patrick.net

Near-term eCBOT mini-gold futures at 6635!

It is basically trending up since the opening of this trading session (4pm PDT)

Anyways, what do you guys think about the South African Rand. South Africa still produces most of the world’s uranium, right?

The downside to the Rand is that it gets punished as a carry trade currency for the USD.

Randy,

That's really interesting! I hadn't thought of RSA as a carry trade economy, especially with the United States. I know (from my Economist reading days) that RSA faces a huge HIV problem and their post apartaid efforts have hobbled the economy, but I hadn't given serious thought to their trading status.

One more reason for amateurs like me to avoid the Rand.

At 90/bbl, the Canadian Tar Sands (oil sands / bituminous sands) become very viable economically. Canada becomes the next Saudi Arabia. Between Venezuela and Canada, 66% of ALL THE OIL LEFT IN THE WORLD in those tar sands...

Australia will surpass South Africa in gold production by 2007 as the world’s biggest gold mine, and has about 30% of the world’s known reserve of uranium, compared to around 10% for South Africa. Kazahstan and Canada ranked 2nd and 3rd.

Hmmm... anyone know of any good currency funds for resource-rich former British colonies? Preferably one that doesn't require passing the Series 7 to be able to understand the risks/transactions involved.

not so good now unless there’s another form of much cheaper energy (nuclear?) to use to extract the oil.

@ahj,

Yes, that's the part where Australia's "30% of the world’s known reserve of uranium" comes in :-). Who knows, Oz & Canada may become the 21st century's newest energy superpowers.

RE listings like the one posted above work on my "last good nerve". I swear, it's the ones that are among the last to "cash out" that seem to be the most gutsy. From the looks of it I doubt this is over a 1,000 sq. ft. including the "studio". So that's what, roughly $1,595 per sq. ft? Then consider the 50 mph relentless traffic in your 30 mph zone. Who could possibly raise children here? Who would WANT to live here? This has "all YOU need to do is find another greater fool" written all over it. It has no value as a "home".

Over the weekend my wife and I saw a print ad for DR Horton for a new subdivision they are working in Albany, OR (near Salem). The full page ad rather than tout all the usual pergraniteteel actually starts out by mentioning that they are "Energy Star" & "Earth Advantage" certified homes. They will be priced between 190K to the 260's and have floor plans from 1,372 to 2,732 sq. ft. Well, at those prices there are some floorplans that are under $100 per sq. ft! While not exactly picturesque Albany is a very nice town, with very nice people.

What is interesting to note is that this is cheap (real cheap) by even our standards. This I feel is proof that builders will continue to build no matter the consequences to "peak of market" buyers. These guys aren't going to simply stop and let the market or wages "catch up". They're going to do the only thing that builders know how to do. Namely, continue building. Would they prefer to be selling these floorplans from the 260's to the 360's? Well sure, what fool wouldn't? This also gives a glimpse that reveals their cost basis and yet allows them enough of a profit to keep the lights on. Not to beat it to death but we are seeing tons of homes come on the market that were bought just in 2004/5 and we have to wonder b/c many of these were custom or semi-custom homes! So it was build to suit but it no longer "suits" you a year later? I understand that peoples lives change but why so many and why so soon after a custom build?

Just for a goof is there a way to track the percentage of homes (in certain markets) that were built/bought in the last say 24 months? I would be curious to see just how big that number really is. Sometime back I believe *athena* said perhaps it's time we called them what the really are. Pre-foreclosures b/c clearly these folks had bought on the expectation of ever higher returns and now their exotic loans coupled with flat to down markets mandate that they bail.

athena also said she didn't want to buy someone elses "maxed out credit cards" and I quite agree.

