patrick.net

"This actually happened in 2009. Foreclosure properties were selling for 30% of their peak value in 2006. Mortgage payments were available at HALF rents in the same area. Where were the buyers?"

You still don't get it do you. 30% of peak value in 2009 was still 25% overvalued. mtg payments at half rents ?? maybe in oklahoma... how about picking a population center with greater than 250k people in it? The bubble deflated it bit, but it never popped. Meanwhile I have been paying rent at 64% of PITI for the same house for about 5 years now. Meanwhile, this bubble has been dragging on for so long people are on their second round of foreclosures.

Where will the buyers come from? From all the sane people who refuse to leverage their income higher than 3-1 during crazy times. That's where. They are out there. You've talked to several on this blog.

As for government staying out of the way... show me how the middle class doesn't file or pay income tax again...? Show me how there isn't a mortgage tax deduction...? Show me how the hell the government is currently preventing rent extraction...... they are in the way as we speak..

"I own three houses with mortgages on one street in Concord, CA, a city of 125,000 people and two BART stations about 1/2 hour from downtown San Francisco."

So lets see : city of over 250k? fail :

30% price drop = under 200k simple math 200k / 70% = 285k peak bubble price. PITI on peak bubble price of 285k w/ 20% down would be 1273.7 / mo.. So you are saying at the peak of the bubble you could buy a house at 4.5% interest for 285k @ 1273.7 / mo PITI, or you could rent it for 1900.
That is a lie, just like your other lies.

Otherwise you are saying there was a price drop of much greater than 30% from peak bubble pricing in this one specific neighborhood, which justified your purchase. Don't lie to the rest of the country if you found one tiny place with an amazing deal.

Zak says

Where will the buyers come from? From all the sane people who refuse to leverage their income higher than 3-1 during crazy times. That's where. They are out there. You've talked to several on this blog.

Agreed.

lets see what other lies you have:

Bart service concord to downtown sf: 1hr 7 mins:
https://www.google.com/maps/dir/Concord,+CA/San+Francisco,+CA/@37.8764336,-122.2929216,12z/data=

by car, 30.8 miles, 46 mins with current traffic, 36 mins with NO traffic.
Probably 2 hrs with rush hour traffic. Guess what.. Palmdale also has cheap houses a 2 hr commute outside Los Angeles.. Guess that means there is no housing bubble in LA right!?!

Zak says

You still don't get it do you. 30% of peak value in 2009 was still 25% overvalued. mtg payments at half rents ?? maybe in oklahoma... how about picking a population center with greater than 250k people in it? The bubble deflated it bit, but it never popped.

So, mortgage payments have to get to 1/2 of rents before you consider the bubble "popped"? Why would investors ever let prices get that low?? They would be walking away from easy money...

And how do you figure 30% drop is still 25% overvalued? How do you determine value?

mell says

There will eventually be an equilibrium where prices are low enough so that the remaining capital can afford them, be it for their own consumption or as an investment.

Because you say so? The remaining capital has no reason to invest beause there are no customers. And if they do, it's even worse--congratulations, you've found a way to make wealth disparity evern worse than it is today. All productive assests would be in the hands of the few billionaires.

tatupu70 says

mell says

There will eventually be an equilibrium where prices are low enough so that the remaining capital can afford them, be it for their own consumption or as an investment.

Because you say so? The remaining capital has no reason to invest beause there are no customers. And if they do, it's even worse--congratulations, you've found a way to make wealth disparity evern worse than it is today. All productive assests would be in the hands of the few billionaires.

2008 directly contradicts your claim, wealth disparity declined sharply before the Fed's stick-save. But don't argue with me, argue with the facts.

mell says

2008 directly contradicts your claim, wealth disparity declined sharply before the Fed's stick-save. But don't argue with me, argue with the facts.

When you say this, you are obviously referring to the Gini that fell during 2008/09.

This explanation for this is simple. Gini fell because broke people remained broke - that is, the lower and middle classes were little affected becaue they really didn't have much to lose.

However, the rich were more greatly affected because they had something to lose.

More to the point - if a rich guys income fell from $50M to 25M, that is equivalent to 500 middle class guys who went from $50k to zero.

Who is more affected though, really?

control point says

This explanation for this is simple. Gini fell because broke people remained broke - that is, the lower and middle classes were little affected becaue they really didn't have much to lose.

However, the rich were more greatly affected because they had something to lose.

More to the point - if a rich guys income fell from $50M to 25M, that is equivalent to 500 middle class guys who went from $50k to zero.

Who is more affected though, really?

Yes, but aside from looking at the extreme cases overall the middle-class would have done better without QE. The money needs to go somewhere and it went to the 0.1% and inflation kicked in. If your goal is to help some cases not to lose their job while overall lowering the standard of living and mobility prospects for the middle-class while greatly enhancing the wealth of the uber-wealthy, then QE is your tool.

mell says

2008 directly contradicts your claim, wealth disparity declined sharply
before the Fed's stick-save. But don't argue with me, argue with the facts.

It does nothing of the sort. My point was that if you let the economy go down the toilet and productive assets go for fire sale prices, then it's the rich that are able to buy them. Luckily the government didn't let that happen.

So, how exactly does 2008 disprove that point?

mell says

The money needs to go somewhere and it went to the 0.1% and inflation kicked in

You are confusing two very different issues here. The money goes into the general economy. It is not pre-ordained to go to any class of people.

