Weekend Open Thread (2009-07-24)

Here is your open thread for the weekend beginning Friday July 24th, 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!

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About 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. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.


  1. 1
    Scotsman says:

    This should be interesting. How many dollars are left overseas to repatriate? How much will the primary dealers eat? Sensing the end of the bull run, will money pour out of the stock market and into safer Treasuries in a flight to safety? The government delayed additional auctions for as long as possible, but now they need the money. If we don’t crash soon, when?

    HOLY !@#!! Treasury Auction Schedule

  2. 2
  3. 3
    Nicole says:

    If you were looking for a real estate agent in today’s market, what type of questions would you ask to find a good partner to navigate through the dynamic market in seattle? I see so many articles which are not based in reality and am interested in the perspective of the folks on this forum so see how you would weed out the knowledgeable/reality based agents. vs. others…….

  4. 4

    RE: Scotsman @ 2



    Then the stock market makes better sense. That stocks went up in March 09 through July 09 is not nearly as important as they plummetted 25-30% from July 08-July 09 (YOY).

    I too have noticed the overly optimistic take that an unemployment surge means green shoots soon too. I wish I could belive the fairy tale, but deep down inside I really believe its wishful thinking.

    Here’s a good article to clarify that the green shoot wishful thinking holds no water, in part:

    “…President Obama must get behind a policy to reverse the trade imbalance with China, or preside over the wholesale destruction of many more U.S. manufacturing jobs. These losses have little to do with free trade based on comparative advantage. Instead, they derive primarily from currency practices that make Chinese products artificially cheap in U.S. and other markets and Chinese restrictions on imports. These Chinese policies deprive Americans of jobs in industries where they are truly internationally competitive.

    In the end, without assertive steps to fix trade with China, as well as fix the banks and curtail oil imports, the Bush years will seem like a walk through the park compared to job and real income losses Americans will suffer during the Obama years….”

    The rest of the URL:


    Reply to this comment By Softwarengineer on 2009-07-23 10:39:34
    This headline today explains a little about the economic dilemma we’re in:

    “Well’s profit up 81% in Quarter. Bank meets expectations but shares slide as troubled loans jump 50%:

    To me, in a nutshell, that explains the market. There is no truth in anything it says. The financial reports of the banks are pure fiction. There’s no way to know how much they have, how much they’ve received, or what kind of condition they’re in. There is no way to evaluate a company on that kind of obfuscation..

    It’s like saying, how’re you doing? And the reply is, you know what, I am doing wonderfully, really badly. Which is it?

    According to Rasmussen this morning, white voter support for Obama has dropped to 41%; most whites think his spending polices are suicide for the country.

    I try not to focus on the Dow and S&P at moment. It is pure hype to generate investor sentiment. Unemployment is increasing…consumer sentiment is down…business is hurting…

    US industry used only 68.3% of available capacity in May 2009 with one third of all US industrial capacity sitting idle; personal income dropped by 26% in the first four months of 2009; US government individual income tax receipts so far this year are down 22% from the first nine months of 2008; US corporate income taxes have plunged 57% in 2009; same-store sales for June are down 5.1% from June ’08; approximately six people are seeking work for every job opening with a record 6.88 million Americans collecting unemployment benefits…

    New home sales are down 73% from the all time high of new homes sold in 2005; for the first 26 weeks of 2009 US railroads reported cumulative volume down 19.5% from 2008..

    It’s all there, and more, in “It’s the Real Economy, Stupid” by Sprott Asset Management– http://zerohedge.blogspot.com/2009/07/sprott-its-real-economy-stupid.html

    Our focus should be on America and what is happening to this country and not on the stock market. We must focus on what this economic crime syndicate, whose muscle arm is the Fed, is doing to the country. The stock market rally just means these people are still in charge. Don’t expect them to be beaten until they are pushed out.

    The Dow Jones is just a reflection of the fact that they are still there.

