patrick.net

I do not know if sub-dividing triggers a Prop 13 reset though.

>>The land isn’t divided up in a way that would make that possible.

Well, how much would the land be worth if the house was knocked down?

SQT,

Oh, thank you for the e-mail exchange! Just another plus for Patrick regulars.

I am curious though as to why folks in that age group never seem to be able to confide in their children (or anyone for that matter) until it's too late or certainly in the 11th hour?

I've always been SO candid with my daughters about money matters. During the 90's (when they took karate lessons and everything under the sun) Mrs. DinOR and I took care to explain that things may not always be like this. We further explained that neither of their parents are anticipating any kind of an inheritance so we're pretty much it. (There really isn't a DinOR family fortune). When it came time for college the expectations (particularly after a long and difficult bear market) were pretty realistic.

It certainly didn't seem to suprise you all that much but I can't help but feel that there was much consolation in being that right either. I'm sure they'll be fine but it looks like their "expectations" will have to come around as well?

DinOR says:
Myself and others have been most vocal regarding “dis-enrollment” for 401K participants! Meaning you’re new on board, we automatically enroll you into the plan and if you really, really want out you have to jump through hoops.

it's compulsory for nearly all workers here - including a mandatory employer's contribution of 8% of earnings. plus a voluntary employee's contribution. all with tax advantages, of course.

Are we having fun yet?

Here's my situation. Moved to a rental in June. Sold my house in October. Investor owner of the house we're in let us know they were selling (I don't blame them--smart). Finding another rental was horrible--three kids, big dog, cat. Tons of houses for sale, hardly anything for rent.

Finally found something. Now trying to move my stuff with little kids on summer break. Have to pick up a few appliances. Have to change mail, bank accounts, brokerage accounts, garbage, cable, phone, electric water, etc.

Good lord.

Moving into a nice 4-bedroom place. I talked with the neighbor there. I asked about the owner of the place I'm going into. He says they are waiting for the top of the market to sell. I only hope they wait until the one-year lease is over before they decide to sell. If they break the lease, sure, I get to pocket a little money, but then it's back to trying to find another rental in the same school district again.

"Why don't you just buy?" everyone asks.

SQT,

Kick-ass mom.

DS,

Good on ya mate! Perhaps there is a thing or two we can learn from the Aussies! It's so crazy it just might work! With our Pension Benefit Gaurantee Corp. about 28 bil. under funded (steel and airline bailouts) maybe they can assert pressure in the right places? That or keep the canned "roo" meat coming.

SQT,

Well that is an alarming situation. Can keeping up appearances be THAT important to Dad? I've got to be honest, after surviving a 3 yr. bear market I'm a little beyond caring about what other people think.

At least the cat is out of the bag. Your Dad hates the exposure, no doubt, but at least he doesn't have to hide things anymore. Hard to sleep with secrets.

Any good way to reduce food expenses?

>>Any good way to reduce food expenses?

http://eatyourpantry.blogspot.com/

Cultivate lobsters in the swimming pool.

We do not have a swimming pool. Only two tubs. I do not want to bathe with clawed creatures.

>>I do not want to bathe with clawed creatures.

Wear a cup.

>>One thing we like to do that is less wasteful is shop twice a week. We don’t do it as much right now, but it helps because only 3-4 days are planned at a time.

That's interesting. Seems counter-intuitive. I'd think that by buying large amounts in bulk, you'd save. I presume your take is that if you shop twice a week, nothing has a chance to go bad?

RE: downsizing to a small condo

How much stuff do they have? We are only 29 and we are already unable to go below a 2/2 apartment and 500 cubic ft of storage.

Tons! They have a fully furnished 5 bedroom home with a very large pool table and two pinball machines.

They will be selling a lot of stuff!

It is not going to be easy.

>>I am not a big fan if bulk food, often Sam’s Club and Costco may save money, but then there is twice as much cardboard and packaging.

Now wait a minute. Wouldn't the volume of the food increase faster than the surface area of the packaging?

Anyway, I suppose you could have the best of both worlds. Keep the bulk purchases to non-perishables, then pick up perishables twice a week.

It’s so crazy it just might work!

oh yes, things are good here. nobody ever wants to leave.

That or keep the canned “roo” meat coming.

i'll see what i can do to help. you can have it all, in fact.

SQT,

at least your parents have you to take care of things, call them lucky. Sounds like your mom has no illusion about the market or the state of financial affairs, as long as she knows her situation well, things will work out.

OT:

I went to US bank today to take care of some errands. It is amazing to see that this bank is still touting NO-DOC, NO-VERIFICATION, ARM-INTEREST ONLY loans of 1-5 year durations all over the place. It is a cheap bank and that's why I use it for no-fee checking, but at this stage of the game, I am actually shocked to see a major bank still giving out flyers, pamphlets full of toxic loans. Are they really that confident that they can unload this s*** once they finish the initiation? What if they have nobody else to hand the bag over and end up having to hold the bag themselves?

