(A dialogue between His Holiness Shri Chandrashekhara Bharati Mahaswami and a Disciple): [His Holiness was the Sringeri Mathadhipati 1912-1954.]



H.H. : I hope you are pursuing your studies in the Vedanta as usual?

D. : Though not regularly, I do make some occasional study.



H.H. : In the course of your studies, you may have come across many doubts.

D. : Yes, one doubt repeatedly comes up to my mind.



H.H. : What is it?

D. : It is the problem of the eternal conflict between fate and free-will. What are their respective provinces and how can the conflict be avoided?



H.H. : If presented in the way you have done it, the problem would baffle even the highest of thinkers.

D. : What is wrong with my presentation? I only stated the problem and did not even explain how I find it to be a difficult one.



H.H. : Your difficulty arises in the very statement of the problem.

D. : How?



H.H. : A conflict arises only if there are two things. There can be no conflict if there is only one thing.

D. : But here there are two things, fate and free-will.



H.H. : Exacly. It is this assumption of yours that is responsible for your problem.

D. : It is not my assumption at all. How can I ignore the fact that the two things exist as independent factors, whether I grant their existence or not?



H.H. : That is where you are wrong again.

D. : How?



H.H. : As a follower of our Sanatana Dharma, you must know that fate is nothing extraneous to yourself, but only the sum total of the results of your past actions. As God is but the dispenser of the fruits of actions, fate, representing those fruits, is not his creation but only yours. Fre-will is what you exercise when you act now.

D. : Still I do not see how they are not two distinct things.



H.H. : Have it this way. Fate is past karma; free-will is present karma. Both are really one, that is, karma, though they may differ in the matter of time. There can be no conflict when they are really one.

D. : But the difference in time is a vital difference which we cannot possibly overlook.



H.H. : I do not want you to overlook it, but only to study it more deeply. The present is before you and, by the exercise of free-will, you can attempt to shape it. The past is past and is therefore beyond your vision and is rightly called adrishta, the unseen. You cannot reasonably attempt to find out the relative strength of two things unless both of them are before you. But, by our very definition, free-will, the present karma, alone is before you and fate, the past karma, is invisible. Even if you see two wrestlers right in front of you, you cannot decide about their relative strength. For, one may have weight, the other agility; one muscles and the other tenacity; one the benefit of practice and the other coolness of judgment and so on. We can go on building arguments on arguments to conclude that a particular wrestler will be the winner. But experience shows that each of these qualifications may fail at any time or may prove to be a disqualification. The only practical method of determining their relative strength will be to make them wrestle. While this is so, how do you expect to find by means of arguments a solution to the problem of the relative value of fate and free-will when the former by its very nature is unseen!

D. : Is there no way then of solving this problem?



H.H. : There is this way. The wrestlers must fight with each other and prove which of them is the stronger.

D. : In other words, the problem of conflict will get solved only at the end of the conflict. But at that time the problem will have ceased to have any practical significance.



H.H. : Not only so, it will cease to exist.

D. : That is, before the conflict begins, the problem is incapable of solution; and, after the conflict ends, it is no longer necessary to find a solution.



H.H. : Just so. In either case, it is profitless to embark on the enquiry as to the relative stregth of fate and free-will.

D. : Does Yor Holiness then mean to say that we must resign ourselves to fate?



H.H. : Certainly not. On the other hand, you must devote yourself to free-will.

D. : How can that be?



H.H. : Fate, as I told you, is the resultant of the past exercise of your free-will. By exercising your free-will in the past, you brought on the resultant fate. By exercising your free-will in the present, I want you to wipe out your past record if it hurts you, or to add to it if you find it enjoyable. I any case. whether for acquiring more happiness or for reducing misery. you have to exercise your free-will in the present.

D. : But the exercise of free-will however well-directed, very often fails to secure the desired result, as fate steps in and nullifies the action of free-will.



H.H. : You are again ignoring our definition of fate. It is not an extraneous and a new thing which steps in to nullify your free-will. On the other hand, it is already in yourself.

D. : It may be so, but its existence is felt only when it comes into conflict with free-will. How can we possibly wipe out the past record when we do not know nor have the means of knowing what it is?



H.H. : Except to a very few highly advanced souls, the past certainly remains unknown. But even our ignorance of it is very often an advantage to us. For, if we happen to know all the results we have accumulated by our actions in this and our past lives, we will be so much shocked as to give up in despair any attempt to overcome or mitigate them. Even in this life, forgetfulnes is a boon which the merciful God has been pleased to bestow on us, so that we may not be burdened at any moment with a recollection of all that has happened in the past. Similarly, the divine spark in us is ever bright with hope and makes it possible for us to confidently exercise our free-will. It is not for us to belittle the significance of these two boons--forgetfulness of the past and hope for the future.

D. : Our ignorance of the past may be useful in not deterring the exercise of the free-will, and hope may stimulate that exercise. All the same, it cannot be denied that fate very often does present a formidable obstacle in the way of such exercise.



H.H. : It is not quite correct to say that fate places obstacles in the way of free-will. On the other hand, by seeming to oppose our efforts, it tells us what is the extent of free-will that is necessary now to bear fruit. Ordinarily for the purpose of securing a single benefit, a particular activity is prescribed; but we do not know how intensively or how repeatedly that activity has to be pursued or pesisted in. If we do not succed at the very first attempt, we can easily deduce that in the past we have exercised our free-will just in the opposite direction, that the resultant of that past activity has first to be eliminated and that our present effort must be

proportionate to that past activity. Thus, the obstacle which fate seems to offer is just the gauge by which we have to guide our present activities.



H.H. : The obstacle is seen only after the exercise of our free-will; how can that help us to guide our activities at the start?



