Madison Real Estate Assessments Decreased 3% last year

The headline story in the Wisconsin State Journal today is an article saying real estate prices in Madison declined 3% last year. It’s good that they’re reporting this in a city where the some bubble-clouded thinking persists. There are few points, though, where the article is could have investigated deeper.

1. The article attributes the decline to the recession. It does not address whether the national bubble could be playing a role.
2. The article accepts property assessment values as accurate (at revealing price fluctuations of neighborhoods) without giving any justification.
3. The headline says this is the first decline in 35 years, but it does not look at inflation-adjusted numbers. I suspect that adjusted for inflation there was at was other decrease in the past 35 years.
4. The article accepts the assumption that it’s good for houses to be expensive.

My impression is that the bubble is still present in Madison and just starting to deflate. Most residential properties on the market are priced such that they would not cash flow at today’s interest rates unless they were purchased with a down payment significantly greater than 20%, which to me is the hallmark of an RE bubble.

Assessed prices appear to lag actual prices, so I suspect the decline we have had so far is well over 3%.

If mortgage interest rates rise significantly, it will push prices lower. Since rates are expected to rise, I’m surprised this risk isn’t priced into the market.

All of this means Madison will be experiencing price declines similar to what Minneapolis experienced in a few years ago.

Daycare Subsidy Issues Runs Into Larger Societal Questions

My least favorite leftwing advocacy group sent me an e-mail about why it’s so important that the government fund childcare and preschool.

My husband and I have to work opposite shifts because child care is unaffordable. He works from 6am to 2:30pm, and I have to meet my husband at his job to drop off our son so that I can be to work by 3:00pm. I miss out on putting my son to bed.

It goes on to say they support subsidize that would allow both parents to work at the same time and the kid to spend all day in daycare.

This two-sentence anecdote really got my attention because childcare is something my family struggles with. We have no struggles in paying for it, fortunately, but we struggle with how much childcare we want to use and how to structure it. I leave for work at 7:30am. Early in the afternoon, our babysitter arrives and my wife goes to work. I arrive home before 7pm and relieve the babysitter. I put our baby to bed around 8pm. My wife gets home at various times, usually a little after 8pm.

We are fortunate to be able to afford any amount of daycare we want, but we specifically structured this so we would both get a good amount of time with our baby. I do not claim this is the best way to do it. It’s a system that works for our family at this time.

The e-mail calling for spending tax dollars to help move a kid who spends all day with his parents to a system where he spends most of the day away from them really catches my eye. The e-mail supposes that if this family had just a more money, they would use it to see their kids only briefly in the morning and briefly before bed. There may be many advantages to doing it this way, but we should think it through carefully before we subsidize it.

We also need to look at who is getting the subsidy. If one member of this family earns a solid living wage but their lifestyle requires two incomes and subsidized daycare, in my mind we’re subsidizing the fancy lifestyle as much as the daycare b/c the family could simply give up the lifestyle and pay for daycare themselves.

The funny thing is I support the key initiatives this e-mail is calling for: childcare funding for the poor, increased funding for preschool for the poor, and nutrition programs. In their call for more subsidies for the poor, though, they run into these hard questions about who should take care of our children. I imagine that most societies throughout human history have had a cultural model dictating who is responsible for taking care of the children. The US culture isn’t about dictating anything, so it’s up to the individual to work it out. Individuals need to take note and start working it out for themselves early. Otherwise you end up like the people quoted above who had kids, wanted someone else to take care of them, and didn’t realize they didn’t earn enough money to pay someone to care for their kids.

Crosstalk Due to Ground Plane Interruptions

The Mar 2010 issue of Printed Circuit Design Magazine has a nice article called Accurate Impedance Control. This is one my mind because I’m currently dealing with a board that has crosstalk due to interruptions in the ground plane. I love the succinct way it the diagram in the article illustrates the problem.

Just Shop It!

An excerpt from another message from my favorite organization for sending e-mails supporting policies I disagree with:

We're outraged that in the last year health insurance companies earned 56% more in profits and covered 2.7 million fewer people. And, healthcare insurance rate hikes of up to 39 percent are now happening across the country!

