patrick.net

uffthefluff says

How can prices be expected to go

What group of people believe Real Estate prices are going up ? Maybe when the stock market crashes and all those investors move in to Real Estate causing a short term rush. But that's it ! For now, Just like spoiled children, everyone is having a tantrum because they are NOT getting what they where gettin over the last 30 years.

Sybrib says

the highway 99 stretch will do well as their economy is tied to agriculture and exports

Fresno County produces a nice ag haul -- at $6B it's the top ag county in the nation -- but it also has a million people.

That $6B is a nice input, but it's only going to ~3% of the population. There's some trickle-down as the money spreads into the wider economy, but Fresno as a whole can't live on ag any more.

It can do well as a closer low-wage job center, but there are no jobs in Fresno even so.

Instead of high-speed rail to the BA & LA, Fresno could use a world-class subway system. Wouldn't cost much since they've got 1000' of dirt until bedrock. Probably cost less too.

Why hasn't anybody thought about banks? I mean banks just can't freely hand out mortgages to younger generations without 1) continuous govt. backing and 2) supporting income of those people who get mortgage.

bubblesitter says

Why hasn't anybody thought about banks? I mean banks just can't freely hand out mortgages to younger generations without 1) continuous govt. backing and 2) supporting income of those people who get mortgage.

True but that also invokes the shadow inventory issue.

Inflation in the past usually mean that prices would go up but in decades past one could simply work OT to make up for it (not happy about it but they could) Now that isn't the case.

One could argue that banks are not unloading houses because the price drop could be severe enough so that a couple (not an individual) could under theory might be able to pay in cash in some markets. If the housing market is removed from banking then how much business would banks really do?

I like to use New York City as an example of how prices can go up when the average person cant afford a home.

The median income in Manhattan is 47k. The median house price is 1.4 million and thats not even a house its a condo.

bubblesitter says

All the idle money should have rescued the banks from their misery by scooping all those rotting mortgages.

Money doesn't buy mortgages, it waits for the courthouse steps.

This whole thing (the capture of housing by wealth) is entirely obscene. Yet we watch it go since there are no power centers in opposition to it.

I can only hope for a prolonged deflationary collapse to clean out the specuvestors, but I doubt that is really coming, and at any rate their money is better than mine.

bubblesitter says

Nope. Rent is month to month and that is it. Mortgage is the commitment for 360 months. Big,big difference.

Nope. Obviously most have 6 mo, 1yr, 2 yr leases, but the real point is regardless of your lease term, housing payments are a commitment for life.

toothfairy says

I like to use New York City as an example of how prices can go up when the average person cant afford a home.

The median income in Manhattan is 47k. The median house price is 1.4 million and thats not even a house its a condo.

That's 100% true. Hence why in Manhattan is the exact opposite of the rest of the country: Renters outnumber homeowners. Everywhere else, homeowners outnumber renters.

Bellingham Bob says

Money doesn't buy mortgages

I could have made it simpler by saying houses instead of mortgages.

Bellingham Bob says

I can only hope for a prolonged deflationary collapse to clean out the specuvestors, but I doubt that is really coming, and at any rate their money is better than mine.

I agree. Specuvestors makes most out of the would be naive buyers. What I am sure of is that their profit margin will keep shrinking as move further into the decline of house prices.

bubblesitter says

all of the court house auction should be won by the investors but most goes back to bank,so in the end your theory of investors flush with cash is nothing but a baloney

no, you don't understand that banks set the starting bid price at these auctions.

often they are too high for the sharks to get interested.

APOCALYPSEFUCK is Tony Manero says

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tdeloco says

So if one has the cash, how does one bid? Please just nudge me in the right direction.

Go to your County recorders office. find the name of the local paper that publishes constructive notice of foreclosures.

