Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.

Mortgage Meltdown - Yesterday's News

by Izzy Thu Mar 6th, 2008 at 06:05:45 AM EST

Ripped from the headlines...

"The major difficulty in achieving home ownership in the past was a mortgage system that had become archaic, far too expensive, and actually dangerous -- for it encouraged high prices, hidden charges, and overbuying."

"...the old mortgage system has often been a hindrance rather than a help in the achievement of home ownership."

"Today, and in the future, those desirous of owning a home will wisely demand [a mortgage] free from hidden charges, lump-sum maturities, and the whole package of old system trials and tribulations."

...of 1935.

Yes, this was the United States Federal Government's response during the Great Depression to some of the depredations of the Gilded Age.  I guess that during those Roaring 20s, people with money, let's just say bankers for instance, had gotten a bit, well, greedy.  

I recently came across this handy booklet in which the government describes exactly how to handle and respond to a mortgage crisis.

Promoted by DoDo

with image edit by afew


Back then, when faced with an unhappy populace who were largely unemployed, homeless, sick of standing in soup lines and armed to the teeth, the feds had an epiphany:

A home, in the minds of most people, is not merely a piece of real property.  It represents a form of security having social attributes.  The home is a place of refuge and the center of family life.  An owned home should be the birthright of every American family.

In fact, they'd seen the proverbial fucking light:

"'Mortgage' was just another word for trouble, and was fast becoming an epitaph on the tombstone of home ownership."

They even give handy examples!

"In Pittsburgh recently it was discovered that an old-style morgage for $2,500 had cost in interest and fees alone over four times the amount of the mortgage -- and still remained in force for the full original amount."

Oh, yes, this was a new and improved Federal Government that had seen the errors of its ways.  No longer would they buy the fat cats' arguments that they should have free rein in a free market.  Oh, no.  Those folks would be regulated and this whole tent-city/dustbowl/soup-line thing would never happen again.  Because the feds are on the side of the people, NOT the system.

"Because of faults in this old system, many people have lost their homes in times of stress and depression, and, in losing their homes, have lost the equity they had established -- most or all of the hard-earned savings they had invested in the home."

Not only would they refinance your home with a reasonable mortgage, they'd loan you money for necessary improvements.  Evidently, until 1935, the government didn't quite realize people needed heating and hot water.

Image Hosted by ImageShack.usImage Hosted by ImageShack.us

Yup, the feds knew just what to do and, if we've learned anything from the past, it's that we must regulate things like banking and not allow greedy lenders to pressure us into relaxing the laws and letting them make obscene profits as this will lead to nasty things like recessions, depressions, and the always-pesky Monetary Collapse.   I'm so glad all that's been settled.

Display:
On second thought, perhaps I should send the government this government booklet.  Any ideas which department might be interested?

Maybe we can eventually make language a complete impediment to understanding. -Hobbes
by Izzy (izzy at eurotrib dot com) on Wed Mar 5th, 2008 at 06:03:54 AM EST
Funnily enough, I have been intending to diary some new survey findings on UK mortgages.  We're having a bit of strife over home ownership because the UK is not half as progressive as 1930's America when it comes to all this malarky.

Is that booklet of yours still legally valid?  Can you walk into a bank with it and demand your birthright to home ownership?

by In Wales (inwales aaat eurotrib.com) on Wed Mar 5th, 2008 at 07:42:06 AM EST
[ Parent ]
Is that booklet of yours still legally valid?  Can you walk into a bank with it and demand your birthright to home ownership?

Now that's an idea!

Maybe we can eventually make language a complete impediment to understanding. -Hobbes

by Izzy (izzy at eurotrib dot com) on Wed Mar 5th, 2008 at 12:38:45 PM EST
[ Parent ]
You can try the Treasury ...

Oh, no, wait, no, forget about it. After nearly four years of that guy, there's no one left over there with sufficient reading skills.

You can call the HUD ...

Oh, no, wait, no, forget about it. They are too busy in New Orleans.

You can fax it to the Department of Justice ...

Oh, no, wait, no, forget about it. They have far more important things to do.

Well, you wait for 2009. With some luck, you'll get a government that will simply do nothing. It would be a vast improvement.

by Francois in Paris on Wed Mar 5th, 2008 at 03:26:25 PM EST
[ Parent ]
damn that's funny and pathetic at the same time.

great diary, izzy!

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Wed Mar 5th, 2008 at 08:07:28 AM EST
spread more of this very accurate gloom and doom?

The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Wed Mar 5th, 2008 at 08:31:40 AM EST
Okay, but, as compensation, I want the deepest housing recession in world history in my area.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Wed Mar 5th, 2008 at 11:44:37 AM EST
[ Parent ]
You're in Florida, right?

Sit tight, you may get your wish.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Wed Mar 5th, 2008 at 12:41:54 PM EST
[ Parent ]
No, I'm just outside of DC.  It won't be as bad as Florida (which has done nothing but build $500k one-bed condos for the last two decades in an effort to rope in more Yankee suckers), because incomes tend to be quite a bit higher here and (I'd guess) more evenly spread, but it should be pretty bad.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Wed Mar 5th, 2008 at 12:50:57 PM EST
[ Parent ]
...adding, though, that the more evenly spread income is also accompanied by more evenly spread housing inflation.  You can still find stuff resembling "affordable" in Florida, but DC is out of control everywhere unless you want to live out with the Klan types in NW Virginia.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Wed Mar 5th, 2008 at 12:58:15 PM EST
[ Parent ]
given how big beds are in the US, you can probably sueeze a lot of people in these...

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Wed Mar 5th, 2008 at 05:04:02 PM EST
[ Parent ]
You're forgetting the average size of an American.

It's like SUVs. Europeans bitch about how Americans drive these behemoth vehicles which get 16 litres per 100, but what we forget is that the driver needs a car big enough to contain a family of him or her.

And that can approach the half tonne...

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Wed Mar 5th, 2008 at 05:09:08 PM EST
[ Parent ]
Another good point.

"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.
by poemless on Wed Mar 5th, 2008 at 05:12:52 PM EST
[ Parent ]
No.

Americans need our space.  It's downright unAmerican to share anything less than 1000 square feet with anyone else.  Unless you are married or drunk.  And you'll go to hell if you're not married.  

"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.

by poemless on Wed Mar 5th, 2008 at 05:11:24 PM EST
[ Parent ]
And you'll go to hell if you're not married.

What did you guys do to the gods? Over here some of them just give you a nasty look. Some of them will cheer you on.
by Colman (colman at eurotrib.com) on Wed Mar 5th, 2008 at 05:17:05 PM EST
[ Parent ]
I suspect the gods are looking at America and asking themselves what they've done to humanity...

Also, I blame Europe for persecuting nutjob Protestants, forcing them to settle in The New World.  

