patrick.net

tatupu...I love feedback. And where is the error in my thinking? I simply offered an example of what many homeowners are doing relative to being upside down in a non-recourse state and having tax relief if they lose their primary home to foreclosure. The bank takes it and they are clean.

Yet, your introduction of an off-topic stock purchase exposed an error in my thinking?

"keep in mind that the vast majority of largely upside down homeowners are in 4 states–florida, Nevada, California, and Arizona."

Yep, those were the problem children but all are also ghosts of Christmas future. If you think appraisers across this great land aren't scrambling daily with comps to support a contract's sale price, you're hugely mistaken. Short-sales are the comps with foreclosures coming soon. It's a national problem.

Like a Bowery bum when he finally understands, the bottle's empty and there's nothing left - Your Latest Trick, Dire Straits

Common Sense says

tatupu…I love feedback. And where is the error in my thinking? I simply offered an example of what many homeowners are doing relative to being upside down in a non-recourse state and having tax relief if they lose their primary home to foreclosure. The bank takes it and they are clean.
Yet, your introduction of an off-topic stock purchase exposed an error in my thinking?

Sorry--I read your post talking about a buying a rock and thought it said stock. I was just trying to illustrate that it wasn't an apples to apples comparison because one asset was purchased with cash and one with borrowed money.

Common Sense says

Yep, those were the problem children but all are also ghosts of Christmas future. If you think appraisers across this great land aren’t scrambling daily with comps to support a contract’s sale price, you’re hugely mistaken. Short-sales are the comps with foreclosures coming soon. It’s a national problem

I'm not so sure. All real estate is local as they say. There are many, many places where the bubble didn't really inflate very much and option ARMS or neg. amortization loans weren't used.

Ah, that makes sense. :) I used rock relative to housing values because they just both seem to sink at the same speed nowadays, don't ya know.

True, all realm estate is local. The temperature of the ocean off the coast of Florida isn't going to be the same as off the coast of Ireland. However...you currently have more factors than just supply/demand at work here. Sanding a few slightly oversupplied areas with a wrecking ball would be easy. But overall, there's no confidence in this administration and the threat to people's future discretionary income. We also have unemployment numbers that will most certainly remain high as long as the aforementioned threat occupies the White House. Corporations are hoarding their cash as not only a safety measure but also revenge for the voter's anti-Capitalist choice. You also have more and more people with damaged credit and those who simply are scared to get into the same problem they just emerged from. These are all national, not local. And these are most certainly going to continue chipping away at home values given inversely related supply-up/demand-down.

Common Sense says

True, all realm estate is local. The temperature of the ocean off the coast of Florida isn’t going to be the same as off the coast of Ireland. However…you currently have more factors than just supply/demand at work here. Sanding a few slightly oversupplied areas with a wrecking ball would be easy. But overall, there’s no confidence in this administration and the threat to people’s future discretionary income. We also have unemployment numbers that will most certainly remain high as long as the aforementioned threat occupies the White House. Corporations are hoarding their cash as not only a safety measure but also revenge for the voter’s anti-Capitalist choice. You also have more and more people with damaged credit and those who simply are scared to get into the same problem they just emerged from. These are all national, not local. And these are most certainly going to continue chipping away at home values given inversely related supply-up/demand-down.

I agree that unemployment is high and that has a negative effect on home prices. Not sure how you blame that on the current administration, however. Clearly it is a product of the previous one. And corporations don't make decisions to get back at voters--hopefully you were kidding there.

And keep in mind that home prices ultimately depend on supply and demand. People who were foreclosed will now rent the houses instead of owning them. It's a no net change in the supply and demand equation. Areas that were overbuilt will see price drops. But, like I said earlier, those areas are highly concentrated in Arizona, Florida, Nevada, and inland empire of California. So, I don't agree that those issues are national.

tatupu70 says

There are many, many places where the bubble didn’t really inflate very much

Where? There are towns in far, outstate Minnesota with fewer than 1,000 people that had a housing bubble.

Find Avon, MN on a map, for example. The little hamlet of like 1100 or so had developers come in and build neighborhoods designed for 600+ HOMES.

