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Has the U.S. housing bubble delayed or prevented other bubbles from collapsing?


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2006 Aug 30, 10:05am   13,145 views  113 comments

by HARM   ➕follow (0)   💰tip   ignore  

global housing bubble

Given this is a very Bay Area and California-centric blog, we often tend to forget that the RE bubble is arguably international in scale. The Economist pointed this out in an excellent piece last year. One of the most perplexing mysteries to many of us fundamentals-driven contrarians, is why haven't the housing bubbles in other countries --which started before the U.S. bubble-- already collapsed?

The Australian, UK and Irish bubbles had a good 2-3 year head start on the U.S. by some measures, while the Netherlands hasn't had a significant price correction in some 15 years. By all accounts, they should have seen sizeable price corrections well before now, and yet we are only recently seeing reports that indicate these booms are finally past their peaks. Could it be that the U.S. housing bubble itself delayed or prevented these other bubbles from collapsing as quickly as they otherwise might have? Could it be that all the Fed/GSE generated USDs and specuvestor credit sloshing around the globe might have propped up the overseas housing bubbles for longer than they would have survived without us?

For that matter, does a rapidly deteriorating housing & credit market here portend doom for these overseas markets? If an SDCIA "investor" here sneezes, does the rest of the world catch a cold?

Discuss, enjoy...
HARM

#housing

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46   Randy H   2006 Aug 31, 2:58am  

alien,

The problem isn't EROIE, or even simple EVA, it's that the fixed costs of such systems is too high to guarantee the positive future flows of such a long harvest time period.

But then, if you were looking at the "Colonize the New World" problem with these kinds of economic and financial constraints, you would have come to the same conclusion.

47   Randy H   2006 Aug 31, 3:09am  

What “resources” were you intending to extract from the ocean?

Quiz:

What current common resource is rapidly diminishing in consumption per capita terms?

Even the US will experience regional shortages of this resource, naturally increasing its commodity value over time.

The Oceans happen to be full of this resource, but with a catch. Some pretty large scale energy production and specialized resource processing facilities need to be designed and built.

And then there's the derivative uses of this great resource, one of which is currently under proof of concept development in many countries; intended to use a sub component of this resource as a transportable energy store.

The problem with economic justification analyses is that they are static, and the framing problem domain is dynamic and often surprising.

48   astrid   2006 Aug 31, 3:10am  

Heavy water?

49   astrid   2006 Aug 31, 3:16am  

I'm personally hoping to see developed world zoning codes move towards underground homes. Not only does this decrease cooling and heating costs and allow for higher construction density, but it would allow a more natural plant covering on top of the housing and relieve urban heat island effect.

50   Peter P   2006 Aug 31, 3:25am  

The recent 42% jump in online queries about homes for sale could suggest that prospective buyers sat on the sidelines this summer waiting for home prices to fall and are now returning to the market.

I do a lot of searches to see if the market is dead yet.

51   Peter P   2006 Aug 31, 3:27am  

As for deadly influenza or a more communicable version of Ebola (Gawd that would be a messy way to die), the upside is that killing large populations this way is less traumatic on human civilization compared to war.

How about A Taste of Armageddon? Perhaps it is a better way to fight wars.

52   Peter P   2006 Aug 31, 3:32am  

What do you think of Warren Buffet getting married at his age?

I have nothing to say.

53   e   2006 Aug 31, 3:42am  

The recent 42% jump in online queries about homes for sale could suggest that prospective buyers sat on the sidelines this summer waiting for home prices to fall and are now returning to the market.

Sorry, that was my fault. I'll stop doing so many searches.

54   astrid   2006 Aug 31, 3:49am  

Or just FBs worried about their home "equity" checking out the competition.

55   e   2006 Aug 31, 3:52am  

Haha. You beat me to it. My line was…

Maybe it’s from me hitting refresh so often to see which houses are reducing their prices.

In semi-seriousness, I actually do a lot of searches to look for content to post on my site (http://burbed.com).

Lately, there's been too much stuff! :(

56   DinOR   2006 Aug 31, 4:32am  

"Or just FB's worried about their home "equity" checking out the competition". LOL!

