patrick.net

"In my admittedly partial acquaintance with the Chinese community, I find the longer people stay in the US and"

...and? Don't keep us hanging, astrid, please continue :-)

Mr. Right,

I just checked out inquiring mind's unemplyment chart, and unemployment didn't hit anywhere near 10% UNTIL the housing bust was in full swing (1992). Back at the peak (1989-90) it was as low as it is now.

Kind of ties in nicely with the stats the indicate most jobs created since the bubble started are in housing itself --as in "about to disappear when it bursts".

I appreciate that all you have as a basis to form your opinions are charts and anecdotes and that’s cool, and theories dove tailing make people feel secure and correct.

But Mr. Right, aside from facts, anecdotes, personal experience and reason, what else is there? Gut feeling? Well, I've consulted gut feeling, too, and it's telling me we're in an unsustainable housing bubble.

I agree with you that history never repeats itself exactly and concede that there are substantial differences between then and now. Differences aside, I still see a LOT of similarities between then and now --buyer/seller psychology being one of them ("it can never go down / buy now or you'll be priced out forever"). I guess we'll have to agree to disagree about where we're headed.

Astrid,

Thanks for continuing with your anecdotes --very interesting. I have to believe you about the asian "veneration for land." I live right next to Monterey Park, the largest concentration of asian people in North America. The first thing asian immigrants seem to do here is buy property --and then add an extra floor or build a guesthouse for more family to come join them. I work directly with two SW engineers about my age, one from China, the other from Taiwan. The funny thing is, neither one of them can afford their own place now, even with a NAAVLP!

Mr. Right

A lot of us "bubbleheads" don't think we're in for a catastrophic housing bust, and in fact hope there isn't one. Personally I hope for a moderate correction that still leaves the economy intact. I also found your links on the last thread interesting. I got my info on the Granite Bay market from a local paper, so I don't know if it is accurate for Granite Bay only (which is what it was claiming to be) of if their info is incorrect.

I also have to say that I appreciate that you have prior experience with a housing bubble and that gives you credibility when talking about this one. But it doesn't make you all knowing or infallible. You made the point yourself that comparing one bubble to another is inexact at best, so therefore predicting an outcome would be the same.

I talked to a realtor the other day - she said that the 30-year fixed rate they got on their first purchase 10 years ago was “the biggest mistake” she and her husband made.

Say whaaaat...?? If she had bought 10 years ago with a fixed rate mortgage, she would have had the BEST of all all worlds: 1. buying at the bottom, and 2. being able to re-fi her fully-amortizing loan later at a much lower rate. How could it get any BETTER than that?

Max, was she trying to talk you into buying with an NAAVLP?

Stanman

_applause_

Of course, the answer is simple - people do not have enough income to actually own properties - they only have enough to pay a little rent to the bank for borrowing money.

I know I'm stealing from Prat here, but "_ding_".

Indeed --"buying" with an NAAVLP isn't really buying at all --just renting money. And renting it at a high premium with tons more risk, I might add...

I was willing to give MP more benefit of the doubt since he was behaving himself. But his tantrum on the other thread does lead one to believe that he is not either 28 or much else he claims to be. I guess we'll see if he can pull it together enough to attempt to refute Stanman's assertions.

You know, I can't help but notice that the bull's are very emotional. (With the exception of Jack-- but he's not an uber bull) I would think that if the facts/statistics and so on were on your side emotion would not to enter the argument. Personally I dislike it when people get insulting, it just isn't necessary. Schoolyard taunts are the weapons of bully's and generally not part of a rational persons arsenal. I think people flare up when they see an argument running away from them.

Well, Stanman, I too was (am still) skeptical of MP's claims of income & homeownership.

On the other hand I did go to college with a good number of trust-fund babies (G.W.B style) who pretty much named their salaries/positions at Uncle So-and-so's firm when they graduated. So, while I don't accept all his "self-made financier extraordinaire" nonsense, I guess I can accept the possibility (however remote) that he is a 28-year-old broker who actually earns what he says. Or at least I can suspend my disbelief for the sake of being able to argue about something else, as there's no way to completely prove or disprove his claims, short of him posting a copy of his W-2 & photo ID here.

At least we've got him (mostly) past sniping and bragging and debating on facts --that's an improvement over before, no?

Schoolyard taunts are the weapons of bully’s and generally not part of a rational persons arsenal. I think people flare up when they see an argument running away from them.

Well said. Let's hope this was only a temporary loss of cool.

Well said. Let’s hope this was only a temporary loss of cool.

I hope so too. I kinda like MP in his rational bull guise.

Personally I dislike it when people get insulting, it just isn’t necessary.

Please refrain from all kinds of personal attacks. We will remain open-minded to all arguments.

