[ARMwrestling]

Best post ever, eh?

What say we up our standards just a little, so that craigslist threads referencing “bitches” and “a–holes” don’t make the list. I’m sure it can be done with a little effort?

[ARMwrestling]

Prices fell from 1989-1994. About 10-15% in nominal terms, more factoring inflation of course. Some areas were hurt more than others, Silicon Valley in particular. In Cupertino, where Apple is based, it was a dark period.

SF itself was probably closer to the 10% mark, but decline it did. It also fell in the 1981-1982 recession (in real terms), which everyone seems to forget about, as well as 1972-74. The idea that SF prices never drop is a myth, pure and simple.

Judging from today’s nosebleed prices in the city by the bay that lesson will have to be relearned yet again, and more painfully than ever it seems.

[ARMwrestling]

The relevance is in noting that the arguments used to promote today’s real estate to the moon are nothing new. The article shows they’ve been tried before, with the same flimsy underpinnings as now.

Yes, housing was overpriced in the early 1980s. The 1981-82 correction proved it.

If you bought in 1983 and held until today then sure, you’re doing fine. But there were dicey times in the early 1990s when you might not have been. Every investment does well in the long run– provided you can get to the long run.

This dataquick article shows that not everyone in the late 1980s and early 1990s could or did buy-and-hold. Sometimes that’s not an option.

I’m not sure how to interpret your comment about gold vis-a-vis 1983 and today. A 10% increase in price over twenty-two years is a terrible investment. Is that what you wanted to show? If so, we agree.

[ARMwrestling]

Your analysis has the ring of truth to it. Housing prices can be sticky, but when leverage is involved a small loss can turn into a big one with a few percentage points in the wrong direction. “Sticky” doesn’t mean “impervious”.

Do I need to point out that anyone who sees their home value drop has incentive-a-plenty to get out before their losses are magnified? I don’t doubt that households will shift and shuffle their finances to make the mortgage payment, more than any other expense. But there are limits to how long someone will swim in an undertow with an anchor around them.

1. If your I/O payment goes up 30% once full amortization kicks in (worse if interest rates are higher), and

2. Your house has depreciated in the past year or two, with no sign of a market turnaround,

You’ll be looking hard at that rent/buy ratio and considering a lifestyle change. If it means avoiding a five or low six-figure loss by acting quickly then a lot of sellers won’t mind having a landlord worry about the roof and plumbing problems. And if you have investment properties that look iffy, selling them is even less of an emotional issue.

[ARMwrestling]

You’re referring to the NAR’s regional housing reports from about a week ago, where they claimed that every market in the country is in fine shape with excellent prospects going forward? Those were fantastic!

I looked at about ten of them, to make sure I hadn’t been accidentally downloading the same one each time. Sure enough, every market in the NAR’s view, from Akron to Honolulu to Walla Walla, was either in good or excellent shape going forward. Even Detroit; so worry not, my GM worker bees, ’cause the NAR has your back.

“I lost two pounds in two years….ask me how!”

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