patrick.net

http://research.stlouisfed.org/fred2/graph/?g=1K1

let me guess...new paradigm?

no -- failure of the new paradigm

24 corntrollio 2011 Aug 22, 9:03am

Cornholio will soon start ripping into you for daring to piss all over the sacred cow known as ObamaCare.

No, I only comment when people say stupid or uninformed things (regardless of ideology or topic). I don't think anyone actually disagrees with Bob's statement -- it's at least partly true. Nothing sacred about it -- it's just annoying when people make ignorant strawman comments about anything or make false claims that are easily shown to be false to anyone with a modicum of intelligence.

In addition, there seem to be a large number of people who speak without knowing anything about Obamacare, as they do for many other topics, and these people largely focus quite transparently on talking points, rather than referring to specific aspects of the legislation. I seem to remember user saying "we don't know what's in ObamaCare" which was particularly unsophisticated because the law has been published for a quite a while now and this was a very old talking point.

The last point I'd make is that most people complaining about Obamacare didn't complain about the Republican Congress' plan back in the 90s that was almost exactly the same. I often wonder why that is.

It's already happening. Just wait for Facebook to IPO for $100 billion or so.

Not sure about this. First of all, I don't think anyone thinks it's worth $100B. Even the Goldman valuation was reported as $50B, but is more like $38B if you do the math.

Second, Facebook does have a decent number of employees, maybe 2000 or so, but they're not all in the Bay Area -- unclear how many are.

Third, the dotcom boom-correlated Bay Area real estate boom happened when there were several companies with IPOs that were legit companies and many many multiples of crappy companies that had IPOs anyway (one of which currently is Groupon, although that's a Chicago company). So far the least impressive company to have an IPO is Pandora (based in Oakland, not Silicon Valley or SF), and that's partly because their business model isn't secure, but there haven't been a steady stream of low quality companies have IPOs pumping more and more cash into the local market, nor do there appear to be a stream of them on the horizon.

Fourth, the vast majority of Facebook stock will be held by co-founders, key executives, VC funds, and a few big institutional and other big stockholders, and not by employees. Obviously the early employees will have more, but many rank and file people won't have all that much.

None of this is really the same as back in the day -- we are seeing a limited number of high quality companies that are in the pipeline, such as Zynga, but not that many low quality companies.

25

LAO 2011 Aug 22, 10:30am

FortWayne says

And tulips haven't risen in price either if you know what I'm referring to.

Big difference between HOUSES and TULIPS.. you can't live and raise a family in a tulip!

Comparing the housing bubble to the tulip bubble is a little ridiculous.

26

tts 2011 Aug 22, 10:38am

This is the chart Im looking at. The trend is pretty consistent. And if youre in California like me we tend to be above trend in price appreciation

Don't place too much faith in charts, especially super long term ones like that. They're great measuring sticks, but that is all they are. You have to consider the history that chart represents too (ie. post WWII and GD the economy was very different than the pre 1920's, and during the pre 1920's the country was still expanding quite a bit into essentially empty land or land that had been forcibly emptied by the military, avg. people routinely put down 50% on a home or even bought outright) and remember that future will likely not at all be a repeat of the past. The past doesn't repeat, it rhymes with the future.

You also have to consider stuff like where wages will be, and how much debt people will likely have, and if we're entering a prolonged L shaped recession (IOW depression) like Japan has been in since the late 1980's.

Most people don't want to consider any of that, its too difficult and scary to think of a future in those terms, but those are real possibilities that your chart doesn't not contain.

27 Hysteresis 2011 Aug 22, 11:27am

anyone that says anything other than "i don't know" is fooling themselves.

- no one can predict even 1 year out
- every year introduces additional error.
- 25 years later the errors compound so the predictions are completely useless

28

HousingWatcher 2011 Aug 22, 11:41am

"We know now...one big fat UNCONSTITUTIONAL rape of individual liberties."

That's not a very nice thing to say about RomneyCare.

