patrick.net

Los Angeles Owner says

Housing recovery on horizon?

No, Housing doom on horizon!

bubblesitter says

Los Angeles Owner says

Housing recovery on horizon?

No, Housing doom on horizon!

Neither.

bubblesitter says

No, Housing doom on horizon!

excellent and thorough analysis. Somebody is making money hand over fist in this stock market... just curious where it's gonna end up? I would say housing investment might be a possibility.

Los Angeles Owner says

I would say housing investment might be a possibility.

Yeah, but only on the low end only where lenders have minimum risk or where all cash investors can reach.

I do not think this has anything to do with any housing recovery.
This is happening because companies are making profits, and interest rates are very low.
Maybe when my AAPL shares reach their peak I can sell them and buy a house for cash with the proceeds.

i'm glad i ignored all the dumbass housing bulls, i ignored them completely and instead put my money in stocks the last several years. i bought quite a bit during the near lows of 2009.

also s&p 500 has been steadily increasing since 2009 and it hasn't helped housing prices. the index being at 2007 isn't some mystical level that turns on like a switch and causes buyers to buy all of a sudden.

clambo says

Maybe when my AAPL shares reach their peak I can sell them and buy a house for cash with the proceeds.

I'm surprised you can't buy a house in cash already! I started investing in Apple in 2003... with shares in the low single digits. Too bad I was fresh out of college and didn't have more invested at such a low cost-basis. Now even if it goes to $1000 a share by 2015.. which i see as entirely possible.. You'd merely double your money.. (far cry from the 100x returns you'd have investing in early 2000s)

Then again, investing in Apple even at these levels might be as safe a money in the bank.

Hysteresis says

also s&p 500 has been steadily increasing since 2009 and it hasn't helped housing prices. the index being at 2007 isn't some mystical level that turns on like a switch and causes buyers to buy all of a sudden.

Well, you will hear the media hyping a general economic recovery being in full swing when we do reach 2007 stock levels... which may coax more people into being less terrified of real estate investing.

2011 was a basically a FLAT stock market year.. S&P in Jan 2011 was 1270s.. early Jan 2012 S&P was 1270s... no gains.

The overall market gains have all occurred this past month!

Los Angeles Owner says

Hysteresis says

also s&p 500 has been steadily increasing since 2009 and it hasn't helped housing prices. the index being at 2007 isn't some mystical level that turns on like a switch and causes buyers to buy all of a sudden.

Well, you will hear the media hyping a general economic recovery being in full swing when we do reach 2007 stock levels... which may coax more people into being less terrified of real estate investing.

2011 was a basically a FLAT stock market year.. S&P in Jan 2011 was 1270s.. early Jan 2012 S&P was 1270s... no gains.

The overall market gains have all occurred this past month!

1. actually i disagree with you on 2011.

yes, year-over-year comparing prices on jan 1 and dec 31 2011 it was flat. no arguments there. but these are only two data points out of the entire year.

it actually was a fairly strong market in 2011 - i use other metrics besides looking only at the price on the beginning and end of the year. there was a LOT!! of action in between that should not be ignored.

2. anyone that makes decisions based on the media's enthusiasm or pessimism will certainly have under performing investments. studies show this is in fact the case. the very large majority of people are horrible investors (most likely because they do listen to the media and other people that know nothing, instead of doing their own analysis).

I always laugh when realtors assume that folks rent because they can't afford to buy. FYI: We are happily renting here in Manhattan Beach for 1/2 what it costs to buy, even though we could easily buy anything we'd like with all cash. Working hard and only investing in markets that are fundamentally sane and sustainable is why we've got the cash, you silly billies! Unless/until this housing adjusts makes sense again, we're keeping our cash safe and sound. Forget about making a killing, just make a living, spend within your means and if you've got extra $, there are more than enough worthwhile causes with which you can share!

Los Angeles Owner says

I would imagine boomers that didn't touch their 401K.. aside from the pain of 5 years of no gains... are starting to feel some relief. And if they "doubled-down" at 6000 they probably made out quite well over the past 5 years.

Here is the memo you didnt get..

http://patrick.net/?p=1208508

Foreclosures at the high end increase

San Jose Merc 2/5/2012

http://www.mercurynews.com/bay-area-news/ci_19899224?source=rss

Throughout affluent communities in the Bay Area, million-dollar-and-up homes are increasingly being lost to foreclosure, or sold as a last resort for far less than their mortgages.

More than 1,500 Bay Area homes with mortgages of $1 million or more were scheduled for auction last year, more than double the number in 2008, according to ForeclosureRadar, a foreclosure tracking service.

"The fact is, upper-end folks are starting to feel the crunch," said Barbara Safran, president of the Contra Costa County Association of Realtors.

Santa Clara County had more than 400 homes valued at $1 million or more scheduled for auction in 2011, the most of six Bay Area counties.

"Most of these higher-end people are, like, 45 years old plus, and they've gone through all their assets," Walker said. "It's a really devastating situation for them. They thought they had planned. They had their kids' college fund, they had their 401(k)s, the stock, the mutual funds, and they've been hanging on for the last three years. They've gone through everything, and they have nothing left, not even the house."

And if congress increases Capital Gains tax next year ?

Housing in California will decrease by up to 10% this year. The State economy cannot have 20%-25% Unemployed/Underemployed and still have a housing recovery.

BTW, the $25Billion deal reached between the state AG's and the five largest banks will help non other than the banks. Think about it, in return for reducing the principal on a house by $20,000, the banks get their paperwork done correctly and will not have future liability. In the end, $20k principal reduction on a loan will have little to no effect on the foreclosure rate. In fact, it might speed up the foreclosure process because banks will not have to worry about "robo signing" lawsuits.

