patrick.net

I take advantage of intro balance transfer offers, like 0 or 1% for 12 months then put the cash into those high yield savings accounts and get around 5% pre-tax. Most CCs will ACH directly into your checking account, so just pay the minimum on time, and pay off the loan when the promo period runs out. Pretty much risk-free unless you miss a payment or if you miss something in the fine print. It'll easily drop your FICO by 100 points, but since I'm bubble-sitting, I don't need the credit score cept for this anyway.

Guess I could invest the money. Go nuts and do some commodities options trading or something. Too bad our compliance guy (also the prez of the company) needs to approve every trade besides mutual funds & treasuries. Not a good idea to be so highly leveraged personally when you work in the industry.

Randy,

I'm curious which fund you used to clear ~8.5% after tax risk free. The only muni fund I'd consider risk free is the money market CA muni, and it yielded ~3% last year. The longer term funds yielded a couple hundred bps more, but those have a decent amount of duration risk.

I think all the 0% promos are great, no matter the industry, given that 1) you have the money and discipline to make the payments on time, 2) you're working with a reputable company, and 3) your FICO score can afford to take the hit.

Harm,

Mortage Deferral - That has got to be a spoof web site!?!

Time to get a Job, HA HA HA! I love it!

Thanks for cracking me up!

Paul

@ Harm,

“If you owe the bank $100, that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.”

Do you think that's what treasury says to China every time they talk?

Paul

Harm,

Mortage Deferral - That has got to be a spoof web site!?!

Nope. Out of curiosity, I called the 800# and got a bona-fide operator. According to their "about us" & "preferred partners" tabs, they're legitimately operating in Roseville, CA and are underwritten by Harbinger Mortgage Solutions: http://www.harbingermortgage.com/.

Being a model tenant (i.e., paying the rent on time every month and not burning the place down) has its privileges!!

Do you rent from some private party? I rent from a corp - and they have no reservation about raising rents.

a harbinger of bad things to come, I suppose.

Here in Chicago, when the lease came up the manager was just so grateful we were staying, there wasn't even a thought about a rent increase.

Mine bumped me 5% in the 11th month of my lease. Not huge, but still it's money.

SP,

you're right, for Singapore, the case is government subsidized housing. For Hong Kong, it is government housing (tenant gets no ownership, pays rent to government). In Japan, it is also government housing.

HARM,

ARM in itself is not exotic, as you pointed out, how we apply it and process it is what makes it exotic. I can't keep track of these latest offers anymore.

Also, people elsewhere who only have ARM available are generally more conservative in committing themselves to long-term debt, because they know the interest rate hikes can come back and bite them in the ass. Lots of Americans take up ARM as if they were taking up FRM, having no memory of how their parents coped with the fluctuating rates. People of my generation (30s) growing up in a predominantly ARM environment all have vivid memories of parents coping with double digit mortgage rates when growing up. I still remember the time when mortgage rate was at 24%, and I grew up assuming one day that I would have to buy a home with a mortgage rate of at least 15%.

@jbunniii -

I rent from a private owner, which is my preferred situation as well. A similar unit in our condo building just rented for $250 more than we are paying. I thought we might see a $100+ increase after the last unit rented so much higher than ours. It feels good to be all squared away for another year, on the sidelines.

I remember back in the dotcom days when I lived in an apt complex - my rent went up $250 when my lease expired. I was single back then and my roommate had just lost her job. Nightmare.

I rent from a private owner

Do you find these from craigslist? Or are there other tips?

I'm looking at possibly moving to Redwood City (a step down from Sunnyvale) and I need to continue to rent (obviously).

Air condition seems to be impossible to find in Redwood City. Yuck.

"You should check if you can afford a 15 yr. fixed"

StuckinBA,

Well there you go! Isn't advocating people in their 40's at least consider a 15 yr. FRM vice a 30 yr. part of the radical thinking that put Patrick.net in the "Extreme Category" for blog awards?

