patrick.net

astrid Says:
Better a lifelong renter than underwater on my mortgage. I don’t believe in your permanent high priced plateau, I think home prices will fall and young people who want to buy will eventually get their chance.

we just don't know for sure tho, do we? there are now nothing down loans, 40 and 50 year mortgages, and beg the parents to go guarantor market-based solutions, apart from the prospect of a cooling... and the market is currently doing its best to create a new two-class societal structure of landlords and tenants, aided by the gurus and the RE industry... unless the hearings in DC go well...

BTW, there are other (I daresay superior) forms of saving besides buying a house. In my opinion, people in their 20’s shouldn’t even be buying houses. Most haven’t figured out their lifestyle or the job situation and buying prematurely would just lead to buying the wrong kinds of property (eg step ladder rental conversion condos).

hmm, yes. these are the comparisons of Joe A and Fred B where one buys a house and the other rents and buys shares or similar instead etc to see how they perform respectively. the problem is that the rent doesn't go into equity, and also that the real world population of renters, taken on average, has lower income and little or no spare money to invest in shares. and the rent-paying trap sometimes means that first home buyers are never able to save a 20% deposit, altho they could probably meet repayments. there has unfortunately also been more like 18 years of boom here since the 1987 stock market crash fallout, not just 2 or 3... but yes, if you look at how much interest is paid to the bank, that is also 'dead money'...

While abroad, insist on hot water (straight from a kettle sitting on a burning stove) or carbonate beverages. I find going to China provides ample excuses to drink beer (for one thing, it's much cheaper than bottled water)

Doug H,

Thanks for all that knowledge. Eek! I usually drink ice water. Maybe I should switch to bottled water in the future.

Jon Says:
Interesting/scary/sad blog post about GDP growth with/without mortgage extraction.

that's perfect, jon, i've been waiting for that -- will send a copy to the smug national treasurer who claims 'economic success' and 'sound economic management' when GDP was high during the boom -- he's gone quiet now GDP is strangely flat...

in the long run, we're all dead...

DS,

In China, where rent is extremely high compared to average wage, guess what people do? They live with their parents and save money, even after they're married. I find that over the long run, people do find rational ways to respond to high housing prices. Extracting money from the proles might be easy in a short run frenzy, but the proles do wise up eventually.

For example, if my boyfriend or I rented a 4 bdrm/3 bath home in a nice area or each leased a Maserati, then we'll never save enough money to buy. But we intentionally live below our means to save money, even though that means putting up with noisy neighbors and a lack of storage space. Sure, we can't own if we merely live within our means, but we're smart enough to live below our means and save. And we're flexible! If rents go up unreasonably, we'd consider roommates or living in someone's basement. If it gets insanely bad, we'll even consider living with parents/sibling.

You speak as if people are doomed to these awful housing destinies. They're not! They can be thrifty and frugal and carefully watch their money and plan ahead. I think if the government get involved and too many safety nets are erected, that'll just force people to be less involved in their personal finances. After all, why bother working and saving if the government ends up taxing my hard earned savings to direct its pet housing projects?

I also don't think current prices are sustainable and I think real prices will dip down to be quite affordable in another ten to fifteen years. Patience and good financial managment will be rewarded.

@DS

Nobody has to buy but there are always some people who needs to sell. If, as you describe, no one can afford to buy anymore, then prices will adjust down until someone can afford to buy.

Are you working out of some economic model where the laws of supply demand bear no relation to how they're presented in classical economics?

HidingintheBronx Says:

Where I live local produce is not really ever an option. I suppose there is the Stone Barn farmers market - owned by David Rockerfeller, I kid you not - but I refuse to go there.

This is not exactly produce, but I'm curious - have you been to the Italian food stores on Arthur Ave? From what I've read, the food there sounds delicious.

ajh says:"My genes tell my body to pack up some (more) pounds all year round :( ."

Yeah, mine too. Damn thrifty genes. Why can't I have spendthrift genes?

This is for DinOR:

From the Money Message Board,

"I currently have my house on the market for $264,900. I live in a small popular town in Oregon. Our home is a 3bed 2.5 bath, large corner lot, rv parking, fenced yards, 2054 sqft and it was built at the end of 2004. We have had several people look at the home but no bites yet. Its frustrating to see houses smaller than mine going for a few thousand less. We have already dropped our price over $10k. We have had several realtors tell us that our home is priced perfect and its just a matter of time. Will the market pick up before we get so discouraged that we take it off the market??"

