Posted by: The Tim

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.

70 responses to “Weekend Open Thread (2010-01-22)”

  1. AMS

    The ever lasting quest for “cash value, equity.”

    More on rent versus buy, but a different example.

    What is it with the ever lasting quest for cash value? In housing there is the thought that paying down a mortgage equals equity. What happens if the market value is going down faster than you make payments? There is nothing new here, but the latest example.

    I was talking to a relatively young guy who was convinced he wanted some form of whole life insurance. You know, you get that cash value, tax advantages, death benefit, blah, blah, blah… Basically he was suggesting that he owned the policy. Term life, on the other hand, builds no cash value.

    Yes, but term costs about $15 per month and whole life costs about $150 per month.

    “But I get cash value with whole life…”

    WTF! He wants to spend $1,800 per year instead of $180 to get some “cash value?”

    It’s no wonder homes cost so much.

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  2. Scotsman

    “Default as a patriotic duty”

    “We live in a world of radical price competition. The obvious competition we are losing is the competition based upon the price of labor. Expensive housing exacerbates our competitive disadvantage.”

    ” …look at the pathetic unit sales above. The government is dropping nuclear bombs on the mortgage market and nobody is dying. They can’t move the product.”

    Here’s a new spin on some familiar territory:

    http://blog.ml-implode.com/2010/01/default-as-a-patriotic-duty/

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  3. softwarengineer

    This Open Forum From AMS and Scotsman Tells Me One Clear Thing

    This “Stay the Course” BS from our Democrats and Republicans with Bernanke getting unsubstantiated credit for his past denials leading us into our present mess is beyond ludicrous.

    I hear old Bernanke may not have enough votes to keep his job by 1/31/10…LOL…and he was made Time’s Man of the Year…..

    We need change, radical change. I’d start with campaign contribution limits. Like $5/person, corporation and/or company….

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  4. AMS

    RE: softwarengineer @ 3 – Will Conan run for the House or the Senate?

    http://www.inquisitr.com/58367/obrien-costs-nbc-1-5-million-for-a-single-minute/

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  5. AMS

    OMG, like you’d better run out and get a mortgage right away!!!

    “Tighter lending requirements for loans insured by the Federal Housing Administration may leave some borrowers unable to get mortgages, but economists are divided on the impact they could have on housing’s recovery.”

    http://www.usatoday.com/money/economy/housing/2010-01-20-fha-home-mortgage-loans_N.htm

    I mean, imagine if you waited until after buyers couldn’t get mortgages.

    (Real advice: If you are a seller, you may want to unload that property sooner.)

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  6. WaitingInIssaquah

    Poking around on the King County Parcel Viewer, I’m seeing new assessment values for many/all houses in a particular neighborhood in Sammamish. Haven’t had a chance to check other neighborhoods yet… is this about the time of year that would happen? Anyway, if what I’m seeing is correct, the assessments in this particular neighborhood are down from last year around 30%, or more in some cases. Wow. I have been watching and the high taxes on many of these was scaring me off. Surprised that they would just plummet like that without appeals… thought you bubble heads would be interested.

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  7. matsayswhat

    RE: softwarengineer @ 3

    I literally JUST e-mailed Murray and Cantwell encouraging them to not vote for Bernanke and further, to nominate Paul Volcker.

    Who knows if it’ll do any good, but if enough people do, maybe it will.

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  8. sawbridge

    Headed back to Seattle area for retirement home since leaving in 2000. Things have changed, what is with the King County Property tax? Its twice that of Pierce county or so it seems. Also there are many nice properties for sale in Gig Harbor area and relatively few in Issaquah, any insight on what is behind the disparity? Thanks

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  9. Flying Ape

    RE: softwarengineer @ 3
    If congress sacrifices Bernanke to the general public over bank bailouts it looks like the inflation/deflation debate is over. No more monetary stimulus but future GOP fiscal stimulus via tax cuts and/or DFL spending sure sounds familiar… Hello Japan?

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  10. WestSideBilly

    By softwarengineer @ 3:

    We need change, radical change. I’d start with campaign contribution limits. Like $5/person, corporation and/or company….

    A campaign donation limit doesn’t matter. The SCOTUS’ ruling on Wednesday that removed indirect campaign funding limits will allow major corporations (and unions) to run politicians’ campaigns for them.

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  11. Ross Jordan

    A good discussion of inflation, unemployment and the economy: http://www.hussmanfunds.com/wmc/wmc100119.htm

    The author argues that we should expect increased inflation towards the end of the decade.

