patrick.net

It is taking much less time for the economy to undergo paradigm shifts. If one happens to be in an ebbing industry, there is no way for his conditions to improve just by macroeconomic changes. It is increasingly important that one does just something in the right place at the right time, as opposed to doing something "right".

The world is becoming a giant casino. Or perhaps it already is... we could have been born in Somalia!

Most eloquently described by Taleb in Fooled by Randomness. I think it's always been this way. I'm not a believer that there ever were "good old days".

Call it Crazy says

The old lady has been haunting me to buy a house again

Uh oh.

Call it Crazy says

trying to "guess" which way the economy is going to go...

"Never make predictions. Especially about the future."

You want a "factor of safety" in any major financial decision, so it's good to think of "what if" scenarios. Like "what if the economy goes tits-up?"

Call it Crazy says

My options, put down a good chunk and go the 15 year route (or shorter) to maximize my equity.... or.... totally leverage the sucker and go FHA 3.5% down and go max on the 30 years and keep the cash in my pocket (and bank the difference).
By what you said above, If inflation continues, it also becomes free money to finance, so let the bank hold the tab..

If you have a wife that likes to blow cash on frivolous stuff, it might be best to do the 15 year route and have as much cash as possible "tied up" in the house. ;-)

Where do you live? Do you live in an area subject to wild RE price swings like CA?

Call it Crazy says

But... she loves to "start" home projects that I get to "finish", that's why I bailed on the last house.... I'm getting too old to be doing this crap and be her handyman........

Solution: RENTING!

Call it Crazy says

That is the BIGGEST issue.... I'm in NJ and it looks like there's going to be a big wave of foreclosures this year. You know what they will do to the property values... That's what makes me "gun shy" on buying again until it looks like this area gets close to the bottom...

Not only that, much of the local RE market is probably tied to the Wall Street Casino Economy, right? What happens the next time the bets go bad?

My two-cent advice: keep renting

Call it Crazy says

But, unlike many others that come here, I don't base it just on the dollars to dollars of monthly payment comparison. I also factor in and budget for repairs, upgrades and maintainance (and with my wife, I have to budget HIGH) as well as amoritize the closing costs on both sides (buying and selling) which very few factor into the equation.

Without getting into logic of including upgrades again, that's the right way to do it. But you should also factor in the principal repayment and tax savings as well.

Not sure why you think others that come here don't include repairs and maintenance though. I think almost everyone smart enough to have found this website is also smart enough to factor in maintenance costs...

Call it Crazy says

I also factor in and budget for repairs, upgrades and maintainance (and with my wife, I have to budget HIGH)

It sounds like your situation is somewhat unique. Any house you might own looks like a real money pit for you.

How long will your wife tolerate renting? Are diamonds cheaper than your wife's remodeling projects? If so, buy her diamonds. At least they tend to hold their value. And you don't have to pay property taxes on them.

Call it Crazy says

Then, where is the "safest" place to be when it goes tits-up... in a rental dealing with a landlord and his financial problems or in your own house dealing with a mortgage/bank?

Yeah that's hard to say. Personally, I'd rather be the renter dealing with the landlord. If the economy is tanking, rents might even go down. Unlike mortgage payments.

Call it Crazy says

that's the part of renting that SUCKS!! not having a permanent place year after year.

True, but you might have to move year after year anyway. There is no job security anymore.

bmwman91 says

It does seem like there is no shortage of engineers, just a shortage of good ones.

What would you consider a "good" engineer?

New renter says

bmwman91 says

It does seem like there is no shortage of engineers, just a shortage of good ones.

What would you consider a "good" engineer?

It's pretty subjective in my book, but here's my take.

I'd sum it up with, "you are either born with it, or you aren't." If you work in tech/engineering, you know that there are just some people that can see something once and understand it fundamentally, whereas others have to work really hard at it and may just end up memorizing facts about it rather than understanding it.

On top of that, the individual needs to possess a high level of personal interest in technical subjects and passion for learning and understanding everything around them. It's the only way to keep from stagnating and burning out in this field. If you can't have fun doing it, you probably won't last too long in engineering, which is why I assume that so many engineers go the management-route after 10-15 years.

Call it Crazy says

The other part of my calculations is to make sure we would be able to cover the mortgage payment if one of us loses their job.

That's a very important thing to consider, yes.

wthrfrk80 says

Call it Crazy says

The other part of my calculations is to make sure we would be able to cover the mortgage payment if one of us loses their job.

That's a very important thing to consider, yes.

Nah, buy with 3% down and just squat. At this point your finances are only needed to qualify.

thomas.wong1986 says

Over the long run, they do, and like Shiller points out using years of data.

We are too focused on here and now and ignore long term fundamental performance to understand the norm.

Cannot ignore simple price to income (or rent) rations which indicate normal prices with low risk. What your proposing is akin to speculation..

