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cyphire.
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August 23, 2007 at 2:50 PM #80114August 23, 2007 at 3:27 PM #79984
cyphire
ParticipantPeople don’t look at the long term – we aren’t wired that way. The house I am in has gone from 900K to 2.5M since Jun ’03. I am renting at 33% of the cost of owning (ignoring tax savings). Thats right, in 4 years it has almost tripled. The free and easy credit and the constantly increasing home values made this a ride up outside of reality. Now we have reality. You need excellent credit and a substantial down payment to buy a home today.
The job losses in real estate, mortgage brokers, banks, construction, and all the companies which provided their services (secondary impact) have yet to be felt by the economy. The tremors have been happening for months, but the first explosion didn’t hit till this month. With the explosion, lava is coming down. But the villages are still a bit down away from the lava, but it is coming.
You can’t build a huge helicopter to take the village away to safety, you have to ride it out. In your smoldering village!
The main aspect of real estate is that it’s severely illiquid. As the loans reset, and the new folks can’t afford or have the credit for the current loans, it will put constant downward pressure on the market. We are truly living in a house of cards. Housing is not affordable, and it is especially not affordable for the large number of people who see their equity erode, their liabilities grow (and the interest rate), and their job prospects diminish as the fallout comes over the next few years (or more).
The suckers haven’t left the market, but I don’t think that there are enough of them to keep the prices stable. I think that while we have had an explosion in credit stability, the long term prospects are much more severe and as previously stated, there must be a return to quasi-affordability. The only reason that affordability didn’t matter previously was the manipulation of interest rates both by the government, and the policy of adjustable rates. Well guess what… Rates have adjusted! I think that the possibility exists that rates will not go up any more, but will go down slightly… I don’t see any easier answer.. I don’t know… What do you think?
August 23, 2007 at 3:27 PM #80112ParticipantPeople don’t look at the long term – we aren’t wired that way. The house I am in has gone from 900K to 2.5M since Jun ’03. I am renting at 33% of the cost of owning (ignoring tax savings). Thats right, in 4 years it has almost tripled. The free and easy credit and the constantly increasing home values made this a ride up outside of reality. Now we have reality. You need excellent credit and a substantial down payment to buy a home today.
The job losses in real estate, mortgage brokers, banks, construction, and all the companies which provided their services (secondary impact) have yet to be felt by the economy. The tremors have been happening for months, but the first explosion didn’t hit till this month. With the explosion, lava is coming down. But the villages are still a bit down away from the lava, but it is coming.
You can’t build a huge helicopter to take the village away to safety, you have to ride it out. In your smoldering village!
The main aspect of real estate is that it’s severely illiquid. As the loans reset, and the new folks can’t afford or have the credit for the current loans, it will put constant downward pressure on the market. We are truly living in a house of cards. Housing is not affordable, and it is especially not affordable for the large number of people who see their equity erode, their liabilities grow (and the interest rate), and their job prospects diminish as the fallout comes over the next few years (or more).
The suckers haven’t left the market, but I don’t think that there are enough of them to keep the prices stable. I think that while we have had an explosion in credit stability, the long term prospects are much more severe and as previously stated, there must be a return to quasi-affordability. The only reason that affordability didn’t matter previously was the manipulation of interest rates both by the government, and the policy of adjustable rates. Well guess what… Rates have adjusted! I think that the possibility exists that rates will not go up any more, but will go down slightly… I don’t see any easier answer.. I don’t know… What do you think?
August 23, 2007 at 3:27 PM #80135ParticipantPeople don’t look at the long term – we aren’t wired that way. The house I am in has gone from 900K to 2.5M since Jun ’03. I am renting at 33% of the cost of owning (ignoring tax savings). Thats right, in 4 years it has almost tripled. The free and easy credit and the constantly increasing home values made this a ride up outside of reality. Now we have reality. You need excellent credit and a substantial down payment to buy a home today.
The job losses in real estate, mortgage brokers, banks, construction, and all the companies which provided their services (secondary impact) have yet to be felt by the economy. The tremors have been happening for months, but the first explosion didn’t hit till this month. With the explosion, lava is coming down. But the villages are still a bit down away from the lava, but it is coming.
You can’t build a huge helicopter to take the village away to safety, you have to ride it out. In your smoldering village!
The main aspect of real estate is that it’s severely illiquid. As the loans reset, and the new folks can’t afford or have the credit for the current loans, it will put constant downward pressure on the market. We are truly living in a house of cards. Housing is not affordable, and it is especially not affordable for the large number of people who see their equity erode, their liabilities grow (and the interest rate), and their job prospects diminish as the fallout comes over the next few years (or more).
