patrick.net

gameisrigged,

I will assume that you are in the middle class. I also remember you stating that you lost your job. You are the exactly the type of person that I see being affected by our own self-destruction. Too bad it has already happened to you.

I have already stated many times my position which is different from most of the "experts". Jobs do NOT drive housing. A strong housing market drives jobs. Not directly, like as in construction jobs. But by producing a stable wealth effect, which leads all consumers, including the middle class which is still the majority in the country, to spend some, which supports all other sectors of the economy. The recession since 2006 is NOT related to jobs disappearing first, but to housing collapsing, which then led to drastically less consumer spending, which then led to job losses. Some folks on this board believe that we should collapse housing even more. Are not the effects of that obvious to everyone?

I have never prescribed bubblicious price rises for homes. I am fine with you guys calling out parts of California and Florida for their excessive growth. I call out India and China as the most absurd bubbles on the planet. I live in the MidWest, where there was never a boom, but there has sure been a bust, leaving home values below inflation. I see plenty of middle class families who have never been greedy losing their equity and then losing their jobs.

A healthy housing market to me is one that appreciates 2-4% in value every year. Too much appreciation leads to speculation and shifting of wealth to just the rich. Too little appreciation destroys the middle class the most.

I have to leave for work, but let me just say this. I find it absurd that we talk about "median home prices" without first defining what a median home itself is. Is that a 8x8 ft tent? A 200 sqft trailer home? I guess it is a 4 BR 2 storey with a huge lot, attached garage, central air and heating, nice roads and neighborhood, good schools, etc. The problem is that we want 5-star luxury housing for everyone, but we want it at a 1-star price. If all that you care about is a home available for everyone at less that 1 time median income, why not just build a whole bunch of 600-sqft condos in every city and sell them for about $25,000.00 each? Surely that will satisfy the folks that want "median house price" to be less than 2 times the median income. A typical person should need only 150 sqft of space, so a 600 sqft condo will easily accommodate a typical family of four. Outside America, that is what people do. And they pay far far more for that small condo than Americans pay for their ultr-luxury housing.

clayfire23 says

The recession since 2006 is NOT related to jobs disappearing first, but to housing collapsing, which then led to drastically less consumer spending, which then led to job losses. Some folks on this board believe that we should collapse housing even more. Are not the effects of that obvious to everyone?

What you are talking about was the end of an embarrassing era of people were cashing out their homes' fake equity in amounts and at a rate that was purely unsustainable. Yes, they spent it on the economy and for a little while, everybody was really pleased. Some saw it for what it was and chose to not partake. It disgusted many people. Everybody else at least realized when the party was over how stupid they all were. This lesson appears to have eluded you.

You know, most people look back on that period with a feeling of sadness, regret, and anger that we as a society could become so stupid. You seem to be the only person that's been asleep for the past four years and is now nostalgic for it. Amazing.

clayfire23 says

Housing is the backbone of every economy

Poppycock. Industry and manufacturing - as in value adding work are the backbone of an economy. Yes, this includes manufacturing or building houses, but that alone is not sufficient.

Borrowing a shit-ton of money to 'buy' a house, and waiting for a greater fool to borrow a bigger shit-ton of money to 'buy' the house from you -- that is nothing more than a speculative ponzi scheme that is doomed to failure. The only ones who make a profit from a ponzi are the ones who get out before it blows up - not the idiots who pile on at the end and make bigger fools of themselves by trying to convince everyone that it isn't over.

The hyperactivity that comes with a speculative bubble creates the illusion that the economy is booming - but eventually the math catches up. Fucking around with 'housing' isn't much of an economy.

idiotwordsofgod also compared walnut creek to beverly hills.

yes, I consider Lafayette a fortress, It is out of reach to 90%-95% of outsiders, the very thing that makes the area attractive. Since it is known for its great school, families with small children(s) covet the area.

My definition of fortress is an area that is out of reach to normal people. Keeping people out based on economic factor is very important to where the well-off purchase and live.

Median family income is around 160K, a tad below the more well known Palo Alto, it's definitely not reachable to the middle class unless the properties are purchased decades ago. No new homes are built there for decades (population was 20K plus in 1970 vs 24K today) so all the features that make it a fortress is there.

clayfire23 says

gameisrigged,
I will assume that you are in the middle class. I also remember you stating that you lost your job. You are the exactly the type of person that I see being affected by our own self-destruction. Too bad it has already happened to you.
I have already stated many times my position which is different from most of the “experts”. Jobs do NOT drive housing. A strong housing market drives jobs. Not directly, like as in construction jobs. But by producing a stable wealth effect, which leads all consumers, including the middle class which is still the majority in the country, to spend some, which supports all other sectors of the economy. The recession since 2006 is NOT related to jobs disappearing first, but to housing collapsing, which then led to drastically less consumer spending, which then led to job losses. Some folks on this board believe that we should collapse housing even more. Are not the effects of that obvious to everyone?

I'm not even going to bother trying to refute this again, since Klarek already did a great job of that, except to say that you didn't address ANY of my points. You simply re-stated your original flawed premise.

I did not lose my job because the housing market collapsed. My losing my job AND the housing market collapsing were BOTH the result of Wall Street influencing government to allow them to engage in a massive ponzi scheme, and abscond with trillions of dollars of wealth that formerly was possessed by the middle class.

The point I made before, and which you did not address, is that the scheme was unsustainable. The proof of its unsustainability is the collapse of the housing market. If, as you seem to think, an economy can be built from the top down, by inflating housing prices, and that jobs and prosperity will follow, then why did it collapse?

And please address my other point, which is what you mean when you say we are "collapsing" or "deflating" housing. You use the words as active verbs, implying that someone (although you haven't stated who, other than to say "we") is engaging in some sort of deliberate process to bring this about. What are you talking about?

