patrick.net

IMO, It is not whether hurricanes are stronger or more frequent

hmm, i think they are changing latitudes too though -- going further north and south in their respective hemispheres... and they're supposed to be more intense as well... could just be due to natural decadal oscillation...

they won't be densely populated areas for long if they keep rollin' in...

"The number of major hurricanes has more than doubled in the last six years. The increase is part of a long-term climate shift that is likely to persist for several decades, said Chris Landsea, a meteorological researcher with the U.S. National Atmospheric and Oceanic Administration (NOAA) Hurricane Research Division and co-author of a study on the findings in the July 20 issue of the journal Science. "

national grographic wouldn't lie -
http://news.nationalgeographic.com/news/2001/07/0719_hurricanes.html

"During the American Revolution, [Benjamin] Franklin is reputed to have proposed the impractical but scientifically tenable idea of diverting the flow of the Gulf Stream to freeze the British."

The strategy's finally worked, 230 years later...

"“During the American Revolution, [Benjamin] Franklin is reputed to have proposed the impractical but scientifically tenable idea of diverting the flow of the Gulf Stream to freeze the British.”"

Ah, Day After Tomorrow scenarios, can I hijack this thread for another Jack Gyllenhaal non sequitur?

"“During the American Revolution, [Benjamin] Franklin is reputed to have proposed the impractical but scientifically tenable idea of diverting the flow of the Gulf Stream to freeze the British.”"

Ah, Day After Tomorrow scenarios, can I hijack this thread for another Jake Gyllenhaal non sequitur?

The Chinese have a saying: If you want one day of unrest, throw a party. If you want a year of unrest, remodel your house. If you want a lifetime of unrest, marry a concubine.

Paying Hamptons or Hawaiian prices for Florida RE always seemed kind of silly to me. Every awake person knows about the constant hurricane threat, the humidity, and the lack of things to do (other than Disney World).

It's kind of like paying full Westside prices to colonize Watts...Or paying house prices for condos...Oh wait, those Miami condos are in bad neighborhoods!

I appreciate all the estate planning wisdom from everyone here. Sadly, we've done just about nothing aside from financial planning. My wife and I are pretty much the first and only from our families to have anything worth planning, so we tend to probably be way to humble about it. Something about the way I grew up tells me that planning my estate means I must be full of hubris. The very word 'estate' doesn't even feel right.

Nonetheless, I'll call my lawyer Monday and get this taken care of. Now if only I can figure out a way to finagle into a Prop 13 legacy property.

Randy,

Don't feel so bad. My wife and I have holographic wills. Probably adequate for where we are today, but embarassing nonetheless. The cobblers kids go barefoot.

-hominmem
+hominy

I think for the most part, there will be more downward pressure on prices due to the more freely flowing distribution of information on the internet. However, there are still some realthors trying there best to brainwash the public into believing the market is going to get better and some sheeple will believe it too as in the very bottom of this article quotes.

"It's a much more attractive time to buy now," said Dettor, 33. "Prices aren't so ridiculous."

"There is a fear of buying at the top of the market," Hunter said. "Once people satisfy themselves that the market is not going into a tailspin, they'll go ahead and buy."

Do these realthors really believe this themselves?????? I think this guy hunter should really be the hunted!

BS said,

hmm, i think they are changing latitudes too though — going further north and south in their respective hemispheres… and they’re supposed to be more intense as well… could just be due to natural decadal oscillation…

they won’t be densely populated areas for long if they keep rollin’ in…

Now you're a climato-sociologist?

Mike,

Shouldn't you be out trying to sell a house?

Randy,

If you have a life insurance agent or a financial planner already, I'd recommend you talk to them first. They should be just as experienced on the basic stuff and a lot cheaper than talking to someone at $200/hr.

Your personal lawyer will probably suffice for a simple form will, advanced medical directives, etc. Chances are, they'll be straight out of a form book with few minor changes. You can probably DIY with a little research and a friendly notary public.