As far as a percentage reduction off retail, or Market or BOOK value, etc. . What a crock... Ask a Real Estate Appraiser where values will bottom ! Those poor PROs... They get a "comp" a typical house that sold recently for a particular number, tell the bank to loan that much and bingo next week the value is another big % less. Do you think the bank will hire that appraiser in the future ? What's wrong with this picture ?

Study up on buying foreclosed property. surprises can be costly. Hidden Repairs, unrecorded liens, etc.

Housing construction has stalled significantly. As the US population increases, demand for housing will continue to increase at a higher rate than supply, eventually causing prices to increase.

BobbyS says

As the US population increases

BobbyS says

eventually causing prices to increase.

This despite decline in incomes? Where will consumer get all the extra money? Borrow from bank? But they are steadily decreasing all the HELOC and cc limits. Think about it.

bubblesitter says

BobbyS says

As the US population increases

BobbyS says

eventually causing prices to increase.

This despite decline in incomes? Where will consumer get all the extra money? Borrow from bank? But they are steadily decreasing all the HELOC and cc limits. Think about it.

The few wealthy property owners will play music house with one another while the masses will pay a large portion of their income on rent.

bubblesitter says

This despite decline in incomes

Will you PLEASE stop this nonsense. Incomes are NOT decreasing.

http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm

tatupu70 says

bubblesitter says

This despite decline in incomes

Will you PLEASE stop this nonsense. Incomes are NOT decreasing.

http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm

Incomes are decreasing due to high underemployment and outsourcing taputu, just not in all sectors. At times of high unemployment it's easy for businesses to offer lower wages with so many applicants.

Last time I put an ad on craigslist for a temporary opening I got swarmed with people wanting that gig. In some places it is pretty bad out there. People don't make the money, so they don't spend it. And businesses can't hire because there isn't a demand, can't hire someone to twirl their thumbs all day.

FortWayne says

Incomes are decreasing due to high underemployment and outsourcing taputu, just not in all sectors. At times of high unemployment it's easy for businesses to offer lower wages with so many applicants

Did you click on the link?

True, fewer young Americans can afford a house; they could afford one if they stop wasting time and money on "mindless fun" like facebook and iPhone.

But there are plenty of Cash lying around, they are just sitting on the sideline and particularly not buying houses. America's printing press has been working overtime. The quantity of US$ greenback has increased tremendously since US adopted fiat money. You can tell by the sudden change of the price of Gold here www.nma.org/pdf/gold/his_gold_prices.pdf

Two important measures of value should be used. One is the study by Prof. Shiller, "real" house prices havent changed since 1800's. The second is the study by Prof. Siegel, "real" Gold prices havent changed much since 1800's, may be 0.2% rate of change.

I combine these 2 facts and use them to compute price of house in oz of Gold. I get median house price here... http://www.census.gov/hhes/www/housing/census/historic/values.html

1950, US median house price=$7354=211ozGold. California price=$9564=275ozGold.

2000, US price=$160,100=282ozGold.

2010, US price=218,000=195ozGold. If I use 275oz of Gold as the median price for California, the median house price today should be $495,800.

As the house prices stand today, it is approximately "normal". And there are plenty of Cash waiting to buy them, but not yet.

MoneySheep says

True, fewer young Americans can afford a house; they could afford one if they stop wasting time and money on "mindless fun" like facebook and iPhone.

And blogging?

MoneySheep says

1950, US median house price=$7354=211ozGold. California price=$9564=275ozGold.

2000, US price=$160,100=282ozGold.

2010, US price=218,000=195ozGold. If I use 275oz of Gold as the median price for California, the median house price today should be $495,800.

As the house prices stand today, it is approximately "normal". And there are plenty of Cash waiting to buy them, but not yet.

Price of a house in gold means nothing.

Its all about wages, jobs, and the cost of living in the end. By these measures housing has a very long way to fall.