"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.

by poemless on Wed Mar 5th, 2008 at 05:20:43 PM EST
[ Parent ]
What?

The nutjob protestants found the Netherlands too tolerant of others for their taste, so they left in search of a place where they thought they could be freely intolerant as there wouldn't be anyone else to tolerate.

We have met the enemy, and he is us — Pogo

by Migeru (migeru at eurotrib dot com) on Wed Mar 5th, 2008 at 05:23:49 PM EST
[ Parent ]
You just don't get it.

Having a persecution complex is Requirement #1 of nutjob Protestantism.

"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.

by poemless on Wed Mar 5th, 2008 at 05:35:45 PM EST
[ Parent ]
Oh, in a "liberal media bias" kind of way?

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Wed Mar 5th, 2008 at 05:50:19 PM EST
[ Parent ]
bingo.

"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.
by poemless on Wed Mar 5th, 2008 at 05:55:10 PM EST
[ Parent ]
Some people seem to really like feeling persecuted and victimized, and if they can get that feeling from the beliefs of their social group, rather than by actually BEING persecuted, so much the better.
by Zwackus on Wed Mar 5th, 2008 at 07:54:17 PM EST
[ Parent ]
Probably today's best point.

Explains a lot, really.
 

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Wed Mar 5th, 2008 at 05:31:33 PM EST
[ Parent ]
poemless:
Also, I blame Europe for persecuting nutjob Protestants, forcing them to settle in The New World.  

You've got it backwards.  We made it clear that they should go somewhere else, (preferably somewhere big and empty where they couldnt cause any trouble, what did we know) after they thought that god had told them that they should take over the running of our countries. Somehow they appear to have sold you on the story that they were persecuted into it, rather than they wanted to persecute us and we told them to swivel.

Any idiot can face a crisis - it's day to day living that wears you out.

by ceebs (ceebs (at) eurotrib (dot) com) on Wed Mar 5th, 2008 at 06:05:57 PM EST
[ Parent ]
I don't know.  Maybe for Midwesterners 1000+ square feet is necessary.  Tends to be a, shall we say, plumper lot there, and, anyway, you can think of it as compensation for living in such a dumpy part of the country.  I don't have half that much space, and pity the poor bastards in New York shelling out $1500/month for their run-down 300 sq ft studios.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Thu Mar 6th, 2008 at 06:35:42 AM EST
[ Parent ]
You live in DC, the armpit of America. That's one to talk.

The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Thu Mar 6th, 2008 at 10:52:55 AM EST
[ Parent ]
I suppose I should've thrown a "/snark" into it, although I'm still a bit surprised, perhaps foolishly, that you and poemless thought I was being serious.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Thu Mar 6th, 2008 at 11:26:55 AM EST
[ Parent ]
What the #!%* is your problem?  I live in a studio apt in the 3rd largest city in the country...

Rather cheap & personal shot Drew.

Sorry Obama lost on Tuesday, but come on...

"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.

by poemless on Thu Mar 6th, 2008 at 11:11:57 AM EST
[ Parent ]
Holy Christ did you take that entirely the wrong way.  It was a playful jab.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Thu Mar 6th, 2008 at 11:23:23 AM EST
[ Parent ]
The Upper Midwest (think all the places run by the Minneapolis and KC Fed) is next to the the atlantic seaboard the healthiest part of the country.

You have to go down south, to Southern California (yes, Hollywood is propaganda) and the chicken-fried steack parts of the midwest (think Chicago and Cleveland Fed) to see all the fatties.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Thu Mar 6th, 2008 at 11:12:01 AM EST
[ Parent ]
There may be some sliver of truth in that, but this stereotyping is annoying me.  Don't you know it's only funny when I do it?  I just want to say that I'm in Chicago and not fat.  (Ok, maybe a US size 4-6 is considered fat in Europe. Probably it is. Damn it.)  Also, when Jerome was in Chicago, he remarked that people weren't as fat as he'd expected they'd be.  So there.  

That said, I'm always freaked out when I visit the more rural/low income parts of my fine state.  Serious correlation between obesity and poverty...  Not a laughing matter, really.

"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.

by poemless on Thu Mar 6th, 2008 at 12:09:53 PM EST
[ Parent ]
For what it's worth, I exempted both Chicago and Detroit from consideration because the reality is that poverty is a key driver of obesity and eating healthy food in the US (as opposed to, say France) is insanely expensive for working families. Especially Detroit which is basically suffeting from a full-blown depression.

I think also that midwestern incidence of obesity correlates very well with per capita incidence of Steak and Shake and Bob Evan's restaurants, neither of which can be found in the upper midwest.

Got to admit I love Bob Evan's country-fried steak, though.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Thu Mar 6th, 2008 at 12:43:29 PM EST
[ Parent ]
a buffet restaurant like Bishops or Old Country Buffet or one of the many Chinese Buffets that spring up like mushrooms on a dead tree. That's where I bring my relatives when they want to get their "fatty porn".

Fortunately there's an Old Country Buffet just blocks from my home.

By the way, size 4 is way too skinny man. Size six is only beginning to be in the healthy range. And you should check out Europeans too, take a long trip in France, which I think has the fastest growing childhood obesity rates in the OECD. McDonald's can't buy growth in the US but they're popping up like whack-a-mole in France and poor Jose Bove can't keep up alone.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Thu Mar 6th, 2008 at 12:57:58 PM EST
[ Parent ]
Fortunately there aren't many of those buffest chains around here.  But if we'd had more time, I could have taken him to Harold's Chicken Shack.  :)  

And don't stress out: I've a clean bill of health.  I'm also only 5'2.  

"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.

by poemless on Thu Mar 6th, 2008 at 02:25:04 PM EST
[ Parent ]
Weird, that url was chopped off at the end...

http://en.wikipedia.org/wiki/Harold's_Chicken_Shack

"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.

by poemless on Thu Mar 6th, 2008 at 02:26:35 PM EST
[ Parent ]
opened one in Minneapolis. Have to go check it out.

I'm not a chicken fan unless it's good fried chicken and since the Popeye's in Saint Paul closed ten years ago we don't have any of it anymore...

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Thu Mar 6th, 2008 at 02:32:25 PM EST
[ Parent ]
By the way, size 4 is way too skinny man.

size 0 - 2 here.  and I'm a bit sick of all these anorexic models giving us skinny folk a bad name.  don't be judging...  

Maybe we can eventually make language a complete impediment to understanding. -Hobbes

by Izzy (izzy at eurotrib dot com) on Thu Mar 6th, 2008 at 02:47:41 PM EST
[ Parent ]
I'm not judging, I love all creatures great and small!

This being said, if you'd like for me to send you a care package of my homemade chitterling or spiced lamb sausages, or a pot of homemade couscous, or the best pasties outside of the UP (the secret is the lard) I'd be happy to oblige.