    Reply to this comment By Guest on 2009-07-23 12:32:37…”

    The rest of the URL:


  5. 5
    ray pepper says:

    RE: Nicole @ 3

    In todays market I would ask them the same as I did in yesterdays market………..

    “How much will you give me if I hire you as my Agent?”

    If its less then 50%….YOU FOUND THE WRONG AGENT!

  6. 6
    Kary L. Krismer says:

    RE: Nicole @ 3 – Well first, it depends on what you’re doing.

    If you’re selling, then a limited service agent is a low percentage game. You’re better off with full service.


    But beyond that, you need to have some idea what type of agent you’re dealing with. What percentage of their listings do they sell? You can’t entirely blame an agent for a failed transaction, because the seller controls the process, but a low percentage may very well mean they are not giving their sellers the advice they need. Also, you might want to see how they disseminate the information about your listing. Believe it or not, not all agents listings are shown on Realtor.com, for example.

    On the buyer’s side it depends on what you want to do. If you know the house you want, then a limited service firm would be satisfactory, or possibly even preferred (although as Ray notes, even a full service agent might rebate part of the commission in that type of situation). Unfortunately I don’t have a good list of questions on the buyer’s side. They need to understand short sales, REOs, general financing issues, but beyond that they need to have some ability to assess the seller’s situation, because that might affect which property you make an offer on, and which properties you totally avoid.

    Edit: One more thing on the buyer’s side. The agent needs to know how to write a contract! It’s amazing how many don’t. Unfortunately, covering that issue would take about 2 hours, so I’m not sure how a buyer would assess that. That’s probably an area where a more structured firm like Redfin would have the advantage.

  7. 7

    RE: Nicole @ 3
    1. If the agent is boasting about how many millions of dollars in sales he/she has brought in, I’d probably look elsewhere. All it means is that they’ve sold a lot of property, and are good at either selling or convincing people to buy. If they’re that busy, you might not get the kind of service/attention you need or want.

    2. If they say anything about how now is a great time to buy a house, I’d look elsewhere. If you’re looking to buy a house, you don’t need some pseudo expert salesman giving you his/her self serving spiel. A good agent should be able to give you actual information and data and be more of a resource than a salesman.

    3. If he/she drives a Mercedes, I’d stay away, for the same reasons as #1. The trappings of success are in no way an indicator of what kind of service you”ll get. In fact, it might more indicate that the agent is an egotistical buttwipe.

  8. 8
    Kary L. Krismer says:

    By Ira sacharoff @ 7:

    RE: Nicole @ 3 – 3. If he/she drives a Mercedes, I’d stay away, for the same reasons as #1. The trappings of success are in no way an indicator of what kind of service you”ll get. In fact, it might more indicate that the agent is an egotistical buttwipe.

    And also an indication that they may need your transaction to make the next payment on their car.

  9. 9
    Kary L. Krismer says:

    By Ira sacharoff @ 7:

    3. If he/she drives a Mercedes, I’d stay away, for the same reasons as #1. The trappings of success are in no way an indicator of what kind of service you”ll get. In fact, it might more indicate that the agent is an egotistical buttwipe.

    I’m going to retract my prior answers. Whether you’re buying or selling, the best agent is one who owns two vehicles free and clear, one of which is a 20 year old pickup. ;-)

  10. 10
    Scotsman says:

    Real economic indicators- mile after mile of idled rail cars, shut sawmills (housing starts?), little change on the horizon. This site is slow to load, but an interesting read on the rest of the world outside Seattle.


  11. 11
    David Losh says:

    RE: softwarengineer @ 4

    Yes, I’m actually going to respond to this. I know it must be confusing to read, but the point is well taken.

    Any one giving the gift of money to the stock market today is a traitor, You might as well send money to Osama Bin Laden. Global corporations, after being caught in the greatest scam in history, are back to business as usual. People continue to dump in money to a system that produces nothing, contributes nothing, and as we have seen will steal money from the vulnerable so they can say they have great paper profits. People will starve to death while the stock market continues to do nothing but collect dollars to pay for a ponzi scheme.