Now, this guy is going to get very discouraged if you don't come to his rescue! Where's that OR "love thy neighbor" spirit?....just in and help this Oregonian.....ROFL

10 to 15 years wait may be too long for many who will lose their savings window of opportunity and will not be able to get a 30 year mortgage due to age. i personally think 5 years is more realistic to see things unwind anyhow, with what we're seeing, although different countries may vary. i would prefer to see a 'social guarantee' of decent affordable housing provided by govt somehow (including the notion of a housing 'credit' system), altho, again, your mileage will vary depending on the conceptualisation of the welfare state in any one country.

and, a govt safety net is a safety net. i can't think of too many safety nets in the modern welfare state that manifestly and profoundly fail most of their intended beneficiaries. e.g. unemployment benefits, child care payments, public housing, old age pensions, universal health care, even public education.

of course you can live with your parents, get them to go guarantor or provide equity (if they will), get a 50 year mortgage, etc, but people are more likely to fall through the cracks this way; there are very many failures of the conventional market in housing...

Jon,

I agree with all your pet peeves except for GPS. I have an innate sense of misdirection and a GPS would be very helpful. Bottled water is great for certain occasions (like company picnics) but 90% of time they can be replaced with a nalgene bottle and tap water.

Most bottle water are sourced from municipal water sources anyhow. They just filter (usually to get rid of the chlorine) and add some minerals to improve taste. Most of the mfgr costs goes into transportation and marketing.

Come to think of it, SUVs are useful for traversing unpaved roads with rocky or soft sand conditions. It's quite handy when travelling in Southern Utah - though not nearly as necessary as the cautious rangers would like you to believe it to be.

One type of "sob story" that I'm really really sick of hearing are jerks who bought a place for let's say $300K and the property reached a peak selling price of $1M in 2005. Forward to 2006, the sellers say they MUST sell but think any selling price below $850K is giving it away.

Geesh Mr. and Mrs. POS Seller, if $849K is giving it away, then what do you call your original purchase price? Did you steal the house? Did you rob the house? Did you burgle the house? --- Do these sellers really believe they deserve above a certain level of appreciation because they lived in the house for X number of years?

I think I can define non-consumerist as being resistant to the siren calls of marketers. I make a point to telling every sales person who approaches me that I buy when I decide to buy and after I've personally done research on my choices. I also use this line to get rid of calls for donations.

Nobody else is gonna tell me what my personal utility function ought to be.

jumping on the thread late here, but if you can possibly catch a screening of Mike Judge's Idiocracy, do so (which actually may be impossible now). It's scathing but hilarious, extrapolating a world of the future based on some of the current trends of our modern society. Unfortunately, it's been buried by the very studio that financed it (fox) who were contractually required to release it in some limted form. tasty morsels: the future president of the united states is an ultimate wrestling champion/adult film star, starbucks is a brothel, costco has a law school, and the most popular show on television consists of a guy being repeatedly beaten in the nads. and that's really the tip of the iceberg.

Jon Says I would not mind at all if the following disappeared from our commercial culture:

It sounds like Jon and I would get along…

> 1. SUVs - You’re not sporty, you’re not active, you’re not sexy.

What is up with the Range Rover “Sport” the BMW X5 Si and the Porsche Cayenne Turbo. SUVs are trucks for hauling and towing stuff and will never be a sporty car (even if it says “Sport” on the back). I don’t see why people spend $100K on a supercharged SUV with Brembo brakes…

> 2. Coffee Chains - For some reason paying $3 for water
> strained through ground up beans is very fashionable….

What is up with all the losers who pay $10 for a “Mega Velti Half Calf Lo-Fat Chi Tea Latte” and a couple scones (what I pay for lunch all week eating a couple $99 value menu cheeseburgers a day at McDonalds) and sit around playing with their iBook listening to their iPod. I have never seen a single one of these people talk to anyone else, so they can’t be doing it to get laid…

> 3. 50-screen movie theaters - “Oh no! We missed the start of
> “Lady in the Lake!” “Don’t worry, it plays again in three minutes

Look the screen is smaller than Tony’s Dad’s home theatre. In SF you can’t go to a movie without at least one cell phone ringing…

> 4. Sh#tty blockbuster mega-explodo-movies that are 150
> million in special effects combined with a 15-cents-off-
> hemoriod-cream coupon’s worth of story. I can’t wait
> for people to be too broke to afford this “culture”.

