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EastCoastBubbleBoy
2011 Mar 10, 11:12am
Call me vain if you must, but its amusing to sit here and read people speculate on where i may or may not live.
At the end of the day the want (not need, but want) for land becomes limiting. And so, I start to look at different "what if" scenarios, to see if maybe I need to forgo a want, focus on covering my needs, and not try to hit a home run at my first at-bat. After all there's nothing wrong with a start house.
But the more I look at it, the more I realize that, even if things have already bottomed out, there is little risk in waiting, as prices are not going on a tear a-la 2000-2007. Double digit appreciation is a thing of the past, at lest for the foreseeable future. And so, I wait and watch. In the end, buying a home is such a big commitment... its kind of like falling in love and getting married. You know the right one when you see it. Perhaps this is a foolish way of looking at it, but its one mans perspective.
Truth be told I get cold feet. The idea of years of savings finally being spent. The fact that my housing cost would almost double. What can I say - I've gotten comfortable living below my means and saving the difference. I've been blessed with decent health, a steady job, and reasonable wage. Why upset the applecart chasing the "security" of material things?
As I read back though some of my posts, I've notice they've gotten somewhat stale and repetitive. Sorry 'bout that.
Regards,
ECBB
FuckTheMainstreamMedia
2011 Mar 10, 8:07pm
But the more I look at it, the more I realize that, even if things have already bottomed out, there is little risk in waiting, as prices are not going on a tear a-la 2000-2007. Double digit appreciation is a thing of the past, at lest for the foreseeable future.
Most of the American public...particularly those still having a reasonable income....does not agree with this...not yet. That's what is currently driving demand. I guarantee you that about 90% of those who bought a primary residence property in LA and OC counties within the past three months, believe that their property will increase in value by a significant amount in a 5-10 year time span.
I disagree, but the mentality out there is still the same as that bubble entitlement.
Huh? ECBB. You're alive?
That's good. And I do think there must be a reason or two when you think it's about the bottom... at least in your area. Actually that is what matters after all.
All I want you to think about is this. There must be a reason why price got lowered in the area. If you can be sure that it happened not because of those negative reasons such as, the area being shitty, high foreclosure rate, high crime rate, poor schools etc, and you like the area.... you may want to go for it, for this can be your chance to have a home. Otherwise, think hard.
A HH that earns stable 80K/yr should be able to afford 200~250K home. Getting cold feet is nothing unusual. It happened a lot and there's nothing wrong about it. Please make sure you got some money left in your hands after you bought a home, because anything can happen to anyone.
EastCoastBubbleBoy
2011 Nov 13, 11:53am
I tried to post the following rant (shown below) but Patrick.net said "that titles already used". Go figure - it was one of my threads from about a year ago.
See rant below.
****
Just need to vent. I've been saving up a down payment for almost ten years now. If you had told me ten years ago that I'd have as much in the bank as I do now. Heck if you told me I'd be earning as much as I am now, I'd have figured that I would have been in a place of my own for some time now.
Obviously that isn't the case - I don't mind renting - but if we are blessed with another child we'd need more space than what we have right now. Don't get me wrong - we're comfortable (and in many ways fortunate - we still have stable jobs, the recession hasn't devastated us the way it has some of our friends and relatives) - but for what our HH income is, one would think that a home would not be as much of a stretch as it is.
I keep thinking its me - that there's something I should be doing - some avenue i haven't considered.
But maybe this is just as good as it gets. Looking at data for my area. Median HH income $98,341, median price $320,300. Far more in line than I care to admit to.
I think what it is is that - our income is x times the median, but we can't afford much more than a starter home without feeling like we're stretching ourselves too thin. Perhaps we're too conservative for our own good. If we spend like the "average" american spent - we'd have the half million dollar McMansion by now - and be one step from disaster.
I keep thinking that moving to a lower tax, lower cost area may be the solution but 1) we'd be far from family and 2) there's a certain amount we need to earn to meet our monthly obligations (student loans, etc.) even if we bought a house in cash - and that supposes we could find jobs.
I just feel fricking frustrated. Plus, the fact that I have such a yearning for something that is so material in the grand scheme of things, that just frustrates me more - I try not to be materialistic.