You can get ready by getting as much financial information together as possible. You're pretty happily married to your first wife, so your primary concerns should be (1) caring for your son in case you and your wife are both out of action (2) probate avoidance (3) dealing with long term illness/disability problems.

For meaty tax planning stuff, I'd recommend you look for someone who specialize in the area. Your lawyer or financial planner or life insurance agent should have someone good on their rolodex. You want to look for someone who spends the majority of his/her time on estate planning and related areas, has at least 5 years of experience, and frequently deals with relatively complicated estates.

disclaimer - just suggestions, always do your own homework before acting

astrid,

Thanks for the advice. We have a crack tax acct and tax attorney already due to my having been a C/S/LLC/LLP owner and my wife having had various stock options and such (not to mention her status as a Section 16 insider). I think our tax planning is well in line, except for probate avoidance. I'm more worried about legal stuff. I don't trust insurance agents as a general rule and I do the financial component of our wealth management myself. What I need is someone to ensure that we have the right legal structures in place to prevent subversion of our intent should we become dead prematurely, or other calamities and such. Both having extended families that are in quite different economic positions than we, there is a huge potential for moral hazard should something happen to us.

Otherwise it's pretty simple. First marriage, 1 child, shared intent to provide financial security to our child in a reasonable manner consistent with our values, maximize tax avoidance, minimize threat of external opportunists laying claim to a single copper plated cent that we sacrificed much of our lives to earn. Isn't this what everyone wants pretty much?

especially when you look at recent exceptional hurricanes and cyclones in the southern US, northern australia, floods in central europe, and the possibility of the entire warming Gulf Stream Atlantic currents disappearing… banks in Europe will no longer finance ski resorts under 1500 m altitude… and they’re selling off the skifields here asap…

But how can one ascertain that the "warming" be "global"? How can one attribute such "warming" to "greenhouse gases"?

testing

newsfreak,

Vegas works because losses are spread out into a series of smaller losses, whereas wins are infrequent but larger. This supports what RLA is claiming which is actually just straightforward mental accounting. To generalize, an average person will equate approximately twice as much significance to a loss than to a gain, in some circumstances much more. So Vegas works because losing lots of $2 bets doesn't hurt so bad, and you occasionally win $25. So you feel one $25 high in between a series of $4 perceived lows, all carefully engineered to cause you to pretty much always lose money but don't really feel it.

Randy,

There are bankrupt's estates, indigent's estates, etc. The word itself is just a legal jargon. With such a high federal estate tax exemption, most estate planning is a form of insurance to protect your family and avoid unneccessary legal costs.

Garth,

You can admit or deny global warming all you'd like. But I'd really appreciate it if you can bring back all the high altitude glaciers.

Astrid
Randy H is brilliant and I think he knows what 'estate' means.

I realize a lot of people in this thread disagreed with the mental accounting thing. The problem is that I've yet to see evidence of it _not_ occuring. People regularly take lump-sum payments in favor of annuities, hold losing stocks too long while selling winners too fast, eschew flat-rate plans in favor of ala carte plans, all of which are almost always de-optimizing, bad decisions. They do it because of the way they _think_ about money.

There's an old cliche that goes along with this: why can't you find a cab on a rainy day in Manhattan? The answer turns out to be that cab drivers make more money on rainy days. It's counter intuitive, until you realize that each cab driver _could_ earn more money on his shift but he instead will go home early because he thinks of it more that he's _earned his day's money already_. Those few who do stay on and rake in the profits will almost assuredly blow that windfall at the track, because it's "house money" to them, somehow different than the other money they earned an hour before.

Communication won't change things, irrational behavior is a part of being human. We all selectively listen to messages that are more pleasing to our ears, sometimes reading around is just a way of confirming what we already believe in.

