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Real Estate in Graphs

By E-man   Follow   Tue, 22 Jun 2010, 3:31pm   7,030 views   116 comments
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I've been doing some readings and found some housing data that I would like to share for those that are interested. Although I'm not very articulate, it's somewhat rewarding if you can understand my points.

The first graph shows the median income multiple since 1950. The second graph shows interest rates for the last 40 years. Let's take a look at the CA housing market in the last 30 years.

1) The first HOUSING BOTTOM was in the mid 1980's when the median income multiple (MIM) of about 3.7 and interest rate (IR) at around 12%
2) The second HOUSING BOTTOM was in the mid 1990's when the MIM of about 4 and IR at around 8%
- (40% increase in buying power comparing to 12% IR)
3) Currently, the MIM is about 5.5 and the IR at around 5%
- (37% increase in buying power comparing to 8% IR). On the surface it appears unaffordable from a 5.5 MIM. However, when you factor in the current interest rate environment, we're pretty close to the bottom of the mid 1990's housing market in terms of affordability. If you get 5.5/4.0 MIM, you get 38% decrease in buying power, but the current IR increases your buying power by 37%. Basically, it's almost a wash.

Therefore, if you think interest rate will go higher in the near future, DON'T BUY. If you think interest rate will go even lower, buying now is not a bad hedge.

If you think interest rate will go HIGHER or LOWER from here, please suppport your argument.

This last graph suggests that we have another 22% drop from here. However, it didn't factor in the current historical low interest rate environment comparing to the past. Are we in for a double dip? How many more percent do you think we're going to drop from here?

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1. mthom Follow Befriend 2 threads 139 comments

   77   3:10pm Fri 25 Jun 2010   Share   Quote   Permalink   Like   Dislike   iwog says How do you expect me to refute “very few”? History is on the side of those who say housing will increase over the next 5 years. The ONLY way anyone can argue that we’re in for a further bear market and 5 years of declines would be to say: “Everything is different now, the old rules don’t apply, it’s a new economy” Sound familiar? Why is it that housing cannot have a net loss over the next 5 years in California or specifically the Bay Area? Are you saying we've never had a period of a net loss over a 5 year period? These historical charts disagree. http://www.realestateabc.com/graphs/calmedian.htm Further, the dip in the early 90's was after a minor run up in prices, not the incredible run up we had over the past few years. Not that this time is completely different, but I think it's fair to say, this time is different than your typical housing bubble/decline.

2. tatupu70 Follow Befriend (3) 15 threads 5,651 comments

   78   4:27pm Fri 25 Jun 2010   Share   Quote   Permalink   Like   Dislike   gameisrigged says Huh? Wages are not rising - where did you hear that? Earnings may be up for the companies that got bailouts (how could they not be?), but small businesses are struggling. Jobs are not “turning” - unemployment is still as high as ever. Let's see. Here's an article I found relatively quickly. Wages have been rising for almost a year now I think. http://www.marketwatch.com/story/income-growth-outpaces-spending-in-april-2010-05-28?siteid=yhoof

3. pkowen Follow Befriend 30 threads 555 comments San Carlos, CA

   79   6:30pm Fri 25 Jun 2010   Share   Quote   Permalink   Like   Dislike   Interesting. Scanning these posts it appears it's primarily those invested in rental properties are arguing that housing is on an upswing. Just like some were arguing rents are going up up up right about the time SF rents were being reported as dropping (and as it happens I negotiated a decrease for myself). "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!" - Upton Sinclair

4. xenogear3 Follow Befriend 10 threads 419 comments

   80   7:49pm Fri 25 Jun 2010   Share   Quote   Permalink   Like   Dislike   pkowen says t’s primarily those invested in rental properties are arguing that housing is on an upswing. At least 50% people on this message board are real estate agents or investors :) All of them live in Bay Area !!! These people just like the people who owns the internet stocks in 2000. NASDAQ was down ONLY 40%. They were calling bottoms like crazy on the message board. When the NASDAQ down to 70%, guess what? They were all disappeared from the message board. The real estate will bottom when no one talks about it.

