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Recipe for a "Soft Landing"?


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2006 Nov 10, 9:27am   11,483 views  147 comments

by HARM   ➕follow (0)   💰tip   ignore  

Some of you out there still seem to be under the mistaken impression that inflation alone can somehow magically bail out f@cked homedebtors (and no, I'm not talking about semi-trolls like ConfusedRealtwhore). Some of you seem to believe that nominal prices --and sales-- can merely hold steady, even after 8 years of the most unprecedented run-up in real estate at least since the 1920s. When (mostly falling) median prices in many parts of the U.S. are now several standard deviations away from the long-term mean vs. supporting rents and incomes, and unsold inventory (phantom or not) continues to grow.

Some of you really ought to put the NAR bong down and pull your lips off Bendover Ben's ass for a second.

In case you happen to be one of those suffering from this popular delusion, please take a moment to look at the following charts, most of them skillfully prepared by Mr Ritholtz over at the The Big Picture. They say a picture's worth a thousand words. What do these charts say to you?

Discuss, enjoy...
HARM


Mortgage Resets 2004-2014
MEW 1960-2006
Prices vs GDP 1968-2006
Housing Starts 1959-2006
Inventory vs Sales 1983-2006

#housing

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91   astrid   2006 Nov 12, 4:37am  

Live shrimp has an interesting texture -- the important thing is not to overthink it.

I have my limits too, I absolutely refuse to eat live monkey brain or live baby mice.

92   skibum   2006 Nov 12, 4:38am  

I refuse to eat Taurus realestaticus. I hear it is stringy and bitter.

93   astrid   2006 Nov 12, 4:39am  

SFGuy,

Sadly, that was intentional. I wasn't sure how to say BS in plural.

94   astrid   2006 Nov 12, 4:43am  

I go by Futurama's guidance on intergalactic ediblity (I will eat anything that was stupid enough to blow its money gambling...including gambling on flipping real estate).

95   Randy H   2006 Nov 12, 4:44am  

BSes

I wasn’t sure how to say BS in plural.

The accepted plural form (American) for "Bullshit" is "Horseshit", although most people will use the colloquial "load of Bullshit", or the idiomatic "pile of Bullshit".

96   astrid   2006 Nov 12, 4:45am  

BSes = bachelors of science.

I'll try B.S.es next time, and hope that's more clear.

97   Randy H   2006 Nov 12, 4:50am  

SFWoman2

Horseshit (see above post).

http://media.ft.com/cms/c51a4c7c-8f2d-11da-b430-0000779e2340.pdf

(2005 data)

Haas: $123,968
Stanford: $156,126
Columbia: $148,778
Harvard: $159,973
Chicago: $140,602
Wharton: $153,415

to find a salary under $100K for US b-school you have to go down the list to Michigan State.

Didn't we already cover this a couple threads ago?

98   Sylvie   2006 Nov 12, 4:56am  

One of the things I have noticed is some of posters who work in Tech or support infer six figure incomes. I lived in the LA metro for thirty years and I know that until five years ago you could still live decent on 45k yr.

99   Brand165   2006 Nov 12, 5:04am  

Well, that's the double-edged sword of engineering degrees. You tend to start out higher than everybody else. But your friends in "money-related" fields (investment banking, capital allocation, stock brokerages, etc.) will eventually earn 1.5-2x more. Of course, they will also kill themselves during the early parts of their careers attempting to reach the big money plateau. In addition to their MBAs and graduate degrees from good schools, they tend to graduate with a lot of debt. Most people at my firm went to state schools, and my employer paid for their masters degrees and MBAs. And there is something to be said for working a consistent 40-50 hour week for your entire career.

People with engineering degrees can be snotty about the "E". Myself included. Hey, at least I admit it. :) But seriously, you go through a lot more punishment in math and physics for the difference to a similar major. My reference list of engineering is basically: chemical, mechanical, electrical, civil, computer/semiconductor, industrial, mining/petroleum, nuclear.

I'm not sure what financial engineering would entail. It sounds like it could be one of two things: 1. some sort of big money job that leads towards CFO positions, or 2. an impostor engineering that ends up somewhere between Sanitation and Software on the bogus title scale. :)

Kidding, KIDDING for all your Sanitation Engineers out there!

100   astrid   2006 Nov 12, 5:10am  

Sanitation engineers...are those the guys who come by in big stinky noisy trucks every Tuesday morning (at 6AM)? I heard there's good money in that, esp. if you're Italian.

101   astrid   2006 Nov 12, 5:13am  

SFGuy,

No, I'm not actually a cannibal. There's an ancient Chinese saying that human meat is sour and foul. I heed that and stay away from human meat.

I'm still working on a loophole so I can consume popplers.

102   astrid   2006 Nov 12, 5:15am  

Wouldn't BScs lead lay people (like me) to think I'm talking about a Bachelor of Science in CS, rather than the plural Bachelors of science?

