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I'm going LONG on canned food and shotgun shells :-)
Just kidding. Depends on your time horizon. I bought into the stock market in 2002 and 2003 during the long slide. Now, many of those purchases have a decent return. But I have a long view, generally speaking.
As someone else said if you interest is 6-months to 1-year then CD's, bonds, mutual funds are the way to go. Even NetBank had a pretty decent interest rate on their money-market account last time I looked. I got fed up with them due to their inability to bank-link my BankofAmerica account though.
If your time-frame is short, then even Index Funds and ETF's I would not consider safe. QQQQ for example if you bought it a year ago like a friend did you'd still be waiting for it to change from red to green.
To answer the specific question, our government does not have any real vision about housing as a market to be controlled, in the same way the Fed regulates currency tightly. I would not expect this to change one whit even if the Green Party came to power. Housing market is simply not even on the to-do list for any party.
I'll take another tangent. SHOULD future governments get even more involved than they already are, in the housing market? As it currently stands, government definitely has an effect, albeit not in a coordinated fashion with a single vision and policy document.
Personally, I feel that the current market effectively prices the middle-class out of owning a home in many areas. My parents could afford a middle-class home with a single working parent, I cannot. To be completely selfish about this, a policy that had as it's working target that housing should be "affordable" (yes I know this is too loose on MANY levels) to own would have many long-term benefits despite short-term hardships to specific groups and areas.
I'll disagree with the points about Republicans being independent thinkers. I used to have bass who was hard-core Republican. She had a radio in her office and would listen to Rush Limbaugh EVERY day. I had the office next door and it was quite annoying when I am trying to work and she is giggling over the latest Limbaugh comment. It seemed quite obvious to me there is a large chunk of Republicans who need daily reinforcement of their beliefs in order to keep believing them. A lot of the political comments out of her mouth were just repeats of what she had heard Rush say.
As a former aerospace engineer who hangs out with a few civil engineers still, I don't believe the amount of structural steel used has a lot to do with how well it will withstand an earthquake. Depends on how it's deployed. From what I understand, it's how the structure is designed and how it floats (or doesn't) on the soil that determines it's immediate survivability. Designing some "give" into a structure can actually be a good thing. A willow will survive wind-storms that a tall oak will not. In any case, getting a good engineering assessment or two of your structure would be a good idea not just rely on the word of the builder/seller about how strong it is.
The best thing you can have is insurance. In any case even a structure that survives an earthquake could be damaged/destroyed by post-quake factors like fire or flood. Or the surrounding area that is destroyed could create it's own hazards for some years. If your neighbors are slow to rebuild you could be living on a block with boarded-up empty buildings and that's not good on several fronts.
Yawn, indeed there are some amateur economists who will have complex explanations.
However, let me take the direct and simple approach. I like Steve Jobs a lot, he had a single question for Sculley that was "do you want to sell sugar water for the rest of your life, or do you want to change the world?"
Cut right to the chase. The population always has a large percentage of people who will stretch their finances right to the limit to afford their Dream Home (tm). The last 5 or so years flat out used up that asset, and some of their friends too who were suckered in with this fiction that real-estate never loses value. What's left are the people who look at their incomes and assets, look at what is a reasonable set of terms to own a house and not be "house-poor" and eating Mac&cheese for the next 30 years, and go nuh-uh!
Quite simple a large chunk of middle America is currently priced out of the housing market, due to it not being in a range they find rational. The last 5-10 years have been devastating to the middle class. Inflation will make NO difference to this population group, as the problem still remains that they look at mortgages with payments a very large fraction of their paycheck and just can't see the benefit to it. Am I victim of group-think? No, I was saying this quite a bit before finding this blog. Few people around me would listen in 2004 and 2005 when the market was booming. The market will correct when prices are more in line with salaries, it really is just that simple.
Not sure what I did to offend you.
Let's say I want to buy a house. I want to buy it next month. Is "inflation" a factor in my thinking? If so, why should it be?
The original point about "inflation" is qute nebulous to me. It apparently involves guessing about the impact of inflation as a long-term major input on real estate values.
Ordinarily when I think about buying a house, I look at my finances and the mortgage and that's it. If a wizard with a crystal ball could tell me what the inflation rate was going to be over the next 30 years and what impact this will have on real-estate that might be useful. Absent such data we have to go with what we have.
