patrick.net

I'd say the Shanghai girls' highest preference would still be FOB Chinese tech geeks (preferably ones employed by Google or Microsoft). They do respect technical competence and an American visa, but they prefer a pliable husband who could be molded to suit their whims and who doesn't have foreign habits.

We shall all see…I think rates will rise.

I'll take the other side of that bet with everyone here. Rates won't rise for quite a while to come. And the reason will have _absolutely nothing_ to do with the dollar vis-a-vis FX. It will purely be domestic inflation, with perhaps a minor factor of import costs, none of which being from any Anglo-economy country.

- The US has not had a dollar rate policy in over 20 years.
- When the US did have a strong dollar policy in the 80s it was a disaster, causing huge damage to US manufacturers.
- A weaker dollar helps exports.
- A weaker dollar helps domestic producers.
- A weaker dollar helps US debt repayments.

Australia, Canada, UK, South Africa, New Zealand are all carry-trades, meaning that any rate moves they make have only a fractional effect on the USD real-rate versus nominal-rate (which for anyone who knows the equation is an expression of inflation).

SFWoman,

China may ultimately pull off their grand strategy. There's a lot between here and there yet to come though. The biggest hitch in their plan is the pressurized inflation they've managed to keep jamming into the closet. They use very draconian capital controls and "sterilization" techniques to prevent hot money, arbitrage, and ultimately inflation from naturally working through the system. If someone can give me an example of any major economy that's managed to transition to equilibrium through centrally planned, controlled, non-free markets I'd love to hear where I missed that chapter in econ history. Rather I think that the longer China dodges the realities of free trade the more they jeopardize their great plan.

The economist had a piece over a year ago about how if China were to float the RMB -- which cannot be done practically without also opening up capital flows -- they'd suffer inflation requiring upwards of 30-35% rates to control. The ensuing credit crunch alone would disrupt their plans, but the real threat would be instant loss of absolute labor advantage they enjoy now. Many of their low-end products (which is mostly what we import) would barely hold adjusted value above the cost of shipping.

$45K per person for a comfortable retirement life? What the heck! My parents live in QLD, with 1 home and 1 car entirely paid off, and spend less than $35K as a couple on everything else, ranging from private medicare to international travel. They can’t fathom their life being more comfortable.

yes, that part's quite true. the super funds seem to want to scare people into investing more with these sorts of stories, or something. once you've got a house paid off, your cost of living goes down dramatically. but, we now know how market forces right now are trying to prevent people from ever owning, and to try to concentrate ownership into the hands of boomer landlords... that means there will be a generation of lifelong renters coming up soon, who were never allowed to get equity in a place...

If someone can give me an example of any major economy that’s managed to transition to equilibrium through centrally planned, controlled, non-free markets I’d love to hear where I missed that chapter in econ history. Rather I think that the longer China dodges the realities of free trade the more they jeopardize their great plan.

well, we haven't had very much history to test that -- we are only talking about perhaps a century of this kind of thinking about economies, the rise of modern capitalism and significant international flows of capital, and so on. further, is china really a centrally planned, controlled economy these days when you look at doctrinaire beijing isolated in the north and the commercial centres of shanghai, macau, hong kong etc operating in the south? decision making and deal making about how introduce offshored factories into china has been devolved a whole lot lower than that. besides, they still have a billion low-paid labourers to draw from, and that is the essence of the labour arbitrage that has driven the success of china in this period of industrialisation and re-commercialisation. i don't think they're necessarily forcibly holding down inflation, localised wage inflation is simply an artifact of prosperity and improving conditions, but there is still a huge, almost inexhaustible, pool of cheap labour to draw from for a long time to come. we are certainly witnessing a number of social changes which parallel the advent of industrialism in the western world tho -- improving conditions, higher salaries, greater individuation and rising expectations, etc, at least for some...

