I noted earlier in the week (and incessantly before that) that home prices have a seasonal tendency to rise in the spring and summer even during the midst of a multi-year price decline.
That sounds like a good enough excuse to make a chart.
I noted earlier in the week (and incessantly before that) that home prices have a seasonal tendency to rise in the spring and summer even during the midst of a multi-year price decline.
That sounds like a good enough excuse to make a chart.
Based on your graphs, it
Based on your graphs, it seems like we are at similar stage of the decline as 1994 in the last decline. Looking at December 1993 vs the actual real bottom of early 1996, the difference is ~ 2% difference. So, not a huge decline. ~90% of the decline is between 1990 and 1993. Only time will tell, but can we see 90% of the decline between 2005-2008 as well?
The 1990’s bust was a
The 1990’s bust was a two-in-one bust. First leg down was due to the overheated market, then in 1991 and 1992 came defense spending cuts. So, the initial 1991 2.3% bounce and the subsequent 10% drop are two unrelated events.
Time to party like its 1994 !
Time to party like its 1994 !
You have the graph through
You have the graph through 1996. I don’t think we really saw the re market get moving and begin to flourish again until 2000. Did it more or less flatline for 4 years?
jpinpb wrote:You have the
[quote=jpinpb]You have the graph through 1996. I don’t think we really saw the re market get moving and begin to flourish again until 2000. Did it more or less flatline for 4 years?[/quote]
Nope, it was at new all-time highs (ie having surpassed the 1990 peak) by mid-1998.
You can kinda eyeball it on the longterm cs graphs but I checked the numbers to make sure.
rich
Ah. I see on the other
Ah. I see on the other graphs home price to income ratio and home price to rent ratio seem to start its ascent in 1998 or thereabouts.
Nice info, by looking at the
Nice info, by looking at the percentages does that mean this drop is 3 times worse by comparison, atleast in the lower tier so far, ouch! Do most Piggs think the upper tier will eventually drop by atleast as much as it went up?
Eugene wrote:The 1990’s bust
[quote=Eugene]The 1990’s bust was a two-in-one bust. First leg down was due to the overheated market, then in 1991 and 1992 came defense spending cuts. So, the initial 1991 2.3% bounce and the subsequent 10% drop are two unrelated events.[/quote]
And the 2000’s bust is a two-in-one bust. First leg down was due to the overheated market, then in 2008-20?? came the deepest and longest recession since the great depression.
zk wrote:
And the 2000’s bust
[quote=zk]
And the 2000’s bust is a two-in-one bust. First leg down was due to the overheated market, then in 2008-20?? came the deepest and longest recession since the great depression.[/quote]
The recession will end (there’s a good chance that it’s already ended, it just hasn’t been announced yet).
Defense spending, on the other hand, did not come back.
We have now entered the
We have now entered the “tinker bell” recovery. If we all hold hands and “believe” enough it will come true. Physical reality be damned!
Arraya wrote:We have now
[quote=Arraya]We have now entered the “tinker bell” recovery. If we all hold hands and “believe” enough it will come true. Physical reality be damned![/quote]
People’s beliefs are a large part of physical reality. They influence saving and spending, and this current recession’s proximate cause was the drop in consumer spending.
I’ve been saying all winter that the recession was psychological, that it was caused by fear rather than objective factors. People are starting to wise up to this idea. They are starting to see that there’s no Great Depression in the cards. Add rising house prices, pretty soon spending patterns will return to pre-Lehman levels, and there you have it – recovery!
Eugene wrote:Arraya wrote:We
[quote=Eugene][quote=Arraya]We have now entered the “tinker bell” recovery. If we all hold hands and “believe” enough it will come true. Physical reality be damned![/quote]
I’ve been saying all winter that the recession was psychological, that it was caused by fear rather than objective factors. People are starting to wise up to this idea. They are starting to see that there’s no Great Depression in the cards. Add rising house prices, pretty soon spending patterns will return to pre-Lehman levels, and there you have it – recovery![/quote]
Ignore the man behind the curtin with the unemployment numbers or that other silly stuff.
rocket science wrote:Eugene
[quote=rocket science][quote=Eugene][quote=Arraya]We have now entered the “tinker bell” recovery. If we all hold hands and “believe” enough it will come true. Physical reality be damned![/quote]
I’ve been saying all winter that the recession was psychological, that it was caused by fear rather than objective factors. People are starting to wise up to this idea. They are starting to see that there’s no Great Depression in the cards. Add rising house prices, pretty soon spending patterns will return to pre-Lehman levels, and there you have it – recovery![/quote]
Ignore the man behind the curtin with the unemployment numbers or that other silly stuff.[/quote]
You don’t have to believe me, but you can’t ignore the causal link between fear, consumer spending, and unemployment.
Eugene wrote:rocket science
[quote=Eugene][quote=rocket science][quote=Eugene][quote=Arraya]We have now entered the “tinker bell” recovery. If we all hold hands and “believe” enough it will come true. Physical reality be damned![/quote]
I’ve been saying all winter that the recession was psychological, that it was caused by fear rather than objective factors. People are starting to wise up to this idea. They are starting to see that there’s no Great Depression in the cards. Add rising house prices, pretty soon spending patterns will return to pre-Lehman levels, and there you have it – recovery![/quote]
Ignore the man behind the curtin with the unemployment numbers or that other silly stuff.[/quote]
You don’t have to believe me, but you can’t ignore the causal link between fear, consumer spending, and unemployment.[/quote]
There is also a link between a credit market collapse and constricting credit lines leading to unemployment. This is quantifiable, that is what happened. Which led to job losses. Which led to fear and cash hoarding and exacerbated the problem.
So far the only thing that has been ‘fixed’ is consumer confidence on zero fundamentals. Credit is still constricting, unemployment still rising, defaults still spiking to historic levels
But hey, they brought the confidence back… Which in essense is an acceptable lie because it’s part of the formula of recoveries. Now they just have to drum up some fundamentals to make the whole thing work or fear and cash hoarding comes back..
http://theautomaticearth.blogspot.com/2009/08/august-1-2009-confidence-is-liquidity.html
Eugene: “I’ve been saying
Eugene: “I’ve been saying all winter that the recession was psychological, that it was caused by fear rather than objective factors. People are starting to wise up to this idea. They are starting to see that there’s no Great Depression in the cards. Add rising house prices, pretty soon spending patterns will return to pre-Lehman levels, and there you have it – recovery!”
AN: “Of all people around here, besides rich, I think Eugene provide the most hard data crunching/statistics.”
Aren’t Eugene and AN some of the most recent knife-catchers?
4plexowner wrote:Aren’t
[quote=4plexowner]Aren’t Eugene and AN some of the most recent knife-catchers?[/quote]
Yes, we are. Now all we need is for ocrenter to chime in and say something good about the economy. He can’t call the bottom in housing prices, since his target was nominal 2000 prices and we’re obviously not there yet (out of two houses sold in the county at nominal 2000 prices, he bought one and I bought the other). But surely his act of knife catching must have imparted some degree of irrational optimism on him, too.
Eugene wrote:4plexowner
[quote=Eugene][quote=4plexowner]Aren’t Eugene and AN some of the most recent knife-catchers?[/quote]
Yes, we are. Now all we need is for ocrenter to chime in and say something good about the economy. He can’t call the bottom in housing prices, since his target was nominal 2000 prices and we’re obviously not there yet (out of two houses sold in the county at nominal 2000 prices, he bought one and I bought the other). But surely his act of knife catching must have imparted some degree of irrational optimism on him, too.[/quote]
…yes, but he doesn’t seem to. I suspect he’s much less convinced of all the economic goodness surrounding us.
And you’re the only two who scored 2000 prices? (no offense intended to ocrenter.) How the heck do you know that?
4plexowner wrote:
Aren’t
[quote=4plexowner]
Aren’t Eugene and AN some of the most recent knife-catchers?[/quote]
Recent? nah, not by a long shot (at least not here on Piggington). But, your point is? In God I Trust. Everyone Else Bring Data. So, everyone is babbling until they bring specific data.
you mean data like
you mean data like this?