Inflation as I perceive it is prices go up and hopefully my salary goes up by that or more. I am not an economist, please elucidate.
RandyH, wasn't addressing you and perhaps "it's just that simple" was poorly chosen. What I was trying to say was that FOR ME, it's "just that simple" that I don't factor in nebulous guesses about inflation or long-term economy into my buying decisions. Can I afford this now, that is something I can grasp. Other people may have more complex standards. What those would be I do not know.
On the flip side of this, the original post...
If anyone remembers at this point
Was someone positing that, somehow, inflation in some murky way, would make it a good idea to buy RE just now after all.
Do I need to re-read this thread a 3rd time? Perhaps it's buried in there somewhere. I just don't see how prediction of inflation would make me want to run out and buy RE now.
This "Minutemen" is a bunch of Limbaugh-blowhard chatter.
There are plenty of factories that are filled with illegal workers, it's not just dudes hanging out in your Home Depot parking lot. Go take a tour of your local chicken-processing plant and see if anyone speaks English. It's been that way for years, and I don't see any Republican-funded INS trucks rolling up and deporting them. If the "Minutemen" were so serious about their task they would be volunteering to work for INS for *FREE* in my opinion. They would be sponsoring and marching for bills to punish employers for say $10K per illegal caught working for them.
Me, I don't care either way, I am just amused by the hypocrisy of both parties which say things and then make absolutely sure no results are achieved. Because neither party really wants to harm the bottom lines of their corporate masters no mater what they say on TV.
Is this going to have a major impact on housing or the economy, I don't see how. Except for news-worthy cases, Jose the Fruit-Picker isn't typically buying a McMansion on a sub-prime loan. They work for 6 months, then go home to Mexico and take their money with them. Then they come back next season.
The thing that makes me MAD in all the articles I read, is the builders and realters and brokers who just don't get the simple fact that they have colluded whether they realize it or not. What did they achieve?
THE MIDDLE CLASS IS PRICED RIGHT OUT OF THE HOUSING MARKET.
I don't want a "free" swimming pool.
I don't want "free" closing costs.
I don't want granite countertops and a hot-tub.
What I want is a cheaper house that I can afford. They are rearranging the deck chairs on the Titanic with hearings and regulations to attempt to prop up an unrealistic market. This will not work. Until they start building and pricing houses to historical norms of price versus salary, I will not buy a house with a bunch of overpriced "extras" that are there not to offer me good value but just to jack up their profits.
What exactly does "spinning my heels in mud" mean?
Sounds kinda dirty....
I wouldn't count on the Fed cutting rates.
At some point, protecting the dollar internationally probably wins out over tweaking the economy. It's not unlikely to see further increases if the dollars keeps dropping. In case the Fed does decide it doesn't care if the dollar becomes worthless, am hedged against this with ETF in foreign currency.
"You can't take out someone with a motorcycle..."
Are motorcycles these days getting down to zero weight with fluffy pillows on the sides? I rather imagine hitting one laying in the road in front of me is going to be as deadly as hitting a washing machine that fell off a MJT.
So someone going under your wheels, or being crunched between you and the 18-wheeler next to you, or a motorcycle cartwheeling through the air, none of those things are likely to cause people to panic and swerve or slam on their brakes? No pileups ever occur because of a motorcycle? This must be a very interesting planet, where only the driver of a motorcycle is ever endangered by their whacky impatient antics.
I thought in-laws were supposed to wish a young couple WELL!
Maybe a dowry or a gift to help them on their way, and sound advice about not getting in over their heads at the start. My parents generation all started off with rental or very small houses from what they tell me, and slowly worked their way up. My parents are not wealthy and were unable to give much in the way of gifts to me and Mrs. V. But they did give a little something and they gave a good example of running a house in the black all their lives, which is worth a lot!
Not once did I hear a story about a relative "gifting" any child a mortgage debt-load. I'll be the bad guy, the one who says your in-laws sound like real inconsiderate jerks. One should not pussy-foot around on such weighty matters. This is a recipe for a quick failed "starter" marriage. If things are like this before the wedding they are assuredly going to get a lot worse. A prenup or a competent divorce lawyer on top of your Rolodex would be prudent preparedness.
