big big deal for keeping the peace. If there were no FDIC right now, what would you do? Possibly put funds into a country that had one...FDIC is part of our reserve currency appeal, lots of foreigners keep $ here just in case. Especially the Chinese. I know a Chinese guy - he says the banks and government are so crooked there, they will sometimes take your money if the guy thinks he can get away with it - or steal your company/factory/demand kickbacks or gifts. Huge gifts are part of doing business there (just like here?) Organized crime is huge overthere. Here the big game is stealing from government/taxpayers - its a much better system,we all get robbed collectively every down cycle,minimized losses to thieves is always a concern for honest people.

297   Claire   ignore (0)   2008 Jan 25, 2:37pm     ↓ dislike (0)   quote   flag        

I was wondering if anyone has data on whether people are delinquent on their property taxes, whether the percentage has risen dramatically this winter in CA and/or by county in CA?

It might be an indicator of how many REO's we could be facing?

298   HelloKitty   ignore (0)   2008 Jan 25, 2:58pm     ↓ dislike (0)   quote   flag        

This story is worth reading

it details the bust today in Cape Coral FL

It reminds me of CA circa 1996.

Its hard to thing back only 12 years ago.. CA was a joke...vacant homes everywhere...no jobs...people leaving the state in droves... Why are people so stupid to think it cant happen happen again? Maybe they just got of the boat in the last 10 years and believe realtors lies? I feel bad for all the newcomers to CA who got caught up and are FB's. Lots of chidians will regret buying starting this year.

299   DennisN   ignore (1)   2008 Jan 25, 3:31pm     ↓ dislike (0)   quote   flag        

Peter P,

I haven't gotten up to C d'A yet, so I have no personal knowlege. But since when does not knowing the facts prevent me from expressing an opinion?

C d'A is only 25 miles east of Spokane on Interstate 90, and just north of the C d'A indian reservation. Spokane is much less prosperous than Boise, perhaps due to its being in WA state with generally "liberal" laws. Add to this the sad fact that crime lingers around indian reservations and this probably has something to do with the crime rate in C d'A. Add firewater to poor indians on a reservation and you sadly get lots of personal crime.

Until about 12 years ago, Spokane was a bigger city than Boise. It has stagnated while Boise has prospered.

300   Jimbo   ignore (0)   2008 Jan 25, 3:41pm     ↓ dislike (0)   quote   flag        

Did E-S-R just show admiration for Stalin's economic policies and Hitler's racial policies? Now I *know* he is nothing but a troll.


301   anonymous   ignore (null)   2008 Jan 26, 2:06am     ↓ dislike (0)   quote   flag        

That's right, everyone who doesn't buy a house or two is a Nazi.

302   anonymous   ignore (null)   2008 Jan 26, 2:11am     ↓ dislike (0)   quote   flag        

Hello-Kitty - I think you have a point about the 1930s, the money WAS there, it just was collected into the hands of the bankers. They were called "carpetbaggers" for the heavy bags they had made out of carpet material, for strength, to hold large amounts of money.

And sadly, history kind of falls off of the memory buffers of Americans after 5 years. Thus, if it happened 12 years ago, it never happened. This is for real, it's why Jay Leno can go around "Jay-Walking" and ask people when 9-11 happened and they don't know, because it's over 5 years ago. They honestly don't know. It's really weird but you can test if yourself, just try asking people if they remember this or that that happened over 5 years ago and watch the hilarious deer-in-the-headlights stares.

303   Peter P   ignore (0)   2008 Jan 26, 2:45am     ↓ dislike (0)   quote   flag        

FAB and Dennis, thanks for the analysis.

I was looking around online and Sandpoint looks pretty too.

304   anonymous   ignore (null)   2008 Jan 26, 3:32am     ↓ dislike (0)   quote   flag        

Interesting discussion on Craigs List in the housing forum ...... someone's noted that the no. of rentals in the BA listed there is around 500 ..... says that when it's below 450 rents go up, when it's above that, gets to around 500, rents start going down.

Frankly with tech dying and with LL's trying to raise rents 20% a month, the vacancy rate should be skyrocketing.

305   DennisN   ignore (1)   2008 Jan 26, 8:54am     ↓ dislike (0)   quote   flag        

Peter P,

Cough up the $20 and get that DVD I linked earlier.

306   justme   ignore (0)   2008 Jan 26, 10:16am     ↓ dislike (0)   quote   flag        

I looked at a few places and even an open house or two in the fortress area today. Very little foot traffic except neighbours, as far as I could tell. And that was after the first dry day in a week.

Did anyone else venture out today? There was plenty of overpriced crap available, but with the amount of traffic they were getting there may be better prices coming. I also looked at some smaller new developments (not in Palo Alto), and they were simply deserted,

307   anonymous   ignore (null)   2008 Jan 26, 10:25am     ↓ dislike (0)   quote   flag        

If I still lived in the BA I'd have spent this afternoon hitting the open houses for the snackies I think. And asking inane questions "Does this house have an upper decker?" etc.

308   justme   ignore (0)   2008 Jan 26, 10:27am     ↓ dislike (0)   quote   flag        

I have an inane question myself: What's an "upper decker"?

By the way, they don't have snacks at open houses around here anymore (or yet?)

