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seeking?

Nice graphic HARM btw! Is that "beauty" up in Oregon?

Well.. I've been doing some initial relocation research and this is what I've found so far.
I've just spent the last 3 days researching Nashville since it could very well be home in a year. I'd never done a lot of hardcore looking, but all I can say is that compared to SF, the pendulum might as well be swung in the total opposite direction. I knew it was cheaper, but jesus, it's super cheap.
Here's that I found so far. The population is around 550,000 in the immediate city and another 500,000 in the surrounding area. So it has grown from the 350,000 it was when I left. Secondly, there are around 220 Japanese restaurants. I didn't expect any. Some were even rated very well. Not to mention the myriads of BBQ joints.
The school system in general is rated highly throughout the city with small classrooms and a full compliment of extra curricular activtities. Most residents send their children to public schools as there's no need to pay for a private school since the public ones suffice just fine.

Now... here's the juicy part. The cost of housing, both rental and buying is totally the opposite of what it is here. On average, the cost of renting is MORE than the cost of a mortgage. Not always, but seemingly a lot of the time. Rents and home prices were all over the place. Smaller 2-3 bedroom homes from the 40's and 50's were as little as 50k. Newer, large homes in more upscale neighborhoods were as much as 400k. A HUGE delta in prices. Rents were as much as $1800 to $350. Yes.. I saw a HOUSE for $350 a month. It wasn't in the best area, but still... $350.
I saw tons and tons of houses in the 50-75,000 range, and all within 5 miles of the city. These homes are the same size and style as what you'd find common in berkeley. Small 2-3 bedroom cottages and bungalows. Of course many were fairly plain, but for 50k? who cares. Nothing that a few trips to Home Depot wouldn't take care of.There were lots of examples like this: http://nashville.craigslist.org/rfs/186078224.html
Again, not a real charmer, but we could literally put 20k down and still pay less per month on a mortgage than we pay now for renting. And to top it all off, the last 2 jobs that I heard back from in Nashville were willing to pay the same that I make here.
So what this means is that a family making around 60-100k would do about the same in Nashville as a family in SF making 200k. These 2 cities might as well be on diffrent planets. They simply do not have anything financially in common.
I know all of this must sound incredibly obvious, but after I really looked and did some research, it was pretty amazing to me.

wow, that place in the pic is a real fixer-upper... a handyman's dream...

i might even be tempted to swap my red paper clip here for that house...

Sean,
Ya... it's a little rough. I don't think I'd buy that one. But to me it was still amazing that anything- even sort of shoddy would be 40k.For a little more, as in 50-60k, you can get a small home in good shape.
There are a lot of nice victorian style homes for 100-150k, which is more along my lines anyhow. This one, though about 45 minutes outside of Nashville, is absolutely amazing. 150k. I'm imagining this would be well over 1.5 million here in SF, if not more. http://nashville.craigslist.org/rfs/189501035.html

I think this one would be more my style, but I'd paint it some other color.
http://nashville.craigslist.org/rfs/185617914.html

Conor,
One has to be honest about the way things are in diffrent areas. Yes, as someone born and raised in the south, the collective culture there is diffrent from California, just like Chicago is diffrent than NYC. I'll admit that I HATE change. I've been here 7 years. Moving to another area is going to be a drastic change even though I am actually from that region to start with.
But just imagine someone who was born and raised in California? All they've ever knows is nice weather, an expectation of good cuisine, and higher salaries? The way I look at it, there are people like my brother who has never left TN, thinks it's the best place in the world, hates going to NY where his GF lives. So in that respect, I can understand the fear people everywhere, regardless of their home state would have when it comes to relocating.
The other side of the equation is that for people in CA and NY, the choice to move is in some instances caused by elements beyond their control. In CA's case- overpriced housing and a stratified social composition. If you're a hardworking middle class person, or in my case, an educated almost upper middle class person, having to leave because you aren't making enough to buy a crappy little house is almost an insult. We're americans and we like to think that we're all equal. But California makes it clear to everyone that indeed there are now places in this country where you HAVE to be rich to survive, and that's nasty sounding to our ears. So people don't like the idea of changing their lives just because they Joe millionaire up the street got his, and they didn't. Pride. Plain and simple.

