patrick.net

O.K., that's not the only problem, though. You seem to be making some rather arbitrary assumptions which aren't warranted. Your 1940s price comparison seems to be completely pulled out of your ass. Where did you get that figure? And why use the 1940s as your comparison? It's an incredibly volatile decade on the index. The index went below 70 at the beginning of the 1940s, yet you are using 90 as your value. Did you just average the decade? That seems a rather imprecise way of doing it. Your statement that the "average" house doesn't sell for $71K is nonsensical. Lots of houses can be bought for that amount and less in many parts of the country; even more so in 2000. Are you talking about median prices? For what area? You don't seem to know or care, yet answering those questions would be crucial to your analysis. If you really want to do an analysis of the C/S index, first you ought to determine what figures they actually used for inflation, not just some website that you arbitrarily picked. Second, you should find the actual prices that homes were selling for, not just a wild guess. If you're going to impugn the entire index, I would expect a bit more rigor in your analysis, math mistakes being just the tip of the iceberg.

This is similar to the sloppy math you used when bragging about your "positive cash flow" on your housing investments.

RE: new roof. A new roof in Monterey will carry value for many more years than a new roof in Fresno. Fresno roofs get the snot knocked out of them with freezing and broiling. Coastal roofs stay at 60 degs 90% of the time. So, a "30 year comp roof" in Fresno is all done at 29 years, 11 months. Where as the exact same roof in Monterey will last a lifetime.

the market in the central valley has started Slide II ... and I am doing The Happy Dance as I watch the specuvestors hunt for stupid renters ... BWAAA HAAA HA HA (evil laugh)

I'm not smart enough to understand all of the macro and microeconomic factors affecting housing - often called our country's growth engine - but I can pass along other interpretations of the case/shiller data:

http://www.ritholtz.com/blog/2010/07/updating-the-case-shiller-100-chart-forecast/

this one appears to use technicals to predict a second leg down.

MarkinSF,

I'm surprised. Why do you expect a NATIONAL index of average land+house values to fit examples from SF bay area?

We both agree that the sf metro index goes back to 1987 only, so we are talking about the national index, clearly.

MarkInSF says

I’m sorry, you cannot tell me that a typical raw acre of land in the Bay Area or any other major metropolitan area in 2010 is worth just 30% more in inflation adjusted terms as it is was in 1950. It’s just ridiculous.

That's not what the index says. It is tracking the entire country, not just the Bay Area or not just any particular metropolitan area. I'm not sure how you can say, "The Bay Area or any other major metropolitan area", as though those are equivalents. If you compare Bay Area prices to, say, Houston, or Detroit, or Cleveland, you will see vast differences in prices. The C/S index isn't tracking the Bay Area; it's tracking the whole country, and the country has a huge middle section that I think you're failing to consider.

Over the past couple of years every weekend I've been using a very unscientific method to reassure myself that prices on the SF peninsula (Redwood City up to San Mateo area) are falling and continue to fall. I simply use redfin and it's filter options to set a price threshold and see what shows up on the map in that area. I generally use 500K. Initially there were NO houses - not even in East Palo Alto but some condos. These days I adjust the filter to exclude all but 'houses' and there are many that show up. In fact, as of this summer I tend to filter further by 'listed in the past 3 days' or some similar method and there are ALWAYS at least 4-5. For fun I sometimes remove that filter and change the prices to 200 or 300K and there are many of those showing up now too. I will admit that most of these, even at the 500K threshold aren't in the most desirable areas - but there are more and more and the data points are moving closer and closer to more desirable locations on the map. I'm 38, have worked in the biotechnology field (genetic analysis) for 13 years in the bay area. I have zero debt. My salary is in the low six digits but I make quite a bit more via company stock, bonuses and other investments. My retirement savings are close to 100K. I have 150K saved for a down payment. I would not touch any of these properties with a 10 foot pole unless prices fall A LOT MORE. Too many friends and acquaintances in many local industries are unemployed or finding spurious low paying temporary work. The state is a disaster and the nation is arguably as well. I'm a renter and enjoying the freedom that comes with renting more and more. I'm not trying to be smug here - I was not smart enough to see the housing crashing coming. There was a time when I thought I'd really missed the boat. I really don't see it coming back though for a long long time. Shiller - Schmiller - that's my two cents!

