patrick.net

If McCain had won it would have been pretty much the same stuff Obama has done without the health care mania.

Pray for gridlock in government, our only hope they cannot pass anything.

propitup1 says

Wow it is interesting to see the politics injected into a blog about real estate.
To everyone reading this:

You must be new here - that's half the threads now days. Driven by a few, I mostly just ignore.

pkowen says

propitup1 says

Wow it is interesting to see the politics injected into a blog about real estate.
To everyone reading this:

You must be new here - that’s half the threads now days. Driven by a few, I mostly just ignore.

Yea, every thread is political after the first few comments.

Thats because 4X loves the banter.

First, quick note on politics... I don't care if your left, right or center, most of us agree that housing prices in the areas we live in are too high. Most of us were not for the bailouts in the beginning, and are skeptical to the effect that it has had. Heck, even most of us are against the health care bill working its way through congress, even if we are for health care reform in principle. So, despite all of the bickering and banter back and forth, when you get down to brass tacks, most of us agree on far more than we realize.

That aside, back to the main point of the OP.

As far as what to expect in 2010, the biggest unanswered question as we entire this year is unemployment. Now I know that it's a lagging indicator, that they calculate it differently now than they did decades ago, and that there is debate as to which number best represents the true number of people out of work, but no matter how you measure it, there is no debate that unemployment has risen sharply as this crisis unfolded. If it continues to rise then we may be in for more trouble than we realize. If it abates, then perhaps the worst is in fact behind us.

http://www.fasttrackteaching.com/Charts7_Large_Unemployment.html

Well... here are my 2 cents. America will have to open up another war front in Yemen... the machines have already started rolling... Since America is already bankrupt and the Chinese have high stakes in Africa, this one will be a bit tricky for Obama. The question is, how long can Obama bail banks and people out if America has to open the Yemen front? With employment growth nowhere in sight, I fear it'll be a free fall.

wish i was lucky says

There isn’t enough money to pay for all the Welfare, Housing, MediCal, Schools, Unemployment Ins., Workers wages, Pensions etc.etc. and still run the Gov’t. We’re kind of at the point where you have to decide between food or toilet paper.

Funny thing is if they raised taxes -- I don't care on what, really -- California's high home prices and rents would eventually be pushed down in response and everyone would be happy. It'd be just like Sweden, but with a lot more Mexicans and Central Americans :)

is RE still "flat" if you factor in the Obama bux and other stemuli? It may be still actually flat, I just wondered if you factored that stuff into your thoughts. It is cool to look back. Good idea you had, hunting this down.

Reading this thread just goes to show that the handful of posters here on Patrick's page that post BS day in and day out weren't as smart as they think they are........most were terribly wrong last year and most of what they post in 2011 will be wrong as well.

inflection point says

Camping,
That term your looking for is inflation. The law of supply and demand.
Bernanke’s gamble is that the Fed can park trillions in the banks, buy mortgage back security’s and US bonds. They are fighting a rear guard action to prevent the collapse of the housing market. Unfortunately, the problem is too big. Those naughty MBA’s on wall street created a lot of debt.
The velocity of money has been low, not really moving in the economy (by design) which is what makes us different than Zimbabwe. He has been “successful” so far.
He will fail. Sooner or later people will figure out that the FED is the only buyer of government debt. The few other buyers will exit stage left.
Thats when the fun begins.
Just a note. I do not think any of this is really funny and I blame our government for letting it happen.

lurking says

Reading this thread just goes to show that the handful of posters here on Patrick’s page that post BS day in and day out weren’t as smart as they think they are……..most were terribly wrong last year and most of what they post in 2011 will be wrong as well.

When my kids were little, we used to buy the national enquirer prediction issue and tuck it in with our christmas ornaments. Then, when we were unwrapping them the next year we'd read what didn't happen. If you keep them year after year, you get to read the bogus statements of some who claim to have "successfully predicted" some event, and then refer to their actual prediction where they said no such thing.

It's fun.

Nomograph says

Looking back, overall the bad news bears lost. No hyperinflation, no new wars, no economic collapse, and RE was mostly flat.
Good thing I didn’t plant potatoes.