SF ace says

yes, I consider Lafayette a fortress, It is out of reach to 90%-95% of outsiders, the very thing that makes the area attractive. Since it is known for its great school, families with small children(s) covet the area

I gotta hand it Marketing people in the Real Estate industry. They come up with the most interesting 'hooks' to overprice homes. We did not have this decades before. So where did this come from?

When you have "fortress" house proped up as a million dollar home, it will net future earnings to RE agents at $60K a pop! Can you think of any other 3rd parties to a transaction in another industry which manipulates prices like this ?

I moved to Los Gatos (so called fortress town today) back in 1982, and bought 10 years later. The price was no different than many other Santa Clara towns and cities. Only in the past 10 years, have we heard this term "Fortress" being thrown around. It did not exist for many decades before that. I have a neighbor from New York, who paid $1.2M in 2003 for a home which otherwise was worth around mid 300K when he bought it. He still thinks he lives in a dream home, but frankly he is dreaming like most. They just dont get they overpaid! He oddly thinks prices in decades past was undervalued. Talk about "bubble denial".

So lets look at "Fortress" Lafayette.. before and today. Clearly people lost their minds.

Property History for 3286 GLORIA Ter
Date Event Price Appreciation Source
Oct 20, 2010 Price Changed $919,000 -- EBRD #40478292
Oct 20, 2010 Relisted -- -- EBRD #40478292
Sep 10, 2010 Pending -- -- EBRD #40478292
Aug 16, 2010 Price Changed $995,900 -- EBRD #40478292
Aug 16, 2010 Price Changed $950,900 -- EBRD #40478292
Jul 22, 2010 Listed $1,150,000 -- EBRD #40478292
Nov 28, 2005 Sold (Public Records) $1,425,000 7.5%/yr Public Records
Dec 27, 2000 Sold (Public Records) $997,500 77.2%/yr Public Records
Jun 23, 1999 Sold (Public Records) $419,000 60.8%/yr Public Records
Apr 24, 1997 Sold (Public Records) $150,000 -- Public Records

here is another one,

Property History for 3399 WOODVIEW Dr
Date Event Price Appreciation Source
Oct 18, 2010 Relisted -- -- EBRD #40477912 $554,900
Aug 05, 2010 Pending -- -- EBRD #40477912
Jul 30, 2010 Delisted -- -- EBRD #40477912
Jul 20, 2010 Listed $554,900 -- EBRD #40477912
Jun 18, 2008 Sold (Public Records) $875,000 -- Public Records Foreclosed
Jun 29, 2006 Sold (Public Records) $1,098,000 -- Public Records

and another

Property History for 898 DEWING Ave
Date Event Price Appreciation Source
Oct 08, 2010 Price Changed $635,900 -- EBRD #40480275
Sep 07, 2010 Price Changed $649,900 -- EBRD #40480275
Aug 14, 2010 Price Changed $699,900 -- EBRD #40480275
Aug 03, 2010 Listed $729,900 -- EBRD #40480275
Oct 02, 1996 Sold (Public Records) $199,000 -15.1%/yr Public Records
Jul 21, 1995 Sold (Public Records) foreclosed $357,503 -- Public Records
Mar 06, 1992 Sold (Public Records) $420,000 -- Public Records

another

Property History for 1117 HILLCREST Dr
Date Event Price Appreciation Source
Oct 22, 2010 Price Changed $899,000 -- EBRD #40488324
Oct 01, 2010 Price Changed $970,000 -- EBRD #40488324
Sep 17, 2010 Listed $1,050,000 -- EBRD #40488324
Jul 17, 1996 Sold (Public Records) $380,000 -- Public Records

Prices around the bay area before the bubble unified at around $125/sq ft, there was no way to market homes in so called "fortress towns". But what changed?

Nothings changed, except Lafayette is even more unreachable than ever. That is my only point and your data is not what I was after. 90 - 95 percent of the local population will never be able to buy there, in 20 years, perhaps it is 95-97 percent. That is the nature of prime property.

gameisrigged,

Please read all my previous comments, including the ones that I posted on Oct 12th.

Most of us repeat the same beliefs that we have stated already. So me re-stating what I said already is just consistency.

I have also repeatedly stated what I consider a healthy home price appreciation, and why I consider American homes vastly undervalued while compared to the rest of the world. The main difference between you and me is that you have very narrow perspective and consider anything happening outside America irrelevant. I have lived in many countries, and see the global economy for what it is.

The way America is being self-destructed is that people such as you with narrow perspective have propagated the "perception" that a 5-star home should be available for everyone to purchase at a 1-star price, and if not, it is a "bubble" and "unjustified". In my previous post, I asked why a 600-sqft condo was not enough for a family of 4 at the 1-star price that you desire, as that is what most people in the world typically get to live in. There are many trailers and manufactured homes that sell in the 10,000-20,000 dollar range.

Let us first define what the median "home" should be. Then we can estimate its median value and then count its multiple against the local median income. The reason for the collapse is NOT that median home values rose a lot (which they DID NOT), but that quite a few folks bought a lot more house than they could ever afford. Never confuse "affordability" with "biting off more than you can chew". In my previous posts, I have given the example of someone with ZERO income and no earning potential ever. This person cannot and should not buy even a hundred dollar tent. That does not mean that the hundred dollar tent is overvalued or there is some "ponzi" scheme at play.

"Perception" is reality in everything. In many parts of the world, real estate is considered/perceived as the BEST investment, and real estate values have shot up many many times, and as many as one thousand times in the past 30 years in the metros of India and China. Compare that to the metros in America. Sure, there are factors like inflation, population density and so on. But for each of those factors, there are counter factors, and proper analysis will consider ALL the factors, not just some.

