patrick.net

If you look at Thomas' chart, you can see that every housing boom collapsed back to pre-bubble prices. If history repeats, then we are about 50-60% done with this collapse. We have more downside.

Will this time be different? Probably not

chanakya4773 says

WRONG !! the index that you showed is INFLATION ADJUSTED.

thats right.. flat adjusted for inflation. Predictable pattern ! It should be, by now clear as daylight if a region is getting HOT as they called it back in the bubble days.. something is amiss.. and going wrong ! Cause every historical example of local bubbles as far back the 1920s Florida land speculation has ended in disaster.

Today, the only meaningful land where prices are up.. may well be the Natural Gas rich regions of middle America.. (fly over states full of people guns and bible -- now Billionaires)

But they are pumping and selling real income producing products.. you certainly dont hear Realtors talking about that.. far from it !!!

epitaph says

Hes better than the boom doom and gloom guy that's for sure, but saying the recovery could take 50 years is a little far out. I can't even imagine what 2014 will be like let alone the second half of this year. I do understand that he analyzes a lot of data, more than we do here, and I know fundamentally he is right there is a lot of headwinds for this recovery. But to end it with "This might take 50 years" really spoke to me more about his character than his analysis.

nah. you're mis-interpreting what he said. he didn't say a recovery was 50 years away, he said another big bubble is far way and he threw out 50 years.

here's the quote:

He added, “I think we’re pretty far from irrational exuberance, maybe 50 years away.”

Until interest rates are allowed to go back to historical levels, 7.5 to 8%, nobody will know what the real house prices, stock prices, bond prices, or gold prices are.

Zakrajshek says

Until interest rates are allowed to go back to historical levels, 7.5 to 8%, nobody will know what the real house prices, stock prices, bond prices, or gold prices are.

Exactly, you said it perfectly. . ."allowed" to go back to historical levels. The implication is that the market is well controlled. So, while many people here are frustrated by the feeling that the market should not be moving up, the reality is that it is being controlled to do so. It is another stealth bailout, and it will continue until the banks are in a safe zone.

There are studies out there that show that in a world full of idiots...the intelligent are made to look like fools. Keep that in mind if you decide to keep your housing bear hat on.

Good Luck Out There.

Zakrajshek says

Until interest rates are allowed to go back to historical levels, 7.5 to 8%, nobody will know what the real house prices, stock prices, bond prices, or gold prices are.

Interest rates are the level that they always are when unemployement is high and the economy is struggling. Rates are not going to rise until unemployment falls down to historic levels.

House prices, stock prices, gold prices, or any asset prices vary with the cost of money. There is no "real" level....

tatupu70 says

Interest rates are the level that they always are when unemployement is high and the economy is struggling. Rates are not going to rise until unemployment falls down to historic levels.

House prices, stock prices, gold prices, or any asset prices vary with the cost of money. There is no "real" level....

Easy to get unemployment numbers down. That doesn't mean much when many of the employed are underemployed. i.e. PhD working in retail selling shoes.
My worry is that we get the unemployment looking better and start moving interest rates up, only to find out that people still don't have any money to pump up the economy. How long do we go down this path of being broke but in denial. Years and years I bet. My kids will have a name for the 3 lost decades I am sure. They will laugh at our stupidity. FYI, I am buying gold for my kids. It'll be the best present for their future.

Call it Crazy says

Do you really think so ???

I guess it depends on what you mean when you say "interest rates". LIBOR, 30 yr. treasury, prime rate, or mortgage rate. The trends look different depending on which you choose.

Call it Crazy says

And when will that happen??

If/when we can get wealth/income disparity down to normal levels.

RentingForHalfTheCost says

Easy to get unemployment numbers down.

I have to disagree with that one. It's not easy at all. Even the shoe company isn't going to hire a PhD if they have enough workers to cover their needs. Employment only increases with more demand.

Looking at the US as a whole, consumers are not broke. It's a distribution problem, not a lack of money probem.

tatupu70 says

RentingForHalfTheCost says

Easy to get unemployment numbers down.

I have to disagree with that one. It's not easy at all. Even the shoe company isn't going to hire a PhD if they have enough workers to cover their needs. Employment only increases with more demand.

Looking at the US as a whole, consumers are not broke. It's a distribution problem, not a lack of money probem.