Eugene: “I’ve been saying all winter that the recession was psychological, that it was caused by fear rather than objective factors. People are starting to wise up to this idea. They are starting to see that there’s no Great Depression in the cards. Add rising house prices, pretty soon spending patterns will return to pre-Lehman levels, and there you have it – recovery!”
That sounded more like
That sounded more like opinion to me, rather skewed opinion, not taking into consideration data and facts.
4plexowner wrote:you mean
[quote=4plexowner]you mean data like this?
Eugene: “I’ve been saying all winter that the recession was psychological, that it was caused by fear rather than objective factors. People are starting to wise up to this idea. They are starting to see that there’s no Great Depression in the cards. Add rising house prices, pretty soon spending patterns will return to pre-Lehman levels, and there you have it – recovery!”[/quote]
Data like these:
AN wrote:
Data like
[quote=AN]
Data like these:
[/quote]
Don’t bother, AN. Next they’ll say that my data can’t be trusted because I’m a homeowner, therefore I’m biased.
By the way, images don’t seem to link correctly.
Eugene wrote:
Don’t bother,
[quote=Eugene]
Don’t bother, AN. Next they’ll say that my data can’t be trusted because I’m a homeowner, therefore I’m biased.
By the way, images don’t seem to link correctly.[/quote]
What do you mean images don’t seem to link correctly? I see them just fine. Do you not see the graphs? Or are you talking about your reply that quoted me not showing the images?
AN wrote:Based on your
[quote=AN]Based on your graphs, it seems like we are at similar stage of the decline as 1994 in the last decline. Looking at December 1993 vs the actual real bottom of early 1996, the difference is ~ 2% difference. So, not a huge decline. ~90% of the decline is between 1990 and 1993. Only time will tell, but can we see 90% of the decline between 2005-2008 as well?[/quote]
…and this is your other “data”. How do you get we’re in 1994? Duration? According to your graphs, peak is more like 2006, putting us at ’93.
December 1993 to ’96 bottom, only 2-ish percent? Way to round down. That’s not what the graph says and are you suggesting we might continue the slide as Rich suggests, but that it will only be along the lines of 2.5 percent?
The graphs you just posted tell us little. Recovery? Dead cat bounce? Could be either. I notice MM has the biggest uptick though. Good on you!
sdcellar wrote:
…and this
[quote=sdcellar]
…and this is your other “data”. How do you get we’re in 1994? Duration? According to your graphs, peak is more like 2006, putting us at ’93.
December 1993 to ’96 bottom, only 2-ish percent? Way to round down. That’s not what the graph says and are you suggesting we might continue the slide as Rich suggests, but that it will only be along the lines of 2.5 percent?
The graphs you just posted tell us little. Recovery? Dead cat bounce? Could be either. I notice MM has the biggest uptick though. Good on you![/quote]
Did you not look at Rich’s graphs? That’s where I get 1994 from. I don’t have any graph of my own, just Eugene’s and Rich’s.
Is there a reason why Rich line up his graph this way? Maybe he can explain that to you.
Do you not see December 1993 = -15% and 1996 bottom at -17%? Am I not seeing this correctly?
Eugene’s graph is what it is. You can interpret however you want. Only time will tell if it’s a dead cat bounce or recovery. You love to put words in my mouth, don’t you?
Probably closer to 2.5 than
Probably closer to 2.5 than 2, but it really goes back to the point I’ve made before, if there’s rounding adjustment to be made, you seem to make it in your favor. That said, what bearing does that percentage have to do with now? As a percentage of the overall decline, it’s still over 10% of that.
Now, me, I won’t suggest we’ve got over 10% of what overall decline actually takes place yet to come, but an argument could at least be made for that. I won’t support it because I frankly can’t make sense out of much of this at this point.
As far as lining up the graphs go, especially if you’re going to dial it down to a specific month (e.g. Dec ’93), well it’s on you to line up the graphs better, not Rich. I don’t think he’s trying to do that with the pinpoint accuracy that you seem to be employing.
…and I thought they were your graphs because you posted them. Mostly, they’re just graphs. Did you think just posting them would make the “bottom” seem crystal clear?
sdcellar wrote:Probably
[quote=sdcellar]Probably closer to 2.5 than 2, but it really goes back to the point I’ve made before, if there’s rounding adjustment to be made, you seem to make it in your favor. That said, what bearing does that percentage have to do with now? As a percentage of the overall decline, it’s still over 10% of that.
Now, me, I won’t suggest we’ve got over 10% of what overall decline actually takes place yet to come, but an argument could at least be made for that. I won’t support it because I frankly can’t make sense out of much of this at this point.
As far as lining up the graphs go, especially if you’re going to dial it down to a specific month (e.g. Dec ’93), well it’s on you to line up the graphs better, not Rich. I don’t think he’s trying to do that with the pinpoint accuracy that you seem to be employing.
…and I thought they were your graphs because you posted them. Mostly, they’re just graphs. Did you think just posting them would make the “bottom” seem crystal clear?[/quote]
Did I ever call the bottom?
Lets take your numbers, then, 2.5% of ~17% is ~15%. Let me ask my question again, are we 85% done then? Only time will tell. Isn’t the graph he’s posting trying to point out that every spring we have a bounce, so this spring is no different? I made my assumptions and asked my question. If you don’t agree, lets see your assumptions and you make your analysis. Trying to discredit my assumptions and question won’t give you credit, unless your soul purpose is trying to discredit my question.
Bingo, they’re just graphs/data. You can make your own analysis. Where’s your analysis of all these data and graphs?
BTW, ONLY HIND SIGHT is 20/20.
Not bottom, but you’ve called
Not bottom, but you’ve called “bottom enough”. and, yes, I round my numbers unfavorably for my arguments. That said, I am not saying that we’re 90% (or 85%) of the way there. To me, it’s a heck of a lot more complex than that. At the higher end, it simply seems like there’s got to be a ways to go, but even with individual lower end properties, I see prices that are still whacky.
I suppose I’m a big fan of ocrenter’s notion of 2001 prices being the right balance, but with all the machinations and madness going on, who knows?
I can also only imagine that if we’ve got such suckers for housing myths here, it must be really bad out in the “normal” world. Maybe it is the bottom, or “bottom enough.”
It’s also not my “soul” purpose or even my sole purpose. I don’t take it that seriously, but you certainly are pretty consistently bullish. Your run of “hey, don’t be bullish” comments whenever somebody was just trying to be balanced was particularly amusing.
Once again, a non answer and
Once again, a non answer and putting words in other people mouths. Good job.
I’ve told you this time and time again, MAKE YOUR OWN ANALYSIS. If you live life dependent on others’ analysis, then good luck to you.
BTW, good job in being a spelling police on an online forum. Here’s a cookie for you. Me, consistently bullish? are you kidding me? How long have you been bearish? I was bearish well before this site started. Do you not understand the meaning of consistently?
whoa, not correcting your
whoa, not correcting your spelling, just thought it was funny in this particular instance. I misspell all the time. No big deal, For example, is it whacky or wacky–I’m not really sure?
Golly, I thought I put something out there. Certainly not asking (or relying) on somebody to do the analysis for me. I know I get a *lot* of insight from guys like Rich and others–less so from random graph posters. But I certainly live by my own analysis (e.g. still consciously not buying)
I think I understand what the word consistent means. In this case, I just meant that you’ve been pretty bullish (or at least of fan of supporting data) since you bought your house. My posts get kind of wordy, so didn’t think the clarification was necessary. I know you used to be a “bear” here, but can’t say I knew what you were like before that…
sdcellar wrote:I know you
[quote=sdcellar]I know you used to be a “bear” here, but can’t say I knew what you were like before that…[/quote]
I’m still a bear in a lot of the move up areas. I’m bullish is some of the hard hit areas. Areas that have fallen 60+% from peak. What’s your call?