103   Brand165   2006 Nov 12, 5:20am  

Isn't the proper term singular-only? I think it only turns plural if you use it as slang to refer to people. You can just call them BSers, I guess.

Sanitation engineering is very lucrative in Chicago. 364 days of the year it's picking up trash, crushing it and burying it. But there's always that occasional call from Uncle Antonio, who needs a special pickup for immediate disposal.

104   Randy H   2006 Nov 12, 5:22am  

Brand

http://mfe.haas.berkeley.edu/

It's a new program. It probably would be more accurately titled "Masters in Financial Mathematics", but "Financial Engineering" is commonly used in the industry, so thus the name of the degree.

The mathematical rigor required for MFEs is an extension of the most rigid engineering, computer science, or physics undergrads. A lot of the folks who go into MFE are physics or math undergrads, and most already have a masters engineering degree of some sort, if I'm correct.

105   skibum   2006 Nov 12, 5:26am  

astrid and SFGuy,

I believe the proper grammar and punctuation you seek is to add an apostrophe when pluralizing an acronym term ending in S. For example, you learn your ABCs, or read some EKGs, but your college granted many BS's and the realtwhore flipped many POS's.

106   astrid   2006 Nov 12, 5:31am  

skibum,

Thanks for clearing that up.

SFGuy,

I prefer to think that popplers look like "breaded shrimp" with eyes. Though you don't see the eyes until they're old enough speak.

107   astrid   2006 Nov 12, 5:35am  

SFGuy,

Thanks for the link. I had no idea that there were so many IBs ahead of investment banking.

108   skibum   2006 Nov 12, 5:38am  

@SFGuy,
Thanks for clarifying. Re-stated: "The FBs try to flip many POS's."

109   astrid   2006 Nov 12, 5:43am  

SFGuy,

Okay, point taken. I will try to avoid ordering fictitious intelligent dog-poop colored creatures in the future.

110   astrid   2006 Nov 12, 5:48am  

Well, cannibalism is technically illegal...and in bad taste.

111   Brand165   2006 Nov 12, 6:08am  

BA company importing consumer products from Asia. ... I’d bet they relocate to Charleston SC - good port, low wages, interesting city, inexpensive housing compared to BA.

Uh, they must be flying the goods in by plane, then? If it's water-based shipping, then I would suspect some Oregon port as a more likely target.

Anyway dryfly, I guess our anecdotes are different. My BA perceptions are admittedly skewed because I know only Californians from my own firm and from our customers. All are doing hardware engineering; most are Fortune 500's. I would point out again that 60-65K in the continental U.S. is equivalent to 70-80K in Silicon Valley, just based on cost of living.

It is actually difficult for salaries to drop at large, existing firms. Once they gain some experience, the new hires start comparing themselves to their peers, and realize that they are making a lot less for comparable work. If you were to tell them that they would never catch up, based solely on their hiring date, you would run the risk of losing young talent. That is particularly dangerous for any firm.

112   Brand165   2006 Nov 12, 6:10am  

Randy, after reading the description of Financial Engineering, I conclude that it is option #1 on my list. A big money major targeted towards CFO and other elite financial positions.

113   skibum   2006 Nov 12, 6:30am  

People, please…. education is key. These are real life figures. But, I don’t know.. i’m just a realtor

Hey Confused,

Aren't you just pining away, hoping for one of these MBA grads to knock on your door and hire you as a RE agent? Maybe if you try harder to troll around this and other boards, our vast influence on the impending real estate crash will end, and you will get your customers.

Good luck, and go and enjoy the weather, and/or watch some football!

114   astrid   2006 Nov 12, 6:51am  

"At current housing costs, 60-65K in the continental US is more like 150K in SV!!"

Depends on whether you're renting or buying at current prices. BA rent is relatively high but quite bearable. Buying - I'd say it's even worse than that...$250K in the continental US (not touching salty water) will buy as much or more than $1M in the BA.

115   Randy H   2006 Nov 12, 6:53am  

Brand,

MFE is not really targeted at CFO or other operational finance type of positions. Those are really more fed from accounting professions with the "Big 8/6/5/4" being the historical feeders. Those folks get MBAs not MFEs.

MFEs are more your uber quant types who end up at hedge funds, investment firms, and certain large transnational corporations.

116   astrid   2006 Nov 12, 7:20am  

dryfly,

I'm too ignorant to comment on anything else you've said, but I don't think Bio Med Engineering would be considered engineering by most engineers. That field sounds suspiciously similar to bio chem to my non-engineering ears.

117   skibum   2006 Nov 12, 7:21am  

dryfly,
Cornell, and maybe Columbia are the only Ivies that offer anything close to a nationally-ranked engineering program. Am I warm?

118   Randy H   2006 Nov 12, 7:22am  

dryfly,

Your numbers must be for MBAs. MBAs do MUCH better but not many 22y/o coming out have MBAs - yes/no?

You are correct. The average age is still around 28 for full-time top-ranked MBA grads. It is falling, which is cause for some recent concern amongst those who worry about such things.

