Can You Make a Soft Landing?
I actually started a completely different article several times in the past few days, but instead shoved in into the draft folder in preference to doing something much more timely. We now take two Philippine papers on Sundays to get more real estate ads … we’re planning on doing a little investment and the Manila Times has way more ads on Sundays …and there is virtually nothing “above the fold” on the front page except the financial crisis in the US … it eclipses all Philippine news for sure.
We get a reasonable quantity of US TV and International CNN, Bloomberg, BBC News and several good news programs on Australian Broadcasting as well … and there is nothing but doom and gloom, breathless finger-pointing expose’s, name calling, and of course blame. Hey the blame part is easy, the root of the problem is greed and lack of caution … trying to continually buy more than one could afford from the personal to the corporate level. But that’s not my point.
Whatever the reasons and even allowing for some over reacting on the part of news media, it would seem many of my “Western world” readers are hurting. If you are in the “really hurting” category … like facing eviction from your home … not being able to charge season tickets for next years football season is only “mildly hurting” in my book, sorry … then perhaps one life preserver could be a move here. It’s certainly worth a thought.
Now please read this before you send me all your ‘be careful’ comments. I say, Be Careful! Dave is not advocating someone pull up stakes and move just because of some minor ‘glitches’ in the family investment profits graph. One of the things I see people panicking about, waving their arms and declaring the sky is falling are real estate values.
If you bought you house for $100,00 and a year ago similar houses were selling for $300,000 you did not make $200,000. And if today the house won’t sell for $100,000 you did not lose $200,000. None of that profit or loss is real unless you actually are forced to sell. If you can still make your monthly payments then the sales price of your house is purely academic. You have a roof over your head, don’t you? Millions and millions of people do not … so count your blessing instead of your ‘paper’ losses. A couple years from now it will likely be selling for $400,000, because new housing starts are way down and the drastic glut of unsold home will gradually dwindle.
If you have a 401K that’s stock market based, or other stock market investments you may be panicking a bit too much also. You’ll notice that the richest man in America, Warren Buffett not only recently passed up Bill Gates for that title, but Gates in effect works for Warren now. Warren just put $3 billion dollars into GE, a corporation that actually produces hard products that the world uses … Microsoft is steadily losing ground to the Open Source world, continuing to sell what will be ‘buggy whip’ software in 5 or 10 years. Do you see the difference in focus?
If you are in your 40’s and your 401K’s are expected to fund your retirement in your 60’s, again don’t panic. Your losses are paper. take advantage of some great bargain that are out there today, if you are competent at evaluating the market, and sit back … a paper value loss is not the end of the world.
But here’s the guy or guy and gal this is really aimed at. Suppose you are already in your 60’s, you have already pulled the retirement pin …or been eased out the door … and your house can’t sell for enough to cover the mortgage, (see some suggestions on that issue here) and your expected income from your stock plans are way less than you expected … can the Philippines provide some sort of life raft to get you through the next couple years? For some of you it very possibly can.
I’ve continually been one to preach that you should not make a move to the Philippines simply because of the low cost of living here. But for those of you who are really in a bind, the fact is the cost of living here is still very low … if you plan wisely it can be way, way lower than most anywhere in the US. If you and your spouse are Filipino, or at least one of you is, then it becomes a much better alternative … because there is no denying our standard of living here is based in a large percent upon my dear wife’s decision-making and bargaining skills.
But if I had to live here alone (or with a non-Filipino spouse), from a fiscal and practicality stand point we could still live much, much cheaper than likely anyone reading this in the US … if we wanted to or if we had to. A non-Filipino can get along just fine here for a couple years and likely pay a lot of bills or make substantial increases in savings or investment if they have an income.
I recently posted our (couple, male US, female Filipina/US, no children) monthly budget on my PhilFAQS site. We can live in the ‘shadow’ of Manila … we are just outside the borders of Metro Manila itself … on $1,200 USD per month. You can look at this map of all the SM malls here and pick any location within easy commute of any of them and you can duplicate our budget pretty easily.
