I assume the realtor meant to say “The house is wired with cat5 cable which terminates at a router in the master bedroom.”  The wireless comment is the laugher.  Its not cheap to pull cat5 through an already built house and most people just want a cheap wireless router for their house.  Residential cat5 is so dot com bubble.  Its the perfect overimprovement.  Unless you run a server farm or call center in your house or love having your friends over for videogaming parties; you aren’t going to ever need it and certainly aren’t going to pay extra for it.

Allow me to add a word to your definition.

IMHO, a soft landing for the FED would be a slow and controlled decline of REAL house prices to levels sustainable . . .

Any (further) decline in NOMINAL house prices is catastrophic almost by definition, given the worst-case leverage involved.

I wired the closet in the bedroom which we use as an office.  It has the printer, router, etc.  They are not obvious, and all of the office supplies can go in there too.

The closet has ethernet “jacks”!  YAY!!!!

Maybe you’ll get lucky and find a VCR left out in the living room too when you move in!

OT I’m about to venture into the devil’s playground by buying Goldman Sachs 4.25% bond maturing on 2015.

Should I do it? It pisses me off that they’re one of the main culprits behind this current financial mess. Yet this very govt got their backs.

It’s like what the old saying goes: if you can’t beat ‘em, join ‘em.

Any feedback/criticism (like “Are you out of your effing mind?”) is welcomed.

By your definition, the FEDs job is even harder because it keeps facing deflation from the fallout of all the stupid loans during the bubble. The FED is certainly focused on creating a little inflation to stop the death spiral. Right now, real interest rates are high which doesn’t make borrowing appealing. This will change as soon as the economy picks up, then the FED will have to worry about overdoing it.

What happens to the value of your bond if we see an inflation spike? If bond yields go to 9% before 2015, then the resale value of your holding cuts in half. You can always hold it to maturity to avoid taking a loss, but when you are stuck earning 4.5% in a world paying 9%, it isn’t fun.

IMO, we are still in an environment that favors holding cash. Long-term debt at low rates is the bubble investment du jour. I wouldn’t do it.

IR, yes, you’re right on the resale value. However, I plan to hold it until maturity (provided that GS doesn’t declare bankruptcy before ‘15).

Not to worry because I’m only putting 4% of my liquid asset (most of it now in MM making pathetic returns, if any) in this. Thus, I still have majority of it in USD that’s still losing its value :-(

Inflation spike is a slight exaggeration.  What happens, WHEN, the fed raises rates to say 2%.  Treasuries would be at 5.5-6%.  Contrary to many opinions GS != UST, and GS’s notes have a nonzero default probability.

Depends on how you view the value of the USD.  Relative to other currencies, it is falling as it needs to per our massive trade deficit.  Right now domestically, I’d say dollars are increasing in value.

What’s the spread between a GS bond and one from Citi or BoA?

No new corporate note from Citi but the one from BofA with expiring year of ‘17 is going for 5.25%.

For 1%/yr, ain’t worth it. I’ll take the firm that’s controlling the govt

“If bond yields go to 9% before 2015, then the resale value of your holding cuts in half.”

Did you mean to say, the interest for the remaining term is cut in half?

By the time rates get to 9%, there will like be a few years left on the bond. For a short term bond, the value will not be cut in half because most of the value is in the principal, not the interest coupon. Now if this was a 30 year bond, the cut would be deep and painful.

“Mexican American Bar Association” - Classic!

We finally are rid of the last Cal Bar President whose sole purpose admittedly was to promote the interests of “women and people of color.” i.e. “Sorry white straight male California attorneys, you are unworthy of my representation and efforts.”

OK, deep breath…I really like the new Sonoma plans that they are building in Woodbury.  I have been playing with the interactive floor plans on the website and really feel like they got it right this time.  The combination of the great room and the indoor/outdoor room seems like a great fit for the Irvine climate.

I was looking for the price just hoping and dreaming that the TIC would get the price right.

“Starting in the 700’s”.  Oh well.  Give me the hard landing please so that I can buy one of these for $500k.  Seems reasonable to me.

As opposed to the one just living off it…:)

GS’s decision to short MBS’s, however distasteful as they were selling them themselves, was brilliant and reflected the fact that they acknowledged the bubble.

Buy a house in Irvine. CNN says that you will get an 8.4% appreciation in 2010…beyond 2010 the sky is the limit

http://cgi.money.cnn.com/tools/homepricedata/index.html?market=21CA

Oh, I so disagree…

I would much prefer Cat 5.  I would like it to go to the TVs for movie streaming, the closet doesn’t do me any good.  It’s so much more stable than wireless.  I have to unplug my router several times/week to re=establish a connection because there is so much interference from all the other routers in the building.

