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I love this thread. Anonymous145201 you are God.
Anonymous145397, Your budget sucks if you're not fully flushed with cash. for starters where's exactly is that $1500/month for "various" going? That should be neglible at most... Second, if you're really living on a shoestring, I wouldn't be spending $200/month on a cell phone... Third,if you are spending $1000/month on food, you really suck at shopping for food...Fourth, preschool doesn't need to cost $1500/month, especially if you have 1 stay at home parent that doesn't work and earn money... There are plenty of lower cost public preschools, particularly in north county's "better" school districts. So again, the problem is less likely what people make, but what a terrible job they do managing their money.
"I simply amazes me how some people choose to live paycheck to paycheck and spend almost everything they earn, on useless crap"
so here's an example; rent: 2300 for 2BR in utc; preschool: 1500, cell/wired internet: 200; gas: 200; groceries: 1000; insurance: 100; utilities: 200; recreation: various: 1500
with no free cash left even for the pension or anything else, where am i having it wrong?
...That said, you'll probably have some households that get in trouble....Not saying it can't happen....But it's unrealistic to expect this to be a widespread problem, in that people's financial situation varies...It's exactly the reason why you do want to live within your means even if you think things are going well, and why you always want to have a second source of income, whether it's from passive investments, a spouse or both...I simply amazes me how some people choose to live paycheck to paycheck and spend almost everything they earn, on useless crap. And then when the shit does hit the fan, go figure.... There are some people that are just unlucky, like those who get sick or those that have to take care of someone that is sick, and those are tragic cases...But for the rest of the folks that choose to live irresponsibly, well you can't fix stupid.
@145384, what about all of those people who used both incomes to qualify for mortgages and one or both lose their jobs? At the end of the day, the responsible borrowers and renters still drive the market prices with their salaries. The "owner" is renting money similar to how the tenant is renting a property...just slightly different forms or serfdom. Both need good jobs to sustain payments. Granted responsible people have more margin, but as we have seen in the past, a downturn in tech can be very brutal
Oh, and if you want to see a real graph of interest rates and real estate prices...
http://3.bp.blogspot.com/-p2ezXN6wiaM/UctWlG-93uI/AAAAAAAAa2w/jn139bP7P-4/s1600/RealHousePricesMortgageRates.jpg
When rates were high during the 70-80ies, you didn't see home prices crashing 30-40% did you?But what is interesting is home prices crashing right around time with the S&L scandals...and (again) periods of easy money/relax lending standards... Perhaps, more acurately, people with the financial means to afford even under the tougher loan standards are simply better off financially and wealth they storm better than those that can only afford to "buy" a home with a sketchy loan and during periods of relaxed/easy credit.
Anonymous145369, oh spare the fake analysis you pretend to make up.. Intrinsic value is basically what people are willing and able to afford to pay. Just because you can't afford a $1million home, doesn't mean there aren't people who can. You people keep under-estimating the financial state of others, simply basing your ASSumptions based on your own limited financial situation. And then like total sour grape syndrome, go off the marker in calling everything you cannot obtain "crap"....It's quite comical..The same uber bears we were laughing on the real estate blogs for trying to catch the absolute bottle in 2009 and missed out...almost as funny as the permabulls that think that real estate prices keep going up... Oh and that graph is fundamentally flawed. The lowest 30 year mortgage was 3% and the 15 was around 2.5% about 2 years ago...Since then we've seen about a 0.50% rise in rates in both...Back then, people were predicting home prices crashing once mortgage rates rose more than .25%..Not only did home prices not crash, home prices rose while rates moved up to where it stands right now (roughly 4% for 30 and 3.5% for 15)...Rising interest rates will squeeze some people out. But let's be brutally honest. The Fed's going to feather rate changes over a long period of time, the Fed isn't going to jack up rates by a huge percentage all at once. So any sort of decline most likely will be a nice long drawn out slow drift downward over 15-20-25+years...By that time, you folks will be wearing depends garment and won't care about renting or buying, because life for the most enjoyable parts will already be over. :) The only shot you guys got at another crash is if you get a lot more people buying with sketchy financing who are so terrible and managing their money, that they will overextend and be forced to sell...Just like in every other RE bubble crash where overly "easy" money landed into hands of people who didn't have the financial means to sustain their level of spending. that sort of irresponsible lending isn't what we have in the current environment, where loan standards are still pretty tough. If you are at all anywhere a shred of credible in understanding real estate, you would agree with that because you would have already gone through at least one or two loan processes and know exactly what I'm talking about...If not, you're just talking out of your ass...Which not even the most bearish knowledgeable RE professionals (that count on buying short sales and REOs) are making on most of the real estate blogs right now...Just you people that missed the boat and are (hoping desperately) to get a good deal (like 40-50+% off, which again, in the absence of irresponsible buyers who overextended on a loan they can't afford), isn't going to happen....