At the moment we could live for a lot less because the Peso has dropped a lot against the dollar … more pesos per dollar each time we exchange … gasoline and diesel fuel has gone down 8 or 10 pesos per liter since the artificially high oil prices have dropped, but things go up as well as down so sticking to the $1,200 is a minimal safety strategy.
We have covered in some detail in the past, and on my PhilFAQS site, there are very few if any suitable jobs here, and the few I occasionally see that typical US blog readers might be able to live with are IT and Call Center (BPO) related, and that part of the Philippines economy is already slowing significantly.
But for the person or family with no home, no regular job and a severely depleted retirement account, … but who can take advantage of the many, many ways you can earn a living here … you might want to think about a bailout move.
If you hate this thought or if you love it, do let me know, because we can discuss this a lot more here, or else move on to other subjects.
Dave, I have searched your philfaqs website for your budget but, for the life of me, I can’t seem to find it. Can you post the link? Thanks!
Hi Gary- I have added a link to Dave’s article.
Dabg! Now that’s what I call editorial service, Bob! I got an email notification of Gary’s comment and by the time I shifted screens to com eover here and answer it, you were alrady on top of the issue. Thanks. feel free to deduct the extras effort from my next paycheck
Hi Dave- No problem, happy to assist!
Or, as they say in SM, (ding, ding, ding, dong, clap, clap, clap sound effects) followed by, “Happy to deserve you” LoL
Thanks guys!
Dave, is that what they are saying at SM? I always thought it was “happy to serve you” but I think you are probably correct.
The only thing I am sure of is that I got tired of hearing the song they play over the loudspeakers…”At SM, we’ve got it all for you.” I still shiver when I think about that. LOL
Ha ha no, Gary, they do say “Happy to Serve You!”.
But I kbnew Bob and others would get a kick out of my young nephew’s translation. he and his brother are, of course, big SM fans … and now, even at home, all you have to do is clap three times and he will usually pipe up with “Happy to deserve you.” (with a “Joisey” accent, I have no idea where that could have dome from)
Always good for a laugh … and most of us, especially these days, don’t do enough of that.
Dave: My father is moving to Ecuador for much of the reasons you listed. Bad investments, upside-down mortgage, over 70.On Social security and self employment, he can live comfortably, but not luxuriously.
My cousin, retiree from San Francisco, still lives like a King in Marinduque for about $1000 per month. Good article, Dave! Cheers!
@ John. Interesting. I wish your dad well. If I weren’t “married” to the Philippines I might very well be in Ecuador or Costa Rica … or Japan for that matter. The main point is, things are not good for seniors in the US any more … the major reason I won’t live there any more is the rotten way the US takes care of seniors and military vets … and I am both. Oldsters should not complain, they should vote with their feet and with their skills as well and empower their retirement … or so I opine.
@ David, thanks yet again for your faithful readership and always useful comments. Marinduque seems like a good plaxce, I know of a few US expats who have settled there and been happy, my wife and I have it on our list of Philippine destinations we must see.
Even though I promote Bob’s book … and indeed heartily recommend it … I still have trouble with the ‘live like a king’ phrase though. I guess it is ok as a shorthand for living happily and well. I doubt there are many ‘royals’ who would be happy in our modest little house here, yet on the other hand, I doubt there are many who are as happy as we are either, so perhaps I ‘live like a king’ (a slightly frugal one)
For those who doubt the comfortable living price, though, David’s cousin’s report virtually paralell’s mine …and the reason behind this article. I’ve always been opposed to promoting the Philippines soley because it’s cheap living here … but in today’s world there are a lot of people who are hurting. They _thought_ they had their retirement all mapped out and then found they had sailed off the map.
For those in that ‘lost boat’, cummon over, you can indeed live comfortably and enjoy it also.
i built a house in talasay an i stayed in it for 100 dollars a week …we r 3 hours from mall in cdo close enuf for me …Phil R.
Dave,
Thoughtful blog as usual. Moving to the Philippines might also save a person from being forced to withdraw from their 401K or IRA while the market is down. By the way I commented on the article on your site about enting, but apparently my comment didn’t go through. Thanks again.
