Weekend Weirdness, Volume III

We begin with a lamb jumping on a bed.  Very cute, but it comes to a strange ending.

Then, I found a delightful children's book about interspecies telepathy, and the inevitable conquest of our planet by alien retroviruses.  It's fun for the whole family!

Look out, bullies.  It's Abe Lincoln, come to kick your asses with his mad wrestling skillz.


Rama?

See what can happen when those fascist zoning restrictions are lifted?  Sometimes I miss Tennessee...

This sort of thing was freaky during the campaign and it isn't any better now.  And this isn't particularly helpful, either.

The correct answer to this question is "Because ice cream has no bones."  Come on, what's the matter with you wiki-using people; do I have to do all the work around here?

Ta da!  From the dustbin of failed political slogans, I give you:  "Spinach is spinach."

In the movies, dinosaurs have a rather limited vocabulary.

I have no idea how I stumbled across Charlize Theron.  But I'm glad I did.

The Regional Great Depression Of 2009

So let's see if I have the myth right.

Way back under the administration of [insert name of last opposition party President here], and inspired by the legislative efforts of [insert opposition ideology bogeyman's name here], banks were [allowed/encouraged/required] to make high-risk home loans. These were profitable for the banks because they could charge higher interest rates due to the high risk, and safe because real estate values were assumed to constantly rise over time.

By [1995/2001], the prices reached out-of-sight levels for most would-be homebuyers, so the banks began to use more creative means to make it appear that home ownership was within the reach of high-risk customers. Adjustable rate mortgages and cliff financing dovetailed with a time of easy credit and rapid increases in real estate market values, and homeowners were told not to worry because they could always refinance before their rates adjusted up, since their property would continue to appreciate in value.

In 2008, the bubble burst and the whole system, predicated upon the idea that real property values would increase by 20% a year forever, failed. Suddenly, that 2+1 on a 4,000 square-foot lot wasn't worth $824,999 after all. Since everything is financially linked to everything else, everywhere, the global economy took a gigantic hit and the credit markets contracted and suddenly everyone was upside-down on all their debts.

Have I got that right? Well, that's the myth, anyway. Here's something else to consider. All those people who allegedly overbought and got snared by adjustable-rate mortgages -- they were mostly in California, Arizona, Nevada, Michigan, and Florida. The other 45 states experienced generally-predictable rates of mortgage loan failure and currently are experiencing predicted rates of foreclosures. This fits in nicely with my experience in Tennessee, where home prices were not rising precipitously during the "bubble years" of 2004-2006, and perhaps in a lot of America.

The unsolved piece of this puzzle to me is why foreclosure rates have not risen, and if market prices have not fallen so precipitously, on the Eastern Seaboard. If you bought a house in Brookline, Massachusetts in 2006, it's for sure you paid a pretty penny for it. What could you get for that house today? I browsed with Zillow and randomly found a really nice-looking place not far from B.U., a 5+3 on a lot with mature trees. The market price for the house in mid-06 was something like $1.4 million. Today, Zillow thinks it would sell for $1.11 million. Now, that seems like a loss of about $300,000, which sounds bad. But, if you'd bought the house in 2004 instead of 2006, you'd have bought it for just under $1 million even, which means you'd still be $110,000 ahead of the game today. This particular house doesn't look like it was sold at all during this time, so this is all sort of academic. And it's always been kind of pricey.

So I looked around Boston some more to find something that might have been a bit more within the reach of a first-time homebuyer. I went a little bit northeast of Cambridge and found another place that looks like a student special, a 1,725-foot 4+2.5 on a side street. Those bedrooms must be tiny, and there's basically no yard to speak of. This is priced at just under $400,000 today; in mid 2006, it would have gone for about $450,000, and five years ago, again it would have gone for about $400,000. So even at a lower price point, the historical price curve for the urban market circling Boston is shaped more or less the same -- the houses peaked a bit but did not fall below their pre-bubble values.

If you buy a house in 2005 and sell it in 2006, you're doing something very close to speculation, and that's a risk. No one is saying that a speculator shouldn't absorb the losses of that risk if things don't work out, just like the speculator could theoretically pocket the gains if the risk did work out. What about buying in 2005 and selling in 2007, a two-year ownership gap? That's still close to speculation in the residential real estate market. Five years? Ten? At some point it stops being a short-term speculation and starts being a long-term investment. Where does that line get crossed? I ask because in Boston, it looks like the longer-term your investment was, the less risk you faced, even in the middle of the go-go 2000's. The same was true in Tennessee, and I'm beginning to think that the same was true pretty much everywhere.

