A news.com.au article is for once apparently not pushing the myth that “housing prices always go up” (well, kinda):

A QUARTER of Sydney homeowners who bought and sold their properties during the past five years lost money.

Despite a broadly rising market, property analyst Residex has revealed 24 per cent of properties bought and sold between January 2005 and January 2010 fetched less than the vendors had paid.

The average shortfall was more than $54,000 but varied between suburbs.

Ok, so that’s about the first time I’ve read a newspaper report that has pointed out that “house prices always go up, except when they don’t”. Must be time for one of those Hitler parodies that humourless political killjoys get so upset about:

The trouble with real estate is that it’s very much like a religion at times: everyone wants to believe a bunch of myths and bullshit stories passed on down through the age. Just like the religious: they don’t like having the harsh reality pointed out to them lest it offend the carefully arranged justifications and half truths that belief is based on. Every single bubble then crash seems to have the same core of delusion oblivious to the lessons elsewhere in the world.

We’re told that the average shortfall was more than a year’s average wages, so that much we know went straight to the bank. An extraordinary amount of money to just blow away in the breeze. In other words: people bought a house and ended up paying on average “more than $54,000″ bank fee essentially (that’s on top of whatever else they paid them.. see below). I bitch and moan about copping a late fee on a credit card, let alone having to work for some number of months just to make up the difference that flows straight to bank CEO bonuses.

So I’d go further if I was in charge of doing the actual journalism for this story because even this apparently negative story is hiding some pretty big problems with their analysis of who lost money. We can most certainly NOT assume that the 3/4 made any money with the metric chosen.

No bullshit sugar coating please.

Let’s look at why the first paragraph isn’t at all accurate and hides the true number of people that lose in the property game.

Inflation

Firstly there’s inflation, if you sell a house for exactly what you paid for it a year or two later then you’ve lost money because your dollar amount doesn’t purchase as much as it used to. So for each year you keep the house you have to make (currently) around 2 and 3 percent in order to not lose money. If you don’t, you lose money. So at very least the calculations should have been based around beating inflation which would have increased that quarter by a little bit. Not huge amounts, but still.

Loan expenses/Interest

Now I don’t have a mortgage, but I’ve heard what’s involved with getting one (and understand the basic concept). There’s loan application fees, insurance (if you don’t have enough of a deposit), interest charges on a rather massive amount of money.. So unless you pay for the house with a suitcase of cash: you have to have the house price go up by whatever amount that all is. Then you most likely will have early exit fees if you sell the house before paying the loan off. So assuming even the nice low rates we have currently house price needs to rise by at least that plus a the other loan entry/exit fees.

I think it is a fairly safe bet that as we now owe our GDP (thanks largely to mortgages) for the first time ever: people are using loans to get into the real estate concept. The trouble that follows is that people become mortgage rate obsessed and vote against anyone who appears to threaten their fragile maxed out finances.

Taxes/stamp duty etc

Unlike the “house prices always go up” myth, there is certainty in two things in life: death and taxes. Assuming you don’t die first government will either take a chunk at the start, during, at the end or at all times.

Kittens.. A more enjoyable alternative to tax.

Sure the govt has been waiving/reducing some of their fees, but somewhere in there there’s some tax being collected. If it isn’t from the housing industry then the rest of us are copping it elsewhere. Again, this wouldn’t be too much of a stretch to factor in a rough amount to work out whether certain house sales were profitable or not.

Real estate fees

Marcus Brigstocke once said “Have you ever noticed that you never see an old real estate agent? Surely proof that you CAN die from shame!”.

Going off my experiences with real estate agents: I know those smarmy bastards aren’t in it for the love.. One day I’ll come across one that’s even remotely professional, but til then I’ll keep the insults flowing. They’re lurking around like a bad smell when you buy and pop up again when you want to sell. There’s really no way to avoid them digging out a kidney’s worth of cash, taking it off to their little real estate lairs and doing whatever they do with their money when they aren’t biting the heads off puppies and kittens for kicks.

Feeding time for your contract waving estate agent.

So whatever the privilege of the company of real estate agents costs you: the house has to rise at least that amount times two. More if you attach a cost to putting up with the crap.

