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powayseller
ParticipantI took the strategy of selling, renting, and will bottom fish. Agent commission of 4% plus $2K moving costs each way is minor compared to the money I took off the table. Earning 5% interest on the profits vs. losing 15% annually on the $800K house! As far as tax deduction, this has been covered before: you’re basically deducting part of the interest. Well, I DON’T pay interest now. No capital gains taxes on the first $500K profit (eliminated in late 90s). I also don’t have property taxes, no home improvement/repair/maintenance. My financial situation has greatly appreciated since I sold my house.
It’s questionable whether commodity prices will stay high. I read Steven Roach’s report today, and he makes good points about the parabolic rise in commodities showing another asset bubble. People are buying on specualation of further increases. Prices have risen much faster than actual demand for the commodities. There’s always a “it’s different this time” story. The commodity different this time story is China. China will not create enough demand to make today’s commodity prices stick. Despite high inflation, wages have been flat for at least 5 years, and will continue to be flat due to the global low wage market in which we compete.
As far as why this time the drop will be greater: the imbalance is much greater between incomes and housing prices, 80% of San Diegans who purchased in the last 2 years will face foreclosure bec. they got ARMs, most SD job growth is RE dependent and we will see huge job losses as RE unravels, banks will fail as foreclosures rise, and if you need to quickly move because you lost your job in the RE bust you’ve got more flexibility if you’re not tied down to a house. MEW was 90% of GDP. Without it, GDP would be less than 1%, and that’s what you’ll see next year when MEW stops.
Rich is not recommending that people sell their homes. He never has. But I’ve said it all along. I highly recommend that everyone sell their home and rent until they can bottom fish. Check with your accountant first to make sure there aren’t any unusual circumstances for you. For most people, this is a prudent financial move. Let the landlord carry the loss for you.
We are hoping to afford a house near the coast when this is all said and done. We’ll pay $800K for today’s $1.5 – $2.0 million house. And we’ll do it with a 15 yr fixed mortgage.
In investing, patience and discipline are key.
ParticipantWhere did you read about these sideline buyers? Is there a statistic on mortgage preapproval inquiries? Or are these cash buyers? I see plenty of people still jumping in, even though they know prices are dropping. RightSide comes to mind. I have a friend who’s moving to San Francisco; they sold their Carlsbad house in 2003 to get out of the housing bubble, they see prices dropping, and the wife is tired of renting is going to buy a house this summer. I’m fascinated by the thinking of people who believe in a price correction, yet buy anyway.
They could buy a house twice as nice in 3-5 years.
ParticipantWhat about the euro? Or the renminbi – can that be purchased?
I see Gold is coming off its high, just as you said. Do you wait to buy until you see the Commercials long, or do you wait for a certain % decline? I would like to take a large position in gold, but am waiting for a pullback.
ParticipantDo you have any charts for the COT currency report? I do like your blog, Chris. I check it every day.
ParticipantWhere are you invested now? I like your philosophy, and it is similar to mine. The Inverse Funds are interesting. RYWBX is a way to bet against the dollar without having to buy foreign currencies. However, I thought of getting euros through an Everbank account.
ParticipantSeveral on this forum are actively looking for homes. Some will wait for prices to hit bottom, while others, such as RightSide, are within weeks of purchase.
Chris and Bugs and others, what would you see as reasons that people might want to buy now? I mean, even the guy making $7mil/year doesn’t want to lose money. What motivates a person from this forum, who knows about the dropping market, to buy a house now? I find this a fascinating topic.
ParticipantSo a manufacturing economy benefits from a devalued currency, while a consuming economy prefers a stronger currency.
Yet, our leaders don’t seem to mind a devaluing dollar. I’ve read this in several commentator reports. Also heard that a lower dollar will finally increase our exports, so again, it’s a positive development.
“The Treasury Department has suggested it won’t stand in the way of a weaker dollar as it has refrained from protesting the currency’s slide, said George Kapasakis, a senior trader at Mizuho Corporate Bank in Sydney.”
ParticipantThese are excellent points. The RE bulls forget that our 1.x% rise in population is mainly from illegals and births (net exodus of 40K San Diegans), and those people don’t create effective demand. Sometimes I hear quality of job comments, but those are rare.
Today’s median household income of $65K should buy a median house 3-3.5x that income, so that’s $215K. The actual median of $500K-something shows how far people have stretched with exotic loans.
ParticipantRightside, based on these posts, could you clarify that as a high net worth individual you are indeed paying cash? If you are, then tell us all to mind our own business.
Also am wondering what kind of business you are in, that brings you to San Diego. Is there some new growth in a new industry, that hasn’t yet made it to the employment data, or are you transferring with an existing company? I would like to better understand the type of people who can come here and buy $1 million houses for cash.
ParticipantI remember RightSide, you did not like my posts Sell Now and the Benefits of Renting. Of course you can ignore my advice, and I do wish you all the best. On the plus side, your property taxes will be reduced by 50% in 5 years, as property values decline. A little something to look forward to… All kidding aside, I hope you find the home you love, and get a great deal. It sounds like you are informed, can handle a possible 50% decline in value, have a secure job that will withstand the recession, and will have a 15 or 30 yr fixed rate mortgage. With all that in place, enjoy your new home. And welcome to San Diego!
ParticipantYou know, I like getting along with people. I’m the kind of person who has a half-smile on my face all the time. I thrive with cooperation. Perhaps you have some tips for keeping more cooperation on this forum.
ParticipantThe Census Bureau reported 43,000 people leaving SD County between 2004 and 2005. With the natural birth rate included, population may be growing. But the exodus of the working adult is a new trend. This could be why you have the positive figure in your data.
I’m researching the employment data, and hope to have answers next week. I am also bothered that we get totals, and not breakdowns. The UCLA Anderson Forecast said we have 1.5% increase in Professional and Business Services, and this sector will keep growing. But which jobs? Why do they never say?
Most job growth is in low wage occupations of restaurant, retails, tourism. High wage job growth is in real estate: realtors, loan officers, contractors.
We need more job growth in engineering, biotech, ship building, manufacturing, movie making, inventing, what else? I’ve not read any headlines of job growth in new areas of a while. I used to read lots of biotech headlines and the promise of new jobs in this area. What happened?
ParticipantIt should. The IMF is meeting in July to figure out how to save the dollar. UK’s Observer writes IMF acts to avoid markets meltdown. There is a global dollar sell-off. “We’re in a meltdown mode”, according to Bear Stearn chief European economist David Brown.
Participantoops – the above post didn’t post properly the first time. Above is the Census data for population exodus.
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