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The Great Housing Mania, Again


By Patrick   Follow   Tue, 12 Feb 2013, 11:58am PST   3,308 views   36 comments
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http://online.barrons.com/article/SB50001424052748704372504578285931623959700.html

Reinflating the collapsed housing bubble, as many desire, would likely yield the same disastrous result. What's needed are lower, fairer prices, and more investment in more productive sectors of the economy.

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thomaswong.1986   Tue, 12 Feb 2013, 12:33pm PST   Share   Quote   Permalink   Like   Dislike     Comment 1

kind of like govt sponsored programs prescribing Methadone to cure an H addict..

we still havent sobered up ...

you would think... from the article...

"Manias begin in obscurity and pessimism, rise with confidence and imitation, reach a state of euphoria and finally end in tragedy. They often change history in ways that are not foreseeable."

one cannot imagine some on Pnet want that piece of the boom to happen all over again,

JodyChunder   Tue, 12 Feb 2013, 12:45pm PST   Share   Quote   Permalink   Like   Dislike     Comment 2

That was a good article...I'm seeing more and more murmurings regarding reflation...I must confess, you know there's something to this when SFH in Victorville are up over 20% year over year.

bmwman91   Tue, 12 Feb 2013, 1:09pm PST   Share   Quote   Permalink   Like   Dislike     Comment 3

Good read, thanks.

bmwman91   Tue, 12 Feb 2013, 2:27pm PST   Share   Quote   Permalink   Like (6)   Dislike     Comment 4

The market got force-fed crazy pills it seems. The media is hyping the recovery like it's going out of style, there isn't squat to buy, yield-chasers are on PCP and chasing as hard as they can in RE and the government is making sure that sub-prime borrowers can maintain a floor under prices with ZIRP and laughable qualification requirements. Ride the gravy train carefully, and make sure to get off before it crashes. You can do well if you get off early enough.

It all comes back down to the fundamentals: personal incomes and employment levels. The media paints a rosy picture, but flying around the country for work, the story I hear from middle class working people is generally the same: the job market is really rough, pay isn't increasing and belts need a little tightening. Cheap consumer debt has sure fueled various measures of consumer spending, but in the end it truly all comes down to what people can afford. Credit is a short term solution to long term needs. Our system is highly dependent on accelerating consumer spending, which has only been possible via debt, and there is just a plain old limit to how much debt consumers can carry. Once their monthly credit card bills equal disposable income, consumption stops accelerating and we get another recession.

curious2   Tue, 12 Feb 2013, 4:58pm PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 5

Favorite excerpt: "Disciplined buyers -- too long unfairly disadvantaged by government policies -- are now sitting on trillions in savings that are earning, doing, and financing nothing. This money could clear the housing market, but only at lower, fairer prices. That would finally be "affordable housing.""

Exactly.

uomo_senza_nome   Tue, 12 Feb 2013, 9:11pm PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 6

There are a number of different channels -- mortgage rates, I mentioned other interest rates, corporate bond rates, but also the prices of various assets, like, for example, the prices of homes. To the extent that home prices begin to rise, consumers will feel wealthier, they'll feel more -- more disposed to spend. If house prices are rising, people may be more willing to buy homes because they think that they'll, you know, make a better return on that purchase. So house prices is one vehicle. - Bernanke, Sept 2012

It is an explicit defense of reflation. So Bernanke wants it and he's getting it. Bernanke's models apparently do not tell him that Ponzi financial policies are unsustainable in the long run. They will blow up.

gbenson   Wed, 13 Feb 2013, 5:22am PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 7

Herd mentality is here, poo-poo it all you want, but you can either run with the herd or get run over by the herd. Just make sure and bring along a parachute, because the herd never sees the cliff coming.

JFP   Wed, 13 Feb 2013, 5:29am PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 8

curious2 says

Favorite excerpt: "Disciplined buyers -- too long unfairly disadvantaged by government policies -- are now sitting on trillions in savings that are earning, doing, and financing nothing. This money could clear the housing market, but only at lower, fairer prices. That would finally be "affordable housing.""

Exactly.

There is no reason house prices have to be lower, fairer or affordable. Just because a lot of people would like lower prices doesn't mean they will get them.

bmwman91   Wed, 13 Feb 2013, 6:34am PST   Share   Quote   Permalink   Like (6)   Dislike     Comment 9

JFP says

There is no reason house prices have to be lower, fairer or affordable. Just because a lot of people would like lower prices doesn't mean they will get them.

Sure. But that misses the bigger point. If America turns into slums where only the wealthy and connected can live with a high standard, America ceases to be the great place that so many think it is. It just becomes another sort-of industrialized dump where innovation and personal initiative are worthless because they don't get you anything. We aren't there, but we sure as hell are heading that way. Having the government purposely make the cost of living go up to the detriment of the productive classes is one big way to get there.