Hi Dave, good article. I hope it shifts some viewpoints that paper gains and losses are not reaized gains and losses. I think, for those who are buying real estate here, they have a hard time in differentiating whether the house is an investment or a home. This is the reason why they keep on doing this mental calculations of opportunity “gains and losses”. I just wonder if they will ever find contentment in their lives.
I sold my house in a townhome community for $450,000 at the height of the market. I can assure you that if I go back I can more or less buy my (a similar) house back for $225,000. I don’t think my purchasers will be liking that or thinking anything less than they are $200,000 plus dollars in the hole especially if they wanted to sell. They crtainly won’t be happy for me or anyone else for that matter buying at this new lower price. However, hopefully they are intelligent people to realize that they bought the house to live in and with their financing that $450,000 will end up costing over $800,000 ion in the end of that mortgage.
@ Ellen … yep,perhaps the most important lesson that a majority of po\eople never learn is, mobney does not equate to happiness or satisfaction. not that I’d be happy being poor … I’m not poor and I have no desire to become poor, but I am one long, long way from being rich, and aside from the usual passing fancies of owning toys like this: http://tinyurl.com/6syv56 I have no aspirations.
Most people need a roof over their head to make them feel comfortable. But that ‘roof’ should be looked at as a famly’s focal point and place of refuge, not an investment. There’s a lot of ways to make money in the real estate game, some of them even work, but buying way too much single family house with way too much mortgage attached is not one of them.
@ Richard … The way things have timed out has made me look pretty smart … so I’ll just sit back and let people think that I am … no sense destroying their illusions.
Mainly because we were planning to move to the Philippines as soon as my wife’s US citizenship was granted, which should hav ebeen in 2005 (it doesn’t happen in the expected htree years of US residency, folks
) we decided to sell our home in Colorado Springs. We even made a small profit. Praise the Lord.
The fellow who bought it invested a non-trivial amnount in a big fencing project, a lot of redecorating and “upgrades” and it has been for sale several times since (marvelous thing, the Internet). As of the last time we saw it listed the asking price was half what he paid in 2005 … and so far as I know it isn’t sold yet.
Massive over-supply of houses coupled with these unregulated mortgages that shoot up enormously in the third or fourth year have really taken the ’shine’ off the real estate market in my view.
Dave:
Further to your comments, I see many half-finished or gigantic, out of proportion, homes up in Cagayan sitting empty, waiting for a buyer. In the RP, considering a house as an investment is wishful thinking in the provinces. Build a home to live in or house a business, but thinking that you can “flip” property here is unrealistic at best. (As a side note… Most of those empty houses were built by foreigners thinking they could simply sell them quickly at a profit if they needed to leave).
Rebecca looks at property as something to invest ON, rather than IN. Build a shop, plant rice, whatever… But USE it rather than hoping to realize a gain. We just bought some land near a university to open a dormitory for students. We will use the land. If the dorm fails, we tear it down and plant rice, fruit, etc. We could also use the buildings for storage / warehousing. Point is, the land itself is not the investment.
@ John Miele … thanks for the personal observations, John. Indeed this really happens all too often. Whay we as foreigners esp[ecially need to guard againts is the almost unconcious attitude all of us at one time or another seem to suffer from … kind of summed up by the words, ‘”after all, being from the US (or whatever country) I am, after all, smarter than ‘they’ are.”
Well on a person versus person basis, everyone of us is smarter than someone and not as smart a sothers … but our home-country based knowledge is very often flawed when it comes to doing things here in the Philippines. There are a thousand and one jokes about Filipinos in the US FOB (Fresh Off the Boat). What we have to guard against … and believe me I am not preaching from the pulpit here, I’ve trapped myself more times than I like to think of … we Westerners are all FOB for long after we arrive here.