This is anecdata, but I'm wondering if maybe a more detailed, regional look at the housing crisis isn't warranted. It doesn't seem to me that Boston real estate consumers (or their lenders) need to be rescued from the precipitous collapse of housing prices in that market, because it didn't happen there. It happened in places like Las Vegas, Los Angeles, San Francisco, Phoenix, Grand Rapids, and Tampa.

So sure, I know that my own modest house in exurban Los Angeles County, bought in a falling market, has still fallen nearly $100,000 underwater even after the purchase. What can I say, I was optimistic and thought that things had reached a near-bottom. My wife also really liked the house and it was at a level we could afford, in a good neighborhood and we aren't planning on moving anytime soon.

So what do I care about the market price? What good does it do me if the market price rises, if I'm not going to sell? What harm do I suffer if my house is worth more than I owe, as long as I can make the mortgage payments? The answer is, even in one of the most impacted regions of this regional phenomenon, no harm at all. I don't need help from the government and neither does my bank (at least, not with respect to my loan). What I need is to keep my job and stay put until the market corrects itself. Is that really so bad?

As President Obama considers a $275 billion Bank Bailout Bill II (the first one became TARP under President Bush), let us remember that this may very well be a regional crisis, not a national one. A one-size-fits-all, Washington-has-all-the-answers solution may very well not be the right one. And that in a lot of cases, doing nothing may well be the right answer, as frustrating as that may be for some people to consider. The people most at risk of losing their houses are the people who were always going to be most at risk; a percentage of them were always going to be in over their heads and wind up losing their houses. That really sucks for them but it's how the market, imperfect in application but still the best system we've ever had, works out.

They've Learned Nothing

A little trip down memory lane, here. How did the financial crisis get started?

If you answered "By banks making high-risk loans to people who couldn't afford the homes they bought," you're (substantially) right.

With that in mind, here's a bit of "news analysis" from the Fish Wrapper which justifies why I call it that -- the headline and leaderline alone are revealing:

$15,000 tax credit won't help low-income home buyers, experts say
The Senate measure offers the credit to anyone buying a primary residence. But buyers must earn enough to have $7,500 in income taxes -- $81,900 per year for a family of four -- to get the full benefit.

It goes on from there to the effect that this particular tax cut is only for rich people and therefore we should all hate and reject it.

Point one. Call me a heartless bastard, becasue I'm about to tell you that, at least in Southern California, a family of four that makes less than $80,000 a year is probably a bad credit risk.

Traditionally, a bank wants no more than one-third of a family's take-home pay to go to the mortgage. That's one of the reasons there is a credit check and financial profile involved in writing home loans. Banks want to make sure that there is enough money so that the family can actually pay the mortgage. In California, a family of four that makes $81,900 a year can expect after-tax income of something like $5,000 a month. Now, after you add things like mortgage points, mortgage insurance, homeowner's and fire insurance, and property taxes, that not-quite-$82,000 a year income is going to translate into about $250,000 worth of loan. More than that, and you're entering risk-escalation territory, all other things being equal.

Now, let's say you were going to go house-shopping with a pre-qual letter for $250,000 in your pocket in Los Angeles County -- if you aren't looking in the Antelope Valley or in Compton, you are S.O.L. because even now, after the market has dropped through the basement, you're still not in a position to buy a single-family home at that price.

So that's point one. For the target audience of the Fish Wrapper, bemoaning a tax cut for the rich is silly because no one who reads the Fish Wrapper and who personally is in a position to benefit from the tax cut is anything but one of the "rich" people who will benefit from it. If you don't make at least that much money, you aren't supposed to be buying a house in Southern California anyway. Writing a home loan to such a person is what got the banks in trouble in the first place.

Point two. The headline is deceptive. It may be that a family that earns less than $81,900 a year will not reap the entire benefit of the tax cut. But that's the impression that the headline leaves. Let's say you have a family of four in Knoxville, Tennessee that is fortunate enough to have a gross income of $70,000 a year and they go out and buy a starter home for $100,000. Now, that's a good credit risk; the mortgage payment even after points, taxes, and insurance will still be less than $1,000 a month, which will be something like 25% of the take-home pay.