    The best point about your comment: According to Rasmussen this morning, white voter support for Obama has dropped to 41%; most whites think his spending polices are suicide for the country.

    Obama is asking to spend money on things like energy, or health care, the auto industry, or providing education. Those are the things white people are opposed to. White people want the status quo. White people want to sit in the office and get paid to come up with plans for the future rather than working to provide a future.

    When white people talk about equality they are talking about all people being equal to whites. In China, where there are almost a couple of billion people, they wouldn’t let white people into the house. In China white people are the scum of the earth, the lowest of the low, they are an ignorant extremely violent race that is not to be trusted. Hey, a couple of billion people can’t be wrong. Majority rules.

    I just found it odd that you would interject what white people think when talking about a manufacturing economy.

  12. 12
    D. in Ballard says:

    Nicole, I’ve been looking for a house since the fall of 2007. I am no doubt a difficult customer. I want a great house in a great location and I want it at a great price. It’s no wonder I’ve been looking so long. From a pickiness standpoint, I am very high maintenance so I chose an agent that isn’t pushy and who seems to know her stuff. I was ready to plunk down 730K for a house in early 2008 when she talked me down from it. Maybe she regrets that now, but that’s aside from the point. She was very good at pointing out flaws and causes for concern in the condition of the houses we looked at. When I was looking at crown molding, she would tell us to forget it. We can install crown molding if we like it so much. Look at the house.

    When I interviewed her, I gave her a few hypotheticals. If you choose your hypotheticals to give her, try to think of situations where you will need an agent to be a good negotiator. I asked her what she would do in a case of multiple offers because we had been burned by a previous agent that way. Any agent can handle a sweet and easy deal. What you want is someone who will be able to handle the difficult situations if you happen to be in a situation where you need them too.

    Finally, as much as I respect and like her and would recommend her without question, I would never blindly trust her opinion. I read as much information as I can get, and if she disagrees with the information I am reading I take her opinion with a grain of salt. RE agents are being pressed by their brokerage to think a certain way. She was telling me in 2008 that her office had been sent to a seminar where they learned that prices would be going up in late 2008 due to a rise in interest rates. Never take your guard down. If something doesn’t sound right, it’s probably not right.

  13. 13

    RE: David Losh @ 11


    Actually it said while only 41% support Obama’s fiscal plans [all ethic groups], the whites oppose it more. I read yesterday Obama is doing worse than Carter on voter support sliding worse during the first six months of office. I’m just giving you the numbers, not my politics Dave.

    To be fair though, Obama inherited 10 [maybe 100] times the economic mess Carter inherited. Carter had stagflation, Obama has depression.

    On our industrial base, you’re right….the globalist bent Baby Boomers [mostly white, but let’s be fair, all ethnic groups were equally represented] killed off our college jobs with the demise of the American industrial base, as follows, per today’s Roubini’s Blog in part:

    “…Paul is right about BLS below. My daughter graduated this past june with a double major in Marketing/commincations and finance. She has yet to find anything substantial. she is only working because she is employed in Sales for a minor league baseball team I have an owenership interest in. the latest I saw was that 20% of Grads this year have sound a job. of that less than 5% found anyhting decent. Most are taking work for minimum wage jobs like restuarants, Chain stores, etc…

    so the future is not good. with so many unemployed anyone that would be hiring will opt for experiance and educated vs inexperianced and educated. it’s a disaster for College grads. Read anothee piece that because famalies have taken such a financail bath, all lot of young adults are opting not to go to college because they cannot afford it, colleges are restriciting enrollments, or they jsut feel there are no jobs for them when they get done with college. Such muich for Obama fixing edcuation in this country.

    Hide reply Reply to this comment By MM CA on 2009-07-24 08:55:51

    If only we have universal health care the JOBS will magically reappear. If only we get college degrees, the JOBS will magically reappear.

