patrick.net

I wonder why all of a sudden not much posting here. ???

This is a problem we should address very soon.

I know, history is unfolding as we have expected but complacency would be ill-advised.

Where is Fake P?

It is interesting that we haven't had the bulls posting as much lately. I haven't even seen Jack, my favorite contrarian, as much.

Doesn’t the market function better without government interference? The fed driving down interest rates has taken normal out of the housing market equation. Maybe it would be better if there wasn’t a Prop 13 (as it is written now) so that the market could function with less interference.

God bless you, SactoQt!

HARM, I think that government itself is a market participant and that it contributes to "normal" cycles. Even without government interventions, I suspect that other large participants will still find a way to make cycles volatile during their blind pursuit of profit.

God bless you, SactoQt!

*Blush*

I like being back in agreement with HARM.

I suspect that other large participants will still find a way to make cycles volatile during their blind pursuit of profit.

I have to ask. What other participants do you think could move the market as much as the fed has with a 1% interest rate?

I have to ask. What other participants do you think could move the market as much as the fed has with a 1% interest rate?

Cartels like OPEC can have different but equally powerful impact on the market.

The herd is the ultimate cartel.

Don't get me wrong, I am no fan of big governments. It is just that I think greed will find its way with or without help.

But don't oil prices generally coincide with other factors to cause big moves in the market (job layoff's, crazy housing market etc.)

No question that the herd can move markets. But usually there is a catalyst, isn't there?

Peter P

I do agree, greed will find a way. I just hate it when the government gives the greedy a boost.

No question that the herd can move markets. But usually there is a catalyst, isn’t there?

Not necessarily. What was the catalyst of the "ty" beanie baby boom? What about the cabbage patch dolls?

Human behavior is highly chaotic. Occasionally, thing leads to thing leads to thing leads to the next big thing. It is truly a conundrum.

Not necessarily. What was the catalyst of the “ty” beanie baby boom? What about the cabbage patch dolls?

I must concede the point.

greed will find a way

Sounds like one of Jeff Goldblum's lines from "Jurassic Park".

I do agree, greed will find a way. I just hate it when the government gives the greedy a boost.

I hate it too. But what are we going to about it?

Sometimes, the victims of greed are powerful enough to fight back with more greed. For instance, the greed in the insurance industry was apparently powerful enough to fight the greed in the auto industry. The result was safer cars.

Sometimes, the victims are just helpless.

Sounds like one of Jeff Goldblum’s lines from “Jurassic Park”.

Didn't they call it "chaos theory" (read the book too)

Perhaps I am cynical but it appears that powerful motivating emotions are all negative: hatred, bitterness, anger, greed, fear.

Love should be more widespread.

Peter P

I don't think you're cynical. It's better to recognize the motivations of people through the 7 deadly sins model. I think most of the time you'd end up being right.

Nice chatting with you guys. Getting sleepy. Good night.

Nice chatting with you guys. Getting sleepy. Good night.

Good idea.

Not necessarily. What was the catalyst of the “ty” beanie baby boom? What about the cabbage patch dolls?

I must concede the point.

Don't be so quick to concede, SactoQt --you were onto something here. OPEC or any number of big cartels or powerful companies (Microsoft) don't weild anywhere near the Fed's (or GSE's) impact on the big macroeconomic picture. No, they don't control it (nod to Peter), but they ARE major catalysts on a scale no cartel or single company can match.

Also, when the beanie baby / cabbage patch doll "booms" crashed they didn't take the rest of the economy with them.

G'nite.

When the beanie baby / cabbage patch doll “booms” crashed they didn’t take the rest of the economy with them.

And luckily the Fed didn't try to "mitigate" the damage from them, either.

Harm

You're probaby right that I shouldn't have conceded too quickly. But Peter's argument reminded me of the tulip bubble, and I had to concede that manias can occur without any rational intervention. I still think nothing will fuel a mania the way the government can, and God help us when it decides to "help" the situation.

Did I say "rational intervention?"

When the beanie baby / cabbage patch doll “booms” crashed they didn’t take the rest of the economy with them.

I heard that those busts took quite a few merchants and collectors with them (the sub-economy!). Silly booms have silly busts. ;)

The one aspect of Prop 13 that no one has really talked about yet is the fact that it actually reduces supply of pre-existing housing by making it a financial disincentive to move.

What you have now is that people who have owned for 5+ years don't want to move because their property tax would jump dramatically if they were to buy a similar sized place (or in some cases for people who have lived in the same place for over 10 -- more for a smaller place!).

The faster that prices jump, the fewer people that want to sell, which further reduces supply.

SactoQt, "rational intervention" is right, although the consequence of the intervention can be highly questionable.

Also, the seemingly rational actions of individuals can sum up to a highly irrational herd.

Only vulcans have rational herds.

Henry, but Prop 13 reduces demand for new housing because existing owners do not want to move, right? So long as new housing can be made readily available (with "smart" growth laws), there should be no problem.

My point is that Prop 13 exacerbates the problem during dramatic price appreciation -- a kind of vicious cycle that further reduces supply

Anyway, going to the NIMBY side of the discussion -- from what I've seen "smart growth" is a euphemism for "little or no growth..."

Peter P

Henry only mentioned the supply of pre-existing homes. And he's probably right that a lot of homeowners will not move in order to keep payments down. But I don't think Prop 13 has much to do with the number of new homes being built because the market is being given so much juice from speculator buying.

Since I don't live in the BA I can't speak on NIMBY too much. We've seen tons of building. I still can't figure out why the BA is statistically given a greater chance of a housing crash than us. We have built like crazy here and the over-supply is going to be big when speculators start dumping property.

My point is that Prop 13 exacerbates the problem during dramatic price appreciation — a kind of vicious cycle that further reduces supply

I agree.

I think one argument is that Prop 13 discourages existing homeowners to move up, thus reducing the supply of starter homes. However, can't we just build more starter homes (instead of move-up homes) to satisfy the demand (assuming growth is not "smart")? Existing homeowners can just renovate their original homes or even build additions.

I believe that the market has a way to work around Prop 13 if growth is allowed.

I am not a proponent of prop 13. As I have said, I am neutral. It is unfair, I agree. But I think growth laws are more unfair and they have worse impact on the market.

We need smarter smart growth.

karl marx, good point!

Unfortunately without "smart growth" these starter homes are in the Central Valley (sorry -- I'm speaking from a BA perspective). And what happens, as you've noted, these starter homes become mansions through additions over the years.

That's what's happening in San Francisco -- there are no "starter homes" anymore. Maybe "starter condos" at best, but even those are getting pricey.

In areas w/o something like Prop 13, I would imagine that there is a natural cycle of people and families moving through the area that would keep a stock of starter homes available. Not sure if that's exactly true, but it is a possibility.

Okay, I have to concede.

San Francisco is bay-locked, supply will be limited unless we start demolishing houses and build higher density residences. I guess we just need the right incentive for the local government to make it happen.

On the other hand, what is there to stop population from growing even faster?

I need a place that’s bitchin’....

Best sonnet I ever read. :)

Unfortunately without “smart growth” these starter homes are in the Central Valley (sorry — I’m speaking from a BA perspective).

No need to apologize, its kind of been my point all along. Its been starter home central (pun intended) out here for awhile. How on earth is this area going to weather a housing bust better than the BA? I'm not seeing the logic in the latest stats that say the BA has a better than 50% chance of a bust, and this area has about a 45% (I think) chance. It boggles the mind.

Maybe I'm misinterpreting the data. Maybe the BA has a stronger likelihood of going down, but what the stats don't say is whether or not the BA will fall as hard or as long.