Maybe a dowry or a gift to help them on their way, and sound advice about not getting in over their heads from day 1. My parents generation all started off with rental or very small houses from what they tell me, and slowly worked their way up. My parents are not wealthy and were unable to give much in the way of gifts to me and Senora V. But they did give a little something and they gave a good example of running a house in the black all their lives, which is worth a lot!
GC wants to be a woman,
Senora V had a strong desire for a house in 2005, constantly window-shopping. I put my foot down on that, seemingly just fighting a delaying action for several months. Me I just knew California was nuts after having moved from a state where a million dollars would buy you a REAL mansion complete with servants.
Around then we found Patrick.net and similar sites. Then I had all the hard facts and analysis like the main page here, or Schiller, or Piggington. Now she's the one baggin on friends who bought houses during the Crazy Years. I have to remind her not to ridicule them too mercilessly.
"Time of Madness"... I like it. Existing Patrick.net terminology?
I'm shopping for a new rental house now. Unfortunately where I live the FBs are still clinging stubbornly to shreds of hope the Big Spring Buyer Bonanza will rescue them, so I haven't yet seen a flood of new rental listings. Probably see it later in the summer, when I want to be moving next month. Arrrgh!
I rather think we were LUCKY to make it through the Cold War IN SPITE of Mutually Assured Destruction, not because of it. Too many fingers on too many buttons, and too many planes and ships pushing the edge..... there are some rather unpleasant stories about how close we ACCIDENTALLY came to WWIII several times.
Take the case of Stanislav Petrov, generally considered to have avoided an unpleasant exchange in 1983. I think this is an excellent example of how reasonable men stuck in the middle of insane systems, made the right choice even if it went against the grain of what they were programmed to do. Was he rewarded, no he was punished.
Now where is that crystal ball....
I doubt anyone here can predict what will happen next enough to know what is best. Personally I bought some FXE a bit ago which is an exchange-traded fund against the Euro. It's doing okay. Like many others I have things spread around in some US and some foreign funds like Emerging Markets.
I stayed out of Chinese funds I think their business/government weirdness is unstable and difficult to understand. Communists may know how to make cheap Walmart goods, but will also run a polluting 50-year old steel mill to death instead of modernizing it. Failure to invest in capital upgrades and R&D eventually bites you. I know a Chinese professor who said no students there want to go into research or PhD everyone is chasing bachelor related to production and then go to work.
However as increasingly interconnected as everything is these days, I can't say that any one thing is safer than another. Now it seems like every time someone sneezes in Norway the international markets catch cold. Money Markets, index funds, CDs those are traditional safe bets. Lately I've been aiming more for things that return high predictable dividends more so than just appreciating stock price. Certain oddball stocks like FRO for example are paying off really well.
I think he should sit down with an accountant and some spreadsheets and crunch numbers. Make different assumptions about housing price down the road and see how it comes out in each scenario. You have to put in a continuum of varying worst cases and see what you risk tolerance is for that.
From previous analyses I have seen, in a declining housing market, it would not be best to hang onto a white elephant. Sell it, get out, put your money to work somewhere where it grows. I have seen plenty of houses wrecked by tenants is another danger. Being upside down, rent less than carrying costs, and the opportunity costs of not putting money to work where it will grow make this a losing proposition most times. But you won't KNOW until you seriously analyze it instead of go with your gut and some back of the envelope calculations.
I bought some Cisco in 1999. I held onto it stubbornly for a LONG time before I sold it for a capitol loss. If I had been smarter I would have sold it when it dropped by 20% and put that money into something else instead of continuing to watch it shrink. Like most people I had to learn the hard way about opportunity cost and the effect of inflation.
Forgot to mention it doesn't matter so much how many years to a recovery, it's how deep it will be. In many areas prices will have to correct by as much as 50% drop to reach that. If you assume a return to norms, prices will actually dip below median historical values for a while. Is he willing to withstand that? Or do I smell a "soft landing" assumption here, where everyone working at WalMart can find a way to pay their mortgage on a McMansion?
What particularly recommends Mendocino as a retirement location?
I think the only reason prices got so out of whack outside immediate Bay area, was crazy pricing that forced people to look further out. Now that demand has collapsed. I mean seriously, look at all the communities in the Central Valley whose prices and development shot up in the last 5 years. Not that many people really want to live on my side of the mountains beyond Napa, they were forced into it.
When it comes to finance, go with the numbers not your gut. Beats some fantasy about a white knight or a lottery ticket.