>>Are they really that confident that they can unload this s*** once they finish the initiation? What if they have nobody else to hand the bag over and end up having to hold the bag themselves?

My friends and I have been talking about that. Ever since the revolution in securitizing mortgages, the local guys don't have to worry about the long term viability of the borrower. Just do the deals, package them into risk bundles, and then have some sellers on the phone with some buyers.

So far, there's always been someone willing to chomp at these loans. If that ever stops, all these local lenders are going to be dazed and confused.

i'm going over to kick some ass on www.sdcia.com. this has gone on long enough...

This is a time for the Fed to pause on rate hikes because we have some interest-sensitive housing markets that have become vulnerable,” David Lereah, chief economist for the National Association of Realtors, said in early June

I seriously would give my left fucking nut to have 15 fucking minutes alone with that fucking asshole. Really, if any one knows Fucknob Lereah and needs a left testicle, perhaps we can get together.

This is a time for the Fed to pause on rate hikes because we have some interest-sensitive housing markets that have become vulnerable,” David Lereah, chief economist for the National Association of Realtors, said in early June

The market is now aware of inflation. If the Fed pauses now, long-term bond rate may shoot up due to higher inflation expectations, causing 30 year mortgage rate to increase. No matter what the Fed does, some interest rates will be going up and some housing markets will be harmed.

OK. Who is that a photo of at the head of this thread? Is it the surgeon from Scrubs?

>>i’m going over to kick some ass on www.sdcia.com. this has gone on long enough…

I assume you are referring to that poor poster boy for the bubble, Mr. Tucson.

Are there any other threads over on those boards worth reading?

OK. Who is that a photo of at the head of this thread? Is it the surgeon from Scrubs?

Have you watched Office Space?

Mr Tucson is still very interested in property investing, will just be more careful next time...

Are there any other threads over on those boards worth reading?

the blog there is advising people capital gains have topped out, the only way to make money now is buy a 2 br condo and wall in the living room to make it a 3...

'worth reading' to see the perspectives of evil deluded people who believe they are 'good' people, and all their deals are 'win/win'...

A friend of mine who is trying to buy into Peninsula told me that he is loving this bubble, it is becoming the renter's heaven. He is not sure if he still wants to buy a home.

Just about 2-3 months ago, there is a glut of homes, all nicely remodeled, coming onto the market for rent (you can find quite a few of them listed on MLS for sale as well). Contrary to before, home renters usually have to put up with torn carpets, dirty kitchen, leaking toilets etc., now increasing number of inventory is made up of updated homes that are meant to be flipped - except that nobody wants them. So instead of leaving the houses vacant, the flippers plow back the nicely updated houses into the rental market, so yes, rent has increased, but the quality of inventory has improved much more than the increased rent. He was about to sign a contract paying 300 more a month in a larger, and entirely updated house in a good location compared to the current rental.

So this may be the story behind the "increased rent" One needs to compare apples to apples. Seriously, 300 is not much compared to the property tax, PITI payments, maintenance, etc. Rent is most definitely a steal considering the choices of rental houses available.

Flippers are after all a good and noble force in the economy, they are sacrificing their money to provide for a better quality of life for renters, what else can you ask for?

Flippers are after all a good and noble force in the economy, they are sacrificing their money to provide for a better quality of life for renters, what else can you ask for?

A 5gallon water jug shoved up their asses, beaten senseless, the death of 1000 cuts, soaking up to their necks in a pit of excrement? Just a start.

http://sfbay.craigslist.org/sby/apa/176028147.html

this one is classic. A few months back, a troll came here claiming that he bought a new SFH in South San Jose for 950K. And I happened to drive through that area (Basking Ridge South SJ), 5 feet away from the junction of 85/101 on the east side, with a major major power station squarely in sight, situated right on top a pile of dirt with zero vegetation whatsoever. Just imagine the ugliest hill on East Bay and you get what I am talking about, oh did I mention the power lines right over the development? Before I forget, the SFHs are 3 levels because the lot size is sub-1000 sft.

So now this "investor" after paying 950K intends to lease out his brand new POS at 2500 rent. The ads is actually not misleading, it is *close to 85/101*, it is so close that you can literally walk to the middle of 101. The development also looks over a lake - only that you need to look over a major power station before you see the lake.

Even if he is able to get an idiot paying him 2500 rent, the gross return is a handsome 3.1% (wow!), is this even enough to cover the interest on mortgage?

>>The ads is actually not misleading, it is *close to 85/101*, it is so close that you can literally walk to the middle of 101.

Do you think the troll saw what he was buying? Or maybe it was a deal done over the phone?

