patrick.net

StoutFiles says

Banks would tear down and/or rent them out if prices dropped too low.

Um, no. They are not allowed to do that.

gameisrigged says

StoutFiles says

Banks would tear down and/or rent them out if prices dropped too low.

Um, no. They are not allowed to do that.

Why not? They own the house. If the loaner bails out, the bank can do whatever it wants.

GameOver says

I personally think that charts are USELESS. Your picking & choosing which ones are 'valid' and which ones 'aren't' simply CONFIRMS my theory.

I TRY to use the valid ones.

Don't get too critical though. A chart is just like a fuel gauge. You probably should not rely on it prior to take off.

( trust but verify )

If we could only find a chart showing the subject SHADOW INVENTORY. But who would verify those numbers. N.A.R. ? S.E.C. ? FRANNIE ? L.H.L. (loud hysterical laughter) I doubt wikileaks has access to that simple number. Don't you just love our transparent gubmint agencies ?
Snakes are more predictable !

Is our tax money being used to keep shadow inventory a secret?
Do you feel Gaped ? (no photo )

From my area it seems there is some shadow inventory..but not an atrocious amount. I follow my market carefully and see how long before some short sales that don't get approved come out as foreclosures and how long preforeclosures go before they hit market and how banks deal with selling them auction vs mls, pricing etc.. I am noticing short sales are going thru better and that banks once they foreclose and market house they are holding out for price where as before they would mark down every 30 days to the day. I am seeing in some no price drop for 6 months. Banks are slowing down and trying to get max out of house. I think they have the end of this tunnel in sight and they are back in money making mode.

I would also echo the sentiments of when you travel internationally. housing is pricey, rent or buy and quality and safety can be very low, in addition staples and food are higher price than we are, but incomes are low and infrastructure very poor, I don't think we have it bad... In my area inventories are low, the housing available is either by busy road, power poles, or over priced not alot of stuff in the sweet spot, In my area rents support generally prices,My prediction is I don't see things really going down too much farther and I don't see them going up drasticly. Just a stagnation and eventual following of inflation.

If your going to rent out your real estate purchase, I think you could do okay but maybe could do better and would be easier and more liquid with bonds equities??? and waiting for equities dip. If your going to live in it I think housing is ready or close to following inflation rates. Of course each geographical area has its own set of factors to calibrate the buying time/ price.

TMAC54 says

I had respected your comments in the past. But your nominated comment makes us realize you don't read what you comment on.

OK. Help me out. Here is your original nomination worthy comment.

TMAC54 says

Real property sales prices GAPPED up 20% to 25% most years from 1974 to 2008.

You said real (inflation adjusted) prices GAPPED up 20-25% MOST years from 1974 to 2008.

Looking at the inflation adjusted chart you posted, I see exactly no years where prices rose by 20% until the recent bubble.

So, please tell me how it happened for "most" years.

Press this for a census data on new home price averages for the pas few decades
http://www.census.gov/const/uspricemon.pdf

tatupu70 says

OK. Help me out. Here is your original nomination worthy comment.

OK NOMINATOR, I used writer's license. I hereby change MOST to MANY. Who wasn't motivated by a 25% return on hundreds of thousands of dollars with virtually nothing invested ? (virtually=writers license)
Like discussing religion or politics, Those who OWN real property will use DENIAL and FAITH when faced with the question as to WHY did prices rise 3 times the normal appreciation rate EVER ?
THAT REASON ; PROFIT generated by the introduction of the computer age.
This might also help you face reality. Gubmint is spending billions/trillions to MANIPULATE home prices ? Or maybe some people envision, How much will gubmint need to spend to restore that 25% rate of appreciation ?
Is this how to cure a spoiled child ?
We HAD a nice run, now "LET IT GO" !

TMAC54 says

I hereby change MOST to MANY.

OK--please show me the MANY years that real housing prices increased 20% or more.

You can't. Because it didn't happen until the bubble in the middle 2000s.

It wasn't semantics--your statement was utterly ridiculous.

TMAC54 says

Those who OWN real property will use DENIAL and FAITH when faced with the question as to WHY did prices rise 3 times the normal appreciation rate EVER ?

You are the one in denial. There was a housing bubble in the mid 2000s caused by reckless lending standards. To imply that it goes back to 1974 is just wrong.

