patrick.net

dunnross says

That article says that it would mean that 50% of all the housing inventory in South Florida is in the shadow. Typically, a shadow inventory of over 5% means a bear market in housing. Are there still any fools out there who don't think that we are going all the way back to 1975 in prices?

Are there any fools out there who do think we are going back to 1975 prices??

tatupu70 says

Are there any fools out there who do think we are going back to 1975 prices??

50% of all the housing inventory in the shadow, means, eventually 50% of all owners are going to lose their houses. This means, that all mortgage holders will be losing their houses. Mortgages are 30yrs+. Hence 1975 is the magic year.

There are plenty of people out there who have been living in their homes without paying the mortgage for over two years... (my neighbor for example).

dunnross says

50% of all the housing inventory in the shadow, means, eventually 50% of all owners are going to lose their houses. This means, that all mortgage holders will be losing their houses. Mortgages are 30yrs+. Hence 1975 is the magic year.

Banks would tear down and/or rent them out if prices dropped too low. If housing dropped to '75 prices the economy would fall apart...people have way too much of their money invested in their house, much like Sauron and the One Ring.

StoutFiles says

Banks would tear down and/or rent them out if prices dropped too low. If housing dropped to '75 prices the economy would fall apart...people have way too much of their money invested in their house, much like Sauron and the One Ring.

The wearer of the note, the bearer of the note

There are millions of people who are underwater and more will become underwater as prices keep falling (your street may vary).
The average fool who thought he was buying an "investment" using "leverage"=banks money is now bummed out.
See, he didn't save much elsewhere and his entire net worth is the house, meaning his entire net worth is.....negative.
Imagine his dismay when he realizes that his entire life's work of study, toil, sweat and effort has produced a result WORSE than the illiterate Mexican high school dropout who came up here and simply rented with his buddies and stashed as much dough as he possibly could.
Of course, this is not ALL homeowners in the USA, just millions of them.

Your results of course are not the average fool's results for who knows how many reasons.
There are going to be more foreclosures and more people walking away from more underwater houses and more houses are going underwater.

dunnross says

tatupu70 says

Are there any fools out there who do think we are going back to 1975 prices??

50% of all the housing inventory in the shadow, means, eventually 50% of all owners are going to lose their houses. This means, that all mortgage holders will be losing their houses. Mortgages are 30yrs+. Hence 1975 is the magic year.

You do realize in a collapse of the magnitude you are predicting... It would be far more likely anyone in a home/mortgage would just get to keep it.. Possession is 9/10ths of the law... When the music stops in a game of musical chairs... Whoever doesnt have a seat loses!

dunross, not in these parts. The stampede of elites from Communist China will set a floor on prices around The Bay, and it won't be 1975 prices.

ptiemann says

maybe 50% of all home owners are under water (I doubt that)

If 50% of home owners are under water, and they are all mortgage holders (since only mortgage holders can be under water), and 50% (approximately) of all home owners are mortgage holders, then 100% of all mortgage holders are under water. If 100% are under water, then the ones who bought their house 30 years ago, and still have a 30+yr mortgage are under water. If they are under water, then prices must be lower than they were 30 years ago, Voila!

BTW, gold prices in 2001, were almost the same as they were in 1975, 26 years earlier. And this is after the economy (DGP) grew 1000%. So, if gold prices could fall back 26 years, why not house prices. Makes perfect sense.

B.A.C.A.H. says

dunross, not in these parts. The stampede of elites from Communist China will set a floor on prices around The Bay, and it won't be 1975 prices.

Most chinese elite would have their capital frozen, because they won't sell in China, as the Chinese housing bubble collapses, so they won't have any money to buy here.

dunnross, you must've made a mistake somewhere.

dunnross says

then 100% of all mortgage holders are under water

If you're 27 years into a 30 year mortgage, then you're 90% into your term. There's just no way borrowers this close to paying off are underwater. Devalued, maybe, but definitely not underwater.

dunnross says

Most chinese elite would have their capital frozen, because they won't sell in China, as the Chinese housing bubble collapses

That makes your definition of "Chinese Elite" actually mean "Chinese Middle Class".

tdeloco says

If you're 27 years into a 30 year mortgage, then you're 90% into your term. There's just no way borrowers this close to paying off are underwater. Devalued, maybe, but definitely not underwater.

A lot of these have used their houses as ATM's. So they have plenty of HELOC's to bring them well under water.

tdeloco says

That makes your definition of "Chinese Elite" actually mean "Chinese Middle Class".

Yes, you're absolutely right. Chinese Elite have much better use of their money than sinking it into a dead investment like BA housing. After all, they didn't become "Elite" by making stupid moves like that.

dunnross says

If 50% of home owners are under water, and they are all mortgage holders (since only mortgage holders can be under water), and 50% (approximately) of all home owners are mortgage holders, then 100% of all mortgage holders are under water

I hope you're trying to be funny here--I honestly can't tell.

