[powayseller]

I used to move my 401(k) money over to Vanguard quarterly, even though I still worked for that company. Did the rules change? Maybe you need to talk to a supervisor. The rollover rules require that you move to the same account type, so you can’t move a SEP-IRA to an IRA, etc. But they should be able to set up an appropriate receiving account. Are you talking about the $10K you can withdraw penalty-free for the purchase of your first home?

[powayseller]

Mr. Brightside, since you are the resident expert on downtown, could you tell me more about your opinions on its current development, both residential and commercial? How many people have moved there? What are the demographics of the current population? What will drive its future prospects? Is the City of San Diego encouraging any development via grants? What would you do for downtown if you were mayor? What are your long-term interests in that area? I know very little about downtown, other than the Gaslamp Quarter has more restaurants than I could ever hope to visit in a year.

Downtowns are a reflection of a city’s urban planning and economics, and showcases the city to the rest of the world. What kind of message does our downtown send? Has San Diego done well in its planning? How does our downtown area compare to that of other cities?

I love your blog, by the way.

[powayseller]

Trough: 2011-2012

SFR, fall from peak in 2005: 35% – 50%
(90% chance of min. 35% drop, 20% chance min. 50% drop)

[powayseller]

Outsourcing started in the blue collar sector decades ago. We felt bad for the unemployed auto worker, but then shifted our attention to the benefit to us: cheaper cars. When Levi’s pulled out of the US, we felt compassion for the displaced families, but then reminded ourselves that jeans would now be cheaper. All along the way, the consumer benefitted, at the expense of the few who lost their jobs. Those of us in white-collar jobs never cared much about the manufacturing sector, because it affected “them”, and not “us”, as we were safe in our office jobs.

Not any more. Borders are opening wider, and outsourcing is gaining momentum, as it has moved to to white collar jobs. It’s not only engineers who are affected. Even doctors must worry about their job security. First, it started with radiologists in India scanning digital images. Recently I read that an East coast company’s employees fly to India to get surgeries at a fraction of the cost. My in-laws have been going to Mexico for years for their dental work and medicine.

A global economy will lead to global wages. Our wages will go down, 3rd world wages will go up.

This is only the beginning. If you want job security, be a plumber. Or be more creative than everybody else.

For 90% of the people, wages will go down to meet the rising wages in 3rd world countries, until the entire globe has equal wages, an equal standard of living. That is how it should be, if we have any sense of justice and compassion for others.

[powayseller]

Japan’s residential and commercial property bubbles resulted in large amounts of bad loans for the banks. The bad residential loans were a small amount, and the RE bubble was not tied to consumer spending. So the main problem in Japan was the busted commercial property values, which caused lost money for companies and banks.

As the value of commercial properties fell, companies cut back on spending, reducing economic growth. In Japan, apparently corporate spending is a bigger part of GDP than here, so a cut-back in corporate spending slowed the economy.

So Japan’s corporate sector and banking sector sustained big losses, and their monetary policy made several blunders, which sustained the economic slump.

Our housing bubble is more related to residential real estate, excess employment and inventory in anything related to housing, and excess consumption financed via MBS from the rest of the world. Our slump could be bigger, since our dependence on consumer spending is greater than Japan’s dependence on corporate spending, and we have sucked savings from the rest of the world to create our bubble.

Our brightest economists and Fed leaders studied what went wrong in Japan. They will not make the same monetary mistakes that prolonged Japan’s slump. OTOH, our federal and trade deficits and personal debt are higher than Japan’s so it will be difficult to jump-start our consumption-driven economy.

Yet, the fallout here could be worse, since housing-created wealth has driven GDP growth. Once housing prices stop rising, GDP growth will fall, and turn negative. Add to that bad loans in the hundreds of billions of dollars, a GSE bailout, pension fund bailouts, and you have the possibility of a great depression. I am admitting that instead of a recession, this could be a depression. The question is, what monetary, political, and foreign policy can come to the rescue? So yes, this could be as bad as Japan, or it could be worse.

[powayseller]

vrudny, count me in with the “stupid”. Although my CPA was hounding me about switching over to Roth IRAs, I didn’t want to take the tax hit. So I prefer the tax deduction today over the tax savings later, hoping my tax bracket will be lower in the future. However, your way is probably better for the long run.

