By The Tim on November 16, 2009
Here is your open thread for Monday November 16th, 2009. You may post random links and off-topic discussions here. Also, if you have an idea or a topic you’d like to see covered in an article, please make it known.
Be sure to also check out the forums, and get your word in the user-driven discussions there!
Posted in Open Thread | Tagged open_thread
Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.
“Neighbor, let me buy your house.”
A guy I know is going to buy his neighbor’s house and rent his house out. He hopes to rent it out for some time, take the deductions, and eventually sell it for a profit tax free. I let him know that there has been some changes in that area, but he suggested his neighbor’s house is the same as his. I suggested selling his house to the neighbor.
Next thing I’ll hear is a housing swap. Neighbor, let’s trade homes, even up, and we will both end up with $6,500 from Uncle Sam. Even if there was a small difference between the two homes, the $6,500 is plenty enough for people to swap homes.
Sound like it really will be a case of “As the trailer park turns.”
Give me two $30,000 fair market homes in Detroit, and both will suddenly sell for just enough to fully qualify for the $6,500. I’m predicting a sudden increase in the average seller price of trailer park homes.
Two “move-up” buyers who don’t move far…
The excise tax alone would eat up most/all the tax credit. Add in loan costs and title insurance, and you’re probably well underwater.
Oh, and why does he think he can sell the house tax free? I could see in a few years he might be able to sell his house tax free and then move into the other house, but don’t see how he could sell the new house tax free.
My thought for the day: I find it ironic that the Seattle Times website has such an extremely low level of educated intelligent posters (or more precisely, such a high number of uneducated moron posters). I would expect a news site to attract a higher level of reader.
RE: AMS @ 1 –
See a Tax Attorney for Advice
And don’t trust the attorney either on these new tax stimulus credits for 2009/2010….its likely the blind leading the blind.
I hear those income tax stimulus in your paychecks may need to be returned this Spring….it seemed the IRS gave them out to double income families, but didn’t factor in the spouses’ incomes lowering or eliminating the stimulus…..LOL….whatever that means….[I wonder if some will owe penalty interest?]
I’m sure the tax credits for buying homes are clear and this won’t happen to them either….LOL
http://finance.yahoo.com/news/Millions-will-have-to-repay-apf-3724344310.html?x=0&sec=topStories&pos=5&asset=&ccode=
nwmls members, how are we doing with closings this far in Nov? Has the tax credit extension seemingly slowed the rush to the initial deadline or are we still relatively high for the season? Relative to the other months in 2009 that is.
I’d say the volume is a bit low at under 500, but remember most the stuff usually is at the end.
The mean is huge at over $650,000, but that probably has to do with one sale over $90,000,000, which is over 30x the list price (and presumably an error). Which reminds me: numbers from NWMLS sources but not guaranteed to be accurate.)
Edit: Maybe that $90,000,000 sale isn’t a mistake. I didn’t realize it was a double wide! :-D
RE: Kary L. Krismer @ 6 – Thanks Kary. $90m, is there or have there ever been a home valued at $90m in the state of Washington? Yes, we’ve seen befoe that the second half can bring about twice the closings from the first half but it does seems likely that volume will stay below 1500.
By Kary L. Krismer @ 3:
RE: Kary L. Krismer @ 3 –
I seems most news forums have this problem. I know yahoo took down their comments a few years ago because they became inundated with moronic posts. The pattern seems to go something like this:
1) intelligent discussion
2) growth in popularity which attracts moronic posters
3) those offering thoughtful/balanced points of view get fed up and leave
4) no one left but moronic commenters
I’m not sure it’s possible to have a long tenured internet forum without some level of active moderation. Although, I’m not sure it’s just an internet problem. Try going to a city council meeting for the open comments by residents. Eeesh
RE: Kary L. Krismer @ 2 – First of all, you assume he is in Washington, which is not the case.
Second of all, you assume that the transaction value is high, which it is not.
The approximate purchase price is $90,000.
RE: softwarengineer @ 4 – I am not sure that news article.
I will say this, he is going to be a “move-up” buyer, and thus qualifies for that $6,500. He will move into the new home, and see above regrading the price and taxes.
I am hosting my second live economics internet radio show tonight (Tuesday the 17th) at 9:00pm. I would just love to have some of my friends on Seattle Bubble call in. Our subjects are pretty broad reaching. We have talked about the great inflation/deflation debate, government stimulus, and real-estate, but are open to almost anything else you might want to say regarding economics or finance.
http://surkanstance.blogspot.com/2009/11/introducing-optimistic-bear-weekly.html
Much Worse Than Swine Flu
That’s what they’re saying about the new plague flu from East Europe, see the URL:
http://www.express.co.uk/posts/view/140492/Million-hit-by-plague-worse-than-swine-flu-
Has the public grown numb to swine flu hysteria finally? Time for the next fear du jour!
RE: Sniglet @ 11 – Sniglet – when will we reach 11,000 for Dow? So far it has been a hell of a ride. 50% gains for everybody. Kind of like free money lying on the street. Anybody could just reach out for it.
http://quotes.ino.com/chart/?s=NYBOT_DX&v=d12
Interesting Zillow blog on Internet buyers of RE . Ok, so a bunch of it looks like the soft sell for Zillow (yea I know, surprise, surprise) but there were a bunch of interesting charts I though…Didn’t watch the video, just went though the slides.
RE: Scotsman @ 15 – Keep saving more, and it will be worth less.
RE: AMS @ 17 –
I’m not so sure- unless you’re planning a trip to Europe. It’s a bit strange. While the dollar is falling, oil prices- in dollars, are holding or even falling slightly and 10 year treasury rates (and mortgages) are falling. What it suggests is something along the line of while the U.S. is screwed, the rest of the world is even worse off. We’ll see. But the net buying power hasn’t changed enough to get me to look for a better strategy than holding cash. If there is one thing that has been learned over the last year or two it’s that traditional economic relationships aren’t in force. You’ve got to hang a bit loose, look at the data, and don’t let the past be your guide.
