Housing won’t hit bottom ’til 2012

[CA renter]

[quote=deadzone]Looking at the last 10 years a macro level RE price to Stock correlation does exist to some degree, but it is not for the reason you guys are saying. It has nothing to do with individuals feeling more wealthy from their stock portfolios. It has everything to do with the Fed’s interest rate policy.

As we saw in the early 2000s and again in 2009, the easy money from the Fed acts to juice the equity markets. In the case of the 2001 interest rate cuts it also helped launch the housing bubble.[/quote]

deadzone,

You likely know that I am a long-time bear (still renting, and have been doing so since spring 2004, and have been sitting in cash for a long time…waiting for deflation), but even I have to admit that for as long as the stock market is up, housing will not crash as spectacularly as it would if the stock market were to implode.

You have to realize that aside from the very real wealth that is created when stocks rise — and I personally know quite a few who cashed-out options/stocks and purchased real estate — there is the psychological aspect. Many, many people look to the stock market to tell them if the economy is “healthy” or not. Yes, it’s stupid and lends itself to the Fed/govt being able to easily control people’s behavior, but it is what it is.

Yes, the price movement is mostly due to the Fed/govt’s actions (note the last paragraph in my post above about “cheap vs. dear” money), but asset prices tend to move together.

The reason we had the insane rise in housing prices is because the credit bubble (which started in the early 80s) was beginning to wobble during/after the stock market bubble, so the Fed tried to juice the market by dropping rates through the floor. It would seem obvious that there would be a tragic end to this reckless credit expansion, but apparently they don’t care, are sociopathic criminals, or are so painfully stupid that they have no right to control our monetary policy.

Still…the correlation does exist, whether we like it or not (I don’t).

[an]

[quote=jstoesz]AN I tend to agree.

I think the link is not so much causative as correlative.

Lower stock prices harm the economy, and when the economy is harmed home prices drop.

So stock prices do have a causative effect on the economy, there link is not DIRECTLY causative to home values. Sometimes, some other asset class is waiting in the wings (a la 2001).

One other note regarding rent vs. buy. Even in markets outside of california, a favorable rent vs. buy is not enough to buoy the market.

In MN (probably in NV too, but I have no anecdotal evidence there) homes can easily cash flow. My friends who have bought in the last 2 years are still underwater even though they can cash flow their home. Psychologically it helps them stay current, but it is still interesting to note.[/quote]
Like sdr, I agree with you that high end homes tend to fare poorly when comparing against rent. Has it ever fare well against rent?

As you move down the desirability scale, the rent vs buy equation gets better. I never suggest that the lowest the price will drop is parity with rent. But if you’re buying your primary resident, comparing rent vs buy is very different than comparing it for a rental property. Although this might be a cliche, but we all have to live somewhere. Every month that you’re paying more for rent than buy that same property, you’re pay more than you need to, to put a roof over your head. Yes, you can wait a few years and price might bottom then, but how much will you save in nominal price vs how much you’ve thrown away in rent (the $ difference between rent vs buy)?

[an]

[quote=jstoesz]AN I tend to agree.

I think the link is not so much causative as correlative.

Lower stock prices harm the economy, and when the economy is harmed home prices drop.

So stock prices do have a causative effect on the economy, there link is not DIRECTLY causative to home values. Sometimes, some other asset class is waiting in the wings (a la 2001).

One other note regarding rent vs. buy. Even in markets outside of california, a favorable rent vs. buy is not enough to buoy the market.

In MN (probably in NV too, but I have no anecdotal evidence there) homes can easily cash flow. My friends who have bought in the last 2 years are still underwater even though they can cash flow their home. Psychologically it helps them stay current, but it is still interesting to note.[/quote]
Like sdr, I agree with you that high end homes tend to fare poorly when comparing against rent. Has it ever fare well against rent?

As you move down the desirability scale, the rent vs buy equation gets better. I never suggest that the lowest the price will drop is parity with rent. But if you’re buying your primary resident, comparing rent vs buy is very different than comparing it for a rental property. Although this might be a cliche, but we all have to live somewhere. Every month that you’re paying more for rent than buy that same property, you’re pay more than you need to, to put a roof over your head. Yes, you can wait a few years and price might bottom then, but how much will you save in nominal price vs how much you’ve thrown away in rent (the $ difference between rent vs buy)?

[an]

[quote=jstoesz]AN I tend to agree.

I think the link is not so much causative as correlative.

