patrick.net

azrob00 says

taputu: those are called factors! I would say the 100% increase in people not paying their mortgages in the past 18 months is significant, but you would prefer to dismiss it and cast insults? did you just buy a home or something that you are so desperate to cast aspersions rather than actually think?

Do you really not get it? Of course those are factors. Those are factors explaining why interest rates won't be rising (much) in the near future.

I like how you guys are pointing to Data that is over 5 months old, as solid proof the bottom was in 09.
Last I heard, last month was the worst foreclosure report on record.

I don't know what cup you guys are drinking from, but the Tea leaves are lying.

http://news.yahoo.com/s/ap/20100415/ap_on_bi_ge/us_foreclosure_rates?source=patrick.net

theoakman says

bob2356 says

Honest Abe says

OK, I’ll ask you a question. How did the world operate when we WERE on the gold standard? Low inflation, fiscal responsibility, no currency debasing? I don’t know - thats sounds good to me.

You are perhaps somehow not aware that there was a major financial crises in America roughly every 20 years from the signing of the Declaration of Independence up to and including the great depression. Here are some hints:1797, 1819, 1837, 1857, 1873, 1893, 1901, 1907. These were just the biggies, there were smaller economic hiccups also. Widespread business collapses, stock market collapses, massive bank failures, high poverty, 20% unemployment, credit collapse, real estate collapses, high foreclosures. All of which happened on the gold standard. Sounds familiar to me. Explain again how this is utopia.

Rose colored glasses are always a good thing. Nothing changes.

Well, fractional reserve banking is an abandonment of the gold standard. It should be illegal. All these banking crises that you speak of are a symptom of paper money being substituted for gold.

I'm seriously confused. The gold standard is paper money backed by gold at a fixed rate (no one has mentioned so far that the fixed rate could be changed AT ANY TIME by a simple majority vote of congress I notice). You are arguing for going back to the gold standard. You argue that being on the gold standard will bring financial nirvana in our time. You are arguing that everything was peaches and cream before dropping the gold standard. But you are also saying that 150 years of financial crises (pre fractional lending) that happened while on the gold standard were because we used paper money backed by gold, which by definition is the gold standard. Huh? Did I miss something or did I just step through the looking glass?

You should start drinking again, bob-o. Everything is starting to make sense... :)

Personally, I wouldn't live somewhere with a requirement that I not park on the street.

Good luck enforcing a "no parking on the street" rule. Its a city street, you don't make rules for it. I lived in an HOA that had such a rule, and they got ripped apart when an owner sued over fines for parking on the street.

bob2356 says

theoakman says

bob2356 says

Honest Abe says

OK, I’ll ask you a question. How did the world operate when we WERE on the gold standard? Low inflation, fiscal responsibility, no currency debasing? I don’t know - thats sounds good to me.

You are perhaps somehow not aware that there was a major financial crises in America roughly every 20 years from the signing of the Declaration of Independence up to and including the great depression. Here are some hints:1797, 1819, 1837, 1857, 1873, 1893, 1901, 1907. These were just the biggies, there were smaller economic hiccups also. Widespread business collapses, stock market collapses, massive bank failures, high poverty, 20% unemployment, credit collapse, real estate collapses, high foreclosures. All of which happened on the gold standard. Sounds familiar to me. Explain again how this is utopia.
Rose colored glasses are always a good thing. Nothing changes.

Well, fractional reserve banking is an abandonment of the gold standard. It should be illegal. All these banking crises that you speak of are a symptom of paper money being substituted for gold.

I’m seriously confused. The gold standard is paper money backed by gold at a fixed rate (no one has mentioned so far that the fixed rate could be changed AT ANY TIME by a simple majority vote of congress I notice). You are arguing for going back to the gold standard. You argue that being on the gold standard will bring financial nirvana in our time. You are arguing that everything was peaches and cream before dropping the gold standard. But you are also saying that 150 years of financial crises (pre fractional lending) that happened while on the gold standard were because we used paper money backed by gold, which by definition is the gold standard. Huh? Did I miss something or did I just step through the looking glass?

No, you are just putting words in my mouth with this "utopia" talk. You brought up banking crises of the 1800s. They are all based on the facts that banks cheated and issued more paper than gold they had in their hands. The practice of a fractional reserve system an abandonment of the gold standard. Prior to central banking in the US, this always resulted in a banking panic that restored prices to a sustainable level because they could not print their way out of a banking crisis. Ultimately, the problems caused by fractional reserve lending would get unwound through a banking crisis. This is not a problem with gold. It's a problem with fractional reserve banking. You are sorely mistaken. Fractional Reserve Lending existed during those entire 150 years of those banking crises and fractional reserve lending was ALWAYS the culprit.