If someone can give me an example of any major economy that’s managed to transition to equilibrium through centrally planned, controlled, non-free markets I’d love to hear where I missed that chapter in econ history. Rather I think that the longer China dodges the realities of free trade the more they jeopardize their great plan.

well, we haven't had very much history to test that -- we are only talking about perhaps a century of this kind of thinking about economies, the rise of modern capitalism and significant international flows of capital, and so on. further, is china really a centrally planned, controlled economy these days when you look at doctrinaire beijing isolated in the north and the commercial centres of shanghai, macau, hong kong etc operating in the south? decision making and deal making about how introduce offshored factories into china has been devolved a whole lot lower than that. besides, they still have a billion low-paid labourers to draw from, and that is the essence of the labour arbitrage that has driven the success of china in this period of industrialisation and re-commercia1isation. i don't think they're necessarily forcibly holding down inflation, localised wage inflation is simply an artifact of prosperity and improving conditions, but there is still a huge, almost inexhaustible, pool of cheap labour to draw from for a long time to come. we are certainly witnessing a number of social changes which parallel the advent of industrialism in the western world tho -- improving conditions, higher salaries, greater individuation and rising expectations, etc, at least for some...

different countries will raise and lower interest rates depending on their own domestic situation. while there are contemporaneous parallels between countries through carry trade, there are also differences, depending on who your trading partners are and what your chief commodities are. australia's 'old economy' has actually shielded it from some of the vagaries of dotcom booms/busts and asian speculation crashes etc. interest rates will be adjusted up if inflation looks to be a problem for a particular economy...

I am also in the camp of no rate increases, and if anything rate cuts in the middle of 2007 if not earlier. Economics be damned, political pressure before 2008 elections will win hands down.

So IMO it's wise to have "some" money in Gold, ForEx and international stocks.

* NOT AN INVESTMENT ADVISE

@eburbed and SFGuy,

We have beaten to death the issue of GOOG holding up the BA market. My take is a bit different now.

Psychology of BA residents is tied to the stock market far more than most parts of the country. Employees routinely invest in ESPP, have varying degrees of stock options, invest in 401K and are tuned to IPO, buy-out news. The good news in stock market lifts the spirit. This is undeniable.

So even if lot of people don't make millions, they generally feel upbeat about economy and their financial future. Add to that the feeling - as long as BA produces rich folks, house prices will keep going up. Buy now or be priced out forever.

Psychology is way more important than fundamentals. If stock market indeed keeps going up, the day of reckoning will take a looooong time in BA. So long, that waiting for that day is fruitless if you can extract utility out of the home, depending upon your unique personal situation. I don't think that's likely to happen, stocks seem overbought to me, but it is not that crazy a scenario either.

If you want to feel better, see the drop after a week of gain in asking prices. Updated today.

http://www.housingtracker.net/askingprices/metro/California/SanJose-Sunnyvale-SantaClara/

I'm all for leaving ConfusedRenter on this board if all he does is post his lame arguments and Realtor-spin. I'm all for beating on the pinata. However, if he keeps posting the same Marina/Pac Heights "I'm so surprised this place went over asking price" crap, I say let's give him the boot.

I say, let's put him on probation. One more realtor ad with some MLS link that he keeps re-posting, and outta here. Anyone else have an opinion on this?

Sorry to beat the dead horse ....

I just read on Views from Silicon Valley that Y-o-y volume was negative for the 22nd straight months (since December, 2004) and 25th out of the last 26 months.

More than 2 years of slowing sales and inventory build-up hasn't translated into substantial price declines yet. I think I now understand what Randy meant about stickiness. Maybe, but I am a slow person.

Unless the belief about BA's invincibility is shaken, there won't be big declines. That process has just started. We will see what happens in spring.

ConfusedRenter,

Be warned.

We've seen this same listing multiple times now. You could at least pick another outlier and try to hide your identity: MP, FR. Next time I see this thing you go into auto-moderation where most your posts will drown with the Jukubot spam.

Did you happen to see the MBA related discussions last thread? We talked a lot about investment bank Junior Associates who don't make the cut. Perhaps if you'd studied harder on the GMAT you could have kept playing with the big boys instead of peddling overpriced condos to new batch of recruits.

