WatchMany participants in here, myself included, are in the "wait for the free market to return" camp. The government subsidies for housing via GSE loans, the MID, prop 13, RE agent-favoring MLS system, shadow inventory, squatters and low interest rates are all items on a (probably incomplete) list of things that us would-be buyers wish to see go away in hopes of lowering house prices. When/If some of these items go away, lots of of us probably figure that it would be OK to buy, and many of us post about how adamant we are about not buying into our current rigged-system.
OK. Obviously, we all have a pretty strong interest in buying houses, or else we wouldn't be spending time in here worrying about it. Buying a house is, for strong personal reasons, a really big aspiration for most people.
So, what if none of the things in the list above change in the next 10+ years? It isn't totally out of the realm of possibility. As far as I can tell, the groups that want to keep the game rigged like it is are also the groups that have the ability to change the rules of the game. The rest of us that are chasing some version of the American Dream can all pine away and wish for a fair, rational system, but we really do lack the means to get those with vested interests in rigging the game to un-rig it. Don't get me wrong, I have a really hard time seeing the system as it operates now lasting. Despite this, short- to mid-term economic behavior seems to be perfectly capable of doing totally irrational things. As far as I am concerned, 10 years is at the start of a "mid-term" time span when planning economic moves. Long-term, in my mind, is 30+ years, or about enough time for one generation to produce the next.
So, say that 10 years from now the game is still rigged and we all know it and hate it. How many of you would have saved & over-paid somewhere in that span? We are all waiting around for a train that we think is coming, but we aren't really sure of when. What if it doesn't come for a REALLY long time? For all of the frustration we seem to have, how many of us are really going to let it stop us? Will you eventually give-in?
Chances are that I would end up over-paying after a few more years of saving (and put down 30-50%). Despite the fact that I despise all of the crookedness in the system and live below my means, I want some personal space to run a workshop that I can walk to in 5 seconds, and to have a yard with big trees to do stupid stuff in with my climbing gear. God help me when I decide to have kids, but it would be nice to have a yard for them to run around in and provide me with manual labor when they are old enough (I knew how to use a jackhammer by the time I was 12, and spent a lot of weekends digging sprinkler line trenches and putting up drywall...it builds character, or something). The main reason I want to avoid overpaying, aside from the obvious short/mid-term issues, is the long term issue of being stuck with high property tax bills. My fiancee and I are fine with buying a $500k SFH, and in a couple more years we can put 40-50% down. We could put 25% down now, but we are, "waiting for that train." Anything over $500k is too much of a financial liability as far as we are concerned.
So, despite all of my idealism about not participating in a rigged system, I am pretty sure I'd cave in and participate at some point. I bet lots of us will. I am fairly certain that those that run this rigged system know this, and that gives them even more incentive to keep it rigged. "Look at these stupid peons...they piss & moan now, but give them a few years and they let us shoot a load in their face anyway!"
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AdamCarollaFan says
what if prices are flat for the next 20 years?
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iwog says
Nominated.
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@toothfairy
ceteris paribus, i'd either choose 1 of two options:
a. rent as cheap as I could, or
b. buy a little bungalow that fits my needs
after a year or two of option a, i'd probably choose option b.
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bubblesitter says
Name one.
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iwog says
supply and demand?
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JodyChunder says
No cheating. I want bubblesitter to name one.
There's no law that dictates what supply and demand do other than supply will always equal demand. If it didn't, there wouldn't be a transaction to measure.
It's the "1 = 1" rule and I don't really think it has any profound meaning in economics.
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bubblesitter says
That's only one part in isolation.
Looking at the whole picture:
http://research.stlouisfed.org/fred2/series/TCMDO
we can see a Great Flattening.
Clearly what's happening is private sphere is deleveraging while the public sphere is getting loaded up on debt.
Graphing by component:
http://research.stlouisfed.org/fred2/graph/?g=3BP
one can see Big Finance (yellow) defaulting on debt, households (red) in the penalty box, and corporations (green) slowly adding debt.