29

Dan8267 2011 Aug 22, 1:37pm

Let's see, Facebook has about 1,700 times as many distinct viewers per month as Patrick.net, so Patrick.net should be worth $100B / 1,700 = $58.8 million!

Unfortunately, that assumes a linear relationship between the value of web site and its viewership.

One of the popular variants of Metcalf's Law says, "The community value of a network grows as the square of the number of its users increase." However, I believe even this is incorrect.

A better model would be a Logistic Growth Curve. The value of a network or website at first increases exponentially, but then value/growth slows down as it reaches a horizontal asymptote at 100% of the population.

Of course, one Apocalypsefuck is worth a thousand regular viewers.

30

Dan8267 2011 Aug 22, 1:40pm

Others are less optimistic and see prices heading back to mid-1990s prices and staying there until 2025.

I like how you refer to this as "less optimistic". I would call that the more optimistic view. Would you say it is pessimistic to believe that gas prices will remain under $4/gallon for the next few years?

31

Dan8267 2011 Aug 22, 1:45pm

I've read some predictions that we wont reach 2006 bubble prices again in Los Angeles until 2024.

Adjusted for inflation, I don't think we'll see housing prices at their 2006 level in any of our lifetimes. And that's a good thing. Why should shelter be so unaffordable? Would we want tulips to ever reach their 1637 inflation adjusted prices?

Dealers refused to honor contracts and people began to realize they traded their homes for a piece of greenery; panic and pandemonium were prevalent throughout the land. The government attempted to step in and halt the crash by offering to honor contracts at 10% of the face value, but then the market plunged even lower, making such restitution impossible. No one emerged unscathed from the crash. Even the people who had locked in their profit by getting out early suffered under the following depression. Investopedia

Wow, that exact same stuff happened in America between 2006 and 2011!

32

Dan8267 2011 Aug 22, 1:55pm

Life is harder now -- MSNBC

What types of effect on our society would 30 years of zero housing appreciation have?

People would be able to spend a greater percentage of their income on non-housing related purchases like restaurants, vacations, clothing, jewelry, automobiles, electronics, and the rest of the 96% of the economy that is not housing.

Bankruptcy law expert and Harvard University Professor Elizabeth Warren spent a lot of time crunching consumer spending numbers for her popular books, "The Fragile Middle Classâ€ and â€œThe Two-Income Trap.â€ In both, she makes this point: Despite all those $200 sneakers you hear about and the long lines at Starbucks, consumers are actually spending less of their income â€” much less â€” on discretionary items like clothing, entertainment and food than their parents did. In fact, after taking care of essentials like housing and health care, todayâ€™s middle class has about half as much spending money as their parents did in the early 1970s, Warren says.

The basics, according to Warren, now take up close to three-fourths of every family's spending power (it was about 50 percent in 1973), leaving precious little left over at the end of the month â€” and leaving many families with no cushion in case of a job loss or health crisis.

So, if families didn't have to spend so much on housing, they could spend more on other things. And that would be the best stimulus possible.

33

Dan8267 2011 Aug 22, 2:04pm

So basically, life was better in 1973 when people dressed like this.

34 swebb 2011 Aug 22, 2:13pm

thomas.wong1986 says

you pay to live near polution free air, better weather, better 4 year schools, better shopping centers, resturants, intellectually smarter nieghbors, and all the other marketing gimicks the REA can come up with.

I don't get the gimmick part. Those are all things that have value to some people, so why wouldn't they pay more to get them?

35

TMAC54 2011 Aug 22, 3:30pm

Time does not exist ! 2025 may bring NO BUYERS, or MULTIPLE OFFERS ??? if the latter is true, we will again be spending time back on Patrick.net !!! We could all be doing our laundry in a river, hopefully upstream of the pig farmer.