    Let’s be real folks [and I’m no NEOCON, I’m an old fashion JFK/MLK baby boomer liberal environmentalist type that apparently went the way of the dinosaur]; do any of us really believe the fairy tale(s)?

    The JOBS, IMO, will come back when we roll up our sleeves and start making stuff again; more growth debt is brainless/reckless and all of us know will just slow the trainwreck down, and in the end hurt us worse.

    When did America get this lazy? In my dad’s generation [60s and 70s] America made practically everything in the house, including the Chrysler in the driveway and still the workers had time for regular sized vacations with about one worker per household too. They still only worked 8 hrs a weekday too.
    Also, the stuff Americans made back then lasted and could be repaired, it all didn’t quickly end up in the landfills a year later, or worse yet, replaced by corporations obsoleting the current model type every year.

    How many of you bloggers bought plasmas TVs recently and paid $20 to have your perfectly good toxic waste old CRT TVs disposed of [thrown into a 3rd world countries’ river]? Yet, be sure to recycle so we can add more population growth to America…LOL

    The college kids would have plenty of jobs today if the manufacturing headquarters; hiring accountants, engineers, managers, etc, etc. were more plentiful in America. Assembly plants in America with foreign headquarters basically hire factory workers only and if non-union, at starvation wages too….no wonder all the nations [except America] are so darn protectionist about their domestic automobile manufacturing. Its clearly the backbones of their economy [America’s too].

    Reply to this comment By Softwarengineer on 2009-07-24 13:41:06…”

    The rest of the URL:


  14. 14
    cheapseats says:

    RE: Nicole @ 3 – Full disclosure, most of your replies are from RE agents. Not that that is good or bad.. Just a point for consideration.

  15. 15
    biliruben says:

    RE: Scotsman @ 10 – Apropos nothing, I was coincidentally in Kooskia a couple weeks ago. Last grocery store before the fishing hole.

    Man. If a town ever needed what Obama is trying to provide, it’s Kooskia.

  16. 16
    cheapseats says:

    RE: David Losh @ 11 – I do not know why I get sucked into these, I feel like maybe you are Andy Kaufman and I am not getting the joke…

    But to compare greedy business to Bin Laden is ridiculous. I suppose it is a variation of Godwin’s law.

  17. 17
    David Losh says:

    RE: cheapseats @ 16

    It’s very simple, but glossed over.

    Osama Bin Laden targeted the World Trade Center twice for attack. Global coporations have actually done more damage to the United States reputation and fiscal stability than those attacks ever accomplished.

    Strange how it all plays out.

  18. 18
    David Losh says:

    RE: softwarengineer @ 13

    Here’s exactly why I got sucked in. It has to do with jobs.

    That plasma tv you bought in my estimation should cost about $300. By the time you finance every step of the way it cost $600. That debt is sold to investors for cash. Investors get the interest income plus a return of principle.

    So if manufacturing is only half of the sales price, and all of the cost, the main return is in the creation of debt.

    The same is going on with housing today. The price of the house pales in comparison to creating the debt, packaging the debt, and selling the debt. The interest income is the true value to the sale.

    I have said repeatedly this past year that a property’s value is what it will rent for. Rental income should be determining the sales price. The question should be if a property will rent for it’s mortgage payment.

    The point I am taking away is that I would rather profit by building the house, in my case fixing the house. I would morally, rather take away my wages as profit than a fancy financing scheme. In my opinion, if we all stopped being so greedy, and just worked our way out of debt we will be in a better place financially.

    It starts with you and your choices of investment. You can lend moeny to create more debt or invest in making, build, manufacturing, or services that will create jobs.

  19. 19
    Kary L. Krismer says:

    Here’s how you find an agent! :-)


    I’m surprised there are only two responses to date.

