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Comment: Re:sigh... (Score 1) 937 937

by Beeftopia (#49984001) Attached to: The Vicious Circle That Is Sending Rents Spiraling Higher

If you don't borrow to buy, you are doing it wrong. Borrow $400k for a $400k house, paying $28k in interest, $10k in carrying cost, and charging $3k for rent.

Google says 280K in interest, not 28K @ 3.92% interest over 30 years.

All other costs and income is labeled "per year", so why would you change that for the interest?

Nowhere did you label your timeframe. The 3K rent sounds like a month, the 10K in carrying costs could be over who knows what timeframe, and the 28K interest makes no sense. I clearly labeled my timeframe.

Comment: Re:sigh... (Score 1) 937 937

by Beeftopia (#49982389) Attached to: The Vicious Circle That Is Sending Rents Spiraling Higher

If you don't borrow to buy, you are doing it wrong. Borrow $400k for a $400k house, paying $28k in interest, $10k in carrying cost, and charging $3k for rent. Though, I used unfavorable rent, and a high carrying cost, so I'm sure you'll take exception at the rental price. The numbers aren't far off for many places. A $300k house in Anchorage will rent for $2300 per month.

Google says 280K in interest, not 28K @ 3.92% interest over 30 years. Just Google "interest calculator", and Google displays their built-in interest calculator.

If interest rates ever normalize - even go to 5%, interest jumps to 373K - about the price of the house.

The goal with a rental is to break-even cashflow. The market will go up 100% in 7-15 years, and you will make 2-5% above inflation with more "guarantee" than any other investment with those returns.

How much people can borrow determines how much they pay for real estate, for the most part. And there's evidence we're at peak debt now. There are two measures - the absolute amount of debt, and how much people have to pay to service their debt. That second measure, the debt service ratio / financial obligation ratio, put out by the central bank, is paradoxically at historical lows. Credit low interest rates for that I suppose, or it's just flat out inaccurate, as the About link admits it's difficult to measure.

There's also competition with big all cash investors, though they're down to around 36% of purchases at this point, which drives up prices.

You can speculate on a 100% increase in the next 7-15 years, but that's a rearward looking indicator and the central bank and government have already done a tremendous amount of intervention already, between the bailouts and quantitative easing (lowering interest rates plus buying mortgages and government debt with printed money). Will it continue? Who knows, I'd say it's a 50-50 shot, provided the distortions they're introducing (namely that low interest rates spark asset bubbles) don't break something.

Comment: Re:sigh... (Score 1) 937 937

by Beeftopia (#49982101) Attached to: The Vicious Circle That Is Sending Rents Spiraling Higher

Houses have carrying costs which people need to understand as well. Investors often buy with no mortgage so they don't have to pay interest costs. Interest is typically the biggest single cost for the buyer using a mortgage. As far as the investors go, they're in and out as quickly as they can be to avoid the other carrying costs of the house - taxes, insurance, utilities, maintenance, other fees. The hidden costs of home ownership, at CNBC - they're claiming 6K a year on average carrying costs. And that's a Zillow spokesperson talking about that, so they might even be understating the carrying costs.

To make a profit on a house, the selling price plus the sum of rents have to be greater than the sum of the carrying costs.

Comment: Re:sigh... (Score 4, Informative) 937 937

by Beeftopia (#49981619) Attached to: The Vicious Circle That Is Sending Rents Spiraling Higher

The interesting question is how long can this last before we reach a level that is not affordable to the majority of the demographic that is being serviced.

Care to guess what happens at that point? New construction doesn't sell, developers go bankrupt, new construction is sold at auction for lower prices. Then the new units available at lower prices push down prices of other housing, which makes purchase more affordable, which results in renters buying, which curbs rent prices.

Unless of course, large financial companies and well-connected donors are threatened by that circumstance.

Then, the central bank will step in, through its many channels, to put a floor under rental prices ("So I think if we spent enough money, got enough of a hit right now, it would look like a floor on house prices, and we might have something every bit as good as a floor on house prices."). The multiple government housing agencies (Fannie, Freddie, FHA, VA, USDA, etc) can also step in to influence the rental market, as they did the housing market.

Blackstone is a company securitizing rental flows and selling them. They are the largest private equity company in the world ("By both profit measures, the first quarter set quarterly records for Blackstone, the world’s largest private-equity firm").

The former head of the US central bank, Bernanke, is now employed by Citadel, a massive hedge fund.

My point is simply this: house prices did not revert to historical norms because of the big players - donors - that would have been deleteriously impacted by it. With big players moving into the rental market, if something went wrong with their business plan, don't expect them not to use their clout to get the government and central bank to do something about it.

Comment: Re:Government subsidies increase prices (Score 1) 283 283

You noted but didn't bother to post any evidence supporting your claims. We can wait.

Fair enough.