Lower stock prices harm the economy, and when the economy is harmed home prices drop.

So stock prices do have a causative effect on the economy, there link is not DIRECTLY causative to home values. Sometimes, some other asset class is waiting in the wings (a la 2001).

One other note regarding rent vs. buy. Even in markets outside of california, a favorable rent vs. buy is not enough to buoy the market.

In MN (probably in NV too, but I have no anecdotal evidence there) homes can easily cash flow. My friends who have bought in the last 2 years are still underwater even though they can cash flow their home. Psychologically it helps them stay current, but it is still interesting to note.[/quote]
Like sdr, I agree with you that high end homes tend to fare poorly when comparing against rent. Has it ever fare well against rent?

As you move down the desirability scale, the rent vs buy equation gets better. I never suggest that the lowest the price will drop is parity with rent. But if you’re buying your primary resident, comparing rent vs buy is very different than comparing it for a rental property. Although this might be a cliche, but we all have to live somewhere. Every month that you’re paying more for rent than buy that same property, you’re pay more than you need to, to put a roof over your head. Yes, you can wait a few years and price might bottom then, but how much will you save in nominal price vs how much you’ve thrown away in rent (the $ difference between rent vs buy)?

[an]

[quote=jstoesz]AN I tend to agree.

I think the link is not so much causative as correlative.

Lower stock prices harm the economy, and when the economy is harmed home prices drop.

So stock prices do have a causative effect on the economy, there link is not DIRECTLY causative to home values. Sometimes, some other asset class is waiting in the wings (a la 2001).

One other note regarding rent vs. buy. Even in markets outside of california, a favorable rent vs. buy is not enough to buoy the market.

In MN (probably in NV too, but I have no anecdotal evidence there) homes can easily cash flow. My friends who have bought in the last 2 years are still underwater even though they can cash flow their home. Psychologically it helps them stay current, but it is still interesting to note.[/quote]
Like sdr, I agree with you that high end homes tend to fare poorly when comparing against rent. Has it ever fare well against rent?

As you move down the desirability scale, the rent vs buy equation gets better. I never suggest that the lowest the price will drop is parity with rent. But if you’re buying your primary resident, comparing rent vs buy is very different than comparing it for a rental property. Although this might be a cliche, but we all have to live somewhere. Every month that you’re paying more for rent than buy that same property, you’re pay more than you need to, to put a roof over your head. Yes, you can wait a few years and price might bottom then, but how much will you save in nominal price vs how much you’ve thrown away in rent (the $ difference between rent vs buy)?

[an]

[quote=jstoesz]AN I tend to agree.

I think the link is not so much causative as correlative.

Lower stock prices harm the economy, and when the economy is harmed home prices drop.

So stock prices do have a causative effect on the economy, there link is not DIRECTLY causative to home values. Sometimes, some other asset class is waiting in the wings (a la 2001).

One other note regarding rent vs. buy. Even in markets outside of california, a favorable rent vs. buy is not enough to buoy the market.

In MN (probably in NV too, but I have no anecdotal evidence there) homes can easily cash flow. My friends who have bought in the last 2 years are still underwater even though they can cash flow their home. Psychologically it helps them stay current, but it is still interesting to note.[/quote]
Like sdr, I agree with you that high end homes tend to fare poorly when comparing against rent. Has it ever fare well against rent?

As you move down the desirability scale, the rent vs buy equation gets better. I never suggest that the lowest the price will drop is parity with rent. But if you’re buying your primary resident, comparing rent vs buy is very different than comparing it for a rental property. Although this might be a cliche, but we all have to live somewhere. Every month that you’re paying more for rent than buy that same property, you’re pay more than you need to, to put a roof over your head. Yes, you can wait a few years and price might bottom then, but how much will you save in nominal price vs how much you’ve thrown away in rent (the $ difference between rent vs buy)?

[jstoesz]

sdr, I am dying to know, what neighborhood are you living in. You don’t have to give the street or anything, but I really would like to know the area.

100% in 11 years, it looks like you are a good realtor indeed! I guess if I ever move back I will be looking for your advice on this matter.

Maybe I needed to broaden my horizons from Pt. Loma. It would have required a different job as the commute would have slayed me, but I do like some areas of NCC. And as I have recently proven to myself, I can get another job elsewhere…maybe not in NCC though I suppose.

[jstoesz]

sdr, I am dying to know, what neighborhood are you living in. You don’t have to give the street or anything, but I really would like to know the area.

