patrick.net

The Truth is out now. The FED colluded with the banks to keep inventory off the market, while they goosed up the bank reserves. Any talk of any kind of a recovery in the house market, is just plain silly, and equivalent to a boxer who has just been KO's, still waving his gloves in the air:

http://truthiscontagious.com/2010/06/16/the-next-housing-crisis-2?source=patrick.net

I personally think it's already a bottom for real estate as well. Prices will always be a mortgage with the same payments (excluding property taxes) as renting, with a 20% down payment or so.

In other words, I agree that low interest rates will cause higher home prices. The only thing that prospective buyers would need to worry about are rent prices.

Cash buyers (or flippers I should say) need to be careful that they are not in the process of flipping when interest rates rise.

They also need to be aware that their potential buyers are all the prospects that they have beat out with their cash offers (or not) on that property. You can be sure as hell that once the properties get relisted after renovation, that there will be negative comments from both buyers and buyer agents.

Interest rates will not rise. Kondratieff winter clearly states:

Rates fall, then they rise again, then they fall much lower:

The FED can no longer lower rates, they ran out of ammunition to prevent K-Winter. But they cannot raise them either.

> Do you realize that people invested in bonds VERY NEARLY lost every penny they had in 2008?

You must be talking about MBS bonds, not the T-bills. People who had T-bills (those are the savers that I am talking about), actually made money. The MBS bond holders should have lost every penny they invested. Instead the FED transferred their losses to the tax-payers, in fact just delaying the inevitable dooms day. You speculators got a great present from the FED in 2009, you got one last chance to get out, lick your wounds, and start all over. But, since you are a greedy SOB that you are, you will not take this chance. You learned nothing in this crash of '08, and you will be paying the piper for a long time to come.

Corporations and municipalities are speculators too. In fact most of municipalities were themselves investing in MBS's. All of these bond holders should have lost all their money, but, instead the FED saved them, at the expense of the tax payers, and the responsible people. Everybody was drinking from this RE punch bowl, except the savers, and the renters. But, when the entire sovereigns start to drop out like flies, they won't be anybody to save them.

The kondratieff wheel clearly shows you that the inflation cycle is 1/2 of the k-cycle. 70/2 = 35.

But, amazingly that didn't happen. Precisely because the k-winter must continue.

Again, like I said, forget the $USD. The $USD itself is a manipulated commodity. Oil prices, stock markets are all subject to FED manipulation. But manipulation can not last long. Eventually all prices fall back to what they should be, according to the k-cycle.

The fact that you can still borrow $1 million is, again, a sign that the BOTTOM is nowhere in sight.

Nomograph - I am afraid that it is you who is full of nonsense. FED is buying T-bills & stocks (ever heard of the plunge protection team - that's synonymous with the FED). The banks are buying T-bills because they are playing the carry-trade game with FED's money.

Factual information actually runs right along with my hypothesis. Sales are down 35% ever since FED stopped propping up the housing market. Case-Shiller is already showing prices falling:

http://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa-cashpidff--p-us----

> Even Case-Shiller admits that the winter quarter decline is seasonal. T

That I didn't hear. I did hear them admitting, however, that their season-adjusted formula is broken because we had a declining market for the last 3 years.

Also, a 35% reduction in sales is nothing to scoff at. This is a huge blow to the housing market, and will, just like it did in 2007, result in a huge price declines down the road.

http://www.calculatedriskblog.com/2010/06/mba-mortgage-purchase-applications_09.html?utm_source=patrick.net

Nomo has waxed eloquent. He's not blowing smoke, peeps. Yeah, he's a keeper all right. I knew he could wing it.
But I do wonder why San Diego didn't call out the SWAT team?

That was a real on the fly humdinger but what's nest?

Ohhh beehave!

Like a ship without an anchor
Like a slave without a chain
Just the thought of that RE market without credit
Sends a shiver through my veins

Yes, but prior to the last decade, Argentina has had a housing collapse which makes Las Vegas look like a child's play.

