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Friday, July 17, 2009
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76 comments:
Krugman encapsulates again my feelings on the financial industry
The American economy remains in dire straits, with one worker in six unemployed or underemployed. Yet Goldman Sachs just reported record quarterly profits — and it’s preparing to hand out huge bonuses, comparable to what it was paying before the crisis. What does this contrast tell us?
First, it tells us that Goldman is very good at what it does. Unfortunately, what it does is bad for America.
Second, it shows that Wall Street’s bad habits — above all, the system of compensation that helped cause the financial crisis — have not gone away.
Third, it shows that by rescuing the financial system without reforming it, Washington has done nothing to protect us from a new crisis, and, in fact, has made another crisis more likely.
...
(Cara in a bad mood because all of today's new listings were over-priced move-in ready stuff, and the $284k one in Woodwalk miraculously is under contract. Unbelievable. That's not the one I was going for, for obvious reasons, like it being way way way overpriced, but still, annoying).
Cara-
This might be the last wave of people who need to move in before summer ends. I expect(at least hope) that things should cool off in the fall and winter.
As to my feelings about Goldman. I think it really is a don't hate the player hate the game. If people did any remote amount of due diligence on what they were buying then these products wouldn't exist. As he clearly states Goldman effectively said MBS are junk we are shorting them, but if you really want them we will sell them to you... So I really think they should be rewarded for their intelligence. If other banks had acted in similar ways and really calculated the risk of these assets and mortgages we likely would not be in this situation today.
housebuyer,
It's mostly just small number statistics and noise. But there were a couple of way overpriced move-in-ready solds in the past few weeks too, although one of these new listings, at $311k for nicely move-in ready in a good neighborhood is really not objectionable. They're just not what I'm looking for. I want to do my own decorating not pay for someone else's.
On Goldman Sachs, I agree that there's no compelling reason to hate the player. However, I would go further than to say, "hate the game". Shut down the game. Make better rules, such that intellegent people have to come up with something more "productive" than just taking candy from a baby in order to make money. The FDIC made banking boring as watching paint dry for what, 30 or more years? I'd like to see that again.
Obama was at the NAACP saying he'd like to see more african americans being scientists and mathematicians. When for 15+ years the physicists who couldn't get jobs in academia went to wall street. I think he just has no idea of the realities of science funding. That since it is always at the mercy of government largess, not "productive" aside from limited sectors, there's a limit on how many jobs can be in that.
Cara-
I agree with the science argument. The most innovative and productive sector for scientists has probably been in the medical sector. Seeing that Obama is trying to cut costs in this sector I don't see huge job gains.
As for mathematics there has never really been many jobs in the field. For a long time many bright people got math majors and then looked for jobs in finance, because there are not that many other sectors that need pure quantitative ability with no business sense. I guess maybe he is saying he wants more black math teachers, but other than teaching there isn't a whole lot out there in the math researching fields.
CR simple supply and demand
I liked CR's simple diagram showing why increasing sales do not necessarily mean that prices have reached the clearing point. It just means we're still on the increasing demand branch of the graph.
Naturally the current buyers think "prices have bottomed out",
I still reserve the right to put in a bid next week, because it would be cheaper than renting with more space, if they accept our price. But I will have no regrets if they don't take it.
Wanted to drop back by to share the results of the couple who I know who is looking for a TH out in Western FFX area. Can't really afford anything they like in Burke or Fairfax, so they were looking out towards Centreville.
As I am sure everyone looking for this type of house has experienced, everything is being grabbed up in days, with multiple offers. It really is insane, especially considering the overall state of the economy and how things were just 3 months ago.
http://franklymls.com/FX7106884
They put an offer on this place (against my advice) that was $8k above list price, and asked for about $4k in closing.
Someone else put in an offer $25k above list with no closing to outbid them!! They apparently also said that even if the assessment comes in lower (than their offer), they will still pay cash for the difference!
I find this incredible, and it goes to show how really rubbery the resale industry is. Each seller and buyer has completely different backgrounds, knowledge and experience, and I'd say close to 60% of the people buying houses probably pay too much.
Looking at that house, while it seems "decent" in my estimation, but it has a unfixable flaw:
You enter the house in the basement. To get to the kitchen/dining/family room, you have to walk up a flight of stairs. And, there is no "walkout" for the basement. So you have only one place to go, and that is up, and if you do want to go outside, you can on the 2nd level to the back porch, but there are no stairs down to the ground. So that is something that you would have to build, otherwise, you have a ton of wasted space down there, and in order to access it, you have to walk around the entire row of TH and then back to yours from the rear gate entrance.
