patrick.net

Easy money/leverage, that is what made the bubble possible. Add to that irresponsible investors/consumers/speculators and irresponsible lenders/speculators and declining interest rates so that savings accounts can no longer deliver a real return on investment and that is plenty of fuel for inflating the bubble.

Is that as far back as the data goes? Looks interesting but a longer duration to establish the "normal" trend would be nice. As it is now (and we all know that the bubble and crash was an anomalous period) half the graph shows a pretty stable direct relationship between the two, but the other half make them look pretty well decoupled..

Ignoring the bubble-crash for the moment, the question for me is what happens next..the blue appears to be increasing more rapidly than the red in the recent few years, but will it rejoin it or establish some "new normal"?

If blue catches back up with red, and Denver follows the national trend, I'm going to do pretty well on my purchase...and only wish I had "stretched" more.

Unless the money created by the fed trickles down to consumers (not likely as outsourcing/automation/increasing rate of retiring workers is the future of american labor) or the wealthy continue to buy up all the real estate (more likely scenario), how can prices continue to rise?

Vaticanus says

Easy money/leverage, that is what made the bubble possible. Add to that irresponsible investors/consumers/speculators and irresponsible lenders/speculators and declining interest rates so that savings accounts can no longer deliver a real return on investment and that is plenty of fuel for inflating the bubble.

we started the bubble before Easy Money or Lower Interest Rates.. if you look back in 1998, we were already well beyond past highs on CS index... and should have corrected downwards. And frankly we didnt have either. Back in late 80s/early 90s as we saw price peak and fall along with interest rates, there isnt a link between the two in a historical context.

fact is.. ALOT of this Bubble was Consumer driven without any regards to rational thinking....

I agree Thomas but even before the days of "easy money" by your own estimation consumers exhibited irrational exuberance and since very few houses are purchased outright, leverage is what enabled this irrational exuberance.

Vaticanus says

I agree Thomas but even before the days of "easy money" by your own estimation consumers exhibited irrational exuberance and since very few houses are purchased outright, leverage is what enabled this irrational exuberance.

if the public believed it, so did the workers in the banks who gave out the loans.

the two are the same....

perhaps you might have spoken to a few people back than and asked if they

recalled when RE prices fallen in early 90s. You bearly could findy anyone who

did.. just a

few current home owners like me. It was a very strange time.. if anything..

Anyway, it seems you are actually supporting my point that leverage and declining interest rates created the incentive and means for the bubble to inflate.

Interest rates have been on a more or less steady decline since 1980.
http://www.freddiemac.com/pmms/pmms30.htm

Answer: You servants are always at the bottom while I'm at the top in the financial dealings between you serfs. So yes; In the world of peasants, you guys are at the bottom.

Enjoy getting fucked in the ass!

Dan8267 says

was worth $40k in 1980, $41k in 1985, $41k in 1990, $42k in 1995, $43k in 2000, $100k in 2004, $200k in 2006, $300k in 2007, $250k in 2010, and back to $270k in 2013.

Dan8267 says

I've been interested in buying for over 14 years, but I refused to get butt-fucked bailing out some speculator.

So let me understand this, if you had bought the crap shack 14 years ago at 43k and now it is worth 270k you consider that a butt fuck. For 227k appreciation I would say bring on the vaseline.

Dan8267 says

Hell, I see townhouses, a.k.a. row houses priced in the $400k in Boca.

Are we talking the same boca raton bwana? I just did realtor.com and found something like 100 townhouses/condos under 40k.

By the way, I'm not a real estate bear. Sure I hope it drops in price again, and in a sense I'm short RE, but I don't have a strong belief one way or the other as to what will happen.

THe sad thing is that lower prices in the near to medium term would be bad for a significant part of the country, but higher prices will be bad for us too.

We are so fucked ! When prices of such as important and large part of everyone's budget are too high, and yet they literally need to go higher to keep the economy running, and at the same time that will destroy our economy,...well yeah, we're fucked.

smaulgld says

This and spygate has the potential to ruin this presidency.

Agreed.

You can tell things are really bad, because Republicans are finally pissed off at a Democrat president.

HydroCabron says

smaulgld says

This and spygate has the potential to ruin this presidency.

Agreed.

You can tell things are really bad, because Republicans are finally pissed off at a Democrat president.

That might be the best line of the day!

smaulgld says

This and spygate has the potential to ruin this presidency.