I want to believe that prices will crash if / when the economy sees its next downturn. But thinking prices will crash - with no data to support it - that's the other side of the same coin (prices always go up). Even Case-Shiller shows that - with enough government intervention - a floor can be put on prices - I expect prices will stay more or less flat (+/-5% in either direction) until inflation finally catches up and equilibrium is restored. Granted real wages aren't rising - but that's a completely different thread.
I just feel stuck. Despite my best efforts to work hard and get ahead, I feel like I've been sold a bill of goods. I'm not falling further behind anymore - but I'm not getting ahead either - and I'm starting to get sick and tired of being sick and tired. How the heck is everyone else doing it? Wait - that's right - the same smoke and mirrors is still going on. Makes me want to give up, given in and follow the lemmings - cliff be damned.
***
Rant ends - thanks for listening.
EastCoastBubbleBoy
2011 Nov 13, 11:56am
I should say that I'm not a whiner (even though I come across as one at times). I try to count my blessings, try to realize that I'm doing better than many. Try to be happy for my health, my family, and even my job.
But its can be difficult to keep perspective when the one thing that i think I want (a house) still seems as elusive as it did a decade ago. Growing up with the "American Dream" ingrained in my head from a young age - it makes one feel like a disappointment when said dream is still just that - a dream.
House prices are still going down, it's gravity, it's a drag but it's the law. The results may be different depending on where you live. Perhaps where you live they stopped falling. Want to see what will happen? Use Zillow or Trulia and see how many are being foreclosed on. Lots of foreclosures=prices going down.
Where my mother lived in CT there are no foreclosures lately, the median house cost 3X the median income. It was a nice prosperous town.
If you want to buy a house, get a second job, take in a roommate, and risk your financial future and use leverage (borrowed money) to achieve this goal.
Look at your tax return someday. You will find that you pay an enormous burden in TAXES that is a wealth transfer to other people who didn't earn it. The % of GDP of TAXES keeps rising, along with debt.
Anyway, we have less money left over to buy houses and pay rent, simple as that.
But, as far as worrying about buying one someday, no sweat. They'll get cheaper when interest rates go up inevitably.
Remember that your goal is always going to be to reverse-mortgage the thing anyway, so you'll get some money back anyway.
After living in Mexico for a couple of years and seeing people at the cancer treatment center a few years ago, I stopped worrying about what others think of my status or apparent prosperity. Some things are important and some are not as important as you think.
How's your health? Do you have energy? Do you have any friends? A girlfriend? Roof over your head, food to eat and some free time?
That's ENOUGH. I know some very wealthy people who are fairly miserable in their monster houses.
Want to know other miserable people? They have thousands of posts on this blog bragging about investments, etc.
Ask their opinion about anything at your peril.
But the more I look at it, the more I realize that, even if things have already bottomed out, there is little risk in waiting, as prices are not going on a tear a-la 2000-2007.
You might want to reconsider this. QE3 is imminent and thus inflation of US Dollar as a currency. While your wage might be (hopefully) adjusted by your employee - no-one will take care about adjusting value of your savings in bank account (or wherever you keep them). That said I do not mean that RE buy is the best (or only) way to protect the value of your savings but definitely one of options.
Â¥
2011 Nov 13, 1:52pm
QE3 is imminent and thus inflation of US Dollar as a currency
LOL.
So you're saying gas is going to be $10/gallon?
How exactly is that going to increase home prices?
In places that consume more oil than they produce, of course.
joshuatrio
2011 Nov 14, 4:29am
I should say that I'm not a whiner (even though I come across as one at times). I try to count my blessings, try to realize that I'm doing better than many. Try to be happy for my health, my family, and even my job.
But its can be difficult to keep perspective when the one thing that i think I want (a house) still seems as elusive as it did a decade ago. Growing up with the "American Dream" ingrained in my head from a young age - it makes one feel like a disappointment when said dream is still just that - a dream.
I think your dilemna is what most of us on this board are struggling with.