Strata fees, council rates, repairs, etc etc

Unlike moving into a dodgy rental property that has rising damp or light fittings falling from the ceiling (I lived in one of those back in uni): you can’t just decide to escape the dive and leave it to the cockroaches.

Nope, you bought the thing. That means instead of calling up a landlord and sticking them with the thousand buck repair bill unexpectedly: you have to pay it. If you have tenants: they can do it to you at any time.

Then there’s strata fees: perhaps the most inefficient, pointless waste of space organisational structures on the planet. Their sole purpose seems to be to funnel massive amounts of money out of owners and throw it into an incredibly deep dark pit with vampire like lawyers/accountants feasting off a large percentage of the money as it falls past them down into the darkness. When enough money collects at the bottom of the pit a big money intensive scoop in the form of “essential building maintenance” or the generic “improvements” will ensure the money pit remains a money pit.

Opportunity costs/passing up earning interest to pay interest

I currently earn on my “easy to get to” money just below 6 percent mark. If I had a loan I would be paying interest rather than earning interest. I would also not have money to spend on various things, experiences, nice food/booze etc. While I’m opposed to rampant consumerism as a measure of society: the way things are structured now is that consumption equals jobs equals economy continues to go around. If people are spending all of their available income on mortgage payments (e.g. bank profits.. which do generate some small number of jobs and pay a small number of people large salaries) then surely they’ll have to spend less on other things. Restaurants will be shunned in favour of eating at home. Clothes won’t be bought. Night outs will be replaced with tv nights. Weekends away will be weekends at home.

Granted, this might be a good thing for the environment cos we sure as all hell don’t need half the stuff we buy in developed nations: but hasn’t anyone in the government thought beyond the “everyone should own a house” idea and to what that means?
US president Eisenhower made a speech about the importance of the USA not falling into dependence on the Military Industrial Complex for some very good reasons.

Think we need something similar about the dangers of the Housing Speculation Dependence. Rent money is no more dead money than buying food or paying for the bus is dead money. It’s acquisition of an essential thing in life (shelter, food, water etc). Interest money is just as dead as rent money (except you pay a lot more of it and end up with a less nice/convenient place to live for far more money).
Currently we’re treating housing as some sort of vehicle to immense wealth when it should be treated as shelter, nothing more. It certainly shouldn’t be a government sanctioned tax evasion technique (investment properties allow people to claim interest payments as tax deductions for some insane reason.. which means taxes have to be higher than they should be to make up this loss.. in addition to the other subsidies).
That or maybe it just sucks to not be able to buy a beer without considering the mortgage dragging behind you.

So just how many people did lose money in real estate?

Hard to tell really as the people coming up with the “a quarter” didn’t even attempt to work it out. All I know it’s more than the quarter stated though unless there are a lot of people buying things without the need for loans/paying taxes/making repairs or who are opposed to earning interest on their money had they put it in investments. It could be as high as a half? Or maybe it wouldn’t make much difference.. But picking purchase and sale price, although easy, is a stupid measure: especially without even taking inflation and taxes into account.

So perhaps though we’ll start to see a bit of critical reporting as the moronic “appears to be the start of a bubble” realises that the bubble’s been going for ages and a pop is on the near horizon. I notice quite a lot how selective wording is used to gloss over or paint a pro-buyer picture whenever at all possible. The trouble is (and we’ve seen this) that people are rather stupid when it comes to economics, interpretation of statistics/numerical information. The baby bonus and first homeowner’s grant is proof enough of that; “bogan economics” is rather short sighted. This guy has a good idea on how mathematics has to change to give people more of a hope of understanding such concepts:

Conclusion
I wouldn’t be jumping in to buy real estate just yet until this silliness of “I’m banking on building equity” or “housing always makes money”. The UK has had a big crash with prices falling to half, the USA was even worse (still is). Absolutely nothing in the lead up to this indicates Australia is immune (and foreclosure rates would be an interesting one to watch with the rising interest rates): it’s obsessed with owning property (life worth defined by house ownership?). The papers, politicians and lots and lots of people are all drunk on selling each other the tales of an easy, risk free path to overnight wealth. No critical debate/argument appears in the papers.

Common sense says that you can’t infinitely raise the prices of houses because demand will dry up. Housing can’t get too much more unaffordable now and it’s only the greed of the banks that is allowing so many people into the market who would normally have to save for a number of years. Those people can’t really afford big loans, it’s an enormous risk when interest rates rise.