Smelly Red Thing,
Me and my wife are in the same boat. We're not from here, and have lived in many diffrent places over the years, most of them NOT on the coasts, which is about what 90% of the people who live in the BA are from.That said, many places across the country are just as interesting, in some cases more interesting thatn the BA. I'll agree to a certain extent that yes, the food is more diversified here.The weather is pretty nice. You can go off to the jazz festival of your choice on any given weekend. The job situation is pretty good. But as anyone here cannot deny, that comes at a severe price. It is at this delta that people make their choices. Do you live somewhere that has perhaps less ethnic foods, 4 seasons of weather-some of it unpleasant, but at the same time have your own place, decent public schools, a stabilized living situation since you are paying less, and living in an economic situation where the middle class still rules, with their fleets of Ford Tauruses, Toyota Camrys, and Chevy Malibus?-Or do you live somewhere that has great food, good weather, ethnic diversity, yet horibble traffic, pollution, bad public schools,uncomfortable socioeconomic disparity and unaffordable housing?
I've had to weigh these things over and over.If I moved somewhere else, would I be miserable? Would I have little choice in excercising my artistic expression and exploration? Would the food suck? Would the people be less open minded?
Then I listened to my parents- both of whom are school teachers, who've never been what you could call rich, that live in a rural part of Tennesee. They own their own 2 story home, with an apple orchard, with a swimming pool, 14 acres of land,and 2 decent cars. They just got back from a cruise to the mediteranian. They went to Italy the year before.
On any day of the week, they can watch a free 1 hour concert of americana, bluegrass, or alt country at the locally supported radio station downtown in a coffee cafe that serves free trade coffee and teas. They frequently take off to Asheville, NC, where they can sample origianal mountain cuisine, scenic beauty, or take part of a traditional chair caning class in one of the Appalachian arts and crafts centers. In Oct is the international storytelling festival in Jonesborough, TN. In Nov is the fall homecoming at the Museum of Applachia.I can rattle off a million other things they do on any given weekend. They don't live in the BA, but by what they do, you'd think they did- and they aren't rich either. My parents stay busy. More so than me and my wife, who work round the clock saving our pennies for the day that we can get out of here and buy our own place, which brings me to my next point.
Sure, moving can be a pain. You will have all kinds of worry and uncertainty. But uncertainty is what the BA is all about.Uncertainty of whether or not rent is going to skyrocket. Uncertainty of whether the job market could implode, just like it did in 2001. Uncertainty and the insult that home prices are assanine. So a move is really no diffrent. But you can make this uncertainty less severe simply by saving. That's what me and my wife have been doing for years. Take those BA wages and figure they'll go at least 50% further elsewhere and apply them towards the home you'll be able to buy outright somewhere else. The jobs, careers, and other stuff will come soon enough, but just think about the fact that yes- wherever you move will be diffrent than it is here. But don't make a point of trying to replace what you knew here with somewhere else. That is a big mistake. Start over and fall in love with a brand new place, with it's own quirks, people, food, music, and fun.
In the end, it all evens out eventually. Go with your gut feeling.

Benjamin,
Don't you think that it's rather interesting that wage increases , according to the report you posted above, grew, but mostly due to an increase in Medicare perscription payments? Why this should be counted as "income" is a mystery to me. And as far as the increase in construction, bring it on! More construction means lower prices and more inventory to add to the already record high level.

Don’t you think that it’s rather interesting that wage increases , according to the report you posted above, grew, but mostly due to an increase in Medicare perscription payments? Why this should be counted as “income” is a mystery to me.

Because income figures are aggregated from employer reporting. This includes the employer side payroll costs as well as employee withholdings.

Benjamin,
you're right only to an extent. The largest number of homes are being built in the midwest and SE. the prices there are actually well below the national average, thus it should come at no surprise, with an ever-increasing number of people leaving CA , and the entire east coast for these areas that there should be a demand for more housing, even though there is no shortage of land whatsoever. The national data you're posting is 'national', and not reflective of California, which has been slowing 4 months in a row. http://abclocal.go.com/kgo/story?section=business&id=4095429
-Northern california numbers out any day now.
So I'm not sure how much relevance posting national data, about cheap housing being built 2500 miles away has to do with a blog specifically dealing with BA RE and it's issues has. IMHO....

