patrick.net

Houses beat inflation by only 0.4% annually from 1890-2004. Since 2004, that number is probably right around 0%. The new idea of home prices coming back is really prices staying stagnant. We have been fortunately to feel like houses always appreciate (at least up to 2007), but the reality is a house is one of the worst investment you can make. Investing in wigs would do you better over time. Buy a house because you want shelter and can afford the purchase. Don't buy because you think you can sell later and get your money back and more.

It appears SFAce was right:

http://finance.yahoo.com/news/february-jobs-gains-seen-strong-060614362.html

Of course jobs are coming back.

1. Person loses job making X dollars.
2. Person stays on unemployment hoping to find job that pays X dollars.
3. Unemployment finally runs out. Person takes job making much less than X.

So yes, there are jobs, but not at the same salary as they once were. That won't help the housing market.

StoutFiles says

So yes, there are jobs, but not at the same salary as they once were. That won't help the housing market.

Bingo!

Yup. It's the same pattern that's been happening since the 70's. Good jobs are lost to China and India and replaced by shit-jobs in the service sector.

wthrfrk80 says

Yup. It's the same pattern that's been happening since the 70's. Good jobs are lost to China and India and replaced by shit-jobs in the service sector.

Te good,bad and ugly part of globalization!

lol--I figured this would bring out the bears and glass half emptiers.

rootvg says

Eventually? Sure. Folks who said America was kaput in the Great Depression (we knew people who had been through it, have heard all the stories about the banks and FDR confiscating gold and folks walking through two feet of snow to get to their jobs) couldn't have been more wrong.

Thanks to game changing massive reform that was just short of a revolution, called the New Deal.

Not because of a little patience.

thunderlips11 says

rootvg says

Eventually? Sure. Folks who said America was kaput in the Great Depression (we knew people who had been through it, have heard all the stories about the banks and FDR confiscating gold and folks walking through two feet of snow to get to their jobs) couldn't have been more wrong.

Thanks to game changing massive reform that was just short of a revolution, called the New Deal.

Not because of a little patience.

Homo Economicus. Like Bigfoot, reported to exist in fantasy books, but never seen in the wild.

We know for a fact that Roosevelt's reform made the Depression worse. Things were getting better around 1936-1937 when we took another hit after all the government money dried up. I think it's gonna happen again with another recession.

rootvg says

We know for a fact that Roosevelt's reform made the Depression worse. Things were getting better around 1936-1937 when we took another hit after all the government money dried up. I think it's gonna happen again with another recession.

Wow--talk about revisionist history. Let's analyze that statement. Things got better under FDR's reform until 1936/37 when the reforms basically stopped. Then things got worse. To summarize--reforms = better, no reforms = worse.

Your conclusion is that the reforms were the problem??

rootvg says

we took another hit after all the government money dried up. I think it's gonna happen again with another recession.

The Dow tanked 500 points right after the debt-ceiling fiasco. What does that tell us about how much of our economy is dependent on government money?
tatupu70 says

lol--I figured this would bring out the bears and glass half emptiers.

Who said the glass was half empty? It's more like one-fourths full.

rootvg says

We know for a fact that Roosevelt's reform made the Depression worse. Things were getting better around 1936-1937 when we took another hit after all the government money dried up. I think it's gonna happen again with another recession.

tatupu70 says

Wow--talk about revisionist history.

Word.

?w=510

rootvg says

Eventually? Sure.

When? after Japan style lost decades?

thunderlips11 says

rootvg says

We know for a fact that Roosevelt's reform made the Depression worse. Things were getting better around 1936-1937 when we took another hit after all the government money dried up. I think it's gonna happen again with another recession.

tatupu70 says

Wow--talk about revisionist history.

Word.

?w=510

Homo Economicus. Like Bigfoot, reported to exist in fantasy books, but never seen in the wild.

What you don't know is that I've spent years with people who went through the Depression. I'm betting you haven't.

Or, I could be wrong.

rootvg says

What you don't know is that I've spent years with people who went through the Depression. I'm betting you haven't.

Anecdotes make for poor evidence.

Do you have any hard facts to support your claim about the New Deal making things worse?