We already have the gov't ability to create fake demand. This is not an open market. We can build bridges and roads to nowhere and have the whole country employed. Won't help a bit though. We need real employment in order to justify any interest rate increase. That is not going to happen anytime soon. It'll be 3 decades of lost growth when we are through. Not 1, not 2, but 3. At the heart of many of our earning years. No house purchase will save you at all, we will all suffer.

robertoaribas says

Yes, the US economy is so bad that housing prices cannot possibly increase... That is why the have been dropping over the past 12 months...

The economy is in bad shape only because we are printing trillions out of thin air just to keep it afloat. We all know that we can't print forever and keep rates at record lows for too long. Everyone is hoping for or expects a soft landing and the Fed to GRADUALLY raise rates. I am betting that it will not be a soft landing and rates will go through the roof once the bond bubble bursts. No burst of a bubble is ever a soft landing.

robertoaribas says

Yes, the US economy is so bad that housing prices cannot possibly increase... That is why the have been dropping over the past 12 months..

as you said.. SFBA is crazy wacked out place anyway.. prices makes no sense.

underwaterman says

It's a non-answer. Answering a question with a question.

It's the only answer. Neither I nor you know what policies the government will enact over the next 4, 8, 20 years. So how can I tell you when wealth disparity will end?

RentingForHalfTheCost says

We can build bridges and roads to nowhere and have the whole country employed.
Won't help a bit though. We need real employment in order to justify any
interest rate increase

This is what you are missing. If you had the whole country working, it would create real jobs because the people who currently have nothing would actually have disposable income. This would create tremendous demand, which would cause companies to increase production and create jobs. Real jobs.

underwaterman says

Watch tutu70 ignore or distort the evidence you presented. There is no
correlation between unemployment and interest rates as your charts
demonstrate.

As I posted earlier, mortgage rates do not equal interest rates. Why don't you look at a chart of LIBOR, 30 year treasuries or the prime rate vs. unemployment and get back with me.

Sakman says

It is another stealth bailout, and it will continue until the banks are in a safe zone.

You're talking like they know what they're doing. They don't. This is the first time anything to this extent has happened. If you want to risk your money in one of the greatest fraud inspired experiments there ever was go right ahead.

For me, when I see the DOJ and the FBI protecting these banksters, lying right to the camera I know it's way over my head.

God forbid we actually make products we can actually sell domestic and internationally..

Build factories, plants and 2nd tier vendors who also hire and spend withing the supply chain..

but thats all dirty water and dirty air... we cant have that in the USA.

thomaswong.1986 says

God forbid we actually make products we can actually sell domestic and internationally..

Build factories, plants and 2nd tier vendors who also hire and spend withing the supply chain..

but thats all dirty water and dirty air... we cant have that in the USA.

Not to ruin your good story, but I think it has more to do with the fact that people in other countries work in sweatshops for $1/day.

thomaswong.1986 says

Raw says

Nothing goes up in a steady predictable, so you can expect major pull backs every now and then. These pull backs are major buying opportunities, which no one should miss.

IF ONLY that chart's dotted lines were playing out!

If it were, we'd be at or very close to an actual bottom now. Instead, every effort is extended to prop things up, so we're not there. Yet.

robertoaribas says

Yes, the US economy is so bad that housing prices cannot possibly increase... That is why the have been dropping over the past 12 months...

Oh, they've actually been increasing over the past 12 months... That doesn't count! My analysis is perfect, so any increase must be manipulated or fake!

"I don't like reality to get it the way of my theories!" - Every armchair economist when they get plowed by market movements.

Vicente says

If it were, we'd be at or very close to an actual bottom now. Instead, every effort is extended to prop things up, so we're not there. Yet.

like to Govt sees it.. cant have people get thrown out of their home..
not to mention see local city/county prop tax revenue take a hit..
did you see all this govt interference in RE in prior decades.. No!

of course they want to see prices go up beyond any rationality.

thomaswong.1986 says

did you see all this govt interference in RE in prior decades.. No!

