tag:blogger.com,1999:blog-35190061.post2870335578982362539..comments2023-10-17T03:59:01.588-07:00Comments on Doctor Housing Bubble Blog: Housing and the age of Affluence: Transforming the Definition of Income and WealthDr Housing Bubblehttp://www.blogger.com/profile/12407700951720008626noreply@blogger.comBlogger52125tag:blogger.com,1999:blog-35190061.post-72830862904323861912007-08-22T17:16:00.000-07:002007-08-22T17:16:00.000-07:00The downside for savers is that the economic and t...The downside for savers is that the economic and tax system is giving you (us) every disincentive to do so. If you're earning 5% on a bank deposit and you are a high earner in California, you are paying 45% of that in taxes to the feds and the state, so you are earning less than the inflation rate, which many of us suspect is fudged to look low anyway. You (we) will be screwed again if/when the gov starts to means-test social security (which they are already doing in stealthy ways, like taxing half of it, assessing medicare premiums, etc.). And then there's the mountain of government and personal debt, much of it accumulated current-accounts deficits. How are our leaders going to get out of it? They appear to have only one option left, and that is to climb into the wayback machine and set the dial to 1973. Yep, unfortunately, I think there's a good chance they'll just try to inflate it away. During such times only hard assets hold value. People with low fixed mortgages and houses made out like bandits in the 70s. The market is not pricing this possibility in, and yet still the dollar has been sinking for years. Stock market? Have a look at the total return on the S&P in real dollars during the 70s, no safety there either. Gold did well for a while, but then tanked and even now has not returned to late-70s nominal prices. In short, nowhere to run, nowhere to hide. I'm hedging my bets - I'm keeping the house with the low fixed-rate mortgage, keeping my index funds, and keeping a pile of 1-2 year CDs even though I know I'm slowly losing purchasing power.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-35190061.post-36990934524071320712007-08-22T16:12:00.000-07:002007-08-22T16:12:00.000-07:00This comment has been removed by the author.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-35190061.post-20055849201911068662007-08-13T16:04:00.000-07:002007-08-13T16:04:00.000-07:00@ned,Try doing some research...Straigth from the S...@ned,<BR/><BR/>Try doing some research...<BR/><BR/>Straigth from the Social Security <A HREF="http://www.ssa.gov/pubs/10022.html" REL="nofollow">website:</A><BR/><BR/>"The Social Security tax rate for 2007 is 15.3 percent on self-employment income up to $97,500. If your net earnings exceed $97,500, you continue to pay only the Medicare portion of the Social Security tax, which is 2.9 percent, on the rest of your earnings. "<BR/><BR/>"The Social Security rate of 6.2% has held steady for quite some time, but the threshold tends to increase every year. Social Security taxes are paid on an individual level; there is no discount for being married. If you and your spouse both make $90,000, then your wages will both be fully taxed by Social Security. Social Security withholdings are sometimes referred to as OASDI (Old age, survivors, and disability insurance) or FICA-SS (Federal Insurance Contributions Act - Social Security).<BR/><BR/>Next comes Medicare. 1.45% of every penny you earn is paid in to Medicare. There is no threshold. Whether you make $5 or $500,000, the entire amount will be taxed for Medicare at a 1.45% rate. This tax rate has been sitting steady for many years as well. Interestingly, when you receive Social Security income in retirement, a small amount is withheld from that money for Medicare premiums. Not only is this something that never really goes away, but the government is starting to significantly raise the premiums of well-off retirees. The law seems to change with the wind these days so I wouldn’t get too excited about this part yet unless you are already in retirement. Medicare may show up on your paycheck as FICA-MC."