My advice to them is this:
There is no point even worrying about the $8k for 1st time buyers. The way things are right now, that $8k is of no help. Because to get the house, you are overpaying by $30k.
Gone (for now) are the days of bidding 5-9% under list price and then negotiating towards a number that is below list and above your first bid. People are paying 1-3% above list, and the lists are jacked up to begin with due to the market. Again talking about entry level TH.
I strongly agree with housebuyer. No point in trying to do anything now. Let the desperates compete against themselves. You can't argue with crazy.
Come October and November, everyone will be concerned about Thanksgiving, Christmas and all the other religious holidays/New Years, and not wanting to move during that time (plus the short days and the cold). Everyone who needed to move before September for schools and that sort of thing will have already done so.
To me, it does not matter if the interest rate goes from 5.25 up to 6%. It still is a solid rate (all things considered) for the last few decades. And if it is a starter house for 5 or so years, all your interest is written off anyhow and you are not in it for 20+ years.
Save yourself $30K and wait. That is my opinion. I think the "supply" can't be much worse then it is now. But demand has surely got to be lower...
Hi T!!
That's a gem, "nicest townhome I've ever listed"? Gotta love realtor hyperbole.
The one we're looking at putting a bid on has been listed since March with ZERO offers. I think it's somehow dropped off everyone's radar. It has orginal 1980 plush carpet upstairs that desperately needs to be ripped out, peeling wallpaper trims in the bathrooms (hey, if it's peeling you should be able to take it down!), and odd child-protected doorknobs through-out. And a freezer downstairs that probably gobbles electricity like a horse (that analogy doesn't work very well). But it's a nice neighborhood, good space, new windows siding and roof and isn't going to require more than $10k to make perfectly livable until you have the funds to redo the bathrooms and countertops.
So, it's just sitting. But move-in ready, with pretty new cabinets? Be-still everyone's beating hearts.
http://franklymls.com/FX7050990
Dude, the crazy people are buying. It's move-in ready alright, but tiny and pergo-d and man are people willing to overpay. That's the most blatant one recently.
Cara-
I think the problem most people have is they can't save. If this is the case it is very important to get move in ready. You can amortize the 30K extra over year and years so it is only a couple hundred a month. Because you have clearly shown you can save and have savings it is obviously a much better deal for you to get a house that needs some work. That way you save money and get exactly what you want.
T-
I am glad that you told me that went over list other than some of the flaws you mentioned it is similar to some of the places I am looking at that are selling in the 450+ range. I know it is more expensive to buy where I am looking, but it really is sad everytime I look further out and realize I am pay 150K to be 15 miles closer.
Wow @ that one you linked.
It really is amazing how people crave that move in ready and don't care that it really would only cost $5k for the floor (max). There would be "no way" they'd buy that one if it were $310 and carpet and vinyl in the kitchen.
But throw in the pergo and charge $339 and they are all over it...
The only ones I think you someone should look at buying now are the ones just like you said: the "non" move in ready. Because the people overpaying now are doing it because they want to be moved in and settled by Sep 1. They don't have time to close and then redo anything.
"But it's a nice neighborhood, good space, new windows siding and roof and isn't going to require more than $10k to make perfectly livable until you have the funds to redo the bathrooms and countertops."
This is a real great move Cara. So many people overlook the "new windows/siding/roof" but to me its a big deal. Energy savings for one, and those items last for a long time, for two. Plus, to get any of that done, you are paying a middle man contractor.
To redo walls/floors/cabinets, you can do all that yourself and save a bunch while you are at it.
So let them pay the bucks to get a contractor out there to hang new windows. You can rip down the wallpaper and paint yourself...
Well, good luck to you and hope things work out! The only thing I'd say about being on the market since March:
Definitely be sure to get a great home inspector in there. Check for mold and anything they might have done to cover it up.
Other than that, good luck!
T,
I think another lesson to learn from their experience is to stop looking at listings when they first come on the market. Bidding within the first week is not a way to get a deal. Look at the listings that have sat, and then bid a price that compensates properly for whatever flaw it is that they have that has caused them to sit. Brand new listings? Let someone else buy them.
Housebuyer - as they say, location is everything.
Personally, I'd rather have a 45 minute commute that requires waking up at 5am and timing things perfectly in order to save that $150k rather than the alternative of having just a 20-30 minute commute that allows me to sleep in until 6:30am.