5. thomas.wong1986 Follow Befriend 16 threads 4,426 comments

   81   10:48pm Fri 25 Jun 2010   Share   Quote   Permalink   Like   Dislike   xenogear3 says When the NASDAQ down to 70%, guess what? They were all disappeared from the message board. They all moved to real estate by 2001, next they will be selling solar panel door to door.

6. iwog Follow Befriend (48) 274 threads 12,575 comments 47 male Lafayette, CA Premium

   82   11:34pm Fri 25 Jun 2010   Share   Quote   Permalink   Like   Dislike   xenogear3 says pkowen says t’s primarily those invested in rental properties are arguing that housing is on an upswing. At least 50% people on this message board are real estate agents or investors All of them live in Bay Area !!! These people just like the people who owns the internet stocks in 2000. NASDAQ was down ONLY 40%. They were calling bottoms like crazy on the message board. When the NASDAQ down to 70%, guess what? They were all disappeared from the message board. The real estate will bottom when no one talks about it. The Nasdaq bubble took less than 3 years to resolve a bottom. The 1929 Dow bubble took about the same amount of time. The oil bubble bottomed in 6 months. We are now in year 5 of the bear market in real property. As much as people want to think that this time it's different, it's never different. If the market prospects for real estate looked any better, prices would be higher. It's precisely BECAUSE things look so bad that real estate has fallen off a cliff.

7. ¥ Follow Befriend 35 threads 5,700 comments Bellingham, WA

   83   1:13am Sat 26 Jun 2010   Share   Quote   Permalink   Like   Dislike   Goddamit, what don't you understand about the TEN TRILLION HOUSEHOLD DEBT bubble that was blown 2001-2008? Layered on the household debt was a similar debt expansion in corporate and government debt at all levels. THIS IS A BALANCE SHEET RECESSION. THERE IS NO EXIT FROM A BALANCE SHEET RECESSION. This is NOT bullshit internet stocks blowing up and taking out daytraders. This is an EXTREMELEY pivotal time in the economic history and fate of the nation. Think of what's going to happen if the Senate Majority leader loses his seat to a Christian Reconstructionist Tea Party twit, Boxer gets booted for Fiorina. Obama will be a lame duck and that's going to be it for Keynesian intervention. We're looking at a replay of the 1930s IF WE'RE LUCKY.

8. ¥ Follow Befriend 35 threads 5,700 comments Bellingham, WA

   84   1:19am Sat 26 Jun 2010   Share   Quote   Permalink   Like   Dislike

9. iwog Follow Befriend (48) 274 threads 12,575 comments 47 male Lafayette, CA Premium

   85   2:08am Sat 26 Jun 2010   Share   Quote   Permalink   Like   Dislike   Troy says Goddamit, what don’t you understand about the TEN TRILLION HOUSEHOLD DEBT bubble that was blown And where can I find data on this ten trillion? I simply don't believe it's real. If you're calculating POTENTIAL household debt tied to equity, that's not an honest measurement and you know it. $200,000 fake equity + $200,000 fake loan + bankruptcy = dick. Actually it's better than that. SOMEONE still has the $200,000 while the negative notation is buried at the fed for the next 1000 years.

10. iwog Follow Befriend (48) 274 threads 12,575 comments 47 male Lafayette, CA Premium

    86   2:10am Sat 26 Jun 2010   Share   Quote   Permalink   Like   Dislike   I can't read the fine print on that chart you posted, but it appears awfully convoluted. WTF does percent job losses aligned at maximum job losses mean anyway? Does that just mean jobs disappeared really fast? I already stipulated that the teabaggers might force a scarce money depression before the dollar is finally destroyed, but I doubt it's going to take very long. In fact the seeds of discontent have been sown with the latest congressional atrocity regarding unemployment benefits. Wait until a fiscally conservative government withholds SSI or Medicare payments because it doesn't want to borrow money or raise taxes. After 2011 the baby boomer chart looks awesome.

11. xenogear3 Follow Befriend 10 threads 419 comments

    87   2:35am Sat 26 Jun 2010   Share   Quote   Permalink   Like   Dislike   iwog says The Nasdaq bubble took less than 3 years to resolve a bottom. The 1929 Dow bubble took about the same amount of time. The oil bubble bottomed in 6 months. We are now in year 5 of the bear market in real property. Unlike oil and stock, real estate takes a long time to reach bottom, because the owners cannot sell at a loss even they want it. The bank will not allow it. This is why there is a myth "real estate price never goes down".

