Robert Shiller – home prices could slide for 20 years?

[DaCounselor]

This country is littered with once-great neighborhoods that have declined for a variety of reasons. Neighborhoods where in their prime it was inconceivable to most that there could be such an eventual result. As it has been, as it always will be.

The wonderous built-out NYC, THE city post-WWII, began its decline in the 60’s and was significantly mired for at least 20 years until the resurgence of Wall St., though some would say it was mired for 30 years until Guiliani stepped in. Inconceivable. Now NYC is faced with its own RE bubble and a severe budget problem. NYC may be on the precipace of another great downturn.

Regarding coastal SD RE, haven’t attached homes devalued significantly? How can this be if the area is immune? Or is it only SFRs that are immune? Or only the very top 1% of SFRs with views and big lots and etc etc? What is the criteria to be immune?

Personally I beleive that in the end there will be plenty of suffering and devaluation to go around, including those who beleive they may be insulated because of their zip code, school rating or their view.

[Aecetia]

I concur with DaCounselor, no one and nothing is immune. Once people catch on that the government has been printing funny money and the economy has not bounced back there will be another downturn. How steep, how long and who will be the most impacted will hinge a lot on geo politics and what happens in 2012. We shall see. I do not expect a big real estate resurgence to pull the economy out of the doldrums for another ten years at least. I hope I am wrong, though for the sake of this country.

[Aecetia]

I concur with DaCounselor, no one and nothing is immune. Once people catch on that the government has been printing funny money and the economy has not bounced back there will be another downturn. How steep, how long and who will be the most impacted will hinge a lot on geo politics and what happens in 2012. We shall see. I do not expect a big real estate resurgence to pull the economy out of the doldrums for another ten years at least. I hope I am wrong, though for the sake of this country.

[Aecetia]

I concur with DaCounselor, no one and nothing is immune. Once people catch on that the government has been printing funny money and the economy has not bounced back there will be another downturn. How steep, how long and who will be the most impacted will hinge a lot on geo politics and what happens in 2012. We shall see. I do not expect a big real estate resurgence to pull the economy out of the doldrums for another ten years at least. I hope I am wrong, though for the sake of this country.

[Aecetia]

I concur with DaCounselor, no one and nothing is immune. Once people catch on that the government has been printing funny money and the economy has not bounced back there will be another downturn. How steep, how long and who will be the most impacted will hinge a lot on geo politics and what happens in 2012. We shall see. I do not expect a big real estate resurgence to pull the economy out of the doldrums for another ten years at least. I hope I am wrong, though for the sake of this country.

[Aecetia]

I concur with DaCounselor, no one and nothing is immune. Once people catch on that the government has been printing funny money and the economy has not bounced back there will be another downturn. How steep, how long and who will be the most impacted will hinge a lot on geo politics and what happens in 2012. We shall see. I do not expect a big real estate resurgence to pull the economy out of the doldrums for another ten years at least. I hope I am wrong, though for the sake of this country.

[Rich Toscano]

Thanks again TG.. you are too kind! That video was really cool, and I too am very excited about and (long-term) hopeful for alternative energy. But we’ve got a very long way to go there. Last year, (per the BP Statistical Review, as helpful summarized by Gregor Macdonald here: http://gregor.us/solar/global-energy-use-by-source-in-2010/ ) alternative energy accounted for 1.3% of global energy use. That was up 36% from the prior year, which is great… but it was up from an incredibly small share to begin with, and remains quite small. Even if a profitable alt energy source could be developed, it would take quite some time to develop it to get to the SCALE at which it is producing a significant enough amount of global power usage that it is significantly impacting demand for fossil fuels. In the meantime, global oil production has been flat for 5-6 years as global demand has remained in a steady uptrend outside the 08-09 recession.

So I share your optimism on the future of alt energy but the key word there is “future.” In the meantime we are facing a situation of constrained supply and growing demand for oil… imho, this (along with the nominal tailwind provided by currency debasement) provides fundamental justification for high (compared to what we’re used to) oil prices.

[Rich Toscano]

Thanks again TG.. you are too kind! That video was really cool, and I too am very excited about and (long-term) hopeful for alternative energy. But we’ve got a very long way to go there. Last year, (per the BP Statistical Review, as helpful summarized by Gregor Macdonald here: http://gregor.us/solar/global-energy-use-by-source-in-2010/ ) alternative energy accounted for 1.3% of global energy use. That was up 36% from the prior year, which is great… but it was up from an incredibly small share to begin with, and remains quite small. Even if a profitable alt energy source could be developed, it would take quite some time to develop it to get to the SCALE at which it is producing a significant enough amount of global power usage that it is significantly impacting demand for fossil fuels. In the meantime, global oil production has been flat for 5-6 years as global demand has remained in a steady uptrend outside the 08-09 recession.

So I share your optimism on the future of alt energy but the key word there is “future.” In the meantime we are facing a situation of constrained supply and growing demand for oil… imho, this (along with the nominal tailwind provided by currency debasement) provides fundamental justification for high (compared to what we’re used to) oil prices.

