patrick.net

What clearer evidence does one need that we’re in a world gone mad when a homeowner of 2-3 years can totally fund a start -up (the riskiest of business ventures btw) solely from MEW?

It could be if it's a Web 2.0 company:

http://www.nytimes.com/2006/11/09/technology/09venture.html?em&ex=1163394000&en=542b13f17c0d72a9&ei=5070

A friend of a friend of a friend is in the photo at the top.

From the McMansion rant piece:

When are people going to realize square footage is not indicative of a nice house, but instead, a hindrance? What is the point of a dinette and a formal dining room? How many times a year do you actually use the formal one? Once on Christmas and once on Thanksgiving? What about a den and a great room? I’m sure you get shit tons of use out of that great room, don’t you? How about a four bedroom house when you only have 2 kids? I bet that’s useful, huh? Three and a half baths? How often does everyone in your house need to use the restroom at the same time? Sunroom? Library? Playroom? Two offices? Three car garage and only two cars?

Uh... isn't have anything less than 1 car per person against the law in California?

I've shown some of my CA friends photos of the house I lived in NY. Most are perplexed how there could be only 1 bathroom and 4 bedrooms. Even a box condo in Sunnyvale with 2br comes with 2ba.

I'm not sure where I'm going with this comment so I'll end now.

what do those picshas mean, mister?

I know of a (really) small company here in Oz that’s currently trying to break into the US Olive Oil market; sounds like it might have picked a good time to do so.

Really? I thought all Olive Oil was imported. The "Extra Virgin Oil" we get is from Italy. I don't know of any U.S. manufactured Olive Oil.

SFWoman,

Can you buy online? I live on the east coast and would be interested in buying but it's to far away for me.

Correction....It's about 10 times the price. We pay $5/liter and it's advertised on the site for $50/liter. We really like the Oil we are using, I ca't imagine their Oil being 10 times better than this. We were getting the Oil $10/3 liter bottle, now it's $15, a 50% increase.

Did you know you can buy ancient olive trees for your house out here? You can have 50 or 100 year old trees delivered and put in. They then take four or five years to start really producing fruit. I was very surprised when I saw the very large palms that you can buy and the very old olive trees. I had never seen large or old trees moved like that back east.

No this would never happen here in the North East. The weather isn't too kind to the Olives. :(

Correction….It’s about 10 times the price. We pay $5/liter and it’s advertised on the site for $50/liter. We really like the Oil we are using, I ca’t imagine their Oil being 10 times better than this.

Do you use Genco Olive Oil Co? If so, I have an offer you can't refuse!

CR,

http://tinyurl.com/ruf9l

Don’t these people know that real estate isn't crashing?

"And some smaller metro areas fell precipitously, including Danville, Illinois (down 17.7 percent) and Akron, Ohio (11.5 percent) ."

@ConfusedRealtor,

No one here gives a crap what's in your stock portfolio. :)
Give it a rest. :)
I feel giddy too! :)

SFWoman Says:

> Nan McEvoy has a very well respected olive oil that
> comes from her ranch in Petaluma.

Nan McEvoy makes good olive oil, but if I was picking up a bottle of high end olive oil to bring to a party in St. Helena with a basket of heirloom tomatoes I would buy a bottle of Maria Manetti Farrow’s Villa Mille Rose olive oil. I first tried it at a (Paula LeDuc catered) wedding reception at Farrow’s Oakville estate (that is on Money Road just across from Silver Oak and hidden at the end of the street just past the crappy little warehouse where the Venge family cellars their Saddleback wine)

http://www.villamillerose.com/estate.html

Another good (but expensive) olive oil made by a wealthy SF family is the Harris Ranch Napa Valley oil made by Gingy Harris and her little brother Jody with olives from their family ranch in St. Helena. The oil I use every day (that is still expensive) is the ETRURIA oil from Italy (that I buy at the little butcher shop in Laurel Village).

ConfusedRenter Says:

> I AM a believer of selling investment property around
> the cycles. I’m wondering if people realize that owning
> one property you live in is equal to net neutrality, renting
> = shorting, and owning more than one property = long.

As a former homeowner who sold his home (taking a large gain with the first $500K tax free) that still owns investment property (with a low Prop. 13 tax rate and fixed rate financing of just over 5%) I’m interested to hear ConfunedRenter explain why selling my investment property and paying capital gains tax on every penny of profit would have been a better idea than selling my home and taking a half million tax free gain?

allah Says:

> Correction….It’s about 10 times the price. We pay
> $5/liter and it’s advertised on the site for $50/liter.
> We really like the Oil we are using, I can’t imagine
> their Oil being 10 times better than this. We were
> getting the Oil $10/3 liter bottle, now it’s $15, a
> 50% increase.