I suggest you read what I actually advocated for at the beginning of this thread.

I live in a place like what Ellie calls a sh*thole.

You see, the majority of the homes on my street in East San Jose have people living places other than the house itself, like in the garages, enclosed patios on attached to the back of the homes, trailers parked in the backyards or along the sides of the house, one home with a massive RV parked along the side of the house which is a full time residence, and at least have two with shacks in the backyards with people living in them. And, among those of us who don't have such "extra" living space footprinted on our lot, almost all of us have some non-nuclear family adults living in the household who have jobs, and therefore, cars.

For the most part the "trailer/garage/shack trash" are not bad people and are not bums, it is just hard to make ends meet and hard to get by here in the Bay Area on low wage jobs.

But jeez there is a problem with parking here. People park all over the place including their front yards (needless to say, not really "lawns" anymore). I parked on my lawn sometimes, not often enough to damage it though. People used to park on the sidewalks or block them but the San Jose Parking Violation Stazi kept giving residents parking tickets so that doesn't happen much anymore. I had to clean out my garage to make parking space to deal with it.

Clearly the problem is that we backed paper with gold. If we all carried around physical gold coins and used them for all transactions we'd be way ahead of where we are today. When you buy something online, you could just shove gold coins into your monitor to pay for them.

Also, it's hard to get robbed when you carry a big bag of gold coins. You just hit the robber in the face with them.

Kevin says

Also, it’s hard to get robbed when you carry a big bag of gold coins. You just hit the robber in the face with them.

I actually did that once many years ago when I was working a summer job at an amusement park collecting coin from vending machines and someone tried to grab a money bag from me. Worked great.

Re: parking on the street. I have friends out in Concord, and, at least in the neighborhoods I know, there are big, generous driveways, definitely adequate for a couple of cars. It's much more spacious out there than it is in other parts of the Bay Area. In my neighborhood, there are driveways that will handle one car of modest size, so obviously it is necessary for most two-car families to have the second car parked on the street. I don't think that would be necessary in most parts of Concord. Given context, the rule makes sense.

Lets recap:

Our resident Donald Trump investor has 3 homes... count them 3.
they are 100% financed (his words)
He is "improving the neighborhood" by not allowing street parking...
He is collecting way above market rents, according to other posters who know the area...

Ok, in what neighborhood in the world is the street parking situation even going to be noticeably changed by the actions of three homes? AND, if one of the renters bought another car, how the heck would the landlord even know about it? Unless you live in one of these three homes, no way you will know who parks on the street. A dog in the house you would know if/when you came by, some car parked in the street that could belong to any of 20 homes? Nope!

This whole self aggrandizing story is BS, top to bottom. He has some homes, nothing special, no magical neighborhood improvement due to his brilliant management, no mythical super above market rents... nada.

Nothing in this passes the smell test.
defend the non-sense if it makes you feel better, be my guest!

@sf
There is a difference between parking 2 cars in the garage, or 2 cars in the driveway vs 8 cars on the street.

@zrob00
He owns his house, he can pull financing from it to use for these other homes. If he pulls 20% from his home, and 80% from the other home, how is that not 100% financed?

The rents don't sound out of line for the area. Owning 3 houses on a street would help that street out. Especially if several of the other homes are owner occupied. Assuming owners are avoiding the 8 cars per house issue, that only leaves a few more houses on a typical street. It isn't a full blown neighborhood as in 8 blocks x 8 blocks, but it could easily impact the area he is in. Especially if the street isn't very far from the main street. If you need to drive though 8 blocks of crap to find your "upgraded" street, it would be obvious. If you drive one block off the main street and you hit a decent street, people will ignore the rest of the neighborhood because they don't need to see it, or probably ever travel through it.

There are periods in history where mortgage rates went down and prices went up, correct? ~2000-2005, for example. Recently mortgage rates have dropped and prices have stabilized or have even gone up in 2009-2010. So there are points in history where your theory is not true. ~2005-2009 was kind of up in the air because of the loose lending. So instead of going back to the 1930's or 1970's, why not use recent historical data?

camping says

There are periods in history where mortgage rates went down and prices went up, correct? ~2000-2005, for example. Recently mortgage rates have dropped and prices have stabilized or have even gone up in 2009-2010. So there are points in history where your theory is not true. ~2005-2009 was kind of up in the air because of the loose lending. So instead of going back to the 1930’s or 1970’s, why not use recent historical data?

