Housing Policy

Reason.tv: Time To Take Our Medicine, Bring on the Foreclosures Says Jim The Realtor


"When I come into a house with buyers, I start picking it apart," says San Diego's Jim Klinge, known on the internet as 'Jim the Realtor,' a wise-cracking real estate agent who posts his honest, painful, and sometimes hilarious assessment of bank-owned properties on his Youtube channel.

While both the Bush and Obama administration have advocated programs aimed at keeping people in their homes , Klinge argues that this is the exact wrong approach and is only prolonging the agony in the housing market. 

"If they wanted to do what was best for the market, they would just unleash the floodgates and let it rip," says Klinge. "It would cause a frenzy of buying to see all of these bank deals, and people would come running."

Reason.tv met up with Klinge for a walkthrough of a bank-owned property in North San Diego County, where he pointed out some of the issues with the home and talked about the past, present and future of the housing market. When does he think the market will bounce back and bring values back up to peak levels?

"We need to be prepared for it being never," he says. "I hate this whole investment thing. Buy a house because you like it and you want to raise a family. The good news is, I think today's buyer is exactly that."

About 4 minutes.

Interview by Zach Weissmueller. Camera by Paul Detrick. Edited by Weissmueller. 

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  1. Anyone with a teenage boy knows houses don’t appreciate in value unless you are lucky enough to live in a rapidly growing community.

  2. There had to be more to that ventilation system- you don’t just blow unfiltered aroma outside. The heat signature from that setup might be questionable as well.

  3. That dude is exactly right. But the pols will continue to try to blow air back into the bubble and, when it does not work, will blame Wall Street.

  4. “I hate this whole investment thing. Buy a house because you like it and you want to raise a family.”


    The whole “house as an investment” notion got rolling in the 1970s when inflation was greater than the interest rates, so leveraging to buy a house made sense. Since then it has been a bidding war driven mostly by supply restrictions and the mortgage tax break.

  5. Is a home an investment?

    Depends on what you mean by investment.

    Will you not be giving money away to a land lord? yes, but if you owe a lot you will be giving away your money to a bank with interest payments.

    A house can be a way to build equity. Anything beyond that is pure fantasy.

  6. I just did a very simple exercise on home prices

    Take the case shiller composite index data by month (20-city average indexed price changes by month)

    take the base year (I used 2000) and just multiply it by monthly inflation data (i.e. “real value” kept completely neutral)

    basically, this is just saying, “what is $100 from yr X worth today/relative to actual home prices”

    Compare it to the disconnect with actual Case Shiller prices (i.e. measure the % difference between the real value and ‘case shiller’ value over each month – the “spread” between real value and current prices)

    The widest difference was in 2008….*7%*. The average spread was a premium of 2.3%.

    Conclusion = your house is basically “worth” what you pay for it in real dollar terms. It hardly increases in real value at all over 10-15yrs, unless there’s a bubble. Even then… on a consolidated basis, its a wash.

    1. Even then… on a consolidated basis, its a wash.

      Vs paying rent, which is just money gone, keeping $1500 a month is not all that bad.

      One should note there are other ways not to pay rent. Live in your car or move in with your parents.

      1. Vs paying rent…

        Different question.

        The point is = “buying a house” does not result in any real capital gain = you transfer your money into a physical asset which basically tracks inflation. You are no “wealthier” than when you started (well, you ‘own’ more, but it is simply equivilent to the total $ outlay spent adjusted for inflation)

        1. You have to live somewhere.

          If you are able to eliminate a cost then you are spending less.

          Most businesses (read all) consider cost savings a return.

          Note: not every home at every price with every home loan will save you more then paying rent….the point being if you don’t get a huge loan on a huge house you can’t afford buying is better then renting.

      2. What about the interest you would be earning on your 20% down that you instead sunk into your house? Isn’t that just “money gone?” Or what about property taxes that renters don’t pay? Or maintenance?

        This notion that rent is “money gone” is really simplistic.

        1. Renters are paying property taxes. If the taxes did not exist the rents would very likely be lower.

          1. True, but when you are doing the calculation, the property tax is not in addition to the posted rental payment, while it is an addition to the posted mortgage payment.

            The same can be said for long term maintenance costs (replacing the roof or the water heater, repainting, etc.)

            1. The same can be said for long term maintenance costs (replacing the roof or the water heater, repainting, etc.)

              As a renter you pay for that as well. The question is can you do those things at the same or less cost then a land lord could. If not then you should consider renting rather then owning.

        2. Oh by the way, what interest? Yields are in the crapper and per the Fed are going to stay that way for a long time. I realize this has not always been the case, but right now, the opportunity cost of plunking down that 20% is nil, unless you are planning to take on the risks of investing in equities.

          1. But your “equity” in your house is not exactly going up at this time either, correct? There’s a pretty straight correlation between returns on savings and real property value appreciation.

            1. it is not a question of owning vs investing.