First, a thought experiment: Imagine Acme company sells widgets at 10 dollars each. One hundred people buy the widgets. Another hundred would like them, but cannot afford them. Uncle Phil sees this. Uncle Phil is a multi-billionaire. Uncle Phil says to those who cannot afford them, "I'll buy you your widgets for you." So now you have two hundred people buying widgets. The business sees its demand going up, and thus begins increasing prices. Most of the original hundred keep paying. Phil is a multi-billionaire so price isn't an option. The business owner wants maximum revenue, which is the maximum (price x quantity). So, business keeps jacking up costs until he reaches that point. If the widgets are essential to life (i.e. have inelastic demand), the original hundred do everything they can to keep paying the higher price.

So - that's the thought experiment.

Here's a paper by a Nobel (equivalent) laureate in economics, the conclusion of which states that subsidies will drive up prices in monopolistic environments (see page 28, the first paragraph of the section titled 'Conclusion': "This paper demonstrates two ways that a subsidy may increase equilibrium prices in a monopolistically competitive market"). My addition is that they drive up prices when demand is inelastic as well: Paper by Joseph Stiglitz (PDF).

You know who else wrote a cogent article on this? The Duke adult film actress, "Belle Knox." She talks about the impact of government subsidies in education, which isn't a monopoly, but for which demand is inelastic.

Comment: Re:Government subsidies increase prices (Score 1) 283 283

I'm not talking about infrastructure projects - aka public goods. These don't drive up prices of particular goods, services or financial products.

I'm talking about subsidies paid to people who then pass those through to a business entity. Those subsidies have the effects of helping the poor, harming the middle class and not having any impact on the wealthy, as I noted earlier.

Comment: Government subsidies increase prices (Score 2) 283 283

Government interventions where they pump money into markets on behalf of the poor do three things:

1) They help the poor.
2) They harm the middle class.
3) They have no impact on the wealthy.

Education, housing, medical care - government pumping money into the system just drives up prices to the detriment of those with moderate incomes.

Then Wall Street can step and say, "Hey, debt! I mean how much is your life (or your kid's future) worth to you? That's how much it'll cost ya."

Comment: Fascinating he selected engineering (Score 1) 348 348

by Beeftopia (#49862201) Attached to: Everyone Hates Harvard

Paulson has no engineering background. His Harvard time was at its business school.

Yet - instead of encouraging more "financial engineering" or business education, he selects the engineering school. Why I wonder? To avoid creating more competition? Maybe he realizes engineering is the thing that actually creates the real value in society? Other?

I found the selection of the engineering school intriguing.

Comment: Re:america! (Score 1) 286 286

by Beeftopia (#49852955) Attached to: US Bombs ISIS Command Center After Terrorist Posts Selfie Online

What we in the West need to understand is that the Middle East is stuck in ancient tribal animosity

Please, explain, how the above is different from "Sandniggers aren't capable of Democracy."

Thank you.

The people in different regions evolved with different evolutionary pressures. This leads to different groups having different temperaments and values. Which in turns determines their culture. Not all groups have the temperaments or cultures suitable for Western-style democracy, it seems to me. And the American model is not necessarily the best in the world. The Chinese have a very different system which is extremely successful at improving their standard of living.

Also - there's no need to use a racial epithet, which conflates the realization that different groups are in fact different with racism. The temperament and values of one group are not necessarily the same as another group. I don't think there's anything wrong or controversial about this. It's just reality.

Comment: Re:Arab? (Score 1) 190 190

by Beeftopia (#49723255) Attached to: Arab Mars Probe Planned For 2020

Trying to induce ambiguity into American - where none actually exists (see the hijacked airplane example) - is obfuscation for no apparent benefit. Forcing Americans to use more syllables to describe themselves is increasing the number of syllables - lowering signal to noise - for no benefit.

If an American wishes to describe himself based on continent, he would say he's a North American. A South American or Central American would do the same. Here's the USGS list of continents.

If they wish to describe themselves by country, there are already clear methods to convey that.

Lowering the signal to noise ratio of verbal communications won't help anyone it seems to me.

Comment: Re:Arab? (Score 1) 190 190

by Beeftopia (#49714099) Attached to: Arab Mars Probe Planned For 2020

No, but then neither are the citizens of the USA the only Americans.

Actually, without a qualifier (i.e. "north", "south", "central"), citizens of the US are in fact the only "Americans". Since the name "America" is in the name of the country.

The best demonstration of this would be on a hijacked plane. When the terrorists ask, "Who here is an American?", rest assured that no Central or South American is going to raise his hand.

Saying USAians or US Americans makes you sound like Miss South Carolina.

Comment: Re:The two things that have led me to oppose the D (Score 1) 649 649

by Beeftopia (#49702899) Attached to: Dzhokhar Tsarnaev Gets Death Penalty In Boston Marathon Bombing

How about kidnapping kidnappers (i.e. putting them in jail, confining them against their will?)

What about robbing people (i.e. taking money from them against their will?)

Justice is about imposing commensurate costs on offenders and trying to prevent them from committing those same crimes again (at which the death penalty is exceedingly effective BTW).

"Even if you're on the right track, you'll get run over if you just sit there." -- Will Rogers

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