Irvine Housing Blog

I have news- Chicago experienced a massive bubble and our laughably overbuilt condo market has totally collapsed. Cook County has about 1200 REO houses and condos on the multilist, and a “shadow” inventory of over 28,000 REO properties.

Yes, these are REOs, already bank owned. That figure does not include deeply underwater properties, properties delinquent on payments but not yet being foreclosed, properties in some stage of foreclosure, or short sales. There are many, many developer foreclosures on converted buildings in my neighborhood, and on massive 60 story 600 unit buildings in the South Loop, River North and South Streeterville. Here, too, one bank has published a list of buildings that it will not write mortgages in because these buildings, mostly new construction or new conversions, are so burdened with foreclosures and unpaid assessments that it’s inevitable that more of their paying owners still there will be driven underwater and out the door by the extra assessments to offset all the non-paying delinquent owners.

I waited for the bubble to break from 2002 to 2004, by what time it was glaringly evident that there was, as Paul Volker put it in 2004, “excessive risk” in the system, and the tower of debt and debt derivatives was utterly out of control, with something like $400 Trillion (that’s not a typo) worth of debt derivatives against $40 Trillion worth of overvalued mortgages.

The bubble and its fallout not only deprived me of a decent place at a decent price, but destabilized my job and endangered my retirement, left millions of other unemployed, and deprived our children of a decent future. It is profoundly depressing to consider what awaits young people who’ve gone deeply into debt to finance educations in demanding professions such as engineering and the hard sciences, just to confront rapidly shrinking opportunity with fewer job niches every year, stuck my elderly mother with stratospheric property taxes while reducing her interest income on her savings to nearly zero, the better to induce her to invest in a stock market that looks rigged to blow any day.

We who are not the bonus boyz of the financial cartel are paying and will keep on paying for this in thousands of ways- taxes, losses, lost opportunity, a destabilized job market, higher property taxes, and a reduced standard of living for at least another 20 years.

Sad but true,
Heads they win, tails you lose.
Money controls everything.

Huh?  Short-term capital gains (< 1 year) are taxed at the seller’s ordinary income tax rate.

The last thing we need in California is more taxation.

There is a huge difference in a transactions tax and a capital gains tax.  (Using a bank-centric example) If you borrow $1Billion to end up making 1% on a transaction, that is $10M in cap gains, for a tax in the ballpark of $2.5M.  If there was a 1% transactions tax, you would not make the transaction because that 1% gain would not have been there.  Lots of banks and financial players make their money picking up nickels in front of a steamroller (nod to Lowenstein).  Good business until the steamroller catches up. 

These types of small profits in highly leveraged situations are destabilizing.  Who pays for the eventual stabilization needed?  Taxpayers.  That is the justification for taxing those transactions.

Gotta wonder about that.  it’s raise taxes, cut spending, or just print it and let the debt inflate away.  Can’t help notice gold & stock market rising lately ... perhaps in anticipation of the answer.

At some point, the economy will actually improve.  At that point, interest rates will rise, and there will be real pressure on the deficit.  Then taxes will go back up, and much spending will already have gone down (less unemployment to pay when UE is at 5% than when it’s at 10%).  Interest rates rising will be the precipitating factor causing tax rates to go up.