Why don't they stop being outraged for a moment and shop their policies? If their current vendor is such a rip-off, it sounds like a great opportunity for another insurance vendor to get its foot in the door. I cannot understand the mindset of just sitting and stewing about what your vendors are doing. It seems simple just to shop the quote to keep them honest and spend most of your effort finding ways to create value for your customers or employers.

I say this because I don't think the outrage is going to do anything. Even if the outrage make politicians carry out some very specific policy, it's not going to make people provide a service for free. Even if the government makes health insurance as we know it illegal, so the risk is sensibly spread among the entire population instead of being spread among those who bought insurance prior to be coming sick, we will still be paying the same amount overall for the same services.

What's "Good" for the Real Estate Market?

My broker’s newsletter today had an article called From Rescue to Recovery on the US housing market. USAA follows the same assumptions that all financial articles on real estate accept: Good = people moving house often and spending a lot of their money on housing. I suppose that is true from the real estate industry point of view, just as it’s may be good for refineries if people burn gasoline often and spend a lot of their money on gasoline. But we never hear this view in a financial article.

I believe in capitalism. I want people to create value that makes people spend their money on goods and services. If people aren’t buying your product, it feels bad for the person marketing the product, but it’s really just feedback from the market. Sometimes people don't want what you're selling.

Writers of articles on real estate should stop and ask themselves what are the virtues of people moving a lot and paying a lot for space.

It’s true that if a lot of good economic activity is going on in an area, it will make space there more expensive. But the cost of space is not a perfect barometer of the desirability of a particular area because we are coming out of a huge real estate bubble. It’s possible in the next few decades people will choose to spend more of their money on vacations instead of residential space. That doesn’t mean things are bad. It’s just changing preferences over time.

Crosstalk on a Reset Line Strikes Again

I have been working on an XScale board that has been giving me trouble for the month. Every time the software attempted to configure something on the mPCI slot, the system hung. Even though the problem only appeared after a spin of the board with the XScale processor, the software vendor (Team F1) worked assiduously on the problem refusing to blame the hardware.

It turns out the problem was a 1.3V core reset line going to the XScale processor was picking up crosstalk from the PCI bus because of a layout issue. The white line is the victim trace, which runs parallel to PCI lines. I do not have access to all artwork layers, but I think these traces run over a break in a split power plane.

The board designer didn’t think of a reset line as a critical trace because it doesn’t transition frequently. That keeps it from being an aggressor trace, but it’s very easy for a core reset line to be a victim of crosstalk. To be deasserted, this reset line must be greater than 1.0V. It doesn’t take much noise to pull it down into its indeterminate range (<1.0v) . I would have probably done the exact same thing because it's an easy mistake to make.

When I probed the line near the reset input, the 12pF capacitance of my scope probe was enough to prevent the problem. Tacking a 10pF cap to via going to that ball of the BGA made the problem go away altogether! Higher values worked just the same. At least this problem was easy to solve.

This is the second time in the past 14 months I’ve encountered a reset line being asserted due to noise or crosstalk. Reset lines must be treated as critical traces, especially if they’re low voltage and especially if their driven high only by weak pullup resistors.

The Basics of PCB Component Placement

There is a nice beginner's overview of component placement in the Feb 2010 edition of Printed Circuit Design and Fab magazing: Component Layout in Placement Process

Some interesting points:

• 75% of soldering defects are related to paste dispensing
• To deposit solderpaste on a large area it is better to use multiple smaller slots than one large slot.
• BGAs near a board’s edge are hard to rework because the thermal mass will be different on the side nearest the edge.

One thing missing from this overview: Even low-speed digital traces can be susceptible to noise from the outside world. It is not only important to keep clock lines clear of sensitive analog lines. It is important to keep digital lines, even “non-critical” ones with low edge rates and clock speeds, clear of places where noise from induced currents outside the board could corrupt the digital lines. A low-speed digital trace that veers across a mote and travels over a chassis ground plane is at risk of picking up noise from the outside world.

Rising Interest Rates Will Supress Real Estate Prices

My brokerage seems to agree with my notion that bond yields are poised to rise. Their bond fund manager says they're holding more cash than usual anticipating a drop in prices.

