patrick.net

Terrabella says

The thing that will collapse the housing market nation wide is interest rates. If and when they start moving up, the housing market is in for far worse conditions than we seen so far. It is anyone guess as to when rates will climb but at some point the rates will move up and once again bring housing to its knees.

Yup. The Fed holds the cards. I can't reliably predict the Fed.

My guess is that the Fed will continue with low interest rates and inflation to help reduce the debts of their buddies in Big Finance and Big Government.

But if I'm wrong, and the Fed tightens the money supply, housing could start tanking again. Especially in overpriced areas.

Terrabella says

Well, one thing the Bay Area has that many other areas don't is jobs. Although the job market is not what it once was, compared to other parts of the country it is comparatively robust in certain segments. Between San Francisco, Silicon Valley and all the support jobs that feed off of both sectors, the Bay Area isn't all that bad. Housing has always been over price in this area but seems to have weather a bit better than say places like Florida, etc. The thing that will collapse the housing market nation wide is interest rates. If and when they start moving up, the housing market is in for far worse conditions than we seen so far. It is anyone guess as to when rates will climb but at some point the rates will move up and once again bring housing to its knees. My personal opinion is it will take at least ten years before we will have stable market which all depends on the political environment both here in the USA and worldwide.

Excellent points.

Bernanke says rates will be stable for about another two years but what if we get a President who wants another Fed chief? Romney is a moderate (although not by California standards) and what if he wants...oh, let's say Bob Rubin at the tiller? My wife says that's nuts because he's a Democrat but strange problems bring strange solutions.

I think it could happen and A LOT of things would change very quickly.

We have to get back to a somewhat more honest currency. Three percent mortgages and one percent on a CD with retirees getting a weekly high colonic when they go to the grocery store IS NOT sustainable.

rootvg says

This isn't the fifties, as badly as my wife and I and others we know would want it to be. I think we can get there again and there are some very smart people who think we can as well but it's gonna take time and WORK.

What exactly about the 50s did you like? Was it the high tax rate for the wealthy? The social engineering (GI Bill)? Or, perhaps that pesky civil rights movement hadn't yet taken hold?

Ah yes, to live in a simpler time when men worked and woman stayed at home and made dinner and babies.

I don't know which "very smart people" you've been listening to, but based on your post either they are not very smart or you misunderstood them.

There is no going back. Never was. The desire to go back - nostalgia - is real and very powerful. Advertisers know this. Politicians do too. Get over the past -- it wasn't nearly as great as you thought it was. (That amazing long bomb touchdown pass I heaved in high school in truth traveled about 30 yards and looked like a dying bird.)

rootvg says

We've been here before: economically, politically and socially. We've navigated these waters before (except for the debt) and we can do it again

Or really? When have we been here before? 1980? That was just the beginning of an end we are just starting to understand. Our glory days are over. The jobs for simpletons are gone from our shores for good. Soon they'll be gone from everywhere for good. The ONLY WAY to keep civilization plugging along will be through redistribution of wealth from people like me to people like you.

You're welcome.

uomo_senza_nome says

realitycheck says

Willing to pay is also linked to banks willing to lend! Anyways, too much competition to buy? In that case prices should be rising.

Agreed. Credit is too loose, that's another problem. There are no repercussions for making bad financial decisions. That's also a problem.

About what you said above concerning foreign policy, I would tell you that Reagan's team from his first term was absolute best of the best and then Bush 41's people were at least that good if not better.

Bush 43 was another matter. I like Rummy and I like Cheney but Dubya was sort of above his head with a lot of things and it showed. A very conservative friend of ours who's a retired statistician from Livermore Labs (and the smartest person I've ever met) said he thought Junior burned his brain with drugs during college. That's really the only explanation. His father was never like that and Prescott wasn't like that when he served in the Senate.