I’d urge anyone considering buying to carefully read the language and terms used and compare it to the metric/statistics in the article. For example the focus was on profitability so when sale prices were rising they used averages, then they swapped to median (a type of average.. but seems a bit pick and choose). Recently I saw an article talking about “activity” (but conspicuously avoiding mentioning whether prices at those sales were high). By that measure a firesale crash situation can be spun “housing activity rises 20%.. flurry of activity in the market.. strong auction figures” etc while completely skewing reality. Only if people take the effort to understand what the real data is will they avoid joining their voices to the unthinking frenzy of property speculation.

Or maybe I just want to make myself feel better about my financial choices or my choice to rent and live in a much nicer place/area than I could afford to buy in? Time will tell: but I think once we get some critical reporting on the situation start to appear: people will perhaps not be so keen to get into debt. I haven’t made many public predictions, but this one I’ll take the risk. After all, it’s not my house on the line, but I might pick up a bargain in the future when the insanity is over.

It’s somewhere between annoying and insulting to hear people start on the age old “oh, be careful they’re dangerous” followed by some enlightened piece of incredibly obvious advice relating to an accident they heard talk of. I’ve actively sought out many bike crash videos over the years with the intent of learning from other people’s mistakes. Just like sports coaches watch other teams play: there’s value to be gained from watching others.

This article (with video) shows the sort of deadly behaviour on a motorbike that result in such a high accident rate amongst motorcyclists.

The video
Here’s the video, it shows the speeding and crash (note: it’s not particularly gory, but you know from the article the outcome):

Sure most people might zip around a little bit, open up the throttle on the freeway a bit, but are by and large, sensible enough to listen to the training they received. This video I think really gives you a bit of an idea of what motorcyclists have to look out for on their own:

On some rides I’ve come across pretty much all of the hazards in that video. The hugely variable part is what other drivers and riders might do. That’s why I watch videos of other motorcyclists getting into trouble to add their situation to my road knowledge. Just to be clear: I’m much happier when I see the rider get up and walk around at the end though, even the twits doing wheelies in singlets and no helmets: because maybe, just maybe they’ve learnt a lesson.

Anyhow: on to this video..

Analysis of this crash – causes

CAMERA or “THE YOUTUBE EFFECT”: I think the camera on was probably one of the first mistakes made in this unfortunate ride.

First time I stuck a camera to the side of my bike in the French alps I began to ride, well, like a moronic show-off. Not pulling wheelies and knee down on corners type moron, but riding faster than I had been minutes earlier and somewhat distracted. As it turned out the included batteries last all of 2 minutes in the cold (why even bother including them??!!) so all my fantastic cornering and exciting riding had been missed, instead showing the rather more tame view up the road while I put my gloves, earplugs and helmet on and cutting out just as I got through the second corner. Served me right. I did get some decent touring footage in the end, but without the urgency and stupidity on the road.

Don’t believe this is a cause: Youtube is littered with video of people showing off for the camera. That’s the prime reason I don’t have any desire to pull wheelies on my bike because the majority of wheelie videos seem to be about crashes.

SPEED: The speeds involved are somewhere beyond ridiculous.

It later emerged Bowden was clocked at a top speed of 156mph, but his speedometer had reached speeds of 170mph, Truro Crown Court heard

That’s around 260 km/hour for the civilised metric world.
In more interesting forms:

• about the landing speed of a 747 jumbo jet
• double any speed limit on a freeway in Europe (Autobahns excepted of course). To look at it in relative terms: were you travelling on the freeway at the speed limit and this guy ran up the back of you: he’d hit with the same impact as if you just veered off the freeway into a brick wall.
• 71 metres per second or 233 feet per second
• A football or soccer field every one and a bit seconds
• fast enough to cross the Sydney harbour bridge in 16 seconds, the Golden Gate bridge in 38 seconds or Tower Bridge in a smidge over 3 seconds (those are including approaches)

In short: a ridiculous speed by any measure. Motorcycles do speed well, but don’t stop or steer so well (we can’t really brake hard and turn at the same time like a car with ABS and four fat tyres can).