The further RE prices fall, the easier economic recoveries will occur. Otherwise it will continue to be sluggish for many many years.

thomaswong.1986 says

Nomograph says

Looking back, overall the bad news bears lost. No hyperinflation, no new wars, no economic collapse, and RE was mostly flat.
Good thing I didn’t plant potatoes.

The further RE prices fall, the easier economic recoveries will occur. Otherwise it will continue to be sluggish for many many years.

How do you figure that?

tatupu70 says

thomaswong.1986 says

Nomograph says

Looking back, overall the bad news bears lost. No hyperinflation, no new wars, no economic collapse, and RE was mostly flat.

Good thing I didn’t plant potatoes.

The further RE prices fall, the easier economic recoveries will occur. Otherwise it will continue to be sluggish for many many years.

How do you figure that?

People won't have to pay as much into housing and therefore will have more surplus income to stimulate our consumer economy. This should be obvious.

The housing bulls unfortunately are only looking out for their own best interest, at the expense of the rest of society. Shameful really.

Every person out there should want lower housing costs, as it enables people to work less (or have stay at home spouses) and the possibility of raising their own children and having more time to make contributions to society. Or heck, even some free time. How people can't see that is beyond me.

Oh wait, the vast majority of people are selfish and greedy. My bad.

CrazyMan says

People won’t have to pay as much into housing and therefore will have more surplus income to stimulate our consumer economy. This should be obvious

Think again. If you own your house, the payment doesn't change when the value of your house changes... All that changes is that you lose money when and if you sell. And the wealth effect will cut spending even if you don't sell.

CrazyMan says

Every person out there should want lower housing costs, as it enables people to work less (or have stay at home spouses) and the possibility of raising their own children and having more time to make contributions to society.

Every renter, you mean. Right?CrazyMan says

Oh wait, the vast majority of people are selfish and greedy. My bad.

And you're not? You just want to buy a house on the cheap. The previous owner be damned, right? Who cares if he lost money...

Nomograph says

No hyperinflation, no new wars, no economic collapse, and RE was mostly flat.

The ten year touched 4% but Fed intervention pushed it down to 2.4%.

But it's now sprung back to 3.4% in the face of a $600B further batch of printing coming next year.

I'm more in the Japan camp but I don't discount the threat of inflation. I don't know how they're going to do it, but they really need to get some wage inflation going around here.

And outside the fortress, RE was anything but flat this year. LA, DC, SD and SF saw 4-5% annual gains but the rest of the country has gone down.

http://blogs.wsj.com/economics/2010/11/30/a-look-at-case-shiller-by-metro-area-november-update-2/

The area I'm looking at in Colorado has been slaughtered this year:

http://www.zillow.com/homedetails/1262-Fremont-Dr-Larkspur-CO-80118/67449976_zpid/

The Federal Reserve says total asset value of owner-occupied real estate has declined from $17.0T to $16.5T through the first 3Q of 2010, down nearly 3%, and that's WITH interest rates at the floor (~4%).

http://www.federalreserve.gov/releases/z1/Current/z1r-5.pdf

I'll stick with my first comment above. The Republican takeover of the House promises a lot more friction and ugly surprises next year.

I am not particularly sanguine, though in the word's literal sense of "blood red", that may in fact describe the streets next year as the Keynesian stopgaps of 2010 start expiring and the Hooverites take over.

Half of this country has been propagandized to respond to "Keynesian" as an evil word. Gonna be a fun 2 years, wish I was in Japan already.

@ tatlol

I already own AND I rent.

You're clueless. It should be OBVIOUS when house purchase price OR rent are LOWER, people have more to spend (or more free time) therefore stimulating the economy. Our economy is what, 80% consumer?

Of course I'm far from perfect, but I'm more than happy to let the value of my SC home continue to fall. I have enough money (I'm not rich my any means) so it doesn't matter either way. A little bit of greed or even selfishness is probably OK, but our society takes it to the extreme.

Society be damned, gimme my pie.

CrazyMan says

You’re clueless. It should be OBVIOUS when house purchase price OR rent are LOWER, people have more to spend (or more free time) therefore stimulating the economy. Our economy is what, 80% consumer?