No wonder every realtwhore in the BA takes a cheap shot at us! Here is yet another cornerstone of traditional financial planning cast aside all in the gamble to have a "free" house at 50, not a paid in full home by retirement age.

You gotta love it!

http://www.consumeraffairs.com/news04/2007/01/mln_subprime.html

"The last few months have seen a flurry of subprime lenders shut their doors, declare bankruptcy, or engage in mass layoffs as the housing market freezes up.

Ameriquest, formerly the country's largest subprime lender, collapsed quickly after its former CEO, Ronald Arnall, was appointed by President Bush to be ambassador to the Netherlands"

the other side,

Spoken like a true realtor (tm)!

Inflation and housing prices - are they tied together?

I’m increasingly of belief that we will see dramatic inflation in the near future. The perpetual fall of the dollar. The massive government debts. Continued upwards trend of the price of raw materials.

I’m too young to know - but what happens to housing prices if inflation say… hits something moderate like 5-6%?

Does it tend to match?

I’ve been futzing a lot with this calculator recently: http://www.dinkytown.com/java/MortgageRentvsBuy.html and I’m perpetually surprised at how close the break even point is… especially when I tweak the inflation knob.

Frank,

Is Ameriquest already gone? I thought any company that can get their name on a blip would be around forever! The name always reminded me of Ameritrade = Let's light this candle, dude!

@eburbed -

I found my current residence via craigslist. You can also find listings in the small publications (Palo Alto Daily) or regular newspapers like the SJ Mercury. Another thing that works on occasion is to drive through a neighborhood you like and check the "for rent" signs.

jbunniii Says:

> OK, I’ll bite. What else would you do
> with an old refrigerator?

When I was a kid my Dad used to make me take apart old refrigerators and save all the old parts in the hope that we might some day save a few dollars by using the old parts to fix another refrigerator. My Dad would not just take apart the old refrigerators he would bring home almost anything our tenants threw in to the dumpsters with “perfectly good hardware” still on it. When the water bed fad ended in the late 70’s I bet I took apart about a dozen water beds saving the nuts, bolts, screws and drawer hardware from the (more often not) “black lacquer” pedestal drawers. I swear I’m not making this up, but I just remembered that my Dad used to make me cut up the shell of the old fridges with the Sawzall so we could throw them in the dumpster and save the couple dollar dump fee at the old Burlingame dump…

Bay Area real estate will NOT appreciate 3% + inflation, because it is already discovered.

30 years ago, Bay Area was an orchard, a huge orchard. My wife who grew up here never thought of this place as the "silicon valley", to her, it is just Santa Clara Valley. As Santa Clara Valley grows into the Silicon Valley, you get 3% + inflation over the last 30 years, which is a very strong appreciation if you compound the 3% over 30-year period.

However, now that it is already the Silicon Valley, where else can it go? Many places on the west coast has been growing faster than inflation due to the "discovery" factor. When it is already discovered, the most it can grow will be pretty much tracking the inflation.

Look for 3% + inflation somewhere else, particularly in the unsung regions of the west coast like Oregon, after the bubble pops.

SFWoman said:
No private developer is going to build houses where you lose money on 64% of them.

Well, I think that interpretation is quite wrong, isn't it? They are saying *below market rate*, not making a loss. i.e. sell it for less than the current 'generally agreed' market price. Developers often have a 25-30% profit margin built into their retail price, to begin with. I'm certainly not asking any developer to 'lose money'. The fact is, the cost of construction is not that high at the development end, it's the attributed cost of land that blows out the price. Hence, I would try to control asking prices for land somehow, as per the rest of my post. (And there are 'not for profit' developers out there who don't walk away with massive markups, as per Bridge Housing e.g. the Fisherman's Wharf project) It can still be win-win for everyone, just not quite so much win for the original land vendor. The point is, if prices crash everywhere as so many posters here predict (and fervently hope and pray) then the cost of land will go down in the market anyhow! i.e. the concept of value of land will be reduced back in line to something reasonable, which then flows into the developed asking price for a place... What went up came back down... I'm just saying go back a step and try to control the asking price for land, probably by govt fiat... is that any clearer?

