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EconProf
Participant[quote=The-Shoveler]Agree CAR,
We may lose a few jobs at first, but the increased spending would create more better paying jobs in a very short time IMO.[/quote]
Actually no.
This “increased spending” from the higher-paid workers is coming from where? The higher payroll outlays of employers who must pass it on to customers via higher prices. So consumers spend more at the impacted businesses and thus less at other businesses. The lost jobs at those other businesses are part of the full impact.
A beautiful example of the seen vs the unseen.Participant[quote=CA renter][quote=EconProf]We economists are largely in agreement about raising the minimum wage: it will kill jobs.
The recently proposed mild increase in the federal minimum wage would cost about a half-million jobs, according to federal officials.
But the huge jump to $13.09 for San Diego only would have a far more powerful impact on employment within our city limits.[/quote]Probably getting the 500,000 figure from the CBO, but you’re omitting some things, too:
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Effects of the $10.10 Option on Employment and
Income.Once fully implemented in the second half of
2016, the $10.10 option would reduce total employment by about 500,000 workers, or 0.3 percent, CBO projects. As with any such estimates, however, the actual losses could be smaller or larger; in CBO’s assessment, there is
about a two-thirds chance that the effect would be in the range between a very slight reduction in employment and a reduction in employment of 1.0 million workers (see Ta b l e 1 ).Many more low-wage workers would see an increase in their earnings. Of those workers who will earn up to $10.10 under current law, most—about 16.5 million, according to CBO’s estimates—would have higher earnings during an average week in the second half of 2016 if the $10.10 option was implemented.1 Some of the people earning slightly more than $10.10 would also have higher earnings under that option, for reasons discussed below. Further, a few higher-wage workers would owe their jobs and increased earnings to the heightened demand for goods and services that would result from the minimum-wage increase.
http://www.cbo.gov/sites/default/files/cbofiles/attachments/44995-MinimumWage.pdf
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I’d say it’s a positive, overall.[/quote]
Thank you, CAR, for buttressing my point about a half-million jobs lost from a higher federal minimum wage by quoting the actual CBO language. But I don’t see it as a net positive.
First, yes, they say the range of job loss could be well under a half-million to over a million. But then they settled on a half-million jobs lost. Where is the positive in that?
Second, yes, some current workers now paid above the minimum wage will get a wage bump. And some of them will also lose their jobs–they are part of the half-million.
It boils down to employers acting rationally and wanting to maximize their profits. If you can put yourself in employers’ shoes, they balance their inputs like capital vs labor in order to be the most efficient. If the government suddenly dictates that they pay more for one of those, they will use less of it wherever possible. And they have the incentive to find all sorts of ingenious ways to do so: automate where possible (e.g. self-checkout counters), hiring two skilled workers to do the work of three unskilled workers, moving their business to a nearby suburb that did not raise the minimum wage to $13.09…the list is endless. And yes, none of this will happen immediately. But over time, the damage will be done.
The minimum wage is one of those emotion-laden terms that sounds good on the surface but underneath does real long term damage. Politicians act accordingly because they can count on the public not digging deep into the real effects. A century and a half ago a french economist, Bastiat, put it well: the seen vs the unseen. We pass laws according to our emotions and gut feelings, without examining the many secondary effects.ParticipantWe economists are largely in agreement about raising the minimum wage: it will kill jobs.
The recently proposed mild increase in the federal minimum wage would cost about a half-million jobs, according to federal officials.
But the huge jump to $13.09 for San Diego only would have a far more powerful impact on employment within our city limits.ParticipantI used to do a lot of trust deed investing, and it is fraught with land mines for the beginner. Go pay for a good real estate attorney to play it safe. It will cost you, but then you can sleep at night.
ParticipantI am in Yuma, AZ, where it is now 4 degrees cooler than San Diego.
We got an email from our HOA in San Diego telling us to evacuate.
Fortunately our house has no brush around it so is relatively safe. As for RSF and Fairbanks, that’s another story.ParticipantSome observations about your guestimates:
The price to rent ratio looks awfully optimistic. Are you sure you can get that high a rent on a $150,000 property?
Landlord insurance looks way high. If it is a condo, why do you need insurance at all?
Property tax will be at least 1.2% of value, or $150/mo.
If your mortgage payment is $600/mo, at least $100 of that will be principal payoff, which is a form of forced savings, or, actually, income, just not cash income.
Glad to see you factored in vacancy cost, repairs, and misc, and put them on a monthly basis, even though they happen infrequently. Many beginners overlook these expenses.
