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Dan8267's comments

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Dan8267   ignore (3)   2010 Jun 10, 8:38am   ↑ like (0)   ↓ dislike (2)     quote        

In Boca Raton, FL renting a middle-class house costs $1600/month or $20k/yr. I can afford that, but it seems ridiculous to have to spend $20k/yr on rent, when home owners who bought BEFORE 2000 spend about $6k/yr on housing expenses. I'd sure like that $14k/yr in savings.

Of course, I'll continue to rent until prices are sane again, but once it makes financial sense, I'll buy. Probably will be a few more years with how much the correction has been drawn out by government intervention.

In non-bubble times, it makes sense to buy instead of renting. Unfortunately, in Florida we're still in a bubble. The buy threshold I'm looking for is $100 sq/ft for a brand new house.

Btw, in Boca right off of Yamato and I95 some developer is trying to sell townhouses for $300k. That same developer was trying to do this about 3 years ago and gave up when it was clear the bubble busted. Evidently the company didn't learn the lesson. The developer basically just renamed the community to "Centra" (sounds like a vitamin pill) and made some minor floor plan changes. $300k is a lot of money for a single family, detached house. It's ridiculous for a townhouse (formally called row-home) that's directly under the flight pattern of an executive airport.

Dan8267   ignore (3)   2010 Jun 11, 2:29am   ↑ like (0)   ↓ dislike (2)     quote        

A dollar used to be pegged to such and such quantity of gold. Some dollars were pegged to silver and called "silver dollars". Today, a dollar is an arbitrary unit of currency backed only by faith in it. As such, it has no fixed value. That's why a dollar today doesn't buy what it did ten years ago. Before becoming a pure fiat currency, dollars did retain their value over decades.

Dan8267   ignore (3)   2010 Jun 11, 2:31am   ↑ like (0)   ↓ dislike (4)     quote        

The thing about trying to time the market, or worse yet an individual stock, is that there are a lot of people who do this for a living, 24x7, and they have access to information a lot quicker than you. They also have trading programs that can react a lot quicker than you can.

It's like trying to win a swimming race against sharks. The best way to win is not to play.

Dan8267   ignore (3)   2010 Jun 11, 6:23am   ↑ like (0)   ↓ dislike (3)     quote        

seaside says

Dan says

In Boca Raton, FL renting a middle-class house costs $1600/month or $20k/yr.
*snip*
In non-bubble times, it makes sense to buy instead of renting. Unfortunately, in Florida we’re still in a bubble. The buy threshold I’m looking for is $100 sq/ft for a brand new house.
*snip*
$300k is a lot of money for a single family, detached house. It’s ridiculous for a townhouse (formally called row-home) that’s directly under the flight pattern of an executive airport.

Couple questions.
What’s typical middle class house you can rent at $1600/mo there in your town? Is it like 10yr old 2000sqft 3/2 SFH?
Bubble in FL is kind of hard to understand as a northern virginian I am, since the situation up here was never been like that. I heard FL housing price got bursted and went down 50% or so, and became reasonable. Isn’t that not true in your area? What’s the current $/sqft ratie down there?

The two houses I rented were $1600/month.

House 1
----------
http://tinyurl.com/2ca38an
2 bedroom, 2 bath
1614 sq. ft.
looks like it was built in the 1970s
poor a/c, breaks often, needs replacing
sold recently (April) for $184,000
decent, small neighborhood
annoying, intrusive HOA

The owner was asking for over $300k back in 2007, got no offers, and decided to rent.

House 2
----------
3 bedroom, 3 bath
2032 sq.ft.
also bad condition (bathrooms horrible, ceiling fans broken)
last sold in 1992 for $115,800
less quiet, large neighborhood
non-intrusive HOA

Dan8267   ignore (3)   2010 Jun 11, 6:42am   ↑ like (0)   ↓ dislike (3)     quote        

shultzie says

Dan says

Btw, in Boca right off of Yamato and I95 some developer is trying to sell townhouses for $300k. That same developer was trying to do this about 3 years ago and gave up when it was clear the bubble busted. Evidently the company didn’t learn the lesson. The developer basically just renamed the community to “Centra” (sounds like a vitamin pill) and made some minor floor plan changes. $300k is a lot of money for a single family, detached house. It’s ridiculous for a townhouse (formally called row-home) that’s directly under the flight pattern of an executive airport.

Del Boca Vista Phase II?

I can hear the heavily made up, prada wearing, kate spade toting agent now “don’t you understand that its BOCA - its desirable“

Is that a Seinfeld reference? http://tinyurl.com/b79gvw

If not, the community is actually called "Centra" and it's on Yamato where the old IBM site's recreation area was. After IBM left, it sold the land and buildings. Mostly a strip mall with a few restaurants, a business complex with various small to mid size companies, and the townhouses that aren't built yet.