I'm hoping there isn't a wave of people following me out of here. I think that the crash will happen soon enough and hopefully people will forget about the housing problem. I have no doubt that there will be a lot of changes in the area I go to, but I'd sure hate to see it turn into another California. What's scary is that a few years ago, a family friend who was from TN moved back from SF after living there as a teacher for 30 years. He moved back for the same reason I'm moving, except he sold his condo for 350k and bought a ranch back home. He told us that Nashville and Knoxville were starting to look like California 20 years ago, so I suppose the inevitable will happen. We'll see.

I have nothing against California or anyone that decides to duke it out and stay. I had to do this for me and my wife and nothing else. That said, I'll keep you all updated on what it's like there, then maybe you'll have a better idea.

Conor,

I agree, those are a few of the overt reasons Californians offer as to why they hang on even when it no longer makes sense. But I sense there's something deeper and "unspoken". I suspect many privately wonder "if this is the coolest place in the U.S, what does that say about me"?

Believe me (as a native Chicagoan) I had plenty of misconceptions when I was first stationed there. Maybe I was picturing some kind of perpetual beach party? What I found was frankly shocking. (Picture Long Beach, CA circa 1979). A lot of mid-western guys didn't want to admit they had made TWO mistakes! Number one, joining the Navy and number two, insisting on being stationed on the west coast. The cost of living was insane even then and the crime rate was unreal! To be sure there were nicer areas but we didn't have any business there. I'll always remeber LB as being some sort bizarre abandoned carnival and counting the days until the ship pulled out for some place. Any place!

main street press? that's an eggcorn.

Dinor,
You know what's funny? Prior to coming here, and this is only 7 years ago, I thought ALL of California was 75 degrees, had a plentiful supply of beach blondes that spent their days roller skating in bikinis down the boardwalks, and that ordinary people like the cast of full house lived in homes right smack dab in the middle of San Francisco.
When I was a kid on 12 acres at my parent's, I figured most everyone in the country lived this way. I remember actually hoping that someday we would move somewhere that had a small yard so I wouldn't have to mow 24 hours a day.
I consider myself a person of some intelligence, and if I had these inaccurate concepts of what California was, imagine what people that have never been to the south must think? If they base their assumptions from the media, it must be an AWFUL place. I read a book years ago, written in the 80's called " Media-Made Dixie", which was a study on the impact that projected media of the region had on the rest of the country. pretty interesting read that in my opinion still rings loud and clear.

the student loan predators are FAR worse than the realtwhores. i have some where i borrowed 10k and now owe 30k. this is wwworse than a mortgage. no more debt for me. not even what the mortgage industry calls "Good Debt".

SHTF,

Funny! You know the largest "expanse" of greenery I saw as a kid was the outfield at Comiskey Park! In the 70's urban decay was in full swing and I just couldn't imagine ANYTHING could be dirtier than this place? So CA HAD to be better right?

I think perhaps the reason so many stay in CA (with one foot out the door) is b/c people HATE to admit they made a mistake! I don't imagine a lot of the folks honking their horns in gridlock traffic tell their folks back home about their frustration level? Their fears for their children's futures and the general level of anxiety and the feeling that they're really not getting ahead (no matter how much their home "appreciates")?

John M,

I KNOW! Most stock traders are really superstitious people (and I'm among the worst of cases) so this damn sign has bugged me all year. It's just so dated! Sometimes it will appear over A.J's right shoulder on the scrolling adv. and that has just f'd me up all year!

John M,

Just to show you all how "text book" a case my OCD is I've taken to NOT wearing my hat on game days if they lost the prior day and the S+P 500 closed up?

I also was going to add (they'll snap out of it) but I didn't want to "hex" the team!

This doesn't have to leave here does it?

