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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.
Randy H
2006 Aug 9, 11:26pm
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.
Randy H
2006 Aug 10, 2:36am
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.
Peter P
2006 Aug 10, 3:45am
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?
Randy H
2006 Aug 10, 3:53am
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.
Peter P
2006 Aug 10, 4:04am
(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. :)
Randy H
2006 Aug 10, 4:11am
I agree as a "rational" analysis that the EMU is not sustainable. Purely economically speaking, inflexible labor markets, people being unwilling to relocate for economic reasons in large enough numbers, and national barriers to free market integration should destroy any attempt at a common currency.
What they really have today is a group of fixed-peg currencies (with the same paper bills) that must abide by a common monetary policy, but by unrestrained separate national fiscal policies.
Recipe for disaster.
The problem is that much of the future of the Euro is political. It may survive despite economic problems for a number of reasons.
Peter P
2006 Aug 10, 4:29am
The problem is that much of the future of the Euro is political. It may survive despite economic problems for a number of reasons.
It is another stable disequilibrium. I have a feeling that it will break and it is not going to be pretty.
I wish IRS would have a system to get all these no doc loans and stated income loans, get the income figures from them and compare it with what they filed in their tax returns. If there is any difference, send income tax bills to them and make sure they pay it.
I will voluntarily work part time to code something up like that.. hehe
Peter P
2006 Aug 10, 5:09am
wish IRS would have a system to get all these no doc loans and stated income loans, get the income figures from them and compare it with what they filed in their tax returns. If there is any difference, send income tax bills to them and make sure they pay it.
I just wish they have a system to go after all cheating cash-based businesses.
This stupid terrorism issues are drawing away attention from the real issues in this world.
The plot to blow up British planes - Are there any proofs regarding this or is it also some cooked up shit so that attention can be drawn away from the real issues. Is Tony Blair up for re-election? .. lol...
"go after all the cheating cash-based businesses"
Peter P, you have NO IDEA how sensitive a nerve you just touched off!!
Before there was a housing bubble to complain about this was my pet peeve. Compared with the gangster like activity we see in RE today it kind of pales in comparison but is equally important!
Laundrymats? It got so bad with the owners "raiding" the machines for wheel barrows full of quarters the IRS now bills based on their power and water useage!
Junkyards? How do we place a value on this "inventory"? Piles and piles of it! Want to pay for that chrome headlight ring with a check? Good luck. It's cash on the barrel head at 99% of these places!
Sports Card and "Collectible" dealers? How many 11 year olds pay with with a check? Some of the "greats" from yesteryear have 100's of thousands in undeclared income. Anyone remember Duke Snyder?
The list goes on but these people laugh at us everyday! They see as the "unenlightened masses" going through their lives unaware that there are other "avenues" to wealth!
Scumbags.
DinOR,
Let's just be thankful that US is not like Italy, where they have tax cheat's amnesty and 60% taxation on anyone unlucky enough to work for a salary.
Phil,
If a former FB that fell victim to a short sale is liable under IRS statutes as a "debt forgiven" has to show that as 1099 income why wouldn't a future FB not have to show the difference between a normal payment and his I/O "minimum payment" as essentially the same thing?
What's the difference? One under paid at the end while the other did right out of the gate!
Randy H
2006 Aug 10, 5:39am
DinOR,
My wife worked for HEREIU Welfare-Pension Fund as a Chicago area auditor for a very brief time after college. She still attributes that "real world" experience as having been just as important as all the Big 6 audit experience thereafter.
She has a great story about auditing a large operation on the West Side that runs vending machines in 5 midwest states. When she'd go to audit they'd put her in a little room on the 3rd floor that literally had huge holes in the floor. The "CFO" there would remind her as she counted beans that it would be a shame if anyone ever fell through that hole. Surprisingly, they always ended up clean in their union audits.
astrid,
WE HAVE tax cheat amnesty! It's called the Offer in Compromise or (OIC). I can tell you get to bed at a decent hour b/c these guys run all kinds of "late night" infomercials.
"I ran a business as a contractor flipping houses and never kept so much as a reciept (let alone books) and owed OVER 200K"! Thanks to the Law Offices of Dewey Cheatem and Howe the IRS settled for 10% of what I owed! Now I can get back to my life of screwing over ex's, employees and future FB's! Thanks Dewey!