With the exception of the airport and train tracks, it would be a good area for housing if the builder hadn't screwed it up with ugly townhomes.

Dan8267   ignore (3)   2010 Jun 11, 8:52am   ↑ like (0)   ↓ dislike (2)     quote        

> Wow–thanks professor. Now it takes $1 to buy a candy bar instead of $.30. But the average income is $30K instead of $10K. So what?

OK, smart-ass. Here's the point. Say you put 20% of your income in a savings account that offers 2% interest, but inflation is running at 5%. You are actually paying a 3% annual fee to the bank for storing your money. You pay a 5% tax if you keep your money in cash. That's damn significant to anyone who has savings including retirement plans. Factor in the fact that you will keep adding to your savings, and the amount of real wealth you lose each year grows every year. That's the point.

Furthermore, the real median income of U.S. households has decline over the past ten years. This may be masked by inflation, but its effects are not.

Inflation also makes it more difficult to meaningfully compare the change in value of assets over long periods of times. This is especially true since the Federal Reserve stopped reporting M3 on Federal Reserve stopped reporting M3 on March 23, 2006. If the fact that they don't even report what M3 is doesn't scare you, then you aren't very smart. Unfortunately, what you don't know can hurt you.

Back before the American revolution, the colonies used a form of fiat currency called "Colonial Script". This is what Benjamin Franklin referred to as "honest money". Although it was a fiat currency, the colonies kept the supply of money a constant, enough to conduct the day-to-day business transactions. The money was a median of exchange, not a commodity. As a result, the American colonies were extremely prosperous.

How prosperous? During a trip to England as a colonial representative, Franklin was asked how the Colonies managed to collect enough taxes to build poor houses and care for the poor. Franklin replied, "We have no poor houses in the Colonies, and if we had, we would have no one to put in them, as in the Colonies there is not a single unemployed man, no poor and no vagabonds." England's response to Colonial Script was to outlaw it because it was infringing upon the profits of English banks. Franklin went on to say that this was one of the primary causes of the American revolution.

Thomas Jefferson warned against the very banking system we employed today, saying "If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."

Class dismissed.

Dan8267   ignore (3)   2010 Nov 10, 12:22am   ↑ like (0)   ↓ dislike (2)     quote        

toothfairy says

only 1 house in Oakland is a buy?

You mean, "a house in Oakland is a buy?" Isn't Oakland, CA the murder capital of the known universe? Why would you want to live, er, die there?

Dan8267   ignore (3)   2010 Dec 6, 12:33am   ↑ like (0)   ↓ dislike (3)     quote        

TechGromit says

I feel sorry for him he had to sell it. You pay most of the interest on a mortgage the first 10 years, he was probably making some good headway in paying off the mortgage after 12 years assuming he was miking minimum payments. He only had 108k left to pay on the mortgage (Assuming the original note was 137k), which isn’t a hell of a lot of money anymore. Unless he was in dire financial problems he would have been far better off keeping it in the long run.

I didn't get the impression that the former owner was in any financial trouble. He owns a house up north, comes down to Florida with his brother every winter and stays at his brother's house, and is retired. Most likely, he was caching out hist Florida house to live off the income in retirement. I think he was in his late 60s / early 70s, so there isn't much of a long run anyway. With social security, any retirement plans, and the money from the house sale, he probably can live comfortably for the rest of his days.

Dan8267   ignore (3)   2010 Dec 6, 12:47am   ↑ like (0)   ↓ dislike (3)     quote        

HousingWatcher says

“And if they don’t, I suspect that the retiring baby boomers with little or no savings will drive down house prices further as they downsize in order to finance their retirements.”
Where are all these baby boomers who are downsizing? I honestly have yet to meet a single one. Virtually all of the houses for sale in my area are owned by younger people. The baby boomers all bought their houses 20-30 years ago and are mostly debt free. They stay in their houses until death. I know because I’ve recently been to a number of estate sales.
Most predictions about the Baby Boomers have been wrong. Baby boomers are not doing the usual “Sell the house, move to Florida” thing.

The oldest baby boomers have just started retiring this year. As such, they haven't started downsizing yet. However, a large portion of Americans do downsize after retirement because they need the cash, but don't need a big house now that their kids have all moved out.

Of course, this doesn't happen the day the boomer retires. As the boomer retire, they will first sell off their stock (long-term bear market in U.S.), perhaps converting it to cash, money-market funds, or short-term bonds. Years later, they will begin downsizing. We won't see this for a few years, but remember, the downsizing of boomer houses will last an entire generation. As such, a think the downward pressure on residential real estate will last about 25 years.