12. ¥ Follow Befriend 35 threads 5,700 comments Bellingham, WA

    88   4:28am Sat 26 Jun 2010   Share   Quote   Permalink   Like   Dislike   iwog says Troy says Goddamit, what don’t you understand about the TEN TRILLION HOUSEHOLD DEBT bubble that was blown And where can I find data on this ten trillion? I simply don’t believe it’s real. If you’re calculating POTENTIAL household debt tied to equity, that’s not an honest measurement and you know it. $200,000 fake equity + $200,000 fake loan + bankruptcy = dick. Actually it’s better than that. SOMEONE still has the $200,000 while the negative notation is buried at the fed for the next 1000 years. The ten trillion came from peak household mortgage debt of $10.5T of mid-2008, up from the $5.5T level of 1Q02, these numbers are from the Federal Flow of Funds Report, Levels table L.100, row 27. So the actual debt overhang is on the order of $5T. As long as mortgage interest rates can stay monotonically decreasing the Fed has a chance of rolling this debt without total systemic meltdown (the Japan playbook). I don't know anything but part of me thinks that's why the ten year is at 3% right now -- we've got a real Mexican standoff between the Fed, homedebtors, and whoever the f--- is buying Treasuries. Rates moving up will result in a repetition of the ending of Reservoir Dogs. It is true hat the Fed has monetized over a trillion of this and can absorb $100B in losses or so a year without anyone really noticing or caring, unlike say BAC or WFC. But the big banks and C are still on the hook for a lot of this and much if not most of the economic vitality of the previous decade was directly powered by this $5T debt issue. That party is over, what we're left with is a partially hollowed-out economy, thanks to NAFTA and MFN with China.

13. iwog Follow Befriend (48) 274 threads 12,575 comments 47 male Lafayette, CA Premium

    89   9:10am Sat 26 Jun 2010   Share   Quote   Permalink   Like   Dislike   xenogear3 says iwog says The Nasdaq bubble took less than 3 years to resolve a bottom. The 1929 Dow bubble took about the same amount of time. The oil bubble bottomed in 6 months. We are now in year 5 of the bear market in real property. Unlike oil and stock, real estate takes a long time to reach bottom, because the owners cannot sell at a loss even they want it. The bank will not allow it. This is why there is a myth “real estate price never goes down”. The "real estate is different" argument makes sense until you realize that historical graphs show real estate prices following the same rules as any other market. There are no modern examples of a bear market in real property lasting over 4 years. During the 1990s most areas saw 3-4 years of very moderate declines, 3 years of flat, and a renewed bull market afterwards. The bear market in the 1980s only saw real money declines due to high inflation. So you're stuck with "everything is different now, the old rules don't apply, it's a new economy". I'm not willing to go there. Owners are indeed simply walking away from their "investments" and sticking the losses to the government. Unlike a Nasdaq speculator being ruined in 2002, a real estate speculator who bought in 2005 and was ruined in 2007 will be eligible for a brand new government-insured loan in 2011. These people still exist, still have jobs, and still want a house. I rent to them.

14. iwog Follow Befriend (48) 274 threads 12,575 comments 47 male Lafayette, CA Premium

    90   9:32am Sat 26 Jun 2010   Share   Quote   Permalink   Like   Dislike   Troy says The ten trillion came from peak household mortgage debt of $10.5T of mid-2008, up from the $5.5T level of 1Q02, these numbers are from the Federal Flow of Funds Report, Levels table L.100, row 27. So the actual debt overhang is on the order of $5T. As long as mortgage interest rates can stay monotonically decreasing the Fed has a chance of rolling this debt without total systemic meltdown (the Japan playbook). So 10 trillion is ALL mortgage debt, and 5 trillion is your estimate on how much of it is excessive. The problem is when you look at the actual mortgage credit contraction, it's a tiny 260 billion so far. (from your chart) How is this possible? Isn't trillions supposed to be missing from the economy? So the mortgage market has shrunk 260 billion. Meanwhile the fed ordered up $1.4 trillion in monetary base and bought up all the bad debt in addition to simply spending 300 billion into the economy at treasury auctions. Conforming mortgages were increased to $600,000, credit jail only lasts 4 years, and we're just past the bottom of a recession that may or may not see some good job growth after the bulk of the stimulus package hits the country during the next couple of years. I like my chances. Certainly there's a political risk that the nutballs will return to the government and force a depression, but it's just as possible that we start growing again.

