patrick.net

Someone argued on my blog that “Seattle has a 30% lower cost of living, but that’s because your pay will be 30% less too.”

Actually, that was probably true 10 or 15 years ago, but no more. When I moved to Atlanta 15 years ago, I recall being shocked at how little most professional jobs paid. $5-8/hour for entry-level office jobs was quite common and not much more for jobs that required college degrees. I once saw a want ad in the local paper for a college professor offering $14,000 --no joke. Nowadays, the two states are almost at par with each other HH income-wise, while houses here cost 2-3x what they do there, and gas, food, utilities, etc. are significantly more expensive as well.

I don’t think I’d trust the sushi in Cleveland.

I've heard it's actually not bad, believe it or not. As long as it doesn't come from the Lake, I suppose...

Yet another Casey saga update:

Snowflake's pulled the "the wife made me do it" goodbye info (see screenshot I posted above) and replaced it with "I'm sorry" in faint grey letters. The abrupt IAFF site closure has also started to attract some media attention:

http://news.com.com/Notorious+debtor+Casey+Serin+shuts+down+blog/2100-1026_3-6188143.html?tag=nefd.top

Check this place out for less than the median Santa Clara county SFH price in Shaker Heights, one of the nicest close-in old-time suburbs:
Also, as it is an "old school" suburb, they actually built it around public transportation. You would be less than a mile from the Rapid Transit (light rail) -- might be a bit to hoof it through the snow, though :-)

Never thought Shaker Heights would seem so affordable. Maybe the Case-Shiller
Indices and Paperdinero can help me understand this phenomena better. Ahhh... now I see.

Idea for new thread -

Anyone notice that interest rates are going up across the entire yield curve (except 3 & 6 month t-bills) and the curve is no longer inverted?

What are the implications for subsequent adjustable mortgage resets? How much do prices need to drop for each 25 bps increase in rates?

Paul,

Here is a starting point:
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2007/IO+April+2007.htm

John,

I had that Pimco article in mind and the following:

http://tinyurl.com/2bsoyx

It's interesting in the Pimco article that there is a table for what happens to prices with interest rates unchanged and then at various levels of cuts. What is missing is how much does it fall with each incremental rate increase from here?

Paul

SP,

(I thought about breaking into a McMansion and slitting my wrists, but I chickened out)

Tell Amazon to throw in a weather related adjustment; properly priced weather related adjustment should cancel out whatever COL and state tax adjustment would be.

If I follow through with my endless threats to migrate to Australia, I would vacation in New Zealand.

From my understanding, the northern half of the North Island is almost tropical.

SP,

you must be talking about Paihia or the surrounds, we didn't go that far north, we traveled from the Dunedin to Auckland, with an intention of seeking a secondary home, so we only went to places with broadband connection (#1 requirement of a vacation home).

Interestingly enough, lots of outback towns in Australia have satellite broadband connection at a reasonable cost (AUD 150 -200 a month), yet most of NZ outside the major population centers have nothing comparable to offer. Surfing on 26K phone line is not bearable even if we are on vacation.

Generally speaking, the roads in both N and S Island are poorly maintained, I won't feel comfortable relying on the infrastructure should weather condition turns harsh.

astrid,

if you look at the map, the northern tip of NZ lies on the same latitude as Sydney. I have never been to that far north in NZ, but I know Sydney quite well since my parents used to live there before they migrated 450 miles further north into Queensland.

Sydney is never even close to being tropical. Even S.E. Queensland where my parents reside now is NOT tropical, it is officially sub-tropical. Queensland becomes tropical from Townville northwards.

I highly doubt that the northern tip of NZ gets tropical.

OO & Astrid,

The wife and I spent a month in NZ in fall of '05 (spring to S. hemisphere). We rented a car and drove most of the length of both islands. The overall climate is considered sub-tropical, but portions of upper north island come pretty close to feeling tropical, at least in the summer, anyways. The ubiquitous tree ferns greatly enhance that impression, especially on the warmer north island.

There are dozens of micro-climates. Much of the interior of the south island (in a rain shadow between major mountain ranges) is quite dry and very much reminded me of Southern California. The north-western coast of the south island is one of the rainiest parts of the world and reminded me of PCH, going towards Big Sur. Other parts, such as the Canterbury plains around Christchurch, and a good portion of the interior of the north island reminded me of England, with plenty of lush, green rolling hills, sheep farms and stone walls. Rotorua (NI) resembles Yellowstone, with its many geysers, coniferous forests and lakes.

If you like temperate and warm with good beaches, stick to the northern end of north island, especially Coramandel, Paihia and Karikari Peninsula. The north is also a lot more developed with about 75% of the population, most of that in and around Auckland. The south island --especially the coasts-- get quite a bit of rain and is generally cooler year round. It also gets the bulk of the sandflies in summer --quite nasty & painful if you don't carry DEET. However, the SI has the NZ "alps" and some of the most picturesque, unspoiled wilderness. Not surprisingly, a lot of LOTR was filmed there.