310   B.A.C.A.H.   ignore (0)   2008 Jan 26, 11:29am     ↓ dislike (0)   quote   flag        


About remembering:

Most of the recent buyers I've been acquainted with either:

had many years or even decades of equity, "traded up" or "traded out" as part of a retirement relocation to places like Sierra foothills, etc. (ie, they were here for it and if 1996 mattered at all, the memory of it was to cashin at the peak);

or else

used the dowry money or family money from Asia, I know a handful of these, in their case, not really taking on big debts/risks, some capital loss maybe but what difference?- the USD economy's been on sale for them anyway;

or else are Smarty Pants who immigrated here the past few years from other parts of the U.S. or other countries. Coddled since schooldays being told how they're the best and the brightest, that's how they got into the elite schools - elite grad schools - Silicon Valley "nameplate" job, because they're the best and brightest. The fact they landed on their feet after, or survived, or recovered from, or came here after, the dot.com burst just reinforces how savvy they are. How could they be wrong.

Doesn't matter that I'm a local all the way back through K-12, etc. The Smarty Pants have been lecturing me for several years now about that I just don't get it on SIlicon Valley real estate, about how wrong I am. After all, they have their elite pedigrees, etc. What do I know, I'm a podunk local from podunk local public schools.

311   B.A.C.A.H.   ignore (0)   2008 Jan 26, 11:34am     ↓ dislike (0)   quote   flag        


The only money markets I have are U.S. treasury money markets. FIdelity and Vanguard both have them. You can make regular transfers from the Fidelity treasury MMF into their "Prime" for other investments. You can write checks against the Vanguard Treasury MMF.

312   HelloKitty   ignore (0)   2008 Jan 26, 12:58pm     ↓ dislike (0)   quote   flag        

I can see how if you first came to CA or the US in mid 90's that RE would appear to be a one way ticket up, but they are gonna find out about the 15 year cycle from peak to peak real soon. 1990 and 2005 are most recent peaks. Based on this most simple of analysis would could say 5 years from now is the next trough....

Right now I agree with the idea to wait until prices actually start going up YOY (case shiller) before buying. So that implies buying a year after the trough.....sigh....

313   DennisN   ignore (1)   2008 Jan 26, 7:27pm     ↓ dislike (0)   quote   flag        

My family got to the BA back in the 1800s and know from personal experience how the RE market goes up and down with regularity - just like the sunspot cycle.

ie, they were here for it and if 1996 mattered at all, the memory of it was to cashin at the peak

That's me baby.

Heck, Florida is even more RE boom-and-busty than CA.

314   Bruce   ignore (0)   2008 Jan 26, 9:18pm     ↓ dislike (0)   quote   flag        


From discussion of leading indicators at Calculated Risk - the surveys produced by the National Association of Home Builders appear to be an accurate marker of turning points in housing.

Their scoring breaks pessimistic or optimistic several months in advance of major directional changes and, theoretically at least, give you and I and all our friends a heads-up when everyone else is dozing.

When I see four consecutive upticks in the survey, I'll be fairly confident we've cleared the markets and are in recovery.

315   justme   ignore (0)   2008 Jan 26, 11:56pm     ↓ dislike (0)   quote   flag        

Boston Transplant,

Now I'm sorry I asked. Urban Dictionary is in fact a favorite reference site if mine, but of course it has more expressions than anyone could learn in a lifetime. And not watching MTV is not helping me.

316   Bruce   ignore (0)   2008 Jan 27, 12:00am     ↓ dislike (0)   quote   flag        

I meant to mention, the surveys are reported with regional figures, with CA included in a broad 'western' category. I don't know if the data specifically for SF is available for 'drilling down' to your local information.

Clearly, SF and environs are following their own timetable.

317   justme   ignore (0)   2008 Jan 27, 12:57am     ↓ dislike (0)   quote   flag        

Dennis N,

New slogan: Come to busty California

318   justme   ignore (0)   2008 Jan 27, 1:01am     ↓ dislike (0)   quote   flag        

Owee, I just made an original slogan. Neither yahoo nor google show any matches. Therefore it must not exist :-)

Thanks to DennisN for providing the inspiration.

"Come to busty california"

319   justme   ignore (0)   2008 Jan 27, 1:20am     ↓ dislike (0)   quote   flag        

Here's a question: I'm thinking it might start to become a good time to buy a condo in Florida, or at least browse around and get a feel for how the market is developing there..

What is the best web site to use? Trulia certainly covers Florisa, but the maps do not un-zoom outside each metro area, and I have a hard time gaining a perspective of the place.

320   DennisN   ignore (1)   2008 Jan 27, 2:08am     ↓ dislike (0)   quote   flag        

"Don't be a boob: come to busty California."

321   Richmond   ignore (0)   2008 Jan 27, 3:10am     ↓ dislike (0)   quote   flag        


I just went onto Zillow after remembering that it was a topic of earlier conversation. We all know about Zillow, the one way valuations, up. (NOT !)
Anyway, the house in which I was raised has actually fallen 20.1% since last summer when I last looked. It's still way, way, too high, but at least it's headed in the right direction. I've always expected this area of the Bay to crack first so maybe there is a glimmer of hope for you folks in the South Bay. Keep your fingers crossed.

322   Richmond   ignore (0)   2008 Jan 27, 3:22am     ↓ dislike (0)   quote   flag        

The houses that are selling are selling for 25ish % less than a year ago and sales volumes are lame.
Mind you, this is just a sample from one working class neighborhood. Probably high five figure incomes.

323   Peter P   ignore (0)   2008 Jan 27, 6:04am     ↓ dislike (0)   quote   flag        

“Don’t be a boob: come to busty California.”

Warning: California contains chemicals known to the State of California to cause cancer, birth defects, or other reproductive harm.

(I remember seeing something like this on a CCF cartoon.)

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