patrick.net

With CA’s population increasing by 500,000 to 600,000 people per year, which translates to a demand of +/- 250,000 homes

I thought 600K people translate to 60K homes. The rule is 10-to-1, isn't it? (At lease for people coming into the state.)

With CA’s population increasing by 500,000 to 600,000 people per year, which translates to a demand of +/- 250,000 homes while we build around 210,000, you could never see 2003 prices again, much less prior.

The market has more than discounted this fact. The reality is that home prices and rent prices are out of whack. History suggests that such divergence will tend to converge.

Supply and demand are not constant and there is no guarantee of a sustained 600,000 per year population growth in California - that is simply a population projection.

This cannot be more true. Taking supply and demand as given is a big sin.

The projection for the sunbelt states was probably made when prices where not out-of-whack. Yet speculators think that demand will not change even if they drive up prices by 200%. Single variable analysis!

Question for the forum: Now that inflation is more of a concern due to Katrina, what do you prognositicators think will be the next step for the Fed?

This one is difficult.

If they raise rate, residents and businesses will find additional difficulties and obstacles.

It they do not, the asset bubble may further overheat and UD dollar may feel yet more pressure.

I will raise rate to contain inflation anyway but special aid and loan programs to NOLA is a must. (Well, even though I can talk Greenspeak, I am not AG himself, so I am irrelevant.)

This is off topic, but I have a question and wanted to know your opinion.

As a result of the wide spread effect of Hurrican Katrina, some "experts" believe that the Fed will stop raising interest rates. Does anyone here believe the Fed will stop raising rates due to the aftermath of Katrina? Will Katrina have an indirect effect on the housing market that will be felt all the way to California?

Thanks, and God help those people affected by Katrina (I can't believe some of the pictures I've been seeing coming out of the gulf region, f-ing terrible).

The one thing I do know is that since 2000, there has been consistent out-migration of existing California residents to other states, but this has been offset by international migration to California.

There are three main types of immigration:

1) Wealthy people
2) Foreign students / Professionals
3) Illegals

(1) will only buy million dollar flowerboxes (as opposed to $hitboxes) in Prime(tm) locations.

(2) buy normal houses that "everybody" buys. However, the number of quota for H-1B visa has been slashed a while ago and the inflow of this group will definitely slow.

(3) ???

Does anyone here believe the Fed will stop raising rates due to the aftermath of Katrina?

It is possible, but not necessarily. Whether they will stop or pause raising rate is difficult to ascertain. The FED is not "tasked" to respond to regional distresses. Unless it is clear that the entire economy is threatened, the FED ought to stay out of it.

Isn’t the threat of more inflation more of an indicator that rates will keep rising??

This will be the new conundrum. Higher oil price can be deflationary because it behaves like taxation. It is indeed very difficult to ascertain. ;)

Hey Peter P,

Thanks for your response. Sometimes I have the chance to watch the stock market on CNBC, and the big story (of course) was what kind of effect Katrina would have on the stock market and further rate hikes. Some of the guests on the show said this was end of rate hikes for a while due to Katrina.

I think you're right though, it is difficult to ascertain what the FED will do.

"Isn’t the threat of more inflation more of an indicator that rates will keep rising??"

Exactly what I thought.

astrid,

Looks like we've got something else in common. Last year a friend let me borrow his Firefly DVD set and I got hooked too --became something of a Browncoat myself. Interesting side-note: went to a pre-screening for Serenity in L.A. in May and got to meet Joss Whedon. Let me know if you want spoilers ;-).

Oh oh oh, I have the firefly DVD set too. Does that mean we're a bunch of hybrid bubblehead/trekkie type geeks? If so, I can live with that.
And I am not ashamed to admit I am psyched that there is a movie too!

I need to see if I can find a family moving into Ca who would be willing to sell me their home. ;)

I just got done watching coverage of Katrina's aftermath. I'm unsure how this is going to affect the economy at large, but they're predicting the rebuilding costs at a minimum of $25 billion, saying it could go twice as high. Because New Orleans has such a high population of poor (30% is what the newscast said) the number of uninsured claims will be very high and that means more taxpayer money to pay for the recovery.

New Orleans also had one of (if not the largest shipping port in the U.S. and that is shut down and shipping costs will rise as ships have to be diverted. And of course the cost of oil. Since this is going to have a national impact I just don't know that the fed can lower rates in what is surely going to be a rising interest environment, but I am certainly no expert.

@TWIT: I would add to the above: A surplus of information creates just as many disparities as a lack of information, given that the general public usually lacks the knowledge and wisdom to discern the valuable from the valueless. So the people would have to be perfect too.

SactoQT, I prefer to think we’re smart enough to appreciate non-lowest common denominator thinking

Works for me. :)
I'm going to start watching my DVD's again soon so I can bone up on my Serenity lore. I did the whole Buffy/Angel thing too right after they took firefly off the air. I need some kind of fix that had a Whedon feel to it. But enough digression...
Simple Life ....bleeeach. ;)

zepyr, you are getting your law degree, correct? In ten years you and your husband (whoever he may be) will almost assuredly be able to afford a house in the Bay Area. What kind of job are you looking for, that will have you jetting back and forth across the Pacific? Some kind of International Law?