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  12. patient

    RE: matsayswhat @ 7 – Taken the fear senators in even blue states must have to not listen anymore I think it’s worth it. Bernanke has been one of the worst ever, a gambling man with a god complex. “If I just bet on 13 one more time I’d be sure to win” mentality by growing the balance sheet like crazy with no sustainable improvement. What the US need is a FED chairman with a proven record to balance budgets and who not favours Wall Street. A tough man with integrity. A man like Andrew Coumo but with economic skills.

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  13. Flying Ape

    RE: Ross Jordan @ 11

    Interesting read but if he sees inflation towards the end of the decade what will he expect now if QE and “extended period” of low interest rates are ousted along with Bernanke? Maybe inflation in 20 years? I don’t buy his fiscal stimulus idea, it sounds like Japan in the 90’s when they though the economy wasn’t too bad and they could beat deflation via tax cuts and big spending projects. Japan “recovered” only when toxic assets were unloaded by the zombie banks a decade later.

    Hate to say it but if Bernanke is no longer here juicing the big banks by unloading their toxic assets they are just gonna be another zombie bank, meaning repeat of Japan. Yeah lower RE prices!!! BOOOO decades of deflation and deficits!!!

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  14. TJ_98370

    No explanation required.

    hopeforhaitinow.org

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  15. TJ_98370

    Deleted by TJ_98370.

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  16. Eleua

    Inflation? How? With what?

    To get inflation, you must have excess demand over production. That is not an opinion – it is a mathematical fact.

    Where is this excess demand going to originate? What asset can become encumbered (that isn’t already) to goose the system with cash to cause this?

    The USD is tanking (not this week) because The FED is artificially propping up the bond market, depressing interest rates below their equilibrium level with risk and causing capital flight. This only lasts as long as he can bid the market, and every piece of trash he buys, he further jeopardizes his own balance sheet.

    As the bid disappears (not necessarily the FED’s bid), prices drop and interest rates rise to match the level of risk. This makes USD investments more attractive and increases capital flows into the US.

    We are just watching the FED and TREAS take on debt to buy old debt. When that game stops, interest rates rise and we get deflation as asset values drop and defaults blow out.

    If anyone thinks the hucksters selling gold on the AM radio are any different than the hucksters selling mortgage refis in 2006, you need to rethink your position. Prices don’t go up beyond people’s ability to pay. Bainbridgeislanddreamhomes found their top as people couldn’t afford to pay more than 12x income. As gold goes up in price, fewer and fewer people can bid. Sure, prices go up on declining volume, and that is the FIRST sign you look for when trying to grope for a top. As volume drops off, the trade becomes lopsided and all the buyers are in, leaving only sellers with the means to participate in the market. The trade tips over and the sellers overwhelm the bid, increasing volume and ratifying the price trend (down).

    Don’t confuse the banks playing at the casino with your money as “inflation.’ They are trying to sucker you into taking their assets because they know that the “short dollars/long assets” trade is behind us, and the “short assets/long dollars” trade is where they want to be. They need you to buy their assets at peak prices.

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  17. Ross

    By Eleua @ 16:

    Inflation? How? With what?

    To get inflation, you must have excess demand over production. That is not an opinion – it is a mathematical fact.

    Where is this excess demand going to originate? What asset can become encumbered (that isn’t already) to goose the system with cash to cause this?

    Well, it’s very easy to stimulate demand by printing money and putting it into the economy. For example, if the federal reserve delivered $1,000,000 in cash to every citizen in the US, we’d very quickly see inflation. That may be an unlikely scenario, but the federal reserve printing new money is not so unlikely. The fed’s balance sheet has expanded by approx 1.5 Trillion in the last year:

    http://www.pimco.com/NR/rdonlyres/DC2F0D9D-25CB-4950-BF22-5802C5FE541C/8443/IOChart2.jpg

    They did this by buying mortgage backed securities (that’s why mortgage rates are at historic lows), as well as treasuries and foreign central bank issues (daisy chaining with foreign central banks buying US treasuries with the proceeds)

    That 1.5 Trillion gets multiplied out by the effects of fractional reserve banking and other leverage in the shadow banking system (1.5 Trillion x 1/10 reserve reqs = 15 Trillion new money, or approx US GDP). Of course, we’ve also seen a ton of deleveraging in the economy over the last year, and its not clear what exactly the summation is. We’ve certainly seen many deflationary pressures during the last year; but we are also seeing some leveraging back up to a new normal and to the extent that this new cash exceeds the deleveraging, we’ll see inflation.

    The federal reserve has stated that it will not monetize these new issues long term, but I suspect that will be very hard to do so long as unemployment remains high.

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  18. Kary L. Krismer

    By Eleua @ 16:

    Inflation? How? With what?

