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Ahh the same ole tired crap.
The entire BA bubble Vs non-bubble debate can easily be summed up in as little as 4 statements.
1) No bubble, there isn’t enough housing, supply Vs. demand.
2) The Google effect, companies in the Bay Area lead the world in everything and attract top notch talent for which they pay handsomely. Never mind that the brunt of companies in the Bay Area do not produce physical items, ahh the “new economy”. Interesting that the code monkeys in China/Vietnam/India etc are rapidly getting as good if not better than the code monkeys in the BA. Companies are in business to make money, period. It is only a matter of time before the equation swings forever in the favor of off shore code monkeys.
3) Houses are worth so much in several areas because of the outstanding schools.
4) The perfect nature of all things BA justify the a$$pounding RE costs.
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Mountain View, CA
Coz a stock market crash would effect those of us that have money in stocks i.e. 401k or instead of a house.....
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Randy H Says:
Others are doubling down.
Escalation of Commitment. Another reason not to seek FBs for lowball offers. The typical FBer will just keep doubling down until they’re forced from the table (and thus inject more lumpy stickiness).
The analogy between FB's and gamblers is apt. There's the well-known phenomenon of gamblers, having gotten some winnings at the table earlier and now in the hole, will have a mentality of "just one more hand" to win it all back. This keeps them at the table, and this keeps them in the hole, because, after all, the house always has the advantage.
FB's will likely be thinking this way for years to come. It'll be interesting to see how that factors into the ongoing housing meltdown. Delayed reckoning will lead to even more catastrophic outcomes.
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‘So you could have an addition $214 a month to spend AS YOU WISH’.
SFWoman, that is an extra sushi dinner, go for it! :)
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I do not see banks doing any tightening of standards at all. Common, we blame the Realtors. How are banks different ? Realtors are trying to sell houses, banks are trying to sell mortgages. They all just want to sell. Morals, ethics and such arcane stuff just comes in way of making money.
What will make banks change is risk ownership. As has been pointed out numerous times, banks do not own most of the mortgages they sell. So the real question is, when will secondary MBS market start asking more risk premiums.
Not anytime soon. There seems to be way too much global liquidity. Investors are so yield starved, that they are willing to finance whoever is willing to borrow at whatever rate.
The whole thing seems to be so precariously balanced, that it it possible to envision a vicious circle forming out of this. If the tide turns, it can get ugly. A real drop in house prices due to bubble collapsing under its own weight will make investors stop buying MBS.
So I do not think banks will change anything to stop the party. Nothing is more important than the psychology of buyers. That is indeed proving out to be the trigger that shot the bubble.
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TBAoNTBA,
That WSJ journal article and the NYT articles linked above basically prove your point. Banks and appraisers have as much to do with this. The interesting thing will be with comps clearly flat to negative in many areas, if shady appraisers and originators can continue to inflate appraisals to allow the refinancing gravy train to continue.
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do not see banks doing any tightening of standards at all.
Banks will tighten only when there is blood on the street. This will happen _after_ a big foreclosure wave. Do not count on banks to trigger the correction.
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Coz a stock market crash would effect those of us that have money in stocks i.e. 401k or instead of a house…..
There is time to react.
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Mountain View, CA
Peter P - I hope that by the time I need the 401K - 30-40 years from now, the fluctuation in share prices now won't make much difference - my husbands 401k plan sucks! But, then, in a few years he will probably change jobs and the 401k plan.
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Mountain View, CA
In fact, if the market does crash that would present a good buying oportunity - now all I need is a ton of cash.....
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Claire,
Coz a stock market crash would effect those of us that have money in stocks i.e. 401k or instead of a house…..
Just my USD 0.02.
If you're in your 20s, then don't worry too much about it. Your 401k allocations -- hopefully in nice low fee no load highly rated index funds -- will return just fine over a long term horizon, especially with tax advantage compounding and the automatic dollar cost averaging you get. So what you are putting money in during downturns. You've been putting money in during upturns; and this cycle will continue to your advantage.
If you're 30s-40s then you might think about checking your allocations and moving stuff around to suit your risk. You're still too far off to worry about trying to time the market.
If you're 50s+ then call DinOR and figure out how to get what you want out when you need it.
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"Investors are so yield starved"
Man ain't that the truth! I see a lot of people taking on altogether way too much risk for what is really not much better than muni rates. The banks unwillingness to tighten lending standards won't matter much in the end and won't create a cushion for the RE market. We're fresh out of greater fools, we've pushed the envelope on appraisals and incomes simply will not support these prices. We're already bumping up against affordability issues in many markets and that IS by using a neg. am. loan!
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Chuck Ponzi's website
Some Jerkoff is posting as John Doe. He is an imposter.
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Some Jerkoff is posting as John Doe. He is an imposter.
