What if it doesn’t collapse?

[HereWeGo]

With the weak dollar, foreigners could try the landlord game.

[rb_engineer]

I think the issue is economy. Its surprisingly resilient. Yes, people are losing jobs but unemployment is low. There are mortgage lenders going under everyday but then there are companies that are soaring (amylin, invitrogen, intuit?). I don’t know why but people are still buying homes. There are many examples of people losing their shirt on the houses but there are just as many who are selling at premiums even now (think north county coastal). I think if the general population think owning a house is too expensive, that’s not a bearish signal. When people are worrying more about their basic needs (food, rent, etc) that would signal a recession for me.

[rb_engineer]

I think the issue is economy. Its surprisingly resilient. Yes, people are losing jobs but unemployment is low. There are mortgage lenders going under everyday but then there are companies that are soaring (amylin, invitrogen, intuit?). I don’t know why but people are still buying homes. There are many examples of people losing their shirt on the houses but there are just as many who are selling at premiums even now (think north county coastal). I think if the general population think owning a house is too expensive, that’s not a bearish signal. When people are worrying more about their basic needs (food, rent, etc) that would signal a recession for me.

[rb_engineer]

I think the issue is economy. Its surprisingly resilient. Yes, people are losing jobs but unemployment is low. There are mortgage lenders going under everyday but then there are companies that are soaring (amylin, invitrogen, intuit?). I don’t know why but people are still buying homes. There are many examples of people losing their shirt on the houses but there are just as many who are selling at premiums even now (think north county coastal). I think if the general population think owning a house is too expensive, that’s not a bearish signal. When people are worrying more about their basic needs (food, rent, etc) that would signal a recession for me.

[kewp]

With the weak dollar, foreigners could try the landlord game.

Ahh, you beat me to it!

My first response is usually that it would take all SD wage earners salaries to triple overnight to prevent a collapse at this point.

However, imagine the doomsday scenario of a collapsed economy, housing market and dollar. Something like whats happening in Detroit going on nationwide. The market turning illiquid in parts of SD county.

The gummint could create a bailout of sorts by granting immediate US citizenship to anyone (and their immediate family) when buying a property. If the dollar sinks low enough, I can easily imagine a large influx of middle-to-upper class Asian familes immigrating in droves (both Indian and Chinese). America will seem like a bargain, particularly to the Taiwanese and Japanese. If they can find work of course, that is.

I can also forsee Mexican families (especially ones with multiple wage earners) pooling resources and snapping up properties in the IE at bargain prices.

This will, of course, give the xenophobes stress-attacks. Kind of an added bonus, I would think!

[kewp]

With the weak dollar, foreigners could try the landlord game.

Ahh, you beat me to it!

My first response is usually that it would take all SD wage earners salaries to triple overnight to prevent a collapse at this point.

However, imagine the doomsday scenario of a collapsed economy, housing market and dollar. Something like whats happening in Detroit going on nationwide. The market turning illiquid in parts of SD county.

The gummint could create a bailout of sorts by granting immediate US citizenship to anyone (and their immediate family) when buying a property. If the dollar sinks low enough, I can easily imagine a large influx of middle-to-upper class Asian familes immigrating in droves (both Indian and Chinese). America will seem like a bargain, particularly to the Taiwanese and Japanese. If they can find work of course, that is.

I can also forsee Mexican families (especially ones with multiple wage earners) pooling resources and snapping up properties in the IE at bargain prices.

This will, of course, give the xenophobes stress-attacks. Kind of an added bonus, I would think!

[kewp]

With the weak dollar, foreigners could try the landlord game.

Ahh, you beat me to it!

My first response is usually that it would take all SD wage earners salaries to triple overnight to prevent a collapse at this point.

However, imagine the doomsday scenario of a collapsed economy, housing market and dollar. Something like whats happening in Detroit going on nationwide. The market turning illiquid in parts of SD county.

The gummint could create a bailout of sorts by granting immediate US citizenship to anyone (and their immediate family) when buying a property. If the dollar sinks low enough, I can easily imagine a large influx of middle-to-upper class Asian familes immigrating in droves (both Indian and Chinese). America will seem like a bargain, particularly to the Taiwanese and Japanese. If they can find work of course, that is.

I can also forsee Mexican families (especially ones with multiple wage earners) pooling resources and snapping up properties in the IE at bargain prices.

This will, of course, give the xenophobes stress-attacks. Kind of an added bonus, I would think!

[hipmatt]

Really, housing only averages the same rate of return as inflation. Of coarse there are bubbles, and busts, but over the long haul, housing will usually “cost” a relatively fixed percentage of what the average household/individual makes. This percentage will fluctuate from time to time, but it is just one of many things that most people (people who live in housing that has monetary value) have to spend money on. This is how it has been for years, and how it will be for years.

