patrick.net

Where are the good sectors to hide out if we are indeed heading into a Great Depression / Great Stagflation?

Any thoughts on that?

I wonder where the hospitality / food service jobs will go when we head into recession. :-)

I predict a rise in the consumption of ham croissants.

If I were to be cynical, I'd say that a weakening dollar bodes well for the Hospitality & Food Service sector, being that tourism in the US will become very affordable for the rest of the world. Maybe we can all get jobs selling hot dogs on the pedestrian approach to the GGB.

Thanks, hymie --I hope the comb-over wasn't too obvious ;-).

Randy,

When it gets really bad, we can send out kids out to beg.

HARM Wrote:

> @FAB, If I get the license but don’t actually practice
> the trade/join an agency, am I legally obligated to
> represent myself as a buyer’s agent (for commission/
> tax purposes) in my own private transactions?

You don’t have to represent yourself if you have sales or brokers license.

> If so, what if I just get the training but forgo taking the
> license exam? Do you think it’s still worth it?

You will learn more helping a top real estate agent for one day than you will learn studying for a real estate license. Most of the stuff on the real estate exam is stuff you will never use.

Randy,

I was talking to some German friends over the weekend. They are located in the Bavaria region.

It seems that the employment situation in Germany is picking up, one guy is in machine tool business and he says they have increased pay by about 12% last year. German companies are very cautious about taking on new headcounts because it is extremely difficult to lay people off, so unemployment rate still remains high, but those who have a job generally have a higher pay raise. His feeling is, the German machine tool industry is benefiting from the infrastructural investment in China. Germans and Japanese are major beneficiaries in supporting the machine tools and automation lines for the world factory in China. But who is this world factory serving? I believe that the Germans and Japanese are just again serving the US consumers in the end, via China.

Another friend from there also mentioned that Germany will start to implement VAT tax (sales tax?) later this year, and people are generally concerned, because it may hurt the burgeoning German internal demand. The same concern also exists in Japan, which is going to implement its own sales tax very soon. We will see how that works out.

So in a way, I am looking for a big and furious housing crash, but sometimes I also wish for soft landing. Right now it almost seems that Americans are singlehandedly lifting the world consumption, so if our demand dries up too fast, we may send the world into recession that will hurt everyone, except for the very rich.

Hello!
$ucka Clara County inventory continues to climb. 4509 SFR & Condos, compared to the mid-October-2005 peak of ~4350. This according to mlslistings.com. Yes, some $ucka's are still buying; but even more are selling....
Good day all!

SQT,

I think it is because people who read a certain type of blogs already have their mind set up about certain things - they are already going there, the blogs are just giving them a push.

This is because a lurker need to spend more time and effort looking for a blog that suits his spiritual needs (or inquisitive mind). I didn't come to patrick.net because it is recommended on WSJ or Economist. I was a marginal housing bear and coming here makes me a fundamentalist housing bear.

So blog reading is a self-selective process, a particulary type of blog just has a bigger impact on people of the SAME MIND.

OwnerOccupier says:
It seems that the employment situation in Germany is picking up, one guy is in machine tool business and he says they have increased pay by about 12% last year.

Wow. Are you sure? That would be great. In the last couple of years, the raises in Germany were either non-existent or more like 1%-2%. Germany became poorer relatively to other industrialized countries.

Another friend from there also mentioned that Germany will start to implement VAT tax (sales tax?) later this year, and people are generally concerned, because it may hurt the burgeoning German internal demand.

I heard they're actually increasing the existing VAT from 16% to 19% (which is a hike of unprecedented magnitude) in order to support their "big government" policy financially (you know, "take from the workers, give to the slackers").
The last SPIEGEL title read: "Wieviel Steuern braucht der Staat? Die Große Koalition zur Verteilung nicht vorhandenen Geldes". In other words: "How much tax income does the government need? The Great Coalition for distribution of nonexistent money". The article scared me a lot.

I'm losing hope on Germany. But that's just me.