My hope is that the movie kindles enough interest in Firefly to allow the series to start up again (or at least get a different studio to offer Fox enough $$ to release its strangle-hold on the series). A futile hope I know, but I guess I'm a dreamer...

but I guess I’m a dreamer…

But you're not the only one.......

What is Firefly?

I feel disconnected. :(

I hope someday the rest of the Posse will join us, and the blog will live as one. :-D

(ok, that's enough Lennon - don't want to cause Surfer-X's head to explode)

Firefly is a great tv show by the creator of Buffy the Vampire slayer.

aaaaaaaaaaaaaannd the blooooog ......
I'd better not.

@Peter,

fireflyfans.net/reference.asp?r=696
fireflymovie.com/intro.html

almost forgot the official site:

http://browncoats.serenitymovie.com/serenity/

Sorry, TWIT :-)

‹^›_‹(ô¿ô)›_‹^›

:lol:

"Has anyone seen coverage of how Katrina will affect the US refinery capacity? I always hear that Louisiana has a lot of oil refineries and that US refinery capacity is a major bottleneck."

Hope this helps.

“Crude is a sideshow here,” said Paul Hornsnell, head of energy research at Barclays Capital in London. “We were expecting gas to spike even before the storm hit because the situation was already very very tight — refineries were having trouble increasing production and inventories were (already) at a 20-month low — and that was last week.”

Eight refineries were shut down due to Katrina — half of them producing gasoline. Vienna’s PVM Oil Associates additionally reported at least three others flooded and power failures sidelining others for an unknown length of time.

Hornsnell said the damage translated into an estimated 30-million-barrel loss in gasoline output — a problem that cannot be solved by increasing crude production or siphoning oil from the U.S. petroleum reserve.

...Crude and distillate stocks were likely to rise. Katrina’s influence on U.S. stocks will only be realized in next week’s report but some analysts already claim to know the score — even if the Bush administration taps the nation’s crude oil stockpile to help refiners.

“In the next few months, there’s no upside,” said economist Mark Zandi of Economy.com, an economic consulting service. “And this winter, we’re going to feel it more noticeably as people pay record gas prices and record home-heating bills.”

http://www.msnbc.msn.com/id/5612507/

Time to buy a moped.

“Crude is a sideshow here,” said Paul Hornsnell, head of energy research at Barclays Capital in London. “We were expecting gas to spike even before the storm hit because the situation was already very very tight — refineries were having trouble increasing production and inventories were (already) at a 20-month low — and that was last week.”

Gas did spike a lot.

http://tinyurl.com/75ema

Note the gap open near the right edge of the chart.

Just to clarify, the chart is for Natural Gas, not gasoline, which is equally crazy:

http://tinyurl.com/a22cx

"Just to clarify, the chart is for Natural Gas..."

hahahaha, thanks for pointing that out as well. I guess I'm getting tired. Thanks for the charts Peter. Now can you please point me to the direction of my bedroom.

Good night.

Pywiack, Thanks for the link about Valdez, Alaska. Very interesting.

NO is such a large city, I imagine any kind of relocation effort would be very difficult. And because it's one of those places that people have such strong emotional attachments to...I don't know. Common sense doesn't always prevail. I would not be surprised by the erection of even bigger levees. Maybe a lot of the population will just disperse elsewhere and stay, but even that would surprise me.

My home heating/cooling costs are already outrageous, the thought of it going up even more will have an impact on my spending, as will the rising cost of gas. Maybe I'm in the minority, but I don't think I'll stay there long.

Maybe I’m in the minority, but I don’t think I’ll stay there long.

Huh? Stay where?

Huh? Stay where?

I don't think I'll be in the minority for long. I think the rising cost of everything will force people to slow down on their spending.

Thanks for the housingmaps link, Surfer-X. Pardon my ignorance, but what does the color-coding represent (R-Y-G) ?

Sorry, Schmend Rick - I just called you Surfer-X. Must be the lack of coffee ;-)

BTW is it time for a post on whether Katrina will force a rate hike pause?

Yes, bring it on!

Or is that just too unknowable?

Whether it is unknowable is difficult to ascertain, if not unknowable itself. ;)

When is a price slump not a price slump, when its a correction.
Gotta love spin doctors.

Prices have fallen 5% in Sydney Oz, with next few years flat or falling.
Watch the exits for the scared investors.

tinyurl.com/b682v
(use bugmenot.com to get password for smh.com.au if necessary)

Back to lurking zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz.

BTW is it time for a post on whether Katrina will force a rate hike pause?

Yes, bring it on!

What? Bring on rate hike or a post?

I guess excess housing supply might now not be so extreme, but it will also mean that unemployment just surged.

What? Bring on rate hike or a post?

Both. Should we have a new thread on Katrina and rate hikes?