patrick.net

I wrote:

> It is stupid not to have health insurance (I don’t think that
> even Different Sean can argue that it is “Smart” to be
> uninsured)…

Then Different Sean Says:

> maybe they couldn’t afford it?

I just filled out a form at:

https://www.ehealthinsurance.com

And I can get Health Insurance for as low as $56 a month (with 10 other quotes under $100 a month). Every time I hire a couple day laborers to do yard work I always pay them more than $100 a day in cash. In America if you truly don’t have an extra $100 a month to pay for health insurance you can get on a government plan that will give you health insurance. In America the real poor are almost always insured it is the Stupid that don’t have insurance. I was recently talking with a tile guy (that I paid $4,500 to replace the tub tile and plumbing in an apartment bathroom) who said that he didn’t have health insurance. This is a guy who makes at least $500 a day (using a tile saw and other power tools) and he does not have insurance, stupid…

sources of finance for the north beach development:

Equity from 9% federal low-income housing tax credits and California housing tax credits syndicated by Related Capital, with Bank of America the main investor: $48 million
Citibank mortgage financing: $23.7 million
HOPE VI grant: $20 million
City of San Francisco, Mayor’s Office of Housing: $10 million
HOPE VI demolition grant: $3.2 million
San Francisco Housing Authority, ground lease reinvestment: $1.4 million
Federal Home Loan Bank of San Francisco, Affordable Housing Program grant, through Citibank (West): $1 million
Developer equity: $451,451
Miscellaneous reimbursement: $183,251
Total development cost (residential and commercial components): $108 million

how much would prime properties at fisherman's wharf retail for in the private sector? some $500-600K per apartment? and they built these for $300K per unit on average (including the cost of lifts, common spaces, etc, plus demolition and site remediation costs).

so they've developed these and valued them at about half retail price. given the normal developers 25% profit margin, it would have cost the developer at least $400 K per apartment to construct...

note that the financing is all 'for profit' private sector though -- so they took their cut, no difference there...

I can get Health Insurance for as low as $56 a month

what do you get for $56 a month?

"The project was nearly 100% occupied at the beginning of July. Demand for the apartments has been strong, but officials have been busy with a verification process to qualify renters. The team filled the tax credit apartments from a waiting list for which 2,100 people applied during a three-week period. The John Stewart Co. manages both the residential and commercial components. "

Hey, this way we can cut out all realtors and apartment brokers from the process as well... even more savings without all those bloated commissions to pay and expensive press ads to take out...

DS,

Marx's misperception about the science of history is shared by many of his contemporaries. Indeed, many twentieth century revolutionaries still did. The early members of the Chinese Communist Party attempted to ferment revolution amongst the urban proletariat, with disasterous consequences. They started living off the land and moving into agarian areas because they were being slaughtered in the cities.

Messianic revolutionary movements occurred with great regularity in Chinese society and probably elsewhere. The peasants greeted the CCP and the Red Army as saviors and attributed quasi-religious devotion to the organization. Mao became a godhead. To understand that is to understand the essence of the Cultural Revolution.

that's cos they were doctrinaire, astrid... they completely failed to exercise their own judgement and common sense or to critique marxian theory, but literally 'took it as gospel'...

the interplay of religious thinking is interesting -- this is taking place in a pre-industrial country which did not have the european 'enlightenment' and 'age of reason' behind it...

north korea was, and is, very devoted to kim il sung as well, i believe, in a very similar way...

bet you're glad you're out of there ;)

Happy Independence Day to all!

To me, this day would be extra sweet, if I were independent of my neutron bomb mortgage. I was one of those duped by the realtors, mortgage brokers, and the professions of the creative financing gurus. “Real estate always goes up…. The best way to build wealth is OPM, other people’s money. Leverage is the best way to build wealth quickly. Everyone needs some place to live…they aren’t making any more land…. Location, location, location…. Today’s high prices are tomorrow’s bargains. Don’t miss the boat…. There are haves and have-nots…. Secure your future by getting your foot in the door. Inflation and appreciation will make it all work out. “ @#!$#%$@#$

I openly confess my ignorance, and bought a $699K Mcmansion, and put in $115K in upgrades. The place has 2550 square feet, granite counters, tile throughout, upgraded custom paint, solid core doors throughout, drip system, a large flat yard, quiet street, great location, fabulous school district and lots of other bells and whistles.

