bostonbubble.com

[john p]

Today is March 30, 2010; we're getting pounded with the second straight BIG rain storm and we are going to break the rainiest month on record set in Marrch 1953.

The lawns are starting to show a bit of fresh green and the buds are on the trees.

And the Spring Inventory of homes is showing up.

After following my market for a handful of years now, one of the biggest distinctions of this year is the variety in price structure. In years past, it was much tighter, even when we had less supply, meaning that if one house was in between this or that house, the price reflected it. Today, I'm seeing obvious situations where one house is significantly over or under priced relative to the rest of the market.

Intitiallly, what I'm going to be looking for is how long the ones that are priced lower than the relative price structure sit on the market.

Aside from that, I'm going to be watching closely the ease in which people can get mortgages to see if this will govern the rate of absorbtion.

Beyond that, I'm curious to see the behavior of the markets that saw significant drops and how they hold up. Many of the baby-boomers are hitting retirement and if they can get a place for a song, they might retire and create more inventory here. Also, to this point, there is going to be a redistribution of wealth to help inflate these areas as we heard reports of Banks (who received Bailout Money) writing down hundreds of thousands of dollars for people that are upside down.

From the Government's perspective, the Democrats passed their Health Care through Reconciliation and 14 States have filed suit against claiming that it is UnConstitutional. I've never, ever seen this in my lifetime. A lot of firsts... Terrorism now in Russia. Strained relationship with Israel. Iran openly advancing nuclear weaponry. China is negotiating with us regarding our trade deficit from a position of power. Last year's approach to loan remodifications (mortgages) didn't reach enough people and didn't address the regionality of the areas that are really upside down or "under water". Last year's first time homebuyer credit stimulated certain markets. After further study, areas like Washington D.C. have been benefitting from the government overspending and their housing market actually went up during the worst economy since the Great Depression. Public Opinion of Unions is waning as people hear more and more stories of their negative impact on society. Last year, there were more union members in government than in the private sector. We are also realizing how their fringe benefits are bankrupting us. The Unions were successful in brokering a sweetheart deal in the new Health Care Bill and have their "Caddillac Plans" exempt from taxes. The head of the Union for Government Workers visited the White House more than any other person. The Unions have their pensions underfunded and they seem to be successfully lobbying for a bailout from taxpayers. Not having to pay the same taxes as others who have Caddillac Plans is one form of a Bailout. There is a new movement called the Tea Party. These are people who are fed up with government spending and hold the Republicans accountable for their overspending during the Bush years. It is unbelieveable how the status quo is trying to disparage them. The press is almost a propaganda arm of the Administration and unlike in years past where people exercising free speech and protested their government was seen as "Speaking Truth to Power", now faces people being seen as it being subversive and treason. It is interesting that the people in power have been artists at playing the victim aggressively and are rooted in extremist "win at any cost" approach of Saul Alinsky. Many people are very mad at the bait and switch and long list of broken promises and others are disappointed in seeing hope turn into a mirage. To the regular homebuyer or seller, they are hearing all of this back and forth and their brains are getting tired. They are changing the channel and hearing totally different scenarios playing out and many are confused. People are worried that as the FED keeps spending at unprecedented levels stops buying mortgage backed securities, the mortgage rates will go up. Top economists argue extreme polar opposite positions: spend more or spend less. People are very confused. On top of that, due to technology, we are seeing more corruption exposed and people are just tired and overwhelmed with seeing certain things come to light. We see Rod Blagoiavich, a Governor who was caught on multiple counts of corruption, a politician who Barack Obama worked as a senior member on two of his campaigns even when people were raising concerns about Blagoiavich's hiring practices. We see Rod Blagoiavich on Donald Trump's "Celebrity Apprentice". People are mentally trying to place in their minds the morality which we base our justice system. Why aren't people shunning those who openly lie and cheat. Should this person be in jail or be on a t.v. show and should we feel bad for him, I mean Barack Obama was a strong supporter of him. Our brains are so mixed up and scrambled that we don't know what to make of what the use of Reconciliation is. Is it an abuse of power and does it circumvent the intentions of the checks and