Real Estate Market / Inflation / Recession / Depression (housing, rent, travel)

[multitrak]

"Blue line is current actual national median home price (as of March 2007). The pink line maps the probable price correction course through approximately 2013. Chart based on actual prices through March 2007. Future price prediction calculated by using current price decline trend integrated with past reverts back to the historic price mean." Housing Bubble Explode / Real Estate Decline housing bubble charts, graphs, videos and more!

the moral of story? price always reverts back to the mean, no matter if it's commodities, stock index futures, or in this case, houses. and the farther the excursion from the mean, then the greater the economic pain when it moves back in line with historic median levels.

[Shuffler]

Originally Posted by jazzlover

I have to agree with Bob's "guess." I think there is a lot of downside potential. One thing few talk about is the possibility that some areas may NEVER come back. Overaggressive lending and poor financial decisions by borrowers may have started this problem (along with plenty over-building and over-development), but there are serious structural problems in the US economy that will alter the housing and real estate landscape over the longer term. The biggest of those is the end of the cheap and plentiful energy era. Simply stated, the suburban and "exurban" lifestyle, as it currently exists, simply is unsustainable over the long term. As more and more people will come to realize, to quote several authors, "other arrangements will have to be made." When they do, the desirability and marketability of those kinds of real estate will plummet, and selling prices will follow--if many such properties can be sold at all. That will be the "other shoe" that drops, and it likely will be a heavier "thud" than the current problems. Personally, there is no way I would want to be owning a piece of real estate in a far flung suburb or exurban area. It will be a long-term loser.

All of this assumes that there is not some sort of significant energy shock that hits any major oil-supplying region in the world. If that happens, there could be an immediate and resounding crash in the US economy, and the potential for serious political destabilization as well. You have to wonder how quickly today's apathetic, spoiled, self-centered, and hedonistic Americans would be to sell out part or all of their freedoms and democratic institutions when there is no gas at the gas station and not enough food to put on their tables in homes they can't pay for or afford to heat.

I love the quote from Kunstler when he wrote about the talk he gave at Google, and one of the employees spoke up with "Dude! We've got technology!"

It's amusing that people have this misguided idea that we'll simply 'invent' our way out of the energy crisis with technology, and life in America will just go on, flexible and fancy-free. They seem to forget that technology requires energy, unless we want to revert back to pre-20th century 'technology'.

That home price chart is pretty telling. It tells me that I'm gonna have a helluva time trying to sell my house in order to leave CO and be with my girlfriend anytime soon...

[sterlinggirl]

Something I've been wondering about:

If we tossed out all the illegal aliens, what would it do to the housing market?

[Shuffler]

Originally Posted by sterlinggirl

Something I've been wondering about:

If we tossed out all the illegal aliens, what would it do to the housing market?

Not much, since they all live 10 or more to a house, anyway....and most of them rent, from what I hear....

'Fixing' illegal immigration equates to 'passing the buck'...so unless we all want to pay more for everything so employers can afford to increase the wages and pay for insurance AND keep their margins high so stockholders are fat and happy thus keeping our fabulous economy rolling, well.....nevermind, it ain't gonna happen.

[multitrak]

Originally Posted by Shuffler

It's amusing that people have this misguided idea that we'll simply 'invent' our way out of the energy crisis with technology, and life in America will just go on, flexible and fancy-free. They seem to forget that technology requires energy, unless we want to revert back to pre-20th century 'technology'.

ok, let's look at current technology and shale oil...a new approach to an old problem: here's the link for a nontechnical summary of the Shell Oil oil shale test project, which has produced 1,700 barrels of 38 API gravity crude oil to date. <b>Seebach:</b> Shell's ingenious approach to oil shale is pretty slick : Columns & Blogs : The Rocky Mountain News

for those who are interested in the details of the Shell oil shale project, here's another link to the plan of operations pdf submitted to the BLM (dated 2/15/2006): http://www.blm.gov/content/etc/media...Operations.pdf

