Demographics- Last Nail in RE's Coffin?

[goodrich4bk]

Re: Demographics- Last Nail in RE's Coffin?

Steve:

You need to get out more. There are many options for the fortunate retirees who still have equity. Here are just one:

Owners of mobile home parks in California are getting killed by a combination of dramatically lower home prices (people prefer cheap houses to cheap mobile homes), the absence of mobile home financing (there is none) and fixed land costs (ppt taxes, insurance, utilities) that require they maintain slot rents of over $350 a month. As tenants leave (often due to unemployment that makes it impossible for them to pay even the slot rent much less their overencumbered mobile mortgage), the part owner must spread those fixed costs among a smaller number of tenants. It's a downward spiral and many parks are now in foreclosure, although the banks are very reluctant to take over management of crack-infested parks.

So what is happening is that a friend of mine is buying mobiles from either the owner of the mobile or from the foreclosing mobile mortgagee. They usually cost $5-10k max for homes that are no more than 15 years old and in good condition. $12-15 gets it removed from the park in California and shipped to Washington, which allows mobiles on individual fee simple lots. Once the mobile is affixed to the lot in Washington, it is worth about $100k to $120k.

Solution: buy a lot in a state that allows mobiles on individual lots. Bring in utilities, buy a mobile in California and ship it to your lot. There are many lots in other states that can be had for $10k to 25k and they are in beautiful country, no gangs. Total cost: less than $50k to live on a couple of acres for a garden, privacy, beauty. THAT can now be serviced with SS income.

Not sure what you mean by "tookis-lackers" so I can't be of much help there.

[flintlock]

Re: Demographics- Last Nail in RE's Coffin?

$120k will buy you a nice smaller home on 1/2 acre lot here in Georgia. STEVE, MOVE TO THE SOUTH!

[goodrich4bk]

Re: Demographics- Last Nail in RE's Coffin?

I had always assumed he was pretty well off. Maybe he did too.

Great line! So much said in so few words.

This goes to the heart of why I believe the re-inflationists will be proven wrong. Demographics and life cycles. In 1987, Greenspan learned that low rates easily re-ignited animal spirits. Of course they did --- most of the animals were just entering their most productive years. Easy come, easy go, I'll earn it all back. When that worked, it lead to even more risk-taking followed by the Fed administering even more cheap money whenever the economy caught a cold. Reflations in the 1990's under Clinton and the 2000's under Bush worked because there was an underlying demand that was forward-looking and in wealth-building mode.

To continue the metaphor, the economy now has pneumonia, a slow, debilitating condition that will not respond to the medicine of cheap money. The reason is that most of the animals are near enough to retirement that they know they cannot suffer another loss, that there is not enough time to earn it back, and that if they suffer any more losses they will be (if they are not already) in a state of helplessness. They are now in full-blown fear mode --- a condition that young people and those employed in secure industries and government just cannot fathom.

This is the Japanese sickness, demographics. It is not going away anytime soon. It cannot be overcome with "stimulus" or cheerleading. Our policy response should be to help people lower their fixed costs, not to raise them by "stabilizing" or "stimulating" the largest fixed cost for most people: housing. Simple things like public expenditures for weatherizing and energy efficiency could be very helpful. Increase the funding of basic research and let the free market exploit the results, just as we did when Al Gore invented the internet (half true because he pushed for the public spending that funded its formation). Liberalize the immigration of educated people with ambition and captial. And most of all cut military spending that is entirely unnecessary for a country with our natural borders.

[goodrich4bk]

Re: Demographics- Last Nail in RE's Coffin?

That reminds me of my father landing in Long Beach at the end of WW2. Housing was difficult to find and impossible to afford, even with the GI bill. So he rented a garage with a hot plate. Having lived through the Depression in a tent cabin (his father's car dealership failed and they lost their home in foreclosure, leaving them with an empty lot outside of Seattle on which they pitched a tent and eventually turned it into a make-shift tent-cabin), he thought he was in the lap of luxury. He'd walk outside each day to sunshine (not the rain of Seattle), hop on a red car and drink a cheap coke at Hollywood and Vine looking for stars. Life was good.

[Starving Steve]

Re: Demographics- Last Nail in RE's Coffin?

Steve:

You need to get out more. There are many options for the fortunate retirees who still have equity. Here are just one:

Owners of mobile home parks in California are getting killed by a combination of dramatically lower home prices (people prefer cheap houses to cheap mobile homes), the absence of mobile home financing (there is none) and fixed land costs (ppt taxes, insurance, utilities) that require they maintain slot rents of over $350 a month. As tenants leave (often due to unemployment that makes it impossible for them to pay even the slot rent much less their overencumbered mobile mortgage), the part owner must spread those fixed costs among a smaller number of tenants. It's a downward spiral and many parks are now in foreclosure, although the banks are very reluctant to take over management of crack-infested parks.