Housing prices will spike again only when someone invents a SURPRISE implement that everyone in the free world wants to buy and is anxious to spend about $2,000 ea. and replace that model with a new one every year or two while that new invention is evolving to reach its peak performance. ( it took the computer from 1983 to 2006 )(coincides wit housing) Then b.r.i.c. will improvise and housing will collapse. This story is boring, it is too simple. We need to move on, learn to take the holding power away from banks, freddie and fannie, find some contractors ready to build realistically priced housing. No land you say ? Go fer a plane ride dufus.

Can anybody name ANY invention that generated ONE TENTH of the revenue that the computer did ?

36

TMAC54 2011 Aug 22, 3:42pm

we would have 30 years of ZERO housing appreciation from

Thats correct L.A.R.... Generation present, sucked all the appreciation potential out of the real estate market for the next several generations.... Its probably a good thing seeing as how we may be living in their home for the rest of their time.

Their philosophy was,,,, it does not matter what you pay for it,,, it will be worth %20 more next year. Justify that !

37

uomo_senza_nome 2011 Aug 22, 3:44pm

My bet is that we will see a new currency system by then and we probably won't be valuing houses in dollars.

38 commonsense 2011 Aug 22, 10:00pm

www.westsideremeltdown.blogspot.com

This is the chart Im looking at. The trend is pretty consistent.

Yes, 1973 was way better to me. This isn't a style site so the clothing of that man is irrelevant. 1973 housing prices is where I see prices settling, (and if the gold standard returns IMHO will likely remain.) I see clearly from this chart the gross insanity of the past 35 years in terms of residential real estate pricing. Adjusted for inflation is IMHO is just more manipulated bullshit semantics to get a person to pay more for something that essentially has not changed in value (the burst has shown that one.) If the gold standard wasn't taken off the table that phrase would not exist. The problems today started when the masses and others bought into the idea of manipulation of a house as a vehicle to make fast money (there is the glitch right there.) A house is not a bank, it is not an investment to me. It is to be lived in with the opportunity to sell it in the future. End of story. I also recommend reading "31 Days" by Barry Werth.

39

freak80 2011 Aug 22, 11:49pm

Over the long term, it isn't possible for house prices to rise any faster in REAL (i.e. inflation-adjusted) terms than peoples' REAL incomes. Am I right? Even if you have a highly desirable area (say a waterfront), prices there can't rise any faster than the average ability to pay. Even billionaires don't have unlimited resources. Indeed, it was arguably the desirable areas (coastal CA and FL) which saw the biggest bubble.

The whole notion that a house can produce wealth is bunk. A house is a consumer good that slowly depreciates and needs constant maintainence (not to mention insurance and property taxes). Factories, refineries, farms, and working businesses produce wealth...not houses.

Unfortunately over the last two decades we've sent much of the wealth-producing sector overseas. It seems our economy is now based on little more than speculation and gambling, er...I mean..."finance."

40 Latesummer2009 2011 Aug 23, 12:42am

I believe we are headed for serious deflation in the short term and than even more serious inflation in the long term. Prices could actually be much much higher nominally in 2020 - 2025, but much lower after adjusted for inflation. The key is, when will we switch from deflation to inflation ? If we continue our present course of keeping zombie banks on life support, while the housing market slowly deflates, at the present rate, it should be around 2017-2018. Keep your eye on precious metals, especially gold and silver and their historical relationship to the dow. IMHO once that trend reverses, it's time to pull the trigger on RE and buy. By 2020-2025 the % of those buying houses will be less than those renting.

www.santamonicameltdownthe90402.blogspot.com

41

TMAC54 2011 Aug 23, 12:48am

No one has offered me even a measly million.

Irish songs are made up of HAPPY WARS and SAD LOVE AFFAIRS. Most people turn away from the painful truth(s). Fight the good fight any way Patrick.

42

taxee 2011 Aug 23, 1:16am

Patrick says:
'Hmmm, something must be wrong in my calculations. No one has offered me even a measly million. In fact, no one has offered anything.' Isn't it interesting how there's so little market for reality? Maybe it's the format. Try turning it into a 'show'.