I have been posting on many blog sites for a long time, but came to patrick.net only recently. I have seen many many posters like you and klarek. Frankly, folks like you are in the majority on every blog. Are you doing this self-destruction intentionally? I hope not, and think it is just your limited perspective. I do not see you guys stopping any time soon, which is why I also believe that America is in a self-destructive death spiral, and that there will be many more jobless bean burrito eaters pretty soon.

tts says

Historical trends and such are great and all, but you can’t ignore the fundamentals of a)wages and b)jobs as well as c)cost of living. You know it costs almost $22,000 a year on average for a family of 4 to have health care? That means you need to have at least one person working a decent full time job just to pay for insurance/health care, and most dual income earner families make less than $55,000 a year.

If you're going to talk about health care costs, then you need to talk about earnings including benefits. A good portion of the $22K is paid by the employer and isn't included in the $55K/year figure you quote.

tts says

Whats worse is that the long term trend for jobs is higher unemployment, short of New Deal 2.0 programs, and the long term trend for wages is down too while costs of goods/services that you need (ie. food, gas, clothes, healthcare) are starting to rise.

Huh? You think the long term trend is higher unemployment than now?

clayfire23 says

I have also repeatedly stated what I consider a healthy home price appreciation, and why I consider American homes vastly undervalued while compared to the rest of the world.

A decent size chunk of the rest of the world (China and Austrailia) are still in the middle of their own housing bubbles, also home prices/rents always depend on local average wages and jobs. Repeating yourself won't make you anymore right.

clayfire23 says

The main difference between you and me is that you have very narrow perspective and consider anything happening outside America irrelevant.

How do home prices in Spain effect home prices in Alabama or vice versa? There is no connnection at all. The laws regarding property are different, the wages are different, the cost of living and taxes are different, etc. You cannot compare prices across the world like that, it is an apples to oranges comparison.

clayfire23 says

The way America is being self-destructed is that people such as you with narrow perspective have propagated the “perception” that a 5-star home should be available for everyone to purchase at a 1-star price, and if not, it is a “bubble” and “unjustified”.

The US is being trashed by its own government, the super rich, and the banks. The middle class, poor, and upper middle class have effectively almost no representation anymore or respect by the institutions which run the state. They are the victims in all of this mess. That you would hold them responsible for the current condition of the country shows that you are either out of touch with reality or trolling.

clayfire23 says

There are many trailers and manufactured homes that sell in the 10,000-20,000 dollar range.

Sure, they're decrepit hovels in the worse areas with poor schools and high crime rates. You have all the morals of a crook if you think that is the acceptable standard for the poor much less the middle class in general who make up most of the population of the US. You're essentially arguing the US should turn into a 3rd world country.

clayfire23 says

Let us first define what the median “home” should be.

No. You don't get to do that, the market does. And the market depends on 2 main things to determine that; wages and jobs. Other things like cost of living and local property laws/government support can have their effect too, but long term it always comes down to wages and jobs.

clayfire23 says

“Perception” is reality in everything.

Liars and theives say such things. Sure, perception can influence markets briefly in the short term, but it doesn't make the market. If it did the bubble never would've popped since the perception was that housing would go up forever.

tatupu70 says

If you’re going to talk about health care costs, then you need to talk about earnings including benefits. A good portion of the $22K is paid by the employer and isn’t included in the $55K/year figure you quote.

That used to be true, but no longer. More and more employers don't pay benefits or pay very little. The new trend is to higher people as "contractors" so they don't have to pay benefits at all and/or can fire them easily.

tatupu70 says

Huh? You think the long term trend is higher unemployment than now?

Yup. The economy, both national and global, is falling apart faster than the markets can adapt while nations wage currency wars on eachother. We're looking at a global version of Japan's Lost Decade, and that is in the best case. If we're lucky it won't last that long and we might come out of it in decent (it. a 2nd world country) shape. If we're unlucky then it might just turn into a full blown modern Great Depression 2.0. I'm not optimistic because our federal/state governments are both incompetent and corrupt, as are our financial system (banks+Wall St.).

Basically we've got assholes running the show, and you can't go expecting the best from some of the worst now can you?

EDIT: going to sleep will check/back reply later tap

tts says

clayfire23 says
“Perception” is reality in everything.
Liars and theives say such things. Sure, perception can influence markets briefly in the short term, but it doesn’t make the market. If it did the bubble never would’ve popped since the perception was that housing would go up forever.

shucks ! tts you beat me to it!

tts says

That used to be true, but no longer. More and more employers don’t pay benefits or pay very little. The new trend is to higher people as “contractors” so they don’t have to pay benefits at all and/or can fire them easily.

It is still true. The vast majority of employers pay benefits on full time positions.

tts says

Yup. The economy, both national and global, is falling apart faster than the markets can adapt while nations wage currency wars on eachother

All evidence to the contrary. There are discussions about proper exchange rates, but not sure how you can claim that the global economy is falling apart faster than the markets can adapt. You sound like a drama queen...

clayfire23 says

I have also repeatedly stated what I consider a healthy home price appreciation, and why I consider American homes vastly undervalued while compared to the rest of the world.

You said it's because of all these houses that haven't tracked with inflation over the years. This is the third time I am asking: where did you get this information? I follow all kinds of news and data related to housing and I have never heard this. I think you are Chicken Little, manufacturing fake reasons for housing to be artificially inflated.

clayfire23 says

I have been posting on many blog sites for a long time, but came to patrick.net only recently. I have seen many many posters like you and klarek. Frankly, folks like you are in the majority on every blog. Are you doing this self-destruction intentionally? I hope not, and think it is just your limited perspective. I do not see you guys stopping any time soon, which is why I also believe that America is in a self-destructive death spiral, and that there will be many more jobless bean burrito eaters pretty soon.