Not sure I agree.  I use wireless to stream movies between two floors and I have no problems.  I suggest you change the channel in your router settings and that should clear up your problem.

Here’s another story calling a bottom in Irvine:
http://lansner.freedomblogging.com/2009/10/20/recovery-more-rapid-than-expected-uci-prof-says/40537/

Granted, looking at the list of donors for UCI’s “Center for Real Estate”, you’ll quickly realize they are highly motivated to make the public believe we are passed a bottom and it’s time to buy.

Still, I’m wondering if this is more consistent with the “soft landing” discussed in this article or the “ICE” scenario described yesterday.  Much of the buzz I’ve been hearing lately seems to support this “soft landing” scenario.  Sadly.  Yes, I’d really really also prefer a hard landing so regular people can actually buy homes in Irvine.  It does tick me off that the median family in Irvine has a tough time affording a median home.

Take a neighborhood in SoFL where homes got finished in 2006/7.  Lots of speculative buyers, but probably a couple actual people living there - minor celebrities included.  Nearly every home will need to sell and for around half what they went for new.  I think they’re foreclosing as fast as possible, and while the rates may help keep prices from falling so fast, they don’t seem to be preventing FC’s. 

While I was once in the work-out camp, I now see FC’s as inevitable and a good step towards real price discovery.

The problem with that area is there just aren’t enough buyers - coupled with the Chinese drywall issues.  Not enough potential renters.  Not enough income to support the level of residential real estate investment.  A huge chunk of the economy there was RE related and that’s gone for a long time, especially at the level it was at.

The band-aid is coming off slowly, but the end result will be pretty much the same.  I don’t think the fed needs to raise rates soon, but it is inevitable, and they should float timelines to see which will be best.  Preparation was abandoned during the bubble, and we should get back to it.

Well, I’d hope that means the place is wired with ethernet, and all the connections go to the closet where you can add a router and connect whatever wall jacks in the rest of the house you want with internet. Wired is much better than wireless… more reliable.

Why feed the GS bonus pool? They have proven very well that they are extremely good at making money trading for their own account, and bonds have been a big part of it. They are not about making money for their clients or customers. Hard to bet against them in view of their success, but betting that they are offering you value for risk seems unlikely.

I’d worry that their bonds are all about making themselves the maximum amount - their capitalist duty in fact. The buyer is the sucker/bag holder getting taken.

With ignorant tools like that floating around the web, I am not surprised people believe their houses rise in value 10% every year.

Sustained delusion requires few data points.

If the banks know that interest rates will most likely rise in the future and many economists are calling for a jobless/incomeless recovery, aren’t the banks risking having assets on their books that they won’t be able to dump in the future for higher values than today due to inability to finance the loans at the higher interest rates?  Aren’t the banks shooting themselves in the foot today and why are we footing the bill for this again?

The difference lies in the obscure accounting details of mark-to-maturity. Lenders are hurting themselves underwriting long-term debt at very low interest rates, but even if the resale value of the loan plummets due to rising interest rates, they do not need to show a loss because they will hold to maturity when they will get back their capital.

The mark-to-maturity model has its place in how banks measure the value of their loans, but right now it is being used as a dodge to avoid writing off the value of the underlying collateral. That is not and has never been the purpose of mark-to-maturity accounting.

Lenders who employ a mark-to-maturity model will not record book losses because they will likely see a return of capital despite the changing resale value of the loan in the mark-to-market model. In short, we will not be bailing out banks that make a large number of low interest loans.

This from DataQuick’s recent default report:

“It may well be that lenders have intentionally slowed down the pace of formal foreclosure proceedings. If so, it’s not out of the goodness of their hearts. It’s because they’ve concluded that flooding the market with cheap foreclosures in this economic environment may not be in their best financial interest. Trying to keep motivated, employed homeowners in their homes might be the most cost-efficient way to stem losses,” said John Walsh, DataQuick president.

Some people thought we (real estate bears) were crazy for suggesting such a thing.  LoL

Follow me here!

The banks are colluding and conspiring to prevent homes (especially in places like The O.C.) from foreclosing.  I’ve got 5 (FIVE) delinquent home-debtors on my street right now.  This problem is huge.  The banks (and the govt) know that a situation like what we’re seeing in LV, could become a lot worse if it hit the coastal communities in Southern California.  They are desperately trying to prevent this from happening.  I wonder if what they’re doing is legal?  We have antitrust laws that typically try to prevent this kinda bullshit from happening .  Antitrust laws are were created to make business compete for our dollars, and discourage monopolies and collusion.  Not that the govt would do anything to stop it right now.

However, this cancer is not going away.  It can treated for a short period of time, BUT the banks are eventually going to seize these properties, kick the freeloaders out, and then they’re gonna have to recognize these losses.  That’s a fact.