JFP   Wed, 13 Feb 2013, 6:45am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 10

bmwman91 says

JFP says

There is no reason house prices have to be lower, fairer or affordable. Just because a lot of people would like lower prices doesn't mean they will get them.

Sure. But that misses the bigger point. If America turns into slums where only the wealthy and connected can live with a high standard, America ceases to be the great place that so many think it is. It just becomes another sort-of industrialized dump where innovation and personal initiative are worthless because they don't get you anything. We aren't there, but we sure as hell are heading that way. Having the government purposely make the cost of living go up to the detriment of the productive classes is one big way to get there.

I get that. My point was that there are a whole bunch of people saying that because what is happening is bad for society, it has to change. That's not the case, and your financial planning should take that into account.

FortWayne   Wed, 13 Feb 2013, 6:50am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 11

robertoaribas says

I actually love how the bubble worked out, i'd be thrilled if it went up and down forever. I'd use the very math I've published on here to time my entries and exits...

By the second one you'll be living in United States of Zimbabwe. No winners there.

FortWayne   Wed, 13 Feb 2013, 6:53am PST   Share   Quote   Permalink   Like   Dislike     Comment 12

Rising prices will allow more underwater owners to put their property on the market and hence increase supply while reducing demand putting a floor on the housing prices until interest rate changes.

There are two sides to every coin, fundamentals are still not there for a flourishing economy. Some folks spend a little more now, but I don't see too much stupid risk, at least not like it was in 04/05.

curious2   Wed, 13 Feb 2013, 6:55am PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 13

JFP says

My point was that there are a whole bunch of people saying that because what is happening is bad for society, it has to change. That's not the case, and your financial planning should take that into account.

I respect that, but I think the Zimbabwe and Weimar examples remain relevant. To quote Margaret Thatcher, "Socialist governments traditionally do make a financial mess. They always run out of other people's money." In this instance, the lemon socialists have taken control of the printing press, and because they're so smart and work so hard they think they invented the thing. They forget it's been around for a while, and tried before. It's the same with the deficits, spending the future wages of people too young to vote. Both major parties are culpable in this. We really don't have a "conservative" party, nor a "liberal" party, we have two different brands of lemon socialism.

Part of the mechanism by which this occurred is the divide & misrule tactics that seem to fool too many people too much of the time. For example, FortWayne can see clearly sometimes, so they distract him by yelling "elephant" or "gay marriage" and he runs off in terror. There are enough of those who can be fooled that the game continues.

Like all unsustainable patterns, it can continue until it stops.

curious2   Wed, 13 Feb 2013, 7:02am PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 14

robertoaribas says

We've seen less government emplyment under Obama, and more private sector employment. I'm guessing you really don't know what socialism is.

I do know what socialism is. I'm guessing you don't know what lemon socialism is.

The "more private sector employment," to which you refer, consists primarily of subsidized medical spending and lobbying. In other words, privatizing gains while socializing losses. In a different thread, Iwog predicted that the subsidized medical sector creating jobs would stimulate the economy. Maybe so, but it isn't a sustainable productive economy; it's a Matrix economy, butchering and poisoning and intubating people for power and profit.

In California, public education has been cut to subsidize more medical insurance, even though education remains a better predictor of longevity than money or medical insurance. Count how many public school teachers were laid off (not to mention community college cutbacks!) so Stephen Hemsley could make another $100 million in 2010, and you'll begin to see the difference between socialism and lemon socialism.

Returning to the original topic, the Federal reserve (partly OWNED by TBTF banks, literally, in addition to banks' renting the politicians who control the rest of the Fed) printing $ to buy mortgages from Fannie & Freddie is an example of lemon socialism. It has enabled some people to profit (e.g. Roberto) but it has also imposed huge losses on everyone else. To paraphrase Eisenhower, the cost of one bank bailout can be measured in how many new schools could have been built for the same money; every QE MBS that is bought, every REO house kept empty (and maybe invaded by squatters) by TARP & ZIRP is a theft, in the final sense, from the families who could have bought or rented those homes if they had been available at genuine market price instead of artificially inflated lemon socialist prices.

Econ101   Wed, 13 Feb 2013, 7:34am PST   Share   Quote   Permalink   Like   Dislike     Comment 15

"There is no reason house prices have to be lower, fairer or affordable. Just because a lot of people would like lower prices doesn't mean they will get them."

Tell that to the next generation, who you don't think should have the opportunity our parents had ... to pay off their home, to live in a single-earner household, who could afford to go to college without incurring a lifetime of debt, and who could afford decent healthcare.

At one point, there will be enough of the 'next generation' to be the majority of the population... that time is coming sooner than you think...and when it does....REVOLUTION.