43

marcus 2011 Aug 23, 1:26am

In 2020 what will have happened will seem obvious, everyone will be able to look back and explain exactly why it happened that way.

You know what we'll call it ?

44

marcus 2011 Aug 23, 1:35am

2020 hindsight.

45

FortWayne 2011 Aug 23, 1:39am

FortWayne says

And tulips haven't risen in price either if you know what I'm referring to.

Big difference between HOUSES and TULIPS.. you can't live and raise a family in a tulip!

Comparing the housing bubble to the tulip bubble is a little ridiculous.

Comparison lies in underlying value. Everything comes back to what it's worth on the free market. Building a box with a door isn't exactly rocket science, just like growing a tulip.

46

taxee 2011 Aug 23, 2:10am

Nope it is not rocket science....You can use the innate desire most humans have for a safe space, their creativity. their territoriality, and competitive nature, to take advantage of them. But first you must get them to let you counterfeit the legal tender. Of course you don't have to take advantage..but if that's YOUR nature....

47

Dan8267 2011 Aug 23, 2:10am

Big difference between HOUSES and TULIPS.. you can't live and raise a family in a tulip!

Comparing the housing bubble to the tulip bubble is a little ridiculous.

You're analysis would be correct if people only bought houses with the intent to live in them. In Florida, most of the speculators didn't live in Florida. Many of them didn't even live in North America.

Even now as knife catchers hope for a rebound, most of the speculators do not live in Florida. People were buying houses with no intent to live in them or even see the houses. They just wanted to flip.

In this respect, the housing bubble was very much like the tulip bubble.

48 Buck in Oz 2011 Aug 23, 2:46am

about 3-5 times your annual wage.

49 Partyboy 2011 Aug 23, 2:46am

TMAC54 says

Can anybody name ANY invention that generated ONE TENTH of the revenue that the computer did ?

Uh...the wheel.

50 thomas.wong1986 2011 Aug 23, 6:18am

swebb says

thomas.wong1986 says
you pay to live near polution free air, better weather, better 4 year schools, better shopping centers, resturants, intellectually smarter nieghbors, and all the other marketing gimicks the REA can come up with.

I don't get the gimmick part. Those are all things that have value to some people, so why wouldn't they pay more to get them?

No one in the past over paid. Condos in SF near SOMO lets say were equally priced to condos in southbay. The most expensive homes in my town of LG were far away from everything. Up on the hills.

51 corntrollio 2011 Aug 23, 7:37am

We know now...one big fat UNCONSTITUTIONAL

I've already shown on multiple threads that you don't know anything about constitutional law. Let's not rehash that in the RE forum.

No one has offered me even a measly million. In fact, no one has offered anything.

You could always sell out and put AdSense revenue all over these forums.

thomas.wong1986 says

Paying an inflated prices for 5% revalues the other 95%. This is what actual happened over the past 5-6 years.

I don't disagree with this. It's sort of true -- even Goldman's stake was fairly small for large $$$ (of course, they'll get a nice piece of that back).

just a guess based it on the last housing crash that ended in 94. 10 years later in 2004 prices had more than doubled.

The last housing bust ended more like 1996/1997. Still had crazy prices 10 years later, but due to two consecutive bubbles. That's not really a great example.

However, you're more likely to be accurate than my friend who in the opening months of the bust thought prices would zoom off into the stratosphere again 6 months later after this "brief pause." The bulk of the losses that friend saw were likely after that prediction, and they were substantial.

When Facebook gets its $100 billion (and it will get it), it will have a war chest to go shopping for smaller startups that will make Google look like a lightweight in comparison.

Actually, I doubt Facebook will get anywhere near $100B in *cash*. If you look carefully at Pandora, you'll see that their market cap at IPO was $2.6B, but they received less than 1/10 of that in cash for the IPO because they were only offering a limited number of new shares.