There are other things in life that are just as mandatory for survival as owning or renting a home. For those of us that eat or drive, food and gas/energy will take up a certain percentage of our incomes. Health care, consumer staple products, clothing, education, cars/transportation, furniture, and more or less are all costs that most people in life will eventually have to spend money on, just as they do housing or food. Together they all add up to the cost of living. The change or increase in the cost of living is known as inflation. The cost of living will usually go up over time, usually in tandem with incomes.

It would be rare for the cost of housing to remain at such a relatively high ratio to incomes, with the exception of a bubble. This is the current situation that we face. There are so many reasons why we are in this huge deflating housing bubble, and I won’t rehash these, but they are in many other threads here. Bubbles deflate, and usually they over correct. There is virtually no chance that housing prices will stay “this high”. There are only a few ways this could feasibly happen.

A. The lower and middle class of America (think retail, education, service sector, police, fire, blue collar, some sales) gets huge increases in their wages to allow them to afford the current high prices. – this is not happening, most of the rise in incomes is seen in the upper class.

B. The cost of everything else drops and allows us to spend more money on housing. – this is not happening either, food, gas, energy, health care, even consumer staples are on the rise. Virtually nothing is getting cheaper except some tech items. Non-housing costs are rising fast, especially after the massive credit/housing boom, and they will rise further if rates are cut.

C. All of a sudden the supply of homes, land or supplies to build them was running out. We all know the current situation with resale and new home inventory.. it is at record levels and not dropping. There is still plenty of land to build on from Las Vegas to Phoenix to Seattle to Dallas. Inventory, construction supplies, and land are and will be readily available for years and years in this country.

Bottom line is that housing is and will come down in price significantly.

[hipmatt]

Really, housing only averages the same rate of return as inflation. Of coarse there are bubbles, and busts, but over the long haul, housing will usually “cost” a relatively fixed percentage of what the average household/individual makes. This percentage will fluctuate from time to time, but it is just one of many things that most people (people who live in housing that has monetary value) have to spend money on. This is how it has been for years, and how it will be for years.

There are other things in life that are just as mandatory for survival as owning or renting a home. For those of us that eat or drive, food and gas/energy will take up a certain percentage of our incomes. Health care, consumer staple products, clothing, education, cars/transportation, furniture, and more or less are all costs that most people in life will eventually have to spend money on, just as they do housing or food. Together they all add up to the cost of living. The change or increase in the cost of living is known as inflation. The cost of living will usually go up over time, usually in tandem with incomes.

It would be rare for the cost of housing to remain at such a relatively high ratio to incomes, with the exception of a bubble. This is the current situation that we face. There are so many reasons why we are in this huge deflating housing bubble, and I won’t rehash these, but they are in many other threads here. Bubbles deflate, and usually they over correct. There is virtually no chance that housing prices will stay “this high”. There are only a few ways this could feasibly happen.

A. The lower and middle class of America (think retail, education, service sector, police, fire, blue collar, some sales) gets huge increases in their wages to allow them to afford the current high prices. – this is not happening, most of the rise in incomes is seen in the upper class.

B. The cost of everything else drops and allows us to spend more money on housing. – this is not happening either, food, gas, energy, health care, even consumer staples are on the rise. Virtually nothing is getting cheaper except some tech items. Non-housing costs are rising fast, especially after the massive credit/housing boom, and they will rise further if rates are cut.

C. All of a sudden the supply of homes, land or supplies to build them was running out. We all know the current situation with resale and new home inventory.. it is at record levels and not dropping. There is still plenty of land to build on from Las Vegas to Phoenix to Seattle to Dallas. Inventory, construction supplies, and land are and will be readily available for years and years in this country.

Bottom line is that housing is and will come down in price significantly.

[hipmatt]

Really, housing only averages the same rate of return as inflation. Of coarse there are bubbles, and busts, but over the long haul, housing will usually “cost” a relatively fixed percentage of what the average household/individual makes. This percentage will fluctuate from time to time, but it is just one of many things that most people (people who live in housing that has monetary value) have to spend money on. This is how it has been for years, and how it will be for years.

There are other things in life that are just as mandatory for survival as owning or renting a home. For those of us that eat or drive, food and gas/energy will take up a certain percentage of our incomes. Health care, consumer staple products, clothing, education, cars/transportation, furniture, and more or less are all costs that most people in life will eventually have to spend money on, just as they do housing or food. Together they all add up to the cost of living. The change or increase in the cost of living is known as inflation. The cost of living will usually go up over time, usually in tandem with incomes.