JFP   Wed, 13 Feb 2013, 7:44am PST   Share   Quote   Permalink   Like   Dislike     Comment 16

Econ101 says

"There is no reason house prices have to be lower, fairer or affordable. Just because a lot of people would like lower prices doesn't mean they will get them."

Tell that to the next generation, who you don't think should have the opportunity our parents had ... to pay off their home, to live in a single-earner household, who could afford to go to college without incurring a lifetime of debt, and who could afford decent healthcare.

At one point, there will be enough of the 'next generation' to be the majority of the population... that time is coming sooner than you think...and when it does....REVOLUTION.

People love predicting revolutions. Mostly they don't happen.

And I never said that I think the younger generation shouldn't have those things. I would like them to, but my wanting it doesn't mean it will ever happen.

uomo_senza_nome   Wed, 13 Feb 2013, 7:51am PST   Share   Quote   Permalink   Like (3)   Dislike     Comment 17

curious2 says

I'm guessing you don't know what lemon socialism is

I think what's happening in America can be appropriately termed as corporate fascism.

uomo_senza_nome   Wed, 13 Feb 2013, 7:52am PST   Share   Quote   Permalink   Like   Dislike     Comment 18

JFP says

My point was that there are a whole bunch of people saying that because what is happening is bad for society, it has to change. That's not the case, and your financial planning should take that into account.

Excellent point, it's essentially called pragmatism.

curious2   Wed, 13 Feb 2013, 7:56am PST   Share   Quote   Permalink   Like   Dislike     Comment 19

uomo_senza_nome says

I think what's happening in America can be appropriately termed as corporate fascism.

John Mackey agrees but had to apologize for saying it. Ron Paul said it too, without regret.

uomo_senza_nome   Wed, 13 Feb 2013, 7:59am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 20

Roberto,

Consider data related to FIRE sector:

America’s period of robust economic growth coincided with FIRE sector profits being between 10 and 20 percent of total profits, and wages in the FIRE sector being below 5 percent of total wages.

The government can and should play a sincere role in ensuring no single sector becomes a parasite that wrecks the rest of the economy. However what we have today is that the government is colluding with the parasitic private sector and making the situation even worse.

There is an ever-increasing cost to propping up a fragile and a dysfunctional financial system.

curious2   Wed, 13 Feb 2013, 8:04am PST   Share   Quote   Permalink   Like   Dislike     Comment 21

uomo_senza_nome says

There is an ever-increasing cost to propping up a fragile and a dysfunctional financial system.

Your link refers more broadly, "The Ever-Increasing Cost of Propping Up A Fragile And Dysfunctional System." You narrowed it to "financial", which is on topic, but the same applies to other systems, e.g. medical.

uomo_senza_nome   Wed, 13 Feb 2013, 8:09am PST   Share   Quote   Permalink   Like   Dislike     Comment 22

curious2 says

Your link refers more broadly, "The Ever-Increasing Cost of Propping Up A Fragile And Dysfunctional System." You narrowed it to "financial", which is on topic, but the same applies to other systems, e.g. medical.

Of course. Complex systems are everywhere.

Seeking Stability undermines resilience.

yup1   Wed, 13 Feb 2013, 9:02am PST   Share   Quote   Permalink   Like   Dislike     Comment 23

Sacramento County is having bold faced manipulation. Just look at the Redfin chart.

http://www.redfin.com/county/336/CA/Sacramento-County

Make sure that you also select # for sale. For the week of July 23, 2013 listing $/sqft 102, number of homes for sale 5.0k. For the week of July 30, 2013 listing $/sqft 117, number of homes for sale 2.78K.

Net change in asking price 14.7%, number of homes for sale -44.8%.

This all happened in one week and was county wide. Collusion and manipulation no doubt.

yup1   Wed, 13 Feb 2013, 9:09am PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 24

uomo_senza_nome says

America’s period of robust economic growth coincided with FIRE sector profits
being between 10 and 20 percent of total profits, and wages in the FIRE sector
being below 5 percent of total wages.

FIRE

Fucked In Rear End!

JFP   Wed, 13 Feb 2013, 11:10am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 25

robertoaribas says

yup1 says

Net change in asking price 14.7%, number of homes for sale -44.8%.

This all happened in one week and was county wide. Collusion and manipulation no doubt.

bullcrap, much more likely that it is a data import problem on redfin...

