[poorgradstudent]

The mean that I think of is the mean value for the ratio between housing prices and incomes. If real incomes rise, you expect housing prices to rise at similar rates, and the converse is true.

Because of inflation, you’re not going to see a return to nominal 1998 prices. Also, according to the data I saw, real, inflation adjusted incomes are up, roughly 36% since 2000.

Nominal prices are going to continue to fall. Just don’t expect the median to fall back to the low $200s. From my crude math, based on current incomes somewhere around $400 for nominal prices seems reasonable, but I’ll be the first to admit my calculations were quite quick and dirty.

[poorgradstudent]

Too bad we can’t just rename this the “Random, somewhat incoherant politics thread”

Hopefully it will die after the election. I enjoy civil discussions of political issues, but this thread is completely unfocused and has a lot of childishness from both sides.

[poorgradstudent]

Traffic speeds should vary according to traffic and conditions. On a congested freeway you can’t expect to go 85 mph safely. But if you’re driving up the I-15 in the middle of no where to Vegas, 85 can be quite reasonable.

[poorgradstudent]

Republicans: “We can keep spending as much as we have been, AND cut taxes!”

Democrats: “We can spend more and keep taxes the same!”

No one who faces election every 2, 4, or 6 years wants to be the guy who says “We need to cut spending and keep taxes the same.”

I miss true fiscal conservatives. Social conservatives make me throw up a little. Neither party stands for financial responsibility right now.

[poorgradstudent]

This is almost pure speculation:

Q4 2006: +1.0%
Q1 2007: +0.2%
Q2 2007: slightly negative

I’m guessing it will be negative for 4-5 quarters in all.

[poorgradstudent]

I’ve noticed on Flip This House they often just take the flippers word for it on how much they can sell it for. Such as “Bought for 375,000, 15,000 invested, expect to sell for 450,000, potential profit: 60,000.”

Now, of course “potential profit” doesn’t really mean anything. If I buy a lottery ticket, my potential profit is in the millions!

Still, the shows are interesting. As a non-flipper you can get ideas of what to look for in a house. You can get ideas on what to pay for and what is pretty much just cosmetic. And often times the conversion of the property can be quite striking.

Of course, you can get the same experience from other “House Porn” like “Extreme Makeover: Home Edition” (as an aside, I’m not surprised, but still amused that the spinoff show has far superceded the original “Extreme Makeover”.)

[poorgradstudent]

Great post Cabinboy.

People’s investment strategies should differ by their goals, lifestage, risk tolerance, and income level. Some people have extremely low risk tolerance (All cash). Others have very high (Gold! Gold! Gold is the answer!)

Generally, it’s hard to go wrong with a diversified portfolio held for the long term.

[poorgradstudent]

Remember though that you earn interest on the savings in the same timeframe.

A lot of first time buyers get help from parents or grandparents in coming up with a down payment.

My anecdotal impression is that 20% downpayments are far from the norm right now. I’d be curious to see statistics on what the mean and median % down payments are.

[poorgradstudent]

Great post qcomer. Only one thing I’d add:

“Companies do stock buybacks from the profits that they have earned and if stock buybacks are announced by a company then analysts account that in their estimates. More than trying to push EPS aove estimates, the main reason for buybacks by big corporates is investing in itself when company considers the price is right”

This is true. However, buybacks also can be viewed as a sign the company doesn’t see any worthwhile growth prospects for its cash. This is pretty common with extremely large companies. Still, buybacks are often a good sign, because minimally it says the company thinks its shares are worth as much or more than the market does.

[poorgradstudent]

In my experience SoCal has some of the worst drivers in the country. I grew up in Minnesota, where the roads are slippery with rain or snow at least 33% of the time, if not more. Even in good weather, drivers tend to be much more cautious, and frankly, more courteous. Sure, there are some jerks everywhere, but only in Southern california have I had the experience of turing on my blinker and having the car in the lane I want to go into speed up, so that I won’t be in front of htem and slow them down by 2 seconds.

I also call the classic move where someone drifts slowly from one lane to another without signaling the “SoCal Lane Change”.

I think part of the problem is a lot of the freeways don’t have good shoulder that cops could safely pull people over onto. But a lot of it is just culture.

[poorgradstudent]

Companies generally do give pretty conservative guidance to help them beat expectations.

Still, the numbers have been very solid this earning’s season. I know a number of big companies posted big increases from last year. Of course, not every stock that beats expectations goes up. Mostly I’ve noticed the biggest jumps are caused by analysts upgrading or downgrading stocks. This can result in hilarious jumps of 5, 10, even 20% in a day. “Wait, the company that was worth 20 milliion yesterday is only worth 16 million today? But… nothing changed?”

The market almost always overreacts to both good and bad news, then gradually corrects.

There probably will be a lot of uncertainty following the election, regardless of who wins. If you’re looking for a good point to take some profits, the Monday before election day might be a good day to trim some positions for safety.

[poorgradstudent]

You really think it will be flippers who get blamed and not loose lending standards and ARMs?

[poorgradstudent]

Mr. Harmer needs to look up the meaning of “Cause and Effect”

The media really started reporting once the sales started slowing.

[poorgradstudent]

Nice anecdote, and good post.

I guess the expectation that things will turn around in the Spring is based on the seasonal nature of real estate? If you were selling these properties right now, what might you price them at?

[poorgradstudent]

“Stock market is on fire since she went 95% cash in March ’06.”
This isn’t a totally fair statement. The S&P 500 rose a tiny bit until early May, then dipped from there into mid-June. Had powayseller bought back in sometime around July or August, I’d say that was good market timing.

Most of the good economic analysis I’ve seen predicts a 40% or so chance of recession in ’07. But how far will it go up before it goes down? And how far will it actually fall? How much worse would imperfect market timing be compared to Buy and Hold? From my reading of Roubini, the average decrease in the market from peak to trough is 10-20%. The S&P is up 10.2% on the year. 3rd quarter profits have been solid, economic indicators are mixed. A lot of the big boys are predicting somewhere in the low 2% for GDP growth in ’07. Energy prices are down. The earliest I could see a recession would be late ’07.

I’m 100% certain there will be a recession in the future. I’m also 100% certain I’m not 100% certain when it will be. To me, the lowest risk strategy is to buy and hold solid companies.

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