With anything in life the increase in quality is rarely in line with the increase in price.

A $100 Napa Cabernet is not 10x better than a $10 Napa Cabernet, and an Aston Martin is not 10x better than a Toyota...

The landing won't be "soft" when real estate CEOs are using terms like "no end in sight" and "death spiral" to describe the market:

http://www.paperdinero.com/BNN.aspx?id=50

When (mostly falling) median prices in many parts of the U.S. are now several standard deviations away from the long-term mean vs. supporting rents and incomes, and unsold inventory (phantom or not) continues to grow.

In case you happen to be one of those suffering from this popular delusion [...]

Well then, I guess there's no point in daring to have a differing perspective, else I "doth protesteth too much". I'll go put my lips back on Bernanke's ass right after I collect my royalty check from the NAR. By the way, 7σ = 0.00000000026% in a normal distribution. With certainty like that, there's no point in discussing this at all.

With anything in life the increase in quality is rarely in line with the increase in price.

Who says there is an increase in quality? The Italians wrote the book on Olive Oil!

Oh yeah, here’s a nice little slide for those want to know why it’s all about location. Found it on money.com.

http://money.cnn.com/popups/2006/biz2/newrules_bubbleproof/index.html

That's old and it was written by the RE industry. We will see in the years to follow what is bubble-proof.

CR

FAB - You do realize that if you sold anytime before this year, you lost out on another 4-7% appreciation right?

I owned in Belmont and sold in 4/05. Considering all factors, my money has returned about 7% more in Vanguard funds than had I stayed and sold today, judging by neighborhood comparables. That number is conservative. Factoring AMT tax treatment it may be closer to 10% in the end.

@Surfer-X,

No need for an "intervention", my friend. Warm weather, Pacifico, tacos, afternoon surfing and listening to RHCP or the Ventures are all well and good (though personally, I prefer mountains and a change of seasons).

Sadly, though, I don't live in $anta Barbara. Nor do most Californians. Unlike your little slice of coastal paradise, most places where regular people actually live and work in Califofornia wouldn't look very good on a postcard. I live in the L.A. basin rat race, which is perhaps why I'm somewhat jaded about the "California lifestyle". I don't personally know many people living it, and most of those few are born-lucky Boomers hell-bent on trying to keep anyone else from achieving it.

@Randy H,

Relax, I wasn't referring to you. We've had a wave of doubting newcomers recently and I wanted to give them a "bubblenomics" refresh. Even better would be to get some good perma-links up on the mainpage (some day...).

Besides, baiting you is really Allah's job :-) .

HARM

I know. Just pointing out that there are still those of us who think that inflation will play a significant role in re-equilibration. Of course it won't do anywhere near all the work, but it will probably do more of the work than any of us would prefer. At least two of the authors here are still open to a soft landing scenario; probably just not as soft as those newcomers you're referring to.

I don't see allah's comments anymore; they're filtered out of my RSS feed. I gave him every chance for civility, in my own humble opinion. But he insisted on calling me a realtor as a pejorative. Contrast that to FAB who also likes to get under my skin, but does so without name calling and with a willingness to back up his arguments and admit the existence of alternative interpretations.

By the way, after searching phantom inventory more widely I found that FAB's definition is widely used in RE circles, especially his type of RE circles (commercial and rental income). Seems there was quite a flap over unlisted properties in Manhattan -- which they called phantom inventory -- recently. So please update the bubble glossary with FAB's definition as an alternate one if we're going to keep it. I found the term applied to both meanings in relation to RE.

Randy H: wrote:

> By the way, after searching phantom inventory more
> widely I found that FAB’s definition is widely used in
> RE circles, especially his type of RE circles (commercial
> and rental income).

I was just reminded that I hear this term most often from commercial leasing brokers who use the term “phantom inventory” to describe sublease space. Public companies don’t like anyone to know when they have leased more space then they need so they will usually hire a broker to look for a subtenant and instruct him not to publicize that the space is vacant.

http://tinyurl.com/y2gbms

Here is a video on the housing market...they also describe "sticky prices" the way I always believed it to mean.

SFGuy,

what is your understanding of significant?

The problem answering that question is the way the math works. If inflation is very small, like a true 4% or less, then it will have a very small impact on equilibration -- say less than 10% of the total adjustment.

But for every percent rise in inflation, there is exponentially less value to the saving renter (assuming compared to the fixed-rate mortgage owner). Crank up true inflation to 10% and it could easily account for somewhere closer to 50% of the equilibration.

