patrick.net

bmwman91 says

Camp one says that prices are too high & still have a lot of falling to do, and they provide figures & statistics to back it up. Camp two says that prices are reasonable, done falling, possibly under-shot, and they provide figures & statistics to back it up.

Or ! to simplify.
Camp one are Tenants-Camp two are Owners. Who WANTS higher rent ? Why might they argue or deny the following ?
Camp one arguments - Millions in shadow inventory, High unemployment rate, Gubmint intervention, Thousands of fraudulent deeds, and revelation that real estate does NOT always appreciate.

Camp two arguments - Location location location. The Bay area etc. still has a number of high paying jobs supporting 2006 prices.
tatupu70 says

TMAC is wrong.

Is online gambling legal yet ?
Hey Tapupu ! Were Women always considered credit worthy during a mortgage application ?

1973 ?

You guys are spinning your wheels about the size of the house. The value is in the land. Sticks & plumbing, shingles etc. depreciate.

bob2356 says

Hooray for fucking concord.

Any house in the Cali Metro Area (especially the Bay Area) is not a good example, anyway, because, these areas have undergone tremendous growths in jobs, and a lot of these cities, have gone from rural to urban, since the 1950's.

TMAC54 says

Let the banks fail, their assets go through receivership and sold for 6 cents on the dollar. Real property will then begin to appreciate and the middle class thrives.

How exactly does the middle class thrive in that scenario??

Isn't the government suppose to break apart this banking oligopoly into smaller pieces? I thought there laws regarding such things.

Game Over-I have already put you on ignore just like others have. You are very rude with the swatiska.

...it is based on sale prices of standard existing houses, not new construction, to track the value of housing as an investment over time...

This is from the caption on the CS graph that you find crap.  The key part is the fact that CS tracks the value of housing as an ***investment*** over time.  

So to go back to your example of an investor buying a house in 1950, you ***absolutely*** need to factor out the cost of that new patio, roof or garage door before computing your ***return*** as the goal is to tract the value of housing as an investment over time.  To compute your true return on your investment, For your equity portfolio you factor in the dividends (inflow), for you bonds portfolio you factor in the interests (inflows) and for your real estate holdings, you factor out the maintenance and improvement costs (outflows). 

However, I do agree with you that the investor buying that house in 2010 will have to pay the $60,000 plus the cumulated cost of the improvements (patio, roof and garage) and his total price should be closer to the census number of $120,000 

http://www.caseshiller.fiserv.com/about-fiserv-case-shiller-indexes.aspx

Weighted Pairs
Different weights are assigned to different changes in home prices, based on their statistical distribution in that geographic region. The weighting schemes include:

Price anomalies – smaller weights are assigned to homes that appear to have changed in quality or sales that are not otherwise representative of market price trends
High turnover frequency – homes that sell more than once within six months are excluded from the calculation of any index
Time interval adjustments – longer sales pair intervals are assigned less weight than pairs with shorter intervals
Initial home value – each pair is assigned a weight equal to the first sale price
Both price anomalies and longer time intervals can indicate physical changes to a home. High turnover frequency and shorter intervals can indicate that the transaction is not arms-length, proceeds or follows redevelopment of the property, or a fraudulent transaction.

http://www.cbsnews.com/video/watch/?id=7370357n&tag=mncol;lst;1
www.youwalkaway.com

Real estate prices MUST go back to their phenomenal value before they can begin to appreciate and stimulate the economy. 60 % of Nevada property is underwater. 50% in Arizona. still only 23 % nationwide.

Don't keep making payments on property that only a bank profits from, and Don't mess with those cute little baby bears. In either case, you could be eaten alive.

TMAC54 says

phenomenal

TMAC54: I noticed you said "phenomenal", instead of "fundamental". I am glad that somebody here agrees with me, that it should be "phenomenal" not "fundamental", which means that values will be "phenomenally" cheap, just like they were "phenomenally" expensive in 2006.

What I meant was, people drive 73 miles pr hr whether the speed limit is 55 or 65. They will only drive 50 minutes each way to work, 14% is max in interest they pay for a mortgage, they only pay 2.5 times their income on housing. NOONE knows why, these are just phenomena. At times these numbers change due to unusual circumstances. The circumstances that caused houses to become detached from reality have vanished like MAGIC.