    To get inflation, you must have excess demand over production. That is not an opinion – it is a mathematical fact.

    So the countries that in the past have suffered hyper-inflation to the point where people need suitcases to carry around money, that was driven by excess demand? And the inflation in the late 70s, early 80s, that was driven by excessive demand?

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  19. Kary L. Krismer

    I heard Olympia was working on it’s own employment/stimulus bill, but unfortunately I wasn’t able to located it. But my thought on that matter is that even if you think the federal stimulus is a good idea, that wouldn’t be the case for stimulus done by a political entity that has to have a balanced budget. To the extent they stimulate the economy by spending money, they have to do so by taking money out of the economy. And to the extent that they are less efficient that private enterprise, or spend the money on things that don’t provide economic benefit in the future (e.g. making a government building look better), the net effect on the economy would be negative.

    Also, I really don’t understand where they expect to get the money for this program. There’s going to be a problem raising enough money for existing programs.

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  20. David Losh

    RE: Kary L. Krismer @ 18

    Yes.

    In developing countries it’s food. Here it was oil.

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  21. Kary L. Krismer

    RE: David Losh @ 20 – Assuming you’re talking about the late 70s, early 80s inflation, that wasn’t caused by excessive demand for oil, but an artificially restricted supply. Something quite different than what occurred in 2008.

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  22. AMS

    RE: Kary L. Krismer @ 21 – Using Keynesian theory, you’re talking cost-push inflation.

    If I remember correctly, in 1972 a gallon of gas went from ~$0.25 to ~$1.30, which promoted higher fuel economy standards. The air quality standards were already underway, but fuel efficiency suddenly became very important.

    Once again going by memory, in 1979 the Iran/Iraq war restricted the supply of Oil, and stagflation set in.

    Right now inflation is non-existent, so stagflation isn’t an issue.

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  23. Hugh Dominic

    By AMS @ 1:

    WTF! He wants to spend $1,800 per year instead of $180 to get some “cash value.

    That could make perfect sense. You’re in no position to judge or refute his personal situation. Whole life does confer those advantages over term. With a long time horizon those policies can have a decent return given their low risk; are accessible in emergencies through loans and cash surrender; and are a great way to transfer wealth to children.

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  24. AMS

    RE: Hugh Dominic @ 23 – Thank you. Once again, I am reminded about why home prices are so high.

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  25. Kary L. Krismer

    RE: AMS @ 22 – I think that’s basically correct, but I think the oil supply problems were related to OPEC action, not a war.

    But my point was simply that you can have more things than too much demand in general cause inflation.

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  26. AMS

    RE: Kary L. Krismer @ 25 – The first energy embargo of the early 1970s was OPEC related. The late 1970s was from low production from Iraq/Iran. After that, there was problems with OPEC member cheating. The cheating is very difficult to support, but later when OPEC has calling for lowered production, prices have remained relatively low. Cheating is one explanation, but other explanations include increase efficiencies, alternative fuels, and behavioral changes that reduce demand (such as teens reducing cruising).

    Today there are two problems:

    1. Not many have been able to raise prices, no matter input costs.
    2. Efficiencies are much higher, so the total impact is lower.

    I estimate that on average fuel is 20% of the cost of vehicle ownership. There’s the cost of capital (or opportunity cost), maintenance, insurance, depreciation, taxes, fees, tolls, and so on. This depends, in large part, on the number of miles traveled and the age of the car. The fuel percentage is generally lower for someone driving a brand new car, no matter the number of miles traveled. On the other hand, if someone is driving a 1989 Ford Ranger, the fuel expense is probably more than 20%, if the number of miles driven is high enough.

    The bigger problem, however, is a result from poor computation of costs. We all have seen the person who is upside down on a car (i.e. owe more than the vehicle is worth). They think they are getting ahead by driving that new car, but in the end, the cost was much more.

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  27. Brat

    RE: sawbridge @ 8

    Look on Bainbridge Island too.

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  28. corncob

    RE: Ross @ 17

    The problem is that the de-leveraging is enormous and the money multiplier is currently running at 0. Banks are increasing reserves, decreasing lending and using billions to pay themselves instead of repair their balance sheet. If we can magically wait and it all fixes itself you might see high inflation when that money floods out. However, nothing has changed at all in the system except that the banks are now zombies. Continued deflation is in the cards in this environment.