Now, this family, you might argue, does not particularly need the tax cut to buy a house in a place like Knoxville. This family will have already bought the house at that income level and in that market. Maybe, but the point is, who gets to take advantage of the tax cut? This family does. Maybe not all $7,500 spaced out over two years' worth. But they do get something on the order of $6,000 spread out over two years. That makes them much better off than they were before the tax cut.

Point three. Is the goal here to lower the financial bar for people to buy their own homes? This is a laudable goal, to be sure, but we're being asked to get behind this bill because we are told it will stimulate the economy out of recession. Consider that family in Knoxville who won't get to take advantage of the "whole" tax cut. Alas! They "only" get a $6,000 cut spread out over two years, while their wealthier counterparts in cities like Nashville and Atlanta get the whole $7,500.

For our hypothetical Knoxvillians, that still works out to $250 in extra take-home income each month, which can make a real difference in the way the family lives its life. At that level, it makes a difference in the sorts of things the family consumes, like how often it goes out to dinner or buys toys for the kids or books and jewelry from the mall -- things that stimulate the economy. Even if they use it to pay down their credit cards, that increases the principal recapture rate of financial institutions and that, too, is beneficial to the economy because the money stays there.

Certainly, they could in theory get more of a tax cut than this. But at this point, the cut is at a level appropriate to serve its stated legislative purpose of a short-term economic stimulus. This, then, is a stimulus-appropriate sort of tax cut, plausibly aimed at the sorts of people who can reasonably be foreseen to do the sorts of things that we are informed will stimulate generalized economic activity. And worst of all, they get to decide for themselves what to do with the money because the government doesn't take it and give it back to them with strings attached.

But left-wing populism about how awful tax cuts are because they help rich people along with poor people will not help get us out of the economic doldrums. So, "boo hiss" to the Fish Wrapper.

The Burst Bubble Isn't Enough

One of the reasons that The Wife and I wanted to move to Tennessee was the possibility of buying our own home. Tennessee didn't work out for a variety of reasons, but when you consider what the real estate market looked like back when we did it, you may have a better feel for why we tried our luck out there.

In today's Fish Wrapper, is yet another report on how far housing prices have fallen because of the downtrun in the real estate market. Real estate agents jumping out of windows and things like that. But of particular interest are the pictures of foreclosed houses -- with reports of how much they were bought for, and how much the banks are trying to sell them for.

Illustrative of the kind of market The Wife and I were facing back in 2005 is this gem in north Redondo Beach. "Gem" is not exactly the right word, on further review. But this is pretty typical of what you can get in the area that we were living in. In most parts of Redondo, you get a two-on-a-lot or sometimes even a three-on-a-lot house. You share a common wall with the other house on the lot. Zillow describes it as a 2,290 square foot residence, which is about right for the area (the other house on the lot will be of similar size), with four bedrooms and three bathrooms. The Fish Wrapper adds from the listing: "...sunny south facing private yard. Open floor-plan, hardwood floors, granite counters and tumbled travertine tile on both floors." It was built in 2005 and sold, new, for $929,000.

That's not a misprint, Tennesseans. Nine hundred and twenty-nine thousand dollars. It probably sold at an auction or after a bidding war; we were aware of a similar house near the home we rented (a slightly less desirable area than the one advertised in the Fish Wrapper) that began its bidding war in early 2005 at $800,000 -- and we later learned that the buyer paid cash for it. To share a lot and a common wall with your next-door neighbor. A thirty-year mortgage at the prime rate prevailing at the time would have produced monthly payments of about $5,600.00 a month -- which doesn't count any points or property taxes or anything else. Hell, the bank is still looking for $829,000 for this house today.

The Wife and I weren't making anything close to the kind of money needed to buy a house at those prices. So that's why we left to find somewhere that we could afford to buy. With housing prices in Tennessee being an eighth of what the bubble was at that time, it made the place look mighty attractive. Of course, the job I thought I had lined up fell through and it took a hell of a long time before I was able to get another one, so that made things a challenge even then.

