patrick.net

@astrid,

Why TVM matters very much for your calculation:

I don’t think the time value of $27.5K will be bad. If the homeowner can successfully do FSBO and capture 2%, the costs would be –> $15K - $10K + 10K + 5K = $20K or 4 yr recovery.

These recovery times are short enough for me to forgo time value of money calculations.

r = 4.5%*

Y0: -27,500
Y1: 5000 [-21737]
Y2: 5000 [-17356]
Y3: 5000 [-13163]
Y4: 5000 [-9151]
Y5: 5000 [-5311]
Y6: 5000 [-1637]
Y7: 5000 [+1879]

Y0: -20,000
Y1: 5000 [-14560]
Y2: 5000 [-10179]
Y3: 5000 [-5986]
Y4: 5000 [-1974]
Y5: 5000 [+1866]

Payback periods for positive NPV is longer than your calculations.

* most people's discount rate will be *much* higher than the 5-year treasury rate, especially if they hold any credit card debt, car loans, etc.

@Lovy

Your calc is good but what about the non taxable profit when the price goes back from $500k to $1mil is 2 years

I don't even know what this means. Those wouldn't be profit until realized, and assumes a dramatic increases over 2 years implying another immediate bubble.

I think Mexicans are fine people. They are hardworking, cheerful and honest. Why does the guest worker program exist? Because a lot of white and black fat asses in this country refuse to pick up jobs they consider beneath them, while at the same time lack the skill and knowledge to fill the high-pay jobs. Instead, they stay at homes watching TV all day long, chewing machos, drinking Pepsi and starting to develop diabetes and having babies at 15.

The whole Katrina thing disgusts me. I was watching one woman in her 40s, already a single grandmom, and her daughter is obviously, well, a single mom, bitching and moaning about the lack of government aid and lack of food and water, and then you get the classic scene of a few guys shooting the helicopter with looted guns, great. I never see any Mexican immigrant workers bitch and moan about lack of aid, when they need food and money, they squat in front of Home Depot to be picked up for remodeling or construction projects. Without Mexicans in the CA agriculture business, how much would you like to pay for your organic vegetables and free range chickens?

I am being serious, if you take away the Mexicans from CA, we will all have a serious toilet problem. They monopolize the cleaning job, expect garbage to start growing in your office and home. Who will fill the spot? Definitely not those folks in South Central, I can assure you that.

I just wanted to add (and see how many others felt the same way) that when contemplating a potential purchase as a "buyer-user" it's important to put as much mental distance between the seller's asking price and what you MIGHT be willing to pay as possible. So when we are "shopping" we shouldn't let ASKING price be the "ultimate" or final parameter. For instance, you want to live in a certain neighborhood (but assumed it was out of your price range). I say, go ahead and look where you would actually want to live, prices be damned! Let's all break this bad habit of conducting searches based on pricing parameters. We've long suspected that prices where negotiable and now that I think it's safe to say that Robert Cote's "Silent Spring" is fast becoming a reality we should become more brazen, not more frustrated. I realize alot of people will say, Easy for you to say DinOregon! This really helps ME anyway. NOT WHAT THEY ARE ASKING, WHAT YOU MIGHT BE WILLING TO PAY! I may even run an ad on C/L that goes something like this:

Have you priced your home or property based on what friends or a realtor told you they thought you could get for it only to watch it sit on the market? Are the "bidding wars" you were told would surely come failing to materialize? Trust me, alot of people are there right now and there's more everyday! Stop to consider what your monthly carrying costs are then calculate how much longer you can afford your payments on top of your own residence. Don't jeopardize your credit rating and your own home! If you are ready to reasonable we can make arrangements to relieve you of your unwanted property as soon as possible! Call today!

It's the warm winter weather:

http://biz.yahoo.com/ap/060323/economy.html?.v=10

P.S (to C/L ad)

If you are already behind on your payments just "renting it out" won't work! We work with people in your situation everyday and it may take months to get a decent, paying tenant! We can make a difference! Call us today!

mr.o

to understand sales volume, you need to understand accounting. I don't know jack about RE accounting, but I can tell you in every single industry, the "Sales" number can be easily manipulated by Micky Mouse accounting. It depends on how you book your revenue. When someone puts down a deposit, do you book it as one transaction? When someone makes a conditional offer, do you make it a transaction? Then there is the trick of shuffling orders, which every companies do all the time, postponing orders from a good quarter to a bad quarter to smooth things out. So how many sales of Feb are in fact sales from Jan or futures sales that cannot be booked until March?

