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sdduuuude
12 years ago

Depends on how you define
Depends on how you define double-dip.

If you define it as a second dip below the last peak, then we are not in a double-dip. But why does the second dip have to be lower than the first dip in order to be considered a second dip?

I say, if you have a period of year-over-year gains sandwiched between periods of year-over-year losses, that is a double-dip.

By that definition, it looks like we went into a double-dip last month.

Jazzman
12 years ago
Reply to  sdduuuude

There has to be a generally
There has to be a generally accepted definition so we all know what we are talking about, but I agree a double dip cold just as easily be when prices start falling again. How relevant it is that we’ve passed the previous low is not clear. Perhaps more significant is that continuing housing market woes influence consumer sentiment which has to impact major financial decisions. For example, I wonder how many would-be buyers postponed plans, or cemented their already postponed plans to buy when they heard the news last night.

citydweller
12 years ago
Reply to  Rich Toscano

As the cost of buying goes
As the cost of buying goes down, so does the amount of rent that needs to be charged in order to be cash flow positive for investors. Isn’t this a good thing for those families that are struggling to make ends meet?

CA renter
12 years ago
Reply to  citydweller

citydweller wrote:As the cost
[quote=citydweller]As the cost of buying goes down, so does the amount of rent that needs to be charged in order to be cash flow positive for investors. Isn’t this a good thing for those families that are struggling to make ends meet?[/quote]

Not only rent, but lower prices mean that new buyers will have extra money that can be spent (or saved!) in a more productive or beneficial way.

I’ve always disliked the one-sided perspective of the housing market — that rising prices are always and inevitably good. In truth, higher prices are ONLY good for current owners, and every bit of benefit that they receive from these higher prices is extracted directly from the benefits the buyers would receive from lower prices.

And can we get away from the idiotic notion that “home equity” is something to be used as collateral for consumer debt, or to be counted on to sustain oneself in retirement? The only benefit one should count on WRT “ownership” in retirement is that, IF the house is fully paid off, the retired person likely has lower, and more manageable, housing payments than they would have had if they had rented, instead.

There is **no guarantee** that you will be able to sell your house for more than you bought it, not even (and especially) after you retire. As a matter of fact, due to the sheer number of people who plan on doing this in the next couple of decades, one could easily make the argument that prices might end up being lower than when they had bought. And Lord help those who HELOC’d and thought they would be able to satisfy their debts, AND get some spending money out of the sale, to boot. The delusion runs deep out there.

Jazzman
12 years ago
Reply to  CA renter

“…every bit of benefit that
“…every bit of benefit that they receive from these higher prices is extracted directly from the benefits the buyers would receive from lower prices. ”

CA Renter, I feel a bit the same way. I’m paying some other babyboomer’s pension to the detriment of my own.

CA renter
12 years ago
Reply to  Rich Toscano

Rich Toscano wrote:CA renter
[quote=Rich Toscano][quote=CA renter]
And can we get away from the idiotic notion that “home equity” is something to be used as collateral for consumer debt, or to be counted on to sustain oneself in retirement? [/quote]

No, it is pretty clear to me that we will not be getting away from that notion. The vast majority of people (and, notably, virtually all policy makers including, extra notably, members of the Fed) believe that an increase in asset prices increases aggregate “wealth.”

This is wrong — you can only access your asset’s “wealth” either by selling it or borrowing against it. In the former case, you transfer wealth from buyer to seller. In the latter case, you temporarily transfer wealth from lender to borrower (in the case where a bank creates new money to fund the loan, you are actually creating purchasing power until the loan is paid back — but simply creating new dollars does not in any way increase aggregate wealth). Thus while the seller of an inflated asset may increase his or her wealth, the increase in asset prices does not add any wealth in the aggregate — it just shifts existing wealth around.