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  29. Scotsman

    RE: Eleua @ 16

    Welcome back. You’re fighting a losing battle here as a deflationist. Take a look at the sidebar poll for expectations going forward- it’s inflation by a wide margin. I think the media has won this battle and established expectations for inflation. What’s not clear is whether they came to their position through ignorance or willful deceit. My money’s on ignorance as shown by a general lack of understanding about Keynesian theory and the self imposed constraints it includes. Everyone focuses on the government spending and forgets the less enticing parts about real savings, etc.

    My personal hope is that the coming crisis will be the end of any Keynesian talk. Even though the theory has been incorrectly applied, failure in part will be seen as a failure of the whole.

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  30. Scotsman

    RE: Ross @ 17

    But the money didn’t go “into the economy.” It went into bank reseveres and losses, where it has effectively disappeared.

    Excess capacity in capital and labor, global wage competition, a consumption based economy with high debt and rising unemployment expressed as falling GDP, all feeding back into the 30+% of the economy dependent upon government tax revenues and spending- none of that supports inflation.

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  31. Scotsman

    “The New Frugality” is deflationary.

    It’s not just a question of can I afford the payment, it’s more about the total cost.

    http://finance.yahoo.com/news/21-Things-Were-Learning-to-usnews-3382196417.html?x=0

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  32. Eleua

    @All,

    When I get my “stimulus check” for $100K and there is no debt obligation attached to it, I’ll buy your premise. Until then, when money is borrowed, it is inflationary and when it is paid back, it is deflationary.

    @KLK,

    Your 1970s era history needs some work. There was no “printing” in the 70s, but we sure did expand debt to cover guns and butter. When that debt came due in the mid-late 70s, interest rates started to climb. As another poster referenced, our input costs also went up.

    The reason we have had “inflation” for the past several decades has come from production allowing assets to become encumbered and rolling debt down the curve as interest rates dropped. We are at saturation and in the “coffin corner” (already at short term and “historic” lows). The only ways out are longer duration and higher rates.

    All of you waiting for your manna from heaven to drop money in your lap, you should follow Tim’s pink pony around and see what you can scoop up. The “printing’ that has been done in the past year is nothing more than an accounting gimmick coupled with an enormous game of “paying off your VISA with your MasterCard.

    The USTreas took in a mysterious $500B in debt from the Caymans. Nobody is talking as to the source. At the same time, Dubai blew high and wide. I don’t think that is by chance. It is my THEORY that the Arab Crescent diverted money to stop what would kill them first. America is too big to fail in their minds. Dubai is unworkable and they know it.

    Enjoy your “inflation.” Go long on leverage. Buy the dips, go in debt, get levered up. Wall Street is counting on you.

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  33. Kary L. Krismer

    RE: Scotsman @ 29 – Part of the reason inflation would win in a poll is few people are old enough enough to remember deflation. Many people aren’t even old enough to remember inflation.

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  34. Scotsman

    RE: Kary L. Krismer @ 33

    And some are old enough to not remember much at all. What? ;-)

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  35. Scotsman

    Just ran across this over on TF:

    TARP funds actually spent so far: 2% of GNP
    Banker bonuses for 2009: 1% of GNP

    What’s wrong with this picture? Didn’t the banks make their money in large part based on the free money they got through TARP?

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  36. pfft

    with all the doubters here I wondered what recoveries looked like in really really bad economies. does maylasia or the other asian tigers during the 1990s ring a bell?

    the economic collapse was much much worse and they still recovered. maylasian gdp fell 40%. the ringgit fell 40%. they had increased gov’t spending, capital controls and a fixed exchange rate! talk about a disaster and a big intervention. I am sure all the doubters had endless reasons why the economy and stock markets would not recover but they did. the US panic was much less serious than the one the asian tigers dug themselves out of.

    http://en.wikipedia.org/wiki/1997_Asian_Financial_Crisis

    here is a june 2000 report from the IMF.

    “The economic recovery of most of the crisis countries has been more rapid than anticipated by many observers. The pessimistic scenarios developed during the height of the problems have been avoided.”

    http://www.imf.org/external/np/exr/ib/2000/062300.HTM#VI

    note the stunning recovery of the maylasian stock market happened when the gov’t intervened in the ringgit.

    http://www.imf.org/external/np/exr/ib/2000/062300.HTM#chart3

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  37. AMS

    RE: pfft @ 36 – Please remind us all, when did the NASDAQ Composite recover? What, it’s not yet back to the same level it was 10 years ago, at less than 50% of the peak.

    Comical.

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  38. Scotsman

    RE: pfft @ 36

    A quick check shows that the Malaysian stock market peaked at just under 1300 in 1997. Last week it closed at right at 1300. That’s twelve years to get back to where it was before the crash of 1997-1998. That’s also in nominal terms, not inflation adjusted. Just like the current rally in the U.S., the market did come back to 3/4 of its peak value pretty quickly. But here we are 12 years later, and in inflation adjusted terms their market is still at only 50% of peak.