H.H. : It need not guide us at the start. At the start, you must not be obsessed at all with the idea that there will be any obstacle in your way. Start with boundless hope and with the presumption that there is nothing in the way of your exercising the free-will. If you do not succeed, tell yourself then that there has been in the past a counter-influence brought on by yourself by exercising your free-will in the other direction and, therefore, you must now exercise your free-will with re-doubled vigor and persistence to achieve your object. Tell yourself that, inasmuch as the seeming obstacle is of your own making, it is certainly within your competence to overcome it. If you do not succeed even after this renewed effort, there can be absolutely no justification for despair, for fate being but a creature of your free-will can never be stronger than your free-will. Your failure only means that your present exercise of free-will is not sufficient to counteract the result of the past exercise of it. In other words, there is no question of a relative proportion between fate and free-will as distinct factors in life. The relative proportion is only as between the intensity of our past action and the intensity of our present action.

D. : But even so, the relative intensity can be realised only at the end of our present effort in a particular direction.



H.H. : It is always so in the case of everything which is adrishta or unseen. Take, for example, a nail driven into a wooden pillar. When you see it for the first time, you actually see, say, an inch of it projecting out of the pillar. The rest of it has gone into the wood and you cannot now see what exact length of the nail is imbedded in the wood. That length, therefore, is unseen or adrishta, so far as you are concerned. Beautifully varnished as the pillar is, you do not know what is the composition of the wood in which the nail is driven. That also is unseen or adrishta. Now, suppose you want to pull that nail out, can you tell me how many pulls will be necessary and how powerful each pull has to be?

D. : How can I? The number and the intensity of the pulls will depend upon the length which has gone into the wood.



H.H. : Certainly so. And the length which has gone into the wood is not arbitrary, but depended upon the number of strokes which drove it in and the intensity of each of such strokes and the resistance which the wood offered to them.

D. : It is so.



H.H. : The number and intensity of the pulls needed to take out the nail depend therefore upon the number and intensity of the strokes which drove it in.

D. : Yes.



H.H. : But the strokes that drove in the nail are now unseen and unseeable. They relate to the past and are adrishta.

D. : Yes.



H.H. : Do we stop from pulling out the nail simply because we happen to be ignorant of the length of the nail in the wood or of the number and intensity of the strokes which drove it in? Or, do we persist in pulling it out by increasing our effort?

D. : Certainly, as practical men we adopt the latter course.



H.H. : Adopt the same course in every effort of yours. Exert yourself as much as you can. Your will must succeed in the end.

D. : But there certainly are many things which are impossible to attain even after the utmost exertion.



H.H. : There you are mistaken. There is nothing which is really unattainable. A thing, however, may be unattainable to us at the particular stage at which we are, or with the qualifications that we possess. The attainability or otherwise of a particular thing is thus not an absolute characteristic of that thing but is relative and proportionate to our capacity to attain it.

D. : The success or failure of an effort can be known definitely only at the end. How are we then to know beforehand whether with our present capacity we may or may not exert ourselves to attain a particular object, and whether it is the right kind of exertion for the attainment of that object?



H.H. : Your question is certainly a pertinent one. The whole aim of our Dharma Shastras is to give a detailed answer to your question. Religion does not fetter man's free-will. It leaves him quite free to act, but tells him at the same time what is good for him and what is not. The resposibility is entirely and solely his. He cannot escape it by blaming fate, for fate is of his own making, nor by blaming God, for he is but the dispenser of fruits in accordance with the merits of actions. You are the master of your own destiny. It is for you to make it, to better it or to mar it. This is your privilege. This is your responsibility.

D. : I quite realise this. But often it so happens that I am not really master of myself. I know, for instance, quite well that a particular act is wrong; at the same time, I feel impelled to do it. Similarly, I know that another act is right; at the same time, however, I feel powerless to do it. It seems that there is some power which is able to control or defy my free-will. So long as that power is potent, how can I be called the master of my own destiny? Whatis that power but fate?



H.H. : You are evidently confusing together two distinct things. Fate is a thing quite different from the other one which you call a power. Suppose you handle an instrument for the first time. You will do it very clumsily and with great effort. The next time, however, you use it, you will do so less clumsily and with less effort. With repeated uses, you will have learnt to use it easily and without any effort. That is, the facility and ease with which you use a particular thing increase with the number of times you use it. The first time a man steals, he does so with great effort and much fear; the next time both his effort and fear are much less. As opportunities increase, stealing will become a normal habit with him and will require no effort at all. This habit will generate in him a tendency to steal even when there is no necessity to steal. It is this tendency which goes by the name vasana. The power which makes you act as if against your will is only the vasana which itself is of your own making. This is not fate. The punishment or reward, in the shape of pain or pleasure, which is the inevitable consequence of an act, good or bad, is alone the province of fate or destiny. The vasana which the doing of an act leaves behind in the mind in the shape of a taste, a greater facility or a greater tendency for doing the same act once again, is quite a different thing. It may be that the punishment or the reward of the past act is, in ordinary circumstances, unavoidable, if there is no counter-effort; but the vasana can be easily handled if only we exercise our free-will correctly.

D. : But the number of vasanas or tendencies that rule our hearts are endless. How can we possibly control them?



H.H. : The essential nature of a vasana is to seek expression in outward acts. This characteristic is common to all vasanas, good and bad. The stream of vasanas, the vasana sarit, as it is called, has two currents, the good and the bad. If you try to dam up the entire stream, there mey be danger. The Shastras, therefore, do not ask you to attempt that. On the other hand, they ask you to submit yourself to be led by the good vasana current and to resist being led away by the bad vasana current. When you know that a particular vasana is rising up in your mind, you cannot possibly say that you are at its mercy. You have your wits about you and the responsibility of deciding whether you will encourage it or not is entirely yours. The Shastras ennciate in detail what vasanas are good and have to be encouraged and what vasanas are bad and have to be overcome. When, by dint of practice, you have made all your vasanas good and practically eliminated the charge of any bad vasanas leading you astray, the Shastras take upon themselves the function of teaching you how to free your free-will even from the need of being led by good vasanas. You will gradually be led on to a stage when your free-will be entirely free from any sort of coloring due to any vasanas. At that stage, your mind will be pure as crystal and all motive for particular action will cease to be. Freedom from the results of particular actions is an inevitable consequence. Both fate and vasana disappear. There is freedom for ever more and that freedom is called Moksha.