When Bay Area prices drop like Argentina in the 80's, whoever is left to pick up the rubble, will be paying cash too.

Those countries which never had any credit, never enjoyed any house bubbles like the US did. As soon as any country introduced credit, house prices took off.

Nomograph says

I wore my yellow jacket to the Hornets game in the New Orleans metropropolis area, but I stick out as a WASP.

You spelled it all correctly, c-o-r-r-e-c-t-l-y, correctly.

E-man,
do you have a link to that presentation?

rmm221 says

Aka the top 1% who actually have enough money to matter!

I keep reading time and time again how this so called 1% keeps going broke. Sports athletes, hollywood movie stars and now some locals. Today is another example you may have read about. Just how do you burn $200M in under 10 years ? Ever pay for a $6M pussy cat.. seems this guy did.

On the Eve of an IPO, Tesla Founder Elon Musk Claims He's Broke
Musk, who co-founded PayPal and cashed out for $200 million, says he invested his last $35 million in Tesla Motors -- just as the company prepares to go public.

http://smallbusiness.aol.com/2010/06/22/on-the-eve-of-an-ipo-tesla-founder-elon-musk-claims-hes-broke/

As part of his divorce proceedings, Musk reported he had just $8,255 in monthly income and $650,000 in liquid assets, with $200,000 per month in expenses.

Elon Musk, eh?

Now there sounds like a real fine upstanding nose to the grindstone EdwardsDeming kinda American Gothic work ethic that a conservative Japanese company like Toyota would really like to partner with, ya think?

This was a killer topic. Now I'm in the mood to pollinate.

Earlier in this thread, Vain said:
"In other words, I agree that low interest rates will cause higher home prices. The only thing that prospective buyers would need to worry about are rent prices.
Cash buyers (or flippers I should say) need to be careful that they are not in the process of flipping when interest rates rise."
I am a prospective buyer and agree with this. I am considering purchasing a condo that, when monthly HOA and bank loan are taken into account, would be less than the cost of renting. Seems to me that the worst-case scenario would be that, if the market went down and I didn't want to live there, I would have to hold it and rent it.
I would appreciate if somebody could provide another perspective.

ltemma74 says

I am considering purchasing a condo that, when monthly HOA and bank loan are taken into account, would be less than the cost of renting. Seems to me that the worst-case scenario would be that, if the market went down and I didn’t want to live there, I would have to hold it and rent it.

I would appreciate if somebody could provide another perspective.

If you were talking about a single-family home purchased with a fixed-rate loan I might agree with you. However, the worst case scenario for condos with HOAs is much worse than you suggest. Many of your neighbors could be underwater on their mortgages, stop paying their HOA dues, and you'll be on the hook for "special assessments" to cover their shortfall even as these deadbeats cause your property values to drop. This is happening to many people around the country right now: they are being totally screwed by the deadbeat squatters in their HOA. The banks won't foreclose on the squatters because then the banks would be liable for the HOA fees, and when the foreclosure or short sale finally does occur the HOA doesn't get a cent unless the bank gets 100% of their money back which isn't going to happen because people without negative equity generally don't go into foreclosure.

simchaland says

Maybe it’s all those thousands upon thousands of IT professionals people keep talking about in Silly Valley who make $150k or more per year currently and are constantly making lateral moves increasing their incomes by 30% or more with these moves these days.

In the mid to late 90's, it was very much like this (I'm one of them).

Nowadays, not so much.

CrazyMan says

simchaland says

Maybe it’s all those thousands upon thousands of IT professionals people keep talking about in Silly Valley who make $150k or more per year currently and are constantly making lateral moves increasing their incomes by 30% or more with these moves these days.

In the mid to late 90’s, it was very much like this (I’m one of them).
Nowadays, not so much.

But wait, I've been told countless times around here that most people in the Bay Area are making $150k or more and that IT professionals especially can make lateral moves right now and increase their incomes by 30% for each move.

You mean to say that none of this is true? You don't say...

simchaland says

You mean to say that none of this is true? You don’t say…

lol, fair enough. Yeah, it's all BS.

