patrick.net

Did I mention my boomer parents have no savings? Oh yeah, and they’re about $800k in debt.

SQT:

But how much "equity" do they have?

I feel your pain. I estimate that my boomer parents have around $350K+ of debt. They have no savings except for about $180K inheritance which they recently received and have not yet blown through and $100K of phony "equity" in their home... I seriously hope they never read this blog...

Glen,

Well, in that regime, there would be no transfer tax for houses, only consumption/usage tax by the way of property tax. As for other financial instruments...I'd say go simple and only have stocks, bonds, derivatives, some combination of these, etc. SEC should have the lead in defining the categories of investments.

Things like fine art and rare gems should be considered a consumable...that'll probably drop their investment value quite a bit.

SQT and Glen,

Wow! I hope your parents make it out okay. Is it because they're running bleeding businesses? It's still a little hard to imagine fairly average people being $800K in debt on consumer credit. I hope they saved some money in retirement accounts just in case.

Southland Home Sales at 9-Year Low

By Annette Haddad, Times Staff Writer
August 15, 2006

Southern California home sales fell to their lowest level in nine years last month as price appreciation continued to take a haircut, data released today showed.

In July, 22,712 homes closed escrow in the six-county region, according to La Jolla-based research firm DataQuick Information Systems. That was a 27% drop from the year before and was the fewest number of homes to close escrow in a July since 1997.
_____

Precious!

Thanks for all the responses on consumption/use tax. I would just like to point out that nearly all of the criticisms raised are also attributes of the current tax system. Sales taxes already exist on practically every consumption item; so I doubt any shock would occur to the consumer economy. In fact, with a simpler system, more revenue could be raised with lower taxation.

The current system is already regressive towards the true poor. They still pay sales taxes on their Big Gulps. That % to them is far more significant to them than to the guy in the BMW. And let us not forget the entire elaborate system of aggressive taxation on poor folks vis-a-vis lotteries and other state run scams.

Investment versus consumption? This is also already a problem, but worse because we interject a third dimension with capital gains taxation.

Special interests et. al. are a problem today, they would be no worse under a use tax.

Very rich people do consume a great deal in the US economy. Not Big Gulps, but a tremendous amount of services and other experiential activities. They consume their fair amount of actual goods too; just expensive ones.

Is a house an investment or consumption? Neither. It is a form of savings. Regardless of the semantics it is relatively simple to classify residential primary owner-occupied real-estate separately. Houses are already a special asset class in our system today.

I always find debate on this subject interesting because most criticisms can be reduced to: "consumption tax isn't perfect, so we're better off with today's by far less perfect system". I have never grasped that logic.

SQT,

http://articles.moneycentral.msn.com/CollegeAndFamily/CaringForParents/ShouldYouBailOutSpendthriftParents.aspx?vv=400

If you haven't already seen it. I thought I was the only one with parents (Silent Gen almost Boomer Cuspers) who inexplicably thought it was everyone elses responsibility to support them financially while they did whatever the hell they wanted to. This hasn't resulted in the best of outcomes for my family. It's really difficult to face the "spend it on mom who really really needs it, even though she blew threw her entire inheritance from her father on 3 husbands, bad habits, and frivolous consumption -- or maybe try to save for my own retirement and my son's college" question. You can't put mom on the street, but her bad choices shouldn't be her grandson's cross to bear.

It’s really difficult to face the “spend it on mom who really really needs it, even though she blew threw her entire inheritance from her father on 3 husbands, bad habits, and frivolous consumption — or maybe try to save for my own retirement and my son’s college” question.

Not difficult to face. I never believe it is right to help people who need help anyway. It is better to help those who will help the world.

You can’t put mom on the street, but her bad choices shouldn’t be her grandson’s cross to bear.

Not to be insensitive. One is no longer productive. One has a bright future ahead. You are to make the right choice.

"I always find debate on this subject interesting because most criticisms can be reduced to: “consumption tax isn’t perfect, so we’re better off with today’s by far less perfect system”. I have never grasped that logic."

That seems like 85% of public discourse anyways. Point out some flaw in the opponent's proposal and ignore the bigger flaws in one's own proposals.

Much of the current trolling is reduced to "rent can increase, buy now" which conveniently ignores that the cost of ownership can also go up in the form of higher taxes, property maintenance, insurance, and ARM resets...not to mention 50-100% more dollars per month compared to renting.

You can’t put mom on the street, but her bad choices shouldn’t be her grandson’s cross to bear.