USAA: Have you taken some risk out of the portfolios you manage?

Espe: Yes. We think interest rates are going higher across the yield curve, and we've begun to prepare for it. Rates will probably go higher if the government stops buying Treasuries and mortgage-backed securities in March as planned. If they extend quantitative easing, it could be later, when the Fed raises rates as the economy recovers. But given the low current rates, the big budget deficit that has to be financed and the potential for the market to get spooked by any signs of inflation, we think higher rates are a question of when, not if.

The way we're managing risk is, first, by taking profits as bonds we own get back to normal valuations. Next, we have lowered exposure to rising rates by cutting back our duration, buying shorter-term securities and floating-rate securities. We're holding more cash than usual so that we are ready to deploy assets when rates rise. We have a big yield advantage over the peer group average, which will help in the event of defaults. We're also minimizing our holdings of U.S. Treasuries at these low interest rate levels, although we may increase our position if there's a spike in rates.

If interest rates rise, it's hard for me to see real estate prices increasing. I am baffled by people who have houses they want to sell but are holding on to them expecting real estate prices to increase.

Obama Should Support Manned Exploration of the Solar System

President Obama has proposed cancelling NASA’s Constellation program to send astronauts to the moon and to explore near-earth asteroids and Mars. He has proposed that once the space shuttle is retired NASA use private companies’ rockets to get astronauts into low-earth orbit. His proposal includes no plans to take humans beyond low-earth orbit.

President Obama is on the right track in creating partnerships with private companies for human space exploration. It is unfortunate, though, that he is calling for no provisions for human exploration of the solar system.

President Obama questions reusing old technologies from the 60s and 70s in a modern space program. I don’t know if reusing technologies is the right approach, but we certainly could use some of the enthusiasm for science and technology that we had in the 60s and 70s.

There are enormous intangible benefits to human exploration over probes. For example, my 18-month-old has recently gotten interested in the moon. This started with him seeing the moon in the sky, apparently independently of my interest in science and technology. I checked out some children’s books on the moon from the library for him. When he looks at the photographs and artist’s conceptions of the solar system, he focuses on “astronauts”. The Voyager probes taught us more about the solar system than human spaceflight has, but un-manned probes are not as exciting. We need people to be excited about science and technology.

We obviously need to be grownups and carry on using probes to do most of our space research. That visceral excitement of human exploration is more important that we might at first think.

I am glad Obama is looking into restructuring NASA and creating partnerships with private industry. When large numbers of humans being to work in space, for tourism, research, and industry, it will be private industry sponsoring it. None of this eliminates the benefits of a separate program for human exploration of the solar system.

LSR's Lab Helped Me Dig into an RF Issue

Yesterday I had the opportunity to spend the day in LSR’s lab in Cedarberg, WI working with their CTO, Brian Petted, on a physical layer issue in an 802.11 card. LSR’s has equipment that can pull out the modulation and display constellation diagram of digital signals and measure properties of the carrier.

My mission was to compare some 802.11b radios with performance issues to those that worked normally. Both radios met the 802.11b spec, but one had a much tighter constellation diagram than the other . (Yes, 802.11b is ancient, but this client has products with long industrial product life cycles.)

Good radio:

Bad radio:

The screenshots above contain loads of good info.
EVM[peak] – Average noise on the symbols, i.e. how much the constellation points spread out.
EVM[peak] – How far the worst outlier symbol lies from the median.
RMS Phase Noise – This is noise on the carrier itself.

It turned out the problem with the bad radio was that signal from the modulator was getting into the LO and causing phase noise in the carrier. Once there is phase noise on the carrier, you naturally have phase noise on the received symbols. Brian Petted worked out all of that without even removing the shield and probing the stages of the circuit.

It is very interesting that the 802.11b spec is so permissive. It allows huge symbol EVM, but compliant receivers do better if your transmitter has a nice tight constellation diagram.

Another interesting thing I found was that some radios I tested showed large side-lobes, approaching the limit mask, but worked fine in their application. Large side lobes seen on a spectrum analyzer can often indicate a problem, but sometimes they just mean a larger modulation index, which does not necessarily cause problems.