Ok Randy,
but do you think an employee is going to go to Wal-Mart and buy a lawnmower with painkillers?

Keep in mind when you read "income" statistics, the financial press is primarily concerned about whether income is rising as a cost to employers. So, even if you don't get more HaHas in your paycheck, anything that increases what your employer pays for payroll is income inflation.

You're right nomadtoons,

This is why many say that inflation is the cruelest tax of all.

I'd be reluctant to say that rents are going to the moon. They have firmed somewhat after years of languishing, but to the moon? Nah. I expected this as it became more obvious that purchasing property with hemmoraging monthly negative cash flow no longer makes good business sense (not that it ever did). Now that the outrageous appreciation is officially off the table folks with excess inventory to let have gotten more realistic about what they need to generate from a property for it to make sense. In short, they've finally learned math.

We just sighned a new lease with our landlord.No increases, same low price. Show me the rent increases, and I'll be sure not to move there.

I believe it was Peter P that said a few threads back that "rents" in his area while firming would just about cover the taxes and HOA's due on a monthly basis. The "owner" would still be on the hook for the brunt of the mortgage interest. So we're a long way from a balance on the rent/own calculator.

nomadtoons2,

Our lease expired in March and we have the same deal, same dollars only now we are month to month with out the lease obligation. If I wasn't so confident that a HARD LANDING will be obvious by July/August I could go back and renegotiate a year lease at LOWER price. I just might yet, but that would seem an awful lot like gloating and it's not my nature. Who can help me out here? We all know caveat emptor but what is the latin saying for "let the facts speak for themselves"?

And don't say it's persona non grata!

We already have one of those.

Dinor,
We were thinking of asking for a lower rate, but since the rate is already very reasonable it wasn't a finacial burden anyway. The way I figured it was that A: we take good care of the place and have actually made the yard about 100 times nicer than what it was when we moved in, and B: The landlord said he was really glad we were staying. So to me, it would seem that a landlord who has good tenents that care for the place and live harmoniously next door are worth any raises in rent he might enact, so we're playing it safe for now. That said, there are still PLENTY of homes in our area for signifigantly cheaper than this one.

nomadtoons2,

Absolutely! Our little condo complex of 5 units is doing a bunch of improvements and they are so tickled that we are compliant about moving our car so the tractor can move in! Just doing my part! Last fall we did about 6 hours worth of work for a fall clean-up and it's like the HOA pres. and I are friends for life. The guy just can't say enough nice things about us! Next weekend we are supposed to grab garden rakes and work an are about the size of 3 pitcher's mounds and they are offering to buy us dinner!

I did not see my friends face down in the mud in 'Nam to have them ridiculed by some faceless cowards. Oh wait that's right, I didn't go to 'Nam. Nevermind.

What? You don't want to drop over a mil for a $hitbox? Come on cowards, just pry up one of those gold bricks off of a Bay Area road.

nomadtoons,

Keep in mind the primary audience for the financial press. It may be an error on the part of the news providers, but traditionally they have targeted a demographic concerned mostly with investment-related news. Changes which are microscopic for the average worker have can have a very significant effect on the investor. If, for example, wage inflation for a particular sector (say energy) was 2.0% per year, and headline inflation was 2.3% per year, then a 0.1% change in inflation will cause all those spreadsheets of valuations and stuff to change and affect the implied stock price, EPS, PE, blah blah blah.

Surfer X,

If you lived in the former garage converted to an uninsulated "studio" you could plow the house down and have an 800sq. ft. lawn!

Randy H,
I agree with you 100%. But I think that many people equate these minisscule changes with the spending habits of the average joe, or the kind of people that buy houses, etc etc. At least that's the gyst I get from Benjamin with the post above, which makes me think he was implying that the high price of housing was justified by these tiny incrimental "improvements"

BenJ ammin Says:

> How come our beloved site show
> that rents are going to the moon?

Rents are not exaclty at the "moon" since owners on my street are paying more in "property tax" than I am paying in rent...

When gas goes up in price demand for housing near jobs increases.