<BR/><BR/>Most employers will pay the other half. The number may seem high but unfortunately this is the reality.Dr Housing Bubblehttps://www.blogger.com/profile/12407700951720008626noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-13533487145462892892007-08-13T15:44:00.000-07:002007-08-13T15:44:00.000-07:00u wrote about "but we pay 15% into a fund we'll ne...u wrote about "but we pay 15% into a fund we'll never see.....i am pretty sure that the standard SSI contribution is less than 15%...get the numbers right....Nat Gladhttps://www.blogger.com/profile/10603970504749405339noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-8927186253312691582007-07-11T13:27:00.000-07:002007-07-11T13:27:00.000-07:00Doctor, what a wonderful concept this is, shortsel...Doctor, what a wonderful concept this is, shortselling your house and getting the debt cxl'd. Why was I not the one to think of such a thing? WOW- it removes a lot of the risk in overpaying for a house. <BR/><BR/>Tell me, how does this look on the seller's credit score? Does he have to bankrupt, or is avoiding BK the point of the whole business? <BR/><BR/>Something about the whole idea really smells. It seems to be a way for a person to do insane things without assuming the risk involved. I have never heard of it here in Illinois.The North Coasthttps://www.blogger.com/profile/14292115710427172625noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-21499826365066265382007-07-10T22:43:00.000-07:002007-07-10T22:43:00.000-07:00@peppermint hippo,Good question. It is the case t...@peppermint hippo,<BR/><BR/>Good question. It is the case that we are starting to see more short sales occurring. A short sale essentially is the bank allowing the seller to sell a home for less than the mortgage balance. For example, say you bought last year a home for $500,000 with 100 percent financing. The home is now worth $450,000. Say you sell the home minus expenses (say 6% for commission and other expenses) so that leaves you with an end balance of $450,000 - $27,000 = $423,000. <BR/><BR/>The bank has essentially "given" you $77,000. What you get in return is a 1099-C, the C stands for cancellation of debt. You will need to pay taxes on that $77,000 as income only if you have equity in assets equaling more than the forgiven debt. After all, if you are insolvent what are they going to do, take your underwear?<BR/><BR/>They cannot go after you if you are insolvent or bankrupt. The laws have changed but there is only so much blood you can squeeze out of a turnip. So many homes in California fall under this criteria I doubt lenders will have much recourse. Cars are leased and many have saved very little in 401(k) accounts.<BR/><BR/>In the end, they will have to shoulder the brunt of the damage.Dr Housing Bubblehttps://www.blogger.com/profile/12407700951720008626noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-20855969985481549992007-07-10T18:18:00.000-07:002007-07-10T18:18:00.000-07:00Hippo, I am in Chicago and don't know the specific...Hippo, I am in Chicago and don't know the specifics of the law in CA.<BR/><BR/>However, in most states, if you walk away from a mortgage and let the place go to foreclose, you will OWE any deficiency between the amount you borrowed and the amount the place sells for. By the same token, you are entitled to any profit from the sale over and above what you paid for the place, but profits are pretty theoretical-obviosly, if you could have realized a profit, you'd have just sold the dump. <BR/><BR/>Believe me, you don't want to just "walk away" from the deal even though you put no money down, because a foreclosure does much more damage to your credit than a bankruptcy. A foreclosure is a complete disaster. A bankruptcy is off your record after 10 years but a foreclosure follows you forever. I know many people who bought with no money down, who will do whatever it takes to hang onto their places, because they have a stake in their credit ratings. Thankfully, most of these people got sensible loans. You can get a fixed rate with no down payment, for rather more interest, and if you buy sensibly, it is not a problem. Just remember that you can buy less house. <BR/><BR/>And if you walk away owing $50K or more, the pain would be indescribable. I don't know how people ever recover,and they just about have to bankrupt, usually.The North Coasthttps://www.blogger.com/profile/14292115710427172625noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-16557562412866474252007-07-10T15:33:00.000-07:002007-07-10T15:33:00.000-07:00Great blog. Question for the good Doctor and othe...Great blog. Question for the good Doctor and other experts:<BR/><BR/>What is the penalty/downside to homeowners who have little skin in the game (no equity) and decide to simply walk away from their homes? Besides ruining their credit, what do they have to lose? <BR/><BR/>Is it true there could be some sort of seizure of the individuals' future income?<BR/><BR/>I'm a renter but ask because I think many first time homebuyers that put 0% down believe they have little to lose financially by going through a foreclosure.Peppermint Hippohttps://www.blogger.com/profile/16960932991788914511noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-70503679437942003582007-07-10T10:05:00.000-07:002007-07-10T10:05:00.000-07:00@desi,Northern California has bigger bubbles than ...