100% in 11 years, it looks like you are a good realtor indeed! I guess if I ever move back I will be looking for your advice on this matter.

Maybe I needed to broaden my horizons from Pt. Loma. It would have required a different job as the commute would have slayed me, but I do like some areas of NCC. And as I have recently proven to myself, I can get another job elsewhere…maybe not in NCC though I suppose.

[jstoesz]

sdr, I am dying to know, what neighborhood are you living in. You don’t have to give the street or anything, but I really would like to know the area.

100% in 11 years, it looks like you are a good realtor indeed! I guess if I ever move back I will be looking for your advice on this matter.

Maybe I needed to broaden my horizons from Pt. Loma. It would have required a different job as the commute would have slayed me, but I do like some areas of NCC. And as I have recently proven to myself, I can get another job elsewhere…maybe not in NCC though I suppose.

[jstoesz]

sdr, I am dying to know, what neighborhood are you living in. You don’t have to give the street or anything, but I really would like to know the area.

100% in 11 years, it looks like you are a good realtor indeed! I guess if I ever move back I will be looking for your advice on this matter.

Maybe I needed to broaden my horizons from Pt. Loma. It would have required a different job as the commute would have slayed me, but I do like some areas of NCC. And as I have recently proven to myself, I can get another job elsewhere…maybe not in NCC though I suppose.

[jstoesz]

sdr, I am dying to know, what neighborhood are you living in. You don’t have to give the street or anything, but I really would like to know the area.

100% in 11 years, it looks like you are a good realtor indeed! I guess if I ever move back I will be looking for your advice on this matter.

Maybe I needed to broaden my horizons from Pt. Loma. It would have required a different job as the commute would have slayed me, but I do like some areas of NCC. And as I have recently proven to myself, I can get another job elsewhere…maybe not in NCC though I suppose.

[jstoesz]

[quote=AN][quote=jstoesz]AN I tend to agree.

I think the link is not so much causative as correlative.

Lower stock prices harm the economy, and when the economy is harmed home prices drop.

So stock prices do have a causative effect on the economy, there link is not DIRECTLY causative to home values. Sometimes, some other asset class is waiting in the wings (a la 2001).

One other note regarding rent vs. buy. Even in markets outside of california, a favorable rent vs. buy is not enough to buoy the market.

In MN (probably in NV too, but I have no anecdotal evidence there) homes can easily cash flow. My friends who have bought in the last 2 years are still underwater even though they can cash flow their home. Psychologically it helps them stay current, but it is still interesting to note.[/quote]
Like sdr, I agree with you that high end homes tend to fare poorly when comparing against rent. Has it ever fare well against rent?

As you move down the desirability scale, the rent vs buy equation gets better. I never suggest that the lowest the price will drop is parity with rent. But if you’re buying your primary resident, comparing rent vs buy is very different than comparing it for a rental property. Although this might be a cliche, but we all have to live somewhere. Every month that you’re paying more for rent than buy that same property, you’re pay more than you need to, to put a roof over your head. Yes, you can wait a few years and price might bottom then, but how much will you save in nominal price vs how much you’ve thrown away in rent (the $ difference between rent vs buy)?[/quote]

Its an opportunity cost thing. If a home is a roof over your head (which it is not, it is a home with an ethereal awesomeness) then the question is could you get a better, safer return with all of your equity elsewhere. In today’s market of low yields, maybe not. I would have to do a detailed analysis, if I were in the position of having gobs of equity (which I don’t). But RE looks like a losing bet to me, at least in the neighborhoods of SD I like and in the near term.

That ethereal stuff is tricky…

[jstoesz]

[quote=AN][quote=jstoesz]AN I tend to agree.

I think the link is not so much causative as correlative.

Lower stock prices harm the economy, and when the economy is harmed home prices drop.

So stock prices do have a causative effect on the economy, there link is not DIRECTLY causative to home values. Sometimes, some other asset class is waiting in the wings (a la 2001).

One other note regarding rent vs. buy. Even in markets outside of california, a favorable rent vs. buy is not enough to buoy the market.

In MN (probably in NV too, but I have no anecdotal evidence there) homes can easily cash flow. My friends who have bought in the last 2 years are still underwater even though they can cash flow their home. Psychologically it helps them stay current, but it is still interesting to note.[/quote]
Like sdr, I agree with you that high end homes tend to fare poorly when comparing against rent. Has it ever fare well against rent?

