Is Real Estate real

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AirForce's picture
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Thus us a note on cnn.money. The bottom line is great. Maybe oil up 8% in a week is of some concern for those who never see inflation. Saving my pennies to buy, buy, buy when most will sell, sell, sell!

Short-term mortgage rates jumped after the Federal Reserve hiked interest rates 17 times by a quarter-point each time since June 2004. The rising rates and several years of double-digit price surges crimped home affordability and dashed incentive for the home refinancings that were driving loan production.

"Long-term interest rates have remained low in the face of rising short-term rates, equity prices have risen nearly 20 percent, capital expenditures remain strong, the trade sector has turned from a big drag on growth to a modest stimulus and energy prices have dropped sharply," Duncan said of his forecast for longer-term stability.

The Fed likely will keep interest rates unchanged with the federal funds rate at 5.25 percent rate through 2008, the trade group predicts.

troll's picture
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AirForce wrote:The Fed likely will keep interest rates unchanged with the federal funds rate at 5.25 percent rate through 2008, the trade group predicts.
Through 2008?  The talking heads were all atwitter today that the Fed seems poised to pull the trigger for a rate increase, and would have loved to have done it today but that the politics of the situation would not allow it.
Through 2008 is more than two more years.  Ain't no way the Fed Funds target is going to remain static for 26 months.  Just ain't gonna happen.

troll's picture
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Devil'sAdvocate wrote:
AirForce wrote:The Fed likely will keep interest rates unchanged with the federal funds rate at 5.25 percent rate through 2008, the trade group predicts.
Through 2008?  The talking heads were all atwitter today that the Fed seems poised to pull the trigger for a rate increase, and would have loved to have done it today but that the politics of the situation would not allow it.
 
I don't know what talking heads you were watching. The ones I saw were discussing how only one Gov was in favor of hiking rates.

AirForce's picture
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Dude, they can't say the truth. The new guy said he sees problems a few months ago and the entire world came crashing down. He was told be cautious on what he says.

troll's picture
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AirForce wrote:Dude, they can't say the truth. The new guy said he sees problems a few months ago and the entire world came crashing down. He was told be cautious on what he says.
 
Dude, that's not remotely accurate. The Fed Head took grief because he made apparently contradictory statements. What he said to Maria, and during trading hours contradicted the previous Fed statement. You might want to save the conspiracy stuff until you earn your wings in this business. For example, there was only one Fed Gov asking for higher rates at the last meeting. The balance seem to think the economy is slowing up enough on its own to warrant a hold on any more increase. My money says it 50/50 whether the next Fed move is up or down.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
 
BTW, when crude moves from $58 to $61 it’s hard to scream inflation when it’s down from a recent high of $78.
 

AirForce's picture
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Yeah man, I do not know the exact details of what the FED chair stated, but I do know inflation is an "egg shell" word.

My concern is with the housing market. Did you know if the value of the home decreases below the mortgage amount one is not supposed to deduct the interest difference. Did you see the average price is now 210 from 255k.

Earning have been strong and I am glad I MCD and AMZN for a while.

As for oil I was talking 56 last week to 61 yesterday. I don't mind the steady drop, but thats an 8% rise.

troll's picture
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AirForce wrote:My concern is with the housing market. Did you know if
the value of the home decreases below the mortgage amount one is not
supposed to deduct the interest difference.

You mean the interest on the mortgage is no longer deductable for that
percentage of the loan above the home's value. You think the IRS is going
to demand new apprasials on every home in the nation to find the tiny
percentage that have mortgages larger than their value? Somehow I doubt
it.

I think there's little to worry about in housing. Some people who are
overextended will be hurt, otherwise people simply live in their homes.

AirForce wrote:Did you see the average price is now 210 from 255k.

I haven't seen that number, but it sounds dubious.
(Existing home sales drop for fifth straight month (msnbc.com))

"The median price of a home sold last month fell to $225,000."

That's not the median price of a home, btw, that's the median price for
what sold last month.

AirForce wrote:As for oil I was talking 56 last week to 61 yesterday. I
don't mind the steady drop, but thats an 8% rise.