I was just surfin around Redfin and I found a funny:
http://www.redfin.com/CA/Irvine/3131-Michelson-Dr-92612/unit-301/home/7219088

“This desirable round plan ‘A’unit ...”.. It seems to be on the 3rd floor… It is very “desirable” to have poles right out side of your “view”. Dues $1,126.97!!! LOL!

THANK YOU!!

First time poster on your blog but I do read it several times a day and love it thankyou. I have a few comments I would like to add. First the Cat5 connections in the closet are very common in Phoenix area apartments but not seen in homes out here very often. Cat5 data transfer speeds are higher than wireless. And in the description of this property I was kinda wondering what a soring ceiling is? Is it something different or maybe a spelling error?

Hmm.. I got 1600 feet of Cat5e in conduit.  Delta backbone with star distribution on all ends.  Someday I hope to go to spanning tree switches with link aggregration.

Gig E.  At least two drops into every one of the five bedrooms with additional drops into the den (two sides) HTPC and living room -24/96 recorder/playback for stereo.

On top of that 802.11g for the four laptops.

High Bit Rate diOne Linux samba server, two 4TB RAID-5 servers, network printer, etc, etc. etc..

A total of 11 machines running today and four more in various states of rebuilding.

Now, what were you saying about Cat5?

Oh, we built TWO closets, one holds the servers, printer and has a 20A homerun.

I thinks the delaying is with the govt’s blessing, so the banks will not likely to be charged.

It looks like with the jobless recovery and improving economy, the USA will be Japan II with another lost generation.  For the kids with parents in power, they will live as usually.  The poor and middle class will be in a world of hurt.

It looks like Citi bank arranged for Andrew Hall to receive his $100 million bonus.  Citi had to be creative by selling that unit to avoid govt review on the bonus’ (Businessweek 10/9/2009).  Who says things have changed and a new era has arrived?

Are they preventing a death spiral in housing or they transferring the toxic assets from being a bank liability to a taxpayer liability?

The former goal is to keep the prior and new home owners paying their debts by keeping prices constant.  If you can’t pay, sell the house without much loss.

The latter goal is to remove liability from the banks and transfer the liability to the taxpayers.  With FHA loan with only 3.5% down, VA and USDA loans at 0% down, the house prices can be inflated with the old loans made whole, new toxic loans issued with the taxpayer on the hook.  With little non-agency home loan occurring today, it looks like a transfer of liability to me.

In both cases the banks are being made whole.  The taxpayer loses in both options, only more in the latter option.  The chances of the latter case is greater than the former case.  Prices can’t be maintained over 4x annual income and have a health long-term economy.

Just so.

  In fact, because the stupid loans you mention continue to feed toxins into the financial system the FED needs to somehow create a discernible, even if low, nominal re-inflation of house prices.

This will have two effects:
1. It will tempt people who are underwater but can afford their monthly to hang on and hope they will eventually be made whole by the re-inflation.
2. As you point out, it will encourage new borrowing.

  HOWEVER,
  Any such re-inflation will have to be SUSTAINED, and at some point that means wage rises at the bottom end.  Ensuring THIS without harmful effects is the real tightrope.

ozajh,
“... at some point that means wage rises at the bottom end.”

As you said wages are the last to rise.  The working man will be the last to really benefit.  The high end still will get the outrageous $100 million dollar bonus with newly issue options at a reduced strike price, while the regular blue and white colar workers will get paycuts, 401k match reductions and few to no new options.

“Sustained delusion requires few data points.”

Data point 1. “As seen on TV”
Data point 2. Bernankes mouth

IR have you seen a calculator with an input for the appreciation to be negative?  :}

It looks as if the non-trade news has a positive spin or mantra…“we into the the recovery… a V shaped recovery… strong rebound….housing is improving….we’re at the bottom of home prices….  The business and trade news are much more negative.

beign wired is less important now.

I’m running 11n (WPA2 secure) from upstairs office to downstairs entertainment center, with some older tech (Wii and laptop) running 11g.  I’m able to stream windows media center from upstairs to the downstairs 360 without a fuss, and my tv (samsung) can directly access a stand-alone network storage array holding all my mp3s. 

I used to think a wired house would be necessary, but that was before 11n.

Cat5 (without the e) limits you to 100mb.
Cat5e/6 and a gigabit router is pretty much overkill unless you have great HDD transfer speed.  (I only get 12% to 20% utilization on my gb router, transfering to the gb-capable NAS)

I actually went and saw this property.  Not bad.

Two other similar properties with the same floor plan are pending sale and accepting back up offer in Turtle Ridge.

- 138 roadrunner - pending sale - reg. sale - 595k
- 57 Gingerwood - back up offers - short sale - 580k

hmmmm

You running a ISP out of your house? Otherwise totally needless capacity.