But even after the housing bust showed how disastrous it was to conflate an aggregate increase in home prices with increasing wealth, the majority of people still cling to this misapprehension, including the guy in charge of our monetary system, who cited an increase in stock prices as one of the salubrious effects of his latest money printing adventure. So I just don’t see this changing any time soon.[/quote]

It’s like nobody ever learns, no matter how dear the lesson. 🙁

Casca
12 years ago
Reply to  CA renter

As Kipling pointed out, “The
As Kipling pointed out, “The burnt fool’s bandaged finger wobbles slowly back to the fire.”

carlsbadworker
12 years ago
Reply to  Rich Toscano

Rich Toscano wrote: including
[quote=Rich Toscano] including the guy in charge of our monetary system, who cited an increase in stock prices as one of the salubrious effects of his latest money printing adventure. [/quote]

My guess is he probably was talking about the increased earning power of the company reflected in stock prices rather than the increased valuation of the same earning power, so it is still valid.

sdduuuude
12 years ago
Reply to  sdduuuude

sdduuuude wrote:Depends on
[quote=sdduuuude]Depends on how you define double-dip.

If you define it as a second dip below the last peak, then we are not in a double-dip. But why does the second dip have to be lower than the first dip in order to be considered a second dip?

I say, if you have a period of year-over-year gains sandwiched between periods of year-over-year losses, that is a double-dip.

By that definition, it looks like we went into a double-dip last month.[/quote]

I meant to say “below the last bottom” here.

pemeliza
12 years ago

“There is **no guarantee**
“There is **no guarantee** that you will be able to sell your house for more than you bought it, not even (and especially) after you retire. As a matter of fact, due to the sheer number of people who plan on doing this in the next couple of decades, one could easily make the argument that prices might end up being lower than when they had bought. And Lord help those who HELOC’d and thought they would be able to satisfy their debts, AND get some spending money out of the sale, to boot. The delusion runs deep out there.”

One could just as easily make this argument say for example cash. Why would anyone who puts 100k in the bank to save for retirement “expect” it to be worth 100k when they retire? In fact, with the way the government is printing money one could easily make the argument that it will be worth significantly less then when they had put it in the bank.

In fact why would anyone “expect” to earn more than 0.25% on their money in the bank? After all, money is just used to buy things and in fact can be printed at will. If interest rates are high then the only people who benefit are the people with money (typically the rich) and the losers are the people who have to borrow it (typically the families living paycheck to paycheck).

I believe that history shows us that over time cash will not hold its value. Stocks will only hold their value provided that the companies are properly managed and the services they provide do not become defunct (something that is not easy to predict). Real estate will only hold its value to the extent that the associated land is scarce and the location desirable.

Of these three asset classes I suppose I prefer real estate because it provides me utility. In the case of my house it is a roof over my head in one of the most desirable places to live in the world and in the case of my farm in flyover country, I get a nice cash rent. I am certainly not bullish on real estate prices in the short run but I find it very difficult to believe that the nominal prices of top quality real estate will be lower in 30 years.

p.s. I agree with you that retires should not expect to be able to finance their retirement by selling their house no matter how desirable it is. Retirement requires cash flow … a big pile of money these days doesn’t cut it with interest rates so low. Thus it is best to start planning for cash flow early rather than throwing too much money at an expensive house.

CA renter
12 years ago
Reply to  pemeliza

Agreed, pemeliza.
But we

Agreed, pemeliza.

But we already know that nobody “saves” cash for retirement anymore, especially for the reasons you’ve cited.

And that’s exactly what makes this mess so sad. We’ve turned everyone into a speculator, because we cannot rely on the value of our money to remain stable over time. In this way, we debase the value of labor, since labor is paid in wages; and we glorify money that isn’t “earned” at all — cap gains, dividends, etc.

IMHO, it would be so much better if we didn’t have a central bank that was so determined to undermine the value of our labor (wages) with their idiotic inflationary tactics.

bearishgurl
12 years ago

Agree with everything
Agree with everything pemeliza posted.

yojimbo
12 years ago

I find it interesting that it
I find it interesting that it is called a “double dip”. Can anyone really consider the first stage of price drops a “dip”? It was a plunge. After listening to the NAR’s careful usage of words to propagandize the real estate market over the last 20 years I’m very picky about how words are used to create impressions now. Maybe a “double plunge” is in the works.