    I’m not sure how you think this example supports your intended point. In fact, it looks more like you just gave credibility to the opposition. I’d suggest you try again. ;-)

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  39. David Losh

    RE: pfft @ 36

    Though I admire the point you are trying to make, you picked a bad example. Asia had a drain of capital when China took over Hong Kong. China shocked the world by leaving the financial markets alone, boosted development of Shanghai, and became a global trading partner in the process.

    We are in a much different situation. A big part of that is China. If you calculate the financial markets by volume China, and India contribute a few billion consumers. Billions of consumers also need to be fed, clothed, sheltered, and cared for. It’s a two way street.

    For all the talk about socialism we missed the part about China being communist. They are set up to pay the way, We here in the United States are kind of dependent on the Wal Mart spirit of socialism. We’re going to come up a little short, and we’re not going to be too happy about that.

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  40. Kary L. Krismer

    By AMS @ 26:

    <On the other hand, if someone is driving a 1989 Ford Ranger, the fuel expense is probably more than 20%, if the number of miles driven is high enough..

    Even with in 2009 having paid to have the clutch and slave cylinder replaced, some clearly optional work on the top end to reduce an oil leak, buying new wheels and snow tires for the first time (which explains our unusually warm January), my repair expenses didn’t even come close to my gas expense driving 15,000 miles. And even though the vehicle is in good condition, I doubt I could have gotten $1,000 for an 89 Ranger at the start of 2009, so the depreciation would be nominal.

    The thing is though, you have to own a vehicle for quite some time before the average depreciation of the vehicle over its life becomes small.

    But I do agree with your main point that people often make the wrong decision on when to replace a vehicle. I often suspect that the error in reasoning is intentional, because what they want is a new vehicle and what they are looking for is a reason to get it.

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  41. Kary L. Krismer

    By Scotsman @ 35:

    Just ran across this over on TF:

    TARP funds actually spent so far: 2% of GNP
    Banker bonuses for 2009: 1% of GNP

    What’s wrong with this picture? Didn’t the banks make their money in large part based on the free money they got through TARP?

    Actually, that shows the absurdity of Obama’s recent attack on bankers. He’s attacking something that would have 50% of the stimulus effect of TARP. And by being this way and forcing the banks to pay back TARP funds early, he’s probably eliminated the other 50% too.

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  42. AMS

    Remember the Doss family in San Carlos, California? The underwater computer engineer with a $1,300,000 mortgage, a wife, 5 kids with another child expected to arrive this month… …and a trustee sale notice for January 19, 2010, among other things. Initially he was taking donations at http://helpuskeepourhome.org/ complete with photos of his family.

    Here is the original video report:

    http://abclocal.go.com/kgo/story?section=news/local/peninsula&id=7199130&rss=rss-kgo-article-7199130

    At the start: Steve Doss, “We have this hard deadline, it’s January 19, and that’s the date the house goes on to auction.”

    Near the middle: Mandie Doss, “My time to deliver is about two days before the sale date on this house, so that would put me coming home to no home.”

    Near the end: Mandie Doss, “This is our home; we have everything ready for the baby to come home to.”

    Well, January 19, 2010 has come and gone, and guess what. The donation seeking website is now just a redirect to some other foreclosure site. I don’t have the energy to check out the site that Doss chose to redirect to, but I wonder if there is any coincidence that the redirect change happened last week.

    The larger question is when Steve and Mandie Doss should have seen the personal catastrophe. It sounds like the big realization hit on December 31, 2009, but he does admit to slowly falling behind.

    My question: When does slowly falling behind become a crash?

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  43. AMS

    RE: Kary L. Krismer @ 40 – Let’s also remember that your insurance costs must be very low too. Gas expense for 15,000 miles at 20-25 mpg and ~$3/gallon = ~$2,000, or about 13 cents per mile. I do agree that the Ford Ranger does not cost 65 cents per mile.

    “But I do agree with your main point that people often make the wrong decision on when to replace a vehicle. I often suspect that the error in reasoning is intentional, because what they want is a new vehicle and what they are looking for is a reason to get it.”

    Note the parallels to buying homes. So many people sought to buy expensive homes for the wrong reasons. Of course, we are the ones calling the reasons wrong, but when you see failures like the one described in #42 above, looking back, it certainly appears that the home was purchased with some very questionable reasoning.

