patrick.net

Claiming that Housing drives the Economy is Procrustean.

During the housing bubble, some people were able to borrow exuberant amounts of money. They would refinance or use HELOCs to take all the equity out of their homes, and use that money to remodel their homes and buy cars. Furthermore, the increase in demand also created a boom in housing construction. So it seems like Housing was driving the economy, but this is only true during the years 2000-2008. This is not the norm. Yet, somehow, people look at this time period and assume that this is the norm.

Assuming that no exuberant lending will ensue that will re-inflate the bubble, jobs are needed in order to create housing demand.

Also, people assume that foreign investors buying up property will drive up the market. In reality, when investors buy a property, that property goes directly into the rental market. A larger supply in the rentals will drive down the prices, and the more people rent, the less buyers there are.

Currently, rent is up. But assuming that it will continue to go up is the same thing as assuming that house prices will always go up during the bubble years.

ZMan says

So Housing can't recovery until, either Job market does, or Prices come way way down. Thoughts?

I think you're right-housing prices are inversely related to the unemployment rate.

But while the job situation still isn't what I'd call good, it is definitely improving. If it continues, then housing will follow.

tatupu70 says

ZMan says

So Housing can't recovery until, either Job market does, or Prices come way way down. Thoughts?

I think you're right--unemployment rate is inversely related to housing prices.

But while the job situation still isn't what I'd call good, it is definitely improving. If it continues, then housing will follow.

That is true, and lets hope the situation improves.

tatupu70 says

But while the job situation still isn't what I'd call good, it is definitely improving

In 2 years it might be only as bad as the tech recession.

What people still don't understand is that the economy of 2002-2008 was floated on a sea of new mortgage debt, ~$5T in total. This money inflow didn't give us just construction and real estate lady employment, this new money pinged around all sectors of the economy.

The direct stimulus was around $1T/yr at the peak:

http://research.stlouisfed.org/fred2/graph/?g=4nd

Now we've got a $50B/month trade deficit -- the Feds are bailing $1.2T/yr into the economy via the federal deficit but half of that is leaking out via the trade deficit.

http://hairynixon.blogspot.com/2011/10/shit-is-fucked-up-and-bullshit.html

tdeloco says

Claiming that Housing drives the Economy is Procrustean.

You are correct, people used homes as ATM and considered them their wealth.

I was just saying in general statement, you can't have one without the other. No housing recovery without jobs

House prices previously rose with wages. Therefore, house prices cannot rise unless 1. wages rise 2. suckers with more hope than brains persist bidding them up.
I believe that in most locations house prices will not rise. In most locations many will have prices fall.
This may accelerate when the backlog of foreclosures starts to hit.
As the national debt and California debt grows, more taxes will be placed onto people and they will have LESS money to spend on houses and other things.

Recovery! to what ? Higher prices and unaffordability ?
That doesnt make sense.. We have been recovering as prices
have been fallen.

10-15 Years from now ? If history is any indication, doubtfull we will ever see recovery (reinflation) in the housing markets.

Japan's RE bubble didnt re-inflate to 1990 peaks. We also see Germany which experienced a RE bubble peak in 1991, at which prices fell and havent re-inflated.

http://economix.blogs.nytimes.com/2009/05/19/der-bubble-envy/

thomas.wong1986 says

didnt re-inflate to 1980 peaks

1990 : )

thomas.wong1986 says

Japan's RE bubble didnt re-inflate to 1980 peaks.

Source: http://www.marketoracle.co.uk/Article8080.html

Bellingham Bill says

1990 : )

thanks..

The odd thing about Tokyo land is that eg. prime Los Altos is still loads more affordable than even literally marginal Tokyo land 10 miles out from Shinjuku.

I guess their 2% interest rates are supporting the land market where it is, but I don't really understand things all that well.

Bellingham Bill says

The odd thing about Tokyo land is that eg. prime Los Altos is still loads more affordable than even literally marginal Tokyo land 10 miles out from Shinjuku.

Comparing Los Altos to Tokyo is like comparing Beloxi, Mississippi to New York, City.
I can't believe that people would actually make that kind of a comparison. Los Altos should be at least 5 times cheaper than Tokyo. The place doesn't even have a legitimate down town.

Living downtown any city always cost twice as much.
Not really sure why, because some cities downtown, what a mess.

ZMan says

Not really sure why, because some cities downtown, what a mess.

It's more convenient. You don't need a car. You can walk to work, theaters, restaurants or use public transportation. It's just a different type of lifestyle. But living near downtown Los Altos is a far cry from living in downtown of a city like Tokyo or New York.

ZMan says

So Housing can't recovery until, either Job market does, or Prices come way way down.

Anybody buying a house now and looking for near-term (say 5 years) appreciation is an idiot.

Organic recovery cannot start without a job market, but prices don't have to come way way down just because the job market doesn't improve. Prices can and do remain stagnant for prolonged periods, where there's no sustainable recovery.

