Forum Replies Created
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AuthorPosts
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stansd
ParticipantRancho Bernardo
1800 Sq Feet
Lot of 7K
3-4 BR
Great Condition
400K, but would get interested at 450K if the market seemed to be stabilizing.Bad as this is, I’m almost hesitant to buy before the next recession. Crazy credit is one thing, but there is nothing like a job loss to motivate sellers.
Stan
ParticipantRancho Bernardo
1800 Sq Feet
Lot of 7K
3-4 BR
Great Condition
400K, but would get interested at 450K if the market seemed to be stabilizing.Bad as this is, I’m almost hesitant to buy before the next recession. Crazy credit is one thing, but there is nothing like a job loss to motivate sellers.
Stan
ParticipantOne thing that I think we are overlooking a bit on this site…Most folks around here understand, but the nuance seems to be getting a bit lost: The subprime CDO market is in a bit of a tailspin. That said, and undeserved AAA ratings notwithstanding, the majority of the subprime tranches will weather even a severe pop of the housing bubble.
This is a bit oversimplified, but Returns on a CDO roughly equal (Interest + repayment of principal – management fees -expenses for dispositions of defaults + collections from sales of defaulted properties)/(initial investment).
There will no doubt be a bloodbath in the “toxic waste” tranches (little interest, little repayment of principal, big disposition expenses, and sales on defaulted properties with a significant haircut).
Assume the following scenario, though: Market Dives 30%, and subprime REO’s go to 20%. Also assume it costs 10% to dispose of a property.
Let’s just talk principal (interest collected further reduces the impact): If you start with $100 of CDO, you still collect $80 (REO’s at 20%). Then, of that $20 you didn’t collect on, you can sell the houses in that $20 for $14 (30% market drop), and you have to pay $2 to dispose of the assets.
In this oversimplified Scenario, then, you still have $80 of principal + $14 from the REO’s – $2 from the REO expenses = $92. Now if the toxic waste segment takes that entire loss, you are probably looking at a complete wipeout of that tranche, and some creep into the tranches above. Not a good thing. That said, there are a lot of holders of the higher tranches still getting paid even in a pretty bad scenario.
This would still cause a substantial disruption; The higher rated segments aren’t so highly rated any more, pension funds have to drop them automatically raising the spread over treasures and decreasing the value. Hedge funds go belly up because of leverage, overexposure, fear. The cost of subprime mortgages skyrockets because banks have to sell that toxic waste tranche very cheaply, etc. Maybe the subprime market isn’t even viable for a time.
What doesn’t happen unless you consider the absolute worst, though is huge losses throughout all the tranches. There is a lot of money that will be lost here, but lets remember that when you hear that there were $300B in subprime originations, it’s only a small fraction of that where losses are actually likely to occur.
Stan
ParticipantOne thing that I think we are overlooking a bit on this site…Most folks around here understand, but the nuance seems to be getting a bit lost: The subprime CDO market is in a bit of a tailspin. That said, and undeserved AAA ratings notwithstanding, the majority of the subprime tranches will weather even a severe pop of the housing bubble.
This is a bit oversimplified, but Returns on a CDO roughly equal (Interest + repayment of principal – management fees -expenses for dispositions of defaults + collections from sales of defaulted properties)/(initial investment).
There will no doubt be a bloodbath in the “toxic waste” tranches (little interest, little repayment of principal, big disposition expenses, and sales on defaulted properties with a significant haircut).
Assume the following scenario, though: Market Dives 30%, and subprime REO’s go to 20%. Also assume it costs 10% to dispose of a property.
Let’s just talk principal (interest collected further reduces the impact): If you start with $100 of CDO, you still collect $80 (REO’s at 20%). Then, of that $20 you didn’t collect on, you can sell the houses in that $20 for $14 (30% market drop), and you have to pay $2 to dispose of the assets.
In this oversimplified Scenario, then, you still have $80 of principal + $14 from the REO’s – $2 from the REO expenses = $92. Now if the toxic waste segment takes that entire loss, you are probably looking at a complete wipeout of that tranche, and some creep into the tranches above. Not a good thing. That said, there are a lot of holders of the higher tranches still getting paid even in a pretty bad scenario.
This would still cause a substantial disruption; The higher rated segments aren’t so highly rated any more, pension funds have to drop them automatically raising the spread over treasures and decreasing the value. Hedge funds go belly up because of leverage, overexposure, fear. The cost of subprime mortgages skyrockets because banks have to sell that toxic waste tranche very cheaply, etc. Maybe the subprime market isn’t even viable for a time.
