Soup's Nightmare

[chibear]

scottcardiff,

 

Tanks for the fascinating piece on the real estate scene out there.

 

My dad lived in Palm Desert for 30 years. Now I understand why friends of his, who live on the coast and never go out to the desert anymore, keep their places on Indian Wells nevertheless.

 

I think something will have to happen with Jarvis if the state is ever going to get solvent. I'd have preferred keeping spending under control, which was Jarvis's vision, but that battle was lost long ago, and most present homeowners stood by while the increases mounted.

 

My original plan was to retire to San Luis Obispo. But why pay 700K plus for a decent house when I can buy a palace for that figure in Charleston, SC or Sarasota?

 

Tanks again. I always enjoy your comments.

[Guest yobob1]

Foxy, I went long before that, in 1976.

In 1982 I went long treasury bonds and non-callable munis ( I had more money by then). You did not need the stock market with the government guaranteeing you a compound rate of return exceeding 12% for thirty years.

In hindsight, that was the buy of a lifetime.

Today, you don't need the generic stock market either. It's madness.

The buy of this lifetime was gold at sub-$300 in my opinion.

 

Oh and silver at 4.50 too!

[Guest yobob1]

scottcardiff,

 

Tanks for the fascinating piece on the real estate scene out there.

 

My dad lived in Palm Desert for 30 years. Now I understand why friends of his, who live on the coast and never go out to the desert anymore, keep their places on Indian Wells nevertheless.

 

I think something will have to happen with Jarvis if the state is ever going to get solvent. I'd have preferred keeping spending under control, which was Jarvis's vision, but that battle was lost long ago, and most present homeowners stood by while the increases mounted.

 

My original plan was to retire to San Luis Obispo. But why pay 700K plus for a decent house when I can buy a palace for that figure in Charleston, SC or Sarasota?

 

Tanks again. I always enjoy your comments.

There are many reasons for owning real estate and many reasons for selling. Some sales are planned and others are forced by circumstances of one nature or another. Those who own outright and are happy with where they live are mostly unaffected by valuations unless it impacts them negatively from a tax standpoint. What if the Gubenator, desparate to raise revenues at all levels of government modifies California's property tax laws and long held properties were suddenly subject to a higher base assessment reflective of the market? "That will never happen!" Governments do pretty much what ever they want to do. In Idaho we passed, on initiatives, term limits twice. Both times the state government ignored and repealed them. The voters said we want term limits. Those in power said we don't and therefore we won't have them.

 

The truth is most people don't own their properties outright and with the frenzy of the last 5-10 years, depending on the market, prices have far outpaced income growth and the general level of inflation. Low rates drive the market and prices. Raise the rates a little and the "affordability" drops, prices soon follow. The statistics don't lie. Prices have soared nationwide and yet the aggregate equity has plunged to new lows, which pretty much says that those who have financed their properties have next to zero equity. Just a tiny shaving of property values puts a whole bunch of RE underwater.

 

There will always be "islands of exception". Previous RE manias tended to be isolated and driven by local expansions. Not this time. It is nationwide and has infested every little bumfork town as well as every metro area. Think Savings and Loan scandal times 100. For the last 3 years it has been the engine of this economy, basically replacing a lot of the lost manufacturing jobs. When construction starts to wane, we will lose those misplaced manufacturing jobs and some of the core construction jobs. At that point the true unemployment levels become clearer. I doubt it will be pretty. At current IR levels RE is no longer providing the requisite escalating credit expansion. There are two choices: either IR (10 year yield) falls to levels necessary to prime the pump (WAG <3%) or another credit bubble must be created to allow the continued expansion of credit at a rate sufficient to keep the wheels spinning. I'm unsure just what credit bubble could be ignited at this point.

 

As to equities, It smells like March 2000 all over. "Good news" is busting out all over. The sky is the limit; we're on a roll. My gut says we will peak long before the Spring thaw. How it goes depends on the short levels, margin levels, and how well program trades work in reverse.

 

RE withdrawing cash. I'm pretty sure withdrawing cash from your account is not subject to reporting requirements, though different bankers may have different levels of nosiness. It is the depositing or spending of cash that is subject to reporting. Otherewise it's nobody's business if you want to remove your cash from your account. I'll check with my banker, but last time I did (about 2 years ago) they were not required to report my withdrawls regardless of the amount.

[chiefywiefy]

Scottcardiff, Thanks for the CA RE update. It is interesting to note differences in state tax policy that can effect supply/demand/price relationships. Here in Moo Hampshire, we have no income or sales tax. Mostly everything is financed through property taxes and it seems like every 10 year revaluation is simply a well disguised tax increase. Unfortunately, when unemployment spikes here the property tax bill remains with the worker of no income and it puts added pressure on the market.