RE: Scotsman @ 18 – How can the dollar fall and purchasing power hold constant?
RE: AMS @ 19 –
Easy, demand for the items you would be purchasing, say oil, falls too. Your reduced value dollar still buys the same physical quantity of reduced value commodity. The dollar has dropped 12% from where it was earlier this year, yet oil hasn’t shot up nearly as much as folks expected. And in fact there is speculation that the price for oil is being manipulated higher through dark off-shore trading pools and may soon fall even further than the dollar. The simple old rules we all learned just don’t apply in these heavily manipulated markets. Supply and demand, risk premiums, inflation/deflation expectations, none seem to be accurately reflected in current pricing. It’s an “Alice In Wonderland” world.
RE: Scotsman @ 20 – The dollar is measured on the world market, so if the dollar falls, then foreign goods cost more, even if domestic demand falls.
AMS – You forget that the yuan is pegged and oil is denominated in dollars. This can certainly skew the consumers viewpoint of dollar weakness.
RE: b @ 22 – Good point about the Yuan, but at the same time we have Obama in China. I think Obama was called to discuss the weakness of the dollar, but I have no inside information…
RE: AMS @ 21 –
All true, but it misses the mark. My point is that it’s a multi-variate analysis, not a one-to-one relationship. The dollar could fall or rise and we wouldn’t necessarily see any change in our standard of living or perceived cost of goods. And while the dollar may be falling, if the rest of the world is headed for the dumpster too we may even come out ahead due to commodity specific supply-demand considerations.
I saw the Chinese were concerned about Obama’s cost projections for his health care initiative. They’re starting to look more seriously at the sustainability of our deficit spending and trying to figure out just how much of it to continue carrying.
RE: Scotsman @ 18 – I know you’re one of the sharp pencils on this blog, shouldn’t you be hedged?
I mean, in consideration of the mad rush to stability that pushed up dollars AND the firm statements by the Fed to keep interest at zero for like ever, dollars were not looking good. Even if all you want to buy is baseballs and apple pies, I’d think some diversification would be called for.
If as you say oil is stable relative to dollars, then the price of oil is plummeting for Europe and most of Asia. That ought to boost demand there in the mid-term.
Is it too late? I don’t think so. Some say the dollar will go to 40. I think that’s crazy, but I think 60 is reasonable and is where I start to rebalance.
RE: Scotsman @ 24 – “My point is that it’s a multi-variate analysis, not a one-to-one relationship.”
The dollar falling is an aggregate observation. As pointed out, the dollar is pegged to the Yuan, so it’s not losing there. Also I bet there is a currency, some currency, that is falling faster than the dollar, so the dollar is gaining on that other currency.
This discussion reminds me of the whole Consumer Price Index, and other measures that use some basket of goods. Sure the United States might be experiencing deflation, but if you purchase a lot of gold, then your expenses are going up, for example. These baskets of goods don’t necessarily reflect any one’s situation.
Taking the alternate view, maybe the strength of the dollar is of no consequence?
http://www.cbsnews.com/blogs/2009/11/17/politics/politicalhotsheet/entry5686644.shtml
“It’s another record-high for the U.S. National Debt which today topped the $12-trillion mark. ”
“The new debt number adds urgency to Treasury Department calls on Congress to quickly raise the statutory limit on the National Debt which now stands at $12.104 trillion. The debt ceiling was last raised in February as part of the $787 billion Recovery Act stimulus bill. ”
Someone tell me,why do we set a debt limit if as soon as we reach it we just raise the limit? I wish I could use that process when faced with a speeding ticket. – Sorry but can’t we just do a quick vote and raise it to 100mph since I’m driving 95 mph? No?
I hate to belabor the point, but China has no war effort, they are too busy feeding over a billion people.
When you look at the debt clock for what it is in real time you can see there are a lot of dollars that can be redirected within the American economy. We only have 305 million people churning a lot of currency while maintaining our own stock of relevant commodities.
We have wheat, oil, gold, and everything else. That’s why so many people talk protectionism.
Our economy may be fragile, but Europe is much worse, in my opinion.
I’m just saying that China has more of a chance to collect the $800 billion in United States debt they own by cooperating with a plan for global stability. My best guess is that China will assist with our efforts in Afghanistan which will free up a lot of needless U.S. spending.
My ultimate guess is that the axis of evil will be dealt with by an economic survival plan rather than military might. China needs a lot of help with it’s population. It is after all the first political body to take a stand on population control, but while they are waiting they need to keep commodities flowing into their country.
Just a thought.
RE: Herman @ 25 –
My ultimate concern is liquidity, given that I still believe the worst is yet to come, and that along with crisis comes opportunity. But you have to be liquid to take advantage of what may come. I may lose a bit between now and then, but the post crash upside should overwhelm. That’s the theory anyway. The government may take gold, or limit IRA/401 withdrawals, etc. but cash should be safe. So far I’m well ahead.
My investing is based on research done years ago that showed most money is made on only a handful of significant positive moves over one’s lifetime. The rest of the time small losses and transaction charges whittle down the total. I still think this is true, although the strength of the last 5 or 6 years has tested the concept. So most of the time I just wait for a certainty… with a bullet- say the banks collapse 2 years ago, the shorting opportunity of a lifetime. I have completely missed the current rally, not believing it’s real and likely to collapse at any time. For me, simple and certain beats sophisticated but without direction. Most all of my calls are early, so much time is spent just sitting around waiting for reality to (hopefully) catch up . ;-)