patrick.net

He also points out that he is seeing what may be early bubble behavior in San Francisco and Phoenix, and even in Chicago and Atlanta.

Uh Oh abandon ship

Shiller is like the physicists who simply cannot accept the conclusions of his mathematical proofs and theories because they don't fit his preconception of how things ought to be. Einstein thought that there had to be something to prevent black holes and a non-static (expanding or collapsing) universe even though his Theory of Relativity demands such things. Einstein later said that trying to adjust his theory to prevent its logical conclusions was "the biggest blunder of my life".

Shiller may someday realize that minimizing the severity of the housing bubble and the correction necessary just to get back to fair market prices is the biggest blunder of his life.

Here's my take on the Case Shiller Index...

P.S. I added the green text/curves as well.

Nothing against boomers, but when their generation passes away, I think we'll be all a bit better off.

I don't know if you would call me a bear. I'm a prospective buyer, but I'm not throwing my 15 years of savings away bailing out some greedy Baby Boomer. I expect to get as much house for my money, if not more, than the Boomer generation. After all, construction is way the hell cheaper today than 30 years ago. Wait a few more years and I'll be able to literally print out my house in 24 hours. Fuck if that ain't cheaper than paying construction workers for 6 months.

Houses should be cheaper, not more expensive, than 30 years ago. Technological advances make products lease expensive. And as for that b.s. about land scarcity, complete malarkey. There are so many vacant lots, buildings, and units in both commercial and residential zones where I live it's almost scary. I estimate that almost half of the available commercial square footage is not being used at all. I don't know the stats for residential, but I've seen so many abandoned homes and that's during snow-bird season.

Dan,

Nice graph, by the way.

Where in '97 do you have it starting, I was around July/August, and have thought Spring 2013 or earlier in the year?

Goran_K says

Nothing against boomers, but when their generation passes away, I think we'll be all a bit better off.

When the Boomers were children, everything revolved around the nuclear family (mid-1940s, 1950s, early 1960s).

When the Boomers were teenagers / young adults, it was the era of unprotected, free love and orgy communes (mid 1960s to late 1970s). Having money was considered evil. This was also the period during which violent crime peaked.

When the Boomers were 30-something and their careers were taking off, it was the era of "greed is good". Money was no longer evil, and the stock market had to be unregulated so that everyone cold make as much money as possible on it. Capital gains had to be reduced. This was also the period during which white collar crimes skyrocketed.

When the Boomers had climbed to the top of the property ladder (during the 1990s to early 2000s), the housing bubble inflated. The government had to lower interest rates and encourage banks to lend any amount to anyone so that the Boomers could buy up everything.

The Boomers never gave a rat's ass about social security -- "never trust anyone over 30" -- until the past decade as the Boomers approached retirement age. Having been given everything to them for the past half century, the Boomers' attitudes towards social security is "it had better be paid out to us, but fuck all the future generations". I've listened to Boomers on NPR and they couldn't give a damn if social security is available for Gen X, the Millennials, or beyond, but they want to be damn sure that they get to squeeze out the last drops of wealth during their retirement.

Since the Boomers got older and unable to physically commit violent crimes, such crimes have plummeted in our society. Neither Gen X nor the Millennials, a generation almost as large as the Boomers, have committed nearly as many violent crimes as the Boomers. And as Gen X proved, it wasn't due to the non-existent parenting of the Boomers. As Boomers move out of Wall Street and corporate jobs, I suspect that the number of white collar crimes will plummet as well.

Don't get me wrong. There are plenty of Boomers I do like, but as a whole the generation is the most spoiled, greedy, and self-centered one in at least the past century. Sure, Gen X is cynical and sarcastic. The Millennials are overconfident and underskilled. But neither generation has caused nearly as much harm in any stage of its life than the Boomers. I just have to chuck up Boomers as a bad, bad generation. I guess that any generation that dominates by sheer numbers will force society to submit to the instantaneous gratification of that generation no matter the long-term costs society has to bear as a result.

upisdown says

Nice graph, by the way.

Where in '97 do you have it starting,

Based solely on the graph provided, I'd put the housing bubble start around Spring of 1997. Of course, the start of any bubble is a nebulous thing.

Dan8267 says

Don't get me wrong. There are plenty of Boomers I do like, but as a whole the generation is the most spoiled, greedy, and self-centered one in at least the past century. Sure, Gen X is cynical and sarcastic. The Millennials are overconfident and underskilled. But neither generation has caused nearly as much harm in any stage of its life than the Boomers. I just have to chuck up Boomers as a bad, bad generation. I guess that any generation that dominates by sheer numbers will force society to submit to the instantaneous gratification of that generation no matter the long-term costs society has to bear as a result.

The past century? How about in history. You are incorrect on violent crime, the peak was 1992.

Dan8267 says

Boomers

Forgot to mention. Now that Boomers are retiring, we've reach peak pedophile. Coincidence, I'm sure.

bob2356 says

The past century? How about in history. You are incorrect on violent crime, the peak was 1992.

Maybe.

However, certainly murders per capital were overall highest in the 1970s. As for other violent crime, I really suspect that the "war on crime" resulted in far more prosecution and reporting of such crimes and that is why the stats are higher in the 1990s. As for actual per capital violent crimes -- both reported and not -- I suspect that more happened during the 1970s, but they simply went unreported or ignored.

