patrick.net

But here’s the economic truth: The Fed doesn’t set mortgage rates. When it “raises rates,” that just means it is removing money from the economic pipeline. Not only doesn’t this procedure increase mortgage rates, but over the long run it reduces inflation and permits the markets to lower mortgage rates.

Very interesting, as I hadn't realized that the mortgage industry had figured out how to set their own cost of capital. It's a financial miracle! No longer do banks in the business of lending need to determine their own cost of lending that capital by evaluating the overnight repo rates or government bond yields. Astounding!

Sarcasm aside, the reason that when the Fed raises overnight rates it puts upward pressure on mortgage rates is simple: The banks/institutions doing the lending have to demand more interest in order to justify using their cash to lend to you. If a bank can get better return lending to companies or with bonds, then they'll just do that instead. Thus the mortgage rates rise to the level where banks will lend you money to buy a house.

I'm ignoring all the micro stuff, which can drive mort rates up too as int rates rise. For example, even though inflation is falling, the risk of financial distress is rising because of the increasing cost of capital. That means homeowners are become more risky debtors in a rising interest rate environ.

Joe,

Montgomery County does have its share of liberal teachers, but not obtrusively so. I was lucky to attend a magnet program full of teachers who were brillant and cared deeply about teaching.

As for the kids, my mom works for the school district and she says she's seeing more rude kids and more kids throwing gobs of money around than was the case ten years ago. So it's probably best to steer your kids away from the richest school districts. Those districts tend to have a mix of monied (but by no means exclusively white schools) and poor kids from the county's affordable housing projects, so your kids might feel uncomfortable being stuck in between. I'm a product of the magnet schools, so I would recommend looking at magnet schools. I had classmates whose parents gave them new Benzes and BMWs and many classmates who had to pay their own way through college, and money was never mentioned in class or out of class.

Hispanics in the DC suburbs are not fresh from the border and the ones in the better schools usually have parents who deeply care about their education, and many of them are middle or even upper middle class.

Most of the Counties near DC, with the exception of Prince George's County, has at least a couple of good schools. I definitely think the situation there is much more middle class friendly than California, and the weather is not too bad. The winters are quite tolerable and warm compared to the midwest and northeast.

On healthcare, I think the rich like OO and FAB are not in a good position to speak about what this country needs and doesn't need from the healthcare system. They're only interested in the best part of the healthcare system, so they don't bother to think about the system the rest of us have to put up with.

I go about uninsured. The cheap coverage I could get is so limited that I'm financially better off uninsured. The cheap coverage doesn't give anywhere close to 100% coverage and does so with high deductibles. Thus, if I were to ever need the coverage, it's financially much better just to file bankruptcy (since most of my savings are in untouchable retirement funds) and get on medicaid.

SQT -

you could always start your own wordpress page. You wouldn't need to do much, just post the links and let the bloggers take over...

:)

LiLLL and SQT,

Thanks for the posts. However, I'm worried that a lot of readers probably like the convenience of going to the same page on patrick.net to get all the links at once, rather than scrolling down to our individual posts.

Despite that, here's my contribution, from the Mercury - this is their bold frontpage headline today!

http://www.mercurynews.com/mld/mercurynews/business/14976554.htm

Some choice quotes:

So it remains to be seen whether the Central Valley market woes soon extend to the Bay Area, or whether the slowdown inland is isolated and short-lived. - yeah, wishful thinking.

In San Joaquin County...nearly 4,000 existing houses were for sale at the end of May, about 3 percent of homes in the county and nearly 250 percent more than the amount in May 2005. - Yikes!

Tracy resident Elaine Tabasa, who commuted to Fremont for her job in high-tech marketing before she went on maternity leave a few months ago, bought a three-bedroom house for about $400,000 in 2004. She and her husband, Chris, moved there from Milpitas. She thinks the house is worth close to $600,000 now. They have no plans to sell soon, though someday she'd like to move closer to the Bay Area again.