Unfortunately, this is America - where the best indicator of your future success is who your parents were.

I'd say prodigal parents should get roof over their head and 3 meals a day. In return, they should help with childcare and household chores to the best of their ability. But there's no need to feel guilty withholding vacations or fancy dinners from them. If retirees wanted more than broadcast TV and beans n frank for their retirement, they should have been saving for it.

As for houses, I still maintain that it is simply an expensive durable good. Calling it a form of savings doesn't make much sense when most people do not ever pay off their home mortgage. The rental value tax make sense in a VAT world in accounting for the usage while not putting the barrier to buy/sale that a one time sales tax would create.

Why tax rentals (currently not taxes), homes (currently property taxed), rent equivalent or sales capital gains? Instead tax the sale of homes to business operators (land lords) and all the goods and services that go into building and maintaining houses. That stuff already is taxed, just terribly inefficiently. In such a tax regime the distinction between owning and renting would only be the amount of savings one might accrue in home "equity" weighed against the risk undertaken for holding a risky asset.

Keep in mind that without all this synthetic tax categorization that we've created, people cannot ever "invest" in anything. People save. Businesses invest. Buying a stock or mutual fund or gold or a house without income tax or capital gains is simply saving with varying degrees of reward/risk. You aren't building any capital. You are loaning your money to someone else to build capital. You withdraw that money later and consume it or leave it to your children to consume.

Randy,

If you want to institute a VAT system for all goods and services, it's only fair that housing be one of those taxable goods. I see no reason for the tax code to get overly complicated on this matter when the current property tax system (outside of CA) largely account for the good of having a roof over one's head. Such housing belongs in the same category as hotels and cabin rentals, and the most efficient way to tax the use is to calculate the approximate rental value of a home and charge it to the owner. Whatever savings component would not be taxed, just the usage component, like other VAT items.

I'd argue that homes are a rather inefficient and ineffective mode of savings because of the high maintenance costs and the nature of the mortgage used to buy homes. A home derives its value mostly due to its rental value to a specific family, a roof over their head and some walls and plumbing. In reality, current "homeowners" usually operate like long term lease holder with specific exit stipulations. They usually own less than 50% of the value of their homes.

So we may be getting a few more planets.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/08/16/PLANETS.TMP&type=science

Astrology is about to be even more confusing.

astrid,

I don't disagree philosophically. But taxing home as equivalent rent is not practical. It would be widely gamed and cheated. Rent is not currently taxed either, so why tax rent equivalent? Instead tax the use/consumption of the LL/owner in maintaining the property. This cost will be passed on to renters in their rent and owners will pay it directly. There is no opportunity for evasion or avoidance, unless one evades upkeep. This also solves itself because it drives down rents for LLs and drives down resale value for home owners.

I didn't say savings through a home is efficient. It is not. It has always been true that a shrewd, well diversified "investor" can save much more over time than an equivalent home owner with equity and appreciation. But the key is "shrewd and well diversified". Few people are either. A home is just a giant compulsory piggy bank in this sense. But that is exactly what many people need.

Of course it would be even more efficient to not allow anyone to own any property and instead have an efficient, scientifically based, state planning committee determine the optimal income level, output level, and savings level for everyone. Also, of course, such a system will end in parastroyka and be a big waste of everyone's blood and time.

I’d say prodigal parents should get roof over their head and 3 meals a day. In return, they should help with childcare and household chores to the best of their ability. But there’s no need to feel guilty withholding vacations or fancy dinners from them. If retirees wanted more than broadcast TV and beans n frank for their retirement, they should have been saving for it.

Astrid,

I agree. Something about the baby boom generation seems to have made them feel immune to financial concerns. It is sad. My mom always complained about how "cheap" my grandparents were because they had lots of money, yet they would never buy new stuff. It never occurred to her that maybe that was *why* they had so much money even though they put 4 kids through college, traveled the world, paid for full time care for a disabled family member and lived in retirement comfortably for 20 years before they died.

Many boomers continue to borrow money from their elderly parents well into their (boomers) 50s and 60s. Now that the WWII generation is passing on it is time to pass the hat to the gen x and gen y kids for a handout.

Seems like most boomers never managed to figure out that debt-fueled consumption is not the way to wealth. Their parents suffered the depression and learned the hard way. Many of their kids took out student loans and got in over their heads with credit card debt and also had to learn the hard way. But the boomers have been rewarded all their lives for their imprudence. The more debt they took on, the wealthier they seemed to get. Now that the game is ending, they will find out what depression era farmers learned about debt--that sometimes creditors actually expect to be paid back. Sad.