Maybe and maybe not. Sure- I would agree that on a broad national level that might hold true. I am not totally in disagreement with you but in the case of those numbers it takes decades of result to come to a conclusion. Should potential homebuyers spend several decades waiting for those numbers to "make sense"? I spent over 12 years saving and I am every bit up there on agreeing that the cost of real estate is ridiculous in the Bay Area. I've also lived here long enough to see that despite all forms of reasonable logic, the application of historical data, and all other common sense that this area doesn't at all act predictably and is prone to wild swings up and down.

The bottom line is that everyone has to make that decision. In our case we saved, we waited, and we bought a house that we could afford and did so on a conservative basis: the overall cost is less than 1/4 of our monthly income, or about the same as what we paid in rent. Even the choice of where to live in the Bay Area can be a major point of that decision: For us the East Bay was the right choice financially. Not so much for SF or the Peninsula.

bmwman91 says

If you can't have fun doing it, you probably won't last too long in engineering, which is why I assume that so many engineers go the management-route after 10-15 years.

Yes, that's no different than straight up science. A case of Asbergers syndrome dosen't hurt either.

bmwman91 says

I'd sum it up with, "you are either born with it, or you aren't." If you work in tech/engineering, you know that there are just some people that can see something once and understand it fundamentally, whereas others have to work really hard at it and may just end up memorizing facts about it rather than understanding it.

There must be very few "good" particle physicists then.

New renter says

Yes, that's no different than straight up science. A case of Asbergers syndrome dosen't hurt either.

lol...well, you do also need to have a balance of social skills too. It's hard to get things done when everyone hates working with you, although it isn't unheard of. So yeah, I sort of forgot about the social skills part! I think that I left it out because it seems sort of like a basic assumption, but I can imagine how people might see "engineer" and "socially adept" as being mutually exclusive.

New renter says

There must be very few "good" particle physicists then.

Scientific research is a bit different than engineering. You really can't be a particle physicist with a bachelor's in physics, whereas you can be a pretty good engineer with a BSxE degree if you have the mind and drive for it. Scientific research requires a much higher level of academic rigor than engineering, for the most part.

Finding an engineer who doesn't always think he/she is always right about literally every topic anyone ever brings up is the hard part.

I had an experience where I had to throw one of our engineers out of a meeting because he wouldn't stop trying to argue revenue recognition rules with our accounting team. Another where one of our top engineers-turned-manager decided he could stop following SOX rules simply because he'd deduced they were "wrong".

Randy H says

Another where one of our top engineers-turned-manager decided he could stop following SOX rules simply because he'd deduced they were "wrong".

lol. Wow, that's pretty bad yes.

Randy H says

I had an experience where I had to throw one of our engineers out of a meeting because he wouldn't stop trying to argue revenue recognition rules with our accounting team. Another where one of our top engineers-turned-manager decided he could stop following SOX rules simply because he'd deduced they were "wrong".

yes.. they are a fun group when it comes to RevRec.. its just comedy !

Its better they dont interface with customers.. and make no promises to future products or updates .... "Only when and if available" should be the only thing they should be allowed to say.

The most extreme case im aware of ... was when an engineer ordered, approved without management knowing a ton of equipment to create their own Engineering Lab at their house.. Yes, he build a R&D LAB in his home using company funds.

edvard2 says

Should potential homebuyers spend several decades waiting for those numbers to "make sense"? I spent over 12 years saving and I am every bit up there on agreeing that the cost of real estate is ridiculous in the Bay Area.

They should understand the risks they are taking.. else wait. Certainly thinking that prices ALWAYS go up and never down they committed financial suicide ...

But even today, we are still ignoring that prices go down, with all this talk of RECOVERY, as if prices will swing up like a bubble.

It has been established that engineers have 0 EQ in general.

However, wanting to be "right" is not unique to engineers. This is the primary reason why there are bubble deniers.

EQ?

thomas.wong1986 says

Yes, he build a R&D LAB in his home using company funds

So? I've knows several engineers with machine shops in their garage who used them to manufacture company products. If he's doing primarily company work at home the company SHOULD pay for the equipment.

Its a good solution for engineers with kids at home who might otherwise have to work short hours to take care of their kids.

EQ= emotional quotient for corporate types,
EQ = equalizer for musicos and stereophiles,
EQ = EverQuest for aging gen x mmo gamerz

Also, for Perl...

$eq eq '0'

Randy H says

EQ= emotional quotient for corporate types,
EQ = equalizer for musicos and stereophiles,
EQ = EverQuest for aging gen x mmo gamerz

Got it.

As an engineer I use the term "P-factors" to describe all of the bullshit that can't be reduced to mathematics and science.

I.e. (People, Perception, and Political) factors.

Example: "yeah, everything works fine in our company, save for the goddam p-factors."