Wrong. It goes back further. "Helping" the real estate market has been around a LOOONG time. At least as long as the home mortgage interest deduction has been around. I would argue further back than that. And it's not unwelcome is the thing, people actively lobby both citizens and real estate types for it. In my own community when a new development was proposed a few years ago, existing homeowners KILLED it dead because that might lower their property values which they wanted propped right where they were.

thomaswong.1986 says

Vicente says

If it were, we'd be at or very close to an actual bottom now. Instead, every effort is extended to prop things up, so we're not there. Yet.

like to Govt sees it.. cant have people get thrown out of their home..

not to mention see local city/county prop tax revenue take a hit..

did you see all this govt interference in RE in prior decades.. No!

of course they want to see prices go up beyond any rationality.

Not a fair assessment.
We did not have a crash of this magnitude since the great depression, so there was no need for the government to interfere until now. Real estate was crashing....major banks were collapsing and we were on the verge of a catastrophe. Government interference is what prevented doomsday for us.
The credit goes to Obama and Bernanke. How can we ever thank them.

tatupu70 says

Not to ruin your good story, but I think it has more to do with the fact that people in other countries work in sweatshops for $1/day.

1 dollar a day or 20 dollars an hour make no difference.. when your talking increasing unit production... 1000s of units a day.. $160-250/day gets "absorbed" into product costing.. they become pennies per unit.

only the journalists and the left use labor as excuse.. and never ask the CEOs about the real issues of modern mfg in the USA.

TODAY | Aired on December 06, 2012
Exclusive: Brian Williams interviews Apple CEO
In his first television interview since taking over from the late Steve Jobs, Apple CEO Tim Cook has made some profound changes at the company including one economic change that he shared exclusively with NBC’s Brian Williams.

http://video.today.msnbc.msn.com/today/50100299#50100299

>> let's say our constitution was a little different and president obama called you in tomorrow and said get everybody out of china and do whatever you have to do, make these, make everything you make in the united states . what would that do to the price of this device?

>> honestly, it's not so much about price, it's about the skills et cetera . over time , there are skills that are associated with manufacturing that have left the u.s. not necessarily people, but the education to stop producing them.

>> that's sad. how do we get that back?

thomaswong.1986 says

only the journalists and the left use labor as excuse.. and never ask the
CEOs about the real issues of modern mfg in the USA.

Thomas--you can't be that naive. You know that jobs go to China because of labor cost. Whether you can admit it to yourself or not, you know it to be true.

Why do companies move from California to Texas? It's certainly not beacause of the "skills" difference. Or from the union states to non-union states? Again--certainly not because of skills.

CEOs may be politically correct in public, but you ask any CEO of a manufacturing company and labor costs are a HUGE focus.

SFace says

nominated

I have no idea it takes 10 man-hours a day to manufacture 1000 units. Bubble gum maybe

absorption .. In January 2012, Apple reported its best quarterly earnings ever, with 53% of its revenue coming from the sale of 37 million iPhones.

it doesnt have to be iphones.. you can pick t-shirts...frankly many consumers already bought 30 millions pieces of underwear during the same quarter. The concept is the same.

Its everything else besides direct materials and direct labor in the realm of overhead costs that get hit the most. OH is certainly cheaper in Texas compared to CA.

tatupu70 says

Thomas--you can't be that naive. You know that jobs go to China because of labor
cost. Whether you can admit it to yourself or not, you know it to be true.

I submit there is more than the regulations of wages to be avoided when manufacturing jobs move to China. The EPA regs, the OSHA regs, Gov-State-and local taxes, plus the permitting of so many aspects of a plant and its componants .. as well as the same entities cost increases tied to each point of a product - tranportation of raw materials, manufactuing, transportation of completed materials, marketing, wholesaling, distributing, retailing - I think those things play a large portion of the reason a job (such as manufactuing) goes to china, along with the labor cost. Right?

Bap33 says

I submit there is more than the regulations of wages to be avoided when
manufacturing jobs move to China. The EPA regs, the OSHA regs, Gov-State-and
local taxes, plus the permitting of so many aspects of a plant and its
componants .. as well as the same entities cost increases tied to each point of
a product - tranportation of raw materials, manufactuing, transportation of
completed materials, marketing, wholesaling, distributing, retailing - I think
those things play a large portion of the reason a job (such as manufactuing)
goes to china, along with the labor cost. Right?

Yes and no. There is some cost to meeting EPA and OSHA regulations, permits, etc., but those costs are FAR less than the difference in labor costs.

Quick and dirty calculation for you. Assume $25/hr difference in wage & benefit costs across 150 people in the plant at any time? Reasonable? That's $3,750 per hour. Or $90,000 per day. Does that put things in perspective?