[powayseller]

That sounds like great advice: look at the competition that got offers (pending and sold). Should you expect your realtor to go along with you on this investigation?

[powayseller]

JES is right; why are you priced $20K more than the other 2-3 guys on your street? Your higher price would be a reason that buyers are passing you up. If they are also passing up the other 2-3 guys, then they are listed too high, also.

So here’s the situation: $249 is too high, but you price at $269. If $249K is too high, then $269K is also too high. What is the right price? Look at a recent comp, and subtract at least 2% per month. So for a May comp, subtract 10%. A realtor can advise you better, as I am just making guesses at the price drops. But you get the idea; find a comp, and then adjust downward depending on how old the comp is. And please, don’t chase down the market; you’ve got to figure out the market price today.

What you’ve got on your side is that you are in a perfect price range for a first time buyer. My neighbors are out of that price range: they have a first-time house at a middle-aged home buyers’ price, so their prognosis is horrible; I doubt they will ever sell until they drop to $300K. But your place is affordable to a starting family. Take advantage!

[powayseller]

dalsik, the 10%/5% rule is something I read on realtor Jim Klinge’s website .

He also writes that buyers will pass up anything with any hint of imperfection; they want the best yard, best location, not backing up to a busy street, etc. He also advises:
“1. Fix up the house the best you can.
2. List it for an attractive price.
3. Start lowering it within two weeks.
4. Keep lowering it until you find what the market will bear.”

Definitely check out his website, and if you are not locked into a realtor, give Jim a call. He’s one of the few good realtors out there: honest, understands the bubble, truly wants to help the buyers and sellers, smart, hard worker, and very nice.

[powayseller]

You set up a Roth IRA in the same way as a regular IRA, except you check the “Roth IRA” box. That means you won’t deduct your contribution from your taxable income. I don’t know any of the tax rules, but I’m sure you can get it all by “googling”. I can buy stocks in my IRA, and my neighbor bought real estate with hers (land via an investment firm). I bet you can do the same with your Roth IRA.

[powayseller]

Not too many; between pension funds going under (Pension Benefit Guaranty Corp insures only a fraction of the obligation), home prices goind down (retirement backup for many), flat wages, and rising debt, not too many.

Did you see the Frontline story about the new trend of boomers working part-time after “retirement”? I posted it this summer… According to Frontline, traditional retirement is history!

[powayseller]

Neighbor #1 is a friend, #2 is dead (estate sale), and #3 wasn’t there when I spoke with the realtor. However, thanks for defending my neighbors, as I am sure they are appreciative of your concerns, and anything that makes my neighbors happy, pleases me as well.

[powayseller]

The problem goes beyond immigration: who is going to buy the glut of recently built McMansions, at a time that demographics show a preference for homes 1800 sq ft and less? As in North Dakota, I think we’ll see lots of homes sell below construction cost. McMansions and Hummers, a symbol of the overconsumption and waste of early 2000, will be shunned. Who will buy them?

[powayseller]

These last exchanges between me and my friend Chris led me to questions the usefulness of economic forecasting for making money.

How useful is economic forecasting to investors? Look at people like Chris, who have made a living off trading, and who doesn’t give a darn about recessions. It’s not even in his model. He can make a bundle without ever looking at unemployment, recessions, or consumer spending. It seems to me that a good trader beats a good economist any day.

I think economic forecasting is important for businesses, government, and long term buy and hold investors. I use it to measure the business cycle, and know when to get in and out of the stock market.

Do most traders beat most economists at investing?

What do you all think?

[powayseller]

Yes, compassion is needed, both for those fellow brave piggingtonians (hey, add that to Wikipedia!) who were teased for their early knowledge of the bubble and selling their real estate, and to those mass followers who piled in at the end, fearful to be left out of further gains.

Few people fully understand real estate cycles, so most pile in at the peak, and get out at the bottom. Just like the stock market, it is the individual investor who gets hurt. I remember too watching as people around me made fortunes in the stock market in 1999. I was a little envious. By late 2000, my envy stopped.

I blame myself for missing out on the real estate bubble. I have compassion for anybody owning a house right now; most don’t even know yet how little their main asset will be worth in a few years.

[Author]

Posts