[quote=sdcellar]Less so from random graph posters.[/quote]
Finally thinking for yourself, eh? How does it feel?
Wow, I’m bearish about the
Wow, I’m bearish about the move up (and higher priced) areas as well, but I’m not “bullish” about the hardest hit. This has to do with more than just price. I feel that folks who go for the “bargains” now stand a good chance to regret their purchase when it turns out they had the means to get something better if they’d only been patient.
I saw this happen during the bubble (I’m sad about my friends who are stuck in nice condos,) and I think it’s happening now, but it “feels” better because it’s SFR. Sure, it may be craptastic or in a dicey area (or both), but they got the deal, they’re in. And then they’ll have kids and want a better area, better schools, and they’ll lose money in the process because they only stayed 4 years and transaction costs end any delusion of a bargain.
That’s what I think and I’ve always thought for myself. Thanks. I do pay attention to those around me though…
sdcellar wrote:Wow, I’m
[quote=sdcellar]Wow, I’m bearish about the move up (and higher priced) areas as well, but I’m not “bullish” about the hardest hit. This has to do with more than just price. I feel that folks who go for the “bargains” now stand a good chance to regret their purchase when it turns out they had the means to get something better if they’d only been patient.
I saw this happen during the bubble (I’m sad about my friends who are stuck in nice condos,) and I think it’s happening now, but it “feels” better because it’s SFR. Sure, it may be craptastic or in a dicey area (or both), but they got the deal, they’re in. And then they’ll have kids and want a better area, better schools, and they’ll lose money in the process because they only stayed 4 years and transaction costs end any delusion of a bargain.
That’s what I think and I’ve always thought for myself. Thanks. I do pay attention to those around me though…[/quote]
Oh wow, you mean 2 people who look at the same data can interpret things differently? Holy carp. I never knew that’s possible. Just because someone disagree with you doesn’t mean they’re peddling something. BTW, your opinion obviously is different than those who bought in the low end. Hence, they bought and you’re still renting. Your word is not the law and neither is mine.
Seriously, you feel sorry for people who bought a house and plan to stay in it for just 4 years? You must feel sorry for all those who bought in the peak then. Did anyone here on Piggs ever buy or will buy a house w/ plans to sell in 4 years? Even in normal RISING market, you’d be lucky to break even after just 4 years, after various fees. People who have 4 years horizon SHOULDN’T be buying houses. They’re the main cause of this bubble in the first place.
I have no (direct) interest
I have no (direct) interest in the low end, so my opinion on that market hasn’t had any (direct) influence in my decision making process.
Did I say somewhere in my post that people knowingly bought a house and planned to be in a position where they wanted to sell it in 4 years? You don’t think anybody here (especially lurkers) might not make that exact same mistake?
And four years might be on the low side. It could still be six, eight, ten years until someone can come out ahead. Sadly, most people aren’t that long range in their thinking. Sure, they should be, but they’re just not. And again, Piggs aren’t insulated from that.
AN wrote:BTW, ONLY HIND SIGHT
[quote=AN]BTW, ONLY HIND SIGHT is 20/20.[/quote]
I thought it was 50/50.
Oops, I might have just outted myself. People who know me know I love to discombobulate cliches.
You know, six of one and twelve dozen of another.
AN wrote:
What do you mean
[quote=AN]
What do you mean images don’t seem to link correctly? I see them just fine. Do you not see the graphs? Or are you talking about your reply that quoted me not showing the images?[/quote]
You can only see images if you visited the blog previously, I think.
rocket science wrote:Eugene
[quote=rocket science][quote=Eugene][quote=Arraya]We have now entered the “tinker bell” recovery. If we all hold hands and “believe” enough it will come true. Physical reality be damned![/quote]
I’ve been saying all winter that the recession was psychological, that it was caused by fear rather than objective factors. People are starting to wise up to this idea. They are starting to see that there’s no Great Depression in the cards. Add rising house prices, pretty soon spending patterns will return to pre-Lehman levels, and there you have it – recovery![/quote]
Ignore the man behind the curtin with the unemployment numbers or that other silly stuff.[/quote]
You mean, the same man who’s pumping TRILLIONS of dollar into this “problem”?
Rich, it may prove
Rich, it may prove interesting to overlay an unemployment graph over this housing price graph. Keeping in mind that the govt is far more restrictive in it’s calculation of what constitutes being unemployed these days.
Even better if you could go back to 1980.
In the grand scheme,
In the grand scheme, trillions may not be enough to beat deflationary forces. At least for now. Timing is everything…
deriving drunk wrote:In the
[quote=deriving drunk]In the grand scheme, trillions may not be enough to beat deflationary forces. At least for now. Timing is everything…[/quote]
In the grand scheme of things, trillions might just be the start. It wouldn’t surprise me if they’ll pump trillions after trillions until we’re out of this recession.
Eugene wrote:Arraya wrote:We
[quote=Eugene][quote=Arraya]We have now entered the “tinker bell” recovery. If we all hold hands and “believe” enough it will come true. Physical reality be damned![/quote]
People’s beliefs are a large part of physical reality. They influence saving and spending, and this current recession’s proximate cause was the drop in consumer spending.
I’ve been saying all winter that the recession was psychological, that it was caused by fear rather than objective factors. People are starting to wise up to this idea. They are starting to see that there’s no Great Depression in the cards. Add rising house prices, pretty soon spending patterns will return to pre-Lehman levels, and there you have it – recovery![/quote]
So the greatest amount of public and private debt ever held had nothing to do with this recession? Only psychology?
Or more importantly, the
Or more importantly, the borrowers ability to sustain the maintenance of the debt. Default is the result.
Eugene wrote:Arraya wrote:We
[quote=Eugene][quote=Arraya]We have now entered the “tinker bell” recovery. If we all hold hands and “believe” enough it will come true. Physical reality be damned![/quote]
People’s beliefs are a large part of physical reality. They influence saving and spending, and this current recession’s proximate cause was the drop in consumer spending.
I’ve been saying all winter that the recession was psychological, that it was caused by fear rather than objective factors. People are starting to wise up to this idea. They are starting to see that there’s no Great Depression in the cards. Add rising house prices, pretty soon spending patterns will return to pre-Lehman levels, and there you have it – recovery![/quote]
I wouldn’t bet your retirement on that thesis. You’re extremely likely to get hosed. This IS not a psychological (consumer/inventory driven) recession. It IS a credit driven recession and nowhere near enough of the bad debt has been defaulted on to call a recovery while the gov’t has taken on even more bad debt to cover it up.
Eugene wrote:Arraya wrote:We
[quote=Eugene][quote=Arraya]We have now entered the “tinker bell” recovery. If we all hold hands and “believe” enough it will come true. Physical reality be damned![/quote]
People’s beliefs are a large part of physical reality. They influence saving and spending, and this current recession’s proximate cause was the drop in consumer spending.
I’ve been saying all winter that the recession was psychological, that it was caused by fear rather than objective factors. People are starting to wise up to this idea. They are starting to see that there’s no Great Depression in the cards. Add rising house prices, pretty soon spending patterns will return to pre-Lehman levels, and there you have it – recovery![/quote]
Eugene, stick to sdlookup forums to babble please..
deleted
deleted
ibjames wrote:Eugene
[quote=ibjames][quote=Eugene]
People’s beliefs are a large part of physical reality. They influence saving and spending, and this current recession’s proximate cause was the drop in consumer spending.
I’ve been saying all winter that the recession was psychological, that it was caused by fear rather than objective factors. People are starting to wise up to this idea. They are starting to see that there’s no Great Depression in the cards. Add rising house prices, pretty soon spending patterns will return to pre-Lehman levels, and there you have it – recovery![/quote]
Eugene, stick to sdlookup forums to babble please..[/quote]
We all have our own opinion as to what’s the reasons behind certain things. Just because you don’t agree to them doesn’t mean it’s babbling. Of all people around here, besides rich, I think Eugene provide the most hard data crunching/statistics. Especially useful when you have a specific area/zip code(s) you want to get statistic for. If your definition of babbling is anything that you don’t agree with, then, we all are babbling.