It sounds like you do well, have a nice DP saved up, but when it comes time to put 10 years of savings down on an item that may still depreciate, in a market full of lies/manipulation by realtors, not to mention fraud economy... it's hard to take the plunge. Plus taking a mortgage out, and being committed to payments for the next 10-30 years. Not fun :)
Buy when your comfortable. Until then, sit on the sidelines.
I've been watching a few areas back east (MD/DE/VA) and have seen prices drop about 10k across the board (last month or two) on some pretty nice 4 bed homes. The homes are still in the $250-350k range - which I don't understand because there is no economy in some of the places we have looked.
So you're saying gas is going to be $10/gallon?
Yeah, this is pretty much what I'm saying. As well as all other consumer goods and services.
How exactly is that going to increase home prices?
You probably misread my post. I never told that home prices are going to go up. I said the value of savings which one might have in cash (by not buying house for example) will decline a lot. And obviously - if house costs $100k with 3% inflation rate and same amount with 7%+ inflation rate - guess which house is cheaper... Anyway, the point I'm trying to explain is that IMHO real estate investment looks to me quite attractive from perspective of saving my cash savings. How so? By renting them!
zzyzzx
2011 Nov 16, 10:25pm
Last night on the news they were predicting a housing bottom in 2015,
That was the first time I actually heard them say that the bottom wasn't "next year".
FortWayne
2011 Nov 16, 11:59pm
if you go to the auctions you can get a good price. auction.com will have them all listed.
Once you go into the re-seller market, outside the auction, you are paying someone huge overhead with too many middle men.
I think California is a special case primarily b/c of prop 13. I personally believe the current situation in California is unsustainable and prop 13 will be dismantled. When and if this happens I will consider buying property there again. If I didn't own property and wanted to invest at this time I would leave the state. California is subject to all the same economic uncertainties that the rest of the country faces but in addition has to deal with the huge repercussions brought about by prop 13. The chickens are just now coming home to roost.
Schizlor
2011 Nov 17, 3:56am
"there are far more pressing problems (on both the micro and marco levels) than home prices"
Correct
B.A.C.A.H.
2011 Nov 17, 4:23am
California is a special case primarily b/c of prop 13
Maybe.
But California, and especially the coastal communities, and of those, The (coveted) Fortress Communities, are a special case because they're Special.
I recently purchased a home in San Diego and I am very happy with it. I paid over $368k for it, and that is reasonable in our area ($575k in 2005). San Diego has 2 of the top 20 colleges in the US, and 3 of the top 20 high schools in the US. I believe we hit a bottom because it takes about 6 months of trends to show this, and recently we had a 6 month gain in prices. I would tell anyone who is thinking about buying, “buy†because as the economy turns around you are going to be bidding for your home. Homes in San Diego currently have 5-7 bids over asking price. This to me signals a recovery! So if you wait and people expect homes to drag along the bottom people are going to be inclined to purchase, and you are going to pay more money because of bidding wars.
San Diego has 2 of the top 20 colleges in the US
UCSD is not a top 20 college, although it might be a top 20 public college. What's the other one? Mostly irrelevant to moving there, though.
All the UCs (other than Berkeley which was always at the top) are performing better on USNews than they were 10-20 years ago, probably partly because admission rates are so low:
3 of the top 20 high schools in the US
Ummm. I get 0? http://education.usnews.rankingsandreviews.com/best-high-schools/rankings/gold-medal-list (Preuss UCSD and a program at San Diego High mentioned below are in the top 100)
http://www.thedailybeast.com/newsweek/features/2011/americas-best-high-schools.html (which lists Preuss UCSD Charter and Torrey Pines in the Top 100)
Even in California, San Diego probably doesn't have 3 of the Top 20:
http://education.usnews.rankingsandreviews.com/best-high-schools/search.result/state+CA
La Jolla High gets an honorable mention, Poway High and River Valley Charter got a silver, the LEADS program at San Diego High which is 87% economically disadvantaged and 89% black or Latino got a bronze, San Diego Metropolitan Regional Career & Technical which is over 50% economically disadvantaged and largely black and Latino got a bronze, the School of Int'l Business at Kearny High which is 75% economically disadvantaged got a bronze, the School of International Studies at San Diego High which is almost 50% economically disadvantaged got a gold, and the Preuss School UCSD Charter got a gold.