The broker said, “never mind the negative amortization. Even if you neg-am $15k per year, the projected appreciation of 8-10 percent per year will greatly overshadow the neg-am. You will be making huge gains, although in a neg-am. Most people sell or refinance within 7 years, so an ARM is an attractive option.”

The UCSB finance guru supposedly projected a “healthy” continued appreciation of a conservative 8-10 percent, “he has never been wrong”. Lol….It seemed like the right thing to do at the time.

In the previous couple of years, close to 70% of the new mortgages in California were ARM’s. I now realize that we are facing a bubble of unprecedented historical proportions. The option ARM gives options all right. One Option is to sell now at a steep loss. Another option is to live in the place for four years, then hand the keys over to Countrywide Mortgage when most of the state is upside-down. Other non-viable options are suicide, homicide, bank robbery or alcoholism. CARNAGE is on the horizon, and percentages reset, mortgage brokers downsize or go out of business, builders are out of work, real estate agents have no sales, and foreclosures are the norm. When the market is flooded with foreclosures offered at a steep discount, no one will get close to 2004 or 2005 prices for their real estate. The “soft landing” of the market is apparently headed for a “Titanic” sort of soft landing, on the bottom of the Atlantic.
Greenspan’s “irrational exuberance” of our “frothy” market was a horrific understatement. He has watched out for the interest of the big banker cronies, but they will be bit in the butt when they are sitting on a TRILLION dollars in defaulted properties. What then?

The old Chinese curse comes to mind, “May you live in interesting times.”

DS,

Most people are into easy one sentence mantras. That's certainly the case with this housing bubble. While housing valuation and situation is actually quite transparent and fairly easy to for a layman to understand, most people don't bother and buys into "RE never goes down" without hesitation.

The spirit of science of the 18th and 19th century made a lot of "wise men" believe that truth is measurable and knowable. Marx and his ilk wasn't simply doctrinaire, they thought they had found the scientific method (of course, their testing wasn't all that rigorous) for society. This sense that society is knowable continues even today in Communist societies, including China. The CCP still puts out publications on Communism orthodoxy, but nobody really buys into them anymore, except maybe my revolutionary Commie grandma.

I just don’t think government redistribution is the best way. A government that works best ought to leave as few marks as possible, doing as much as possible via regulation and the market.

Why's that?

you're right, you're better off with Enrons and Worldcoms running the show... robber barons and fly-by-nighters are much more accountable...

of course, this 'minimal govt' conception is textbook right-wing marketspeak which is in vogue and attempts to sideline govts wherever possible so the private sector can get on with gouging innocent dupes...

That's no good, Option Dude, you seem calm about it now...

unfortunately, mortgage brokers and realtors will continue to get work in a collapse, as they take commissions for reselling properties and writing new mortgages on the way down. but they've been doing exceptionally well out of the boom as their commissions have stayed at a fixed percentage of sale price...

Option Dude,

Don't panic yet. When and where did you buy? You might not be as badly off as you think. Also, can you afford to move to a higher monthly cost fixed rate mortgage?

Be wary of the foreclosure option. It sounds like you have more than one mortgage, in which case, you might not be able to walk away scots free. Regardless of that, your credit will be torn to shreds for at least 7 years. That could impact your life in lots of ways, including any future rentals you may wish to take. If you're thinking of getting out and can't sit on the house long term, it might be better to sell at a loss.

Disclaimer: just my opinion, do your own investigation before acting on anything I say

Marx and his ilk wasn’t simply doctrinaire

no, he wasn't so doctrinaire, all the people who followed after him til the present were...

freud was apparently quite doctrinaire and unscientific, if anyone disputed his 'interpretation of dreams' and psychoanalytic theory, he would just dismiss them as irrelevant... jung fell out with him... freud's had a rather bad press in recent years...

Native speakers, please make an effort to speak proper English as befitting the class you were born to or the class you now find yourself in or the class you aspire or pretend to belong to. For example, when you say "less" you really mean to say "fewer."

Mercy boogoo.

