patrick.net

HARM Says:
January 3rd, 2008 at 3:48 pm
"New tee-shirt for the Patrick.net store?:
“I make more money than 99.9% of America, but I still can’t afford a house in the Fortress”"

How about, "I lost my house due to my own stupidity, and all I got was this stupid fucking T-shirt!"

"I'm a professional real estate agent, would you like fries with that?"

"Refis or crack? What's the difference?"

Yippie, Hillary running 3rd in Iowa. I hope she implodes and completely blows her chance.

I would rather have Bush 3rd term than the uberbitch.

>> Hillary running 3rd in Iowa

I am with you. I vote for republicans since democrats seem to encourage illegal immigration. I am a US citizen through naturalization (H1B ==> Green Card ==> Naturalization).

Australia is suffering through its worst dry spell in a millennium.

What's that apropos of??? I don't know how they measured the rainfall for a millennium...

A vote for Obama is a vote for Huchabee. Obama talks a good game but we have something called the electoral college.
If Obama came out with a hard stance against illegal immagration, he might have a chance, otherwise he's just another great black hope.

HARM Says:
I’m tired of beating this horse too, but I’m also tired of *still* hearing variants on the “rich people will save prices from falling in _____” argument.

Again, with all due respeck, what I said was not that. If you want me to rephrase it, it would be "foolish two-income couples will delay the inevitable fall until they either become one-income couples or scared two-income couples". Does that sound better?

FAB said:
More and more rich people have decided not to buy (and some have even decided to sell) now that prices have stopped going up and have started going down in almost every area.

I would re-cycle the "patrick.net readers are not representative" line here. You are right that a lot of the smart people, rich people and almost all of the patrick.net readers are on the sidelines with no interest in buying. But the foolish people that remain out there need something to scare the bejeezus out of them. That is the trigger I am looking for.

The market is teetering on these fools being "willing and able" to buy. The end of the dumbass loans is a good thing - it removed the "able" part. Something now has to take out the "willing" part - then we will have ignition.

I am with you. I vote for republicans since democrats seem to encourage illegal immigration. I am a US citizen through naturalization (H1B ==> Green Card ==> Naturalization).

Both parties are to blame, I posted this before about enforcement action by the current administration.

http://www.washingtonpost.com/wp-dyn/content/article/2006/06/18/AR2006061800613.html

As for H1B ==> Green Card, the part about getting a labor cert and asking the employer to post the hiring notice on newspaper is a joke, who goes to newspaper classifieds to hire engineers? I have to say a large number of the positions can be filled by American citizens.

@Permarenter, it is difficult to answer your question - Principal Engineer salaries vary quite a bit depending on specific industry sectors and the institution/employer. There are also non-monetary factors -- a good P.E. could easily get a significant increase in $$$ by going from a large established company to a smaller specialized shop, but that is not always a good thing - depends on what you want out of it.

A first-level manager is usually in a lower grade (by one or two levels) than P.E.

As for my current housing situation, I own a modest tract home just outside the fortress area. Nothing fancy.

skibum Says:
Let’s keep some perspective on the income thing. Even though 2+ Ha Ha’s is a high salary, keep in mind that even in nutty Silly Valley, at most this should translate to looking at homes in the 8-10 Ha Ha range, or about 1.2 to 1.5M.

True, but salary isn't everything. Salary will put a limit on debt-service ability, but some won't need any debt for a 1.5M home. The question is how many of these people are still here. 100? 200?. I have no idea how to figure this, which is what makes it hard to predict.

>>>Bay Area is like a big hotel … there is no community feeling and sense of beloging. There is no there there ………

That is your experience of the area, but certainly not mine. I know almost everyone on my block and have watched the kids and dogs grow up. I ride Muni every day and usually see an old co-worker or someone else I know on the train. I hang out still with my friends from college, which I graduated from 15 years ago.

The Bay Area, like most places, is what you make of it. If you are bitter and alienated, you think everyone else is too. If you are friendly and approachable, you find others who are the same.

>>>I mentioned this fact a long time ago here, but it’s truly fucked up when professionals and execs are buying in neighborhoods that were built for blue collar workers.

Where are the blue collar workers in the Bay Area? Should we tear down all of our old homes and neighborhoods because some guy who worked with his hands lived there 100 years ago?

What a strange way to think about communities! Noe Valley is a great place to live, even if (or perhaps particularly because) it was a blue collar neighborhood 50 years ago. We have professionals, technical workers and managerial jobs now, that is who is going to live in those houses that once housed steel workers. Who else would live there?

They are probably fixed up better now, if it makes you feel any better about it.

Seems these guys must be privy to the same sort of inside information and perspective that realtors are. I've got an idea; why not have market analysts and realtors trade places - lately each group seems more in touch with the others future.

But the foolish people that remain out there need something to scare the bejeezus out of them. That is the trigger I am looking for.

How does a crappy national jobs report out today fit the bill?

http://money.cnn.com/2008/01/04/news/economy/jobs_december/index.htm?postversion=2008010411

Salary will put a limit on debt-service ability, but some won’t need any debt for a 1.5M home. The question is how many of these people are still here. 100? 200?.