I'm just curious, what was your last bonus before you got bumped? You do know that your idol, that other sub-famous IB guy turned real estate "investor", moved to NYC and *rents* there, no? His genius was selling a book claiming that anyone could make more than an IB by getting a RE 'license'. You shoulda gone for your Series 7 .. oh, that's right, sorry. You've got to be bright enough to pass the test.

Bloomberg just reported that CDS prices have gone up, indicating that the increased risk of default is (finally?) making itself felt in the secondary MBS market. To my untrained eye, this looks like something that will inevitably cause mortgage interest rates to rise, no matter what Heli-Ben decides to do with the fed rate.

Not really my area, but perhaps DinOR or Randy can comment more authoritatively?

SP

OO Says:
SFWoman,
don’t worry, that is a 20-year plan. In the next 5 years, they have no choice but to hold the bags.

Also, I have read (don't have the link anymore) that due to easy lending, there is overinvestment in some industries to the extent of 6X the worldwide demand. The over-capacity (and related bad-loans) will also lead to a slippery situation for them.

SP

Where is that food blog that I've heard about for a while, still alive and kicking? Can someone post the new food blog started by the food enthusiasts here please?

skibum said:
I say, let’s put him on probation. One more realtor ad with some MLS link that he keeps re-posting, and outta here. Anyone else have an opinion on this?

Seconded. "Confused Realtor" is not adding anything to the discussion other than shill-talk.

SP

Sorry, I meant to sign off my previous two posts as "confused realtwhore", but mistyped. I am confused, after all.

Confused Realtwhore

@SP,

That cracks me up. You've even got the right cadence and feigned disbelief. All you're missing is the bad grammar (?English as a second language).

"Enjoy the whether!"

Found this old article again on a spring clean:

Stay grounded: prices haven't hit the floor
January 20, 2005
Hold tight until the end of the decade before any real property upswing begins, writes Peter Martin.

[...]None of them lied about the state of the houses they were selling. But when we asked about the state of the market they began to babble.

Prices were just about to pick up. They could sense it. They were getting more inquiries. Some confided that they believed prices were already moving up. This was at a time when Sydney prices were relentlessly falling and when the agents themselves were coming back to us with progressively lower asking prices.

[...]Each year the executive of Australian Business Economists (ABE) presents its forecasts for the 12 months ahead. Not a single member of that committee expects an increase in overall house prices during the next 12 months. The committee's forecast is for a fall in prices of between 5 and 10 per cent. And it says there's no sign of a pick-up beyond that. There won't be a "meaningful" increase in prices until the end of the decade.

Professor Peter Abelson, from Macquarie University, has done anyone interested in house prices a huge favour by putting together reliable data for each Australian city going back to 1970.

When adjusted for inflation, Abelson's data points to four distinct house price booms in Australia, each separated by years of stagnant or falling prices. The first thing to note is that each of the first three booms was short. Beginning in 1971, 1979 and 1987, each lasted two to three years. The most recent boom is the exception. It lasted from 1996 to 2003. [T]he slumps between them have lasted even longer: some for the best part of a decade.

The second thing to note is that after each boom collapsed it took five to seven years for Sydney prices to crawl back to their previous real level. And Abelson believes the true story on prices is even grimmer than those figures suggest. That's because houses are getting bigger. New homes have typically 40 per cent more floor space than they did 20 years ago. And existing homes are continually being extended at the owners' expense.
[...]
Peter Martin is the economics correspondent for SBS television.

My nominal g/f sent an SMS to someone selling a 3 yo place for $580K (now reduced to $559K) -- 3 br, 3 bath townhouse with double garage -- and as a joke made an offer for $470K. They're very interested, apparently. (I've discovered for $3.95 it's possible to find out the most recent price on a property via an SMS text message. Other price reports cost about $60 -- I don't think there's a free information service operating in this city.)

Randy H Says:

> ConfusedRenter, Be warned.
> We’ve seen this same listing multiple times now.

We have seen this listing before (that as SF Woman points out is not in a prime part of the Marina). It looks like these buyers may have fallen off the last turnip truck to drive down Lombard in a while...

