patrick.net

If I have a small rock and someone is willing to pay me 200k for it (of course they will have a deal), I will collect 200k so it was worth 200k. Of course if he told me he wanted his money back, I would say it’s not worth a penny to me! …too bad sucker!

Then there is no market for the rock, therefore its market value is not 200K. Good for you for getting the 200K!, but you cannot reasonably expect to repeat this event.

A willing buyer + A willing seller are NOT SUFFICIENT to define a market, only a price settlement. A MARKET requires that other willing buyers also have the ability to participate in the price function, which of course would have the effect of driving down the market value of your rock.

I think the most popular post-crash house will be the 1988 Chevy full-size van.

Those will be Prime(tm). Most people will have to settle for a Yukon/Exploder/Tahoe/LandRover/Canyonero, which should be affordable for the average 2-income family. I realize, not as many sq ft as the Prime EconoVan, but still enough room for the sprouts and a small pet.

allah,

The problem is you've violated the *rationality* requirement. Markets require an assumption of rationality, granted that the interpretation of rationality is fraught with its own hazard. But the point is that a functioning market should result in the displacement of _overtly_ irrational actors, like the 200K rock buyer.

Logically, your line of reasoning leads to coercive price functions, which is why we have the rationality requirement in the first place. And, if we allow for unmitigated coercion, then we declare that market value is any price I can obtain by any means. You can see where this ultimately leads, and why we don't consider this a market.

I don’t know what dictionary you get your definitions from? If you go to onelook.com, you can select many different ones to look up what the word “market” means….

To me a market is a place where people sell vegetables in baskets and shellfishes on ice.

shellfishes

Huh?

With all due respect, I don’t know what dictionary you get your definitions from?

My references are: Pindyck, Rubenfld, Besanko, Brandenburger, Sustow, among others.

From Pindyck: A market is the collection of buyers and sellers that, through their actual or potential interactions, determine the price of a product or set of products. Both buyers and sellers are assumed rational, and their participation in the market is assumed voluntary.

Further, [...]market price is equivalent to the term market value. Market price is the price prevailing in a competitive market. Therefore, there must exist either competiting buyers, competiting sellers, or both for a determination of market price to be possible.[...]

And, for the guy who said there is only microeconomics...this is from a classic micro text.

Okay, let's play "Guess the bull quote". Which (in)famous RE bull (REd bull? lol) recently said this:

"Even so, national sales should stay close to record levels over the next two months and housing will continue to support the economy."

Give up? Here's the link:
http://www.car.org/index.php?id=MzA0NDc=

The irony of the last phrase in that quote is just too much...it's probably lost on the speaker.

I don't know about future house design; but currently, at least in california, we definitely have the kind that "supports the economy."

I don’t know about future house design; but currently, at least in california, we definitely have the kind that “supports the economy.”

Gotta have 32" concrete walls.

I wish your Mom would move…if I hear that vacuum again after midnight I might go insane….

Mom hasn't had vertical neighbor's in over 25 years. But I thought I'd give a potential reason for the nocturnal vacuuming. Btw, try being the kid who's bed she vacuumed under. That'll drive anyone nuts.

"Assuming this thing actually gets built"
Hmmm, what happens when property tax revenue dries up? Just vote for a bond? yeah, that would be typical.
.
.
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I still wonder who pocketed all the tax revenue generated during the tech-boom yrs. It certainly wasn't used to improve (much) the state's infrastructure.

which by the way is irrational, the houses that are sold today will be worth less a year or 2 from now according to my (I like to believe) rational expectations.

I admitted from the start that *rationality* was a term fraught with hazard. If you replace *rational* with *not overtly, blatently irrational*, then perhaps it works better for you. The 20K rock was overtly, blatently irrational. A $1M $itbox may or may not be rational. Rational buyers could indeed think the market pricing is correct. Rational buyers can and do disagree on price; this is why economics cannot predict a settlement price, only describe the optimal equilibrium price. Nonetheless, both pieces of data are useful, because when they diverge by too much the risk of "correction" rises.

If we run out of black gold, it will be the opposite…Noone will live in the city. You cant grow food…We will look like Cuba, where they grow their
food in their back yard.

The great cities arose long before industrialization and the oil-energy economy. There were very large cities in antiquity. I suspect cities will find a way to survive well beyond oil and steel.

High-speed rail in California will be no more successful than light rail in the silly valley.

allah,

Of course not, you just rationilzed the rock story, making it reasonably believable it could be more valuable to willing buyers. By applying unique attributes to any arbitrary item you could plausibly raise its value to potential buyers. I realize this is circular, which is what most people have an intuitive problem with, but I assure you that dropping either the rationality or non-coercive requisites render market theory entirely useless.

...

easily categorized as irrational: you go to a "rock auction" and buy a rock for $1M not knowing if it does or does not have any special features of value. No one has told you the rock might be special. You have no secret information about the rock giving you an edge. Of course, you never know, anything is possible...

very likely rational: you go to a "rock auction" and buy a rock which you and other buyers believe has special features making it valuable to you and at least some others.

arguably rational: you go to a "rock acution" and bid on a rock which you know MIGHT have a chance of being special; you're not absolutely sure if it's a fake or geniune special rock, but you determine that the caluclated risk is reasonable because of the potential value of the rock if it is authentic. You are also rational to assume that other buyers have made the same or similar conclusions about the rock.