gameisrigged says

I don’t see where he has explained any of his assumptions. Please re-read; I said the ASSUMPTIONS he makes are pulled out of his ass. I do not doubt that he took some numbers and applied mathematical formulas to them (although he did it incorrectly initially), but I do not see that he has justified the numbers that he selected. I have explained this in great detail, I’m rather baffled as to how you are not understanding my point.

OK--so what ASSUMPTION do you dispute? That a house cost $6000 in 1945? That can be very easily verified.

gameisrigged says

All he has offered so far is a vague account of finding one house in Concord that sold for $6000. I can’t even begin to tell you what’s wrong with that methodology.

You are being purposely obtuse. What he actually did was find a home that sold for ~$6K and show what it's worth today. Not to prove what housing prices were then, but to prove how much they've appreciated.

tatupu70 says

gameisrigged says

All he has offered so far is a vague account of finding one house in Concord that sold for $6000. I can’t even begin to tell you what’s wrong with that methodology.

You are being purposely obtuse. What he actually did was find a home that sold for ~$6K and show what it’s worth today. Not to prove what housing prices were then, but to prove how much they’ve appreciated.

Wow, you just aren't getting it. Do me a favor - go back and read everything I have written in this thread. You obviously have not done that, because you do not even have the first clue as to what my point is.

gameisrigged says

Wow, you just aren’t getting it. Do me a favor - go back and read everything I have written in this thread. You obviously have not done that, because you do not even have the first clue as to what my point is.

I agree. It's impossible to figure what your point is. You can either post it or continue to duck and evade like you have been doing. Your credibility is further eroded with each post though...

thanks

tatupu70 says

Seriously–it takes longer to write your long winded evasion than it would to simply answer the question. Here is a link to the average new home price in 1945.

http://www.thepeoplehistory.com/1945.html

$4600.

So, can we put that debate to rest now? Do you acknowledge that $6000 is probably on the high side for average home price in 1945 now?

Or,

http://www.census.gov/hhes/www/housing/census/historic/values.html

Median home value in 1940 = 2430
Median home value in 1950 = 3670

not inflation adjusted

MarkInSF says

I still think some or most of the effect just has to do with the differing appreciation rates of raw land (exceeds inflation where the economy is growing), and structures (which even when maintained usually undershoot inflation).

Land price inflation is one big reason why sf metro index (1987-2010) is so different from the national index.

And it is INCREDIBLY WRONG to try and apply the national index to a specific metro area such as metro sf and expect to get close matches.

How many times do I have say this? It is not that the national index is "wrong", it is that people misapply it to specific metro areas and then expect it to produce close matches.

justme says

How many times do I have say this? It is not that the national index is “wrong”, it is that people misapply it to specific metro areas and then expect it to produce close matches

I think everyone understands this. The point is that the index doesn't work ANYWHERE. Further, if you think about it, large metro areas obviously have the largest concentration of housing. And they also have the highest prices. So, there is no way for it to average out to what Case Shiller predicts.

Prices in prime markets in Orange county have hardly budged. The reasons for it is the existing home owners and realtors scare talk of prices will never go down in OC and buyers are still ready to pay big chunk of their income toward mortgage payment. Prices are still way high and I now see good properties moving fast very close to the peak prices. This market movement is getting very complex. I am sticking to the area where I am interested in and will probably jump after 2 years of year over year increase in prices(not median).

>> I think everyone understands this

Glad you do, but judging from this thread, there were several persons who did NOT understand.

justme says

>> I think everyone understands this
Glad you do, but judging from this thread, there were several persons who did NOT understand.