    We’ve seen the reasoning here in the past, including claims like,

    1. being priced out forever
    2. buy now before interest rates rise
    3. if you hold out long enough you’ll be fine
    4. you own it even if you’re paying on a big mortgage
    5. an $8k immediate income tax credit is a good reason to buy
    6. if the bank says you can afford more, you most certainly should spend more
    7. all that interest you pay is tax deductible, so you’d better pay more interest to maximize your tax deduction.
    …the list goes on an on…

    There is some ingrained desire to own in this society, and from a sales perspective, it’s only a question of how to exploit the underlying bias toward home ownership. Note Hugh Dominic @23. It’s almost as though taking an ownership position is a sure bet, no matter how risky. I guess this, in part, explains why so many want to own their own business? idk.

    I’m probably asking the wrong guy, but what is at the root of the desire to own newer cars, homes?

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  44. TJ_98370

    RE: Eleua @ 32

    Hey Eleua, welcome back. Where have you been? You’ve been missed.

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  45. Kary L. Krismer

    RE: AMS @ 43 – Insurance is mainly low because I was able to drop some coverage (collision and/or comprehensive, I forget). Liability surprisingly isn’t all that dependent on what you drive.

    As to the housing decisions comments you reference, the one thing that people haven’t taken into account, that would actually suggest they buy something bigger/better, is their future needs. When prices had gone up consistently for 20 years the thought was to buy something that would last them 3-5 years and then sell and move to something bigger at that point. Now they’re finding that their needs are increasing (e.g. another kid is born) but that they can’t move out and up. Maybe this is also due to people having started to buy at a younger age than in the past?

    On that note, is anyone aware of any statistics on the average age of buyers (particularly first time buyers) over the years?

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  46. softwarengineer

    Inflation is Back at the Grocery Store

    But is it short lived?

    Oil is plummetting down again due to supply gluts. The dollar is beating everyone in the world lately, and gold is plummetting too.

    What does it mean? It means, IMO, when America sneezes; the rest of the world catches pneumonia.

    BTW, speaking of deflation/inflation; have you noticed the deluge of 2 for 1s in empty restaurants lately….LOL

    The only inflation I’ve seen eating out is the 10% sales tax and some the places shrank their portions….like pizza, subs, Sharis, etc….basically, its cheaper to eat out with coupons right now than the 80s.

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  47. AMS

    Supply and Demand & Mass Psychology

    So I was asked a question, “Why is it that I had to compete with so many buyers when I was buying, and now that I’m selling I have to compete with so many sellers?”

    As always, there is some level of competition, but what I believe this poor seller is suggesting is that when he purchased demand was high relative to supply, and now that he’s a seller, supply is high relative to demand.

    Something seems backwards here.

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  48. ARDELL

    RE: Eleua @ 32

    E!!! Happy New Year! Great to “see” you again. We (or I) missed you.

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  49. AMS

    RE: Kary L. Krismer @ 45 – “Liability surprisingly isn’t all that dependent on what you drive.”

    But you are probably in the low-risk group for liability, based on the various factors that are used.

    Hopefully you dropped the collision and kept the comprehensive (fire, theft, vandalism, glass, animals, but not humans). As always, if the comprehensive cost is too much relative to the potential benefit, then drop that too.

    As far as buying bigger, better when more kids are born, there must be a breaking point. The point where having more kids suggests moving into a smaller home. Maybe the Doss family has it right? More kids suggest that a more expensive home is the right way to go?

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  50. patient

    It seems like the WH is saying that Bernanke’s confirmation is as good as secured. It boggles my mind why they would do that. There is absolutely nothing to win but all to loose for a senator to vote for Bernanke. Other than shady contributions from lobbyists I guess. I think they underestimate peoples anger with Bernanke, voters will keep track on how their representatives votes on this one. This is BIG mistake Obama, that will cost you dearly.

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  51. David Losh

    RE: Eleua @ 32

    This sounds a little like a consiracy theory. Yes the Arab Cresent State government understand the need for the United States, the population doesn’t. That’s the disconnect between what politicians say, and what they can deliver.

    In the other post about what inning the economy is in the first comment has a link to a crash course about the economy. The second premise in the presentation is about oil. Arab States want to sell oil to us, to any one.

    The hard part is the financing. Islam is against Usury, and has the seven year forgiveness of debt. Any money invested in the Arab world is lost.

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  52. Scotsman

    Taxman!

    http://www.youtube.com/watch?v=_0M__0Z1pjg

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  53. AMS

    RE: David Losh @ 51 – I don’t know if you’ve noticed, but more and more it seems that, “Any money invested in real estate is lost.”