Those developments are completely empty - some of them have one completed house in them! It looks hilarious.

Detroit metro area - it's DETROIT for goodness sake - place is a CRAPHOLE, yet the metro area in the early 2000s was actually sprawling/booming because of all the easy-money crapola loans - IN DETROIT!

There is this ridiculous notion that the coasts experienced a housing bubble while the fly-over states did not. DREAM ON!

I blamed confidence, threat and revenge, not the administration directly. Reactions are sometimes far more damaging than initial actions. With 60% to 70% of the country firmly against just about everything coming out of Washington right now, The Law of Unintended Consequences is surely going to affect us all. Regarding the rentals creating equilibrium...who will be the owners/landlords? Right now there's 7 million, and growing, orphaned homes that the owners don't want and the banks won't put on the market. Some estimate this number to top 20 million if values continue to decrease while, of course, stategic foreclosures increase. I know the rest of the country...values are regressing everywhere. Trust me.

schmitz_kris says

There is this ridiculous notion that the coasts experienced a housing bubble while the fly-over states did not. DREAM ON!

No need to dream. There are readily available statistics to demonstrate it. Certainly there are areas outside of those four states where prices went up too high, but in general, it wasn't like on the coasts.

Sorry to burst your bubble (no pun intended) but one anecdotal example of Fort Avon, MN doesn't prove your point...

Common Sense says

Trust me.

I'm sure you're a very trustworthy fellow, but I tend to follow numbers and statistics over opinions.

"And corporations don’t make decisions to get back at voters–hopefully you were kidding there."

The revenge part was for drama but hovering at low profit margins because of a clear and present danger to higher earnings makes sense given the current government spending. As the tale was told to me, 3 out of 4 CEOs shot one across our bow during the primaries proclaiming an Obama presidency "shall" be bad for the economy. Presumably the economy they operate? Revenge, I don't know. But countering one action with an equal and opposite reaction does make a little sense.

I understand and can appreciate solid DD based upon reliable data. However, this administration and market-related interest groups such as NAR have been exposed for skewing the numbers in their agendas favor.

Common Sense says

I understand and can appreciate solid DD based upon reliable data. However, this administration and market-related interest groups such as NAR have been exposed for skewing the numbers in their agendas favor.

I hadn't seen that. To what are you referring?

tatupu70 says

There are readily available statistics to demonstrate it.

All of the readily available statistics indicate foreclosures continue to INCREASE in every state with two exceptions (see below) - we just had another big increase from June to July of 2010.

There are only two states which have been relatively unscathed - the Dakotas. I'm sure BOTH homeowners there are quite happy. Eyes roll.

What other stats are you talking about?

Well, "Jobs Saved" and the true cost impact of Obamacare are merely two blatant and unforgettable E ticket rides.

schmitz_kris says

tatupu70 says

There are readily available statistics to demonstrate it.

All of the readily available statistics indicate foreclosures continue to INCREASE in every state with two exceptions (see below) - we just had another big increase from June to July of 2010.
There are only two states which have been relatively unscathed - the Dakotas. I’m sure BOTH homeowners there are quite happy. Eyes roll.
What other stats are you talking about?

Of course foreclosures are higher than normal. We are either still in or very slowly recovering from the worst downturn since the great depression. That does nothing to disprove my point. The magntitude of the problem is vastly different in Kentucky as it is in California.

Are you really going to argue that?

Common Sense says

Well, “Jobs Saved” and the true cost impact of Obamacare are merely two blatant and unforgettable E ticket rides.

Well, jobs saved is an almost impossible stat to measure. Same with the true cost of Obamacare. Those are really just estimates.

I consider that different than # of homes sold or median home price. I would think that it would be much more difficult to fudge those numbers.

David Lereah & Lawrence Yun of the NAR have enjoyed the pump & dump award.