In the current RE environment, how many of these people will want to sink the bulk of their "hard earned" stock options money into a 1.5M stucco home that is depreciating? Maybe more than I imagine, but then again there is the saying about a fool and his money...

Jimbo,

You're conflating. You're talking about gentrification. Generally that suggests the people moving into previously run-down neighborhoods are excited to get in there and change things for the better. I'm talking about professional couples and families moving literally next door to blue collar workers, not because they love the neighborhood, but because they can't afford the one they really want to live in. As a result, they end up paying 5x more than that blue collar family paid for their home 12-15 years ago. There's a lot of interesting socioeconomic displacement going on these days.

Hooray, Dow is at 12K ==> 12,884.63

Millions of jobs (and I think that is a safe number) were filled by bodies that weren't on the books. So by the time unemployment numbers begin to rise as we're seeing now, the economic slowdown has not only been going on far longer than reported, but is far greater than reported.
Just a thought.

Noe Valley is a great place to live, even if (or perhaps particularly because) it was a blue collar neighborhood 50 years ago. We have professionals, technical workers and managerial jobs now, that is who is going to live in those houses that once housed steel workers. Who else would live there?

This is a silly argument, to say the least. Look at Soho, Greenwich Village, not to mention the Meatpacking District, LES, East Village, etc. etc., or most older east coast cities. Sought-after apartments/condos in great neighborhoods used to be tenament buildings in a lot of these places... 100 years ago. That's an interesting sociological point, but irrelevant to my argument.

skibum,

which candidate's medicare policy makes most sense to you?

@Permarenter,

Very good week for the DOW, oh, I meant DOW bears.

@Stuck,

have a few more weeks like this, that will wipe out quite a bit of options/ ESPP gains of the 2 income households, which will grant you your wish.

Fed Ups Auction Amounts to Aid Banks
Fed Says It Will Boost New Auction Amounts by 50 Percent to Help Banks Through Credit Squeeze

WASHINGTON (AP) -- The Federal Reserve announced Friday that it is increasing the amount of money available to banks through the new auction process it created to ease the nation's severe credit squeeze. The Fed again pledged to continue the auctions "for as long as necessary."
The Fed said that it will increase the amount offered at each of the next two auctions from $20 billion to $30 billion, a 50 percent jump. Those two auctions will be Jan. 14 and Jan. 28.

The Fed announcement indicated that the auction process it began last month has been successful in providing a source of loans for cash-strapped banks.

The first two auctions offered $20 billion each and attracted bids for about three times that amount.

I am still waiting for the day when people talk about crappy economy and retire "credit squeeze", "sub-prime".

Web Crash 2.0

If a recession finally hits, Web 2.0 companies will find there are neither enough ad dollars out there for all of them to survive on, nor enough big corporate buyers such as Google, Microsoft, and traditional media companies to buy them all out. What's more, venture capitalists may decide that momentum looks better for clean-tech investments than for Web startups that depend on a cyclical business like advertising. So more will join the "DeadPool," as the Web startup blog TechCrunch calls its list of failed companies.

Today we learn of two more Googlers leaving the search giant: Kevin Fox, a UI designer who worked on Gmail, Googel Calendar, and Google Reader, and Nathan Stoll, a product manager at Google News. Fox is going to an unnamed startup. Stoll is vague about his plans.

Remember, these are two employees out of 16,000 and the end of the year is a natural time to leave a job for something else. But Fox and Stoll join a growing trickle of Google veterans who no longer find Google as alluring a place to work as they once did.

Anyone know what Google’s employee churn rate was in 2007? Anyone want to guess what it will be in 2008?

Well, recession usually helps the churn rate of big companies like GOOG and MSFT. There will be fewer options out there.

OO,

At first, I read your query too quickly and thought you asked about the candidates' mediocre policy and thought, you're right ...

But in terms of health care reform, you can read all about it on the Kaiser Family Foundation site - they have a nice side-by-side comparison. For me personally, the bottom line is there is little difference between the candidates, not surprisingly. They all tow the party line and espouse a bunch of glad-talk. My key points:

- ALL the Dems propose some form of "universal coverage", although if you read the details, only Kucinich's is probably a radical overhaul.

- ALL the Republicans propose only to tweak the status quo - make insurance coverage more "free market" oriented, whatever that really means.

- You can't trust John Edwards, the bastard. He's a glorified ambulance chaser, and his claims of tort reform are only lip service. I'll guarantee he's in the pocket of the trial lawyers lobby.

Permarenter,

I think it's been SP and me claiming this exact scenario about crappy Web 2.0 "companies" if recession hits. Their businesses are all about fluff, and their lifelines will be the first too be cut in recession.

Speaking of which, many with more economic expertise than me (CR, for instance) claim that in retrospect, Q4 of 2007 may already have turned out to be the start of recession. Doesn't bode well, since let's not forget there's still the looming ARM and Alt-A reset tsunami coming in the next 2 years...

