patrick.net

SFWoman,

The other thing that occurred to me was that some of these people might be on the "live it up and die broke" retirement plan, in which case extracting equity would be a reasonable way to go. (And once your balance drops below 10K, take up skydiving.)

(I'd love to see some reasonable life expectancy figures at different ages; I think that last one I saw was about 2K years out of date.)

“Worked 80 hours a week at three jobs to pay off his adjusting 50-year Mortgage.”

“He is survived by his 2 loving children, 3 grandchildren, and his 100 year mortgage.”

:lol: + "His only regret in life was he didn't get a chance to liberate ALL of his equity to buy more useless crap before kicking the bucket."

“Worked 80 hours a week at three jobs to pay off his adjusting 50-year Mortgage.”

“He is survived by his 2 loving children, 3 grandchildren, and his 100 year mortgage.”

Imagine inheriting debt!

"I was barely scraping by and then suddenly my parents died and I was left with all their debt. I never owned a house, but I actually foreclosed one".

allah,

Unless the kids are dumb enough to be tenants in common with their parents or cosigned the loans or some other such lifetime arrangment, they're pretty safe. They just need to renounce claim to their parents' estates.

requiem,

So would taxpayers in Oregon. Our public employees have their guaranteed retirement benefits paid out based on circa 1970 mortality tables. Much of this data was skewed by the WWll generation and their general practice of working until you drop dead. Now we are by law required to keep them in the manner in which they have become accustomed for considerably longer! (Rather than take the same dollar amount and spread it out over a longer life expectancy). In the end, they'll win. Even if it means bankrupting the state. They're just soooo inflexible!

requiem Says:

> (I’d love to see some reasonable life expectancy
> figures at different ages; I think that last one I saw
> was about 2K years out of date.)

The best way to figure your life expectancy is to take the average age your relatives died (pulling out the 17 year old cousin that drove his car in to a tree drunk) then and add a few years since the average tends to trend up and then add a few more if your lifestyle is healthier than your average dead relative or subtract a few if you are not as healthy as your average dead relative.

Averages in a specific family will mean a lot more than national averages. If a 20 year old Japanese American girl and a 20 year old Samoan American girl wanted to find out how much they will weigh at 50 years old talking the average weight of their relatives at 50 (probably 120 for the Japanese American Girl and 260 for the Samoan American Girl) will be closer than the national average weight at 50 of around 160 for the "average American woman".

FAB,

Overall, I tend to agree. However just b/c the males or the females on your side of the family lived to be a ripe old age doesn't mean ANY of us should take that for granted! (Please note how heavily some boomers lean on this). Yeah "Gramps" lived to be 91 (but he didn't have his lips wrapped around a bong for 50+ years). On the flip side I see perfectly healthy people obsess about their relatives lack of longevity. It would be better if we thought of ourselves as the one that up'd the average?

Sad to note that many early traders and whalers described the Samoans as "almost God-like" in their physical perfection. Of course this was before Spam and Budweiser.

Thanks for the link!

FAB: What happens if you don't have any dead blood relatives?

Unless the kids are dumb enough to be tenants in common with their parents or cosigned the loans or some other such lifetime arrangment, they’re pretty safe. They just need to renounce claim to their parents’ estates.

I know that, but it just is very funny imagining something like that.

requiem,

Huh? You mean if you're adopted or made in a lab from donor egg and sperm?

Or that you come from a family of immortals.

Well, I stopped to think, and other than grandparents who died (rheumatic fever) a decade or two before I was born, the only dead relatives are those who married into the family.

(Of course, they are aging normally, which I guess goes against the immortality idea.)

You know (back to the original thread) so many FB's would probably be better off even in the short term just walking away. The sooner, the better. This obituaries schtick and some of the comments really got me thinking. Patrick doesn't say that home ownership is necessarily a bad thing. Ownership is not without it's postives but it's not worth it if it means ruining your life!

I fear this is exactly where so many FB's are heading. Tapping out what little savings they have DO have and yet unwilling to make the hard choices. Never mind letting go of the bimmer, they probably won't even let go of their cable TV and magazine subscriptions! Once they miss that SECOND payment and realize that they don't get "auto evicted" they'll check the state statutes and figure how long they can live there "rent free" while their ship comes in! Sure, they'll try to sell it (a few might even get lucky) but with all the inventory they'll begin the eventual slide into foreclosure.

If they let the H2 and bimmer go the auto lender will get stiffed but carpooling in a beater will soon lose it's stigma. Then they might have a shot. But if they're unwilling to let go of their health club membership? Forget it.

SQT,

Sorry to hear about the folks. Where you adopted at an early age?

