San Diego Housing Bubble News and Analysis

A few people have pondered about this out loud.

So we have a race don't we? What is happening quicker, the depreciation of housing or the value of our currency.

Hard to say. I guess it all depends on how much you think the submarket you want to live in will go down. That coupled with your own job security, etc... I tend to think that we will have more depreciation in housing before the hyperinflation people are forecasting will kick in. There may be a sweet spot of being able to get a home at a decent price at a decent rate. It just depends on how successful the government will be at trying to support pricing through various measures over the next 2 years. I don't think they will be successful but I do think they will throw away a hell of alot of money trying.

Incomes aren't rising while housing is falling so I don't see this as much as a problem.

I think whats happening is money is being destroyed faster than it is being created. Deflation is still the dominant economic force.

Its one thing if the old dollars were being used to buy houses and oil along with the new dollars. That would be inflationary. But the reality is more like the old dollars were burned up in a furnace. The trillions of new dollars are simply taking the place of the missing money.

kewp - that is a good point. The ATM housing money has been spent. That was all borrowed money. This new injection of money is going to cover the already borrowed money. Small example, the stimulus package. How many ran out and injected it into new purchase. I'd go out on a limb and say many just paid bills, credit cards, car payments, etc. Some Piggs probably invested it (hopefully not in stocks like me) or just saved it (some of it).

I don't think the stimulus package did one thing towards jump-starting the economy, even if a few actually bought something w/it.

I don't think the 700 billion is anywhere near pulling us out of this hole of debt. We have to get out of the hole of debt before we can think about stimulating the economy.

Kewp- I think you've hit on exactly what's happening out there. Credit was a gigantic part of the money supply....see charts of global credit growth for the last 8 years.
That's all but destroyed now. Compare this recent destruction of global credit to what's actually in bank account deposits and in wages. It is tiny compared to the credit destruction. Keep in mind, there's little money left in home equity, stock market equity has been devistated and wages are not rising (unemployment rising).
How can the US$ not rise in this equation?! There's really not that much of it out there. Go try to take your money out of bank, see how they cry. Cause they aint got any more they can get.

"Cash is king" and "cash in a crash" Is really true. Look around, it's happening real-time. The US$ is buying more of almost everything by the day!!

But what happens when this crisis settles down? (and it will settle down at some point) With the market crashing, you would expect treasuries to be skyrocketing. But they aren't. Matter of fact, yields on 10yrs have been rising. Might be because people need to liquidate them so they pay their Lehman CDS's, but might it be that there is an enormous bubble in treasuries right now?

If the people arguing that treasuries are the mother of all bubbles out there are right, what happens when that pops? The obvious answer would be that interest rates go through the roof. And then we get a full blown dollar crisis. This could put a crimp in all the bailout plans.

Of course if you're buying an american house with american dollars all this might be irrelevant. Then again, it might not. What do I know.

XBoxBoy

If there's a worldwide crisis and the dollar is worthless, then what difference would it make to have cash on hand? I've heard/read to buy gold. But in a real crisis, you can't eat money or gold. Just stock up on food and water, right?

I can't imagine it will get that bad, but I made a trip to Costco today, JIC, and got a few extra things.

"Brown and white rices store very differently. Brown rice is only expected to store for 6 months under average conditions. This is because of the essential fatty acids in brown rice. These oils quickly go rancid as they oxidize. It will store much longer if refrigerated. White rice has the outer shell removed along with those fats. Because of this, white rice isn't nearly as good for you, but will store longer. Hermetically sealed in the absence of oxygen, plan on a storage life for white rice of 8-10 years at a stable temperature of 70 degrees F. It should keep proportionately longer if stored at cooler temperatures. Stored in the absence of oxygen, brown rice will last longer than if it was stored in air. Plan on 1 to 2 years. It is very important to store brown rice as cool as possible, for if you can get the temperature down another ten degrees, it will double the storage life again."

We have to get out of the hole of debt before we can think about stimulating the economy.

Exactly. Which is why we need to socialize the credit business.

The Fed needs to take over a big national bank and begin lending directly to the people and businesses; with salaries and assets secured as the collateral.

Want to stimulate the economy? Give me a loan at the fed prime rate to pay off my credit cards with my salary as the collateral. Same thing for home, student and auto loans.

So basically have the US Govt come in and restructure all existing consumer debt to 1.5% with no one able to default or go BK? This would be nationalization of about $10T? Bring the world to it's financial knees. Crowd out all private sector activity for the biggest economy in the world. Socialism transition.

Prices need to come down to a level that is sustainable by wages. If this means economic failure by individuals and companies, so be it. But it's what's got to happen and the global market will not allow anything else. All intervention will do is prolong the event and perhaps make it much worse.

You know. I'm normally pretty calm about things. But at this point. I have to admit... Peterb's posting and folks like you got me to start thinking, the what if...

Personally, Peterb, I want to believe you're a lunatic, and I was pretty jokingly responded to one of your posts about a bullet proof vehicle...

But you know, there's a paranoid side of me this morning that told me to

1)Buy a safe....check.
2)Take out of cash (in case we have a run on banks)....check...
3)Buy a few boxes of cans of food for my family and relatives....check
4)Buy a gallons of water...check
5)Buy a gallons of gas...to do
6)Buy a big, highly capable SUV that can get me,family, and relatives to canada....to do..
7)Find a company to add light body armor and bullet resistent glass to the SUV...to do...
8)Buy a few guns..just in case...to do..

I'm not as concerned about the stock market crashing right now as much. Nor am I really concerned about employment. Because over time (assuming we really don't have a complete meltdown), that will get resolved one way or the other.

But, I guess i'm thinking IF we have a systematic breakdown, and if it's really back to food/shelter/bare necessities..it won't matter if you went long or short in the markets...

Vons store clerk looked at me kinda funny today, because I pretty much filled up a cart full of canned foods.

"Preparing for a natural disaster, like an earthquake?" she asked.

"Disaster of some sort, something like that maam" i said.

Worse comes to worse, all this goes to the food bank a year from now, and we call all laugh about it.

I'm seriously considering putting a deposit down for something like this.
http://www.alpineco.com/inventory/suvs/s...

http://www.alpineco.com/inventory/suvs/s...

You'll need a lot of gas to get that thing to canada!

I'm thinking all those people who bought those big Hummers were on to something. They can just live in that when the house is gone.

Winnebago's stock and sales dropped. You can probably get a deal on one of those and use that both as transportation and shelter.

The only cog in the wheel for both those options is gas. They both suck it down like no tomorrow.

In the end, it won't matter much if you rent or own. And if you stocked up on food and water, you won't need to drive anywhere.

Sorry. This turned out to be a thread hijack.

back to Misheloff. Housing prices in SD are still high. Good discussion about it on OC's blog

Lots of people have called me a "lunatic". So, I am used to it. Mostly it's been "pessimist".
I've just been in the investment world since the late 1970's. I've seen most everything, except what we're seeing now. This is by far, the worst. I doubt we'll really need to have fortifications of food, water, etc...but what's the cost of this stuff? Not much, so why not do it? At an earthquake or any natural disaster could always wander by. Ya never know. Again, very little at risk to have food and water, etc...

But, I feel sure that we will see the DOW between 5000 and 7000 in the next 12 months. And that houses will be priced at a ratio of 1:3 for incomes in the next 4 years. And that we'll see unemployment in the high teens within 24 months. We were headed to this in 2002, but Greenpants elongated it until 2007. And now there's nowhere to run. It's payback time.

I will continue to short the market when it's exhausted it's run up. And buy when the indicators tell me we're through going down. That's all. Beats working for living.