Everybody Loves Your Money

I’m sure this won’t be the last article like this. People are selling all kinds of things to cover their monthly bills. From Jewelry to Harleys it’s all got to go. No one is exempt from this as even people who thought of themselves as “wealthy” now find themselves selling their high ticket items to keep their homes or pay for basic necessities. I guess maybe they better redefine the term “wealthy” for these folks.

http://www.komonews.com/news/19269219.html

Pretty much everyone I’ve talked to lately has a story about someone they know who is flailing their arms trying to keep their head above water. Nowhere is it easier to see than in the real estate market in your area. I’ve been watching real estate pretty closely around our area because I find it very interesting.

About 2 years ago they built an upscale neighborhood of about 25 houses a couple blocks away from my neighborhood. This neighborhood was different than ours in a number of ways. The builder subdivided the lots in to the smallest possible size. This means that the house has about 6 feet from the backdoor to the back of their yard and the front yard is just big enough to hold two average size cars in the driveway without them sticking out in the road. The houses range from about 2900-3500 feet in size and have many upgraded features in the interior. Granite counters are standard as well as hardwood floors and lots of millwork. You get the idea. They aren’t entry level homes.

It has been a very interesting experience to watch people come and go from that neighborhood. They all drive high end cars and at first glance, you’d guess they are all high level executives. (But I’ve read “The Millionaire Next Door so I’m not fooled) It turns out that many of the people aren’t highly paid executives but rather people who fell in love with a house that they couldn’t afford. Over the last year roughly 8 of the homes have changed hands. For a small neighborhood that is only two years old, it’s really kind of surprising to see so many houses with second owners and at least two of those for sale now which will lead to a third owner in the span of a little over two years. Imagine the equity losses people have experienced. What makes it even more interesting is that these houses were sold at higher prices than the general neighborhood had ever seen. The higher grade materials inside certainly played a role in that, but the tiny lots should have also been a reason to hold the prices down.

Today, when you look on Zillow, you see the valuations on those houses at $100K less than they were sold for two years ago. Even if Zillow is half wrong, it’s still a sign that the builder made out quite well, while the homeowners paid too much. The two houses that are up for sale started their asking prices at about $600k. Both of them have lowered their prices this week by almost $50K. One of them paid $614K last November so between the loss in value plus commissions and taxes, they are going to lose upwards of $100K if and when the house sells.

Have you heard of any interesting real estate stories in your area, or have you experienced something like this yourself? Leave a comment. Depending on turnout, I’ll highlight it in a subsequent post.

Here’s a shot of one of the houses:

I stumbled on to this article about Greg Lasrado. He started an internet porn business when he was young and in college. At one point he had 100,000 people worldwide paying a monthly fee to access the porn sites he ran. He bought houses, many nice cars, traveled all over the world and even held $100,000 parties in Las Vegas. He was on top of the world.

He now lives in his parent’s house and has absolutely nothing. Somehow he managed to burn through over $60 million. As I read through the article, it became pretty darned obvious how someone can burn through that much money.

Anyway, it’s well worth reading:
http://www.aol.com.au/lifestyle/story/the-rise-and-fall-of-a-porn-king/459771/index.html

So gas is getting rather expensive. I just paid $3.70 per gallon. Yeah, I know, it could be worse. People in other parts of the world are probably laughing their asses off at us Americans complaining about gas prices. That doesn’t change the fact that we’ve built our economy and way of life on the assumption that gas prices would be low indefinitely. Well, apparently indefinitely means 2008.

We’ve definitely been altering our activities to cut down on gas consumption. I wouldn’t say we’ve made any drastic changes but we also don’t drive the really large SUV’s so getting 24 mpg keeps us from feeling too much impact. The fact that I work out of the house most days has also really kept us shielded from the impact. The one place that I definitely notice the price of gas is when we drive out to the lake house. It’s costing us about $30 to get there and back. (Begin playing your imaginary violin for us now). Overall, the price of gas hasn’t really been too tough for us for a few reasons, some of which I mentioned above. Here are the things we are doing that have kept us somewhat shielded from the impact:

We do have an 850 mile trip coming up in July. In order to minimize fuel consumption we’ve decided to carpool with my mother and aunt. None of us have a car that we’d really like to drive that far so we’ve decided to share the rental cost of a minivan for the trip. I did some shopping around and was able to rent a new Dodge Caravan for $295 total. That gives us unlimited mileage and a 6 day rental. I found that Enterprise rental had the cheapest rates BY FAR. I checked a couple other companies and they wanted over $650 for a similiar rental. Anyway, by all of us sharing in the cost of the rental and gas, we’ll each save quite a bit of money as compared to driving separately. Another bonus is that we can share in the driving which should make the trip even more pleasant.

Are you feeling the impact of higher gas prices? What changes have you made?

I found this article on Slate pretty interesting. It reviews all of the Obama finances and shows that they are doing pretty well by yours or my standards but are much more humble than the other two presidential candidates.

Their holdings are pretty conservative but if I had that level of income, I think I’d probably play it pretty safe too.

Anyway, it’s pretty interesting reading:

http://www.slate.com/id/2190879/