Now now Little Buddy, your just going to have to save while your renting just like the boomers did when they were young and then someday youll have a down payment.

Work for a down payment Mr. Vincent? I thought they were too busy fucking your mom to work. Come now boomer fuck, work and boomer, two words that just don't go together. Kind of like Mr. Vincent and noncockgobbler.

Ahhh don't worry Mr Boomer there will be plenty to go around for you and your greedy fucking hoard. Any chance of you and a couple of your buddies stopping by $anta Barbara? I would really love to meet you.

since we're all talking about global warming, here is a primitive ancient baleen whale that had large sharp teeth, made extinct in a global warming episode some 23 million years ago...

Discovered: Aussie T-rex of the deep - Science - Specials - smh.com.au

all that were left were modern whales and dolphins from that time...

"Property group Lend Lease Corp said the Australian residential housing market was showing signs of distress, particularly in NSW.

Lend Lease is expecting difficult conditions for the residential housing market amid record high oil prices and an uncertain outlook for interest rates."

whatever does that mean?

Housing market shows signs of distress: Lend Lease

I wonder how many realtwhores took this poll?

I'll add my 2 cents worth. I would assume the real reason why there are such cost diffrences in terms of housing between LA and SF is the kinds of people that lice in these areas. LA has a far youunger population, and one that has historically been transient for the better part of a century due to the non-static entertainment biz. Condos would seem more appealing to young couples without kids.
SF on the other hand has a much older population. The majority of the population is over 40-something and of these, most have kids. That explains why condos are " cheaper" than those in LA while SFH are more. That's a fairly easy explanation right there.
You barely hit on a regional diffrence pertaining to entirely diffrent parts of the country. I can say that the diffrences between TN and CA couldn't be more diffrent in terms of perceptions of home ownership. Here in CA it is definantly seen as a vital, if not guranteed source of future wealth and investment. Homes aren't neccesarily bought on principal that they are neccesarily a great deal to start with, as the equation has long been backwards: It is and has been more expensive to buy than rent for decades. This is entirely the opposite in TN where you still have the option to buy on basic principals pertaining to the fact that buying is still CHEAPER than renting. When I re-discovered this rather common concept that was left at the door when I moved to Cali, it was a wakeup call. So the diffrences between cali and diffrent regions are the value structure tied to housing: One being a way to perhaps glean future, but not immediate wealth, and the other as a means to cut costs and start saving actual wages, and not neccesarily putting all the bets on the house. This is why people in California are so desperate to sell because without their homes, they have zero savings, and zero economic safety nets.

Average SAT scores don't tell you much about a school. I went to private HS on the Peninsula but most of my friends from my local public Jr. HS went to San Mateo High. The "average" SAT score at San Mateo High has never been that great, but most of the white (and now Asian) kids that will go on to Cal, Stanford or UCLA will never have a single class with the Black and Mexican kids that will go on to become gardeners, maids and drug dealers after graduation. I don't know if they are still bussing in the San Fernando Valley, but 25 years ago when I started Cal I met lots of Jewish kids from the Valley and not one of them ever had a class (or even talked with) the black kids they used to bus in from Central LA…

By the way, I had to share this with you guys. The house across the street from ours has long been a swinging door for and endless sea of mysterious, sort of creepy people. it is a small house sandwiched between overgrown trees and an ugly smallish condo. The house has been in poor condition for the 2 years that we've lived there. Cracked windows, filthy exterior, broken slats on the porch laticework, garbage and old furniture in the yard. me and the neighbors have been referring to it as the "crackhouse".
Anyhow, last weekend, we noticed that very suddenly, everyone moved out. While they were moving out, a fly-by-night spray painting crew showed up. No priming or prep seemed to be done to the house. Just a quick removal of the vines that had wrapped around the garage. The house was painted in less than ONE DAY. The contents of the house was thrown out front. The trees were chopped down, and the rest of the inhabitants moved out with what little posessions they owned.
Yesterday I noticed a young 30-something looking couple that I've never seen before. They were almost running in and out of the house the rest of the afternoon and into the night, with frequent trips to what I assume was the Home Depot. They have the exact same look on their faces that I see so many people around here have. It is the look of " Oh shit!- we gotta' fix this up now and sell it!"
This pisses me off. Maybe I don't have a good reason to be, but I'm starting to get sick and tired of seeing this. Its like the weasley used car salesman putting cigarette ashes in the radiator. Hire a spray crew, slap some paint over the dirt, and sell it. Whats worse is that these people obviously bought this place, filled it with as many people as possible, didn't take care of it. I don't even know if they ever even showed up at the place the entire time we've lived there. Now they're going to sell it to some unsuspecting people that probably have no idea that the thing is likely rotten and full of some major problems.
That paint job done in ONE DAY just totally blows me away. This story is classic for the times we live in where people don't cre about their community, home, or neighbors and simply want to make a quick buck instead.