    And those who seem lost include those playing the silly game of extend and pretend.

    lol

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  54. Kary L. Krismer

    RE: AMS @ 49 – On the cost of auto insurance, years ago (e.g. still in my 20s) I went from a cheap American gutless four-banger to a top of the line RX-7, and my premiums hardly changed at all. The RX-7 was worth over 4x as much, and twice as powerful. Maybe it had better bumpers! ;-)

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  55. Scotsman

    Up, up, and away! Mortgage rates, that is, unless…

    “Today, we focus on the most critical segment of debt issuance for 2010 – those ever critical US Treasuries, without whose weekly uptake by various investors, the multitrillion budget deficit will become unfundable. Using estimates from Morgan Stanley for 2010 Treasury supply and demand, the conclusion is that there will be a demand shortfall of at least half a trillion, and realistically $700 billion, to satisfy the roughly $1.7 trillion in net ($2.4 trillion gross) coupon issuance in the upcoming year….

    … Treasuries will likely find it needs to be increasingly more attractive to find bidders, which in turn will jar mortgage rates out of hibernation”

    http://www.zerohedge.com/article/700-billion-us-funding-hole-desperately-seeking-very-indiscriminate-treasury-buyer

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  56. AMS

    RE: Kary L. Krismer @ 54 – It just shows how cheap property damage is relative to the costs of personal injuries.

    If you had six children, I suppose you’d need more than a Ranger.

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  57. AMS

    The Tim: “I’m pretty interested in this magical over 100% commission…”

    Remember the days when it really was magical? REALTORs could buy a home with zero down and walk away with $30,000?

    The agent got both the house and the commission.

    lol

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  58. David Losh

    RE: AMS @ 53

    I think you are like a lot of people in the United States who continue to fiddle while the world moves on without you.

    Real Estate never changes. It’s constant. It’s tied to the CPI, but is not a part of the calculation. So there is no equity lost. People paid too much, banks lent too much, and now we are back to core values. What may be left is debt. .

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  59. One Eyed Man

    News update from Muncie.

    No one will lend money to my niece so she can’t buy the house without my brother in law. But it turns out the furnace is dead and there’s a roof leak so few if any lenders will lend on the house (except maybe a HUD rehab loan program or a private lender) until someone fixes the furnace and the roof which of course the seller (its an REO) won’t do.

    The listing is for 45K and there are a lot of people looking at the house but no offers yet. My brother in law put in an all cash offer of $25K. That’s less than $12/sq ft. At that price, his attitude is so what if it goes down another 20%, that’s only 5 or 6K which is about 8 months gross rent in the current economy. Maybe he’ll start a bidding war of bottom feeders.

    And speaking of bottom feeders;-), how can realtors put in the time to do these deals? At 25K a 3% commission is only $800 a house. The realtor would have to do a deal a week just to avoid starvation.

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  60. pfft

    By Scotsman @ 38:

    RE: pfft @ 36

    A quick check shows that the Malaysian stock market peaked at just under 1300 in 1997. Last week it closed at right at 1300. That’s twelve years to get back to where it was before the crash of 1997-1998. That’s also in nominal terms, not inflation adjusted. Just like the current rally in the U.S., the market did come back to 3/4 of its peak value pretty quickly. But here we are 12 years later, and in inflation adjusted terms their market is still at only 50% of peak.

    I’m not sure how you think this example supports your intended point. In fact, it looks more like you just gave credibility to the opposition. I’d suggest you try again. ;-)

    I don’t think you get it. I have been talking about what a recovery looks like. we aren’t talking about 1300. we are talking about 300, the point of maximum pessimism. we are talking about gdp down 40%. the currency down 40%. capital controls. a pegged currency. if we move our starting point, from 300 to 1300 in 10 or 11 years is awesome growth, especially from the end of the world bottom. if they can dig out of a gdp plunge of 40%, we can dig out of our measly 6% plunge.

    the fact that the falling currency boosted exports and the recovery gives us hope. contrary to popular belief we do manufacture a lot.

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  61. Scotsman

    RE: One Eyed Man @ 59

    Hmmm- at least I’ll be able to afford retirement in Muncie. I was kind of hoping for eastern WA or ID but they don’t have houses for $40k.. yet.

    I was going to take a shot at this and fix it up, but the dang things gone pending:

    http://www.johnlscott.com/propertydetail.aspx?IS=1&ListingID=300401551

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  62. Scotsman

    RE: pfft @ 60

    I see your point, but my response is the same. A recovery, 12 years on, looks like you’re still well in the hole compared to where you started. The U.S. will survive, “recovery” will happen, but life will be very different than it is today. First and foremost the government probably won’t be there to catch you if you fall. Life will be simpler, and for many more enjoyable. We’ll all do more with less. One positive change- I just read that if you have heavy debts you’re 11 times more likely to experience significant back pain. That issue will be resolved for many. In the new world, if you can’t save up the money and pay cash, you probably don’t buy a lot of those things you have today.