  20. 20

    By cheapseats @ 14:

    RE: Nicole @ 3 – Full disclosure, most of your replies are from RE agents. Not that that is good or bad.. Just a point for consideration.

    I’ve been thinking about that, and it’s been kind of sticking with me since I read that. Maybe it’s because I see myself as someone who has a whole different mindset than many other real estate agents, but how I read it was, rather than ” just a point for consideration” was ” Don’t believe anything these guys say. They’re real estate agents, AKA liars who would sell their grandmother if it meant earning a commission.”

    Was there anything in my response that made it sound like I was a real estate agent, or that I was giving a perspective from a real estate agent’s point of view, or that I was promoting myself?
    What I thought I was doing was warning against the type of real estate agent who is pretty commonly found, and was really basing it more on my experiences as a former client rather than as an agent.

  21. 21
    Kary L. Krismer says:

    RE: Ira sacharoff @ 19 – As an attorney I feel I’m in a much better position to know how to pick an attorney than the average Joe.

    As an agent I feel I’m in a much better position to know how to pick an agent than the average Joe.

    What they have in common is that in both instances as a practical matter the average Joe is screwed. There is no good way to pick either. For attorneys I used to say the best way to pick one was to go to law school and then practice in the area five years. Then you’d know who was good.

    BTW, I thought I’d already posted this link, but here’s a bad way to find an agent.


  22. 22
    Steve says:

    I have been reading this blog with interest and there are some well informed opinions about the state of the housing market.

    I am up against a wall and wonder what my ‘best option’ is? I don’t live in Seattle by the way, I am just reading the blog for the last few weeks for ideas. I live in Virginia, near DC, so I am not in a recourse state. Deficiency judgments are wide open in Virginia.

    I am 33, single, pull in about 95-100, give or take some overtime. I work two jobs now, and looking for a third. I am currently in a Masters as well. basically I have no life. I spent most of last year on disability, scraping by on 60% income and making my mortgage payments and eating tuna fish. This is a potentially recurring disability and my doctor fears its return.

    Right now I make plenty of money. On the last year of a 5/1 ARM. My ARM would go down if it reset today, tied to the LIBOR. I already went to the mortgage bank that owns my first. They know how much I make and a rough sense of my assets. They won’t modify my loan and I told them my asset information. I have a second, HELOC, part of the purchase that I refinanced over into my main bank fo rthe lower interest rate years ago. My main bank holds about my entire life, savings, investment, insurance. And this entirely worthless HELOC. No getting around that fact. Btw, I had no idea how risky this purchase was until about 3 months ago (tax time and my accountant clued me in). Since then my life has been a living nightmare of sleepless nights and worry. I’d been getting over disabilty and didn’t realize how bad the market had tanked in relative to my condo. by the way, the original mortgage broker / bank approved me for $450 k to buy a third place last year. Lucky I didn’t.

    I listened to the pundits and real estate shills and bought a condo in northern virginia in Spring of 05. I bought a condo for around 350. I owe about 340. It’s worth about 260 now. I owe 277 on the first and the rest on the HELOC. I also hate it now. I’ve poured thousands in upgrades for broken things and burst pipes. I rented it out to get away from it and to decrease my commute. It’s a financial albatross now. It rents for $1250 and the mortgage interest, HOA, and costs are about $1900. That’s before it resets/recasts. I didn’t buy it as an investment and learning now, way too late that I should have crunched these numbers before hand. I also own another house I bought in 2002 in another state (MO) that makes about $300, so in mental accounting I kind of lump my two rental properties togther.

    I looked at the amortization schedule for a 25 year loan on 277 and it makes me sick to realize when I may be right side up. And I have no idea what interest rate to project. I pay 5.25 now and it can go to as high as 10.5

    I have about $50 k in cash and could scrape together another 40-45 k in decimated stocks and mutual funds. My other house might have some equity left if I can sell it. The 50 k is my emergency fund for job loss, repairs, etc. I have no CC debt and one used car I own outright.