Usually when I’m testing wireless equipment, I have to work out what’s going on based on performance, usually PER vs SNR. I make hypotheses being careful not to tell them shape future observations; I can’t lose sight of the fact I don’t really know what’s going on at the physical layer. So it was amazing for me to spend some time in a lab with high-end equipment and a communications theory expert. I got insights that I never could have worked out sitting in my lab with a just scope, spectrum analyzer, and a WiFi sniffer.

I am always in awe when I dig into high-speed digital modulation because the technology completely blows away my wildest childhood geek-dreams I had back when I used a 2400bps landline modem and wireless digital modulation meant RTTY on shortwave or numeric pagers on VHF.

Your Child Must Become a Millionaire

An article in Directory of Madison says Your Child Could Be a Millionaire. I agree and would go a step further and say your child must be a millionaire and must be nearly a $100,000-aire by age 18. $200 a month over a child’s life at an 8.4% return will be $100,000 by age 18. $100,000 is not a lot of money. $100,000 plus continued monthly contributions will pay for a medium-priced undergrad education. If your child doesn’t go to college or gets a scholarship, that money can pay for their first home. Having that will make it easier for an adult child to save for retirement, which will require more than a million dollars.

If you accept that a comfortable retirement costs more than a million dollars, you have to start out saying my child will be a millionaire. The only other option is to teach them to manage the condition of having no money. Knowing how to operate with little or no net worth is a good skill to have. People should never, IMHO, consider living broke to be their primary path. The primary plan has to be having a reasonable net worth available to take advantage of business opportunities, handle emergencies, and help others. The plan should include ways to transfer some of that wealth to children so they don’t have too many opportunities in life to use their skills at living life with no money.

None of this is to say child must become rich. This is saying they must have resources to manage life’s ups and downs, and having a million dollar net worth or more is one part of doing that.

DreamBikes of Madison is Amazing

The winter is very hard on bicycle brakes, harder than I would intuitively expect. I estimate that my brakes wear out about eight times faster in the winter than in other seasons. The salt and sand gum up a bike chain about as much I as I would intuitively expect given that the front tire constantly kicks road dirt up on the chain.

I took my bike in to DreamBikes thie past Friday evening. I hoped I could have it back this weekend, so I would have it for this week. I know DreamBikes is inexpensive, so I figured it would cost about $12 for both sets of pads, another $12 for the labor, and maybe $50 for a cleaning. They had it ready the next morning, and the total cost was $10.55!

I have consistently found DreamBikes to have the friendliest service of the bike shops I have tried in Madison. There are many good bike mechanics working at the the other shops, but it doesn't take too many visits before you encounter someone with an attitude. They want to tune up a bike for someone who gets his bike out two weekends out of the year and has money to burn on the hobby. DreamBikes has a map showing all the places you can get to within two miles. They understand people use bikes for transportation.

Even if you're an occasional bike rider, you simply cannot get a bike fixed up at a shop less expensively or with better service than taking it to DreamBikes.

Fancy Baby Bow Website Was a Hiding Place for a Phising Scam

The other day I got a Phishing scam e-mail. I noticed the link pointed to virginia.edu. When I went to the website, I found a directory full of various html files pointing to another directory buried in a website selling fancy bows and hats for babies.

I wrote the webmaster at virginia.edu and at annebows.com. Virginia.edu webmaseter and annebows.com’s owner wrote back saying they were not behind the scam and they were cleaning the scam pages off their website. I assume annebows.com is not involved with the scam; otherwise they would not have written back apologizing for their site being hacked.

I have never been into babies until my first baby was born in 2008. I have another baby coming in 2010, so I’m sort of glad the scammer led to me a page with cute babies.

If we were into buying cute hats for infants, and neither my wife or I are into baby clothes, I would buy something quality from a small business I felt I could connect to instead of going to a huge chain. There’s nothing wrong with chains. I’m just saying, all things being equal, I would rather deal with a place where the owner writes back personally.

Obama Right on the Money with Spending Freeze

I was happy to read that President Obama is seeking a freeze on government spending, excluding military and entitlement spending.