Don't fucking say poor people are lazy and stupid, or they'll kill you fucking smart asses. We poor people don't like to work. Work is for slaves. Your money from hard work is and will be redistributed to us poor people by my governmnent. Note, my government, not yours. Anyone here who boasts his money and looks down on the poor is a middle class sucker. Let me tell you how the upper class (a few of us poor, lazy and stupid) got their money: Plunder, crime, thievery, robbery, and you name it. NOT BY HARD WORK, you fucking middle-class ass sucker.

DS,

Just because I don't usually support direct government subsidies doesn't mean I don't support enforcing existing regulations on the market. I'm all for government policing of the private sector. I don't see why you're jumping from my lack of support for government subsidies to individuals (I have no such opposition to large community projects like dams and electricity generation plants) to assuming that I don't want SEC to enforce rules on book against Enron et cie.

I don't think that's right wing marketspeak. I just want an efficient government that consistently yields the highest level of utility for overall society.

That's a very well written description of the situation, Option Dude. It sounds like your place is very solid, though, and will retain value - construction, location, etc.

I think you've spelt out the deception of the real estate racketeers perfectly.

Probably forget about 10% appreciation every year, but if you sold now, would you be able to break even? Based on the quality of the place? That might forestall a loss and the continuing negative amortization if you tried to sell later if the market tanks.

I just want an efficient government that consistently yields the highest level of utility for overall society.

so you keep saying. i don't know if it's as simple as that... not even allowing for crony capitalism and government-industry corruption and revolving doors...

the latest fad is to sell off all public assets to PPPs -- energy is sold off, infrastructure, everything...

on direct subsidies, i tell you, there's subsidies galore here -- $7000 to $14000 as a first home buyers grant, plus a stamp duty waiver; $4000 grant to a mum just for having a kid... every kid they pop out now they get $4000... but then, the Federal govt is in about $10 bn surplus, which is a lot for the size of population...

Let me tell you how the upper class (a few of us poor, lazy and stupid) got their money: Plunder, crime, thievery, robbery, and you name.

often

NOT BY HARD WORK, you fucking middle-class ass sucker.

generally not. certainly not the hard physical work of low paid labourers.

A Government of Thieves - Bush family

Thanks for the thoughts, Astrid.
You have raised some valid and good points. The fixed rate, higher payment mortgage will become less of an option, and then a non-option as prices plummet, and interest rates rise. If debt exceeds appraisal, no refinance will be possible, for me, and countless others.

"Plunder, crime, thievery, robbery, and you name. NOT BY HARD WORK, you fucking middle-class ass sucker."

Yikes.

I guess I am one of those idiots who believes in love, honesty, hard work, friendship, faithfulness, and good family values.

editor, please edit "you name" to "you name it." Thanks.

I only lambasted the ass suckers of the middle class. The predominant majority of that class are good, unpretentious people. They don't look down on us poor as lazy and stupid.

DS,

If you're not willing to talk straight economics, we can't conduct a functional economic discussion. Of course crafting government policy is not as obvious as what I've just said, but I've just stated my starting point. You've also ignored all the instances where I was quite willing to concede and have the government run things, if that yields the most efficient solution.

It sounds like the Australian government has a wad of cash and its burning a hole in its pocket. Howabout saving it for a rainy day? Or set up some research labs that will drive the economy ten years from now? I think direct subsidies given out are a bad idea, the home buyers have already demonstrated a willingness to pay crazy money for houses, so wouldn't giving them more money just push the prices up higher? As for kids, it's not as if $4000 would cover much cost, I doubt it would encourage more kids. Wouldn't that money be better spent on better childcare for those kids? I don't think families who depend on that $4000 to have the kid should really have the kid.

Option Dude,

It's good that you found out. Now is as good of a time as any to act. If you want to stay on and have the means to do so, now is the time to refinance into a fixed rate mortgage. If you would rather go, then now will likely be the best time to sell, while the sellers still have high price expectations and a lot of priced to sell properties are still moving briskly. If neither of those options are workable, think very carefully about the consequences of just staying put and waiting for foreclosure to come.

Disclaimer: just my opinion, please do your own research before acting.