Randy H,
LOL! Yeah, I remember a lot of those guys! Sorry Mrs. H had to go through that. It had to be pretty intimidating!
Vending route guys come under the same BS. The buy the stuff wholesale (or from a guy named Vinny) and empty the machines daily. I'm sure they report every dime of it.
Taverns can fall under the same general category. One drink for the IRS, one for me. One drink on the books, one drink for me.
Ever wonder how small town "antique" dealers keep the doors open? You're looking around and you're thinking, how do these guys stay in business? For crissakes the pawn shops are better monitored than half these guys! I've heard they've made it tougher for these cash operators through forensic acct. etc. but they just pull up their tent stakes and move down the road. I have more respect for arsonists.
Scumbags.
DinOR,
Nah, I just don't watch TV often and then I use the DVR to skip over the commercials.
I believe Italy's tax amnesties are bit different than making a settlement with the IRS. The Italian government just announces forgiveness for all back taxes up to a certain point. This scheme is often cited as a primary reason for Berlesconi's long stay in power dispite his obvious corruption and coziness with Bush.
That sort of small biz hiding their stash is why I welcome the appearance of credit cards/debit cards everywhere. I foresee a day twenty years in the future where any business that accepts cash only gets immediate auditing scrutiny.
...too bad the US is not a landlocked country with limited access to salt, or the government could just tax salt like ancients...though there were tax cheats back then as well.
Randy H
2006 Aug 10, 6:32am
DinOR,
I think it is getting harder for the vending route types, because of electronic tabulation, etc. The taverns, etc. fall under all that IRS minimum statistical revenue stuff. They have to prove the didn't make a certain amount of money, not the opposite.
Antique dealers all cheat. Half of them probably don't even know when they're cheating; they just don't care about all but the basic rules. Same for any small-town storefront with low volume, high inventory, and irregular suppliers.
The real cheats, IMO, aren't all these guys though. The new cheats are the ACCRUAL-based personal small biz's. You know as well as I how much room there is for guys like us to game the system. I often feel like the sole chump because it seems like everyone I know is breaking at least 100 accounting and tax rules. Ever wonder about the "self-employed" guy next door who's some kind of contractor or consultant, but seems to only work about 5 hours a week? There's a pretty good chance he's making double your income and paying half your taxes. But at least he gets to contribute to his SEP because he made his sister a director of his S-Corp, and he can also tax defer 5x what you can in any given year.
DinOR Says: “go after all the cheating cash-based businessesâ€
> Before there was a housing bubble to complain about this was my pet peeve.
> Compared with the gangster like activity we see in RE today it kind of pales
> in comparison but is equally important!
Don't forget you don't need accept "just cash" to be a cash based business. When I write a check to "John Doe" the owner of John Doe plumbing all he has to do to get cash is walk in to a Wells Fargo with his ID and cash the check.
> Laundrymats? It got so bad with the owners “raiding†the machines for wheel barrows
> full of quarters the IRS now bills based on their power and water usage!
I've never met an apartment owner that declares the quarters from their laundry machines. They just roll the coins and "sell" them back to the tenants...
> Junkyards? How do we place a value on this “inventory� Piles and piles of it! Want to
> pay for that chrome headlight ring with a check? Good luck. It’s cash on the barrel
> head at 99% of these places!
Don't forget the added profit they make after pulling the engine and tranny from a car with 150K on it and selling the engine and tranny with a tag that says "only 32K miles"...
> Sports Card and “Collectible†dealers? How many 11 year olds pay with a check?
> Some of the “greats†from yesteryear have 100’s of thousands in undeclared income.
> Anyone remember Duke Snyder?
Most card shops are fronts to launder money for drug dealers (does anyone wonder why South Central Los Angeles is full of card shops). If you look at the books of most card shops you will see that they paid $10 cash for a Reggie Jackson rookie card then sold it later that day for $10K in cash...
> The list goes on but these people laugh at us everyday! They see as the “unenlightened
> masses†going through their lives unaware that there are other “avenues†to wealth!