Enacting this freeze would save $250 billion over the next ten years. That’s a drop in the bucket, but it’s the exact right thing to do at this time. We need some measured deficit spending during a recession to even out the economic cycle. The key is to cut off the deficit spending when the recession ends and, just as the Fed is supposed to do, take away the punch bowl just as the party gets going.

By proposing a modest reduction in projected deficit spending, Obama signals he is concerned about the deficit. He will have to get the government to follow through with serious deficit reduction when the economy begins to expand. For this moment, though, a modest cut in projected spending is exactly what is called for.

Making Things Work for the Poor

From an e-mailing from Mom’s Rising organization supporting healthcare overhaul: (I’m a dad, so I don’t know how I got on their list, but they’ve become the organization I love to hate.)

Healthcare reform is not about Democrats or Republicans, but about the real people who are struggling every day to find or keep health insurance for themselves and their families.
It's about MomsRising member Jamie in Mississippi whose husband struggled to decide whether or not to go to the ER when he thought he was having a heart attack for fear of having to pay their $500 deductible plus co-pay.

I come across comments like this on a daily basis. Are they saying that we need to restructure everything in our society so that people can operate without having even $500 set aside for emergencies? This same family doesn’t have $500 to handle dealing with an ice dam on their roof. They don’t have $500 to deal with car trouble or replace a broken appliance. They wouldn’t have it to deal with an unexpected legal issue either. Following the logic of overhaul supporters we need to overhaul the home maintenance system, the car repair system, the appliance replacement system, and the legal system so people can meet their basic needs without having any money to their name.

I am concerned about the issue of poverty. It’s a huge logical leap, though, to say the answer is to overhaul entire industries. In addition to being unnecessary, it will not work. The only thing that will help Jamie’s husband is having money on hand to pay for the things they need. We can debate how to make that happen. My claim is overhauling an entire industry will have many repercussions without solving the problem in question.

Analog Design Value in Mixed-Signal Design

Dave Van Ess at Cypress Semiconductor likens analog engineers who resist the idea of designing “the crappiest analog you can get away with” and relying on digital algorithms to clean it up to people who worked resisted the transition from mechanical to electronic calculators.

Pushing all design effort to the digital side makes sense for some applications and not others. The question for each application is how crappy are we are comfortable getting away with. It’s nice to have headroom in case signal-to-noise ratio decreases from some unexpected cause. OTOH, spending time designing an analog circuit for low-noise or elegance just for their own sake never made engineering sense even before digital processors became inexpensive.

Earth-Like Exoplanets Could Be Closer Than We Might Think

Today’s AP story on earth-like planets caught my eye in today’s newspaper.

Astronomers found the first planet outside our solar system when I was in high school. Before that, everyone said there probably were exoplanets, but no one could be sure. The first planets found were gas giants, where life as we know it could not exist. Now we have the ability to detect earth-size planets.

This reminds me of something I learned a few months ago when I read Entering Space: Creating a Spacefaring Civilization by Robert Zubrin. Zubrin says that, although all my life Alpha Centauri has been thought to be the nearest star, there may be many closer starts. Many stars in the sky have not be studied to determine their distance. Most starts are dimmer than our sun. So some apparently distant sun-like stars could actually be dim stars very close to our solar system. There is still question about the number of stars near our solar system. There could be systems with Earth-like planets only a few light years away. We could have probes orbiting such a planet within a few human lifetimes.

I hope many other people besides me are willing to support astronomy research projects. I hope to see some amazing astronomical discoveries in my lifetime.

Madison Listed in Best Places to Launch a Business

Fortune listed Madison, WI as one of the best places to launch a business:

• Highly educated population
• Convenient transportation – Bike lanes on most roads. Bus coverage has been expanded at a time when other cities are having to cut back.
• 250 biotech companies employing 10,000 workers
• Temperate climate? (I think someone made an error with this one.)

It’s funny when ideologues say you can have [insert some progressive policy that Madison, WI implements] without disastrous consequences for the economy. These are usually people who think low taxes are the key to everything. Low taxes are important, but sometimes (not always) you get what you pay for.

I suspect Madison’s success doesn’t have much to do with politics. It’s mostly that we have an educated population, a family-friendly environment, and a Midwestern work ethic.