But that's just me... everyone is different and convenience is a difficult thing to put a price tag on. Plus, if you not only work, but like to "play" near where you are looking, it makes more sense.
T,
The current owners are still living in it. Which I think is the main reason they haven't replaced the carpet. (too much hassle) But yes, a good non-biased inspector will be key.
We shall see, if this one doesn't work out, we'll be going with the 6 month lease looking for a close anywhere from November on.
T,
Well, that one was the most grevious example. Most are a little more sensical:
http://franklymls.com/FX7073199
This may be 349k, but it's a lot bigger than most THs in Burke, with a nice back to woods/parkland location and pretty convenient to the Rolling Road VRE stop. And it's in the better elementary school for TH's in the proximity of that VRE stop. So, with all that + move-in ready, I don't think they're totally nuts. I wouldn't chose it, but it's not insane. Still, I agree it's at least $25k more than it "should" be if not more. But for it to come down further would require competitive pressure from the SFHs.
Cara - very true. I think they have been frustrated at the ones that have sat there, because generally they have sat there for a reason. And even then, it is really hard to even find ones out there.
Here is the example:
http://franklymls.com/default.aspx?m=R&l=200K&h=300K&s=20121,+Townhouse
Look in that zip code, between $200 and $300. There are 75 listings, but only 10 active (not under contract).
And 9 of the 10 have been on the market 10 or fewer days. And the other one has not been built yet.
So there (unfortunately for buyers) is not much out there that has been on the market for 30 or so days. But that's just one zip, perhaps there are better options. I have only been involved with them on a limited basis to provide feedback on ones they liked...
Cara - that one is solid. Large rooms and you are right White Oaks is a great school.
T,
Yeah, more of the closings are like that, than the crazy ones. But obviously if they had chosen pergo instead of cheap carpet, they could have gotten $25k more, for $3k more investment....
Yeah, if the market is that tight? Just wait it out, or start investigating other options. But with this stark of a preference for move-in ready, I think that does bode well for the strategy of trying to buy when others don't want to move-in.
T-
I tried commuting over an hour one summer during college when I was in in Tysons and lived with my parents in Fairfax Station. I hated it. As it is I work 10ish hours so once you add on an hour each way my work day was at least 12 hours I ate dinner than basically went to bed. So since the finances still work and I should still be fine saving a decent amount I figure no reason to put myself through that stress for a couple years.
Obviously you are right though everyone needs to make that sort of decision themselves.
T said ...
"you can't argue with crazy"
That about sums up my opinion on most of the markets, housing, stocks and bonds.
Obviously there are a lot of people that share your commute vs. house price preference T, as noted by all the homes out in Ashburn, Leesburg, Gainesville/Bristow, etc. For me personally, I plan on being in my home for 20 years and can't possibly fathom 1+ hours in traffic every day for what seems like forever right now. A 45 minute commute in 2009 will be probably 1:30 by 2019. Just my guess judging by what it took me when I was an intern living with my uncle in Purcelville commuting into Arlington and what that commute takes today.
[In yesterday's post near the end contrarian quoted Sheila Bair on more bank failures.]
Contrarian,
Bair has been warning about a large amount of bank failures for a while now. This isn't new. I don't view it as a big deal. She just wants to make sure the FDIC has enough money. As we saw a while ago, they stupidly let banks stop paying into the FDIC system for a few years when there were no bank failures.
I have no doubt that the Congress would provide the funds if ever needed for the FDIC to rescue a bank. Obviously it's better that it has the funds ahead of time instead of a last minute fix as the last minute fix would probably create a bank panic like we have not seen since the Depression.
I read Bair's comments less as a reason to be worried and more as a "come on Congress, give the FDIC more money and play it safe" type of comment.
Wow Cara,
http://franklymls.com/FX7073199
This place sucks for 342k!
The owner must be smoking crack!
I wouldent commute more than 20 minutes personally. Life is too short.
Cara/housebuyer,
Give me a break. Math and science majors are golden. They have way more employment opportunities than social studies and humanities majors.
If I had intended my B.A. to be my last degree (instead I always planned on going to law school or grad school), then I would have done math or science or an undergrad business degree. Thankfully knowing my B.A. would not have to "pay the bills" so to speak I was able to study what I loved and had a true liberal arts undergraduate experience. But I would not recommend said course of study for anyone planning to just get a B.A. (unless they were going to live in a lower cost of living area where only making $30-70k over your lifetime was enough to live comfortably.)