I think you're missing the point. At least what I was/am trying to say. It's certainly true that interest rates may move opposite of home prices, just as they might move in tandem with them. What the history has shown is that there really is a very low correlation between interest rates and home prices. So, despite all the posters saying once interest rates go up, home prices will fall like a rock--the data says different. Prices may go down, or they may go up. We just don't know.

tatupu70 says

camping says

There are periods in history where mortgage rates went down and prices went up, correct? ~2000-2005, for example. Recently mortgage rates have dropped and prices have stabilized or have even gone up in 2009-2010. So there are points in history where your theory is not true. ~2005-2009 was kind of up in the air because of the loose lending. So instead of going back to the 1930’s or 1970’s, why not use recent historical data?

I think you’re missing the point. At least what I was/am trying to say. It’s certainly true that interest rates may move opposite of home prices, just as they might move in tandem with them. What the history has shown is that there really is a very low correlation between interest rates and home prices. So, despite all the posters saying once interest rates go up, home prices will fall like a rock–the data says different. Prices may go down, or they may go up. We just don’t know.

That may be your point, but that doesn't seem to be the point of the original quote. "In fact, housing prices generally rose when interest rates climbed."
I personally don't see how they are unrelated, particularly in parts of the bay area where we're talking $500k+ mortgages. A few ticks up or down results in a big change.

E-man says

And please don’t compare us to Japan and Germany because they don’t have population growth. In fact, their populations have been on the decline. It’s like comparing apples to oranges. In fact, CA has been gaining population forever.

CA only has a less than a third the population density that Japan has. There is plenty of land in CA to build. Not so much in Japan.

camping says

I personally don’t see how they are unrelated, particularly in parts of the bay area where we’re talking $500k+ mortgages. A few ticks up or down results in a big change.

That's why I trust data over intuition...

Perhaps I'm missing something but I think quantity has a bearing. I don't think you can draw a graph with a straight line on it and say "We are here and when this happens we'll be here."

I think the amount of the increase and how fast it's implemented would make a huge difference as to wether or not it would affect house prices.

Also I think we're looking at secondary market forces and claiming them to be primary. Interest rates will not climb until inflation of some other primary market force causes the Fed to raise the rate. It's more likely that THIS market force will act upon house prices and not a reactionary action the Fed uses to slow the economy down.

So if you said: "When the economy turns around... as a result house prices will rise. To slow a rising economy the Fed traditionally raises rates to keep rapid growth in check." That may then become a true statement.

However. I disagree. I don't think that this time house prices will rise "along with interest rates". I have been wrong in the past and I could be wrong again. Here's how...

At the moment the stock market is and has been regaining lost ground. Now is this a market recovering or is it another mini bubble? If it is another mini bubble... There is a chance that houses could bubble again (small) as the die-hards jump back in. Some call it a "W". I see some signs of that, where buyers/investors are all too ready to jump back in on what they believe to be the bottom. ANYONE who knows real estate knows... there shouldn't bean instant rebound, more a gradual slowing of the decline, then a long flat period and then perhaps a pickup.

Then again who knows? Let's increase the tax incentive, or extend it. How about forgiveness of tax debt? Let's make it easier for foreign investors to buy US property. How about the tax payers buy a few car companies? Let's force banks to lower the mortgages on their customers. Let's open the discount window forever? Hey did I just see a pig fly by?

See what I mean? All bets are off. All these other forces are now in play when they weren't before. It's my opinion that we've become a consumer nation, and it's our spending that drives the economy. So what will the forces that be do to convince us we're wealthy again?

Sure they may convince us our houses are worth more, but if you don't have a job... you basically can't afford the mortgage on a house that's now worth more. I'm interested to see how this plays out but anyone with a bold prediction is asking for trouble.

tatupu70 says

camping says

I personally don’t see how they are unrelated, particularly in parts of the bay area where we’re talking $500k+ mortgages. A few ticks up or down results in a big change.