You want to return to a time when housing prices are completely out of control and money comes pouring out of the walls. You think that drives production or has any sort of long term beneficial impact on our quality of life. You have no understanding of the housing bubble or economics in general. You're pissed that we can't live in a completely bogus economy (though we are close), and you want to blame it on us "self-destructors". Pathetic.

tatupu70 says

It is still true. The vast majority of employers pay benefits on full time positions.

And that trend is changing. And the current benefits payed don't pay for enough of it. Healthcare costs are effectively unaffordable and aren't going to get any cheaper. You're out of touch with reality if you don't know this.

tatupu70 says

All evidence to the contrary.

What evidence to the contrary? You saying something doesn't make it so. I didn't chart spam but I least I pointed out the currency wars we've got going on ATM.

tatupu70 says

There are discussions about proper exchange rates, but not sure how you can claim that the global economy is falling apart faster than the markets can adapt.

The currency wars are playing games with the prices of commodities, generally raising them, while also causing the global credit markets to go haywire. Businesses are having to raise prices to stay in business (http://www.dailyfinance.com/story/walmart-raises-prices/19587730/) in a severe recessionary environment. Businesses who don't do this are failing, but the ones who do jack up prices end up having lower sales due to higher prices, and reduce inventory, which cuts back on manufacturing, etc. All of this is reactionary and uncontrolled.

tatupu70 says

You sound like a drama queen…

Yay insults. Again.

tts says

And that trend is changing. And the current benefits payed don’t pay for enough of it. Healthcare costs are effectively unaffordable and aren’t going to get any cheaper. You’re out of touch with reality if you don’t know this.

I pretty much agree with this. You should have said this from the start...

tts says

What evidence to the contrary? You saying something doesn’t make it so. I didn’t chart spam but I least I pointed out the currency wars we’ve got going on ATM.

Do I really need to post evidence that the world economy isn't falling apart? Come on.

tts says

The currency wars are playing games with the prices of commodities, generally raising them, while also causing the global credit markets to go haywire. Businesses are having to raise prices to stay in business (http://www.dailyfinance.com/story/walmart-raises-prices/19587730/) in a severe recessionary environment. Businesses who don’t do this are failing, but the ones who do jack up prices end up having lower sales due to higher prices, and reduce inventory, which cuts back on manufacturing, etc. All of this is reactionary and uncontrolled.

Times are tough--no doubt about it. Weak businesses fail during recessions-nothing new about that. Walmart raised prices back to previous levels because their strategy of lowering prices didn't generate as much new sales as expected. But the point is that there is nothing reactionary or uncontrolled about this. Maybe 2 years ago I might agree, but certainly not now.

tts says

You sound like a drama queen…
Yay insults. Again.

Wow-you've got a bit of a thin skin. I just said you SOUND like a drama queen--didn't even really insult you at all...

klarek,

Your questions have already been answered many times. Tatupu explicitly specified Detroit as vastly below inflation. I have stated time and time again that much of the MidWest has underperformed inflation, has never had a boom, but definitely a bust. I also told you to dig up the data yourself (taste of your own medicine) than ask me for data. One of my early posts on this thread asked for Shiller to point out the markets where home prices were lagging inflation. Shiller sticks just to comparison against inflation in his charts, but once you realized that there are indeed many places in the USA where homes were lagging inflation, you changed your story for it now be about local GDP and local conditions. You cannot have it many different ways.

tatupu70 says

Do I really need to post evidence that the world economy isn’t falling apart? Come on.

Sure. What makes you think things are getting better instead of worse? Unemployment is still very high, wages are falling, home inventory is high, home foreclosures are high, etc. Maybe all of this has been going on for so long that you've become desensitized? We're you expecting some sort of singular event that clearly signaled that yes, _now_, the economic system of the world is kaput and the streets would be flooded with hobos and lines going into soup kitchens around the block the very next day?

It doesn't work that way.

This is going to be a process, not an event, and it probably won't be publicly recognized as such until long after it has already occurred, assuming it hasn't happened already. Much the same way it took almost a year for the government to recognize that a recession had started in late 2007.

tatupu70 says

Times are tough–no doubt about it. Weak businesses fail during recessions-nothing new about that.

Uh there is something very new about stores raising prices in a recession. Prices are supposed to go _down_ not up. The weak businesses already failed a year ago, now few remain other than the big box stores.

tatupu70 says

But the point is that there is nothing reactionary or uncontrolled about this. Maybe 2 years ago I might agree, but certainly not now.

You think they want to raise prices which result in lower sales? Like they planned on doing it because its such a good thing with inventory through the roof that they still can't get rid of? Really?

tatupu70 says

Wow-you’ve got a bit of a thin skin. I just said you SOUND like a drama queen–didn’t even really insult you at all…

Hahah, a kinda sorta but not really insult. That has to be one of the most lazy attempts at being passive-aggressive I've ever seen.

clayfire23 says

gameisrigged,
Please read all my previous comments, including the ones that I posted on Oct 12th.
Most of us repeat the same beliefs that we have stated already. So me re-stating what I said already is just consistency.

No, we're not playing the "please read my previous comments" game. I DID read them, and you did not address my points. You simply went off on a very long tangent. I asked you two simple questions; I don't see why it's so difficult to just answer them succinctly.

Again: (1) If, as you seem to think, an economy can be built from the top down, by inflating housing prices, and that jobs and prosperity will follow, then why did it collapse? (2) What do you mean when you say we are “collapsing” or “deflating” housing?

I actually don't have much to do here, because a couple other posters have already made mincemeat of your arguments, but to add just a little bit:

I have also repeatedly stated what I consider a healthy home price appreciation, and why I consider American homes vastly undervalued while compared to the rest of the world. The main difference between you and me is that you have very narrow perspective and consider anything happening outside America irrelevant. I have lived in many countries, and see the global economy for what it is.