What doesn’t happen unless you consider the absolute worst, though is huge losses throughout all the tranches. There is a lot of money that will be lost here, but lets remember that when you hear that there were $300B in subprime originations, it’s only a small fraction of that where losses are actually likely to occur.
Stan
ParticipantPlease do not feed the trolls.
Stan
ParticipantPlease do not feed the trolls.
Stan
ParticipantNow we are really off topic, but only the Old Testatment law says that. The new says we are all screwed up, and live in the freedom that those screw ups have been covered.
Based on that I will come forward as righteous…not on my own actions, which are as rotten as the next bloke, but based on the death of my savior who has covered them on the cross.
Let the religious heretic bashing begin.
Stan
ParticipantNow we are really off topic, but only the Old Testatment law says that. The new says we are all screwed up, and live in the freedom that those screw ups have been covered.
Based on that I will come forward as righteous…not on my own actions, which are as rotten as the next bloke, but based on the death of my savior who has covered them on the cross.
Let the religious heretic bashing begin.
Stan
ParticipantAt the risk of getting off topic again, I think your lemon analogy is flawed. Your neighbor owns the lemon tree, but the true owner of the internet signal is the broadband company. The fact that your neighbor granted you access to that signal makes it no more moral than if a bank employee chose to leave the vault open for you late at night.
Stan
ParticipantAt the risk of getting off topic again, I think your lemon analogy is flawed. Your neighbor owns the lemon tree, but the true owner of the internet signal is the broadband company. The fact that your neighbor granted you access to that signal makes it no more moral than if a bank employee chose to leave the vault open for you late at night.
Stan
ParticipantI’m living in RB, not making a ton more than 90K, tithing, wife staying at home, just blew 2K on a ridiculous TV, and putting 15K into my 401(k). It can be done-it does entail some sacrifice, especially versus other parts of the country, but it can be done.
The other thing always worth noting: economic studies show we base our quality of life on our immediate peer group. We are filthy, filthy rich compared to 95% of the world. Tithing, or not, the idea that your Coach handbag or Armani Suit (or ridiculous TV) could feed 30 malnourished kids in Ethiopia for a year through a charity that puts over 80% of its expenses to actual use should give you pause.
When I was in business school, I remember sitting around a lunch table one day. I asked about 10 of my classmates how much it would take to make them happy. First answer: 10M. Thought to myself, wow that’s really high, would only take me about 2M. Second answer 25M…I’m thinking…these guys must be anomolies. Rest of the answers: 10M, 25M, 25M, 50M, 10M, 10M, 25M, 10M, 30M…many of them were from wealthy families.
The key is being grateful and content for what you do have. You’ll never have as much as you want-the human ego and appetite for wealth are both insatiable.
Stan
ParticipantI’m living in RB, not making a ton more than 90K, tithing, wife staying at home, just blew 2K on a ridiculous TV, and putting 15K into my 401(k). It can be done-it does entail some sacrifice, especially versus other parts of the country, but it can be done.
The other thing always worth noting: economic studies show we base our quality of life on our immediate peer group. We are filthy, filthy rich compared to 95% of the world. Tithing, or not, the idea that your Coach handbag or Armani Suit (or ridiculous TV) could feed 30 malnourished kids in Ethiopia for a year through a charity that puts over 80% of its expenses to actual use should give you pause.
When I was in business school, I remember sitting around a lunch table one day. I asked about 10 of my classmates how much it would take to make them happy. First answer: 10M. Thought to myself, wow that’s really high, would only take me about 2M. Second answer 25M…I’m thinking…these guys must be anomolies. Rest of the answers: 10M, 25M, 25M, 50M, 10M, 10M, 25M, 10M, 30M…many of them were from wealthy families.
The key is being grateful and content for what you do have. You’ll never have as much as you want-the human ego and appetite for wealth are both insatiable.
Stan
ParticipantSDHH,
We probably should get our families together for dinner sometime…sounds like we are in a similar situation with similar ideas:)
Ignore the nonsense on this board about tithing. We give 10% pre tax to our church (Protestant) as well, not because it’s an OT obligation, but because we are grateful for how God has blessed us and want to give back. Most of the responses on here are from people who clearly aren’t religious and don’t get it. Hopefully someday we’ll be giving much more than 10%. I’m married with one child & 1 income as well. I’m in a similar financial situation, but don’t have some of the self employment expenses, and make a bit more. I also get frustrated from time to time with things: I have an MBA from an Ivy league instituation and still can’t afford a house in SD (not sure how bad I really want one, but hate not being able to afford it if I did).
