patrick.net

Not only should some of these homedebtors that got in up to their eyeballs in mortgage troubles be deserving a nice humble pie, but so too should all those snake oil salesman that lured people ( stupid people) into flipping homes on TV. For almost a year, when I've turned on the TV at either early Sunday or a Saturday afternoon, there are at least a few of these "flipper" TV shows where smiling RE agents sit in front of a rolling screen of homes that according to them were "bought" for as little as $1500 and flipped for an instant 60K profit. The show goes on to show yappy-happy pudgy working Joe couples that made a bundle, telling the audience of their incredible sucess.
I have no sympathy for anyone that bought one of those shoddily constructed fake mediteranian looking condos that now create an endless sea of eyesores across the state. I'm also sticking with my original thought that these condos will be the first to plummet in price and head towards becoming slums and turn all those recently gentrified industrial areas right back into ghettos.
I DO feel for families that bought because they have kids. It was their decision, and they are ultimatly responsible, but their kids shouldn't have to pay for their parent's sucess. SF has chased out most of the families. It would be ashame to lose the rest.

+ parent’s failure
- parent’s sucess

SFwoman,
As a designer, I actually like a lot of the ads that are produced for Hummer. Some are pretty unique and stylish. My dad said that back home the things are selling like hot cakes, which is perplexing since the only one that gets somewhat decent fuel economy, the H3( 22 mpg) is seemingly their worst seller while the H2 is flying off the lots.

The new Hummer ads are hysterical. It's just crying out "if you're a Hummer owner, then you're inadequate somewhere."

SHTF,

I'm not too surprised. If H2 cries out the fact that the owner feels inadequate, H3 cries out that not only is the owner feeling inadequate, but salved their inadequacies with an inadequate vehicle.

The new Hummer ads are about as anti-social as those new VW commercials. It's not even making a pretense about Hummers being outdoorsy and all that. It's all about intimidating the other people on the road.

This sort of FU mentality is just sick. It's the equivalent of a tobacco ad that says "blow some smoke into that non-smoking wuss's face."

This really is an accounting question. (And one I'd love to have Randy H and the likes weigh in on).

Everybody and their long lost brother knows that there are no cap. gains paid in IRA's/401K's. No revelation there. Controversely; there is no provision to "write off" cap. losses within same said IRA.

Now that we've created an environment where we've had NOTHING BUT UPSIDE since the 1997 legislation passed we now have to "test" the system on the downside! Plenty of folks were gleefully NOT paying taxes on their primary residence (or any 2 of the last 5 years) how will the take it when they're told their 100/200/500K loss on a property CAN be written off (but to the tune of 3K per year)!?

Folks, even with the 3K limit we have an uneven playing field, a "preferred" asset class already! As FB's grow in number will the cries be loud enough to FURTHER tip the scales? Can you see how this is already having your cake and eating it too?

You can have up to 500K in cap gain free money, but; if it doesn't work out NO BIG, just write off 3K per year until you've recouped your losses! That doesn't strike any one as a little strange? Using that logic we'd all be writing off losses in our 401K's at work or our own IRA's from March of 2000 on! This has to be the very definition of madness.

SFwoman,
The fact that the H1 and H2 are entirely diffrent is a mystery to me- a mystery only in that people that buy the H2 equate it with the H1. The H1 is a true military machine with catepillar industrial diesel engines, a reinforced frame, and lightweight body. The original doesn't even have doors. The H2 is simply a large box with a conventional Duramax Chevy truck engine. The things are stupid and would never make it off road.
If people really wanted to go off road, they'd get an old Jeep. My cousin has a 47' Jeep that has 3 speeds, goes 40 MPH max, a little 4 cylinder engine, and crank up windshield wipers. That said, it'll go anywhere. Probably more places than an H2 for sure.
The other odd thing is that apparently the biggest buyers off SUVs aren't men, but women. Something likee 70% of all SUV drivers are females- often women that previously drove minivans. if I had a car company, all I would produce were ads that showed babies in the back seat with torrential rain or snow, and a stern, concerned mom at the wheel. " for the love of god, save the kids... buy an SUV!" I'd beat the crap out of the competition.

