[EconProf]

The real estate agent is selling something which is overpriced, but something you can be proud of owning for its appearance or location.

[EconProf]

Long ago I bought a tiny dump of a house in Normal Heights with such a sagging foundation that the roof line was uneven. No buyer could get financing so I paid $48,000 cash, rented it for $900, and sold it for an obscene profit a few years later. Most profitable buy ever, especially compared to some I picked up that are still underwater.

[EconProf]

[quote=spdrun]Interest rates: no idea, but betting on same or higher since they can’t get much lower.
Economy: slow growth in sum, but not necessarily even by time or area.
Property: Lots of foreclosed properties to still be worked through in the East Coast judicial states, which is what matters right now, less in states where processing is faster. Not a huge change in values since lending standards are still tighter than a few years ago, despite recent changes.[/quote]
I see the opposite.
Interest rates “can’t get much lower”. That is exactly what forecasters have been saying for years now, and interest rates continue their downward trend. I think they will trend lower for most of the year. Reasons…far lower interest rates in most of the developed world. In Europe they are close to zero. European investors put their money here for a better interest rate and a currency play as the dollar continues to rise with our relatively stronger economy.
The lower interest rates will continue to lower our cap rates and prop up values of real estate in all categories.

[EconProf]

[quote=spdrun]Interest rates: no idea, but betting on same or higher since they can’t get much lower.
Economy: slow growth in sum, but not necessarily even by time or area.
Property: Lots of foreclosed properties to still be worked through in the East Coast judicial states, which is what matters right now, less in states where processing is faster. Not a huge change in values since lending standards are still tighter than a few years ago, despite recent changes.[/quote]
I see the opposite.
Interest rates “can’t get much lower”. That is exactly what forecasters have been saying for years now, and they continue their downward trend. I think they will trend lower for most of the year. Reasons…far lower interest rates in most of the developed world. In Europe they are close to zero. European investors put their money here for a better interest rate and a currency play as the dollar continues to rise with our relatively stronger economy.
The lower interest rates will continue to lower our cap rates and prop up values of real estate in all categories.

[EconProf]

You should raise the rent, for all the good reasons you explained.
1. One rent increase in three years should be acceptable to any thinking tenant, especially since San Diego market rents have risen. And I suspect they have gone up more than you think.
2. You can point out in your rent-increase letter that your costs have gone up.
3. You can point out higher rent comps in the neighborhood to justify yourself.
4. You can point out that no further rent increases are contemplated for at least_____years.
A rational tenant will not be prompted to move because of your proposed rent hike. Of course, some people might move out of spite, even if it is to their own disadvantage.

[EconProf]

That’s a good question and one everyone should be asking of themselves occasionally.
I am heavily into real estate in a weak area economically, but have done OK mainly because of the low interest rate environment. Have regularly refinanced into lower interest rate loans over the past 6 years. So cash flow is good because interest costs have been cut in half. Appreciation in values, not so good.
I am not at all into the stock market and wish I had been, since it is 2 1/2 times its low of about six years ago. Now it is so overvalued that I cannot imagine jumping in, which is exactly what I have thought for each of the past few years as it has gone up.

[EconProf]

Try the misnamed chain store Burlington Coats. One is in the Clairmont area of San Diego. Big selection, low prices.

[EconProf]

Home warranties buy you some peace of mind, but at a high price. Their fine print shows there are a lot of things they don’t cover, so the odds of your filing a claim are fairly small. Like extended warranties on cars and other big purchases, they are highly profitable to the companies, but not a good deal for the consumer. The best indicator of this is something called the payout ratio, which is the share of premiums collected that an insurance company pays out in claims. It’s pretty small for home warranties–perhaps 50 percent or so. That said, it’s so common and expected in home purchases, the buyer can still demand the seller pay it.
As for renewing it after one year, that really makes no sense.

[EconProf]

[quote=livinincali][quote=CA renter]
While jealousy and the desire to attain a dominant position and to remain on top are perfectly natural human emotions (and probably necessary for survival, especially in more primitive times), the extent of this empathy/lack of empathy for others is likely at the root of our political/sociological differences.

And I believe that it takes a certain intellectual perspective to be able to truly appreciate another person’s lot in life — especially if it’s very different from one’s own — and to have empathy for them…leading to a true desire to see them attain a higher socio-economic/power status that might feel more “threatening” to those already at the top.[/quote]

I don’t know that it’s a lack of empathy. It’s the fact that many people don’t behave as rational economic actors. If you give someone living paycheck to paycheck a $10/hr an hour raise are they going to use that addition money to save and behave rationally or are they going to blow it on junk from China.

No matter what people make there’s always going to be someone on the bottom and if your at the bottom you’re likely to be subject to some scarcity of some resource. The poorest of poor in this country live better than billions of other people on this planet.

I’ve come to realize I can’t put myself in some dumb persons shoes. I just can’t understand the decisions that they make or the things that they deem are important. I also can’t dictate how they should do things either. That’s where the Ivory tower types get it wrong. They can’t force people to behave in a logical economic manner.

I know the flaws with supply side economics but if you want everybody to have a higher standard of living you need to produce more quality goods and services.[/quote]
I think you nailed it Livinincali. A big difference between the poor and the middle class is their time horizon, their planning, and their ability to defer gratification. This is either taught by the parents or not, and it has a lifelong impact.
What is important that we inherit from our parents is not so much money but values which determine our lifetime spending, education, and work ethic.

[EconProf]

Profits = revenues minus expenses. Companies naturally seek to increase profits. They can use various means to increase revenues or cut expenses. It looks like, for whatever reason, they could increase profits, or decrease losses, by letting go some of their employees. In other words, the contribution of those employees to the firm was not worth their pay. I don’t see a problem with that.
I’m sure they did not enjoy laying off people, but their job is to satisfy their customers and their stockholders, not be a charity.

[EconProf]

It is hard to believe San Diego’s housing is almost as expensive as NY, San Francisco, and D.C.
Worse is that our average household incomes are far less than those big cities. I bet that housing expense as a % of household income would place San Diego as the most expensive.

[EconProf]

CAR, the (apparent) fact that your husband is a firefighter explains your strong defense of government sector unions. We all get that. I don’t know why you won’t admit it. Piggs are smart enough and fair-minded enough to look beyond that fact and weigh the arguments and evidence based on their merits.

[EconProf]

[quote=CA renter][quote=EconProf]Thank you for telling us what you have done in the past. What about your spouse?[/quote]

Also in the public sector after working for years in the private sector.

If you were a full-time, faculty professor, are you also receiving a pension and, possibly, retiree healthcare? How about your spouse?[/quote]
Someone told me he is a firefighter. Is that correct?

[EconProf]

Thank you for telling us what you have done in the past. What about your spouse?

[EconProf]

To answer your question–I taught economics for 18 years at SDSU and have since kept up with the research and published nationally.
CAR, please tell us Piggs what you and your spouse do for a living.

[Author]

Posts