patrick.net

Mark D says

i could say the same thing about you, you are trumping him up because he supports your housing agenda. see the irony?

you need to be able to comprehend what people have been saying before you can engage in any intelligent debate. it's hard to take you seriously when you keep missing the point: why would he be right this year when he has been wrong every single year since the crash? address that. show you are capable of an intelligent discussion.

I get along well with many people on this board who are housing bulls/investors but they are at least willing to discuss points. You know, the points of discussion?

From all of your post in this thread, it's impossible to ascertain whether you actually watched the video being discussed because you have barely made reference to anything said within it. That's called trolling on many communities.

Goran_K says

Mark D says

i could say the same thing about you, you are trumping him up because he supports your housing agenda. see the irony?

you need to be able to comprehend what people have been saying before you can engage in any intelligent debate. it's hard to take you seriously when you keep missing the point: why would he be right this year when he has been wrong every single year since the crash? address that. show you are capable of an intelligent discussion.

I get along well with many people on this board who are housing bulls/investors but they are at least willing to discuss points. You know, the points of discussion?

From all of your post in this thread, it's impossible to ascertain whether you actually watched the video being discussed because you have barely made reference to anything said within it. That's called trolling on many communities.

you mean one needs to watch his video to find out what's being said in the video? really? he's been repeating the same things for many years now, along with many predictions, none of which came true. in fact, one must have some kind of memory deficiencies if they need watch the video in order to find out what he says.

most people can tell what he is going to say before he even says it. that's how predictable he is.

address my points first and you may be taken seriously. until then you are a troll wishing housing would crash so you can buy it for cheap. are you war/darrel/liarwatch?

Goran_K says

Both booms, the big one, and the current mini-one were fueled by cheap money. Except a crash this time would be worse (as Peter points out) because of our weakened economy

I didn't watch the video, I read the text article pimping his book, complete with a referral link to Amazon.

Lending standards have toughened up considerably since 2006. Foreclosures and defaults are declining.

Unemployment is improving as is consumer confidence. Real disposable personal income is up 2% YOY. Car sales are back up. The economy is improving.

Schiff's main argument for impending doom is hyperinflation, and the numbers don't bear it out.

Beyond the obviously low inflation numbers:

- The bond market is still exceptionally low, and investors are still flocking to US Treasuries.

- Since the US prints it's own currencies and is the de-facto global reserve currency, the only way we'd hyper-inflate is if people believed we'd default on our debt. Given that the US infrastructure and economy is strong, and there's still a lot more room for taxes, there's no reason to believe we're anywhere near a default.

@zesta: Goran_K is a resident troll here. he doesn't care for facts or reasons. he's like that guy war/darrel who keeps repeating the same nonsense, counter-productive arguments at this site. could be the same person.

zesta says

Unemployment is improving as is consumer confidence. Real disposable personal income is up 2% YOY. Car sales are back up. The economy is improving.

I'll agree that there are indicators showing that consumer confidence is improving, but .02 growth in disposable income is almost laughable compared to the current household debt ratio. Also none of that "confidence" is trickling into housing as the MBA Purchase mortgage index just reported another 2% down month-over-month (we're already at mid-90s levels). Buying an Apple IPad is a lot different than buying an over priced house.

On top of that hiring forecast, earnings reports, and non-existant wage growth show that this current run is highly suspect as a "true" recovery.

If I can refinance an existing debt for half the cost, I effectively have less debt.

Absolute value of debt is less important because this isn't 1920 and banks can't call notes due.

If I go from paying $2000 a month to $1000, the risk of default goes down and my disposable income goes up. Ignoring this is a great way to make terrible decisions based on the economy.

If interest rates were zero, debt would literally not matter because you'd just keep reissuing indefinitely.

Darrell In Phoenix says

When you borrow an inflated amount for a rapidly depreciating asset

Sigh. Housing does not "rapidly depreciate".

For one, the land component does not depreciate at all, unless you live on an active volcano or on an eroding seacliff (or, alas, the ghetto comes and gets your neighborhood!)

The fixed improvement -- sticks and bricks -- lasts 50+ years in most temperate areas, and inflation here tends to also mitigate depreciation.

