patrick.net

Darrell In Phoenix says

That's about right. Actually housing already resumed tanking last month.

That was just the Overture to the Opera in 3 ACTs.

6. Interest rates soar.
6a. Fed funds mortgages at 3%
7. Housing does not tank.

8. Public Debt Soars.
9. Interest on Debt exceeds Tax Revenues.
10. FED cannot reduce Prime Rate below 0%.
11. California declares freshly minted silver coins as legal State Currency.
12. Dollar is no longer accepted as legal tender.
13. Dunnross buys his house in Palo Alto for 100 Gold coins.

dunnross says

1. Fiscal cliff will be kicked down the road, again.

What does that even mean? They'll have to agree to cut something, and it's all but guaranteed that at least the top brackets will be allowed to roll back to 2001 levels.

2. Look for S&P downgrading US rating by February, 2013.

Unlikely. Republicans aren't dumb enough to try to resist raising the debt ceiling again, and there is still no place safer than US bonds.

3. As a result China/Japan/OPEC selling bonds en mass.

Why would they do that? These countries buy US bonds because there isn't anything else to do with all of those dollars that is a better investment. They're not going to fuck up their own fiscal policy.

4. As a result, FED to raise QE-infinity to $60B/month, which also will include T-bill buying.

More QE is all but certain unless inflation kicks up. They have to get rid of debt somehow.

5. Banks, realizing that FED is the buyer of last resort, dump the bonds at the auction.

"realizing"?

6. Interest rates soar.
7. Housing tanks.

Not going to happen simultaneously. Interest rates will only go up if:

a.) There is massive inflation

b.) US credit becomes so bad that nobody wants bonds.

B will not happen in your life time. The alternatives for investors are all universally much worse.

A is possible, but it won't tank housing. Quite the opposite, actually -- high inflation would suddenly make overpriced houses affordable again.

Darrell In Phoenix says

Kevin says

but it won't tank housing. Quite the opposite, actually -- high inflation would suddenly make overpriced houses affordable again.

Don't be silly. There is no inflation without wage inflation.

Literally true. Which is why I said it. Wage inflation is inevitable.

Have you actually convinced yourself that wages are going to triple to meet the inflated prices of resale housing?

Not gonna happen.

Inflated housing prices will be halved to meet much lower wages.

I think you're nuts if you think housing is 3x overpriced. There are probably areas where that's true, but they universally have dumb non-macro related reasons for it.

Housing is still somewhat overpriced relative to wages, but it's nowhere close to 3x on average. In many of the crappier parts of the country (say, ohio, michigan, and indiana), it's very cheap compared to incomes.

Darrell In Phoenix says

Kevin says

Housing is still somewhat overpriced relative to wages, but it's nowhere close to 3x on average.

Sure it is. You've demonstrated so by the construction figures you posted.

I'm building a high end modern home on a single lot of land. It'll be marginally cheaper than buying an existing home of similar quality. It's roughly in line with other high end homes in the area, and people who buy these homes (like me) all make north of $300k/year. I have no idea WTF you're talking about.