As you move down the desirability scale, the rent vs buy equation gets better. I never suggest that the lowest the price will drop is parity with rent. But if you’re buying your primary resident, comparing rent vs buy is very different than comparing it for a rental property. Although this might be a cliche, but we all have to live somewhere. Every month that you’re paying more for rent than buy that same property, you’re pay more than you need to, to put a roof over your head. Yes, you can wait a few years and price might bottom then, but how much will you save in nominal price vs how much you’ve thrown away in rent (the $ difference between rent vs buy)?[/quote]

Its an opportunity cost thing. If a home is a roof over your head (which it is not, it is a home with an ethereal awesomeness) then the question is could you get a better, safer return with all of your equity elsewhere. In today’s market of low yields, maybe not. I would have to do a detailed analysis, if I were in the position of having gobs of equity (which I don’t). But RE looks like a losing bet to me, at least in the neighborhoods of SD I like and in the near term.

That ethereal stuff is tricky…

[jstoesz]

[quote=AN][quote=jstoesz]AN I tend to agree.

I think the link is not so much causative as correlative.

Lower stock prices harm the economy, and when the economy is harmed home prices drop.

So stock prices do have a causative effect on the economy, there link is not DIRECTLY causative to home values. Sometimes, some other asset class is waiting in the wings (a la 2001).

One other note regarding rent vs. buy. Even in markets outside of california, a favorable rent vs. buy is not enough to buoy the market.

In MN (probably in NV too, but I have no anecdotal evidence there) homes can easily cash flow. My friends who have bought in the last 2 years are still underwater even though they can cash flow their home. Psychologically it helps them stay current, but it is still interesting to note.[/quote]
Like sdr, I agree with you that high end homes tend to fare poorly when comparing against rent. Has it ever fare well against rent?

As you move down the desirability scale, the rent vs buy equation gets better. I never suggest that the lowest the price will drop is parity with rent. But if you’re buying your primary resident, comparing rent vs buy is very different than comparing it for a rental property. Although this might be a cliche, but we all have to live somewhere. Every month that you’re paying more for rent than buy that same property, you’re pay more than you need to, to put a roof over your head. Yes, you can wait a few years and price might bottom then, but how much will you save in nominal price vs how much you’ve thrown away in rent (the $ difference between rent vs buy)?[/quote]

Its an opportunity cost thing. If a home is a roof over your head (which it is not, it is a home with an ethereal awesomeness) then the question is could you get a better, safer return with all of your equity elsewhere. In today’s market of low yields, maybe not. I would have to do a detailed analysis, if I were in the position of having gobs of equity (which I don’t). But RE looks like a losing bet to me, at least in the neighborhoods of SD I like and in the near term.

That ethereal stuff is tricky…

[jstoesz]

[quote=AN][quote=jstoesz]AN I tend to agree.

I think the link is not so much causative as correlative.

Lower stock prices harm the economy, and when the economy is harmed home prices drop.

So stock prices do have a causative effect on the economy, there link is not DIRECTLY causative to home values. Sometimes, some other asset class is waiting in the wings (a la 2001).

One other note regarding rent vs. buy. Even in markets outside of california, a favorable rent vs. buy is not enough to buoy the market.

In MN (probably in NV too, but I have no anecdotal evidence there) homes can easily cash flow. My friends who have bought in the last 2 years are still underwater even though they can cash flow their home. Psychologically it helps them stay current, but it is still interesting to note.[/quote]
Like sdr, I agree with you that high end homes tend to fare poorly when comparing against rent. Has it ever fare well against rent?

As you move down the desirability scale, the rent vs buy equation gets better. I never suggest that the lowest the price will drop is parity with rent. But if you’re buying your primary resident, comparing rent vs buy is very different than comparing it for a rental property. Although this might be a cliche, but we all have to live somewhere. Every month that you’re paying more for rent than buy that same property, you’re pay more than you need to, to put a roof over your head. Yes, you can wait a few years and price might bottom then, but how much will you save in nominal price vs how much you’ve thrown away in rent (the $ difference between rent vs buy)?[/quote]

Its an opportunity cost thing. If a home is a roof over your head (which it is not, it is a home with an ethereal awesomeness) then the question is could you get a better, safer return with all of your equity elsewhere. In today’s market of low yields, maybe not. I would have to do a detailed analysis, if I were in the position of having gobs of equity (which I don’t). But RE looks like a losing bet to me, at least in the neighborhoods of SD I like and in the near term.

That ethereal stuff is tricky…

[Author]

Posts