@desi,<BR/><BR/>Northern California has bigger bubbles than here in the south. You are doing very well with your family and there is no reason to rush out and purchase a home, at least not today. The time will come to buy. <BR/><BR/>Your perspective is interesting because you have two world views; coming from a tough area to supposedly the most prosperous area in the country. Yet you are still able to see how out of control prices are.Dr Housing Bubblehttps://www.blogger.com/profile/12407700951720008626noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-70283136154888069732007-07-10T10:01:00.000-07:002007-07-10T10:01:00.000-07:00@graphrix,Good to see you and thanks for the link....@graphrix,<BR/><BR/>Good to see you and thanks for the link. Again, many public policy assessments have been conducted on the state regarding housing and what we need is more high density affordable housing. The in migration is of low wage workers; the middle and upper middle class are actually migrating out.<BR/><BR/>@turdly,<BR/><BR/>Congratulations on an extraordinary milestone and sharing it with us. To do this by 50 is great. Considering that the average nest egg of someone nearing retirement is $50,000, you are well beyond that already. You’ve done the prudent thing and invested well. <BR/><BR/>Each person has their own expertise in various areas. If you are good at programming, think about consulting. If you are excellent at accounting, become a CPA with your own firm. Ultimately, your knowledge and education is the most valuable investment you will ever make. Whether this is through formal schooling or you buying books and teaching yourself. Either way, learning is a life long process and goal. <BR/><BR/>You’ve done an excellent job and proven that you can be a bear and be wealthy.Dr Housing Bubblehttps://www.blogger.com/profile/12407700951720008626noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-14372113290824009782007-07-10T09:53:00.000-07:002007-07-10T09:53:00.000-07:00Today, exactly, I am a millionaire. Yesterday I ha...Today, exactly, I am a millionaire. Yesterday I had $992,806 today I finally have $1,000,000 cash in the bank. Taxes will take a toll, but I'll come out at the end of the year with a million left after taxes. I turn fifty in a couple of months.<BR/> I do not play head games with myself so I have never counted my homes as an asset of value. It costs me $3300 monthly in upkeep and lost interest to keep the PAID FOR houses running. I do not understand how that is an asset of any sort until I sell it.<BR/> I did this on 5% cd and savings accounts.<BR/><BR/> I remember very well;<BR/>I recall the experiment of the chimp throwing darts at a stock chart during the tech boom. He beat a large number of expert analyst. <BR/>11:16 PM, July 09, 2007 <BR/><BR/>It was a supposedly funny experiment that I think 60 minutes did for about 18 years in a row. I think the expert won once, the monkey every other time, or that's how I remember it. I was very young at the time but it sure sunk in that invesment in the stockmarket was a pyramid scheme at best. So whether I remember correctly or not, it paid off for me.<BR/> Anything that you pyramid, without pulling out your initial investment, is a pyramid scheme. I don't care if it's thinking you're a poker player, a market analyst, a cdo speculator, or just playing the lotto; when you win you take out your principal and play with the interest. When that's gone you move on.<BR/><BR/>Laypeople investing in anything without the proper education or without implicit instruction of masters is going to fail. <BR/><BR/>This is just a random rant from someone who just doesn't understand.<BR/><BR/>Here's what I think goes on in their heads;<BR/>'I misunderstood a poorly worded soundbyte taken from an obscure forum aimed at a target of which I am unfamliar with. I think it was specifically designed for colloquial usage by an imbedded faction of which I have no knowledge. Therefore; I'm all in. Let's invest.'