It would be rare for the cost of housing to remain at such a relatively high ratio to incomes, with the exception of a bubble. This is the current situation that we face. There are so many reasons why we are in this huge deflating housing bubble, and I won’t rehash these, but they are in many other threads here. Bubbles deflate, and usually they over correct. There is virtually no chance that housing prices will stay “this high”. There are only a few ways this could feasibly happen.

A. The lower and middle class of America (think retail, education, service sector, police, fire, blue collar, some sales) gets huge increases in their wages to allow them to afford the current high prices. – this is not happening, most of the rise in incomes is seen in the upper class.

B. The cost of everything else drops and allows us to spend more money on housing. – this is not happening either, food, gas, energy, health care, even consumer staples are on the rise. Virtually nothing is getting cheaper except some tech items. Non-housing costs are rising fast, especially after the massive credit/housing boom, and they will rise further if rates are cut.

C. All of a sudden the supply of homes, land or supplies to build them was running out. We all know the current situation with resale and new home inventory.. it is at record levels and not dropping. There is still plenty of land to build on from Las Vegas to Phoenix to Seattle to Dallas. Inventory, construction supplies, and land are and will be readily available for years and years in this country.

Bottom line is that housing is and will come down in price significantly.

[bsrsharma]

rb_engineer,

Going by the Piggington thesis that all analysis be data driven, the basic data to support the collapse theory is the ARM reset schedule that has been much discussed at this site. If I remember, it is bimodal with the first wave resetting in 24 months (Jan 2007 reference) and the second one in 60 months. Accordingly, the first fallout should be around Jan 2009. By then about a million mortgages (conservatively) would have defaulted and foreclosure process would have started. Depending on the speed of foreclosure process, when the homes will become REO may vary. But once you have million plus homes in REO, the pressure on the financial institutions will be very great to liquidate and “clean up” their balance sheets. This is how I remember the Savings & Loan crisis unfolded. A temporary government agency called Resolution Trust Corporation (RTC) was formed to liquidate assets at whatever price. I have seen real estate liquidated by RTC at 20 cents on $. Strange thing is there were NO takers many times at 20 cents! You have to wait till 2009 for the eye of the (First) storm to pass through. What we are seeing are just the early showers.

[bsrsharma]

rb_engineer,

Going by the Piggington thesis that all analysis be data driven, the basic data to support the collapse theory is the ARM reset schedule that has been much discussed at this site. If I remember, it is bimodal with the first wave resetting in 24 months (Jan 2007 reference) and the second one in 60 months. Accordingly, the first fallout should be around Jan 2009. By then about a million mortgages (conservatively) would have defaulted and foreclosure process would have started. Depending on the speed of foreclosure process, when the homes will become REO may vary. But once you have million plus homes in REO, the pressure on the financial institutions will be very great to liquidate and “clean up” their balance sheets. This is how I remember the Savings & Loan crisis unfolded. A temporary government agency called Resolution Trust Corporation (RTC) was formed to liquidate assets at whatever price. I have seen real estate liquidated by RTC at 20 cents on $. Strange thing is there were NO takers many times at 20 cents! You have to wait till 2009 for the eye of the (First) storm to pass through. What we are seeing are just the early showers.

[bsrsharma]

rb_engineer,

Going by the Piggington thesis that all analysis be data driven, the basic data to support the collapse theory is the ARM reset schedule that has been much discussed at this site. If I remember, it is bimodal with the first wave resetting in 24 months (Jan 2007 reference) and the second one in 60 months. Accordingly, the first fallout should be around Jan 2009. By then about a million mortgages (conservatively) would have defaulted and foreclosure process would have started. Depending on the speed of foreclosure process, when the homes will become REO may vary. But once you have million plus homes in REO, the pressure on the financial institutions will be very great to liquidate and “clean up” their balance sheets. This is how I remember the Savings & Loan crisis unfolded. A temporary government agency called Resolution Trust Corporation (RTC) was formed to liquidate assets at whatever price. I have seen real estate liquidated by RTC at 20 cents on $. Strange thing is there were NO takers many times at 20 cents! You have to wait till 2009 for the eye of the (First) storm to pass through. What we are seeing are just the early showers.

[sdrealtor]

Matt,
Saying housing only averages the same rate of return as inflation completely ignores the impact of leverage. The returns on housing have historically been so great because of the leverage and tax benefits associated with that leverage.

sdr

[sdrealtor]

Matt,
Saying housing only averages the same rate of return as inflation completely ignores the impact of leverage. The returns on housing have historically been so great because of the leverage and tax benefits associated with that leverage.

sdr

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