Cara/housebuyer,
I view the fact that Goldman Sachs and JP Morgan are doing well as positives for us. Remember when some analysts were saying DC was going to become the financial center of the USA instead of NYC? Now that looks laughably naive.
I am ecstatic that it looks like the financial center in NYC has more life in it and is not going to be moving down here. Otherwise those people might have ramped up DC area prices like they did NYC area prices.
tbw,
Math/science major is not the same thing as being a mathematician or a scientist. Generally, though not exclusively, that requires a higher degree. But if he just meant math/science major, then I fully agree that has more job opportunities. It's not what he said though.
Doug,
at 7 AM that is only a 20 minutes commute for me. Burke is not Western FFX. It's all about where you in particular actually are commuting to. I go against most of the traffic.
Re commute...
This will probably sound horrible but I was thinking once about whether it's worth all that ridiculous extra money for Arlington (20-30 minute commute to DC) vs somewhere in the Vienna/Oakton/Fairfax area coming into DC via the Vienna Metro stop (50-60 minute commute).
I thought oh that's horrible that extra hour I should sacrifice for Arlington and the shorter commute or if Vienna work really hard to find a comparable job in the suburbs.
Then I thought as much as I plan to spend as much time with the family when I'm home mornings, nights, and weekends, I am someone who likes a little me time. And while an extra 30 minutes each way sounds horrible to me now as a single . . . dare I say I might enjoy having that quasi-alone time (ignoring all the other people on the Metro) during the commute? I can sit there and read and clear my mind.
I hope that does not sound horrible. Talking with people who are new to relatively new parents . . . it really brings home how little you time you get when you are at home with the kids.
And I know people in successful marriages who believe each spouse should have some activities they do on their own and that you can't spend 100% outside of work together.
I think I can see one upshot to the longer commute especially on mass transit when you can do some reading or Sudoko or whatever floats your boat.
Sunday's Baby Blues strip might be on point: Sunday Strip
tbw,
yes, a purely non-driving commute can be longer and yet more relaxing. I agree. Of course I also have a major outside activity separate from my husband...
http://trueslant.com/matttaibbi/2009/07/16/on-goldmans-giganto-profits/
Check out Matt Taibbi's take down of Goldman Sachs. He has been doing a ton or reporting on the company, including a long article in Rolling Stone.
I don't think they are the smartest men in the room. They are opportunists.
T,
There would be "no way" they'd buy that one if it were $310 and carpet and vinyl in the kitchen.
Count me as a homebuyer who would love to have carpeting. I know some disagree, but I think carpeting is so much easier to maintain. In yesterday's Home section they noted a lot of people cutting back on home cleaning services. I wonder if people will start to rethink hardwood floors when they think of cleaning those as opposed to just running a vacuum over carpeting (and once a year or so doing the deep cleaning).
Also, I think carpeting is nicer for babies and kids.
Doug said...
"I wouldent commute more than 20 minutes personally. Life is too short."
It takes me nearly 20 minutes to get to my car in the evening.
TBW: Roomba is your friend. Start it up before you leave for work in the morning, and come home to a vacuumed house (or at least one level, and assuming it didn't get stuck).
tbw,
Pergo's even easier than carpet, you just sweep it. And put down rugs for kids and babies. (and my cat who loves, loves, loves, to pick at carpet).
Although, it's true there's no roomba for sweeping.
But, yes, everyone does have their own preferences. I think the worst is when a place has tiled the kitchen hardwooded only the dining room and carpet in the living room, because if you don't like that setup, you'd have to take out the hardwood to get it to match (this on an open floor plan).
I commute with my wife most days. If I'm driving, I'll be listening to Bloomberg, she'll be reading. It's still quasi-alone time. I just hate the drive.
But moving wouldn't fix that. I'd just be driving against traffic for a portion.
Of course, that is the baby's fault, so--there's still something to be said about the situation. It's different for singles, married-no-kids and married with children.
Cara: Roombas are great for sweeping, just be careful of carpets with fringe (e.g. oriental carpets).
tbw--
My husband almost relishes his hour-each-way commute on the VRE. Peace and quiet and time to read...I am so outrageously jealous of that time! In fact, one of the biggest fights we've had (not that we ever fight) is when he seemed pensive over dinner one night, and I asked him what was wrong, and he said, "I just need a little transition time when I come home." Censored, I said something like "What the bleepity bleep is your train ride for, then?! BLEEP."
But that was a couple years ago, and I'm way more mature than that now ;)
But seriously, I would go nutty in the car an hour each way, even with NPR or an Ipod, but an hour on a train with a fat book? Sweet. That's all I can think about some days...a book...a couple purring cats...the hammock...the birds...the dog..."MOMMY? WHERE ARE YOU???"
