Comments on: Someone Did Imagine

By: Bryan

Bryan — Fri, 15 May 2009 21:47:50 +0000

You just had to include “productive”. There might be a handful of really skilled surgeons in the world who could afford it and a few entrepreneurs who have actually created something new and useful, but beyond that, the people who live in houses like that would never be missed of they all went “Galt”.

By: cookie jill

cookie jill — Fri, 15 May 2009 20:05:31 +0000

MEDIAN priced home in SB before the flames....$1.2 MIL. I'm sure it's dropped just a bit now...but who makes this kind of money doing something actually productive in society? cookie jill´s last blog post..Happy Animal Blogging Friday

By: Bryan

Bryan — Fri, 15 May 2009 16:56:45 +0000

As an anthropologist you have to crunch numbers to provide the statistics for your papers. Apparently you don’t need to be able to crunch numbers to be a financial reporter.

I know what you mean about house prices. When they started spiking around here, the common question was – who in hell can afford it. The locals are having fits after they found out that the county pays a few department heads $100K and the county commissioners make $67K. Those are huge salaries for this area, so two-bedroom town houses going for $500K are jaw dropping. I still work on the old standard that you can afford a maximum of 5 times your annual salary, which leaves a very small market for prices that high.

The fact that banks were talking to people about mortgages on houses with prices like that raised flags among the old-timers, as well as all of the new banks and banks being bought up. Banks are supposed to be stable. People weren’t sure what was going on, and the powers that be and brokers kept saying “it’s a new economy”, and the old rules were no longer valid.

The signs were out there, but no one with major influence wanted to talk about them.

By: cookie jill

cookie jill — Fri, 15 May 2009 14:05:16 +0000

OT but talk about “melt down…”

http://www.bmumford.com/Jesusita/

cookie jill´s last blog post..If Los Angeles has a Fire Service Recognition Day

By: Badtux

Badtux — Fri, 15 May 2009 06:58:30 +0000

I knew something was wrong in early 2003. I went house-hunting, and the price of houses was nowhere near what it would be with an affordable 30-year fixed-rate mortgage. So people were pitching these exotic mortgages to me. Well, that would only work if you could flip the house at rate reset time, and that required that housing prices continue to go up 10% per year or more to cover the expenses of flipping the house, but that couldn't work because at that point nobody could afford to buy houses even with the exotic mortgages. In a properly functioning market, the rents you have to pay for a house should be similar to the mortgage you pay for the house, taking into account the significant tax deductions for property tax and mortgage interest and with a slight premium to account for the fact that with a fixed-rate mortgage you won't ever have a rent increase. The price of houses had clearly gotten out of hand at that point, because even the cheapest houses were much too expensive and the never-have-a-rent-increase premium clearly didn't apply to a variable-rate mortgage. So I rented. Problem is, this all required math for me to do the computations as to whether it made sense to buy or not. And as we all know, Math Is Hard. Sigh... - Badtux the "World keeps creating bigger and better idiots" Penguin Badtux´s last blog post..More on "Socialist Medicine"