Shell's plan for extracting oil from kerogen rich shale in the Piceance Creek basin of Colorado is an exciting idea blending innovative technology with plain old organic geochemistry. It's simply heating the rock in-situ to between 550 and 750°F for two years and then pumping the oil out, essentially completing the process that nature had not quite yet finished. Quoting the BLM on oil shale reserves: "More than 70 percent of American oil shale — including the thickest and richest deposits — lies on federal land, primarily in Colorado, Utah, and Wyoming. These federal lands contain an estimated 1.23 trillion barrels of oil — more than 50 times the nation's proven conventional oil reserves." the viability of the project rests with Shell's projected EROEI, or Energy Returned on Energy Invested, of 3 to 4. the Canadian Athabasca tar sands, in comparison, have an EROEI ranging from 1.5 to 2. Shell believes their oil shale extraction technology could be competitive with oil prices above $30/barrel. bottom line, the recoverable reserves work out to 1 million barrels recoverable oil per acre or 1 billion barrels per square mile times 1,000 square miles of the richest oil shale (Mahogany Ledge or Zone), yielding 1 trillion barrels oil. pie in the sky? maybe. but the next step, a commercial level project beginning by 2010, would determine if the predicted EROEI and oil yields could be sustainable over the long haul. again, according to Shell's estimates, if they incrementally process 23 square miles of the richest oil shale and maintain a daily production rate of 3 mbopd, the project could ultimately yield 15 billion barrels oil over a 40 year life. Prudhoe Bay, the largest oil field in North America, in comparison, contains 25 billion barrels oil.

the Shell process is not science fiction, it's doable now. and possibly by the end of this decade, it could add up to an extra 3 million bopd entirely from Colorado. read the Shell pdf, specifically section 4.4 Recovery Efficiency and Energy Balance, which explains the economics of how 1 btu energy in provided by electrical power could result in 3 to 4 btu's energy out from the produced oil and gas in the shale. hey, maybe we do have technology, dude!

[LBear]

Originally Posted by Bob from down south

My guess is no gains until at least 2012-2014, which is when the wave of subprime and option ARM economic gangrene works its way through.

Bob

Most things I have read state that the fall of 2010 is when the bottom will finally hit and then 2011 and 2012 will see slight increases from there.

So, real estate, for the most part, is now a 5-10 year investment before one would see significant gain when selling...Gone are the 2 year flips, seeing a 20% increase within those 2 years.

[suzco]

Originally Posted by multitrak

ok, let's look at current technology and shale oil...a new approach to an old problem: here's the link for a nontechnical summary of the Shell Oil oil shale test project, which has produced 1,700 barrels of 38 API gravity crude oil to date. <b>Seebach:</b> Shell's ingenious approach to oil shale is pretty slick : Columns & Blogs : The Rocky Mountain News

for those who are interested in the details of the Shell oil shale project, here's another link to the plan of operations pdf submitted to the BLM (dated 2/15/2006): http://www.blm.gov/content/etc/media...Operations.pdf

Shell's plan for extracting oil from kerogen rich shale in the Piceance Creek basin of Colorado is an exciting idea blending innovative technology with plain old organic geochemistry. It's simply heating the rock in-situ to between 550 and 750°F for two years and then pumping the oil out, essentially completing the process that nature had not quite yet finished. Quoting the BLM on oil shale reserves: "More than 70 percent of American oil shale — including the thickest and richest deposits — lies on federal land, primarily in Colorado, Utah, and Wyoming. These federal lands contain an estimated 1.23 trillion barrels of oil — more than 50 times the nation's proven conventional oil reserves." the viability of the project rests with Shell's projected EROEI, or Energy Returned on Energy Invested, of 3 to 4. the Canadian Athabasca tar sands, in comparison, have an EROEI ranging from 1.5 to 2. Shell believes their oil shale extraction technology could be competitive with oil prices above $30/barrel. bottom line, the recoverable reserves work out to 1 million barrels recoverable oil per acre or 1 billion barrels per square mile times 1,000 square miles of the richest oil shale (Mahogany Ledge or Zone), yielding 1 trillion barrels oil. pie in the sky? maybe. but the next step, a commercial level project beginning by 2010, would determine if the predicted EROEI and oil yields could be sustainable over the long haul. again, according to Shell's estimates, if they incrementally process 23 square miles of the richest oil shale and maintain a daily production rate of 3 mbopd, the project could ultimately yield 15 billion barrels oil over a 40 year life. Prudhoe Bay, the largest oil field in North America, in comparison, contains 25 billion barrels oil.