Again--how do you figure? My monthly payment won't change if the value of my house falls. All that will change is that I will feel less wealthy knowing that I've lost money. So I will be more likely to tighten my own purse strings. Falling home prices do the opposite of stimulating the economy--as the last few years have proven.

If they can afford their payment and it hasn't changed, why would their spending habits change? That makes no sense.

Look at the bigger picture instead of having tunnel vision. It, again, is obvious why our society would do much better in so many areas if housing was cheaper. More money to spend on other goods, more time to spend with family, more time to get involved with the community, etc. Putting 60% of your income into housing IS NOT GOOD. Why is this hard to understand?

All we have now is a bunch of workaholics who have their noses buried in the rat race to pay for that 1200 sq ft shitbox they call home. Well, when they actually have a chance to see it. Sad really.

tatupu70 says

Falling home prices do the opposite of stimulating the economy–as the last few years have proven

You've got your cause-effect turned around here.

Home values rise in response to rising disposable incomes and lower cost of money.

They fall in response to falling incomes and increasing cost of money.

Without understanding this one cannot understand anything about real estate.

Real estate is not like any other good on the market. It is, by its very definition (and immobile nature), unique.

any chance the public can force the RE sector to abandon their system of getting paid based on transacton amount, and force them to follow other service providers that work for a flat fee or by the hour?

CrazyMan says

If they can afford their payment and it hasn’t changed, why would their spending habits change? That makes no sense.

It's called the wealth effect.

CrazyMan says

Look at the bigger picture instead of having tunnel vision. It, again, is obvious why our society would do much better in so many areas if housing was cheaper

I agree that if someone could magically wave a wand and cause home costs to instantly be a smaller percentage of take home pay, then it would be good for the economy. But that's not what you're talking about. You are talking about making ~65% of the people in the US suddenly less wealthy. There is no way that can be good for the economy.

Troy says

You’ve got your cause-effect turn around here.
Home values rise in response to rising disposable incomes and lower cost of money.
They fall in response to falling incomes and increasing cost of money.
Without understanding this one cannot understand anything about real estate.

Yes, that is true, but consumer spending does also appear to vary in response to rising or falling home prices...

tatupu70 says

You are talking about making ~65% of the people in the US suddenly less wealthy. There is no way that can be good for the economy.

Housing wealth is not a productive asset in the sense of true capital. All housing wealth really is is the sum total of how much we are prepared to pay for an absolute necessity of life -- land and the housing good.

There could be a 100% tax on land instituted tomorrow and we as a nation would not be one penny less wealthy.

For every loser there would be a gainer. And given how much of housing is absolutely dominated by leechfuck rent-seekers, there would be a better economy that resulted from this alteration of economic realities.

tatupu70 says

but consumer spending does also appear to vary in response to rising or falling home prices…

This is one of my central annoyances with current economic thought. Brad DeLong wrote several dozen paragraphs about the housing crisis but missed the central fact that TRILLIONS of dollars of debt-money was distributed into the wider economy 2003-2007 via the housing bubble. This was entirely an ARTIFICIAL stimulus and not built on rising productivity or other forms of wealth. Just a goddamn asset bubble, of the sort that appears from time to time.

Troy says

Housing wealth is not a productive asset in the sense of true capital. All housing wealth really is is the sum total of how much we are prepared to pay for an absolute necessity of life — land and the housing good.

I don't disagree, but that's completely orthogonal to my point. If people lose their wealth, they will have to save more and spend less.

Troy says

This was entirely an ARTIFICIAL stimulus and not built on rising productivity or other forms of wealth.

Again--you're right. But whether it was artificial or not, when people lose $$, they tend to cut back on spending...

tatupu70 says

If people lose their wealth, they will have to save more and spend less.

And my point is that there IS no wealth embodied in houses. They do not produce any new wealth, other than the housing good itself which is simply an ephemeral service that is provided by the capital whether or not the house is even occupied.

Every dollar a homeowner gets from his house has to come from a lender, a buyer, or a renter.