And for the record, I am not fat, even though I have gained 15 kg since August (starting out at 75 kg/165lbs for 1m82/6ft, not sure what the dress size is on that). That's what you get for eating like I do and working on my house and packing rather than training.


The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Thu Mar 6th, 2008 at 04:56:21 PM EST
[ Parent ]
Can you really mail those things?  Because I could use some variety -- I've been on a pancake binge throughout the greater Los Angeles metro area.

Maybe we can eventually make language a complete impediment to understanding. -Hobbes
by Izzy (izzy at eurotrib dot com) on Thu Mar 6th, 2008 at 06:12:18 PM EST
[ Parent ]
that's probably too far.

But if I get out there to visit my da between now and July I'll be sure to drop you a line and bring something interesting.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Thu Mar 6th, 2008 at 11:12:22 PM EST
[ Parent ]
pity the poor bastards in New York shelling out $1500/month for their run-down 300 sq ft studios.

In Manhattan that's very cheap for a studio, meanwhile I pay significantly less than that for my nice good sized 1br in Brooklyn.

by MarekNYC on Thu Mar 6th, 2008 at 04:01:34 PM EST
[ Parent ]
dumpy part of the country?   huh?
by Maryb2004 on Thu Mar 6th, 2008 at 04:45:43 PM EST
[ Parent ]
Well, actually, St. Louis...

</ducks, runs!>

"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.

by poemless on Thu Mar 6th, 2008 at 04:51:22 PM EST
[ Parent ]
You can run but you can't hide.
by Maryb2004 on Thu Mar 6th, 2008 at 10:34:27 PM EST
[ Parent ]
Don't be silly.  We only let the Mexicans do that here.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Thu Mar 6th, 2008 at 06:51:28 AM EST
[ Parent ]
On any given morning there are likely to be four in my bed.

None of us Mexican...

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Thu Mar 6th, 2008 at 10:53:50 AM EST
[ Parent ]
Sell it now and rent for the few months you still in the US. No, seriously.

You've seen Case-Shiller, right?

by Francois in Paris on Wed Mar 5th, 2008 at 02:41:11 PM EST
[ Parent ]
It's on the market starting next Monday, I've been feverishly painting and packing and getting it staged for sale the past three weeks.

Not overly worried, in my parts the interest rate dip has gotten things moving a bit, my neighbor just sold his in three days. If I can get it to move in three months, I should be ok.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Wed Mar 5th, 2008 at 03:25:41 PM EST
[ Parent ]
Have you considered a property LLP?

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Wed Mar 5th, 2008 at 05:25:08 PM EST
[ Parent ]
Big cap gains issues at some point.

It's homesteaded now so all cap gains are tax free, sell into an llc annd the separation would be clean, could pay the mortgage off of rental cash flows (it's not a big mortgage) but eventually the asset needs to be sold and there'd be a big cap gain. I get two years homestead if just rent with no separation transaction, no homestead if llc if immediately so.

My loan to val is just over 50% even after the 10-15% slide over the past two years so there's going to be a cap gain regardless.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Wed Mar 5th, 2008 at 05:39:21 PM EST
[ Parent ]
I had no idea what you meant by homesteaded.

Wikipedia to the rescue:

Homestead exemption laws typically have three primary features:
  1. They prevent the forced sale of a home to meet the demands of creditors;
  2. They provide the surviving spouse with shelter;
  3. They provide an exemption from property taxes which can be applied to a home.
For purposes of these statutes, a homestead is the one primary residence of a person, and no other exemption can be claimed on any other property anywhere, even outside the boundaries of the jurisdiction where the exemption is claimed.
Is that what you mean?

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Wed Mar 5th, 2008 at 05:48:12 PM EST
[ Parent ]
Yes and no. More specifically I meant homestead as shorthand for primary residence, which gives a very specific tax advantage when selling a house with a significant capital gain.

The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Wed Mar 5th, 2008 at 05:52:24 PM EST
[ Parent ]
even if you're a member of the LLC, and get your 'primary residence' capital gains benefit. The LLC won't get that advantage, if it sells the property in the future, but the point of the LLC would actually be to continue to own/manage it.

paul spencer
by paul spencer (spencerinthegorge AT yahoo DOT com) on Thu Mar 6th, 2008 at 03:33:16 PM EST
[ Parent ]
few big caveats. First, the transaction costs; I'd have to pay a proper appraisal (for auditing purposes I'd need a third party to do this, arms-length and all) which is probably going to be aroud $1000, not including title transfer, various registrations and so forth, another $2,000.

Second, after this I lock in my tax free capital gain, with all future capital gains not benefiting from the homestead tax credit. Since an appraisal done to withstand the rigor of an audit will be quite conservative, and use as its basis the current local government tax appraisal for the property (which, for historical reasons, is in this state usually roughly 10-15% under to actual market value) I am probably looking at a capital gains reduction on the transaction of roughly $50K, which means when I get around to selling the property down the road the tax basis for the gain will be $50K more than it would have been had I not done the llc transaction. Assuming US tax policy doesn't change in the menatime (and I would not be willing to make this assumption) that is a future cost of $7,500.

Transaction costs related to setting up the llc as a legal entity are not nothing either, nor are further transaction costs related to accounting for that llc, tax filings, maintenance costs (likely to be significant risk here since I will be 10,000 km away and unable to manage or control due to lack of proximity).

My guess? The pv of setting up an llc on my house and renting it out is likely in excess of a $10,000 loss, perhaps double that.

All this ignoring the fact its likely better to make one's USD assets at the very least liquid if one is going to be having regular non-USD expenditures (which is the case when you've got your family living in the Eurozone), and also ignoring the fact that there are negative covenants in most mortgages (and certainly my own) which would preclude such a transaction without the bank calling the loan and, at best, refinancing it with less favorable than I have now commercial real estate rates (assuming they'll actually lend money to an EU resident for US real estate).

In short, some of us may "get it," but also understand that while theory is nice and good, at one point theory needs to meet reality. And on this particular scenario, transaction costs and loan covenants are where the llc scheme meet the cash reality...

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Thu Mar 6th, 2008 at 04:38:00 PM EST
[ Parent ]
Sounds like a job for ET Mortgage Refinancing LLP.

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Thu Mar 6th, 2008 at 07:04:21 PM EST
[ Parent ]
Are you ready to help to found this project?

paul spencer
by paul spencer (spencerinthegorge AT yahoo DOT com) on Thu Mar 6th, 2008 at 07:16:25 PM EST
[ Parent ]
Sure, I'll help found it. But until I get a job I can't help fund it.

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Fri Mar 7th, 2008 at 08:13:31 AM EST
[ Parent ]
I will add you to the e-mails on this subject. I will submit my 'bylaws' to WA soon on the LLC that I registered. Steve Nieman (who may be meeting Chris in mid-April) and I will be working on the physical parts of the Klickitat Land aspect, plus recruitment.