The Feds (blue) are the ones carrying the debt ball forward now.
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iwog says
price floors and ceilings ?
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iwog says
I doubt you were even around when Reagan was the Prez.
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My favorite is the SWIFFY SWIFFER. Right round the Iraq incursion. They started selling SWIFFY SWIFFERS. No one really needed a SWIFFY SWIFFER. I started having nightmares of being assualted with a swiffer. I even married a swiffer in one dream.
I tried to figure out why Chase Manhattan would even want to sell swiffers. One of my tenants had one. I tried it out. Hey slick but damn do they have to run that commercial 300 times a day? I was being nice. Of course. I really had doubts about anyone really wanting a swiffer. It was ok. Nothing a mop couldn't do of course with some lemmon i guess.
Think of all the people it employ's someone was thinking. Yea and think of all the half filled boxes of cookies and same of bags of potato chips. My silent question was does ripping your neighbor off constitute an honest jobbie. More often than not it may not.
So America needs SWIFFERS. BADLY. Dunking dognuts and Starbucks the place to meet. I prefer a good church to meet. I have met more people at church than anywhere or a mosque. True you have to put up with the religous bullshit. But hey its a good place to get free liquor and find a fun girl. Not trying to scare anyone but you just may be on track. Anyway. Here is my offering to the great state of California and its way hip people.
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ArtimusMaxtor says
SWIFFER is not a all together bad deal Art but you gonna want to wash what ever it is you are swiffing with a real good scrub at some later point. ok. it is just a fast job for suprise company or if you in a hurry.
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Lemon does a good job.
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I watched them take out the Occupy in LA. Hippies used to have problems gathering. The way they used to do things? They would line the streets. Outside of clubs. Not going in all that much but going in. Then when it came time to march they would gather. There was way to many out lining the streets. Smoking weed, talking, drinking, sleeping in various places.
In many cases the entire city was filled with them crashing together in apt buildings. Sometimes as many as 15 in one apartment. Was far to spread out to manage. It took them 6 years to get rid of them all after Vietnam. It was a real pain. In came ole slick Jimmy Carter of grecian formula fame. He had a lot of people fooled me included. I watched a film called Gumball Rally the other night. There it was kind of transparent in many respects.
Everyone thought he was something else. Nothing more than Plato with grey hair and a practiced smile. Obomber calmed the world down. Seems to go that way when we are in deep shit with the rest of the world. The system gave itself away this time. Too juicy a target I guess. Plus we owe the debt merchants for military equipment. Leases on our battleships from England. Also mostly everything else of asset.
Some people also don't realize how far other countries will go for the debt merchants. Sometimes just for a slice of the pie. I demonstrated how Iraq was sliced up and given away. Makes me wonder about the carving up of Afganistan. A taken peoples don't have much choice.
Here we sit as fools. Not knowing a GD thing or able to do anything about it. You pile the no nothings and too afraid to say on us. The war buzzards that try to hustle us. That don't have enough sense to figure out all their people are in debt. But hey isn't war great and aren't we having fun as a gang? Look at all this great stuff. We don't really own shit. But its great to look at.
I look at the songs of the Vietnam era. I came to the realization they were nothing more than the debt merchants having fun with youth and love. Things like: say you want a revolution. Don't you want somebody to love? The songs contained nothing of revolution for the most part. Just the things of love. Some of lifestyle. Arlo Guthries: Coming into Los Angeles. Which the police might love. Police work can be big business too. I guess.
"Coming in from London from over the pole
Flying in a big airliner"
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thomas.wong1986 says
Nope, it's not even close to a law. There is no equation in economics where you can plug in numbers and get the same answer every time. The BEST you've got are rough estimates that break down constantly. You cannot accurately model variables that are based on emotion and a constantly evolving market.
thomas.wong1986 says
You're wrong, but it doesn't even matter. I didn't have to be around in 1945 to pass judgement on Hitler in 2011.