So sales is a general indicator, don't look at it religiously.

For example, in retail business, you don't book the revenue until the goods are shipped, same thing applies to software vendor that need to get the bits delivered to the customer. But enterprise license or retail order is usually fixed several months ahead, you won't get to know the bad news until the day before quaterly reporting. So as the CFO, u juggle numbers, if the numbers are too low, you talk to your customers to have the stuff delivered early, if your numbers are too good and you want to avoid spikes, you delay delivery. It is particularly done in the last quarter of the accounting year so you always have the YOY growth.

Come to think of it, I find the Redneck, white-trash, ghetto stereotypes is a little ironic because if you think about it, the whole housing bubble isn't about big, huge, mansion sized homes, BMW's, and Caviar. It's all about people in places like California- people that are educated, smart, well paid, and culturally aware trying desperatly to attain the basic basement level housing that only 15 years ago would be lower middle class housing, and what in the rest of the country still is. In fact, people are struggling to attain the same kind of housing that " white trash" inhabited less than a decade ago. It has come full circle, and many people don't even see what they are fighting for- a whole lot of nothing. When I see people who are so proud of their 2 bedroom home in oakland, or some house with no yard perched in berkeley, I can't help that despite all of this, Most housing in the Bay Area is substandard, ugly, and oudated.

@Ray W

I come from a rural-rural background, not a semi-rural background. Families worked very hard to not be "hicks". It was in how our mothers and fathers raised us, taught us manners, and disciplined us and made us go to school and do our homework. Few of us had any money at all, but our mothers and fathers still didn't want us to be known as hicks. The hicks usually had alcoholic fathers, dirty houses, kissing cousins, 32 year old grandmothers, and lots of extra puppies and kittens they were always trying to give away.

Calling this racism or elitism is demeaning to the basic family values, which I can reasonably assume by your comment, you favor yourself.

It really doesn’t matter what the difference is. Redneck, hick whitetrash are all meant to be demeaning, derogatory put downs. It’s a way for elitists to make themselves feel superior to others. In my opinion use of those words is a form of racism or cast system.

The hicks have words to describe urban elistist [sic] also. None of which would considered flattering by the recipient.

I know that illeagal immigration really hurts the US economy. Its a drain on hospital resources, schools, police and just about every other bit of infrastructure you can think of. So what are all the meat packing plants and produce farms going to do without their uber-cheap labor? Aren’t these corporation the ones that want to keep the door to Mexico wide open? It’s almost as if there are parts of the US that wants slavery to be legal so that they can profit from it. Cheap labor, no benifits = huge profit. Come to think of it, I get a feeling that agricultural corps are just as greedy than the Kenneth Lay types because they’re exploiting people in the worst way. If they had to pay real US wages and provide benifits to all employees, they’ll have “medium” profit. And then, some of them may actually need to retool their business to stay competitive. I really don’t feel a lot of sympathy for those rich agricultural monolith blastaaaards! (I can’t type a reall cussword at work)

EXACTLY!

I think some people here are confusing the terms "Mexican" with "illegal alien". The two terms are NOT interchangeable. One refers to a person's nationality/country of origin, while the other refers to his immigration status.

I have *no problem* with "Mexicans", or Salvadorans, or Columbians, etc. legally immigrating to my country, working and paying into the system. I *do* have a problem with large numbers illegally flooding in and overwhelming local schools, hospitals, police, etc. while depressing local wages and forcing ME to pick up the tax tab.

Like Scott J, I also don't buy the corporate line about "Americans won't do the work, blah-blah-blah..." Bull$hit! Americans USED to do the work before there was a gigantic pool of quasi-slave labor to do it. Of course that was back when such jobs might have paid a decent wage. Lily-white Autralians, Kiwis and Europeans (who lack ready access to said slave labor pool) all manage to do those jobs, or they automate them, so why can't we do the same?