SHTF,

Well, why do middle age white men go crazy for Harleys when they're very expensive and not that fast (since they're so big and heavy)?

I never saw a Hummer going offroad while I was in the Southwest. Their wheelbase is too long and they're way too expensive to get trashed up. If anyone actually cared about going offroad, a beater small truck or jeep is certainly top choice. My choice would certainly either be a jeep or a small Toyota truck or SUV. Those things are reliable and have the short wheelbase for sticky situations.

DinOR,

I don't think it'll matter. Most of these specuvestors are so strapped that a 50K loss would be enough to send them to bankruptcy court.

I know this goes against your professional interests, but I'd personally want the same treatment for investment income as for wage income. They should be exactly the same. There's no reason why financial capital should be rewarded with more favorable tax policies compared to labor capital.

Most folks that take the bother to file "Schedule A" (which is a lower percentage than most might think) have NEVER had to take a cap. loss. Certainly not one that exceeded the 3K limit, and rarely one that had to be carried over year after year. Now faced with the potential for SUBSTANTIAL cap. losses how will FB's respond? Never mind them, how will WE respond?

astrid,

I'm sure you don't mean that each time you're paid a dividend that:

STITW,
FICA
SS

etc. etc. be with held? You're kidding right? We already paid tax on it once.

Astrid,
what;s funny is that a while back, I went to Death Valley in my 2 wheel drive small toyota truck with a camper top. A lot of the roads were unpaved and sometimes very rough and heavily rutted. The truck actually did very well. Offroading is more about the ability off the driver and less the vehicle.
The harley thing bothers me. There are so damned many of them now. I wonder if any of the fat slobby 50-something men that drive them realize that they look like a sack off dog food sitting on those things.

DinOR,

I'm not in favor of the current payroll tax system either. I think we'd all be better served if we treat medicare and SSI costs like the rest of the budget. I would like to see their scope dramatically reduced and means tested. I want the means testing to be so stringent and the payments so low that it only the truly desperate would seek it.

I don't see either of my ideas flying, but I would like taxation on all incomes. (though I think we should exempt taxation on the portion of the capital income that falls below the real rate of inflation). It's a system that overwhelmingly favors the rich and the elderly, at the cost of younger workers.

Think of it this way,

Not all of us are W-2 employees (although I was for years).

Our tax code by it's very charter will ALWAYS favor self employment and investment. There's NFW that inv. cap. and wages should or even could be treated the same. If this were true NO ONE would EVER be able to leave the work force to pursue start ups or even their own career or interests. What I'm pleading here is that ALL investments be treated with SOME measure of parity.

Finally, IT DOES MATTER. FB's that can't find relief in BK Court WILL seek "other remidies". Their path to financial recovery will be contingent on "broadened legislation" that will allow them to write off those losses in ever bigger ways. This could in essence provide FB's with a built in tax shelter for years to come. It matters.

SHTF,

LOL! I know what you mean. Those guys think they're so out there when they're complete conformists. They always dress the same, eat at the same places, hang out in packs. Personally, I couldn't be paid enough to be a bike-bitch and deal with the heat and noise and the stifling wardrob choices, and I've seriously considered getting a scouter once I'm in the BA.

I find that whenever it snows or if there's other bad weather conditions, it's always the SUVs that skid to the side of the road or fall into the ditches. I am intrigued by this 2WD offroading that you speak of. Which roads did you take?

astrid,

Don't get me wrong here. I'm hardly pro tax. In 1997 we had no way of knowing that not even 10 years later we would have reduced what is many Americans most valuable asset to nothing more than a ponzi scheme. But here we are. We've allowed folks like the guy that was the inspiration for this thread to paint themselves into a corner by giving him "training wheels" and now we want them back! If cries for help are coming this soon in the cycle how far are we away from outright debtor amnesty?