Estimates? They were actually delivered as selling points to modify public behavior and support. Anyone overspending by 1.3 trillion based upon loose estimates should lose their job. I over-ordered lettuce at my first job at Lucky's in high school based on an estimate. You'd have thought I was wearing a Safeway shirt! Bada bum!

tatupu...let's say I understand and agree with your point regarding California being one of the instigators and sinking-champs of this disaster. That said, if federal dollars ultimately go towards fixing what the other 49 states have relentlessly warned against for decades...I will personally be very disappointed and ashamed of my home state.

thomas.wong1986 says

dadab says

Theo says

The Job news today along with all these makes me think this winter is going to be a great time for prospective buyers like me :).

Home prices will continue to correct for some time to come. We have nearly 12 years of bubble prices to burn off. $600K may seem better today than $750K two years ago, but $400K in the future will be far better than $600K today. The magnitude of the housing bubble in the BA is often overlooked by many.

Jobless rate drops in 18 states, rises in 14

Unemployment declines in 18 states, fewer than in previous months, as job creation slows
http://finance.yahoo.com/news/Jobless-rate-drops-in-18-apf-2789684685.html?x=0
Nevada posted the nation’s highest unemployment rate for the third straight month, at 14.3 percent. It took the top spot from Michigan, which held it for four years, in May. Michigan’s rate, the second highest, fell slightly to 13.1 percent from 13.2 percent in June. California posted the third-highest rate, at 12.3 percent, the same as the previous month.

Based on this chart I'd be inclined to agree with you BUT .. the big green line used as a basis can be tilted one way or the other depending on what exactly is used as a criteria for the inflation numbers. Also the prices dont reflect the type of house, the type of buyer, or the condition of the house. Alot of these houses that are dropping in price are dilapidated poo-poo smelling houses

Based on this chart I’d be inclined to agree with you BUT .. the big green line used as a basis can be tilted one way or the other depending on what exactly is used as a criteria for the inflation numbers. Also the prices dont reflect the type of house, the type of buyer, or the condition of the house. Alot of these houses that are dropping in price are dilapidated poo-poo smelling houses

Great time to buy, you had better buy now or be priced out forever right marko? LMAO!!! You bulls are killing me!

Common Sense says

Estimates? They were actually delivered as selling points to modify public behavior and support. Anyone overspending by 1.3 trillion based upon loose estimates should lose their job. I over-ordered lettuce at my first job at Lucky’s in high school based on an estimate. You’d have thought I was wearing a Safeway shirt! Bada bum!

How could they be anything but an estimate? How do you quantify for certain whether a job would have been lost or not? You are basically predicting the future...

woggs1 says

Great time to buy, you had better buy now or be priced out forever right marko? LMAO!!! You bulls are killing me!

Woggs--You are completely ridiculous. Marko posted nothing even remotely implying that now was a good time to buy. All he said was that the graph that was posted was still open to interpretation and he questioned some of the conclusions from it. Are you that closed minded that you can't even listen to other views?

elliemae says

I don’t believe it’s that way everywhere. There are some places that are more than affordable. Just not California. People forget that there’s a bit of space between California & Florida.

A fact that has not escaped many Bay Area employers. As I stated in prior posts, many employers, small and large, have equal if not more employees outside of the Bay Area.

marko says

Based on this chart I’d be inclined to agree with you BUT .. the big green line used as a basis can be tilted one way or the other depending on what exactly is used as a criteria for the inflation numbers. Also the prices dont reflect the type of house, the type of buyer, or the condition of the house. Alot of these houses that are dropping in price are dilapidated poo-poo smelling houses

Sure inflation is tricky. You can look to our local emoloyers in our industries.. We can certainly say that the costs of materials, and overhead that went into production of goods, and the costs of machinery that produces these goods, have inflated over the past decades. Steel, Gold, copper, plastics, silicon, etc etc... But we also currently have long running deflation due to growing competition from global producers after our same markets. When I first started in high tech industry, our revenues per unit shipped could cover the cost of many material and employees costs. Today, due to greater global competition our revenue per unit cannot cover labor or material costs. That is why we had manufacturing moved out and continue to move other labor costs to other lower cost regions.

Instead of having 100,000 HP or Intel employees locally, as we had in the past, that number has shrunk to a token 1,000 each. This has gone on for a long time now.

