[(former)FormerSanDiegan]

Interesting thing about this thread is that we can have 15 different answers that are all correct, depending on
which submarket (condos, downtown condos, median price, price in specific area) and whether the call is in nominal dollars or real dollars.

My best guesstimate :

For SFR – Central San Diego Median 20% in nominal dollars
by 2009-2010. (assuming 4% inflation, that’s up to ~40% in real dollars).

[(former)FormerSanDiegan]

PS –

Harry Dent’s Book uses the same demographic argument. The premise is that in the US the peak earning age is about 46. Spending = earnings – savings, and historically savings has been in the 0-7% range, so the bulk of $ earned is spent, stimulating the economy.

Dent showed a strong historical correlation of the US stock market with this demographic and also made the same comparison to the Japanese market. The only difference is that Dent’s book was titled “Great Boom Ahead” and published in 1994.

The reviews I read on this book and the web site itself indicate that this is a thinly veiled rip-off of one of the elements of Dent’s book. Even the title is a play on Dent.

I wouldn’t support this by purchasing. Get Dent’s book, ignore the title, and focus on the demographic trends beyond 2010.

[(former)FormerSanDiegan]

This is a Harry Dent copycat.
The book should be re-titled “The great Butt Head”

The first chart predicts a 7 year huge run-up in stocks starting in 2005 and ending in 2012. By the eyeball it looks like about a factor of 2. That’s 10% per year ?

Woo hoo ! good times ahead the next 7 years. Housing bust … who cares we’ll double our money in the Dow.

The hangover looks bad, though, but who cares, let’s party like it’s 2009.

[(former)FormerSanDiegan]

My contribution to the savings rate …

This thread got me thinking about the negative savings rate in the U.S. and how this was horrible for the economy. I was thinking, geez how come these other people don’t wake up, smell the coffee and start saving … like I do …
Or so I thought.

Since the point I left school about 30K in debt, I’ve always considered myself an obsessive saver. So I started doing the math. For the last 8 years, our family has been maximizing IRA conributions (first ROTHS, then non-deductible IRAS), we’ve been maxing out our 401k (defined contribution plans) since we’ve been employed. We also put a small monthly amountinto 529 plans for our kids (ages 7 and 4) for college, and devote the remainder of our income to living costs. I figured that our annual contributions to these things amounts to about 80% of the median family income in SD. So I figured that we were pulling the weight of about 80 families (when the savings rate was at 1%).

However, after careful research, I figured out that I AM THE PROBLEM . Why ? It turns out that of the >$45K + we “save” each year, only the 529 plan contributions counts. So we are actually only saving about 1%, according to how the savings rate is computed.

I have to apologize to society at large. I am truly sorry. To do my part to bring the savings rate back up to 7%, I need to stop contibuting to my retirement accounts and instead start paying taxes on those dollars and save them outside my retirement account. That way I can go from being part of the problem, to part of the solution.

Is this a good plan ?

[(former)FormerSanDiegan]

build a log cabin, stack up on beans, rice and items for self-defense and wait for armegeddon …

OR

You could contact a commercial real estate expert in the area and find out what it would take to sell this windfall asset for cold, hard cash to invest in assets with which they are already familiar.

[(former)FormerSanDiegan]

Poway –

Only a change in incoming data would reverse my recession call.

Doesn’t this make it less than 100% certainty ?

I see no etiquette rule broken.
Just negative reactions to black-and-white predictions in a gray world of uncertainty.

[(former)FormerSanDiegan]

The savings rate in the US is atrocious and a negative savings rate is unsustainable. As interest rates improve for savings there is now more of an incentive (but perhaps not the ability due to the debt-laden consumer) to improve the savings rate. Hopefully this incentive and the next economic recovery will result in improved savings rates as these boomers mature.

The oldest boomers are just now in their early 60’s, with the tail end at their early 40’s. There is still time for these people to contribute to society in meaningful and productive ways and start saving and becoming more frugal as they age over the next 15 + years.

The $80 billion question is, will they ? and will it be enough ? I think some will, but many won’t and the next generation will learn from these folks and drive savings rates higher over the next 20+ years than the last 20.

