AskDong

I’m writing this from my new g3 iPhone. I was one of the fools to wait in line. Not at 8 am but later in the day when the wait at the Apple Store in Boston was down to a mere hour and half. It was money and time (I waited with a few buddies of mine) well spent. I’ve been thinking about this purchase for a long time and now having finally gotten this phone in my pocket, it’s lived up to the hype.

Now, I return my regularly scheduled writing implement (a computer). This is my first smartphone and am trying to figure out all the uses. Web browsing, email, games; those are the obvious ones. The question is what are the less obvious ones? Budgeting? Is the convenience and added functionality worth the extra cost? One functionality, I think I can strike is it’s use as blogging platform. It’s great platform to read blogs, but not so much to write them. I don’t think any hand held device is.

Cost Breakdown:
This is a personal finance blog. My transition to the iPhone 3G is a costly one. I was on a basic family plan that cost a little over $80 for three phones. I’m transitioning to a plan that will cost over $130 a month for two iPhones, and a yet undetermined amount for a 3rd regular phone. Yikes! Ironically the $299 price tag on the phone itself is the least of my worries. Buying the iPhone is not frugal decision.

Stay tuned for a full review later in the week, once I actually put some time into using the phone.

I hope everyone had a great 4th of July weekend. I personally spent some time at “the Beach”, though not actually at the beach. The weather was not cooperative, and to be quite truthful I’m not much of a beach person. I like going to beaches in far away and “exotic” locales, but don’t like going to the beach just to go to the beach.

Everytime, I go away for the weekend within driving distance, I wonder if having a summer or winter home makes sense. Would I use it? Would it be a good investment? I have only mulled the question without really coming up with an answer.

Would I use it?
This is the most important question. While making a great investment is all good and dandy, the real reason to own a place is to enjoy it’s use. Living in boston I’m within two hours of both the mountains and the beach. I firmly believe that if it takes more than 4 hours to get “there,” it’s not worth it. Both summer beach homes and winter ski lodges are really only useful 3 to 4 months of the year. The question is, would I use it enough to make it worthwhile? Given my current habits, I know I wouldn’t. However, I can envision changing my habits. I would have to go on fewer long vacations and replace them with shorter trips to the vacation home.

Is it a worthwhile Investment?
The question of evaluating a property as investment is much more straightforward, or at least on the surface. But really the question can’t be fully answered without also taking into account the personal benefits. Vacation homes are rarely good investments in themselves, but can be a fantastic investment when they also provide weekends spent with family and friends. With the housing market in turmoil, this might be a great time to get a great deal on a place, or not.

The one area that Vacation homes can provide unique benefits is in the area of taxation. The IRS provides a great deal of flexibility on how a vacation home is treated depending on how much it gets used as personal property or as rental property. While I have my own personal reservations on why the Government should be giving tax breaks on mortgage interest, let alone second home mortgage interest, I can hardly argue against anyone for taking advantage of the rules as they are.

A Home on the Cape:
For example a 2 bedroom home on the Cape near the beach would cost me about 300-380kk. If I were able to put down the full 20% down of a 320k home that would leave me with a mortgage of about 256k and monthly payments of $1620 a month (assuming a 30 year term and 6.5% rate) or about a little over 19,000 a year, and more like $21,000 after considering property taxes. A realistic scenario would allow me to rent out the unit for 8 weeks of the year for $1000 a week. Renting it out for about 8 weeks would then leave me with 2 “prime” summer weeks, and another 4 weeks slightly out of season. Without considering the tax consequences or other complexities; the question is $13,000 worth 6 weeks of a vacation home? I could spend $13,000 and have a fantastic 4 week exotic vacation for my girlfriend and I.

The last part is the rub really. A vacation home is much more worthwhile when you have a family to share it with. Being unmarried and without children that benefit is greatly diminished. Without expectations of inflated real estate returns, the economics do not make sense. A vacation home is best used when more people are able to take advantage of it. That’s why, I’ve actually never seriously considered purchasing a vacation home on my own. I would much rather go into such an endeavor with either family or friends at this stage in my life.