And it's nothing, when it comes to inflation pressures, since oil was at
$74 recently. Nothing to worry about.

AirForce's picture
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New prices plunge (boston.com - Boston Globe)

As for the new prices.... If one was audited they potentially would have to
show the current homes value to justify 100% of their interest. If someone
has a million dollar mortgage, but current home value of 750k they may
have to eat the 25%.

When was the last time homes droped 10 or 20%? In DC friends
purchased homes at 750k and now they are worth less then 650k.

I do not understand the justification of these massive increases in home
prices. Where I live there are about 80% jobs paying less then 30k a year.
Incomes have went up 2% yearly over the past 5 years and housing went
up 100%. Something is wrong.

Maxstud's picture
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Low interest rates

troll's picture
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Your link doesn't work.

AirForce wrote: As for the new prices.... If one was audited they
potentially would have to show the current homes value to justify 100% of
their interest. If someone has a million dollar mortgage, but current home
value of 750k they may have to eat the 25%.

I doubt the IRS would go after someone who wrote a mortgage for the
home's value or less (how many 100% mortgages might there be to begin
with) and then saw a decline in value that meant they were upside-down
in their mortgage.

AirForce wrote: When was the last time homes droped 10 or 20%? In
DC friends purchased homes at 750k and now they are worth less then
650k.

No doubt it could happen is some, select, markets. Nationwide, here's
something from the article I provided.

The median price of a home sold last month fell to $225,000. That was
down 2.2 percent from July and down 1.7 percent from August 2005.

That's 1.7%.

AirForce wrote: I do not understand the justification of these massive
increases in home prices. Where I live there are about 80% jobs paying
less then 30k a year. Incomes have went up 2% yearly over the past 5
years and housing went up 100%. Something is wrong.

As was noted below, it was the low interest rates (and historically high
demand) that made more expensive homes afforable.

blarmston's picture
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Its my opinion that nationwide the real estate market is in the second inning of a difficult pullback in prices. The advent of interest onlys for the past 3 years will finally start to hurt homeowners when their fixed period ends and the higher adjustable rates start.
I read some research the other day that stated there was an 18% increase in default notices nationwide Y/Y and a 38% increase in CA alone. People used hybride mortgages as a last resort to affor their new homes and 'get in' on the boom, and they will lose their shirts in the process.
Some of you may know that I am living in SoCal, and renting right now. One indication (granted it is here in SoCal) is the dream condo I am waiting on. One block from the beach, 2BR, 2BA, balconies, just built, the WORKS). They were intitially listed at $650K last summer, and a recent unit went for $535K.
I will let Rightway, JoeDaMan, and the rest of you guys know when the blowout house warming party is....

troll's picture
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blarmston wrote:
Its my opinion that nationwide the real estate market is in the second inning of a difficult pullback in prices.

Just when you think you know something you get an awakening.
One of my daughters lives in the nothern DFW metroplex.  She and her husband are wanting to move closer to Fort Worth so they have been looking at houses.
Since it takes four to six months to get a contract in the metroplex these days they decided to list their house before they found another one.
On the FIRST day they got an offer for $10,000 more than their asking price--the buyer wants to close before Thanksgiving and the kids have nowhere to go.
Now I have to wonder if she'll volunteer to repay the $50,000 we "loaned" her to make the downpayment.

BankFC's picture
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I love how Put lies...just to stir the pot.  But even if it was a truthful anecdote, it is no more than that.  Hardly an indicator of anything really.

troll's picture
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Isn't reality made up of individaul anecdotes?

AirForce's picture
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One rare isoalted situation. COre inflation up again near long term high. So is inflation a factor? After the election I say yes, but WTF do I know.

troll's picture
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AirForce wrote: COre inflation up again near long term high.
Huh?
 
 AirForce wrote:So is inflation a factor? After the election I say yes, but WTF do I know.
Huh, no. But I do agree with your alst part  

troll's picture
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alst = last

BankFC's picture
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Devil'sAdvocate wrote:
Isn't reality made up of individaul anecdotes?

