patrick.net

Fundamentals are missing, that is why I'm not looking for Location I'm shopping for as much sq ft I can buy with the money I'm willing to spend. Those idiots buying 1500 sq ft 3 br ranch houses on 4000 sq ft lots for 225K are going to feel silly when "Location location location" becomes the deciding factor on RE value again.

Where they would have paid $148 per sq ft, I will have paid $69 a sq ft.
My property will still be worth 225K when these idiots will be lucky to get 103K

Here in So Fla it seems sq ft has little effect on the price of the property. Any 3 br goes for the same range. (with several notable exceptions)

>>You might be able to make an argument that REAL home values dropped 17%, but for the vast majority of home owners this is NOT RELEVANT because the mortgage value depreciates at exactly the same rate as inflation.

Whoa! You claim it is NOT RELEVANT that one could have bought the house for 17% less than what one paid? What planet are you from? (Planet Lereah comes to mind).

And by the way, "the mortgage value depreciates at exactly the same rate as inflation" is another big whopper of a statement.

justme says

>>You might be able to make an argument that REAL home values dropped 17%, but for the vast majority of home owners this is NOT RELEVANT because the mortgage value depreciates at exactly the same rate as inflation.
Whoa! You claim it is NOT RELEVANT that one could have bought the house for 17% less than what one paid? What planet are you from? (Planet Lereah comes to mind).

Huh? I'm not sure you understand what REAL home value means. It is the inflation adjusted price. In the early eighties, inflation was very high so the REAL values dropped even as the nominal price was increasing. So, you could never have bought the house for 17% less than what one paid. On the contrary---values were rising quite rapidly--just look at the above graph in black.

Terminology: Real, nominal, or inflation-adjusted?
TMAC54 used the term "real property prices", not "real property values". There is some room for interpretation here. Was he talking about real property and its price, or property prices in "real" terms, which one should perhaps rather call inflation-adjusted price.

I'm looking at the chart from 1963-1975! It's fairly flat... This is where I see home prices over the next 10 years... And i have history and a nice pretty graph to back up my guesstimate!
Why do you believe we wont' enter a 1963-1975 type housing appreciation period? What would motivate the market to go back to the 1998-2007 chart?

I'm looking at the chart from 1963-1975! It's fairly flat... This is where I see home prices over the next 10 years... And i have history to and a nice pretty graph to back up my guesstimate!

Why do you believe we wont' enter a 1963-1975 type housing appreciation period? What would motivate the market to go back to the 1998-2007 chart?

The only problem with "fairly flat" is that the US culture has changed recently and created temporary millionaires through "get rich quick" schemes. Stocks, options and housing. People want to risk nothing, get 1000% profits and be a retired millionaire in a few years. It really seems that there has been a culture shift going on here. People are going to continue dumping money in areas that they believe will create instant wealth for them, especially the "wealth" they felt over the last couple of years, whether it was realized or not, and whether they still have it not, they're going to want it back somehow.

The house I bought in 1999, were it to go on sale today, would seem to most definitely be worth less than what I originally paid. Eleven years, at least, gone.

The entire city where that house is located follows along those same lines.

The cause of the great depression was the radio. The Radio was Introduced about 29 years prior to that crash. The cause of the present financial crisis was the computer. APPLE was introduced about 29 years ago.... 1981. Get ready for the "even greater depression". History does repeat itself. Human nature knows to hoard, It does not know to cut back.
Maybe Obama can save cities like Los Angeles, Miami, Las Vegas. San Francisco, San Jose, Sacramento, Seattle, their suburbs etc etc. He could pay their Mortgages in half. ( does this mean taxpayers own half of your deed ? ) Now to pay the other half, the owners only need jobs, many of which used to be associated with the computer industry.