NoVAwatcher, So Roombas really do work? Then I'd like to get one but I'd be terrified to see what I'd come home to after the cats were left alone with it for a day.
Cara, I agree that is too much variety in floors but just to clarify - (not sure if this responds to your point or not) - good floor guys can actually match 60+ year old oak (if it's in good shape, in rooms that don't get extreme wear or moisture) with new oak, then sand and finish it all, so that you would never know what has not been there forever. If we had not had that done, I would never have believed it. Also, oak looks great in the kitchen but looks worn more quickly than I'd like - needs more babying than I would prefer, esp. near the dishwasher.
I'm glad to hear I'm not the only one who can see an upside to a longer commute on a train.
I just shudder to think what parking at suburban Metro stations will be in the future. If it's $4.50 now I think it's going to be $10 at some point in my working life. And the fare cost also will probably be insane at some point. It's already scary how much medical premiums have gone up this decade as well as college expenses.
On the other hand, I would say the average amount spent on clothing has remained the same this decade. My food bill -- other than a spike around when gas was $4/gallon -- is probably only up 10-15% this decade. Milk has even gone down back to $3/gallon after a long period of time at $4.
Cara,
I've never seen a cat destroy a carpet (although I'm sure it happens a good amount.) I have seen many a couch ruined by cats. So if the carpet keeps the cat away from the side of the couch sign me up. :)
Ace,
excellent advice! I would not have guessed this. (although this particular offender may have used pergo...)
tbw,
she loves carpet, absolutely uninterested in anything vertical. We have 6 throw rugs in 3 rooms so she doesn't destroy the wall-to-wall too visibly. She's only destroying the couch by leaping up to the back of it from the floor (3.5 feet).
WASHINGTON -- Construction of new U.S. homes rose in June to the highest level in seven months as builders rushed to pour foundations for homes that must be completed by the end of November for first-time buyers to take advantage of a special tax break.
OMG. I better carefully note if any property I buy in the future ever had a rushed foundation in hopes of beating the end of November for a sale...
BLS unemployment numbers by state
Virginia is unchanged from May in terms of unemployment (7.2 in June) but did see a statistically significant change in employment:
Table D. States with statistically significant employment changes from
May 2009 to June 2009, seasonally adjusted
--------------------------------------------------------------------------
| May | June | Over-the-month
State | 2009 | 2009(p) | change(p)
----------------------------------------------------------------------
Virginia......................| 3,677,600 | 3,654,800 | -22,800
--------------------------------------------------------------------------
p = preliminary.
So, the regionalists can say that VA is worse than NoVa, and when the DC-Metro area data comes out July 29th, say that that's biased down because of DC, but still some of these ongoing net job losses are in NoVa.
TBW-
Gas prices are up over 100% this decade. In 1999 they were just under $1, although gas was ~$1.25 in 98 and 2000. SO at the current ~$2.50 it up about 100%.
I am pretty sure inflation is close to the numbers I am listing below. Although they are just my estimates
Commodities up ~100%
Labor up ~40%
Food up ~40%
Clothing up ~10ish
Electronics down ~10-20%(also for higher quality electronics)
Most other categories are up 10-20%
TBW if metro becomes so popular that parking is $10 I assume traffic would have to be really really bad and they could even implement a congestion tax.
contrarian,
There are two types of money market accounts. Some are with banks and are akin to a savings account and are FDIC insured. Others are with companies like Vanguard or Fidelity and are akin to a mutual fund. They are not FDIC insured and when you invest in one most companies note in large letters "Not FDIC Insured" "May Lose Value" and other similar warnings.
The NAV $1.00 guarantee was a temporary measure and it's good it's not there anymore. It means we are not in crazy land (where we were last year) where a bunch of money market mutual funds were at risk of breaking the buck. It's possible that some company will break the buck, but that usually is a risk you take with non-FDIC accounts.
It does not matter if the FDIC runs out of money. Congress will print more. If Congress can come up with trillions for TARP and AARA it can come up with the .1% of money that it would take to ensure the FDIC does not run out of money.
Also, not all bank failures even cost the FDIC anything. Many bank failures are resolved by selling a failing bank to another bank. There is thus no bank failure and no need for the FDIC insurance.
housebuyer,
TBW if metro becomes so popular that parking is $10 I assume traffic would have to be really really bad and they could even implement a congestion tax.