``If we decided to move back to the Bay Area, we could take that equity from the home in Tracy, and use it to buy another house in the Bay Area,'' while keeping the current house as a rental, she said. ``I think our house is still a good investment.'' -These people are so screwed.

I wonder how many people did this - moved to the Central Valley in hopes of building enough equity to move back to the BA? Some will get out in time, but I fear many might find out they are stuck and cannot move back without taking a loss.

As many have said so on this board, the "fringe" areas will fall first and fall hardest.

The fringe areas may also become*fringier*

LiLLL,

This is already happening. I saw a piece on the local news (KTVU I think?) about how people in Antioch, clearly a fringe area in the BA, are up in arms b/c a lot of the new developments there have units rented out under Section 8 subsidized housing. I feel bad for these follks, but it's a very hairy subject to breech, in terms of class/race issues, etc. These people were complaining about the increase in crime, graffitti, etc. resulting from this. My initial thought was, which owners were signing up for Section 8 rentals?? Could it be flippers?

Governor Conan Says:

"Two kinds of people disdain money: Those who don’t have much and have convinced themselves that they can live happily without much money and those who were born with too much and never have never felt the need for money. "

I have heard inherited wealth (as in Getty) sneer on about how money is not important. But I suspect that money to inherited wealth is like air to the rest of us. We don't think about air because although air is needed, we have more available than we can use. Take away the money from inherited wealth and money will occupy thier thoughts as much as air would to a man trapped under water.

I go about uninsured. The cheap coverage I could get is so limited that I’m financially better off uninsured. The cheap coverage doesn’t give anywhere close to 100% coverage and does so with high deductibles. Thus, if I were to ever need the coverage, it’s financially much better just to file bankruptcy (since most of my savings are in untouchable retirement funds) and get on medicaid.

This is what kills me when reading a typical FAB "you can get medical ins. for only $56/month" rant. Anyone who has ever had to actually rely on such a policy (as in *gasp* actually get sick) quickly learns it's not worth the paper it's printed on. The cost for a truly comprehensive individual plan that actually has a chance of paying up when sick person needs it will run you anywhere from $200-500/month, depending upon your age, health & location. And for all those people who love to bash Kaiser, Kasiser is one of the very few companies out there that will accept people with pre-existing conditions. Pretty much all the other HMO/PPO plans prefer to cherry pick only healthy, younger people with no history of any medical problems.

Kaiser is also not for profit, so they're actually operating for the benefit of their employees and patients, rather than that of the shareholders.

California's overall healthcare system sucks though. The one time I had to use emergency service here, I was treated like a half rotted piece of meat and they totally messed up my billing and threw me into collections (I had good health insurance at a time).

The best scenario is to be born with lots of money but learn to be happy with very little money. This housing bubble has done just the opposite. There are so many people who've learned to live like they have tons of money but don't actually have the means to support themselves.

It's funny, we generally go to UCLA for our medical needs, even though it's on the west side and a bit of a drive. Their billing system is SO screwed up -- on at least two occasions, I've gotten letters from collection agencies before ever receiving the first bill from the hosptial!

And they have this annoying habit of sending like 20 bills at a time -- one for $5.63, another for $41.27, etc. There does not appear to be any rational basis for this; it's not like each bill is from a different unit of the hospital, or for a different test, etc. For some unknown reason, they just break the bills up into these miniscule amounts.

I am not persuaded by the argument that socialzied medicine is more "efficeint" than private medicine, and that we will all SAVE a lot of money under a single-payer system thanks to lower administrative costs. However, the system we have now is obvioulsy far from efficient.

California’s overall healthcare system sucks though. The one time I had to use emergency service here, I was treated like a half rotted piece of meat

I could start another rant about CA's failing emergency room system and the causes (hospitals being overwhelmed by illegals who can't/won't pay for ER services the government FORCES them to provide free of charge, etc.) but as we're already way OT, I'd better not go there.

SQT,
I'm glad things turned out well for your dad in OKC. If you're talking about U Oklahoma, yes, they have one of the top cardiology programs in the country, believe it or not. I've visited there several times for work collaborations in the past. The hospital is a massive sprawling complex. There would never be enough land in CA to build up something like that.

