patrick.net

I agree

the United States, currently UNDERVALUED compared to the rest of the 1st world, (including Canada)

This leaves out that we also have one of the lowest (if not THE lowest?) minimum wage of any industrialized nation in the world, and that nearly 4 million American workers subsist on minimum wage -- numbers which do not account for recessionary trends. Add to that, the most lopsided income distribution of any industrialised nation in the world, the jobless recovery and the sheer volume of fraud, heartache and otherwise slime surrounding real estate in America and it's very hard to make a compelling argument for it being UNDERVALUED -- capital letters & all.

As for Canada...

My brother was a barber all his life and I doubt he ever earned more than $25,000 in any single year plying his trade. He also had serious health issues from a young age and never finished eighth grade.

But when he died he had a net worth in excess of five million dollars and a net rental income from his rental properties of almost $15,000 a month; I know because I helped with his estate.

Every few years we would have the same conversation: There is no way prices can go up any further, I would say. He would reply: They will go up. He was right every time.

During every downturn in the RE market I would say: This is it for real estate, right? He would answer: Now is the time to buy. Every time, he was right.

I do not know where his faith came from, he had every reason to doubt; and he was a one-trick pony in that he screwed up every other aspect of his life but, man, did he ever know how to spot a good horse and how to ride it!

I wish he were still alive today so I could get his take on this present market...although I can almost hear the conversation: This time it's different, right? I would ask him.

There has never been a better time to buy, he would answer.

look at recent listings on redfin.
prices reductions are getting large; especially on REOs. banks/sellers are getting worried.

it's going to be a fairly good fall/winter for buyers.

there have been listings that i was surprised to see.
not because prices were outrageously high, i've become desensitized to $2000+/sq listings or 800 sq homes selling for over $1M, but because in the elite cities, there were listings that i consider cheap.
very few of these, just one or two, but i've never seen cheap prices in these cities until now.
the problem with places like palo alto or los altos is the home debtors have wealth. so even though there are cracks, the dam won't burst. i expect a slower drop in the high priced housing market.

it's like when i saw prices in san jose under $400k for the first time many years ago.
that was also a turning point.

I don't know what to think, for me both sides are very persuasive. Maybe it's because I live with one foot planted in the lower 80%, and another foot planted in the top 5%. I personally know how bad it really is for the large majority of Americans, but I also know very well just how much money the wealthy Americans have.

No matter what, I really fear for the future of this country, not a single possible outcome leads us to a brighter future.

Karl Denninger: "Foreclosuregate... looks like this.... (crank it up!)"

http://www.youtube.com/watch?v=-zvCUmeoHpw&feature=player_embedded

I don't know what is so difficult - demand was out of whack due to various reasons (cheap lending, irrational exuberance, perceived safe investment,etc), the prices went up. Supply increased unreasonably high and the artificial demand collapsed under its own weight as people overextended themselves. The supply exceeded the demand and the price dropped. The downswing, in my opinion, was an over correction (and may still in the process of correcting) for the most part. I'm not trying to minimize the ethical issues involved or the somewhat unique intersection of a lot of bad events - but once the oversupply is consumed (the population is still increasing..) there will be at a minimum a floor or more likely a bounce. Of course, it won't be apparent until after this happens. You can't continue selling houses forever for less than it costs to build them - eventually you run out of supply, the building will kick up, and hopefully we've learned a lesson and won't be so stupid again.

It happened in the Great Depression with stocks, it happened with the tech bubble (how were we supposed to make money off dogfood.com?), and it happened again with real estate. I'm sure there are other similar events that one could add - but Joe Sixpack is always the last to know and is the sucker that jumps in right before the crash. He is also the one that cries Chicken Little the longest.

The excess inventory is a nightmare. Unemployment is a nightmare. Foreclosuregate is a nightmare. I don't see how anyone can be optimistic about the housing market.

HousingBoom says

The excess inventory is a nightmare. Unemployment is a nightmare. Foreclosuregate is a nightmare. I don’t see how anyone can be optimistic about the housing market.