The bottom line is that at 3% mortgage rates it makes more sense to buy a $700,000 house than rent one for $2000/mo.

Now, this will change if for some strange reason this nation decides to double the tax rate like we need to.

But we're not going to do that unless we're forced to, and nobody can make us.

Darrell In Phoenix says

Houses depreciate ALWAYS.

NOPE.

My parents paid $60,000 for their house in 1980. Worth more than that now, LOL.

And as for the fixed part, the actual decay of the materials is not "rapid" as you asserted.

The shake roof lasted 25 years for instance.

Darrell In Phoenix says

like ALL manmade items.

"Depreciate" here means goes down in value.

My parents house has not gone down in value, thanks to inflation outpacing the decay of the fixed improvements.

What was $60,000 in 1980 is $150,000 now. That's a 3% pa compounding rate of inflation. With a 50 year service life, that's a 2% pa non-compounding rate of depreciation.

Darrell In Phoenix says

ALWAYS
like ALL manmade items.

Land isn't a man made item. Or did you foget that?

When acquire title, the real value of the title is the power -- backed by the State -- to say who gets to use that real estate.

Darrell In Phoenix says

Considering 95% of the globe is undeveloped, it's essentially worthless. If you're paying more than $500-1,000/acre, you're getting ripped off.

Good point. I'm sure 1 acre lots in the Pacific Ocean are very reasonable.

Darrell In Phoenix says

Considering 95% of the globe is undeveloped, it's essentially worthless.

This guy is the biggest troll I've ever seen.

Or the most reality-challenged.

Yes, land in Gila Bend is going for under $4000 per acre:

http://www.redfin.com/AZ/Gila-Bend/0000-UNDETERMINED-85337/unit-0/home/40366054

this is because the economic potential of that land -- its NPV of all future rents, is around that.

Thing is, until either a virtual economy is perfected, or teleportation technology comes along, land has immense site value.

Site value is simply the value of whatever is OUTSIDE the lot lines. It is the value of the location, what that location can access, plus any scenic views it may possess.

What is the value of a beachside residence? How much would you pay to see the sunset off your balcony every night for the rest of your life?

More prosaicly, people also pay to be able to find work in a given local economy, and also good schools for the kids, safety at night from criminals, etc.

Darrell In Phoenix says

Sure it has. They've merely offset the rapid depreciation by throwing more money in it.

Not at all. Thus far they've put on a new roof, and one new water heater, refrigerator, w & d, sprinkler repairs, garage door, carpets. $20,000 tops.

They'll never get out of it what they have in it.

I've done the calculation of if they'd have been better off investing in the S&P since 1980 rather than buying when they did.

Area rents overtook their mortgage payment in 1988, so they would only have had 6-7 years of investment in the stock market to build up.

Currently my parents cost of housing is $200/mo. Equivalent rent is $1000+ more, $12,000 a year.

At 3% rate of interest, $12,000 in income requires a $400,000 pile of savings. No way several thousand in an S&P fund from the 1980s would amount to that now.

Darrell In Phoenix says

It seems the truth gets in the way of your realtor driven narrative.

Dude, reality is not "realtor-driven". They're just along for the ride, usually.

Peter Schiff sells gold, so he has a vested interest in having an economic collapse.

This is his website.
http://www.europacmetals.com/

The other thing is that gold can always go up. It is purely an emotional purchase.

You can also look at QE3 as a deflationary event. The United States economy has plenty of room to decline.

Darrell In Phoenix says

It must be quite the run down place.

It's livable.

Darrell In Phoenix says

Oh it's realtor driven. And it's so ingrained in your mind you don't even know it.

It is entirely true that realtors have participated in forming the reality we have today.

And you are correct that land is inherently valueless (it takes the state to make it valuable -- Thomas Jefferson recognized as much)

Problem is, the powers that be own a lot of land -- and profit immensely from this ownership, so the bullshit legalities of land economics are simply not going away, and are, thus, reality.

As Philip K Dick said, "Reality is that which, when you stop believing in it, doesn't go away."

60-70% of this nation has been corrupted by the dynamics of land wealth. People do actually think "up is down" -- higher land values are good.