When I was a kid my Dad used to make me take apart old refrigerators and save all the old parts in the hope that we might some day save a few dollars by using the old parts to fix another refrigerator.

Beware escaping refrigerant!! :o Actually, your father sounds like me -- a bit of a scavenger 'just in case' the part can be used again...

"Ameriquest, formerly the country’s largest subprime lender, collapsed quickly after its former CEO, Ronald Arnall, was appointed by President Bush to be ambassador to the Netherlands”

surprise surprise... the republican establishment guy at the top gets a plum job to escape to... a defence minister here 'retired' after a phone card scandal, went straight to a job chairing a billion dollar defence contract bid, which he surprisingly won, then went on to become a Euro ambassador on $400K paid for by the EU...

Threadmasters,

Is there an Email address that us proles can send thread suggestions to?

I have a couple of ideas, but I don't think I would be able to adequately control them. I'm in the wrong time zone for to-ing and fro-ing during my evening (this is 10:15pm for me), and I can't send from my work PC any more (firewall restrictions).

theotherside,

Before concerning yourself with "how" this blog is administered perhaps you would have at least some credibility if you addressed the following:

1. Why the collapse of sub prime lenders doesn't matter.

2. Why rising delinquent payments, Notice of Defaults and foreclosures are of no consequence.

3. Why it is perfectly ethical for the Santa Barbara CA and Danville, IL realtors associations to withhold their data from NAR.

4. How there is no mortgage or appraisal fraud.

5. Explain Leslie Appleton-Young's new affordability index for CA.

6. Why MID and cap gains exemptions played no part in all of this and that there is "no national RE market" or rolling bubble.

No, you won't address any of that. You're too busy defending your own poor investment choices rather than own up to the mistake that you made. Besides, didn't you promise us you were back to work doing open houses for non-existent buyers?

Different Sean Says:

> And there are ‘not for profit’ developers out there who
> don’t walk away with massive markups, as per Bridge
> Housing e.g. the Fisherman’s Wharf project) It can still
> be win-win for everyone, just not quite so much win for
> the original land vendor.

> “Ameriquest, formerly the country’s largest subprime
> lender, collapsed quickly after its former CEO, Ronald
> Arnall, was appointed by President Bush to be ambassador
> to the Netherlands” surprise surprise… the republican
> establishment guy at the top gets a plum job to escape
> to… a defense minister here ‘retired’ after a phone card
> scandal, went straight to a job chairing a billion dollar
> defense contract bid, which he surprisingly won, then
> went on to become a Euro ambassador on $400K paid
> for by the EU…

Most of the “not for profit” developers (including Bridge) are just shell companies that allow politicians to pump money back to campaign contributors. On average “not for profit” housing costs at least twice as much to build as “for profit housing”.

I’m not partisan like DS and I have no problem saying that Ron Arnall is a scumbag, but not talk bad about a dead guy it’s interesting to note that Don Terner former CEO of Bridge Housing died in a plane crash with Ron Brown about 10 years ago. Ron got started in politics registering dead African Americans for Teddy Kennedy (this is according to life long Democratic Brookline relatives that still support Kennedy). I have many “Democratic” friends that think that Terner and Brown were killed by members of their own party since both were under investigation when their plane went down…

Many liberals think that developing real estate is a license to print money. It is not, it is a very risky line of work that has put a lot of smart guys in to bankruptcy. When a “not for profit” develops property the costs just keep going up and up since the government will pay for all the “costs”, just not any of the “profit”. Let’s not forget that a “cost” to a “not for profit” developer includes a lot of “profit” that goes to the contractor and all the subs…

I suppose there are people freezing to death every August because they are outdoors in Scotland.