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Great post about home buying

http://healdsburgbubble.blogspot.com/

A Farewell to Equity... and to this Website

Jim Cheney has a featured listing up on a Windsor home located on Equity Court. It caught my eye not only for the ironic name of the street, but because it is listed for $399,000... nearly $100,000 less than what it sold for in 2003.

When I started this website a year ago I viewed it as a way to address what I saw as a major problem: housing prices were still too high and first time buyers were getting bad advice from Realtors.

This post by local agent Dave Roberts was emblematic of what I viewed as the problem (i.e. no presentation of the downside of home ownership, stating that despite the bubble a house was still “a sound basis for financial planning”, telling first time buyers they “are the heroes of our economic recovery”, a misconceived notion of bank capital, etc.).

While I’ve had some cordial conversations with Realtors, for the most part the reaction to this site has been negative. That was to be expected.

What I did not see coming was how first time buyers would generally react. I thought it would be a useful source of some facts/opinions regarding the risks of home ownership. But overall these facts/opinions have NOT been seen as a beneficial point of view to weigh when considering the purchase of a home. They’ve been viewed as an annoyance.

People want to buy a home, they want to have someone tell them it is the smartest decision they are making in their lives, and they don’t want to hear about any downside risk. In hindsight it makes sense. You are about to take on a load of debt that is 4, 5, 6 times or more your income for a 30 year time frame. Buying your first car for a couple thousand dollars is stressful. Buying your first home for a couple hundred thousand dollars is all the more so. You don’t want to hear that all that debt you are taking on could be a huge mistake that could ruin your life.

But this brings me back to the home on Equity Court. It’s an example of how the problem is not high home prices per se. The problem is too much debt.

Let’s take a look. According to the public records on ForeclosureRadar.com:

• It was purchased in 2003 for $495,000 with a 1st of $396,000 and a 2nd of $49,500 giving them a 10% equity cushion.
• In 2004 it was refinanced for $522,000 with a 1st of $445,000 and a $77,000 2nd mortgage (i.e. $76,500 pulled out of the home).
• In 2005 it was refinanced again into a single $580,000 loan, thus taking out another $58,000.
• In 2006 it was refinanced again into a $564,000 1st mortgage, and a $44,550 2nd mortgage (i.e. another $28,550 pulled out).

The home was put on the market last January for $495,000 and within 2 months it was lowered to $399,000. We’re still waiting for a sale. A Notice of Default was filed in August meaning in a normal foreclosure time frame it would have went to auction a few weeks back, however, a Notice of Trustee’s Sale has still not been filed. This is going to drag on for a while folks.

The total loan balance on the home is $608,500 (not including negative amortization from non-payments). Now, I’m not judging how this money was spent for I have no way of knowing. Tragedies happen in life (divorces, deaths, diseases and medical bills) and possibly the money pulled out went to take care of problems like these.

But $608,500 is a lot of debt. It looks to me as if this Countrywide loan was an adjustable rate mortgage due to reset in the summer of 2011. That’s still a year and a half before they would have to fully service the loan. Again, using ForeclosureRadar you can see that there are a multitude of homes in similar situations. No doubt more will appear in the next 2 years as everyone’s interest rates reset.

All this debt is not going away. Either people will struggle with this burden for a decade or they will default and a government that is already bankrupt will be picking up the bill. How that all ends I don’t know but you can bet that it means higher interest rates compounding the problem for everyone. Expect housing prices to fall for the foreseeable future.

At any rate, I feel it is time to wind down this website. I’ve still got a few posts in the works that I want to put up (one in particular focuses on around 60 homes purchased for over a million dollars that are all severely underwater showing this crisis is far from over) and from time to time I’ll link to interesting news stories. But overall the website has served its purpose. I’m now one of the top rated real-estate websites in Sonoma County so anyone looking for information on the local market can find reasons why buying in Sonoma County in the immediate future might not be a good idea. Sadly, that’s the last bit of news most want to hear.

A special thanks goes out to Patrick Killelea of Patrick.net (see a great recent interview with Patrick here). He really helped put this site on the map and has driven tens of thousands of readers to some of my posts. I also take some pride in the fact that the top three economic blogs on the web (Calculated Risk, The Big Picture, and Mish) have all linked to my articles as have news websites like the Wall Street Journal, Orange County Register, Washington Independent, Seeking Alpha, etc. Even real estate firm Redfin put a link to the site on their blog. A year ago I would not have thought all this was possible for a small local website with an anonymous author.

Also the regulars in the comment section have really kept me going (Tom Stone, Lisa, Tyrone, Tom from Healdsburg, and others). Maybe we can keep the discussion going in the comment section of occasional posts.

While the site is not completely dead, it will now begin its ride off into the sunset. Happy New Years and best of luck to everyone in 2010.

Before you buy a home

http://patrick.net/housing/crash3.html

US Housing Crash Continues

What are their arguments?

1. Houses always increase in value in the long run.
   FALSE. Price is what you pay and value is what you get. The value of a house is constant. It just sits there. You get shelter, but you have to pay property tax and maintenance and the loss of alternative uses of capital. The price of a house rises with salary inflation, but house prices cannot increase more than incomes in the long run. This is obvious if you think about it. If house prices go up more than people can afford to pay, buying stops, like it has stopped now.For example, prices in the Netherlands are about the same as they were 350 years ago, in terms of how many years of work it takes to buy a house. Warren Buffett and Charles Schwab have both pointed out that houses don't increase in intrinsic value. Unless there's a bubble or a crash, house prices simply reflect current salaries and interest rates. Consider a 100 year old house. Its value in sheltering you is exactly the same as it was 100 years ago. It did not increase in value at all. It did not spontaneously get bigger, or renovate itself. Quite the opposite - the house drained cash from its owners for 100 years of maintenance, taxes, and insurance - costs that never go away. The price of the house went up about as much as salaries went up.
   My grandmother always used to complain about the cost of milk. "Why, when I was a girl, a gallon of milk cost a dime! Just look at how much people are overcharging for milk now." I asked her how much people got paid back then. "Oh, about $15 a week", came the reply. Hmmm, sounds very much like the reasoning people use now when they talk about how much their father's house appreciated "in the long run" without considering that inflation and salaries rose a proportional amount.
   I don't see any salary inflation in our future for years to come, and that's the only kind of inflation that boosts house prices. Inflation in everything else (food, energy, medical) just takes away from the money people have to spend on housing.
    