That's nonsense. If you think a house in Tokyo, for example, should be the same price as a house in Nebraska, then you understand nothing. To say that those who disagree have a "narrow perspective" is a simple low brow ad hominem argument, and is without merit.

The way America is being self-destructed is that people such as you with narrow perspective have propagated the “perception” that a 5-star home should be available for everyone to purchase at a 1-star price, and if not, it is a “bubble” and “unjustified”.

That's just a silly strawman argument, and you know it.

In my previous post, I asked why a 600-sqft condo was not enough for a family of 4 at the 1-star price that you desire, as that is what most people in the world typically get to live in. There are many trailers and manufactured homes that sell in the 10,000-20,000 dollar range.

That is a silly comparison. Much of the value of real estate is the land itself. People who buy trailers do not necessarily own the land that the trailer sits on.

Let us first define what the median “home” should be. Then we can estimate its median value and then count its multiple against the local median income. The reason for the collapse is NOT that median home values rose a lot (which they DID NOT), but that quite a few folks bought a lot more house than they could ever afford.

Right here, it's hard to take you seriously. I am amazed that you would seriously make the argument that home values did not rise a lot in the bubble. That is so demonstrably false as to be laughable. I don't know where to go from here. You might as well say the sun doesn't emit light.

I have been posting on many blog sites for a long time, but came to patrick.net only recently. I have seen many many posters like you and klarek. Frankly, folks like you are in the majority on every blog. Are you doing this self-destruction intentionally? I hope not, and think it is just your limited perspective. I do not see you guys stopping any time soon, which is why I also believe that America is in a self-destructive death spiral, and that there will be many more jobless bean burrito eaters pretty soon.

You made the claim that inflating housing prices leads to jobs and a stable economy, and I disagreed. You have provided absolutely nothing to back up your argument. Your argument doesn't even make sense. So which one of us do you you really think is being destructive?

tts says

Sure. What makes you think things are getting better instead of worse?

Most--not all--but the majority of economic trackers are improving.

tts says

Uh there is something very new about stores raising prices in a recession. Prices are supposed to go _down_ not up. The weak businesses already failed a year ago, now few remain other than the big box stores.

What makes you think they aren't? Inflation is basically zero. Stores aren't raising prices. Walmart tried a promotion to increase sales. It didn't work so they ended the promotion. It doesn't say anything about the rest of the economy.

tts says

Like they planned on doing it because its such a good thing with inventory through the roof that they still can’t get rid of? Really?

Inventory is not through the roof. Last I checked it was up slightly from the low it reached a few months ago. But still much, much, much lower than 2007/2008.

gameisrigged,

I answered your questions many times already. The answer to both your questions is the same. Home values collapsed because YOU succeeded in spreading the perception that the home price appreciation that we had just in some parts of the country was totally unjustified, and so the whole country should suffer a massive correction in prices. You will continue to spread that perception, until all American homes are totally worthless. I already stated that perception is reality. If the perception changes that home values will rise 10% in the following year, how many current homeowners will foreclose intentionally?

Your whole argument that the home price rise was unjustified has to be either based on Shiller's inflation adjusted charts, or based on median price to median income multiples that indicate affordability. Both of those do a poor job in defining what a "home" is, so how can you use those blindly? I am not saying using those metrics is wrong, but define them well first, and use them the same way across the world. How can anyone justify a typical dirty 1000-sqft apartment in India or China's metros being 50 times the local typical household income while considering it unjustified for a nice typical single family home in say L.A or Boston to be even 5 times the local typical household income?

The demand/supply argument is not strong. There is always demand if the perception is that prices will go up. Supply exceeds demand if prices are expected to go down. This is true in every part of the world. A lot of people are waiting on the sidelines or have exited homeownership because the current perception is that prices will go down.

You want a palace of gold for just a few dollars, and if I call that as unreasonable and suggest a small condo for that price, you just call my argument "silly".

You consider it "fake" money if housing goes up even 2% per year. In other words, you will be happy if housing goes down in value every year like a used car does. Should that not apply to the stock market, 401k investing, gold, silver et al? Is all "investing" fake and "greedy"? Are you so distraught with your own life that everyone losing their wealth in every possible way is all that you wish your every living minute?

Our citizens have lost 14 trillion in wealth in the last few years, as per this article out today titled :
AP : Painfully slow economic gains

http://news.yahoo.com/s/ap/us_ap_economy_survey;_ylt=AsAio.rf2XeDRENxvvJn8HOs0NUE;_ylu=X3oDMTNsa2J1cWJuBGFzc2V0A2FwLzIwMTAxMDI4L3VzX2FwX2Vjb25vbXlfc3VydmV5BGNjb2RlA21vc3Rwb3B1bGFyBGNwb3MDMwRwb3MDMTAEcHQDaG9tZV9jb2tlBHNlYwN5bl90b3Bfc3RvcnkEc2xrA2Fwc3VydmV5cGFpbg--

clayfire23 says

Your questions have already been answered many times. Tatupu explicitly specified Detroit as vastly below inflation.

Actually it was ME who used Detroit vs DC as an example of how local housing markets follow local fundamentals, from which you entirely missed the point and went off on a baseless tangent about me being inconsistent. Now, Detroit aside (which, by the way, has NOT tracked below inflation for all of the past 30 years like you said), where are we talking about where housing hasn't tracked with inflation? You insinuated that this is a widespread problem and has been going on for three decades. I think you are full of it. Just admit you made that up.

clayfire23 says

I have stated time and time again that much of the MidWest has underperformed inflation, has never had a boom, but definitely a bust.

