[ybc]

Chances are it is not about the house. It’s about her… and you. Go get counseling if you still have feelings for her. Go get a good attoney if you don’t.

[ybc]

I lived and worked in many cities – Maryland, NYC/NJ, Charlotte, Dallas, Chicago, San Diego. Overall, I think that San Diego has very good talent in wireless (due to Qualcomm) and maybe in biotech (but biotech here is small, and most of them are in startup stage). Otherwise I don’t see how San Diego attracts better talent. In fact, we have problem attracting graduate students from top schools to San Diego sometimes from my recruiting experience. School (UCSD the best here?) is OK here, maybe we have some top research institutions like Salk, but impact is small. It is true, though, that some established people (scientists, professors, business men/women) like to retire here. Money is likely of no issue to them.

My personal experience actually says that overall IT talent is poorer here, but I don’t count it as a reliable data point.

Back to housing and economics…San Diego will likely always have higher price levels (if nothing else, those rich out-of-towners like to keep a vacation home here). But I don’t think it’s supported by better local human capital.

[ybc]

On WiMax, Intel and Motorola both push it hard, partly because they don’t benefit much from existing technologies (from infrastructure side for Motorola). Its core technologies is similar to OFDM, and Qualcomm bought OFDM pioneer Flarion, so Qualcomm should be a player too if WiMax takes off. The “if” is big — even though WiMax itself is a good technology, standards are not firm yet, especially for the roaming part. So by the time that standards get set and the whole value chain (devices, infrastructure, etc) gets established, CDMA EV-DO RevA and HSDPA would have been widely deployed. So WiMax will more likely be supplemental to the existing wireless infrastructure, likely providing high speed data access for hot spots.

It’ll be interesting if NOK rehires here… I assume that they will always want to have some R&D people close to Qualcomm?

[ybc]

I don’t know about software developers, but for system/network architect type, it’s definintely better elsewhere. Even LA is better. Dallas could be better too.

What data suggests taht quality of employees here is better than that found in Dallas (as implied by your statement)?

[ybc]

Indeed, QCOM charges royalty on WCDMA phones at the same rate as it does CDMA phones. That was the reason that Nokia shut down its Sanyo CDMA venture — essentially to enhance its bargaining power now that it’s negotiating with Qualcomm on WCDMA/UMTS royalty rate. It’s critical to Qualcomm, because CDMA in emerging markets is facing serious challenges as CDMA phones are much more expensive than GSM phones…

We lived in Dallas before. It’s short short on weather and scenary, but definitely more cost effective for businesses and for individuals. Also, it’s nice to always be able to get a direct flight no matter where you go…

And I’m pretty sure that average pay in SD is below other major cities for skilled professionals such as IT. Wireless is an exception because of Qualcomm.

I know that If I had a choice, I wouldn’t be here.

[ybc]

A friend of mine just bought a house (above $1M) after selling their older house. He said that he submitted a low-ball offer (about 80% of the higher end of the range, I believe), and it was accepted.

[ybc]

The 15% or so rental increase in SFH could just be a mix shift towards more higher end SFH being offered as rentals. I was surprised by how many $3000+ SFH houses there are on the market; but won’t be surprised if former owners with good profit from selling their houses are now willing to pay up a little so that they don’t compromise their lifesytle. Ultimately, rental price has to be supported by income.

[ybc]

Who holds mortgages and therefore get hurt by a housing price downturn?

– mortgages used to be held by financial institutions (banks, S&Ls) that originated them. But in recent years, more and more of them are packaged into mortgage backed securities and sold to investors, including foreign investors. So if a downturn does occue, the pain will be more spread out, hence less severe at the investor level. Nonetheless, that will drive up the interest rate that investors demand, thus the mortgage rate.

— but there are twists here. For mortgages to be sold, it typically has a guarantee, and Fannie Mae and Freddie Mac have the largest market share that offer mortgage guarantees to conforming loans. Because Fannie and Freddie are government sponsored entities, that give investors the perception that mortgage debt has the implicit US government backing, so that reduces risk in buying mortgage backed securities guaranteed by Fannie and Freddie.

— In order for Fannie and Freddie to give that guarantee, it requires that Loan to Value ratio be lower than 80%. If a 20% downpayment is not made, then mortgage insurance is required in order to get that guarantee. PMI is the largest mortage insurance company in the US, I believe.

So consider that PMI and Fannie and Freddie are buffers to absorb shocks. They are in the front line. Mortgage insurers are the first.

But then another twist is the widespread practice of using piggyback loans to satisfy the 20% downpayment requirement and avoid paying mortgage insurance. So a layer of buffering is removed. In addition, some mortgages are so risky that it’s difficult to securitize them, and they are held by originators.

So who’ll get hurt? Mortgage insurers, banks and mortgage companies that issue a lot of piggyback loans, banks and mortgage companies that hold on to risky loans; Fannie and Freddie (partly because they hold a lot of mortgage backed securities themselves, the guarantee business starts to suffer then price goes down more than 20%, but that’s unlikely because they mostly only guarantee conforming loans, which means that they’d have low exposure to high priced areas like California)…investors who bought the less risky taunches of mortgage securities won’t likely lose their principle if they hold on to maturity.

[ybc]

I’d rather buy put than short. Just limit your total % of puts to an amount that you think you can afford to lose. In another word, not too much. My experience with puts is that sometimes you lose 100% (just like Powayseller said), and sometimes you make more than 100%. If you have more hits than misses, then you are OK. So the discipline is to limit your total exposure if you use puts. Also, think in terms of portfolios, not a single stock (or option). It’s a hedge.

