patrick.net

Housing Bubble Troll, I think I read that in the Marin blog, if I remember correctly.

No, I posted this on the Yahoo Fannie Mae (FNM) message board.

Yes, no troll here...just think that this whole troll babble posts are too funny. :-)

Peter P

It was on the Marin site too, I read it earlier. I like that site btw, it had some good articles.

SactoQt, I like the Marin blog very much too. Looks like it is going to be yet another site that I have to follow.

Jack is not going to be very happy though.

Why don't you start a Sacto bubble site? I will have a south bay bubble site then ;)

Instead, we should have a "Start you own housing bubble blog" late night infomercial.

I cross over from right to left on this one.

I got no problem with growth limit laws. I do not want to see a f&@$ing Wal-Mart on the slopes of our beautiful hills along highway 280. I don't want to see Miami-style condos cluttering the coastline. SJ already looks like Mexico City (crowded, stinky, ugly - sorry SJ owners, there are some nice pockets)...let's not ruin the peninsula too.

I *salute* Prop 13 too. It was a successful taxpayer revolt. Without Prop 13, long time residents (esp old people) would be kicked out of their own homes by rising taxes. I lived in Illinois...and there, they would patrol neighborhoods to find new decks so that they could 'dynamically' adjust your bill from year to year. No thank you.

We need more tax revolts - but people today OPPOSE tax cuts. Talk about mass delusion.

Anyway, even if you doubled the property tax money and corresponding school funding I would take all comers with ANY BET that student would end up better educated. You would just have more money for useless multiculturalism, pools, ski trips and sensitivity indoctrination.

So, in conclusion, if NIMBY legislation and Prop 13 equate to a increased house price 'tax', I'll GLADLY pay it.

Housing Bubble Troll,

You sort of lost me on why you sold your house. I'm as much of a bubblehead as anyone, but if I *owned* my house outright, man I'd never sell unless it was the wrong size or I hated it. Are you in CA? Have you done the math?

Most of all I would not do it as some kind of protest or reaction against our President. Now look, although I never vote blue, W. is far from my favorite President. But blame our state of affairs on the right forces, not our President and Fed Chief.

The basic forces that cause the bubble - fear (of being priced out), greed (flippers), a universal desire to own a home, and cheap money - are only slightly influenced even by Greenspan, much less Bush. The fact that Greenspan's rate increases aren't having much of an impact should prove this out to you.

What you should do, IMO, is
(1) wait for the crash
(2) buy a second house
(3) sell house #1 at the next rise
(4) Repeat
(5) Profit!

That way, you never have to rent, and you can ratchet yourself up.

Matt,

As far as Wal-Mart goes, I'm no fan either. Urban Boundary Limits generally have nothing to do with retail development. Though UBL's vary from area to area, they are almost always about stopping residential development.

So, if you really don't want more Wal-Marts blighting the landscape, then you'll join me in OPPOSING Urban Boundary Limits.

I *salute* Prop 13 too. It was a successful taxpayer revolt. Without Prop 13, long time residents (esp old people) would be kicked out of their own homes by rising taxes. I lived in Illinois…and there, they would patrol neighborhoods to find new decks so that they could ‘dynamically’ adjust your bill from year to year. No thank you.

Well, I can't comment intelligently on how property taxes work in Illinois, but I can tell you that here in CA, Prop. 13 started out as a nice idea --limit property taxes and help out "old people on fixed incomes". As usual, few people who voted for it anticipated those unintended consequences that usually seem to result from government/special interest attempts at "controlling" prices and free markets. Things like new homebuyers getting charged 10X what their neighbor gets charged in prop. tax for the same sized house in the same development.

So-called "Tax-revolts" almost never keep government from raising taxes or overspending our money. All it does is arbitrarily shift the burden from one group to another.

Matt,

What's your view on rent control? Isn't rent control supposed to "help" poor renters? Odd how those very cities who've managed to pass rent control laws always seem to have the LEAST amount of rental housing available. Santa Monica used to have rent control and just recently abolished it. Reason: It pretty much *destroyed* the rental housing stock during the roughly 25 years it was in force, by eliminating any incentives for developers to build any more of it, or even to maintain the existing stock.

"The road to Hell is paved with good intentions."

Btw, I have a couple of "solutions" of my own to the problem of retired old people getting slapped with rising property taxes:

1. Eliminate legislative/financial/NIMBY barriers to residential development. We're not going to fight population growth or "protect" the environment by restricting housing supply --all it does is drive up the cost of housing (and taxes) for everybody.