I have at least 30 more years before anyone usually retires. I just meant during that 30 year time period the price of parking would likely go from $4.50 to $10. Not that it would be $10 in the next 5-10 years. Sorry for being unclear.
It's like how I find it fascinating that magazines were 10-12 cents during the time my grandparents were young and now they are $3-5. If print magazines still exist when I'm that age, I imagine those two generations younger than me will marvel at the $3-5 price.
housebuyer,
I would add that Metro is not that popular. A large reason why it has inelastic demand is because about 50% (or more) of the ridership gets it for free or heavily subsidized because they are federal government employees.
Also there is essentially a congestion tax for people commuting by car to DC jobs. Except only 15% goes to the DC gov't and the rest goes to the parking lot owners. I know technically it's not a congestion tax but it's in some ways a tax as compared to working in Reston or Tysons or Gaithersburg where your job would have free parking.
Cara/Doug/T townhouse at 9860 High Water Ct (FX7050990) sold on July 15 for $339,000 and $11,000 closing costs paid by seller; townhouse at 6043 Clerkenwell Ct (FX7073199) sold for $342,000 on July 9.
anielarke,
Okay so subtract the $11k and get $328k. And given that they needed that much of a subsidy the buyers probably don't have any money saved up to redo anything, so move-in ready was really important to them.
It's still a $53k premium over the $275k it would have been lucky to get without the newer appliances/counters/ and floors. There's lots of work out there for you flippers to do. People want a move-in ready product. Instead this is a 2005 owner (paid $366k)taking a bath on their downpayment to get the heck out of this place.
contrarian,
The FDIC only falls apart if the country falls apart. Given your latest post it seems you think the country is going to fall apart. So I can understand why you think the FDIC will fall apart. I will just say I disagree. I am a short term pessimist but long term optimist regarding the regional and national economy. I think we are headed for a better nation actually because of the recession and think we will never again see a negative savings rate or at least not until those who are in their 20s-30s are all 70s-80s.
On a side note, the PBGC does not fully insure pensions. It insures them up to a limit. Most pensioners whose companies end up under the PBGC are screwed. This has been going on for a while. It's one reason (of many) that while 401ks suck compared to a fully funded pension plan, they are a million times better than a bankrupt pension plan.
The Arlington Cinema 'N' Drafthouse has filed for bankruptcy reorganization, seven months after pulling the plug on an expansion.
http://washington.bizjournals.com/washington/stories/2009/07/13/daily96.html
For the poster a week or so ago who bemoaned the lesser South Arlington price differential for the portion between Rt 50 and Columbia Pike, looks like that might be going away soon.
Okay, okay, this is just one business in that area. But it had a lot of charm and will be a loss for the area if it's bulldozed or lie vacant for years.
If Bob & Edith's also shuts down I predict 50% price drops along Columbia Pike. ;)
It remains to be seen if the drafthouse will actually close or not though, right? I like the idea of the place but was *really* not a fan of the food there.
Jeff-
Yeah I am pretty sure that they were saying they will not create the new one, but will keep the old one open during bankruptcy. I have a hard time believing that it is better to keep them out and try and find someone new. It is possible that it will be sold to someone else.
I have never been to it, is it similar to the old town theater?
You guys are correct. They may still run the place post-bankruptcy. I was just joking around -- one business does not make or break an area.
I don't know the old town theater, it might be before my time. The drafthouse is an older movie theater converted to have a bunch of tables and chairs instead of rows of seats. You can order food and booze while you watch the movie. There are a fair number of special events there that are pretty neat, I usually go to their Oscar party every year for instance. If they improved the food I'd give it a much better review :)
The building with the Cinema & Drafthouse is part of an assemblage being done on that corner of Columbia Pike to take advantage of the old AT&T building which has all the telephone lines runing from there down to the Pentagon under Columbia Pike. The new Lost Dog Cafe across the street from the Cinema & Drafthouse is a nicer replacement for it.
TBW-
We knew you didn't think it would break the economy, we weren't sure if you thought it was going to go under. I think most people do not realize that bankruptcy does not mean a company is going under and closing its doors.
Jeff-
The old town theater still exists. It sounds the same basically an old theater(not particularly good screen), and you can drink beer and wine. I think they also have food, but nothing fancy.
Is that the corner with the new condo development on it? The one with the giant banner that says "What matters is what's on the inside!" or something like that? That banner always cracked me up..."the neighborhood sucks but don't let that stop you from buying a luxury condo here!"