RE: MP's claim... I do not really care so long as he remains reasonable.

I hope so too. I kinda like MP in his rational bull guise.

Same. MP can be quite respectable at times.

Well, I've experienced the boom/bust cycle before in 70s Seattle RE, so I recognize it can happen here too. I was in the middle of the tech boom, and noticed the level of unguarded optimism (if not euphoria) towards questionable online businesses. At that time, I considered the rise in RE due to increased jobs, and corresponding housing demand. Then tech crashed, and there was a worker exodus--but housing kept rising (inexplicably). It was then I began to question what's driving demand, So when I hear people talking about RE in the same way as now-defunct tech stocks, I get concerned; I've seen this all before.

LOL

Thanks for clearing that up, "M & D Bank" !

Forgive a newbie for possibly re-beating a dead horse, but I just read the best explanation of short-term-only memory in Shiller’s Irrational Exuberance, 2nd Ed. In brief, it’s just a part of human nature.

pbass, his book is indeed a pretty good summary. Have you read Devil Takes The Hindmost? Very easy to read.

Pop!,

I don't think theres' a general conspiracy out there in the MSM with regards to keeping the public in the dark on the Bubble. I think it comes down to the fact that the HB is a very complicated, difficult to unravel, multi-faceted esoteric subject that takes hours of research, thought and careful analysis to fully understand. In other words, not a chance in hell the MSM's gonna do that. Not when there's an attractive missing white woman out there to report on.

Actually, I'm somewhat optimistic in that the MSM has started to pick up the bubble theme and report on it in a big way. I credit this mainly to all the hard work and steady drumbeat by bearish economists, authors & contrarians out there: Schiller, Krugman, Fleckenstein, Grant, Learner, etc.

As far as rising wages & rents "saving" recent homedebtors and bringing home prices back into line with historic norms, I'm not so optimistic. As many on this blog have repeatedly pointed out, housing has been driving most of CA's job growth since 2001, and there's not much that can take its place if it falters. Plus you have intense competition from overseas for jobs in all sectors of the economy --not just blue collar jobs. I think it's far more likely that prices will fall than rents & incomes will rise, but hey, anything's possible I suppose. I wouldn't mind getting a 200% raise, but I'm not holding my breath...

Forgive a newbie for possibly re-beating a dead horse, but I just read the best explanation of short-term-only memory in Shiller’s Irrational Exuberance, 2nd Ed. In brief, it’s just a part of human nature.

pbass, you're not beating a dead horse at all. Would you mind posting a few relevant excerpts for us here?

The slant is that some will get hurt, but nothing of real significance will cause our economy to go south. In addition, when this topic is discussed, the very surface of the problem is discussed rather than the real numbers

Pop!,

Also consider WHO is buying tons of tv, radio & print advertising in the MSM: Realtors, mortgage lenders & homebuilder, perhaps? As they say, "don't bite the hand that feeds you."

I grew up in the Bay Area, Contra Costa County, Clayton (an upper middle class area) to be specific. My parents unfortunately decided to divorce in 1991. In late 1991, they put their 2500 square foot, 5 bedroom, 3 bath home on the market for $280,000. Home sat on the market for 8 MONTHS in 1992 and was reduce to $260K before they decided to take it off the market indefinitely in July 1992. In April 1993, they decided to try again at $250K. STILL NO TAKERS! Finally, in September 1993, they got an offer and accepted it at $235K! Can you imagine that this was just 12 years ago? $235K for a 5 bedroom home in the Bay Area that my parents could barely give away! And this was in the hallowed BAY AREA!! But they had to do it then as part of the divorce settlement. Granted, they bought the place in 1973 for $47K so they still made out OK. But I remember VERY WELL that time when it seemed like you couldn;t give it away.

You say you live in a city next to Monterey Park? Could it be Alhambra?

I am not HARM but I think he does live in Alhambra. :)

Is it me or does it seem that inventory is WAY UP for this time of year in northern California. Seems to me like it should be going down somewhat now that summer is drawing to a close, but there seems to be more inventory now than there was in the Spring months - Spring historically being the hottest time of year for RE.

when this topic is discussed, the very surface of the problem is discussed rather than the real numbers and all the contributing aspects that are involved in this bubble. Does the news media choose to find just half rated experts to talk about this subject?

I've noticed that as well...usually a worn reasoning is employed (jobs, people needing homes), but little discussion on how investors figure into the RE picture. I think realtors are aware how big the investment segment is, but they don't discuss it publicly. However, I think the topic is getting more openly discussed in the media, and people are doing their own research. It's only a matter of time before disbelief in realtor spin sets in.