My Budget:
Rent: $1,875
Grocery: 475
Utilities: 190
Gasoline: 208
Student Loans: 200
Clothing: 83
Internet/Phone/Cells: 102
Church Giving: 850
Entertainment/Athletics: 171
Auto Insurance: 232 (was 150-wife backed into 2 cars)
Other expenses: 800-Car Service, Cash, Computer, Dining out, misc. household, haircuts, vacation (wife’s parents in NE)Health insurance is through work. I also save 15K/Year to my 401(k).
that’s enough detail. As others have suggested, your grocery bill is way too high unless you are eating very, very well. My wife uses http://www.thegrocerygame.com along with getting veggies from Be wise ranch. I live 5 min from work, which saves on Gas. I’d consider the $600 toward loans to be savings-paying down debt is a form of savings…my loans are at 2%, so I’ll never pay them off.
Your take home also suffers from the fact that you are paying your own employment taxes.
I’d say you could trim $500 from your budget, but there are other things that don’t seem to be on your list, which might eat that up anyway.
If you want to live on one income, SD isn’t the place to do it, that’s for sure. That said, a few years from now, it may be just fine.
My experience has been that there are a lot of young couples around making around 100K on 2 incomes (blue collar or service jobs). Then there are a few making around that amount on 1 income (college educated professional). There are some that have 2 incomes and are in the 150-180K range (2 College professionals)-those are the ones that can afford a house, but are working hard for it. Then there are older folks, who often are around 130K for the family, but have a ton of home equity and so are living quite well on the old SD standard of living.
Your observation is just an anecdotal proof point of why current prices won’t persist. Hope the budget data is helpful.
Stan
ParticipantSDHH,
We probably should get our families together for dinner sometime…sounds like we are in a similar situation with similar ideas:)
Ignore the nonsense on this board about tithing. We give 10% pre tax to our church (Protestant) as well, not because it’s an OT obligation, but because we are grateful for how God has blessed us and want to give back. Most of the responses on here are from people who clearly aren’t religious and don’t get it. Hopefully someday we’ll be giving much more than 10%. I’m married with one child & 1 income as well. I’m in a similar financial situation, but don’t have some of the self employment expenses, and make a bit more. I also get frustrated from time to time with things: I have an MBA from an Ivy league instituation and still can’t afford a house in SD (not sure how bad I really want one, but hate not being able to afford it if I did).
My Budget:
Rent: $1,875
Grocery: 475
Utilities: 190
Gasoline: 208
Student Loans: 200
Clothing: 83
Internet/Phone/Cells: 102
Church Giving: 850
Entertainment/Athletics: 171
Auto Insurance: 232 (was 150-wife backed into 2 cars)
Other expenses: 800-Car Service, Cash, Computer, Dining out, misc. household, haircuts, vacation (wife’s parents in NE)Health insurance is through work. I also save 15K/Year to my 401(k).
that’s enough detail. As others have suggested, your grocery bill is way too high unless you are eating very, very well. My wife uses http://www.thegrocerygame.com along with getting veggies from Be wise ranch. I live 5 min from work, which saves on Gas. I’d consider the $600 toward loans to be savings-paying down debt is a form of savings…my loans are at 2%, so I’ll never pay them off.
Your take home also suffers from the fact that you are paying your own employment taxes.
I’d say you could trim $500 from your budget, but there are other things that don’t seem to be on your list, which might eat that up anyway.
If you want to live on one income, SD isn’t the place to do it, that’s for sure. That said, a few years from now, it may be just fine.
My experience has been that there are a lot of young couples around making around 100K on 2 incomes (blue collar or service jobs). Then there are a few making around that amount on 1 income (college educated professional). There are some that have 2 incomes and are in the 150-180K range (2 College professionals)-those are the ones that can afford a house, but are working hard for it. Then there are older folks, who often are around 130K for the family, but have a ton of home equity and so are living quite well on the old SD standard of living.
Your observation is just an anecdotal proof point of why current prices won’t persist. Hope the budget data is helpful.
Stan
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