Some of the houses in the Fish Wrapper's feature have lost even more of their height-of-the-bubble value. This house in Redondo Beach seems to have "only" fallen off 10% from its peak price. But it's still way, way, way out of reach of nearly any income-earning family. Which is one reason why we're glad to be where we are; the house we bought was still uncomfortably expensive but we were able to get the kind of house we wanted, in the kind of neighborhood we wanted, for a price that we can afford.

How is anyone in the city supposed to get started? If you don't have a huge helping hand from family wealth -- not just a loan of a ten thousand or so from your parents to help buy the house but I mean hundreds of thousands of dollars to make as a down payment -- then the mortgage payments are going to simply slaughter you.

I'm told that one should spend between a third to 40% of after-tax monthly income on housing payments. So if you took a zero-down loan on this house in Redondo Beach, and assume you had the best possible interest rate you can hope for, your base payment for a thirty-year loan would be five thousand dollars ($5,000) a month. Maybe you don't have credit quite as good as Senator Chris Dodd. So maybe you have to add a basis point or two. You certainly will have to add in closing costs like escrow fees, title insurance, and broker commissions. And there's property taxes to pay, too. Your monthly payment will wind up being something like $6,100 a month. That works out to needing nearly three hundred thousand dollars a year of pre-tax income to be able to make that payment.

Mere mortals simply don't make that kind of money. Very well-paid professionals do. Senior associates at Biglaw firms (but not newly-minted lawyers). Doctors with high-risk specialties. Mid-level accountants at Big Four firms. Stockbrokers and hedge fund managers. And it helps if both spouses do jobs like that, too. For mere mortals -- including the bulk of the professional class, I might add, meaning doctors who are general practicioners, accountants who prepare tax returns, and the 90% of lawyers who don't have blue enough blood or good enough academic credentials to sell themselves into indentured servitude at law firms like Arrogant, Condescending & Overpriced LLP, well, they're ass-out if they want to buy a house in that kind of a market. They should look at, you know, Claremont. Thousand Oaks. Santa Clarita. Redondo Beach -- that's just out of the question.

The Subprime Mortgage Crisis -- In Easy-To-Understand Cartoon Form!

Good link here from Volokh.

They Knew What They Were Getting Into, But Still...

My parents have apparently been having a lot of trouble getting carpet installed in their basement back at The Estate At Louisville. They have my sympathies, but they can't say that The Wife and I didn't warn them that people in Tennessee struggle.

I Am Not An Electrician...

And I am not a plumber and I am not a carpenter and I am not a painter. I am a homeowner (again) and that makes me by necessity all of these things. This weekend, I’ve had to re-wire lamps and stereos, replace and troubleshoot washing machine and dryer hookups, paint crown trim, and a whole host of other things for the new house. What’s more, I don’t think I’ve been working as hard as my wife, who has been putting stuff away as fast as I can get it to the house, and who did a lot more of the painting than me.

I am also not a mover, but I got to try my hand at that, too. We hired a couple guys to move the big stuff, and they were a big help. It took two trips with a 14’ U-haul truck, but fortunately Soffit House is only a mile away from our former house, and after five hours all the furniture and other large things had been moved. Yesterday, my buddy helped out with a couple carloads of stuff, and we were finished getting everything over before dark last night, including our food, which was good because it meant we could eat something other than fast food again.

I am also not a dogcatcher. I thought I had shut the gate to the backyard after taking out the trash last night, but apparently I didn’t do a very good job of it, and the gate was open this morning when The Wife let the dogs out for their morning constitutional. And that meant that it was time for the doggies to go boldly forth and explore, where No Dog Had Gone Before. She caught on to what was happening pretty quickly, but in the dark of the early morning, she couldn’t see the dogs and it was anyone’s guess where they had gone.

I am not a happy early riser. But there I was in my pajamas at not yet five o’clock in the morning, calling out my dogs’ names to every blind corner in my new neighborhood. The neighbors undoubtedly think their new neighbor is some sort of crazed Buddhist botanist wandering the streets shouting for “Karma” and “Sassafras.” We saw that the sun had come up, but didn’t enjoy the dawn – we were panicked, looking for our missing doggies. It got to be nearly eight o’clock, The Wife was late for work, and I finally made the call that someone would either catch them and call the number on the tags, or they would be caught by Animal Control and we’d get a big ticket, or they’d be just plain gone. On that glum note, we went to work.