Ahem,

On the "more cowbell" issue. I have been a BOC fan from their first album on and it makes me ill that for all they have given (and they have given all) to R+R they get totally dissed by FM jocks. Right out of the gate they were totally original and have only done 3 "cover tunes" in over thirty years of recording. Roadhouse Blues, Born to be Wild and a Calvin Carter classic, "Ain't Got You"! They never really were "mainstream" b/c they heavily favored a 7, 9, 11 minute format which meant that FM jocks actually had STFU for longer than they can STAND to STFU!

I saw these guys rattle the plaster off the ceiling at the Aragon Ballroom (Chicago) circa 1974. Their live performances have never really been equaled.

Back to the "sexy" issue of taxation!

SFWoman,

The way that AMT has always been explained to me is that it is a "parallel" tax system. It's always running right along side our existing tax system. YOU, are taxed by whichever is the more punitive. Dating back to it's origins in the 1960's when congress figured out there were about a thousand "ultra" wealthy people that had enough critical mass to live entirely off of the interest paid by tax free municipal bonds. At the time it was "grand standing" for the masses and has since morphed into a very real middle/upper middle class nightmare. As you suspected it has spawned an entirely new sub set within the financial services arena.

Kind of harking upon Joe's comments and NYC, it's interesting to note that people there have a much harder time even being able to afford living there at all. I have friends who have decent jobs, work round' the clock, yet pay most of their wages away in the form of rent. There is a rental bubble there as well. One of my friends lives in a fairly dangerous neighborhood and rents a single room without windows in the basement of a building for over 1k a month. Think about how much it must suck to live somewhere that is not only unaffordable to buy in, but equally unaffordable to rent. I have no idea how NYC is able to keep as many young professionals as they do as anyone with half a brain would surely see that the financial situation there makes no sense. Then again... they seem pretty addicted to the city.

Randy H Says:

> It has always been true that a shrewd, well diversified
> “investor” can save much more over time than an
> equivalent home owner with equity and appreciation.

Due to the bubble in the Bay Area I can't think of any "investor" (even the shrewd and well diversified ones) who have done better than Bay Area real estate investors. In the 70's my Dad was buying homes in Burlingame and San Mateo with $3-$5K downpayments. Due to positive cash flow at the time (even with the seller 2nd TDs) he had his down payment back in a few years and could buy another home. He never sold any of them and they are all worth over a million and have positive cash flow of more than their original cost each year...

Former apt broker,
I think the issue is now versus then. Yes, historically investors have done well in Bubble times. But what about when the times aren't as "bubbly"?Thoe times too just be taken into consideration as an equal part of the equation.
I recall reading a wall street journal article a few weeks back pointing out that startup investment dollars in California business in general is starting to go sour simply becase so much of that startup capital has nothing to do with the business and more to do with the location.

shit_hits_the_fan Says:

> I have no idea how NYC is able to keep as
> many young professionals as they do as anyone
> with half a brain would surely see that the
> financial situation there makes no sense.
> Then again… they seem pretty addicted to the city.

I think that every person who wants to go in to business should spend a few years working in Manhattan between undergrad and business school...

shit_hits_the_fan Says:

> Former apt broker, I think the issue is now versus then.
> Yes, historically investors have done well in Bubble times.
> But what about when the times aren’t as “bubbly”?

An investor that buys now is almost guaranteed to have a tough time…

I was just disagreeing with Randy who said: "It has ALWAYS been true that a shrewd, well diversified “investor” can save much more over time than an equivalent home owner with equity and appreciation. "

There are also very few people (even great investors) who can say no to the wife and kids over the years and actually "invest" the planned amount of cash each month while the guy with the big home payment it "forced" to invest (unless he is real stupid and he pulls the cash back with a HELOC).