As taxes keep going up I think that we are going to have more and more people bartering and paying cash so the government can't get a cut…
P.S. A friend of mine comes from a family that owns successful restaurants and bars and they have never put a single dollar of cash money in the bank...
Peter P
2006 Aug 10, 7:10am
Don’t forget you don’t need accept “just cash†to be a cash based business. When I write a check to “John Doe†the owner of John Doe plumbing all he has to do to get cash is walk in to a Wells Fargo with his ID and cash the check.
This is why I do not use cash or checks. I use credit cards whenever possible. Most swipe systems require a merchant account.
I am all for abolishing cash. We should make ALL transactions accountable. Smart cards and micro-payment systems CAN make this economically feasible.
I am all for abolishing cash. We should make ALL transactions accountable. Smart cards and micro-payment systems CAN make this economically feasible.
...and be sure to invest in middle-man companies like Visa, MasterCard, Amex, etc. :)
But let's be honest, you'll still need cash if you ever want to go to San Gabriel or Miami. :(
Peter P
2006 Aug 10, 7:36am
But let’s be honest, you’ll still need cash if you ever want to go to San Gabriel or Miami.
Why? If cash is abolished then only gold or plastic will be accepted. :)
FAB,
I had NO idea that's what they were doing in "South Central". Seems to me that would be fairly easy to identify and shut down. Now that you've brought it to light it makes perfect sense though!
"breaking at least 100 accounting and tax rules"
Yes they are. What's worse is that so many of these guys don't even take the time nor effort to truly understand our tax code.
The only thing they know is that they're not going to pay it.
Randy, how many times have you called some of these guys, first out of legitimate need, then out of curiousity? One of the tell tale signs (for me anyway) is when you've left them a message on their ans. mach. NEVER get called back, then call back like SIX weeks later and IT's THE SAME MSG!
"Hi, this is Jack with _______ consulting and today is Friday May 3rd. I'll be out of my office until_______.
May 3rd! Dude this is AUGUST!
When you finally get a hold of them they will listen to you, make an appt. and then promptly reschedule it until........ well you get the idea. They know you're legit! You're part of "that" system. Then you find yourself wondering why they even bother to hang their shingle?
It's like they're the "floatsom and jetsom" of the business world. Dead leads, dead weight.
FAB,
Glad you solved that mystery! Now what are those "flower sellers" in the road medians really selling? :)
Randy H
2006 Aug 10, 8:05am
Most card shops are fronts to launder money for drug dealers (does anyone wonder why South Central Los Angeles is full of card shops).
...or all the Bedding and Mattress from NW Schaumburg to Elgin. I actually went in to buy a mattress in one once, and there were two guys straight out of The Godfather sitting at a little wooden table just through the rear door working on something in a nice leather folder.
It wasn't a bad mattress either. And pretty cheap, since Tony told me 50% off if I paid in cash.
How can card collectors and antique dealers make money if we dont encourage them. I am sorry I am not very much into antiques or cards or stuff that dont add value to my life. I am not a believer in One mans junk is another mans treasure. It still is junk for me and I might pay a dollar for it.
Every once in a while, one of those tax cheats gets caught. They end up owing massive back taxes, interest & penalties. If they are lucky, they stay out of jail. But they can't discharge the tax debt in bankruptcy. So they are basically locked out of holding a regular job for life (because the IRS will attach 25% or so of their wage).
The IRS is starting to crack down on these guys--20% down required. This may not sound like a lot, but that is 20% of the total tax debt, which includes interest and penalties:
Randy H
2006 Aug 10, 8:24am
It’s like they’re the “floatsom and jetsom†of the business world. Dead leads, dead weight.
Back when I had a telecom software consulting co I used to Hire or W2 all my talent. I wouldn't 1099 unless they could corp-to-corp and could convince me they knew how to file their taxes correctly. I got stung by a 1099 not paying his taxes once and learnt that the IRS has the authority to move upstream with the failed withholdings demand.
Most other guys I knew running similar corps used shell "broker-employers" for all their talent so they could 1099 to that corp, which would mysteriously disappear whenever the audit notice was served.