TMAC54 says

The circumstances that caused houses to become detached from reality have vanished like MAGIC.

Yes, but now the pendulum is swinging in the opposite direction, and these silly bulls are still trying to justify why the Bay Area "Fortress" prices are still above the "fundamentals", where they should be arguing why Bay Area prices should even be anywhere close to the "mean trendline".

I usually lurk and just read what others post. But I have to say the shadow inventory here in Las Vegas (Henderson Area, Near Anthem) is about 10%.
How do I know? Well I am a mailman and I have 1100 deliveries. Out of those deliveries about 220 of them are vacant, and have been for awhile now. To claim vacant within the post office there has to be no one in the house for 90 days. Also I have to go to the door to deliver certified mail to the owners when are losing their house.
Now just by looking at realtor websites and signs on the property that are for sale about 70 was the last time I counted. So that leaves about 150 give or take 10 either way that are shadow.
So next time you see your mailman ask them about your area, you might be surprised what they tell ya.

just looking at that chart it seems pretty obvious why the low tier has fallen more than the high end.

all of you guys waiting for the 40% drop at the high end "any day now" are a bit delusional.

dunnross says

The entire process takes about 12-17 years to complete

When did the "process" begin? 2000, 2007, 2010?

Saying "12-17 years" isn't exactly specific, or useful and it just sounds like a wild guess. Yeah, of course the immediate future is when we will all find out of "something big" is going to happen, or not.

Women generally wait 16 to 35 years before having a child. It's the same kind of claim.

bmwman91 says

Women generally wait 16 to 35 years before having a child. It's the same kind of claim.

Actually, believe it or not, those two (women and housing) are related. The reason, I said 12-17 years, is because, in the past, the cycles were shorter, because a person's lifespan was much shorter. Now, it's actually closer than 17 years. Also, the fact, that the gov't is constantly meddling in it, is throwing off the whole cycle. But the gov't can only delay the cycle, they cannot eliminate it.

17 years huh? That's 612k in rent money before we hit bottom.

toothfairy says

17 years huh? That's 612k in rent money before we hit bottom.

Yes, but mortgage and taxes would cost me the same. Besides, it means that I can put all my cash into gold, which should, at least, double by then.

dunnross says

Yes, but mortgage and taxes would cost me the same. Besides, it means that I can put all my cash into gold, which should, at least, double by then.

Putting ALL your money into one asset class seems like a very poor strategy....

Gold is also taxed very highly by the government when you go to sell.. No matter how long you hold it.. It's taxed as a COLLECTIBLE at 28%.... add on state taxes.. and your talking 38% taxes when you go to sell.

And if we did have any larger crisis.. The government would probably tax gold even more! Look how they outlawed short selling temporarily in the stock market crash.

Los Angeles Owner says

Putting ALL your money into one asset class seems like a very poor strategy....

This statement makes no sense, because gold is money.

dunnross says

This statement makes no sense, because gold is money.

And why would I want to go to sell gold. What would I get in return, a US dollar? I would just go and buy the house directly using my gold, like they do in Vietnam.

dunnross says

And why would I want to go to sell gold. What would I get in return, a US dollar? I would just go and buy the house directly using my gold, like they do in Vietnam.

How much actual physical gold do you own? I wouldn't trust a Gold ETF in an economic collapse.. Hell I wouldn't even trust the bank vault that is holding your gold. What's to keep them from stealing YOUR gold themselves in worst case scenarios.

Los Angeles Owner says

What's to keep them from keep YOUR gold themselves in worst case scenarios.

The US Govt confiscated gold back in 1933, because we were on the gold standard. They didn't actually confiscate it, but paid every holder $25/oz, which was the current market value, at the time. The intent was to use the gold to pay off the debt, and then, get off the gold standard, once the confiscation was completed. Now, there isn't much chance of this happening, because we are no longer on the gold standard.

dunnross says

he US Govt confiscated gold back in 1933, because we were on the gold standard. They didn't actually confiscate it, but paid every holder $25/oz, which was the current market value, at the time. The intent was to use the gold to pay off the debt, and then, get off the gold standard, once the confiscation was completed. Now, there isn't much chance of this happening, because we are no longer on the gold standard.