We cannot have any real growth in the economy until the private debt is completely de-leveraged. Gov't ZIRP (zero interest rates), while helping the debt de-leveraging is killing lending, because, at these low rates and high risk of foreclosure, banks don't want to lend money for housing. ZIRP is also killing savers, so young people cannot save any money to buy the houses from the retiring baby boomers. All those things have to be reconciled, in order for the jobs and real growth to come back. The only solution is lower house prices.

thunderlips11 says

rootvg says

What you don't know is that I've spent years with people who went through the Depression. I'm betting you haven't.

Anecdotes aren't evidence.

Do you have any hard facts to support your claim about the New Deal making things worse?

Homo Economicus. Like Bigfoot, reported to exist in fantasy books, but never seen in the wild.

And this isn't a parlor game and I'm not in your court of law.

We had what was basically a third set of grandparents, and THEIR parents lost all their money in the Depression. I spent the better part of thirty years hearing their stories.

Where do you think I learned all this stuff?

rootvg says

We had what was basically a third set of grandparents, and THEIR parents lost all their money in the Depression. I spent the better part of thirty years hearing their stories.

Yep--the depression was a horrible, horrible time. Which is why I can't understand why many of the posters here seem to want to relive it.

Raising interest rates, cutting government spending, etc. are a recipe for Great Depression II.

And just so I understand--how does your knowing people who lost everything during the Depression lend any credence to your ridiculous statement that FDR's policies made things worse?

dunnross says

We cannot have any real growth in the economy until the private debt is completely de-leveraged. Gov't ZIRP (zero interest rates), while helping the debt de-leveraging is killing lending, because, at these low rates and high risk of foreclosure, banks don't want to lend money for housing. ZIRP is also killing savers, so young people cannot save any money to buy the houses from the retiring baby boomers. All those things have to be reconciled, in order for the jobs and real growth to come back. The only solution is lower house prices.

There are lower house prices, but not in most parts of the Bay Area.

As I keep saying, I was raised in this business. I don't see any reason to believe that desirable parts of this region are going to come into price ranges most of us here would see as "affordable". They're simply too much in demand and there are too many foreign investors (Asians) out there ready to pounce. You can give me all the charts and graphs you want but at the end of the day it's my money and I'm gonna do whatever the hell I want. I saw an opportunity, I took advantage of it and so far the people telling me it was a good idea outnumber those who don't about three to one.

This is always the battle that goes on between academics who say you can't do this or that and the people in the trenches who go out there and do it. After that, it's usually the academics who want some dickhead from the government to come in and make things "fair", whatever the fuck they think that means on any given day.

If you can't pay the prices here, MOVE. We almost did but (as I said) we got lucky in the right neighborhood and the people liked us and we ended up buying something out of an estate. All the kids from that family live in the same neighborhood where daddy built the houses. The oldest brother comes up to check on us about once each day.

tatupu70 says

rootvg says

We had what was basically a third set of grandparents, and THEIR parents lost all their money in the Depression. I spent the better part of thirty years hearing their stories.

Yep--the depression was a horrible, horrible time. Which is why I can't understand why many of the posters here seem to want to relive it.

Raising interest rates, cutting government spending, etc. are a recipe for Great Depression II.

And just so I understand--how does your knowing people who lost everything during the Depression lend any credence to your ridiculous statement that FDR's policies made things worse?

If raising interest rates and cutting government spending are a recipe for Great Depression II, why didn't we have one in the mid to late eighties?

robertoaribas says

RentingForHalfTheCost says

Houses beat inflation by only 0.4% annually from 1890-2004. Since 2004, that number is probably right around 0%.

So lets see: I buy a home that rents for 10% or more of price, with a loan at around 4%... AND it increases at the inflation rate? Inflation is quite low right now, but let's use 2% as a goal. With 2% appreciation, ANY purchase at near the same monthly outlay as renting becomes an extremely good investment long term.

Buying in areas where houses are cheap makes good sense. Like you said if you can rent for 10% of price then go for it. Impossible to do that in most areas of the country, especially the BA. BTW, real inflation (you know the one with energy and food) is running more like 6-7%. Don't listen to the results from a new formula that was designed to shield us from the truth. Lets do a 1-for-2 reverse split on the dollar and then post headlines saying "House prices have gone up 100%!" Let them fool the masses, but not us. i.e. watch the shells closely as they move, but also check the table for the trap door. That ball might move around if you are not looking hard enough. :)

http://etfdailynews.com/2012/03/08/inflation-how-the-government-lies-about-the-real-inflation-rate-uup-udn-tlt-tbt/

rootvg says

If raising interest rates and cutting government spending are a recipe for Great Depression II, why didn't we have one in the mid to late eighties?