You will find that it was the typical home that went from 200K pre-bubble to 600+K in a few years.

tatupu70 says

And keep in mind that home prices ultimately depend on supply and demand. People who were foreclosed will now rent the houses instead of owning them. It’s a no net change in the supply and demand equation

Not true. Density can vary. Look at for NJ. I lived there in the late 60's and late 80's. In the late 60's the vast majority of the population was in the very densely populated 20 mile area around NY and Philly. Outside those area's the state was rural. By the late 80's this area had spread to about 30 miles. Now when I go back the state is pretty much one large housing development. The population has increased about 18% yet the number of houses multiplied exponentially.

The density can go the other way pretty easily. When people run out of money they can and must double up. Move in with relatives, house share, whatever it takes to survive. With the true unemployment running close to 20% I don't think it's going to be a zero sum game under these circumstances for a long time.

What about the baby boomers? They are starting to retire and this will be a tidal wave in the next 10 years. They will be downsizing and moving into much higher density living situations (retirement villages, assisted living, nursing homes) in large numbers. The number of baby boomers retiring will far exceed tradition immigration increases in population for at least the next 20 years. Who is going to buy all those houses when they hit the market?

thomas.wong1986 says

marko says

Based on this chart I’d be inclined to agree with you BUT .. the big green line used as a basis can be tilted one way or the other depending on what exactly is used as a criteria for the inflation numbers. Also the prices dont reflect the type of house, the type of buyer, or the condition of the house. Alot of these houses that are dropping in price are dilapidated poo-poo smelling houses

Sure inflation is tricky. You can look to our local emoloyers in our industries.. We can certainly say that the costs of materials, and overhead that went into production of goods, and the costs of machinery that produces these goods, have inflated over the past decades. Steel, Gold, copper, plastics, silicon, etc etc… But we also currently have long running deflation due to growing competition from global producers after our same markets. When I first started in high tech industry, our revenues per unit shipped could cover the cost of many material and employees costs. Today, due to greater global competition our revenue per unit cannot cover labor or material costs. That is why we had manufacturing moved out and continue to move other labor costs to other lower cost regions.
Instead of having 100,000 HP or Intel employees locally, as we had in the past, that number has shrunk to a token 1,000 each. This has gone on for a long time now.
You will find that it was the typical home that went from 200K pre-bubble to 600+K in a few years.

1000 employees at Intel ? HP ? Ok that is not your point and I agree that the tech industry has been in a deflation especially when looking at the consumer -driven part of it. A brand new top-o-line PC was $1200 bucks back in 1990. A MAC was probably twice that. With all that, tech is not the only economy in the Bay Area. So I am not sure we could just say we have long running deflation. But this is an example of how you could shift that green line around, depends what the focus is. If we are saying that the Bay Area is in deflation because of tech then we need to drastically lower that green bar for the bay area.

woggs1 says

Based on this chart I’d be inclined to agree with you BUT .. the big green line used as a basis can be tilted one way or the other depending on what exactly is used as a criteria for the inflation numbers. Also the prices dont reflect the type of house, the type of buyer, or the condition of the house. Alot of these houses that are dropping in price are dilapidated poo-poo smelling houses

Great time to buy, you had better buy now or be priced out forever right marko? LMAO!!! You bulls are killing me!

What a bunch of Bull

bob2356 says

The density can go the other way pretty easily. When people run out of money they can and must double up. Move in with relatives, house share, whatever it takes to survive. With the true unemployment running close to 20% I don’t think it’s going to be a zero sum game under these circumstances for a long time.

I agree--unemployment will always have a pretty serious effect on home prices.

bob2356 says

What about the baby boomers? They are starting to retire and this will be a tidal wave in the next 10 years. They will be downsizing and moving into much higher density living situations (retirement villages, assisted living, nursing homes) in large numbers. The number of baby boomers retiring will far exceed tradition immigration increases in population for at least the next 20 years. Who is going to buy all those houses when they hit the market?

Another good point--changing demographics may have an effect on prices too. I'm not sold that it will be as drastic as some, but it's definitely a factor.