The usual suspect is the BS/BA grad who went straight into a tracked ladder, like the investment banks, many large corps with management training programs, or public accounting. A much smaller number of FT MBAs are engineers, comp sci, etc. who go for management credentials ... they usually are older and go into part-time programs.

The numbers I posted were for *global* rankings of *full-time* programs. There is a separate report done for executive programs. EMBAs tend to be young 30s and have *much* higher average salaries due to the fact they've been in the work force for many years already. Also, top EMBA programs are over $100K in tuition, so few low-earners go into these programs. Last time I looked a lot of the EMBA salaries for the top 5 schools were over $200K. My personal theory about the reason EMBA salaries don't increase as much as FT-MBA salaries is that many EMBA grads switch functional roles, industries, or both. They usually incur at least a temporary salary setback doing that. EMBAs are also popular for unique-situation folks who want the degree to build a rolodex and have creds to re-enter the workforce after a hiatus. Career women who take time out after having children, people who just take personal sabbaticals, successful entrepreneur types who have patchwork career histories but nonetheless made respectable money.

119   astrid   2006 Nov 12, 7:35am  

What sort of realtor trolls on online blogs Saturdays and Sundays? Even a bad one should be hitting open houses to hunt for work.

I'm beginning to think CR is lower than a realtor...maybe he or she is a realtor's assistant.

120   skibum   2006 Nov 12, 7:44am  

What sort of realtor trolls on online blogs Saturdays and Sundays? Even a bad one should be hitting open houses to hunt for work.

I’m beginning to think CR is lower than a realtor…maybe he or she is a realtor’s assistant.

Actually, he could just be a *really* bad realtor without any real clients.

121   Michael Holliday   2006 Nov 12, 7:46am  

ConfusedRenter Says:

"...Time to enjoy the sun guys!"
_____

Have fun!

Don't let the door hit you in the ass on the way out!

Ta, ta!

122   Allah   2006 Nov 12, 7:47am  

Allah
Do make sure you cook the scraped up roadkill before you eat it.

was this an attempt to offend me?

Huh?

123   Randy H   2006 Nov 12, 8:00am  

SFWoman2

If you include more than 1 link, the post automatically gets sent to the moderation queue. Most spam-bots are posts with multiple links.

The moderation queue is overloaded, and we admins can't really read through it anymore. Everytime I look there are over 500 posts in there, 99.9% spam.

124   astrid   2006 Nov 12, 8:06am  

RPI is "low level" ivy?

That's stretching it quite a bit, isn't it? Rensselaer Polytechnic Institute is a good school in its field, but it's a looooong way from MIT/CalTech. I originally had guessed that your daughter went to UVA or GeorgiaTech, then UPenn or Cornell, but RPI didn't really enter my mind.

Before I get accused of overwhelming snobbishness, I do want to emphasize that of my friends from HS, the ones who went to University of Maryland undergrad did about as well as the ones who went to MIT/real Ivies - maybe better, they seem to be better adjusted as a group.

125   Allah   2006 Nov 12, 8:18am  

it’s a simple question. This forum sometimes makes it difficult to distinguish between a simple joke and an attempt to rudely offend. So when in doubt, I ask. If you meant to offend, I wouldn’t want my low IQ to get in the way of knowing it.

Of course I wasn't trying to offend you. I don't even know anything about you, that should have been a clue. I guess not everybody appreciates my jokes.

126   astrid   2006 Nov 12, 8:24am  

There's nothing wrong with eating fresh roadkill, provided that some precaution is taken. In fact, eating roadkill is quite commendable; doing so clears up the road, gets rid of a possible disease vector, conserve food resources and adds extra interest to one's diet.

I don't want to hear anyone here badmouth scavengers or their vital role in natural ecology. :)

127   Bruce   2006 Nov 12, 8:35am  

...vital role in natural ecology.

I tend to believe the 'chef de cuisine' at our college cafeteria studied at the Lagos Culinary institute. Just shows the utility of the expression 'casserole'.

128   Allah   2006 Nov 12, 8:57am  

I’m sorry. I was not trying to be abrasive, just trying to be clear. It’s not your fault I didn’t get the joke. It’s the nature of the forum.

No problem here.

129   Bruce   2006 Nov 12, 8:58am  

I'm uncertain of Patrick.net etiquette regarding proposing topics, but am interested to know if any of the posters here are considering building a home as opposed to purchasing an existing one and remodelling.

Since builders are caught up in the forces we're discussing here, is there an ideal point in the proceedings when the circumstances are better or worse for pursuing new construction of an architect-designed home?

130   FormerAptBroker   2006 Nov 12, 9:09am  

ConfusedRenter Says:

> I don’t know a single person over 28 years old
> making under $200,000. Most make around $300-350K.

First we get homes in the Marina selling for $250K over list, then we have condos going up in value by almost 20%, now this...

Why has CR not been banned from the BLOG?

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