The housing bubble is over!

[Daniel]

Follow-up to my previous comment: it may seem hard to believe to some, but there was a time in the recent past (late nineties) when oil, gold or the euro went down abruptly against the dollar. When measured by these yardsticks, prices of everything from toasters to tomatoes rocketed upwards. I didn’t hear anybody complaining that jeans prices tripled when measured in oil, and were therefore too expensive. Did you?

And another thing: there is current inflation, and a lot of it, outside the US. That is because many people worldwide used to keep their savings in dollars. They are the ones “being robbed”. But they can’t really blame the Fed: there is no mandate for the Fed to keep inflation low in Brazil or Kazahstan. Individuals and central banks outside the US keeping their savings in dollars did so at their own risk. They may think “fool me once, shame on you, fool me twice, shame on me”, and move away from the dollar, and that would hurt us. Fair enough. But, again, the bond market would go haywire if this happens. Interest rates would go up. That’s not good for housing prices, nominal or otherwise.

[tothjj]

This is one of the best threads I have read in a while. Nice post D.M.
The only problem I see with the argument is that it seems to make sense in a hypothetical sense (meaning I do understand and can rationalize your argument), but it doesn’t seem to work in a real world scenario. Incomes have not risen as the dollar has been devalued. So a 700k house that was 400k five years ago is still expensive to most buyers. Milk may have gone up 80%, but I can still buy milk. Housing went up 80%, and while it has come down a bit, it is still out of my price range. I guess I am looking at it in layman’s terms. To the average Joe, these houses are still out of reach for most Americans.

[tothjj]

This is one of the best threads I have read in a while. Nice post D.M.
The only problem I see with the argument is that it seems to make sense in a hypothetical sense (meaning I do understand and can rationalize your argument), but it doesn’t seem to work in a real world scenario. Incomes have not risen as the dollar has been devalued. So a 700k house that was 400k five years ago is still expensive to most buyers. Milk may have gone up 80%, but I can still buy milk. Housing went up 80%, and while it has come down a bit, it is still out of my price range. I guess I am looking at it in layman’s terms. To the average Joe, these houses are still out of reach for most Americans.

[tothjj]

This is one of the best threads I have read in a while. Nice post D.M.
The only problem I see with the argument is that it seems to make sense in a hypothetical sense (meaning I do understand and can rationalize your argument), but it doesn’t seem to work in a real world scenario. Incomes have not risen as the dollar has been devalued. So a 700k house that was 400k five years ago is still expensive to most buyers. Milk may have gone up 80%, but I can still buy milk. Housing went up 80%, and while it has come down a bit, it is still out of my price range. I guess I am looking at it in layman’s terms. To the average Joe, these houses are still out of reach for most Americans.

[tothjj]

This is one of the best threads I have read in a while. Nice post D.M.
The only problem I see with the argument is that it seems to make sense in a hypothetical sense (meaning I do understand and can rationalize your argument), but it doesn’t seem to work in a real world scenario. Incomes have not risen as the dollar has been devalued. So a 700k house that was 400k five years ago is still expensive to most buyers. Milk may have gone up 80%, but I can still buy milk. Housing went up 80%, and while it has come down a bit, it is still out of my price range. I guess I am looking at it in layman’s terms. To the average Joe, these houses are still out of reach for most Americans.

[tothjj]

This is one of the best threads I have read in a while. Nice post D.M.
The only problem I see with the argument is that it seems to make sense in a hypothetical sense (meaning I do understand and can rationalize your argument), but it doesn’t seem to work in a real world scenario. Incomes have not risen as the dollar has been devalued. So a 700k house that was 400k five years ago is still expensive to most buyers. Milk may have gone up 80%, but I can still buy milk. Housing went up 80%, and while it has come down a bit, it is still out of my price range. I guess I am looking at it in layman’s terms. To the average Joe, these houses are still out of reach for most Americans.

[peterb]

I remember when the Euro traded for about $.90 USD in 2001 or 2002. Now it’s about $1.53 USD. Gold was much less as well. These are investments. They go up and down. Buying a house is an investment as well. They go up and down. There are fundemental reasons as well as emotional reasons that these investment move in price. Although one could argue that the cost of a house in the OC is now less than it was in 2000 (when valued in inflation adjusted dollars), using this as a marker for the “Ending of the Bubble Bursting” is premature given other factors, IMO.
A median house in SD County has historically cost about 7 times what the median income is when housing has been a relatively negative emotional purchase..i.e..3rd or 4th year of a RE down cycle. I think using this as a gauge is a more accurate measure of when the prices will stop dropping. This shows the level at which people are willing to buy even when the investment does not look that appealing. Of course other factors have an effect, like interest rates, availability of credit, etc…but this ratio seems to have a strong track record even when all other variables are considered.

In SD County the median price is still about 11 times the median income. So it’s still very high, historically speaking. And RE now has a very negative investment appeal. No matter how you measure inflation, which I personally think is vastly under reported, using historical ratio’s of income to prices will probably be a more accurate way to predict the bottom than calculating the effects of inflation on the USD.