No, I understand that, but as tatupu70 says, most homes in the US are in large metro areas.

And as I said, I think you would be hard pressed to find a home ANYWHERE in the country that was bought for the national median value of $3670 in 1950, is still in roughly the same state, and now goes for $40K, which is what Case-Shiller long term chart predicts. (Inflation makes price 9.2X, and C/S chart shows roughly 1.2X since 1950) Care to try?

MarkInSF says

justme says

>> I think everyone understands this
Glad you do, but judging from this thread, there were several persons who did NOT understand.

No, I understand that, but as tatupu70 says, most homes in the US are in large metro areas.
And as I said, I think you would be hard pressed to find a home ANYWHERE in the country that was bought for the national median value of $3670 in 1950, is still in roughly the same state, and now goes for $40K, which is what Case-Shiller long term chart predicts. (Inflation makes price 9.2X, and C/S chart shows roughly 1.2X since 1950) Care to try?

Further up, you (MarkInSF) also said

>http://www.census.gov/hhes/www/housing/census/historic/values.html

>Median home value in 1940 = 2430
>Median home value in 1950 = 3670

>not inflation adjusted.

I followed the census link and the number 3670 (or 3,670) occurs nowhere on the page you refer to.

I do see the following, including a number of 7354 for 1950, which is ~twice as high as the 3670.

Median Home Values: Unadjusted

2000 1990 1980 1970 1960 1950 1940

United States $119,600 $79,100 $47,200 $17,000 $11,900 $7,354 $2,938

On top of this data problem, there is the problem that year 2000 is 10 years ago, and that this is not Case-Shiller data, so hiw does ot prove that Case-Shiller is "wrong"? I suppose we can start a whole other argument about whether the census data is "wrong", but please don't ;-).

mthom says: "I agree that just because people are doing something or believe something, doesn’t make it true, particularly if they are all like-minded (maybe that’s what the polish guy was trying to say with Christians)."

I was not only "trying" to say that, but also sarcastically demonstrating how corrupted science has become by politics on the global warming or "climate change" issue. It's the biggest scandal since Galileo (with the Catholic Church not entirely in the wrong, BTW.)

Science is supposed to welcome healthy skepticism, but it's limited by the fact that it's practitioners are human beings like anyone else subject to ego and a desire to keep their status in institutions such as government funded universities. One particular case I find amusing is where a (later) nobel prize winning doctor hypothesized that ulcers were caused by bacteria rather than stress and stomach acid. He couldn't get the 'consensus' to believe him. So he swallowed a sample of bacteria and gave himself an ulcer, then cured it, to prove his point.

"They called me mad!!! Mad I say!!!!"

I hear defenders of the scientific status quo defend this behavior by claiming: "Look! Eventually the guy proved his point and then the consensus came around" but that can largely be said of anything. Even the Catholic church has come around on heliocentricism. So what? Science is supposed to be better than that.

Anyways, back to the real estate bubble. I remember the crowd telling me I was mad for not buying right away since "real estate has gone up for the past 10 years so it has to go up forever. In addition, the consensus on that issue also tended to work for government (which had an interest in seeing RE prices go up along with the property tax base), the construction industry, and even most homeowners who were advising me to buy precisely because if I, and enough like me stopped, that would be the end of their free ride.

I had to look at the issue, decide what my own personal interests were (balance the risk of "being priced out forever" versus buying at top dollar) and the fundamentals. Even now, I still am no worse off renting than buying even in this slight upturn. Hence, this is why I see so many renters willing to pay an additional 30% to wait the market out and it appears investors are following suit: They don't want to jump in that pool either.

PolishKnight says

I was not only “trying” to say that, but also sarcastically demonstrating how corrupted science has become by politics on the global warming or “climate change” issue. It’s the biggest scandal since Galileo (with the Catholic Church not entirely in the wrong, BTW.)

You almost had a valid point.