If you’re not willing to talk straight economics, we can’t conduct a functional economic discussion.

well, that all depends... i'm more than happy to talk straight economics. when i started talking straight economics with FAB, it turned out all his costings were wrong and his assertions based on prejudices. the govt did it for the same price as the private sector because they used the private sector. and the end result was much cheaper because it was not for profit.

we can't cover every single combination and permutation of govt vs private sector activity in the known cosmos, so there's no point trying to make generalisations about who should be doing what at what cost, it's just not realistic... pick one example if you like, i just did PPP affordable housing development with FAB and ran the numbers...

You’ve also ignored all the instances where I was quite willing to concede and have the government run things, if that yields the most efficient solution.

no, i didn't ignore them, i said i'd realised you weren't a lost cause. should i have seized upon them with glad cries of evident joy? :P glad you've come 'round. ;)

It sounds like the Australian government has a wad of cash and its burning a hole in its pocket. Howabout saving it for a rainy day?

they are. giving some away and saving some.

Or set up some research labs that will drive the economy ten years from now?

they're pretty bad at that, missing opportunities for solar cell research, all kinds of things. but that's because their cronies can't make money out of solar cells, their cronies are all into mines.

I think direct subsidies given out are a bad idea, the home buyers have already demonstrated a willingness to pay crazy money for houses, so wouldn’t giving them more money just push the prices up higher?

yes, that's what i argued. altho $7K is a drop in the ocean, and a smart first home buyer wouldn't let the realtor know... other suggestions are accessing the 401(k) fund to buy property, which would definitely feed the boom without price caps in place...

As for kids, it’s not as if $4000 would cover much cost, I doubt it would encourage more kids. Wouldn’t that money be better spent on better childcare for those kids? I don’t think families who depend on that $4000 to have the kid should really have the kid.

they're not necessarily relying on it, it's just a sweetener. however, it's bad policy, just a vote winner and a way to get people to populate or perish. the PM actuallyl opposed it, but got rolled somehow. a lot of really young girls who are on welfare are eyeing the $4K and thinking what they can spend it on, as they know they wll get welfare for life for the kid growing up anyway... $4K buys a lot of drugs...

Thanks Astrid. We have listed the property, at a loss, but not a catastrophic one. Refinance would be possible six months after the end of the listing, but would in my case render me quite "house poor" with the interest rates as they are, or will likely be April 2007. Refinance of course would be possible IF I qualify for a higher payment, IF appraisal covers the place, and IF the underwriters are willing to make a loan a previously unsold house. They may insist on a significant prepayment penalty if they grant the refinance. Comparative market analysis in March suggested a list price for $929K on the place. We are presently listed at $799K. We have had some lookers, but no offers, in the 5 weeks we have been listed.

Option Dude,

Sounds like you did your homework well. All it takes is one good bite and your house sounds really attractive overall.

Good luck!

DS,

I try my best to base on assessments on facts presented. Also, note that I differ from the traditional free marketers in one important aspect, I think in terms of utility and not in terms of dollars. So, I'm even willing to consider options that don't yield the highest dollar amount.

It sounds like you agree with me about the two examples of direct subsidies presented. It's moral hazard. Direct subsidies tend to cause people to overconsume most goods. There are exceptions, such as free immunizations or free daycare, which are unlikely to be abused. However, overall, I think subsidies just shifts demand up and most of the subsidy end up in the seller's pocket.

I don't mind a government spending money on building more affordable housing units and spending more money on children, most governments don't spend nearly enough on those two things.

Option Dude,

Welcome! You took stock of the problem out early and I am confident that you will be able to extricate yourself from this with a minimum of pain. Please keep us posted!

Astrid,

It's not just about the kids. As some of my rapper clients say in their songs, I want to get PAID. I've deferred gratification for a long, long time, and I'm sick of it.

I am tired of going to work in Beverly Hills and coming home to my one-bedroom slum apartment.

My job requires me to assume enormous responsibility. Millions, and sometimes even billions, of dollars are riding on the decisions that I make. I work very hard to do a good job, win my cases, provide good advice, and earn a great deal of money for my law firm. It's stressful as hell. I have to generate top quality work product every single day. This is intellectually and emotionally demanding.

To be sure, there are people with harder jobs -- doctors, soldiers, priests -- but my job is quite difficult. It's a hell of a lot more difficult than working at a gas station. But my neighbor works at a gas station, and we live in the same apartment complex. This arrangement isn't going to work for me any more.