the Shell process is not science fiction, it's doable now. and possibly by the end of this decade, it could add up to an extra 3 million bopd entirely from Colorado. read the Shell pdf, specifically section 4.4 Recovery Efficiency and Energy Balance, which explains the economics of how 1 btu energy in provided by electrical power could result in 3 to 4 btu's energy out from the produced oil and gas in the shale. hey, maybe we do have technology, dude!

In every generation there's excitement and hope surrounding oil shale. It's a part of the mix in our cyclical boom/bust economy. Do you remember the modern ghost towns created in places like Rifle after the oil shale extraction plans of the late 70's, early 80's were abandoned? This couple of years old article provides some interesting background:

The Illusive Bonanza: Oil Shale in Colorado | EnergyBulletin.net | Peak Oil News Clearinghouse

Published on 3 Oct 2005 by Energy Bulletin. Archived on 4 Dec 2005.
The Illusive Bonanza: Oil Shale in Colorado

by James R. Udall, Steven B Andrews

Climate - Jan 30...

“Pulling the Sword from the Stone”

A History of Hope

Buried beneath the ground, in Colorado and Utah, are a trillion tons of oil shale. Throughout the 20th century, men have tried and tried again to unlock the energy contained in these rocks. To date, all efforts have failed. But every twenty or thirty years, when energy prices spike, a new attempt is mounted. The persistence is understandable: whoever unlocks this resource would capture a trillion dollar prize. But oil shale’s track record is not encouraging. The rocks are stubborn, an illusive bonanza, promising much, delivering little. Despite a century of trying and $10 billion in investment, oil shale currently provides an infinitesimal 0.0001 (or one ten-thousandth) of world energy. This paper explains why oil shale is so difficult to unlock, and why the “rock that burns” may never provide more than one percent of U.S. energy.

[jazzlover]

I have to agree that oil shale will never be a significant source of energy for the US, and I've spent a lot of time in "shale country." The problem with shale is that, despite a century of trying, no one has been able to figure out how to produce oil (actually kerogen) from it without expending nearly as much energy as is contained in the shale itself. A friend who worked in the synfuels industry in the 1970's explained to me that the higher energy prices go, the higher the cost to produce the petroleum from shale gets--the lines of cost vs. income never cross to make the process profitable. When the federal government pulled subsidies from oil shale in the early 1980's, "Black Sunday" in 1982 was the direct result. Exxon made way more money turning their development at Parachute for oil shale employees into a retirement-type development than they ever did in the oil shale business.

The best hope for synfuels is much simpler and much more direct than oil shale--it's coal liquification; that is, making diesel fuel and other distillates out of coal. That technology is already available and coal has much more concentrated hydrocarbons than oil shale. Even that technology is yet to be used on any significant scale in the US, but I predict that it will be--and that will leave oil shale development in the dustbin of history.

We Americans need to get over "wishing" for some magic bullet of cheap energy to save our sorry ***es from having to modify our overconsumptive, auto-dependent lifestyle. The era of cheap, plentiful energy is OVER, and the sooner we accept that, the sooner we can go about keeping this country relatively comfortable and livable within the constraints of that new reality. Otherwise, the US is likely not to be either very comfortable or very livable.