    My only real concern about recovery is that it could get ugly in the cities where too many depend on the government and have little to fall back on. Did you know that 20% of the residents of L.A. county are dependent on welfare? What happens when CA and then the feds have to cut those programs?

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  63. pfft

    By Scotsman @ 62:

    RE: pfft @ 60

    I see your point, but my response is the same. A recovery, 12 years on, looks like you’re still well in the hole compared to where you started. The U.S. will survive, “recovery” will happen, but life will be very different than it is today. First and foremost the government probably won’t be there to catch you if you fall. Life will be simpler, and for many more enjoyable. We’ll all do more with less. One positive change- I just read that if you have heavy debts you’re 11 times more likely to experience significant back pain. That issue will be resolved for many. In the new world, if you can’t save up the money and pay cash, you probably don’t buy a lot of those things you have today.

    My only real concern about recovery is that it could get ugly in the cities where too many depend on the government and have little to fall back on. Did you know that 20% of the residents of L.A. county are dependent on welfare? What happens when CA and then the feds have to cut those programs?

    where we started is 300, not 1300. I have been talking recovery since august as per the US stock market. we have been talking about a recovery on seattlebubble for the last month or so. I don’t care where we started. I care about when the recovery began and where we are going. I care about where we are going from there.

    the whole point about the maylasia is that it was worse there but they recovered off the bottom.. nobody at 300 probably ever saw a recovery like that to 1300. the move off the bottom was most likely improbable. if they can do it. we can do it. 1300 is water under the bridge.

    the gold haters always talk about 1980, but the gold bug’s are talking about $250 and the giant bounce from that levels. where the high was is irrelevant.

    ““The economic recovery of most of the crisis countries has been more rapid than anticipated by many observers. The pessimistic scenarios developed during the height of the problems have been avoided.”

    sound familiar?

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  64. AMS

    RE: One Eyed Man @ 59 – Thanks for the update. In the end when dealing with relatively small amounts the losses cannot be so massive. A 10% decline on a median Seattle home would be nearly a total loss on a $45k home.

    For the price, it sounds like a nice home in a decent area.

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  65. AMS

    RE: David Losh @ 58 – You are right; I’d rather play the fiddle than take a blood bath with the rest of the world.

    lol

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  66. Eleua

    @TJ and Ardell,

    Thanks for the welcome. I have always liked SB and it has taught me many things and introduced me to wonderful people. I know that I can come off a bit strident, but that’s just an online persona.

    Yes, Ardell, you will always be near and dear to me. I truly mean that. I hope all is going well.

    E

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  67. pfft
  68. Sniglet

    “The economic recovery of most of the crisis countries has been more rapid than anticipated by many observers. The pessimistic scenarios developed during the height of the problems have been avoided.”

    So how would one classify the “recovery” Japan experienced after their economy hit a peak in 1989? Was the recovery more rapid than observers had anticipated? What about the recovery from the US market crash in 1929? Was that faster than most people thought likely?

    Heck, I know lots of people in California who bought homes at the peak in the late ’80s who didn’t see the prices recover to what they had paid for over a decade.

    There is no historical basis in saying that “recoveries” are always swift, or quickly recover what was lost. I’ll go one further. The swifter the recovery the less durable it is likely to be. Fast economic expansion (and asset price appreciation) are always signs of a bubble.

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  69. Scotsman

    RE: Sniglet @ 68

    ” The swifter the recovery the less durable it is likely to be.”

    Yup. I think we’re about to see that proven once again.

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  70. pfft

    By Sniglet @ 68:

    �The economic recovery of most of the crisis countries has been more rapid than anticipated by many observers. The pessimistic scenarios developed during the height of the problems have been avoided.�

    So how would one classify the “recovery” Japan experienced after their economy hit a peak in 1989? Was the recovery more rapid than observers had anticipated? What about the recovery from the US market crash in 1929? Was that faster than most people thought likely?

    Heck, I know lots of people in California who bought homes at the peak in the late ’80s who didn’t see the prices recover to what they had paid for over a decade.

    There is no historical basis in saying that “recoveries” are always swift, or quickly recover what was lost. I’ll go one further. The swifter the recovery the less durable it is likely to be. Fast economic expansion (and asset price appreciation) are always signs of a bubble.

    japan may be an exception, but the quicker the fall the harder the bounce. that’s the experience of unemployment in the US and around the world.

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