As flu suggests, the long run is what counts, and it depends mainly on the rate of appreciation of the property. The big money in rental real estate is historically made, or lost, due to property values changing over time, not cash flow.ParticipantDecisions of whether to hold or sell an investment should not depend upon past events but on future expectations. If you expect values to go up and rents to increase in excess of cost increases, then hold on. Whether you paid too much or not in the past does not matter, except psychologically. Even whether or not it is making money now or not, does not matter. Investing is all about future expectations.
Investors who were courageous enough to buy pretty much anywhere in San Diego at the bottom–about 2009-10–have profited handsomely. They looked at the losses everyone in real estate had just suffered and decided that it was a good time to buy. They based their decision on their future expectations, not the past. So the question now is what will happen to San Diego rents and costs, and market prices. I wish I knew.ParticipantI guess I didn’t make myself clear.
The market rent for one’s particular unit incorporates all the factors you bring up. The market rent for an extra nice unit, or a better location, or an ocean view, etc. will naturally be higher. A unit with negatives would command a lower market rent.
Accordingly, one should never charge “above market rent”. Again, the hard part is “price discovery”–to objectively look at comps and find your proper rent.ParticipantMy policy is to look at market comparables and put your rents slightly below the average. Rental comps are just like for sale comps–location, size, condition, neighborhood, etc. all factor in to one right price for your rents. The reason you should come in slightly under the market rent is to keep your vacancy periods to a minimum, and to keep good tenants happy.
What is utterly unimportant is many of the factors people have been bringing up here: higher costs, your mortgage rate, how long you have had it, taxes, etc. The market doesn’t care. Supply and demand results in one single number for your market rate, and that is what you need to discover. Craigslist is a great tool for that. And yes, people, just like appraisers, disagree about that number. So you have to really do your research, and take a cold-eyed, clinical view of the evidence. With that ammunition, raise your rents as much as the market allows, minus a decent margin, more for a good tenant, less for a bad one.
This way a good tenant will have no reason to move, especially if they are rational consumers and also look at comparables.
I run 35 apartment units in a depressed part of the country. I have not raised my rents in six years, because the market remains weak and it won’t let me. My tenants think I am a nice guy for not raising rents. I’m not. I’m just listening to the market.Participant[quote=The-Shoveler]I could not imagine moving from say a Palos Verdes home to the Dallas area holds much appeal.[/quote]
Piggington has often had dialogue concerning where it is best to live or do business. Inevitably, posters who defend CA reveal what is called confirmation bias, or “my side bias” wherein we seek out information that reinforces our existing choices or beliefs. Accordingly, those that bash Texas are really seeking to prove to others, and maybe themselves, that they have made the right choice, and those in competing states are fools or yahoos.
I’d bet that a Piggington-type site in Texas with a topic of where it is best to live or do business would be full of rants against California.
I grew up in Minnesota, where they bragged about the wonderful change of seasons. I left when I realized nine months of winter wasn’t for me. I read that in North Dakota, when an outsider complained about the bitter winters, a native said “It keeps the riff-raff out”. Come to think of it, there aren’t many homeless there compared to San Diego. To each his own.ParticipantGo to a title company to ask for advice. They may just tell you to take it to a lawyer, which will cost plenty. But they are interested in generating good will and having you as a customer, and may just give you useful information. Can’t hurt to start there…its free.
ParticipantToyota has weighed the pros and cons of CA vs. Texas, and decided to leave. They undoubtedly based their decision on the vastly different costs of living in the two states, the taxes, utility costs, regulations, and “business friendly” comparison, and work ethic of the two different populations. Most of all, they have to be future-oriented, so they looked at the political trends of the two states and decided CA was getting worse in all of the above categories relative to Texas. We voters picked our government, now we are living with the results.
ParticipantI’ll tell you later.
When we economists make forecasts, we like to use those fuzzy words to be able to define them later and then be able to say “Yep, I predicted that”.ParticipantLet’s drop this silly subject of imminent hyperinflation. It has been predicted for years now, and has not happened. In fact, the Fed, the EU, and many economists now say the bigger threat is deflation. The fact that one of these scaremongering posts forecasted terrible coming inflation in 2011, and the fact that average inflation only decreased since then tells us how much credibility we should assign to them.
Their fears are based on monetarism, the economic theory pushed by Milton Friedman that an increase in the money supply (M1, M2, etc.) quickly translates into inflation. However, Friedman also took into account the velocity of money–how quickly it changes hands. Because of structural changes in our banking system and people’s desire to hold on to liquid assets, velocity has slowed way down. Accordingly, though the Fed has rapidly increased the money supply in order to stimulate the economy, these structural changes have offset the stimulus, so major inflation has not occurred.
So as a school of thought, Monetarism is not dead, it simply must be properly applied. Indeed, hyperinflation may still occur some time in the distant future, but there is no sign of it now. -
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