<BR/><BR/>While sheeple won't be so succinct as to say this, I find it to be the truth with the whole housing debacle, whether on a layperson level or a CFO level, it all boils down to this is where they got their information.turdlyhttps://www.blogger.com/profile/17604431038168902640noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-31593665478294355332007-07-10T01:08:00.000-07:002007-07-10T01:08:00.000-07:00Sorry here is the tinyurl:http://tinyurl.com/3yoc4...Sorry here is the tinyurl:<BR/><BR/>http://tinyurl.com/3yoc4egraphrixhttps://www.blogger.com/profile/13650760690215056873noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-47188028627170084492007-07-10T01:06:00.000-07:002007-07-10T01:06:00.000-07:00http://www.scag.ca.gov/publications/pdf/2006/SOTR0...http://www.scag.ca.gov/publications/pdf/2006/SOTR06/SOTR06_Population.pdf<BR/><BR/>This report shows how we have had net-migration in socal. It also shows how we have less foreigners staying in socal and dispersing elsewhere. And these guys have been housing bulls for years.graphrixhttps://www.blogger.com/profile/13650760690215056873noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-40750928472337400032007-07-10T00:11:00.000-07:002007-07-10T00:11:00.000-07:00many people erroneously think that they can walk a...many people erroneously think that they can walk away because of the homstead law that exists. They don't realize it only pertains to the purchase money loan and not the cash they sucked out during a refi.<BR/><BR/>In addition they'll have a heavy tax lien because the IRS will see a short sale as a forgiveness of debt. I think you've also posted about this. But now, our former homedebtor will no longer have a home to levy...so guess what??? They'll get a wage garnishment and have their wages levied. Not a situation I want to be in.lendingmaestrohttps://www.blogger.com/profile/09881250499388864088noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-82509761913807059952007-07-09T23:16:00.000-07:002007-07-09T23:16:00.000-07:00@Mmg,You’d be surprised at some of the median inco...@Mmg,<BR/><BR/>You’d be surprised at some of the median incomes. Take a look at some prime Orange County cities from the 2005 Census Data:<BR/><BR/>Median Household Income<BR/><BR/> * Anaheim Hills: $120,852<BR/> * Villa Park: $116,203<BR/> * Tustin Foothills: $96,230<BR/> * Irvine: $85,624<BR/> * Newport Beach: $83,455<BR/> * Yorba Linda: $79,593<BR/> * Rancho Santa Margarita: $78,475<BR/> * Mission Viejo: $78,248<BR/> * Aliso Viejo: $76,409<BR/> * Laguna Niguel: $76,408<BR/> * Laguna Beach: $75,808<BR/><BR/> * Laguna Hills: $70,234<BR/> * Fountain Valley: $69,734<BR/> * La Palma: $68,438<BR/> * Lake Forest: $67,967<BR/> * West Garden Grove: $66,830<BR/> * Huntington Beach: $64,824<BR/> * Brea: $64,820<BR/> * Cypress: $64,337<BR/> * San Clemente: $63,507<BR/><BR/> * Dana Point: $63,043<BR/> * Placentia: $62,803<BR/> * San Juan Capistrano: $62,392<BR/> * Orange: $58,994<BR/> * Tustin: $55,985<BR/> * Los Alamitos: $55,286<BR/> * Costa Mesa: $50,732<BR/> * Buena Park: $50,336<BR/> * Fullerton: $50,269<BR/> * Westminster: $49,450<BR/> * Garden Grove: $47,754<BR/> * La Habra: $47,652<BR/> * Anaheim: $47,122<BR/> * Santa Ana: $43,412<BR/> * Seal Beach: $42,049<BR/> * Stanton: $39,127<BR/> * Laguna Woods: $30,493<BR/>Interesting diversity of income wouldn’t you say?<BR/><BR/>@r,<BR/><BR/>Glad to see you onboard Bob. Interesting petition. From sea to shining sea we see the signatures coming in. Maybe you were a couple of decades early in calling the large credit bubble of a generation. Things take time to play out in the chapters of time but this credit bubble is one for the ages.<BR/><BR/>@lendingmaestro,<BR/><BR/>You bring up a solid point. Many Alt-A loans, the riskier loans made to prime borrowers, will default in the coming months. The current “sludge” as you mention is simply the low fruit that the market is currently grabbing, that of the subprime market. The egregious outright criminal loans made on buyers who financially had no business buying a home.<BR/><BR/>I agree that we are in the 1st inning of the CDO debacle. We are only seeing the first pitch being thrown out of this extra innings game. And many folks that have prime credit, should their loan reset, may find themselves unable to afford their mortgage. Many people will simply walk away from their homes. And prime when I was in the industry was 620, not exactly stellar credit. But lenders where so happy churning commissions and had a safety net of a market that was in bubble mode that even outright ludicrous loans were remedied by selling into a rising market. <BR/><BR/>I recall the experiment of the chimp throwing darts at a stock chart during the tech boom. He beat a large number of expert analyst.Dr Housing Bubblehttps://www.blogger.com/profile/12407700951720008626noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-64016997365350764962007-07-09T23:09:00.000-07:002007-07-09T23:09:00.000-07:00It's a good article. But housing inthe Silly Con v...It's a good article. But housing in<BR/>the Silly Con valley still continues to appreciate. <BR/><BR/>Me and my wife are Software Engineers from India. Between the two of us we earn around 260K per year.