[RottedOak]

Please note that if you try to use any of the typical tax protest arguments (no law requires filing, etc.) as a basis for failure to file, the IRS will assess a substantial additional penalty for taking a “frivolous position” against filing. These arguments get traction on discussion boards and in ordinary conversation because most people don’t have the detailed knowledge of constitutional and statute law to refute them, but in court they will just make the judge mad at you for wasting the court’s time.

[RottedOak]

One positive for your situation is that you bought early in 2004. Based on your escrow date I’m assuming you paid Feb pricing. That was the biggest year for increases, so you would have paid significantly more in Nov/Dec. That explains why your home has appraised for the original purchase amount — you’ve been insulated from the price declines so far because you were just losing the (theoretical) gains made since you bought.

[RottedOak]

This is a classic example of a periodical publishing a press release straight from the source. Look at the note at the bottom of the article that says the author “is with Scribe Communications.” Scribe Communications is a PR firm! This type of lazy, non-journalistic behavior by the media is exactly why PR firms and their customers even bother to write these releases. All it takes is a one indolent editor who decides to fill space the easy way, and suddenly the company’s message is legitimized as “news”

[RottedOak]

The professional flipping companies will probably continue to do fine, because they focus on buying and improving the most distressed properties.

“Flip This House” has started doing “flip forward” updates on what happened to their old flippers. Most of them are from far enough back in the boom that they did make money, but the updates finally tell the truth about their profits. In the original episodes, they just took the realtor’s proposed selling price and subtracted the purchase and renovation costs. They didn’t take into account carrying costs, realtor commissions, closing costs, etc. The updates acknowledge these costs when calculating the final results.

A few of the flips flopped. This is sometimes papered over by the flippers, who declare that they “fell in love” with the flip house and decided to keep it to live in themselves. I did see one admit that “the market changed,” so they put it out as a rental. They haven’t shown anyone getting foreclosed, but I doubt someone in that situation would put their face on TV for an update show.

[RottedOak]

HOA vs. no HOA is partly a lifestyle preference. Some people just don’t like the idea of a community board telling them when to take down their holiday lights, etc., while others want to live in a community that has those types of restrictions. That preference isn’t really a financial decision.

Regarding what you get for your money in terms of amenities, I would look at this very closely. For example, a high-rise building will have expenses for things like elevator maintenance and window washing. If you are on a high floor getting the benefits of the great view, then you might be OK with those costs. If you are going to be on the lower floors, you are still paying but not getting much return on those parts of the HOA fee. Similarly, think about whether you will use the pool, gym, etc. — really use them, not just think, “I’d love to start working out again.” On the other hand, if the condo with the expensive HOA is a five-minute walk from your work, while the SFR will be in a suburb with a long commute, you should factor that in as well.

Bottom line is that if you are going to buy at all — and I would counsel caution on buying in general right now — your choice of housing involves so many factors that it is hard for strangers to give especially good advice.

[RottedOak]

You can use SDLookup.com to get sale data on properties in San Diego county. This particular property sold for $446,900 back in 2002. However, that alone doesn’t tell you what the owner is paying per month, because you don’t know how much he put down, what his interest rate was, whether he has refinanced, etc.

[RottedOak]

You have to be very careful with this type of thing because you could easily end up being accused of fraud yourself. Shows like “Dateline” work with local authorities. If you set up your own “unauthorized” venture and approach an honest broker, etc. with some shady deal, they might report you to the police. Then you are left trying to explain to skeptical authorities that you didn’t really intend to rip anyone off.

[RottedOak]

My favorite line is, “I can only work with you if you or someone you know have an average credit score of at least 680.” (emphasis added)

Also, while this seller claims to have access to zero-down loan programs, the pictures indicate that he doesn’t have access to a housekeeper. Is it really too much trouble to move the fast-food cup off the kitchen counter before you snap the photo? Or move the shirt that’s hanging on the lamp in the bedroom?

I’d categorize this one as FSBI — for sale by idiot.

[RottedOak]

Just because Zillow indicates a particular value does not mean that you could actually sell for that price. Zillow is using automation to come up with an estimate. Real buyers often feel differently about the value. The buyers for high end homes ($2M is atypical even for LA) are much fewer than for “regular” price ranges, and each home tends to be unique. As a result, these homes often sit on the market for a long time even during a boom waiting for a buyer who can afford the home and likes it. If you waited another six months and asked for the extra $600K, you might have still been sitting on the listing as prices turned down.