My uncle served as Flight Superintendent (E-8, didn't stick around for the last stripe) in the 89th Airlift Wing (Air Force outfit that functions like a private airline for Congressmen, Senators and VIPs, it's separate from Air Force One) and flew with all of these people for many years. He said the Bushes and then Al Haig were some of the most gracious people you could ever meet. The enlisted guys were always in awe of Bob Dole because of what had happened to him and what he managed to accomplish. It's a story that's well known but rarely told anymore.

Terrabella,

I totally agree with you, rising interest rates can collapse housing which is why Ben Bernanke said in speech he is planning to hold interest rates at record-low levels until at least late 2014. The Fed is also comfortable with official inflation being above 2%. This type of environment will punish savers and reward people who have debt.

fewy says

Terrabella,

I totally agree with you, rising interest rates can collapse housing which is why Ben Bernanke said in speech he is planning to hold interest rates at record-low levels until at least late 2014. The Fed is also comfortable with official inflation being above 2%. This type of environment will punish savers and reward people who have debt.

It's been going on for awhile...

...but as I said, if we get a new Fed chief as we did when Paul Volcker replaced Bill Miller, all bets will be off.

rootvg says

You can live the same life but without the tax advantages. We did it for eight years and that was enough.

Enjoy your tax benefits,if you got your math right. :) I have never recommended renting for life - It is about renting vs buying the same property.

bubblesitter says

rootvg says

You can live the same life but without the tax advantages. We did it for eight years and that was enough.

Enjoy your tax benefits,if you got your math right. :) I have never recommended renting for life - It is about renting vs buying the same property.

My landlord and CPA even said we were pushing the envelope for the length of time we waited to buy.

Debt scares me. Great big honking tax bills scare me even more.

If I suddenly got rich, I'd pay that mother off so fast you wouldn't know I did it no matter what the interest rate is. It's a TON of money.

We understand the seriousness of what we did. Trust me.

rootvg says

My landlord and CPA even said

rootvg says

Trust me.

You forgot to add your Realtor. :)

There are many things I disagree with President Carter about, but he really socked it to the oil companies in the 70s. I believe he put in a windfall profits tax on them, a maximum price limit on gas at the pump, a 55mph speed limit nationwide. This scared them so much that the price of gas stayed stable for some 20 years after he left office. Back then it felt like the government was at least somewhat watching out for us.
With the cast of wimpy charactors in charge today, policies like these are unimaginable, and the greedy oil companies run amuck with zero fear of the people. Carter is a good man.

Patrick - Let's say we have a currency crisis like we did in 1980 (due to the money printing and low rates). If rates hit 18% again, will home prices get crushed beyond everyone's imagination? Some people are saying that inflation will help increase home prices even if rates skyrocket above 10%.

Zakrajshek says

With the cast of wimpy charactors in charge today, policies like these are unimaginable, and the greedy oil companies run amuck with zero fear of the people.

Which greedy oil companies? Are you speaking of Saudi Aramco? The OPEC cartel? Or small-time punks like ExxonMobil?

Right, Obama should send a "stern letter" to OPEC informing them they must pump more oil or else!

Hahahahahah...

HousingBoom says

Patrick - Let's say we have a currency crisis like we did in 1980 (due to the money printing and low rates). If rates hit 18% again, will home prices get crushed beyond everyone's imagination? Some people are saying that inflation will help increase home prices even if rates skyrocket above 10%.

Canada had a currency crisis in the mid nineties and their property prices didn't crash (especially in BC and in the Toronto area) because of continuing in-migration from Asia. My guess would be we'll have something similar in this country.

Peter Schiff said the Chinese would flood in here to invest all those Dollars we've given them over the past twenty years. He was right.

bubblesitter says

rootvg says

My landlord and CPA even said

rootvg says

Trust me.

You forgot to add your Realtor. :)

But we didn't buy in Hayward, Fremont, Brentwood or Oakley.

There's a reason.

This is also the first time a landlord said he was glad to hear we were staying close by. We'll end up having him over for a barbeque.

rowemoore says

What exactly about the 50s did you like?