If you think being a "Heretic" is a valid charge in any society, then you lost me.

justme says

Median Home Values: Unadjusted

2000 1990 1980 1970 1960 1950 1940

United States $119,600 $79,100 $47,200 $17,000 $11,900 $7,354 $2,938

Sorry, didn't notice they had they unadjusted numbers. I made a mistake in my unadjusting for inflation.

Still, take a median home in 1950: $44,600 in 2000 dollars. According to Shiller, that home which was a median home in 1950, in similar condition w/o significant improvements, went for roughly that amount in 2000, maybe 10% more. Do you really think think that is correct?

gameisrigged says

I already answered your question, and I can’t fathom how I can ask you the same questions 4 or 5 times without you being aware of it.
Let me know when you want to be serious about this.

Your credibility is now at about zero. You're obviously playing games because you know that you've been proven wrong...

tatupu70 says

gameisrigged says

I already answered your question, and I can’t fathom how I can ask you the same questions 4 or 5 times without you being aware of it.

Let me know when you want to be serious about this.

Your credibility is now at about zero. You’re obviously playing games because you know that you’ve been proven wrong…

That's hilarious coming from you. Read the fucking thread, because you have no idea what you're talking about.

gameisrigged says

That’s hilarious coming from you. Read the fucking thread, because you have no idea what you’re talking about.

Oh no. You've broken out the bad language. Pretty textbook behavior.

If you've got a point, why not just make it instead of all these games...

I can't believe you guys are still going back and forth about this.

Still, take a median home in 1950: $44,600 in 2000 dollars. According to Shiller, that home which was a median home in 1950, in similar condition w/o significant improvements, went for roughly that amount in 2000, maybe 10% more. Do you really think think that is correct?
Conceivably. Look at it this way.
California population 1940: 10.5 million
California population 2000: 33.9 million

or this way:
In 1950, the average new house was 983 square feet and cost $11,000. In 2000, the average new house was 2,265 feet and cost $205,000. In 1950, there were 3.37 people per household, and now there is but 2.6. In 1950, only 6% of homes had a two-car garage. In 2000, 65% had two-car garages and 17% had three (or more) garage spaces.

In 1950, the average cost per square foot was $11. Today it is $91. Much of that is inflation, as inflation alone would increase prices to $76. The actual value of a square foot today is far more however. I grew up in one of those 1950 homes. No air-conditioning, one bathroom, rudimentary appliances, heating was a space heater in the main room.

I'll take my housing index comparing like-to-like (with it's inherent flaws) thank you very much.

well .. dude .... Chip and Skyler need their space to meditate away from mumsie and her "best friend", aunt susie.

EBGuy says

or this way:
In 1950, the average new house was 983 square feet....In 2000, the average new house was 2,265 feet ....

I’ll take my housing index comparing like-to-like (with it’s inherent flaws) thank you very much.

I was already talking like-to-like. Not a new house of 1950 compared to a new house today. I'm talking about houses that are STILL 983 square feet, just as they were in the 1950. They are the same house as they were in 1950. Why is this so hard to understand?

Of course I'm not going to compare median price from 1950 to median price today. Newer homes are much different. That would be comparing apples an oranges.

There are plenty of homes that are just about the same as they were in 1950. In the East Bay, EBGuy! Almost none of them are worth as little what Shiller's index says they are worth. Not even close.

Tenouncetrout says: "You almost had a valid point.
If you think being a “Heretic” is a valid charge in any society, then you lost me."

Skeptics of climate change/global warming are referred to by the faithful as "deniers". Since the term "denier" doesn't, by itself, carry sufficient weight they often go further and then compare them to _holocaust_ deniers.

In other words, they refer to their opponents as nazis. That's a pretty strong word compared to "heretic."

Different times, different dogma...

You cannot use a *median* house from a median index (census) as a starting point to impugn an index that is based on *averages* (case-shiller NATIONAL).

Another flaw in the whole argument, among the many others that have been pointed out.