US housing wealth has declined from $22.7T of 4Q06 to $16.5T 3Q10. This $6T+ was funny money going up, and it's funny money going down. VALUATION IS NOT WEALTH.

tatupu70 says

But whether it was artificial or not, when people lose $$, they tend to cut back on spending…

You referred to a "wealth effect" above. This certainly existed to some extent, but boosting consumption is not what we need now to fix our economy. We need to boost PRODUCTION.

(and take out the rent-seekers in this society and shoot them)

Troy says

And my point is that there IS no wealth embodied in houses

When I put $50K down and see that I have lost it based on comps in the area, I would say that is wealth lost. And, more importantly, people perceive it to be wealth lost, so they will spend less.

Troy says

We need to boost PRODUCTION.

I agree. But I don't see how making housing cheaper accomplishes that.

tatupu70 says

that I have lost it based on comps in the area, I would say that is wealth lost

The wealth was not lost, it just went to smarter hands.

people perceive it to be wealth lost, so they will spend less.

This is what a balance sheet recession is. People must spend less. The previous economy was a fake economy and it ain't coming back.

People spending money 2003-2007 while thinking their home valuation was money in the bank were spending their imagined future buyer's money today, just as if they were borrowing it themselves via a HELOC.

But I don’t see how making housing cheaper accomplishes that.

Every dollar we borrow to buy a home could have been a dollar lent to support actual productive enterprise or other forms of capital. So much of our high cost of living expresses itself as ground rents.

Like the Japanese in the 80s, we got ahead of ourselves in the previous decade. Whether or not we will succeed in inflating our way out of the liquidity trap remains to be seen. I think not, really, as inflation can hurt us -- via health, education, energy sectors -- more than help, afaict.

E-man's predictions. pretty scary in how accurate it was.

I was close but maybe 1-2 years early :)

Troy says

The wealth was not lost, it just went to smarter hands.

I disagree. The wealth, or perceived wealth, is lost. Whoever buys the house after me doesn't have the $50K that I put down. That money is gone. You can argue that it never really existed--fine. But my point still holds. People believed it to have existed and will adjust their spending accordingly.

Troy says

Every dollar we borrow to buy a home could have been a dollar lent to support actual productive enterprise or other forms of capital. So much of our high cost of living expresses itself as ground rents.

Yes, I get that. But making 65% of the people poorer isn't going to make things better.

CrazyMan says

tatupu70 says

thomaswong.1986 says

Nomograph says

Looking back, overall the bad news bears lost. No hyperinflation, no new wars, no economic collapse, and RE was mostly flat.
Good thing I didn’t plant potatoes.

The further RE prices fall, the easier economic recoveries will occur. Otherwise it will continue to be sluggish for many many years.

How do you figure that?

People won’t have to pay as much into housing and therefore will have more surplus income to stimulate our consumer economy. This should be obvious.
The housing bulls unfortunately are only looking out for their own best interest, at the expense of the rest of society. Shameful really.
Every person out there should want lower housing costs, as it enables people to work less (or have stay at home spouses) and the possibility of raising their own children and having more time to make contributions to society. Or heck, even some free time. How people can’t see that is beyond me.
Oh wait, the vast majority of people are selfish and greedy. My bad.

I dont think you understand the concept of a deflationary spiral. Prices keep going lower people will not buy because it'll be cheaper 6 months from now. If people aren't spending money due to this and the fact that their house is now worth half what it used to be then more businesses fail. More people lose jobs. rinse and repeat.

If it's selfish and greedy to not want to be in perpetual recession and actually want the economy moving again then call me greedy :)

Tenouncetrout says

Obama bitch slaps somebody before April.

Well I was off by a few months, he waited until June to put his Boot to the Throat of BP.

tatupu70 says

Whoever buys the house after me doesn’t have the $50K that I put down

you didn't "put it down" you PAID IT to someone. That's where the money went.

But making 65% of the people poorer isn’t going to make things better.

Nobody is any poorer. Home owners still have title to their houses, which still exist undamaged.

There has been no actual wealth destruction, unlike say an act of God or war.

toothfairy says

If people aren’t spending money due to this and the fact that their house is now worth half what it used to be then more businesses fail.