LACK OF BUFFER ZONE: People don’t watch out for motorcycles. They can be on their phone, drunk, stupid or just bad drivers. That’s why you need a buffer zone to give you room to make up for their lack of awareness of where you are on the road.

The UK has a long running series of ads about “think bike” while I was there, here’s one that shows why you need a buffer zone:

Hasn’t changed too much really:

Australia does it a different way (we reserve our nasty ads for smoking and HIV/AIDS ads):

PEER PRESSURE: The guy in front probably didn’t want to be the slow guy, the one that crashed overtook and had to continue upping the speed. Thing is that perhaps neither of them wanted to be speeding that day but they might have thought they had to to not be slowing the other one down.

• Front guy: “man this is a bit fast, but he’s still on my tail, better give it a bit more throttle”
• Back guy: “jesus he’s off quick.. Don’t want to lose him, better give it a bit more throttle”
• Front guy: “he’s still there, better go faster..!”

You can see how that just keeps spiralling up until someone comes unstuck.

HIGH TO LOW SPEED PERCEPTION LAG: Best term I can come up with to describe it. So when you go from high to low speeds your brain stays in high speed mode for a while.

The rider that crashed did a bit of a hasty zip around his friend (who had been leading). Maybe he was still in “high speed mode” and misjudged the braking of his friend a bit. I had that happen after a long freeway blast in Europe, took the exit and thought I’d slowed down enough. Got up to the sharp exit corner and a glance at the speedo/gear indicator showed I was still going too fast and in 3rd gear, even though it felt like I had (the human brain is amazingly good at adjusting). Luckily I had a good line, cornering braking/downshifting habits and time to contemplate a safe run off area, but it was a good lesson in not trusting your perception of speed. He probably had a bit of a scare and extra adrenalin probably contributed to the later mistake (high as a kite: gunning it harder).

Analysis of the crash – stuff that usually matters but didn’t here

ROAD SURFACE: As anyone who has ridden in the UK will tell you: those stripey bike overtaking sections of the road are a shitty shitty surface to depend on. For one they’re always littered with rocks, glass, bits of truck tyre. For another: they’re where the two sides of laid tar join (poorly).  That’s without the fact that the painted surface is not great for grip on top of that. But for this case the quality of the road surface made no difference but it should have been another reason to slow down.

GEAR: This guy was wearing decent gear, but at those speeds and in that mess of cars on both sides of the road it wouldn’t matter what you wore.

TARGET FIXATION: This guy was throttle fixated, not target fixated. He probably didn’t even notice the car until the very last minute, so it wasn’t like he had a chance to lay eyes on it long enough to steer towards it. So I don’t think that was the issue.

Analysis of the crash – How the rider could have avoided it

Less speed and ensuring proper buffer zone are where I’d put my money on avoiding this outcome.
Maintaining buffer zones is the primary reason some riders are safe and others are not safe. I keep a buffer zone pushing out ahead and to the sides of me. 3 seconds is the goal (or more if possible or at speed). It’s a habit I continue when I get in a car which is a nice thing.

Easiest way is to have a habit of picking a stationary spot that the vehicle in front passes (e.g. reflector pole, mark on the road etc) and count back until it passes your front wheel. Three thousand, two thousand, one thousand.. check. If you cut yourself off talking then that’s probably the point you’d impact. Roll off the throttle a bit and drop back or else (check blind spots), indicate and change lanes to give yourself more room. If someone’s doing something stupid start braking and/or cover the brakes to reduce your reaction time.

You’ve generally got a bit of time to think on the bike and nothing else to focus on except improving your riding craft, so any boring time: just practice spacing.

The guy in the video had no buffer zone in front or to the side (the downside of filtering through gaps with oncoming vehicles), he’d be lucky if he had 1 second between the car in front doing something stupid (as they do) and hitting it. It takes probably that long to start braking (reaction time). That and 160km/h (100 miles per hour) impact velocity meant with any sort of buffer zone he’d be hard pressed to keep it together while yanking on the brakes.. Accelerating through that sort of congestion coming up is an easily avoidable issue with a bit of scanning up the road and less urgency to get up to top speed ASAP to show off to your mate with the video camera.

Anyhow, my condolences to the family/friends left behind and I hope it makes some people think a bit and focus on good riding habits.