Do you think that one individual anecdote is a proper basis for the reality of an economic condition in the U.S. such as housing?

troll's picture
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BankFC wrote:Devil'sAdvocate wrote:
Isn't reality made up of individual anecdotes?

Do you think that one individual anecdote is a proper basis for the reality of an economic condition in the U.S. such as housing?

No, but it factors into the reality.  What I said was reality is a collection of anecdotes.  I stand by that statement.

BankFC's picture
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Right, it factors in...about as much as an albino chimpanze factors in to the overall look of chimpanzes.
One outlying variable does not constitute a trend.  Only liars and the media (which sometime are one and the same) try to prove otherwise.

troll's picture
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BankFC wrote:
Right, it factors in...about as much as an albino chimpanze factors in to the overall look of chimpanzes.
One outlying variable does not constitute a trend.  Only liars and the media (which sometime are one and the same) try to prove otherwise.

That's true, but my daughter bought into the hype about how hard it is to sell so she adjusted her expectations regarding pricing and time required and sold in one day.
Obviously they were not asking enough for their house--but the doom and gloomers (of which I am definitely one) caused her to adjust too much.
For the record, she did not ask me or her mother for advice regarding the house--our advice has been, and would have continued to be, to stay put for the time being.  Her husband is not even sure he wants to stay with his current job.
He's fairly studly--got a BBA at Texas Christian--then went to Harvard for his MBA and as long as he was iin Boston went over to MIT and got a Masters in Computer Sciences.  He's pullling in about $200 grand and he's not quite 30.

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Devil'sAdvocate wrote:BankFC wrote:
Right, it factors in...about as much as an albino chimpanze factors in to the overall look of chimpanzes.
One outlying variable does not constitute a trend.  Only liars and the media (which sometime are one and the same) try to prove otherwise.

That's true, but my daughter bought into the hype about how hard it is to sell so she adjusted her expectations regarding pricing and time required and sold in one day.
Obviously they were not asking enough for their house--but the doom and gloomers (of which I am definitely one) caused her to adjust too much.
For the record, she did not ask me or her mother for advice regarding the house--our advice has been, and would have continued to be, to stay put for the time being.  Her husband is not even sure he wants to stay with his current job.
He's fairly studly--got a BBA at Texas Christian--then went to Harvard for his MBA and as long as he was iin Boston went over to MIT and got a Masters in Computer Sciences.  He's pullling in about $200 grand and he's not quite 30.

First of all, who says the word "studly"?  Wait...I forgot, you're the old man who dresses his little dog...that explains it.
I don't believe for a minute your little snipit about your "son-in-law" is true, not because it isn't realistic (I have a great friend who graduated from MIT) but because you are just such a loser.
$200,000 and not quite 30?  I made just north of 1/2 that last year...when I was not quite 26.  I am debt free except for my mortgage.  I guarantee you your imaginary son-in-law is not unless he asked for help from daddy. 

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BankFC wrote:
I guarantee you your imaginary son-in-law is not unless he asked for help from daddy. 
Nah, his father died when he was a teenager.
The reason you're not getting paid like he is is because you don't have an MBA from Harvard and a Masters in Science from MIT.

BankFC's picture
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You are more dense than I imagined.  My point is I will exceed his income in three years, all the while building wealth and stimulating the economy by being in the workforce, while conversely this imaginary person was accumulating debt and out of the workforce.

BankFC's picture
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Plus, I am a real person.

troll's picture
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BankFC wrote:You are more dense than I imagined.  My point is I will exceed his income in three years, all the while building wealth and stimulating the economy by being in the workforce, while conversely this imaginary person was accumulating debt and out of the workforce.
Why would he be accumulating debt, or be out of the workforce?
Why would his income not go up?  From what I understand he is talking to a head hunter about a job in Chicago that will pay north of $400 grand plus bonuses for hitting profitability targets.

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Devil'sAdvocate wrote:
Isn't reality made up of individaul anecdotes?

Only if the sample size is of sufficient quantity and diversity.  Your reality is not necessarily real for other people.

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babbling looney wrote:Devil'sAdvocate wrote:
Isn't reality made up of individaul anecdotes?