People who bought a house made a decision to lock in their housing expense. If they stop "spending money" because their gamble didn't break the way they expected, then yes, more businesses will fail.

An actual economy must be founded on wealth-creation, all the bullshit of the previous decade will either be purged through the pain of deflation or the pain of inflation.

Troy says

tatupu70 says

Whoever buys the house after me doesn’t have the $50K that I put down

you didn’t “put it down” you PAID IT to someone. That’s where the money went.
But making 65% of the people poorer isn’t going to make things better.
Nobody is any poorer. Home owners still have title to their houses, which still exist undamaged.
There has been no actual wealth destruction, unlike say an act of God or war.

OK--we're talking in circles now. If you want to argue that assets losing value isn't wealth destruction, go at it. People adjust their spending habits based on asset values, so it really doesn't matter how you categorize it.

tatupu70 says

People adjust their spending habits based on asset values, so it really doesn’t matter how you categorize it.

And people have their wages drawn off into supporting these same asset values. It's a zero sum thing here.

"Spending habits" based on "asset values" and not ACTUAL HOUSEHOLD INCOME is just bubble BS. We've had ~90 years of inflation to ingrain in us that assets only go up, but we also have the recent experience of Japan as a counter-example, that when asset values just get too damn high they will come back down.

During the NY governor debate, the whacky "The Rent is Too Damn High" guy was the only dude making sense.

Troy says

toothfairy says

If people aren’t spending money due to this and the fact that their house is now worth half what it used to be then more businesses fail.

People who bought a house made a decision to lock in their housing expense. If they stop “spending money” because their gamble didn’t break the way they expected, then yes, more businesses will fail.
An actual economy must be founded on wealth-creation, all the bullshit of the previous decade will either be purged through the pain of deflation or the pain of inflation.

Yes unfortunately people will stop spending as a result. And not just from a negative paper wealth effect.
In my case for example I've been trying to do a remodel for the last 2 years and the numbers simply do not pencil out. I'm not upside down right now but if I took out a loan for the remodel I just might be.
So it's not gonna happen unless the housing market improves.

In the meantime my contractor sits idle.

The problem is the coupling of asset values and consumption.

If the remodel doesn't add value to your place, then it's some form of consumption.

The market value of your place is neither here nor there, other than you want to borrow money using your house as collateral.

I'm 70% in the Japan camp that further pain will be coming out of home prices for the foreseeable future.

Republicans like Coburn are saying we need to cut cut cut government. ARRA is running out of money, that's going to be a $300B shock to the system next year -- pretty deflationary, too. Peak job cuts happened in 1H09 so unemployable people are going to be losing their unemployment benefits starting now. I was paying $3.40 a gallon driving around California last week -- we'll see what happens to energy this next year in the face of QE2.

The housing market should RESPOND to the wider economy and not DRIVE it. Even the Japanese didn't commit the degree of economic sins we did, 2003-2007. We are so f----ed.

anon says

anon
From CalculatedRisk:
---------------------------------------------------------------------------------------------------------
http://www.calculatedriskblog.com/2009/12/government-housing-support-update.html
As everyone knows there has been a massive government effort to support house prices.
# Housing Tax Credit Ends
# Federal Reserve MBS Purchase Program: This is scheduled to end March 31, 2010
# Treasury MBS Purchase Program: This program will end Dec 31, 2009
# HAMP Trial Programs Extended: The Treasury has extended any expiring trial modification program until at least Jan 31, 2010
# Support for Fannie and Freddie: Treasury has uncapped the support for Fannie and Freddie for the next three years.
# Fannie / Freddie Low-Cost Refinancing program. This is the program that allows homeowners with Fannie and Freddie mortgages to refinance loans up to 125 percent LTV. I believe this program expires June 10, 2010.
# FHA Loose Lending Standards: In his Dec 2nd testimony to Congress, HUD Secretary Donovan said the FHA would propose tighter lending standards by the end of January 2010.
# Various Holiday Foreclosure Moratoria: Fannie, Freddie and most of the large banks routinely suspend foreclosure activity over the holidays.
---------------------------------------------------------------------------------------------------------

Currently the real estate market is heavily supported by government intervention.
In 2010, many of these programs will end.