Now, I am a lawyer, but I was a rather distracted one during a client meeting as I was trying to set aside the “Lost Dogs” poster I had created to try and think about my client’s problems. Immediately after a client interview today, a guy called my cell phone and said he had Karma but couldn’t get “the other dog” to come to him. I flew out of the office, and met the guy and his friends at his house – which was about a quarter-mile from Soffit House, but across a very busy street – and collected Karma. He pointed out where he’d last seen Sassy, and sure enough, there she was, and she came when I called her. The dogs were very thirsty but otherwise unhurt. The guy initially refused my offer of a reward, but when I characterized it as, “Have a pizza on me,” he took it and I was pleased to offer it.

Finally, I am not a gardener. But, even before we can replace and stain the cabinet doors, and finish the painting and the trim, I’ll need to buy a lawn mower because the lawn is starting to look a little bit shaggy. And I'll need to set up some chain-link fence to further confine the dogs to an area they can't get out of should I fail to close the side yard gate properly again.

Ah, the joys of home ownership.

Cashier's Check

Today is the day for closing escrow on Soffit House. The Wife and I needed to produce $8,600 in the form of a cashier's check to close on our house. So yesterday, I went to Wells Fargo to have that check drawn up, and was told by the perky 19-year-old teller that a cashier's check was for amount in excess of $10,000, and that she could give me an official check instead which would be just as good.

No, I said, it isn't the same thing. Patiently, I explained the taxonomy of commercial paper to her. A cashier's check is an instrument for which both the drawee and the drawer are the same party (in this case, Wells Fargo), and therefore is payable upon presentment. An official check is guaranteed by the bank, but it is not payable upon presentment as it is subject to Federal Reserve Regulation CC. (Well, okay, maybe I didn't feel very patient inside as I explained this, but I did try to be polite while explaining myself.)

No, sir, the teller said, at Wells Fargo, the cashier's check is for $10,000 and the official check is for less than that amount. Would you like to confirm that with my manager? Sure, of course you would.

Amazingly enough, the manager did confirm the teller's statement and would not authorize issuance of a cashier's check in the amount of $8,600. Perhaps she believed something she read on the internet. Needing to get back to court rather than continuing the argument, I took the official check, and the manager's card, and told her to expect a call from my escrow officer about the exact nature of the instrument that Wells Fargo had just sold me and whether it qualified for escrow.

Wells Fargo. The only stagecoach that robs you.

The Wages of Stress

Didn't I just take a vacation? How come I'm so stressed out?

I've had what feels like an unusually stressful week. Couple of weeks. Work has been at what often feels like a frantic pace. I've bowed to necessity and done what I have to do, but it's been a juggling act on more than one day. I think, after giving a presentation requiring much more research than I had originally anticipated it would, I am over the hump but I am not out of the woods yet.

Buying a house is a stress. Soffit House, because it is in California, commands a much higher price and a much greater financial commitment than the home that The Wife and I bought in Knoxville and I worry that we will not be able to afford it. We will also be able to add less value to the house easily because so much improvement has already been done to it. This is but one of the many ways I find to fret over money. The missing income that University of Phoenix used to provide -- no more can I taste of that, but the money itself would certainly be welcome.

When I get home at night, I've felt so deflated that all I can do is sit. Things that normally would only be minor problems feel like major annoyances and I don't know why I'm taking life's little travails so hard recently. Patience during the day is a greater effort to find than it normally is. My animals, who want attention and love, annoy me more than is fair to them.

The Wife, who has joined Weight Watchers, seems to constantly obsess over food, constantly counting the points of everything she eats. I am inspired to lose weight, too, but I lack the discipline to track all my food intake. I have tried to moderate my portions and help make healthier choices while eating with The Wife. Although I've tried to make portion sizes right for her and use ingredients that will fit with her dietary plans, we still have had a lengthy negotiations about things like sauce for pasta. A lack of food will affect anyone's mood negatively, and we're both eating less than we're ordinarily used to. The result is that we're a little bit more on edge around each other than we normally are. I wonder if losing weight is worth that.

My feet hurt. All the time.