More like starving to death beacause all they have to eat is haggis.

I came across these guys, Contrary Investor - DinOR, RandyH, FRIFY, or anyone else - heard of them? Their monthly market outlook is free to the public:

http://contraryinvestor.com/mo.htm

This month's report is on housing, and they are extremely bearish. I don't know if these guys are any good, or if they are just small-time. But I will say their analysis seems reasonably good. It's a long read, but it's written rather colloquially.

skibum,

Oh sure, I've heard of them before. It was pretty solid analysis but didn't Liz Ann Sonders (Charles Schwab) do a very similar piece some months ago?

I seem to remember it raised some eyebrows b/c that bearish a sentiment coming from a firm as mainstream as CS was something of a bombshell. Either way, it definitely gives the "we've stabilized" spin a death blow!

MtViewRenter

Most of my after tax returns are related to tax position. To be honest, I don't pretend to understand all the tax stuff; I just do what my tax acct advises, then balance the portfolio going from there. Currently, tax-exempt munis and mmkts have the best after-tax return for risk for me (related to "debt arb" only).

DinOR,Skibum

Same impression. They seem to just aggregate, reformat and comment on other works. But that's what most of the blog-o-sphere is all about. I try to add a tad bit more original thought or analysis when I regurgitate someone else's work; but in the end most blog econ stuff comes from the same dozen or so original sources. CS, HSBC, etc. and the academic sources.

tannenbaum,

”Because there’s excess inventory, there are still significant concessions,” he said. “We expect that will drop considerably later in the year. In other words, now is a great time to buy.”

If you have the time to read the link I posted, you will see how ridiculous this statement is. Based on multiple indicators (housing permits, housing starts, inventory), we are nowhere near the "bottom" of this housing cycle. There will be realtors (TM) and MSM calling the bottom periodically all the way down. By the time we reach the true bottom, the cheerleaders and pundits will have long stopped calling the bottom, because frankly, at that time, housing will not be a "hot" investment.

SFWoman,

As I understand it, there was massive fraud and loose lending standards in the late '80s, particularly in Boston. They suffured during that housing crash more than most other places. What's "humorous" is this Boston realtor's web site and his "market analysis" reassuring us that the '80s disaster won't be repeated:

http://www.richhaen.com/market_update.php

Conversely, the debacle of the late 1980s was unfortunately fueled by speculation with Boston's occupancy rate at an all time low of ±60/40 heavily laden with "investors" versus "homeowners". In addition, mortgage lenders at that time were allowed to offer these same investors little or no cash down financing, appraisals were not required and the validity of the Purchase and Sales Agreements were not verified. Many transactions went unregulated with falsified documents and inflated cash down payments. When the real estate market crashed in 1988, these same investors bailed out of the market, allowing their units to be foreclosed upon by numerous lien holders. In the condominium market, this surely had a major impact on the City of Boston's real estate values. Unfortunately, these foreclosure numbers became the most recent "comparable sales figures", leaving the homeowners in a very precarious situation with devalued properties. The first thing to be sacrificed in a downward spiraling economy is speculative real estate investments. Again, the laws of supply and demand could not be more clearly outlined! Ask any financial advisor, tax accountant or lending institution, the last thing people walk away from is their primary home mortgage.

Doesn't this sound familiar? Hmmm.... "investors" rather than "homeowners" in the market, little or no down payment required, little or no documentation required for loans, investors bailing out of the market...

Surely that's not the situation we're in today! I guess we won't see foreclosures increase, comp sales prices decrease, and devalued properties this time around!

Randy H,

True, sometimes we wonder just how many financial web sites we really need? One of the few things I HAVE enjoyed about this bubble is the birth of a bear voice in RE! Prior to this, only bulls had any rights.

This weekend I intend to pick up Sell Now! It wasn't that long ago a publication of this sort was unthinkable! It's the equivalent to "The Satinic Verses" that got that Rushdie fellow into so much trouble. Ha Ha inspired me to fork over the coin.