Real property sales prices GAPPED up 20% to 25% most years from 1974 to 2008.
WHY ? WHY ? WHY ?
3 simple reasons ; Women became creditworthy, Computers became appliances, Gubmint eased financing. Those 3 reasons that caused all the unjustifiable investing are now obsolete.
Why guess as to where values will end up ?
One formula is steadfast (2.5 times income) If incomes remain at current levels, National median sales prices will return to near $155K after the pendulum swings.

The pendulum swings.

Virtually Every buyer who purchased or refinanced during the housing bubble watched their equity IMPLODE.

65% of all homes for sale out east on LI are short-sales homes. this means the home owner owes more than the mortgage is worth and they are trying to get out. they are trying to negotiate with the bank on selling at a price much less than the remaining mortgage balance.

TMAC54 says

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

Nominated. This thread is just full of great stuff.

dunnross says

If 50% of home owners are under water, and they are all mortgage holders (since only mortgage holders can be under water), and 50% (approximately) of all home owners are mortgage holders, then 100% of all mortgage holders are under water

You wrote this seriously? Come on. I don't believe it. This is Homer Simpsonesque.

When your logic yields an answer that is so absurd, then you need to recheck your assumptions.

(hint: 50% of all homeowners are NOT underwater)

tatupu70 says

(hint: 50% of all homeowners are NOT underwater)

Hint: I was not talking about today. I was talking about when we finally hit the bottom in prices. Although, in some parts of Detroit, it sounds like we may be pretty close to that. That's why, as you would notice, prices are already getting pretty close to 1975 levels. In fact, Detroit can serve as a pretty good harbinger of what's coming down the road for the rest of the country, including the Bay Area. And, I don't want to hear any more "Our sh*t don't stink" crap from any of you any more. I am getting pretty tired of these BS arguments.

dunnross says

A lot of these have used their houses as ATM's. So they have plenty of HELOC's to bring them well under water.

Are you also a pyromaniac that likes to watch things burn down to rubble? Honestly, I can't figure out why people keep saying such outrageous things. Not everyone has a mortgage, not everyone HELOCed themselves into hell, and the price of a house can not sustain a level less than it costs to build another one as the population continues to increase. A house will not be cheaper than an SUV no matter how much you wish it so.

EightBall says

Are you also a pyromaniac that likes to watch things burn down to rubble?

I am not a pyromaniac, because the housing bust is not the fire or the disease; it's the medicine which is now being dispensed to cure the real disease, which was the housing speculation and greed which led us to the point where everybody was HELOCed into hell.

Your argument that "the price of a house can not sustain a level less than it costs to build another one as the population continues to increase.", is the one which could probably be nominated as the most falacious argument on this blog, because prices in many parts of the country are already way below building costs, and, population growth has slowed down to a crawl, but, even more than that, wages are dropping like a rock.

Nomograph says

dunnross says

all the housing inventory in the shadow

Foreclosures are a matter of public record. There is no secret shadow inventory.

Jeez, you've been here how long and you still haven't learned the basics of how this works?

You understand that shadow inventory and foreclosures are two totally different things, right?

I'm not going to argue if it exists or not (there's more than enough evidence to show that it does.. and in massive numbers) but you're not understanding the difference.

I mean Jeez, you've been here how long and you still haven't learned the basics of how this works?

Oh and I'm pretty much a bear on RE, but 1975 prices? That's not going to happen.

I'll be happy when we go back to 2000 (and we're almost there).

CrazyMan says

Oh and I'm pretty much a bear on RE, but 1975 prices? That's not going to happen.

I'll be happy when we go back to 2000 (and we're almost there).

I am happy that most people here, don't think that the prices will drop that low, because, this just fortifies my argument even more that, when this bubble finally implodes completely, prices will tank much lower than 99% of the population think, even on a bearish blog like this. When gold prices hit $250 in 2001, that was way below mining cost of $450/ounce, let alone considering the millions of dollars it cost for exploration, so, do you think that most people honestly expected it to drop that low?

dunnross says

CrazyMan says

Oh and I'm pretty much a bear on RE, but 1975 prices? That's not going to happen.

I'll be happy when we go back to 2000 (and we're almost there).

I am happy that most people here, don't think that the prices will drop that low, because, this just fortifies my argument even more that, when this bubble finally implodes completely, prices will tank much lower than 99% of the population think, even on a bearish blog like this. When gold prices hit $250 in 2001, that was way below mining cost of $450/ounce, let alone considering the millions of dollars it cost for exploration, so, do you think that most people honestly expected it to drop that low?

I guess we could go back to '75 prices, but we'd have '75 average salaries. The economy is set up so that housing prices can't go too low else everything would crash.

StoutFiles says

I guess we could go back to '75 prices, but we'd have '75 average salaries. The economy is set up so that housing prices can't go too low else everything would crash.