I 'retire' at the end of March; then I'm in Europe for almost a month. When I get back, I'm general contractor on a house project, and I'll be deciding which election to undertake - plus a few other minor projects. The land LLC and related projects/organizations will actually be my main focus, though. Just saying that I will be much more aggressive on the co-op matters, starting around May 7.

paul spencer

by paul spencer (spencerinthegorge AT yahoo DOT com) on Fri Mar 7th, 2008 at 12:25:13 PM EST
[ Parent ]
May 7 is two months from now. I should certainly hope to find a job by then.

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Fri Mar 7th, 2008 at 01:54:52 PM EST
[ Parent ]
Yup.

You don't have the LLP or LLC actually OWNING anything.

Paul and I differ over that, but I understand his POV.

They act as "pass through" or "tax transparent" frameworks.  Either a "Not For Profit"  owns the freehold or one or more individuals do so as Trustees/ Custodians.

The other Members are then the "Occupier", "Investor" and (maybe) "Developer/ Manager".

I'm bored with explaining it, and probably so is everyomn else here. I'm just f..ing doing it.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Mar 6th, 2008 at 07:18:02 PM EST
[ Parent ]
here. In my world, the llc is simply another form of corporate constitution for fiscal and governance purposes. It has its plusses and its minuses, as does the C-corp, the sole proprietorship, the S-corp and so forth.

Also in my world (principally M&A work for a PE firm and subsequent post-acquisition governance and management) the llc is primarily a vehicle whereby taxes can, under certain circumstances usually revolving around future capital gains, be greatly avoided.

Nothing magical about it at all.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Thu Mar 6th, 2008 at 11:09:55 PM EST
[ Parent ]
It depends how you use it.

The UK LLP was developed as "just another vehicle", in this case to get accounting partnerships off the hook of their own negligence.

It has unintended consequences, though.

Both may be used - unconventionally - as what I call an "Open" Corporate, and I believe that it is this use which is capable of revolutionising "your" world, if you get it, and if you let it.

Using it in the way I am doing allows a new form of "unitisation", which I believe - and from a background in financial product development at the IPE and elsewhere - is potentially market-changing.

Canadian Income and Royalty Trusts evolved in just this way. Someone did it, and others followed.

Sooner or later, most people will go this road, I think, because not only is to do so actually in their interests, but if they don't they'll be at a "competitive disadvantage".

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Mar 7th, 2008 at 08:39:17 AM EST
[ Parent ]
My personal preference is to describe and act upon the world and people's behaviors as they really are, and not how we imagine they ought to be.

I understand people have different preferences.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Fri Mar 7th, 2008 at 12:05:58 PM EST
[ Parent ]
I really enjoy your writing style and generally agree wholeheartedly with your points and POV. But don't denigrate others' efforts and projects, when they don't interfere with yours, if you don't mind.

As Chris knows, I was doing these types of things over 40 years ago. I heard the same comments back then - can't be done, waste of time, yada-yada. Then the co-ops happened anyway and involved people in concrete ways. Yes, we melted back into the system after 1975. Sorry about that, but we still influenced enough people to create the skeleton - and the brains - of the resurgent movement that we see today.

paul spencer

by paul spencer (spencerinthegorge AT yahoo DOT com) on Fri Mar 7th, 2008 at 12:32:25 PM EST
[ Parent ]
Thanks Paul, but I'm a big boy.

Redstar's entitled to his view and if he thinks the financial world he inhabits constitutes "Reality" then he's in for a shock.

The game has changed and is changing whether he likes it or not.

Bank Credit, financial intermediation, securitisation and even derivatives is over.

He'll get used to it.

by Solveig (link2ageataol.com) on Fri Mar 7th, 2008 at 12:47:16 PM EST
[ Parent ]
Oooops...this isn't Solveig's argument, it's mine!

That's what comes of only having skype on the one laptop...

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Mar 7th, 2008 at 12:51:57 PM EST
[ Parent ]
When redstar talks about reality I don't think he means the financial world.

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Fri Mar 7th, 2008 at 01:27:14 PM EST
[ Parent ]
Using Solveig's laptop again, Chris?

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Fri Mar 7th, 2008 at 01:25:52 PM EST
[ Parent ]
out there pushing economic alternatives, and obviously this is an argument about strategy and not aims, at least I don't think it is about aims. And I agree about many of your arguments, in particular inflation in the US, though I take it from a different angle than you.

This being said, I don't think I'm being ridiculous when I point out that such economic alternatives, of quite frankly limited if quite noble application in my opinion, are not going to save the world. Avarice and greed will not end overnight, free-riding is a powerful economic incentive, the wealthier among us will the majority of them always aspire to more power, it's not like these things have changed much over the centuries without significant collective (and usually centralized through eventually state mechanisms) pushback.  You want an omelet, unfortunately you have to crack some eggs.

Creating more than a few collectives which are essentially voluntary, and assuming benevolent financing outside of established credit mechanisms, for me simply isn't applicable in the majority of cases that are in pressing need to be addressed. I know it's nice to think that suppliers of capital are just going to accept future cash flows in lieu of payment to get a project off the ground, but that's simply not how things work; the suppliers need their cash now and it is economically inefficient for everybody to be a bank.

For instance, healthcare delivery in the US. I fail to see how establishing cooperative llc's is going to get poor people equitable access to quality healthcare in the US. Doctors want to get paid now. The folks building the hospital want to be paid now. The pharmaceutical companies supplying the chemo drus need to get paid now, because their researchers need to get paid now. The utility company needs to be paid for the heat in the winter and the AC in the summer. And so on. And, without getting patients to pay, insurance companies to pay or, better, the state to pay, it's not simply going to happen. Ultimately, you cannot disintermediate the bank, and if you can't do that, there's a number of other things you can't do, like break covenants. Not now, not after the current US economic system collapses, assuming that it even does (and that's a big assumption I am far less willing to make than some here). That, for me, is the smell test. It simply isn't going to happen without some serious reforms, which will need to be imposed centrally, or it ain't going to happen, that's not how people work, it's as simple as that. There is a much more comprehensive answer which has shown itself to work just fine, it's called Socialism, and I'm not "out there" by any stretch of the imagination when I say you will not got to the desired goal without a strong State. Period. Proudhon's experiment proved the rule 150 years ago, and for me, pushing those same prescriptions in a modern guise is voodoo economics every bit as that practised in Washington DC and London today.