There’s just one word way to describe the Markets in June . It sucked. All the major indexes were down well over 5 percent. My own portfolio fared little better. I keep telling myself that I’m in it for the long haul. Eventually, I’ll have myself convinced.

Below is my historical performance for the last 6 months.

Brokerage Accounts: Accounts in which I pick individual stocks and some mutual funds. My IRA account(s) are amongst these accounts.
Asset Account: Accounts in which I managed on basic asset allocation principles. These accounts accounts consist of my 401k and Vanguard accounts.
All Classes: Total from all accounts

Is there any disadvantage selling your home in a buyer’s market if you are going to buy in the same market? In reality, isn’t a wash if you sell and buy in a slow market?

How would you go about finding comps for a condo? Does it cost to ask a realtor to do a price analysis and are you bound to use them when you sell your place?
-stevie

I’ll answer the 2nd question first. Unless you sign a contract you’r not bound to do anything. When a realtor does a price anaylsyis, he or she’s really making a sales pitch. Getting a price analysis is not a obligation to work with that broker. That said, you should be clear on your position. Always deal in good conscience. Don’t tell a broker that you’re definitely going to work with him or her if know you won’t. As for finding comps, the Internet really has really made things much easier. Websites such as Zillow not only give it’s estimate on prices, but will also report the last sale. I find the best way to get a sense of comps is to start monitoring listing in the area you’re interested in. That way you have all the info from the listing, and then it’s easy enough to determine what those properties eventually sell for.

As for selling your home in a buyer’s market is trickier question. In buyer’s market, buyers have more leverage and that makes selling harder. In a perfect world buyers would only buy in buyer’s markets, and sellers would only sell in a seller’s market. In this non-perfect world of ours, we usually buy and sell homes not because of the market but because of life. The best you can do is try to manage the process smoothly.

You do bring up a good point about selling and buying once you already own a place. Given that you’re selling and buying into the same market, the changes in price is less relevant. If anything if you’re looking at upgrading, it’s most likely that you’re better off, all else the same. Let’s say your home is worth 200k, and you want to buy a place that’s worth 400k, and the market comes down 10%. In absolute terms your house is worth 20k less but the house that you’re buying is 40k less.

The far bigger difference that people often lose sight of is that the housing market is incredibly inefficient, and non-objective. Outside of the cookie cutter developments, homes are unique. One person may pay 300k for a house that I wouldn’t think of paying more 250k for. So if you’re looking to make a change, I would spend time on thinking about how you want to sell your home, and carefully assessing the market rather than worrying about timing.

Do you know that it’s illegal to trade Onion futures? I certainly didn’t, and they do make a fascinating study on the how futures trading might or might not affect commodity prices.

Onion prices have been fluctuating more wildly than even other food commodities. Many think this is because of the ban on the trading of Onion futures. The conventional wisdom today is that speculators in the future markets drive price volatility. A great deal of blame has been laid at the feet of oil speculators. However, a properly functioning futures market should do exactly the opposite. When properly used futures create price certainty that helps smooth volatility.

For example without oil futures, oil production companies are less likely to make infrastructure investments for future supply as they cannot guarantee the price at which they can sell the oil at a later date. By trading futures, an oil company can lock profits that can be put towards infrastructure. If oil prices end up moving lower, the oil company is in no worse financial shape. Without futures, the oil company might drilling oil that uneconomic to recover. If oil companies must bear all that risk then are likely to be more conservative in it’s infrastructure investments.

Of course many the proponent of additional regulation in futures market want only to restrict speculators who have no natural position in the commodity. An oil producer, and airlines have natural positions in the oil market. The oil company needs to sell future production while airlines need to purchase jet fuel for flights in the future. A financial participant has no such interest, but this is not to say they do not have a proper role in the market. Speculators should on the most part drive volatility down. Without speculators, the liquidity in the market would be less and lead to wider price variations.