Why? 2001 salaries where much bigger than 1980 salaries, but gold price in 2001 was 70% lower than in 1980. Salaries in 2006, were lower than they were back in 1998, yet house prices where 2.5 times higher. I do agree that there is a relationship between house prices and wages, but at the extreme points like 2006, and at the point of the housing bottom, they will not be inline.

dunnross says

Your argument that "the price of a house can not sustain a level less than it costs to build another one as the population continues to increase.", is the one which could probably be nominated as the most falacious argument on this blog, because prices in many parts of the country are already way below building costs, and, population growth has slowed down to a crawl, but, even more than that, wages are dropping like a rock.

What do you mean? I said it can't sustain it as the population increases. I didn't say it will never happen. The ebb-and-flow of people will raise and lower prices. If no one is building new in Detroit, the prices can easily stay below construction cost. Places where people actually want to live it can't keep dropping forever and will be equal or higher than it costs to build once the hangover from the last decade is consumed. There are plenty of examples of both sides of this - think of the current energy boomtowns now on the high side, factory closes up show in Smallville, USA on the downside. Supply/demand is how it works - not your pent up zeal to punish people caught up in the last housing boom/bust cycle.

I will admit, though, that I was wrong (or perhaps not clear) about this:

EightBall says

A house will not be cheaper than an SUV no matter how much you wish it so.

Better stated it should be:

A house will not be cheaper than an SUV in any decent area no matter how much you wish it so. If you want that, move to the projects or a mobile home park but you didn't need the bubble to burst to achieve this.

EightBall says

A house will not be cheaper than an SUV

In 1975 Soviet Union a 2brm apartment was much cheaper than a Lada (Soviet version of the 1970's vintage Fiat 134).

Dunross,

You realize your 1975 price prediction is basically an apocalyptic scenario right? I'm talking Mad Mex life-style in the U.S. The U.S. would be involved in a huge world war and NYC or LA would probably be nuked before what your predicting would come to pass. So planning not to buy a home for fear of 1975 home prices is kinda ridiculous.... Because the economic consequence of such an event would cause total collapse of our current civilization... or vice versa.

Los Angeles Owner says

You realize your 1975 price prediction is basically an apocalyptic scenario right?

Adjusted for inflation, not at all apocalyptic for many. We been there before if you recall when SoCal prices fell 30-40%.
Right back to 75 prices plus inflation....

http://www.housingbubblebust.com/OFHEO/Major/SoCal.html

Los Angeles Owner says

Because the economic consequence of such an event would cause total collapse of our current civilization... or vice versa.

I rather enjoyed my trips to LA back in the early 90s...the Sun was out and the babes were busty...

Los Angeles Owner says

You realize your 1975 price prediction is basically an apocalyptic scenario right?

No, 1975 prices is not an apocalyptic scenario. According to the long-term Case-Shiller chart, prices where already way below the mean back in 1920, and there was no "apocalypse" back then. You are assuming that the economy is always going to be 100% dependent on the housing, like it did during the boom, but the economy will learn how to live without housing, as, everyone realizes that housing is not the bread-and-butter it once was.

dunnross says

apocalyptic scenario

only the vested interest who gambled every dime they had will suffer.

Shadow inventory is going to get LARGER apparently.

Feds now have given squatters and extra 3 months free living. (on top of average 2 years to forclose, i guess it will now be 2 yr 3 months?)

http://www.housingwire.com/2012/01/06/freddie-mac-extends-mortgage-forbearance-to-unemployed-to-one-year

Game Over you should remove the swastika from the avatar.

Im putting u on ignore. I Cant have have that shit up at work whihle im slacking off on this site - and no one cares that you are probably not a nazi but 'calling the feds nazis'

I knew a guy that spend 4 months in jail for placing a snarky sign up on a government office calling them nazis. Well it turns out there are laws about the swastika you GO TO JAIL sometimes for displaying it AND it can be hate crime. really look it up.

He should be banned asap IMO but that is up to patrick.

That symbol means 'kill all jews' its startling to see it when it comes up - I dont care wtf the message is - it drowns it out anyway. he should be posting on storm front (dont visit that site unless u wann be on the terrorist watch list)

dunnross says

A lot of these have used their houses as ATM's. So they have plenty of HELOC's to bring them well under water.

Don't forget to add all the Refi's to the HELOC's. In my area in the last few years, many Refi'ed/ATM'ed at the same time for a lower rate in bubble land. Now, they are sitting with large NEW 30 year notes and no equity while their houses have lost 20% - 30% of value...

dunnross says

You are the one who is ignoring reality, by confusing facts with wishful thinking. According to patrick's latest charts, rents have not gone up at all. I am renting in West San Jose, and my rent hasn't gone up for 5 years.

Yours may be a special case. If I recall, you posted on a different thread a long time ago that you were paying some ridiculously high amount of rent.

tatupu70 says

Nominated. This thread is just full of great stuff.

Did you do the math ? Well then here you go .

It seems you LOST enough on your house, huh TAT ? It is amazing to note someones beliefs when their own equity is the topic.
What is your zip code ? Tell us when you purchased, I can wager what your home will soon sell for.

1978? 1968?