Unfortunately, right now we live in a period that promotes wealth disparity so any new money increases that effect. QE just increases the rate, it's not the cause.

And where do you get off continuing to claim we have high inflation??

mell says

Yes it is. You think buying MBS, keeping the ZIRP discount window for banks and
bailing them and Buffet and co. out is the "general economy"?

Are we talking about bailouts or QE? Those are two different things.

"I'm saying no such thing. I said there was a price drop of over 60% in this one specific neighborhood which resulted in rents being nearly twice the cost to purchase numerous houses yet the buyers did NOT show up in droves. In fact buyers were extremely scarce and almost everything went to investors."

30% drop with an extra 25% drop ~= 55% drop pretty close to the 60% off that got you to buy. In fact, I bet every one of those houses sold that were for sale. That's called buyers showing up. So again, stop saying there was a 30% drop and "nobody was buying". It is complete and utter bullshit.

"Actually, I think you need to scroll down a bit until you get to rail service which it shows at 43 minutes."
Nope.. Select the public transit option in the link I provided. By car it was 43 minutes with current traffic (36 mins NO traffic), by Bart it was 1hr 4 minutes.

The times seem to vary a bit with the amount of traffic, but I have no problem with being 100% transparent with all the data I am using, showing my sources, and highlighting the portions of the data that work AGAINST my argument.

Zak says

Nope.. Select the public transit option in the link I provided. By car it was 43 minutes with current traffic (36 mins NO traffic), by Bart it was 1hr 4 minutes.

Actually, Yes. When you used google, it picked a random place that it considers "San Francisco". The 1hr 4 minutes is how long it takes to get to that point--including walking and a transfer.

Most people consider you to be in SF when you arrive at the station in 43 minutes.

Just to be clear the GINI index is rubbish because they don't show government transfers as income, which they most certainly are.

I have linked to the facts of this in the past and will not bother at this point.

tatupu70 says: "Actually, Yes. When you used google, it picked a random place that it considers "San Francisco". The 1hr 4 minutes is how long it takes to get to that point--including walking and a transfer. "

That's great if you work in the train station. Nobody works in the train station. So yes, 1hr 4 mins by public transit. And thank you for agreeing that what I posted matched what I said.

Zak says

That's great if you work in the train station. Nobody works in the train station. So yes, 1hr 4 mins by public transit. And thank you for agreeing that what I posted matched what I said.

lol--So, downtown SF is only one specific location then? My guess is more people work in the train station then at the "San Francisco" dot that you are using.

You are 100% incorrect. Give it up. When people speak of "downtown" SF, they aren't talking about one location that google selects...

The fallacies of the Gini index:

The most common definition of income used by the Census Bureau and other statistical agencies is total money income of a household, excluding capital gains. All of the members of a household are assumed to share in the household’s combined income.

Household income includes wages, salaries, interest, dividends, alimony payments, child support, Social Security payments, and any other cash transfers. It doesn’t include food stamps, Medicare, or other non-cash benefits

A major gap in the measurement of income inequality is the exclusion of capital gains, profits made on increases in the value of investments. Capital gains are excluded for purely practical reasons. The Census doesn’t ask about them, so they can’t be included in inequality statistics

The United States scores worse mainly because Social Security, unemployment insurance, and other cash benefits in the United States contribute much less to income than comparable programs in other countries.

- See more at: http://inequality.org/unequal-americas-income-distribution/#sthash.YMbFD4h1.dpuf

So Buffet would be greatly affected in his standard of living if he was not bailed out by the taxpayer. He also does not pay taxes on his investments which are the vast majority of wealth. Which greatly skews the index.

Government transfers to the poor do not count as income which greatly skews the index.

How much better would social security income be if the individual was allowed to keep and invest the 12.4%?

Another factor is the household income number. Which does not account, for a huge increase in divorce which cuts the household income in half. It also does not account, for the fact that in many successful households, there are multiple high income sources. Like in Asian families for example.

tatupu70 says

only one specific location then? My guess is more people work in the train station then at the "San Francisco" dot that you are using.

Are you just being stubborn now? How many people work 1 transfer and a short walk from the train station? FYI, I notice you're not trying to improve my estimated start point on the other side.. I'm sure everyone also gets to skip all transit TO the bart station right? They just magically wake up and are sitting on the train as it pulls out of the station, ready to go. No waiting, no ticket purchasing... yup, just automatically teleported from their bedrooms to the magic chair they sit in on the BART on their way to work.

It strikes me that you must really buy into the idea of socialism too. Because when you ignore all reality and just go off the theoretical model, socialism is also great.

Like the Gini index?

"Just another free-market fuckstick who is bloody ignorant of basic economics"

Do basic economics not count things as sold when one person sells them and another buys them? If you want to say that in Detroit there are no buyers, then I guess we can agree. Because there are a whole bunch of houses for sale that no one is buying. Then again, I guess you don't really want to hold up Detroit as an example of "free-market fucksticks" ruining a town because those aren't the guys who were in charge, were they?

One thing about "nobody buying", only the specuvestors can afford to DCA in a down market.

When prices are going down, it makes sense to stand aside.

Falling knife, etc.

Bellingham Bill says

One thing about "nobody buying", only the specuvestors can afford to DCA in a down market.

When prices are going down, it makes sense to stand aside.

Absolutely, that's called price and tail risk discovery. And it's a good thing but it cannot happen if the Fed takes away the tail risk and helps big investors to buy and drive up the price.