In rootvg's defense, he was talking about the economy. That's probably enough to know he wasn't talking about all of the unresponsible sexual activity of the fifties.

rootvg says

Peter Schiff said the Chinese would flood in here to invest all those Dollars we've given them over the past twenty years. He was right.

They said the same thing about the Japs in 1989. Remember the final episode of "Newhart" where the whole town sells out to a Japanese RE tycoon and Joanna is wearing a kimono?

China in 2012 = Japan in 1989. Same kind of asset-bubble driven economy. China will have a "lost decade" just like Japan...except with potential civil unrest and violence.

FunTime says

rowemoore says

What exactly about the 50s did you like?

In rootvg's defense, he was talking about the economy. That's probably enough to know he wasn't talking about all of the unresponsible sexual activity of the fifties.

The economic stability, the relative stability of our culture...although my father was one of those James Dean wanna be types who ended up in the military because there were no other options for a working class kid from a small town in Appalachia.

In my lifetime, the mid eighties and then the mid to late nineties were good. Strictly on the basis of economics, most all of the early and mid sixties were good, late sixties not as much due to creeping inflation from having guns and butter. When we went off the gold standard in 1971 and then found ourselves in a position where we no longer controlled the worldwide price of oil, that's when things got bad. Again, Alan Greenspan discusses this at considerable length.

I have a copy of John Chancellor's book where he discussed many of the same issues, saying he thought the last "good year" in the United States was 1972. That would roughly match up with the beginning of our oil problems and then our currency problems which ramped up when we had to have all that social spending during the Vietnam War days.

wthrfrk80 says

rootvg says

Peter Schiff said the Chinese would flood in here to invest all those Dollars we've given them over the past twenty years. He was right.

They said the same thing about the Japs in 1989. Remember the final episode of "Newhart" where the whole town sells out to a Japanese RE tycoon and Joanna is wearing a kimono?

China in 2012 = Japan in 1989. Same kind of asset-bubble driven economy. China will have a "lost decade" just like Japan...except with potential civil unrest and violence.

You could be right. Some very smart people think you are right.

Yes, the shit could really hit the fan in China. One would think our national security folks are ready for it.

I miss Mary Frann.

The 50s were great. Gas was cheap. Average people could get a good job w/o needing college and six figures of student loan debt. House prices were reasonable. We didn't have people telling us that our very existence is destroying the planet. We weren't morbidly obese or hooked on anti-depressents.

We as a nation actually defended our own industries and economic interests, rather than selling out to the global financial elite. But then again, we actually had a nation worth defending back then.

It wasn't so great if you were black, of course.

wthrfrk80 says

It wasn't so great if you were black, of course.

Or a woman. Or from Japan or Germany.

wthrfrk80 says

The 50s were great. Gas was cheap. Average people could get a good job w/o needing college and six figures of student loan debt. House prices were reasonable. We didn't have people telling us that our very existence is destroying the planet. We weren't morbidly obese or hooked on anti-depressents.

We as a nation actually defended our own industries and economic interests, rather than selling out to the global financial elite. But then again, we actually had a nation worth defending back then.

It wasn't so great if you were black, of course.

If I had to pick a year to go back to, I (and many others) would pick NOT 1957 but probably 1964. It represented the peak of middle class prosperity for many people. 1965 wasn't bad but that's also when our involvement in Vietnam got serious. I've also heard people say 1954 was a good year, when things truly settled down after the wars. It was when people started living again. If you watch movies from 54-55-56 it looks very tranquil. Lee Iacocca used to talk about those years.

FunTime says

wthrfrk80 says

It wasn't so great if you were black, of course.

Or a woman. Or from Japan or Germany.

My mom is sixty eight and said the late fifties/early sixties were a dream come true. Grandma ran their grocery store and Grandpa was an electrician. Kids got off school and worked in the store at night. Life couldn't have been any better.

FunTime says

Or a woman. Or from Japan or Germany.

