patrick.net

Bruce's analysis seems reasonable. Nobody ever said that a woefully unhealthy RE market only involves price declines!

20% sounds like bubble talk to me.

Goran_K says

20% sounds like bubble talk to me.

Is anyone seriously denying that we are heading right into the next one? Wildly different mechanisms, same effects on pricing as last time. Hell, Obama and Bernanke have openly stated that their goal is to "recover" housing prices via policy.

bmwman91 says

Is anyone seriously denying that we are heading right into the next one? Wildly different mechanisms, same effects on pricing as last time. Hell, Obama and Bernanke have openly stated that their goal is to "recover" housing prices via policy.

Could be. Not sure how they will do it though unless they literally do 0% interest loans.

Inflating a bubble with the economy of the late 90s is a bit different than inflating a bubble in 2012. I mean, this isn't their first attempt. They tried in 2009, 2010, and 2011. For the most part, prices have been flat. We're still at 2010 in OC prices and we're down to 1 months inventory. Not exactly what I'd expect as a precursor to a bubble.

Private banks aren't stupid, normal buyers are timid. Investors/speculators, continue buying by all means. :)

robertoaribas says

affordable sonoran desert paradise that is Phoenix...

Roberto, what are the popular hangout spots for families in Phoenix?

Goran_K says

Could be. Not sure how they will do it though unless they literally do 0% interest loans.

Inflating a bubble with the economy of the late 90s is a bit different than inflating a bubble in 2012. I mean, this isn't their first attempt. They tried in 2009, 2010, and 2011. For the most part, prices have been flat. We're still at 2010 in OC prices and we're down to 1 months inventory. Not exactly what I'd expect as a precursor to a bubble.

Private banks aren't stupid, normal buyers are timid. Investors/speculators, continue buying by all means. :)

Well, there are all sorts of very obvious benefits to Wall Street from the Fed and government's actions. I firmly believe that all of the central planning that is going on really is just to facilitate the wealth transfer from the 99.9% to the 0.01%. Welcome back, robber barons. Hopefully we'll still have the second amendment in a couple of decades so that the people can take back this once-great nation once they have been pushed far enough. Life's still FAR too comfortable to get anyone to do anything to reverse the process while it still can be reversed.

Then there is the official story from the government and Fed. One of Obama's campaign promises was to put a floor under housing. Obviously, he will support any policy that does this. Why? Well, it seems that most of the economists that provide policy advice believe that we just need to get consumers spending again since our GDP is mostly made of consumer spending. Bernanke has openly stated that he needs to get equities and RE into an upward trajectory to stimulate the wealth effect. That's the master plan. Pump up asset prices so that consumers feel safe with taking out more credit to consume with.

The last bubble was made of unsupervised greed and idiocy. This one is FULLY supervised and has the blessing of our esteemed leaders, and it would seem that they can't really say anything to stop it since their mouths are stuffed full with Wall Street's cock.

Mark D says

unsettling news for the bears indeed.

I don't think so. I don't listen to shills trying to sell newsletters or charge people for "speaking engagements."

Regardless of what happens with the fiscal cliff, unemployment is not going to improve.
https://www.tiaa-cref.org/public/advice-planning/market-commentary/market_commentary_articles/articles/mc_051.html
http://online.wsj.com/article/SB10000872396390443294904578050492836822044.html

Housing prices are decoupled from employment and wages. It's not an accident, it's policy.

Maybe you should listen to a few shills, norris has been buying for last few years like Wogberto.

Heck, house / condo prices went up 10% in my Redfin email this morning.

Whether or not I think these assets are a good value or if this price surge is based on market fundamentals is a different story.

the chart below is the main reason why prices have been going up. it is simply supply and demand. i don't see anything "unnatural" about this recovery. it has always been one of the FED's primary functions to lower interest rates to stimulate the economy when necessary.

The problem with your statement is that the supply is artificially low.

Facebooksux says

The problem with your statement is that the supply is artificially low.

while banks are not in a hurry to foreclose and drive prices down, based on the graph, it appears that the main cause for the low inventory is low construction. and builders have not been building because profit has been low due to low home prices. doesn't look artificial to me.

Yeah right. I seriously doubt home prices are going up 20% anywhere. PS: I own a home too.

unless it's Phoenix (28% Y-o-Y). just saying.

The whole system is now artificial and managed. You can break free by moving 100 miles from nearest job center and pay cash for raw land and biuld. The unabomber did this, he wasnt so happy....

Mark D says

unsettling news for the bears indeed.

More like, wow! That is the largest house of cards I have ever seen. Maybe it is stronger than the last ten thousand attempts to stimulate a dead economy with the printing press.

Crap, who left the window open. Shut it now before anyone sees the cards shivering. Quick! Close your eyes everyone. Nothing to see here...