[multitrak]

Originally Posted by multitrak

the viability of the project rests with Shell's projected EROEI, or Energy Returned on Energy Invested, of 3 to 4.

if the EROEI, or more simply energy out/energy in ratio is <= 1 for the next commercial phase, then game over for the Shell process. that we all agree on.

why my interest in oil shale (and no one in the oil biz calls it "kerogen marlstone" btw)? i spent a stint in the middle 70's as a geologist with Exxon Minerals (before moving on to their oil and gas company) mapping the Mahogany Ledge on the surface and subsurface in the Piceance Creek basin. so, yeah, i kicked around nw Colorado for a while and you might say i know something about the geology of the area. Exxon's vision was to strip mine the richest part of the basin, cooking billions of tons of rock in massive sized retorts requiring equally massive amounts of electricity and water, and dumping the toxic heavy metal laden tailings back in the hole created by mining. it was doomed from the beginning because of a marginal EROEI and the saudis threatened production increases (defending their market share) at nearly opec meeting. i suggested instead a in-situ approach similar to Shell's ICP, but got voted down by management and the senior engineers because it wasn't "grand" enough for Exxon and their shareholders. ultimately Exxon abandoned the program in the early '80's because management decided that developing their Natuna field in Indonesia (S China sea) had a higher upside than shale oil. they were right. Natuna is the largest gas field in the world with 222 TCF gas in place and 46 TCF gas recoverable. end history lesson.

some important points about the Shell process: the oil produced is 38 gravity crude and can be processed by any refiner in the country. two, the electrical expenditures predicted by RAND are way too pessimistic, but as expected by a peak oil biased report, hence the need for a commercial scale project to get accurate costs. three, in-situ means minimal land disturbance or no more than what is necessary for a multi-well oil field with enhanced recovery operations. four, formation and surface waters would be reprocessed and reused in the extraction operation. the water requirements for this process are much lower than those used by retorting. five, alternate energy sources, such as geothermal and wind power could be used instead of coal or gas fired power plants. Quoting from Xcel Energy website: "As of early 2007, we had 1,323 megawatts of wind energy capacity in service. We expect to have 2,600 megawatts in service by the end of 2007 and 6,000 by 2020." Colorado is rich in unexploited geothermal energy that can be converted into electricty. so there's more than enough usable electricity available generated from alternate but now conventional sources.

conclusion? wait and see in 5 or so years who's right and who ain't...

[jazzlover]

I absolutely agree that the "Shell" process has much more promise than the grandiose Exxon gambit of nearly three decades ago. My view, however, is a more macro one. Our petroleum-reliant infrastructure was built initially when getting oil in the US was not much more than punch a hole in the right place and pump the oil out (some places it would even flow on its own). There are still quite a few of those relatively cheap-to-produce-oil fields out there in production, but they are obviously in decline and it's highly unlikely we will find any more like that. In the last 30-50 years, oil production has moved to more and more of a) figuring out how to wring the last drop of oil out of a field; or b) drill for conventional oil in more and more difficult and remote places; or c) import it from places where cheap-to-produce oil is still found. If one reads the EIA reports for any length of time, it's clear that much of the US supply is now coming from option "c)" Now, I don't happen to think that reliance on that much foreign oil is a good idea, especially since those "easy" fields are clearly now in decline, too. Not great, either, that much of that oil is located in countries that happen to hate our guts. So, the relatively new option "d)" is to figure out how to produce oil from "non-conventional" sources, oil shale being one.

There is only one little itsy-bitsy problem with that (actually it's a HUGE problem): Our current lifestyle in the US depends on copious quantities of CHEAP petroleum. Even if oil shale is wildly successful, the oil produced from it will be anything but cheap--and, all the while, those older "cheap" sources of oil production in the US and around the world will be depleting. So, regardless of whether or not shale or other non-conventional (read: expensive to produce) oil production happens, I stand by the last sentences of my prior post:

We Americans need to get over "wishing" for some magic bullet of cheap energy to save our sorry ***es from having to modify our overconsumptive, auto-dependent lifestyle. The era of cheap (emphasis added), plentiful energy is OVER, and the sooner we accept that, the sooner we can go about keeping this country relatively comfortable and livable within the constraints of that new reality. Otherwise, the US is likely not to be either very comfortable or very livable.

The big, mistaken assumption made by the average American is that some great new technology will suddenly make oil cheap again--and we can go happily along living the way we have the last 50 years or so. That ain't gonna happen.