[Rich Toscano]

Thanks again TG.. you are too kind! That video was really cool, and I too am very excited about and (long-term) hopeful for alternative energy. But we’ve got a very long way to go there. Last year, (per the BP Statistical Review, as helpful summarized by Gregor Macdonald here: http://gregor.us/solar/global-energy-use-by-source-in-2010/ ) alternative energy accounted for 1.3% of global energy use. That was up 36% from the prior year, which is great… but it was up from an incredibly small share to begin with, and remains quite small. Even if a profitable alt energy source could be developed, it would take quite some time to develop it to get to the SCALE at which it is producing a significant enough amount of global power usage that it is significantly impacting demand for fossil fuels. In the meantime, global oil production has been flat for 5-6 years as global demand has remained in a steady uptrend outside the 08-09 recession.

So I share your optimism on the future of alt energy but the key word there is “future.” In the meantime we are facing a situation of constrained supply and growing demand for oil… imho, this (along with the nominal tailwind provided by currency debasement) provides fundamental justification for high (compared to what we’re used to) oil prices.

[Rich Toscano]

Thanks again TG.. you are too kind! That video was really cool, and I too am very excited about and (long-term) hopeful for alternative energy. But we’ve got a very long way to go there. Last year, (per the BP Statistical Review, as helpful summarized by Gregor Macdonald here: http://gregor.us/solar/global-energy-use-by-source-in-2010/ ) alternative energy accounted for 1.3% of global energy use. That was up 36% from the prior year, which is great… but it was up from an incredibly small share to begin with, and remains quite small. Even if a profitable alt energy source could be developed, it would take quite some time to develop it to get to the SCALE at which it is producing a significant enough amount of global power usage that it is significantly impacting demand for fossil fuels. In the meantime, global oil production has been flat for 5-6 years as global demand has remained in a steady uptrend outside the 08-09 recession.

So I share your optimism on the future of alt energy but the key word there is “future.” In the meantime we are facing a situation of constrained supply and growing demand for oil… imho, this (along with the nominal tailwind provided by currency debasement) provides fundamental justification for high (compared to what we’re used to) oil prices.

[Rich Toscano]

Thanks again TG.. you are too kind! That video was really cool, and I too am very excited about and (long-term) hopeful for alternative energy. But we’ve got a very long way to go there. Last year, (per the BP Statistical Review, as helpful summarized by Gregor Macdonald here: http://gregor.us/solar/global-energy-use-by-source-in-2010/ ) alternative energy accounted for 1.3% of global energy use. That was up 36% from the prior year, which is great… but it was up from an incredibly small share to begin with, and remains quite small. Even if a profitable alt energy source could be developed, it would take quite some time to develop it to get to the SCALE at which it is producing a significant enough amount of global power usage that it is significantly impacting demand for fossil fuels. In the meantime, global oil production has been flat for 5-6 years as global demand has remained in a steady uptrend outside the 08-09 recession.

So I share your optimism on the future of alt energy but the key word there is “future.” In the meantime we are facing a situation of constrained supply and growing demand for oil… imho, this (along with the nominal tailwind provided by currency debasement) provides fundamental justification for high (compared to what we’re used to) oil prices.

[zk]

[quote=Rich Toscano]
The counterargument would be that Japan was in deflation and we too could go into a 20 year deflation, but for reasons I have discussed many times and in great depth, there is no chance that this will happen. No chance. And I think the 3% inflation figure used in the above calculation will almost certainly prove to be significantly low.

Shiller has done some excellent and important work on the topic of valuations and of market booms and busts, but he has his areas he focuses on and areas he doesn’t. Notably, he pays virtually no attention to the imbalances caused by our coming-apart-at-the-seams monetary system (except inasmuch as they have influenced the historical CPI, which to his credit he accounts for). Only by ignoring that topic could he predict a 20 year decline in the nominal price of housing. This blind spot is also imho why he is seeing bubbles where there are none (oil and gold) while ignoring the actual bubble (Treasuries — not really a greed-driven bubble in the traditional sense, but worlds closer to being an actual bubble than oil or gold).[/quote]

This brings up a question I have for you, Rich.

If I’m not mistaken (and I easily could be) a lot of your predictions are based on the idea that helicopter Ben et al will take extreme measures to prevent deflation, regardless of the risk to the dollar. To me, it seems as though – I won’t say the political winds are changing, but – there is at least a whiff of “the deficit/debt is our biggest problem, we must do everything we can to fix it” out there. I suppose it could just be talk from politicians pandering to their constituents. But it seems to be picking up momentum.

One theory says that, at some point inflation will take hold and spiral away before we can catch it. Another says that deflation could do the same thing. Do you think there’s a meaningful chance that this “fix the debt” idea will get enough support that our politicians will stop throwing printed money at the situation long enough for deflation to actually take hold? Or at least to prevent serious inflation?