The government going into huge debt is exactly the wrong thing to do. To use your monopoly analogy, that would be like the creation of another bank with more money. But the wealth is still in the hands of the one rich player, he is just able to stay afloat longer because another souce is giving him money. That is, the guy with the power gets the only long term benefit from the new money. Maybe the nearly broke players get to play for longer, but are they any better off? Not collectively, maybe one smaller player can take some wealth off of another, but they aren't siponing any wealth off the top.
This is the same thing our federal reserve does. How did GS, et al, make their profit last year? Their cost of capital is less than 1% and most of their balance sheets doubled. Their balance sheets increased greatly. In the middle of the biggest economic downturn since the Great Depresssion. In order to do that, they borrowed a ton of money. Usually, the more money you borrow, the higher your firms financial risk and the higher rates the market demands for loaning you the capital. They are borrowing money from the fed at zero! Then they are buying treasuries at 3-4.5%. That isn't innovative. That isn't creating wealth. Anyone could do that if they had access to capital at 0%. Its called leverage. Do I blame them for doing it? Heck no, I wish I could do it too. Hey Ben, can you loan me a measly 100 million at 0%. I swear I'll pay it back next year, after I pocket 2 million from buying a 1 year t-bill. Where do I sign up? I blame the government for letting them do it.
Think about it. The federal reserve lends money to banks at 0% but lends money to the government at rates higher than this. They enchange federal reserve notes (money) for t-bills and bonds, paying anywhere from .5% - 4.5% . All of those are higher than what they lend money to the banks...who pays the interest? Taxpayers. So, in essence, the private banks are now acting as lenders to the government (taxpayers), and collecting interest from the taxpayers on money created out of thin air by the federal reserve (lent to them at zero interest) who was given the authority to do so by the Government. But wait, any profit the Fed makes returns to the government, but profits made by the private banks does not.
Who do they work for again?
These money changers are good.

And another thing, it would be one thing if it the majority of the profit from this was going to shareholders. But from Goldman 23 billion is going to bonuses and 2.3 billion is reported as yearly net income. And based on the dividend payments about 715 million is going to shareholders.

hmm..

for people with an estate of

What's the deal with grandparents raising the family's children? Both my wife and I are taking classes/working 2 jobs at night right now, and my parents are having a ball (in-law apt) while they care for my daughter. As boomers retire we the middle generation will be expected to work even more hours than we do already, leaving grandparents to pick up the slack.

My point is now that my wife an I both have 2nd jobs......

Grh. Allergic reaction to hyperbole continues. Antihistamine is to allergy, as ________ is to hyperbole. Logic? Impartiality? Copious amounts of beer?

Can anyone produce a credible graph and information source showing how 10% of the people own 90% of the wealth? This is not astonishing to me, per se, but it borders on hyperbole. For example, if you look at a 2010 graph of U.S. age distribution, then 25-30% of people are under age 20. For the most part, they don't have tangible assets yet, but you can't cite youth as a form of economic inequity (were it possible, I'm sure older people would gladly trade their wealth for youth!).

Ten percent of the people do not own 90% of the guns, at least not yet. And even many of the armed cops and military who are part of the system are in the 90% of us in hock.

@rmm221,
RE: "Why do you believe we wont’ enter a 1963-1975 type housing appreciation period?"

The wifes went to work at that time and loans only went to those with 20% down. The HUD programs of that era were for working FAMILIES only. We can only see something similar in growth if the new marriage laws being pushed for result in a third partner in each home. 2 wages made a difference, so 3 wages are going to make a difference.

Yes, I am kidding. Except for the wage earner being added making room for growth. And leaving the Gold Standard so we could give money to the world.

Fundamentally, many of the comparisons to previous eras are irrelevant. We can only compare apples to apples. For example, I think it's fair to compare the housing bust to the Great Depression, from the standpoint that both were caused by excess leverage and a mania mentality.

For housing appreciation, there are two basic factors to consider: inflation and demand. There can be a great debate about whether homes are the common man's defense against inflation (I tend to believe not). But inflation is secondary to demand. What will drive housing demand going forward? Many people purchased primary and secondary homes beyond their price range, including many purchases for homes that weren't needed per lifestyle. I know lots of mid-20's single people who bought "because houses are making a lot of money", not because they really needed a house. The easy loans are gone, so most people who purchase single family houses now will be actual stable families with reliable incomes who want a house as a home. The casual investors and tulip speculators have all been shipped back to the sidelines. There are demographic factors like retiring Boomers that lead me to believe that housing demand will continue to shrink in the coming years. The exceptions will be retirement towns (for Boomers) and job growth areas (for Gen X/Y), where an influx of people will stabilize demand.

For anything to become a long-term trend, it has to be accompanied by a true change. Bap's example is one such shift---wives entering the workforce and doubling household earning capacity. This bubble was caused by easy credit, the bust was from unwinding of over-leverage, and I see nothing notable on the horizon that will replace that. It was a blip, not a shift.