DinOR,

From a utility stand point, I see where you're going with a government policy that encourages overcapitalization, since that leads to greater job creation and lower unemployment rates. So on second thought, I'd probably prefer a government to encourage higher amount of capital investment than would be the case if the market was left on its own.

However, there's nothing inherently wealth building about a bunch of people trading AT&T stocks back and forth. Support for bonds and small businesses seems like a better way to support capital investment.

DinOR,

Yes, I believe you've described our worst nightmare here --Congress vastly stepping up cap loss write-offs while sucking the rest of us dry for the next 20 years. Basically legalized theft from the virtuous and responsible to subsidize the stupid and reckless. If this actually comes to pass, may be time to consider a move elsewhere. Hope it never comes to pass, cause I don't speak Australian ;-) .

Peter P,

How come you removed the photo? It looked great and I thought you like it?

DinOR,

I'm not anti-tax, by any means. However, like you, I'm not comfortable with the government using tax policy to support their social hobby horses.

Given that everybody and his dog is treating houses like investments, maybe front doors should come with this warning: "The price growth rate between 1996 and 2006 are abnormal. Past price performance is no guarantee of similar future returns. Home ownership requires payment of mortgage, property insurance, property taxes, and HOA fees. If you do not promptly pay any of these costs, you can face foreclosure and lose this house."

If politicians absolutely *must* provide some "relief" to greedy, stupid asshats (to stay in power), I'd much rather it come in the form of removing the new Chap. 7 BK restrictions or some type of debt forgiveness/short sale arrangements with the lenders. This isn't great in that it lets them off too easy for making collossally stupid decisions --and therefore may not provide the kind of "never again" pain required to prevent this mess from recurring-- but it sure beats stepped-up cap loss write-offs.

SHTF re:Death Valley

Heheh...I went to Death Valley in my Nissan Sentra. OK, there were a few places that it could't go, but most of it is accessble in a 4 door compact. Most of the inaccessable places it more a question of clearance than road quality. I'm with you - its more to do with the skill of the driver and less to do with the vehicle you're driving.

On the H2: the H2 just seems to be a Weekend Warriors version of the real thing. The original Humvees are awesone vehicles - in the right gear you can litrally crawl up the side of a building. However they get about 5 miles to the gallon, and only go about 50mpg flat out. And there's that irritating central axle... and no cup holders. What's a suburban communter to do?

H2 are All About The Bling. They have none, literally none of the things that make Humvees so amazing. They're just Status Symbols On Wheels.

My jaw dropped when I saw those adverts. They are ads for Keeping Up With The Joneses With Some Road Rage for added value.

Veeerrry Interesting to note that they've come out since the price of oil has skyrocketed. Advertising at its best (or worst, depending on how you look at it).

The husband has a link showing an aerial view of a parking lot somewhere out here in the West, and all you can see for miles are row upon row of new H2s... Now that people are starting to realise that they're just too expensive to run, no ones buying them and there's a huge glut of them, already made, waiting for the remaining suckers to put their money down.
Hence the ads. They're playing on human's most basic instincts in their desperaton to unload all those unbought H2s. Once the husband is awake I'll try and get the link.

HARM,

I don't see it happening. The FBs would only be able to exercise the option after they sell, and I don't see many people who can take that kind of one time loss and still stay solvent to collect any tax benefits(which will only be in 15% of the loss anyways). It's not like the stockmarket where you're using your own money and the stocks are easily liquidated.

Astrid,
There were a lot of roads that went to ghost towns all over the park. We were not very sure how bad some of them would be. A few were over 20 miles long and extremely rough, as in boulders in the road and the occasional 100 foot drop on one side with no guardrails. It was an awful lot of fun, but I probably wouldn't have done it in a car. You do need some clearance or you could crack a tranny case or oil pan.

“Foreclosure Prevention Program” which allows 0% interest loans to those that qualify.

Nice. Yes, let's reward all the idiots, while responsible borrowers pay full market rate. No moral hazards here! And who's paying to subsidize this wonderful social experiment, I wonder?