I’m an optimist and a believer that economic excesses and deviations revert to the mean and that eventually savings rates will increase in the future. Getting their will definitely be interesting.

[(former)FormerSanDiegan]

PS –

The S&P 500 will double.

In other words, I am betting that the next 100% move in stocks is to the up-side, as opposed to the downside.

On another subject … as for relying on a traders or an economist for short-term stock advice, I think I’d put money on the trader, and here’s the reason :
High-profile economists have to stick by their prediction or “adapt” their opinion slowly as the markets change to save face. A trader knows they will be wrong many times and have no problems switching sides if it will make them money.

[(former)FormerSanDiegan]

Chris –

My reply was tongue-in-cheek. Just pointing back to the ridiculous notion in the original post that an xx% decline in the housing index predicts an xx% decline in S&P 500.

My (near-term) bet is that S&P 500 tests lows in the 1200-1250 range over the next 1-3 months, then rallies at least once more before the $h!t hits the fan.

[(former)FormerSanDiegan]

Today the S&P 500 closed at 1300. Only 700 more points to go. That’s only -3.5 points per trading day between now and the end of May.

[(former)FormerSanDiegan]

I would reccomend staying away from the coast.. coast living is the most overrated type IMO.. it’s hardly ever sunny, and there’s usually a damp salty humidity around..

Yes, and those pesky naturally cool breezes really don’t cut it when compared to a large A/C unit. Also, walking to Mission Bay to roller blade or jog really sucks, and getting sand stuck between your toes from walking on the beach is a real downer.

[(former)FormerSanDiegan]

Perry –
I agree with you … though I am biased, since I actually did buy and remodel a Bay Park house.

[(former)FormerSanDiegan]

LEGS and BACKS being adjusted also …

I just heard from an inside source that in addition to all ARMS being adjusted he recommends that EVERYONE get their LEGS and BACKS adjusted also. He says this is MANDATORY, even though it has not yet been made public. When it IS made public there will be a panic, so you should make your move NOW and get EVERYTHING adjusted before it’s too late. Make sure to get your adjustments SOON.
By the way, the inside source is a chiropractor

[(former)FormerSanDiegan]

I’m (almost) in the same exact boat.

Make sure to consider all the costs of selling …

It’s important to consider the costs of selling versus keeping. I am in a similar boat with a house purchased in 2002. It breaks even and I could sell for about the same gain as you have. I also sold my personal residence in SD in June 2005.

I would have sold the rental but my selling costs would total ~ 20% of the homes value due to commissions and CAPITAL Gains taxes. That’s a guaranteed 20% loss on top of the 10% or so already factored in.

Did you live in the house in two of the last 5 years ?
If so, and if you sell after 7/07 (2 years after previous sale of personal residence) you can take the gains tax-free (minus paying some taxes on any amounts that you depreciated if it was rented out).

If your gain is 180K, the capital gain would be ~ 27K. Not huge enough to make the decision to keep or sell, but large enough to consider. Make sure to take this into account.

In our case we decided to keep the house because of the following financial and non-financial reasons:
1. Cash reserves nearly enough to pay off the house.
2. Positive cash flow.
3. Central coastal SD location.
4. Desire to return to San Diego in the future or use as vacation home in 15-20 years
5. Other diversified investments.

BTW – Your screenname reminded me of the restaurant (Zocalo) in Old Town. Great Food. I miss it.

[(former)FormerSanDiegan]

PS –

Just because a dividend increases, doesn’t mean your investment is any better.

This is not what I wrote or intended.
I wrote, “when bond yields go down, the relative value of REIT dividends go up”

There are certainly some horrific cases where a dividend goes from 3-4% to 9-20% only because the associated stock tanks in value. This is not related in any way to the point I have made.

My point was that an investor is willing to pay more for an income stream that the REIT produces when bond rates have fallen.

Hopefully an example will solidify this …
Suppose you are out shopping for an investment and the 10-year bond pays 5.5% and a commercial REIT pays $6.50 in dividends and costs $100. Now, suppose that the 10-year bond yield goes to 4.5%. The $6.50 dividend in the REIT is now significantly more valuable. The investors that paid $100 for the REIT (1% spread over treasury) might be willing to pay $110 (1.5% spread over treasury) or even $118 (1% spread) .

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