Dinor,
I'll admit that part of the reason it took me so long to make the decision was that as you mentioned above, I was sort of embaressed that I stayed here as long as I did while I watched all my friends who stayed back buy their own places, invest in their communties, join clubs, and rise in the same jobs that I have. In many ways I was pissed at myself that I realized that all along, what I was seeking wasn't here.It felt weird here because frankly, the economics and social strata are weird. I think I could have done what most people do here, which is work for decades before accomplishing what people everywhere else accomplish by the time they're 25. It took me 7 years to figure that out.
The other thing was that 5 of my friends from the same town moved to NYC, SF, and LA. I guess I figured that if I moved back, I'd be seen as a failure in my friend's eyes.I know that sounds stupid. But they're all in the same boat too. Most are actually flat out broke. Some are now saying that they too will be moving somewhere else. But we are all changed men. We went west, and now we're going back South!
To be fair, I learned a lot living here. I learned about diffrent food, people, places, cultures, art, music, and seeing wonderful things. But at the end of the day, I still felt that I was proud that I was a Southerner and not from California. I still feel that way, and perhaps what that meant was that I was seeking a way to go back home. At least I saved money during the time that I was having these life altering revelations. I guess I sort of grew up out here. I'm sure the experiences I had here will help me out whereever I go.
Perhaps I won't be able to see as many parades full of men dressed in women's clothing, or competitions of people peddaling flying machines into the bay, but I do know for a fact that there will be the National Lawn Mower races in Nashville in October. Hell ya!

SHTF,

Look, I grew up in a lower middle class family in Cicero, IL. I had no where to go but up! My uncle died at 60 from working in a plant that made fiberglass food trays for prisons and the Navy (which is a prison that floats).

I am NOT one of these "bloom where you're planted" types! You gotta get out there man and see what's up. You gotta make mistakes. Have FUN! See places and THEN decide.

One of the big problems that internally motivated people encounter is that when they are confronted by an obstacle (however slight or grand) they automatically assume THEY ARE the problem! I'm not making enough cold calls. I have to take night classes. I have to get a second job, etc. etc. At some point you have to admit the deck is stacked and move on. Not in defeat but with greater knowledge.

Was it a mistake for me to have stayed in OR after encountering so much rejection. Probably. Was I going to go back and admit defeat? NFW! This is how we are wired. It's what our parents wanted. It's what ALL parents want. The problem with this "parental" advice is that when you're 38 and have a stroke they'll quietly say, "you know if he/she had stayed here I'm sure none of this would have happened".

"get the speculative juices going" LOL!

Conor this has been one of my greatest fears and I think at the core of my current bearish mind set. Like you, I DON'T LIKE being a bearish guy! It's not me. I'm not having fun here. Maybe if I were younger I'd have the energy to chase one bubble after the other. Like I say for those posters here that are already in their late 30's 40's and beyond we should be on a path where every year marks a point that more of our income comes from our investments and less from our labors.

However with the RE stakes this high (and a risk to reward ratio gone mad) who wants to play in traffic?

Conor,

There is new data today regarding weak jobs growth in the US.

REUTERS US stocks fly; jobs data may mean end of rate hikes
By Ellis Mnyandu
NEW YORK, Aug 4 (Reuters) - U.S. stocks shot higher on
Friday as a government report showing weaker-than-expected
July job growth increased expectations that the Federal
Reserve will decide against raising interest rates next week.
Optimism that more than two years of Fed rate increases
may end soon underpinned gains in the shares of interest-rate-sensitive companies, including banks, insurers and home
builders.
"The Street believes the Fed's out of the way. We can now
go on with the process of healing the economy without higher
interest rates to come," said Barry Hyman, equity market
strategist at EKN Financial Services Inc. in New York.

I'm still giving 50-50 odds on hard-v-soft landing at this point. I think one or two more rate hikes could well have tipped things towards hard landing. But with a halt and even a slight chance of cuts if a recession fires up soon enough, the credit cycle could be extended by another two years easily. In that case we won't see a return of flippers and specuvestors as real home prices will keep dropping, but we probably also won't see ARM resets driving out near as many homedebtors, as they'll just keep refi'ing into further-out ARMs -- especially when those refis will be sold with a "take advantage of falling rates" spin.

Batten down the inflation hatches.

DinOR,

I'll take that glass of water now. And some alka-seltzer if you've got it.

Conor,

I'm not a permabear either, but I expect the worst of both worlds:
Real deflation of US wages and real inflation of cost of living (energy, food, imported goods, etc...). This should be tempered somewhat by the reduced cost of housing as a percentage of disposable income, IMO.

Our currency is backed by our military, which is simultaneously bloated and overstretched. This middle east situation could get ugly really fast, which will not be good for the dollar (not to mention our massive credit bubble, etc...).

