[powayseller]

Some of our exports go into products made by the Asian export-oriented countries, and sold to us. So our recession will first hurt the Asian export countries, and then trickle down to us by reducing our exports to them.

[powayseller]

So gold soared in the 1980s because the Saudis bought it with their dollars, instead of buying Treasuries?

I think Roubini is against gold, but he has never explained what else people will flock to once they want to divest from the dollar. What are the choices? Equities, bonds, euros, swiss francs, sterling, yen, renminbi? Gold, silver? All that money will go somewhere else, pushing up the value of that “something else”.

[powayseller]

Patriotic politicans would tell us the truth about our deficit and pull us together to solve our financial problems before they lead to a dollar collapse. These guys are just cowards who want to get re-elected. Just my opinion. So they will react to the crisis, and they won’t act to prevent it. Just keep printing money to prolong the day of reckoning.

[powayseller]

kev374, you make a lot of sense. In the early 90’s we had pretty big price drops, and that was based on houses that were bought with 20% down, rental property purchased with 25% or 30% down. This time, we have more air (half of homes bought have 0% down) and bigger jump. If the last bubble rose 20% and fell 20%, then why can’t this bubble that rose 170% fall by 170? (Numbers are approximations,but you get the point)

Previous bubbles fell by about the same percentage as the rise. So should this one. If you say otherwise, you have some explainin’ to do.

[powayseller]

I don’t think they’ll raise rates, since inflation goes down in a recession. According to Nouriel Roubini, the next Fed move will be a rate cut in early 2007 to stimulate the economy after it’s clear we’re in a recession.

[powayseller]

horsepropertyneeded, what happened with this house? Did you discuss the lease or lease option with the owner. I noticed it is now withdrawn. Beautiful house!

[powayseller]

The NAR has a big lobby, don’t they?

[powayseller]

Workers’ comp is a high cost, definitely. I asked several of the subs who worked on my house in 2005 (after Arnie’s reform passed) about their WC costs. Every single guy said he paid 30% (or 35%, can’t remember now), of wages! So for every $100 he paid his worker, he had to pay an additional $30 to Workers’ Comp. Now, this isn’t just for a big employer. Even the driller and the painter with just 2 employees had to pay that same rate.

Remember docteur’s posts about his entitled land that he just sold a year or so ago? It took him 15 years to entitle that land, and God blessed him by making the timing so that he finished the process right at the top of the market and retired very nicely off his work. But that is an incredibly long time to get some land entitled.

So those are just some of the higher costs. Then you’ve got zoning restrictions, environmental laws, etc. Is some of that offset by non-payroll employees, i.e. illegal Mexican labor?

The sunshine tax just means that people in CA don’t get paid more to make up for these higher costs. Our higher living costs are a form of tax for the priviledge of the sunshine. After seeing all those freezing people chopping ice off their windshields in Oklahoma this week, I was glad to be in sunny San Diego.

[powayseller]

I don’t know so much about gold. I know its value is affected by the value of the dollar and US inflation, but didn’t know it’s affected by our GDP. But even with regard to the money supply, I have a question: since the Federal Reserve is just printing more money constantly, how is the price of gold affected? M3 has been growing at a faster rate in the last year, right?

Gold investors like Eric Janszen and Peter Schiff think gold will rise to thousands of dollars per ounce when the US dollar finally collapses.

Besides your method jg, is there any way to measure the value of gold? Or is it just set by supply/demand of jewelers, industrial companies, and investors?

[powayseller]

bubba99, how did you invest in euro bonds? I’m interested in euro government bonds.

What about swiss francs? The Swiss dropped their backing to gold, so is the swiss franc still as good without the gold backing? I once saved this link about investing in Swiss banks, but don’t remember where I got it.

[powayseller]

Isn’t that the neighborhood where docteur lives? I think prices held up there for a long time though.

sdr, to what would you attribute the percentage drop in values? Why are some places falling less than others? Do you think the high end home market is stronger than the first time buyer market? Are lenders looser than ever with their standards (thanks to lots of cash from foreigners looking for a place to put their dollars)?

[powayseller]

Where are prices stable? This Dataquick U-T zip code chart shows price drops in all of San Diego County. Bonita -16.5%, La Mesa -10%, Clairmont -12.7%. But I don’t put much stock in the median, because look at Mira Mesa, which is supposedly down only 2% from last year. Mira Mesa is almost dead, according to a realtor I spoke with today. Mira Mesa price drops are more like 20%, according to him. It was a first time buyer’s paradise, and the first time buyer is practically a relic. Condos and townhouses are also harder to sell.

So while each individual house is worth 2% – 20% less than the peak, the indexes and median do not reflect that at all. For that reason, Bob Casagrand did not publish the median in his last month’s housing report. He decided it is a useless number. What he puts the most emphasis on is the months supply. Most of all, each home’s value is unique for that zip code, neighborhood, and even street.

Thanks to Mr. Brightside, we know that downtown condos are dropping in price too.

ocrenter is showing us foreclosure flips gone wrong all over the Southland.

So the price drops are going on all over, and I’m puzzled why the OFHEO and Case-Shiller indexes are not reflecting that. Does anybody know why? That could be a thread of its own.

[powayseller]

OHFEO index is -.21% from last quarter, the first quarterly decline since Q2 1996. Since it measures the change in same-house sales and refinances, why didn’t it start declining last year, or at least show a bigger decline? One explanation could be the effect of refinancing, where appraisals come in higher than for purchases. Maybe bugs or sdrealtor have an explanation.

Housing prices have been going down since last summer or before, and none of the quantifiers shows it (median, OHFEO, Case-Shiller).

[powayseller]

davelj, Roubini quoted me on his blog this week. So I’m not as dumb as you’d like to think. And I know you’re pretty smart too. So let’s put our heads together, as we should in the piggington community, and figure out what are the chances of those FBs actually being able to pay off one of those loans (meet me at the ARM thread for that one). What is your prediction for GDP?

[powayseller]

I read that book, but I believe commodities will take it on the chin, as they do in recessions. After the recession, will they take off again? Also, Jim Rogers has a commodities index fund that he started, which he is promoting by writing the book. Asking Jim Rogers about commodities is like asking David Lereah about buying homes. I am a skeptic of Rogers. I posted recently how much commodities got trampled in the 2000-2001 recession (which was mild and was only a capital spending recession), so in this consumer led recession the commodities will get hammered. How much copper and lumber will we need when housing construction falls 75%? THat is why I’m not a fan of Tim Iacono’s site, TheMess; he is a bull on commodities and I just don’t share the view that commodities are in a bull run. We’ve got a recession to work through. Maybe after that, commodities will take off. I just don’t know.

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