patrick.net

"The Next Slum? Turning America's McMansions into tomorrows tenements"

Interesting article in the Atlantic positing a new exodus from the burbs into the town. Nice points on reflection of an attitude change in TV and Hollywood I had not considered, and a vivid, disturbingly dark painting of the "new slums". A rather shocking vision actually, changed my viewpoint of what the landscape might look like in a few years.

http://www.theatlantic.com/doc/200803/subprime

DinOR Says:
February 20th, 2008 at 10:38 am
Malcom,
"With escalating housing costs most of my retired buddies have been driven inland. Temecula, Murrieta etc. I lived in Imperial Beach and still check prices there from time to time. That aside it just seems SD has this legacy of corruption (Duke Cunningham and a number of mayors?)"

Encinitas is one of my favorite areas. Duke was a real disappointment for me since he was a childhood hero of mine. Roger Hedgecock is a weeney who has a radio talk show. The smoke was still clearing from his time in office when I moved here in 90. I've actually been on his now off the air TV show before I knew his past. My favorite scandal is probably the city council people who were bribed to change nudey bar laws. Too bad your friends are out in Riverside, that is a real pit. I hope they didn't buy houses there, we have friends who just announced they are walking away from a house that they are now 200K under water.

NEW YORK (Reuters) - A rapidly deteriorating U.S. economy will cause home prices to drop by 20 percent peak-to-trough, a leading economist said on Wednesday.

Mark Zandi, chief economist and co-founder of Moody's Economy.com, said he also expects a recession in the first half of this year.

Zandi, speaking at the Reuters Housing Summit in New York, said this is a "significant" change from the Moody's Economy.com outlook published in December, which called for a 13 percent drop.

He expects home sales to hit bottom this spring, housing starts to reach a nadir this summer, and house prices to trough in the spring of 2009.

Malcolm said:
Someone buying today will have a smaller tax bill than someone buying the same house 2 years ago. It doesn’t just go one way, although those people can appeal and have their taxes lowered to today’s rates they still were paying more than someone buying now.

When the price of a car goes up is it fair that the person buying the car later pays more sales tax and higher registration fees? Just curious about your opinion, I’m not trying make a point.