[zk]

[quote=Rich Toscano]
The counterargument would be that Japan was in deflation and we too could go into a 20 year deflation, but for reasons I have discussed many times and in great depth, there is no chance that this will happen. No chance. And I think the 3% inflation figure used in the above calculation will almost certainly prove to be significantly low.

Shiller has done some excellent and important work on the topic of valuations and of market booms and busts, but he has his areas he focuses on and areas he doesn’t. Notably, he pays virtually no attention to the imbalances caused by our coming-apart-at-the-seams monetary system (except inasmuch as they have influenced the historical CPI, which to his credit he accounts for). Only by ignoring that topic could he predict a 20 year decline in the nominal price of housing. This blind spot is also imho why he is seeing bubbles where there are none (oil and gold) while ignoring the actual bubble (Treasuries — not really a greed-driven bubble in the traditional sense, but worlds closer to being an actual bubble than oil or gold).[/quote]

This brings up a question I have for you, Rich.

If I’m not mistaken (and I easily could be) a lot of your predictions are based on the idea that helicopter Ben et al will take extreme measures to prevent deflation, regardless of the risk to the dollar. To me, it seems as though – I won’t say the political winds are changing, but – there is at least a whiff of “the deficit/debt is our biggest problem, we must do everything we can to fix it” out there. I suppose it could just be talk from politicians pandering to their constituents. But it seems to be picking up momentum.

One theory says that, at some point inflation will take hold and spiral away before we can catch it. Another says that deflation could do the same thing. Do you think there’s a meaningful chance that this “fix the debt” idea will get enough support that our politicians will stop throwing printed money at the situation long enough for deflation to actually take hold? Or at least to prevent serious inflation?

[zk]

[quote=Rich Toscano]
The counterargument would be that Japan was in deflation and we too could go into a 20 year deflation, but for reasons I have discussed many times and in great depth, there is no chance that this will happen. No chance. And I think the 3% inflation figure used in the above calculation will almost certainly prove to be significantly low.

Shiller has done some excellent and important work on the topic of valuations and of market booms and busts, but he has his areas he focuses on and areas he doesn’t. Notably, he pays virtually no attention to the imbalances caused by our coming-apart-at-the-seams monetary system (except inasmuch as they have influenced the historical CPI, which to his credit he accounts for). Only by ignoring that topic could he predict a 20 year decline in the nominal price of housing. This blind spot is also imho why he is seeing bubbles where there are none (oil and gold) while ignoring the actual bubble (Treasuries — not really a greed-driven bubble in the traditional sense, but worlds closer to being an actual bubble than oil or gold).[/quote]

This brings up a question I have for you, Rich.

If I’m not mistaken (and I easily could be) a lot of your predictions are based on the idea that helicopter Ben et al will take extreme measures to prevent deflation, regardless of the risk to the dollar. To me, it seems as though – I won’t say the political winds are changing, but – there is at least a whiff of “the deficit/debt is our biggest problem, we must do everything we can to fix it” out there. I suppose it could just be talk from politicians pandering to their constituents. But it seems to be picking up momentum.

One theory says that, at some point inflation will take hold and spiral away before we can catch it. Another says that deflation could do the same thing. Do you think there’s a meaningful chance that this “fix the debt” idea will get enough support that our politicians will stop throwing printed money at the situation long enough for deflation to actually take hold? Or at least to prevent serious inflation?

[zk]

[quote=Rich Toscano]
The counterargument would be that Japan was in deflation and we too could go into a 20 year deflation, but for reasons I have discussed many times and in great depth, there is no chance that this will happen. No chance. And I think the 3% inflation figure used in the above calculation will almost certainly prove to be significantly low.

Shiller has done some excellent and important work on the topic of valuations and of market booms and busts, but he has his areas he focuses on and areas he doesn’t. Notably, he pays virtually no attention to the imbalances caused by our coming-apart-at-the-seams monetary system (except inasmuch as they have influenced the historical CPI, which to his credit he accounts for). Only by ignoring that topic could he predict a 20 year decline in the nominal price of housing. This blind spot is also imho why he is seeing bubbles where there are none (oil and gold) while ignoring the actual bubble (Treasuries — not really a greed-driven bubble in the traditional sense, but worlds closer to being an actual bubble than oil or gold).[/quote]

This brings up a question I have for you, Rich.

If I’m not mistaken (and I easily could be) a lot of your predictions are based on the idea that helicopter Ben et al will take extreme measures to prevent deflation, regardless of the risk to the dollar. To me, it seems as though – I won’t say the political winds are changing, but – there is at least a whiff of “the deficit/debt is our biggest problem, we must do everything we can to fix it” out there. I suppose it could just be talk from politicians pandering to their constituents. But it seems to be picking up momentum.

One theory says that, at some point inflation will take hold and spiral away before we can catch it. Another says that deflation could do the same thing. Do you think there’s a meaningful chance that this “fix the debt” idea will get enough support that our politicians will stop throwing printed money at the situation long enough for deflation to actually take hold? Or at least to prevent serious inflation?

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