Michael Janzen

I was listening to Kunstler’s podcast (#122) tonight and he gave a fairly good explanation of how parts of the financial world work; including the reality that many financial institutions could be holding toxic assets. The truth is that an asset is only toxic if it brings the show to an end.

Take my mortgage for example. My home’s value has been fairly stable for about a year, bouncing along the bottom. I’ve been hoping it would creep back up and meet me half way so I can refinance or sell. I’m an optimist.

But sadly it just took another downturn. I suspect it’s partially due to the the time of year and all the talk in the media about the possibility of a double-dip recession. Who knows what the cause is, but it definitely gives me a moment of pause but doesn’t change my plan.

I’ll keep paying this mortgage until I can’t. I’ll also keep noodling over low-cost simple housing options and looking for ways to move in the right direction. Tiny houses are great therapy for that.

The other thing I take solace in is that while nobody can predict the future, we can all tell when we’re walking on thin ice if we’re paying attention. So I’ll take each step with care and keep that rope tied tightly to my belt. I might take a dip in the ice-cold water but I’ll always be able to pull myself to shore.

The other night Julia spotted a story about The Emerald Triangle on one of our local Sacramento news channels. The Emerald Triangle is the nickname for California’s most prolific marijuana producing region, a tri-county area made up of Mendocino, Humboldt, and Trinity counties.

I don’t watch TV anymore but I did take 5 minutes to watch this story. It confirmed something I learned when I lived there over a decade ago, marijuana growers mostly prefer pot to stay illegal.

The main issue is economic. It’s estimated that 2/3 of the local economy is funded by pot. You see so many people are active in the industry and even those who were not benefited from the influx of pot money into the local economy. So in a way everyone benefitted from this huge cash crop.

In November 2010, Californians will have the opportunity to vote to legalize marijuana for recreational use. This would mean that everyone who wants to smoke pot could grow it themselves. Ever since Californians voted to legalize marijuana for medical use in 1996 (prop 215) the price of pot has dropped significantly due to simple economics. More supply on the market has been driving prices down.

So imagine what will happen if everyone who wants to grow can do it legally. My fear is that the local economy in that neck of the woods will fall apart and people will be forced to find other ways to make a living. For example land prices have always been high up there making it difficult to live there without growing pot.

Julia and I have always dreamed of moving back ever since we left… no no not to grow pot. I’m not opposed to other people using it but I’ve been a mostly sober guy for years now. But if marijuana is legalized will this be our opportunity to move back as land prices drop? What will these remote communities be like without the influx of so much outside money? Will a tourist trade open up when pot is finally completely out of the closet?

Who knows… only time will tell.

Below is a photo of a little blue house in the village of Mendocino that Julia and I dreamed of buying before the recession. They wanted something like 600K for this tiny house back then. Zillow says it’s worth $658,000 now. Yeah yikes; see what a billion dollar pot industry will do to real estate prices.

I got another email on my home’s value from Zillow.com this morning and it shows the curve making a turn upward! These numbers could simply be a market fluctuation due to a temporary increase in home sales. It is fall after all, a traditional time to make last minute moves before the school year begins. But I’m hopeful that maybe it’s a sign we’ve hit bottom and might start to see a slow climb back up. As you can also see these numbers aren’t reflective in the US (dark blue) or California (light blue) chart lines, just my house (dark green) and Sacramento (orange).

I get a newsletter from Zillow.com regularly with an update on local home values. There has been no good news for a long time, home values continue to drop here in California. Below is a chart that shows the most recent numbers. When you add this to the overall outlook for the economy it looks like millions of people are going to be stuck in their homes or seriously considering letting the bank take it back simply because the climb back up is looking longer and less likely.

Another option I’m still keeping in the back of my mind is adding onto the house simply to raise the value. I definitely don’t want any more house myself… I have too much as it is… but I can see adding on right before selling. But for now we’ll just continue to hang on and hope for the best.