Generation X is simply too small to make up for the loss of baby boomer demand. And the Millennials are so far into debt from college, they have to buy the bank a nice house before they can buy themselves a starter one. So I don't see the Milennials driving demand for home purchases for many years. -- If you haven't seen the debt burden that today's 22 year-olds have, it's scary as hell.

The important thing to remember is that as baby boomers retire, they will consume their savings. This will be a major decline in the demand and a major increase in the supply for whatever investments the boomers had invested in. I suspect that Housing and U.S. stocks will have to endure a generation-long bear market as a result. I don't think that bear market has started yet, but it will start within the next five years.

Dan8267   ignore (3)   2010 Dec 6, 12:58am   ↑ like (0)   ↓ dislike (3)     quote        

cab says

Apple Computer at that time was somewhere around $13 a share. Now it’s around $317. Extreme example maybe, but that sorta eclipses the great deal he gained…

A bit off subject, but important... One thing to remember about tech stocks is that for every Apple, Microsoft, or Google, there are tens of thousands of Pets.com that go bankrupt. This was true during the personal computer revolution of the 1980s and the Internet revolution of the 1990s.

In the mid-to-late 1990s, everyone knew that the Internet was the future and that new companies would become super-rich and make billionaires. The two problems were:
1. Everyone knew this, so everyone wanted a piece of the pie.
2. No one knew which company was going to make it, so everyone bought everything.

It turned out that this resulted in a grotesque overvaluation of the tech industry as a whole. As a result, by mathematical necessity, the average investment lost a lot of money. The lesson was that during a land rush, most rushers lose.

People seem to forget about the companies that didn't make it in the 1980s PC revolution or the 1990s Internet revolution. And as such, they think that the time was a quick, easy, and reliable way to get rich.

Also, consider this. If everyone is expecting some industry to return huge profits to investors, it becomes a self-defeating prophecy. The expectation cancels out any opportunities for investors.

Dan8267   ignore (3)   2010 Dec 6, 1:04am   ↑ like (0)   ↓ dislike (3)     quote        

justme says

Michinaga says

In getting back his selling price plus inflation, basically he got to live rent-free, paying only taxes and fees, for nine years.

This does not compute, because you left out the specifics of the equivalent rent: How much rent (interest) [A] did he pay to the bank compared to how much he would have paid to rent a similar house [B]?
If (A > B) then he paid extra money for an inflation hedge that turned out to be nothing.

Perhaps I should have clarified the former owner's situation. He was retired and a snowbird. This was not his primary house. So, he would not have been spending rent money for shelter. The house mentioned in this post was just an investment and vacation property.

Yes, he does have to pay HOA, taxes, and at least minimum upkeep expenses. However, the point I was making in the post is that the would-be sellers need to realize that the selling prices of homes tends be the same as their purchase price, in the long term. This is true regardless of the taxes and other expenses that come with owning a house.

Dan8267   ignore (3)   2010 Dec 6, 1:07am   ↑ like (0)   ↓ dislike (3)     quote        

Michinaga says

(I bought Yahoo and Cisco with some of the first money I ever saved in late 1999. I’ll *never* make up the losses I sustained in the first year of owning them.)

That's the thing about buying tech stocks as soon as they IPO. It's really a crap-shoot. Since everyone wants to get in on the IPO, the stocks may be very overvalued. You really can't tell. Hell, the "professionals" can't even tell.

You could end up doubling your money over a few years like with Google, or you could end up losing most of it like with Yahoo. It seems the smart money uses the strategy of gambling with other people's money. That way, heads you win, tails your client loses.

Dan8267   ignore (3)   2010 Dec 6, 1:08am   ↑ like (0)   ↓ dislike (3)     quote        

cab says

You can’t eat a house (unless you’re a termite).

Speak for yourself. I intend to live in a Gingerbread house.

Dan8267   ignore (3)   2011 Mar 15, 12:56am   ↑ like (0)   ↓ dislike (2)     quote        

Nomograph says

Don’t loan anyone money unless you are OK with never seeing it again. That’s my rule of thumb.

Does this include Wall Street? Hmmm... bad example.

Dan8267   ignore (3)   2011 Mar 29, 1:35am   ↑ like (0)   ↓ dislike (3)     quote        

Highlights
------------

The number of vacant homes in Broward and Palm Beach counties nearly doubled during the past decade, as the devastating housing collapse led to record foreclosures.