Things are getting tough for Nobel prize boy, his latest row of boondoggles and debacles are things that the Liberal spinpress can't pin and blame Bush for. Obama's ass is just left hanging out in the wind, and all of those dingle berries you see, are all of the things that he tried to blame Bush for in the past.

bob2356 says

Dan8267 says

I've been interested in buying for over 14 years, but I refused to get butt-fucked bailing out some speculator.

So let me understand this, if you had bought the crap shack 14 years ago at 43k and now it is worth 270k you consider that a butt fuck. For 227k appreciation I would say bring on the vaseline.

You misunderstand. In the scenario you described, you are the one doing the butt-fucking.

However, if you are the one buying that shack today at $270k, you are the bottom. You don't want to be the bottom.

What ever happened to "survival of the fittest"? If people are inherently sick, let them fend for themselves and only the strongest and most disciplined will survive thereby making the human race more superior. Why try to spend so much of this nation's resources saving the weak?

Dan8267 says

Explain why that house suddenly and permanently quadrupled in value around 2004? What the fuck value was injected into that house in 2004 that I'm not seeing?

If that house actually has a value history like you described, I'd say it's pretty obvious it's the land that is appreciating. Where is it? Is it possible that Something Big happened in the area to bring up the values? It happens.

Here in Denver the area near Coors Field used to be off limits (unless you wanted heroin or hookers), but once the ball park was put in, it's one of the hottest areas in the city -- I couldn't afford to live there. Similar thing happened on the northwest side of the town. As the economy grew and there were more people looking for "city close" housing, the Highlands section went from cheap to out of my price range, seemingly overnight.

People buy and "scrape" houses all the time -- clearly they didn't value the structure, and were just after the land.

Meanwhile, in the news, latest polls show only 22% of Americans approve of the GOP in general.

edvard2 says

Meanwhile, in the news, latest polls show only 22% of Americans approve of the GOP in general.

Oddly only the President cracks 40% approval. Congress dems and reps are in very poor standing
Confidence is not gained when we see congressional fighting over the budget that just kicks the can down the road for two months, closes part of the government while the healthcare.gov site doesn't work and has security holes.

The system is cracking and its not just because of Republicans

I don't think the 1890 index is truly Case-Shiller at all. I'm pretty sure it's only Shiller and someone posted on here in the past that it was actually his grad students that did the work. I'm a bit skeptical of its conclusions as well.

I'm a bear, but only in the world I once knew.

This new world is different. House prices only go up.

The Professor says

If prices go down the investers (not investors, their good for the economy) will
swoop down and snatch up the houses to rent at double the PITI.

What PITI? Aren't investors by and large purchasing with cash? You know what else is good about cash purchasers? They can fix up uninhabittable houses and bring them to market to put downward pressure on rent.

As money supply expands, money has to go somewhere and it will go to stocks and real estate primarily depending on perceived value at the time of investment.

swebb says

If that house actually has a value history like you described, I'd say it's pretty obvious it's the land that is appreciating.

That's certainly a common belief, but I would not accept it as an inevitable fact. Land has appreciated over the 20th century because
1. The U.S. population has grown.
2. Cities have grown.
3. Americans have migrated from cold climates to warm ones like Florida after the invention of air conditioning.

These three things greatly contributed to rising demand for land, particularly in Florida, during the 20th century. But none of these forces apply today.

1. The U.S. population is now stable. It's not going to double like it did in the 20th century.
2. Cities have reach maximum size.
3. Air conditioning has been around for generations and the migration that started in the mid-20th century is done.

As such, I do not expect the same appreciation rates to happen now.

Dan8267 says

Did houses suddenly start giving blow jobs?

They've always done that.

Dan8267 says

You certainly did not prove to me that the CSI is bullshit

The 1890 chart isn't CSI

Dan8267 says

Nor should you expect that disproving a peer-reviewed theory that won a Nobel Prize should be easy to disprove with a paragraph or two of text.

Shiller didn't win his Nobel prize for his work on the CSI.

bgamall4 says

Bigsby says

No, they aren't. The shattering of glass and expulsion of air and debris are clearly as a consequence of the collapse NOT the cause.

No, that would only be the case if the floors pancaked, but they didn't. They stayed spaced apart the exact same way. There was no way pressure was forced out of the windows due to pancaking because there was no pancaking at all.

How many times do I have to tell you this, roach?

Duh, you don't need pancaking of the whole building to have the result that is blatantly obvious in that video. There was quite obviously internal collapse occurring. Only a conspiracy moron like yourself would deny what your own eyes are clearly showing you. Look again at the video I posted up and tell me once again that you think those are squibs. Go on, say it again so that everyone can clearly understand what it is that you do.