While CA's medical services is peripheral to the overall housing discussion, it does highlight the low quality of CA's living standards for the average middle class family. CA's overall education and healthcare quality has both gone down in the last two decades. The culture aspect really depends on your vantage point, but I'm not sure I'd want to raise any kids here. (If I'd ever had kids, I'd probably prefer to raise them in Shanghai in private schools, or in Australia or Canada)

The weather and food here is still fantastic, but those could be enjoyed on vacation. If I was rich or don't have kids, I think I can manage. But having kids here is just kind of scary.

I could start another rant about CA’s failing emergency room system and the causes (hospitals being overwhelmed by illegals who can’t/won’t pay for ER services the government FORCES them to provide free of charge, etc.) but as we’re already way OT, I’d better not go there.

HARM, I have to say that if an illegal has a true emergency, he should be treated because of humanitarian reasons. One solution is to reduce the population of illegals, through legalization or deportation. Neither is really doable.

Peter P,

I'd say that's why punitatively punishing anyone hiring illegals is so important. When they hire illegals for so little money, they're not just robbing the illegals with low money and work from legal residents, but they're also pushing the social cost of those illegals onto everybody else.

The great thing about that Crapatino house is that it would require both parents working at very high paying jobs. This so they can get the 'good' Crapatino schools? Funny that as they are going to shove Jr. into day care so they can also drive their fancy german cars. Strangers raising your kids, now there's a good idea. Ok from totally out in left field, how about this, the school doesn't really matter so much if you are there to help in your childs education. If the McDebtor has a high paying job chances are they are also highly educated, more education than the schmuck teaching at Crapatino jr. high. So fill in the holes at home. Idiots. Or you could just work 60 and buy more crap you don't need to fill up your shallow existence.

Mr Schmoe, my comments were of course not directed at you. Keep the faith, fight the power. Free your mind and your ass will follow.

I’d say that’s why punitatively punishing anyone hiring illegals is so important.

I definitely agree. That should be a felony crime. However, it is not going to happen. The second best option is

1. legalize their stay, authorize them to work, but deny them residency
2. tax them as US residents but give them no welfare
3. make them pay a special fine every year
4. make them pay all back taxes

I’d say that’s why punitatively punishing anyone hiring illegals is so important.

I definitely agree. That should be a felony crime. However, it is not going to happen. The second best option is:

1) Give them a '64 Impala, but not a SS
2) Let them have hydraulics, but no batteries.
3) Let them have 3-wheel motion, but sip of the potion.

Whoops, category 3 should read, Let them have 3-wheel motion, but no sip of the potion

Surfer-X,

Great observation about Cupertino school districts. Makes you wonder why they can't just live in a cheaper district and do home schooling in conjunction with other parents.

Schmoe at Law, have you filed our class action suit against the boomers yet? Why I think you should be happy living in a crappy apt. you think all that schooling, talent, hard work, and suffering can possibly replace getting high and having group sex? Dude, 60 is so the new 20. From what I can see the boomers will never let us up to the Masters house. The boomer I share an office with had me help him with excel yesterday, seems Holmes couldn't select non-contiguous rows of data. Oh and he has me get data for him which he then puts his name on. Is my name found anywhere? They aren't going to go away, they are going to stay on the job until they are in their 70's. We need to formulate a plan to oust them.

Surfer-X,

If those boomers are out of a job, guess who they'll depend on to support them? We're screwed no matter what we do.

SFWoman Says:
Yesterday’s article in the WSJ really should help burst the bubble. The manager of the best performing real estate mutual fund over the past ten years in the US said that prices could come down about 50% in California, Florida, the Northeast and other bubble areas.

Hm. The folks who are crowding the open house across the street as I write this (on a weekday!) may not have read that article.
They're falling over themselves, and there's no parking left within about 300ft up and down the street.
The house is listed for $1.2 mil. It's a nicely remodeled 2000SF 4BR rancher on a rather large lot in West San Jose. Nothing special, though.