Honey, we've been on the market for 11 days now and we damn sure don't have next months first and second payment, check how the Jones' are doing on Zillow to see if our latest price reduction is lower, again.

Like I say "Bubbletainment"

I cold call for MB buddy and a lot of the "leads" are in SoCal and every third person tells me, "Oh, we're listing it, so we won't be needing your services!" Some w/confidence and even bravado (clueless) most others are clearly frantic! Research is great but there's NOTHING like cold calling if want "da goods".

57   DinOR   2006 Aug 31, 4:34am  

George,

I'd say you're on a roll, don't stop now!

58   astrid   2006 Aug 31, 4:36am  

alien,

I could swear Randy H was talking about components for a fusion or fission reaction. Wasn't there some stupid rumor about the Chinese or Rumsfeld or somebody going to the Moon to look for some kind of nuclear fuel.

59   Peter P   2006 Aug 31, 4:46am  

Amsterdam, the Netherlands, thanks for your analysis.

60   DinOR   2006 Aug 31, 4:57am  

Amsterdam, the Netherlands,

Thanks for the global perspective. Agreed, not looking good. Just curious though, what can you tell us about Vestas, the wind powered generation company? They're starting to ship a lot of units here in the Pacific NW and people are....... well curious.

61   Randy H   2006 Aug 31, 5:03am  

Alien

If it is fresh water you are after you DON’T need large scale energy production

Now who's being unrealistic. People who propose things like There are a number of initiatives to build low-tech facilities to reap freshwater supplies by mimicking the characteristics of insects are at best ignorant about the scale of the problem or at worst disingenious. If you want there to be less people and less technology, then just state that up front. It is a noble goal in some people's minds. As to composting, what exactly do you think is occurring in landfills? Or are all those methane recapture facilities I see in landfills-turned-parks just for show? By the way, existing large-scale desal facilities are powered by fission reactors. It is a very efficient, low emission system.

62   FormerAptBroker   2006 Aug 31, 5:04am  

astrid Says:

> Sorry, didn’t mean to imply old people threesomes. Buffett picked up the
> current wife after he became somewhat estranged from his first wife, but
> the three of them would show up at events together and sign Christmas
> cards together.

I've met Buffett a couple times (and send him a happy birthday e-mail yesterday) and his a little strange (if you consider that the "normal" American watches American Idol rather than reading annual reports at night).

Buffett does not have a "current wife" since he was only married once to Susie who died last year.

After 25 years of marriage Warren and Susie basically got "divorced" without actually filing the papers and Susie moved to SF in the 70's.

Like many couples who split up since they want to do different things Buffett and his wife remained friends over the years even after Buffett's current girlfriend Astrid moved in with him.

63   FormerAptBroker   2006 Aug 31, 5:08am  

I just heard that Buffett now has a second wife...

64   astrid   2006 Aug 31, 5:16am  

alien and Randy,

Wait, this is a discussion about freshwater?

Then the solution is obvious. Annex Canada!

65   FRIFY   2006 Aug 31, 5:21am  

If it is fresh water you are after you DON’T need large scale energy production

It's true that solar energy is responsible for 99.9% of the freshwater on this planet. My idea is to have huge floating transparent plastic barges out in the pacific and pump in a small amount of water into the insulated bottoms of them. The sun would rapidly turn this into water vapor. Then flush out the remaining brine, add fresh salt water and repeat.

You then either use condensation towers or connect to a wide diameter plastic pipeline that climbs up to the top of the Sierras where the water vapor cools and gets dumped as water.

Could work. Wouldn't use fossile fuels. Save all that nuke power for H2 production.

66   FRIFY   2006 Aug 31, 5:34am  

Alien,

It's true that dumping the heat to the ocean is preferred as if obviates sending it somewhere else. The problem is those closed liferaft solutions high a max vapor pressure and max out. The steam vent in the sierras just keeps pouring out humid air, so I think it might be better for large scale production with no moving parts.

anyway...

67   skibum   2006 Aug 31, 5:54am  

SF Woman,
What I find interesting about your flipper example is that when you are dealing with that amount of capital (or perhaps debt), why not use it to finance multiple property flips rather than a single property, to distribute risk a little better. Yes, if they sell at $7M they will reap a huge profit, but that seems like gambling and putting all your chips on "7 Red" on one spin.

