patrick.net

SQT,

I...... wouldn't be all that concerned with former stockbrokers converting to mortgage brokers and back again. Having even a DAY lapse in your sec. lic. is a major freaking hassle. A lot of firms attempt to do "U-5" you on your way out the door to your new firm. Any "break in service" looks really bad.

Besides how many sales managers would welcome you with open arms (and sink a ton of money into re-training you) when it's obvious you'll be down the road at the first sign of trouble? I realize many here are reluctant to acknowlege the disparity in the two regulatory environments so I'll just say these types are *not what the sec. industry is looking for.

GC,

I have a client that has a south facing condo/loft/whatever right on Western Avenue with great views. No, I mean REALLY great views! They're renting for about half of owning and they both believe a correction is inevitable in the Emerald City. He's in Costa Rica right now so I don't plan on seeing him until Spring. Must be rough.

What's all this "needs" talk?

But we have to escape this place in the next couple months or my wife will strangle me in my sleep.

At least you will be in your sleep. ;)

BTW, is it really that bad there?

Randy, I'm dreadfully curious, what is a "Strawberry McMansion"?

I’m glad I didn’t buy this place for $3.3mm when Leslie De Brettvile first listed it at the end of the summer.

http://tinyurl.com/2h9raf

This is another example of the point I made a while back that in SF there is supposedly some architectual guideline that all low-rise residential buildings must have oriel windows on their facade. This place seems to be going for some kind of mish-mash of Wright and modernist styles.

SQT,

I suppose there are correct applications for an annuity but in my experience, they're actually pretty rare. This is why we've seen so many "added features" like some, I dunno "lock-in period" and such to make them more appealing to a broader audience. Most of us need growth, when you're annuitizing wouldn't be nice if you had something TO annuitize?

Our idea of fun this year is going to be hitting people with some serious low-ball bids. If it isn’t at least $100k below asking, we won’t bother. Some of my husbands co-workers are already doing this. And when they put in the offer they’re also saying they want stuff like the refridgerator, microwave, pool table etc. as part of the deal. It’s going to be fun this year. :twisted:

Only $100K? I'm surprised there are no takers!

Bad Boy,

Uh I thought an upper decker was a home run that landed in the upper deck? No?

what is a “Strawberry McMansion”?

Just a normal McMansion, even more overpriced because it is located in a little tract of land east of 101, between Mill Valley and Tiburon. The kind of place that Habitat for Humanity gets assaulted by angry residents if they try to build 2 units for fire or police workers to live in. Hell's wrath if we're forced to live among the Prols.

Otherwise read, commeth Les Débiteurs, I'll change my name to Randy Valrandy.

It's an upper-tanker.

Oh what fun, type in "king city" in zillow and see the prices. The pure folly will not be lost on anyone that has driven through king city.

500K for a $tucco $hitbox in king city, come on now.

Oh what fun, type in “king city” in zillow and see the prices. The pure folly will not be lost on anyone that has driven through king city.

Perhaps people who get enough speeding tickets around there may decide to buy a house for odd reasons?

A light bulb ban? Kalifornistan indeed!

http://tinyurl.com/yphpqz

From the automatic millionaire piece:

Assume you're renting a house for $1,500 a month. Now let's say you stay put for 30 years, during which the landlord increases the rent by 5 percent a year. Over those 30 years, you will hand over a total of nearly $1.2 million in rent payments -- and at the end, you'll have nothing to show for it except a bunch of cancelled checks. To add insult to injury, you'll now be paying $6,174 a month in rent!

Now let's imagine that instead of continuing to rent, you buy the same home for $200,000 (this is just an example, and prices will vary greatly from market to market, especially in big cities where homes are typically much more expensive).

That's actually a pretty valid example. A $180k mortgage is about $1108.

But does this condition actually exist anywhere?

But does this condition actually exist anywhere?

Ha!

GC Says:

> It sometimes depresses me that by buying up
> properties at cool locations, the rich people end
> up gentrifying and then slowly destroying the very
> culture and hippiness that attracted them there in
> the first place; the cool people can’t afford living
> there anymore — they are not wired to make money.