That’s why I trust data over intuition…

To what data are you referring? And this isn't intuition - it's called logic. If something becomes more expensive, fewer people are able to afford it unless the purchasing power of the purchasers increases. That's why prices typically increase during times of higher rates, because wage inflation is also happening concurrently. 2000-2005 were years without wage inflation yet prices went up because of decreasing mortgage rates. Is there any historical data where prices and mortgage rates went up where there WASN'T wage inflation to support the increases? If not, what makes you think that we're going to have any meaningful wage inflation in the next few years? Is it the 9.x% unemployment rate, the continuous exporting of jobs or some other anti-logic that will cause this wage inflation?

camping says

To what data are you referring?

Historic housing prices and interest rates.

camping says

Is there any historical data where prices and mortgage rates went up where there WASN’T wage inflation to support the increases?

Probably not.

camping says

If not, what makes you think that we’re going to have any meaningful wage inflation in the next few years? Is it the 9.x% unemployment rate, the continuous exporting of jobs or some other anti-logic that will cause this wage inflation?

What makes you think interest rates will go up if we have 9.x% unemployment?

tatupu70 says

camping says

To what data are you referring?

Historic housing prices and interest rates.

Well, that leaves out a lot of data.
camping says

Is there any historical data where prices and mortgage rates went up where there WASN’T wage inflation to support the increases?

Probably not.

If not, what makes you think that we’re going to have any meaningful wage inflation in the next few years? Is it the 9.x% unemployment rate, the continuous exporting of jobs or some other anti-logic that will cause this wage inflation?

What makes you think interest rates will go up if we have 9.x% unemployment?

The fact that mortgage rates have been artificially depressed by the Fed for the past year+. If mortgage rates were naturally going to go down to 5% while our economy tanked, then why did the Fed spend $1.25T buying them?
From what I've heard, there's a general consensus that mortgage rates will rise to above 6% by the end of this year and that unemployment will remain stubbornly high. It seems you agree that house price inflation won't occur without wage inflation (based on historical data or lack thereof), and there won't be wage inflation with high unemployment. Therefore, if unemployment remains high as expected, yet mortgage rates also rise, the next logical step is that prices will fall.

camping says

From what I’ve heard, there’s a general consensus that mortgage rates will rise to above 6% by the end of this year and that unemployment will remain stubbornly high. It seems you agree that house price inflation won’t occur without wage inflation (based on historical data or lack thereof), and there won’t be wage inflation with high unemployment. Therefore, if unemployment remains high as expected, yet mortgage rates also rise, the next logical step is that prices will fall

There's a lot of ifs there. Under your hypothetical scenario, I'd agree that prices would probably fall. I don't agree that interest rates will necessarily rise to 6% if unemployment remains stubbornly high, however.

tatupu70 says

camping says

From what I’ve heard, there’s a general consensus that mortgage rates will rise to above 6% by the end of this year and that unemployment will remain stubbornly high. It seems you agree that house price inflation won’t occur without wage inflation (based on historical data or lack thereof), and there won’t be wage inflation with high unemployment. Therefore, if unemployment remains high as expected, yet mortgage rates also rise, the next logical step is that prices will fall

There’s a lot of ifs there. Under your hypothetical scenario, I’d agree that prices would probably fall. I don’t agree that interest rates will necessarily rise to 6% if unemployment remains stubbornly high, however.

Actually, it was just one "if" in the stated hypo. Hard to do any sort of hypo without an "if" considering that's pretty much the definition of a hypo.
The unemployment rate isn't going anywhere soon. Mortgage rates were up at 8% during the 2000 recession; I'm not sure why they can't make it to 6% during this recession (that ended).
Well, then what do you think is going to happen over the next 2 years?
Unemployment is going to drop significantly?
Mortgage rates are going to stay at 5%?
Wage inflation is going to occur?
My view is that unemployment is going to stay high, rates are going to rise to at least 6% by EOY 2010 and wages are going to be flat. This is based on the fact that millions of jobs were lost over the past few years and the current hiring numbers are still unimpressive, Fed getting out of MBS and the rest of the world not bailing us out, wages continue to be flat due to high unemployment. Where's your logic/evidence to the contrary?

I'm no good at predicting the future of the economy... If we're talking about 2 years out, I'd guess that unemployment will drop a couple of points and that wages will increase. Interest rates will rise a bit--I think 6% is a reasonable guess.

My view is while each recession has its own special causes and concerns, the economy as a whole acts similarly during recovery. If you look at business articles from the last couple of recessions they scream jobless recovery, outsourced manufacturing, budget deficit, etc., but 2 years later things were somehow back to being OK.

