"Rummage $ale Chic: Why We're Going Gaga Over Pinching Pennies"
invite response
2005 Dec 21, 3:49am 21,611 views 134 comments
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Peter P
2005 Dec 27, 3:56am
Though I prefer gold to diamonds, I plan to invest in apple trees, strawberry plants, blueberry bushes, and seeds this spring. I’ll eat my wad, and sell others the excess.
Good move. ;)
If I am rich one day, I will probably invest in an abalone farm. Edible investment. Yummy.
Wouldnt the fact that so many recent buyers are clueless about the bubble be a good argument AGAINST a crash?
After all, if MOST of the buyers have no fear of a bubble, then they wont be jumping ship anytime soon, and that would go a long way to mitigate the all important “herd mentality†that is so crucial to a true crash.
LOL... Jack, you're killing me --thanks for the belly-laugh!
Peter P
2005 Dec 27, 4:11am
After all, if MOST of the buyers have no fear of a bubble, then they wont be jumping ship anytime soon, and that would go a long way to mitigate the all important “herd mentality†that is so crucial to a true crash.
But many will be forced to walk the plank when their ARM adjusts. Serial refinancers will also find themselves thrown overboard when they are unable to reset their NAAVLPs and their payments go up at least 7.5% a year.
Peter P
2005 Dec 27, 4:12am
After all, if MOST of the buyers have no fear of a bubble, then they wont be jumping ship anytime soon, and that would go a long way to mitigate the all important “herd mentality†that is so crucial to a true crash.
I somehow watched Brokeback Mountain and saw the sheeps. I said to my wife: look at the sheeple!
Peter P
2005 Dec 27, 4:16am
Most people do not do what-if analysis, which is extremely important with a highly-leveraged investment like a mortgaged house.
Peter P
2005 Dec 27, 5:06am
Does a 2-yr rental agreeement even exist? Does it yield a decent discount? I’d like to lock in the low rents, and not risk having to move or pay higher rents after 1 year. Would a slowdown in housing mean higher or lower rents in the 1-3 year window?
I think real rent will be firm with the slowdown in housing. In many places, there is so much vacancy that it will take a lot more tenants to bring up the price.
Peter P
2005 Dec 27, 11:21am
What do you mean by “real†rent? Adjusted vs. ‘real; inflation? Or adjusted vs some kind of mortgage numbers?
Inflation.
I think rent may still rise according to inflation in the post bust world.
Peter P
2005 Dec 27, 11:23am
Now, if only I could figure out where to park the wad
You need to negotiate wad parking space with your landlord. :)
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I was intensely curious to see how the looming housing crash would play out in the MSM in years to come, so I fired up the ole' Time Machine and jumped ahead to December, 2010, where I picked up the latest holographic edition of Time Magazine. You will be amazed at the cover story:
"Rummage $ale Chic: Why We're Going Gaga Over Pinching Pennies"
A new trend is sweeping the nation. The signs are unmistakeable: legions of people turning in the keys to their I/O purchased 4,000 sft exurban McMansions to rent a modest townhome within walking distance to work, others trading in the H2 for a Prius/Insight --or even a bicycle. The neighbor who just unloaded his six negative cash-flow Las Vegas condos to "scale back". Everywhere you look, there are signs of a powerful drive to cut back, scale down and simplify. An almost Japanese ethic of thrift has captivated the nation, and nowhere is this trend more pronounced than among America's largest demographic cohort: The Baby Boomers.
"After housing prices kept falling 10-20% a year and our rents didn't even cover the taxes owed, we figured it was time to reassess our financial situation", says Joe McLemming. Joe, 58, is just one of the millions of Boomer investors who participated in the real estate bull market of 2000-2005. "Now that we're renting again, we're not hemorrhaging money like crazy and we can even go out to McDonalds once in a while. I got so damned sick of always eating Top Ramen!" He let out a raspy cough before continuing, "Besides, renting nowadays is cool! Everyone's doing it --even Hollywood actors."
"Yes, it's true," his wife, Marge, agrees. "It's such a relief to be able to go to dinner parties and not have to avoid embarrassing questions about all the money-losing properties we owed on. It's getting so you're practically a pariah if you're a homedebtor now."
"Yeah, " Joe chips in, "nowadays all people want to talk about is how much they're saving by walking to work, or buying clothes at thrift stores. Anyone who shows up bragging about some condoflip Ponzi scheme is just asking for trouble."
The McLemmings anti-homeownership sentiments are echoed by a series of national consumer polls on the subject. In the wake of the housing market collapse (and the Fed's disastrous attempts to revive it by reinflation), over 90% of Americans remain convinced that real estate is a bad investment. Five-year cumulative losses of up to 70% percent in the worst bubble-infested markets seem to have permanently tarnished RE's image in the minds of the consumer.
Former NAR spokesman, David Lehreah (now chief advisor to Consumer Credit Counselors) had this to say:
"If you haven't paid your mortgage off, it means you probably did not manage your funds efficiently over the years. It's as if you were putting a match to 500,000 dollar bills."
He called it "very unsophisticated."
The new thrift-is-chic mantra has even permeated popular culture, with "grunge" bands making a big comeback and D-I-Y shows earning top prime-time ratings. Versace has even premiered a new homeless-inspired fashion line dubbed Derelicte.
"Clearly, anyone not getting with the program and scaling back is missing the boat," says Rolling Stones trend-spotter Shane Browner. "Setting the thermostat to 50F is cool --I mean really cool!"
#housing