SJ_Jim Says:
$ucka Clara County inventory continues to climb. 4509 SFR & Condos, compared to the mid-October-2005 peak of ~4350. This according to mlslistings.com. Yes, some $ucka’s are still buying; but even more are selling….

Let me relativize this for you:
5/16/2006: 3397 SFH for sale or sale pending
5/16/2001: 5041 SFH for sale or sale pending
(I only have 2001 data for SFH w/o condos, so I found the corresponding number for today from MLSlistings).
The 5041 figure is within a few percent of the peak for that year, so if the number keeps climbing this year, that would be a good sign.

On the other hand, a friend tells me he bought a newly built house in Saratoga this week. The seller had dropped the original asking price twice, both times by about 15%, then accepted his lowball offer for 20% below the new, reduced asking price.
Do the math: 100 * 0.85 * 0.85 * 0.8 = 57.8. Comes out to a 43.2% price drop.
No idea what how ridiculously overinflated the original asking price was, though.

So, *something's* going on.

OO,

I would echo Girgl. Germany is starting from a much higher unemployment baseline than the US; *much* higher. And, most unemployment in Germany is among the younger generations as the older gens sit there in protected jobs. Also, everyone is basically holding their breath over German consumer confidence right now. Last week the FT had a comparison of all the Eurozone's + UKs consumer confidence as compared to real growth, and Germany is by far the lowest confidence for the most growth. Basically, Germans are pessimistic, even when there's good news.

The big questions I read on faz.net or hear on DW are all about the continued strength of the Euro potentially hurting exports, continued failure to comply with EMU stability pacts, and how Hertz IV and other programs demands are forcing some pretty big tax increases.

Girgl,

probably I didn't phrase it correctly. What I meant by "employment picking up" was referring to the pay alone. The same guy was in a management situation with

Girgl,

probably I didn't phrase it correctly. What I meant by "employment picking up" was referring to the pay alone. The same guy was in a management situation with less than 2% pay raise for the last few years, and this was the first time he saw a substantial pay raise himself. His employer also added very few headcounts, as opposed 0 in almost a decade.

But my point is, even though Germany may look better for the time being, in few select spots (Munich or Stuttgart instead of Dusseldorf or Hamburg), the demand growth is still quite fragile. In his case, it was export-driven. So if we Americans turn off the tap, what is there left in the world economy?

Randy,

I am not sure if employement can measured across the board like this, you have to dig down to the core. Japan has been showing an unemployment rate of no more than 7%, but their way of doing it by having several people split one job, or reducing everyone's pay in the company, is that unemployment rate comparable to that of the US? I don't think so.

Hiring and firing is a lot more difficult in Europe, so unemployment rate is kept artificially high, no one is adding headcount unless there is a relative certainty that such a job will last several years at least. You are asking a lot of commitment from the employers to add just one headcount. So is the unemployment rate comparable to the US? Perhaps not either.

Girgl,

if you don't mind, what is the price range that your friend ended up paying?

The Boomers are on their third era. The Boomer era's are

1) Moral/Spiritual bankruptcy, 1960-1985, characterized by excessive drug use, excessive sex parties, excess just for excesses sake.

2) Ethical bankruptcy, 1985-2000, this era happened when the boomers collective realized that less for you equaled more for them.

3) My favorite, 2000-present, after they finally ran out of borrowing options, just plain ole bankruptcy. Enjoy your dog food fuckers.

SQT,

People who read blogs have a disproportionate influence because we are early adopters and in some ways thought leaders. We are more curious, smarter, more adaptable and communicate more. This sounds like a lot of self-aggrandizing hogwash, I know, but I really think it is true.

Owneroccupier Says:
if you don’t mind, what is the price range that your friend ended up paying?

He didn't share the dollar amount. Your guess is as good as mine. Sorry.