    Anyone have any great ideas about what I should do? I’m at a loss, though I’ve gotten plenty of opinions. My Mom and my accountant told me to foreclose if the bank(s) won’t let me short sale. My brother is a CPA and told me to go back to zero. My dad said crunch down all expenses, move into shared housing that costs $500 a month, eat tuna, no vacations, 3 jobs, and pay down the debt. My other brother, a banker, said carry the loan through the next year, and maybe another year to see what the market does. Realtors all claim to keep renting it out until the big comeback.

    I really have no idea what the ‘best’ worst option is. I hate my condo and I hate my primary wage earning job. I feel that in a recession and given the times, maybe I should be content with having three mortgages to fight for, but I am not sure if the medical condition will hold up over the additional stress of condo support. After the bubble burst I’ve now paid a town house price for a one bedroom, I know that

    I don’t mean to hijack anyones blog, I see it says weekend open thread here so I was wondering for some advice.

    1) Walk away, visit the court house steps, and to be sure a deficiency from at least one (HELOC) if not both banks
    2) Try to short sale, pay off 1st bank and then carry a soft note on the difference to the second
    3) Keep holding the condo and eventually paying more in negative cash flow than the renter will pay rent
    4) wait until next year and reevaluate
    5) ditch job and get a newer, lower paying, less stressful job and reapproach the short sale due to less income
    6) wait and see if I have to go back on disability and then walk away/’short sale
    7) keep working three jobs and stock pile cash, try to pay down mortgage or sell with cash at close
    8) try to sell to a renter on some kind of lease option at a higher rent to reduce negative cash flow
    9) move back into it to reduce negative cash flow though I hate it and my commute would suck in gas and time
    10) some other option I haven’t thought of yet.

  23. 23

    I can’t tell you what the least worst option is, but I can tell you what the worst worst option is. That is renting out the condo and taking a 700 + dollar month per loss. You don’t need that kind of stress. You’ve had health issues and you want to folllow the course which will result in you feeling the least stress. The limbo of continuing to live in a place you hate working a job you hate can’t be healthy.
    I think your mom’s and accountanat’s advice seem to make the most sense, and I also like your idea of quitting your primary job and then making a short sale/foreclosure more likely.
    The only other option I can think of is :
    Sell the MO house, sell the stocks, quit all the jobs, let the condo go into foreclosure, take the money you’ve got, and go to Brazil.

  24. 24
    cheapseats says:

    RE: Ira sacharoff @ 20 – Ira, it was not a dig at anyone. Since I had not seen Nicole post much here I was not sure if she was familiar with who people were. I thought it fair for her to know that some of the advice was from realtors

    I personally respect your opinion on this blog and am glad you contribute here.

    That said, when someone asks for advice about a group of professionals, I think it fair to know when the advice comes from that group. As Kary stated, maybe RE professionals are the best people in position to give that advice.

  25. 25

    RE: cheapseats @ 24

    No problem, cheapseats. It was just me being prickly, like ” Omigod! He’s calling me a real estate agent!”

  26. 26
    Scotsman says:

    Steve, I’m in the camp that doesn’t expect things to get any better for a decade or more, and indeed think there’s a good possibility they could get much, much worse.

    I’ve dealt with serious disease, and believe that stress and unhappiness are not only contributors, but can kill you. While some stress can be motivating and invigorating, too much can overwhelm us and be seriously detrimental. It sounds like that’s where you’re at.

    If I were you, I’d collect as much of my money as I could and walk out the door. Live simply, have some savings, look for work that makes you want to get up in the morning. The consequences of your actions will have very little, if any, impact on anyone except yourself. And for you, the damaged credit will be repaired and life will go on. But I can’t see killing myself for a decade or more just to satisfy someone else’s sense of honor regarding a business deal where both sides knew the consequences of breaking from the original agreement. Lots of folks are in your situation, and many, many more will join up before this is over.

    Brazil might be interesting. Or Alaska in the summer.