As a result house prices will drop.
I believe the effects will be felt nationally, and significantly in 2010 and beyond.
More than a 5% drop but potentially, and I think more likely, a larger median price drop.

We are nowhere near a normal real estate market. at least in the SF bay area.
When more than 2/3 of sales are foreclosures and distressed property there is no reason for prices to increase, yet in some areas this is exactly what happened.

Once the government has scaled back it's housing stimulus we should slowly see prices adjust to rational levels in the bay area. Prices are still too high. I make good a good salary and I can only afford a crapshack in a bad neighborhood(without over extending myself on payments). No way that's a stable market.

the 2010 prediction sucked because it's too hard to verify(prediction was too vague).

this year i'm going with a similar theme as last year but make it easy to check (as long as the housing tracker website is still available).

5% drop in prices in 75% category in san jose as recorded by housing tracker:
http://www.housingtracker.net/asking-prices/san-jose-california/

similar 5% drop in SF:
http://www.housingtracker.net/asking-prices/san-francisco-california/

and i'm going with barry ritholz for 2011 predictions. i'd go with calculatedrisk again because he's very conservative (he doesn't make stupid crazy predictions, just bets on thinsg that has high odds - but i'm too lazy to find the link.)

http://www.ritholtz.com/blog/2010/12/10-reasons-to-be-cautious-for-the-2011-market-outlook/

1. In Barron’s look-ahead piece, not one strategist sees the prospect for a market decline. This is called group-think. Moreover, the percentage of brokerage house analysts and economists to raise their 2011 GDP forecasts has risen substantially. Out of 49 economists surveyed, 35 say the U.S. economy will outperform the already upwardly revised GDP forecasts, only 14 say we will underperform. This is capitulation of historical proportions.
The last time S&P yields were around this level was in the summer of 2000, and we know what happened shortly after that.

2. The weekly fund flow data from the ICI showed not only massive outflows, but in aggregate, retail investors withdrew a RECORD net $8.6 billion from bond funds during the week ended December 15 (on top of the $1.7 billion of outflows in the prior week). Maybe now all the bond bears will shut their traps over this “bond-bubble” nonsense.

3. Investors Intelligence now shows the bull share heading up to 58.8% from 55.8% a week ago, and the bear share is up to 20.6% from 20.5%. So bullish sentiment has now reached a new high for the year and is now the highest since 2007 ― just ahead of the market slide.

4. It may pay to have a look at Dow 1929-1949 analog lined up with January 2000. We are getting very close to the May 1940 sell-off when Germany invaded France. As a loyal reader and trusted friend notified us yesterday, “fighting” war may be similar to the sovereign debt war raging in Europe today. (Have a look at the jarring article on page 20 of today’s FT — Germany is not immune to the contagion gripping Europe.)

5. What about the S&P 500 dividend yield, and this comes courtesy of an old pal from Merrill Lynch who is currently an investment advisor. Over the course of 2010, numerous analysts were saying that people must own stocks because the dividend yields will be more than that of the 10-year Treasury. But alas, here we are today with the S&P 500 dividend yield at 2% and the 10-year T-note yield at 3.3%.

From a historical standpoint, the yield on the S&P 500 is very low ― too low, in fact. This smacks of a market top and underscores the point that the market is too optimistic in the sense that investors are willing to forgo yield because they assume that they will get the return via the capital gain. In essence, dividend yields are supposed to be higher than the risk free yield in a fairly valued market because the higher yield is “supposed to” compensate the investor for taking on extra risk. The last time S&P yields were around this level was in the summer of 2000, and we know what happened shortly after that. When the S&P yield gets to its long-term average of 4.35%, maybe even a little higher, then stocks will likely be a long-term buy.

Source: Haver Analytics, Gluskin Sheff

6. The equity market in gold terms has been plummeting for about a decade and will continue to do so. When measured in Federal Reserve Notes, the Dow has done great. But there has been no market recovery when benchmarked against the most reliable currency in the world. Back in 2000, it took over 40oz of gold to buy the Dow; now it takes a little more than 8oz. This is typical of secular bear markets and this ends when the Dow can be bought with less than 2oz of gold. Even then, an undershoot could very well take the ratio to 1:1.