<BR/><BR/>For some reason that kind of money<BR/>is not making us feel rich in the<BR/>Silly con valley.<BR/><BR/>I have looked at the houses that<BR/>can be bought for 600-800K and<BR/>for some reason they remind me<BR/>of the shanties in the slums that<BR/>I was born in Bombay. <BR/><BR/>Meanwhile I invest the money I save<BR/>and those investments now pay my<BR/>rent and feed me well.<BR/><BR/>My 1200sq. ft. rental is better<BR/>than my 250 sq. ft. shanty in Mumbai and costs only 2k per month. So for a slum dweller like me this is a huge improvement in life. <BR/><BR/>I don't owe a penny to anyone.<BR/>My rent comes out of my investment.<BR/>I drive decent fully paid for<BR/>cars. Yes I drive a cheap TL.<BR/>My kid goes to a private<BR/>school. I don't see any reason<BR/>why I should take a loan and pay 800K for a shanty and screw this all up.<BR/><BR/>I struggled all my life to get<BR/>out of that shanty in the Bombay slums and for some reason I am not paying 800K to go back to one in the Silly Con Valley. <BR/><BR/>Thank you.Unknownhttps://www.blogger.com/profile/13223784075623222439noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-61070905000549394292007-07-09T22:15:00.000-07:002007-07-09T22:15:00.000-07:00hey doc-I want to make a clarification about the s...hey doc-<BR/><BR/>I want to make a clarification about the subprime market. Please don't confuse aggressive PRIME financing with aggregious subprime lending. Both are bad. Any 1% or 1.25% option arm loan is NOT subprime. These were written to millions of PRIME borrowers. Also anyone who purchased within the last 2 years with an 80/20 or 80/15 are screwed.<BR/><BR/>The CDO debacle that has started to occur is just the tip of the iceberg. This has had nothing to do with neg am loans recasting, or the 5/1 arm of the 80/20 adjusting. The shit is going to hit the fan when the prime borrowers who made no late payments and still have flawless credit, cannot refinance into an affordable mortgage.<BR/><BR/>This is starting to happen now, but the high risk prime loans that were originated in 05 to now will not adjust/recast until 3-5 years from now. By that time enough sub prime sludge, rate increases and job reduction will utterly destroy many prime borrowerslendingmaestrohttps://www.blogger.com/profile/09881250499388864088noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-51806400565032304332007-07-09T17:48:00.000-07:002007-07-09T17:48:00.000-07:00R=Bob from Brooklyn : )R=Bob from Brooklyn : )Unknownhttps://www.blogger.com/profile/01346652159972474451noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-35997900016210761152007-07-09T17:47:00.000-07:002007-07-09T17:47:00.000-07:00Dr. B—Continued acumen.I happened to write an orig...Dr. B—<BR/><BR/>Continued acumen.<BR/><BR/>I happened to write an original paper in college on this exact topic (“The Coming Downward Mobility”, in 1986…NINETEEN EIGHTY SIX !). I believed I was being speculative and naïve, by just logically extending the (smaller) run-up in prices in the early 80’s…<BR/><BR/>…but if the trend continued, from a secure, government-backed mortgage on a home worth 2X annual household income in the ‘50’s, I figured home prices would eventually reach near a million, easily outpacing the wage curve, chilling large demographics at least…<BR/><BR/>…OF COURSE I COULDN’T predict the privatization and junking of the mortgage sector, the commoditization of homebuilding and homebuilders, outsourcing, automation, elimination of social and health insurance, and the myriad factors that make me look like an unintentional genius now…<BR/><BR/>One of the more frightening circumstances being--<BR/><BR/>http://appraiserspetition.com/<BR/><BR/>Some ten thousand (brave) real estate professionals are letting us know that it is in fact white-collar organized crime we are living through. Nothing less.Unknownhttps://www.blogger.com/profile/01346652159972474451noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-23514978298321274792007-07-09T17:17:00.000-07:002007-07-09T17:17:00.000-07:00thanks dr. bubble for the info on CA incomes, I wa...thanks dr. bubble for the info on CA incomes, I was just about to ask.<BR/><BR/>alot of the people I talk to seem to think that because the prices here are higher, then incomes must be too(or thats what they want to believe.<BR/><BR/>Actually what's interesting is incomes tend to be lower her in socal becuase everyone wants to live here is true to some extents. in some fields you get higher offers if you leave cali. thats why I strongly agree with you that prices will continue to correct over time to fall in line with income, including the more expensive areas.