None of this is to say that San Diego is a bad place to live, but where are you getting these stats?
I would tell anyone who is thinking about buying, “buy†because as the economy turns around you are going to be bidding for your home. Homes in San Diego currently have 5-7 bids over asking price. This to me signals a recovery! So if you wait and people expect homes to drag along the bottom people are going to be inclined to purchase, and you are going to pay more money because of bidding wars.
The statistics disagree:
http://dqnews.com/Articles/2011/News/California/Southern-CA/RRSCA111115.aspx
Home sales are flat YOY. Median prices aren't always the best to reference, but they are down almost 6% YOY ($334,500 to $315,000). I'm not buying it.
I wouldn't be surprised if the best houses at certain price ranges had bidders, but that's true everywhere.
David9
2011 Nov 17, 7:03am
Regarding prices, this is front page msnbc right now: (probably on this blog tomorrow)
http://bottomline.msnbc.msn.com/_news/2011/11/17/8859967-foreclosure-crisis-only-about-halfway-over
As I said before, I have personally been watching prices for two years in the Los Angeles area, drop, pause, drop, drop, inch up, drop, drop, drop. Not saying I want this property for 79k, but I'm sure and I think you'll all agree this would have sold for 250k in the bubble.
http://www.redfin.com/CA/Tarzana/18530-Hatteras-St-91356/unit-104/home/4060700
Regarding prices, this is front page msnbc right now: (probably on this blog tomorrow)
http://bottomline.msnbc.msn.com/_news/2011/11/17/8859967-foreclosure-crisis-only-about-halfway-over
I wish we could re-write the headline to reflect reality. The current headline is:
Foreclosure crisis only about halfway over
What it should really say is:
Foreclosure solution only halfway implemented
We need more foreclosures, not fewer, to fix the housing market. Prices need to come down in order to fix it.
simchaland
2011 Nov 17, 7:34am
I find this site to be interesting:
Housing Tracker Residential Real Estate Listing Statistics by City
I used to check this site regularly before and just after the crash.
I haven't checked it in about a year.
San Francisco:
The data shows that the asking prices are still declining in the San Francisco Bay Area dropping 2.5% YOY. The inventory seems to have dropped a whopping 24.5%. The general tragectory of the graph for asking prices for all ranges seems to show a slow and steady decline. Are we still seeing a slow and steady decline or are we going to start trending higher?
San Jose:
San Jose asking prices are actually up 1.8% YOY. Inventory dropped 23.3% YOY. The general tragectory of the graph for asking prices for all still seems to show a slow decline but what comes next?
Los Angeles:
Los Angeles asking prices are down 6.6% YOY. Inventory fell 9.9%. The tragectory of the graph for asking prices shows a slightly steeper decline than in the Bay Area. What direction from here?
San Diego:
In San Diego they show that prices declined 5.0% YOY and inventory dropped 12.8%. Again the price declines seem to be steeper than the Bay Area. But where does it go from here?
Conventional wisdom would say that declining inventory would begin to match lower demand eventually and that asking prices would increase. But in the Bay Area a very steep decline in inventory hasn't translated into a sharp increase in asking prices yet.
In my opinion, taking into account unemployment rates in California plus the stagnation and decline in incomes for most people in California will yield steadily declining prices for the forseeable future.
After all, people will only buy what they can afford these days. It's not like the high rolling days of the boom. Banks are not lending to people who don't have enough income to qualify for mortgages like they were before the crash.
The economic outlook is uncertain at best so I don't see evidence that asking prices are going to increase in any significant way.
IMHO, unless there is a huge change and jobs start rolling into California while incomes of most Californians increase we will continue to anemic asking prices at best or a continued slow and steady decline.
Even in California, if only the 1% can afford to buy, house prices won't go up. Real mansions with exclusivity will be an exception because the 1% will always be able to afford whatever they want at whatever price.