I try reading or watching television. I cannot concentrate. My mind meanders and can only be focused for short periods of time. Crime shows, like CSI or The Closer, feel too real and disturbing; it is sometimes too easy for me to visualize someone I love as the victim. Such thoughts are particularly unwelcome on this of all days, when the nation indulges itself in a day-long remembrance of a very dark day not so long ago, a day that altered our own national perception of, and reaction to, the world and of ourselves.

Sleep? A fleeting zephyr that either smacks me full in the face at a ridiculously early hour, or else flees from me, always just out of my grasp and mocking my feeble efforts to quiet my mind. Tonight, sleep is far, far away from me, though I am very, very tired and as you can read, my prose has become purple as a result. Perhaps tomorrow night I will follow up on dinner with a round of meditation under the guidance of our friend the Monk. It has been far too many weeks without that periodic moment of mental quiet -- perhaps I can achieve it on my own but it seems easier with the trappings of the zendo. As it is, when I lay in bed, unsleeping, and force myself to think of matters other than the stressors that haunt me during the day, dark, dark thoughts of terrible things enter my mind. I've had plenty of intense and disturbing dreams whose content vanishes with the light of the morning, but which nevertheless leave behind an aftertaste of fear, unease, or foreboding. Dreamless sleep is pleasant, but so hard to achieve!

Perhaps all this will pass as I move out of a phase of intense work activity; perhaps when the purchase of Soffit House is complete; perhaps when we adapt to a modified diet; perhaps when some other challenge, as-yet unknown to me, is overcome. But, as you likely know yourself, Loyal Reader, one stressor magnifies another and when many pile atop one another, the effect compounds geometrically.

For now, the wages of stress are insomnia, an inability to stop grinding the teeth at the back of my jaw, an occasional loss of impulse control when given the option of eating deliciously fatty food, horrifically powerful sneezes, and what feels like a constant effort to remain pleasant around the good people surrounding me who have, in reality, done nothing to earn my annoyance and discomfitude. I hope that it does all pass soon, though.

Our Last House Guest?

Yesterday, a friend came over for dinner. She'd never been to our house before and was taken aback by its size. She may well be the last guest we entertain here in the Rented Mansion In The Desert.

The reason for that is that The Wife and I put in an offer to buy a house of our own, less than two miles away. After some negotiation, the seller and we agreed on the price and terms. Escrow is open and should close by the end of the month. Our new house will be half the size of the Rented Mansion In The Desert, has hard flooring surfaces throughout the living space, pleasing landscaping with mature trees, a combined air conditioner and swamp cooler climate control system, and granite tile countertops in the adequate if not luxurious kitchen.

Its defining architectural characteristic is a rather unusual structure running about eight feet high underneath a vaulted ceiling in the front portion of the house. When I first saw it, I said, "What's up with that floating soffit?" and thus the nickname "Soffit House" was born. (It's not really a "floating soffit;" I think properly it would be called an archway, but since it doesn't have a classic arch shape, I didn't use that term.)

Contempt

I see and hear stories of contempt when people lose their houses a lot, doing what I do. People losing their houses to foreclosure stealing toilets. People being evicted in unlawful detainers pouring wax down the drains.

But this one is particularly obnoxious, because it involves animal cruelty in addition to unreasonable destruction of other peoples' property. It seems that the pigs are OK now and hopefully, the jerk who starved them for a week is getting appropriate treatment from law enforcement.

Death House

When we buy a house, we ought to look for a house where someone has died recently.

No, I'm serious.

People, for some reason, seem to think that a death taking place in a house is a bad thing, something that would make the house less desirable to live in. I suppose if no one cleaned up after the death and all the gooey nastiness that happens when someone dies, that could leave a stain and a bad smell. Maybe if the person died from some sort of communicable disease I might consider that relevant. But aside from that, it's not like death is particularly contagious.

But the fact is that the market price of such a house drops dramatically. This seems to me to be completely irrational; what are these people afraid of, ghosts? Turns out, yes, that is part of the fear, although the stigma of being the situs of a deaht seems to be somewhat more complex than that. There is money to be made as a result of this sort of irrationality.

California Civil Code § 1710.2 states that a seller need not disclose a death in the house that took place more than three years prior to the intended date of sale. But does that imply that a death in the house within three years is material? It would seem so -- any fact that, if known, would lead to a change in the market price of the property, is material. Since a recent death is such a fact, it should be disclosed.