Well, think about it.. The chaos that would ensue in the transition period where the dollar is worthless.. and you use gold for everyday normal transactions... Are you really naive enough to believe no one will steal all your gold first?

Unless you want to hire an entourage and travel around in a BRINK trunk all day... Your gold won't be safe in the scenario you are "predicting".

I'd be willingly to bet you would be killed in the ensuing riots and social upheaval long before you can buy a "fortress home" with 30 oz of gold.

dunnross says

The US confiscated gold and paid market price for it so they could use the gold to pay off the debt.

The problem was that once we were off the gold standard, the foreign banks didn't want our money any more. They wanted gold. That's why Roosevelt needed gold at the time.

Los Angeles Owner says

dunnross says

... I can put all my cash into gold, which should, at least, double by then.

Putting ALL your money into one asset class seems like a very poor strategy....

Kinda like paying 3K per month to rent in San Jose.

StoutFiles says

1. Because it would cost 15 million dollars for a professional audit of 700,000 gold bars.

$15M is nothing. Ron Paul will gladly pay for this out of his own pocket, if only they let him do it.

dunnross says

StoutFiles says

1. Because it would cost 15 million dollars for a professional audit of 700,000 gold bars.

$15M is nothing. Ron Paul will gladly pay for this out of his own pocket, if only they let him do it.

Okay, but how would this audit benefit the country in any way? Also, Ron Paul does not have 15 million dollars. His net worth is closer to 5 million.

StoutFiles says

Okay, but how would this audit benefit the country in any way?

"My Administration is committed to creating an unprecedented level of openness in Government. We will work together to ensure the public trust and establish a system of transparency, public participation, and collaboration. Openness will strengthen our democracy and promote efficiency and effectiveness in Government." - Barack Obama

SO ,,,, Now we equate "SHADOW INVENTORY WITH GOLD"
http://www.inman.com/news/2012/01/20/real-estate-sales-end-2011-positive-note-chart
note: 1/3 of the sales are distressed.dunnross says

"My Administration is committed to creating an unprecedented level of openness in Government. We will work together to ensure the public trust and establish a system of transparency, public participation, and collaboration. Openness will strengthen our democracy and promote efficiency and effectiveness in Government." - Barack Obama

In the 1960s and 1970s, most of my aunts and uncles in my huge family lived in 3 bedroom/1 bath houses built in the '50s. These were all-white neighborhoods that would have been considered "middle class" or at least "working class" as late as the mid 1970s. Now, however, almost all of the aunts and uncles have moved from their original neighborhoods (in various parts of the Midwest and Mid-South) because the old neighborhood is now all or mostly minority, with bad schools and lots of crime.

The Case-Shiller index is interesting because it compares the same house at different points in time, but it does have some problems, because the demographics of the neighborhoods have changed so much. Middle class people don't want to live in a scary neighborhood in a house that only has one bathroom, even if the lots are large and the landscaping is mature.

There are areas of California where the 1950s houses have done well price-wise, but in Midwestern and Southern cities that I am familiar with, they have NOT fared well at all.

Starving Realtor says

And Buffalo, NY had a top-tier higher education system that produced industry titans.
Now look at it.

Weather may play a bit of a factor too.

I don't think California's current educational system is much to brag about. I guess the U of C system is still very highly regarded. The K-12 system is badly broken. My children attended Newport Beach public schools in the early 90s. They were overcrowded and the curriculum was nothing but trendy nonsense.

I think the reason that 50s houses have held up better in California is that the 50s houses were often built in the more desirable areas closer to the beaches, keeping at least some of the neighborhoods from becoming slum areas. In midland cities, the geography surrounding the urban core generally doesn't vary dramatically. There is typically a good side of town and a bad side of town, with the center of town generally having high crime and bad schools. Land is cheap, and people don't have any reason to stay in an older neighborhood once the neighborhood starts having big problems. Consequently, many well-constructed brick 50s houses in the area north of St. Louis can be had for less than $20,000, while 50s houses west of St. Louis may have become very valuable if they are still in a good school district with low crime.

The median house price and the Case Schiller index are interesting in terms of general trends, but you shouldn't base a decision to buy or sell on any sort of regional average.