"Now they're a way of life," said Bill Richardson, a real estate broker for 25 years and president of the Realtors Association of the Palm Beaches. "Virtually every community has a vacant home or two or five or 10."

"Once a home looks abandoned, it brings down an entire neighborhood," said David Dweck, a Broward real estate agent and founder of the Boca Real Estate Investment Club.

In Fort Lauderdale's Poinciana Park neighborhood, one in five homes was vacant in 2010; a decade earlier, only 11 percent were empty.

Dan8267   ignore (3)   2011 Apr 13, 9:09am   ↑ like (0)   ↓ dislike (3)     quote        

I can only speak for myself, but the prices in South Florida are so ridiculous that I just don't even look. So there's little incentive to discuss a specific property. Perhaps as house prices continue to plummet, it will be worth taking the time to look at properties again.

Unfortunately, the fed gvt's attempt to trick buyers into overpaying have delayed the recovery of price sanity, but now that the gvt can't "stimulate" the housing market anymore, I expect the house prices will plunge at a faster rate to make up for the lost time. Ironically, if the fed gvt had not tried to pursaude people to buy houses in 2010, the prices would have fallen (based on Case-Shiller trend) to where I would have bought a house.

Dan8267   ignore (3)   2011 Apr 20, 7:13am   ↑ like (0)   ↓ dislike (3)     quote        

$120,000 for 364 sq.ft. is $330/sq.ft., a total rip-off even for a middle-class quality house. I'd only pay $100/sq.ft. for a normal size house. If you want me to buy a micro-house, then price it at a micro-level like $10/sq.ft. As such, the houses should be going for $3,640. That's all they are worth.

Since neither the cost of building the house nor the value of the house is linearly related to its size, it does not make sense to scale houses up or down to extremes. There is a happy middle ground in which the price per sq. ft. is highest. But that global maximum isn't higher than $100 / sq.ft. Builders are going to have to accept that reality or find a new industry.

Dan8267   ignore (3)   2011 Apr 20, 7:21am   ↑ like (0)   ↓ dislike (3)     quote        

Here's something else that builders need to get straight. Why would I pay a builder over three times as much to build a house then I would have to pay for an identical prefabricated house? As builders continue to overcharge, they make pre-fabrication more cost effective, which in turns allows pre-fabrication to be further developed and refined -- a positive feedback system that makes pre-fab ever cheaper.

Eventually, we'll all be able to print out a house using a 3D printer that can render building quality materials (synthetic or natural). Then the cost of a house will be the blueprints (free via Bit Torrent or open source), the cost of the materials (perhaps $100/ton), and the cost of the electricity used in printing (a few hundred dollars). Hmmm, can anyone say from dirt to McMansion for under $10k?

Maybe the path back to affordable housing is to make builders obsolete.

Dan8267   ignore (3)   2011 Apr 26, 1:56am   ↑ like (0)   ↓ dislike (3)     quote        

HousingBoom says

Who wants to catch a falling knife? Most people still think that housing has bottomed but the mainstream media already pulled the plug on the housing market. We see nothing but bad news in housing now and people are beginning to wait on the sidelines.

People, including the media, have been saying "housing has bottomed and the recovery is on" for the past five years. And they'll continue that line for the next five years. The bottom is going to be lower than the bubble start prices. Right now prices are still higher than the bubble start. Doesn't take a rocket scientist to figure out that the correction still has a long way to go. Evidently, though, it does take honesty, something that the media, being paid by real estate advertisements, is incapable of.

Dan8267   ignore (3)   2011 Apr 27, 3:22am   ↑ like (0)   ↓ dislike (2)     quote        

A clawback would have been more socially just than having taxpayers and savers bailing out the big banks, the debt speculators, etc. However, it is impossible to clawback now. The profit taking occurred years ago and the financial trail is too convoluted. A clawback on a per-case bases involving investors suing institutions for financial fraud would have been possible back in 2006-2007, but the government was too much in bed with the bankers to do this.

Really, what the government should have done was simply let the courts back in 2007 hear cases from both US investors and foreign investors regarding the fraudulent packaging of mortgage back securities. Sure, a lot of big banks would have gone down, but that would simply open the market to all the little banks with little to no exposure to the fraudulent securities.

Other than that, the government should have simply done nothing. No printing money, no redistributing resource by "stimulating" one area of the economy at the expense of other areas, and no artificially low interest rates -- the only way to stimulate an industry is by taking resources from and thereby depressing some other industry. Government policies are always doom to fail when they address the symptoms of a problem instead of the causes. The cause of all the financial mess we have today is simply the misallocation of vast resources into an overpriced housing market. The solution is simply to stop misallocating resources to this pig.