Reagan actually ran his campaign on an anti-deficit spending platform. His entire administration was a lie.
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Dan8267 says
+1
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iwog says
http://freeliberal.com/archives/000438.php
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This is very good question. I'm beginning to sense that there won't be any
change in our financial system. They want to show nothing is wrong with
the system despite a few hiccups.
US might rhyme similar to Japan of last 20 years. Maybe housing/stock
market won't be as depressed as Japan's lost decades. But we will pay
other ways.
I'm uncertain as other people but I think I'll do following
1. I will stay invested in assets(house, stock etc) but don't expect high
return and be aware I am paying much higher price than it looks.
2. Hedge inflation: invest in some commodities but fight daily inflation.
3. Forget social security/medicare and prepare retirement by myself.
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iwog says
Agree. He also raised taxes nearly as much as he lowered taxes, even though many simpletons only focus on the marginal rates.
George W Bush in particular also believed deficits didn't matter, of course. Funny how people change their minds so quickly when it's politically convenient...
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Plus if conservatives succeed in hand waving away the two trillion plus in FICA over contributions, St. Reagan will have really raised taxes on the middle quintiles.
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bubblesitter says
Although you're calling these laws of economics, not one can be used to make a calculation with a determinate answer.
These are not laws of economics. These are loose predictions of economics. It's obvious when you actually read them. I'll type the fudge words in bold:
4. The law of one price. In an efficient market, a financial asset will tend to have one equilibrium price, because of arbitrage. (unless it doesn't)
6. The law of reflux. In competitive free-market banking, there cannot be a permanent over issue of banknotes, since any issued in excess of the quantity demanded will be redeemed. (HAHAHAHAHAHAHA.......right)
8. The law of diminishing marginal utility. As one obtains more and more of a particular good, eventually the marginal utility (value from one more unit) declines.
(translation: wait long enough and anything will happen)
13. Foldvary's law of inequality. Inequality equals the concentration of a distribution times the number of units (I=CN).
(nothing like subjective undefined terms in a pseudoscientific equation)
15. Law of time preference. People tend to prefer to obtain goods sooner rather than later, and will pay a premium (i.e. interest) to shift buying from the future to the present.
(unless they don't as the internet is demonstrating)
20. The law of wages. The wage level of an economy, where labor is mobile and competitive, is determined by the marginal productivity of labor at the margin of production, i.e. the least productive land in use.
(this must have been put on the list as a joke)
I could go on but why bother?
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iwog says
Libs... I guess you prefer Mondale ?
The Real Reagan Economic Record: Responsible and Successful Fiscal Policy
http://www.heritage.org/research/reports/2001/03/the-real-reagan-economic-record
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The Economic Recovery Tax Act of 1981
Summary of provisions
The Office of Tax Analysis of the United States Department of the Treasury summarized the tax changes as follows[2]:
phased-in 23% cut in individual tax rates over 3 years; top rate dropped from 70% to 50%
accelerated depreciation deductions; replaced depreciation system with ACRS
indexed individual income tax parameters (beginning in 1985)
created 10% exclusion on income for two-earner married couples ($3,000 cap)
phased-in increase in estate tax exemption from $175,625 to $600,000 in 1987
reduced windfall profit taxes
allowed all working taxpayers to establish IRAs
expanded provisions for employee stock ownership plans (ESOPs)
replaced $200 interest exclusion with 15% net interest exclusion ($900 cap) (begin in 1985)
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thomas.wong1986 says
Without question. Reagan was the worst president of the 20th century. He unleashed the deficit spending floodgates and started us down the road to Mexican style wealth disparity, crippling deregulation, and the abandonment of a 200 year history of strong economic borders.
What's your rebuttal? An election map? Nice work.
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How did I miss this thread?