An interesting observation, our taxes go up a max of 2% per year. For the last 10 years it seems that inflation has been published at about 2%. It is interesting that property taxes for someone like me who bought in 2000 do seem very low which sort of shows how misleading the government figures are.

~~~~~~~~~~~~~~~~~~~~
Yes, I agree, the inflation numbers are cooked. No way it has been 2%.

The car analogy does not work for me, quite, because sales tax and initial registration of a car would be more analogous to a transfer tax on a house. Transfer taxes and sales taxes are one-time events and do not concern me.

Prop 13 concerns me because it keeps on going--even into subsequent generations--and because I view property taxes as yearly fees for basic community needs eg. schools and roads and firefighters and ambulances. If I bought a house in 1985, and you bought a house in 2005, I will pay a fraction of what you pay every single year forever, as will my child, though we will all have the same access to services. It does not matter if I make more money than you, I get this gift from the state simply because I bought before you and did not move. Hey, maybe they can do that with income tax, too--if I work for the same company for years, shouldn't I be taxed only on the amount I made the first year I worked, plus, say, 2% a year? That would be really nice. Let's do that. Then the people who insist on graduating college after I did, or who insist on changing jobs--well, they can pay most of the taxes, no? It'll work out fine. At some point, it ceases to make sense. Especially given that we are running seriously short on state funds, despite the fact that sales tax and income tax are on the high side here in Cali. I reckon there must be rampant mismanagement, but this property tax piece does not sit well with me.

Rant: This is the 7th straight year my community has seen major cuts in funding for public schools. Given that the PTA is already paying for the music teachers and front office staff, and that parents act as art docents and assistant teachers, and the teachers don't make much money at all, I honestly don't see what more can be cut, and I really feel for communities that lack the private resources to make the public schools work. But heaven forbid healthy employed people who were clever enough to buy their houses in the 80's or 90's should be asked to pay market rate property taxes so that all the kids can be literate and we can have firefighters available when the hills are burning. Yes, I am cranky about this.

Paul,

Thx for advice. I'm not suggesting shorting gold, I'm just saying it may become profitable in not too long. And I think gold will exhibit much less "stickyness on the way down" than real estate has been showing.

Eliza,

What you said. I'm all for getting rid of prop13, and reducing the property tax rate while we're at it. One of my favorite causes -- and I am repeating myself.

Every percentage point the house prices decline, is 1 point more I am in favor of prop 13.

Hopefully I can maybe, possibly buy near the 'bottom' and then in 10 years brag to young people and newcomers, and those who move or upgrade thier home how low low my tax rate is. oh how sweet it could possibly, maybe, be to be p13 rich! *mentally rolling money while cackling*

Housing in CA is now a fookin casino game. And weve done it to ourselves....passing selfish laws that only screw the other guy....p13,nimby measures,rent control, endless tax breaks for REICestate, just like the curse of Indian casinos which are predatory on the weak minded (why not take money from them?)

----"Auction is the best way to correct housing oversupply."

is there really an oversupply of housing in the bay area?

wasn't there really an undersupply driving prices up (along with overexuberant demand, of course), which is partially improved as a result of increased building the last few years.

I would agree that auction is a wonderful way to set prices both in settings of oversupply and undersupply.

If houses are sold by auction, at least there is a relatively simple way to assess whether the competing bids are for real or not. Of course,there also must be an ironclad rule that the reserve price must be published information, if there is any at all.

NVR,

Thanks for the article. That's what was so quizzical about this latest round of unabated sprawl? Why? Even here in PDX the trend has been toward an urban lifestyle for at least the last ten years.

A friend explained that Moreno Valley (N and E of SD) was spawned during the last boom and quickly degenerated into "Thug Haven" in the 80's. I think it's the place where car-jacking was born?

DennisN,

I'll have to read that. Polling (like stock picking) is often said to be "more an art than a science" but Dick takes a lot of the mystery out of it for us non-politicos.

The reason I found the Tamarack story interesting was that there are several companies touting fairly substantial spin-offs and you find yourself wondering just who it is that will be able to finance them to get the deal done? Speaking of which MSFT is said to have an announcement (?) in about 2 hours. What... could it be?

Eliza Says:
February 20th, 2008 at 11:26 pm
"The car analogy does not work for me, quite, because sales tax and initial registration of a car would be more analogous to a transfer tax on a house. Transfer taxes and sales taxes are one-time events and do not concern me. "

Yes, but the registration is an ongoing thing based on the original purchase price of the car and adjusted each year. I'm just gauging the principle of the thing on a different example.

"if I work for the same company for years, shouldn’t I be taxed only on the amount I made the first year I worked, plus, say, 2% a year?"

Forget the tax rate, you're on to one of my problems with these entrenched boomers in these corporations who produce less, require more, and somehow have made themselves a protected class. They basically are doing a prop 13 but on the salary side.

"Rant: This is the 7th straight year my community has seen major cuts in funding for public schools."

This is where we disagree. For some reason schools keep needing more and more money, and they keep cutting and adding new bonds etc. Yes maybe 2% is low but owners are not paying less, they are paying more and more in real money each year. The fact that schools are still suffering even during the boom when revenues should have been gowing through the roof (lots of houses were sold, and even resold causing 2 to 10 fold increases in assessments) is proof positive that it is not an income problem, they simply won't spend the money properly. Using your own stat 7th straight year, that is basically describing the bubble period. Were they not cutting before the bubble when assessed values were much lower?

DennisN,

If you're near a TV tune in to CNBC, I guess they're ready to reveal Steffi and Andre's involvement in Tamarack shortly.

I’m not suggesting shorting gold, I’m just saying it may become profitable in not too long. And I think gold will exhibit much less “stickyness on the way down” than real estate has been showing.

"Not too long" can mean 1 month or 15 years.

The rise of gold has been relatively mild.

Rhodium was trading below $450/oz in 2003. It now costs over $8000/oz. Yes. More than 17 times.

BTW, Randy H is the resident expert on housing price stickiness.