The money on the sidelines will stay on the sidelines until the bottom comes which is years away. Likely very little of it will ever enter housing since there really isn't much money to be made for those sorts of buyers going after blocks of SFH. They'll want big rental blocks that pack the people in for maximum income for a minimum of cost. They'll also want to stay liquid since there are likely to be much better investments out there than buying/selling property or owning rentals, especially in an America where most everyone except those at the top keep getting poorer over time.

Also if you think the iPhone/blogging are what is holding up young buyers from owning a home then I have some cabanas (read: shitshacks) I'd like to sell you for a quarter million a pop.

When prices go low enough you'll find buyers for nearly anything. Of course that also depends how much money they want to put into it in fixing them up.

There is a book about tax liens called the 16% solution that is pretty interesting. Basically when people don't pay the property taxes it goes up for auction. You don't owe the property but you can end up having the right to collect the taxes on it. If they don't pay then you get the property. Interest varies dramatically along with the maturity duration. in RI it is 10% and 1% in addition for six months..I think with a year at most for maturity. In MA it depends on the town so that's a ton of work. I think NY and CA have some long long times (ten years). The only problem with this is it was written in the early 90's before there so much mortgage fraud.

theres a number of things working against those hoping for lower prices.

stock market is at a low
unemployment is at a high
lending standards are tight

when these reverse (when not if) it will produce more buyers. more buyers = higher prices.

tts says

Likely very little of it will ever enter housing since there really isn't much money to be made for those sorts of buyers going after blocks of SFH.

If history is any guide there is tons of future revenue in houses now.

Cap rates might only be 5% now, but when rents triple in the 2020s those who bought now will be happy campers, especially if they can successfully defend their Proposition 13 license to steal.

Landlords operating on 3X leverage will see 40-50% ROI numbers. Sign me up (sure beats 0% TIPS)

The question is whether history is any guide.

tatupu70 says

Will you PLEASE stop this nonsense. Incomes are NOT decreasing.

Those who do not read the newspaper are uninformed.
Those who read the newspaper are misinformed.
I speak with blue collar sector daily. Truck Drivers were making about $24 pr hr in 1997 they are closer to $20 in 2011.

Bellingham Bob says

Cap rates might only be 5% now, but when rents triple in the 2020s those who bought now will be happy campers, especially if they can successfully defend their Proposition 13 license to steal.

Landlords operating on 3X leverage will see 40-50% ROI numbers. Sign me up (sure beats 0% TIPS)

Rents tripling? Really? Rents are subject to wages, jobs, and cost of living just like housing. If people can't afford to rent they'll live with mom n' pop until they're 30 or 40, which is what is happening now. Landlords demanding those rents will either drop their price or end up foreclosed on, just like with housing.

Your dreaming if you think rents will triple. Especially that far in the future. Its likely the best case scenario for the US at this point is a nastier version of Japan's lost decade which was (is really) a long protracted but low level depression.

TMAC54 says

Those who do not read the newspaper are uninformed.
Those who read the newspaper are misinformed.
I speak with blue collar sector daily. Truck Drivers were making about $24 pr hr in 1997 they are closer to $20 in 2011.

Yea the numbers are off in her article too. They'll be revised downwards late this year or early next, just like always. MIT's BPP shows inflation is still much higher than what the government officially says so wages are actually down about .5% this year, not up.

Doesn't sound like much but it compounds after a few years much less decades. Factor in the cost of living increase, especially for healthcare which is around $22K a year for a family of 4, and most people are effectively 1 paycheck away from being on street.

tts says

Its all about wages, jobs, and the cost of living in the end. By these measures housing has a very long way to fall.

EXACTLY. No one disagreed three years ago that only 17% of the San Francisco Bay area's population could afford to BUY in the bay area. 17% of the Bay Area buyers were employed in the high tech field. They since have moved to Pakistan. Real property prices will now return to the average buyers reach.

Bellingham Bob says

when rents triple in the 2020s

What is the stock market going to do in the 2020s ?