Prices are still about 45%
Prices are still about 45% above 2000 levels. When cost of money is taken into account that shrinks some.
Considering the area under the curve was many times larger for this bubble compared to the last, it seems there is greater downside risk percentage-wise, even now.
What are all the relevant factors? Population, inventory, financing availability/rates, employment, income levels, psychology of course.
Place your chips…govt has your back. Gives you a clunker for your cash.
Thanks Rich. Very useful to
Thanks Rich. Very useful to see how it really plays out over the seasons! I remember, 1996 to 1998 saw a good solid rise. Places I was tracking went up ~25% from 1996 to 1998.
Looks like Rich isn’t the
Looks like Rich isn’t the only one to use the term head-fake in his assessment.
Another take on it.
The Mother Of All Head Fakes
Great insight as usual, Rich.
Great insight as usual, Rich. I particularly like the “Two Housing Busts” graph. Thanks for the renewed dose of reality.
“How banal, yet how sagacious!”
Greekfire
I wouldn’t bet your farm on
I wouldn’t bet your farm on the ability of the Federal Reserve in collusion with Treasury and the large banks and lenders to engineer a hearty or sustainable bubble reflation. Haven’t we seen this movie before?
And if they can reflate a half-deflated bubble, to what end? Are owners going to extract equity from their inflated home value to compensate for lack of real income or a too-high DTI? Are owners going to sell and downsize or move to Iowa to realize any gains? Who is going to buy at the lower end to sustain the property escalator? Again, haven’t we seen this movie before?
The debt loads are enormous and are crushing all efforts to reflate. GDP will be positive only because of massive deficit spending. Real incomes and unemployment will worsen. How is the Fed going to unwind it’s credit facilities of our Free Enterprise System.
As always, those who have the income and/or assets to make it through the downturn will be fine. Lord knows there are plenty in SC. But I think their reach and breadth is overexaggerated.
Re: the trillions being
Re: the trillions being pumped into the system…
Dylan Ratigan, formerly of CNBC and formerly one of the few good guys on that disgraceful network, comments on this and “the greatest theft ever”
http://www.youtube.com/watch?v=UhfvE9bNls4
Maybe they can pump another few trillion more to pump up your house values, maybe not…
I’m afraid this is where the
I’m afraid this is where the inventory is that is creating the tight market…..
http://market-ticker.denninger.net/
NOTE: I see this morning that Colonial Bancorp was taken over today. They are mentioned in this article.
I’m sorry, the above link
I’m sorry, the above link wont take you where I wanted you to go. Here’s and excerpt…
So what’s going on here?
Simple: An enormous number of banks are holding loans at or close to “par” that really aren’t. They’re holding mortgages at massively-inflated values, even on defaulted properties, and this is why you are not seeing more foreclosure sales – that is, why inventory is being held back. If they sell it the accountants will force recognition of the loss, which will render them instantly insolvent, but so long as they “extend and pretend” they are marking these loans way, way above recovery value. The upshot of this is that these firms’ balance sheet claims on asset values are massively inflated, regulators know it, and they’re intentionally ignoring it.
I have been sounding the alarm on this for more than a year; it has in fact been the focus of multiple petitions to Congress and the cause of thousands of dollars of personal expense faxing letters and Tickers to members warning them of the danger of letting this sort of accounting misdirection continue.
The claim of banking sector health and “successful rescue by Treasury and The Fed” is in fact false. No such thing has occurred. What’s going on here is nothing more or less than intentional false claims of asset “valuation”, which is repeatedly exposed when the FDIC is finally forced to seize institutions, exposing the lies. Then, suddenly, 20, 30, even 40% losses on alleged “asset books” come out into the light and the taxpayer eats them.
The bank executives and accountants that played this game with the books should have been arrested and the bank thrown into receivership over a year ago.
Oh by the way, just as with all such “extend and pretend” games (otherwise known as fraud when practiced by anyone without a “government can cheat all it wants and nobody goes to jail” card) the longer you play this game, the longer you wait to do the right thing, the more money it costs you (in this case the Taxpayer gets the inevitable bill.)
For those of you who say that the FDIC is “not the responsible party”, that’s nonsense. OTS/OCC are the agencies that perform primary regulation for any federally-chartered bank but the FDIC is the agency that is responsible for resolution, and they are always working together in this regard.
Yes, the FDIC has a “backup credit line” (a big one at that!) from Treasury, but the fact remains that about 75% of the FDIC’s “insurance fund” has been depleted over the last year due to massive and intentional failures to enforce Prompt Corrective Action, with the most-expensive and most-outrageous (thus far) being IndyMac, where OTS was found (by the government’s own auditors!) to be complicit in backdating deposits to “cook” capital ratios!
Riddle me this folks: What possible positive purpose can come from the FDIC refusing to seize these institutions when their capital ratios are either negative or clearly going to become negative? These banks have all been train wrecks that I and others have written about for more than a year; Colonial was referenced in a Ticker on the 14th of July of 2008, with my first warning on them more than two years ago in April of 2007.
What do I think?
I believe the FDIC is broke and knows it; that under the law they should have seized these three banks (and many dozens more, including some really big ones) some time ago, but doing so will force them to tap the Treasury “emergency” credit line. They’re well-aware that this could instill quite a bit of panic in the public (never mind Congress!); as such they, along with OTS and OCC are conspiring to (once again) hide the truth and pray for an economic recovery before they are forced to act as the law demanded months or even years ago!
This is nothing more than an attempt to keep this graph from looking dramatically worse than it already does and keep the “green shoot” lie alive to pump the stock market so that Americans “feel better.” Big banking and other executives are taking advantage of this lie by selling shares into an overheated market (which they have been doing, by the way: Insider sales are at levels last seen just before the top in October of 2007!)
Govt believes strongly in the
Govt believes strongly in the axiom that “time will heal all wounds”. So delaying tactics are the order of the day. I believe this was the strategy of the japanese from 1990 on. At least they kept their unemployment at 5%. I dont think we’ll be that lucky.
Procrastination is the thief
Procrastination is the thief of time, to quote some poet (forget who). Eventually, it has to be dealt with. I just don’t know how we can continue to sweep it under the rug. We will have one heck of a hill that’s going to be oozing out the sides of this carpet sooner or later.
I just keep thinking the longer we take, the harder it’s going to be. I have to say, day to day life, I don’t notice major differences. I notice a lot of businesses/offices for lease. Other than that, life is seemingly functioning as normal. The average person will be taken off guard.
I mean, when I say normal, sure there are layoffs and people losing jobs. But the pain is minimal. They collect unemployment and as I imagined, there are going to be more extenstions to unemployment. Money comes in, just less. Purse strings will be tightened. So they won’t pay their mortgage. They live in their house for free for a year or so. The banks don’t want it on their books – or whatever reason foreclosure isn’t happening. People can have some money if the main expense, house, is taken out of the equation.
I just don’t know how long they can pretend everything is okay. I would think there would be something specific to spur a recovery. Does pretend recovery count?
Whatever any of you want to
Whatever any of you want to beleive the market is very active from my seat. I have a listing that had a few offers between 340 and 345 which I thought was a fair price based upon comps. The lender countered at 355 which I think is too high. I told them so but brought it back to the 340 to 345 buyers. The ones still around said no way. I had to put it back on the market as active instead of contingent. I got 4 offers in a day at 355 or higher and everyone had at least 10% to put down.
Buyers are continuing to pile up on themselves while supply is still very low. We can only hope for a flood of shadow inventory. It would get swallowed quickly.
The market is obviously back.
The market is obviously back. We are seeing homes in our search going for 15, 20 percent – even 35 percent above list in one case.