I agree, but it won't last forever. Once the collective psyche believes we have reached a bottom the markets that aren't overbuilt will come back to reality. I'm sure there will be some areas which will remain in a death spiral - but not everywhere. It would have been painful to have everything crash and burn all at once - but at least we would have seen the end of the tunnel. Protracting the inevitable hoping for a solution other than simple supply and demand is fruitless. It just drags everyone down the tubes and loads us down with debt. Then again, misery loves company, right?

Foreclosuregate is just a distraction. Unemployment is a pickle - you need people to buy something so you can hire, but no one is hiring so no one can buy. On the flip side, though, it can be used to drive labor costs down to make us more competitive. Yeah that stinks but as my daddy always told me "Life isn't fair".

As a side note to employment...I've heard some people comment regarding the "two-earner" households not being able to keep up. Is the two-wage earner household the cause of reduced wages or simply the effect of lower wages? If you think about it, the entrance of women (and I'm not being anti-women just making the observation here) en mass into the workforce increased the "supply" of workers - would this not drive down individual salaries/compensation? Something to consider...

United States real estate is CHEEEEEEEP compared to every other first world nation on the planet.

Which is great if your from any other first world nation on the planet, since not every other first world nation is bent over the barrel at such an acute angle as most average Americans.

Another difference worth noting are the types of loans a buyer qualifies for/allowable DTI levels which vary from one nation to the next. One example is the Netherlands - in Amsterdam, a typical residential mortgage loan is 7-8 X income, complete with a home improvement loan rolled in.

bob2356 says

No one ever moves back in with their parents in your world?

They won't live there forever. If people are self-imposing austerity in order to build wealth/get out of debt, we will be better for it in the long run. What people are doing in a down economy is not what they will do once it begins to grow again. This is called "sacrifice" which has been lacking in our culture.

Of course, the chicken little's keep saying that the economy will never grow again and we are in a permanent funk. These are likely the same people that thought they would retire at 40 with their dotcom investments and cashed out the equity in their homes like an ATM machine. They weren't right then - why would they be right now? Don't take diet advice from a fat person.

klarek says

No, that’s not what I said. I was pointing out one of many many differences between countries. Just pointing out that a lot of the U.S. lives in flyover states and we have a whole lot of undeveloped land for cheap. There aren’t very many countries that enjoy such a situation. Not Japan, the U.K., or Canada (again, despite its low density as I have pointed out the people in CA live in very condensed pockets because the country is uninhabitable, hence very dense when excluding those other parts).

I don't think that's a very well thought out hypothesis. People live in condensed pockets because they want to not because they are forced to. China has huge rural areas. So does Europe. But there are no jobs there so nobody lives there.

klarek says

Yeah, in Missouri or Kansas. Not in the coastal states.

That's not true either. Large cities are more expensive than rural areas everywhere--I'll agree with that. But there's certainly nothing magical about North or South Carolina. Florida is even pretty cheap now.

Are there any first world countries with lower average/median prices than the US?

One thing I am struck by is that 30 year interest rates are HALF

http://research.stlouisfed.org/fred2/graph/?chart_type=line&s[1][id]=MORTG&s[1][range]=10yrs

what they were 10 years ago. And the conforming limit is TRIPLE that of 1999.

Recently sold, below 2004 prices, but does it really make sense to pay even 2003 prices.
At best if I been a buyer, $450K would have been more rational than $800K.

Property History for 1750 ORCHARD Way
Date Event Price Appreciation Source
Aug 31, 2010 Sold (Public Records) $806,000 -0.5%/yr Public Records
Jul 22, 2010 Delisted -- -- Inactive EBRD #40476939
Jul 14, 2010 Listed ** -- Inactive EBRD #40476939
May 21, 2004 Sold (Public Records) $830,000 36.5%/yr Public Records
Mar 06, 2003 Sold (Public Records) $570,000 8.6%/yr Public Records
May 23, 1997 Sold (Public Records) $354,000 -- Public Records

Another example of a home not worth more than $450K, but listed at $765K today.
certainly needs nearly a 40% haircut to get back to the normal pricing before the bubble mentality...