My whole family is of German ancestry. We had no problems. Even my Grandpa who came here in the 50's with a thick accent had no problems. Even though he fought for the Germans in WWII. He was the one who taught me how to properly fold and respect the American flag, by the way. Pretty amazing when I think of it, considering that same flag was on the planes bombing the shit out of his homeland.

Women were treated better then since they were seen as future wives and mothers; not just sex objects. The whole "sex is just recreation" concept had not yet gone mainstream. Cooking, cleaning, and taking care of a family at home had not yet been scorned by an angry bitter minority. As if sitting for 40+ hours a week in a cube farm is somehow more glamorous and fulfilling.

wthrfrk80 says

FunTime says

Or a woman. Or from Japan or Germany.

My whole family is of German ancestry. We had no problems. Even my Grandpa who came here in the 50's with a thick accent had no problems. Even though he fought for the Germans in WWII. He was the one who taught me how to properly fold and respect the American flag, by the way. Pretty amazing when I think of it, considering that same flag was on the planes bombing the shit out of his homeland.

Women were treated better then since they were seen as future wives and mothers; not just sex objects. The whole "sex is just recreation" concept had not yet gone mainstream. Cooking, cleaning, and taking care of a family at home had not yet been scorned by an angry bitter minority. As if sitting for 40+ hours a week in a cube farm is somehow more glamorous and fulfilling.

I came across some class photos from my mom's Catholic grade school years and I have to say, those kids look happy.

wthrfrk80 says

Women were treated better then since they were seen as future wives and mothers; not just sex objects.

I've quoted this here, so you can again read what you wrote. I see a connection between sex, wives, and mothers. Do you?

Here's how your sentence reads to me, "Women were treated better then since they were seen as future wives and mothers, not just wives and mothers."

I have to admit I'm fairly new to trolling and the number of smart people on patrick.net has me thinking I'm constantly being subtly, smartly trolled.

Should I have said "objects of pleasure" instead of "sex objects"?

I was trying to make a distinction between two very different attitudes men can have toward women: an attitude of genuine love, or a very different attitude of selfish lust.

wthrfrk80 says

China in 2012 = Japan in 1989. Same kind of asset-bubble driven economy. China will have a "lost decade" just like Japan...except with potential civil unrest and violence.

I dont see any industry we lost to Japanes companies ever come back. Have you ? Fact is Japaense companies are still a global powerhouse and still compete with US companies and have doubled-tripled in size compared to us.

wthrfrk80 says

an attitude of genuine love

I would argue women are not genuinely loved by men until they are paid the same for the same job" etc, etc, in the midst of life we are in debt etc."

[...]

Fwiw, the chart that leads up this thread is misleading and inaccurately titled. It is simply bogus to conclude that it represents what actually happened to overall prices in any area during the periods represented.

Why? Because the data represented from the FHA only includes conforming loans. So, in any year that the conforming loan limit went up faster than actual home prices, the graph will simply catch the new larger number of properties that would have previously been financed as a non-conforming loan.

A Sunnyvale house that in 2000 sold for $500K would probably not have been included in the data owing to an underlying conforming loan limit of $379,050. But that same house being resold for $500,200 in 2003 would have been financed with a conforming loan which would now be recorded as included in the data. Viola, highly skewed data!

So the chart is going to loosely track whatever happens to the conforming limit and really only represents what is happening in a given area where only a small minority of the home prices exceed limits that would price them into conforming loans.

Hmmm, I've tried to upload a chart that shows the conforming limits over the same period and I never seem to get anything after clicking Upload Image. Well, I tried....

delete this account says

Fwiw, the chart that leads up this thread is misleading and inaccurately titled. It is simply bogus to conclude that it represents what actually happened to overall prices in any area during the periods represented.

No, not bogus at all. Prices have spiked from just 1997 to 2000, even though LT fundementals didnt support that.. JOBS.

After 2000 ? totally irrational!

