Entries Tagged 'Housing' ↓

In part one I talked about dealing prejudice, and I got some pretty interesting comments. I encourage you guys to check it out. In this part I want to talk about the reasons why in some instances you shouldn’t try so hard to fit in. Granted, everyone wants to be “normal”, and I expressed that feeling in a previous post about sending children to school early. However, being “normal” is not always wise, and you shouldn’t follow along for the sake of being part of the majority.

It all started when I was a kid. I was never into fashion and I was fine with wearing things I picked out at church sales for 25 cents. Heck, I still have one of those shirts and I wear it sometimes. I have been teased about my clothing in elementary school, but it didn’t matter to me. I knew that having brand name clothes and shoes wouldn’t really affect my schoolwork and I had good friends anyway.  Additionally, my parents really didn’t have money to buy me new clothes so there was no reason for me to unnecessarily add to their expenses.

Now that I am an adult, I think I still tend to shy away from what is considered popular. For example, I still don’t have an iPod, and I don’t intend to ever get one. I could afford a very nice car, but I have no need for it. Considering how many of my coworkers have extremely luxury cars I would say that I am in the minority. I’m not in a car contest with them, so I don’t feel the need to join in and fit in. I have to confess that as a teenager I wanted a Porsche, but now I understand that fancy cars are not necessarily a mark of success because most of them are financed by debt.

Another way that I am a minority right now is that I am a renter. I have written quite a few articles on why I am not buying a house now, and I truly believe that in San Mateo County I am building more wealth by renting rather than buying. Even though I will buy a house some day, I think it is good to have a different mindset right now.   I know many people jumped in to real estate because everyone was doing it in the past couple years.  Now many of the same people are regretting their decisions.  So in the particular case of real estate, I am glad that my husband and I did not decide to buy anything when we got married even though our parents wanted us to.

Finally, what is scary to me is that in America debt is considered normal. Dave Ramsey actually has a funny sticker that says, “Debt is normal, be weird!”. So when it comes to things such as debt and fashion, I don’t mind being in the minority. In fact, I think many people would be much more successful than they already are if they stopped trying to fit in and do their own thing.  I know that peer pressure is a powerful force, but we have to be level headed and see if “normal” is really the best thing for our goals.

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We are officially in a recession! I have written about how I would deal with a recession previously, and also shared the views of one of my company’s founders.  I think most of us saw this coming, and a lot of us will just go on quite unaffected as long as we have a source of income. There are some effects I am seeing due to the recession all around me and I feel like I should address them here.

1. Cuts to education in California- Unfortunately I am hearing a lot of news about good teachers being fired all across California and student walking out of schools  to participate in protests in the hope of keeping their teachers.  It is a pretty difficult situation for everyone, but with 1 in 240 or so homes in foreclosure, the state of California is losing billions in tax revenues.  The former budgets made in the flush housing bubble years are just not sustainable anymore. The funding cuts are necessary because I heard that municipal bonds are not selling well these days and there just isn’t enough money.  I still think it is stupid to fire good teachers, and I hope it really is the last resort.

2. Devaluing of the dollar - The value of the dollar is plunging around the world.  This is going to make travelling quite a bit more expensive for Americans. I know my trip to China later this year will be much more expensive than the past two years.  It will also make everything we import more expensive.  Since we import almost every thingamajig from China and the Chinese Yuan is 12% higher than last year, I expect household goods will increase in price quite a bit. However, it also makes American exports more attractive so hopefully that will make our economy recover more quickly.

 3. Food prices skyrocketing - This is insane, but last  month I picked up pizza dough for 99 cents at Trader Joe’s, and this month it was 1.29!  The same item increased 30% in a month.  Then I heard on the radio that flour prices are skyrocketing and many bakeries are paying 2 to 4 times what they paid last August for flour.  The reason is that wheat supplies dwindled this year and the demand increased.  Other foods are also getting more expensive because of increased  global competition for food and gas.

I haven’t really heard of massive job loss here in the Silicon Valley…yet.  It seems like companies are hoarding tons of cash, and that could be a good thing.  Today our CEO said that “difficult economic times are times for great companies to shine”, and I agree with him.  Anyway, I feel like my life hasn’t been affected greatly by the current recession, but that may change in the future if food gets more expensive than rent.