I've (pardon the expression) busted my ass and lived well beneath my means for the last 16 years.

I want a house, and I want it now. More to the point, I want to get out of this apartment -- now. Right now, today. If the law firms in Los Angeles aren't willing to pay enough to enable me to buy a house, then I'll move to a city where I can. My employer will just have to find someone else. It's too bad -- I like my job, a lot. My boss is an exceptional lawyer, and I respect him and am learning a lot from him. I would like to stay. But I am not going to work as abig shot entertainment lawyer and live in this goddamned apartment any more. I have had it up to here with this.

Joe,

If you make important decisions on a billion dollars, you should be able to take a fat cut. It sucks that you can't afford a decent place with this kind of work. You are being exploited, BIG TIME. Why can't you start your own business/firm?

I think across the board in the Bay Area, there’s a simple acceptance (maybe even an expectation) that 60 hour work weeks can only provide you with crappy schools, crappy houses, crappy traffic, and no disposable income.

Do engineers really work 60 hours? How silly. I guess if they like to work so much they should not complain.

Joe and Astrid,
Thanks for the kind comments, and kudos. I know that there are many people out here who revel in the misery and demise of us in the pinch. I don't really blame them, as I can empathize with their position. However, if rates plummet because of interest rate hikes, housing will likely come down alot, but getting into the game at higher rates will be bad initially, until a person can refinance, if rates later come way down.
Pondering Joe's situation, I am reminded of some of the most important aspects of life which are the most fulfilling, family, friends, enjoying good health, making an appreciated difference in the lives of others, enjoying nature, and all of the small things that make life enjoyable. As we are living now, and not in a dress-rehearsal, I support you Joe, in creating that place and life circumstance that will give you the greatest peace and satisfaction.

GC,

To start your own firm, you need clients and capital. I have neither. Well, I have a few clients, but they don't need that much legal work, so they don't generate enough business to permit me to pay the bills. To start a my own high-end litigation practice, I'd need a minimum of $400,000 in capital. And that would be the absolute bare minimum amount, enough to give me a fighting chance and not much more. I'd have to do all of my own secretarial work and open up an office in the cheap part of town, etc. You really need a lot of seed money to succeed as a plaintiff's lawyer, it's an expensive business.

I also have a wife and two kids to feed, clothe, and house. Additionally, I get a bill each month for $1,200 from my student loan lenders.

I would very much like to have my own practice someday, but it takes a long, long time to develp the web of professional and social connections necessary to generate enough business to pay the bills.

I only know two young lawyers under the age of 40 who have successfully started their own practices. One comes from a wealthy family, and I think they financed her in the early days. She is doing quite well now, she was a CPA before going to law school and defends CPA's in malpractice cases. The other guy has an office in one of Los Angeles' Hispanic ghettos. He grew up in the neighborhood and still lives at home with his parents, so his expenses are minimal. I think he will be quite successful, as he is a damned good lawyer.

These are the only two examples I can think of, and I know probably 100 lawyers under 40. A couple of other people have started practices; one failed, and the other is just sort of limping along; his wife is a dentist, so she can pay the family's bills during the lean times. But there is a reason why the other 96 of us are still working for other people. It's not easy to start your own practice these days. It's always been a challenge, but today it is even harder.

Why? I am not sure. There are a lot more lawyers per capita today than there were, say, 30 years ago, and that undoubtely has something to do with it. But I also think demographics are a reason. The Boomers control all of the legal work. The general counsels are all Boomers, the succesful lawyers are all Boomers, the government officials are Boomers, etc., etc. They tend to refer business to one another, and it is hard for someone who isn't a member of the club to break in. This isn't because of some conspiracy; it's just human nature.

Most lawyers get business from the people they know. For example, my own clients are mostly tech people, because I know a lot of tech people. A few of my clients are soliders (I don't charge them, obviously) because my friend Ed is a solider. A couple of clients have followed me from firms I have worked for in the past.

But as a lawyer, you generally don't really start generating business until your peers become established and successful. Most of my peers are not yet in a position to need much legal work. Nor are they in a position to pay for it. Those who work for large companies are not yet in a positition to hire and fire lawyers on behalf of the company. They will be someday, but not yet.