HARM,

if you don't like illegal immigrants, just shut down their access to schools, hospitals, etc. Require passport or proof of citizenship, PR to open a bank account. It is not that hard to do. In fact, this country is already clamping down on illegal immigration. The tide is turning, and when RE crashes, the tide is going to turn even more.

Now, I seriously challenge your notion of "there are Americans who will do the job". You need to see some welfare people who are 300+ pounds shopping Frito-Lays and cigarettes with food stamps. If one can cut them off the welfare and get them back to work, I am all for it. I just doubt if they ever will. The Jerry Springer guests will never get back to workforce, and there are sadly plenty of them.

mr.o Says:

Existing Home Sales Post Unexpected Gains!
How do you explain this? The National Association of Realtors reported Thursday that that sales of existing single-family homes and condomiums rose by 5.2 percent in February to a seasonally adjusted annual rate of 6.91 million units.

maybe all of this bubble talk is wrong!

*********
New poster here.

Actually, if you look at the rest of the data that the NAR text neglects to mention in the official press release (even though it's their own data):

http://tinyurl.com/h3zr3

Inventory:
Feb 06: 3,033,000 units (up 5.2% in 1 mo, 30.2% in 1 yr)
Jan 06: 2,883,000 units
Feb 05: 2,330,000 units

- Months supply
Feb 06: 5.3 months (even in 1 mo, up 32% in 1 yr)
Jan 06: 5.3 months
Feb 05: 4.0 months

- Median Price
Feb 06: $209,000 (down slightly in 1mo, up 10.6% in 1 yr)
Jan 06: $210,000
Aug 05: $220,000
May 05: $206,000
Feb 05: $189,000

You would see that every single other indicator points to a slowdown. Interestingly, with these trends, median price may YOY negative by the summer???

Ray W,

I have no dispute; I think we're talking about the same thing. And yes, I was called a hick plenty when I migrated to a city to go to school and later for my first job because of the way I talked, dressed, and my choices in automobiles.

...but the folks where I grew up weren't very nice to people from urban/suburban environs when they moved in either. They called them plenty of names, even though some of them were nice and shared their values. It cuts both ways.

Did anyone else notice that at the bottom of the NAR release TODAY they stated:

***"NAR will soon revise national and regional monthly median existing-home prices back to 1999. The fixed reporting sample of representative multiple listing services has been updated to reflect geographic changes over time so that the monthly samples for regional price measurements are as accurate as possible. The changes in price patterns will be consistent with previously reported data.
"***

DOES THIS MEAN CURRENT DATA IS NOT HELPFUL TO THEM SO THEY WIILL REORGANIZE THE DATA TO HELP Y/O STATISTICS THAT ARE CLEARLY SLIPPING?

HARM,

if you don’t like illegal immigrants, just shut down their access to schools, hospitals, etc. Require passport or proof of citizenship, PR to open a bank account. It is not that hard to do. In fact, this country is already clamping down on illegal immigration. The tide is turning, and when RE crashes, the tide is going to turn even more.

Owneroccupier,

Apparently you haven't spent too much time here in the PRC, but actually the voters here tried that about 10 years ago. It was called Prop. 187 (a rare GOOD use of direct ballot initiatives), and it passed with a large majority comparable to Prop. 13's --around 65% as I recall. And then the agribusingess, construction, hotel, restaurant lobbies & Hollywood all opened their wallets and hired every attorney they could get their hands on to fight it.

End result: it was tied up in the courts, never enforced, and eventually overturned by our wonderful CA Supreme Court. At some point it might be possible to amend the state constitution, but I'm not holding my breath on that. Simply put, the regular voters/taxpayers here have no say in how the state is run. Big money trumps all.

Now, I seriously challenge your notion of “there are Americans who will do the job”. You need to see some welfare people who are 300+ pounds shopping Frito-Lays and cigarettes with food stamps. If one can cut them off the welfare and get them back to work, I am all for it. I just doubt if they ever will. The Jerry Springer guests will never get back to workforce, and there are sadly plenty of them.

