patrick.net

Having come so far with so many bailouts, do you think the government is going to give up now when supposedly the worst is over ?

I think the biggest beneficiaries that come out as we navigate through this mess will be the people who took massive amounts of debt and cannot pay it off. The govt. will use whatever means to prevent a crash in the housing market and modify or write-off those loans; this is not a Republican or Democrat issue. The reality is understood by those who see the big picture. Moral hazard is not even an afterthought for the solutions that the govt. can and will implement.

Losers are those who put big down payments and still keep paying their mortgage. Market will never allow them to pull out their invested equity by allowing a cash out re-fi. As also the future generation of home buyers who will only be able to buy lower priced homes because of stricter regulations. This means every segment of home prices will see down-size buyers. The folks who wanted to buy in Cupertino will settle for Evergreen or Cambrian. The Fremont good school district house buyer will settle for Union City, etc. School scores have gone up significantly in these 2nd choice areas this year ( see http://api.cde.ca.gov/AcntRpt2009/2009GrthAPICo.aspx?cYear=2008-09&cSelect=43,SANTA,CLARA) and those folks will be willing to move to where the schools are decent but still improving but the home is at a massive discount over fortress areas.

There will never be another bubble in home prices though, but what we are seeing is govt. pulling out all stops to put a floor on home prices. And they will succeed..........

steady market watcher says

As also the future generation of home buyers who will only be able to buy lower priced homes because of stricter regulations. This means every segment of home prices will see down-size buyers.

Uh, do you mean that people will only be allowed to buy within their means? No more double income, stretched to the limit budgets in McMansions? No more new granite countertops ('cause the old ones were the wrong color) and gourmet kitchens for microwave cookers/out to eaters? (and no more Hummers in the driveway)?

Sign me up.

What's next - paying homebuilders to not build new homes? We do that with the farmers - who knows what nonsense they might come up with next...

Has anyone thought that - perhaps - we might reach equilibrium when existing/resale home prices are in line with the cost to build a house (with some profit for a builder - he doesn't have a "stash" to give away like Obama and might even have a family to feed) and the overhang is worked through? Homes don't last forever and assuming gains in the population/homeowners/renters, eventually we will need more housing. Right now we are overbuilt (or not ... I don't have any figures to back this up either way but it seems like it is) but at some point there will need to be more units available. Granted, the new housing might not have granite counter tops and stainless steel appliances...

We are effectively "plowing under" inventory. Some bank-owned are being left empty and unmaintained long enough, that eventually they will be sellable. The damages will exceed reasonable bounds.

Vicente says

We are effectively “plowing under” inventory. Some bank-owned are being left empty and unmaintained long enough, that eventually they will be sellable. The damages will exceed reasonable bounds.

I believe you meant to say unsellable.

steady market watcher says

There will never be another bubble in home prices though, but what we are seeing is govt. pulling out all stops to put a floor on home prices. And they will succeed……….

They will? So far, they have tried 8 different programs and all have basically failed. Did you actually read the article?

EightBall says

What’s next - paying homebuilders to not build new homes? We do that with the farmers - who knows what nonsense they might come up with next…

Don't think for one second such an absurdity isn't possible.

I think government is trying to prevent a fast correction. Government and banks are trying to drag this out as long as possible so the impact will not be too huge for people who are involved in it, especially the banks. Is all money and politics.

If a fast correction happen and the price of housing finds its equilibrium, many banks will go under and investors lose everything. That means congressmen and senators will get a lot of phone calls from their rich friends. Plus these politicians must also take big hit on their portfolio. The only winners are those who are frugal and prudent enough to avoid the kool aid. So those on top will try everything they can to make sure this does not happen at all cost.

EightBall says

What’s next - paying homebuilders to not build new homes? We do that with the farmers - who knows what nonsense they might come up with next…
Granted, the new housing might not have granite counter tops and stainless steel appliances…

In a place like the Bay Area, you can replace all of your old appliances ( refrigerator, dishwasher, cooking range ) with new stainless steel ones for under $2K. Granite countertops do not cost much. In fact, I had a whole kitchen redone for less than $10K ( tear down + new birch cabinets + granite countertop + brand new stainless steel appliances ). In fact, materials are cheap. It is unskilled labor that is extremely expensive - that is why all of the manufacturing not requiring a high degree of skill is moving outside this country. Why should I play a plumber $200 to fix a leak or change a faucet ? Labor for plumbing or electrician jobs should not be more than $20/hr. You do not need to go to college and study hard for 4 years to learn those skills.

Labor for plumbing or electrician jobs should not be more than $20/hr. You do not need to go to college and study hard for 4 years to learn those skills.

Your analysis is arbitrary at best. Why twenty dollars? Is that starting pay or five years on the job? Commercial or residential? How about linemen? How would they pay their famously high insurance premiums on twenty dollars an hour? Please elaborate.

Whether it sits well with you or not, workers skilled in a vocation provide much more immediate value to society than the sociology major who polished his/her professor's apples for four years. They're both part of the same working class, but one actually provides a useful, tangible service.