balances carefully crafted by our founding fathers, or is it a last resort to pass something that is meaningful? Didn't they describe the Senate as the saucer that held the hot emotions of the House? Didn't this one go in reverse? Is extending the interprertation of the constitutional term "General Welfare" a good idea? Where does it stop? The reason I bring this up is that many people have held off on buying to "wait until things calm down." Many thought it would be after the election, but things aren't calming down, yet somehow because people are almost so punch drunk, it kind of is. Think of it this way, when John Kerry misspoke when he was tired back in 2004 and said "I voted for the $87 Billion before I voted against it", that was played and replayed again and again and again, yet somehow Obama gets caught in dozens and dozens of flip flops and we see it on youtube (which wasn't around in 2004) and people still argue that it isn't true. I'm told that FOX News is a joke, but last night, I see video footage of the President promising troops that he would never cut and run from a mission, and then they run footage of him saying on the campaign trail that Afghanistan "Can not be won as a Military Operation and we need to get our troops out of there". It goes on and on and on, so I am drawn to the truth but I am hearing propaganda that assasinates those that show us that footage of the truth. Then we get people who say "Gee, all politicians are liars and we should tolerate it". If this is the case, how can we expect people to do the right thing when they are under water in their mortgages. What are people supposed to think when their President lies and they see people who refuse to pay their mortgage getting hundreds of thousands of dollars given to them for free, a reward for irresponsiblity. I mean if Obama didn't associate with the likes of Tony Rezko, Rod Blagoiavich etc. would he be our President today? By being on Rod Blagoiavich's campaign he got piped in with the Democratic Party players. If he was honest he wouldn't have joined a corrupt group, he actually would have been an outsider not an insider. So how are people supposed to govern themselves when they see their President helping out people who are found to have a history of corruption to advance his career. This being unsure of your own morals and erosion of the moral fabric at the same time people are looting the public safety net and we're having trouble competing due to the higher cost of living, times are very tough. This is how people in Big City government think. They are so polluted that they can't distinguish right from wrong and they just shake your brain into such a frenzy you lose your root in your own morality. In sports, this would be a fast break offense where one team paid off the referees. This is why there is so much corruption in Cities. The dangerous thing is that the person who many believed in, believe in that pure honest innocent voice that told us to hope and govern ourselves more pure has thrown in the towell himself and we see now that he was a politician. Many will say that all politicans are like this, but many DON'T being lied to. What is dangerous is although people do have a right to be angry when someone lies to them, the propaganda machine is trying to put a lid on it by making you feel like you're subversive for being mad at them for lying to you. I think that the theme moving forward will be to SLOW DOWN. In housing, this might mean more people sit on the sidelines because the socio-political-economic situation is turbulent. We are in a "Loss of Innocence" period. In each and everyone's mind we have different voices; voices that ask us to do the right thing, or to follow the path of least resistance. As a Nation, Obama asked us to listen to that innocent voice and reminded us that the values of the pure heart are essential, and then he plays by prison rules to win. So what happens now, do we evolve to being pure as doves and wise as serpents or does it devolve to prison rules in or society where people loot the good will and safety net that prior generations have built?

Globally, I mean we have some serious issues with China, but I believe we're really partners with them and our relationship with Russia is on much stronger ground. If we were going to attack eachother it would have happened decades ago. The big wildcard out there is Iran and more terrorism. It was weird to see Obama blow off a foreign trip for a domestic issue because it was typically the other way around with Bush.

Spring's Back....

[GenXer]

This is brilliant. They now managed to push off the problem to the future generations, compounding it in the process. I don't have high hopes that our economy will rebound, but the world economy certainly will. We, on the other hand, will follow Argentina...

[Kaidran]

The can is certainly kicked down the road but I dont see the Tea Party people any more willing to take on the pain necessary to sort it out. It is a sorry state of affairs but in reference to the last big discussion which is going to be cut? Social security or the military. I dont see the TPs calling for either, essentially because they want something for nothing just like everyone else. Keep your government hands off our Medicare, anyone?