15. pkowen Follow Befriend 30 threads 555 comments San Carlos, CA

    91   10:55am Sat 26 Jun 2010   Share   Quote   Permalink   Like   Dislike   iwog says xenogear3 says pkowen says t’s primarily those invested in rental properties are arguing that housing is on an upswing. At least 50% people on this message board are real estate agents or investors All of them live in Bay Area !!! These people just like the people who owns the internet stocks in 2000. NASDAQ was down ONLY 40%. They were calling bottoms like crazy on the message board. When the NASDAQ down to 70%, guess what? They were all disappeared from the message board. The real estate will bottom when no one talks about it. We are now in year 5 of the bear market in real property. As much as people want to think that this time it’s different, it’s never different. If the market prospects for real estate looked any better, prices would be higher. It’s precisely BECAUSE things look so bad that real estate has fallen off a cliff. Year 5? really? So we crashed in June 2005?? Check you chronology.

16. ¥ Follow Befriend 35 threads 5,700 comments Bellingham, WA

    92   12:25pm Sat 26 Jun 2010   Share   Quote   Permalink   Like   Dislike   iwog says but it’s just as possible that we start growing again. The problem that I see is that we've used up all the avenues of growth. We've had some very friendly Megatrends at our back since the 80s -- 1) Personal Computers to dramatically increase productivity, 1982-2000. 2) The internet, 1994-2004 3) Falling oil prices thanks to non-OPEC ramp (1985-2000) and approach of Peak Oil (2005-now) 4) The integration of China into the global economy (1990-2005) 5) The ability to seriously deficit spend for military stuff (1985-1990, 2001-now) 6) The Baby Boomers leaving their dependency age (1965-1985) But each of these have also come with a flipside -- the ability to offshore jobs to English-speaking countries, pump prices of $3 now and $5 just around the corner, the total uncompetitiveness of America's productive base vis-a-vis China's, the necessity to draw down from the $700B/yr defense costs (each tiny $1B cut being a loss of 10,000 or more gov't jobs somewhere), boomers reenetering their dependency age (2010-2030). This country MUST get its major policies -- health care, energy technology, transportation, taxation, immigration -- straightened out. Politically, this is the most dysfunctional situation I've ever seen, both at the state and Federal level. We've just seen the Republicans block a paid-for $100B stimulus attached to a $35B emergency unemployment extension, the fallout from this is going to be very reminiscent of the 1936 pullback in gov't stimulus. State budget is MIA, and without new taxation there's going to be a MAJOR spending cut hitting us. The way things are going now, we're heading straight for a Soylent Green future. I need to get back to my Mandarin studies again.

17. iwog Follow Befriend (48) 274 threads 12,575 comments 47 male Lafayette, CA Premium

    93   1:28am Mon 28 Jun 2010   Share   Quote   Permalink   Like   Dislike   pkowen says Year 5? really? So we crashed in June 2005?? Check you chronology. I don't think that's necessary. Putting an approximate peak on January 2006 means that we have 4.5 full years of a bear market in real estate. That means we're half way through the 5th year. One might even say we are well into year 5 of the bear market.

18. tatupu70 Follow Befriend (3) 15 threads 5,651 comments

    94   5:14am Mon 28 Jun 2010   Share   Quote   Permalink   Like   Dislike   UnitedSocialistStatesofAmerica says If you need to know whether you’ll need an umbrella or not before going out, you NEEDN’T consult a graph for it. You simply look out the F’ing window and see for yourself what the weather’s like. Interesting analogy. So, you never watch a weather report then? When you leave for work, you just look out the window, right?