TMAC54 says

How much will gubmint need to spend to restore that 25% rate of appreciation ?

Strawman.

bmwman91 says

Camp one says that prices are too high & still have a lot of falling to do, and they provide figures & statistics to back it up. Camp two says that prices are reasonable, done falling, possibly under-shot, and they provide figures & statistics to back it up.

Or ! to simplify.
Camp one are Tenants-Camp two are Owners. Who WANTS higher rent ? Why might they argue or deny the following ?
Camp one arguments - Millions in shadow inventory, High unemployment rate, Gubmint intervention, Thousands of fraudulent deeds, and revelation that real estate does NOT always appreciate.

Camp two arguments - Location location location. The Bay area etc. still has a number of high paying jobs supporting 2006 prices.
tatupu70 says

TMAC is wrong.

Is online gambling legal yet ?
Hey Tapupu ! Were Women always considered credit worthy during a mortgage application ?

1973 ?

You guys are spinning your wheels about the size of the house. The value is in the land. Sticks & plumbing, shingles etc. depreciate.

bob2356 says

Hooray for fucking concord.

Any house in the Cali Metro Area (especially the Bay Area) is not a good example, anyway, because, these areas have undergone tremendous growths in jobs, and a lot of these cities, have gone from rural to urban, since the 1950's.

TMAC54 says

Let the banks fail, their assets go through receivership and sold for 6 cents on the dollar. Real property will then begin to appreciate and the middle class thrives.

How exactly does the middle class thrive in that scenario??

Isn't the government suppose to break apart this banking oligopoly into smaller pieces? I thought there laws regarding such things.

Game Over-I have already put you on ignore just like others have. You are very rude with the swatiska.

...it is based on sale prices of standard existing houses, not new construction, to track the value of housing as an investment over time...

This is from the caption on the CS graph that you find crap.  The key part is the fact that CS tracks the value of housing as an ***investment*** over time.  

So to go back to your example of an investor buying a house in 1950, you ***absolutely*** need to factor out the cost of that new patio, roof or garage door before computing your ***return*** as the goal is to tract the value of housing as an investment over time.  To compute your true return on your investment, For your equity portfolio you factor in the dividends (inflow), for you bonds portfolio you factor in the interests (inflows) and for your real estate holdings, you factor out the maintenance and improvement costs (outflows). 

However, I do agree with you that the investor buying that house in 2010 will have to pay the $60,000 plus the cumulated cost of the improvements (patio, roof and garage) and his total price should be closer to the census number of $120,000 

http://www.caseshiller.fiserv.com/about-fiserv-case-shiller-indexes.aspx

Weighted Pairs
Different weights are assigned to different changes in home prices, based on their statistical distribution in that geographic region. The weighting schemes include:

Price anomalies – smaller weights are assigned to homes that appear to have changed in quality or sales that are not otherwise representative of market price trends
High turnover frequency – homes that sell more than once within six months are excluded from the calculation of any index
Time interval adjustments – longer sales pair intervals are assigned less weight than pairs with shorter intervals
Initial home value – each pair is assigned a weight equal to the first sale price
Both price anomalies and longer time intervals can indicate physical changes to a home. High turnover frequency and shorter intervals can indicate that the transaction is not arms-length, proceeds or follows redevelopment of the property, or a fraudulent transaction.

http://www.cbsnews.com/video/watch/?id=7370357n&tag=mncol;lst;1
www.youwalkaway.com

Real estate prices MUST go back to their phenomenal value before they can begin to appreciate and stimulate the economy. 60 % of Nevada property is underwater. 50% in Arizona. still only 23 % nationwide.

Don't keep making payments on property that only a bank profits from, and Don't mess with those cute little baby bears. In either case, you could be eaten alive.

TMAC54 says

phenomenal

TMAC54: I noticed you said "phenomenal", instead of "fundamental". I am glad that somebody here agrees with me, that it should be "phenomenal" not "fundamental", which means that values will be "phenomenally" cheap, just like they were "phenomenally" expensive in 2006.

What I meant was, people drive 73 miles pr hr whether the speed limit is 55 or 65. They will only drive 50 minutes each way to work, 14% is max in interest they pay for a mortgage, they only pay 2.5 times their income on housing. NOONE knows why, these are just phenomena. At times these numbers change due to unusual circumstances. The circumstances that caused houses to become detached from reality have vanished like MAGIC.