Got to take ‘baby steps’ until you really learn the ropes and you have to remember that the Filipinos were here, running things their way and making things happen in their country long before the USA was even the 13 original colonies. And the Chinese … a large proportion of Filipino ethnicity … had a very advanced civilization already back when European countries were living in mud huts and communicating with grunts.
There’s a lot to learn here, for people who are open to learning.
Can an american go live in the phillipines for any reason? Do I need any special reason to go there?
Hi tim scott- Sure, you can come for any reason you want, or no reason at all!
Hi Scott, you heard it first from the real source … you need no reason at all. Feel free to contact me direct if you have any specisl questions, but absolutely you need no reason to come here at all except a desire, a passport and teh air fare. TThanks for dropping by, reading my column and leaving a comment … hope to see you again.
Hello Dave,
I found this wonderful site a few weeks ago while reseaching what to expect when I moved there. Now I just go in and read the older blogs and this time I thought I’d at least say thanks to all the contributors. I will be in Davao City to be with my fiance for the second time in January. And also to look at some houses. She is very prudent and I told her this time we should just rent a house that was furnished instead of a western hotel downtown. Well she found us a house for only p12000 a month. And I just told her it had to have hot water. She said yes and refridgerator and stove. In disbelief I sent her the money and she reserved it for us. Oh her sister and two little girls will stay too. Now next day it seems the hot shower is in the form of portable shower that I have to buy. hehe Is ok though because when we leave it was agreed that we could take and she has no hot water at home and I will experince REAL live in the Philippines, Thank you again for your site.
@ Andy … Thanks for reading and for your comments. Yep, things are different here. Most Ameruicans have trouble with two issues you have already faced. Rental housing is hard to find, short-term furnished rentals eve harder, and landlords in the Philippines epect tenants to do more for themselves … even things like hot water.
Hot water in the Philippuines is normally provided via individual ‘flash’ wate rheaters at the tap where the water is needed. Actually, many new energy-efficient US homes are being built this way too, as the individualk jeaters are way, way more energy-efficient than the ‘normal’ methpud of heating a 40 gallon tank in the baement and then piping it to reach outlet. It’s common practice to buy an individual heater at harware or builder’s stores, connect to the shower and then take it with you when you leave, so rerat assured you are getting good advice.
This will _not_ be the strangest thing you’ll encounter here I am pretty sure … but take them is stride and you’ll probably be glad you did. Happy Holidays.
LOOKING TO MOVE TO THE PHILLIPINES VERY SOON. MY WIFE AND I ARE IN OUR FIFTIES. JUST MARRIED LAST YEAR. I AM A RETIRED SHERIFF DEPUTY. WE WANT TO LIVE HERE TILL WE EXPIRE. LOOKING FRO A HOUSE RENTAL. I WANT TO LIVE HERE BUT ONLY HAVE 1000.00 A MONTH U.S.D . PLEASE GIVE ME SOME ADVISE THANKS ROB AND MARY…????
Hi Rob and Mary. Thanks so much for commenting. As far as your questions, I can only give some general answers. First it makes abig difference (I think) in ypour living costs if one or both spouses are Filipinos/former Filipios.
Second, I’m not sure where ‘here’ is. Are you living in the Philippines now, or planning to move here which is what your first sentence seems to indicate.
Third, depending where you live in the Philippines you might6 squeeze by on $1000 USD per month but a great deal depnds on you medical care requirements. If you have medical coverage that works in the Philippines, you should be safe enough, but you could be put in a very precarious position if you have a medical problem and have to foot the bill out of pocket. Medical care is typically on a cash basis here, one the “everything down and nothing per month” plan.
Also with health care consider this. Many US plans factor in Medicare when you reach 65. In other words at age 65 they expect Medicare to pay first and then they pay what Medicare doesn’t pay. The problem is you can’t use medicare in the Philippines, so you muight be in great shape until age 65 and then discover a huge gap in coverage.
Summary advice? You can live in the Philippine son $1000 USD per month but you won’t live very comfortably. Number two thought is, if I had obnly $1000 USD available I wouldn’t be living here. The US is a much better place to be poor than the Philippines, it’s a great life here if you can pay cash.