patrick.net

HousingWatcher says

Actually, the exact opposite has happened. Despite falling in price, housing is LESS affordable today to most people than during the bubble. How is that possible? Simple: Because incomes have fallen more than home prices have.

So much wrong with that statement... Median incomes have fallen a few thousand dollars... while interest rates have fallen 3+% and home prices have fallen 40%...

A median income of $80K x 3 = $240K affordable home
A median income of $75K x 3 = $225K affordable home

Interest rates have more than made up for the drop in incomes.. atleast in terms of monthly nut.

The biggest problem is lack of job security, anxiety, group think, fear, bad credit, tightest lending standards in the past 30 years, media constantly calling bottoms that never materialize for 5 straight years...

Even most bubble bloggers predicted a bottom in 2011-2012... back in 2006. Now they've all extended that to 2020 or later... That's what's keeping people from buying a home.

Los Angeles Owner says

Median income of an area is a very misleading indicator of what property values should be!

for instance... http://projects.latimes.com/mapping-la/neighborhoods/income/median/neighborhood/list/

Median income in Santa Monica, CA is only $69K... yet look at median income in Porter Ranch.. (north of Northridge on the outskirts of the san fernando valley) is $121K. Now Porter Ranch is a nice area... but based on median income home prices should be way more expensive than in Santa Monica.

Median income is bunk for any areas with large rental markets/apartment complexes.

You have a lot of low income renters packed like sardines in studio apartments lowering overall incomes for areas.

Anyone have a better way to estimate what home prices SHOULD BE in Santa Monica, CA for instance? When median income states 69K a year in reports listed above... And other areas like Porter Ranch, CA list median income of $121K yet have FAR FAR lower home prices per sq foot...

How can anyone say median income is an accurate indicator of home prices?

bgamall4 says

May I remind both you that there have been 4 housing bubbles in the UK in 40 years. That is one every 10 years. The UK is the mentor of Wall Street

What is your definition of a bubble?

Bellingham Bill says

No, they lose the ability to borrow money against their home. But as HeadSet said above, lower housing costs are a net benefit to the economy and a really necessary price adjustment.

I have to disagree with that one. When prices fall, you lose money. I don't buy into the--you don't lose any money until you sell argument. If people have an asset that they paid 500K in 2006 that is worth 300K now, they will feel like they lost money. Guaranteed.

Again--lower prices are good. Falling prices are not.

Head set and housing watcher have a clue. The people who are not mortgage debt slaves are those who are now where GDP is actually growing. Hint: NOT in the USA or sclerotic Eurozone countries.
My friends in Mexico all do not have a mortgage! They built their houses paying cash to guys to slowly build them. Funny thing is down there the places are all concrete and you see rebar sticking up towards the sky. This is so they can build another floor on top someday. My friends all did this, it was interesting to visit each year and see new rooms.
ONE guy I know has a mortgage, but he's the exception. He is also the highest paid guy and he works for a government institute that takes good care of him.
The others have not enough cash to buy new CARS either. They rarely have credit card debt either.
So, a guy in Mexico making $2000/month has probably more disposable income as a guy up here with $5000/month income. Property tax for example was $70. I imagine the situation is similar in places like Brazil, Colombia, Peru, etc.
The no or low personal debt is also seen in the other developing countries. They can buy an iPad with cash after saving up a couple of months.
Falling prices being good or bad is irrelevant, it's like gravity. It's neither good bad nor indifferent. "Gravity sucks but it's the law."
I also know of many places where the house prices zoomed very high and fell very hard while income changed very little over that time.

clambo says

Funny thing is down there the places are all concrete and you see rebar sticking up towards the sky.

I saw this in Sicily (Italy) also. The reason, I was told, is that unfinished homes are not taxed. Homes stayed "unfinished" forever.

bgmall--

No, that didn't help. I was just curious what your definition of bubble was--what % rise in real asset price over what time period.

clambo says

ONLY when banks started opening the floods of easy money to anyone breathing to buy houses did the value of houses rise anywhere above inflation.

on the otherhand we also saw consumers with unrealistic expectations of future appreciation.

Low rates and easy credit was in some way a response to the irrational thinking by many.

http://www.d__GPqOVNbE

During prior boom-bust, resulting in recession the FED also reduced rates as RE prices also decline. Both went down in tandem.

bgamall4 says

This may help you. The most powerful was the UK Big Bang of 1986, of Thatcherism, that set the table for the Blair and the massive bubble based on liar loans, which in England were called self certified loans. Isn't that nice?

You want to add Germany to that .. but did they NOT have Liar loans as they absorbed former East Germany in 1991. All it did was fuel speculation by West Germans.

A bubble is a bubble by any cause created. Of course there was easy money and plenty of speculation.. created by the Govt.

bgamall4 says

Any significant price rise over the rate of inflation in a short time. If you learned from Patrick you would know that. :)

Even as vague as that definition is, I would disagree with it. Bubbles are extraordinary events. Prices rise and fall routinely.

Obama works for Wall Street. He has 10 Goldman Sachs former employees on his White House Staff. It seems some people are fans on here and I can't believe it. Government provides new loan to buyer who is 50% upside down on million dollar home that should probably be worth $250K. Bad bank is going to lose $500K after they foreclose on bad loan. Thanks to gov they get paid in full when gov refinances the loan that is not refi-able in a free market. Bad bank walks away paid in full for bad loan and is no longer bankrupt thanks to stealing money from tax payers. THE END

bgamall4 says

No politician believes in price discovery. And the Republicans likely want another bubble even more than most Democrats, so they won't want price discovery either since you cannot have price discovery in a bubble.

Gary Anderson strategicdefaultbooks.com

Seriously? Who is this guy? Republicans and Dems are the same. Wall Street employees for the most part. Ron Paul is the only one who actually voted to let the big banks fail. The only real Republican we have.