CR is correct that "it went for $110,000 over asking to $1.81!", but even more impressive is that is went for almost a million more than the $850K that it sold for on 9/22/05...

Top 10 mistakes Casey Made:
http://tinyurl.com/yc4hge

SFWoman et. al.

They have not changed the inflation calculations recently. Energy and food have always been part of the calculation, just not of the component they consider critical to consumer-inflation indexing. You can look up PCE Deflator, CPI, and all the other indices and deflators easily enough on the web if you want to know what's included and how it's computed.

There are plenty of valid criticisms of the Fed's inflation computation methods. In my opinion, one of them is not transparent frivolity.

SFWoman,

Sure, it happens everyday. In order to have the scam make sense though it's better to have a large "supporting cast". This way they can change roles as lender/appraiser/strawman etc. They are still looking for a couple (sheesh, it's always a couple) from the Atlanta area that walked away w/about 15 mil? I'm sure they were decent church goin' folk that we never saw drink nor heard cuss. Oh and for a goof!

http://bend.craigslist.org/rfs/224005690.html

The reason I thought Casey's friend up in Bend, OR was SO funny is his complete lack of understanding of what a "short sale" involves! These people are so used to winning, so used to showing up w/borrowed money, hold for a few months and then collect their profits they've never imagined there WAS a downside!

Dear Mr. Specuvestor in Bend, OR

When one goes "tango uniform" on one's debt obligations you may (with the lender's blessing) do a short sale. Ahem, however it is done to a private party NOT a short sale BACK to the bank!

What a dickhead! Arrrgh. Can you believe this stuff? Somebody, "somebody" loaned this DH 400k+ to buy an empty lot? An empty lot? 400k, can you believe this? Now..... "Son of Casey" claims he "just" sold an identical lot for 600k. Well, o.k why don't you just sell this one for 600k then? Oh....... The Bend market is falling apart now and when you say "just" evidently that means OCT 2005? DH.

SFWoman Says:

> Would it be possible to have someone make an
> offer that was $1 million more than market value
> of a house, get a friendly appraiser to have the
> numbers come in, get the loan, the seller get paid,
> and then the new owner walk away from the loan
> after a year or so?

It was this game took down many TX S&Ls when TX ranchers started to sell almost worthless ranch land to each other pushing the “values” higher and higher until they all just stopped making payments and let the banks take back the land that “secured” the loans.

As I read the USA Today article on Casey I noticed that he got “cash back” from almost every sale and I started thinking that maybe all the Sacramento Hummers I see when I drive up there were paid for with “cash back” from sales.

A while back I posted that I heard that most of the $500K + crappy homes in the Bayview and Hunters Point were being sold to recent immigrants by people that speak there language with no money down and interest only neg. am loans.

I was just thinking that “cash back” would make it even easier to “sell” the homes when you can take an immigrant making $8 an hour (reported as $173K a year on the “stated income” loan application) and put him in to a home for under $1,500 a month (less than his rent thanks to the magic of the neg.am.IO loan) AND give the guy $50K in cash (when he has never had more than $500 in the bank at one time).

Realtors always seem surprised when I agree with them after they say “it will be different this time” then go in to panic mode when I point out all the reasons why it will be worse then ever…

Allah said:
Obviously a first time buyer wouldn’t be buying this. A trade up buyer would only buy if he could get the bubble price for his house….which is not going to happen. Therefore all I can say is “lookout below”!

Allah, that post was supposed to be a joke. I was borrowing the Confused Realtor troll's style to post about overpriced homes that were NOT selling despite price reductions.

SP

FAB,

"Son of Casey" up in Bend, same boat. He had a gross profit of 160K on his one transaction (thanks to a GF from heaven) yet he can't make boo dick payment on his lot in the "prestigious" North Rim sub division!

In keeping w/tradition the guy uses his real name in his C/L reply? Dude. What happened to the 160k (which let me guess) you didn't hold anything back for taxes either?

Jake Oge aka/ "Son of Casey"!

