Tuesday, May 30, 2006

So, what caused the Boom?

...was what an old friend of mine asked when I was telling him about the current state of housing and how speculation has driven prices far above what home values really are. But to discover the seed (or fertixlizer) from which speculation blooms is not easy to impart. He was an engineer and me ... a bus. ad major back in the day at Marquette U. I take a lot of economic theory for granted, or rather, I assume that others know it as well.

This morning I found a great article on the very subject titled "How to buy a $450K home for only $750K".

Thursday, May 18, 2006

Off topic - Used cars

I'm 37 years old. When I was growing up in the midwest a car would typically be rusted after 5 years and rarely make it to 100,000 miles. My dad always believed it was best to buy a new car so that you wouldn't have to worry about reliability. It was a valid philosohy. We've come a long way. Yes, a car may cost more in inflation adjusted dollars, but think of how are expectations have increased and how much better cars are today.

I bought a 5 year old BMW 328i 5 years ago. It's now 10 years old and has over 130,000 miles. It's still a solid vehicle with a strong engine. No rattles, no rust. Even oil has gotten better. You'll never appreciate just how slippery synthetic oil is until you run over a bottle in you driveway. It's like an asphalt ice rink in the summer.

So I just bought another used car. The amount of quality used vehicles seems to be quite high. In fact, you might argue that the market is flooded with them. I bought a 2002 BMW X5 3.0 loaded with 34K miles. 8K mi/yr. ... that's nothing! It was $50-55k new and the equivalent today is $60k. I paid $25.5k so do the math. A 4 yr old vehicle (w/ less than 3 yrs worth of miles) for less than 50% of the original cost. What a great way to save $35K and get a very desirable ride!

It really seems that your used car dollars are going a lot farther than they used to 10 and even 5 years ago. Yeah, I'm a value shopper (hey, I'm saving for the house fund!) but I won't sacrifice quality.

--- added 5/22
There have always been a lot of nice cars here in CA. But the last year or two in particular it seems that there are soooo many expensive new cars. Do you think it has anything to do with "paper gains" and HELOC's? The owner of Bimmer Clinic told me the used market was flooded right now. I guess that makes sense. People trading in their x-pensive lease cars for the new hotness would create a large pool of very nice low mileage vehicles. God Bless them.

A picture is worth a thousand words

Just in case you didn't realize how big this housing boom was. A lot of people made a lot of money. 2005 buyers are in a dangerous position.