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thomas.wong1986 says
pretty sad you've gotta link to a right-wing propaganda mill to make your point, thomas.
Whatever our economy accomplished during the 1980s, it was built on an s-curve of leverage:
http://research.stlouisfed.org/fred2/graph/?g=3CQ
It might have been "successful", but it wasn't responsible. Something was certainly rotten in the state of Denmark when I was coming out of college in the early 1990s, and frankly I have yet to really undertand what really underpinned the recovery of the mid-1990s.
One thing that did get rolling in the mid-1990s was the return of leverage in the financial sector:
http://research.stlouisfed.org/fred2/graph/?g=3CS
shows how annual debt take-on in Big Finance went to over 5% of GDP in the mid-1990s.
Additionally, the yuan rate was lowered dramatically prior to 1995:
http://research.stlouisfed.org/fred2/series/AEXCHUS
That's part of the story but I haven't worked it all out yet.
Maybe it was the return of the Baby Boom too that got the economy rolling again. They were aged 34 to 49 in 1995. Or maybe it was all the $1 gasoline, that was great. Plus Windows 95 and the dotcom revolution, that didn't hurt either.
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thomas.wong1986 says
which was followed by a tax rise:
" One year after his massive tax cut, Reagan agreed to a tax increase to reduce the deficit that restored fully one-third of the previous year's reduction. "
http://www.washingtonmonthly.com/features/2001/0301.green.html
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Bellingham Bill says
and you quote a left of center publication....."The politics of the Monthly are left of center, though somewhat moderately so. Founder Charles Peters refers to himself as a New Deal Democrat and advocates the effective use of government to address social problems. "
It just kills you, that Reagan has outclassed many far and wide margin.
http://en.wikipedia.org/wiki/Historical_rankings_of_Presidents_of_the_United_States
iwog says
I believe John Edwards also said the same.. as if Edwards like you ever mattered.
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Bellingham Bill says
You mean consolidated 15 to 4 tax rate brackets. Similar to what we have today.
http://en.wikipedia.org/wiki/Tax_Reform_Act_of_1986
Income tax rates
The top tax rate was lowered from 50% to 28% while the bottom rate was raised from 11% to 15%. Many lower level tax brackets were consolidated, and the upper income level of the bottom rate (married filing jointly) was increased from $5,720/year to $29,750/year. This package ultimately consolidated tax brackets from fifteen levels of income to four levels of income.[1] This would be the only time in the history of the U.S. income tax (which dates back to the passage of the Revenue Act of 1862) that the top rate was reduced and the bottom rate increased concomitantly. In addition, capital gains faced the same tax rate as ordinary income.
The rate structure also maintained a novel "bubble rate." The rates were not 15%/28%, as widely reported. Rather, the rates were 15%/28%/33%/28%. The "bubble rate" of 33% simply elevated the 15% rate to 28% for higher-income taxpayers. As a result, for taxpayers after a certain income level, TRA86 provided a flat tax of 28%. This was jettisoned in the Omnibus Budget Reconciliation Act of 1990, otherwise known as the "Bush tax increase", which violated his Taxpayer Protection Pledge.
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thomas.wong1986 says
Reagan was a clown, but yes, it kills me that so many retards in this country idolize his administration.
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Bellingham Bill says
Think back 10-12 years prior to you coming out of college. Well it sure was rotten in the US when Carter was in office.
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Bellingham Bill says
Maybe ... they were right and you were wrong.
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thomas.wong1986 says
Too bad if anyone asks you what Carter did to make things so rotten you freeze up and have nothing to say.
Reagan was a pathetic fool who had no idea what he was doing. He applied the biggest Keynesian spending policies since World War II, and he preached against deficit spending at the exact same time he was setting new records for deficit spending.
Congress passes a law prohibiting Contra funding? No problem, just arm Iran and Iraq and pretend you were taking a nap when it was happening.