Can we go back to discussing the graph
Buying without regards to price or intrinsic value. How do bubbles form again? But anyway, ponzi scheme does not refer to low interest rates for some upper middle class schmucks to buy up north county crapshacks. It refers to the unlimited FREE fed money spigot and TBTF bailouts. The top 5% may have done better due to QE's phony "wealth effect" of propped up assets, but even the top 1% are falling way behind compared to the top 0.1%. It's not a functioning free market if panic sets in when a bunch of academics contemplate "liftoff" of 25 basis points.
Look at it this way.... From a mainland chinese perspective, they'd rather take their chance and immigrate here, and take a 20-30% beating in their "investment" real estate versus losing 100% of it by remaining in china if the regime changes and they are a scapegoat. And since everything in China works on a bribe, it's not a matter of if you get arrested for bribery. It's simply a matter of when is it your time to get arrested for it. It's similar to using internet access from qualcomm to post nasty things on a message board. Yes, everyone uses company resources for personal web browsing at work...And no, when things are ok, it's not a problem...But if there's any reason to fire/layoff anyone, you can better anything that is out there will be used to get rid of you.
Anonymous145352,
When ponzi schemes collapse, it's usually the bottom 95% of the population that takes the beating, while the remaining 5%+ that can weather the storm usually makes out even financially better off (provided they don't go to jail for something illegal or something suspected as illegal)...Kinda of like what happened here during the real estate crisis...Majority of the 95%er lost their home, lost their job, had their credit ruined, and had to spend a lot more rebuilding their wealth,etc. The remaining 5% had a field day buying dirt cheap property, and then had access to all the low interest loans that only well qualified/well financed people could get....
they bought pebble beach!!! lol
Anonymous145355..You don't understand what is driving Chinese versus Japanese(or for that matter Korean or Taiwanese)...The Japanese/Koreans/Taiwanese bought real estate for investments, but never really relocated here... The wealthy Chinese (from mainland china) are partially buying real estate in the U.S. because of the fear that when the economy tanks in China, that they won't be the scapegoat for the next government administration. So for them, the plan is to take the money and run...Literally....See, that's what you folks don't get... The 1%er in china are really scared right now... Not scared that they are losing some money in investments. They are scared they will lose their money from the government, when it decides to confiscate their wealth if the economy gets worse or if the regime changes......That's why the 1% are quickly trying to get plan B to Canada, US, Europe, Australia. 1% of 1.35billion people, is a lot of people....Just look at what is happening right now. Maybe of the wealthy from the Citric brokerage in China are under arrest for suspected insider trading. Whether that's true or not, maybe. Maybe not..Maybe the government wants someone to blame, and they're the ones to blame. So, as you can see, there is a lot of free on the Mainland right now.
Back in the 80's everyone thought the Japanese were going to take over because they brought over hot money from their bubble. The Chinese money spigot will stop soon as well..when it does, look out below
so which country's ponzi scheme is going to collapse first? china, japan or US? I'm going with China at near 300% debt to GDP.
funny, because the chinese seem to be buying like mad....Fact 2 out of 3 purchases over $1million in San Diego were bought by asians or indians.. Most had over 40% down. About half were cash purchases.....just saying..My prediction is that parts of SD will turn into Orange County prices, especially like places like Irvine.
.http://finance.yahoo.com/news/china-s-investors-find-safe-haven-in-american-real-estate-171923676.html
@ZIRP, You're obsolete. QE4 is coming. You can't tighten a free money spigot.
Everyone is going crazy over 25 basis points!! That's all that it takes to crash the party. If you didn't see this and took the fed's free money with both hands and feet, then you deserve to be a bagholder
so home prices change before interest rates change?
i will save you