Let's call him Fake Doe, or Fake D.
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Uh, I don't know how much having a home "branded" by Martha Stewart would motivate me to buy? Is this what builders have sunk to in order to move inventory? Sorry but using "star power" to sell homes just smacks of desperation. It'll be funny to see a year from know when some of these people go to sell if they'll play that up (or try not mentioning it at all).
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When you tag something as “Black-Litterman” you’re granting it a degree of respect that not many things in finance deserve…this is really a lot more like poker than physics in the short to intermediate term.
Black-Litterman is a factor model. It specifically allows for sentiment and behavioral factors. Do you just dislike models in general?
Plenty of economics is not Keynesian or Neo-Keynesian. One of my favorite courses was with Eric Johnson, a well regarded behavioral economist who is a psychology academic first and an economist second.
Just because behavioral factors are nondiscrete, hard to quantify and difficult to predict precisely doesn't mean they cannot be modeled with some success.
Sorry, I'm not much of a "ghost in the machine" believer. Complexity is sufficient enough to explain most seemingly unlikely outcomes.
I thought LTCM was a textbook example of classic group dynamic failures like group think, escalation of commitment, and self-validation (curve fitting). Surely all those PhDs took those classes at some point. All their failure proves is that they are human and prone to failure.
Think back to Psych 101. The "would you shock the test subject" classic experiment. Everyone thinks they wouldn't. Almost everyone would, regardless of education level. Perhaps you just have too high of expectation of academics. They aren't ueberman.
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This Martha Stewart gimmick is a sign of HB desperation, trolling for the last remaining idiots who want to "get in" to the boom. The locations (NC, Atlanta, Texas) are largely bubble-free zones anyway.
The bigger picture is that new and existing home sales for June will be out later this week. Let's see what the NAR and NAHB can cook up and spin this month.
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SFWoman Says:
Wasn’t there a Thomas Kincaid housing development over in the East Bay? What happened to it?
What the hell is that? Are the houses there set in some cheesy faux-natural setting with hazy filtered lighting everywhere? Does he paint your walls for you and throw in one of his exquisite paintings too? That's just too weird.
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George,
As usual you've nailed this one spot on. Months ago you said that if anything (short term anyway) commissions will trend up! True to form this has now come to pass. I also tend to agree that this is a very risky gamble as builders move out of "hearth and home" and reduce this to nothing more than some kind of short term auto lease. My guess is that few will bite at this and those that are turned off by it (the majority) will be permanently turned off.
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nomadtoons's website
We don't have to worry about Martha Stewart housing in the BA. We already have our own boring, overdone, generic style- the "mediterranean condobox" style. I'm so damned sick of this kind of treatment given to condos in a pointless effort to make them look like they aren't really just large barren concrete boxes.
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With all due respect to the illustrious and great SP, I must claim rights to the coinage of "Mr. Bendover" and all it's variants.
I wrote in the Police: Realtor® Murders Possibly Related thread:
NARB Says:
July 14th, 2006 at 1:13 pm
Is it too soon to call BB Bendover? As in bendover for Shrub and Congress? Is he really able to operate free from political restraints?
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MA,
In the end, about 65% would administer the final shock. That’s most, but not “almost everyone.”
True nowhere near "almost everyone" would kill test subject. But, if I recall, nearly 90% would go all the way to the severe pain setting, and over 3/4 to the likely permanent damage level.
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Likewise, if there is a 90% chance a trade will be wildly profitable and a 10% chance it’ll cause the fund to blow up, odds are the portfolio manager won’t make the trade (assuming he can’t scale down the bet).
Why? A manager gets a portion of the upside and no pain of the downside.
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Conor,
Neural Networks can model some pretty impressively complex and dynamic systems, even when containing many millions of interrelated variables. Fewlesh (who hasn't been around in a while) would argue that Bayesian networks can model even more complexity with even higher accuracy and greater simplicity.
How would Occam model the human brain? A ghost in the shell? Actually, neural networks are beautifully simple constructs, yet capable of producing dynamic complexity that is staggering. Not all mathematics is Calculus and Differential Equations. Cellular Autonoma can produce some unbelievably elegant complexities with simplicity a 10 year old could understand.
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Cellular Autonoma can produce some unbelievably elegant complexities with simplicity a 10 year old could understand.
Same for fractal patterns.
I still do not believe that the brain is really responsible for our thoughts.
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HARM's website
NARB Says:
July 24th, 2006 at 2:02 pm e
With all due respect to the illustrious and great SP, I must claim rights to the coinage of “Mr. Bendover” and all it’s variants.
Ok, NARB, I must confer "bendover" credit to you. Sorry, SP :-(
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but you’re never really going to be successful unless your “system” matches your personality
Excellent!
