[VCJIM]

Wow, that is fascinating Desmond. I never knew that! Idaho is having a terrible property tax issue, I’ll post some links.

[VCJIM]

My house sold in Feb 2005, I’ve been renting since August 2004 in a much nicer area, better schools and WAY better house. My house was one year from being paid off on a 15 year fixed loan. We paid some of the principal down the first year we bought it, turning the 15 year loan into 11 or 12.

The house I am renting is in a community of similar homes (cookie-cutter), the prices have not changed much since I started renting. Strangely, though, two were recently removed from the market after about 3 months of sitting. I don’t know if they sold, going to different realtors, repos.

[VCJIM]

When everyone’s doing it, it becomes accepted practice. That is when it is most dangerous!

I have two friends with 1Mil+ homes on I/O, stated income loans (this info comes from a mutual friend, I don’t know it for myself). Both with families, kids, expensive cars, etc. They are both musicians. Hmmmm….

[VCJIM]

With the interest rate as low as it was, all banks should have been DEMANDING traditional loans, not fueling the fire with low interest rates AND psycho loans. I hold the banks and any other institutions that allowed these loans 100% responsible for the bubble.

Many on here, I believe, would hold the consumer responsible. While there will be some tough-love education coming up, most people do not educate themselves before they get a loan; they trust the bank. This puts the bank in a position of responsibility for ensuring the consumer can pay for the loan.

[VCJIM]

I agree with Poway. I/O and other non-conventional (although now they may be called conventional!) loans were created with a specific purpose. Take, for example, a medical student that knows he will have a significant increase in income in two years, once he is done with residency. However, he has kids and wants to purchase a house in a good school area now. This is a perfect case for an I/O loan…it allows them to get into the house and it is relatively assured they can pay the increases when the time comes.

It should be clear from the above example that these are very rare cases; the loans are being used for other than their intended purpose. What happens when a tool is misused? It breaks!

I will have to say though that this will be a real test of resiliency for many Californians. While the extravagance really came out with radically increasing home values, will we see extreme thrift as they decrease? Rented out rooms, working longer hours, eating in, less travel, using coupons? I think we will see people really stretch to make it. I, and many of the people I know have made it through tough times using these tactics.

[VCJIM]

I would not invest with anyone that does not know the difference between “weather” and “whether”.

“I don’t want to debate with you over **weather** this is a good investment or not. Western Financial Planning has been in business since 1978, and has quite a track record. I’ll be happy to share that info with you if you are interested!”

Some might think I’m joking, but I am dead serious. If I received that lettter, I would NEVER have anything to do with them again. It goes to professionalism and care…if they can’t get that right, how could I trust them to get investments right?

[VCJIM]

The aspect of goverment revenue has been on my mind a lot lately too. I believe our governments (local, state, fed) tend to spend what it takes in; it does not tend toward conservation or saving. This is a blanket statement that may have exceptions, but I believe it is the natural tendency.

Moreover, I am doubtful that many financialists within these governments are mindful of housing as it relates to government revenue, specifically what would a housing downturn mean to them?

I can think of two main aspects:

first, the re-evaluation of the house’s tax base one it’s sold. If fewer and fewer homes are sold, there will be that many fewer being re-evaluated.

Second, if property values are declining, there can hardly be a basis for increased property taxes.

So, if our governments are currently spending all of their property tax revenue, what will they do when it is no longer increasing? What will they do when sales tax revenue drops significantly due to lowered consumer spending?

[VCJIM]

I recently read a funny conundrum:

Inflation rises, so fed raises interest rates. Rising interest rates makes house purchases less affordable, thereby increasing rentals. Increase rental demand causes increased rental prices, which increases inflation.

while redically oversimplified, it made me realize the number of factors that must be at odds with each other, and constantly changing with time, micro and macro economics, politics, etc. when interest rates change. I like the idea that the head of the Federal Reserve is in contact with corporate CEOs and the like, to get a real idea of what is happening.

[VCJIM]

Most homeowners care what is going on, but do not have / want to take the time to research like we are. So an article full of statistics and graphs, etc. would fall on deaf ears. A simple, well written article will hopefully be effective in preventing some people from financial turmoil.

[VCJIM]

Sorry, my bad. Was reading too late at night : )

[VCJIM]

Would this not, at least partially, explain the skewing of the median up? If the 750K – 1Mil homes are selling more frequently than under 750K, it would match many of the hypotheses I’ve read here.

[VCJIM]

Poway, you bought shorts against home collateral lendors?

[VCJIM]

Thank you Lindi, that’s very nice of you to say : )

I’m in Ventura County, so it would be quite a drive, but maybe next time I will make it.

I also do business with China, but I’m a manufacturer / exporter. Shocking, I know! But I see it the same as you.

For example, take the packing foam we use to package our products; the cost of this is directly tied to the cost of petroleum. My business has slowed down in the last couple of months, so I am purchasing less packing foam, thereby consuming less petroleum. Then I start thinking about all of the other things I purchase that are tied to petroleum…EVERYTHING. Then I start thinking about all the things that are manufactured in China. These are not necessarily the consumer goods labeled “Made In China”. I think about printed circuit boards and material, ICs, those plastic knobs in your Toyota, Honda, etc. It is mind-boggling to consider how many products we buy from China, even though we may never know it. Another example is a Gateway computer. How much of that comes from China? I don’t know exactly, but I would bet a huge portion. Many PC mother boards are made in Taiwan…but guess what that means? In most cases it means the board was assembled, and tested, in Taiwan, with electronic components largely manufactured in China.

Then, if one is of the belief that USA consumption is a significant driver of manufacturing production in China, directly or indirectly, AND one believes we are headed into an economic slowdown, then it would follow that China would consume less petroleum.

Maybe. I’m often very, very wrong. And I love it, because then I get to learn something new.

[VCJIM]

I certainly could be wrong, wrong, wrong. I don’t recall writing that I am right, right, right. Only that my opinion is a little different than yours, and the reasons why.

I have believed that China is strongly export dependent, that they have not built a consuming infrastructure. Has that changed? Is it changing?

[VCJIM]

I don’t belive China will consume more oil if the Yuan increases in value. I belive their consumption is tied to demand, based primarily on manufacturing. So if demand for Chinese goods decreases, Chinese demand for fuel decreases. Just my guess.

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