19. tatupu70 Follow Befriend (3) 15 threads 5,651 comments

    95   6:55am Mon 28 Jun 2010   Share   Quote   Permalink   Like   Dislike   Another report from today. For anyone else who thinks wages are not rising... "Incomes rose for the sixth time in seven months, boosting household finances and potentially providing fuel for greater future spending." http://finance.yahoo.com/news/Americans-spend-more-in-May-apf-966568080.html?x=0

20. mthom Follow Befriend 2 threads 139 comments

    96   8:21am Mon 28 Jun 2010   Share   Quote   Permalink   Like   Dislike   iwog says pkowen says Year 5? really? So we crashed in June 2005?? Check you chronology. I don’t think that’s necessary. Putting an approximate peak on January 2006 means that we have 4.5 full years of a bear market in real estate. That means we’re half way through the 5th year. One might even say we are well into year 5 of the bear market. That depends on your area. The better areas of the Bay Area didn't peak until late 2007, early 2008. So for some areas, you are 2 years early, which probably explains the difference between your view and others.

21. iwog Follow Befriend (48) 274 threads 12,575 comments 47 male Lafayette, CA Premium

    97   11:17am Mon 28 Jun 2010   Share   Quote   Permalink   Like   Dislike   mthom says That depends on your area. The better areas of the Bay Area didn’t peak until late 2007, early 2008. So for some areas, you are 2 years early, which probably explains the difference between your view and others. Yes all markets are local, but by and large most of the United States peaked in 2006.

22. mthom Follow Befriend 2 threads 139 comments

    98   11:33am Mon 28 Jun 2010   Share   Quote   Permalink   Like   Dislike   iwog says mthom says That depends on your area. The better areas of the Bay Area didn’t peak until late 2007, early 2008. So for some areas, you are 2 years early, which probably explains the difference between your view and others. Yes all markets are local, but by and large most of the United States peaked in 2006. I guess it depends on what your point is. There's really no point in arguing what is happening nationally, is there? If housing increases 20% nationally but the area of Cupertino I want to buy in still has another 2 years of declines, the national data doesn't help me in making my decision to purchase now or wait.

23. iwog Follow Befriend (48) 274 threads 12,575 comments 47 male Lafayette, CA Premium

    99   11:45am Mon 28 Jun 2010   Share   Quote   Permalink   Like   Dislike   mthom says I guess it depends on what your point is. There’s really no point in arguing what is happening nationally, is there? If housing increases 20% nationally but the area of Cupertino I want to buy in still has another 2 years of declines, the national data doesn’t help me in making my decision to purchase now or wait. Bear markets don't have time limits, but I think it's important to remind everyone that things have been going down for years. Even the often cited Great Depression reached the bottom in less than 4 years, after which things began to improve. Cupertino might go down for another 2 years, or it might already be headed back up. I don't know anything about that market and don't have an opinion on it. I think national trends are a little easier to identify and it's national trends that most people are refering to when they talk about "the market".

24. tatupu70 Follow Befriend (3) 15 threads 5,651 comments

    100   11:58am Mon 28 Jun 2010   Share   Quote   Permalink   Like   Dislike   UnitedSocialistStatesofAmerica says Isn’t it an AMAZING concept? And here’s ANOTHER crazy thing I do; instead of consulting a graph in order to determine if I’m HUNGRY or not, I simply rely on my stomach to tell me. Will wonders never cease? Again--great analogy. I'd say deciding to eat is pretty much the same as deciding to buy a house... btw--do you get wet on the way home from work a lot?

25. tatupu70 Follow Befriend (3) 15 threads 5,651 comments

    101   1:17pm Mon 28 Jun 2010   Share   Quote   Permalink   Like   Dislike   UnitedSocialistStatesofAmerica says No, I DON’T because I always look out the window beforehand to see what the weather’s like. Maybe you live in a different area than me. Where I live there is very little correlation between how the sky looks at 6AM to how it looks at 5pm

26. tatupu70 Follow Befriend (3) 15 threads 5,651 comments

    102   2:03pm Mon 28 Jun 2010   Share   Quote   Permalink   Like   Dislike   UnitedSocialistStatesofAmerica says Then may I suggest you look out the window AGAIN @ around 12 pm? After all, THAT’S what a professional meteorologist does right before they flip a coin and prepare the weather forecast anyway The problem is that I've already left the house. The choice about whether or not to bring the umbrella has to be made at 6AM...