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustained recovery.

uomo_senza_nome says

but prices don't have to come way way down just because the job market doesn't improve.

You must be talking about those areas where prices are not currently still in the bubble. Most of the Bay Area, or any other Metro area on either coast, are still in a huge, unprecedented bubble, and prices must and will come down, whether we have jobs or not.

Interesting that people mention real estate in Japan because if you knew Japan, you would also know that many people there can never own a house or property of any kind.
My ex girlfriend was Japanese and I visited. Her parents had this nice house in a suburb of Tokyo, Tama. They had to win a lottery to be even able to buy it, there were not enough houses in the development for the demand. This was before the bubble popped of course. I visited in 1984 the first time in Japan.
I went back in 88 for work stuff and was around for a couple months. Boy was real estate expensive then. The story goes that the land under an 8.5x11 sheet of paper would be worth about $12,000. The other was that the akasaka castle grounds would be worth more than the entire state of California. Oh yeah, that's a bubble.
The girl in question was recently complaining to me because her parents sold that fancy house to her sister. They want to buy another place and now the bank is requiring 40% downpayment. I asked her "well, what are house prices doing now in Japan?" "I don't know" "maybe they are still falling. this is one reason they want a big down payment" "It's unfair!" (Do you notice how often females say that?)
Anyway, if foreclosures are going to accelerate, and wages are stagnant, and taxes are going up, I see no MONEY increasing in the grubby fists of house buyers=house prices will go down.
When the inevitable happens and interest rates rise, houses will go down in price a little bit more.
And so on.
I was just looking at a condo to rent in Cabo for $450. Sure, it's one bedroom and it's hot in the summer. The girls are hot too for that matter. So, take a couple showers and cool off with a nice margarita.
Just sayin'..

dunnross says

ZMan says

Not really sure why, because some cities downtown, what a mess.

It's more convenient. You don't need a car. You can walk to work, theaters, restaurants or use public transportation. It's just a different type of lifestyle. But living near downtown Los Altos is a far cry from living in downtown of a city like Tokyo or New York.

Yeah I guess that is semi true, but alot of area downtown cities still don't justify the prices.

uomo_senza_nome says

ZMan says

So Housing can't recovery until, either Job market does, or Prices come way way down.

Anybody buying a house now and looking for near-term (say 5 years) appreciation is an idiot.

Organic recovery cannot start without a job market, but prices don't have to come way way down just because the job market doesn't improve. Prices can and do remain stagnant for prolonged periods, where there's no sustainable recovery.

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustained recovery.

Exactly... Good points

David Pinocchio Liareah says

A "housing recovery" is dramatically lower prices by definition.
Housing is going to do a whole lot of recovering over the coming decades.

Have you seen the print/online and TV/radio broadcasting media ever even mention that ever... even once? I havent. Try to explain this to a journalist or a local/state goverment representative ... almost impossible! It hasnt sunk in yet!

Many in the media and govt, "recovery" still means higher prices as early as next year 2012 and forward.

David Pinocchio Liareah says

A "housing recovery" is dramatically lower prices by definition.

Housing is going to do a whole lot of recovering over the coming decades.

thomas.wong1986 says

David Pinocchio Liareah says

A "housing recovery" is dramatically lower prices by definition.

Housing is going to do a whole lot of recovering over the coming decades.

Have you seen the print/online and TV/radio broadcasting media ever even mention that ever... even once? I havent. Try to explain this to a journalist or a local/state goverment representative ... almost impossible! It hasnt sunk in yet!

Many in the media and govt, "recovery" still means higher prices as early as next year 2012 and forward.

EXACTLY! It drives me NUTS every time I hear or read some media goon saying, "recovery to 2006 prices." No dummy, "recovery" is what is going on right now with falling prices. I want to believe that these guys are actually this stupid, but I think that the reality is that the NAr probably has its fingers in there somehow & gets them to spout this nonsense.

bmwman91 says

I want to believe that these guys are actually this stupid, but I think that the reality is that the NAr probably has its fingers in there somehow & gets them to spout this nonsense.

They are just reporting, what they are told. No need to use any common sense when talking.

thomas.wong1986 says

Recovery! to what ? Higher prices and unaffordability ?

That doesnt make sense.. We have been recovering as prices

have been fallen.

10-15 Years from now ? If history is any indication, doubtfull we will ever see recovery (reinflation) in the housing markets.

Japan's RE bubble didnt re-inflate to 1990 peaks. We also see Germany which experienced a RE bubble peak in 1991, at which prices fell and havent re-inflated.

http://economix.blogs.nytimes.com/2009/05/19/der-bubble-envy/

Sorry, you right. Just reading some articles and it says ..Experts see Housing Recovery in 2012.
Thats really enough for me.

Because the people that didn't see it coming before, are now predicting whats going to come.