I have no moral qualms about cutting these people off, either. Why should able-bodied Americans get a free ride at workers' expense? And if you cut off the food/money/cable TV, these people WILL do "those" jobs. All some people need to get on their feet is a friendly helping hand, while others require a boot in their ass. Either way, it's all about aligning incentives & motivation with outcomes.

There is no housing bubble. How can I be so sure? Because the NAR says so. I rely on their unbiased, truthful reports as a basis for my outrageous portfolio moves. Residential housing is an investment first and foremost. If you paid off your mortgage you made a huge financial mistake. Home prices in California will soon go back to their normal 15-20% YOY increases. It's your money, take it out with a HELOC, don't worry because you can always sell the house to the next sucker, whoops, strike that, I meant "investor". You can rely on the professionalism and integrity of the NAR. Their charter is to provide accurate, timely information so you can make informed decisions on your vast real estate portfolio. They have these values in common with the stock brokers who moved your 401K to tech in '00. These people understand that the rules have changed, the paradigm has shifted and Jonny Lunchbucket is on the same playing field as the multi-million dollar client. After all Mr. Lunchbucket gets exactly the same advice as the fat stack client. They were told to invest in tech in '00 also weren't they? Whoops that's right they were selling when you were buying. Funny that.

If they are realt whores, who is the Pimp?

SFWoman,

back in the 1980s, Australia used to hand out citizenship to everyone who was born there. Then they changed the law so that only kids born to PR or citizen parents can be recognized as citizens. I think this is a great immigration control, but implementing the same thing here would require changing the constitution, which is going to be really nasty.

I actually know of Taiwan and Chinese citizens who have NOTHING to do with America, just arrive here to deliver babies (you'd wonder what the freaking border control is doing), so that their kids will get an American citizenship. At the same time, the kids will be educated in Asia speaking Chinese having little exposure to our way of life or our culture. Then get this, if you are not angry yet. They send their kids to good schools here applying for waivers only applicable to POOR families, because their parents make all the money overseas, so IRS cannot track their income at all. Their plan is, when they are old, they can immigrate here through their kids to continue feed on our system that my tax money is paying for. To make it more amusing, there is an organized community for such baby delivery trips, you can find flyers in Taiwan and certain Chinatowns providing a whole program of how to ship pregnant women into the US, including preparing them for immigration interrogation upon entry, seeking Chinese speaking doctors, etc.

If I can have it my way, the first thing I will take away is the natural born citizenship crap. If an H1B has a kid born here to become a US citizenship, I have no problem with that, because their parents live here, and they pay taxes. If someone how just flies here to deliver his baby so that the whole family can later become parasites of our system and their kids will get an unfair advantage over mine, I say toss these "citizens" outta the country.

And then the agribusingess, construction, hotel, restaurant lobbies & Hollywood all opened their wallets and hired every attorney they could get their hands on to fight it.

I think it is possible to sweeten the deal if the minimum wage system is also abolished. Companies prefer to hire English-speaking Americans if they cost not much more.

Someone bought abt the difference between asians and mexicans. Asians and Mexicans have same family values but when it comes to child birth and rearing them up, it is different. Asians stand out in the sense that they dont claim Govt money and resources as much as Mexicans and Rednecks do. Mexican family values are not maintained by many mexicans. Tell me why mexican women have so many kids that they cant support. I also had the opportunity to interact with a few of them and I have seen the difference. It matters who you intereact with. Just cuz you met a few mexicans does not mean that mexicans in general are all with good family values. Go to any govt social security office or immigration office or dmv, get a count and tell us.

But can't there be some technicality that changes the citizenship law without opening up the consitutional debate?

For example, only citizens of the US who have lived here X number of years can enjoy the same level of benefits as others. If your kid grows up elsewhere and come to the US for high school and university, and you want to waiver in tuition due to "low family income", sorry, you were not here for the last 10 years, no chocolate for you.

It is a bit ridiculous that I cannot run for Presidency in this country although I live here and work here (not that I want to), but a kid born here and raised elsewhere his entire life is actually more eligible than me from a legal point of view.