So, you buy a house where there has been a death within three years. As a result of that fact, you pay a sub-market price for the house. Hold on to the house for three years and, if no one else dies in the intervening time, you can then sell the house for its market price. The downside is that you will absorb a capital gain tax liability, but you can avoid that if you are lucky enough to buy a new, better death house that you buy for a sub-market price, and structure the sale as a 1031 exchange.

Alas, The Wife wants to buy a new house, it seems. There's another model home with a floor plan she really likes. So I guess that's what I want to buy, too, even though this bit of useful knowledge could get us in to a lot more house than we otherwise could afford.

Do Street Names Affect Property Values?

Take two houses – with identical floor plans, identical lot sizes, in the same neighborhood, and functionally identical landscaping and decoration.  One of them has the address of 123 Shady Oak Lane, and the other has the address of 44293 Solzhenitsyn Street.  Will these houses sell for different prices because “Shady Oak Lane” is easier for most people to say than “Solzhenitsyn Street”?  A realtor in Austin, Texas thinks so.  But, there is an upside to an unusual street name – buyers don’t seem afraid to buy a house with an unusual name, and will buy the less expensive house with the unusual street name faster than the more expensive house on the traditionally-named street.  Hat tip to Steven Levitt at Freakonomics blog.

Exile in My Own House

The Wife is having her girls over for a stamping party. This is where they convene around a table and make greeting cards using a variety of stamps and other craft techniques.

After helping out with the cleaning, I prepared food for them -- from-scratch mac-and-cheese, crudites with mint ranch sauce, and melon balls. I made up a honey butter for The Wife's banana bread, too. Now that this is all accomplished, my job is to get out of the way and let the girls have their fun. I may come down to grab some food in a bit, but aside from that, it's up in the loft with the cats, so I can let the girls have their fun.

All part of being a good husband.

I feel bad after our near-miss on buying a house earlier this week. We found a nice house during one of our open house shopping expeditions, one in which the owners had put in a lot of extras -- granite countertops in the kitchen, custom millwork everywhere, and laminate floors in practically the entire house. We thought they were a bit over the market in this neighborhood at $373,000, but loved the house. So when the owner called me up and said that his realtor suggested they come down in price, and had cut the price to $267,000, we jumped at the chance to buy it.* I pulled the public recordings, saw their mortgage situation, and figured that the drop in price was because the house had been on the market for seven months and the sellers were beginning to feel distressed, so the big drop sounded like it was within the realm of possibility. So I spent a day lining up the financing. But later, the owner and I spoke again and he apologized for misspeaking; he had cut his price to $367,000, not $267,000. $367,000 will probably not be within our grasp for several months yet.

Now, remember that I haven't seen the house yet that has made me swoon, but The Wife cannot make that claim. (I certainly did like the good layout, generous workspace and storage, and granite countertops in the kitchen of this house.) So she was pretty bitterly disappointed with the miscommunication and the likelihood that we will not be buying this house. I feel bad for her and I figured helping her out with her girly event would make her feel better.

Or, maybe we will, when we get in a position to put a bigger offer down on the table than we are in at the moment. The general consensus of the real estate brokers and real estate lawyers I've spoken about this with is that $367,000 is still over the market for this neighborhood and a house like this. Yes, it has a lot of extras one would not expect in a neighborhood like this, but that's the reason why the owners aren't getting the value for it that they would like; they've overbuilt the extra touches and the market won't support it. And real prices are falling faster than these owners seem to be reacting; one broker I had lunch with a few days ago said that real prices** were down 12% in the past three months.

So for the time being, I'm exiled to the loft of the Rented Mansion In The Desert, and that's okay; I'll manage for a few hours. My class for tomorrow is already written; it's about employment law so that's one I will be able to teach with enthusiasm and little preparation since it's my second-favorite subject (after Constitutional law) to cover. I'll just take it easy. If I decide I want to watch a hockey game on TV or something I can always drive out to the sports bar a few miles away, but I'm not motivated enough to do that just yet.


*(I know those prices seem out of sight to people in Tennessee. I assure you, housing in the Antelope Valley is the only place in Los Angeles County that is even remotely affordable like that.)

** "Real prices" are distinguished from face-value prices in that most of the price depression is showing up in after-transaction values to the buyer, in the form of financial incentives like interest rate deductions or principal rebates, or premiums like free swimming pools, free granite countertops, or free cars.

