[lindismith]

Related Link
http://money.cnn.com/2006/05/03/news/economy/realestateguide_2_fortune/index.htm

[lindismith]

The article states,”For the past few years the housing boom has driven the economy, adding jobs in construction, remodeling, and real estate services. And consumers gorged on the equity in their homes, taking out a total of $2 trillion via loans, refinancings, and sales over the past five years.

Those powerful stimulants, which added a full point to annual GDP growth, will soon vanish. If corporate spending or some other force doesn’t come along to pick up the slack, we could go into a recession that would cut income growth to zero. Then inflated housing prices would have to shoulder the entire, wrenching adjustment, falling 30 percent or more over several years.”

I’m curious – just how bad does everyone think it could get? What exactly would happen? People talk about pain, but what exactly do they mean? Does anyone have any scenarios?

And could the government help stimulate corporate spending? If so, how?

What potential “other force(s)” are there to stimulate the economy?

[lindismith]

I’m also interested to learn more about this. My sister’s mother-in-law got herself into serious credit card debt over the past 5 years. It was to the point where the balance was staying the same even when she was making $500.00/month payments. The solution? Refinance the house. She had only 6 years left on her home loan until it was paid, and now I shudder to think of what shady broker got her into what kind of shady new mortgage. (I will ask my sister, and see if she’s ok.) This woman has a college degree from Cornell. And she’s certainly been responsible for herself for the last 35 years as she’s divorced. But yet, she’s accumulated all this debt. I should also add she doesn’t make a lot of money, (she works in a clothing store,) and certainly she’s responsible for her own spending habits, but the lure of easy credit, and predatory lending practices have put a lot more at stake than anyone intended.

Bugs, I’m also interested in hearing more on your thoughts.

[lindismith]

Actually I have heard of most places in the world, but even manufacturers producing in Vietnam, Thailand and Korea have moved production to China, as the labor is cheapest there. The tech world is a little different, but manufacturing is concentrated in China for a good reason. As for the Dark Continent, I grew up there, and I can tell you it will never be a viable player because it does not have the infrastructure nor the stability. Not in our lifetimes anyway.
Am not sure where PI is, Josh.
I agree with the comments about English continuing to dominate the world business market, but it sure helps to know what a factory manager is saying in Chinese when I’m negotiating something.

[lindismith]

HS I might take you up on your lessons. I’m in manufacturing, and just started producing offshore about 2 years ago. (I only produce about 3% offshore, but I expect that to grow.) The first time I went to the mainland to inspect the factory, I was stunned that the factory managers didn’t speak a lick of English! (But then I realized I didn’t speak a lick of Chinese. Ignoramus Deluxe, you might call me.) I could immediately see the benefit of being able to at least greet each other, and make small talk. I took Spanish in high school and college, and it has served me well; I’m sure learning Mandarin (or another dialect – which one to pick?) would be the same.
I would also add that if the American economy slows down, it will definitely impact the Chinese economy too, as they are so dependent on us buying their products. And thusly, (to borrow a word from Bugs,) I’d expect the demand for Chinese language to slow down also.
One last interesting tidbit: my Agent in Taiwan predicts there’s probably only 10 years of cheap labor left in China. That speaks to how fast their economy is growing! After that we can all say good-bye to cheap products on the shelves of Wal*mart. Where cheap labor will come from after that is anyone’s guess.

[lindismith]

Well, this is the ME generation/decade/millenium we live in. I think from a marketing standpoint, people will identify more with the statement written with “me” than with “I”. (But I am a big fan of yours, Powayseller, and always appreciate the grammar lessons! And more importantly, your posts.)

He has a handy mortgage calculator which is a little more robust than the usual ones I’m accustomed to seeing on websites. And, surprisingly, it does allow for a negative number when you input the value in the field for “annual appreciation on the home.”

When I allowed for a 4% decrease in value over 4 years (just as an experiment,) it told me renting would be favorable.

[lindismith]

Gibraltar, that sounds like a pyramid scheme!

Ok, so just so I’m clear, it sounds like a good way to pump up a tired economy; simply lower interest rates so people borrow, and then pretty soon everyone’s borrowing (and hopefully spending), and it stimulates the economy.
The problem is people are borrowing to obtain assets that are overvalued, so they actually have to borrow more than is really needed. Wouldn’t banks want to make sure home appraisals are indeed based in reality, else they (the banks) are also overextending themselves? Or is there something to be gained by the banks for lending bigger loans? Yes, maybe they get to post bigger ‘sales’ or loans, but that seems really risky to me. MONEYMAKER BANK is really making it’s own money.

[lindismith]

Curiously I noticed 1 recently here in Hillcrest. But it was the first one in ages! It was on the same block as a trio of others who were on the market for at least 5 months. The trio owner must have finally just stopped trying because the For Sale signs on his lots are gone.

[lindismith]

I’m in manufacturing, and margin is my number one consideration all day long. I’d be interested in finding out what kind of gross margins builders work on. It seems to me, the little guys can’t be making that much money. The big guys yes, but not the little ones. Can anyone shed some light on this subject?

[lindismith]

Condo conversions can last anywhere from 9-24 months, or longer, depending on how fast the paperwork gets approved. On those bigger developments, I’d guess it’s at least 2 years.

[lindismith]

Yeah, the site looks great, and the way we get the content now is really efficient! Thanks for all the info! I hope you’re making some money out of this, Professor!

[lindismith]

I’ve been watching the rental market as much as the sales market for the last 2 years, because I want to move, but don’t want to buy if we’re at the top of the market, but don’t want to rent for just 6 months somewhere only to find I should buy if the market drops enough.

I would say the rentals have been going way up for at least 2 years! I have been amazed at what owners are asking and getting in rents! I have to assume it’s only going to get worse: as more people keep moving here, and as foreclosures go up and people become renters again, it seems like that will just drive up the rental market too. If I’m wrong, someone please let me know.

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