Maybe I shouldn't have said "accountant". What I meant was someone competent to run the numbers for you. Could be you with a little study. Should not be anyone in any way connected with banks, mortgage brokers, RealtWhores, etc. Inevitable if they've got something to sell, they will consciously or not distort the numbers.
Heck even my tax accountant at H&R block keeps trying to work me for a home purchase while we're going over 1040 paperwork. They also do mortgage biz so even the best numbers guy will be corrupted by the sales-man pressures of their firm.
I don't know what the best source of impartial analysis would be, perhaps someone here has an idea?
Can you be more explicit about "financial stocks are taking a beating"?
Why would Bear Stearn be the straw that broke the camel's back particularly? Perhaps like some other recent implosions it's a symptom or a victim not a trigger event.
Perhaps now that it's down "there's never been a better time to buy" a CDO eh?
In keeping with the start of this, you would think a "hedge fund" would be something you would want as a safety net? It seems now that the meaning of hedge fund is something entirely different? I are an engineer not a financial analyst, sometimes the terms they toss around confuse me.
Re "taxing wasteful behaviour".
This sort of thing has no end. Examine the billions spent each year on cosmetics, or...... well name your topic. CEO stock grants, congressional retirement funds. Perhaps booze? Cigarettes? Everyone has something they despise money being wasted on. For me it's golf, can't say building a green manicured golf course in the desert makes a bit of sense, but people do it. The answer to something you don't like is often expressed in the form of taxation. Yeah a GOLF TAX, I'd vote for that one. Make them pay double for their water bills too, instead of discounted.
The problem you will run into, is the entrenched bureaucracy and legal barriers thrown in your way. Every state will have their own system for handling sales, and if you aren't an approved and certified person to take part in that process......
Every little squeaky wheel in this process will trumpet that their role is ESSENTIAL, and if you take them out of the way who will you turn to for help? Not that suing any of these people does any good when the process goes wrong now. But anyhow you have an uphill battle.
If you wanted Federal intervention to untangle this mess, they would only make it worse. Probably end up with a bill with 57 other things added onto it.
I for one would welcome anything that is leaner than what we have now.
I should add, it would be nice to see a potential service like this, with a transparent and understandable set of fees. The current system involving a percent of the sale price so heavily, encourage agents to find way to inflate the price.
On the other hand something like fee of X per square foot of house or of yard, would be more transparent and fixed. And this would reflect perhaps that doing lawn-care and staging for a larger house or lot, would be more work. You get the idea.
Nothing wrong with CraigsList, but look carefully for actual individual landlords. Your worst enemy is the Property Management Empire. Whether they be a large corporation, or a RealtWhore doing some slumlording on the side, they are professionals adept at screwing you over. I find a depressing number of CraigsList ads, when I go to see the house and meet the landlord, at some point they will reveal they are part of the REIC. They make very poor landlords because they are not interested in keeping the house in best condition, just good enough to keep turning a profit. They'll want to run a full credit check on both parties, sign a 12-page lease plus 3 ancillary documents saying basically they agree to do nothing and if certain things break it's not their problem to fix it.
Every "family" landlord I've had, the contract has never been more than a few pages and we worked out that what I would repair (and give them receipts for) and what they would take care of, shake hands done. I agree to take good care of their house, they agree to let me live there for money it should be that simple.
Glen, I'm not sure what you concern is? If it's simple worry over being evicted by a new owner, I though that any lease must be honored by next owners? Not really sure though.
I just want to point out, that ultimately YOU (generally speaking) put up with this sort of salary imbalance. To try and rectify things on the backside with fiddling with the tax rules, always strikes me as cowardice. I had a boss once who did virtually nothing and made a bunch of money off my work. After it was apparent this situation was not going to fix itself, I made it clear how I felt about this situation and left.
I really wonder about the people who work at Home Depot at ANY level whether it be floor sales or middle management, who sat around and did nothing about the fact that useless CEO Bob Nardelli made so much money. WTF?
Man I hate to bring up the UNION word, but I mean really, are employees these days all frightened sheep? So terrified that they might lose their jobs they take any abuse management will heap on them?
Then go home and once in a while pull a level in a secret ballot, that a POLITICIAN *PROMISES* them will redistributed the wealth? Come on, we all know most of this money goes to the IRS flunkies, accountants, and tax lawyers anyhow, it doesn't help you one damn bit.