Actually, being a southerner in California can be a pain and a blessing at the same time. I have a fairly thick undeniable accent that makes me stick out like a sore thumb in any conversation. I don't feel that people who I randomly meet ever take me initially very seriously. It's almost like they expect my vocabulary and general knowledge to be less superior to theirs. I don't blame them, because all you have to do is see the approximatly 99% of the films made in Hollywood that depict the south as a cotton growin' bible belt dated from the 1860's- the 1960's. In part I thank this depiction from preventing an earlier in-migration from the "sophisticated" states because frankly, most people from NY, etc probably beleived the propaganda.
Having this accent also can be good. I've been pulled over a few times and can whip out the super-drawl and claim that " I jest got here, an' didn't know about them thar' laws er nothin." I get away scott-clean. Better yet, when I was single, california women somehow had this fetish for " fine southern gentleman" because we're supposevly polite and perhaps naive when it comes to the general crap men sometimes give them. Thus I really played that one up to. All in all, most people are fairly respectable, but there's been way too many times when people have passed me off as white trash just because of the way I sound. I would love it if someday on the evening news, the newscasters were from all over the country. Boston accents, Louisiana Accents, Southern Accents, and of course valley girl LA accents. It'd be a great way to make anyone with an accent seem normal and more palletable to the general public.

@SGV Patience,

Your arguments/proposals sound pretty logical to me. The only point I would somewhat disagree with is in removing the welfare safety net completely. There are people out there who --through no fault of their own-- are unable to care for themselves: the physically disabled, mentally ill, retarded, terminally sick, etc. I have no pity for Owneroccupier's able-bodied 300 lb+ Jerry Springer-addicted couch potatos ("Jerry's" kids?), but I do for the truly needy.

Easy explanation of the NAR report: This is NATIONWIDE, and yes, houses are still very much affordable in a large chunk of the country, thus people can still easily buy( including people moving into those states). Perhaps the numbers for California are very diffrent, as I assume they are.

Owneroccupier Says:

> If you don’t like illegal immigrants, just shut down
> their access to schools, hospitals, etc. Require
> passport or proof of citizenship.

This will never happen since the people that write the big checks to the elected officials that run the country don’t want anything to change. The rich GOP business owners that give the most money to the party want the cheap labor (even if most of the rank and file Republicans want to enforce the laws and get rid of the illegals). The rich Dem. “limousine liberals” that give the most money to the party feels sorry for the poor illegals and will not stop the government from giving them free services or police the border (even if most working class Democrats want to enforce the laws since so many are forced out of jobs buy illegals that work for less money).

@Ray W,
:lol: Sounds like the punchline to a Valley girl joke.

But can’t there be some technicality that changes the citizenship law without opening up the constitutional debate?

For example, only citizens of the US who have lived here X number of years can enjoy the same level of benefits as others.

The problem here, as I understand it, is the Equal Protection Clause. The Constitution is very specific about rights and protections, except where explicitly called out, must apply universally and equally to *all* citizens. So, when Congress or lower courts try to put complex limits on stuff the Supremes tend to knock it down and say "if you don't like it, change the Constitution". Historically, they've applied this evenly to things, like blowing out all the Jim Crow laws and other voter limitation laws (some states tried to make the age higher, exclude bankrupt debtors, non-felon drug users, etc.), and citizenship limitations.

The guys who wrote the Constitution were really paranoid about giving legislators power to discriminate. These guys were very much into making laws apply to everyone, regardless of the politics of the day.

*IANAL

SGV Patience,

Your arguments are logical, but there is an inherent conflict between free enterprise in a loosely regulated free market and minimum livable wages or laws to enforce such.

Companies -- especially those in commodity* economic environments -- are driven entirely by marginal costs and marginal revenues. Therefore, they must pay marginal wages or perish in the wake of competition. There is no force other than government to establish a floor to the lowest marginal wage they are willing to pay. In other words, they must all pay the lowest wages the labor market will bear if at least one is willing to do such. Worse, consumers drive the prices that these companies can command (they are price takers), and consumers implicitly set the cost function. Economically, this is the old MR = MC equation. The producer gets only the marginal revenue that they can earn on price *regardless of their costs*, so they must produce at marginal cost = MR, or perish.