Specifically, it is cheap money that got us into the second great depression. And the fed's solution is more cheap money. That's like trying to save a person from drowning by pouring buckets of water on him.

Dan8267   ignore (3)   2011 Apr 29, 3:23am   ↑ like (0)   ↓ dislike (3)     quote        

Yes, every time someone clicks on a Google ad, Google takes money from the advertiser’s account.

That makes it the first ad worth clicking in a long time!

Dan8267   ignore (3)   2011 Apr 29, 3:51am   ↑ like (0)   ↓ dislike (3)     quote        

Zombie-proof house. Finally, something worth spending a small fortunate on. Looks pretty hurricane-proof, too.

Dan8267   ignore (3)   2011 May 16, 7:19am   ↑ like (1)   ↓ dislike (4)     quote        

solver says

Holy Smokes. It looks like we’ve got a long way to go still. I only hope we do not drop equal to the times of the Great Depression.

Why not? It would be a good time to buy if it did.

Dan8267   ignore (3)   2011 May 16, 7:42am   ↑ like (0)   ↓ dislike (4)     quote        

istt says

What doesn’t make sense is incomes are not falling precipitously. Therefore, most houses are already getting quite affordable. I just can’t see house prices falling much further.

I smell a shill. Who could look at the above graph, showing we've only back down to about 30% of unfounded and unjustified price increase during the peak of the bubble, and say "I can't see house prices falling much further." Perhaps someone who says "As soon as banks loosen lending standards again buyers will be groping for the McMansions." and "The affordability factor is what keeps me thinking now might be a good time to buy."

Prices still need to fall 30% from the 2006 levels or 25% from the current levels (2011-05-16) just to reach fair-market levels. And since no market has ever corrected without over-correcting, it would be ridiculous for the largest equity bubble in the history of the world to "softly" land back to fair-market prices. The correction will be below the median levels of the Case-Shiller graph, which is 110. It may even overshoot the 1940 bottom for the following reasons.

1. Unemployment has been extremely high for about five years. The government stats do not reflect the long-term out-of-work whose benefits have run out, and who have just stopped looking because their prospects are so bleak.

2. The baby boomers have started to retired. They are in the phase of their lives where they are downsizing to support retirement and reduce expenses. Since they have little savings, they must tap into equity. This trend will continue for the next 30 years until Gen X reaches retirement.

3. Interest rates have no where to go but up. Eventually the fed will have to raise interest rates or risk a dollar flight that will devastate the economy even worse than the housing bubble and financial sector collapse. When interest rates rise, housing prices will decline such that month-to-month payments remain the same. This means the initial raise in rates, since they are so low, will have the largest impact.

4. Eventually the sellers who are holding onto overpriced houses in the vain hope that the bubble level prices will come back will no longer be able to remain solvent. They will be forced to sell either directly or through foreclosure. If they are foolish enough to keep paying the mortgage on an overpriced house, it will be they who carry the burden of bailing out the banks. Either way, the net demand for housing will not be affected.

John Maynard Keynes is often quoted, "Markets can remain irrational a lot longer than you and I can remain solvent." However, this saying does not apply to renters. A renter can stay solvent indefinitely. A house flipper cannot. Perhaps the saying should be correct as, "the time between market bubbles is a lot longer than you and I can remain solvent."

Dan8267   ignore (3)   2011 May 16, 7:48am   ↑ like (0)   ↓ dislike (3)     quote        

istt says

What doesn’t make sense is incomes are not falling precipitously. Therefore, most houses are already getting quite affordable. I just can’t see house prices falling much further.

Actually, there have been quite a few studies that have shown that not only is real income falling, but the nominal income is falling as well, particularly for better paying labor. Factor in unemployment, underemployment, and decreases in benefits and there has been a trend over the past decade of decreasing compensation for the middle class worker.

Two articles that discuss this issue:
http://www.nytimes.com/2009/05/04/opinion/04krugman.html
http://economistsview.typepad.com/economistsview/2008/09/wages-are-falli.html

The important consequence as stated the NYT article: "Japan — where private-sector wages fell an average of more than 1 percent a year from 1997 to 2003 — is an object lesson in how wage deflation can contribute to economic stagnation."

Dan8267   ignore (3)   2011 May 16, 7:53am   ↑ like (0)   ↓ dislike (4)     quote        

vrpirata says

Dan8267 says

solver says

Holy Smokes. It looks like we’ve got a long way to go still. I only hope we do not drop equal to the times of the Great Depression.

Why not? It would be a good time to buy if it did.

Why not you ask, well, because that would mean most of us would be unemployed and therefore without the capacity take advantage of the good time to buy. Remember, recesion is when somebody else is unemployed, Depression is when you are unemployed.