<BR/><BR/>Again not too many people making 250k even in SoCal to support average prices.<BR/><BR/>Dr. bubble, I wonder if you have a break down of incomes in SoCal like the national ones. I wonder how many people make 200-350k in SoCal or OC.<BR/><BR/>excellent post by the way.MMGhttps://www.blogger.com/profile/00936296514826325928noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-66452941242892188192007-07-09T15:25:00.000-07:002007-07-09T15:25:00.000-07:00@anon 2:55,You are doing the right thing holding b...@anon 2:55,<BR/><BR/>You are doing the right thing holding back. And why would anyone buy at the peak in the housing bubble? Not sure what the desperation is to buy right now. A few years ago, the argument was that real estate was going up 20% per year so next year you would be out. But wouldn’t the logic of a declining market lead you to think that maybe you would wait because the market may go down 20%? Somehow for housing pundits whether the market is going up or down doesn’t really matter, it is always a good time to buy regardless of price.<BR/><BR/>@anon 6:05,<BR/><BR/>Thanks for the link. The CDO market implosion is only beginning and look at how much brouhaha is already happening. <BR/><BR/>@son of brock landers,<BR/><BR/>I will make sure to take a look at that book. We have unbelievable trade deficits. I’m not sure we can keep on spending without raising taxes. Kind of like buying a $500,000 home with a $60,000 income. Someone is going to eventually need to pay for all this spending. <BR/><BR/>@anon 10:01,<BR/><BR/>That is a good point but I think the number is small. I mean how many times have you seen the Japanese salaryman or the London trader living in Lynwood, South Gate, Compton, or Huntington Park? If anything foreigners are buying the MBS debt. Little do they know that the notes they have in their hands are securitized by fabulous homes in areas with high crime and low rent rates. <BR/><BR/>@anon 10:03,<BR/><BR/>As long as they use facts to back up their arguments, then we can listen. But when they use anecdotal evidence of someone in a $1 million dollar neighborhood, I’m not sure this has any macro significance to the overall housing market. This thing is global and beyond local dynamics.<BR/><BR/>@mmab,<BR/><BR/>My parents didn’t buy their starter home in crime invested areas. They bought in blue collar areas that had decent schools and safe neighborhoods. We aren’t talking about Newport Beach here. But a starter home is now some tiny box in an area where schools are marginal. The middle class will not move there. And this idea of everyone trading homes like baseball cards and making it to the top is absurd. This is the definition of a ponzi scheme because the last folks in get hammered, but those in the beginning do well. No economic logic to this.<BR/><BR/>@anon 10:54,<BR/><BR/>I am in California. You can get a condo in Irvine or San Diego for $500,000 in a nice area. Prices are now adjusting. I agree that homes are a lot more but in time these will adjust to reflect local income levels. Some poorer areas unfortunately will be hit much harder.<BR/><BR/>@anon 10:54,<BR/><BR/>But you’re not a true millionaire until you have a mortgage. Or so the housing industry would like you to believe. The key is to manage your debt and income. Of course there are folks making $500,000 a year so they don’t worry about their ARM adjusting and increasing payments by $1,000 a month. But what about the $65,000 household that went with a 1.25% teaser rate mortgage? They will face a harder reality.<BR/><BR/>@taylor and anon 1:04 and 1:14,<BR/><BR/>I think investing is important. There is a difference between bubble speculation, outrageous home prices, and investing prudently. Like a stock, you have a price to earnings ratio giving you an idea of how well a company is functioning. Some stocks are priced at a low to moderate value and you can make decent money from here. Some are riskier and you pay for this risk. I think this applies to housing as well. <BR/><BR/>Housing has gone from being a bond-like investment where appreciation was moderate but steady to a speculative stock with a lot of upside and downside potential. A homes price should reflect local lease/rent rates to a certain extent. After all, it is only worth what someone will pay you to be in there. But right now the price/rent ratios are looking more like a technology stock than an intermediate bond fund.