Not to get on a soapbox that will get me into trouble, but this is the entire driving philosophy and emotional force behind the CSR movement (corporate social responsibility). CSR seeks to change the basic MR = MC system by both pressuring consumers to be freely willing to pay higher prices (like Whole Foods using solar power, even though it raises the prices for all their customers "unnecessarily"**), and pressuring producers to be unwilling to produce at MC; or more precisely, making producers have a conscious where they say "we won't produce unless we can get at least X so we can pay our workers Y". This is an attempt to redefine MC.

My own personal opinion is that CSR is a misguided, doomed movement because it ignores basic game theory and our system of market democracy. Again, Whole Foods can do their thing all they want, but they will never survive *at scale, in the long run* so long as at least one direct competitor is willing to forgo self-imposed CSR behavior. CSR advocates say "wait, but people want to shop where they can feel good about it". I say, "fine, at a very small scale some consumers are price inelastic, but eventually competitors get better at pretending they're doing the same thing only without paying the real costs". And, without government regulations to verify, audit, and enforce compliance, there is no real cost associated with cheating. In fact, all the costs are associated with self-imposed compliance.***

* commodity here being the economic term, not the financial market term
** unnessessarily here meaning that companies are not explicitly regulatorily bound to behave in such a manner
*** I warned I would get myself in trouble. No I sound like a market fundamentalist (note to those who occasionally brand me a lefty)

Got the link from Ben's blog.

http://www.inman.com/inmannews.aspx?ID=50677

The California numbers are out for Feb. It will be very hard to give a +ve spin to this.

Addendum:

*i meant to say elastic, not inelastic consumers

Further:

The economic counter to the limitation of immigration as a source of cheap labor (note, not taking a stand on illegal immigration, just all immigration aside from how it gets here) is as such: Within a free market system, any limitations on the labor market, even as imposed by limiting the labor supply available for various jobs, will only result in forcing more imports because consumers have relatively inelastic demand for most non-luxury goods, even for goods that are not vital staples. This manifests itself in consumer price shopping selection behavior. Consumers will take competitor's goods based on price, even over quality. Or, they will find reasonable substitutes for the price they demand.

The bottom line is that cutting off illegal immigration is not enough. You also have to erect complicated, punitive trade barriers. You can see how well this is working in Europe at the moment. For the US, the effect of limiting cheap labor sources (cheap meaning workers willing to work below the rates immigrants are for the same jobs) would only benefit the Chinese and other global suppliers, and would rob the US of domestic economic activity and tax revenues.

My younger brothers friend insisted that there was no such place as New Mexico or Turkey.

I guess that Hungary is out of the question then.

Ray W Says:

"When I first moved to California from New Mexico I was at a party and a young lady asked me if I was from Texas because of my mild southwestern drawl. I told her no, I was from New Mexico. She looked quite puzzled and asked; “Like do you hafta have a green card to stay here?” "

I had a friend living in Los Angeles who had to go to another U Haul rental place since he could not convince the guys behind the counter that they would not be violating the "no rentals to Mexico" rule if they rented him a truck to take to "New" Mexico...

SGV Patience Says:

"I would pose to you the example of Costco that has so far been able to fend off Wal Mart’s Sam’s Club in the retail warehouse market. As a follower of finance I’m sure your aware of their business model and the benefits it offers their employees while they remain the market leader."

Costco "is" the retail warehouse market leader just like K mart "was" the discount store market leader...

Wal Mart under Sam Walton was a much different company than it is now and I would not want to try and compete with Wal Mart at any level...

Guys, here is the official defnition of *existing home sale* and *new home sale* from US Census Bureau

The devil is definitely in the details. Here you go:
http://www.census.gov/const/www/existingvsnewsales.html

New home sales and existing home sales are released each month at about the same time. Many comparisons are made between the two series, but before doing any comparisons, one must be aware of some definition differences that affect the timing of the statistics.

The Census Bureau collects new home sales based upon the following definition: "A sale of the new house occurs with the signing of a sales contract or the acceptance of a deposit." The house can be in any stage of construction: not yet started, under construction, or already completed. Typically about 25% of the houses are sold at the time of completion. The remaining 75% are evenly split between those not yet started and those under construction.