2. As a renter, you have no opportunity to build equity.
   FALSE. Equity is just money. Renters are actually in a better position to build equity through investing in anything but housing. Renters can get rich much faster than owners, just by saving the money that owners are wasting on mortgages, taxes, and maintenance. Renters are getting paid to wait, both by the monthly savings and by watching the value of their savings increase relative to housing.
   • Owers are losing every month by paying much more in interest than they would pay in rent. The income deduction does not come close to making owing competitive with renting.
   • Owers are losing principal in a leveraged way as prices decline. A 14% decline completely wipes out all the equity of "owners" who actually own only 20% of their house. Remember that the agents will take 6% if they possibly can.
   • Owers must pay taxes simply to own a house. That is not true of stocks, bonds, or any other asset that can build equity. Only houses are such a guaranteed drain on cash.
   • Owers must insure a house, but not most other investments.
   • Owers must pay to repair a house, but not a stock or a bond.
3. Renting is just throwing money away.
   FALSE, renting is now much cheaper per month than owning the same thing. If you don't rent, you either:
   
   • Have a mortgage, in which case you are throwing away money on interest, tax, insurance, and maintenance.
   • Own outright, in which case you are throwing away the extra income you could get by converting your house to cash, investing in bonds, and renting a similar place to live for much less money. This extra income could be 50% to 200% beyond rent costs forever, and for many is enough to retire right now.
   Either way, owners lose much more money every month than renters. Currently, yearly rents in the San Francisco Bay Area are about 3% of the cost of buying an equivalent house. This means a house is returning about 3% rent minus taxes and maintenance, bringing the landlord's return down to 0%.
   Landlords are loaning a house to their tenants at a 3% interest rate, called rent. This is a fantastic deal for renters. When it is possible to borrow a million dollar house for 3% yearly rent at the same time a loan of a million dollars in cash costs 6.5% interest, plus 1.3% property tax, plus 1% maintenance, something is clearly broken. Renters are enjoying an extreme discount at the owner's expense.
   To add insult to "owners", their property is declining in value. Renters are completely protected from the massive losses owners are experiencing. Here's a great quote from NPR:
   Underwater owner: "We would do it [pay the mortgage] if the equity was there, but in a case where we're already so behind... Imagine that for five years, say, we're gonna pay four grand a month and then we're just gonna be back up at what we bought the house for. We feel like we're throwing away money."
4. There are great tax advantages to owning.
   PARTIALLY TRUE. It's true for high-income couples with expensive houses and big mortgages, but not for modest-income couples in modest houses, especially if there is no mortgage.Every married couple filing jointly automatically gets to subtract an $11,400 deduction ($5,700 for singles) from their adjusted gross income to arrive at their taxable income. Alternately, you may add up modest deductions in seven categories: Medical, Taxes, Interest, Charity, Casualty and Theft, Job Expenses, and Other Misc. If the total of your expenses in these categories exceeds the standard deduction, you can itemize them on Schedule A of your tax return to reduce your taxable income.
   Let's assume that your only deductible expenses fall into the Taxes and Interest categories. Taxes mainly include the income tax you pay to the state (or its sales tax) and the property taxes on your home or other non-investment real estate. In a high-tax state like New Jersey, you might easily pay $7,200 in property taxes and $200 in income taxes, for a total of $7,400. So the first $4,000 of interest expenses just brings your deductions up to the standard $11,400, without reducing your taxable income.
   For a high-income couple, let's assume they can itemize their state income tax of $3,400, contributions of $1,000, and medical expenses of $1,000. These deductions use up $5,400 of the $11,400 standard deduction. So the first $6,000 of property taxes and interest save them nothing. After that, their savings depend on their tax bracket, which could be as high as 35 percent.
   For couples with modest incomes and mortgages, the first $11,400 of taxes and interest save them nothing.
   Evaluate your situation before making a buy-rent decision based on potential income-tax savings. Be sure to consider the deduction limit imposed by the AMT, too. Interest is paid in real dollars that buyers suffered to earn. That money is really entirely gone, even if the buyer didn't pay income tax on those dollars before spending them on mortgage interest. You don't get rich spending a dollar to save 30 cents!
   Buyers do not get interest back at tax time. If a buyer gets an income tax refund, that's just because he overpaid his taxes, giving the government an interest-free loan. The rest of us are grateful.
   If you don't own a house but want to live in one, your choice is to rent a house or rent money to buy a house. To rent money is to take out a loan. A mortgage is a money-rental agreement. House renters take no risk at all, but money-renting owners take on the huge risk of falling house prices, as well as all the costs of repairs, insurance, property taxes, etc.
   Even if you pay outright, you're still renting the house to yourself, losing alternative uses of that money, and taking the risk of falling house prices.
   Compare the cost of owning to renting.
5. All real estate is local, so you cannot say anything about the national market.
   FALSE. Lending is global. All loans are harder to get. This will push prices down everywhere.
6. OK, owning is a loss in monthly cash flow, but appreciation will make up for it.
   FALSE. Appreciation is negative. Prices are going down, which just adds insult to the monthly injury of crushing mortgage payments.
7. As soon as prices drop a little, the number of buyers on the sidelines willing to jump back in increases.
   FALSE. There are very few buyers left, and those who do want to buy will be limited by increasing difficulty of borrowing.No one has to buy, but there will be more and more people who have no choice but to sell as their payments rise. That will keep driving prices downward for a long time.
8. House prices don't fall to zero like stock prices, so it's safer to invest in real estate.
   FALSE. It's true that house prices do not fall to zero (except in Detroit), but your equity in a house can easily fall to zero, and then way past zero into the red. Even a fall of only 4% completely wipes out everyone who has only 10% equity in their house because agents will take 6% if they can trap the seller with a contract. This means that house price crashes are actually worse than stock crashes. Most people have most of their money in their house, and that money is highly leveraged.
9. The bubble prices were driven by supply and demand.
   FALSE. Prices were driven by low interest rates and risky loans. Supply is up, and the average family income fell 2.3% from 2001 to 2004, so prices are violating the most basic assumptions about supply and demand.The www.census.gov site has data for Santa Clara County for the years 2000-2003 which shows that the number of housing units went up at the same time that the population decreased: year units people
   