BTW, for those who didn’t look at the info, this home is in LA, not anywhere in San Diego county.

[RottedOak]

A better way to compare Irvine and Minnetonka might be to look at their price increases over the past decade. Sure, many might consider Irvine to be more desirable, and thus it commands higher prices overall, but I don’t know of anything that has happened in the recent years to make Irvine increasingly more desirable than Minnetonka.

[RottedOak]

I don’t doubt that some people got ripped off on their mortgage, but many just failed to do their own due diligence. And comments like this one really irk me: “The debt is forcing people to take second jobs, sell family possessions, and rent out a second room.” OH NO! People have to work hard and take on boarders to afford more home than they should have bought in the first place! What kind of over privileged snot makes a comment like that?

[RottedOak]

Yes, I disregarded the details of your “brink of collapse” predictions in my reply. I have read enough end-of-the-world-as-we-know-it predictions to know that they barely deserve a response. I remember how the population explosion led to worldwide famine in the 1970s, inflation ravaged the economy in the 1980s, peak oil destroyed the remainder in the 1990s, and finally society ground to a halt on Y2K. After living through all of those disasters, the unwinding of the yen carry trade should be a breeze. And we’ll need a cool breeze after all the global warming.

Do I think there will be a housing bust? Obviously. Recession? Probably. General economic disaster? I don’t think so. Your “macroeconomic” claims are just the latest fantasies of the inevitable and ever-present doomsayers.

[RottedOak]

An HOA (homeowners association) is the homeowners, acting as a corporate body. They can definitely change their fees.

However, those fees aren’t imposed just because someone felt like charging them. They pay for things, such as maintenance and community services. If the HOA wants to lower its fees, it has to budget accordingly. That might mean cutting back on luxury services (concierge, 24-hour security), renegotiating vendor agreements (gardening, maintenance), etc. I lived in one community that stopped heating its pool in the winter and cut back the hours for security patrols to control fees. But there’s only so much they can do. If the building is a 20-year old high rise with elevators, long-term maintenance issues, high insurance costs, etc., then the fees are still going to be high even if you fire the concierge, let the plants die, and stop washing the windows.

[RottedOak]

An increase of 0.7% is a statistical blip. These are only the preliminary numbers, which are almost always revised by the following month and sometimes revised again after that. Here are the PHS index numbers as they were originally announced and as they currently stand for 2006:

Month * Original * Revised * % Revision

Jan * 116.3 * 119.3 * +2.6%
Feb * 117.7 * 119.4 * +1.4%
Mar * 116.2 * 116.5 * +0.3%
Apr * 111.8 * 112.9 * +1.0%
May * 113.4 * 112.7 * -0.6%
Jun * 113.9 * 112.0 * -1.7%
Jul * 105.6 * 107.1 * +1.4%
Aug * 110.1 * 108.9 * -1.1%
Sep * 109.1 * 107.6 * -1.4%
Oct * 107.2 * 106.8 * -0.4%
Nov * 107.0 * 108.4 * +1.3%
Dec * 112.4 * 113.3 * +0.8%

The average change using absolute values is 1.2% — more than the claimed 0.7% month-to-month increase. By the time they finish revising the numbers, the increase could easily be a decrease instead.

[RottedOak]

Partypup, you write that you are “flabbergasted that the author thinks that a return to 2001 prices is out of the question.” I’m not certain who “the author” is in this case, but if you mean me (as the author of the post that started this thread), then I would point out that I said no such thing in my posts. I said that such predictions lack a foundation in the historical data.

You say that the situation we face is “completely unprecedented in the modern financial world” and that “Gauging the impact of the coming housing crash based on past downturns will be of no use this time.” So it seems that you consider the past data to be of little relevance.

Regardless of how relevant you think the past is, you should avoid making false statements about it, such as, “But prior to 2001, we had seen steady 5 – 7% appreciation.” Appreciation in San Diego was far from steady. Instead it showed considerable up and down swings. Here is the year-to-year average appreciation from 1987 to 2000 (from the Case-Shiller Index data):

87-88: 12.3%
88-89: 22.2
89-90: 8.8
90-91: -3.8
91-92: -2.8
92-93: -5.4
93-94: -1.7
94-95: -2.2
95-96: -0.7
96-97: 3.8
97-98: 13.1
98-99: 12.4
99-00: 15.1

Perhaps this downturn will be much worse than any prior one. Perhaps not. Either way, I can say with confidence that generalizations about impending economic collapse combined with falsities about historical appreciation are not going to convince me of it.

[Author]

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