7. As Bob Farrell is clearly indicating in his work, momentum and market breadth have been lacking. The number of stocks in the S&P 500 that are making 52-week highs is declining even though the index continues to make new 52-week highs.

8. Stocks are overvalued at the present levels. For December, the Shiller P/E ratio says stocks are now trading at a whopping 22.7 times earnings! In normal economic periods, the Shiller P/E is between 14 and 16 times earnings. Coming out of the bursting of a credit bubble, the P/E ratio historically is 12. Coming out of a credit bubble of the magnitude we just had, the P/E should be at single digits.

Source: Haver Analytics, Gluskin Sheff

9. The potential for a significant down-leg in home prices is being underestimated. The unsold existing inventory is still 80% above the historical norm, at 3.7 million. And that does not include the ‘shadow’ foreclosed inventory. According to some superb research conducted by the Dallas Fed, completing the mean-reversion process would entail a further 23% decline in real home prices from here. In a near zero percent inflation environment, that is one massive decline in nominal terms. Prices may not hit their ultimate bottom until some point in 2015.

10. Arguably the most understated, yet significant, issue facing both U.S. economy and U.S. markets is the escalating fiscal strains at the state and local government levels, particularly those jurisdictions with uncomfortably high pension liabilities. Have a look at Alabama town shows the cost of neglecting a pension fund on the front page of the NYT as well as Chapter 9 weighed in pension woes on page C1 on WSJ.

Consumer spending was taken down 0.4 of a percentage point to 2.4%, which of course you never would have guessed from those “ripping” retail sales numbers.

In the absence of Chapter 9 declarations or dramatic federal aid, fixing the fiscal problems at lower levels of government is very likely going to require some radical restraint, perhaps even breaking up existing contracts for current retirees and tapping tax payers for additional revenues. The story has some how become lost in all the excitement over the New Tax Deal cobbled together between the White House and the lame duck Congress just a few weeks ago.

CrazyMan says

tatupu70 says

thomaswong.1986 says

Nomograph says

Looking back, overall the bad news bears lost. No hyperinflation, no new wars, no economic collapse, and RE was mostly flat.
Good thing I didn’t plant potatoes.

The further RE prices fall, the easier economic recoveries will occur. Otherwise it will continue to be sluggish for many many years.

How do you figure that?

People won’t have to pay as much into housing and therefore will have more surplus income to stimulate our consumer economy. This should be obvious.
The housing bulls unfortunately are only looking out for their own best interest, at the expense of the rest of society. Shameful really.
Every person out there should want lower housing costs, as it enables people to work less (or have stay at home spouses) and the possibility of raising their own children and having more time to make contributions to society. Or heck, even some free time. How people can’t see that is beyond me.
Oh wait, the vast majority of people are selfish and greedy. My bad.

Lower prices lower cost of living ... even lower salary demand, else jobs moving to other states/overseas. Its better to have a job locally even if its lower paying than have no job at all.

Crap happens and has happened like this before.

anon says

As a result house prices will drop.
I believe the effects will be felt nationally, and significantly in 2010 and beyond.
More than a 5% drop but potentially, and I think more likely, a larger median price drop.

http://www.realestateabc.com/outlook/overall.htm

year-over-year for october is down slightly to flat.

probably need to wait for early feb to see how prices are yoy for december.

anon
We are nowhere near a normal real estate market. at least in the SF bay area.

Once the government has scaled back it's housing stimulus we should slowly see prices adjust to rational levels in the bay area. Prices are still too high.

we won't know the numbers until 2011 because case-shiller is a moving average over 3 months and reported the following month. also CSI only tracks SF and not SJ.

here's socketsite Case Shiller for SF in August2010 which covers May-July:
http://www.socketsite.com/archives/2010/10/august_caseshiller_san_francisco_msa_falls_across_all_t.html

as i mentioned, this is a bad prediction because it's not specific enough.