RentingForHalfTheCost says

Maybe it is stronger than the last ten thousand attempts to stimulate a dead economy with the printing press.

so what would you have done if you were Bernanke and why would it have been a better fix for the economy?

robertoaribas says

4. the oversear of fannie and freddie is getting sacked, probably replaced by someone who will be more aggressive with the administration's plans to bailout struggling homeowners...

This one always gets me wondering. If various government measures can get a lot of people back above-water, is there the potential that those people would then sell as soon as they are above water since they may have been wanting to move for a few years but couldn't? Just curious.

robertoaribas says

2. bernanke just announced rates will stay near zero until unemployment drops a full 150 basis points from today...

http://research.stlouisfed.org/fred2/graph/?g=dMN

hmm, that implies 1H14 or maybe 2H14 at our current progress.

But ISTM we're more on a 2000s pattern than a 1990s sustained drive.

This is seen:

http://research.stlouisfed.org/fred2/graph/?g=dM3

which isn't all that strong compared to the 1990s.

The danger I see is that QE4 just weakens the dollar, pushing gas to $10, and doubling food costs as we start exporting more of our ag product for the same dollar received.

We've promised the world $5T or so of our future output thus far. That's a lot of almonds, LOL.

http://www.modbee.com/2012/12/12/2493437/ag-secretary-attends-almond-conference.html

With a weaker dollar comes better wage competitivity, but if the cost of living is going up for wage earners, that's just spinning our wheels there.

Plus the factory wage in China is still $2 or $3/hr, max, with pretty shitty working conditions compared to us.

Mark D says

so what would you have done if you were Bernanke and why would it have been a better fix for the economy?

One intelligent thing I read was the Fed buying state infrastructure bonds.

Basically free useful stuff, LOL.

The problem with QE4 is its transmission into the paycheck economy. If it just raises home prices, then it will raise rents too, since landlords know they compete more with the entry into home ownership than with each other.

Well, higher-end LLs I guess.

edvard2 says

Yeah right. I seriously doubt home prices are going up 20% anywhere. PS: I own a home too.

It wouldn't be too bad if they tracked inflation though.

Facebooksux says

Mark D says

unsettling news for the bears indeed.

I don't think so. I don't listen to shills trying to sell newsletters or charge people for "speaking engagements."

Regardless of what happens with the fiscal cliff, unemployment is not going to improve.

https://www.tiaa-cref.org/public/advice-planning/market-commentary/market_commentary_articles/articles/mc_051.html

http://online.wsj.com/article/SB10000872396390443294904578050492836822044.html

tiaa-cref- Good find.

Now I must start to deny they know anything. lmao

if mortgage rates drop another 2%; then prices, i suppose, could increase 20%.

i don't think rates can drop another 2% since the fed fund rate is already at 0%.

Is this thread for real?

dodgerfanjohn says

Is this thread for real?

Oh, GOD yes!, please say it is! >>>reaching for the wipe down towel

Mark D says

RentingForHalfTheCost says

Maybe it is stronger than the last ten thousand attempts to stimulate a dead economy with the printing press.

so what would you have done if you were Bernanke and why would it have been a better fix for the economy?

The best way to not have your house of cards topple, is to not build one! I wouldn't have created the housing bubble by being dishonest. Back in the dot com collapse there were signs of strain on the housing market. That was when the trouble first started, instead of letting the market come down to its health, the feds started to get greedy and thought they could have their cake and eat it too. Drop rates, drop rates, drop rates, with no regard to the side effects. Pretty soon you got everyone refinancing, buying, etc. and making an economy that is completely virtual and not true. The real quality of life is there somewhere, but we are so far away from it now and in such a mess that the drop will be more damaging. Oh well. Good luck to everyone. I'm glad I got 25 years until I need to retire. Your own skills are the only things that has value at this point.

robertoaribas says

then have those weak dollars earning nothing in the bank!

Nothing will look like +20% when housing collapses another 20%. ;) Just saying.

Heck, I would have bought in Phoenix the last few years.

Here in California, homes in the hood (We say that affectionately here) are still 200k.

http://www.redfin.com/CA/Compton/1610-E-San-Luis-St-90221/home/7362923

Hysteresis says

i don't think rates can drop another 2% since the fed fund rate is already at 0%.

Rates are 2% in Japan. They do that by having their Fed buy loan points for you.

robertoaribas says

RentingForHalfTheCost says

robertoaribas says

then have those weak dollars earning nothing in the bank!

Nothing will look like +20% when housing collapses another 20%. ;) Just saying.

yeah, but how much am I up since the first time you warned me? Phoenix prices are up well over 10% on everything I own since just six months ago, not to mention rental income... we have under 3 months supply in the dead of the slow season, and foreclosures are slowing...

it's going to be a very interesting spring/summer next year!