The common wisdom that real-estate is a natural hedge against inflation did not come about because people are stupid. It came about because it's historically been the case. This wisdom will only come undone if there is (a) persistent secular deflation like Japan, or (b) the economy by and large begins to truly believe that future nominal interest rates will _not_ rise in response to inflation.

CR

Comps for single family homes like the one we sold, the upper range for Belmont, are decidedly *down*.

Let me get this straight:

So, although you made money selling 04/05, you have to admit that if you were still a homeowner, your place is at LEAST 10% more than it is now. So, if you ever want to get back in, the wait will take longer than you think. This is why you shouldn’t sell your primary residence.

So my *real* returns are 7%-10% *higher* than if I'd held the home and sold *today*. Somehow that means I need to wait *longer* to buy back in???

I'd love to see your calculator. I imagine a CAR-issued one with really big buttons, and nothing but + signs and numbers that "only go up".

By the way, I'll go tell my old neighbors, some of whose homes have sat on the market since June, that their prices are _increasing_.

I'll let X tell you what you are, but know that it's what I'm also thinking at this point.

@CR: Well, why don't you post those comps? As a realtor you have access to the tools and data. Your vague statements have damaged your credibility, so let's see some numbers already.

ConfusedRenter Says:

> I have two homeowner friends in Belmont, one who bought
> a couple years ago, and another who bought in July of 2005.
> Both have confirmed they have seen prices rise by more
> than 12% in 2005 for same comps and another 5% this year.
> One bought in a new townhouse complex and has had at least
> 6 exact same comparables sell this year for 12-18%+ more
> than last year.

CR never answered when I asked why it was better to sell commercial real estate and pay capital gains taxes and I’m betting that he won’t tell us the name of the Peninsula condo complex where values have gone up 12-18% in the past year…

FAB, you mean that CR is full of crap? No! That just ruins the mystique of a guy consistently generates huge profits in Yahoo and makes millions selling homes! What I would be really interested to see is CR post his own listings (sell or buy) so that we can see what his own comps go for.

If I were the NAR, I would buy a house in downtown Cupertino. Then I would put it on the market for $2. The frenzy would be poetic. "Why is everyone so reluctant to buy? Look, this house here had 15,000 bids and sold for an amazing 18,000,000% markup! Everything is up and to the right, the sun is shining and my stainless steel eat-in garage is appreciating as we speak! YAHOO!"

they have a number of olive oil groves here -- they seem to thrive in hot, dry Mediterranean-style climates like CA, with relatively cool winters -- typical desert-style weather.

"The modern American, with all his patent contrivances...will never know...a full tide of health until he returns to the proper admixture of olive oil in his diet. Until he again recognizes the value and use of olive oil, he will continue to drag his consumptive-thinned, liver-shrivelled, mummified-skinned, and constipated and pessimistic anatomy about...in a vain search for lost health."
Dr P.E. Remondino, Olive Grower's Convention, California 1891.

SFGuy,

You had it right the first way. If people began to believe in permanently higher inflation levels without rates also rising then inflation would have a *bigger* impact on housing, making housing more valuable (along with other real assets).

I doubt this will happen. Hyperinflation pretty much cannot happen in the US, but if it did then houses would be like pure gold, so long as you can defend them from unruly mobs with torches.

CR never answered when I asked why it was better to sell commercial real estate and pay capital gains taxes and I’m betting that he won’t tell us the name of the Peninsula condo complex where values have gone up 12-18% in the past year…

FAB,

If you haven't already noticed, the ConfusedRealtor conveniently doesn't answer questions he doesn't have a good answer for. He really truly MUST be a realtor (TM), since he likes to only tell half-truths when it benefits him.

$100/liter (after shipping and everything) olive oil?

I think I'm going to faint now.

I don’t see allah’s comments anymore; they’re filtered out of my RSS feed.

This reminds me of when I was in grade school, I remember making fun of this kid and he used to put his hands over his ears and say "I can't hear you!", "I can't hear you!" as I would continue the harassment. Then he would give me the silent treatment. :lol:

I gave him every chance for civility, in my own humble opinion. But he insisted on calling me a realtor as a pejorative.

I never called him a realtor (you can see for yourself if you read through my posts), I ASKED him IF he is a realtor.... You would think someone who claims to be so intelligent would know the difference.

Contrast that to FAB who also likes to get under my skin, but does so without name calling and with a willingness to back up his arguments and admit the existence of alternative interpretations.

Once I ASKED him IF he was a realtor based on the things he was talking about (I'm too lazy to search for the posts). This was his personal attack number 1.

Then when he argued that savings is just like equity and in my argument against it I said that his philosophy SEEMS like "it always goes up" because savings, unlike equity DOES always go up. This was personal attack number 2 which broke through poor Randy's skin causing him to cover his ears and say "I can't hear you!".....I mean filter out my posts.

