The fall of IndyMac
July 14th, 2008
One of the many reasons that we pulled the plug on our situation in Santa Cruz
(circa 2004) was a huge mortgage that no longer felt sustainable. Or at least we
didn't want to continue to pay over 4k per month for another 27 years so that we
wouldn't lose our investment (that includes about $600 USD a month in property taxes).
We had bought the place because we loved Santa Cruz and saw an opportunity to get in
before the market left us behind. With both of us earning I also wanted to take
advantage of the generous tax breaks that the US government gives home owners on the
interest paid on a mortgage for their primary residence.
So we bought in. We loved the house and continued to love Santa Cruz. But a few
things happened along the way. My mom got sick and it felt awful to be there and not
nearer to my folks as they were going through all of that. We also kept hearing about
the falling price of programmers and other IT workers in places like India - I had to
program about as well as 10 east indian programmers to be able to offer the same bang
for the buck (ignoring the slight logistical advantage of me being in Silicon Valley)
and that really had me spooked. I also found that the pace of Silicon Valley was
starting to take a real physical toll - when I got sick I would often be down for 5
days and returning from Cryptic Studios every Monday night (I was commuting into the
office about once a week) was invariably combined with a splitting headache. Those
things, and the growing realization of how constrained my career choices would be
over the next 30 years - essentially my retirement age - had Jennifer and I doing a
lot of talking. If you follow this blog you know that we eventually pulled the plug
and went back to my hometown of Terrace BC, up in Canada.
So, that's the long winded reason why we are particularly interested in the US housing market. As usual, here at the lake for the summer, the NY Times is showing up daily along with various business periodicals like Business Week. It's been interesting to go from a fairly hot local housing market up in Terrace - where we read about the US market but it's abstract - to being here and reading the blow-by-blows daily. On Friday we started to read about the IndyMac bailout which is also covered online today at
CNN says that your money is generally safe. They don't mention the 10,000
folks that the NY Times did over the weekend. Those people are sharing in a 500
million dollar loss - I'm assuming because they each had more than the FDIC insured
100K in that bank. A very expensive lesson to distribute your money, if you have
more than 100k in the bank, into more than one bank so that each account gets the FDIC
coverage. Seems too much to hope for that none of those people are retirees.
My take on all of this is that the very high housing prices in both the US and Canada
are going to hurt our long term competitiveness as too many folks aren't going to
ever be able to afford to buy and properly maintain a home. If we have to compete
in a global economy - and even with peak oil and global warming I think we are going
to continue to buy and sell over borders - then our workers need to be on a somewhat
level footing with regards to cost of living. The jobs that leave matter but I think
the bigger loss is in the expertise of being able to create the products that end up
being imported.
I hope today doesn't find you too stressed about your own housing situation.
Peace,
L
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