Girgl,

I am just nosy, here are the pending Saratoga new constructions:

http://www.mlslistings.com/common/properties/propertyDetail.asp?open=0&page=2&mls_number=617388&type=property&name=
$3.4M asking, after price drop will come out to about $1.96M, sounds a bit on the cheap side for a 5000 sft home on 1 acre plus land.

http://www.mlslistings.com/common/properties/propertyDetail.asp?open=0&page=2&mls_number=618614&type=property&name=
$3.3M asking, 5000sf on about 1/3 acre land, sounds like a McMansion to me. I think this is the most likely candidate. After price drop, $1.89M, I think your friend still get robbed. 5000sf homes are very difficult to unload now because of the heating and maintenance cost. If the other one is offered at a mere 20K more, I think most reasonable people will choose the previous one, but I doubt if developer will be so stupid to drop on that one.

http://www.mlslistings.com/common/properties/propertyDetail.asp?open=0&page=2&mls_number=571741&type=property&name=
asking $1.7M, 2900 sf on a 1/3 acre lot, after price drop will come out to be $1M, sounds a bit too cheap in this market, not likely.

Girgl,
Thanks very much for the long-term context of the inventory numbers (2001 vs. now). I do not recall too much the market dynamics in May 2001, but I do know that people buying, and perhaps using it as safe haven for $$$ after tech bust. But, not in such a frenzy as during the time of plunging interest rates from late 2001-2003, and during the loan-to-dead-people period from 2003-2005 (even now???).

And thanks for sharing the anecdote of your friend's $aratoga purchase; must not be too much a $ucka if they put in a lowball offer after (2) 15% reductions! As for $$$ amount, surely it's somewhere in the 1-20 mill range, yes??? (sorry bad joke)
Thanks again!

Surfer-X,

Please go to Amazon's Boomer book review page (http://tinyurl.com/lrfcr) and post a review & book rating ASAP! You'll need to register & log in. And while you're there, please read the recent review by "Boomer-B-Gone" --you'll enjoy it.

Randy H says:
Last week the FT had a comparison of all the Eurozone’s + UKs consumer confidence as compared to real growth, and Germany is by far the lowest confidence for the most growth. Basically, Germans are pessimistic, even when there’s good news.

I'm not surprised.

The sheer lunacy of the government over there is enormous ("Hartz IV" is a great example. If there would be a 1-10 scale for government screwups, this one would go to 11), the weather's bad, and TV is full of stories about poor disadvantaged people who have been deprived of their well-deserved government handouts for some bureaucratic reason. On the other hand, economic success is generally portrayed with malice and envy.
The popular solution to all social and economic ills including unemployment seems to be to add more bureaucracy and government "Fürsorge" (welfare), all paid from money extracted from the few dumbasses who still work for a living in the few parts of the economy that haven't been ruined by stupid regulations yet.

And if somebody thinks that the cliche German values of honesty, discipline, industriousness, punctuality etc. might save them in the long run: I'm not so sure anymore. A lot of folks got turned on to good old laziness and hedonism after having been told by the German mass media for about 30 years now that honest, hard-working folks (and especially the ones with families) are basically provincial idiots with fascist tendencies.

Of course, because of the sheer numbers of yuppies who chose to stay childless in favor of stylish furniture and three vacations a year, the country's now in deep, irreversible shit: A whole generation's worth of children have never been born, and those non-existent folks can't have children either, multiplying the effect. So German population is declining quite rapidly now, which basically ensures a long and painful economic downward spiral. Who's gonna build and buy houses in that kind of situation, for starters? Invest in the future?

Argh.

This is all grossly exaggerated and emotionally colored, of course. But I feel better now. Thanks for listening.

Owneroccupier Says:
I am just nosy, here are the pending Saratoga new constructions:

http://www.mlslistings.com/common/properties/propertyDetail.asp?open=0&page=2&mls_number=617388&type=property&name=
$3.4M asking, after price drop will come out to about $1.96M, sounds a bit on the cheap side for a 5000 sft home on 1 acre plus land.

Heh. You're very resourceful.
I think the price in the MLS might be after the two 15% reductions. So, in your example, maybe the original asking price was $3.4M / 0.85 /0.85 = $4.7M, and he got it for $3.4M * 0.8 = $2.7M?
As I said, I have no idea what the absolute dollar amounts are. I'll share if and when I know more.