As a quasi-georgist I would love to tax away every last dollar of land value such that all acreage did trade at $1000.

Unfortunately, the only place where any semblance of this reality obtains on this planet is maybe Hong Kong, Taiwan, and Singapore, since these (AFAIK) are the only major land value tax regimes around.

Without a LVT, land will always have immense value. Without tenancy to land, nobody can live much of a life.

And that's the reality we're in now.

Darrell In Phoenix says

Not at all considering acreage can be had for less than $1000/acre in all 48 states.

Sure, economically worthless land out in BFE.

You are clearly impervious to argumentation so having already said what I wanted to say on that that will be all for you.

David Losh says

The other thing is that gold can always go up. It is purely an emotional purchase.

Similar to a house. Question is which holds their intrinsic value better than the other?

zesta says

Lending standards have toughened up considerably since 2006.

No. The FHA is willing to make a loan to anybody for close to nothing down.

Kevin says

If I can refinance an existing debt for half the cost, I effectively have less debt.

That's somewhat true, but you also have less buying power. But it is still potentially a good deal for you (if your financed asset rises with inflation) because the loss of buying power is distributed throughout all (other) people's cash.

mell says

Similar to a house.

A house has an economic viability. There is rental income.

You can peg the value of housing to the rental market, CPI, and wages.

mell says

That's somewhat true, but you also have less buying power

How do I have less buying power in a *refinance*?

Here's an example:

I bought my current home in 2009 for $550,000. I borrowed $440,000 at 5.5%

I refinanced in 2011 at 3.25%.

Over the 30 year duration of the loan, and ignoring the slight difference in principal at the time of refinancing, that refinance effectively saves me $200k in debt.

Aside from the long-term calculation, in the short term my payment went down by several hundred dollars per month, which means more money to spend on whatever I want (the only other debt I have is at 0% interest, and thus not worth paying off early).

The low interest rates are effectively reducing the debt load of american home owners. Every time someone refinances a $100,000 mortgage for 1% lower they are reducing their long term obligations by around $20,000 and their short term obligations by around 10%. That's real money going back into the economy and making that person's life easier.

Now, the effect on purchases is certainly not as pronounced, but the fact remains that low interest rates absolutely are helping ease the debt burden and boosting consumer spending. Until such time as these things are corrected by other means (inflation, new jobs, etc.), the low interest rates are essential.

Darrel, please come back when you actually earn enough money to think about buying the types of homes that I live in.

Yes, I paid $550,000 for a house. That's what a house this size and finish quality costs in this area. I'm going to spend a lot more on my next home.

Darrell In Phoenix says

You paid $550k for a house? Seriously?

$550,000 purchase with a FHA 3.25% loan pencils out to a ~$1500/mo average cost of ownership over 30 years.

Beats renting, LOL.

Total interest paid would be $360,000, less $100,000 tax credit is $260,000 -- over 360 months the interest expense averages $720/mo.

Property tax is ~$400/mo.

Maintenance, opportunity cost of the down payment, etc is another $400/mo.

(at 8.5% all this pencils out at $2600/mo, btw, or, alternatively $1500/mo TCO @ 8.5% interest rate is reached at the $290,000 price point))

Darrell In Phoenix says

There is a big effort to conceal the fact that millions paid massively inflated prices for rapidly depreciating assets. Why?

Because the alternative is renting, of course.

Renting might be a good tactical move in the short-term (like in the 2005-2008 housing market), and, who knows, maybe the wheels will come off and our economy crash through the basement this decade.

Don't get me wrong, I'd love to see taxes doubled in this country like they need to be, since I am pretty sure that will utterly slaughter rents and land values.

But the chances of that happening have to be less than the system just trying to print/borrow our way back to prosperity, so I certainly wouldn't bet on it.

The worst thing that can happen with a house purchase (in a non-recourse state) is that you just give it back to the bennie.

A house is a perfect hedge against future inflation.

. . . Historically, that can change . . . like if Romney had been able to cap itemized deductions at $17,000 (or whatever number he pulled out of his er, hat) that would have kneed the California housing market in the balls.

My mortgage is $1900 a month.

Please show me where I can rent a 3500 square foot home with high end finishes within walking distance of a top tier school for $1000 or less. I'd love to make that trade!