Well, you have to look at what was going on at the time. There is no single recipe that works all the time. The economic conditions of the mid to late 80s are vastly different than what is going on now. You agree, right?

Therefore the economic policies must be different.

rootvg says

If raising interest rates and cutting government spending are a recipe for Great Depression II, why didn't we have one in the mid to late eighties?

There was no cutting government spending in the mid to late 80s.

Edit: Another chart:

tatupu70 says

rootvg says

If raising interest rates and cutting government spending are a recipe for Great Depression II, why didn't we have one in the mid to late eighties?

Well, you have to look at what was going on at the time. There is no single recipe that works all the time. The economic conditions of the mid to late 80s are vastly different than what is going on now. You agree, right?

Therefore the economic policies must be different.

Volcker's actions between 1979 and 1983 set us up for the twenty year growth spurt that followed. Geez, everyone knows that.

I think we're going to get a new President and Congress and Fed chief who are going to do precisely the same thing. I think they have to.

thunderlips11 says

rootvg says

If raising interest rates and cutting government spending are a recipe for Great Depression II, why didn't we have one in the mid to late eighties?

Homo Economicus. Like Bigfoot, reported to exist in fantasy books, but never seen in the wild.

Here again, it's all about results. If you add up the number of years Republicans versus Democrats have served in the White House since World War II, I think you'll find Republicans come out very well.

Reagan's deficits were so bad because he had a Democratic House to deal with. That won't be a problem for the next guy. Paul Ryan is already meeting with various movers and shakers in both parties, on the sly. They know this president and this administration are dog shit. They can't come out and say it but his polls are what they are, and that means it's just over.

robertoaribas says

rootvg says

Volcker's actions between 1979 and 1983 set us up for the twenty year growth spurt that followed. Geez, everyone knows that.

rootvg: you really are the village idiot!

Volckers action was taken to stop spiraling inflation... It was not taken to 'spur growth' and in fact caused a nasty recession.

seriously, my dogs have a better grasp of economics than you do!

Volcker conspired with Reagan to stimulate the 1980-1982 recession to wring all the inflationary pressures out of the economy that had been hanging around since the late sixties when we had guns and butter. That allowed us to grow for twenty years afterward...and I think the next Fed chief (with the blessing of the White House) will do the same thing. He'll have to.

thunderlips11 says

There was no cutting government spending in the mid to late 80s.

Sort of depends as to what is meant by spending. Under Carter there were block grants to states given with no strings. When Reagan got in they had plenty.

What happens sometimes is that the federal government gives out funds but it can only be spent in that given way. So technically a federal plan might be so similar to a state or local plan but due to spending it crowds it out. It could be called cutting spending depending if you view government as different levels vs all together.

The labor participation rate is too low. We have more people than ever and a lower rate since the 1980s. Also, all women "need" to be working these days - most households are at least dual income.

We are potentially at the edge of a big change. We are certainly in a severe stagflation, with wages dropping and prices of food, gas and rent accelerating.

Its not going to end well. Enjoy every day and love life while you still have it.

Mick Russom says

The labor participation rate is too low. We have more people than ever and a lower rate since the 1980s.

I just read an interesting article about the labor participation rate and why it's lower now. The conclusion of a recent study was that the lower rate was due more to demographics (read older population) than long term unemployment. The authors further thought that the participation rate probably would not jump up as jobs came back and that the unemployment rate should drop faster than most expect.

Mick Russom says

The labor participation rate is too low. We have more people than ever and a lower rate since the 1980s. Also, all women "need" to be working these days - most households are at least dual income.

We are potentially at the edge of a big change. We are certainly in a severe stagflation, with wages dropping and prices of food, gas and rent accelerating.

Its not going to end well. Enjoy every day and love life while you still have it.

That depends. Economic conditions in the Rust Belt are much worse than they are in the Bay Area. They're not great here but they ARE better. DC is still vibrant due to all the government money sloshing around there.

Houston is positively nuts with the energy boom. When we left Texas in 2003, Austin didn't have any toll roads. Now it has (I think) three and they're building two more.

Dallas is on course to become another Los Angeles. I honestly believe The Metroplex will extend to the Oklahoma border within the next ten years. They're laying the infrastructure for it right now.

StoutFiles says

yes, there are jobs, but not at the same salary as they once were. That won't help the housing market

I love how we insouciantly write off this very serious question with, "glass half empty."