Further, all this doomsaying about the state of the economy, in particular the US economy, is counterproductive. Anglo-American capitalism is rightfully under some very self-perpetuated strain, and it is an inhuman and immoral system, but it is not about to collapse this month, which is some of the rhetoric I am reading here. In fact, it's likely not going to collapse at all, there's far too much real wealth and real marketable goods and services made in the US for the place to collapse, hell it didn't collapse in the 1930's, things were very bad but it didn't collapse and the economic elites were trying even harder back then to make it do so. No, assuming it will and that such a collapse will create the conditions for needed change is, in my view, shortsighted. For one thing, even if true that the Anglo-American financial capitalism model were to collapse tomorrow, what comes next is not likely going to be progressive change. And if it is going to be progressive change, it is change that needs to be communicated simply and understandably to the masses so that it has heavily collective and universal aspects to it so as to offset the extreme disadvantages we face vis a vis those who control all the Capital. And I'd suggest if y'all are having a hard time explaining to a finance professional with 15 years experience how the llc cooperative model would work to solve the planet's ills, getting unemployed folks from the US' dying manufacturing industries to "get it" is going to be pretty tough.

And I don't think I've been cheap shooting here. For one thing, if anything, I feel more than a little put off by some of the tone in this thread with respect to my "not getting it" that llcs are both the solution to all the world's wicked inequities and to my own personal situation. And, I'll have you know, I am more than professionally competent to evaluate that situation, thank you, as I pretty much do these things for a living. If one of y'all has $400K and wants to start an llc and cash me out, I'm all for it, else the unsolicited advice directed towards me got tiresome about two days ago.

Ok done with this rant, it's turning into a fucking diary and I have to go back to work.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Fri Mar 7th, 2008 at 02:46:12 PM EST
[ Parent ]
Diary, redstar, please.

Good post.

What I am putting forward in the "Capital Partnership" LLP/LLC is how you package DEVELOPED assets.

Credit is of course usually (but not necessarily)needed to develop assets: but if so, it need not be created by Banks.

The other partnership-based tool I've been working on is the "Guarantee Society". Simply a mutual guarantee of bilateral interest-free "Trade" credit.

Interest-free, but not "cost" free. Both Seller AND Buyer pay a provision in respect of the use of the guarantee (and the service) into a "Default Fund".

There is no credit limit: instead there are "guarantee limits", and the role of banks is not to create credit - backed by a PROPRIETARY pool of Capital (as now)- but instead to act as "service providers" MANAGING the creation of credit, defaults, and the accounting system.

This is essentially what Keynes was calling for when he suggested in respect of his International Clearing Union/Bancor proposal that a charge should be made on BOTH positive and negative trade balances denominated in his proposed "Bancor" Value Units.

Such a "not for profit" (and "not for loss") monetary system, combined with "Capital Partnership" based markets in investments in productive assets of all types, but particularly land and renewables, is how we reconfigure global financial markets....

 

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Mar 7th, 2008 at 05:54:30 PM EST
[ Parent ]
Sorry if I sounded smug or some such. I was sort-of using your situation to 'advertise'. It's quite apparent from your posts that you are "competent to evaluate" your situation.

I lean more toward your take that: 1) some eggs are going to be cracked; 2) that socialism is part of the solution for what ails us; 3) that government has to be considered, both for what it does wrong and what it can do well; and 4) that the super-rich - plus a fairly large group of wannabes - will continue to be a source of problems for the vast majority of us relatively peace-loving folks.

However, one of my points above is that we should model organizational benefits, as well as proselytize. The co-ops of the '60s and '70s felt good to most of the participants. We can do this on a much larger scale nowadays - partly because we have more resources and more potential participants this go-round and partly because of advanced theory, such as Chris' schemes.

In fact there are some people who own real assets who are looking for a hedge, at the least. Some are even seeking an Islamic financial relationship (is that a suitable term, Chris?) with their fellows. I intend to prove that to you to some reasonable degree by the end of this year.

paul spencer

by paul spencer (spencerinthegorge AT yahoo DOT com) on Sat Mar 8th, 2008 at 12:10:19 AM EST
[ Parent ]
When I developed the "Capital Partnership" I didn't realise that it is in fact Islamically sound, being a mirror image of what is called "musharakah". Likewise a "Guarantee Society" is a clone of a form of mutual insurance known as "takaful".

But, to me, "Islamic" is just a subset of "Ethical", and it is my thesis that the reason people are increasingly using these risk and revenue sharing structures is quite simply because they work.

ie "Ethical is Optimal".

The proof of that pudding is in the eating.

As for Socialism, well, I don't see anything in the wikipedia definitions of Communism or Socialism that I disagree with.

The one area where I do differ is in the role of the State.

Early on, Marx wrote about the "Abolition of Labour", and the consequences of "Abolition of Property" and the "Abolition of the State".

He later reconsidered - as I understand it - concluding that while this thinking may have been analytically correct it was unimplementable in a world of industrial Capital. However, I think that in a knowledge economy, with direct peer to peer connection, and the possibility of "open" legal protocols ("Open Corporates") linking people together economically that his analysis will be proven correct.

Labour is "abolished" when people work with not for Capital.

Property is abolished if "ownership" is held in trust, and the rights of use, and "usufruct" shared consensually between Labour and Capital.

And the State will be abolished when every citizen is a member of it and participant in it

I believe it is possible to create a participative State which is NOT distinct from its citizens, and to do so ground up in a network of Cooperative/ Collaborative partnerships.

That does not mean any necessary planning is not possible, but it does mean that it is achieved consensually and not imposed by the more or less benevolent hierarchical dictatorships that too often result from "representative" democracy and the tyranny of the majority.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Mar 8th, 2008 at 05:53:14 AM EST
[ Parent ]
Does every humorous quip

Migeru:

Have you considered a property LLP?
need to have a "friendly snark" tag, or something?

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Sat Mar 8th, 2008 at 05:01:53 AM EST
[ Parent ]
the LLC would have to exist before the sale, and it would be funded so that it could pay you for the house - not to mention get out-from-under your mortgage. Your membership would just be one of several or many, if you chose to be a member at all.

Don't know about the Minneapolis market, but, right now, in a lot of places the assessed value would be higher than market (appraisal).

Transaction costs would be standard stuff, but you'd have your profit and your tax break. Cost of the LLC in WA is $175, and the statute is prescriptive enough that you really don't need a lawyer. Founder(s) could just go with the default language on most of it.

As to your particular situation, you are probably correct, because remote maintenance of the LLC and of the house are serious obstacles. And I don't know anyone in your area to take it on.

paul spencer

by paul spencer (spencerinthegorge AT yahoo DOT com) on Thu Mar 6th, 2008 at 07:13:32 PM EST
[ Parent ]
The Norwegians used to get it right...

Norwegian State Housing Bank

has gone off the rails a bit since 1946 (by allowing commercial banks in).

This

About half of all houses after World War II in Norway have been financed by the Housing Bank.

says it all, IMHO.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Wed Mar 5th, 2008 at 09:15:30 AM EST
Is this part of the peak snark movement?
http://www.eurotrib.com/story/2008/3/5/71131/74831
by NBBooks on Wed Mar 5th, 2008 at 09:15:41 AM EST
No, I was an early adapter -- I hit peak snark in early 2005.