It depends on your location. If you live in a business-friendly state such as Arizona, Texas, Florida, Nevada, North Carolina, I believe there is a chance prices will bottom out or increase. Values already have increased in certain areas. California is on the way down. Inland areas keep plummeting and are fraught with abandoned housing developments. If you check out the OC Register, 204 major firms left California last year, and the list keeps growing. 21% of small business plan to leave California within the next three years. With California's hostile business environment, this migration will will continue. No one really knows how bad it will get. Will the coastal areas still retain value? or will CA become a larger version of ruined Detriot?
rooemoore
2011 Nov 17, 8:40am
It depends on your location. If you live in a business-friendly state such as Arizona, Texas, Florida, Nevada, North Carolina, I believe there is a chance prices will bottom out or increase. Values already have increased in certain areas. California is on the way down. Inland areas keep plummeting and are fraught with abandoned housing developments. If you check out the OC Register, 204 major firms left California last year, and the list keeps growing. 21% of small business plan to leave California within the next three years. With California's hostile business environment, this migration will will continue. No one really knows how bad it will get. Will the coastal areas still retain value? or will CA become a larger version of ruined Detriot?
Your not paying attention to what is happening in this country. "Business friendly" states with their low paying jobs with no health insurance are going to be having there own headaches as Americans finally wake up and realize how screwed they've been for the past two decades.
I've been alive long enough to know that this is going to get ugly. The only solution: high paying jobs. Unfortunately, that boat sailed long ago.
So no, California will not be going the way of Detroit.
"I would tell anyone who is thinking about buying, “buy†because as the economy turns around you are going to be bidding for your home. Homes in San Diego currently have 5-7 bids over asking price. This to me signals a recovery! So if you wait and people expect homes to drag along the bottom people are going to be inclined to purchase, and you are going to pay more money because of bidding wars."
Presently, banks keep a large shadow inventory off of the market. In some cities, the shadow inventory is 2-3 times as large the inventory of available homes. That does not even include distressed properties. Even in wealthy Laguna Beach, 11% of all homes are "under water". Most of the homes available in coastal cities are overpriced and unappealing. When a reasonabley priced, appealing house enters the market it will receive multiple offers. Such homes are rare and this should not be in indicator that we are "recovering". This is a temporary effect created by artifcial financial manipulation. In California, firms of all sizes are leaving in droves. it is unlikely that property will ever recover here.
"Your not paying attention to what is happening in this country. "Business friendly" states with their low paying jobs with no health insurance are going to be having there own headaches as Americans finally wake up and realize how screwed they've been for the past two decades.
I've been alive long enough to know that this is going to get ugly. The only solution: high paying jobs. Unfortunately, that boat sailed long ago.
So no, California will not be going the way of Detroit."
The relatively high paying jobs, such as provided by Apple Computers and TV Guide have abandoned California. Apple relocated its headquarters to North Carolina and TV Guide moved everything to Oklahoma. Those are two random examples. for a longer list, check out that article I listed from OC register.
Statistics speak for themselves. here is the article reporting the migration:
http://jan.ocregister.com/2011/01/28/2010-total-204-firms-tell-calif-good-bye/53594/
If you scroll down, you can see several more articles reporting this situation. Many counties in CA are already "Detriot". Here is an interesting news video on youtube about "ghost" developments in CA.
http://www.youtube.com/embed/viCljYVnyDg
It looks like Detroit to me. Part of the reason for this is high taxes. High taxes lower wages and increase unemployment. In business friendly Austin, TX, property values actually went up this year...no ghost towns.
simchaland
2011 Nov 17, 9:22am
AA, I don't think you understand the business environment in California. Even corporations realize that they need to be located in places where people want to live. California is still a desirable place to live despite recent economic difficulties. We still have weather, scenery, and a variety of entertainment that rivals many states. (I can't believe I'm saying this as a reluctant California transplant from the Chicago Area via the Quad Cities/Iowa.)
Even with mobile labor, people do like living in places that are fun and interesting that offer opportunities for enrichment. And not all jobs can be done "from home" so most employers need a physical plant somewhere and employees that actually come to that physical plant.
Also employers like to locate where there are easy local connections to other companies that service, compliment, or collaborate their work.
Small town America does offer its own charms. I've lived there and I enjoyed my time there. But it can't compare to a large coastal metropolitan area in terms of offering a diversity of highly talented workers. Most of these workers don't want to relocate to small town America.