  27. 27
    Softwarengineer says:

    RE: Ira sacharoff @ 23


    Actually, I’m using humor because Steve’s story did touch my heart too. My girlfriend is from Venesuala and wanted me to move to South America too; she showed me pictures of the beaches down there…wonderful…she’s down there now visiting her family. If Steve is tall, the women will go for him down there too.

    If I was Steve I’d keep the house he’s making $300 on now, if he can still commute to work from there [keep making the payments from your hidden cash, if asked, tell anyone that asks that family lent you the money]. Turn the $50K into cash and get it out the bank…NOW. Quit his jobs with medical reasons [get a doctors letter] and wait a month or two; then hand the keys back to the bank on the condo. Contact a disability attorney to get yourself back on it, but have the attorney drag his feet. for months…tell him its for personal reasons, embarrassment over being on disability again….Hades, get a therapist involved to substantiate the allegations and foot dragging. The more you convolute your case before foreclosure/default on the condo the better.

    Kary may not agree with this pirate scheme, but Hades, look what the banksters are getting away with and with bonuses.

    After the dust settles after 4-6 months after the foreclosure is for good….go back to work, but do not go on disability again, it hurts your re-employment chances.

  28. 28
  29. 29
    Kary L. Krismer says:

    RE: Scotsman @ 28 – That’s the problem with charting and pattern analysis.

  30. 30
    David Losh says:

    RE: Steve @ 22

    Good Morning!

    This seems like a trick question.

    You have an answer there in your numbers and amortization schedule. How much is the HELOC and why wouldn’t you pay that down with your savings to get rid of it? Second is that you are making good money and seem like a good person with potential.

    2002 and 2005 were OK times to buy. It’s OK. Many people, in the Real Estate business, financial planners, and economists, thought these were good years to buy Real Estate, in other words, it’s OK.

    Stop beating yourself up.

    I targeted the HELOC first because it is not worthless and is the instrument that will come back to bite you. You need to get rid of it one way or the other so do it now. If a $277K condo is an asset and at $360K it’s a liability that’s less than $100K and you have $50K in the bank. I’m going to go so far as to say that the HELOC is probably for 20% that’s $70K so if you put $20K at the principle the amortization will escalate.

    If you have been reading this blog you might get the idea that Washington D.C. is going to be the biggest job center on the planet. The condo may have future value.

    Let me address your over all premise. You own two properties with a combined negative cash flow of approximately $350 per month. You make, let’s say, $6500 a month. You have $50K in the bank, plus another $40K.

    Real Estate is all about owning it free and clear. If the condo is a problem then pay off the HELOC and pay down the principle on the first to amortize that quicker. Once you pay down the principle you can absorb whatever the reset does. Leave the house to cash flow and start looking at it separately. Handle the problem first then address paying off the second property.

    The reason you should pay off as opposed to what many people look at as a walking away solution is your potential. I don’t know what you do but you have ambitions. Dealing with this problem now will only help you to fulfill those ambitions in the future. You didn’t walk with the disability the first time so why now?

    Oh, the taxes, yes that is a surprise when you find out all that interest on two properties isn’t what you thought. The income from the second unit far exceeds the tax savings. By the way are you counting in the rents as income?

  31. 31
    Steve says:

    That’s been on my mind a lot, the $700 a month loss. It’s only going to grow larger on the ARM reset though. It kind of adds to the stress. Mom is tired of seeing me pay interest only and never wanted me to buy in the first place. Good idea on Brazil though! I’d never thought of that one. This whole thing has me turned upside down. I’m trying to think of ways to game the bank(s) now. I’ve always paid my bills, have an 800+ credit, and now I’m trying to figure out how to get my cash to Brazil. Can I shuttle money out of the country if it is less than 10k without raising eyebrows? Will my cash be safe in a foreign bank?