WHERE??? I've looked at bubble graphs for every single metro region and you're complaints aren't backed by any of them.

clayfire23 says

I also told you to dig up the data yourself (taste of your own medicine) than ask me for data.

http://www.housingbubblebust.com/CaseShiller/Midwest.html

I told you to dig up readily-available data on something that should by this point be intuitively known. You are asking me to dig up data on your bullshit claim. When the burden of proof lies on your side, you look really freaking stupid by challenging someone else to disprove it.

clayfire23 says

One of my early posts on this thread asked for Shiller to point out the markets where home prices were lagging inflation. Shiller sticks just to comparison against inflation in his charts, but once you realized that there are indeed many places in the USA where homes were lagging inflation, you changed your story for it now be about local GDP and local conditions. You cannot have it many different ways.

I didn't. You are just to freaking stupid to grasp that markets are different and that a boom in local GDP will spur the housing sector of that region. That was my only point, and you are the only person that was confused by it. A child could understand this faster than you ever will. It comes as no surprise that a person incapable of grasping simple anecdotes such as that would have the absurdly wild imagination (and lack of knowledge of recent history) to believe that artificially pumping up home prices has a real and long term positive impact on the economy. Hey, why don't we just print a bunch of money until we're all rich? It's that simple!

tatupu70 says

Most–not all–but the majority of economic trackers are improving.

If by improving you mean not as bad as the worst of 2009 you'd be correct. Just because things are a little less bad, mostly due to gov. support, doesn't mean that things are actually better or that a recovery had started. If anything it looks like we're headed for a double dip.

tatupu70 says

What makes you think they aren’t?

Only the larger chains can afford to stay in business by virtue of being big in the first place. The mom n' pops were already squeezed out of most markets by them years ago and the few that still remain have a hard to impossible time competing with them. This is old news....

tatupu70 says

Inflation is basically zero.

Sure, if you don't count the cost of health care, food, gas, or commodities and use a contorted version of rents as your benchmark for home prices. You're seeing plenty of +debt deflation+ (home debt) right now, but there is actual +monetary inflation+ (ZIRP, QE, xxLF, payment on interest for banks from FED, etc.) going on too, which is why commodity prices are rising which is driving up the cost of goods. That is the effect the currency wars (competitive devaluation) are having right now. And its not getting better, but worse. QE2 is coming, weather its a blow out or incrimental is unknown but it is coming.

tatupu70 says

Stores aren’t raising prices. Walmart tried a promotion to increase sales. It didn’t work so they ended the promotion. It doesn’t say anything about the rest of the economy.

Uh, sure a "promotion" to buy more expensive goods, right that'll encourage sales in a recession.... They never dropped prices back down and other retailers are starting to raise prices as well.

tatupu70 says

Inventory is not through the roof. Last I checked it was up slightly from the low it reached a few months ago. But still much, much, much lower than 2007/2008.

Its lower than 2009 but still high compared to how they normally do business. They still haven't sold most of the goods they bought in _spring 2010_ and now its fall. They also took large inventory of goods in anticipation of a recovery by Christmas, but now forecasts are for a worse Christmas than last year.

clayfire23 says

I answered your questions many times already. The answer to both your questions is the same. Home values collapsed because YOU succeeded in spreading the perception that the home price appreciation that we had just in some parts of the country was totally unjustified, and so the whole country should suffer a massive correction in prices. You will continue to spread that perception, until all American homes are totally worthless

LOL you can't possibly believe that. NOBODY is that dumb.

clayfire23 says

Your whole argument that the home price rise was unjustified has to be either based on Shiller’s inflation adjusted charts, or based on median price to median income multiples that indicate affordability. Both of those do a poor job in defining what a “home” is, so how can you use those blindly?

If you ever bothered to read the Case-Shiller methodology, you'd see it's pretty sound and far more sophisticated than anything you could ever come up with. In fact, I doubt you possess the capacity to even read an abstract of the methodology, let alone have an opinion about it.

tts says

tatupu70 says
Uh there is something very new about stores raising prices in a recession. Prices are supposed to go _down_ not up. The weak businesses already failed a year ago, now few remain other than the big box stores.
What makes you think they aren’t?
Only the larger chains can afford to stay in business by virtue of being big in the first place. The mom n’ pops were already squeezed out of most markets by them years ago and the few that still remain have a hard to impossible time competing with them. This is old news….

I'd appreciate if you wouldn't purposely misquote me.

tts says

Uh, sure a “promotion” to buy more expensive goods, right that’ll encourage sales in a recession…. They never dropped prices back down and other retailers are starting to raise prices as well.

OK--this is tiring. Walmart's promotion was to LOWER prices--I think it was ~6 months ago. They thought it would spur more sales. It did, but just not as much as they had hoped/expected. So they moved prices back to the pre-promotion levels. Prices went up--but only to the levels they were at 6 months ago.

I think a lot of what you say might be OK if you wouldn't make everything so dramatic and full of hyperbole. "through the roof", "collapsing", "falling apart", etc.

thunder .... you're really hitting on something. I've noticed the exact same thing and it's pretty much across the board on products. Packages that used to weigh 16 oz. are now 13 or 14, etc.

thunderlips11 says

Inflation is may have started to creep up on us, and it’s hiding in reduced sizes and quality rather than price increases.

Well hopefully this'll trick us fat Americans into eating smaller portions. Having less people get quadruple heart bypass surgeries after decades of eating cheap 1/2 gallons of ice cream will shave off the cost of our total national healthcare bill :)

Packages that used to weigh 16 oz. are now 13 or 14, etc.
The Great Repackaging happened during the oil bubble of 2008.

tatupu70 says

Walmart’s promotion was to LOWER prices–I think it was ~6 months ago.

Prices are higher than they were 6 months ago, and a year ago too. It isn't just Walmart raising prices, its the clothes and electronics manufacturers too. Every body is right now. Walmart was just one of the bigger and more visible ones.

tatupu70 says

I think a lot of what you say might be OK if you wouldn’t make everything so dramatic and full of hyperbole. “through the roof”, “collapsing”, “falling apart”, etc.