This weekend I intend to pick up Sell Now! It wasn’t that long ago a publication of this sort was unthinkable! It’s the equivalent to “The Satinic Verses” that got that Rushdie fellow into so much trouble. Ha Ha inspired me to fork over the coin.

Maybe the NAR will issue a fatwa calling for the death of the author of "Sell Now!"

SFWoman Says:

> FAB, I remember there was a large condo and apartment
> below market and subsidized development built in Boston
> when I was in college (late 1980s). At the time it ended up
> costing $600,000 per unit to build. I had friends who were
> buying condos in Back Bay for about $350,000 at the time.
> The whole thing was a giant boondoggle for someone.

The “someone” are the “campaign contributors” who get paid back for their donations with government contracts. I met a Bay Area real estate developer once who tracked his campaign contributions like his other investments and said that no other “investment” has as high a “return” as his campaign contributions. If you dig down to the key principals who have made millions on the Third Street Rail project/boondoggle (and who will make money on the SF “Big Dig” if the Chinatown subway starts this year) almost all the names will be on the friends and donors to Willie and Gavin list…

What percentage increase is 1.6% to 5.6%? The actual percentage might still be low, but it looks like there is an almost 200% increase in the number of people who are losing money nominally (not even inflation adjusted or counting Realtor(TM) fees) when selling their houses in Marin in the past couple of months.
Is this drop enough for Randy to start writing more "This-is-my-final-offer" Offers? I got the feeling from reading his latest Shiller analysis that he may be sitting tight for a while longer. I am also curious to reconcile this statement:
Long term, in the Bay Area and Southern California, housing appreciates only 3.5 percentage points a year over the rate of inflation with Shiller's numbers (even with inflation). Anybody know if Shiller broke out the numbers for CA?

"The law, if passed, would make France the second European country to guarantee the right to housing, after Scotland which adopted similar measures with its 2003 Homeless Act.”

The Soviet Union had this right guaranteed in their constitution.

Does this mean there are no homeless in Scotland? If you own a home, are you required to take in strays? Or just those owners with spare bedrooms?

Is this drop enough for Randy to start writing more “This-is-my-final-offer” Offers?

We're planning to start trying again in February. *But* we're skeptical enough so as to hold onto our rights to keep renting here for another year.

A lot of stuff here in South Marin (in our price range at least) seems to have been pulled for the winter. *Quality* inventory has shrunk considerably. The crapola that's languished for months is starting to sell for what I consider healthy price reductions. For example, a $1.9m in Corte Madera seems to have sold in November for $1.7m. That's not huge, but it is $200K, which is real money. Just not enough real money to get me to bite.

I don't know who's still buying. Well, actually I do in some cases. Colleagues of my wife -- executive types generally making $200k minimum base -- were buzzing around at their xmas party about how this is "the opportunity of a lifetime". Crap like "I grew up in Marin and this is the first time prices have ever gone down! Better buy fast!".

I didn't bother to point out any data, out of respect for my better half's career.

I do see stuff movin' that I thought wouldn't budge. Two knock-down McCraftsam rebuilds down the hill from me in Mill Valley, one started at $2.8something and the other $1.6m, both sold in December after over half a year on the market. I have no idea for how much or if the sales were even legit or just some tax-transfer hoohaa.

The Soviet Union had this right guaranteed in their constitution.

As did many other old-line Social1st and Commun1st countries from the previous era. It was a "constitutional" right in the DDR. Probably so in most other Soviet satellites. I'm pretty sure there were some in SE Asia and Latin America as well.

...actually, I happen to be working with "Kati", who grew up in the DDR, today. She says they taught her in school that the fences & walls were to keep out all the oppressed homeless from the West who knew that in the East they had a people's constitution that guaranteed things like food and shelter to all people. There were so many the guards often had to "unfortunately" shoot them to keep them out.

She also said by her generation no one believed it either.