Maybe we can eventually make language a complete impediment to understanding. -Hobbes
by Izzy (izzy at eurotrib dot com) on Wed Mar 5th, 2008 at 12:40:43 PM EST
[ Parent ]
Pray we haven't yet reached peak snark! The need for snark is growing rapidly and supply must keep pace. To meet the challenge, I favor stronger supply-side policies, such as faster depreciation of brains and brain-drilling equipment.

Words and ideas I offer here may be used freely and without attribution.
by technopolitical on Thu Mar 6th, 2008 at 10:42:19 AM EST
[ Parent ]
It's all in our heads.  House prices never go down.  The National Association of Realtors told me so in a mailer I got yesterday.  It's a great time to buy, especially for folks in the Northeast and the Southwest.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Wed Mar 5th, 2008 at 11:46:18 AM EST
A 40-50% drop in prices here in the bay area and I'll think about buying. If it's not in the same ballpark as renting I'm not even going to consider it.

you are the media you consume.

by MillMan (millguy at gmail) on Wed Mar 5th, 2008 at 12:55:54 PM EST
[ Parent ]
I don't know about the Bay Area as a whole, but I know that San Francisco's prices are nuts.  A 40-50% drop there would be significant but still not enough, from what I've read.  California, in general, went completely insane over the last decade.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Wed Mar 5th, 2008 at 01:00:45 PM EST
[ Parent ]
A lot of areas here won't fall that far, though. Like NYC and Boston there is an enormous amount of wealth out here and as such the prices are somewhat justified. It's the everyday middle class houses out in the east bay that were going for $600k that are going to drop over 50%.

you are the media you consume.

by MillMan (millguy at gmail) on Wed Mar 5th, 2008 at 01:06:32 PM EST
[ Parent ]
True.  Certainly the presence of major businesses, especially the whole Silicon Valley scene, justify an overall high price level.  But it's not enough to justify the median price being 10x the median income in San Fran, or, similarly, 8x in New York.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Wed Mar 5th, 2008 at 01:10:12 PM EST
[ Parent ]
I'm talking in part of the return to the gilded age. It's on display here and in NYC where much of the wealth is concentrated.

Prices in SF actually rose in 2007, not many US cities can claim that. I can make a decent guess, I think, on which SF neighborhoods will retain most of their current valuation (hint: it's where the truly wealthy people already live).

you are the media you consume.

by MillMan (millguy at gmail) on Wed Mar 5th, 2008 at 01:26:27 PM EST
[ Parent ]
Sure.  Same thing here with areas like Georgetown/Adams Morgan and the rest of the Rock Creek Park area.  A few others downtown and near the water in Virginia.  The middle- and upper-middle-class areas will fall a great deal, though.

San Fran will get a little bit of a cushion in the same way Manhattan will.  They're not like Dallas or Atlanta, where you can just keep building farther and farther out.  Eventually, you run out of land and can only tear stuff down and build up bigger stuff.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Wed Mar 5th, 2008 at 01:37:23 PM EST
[ Parent ]
Prices didn't really rise in SF in 2007.

Case-Shiller says San Francisco went down quite a bit. The CS index came from 218.37 in May 2006 (peak peak, not Twin Peaks) to 189.23 in December 2007, last reported, -14% over a year and a half.

There's a "flight to quality" and a concentration of transactions to the top end of the market by wealthy buyers who are little affected by rates or economic uncertainties in general. So the average transactions are still high but property values are going down.

But the peak is so insane that it doesn't make much of a difference for normally built would-be buyers.

by Francois in Paris on Wed Mar 5th, 2008 at 03:45:42 PM EST
[ Parent ]
Case Schiller is badly flawed for urban areas since it only counts detached single family homes. According to the Census Bureau those represented about 18% of all housing units in SF as of 2000.
by MarekNYC on Wed Mar 5th, 2008 at 05:01:32 PM EST
[ Parent ]
Not that the 18% figure is somewhat misleading since the detached single family homes are disproportionate part of the owner occupied market. Still, it does make C-S very miseading for the urban cores. Once you get out into the burbs things change radically - for the Bay Area you get Alemada 54%, Marin 61%, San Mateo 58% and Santa Clara 56%
by MarekNYC on Wed Mar 5th, 2008 at 05:09:51 PM EST
[ Parent ]
preview is your friend, Note, not not. Anyways I've long thought that the C-S NYC figures should be described as NYC metro area housing prices, ex NYC, while the OFHEO ones should be subtitled exurbs only (their price ceiling is well below the median in the inner burbs.)
by MarekNYC on Wed Mar 5th, 2008 at 05:16:02 PM EST
[ Parent ]
Yes, it's just a proxy like pretty much everything in econometry but it's the best we have on property valuation.

All measures based on immediate transactions like average sale price are worse than worthless because they suffer of the "Bill Gates walks into a bar" effect, particularly in places like the Bay Area which as a hugely unequal income distribution. The tiered CS report is very telling in this respect, with the market going splat in the low and middle tier while being flatish upish since 2005 in the high tier.

by Francois in Paris on Wed Mar 5th, 2008 at 05:24:29 PM EST
[ Parent ]
Is it only SFHs?  I thought condos/townhouses were included in it as well, and that the two were measured separately, but I'm assuming I've got a different index in mind.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Thu Mar 6th, 2008 at 06:42:47 AM EST
[ Parent ]
That booklet may be worth a fortune!  It shows a world now Gone With the Wind ....

I like the drawing of the lady peeking over the picture of her dream kitchen.

Good diary.  I think people are finally starting to realize why some govt. regulation might be a good thing.

by Maryb2004 on Wed Mar 5th, 2008 at 11:15:58 PM EST
I like it, too -- here's a larger version for your viewing pleasure.

Image Hosted by ImageShack.us

Maybe we can eventually make language a complete impediment to understanding. -Hobbes

by Izzy (izzy at eurotrib dot com) on Thu Mar 6th, 2008 at 02:12:34 AM EST
[ Parent ]
It's absolutely incredible how far ahead the US was in those days. This is so far removed from my grandparents living conditions in the thirties.
by GreatZamfir on Thu Mar 6th, 2008 at 05:36:09 AM EST
[ Parent ]
Where were your grandparents living then?  

Actually, I think these pics were of places pretty far removed from most people's living quarters in 1935, even in the US -- the booklet says that of the 25 million homes, 15 million of those needed repairs or modernization to make them "wholly livable"

That all changed in a lot of parts of the US for a lot of people in the next decade, although there are still plenty of people today who have a long way to go to get up to those standards.