Houses around here rent for $3000 minimum. Please stop making bullshit claims that you can't back up.

I'm guessing you've never actually visited another state. You probably also think $550000 is a lot of money.

Darrell In Phoenix says

Don't be silly. Depreciating assets are NEVER a hedge.

http://research.stlouisfed.org/fred2/series/CUUR0000SEHA

they are when the reality -- only alternative -- is dealing with that trend.

Darrell In Phoenix says

$2400/month in principal and interest alone.

principal repayment is, historically, a form of savings

that was the mistake I made in my rent-vs-buy analysis ca. 2001, I was comparing a $2000/mo PITI vs my $800/mo rent.

Unfortunately, had I bought in 2001 my PITI would now be more like $1200/mo (thanks to interest rates falling from 8% to 3%), and my rent is now $2000/mo.

So I screwed myself but good not buying in 2001.

I suspect the system has another screw job awaiting me this decade, sigh.

As for "realtor math", as of now interest is tax-deductible (even on the AMT). $550,000 mortgage at 3.25% has $18,000 in interest, and at the 28% marginal bracket that's a ~$5000 tax credit, over $400/mo money back from Uncle Sam for carrying that insane mortgage.

David Losh says

mell says

Similar to a house.

A house has an economic viability. There is rental income.

You can peg the value of housing to the rental market, CPI, and wages.

Gold does have intrinsic value as well and does not deteriorate as fast (less upkeep but you need to keep it safe).

Kevin says

How do I have less buying power in a *refinance*?

I didn't mean that with regards to your refinance, that is always a deal if you can lower your rates, but those rates are only made possible by constant debasement of the dollar which affects everyone, so you likely still come out ahead.

mell says

but those rates are only made possible by constant debasement of the dollar

our "strong dollar" is killing us.

http://research.stlouisfed.org/fred2/series/NETEXP

we need a lot more "debasement"

plus we need to get off of our petro-economy, at least for transportation.

The true economic crimes were made 1999-2007:

http://research.stlouisfed.org/fred2/series/TCMDODNS

That graph should be at $24T now not $40T.

Bellingham Bill says

mell says

but those rates are only made possible by constant debasement of the dollar

our "strong dollar" is killing us.

http://research.stlouisfed.org/fred2/series/NETEXP

we need a lot more "debasement"

plus we need to get off of our petro-economy, at least for transportation.

The true economic crimes were made 1999-2007:

http://research.stlouisfed.org/fred2/series/TCMDODNS

That graph should be at $24T now not $40T.

The dollar is not strong it is very weak, it's just that the Euro i(and others) is equally in the toilet. Tons of countries with strong currencies still have balanced trade or better. Trade deficit does not come from a strong currency, it comes from mission manufacturing and deteriorating quality as well as a public focused on consumption. Also, I wouldn't call data about the strength of the dollar from the st louis fed unbiased research ;)

Billybigrig says

Darrell In Phoenix says

"Mark D."??? lmao

http://en.m.wikipedia.org/wiki/Internet_Sock_Puppet

you mean he didn't already know the meaning of that?

Goran_K says

Right now the market is basically investors/speculators, foreign buyers, and FHA'ers. Two of those sources are going to be seriously constricted within the next year. One of those is going to be left holding a stinky bag.

more BS from the resident negative nancy. you can tell this person has never attempted to apply for a mortgage before.

dude, learn how to fucking read first.

the interest cost (net tax benefits) roughly compares to the rent in the renting case.

your talent of producing counterfactuals is clearly immense.

3.25% (fixed!) rates are not "inflated borrowing costs".

QUITE the opposite.

$550k at 3.25% interest is a $1500/mo borrowing cost.

My rent is more than that, and that doesn't even figure in the MID.

AND that borrowing cost goes down as the principal is paid down.

rents, on the other hand, have not been going down for me lately, alas.

Bellingham Bill says

principal repayment is, historically, a form of savings

This is true only if the dollar and the house both hold values compared to other assets. Remember, low interest rates cause a higher house value, and hence a higher principal. Interest rates are also in historic lows. Of course, you may assume that will go lower or stay there forever.