The review of Tokyo Drift (that just came out on DVD) in the Chron yesterday reminds me of the way I would review most movies:

“This movie is about a racing fool, literally, who is supposed to be a great driver, but can't get into a car without totaling it.”

“It's never explained why the most beautiful women in Japan should want to hang out in a parking lot. That's just one of the mysteries of the East.”

“The problem is, even an hour into the movie, Sean has no plan and no direction, just a blind desire to smash up automobiles and steal a mobster's girlfriend. There's no plan, no vision for the future, no nothing, just a goofy compulsion.”

Another sign that most Americans are retarded “Jackass II” is the number one movie in the country”…

> 5. ipod culture - it’s an MP3 player. Get over it. No, no
> you’re not a carefree silhouette dancing the night away.

Does anyone need 40 gigs of songs at one time? I can drive from SF to NY without hearing the same song twice with the little 2 gig chip that slides in to my Treo (or any other PDA)…

> 6. “Lunchables” and other stupid pre-packaged kid food…

My favorite working mom food is the pre-made Jello (spend $10 since you are too lazy to add water to powder and stick it in the fridge for a while)…

> 7. GPS Gadgets - Useful for a small minority and totally
> absurd for everyone else.

I have thought about getting a SD card GPS for the Treo, but then I remind myself that I almost never get lost and I don’t have the time to figure out how to use the thing…

> 8. Gyms and Fitness Centers/Culture.

I’ve been going to the gym a few days a week for over 20 years and laugh every year when the fat people (in new workout outfits) join each Jan. and are never seen again…

> 9. Bottled Water - Talk about selling ice to the Eskimos.

Even worse than bottles water in SF (with great tap water) is bottled water in Tahoe (with amazing tap water)…

Doug H,

Thanks for that very telling post! If I've said it once.........

I suppose this blows holes in the "Interesting, WRONG.... but... interesting" delusion most/nearly all Oregonians labor under! If they're selling a 2,054 sq. ft. home for $264,900 (that they bought in 2004) what is wrong with this picture? Most car leases are as long if not longer so why is it after only 2 freaking years it is so frustrating that you can't sell it at the drop of a hat? WHY would you be selling it? It's on a corner lot, has RV parking and is only 2 years old! Evidently this small OR town is not as "popular" as you'd thought?

Talk to old time realtors here. These back water OR towns "popularity" changes like the wind! The slightest change in commute-ability and they slide into obscurity for another decade or two. Anyway, why are they selling after ONLY 2 years? They've lowered their price by 10k? This may shock a lot of CA's here but my guess is they can no longer afford it (if they ever really could). Thanks Doug, do you have the link? I'd love to follow that one.

George,

I had CNBC on in the background and find myself wondering the same things. It's a very conflicted picture here. The good news is, now that ALL of the momentum is out of housing even lower mort. rates are failing to entice new buyers! Better still is that the "re-set land mine" that MB's very purposefully set out for FB's will not play out in their favor. For FB's this is very much a day to day situation and if their MP didn't go up that month, no need to re-fi to a fixed (yet anyway).

Even a BMW with snow tires was not safe in the hands of my dad.

BMW is rear-drive, right?

I don't think I can drive in the snow either. :(

For cold weather driving, AWD tends to be the best choice. A lot of people in DC allegedly buys SUVs for snow driving, but they either buy 2WD SUV (same as passenger vehicles with more clearance but also higher center of gravity) or only go 4WD during snow storms, so they don't really know how to handle it in snowy weather.

I see a lot of spun out SUVs after every snow storm.

Lawrence, you touched on the major reason for credit bubble: Chicks. They NEED stuff. New clothes, 3000$ Gucci handbags, 1000$ Manola's, BMW's, jewelry. Oh and of course a 5000 sq ft home (or at least one bigger than their friends); preferably more than one. This is why most of us go to work, right? I couldnt imagine what she would say if I sugested we "downsize".

doc1,

You know, it could just be your wife. Maybe she'd rather not having you around the house so she goes high maintenance to tie you to your office.

Jon: greatest post ever. FormerAptbkr: 2nd greatest.

DinOR,

Ask and ye shall receive:

http://moneycentral.msn.com/community/message/thread.asp?board=YourMoney&ThreadId=60637&BoardName=Hide&header=SearchOnly&Footer=Show&BoardsParam=Page%3D5&LinkTarget=_parent&pagestyle=money1&ForumId=18

Message #59 and take a peek at his first post about his house. It sounds like he's trying to brag and then switches gears and starts to whine.