Indicators of market distress are still largely absent, DataQuick reported.

Now guys (and gals) is there something I am missing here? Is there supposed to be some signal of market distress that is absent?

(Other than unprecidented inventory and huge slowdowns in sales and marked increase in foreclosures.)

Are they saying that there is no indication of market distress until there is a freefall of prices? Seriously, I want to know.

@LILLL,

I think DQ would define "market distress" thusly:

1. legions of f@cked borrowers being evicted en masse into the street
2. legions of FBs throwing themselves off highrise buildings (while on fire)
or...
3. 90% or more drop in median prices

Anything less than that just doesn't meet DQ's justifiably high standards.

SJ_Jim Says:
Thanks very much for the long-term context of the inventory numbers (2001 vs. now). I do not recall too much the market dynamics in May 2001, but I do know that people buying, and perhaps using it as safe haven for $$$ after tech bust. But, not in such a frenzy as during the time of plunging interest rates from late 2001-2003, and during the loan-to-dead-people period from 2003-2005 (even now???).

I remember everyone being pretty scared, more than they're now, it seems. The market was extremely slow, and pretty much dead for houses above $1mil. Lots of houses got eventually taken off the market because they did not sell for months.

But you're right - the circumstances are different now, and gravity will win, as it always does eventually.
I just think that we need to wait a little bit longer for this to play out in the Bay Area. Too much money still sloshing around, and a good example in the back of everybody's head showing that not even a secular bust in the main local industry incl. loss of >100k jobs can make the housing prices go down around here for more than a few months.

LILLL Says:
Are they saying that there is no indication of market distress until there is a freefall of prices?

Exactly.

Good answers.
Thanks guys.

Randy H,

Unemployment rates in Germany and the US are hardly comparable. Better to look at employment rates, which are almost the same: 65% in Germany vs. 66% in the US.

Almost everyone on the dole counts as unemployed in Germany, where we have a huge disabled and prison population that does not work and does not show up in the unemployment statistics.

German workers are more productive, per hour worked, than US workers. That is probably because of the huge capital investment in German industry though, since wages are so high. If the "German model" was so broken, how does German GDP/person manage to keep up with the US and even gain a bit over the last 30 years?

Germany has its problems, but they are no worse than here, simply different.

I think DQ means foreclosure rates, basically. LILLL.

OO
I believe that the Germans and Japanese are just again serving the US consumers in the end, via China.

they're also serving themselves -- 450 million people in the EU (plus a few other European countries who never joined), and 127 million in Japan, vs 280 million in the US. Then there's 20 million in Canada and Australia respectively, and so on...

The German economy AND property has been lacklustre for a while, one of the few places there was no real property boom. A German friend of mine in IT prefers to work in Switzerland, lower taxes and higher pay...

However, it would be interesting to 'study' those advanced countries where there was no boom to work out the major factors why... e.g. Japan had already boomed and collapsed earlier, etc...

Leave it to Fox News to grace us with such a brilliant mind as Varney.

Yeah, it's all crap. It avoids the fact that we're talkigna bout essential human shelter and quality of life issues and treats all property (really land speculation) purely as some sort of permeable investment asset class.

here's an attempt at an ethical real estate practice/advocacy firm in Oz (no, it's not an oxymoron). i'm in touch with the organisation, but they are still operating 'inside the square' of a market-based approach to all property transactions.

this article is quite good, it's talking about the dodgy real estate umbrella association spin on clearance stats, and how it gets into the media:

http://www.jenman.com.au/NewsNews1.php?id=365

you can just go back to the home page to peruse the site, of course.

there was an article in the Economist some time ago when they devoted an issue to the bubble (2003!) comparing transfer costs in different countries: US cost is about 12% of value of property, in Oz it's about 7% (which unfortunately makes for a lower barrier to entry to specuvestors). e.g. buyers' agents are not used here, the selling agent usually gets 2½-3%, and mortgage brokers get less than 1%.