Yes, this time it might be different. Like I said, I'm no good at predicting these things...

Here's some more of the competition in Concord; the property at 1786 Toyon Dr rents for $1650. It's a 3/2 that advertises 1700sq.ft. of livable area (property records indicate 1400sq.ft., perhaps there have been improvements). It's about 1/2 mile to BART and the highway. Oh, and it has a sub $60k tax basis. How low can you go...

I’m not sure what evidence there is to suggest that we are returning to normal market conditions.

The pendulum doesn't swing one way only to swing back and stop in the middle. Asset bubbles typically over correct.

It seems you agree that house price inflation won’t occur without wage inflation (based on historical data or lack thereof), and there won’t be wage inflation with high unemployment.

There will be no wage/salary inflation for the biggest percentage of American workers. All data points to things trending in the opposite direction, but for some radical shift in policy/trade laws.

Tech stocks, USA... ex NASDAQ 2000 to today, 11 years and counting.
Japanese stocks a couple of decades
Japanes land, ditto.
Gold, 1980 peak $850 an ounce... took 27 years to come back.

tatupu70 says

If you look at business articles from the last couple of recessions they scream jobless recovery, outsourced manufacturing, budget deficit, etc., but 2 years later things were somehow back to being OK.

The 1991 peace-dividend, RTC recession sucked until 1995-1999. Dotcom got the ball rolling in the bay area again, and from 1995 to 1999 Greenspan was allowing money supply to really flow.

2001 recession never ended, really. We just had the mother of all housing bubbles to pull us out of it temporary-like.

Zlxr's above comment echoes my thinking exactly.

I'd add that the median baby boomer was turning 20 in 1975, putting pressure on household formation.

We got trade flows with China and OPEC taking wealth out of the economy. NAFTA thanks to Clinton.

I just don't see any upside from here.

The existing stock of housing has a cost of production of $200/mo or so. That's the baseline that housing providers are facing, the price the market is seeking as the middle-class and below wage base is beaten down and has to make ends meet.

We bid up the cost of housing to where it is now, and we can and will bid it down.

E-man says

And please don’t compare us to Japan and Germany because they don’t have population growth. In fact, their populations have been on the decline. It’s like comparing apples to oranges. In fact, CA has been gaining population forever.
.

Slapping random charts together without any explanation is in?! No one told me...California is losing US citizens and gaining illegal immigrants with no skills. Is that the point you were trying to get across or was it some correlation between California population and the Irish RE bubble?

short drive to DiVino's Pizza in PH is a plus

Silicon Valley median home price rises 29 percent

http://www.contracostatimes.com/real-estate/ci_14890494?source=rss

Wow, according to that article Alameda county saw house price raises of 40%. I wonder who has the money for these crack shacks?

rcesar says

Silicon Valley median home price rises 29 percent
http://www.contracostatimes.com/real-estate/ci_14890494?source=rss

...

But the big increases in median price...does not mean a correspondingly generous increase in the value of all homes in the county.

Median prices have risen sharply in recent months compared with year-ago levels primarily because the mix of homes selling is more balanced now than it was a year ago, when post-foreclosure resales were a bigger portion of the completed transactions.

Median price can be a misleading number.
I prefer to track prices in neighborhoods known to me.
I am constantly "window shopping" in those areas.

From what I see, prices for less expensive homes hit bottom at the beginning of 2009. Those great deals are gone.

Prices for middle market seem to be bottoming now.

High end properties might slip a little more, and I think multi-family and commercial will slip a little more as well. But not much, and not for long.

oh, my dear friends, the next drop commeth

The next drop does commeth - but not until after the next peak.
We are into the recovery phase of the economic cycle now.

Zephyr says

Median price can be a misleading number.

I prefer to track prices in neighborhoods known to me.

I am constantly “window shopping” in those areas.
From what I see, prices for less expensive homes hit bottom at the beginning of 2009. Those great deals are gone.
Prices for middle market seem to be bottoming now.
High end properties might slip a little more, and I think multi-family and commercial will slip a little more as well. But not much, and not for long.

Can you tell me, what area and what percentage of peak price level are you talking about?

In my area, home prices on all classes are holding up quite well at mid 2005 to early 2006 price level. Do you think I can say the same?

Your good feeling could possibly be an early indicator of the next phase of the downcycle. Do you remember when you last had a "recovery feeling?"