Maybe a bit off the subject, but a few comments mentioned demographics. I see this as a possible problem also.
Where I live there are TONS of anchor babies who are barely literate high school slackers with no ambition or skills. Their parents are high school dropouts from Oaxaca, etc. who are therefore barely literate.
The other various and sundry slack-jawed punks are frequently from single parent homes and these ne'er-do-wells also are pretty useless.
The lack of housing at UCSC means there is a healthy rental market here, and of course, almost all of the other apartments are illegals and their families.
There are TONS of sec. 8 people, and people on SSI getting monthly checks because they convinced the govt. that they were 1. bipolar 2. depressed 3. etc. and therefore have a "disability".
Downtown is of course infested also with hordes of skells shuffling up and down Pacific ave begging or doing whatever they do.
I suppose someone inclined to be a landlord here could pick up a place that was foreclosed and become a cop wondering when his tenants were going to destroy, burn down, break the toilet, etc. etc.
No thanks. Vanguard High Yield Corporate Bond fund, High Yield Tax-Free, Total Bond Market Index.
Want capital appreciation? That's another asset class.

In my sub-neighborhood of a about 25 houses currently, about 4 are built and SOLD. But nobody has moved into them. Maybe 4 other sold starts and a few other specs. But, has anyone else seen SOLD with no occupancy? Its been a few months for two of them....

CBETA says

You kidding, right? Many of those did not have 5%, 10%, or 20% when during the bubble, but be sure, they do have 20-30% for a downpayment now when the prices have fallen!

CBETA. I think you need to go back to school and take your math class again. If somebody didn't have 5% during the bubble, prices would have to fall more than 75% from the peak, for them to afford 20% or 83% to afford 30%. Where do you know of a place where prices have fallen this much?

The reason they may not have had that money during the bubble. For example, could be, that they just entered the workforce and had no significant savings yet.
Also 5% from 600K is 30K, where is in the same area houses are now closer(Grimmer) to 400K and 20% is 80K. In 5 years, those with a degree and a goal are capable of saving $80K... I personally know a few.
Hence it is not just math. It is time that worked for them and goal that they worked on.

One example; http://www.redfin.com/CA/Fremont/4726-Victoria-Ave-94538/home/1110471
Note not every house in this neighborhood is like that, varies street by street.

Is everyone was able to achieve same - of course not.
Reminds me of this
Колхозное собрание. Отчитывается главный зоотехник: (All hands at a Farm. Key technician is providing status)
– ...в среднем от каждой коровы мы надоили 7 тонн молока. (.. on average from each cow we got 7 tonn of milk)
Встает из зала бабка, спрашивает: (An older woman gets up and asks:)
– Милок, что такое в среднем? (Dear, what is 'on average'?)
– Ивановна, взять к примеру корову Зорьку, она дает 3 тонны, а Звездочка – 13, а в среднем они дают 8. Понятно? (Well, if you for example take cow 1, she gives 3 tonns, whereas cow 2 - 13, but on average they give 8. Understand?)
– Люди, так шо эта деется... Если секретарша председателя Ленка даёт ему и главному инженеру, а доярка Машка – каждому механизатору, то в среднем по колхозу и я блядь получаюсь?! (People, what is this... If director's secretary Lenka f* him and principle engineer, milkmaid Mashka f* each mechanic, then on average for our farm, I am a whore????)

CBETA says

they just entered the workforce and had no significant savings yet

Hi SBETA,

With the "real" unemployment or underemployment rate above 20%, and prices of everything (except housing) going up every year, unfortunately reality is not on the side of those who are trying to save money for a down payment. Yes, there will be exceptions (outliers), but those outliers will not prevent prices to continue falling to their "fair value", and, even lower, because, when we are talking about real estate prices or trends, we are talking about the law of large numbers:

http://en.wikipedia.org/wiki/Law_of_large_numbers

And, also, your joke is funny, but it's not true. Even though your babushka may say that she is not a whore, odds are greatly against her, so, most likely, she probably is.

Nomograph says

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

Shadow inventory is not just the foreclosure inventory. It also includes delinquent loans. Foreclosures represent less than 1/3 of the total shadow inventory, akin to the top of an iceberg, where the bulk of it is "under water" - pun intended.

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