http://www.economist.com/surveys/displaystory.cfm?story_id=E1_TSJQJNV

Unfortunately, this article requires a subscription... Anyone? randy, my ol' drinking buddy, do you have online access to the Economist?

however, anyone can look through this opening series from the same edition, it tracks across several pages. all makes perfect economic sense, just that no-one heeds it -- realtors, govts, specuvestors, etc...

http://www.economist.com/displayStory.cfm?Story_id=1794899

George,

Not being a Fox News regular I'm not familiar with Stuart Varney, are you sure you didn't mean Jim (Hey Vern!) Varney? Prices ARE going down, he's not buying and prices may not come back for years but it's not a bubble? George, in instances like these it's imperative to remind ourselves that the primary purpose of television is to entertain!

"The first thing we do, let's kill all the lawyers," a character in a Shakespeare play famously remarks.

I have a different suggestion: Make it realtors.

Here's why: Americans will spend about $1.14 trillion buying 6 million homes this year—both records. Yet the flat commissions paid to the realtors who handle the vast majority of those sales, averaging 5.1 percent, act as an enormous tax on the transaction process, taking wealth from both buyers and sellers in what for both is often the biggest financial transaction of their lives. It's true that selling a house is a complex task. But so is writing a will, and an attorney doesn't ask for 5 percent or 6 percent of your net worth as compensation.

And what do Americans receive in exchange for that commission, which can total up to $24,000 on a $400,000 home? In many cases, not much. A realtor's license can be had after as little as 50 or 60 hours of training (the person who cuts your hair probably has 1,000 hours or more).

But the real knock on realtors is a bit of simple economics that many people don't understand. Whether you're buying or selling, they rarely work in your interest.

etc etc http://www.slate.com/id/2105114/

While I wasn't able to stay awake for the entire "Boomers, finances and why they're screwed" PBS special I caught most of it. In typical fashion (b/c boomers comprise their core viewership) the coming financial debacle (that younger taxpayers will ultimately subsidize) is not boomers fault. It's the government's fault (oh, and Wall Street's!) ERISA Laws enacted back in 1974 have loop holes you could drive a Mack truck through! Well....... duh! While they focused on a major airline, their Chapter 11 filing and it's impact on the rank and file employees like it was breaking news, this tired scenario is hardly new.

Not to get on a soapbox but individuals like myself have shouted from the rooftops for years to implore these very people to establish their OWN retirement accounts! Think the "company plan" is a flimsy joke? Great! Then I think it sucks too! Are you going to open your account now? "Well let's hold off on that for now, I'll see how this new union guy works out". Done. I'm out of it.

Liz Pulliam-Weston covered this very topic (in much better detail) several years ago revealing that over half of all plan participants "cash in" their 401K when they leave their job (presumably to pay for education?) grossly under contribute and can't be bothered to understand the investment selections. Average family retirement savings in 401K's? $29,000. Now there's a path to retirement success!

The reason I firmly believe this issue goes hand in glove with the "bubble" is that this sexy alternative trumps the drudgery of "saving" every time! Talk about a negative self fulfilling prophecy! Take 1% of your income, make your investment selections before "break time", borrow against it every chance you get and cash it in when you leave. Make sure to tell your fellow employees that you've made a sincere attempt at retirement saving "but it just never seemed to work out for you".

If boomers spent a tenth the time analyzing their retirement plan options as they did debating installing a cedar OR redwood handrailing on their deck we wouldn't be here now would we!

I realize that the PBS special centered around DBP's (Defined Benefit Plans) but that only makes it that much dumber. For those that haven't been a participant in a DBP it basically means you're blindly putting your fate (and future) in the hands of company execs.

I also realize there are many "tech" employees that post here so please understand my comments are more directed toward less sophisticated employees. Tech folks are at the other end of the spectrum and if anything they have a tendency to over analyze their options and can tell you there account balance from their Palm Pilot.

On why do airline employees stay on after having their pay and benefits package are regularly reduced? I really can't say. Then again I've never been in an "open" marriage.