(For those who are keeping track, the house for sale I'm talking about is different from the one I posted about a few weeks ago, also across the street. That one sold and stayed sold. Asking price was $1.3 mil, no sale price in Zillow yet.)

I don't know what to think, really.
On one hand, I think it's great that folks who still have too much money on their hands are keen on sinking it into a depreciating asset, so that when finally everybody has theirs and/or is fully leveraged, prices can come back to fundamentals.
On the other hand, I'm starting to question my own convictions (which I should have in early 2002, when I was convinced that the bubble would pop, learned about multiple offers for crappy houses at a much lower level than now, and continued to deny reality).

The scary thing is that with every such sale, paper gains become real money which starts to slosh around. Now there's real money in the seller's bank account, and there's real money to be repaid to the lender over the next 30 years.

@Girgl, San jose, especially West San Jose is a paradise on earth. 1.2mil, shit, that house should go for 1.8-2.2 mil. The FB's should consider themselves lucky to have such a place. You are correct that it is real money, in their pockets. I say get one and watch your future savings grow.

This is what kills me when reading a typical FAB “you can get medical ins. for only $56/month” rant.

If you go back through FAB's comments, you'll find that this is the same fount of knowledge which declared that public schools in Mill Valley are dangerous because of too many black people, professional women are the enemy of proper families, middle aged men can copulate with over a hundred women while simultaneously declaring that younger women are increasingly sluts, only conservatives have a greater than middle school science education, and that poor folks shouldn't have babies.

Elitist naivete aside, such wisdom is what we're likely to see more of as things continue to slide.

HARM, I have to say that if an illegal has a true emergency, he should be treated because of humanitarian reasons.

I agree, however what I'm referreing to was not the use of ERs for legitimate medical emergencies, but abuse of them as proxy "free clinics". As far as punishing/fining employers hiring illegals, I agree it's the right thing to do and would be incredibly effective at dis-incentivizing illegal immigration. However, thanks to the alignment of powerful special interests/lobbies on both the corporate right & pro-"diversity" left (the former in favor of unlimited cheap exploitable labor; the latter pursuing "reparations/Reconquista" for perceived historical wrongs), I also doubt this will happen anytime soon.

And anyone under the mistaken impression that BushCo & Associates is really serious about "cracking down" for any reason other than getting those election year media soundbites ought to read this:

Illegal Hiring Is Rarely Penalized
Washinton Post

Between 1999 and 2003, work-site enforcement operations were scaled back 95 percent by the Immigration and Naturalization Service, which subsequently was merged into the Homeland Security Department. The number of employers prosecuted for unlawfully employing immigrants dropped from 182 in 1999 to four in 2003, and fines collected declined from $3.6 million to $212,000, according to federal statistics.

The government's steady retreat from workplace enforcement in the 20 years since it became illegal to hire undocumented workers is the result of fierce political pressure from business lobbies, immigrant rights groups and members of Congress, according to law enforcement veterans. Punishing employers also was de-emphasized as the government recognized that it lacks the tools to do the job well, and as the Department of Homeland Security shifted resources to combat terrorism.

I think the guest worker program is a great idea. The pro-business side should be happy, as business will get workers that must work in order to stay in the country. So long as these people are properly taxed, the situation will improve.

Need a way to silence the pro-diversity people. How about a "Diversity = Food" campaign? Since illegal aliens are not food items, diversity does not apply to them. :-P

“Hm. The folks who are crowding the open house across the street as I write this (on a weekday!) may not have read that article.

Brokers' Tour definitely. The less business volume agents do, the more they'll fall all over each other to see new inventory...probably in hopes of finding something that's "perfect" to motivate a slowfooting client of theirs

Punishing employers also was de-emphasized as the government recognized that it lacks the tools to do the job well, and as the Department of Homeland Security shifted resources to combat terrorism.

There are two ways to increase the expected cost of hiring illegal workers:

1. Increase enforcement
2. Increase penalty

If anyone found knowingly hire illegal workers is sentenced to 10 year in prison, effects can be felt with just a few (high-profile) prosecutions. However, businesses need workers. The guest worker program must be implemented in parallel.