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I have decided to do the update of San Mateo homes every 4 weeks, and the last update is pretty interesting. In 4 weeks there were 126 unique properties totaling 142 listings that are listing less than their last sale price. This is an increase of 50% from the last report in January. Here are some highlights.

Total Count of San Mateo Home Sellers in Trouble for 1/14/2008 to 2/10/2008: 126

Average Time from Last Sale Date: 1.87 Years

Average Annualized Loss: 14.1%

Average Absolute Percentage Loss: 24.8%

Average Size of Home: 1224

Average Price Per Square Foot: $444.42

Biggest Loser: 649 Hurlingame Ave in Redwood City with an annualized loss of 77%

A notable home is this mansion in Hillsbourough, which sold for 7.9 million dollars in 2001, but is now listing for 6.95 million. I guess we are rolling back to 2001? It is a beautiful property from the looks of the pictures. This is the most expensive listing I have found to date.

In the spreadsheet you will see that over 1/4 of the properties have listing prices that are over 25% less than their last sale price. The worst example is a home that is listing for 47.5% less than its last price. It seems that the Goldman Sach’s prediction of Californian homes losing 40% of their value is coming true one house at a time.

I expect that the next report will be even worse as more people try to list their homes for the spring selling season. They will be competing with so many banks and other desperate home sellers who already have their homes on the market. There is quite a bit of news that many homedebtors are just mailing their keys back to their lenders, and that may be a prudent thing to do if it costs even more to carry the home and try to sell it.

Until next time, enjoy!

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I am sure that most Americans are quite excited about the tax rebates that may be coming soon this year due to a major economical stimulus package. What is lesser known about this package is that it will also raise the “conforming” mortgage loan limit from $417,000 to $729,750 in high priced regions until the end of this year. This means that government sponsored enterprises such as Freddie Mac and Fannie Mae will be able to purchase loans as large as $729,750, and any loan under this limit will not be a jumbo loan. Basically, people will be able to borrow more money and pay less interest. Who is cheering for this change and why? More importantly, how will you be affected?

Opposing Views on the Issue

What I found interesting is that the National Association of Realtors put out an extremely positive review about this move stating that “NAR’s research found that simply increasing the loan limits for Fannie Mae and Freddie Mac to $625,000 would permit as many as 300,000 families to enter the housing market, reduce foreclosures by as many as 210,000 and allow as many as 500,000 jumbo loan borrowers to refinance to lower cost loans, saving these people $274 to $411 a month.” On the other hand, this article states that “the director of the Office of Federal Housing Enterprise Oversight (OFHEO), which is the governing body over America’s government-sponsored enterprises (GSEs), warned the Senate Banking, Housing and Urban Affairs Committee this week about expanding the GSEs’ ability to take on jumbo loans without first having the appropriate stipulations and regulatory structures in place.”

Who should we believe? The glowing report of an association of realtors who have lobbied for the change or the director of a branch of the government that has been tracking housing prices and demographics for more than three decades? I personally believe that the director of OFHEO’s opinion is prudent and logical. With bigger loans, the government sponsored enterprises will be taking on more risk, and if these agencies are destablized by more risky debt then the entire economy could collapse even further.

Best Case Scenario for the Average American

The best case senario I see is that nothing really happens and very few loans get funded under the new limit. These few homeowners will benefit from the lower rate and keep on paying their bills. Hopefully, the paltry number of these homeowners will not affect the housing market in any significant way. The prices of houses continue to decline for a while making homes more affordable and lowering the need for jumbo loans. Basically, the best we can hope for is that nothing changes.

Worst Case Scenario for the Average American

Unfortunately, I think it is possible that this footnote to the stimulus package could have a devastating effect on the current mortgage crisis. First, it may prolong the bubblicious prices in California and the Northeast. Right now I am reading many stories where offers on homes fell through because of the lack of financing. Considering the fact that the average price of shacks in my neighborhood is $700k to $800k, most of these buyers are trying to secure jumbo loans. Once this package goes through, financing will be possible, and the prices on the shacks will not come down as quickly. Even though this higher limit is only in effect for one year, it is possible that more speculators and fraudsters will get into the market and drive prices up even higher. After all, it only took about two years (2004 to 2006) for home prices to double in many parts of California. You may say that this is not a problem for the rest of America, but if Freddie Mac and Fannie Mae become insolvent because of more risky debt, then all Americans will have to pay dearly with mandatory bailouts. Then we can kiss that tax rebate and even more money goodbye.