SHTF,

Hmm, that doesn't sound too bad. It seems like 4WD is mainly important in deep sand situations where 2WD might get trapped. Renting a 2WD SUV is a lot cheaper than renting a 4WD one, so it's nice to know where high clearance alone is enough.

Let's look at this from a practical national viewpoint. Ok, so let's say that uncle sam says oh well to all those folks that played the game. The game was their plan anyhow. But... people got a little carried away and the "plam" totally backfired and Uncle Sam is now in worse shape than ever.
What this little experiment proved was that if you have a sagging economy, the best way to prop it up is find something people will buy even if they are willing to almost kill themselves trying to find ways- any way- to buy it. it sure isn't cars, boom boxes, or laptops. it's housess. Yes- a house for everyone in the "american dream".
So Uncle sam is up shit creek without a paddle. What to do? Should all those folks with debt out their ears be saved? The answer the govmint' will give you is yes. Why? Because this event proved that there is an enormous supply of people with a lack of fiscal responsibility. if they can be counted on to make idiotic decisions, then they can be bailed out and reused in the next little scheme. Just you watch- those people will get off scott clean and we'll have to sit and watch.

astrid,

I fear most FB's will wind up in a "short sale" situation. As will "Joe Dude" our Claremont flopper. Status Quo dictates that the pain stays where the pain belongs. The lender (FL) gets stiffed b/c of their overzealous lending and total lack of underwriting discipline and the FB gets a 1099 at the end of the year declaring the amount not paid as "income".

If they ARE through some divine intervention able to sell the house below what's owed and "bring cash" to the closing then they will be able to write off the loss. All I'm saying is to retain staus quo so they'll only be able to write off 3K per year. That's your "never again" lesson b/c they'll be carrying it forward for, for....... forever!

I would be VERY surprised if the US Govt does not try to rescue the distressed homedebtors. We are just at the beginning of the crash. And already, people are screaming for help in various forms.

Did anyone pay attention to the BB testimony yesterday ? At least one senator was complaining that Fed is fighting an inflation monster that just does not exist. So many stock analysts and journalists are already criticising Fed. And BB is already being dovish - just a few weeks after the hawkish posturing.

I believe "Greenspan put" is a real Fed strategy, not a made up expression. The stock market crash was not a good enough reason to reduce interest to practically zero. If they could do it then, expect Fed / Govt to do something even in the coming crash.

Maybe ZIRP ? Maybe tax breaks ? I don't know what that will be. But 2008 is an election year, and also an ARMS reset year. Expect Govt to do something. Definitely. I am so sure that it is not even an interesting discussion to me.

More interesting discussion is, whether it will really help ? Even after prolonged low interests, stock market - a good proxy for economic future - is not indicating anything good. A low interest policy will devalue US$, as it did yesterday. Prolonging the pain only makes it worse.

SFWoman,

LOL! Yes! I find both the VW and the Hummer ads really hilarious, as they bridge the widening gap between practical usage and perceived usage. 90% of the ownership comes down to buying something that appeals to their vanity. Most German car owners could get a better built car for less if they go with a Japanese built vehicle. Most SUV owners would actually get a better driving experience and better offroad capabilties from a Suburu or a minivan. But darn if they'd ever settle for something that practical.

I still don't get the FU attitude that SUV drivers have around other cars. Just because they're likely to do better in a head-on collision with another car doesn't mean they can stop watching the road or stop using signal lights. If they get in a crash, they can still get hurt and see their insurance rate shoot up.

I have a bit of a mixed feeling on this one. I know too many people, both on a business and personal level, that are being legitimately pinched, and most never participated in the bubble run-up. They’re just struggling to hold onto their homes that they bought years ago, and don’t want to indebt themselves to the hilt to do it.

Yes, sometimes the JBRs here --myself included-- forget there are OTHER bubble victims out there: legitimate owner-occupiers who bought in pre-bubble with traditional financing and are now seeing their property tax go through the roof. Of course, it's not a problem in CA thanks to Prop. 13 --a rare example of Prop. 13 actually serving a socially useful purpose.