Maybe we can eventually make language a complete impediment to understanding. -Hobbes

by Izzy (izzy at eurotrib dot com) on Fri Mar 7th, 2008 at 04:27:32 AM EST
[ Parent ]
Maryb2004:
people are finally starting to realize why some govt. regulation might be a good thing
I am reminded of the following:
The no-business meeting was an almost perfect instrument for the situation in which President Hoover found himself in the autumn of 1929. The modest tax cut apart, the President was clearly averse to any large-scale government action to counter the developing depression. Nor was it very certain, at the time, what could be done. Yet by 1929 popular faith in laissez-faire had been greatly weakened. No responsible political leader could safely proclaim a policy of keeping hands-off. — John K. Galbraith in The Great Crash 1929
(my emphasis)

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Thu Mar 6th, 2008 at 07:48:04 AM EST
[ Parent ]
European Tribune - Mortgage Meltdown - Yesterday's News
A home, in the minds of most people, is not merely a piece of real property.  It represents a form of security having social attributes.  The home is a place of refuge and the center of family life.  An owned home should be the birthright of every American family.

I'm always surprised that in the XXIth century most still want to "own" a home (flat, etc.)? But then I must be a hard lined communist :-)

"What can I do, What can I write, Against the fall of Night". A.E. Housman

by margouillat (hemidactylus(dot)frenatus(at)wanadoo(dot)fr) on Thu Mar 6th, 2008 at 06:43:12 AM EST
Depends on the legal circumstances: a lot of places make life for tenants rather less fun than one might like.
by Colman (colman at eurotrib.com) on Thu Mar 6th, 2008 at 06:44:28 AM EST
[ Parent ]
I agree... But wouldn't the fight be more interesting on the rights of tenants as the rent's values then slicing up territories in private spaces ?

Not to say that most of us will end in some institution while we'll see our offsprings tearing apart on some old cardboard disney house legacy ?

OK, I'm biaised by having two generation of my family with no property, moving if needed from a country to another, to a city to another, to a district to another... Changing size or square meters depending of the use, the needs, the possibilities... My childrens, (third generation) seems to have the same feeling about places, locating their youth memories in several places and for those who are on their own, already thinking of moving somewhere else...

Because of transportation, most of my niece and nephews just move next to their work, changing when they change work... And ranting because they can't always find what they need in the proper financial niche... But that state of facts is also because the system tends to favorize ownership (and in the meantimes asks for mobility)... Go figure, the debate between Sego and Sarko agrred on ownership as a value...
I could live in Mallaig (I did) or in Freïburg or in Izmir, there's even a nice flat with view I can use in Istanbul... Why would I want to limit my moves, or expand transportation problems when I can have about ten centuries of family memories flowing with me when I move with a few crates ?

Having up to date appliances of the sustainable type is much easier to retro fit with whole buildings then with thousands of flats each owned separatly, or with individual housing scattered over the countryside...!

I'll stop the rant here :-)

"What can I do, What can I write, Against the fall of Night". A.E. Housman

by margouillat (hemidactylus(dot)frenatus(at)wanadoo(dot)fr) on Thu Mar 6th, 2008 at 07:27:23 AM EST
[ Parent ]
You should actually write a diary.

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Thu Mar 6th, 2008 at 07:40:17 AM EST
[ Parent ]
Aha... Caught red handed...! I have to agree :-) (though it'll have to wait a few weeks as I'm a bit out of personal time just now)!

Do you know about Daniel Innerarity (articles in El Païs) ? He has an interesting look on "public space" as a democraty feature ! But I haven't "heard" of him otherwise (I don't read Spanish)!?

"What can I do, What can I write, Against the fall of Night". A.E. Housman

by margouillat (hemidactylus(dot)frenatus(at)wanadoo(dot)fr) on Thu Mar 6th, 2008 at 07:46:30 AM EST
[ Parent ]
My biggest problem with renting is that it discourages both the owner and the occupier from improving the house.

The classic principal-agent problem in a new guise, I suppose?

There has to be a property model that aligns the interests of the owners and the occupiers, but the way landlord-tenant relations are configured in most places isn't it.

We have met the enemy, and he is us — Pogo

by Migeru (migeru at eurotrib dot com) on Thu Mar 6th, 2008 at 08:07:06 AM EST
[ Parent ]
Another idea regarding home ownership is that owners will take better care of the property than renters would.

For me, ownership's biggest advantage is my gardening.  There are no convenient community garden plots where I could grow my vegetables and flowers, and living in apartments or flats often means no yards; renting a house can mean the same, without permission of a landlord.  Even home ownership can mean restrictions on gardens and such if you're unlucky enough to buy into a subdivision with a Homeowners Association and lots of rules.

I heartily agree that it's a wonderful thing to live many places in one's lifetime, but ownership doesn't HAVE to change that, it just adds buying and selling to the aggravation of packing and relocating.  

Of course, depending on how much the insurance and property tax costs are (homesteading reduces the taxes, it doesn't eliminate them) one still has monthly charges that can be considerable, even if the home mortgage has been fully paid.  Our taxes and insurance for a very modest home are about $500 per month, and will probably only rise as time goes by.

For what it's worth.

Karen in Austin

'tis strange I should be old and neither wise nor valiant. From "The Maid's Tragedy" by Beaumont & Fletcher

by Wife of Bath (kareninaustin at g mail dot com) on Thu Mar 6th, 2008 at 09:56:06 AM EST
[ Parent ]
I'm not sure why your homeowners' insurance costs would rise a great deal above inflation in Austin.  That's Austin, Texas, right?  I know insurance costs are going sky-high in places like Florida, because of the hurricanes, but I'm assuming that's not an issue in Austin.

All good points.  I'd also add to them that, with ownership, you have an asset to sell if you move, whereas with renting you have, at best, a security deposit returned when you walk away (and, as I'm sure most know, getting that security deposit back can be a royal pain).

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Thu Mar 6th, 2008 at 10:17:28 AM EST
[ Parent ]
You should ask redstar about that "asset" to sell... :-)

But I do agree that when you buy property you can sell it with or without profit... While renting seems more about paying for a service !
I don't own a car (I used to), and even with today's freaking prices I find it more interesting and financially sound to rent a car (latest model, no mechanical problems, good sleep at night as everything is covered by insurance with immediate replacemnt car, etc.)

Many people in my environment thinks alike.. But haven't yet shifted that concept to housing, as there are few good examples!
And people tend to project much more in houses then in cars as stated in the original article...

"What can I do, What can I write, Against the fall of Night". A.E. Housman

by margouillat (hemidactylus(dot)frenatus(at)wanadoo(dot)fr) on Thu Mar 6th, 2008 at 12:33:06 PM EST
[ Parent ]
Ha, yes, although redstar's take on the market seems reasonable.  Probably (and hopefully) not too much damage to be taken there.