Worried you have a small penis? No problem, just send an invasion force to kill people in Grenada............a commonwealth nation of the United Kingdom, and forget to tell Queen Elizabeth that you're murdering her subjects on an Island that's only 12 miles long.
Reagan was a sick disgusting piece of shit. End.
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thomas.wong1986 says
This is where you pretend to construct counter-arguments why Reagan's atrocities were really cool and should be idolized. No? You're going with the trite unsupported assertion? What a surprise.
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thomas.wong1986 says
if by 'right' you mean looting my country, then yes, conservatives were right.
So much misinvestment and disinvestment started in the 1980s, eg. the reversion to Vietnam-level defense spending:
http://research.stlouisfed.org/fred2/graph/?g=3Du
It was the beginning of the unravelling.
In 2005 dollars, we have spent $16T on defense since FY82, $500B per year, $4000 per household per year suck of wealth.
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thomas.wong1986 says
you guys are that old? :)
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thomas.wong1986 says
Reagan had multiple tax laws passed -- the 1981 one is the main one where taxes went way down, but look at his tax laws from 1982 and 1984, for example, to see where these cuts were pared way back. Then look at 1983 when payroll taxes were hiked for Social Security and Medicare. The 1986 tax reform was intended to be revenue neutral, but generally served to raise taxes on the rich a bit by cutting deductions/exemptions that largely benefited the rich. Overall taxes during the Reagan era matched the 40-year average, and overall spending was noticeably higher than the 40-year average because Reagan thought deficits didn't matter (http://money.cnn.com/2010/09/08/news/economy/reagan_years_taxes/index.htm).
There are many good analyses of Reagan's various tax laws around the web that explain how much taxes were actually raised by broadening the tax base and doing other things. These facts are only a mystery to people who naively think supply-side economics works. It's not that lowering rates brought in more tax revenue -- the combination of raising taxes by broadening the tax base and the economy getting better brought in more tax revenue. Another key principle was keeping the income tax the same as the capital gains tax so that there was no tax preference for labor vs. investment. As I've mentioned before, I've even spoken to Reagan's tax policy architect about some of these issues. Bruce Bartlett who worked in the Reagan administration has also talked about this a bit too.
Reagan was also the inventor of "amnesty" (as teabaggers call it) for undocumented immigrants. It raised GDP, of course, as comprehensive immigration reform would do today.
Reagan was far more of a pragmatist than the Tea-flavored Kool Aid-drinking people who seem to be running his party now. He would likely be considered a heretic and a RINO.
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iwog says
Former Soviet President Mikhail Gorbachev remembers Ronald Reagan as a great president
Gorbachev said, “We must pay tribute to President Reagan; to Ronald Reagan he was a great man. While I’m alive, I’m proud of what we did together.”
You forgot to mention Grenada where the Marxist Govt of Bishop suspended the constitution, banned a free press and elections. Bishop was later killed by Ultra Left pro Cuban Marxists in a bloody coup and imposed summary execution in the streets on anyone skipping the cerfew. We had 2000 US citizens on the island. No guarantee of their safety. The ones killed were Cuban and Grenadian Army who fired on the US troops. Over all, a turning point to show those Reagan was made of the real stuff of leaders.
You may ask many globaly what Reagan did for world peace.. ask a Pole, Hungarian, East German, Romanian, Vietnamese, Croat. Globaly he is a world hero by far and wide. The world is a far better place today than 30-35 years ago.
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corntrollio says
That was even true as California Governor. He was simply way way ahead of many.
-p-Nuu8hYQ
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thomas.wong1986 says
Really? Reagan is a world hero? Which nation views him as a world hero? Most people remember him for creating Osama Bin Laden and arming Iran and pretending he was involved in ending the cold war when in fact he had nothing to do with ending the cold war.
Once in awhile it might be nice if you actually presented an argument.
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iwog says
As if its going to change your pathic little neo-marxist views.
Imagine that .. even the last USSR party boss called him a hero!
Choke on it!