A beautiful, largely unspoiled country ideal for outdoorsy people. However... not cheap, especially considering the lousy exchange rate today (for us). I'd go back there in a heartbeat.

Found a brief article on Edward Killingsworth in LA Times. He was one of the case study participants. Included are a very few interior shots of his own home:

http://www.latimes.com/features/printedition/home/la-hm-killingsworth13may13,1,2459668.story

This article pretty much sums up why I will NEVER buy new construction in my town.

http://tinyurl.com/ywrdvq

Paul,
That story is behind the Trib's firewall. Could you give us a synopsis?

"equally insufferable 'special' place?"

Uh huh. Yeah... buddy!

I've been to Tasmania and NZ and what really struck me was the people. Nice to the point of a fault. Even to U.S sailors!

Dogs and sailors stay off the grass! San Dog (San Diego)

Casey's site is gone, but I don't think we heard the last of him yet. I'm thinking he'll probably come up with another site such as www.iamfacingdivorce.com. Some people just can't help making their life public!

skibum Says:

> Sorry to be nitpicky, but technically that house
> is not a Craftsman home.

While we are nitpicking can people use “Mtn, View” when talking about the city south of Palo Alto?

Most people in Southern California think “Mission Viejo” when they see me “MV” and most people in Northern California (except the people that live between Page Mill Rd. and the Lawrence Expy.) think “Mill Valley” when they see “MV”.

Allah Says:

> Casey’s site is gone, but I don’t think we heard
> the last of him yet. I’m thinking he’ll probably
> come up with another site such as:
> www.iamfacingdivorce.com

Take a look at:

http://iamfacingbankruptcy.com/

Most people in Southern California think “Mission Viejo” when they see me “MV” and most people in Northern California (except the people that live between Page Mill Rd. and the Lawrence Expy.) think “Mill Valley” when they see “MV”.

To folks in Baahston MV is "The Vineyard," ie, Martha's Vineyard.

Nothing like a bit of healthy optimism, is there? Seems like this Yun guy at NAR has just predicted in front of a Florida audience that prices in one region will go up 20 times between now and 2045. All of a sudden, those 40-year mortgages make perfect sense. ;)

I can imagine DinOR coming in off the long run on this one. (Errrrr, cricket phrase. Offhand I can't think of a common US equivalent.)

"Speaking about Mountain View, anyone know if the neighborhood around Rock Street (at Sierra Vista - between Middlefield and Old Middlefield Road) is any good?"

I always make sure my doors are locked when I drive through this neighborhood.

Looks like a new FB site

Interesting chart.

http://tinyurl.com/dtgoj

The USD has gone from 46.5 to 40.5 INR (Indian Rupee) in last 12 months. With most of the decline - about 10% - coming in last 2 months. Five years ago the USD was nearly 50 INR.

Outsourcing companies are going to get hurt, and I am sure software engineers in India can say good bye to 25% pay hikes every year. I don't expect that this will derail the Indian economy, but growth will slow.

This may bode well for our jobs here.

I am fascinated by the double edged nature of the declining USD sword.

I speculated that as the U.S. dollar weakens, all sorts of stuff will come back onshore. Or at least, the rate of offshoring will decrease markedly. I think many outsourcing and manufacturing trends will show themselves to be terribly short-sighted in the coming years. Consider that after WW-II, Europe embraced cheaper U.S. manufacturing, only to see the benefits decrease as the U.S. economy boomed.

In another decade, I think we will regret disbanding manufacturing here, especially of higher-end products. The Chinese and Indian economies have a lot of U.S. dollars floating around, and as their standard of living climbs they will want to spend that money. Some of that money would come back here, except that we create less and less every year...

SpaceAce: I think that semiconductors and electronics are a special industry with regards to manufacturing. Companies like TSMC aren't relying on cheap labor to compete. I have worked with TSMC, and they benefit from economy of scale and excellent process control. Although I would also point out that they get government subsidies and often a much improved tax rate over U.S. corporations.

What we see in semiconductors is that profitable threshold to own your own fab has risen with falling geometries. In the 80's there were a lot of small fabs, but in a few years none of them could move to 0.25 micron tech or bigger wafers because the equipment and infrastructure was too expensive. In the 90's we saw the same thing with 0.18 and 0.13 micron, but now even bigger companies were closing their personal fabs. Now there is a huge falloff with 300 mm wafers and 90 nm process technology (0.09 micron). The equipment is so outrageously expensive that almost everyone would rather go to TSMC or another professional foundry because it minimizes risk. Foundries have enough customers to amortize the equipment, and they run enough wafers to truly tune the process. Only huge companies like Intel, AMD, Philips, Siemens, ST Micro, Texas Instruments, LSI Logic, etc. have the sheer scale to justify developing and owning their fabs.

My prediction: as 65 nm goes mainstream, you will see fab closures within even the biggest companies. They close old fabs all the time, but you will see fewer revamps to the next process node and fewer builds of new fabs. The same will happen at 45 nm, and then at 32 nm. Companies need the cost decreases that smaller geometries and larger wafers can provide, but the equipment required to fab that stuff is completely out of their reach.