Peter P,

The guest worker program is just corporate subsidy by another name. Society as a whole subsidizes the employers of minimum wage workers since the workers pay in less in taxes than they get in return in benefits. While this might be a reasonable solution to a low immigration society, this leads to workplace arbitrage and race to the bottom in a society like the US.

You can get someone to do almost any job, as long as the wage given is right. There's no reason to import workers, especially unskilled laborers. Just start cutting back welfare for the natives and give them jobs they can live on and be proud of.

I'm against market distortions in all its forms and I want people to pay the fair and total cost of any goods and services they receive. In my opinion, guest workers are a highly disruptive market distortion that subsidize the users of the cheap laborers while penalizing everybody else.

There are two ways to increase the expected cost of hiring illegal workers:

If anyone found knowingly hire illegal workers is sentenced to 10 year in prison, effects can be felt with just a few (high-profile) prosecutions. However, businesses need workers. The guest worker program must be implemented in parallel.

Wouldn't America have been better if this type of forward thinking policy had been adopted during times of much higher immigration, like the 1800s to 1950s.

My my, too bad computers didn't exist to make it all possible back then and the civil service wasn't big enough to handle such programs.

Just think about how much more homogenious and appreciative the american population would have been if the irish, ukranians, poles, germans, japs and chinese had been accepted on an enforceable temporary basis.

They're just like those darn Mexicans, bunch of foreign opportunists all of them!

However, businesses need workers. The guest worker program must be implemented in parallel.

I am wary of any sort of blanket amnesty for illegals already here, as all this will do is basically reward breaking the law and provide even more incentives for others to do so in the future. Basically like saying, "Get here any way you can. If you get caught, we'll 'punish' you by making you a legal guest worker."

Another problem is the type of workers such programs tend to attract: low-skilled, uneducated dirt-poor laborers (as in unlikely to join/expand the middle class). Why not try to attract the world's "best & brightest" by expanding existing H1-B programs in key sectors that are experiencing the supposed shortages of skilled labor (hard sciences, engineering, R&D, etc.)?

The guest worker program is just corporate subsidy by another name.

From another perspective, this is the only feasible way to obtain support for regulating illegal immigrants.

You can get someone to do almost any job, as long as the wage given is right.

But the right wage will lead to the wrong price. :)

You can get someone to do almost any job, as long as the wage given is right.

But the right wage will lead to the wrong price.

What, you mean urban professional couples won't be able to afford nannies and gardeners anymore?

Who will do the work if the mexicans and filipinos can't do it and slacker youth from the suburbs can't be bothered.

Migawd, a pending national crisis for the boomers and their best paid progeny - anything, I mean anything, must be done to avoid this disaster!

tsusiat,

Except that America didn't have high wages and a huge infrastructure that props up a high living standard. Would you advocate that the new arrivals receive the sort of living standard and wages and life expectations that awaited those 19th century immigrants? Furthermore, those 19th century immigrants treated immigration as a lifetime commitment for themselves and their children. A lot of immigrants today just treat America as a place to make money and get some benefits, without truly merging into the American society at large.

tsusiat Says:

Wouldn’t America have been better if this type of forward thinking policy had been adopted during times of much higher immigration, like the 1800s to 1950s.

Tusiat,

As a matter of fact, in the 1950s immigration laws were actually enforced with some degree of regularity and consistency. Not surprisingly, this was also a period when the middle and working classes made great strides in terms of real income and a higher standard of living.

As far comparing the U.S. of 2006 to the U.S. of the 1800s, there's really no comparison. In the 1800s, the U.S. was still a young, sparsely populated nation. Huge swaths of the West & Midwest were basically undeveloped & uninhabited wilderness. We're now a nation of 300 million people, rivalling Europe for population density --especially along the coasts. I believe we should still allow as much legal immigration as we can absorb. However, no nation can accept unlimited numbers of dirt-poor immigrants indefinitely without it negatively impacting its citizens' own standard of living.