68   astrid   2006 Aug 31, 5:55am  

Or we could just ban lawns, golf courses, and desert rice growing...

69   Peter P   2006 Aug 31, 6:08am  

Or we could just ban lawns, golf courses, and desert rice growing…

Why ban anything. Just charge the right price and people will act accordingly.

70   astrid   2006 Aug 31, 6:10am  

"Just charge the right price and people will act accordingly."

And how do you propose to set up the "right price" for clean air, or clean water, or salt, or Alaskan brown bear reserves?

71   Peter P   2006 Aug 31, 6:12am  

And how do you propose to set up the “right price” for clean air, or clean water, or salt, or Alaskan brown bear reserves?

Just let people bid for them.

72   skibum   2006 Aug 31, 6:12am  

Can we say, "Waterworld"???

73   Peter P   2006 Aug 31, 6:13am  

Can we say, “Waterworld”???

Whatever happens in the future, we will adapt, or not. We should not worry too much about it.

74   skibum   2006 Aug 31, 6:15am  

Peter P Says:

Whatever happens in the future, we will adapt, or not. We should not worry too much about it.

Que sera sera...

75   skibum   2006 Aug 31, 6:18am  

SF Woman,
That may very well be true. From the perspective of a potential buyer (not that unit), personally, I'd much prefer renovating myself rather than paying for someone else's choices and tastes. Especially if one were buying in that price range, it seems preferable to do things the way you want them. I do realize, however, that there are people who like everything "move in ready."

76   Peter P   2006 Aug 31, 6:18am  

Que sera sera…

Two things you cannot avoid: tax and death.

On the species level: suffering and eventual extinction.

77   astrid   2006 Aug 31, 6:21am  

"Just let people bid for them."

What do UC Irvine profs teach in lieu of communal goods and inelastic demand curves?

78   astrid   2006 Aug 31, 6:22am  

"On the species level: suffering and eventual extinction."

Let's hope our breeding habits do not resemble that of carrier pigeons.

79   Peter P   2006 Aug 31, 6:25am  

What do UC Irvine profs teach in lieu of communal goods and inelastic demand curves?

How would I know?

I understand the importance of communal goods but I understand human nature better. We cannot force people to become responsible when it is against their nature. They have to come to their enlightenment on their own "free will".

80   astrid   2006 Aug 31, 6:29am  

SFWoman,

$3.1 million is a heck of a lot of renovation! If I was in the market I'd be tempted to ask if they've installed 24 karate golden toilets and bathtubs.

81   astrid   2006 Aug 31, 6:34am  

"We cannot force people to become responsible when it is against their nature. They have to come to their enlightenment on their own “free will”."

Yet there are national parks and police departments and free public education throughout the world...

I may think humanity is a bit slow on the uptake and may well be marching towards extinction, but I'll give it credit for teetering along this far. Not everything needs to be auctioned off like cellphone bandwidths.

82   DinOR   2006 Aug 31, 6:36am  

SFW/astrid,

This will be interesting to watch unfold. I'm definitely w/astrid b/c with Zillow etc. how difficult would it be to mistake this for any thing other than naked greed? No offense to your friend.

With all of the "market coverage" we have at our avail it's going to be a lot more difficult to find an "undiscovered gem" or more specifically (to be able to pawn it off).

83   Peter P   2006 Aug 31, 6:40am  

Yet there are national parks and police departments and free public education throughout the world…

People were not necessarily responsible. They were just acting on their own self-interests.

Many environmentalists (not all) choose to do the "right thing" simply because they like things to stay certain ways. They may even ignore Nature's tendency to evolve and renew.

84   DinOR   2006 Aug 31, 6:49am  

"we will adapt, or not"

To a large degree....... that is true. I just can't help sensing this daily burden to do our absolute level best. Each preceeding generation fought and struggled just to survive and, we are their children. They've brought us this far. So with every acre they cleared with primitive hand tools just to ensure there would be a next generation we can and should seek innovations to confront our issues. Even we do become extinct we should at least go down swinging! Don't we owe them at least that much?

85   astrid   2006 Aug 31, 7:08am  

Humanity is overrated. Just wait until the cockroaches become the dominant species on Earth.

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