This house was listed at 245, IIRC. It just closed for 303 and change.
http://www.sdlookup.com/MLS-090038917-555_Butterwood_Ave_San_Marcos_CA_92069
I think I’ll stop babbling
I think I’ll stop babbling and go away.
The graphs extend back only
The graphs extend back only 18 months. Could be noise. Again, there is a STRONG seasonal aspect to sales and prices.
You’re betting a recovery based on currently restricted inventory?
I don’t think it’s possible
I don’t think it’s possible or advisable to “line up” the two graphs, 90’s vs 00’s or try to draw too many likely chronological similarities. Look at the differences: financing differences ie exploding mortgages, moratoriums, deferred foreclosures ie loan modifications, extraordinary monetary intervention, historic unemployment, and declining real incomes all conspire to make this bust much deeper and longer-lived than a completely different 80’s/90’s bubble.
deriving drunk wrote:I don’t
[quote=deriving drunk]I don’t think it’s possible or advisable to “line up” the two graphs, 90’s vs 00’s or try to draw too many likely chronological similarities. Look at the differences: financing differences ie exploding mortgages, moratoriums, deferred foreclosures ie loan modifications, extraordinary monetary intervention, historic unemployment, and declining real incomes all conspire to make this bust much deeper and longer-lived than a completely different 80’s/90’s bubble.[/quote]
Yes, we already saw that this bust is A LOT deeper than the last bust. Only time will tell if it’ll be longer as well. I agree on all the points you’ve made to distinguish the current scenario vs the past. I just disagree on the conclusion. I think the government will do whatever it takes to blow this bubble back up. It doesn’t seem like they have a limit as to how much they’ll dump into this problem.
we are at the bottom of
we are at the bottom of interest rates. Interest rates trended down from ~1980 until now, fueling the rise in real estate values. That engine is now exhausted. The inevitable rise in rates will affect any upward real price growth trend unless crazed lending begins anew. It may cycle up again or stablize on this but will be a temporary stabilization.
Like you said though, if you’re planning to stay in the same spot for many years, the risk is lower you will have to sell into a high rate environment and take a bath. I think it’s very, very difficult to see down the road more than a few years. It seems job, family factors can change things in a hurry.
AN wrote:I just disagree on
[quote=AN]I just disagree on the conclusion. I think the government will do whatever it takes to blow this bubble back up. It doesn’t seem like they have a limit as to how much they’ll dump into this problem.[/quote]
See, just when I think you’re sounding sensible. Did you just say “blow this bubble back up”? Aren’t they just trying to keep it from losing more air? Am I putting words into your mouth again?
Maybe you just meant that if they can keep it right here, i.e. the new “normal”, then they will have sustained the bubble to some extent.
sdcellar wrote:
See, just
[quote=sdcellar]
See, just when I think you’re sounding sensible. Did you just say “blow this bubble back up”? Aren’t they just trying to keep it from losing more air? Am I putting words into your mouth again?
Maybe you just meant that if they can keep it right here, i.e. the new “normal”, then they will have sustained the bubble to some extent.[/quote]
I didn’t know being sensible = agreeing with sdcellar. Good to know. Now that clears up a lot things. It was never a debate with you. It’s insensible for all opposition and your opinion is the law of the land.
You say “keep it from losing more air”, I say “blow this bubble back up”, you say to-mah-to, I say to-may-to.
You’re a car guy, right? Let
You’re a car guy, right? Let me explain with tire pressure.
“keep it from losing more air” – tire inflated to 30 PSI remains at 30 PSI.
“blow this bubble back up” – tire at 30 PSI is inflated to 35 PSI.
to-mah-to, to-may-to? more like simple math, physics, whatever you choose, but not pronunciation and not even semantics. You’re not being sensible has nothing to do with not agreeing with me.
oh, and flat out, I’m in the to-may-to camp. Who the hell says to-mah-to?
What’s the common denominator
What’s the common denominator in your two example? They both require you to BLOW. They’re obviously blowing hard right now. Right? Or do you think them pumping trillions into this problem is just a normal thing?
You obviously think 30 PSI is still a bubble. The government obviously don’t agree, that’s why we have moratorium, $7500 tax free loan, $8k tax credit, $10k new house tax credit, etc, etc. The average American public don’t agree. So no, I don’t think they’ll do just enough to keep house at today’s level. They’ll try their hardest to get us back to where we were. I don’t have faith in our government blowing just to enough to keep us as 30 PSI. I think they’ll blow too hard and cause a different bubble. That was what they did when the .com crash and I think that’s what they’re doing today.
Obviously to you, only those who agree with you are sensible and all others are not. For a second, you thought I was sensible, because we both agree that the high end are still bubbly. But then as soon as I disagree with you, I’m no longer sensible. Is that coincidence or intentional? Hmmm…
The common denominator in my
The common denominator in my example is equality. One is and one isn’t. I really can’t make things any simpler for you. Heck, you attack the air pressure level I picked. Isn’t 30 PSI a reasonable tire pressure in most cases? I knew I should have been more careful in picking the exact number, what with you being the data guy. I *thought* I was being conservative–it’s not like I said 75 PSI or something.
Plenty of sensible people disagree with me. Hey! That’s funny! Get it?
sdcellar wrote:The common
[quote=sdcellar]The common denominator in my example is equality. One is and one isn’t. I really can’t make things any simpler for you. Heck, you attack the air pressure level I picked. Isn’t 30 PSI a reasonable tire pressure in most cases? I knew I should have been more careful in picking the exact number, what with you being the data guy. I *thought* I was being conservative–it’s not like I said 75 PSI or something.
Plenty of sensible people disagree with me. Hey! That’s funny! Get it?[/quote]
Huh? Equality? Wow, I’m stopping now before I get completely lost. Nice talking to you, good bye.
30 = 30
35 <> 30
Using your
30 = 30
35 <> 30
Using your analogy, one requires you to blow harder (and I’ll just let that one go…)
perhaps if you read before rambling and deflecting you might find yourself a little less lost. I’ll admit these are advanced concepts.
For those who’s interested in
For those who’s interested in what common denominator means:
Common Denominator – Denominator that is a common multiple of, and hence exactly divisible by, all the denominators of a set of fractions, and which therefore enables their sums or differences to be found.
AN wrote:I don’t have faith
[quote=AN]I don’t have faith in our government blowing just to enough to keep us as 30 PSI. I think they’ll blow too hard and cause a different bubble. That was what they did when the .com crash and I think that’s what they’re doing today.[/quote]
AN, did you see the dow today? we are pushing 9300! but is there truly good news all around to support this increase from 6500? Nope.
I say the near 3000 point jump is coming from anticipated inflation. expect oil to start climbing as well. the dollar will be trash.
so here goes: scratch nominal 2000 pricing, with hyper-inflation it doesn’t mean anything.
there’s a lot of debate about the high end, and the larger than norm price differential between that and mid-tier and low-tier. what is going to happen is the high end pricing is going to go down, but not as low as it would take to return to normal gap. rather, the mid-tier and low-tier would gradually rise to meet it. why? we are on our way to inflate ourselves out of the housing downturn.
someone was telling me he was anxious because his $600k home was dropping in value. I asked him how much he got it for, he told me $300k back in 2000. I told him that is the true value. But because of his anxiety regarding this “drop in value,” the government will trash the dollar to the point that a loaf of bread would cost $20.
when asked what he thinks, he said: “$20 bread is bad, but that’s a small price to pay if it means my house stays at $600k.” This is how most Americans think and the government BY the people and FOR the people will do just that.
oc and anyone else who may
oc and anyone else who may know. When inflation is in full bloom, where do you expect unemployment to be?
We have tried to fill the bubble w/air. Are we going to find high paying jobs out of thin air? Where will the jobs come from? Let me rephrase that. Where will the HIGH paying jobs come from to pay for that $20 loaf of bread?
Even if we have wage inflation, wouldn’t we need jobs for the U6 double digit workers. And if we continue on this path, it’s looking like unemployment will continue for some time. Unemployment benefits will be extended.