2. Elderly retirees can move to a lower cost/less densely populated area. If you're retired, why do you "need" to live within commuting distance of a major city/employment center anyway? Doesn't being retired mean you get to move OUT of the city and enjoy fresh air & open space? Young people have a good reason for living near large cities: it's where their jobs are.

IMHO, the whole deal about the "poor elderly grandmother" being evicted by the mean old tax man is a bunch of baloney. If you're so fortunate to be retired and sitting on property worth an assload more $$ than you paid for it, then you're solution is simple: cash-out and retire someplace else. Sheesh...

The whole deal about the “poor elderly grandmother” being evicted by the mean old tax man is a bunch of baloney. If you’re so fortunate to be retired and sitting on property worth an assload more $$ than you paid for it, then you’re solution is simple: cash-out and retire someplace else. Sheesh…

Weeeeeeeeeeeeell. The problem with that scenario is where is the elderly grandmother supposed to live when prices are through the roof on everything. My husband's grandparents are in their 80's and live in the first house they ever bought. They are on a very tight budget because who knows how much longer they'll need to live on what little they have. Yeah, they could sell their modest home, get a few hundred thousand in equity (which would mostly go to their heirs anyway) and then what? Live in an apartment? Why? Their house is convenient and comfortable for them. Without prop 13 they would be forced to sell. (assuming prices still skyrocketed without it)

I don't know if the housing bubble would be as crazy as it is without prop 13. I tend to dislike too much government intervention in anything; when has the government ever done anything well?

Yeah, they could sell their modest home, get a few hundred thousand in equity (which would mostly go to their heirs anyway) and then what? Live in an apartment? Why? Their house is convenient and comfortable for them. Without prop 13 they would be forced to sell. (assuming prices still skyrocketed without it)

SactoQt,

Normally we agree on most issues and I do respect your right to disagree, but I think you're kind of missing my point on this.

Well, for starters, I'm not advocating evicting the elderly, or deliberately jacking up property taxes, quite the contrary. My firm belief is (and we may disagree here) that --ignoring the current speculative bubble-- if it weren't because of unintended consequences from bad public policy like Prop. 13 & UBL laws, housing in CA would be a lot cheaper in the long-run.

If CA housing were a lot cheaper overall (again I'm ignoring the bubble's effect on prices here), then getting your property tax reassessed every couple of years would be *no big deal*. Grandma & Grandpa Sacto wouldn't even need Prop. 13 --they'd be able to stay.

Now, let's assume they bought way back when in an area that's since become "prime" high-density RE. Even if CA prices overall were a lot lower, they are still much higher in their particular neighborhood --and so are prop. taxes. Ok, in that situation, they can still sell "get a few hundred thousand in equity" and use it to buy an equally nice or better house in a cheaper, lower density --but still very nice-- community. Nobody would be forcing them to live in an apartment (except for maybe those over-eager "heirs" ?). ;-)

IMO, no one (not even grandpa) is "entitled" to live on Nob Hill in perpetuity simply because he bought there a long time ago (when it was cheap). No more than I'm "entitled" to own real estate by virtue of being a CA native.

Life's already unfair. Let's not advocate public policies that make it even more unfair --on a gargantuan scale.

Btw, if you really want a law protecting elderly homeowners, why not just target the elderly? Prop. 13 isn't that law --it caps tax reassessments for ALL existing homeowners, not just fixed-income retirees.

Harm

The last thing I am ever going to do is advocate public policy that throws a monkey wrench into the economy in any way. I tend to lean on the side of the fewer taxes the better. The only point I was making is that in this kind of crazy bubble, there aren't a lot of options for seniors on a fixed income. If the argument is correct that prop 13 is in large part responsible for the run-up in housing prices, then by all means abolish it. If, however, the main culprit is all the NAAVLP's then maybe prop 13 isn't the evil twin to all the loose lending. And believe me, my husband's grandparents DON'T live on nob hill. When I said modest, I meant it. The only thing they are entitled to is to hang on to the home they worked their whole lives to pay for. Not too much to ask in my book.

I would have no problem with tax laws that apply to seniors only. You start the petition, and I'll sign it.

SactoQt,

Like I said, I DON'T think the run-up in prices in recent years has much if anything to do with Prop. 13. But I do think Prop. 13 and other NIMBYish UBL laws have much to do with why CA housing (including rents) is/was more expensive than practically everwhere else even BEFORE the bubble.

The only thing they are entitled to is to hang on to the home they worked their whole lives to pay for. Not too much to ask in my book.

No arguments here. Like I said, if Prop. 13 were restricted to ONLY low-income elderly people, then maybe even I'd be ok with it. The whole "grandma being evicted" myth to me is nothing more than a smokescreen for it's true purpose: transferring the tax burden from older established homeowners to younger homeowners --generational selfishness at its finest.