Property History for 4839 MERGANSER Ct
Date Event Price Appreciation Source
Oct 07, 2010 Relisted -- -- EBRD #40485088
Sep 15, 2010 Delisted -- -- EBRD #40485088
Aug 30, 2010 Listed $765,000 -- EBRD #40485088
Jul 15, 2010 Sold (Public Records)
This home was foreclosedForeclosure is a process that transfers the right of home ownership from the homeowner to the bank or lender. A home goes into foreclosure when the owner stops paying his mortgage loan payments. and bank-ownedShort for "real estate owned," REOs are foreclosed homes owned by banks and lenders.. $637,500 -- Public Records
Jul 06, 2010 Delisted * -- Inactive EBRD #4
Jun 29, 2010 Listed * -- Inactive EBRD #4
Oct 21, 2008 Delisted * -- Inactive EBRD #3
Oct 04, 2008 Relisted * -- Inactive EBRD #3
Sep 15, 2008 Delisted * -- Inactive EBRD #3
Sep 10, 2008 Listed * -- Inactive EBRD #3
Sep 10, 2008 Delisted * -- Inactive EBRD #2
Aug 16, 2008 Price Changed * -- Inactive EBRD #2
Jul 22, 2008 Listed * -- Inactive EBRD #2
Jul 22, 2008 Delisted * -- Inactive EBRD #1
Jul 02, 2008 Listed * -- Inactive EBRD #1
Aug 31, 2005 Sold (Public Records) $1,025,000 14.0%/yr Public Records
Mar 01, 2000 Sold (Public Records) $499,500 12.0%/yr Public Records
Jul 01, 1996 Sold (Public Records) $330,000 -- Public Records

Will the sercurities markets ever go away? That's more interesting to me than anything else right now. I like the thought that the recent trouble is a smoke screen to slow down forclosures.

thomas.wong1986 says

That's nice. Can you post a chart for Southern CA?

http://lmgtfy.com/?q=fhfa+southern+california

:)

thomas.wong1986 says

A fully loaded engineer in Silicon Valley costs X and it’s about a tenth of X in China and close to that in India. And they are often as well educated, entrepreneurial and as hungry as the people who graduate here.

If the engineers in China and India are as good as the ones in US, why don't they invent internet and develop chips and OS?

No one in China wants to be an engineer. They all want to be government officers which can get millions of US dollars bribe.

xenogear3 says

If the engineers in China and India are as good as the ones in US, why don’t they invent internet and develop chips and OS?
No one in China wants to be an engineer. They all want to be government officers which can get millions of US dollars bribe.

Xeno, just curious, are you posting from the USA? - Are you an engineer?

xenogear3 says

If the engineers in China and India are as good as the ones in US, why don’t they invent internet and develop chips and OS?
No one in China wants to be an engineer. They all want to be government officers which can get millions of US dollars bribe.

Never under estimate your competition! The japanese pretty much killed off our semi/hard drive production in Silicon Valley many years ago. We once had clear #1 spot when it came to production in SV and market share.

Names like Hitachi, Panasonic, Toshiba and Sony make more than toasters and TVs. They too make similar High Tech products which take away market share in High Tech and compete in global markets. And they been doing it for 20+ years.

European Software makers also take a fair share of SW sales like SAP. Clearly Linux (euro brew) has had a fierce impact on Microsoft sales.

How do you compete with products half your cost or even free ?

As for India/China? You should be more worried about other states in the USA who come to SV phishing for jobs. We have more SV company Tech jobs outside of SV in other states than locally. Go figure that one out!

sam1 says

using international “comps” as reference for US pricing is definitely not an outragous approach

If so why didnt we use similar matrix back in the 80s and 90s. Or is it different now! People buy homes in the nation and region they live.
It makes no sense to compare a homes in Europe, Asia, South America or Africa. What are you trying to prove ?

CrazyMan says

http://lmgtfy.com/?q=fhfa+southern+california

Thanks, asshole.

You do realize that the source of the original chart was an image uploaded to patrick.net, and therefore it was not at all obvious that there was a website containing the chart, right?

gameisrigged says

CrazyMan says

http://lmgtfy.com/?q=fhfa+southern+california

Thanks, asshole.
You do realize that the source of the original chart was an image uploaded to patrick.net, and therefore it was not at all obvious that there was a website containing the chart, right?

Calm down there, I was just giving you a hard time, hence the smiley face.