   • 2000 580868 / 1686474 = 0.344 housing units per person
   • 2001 587013 / 1692299 = 0.346
   • 2002 592494 / 1677426 = 0.353
   • 2003 596526 / 1678421 = 0.355
   So housing supply in Santa Clara County increased 3% per person during those years. There is an oversupply compared to a few years before, when prices were lower.At a national level, there is a similar story in the years 2000 to 2005:
   
   • 2000 115.9M / 281M = 0.412 housing units per person
   • 2005 124.6M / 295M = 0.422
   At a national level, there is 2.4% more housing per person now than in 2000. So national prices should have fallen as well.The truth is that prices can rise or fall without any change in supply or demand. The bubble was a mania of cheap and easy credit. Now the mania is over.
10. They aren't making any more land.
    TRUE, but sales volume has fallen 40% in the last year alone. It seems they aren't making any more buyers, either.Japan has a severe land shortage, but that hasn't stopped prices from falling for 15 years straight. Prices in Japan are now at the same level they were 23 years ago. If we really had a housing shortage, there would not be so many vacant houses.
11. Your calculator says the house I'm interested in is worth far less than the asking price. That's not very helpful in coming up with an offer.FALSE. It's very helpful to be able to document that you could be paying much less to live in the same location and same quality house, just by renting. It's a great negotating point.
12. It is hard to find a rental that is the equivalent of this home. PARTIALLY TRUE. Sometimes there just is no equivalent rental available in the same area. Placing an ad saying you're looking for a rental in that area in a certain rent range is often enough to bring new rentals out of the woodwork though.
13. Attractive areas will not follow strict economic laws of their worth. If I keep bidding what a home is strictly worth, I will always lose to someone who simply wants to live there, even if their money could be better invested elsewhere. FALSE. You can't lose by winning. Renting the same quality house in the same area for much less money every month than an owner pays is winning. Maybe others get the intangible feeling of ownership, but you get the cash that they are losing.
14. If you don't own, you'll live in a dump in a bad neighborhood.
    FALSE. For the any given monthly payment, you can rent a much better house than you can buy. Renters live better, not worse. There are downsides to renting, such as being told to move at the end of your lease, or having your rent raised, but since there are thousands of vacant rentals, you can take your pick and be quite happy renting during the crash. There are similar but worse problems for owners anyway, such as being fired and losing your house, or having your interest rate and property taxes adjust upward. Remember, property taxes are forever.Some people want the mobility that renting affords. Renters can usually get out of a lease and move anywhere they want within one month, with no real estate commission. On the other side, if you can get a long-term lease, you will probably find it worthwhile to repair the place to your taste. The average time of owning a house is only seven years anyway.
    It is cheaper to rent a house in a good school district than to buy a house in the same place. In fact, children benefit in several significant ways from living in a rental. Aside from having a choice of school district, kids in a rental benefit from better parks in nicer neighborhoods, more living space, and less stress in their parents' voice -- all because it is still so much cheaper to rent than to own in bubble areas.
    A fun trick to rent a good house cheap: go to an open house, take the agent aside, and ask if the owner is interested in renting the place out. Often, desperate sellers will be happy to get a little rental cash coming in and give you a great deal. Sometimes they will rent to you for free ($0) as long as you keep the place up and pay the utilities.
    The biggest upside is hardly ever mentioned: renters can choose a short commute by living very close to work or to the train line. An extra two hours every day of free time not wasted commuting is the best bonus you can ever get.
15. Owners can change their houses to suit their tastes.
    FALSE. Even single family detached housing is often restricted by CC&Rs and House Owner's Associations (HOAs). Imagine having to get the approval of some picky neighbor on the "Architectural Review Board" every time you want to change the color of your trim. Yet that's how most houses are sold these days.In California, the HOA can and will foreclose on your house without a judicial hearing. They can fine you $100/day for leaving your garage door open, and then take your house away if you refuse to pay. There's a good HOA blog here.
    
16. The house down the street sold for 25% over asking, and that proves the market is still hot.
    FALSE. agents have been known to create the false impression of a hot market by deliberately "underpricing" a house, especially in California. I personally have seen this happen repeatedly. Say a seller's agent knows that house will probably go for $400,000. He places ads asking $300,000 instead, a price lower than the buyer would accept. (Bait-and-switch is illegal when selling toasters, but apparently not when selling houses.) The goal is to first of all prevent buyers from knowing what a realistic price is, and secondly to get buyers to blindly bid against each other. There are four players in this game and three of them are against the buyer -- the seller, the seller's agent and the buyer's agent. Yes, the buyer's own agent works against the buyer, because there is no commission if there is no sale. There's a saying in Las Vegas: "There's a patsy in every game, and if you don't know who the patsy is, you're it."If you want to prove your agent is not on your side, ask to see houses "for sale by owner" or houses listed by discount brokers. If the agent cannot make a commission, you will not be told about the house.
    There is a way around the conflict of interest inherent in being a buyer's agent: let the seller's agent be your agent too, just for that one house he's trying to sell. Then the seller's agent has a big motive to lower the price, because he will get double the commission if you buy it rather than some buyer with his own agent.
    Note that you are free to bid far lower than the asking price. You might be pleasantly surprised to find out how desperate the sellers are. Another good reason to start low: you can easily raise your offer, but it's awkward to lower it. A suggestion from a reader: have all your friends bid extremely low for the house before you, then your own low bid will seem more reasonable.
    Another suggestion for dealing with underpricing:
    

    Get over it, and just beat them at their own game: Beat out all other bidders by bidding unrealistically high, and just be sure to have your offer contingent upon financing & house inspection. Since the bank won't finance you above the appraised value, you're then in a very strong position to re-negotiate the price far lower during escrow. The other bidders will be long gone.