House Hunting (Again)

Like another couple pictured to the right, The Wife and I are house hunting. Our budget is somewhat more modest than Dave and Vicky, but we're hopeful we can find what we're looking for anyway.

So, this weekend's primary activity was house hunting with The Wife. She found a floor plan online that she fell in love with. To me, falling in love with a floor plan seen on the internet is not comprehensible, but that's what happened. So we drove around to the address where the developments were going to see the floor plan in real life. The developer indicated that the floor plan would be available in three locations.

At the first location, there was a retaining wall surrounding a dirt field. Not even a sales office.

The next location was twenty-one miles away. We drove there and found nothing but older developments. We tried looking for the marginally-employed people holding signs to guide home buyers to the developments, but there were none to be found.

The third location was an alfalfa field north of the aircraft assembly plant, inhabited by sagebrush and Joshua trees.

So we found another tract being built by the same developer, and went into a sales office there. It was a madhouse. There were people waiting in line to buy houses. We were collared by a real estate agent before we even walked in the door. After some difficulty, we got directions to the site where a model of the house could be found -- about a mile from where we had been earlier that day.

But we didn't just tour that house. Oh, no. That house was nice but we had to see the other five models also. I got a kick out of the one with the foyer with a mosaic floor in the turret, with a big heavy oak door facing the entryway. (Someone knocking on the door could say, "Open in the name of the King!")

Virtually all of the houses were way too big for The Wife and I. It's just us and our critters, and we're not real big on the whole formal room thing anyway -- we rarely use our formal dining room now and never use the formal living room. Both of these are dens for the animals, who could care less about the extra space. We also don't need four bedrooms -- ideally, we'd have two but will probably have to put up with three.

We looked again today, at two open houses and one built by a developer that hasn't been sold yet. Two houses that we saw were suitable for us. Both had the "great room" design, rather than having divided spaces. I favor this idea because the fact of the matter is that most of the time people are in the casual rooms or the kitchen anyway, even when you have guests over. Formal dinners and cocktail parties are not really part of our lives, so we'd rather have a house set up for relaxed everyday life and causal entertainment.

The good news is that, by California standards, these kinds of houses -- 3+2 with great room and adjoining kitchen -- are on the "affordable" end of the spectrum. The bad news is that there just aren't very many of them out there. Developers seem to think that people want to buy the biggest houses they can, with the greatest number of rooms possible. Formal dining rooms, eat-in kitchens, formal living rooms, parlors, libraries, offices, and even conservatories in which Colonel Mustard might use the revolver.

Master bedrooms have grown to "master suites" in a lot of these houses. Instead of a larger room with an adjoining bathroom, now there are cavernous complexes of rooms, with arched entryways to dual walk-in cabinets. This is just the master suite, remember. Several of the houses we saw (for me, they all start to blend in together after I've seen three models) had separate seating areas within the master suites.

No, not for us. Less is more. Great rooms are great. We don't need, or want, master suites with separate seating areas long enough to install bowling lanes. This isn't a room at the Plaza, it's where we intend to live every day. And we don't spend a whole lot of time (awake) in the master bedroom anyway. Back when we lived in the Estate at Louisville, we made a point of using the smallest available bedroom for our sleeping purposes.

So it's proving to be something of a challenge to find the right house. The one model The Wife found was, indeed, very much what we're both looking for. We intend to buy the house and stay put for some time, so it pays to look around and take our time. It also pays to think about the neighborhood the house is in -- to me, that is probably more important than the house having the perfect layout. Methinks The Wife's priorities are a bit different, but that's what all the shopping about, so that we can both get what we're looking for. There's no reason we shouldn't have both.

No Hay Agua

Once again, plumbing problems confound the Rented Mansion In The Desert. This time, the rear yard's sprinklers had a PVC coupling bust in half. Water has shot out uncontrollably for several days. The landlord has not fixed the problem -- admittedly, information about the problem has been slow getting to him -- and now one of our meddling neighbors took it upon himself to turn off our water main so once again, we live in a house, in the desert, with no water at all. That this situation infuriates me should not be a significant surprise to anyone. So I'm going to Wal-Mart to find a cap and some super-glue and I'm going to cap off the pipe so we can have water again. I am sick and f****ng tired of the water not working around here.