I always thought these were the absolute scum of the earth. We already had 400%+ margins in that type of biz during that time. But that wasn't enough. These guys had to shoot for another couple hundred percent.
Look at advertisements added to the site since we started talking about evading taxes. These people who help evade tax paying should be prosecuted first.
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If there's one thing that distinguishes your average Patrick.net blogger from your typical robotic SDCIA.com perma-bull, it's the ability to consider your opponent's P.O.V. and to see things from others' perspectives. This thread is dedicated to this proposition. I want you to put yourself into the mind of a F@cked Borrower.
Peter P has already suggested this concept --in jest-- with his thread, "A cry for help". I would like this one to be approached from a more serious mindset. Image for a moment that you --as our hapless friend from the SDCIA-- find yourself saddled with 14 underwater properties, all bought on margin with exotic financing, and are now unable to make the ARM-reset payments on your night manager's salary from Taco Bell. Never mind that you could have avoided your unsavory predicament by merely applying a modicum of logic, some cursory market research and a dash of high school math to the dubious principle of "it always goes up". It's too late for regret now --you let your greed get the best of you, and so here you are. You now have a "diversified" portfolio of 14 equity-negative properties in different states, and all of them are heading in one direction: down.
So, let's assume you've gotten past the denial, anger, bargaining and depression stages, and have picked yourself up off the floor (after spending several days there whimpering in the fetal position). You've finally reached "acceptance" and are ready to rationally assess your sorry situation with cold, hard-eyed reason, and you must determine a course of action before events progress to the point where your creditors begin making all your decisions for you.
At this point, you have basically three options, none of them particularly good from your P.O.V. Which one do you take?
1. Confront your creditors (MBS shareholders) and request permission to start making "short sales" (i.e., selling the property for less than the amount owed).
This option has a number of attractive advantages, particularly the ability to avoid bankruptcy and/or liens and legal actions against you, as well as the ability to be quickly rid of those 14 "equity alligators" before they eat your alive. If your creditors agree to this, it amounts to a non-BK debt forgiveness, and you will not owe any money after the sales.
It also carries a few drawbacks: (a) Exactly whom do you negotiate with? Your loans got bundled up as MBSs and sold off before the ink even dried. Do you call Fannie Mae, Fredie Mac, the Bank of China, Fidelity, Vanguard, CalPERS --other? (b) Your creditors will undoubtedly require you to bring your entire life savings to the closing table in order to minimize their own losses. Of course, being a reckless speculator who used other people's borrowed money, you're not likely to have much anyhow, so no biggie. But there's another drawback: (c) your creditors will have to report the amount forgiven to the IRS as "cancelled debt", which will be taxable as income. Given your 14 underwater properties, this amount may be quite large. Bailing on your creditors? Relatively easy. Bailing on Uncle Sam? Not so easy.
2. Leave 14 sets of keys on 14 granite kitchen counters and walk away.
Pros: Perhaps your creditors will eventually realize you have no money, no reasonable chance of paying off the debts, and just write them off and leave you alone. To borrow a phrase from J. Paul Getty, “If you owe the bank $100, that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.†Even better, if all of your mortgages are "firsts" (no refi's) and you live in a non-recourse state (CA), then your creditors basically have to eat the loans. You'll still be on the hook for tax on the cancelled debt, however.
Cons: Aside from trying to sue you for any current assets and garnish your future earnings (assuming any of your mortgages were refis/recourse loans), your creditors may also try to intercept your tax refunds, ruin your credit (ha-ha, I know --like you care!) and generally harass you and try to make your life miserable.
3. File for Chapter 7 bankruptcy.
Pros: Means a "clean start" no more debts, and no tax liabilities --if you can get it.
Cons: Thanks to the new creditor-friendly Bankruptcy "reform" law, you have to qualify for means-testing and prove you did not commit fraud to obtain the loans in the first place. Uh-oh. That last part could really bite you in the a$$. How much did you inflate your Taco Bell night manager's salary to get those 14 $0-down NAAVLPs? Don't remember? Better consult with an attorney first. If you can't qualify for a Chapter 7 under the new rules, then your only option is to file for Chapter 13 (repayment plan --not good) or reconsider options #1 & 2.
Discuss, enjoy...
HARM
#housing