So what is happening is that a friend of mine is buying mobiles from either the owner of the mobile or from the foreclosing mobile mortgagee. They usually cost $5-10k max for homes that are no more than 15 years old and in good condition. $12-15 gets it removed from the park in California and shipped to Washington, which allows mobiles on individual fee simple lots. Once the mobile is affixed to the lot in Washington, it is worth about $100k to $120k.

Solution: buy a lot in a state that allows mobiles on individual lots. Bring in utilities, buy a mobile in California and ship it to your lot. There are many lots in other states that can be had for $10k to 25k and they are in beautiful country, no gangs. Total cost: less than $50k to live on a couple of acres for a garden, privacy, beauty. THAT can now be serviced with SS income.

Not sure what you mean by "tookis-lackers" so I can't be of much help there.

In Yiddish, a "tookis-lacker" is one who politely, kisses bottoms with their tongue. One of Bernanke's "tookis-lackers" would be a "ditto-head". Paul Krugman, for example, would be a Bernanke "ditto-head". Krugman probably wants to work at the Fed with Bernanke and maybe someday head the Fed.

A tookis-lacker, especially these days, would do anything for a good job. He/she would more than agree with authority. They would.........

Get the picture?

In corporate America, especially in Silicon Valley, "a ditto-head" is also known as "a team-player".

The problem now-a-days is that there have been too many team-players and ditto-heads making policy in America, especially at the Federal Reserve Bank. These team-players have networks, and those networks extend into the universities, also into the media..... Krugman's criticism of Bernanke was that Bernanke was not doing more to flood the world with cheap money.

[bpr]

Re: Demographics- Last Nail in RE's Coffin?

I'm long Funeral parlours and the things that keep you from them

Nothing keeps you from funeral parlors forever. I'm long the funeral industry: 92 credits long.

[thunderdownunder]

Re: Demographics- Last Nail in RE's Coffin?

Go You "good thing"

[thunderdownunder]

Re: Demographics- Last Nail in RE's Coffin?

Great line! So much said in so few words.

This goes to the heart of why I believe the re-inflationists will be proven wrong. Demographics and life cycles. In 1987, Greenspan learned that low rates easily re-ignited animal spirits. Of course they did --- most of the animals were just entering their most productive years. Easy come, easy go, I'll earn it all back. When that worked, it lead to even more risk-taking followed by the Fed administering even more cheap money whenever the economy caught a cold. Reflations in the 1990's under Clinton and the 2000's under Bush worked because there was an underlying demand that was forward-looking and in wealth-building mode.

To continue the metaphor, the economy now has pneumonia, a slow, debilitating condition that will not respond to the medicine of cheap money. The reason is that most of the animals are near enough to retirement that they know they cannot suffer another loss, that there is not enough time to earn it back, and that if they suffer any more losses they will be (if they are not already) in a state of helplessness. They are now in full-blown fear mode --- a condition that young people and those employed in secure industries and government just cannot fathom.

This is the Japanese sickness, demographics. It is not going away anytime soon. It cannot be overcome with "stimulus" or cheerleading. Our policy response should be to help people lower their fixed costs, not to raise them by "stabilizing" or "stimulating" the largest fixed cost for most people: housing. Simple things like public expenditures for weatherizing and energy efficiency could be very helpful. Increase the funding of basic research and let the free market exploit the results, just as we did when Al Gore invented the internet (half true because he pushed for the public spending that funded its formation). Liberalize the immigration of educated people with ambition and captial. And most of all cut military spending that is entirely unnecessary for a country with our natural borders.

You Sir have a good take on everything that this "Bulge" is going to produce. Yes, my Niece rents a half of a garage in a 5 bed house -11 people live in it including the Chinese student who is paying it off by collecting $150/week + share of outgoings from the 10 others. On her wage as a Childcare worker it is her only survival.
But it is close to her work via public transport. She can't afford to run a car. She has no hope of ever owing a home, unless she marries "well".
From a Real Estate agents mouth. "We have so out priced the family home, two incomes over 30 years cannot own a home when before the 70's one wage could do it in 20 years, Now they only buy equity. We have allowed Land Lord's such increase in rents that none can save a deposit to get out of the rental/poverty trap". That tells me one thing - They killed the golden goose by stripping it of everything it has produced. And we have Apple - bad Apple - taking small bites with bi annual model re writes. Innovation my ass, wealth destruction by planned obsolescence.
One day we will be forced back to the Future.
Nice to read your well thought out posts