Companies based in California still make good profits. Look at Apple for one shining example. Apple headquarters is in Cupertino, California (an expensive part of the San Francisco Bay Area). It still is there in Cupertino at 1 Infinite Loop, Cupertino, CA 95014, see here. Apple is branching out and built a big Data Center in North Carolina. They are even building a giant new campus in Cupertino, CA. Apple surpassed Exxon as the most valuable company in April 2011.
California has its problems. Attracting investment hasn't been one of them. California is suffering now because the world economy is suffering.
If California were a country it would have the world's 8th largest economy having had a Gross State Product of $1.9 trillion in 2008 which was 13% of the US Gross Domestic Product for 2008. (See article for references)
Dan8267
2011 Nov 17, 9:46am
Here is an interesting news video on youtube about "ghost" developments in CA.
The destruction of real wealth described in the video is exactly what we all predicted would happen if the government didn't just let housing prices fall. None of this crap would have happened if the government didn't bail out the big banks and prop up housing prices.
The housing bubble ended five years ago, and we're still paying the price. Hell, I'm voting for The Rent is Too Damn High Party.
simchaland: I don't think all of California will fall overnight, but the statistics are alarming. I own a small business here and I would never be able to grow unless I moved elsewhere. I would go bankrupt if I tried to expand here. I like the area, but I have to keep it small. Many other small business owners say the same. There are old, established large firms that may always stay, but many are leaving. As far as fun interesting and desirable places, I couldn't believe it when media staple, TV Guide, moved from Hollywood to Oklahoma. I also couldn't believe it when AAA Southern California moved to Texas. How can AAA California be located in Texas?? Do an google search on "businesses leaving California, 2011". It is eye-opening. As far as urban decay goes, upscale coastal cities appear ok, but have a look at inland cities and farm communities throughout the state. The rate of decay is dramatic.
21% of small business plan to leave California within the next three years. With California's hostile business environment, this migration will will continue.
This is nonsense. I already posted actual numbers showing that the number of businesses in California rose from 2006 to 2009. It looks like the number has gone down slightly for 2010 Q3:
2006: 1,265,268
2007: 1,304,291
2008: 1,337,920
2009: 1,347,245Even in the worst economy since the Great Depression, the number of businesses in California has increased, although growth has certainly slowed because of the economy.
The number for Q3 of 2010 (all the others are also Q3) is 1,344,480. If you delve into the numbers, you will see that businesses with 0-4 employees declined by almost 5,000, businesses with 5-99 employees (small businesses!) rose, businesses with 100-499 employees declined, and businesses with 500+ employees went up.
As you can see, the 5,000 0-4 employee businesses disappearing drove down the overall number. Why would 0-4 employee businesses disappear in 2010? Maybe because the number of independent contractors went down because some of them got jobs.
As you can see, the number of businesses with 5-99 employees went up -- in all four categories, 5-9, 10-19, 20-49, and 50-99.
Some of the stats you're giving are probably questionable, like Rick Perry's:
The relatively high paying jobs, such as provided by Apple Computers and TV Guide have abandoned California. Apple relocated its headquarters to North Carolina
Are you high? The company building a new HQ building in Cupertino, CA? I believe Apple has a data center in NC, but it has not relocated its HQ. The fact that you said this makes you lose all credibility in the rest of what you say.
TV Guide moved everything to Oklahoma.
False, as well. Where do you get your information? TV Guide Magazine is based in NY and started out in Radnor, PA. TV Guide Interactive is based in Tulsa. TV Guide Network is based in Los Angeles.
Regulation and taxes do make a difference in where businesses locate, no doubt. However, there are other factors that matter too. California offsets some of the negative factors by having a deep job market with lots of high-skilled workers and by being a desirable place to live.
I doubt you live here.
I also couldn't believe it when AAA Southern California moved to Texas. How can AAA California be located in Texas?? Do an google search on "businesses leaving California, 2011"
AAA of Southern California, eh? You did realize that the Auto Club of Southern California owns AAA Texas, AAA Hawaii, and AAA New Mexico, didn't you? I bet you didn't. I believe it's also affiliated with AAA Northern New England, AAA Missouri (which covers several states, not just Missouri), and AAA Alabama.
