Real Estate Market / Inflation / Recession / Depression (Denver, Colorado Springs: equity, affordable house, debt)

[sterlinggirl]

Multitrak,

Its just as much about the number of square feet as about the price per square foot. The real estate market is full of the equivalent of SUVs, when the market really needs some cheap sedans that people can actually afford to drive.

[Bob from down south]

Originally Posted by LBear

He will NEVER admit when he is wrong. He's waiting for a 3,500 sq.ft. home to be priced at $85K. That is his "median income" range.

Funny, the real estate "experts" were saying just a year ago that anyone expecting to see double-digit drops in home prices would wait forever.

A 3500 square foot home is nowhere near the median anywhere in Colorado, but then you already know that. Prices on homes in that range are now falling at double-digit annual rates. And prices will continue to fall until the wages that people earn can carry the payments on the homes they buy without crazy financial smoke-and-mirrors.

There's a fundamental disconnect between income distribution and home price distribution. That disconnect was previously bridged with negative amortization, interest-only, pay-option, and/or stated-income financial sewage that has largely been flushed downriver. There aren't enough people with savings for a substantial down payment and who earn the six-digit salaries now needed to buy up the massive overhang of oversized and overpriced houses. So either wages have to be inflated up, or prices have to deflate until equilibrium is reached. Is that gloom and doom? I guess it is if you bought too much house in 2005 and now desperately want to unload it on a next-greater fool that can't get a loan any more from a wary and grievously injured banking system.

The idea that a one-month drop in annualized rate of decline from -18% to -14% is a sure-fire sign of a "bottom" is insanely ludicrous. Keeping in mind that right now we are at the seasonal peak in demand, some decel in the downward price velocity makes some sense. But it's still dropping at 14% per year. Just wait until late summer, boys.

Last, the effects of energy price hikes are taking a cumulative toll on family finances. The signs of major pullback are all around if you stop to look. The effects of these prices have only just begun to show up in products across the broader marketplace. I don't understand how anyone with even a small amount of situational awareness doesn't see the threat posed by the pullbacks that have to happen when families are paying $75 a tank for gas.

[jazzlover]

Originally Posted by Bob from down south

I don't understand how anyone with even a small amount of situational awareness doesn't see the threat posed by the pullbacks that have to happen when families are paying $75 a tank for gas.

Or how $4-headed-way-higher prices for the diesel fuel used to transport every single thing we eat, live in, play with, or use to make a living is going to massively inflate costs for everything and chew up a good chunk of what little discretionary income the middle class has left. And, know what? If the middle class is down in the dumps economically, it won't be long until the lawyers, doctors, and businesspeople who are selling them goods and services will be, too.

People still don't get it--it took us close to 20 years to consume and borrow ourselves into this mess. It's not going to go away overnight. We are no where near the bottom, and even when we do hit the bottom, the road back up will take years. I figure at least a decade from the bottom to get back to something akin to what our living standard was before this started--if we EVER get back to that level again. We may not.

[Bob from down south]

Originally Posted by LBear

I find it funny to read the doomers & gloomers. With their "sky is falling" mentality. I believe some have ulterior motives. They use the FEAR they spread to make their money. They probably hold interests in the rice market.

By the way "Bob from down south", you are wrong and when all is said and done, you along with Jazzlover will owe us an apology. I wait for that day....

I will never have to apologize to anyone for believing what I believe, nor for speaking about it. This is a classic ad hominem character attack...you don't like the message, so you opt for a personal attack on the messenger.

FWIW, I no longer have a single dime invested in equities or commodities. I stand to gain nothing financially from sharing my views in this or any other forum.

I use a macro, "big-picture" approach to financial decisions. I learned from a master to step back and do my own thinking about where things are headed. I saw the tech bubble for what it was in late 1998, and allowed myself to be cowed into silence by people that were sure that some sort of new age had dawned where the "old math" didn't work. I had a coworker that turned a seven-figure fortune into close to nothing with leveraged investments into tech...he was in denial and rode the bubble all the way down. And I watched family and friends get pillaged in that crash as well. I still ask myself if I could have saved them some of the pain had I spoken up more forcefully about my gut-twisting misgivings about the obvious unsustainable trends.

And here we are today. I have the same tormenting misgivings about the housing and financial markets. Once again, I see in so many people the same cavalier denial of that which strikes me as patently obvious. But this time, I'm not going to remain silent. You can hear the warning, or not.

[jazzlover]

Bob and I have something in common: Neither of us has anything to gain from what we post here. I'm not a realtor, not a stockbroker, not a short-seller, not a commodities trader--none of that. In fact, financially, I would be better off if things DIDN'T bust. Readers of City-data might do well to consider what "axes to grind" some posters have in these threads--people who have a vested financial interest in seeing this drunken brawl that has been the US economy going for one more round of the "bubblies." They should also look at that when they listen to the politicians, the Fed, and the financial "gurus." Most of them have a big dog in the fight to say things are really OK, when they are really not.

At least some of the mainstream media is starting to report on what is happening--a little. Of course, the big pink elephant of the housing bubble, the debt bubble, ethanol stupidity, and commodity inflation has been roaming all over the house for over a year now, breaking up the furniture and generally raising hell. So much for "instantaneous" reporting of news.