What I Think Should Happen

I am not an expert, but I firmly believe that what we need is more affordable homes, and not larger loans. So it is probalby best if the limit was left alone and the ridiculous prices fell back down to earth. I think it is ludicrous that the “conforming” loan limit is being lifted more than $300,000 in this package in the blink of an eye considering that it took a span of 23 years for the loan limit to go up from $115k to $417k. Is more debt really good for Americans? What do you think should happen?

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This is a continuation of my family’s immigration story. If you have missed the first two posts they are here:
Fifteen Years in America — An Introduction
Fifteen Years in America - Chapter 1: The Struggle Before the Reunion by Jian (Part 1)
Enjoy!

The church is located just across the street from the University of Hawaii’s business school. Because of its proximity to the University, this church has many programs that aid international students, and thus they have a good relationship with the Internation Student Services. When they received Jennie’s call for help, they sent someone to bring Helen to the church.

Later, Helen told us that the first three nights she was in Hawaii she slept on the ping pong table of the church’s library. In those three nights there were no one present in the church, and it is hard to imagine how she survived those nights in the pitch darkness of the church surrounded by cockroaches and mosquitoes. In order to save money, she only ate one hamburger in those three days.

In America the grants given to students in humanities majors like theatre arts is much less than those given to science majors. Thus Helen did not get much money from her department. When she just arrived she only received a tuition waiver, and had to work for her living expenses. This is a very common occurence. Hawaii’s main economy is tourism and is also one of the highest cost of living areas in the United States. Because of these reasons, Helen desperately needed to save money.

God always opens a path for those who tries to find it. Three days later, the people at the church managed to use their connections and found a place for Helen to stay. They found a single mother named Lory. She is a hapa (half Japanese, half Caucasian) in her mid thirties and she is quite beautiful. She has a four year old boy named Dane, and she wanted to find a student who could babysit her son on Friday nights when she went out on dates. When she saw that Helen was about her age and has experience in raising a child she was very satisfied. She offered Helen a room in her house for $150 per month and asked for free babysitting on Friday nights. With this deal, Helen was able to have an affordable roof over her head.

After she settled down in Lory’s home, Helen really wanted me and Xin to come to America. However, she did not have enough economic capacity to bring us to America so she had to work. She found a job at the Kennedy Theatre at the University of Hawaii making sets and costumes. It is not easy to make costumes. When she just started she was not familiar with sewing and often stabbed herself with the needle. When she was making sets she often had to do heavy labor and lift things to high places. Even though it is hardwork, she silently endured it to realize her goal of reunion. In addition to working at school she also did some part time jobs on the side.

Helen worked hard at earning money in order to bring us to America, but she also had the difficult task of exceling at school. Getting a PhD in America is not a simple feat.  With each lecture there are tons of reading materials and research to go through and papers to write.  Everyday Helen worked 16 to 18 hours to finish work and school. After a few months Helen was able to save a bit of money and went to Jennie at the international student service  to obtain an I-20 form for us to come to America.  Because she did not have enough money she asked for the help of a few classmates.  She borrowed some money and put it into her account and then obtained a certificate from the bank stating that she has enough money.

At that time there was a student from Shanghai named Hu Leping who helped Helen greatly.  This man majored in library sciences and loved to help other students from China.  In UH, he had a great reputation of “Hu Leping, loves to help others”. He found two to three classmates who were willing to help and collected a bit over $8000 for Helen’s account.  With this help Helen’s assets qualified for an I-20.

Helen took her bank’s certificate to the international student service to Jennie for an I-20.  Jennie is a very experienced officer and is very sympathetic and understanding to the situation of international students.  She was very responsible and tried to talk Helen out of bringing us to America because the living expenses are high and it would be very hard for Helen to support us on her wage of $6.50 per hour.  She asked Helen to wait a while before making the decision, but Helen was adamant, and Jennie had no choice but to issue the I-20.  When Helen left the office Jennie told her that even if she had an I-20 there was no guarantee that the Consulate would give us a visa because Helen did not have enough money to support us.

Jennie turned out to be right.   I took Xin and the I-20 Helen sent us  and went to the U.S. Consulate in Shanghai for a visa. An officer looked at our documents and did not say much.  He wrote a date for six months later on my and my daughter’s passports, which meant that the visa is denied and we may reapply in six months.

To be continued…

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