Ace: yep, they work. I use to turn mine on every morning I left for work, moving it to a different level of my townhouse each day. It had no problems transitioning from linoleum to wood to carpet. The only problem it had was with carpets with fringe.
Also, as an added bonus, it would sweep places you almost never vacuum, such as under the sofa, under the bed, under the dresser, etc.
A Roomba won't clean as deep as a good upright, but on the other hand, I wasn't vacuuming my place 2-3 times a week with the upright, either.
The Halstead is across the street from the Cinema & Drafthouse. The Halstead was intended to be condo but switched to a rental building with the downturn in the housing market. The building being built on the site of the old Adams Square Mall is also going to be rental with retail on the main level. Arlington Co. has applied to take control of Columbia Pike from the State of Virginia. If they are able to do that, it will hasten the development of the trolley line and other projects on Columbia Pike. Most of the major properties along the Pike are either owned by the B.M. Smith Co., the Reinsch family or investors who keep adding to their assemblages. It is difficult to buy any big commercial properties on the Pike. The Westmont Shopping Center is still owned by the two sisters-in-law who don't speak to each other.
"I am a short term pessimist but long term optimist regarding the regional and national economy."
I think things are getting better now but I'm not betting the farm on it.
That's one reason I have RE investment money parked in a MM at 1.0%.
The odds are hard to compute but my "guess" is that there's a small probability that we'll see a fiscal collapse. How small? 20% or less.
There are too many strange things happening in the economy and too many weird government programs.
Dumb luck perhaps but recent equity investments are paying off great.
TBW:
I'm not being disagreeable for the sake of being disagreeable, but I have to correct you regarding a couple of points. First, I happen to know quite a bit about PBGC. Most ppl whose pension plans are taken over by the PBGC are doing just fine. Now, if your pension plan is extremely generous and allows for early retirement benefits [read: airlines, auto and steel industry], then you may lose a portion of your benefit. But, make no mistake, most people see no significant difference in their pension payments once the PBGC has taken the plan over. In sum, a defined-benefit pension plan beats a 401(k) six ways to Sunday, regardless of whether it is trusteed by PBGC or not.
Second: regarding the FDIC. The reason Bair is predicting more bank failures is because there will actually be more failures. Banks are holding-on to their depreciating real-estate portfolio because they do not want to take the loss to their balance sheets. Thanks to mark-to-market modification, banks can pretend they are doing just fine until they are actually forced to sale or modify a home loan. Bair realizes the obvious: you can only hide so long ... everyone must pay the piper sooner or later. My understanding is that the next wave of bank closures will be primarily mid-size banks.
Mike: "if your pension plan is extremely generous and allows for early retirement benefits [read: airlines, auto and steel industry], then you may lose a portion of your benefit."
Someone in my circle lost most of their pension when Bethlehem Steel went down.
They didn't share the details but they had to go back to work.
TBW: "Most pensioners whose companies end up under the PBGC are screwed."
THAT is my impression.
I'm not certain that the economy is in full scale collapse but there are indicators that's happening.
YMMV
Contrarian: "One thing's for sure, the housing market is far, very far, from a bottom."
I don't agree. I do agree that there are unprecedented problems in the economy.
Housing is a side issue compared to jobs, lost savings, failing businesses.
I'm not denying that there is a connection and a problem. There certainly is.
Here's what I'm seeing in my circle of acquaintances.
Many are unemployed or significantly under-employed. Some have been out of work for more than a year.
Many have lost their savings. I'm older and hang out with older, upper middle class types. I hear stories of losing hundreds of thousands of dollars. Some admit to losing over a half mill.
No one has lost their home.
The reason might be that their mortgages are low. Most bought more than 10 years ago.
I haven't lost a dime and I'm still working.
My savings (401(k), SEP-Ira, MMs, stock trading accounts) are up significantly. It's a combination of dumb luck and acting on reports from writers like Contrarian who scared me onto the sidelines as the equity markets fell.
My gains come from taking risks with "gambling money", basically trading on the volatile market. My small stake in SLM is up 50%. I did not buy INTC when I mentioned it a couple weeks ago. Shoulda, coulda, didn't. -shrug-
I eagerly read Contrarian, TBW, Cara, Xpovos, and others who have substantive opinions because they help me think my options through.
I don't necessarily agree with them but their thoughts help me.
What am I doing? I remain in conservative investments and ultra-safe MMs. I'm making long overdue upgrades and repairs to my house. Quality tradesmen are available at a discount. I'm going for modest upgrades, my place will never make Architecture Today or a high style magazine.