The media very disingenuously reports only one side of this issue: we added jobs. What kind of jobs? What are the recent trends in average income to compare with this job "recovery"? I'd be skeptical if they aren't talking about it, it must be because it's largely lower paying jobs.

Anybody have info out there? I can't find much to say either way.

Philistine says

Anybody have info out there? I can't find much to say either way.

Very simple. Try yourself getting into one of those highly paid positions and see what response you get. I bet more then likely you want face an interviewer.

Again with the Republican/Democrat argument? I'll solve the debate: they're both horrible. They also need each other, when people are tired of one failing they pick the other party hoping for better results. Both parties should be ousted.

StoutFiles says

Again with the Republican/Democrat argument? I'll solve the debate: they're both horrible. They also need each other, when people are tired of one failing they pick the other party hoping for better results. Both parties should be ousted.

It was always that way.

Have you ever wondered why there are two podiums in the House? Not one, not three...but two?

Washington hated parties and that's what it goes back to. The idea was to have two parties but close enough together that the country would always be basically headed in the same direction.

Bottom line, this isn't Europe. God Forbid that we turn into Britain or France. That's precisely what the Founders did NOT want.

This is also why I truly believe we're gonna be okay. It's the same people in charge, regardless...with a few exceptions during the last three years when we elected a thinly veiled rock thrower as President. The more I think about it, the more I'm convinced he was put there to shepherd the bailouts. We gave him Bob Dole's health care plan from the nineties in return which the Supreme Court might throw out, doing our dirty work for us. They're good at stuff like that.

Nothing has changed in two hundred and thirty five years.

I started this thread because I believe we are at an infliction point and based on what I see today, the US economy has turned the corner. Isn’t that pretty good news for most American’s?

The February jobs report make that three solid reports in a row. There is no reason to believe March will not be better. Economic trends are very powerful. Just as firing leads to more firing, hiring trends have that same effect. The stock market has been screaming this all along.

There are two reasons why hiring is important, in addition to getting more people to work and contribute to the economy, it gets people who have already have jobs to feel safe about their jobs. Those how have wealth have more wealth. People who feared for their jobs in 2008 are now the same people who will no longer feel insecure about their jobs or may in fact demand raises and move to another company. It already happened in San Francisco/Silicon Valley as raises and bonus in 2011 are some of the highest in recent memories. 2012 will be an even better year for compensation.

All this really means is overall consumer confidence will be rising which leads to a little more spending and companies will be expanding thus have to hire more and pay a little more to retain what they have. Families who have been on the fence to buy a home will be off the fence to buy, in significant numbers which will move the market up. Seller’s will demand a little more or wait out their price a little more. That is already happening in the field level which will be reflected in the case shiller in about 3-4 months.

Here's what I know:

My contractor says he's getting busier.

The guy at the hardwood store says he's getting busier.

The lady at the carpet store says her guys are booked for the next month.

Those people don't have charts and graphs that came from some professor over at Berkeley but they're feeling better and they're making a little money again.

SFace says

I believe we are at an infliction point

We most definitely are at an infliction point:

dunnross says

The only solution is lower house prices.

Problem is lower home prices CREATES more debt! Because in order for homes to sell people have to sell at a loss, putting them in a bigger hole of debt. If Fannie or Freddie own the loan and the "owner" defaults, then YOU the taxpayer go into more debt.

Sure the new buyer will come in and have a smaller mortgage than they would otherwise, but you just transfer the debt load. It's not fixing anything.

There's a lot of bad unintended consequences to home prices falling dramatically from current levels. A better solution at this point is to concentrate on increasing wages. Just because it's "easier" to lower home prices doesn't mean it's better for our society. I would argue wages being stagnant for over a decade is the REAL problem.

Housing got way ahead of wages in 2003-2007, but now it's time to stop trying to squeeze blood from the turnip of the housing market and concentrate on ways to increase wages.

I would like to point out that many of the unemployment numbers cannot be relied upon at all.

When they increased the benefits from 6 months to 2 years that means there are a maximum of FOUR TIMES as many people on unemployment than previously possible.

I know if I got laid off I would milk the whole 2 years THEN start looking for work - you are crazy not to! (or you are broke and need the full income).

So if half the people on unemployment are like me (probably close to that) then the # is doubled. cant compare it to 'pre obama' numbers.

Wait did he mean inFLECtion point?