Just like you are not up in the stock market until you sell, same applies to the housing market. Today's buyers end up buying. You are interested in the buyer when you turn around and sell. The fact there are healthy buyers now should make you feel good, but if you are not a seller, then you haven't benefited from the rise. I never talk about my stock wins until after I sell. ;)

David9 says

Heck, I would have bought in Phoenix the last few years.

Here in California, homes in the hood (We say that affectionately here) are still 200k.

http://www.redfin.com/CA/Compton/1610-E-San-Luis-St-90221/home/7362923

Shit, a similar home in the tech hood is 3x that value. 688K for 1000 sqft of Ikea building materials. Awesome!

http://www.redfin.com/CA/Mountain-View/485-S-Rengstorff-Ave-94040/home/616001

Bellingham Bill says

Hysteresis says

i don't think rates can drop another 2% since the fed fund rate is already at 0%.

Rates are 2% in Japan. They do that by having their Fed buy loan points for you.

didn't know that. thanks.

if the US fed starts buying points, then that would be more evidence that the economy is not stable (not enough sustainable organic growth).

RentingForHalfTheCost says

1000 sqft of Ikea building materials. Awesome!

I suppose Ikea is one step up from the Home Depot materials I posted, lol.

RentingForHalfTheCost says

Back in the dot com collapse there were signs of strain on the housing market. That was when the trouble first started, instead of letting the market come down to its health, the feds started to get greedy and thought they could have their cake and eat it too. Drop rates, drop rates, drop rates, with no regard to the side effects. Pretty soon you got everyone refinancing, buying, etc. and making an economy that is completely virtual and not true.

the problem wasn't that Greenspan lowered the interest rates. the problem was he did it for too long. as long as they don't overdo it this time it will be fine.

this system has been in place since 1913 and interest rates have gone up and down since then, why do you think it is suddenly making the economy "virtual"? in this aspect, the economy is no more virtual than it was in 1960's.

the real problem facing the economy is job loss, not the FED's manipulation of interest rates.

robertoaribas says

Phoenix prices are up well over 10% on everything I own since just six months ago, not to mention rental income...

Not because of a healthy economy. Have salaries improved? Has GDP growth come back? Have companies started to hire again. Has immigration growth come back? No, No, No and No. So, what is driving the upward pressure? Nothing that leads to health in my opinion. The gov't buying its own bonds to artificially keep rates low. Upteen programs to keep people from foreclosing that is only helping the few and adding to the Deficit/Debt. Banks back to their old schemes again trying to prop up earnings by selling to the people who shouldn't be allowed to buy. It will not end well. Good luck to you.

If prices rise 20 pct next year my 875k estate will be up 175k. Try saving that much in one year. Saving and paying down debt will keep you poor in bernanke printsville zirptopia town. Must use leverage or get buried by inflation.

PockyClipsNow says

If prices rise 20 pct next year my 875k estate will be up 175k. Try saving that much in one year. Saving and paying down debt will keep you poor in bernanke printsville zirptopia town. Must use leverage or get buried by inflation.

All depends on finding the greater fool. i.e. Ponzi scheme

Mark D says

the real problem facing the economy is job loss, not the FED's manipulation of interest rates.

Disagree. The problem was trying to hold onto housing values when they should have let it decompress in a downward market. Back in 2002-2003 it just would of meant prices stabilizing. Everyone was caught up in growth, even the feds. Greed too over everyone's thinking, from bankers, realtors, title insurance companies, appraisers, builders, etc. The whole housing industry was a paradise. The job losses came much later and were because of the continued greed. Saying job losses are the cause is not going deep enough IMHO. Trying to prop up a market that should have stumbled slightly is the root cause. Now we are doing the same to even a greater extent. Good luck with that. I got years to wait for the collapse, and it will be a duzy!

RentingForHalfTheCost says

The problem was trying to hold onto housing values when they should have let it decompress in a downward market.

if we're talking 2002-2004, that was not on the table since the Fed's job is to raise rates on Democratic presidents and lower them on Republicans.

http://research.stlouisfed.org/fred2/graph/?g=dO7

The problem that bit them in the ass 2004-2006 was the fraudulent lending and temporary "affordability" products like negative-am and liar loans that boosted purchasing power, but for only a couple of years.

As for 2008-now, I don't have any solution but I certainly admire the problem.

As a renter, letting housing pancake sounds great in theory, but I understand that the $14T mortgage credit bubble is everybody's savings, too.

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

With the mass defaults come loss of savings. Maybe the Fed coulda just printed to pay the savings.

Like I said, the solution to the mistakes of 1993-2003 are not easy to find.