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bubblesitter
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2010 Nov 5, 2:21am
Housing always goes up. Thanks for asking.
If housing is gonna go up like crazy than we'll have the third world country kind of life style, because people won't have much money left for everything else other than paying mortgage.
MarkInSF says
There seems to be this meme going around that the fed is causing commodity prices to go up dramatically. It’s nonsense.
If the dollar gets weaker then our farmers will export more of our food stuff for the same amount of income, reducing domestic supply.
Oh, no doubt commodity prices get higher if the dollar gets weaker against other currencies, but that is far from the biggest driver of commodity prices. Commodities are getting more expensive in EVERY CURRENCY.
I'm talking about articles like the original poster's, or this on patrick.net from page:
Intended or not, the Fed's destruction of the dollar's value has pushed prices of commodities that Americans need -- such as instance food, cotton and oil -- higher.
Whether the Fed's QE2 policy will actually spark renewed growth in the economy is not yet known, but what is known is that the producer costs for essential commodities such as grain and cotton are skyrocketing, and those increased costs will soon appear on store shelves.
The dollar simply has not gone down enough to explain the rise in commodity prices. It has far, far more to do with what is going on in China and the rest of the world as their economies boom, and they consume more commodities.
The dollar is about 5% weaker than it's 2 year average year average. Sorry, that does not cause the price of cotton to double in 2 years.
I'll say it again: The commodities boom, and the occasional bouts of hoarding (like what's going on with cotton now), has been happening for 10 years, long before the fed expanded it's balance sheet.
Rice hoarding and peak price? 2007. Before QE was even thought about.
Peak oil futures? early/mid 2008. Before QE was even thought about.
Copper, wheat, uranium? Go look at the 10 year charts.
The "blame the Fed" crowd, is mostly just interested in blaming the Fed. Not in facts.
Mark_LA
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2010 Nov 5, 4:51am
Housing always goes up. Thanks for asking.
If housing is gonna go up like crazy than we’ll have the third world country kind of life style, because people won’t have much money left for everything else other than paying mortgage.
For the most part, people in third world countries don't use mortgages. They add-on to their house little by little with whatever cash they can save.
Most people in Mexico first lay down the foundation one year, then next year they'll build the living room/bedroom, then a couple of years later, they'll build a kitchen. All around the country you see half-built homes and even rooms with the concrete block walls made, but missing a roof since they're still saving for that part a couple of years down the road.
Home prices would drop to 75% overnight in the U.S. if mortgages weren't available, since the majority of Americans live paycheck to paycheck and have $0 Net Worth. Cash-rich investors would buy everything up and rent to the cash-poor masses.
bubblesitter
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2010 Nov 5, 5:50am
Housing always goes up. Thanks for asking.
If housing is gonna go up like crazy than we’ll have the third world country kind of life style, because people won’t have much money left for everything else other than paying mortgage.
For the most part, people in third world countries don’t use mortgages. They add-on to their house little by little with whatever cash they can save.
Most people in Mexico first lay down the foundation one year, then next year they’ll build the living room/bedroom, then a couple of years later, they’ll build a kitchen. All around the country you see half-built homes and even rooms with the concrete block walls made, but missing a roof since they’re still saving for that part a couple of years down the road.
Home prices would drop to 75% overnight in the U.S. if mortgages weren’t available, since the majority of Americans live paycheck to paycheck and have $0 Net Worth. Cash-rich investors would buy everything up and rent to the cash-poor masses.
My point is, if inflation picks up fast without incomes catching up with it the US middle class will be in very tight spot.
Home prices would drop to 75% overnight in the U.S. if mortgages weren’t available, since the majority of Americans live paycheck to paycheck and have $0 Net Worth. Cash-rich investors would buy everything up and rent to the cash-poor masses.
However, this actually wouldn't happen, because if there were no mortgages, there wouldn't be many cash rich investors. It requires somebody to be in debt on the other side of the bank's balance sheet in order for somebody else to have a cash balance at the bank.
Mark_LA
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2010 Nov 5, 7:07am
Home prices would drop to 75% overnight in the U.S. if mortgages weren’t available, since the majority of Americans live paycheck to paycheck and have $0 Net Worth. Cash-rich investors would buy everything up and rent to the cash-poor masses.
However, this actually wouldn’t happen, because if there were no mortgages, there wouldn’t be many cash rich investors. It requires somebody to be in debt on the other side of the bank’s balance sheet in order for somebody else to have a cash balance at the bank.
I agree with you, but only by modifying your statement to read "there wouldn’t be many NEW cash rich investors."
There's millions of "millionaires next door" with $1 million+ net worth in the U.S. These cash rich investors would buy homes for $100k cash that rent out for $2,000 per month. In less than 5 years, they would get their initial investment back, then in the next 5 years earn another $100k from the renters. They would then use that $100k to buy another property.
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Property prices wouldn't increase much, since all the financed buyers would be marginalized, preventing them from bidding up home prices. The opposite of what happened in from 2002-2006, when anyone with a pulse qualified for a loan and were able to bid-up home prices to bubbly levels.
The renters would face a big hurdle in becoming future home owners: how can they save $100k when they're giving $2k/month in rent to the landlord & there are no 30-year mortgages available?
There you have the explanation for the huge income disparities in third world countries like India and Mexico. The richest man in the world lives in Mexico, while it takes the common man there 3 years to save up to build 4 walls for a room.
There you have the explanation for the huge income disparities in third world countries like India and Mexico. The richest man in the world lives in Mexico, while it takes the common man there 3 years to save up to build 4 walls for a room.
I agree. The lack of a working credit system is a huge part of what distinguishes rich countries from poor countries.
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With the recent announcement by the FED to print $600 billion dollars and release them into the system it seems that the FED is determined on destroying the dollar in an attempt to stimulate inflation and get the economy moving again. I heard an interesting projection made today from a guy by the name of Steve Peasley on KDOW predicting that housing prices will inflate as the dollar gets crushed eventually causing housing, stocks and commodities to increase significantly in the next few years. I would like to hear the boards comments as to what effect you think QE2 will have on housing prices in the next 2 to 5 years.
#housing