[powayseller]

Only 2% of households buy/sell their homes every year and they set the price for the other 98% of homes. How many people earning $120K would you need to drive up the prices for the other homes? Could 10,000 people drive up the prices of homes for the other 30,000?

If it isn’t the income, what explains why some cities had a housing bubble and others did not? Loose lending is nationwide. Even Omaha, NE, has a “mortgage lender on every corner” according to a friend who lives there.

I’m not saying the wet sweaty guy is right, but perhaps the jobs/income contributed?

[powayseller]

With HH income of $200K, you can get a 30 year fixed at $600K – $ 700K using traditional lending standards (3-3.5x gross income).

The runup in prices was possible due to low lending, but maybe it got started because of the many higher paying jobs. Say we are selling 40K homes/year, and half those people are making enough money to buy at 3.5x income, and then the other half must stretch to 7 or 10 x income just to keep up. So the combination of $120K jobs and loose lending caused the higher prices.

I don’t know of any other way to explain why Cheyenne Wyoming is not in a housing bubble. Las Vegas and Phoenix are in a housing bubble, but Cheyenne Wyoming is not. What explains it, if not the difference in wages?

[powayseller]

sdrealtor, what do you mean they think they are movers and shakers? Do you think their salaries contributed to the boom? After all, Wyoming has 10% or more of its loans as Option ARMs, but they didn’t see the price appreciation. Despite loose lending all over the country, only a few cities saw bubblicious prices, and maybe they were the cities with the higher paying jobs? By the way, the guy was beyond sweaty, and looked like he just got out of the pool (he started talking to me because he said I’m the only person at the gym who knows how to do proper push-ups); I have great respect for someone who gets as wet as I do in the gym.

[powayseller]

You’re right, Bugs, now I can see his argument doesn’t hold up to scrutiny.

[powayseller]

carlisle, this is the post to which you are referring. I took it seriously, since it came from Merrill Lynch. Well, shoot me for believing Merrill Lynch!

Then FormerSanDiegan posted a chart going back for several decades, and it shows the correlation did not exist back then. So I thanked him for that.

Yesterday, I continued the discussion of this chart by posting a financial advisor’s study from iTulip.com, which shows statistically, housing and the stock market have a .84 correlation with a 1 year lag since 1995.

So where is my bias? This Merrill Lynch-originated homebuilder/stock market chart made the internet rounds, and unfortunately some people posted only the data since 1995 without explaining that the prior years were exluded because the correlation was low. It was up to any of us, you included, to show that it did not go back far enough, and that there is a greater correlation between the index and housing since 1995. It’s too bad that nobody has made any theories as to why housing is the economy since 1995, and not before.

I post the stories that I like or that are interesting, and you can post the stories you like. In that vein, I would love to see some posts from you. What kind of articles strike your fancy, what do you consider worthy of posting, what kind of bias will you show in your posts?

I get bored reading my own stuff, and would love to read posts started by people who disagree with me! That is how we can get more diversity here. Don’t just wait for me to entertain you with my writing, and then complain about the content. Step up and start your own thread!

[powayseller]

BikeRider, thanks for your candid admission. Someone told me today that he got a HELOC, but the interest rate is rising so much, that it is making up more of his payment, and he’s working diligently to pay it off. People will really struggle when their loans reset, and their HELOC payments rise. You are fortunate you got out of the trap.

[powayseller]

He said that a former mayor made San Diego a tech town in the 80’s, and the lagging effect was was a large number of people earning $120K in the mid to late 90’s. The per capita income is skewed up by these workers. So we’ve got a bunch of low wage jobs and the $110K jobs, and the latter were able to pay more for housing, pushing up the prices of homes for everyone. That’s why housing prices did not rise in Pittsburgh.

For his theory to hold, we would have needed a significant number of new employment in +$110K jobs since 2000. Did we?

Of course, loose lending was the main enabler.

[powayseller]

I meant to say that incomes contributed to the housing bubble, not caused it. I know I’ve got a group of semantics watchers here..

[powayseller]

Good points, carlisle…

[powayseller]

There’s nothing wrong with cardiff wanting to live with his demographic peers. That doesn’t make him racist. You could call everyone racist; after all, isn’t Chinatown supposed to be for the Chinese? They wouldn’t want a white boy from England in the Hispanic neighborhood, would they? I would feel like a total outcast in a Hispanic neighborhood. So Cardiff, you don’t need to defend yourself. Personally, I seem to have more hispanic and oriental friends than white friends, so like Cardiff, I am more comfortable around people with similar education and lifestyle regardless of race.

[powayseller]

Are you saying that since 1985, we started borrowing from the future to fund our consumption? What happened in 1985 to increase consumption percentage? How long do you think we can keep spending our future? Will our reserve currency status mitigate any negative effects? What happened to the other reserve currencies, such as the British pound – how did they fall? I think fiat currencies typically last 200 years, so the US dollar has little life left. What will be the next reserve currency?

[powayseller]

justme, you are absolutely right! I think yoy is more meaningful when we are discussing anything cyclical, such as real estate sales. However, I think the New Home Sales are released by the Commerce Dept. and the gov’t likes the month to month or quarter to quarter figures. It is up to astute observers like justme and Calculated Risk and Barry Ritholtz, etc. to point out the flaw in the numbers. Once again, the media merely reports what they are given, and don’t provide the analysis that makes sense of it all.

[powayseller]

I don’t subscribe to Zeal Speculator, so I’ve got to wait for October 1 to find out what to accumulate. Can you give me a heads up?

[powayseller]

I have no idea about the legal implications. That is something I need to learn more about. I sure wish we had some mortgage and foreclosure folks post here. One poster came by for a week, and gave so much good information about loans, and then she disappeared (x1y2z3).

[powayseller]

” The headline news said sales rose last month. However, that was only versus the new, lower number. Against the original reported number, sales fell!” – Bill Fleckenstein, today

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