So it would be quite logical that the Auto Club has had employees in Texas ever since it bought AAA Texas, wouldn't it? It has since moved some back office and call-center stuff to its Texas office, by some estimates about 350 employees over the last 6 or 7 years since they moved AAA Texas from Houston to Irving. The Auto Club of SoCal still has more office space and employees in Costa Mesa than it does in Irving, TX -- almost 5X the office space in Costa Mesa (http://realpoints.dmagazine.com/2011/04/buzz-whats-next-for-aaa-texas/).
In short, you don't really know what you're talking about. And your Google search returns 5 results, none of which say all that much.
tatupu70
2011 Nov 17, 11:00am
The destruction of real wealth described in the video is exactly what we all predicted would happen if the government didn't just let housing prices fall. None of this crap would have happened if the government didn't bail out the big banks and prop up housing prices
You've got to be kidding. There's a good chance we wouldn't have an economy in the US without some sort of bailout.
Do you think things would have magically worked themselves out?
California offsets some of the negative factors by having a deep job market with lots of high-skilled workers and by being a desirable place to live.
"desirable place to live" doesnt translate into a budget or forecast number. High home costs has been sinking our ability to compete and attract skilled labor.
I cant say, where GE or IBM has its center of R&D. They are scattered nationally and globaly. Today HP, Intel, Oracle, Seagate and many others are also scattered globally.
Plenty of people would leap at the oppurtunity to work for Intel or HP regardless of where the job is located. So if you dont like Washington, Arizona, or Nebreska, someone else will.
The company building a new HQ building in Cupertino, CA?
That may not happen given Emporer Nero is gone. Jobs was married to Cupertino, Cook is from Alabama. We will see how it goes. But like every other great campus in our history, doesnt go far.
EastCoastBubbleBoy
2011 Nov 17, 12:19pm
We have a relative in our family. She relates everything to how it was back in the 1950's be it child rearing, the labor market, or prices. Needless to say, she things that EVERYTHING is overpriced because of her frame of reference. I don't want to get into the same trap with my thinking on houses.
Late 1990's this area was somewhat undervalued. By 2003 it was overvalued - then it just got crazy. But if I keep my frame of reference as "what prices were in 1998" - then prices will always look overpriced by comparison. For example in my school district, I can find a half dozen or more 3 bdrm / 2 bath houses, each on about 0.5 acre for an average asking price of about $280k in my area. Now if you ask me my valuation - I'd say they aren't worth much more than $220k - heck they sold for $160k back in 1998.
Therein lies the rub. If they are selling at or near $280k - then perhaps the problem has shifted from "housing prices are too high" to "I have underestimated the price the market will bear."
I'm not timing the market - I'm looking for value. Its a big purchase - I want to feel like I'm "getting my money's worth."
But if I get in the mental trap of using an outdated frame of reference - everything seem expensive by comparison
Dan8267
2011 Nov 17, 2:36pm
You've got to be kidding. There's a good chance we wouldn't have an economy in the US without some sort of bailout.
Do you think things would have magically worked themselves out?
We certainly would have an economy w/o bailing out the big banks. People still make stuff. Banks, on the other hand, produce nothing. At best they facilitate the movement of money. At worst, they impede it.
Had the "too large to fail" banks been allowed to fail, all the "too small not to fail" banks would have eaten up the assets of the too big banks at a steep discount. This would be the economic equivalent of the small, agile mammals taking over from the slow, lumbering dinosaurs after the asteroid strikes.
Our economy would be far better off as the big banks could not continue to hold it hostage, borrow at 1% and loan to the gvt at 6%, and keep housing inventory off the market. The rapid re-adjustment to housing prices would have allowed so-called "fence sitters" to buy a house and have money left to furnish it. The economy would start moving again.
Right now, we have executives in these too big to fail banks keeping the losses off the books for as long as they can. That is why we are experiencing a lost decade similar to Japan's.
If we had let the lumbering, foolish dinosaur banks die and be eaten by smarter, smaller banks, unemployment would not be as high as it is now. We would have had two years of recession 2007-2009, and then a recovery. As it stands, we'll be in this depression for at least another five years if not more unless something drastic changes.