[john p]

Because of technology we're seeing more corruption and we're also able to review data.

I don't know if any of you have read "Freakanomics", but it is a modern way to look at things using data as a guide and it helps better understand what's a true cause of something and what is just context.

What is coming to a head will be education. I heard this big Union President talk about how people had the AUDACITY to blame TEACHERS when the students didn't perform well on Standardized Tests. This guy who was interviewing him was like "Yeah, can you believe it.". I'm thinking to myself, who the fuck else would you blame? It is amazing the zero accountablity they have yet drive like piranha at money.

Because Obama is an academic he's having trouble with this one. He understands you need quality teachers to be accountable to get performance, but when it comes to the private sector competitiveness, he is clueless. He wants A-Students, but apparantly doesn't want an environment for them to thrive in; as soon as they get out of school they are the bad guy if they make any money. It is very weird. It is ok to be a teacher or professor and he'll subsidize higher education, but there won't be a robust market for them when they graduate. I wonder how he envisions how the economy works. It's like what color is the sky in his world?

My two points about John Kerry's 2004 famous "flip flop" comment was that number one: Bush was almost rigid to a fault, you knew what you were going to get from him and he didn't waffle based on political currents. People were used to that type of expectation stability and Kerry's one moment got played over and over and over again and it actually had an impact. Today, you can spend an hour running film of Obama's broken promises but people just don't seem to care and value honesty. Second, it was 87 Billion dollars and we were floored back in 2004 about 87 Billion Dollars TO FIGHT A WAR. Well we all know how much that War really cost, and Obama pisses through $87 Billion like it's his bar bill at the club. Think about how we all thought how much $87 Billion and how bad we thought it was that Kerry misspoke. How is it that we've lost our grip on how much things cost and our grip on holding politicians accountable for what they promise?

The bottom line here is that, I know many will disagree with what side I'm on with these issues; my point is that these are the basic fault lines and given all of this, do you think more people will sit out the real estate season this Spring or will people get on with their lives despite the turbulence.

We didn't even mention the possiblity that we can get another massive wave of foreclosures and now we, the taxpayer own that subprime paper.

It is worth reading the Finance Minister of China's article in the Wall Street Journal (last week some time). It was weird to see someone say China-US Relations. I am so used to having US as the headliner. Read his last paragraphs, he's pretty firm and says things like "we don't want to become enemies, we want to work together"...... Bottom line here is that we're being treated like deadbeat renters. We are so used to thinking we're being looked up at, but our irresponsiblity and debt are making us look bad abroad, and wan't Obama supposed to help our image?

Domestically, we have too many entitlements and too many sacred cows like teacher and government unions, too generous pensions and a babyboom that is going to plunge into the public safety net on top of an exploding housing bubble. Instead of cutting entitlements, we're expanding them, I can't believe it. We actually have to face disaster like California and New Jersey to learn the lesson. I wish people would allow themselves to get out of their political party mindset. No political party wants to talk yet about cutting entitlements, but there is nothing we can do to stop them from continuing to devour us. We don't have ANY wealth to begin with, we're already borrowing and spending on I.O.U.'s and we're living like we just turn on the money machine to get what we want. I mean Obama goes to Harvard and all he comes up with is let's print out money to give people more of what we already can't afford? We're still in the delusion, still in the BUBBLE.

[GenXer]

Scale back we must, but I'm afraid the only way that would happen is after we go bust.

[Kaidran]

I think your argument would hold more weigh if you were arguing against firefighters instead of teachers but firefighter seem to be sacred so are not as easy to bash as teachers.