Dude, your credit is ruined AND you are an Offer in Compromise in the making, say long about 2009 when your paycheck from Buy Rite Shoes gets attached!

SQT,

Beer prices appear to be stable if not declining. (Dodged a bullet on that one). Check out the "Bend" link above, it hysterical! The guy dug a half mil. hole and is now pleading his case on C/L.

"If you're interested in helping"

Interested in helping? You wanted to be this BIGTIME deal maker and now you're begging for MY charity? We should e-mail him Casey's web-site, I'm sure they'd have a lot to talk about!

Allah,

Please to notice the carefully "couched" position at the Mort. Bkr. Convention? It's as if ALL of the debt pressure is coming from the 12 million new homeowners they have "nurtured" into home debtorship! Through their help, concern and generosity they took the 30 year norm of 64% home ownership to 69% out of the goodness of their hearts.

Now that 4% are facing a personal hell of the MBA's making, they need to be prepared to face the "firestorm" from the media and focus on the 94% that ARE somehow making their payments (for now anyway).

Allah,

I'm very careful not to jump on any kind of a conspiracy theory band wagon but given the FACT that DOM has become totally meaningless can there be little doubt that the foreclosure figures won't be equally manipulated?

Allah,

Well, our friend in Bend would love for that to be true! He "just" sold an identical lot for a 160k profit so why not just sell the other one? What's the problem?

Agreed, FC's at this point are simply a foil. When I look at these things it gives you an idea as to what they "can't" sell for. Great article on the auction in San Diego that did not produce ONE stinking sale btw!

Another CNN FB seller sob story:

http://money.cnn.com/2006/10/24/real_estate/help_home_for_sale_Morrisett_maldve/index.htm?postversion=2006102410

All I can say about these dolts and their Realtwhore is, caveat emptor.

Hey! Where's the "lunch crowd"?

skibum, good stuff. I loved the "these are not intellectually challenged people" quote! Well o.k that might be but they are obviously "market psychology challenged"! These folks with steady paychecks really should try a little "barnstorming" if you want sleepless nights.

Allah,

When I look at the prices in some of those towns it just makes me a little queasy. The Green Light article exhibits just how real estate-centric our economy has become. Our guiding light going forward is about doing what's right for RE.

SFGuy

The problem with the current attempt to tighten mortgage lending regulations is one of enforcement. The Fed can only exert control directly over banks and institutions that make use of the Federal Reserve System; FDIC, etc. Many of the smaller lenders (and I think a couple of pretty big ones) are pure lenders and independent of the FRS.

The participating institutions, which includes most of the big buys and retail banks, make a very good argument against this type of lending regulation. They argue that imposing tightened lending standards will *increase* risk for the whole system, themselves included. That's because the are believed to employ less sophisticated risk management techniques, including lower effective lending standards. But they still sell their loans into the secondary markets. The ricochet comes back around to hurt the big banks more than the small lenders. So they argue that either:

a) Congress needs to pass comprehensive regs that apply to all mortgage lenders, not just FRS ones, or

b) There should be no regulation by gov't and the market should sort 'em out.

It's not a bad argument, even if it's obviously self-serving to the big banks. Our current government's bias makes it highly unlikely that they'd allow lopsided regs to go through which damage (in terms of both revenue and risk) the very largest corporate constituents.

And absolutely nothing until '07, guaranteed because of the tight election. And, even then, probably only if the changes in Congress the pundits keep gurgling about actually happens. (And even then it could just all die in gridlock. There'd be no chance of overriding veto on this type of legislation).

This is quite interesting too.

@allah, I saw that article, too. What it doesn't seem to account for is that the 4BR 2.5BA home in Palo Alto is an Eichler that hasn't been upgraded since the Nixon administration, while the same in TX or some other not-so-bubbly place is likely a new home in a development, albeit likely a crappily put together home. The strict comparison of like-sized homes is interesting, though.

@SF Guy,

The more exotic loans get written, the harder the crash, IMO. I just don't understand what idiots, in this day and age with even the MSM on the anti-NAALVP bandwagon, are still using these products.