>>the only way to make money now is buy a 2 br condo and wall in the living room to make it a 3…

Oh that's nice. Why not just split all the rooms in half vertically and fill it up with twice as many short people?

Even if he is able to get an idiot paying him 2500 rent, the gross return is a handsome 3.1% (wow!), is this even enough to cover the interest on mortgage?

And who is the troll now? It only goes up fool, this savvy investor will make at least 250K in two years. How much is your troll ass going to make?

__________
Sarcasm off.

Michael Anderson-

"Why not just split all the rooms in half vertically and fill it up with twice as many short people?"

You laugh now, but that's the direction that all of this is headed. In my neighborhood of 50 year old 3/1 tract homes, little by little the buyer type has changed from "first-time home-owning young family" to "multi-family" as the prices have tripled in six years. The first thing to change is that parking becomes a scarce commodity. Sure, I can park in my driveway, but my guests often have to hunt for parking. Luckily, I am just a JBR so I can leave if things get ugly.

SQT-
The story of your parents' plight is jaw-dropping. My mom has a similar situation but on a lesser scale. It makes you wonder a lot of things. How did they sleep at night while they were in such a downward spiral? Why didn't they "ring the bell" earlier, if not to you, to a credit counselor .... how did their generation get to be so nonchalant about their household balance sheets? Most of the REALLY BAD stories like this I've heard involved a cash-burning business -- I think that's bar none the fastest way to rack up six digit debt. Even faster than a crackhead in law school.

>>How did they sleep at night while they were in such a downward spiral? Why didn’t they “ring the bell” earlier, if not to you, to a credit counselor …. how did their generation get to be so nonchalant about their household balance sheets?

For water to boil, you need a first bubble to get things started. SQT's parents got into trouble gradually. Nothing served as that first bubble until SQT's dad let something slip.

>>How did they sleep at night while they were in such a downward spiral?

I'd guess her dad had compartmentalized the money, and was able to sleep because of it. The losses are over there and the assets are over here. Just as long as he never lets the subtraction happen in his head, he's OK. People are notorious for keeping their little piles of money in seperate mental boxes. "This is the money I inherited." "This is the money I got back from taxes."

>>Why didn’t they “ring the bell” earlier, if not to you, to a credit counselor

Less painful to hope that the business turns around and fixes the problem.

>>how did their generation get to be so nonchalant about their household balance sheets?

I don't think it's generational. I think it's temperment. For each generation, I know people who balance checkbooks and those who don't. People who keep receipts for decades and people who shred them or lose them immediately.

Often, busy "successful" people are the worst offenders. The money rolls in, and it seems to be smarter to concentrate on the money-making than the accounting.

>>and some seem to love to spraypaint roman numbers everywhere, but they dont vote.

CMLXXVI

Like that? WTF?

Randy H - "The fact is that the US is a large-open economy with nominal interest rate power aside from real interest rates as determined by the “market”. This requires an active manager"

Huh? Run that one by us again please. As HARM points out, rates need *only* be determined by the market. Anything else is at best a guess and if wrong, will likely lead to misallocation of resources.

"This natural “”market fair price” you refer to will be set by other countries who do have Central Banks."

And what is the problem exactly?

--“This natural “”market fair price” you refer to will be set by other countries who do have Central Banks.”

And what is the problem exactly?

Sorry, this is getting a bit tiring. You know what, it's a great idea. The whole notion of Central Banks, assurance of payments, counter-party risk oversight, and nominal interest rate management is folly. If we just eliminated Central Banks, fiat money, and hell, all forms of fiscal management while we're at it, then we'd instantly find ourselves living in some kind of Ayn Rand Walden, because everyone knows that no person, corporation or nation would ever attempt to exploit one another or game the system.

If we all drove around without seat belts everyone would be a better driver too.

It is difficult to judge the Fed without knowing what would have happened if a different policy course had been followed. But I think that the Fed always overreacts. Whatever the “right” policy is, they will do too much of it. This in turn requires them to be heavy with the antidote to their preceding mistake.

The huge liquidity move in 2001 through 2004 was excessive. And to the extent that it was excessive and lasted too long it was damaging. I think they should never have gone below 2%, and 2% should have been a six to 12 month affair with rates coming back up starting at the end of 2002. Instead they went lower (to 1%) in 2003 and stayed there until mid 2004. So the pot boiled over.

If only they would have the patience to wait for their medicine to take hold before upping the dose. They know that the lag time is about 18 months for full effect and about nine months for the first real impact of their policy changes. And yet they get impatient and keep upping the dose.

Now (at 5%) the Fed has already raised their target rate above the natural equilibrium level. This is more than enough “medicine” to slow the economy, but it will take a while for the medicine to be digested. Any further increases will intensify the recession that will come soon (2007).

This is a mistake and by early next year they will be cutting rates to reverse the overdose that they have already administered.