Quite simply, yeah you worked for Home Depot under Bob Nardelli and put up with that crap, you got what you deserved. Organize a wildcat strike, or a union, do something. Even if it's just speak up at a company meeting about compensation. Sure I'd ask why I'm not getting a raise this year if the CEO just got 300 mill in stock options. Where do you think the manager's salary comes from, from YOUR labor. If they start forgetting that maybe it's time to remind them.
Geez! I'm trying not to use the P word here.
Couldn't we just blame rich people for all our problems? Then round them up, kill them, redistribute their house and personal wealth.
I call this the Pirate Solution.
Man you guys are taking a thread that started with a pirate flag too seriously.
I'm still picturing the first 10 minutes of Monty Python's "Meaning of Life", the Crimson Permanent Assurance segment. Reminds me I need to watch YellowBeard again too.
AVAST, YE SCURVY DOGS!
Well I don't know about other countries, but this one is starting to look like "House of Lancaster, House of York".
We have royal families that swap roles. Clinton, Bush, now maybe another Clinton. Are we grooming more of their kids for leadership? Maybe we need another Kennedy in the job again. Some choice there.....
Knock the pins out from under the SYSTEM OF DEBT-SLAVERY:
1) Pull all funds from national megabanks, move to local bank preferably a credit union. Credit unions are operated like membership clubs there is no STOCK sales to turbocharge them so they run responsibly like a bank should.
2) Stop using credit cards. Carry cash for all incidental purchases use credit cards sparingly if at all. The "reward points" are actually funded by merchant fees which means you are paying a higher price for items in the first place.
3) Capital preservation is the rule of the day NOT speculation, that is what got us into this mess. Stop adding to your 401k/403b unless there is employer match and invest it yourself somewhere safe even simple long-term CD. This disaster proves that smart fund managers were not so smart as anyone's retirement account should prove right now. All your retirement fund was to them was another big pot of money that propped up the gambling casino in Manhattan.
CNBC bimbo: ... What is the worst-case scenario if we were to see house prices come down substantially across the country?
Bernanke: I guess I don't buy your premise. It's a pretty unlikely possibility. We've never had a decline in house prices on a nationwide basis. What I think is more likely is house prices will slow, maybe stabilize, might slow consumption a bit. I don't think it's going to drive the economy too far from it's full employment path though.
(later on "froth") I do think this is a localized problem and it's not going to affect the national economy.
Ooops sorry meant to post this in misc. Can we edit posts or move them in new forum?
Why not revise Prop. 13 to "owner-occupied PRIMARY residence"?
That should neatly take care of all the Grannies on teacher pension that they trumpet the thing for. And neatly hose all the parasites and cheats who are the ones really behind it.
Watch this 1997 Jim Cramer interview:
PBS Frontline: In the news Cramer vs. Stewart
So the snake oil he sells, the fantasy they want to addict you to, is the same as that of horse-racing. Pick the right horse and ride it to the finish line to riches
Jim Cramer: If you had bought Merck in the 1950's, just bought 10,000 shares of Merck, instead of buying US Savings Bonds, you would not ever have to work again.
This is a corrosive crazy notion that should be TREATED not promoted. There's nothing in there about doing hard work or bringing something new into the world. All you have to do is be some schlub with a few bucks who puts it on a horse named Fat Chance, or in his terms a pharmaceutical company. Or more importantly that you have given this money passively to Wall Street so they can play with it and skim off the top.
There's a LIMIT to how far you can carry that scheme, and I view that as acceptable risk for SIMPLE revision. By "on the rolls" do you mean the wife is the owner in deed and all other paperwork? That would make things simpler during divorce eh?
It would slice out a large chunk of slumlords who rent out family houses they inherited. I know of plenty of examples here in Davis where original owners died long ago, and the children haven't been here in decades. They get some Realtor (TM) to be their property manager and rent them to students. Instead of putting these houses back on the market as would happen in other states, the low taxes they inherited form a subsidy that makes it profitable for them to continue renting them forever.
The real elephant in the room is Commercial Real Estate as previously stated by many. The Disney folks and strip mall owners who inherited a windfall will squeal like stuck pigs.
A husband & wife playing ownership shell games to beat the tax system hardly seems worth the extra effort to chase down.
Just got memo from top fatcat where I work, at least 8% paycut coming. Probably in furlough form. Also some layoffs,