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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.â€
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:
CNBC [thefinancial entertainment network] on in the background, and they are just hammering housing,
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.
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.
Sprawl is good. Sprawl encourages biodiversity. Sprawl protects indeveloped spaces from the machinations of planners.
Perhaps. This is why we should let the market decide.
I think cats have made incredible strides in making us their pet, food (can opener), and sport even without opposable thumbs.
CNBC women are the penultimate generation in the Bene Gesserit breeding program.
Somehow, thinking of them as scifi witches doesn't make them any less attractive in my mind.
Peter P Says:
"All right, I will scare them away by throwing in some crab meat."
Perhaps a sea urchin dressing. You could claim you thought sea urchins were a vegetable.
You could claim you thought sea urchins were a vegetable.
You mean it is not? 8-O
I think the movement to force vegetarianism upon humanity is real. If we do not act we will soon face a crisis.
We are seriously being distracted from real issues like terrorism, diseases, and overpopulation.
Someone should start a Human First initiative.
long time lurker here ... first time posting.
thought I'll share what I read in Rob Black's blog: http://robblack.typepad.com/robblack/
>>
Real Estate . . . These days there are more ``home for sale'' signs then than at any other point in time since 1993. Most gauges are confirming that the housing market has hit the brakes and may be in a tailspin. Existing-home sales dropped a more-than-expected in July while new-home sales fell 22 percent from the same month last year. And construction spending fell the most in five years. Higher mortgage rates and affordability concerns have been the bogeymen in the current U.S. housing decline but little attention has been paid to the adjustable-rate mortgages. Those with adjustable-rate loans -- almost a quarter of all U.S. mortgages -- will face re-adjustments soon. That means higher monthly outlays. Some 1 million people may lose their homes when 60 percent of adjustable loans ratchet borrowing costs higher by the end of 2006. Those at greatest risk are typically credit-challenged, carry high-cost, sub-prime adjustable loans and are mostly black or Hispanic. For the record, these borrowers tend to be concentrated in all urban areas in California.
Home-price growth slowed during the second quarter from a year earlier in the sharpest three-month plunge on record since 1975 which indicates this year's housing slump is deepening. The quarterly slowdown came during the ``spring selling season,'' when about half of a year's home sales typically occur, suggesting the housing market may be slowing more rapidly than economists initially predicted.
>>
As a first course or appetizer? Ewwww. Not even with a solid grenache. I’m not even a fan of cheeses in the first salad but a heavy meat early on? No, humans should never be served before the red wine.
Hor D'oeuvres. :-D Just kidding.
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I now agree with the housing bulls. There is no housing bubble.
The bubble is no longer "is", it is now "was".
Yes, I think it's time to officially declare that there is no longer a housing bubble in USA. There was one, whose size, implications and aftermath are the only remaining questions. The MSM has jumped on the bandwagon. The bulls (NAR, CAR and their mouthpieces) have no clue as to how to describe the situation.
The depth and speed of the unwinding process seems to have surprised everyone. Take a look at the DQ charts for Bay Area.
http://www.dqnews.com/ZIPSJMN.shtm
San Mateo and Santa Cruz have -ve YOY gains for the median. Santa Clara is holding to a 0.1% gain. The price per SQFT is also rapidly trending downwards. Sales have fallen over the cliff. No matter how faulty and lagging these indicators are, they will make headlines. I was hoping to see that (-ve YOY median in Santa Clara county) happen by the end of this year. Seems like we are way ahead of schedule.
Maybe we all wish this to get over quickly, but we know it won't. Still, do you think it's happening faster than you had expected ? Or slower ? Or about the same ?
- StuckInBA
#housing