Um, I think your misreading the Case-Shiller chart. The chart refers to the inflation-adjusted cost of housing from a period of 1890 to the present. So a low level, say that during the time of the depression, indicates affordable housing and NOT unemployment.

Just because housing is cheap, does not mean that unemployment would be high. In fact, the less people have to spend on housing, the more they can spend on other goods and services like furniture, restaurants, automobiles, vacations, etc. I.e., the less money spent on basic necessities, the more that can be spent on everything else. If anything, history has shown that the economy benefits when the masses have disposable income. The alternative is living like Europeans did in the dark ages, devoting all their resources on basic survival.

Dan8267   ignore (3)   2011 May 20, 1:08am   ↑ like (0)   ↓ dislike (2)     quote        

We fence sitters won't impact the market. The knife-catchers have caused a few blips in the declining prices, but those blips were temporary.

I've got enough saved to buy a house in cash right now, but I'm not going to buy today because the prices are way to high. It all comes down to the Case-Shiller index. The fair-market price, as shown in the 110-year history from 1890 to 2000, is 110 on the Case-Shiller index. We're still way above that.

Housing prices have only retreated about half-way from their bubble gains in places like South Florida. Not only do prices need to plummet to 110 on CS just to get to pre-bubble levels, but they will go below 110 because all markets overcorrect.

Given that the housing bubble was the biggest commodity bubble in the history of the world, I wouldn't be surprised if the CS Index plummets to the levels last seen in 1984, see http://tinyurl.com/3mkn9h8 . Guess it's time to break out the orange life-preserver jacket, http://tinyurl.com/y9t6tse .

The bottom line is that anyone smart enough to stay out of the bubble, not catch any knives, and save up while house prices correct isn't going to be stupid enough to buy before the market is back to historical lows (under 110 on the Case-Shiller Index).

[Note]
There's a bug in the software driving this forum. When it detects a URL, it includes punctuation like periods in the URL. Workaround: put a space between the URL and your period.

Dan8267   ignore (3)   2011 May 22, 3:04pm   ↑ like (0)   ↓ dislike (2)     quote        

“Humor is tragedy plus time.” - Mark Twain

If you think this post was directed at the actual home owner, who was not identified, then you missed the whole point.

Dan8267   ignore (3)   2011 May 24, 1:26am   ↑ like (0)   ↓ dislike (2)     quote        

The realtor gives four numbered reasons to stop renting (shown below as 1-4) and several other unnumbered reasons (shown as 5+).

1. Opportunity costs - loss appreciation on purchase. Owning a property free and clear.
2. Benefits of income taxes - property taxes and mortgage interest. As long as monthly payments are less than rent, it’s a good buy.
3. Securing your future.
4. Quality of life
5. Prices are affordable.
6. Interest rates are low.
7. Lots of inventory.
8. Owning your home is everyone's dream.

I’ll address why he is wrong on each of these points. Of course, since this guy makes his living on real estate sales, it’s in his best interest to convince people to buy regardless of whether or not it’s a good idea for them.

1. Opportunity costs. There are far greater opportunity costs associated with buying real estate than with not buying it. Including: not putting the money into other investments like stocks, not being able to relocate easily for a job, not being able to easily upsize or downsize your shelter.

2. The money you would save on deducting property taxes is less than the money you spend on property taxes. The money you save on mortgage interest, similarly is less than what you lose on interest. For the first 1/3rd of a mortgage, you are paying almost entirely interest. Also, even if the monthly mortgage is than monthly rent, it might not be a good deal especially if prices are falling.

3. Purchasing overpriced real estate does the opposite of securing your future. Saving up so you can buy in cash is a far better way to obtain financial security.

4. Quality of life is highly dubious. Buyer’s regret can cause a drop in quality of life. Finding out that your neighbors are load or a bunch of @$$holes can lower the quality of life.

5. Even a cursory glance at the Case-Shiller Index shows that today’s prices are still at historical highs and way overpriced.

6. It is better to save up and buy in mostly/completely cash when interest rates are raised. Low interest rates artificially increase the price of a house. Even if you are buying with 0% down, it’s better to have a $2000k/month payment going towards high-interest loan on a low balance than a low-interest loan on a high balance for the exact same house. One, interest rates might go lower again and you can refinance. Two, the savings on mortgage interest is increased. Three, property taxes are lower. Four, you can pay the loan off early and save interest.