Pretty much anything in this observation can be applied to printed circuit boards and IC packages as well. Asia has simply become a foundry for the world. Excellent foresight on their part, and probably not much dependent on cheap labor.

Hi. Just seeing why my posts aren't appearing.

My posts aren't showing up for some reason.

OK, working now I guess. Must have been something in the content.

This ties in a little with what I posted a few weeks ago. The blog is most interesting when there are heated debates about whether or not there is a bubble, and when it will pop, and how much it will drop etc...

There are a very few people left who try to stir things up, but overall the debate is pretty much dead. I'm sure we will monitor DQ's property to see what it actually closes for. That will be a fun conversation when we get the numbers. I'd like to see thread content morph into where do we go from here? Do we collectively share ideas on real estate? How are current events effecting the generally accepted scenario? What are the up and coming areas to invest in? The answers to requests for advice I find the most fun. I enjoy not just point counterpoint in a black and white debate but I also enjoy the subtle differences in stategic moves as well.

There's still a lot to talk about. I for one am really noticing overall deflationary pressures everywhere I look. The WalMart effect on our general economy is very good in the short term, but long term I see stagflation with even higher deficits, more sliding in our currency, continued abysmal interest rates, and a horrible deskilling effect on the country.

Is the word D-airyQu--n blocked? My post worked when I changed it to DQ.

affecting ~

Malcom:

Care to enumerate some deflationary pressures? I believe the buying power of the U.S. dollar is falling relative to other countries. That is an inflationary scenario, considering the size of our trade deficits. I'm having a hard time envisioning a situation where the buying power of the U.S. dollar is increasing daily within the country itself. I do believe that deflation might happen as a local phenomenon in specific markets like bubble area housing, but that's not really deflation so much as a rational market correction.

A falling U.S. dollar doesn't necessarily concern me from an economic standpoint. If our goods become less expensive to the rest of the world (again), then that will have a positive effect on U.S. jobs and trade output. At some point China and Japan will have to start doing something with all the U.S. dollars they've stockpiled over the years. I expect that China at least might buy oil and hard resources (steel, copper, uranium, lumber, etc.), which will drive up energy costs in the U.S.

You can sell me on unpleasant but bearable inflation for the next couple of years. I doubt the stagflation scenario, and as Randy and others have often pointed out, no dominant military power has ever really suffered deflation in the last couple hundred years (at least, not until they were defeated).

China is actually entering into pact with the US to support our dollar while getting a cut of some financial asset of the US. The blackstone deal is a way for them to test water.

Not a smart IMHO, they'd be much better off buying hard assets. But if someone wishes to hold USD the bag a bit longer, I am all for it. After all, the last time I checked I am still paid in USD.

China is actually entering into pact with the US to support our dollar while getting a cut of some financial asset of the US. The blackstone deal is a way for them to test water.

Not a smart move IMHO, they'd be much better off buying hard assets outright. However, they need to worry about engineering a soft landing internally with the twin housing and stock market bubble so there are not that many comfortable choices to choose from. But if someone wishes to hold USD the bag a bit longer, I am all for it. After all, the last time I checked I am still paid in USD.

"Thanks lunarpark - can you elaborate?"

It's just always been sort of trashy - thinking back to the 80's. I don't get over there very often these days, but it doesn't seem to have improved. I could be wrong though. Maybe a Mtn View resident would be able to give you more insight.

A falling dollar scenario as you point out would be a good thing in my opinion as well. I'd like to be wrong on that point, but it just doesn't seem to be happening, although logically it should. I've thought the same thing, what will Japan and China do with the dollars. It is a nice surplus to them, but it is a depreciating asset if they just sit on it. The problem is that we just print more money, it is not like the money they have is backed by anything. The value add in our economy is now done overseas, and those sorts of ramifications are some things I'd like to talk about. I like to throw a thought like that out there to get some feedback. I'm definitely flexible and not fully decided on some of the macro short to long term outlook. We have discussed some outsourcing issues on the blog before, but I am curious what happens as it moves not only from the tangible value ad, but into the engineering and scientific fields as well. I guess my point is that all of this deskilling going on wll have a net negative impact on real economic growth.

Then again, Japan, and China loan us back our own trade deficit to supplement the annual budget deficit. It is my understanding that they are also propping up the mortgage fund bonds which are currently losing value. Basically they are misspending their surplus by reinvesting in our economy.

theotherside,

The article you quoted puts median middle class household income at $63,000. An income this low does not even begin to quailify for a homeloan on a median priced home in the Los Angeles area. My wife and I earn more than twice that amount and we also can't realisticaly qualify for a loan that will get us into a home here in L.A. even with over $100,000 saved as a down payment. Both of us have good credit scores. If we accept the definition of upper class as stated in the article ($91,000 and above)in the current housing market here it takes a very solid upper class income to be able to afford a small starter home. Does this really seem normal or right to you? I won't attempt to speak for the rest of the country but here in the Los Angeles I do believe that the middle class is struggling. If I, with my so called upper class income, am unable to afford a decent home in the working class neighborhood I grew up in, how hard must things be for those in the middle class.