TMAC54 says

The circumstances that caused houses to become detached from reality have vanished like MAGIC.

Yes, but now the pendulum is swinging in the opposite direction, and these silly bulls are still trying to justify why the Bay Area "Fortress" prices are still above the "fundamentals", where they should be arguing why Bay Area prices should even be anywhere close to the "mean trendline".

I usually lurk and just read what others post. But I have to say the shadow inventory here in Las Vegas (Henderson Area, Near Anthem) is about 10%.
How do I know? Well I am a mailman and I have 1100 deliveries. Out of those deliveries about 220 of them are vacant, and have been for awhile now. To claim vacant within the post office there has to be no one in the house for 90 days. Also I have to go to the door to deliver certified mail to the owners when are losing their house.
Now just by looking at realtor websites and signs on the property that are for sale about 70 was the last time I counted. So that leaves about 150 give or take 10 either way that are shadow.
So next time you see your mailman ask them about your area, you might be surprised what they tell ya.

just looking at that chart it seems pretty obvious why the low tier has fallen more than the high end.

all of you guys waiting for the 40% drop at the high end "any day now" are a bit delusional.

dunnross says

The entire process takes about 12-17 years to complete

When did the "process" begin? 2000, 2007, 2010?

Saying "12-17 years" isn't exactly specific, or useful and it just sounds like a wild guess. Yeah, of course the immediate future is when we will all find out of "something big" is going to happen, or not.

Women generally wait 16 to 35 years before having a child. It's the same kind of claim.

bmwman91 says

Women generally wait 16 to 35 years before having a child. It's the same kind of claim.

Actually, believe it or not, those two (women and housing) are related. The reason, I said 12-17 years, is because, in the past, the cycles were shorter, because a person's lifespan was much shorter. Now, it's actually closer than 17 years. Also, the fact, that the gov't is constantly meddling in it, is throwing off the whole cycle. But the gov't can only delay the cycle, they cannot eliminate it.

17 years huh? That's 612k in rent money before we hit bottom.

toothfairy says

17 years huh? That's 612k in rent money before we hit bottom.

Yes, but mortgage and taxes would cost me the same. Besides, it means that I can put all my cash into gold, which should, at least, double by then.

dunnross says

Yes, but mortgage and taxes would cost me the same. Besides, it means that I can put all my cash into gold, which should, at least, double by then.

Putting ALL your money into one asset class seems like a very poor strategy....

Gold is also taxed very highly by the government when you go to sell.. No matter how long you hold it.. It's taxed as a COLLECTIBLE at 28%.... add on state taxes.. and your talking 38% taxes when you go to sell.

And if we did have any larger crisis.. The government would probably tax gold even more! Look how they outlawed short selling temporarily in the stock market crash.

Los Angeles Owner says

Putting ALL your money into one asset class seems like a very poor strategy....

This statement makes no sense, because gold is money.

dunnross says

This statement makes no sense, because gold is money.

And why would I want to go to sell gold. What would I get in return, a US dollar? I would just go and buy the house directly using my gold, like they do in Vietnam.

dunnross says

And why would I want to go to sell gold. What would I get in return, a US dollar? I would just go and buy the house directly using my gold, like they do in Vietnam.

How much actual physical gold do you own? I wouldn't trust a Gold ETF in an economic collapse.. Hell I wouldn't even trust the bank vault that is holding your gold. What's to keep them from stealing YOUR gold themselves in worst case scenarios.

Los Angeles Owner says

What's to keep them from keep YOUR gold themselves in worst case scenarios.

The US Govt confiscated gold back in 1933, because we were on the gold standard. They didn't actually confiscate it, but paid every holder $25/oz, which was the current market value, at the time. The intent was to use the gold to pay off the debt, and then, get off the gold standard, once the confiscation was completed. Now, there isn't much chance of this happening, because we are no longer on the gold standard.

dunnross says

he US Govt confiscated gold back in 1933, because we were on the gold standard. They didn't actually confiscate it, but paid every holder $25/oz, which was the current market value, at the time. The intent was to use the gold to pay off the debt, and then, get off the gold standard, once the confiscation was completed. Now, there isn't much chance of this happening, because we are no longer on the gold standard.