Randy H,

Coming right up!

Conor,

Given the most recent opinions of the O.C.C I get a sense that a tightening of lending standards has absolutely got to take place before we can even discuss rate reductions. (God, I can't believe I just said reductions). I understand Bill Gross has already come out today at the open and said no hike on Tuesday (for those that follow BG).

Conor or Randy,

What do you make of the 4.99% yield on the 30 year? Doesn't seem like the market expects hyperinflation.

Even if the fed starts cutting again, they may be "pushing on a string." Hard to get anyone to borrow when they are all already in debt up to their eyeballs. Having learned their lessons, many homedebtors would use the opportunity to switch from ARM to fixed, but there are too few underleveraged new buyers to really get the speculative juices flowing again, IMO...

Interesting that the next rate cut cycle will be coinciding with the new restrictions on lenders... I'm guessing that the stricter lending standards will drive down demand just as the housing supply is topping out. If I'm right, it may be possible to get a much cheaper house *and* a low mortgage rate within the next 4-5 years (ie: back to '01 or '02 prices and rates).

Conor,

Just my gut, but I don't think the rate easing will reignite the RE bubble. RE has played out for a while. My guess is that defaults and foreclosures will keep rising, the media will keep lagging and talk about lots of desperate souls forced out of their homes for quite a while.

Newly abundant credit will seek out a new victim. Probably in stocks for a while, maybe a good bit into commodities too. Maybe the next big scandal will be people investing in narrow ETFs inside of their tax-deferred accounts. When Joe Sixpack ends up with all of his retirement in gold and silver ETFs you'll know its definitely time to run not walk. I kind of doubt that, actually, but it wouldn't surprise me. Instead I think we're in for just another sector stock-bubble which starts pulling up the entire market. Techs have been inexplicably bullish of late. GOOG 2,000 anyone?

Bernanke has said that rate decisions will be "data dependent" and that we need to wait until the last round of rate increases is absorbed by the market.

I am no expert, but here is my two cents: I think a pause is virtually certain. Maybe a long pause (like 4 or 5 meetings). Then, if inflation is really undeniably taking hold and/or the dollar is crashing, the Fed will tap the brakes again. But if inflation is "well contained" and the economy is softening, the cuts can get started...

Glen,

No one who's serious or respectable expects anything one could label "hyperinflation". Some expect stiff inflation -- something like maybe 10% per year. Hyperinflation is 1% per day.

Fed will raise rates to slow domestic, realized consumer inflation as in PCE. They don't care about the dollar. The dollar is actually a very complex issue. In many ways a weakening dollar is tremendously advantageous for the US. It creates domestic jobs, increases exports, narrows trade and capital flow balances, reduces government debt burdens, and puts pressure on any country pegging to the dollar. Anyone who keeps their dollar pegs (to fight off losing their export-to-US cost advantage) is effectively taking inflation off our hands and eating it themselves. So, we don't even pay the full cost of the inflation we create.

Many believe that a pause is a sure thing, but I believe if there is a pause, inflation will take off like a rocket. Missing 4 - 5 meetings is not going to happen. As rents rise (which are a part of core CPI), inflation will continue to grow. The CPI has been rising steadily since the beginning of the year. Inflation is not under control!

tannenbaum,

Nice recap of rates. I believe you're right, any reductions in the near term will not provide the salvation DL and FB's so desperately seek. All it can possibly do is quell the panic and hopefully prevent too many FB's from "just dropping off the keys".

Incentives for them will not include pools, pergraniteel or anything of the like. It will be more along the lines of: Re-fi NOW to a FRM and get a free case of Top Ramen Noodles! (Why do I get myself so worked up about this stuff)?

Allah,

I agree that inflation is not under control. But that's why I think the Fed will pause, rather than cut. They can get away with this if they continue to talk tough on inflation, while claiming that inflation is contained.

They can get away with this if they continue to talk tough on inflation, while claiming that inflation is contained.

From what I read, they aren't claiming inflation is under control and if hint that they are finished much less decrease rates, the dollar will crash very hard. There are many who are about to dump the dollar, myself being one of them!