RE: schools

School voucher is the answer. I have yet to see a rational argument against it.

I would also like to see more tax incentives for home schooling.

Jeff Bezos just unloaded 1.8M+ shares at $70+.

Time to buy puts on AMZN.

Who is Jeff Bezos?

Founder of AMZN.

@Peter P,

The COMEX/NYMEX does not like competition-

Why doesn’t GLD have options???

The COMEX/NYMEX does not like competition

Gold is also traded on CBOT anyway.

Anyone has experience with YG/ZG on CBOT? I heard it has good activities at night.

Peter P Says:

> RE: schools School voucher is the answer.
> I have yet to see a rational argument against it.

Liberals in general hate vouchers because it will allow poor people to take their kids out of public schools where they learn important things like “white men are evil” “SUVs kill polar bears” “government programs are the way to succeed”.

Liberals in the teachers union really hate vouchers since private schools don’t pay as much and actually expect you to teach vs. sitting at your desk e-mailing friends while the kids watch DVDs of current movies.

Free Market is the only feasible solution to education.

Liberals in the teachers union really hate vouchers since private schools don’t pay as much and actually expect you to teach vs. sitting at your desk e-mailing friends while the kids watch DVDs of current movies.

I was about to express offense at this (I was a public school teacher back in the '90s), but then I realized: a) I was never unionized, and b) it accurately describes some (though certainly not all) tenured teachers I knew.

I am not aware that private school teachers aren't paid as much.

I know in other parts of the world, the private school teachers are paid a LOT. For example, for the private schools in Hong Kong, a teacher with 10+ years experience was paid on average US$75K+ a year, and I am talking about the early 80s. My aunt-in-law was a private school teacher, and when she retired in the mid-90s, her gross salary was already close to US$120K (plus housing allowance). She also enjoys generous pension after retirement which was almost half of what she made right before retirement.

Most liberals are genuinely kind-hearted people who want to help.

Most teachers genuinely want the best for the kids.

However, mixing liberalism and human nature gives interesting chemistry.

Just out of curiosity, how much do these teachers at Harker make?

What about the real elite boarding school teachers at Philips Academy?

I believe that public school teachers only make about $50-80K in the Bay Area, which is really not a lot given that such positions require certain certification/training beyond undergrad education. It is hard for me to imagine that you can recruit any quality teachers at Harker at a salary below that.

Moreover, home-schooling should be encouraged.

I believe that public school teachers only make about $50-80K in the Bay Area, which is really not a lot given that such positions require certain certification/training beyond undergrad education.

In a relatively free job market, why would they choose this profession?

The problem with vouchers is that it will amplify the difference between good and bad schools. Good schools will take the vouchers, add tuition on top and start an arms race the like of which you have never seen before.

The lesser schools will decline even further. The less savvy parents will not know what to demand from their schools in return for their vouchers.

The net result will be an even further decline in uniformity, and a near total loss of opportunity for the pupils in the poorer areas.

Guess which choice the REIC (especially agents) are salivating over? That should tell you right there which choice is the right one.

The problem with vouchers is that it will amplify the difference between good and bad schools. Good schools will take the vouchers, add tuition on top and start an arms race the like of which you have never seen before.

What's the problem with differences?

The net result will be an even further decline in uniformity, and a near total loss of opportunity for the pupils in the poorer areas.

If uniformity is a virtue, God would have cloned us like Imperial Stormtroopers.

Why do you want uniformity? People are not born to be in equal in IQ, aptitude and creativity. We strive for a society of equal access to basic rights, not equal performance. We are not even born with equal opportunities, my kids will never get the same exposure and doors open to them as Bill Gates' kids, and that is fine with me.

In some areas, I have more rights than the emperor of Japan, who is prohibited by law from consuming Fugu. :)

Guess which choice the REIC (especially agents) are salivating over? That should tell you right there which choice is the right one.

Of course the REIC does NOT want vouchers, which empowers residents to send their kids anywhere they want.

Good schools will take the vouchers, add tuition on top and start an arms race the like of which you have never seen before.

Excellent! Free Market solution!

It is hard for me to imagine that you can recruit any quality teachers at Harker at a salary below that.

OO,

My wife was an Elementary School teacher. People who go into that field know they will be low paid, money is not the draw. You may have noticed that teacher shortages are not in the districts with the lowest, pay but where the students are more unruly. I never heard a teacher tell me they quit because of the pay. They lose heart after dealing with an entity that allows a student to be flunked only once, allows no way to effectively deal with disruptive students (one of the drivers at the cab company is a burley black man who quit teaching middle school to drive cabs because he was tired of facing down tough acting students), and parents concerned more with students "rights" over student learning. Add to that having coworkers who were hired more for affirmative action than for ability or work ethic.

I accompanied my wife to the housing projects several times for Parent-Teacher meetings. The third grade kids were able to be good students, but the parent (single term intended) usually stunk on ice and was the biggest detriment to the kids education.

Hopefully, the Supreme Court will get more conservative over time.

We need serious changes in the education system.

Headset,

thanks for the explanation. But low pay is definitely deterring more good people from entering this profession. In your wife's case, at least she has a spouse, you, who is probably making market salary. If she married another teacher, or remained single, her life would be very harsh given the cost of living in the BA. I think I have read some disheartening story about a teacher who had to get by at a homeless shelter.

I think such a compensation system is sickening. I am more than happy to pay for the best talents, and what investment is more important than our offspring? Teachers have kids too. Even if they are not materialistic at all, they still need to worry about putting food on the table for their family.

I am all for paying competent teachers the best salary we can afford. Admins are the people that we absolutely don't need at all. Parents who care about the education of their kids should be allowed to pay higher tuition to make teachers happy.

I am not a believer of public education.

We need serious changes in the education system.