[caysal]

Over the past twelve to 24 months, we here in the Great Smoky Mt. National Park region of east Tennessee (USA) have seen an ever-increasing number of elaborate log home resorts constructed and completed, at what would seem to be great expense, only to remain largely inactive during the height of the previous and most recent summer seasons. The conventional thinking of the locals and others who have observed and questioned this enigma is that they were intentionally built with failure in mind... Suggesting; a tax incentive was the likely reason for the development in the first place. Considering what I believe to be a tenuous U.S. economy with a questionable Federal Reserve policy at best, does this rational make sense? Could it be a protracted effort by the lending institutions to sustain an illusion of prosperity in hopes that something will turn it all around?
"The busy man is never wise, and the wise man is never busy."
Chinese philosopher,
Lin Yutang

[some_guy282]

Interesting. It's possible. Sounds like a good lead for some real reporting. Too bad this country's media isn't worth a damn anymore.

[Dukat_Reloaded]

The asumption among 99% of the population is that if they build a house/property that it will increase in value 20% per year, even if it has no prospects of business or homerentership. It just blind following of the trend which has past it's peak, these people are going to be the worse off, the people who come in too late during the game. It's very typical to see these things at the peak, people are running out of money so they are building more to make more money but they will be in alot of trouble soon.

[aahala]

caysal

Welcome to the boards.

(Post originally about a PM inadvertenty sent)

[FoxV]

also remeber near the end of the Dot com and hi tech bubble, some companies where expanding even though they did not have customers to support the expansion. It was all just a ploy to fool share holders that they were doing something.

One such company expanded to our town, hired 300 people, then all those people sat pretty much idle and finally the plant closed down after 6 months of "operation". Leaving everyone with the question "Why the hell did they even bother"

does this sound familar caysal?

[hull3551]

Well I think there are a few items to address here. The first, as noted, is the woefully underperforming US debt and equity markets. People feel that they want to be on the next big land rush, and consequently are investing in the next hot market.

The Smokies is a great place since it is somewhat close to the new growth of the South (ie, Research Triangle, Atlanta, etc.). Many people are duped by the media and feel they can’t go wrong in undervalued locations, versus the overheated Miami, Las Vegas, San Diego, etc. markets.

I think another big factor is the aging baby boomers that are looking to retire soon and figure it would be wise to invest in a home they will someday retire to. I am a bit disturbed that the US society is the most wasteful on the planet and now we own and upkeep to McMansions versus one, and feel this need to redecorate on an ongoing basis. But that’s a rant for another time. Here in the Sierra I’ve heard these homes call two-two-four homes. One couple (two people) use it for two weeks out of the year, and it encompasses 4,000 square feet. There’s a lot of development that impacts the ecology of the Sierra Foothills by this building that goes on and I don’t think people realize it. But I’m getting way off topic now.

[spudbuddy]

I don't know that 2000 sq ft per person is way off topic at all, hull.
I'd say that's a pretty false economy.
(and brings up the issue of waste)
The whole status thing...if you can afford to do it, then do it and flaunt the thing, just to prove you can.
Once upon a time America was much admired for its thriftiness, ingenuity, common sense (anyone remember?)
Now...I can't imagine how anyone would question the animosity addressed globally toward its wastefulness.
Many countries are in the same boat...just none quite so flamboyantly as America.
I suspect there will be a lot of nervous nellie "Marie Antionettes" out there soon enough.
We've had our dot.com bubble, are now enjoying the impending housing bubble....we're just a regular champagne society!
Our economy (such as it is) is of course, as phony as a three-dollar bill.
(hallucinated wealth?)
Just whistlin' in the dark.

[orwell76]

How long will the party last?

[marko]

$this->bbcode_second_pass_quote('orwell76', 'H')ow long will the party last?

[jaws]

http://www.financialsense.com/fsu/edito ... 0916b.html
$this->bbcode_second_pass_quote('', 'O')ne of the accountants who bought a home recently is a 25-year old woman who works in his office. She makes $50K a year and bought a home for $600K with 100% financing. There is nothing unusual about this because this is not uncommon in the la la land (my son works in the L.A. Area).

Our ac-countess “calculated” the net after-tax cost of the home to be only $1,500 a month. She conveniently ignored the property taxes, $600-700 a month, but her biggest error was in assuming that she will save 40% of the interest payment in taxes, which is only true for those in the highest tax bracket. In her case, the tax rates, after normal deductions, is less than half that the rates she was told by con men and con women in the home selling and mortgage business. All in all, my son (one of the best accountants by all accounts) calculated the cost to be $3,500! Now, our ac-countess has only owned the home for 3 months, but in less than 2 years the reality will seriously catch up. Even if we assume a net after tax cost of $3,000 a month, how is some one making $50K a year (roughly $3,400 after tax monthly income) to foot an after tax housing bill of $3,000, or even $2,500, a month?

Another accountant that my son knows also bought a home very recently. By galley, he also seriously underestimated the after-tax cost of “owning” the new home. One of his errors, totally inexcusable, was that he thought that the mortgage interest payment was a tax credit and not merely a tax deduction, an error by a factor of 4 for his tax bracket.

[orwell76]

How the US federal government sustain a debt of 8 trillion dollars and an annual deficit of 450 billion?

[marko]

$this->bbcode_second_pass_quote('orwell76', 'H')ow the US federal government sustain a debt of 8 trillion dollars and an annual deficit of 450 billion?

[pup55]

$this->bbcode_second_pass_quote('', 'h')ave seen an ever-increasing number of elaborate log home resorts constructed and completed, at what would seem to be great expense, only to remain largely inactive during the height of the previous and most recent summer seasons

[Dukat_Reloaded]

ok the cabin and land is worth $130k so you buy that and hope to sell it for 200k in 2 years. If everything went to plan you would make about $40k only on it after you paid the bank back, taxes and interest rates. But I do see your point, and it could work the same way as with stocks.

[pup55]

d'oh.

True enough, you are right about having to pay back the mortgage. My bad. You pay out $135K and net only $65K, which is still a 300% ROR.

Anyway the point is, this is how these people think.

What they then do is take the $65K, and put another $20K down on three other pieces of land nearby, and build three more $80,000 houses on them, and try to then sell the whole thing for $600K, and net out $135K. All they did was organize the whole thing. The hillbilly did all of the work.

The whole thing works as long as the bank will loan them the money, they can sell the three houses, etc. But you can see that you would pretty quickly end up with a lot of cut down trees and empty houses. This is how suburban sprawl happens, or in this case, opryland sprawl.

[marko]

When the real estate market crashes and everyone goes bankrupt, those houses will be cheap and will serve some folks well as places to bug out.

[hull3551]

$this->bbcode_second_pass_quote('spudbuddy', 'I') don't know that 2000 sq ft per person is way off topic at all, hull....

[pup55]

$this->bbcode_second_pass_quote('', 't')hose houses will be cheap and will serve some folks well as places to bug out.