As for the four years of hard study -- it takes a skilled laborer in any discipline much longer than four years of prescribed coursework to be considered a master at their craft. There's a broad dividing line separating theory from practice, and it's the skilled laborer who actually has the years of practice and troubleshooting who earns the distinction of master. It's also this practical knowledge that separates him from the layman who picks up a DIY book. If you are unable to tell the difference between the work of a journeyman and home brew work or the work of an ad hoc Home Depot crew, then you've clearly never witnessed master work. That might also explain your hasty dismissal of skilled labor.

...No offense to Sociology majors: I am sure they are a damn fine bunch.

Austinhousingbubble says

Labor for plumbing or electrician jobs should not be more than $20/hr. You do not need to go to college and study hard for 4 years to learn those skills.

Your analysis is arbitrary at best. Why twenty dollars? Is that starting pay or five years on the job? Commercial or residential? How about linemen? How would they pay their famously high insurance premiums on twenty dollars an hour? Please elaborate.
Whether it sits well with you or not, workers skilled in a vocation provide much more immediate value to society than the sociology major who polished his/her professor’s apples for four years. They’re both part of the same working class, but one actually provides a useful, tangible service.
As for the four years of hard study — it takes a skilled laborer in any discipline much longer than four years of prescribed coursework to be considered a master at their craft. There’s a broad dividing line separating theory from practice, and it’s the skilled laborer who actually has the years of practice and troubleshooting who earns the distinction of master. It’s also this practical knowledge that separates him from the layman who picks up a DIY book. If you are unable to tell the difference between the work of a journeyman and home brew work or the work of an ad hoc Home Depot crew, then you’ve clearly never witnessed master work. That might also explain your hasty dismissal of skilled labor.
…No offense to Sociology majors: I am sure they are a damn fine bunch.

It is not a question of skill but what is a reasonable labor charge for a certain kind of work. By your yardstick, a 10 year burger flipper has built a skill that you cannot match during your weekend BBQs. Maybe that is true, but does it really matter or warrant you hiring the professional bugger flipper vs doing it yourself if you are having a small party? I have closely observed electricians and plumbers at work. Compared to a DIY person, they can get the job done quicker and that is why they are considered professionals. They are skilled, do the job without errors but at what price ?

I agree that changing internal plumbing or wiring or drilling holes and fixing/installing stuff is more complicated work and it requires experience acquired over years but I am not willing to buy your argument that one ought to pay more for routine things like maintenance plumbing to avoid leaks or installing basic switches or wiring just because it is a person with several years experience doing the job.

Nomograph says

steady market watcher says

The govt. will use whatever means to prevent a crash in the housing market and modify or write-off those loans;

The housing market has crashed anywhere from 30-75% in most areas, and foreclosures have been at an all-time high during that time.
Didn’t you get the memo?

I should have been clear that I actually meant preventing a further crash. Anyway, if you read the rest of my email, it can be understood that I was alluding to putting a floor on a further decrease in home prices. On forums sharing ideas and thoughts, it is always important to understand the context of the post when an opinion is expressed. Unless I am quoting facts and figures, every statement does not necessarily need to be proof-read for completeness.

EightBall says

Has anyone thought that - perhaps - we might reach equilibrium when existing/resale home prices are in line with the cost to build a house (with some profit for a builder - he doesn’t have a “stash” to give away like Obama and might even have a family to feed) and the overhang is worked through? Homes don’t last forever and assuming gains in the population/homeowners/renters, eventually we will need more housing. Right now we are overbuilt (or not … I don’t have any figures to back this up either way but it seems like it is) but at some point there will need to be more units available. Granted, the new housing might not have granite counter tops and stainless steel appliances…

What you have articulated makes complete sense. The only problem is that there are vested interests who will manipulate and twist things as much as they can by whether by scaring the rest of the population or giving you some other cock and bull story about why they need to bail out the gamblers and pimps. They are all in this together - banks, politicians, real estate agents & underwater mortgage holders.

Honesty and truth are finally the victim in these kinds of scenarios. The attempt being made is to get more people to wink and look the other way than those willing to confront the crooked and corrupt policy and decision makers. The right way is to grill each and every one of our elected representatives throughly ( i.e. lie detector test et al) and have them assessed for incompetency or being corrupt. If they turn out to be incompetent, fire them and sue for damages, corrupt go straight to prison and confiscation of all material wealth - better still I would say is to air drop them to some remote caves in Afghanistan and let them battle it out for survival - it would also be a true test of their patriotism. The sincere and honest ones that come out of this intensive questioning process are the only ones to be excused.

By your yardstick, a 10 year burger flipper has built a skill that you cannot match during your weekend BBQs

You're merging menial minimum wage labor with skilled labor and master craftsmen (my original two examples) which is a very cheap attempt to cloud the point.

Compared to a DIY person, they can get the job done quicker and that is why they are considered professionals,

The most important component you leave out of the equation is quality - something I deeply wish was more valued by consumers in general. It's what separates the shade tree mechanic from the master mechanic.