The unions might be too powerful and when that happens you do see a shift from protecting rights to protecting bad behavior. There was a fantastic "This American Life" this weekend about GM and Toyota in the 80's. Everyone should listen.

http://www.thisamericanlife.org/

Anyway. If you are arguing the teacher benefits are to much well the market disagrees because even with them they still cannot attract enough quality people. Being a teacher sucks (at least below University level) and from the general disrespect on this forum you can get an idea why. Unless you are talking about dismantling the entire system and making all parents responsible for their kids education the market is saying teachers need higher benefits not lower. That would seem to be a fast track to 80% illiteracy. I'm not suggesting we can pay for this but all you are going to do with performance related pay is dissuade even more people from being a teacher, sending the standards lower. Teachers make a difference but they can only work with what they have available. Is that not the argument we had in the other thread that the teflon towns dont make a difference because the catchment area (or the people that choose to live in it) make the difference. I think that was from Freakonomics, with data from Chicago.

Compare it to the firefighters which have argued and obtained strong benefits also. They have no problem with recruitment and can afford to be very selective. Suggesting that they could still fill all positions with fewer benefits. However firefighters are seen more positively and people only listen to the market when it is saying things they want to hear. (House prices will go up forever?)

I am so tired of the flip flop crap. All politicians will make the decisions that follow the best path at the time they have to make them. The situations change and so does the decision. Nothing is static in life. I would be more worried about someone that was impervious to evidence refused to change direction, regardless of events following the decision. The during the JK vote presumably the republicans voted against it before they voted for it. Are they flip floppers? Of course not, because Fox says so, or forgets to mention it.

[Kaidran]

[john p]

[balor123]

My cousin just graduated from Tufts with a Master's in teaching and has had a hell of a time finding a teaching job. The simple reason we don't have to provide these benefits and current pay is that there are plenty of willing people to do the job for less and many of them are better than those currently employed. But I'll take Milton Friedman's stance here - no one minds if some (good) teachers make a lot of money I just don't think they should all make a lot of money.

I should point out there is one problem with intermingling money with teaching and that is that with the New England style of education it means that rich kids will get a better education than poor kids. While some would claim that poor kids are dumb, not all of them are and this country thrives on opportunities for all. Perhaps mixing the two would make more sense if funding were allocated differently.

[Kaidran]

Saying all poor kids are dumb is a straw man. Of course all poor kids are not dumb and all rich kids are not smart but rich vs poor often comes with a very different set of values. As John says, those values are important. (I dont mean morals, I mean what they place value in.) A person talented enough to change the views of an entire school and their parents would be able to command 100x the salary in business so the draw is small and personal. If you then assume you need these geniuses to fill every school in every failing district you begin to see how difficult it becomes. You can have talented people that know there subject and convey it to a receptive audience but if the audience is not receptive they fail. Tying your bonus to a snot eating thug that does not want to be there does not seem very attractive to me and I'm sure it would not be attractive to others.

I hardly think that you can judge the state of the teaching system based on a new graduate looking for work after many towns have had massive budget cuts following a huge recession.

If there is one thing that should be done about teachers they should lose tenure. It is a crazy system which simply is there to secure the jobs of bad teachers. Maybe this would free up positions for bright eyed young Tufts grads.

[john p]

They say real estate is about three thing(s): location, location and location.

The three most powerful underlying value(s) to evaluate location is schools, schools, schools.

Memo to the Boston Globe and Boston Herald; if you write articles about evaluating school systems, people will read them very closely this year.

I've been on this blog for about four years or so and this past winter, I saw more discussion about school systems and I think that because the price structure is so different now from town to town because certain towns have dropped more than others, people are stepping back and looking at value based on this new price structure.

[jfunk138]

[balor123]

Just out of curiosity, what does your friend who is a teacher in Boston Public make? I think part of the reason that people sit on both sides of the fence is lack of access to good data. Someone on FatWallet claimed that a friend of his was a teacher making $80k and 7 years experience in Boston public. I don't know the qualifications of this person but if that's true then I'd say that they are paid quite well considering that most engineers here with the same number of years experience have to work the full year with worse benefits and don't make much more (and I think good engineers are far more selective than good teachers).

[balor123]

Four kinds of money spending

I think part of the reason that there's so much sympathy for professions like teaching and medicine is that they bring great value to customers and the money is either not coming from customers or is spent indirectly (in which case, you're mostly spending other people's money). In the case of medicine, the money is spent by insurance and in the case of teachers it is spent by government.

[jfunk138]