7. Lots of inventory is not a reason to buy. The inventory is still causing the prices of houses to drop. So it’s better to wait. Also, a lot of that inventory was hastily built during the bubble and not maintained since the crash started. The result is a lot of shoddy construction and derelict housing. It’s amazing how quickly nature can reclaim a house when no one lives in or maintains the house. Climate control alone makes a huge difference in preventing mold or bursting pipes.

8. I think that today, more people are concerned with financial security than owning a home. The housing bubble and consequent bust have shown that owning a home is NOT synonymous with financial security.

In some places, where the bubble was less pronounced, it does make sense to buy today. But in high bubble areas like FL, CA, AZ the math simply does not work. As prices continue to plummet, there will be a time when it makes sense to buy again in these areas. But remember, the housing market isn’t going to bounce like a rubber ball. It’s going to splatter like an egg and stay flattened for a long time. So there’s no way you can miss the bottom.

I’m of the opinion that since the housing correction has overlapped the retirement of the baby boomers, we won’t see a “recovery”, i.e. a boom/bubble in housing, until after the last baby boomers have died of old age. Gen X is too small and too poor to put a dent in the housing inventory left by the aging and downsizing boomers. The Millennials are so far into college debt, which cannot be forgiven even through bankruptcy, that there is no way they will be buying houses. Meanwhile, most boomers do not have enough retirement savings to live comfortably for the rest of their lives. They will have to downsize to survive. All this leads me to believe that the Case-Shiller will flatline for years if not decades once the bottom is reached.

Dan8267   ignore (3)   2011 May 27, 1:47am   ↑ like (0)   ↓ dislike (2)     quote        

APOCALYPSEFUCK says

EXPORT EVERY LAST JOB TO CHINA and let Americans devolve into a bankrupted cannibal wasteland where food is free if you can kill your neighbor and eat him before he drops a bead on you!
Hahahahahahahahahahahahaha!

Is that you, Glenn Beck?

Dan8267   ignore (3)   2011 May 27, 2:02am   ↑ like (0)   ↓ dislike (2)     quote        

Tenouncetrout says

You mean like me, who sit out my entire 30’s expecting the market to tank any day now. Only for it to do so, in my 40’s when I’ve never been more marketable in my life, because the younger generation is so shiftless and lack gumption of the lowest order.

How ironic, a Gen-Xer calling Millennials lazy and unambitious. Um, don't you remember the Baby Boomers saying that about us Gen-Xers for like the entire 80s and 90s?

Maybe it's not a generational thing, but an age thing. Young adults have all the freedoms of adulthood, but few of the responsibilities. As such, they can have a really good time for a few years. I think some of us 30-somethings feel a bit jealous because we miss those times or, at least, wish we could relive them and correct a few mistakes.

I don't think the Millennials are any more lazy than any other generations -- I remember Boomers calling my generation lazy while I was working 90-hour weeks coding -- but I am concern that they are too easily distracted by shinning things like IPods and ring tones. I'm afraid that they could be much more easily manipulated by big business.

Dan8267   ignore (3)   2011 Jun 1, 5:54am   ↑ like (1)   ↓ dislike (1)     quote        

APOCALYPSEFUCK says

Plant potatoes and teach your family to kill with their hands for the day the ammo runs out.

Wouldn't it be wiser to teach them how to make ammo?

Dan8267   ignore (3)   2011 Jun 1, 3:00pm   ↑ like (0)   ↓ dislike (2)     quote        

APOCALYPSEFUCK says

people weren’t expected to work until 10 PM every single night to pay down the mortgage

Heck, us people in the software industry work till 10 pm or even after midnight and at most places don't even get paid for overtime! I miss the 90's.

Dan8267   ignore (3)   2011 Jun 2, 2:10am   ↑ like (0)   ↓ dislike (1)     quote        

http://www.census.gov/hhes/www/income/data/statemedian/index.html
has several good spreadsheets on median incomes by states. I remember reading that the median income in the U.S. was a little over $46k/yr and has held steady there in nominal, not real, terms for over a decade. I can't remember the source though.

In any case, historically houses have been priced at 3x to 4x median incomes. 10x income is way too high.

Dan8267   ignore (3)   2011 Jun 5, 5:11pm   ↑ like (0)   ↓ dislike (1)     quote        

Quote: I have my eyes on a 1 bedroom apartment for 400K (with parking)

I don't live in San Francisco, but $400k for a 1-bedroom sounds ridiculous unless the property is on the Playboy mansion's grounds. For that price, you could get a really nice houseboat and have some cash left over for dockage.

44' Sea Ray SEDAN BRIDGE
Year: 2007
Current Price: US$ 369,000
http://www.bradfordmarineyachtsales.com/yacht-sales-44-sea-ray.html

Or get an older houseboat for a fraction of the price.
48' MARINE MANAGEMENT MOTOR YACHT
Year: 1978
Current Price: US$ 189,000
http://www.bradfordmarineyachtsales.com/yacht-sales-48-marine-management.html

San Francisco has a bay, right?