I agree that changing internal plumbing or wiring or drilling holes and fixing/installing stuff

Installing stuff and drilling holes... I can't tell whether you intentionally try to diffuse the value of skilled laborers or whether you are simply unable to recognize and appreciate the product of skilled labor. Either way, I think you are not in a position to arbitrate - not even for the sake of conversation - a pay grade to work which you do not ascertain. We are not discussing NBA stars or Wall St crooks here, after all.

steady market watcher says

It is not a question of skill but what is a reasonable labor charge for a certain kind of work. By your yardstick, a 10 year burger flipper has built a skill that you cannot match during your weekend BBQs. Maybe that is true, but does it really matter or warrant you hiring the professional bugger flipper vs doing it yourself if you are having a small party? I have closely observed electricians and plumbers at work. Compared to a DIY person, they can get the job done quicker and that is why they are considered professionals. They are skilled, do the job without errors but at what price ?

I agree that changing internal plumbing or wiring or drilling holes and fixing/installing stuff is more complicated work and it requires experience acquired over years but I am not willing to buy your argument that one ought to pay more for routine things like maintenance plumbing to avoid leaks or installing basic switches or wiring just because it is a person with several years experience doing the job.

I know a plumbing contractor that I worked with when I was in the construction biz. I asked him why he became a plumber. He told me the story of his decision. He was working as a laborer for a plumber on a water line repair. The home owners in this area were responsible for the line running from the meter pit to their house. There was a break so the water to house was shut off. It was quitting time and the plumber went to tell the homeowner they were leaving for the day. The homeowners response "I don't care how much it costs just get my water back on." It was then he decided to become a plumber.

One may denigrate and demean trades people because it is blue collar work and one may equate a skilled journeyman with a burger flipper but that only shows a level ignorance that makes it clear that you have no experience in this type of work. Is it that you are pissed that tradespeople and contractors often can make more money then the typical white collar college grad? Many in my generation went to college and decided for many reasons to go into the trades. The reasons include more then just the money, there is a level of satisfaction that comes with working with your body and your mind that really cant be found sitting at desk. For some people this is important for others not so much. I stayed away from residential work mainly due to attitudes such as you have voiced.

kimtitu says

I think government is trying to prevent a fast correction. Government and banks are trying to drag this out as long as possible so the impact will not be too huge for people who are involved in it, especially the banks.

Yes, the spread the pain and deny reality approach. Brilliant.

klarek says

kimtitu says

I think government is trying to prevent a fast correction. Government and banks are trying to drag this out as long as possible so the impact will not be too huge for people who are involved in it, especially the banks.

Yes, the spread the pain and deny reality approach. Brilliant.

Yes. 1 liter blood is going to bleed in 10 minutes but you wanna do that in 40 minutes instead to prolong your pain? I'd prefer the first one.

Try handling asbestos insulated pipes after watching a DIY youtube vid and reading an ehow article about proper handling procedures of asbestos insulated pipes. Good Luck!

In spite of all the Government's efforts to prop up the housing market, foreclosures continue at record pace:

http://news.xinhuanet.com/english2010/business/2010-11/13/c_13604563.htm?source=patrick.net#mostsearch

Don't worry Ray, when it all goes to hell you'll be free to roam the wasteland with your pal:

Nice photo. Are they neighbors of yours or relatives?

steady market watcher says

Why should I play a plumber $200 to fix a leak or change a faucet ? Labor for plumbing or electrician jobs should not be more than $20/hr. You do not need to go to college and study hard for 4 years to learn those skills.

Good luck with that. When I used to an electrician's helper 20 years ago, my boss charged people $65 a hour for labor. It's closer to $75 an hour now. If you can do-it-yourself, then you don't have to bother with an electrician or plumber, but don't assume you can dictate there rates for them. If your really lucky, you might be able to find someone unlicensed who does it on the side.

rdm says

... Is it that you are pissed that tradespeople and contractors often can make more money then the typical white collar college grad? Many in my generation went to college and decided for many reasons to go into the trades. The reasons include more then just the money, there is a level of satisfaction that comes with working with your body and your mind that really cant be found sitting at desk. For some people this is important for others not so much. I stayed away from residential work mainly due to attitudes such as you have voiced.

You also have to consider that the average Plumber or Electrician doesn't make $65 a hour, (130k a year) even if they own there own business. A. They have costs like liability insurance, Truck payments, car insurance, Health insurance etc. B. It's either feast or famine with these guys, they either work 12 hours a day and still have people begging them to come over to build there house or repair this or that, or they are sitting home all day, for days willing the phone to ring. During the housing boom there wasn't enough hours in the day to satisfy all there clients, during the crash many contractors laid off half there work force, they are doing more service calls and repairs then building new houses and remodeling now.

For all the disadvantages of working in an office for someone else, you do have advantages Job Stability, working inside in a controlled environment, Fixed working Schedule, etc.

Oh no! Now Canada's housing bubble is about to burst. We need to send our Duck up north quick like in order to convince the Canucks "now is a great time to buy." LOL

http://money.cnn.com/2010/11/12/real_estate/canada_housing_bust.fortune/index.htm?source=patrick.net#storyLogo