Only if the sample size is of sufficient quantity and diversity.  Your reality is not necessarily real for other people.

Did I say anything different?

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Devil'sAdvocate wrote:babbling looney wrote:Devil'sAdvocate wrote:
Isn't reality made up of individaul anecdotes?

 
Only if the sample size is of sufficient quantity and diversity.  Your reality is not necessarily real for other people.

Did I say anything different?

Yes, you did.  Someone posted that the essentially, the residential housing market has topped out.  You posted that this wasn't true, and then supported your argument with an anecdote about a daughter and son-in-law (who may or may not exist) and the sale of their house at a price below what they should have been asking (an event that may or may not have happened).
Isn't the internet wonderful?  A bitter old man such as yourself can create any world that he likes!

troll's picture
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Starka wrote:
Someone posted that the essentially, the residential housing market has topped out.  You posted that this wasn't true

Say what?  I happen to believe the housing market is about to implode in a great many places around the country.  At no time did I say anything else.
It would be interesting to hear how you financial "advisors" will deal with a client who simultaneously sees his home losing value and his portfolio losing value too.
Do you suppose that could lead to a selling panic of epic proportions?

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Devil'sAdvocate wrote:Starka wrote:
Someone posted that the essentially, the residential housing market has topped out.  You posted that this wasn't true

Say what?  I happen to believe the housing market is about to implode in a great many places around the country.  At no time did I say anything else.
It would be interesting to hear how you financial "advisors" will deal with a client who simultaneously sees his home losing value and his portfolio losing value too.
Do you suppose that could lead to a selling panic of epic proportions?

No, I don't see a selling panic of epic proportions. 
Honestly, I think you're whistling in the graveyard with your talk of implosions and market meltdowns.  If I was a gambling man, I'd wager that you've put a disproportionate amount of your net worth at risk by shorting the market, and it's you that are about to implode.

troll's picture
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Starka wrote:
Honestly, I think you're whistling in the graveyard with your talk of implosions and market meltdowns.  If I was a gambling man, I'd wager that you've put a disproportionate amount of your net worth at risk by shorting the market, and it's you that are about to implode.
You'd be wrong.  I am so ultra conservative that I scare and frustrate myself.

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Devil'sAdvocate wrote:
Starka wrote:
Honestly, I think you're whistling in the graveyard with your talk of implosions and market meltdowns.  If I was a gambling man, I'd wager that you've put a disproportionate amount of your net worth at risk by shorting the market, and it's you that are about to implode.
You'd be wrong.  I am so ultra conservative that I scare and frustrate myself.

This from an ultra-conservative options trader.  Actually, all your claims of being ultra-conservative ultimately mean that you've been on the wrong side of the markets for years now.
The reality is that to the world, you're nothing but a self involved bullsh*t artist.  But to me you'll always be nothing more than words on a screen.

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Starka wrote:Devil'sAdvocate wrote:
Starka wrote:
Honestly, I think you're whistling in the graveyard with your talk of implosions and market meltdowns.  If I was a gambling man, I'd wager that you've put a disproportionate amount of your net worth at risk by shorting the market, and it's you that are about to implode.
You'd be wrong.  I am so ultra conservative that I scare and frustrate myself.

This from an ultra-conservative options trader.  Actually, all your claims of being ultra-conservative ultimately mean that you've been on the wrong side of the markets for years now.
The reality is that to the world, you're nothing but a self involved bullsh*t artist.  But to me you'll always be nothing more than words on a screen.

The way I have run my money is to be ultra conservative with my money because my wife, her trust fund, and my parents are about 65% in equities.  For example my folks own about 45,000 GE, which scares the hell out of me.
But it was inherited from my mother's family and it is a family tradition yet to be broken to never sell the GE.  We are having a family meeting next week and I intend to argue in favor of call writing or something more productive than simply holding it.  There are other very sizeable positions--such as 20,000+ XOM, but the GE is the scariest to me.  I damn near panic when I hear talk of accountinig scandals and things like that.
My wife's trust has more than 100,000 PL.  I'm a bit more comfortable with it, especially since it's from her family and we have very little control over the trust--but we get to spend the money they send her.
Anyway, you're right I have missed most of the run up with my personal money--but not with my family money.  As for options trading, yep I do some things that I would be doing if I were on the floor--like I was so long ago.
So far it's been working well--I just have to learn to go flat when earnings are coming.
If you stood to inherit 22,500 share of GE from parents who are both in their mid 80s what would you suggest they do?