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It’s pretty obvious by now that I’m never going to fully embrace any system full of matrices and heatmaps, so I’ll stick to what suits me and leave the neural nets to somebody more able to employ them.
What suits you? Care to share without saying too much? ;)
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Think back to Psych 101. The “would you shock the test subject” classic experiment. Everyone thinks they wouldn’t. Almost everyone would, regardless of education level.
What I find most interesting about that experiment was the debate over whether the experiment itself was ethical, especially given some of the later responses from the test subjects.
/ I think too many know about this experiment for a repeat to provide good data; too many people would be continuing the shocks just for the fun of it, or stopping early just to show they could. Well, except for a psych 101 class; it's amazing how little kids these days know.
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nomadtoons's website
this is freakin' hilarious: http://flippersintrouble.blogspot.com/
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I was pretty shocked to find out how little house I could afford using a standard 30 year mortgage via some calculators on dinkytown.
30YR FRM? Are you stuck in the 80's? :)
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HARM's website
this is freakin’ hilarious: http://flippersintrouble.blogspot.com/
Awesome site - the author clearly spent a lot of time collecting this data from the Sac. MLS & Zillow and should be commended by all.
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Awesome site - the author clearly spent a lot of time collecting this data from the Sac. MLS & Zillow and should be commended by all.
Data is irrelevant. Psychology is all important.
I do sense a change in psychology recently. We will prevail.
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New thread: Should people be prevented from doing stupid things?
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Of course, this means Randy’s gonna yell at me…
Not at all. It's all just blogdebate. My stance on fiat is well established at this point.
Anything you cannot eat, kill someone else with or make love to is fiat to some degree.
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Anything you cannot eat, kill someone else with or make love to is fiat to some degree.
Huh? Are you all right, Randy?
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It says:
Prices go up 30% every year. Even if its for investment, great investment for future sale or use!
Huh?
BTW, the feng shui of cemetry land is also very important.
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Different Sean's website
gold-backed currency, or fiat currency or anything currency is beyond the understanding or cares of most ordinary people, so not much to do with groupthink at all...
the shock experiment was done back in the 60s or thereabouts, so there are effects now due to time (cohort), and culture. you can't generalise the results to the present-day population, for instance, especially with awareness of OH&S, changing standards of morality and personal endangerment, etc. understandings of ethics have changed enormously with each decade (at least in some countries), meaning you could not even run that experiment now most likely in its original form, apart from the awareness factor. you would also need to control for social class, age (life experience), culture, sex and other factors. you would really have to try to re-run the experiment in an attenuated form, just to find out if subjects are willing to shock a false subject at all. you would get different results if you used a prison popn, an army popn, a youthful popn, etc. you would also need to employ good actors, because there could be a 'disbelief' effect if they didn't really believe they were shocking someone which could distort the results. even the modes of thought of experimenters have changed since then. i've got a feeling most of the subjects in those experiments were male, women didn't count as 'people worthy of psychological study' back then, hmm... a lot of the famous social psych work back then was trying to make a dramatic point about something or other with debateable constructs like 'obedience', e.g. the prison guards and prisoners experiment, and so on.
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I would argue that the continued acceptance of a fiat currency by a population is an example of irrational groupthink
Couldn’t you say the same thing about gold backed currency?
Precisely, although probably not "groupthink" per se. But absolutely not "irrational". It's really very simple, something that should appeal to the other side in this debate:
1) A person values greenbacks because he/she observes that everyone else values greenbacks, and can reasonably expect everyone to continue valuing greenbacks.
2) A person values gold because he/she observes that everyone else values gold, and can reasonably expect everyone to continue valuing gold.
That #1 is an intentional, designed social construct and #2 is an accident of history makes no difference in terms of "rational".
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Different Sean's website
wanker...
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Hey Big V
Try being single living on under 50k a year in southern cal that is what I was doing until six months ago. I wish I even made 100k I know you're asking does she have a college degree? Yes ,I'm a jeweler and have been in the trade 16 years. Sooner or later people in the bubble areas realise not everyone will keep trying to eek out a living paying upper middle class dollars for a barely middle class existance . That area might as well be a seperate country as it does not reflect what is going on in most of the rest of the US.
It's simple you can stay and struggle or take that same skill and translate to another market and live very well. I took a calculated risk leaving LA but if things play out correctly I'll end up way ahead financially. Overall salaries where not keeping up with the cost of things in california. Who wants to rent thier whole life? I didn't and you couldn't convince me to stay around and wait for what may or may not happen.
I sometimes wonder what would happen if people really woke up and saw the reality vs the marketing of the "golden state". Don't get me wrong not matter where I eventually settle I'll always be a californian. It just became a state where you're not shit if you don't make 200k a year It's a sad commentary .