T. Howell III

I for one have always found your comments appropriate and tasteful. How ARE things at "Howell Industries"?

FAB Said

There are also very few people (even great investors) who can say no to the wife and kids over the years and actually “invest” the planned amount of cash each month while the guy with the big home payment it “forced” to invest (unless he is real stupid and he pulls the cash back with a HELOC).

That is entirely irrelevant to the discussion we were having. We were not talking about the intangibles of home ownership, nor were we talking about businesses that earn cashflow off of real estate. I'm not sure what your points are.

Mr. Vincent,

Chill the F out dude! We need our Troll Patrol . Hey X honey I was sooo impressed with your tracking his ISP address and info. But I'm not Techie girl. The little pmple face punk ass was bored and looking for something to do.

I vote to keep X

http://www.mlslistings.com/common/properties/propertyDetail.asp?open=0&page=3&mls_number=611266&type=property&name=

The shell of a house in Cupertino has been reduced again.

Now as for topic:

I found LA way out of line with income and cost of living. I didn't even live on the coast and it was outrageous. I 2000 you could get a place for 150k about 1100 sq ft. When I moved from california in Jan 06 it had jumped to 600K. Wages were about the same gas shot way up kaiser health insurance had jumped up about 10% a year since 2002.

It was a hard decision but I took a temporary work assignent in the southeast. Do I like it here compared to So Cal? It has it's moments and it's dirt cheap to live here so I can save alot of money. On the other end of the coin it's boring as hell only 45 thousand pop. Not alot of amemnities like good restruants, shopping, cultural events. If you've lived in a big Metro primarily it won't suffice for the long term.

So I'm just chillin until the next opportunity all the while keeping my eyes on patrick community and the housing and economic markets. I had co-workers and friends tell me not to move because I could never afford to come back. Maybe I will maybe not. I'll keep my options open.

"What was the starting price? I forgot."

I believe it was in the $700k+ range. Anyone out there remember the asking price when this beauty was first listed?

I can't count how many times I was actually prepared to be fed some "woof cookies" and I'm reading and I'm thinking hey, that "might" make sense? But there's something vaguely not right with the "position".

Then BLAM!

X cuts right through to the chase and in my mind anyway is very vigilant about keeping "bad seeds" from taking root. Think of all the posts you've seen that start out more or less on reasonable basis and then very adeptly take us down a dark alley.

If X did not exist, it would be necessary to invent him.

lunarpark,

799K (I do believe).

It was on Mr. Overvalued and truly his finest hour. Anybody heard from him lately? Flippersintrouble is great and all and I just LOVE the coverage they give to stupidity. A few snide remarks would go a long with me (especially as this has morphed from speculation on our part to entertainment) what could it hurt?

I'm starting to wonder with all of the inventory glut why realtors don't have price reductions "built in" to the selling agreement?

O.K Mr. FB, we'll try and list it for 699K but only for the first 30 days. You see we have plenty of homes and we really don't need any more that are priced above where we can sell 'em.

SO: After the first 30 days we "Auto Reduce" (TM) your asking price by 10%. This is SO SLICK! No more having to chase me down on my cell phone in between looking at repo's! AND we do this for our clients at NO CHARGE!

For every 30 day your P.O.S stays on the market we will continue to mark it down until we find a motivated buyer!

Enrollment in our selling agreement includes FREE Credit Coulseling and we'll do our best to help you with finding a place you CAN afford after your short sale!

Mr Vincent Said:

…but Skipper, if the boomers would just hurry up and die, I wouldnt [sic] care about Prop 13 because I can get their house for nothing. Now now Little Buddy, your [sic] just going to have to save while your renting just like the boomers did when they were young and then someday youll [sic] have a down payment.

Thanks Skipper, maybe if I work hard and save hard Ginger will marry me? Don’t get your hopes up Little Buddy, just wait for this housing bubble to burst and all will be jake.

You know what pisses people off about Boomers and causes otherwise reasonable, open minded, considerate people to stereotype?

Unapologetic, hypocritical, hubris. It's one thing to admit your year of birth was a fortunate stroke of luck, and that the system today wasn't built by your generation but is very beneficial to it.

It's another thing altogether to have the audacity so as to think that you somehow earned or deserve this luck. I'm really sorry if you need to justify your own pathetic, vapid self conscious by denying the fact that we are in the midst of the single largest transfer of wealth from young to old ever in US history. But go on living in your Boomer-contrived self inflicted universe of ignorance. It's what you do best.