17. I was lucky that my agent told me to increase my bid by $50,000. Otherwise I would have lost, because my agent knew about a secret bid $40,000 above mine.
    FALSE. Your agent gets paid nothing if you don't buy the house, and he gets more if you waste more money by bidding too high. It is unwise to take at face value "secret" information that costs you money.
18. The MLS proves things are great.
    FALSE. The MLS (Multiple Listing Service, a private network of databases controlled by real estate agents) is a used-house sales tool designed to restrict access to critical market information to prevent the free market from working efficiently.I have been told that all sorts of funny things happen in the MLS. For example, if a house just doesn't sell, that agents can remove its record in the MLS so that you cannot see that it failed to sell. Then the house comes back on the market at a lower price, and unsuspecting buyers think it's on the market for the first time. Their agent can "prove" it's a new listing by showing the MLS record to the buyer: "See, here's the listing date, just came on the market. Better hurry and buy it, this one is hot."
    There is no government agency checking that the MLS shows true transaction prices.
    Furthermore, the MLS will not list any house for sale by owner, and will resist listing property for sale through a discount broker, or bank-owned property, or extreme discounts from builders, or many other cases where you could save huge amounts of money. Those cheaper prices are often not in the system, because if you save money, they lose money. Even if some cheaper properties are listed, your agent is not likely to tell you about them if they require more work on his part, or get him a smaller commission.
19. I'll just amortize the commissions and other transaction costs over 30 years and they'll be OK.
    FALSE. The average length of ownership is seven years, not thirty. That means the 7% or so that you'll pay in commission and closing fees comes out to about 1% per year, and that's actually a lot of money. You may think you're different and will actually stay put for 30 years, but statistically you're not, and you won't.
20. Rich Chinese (or Europeans, or Arabs) are driving up housing prices.
    FALSE. The percentage of US houses bought by rich foreigners is tiny. Furthermore, American housing is clearly a bad investment at this point. Foreigners can just wait and watch American housing continue to fall, and then buy for much less in a few years. Rich foreign investors are not dumb enough to buy into a badly overpriced market, but your agent is hoping that you are.
21. Local incomes justify the high prices.
    FALSE. Most bankers use a multiple of 3 as the maximum "safe" price-to-income ratio. We are well beyond the danger zone, into the twilight zone. The price to income ratio is still around 10 in the SF Bay Area.
22. Higher-income people can afford to spend a larger portion of their income on a mortgage, so your 6% rule of thumb does not apply to them.
    FALSE. Even if you can spend more than 6% of the purchase price each year on a mortgage and other costs to own a house, that does not mean you should. In fact, gross rents are almost always less than 6% in richer neighborhoods, making it an even worse deal for the buyer in these places. The renter living in the same quality house next door loses far less money per month.
23. You have to live somewhere.
    TRUE, but that doesn't mean you should waste your life savings on a bad investment. You can live in a better house for much less money by renting during the crash. A renter could save hundreds of thousands of dollars, not only by paying less every month, but by avoiding the devastating loss of his downpayment.
24. Newspaper articles prove prices are not falling in my neighborhood.
    FALSE. The numbers in the papers are not complete and have murky origins. Those prices are "estimated" from the county transfer tax and making that tax public record is optional. A buyer who does not want you to see how little he paid has only to ask to put the transfer tax on the back of the deed and it will not show up on computer searches of the deed, which show only the front. Others voluntarily pay more tax than they have to, in order to inflate the apparent price to fool the next buyer. At a tax rate of about $1 per thousand of sale price, as in San Mateo county, you have to pay only $100 extra tax to make your purchase price look $100,000 higher.Even though you can in theory go to your county building and get sale price information, in reality the county will give it to you in a painfully slow and inconvenient way. For example, in Redwood City's county building there are PC's where you can look at data for any particular house, but you cannot print, you cannot save to a floppy disk, you cannot email data out. All you can do is write things down manually, one at a time. And that's how real estate interests like it. Your elected representatives are serving them, not you.
    Supposedly impartial sources like Dataquick are paid for entirely by people with a large financial interest in "proving" that prices are not falling. This makes it unwise to take their numbers at face value.
    For the obviously biased sources like real estate agents, you should assume that their sales price numbers do not include the effective price reductions from "incentives" like upgrades, vacations, cars, assumed mortgages and backroom cash rebates to buyers.
25. My appraisal proves what my house is worth.
    FALSE. "An appraisal in its typical residential real estate form is little more than a comparative analysis conducted by someone with no skin in the game offering confirmation that other lemmings are paying too much for their houses as well." -from an article on morningstar.comAmazingly, government house price measures do not include houses with jumbo mortgages. This excludes well over half of all houses in California. So the government can report a slight price rise, but fail to mention that prices actually fell for the other 60% of houses in California.
26. Foreclosures destroy neighborhoods, so we should stop foreclosures.
    FALSE. Empty houses destroy neighborhoods. Houses remain empty only because the prices are too high. "Anti-foreclosure" programs just keep prices too high, and keep houses empty. In areas where there are jobs, if prices were allowed to fall enough so that salaries can easily cover the cost of owning, people would move in and take care of the houses. In areas without jobs, the first priority should be jobs.
27. It's not a house, it's a home.
    FALSE. It's a house. Wherever one lives is home, be it apartment, condo, or house. Calling a house a "home" is a manipulation of your emotions for profit. Don't let them push your buttons.A house is a wooden box that sits out in the rain and slowly rots. No one would buy in this market if they really thought about how much pain it's going to cause them in the long run. That's why they sell you a home, not a house.
28. If you don't own, you're a failure.
    FALSE. Maximizing your savings and escaping the slavery of debt is success. Most people have a hard time understanding this, but they do understand cash. You could show them your bank statements to prove you're way ahead of the game as a renter, but then they would probably just ask you for a loan!The use of the status card is another well-known button that agents push to trick people into making foolish purchases. Don't let them do it.
29. Property in the San Francisco Bay Area is a luxury good, and so will be less affected by economic downturns.
    FALSE. Most San Francisco Bay Area mortgages are ARMs, and ARM loans are not taken out by the rich. People on the border of bankruptcy take out ARMs because they can't afford fixed rate loans. The rich don't have loans at all.Many of these ARM loans have exceptionally deadly repayment terms, and so are known as "neutron mortgages". Like the neutron bomb, they destroy people, but leave buildings standing. They are also known as "suicide loans".
30. House ownership is at a record high, proving things are affordable.
    FALSE. The percentage of their house that most Americans actually own is at a record low, not a high. We do have a record number of people who have title to a house because they have dangerous levels of mortgage debt, but that is no cause to celebrate.
31. Rents could shoot up, making it a better deal to buy.
    FALSE. Rents are limited by the money people actually earn, not by how much they can borrow. Try walking into a bank and asking for a loan to pay your rent. For rents to shoot up, salaries would have to shoot up first. Salaries are not likely to rise at all given the current unemployment rate.
32. You failed to factor in emotion. More houses are sold on emotion than will ever be sold based on perceived value. They buy all they can afford plus.
    FALSE. Buyer emotion doesn't matter at all to the lenders, not on the way up or on the way down. Most people will borrow as much as the possibly can. The limiting factor is lending, not emotion.
33. It's unpatriotic to talk about mispriced houses. It might drive down prices.
    FALSE. Lower prices are better for America, especially for new families. Aren't lower food and energy prices better for America? Housing prices are the same: lower is better. Most Americans directly benefit by a decrease in house prices. Only the banks benefit from increased mortgage debt.If you own a house, lower prices have very little effect. If you want to sell and buy another house, higher prices mean you'll just have to pay more for the next house, while lower prices mean you will get a discount when you buy. If you want to buy a bigger house, you come out ahead with lower prices.
34. My wife will divorce me if I don't buy a house.
    FALSE. She will divorce you if you do buy a house and go bankrupt trying to pay the mortgage. She won't divorce you if you rent a much nicer place than you can buy, and then take her to Paris for a month each spring, which you can do just by avoiding that suicidal mortgage.If she's religious, you could also point out Proverbs 22:7: "The rich rule over the poor, and the borrower is servant to the lender."
35. My new baby needs a house.
    FALSE. If you're pregnant and desperately want to buy a house for your new child, that's a perfectly normal feeling called "nesting". It is also the leading avoidable cause of financial fatalities! You most definitely do not need a house for a baby. A baby is utterly unaware of whether it lives in a rental or not. Babies also don't need much space.Your baby will do better if you're not stressed out about a mortgage. You have five years before school quality becomes an issue, and at that point you can more easily move into the best school district as a renter than as an owner. Avoid debt and save your money so your child has a better start in life.
36. I just want to own my own house.
    TRUE, most people do. There's nothing wrong with that. Buyers will get their chance when housing costs half as much and they have saved a fortune by renting. House ownership is great - unless you ruin your life paying for it. If you can save even just 10% on the price of a house, you can retire several years earlier than you would otherwise. If you can save 50%, then you can easily take a ten year vacation and still come out ahead. Great quote from http://healdsburgbubble.blogspot.com/: "People want to buy a house, they want to have someone tell them it is the smartest decision they are making in their lives, and they don't want to hear about any downside risk."Housing is the biggest expense in nearly everyone's life, far more expensive than food, gas, energy, even more expensive than education or medicine. To reduce the time you spend working to pay for housing is to increase the time you have for everything else.
    Cheap housing is good for us all! High housing costs take away from families' ability to save for retirement, fund their children's education, travel and lead a quality life.
    How can we make lower house prices our official government policy? How can we completely eliminate the mortgage interest deduction which drives up housing costs and discriminates against renters? How can we wipe out Fannie Mae, Freddie Mac, the FHA, and other agencies whose job it is to enslave Americans to mortgage debt?
    As reader Sean Olender put it: "Many people have forgotten that the number one restriction on their future freedom to do what they want, when they want, and to go where they want isn't the Iraqis, or Iranians, or North Koreans -- it's their mortgage lender."