Dan8267   ignore (3)   2011 Jun 7, 1:59pm   ↑ like (0)   ↓ dislike (1)     quote        

Gold is clearly a bubble just like housing was. And like all bubbles, it's impossible to predict when it will pop close enough to profit from shorting it unless you have inside information. As John Maynard Keynes said, "Markets can remain irrational a lot longer than you and I can remain solvent."

That said, gold is riskier than housing because of two things. First, those who were serious about selling houses in 2007 when the housing bubble burst could have simply sell them for a modest loss. They choose to ignore the burst and thus suffered greater losses. When gold drops that won't be an option because gold is far more liquid of an asset. That means that everyone can sell more easily and the price drop will be much quicker.

Second, and perhaps even more importantly, in housing you can simply walk away from a mortgage in a non-recourse state and the only negative effect is seven years of having a foreclosure on your credit report. This has practically no effect on a person who isn't taking out any loans. However, if you overpay for gold and then the bubble bursts, you have to bear the actual loss of capital.

Any investment that offers quick gains entails high risk.

Dan8267   ignore (3)   2011 Jun 7, 2:05pm   ↑ like (1)   ↓ dislike (1)     quote        

This is exactly why we need single payer. If medical providers can't charge people different amounts for the same service, then insurance companies cannot hold people captive.

90% of the reason people buy insurance is just for the group bargaining power. You get billed a lot more if you don't have insurance.

Plus if single-payer existed, anyone could start up an insurance company and compete against big insurance since the prices would be the same. A well written software system could put all the big insurance companies out of business. After all, it's all well-known math and if an insurance pool reaches a critical size, it's essentially zero-risk.

Dan8267   ignore (3)   2011 Jun 7, 2:38pm   ↑ like (0)   ↓ dislike (4)     quote        

Haven't read responses till now, but to clear this up so no one looking at these messages gets bad information...

tatupu70 says

If you do that–it’s your own fault. Investing your savings in a bank is almost always a losing proposition.

It is impracticable for the average American not to use banking for most of his day-to-day financial transactions. Furthermore, it is ridiculous that a person should be forced to take any financial risk in terms of investing in stock, bonds, or other assets simply to RETAIN the value of his money rather than to grow it. Money should automatically store value without loss. That's part of the definition of money.

Real incomes always decline during a recession and rise again as the economy grows.

Your statements are empirically false. Real incomes have frequently over the past two generations failed to climb at all during economic booms while falling during recessions. Simply Google "real income of Americans over time adjusted for inflation." Furthermore, inflation has the immediate effect of lowering the purchasing power of your income. You are entitled to your own opinions, but not your own facts.

You need a lesson in cause and effect.

This is like saying, "insert counterargument here." You haven't actually said anything, so the only reply I can give to you is, never try to out logic a person who does logic 70 hours a week for a living. It's like trying to outrun a professional racer.

Oh, wait a sec. If Thomas Jefferson said it, then it must be true….

In addition to explaining exactly how inflation works to undermine economic prosperity, I have quoted the founding fathers to show to you that these facts have been well-known for a long time. However, if you really want to compare your reputation to Thomas Jefferson or Benjamin Franklin, I'll give more credence to the fathers of our country.

Who would more people trust as a source of wisdom: the author of Poor Richard's Almanac or tatupu70?

Dan8267   ignore (3)   2011 Jun 8, 4:19am   ↑ like (0)   ↓ dislike (4)     quote        

Nomograph says

Money is issued by the government as tender. Are you actually suggesting that you think it is the job of the government to store your wealth for you?

(HINT: It isn’t)

Sorry pal, but your cries for a nanny-state to shelter you from the perils of a free market will go unanswered.

Nomograph, you ignorant slut. No, I am not suggesting that government should protect people from risks in free market investments. I have no idea how you pulled that out of your @$$ from my comments. Nor am I suggesting that we should have a nanny-state. I am not even suggesting that government should be the controller of money -- and in our country, it isn't, the fed is.

What I have stated is that money should retain value as that is one of its four functions. As Peter Schiff states in his book Crash Proof, the purpose of money is
1. A medium for the exchange of goods and services.
2. A unit of accounting.
3. A method of deferred payment.
4. A store of value.

When money fails in any of these purposes, the economy suffers. Before the federal reserve was created, the U.S. dollar held its value. After the fed was created, we got the Great Depression.

The only people who are pro-inflation are debtors and the big bankers.

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