[peterb]

I remember when the Euro traded for about $.90 USD in 2001 or 2002. Now it’s about $1.53 USD. Gold was much less as well. These are investments. They go up and down. Buying a house is an investment as well. They go up and down. There are fundemental reasons as well as emotional reasons that these investment move in price. Although one could argue that the cost of a house in the OC is now less than it was in 2000 (when valued in inflation adjusted dollars), using this as a marker for the “Ending of the Bubble Bursting” is premature given other factors, IMO.
A median house in SD County has historically cost about 7 times what the median income is when housing has been a relatively negative emotional purchase..i.e..3rd or 4th year of a RE down cycle. I think using this as a gauge is a more accurate measure of when the prices will stop dropping. This shows the level at which people are willing to buy even when the investment does not look that appealing. Of course other factors have an effect, like interest rates, availability of credit, etc…but this ratio seems to have a strong track record even when all other variables are considered.

In SD County the median price is still about 11 times the median income. So it’s still very high, historically speaking. And RE now has a very negative investment appeal. No matter how you measure inflation, which I personally think is vastly under reported, using historical ratio’s of income to prices will probably be a more accurate way to predict the bottom than calculating the effects of inflation on the USD.

[peterb]

I remember when the Euro traded for about $.90 USD in 2001 or 2002. Now it’s about $1.53 USD. Gold was much less as well. These are investments. They go up and down. Buying a house is an investment as well. They go up and down. There are fundemental reasons as well as emotional reasons that these investment move in price. Although one could argue that the cost of a house in the OC is now less than it was in 2000 (when valued in inflation adjusted dollars), using this as a marker for the “Ending of the Bubble Bursting” is premature given other factors, IMO.
A median house in SD County has historically cost about 7 times what the median income is when housing has been a relatively negative emotional purchase..i.e..3rd or 4th year of a RE down cycle. I think using this as a gauge is a more accurate measure of when the prices will stop dropping. This shows the level at which people are willing to buy even when the investment does not look that appealing. Of course other factors have an effect, like interest rates, availability of credit, etc…but this ratio seems to have a strong track record even when all other variables are considered.

In SD County the median price is still about 11 times the median income. So it’s still very high, historically speaking. And RE now has a very negative investment appeal. No matter how you measure inflation, which I personally think is vastly under reported, using historical ratio’s of income to prices will probably be a more accurate way to predict the bottom than calculating the effects of inflation on the USD.

[peterb]

I remember when the Euro traded for about $.90 USD in 2001 or 2002. Now it’s about $1.53 USD. Gold was much less as well. These are investments. They go up and down. Buying a house is an investment as well. They go up and down. There are fundemental reasons as well as emotional reasons that these investment move in price. Although one could argue that the cost of a house in the OC is now less than it was in 2000 (when valued in inflation adjusted dollars), using this as a marker for the “Ending of the Bubble Bursting” is premature given other factors, IMO.
A median house in SD County has historically cost about 7 times what the median income is when housing has been a relatively negative emotional purchase..i.e..3rd or 4th year of a RE down cycle. I think using this as a gauge is a more accurate measure of when the prices will stop dropping. This shows the level at which people are willing to buy even when the investment does not look that appealing. Of course other factors have an effect, like interest rates, availability of credit, etc…but this ratio seems to have a strong track record even when all other variables are considered.

In SD County the median price is still about 11 times the median income. So it’s still very high, historically speaking. And RE now has a very negative investment appeal. No matter how you measure inflation, which I personally think is vastly under reported, using historical ratio’s of income to prices will probably be a more accurate way to predict the bottom than calculating the effects of inflation on the USD.

[peterb]

I remember when the Euro traded for about $.90 USD in 2001 or 2002. Now it’s about $1.53 USD. Gold was much less as well. These are investments. They go up and down. Buying a house is an investment as well. They go up and down. There are fundemental reasons as well as emotional reasons that these investment move in price. Although one could argue that the cost of a house in the OC is now less than it was in 2000 (when valued in inflation adjusted dollars), using this as a marker for the “Ending of the Bubble Bursting” is premature given other factors, IMO.
A median house in SD County has historically cost about 7 times what the median income is when housing has been a relatively negative emotional purchase..i.e..3rd or 4th year of a RE down cycle. I think using this as a gauge is a more accurate measure of when the prices will stop dropping. This shows the level at which people are willing to buy even when the investment does not look that appealing. Of course other factors have an effect, like interest rates, availability of credit, etc…but this ratio seems to have a strong track record even when all other variables are considered.

In SD County the median price is still about 11 times the median income. So it’s still very high, historically speaking. And RE now has a very negative investment appeal. No matter how you measure inflation, which I personally think is vastly under reported, using historical ratio’s of income to prices will probably be a more accurate way to predict the bottom than calculating the effects of inflation on the USD.

[jpinpb]

I remember seeing somewhere that oil, gold and Euro was a bubble. I admit my lack of knowledge on this topic.

However, I also remember hearing that some countries in Europe are also having a housing crisis. Will that hurt the value of the Euro down the road?

[jpinpb]

I remember seeing somewhere that oil, gold and Euro was a bubble. I admit my lack of knowledge on this topic.

However, I also remember hearing that some countries in Europe are also having a housing crisis. Will that hurt the value of the Euro down the road?

[jpinpb]

I remember seeing somewhere that oil, gold and Euro was a bubble. I admit my lack of knowledge on this topic.

However, I also remember hearing that some countries in Europe are also having a housing crisis. Will that hurt the value of the Euro down the road?

[jpinpb]

I remember seeing somewhere that oil, gold and Euro was a bubble. I admit my lack of knowledge on this topic.

However, I also remember hearing that some countries in Europe are also having a housing crisis. Will that hurt the value of the Euro down the road?

[Author]

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