Right now I am trying to put myself in the best position to get the legal work once the floodgates finally do open. For example, there are very few complex litigators with trial experience these days. There just aren't that many jury trials any more in big cases. The only people who try cases are personal injury and criminal lawyers. So I am getting trial experience. When the time comes, I will be able to sell that expereince to clients.

Option Dude,

sorry to hear about your situation first hand.

Having seen this happen to people I know in other places of the world, I'd say your best option is to unload, at any cost right now, as the maret just starts to crumble, there are always naive buyers at the first stage of a bust. Dumping right now biting the bullet is tremendously better than paying month after month into a big black hole which will suck decades out of your life.

If you want to tough it out, there is also another option - which will require you to take a serious step down in quality of life. Divide your house up in a multiple compartments and rent to longer-term tenants.

But I personally would have chosen to dump it right now over a heartbeat. As long as you have no illusion about the situation, you are already way ahead of the other FBs who are still waiting for a summer bounce.

Option dude, sorry to hear of your dilemma. You should be fine as you are aware of the issues which sadly most are not. While I fanaticize about reveling in people’s misery it is simply just too mean to poke fun at people in that position. I think that is one of the large aspects of the bubble beast, people are going to get hurt, badly. Unfortunately people will get hurt simply because they were in the wrong place at the wrong time. I hope your situation works out for you.

Joe Schmoe, dude, the man is giving you the high hard one. how about a class action suit against the boomers? I would sign up.

fuck the joint driller, bust out the pharma grade blow.

Joe,

That sounds good. You have a plan. How about letting your tech friends invest in your future law firm when the time comes? Or are people generally scared of going into business with a seasoned lawyer? (Just kidding)

SQT, littlered seems mighty close to troll, trollbgone?

GenX are 43-25 (1963-1981). Some consider '61, '62 to be cusp years. Some cut off GenX at 1977 (29). It sort of depends upon whether one considers GenY to be really just the second half of GenX, or a new generation. By previous generational periods, GenX & GenY are the same generation, and mostly children of Silent Generation parents (not Boomers), with a sizable minority being children of Cusp-Boomers or leading edge Boomers. Most Boomers have children younger than 29 in the "Millenial Generation/Internet Generation". Those who began graduating High School around 2000. There is another new generation who began being born around 2000/2001 that are being called "New Silent" and have only GenX/Y parents, no Boomers.

Most of the rants here against Boomers end up indicting older Gen X'ers or Silent Generation (1925-1945), because everyone thinks everyone else is a Boomer. The "Greatest Gen" or "GI Gen" are mostly dead or not talking much anymore (1900-1924...if you weren't born by '24 you probably weren't a GI in WWII). They definitely aren't selling houses much these days.

Just keep in mind when you spout off how much you hate everyone that you're probably talking about a good part of your own generation or your parents instead of Boomers. For the record, I'm not a Boomer by any measure; just kind of sick of generational warfare.

There is another new generation who began being born around 2000/2001 that are being called “New Silent” and have only GenX/Y parents, no Boomers.

That's a bit young to be judged silent already! Let's give them a chance in their 20s at least, may be they will say something...

ajh:
>>Australia’s minimum wage is about the highest in the OECD at about $12/hr, but at least it ensures survival without having to turn to crime.

On the other hand, my nephew knows a lot of people at the bottom of the heap (and yes, even in Canberra we have an underclass).

i've heard about it -- rural poor, heroin addicts, etc...

If these people work at all, it’s in the black economy for 2 reasons; firstly that they are not employable at $12/hour and secondly because documented employment would seriously interfere with their welfare benefits. When you actually see a poverty trap in operation, it’s an ugly thing.

yeah, somewhat. i've encountered 2 generations of people living in public housing in a neighbourhood in wollongong recently, they have a nice life, really -- 2 blocks from the beach, and a bungalow on a block of land. if they start working, they get to keep the place, but the rent goes up a bit. and they get offered to buy the place by dept of housing for well under market, e.g. 300K instead of 500K -- a lot of people have taken up the offer then immediately flipped the place for 200K profit, and put it onto a new cheaper apartment elsewhere. beats working for a living...