On that note, I dug this out of a post I made about the Front Range real estate market:

. . . it's becoming more and more evident that many Front Range areas are starting to see the "bubble" deflate. Colorado in general has the highest current foreclosure rates in the country. Some northern Front Range areas are being hit very hard, Weld County especially. Is this the "canary in the coal mine" for a wider real estate downturn in Colorado? My experience says that it is.

Made April 18, 2007, folks.

[Bagz]

I'm back..I moved to the Politics threads as the moderator asked, but checked in today only to find that the boo birds are still here. I would recommend that you come over too. You will find that the national conversation is a little more intelligent. Maybe you find it nicer to be a big fish in a little pond.

Anyway, my being gone is not an indication that the news is all bad. The recession was held off another quarter, national gas demand is down, exports are up, the Dow is up, and we are hearing the same old sob stories from the same people.

Bob is stuck on the concept that the median house must be affordable by the median income. It never was and never will be. Why? because it only applies to the entry level home buyers. After you build equity, that is no longer the case. By the time people are in their 40's, they have built substantial equity over 20 years and that is the time when they can afford the median house. To completely ignore this aspect of home ownership is either ignorant or deliberately destructive.

Everything else on this thread is simply rehashing old platitudes and not worthy of another response. Feel free to look at my old postings, I pretty much answered the stuff there.

In the mean time come into the Politics threads where the big boys play. (not much here about Colorado anyway.)

[jazzlover]

Originally Posted by Bagz

I'm back..I moved to the Politics threads as the moderator asked, but checked in today only to find that the boo birds are still here. I would recommend that you come over too. You will find that the national conversation is a little more intelligent. Maybe you find it nicer to be a big fish in a little pond.

Anyway, my being gone is not an indication that the news is all bad. The recession was held off another quarter, national gas demand is down, exports are up, the Dow is up, and we are hearing the same old sob stories from the same people.

Bob is stuck on the concept that the median house must be affordable by the median income. It never was and never will be. Why? because it only applies to the entry level home buyers. After you build equity, that is no longer the case. By the time people are in their 40's, they have built substantial equity over 20 years and that is the time when they can afford the median house. To completely ignore this aspect of home ownership is either ignorant or deliberately destructive.

Everything else on this thread is simply rehashing old platitudes and not worthy of another response. Feel free to look at my old postings, I pretty much answered the stuff there.

In the mean time come into the Politics threads where the big boys play. (not much here about Colorado anyway.)

"All politics is local." -Longtime speaker of the US House of Representatives, Thomas "Tip" O'Neill

[suzco]

Originally Posted by Bagz

I'm back..I moved to the Politics threads as the moderator asked, but checked in today only to find that the boo birds are still here. I would recommend that you come over too. You will find that the national conversation is a little more intelligent. . .

In the mean time come into the Politics threads where the big boys play. (not much here about Colorado anyway.)

An excellent suggestion. Please keep the conversation here focused on the topic of this thread, Real Estate Market / Inflation / Recession / Depression in Colorado, and go to the discussions in the Politics and Other Controversies forum for more global and general discussions.

[Bob from down south]

Originally Posted by Bagz

Anyway, my being gone is not an indication that the news is all bad. The recession was held off another quarter, national gas demand is down, exports are up, the Dow is up, and we are hearing the same old sob stories from the same people.

We'll let the NBER decide if the recession has been held off. An anemic 0.6% growth got reported while businesses accumulated a sizeable overhang of unsold inventories. I don't think that obvious displacement will get a pass from them. I still think they'll call Dec 07/Jan 08 as the start of this recession.

The Dow is up? I seem to remember it being above 14000 quite a few months back. Up indeed. My ultra-low risk I-series savings bond portfolio has absolutely trounced the Dow over a 10-year holding period.

Originally Posted by Bagz

Bob is stuck on the concept that the median house must be affordable by the median income. It never was and never will be. Why? because it only applies to the entry level home buyers. After you build equity, that is no longer the case. By the time people are in their 40's, they have built substantial equity over 20 years and that is the time when they can afford the median house. To completely ignore this aspect of home ownership is either ignorant or deliberately destructive.

Not a lot of equity-building going on right now, is there? You're telling us that the average Colorado Springs homebuyer needed to be in his/her 40s to buy the median $202,000 home?? I don't think too many people will have too much trouble looking at this so-called fact of yours and seeing it for the falsehood that it is.

The sad thing is that even while prices were appreciating many people were extracting anything that even smelled like equity from their homes as fast as they could build it.

The fact is that incomes and affordable house prices are related. House prices have appreciated significantly in Colorado...wages have not kept up. There's plenty of local data publicly available to see that. Houses cannot continue appreciating ad infinitum absent equivalent wage increases. You don't get something from nothing, and the documented housing price collapse in progress now in Colorado and all across the looted plains is proving that point in terms even a fool cannot deny.

[multitrak]

Originally Posted by sterlinggirl

Multitrak,

Its just as much about the number of square feet as about the price per square foot. The real estate market is full of the equivalent of SUVs, when the market really needs some cheap sedans that people can actually afford to drive.

it's been here for a long time and it's called modular housing...small and low cost, but most folks won't have it cuz it's too small and cheap. 2K sq ft is entry level these days for a family of four.