              It is a question of renting vs owning.

              You do not ask “i could get a better return if invested my money rather then use it to buy food”.

              You don’t ask that cuz you have to eat.

              Just like you have to eat, you have to live somewhere.

              When we are brains in jars floating in cyberspace then your argument would make sense.

              1. It IS a question of owning versus investing, if you have to put money down on a purchase (and I don’t see too many 100% financing loans anymore) then that’s an opportunity cost. That down payment is not earning interest.

                You can’t compare a $1500 rent to a $1500 mortgage payment if you’re not going to consider the lost interest on the down payment.

        3. What about the interest you would be earning on your 20% down that you instead sunk into your house?

          It is the same interest you would not get back if you spent it on rent.

        4. What about the interest you would be earning on your 20% down that you instead sunk into your house?

          Also land lords generally expect a return after costs at a rate above any interest you would get from putting that money in a bank….and you are paying that with your rent check. So no it is not money gone.

          1. And banks expect a return after costs on the money they lend you when you borrow for a mortgage. Why do you ignore that? A $1500 mortgage payment is NOT the same thing as a $1500 rental payment. In most cases, your mortgage will “cost” more, when you add in the additional costs of homeowners insurance, property taxes, maintenance and lost interest from the down payment, while subtracting the tax benefit from the deductible interest.

    2. Houses are basically expensive cars, they decrease in value unless you pump money into them (the decrease is slower than for cars).

      Land, on the other hand, can be an investment.

      1. Houses are basically expensive cars, they decrease in value unless you pump money into them (the decrease is slower than for cars).

        One months rent is gone in one month…one would think slowing the rate of that money loss is a good thing.

        Also as I said before above you are paying that same “pump of money” when you rent.

  7. The longer the “owners” stay in a defaulted/foreclosed property, the more they beat the living fuck out of it.

    So, prolonging this process just facilitates the literal destruction of housing values, even below the loss of value in a market(ish) correction.

    Somebody needs to explain to the Big Brains in DC that “broken windows” is a fallacy, not a panacea.

    1. ^^^THIS^^^^

      Once people know they are going to lose the property (or any asset) to a lender, they have ZERO incentive to maintain it. Even if they don’t deliberately cause damage to “get even” with the ‘evil banker’.

      Hence the old lender proverb: “Your first loss is your best loss.”

      OTOH: The sloppy documentation that lenders did during the bubble and the even sloppier way they took on the foreclosures (e.g. robosigning) means I have little sympathy for them, either.

      The people who are being screwed are the taxpayers who are being asked to throw money into schemes to prevent the inevitable adjustment and the people who would be able to get into houses if the government would just let the adjustment happen.

      1. Not to also mention anyone who saves $$$ and is being pummeled by the zero interest rate policy, specifically designed to help housing and to finance the government spending blowout.

        Speculate on houses and lose? The government is here to help. Save your money? Fuck you. About sums up our current policy.

        1. And those of us who could buy a house right now but don’t want to take a bath when prices adjust. I’m betting I’ll lose less money renting for another couple of years than I would buying a house today.

          1. Depends where you live, and depends on the deal you make when you buy your house.

            Not everywhere had the housing bubble like say California did.

          2. For the last two I have been renting at $2500/month ($30,000/year). Meanwhile the local housing market has been going down about 5%/year. The targeted houses for me cost around $600,000-$700,000. The conclusion: For the last two years I have been virtually living rent free compared to if I had bought a house two years ago.

  8. All the bullshit in the market has also completely distorted the average citizen’s view of what their home are currently “worth”.

    My mom is a great example. She owns free and clear a house that was originally worth about 30 grand when she got it via mortgage back in 1986. In 2006, a neighbor’s similar (but nowhere near as nice) house sold for about 150 gs with hers being worth around 180 at the time!

    Now, while I did suggest to her at the time that she should sell and then buy a new place in a few years when the market implodes, she’s FURIOUS that her house is now appraising at around 55 grand! I’ve tried to explain that her house was NEVER worth 180 gs and that adjusted for inflation her home is actually worth about the same as what it originally was valued for!

    She’s absolutely convinced that the realtors and bankers are out to get her!

    1. She’s absolutely convinced that the realtors and bankers are out to get her!

      She is right, they are. Still does not change the fact that no one is going to pay 180k for her 55k house.

    2. “How was the casino – did you win?”

      “Naw, I lost three million bucks.”

      “What? I never knew you had that kind of money.”

      “Well, I didn’t. Then I did. Then I didn’t again.”

  9. Abolish the wages system

  10. “buy a house because you want to live in it…..” umm, ok. “this shower is so 199x”……I dont need a fancy up to date shower stall to give me a euphoric experience……
    just give me a cinder block wall and solid floor, good water pressure, and enough hot water to scrub my ass and maybe even finish rubbing one out….thats euphoria!!!

  11. My house is paid off, and worth 4 times what I paid for it.


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