Many analysts believe the number of homes for sale or headed for foreclosure is so high that prices will slip this fall and hit the bottom by early next year.

This propaganda about prices bottoming in 2011 makes me believe it will not be true now. I'll buy when housing stops becoming news every day. Or if they accept a low ball offer. Of course then I'd raise my offer when housing does not make the news almost every day. Which ever comes first.

ARMS recasts don't even peak until 2012.

A ways to go.

It's pretty simple. Wall Street is a parasite to the real economy and they've tripled their take on the economy's profit since the 70s. They are sucking us dry for all we have. Even when they lost everything they had, we were forced to make them winners.

Those areas like Victorville, Hesperia, etc., that are out in the middle of nowhere have always been, shall we say in a polite way......... less than desirable. For folks not familiar with this area, it's in the middle of the desert (SW portion of Mojave Desert) and about 30 miles from Barstow, which is about 1/2 way between L.A. and Las Vegas on I-15. I have no idea what people were thinking when they bought houses out in the middle of nowhere, but I had many conversations with friends over the past 6 or 7 years when those new homes where being built (you could see them going up by the 100s from the freeway on the way to Vegas) and my feelings then were that these subdivisions in the far-flung exburbs would be the slums of tomorrow. I was right, it just happened a lot faster than I thought it would. There isn't even a train or public transportation to get to the metro L.A. area so I am not sure where people went to work at a decent job unless they commuted the 80 miles each direction to Los Angeles. There are only so many hospital and San Bernardino County government jobs out there.

Prices are still dropping in my area - exurbs of Minneapolis-St.Paul metro area. Every single RE publication I pick up has more and more ads that scream REDUCED PRICE, PRICE REDUCED AGAIN, etc. I keep a very keen eye on my exurb and local area - prices have gone down continuously.

Yet the Case-Schiller index states that the Mini-Apple is up 11%.

I've spoken with RE people from all over the region - nobody knows how that figure was derived. Everything they see screams the opposite. It may be that bidding wars for some inner-city hellhole shortsale dump did increase 11% from 100K to 111K or something ridiculous like that, but average homes in the suburbs have gone down in value and price in general. In fact, in my particular exurb the price declines seem to be increasing, not decreasing.

Keep in mind Forbes IIRC had an article detailing how Minneapolis has fared the best of any major US city in terms of employment losses since the Great Recession began in 2007.

about all I can say is... I am sure glad I do not live in CA... not that this is confined only to California,,, but CA is the world's capital of it.

The state, in reality, may not recover. It may only eventually consist of slave workers who work to pay rent on homes owned by the state and local government workers' pension funds (CALPERS) so those fine folks can live the life of Riley, retire at 50 on fuil pay, on the backs of the slaves.

Very sad. Have to blame the government 90% for this (as it advertised spiking house values and the GSE's gave away mortgage money to fund the spikes) and 10% to dumb, greedy home buyers

If you guys are interested in a specific area, property shark tells you how many homes have been sold in that area this current year, and gives you numbers for the previous years up to 1986. The area I am interested in, if it keeps its pace, will be the lowest since 1986. In 1986, prices were averaging around $200k. Now, it's averaging around $550k; with the investors picking up properties for under $500k, and the suckers picking up the flipped properties for $600k++

schmitz_kris says

Prices are still dropping in my area - exurbs of Minneapolis-St.Paul metro area. Every single RE publication I pick up has more and more ads that scream REDUCED PRICE, PRICE REDUCED AGAIN, etc. I keep a very keen eye on my exurb and local area - prices have gone down continuously.
Yet the Case-Schiller index states that the Mini-Apple is up 11%.
I’ve spoken with RE people from all over the region - nobody knows how that figure was derived. Everything they see screams the opposite. .

This is common throughout the US... I saw that San Fran shjowed an 18% price increase and there's not a soul in San Fran who believes that figure. the only way it seems C-S could be right is if they are taking the very tiny number of actual sales and calculating the overall local market based on those few sales