patrick.net

Only with a very very high alpha.

Not if the FSs (f@cked swimmers) believe that the lake bottom only goes up!

CNBC on in the background, and they are just hammering housing, and not just homebuilders stocks, but now all residential real estate in general. Some of these reports are coming across from MSNBC, so it's not all just market-geek targeted.

Not if the FSs (f@cked swimmers) believe that the lake bottom only goes up!

:) True, but then that wouldn't be a very "normal" distribution, but more of a bubble-shaped one.

HARM,

Yeah, that was the infantile meltdown in San Diego. What was really weird was that the wife "Rosa" kept shouting "Get that f@cking camera out of my face" (but kept PERFORMING for it!). Did you check out that "walk" when she was going back to get a gun? Hubba hubba.

The reporter seemed to be hamming it up as well. The big fellow that had run-ins w/Mr. Scumbag earlier had him pretty much under control but the reporter continued to flail away on the ground. He also seemed to have just the right interval in his "conversation" w/Rosa (Mrs. Scumbag) to set her off! Nice job Rosa. Now everyone in the country with a TV knows you're a foul mouthed skank.

True, but then that wouldn’t be a very “normal” distribution, but more of a bubble-shaped one.

LOL!

RC,

Yea, short covers is my guess for homebuilders today. I heard the book to value statement. That guy was an idiot. Book values for homebuilders don't work like other companies, because of their large land options positions. A lot of book value can disappear quickly for these concerns.

You know what bugs me about CNBC? Those talking head women have to be the result of some sinister eugenics experiment. They are strangely mesmerizing (which is why I sit askew to the TV when working from home).

"A comfortable mortgage for a HaHa is still less than $500,000."

I fully disagree with that. I think the percent of your salary that can be directed toward housing increases with higher salaries. I'm paying 40% of my income for a 30-yr FRM. I am not uncomfortable and it isn't difficult because the other 60% is more than I used to live on when I paid $1495 in rent. We still eat out at least once a week, and we're still saving money.

The standard 28% of income toward housing only holds true for those struggling with lower than "Ha Ha" incomes.

The standard 28% of income toward housing only holds true for those struggling with lower than “Ha Ha” incomes.

I disagree. Housing costs ought to be regressive. I do not see Bill Gates spending billions on McColonies.

28% gross is still quite a lot considering that many people spend less than half of that on rent. (Yeah, I know about the tax deduction, but still)

We still eat out at least once a week, and we’re still saving money.

Perhaps I should cook more. But I find eating out being slightly cheaper.

You can drown in 3 inches, if can’t get your face out of the water!

Or if one is standing upside down in eight inches of water.

Both excellent points.

If fate says you’ll drown, you’ll drown even with no water! (Perhaps in a bowl of pea soup).

Leave it to Peter P to find a way to combine Predeterminism and food. :-)

You're both right.

In general, for career-trackers, it is often fine to take on significantly more than .28 AGI in PITI, because salary can be expected to rise much faster than inflation (yes, even during stagnant wage growth periods...people get paid more as they gain experience, especially in early work years).

Then, as salary rises, often PITI will fall well below .28. Eventually, a trade up will again put people above .28. In this case, people who've managed their careers well will be in the "summer of their career", and can again expect salary rises to accelerate a while as they climb into real management. And again, PTII will fall below .28.

Where people get into trouble is when they're too optimistic about their salaries, and/or when they take on too much variable rate mortgage debt. This tried and true formula only works for fixed rates, even for shorter term holding periods.

Randy, you are right.

However, I do not recommend spending more than 50% after-tax on shelter in any case. Life should not center around the house.

Chris Says:

September 7th, 2006 at 11:57 am
Holy cow! Santa Clara with a 33% hit?

Where did you get this from? A friend of mine is looking at houses and the realtors are now telling her that oh, they'll only go down 10%

I told her to wait until next Summer, but I think it's real hard waiting when some nice houses are coming on the market and are reduced 10% from previous levels.

I was hoping I could find some more data to indicate or that predicts a bigger drop in prices in Mountain View area.

Peter P,

I don't want to get into the middle of this thing but isn't it possible that maybe buyer's willingness to adjudicate ever greater portions of their income toward housing costs are part of the problem?

Isn't it further possible that lenders gauging that willingness saw more "jumbo" loans? It's probably a little late to "stick to our guns" and draw the line at .28 but I hope mainstream Americans see this for what it is, the battle for "wallet share"? Isn't this where much of "Consumers Gone WILD" has come from?

I don’t want to get into the middle of this thing but isn’t it possible that maybe buyer’s willingness to adjudicate ever greater portions of their income toward housing costs are part of the problem?

Spending more in housing is not the biggest problem. However, many people do so only because they think of housing as an investment. This is the problem.

(I am sure I have been spending more than the "guidelines" on food.)

A friend of mine is looking at houses and the realtors are now telling her that oh, they’ll only go down 10%

I told her to wait until next Summer, but I think it’s real hard waiting when some nice houses are coming on the market and are reduced 10% from previous levels.

Claire, let me respond to this with a quote from the legendary studly Robert Coté:

"Just like it took the stupidest buyers at the top, at the start of the decline the stupidest buyers will get the first deals. We need to run out of stupid buyers yet again before the deals reveal."

"spending more than the "guidelines" on food" LOL!

O.K, point taken. I wasn't trying to make the very personal choice of how much one spends on their personal residence a corporate (or State) decision. At some point though, when the house you intend to buy vastly exceeds any imaginable need, then it has definitely crossed the line into "investment" or business decision.