With (very) rare exceptions rich people are not attracted to “hip” or “cool” locations and only buy there because they are not “rich enough” to buy where they really want to live. I bet you can’t find a single person who bought just North of the Panhandle (aka NOPA) in SF who would not be living on the other side if Geary if they had the money and every person I know (and know of) that bought between Geary and California in the past few years would have been North of California if they had the money…

With (very) rare exceptions rich people are not attracted to “hip” or “cool” locations and only buy there because they are not “rich enough” to buy where they really want to live.

Of course. Is it true that most Palo Alto people would be in Woodside or Portola Valley if they are "rich enough""?

Love it, 5% per year increase in rent, just does not happen.

Love it, 5% per year increase in rent, just does not happen.

I thought most calculators assume 5% increase in rent and 5% increase in price every year. As a result, only JBRs will refrain from buying.

I didn't have much of an objection to that part. I found this to be the irritating section:

Leverage is what you get when you use what is called "OPM," which stands for "other people's money" -- the other person in this case being your bank or mortgage lender.

As much as I like stocks, bonds, and mutual funds, there's little chance any of them will produce anything close to that return in such a short amount of time.

I actually posted a comment on the Yahoo! forum and I believe it was deleted. Here is my counter. Let's assume his 10% appreciation on a $200,000 house in two years. Let us further assume a 30 year fixed-rate mortgage for $160,000 at 6%.

What is conviniently ignored is that the leverage has cost. In two years, it is still very early in the loan, so almost all of the monthly payment is going to still going to interest. You will pay $19,200 to the bank. Your return is really $20,000 - $19,200 = $800, or a whopping 1% per year return on your $40,000 downpayment. Even including tax breaks, you're still probably only making 4% on your $40,000, which is inferior to a 5% CD and vastly inferior to the stock market over any long duration. This does not include property taxes, maintenance, HOAs and other house costs.

I acknowledge that people need a place to live, and that rent is effectively a loss. But his statements that housing beats the stock market are just ridiculously naive. A better read is Ben Stein's article on why houses are nice places to live, but they aren't great investments because they barely keep pace with inflation.

Except in California, where I guess everything is as special as New York. ):

eburbed,

I suppose such a place exists in Iowa and certain neighborhoods of Randy Valrandy's old hometown.

Mr. Automatic Bigfatstacks belongs in a museum! Firstly, the myth of the avg. loanowners occupancy at 7 years must die! It really does. Factor in the churn in the 2nd home mkt. and take out the midwest (where people "bloom where they are planted") and I'd say it's more like 3 YEARS! If it's that. So drawing any kind of a parallel to a 30 yr. stay (renter OR owner) is just about meaningless.

While taking great pains to exhibit the impacts of 5% a year inflation he neglects to mention that in the year 2037 $6,174 will get you about half a buzz. What a dillrod.

Love it, 5% per year increase in rent, just does not happen.

Not only that, seems the author wants people to believe they have only two choices:

1) Rent for the rest of your life.
2) Own and live happily ever after.

What is wrong with renting until the prices drop 30-40% and then buying with a mortgage that makes sense? Why doesn't the author discuss the possibility of overpaying for a house and losing it to foreclosure; especially since foreclosures are at a 52 year high! Propaganda is everywhere!

Bah, my attempt at creating the little devil icon has failed. What is this forum's code for that smiley?

Bah, my attempt at creating the little devil icon has failed. What is this forum’s code for that smiley?

:twisted:

"almost all of the monthly payment is still going to interest"

Brand, the next time anyone get's in your face and says some BS like "Well yeah we may have bought at the top of the market BUT we got a __.9% int. rate" you tell them "Sure thing pal, as long as you STAY in it for 30 years!"

See the ALT text of the icon.

Not some russkie FB in speedos.

Oh, I was thinking about us bubbleheads in speedos. Nevermind.

Maybe we should start a new site, www.YouAreFacingForeclosure.com. We could chronicle all of the FB's as they get dragged through the ugly process of foreclosure. Sort of sports commentary on financial misfortune.

Although I suspect that commenting on individuals is probably illegal...

swissmiss,

I can't yoddle at all but isn't your tax structure a little different than ours? I can't imagine it would be any MORE generous than what we have!

From the automatic millionaire piece:

> Assume you’re renting a house for $1,500 a month.
> Now let’s say you stay put for 30 years, during which
> the landlord increases the rent by 5 percent a year.
> Over those 30 years, you will hand over a total of nearly
> $1.2 million in rent payments — and at the end, you’ll
> have nothing to show for it except a bunch of cancelled
> checks. To add insult to injury, you’ll now be paying
> $6,174 a month in rent!