Hysteresis says

it actually was a fairly strong market in 2011 - i use other metrics besides looking only at the price on the beginning and end of the year. there was a LOT!! of action in between that should not be ignored.

Sure, you had just as much a chance to lose money as make money in the market in 2011... I know a guy who was heavily invested in solar stocks... He got killed in 2011.

kashif313 says

BTW, the $25Billion deal reached between the state AG's and the five largest banks will help non other than the banks.

Must have been the same states screeming "Bonanza" as prices started to explode upwards. Same states that were saying "there is no housing bubble".. etc etc etc.

So now they want their cut.. sounds like another shake down.

Of course the state realtor associations were all to eager to equally fuel the RE boom... and they are still at it.. no word from state AG on that one. No not a single word.

I was just looking at the 5yr dow chart and its almost a perfect V
By the time the masses realize were not in a recession the markets will be at a new all time high

kashif313 says

Housing in California will decrease by up to 10% this year. The State economy cannot have 20%-25% Unemployed/Underemployed and still have a housing recovery.

Except I would say that this also applies to a bunch of other states (most of them).

thomas.wong1986 says

And if congress increases Capital Gains tax next year ?

I expect this to happen, but I'm not sure if anyone earning under $250,000 will have this though.

The stock market was flat in 2011??? I think it was down 20%. What was the price of gas Jan 2011? Food? Electric? Gold?

Stocks denominated in fiat were flat... purchasing power was down.... and nobody noticed? In the end it matters not how many shares you have if they won't buy anything....

Stocks back to their peak in 2007? Big deal. Call me when they are back to their 1999 levels!

America has lost an entire decade of productivity due to the housing bubble. And we're going to lose another decade, too, just like Japan!

20 years of a crappy economy because the damn Keynesians won't let us prosecute and end the accounting fraud pervasive in our financial industry. As long as the books are cooked, the malinvestments continue, and prosperity will not be achieved.

Dan8267 says

20 years of a crappy economy because the damn Keynesians won't let us prosecute and end the accounting fraud pervasive in our financial industry. As long as the books are cooked, the malinvestments continue, and prosperity will not be achieved.

We've had this discussion before, I know. But I still don't get how you come to the conclusion that Keynesians don't want to prosecute accounting fraud.

Los Angeles Owner says

Somebody is making money hand over fist in this stock market...

:D

I think these are disconnected. Companies have become much leaner, outsourced, cut costs, employees. Even profitable tech companies are always understaffed on purpose.

So stocks will rise with profits, not clear how mcuh of the profits will go towards incomes and housing recovery though.

tatupu70 says

you come to the conclusion that Keynesians don't want to prosecute accounting fraud.

Prosecuting fraud means acknowledging loses. Keynesians want to spread the loses over a very long period, and the only way to do that is too keep cooking the books. Banks still haven't written off the bad debt.

Dan8267 says

tatupu70 says

you come to the conclusion that Keynesians don't want to prosecute accounting fraud.

Prosecuting fraud means acknowledging loses. Keynesians want to spread the loses over a very long period, and the only way to do that is too keep cooking the books. Banks still haven't written off the bad debt.

It's not fraud if it's allowed by the law....

It's not worth arguing the merits of the policy because I think both of our points of view have been well made previously.

You folks Are high on Kool-aid.

we are in a BIG recession.

Nothing is getting better but the Hype.

(Que Flaver Flav)

Dont,.. Don't believe the Hype!

I invested in the stock market before and all throughout the recession. A lot of people panicked and pulled everything when it hit bottom. Those people are the ones who actually "lost" money. My stocks are back to where they were in 2007 and have been gaining steadily.

As far as real estate and investing in it, well for starters most of what's being bought by investors are lower cost foreclosures which in turn causes projections for average sales prices to go lower overall. Not exactly foretelling of rockstar home appreciation. Secondly, none of the fancy-dancy mortgage products that allowed buyers to grossly overextend their purchasing powers and thus artificially over-inflate prices exists anymore. There is basically zero interest on part of lending and banking institutions to go back to those either. Without those prices will at best be anemic and if there is appreciation it'll likely be very modest because at that point appreciation will only come from actual economic growth- like wage increases for example, and not from pumping up prices with failure-prone loans. That's going to be especially true in higher cost areas.

I'm still unsold on the stock market "recovery". I think we're headed for another crash like in 2002 or 2009. When everyone is irrationally exuberant about any market (stock or housing) it's usually time for anyone in their right mind to sell. The diminishing returns and increased risk on the way to the peak are not justified and prudent. A better bet is doubling down and getting the best stocks after the crash. You get a much bigger profit spread, and you get relative safety. I don't think we're going to see growth like the 1990s ever again. We're in a bubble crash bubble crash pattern.

Dragos Toader says

I'm still unsold on the stock market "recovery". I think we're headed for another crash like in 2002 or 2009.

We're always heading towards another crash and always have been. That's how it works: It goes up and then it goes down, and then it goes up again.

Dragos Toader says

When everyone is irrationally exuberant about any market (stock or housing) it's usually time for anyone in their right mind to sell

I agree that we're in a cycle but do you really think people are irrationally exuberant right now? Do you even remember the tech bubble or housing bubble? Going by the level of mania both of those bubbles reached we're not even close.

The thing to think about is that there's been a fairly pronounced shift in regards to how a lot of US companies make their money. It used to be that we bought most of our own "stuff" and that was what drove the majority of profits. Now its more along the lines of us selling more stuff overseas. Many brick and mortar companies like automotive, industrial equipment makers, fast food venders, and so on are selling more product- often in China- more than they do in the US. Thus you get profits even if Americans aren't buying their things. This is perhaps one of many reasons the market is doing well.