Â¥
2011 Nov 17, 3:21pm
unemployment would not be as high as it is now. We would have had two years of recession 2007-2009, and then a recovery.
utterly wrong.
Again, it was consumers taking on trillions of debt:
http://research.stlouisfed.org/fred2/series/CMDEBT
that gave us the economy of 2002-2007.
While I have been recently re-thinking my views on TBTF, I do still remember the summer of 2008 and thinking that the Indymac failure was going to be the first of very very many.
You can talk about assets being liquidated, but these assets are the flipside of the banks' liabilities, which were -- and are -- everyone's fucking money we've given them to keep.
The rapid re-adjustment to housing prices would have allowed so-called "fence sitters" to buy a house and have money left to furnish it.
The housing sector is sick for other reasons, not the banks. We had abused it 2002-2007, and now it's not going to work for us any more.
bubblesitter
2011 Nov 18, 1:54am
http://research.stlouisfed.org/fred2/series/CMDEBT
that gave us the economy of 2002-2007.
Troy, that graph scares the shit out of me.
"desirable place to live" doesnt translate into a budget or forecast number. High home costs has been sinking our ability to compete and attract skilled labor.
Which of course I acknowledged in my post. You don't really seem to do well with shades of gray -- I said that it offsets somewhat, and I didn't say that "desirable place to live" is the number one factor or anything. As another example, many California colleges get better professors than school rank would otherwise dictate simply because of the desirability of living here. But cost of living is still a big negative, obviously.
That may not happen given Emporer Nero is gone. Jobs was married to Cupertino, Cook is from Alabama. We will see how it goes. But like every other great campus in our history, doesnt go far.
I wouldn't be surprised if the iHQ isn't built, but I don't see Apple moving from Cupertino any time soon either.
Had the "too large to fail" banks been allowed to fail, all the "too small not to fail" banks would have eaten up the assets of the too big banks at a steep discount. This would be the economic equivalent of the small, agile mammals taking over from the slow, lumbering dinosaurs after the asteroid strikes.
Yes, this would have been a good thing. It may not have been pretty in the short term, but it would have been better in the long term. Instead, entrenching the banks as even bigger than TBTF with largely the same incompetent management as before (with bigger bonuses) and without penalizing shareholders for not engaging in enough oversight isn't really solving the problem. We still need more deleveraging.
PockyClipsNow
2011 Nov 18, 2:21am
I was really suprised when all the banks got bailed out with TARP and endless bailouts, accounting rules thrown in the fire,etc all in a matter of weeks back in 08.
Remember Obama and McCain during the month before the 08 election when TARP was 'wobbling' in congress and they both stopped campaigning, flew back to washington to MAKE SURE IT PASSES? ha!
D and R is same party.
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OK. Prices may fall another 10% over the next two years (I expect that most areas will have reached their respective bottom by 2012), perhaps even 20% in some highly resistant areas. But expecting further precipitous price drops is unrealistic, as such as scenario would mean there are far more pressing problems (on both the micro and marco levels) than home prices.
But if I buy a $250k house at 4.75% today, or a $200k house a 5.5% two years from now, how much difference does it make? At the end of the day, not much. Not to mention that once I outgrow the space I am living in now, the rent will be far more.
Seven years ago, the bubble was evident, three years ago, it started to pop. Now the calculus of buy vs. wait is far more uncertain.
Certainly buying isn't a good investment, but then again, it was never meant to be. Using rent as a metric is a false barometer. There are fare more 800 ft2 apartments than 800ft2 houses, and far more 1800 ft2 + houses than 1800 ft2 rentals. In short, it is not an apples to apples comparison.
For my own personal situation, if I compare cost per square foot of buying vs. renting, it is almost a wash.
Rent/current living area = 1.17
PIIT / projected living area = 1.18
Monthly payment is 2x as much, but a house would be 2x as big.
And yet, with the low ROR on investments these day combined with the continued appreciation of rent and other living expenses, the NYT calculator says that in almost all circumstances, renting is a better option. (mostly due to the higher cost of ownership in the form of taxes, additional utilities, etc.)