What should you do?

First of all, both sides should avoid using agents. They suck money out of the deal and monopolize the critical information of exactly how many bids there are and at what prices. Just find a property or buyer on your own, have the property inspected, and get a real estate lawyer to draw up or review the offer. If you make an offer, mail the offer to the seller yourself so that your agent or the seller's agent can't block it. If you are accepting or rejecting an offer,mail that information to the bidder yourself so that your agent or the bidder's agent can't block it. agent have been known to block offers that don't give their own agency both sides of the commission, or that exclude some other buyer they want to favor.

Never sign any contract with any agent! Agents try to trap you with a contract so that you cannot know for sure what is going on or make independent decisions.

Post on the patrick.net Addresses Forum to get uncensored feedback about a particular property.

If you own, sell now so you can actually keep some of that funny money that appeared out of thin air. Otherwise, it will be painful to watch it vaporize back into thin air. Investors in mortgage-backed bonds subsidized the increase in the price of your house. Now they want their money back, and your challenge is to prevent them from getting it. The only way is to sell before your neighbors do. Time is not on your side.

If you can't sell without a loss, it's probably best to just walk away and free yourself from mortgage slavery. It depends on whether your loan was "recourse" or "non-recourse". In the latter case, the deal is simply that you can stop paying the loan and give back the house at any time. It's perfectly legal and moral according to the terms of the mortgage. Now that the government has temporarily stopped taxing forgiven debt, you can do it without owing anything! But talk to a lawyer and accountant first. If you refinanced, you may have given up your non-recourse status.

A long-term rental with a multiple-year lease is a good way to get stability with the economic benefits of renting. Many landlords are desperate, and you'll probably find them quite willing to negotiate a long term lease. Make sure they can't raise the rent much during the lease term, and make sure there is only a small penalty for ending the lease early. Even if you sign a normal 1-year lease, most landlords are happy to keep good tenants as long as possible.