The suckers haven’t left the market, but I don’t think that there are enough of them to keep the prices stable. I think that while we have had an explosion in credit stability, the long term prospects are much more severe and as previously stated, there must be a return to quasi-affordability. The only reason that affordability didn’t matter previously was the manipulation of interest rates both by the government, and the policy of adjustable rates. Well guess what… Rates have adjusted! I think that the possibility exists that rates will not go up any more, but will go down slightly… I don’t see any easier answer.. I don’t know… What do you think?
August 23, 2007 at 10:55 PM #80237asragov
ParticipantWe have seen quick reactions on the way down.
How about on the way up? Do jobs get created that quickly? Probably not.
The longer a bubble has been drawn out, the longer it will take to deflate.
You may or may not be a fan of the Austrian economics / libertarian commentary of Sean Corrigan, but he makes a persuasive case for why this will hurt significantly on the way down:
August 23, 2007 at 10:55 PM #80368ParticipantWe have seen quick reactions on the way down.
How about on the way up? Do jobs get created that quickly? Probably not.
The longer a bubble has been drawn out, the longer it will take to deflate.
You may or may not be a fan of the Austrian economics / libertarian commentary of Sean Corrigan, but he makes a persuasive case for why this will hurt significantly on the way down:
August 23, 2007 at 10:55 PM #80390ParticipantWe have seen quick reactions on the way down.
How about on the way up? Do jobs get created that quickly? Probably not.
The longer a bubble has been drawn out, the longer it will take to deflate.
You may or may not be a fan of the Austrian economics / libertarian commentary of Sean Corrigan, but he makes a persuasive case for why this will hurt significantly on the way down:
August 24, 2007 at 8:44 AM #8031234f3f3f
ParticipantThe first point I would make is that information on the internet is only as good as its providers. While it has helped many in making economic decisions, it probably has hindered as many. It seems ironic that one of the biggest crashes of recent years was brought about by the information age. Perhaps we still haven’t quite got to grips with it.
If, as many seem to suggest, the economy in the US is becoming more service industry based, and less manufacturing based, then you can expect more volatility. The RE market also seems to have changed, from how mortgages are sourced to the impact they can have on the stock market. Whereas one may have been a hedge against the other, it seems they are now more closely linked. If at one time the housing market would slow as a result of a slowing economy, it now seems the reverse is true. Therefore, I don’t see how it is possible, with any degree of accuracy, to predict time scales for a recovery with so many imponderables. I think the internet has given us the tools to see cause and effect up close, but it doesn’t necessarily give us the tools to change it, at least not with the alacrity we would like.
August 24, 2007 at 8:44 AM #80443ParticipantThe first point I would make is that information on the internet is only as good as its providers. While it has helped many in making economic decisions, it probably has hindered as many. It seems ironic that one of the biggest crashes of recent years was brought about by the information age. Perhaps we still haven’t quite got to grips with it.
If, as many seem to suggest, the economy in the US is becoming more service industry based, and less manufacturing based, then you can expect more volatility. The RE market also seems to have changed, from how mortgages are sourced to the impact they can have on the stock market. Whereas one may have been a hedge against the other, it seems they are now more closely linked. If at one time the housing market would slow as a result of a slowing economy, it now seems the reverse is true. Therefore, I don’t see how it is possible, with any degree of accuracy, to predict time scales for a recovery with so many imponderables. I think the internet has given us the tools to see cause and effect up close, but it doesn’t necessarily give us the tools to change it, at least not with the alacrity we would like.
August 24, 2007 at 8:44 AM #80465ParticipantThe first point I would make is that information on the internet is only as good as its providers. While it has helped many in making economic decisions, it probably has hindered as many. It seems ironic that one of the biggest crashes of recent years was brought about by the information age. Perhaps we still haven’t quite got to grips with it.
If, as many seem to suggest, the economy in the US is becoming more service industry based, and less manufacturing based, then you can expect more volatility. The RE market also seems to have changed, from how mortgages are sourced to the impact they can have on the stock market. Whereas one may have been a hedge against the other, it seems they are now more closely linked. If at one time the housing market would slow as a result of a slowing economy, it now seems the reverse is true. Therefore, I don’t see how it is possible, with any degree of accuracy, to predict time scales for a recovery with so many imponderables. I think the internet has given us the tools to see cause and effect up close, but it doesn’t necessarily give us the tools to change it, at least not with the alacrity we would like.
August 24, 2007 at 9:53 AM #80391temeculaguy
Participantcyphire, great volcano analogy, love it!
August 24, 2007 at 9:53 AM #80520Participantcyphire, great volcano analogy, love it!
August 24, 2007 at 9:53 AM #80543Participantcyphire, great volcano analogy, love it!
August 24, 2007 at 9:57 AM #80394(former)FormerSanDiegan
ParticipantHave to agree with tmg …
“I don’t know where I’m a-gonna go when the volcano blows” – Jimmy Buffet
August 24, 2007 at 9:57 AM #80523ParticipantHave to agree with tmg …
“I don’t know where I’m a-gonna go when the volcano blows” – Jimmy Buffet
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