You might think of it as "dramatics" but from a historical perspective they're correct. Even the talking heads on TV call it the worse recession since WWII, which is just a round about way of saying the Great Depression.

tts says

Prices are higher than they were 6 months ago, and a year ago too. It isn’t just Walmart raising prices, its the clothes and electronics manufacturers too. Every body is right now. Walmart was just one of the bigger and more visible ones.

No they're not. Have you checked out LCD TVs lately?

tts says

You might think of it as “dramatics” but from a historical perspective they’re correct. Even the talking heads on TV call it the worse recession since WWII, which is just a round about way of saying the Great Depression.

Oh, well--if the talking heads on TV say it then it must be true. Never mind that it's nothing like the Great Depression..

tatupu70 says

No they’re not. Have you checked out LCD TVs lately?

You're conflating technology improvements with monetary inflation? That is an apples to oranges comparison. You can read the BLS commodity price list (http://www.bls.gov/ppi/ppitable06.pdf) if you want a more correct view. Great article on that here (http://gonzalolira.blogspot.com/2010/10/signs-hyperinflation-is-arriving.html) but, "Grains as a class have risen over 33% year-over-year. Refined oil products have risen just shy of 13%, with home heating oil rising 18% year-over-year. "
tatupu70 says

Oh, well–if the talking heads on TV say it then it must be true. Never mind that it’s nothing like the Great Depression..

Most people still put some store in what the talking head on the TV box says. These days food stamps and unemployment benefits have reduced the soup kitchen lines and hobos, but that just hides the problem, that doesn't mean that there isn't one.

clayfire23 says

gameisrigged,
I answered your questions many times already. The answer to both your questions is the same. Home values collapsed because YOU succeeded in spreading the perception that the home price appreciation that we had just in some parts of the country was totally unjustified, and so the whole country should suffer a massive correction in prices. You will continue to spread that perception, until all American homes are totally worthless.

Ha, ha - I didn't know I had that kind of power.

Hey everyone - I command you not to buy a house until they cost $1 each. LOL.

So THAT'S what you meant by "we are deflating housing"? You mean it is your belief that the housing crash was caused by some dudes on a message board? Sorry, but I have to disagree with your theory.

I already stated that perception is reality. If the perception changes that home values will rise 10% in the following year, how many current homeowners will foreclose intentionally?

I disagree. Lots of people tried to wait out the crash, and ended up chasing the market down. Silly homeowners thought it would be over in a few months and we'd be right back to bubble-land. That's why the majority of houses for sale in 2008 were foreclosures - because nobody would put their house up for sale unless forced to. Did that "perception" that prices would immediately come back help anything? No. Many people's homes are worth even less now, so waiting actually made things even worse for them.

Your whole argument that the home price rise was unjustified has to be either based on Shiller’s inflation adjusted charts, or based on median price to median income multiples that indicate affordability. Both of those do a poor job in defining what a “home” is, so how can you use those blindly? I am not saying using those metrics is wrong, but define them well first, and use them the same way across the world. How can anyone justify a typical dirty 1000-sqft apartment in India or China’s metros being 50 times the local typical household income while considering it unjustified for a nice typical single family home in say L.A or Boston to be even 5 times the local typical household income?

We're just going in circles now. You keep insisting that comparing our prices to other countries is relevant, when several of us have explained to you why it's not a good comparison, and you haven't addressed any of those points. Just the fact that you consider a communist country with a population density over 4 times greater than the U.S. to be valid as an unqualified comparison of housing cost, shows you haven't the slightest clue what you're talking about. And again, the fact that you're trying to compare trailers where the buyer doesn't even own the land it sits on, is just embarassing for you.

The demand/supply argument is not strong. There is always demand if the perception is that prices will go up. Supply exceeds demand if prices are expected to go down. This is true in every part of the world. A lot of people are waiting on the sidelines or have exited homeownership because the current perception is that prices will go down.

O.K., I'll let every economist in the world know that you do not believe supply vs. demand has any effect on markets. I'm sure they'll rewrite all the textbooks in light of your revelation.

You want a palace of gold for just a few dollars, and if I call that as unreasonable and suggest a small condo for that price, you just call my argument “silly”.

No, claiming that I said I "want a palace of gold for just a few dollars" isn't silly at all, is it? And when did I say that, again?

You consider it “fake” money if housing goes up even 2% per year.

Strawman.

In other words, you will be happy if housing goes down in value every year like a used car does. Should that not apply to the stock market, 401k investing, gold, silver et al?

Only if it's overvalued.

Is all “investing” fake and “greedy”? Are you so distraught with your own life that everyone losing their wealth in every possible way is all that you wish your every living minute?

Strawman.

Our citizens have lost 14 trillion in wealth in the last few years, as per this article out today titled :

False. That "wealth" was fake, overinflated bubble assets. A more accurate way to put it would be to say that housing was overvalued by 14 trillion dollars, and now it is returning to normal. What good is fake wealth if it can't be sustained, and screws up the economy when it crashes?

tts says

You’re conflating technology improvements with monetary inflation? That is an apples to oranges comparison.

I'm not conflating anything. You specifically mentioned electronics as somewhere that prices were rising. Now you want to change and say you were actually talking about commodities?

robertoaribas says

There was a rather in depth article about this today in fact, on the news, profits are dropping at LCD manufactures which rather proves this is not deflation, and rather a market disequilibrium. Funny Tapa-bootie thought this meant something else!