Existing home sales data are provided by the National Association of Realtors®. According to them, "the majority of transactions are reported when the sales contract is closed." Most transactions usually involve a mortgage which takes 30-60 days to close. Therefore an existing home sale (closing) most likely involves a sales contract that was signed a month or two prior.

Given the difference in definition, new home sales usually lead existing home sales regarding changes in the residential sales market by a month or two. For example, an existing home sale in January, was probably signed 30 to 45 days earlier which would have been in November or December. This is based on the usual time it takes to obtain and close a mortgage.

Effective with January 2005, the National Association of Realtors created a new monthly series to overcome the lagging effect of the existing home sales definition. This new series is called Pending Home Sales and is based on sales of existing homes where the contract has been signed but the transaction has not been closed, making it roughly equivalent to the new home sales definition. Monthly estimates are expressed as an index where the year 2001 has been set to equal 100.0.

Those of you who worked in RE and mortgage industry please chip in, does a tightening in mortgage lending standard lengthen or shorten the transaction process? By how much?

SGV Patience,

We are generally in agreement. I would counter that what Costco has accomplished is a strategic triumph more than a disproof to the economic fundamentals I proposed. Costco is thus far winning a defensive battle against Wal-mart, not an offensive initiative. It is much easier for Costco to defend it's markets against Wal-mart than the converse, especially since Costco has met or exceeded Wal-marts scale and logistic supply chain advantages. The CSR aspect is really a PR aspect, which Costco is masterfully doing well without really investing in CSR to the degree many companies like the apparel sector (namely The Gap) have been doing.

As to "on-shoring": I do think this is sustainable over the medium-term. What is great about America is our dynamism and fluidity. We are willing to move often and change jobs often. This causes social disruption, but makes us very hard to compete against over the long-term. I have never really questioned the long-term effect of global wage arbitrage: we will win more than we lose. It's happening now as the comparative advantages of places like India are eroded. India has not invested in restructuring old, rigid systems anywhere near to the level the US has always done. So, jobs come back, although in a different form. In fact, more GDP per capita results than would have if we'd just done things the old way and protected our markets with barriers.

The problem with manufacturing is that the US has progressed to a point of extreme capital-heavy manufacturing. That is, we utilize technology for productivity to a point that makes us more reactive, but less labor intensive. So, the minimum wage factory worker is a thing of the past. The new factories require far less labor per output, and that labor is much higher skilled. So, I do not see a return of manufacturing in its old form, ever. I see already a large flowering of micromanufacturing which is about 80% capital and 20% labor, and going more automated every day.

By the way, this is a great contradiction for the CSR advocates. We should be welcoming labor-poor, capital-rich manufacturing and happy to see the opposite leave. The former is environmentally more friendly, more efficient, and more flexible. The latter externalize much of its costs to the environment, illegal immigration and uneducated non-skilled workers. But CSR has gotten into bed with big labor unions, so they can't take this stand. Instead they are trying to protect socially irresponsible industry.

Well, onshoring or offshoring, the only way that this country will continue to do well in the long run is we educate our kids well so that even those working at U-haul knows that New Mexico is not another country.

Wanna disucss why school district has become such an important aspect in home purchase? I really don't remember it being this way before, it is a recent phenomenon within the last decade, and it is even more ridiculous that given such a RE value, CA is able to turn out such crappy schools. Where did the tax money go?

The bottom line is that cutting off illegal immigration is not enough. You also have to erect complicated, punitive trade barriers. You can see how well this is working in Europe at the moment. For the US, the effect of limiting cheap labor sources (cheap meaning workers willing to work below the rates immigrants are for the same jobs) would only benefit the Chinese and other global suppliers, and would rob the US of domestic economic activity and tax revenues.

I never see cutting off illegal immigration as a way to keep wage high. The Market has a price for every job and setting up barriers will prove counterproductive in the end.

However, there are two issues:

1) Selective law enforcement - those who ignore the law should not be given the unfair advantage of cheaper available labor over those who obey the law.

2) Massive undesirable immigration is a direct result of having a welfare state. We may need to approach the problem at the souce and reform the welfare system.