My neighbor put in a new kitchen with Bosch and other top end appliances. Mid-range Kenmore and GE are plenty good enough for me.
One thing that keeps me from doing a high-end renovation is that I own a small SFH in Beverly Hills. If RE goes up much, no matter what I do, my place will be a knock-down. I can see someone plopping a 5/4 McMansion on my lot. There are two across the street from me.
Perhaps that's a while off, sales of high-priced homes is stalled in my zipcode, 22305. The middle and lower end are selling very well.
Wow . . . that townhouse in C'vill is just ludicrous . . . 300k for that there! . . . Dude messed up.
I also wanted to thanks VA for correcting me on stupid math early this week. Sometimes, I can do complicated calculus and not simple math. Hopefully, my math for the next part is decent . . . they are estimates.
I wanted to jump in a few days ago on the 65k person can afford a 250k place. I personally think that is really, really close to the edge. My bi-weekly takehome when I was making ~that was ~1750. That's ~3790 a month. If we take, w/ 20% down it's ~1400 month . . . but seeing as 20% on 250k is 50k and the person is only bringing home at most 45.5k a year. If they saved 10% (more than double the average savings), it would take them 10 years!!!! to save up enough for a 20% down payment . . . so we know that ain't happening!
So we'll be generous and say they have 5% saved up (realistically only 2.5% since FHA is using the 8k as the 3.5% downpayment so in essence FHA has 0% down loans . . . stupidity). . . they would be financing ~238k. That would be anywhere from ~1600-1700 a month.
Now let's add up expenses. Cable, phone, internet, gas, electric-etc . . . utilities ~300. Car payment ~350. Car Insurance ~100. Gas/Car Maintenance ~100. Student Loans ~250. Food ~350. Misc. ~100. That's ~3250 a month. If they are responsible they would prob. save 10%, that's another 370. That's a total expenses of 3620 vs. taking home 3790. Ummm .. . . having 170 left over at the end of each month after basics is not affordable in my opinion . . . that's living on the edge.
Angel and Demons 7pm tonight at AC Drafthouse
Mike PBGC works tolerably well if you are already retired. Compare 2 people each making 81K,
not bad, one is 66 and working at a company with a
66% pension plan. Man B is 55 and working at the same payscale.
The company declares bankruptcy closes the pension plan, keeps running in CH 11.
Man A opts to retire and PBGC pays him the
maximum 4500/month plan benefit.
He probably loses his health care benefits
but he has medicare so he shouldn't be homeless.
Man B looks and gets a letter from PBGC, that says
"we will pay you $2,025/month after you opt to retire, wether that is 59 or 72, we suggest you revise your lifeplan"..
man B now has 10 years to save up to
produce an additional 2,000/month income.
Say both men have an expected actuarial life of 86.
Man A will get 20 years or 240 months or about 1 million in plan benefit.
Man B will get 240 months at 2025 or 500K.
So Man B must save about 50K/year in the next ten years to make up the loss.
The numbers become psycho if you expect both people to live to 92.
I don't know what Mike is thinking, but PBGC is not very much help to a lot of people.
Pat: sorry, your beef is with the bankrupt company, not PBGC. PBGC insures the benefit you've earned until the plan terminates. So, in your example, Man B stops earning a benefit when the COMPANY terminates its pension plan in bankruptcy. What you really seem to be upset about is the fact that companies can terminate their plan before Man B has earned his full benefit. That's not PBGC's fault ... call your congressman, silly. PBGC is an insurer of last resort ... millions of ppl depend on the agency and MOST (I believe its over 80%) of them receive their full benefit when PBGC takes it over.
Contrarian: some of your predictions may well prove true one day.
"First, it tells us that Goldman is very good at what it does. Unfortunately, what it does is bad for America.
Second, it shows that Wall Street’s bad habits — above all, the system of compensation that helped cause the financial crisis — have not gone away.
Third, it shows that by rescuing the financial system without reforming it, Washington has done nothing to protect us from a new crisis, and, in fact, has made another crisis more likely."
I am afraid he is right in this case.
All that this profit shows is that little has really changed. A few big companies got hurt of destroyed, but for the most part the remainder have learned all the wrong lessons from the near collapse of our financial industry.
They are resuming business as usual, with an even greater expectation of a government rescue if needed.
I also question whether "financial engineering" is in fact a productive enterprise.
It is unquestionably profitable, but are these profits derived from enhanced productivity? Or are these profits being generated by a relative handful of extremely well connected insiders who have learned how best to game the system such that they can all but print money while passing the risk off to someone else?
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