This paper describes you to a tee. Have you read it yet or is self-awareness something else that doesn't interest you?

http://www.thepsychologist.org.uk/archive/archive_home.cfm/volumeID_23-editionID_190-ArticleID_1694-getfile_getPDF/thepsychologist/0710swam.pdf

Dan8267 says

In example 2, if this asking price is reasonable, then what the hell made this particular house all of a sudden worth so much more than it's ever been worth?

This question gets even stronger when you look at incomes over the same periods. Where are people getting all this extra money? Oh yeah, they're borrowing it.

No one reads C-S.& their thin air created facts.
I don't know how a tiny blog like C-S continues to post when they are totally ignored.They must have a govt. grant., EBT cards,Section 8 housing,welfare,disability, etc.
ROFLMAO

FunTime says

This question gets even stronger when you look at incomes over the same periods.

Absolutely. But even without that realization, the question is compelling.

FunTime says

Where are people getting all this extra money? Oh yeah, they're borrowing it.

I don't think that's necessarily the case. About half of the residential real estate purchases in south Florida have been all-cash purchases.

However, the buyers are largely foreign speculators, and that has dire consequences. Foreign speculation is not a good foundation for prices. Speculators, especially ones from other countries, can flee a market very quickly and will do so if they get skittish. This can result in a second collapse.

Building housing prices on foreign speculation is like building houses on quicksand.

smaulgld says

edvard2 says

Meanwhile, in the news, latest polls show only 22% of Americans approve of the GOP in general.

Oddly only the President cracks 40% approval. Congress dems and reps are in very poor standing

Confidence is not gained when we see congressional fighting over the budget that just kicks the can down the road for two months, closes part of the government while the healthcare.gov site doesn't work and has security holes.

The system is cracking and its not just because of Republicans

Here is an article that makes similar points
http://www.nationaljournal.com/politics/how-crazies-are-destroying-your-party-20131031

Could the current increase in prices be rather simply explained by the influx of cash from investors and now large financial firms looking for rental income by buying SFHs?

Nationally, the bubble is mostly deflated:

http://www.multpl.com/case-shiller-home-price-index-inflation-adjusted/

debyne says

What ever happened to "survival of the fittest"? If people are inherently sick, let them fend for themselves and only the strongest and most disciplined will survive thereby making the human race more superior. Why try to spend so much of this nation's resources saving the weak?

Yes!!! CANNIBAL ANARCHY!!!1!!1!!

I Drink your Milkshake and eat your brains for the protein. NOM, NOM, NOM!!!!

humanity says

Not sure that money needing to be invested means that the price that money
pays for the assets must be a good price (that is, that the asset must go up
from there).

I have no doubt that without QE the stock market would not be where it is. Without that liquidity, DOW is lucky to be past 11K at this point. Look at all the "corrections" that have occured every time that it appeared that QE was gonna get turned off only to turn right back around as soon as it was "obvious" that QE was back.

Heraclitusstudent says

But assets themselves are linked to the real economy

Yes and companies will continue to do what they can to increase profitability and big part of it will be continued ahem "cost control" which is music to the ears of stock investors who now have control of this liquidity.

Looking at historical inflation-adjusted values of homes alone is not the correct methodology. You must also consider rental rates. Rental rates, IMO, is the real way to value a home.

Much of the housing "recovery" is because house prices were a relative "steal" for investors to rent out. Ex: Buy a home/condo for $30,000 and net $500/month AFTER expenses and taxes. So at $6,000/year return on a $30,000 investment, they were pulling in 20% annually which is great. A whole bunch of investors jump into real estate, it becomes a feeding frenzy, and pretty soon that home which was $30,000 in 2010 is now $120,000 in 2013 and only yielding 5% annually. The frenzy cools off.

Because much of the "recovery" was investor-driven (rather than buyers drinking realtor koolaid), I think prices will level off and track rent, at least for the short-term. If rents increase, home prices will increase. If rents decrease, home prices will decrease.

There are some areas with manias that are sellers' markets (ex: California) and other areas where there are still relative deals for buyers (parts of Midwest/Rustbelt) but the norm for most of the country right now is buyer-seller equilibrium.

Good point matee. Where people are finding work and or a good place to retire rents are probably going to keep housing prices stable. But in areas that are not so desirable or are suffering serous job loss it certainly is not a good time to buy, unless you can buy for less than cost of renting.

debyne says

What ever happened to "survival of the fittest"? If people are inherently sick, let them fend for themselves and only the strongest and most disciplined will survive thereby making the human race more superior. Why try to spend so much of this nation's resources saving the weak?

I know huh, frederich talked about that in his critique of christianity.