So if I acquiesce to what you're driving at, we can stop all this. I still maintain that buyer-seller price arguments are the equivalent of insisting that "all mathematics can be explained by addition". Although the statement is not untrue, it is not very useful either.

Randy H, Allah, you two should try out for an obscure british comedy ;) Man your posts are so far over my head I need air traffic control to understand them.

"The Now House is something we’ve been thinking seriously about. On a small plot of land, but large enough to grow some fruit and vegtables.I do my"

Moonvalley, have you visited the Now House? I am curious to know what the quality is like inside. I too love the design and the other designs at http://www.cleverhomes.net and would love to find a nice little plot of land to have one built on.

Does anyone know how land prices behave during real estate corrections? Do they mirror regular real estate prices? I was just checking and found what seemed to me to be relatively affordable lots (around 300K) in Santa Clara and Marin County, but I'm not knowledgable enough to know what the catch is...toxic waste on site? (The ones I'm looking at have utilities present and are zoned residential.)

Similar to the dome houses, check out these houses made of dirt:

http://www.calearth.org

This place is not far from where I live. I'll have to check it out some time in person.

My guess is that the implied land price is the sale price of a house minus its replacement cost. Since the construction costs is realitvely constant, I would think that loand prices are much more volatile?

If the market crashes badly I assume one can buy at a price that is below replacement cost.

"check out these houses made of dirt

Nice…How do they keep them so clean? "

LOL. I think it's kind of like making a big clay pot that you can live in--pottery making on a grand scale. :-)

Republic of California

Actually it's the California Republic.

it’s a chunk of metal with no inherent value to me, and while I recognize that it has been highly prized for thousands of years by many civilizations, there’s no fundamental reason why it has to be so.

Actually gold does have intrinsic value, it is unique in the world of metals, first of all it is the only metal that exists in nature in its pure state, all others are either oxides or sulfides. Second, golds electronic structure is unique among metals, it is amazingly mallible and perfectly noble. And it is rare. Gold's value can be thought of in the amount of human toil it takes to get a chunk of it. This differs from diamonds which are less rare than high purity quartz, they are just controlled by the DeBeers family. They are a sham, where as gold is the real deal.

Gold’s value can be thought of in the amount of human toil it takes to get a chunk of it.

I heard that many fishermen/divers died harvesting king crabs and abalone. Edible investments with intrisic values!

I am anti-diamonds. People are just brain-washed into buying diamond engagement rings. Thank God my wife is practical.

I am pro-emeralds.

Allah, welcome aboard! Nice rant, could use a tab bit more anger and outrage in my humble opinion though. But nice work.

Thank God my wife is practical.

BTW, she would rather have a stash of devalued dollar than a meaningless diamond.

Does the 5-second rule work in dirt house? Should people who live in dirt houses throw glass?

Hmmm, I took a look on realtor.com and it seems they are up to some pretty good monkey business, there are a ton of properties that are listed several times, each with a slightly different description. Why would they want to do that?

Surfer-X, I've noticed that too about double listings of the same property. I'm not sure what the deal is with that.

My personal favorite realtor flim-flam technique on realtor.com is when they stretch the photo horizontally to make it look like a bigger house or room, LOL. Like, ooh, look at that nice wide house with the really big doors and windows...but hmm, is that a Honda Civic limousine out front on the curb?

"Does the 5-second rule work in dirt house? Should people who live in dirt houses throw glass?"

No, but in a dirt house, heavy rains mean an opportunity for extensive remodeling.

My personal favorite realtor flim-flam technique on realtor.com is when they stretch the photo horizontally to make it look like a bigger house or room, LOL.

HAHAHAHA

Or they should stretch it vertically and say "high ceiling". Perfect for stretched buyers!

Other notables of gold: high conductivity, alloys easily with other precious metals, completely harmless to the human body, almost 100% non-reactive to other elements, etc. Of course, there's a few other native metals, such as copper, silver, mercury.

This differs from diamonds which are less rare than high purity quartz, they are just controlled by the DeBeers family. They are a sham, where as gold is the real deal.

Absolutely! Overvalued chunks of carbon...someday Sibera will bring its diamonds to market and the DeBeers price-fixing ends!

Absolutely! Overvalued chunks of carbon…someday Sibera will bring its diamonds to market and the DeBeers price-fixing ends!

Also, diamonds can be economically made (gemesis.com), but making gold probably requires a huge particle accelerator.

Gold is also edible. It looks good on sushi.

I actually consulted my physics professor friend about gold and diamond because my wife was nagging me about a bigger stone (yuck!).

He said, pal, diamond can already be manufactured fairly easily! Exactly the same thing as what mother nature creates. Gold, forget it, it is an element, we human beings are so far away from manufacturing gold at a cost cheaper than mining. Costwise, it is just impossible to manufacture gold with forseeable technological advances.

Man-made colored diamonds are now artificially marketed at 25% discount from natural ones because DeBeers bought these diamond-manufcaturing technology about 3 years ago. It is just a big pyramid scheme for carbon.

What are the uses of diamonds other than cutting diamonds and making doomsday machines for James Bond villans?

Women seem to have more uses for diamonds than guys, must be good marketing from DeBeers.