Is it me or does it seem that inventory is WAY UP for this time of year in northern California
Any quick link to stats on that? I've seen the national stats, and supply is indeed up.

I do a daily search on EBRDI.com, the East Bay MLS service, for a count of all active listings. There are 5800+ today when back in April it was barely cracking the 4000 mark. Anectodal I know, but I've seen a difference with my own eyes.

I do a daily search on EBRDI.com, the East Bay MLS service, for a count of all active listings. There are 5800+ today when back in April it was barely cracking the 4000 mark. Anectodal I know, but I’ve seen a difference with my own eyes.

I'm also keeping a weekly count for Marin, Sonoma, and Napa.

You say you live in a city next to Monterey Park? Could it be Alhambra? I live in Alhambra and trying to buy a 2 beddroom condo there is crazy!

@ADefWebserver,

Oh, well, so much for blog anonymity... :-(
Yes, I live in Alhambra. I agree the market here is crazy, especially since I see more and more good-sized affordable rentals being advertised. This is of course a wholly predictable consequence of a euphoric, debt & speculation-driven asset bubble.

The new numbers sure seem to support a soft landing, don’t you think?

Mr.Right, I know you are wishing for a soft-landing. Same here.

However, we have not landed yet. The new numbers seem to support a landing. Soft or hard, we cannot tell yet.

Betting against the long term US economy is a suckers bet.

How patriotic you are. I certainly hope that you are right.

Mr.Right, the simple math suggests that for many areas, even 5% YoY increases are NOT sustainable going forward. Be careful with Chewbacca defenses.

BTW, Mr.Right, are you Antonio Villaraigosa?

Heck, even SD where all the death watchers have assembled is seeing a normal, sustainable 5.1% YoY pace.

On the topic of San Diego, how about we calculate a historic appreciation as a basis?
Taking median home price data from '82-'98, I see there's a range from -3.4% (92-93) to +18.5% (88-89). Over the 82-98 span, this averages to +3.71%. I could go back further, but the data isn't handy (source: dqnews, abag.ca.gov). Now perhaps the growth from 99 onward is "normal", yet if we apply 3.71% annually from this year onward, the disparity between medians is quite large, approx. $390K or 269%. While I won't take this calculation literally, it does suggest to me a gross overvaluation, and I cannot see how these prices will be sustained, even at a "normal" 5.1% growth.

Betting against the long term US economy is a suckers bet.

I agree, Mr. Right, but I am not betting against the entire U.S. economy long-term. I'm "betting" against the current RE market relatively short-term (1-5 years out or so).

I think the RE crash/correction will have a significant impact state-wide, and probably nationally as well. Falling demand/prices could even trigger a recession by itself, given how much current consumption and job growth has been driven directly/indirectly by housing & refinancing activity.

Nonetheless, as I've said before, "rumors of the Apocalypse are greatly exaggerated."

@Kurt S,

Over the 82-98 span, this averages to +3.71%. I could go back further, but the data isn’t handy (source: dqnews, abag.ca.gov).

In the latest edition of Irrational Exuberance, Robert Schiller went all the way back to the late 1800s (as far as the surviving data could take him) and estimated housing just barely stays ahead of inflation since then.

Shmend Rick,

I don't want to see a new bubble replace the current one any more than you do, but I am not hoping for a national or global economic meltdown. The results would be catastrophic for everyone, bears included. Not saying it can't happen, just that it's by no means a "sure thing" --and that's a good thing in my book.

As fun as it is to fantasize about watching speculators/greedy a$$holes go down in flames, the reality for everyone would be very grim if RE implodes the whole economy. I personally am hoping for a relatively brief, shallow RE-triggered recession, where prices revert to the mean historically vs. rents/incomes, followed by sustainable growth. That way, mostly speculators get burned and everybody else can go back to viewing houses as something to LIVE in.

Stanman Says:

August 14th, 2005 at 10:35 pm
To Marina Prime (and others that might believe this troll):

I noticed in the “Housing Bubble Glossary” thread that you were bashing Astrid for using the bank of Mom and Dad to finance law school and/or a mortgage down payment. I have no idea if this is true in her case, but I agree with you on the overall issue of how screwed up it is for middle class or even rich parents to set their kids up to be spoiled losers at an early age by buying them everything and watching them work lazy and/or save nothing.

Right on Stanman...this Marina dude is a BSing ZERO.

1) Whoever said i was in corporate finance, m&a? I already posted that i get in before 6am, and leave no later than 4:30pm-5pm. Hmmmm…. what other big bucks position could that be in IB? Hint, i don’t have to work weekends either.

Let me guess... trading? private banking?

You seem to be a more of a qualitative guy than a quantitative guy to me.

Gotta love it!

Please attempt to resist attacks...