Not really funny ha-ha, but whatever makes you laugh is a good thing. What I thought was that it meant prices of LCD TVs were falling. Which is pretty much the definition of deflation.

robertoaribas says

If you really feel that this entire crisis is caused because some people see it, and actually write about it, well as they say in the south, God bless you! [I think that translates from Southern to English as ” you are too much of an idiot to bother explaining it to” but I don’t speak fluent Southern]

LOL

klarek, you have now self-destructed yourself....LOL....thanks for confessing that your entire philosophy is based on Case Shiller data. That is all you got? Case Shiller data is just ONE measure, and is by no means without major flaws

1. It uses data from just 20 metros, and ignores MANY metros including the MidWest that have multi-million populations

2. It compares same home re-sales, but totally ignores improvements/remodelling/teardown and reconstruction of the home that causes it to go up in value. In the last 20 years, so much has gone into home renovation/room additions/finished basements etc and government sponsored re-development of several neighborhoods and homes, all of which raises the value of a given home, but that does not matter to Case Shiller.

3. It only considers homes that have been sold twice in a specific short time period, and so that skews the sample quite a bit, and includes more of the short term "flip" sales especially with foreclosed homes

To be honest, the Case Shiller index actually does not help your case or mine. It can easily overstate both home price appreciation AND home price declines because of its methodology. Other methodologies are also not perfect, which is why I keep bringing you guys back to first defining what a median home is before analyzing its price or affordability. You can be like gameisrigged and refuse to acknowledge the greediness of wanting to buy a palace of gold for a dollar, or do some fair analysis. The choice is yours.

Case Shiller's big research basically just says that home prices have stayed the same as inflation over the past 100 years. They do not jump around and include GDP, local economy etc. They are consistent in what they say, unlike you. You like to use inflation where it works for you, and then jump to GDP where it does not. And by the way, GDP can easily be bloated up with fake housing/infrastructure building, and so GDP cannot be justified to do more building or price rises. The Chinese government does this on a massive scale with government sponsored home and city building, and there are many ghost cities with no citizens. GDP is another factor that actually does NOT help your argument.

But ignoring all that, and even just looking at the Case Shiller data for what it is worth, I see many places even its 20 cities where prices are now below inflation. As per the inflation calculator provided by the Bureau of Labor Stats at
http://data.bls.gov/cgi-bin/cpicalc.pl, the cumulative inflation from 2000 to 2010 is 27%. From 1990 to 2010 is 67%. So prices should be 27% higher than 2000, and yet it is not in ALL the following cities, considering that the Case Shiller index started at 100 in Jan 2000. It is actually not up 67% from 1990 in quite a few cities just in the 20 that Case Shiller follows. There are many cities in the MidWest like Indianapolis, St.Louis, Kansas City etc where prices have lagged inflation quite a bit.

2010/2000/1990 index values
Atlanta 109/106/69
Charlotte 115/102/74
Dallas 119/106/na
Phoenix 111/105/66
Las Vegas 102/105/82
Chicago 125/107/71
Cleveland 106/103/69
Detroit 70/105/58

There are more cities in the Case Shiller list that are pretty close to being on par with inflation now and if home prices drop even more, will start lagging inflation.

Now who trusts the official inflation numbers put out by the BLS? that is a whole different story and not worth getting into here...enough to say that the official inflation numbers are considered to be far less than what they actually are....

tatupu70 says

I’m not conflating anything. You specifically mentioned electronics as somewhere that prices were rising.

And they are rising. The new tech causes temporary price drops but then the price starts to go up again because the matierials they're made from keep costing more. Did you not read the BLS report?

tatupu70 says

Not really funny ha-ha, but whatever makes you laugh is a good thing. What I thought was that it meant prices of LCD TVs were falling. Which is pretty much the definition of deflation.

"Deflation" as its used by the FED is a monetary term when talking about the money supply as a whole shrinking effecting the value of the dollar. You're talking about the price of a single class of goods, or even just a single item falling which can also be described as deflation in terms of price but not as economists use it. The BLS report shows the price pretty much _all_ commodities rising though, and that will effect everything. You still haven't addressed that.

tts says

“Deflation” as its used by the FED is a monetary term when talking about the money supply as a whole shrinking effecting the value of the dollar. You’re talking about the price of a single class of goods, or even just a single item falling which can also be described as deflation in terms of price but not as economists use it. The BLS report shows the price pretty much _all_ commodities rising though, and that will effect everything. You still haven’t addressed that.

I haven't addressed it because you weren't talking about it until just last post. Previously you were arguing that prices were rising and using WalMart as an example. If that were true, it would be shown in the CPI. Which it's not. Inflation has been and continues to be very tame.

Now if you want to argue that we will see inflation in the future because of rising commodities--that's a different discussion. I would say that's a big maybe. Of course commodities have risen over the last year as the world economy has improved. Not sure that's big news.

tts says

“Deflation” as its used by the FED is a monetary term when talking about the money supply as a whole shrinking effecting the value of the dollar.

Wrong. Here is the generally accepted definition of deflation:

In economics, deflation is a decrease in the general price level of goods and services.

It can be caused by monetary factors, but that is not the definition.

It appears that James at bubblemeter already beat me to what I said in my last post. He posted this in 2009.
http://bubblemeter.blogspot.com/2009/05/cities-below-2000-inflation-adjusted.html

clayfire23 says

klarek, you have now self-destructed yourself….LOL….thanks for confessing that your entire philosophy is based on Case Shiller data. That is all you got? Case Shiller data is just ONE measure, and is by no means without major flaws

I look at them all. CS has pretty sound methodology though.
clayfire23 says

It compares same home re-sales, but totally ignores improvements/remodelling/teardown and reconstruction of the home that causes it to go up in value.

Actually, if you bothered to look up the methodology used by the group that collects the data, they do exactly that. Try again.

clayfire23 says

It only considers homes that have been sold twice in a specific short time period, and so that skews the sample quite a bit, and includes more of the short term “flip” sales especially with foreclosed homes

There isn't any kind of covenant on time which you're alluding to.