Man, when I think about the stuff Mr. and Mrs. FB (formerly Mr/Mrs Homedebtor) will have to do with out, it just gives me the willies!

Lattes: Gone.

Cell phone: For what? So you can have constant communication regarding how broke and behind on your bills you are?

Health Club: Want to reduce your "stress" level? Think how good you're going to feel being only 3 months behind on your second mortgage!

Store Cards: Pffft! So you can buy more stuff to gussie up the sh@tbox you're about to be thrown out of?

Who needs a health club when you have to bike to work cause the repo-man took the Lexus?

Ben Jones gets interviewed by Newsweek:

http://msnbc.msn.com/id/14252223/

HARM Says:

http://msnbc.msn.com/id/14252223/

Yup, saw that. Did you notice on the list of other RE blogs, patrick.net?

Bay area house prices change finally went negative in July.

Even single-family detached homes? Wow.

I thought SFHs in good school districts are as untouchable as Al Capone.

Bay area house prices change finally went negative in July.

Which cities/counties are they using for this median of 800K + ? Per DQ, the median in Santa Clara county is "only" around 770K for resale SFH. There is a some difference in their calculation methods. Anyway, as long as all measure point downwards, it's fine.

BA is so so behind other cities. Our patience will be tested till the end.

The site

http://www.benengebreth.org/housingtracker/location/California/SanJose/

provides a good leading indicator. The asking price has been going down for last couple of months.

I thought SFHs in good school districts are as untouchable as Al Capone.

Oh yes, they are untouchable. The new wisdom is "East Bay, Livermore etc will do down. But this area [Sunnyvale-Cupertino], nah. May be 5-10K. That's it."

The arrogance, even in spite of all the MSM reports, is really annoying.

Oh yes, they are untouchable. The new wisdom is “East Bay, Livermore etc will do down. But this area [Sunnyvale-Cupertino], nah. May be 5-10K. That’s it.”

Well, they used to say "California will not go down". Then they said "Bay Area will not go down. Now they are saying "Sunnyvale-Cupertino ..."

Yeah right.

Then they said “Bay Area will not go down. Now they are saying “Sunnyvale-Cupertino …”

I dunno - I see Gilroy going down, probably Sunnyvale too (lots of condos)... but I'm betting that Palo Alto will stabilize.

Well some houses in Mountain View, between Los Altos and Sunnyvale have gone for below asking, some for asking and some for a bit more, and some had to be reduced first by 50-100K, the market seems to be in turmoil....

sore,

Psychology factors usually cause corrections to overshoot. The worse the bubble, the more likely the overshoot of the correction. I highly doubt that Total Rent Costs will exceed or come within too close of Homeowner Holding Costs (PITI + PV of likely holding period). But prices will very likely fall below their "support level" before rebounding and flattening out.

This will be very frothy. Neighborhood by neighborhood. Averages and medians won't be much help once the correction is in full swing. Also keep in mind that it's uncertain yet what will happen to the middle IT of PITI. Taxes may go up or down, as may mortgage rates, causing the rent-to-own ratio to not track rent and housing prices 1:1.

If you want, you can download the model I created some months ago and shared here, called the Bubblizer. It lets you pick your own circumstances and express your own beliefs about the correction, and tells you how insane or sane you would be to buy under those conditions.

By the way, for those of you who helped by contributing to creating the Bubblizer: thank you. I'm working on .

...seeing if we can webifiy it. (Sorry for the truncation)

sore arm,

I think Randy is disclaiming fore-knowledge about just how low BA prices ( as a variable of PITI) can get. Based on previous experience (me cribbing comments by other commenters on this blog), it seems that the more "prime" and desireable the location, the less the fall in case of a RE bubble burst. This is in part because as prime areas become more affordable, they will be sought out by people who might have bought in less desireable areas before. Ditto the condo v. SFH debate.

Take-away? Don't buy anywhere, but definitely don't buy a condo in the Merced.

uh-oh, fuel prices just went up some more. AUD$1.45/litre = US$4.32/gallon

they're tipping $2.50 a litre in a month = US$7.45/gallon

it just cost me $50 to fill up a Corolla -- now you know why i'm always so cranky ;)

high fuel prices and continued uncertainty over oil prices will inevitably depress housing prices tho... this is the straw that broke the camel's back...

in fact, this is the straw that broke the camel's back of the elephant in the living room...

Here is a link to a recent talk by Professor Ester Fuchs of the (new) NYC city council -- they have announced the delivery of 165,000 affordable housing places over the next 10 years...