The other stuff you mention--transportation of finished good is much more expensive when you manufacture in China, transportation of raw materials is hard to say--depends on what your raw materials are, marketing, wholesaling, distributing, retailing--not sure what you mean. Why would any of those be cheaper when you manufacture in China??

Perhaps the housing bears can explain the following development - how come in many parts of bay area, the rent zestimate for single family homes is about $1,000 more than estimated mortgage payment for same property (this is for single family homes). Please no asinine conspiracy theories questioning the accuracy of zillow as there are some folks I know who decided to rent single family homes and their rent is extremely close to the zestimate. In other words, what is the driving force for why current rents are so much higher than mortgage payments if as you claim renting is so much better because the market is "rigged."? Thanks!

SFace says

A US company makes a sample, say a Disney Princess Doll

I don't disagree with your example figures, however there are some things that we as American's (or buyers at Disney) fail to consider.

- Your China manufacturer may use toxic materials and subject consumers to health issues (major liability concerns) and employ child labor (bad press). So now you have to spend another $1/doll testing, enforcement, and maintain PR.

- Each dollar that leaves the US is not reinvested in your consumer base. If you pay a US worker the $6 more in labor, they can go buy dolls for their kids.

The last point really irks me that more people don't think about the ramifications of what this means to the US. You make a product that you want to sell to the American people, but in an effort to make it cheap, you take away their jobs so they can't afford to buy your product. It's a downward spiral with a smaller and smaller consumer base that leads to (Apocalypsefuck usually shows up at this point in the story)

tatupu70 says

CEOs may be politically correct in public, but you ask any CEO of a manufacturing company and labor costs are a HUGE focus.

This is why all that "job creator" business is complete bullshit.

Jobs are an undesired cost for a CEO. If they could replace everyone with robots they would do so. Except themselves of course, they are indispensible!

dublin hillz says

the driving force for why current rents are so much higher than mortgage payments

Because the renter doesn't carry the debt load, the land lord does. Many people, myself included, would love to dump the property I pay a mortgage on, and rent.

It's a demand side of the equation. Also over time the rents will come down, that mortgage payment will remain the same.

Vicente says

If they could replace everyone with robots they would do so.

I used to have cold callers as well as auto dialing machines. It's a total waste of time and money employing cold callers. The machines outperformed the humans every time for a fraction of the cost and no personal problems to deal with.

gbenson says

The last point really irks me that more people don't think about the ramifications of what this means to the US. You make a product that you want to sell to the American people, but in an effort to make it cheap, you take away their jobs so they can't afford to buy your product. It's a downward spiral with a smaller and smaller consumer base that leads to (Apocalypsefuck usually shows up at this point in the story)

There was a time when it benefitted America to sit back and allow certain countries to stay in poverty. Now it's biting us back. Call it Globalization, karma, invevitability... whatever. It can't be reversed. Americans have to put down their beer and porn and get serious about success. It's kinda hard to compete with a chinaman when you've got your dick in one hand and your remote in the other flipping back and forth between the porn channel and Fox News and your biggest worry in life is that your little gun might get taken away.

robertoaribas says

Not to mention, all of the lead toddlers will get by sucking on these dolls.

There's supposed to be stickers on them that say, "Made In China Wash Throughly." But Disney removes the stickers. However, every once in a while they forget to remove the sticker.

robertoaribas says

My analysis is perfect, so any increase must be manipulated or fake

Any trend that benefits me (and none of the people renting from me) is TRUTH, and propaganda must be crafted to support this trent, not matter what! I will use my position, credentials and a housing crash blog to sell it.

tatupu70 says

Looking at the US as a whole, consumers are not broke.

Really. The average net worth in 2010 including home equity was 77,000.

Without plastic the nation would be halted.

robertoaribas says

Not to mention, all of the lead toddlers will get by sucking on these dolls.

Or paint chips from the nasty hovels you rent to the working wage slaves so you can keep earning unearned income.

tatupu70 says

That's $3,750 per hour. Or $90,000 per day. Does that put things in perspective?

$90,000 x 90 days (quarter) $8.1M direct labor costs spread that across 37M units ( produced and sold) comes down to .21 /unit of direct labor costs.

Clearly even Tim Cooks comments illustrate this...Its not price/costs...