Conor Says:

Randy, 50/50 sounds about right. The key for me is how economic actors will respond once the Fed finally does cut rates again. Will people embrace risk-taking anew? How will they express this view? Stocks? Real estate? Commodities? Obviously, the housing bubble created a lot of the prosperity we’ve seen over the past few years, so if we could create a new bubble perhaps we can have a soft landing for awhile.

The other economic "actors" to consider are foreign investors and how possible near-future rate cuts would affect thevalue of the US dollar, the bond market, and commodity prices. If the Fed goes soft and starts cutting rates again soon, these players will not like it. I would imagine these considerations are as important if not more important than the herd of mass investors looking for the next asset bubble. Maybe I'm just being naive.

Conor,

Definitely some pass through from rising real oil prices, and a significant source of inflation. But the US imports a fairly small portion of oil from currency risk sources, and even with those will still enjoy a reserve currency status for at least 10-15 more years. The ECB helps ensure that with their policy -- the ECB does not want a disorderly appreciation of the Euro which would come with a rush to petroeuros. That would kill their ever anemic export-driven recovery.

Meanwhile the US is (in my opinion unwisely, for other reasons) plowing forward with a policy that will result in domestically produced corn & beans increasingly taking the edge off of foreign currency exposure to crude. Add to that the far less currency exposed sources of crude from which the US largely draws.

These equations are far from linear. There may well be an ultimate day of reckoning. I just contend that no one here or elsewhere is likely to guess it with any accuracy.

The missing piece of the puzzle is FISCAL POLICY. I sometimes think everyone forgets there are 2 seats in the cockpit. The pilot is the Congress/Executive with Fiscal. We've just decided the pilot is drunk and we'll let the co-pilot fly this bird.

The stock market is completely confused about the rate hikes. The thing has now turned south. Even the Gold market is very tentative on rate hikes.

The stock market is fixated on the rate for the short term. Given that they have almost concluded that Fed won't hike, we already had some short rallies. I am betting the gains are priced in. If Fed pauses as expected, it will not start any rally. But if the Fed shocks, there might be a strong decline.

Hence I have made some short term bets on the downside. Let's see.

The feedback loops and various branching points are extremely interesting.

Fed stops the hikes, not just pause. Then reduces the rates soon. Maybe the $ weakens. That might push up inflation and/or long term rates. It reduces consumption. That hurts economies that export to US. Which might reduce the oil demand, and stabilizes oil, keeping inflation in check.

This is just one of the many scenarios. Seems more like weather predictions.

Is Chaos Theory used in economic modelling ?

Re: Listings

I love this little trick by realtors where they list a home as having 3 beadrooms, however upon further investigation, you come to find that the house isn't a true 3 bedroom home, but rather a 2 bedroom home that can be converted into a 3 bedroom house.

Makes me laugh when I think back to those RE sponsored commercials where they dressed some actor up in a suit who said - As a realtoooor, I have high ethical standards to live by, you can trust me, etc. Please, the lack of ethics in this industry is a joke (which really isn't funny).

I can just imagine the training that goes on within the walls of Century 21 where they probably have some sales manager stand in front of a bunch of new agents and says - Okay people, just remember, there is the truth and then there is the "truth".

Is Chaos Theory used in economic modelling ?

Have you read The Misbehavior of Markets by Benoit Mandelbrot?

Is Chaos Theory used in economic modelling ?

There's a reason neural networks are so popular when it comes to modeling this beast. Too many interrelated moving parts. Feedback loops within feedback loops which affect other feedback loops inside of other feedback loops.

But just imagine someone who was born and raised in California? All they’ve ever knows is nice weather, an expectation of good cuisine, and higher salaries? The way I look at it, there are people like my brother who has never left TN, thinks it’s the best place in the world, hates going to NY where his GF lives.

That strikes too close to home.

Basically the problem is that Californians think that California is the center of the universe because they can't leave California no matter how many hours they drive, and because they're too cash strapped to visit other places.

In reality, it's universally understood that New York is the center of the universe. But Californians will never understand because of Californiatitis (the swelling of the California in the brain.)

Thought it would be back at 1997/1998/1999 levels of 2-3% with the “google” effect and Web 2.0 and all!

That, stabilized interest rates, continued money flowing out of google - Mountain View condos to start at $500k for a 1br/1ba by end of the year. (Pretty close already...)