patrick.net

The Housing Bubble has a lot of people on edge because it is a symptom of an approaching cataclymic shift. Most of the 5 billion members of humanity want a slice of the pie. We are facing a major redistribution of wealth and resources on a global scale. Americans and Europeans alike realize that their standard of living has become destabilized and will soon degrade rapidly.

We are facing a major redistribution of wealth and resources on a global scale. Americans and Europeans alike realize that their standard of living has become destabilized and will soon degrade rapidly.

I don't deny that this is a possibility, but it is far from a certainty--at least in the near term. Empires tend to decay slowly, not abruptly halt overnight.

The macroeconomic growth in standard of living (as defined by GDP per capita) in China, India and much of the developing world does not necessarily indicate a reducting in the standard of living the North America & Europe. People often mistakenly think of the world economy as a zero-sum game. It is not. The Solow long-run growth model (and related models) all account for real economic growth which roughly equates to growth in productivity, which itself reduces to technology (as broadly defined: technology can be technique, scientific progress, automation, etc.).

If China grows so rapidly that they begin consuming resources faster than aggregate worldwide productivity growth, and this persists for many many years, then the proposition that they are taking away our standard of living would have merit. We are far from that reality today.

anthony

You understate the effects of the modern real estate collapses around the world. In Japan it took a mere 2 years with deflation going on 15 years. The Asian Tigers collapse took a mere 12 months:

December 1996: The IMF praises the Thai Government’s ‘consistent record for sound macro-economic management policies’.

July-1997: Thai property companies get into difficulties after a real-estate bubble bursts, wiping a third of the value off the stock market and leading to the collapse of the banks which backed them. Foreign investors lose confidence and start pulling out. The Thai currency’s peg to the dollar wobbles. Currency speculators move in for a killing. The Thai baht is floated and the currencies of the Philippines, Malaysia, Indonesia and South Korea also suffer. A wave of devaluations follow, triggering a massive haemorrhage of funds as panicky foreign investors sell up their stocks and bonds. The economies of Thailand, Indonesia, South Korea and the Philippines go into free fall.

December 1997: By now millions are without work and decades of social and economic progress have been thrown into reverse. Of 282 firms on the Indonesian stock market only 22 are technically solvent.

You can’t possibly be offering to sell gold for a straight spot price swap of USD; there would be a long, long line of arbitrageurs coming to that window!

I was implying that I'd be happy to be the E-Gold gold-denominated-currency treasury for the goldbugs. Then it would be me arbitraging them, as they'd be taking spot risk while I'd be engineering hedged liquidity forward. I'm not interested in taking any commodity spot or derivative risk, having spent enough time with my sleepless friends who work for on the CME.

I just had a great idea. Let's set up a E-Gold style "currency" that's based on crude. We'll let people store their value in litres of crude, while taking all the spot volatility risk. Meanwhile we'll rake in transaction fees and hedge profits on the treasury. All we'd need is about USD 6M to prime the pump (and a nice offshore registry).

ajhThank you for the Anger thread link.

Here are some numbers on home sales published in today's Stockton Record, pg H-6 (source cited is Central Valley Assn of Realtors):

For Stockton
Year to Date Home Sales 2005: 419
Year to Date Home Sales 2006: 40

For Tracy
Year to Date Home Sales 2005: 170
Year to Date Home Sales 2006: 14

Poguemahone,

Thanks for linking the new OFHEO stats.

PMI Mortgage uses the OFHEO index (vesrus average incomes) to compute its Regional House Price Risk Assessment.
http://home.businesswire.com/portal/site/pmi/index.jsp?epi-
As I understand the PMI Index a regional number over 500 means that PMI expects prices to fall.

I followed the OFHEO links one day and came up with this: The OFHEO tracks the average increase (or decrease) in the sale price for a given home. That is, each time a house sells they record the price and then the next time that same exact parcel sells they track the change. They average all the changes to derive their Home Price CPI. I think the OFHEO numbers are confined to conventional, conforming loans. I know someone will correct me if I’m reading this wrong.

I’m no statistician, but I assume the OFHEO numbers avoid some of the obvious problems involved in tracking the market via either median or average sale prices.

Perhaps it's apparent by now that I'm agnostic, but what do the real Patrick-ans think of the PMI Co numbers?

Should be "versus" versus "vesrus."

Can someone start a new thread so we can leave the racist, bigot etc. stuff behind?

Leave it to a RENTER FORUM to come up with LOW CLASS and DEROGATORY comments about various ethnic groups.

I am so offended by this board.

As a quite well educate, self sufficient, former homeowning, non-racist, non-bigot, I am quite happy you are offended--too bad it had to be of such a baser form of discourse. I am equivalently offended by your self righteous generalizations as I am by their pubescent banter.

lol, educmacated.

"Leave it to a RENTER FORUM to come up with LOW CLASS and DEROGATORY comments about various ethnic groups.
This board is pathetic. No wonder you guys WHINE AND COMPLAIN b/c you’re so uneducated and helpless.
You guys deserve to throw money away in rent EVERY SINGLE MONTH. I am so offended by this board."

Sounds like this person has some issues of their own, doesn't it?!

"Ewww, renters are un-clean and low class. If people on this board are talking about housing actually dropping in price, they must all be filthly renting Proletariat. They must be uneducated and helpless too, because all of my "upper class" friends and I all KNOW that housing only goes up. Dirty, dirty renters, I am SO offended! I'm going to have to go wash my own mouth out with soap now because even the act of reading this discussion board has defiled my sensibilities!"

Ha hah hah hah hah!

"Statistics are already showing a steep rise in foreclosures. Clearly it’s not the time to jump in. I’m thinking 2008 might be a good time to get a foreclosure deal."

Yep, don't get caught on the dead cat bounce! 2008 at the earliest. Lot of ARMS adjusting in 2007 according to the SoCal Mortgage Guy, that should accelerate the decline next year. We shall see.

I found something good that the Doomer/Gold Bug/Peak Oilers around here will love (although most of you probably found it already). James Howard Kunstler's blog, check out the January 2, 2006 entry:

http://www.kunstler.com/mags_diary16.html

He equates Peak Oil to the Housing Bubble in that entry and makes some (I think) valid points about high energy prices negatively impacting suburban home prices. I don't agree with all of his conclusions, but he's a smart guy and a good writer and makes some very good points.

More to the topic, I’ve noticed much more real estate bubble talk in the mainstream media lately. It hasn’t stopped the infomercials that are still pushing the get rich quick real estate programs.

This is the very signal that RE has peaked in this cycle. "When the paperboy is offering stock tips it's time to sell".

About the time you see the "get rich quick on foreclosures" infomercials, it's time to buy a new home and pick up some income rentals and perhaps a new vacation home to boot.

In a feeble attempt to twist threads: It is this reasoning behind why I don't buy gold. I'm quite confident that people who deal in commodities for a living are way ahead of whatever curve I think I see. And, they'd be more than happy to separate a fool from his money.

It's time for a new thread, btw. At 225 responses, the tail is no longer fat.

DinOR, does your e-mail address work?