The problem with shorting (I’ve never shorted) is that you have to continuously put up margin if the stock goes up, and you may get squeezed out before you are proven right. The problem with buying puts is that your initial price incorporates time value, and that time value keeps going down.

Either way, shorting or buying puts are not easy. If you experiment, play with a small sum of money. If you’re initially successful, then don’t get too carried away.

[ybc]

Here is one data point on rent going up.

Our former landload is trying to rent her UTC house at about 30% higher than what we paid two years ago. (It seems that she might have done some remodeling work, and based on our experience, probably at the previous renter’s expense – just a guess). Apparently, she can’t find a renter quickly. So now she’s only asking about 20% higher than what we paid two years ago. So it looks that it’s difficult for landlord to keep asking for a high price and shoulder the cost of vacancy. To rent our current place, we did negotiate a little and get a little consession too.

BTW, if anyone is looking to rent a house in UTC and wonder if this is the one, let me know. Because I’d advise anyone against it! (The day we moved out, our neightbor told us that she ran through 6 or 7 renters in 5 years)

[ybc]

A lot of the mortgages are securitized and sold to investors – many of them overseas (especially Asian) investors. So sometimes the banks are off the hook. Although I read recently that some banks still have a high percentage (around 40% to 60%) of their asset in mortgages. With mortgages sold, I don’t know who will be responsible for the cleaning up (i.e. foreclosure, etc)…is the mortgages servicing companies responsible? But one potential chain effect is that once the defaults start, then these investors, who once perceive mortgage securities as safe government guaranteed bonds, will price mortgages with more risk — therefore the spread will increase, further driving up the mortgage rates. Now this only happens if the current safety brake, i.e. the mortgage insurance and guarantees fails to cover the full loss. So additional research can be done using mortgage insurance companies’ (PMI,http://www.pmigroup.com/ for example) and Freddie Mac or Fannie Mae’s data. If that safety machanism is breached, then just like the leeve was breached in New Orleans,the consequences will be severe.

If investors start to shoulder a lot of the loss, then we will likely have a credit crunch in residential mortgages, and that will further drive down prices, and hence starts the vicious cycle. Without that credit crunch, the likelihood of rapid steep price decline will be smaller. Don’t know if fed or the government will try to rescue.

And for those of you who are waiting to buy at a good price, better be prepared to come up with cash:-) becasue financing costs will likely be very high when the price is really attractive!

[ybc]

here is a Washington Post article on the widening gap of income (you may need to register to view the article)

http://www.washingtonpost.com/wp-dyn/content/article/2006/07/09/AR2006070900914.html

Unfortunately, for some struggling at the bottom of the income spectrum, it takes very little (medical problems, job loss, etc) to disrupt their economic security. So they’d turn to home equity to tide them over. But I agree in principle that a lot of people here probably have forgot that one shall always underspend his or her income…

[ybc]

I want to follow up on the retirement thread. I think that the social safety net (social security, company pension, healthcare) is gradually being withdrawn, and a majority of people don’t realize it. Current retirees still enjoy good pension if they’ve worked for a large employer, social security complements that. Many of them enjoy their employer’s retiree healthcare benefit before medicare kicks in. Their housing is worth a lot. Inflation (other than healthcare) is mostly low. Their adult kids probably extrapolate that peaceful retirement into their own old age.

Fast forward 10 to 20 years. Future retirees will rarely have company sponsored healthcare. I see a lot of discussion on pension, but healthcare is even worse a problem. Only a minority of retirees will have employer sponsored pension (defined benefit kind). Medicare by then will very likely run into serious solvency problem. Social Security probably will still be OK. So to have a good retirement, one has to have a house that’s paid for (forget about how much it’s worth), healthcare from somewhere, and enough savings to cover all other expenses. No, a lot of people won’t be able to aford to retire, at least not living the same standard of living.

I have a friend who jokes that since all their money is spent on their kids, their house is their retirement. I guess reverse mortage will be a very popular financial product 10 to 20 years down the road.

[ybc]

I’m about to buy a car…have always bought used ones paying cash. Now I’m considering buying a new Toyota highlander. Do I get a good discount if I get a one year old? What’s the best place to get a good slightly used car?

[ybc]

Maybe it’s not a big percentage, but wireless industry is strong in SD because Qualcomm is here and it’s doing well, and I heard that they pay very well. There are many many small biotechs in San Diego, and scientists there get paid quite well too. Still, in aggregate, SD doesn’t have a high wage level.

Regarding why people don’t see that a big price correction is coming — by definition, bubble exists when a majority of people believes that the existing price trend will continue. It appeals to human’s basic biases, and it comforts them in believing so. On the other hand, if there is no price correction later on, then people still stop calling it “bubble”. To me currently housing is borderline on being stable – anything go slightly wrong may tip the balance. Could be ARM reset, could be foreigners want to get out of dollar and dispose of dollar based mortgage based asset and drive up lending cost further… the problem is that once the process starts, it can easily escalates because of debt level, use of ARM and interest only mortgages, and real-estate dependent consumer spending and job creation.

The problem is that the tools that were available in the past to stimulate were already used. Fiscal policy — debt is already a big problem. Monetary policy – more easy money will only lead to further commodity inflation and a more leveraged economy. Not that policy makers won’t use this to provide more temporary release just to make people happy a while longer.

For disclosure, I rent. I had to move twice in the last two years – once because landlord is a real pain, another time because landlord wants to move back. Moving is a big pain, and I have to say that owning has certain quality of life advantages. But I’m sticking with renting for now.

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