patrick.net

interesting stuff about human nature in tol message boards

by: amcrokos
Long-Term Sentiment: Strong Sell 12/26/05 09:53 pm
Msg: 58246 of 58257

THINK DIS TIME IS DIFFERENT (LOTE & CO.)

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The New York Times has look back at the Japanese housing bubble. "With housing prices in the United States looking wobbly after years of spectacular gains, it may be helpful to look at the last major economy to have a real estate bubble pop: Japan. What Americans see may scare them, but they may also learn ways to ease the pain."

"To be sure, there are several major differences between Japan in the 1980's and the United States today. Still, for anyone wondering why even the possibility of a housing bubble in the United States preoccupies so many economists, it is worth looking at how the property crash in Japan helped to flatten that economy."

"At the market's peak in 1991, all the land in Japan, a country the size of California, was worth about $18 trillion, or almost four times the value of all property in the United States at the time. Then came the crashes in both stocks and property. Both markets spiraled downward as investors sold stocks to cover losses in the land market, and vice versa, plunging prices into a 14-year trough, from which they are only now starting to recover."

"Now the land in Japan is worth less than half its 1991 peak, while property in the United States has more than tripled in value, to about $17 trillion."

"Professor Noguchi said he also saw parallels between Japan then and America now. Last year, as a visiting professor at Stanford, he said he read real estate articles in local newspapers that sounded eerily familiar. Houses were routinely selling for $10 million or more, he said, with buyers saying they felt that they had no choice but to buy now, before prices rose even further."

"'It was déjà vu,' Professor Yukio Noguchi, a finance professor at Waseda University in Tokyo who is perhaps the leading authority on the Japanese bubble. said. 'People were in a rush to buy, and at extraordinary prices. I saw this same haste psychology in Japan' in the 1980's. 'The classic definition of a bubble,' he added, 'is people buying on false expectations about future prices, and buying with the hope of selling in the future.'"

"Japan's experience teaches the need to be skeptical of that fundamental myth behind all asset bubbles: that prices will keep rising forever. Like their United States counterparts today, too many Japanese homebuyers overextended their debt, buying property that cost more than they could rationally afford because they assumed that values would only rise. When prices dropped, many buyers were financially battered or even wiped out."

"'The biggest lesson from Japan is not to fall into the same state of denial that existed here,' said Noguchi. 'During a bubble, people don't believe that prices will fall,' he said. 'This has been proven wrong so many times in the past. But there's something in human nature that makes us unable to learn from history.'

DiNor:

I have a prospect that decided to move his company to Portland because he couldn't hire people and get them to move to CA (Bastard--I was hoping for a deal). It is an enormous trend that companies that can not outsource to China (my company helps them with that) outsource to NV, AZ, TX, and OR. I see it all the time in my business. I think that the communists in OR will prevent you from picking up your fair share of jobs, but I still expect the trend to continue. Until it reverses of course. Why would it slow or reverse?

1. What you said about quality of life not really being higher. There is no heaven earth, just frustrated people from CA.
2. The Bay Area (CA) is going to crash and bring costs back into line.
3. The communists, despite the stalemate with the governator, will ultimately lose and a favorable business climate will re-establish itself.

WHy? Because trends revert to the mean. That which is unsustainable will stop. Once people lose their jobs, they drop the idealistic bullshit and examine the facts. Crisis breeds pragmatism. BA Liberals are really just hipocrites/Fair weather liberals. They don't care about other people, they just want to project an image of being liberal because they want to be seen by other people as is hip/cool/against the establishment. Its called Pride and Hubris.

Eventually, they will come to recognize that they ARE the establishment, and that they are just fucking themselves. When the trend changes and it is no longer fashionable to be a liberal, they will distance themselves from the true communists. They will eventually come to accept that you can't fix every problem with a hammer and sicle.

It is really just a byproduct of having so many Ivy League educated white trash yankee Peasants (like the heretics that came over on the Mayflower). They think that the Kennedys are upper-class, for fucks sake. Those people are incapable of handling power without being corrupted by it. But, they can be counted on to do what is in their best interest in the long run.

--Deo Vindice

P.S. I hope that people will have the wisdom to stay put, advance in their careers, take advantage of the crash when it happens, and then work to build a sustainable CA economy for future generations.

Though I prefer gold to diamonds, I plan to invest in apple trees, strawberry plants, blueberry bushes, and seeds this spring. I’ll eat my wad, and sell others the excess.

Good move. ;)

If I am rich one day, I will probably invest in an abalone farm. Edible investment. Yummy.

Wouldnt the fact that so many recent buyers are clueless about the bubble be a good argument AGAINST a crash?

After all, if MOST of the buyers have no fear of a bubble, then they wont be jumping ship anytime soon, and that would go a long way to mitigate the all important “herd mentality” that is so crucial to a true crash.

LOL... Jack, you're killing me --thanks for the belly-laugh!

After all, if MOST of the buyers have no fear of a bubble, then they wont be jumping ship anytime soon, and that would go a long way to mitigate the all important “herd mentality” that is so crucial to a true crash.

But many will be forced to walk the plank when their ARM adjusts. Serial refinancers will also find themselves thrown overboard when they are unable to reset their NAAVLPs and their payments go up at least 7.5% a year.

After all, if MOST of the buyers have no fear of a bubble, then they wont be jumping ship anytime soon, and that would go a long way to mitigate the all important “herd mentality” that is so crucial to a true crash.

I somehow watched Brokeback Mountain and saw the sheeps. I said to my wife: look at the sheeple!

Most people do not do what-if analysis, which is extremely important with a highly-leveraged investment like a mortgaged house.

Does a 2-yr rental agreeement even exist? Does it yield a decent discount? I’d like to lock in the low rents, and not risk having to move or pay higher rents after 1 year. Would a slowdown in housing mean higher or lower rents in the 1-3 year window?

I think real rent will be firm with the slowdown in housing. In many places, there is so much vacancy that it will take a lot more tenants to bring up the price.

What do you mean by “real” rent? Adjusted vs. ‘real; inflation? Or adjusted vs some kind of mortgage numbers?

Inflation.

I think rent may still rise according to inflation in the post bust world.

Now, if only I could figure out where to park the wad

You need to negotiate wad parking space with your landlord. :)