When underwriting guidlelines actually made the distinction between primary res. and "inv. property" more down payment was required. When realtors (TM) and MB's raised no objections whatsoever it seems to me that the lines got blurred.

DinOR,

People could devote 99% of their income towards whatever they want and spend less on everything else. If they did spend 50%+ on housing, that probably means they're spending less on vacations and restaurants and movies, so you can optimize your personal expenditures to take advantage of less crowded entertainment and eating venues.

In the long run, housing should fall, when people realize they can't afford to retire or visit the dentist unless they get rid of the McMansion albotross.

"can't afford to retire or visit the dentist" Funny!

I suppose the reason I've tread lightly here is b/c we have been through much of this before and I'd prefer to steer clear of those "values" arguments.

If I inherited a cool mil. I doubt seriously a dime would find it's way into RE. That's just me. Many would decide to go ahead and get the home they want cash out right. That's fine too. Clearly though at some point balance and common sense has to enter in the equation if only to keep the lights on and "body and soul together".

RE: Horse Slaughtering

I think it has gone too far. What is wrong with horse slaughtering? Soon enough we will all be forced into becoming vegetarians.

The nonsense must stop here.

I think vegetarian fundamentalism and animal right extremism are becoming dangerous religions.

“Just like it took the stupidest buyers at the top, at the start of the decline the stupidest buyers will get the first deals. We need to run out of stupid buyers yet again before the deals reveal.”

This assumes that everyone is optimizing utility by the same objective function.

That assumption is false. Some people actually buy homes to live in and increase their quality of life. Those people are not "stupid" if they buy earlier than other people, regardless of price direction. In fact, many people will be "stupid" for waiting too long, even if they save some money.

Money is not an objective function.

I am truly worried about our future in the hands of those who think animals have more rights than humans.

How can we fight back?

Animals have the same rights as people. No one is denying them the opportunity to vote. Alright. Show of hands…. err show of appendages… who thinks we should eat Smith? Zero. okay, who thinks we should eat Ahi the lovely deep pink tuna? Motion carries. Quorum adjourned to the grille.

LOL!

I think the meat industry should lobby harder though. We are at the top of a slippery slope.

I hate cooking for vegetarian friends. I cannot cook vegetables without chicken broth!

On the way up it is important to have a supply of stupid but on the way down you need to be the one buyer left standing

There are inevitably people who bought near the top, perhaps even a few at the absolute top, who are not "stupid" when viewed versus their utility function. In a market such as this supply & demand fail as primary analysis because every participant, on both curves, has a different elasticity.

Animals would eat you if they evolved the teeth and stomach and cutleries for it.

I wouldn't oppose vat grown meat though, as long as it tastes good.

Animals would eat you if they evolved the teeth and stomach and cutleries for it.

Very true. There are no laws in the Animal Kingdom against slaughtering humans.

I wouldn’t oppose vat grown meat though, as long as it tastes good.

I agree. But we should never ban meat.

Some open space preserve people actually approached us for support. They said they wanted to force vertical development. No support from me!

Once we allow/encourage vertical development and fix the urban environment there will be less sprawl as a result. Banning development will not work.

I should have told them that I would support building condos in Yosemite.

The answer is genetically engineered, cloned meats for consumption.

*hides*

(someone did say we need to stir up more controversy around here, so I also propose the above be powered by breeder nuclear reactors)

Peter P,

2 rules.

Never invite vegans for dinner. If vegans show up uninvited, toss them a garden salad and a lemon juice vinagrette.

Spinach quiches for the rest.

I don't support factory farming though. They're unnecessarily cruel and polluting in my opinion, and the meat doesn't taste very good.

The answer is genetically engineered, cloned meats for consumption.

No need to hide.

I would support that. If cloned meat (cheap Kobe beef?) is available, there will be less demand on slaughtering animals. Problem solved.

Robert Coté Says:

Yeah, brutal and even Maria is piling on.

I'm picturing Maria piling it on... not a bad one.

Never invite vegans for dinner. If vegans show up uninvited, toss them a garden salad and a lemon juice vinagrette.

Perhaps a pasta with pine nuts, arugula and cherry tomato.

I can guarantee that it will happen, eventually. It's a question of time. In the future, people will pay a huge premium for "natural" food, whereas engineered food will provide mass sustenance. It will happen for pure economic reasons. Less pollution, greater safety, higher efficiency, and more reliability of product quality. There will probably be some zealots who will try to bomb the factories, but that's always the case with anything that works well.

newsfreak Says:

Or should the tombstone be wrapped in perigraniteel?

I think the tombstone in the graphic is granite already!

But back to the original post, technically, isn't the bubble still alive and well? The deflating/collapsing period of the bubble is still part of the bubble phenomenon, just the downside of it.

HARM-X Industries Ltd :

Cool. Thanks for the graphics.

CNBC women are the penultimate generation in the Bene Gesserit breeding program.

One of the questions unresolved from the BlogII party was; if cats had opposable thumbs would we be pets, food or sport?

All three. Cats are amazingly smart and/or "evil". One of our cats has "human" eyes. Very cute, yet scary at times.

Peter P Says:
September 7th, 2006 at 3:30 pm

"Perhaps a pasta with pine nuts, arugula and cherry tomato."

If you want them to come back...

If you want them to come back…

All right, I will scare them away by throwing in some crab meat.