I would have no problem with tax laws that apply to seniors only. You start the petition, and I’ll sign it.

I posted before I read this --great, we're back in agreement!!

Hey, SactoQt,

Did you hear the good news? The S&P 500 is at a 4-year high! That means speculators could soon be exiting RE and getting back into stocks! Also, I've heard that buyers AND sellers are away for July/August.

The good news just keeps on coming :-) .

I was excited to hear that stocks were heading back up. You knew that the stock market and the RE market historically move in opposite directions right?

Good news indeed!

I am neutral on the Prop 13 issue. I still think it is the wrong target to shoot for.

We may have to live with the possibility that nothing is to be blamed. Boom-bust cycles are perhaps part of capitalism that we have to live with. There is no alternative.

Good news indeed. Back into the stock market everyone, quick!

(Not investment advice)

Boom-bust cycles are perhaps part of capitalism that we have to live with. There is no alternative.

But wouldn't common sense tax laws (ROFL) .......... wait, wait.... lost my train of thought...

I'm ok now. Doesn't the market function better without government interference? The fed driving down interest rates has taken normal out of the housing market equation. Maybe it would be better if there wasn't a Prop 13 (as it is written now) so that the market could function with less interference.

Boom-bust cycles are perhaps part of capitalism that we have to live with. There is no alternative.

Very true, Peter. And (as you already know by now) my opinion is that every time the government attempts to interfere with these relatively "natural" economic cycles/trends, it inevitably succeeds in making them even worse.

Exhibits A: 1997 homestead law tax-exempts $500K/250K for anyone who sells in 2 years, to "ease the tax burden" on homeowners who need to sell.

Exhibit B: Greenspan's too-low-for-too-long interest rates attempts to limit the damage caused by the tech bubble.

Exhibit C: The GSEs converting mortgages to MBSs like there's no tomorrow, to "encourage homeownership".

All three had reasonable-sounding justifications, and all three severely magnified the current housing bubble. Ahh... those unintended consequences.

I wonder why all of a sudden not much posting here. ???

This is a problem we should address very soon.

I know, history is unfolding as we have expected but complacency would be ill-advised.

Where is Fake P?

It is interesting that we haven't had the bulls posting as much lately. I haven't even seen Jack, my favorite contrarian, as much.

Doesn’t the market function better without government interference? The fed driving down interest rates has taken normal out of the housing market equation. Maybe it would be better if there wasn’t a Prop 13 (as it is written now) so that the market could function with less interference.

God bless you, SactoQt!

HARM, I think that government itself is a market participant and that it contributes to "normal" cycles. Even without government interventions, I suspect that other large participants will still find a way to make cycles volatile during their blind pursuit of profit.

God bless you, SactoQt!

*Blush*

I like being back in agreement with HARM.

I suspect that other large participants will still find a way to make cycles volatile during their blind pursuit of profit.

I have to ask. What other participants do you think could move the market as much as the fed has with a 1% interest rate?

I have to ask. What other participants do you think could move the market as much as the fed has with a 1% interest rate?

Cartels like OPEC can have different but equally powerful impact on the market.

The herd is the ultimate cartel.

Don't get me wrong, I am no fan of big governments. It is just that I think greed will find its way with or without help.

But don't oil prices generally coincide with other factors to cause big moves in the market (job layoff's, crazy housing market etc.)

No question that the herd can move markets. But usually there is a catalyst, isn't there?

Peter P

I do agree, greed will find a way. I just hate it when the government gives the greedy a boost.

No question that the herd can move markets. But usually there is a catalyst, isn’t there?

Not necessarily. What was the catalyst of the "ty" beanie baby boom? What about the cabbage patch dolls?

Human behavior is highly chaotic. Occasionally, thing leads to thing leads to thing leads to the next big thing. It is truly a conundrum.

Not necessarily. What was the catalyst of the “ty” beanie baby boom? What about the cabbage patch dolls?

I must concede the point.

greed will find a way

Sounds like one of Jeff Goldblum's lines from "Jurassic Park".

I do agree, greed will find a way. I just hate it when the government gives the greedy a boost.

I hate it too. But what are we going to about it?

Sometimes, the victims of greed are powerful enough to fight back with more greed. For instance, the greed in the insurance industry was apparently powerful enough to fight the greed in the auto industry. The result was safer cars.

Sometimes, the victims are just helpless.

Sounds like one of Jeff Goldblum’s lines from “Jurassic Park”.

Didn't they call it "chaos theory" (read the book too)

Perhaps I am cynical but it appears that powerful motivating emotions are all negative: hatred, bitterness, anger, greed, fear.

Love should be more widespread.