patrick.net

Don't make the mistake that "inflation" is going to necessarily result in asset appreciation across the board.

The existing housing stock isn't going to get more expensive to produce (it already HAS been produced), so it may or may not join the inflation party.

Construction employment is way, way down:

http://research.stlouisfed.org/fred2/series/USCONS

though wages are up slightly, oddly enough:

http://research.stlouisfed.org/fred2/series/ECICONWAG

We collectively bid up the price of housing to whatever we (and/or the underwriters) feel we can afford, or in areas of scarcity, whatever is necessary to outbid the next guy.

Housing in general is not in undersupply now, though at any given level (above the bottom) there are more people wanting to move up than supply, since most people would like to live in a nicer house or nicer neighborhood.

If taxes go up, food goes up, energy goes up, health care goes up, housing isn't necessarily going to go up too, not unless wages go up enough to cover all of that.

The housing market is complicated.

There are other ways to invest with our without borrowing (the real meaning of your Cool and Hip "leverage").

Like, using some work-study money, some saved money and some borrowing (your Cool and Hip "leverage") to pay for an education in an in-demand major, like MS Nursing from Georgetown or Petroleum Engineering from Texas or Oklahoma.

Or, using some savings AND some borrowing (Cool and Hip = "leverage") to start a business.

Or, investing by buying stocks on margin (for the Cool and Hip, "with leverage"). Don't have to buy them all with cash.

You're obsessed with "cool and hip".

Sybrib says

(the real meaning of your Cool and Hip "leverage").

The definition of leverage that I was taught and attempted to lay out in the origination of this thread, is to use borrowed money to gain larger value.
NOT something I have thought of using on the dance floor.

Although I wonder about life where interest is NOT paid, 4% is probably the lowest we will ever see in this country.

real estate prices should track inflation but thats on average.
at the ground level its location that matters.
some areas will outperform others will underperform.

My guess is areas that were overbuilt during the bubble will underperform.

TMAC54 says

Although I wonder about life where interest is NOT paid, 4% is probably the lowest we will ever see in this country.

Debt go up, rate go down.

http://research.stlouisfed.org/fred2/graph/?g=28y

Buying SFH that are already built, at full price, for the sake of renting or appreciation isn't an investment, it's consumption.

Stocks go up in inflation if you bought companies that can raise prices. SFH prices only go up when inflation of wages occur.

Both have risk involved, but I tell you they don't sell stocks on late night tv. They only sell real estate and other ponzi schemes on late night tv to the biggest suckers in the world out there.

Bellingham Bob says

If taxes go up, food goes up, energy goes up, health care goes up, housing isn't necessarily going to go up too, not unless wages go up enough to cover all of that.

Yep, as simple as that.

FortWayne says

Buying SFH that are already built, at full price, for the sake of renting or appreciation isn't an investment, it's consumption.

I have seen a growing trend among existing home owners, people who bought pre 2001. They basically they keep the existing property,rent it out and use the proceeds toward mortgage payment for a much higher priced property then the first one.

FortWayne says

SFH prices only go up when inflation of wages occur.

Wages have not gone up at all in last few years due to unemployment situation. I don't see super low rate as a solution to fix this,as fed thinks.

bubblesitter says

Wages have not gone up at all in last few years due to unemployment situation

Except that they have.

tatupu70 says

bubblesitter says

Wages have not gone up at all in last few years due to unemployment situation

Except that they have.

How come no one noticed except the few confidence boosting headlines which have absolutely no merit?

bubblesitter says

I have seen a growing trend among existing home owners, people who bought pre 2001. They basically they keep the existing property,rent it out and use the proceeds toward mortgage payment for a much higher priced property then the first one.

That's always been there, haven't seen success stories there either. Of course there are several very succesful men on late night tv bragging about making millions in RE while asking you to send them a few bucks so that you can also learn that RE easy money secret.

FortWayne says

tatupu70 says

bubblesitter says

Wages have not gone up at all in last few years due to unemployment situation

Except that they have.

How come no one noticed except the few confidence boosting headlines which have absolutely no merit?

Quality Auto Repair Since 1979

Not sure what you mean. Anyone who follows that sort of thing noticed.

tatupu70 says

Not sure what you mean. Anyone who follows that sort of thing noticed.

Clearly

FortWayne says

very succesful men on late night tv bragging about making millions in RE

I always wonder why is Kramer not buying all the stock he is recommending people to buy.

FortWayne says

tatupu70 says

bubblesitter says

Wages have not gone up at all in last few years due to unemployment situation

Except that they have.

How come no one noticed except the few confidence boosting headlines which have absolutely no merit?

Quality Auto Repair Since 1979

Why is it that headlines are good when you agree with them and bad when you don't?

In this case, both of your responses have some amount of merit, but household income is barely up since 1989 in inflation-adjusted dollars and is down from the 1999 peak nationally (and the 2005 peak in the Northeast, the 2000 peak in the Midwest, the 2007 peak in the West, and the 1999 peak in the South):

http://www.census.gov/hhes/www/income/data/historical/household/H06AR_2009.xls

corntrollio says

In this case, both of your responses have some amount of merit, but household income is barely up since 1989 in inflation-adjusted dollars and is down from the 1999 peak nationally (and the 2005 peak in the Northeast, the 2000 peak in the Midwest, the 2007 peak in the West, and the 1999 peak in the South):

Agreed, but in this case I'm more concerned with nominal rises. If wages keep up with inflation, then housing prices will rise (with inflation)...

tatupu70 says

Agreed, but in this case I'm more concerned with nominal rises. If wages keep up with inflation, then housing prices will rise (with inflation)...

I understand your point, but we are still nominally down from 2007 and 2008 per 2009 national statistics.

In addition, the 0.5% annual increase in real household income since 1989 (even as a peak year) is pathetic. Even if you compare that to housing, you can get some interesting results in places like the Bay Area.

corntrollio says

In addition, the 0.5% annual increase in real household income since 1989 (even as a peak year) is pathetic. Even if you compare that to housing, you can get some interesting results in places like the Bay Area.

Why is that pathetic? Wages beating inflation by 0.5% per year seems OK to me. The problem is that it's all going to the top 0.5% and not to the other 99.5%.

taputu you may find this article interesting. just came out today.

http://online.wsj.com/article_email/SB10001424053111904265504576568543968213896-lMyQjAxMTAxMDEwMzExNDMyWj.html?mod=wsj_share_email

FortWayne says

taputu you may find this article interesting. just came out today.

http://online.wsj.com/article_email/SB10001424053111904265504576568543968213896-lMyQjAxMTAxMDEwMzExNDMyWj.html?mod=wsj_share_email

Quality Auto Repair Since 1979

Yep--it's unfortunate that all the income is going to the top instead of the middle class.

But again--I'm more interested in nominal wages rather than inflation adjusted.

tatupu70 says

Why is that pathetic? Wages beating inflation by 0.5% per year seems OK to me. The problem is that it's all going to the top 0.5% and not to the other 99.5%.

Well, the rate is slowing on this. If you look at 1975-1999, it's more like 1.0%. And even peak to peak, 1989 to 1999 is 0.8%. Down 5% since 1999 when inflation adjusted is pathetic for sure. But yes, I think you identified the problem.