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  • Archive for September, 2012

    California real estate markets are RED HOT!!

    Posted by Frugal on 21st September 2012

    I would think that you’re crazy if you tell me this statement six months ago. Frankly, RED HOT is not even enough to describe the current market. Here are some of my personal anectodes, based on my bidding in the market:
    1. Most listings go into pending on the first two days, or after the first weekend.
    2. ALL homes have multiple offers at or WAY above listing prices. It’s getting common to have some 20 to 40 offers if the listing doesn’t get pulled down in the first month.
    3. If you don’t work with listing agents, it’s end-of-story for you.
    4. Grand opening at new home sites are PACKED!!
    5. The bidding frenzy is extending some 60 miles away from the center of the metropolitan area.
    6. Even handyman or contractors for flooring/carpeting, etc. won’t answer or return your phone calls. I tried to call a handyman for flooring. Not only that he doesn’t return the calls, he has requested his carrier to post a message: “On the request of the subscriber, this phone number does NOT accept incoming calls.” Frankly, that is just NUTS! And this is not just an isolated experience on one handyman, but my experiences with several handymen are like this as well.
    7. MLS inventory was 40% down year-to-year several months ago. I wouldn’t believe this if I didn’t see this myself, but MLS listing inventory is going down to essentially absolute ZERO probably in the next one or two months within the 60 miles radius of my search. Just go to redfin.com, and punch the city names. On the upper-right corner, you can see the inventory plots. It’s a straight line heading down to zero, since last October/November.

    With Fed buying 40 billions of MBS mortgage securities every month thru QE3, which will tend to close the spread between treasury bonds and mortgage bonds, it is possible that mortgage rates may go even further down. FHA also may waive the 3-year waiting period after short sale/foreclosure. If that happens, in conjunction with even lower mortgage rate, the housing markets can easily go up by another 20%. FHA down payment is only 3.5%. That is basically nothing, and won’t even cover the transaction cost of buying and selling. Taxpapers are essentially subsidizing all the future defaults (again)!

    So where do we go from here? I’m a long-term bear on the housing market, and I have called the short-term bottom five months ago this year. I’m not changing my view (yet). But it is surprising that how much intervention can do to the housing markets. I expect the next short-term peak at about 2016, and the next bottom to come at about 2018 to 2020, but that is at least 6 years away from now. If you need a home, but you cannot wait for 6 years, it may still be better to buy now rather than later. I think the prices at the next bottom may be slightly higher than the bottom that was made in 2011/2012. But you would have saved on rents for sure. Given the current pricing, with the exceptions of being right at the center of metropolitan area, it is certainly cheaper buying than renting.

    Best luck on your housing hunting trip, because you will need A LOT of that.

    Posted in Real Estate | Comments Off

    Amazon starting to require California tax on Sep 15

    Posted by Frugal on 12th September 2012

    There won’t be any more tax advantage for Amazon starting in September. It would be interesting to see how Amazon will compete vs the big discounters like Walmart and Target. If you have any big items and know that they’re priced cheaper, you may want to get them before the tax deadline.

    Frankly I find that items at Walmart are usually cheaper, even after considering the tax factor. This year I bought just $50 from Amazon, and that is after many hours of searching just to try to put myself over the $25 for free shipping. Besides books & music which I don’t buy much these days, I often find that more than 50% of the 9% California sales tax goes into Amazon’s bottomline, while the buyers gain less than 50%.

    The stock of Amazon is at all time high, due to its new Kindle release. From that aspect, I believe Amazon has a very good chance in competing against Apple products. After all, people want to access content (music/video/books/games). A platform that allows you to access the greatest content at the cheapest cost will be the winner. Long battery life & easy access to any of your Cloud storage also counts. Cheaper price of $199 also goes a long way. A heated competition is always better for consumers.

    Posted in Miscellany | Comments Off

    QE3 rally

    Posted by Frugal on 11th September 2012

    Markets are already expecting a QE3 for tomorrow, and I believe that Bernanke will deliver, sending S&P 500 to new high. Despite that markets are overbought, with $VIX index at a very low level, I think we will get the QE3 nevertheless.

    All the people who are expecting Euro problem to continue are probably right, but being right doesn’t make you money. I’m holding my core positions at this point, and hesitate to chase this market further with VIX being so low. September/October is typically a season of higher volatility. Expect violent swings in both ways. Buying both calls & puts (or volatility) will be a good play.

    My portfolio has gone up by 11.7% in the last 30 days. Risky assets are back into play.

    Posted in Stock Market | Comments Off