However, communication will amplify the trend both upwards or downwards. I don't know the amplification factor, but it will definitely be higher than without the blogs and widely available data beyond the mainstream media. My hypothesis is, the bubble grew bigger because of internet, and will pop harder.

When the bubble pops, the sellers are comprised of TWO groups.
1) People who have no other options than selling (laid off, run out of cash)
2) People who expect the real estate to go down further

At the first stage of the pop, aka, the next 12 months, 1) will be wiped out, and continually wiped out throughout the process. 2) are usually investors, because no owneroccupier will give up his primary residence unless he has absolutely no choice whatsover. So setting the expecation of 2) is very important. If the internet amplifies the perssimistic tone on the way down, you will see more 2), stepping over each other to set the new low comps. 1) will be there anyways, it will be the marginal 2)s that are dragging the market down further.

Linda,

I would never dream of calling any of you stupid. :) We even have above average trolls!

Mental accounting is one of the ways we account for money. Housing happens to be a very special category. People equate housing to prestige, sense of security, ultimate shelter etc. Money is not the most important things when it comes to an owner-occupied house, because it is called a home.

Some guys may end up with a very pissed-off wife who determines his frequency of corporal pleasure if they don't own a home together, how do you account for this in mental accounting model?

Owneroccupier,

But what about one of the groups most likely to sell - the retirees? I'm sure some of them are extremely savvy and will continue to exploit their prop 13 position, but many will probably take the profit and relocate elsewhere.

If this was 5 years ago, I'd agree with you. At the time, most people still treated a house as a durable good. So they bought only as much as they can reasonably afford to use.

But now, many people are buying houses as investments, and in anticipation of appreciation. This misguided belief has lead many to buy much more house than they really need or can afford. I know almost everyone in my generation and many who are ten or twenty years older have told me that they bought their current home in anticipation of a big pay day 3 or 5 years down the line.

Some guys may end up with a very pissed-off wife who determines his frequency of corporal pleasure if they don’t own a home together, how do you account for this in mental accounting model?

It would fit in quite well. Every night you are denied, err, companionship. The pain you feel from this is at least 2X as "much" in your mind as every one night you do share in physical delights; probably much more than 2X knowing the typical male. For me, perhaps about 34.5X, but I'm the overambitious sort. This would predict that I am willing to pay a higher premium for a home (overpay from a coldly rational, economist's viewpoint). My Bubblizer actually lets you put this number in as a guesstimate, put it in the annual Present Value of "intangibles" assumption cell. Seems a bit unseemly to put a $ value on things like this, but you can rationalize it away that you're willing to trade this pain to avoid that pain.

...and for my wife it's $0. Luckily I found a woman more logical and rational than I.

I know almost everyone in my generation

(as Peter P would say were he here today):

Huh?

Oops. Everyone = everyone I personally know who bought into the RE since 2002.

(Or maybe I'm the Lois Weisberg of my generation :) http://www.gladwell.com/1999/1999_01_11_a_weisberg.htm )

astrid,

your investor friends fall into the investor category.

I am only familiar with the retiree situation in the Bay Area, cannot comment on the other places. Somehow the retirees here are quite satisfied, and as long as they have a paid-off home, there is really little incentive for them to go elsewhere. Retirees care about weather, a LOT! I talked to the retirement community residents here, they are mainly from the Bay Area, plus some from the east coast, citing weather as the number 1 reason for their move, of course they are quite well-off to make such a move.

I was not aware of the prop 13 pass-down gimmick until I talked to my old-timer neighbor. I don't know how many of them are aware of this, but I certainly won't "misunderestimate" (bushism) the intelligence of old-timers here. It is these people who built Norcal to what it is known today, the Silicon Valley. So financially, I don't see the need for the retirees to piss away the prop 13 goodies when they pass away either.

Owneroccupier,

I'm not intending to misunderestimate anyone either. Mental accounting theory doesn't make value judgements about people. It's much like the "herding" instinct. People behave this way because it almost always works for them and is common sense. It's just that with financial and economic things, common sense often contradicts what logical reasoning would otherwise conclude.