There's plenty of people here with plenty of money. IMHO, no where enough to support the current market. Not even close.

ns says

ltemma74 says

I am considering purchasing a condo that, when monthly HOA and bank loan are taken into account, would be less than the cost of renting. Seems to me that the worst-case scenario would be that, if the market went down and I didn’t want to live there, I would have to hold it and rent it.
I would appreciate if somebody could provide another perspective.

If you were talking about a single-family home purchased with a fixed-rate loan I might agree with you. However, the worst case scenario for condos with HOAs is much worse than you suggest. Many of your neighbors could be underwater on their mortgages, stop paying their HOA dues, and you’ll be on the hook for “special assessments” to cover their shortfall even as these deadbeats cause your property values to drop. This is happening to many people around the country right now: they are being totally screwed by the deadbeat squatters in their HOA. The banks won’t foreclose on the squatters because then the banks would be liable for the HOA fees, and when the foreclosure or short sale finally does occur the HOA doesn’t get a cent unless the bank gets 100% of their money back which isn’t going to happen because people without negative equity generally don’t go into foreclosure.

Thank you ns. Very good point!

...and a 'ungry Mob is an Angry Mob!

How long you think unemployment benefits should last? 30,60,90 days, a year, two, indefinitely?

jkingeek says

How long you think unemployment benefits should last? 30,60,90 days, a year, two, indefinitely?

I think the present system is about right. Six months when the economy is not in recession, one year in recession, two years when in depression.

If you can't get your act together in two years then no amount of UE is going to help you.

Note that UE is about 25-40% of one's previous paycheck. The 66% COBRA subsidy was actually a much bigger deal this cycle, and that's been terminated regardless of whether the Republican filibuster on UE and income tax fixes is broken.

Tenouncetrout says

…and a ‘ungry Mob is an Angry Mob!

Very curious political struggle. So far the Dems are going to make the Republicans walk their talk about no tax increases and spending cutbacks in a recession.

Tho they did cave and give a six month reprieve on the medicare doc fix. There's still tens and tens of billions of other spending in this bill, medicaid, the annual tax extenders, and the $35B for people on extended UI benefits.

The Republicans said "pay for the stuff" and so the Dems put in fixes to the S-Corp pass-thru (for people avoiding payroll taxes by taking divies out of their professional S-Corps), and of course the carried interest fix (for equity managers taking dividends on risk capital that is not their own).

Class warfare at its finest. Dunno which way the public is going to break on this. Both sides are pretty entrenched. Complicating matter is not 1 in 100 people could tell you what an S-Corp is.

Troy says

If you can’t get your act together in two years then no amount of UE is going to help you.

Yea - but it still sucks if it's you. People didn't plan for this deep of a recession, nor did they realize that they couldn't maintain their standard of living forever.

simchaland says

Umm, who has the cash to pay for a house outright here in the Bay Area? It most certainly isn’t anyone who is in the working class here. Maybe it’s all those thousands upon thousands of IT professionals people keep talking about in Silly Valley who make $150k or more per year currently and are constantly making lateral moves increasing their incomes by 30% or more with these moves these days.

The average salary for an Oakland Police Office is $180k/year w/ nearly 100% pension. Starting pay is $100k (starting pay for a cop in NYC is $44k). So there are plenty of wealthy "working class" people who can afford expensive houses. Not that I think 760 OPD officers can move the Bay Area housing market, but it's not just "IT Professionals" that are bidding up house prices. Thankfully Oakland (and many other cities) are bankrupt so hopefully those salaries will start to come down.

grywlfbg says

The average salary for an Oakland Police Office is $180

Are you sure about this? I remember seeing the signs from the freeway few years ago "starting at 70,000". I am sure there is overtime abuse, but that can't be the average.

On another note. The city of Alameda is about to close 1/2 their schools. And yet you read about firefighters with base salaries over 100,000 and 90000 in overtime. (No verification of accuracy)

http://spreadsheets.google.com/pub?key=rTunTmsQHa5re6Rh5bk_SXA