Well, think about it.. The chaos that would ensue in the transition period where the dollar is worthless.. and you use gold for everyday normal transactions... Are you really naive enough to believe no one will steal all your gold first?

Unless you want to hire an entourage and travel around in a BRINK trunk all day... Your gold won't be safe in the scenario you are "predicting".

I'd be willingly to bet you would be killed in the ensuing riots and social upheaval long before you can buy a "fortress home" with 30 oz of gold.

dunnross says

The US confiscated gold and paid market price for it so they could use the gold to pay off the debt.

The problem was that once we were off the gold standard, the foreign banks didn't want our money any more. They wanted gold. That's why Roosevelt needed gold at the time.

Los Angeles Owner says

dunnross says

... I can put all my cash into gold, which should, at least, double by then.

Putting ALL your money into one asset class seems like a very poor strategy....

Kinda like paying 3K per month to rent in San Jose.

StoutFiles says

1. Because it would cost 15 million dollars for a professional audit of 700,000 gold bars.

$15M is nothing. Ron Paul will gladly pay for this out of his own pocket, if only they let him do it.

dunnross says

StoutFiles says

1. Because it would cost 15 million dollars for a professional audit of 700,000 gold bars.

$15M is nothing. Ron Paul will gladly pay for this out of his own pocket, if only they let him do it.

Okay, but how would this audit benefit the country in any way? Also, Ron Paul does not have 15 million dollars. His net worth is closer to 5 million.

StoutFiles says

Okay, but how would this audit benefit the country in any way?

"My Administration is committed to creating an unprecedented level of openness in Government. We will work together to ensure the public trust and establish a system of transparency, public participation, and collaboration. Openness will strengthen our democracy and promote efficiency and effectiveness in Government." - Barack Obama

SO ,,,, Now we equate "SHADOW INVENTORY WITH GOLD"
http://www.inman.com/news/2012/01/20/real-estate-sales-end-2011-positive-note-chart
note: 1/3 of the sales are distressed.dunnross says

"My Administration is committed to creating an unprecedented level of openness in Government. We will work together to ensure the public trust and establish a system of transparency, public participation, and collaboration. Openness will strengthen our democracy and promote efficiency and effectiveness in Government." - Barack Obama

In the 1960s and 1970s, most of my aunts and uncles in my huge family lived in 3 bedroom/1 bath houses built in the '50s. These were all-white neighborhoods that would have been considered "middle class" or at least "working class" as late as the mid 1970s. Now, however, almost all of the aunts and uncles have moved from their original neighborhoods (in various parts of the Midwest and Mid-South) because the old neighborhood is now all or mostly minority, with bad schools and lots of crime.

The Case-Shiller index is interesting because it compares the same house at different points in time, but it does have some problems, because the demographics of the neighborhoods have changed so much. Middle class people don't want to live in a scary neighborhood in a house that only has one bathroom, even if the lots are large and the landscaping is mature.

There are areas of California where the 1950s houses have done well price-wise, but in Midwestern and Southern cities that I am familiar with, they have NOT fared well at all.

Starving Realtor says

And Buffalo, NY had a top-tier higher education system that produced industry titans.
Now look at it.

Weather may play a bit of a factor too.

I don't think California's current educational system is much to brag about. I guess the U of C system is still very highly regarded. The K-12 system is badly broken. My children attended Newport Beach public schools in the early 90s. They were overcrowded and the curriculum was nothing but trendy nonsense.

I think the reason that 50s houses have held up better in California is that the 50s houses were often built in the more desirable areas closer to the beaches, keeping at least some of the neighborhoods from becoming slum areas. In midland cities, the geography surrounding the urban core generally doesn't vary dramatically. There is typically a good side of town and a bad side of town, with the center of town generally having high crime and bad schools. Land is cheap, and people don't have any reason to stay in an older neighborhood once the neighborhood starts having big problems. Consequently, many well-constructed brick 50s houses in the area north of St. Louis can be had for less than $20,000, while 50s houses west of St. Louis may have become very valuable if they are still in a good school district with low crime.

The median house price and the Case Schiller index are interesting in terms of general trends, but you shouldn't base a decision to buy or sell on any sort of regional average.