TMAC54 says

Those who do not read the newspaper are uninformed.
Those who read the newspaper are misinformed.
I speak with blue collar sector daily. Truck Drivers were making about $24 pr hr in 1997 they are closer to $20 in 2011.

Yes, wages have probably come down in certain professions. And they've gone up a lot in others. Overall, they've increased and are continuing to increase.

TMAC54 says

tatupu70 says

Will you PLEASE stop this nonsense. Incomes are NOT decreasing.

Those who do not read the newspaper are uninformed.

Those who read the newspaper are misinformed.

I speak with blue collar sector daily. Truck Drivers were making about $24 pr hr in 1997 they are closer to $20 in 2011.

For some people highest unemployment in recent times means increase in income. Yeah sure,makes sense. LOL.

TMAC54 says

What is the stock market going to do in the 2020s ?

It tripled in the 1980s. If the PTB allow debt-to-GDP to rise like it did then, we'll triple again too.

http://research.stlouisfed.org/fred2/graph/?g=20E

Do not underestimate the power of the system.

Bellingham Bob says

It tripled in the 1980s

I don't know how are you are seeing that. I am not even seeing doubling in 2020s nowhere close to tripling.

bubblesitter says

I don't know how are you are seeing that.

S&P 500 was 100 in 1979, 350 in 1989.

I am not even seeing doubling in 2020s nowhere close to tripling.

Debt to GDP went from 1.4 to 1.8 in the 1980s (+30%), and 1.8 to 2.5 (+40%) in the 2000s.

I don't know what the system will do but it's in its power to increase debt to gdp another 30%, to 3.25 of GDP.

Assuming nominal GDP rises 2% pa, it will be $20T by 2025 and with that 3.25 ratio, total debt will be $65T, twice what it was in 2010.

http://research.stlouisfed.org/fred2/series/TODNS

This is certainly a possible future.

This is what the bond market is telling you. Be happy with your 0.1% yields since that's all the system is going to be giving you.

tts says

Your dreaming if you think rents will triple.

Part of this thesis is $10 gas and Walmart paying $20/hr.

I don't really see this happening but it's not impossible.

The system is stacked against prudence because if you gamble wrong, you can just Chapter 7 and try again later.

My thesis WRT real estate is that it is one major mechanism by which the proles are enslaved. Inflation is its dearest friend, historically.

Bellingham Bob says

Do not underestimate the power of the system.

The system is driven by confidence. There are reasons markets spike. New inventions, products, new services cause NEW cash flow and confidence. The Radio caused the 1929 spike. The Computer caused the present catapult. The 2008 peak on the DOW is 14 times greater than the1929 peak. If you draw a straight line following D.O.W. growth from 1900 to present, you find 6500 is on target. Do you envision an invention that will triple markets by 2020 ?

TMAC54 says

Do you envision an invention that will triple markets by 2020 ?

bubblesitter says

For some people highest unemployment in recent times means increase in income. Yeah sure,makes sense. LOL

Hey--I don't make the rules, I just report on them. You can live in your own delusion if you want. I've posted the link. How about you post something that disputes it.

Anything.

Oh, I see, You are counting on tarp or government issued paper thru 2020.

TMAC54 says

You are counting on tarp or government issued paper thru 2020.

if that's to me, no I don't. I don't know what's going to happen this decade or next.

One possible evolution I see is continued consolidation this decade and another debt renaissance in the 2020s.

This would conform to the general pattern of a decade of expansion, then a decade of consolidation.

In 2020 we've got the baby boom echo hitting their 30s, along with a serious echo echo forming at the bottom. Throw some new debt-money creation at this and things will go up like a wild fire.

Heck, if we get enough inflation there might not be nominal debt to GDP growth. It'll be the 1970s all over again.

I think it might be like the 70s but for other reasons. Basically guns and butter. Wars in iraq and afghanistan certainly were not cheap. Coupled with tax cuts, prescription drug bill and obamacare and something has to give.

I think rates really should go up but we don't want to upset the NAR now do we...