While there are people out there in a hurry to buy b/c after the greatest bubble in history they are seeing declines and low inventory thanks to gov/bank manipulation, what will happen after that?
Isn’t this hot potato all over again? Who is going to keep buying when we do have inflation and high unemployment and low wages?
When it comes time for your kids to buy, how are they going to do it?
Germans sell their belongings
[img_assist|nid=11641|title=Germans sell their belongings to make ends meet|desc=|link=node|align=left|width=400|height=304]
who needs a job? as long as I can sell my useless shit on ebay and craigslist I’ll be OK
ocrenter, I wouldn’t go as
ocrenter, I wouldn’t go as far as hyper-inflation. At least I have some faith in our government to not swing us that far into that end of the pendulum. However, I agree with you that your average American/voters prefer inflation over deflation. So, the power that be will do what they can to try and keep everyone happy. Which means, try and keep recession as short and as painless as possible. They’ve been successful this far it keeping the ball rolling. We’ll see if they can keep it rolling this time. So, far, it seems like they’re successful.
[quote=jpinpb]Isn’t this hot potato all over again? Who is going to keep buying when we do have inflation and high unemployment and low wages?
When it comes time for your kids to buy, how are they going to do it?[/quote]
Isn’t this what happened in the 70s?
plenty of folks got to
plenty of folks got to nominal 2000 pricing and beyond. and even more got close.
So no, me and Eugene did not get 2 of the only nominal 2000 homes in the county, although that was a rather funny comment.
back in 12/2008 I posted about SiverCrest in San Marcos, I thought $150/sqft was catching the knife, I also figured $130/sqft was around nominal 2000 pricing.
check out this recent sale: http://www.sdlookup.com/MLS-090031793-663_Edgewater_San_Marcos_CA_92078
that’s at $105/sqft! but there are plenty more folks paying well over $200/sqft in San Marcos as well. overall the median is not even close to 2000 nominal pricing but there are numbers of folks that got down to that price range.
I see it in my neighborhood too. one neighbor would buy a house for $180/sqft, and another guy just next door close within the same month for $270/sqft.
when I pushed the nominal 2000 pricing, I wanted BMIT readers to be that guy that got the house for $180/sqft, not the fool that bought next door for $270/sqft.
are we truly going to see median pricing at nominal 2000 level? probably not. but has there been opportunities? you bet!
Thanks oc, I didn’t think you
Thanks oc, I didn’t think you were the only two and that’s exactly where I’m coming from. I don’t want to be that fool and I don’t want other good people to be that fool either.
Will medians or c-s or whatever get to the 2000 nominal (or “just” the 2001 nominal I’m looking for?) I agree that it looks unlikely, but on an individual basis, it still seems within reach. Since I’m looking in the high end (at least according to c-s), I just have to be more patient (or look harder)
Reading the comments
Reading the comments here…real estate is some wierd religion — needs to die.
Anecdotes on bidding wars mean nothing. What’s to stop the same group of buyers from bidding on multiple properties? We don’t know the composition of the buying group. I am taking the long view, not the next month.
Two anecdotes from Lansner’s
Two anecdotes from Lansner’s blog. I’m sure this isn’t happening in SD.
SW says: I just received requests to appraise two REO properties which lenders took back from the borrowers December 2008. Both of these properties have been sitting vacant since then and neither has yet been put up for sale in the MLS.
Post Reply Modguy says:
August 3, 2009 at 5:42 pm I mentioned the other day that where I work there are thousands of del’q mortgages that have not yet resulted in FC due to our own delays, but more so due to stall tactics of borrowers (whether intentional or not) – apply for mod, drag your feet, cancel mod, apply for short sale, hire an attorney, file BK, etc.
Here’s some research for you Matt: find out how many loans are truly del’q right now, and how many fall into each bucket (30, 60, 90, +), that HAVE not been foreclosed.
I know we still have some from 2006/2007 that haven’t made a payment since!!
I think this would settle the question about looming FCs and any possibility of being at the “bottom”.
deriving drunk wrote:Two
[quote=deriving drunk]Two anecdotes from Lansner’s blog. I’m sure this isn’t happening in SD.
SW says: I just received requests to appraise two REO properties which lenders took back from the borrowers December 2008. Both of these properties have been sitting vacant since then and neither has yet been put up for sale in the MLS.
Post Reply Modguy says:
August 3, 2009 at 5:42 pm I mentioned the other day that where I work there are thousands of del’q mortgages that have not yet resulted in FC due to our own delays, but more so due to stall tactics of borrowers (whether intentional or not) – apply for mod, drag your feet, cancel mod, apply for short sale, hire an attorney, file BK, etc.
Here’s some research for you Matt: find out how many loans are truly del’q right now, and how many fall into each bucket (30, 60, 90, +), that HAVE not been foreclosed.
I know we still have some from 2006/2007 that haven’t made a payment since!!
I think this would settle the question about looming FCs and any possibility of being at the “bottom”.[/quote]
Yep and all of that on the taxpayer dime. Although I tell everyone in that situation that they might as well live rent free as long as they are allowed it is still a punch in the face to those who have been responsible all of this time.
Buy a house you could never afford and .gov will find a way to keep you in it rent free…
Buy a big huge gas guzzler you also can’t afford and .gov will let you write off the whole purchase and then a few years later will give you $4500 to take it back…
It’s pretty sad that most everyone has become apathetic towards this stuff. I’m not talking about people on this board but people in general. I have to get to work so I can work even harder to pay for more irresponsible people! 😉
As for RE in San Diego… it’s still got a long way to go down until all of the free renters are kicked out, the homes taken by the banks and then unloaded at market prices. If this doesn’t happen until rates rise, unemployment peaks and the banks are finally in cardiac arrest from their balance sheets then the downward pressure on pricing will be so heavy this last downwave will look like a picnic.
the sudden rise in the dow
the sudden rise in the dow worries me. we are officially over 9300. what is the rise based on? has to be impending inflation.
Strong US Dollar
“inflation”
[img_assist|nid=11645|title=Strong US Dollar|desc=|link=node|align=left|width=400|height=208]
“inflation” is propaganda that Americans have bought into hook, line and sinker
“inflation” is just another name for the devaluation of our fiat currency
it’s hard to see in the chart above but the US dollar has fallen from above the 1.40 level in the mid-1980’s to its current value of 0.77
who gives a flying-flip if the Dow makes it back to 14,000 points if it means $20 bread and $9 gasoline?
“Strong” US Dollar
[img_assist|nid=11646|title=”Strong” US Dollar|desc=|link=node|align=left|width=400|height=268]
4plexowner, I always thought
4plexowner, I always thought inflation is synonymous to the weakening of the currency. Isn’t the true definition of inflation is the increase of money supply? If you increase the supply of money, don’t you devalue it? Am I missing something?
Money supply will contract
Money supply will contract initially. 2010 will be deflationary, possibly to the back drop of the world ditching the dollar. Defaltion with devaluation?
The pace of credit destruction can be extremely rapid once a credit bubble implodes in earnest. We have yet to see nearly a quadrillion dollars in derivatives freeze solid (ie the market becomes illiquid), but we will. Some 80% of those bets (which is all derivatives are) are on currency inter-relationships and interest rates, and these have not yet seen the extreme volatility that is coming and will wrong-foot a majority of gamblers. In the early stages of deflation we will see the dollar appreciate, but later we are likely to see a chaotic currency regime. Initially we will see historically low interest rates on government debt against a background of very high credit spreads, but later we are going to seer a bond market dislocation where interest rates short up into the double digits. It is these kinds of events that will finish the derivatives market. The inevitable meltdown in the CDS $62 trillion market due to extreme counter-party risk will also be important.