27. Nomograph Follow Befriend (1) 104 threads 2,851 comments

    103   4:00pm Mon 28 Jun 2010   Share   Quote   Permalink   Like   Dislike   tatupu70 says The problem is that I’ve already left the house. The choice about whether or not to bring the umbrella has to be made at 6AM… USSA is a troll. His first post was a lie, as there was never anybody pumping Vegas RE on this board. He didn't "lurk" on this board for years; in fact he was chomping at the bit so badly to begin trolling that he posted blank comments in the Nursing Home section to get past the anti-spambot four comment rule. He's just a garden variety troll, and not even a very good one at that. His trolls will become increasingly vitriolic, and he will move away from calling people RE shills and begin accusing everyone of being commie pinko libs who hate America and everything it stands for. They are all the same. A new one comes along every couple months, but they generally don't last.

28. robertoaribas Follow Befriend (23) 55 threads 3,813 comments Scottsdale, AZ robertoaribas's website

    104   8:14pm Mon 28 Jun 2010   Share   Quote   Permalink   Like   Dislike   I live in Arizona. Why would anyone carry an umbrella, rain falling would likely hiss into steam when it hit the 200 degree pavement anyways...

29. Nomograph Follow Befriend (1) 104 threads 2,851 comments

    105   8:55pm Mon 28 Jun 2010   Share   Quote   Permalink   Like   Dislike   UnitedSocialistStatesofAmerica says Ad Hominem AdHo! Welcome back!

30. American in Japan Follow Befriend (28) 149 threads 1,398 comments

    106   5:21am Wed 30 Jun 2010   Share   Quote   Permalink   Like   Dislike   E-man, I don't comment much here. I like this post of yours and find it very informative. (ignoring much of the bickering and name calling following) Thanks!...from Japan.

31. E-man Follow Befriend (31) 34 threads 2,552 comments San Jose, CA Premium

    107   3:54pm Wed 14 Jul 2010   Share   Quote   Permalink   Like   Dislike   Hey, As long as someone likes my post, I will keep on posting :o) For the doomers and gloomers, our government debt as a percentage of GDP is not so bad comparing to Japan and other European countries. We definitely can prolong this real estate game. Post your thoughts if you feel otherwise.

32. E-man Follow Befriend (31) 34 threads 2,552 comments San Jose, CA Premium

    108   3:56pm Wed 14 Jul 2010   Share   Quote   Permalink   Like   Dislike   A picture is worth a thousand words. Inventory is at historic low.

33. E-man Follow Befriend (31) 34 threads 2,552 comments San Jose, CA Premium

    109   3:59pm Wed 14 Jul 2010   Share   Quote   Permalink   Like   Dislike   Looks like the job market is a tad better than last year. More job openings comparing to lay-offs.

34. E-man Follow Befriend (31) 34 threads 2,552 comments San Jose, CA Premium

    110   4:03pm Wed 14 Jul 2010   Share   Quote   Permalink   Like   Dislike   If history is any indications, hiring should pick up significantly in early 2011.

35. E-man Follow Befriend (31) 34 threads 2,552 comments San Jose, CA Premium

    111   4:07pm Wed 14 Jul 2010   Share   Quote   Permalink   Like   Dislike   Thanks to Troy for over-laying these graphs. As shown on the graph and its trend lines, we're closer to the bottom than the top of the housing market. If you factor in the current low interest rate environment, home affordability in the U.S. should be at historic high.

36. E-man Follow Befriend (31) 34 threads 2,552 comments San Jose, CA Premium

    112   4:09pm Wed 14 Jul 2010   Share   Quote   Permalink   Like   Dislike   One final note, REO agents told me that home sales fell out a cliff in the past three weeks. Does this signal home price softness in the next several months? Stay tuned, I'll keep you posted.