Demography is like the motion of an ocean liner and stuff like house prices, Moore's Law for deflation, etc. are the goings on aboard the ship.
The ship can be undergoing acceleration or decceleration and at those moments the passengers don't notice it, but later on they will when the time to get to the destination is shifted. The demography passengers can also party on while the ship heads straight into a catastrophic collision with an ice berg or another ship, or into getting mired in a shoal; they won't know its coming unless they're in the bridge overlooking the shoulder of the pilots.

Just the market correction one again.... move along not much to see here....

sybril, the deflation i speak of is on the top revenue line due to increase in competition and price cuts. Moores law never forsaw international competition with favorable lower cost could impact domestic producers near pricing monoply.

You have have declining revenues per unit shipped to end user, vs increases in cost to produce. To combat rising costs.. mfg, and now pretty much everthing else is moving out. ... This is deflation I speak off.

http://en.wikipedia.org/wiki/Moore%27s_law

Relation to manufacturing costs
As the cost of computer power to the consumer falls, the cost for producers to fulfill Moore's law follows an opposite trend: R&D, manufacturing, and test costs have increased steadily with each new generation of chips. Rising manufacturing costs are an important consideration for the sustaining of Moore's law.[33] This had led to the formulation of "Moore's second law", which is that the capital cost of a semiconductor fab also increases exponentially over time.

Materials required for advancing technology (e.g., photoresists and other polymers and industrial chemicals) are derived from natural resources such as petroleum and so are affected by the cost and supply of these resources. Nevertheless, photoresist costs are coming down through more efficient delivery, though shortage risks remain.[36]

The cost to tape-out a chip at 90 nm is at least US$1,000,000 and exceeds US$3,000,000 for 65 nm

Thomas,

"The complexity for minimum component costs has increased at a rate of roughly a factor of two per year."

That is Moore's Law, as he defined it, in his own words, from his 1965 Solid State Technology paper that's on the Intel website, it is cost reduction and it is deflationary.

A whole lotta low hanging fruit went into that cost reduction, like the economies of scaling from a niche component industry to mainstream, cheap cost of capital during the Greenspan years in the USA and in Japan by the investment dynamics there in the late 1980's, more of it during the spillover of dot.com mania into hardware stocks in the late 1990's, planned obsolescene by team Wintel in the days of incessant upgrades, giveaways and local subsidies from local governments like in the SW of the USA, and later on regional gov'ts in places like Hsinchu and Communist China.

These "innovations" may also have been key in the Deflationary Moore's Law as are the technical innovations.

tatupu70 says

woggs1 says

Great time to buy, you had better buy now or be priced out forever right marko? LMAO!!! You bulls are killing me!

Woggs–You are completely ridiculous. Marko posted nothing even remotely implying that now was a good time to buy. All he said was that the graph that was posted was still open to interpretation and he questioned some of the conclusions from it. Are you that closed minded that you can’t even listen to other views?

It was clear what his point was. The data was clearly spelled out right in front of him but refused to see it. The beauty of the bull/bears debate is that time will show who is right. BTW I agree I am ridiculous. Not being ridiculous is just boring.

APOCALYPSEFUCK says

Bottom line: DEAD MEAT. Anyone buying a house in the next 20 years is committing suicide.

Oh yeah? Well I say FIFTY YEARS! Do I hear sixty, sixty, going once. Sold! to the new Bearmarket.

woggs1 says

It was clear what his point was. The data was clearly spelled out right in front of him but refused to see it

The point of the graph was clear, no doubt. He was questioning one of the implicit assumptions though. I like people who question the obvious...

schmitz_kris says

Well, duh.
You’re still doing better than the exurbs of Minneapolis - our sales are down much more significantly m-o-m. Then again, the moral fabric of California being what it is, your real estate officials are probably just lying.

Im a newbie and apparently I need (3) posts to create a new one.. but I saw your.... thinking about dumping our n. cali home (tops schools, good neighborhood, town, etc) and moving to MSP. Edina or somewhere in that neck of the woods.