Many people don't care if they spend 4 hours in the car every day if they can save $500 per month in rent living in Tracy. When the price of gas goes up and they are paying $600 for gas to save $500 on rent they start looking for Bay Area apartments closer to work...

Gas would need to go up another dollar to force people to pay $2k for an apartment in SF... then again, $4.50 gas would probably spell more than just people moving closer. It would spell economic disaster, which isn't that far away anyhow even if gas prices go down.

SQT,

Frankly I'm suprised that rents haven't gone up more. Given that there have been so many cancellations on new homes and so actual closings. Then again I suppose just in the same manner we felt that the entire year of 2005's outrageous "appreciation" couldn't go on forever rents too are proving "sticky". Some have mentioned that the rent increases we've seen are more energy cost driven than actual market/demand inreases.

uh, that should read, so FEW actual closings.

DinOR I think rents in the BA will skyrocket. Afterall the run-up in housing is a result of the mind bendingly strong BA fundamentals. You see as the common average BA salary is 250K a year, even for the most lowly of tech worker, the housing costs aren't really that expensive. They merely reflect the nature of the area. To quote the most famous of Patrick Bears (now in hibernation), it's the "intangibles" of the area that make it just so gosh darn expensive. Besides wouldn't you pay to hang out with the trolls that frequent this site? The BA is full of them. But then again they merely reflect the amazing BA, replete with amazing weather, amazing food, amazing insular economy, and gold paved roads. As rents reflect the true cost of housing why would they not skyrocket? Remember there is a chronic housing shortage in the BA.

I'm actually on the opposite end of the spectrum. This summer will be a great time to pick up a late model, low mileage Suburban! They are already going so cheap! True, not an ideal commuter car but for golf outings in the summer and hunting and fishing trips, they're great! I'm thinking July maybe August. A lot of Suburbans in Oregon sit about as much as RV's but they are great fun for the "drive-in" season. Remeber the drive-in?

I believe it was Peter P that said a few threads back that “rents” in his area while firming would just about cover the taxes and HOA’s due on a monthly basis.

For SFHs, this may still be the case.

However, condo rent should cover more than half of PITI now. I tried to look at a 2/2 in Menlo Park that asks for 2500+ a month but it was already gone (in a week). Last year, no one would pay 2500 for an old 2/2 in MP.

Rent appear to be volatile and very location specific right now.

Surfer X,

Damn that it is a scary thought! Paying a "premium" to hang out with the trolls!

I tend to think that even if rents rise, home prices will have to get down to "pre-bubble" pricing levels for there to be any semblance of sanity! When I first got out of the service it was actually a *little* cheaper to own than rent in Oregon. Right now (with trad. financing) it would cost us about double to own vice renting.

Like I say I went through the actual closings for our area YTD and it was NOT impressive! Only about 2 or 3 higher end homes sold and one of those was to a local realtor. Most of the inventory that was moving were older homes below the median and mobiles. Stuff like that.

SQT,

I commuted with a 4 cylinder Volvo 940 for about 10 years. You actually had to prepare and ramp up your speed so you weren't doing 45 mph at the top of Sylvan Hill (elev. 450 ft.). When my oldest daughter "took over" she would ask for 20 bucks for gas and I doubt 5 of it found it's way into the tank. Oh, come on! We all did it!

My impression is that higher-end homes are selling but lowering-end homes are not. This alone would keep the median price up there even if many homes are selling for less.

Surfer X,
While I realize you were being sarcastic above, let's pretend that rents do skyrocket anyway, and that BA fundementals come into play. I would think that if rents did go through the roof, all those liberals that have been focussing 90% of their attention on Iraq and Tibet would suddenly call foul and start on the warpath. Come to think of it, why in the hell aren't those 10's of thousands of protestors, who spent all that time and energy protesting over an event that likely wouldn't affect them directly choose NOT to protest over something that is actually affecting them all? Or- could it be that the majority of them already own their homes? Interesting... Sort of paints the picture diffrently doesn't it as far as their "values" really lay.