If you want to buy, look around and see that house prices are falling. Why hurry to buy into a falling market? Time is on your side. Save your cash and buy for much less in the future. All your savings on the price of a house are tax-free earnings! For Californians: buy after the earthquake, not before.

Good advice from reader Stephen G. Bishop:

Signing a 30-year commitment is absurd. Can you guarantee your income will be uninterrupted for 30 years? It worked in the previous generation, when Dad worked at the same factory for 40 years and retired. Those days are gone. 80% of all mortgages are never kept to maturity. Triple the price of the property when you add interest for 30 years in. It's only worth it if the property doubles in value every ten years. Those days are gone.

Do not buy anything that wasn't built properly, no matter how cheap it gets. Many foreclosures are houses that weren't built properly, and these houses tend to be foreclosed over and over again. Lots of houses are ugly, but an ugly but well built house is often the best deal.

The way to win the game is to have cash on hand when others cannot get a loan. You do not want to be bidding your hard-earned savings against people who are bankrupting themselves with debt. It will be time to buy when lenders once again demand a 20% downpayment from everyone and get serious about checking ability to repay. You'll know prices are reasonable when it's cheaper to own than to rent the same thing. We're not there yet, not even close. Find a nice cheap rental, invest your savings every month, and enjoy the show till then.

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And a little comic relief (illustration courtesy of Rick LaForce, RickL@ci.union-city.ca.us)

Annual income twenty pounds, annual expenditure nineteen six, result happiness. 
Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.
--Charles Dickens, David Copperfield, 1849

Saying it is "good" for housing prices to rise is saying that it is good for housing to take an increasing share of salaries each year, forever. There's a limit, and it is somewhat shy of 100%. --Bryce Nesbitt

If you need a mortgage, you can't afford it. --Stephen G. Bishop

From anonymous: The Mexican Dream is to escape from debt peonage. The American Dream is to get into debt peonage.

Lowering interest rates will help the housing and stock market for about as long as peeing your pants will help when you have to go. It will give a warm feeling for a minute.

Everybody hates house-agents because they have everybody at a disadvantage. All other callings have a certain amount of give and take; the house agent simply takes. -- H. G. Wells

Nick Naylor, in Thank You For Smoking: "99% of everything done in the world, good or bad, is done to pay a mortgage. Perhaps the world would be a better place if everyone rented."

From The Politics of Life by Craig Crawford: "Beware the boss who encourages you to buy a house or new car. Mortgages and car payments enslave you to the paycheck that your boss controls."

From Benjamin Graham, in The Intelligent Investor: "The outright ownership of real estate has long been considered as a sound long-term investment, carrying with it a goodly amount of protection against inflation. Unfortunately, real estate values are also subject to large fluctuations; serious errors can be made in location, price paid, etc.; there are pitfalls in salesmens' wiles."

Why do the buy side idiots ALWAYS fall for the FALSE CHOICE FALLACY????
Choice 1: Buy today, right now, this second.
Choice 2: Rent until you die.
Um, I'll take door #3: let prices fall another couple hundred $K on a home
like this, and buy it in a year or two. What did I win?
--Roberto Aribas

What the public believes, or can be induced to believe, no matter how wrong, is reality to politicians.

Republicans think the rich are not rich enough, and the poor are not poor enough.

They hang the man and flog the woman Who steals the goose from off the Common;
But let the greater criminal loose Who steals the Common from under the goose

Interest never sleeps nor sickens nor dies it never goes to the hospital; it works on Sundays and holidays; it never takes a vacation; it never visits nor travels; it takes no pleasure; it is never laid off work nor discharged from employment; it never works on reduced hours. Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands, or orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you. -- J. Reuben Clark

It is better to get a poor interest rate than own a depreciating asset. -- Michael Surkan

Everyone in Western Europe, Japan, Canada, Australia, Singapore and New Zealand has a single-payer system. If they get sick, they can devote all their energies to getting well. If Americans get sick, they have to battle two things at once, the illness and the fear of financial ruin. ... And don't believe for a second that rot about America having the world's best medical care or the shortest waiting lists: I've been to hospitals in Australia, New Zealand, Europe, Singapore, and Thailand, and every one was better than the "good" hospital I used to go to back home. The waits were shorter, the facilities more comfortable, and the doctors just as good. --Lance Freeman at escapefromamerica.com

In America, as you get older, one of three scenarios will pay out for you:
1. You don't buy health insurance, so you go bankrupt when the first major illness hits.
2. You do buy health insurance, but you go bankrupt when the insurers raise your premiums to the sky.
3. You survive long enough to get on "socialized" medicine, named Medicare.

From Our Lot by Alyssa Katz: "The secret, he was learning, was to trigger buyers' emotions, specifically women's emotions."

50 Ways To Leave Your Mortgage

You just slip out the back, Jack
Make a new plan, Stan
You don't need to be coy, Roy
Just get yourself free
Hop on the bus, Gus
You don't need to discuss much
Just drop off the key, Lee
And get yourself free

I don't think I'll get married again. I'll just find a woman I don't like and give her a house. -- Lewis Grizzard

Cashtration (n.): The act of buying a house, which renders the subject financially impotent for an indefinite period of time.

  

The End

No change !!!

Life is Same!!!!

20 years Back	Today
School bag.	Office bag.
Lepakshi Note book.	HP Note book.
Hero Ranger.	Hero Honda.
Half pants.	Full pants.
Playing with plastic car running on battery and remote.	Playing with metal car running on petrol and gear.
Scared of Teachers and exams.	Scared of Bosses and targets.
Wanting to be class topper.	Wanting to be 'Employee of the month'
Quarterly exams.	Quarterly results.
Annual School Magazine.	Company Annual Report.
Annual exams.	Annual appraisals.
Pocket money.	Salary.
Waiting for Diwali crackers.	Waiting for Diwali bonus.
Running after grades and prize cups..	Running after incentives and promotions.
Craving for the latest toy in the market.	Craving for the latest gadget in the market
Eager to watch the latest cartoon show.	Eager to watch the latest blockbuster.
Crush on class mate.	Crush on colleague.

  
  
Deenemmaa Jeevithammmm....