Any serious attempt to print our way out of it will simply result in the bond market having a seizure sooner rather than later. Once interest rates hit double digits (in nominal terms, higher in real terms), we will have hit the ’emergency stop’ button on the economy. As there will be massive defaults and no new lending, the money supply and the velocity of money will collapse. This will be like running an engine with the oil light on, as money is the lubricant of the economy. Without enough money, the economy will seize up just like it did in the 1930s
“inflation is synonymous to
“inflation is synonymous to the weakening of the currency”
exactly – it’s a semantics game to control the psychology of the sheeple
remove the link between “inflation” and “devaluation of the currency” so people won’t understand that they are being robbed of the fruits of their labor (google “inflation silent tax” if you don’t understand this)
one of the results of this semantics game is that people like you will think that all we have to do is print a few trillion more dollars and this recession will be over
I’ve heard it as “inflation
I’ve heard it as “inflation silent tax”, “inflation hidden tax”, etc. So, you’re predicting they’ll fail and we’ll have both inflation and deflation at the same time. At least you covered your bases by saying “one of the results…”. I can say, one of the result can be that we’ll have rampant inflation and it’ll kill this recession. Only time will tell what is the actual result.
Based on historical data from the US Census bureau, http://www.census.gov/hhes/www/housing/census/historic/values.html, you can see what happened to median home price over the last 70 years.
deleted
deleted
Eugene][quote wrote: If we
[quote=Eugene][quote] If we start running out of oil before the economy is fully recovered, things may turn nasty.[/quote]
http://www.independent.co.uk/news/science/warning-oil-supplies-are-running-out-fast-1766585.html
Warning: Oil supplies are running out fast
Catastrophic shortfalls threaten economic recovery, says world’s top energy economist
Unless we deflate far enough by say late 2010/2011 we should hit shortfalls.
It’s kind of a you’re damned if you do, damned if you don’t situation for the global economy.
“I got 4 offers in a day at
“I got 4 offers in a day at 355 or higher and everyone had at least 10% to put down.”
LoL! So there were 4 people who had $36,000 of their own money to buy a home with.
I think this sums up this market very well.
The 1990’s recession saw ~10%
The 1990’s recession saw ~10% reduction in global demand for oil. That recession is starting to look like a boy scout jamboree compared to where we’re headed now. How’s the oil supply at 20% demand reduction?
patientrenter wrote:”I got 4
[quote=patientrenter]”I got 4 offers in a day at 355 or higher and everyone had at least 10% to put down.”
LoL! So there were 4 people who had $36,000 of their own money to buy a home with.
I think this sums up this market very well.[/quote]
Oh, that’s not at all glib. What does that prove, in your mind?
I said at least 10% not only.
I said at least 10% not only. 3 actually were 20% down or more. The real point is that not all entry level buyers are 3.5% down FHA.
I hope you are ready to be verypatientrenter. Its gonna be a while;)
Now thats glib!
Yeah, the down payments do
Yeah, the down payments do sound meaningful. The buyers who were ready to fork over another 85 bucks a month, less so. Heck, that’s not even a cable bill–you can probably make that up by watchin’ TV on hulu.
What I’m really curious about is what one now gets for their 350ish kilobucks.
Okay piggs, correct me where
Okay piggs, correct me where I am wrong.
All this talk about inflation has me thinking that buying a home might not be such a bad idea, particularly in the low end where prices have come down most and renters are abundant. If inflation is going to increase dramatically, then it seems like locking in a 30-year fixed at 5% would be an even better deal because inflation will drive up both the cost of borrowing and the cost of the alternative, paying rent. In that scenario, it seems like having a fixed payment would be advantageous. And if you hold onto it for 10 or 15 years, home values should eventually recover from the current bubble. What am I missing?
“Okay piggs, correct me where
“Okay piggs, correct me where I am wrong”
you aren’t wrong in your assessment – the challenge is that there are no guarantees that the scenario you describe is the one that will play out
here’s another scenario: unemployment continues to climb, deflation in asset prices continues, people in the low end continue to leave California and the low end drops another 20 or 30%
sounds far-fetched but back in 2004/5/6 very few people on this board believed that 2007/8/9 would play out the way it has
I don’t think we will see a bottom before 2011/12 and think that 2014 is just as likely – I’m keeping my money off the table for a few more years
I have to caveat my opinion: I am looking at San Diego real estate from an investor perspective – other factors come into play when you are looking for a place to call home
I have another question. Say
I have another question. Say we hit bottom or have hit bottom according to some bulls. Who thinks it’s going to be a V recovery? It may flatline for a while before we see prices go up. It might be ___/ recovery.
I would think there would have to be some impetus to drive prices up again. Unless we have wage inflation, I don’t see how home prices will rise. Well, they could rise, but if people’s wages will not afford them the option to buy, then few will sell at the high prices.
Of course, banks could start lending to dead people again.
jpinpb wrote:I have another
[quote=jpinpb]I have another question. Say we hit bottom or have hit bottom according to some bulls. Who thinks it’s going to be a V recovery? It may flatline for a while before we see prices go up. It might be ___/ recovery.
[/quote]
I think we’ll see a _________/ recovery, where the _____ can be anywhere between 2-10 years. During the _____ period, I wouldn’t rule out a very slow decline either, where the nominal bottom won’t be reached until the end of the _____ period. So, it can very well be 2020 before we reach the absolute nominal bottom. I won’t rule out a / shape recovery though. Anything can happen. Only time will tell.
short of bringing back the
short of bringing back the liar’s loans and fog-a-mirror loans (sorry, no dead people), I don’t see any impetus for rising prices
until some of the major (or should I say MAJOR) headwinds lessen, I think the safest bet is to assume that prices will continue to fall at ALL levels
what are these headwinds?
– historic unemployment
– historic debt at all levels of society – both private and government
– quadrillion (yes, with a ‘Q’) dollars worth of derivatives yet to be unwound
– peak oil
– peak resources
– retirement of 25% of America’s workforce (Boomers) and their need/desire to downsize
– global move away from the US dollar as a reserve currency
4plexowner wrote:
what are
[quote=4plexowner]
what are these headwinds?
– historic unemployment
– historic debt at all levels of society – both private and government
– quadrillion (yes, with a ‘Q’) dollars worth of derivatives yet to be unwound
– peak oil
– peak resources
– retirement of 25% of America’s workforce (Boomers) and their need/desire to downsize
– global move away from the US dollar as a reserve currency[/quote]
Wouldn’t “historic unemployment” and “retirement of 25% of America’s workforce (Boomers) and their need/desire to downsize” cancel each other out? “retirement of 25% of America’s workforce (Boomers) and their need/desire to downsize” will be a non issue in 25 years or so, since in 2008, we saw the largest amount of birth (higher than even the Boomers years). “peak oil” and “peak resources” will probably be a non issue in 25 years too when alternative tech will take over. It might be sooner if you think Boomers will use less oil and resources, now that they’re retiring and downsizing.
The one thing you’ve got
The one thing you’ve got going for you on this is that it’s a highly leveraged gamble with someone elses money. Always a good thing. The less money down, the better. And if you can get it as non-recourse, then the downside is only your credit score. And credit scores only matter if you want to take on more debt, which you probably wont if the ROI’s in the market dont exceed the cost of the debt.
Housing Numbers Err on the
Housing Numbers Err on the Bright Side
http://news.goldseek.com/DailyReckoning/1249480629.php
another perspective on the current housing market
yes, Boomers retiring will
yes, Boomers retiring will open up jobs for younger generations – will they balance out? maybe
yes, if you want to look out 25 years in the future most of these issues COULD be non-issues – how much real estate do you want to own in the interim? – reminds me of a saying inre the stock market: “the market can remain irrational longer than you can remain solvent”
Boomers are not retiring. The
Boomers are not retiring. The latest stats actually show that the over 55 crowd is taking most of the job growth. Scared people have a way of getting aggresive. Of course, this is the private sector with 401K’s. The public sector has no worries.
4plex – loans were given to
4plex – loans were given to 23 dead people in Ohio. I used to kid around saying lending was so lax I’m surprised dead people weren’t getting loans. Since as it turns out it happened, that’s my standard.