Just because they’re likely to do better in a head-on collision with another car doesn’t mean they can stop watching the road or stop using signal lights. If they get in a crash, they can still get hurt and see their insurance rate shoot up.

They do not even do better in all crash scenarios.

Remember the Mustang vs. Explorer crash with Tongan royalties recently? The person in the Mustang was not hurt but Explorer flipped multiple times, killing everyone onboard.

Moreoever, if an SUV causes a fatal accident, they driver can be charged with vehicular manslaughter, which is punishable by months of imprisonment even without gross negligence.

The only problem I have with the VW ads is that as someone interested in mechanical things, I can't help but think that the people wanting one of those doesn't realize what utter engineering disasters they are. Almost everyone I've known that's owned a VW made in the last 10 years has had major problems with them. We're talking cracked intake manifolds, transmissions that give out at 65k, excessive carbon buildup, and radiators that are so close to the ground that running over a curb causes them to rupture. yet they're sort of sold as yuppie metrosexual vehicles. The people that buy them are supposevly people that appreciate good quality. yet they buy these things and to me that'ss too ironic.

I do not get the "prop 13 protects poor old people" argument. Why do they need special protection? If the property tax is too high the owner can always sell the house and move over. Why is it so diffcult to say "tough" or "too bad"?

Of course, I prefer removing property tax altogether. It can be replaced by a rental-equvilent consumption tax.

I think there’s a feeling of invulnerability that comes with driving an SUV. I drive my husband’s car quite a bit and it’s a sub-compact. I get tail-gated something awful in his car. But in the SUV, I never get tail-gated. Odd.

SQT, sub-compact is a no-no. Get him something safe.

Get a rear bike rack and you will not be tailgated. :)

I have to admit that most of the auto ads are actually painful to watch. Firstly they JACK UP the volume on the commercials and then insult your intelligence with base messages. It's funny b/c I have an associate that recommended I read, "Why is it always about you?" (a guide for dealing with narcisstic types). I'm still pecking away at "Snakes in Suits" and I say pecking not b/c it isn't interesting or valid but more b/c that stage of my life is behind me.

Now these "narcisstic types" that's another story!

Peter P,

Seriously? I'd never thought of that! I don't really bike so would you rec. just putting some "junker" up there just for effect?

Seriously? I’d never thought of that! I don’t really bike so would you rec. just putting some “junker” up there just for effect?

I was just joking. :)

The proposition 13 protecting the poor is about as stupid as it gets because it's self defeating. The only thing it did was essentially delay paying for any of the neccesary costs needed for most of this state's infrastructure. As mentioned endless times here, the school system is ranked 44th, the roads are amoungst the worst in the country, and there is little chance for anyone not making signifigant money- as in anyone not posessing a degree in law or medicine- to ever afford their home, or at least do so and not live like working class citizens if they do so.

Since living here, I've noticed that if someone has bought a home, and this goes for people that bought as long as 20 years ago, it seems like quite a few of them own derlict older beater cars, rarely take vacations, or have kids until they are almost at retirement age.This is very diffrent from most other places, where there's a new car every 5-10 years, people have kids earlier, and there is generally more money that is free to spend. This is how a healthy economy is supposed to work.

If you take away the housing bubble, this state is still damned expenssive, and the reasons are from all the ill-concieved legislation created in the 70's. If there was a time to address these issues and bring them to light, now is the time. if not, the bubble will likely burst, people will once again barely be able to buy something on a conventional loan, and the same low quality of life will continue.

I don't know either way if bankruptcy would be a solution for FB's or not. I have a friend that handles "loan work-outs" and as painful as they might be he says it's preferable to filing BK. The claim is that most people that file BK wind up losing the home within a year anyway! Even before the "new" law was passed (which btw needed support from both sides of the aisle) my buddy tells me that BK judges were getting tougher anyway. I just can't see it as an "easy out" for FB's at all. It's really just a temp. solution at best.