    Scotsman, that’s what I’m worried about now. I started reading and looking at the press and now I’m scared that the market is going to crash even further in the next few years, both real estate and the stock market. I wonder if I should cash out the rest of the stocks and liquidate? What if the housing market drops another 25% because no one will buy?

    I’m kind of weary thinking about a decade of toil. After the disability I was kind of hoping to take a lesser job that might be more satisfying and now I’m trying to figure out if this is even possible without a messy foreclosure. The lawyer mentioned it won’t be over after foreclosure, that might just be the beginning. Am I going to be sued in court and have some kind of massive judgment placed against me? I’m just tired of thinking abou it.

    Softwareengineer, interesting comments. I’ll have to ask the attorney about the disability and foot dragging. disability just plain sucks though its better than nothing. It doesn’t do much for your self esteem either. Are the banks going to hound for me for getting cash out of the bank? the last few months I’ve been turning my rental checks into travelers checks in case of emergency or default, i guess. I have 10k as a goal for now in various denominations of travelers checks.

    David L, thanks for the comments. It’s more food for thought and things to think about. I’m at a loss to what is the best answer for my cash, as I’ve been holding it in reserve. The HELOC apr is 3% so it isn’t very much interest but I’ve been throwing a grand a month on it for now. The HELOC is at $68 k right now. My brother seemed to think I’m stuck to it as well and it’s a big liability one way or the other.

    I have been beating myself up though. It probably makes no sense. The DC job market is strong. The thought never crossed my mind to let it go on disability the first time. I had the pay to scrape together the payments and still eat ok and have enough money for cable so I could watch daytime TV. I didn’t know the market was that bad and what that really meant as I was carrying this thing.

    Now I’m just panicked. I see a lifetime of saving and scrimping float away and I don’t know what to do about it yet. I got in over my head. I didn’t realize the market would tank and I’d be stuck in an I/O ARM and my lender wants to just squeeze me for interest even though they kept the loan too. They’d be content to see me work three jobs and take every penny. It’s probably good I have the HELOC or they’d get the condo.

    I work in defense consulting so there is some concern as to what a foreclosure will do, though with all of the foreclosures now there may not be much too worry about since it’s affecting everyone. I do have some questions about the right answer and not affecting my future potential. I’m really just panicked. It all started when my accountant firmly pointed out I was bleeding red all over my schedule E and it was just going to get worse. Then he said I could be staring foreclosure in the face and I might want to consult with a bankruptcy attorney. And I’m still in shock. Bankruptcy?? Who buys a condo planning to go into foreclosure. Or die in it becuase they can’t sell it. Let alone bankruptcy. I was like I have 50 grand in the bank, how can I file for bankruptcy?

    I did not add the rental income as my salary though, so I guess I’m making about 125 a year.

  32. 32
    David Losh says:

    RE: Steve @ 31

    This is most definitely a trick question. You have no choice.

    Yes at 3% you are stuck with the HELOC. Did you say cash back?

    You’re on the hook for $68K. With the disability you would have been dragged along the bottom of the ocean in a short sale or foreclosure process then still owed the $68K or been asked for your saving. The government frowns on garnishment so you would be kissing that job good bye.

    If your first is an interest only 5/1 ARM with a year to go buy it down. Ask your lender to convert to a fixed and take your lumps on the interest rate. With a 3% interest on the second you will paying that down soon enough.

    You have no choice. You have to move forward and fix it. Play hard ball.

  33. 33
    Scotsman says:

    RE: Kary L. Krismer @ 29

    While mass psychology and the behavior of crowds/groups is well established and can be seen as a basis for charting, I’m not in that camp. What I found interesting with regard to these charts was the lull or minor bull market in all cases after the initial plunge. Yes, the lull that many now claim is the start of a bullish recovery. B.S.

    There is no doubt in my mind which way this will break- it’s going to be 1929-1940 all over again, not because of any chart, but because of the macro cash flows. The consumer and the country are broke, and neither is coming back until their past excesses have been cleaned up.

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