C'mon Roberto, you need to get with the paranoia and delusion that rules p.net

JodyChunder   Wed, 13 Feb 2013, 1:54pm PST   Share   Quote   Permalink   Like   Dislike     Comment 26

Chicks dig paranoia.

postbubblesucess   Thu, 14 Feb 2013, 4:18am PST   Share   Quote   Permalink   Like   Dislike     Comment 27

Finally we see people admitting to housing prices going up. What happened to them going to 1970's levels. All I see is $ signs. Can't wait to sell and double my money, after I collect 5 years worth of rent 1st of course. Looks like my 43.5kI investment is gonna turn into approx 150k when it's all said and done. Will now wait for the jealous comments.

thomaswong.1986   Thu, 14 Feb 2013, 4:55am PST   Share   Quote   Permalink   Like   Dislike     Comment 28

postbubblesucess says

Finally we see people admitting to housing prices going up. What happened to them going to 1970's levels

for places like Vegas, Miami, Sac, and many others.. they reached 1996 ( or 1970) plus inflation. But parts of SFBA havent corrected yet, others have. going for 10-15-20% annual appreciation spells trouble down the road.

thomaswong.1986   Thu, 14 Feb 2013, 4:57am PST   Share   Quote   Permalink   Like   Dislike     Comment 29

postbubblesucess says

Looks like my 43.5kI investment is gonna turn into approx 150k when it's all said and done. Will now wait for the jealous comments.

appreciation based on what ? creating new industries, job growth and incomes... please!

REpro   Thu, 14 Feb 2013, 5:11am PST   Share   Quote   Permalink   Like   Dislike     Comment 30

thomaswong.1986 says

postbubblesucess says

Looks like my 43.5kI investment is gonna turn into approx 150k when it's all said and done. Will now wait for the jealous comments.

appreciation based on what ? creating new industries, job growth and incomes... please!

Humm, based on tulip mania.

Bap33   Thu, 14 Feb 2013, 5:13am PST   Share   Quote   Permalink   Like   Dislike     Comment 31

Right now money cost banks X and banks loan money for 3X ....I am pretty sure that is the largest profit magin banks have ever seen. Sure, the numbers being tossed about are low, but the profit line is absurd when you look at say 1995(estimating here folks) when money cost a bank Y and banks loaned it for 1.5Y. WHen the interest rate was higher the banks had a much lower profit side. Banks are trippling their money right now.

$4 per gallon is here and $3 per gallon seems like a Chirtmas sale. This hurts.
Electric rates will shyrocket this year (and future) and you will be pushed into smart-meters with time-use tech and/or solar panels -- I think.
Food is up, clothing is up, CHina is holding the bag .....

I just do not think many people will be willing to over-pay for a house. So, I do think the REMafia will continue to gather up the pieces and make huge profits on rentals - because they can. One possible block would be for local govenment to make renting a SFH expensive for the LL by requiring them to pay a fee for the reduction in value they bring to a neighborhood. Or, to not allow Section8 in SFH's. Those types of blocks against the REMafia may help.

REpro   Thu, 14 Feb 2013, 5:19am PST   Share   Quote   Permalink   Like   Dislike     Comment 32

Some people sells the cake, while others eat’em.

The Professor   Thu, 14 Feb 2013, 5:23am PST   Share   Quote   Permalink   Like   Dislike     Comment 33

postbubblesucess says

Will now wait for the jealous comments.

Keep trolling. I notice you got a couple of nibbles but you need better bait to fish on Patnet.

See Roberto and Iwog for examples of lures needed to catch the big ones. Good luck with the fishin'.

REpro   Thu, 14 Feb 2013, 5:30am PST   Share   Quote   Permalink   Like   Dislike     Comment 34

Bap33 says

$4 per gallon is here and $3 per gallon seems like a Chirtmas sale. This hurts.

Have you notice that low gas prices are almost always for Christmas time?
Strategic reserves are released (president decision) just for purpose to boost people mood for spending. Get used to this.

David9   Thu, 14 Feb 2013, 6:18am PST   Share   Quote   Permalink   Like   Dislike     Comment 35

I appreciate being a "Knowledgeable insiders", or one of:

"Disciplined buyers -- too long unfairly disadvantaged by government policies -- are now sitting on trillions in savings that are earning, doing, and financing nothing."

My God. I never really thought of it until now, who in their right mind would give government supported deposit insurance to investment bankers !

"In the late 1990s, there was a major banking reform. The Glass-Steagall Act, a reform of the Depression era that had separated investment banking from commercial banking and had given only the latter government-supported deposit insurance, was repealed. "

FunTime   Thu, 14 Feb 2013, 9:59am PST   Share   Quote   Permalink   Like   Dislike     Comment 36

yup1 says

Make sure that you also select # for sale. For the week of July 23, 2013 listing $/sqft 102, number of homes for sale 5.0k. For the week of July 30, 2013 listing $/sqft 117, number of homes for sale 2.78K.

I'm embarrassed to risk writing something ridiculous, but maybe you got unexpected results because you asked that site to predict the future?

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