<BR/><BR/>@anon 1:26,<BR/><BR/>California actually has one of the lowest homeownership rates 57% compared to 70% nationally. Income levels overall are higher in California but not in the realm to justify the prices we are seeing. So let me give you some numbers instead of hyperbole or using imagination:<BR/><B><BR/>US Median Income: $46,326 <BR/>CA Median Income: $54,000<BR/><BR/>US Median Home Price: $212,300<BR/>CA Median Home Price: $555,290<BR/></B><BR/>So you can see, that even though income is higher by 16%, home prices are higher by 161%. But you are right, nothing dire about that minor discrepancy. <BR/><BR/>All,<BR/><BR/>I think having a pseudo-name for everyone will make the discussion flow a lot more smoothly. You can easily make up a blogger account in a few minutes. Hope this will help because I’ve noticed many anons post multiple times and it is hard to follow.Dr Housing Bubblehttps://www.blogger.com/profile/12407700951720008626noreply@blogger.comtag:blogger.com,1999:blog-35190061.post-13192698771048772982007-07-09T13:26:00.000-07:002007-07-09T13:26:00.000-07:00Why are we comparing NATIONAL income numbers to CA...Why are we comparing NATIONAL income numbers to CALIFORNIA housing prices. If you compare the national income numbers to the national median home price (about $200k?) you'll find that a home is within reach for a much larger percentage of the population. I would imagine California income numbers are higher than national average as well, which correspond with higher housing prices here. That doesn't mean that housing isn't currently over-valued here or nationwide, but the situation is not as dire as that portrayed when comparing numbers for two different populations.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-35190061.post-44437344161464364002007-07-09T13:14:00.000-07:002007-07-09T13:14:00.000-07:00I still think it's silly that people think that 40...I still think it's silly that people think that 401(k) programs are "saving".. <BR/>no offense but this is the dumbest statement I read in a long time.. if this is the level and kind of people this board attracts and talk about housing bubble and such? <BR/>you as bad as the idiots paying 500k for a shack..good griefAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-35190061.post-44793210232005634162007-07-09T13:04:00.000-07:002007-07-09T13:04:00.000-07:00Taylor,Too bad you understand very little about in...Taylor,<BR/>Too bad you understand very little about investing. True putting money in a 401K has some risk but all studies have shown that over long time periods you will come out ahead. Look at the past 80 years of investing history and you will see that any 20 year rolling period will product returns of 10%. This is assuming you are properly diversified of course. Yes, technically the stock market is risky but there are many ways to mitigate this risk that any reasonable person can use to save responsibly. Investing in the stock market is not a game, it is funding the economic growth of the future. Putting money under your pill will surely degrade its value over the long term because of inflation.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-35190061.post-41334400253388338542007-07-09T11:23:00.000-07:002007-07-09T11:23:00.000-07:00I still think it's silly that people think that 40...I still think it's silly that people think that 401(k) programs are "saving" in any way, shape, or form. They are investments at best, and speculation at heart, as much as the dysfunctional housing "market". The only way to actually save money is not to spend it. "Investing" is not "saving", and 401(k)s are one more way to gamble on the market, hoping that it will pay off later.<BR/><BR/>Sad thing is, the US economy is based on spending, consumption, and speculative greed. If you truly want to be wealthy, or just be able to save for your retirement (as in, be able to pay for what you need, without requiring "liquidation of assets" to do so), spend less than you earn, and don't rely on other people to make you wealthy (which is what Wall Street amounts to). Be a producer, not a consumer.<BR/><BR/>Too bad there's not really any support for such a "puritanical" work ethic these days. Saving money by loaning it to the banks in savings accounts pays substantially worse than "investment" (appreciating 10% a year, anyone?), and even that's only if the bank guarantees being able to reclaim your money at any time.<BR/><BR/>Bottom line, there are <I>no safe investments</I>, by definition. As long as our economy is based around taking risk and gambling away our livelihood, hoping to leave someone else holding the bag, this sort of bubble is inevitable.Teshhttps://www.blogger.com/profile/11760350503235227686noreply@blogger.com