I have been wondering how well GOOG will do in the next recession with its majority of revenue still from advertising.
I think it will get hit the same way YHOO did in 2000.

With regards to the high income earners in the Bay Area keeping the market up - they too were drinking the kool-aid and were most likely going for the biggest loans that they could to get into the biggest best located McAlbatross that they could - I bet the mortgage brokers were not selling them the 30 year fixed, but instead selling ARM's - because - why pay all that extra interest when you can just refinance in 2 years time?

I think that they are going to be stretched too because remember they all liked their new kitchens/ remodels and Mecedes too - plus those extravagant holidays that all their friends were taking - please - I really think some of them will have bitten off more than they can chew too - even if they have a better chance of digging themselves out of their money pits!

I think that they are going to be stretched too because remember they all liked their new kitchens/ remodels and Mecedes too

I know of 2 people at work are like that, they make really good money but elected to have really expensive houses. It's like if they can comfortably afford a 1.2 M house, they will stretch to get something close to 2M.

Claire :

Your bet is safe. Till 2007, not a single person I know had a fixed rate mortgage. In 2007, the buyers I know took 30yr FRM because there was very little difference in the ARM rate and FRM.

Prices will soften in the valley. But the hard realization is still couple of years away. That's when their ARMs and Option ARMs reset. It all depends on what the interest rate would be at that time.

SP Says:

> Salary will put a limit on debt-service ability, but some
> won’t need any debt for a 1.5M home.

Then skibum Says:

> In the current RE environment, how many of these people
> will want to sink the bulk of their “hard earned” stock options
> money into a 1.5M stucco home that is depreciating? Maybe
> more than I imagine, but then again there is the saying about
> a fool and his money…

If you have $1.5mm you can get an almost risk free return of about 5%/75K a year. The taxes. Insurance and maintenance on a $1.5mm home will be about $25K a year. Why buy a crappy $1.5mm home in the Bay Area when you can rent a much nicer multi-million dollar home and save money without any down side risk?

Jimbo :

I completely agree with skibum here and Claire and cb have also echoed similar thoughts.

And that is very similar to my primary reason for not buying. We work long hard hours and earn a really good salary. To do what ? Transfer all that money to some lender ? And for what ? To live in a crappy sh1tbox - a 50 year old hut sold as is ? With such an antiquated plan where I can not even figure out where to put my high end TV ? With a minuscule kitchen and tiny bathrooms ? And I am supposed to be in a bidding war over this ? So that I won't have any money left over to live like I am actually earning a nice salary ? That completes the circle.

It's a tragedy that IN SPITE of earning such high income, people cannot live to that standard. They won't become rich by saving money after earning this high salary. The only way they have a chance of becoming rich is that sh1tbox gets sold to a greater fool.

This is NOT a rich area. This is a high income, higher debt area. Someday, people might actually understand it.

Claire Says:

> With regards to the high income earners in the Bay Area
> keeping the market up - they too were drinking the kool-aid
> and were most likely going for the biggest loans that they
> could to get into the biggest best located McAlbatross that
> they could - I bet the mortgage brokers were not selling them
> the 30 year fixed, but instead selling ARM’s - because - why
> pay all that extra interest when you can just refinance in 2
> years time?

Just in case anyone has not noticed lenders are losing Billions every month on real estate loans. Most people with a ton of cash already own a home and when many of these recent buyers can’t re-fi (due to stricter underwriting) they will be forced to sell and keep lowering the price until they sell that will create a low comp that makes it even harder for the guy down the street to re-fi that will force him to sell creating an even lower comp…

P.S. I know someone who was told by the bank that they would re-fi his current loan to a fixed rate if he just paid it down $300K (not many people have $300K in the checking acct.)…

>> The only way they have a chance of becoming rich is that sh1tbox gets sold to a greater fool.

Government will continuously tinker with policy so that this SCAM is perpetuated. Democrats sepecially will try to raise conforming loan limit to $1 million.

FAB,
Is it fair to say that balance due after the pay down of 300k represents the fair market value at this time?

GOOG (669.39) is steadily going down:

3-Jan-08 685.26 686.85 676.52 685.33 3,252,500 685.33
2-Jan-08 692.87 697.37 677.73 685.19 4,306,900 685.19
31-Dec-07 698.57 702.49 690.58 691.48 2,376,200 691.48
28-Dec-07 704.93 707.95 696.54 702.53 2,537,000 702.53
27-Dec-07 707.07 716.00 700.74 700.74 2,942,500 700.74
26-Dec-07 698.99 713.22 698.21 710.84 2,530,000 710.84

OO :

have a few more weeks like this, that will wipe out quite a bit of options/ ESPP gains of the 2 income households, which will grant you your wish.

:-) The stock market gyrations have a deep psychological effect on BA. I guess outside the financial areas of NY, Chicago, Boston etc, nowhere else in this country you will see so many mood swings that are in sync with the major indexes.

Well, happy new year, I guess ;-) to all the bears. What an opening week.

FAB,
Been meaning to ask, how were conditions at Sugarbowl? Man, I haven't been there in about 5 years.