Starka's picture
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You shouldn't feel as though you have to justify yourself to me.
I don't believe a word you say anyway.

troll's picture
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Starka wrote:
You shouldn't feel as though you have to justify yourself to me.
I don't believe a word you say anyway.

OK, means nothing to me if you do or don't.  Have you never heard of a family that passed blocks of stock from one generation to the next with the admonition that it should not be sold?

Starka's picture
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Yes, I have.  I know precisely how it works.

troll's picture
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Starka wrote:Yes, I have.  I know precisely how it works.
Do you think it's a good idea to put what amounts to a jinx on the generation that holds the stock?

Starka's picture
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I don't consider it my place to teach you how to handle legacy accounts.

dude's picture
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Devil'sAdvocate wrote:Starka wrote:
You shouldn't feel as though you have to justify yourself to me.
I don't believe a word you say anyway.

OK, means nothing to me if you do or don't.  Have you never heard of a family that passed blocks of stock from one generation to the next with the admonition that it should not be sold?

Devil's Advocate, if you're half as smart as you claim to be, I think you know what the prudent (not emotional) decision is...f*ck family tradition!  What if the stock was one of the many other past GE's that are now either extinct or former shadows of themselves?
Just because people have money doesn't mean they have brains...as exemplified by the ignorance of running money based on 'family tradition'.  I hope you can leverage your good looks and smarts to convince your parents to at least develop the latter (assuming that the former is already accounted for due to genetics).

babbling looney's picture
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Devil'sAdvocate wrote:
Starka wrote:Yes, I have.  I know precisely how it works.
Do you think it's a good idea to put what amounts to a jinx on the generation that holds the stock?

No I don't.  So when you get the stock, you can do what you want with the stock.  What are they going to do about it, come back and haunt you? (It is Halloween you know).   In the meantime, I agree holding huge blocks of stock with no protection is dangerous.  I have a couple of clients who are holding large concentrated positions. One client has over 100,000 shares of CVX and refuses to do anything about it because it is a "family" holding and they intend to pass it along. 

babbling looney's picture
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Ooops.  10,000 shares  not 100,000!!  They only wish.

troll's picture
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Devil'sAdvocate wrote:If you stood to inherit 22,500 share of GE from parents who are both in their mid 80s what would you suggest they do?I would get a middle-management job at a major brokerage firm and milk it for as long as I could, collect a fat pension, and live off thte backs of others....waiting for my inheritance.Sound about right?

AirForce's picture
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Good thing its GE and not ENRON or one of the Steel bombs. Maybe their will has the money going to the church.

BankFC's picture
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Why even give this loser a response?  I doubt he even has a home computer...I can see him now, sitting in the public library all day, abusing the eight hour a day limits for the internet.
Sad.

troll's picture
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BankFC wrote:
Why even give this loser a response?  I doubt he even has a home computer...I can see him now, sitting in the public library all day, abusing the eight hour a day limits for the internet.
Sad.

Do you really believe that?  Really?  Cross your heart and hope to die?

troll's picture
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AirForce wrote:Maybe their will has the money going to the church.
Nope, our family has passed securities from one generation to the next for years---my brother and I will be the fifth generation to own the GE.
The really great part is that they have a large second to die policy to pay estate taxes which are being reduced.  With luck the second to die will check out in 2010.

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Devil'sAdvocate wrote:
AirForce wrote:Maybe their will has the money going to the church.
Nope, our family has passed securities from one generation to the next for years---my brother and I will be the fifth generation to own the GE.
The really great part is that they have a large second to die policy to pay estate taxes which are being reduced.  With luck the second to die will check out in 2010.

You could always hurry things along.....just to be sure.

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