AN – I think retirement will not happen as pensions are lost and people may still need to work and hence, postpone retiring – and there will be people graduating that need to be added to the mix looking for jobs.
4plexowner wrote:
here’s
[quote=4plexowner]
here’s another scenario: unemployment continues to climb, deflation in asset prices continues, people in the low end continue to leave California and the low end drops another 20 or 30%
sounds far-fetched but back in 2004/5/6 very few people on this board believed that 2007/8/9 would play out the way it has
I don’t think we will see a bottom before 2011/12 and think that 2014 is just as likely – I’m keeping my money off the table for a few more years
[/quote]
Yes, but what if by 2014, inflation is already here. Even if prices go down another 20%, if you get a 5% interest rate instead of a 9 or 10% rate down the line, losing a little home value won’t feel so bad. Who knows how long the government will be able to try to keep forcing mortgage rates down. And if inflation really takes off, that will inevitably begin to take home prices with it.
you are making some
you are making some assumptions in your assessment – they might be valid, they might not
“because inflation will drive up both the cost of borrowing and the cost of the alternative, paying rent”
with 18 million vacant houses in the market today what makes you think rents will increase?
new household formation has dropped from 1.2 million per year at the peak to its current level of 500K per year – that means far fewer people looking to buy OR rent housing
“if inflation really takes off, that will inevitably begin to take home prices with it”
yes, if inflation hits everything equally that will be true – a number of analysts are expecting inflation in the things that we need to survive (food, water, energy, health care) while the things we don’t need (cars, houses, big screen TVs, etc) deflate in value
and don’t say that people HAVE to have houses – there are a lot of people couch-surfing, moving back in with the parents, moving in with the kids, picking a freeway underpass and cardboard box, etc – again, new household formation has dropped from 1.2 mil to 500K per year
I don’t know about you but 20% of even an entry level house in San Diego is real money to me – 20% of $350K is $70K – more than most people earn in a year
4plexowner wrote:
yes, if
[quote=4plexowner]
yes, if inflation hits everything equally that will be true – a number of analysts are expecting inflation in the things that we need to survive (food, water, energy, health care) while the things we don’t need (cars, houses, big screen TVs, etc) deflate in value
and don’t say that people HAVE to have houses – there are a lot of people couch-surfing, moving back in with the parents, moving in with the kids, picking a freeway underpass and cardboard box, etc – again, new household formation has dropped from 1.2 mil to 500K per year
I don’t know about you but 20% of even an entry level house in San Diego is real money to me – 20% of $350K is $70K – more than most people earn in a year[/quote]
By your logic, people don’t really need food or energy or health care either. People don’t need a $10 steak, they can eat rice and soy sauce for $0.5/day. People don’t need to drive and consume energy, they can ride their bikes or walk. People don’t need health care, there are plenty of old people in the 3rd world countries. It’s just more of a survival of the fittest in that environment. Only thing you really need and can’t cut back on is drinking water.
http://news.goldseek.com/Inte
http://news.goldseek.com/InternationalForecaster/1249492124.php
“Boomers, some 80 million strong, accounted for 47% of national spending and now they are saving. They provided 78% of spending growth up until recently. What we find of special interest is that boomers aged 54 to 63, even though told over and over again to prepare for retirement only 31% are prepared. If the Dow falls to 4,000 and house prices fall another 20%, how much smaller will the percentage shrink? The number of plus 55 year olds reentering the workforce to survive, is cutting off jobs for younger members of society.”
4plexowner wrote:… If the
[quote=4plexowner]… If the Dow falls to 4,000 and house prices fall another 20%, how much smaller will the percentage shrink? [/quote]
By that logic, if the Dow rises above 10,000 and house prices rise 10% (personally, I expect both things to happen before the end of the year), will they stop working and start spending again?
Eugene wrote:4plexowner
[quote=Eugene][quote=4plexowner]… If the Dow falls to 4,000 and house prices fall another 20%, how much smaller will the percentage shrink? [/quote]
By that logic, if the Dow rises above 10,000 and house prices rise 10% (personally, I expect both things to happen before the end of the year), will they stop working and start spending again?[/quote]
You’re assuming that short term asset gains will sustain boomers through retirement. If they are going to retire they need enough funding set aside in the short term. Small short term increases in their portfolio won’t do jack for them long term. Meanwhile the P/E on the markets is at historic levels and the market is incredibly more likely to go down 10% rather than up.
“What I do know is that there
“What I do know is that there is no free lunch.”
amen, brother!
I like your handle, deriving drunk
Looking outside in, there
Looking outside in, there will be no ‘/’ in the ‘recovery’. I was a TA in Budapest back in 1990’s and most people aspired to continue with their careers in US. 15 years later, huge difference.
Go talk to middle-schoolers in the ‘highly acclaimed poway school district’ and see the future.
Inflation and deflation have
Inflation and deflation have more to do with credit availability than money supply. When there is already an enormous amount of credit debt out there, seen and unseen, can we push more and more or is there a limit to what will be accepted?
I’d like one of you to explain to us how we’re going to get a generalized wage-price spiral? What is the chance of stagflation instead?
I’m also curious to see how your prediction of rising stocks and home prices in a high inflation environment/high rate environment will do.
I’m not smart enough or connected enough to know what’s going to be manipulated next. What I do know is that there is no free lunch.
deriving drunk
[quote=deriving drunk]Inflation and deflation have more to do with credit availability than money supply. When there is already an enormous amount of credit debt out there, seen and unseen, can we push more and more or is there a limit to what will be accepted?
I’d like one of you to explain to us how we’re going to get a generalized wage-price spiral? What is the chance of stagflation instead?
I’m also curious to see how your prediction of rising stocks and home prices in a high inflation environment/high rate environment will do.
I’m not smart enough or connected enough to know what’s going to be manipulated next. What I do know is that there is no free lunch.[/quote]
I never heard of inflation/deflation tying to credit instead of money supply. Vietnam is currently experiencing hyper-inflation right now and credit over there is almost non-existent. How do you explain that?
I’ll let people more knowledgeable predict whether we’ll see inflation/deflation/stagflation in the future. What ever they predict, only time will tell.
Regarding home price during stagflation environment, you can look at the last period where we had stagflation(in the 70s) to get an insight of what home price might do in a stagflation scenario. Here’s the link to the census bureau: http://www.census.gov/hhes/www/housing/census/historic/values.html. Specific to California median home price, this is adjusted for inflation up to year 2000:
California:
Median price(year)
$211,500(2000)
$249,800(1990)
$167,300(1980)
$88,700(1970)
$74,400(1960)
$57,900(1950)
$36,700(1940)
Here’s the numbers without adjusting for inflation:
California:
Median price(year)
$211,500(2000)
$195,500(1990)
$84,500(1980)
$23,100(1970)
$15,100(1960)
$9,564(1950)
$3,527(1940)
I would wager real household
I would wager real household incomes were increasing at a healthy rate during the 60’s and 70’s, there was wage-price inflation, and we also had an increasing rate of 2 income households.
The recent gains are principally due to credit expansion over the past 30 years, not real household income growth.
I’m not convinced how we are going to see real wage increases. Convince me.
deriving drunk wrote:Convince
[quote=deriving drunk]Convince me.[/quote]
What’s the point? You’re already convinced that stagflation & inflation are not in the cards. There’s no 2 period on time that’s exactly alike. Only time will tell. At any given point, there are always people on both camps. Only 1 group get to be right.
Wages are headed down.
Wages are headed down.
http://www.bloomberg.com/apps/news?pid=20601068&sid=aRU6ZUwzT9iA
Wages and salaries, which drive recoveries in spending, fell 4.7 percent in the 12 months through June, the biggest drop since records began in 1960, according to Commerce Department figures released yesterday. The Obama administration’s tax cuts, extended jobless benefits and a one-time Social Security bonus have helped mask the damage done by the worst employment slump since the Great Depression.