If RE is to fall by say 50% (and I'm not saying it will in the BA), then a retiree who sells after 20% "paper loss" may be maximizing their own situation quite effectively, where if s/he held for 10 years to regain or exceed that 20% s/he may "pay" in other ways not nearly as acceptable as the pain they feel from that payment. All I'm saying is that they'd roughly need to earn 40%+ in this stylized scenario to overcome an otherwise balanced personal decision to sell or hold.

The cost of living in the Bay Area, aside from housing and private school tuition, is actually quite low.

I need to qualify the word "low", it means for a certain minimum quality requirement you demand, Bay Area offers such service and goods at a cheaper rate than most parts of the country. It is not only the case for the Bay Area, it is the same with NYC, Boston, any big cities with tons of vendor competition.

If you want high quality Italian food, it will cost you more in Ohio, if it is available in the first place. You can go to Boston's North End or SF's North Beach for a very reasonable cost. Two buck chuck, for example, costs 3 bucks in some inland states because it is made in Sonoma. We are very close to one of the biggest veggie bowls in the world in the Salinas valley, anywhere else you will need to pay far more for fresh salads. We also have very low heating or cooling costs compared to other states.

When you retire, there is not much you can save by moving to TX or FL, if you already locked down a fully-paid home and a low property tax base, plus these states float your property tax, which may demand higher cash outflow annually.

Owneroccupier,

Great insight. However, what about the much larger number of boomers who have little savings outside of their house equity? Won't they be forced to sell in order to obtain the equity needed for retirement.

I am not saying every retiree will be able to end up in a fully paid-off home, but a certain portion will. If they do, and have a small pension or SS or if their kids are willing to step up the plate in exchange for the inherited home later, then these retirees will very likely never move out.

The calculations above were actually laid out by some retirees to me. They have a life-long relationship with their doctors, so they want to stay close to people who know their health well. They also have a family here, so the pure financial incentive to somewhere else to take advantage of that little price differential is not enticing enough. This will be the case in a down market when housing price is dropping.

They were obviously willing to cash out in the last few years because they realize this is a lifetime cash-out opportunity. I believe that these retirees have a relatively high mental bar on how much they need to let go of their home.

If you want high quality Italian food, it will cost you more in Ohio, if it is available in the first place.

It is not available, unless you consider Olive Garden high quality.

Owneroccupier,

You're assuming an awful lot of smart people. I just don't see this group as big enough to affect the overall market. Small pockets here and there, perhaps, but not the overall market. You'd also need agreement across two generations, who may have very different spending priorities and lifestyles.

Also, I think the step up in basis will be a much more important motivation to not sell. That is worth up to 15% of FMV. Prop 13 is only worth at max 1-2% of FMV per year.

It is not available, unless you consider Olive Garden high quality.

Olive Garden?

Peter P,

I refuse to believe you're that sheltered :P

astrid,

every year, the number of properties on the market for sale is only 5% or less of the entire stock. You don't need that many dumb people for the market to head down. If you have 10% dumb homeowners, that is already a big enough disaster.

I heard about the mythical dumb elderly, but I keep running into elderly here much smarter than I expect. Perhaps it is us who are dumbing down :-0

hUNTINGTON
Newsfreak is right. Buying at the top of the cycle is generally not a good idea, unless you simply can't wait to buy. I have had many properties with illegal add-ons and they can be more trouble than they're worth...especially if you plan to rent them out. Tenants can 'hold you hostage' in a sense if they find out that its an illegal addition. Neighbors can turn you in. Building and safety can make you either bring it to code(which can be prohibatively costly) or tear it down.YIPES!
Be very careful and do your homework and get the facts on this property before you get in over your head. When you are spending that kind of money, there's no reason to live in fear of your tenants or neighbors turning on you. Good luck.