I have mentioned before that my sister rents a home on the Peninsula that (at least last year) would sell for $1.5mm for $2,000 a month (She was paying more in 2001 but got the landlord to lower the rent a few years ago when she said was going to move to a nicer place she found with lower rent).

To “buy” a $1.5mm place with no money down and a couple 80/20 fully amortizing loans the monthly PITI payment will be just over $12,000 every month. If my sisters rent goes up by 5% EVERY YEAR for the next 30 years she will be paying $8,232 a month.

If my sister invested the difference in renting to owning ($10K a month this year that would drop each year as the rent went up) and got an average return of 8% a year over the next 30 years she would have $12,657,000 in 30 years (and have $3.3mm in liquid assets in only 15 years, or $2.5mm in 15 years if her average return never got higher than 5%)…

Brand,

We must be helpful and loving toward FB's at all times!

I was thinking more like: call"thetorch".com OR:

HowtoTrashtheBank'shome.com?

www.Bank_of_Vinnie.it

Full recourse bailouts of all underwater buyers. Uncle Vinnie guarantees youse will never miss another payment!

"They don't have credit cards" LOL!

Well, if I HAD credit cards yeah, maybe that WOULD hurt!

Actually I've done quite a bit of travel and I'm writing a book for Frommer's about my exploits. It's going to be called:

Slummin' the Globe with DinOR!

It'll have all the best dive bars and which dark alleys to steer clear of! It hits the shelves in March. We've already got a "pre-quel" in the works called "How to Talk Your Way Out of any Jail" (and keep the local cops from ruining your night!) Remember! They'll be available in the "Travel" section NOT "Self Help"!

Truth hurts…

Or inconvenient.

I worked in Zurich up to 1996 and I only paid 1 month salary to taxes…

But can Zurich compare to Sunnyvale? Is it as special? I didn't think so.

If you don't have El Camino Real, you don't have anything!

What is wrong with renting until the prices drop 30-40% and then buying with a mortgage that makes sense?

This might be "extreme" - but I don't think that's going to happen here in the Mountain View/Sunnyvale area.

SP,

I wish we could attribute that abomination to a "master stroke" of advertising but.........!

In ways it's fitting that these guys (coming off the biggest re-fi boom in history) have been as equally flagrant about their finances as the very clients they serviced. I'm afraid it's all he could afford. Too bad you threw it out, otherwise you could've scanned it for all of our entertainment.

The funny thing about the Automatic Millionaire crap, it's falsifiable even without needing to criticize the rent inflation rates.

My Bubblizer (click my name if you're reading this for the first time) actually takes rent at exactly inflation, and extends that courtesy to salary also. By simplifying all inflation as if it were one variable I am being very generous to the Buy in Buy versus Rent, to say the least.

I also let you separately turn down your alternative investment return rate, and your reinvestment rate (how much of and where you put the difference between rent and mortgage).

Drum roll.....

It's still very stupid to buy. The reason is simple. The prices are just way too damned high relative to everything else.

For the Automatic Millionaire's fake little calculation to work in the real three dimensional world, you'd need to own that house for over 60 years -or- see about 140% appreciation in real value (with 5% inflation that means hundreds of percent of nominal value).

Good luck finding a buyer of that minimum 300%+ increased price tag who can afford to surrender about 89% of his gross income to buying it form you.

I take that back. I don't wish you good luck at all.

I acknowledge that people need a place to live, and that rent is effectively a loss. But his statements that housing beats the stock market are just ridiculously naive.
Brand, I strenuously disagree with your critique. There are many bubblesitters here who are in the home buying camp precisely because, in a "normal" market, housing performs quite well. I would suggest, however, that Mr. Leverage, from your example, forgot to subtract the 6% Realtors (TM) fee -- a mere $13,200. Now that should put a damper on the returns and is, IMHO, a much better critique.

EBGuy,

In fairness to everyone that weighed in on that one it was so full of holes we hardly knew where to start! Unless you were willing to go at it in one of those marathon posts?

I happened to think (as apparently do you) glossing over the realtor's commission alone basically derailed his whole little strategy. Really! (We are trying our best here you know!)

Don't you pay a wealth tax in Switzerland on all owned assets? That would make home ownership a less attractive thing to all but the wealthiest.