37. errc Follow Befriend (7) 30 threads 1,217 comments 31 male Premium

    113   5:41pm Wed 14 Jul 2010   Share   Quote   Permalink   Like   Dislike   Not sure what the property tax environment is in your specific area, but i know my local gov is cash strapped, and i would have to think that property taxes are going to rise, and that will dissuade people from wanting to buy a house people have certainly come to question just how good an investment house debtorship really is. with the jobs situation being the mess it is, i don't see young people jumping into massive debt to own a house, you have to desire to be anchored to one spot for an extended period of time, and i'd guess people are rethinking if they really want to be chained to a house, when there's plenty of comparable places to rent. in order to get to the peak we recently witnessed, it absolutely required the pyramiding, or upgrading of houses over a long period of time,,,,,,,,starter home, small family home, bigger family home. Those starter home neighborhoods are not as desirable as they once were, and while the boomers are downsizing, there isn't a new base of families looking to upgrade, especially with the direction of house equity people no longer hold. Let's not forget the ravenous pace that HELOC's and the like allowed for expansion in housing. How many 'infestors' were able to leverage to the moon with the combination of rising equity and rising credit availability. i admit, i look to reinforce my own (negative) view of house price direction. that's what i want to happen, so that's what i see and that's what i seek. I think the only way we get this truck out the mud and get back to house prices going higher is via gov't induced monetary inflation, whatever their gimmicktry/vehicle may be. I do not see where incomes will drive house prices upwards. not that i haven't been wrong before

38. thomas.wong1986 Follow Befriend 16 threads 4,426 comments

    114   9:37pm Wed 14 Jul 2010   Share   Quote   Permalink   Like   Dislike   E-man says Thanks to Troy for over-laying these graphs. As shown on the graph and its trend lines, we’re closer to the bottom than the top of the housing market. If you factor in the current low interest rate environment, home affordability in the U.S. should be at historic high. Now if you can find charts local for each market, like SF Bay Area, you pretty much wind up with SF Bay Area coming down to mid 300K .. and staying there for a long time. So far we havent hit the perm bottom yet. Otherwise yes, you can more likely find great bargins in Vegas and SoFLA.

39. LAO Follow Befriend 78 threads 405 comments

    115   1:02pm Thu 15 Jul 2010   Share   Quote   Permalink   Like   Dislike   Vain says Well if you really think about it, in 2008/2009 (our current situation), prices of homes dropped and so did interest rate. It’s all manipulated. People in the future will view today as another example as to why iwog is correct. Unless wages rise... along with interest rates rising.. homes can't go up in price. If we have hyper-inflation maybe.. but hyper-inflation would bring upon the fall of the U.S. like the fall of Rome.. so who really cares how much your house costs if it's being looted and vandalized. You can point to instances in the past where interest rates rose and housing rose.. and vice versa. But you have to look at the unemployment rate and how fast wages were increasing at that time too.. those were the factors driving home prices... not just interest rates. I look at it this way.... If i eat over 3000 calories a day i'm gonna gain weight... So people will say.. if my caloric rate increase, my weight increases..... but if i work out 4 hours a day and eat 3000 calories i'll lose weight.. so it makes the top theory false. One change in the equation throws all the theories and graphs out the window. Home prices can not rising in this environment if interest rates rise also... In fact the ONLY reason home sales and prices have recovered at all since 2008 is becomes interest rates have fallen and due to govt stimulus. Look at how crappy of a summer buying season we are having.. I thought home sales picked up the summer months? And we have 4.5% interest rates... if we were at 9% tomorrow no one would be buying a home.

40. ¥ Follow Befriend 35 threads 5,700 comments Bellingham, WA

    116   1:22pm Thu 15 Jul 2010   Share   Quote   Permalink   Like   Dislike   rmm221 says f we were at 9% tomorrow no one would be buying a home. $375,000 @ 4.5% is around a $2200/mo commitment. At 9%, it's $2800/mo. $2200 mo @ 9% would require around $100,000 off the purchase price. BR had a good post today about how interest rates simply must stay low to keep the game going. Now, we can argue that .4 may be too high a bar, that with these low interest rates we can get by with more leverage, but at any rate the sheer overhang of mortgage debt to present valuations is sobering, and in-line with my previous predictions from 2007-2008.

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