During the past 20 years, the private prison system has made it much easier and profitable to prosecute any and all crimes -- even ones not committed.

Of course, it would be nice if some expert organization could do a truly multi-decade study that used a non-changing metric for accurately evaluating the real crime levels.

Dan8267 says

During the past 20 years, the private prison system has made it much easier and profitable to prosecute any and all crimes -- even ones not committed.
Of course, it would be nice if some expert organization could do a truly multi-decade study that used a non-changing metric for accurately evaluating the real crime levels.

There were many laws that went into effect also like 3 strikes and even RICO, whereas Rico was actually being used in many different ways to prosecute. I also think real crime was higher in the 70s too.

I think Dan is a brother from another mother. I've always felt the Boomer generation sucked everything out of the U.S economy until economic hegemony completely disappeared from the country during the 90s. Now they're trying to sell their homes, aka cheap stucco boxes, and ranch styles back to Gen X, and Gen Y to fund their retirement (since they spent their retirement funds on vacations, BMWs, and second homes).

BoomAndBustCycle says

Wow, Shiller called a bottom... for now. Where the bears at?

Sure if your talking about metros with plenty of media attention.. like Miami and Vegas.
But others are still a long way off such as San Francisco... but that too will change as the others.

There are some who attribute the decline in crime to reduction of environmental lead and better prenatal and childhood nutrition.

Arguing the morality of the boomer generation doesn't help us understand the housing price curve.

I agree that this demographic hump will have some effect on price, but not as dramatic as some would say.

For one, the baseline curve of population growth is trending upward. After the baby boomer hump dies off, it's not like everything goes back to 1945 population numbers. Demand for housing is in an upward curve, as long as population continues so.

For another thing, consider that many seniors move to senior communities for 5-20 years. These appear to have strong demand in today's market. I think this has an effect on the market of advancing the effect of boomer retirement on single family homes. Therefore, the SFR market may already be seeing the tail end of the boomer generation NOW. It is happening gradually over time, and I think this will prevent the big RE crash that is being predicted/fearmongered.

I think the graph shown above underestimates the baseline; in other words, we won't plunge down in the future, we're ramping down now.

Dan8267@2
Thanks for the green line. Rough math, peak to fair market 66% drop?

Goran_K says

Nothing against boomers, but when their generation passes away, I think we'll be all a bit better off.

Your correct. Being one, I've had to live my whole life with many Baby Boomers (A-Holes).

2014 is a little early

I don't get all of the animosity toward the baby boomers on this board, and with liberals in general. Anyone over the age of 62 voting for Obama, deserves the ass pounding they will get.

Baby boomers weren't the ones buying $500K++ houses on less than $70K income. It was couples between the age of 21 - 47. The boomers were duped into HELOCs, but that didn't effect the price of Real estate.
Most boomers that were ever going to buy or afford houses, already had houses by the time the bubble was in full swing. Face it, retirement years are NOT the time to be buying overpriced RE to live in or for investment.
Perhaps rich ones, but that had more to do with the way they always invested and took risks for returns, than a reflection on a generation as a whole.

The Liberal Senators are the class of people you folks you should out raged by, not the retirees on a fixed income that paid taxes and ss all of their adult lives.

Dan8267 says

As for actual per capital violent crimes -- both reported and not -- I suspect that more happened during the 1970s, but they simply went unreported or ignored.

Why would you "suspect" that? Do you believe people didn't have telephones to report crime in those pre historic days? What is the basis for this belief?

CaptainShuddup says

Baby boomers weren't the ones buying $500K++ houses on less than $70K income. It was couples between the age of 21 - 47.

Your proof for this is? Over 50% of houses sold at the peak were not owner occupied. Who do you think were buying all these second homes, mostly as investments to rent out?

Welcome back, shostakovich

bob2356 says

Who do you think were buying all these second homes, mostly as investments to rent out?

Almost every fool I knew that bought a 350K+ house were bragging about closing on their second or third house. It was their proof that if I didn't buy then I would be priced out for ever.

Automan Empire says

There are some who attribute the decline in crime to reduction of environmental lead and better prenatal and childhood nutrition.

Add to that Roe v. Wade in 1973 - same concept: uncared for children. Peak criminal actors are men aged 16-25 meaning an inevitable decline between 1989 and 1998.

http://www.youtube.com/embed/zk6gOeggViw

http://www.wired.com/wiredscience/2012/09/neuroscience-of-neglect/

Goran_K says

Nothing against boomers, but when their generation passes away, I think we'll be all a bit better off.

Are you sure? have you seen Gen Y?

Dan8267 says

And as for that b.s. about land scarcity, complete malarkey. There are so many vacant lots, buildings, and units in both commercial and residential zones where I live it's almost scary. I estimate that almost half of the available commercial square footage is not being used at all. I don't know the stats for residential, but I've seen so many abandoned homes and that's during snow-bird season.

A - Your area is not every area.

B - Just because land is vacant doesn't mean it is not being used for something by somebody.

C - Just because it's vacant doesn't mean it's available for sale and use by you.