City of Sydney - City Talks - "A City for People - Lessons from New York"

podcast or audio feed...

she doesn't have kind things to say about rudy guiliani or donald trump, funnily enough...

Blah Blah Blah, HARM's wife is hot. BLAH BLAH BLAH. LLILL is very attractive also.

Labour day blog party in $B? Bring your moist wipes.

HaHa Jr.

Son of HaHa

Spawn of HaHa

What happens when 2 hahas have unprotected sex?

tinyurl.com/ojzo8

sore arm Says:
Didn’t parts of europe and japan “invert” after their real estate crashes?

I just checked yesterday.
You can buy a nice 2BR condo in a pretty decent area of Munich, Germany for 150k Euro. That means with about 20% (30k Euro) down, and a 5/25 mortage at 4.29%, your monthly mortgage payment would be 571 Euros. Property tax is another 20 Euro or so per month.
You can get 700+ Euro rent for that compound. Positive cash flow right off the bat.
Renting the place out to tourists on a daily basis might generate even more money.

BTW, they were charging about this much rent for that kind of accomodation in 1989 when I was in the market the last time, and it seems it never went up from there. Must be the impending population decrease.

Girgl,

"Inversion" (Rent greater than PITI) has been true in most of Germany for many years. Germany is the "perfect storm" of persistently low consumer confidence, historically sluggish real estate appreciation (or even bouts of depreciation in many areas, but I don't know about Bayern), and the lack of a debt-ownership culture. Ownership is rising in Germany, but the prototype owner is someone near or at retirement who buys their home with 100% cash.

I personally think most of continental Europe represents a very bad comparison to the US in this regard. Japan or UK may be closer, but there are still fundamental differences (esp btw Japan).

HARM/skibum,

Great link to Ben Jones interview! Being a "home office" type myself I just know he was scrambling around at the last minute to find a pressed shirt and a tie that matched! Ben's modesty never ceases to AMAZE me! Had it been me I would have told the reporter to meet me at the Portland Grill so there would have been a commanding view of a bubble deflating skyline over my left (best side) shoulder! His answers were short, direct and if anything, understated. Either Ben truly is a modest person (a rare occurence for native Texans) or he was fighting the urge to say "I TOLD YOU SO"! with considerable restraint! Good on ya' Ben.

Randy H says:
Germany is the “perfect storm” of persistently low consumer confidence, historically sluggish real estate appreciation (or even bouts of depreciation in many areas, but I don’t know about Bayern), and the lack of a debt-ownership culture.

Re depreciation: There are now areas in Germany where some of the existing housing stock has zero value because no one wants to live there (rural areas in the east).

Re ownership culture: My personal pet theory (pulled right out of my a**, of course) is this:
1923: runaway inflation - asset owners are the only ones who are not wiped out
1924-1930: people have learned their lesson. massive housing bubble develops. Supply is low, credit is loose. Prices multiply. Some people buy in, the rest must rent.
1930-1995: RE prices stay at a much higher relative level than in other European countries because the majority of people now have settled into renting, and only the "rich" can buy.
1995-now: The market opens up. EU citizens can now buy RE all over Europe, and price levels adjust - rest of Europe goes up, Germany goes down.

I believe another factor unique to the German situation is the incredibly strong rights that renters have, enough so that there may be a justifiable premium built into the cost of renting. Also, I'm not sure if it's still true today, but a few years ago when a protected German worker lost their job the government would pay their rent pretty much regardless of the cost. Owners enjoyed a much lower level of subsidization. Couple that with tremendously high structural unemployment and you have effectively killed any hope of a housing market.

Couple that with tremendously high structural unemployment and you have effectively killed any hope of a housing market.

What happened to Germany? I know the "reunification" was a factor. What other problems is Germany facing?

What other problems is Germany facing?

Just my opinions.

1) Reunification hangover
2) Berlin building fiasco
3) Inflexible labor market
4) Major flaws with structure of German corporate governance
5) High levels of government erected barriers to just about all free markets
6) numbers 3,4,&5 causing incurable structural unemployment
7) demographic squeeze causing massive youth unemployment
8) lack of well planned immigration policy; lots of unwanted immigration
9) Monetary-Fiscal mismatch (faced by all EMU countries). Esp. bad in Germany which has needed rate cuts for many years. Coupled with overly tight fiscal policy equals very thin liquidity, most of it DFI
10) Maybe the most important: A persistent psychology of pessimism.

(4) and (5) sounded like Japan. (8) can be easily taken care of.

Re: (9), I have a feeling that the single currency system is unsustainable.

Re: (10), I have the same problem. Perhaps not. I am optimistically depressed. :)