Born, and raised in Sunnyvale, so dont make SU sound like its Bel Aire or something.. its not! Take a step back and look what prices were for decades...

Yes! it a fucking bubble all right!

Fed will keep rates low for a vey long time as they realize increasing rates will have a negative impact on housing. They will continue trying to re-inflate the housing market over the next decade. Unfortunately, I need a house, have a baby on the way, and have to face the fact that my wife wants a house.

I would rather rent, but renting a 4 bedroom house in nice area in the Bay, probably runs 4-5K per month. A 700K+ loan interest only 3% interest loan + taxes - minus the tax break make the decision to buy a relatively easy one.

I agree with many of your comments - job market sucks and the recovery is a myth. Every US President, whether Obama or Romney wants to govern in an interest low environment.

Helloeeze says

If houses decline to the level of inflation, my home in San Jose will be worth 50,000 more than I bought it for in 1989. Seriously.

And yet that is how it works..even go back to the 89 peak and correction.

By the time this thing is over all our minds are going to blown how low prices are at the bottom.

Dumbest time in the history of the world to go into debt for decades so you can think you "own" a house.

pazuzu says

By the time this thing is over all our minds are going to blown how low prices are at the bottom.

Dumbest time in the history of the world to go into debt for decades so you can think you "own" a house.

But, if your mortgage is the same as rent and you're getting the tax incentives you weren't getting before (important when your household gross is close to $300K) and your utility bills are half of what they were in the rental...

...it makes sense.

And, it was a fixer priced ~$100K less than everything else around it. That's why we're already being approached to refi at no cost, only having lived here a few months.

That's the only scenario in which it would make sense and that's why we bought. Otherwise, I would have stayed with the rental.

“and your utility bills are half of what they were in the rental...”

That’s an extremely rare circumstance, in fact it sounds like bullshit unless the place you were renting was much larger than what you bought, or something was wrong with it, in which case your rent vs. own comparison is also bullshit.

Either way having to factor in the gross overpayment of utilities in a rental shows just how far one has to reach to make the case for buying.

duckhead says

“and your utility bills are half of what they were in the rental...”

That’s an extremely rare circumstance, in fact it sounds like bullshit unless the place you were renting was much larger than what you bought, or something was wrong with it, in which case your rent vs. own comparison is also bullshit.

Either way having to factor in the gross overpayment of utilities in a rental shows just how far one has to reach to make the case for buying.

It's rare but it's real. I just got last month's bills. I'm looking at them.

We made out like bandits, mostly because of the location and the tax advantages. Whether or not you think that's fair is up to you but the numbers are what they are.

wthrfrk80 says

FunTime says

Or a woman. Or from Japan or Germany.

My whole family is of German ancestry. We had no problems. Even my Grandpa who came here in the 50's with a thick accent had no problems. Even though he fought for the Germans in WWII. He was the one who taught me how to properly fold and respect the American flag, by the way. Pretty amazing when I think of it, considering that same flag was on the planes bombing the shit out of his homeland.

Women were treated better then since they were seen as future wives and mothers; not just sex objects. The whole "sex is just recreation" concept had not yet gone mainstream. Cooking, cleaning, and taking care of a family at home had not yet been scorned by an angry bitter minority. As if sitting for 40+ hours a week in a cube farm is somehow more glamorous and fulfilling.

I have a friend in Ohio who was raised old school Italian and he still looks at women as future wives and mothers. He evaluates potential girlfriends with that same set of criteria.

wthrfrk80 says

rootvg says

Peter Schiff said the Chinese would flood in here to invest all those Dollars we've given them over the past twenty years. He was right.

They said the same thing about the Japs in 1989. Remember the final episode of "Newhart" where the whole town sells out to a Japanese RE tycoon and Joanna is wearing a kimono?

China in 2012 = Japan in 1989. Same kind of asset-bubble driven economy. China will have a "lost decade" just like Japan...except with potential civil unrest and violence.

I loved that episode, especially where Suzanne Pleshette shows up in the final scene.