If you want my absolute favorite one, check out page 19, #226:

She says:

"I put my West Seattle skyline view (from the deck AND the bedroom), 4th floor of 5, CORNER end-unit, IMMACULATELY clean, light, bright and open spaced 780 sq. ft. 1br condo (built in 1997) on the market 19 days ago for $265K - I've had 2 people look at it, and no offers or lookers the past THREE weekends! So I've dropped the price TWICE now - as of today, it's listed at $254,990 - I've already rented an apartment in a closer-in Seattle neighborhood for move-in the 2nd week of October, and I'm FREAKING. The unit 2 doors down from me, with NO VIEW (unless you stand out on the deck) and crappy carpet and weird use of space sold 3 months ago for $246K after FOUR DAYS . . . the ugly, no view studio unit next door (which smells bad and has been unoccupied for 1.5 years!) sold also in FOUR DAYS, for about $229K. Am I frustrated? You BET CHA, considering that "Brand! New! 1br Condos!" are being sold across the street from me STARTING at $270K!! And they don't have half the amenities I have!! Grrrrr. I got the place 3 years ago for $177.5 - $250 is my minimum, and it better sell QUICKLY - I will NOT be buying again at any time soon! Thank you GW and all the rest of your useless cronies for screwing over the American Middle Class once again! "

I know she'll get lots of support from our friends in SF because they think Bush is responsible for EVERYTHING bad in the world. I gotta say, I really enjoyed my last visit to Berzerkely when I got 'em wound up by talking loudly about how Bush was "God's favorite president and could do no wrong".....I'm evil.

Doug H,

These "I'm not giving it away even though I bought 5 years ago for half the listed price" people deserve their own level of hell. If you stuff them elsewhere, that layer of hell would get really crowded really quickly.

Astrid said:
"...that layer of Hell...."

I think Dante covered it quite well. I think a good topic would be which level for realtors, brokers, media type, and so on.....LOL

Bap33 said:
"why is that gal selling??"

Dunno, I doubt she's dumb enough to allow foreclosure with that much equity....but....she just might not have the equity she claims. Ever notice how people "massage" the facts when it comes to getting themselves in a bind. Let's check on her progress or maybe I'll "bait" her to see what she says. One of my hobbies is baiting 419 scammers so I've got a little practice with "social engineering"......evil grin.

Ah, Doug H, you bad, bad man...;-)

Please let us know what goes down - even though I've never met her, I dislike her already.

Bu ,bu bu, but the OTHER condos sold for more, and I WON'T take less than 250K!"

Come over here and let me slap you, you dozy mare.

Hell, if she's fully legit, she probably HELOCed herself a decent pair of silicone and she can dance the debt off.

I just found my parents' nasty former neighbor (who was a slumlord who broke all kinds of zoning and HOA rules) is selling his 1998 construction AS IS. The agent says "highly motivated seller" but the asking price (came down $15K from initial asking price about 30 days ago) is about $20K higher than non-trashed houses.

This guy bought in 2003 for $470K and now he wants $600K. If he was motivated, how about selling for $270K (the builder's original selling price in 1998)? I'd consider that motivated.

Even underwear?

From the People's Republic of Portland:

http://www.oregonlive.com/news/oregonian/index.ssf?/base/news/115932211250650.xml&coll=7&thispage=1

I've finally seen somebody go on the record about something I've been worried about since this crazy crap began....on page 2 the U.S. Attorney said it reminded him of the S&L mess. If so, every taxpayer in the country will be paying the bill for all the fraud for years to come in the form of higher taxes. The more we learn, the worse it gets.......

Alex,

Unfortunately, "blowing up" the housing market now is a forgone conclusion. The bust is already here --and it was market excess itself that precipitated it, not any so-called regulators (who were effectively asleep at the wheel or cheerleading the bubble all along). Anything Congress or the Fed does from now on re: housing will very likely be damage-control related, and even then only to help bail out the GSEs and banks --not Joe & Jill Homedebtor. F@cked borrowers are screwed.

As far as writing your Congressman goes, I think that's a good idea, but I wouldn't expect too much of a response. Let's face it, 7 out of 10 people "own" their homes (or are owned BY them), plus homedebtors tend to vote regularly in much greater numbers than renters. Congress will pander to whichever group brings it the most votes and money (homedebtors, NAR, mortgage companies, banks, etc.), so don't expect much as a result.