It all depends on how expensive the mortgage is compared with the rent, of course.  There's certainly a point at which it's better to simply consume your housing than own it.  And I'm not a big believer in the idea that owning a house is some kind of all-important thing.  I'd rather rent a nice apartment in a nice area than own something I don't like in an area I don't like just for the sake of ownership.  People here get too hung up about owning a house.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Thu Mar 6th, 2008 at 12:54:12 PM EST
[ Parent ]
And you have the escrow system, and can sell or buy quickly, as we have the "notaires" with a three month minimum delay ! (To think that our "président" wanted those to take in charge divorces ! )

"What can I do, What can I write, Against the fall of Night". A.E. Housman
by margouillat (hemidactylus(dot)frenatus(at)wanadoo(dot)fr) on Thu Mar 6th, 2008 at 12:59:29 PM EST
[ Parent ]
No way!

Holy crap, I can see it now. French notaries are the biggest racket going. I can just imagine how divorce will be handled. Just like bankruptcies with the bastards taking months if not years to liquidate assets, collecting retainers and fees along the way until 50 centimes are left for the creditors.

Not even to mention how they operate in real estate. You know why they take so long? They make their money in real estate on the agios they get from the blocked funds it is ostensibly their fiduciary duty to manage on behalf of all parties. If it were the mafia of course we'd have a different name for them, and it wouldn't be "notary".

If Sarko wants this it's because the notary's industry group has its hands far far down his pants. I'm not sure they were able to find anything, though.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Thu Mar 6th, 2008 at 01:05:23 PM EST
[ Parent ]
Ummm...here's something I made earlier...

Co-ownership

.. a bit out of date now....

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Mar 6th, 2008 at 02:12:45 PM EST
[ Parent ]
Co-ops, LLCs, CLTs - everything that is being discussed above your comment - it all fits so neatly. I guess that we'll just have to keep slogging along on this. One of these days, there'll be a mass "Oh, yeah! I get it now."

paul spencer
by paul spencer (spencerinthegorge AT yahoo DOT com) on Thu Mar 6th, 2008 at 03:42:23 PM EST
[ Parent ]
There is no deliberate attempt to 'not get it'. We all wear blinkers and we are all approaching the same problem from different directions. ET is about convergence - bringing all these tunnel-visions into a single vision.

We are a long way off convergence at ET. That doesn't worry me. It's about having the patience and stamina to build the critical mass for real change. 'When it is ready, it will emerge'....

You can't be me, I'm taken

by Sven Triloqvist on Thu Mar 6th, 2008 at 04:12:44 PM EST
[ Parent ]
from all of those drugs that you were touting the other day. The 'convergence' thing proves it. Nobody talks about 'convergence' unless they've been doing drugs or calculus. It's one or the other. (Do I have to do this  ;D ? I hate doing that.)

OK, OK - convergence it is. (Where's my pipe?)

paul spencer

by paul spencer (spencerinthegorge AT yahoo DOT com) on Thu Mar 6th, 2008 at 07:25:02 PM EST
[ Parent ]
Almost all of my mind-expanding experiments were 40 years ago!

You can't be me, I'm taken
by Sven Triloqvist on Fri Mar 7th, 2008 at 02:38:28 AM EST
[ Parent ]
OK. You do realize that I'm joking, yes?

paul spencer
by paul spencer (spencerinthegorge AT yahoo DOT com) on Fri Mar 7th, 2008 at 12:09:38 PM EST
[ Parent ]
I do ;.)

You can't be me, I'm taken
by Sven Triloqvist on Fri Mar 7th, 2008 at 12:20:40 PM EST
[ Parent ]
paul spencer:
Nobody talks about 'convergence' unless they've been doing drugs or calculus.
Now that explains why in the 1970's theoretical high energy physicst started exploring Grand Unification.

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Fri Mar 7th, 2008 at 03:23:27 AM EST
[ Parent ]
Have to show you mine sometime. About 40 pages, single-spaced.

paul spencer
by paul spencer (spencerinthegorge AT yahoo DOT com) on Fri Mar 7th, 2008 at 12:10:45 PM EST
[ Parent ]
Give us the Cliff's Notes version!

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Sat Mar 8th, 2008 at 04:59:46 AM EST
[ Parent ]
I've got a follow-up on the solar project, a Spring garden piece, and an LLC update to do - not to mention the meet-up reprise, plus report, maybe another hike diary. GUT is way down the line.

paul spencer
by paul spencer (spencerinthegorge AT yahoo DOT com) on Sun Mar 9th, 2008 at 01:39:02 AM EST
[ Parent ]
Hoo-boy.  Fun graph.

Can we have a housing depression?  Yes. We. Can.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Thu Mar 6th, 2008 at 09:20:45 AM EST
Depends.

Look at that graph differently; assume a properly moderate 3.5% - 4.0% appreciation rate on real estate and this chart suggests to me a 30% decline, roughly, is in order on average, and that a bit more than half of that decline was realized in 2007.

Recession, yes, depression probably not but maybe.

In any event, note the big bubble started in 2004-2006, a credit-fueled bubble caused by the US fed pumping too much cash into the system. And why was the US fed doing that? Huge ideologically driven budget deficits greatly accentuated by the Iraq war (which is no accident; such wars are features of the very same ideology).

The housing bubble isn't the cause of the recession coming, it's just another symptom.

Oh and can we please stop talking about this until I've sold my damn house?

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Thu Mar 6th, 2008 at 10:50:00 AM EST
[ Parent ]
I think there's some confusion here.

The US Fed were for sure borrowing a lot of cash to fund the deficit. That's a fiscal phenomenon, but isn't leading to retail price inflation (as, say in Zimbabwe) because US consumers spent these dollars on overseas stuff and US creditors keep taking the US $ paper.

That's not pumping in cash it's pumping it out for as long as creditors of the US will take it. But while fiscal deficits may lead to retail price inflation, they aren't causing asset price bubbles.

Bubbles are being caused by Private Banks creating too much credit, because the Fed set rates too low.

Sure the Fed pumped in cash, but only in respect of loans=credit first created as money by the Private Banks. The Fed - as a Central Bank - feeds in the cash (or the electronic equivalent, cf Northern Rock) Banks need, because that's what Central Banks do - in extremis as "lenders of last resort".

The equity released by the US middle class on the back of this cheap "asset-backed" credit compensated ("Anglo Disease")for their  decline in real incomes.

The game's up: we're not talking Recession, we are talking Depression, as money simply drains from the system in a foreclosure-led Death Spiral....

And it will indeed have been the housing bubble that is the cause of it, not a symptom.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Mar 6th, 2008 at 07:49:39 PM EST
[ Parent ]
confusion here.

As for where the source is, you might consider taking that up with Nobel Prize winner in Economics Joseph Stiglitz as to economic causes and effects.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Thu Mar 6th, 2008 at 11:06:34 PM EST
[ Parent ]
Stiglitz's assumptions are maybe only slightly less faulty than the rest.

If you get garbage in, like the existing financial capital paradigm, then you get garbage out, IMHO.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Mar 7th, 2008 at 08:48:24 AM EST
[ Parent ]


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