Do these two things that I have said constitue name calling? I'd like to hear what you guys think. As for Randy, I couldn't care less if he chooses to filter out my posts. I do realize that some people have to have some skin if they get into an argument (especially with me) so maybe he is better off doing just that.

I wish people who dislike me would filter out my comments...it would save me a lot of self-censureship.

Inflation is up here now. Somewhere around 4% I believe. They put up interest rates .25% a week ago. Apart from the cost of fuel stabilising at about 150% of where it was 3 years ago (from a peak of about 200%), I blame the housing boom for contributing heavily to general inflation.

The Reserve Bank does not want high inflation and acted accordingly. The Labor Party, not in power, promises to lower both interest rates and inflation somehow. They're a little short on specifics on how they're actually going to do that.

SFGuy,

But I “sense” from what you say that you consider elevated inflation as a true possibility. Have you seen any indication that the supposed commitment of the Fed to always keep inflation low is weakening? (links to articles/papers?)

Or do you think they’re incapable of keeping it as low as they might promise?

Two very good questions. If I really knew the answer for sure I wouldn't be wasting my time blogging. In fairness, HARM has done a great deal of fact-finding on the 'net regarding your first question. He compiled a couple of threads in months past that showed evidence that the Fed is quietly abandoning it's inflation imperative. Look for threads right around the time of the last Gold-Bug craze.

I suspect that HARM (and others) are correct that there is some serious obscuration of real inflation numbers going on. I part company when it gets into conspiracy theories -- such as the grand M3 global conspiracy. But, I do think that liquidity is leaking into the system beyond what the Fed would otherwise have if they were really locked to inflation fighting.

That leads to your second question. I think the Fed is politically incapable of keeping inflation low in the current global, hot-money, high velocity (of money) environment. In this world, recession is far more painful than creeping inflation. It's a Monetarist's nightmare and a Neoclassicist's (or even Keynesian's) dream.

Simply, the *fiscal* aspects of the economy have taken the bulk of control away from the *monetary* aspects. Things like trade policy, regulation regimes, deficit spending, etc. have a bigger ability to drive real rates than do overnight nominal rates.

Now, all this can't go on forever. The question is how it will unwind. In a big global catastrophe 1920s-30s style (whether deflation or hyperinflation is irrelevant), or will it slowly rebalance. Both outcomes are possible and both outcomes have happened in the past.

The argument for slower, non-cataclysm is centered on modern global financial systems. You can see this happening in our own lives. A few examples: 1970s oil shocks were smaller in adjusted dollar percentages than recent oil shocks, yet the impacts were vastly different. Currency crises in the 80s caused much more damage than bigger currency collapses in the late 90s. Here in the US hedge funds like LTCM seized up markets yet Marin Capital or Amaranth caused barely a ripple. Even disasters like Hugo caused much deeper impacts on the economy than did Katrina.

A new paradigm or a ticking time-bomb. That's the trillion dollar question. I have no clue, but I'll tell you which one I'm rooting for.

you should of course freely defend yourself. In my opinion though, it is “bad form” to ask those who post here to pick sides on an argument, which is of a personal nature.

I'm not asking anyone to pick sides, just to observe what was actually said and what the accusation was and to realize the difference. We all know the difference between "are you a realtor?" and "you are a realtor?", don't we? You can answer that question without taking someones side, it's plain old common sense. :roll:

When the argument is with regard to an issue that can be judged “objectively” (e.g, does it always go up!?), people seem pretty free chiming in without much special encouragement. However, to pronounce on whether what you said was or was not name-calling, is out of bounds for anyone other than those *directly* involved and - if it is really out of hand - the threadmaster.

I have read almost every one of Randy's posts and one thing I noticed is that he never gives in to an argument, even when he is wrong. This is why when I get into an argument with him, it turns into a long drawn out episode that ends in us either agreeing to disagree or in this case "I can't hear you!". Another thing, I found he likes to make an issue alot more complicated than it needs to be by exercising the big words he learned in school. Like Surfer-x has said before, he can't understand half the stuff he says.

Well, since he has his ears covered, I won't mention anything else about him. After all we are here to discuss mainly housing and the economy so let's leave it at that....btw, Randy was the threadmaster in that argument.

Does Allah ever give in to an argument? :-)

Not when I strongly feel that I am right....and I don't always feel strongly that I am.

Enjoy the evening everyone. I need to get ready to go out and stuff myself full of some dead, but very delicious animals.

Do make sure you cook the scraped up roadkill before you eat it.

Some animals are even more delicious alive...

Some animals are even more delicious alive…

Such as?......