housing affordability at an all time high (NOT) (mortgage broker, credit)

[sholden]

Originally Posted by JG183

once again, people are using 1980's economic theories to support these sort of predictions, but it won't wash.

as long as gasoline stays below $2 /gallon, even having 10% unemployment won't set inflation off to the degree you say.

geebus, it's deflation we should be worried about !

Just wait and see.

Inflation has nothing to do with unemployment (Keynesian fools will say it's inversely related the 70s showed them to be completely wrong (well the 30s showed them to be wrong but that seems to be erased history)).

What will kick off inflation in the US is the exchange rate. We import so much that any devaluation in the dollar will push up prices (gasoline is one obvious example). Almost everyone is pretending that the US dollar is still "safe" and people are still running to it as they get out of other investments and other currencies. But people were still buying houses (and cashing out equity) in 2005 because they "only go up" so just because the most people think and do something doesn't mean they're right.

At some point the rest of the world cuts their losses on their US debt, when that happens inflation to the moon, baby!

Of course the housing bubble lasted for over 5 years after I thought it was a unsustainable and had to pop any day. So a US currency revaluation might be years away too, but the government seems to be doing everything it can to speed it up.

It's fun to watch though isn't it? Will the DJIA reach the 2000s before an inflation spike shoots it to 10k?

[elflord1973]

Originally Posted by JG183

sorry monger, there will be no "collapse" in NJ.

we are at bottom. prices may stay there for a while, but the indicators are coming in to support what guys like Marc have been saying...

First you stated that "affordability is at a record high". My first post demolishes that notion.

Now you are suggesting that "we are at the bottom".

Did you look at any of the charts I posted ? All of them show a clear bi-modal
behavior, with the bubble years clustered around 1 mode (prices at or above 4x median income, affordability around 15-30%), and the rest of history clustered around what seems like a more stable equilibrium: prices around 2.5x median income, affordability around 50% (meaning, median income gets the median housing option).

Guess which mode today's numbers are closer to ? To argue that we are truly "at the bottom", you're essentially arguing that there was no bubble -- that the new mode represents "the new reality", and not a temporary departure from reality. I don't see how anyone who reads the papers or watches the news would be prepared to defend such a position.

[xmonger]

Originally Posted by Lusitan

At best (and I hesitate to use the word "best" given what this scenario means) nominal prices will stay flat from here on out, as inflation and hyperinflation ravage the buying power of a dollar for the foreseable future. But home values will continue to collapse, in real terms.

So your 500K house today may still be worth 500K in two years, but that 20K Toyota you're considering buying today will cost 50K in two years, and your 500 dollar monthly utility bill will be 1K per month. If you can't see that this means the value of your house is collapsing, then it's not worth having a discussion with you.

Home values will continue to collapse until they are back in line with historic norms. There is no way to stop it; the bubble was unsustainable for a reason, i.e., it cannot be sustained. No matter what Obama & Co. do.

Do what you need to do to protect your family -- nobody will be able to say they weren't warned.

You are going to lose the housing bulls with fancy economic terminology like nominal vs. real values.

I am curious about your last comment. If you had $1MM in cash equivalents today...what would you do?

[sholden]

Originally Posted by xmonger

I am curious about your last comment. If you had $1MM in cash equivalents today...what would you do?

Buy a 2 bedroom condo in Hoboken?

[JG183]

Originally Posted by Lusitan

your 500K house today may still be worth 500K in two years, but that 20K Toyota you're considering buying today will cost 50K in two years, and your 500 dollar monthly utility bill will be 1K per month. If you can't see that this means the value of your house is collapsing, then it's not worth having a discussion with you.

if I follow you, your example means to say that the money to pay for the inflated car price and inflated heating bill have to come from somewhere, and that somewhere is out of your home's equity ?

[Lusitan]

Originally Posted by JG183

if I follow you, your example means to say that the money to pay for the inflated car price and inflated heating bill have to come from somewhere, and that somewhere is out of your home's equity ?

Nope. You're darn right that the money needs to come from somewhere. But where, or, more accurately, whether the average person will actually find money to pay these bills is the problem.

And when the average Joe adds subtracts all of his monthly non-housing expenses from his monthly income (if he's lucky enough to have a job) he'll have much less left over to pay for housing.

We are facing a lower standard of living.

[JG183]

Originally Posted by Lusitan

Nope. You're darn right that the money needs to come from somewhere. But where, or, more accurately, whether the average person will actually find money to pay these bills is the problem.

And when the average Joe adds subtracts all of his monthly non-housing expenses from his monthly income (if he's lucky enough to have a job) he'll have much less left over to pay for housing.

We are facing a lower standard of living.

this all assume's that incomes won't increase at the pace of inflation, correct...?

[sholden]

Originally Posted by JG183

if I follow you, your example means to say that the money to pay for the inflated car price and inflated heating bill have to come from somewhere, and that somewhere is out of your home's equity ?

No it comes from the flood of dollars the Fed has been printing. Of course since incomes tend not to keep up a lot of people won't be able to afford gas to put in their car, let alone the car, or to heat their home.

It's only temporary, but it will be very unpleasant for the duration, that inflation collapses the dollar (or the dollar collapsing causes the inflation - depending on how you squint) which means all those cheap things from China aren't cheap anymore. And things produced in the US are suddenly cheap overseas - so an export driven production boom pulls the economy out. Just like the Chinese economy has been driven by exports, the trick is not to artificially keep your currency low like China has, that way the production for export will over time switch to production for domestic consumption.

The real bummer is that the US productive base was essentially sold off to the Chinese or destroyed to build wallmarts and starbucks stores. Rebuilding it will take some time, meaning the unpleasantness will last longer than it would otherwise.

But the US will recover just fine, and return to being an engine of the world economy. As long as the damn politicians stop trying to stop that from happening by supporting bankrupt companies that need to go under and release their capital to productive endeavors, trying to put up trade barriers at the worst possible time, and lighting a fire under inflation.

[Lusitan]

Originally Posted by JG183

this all assume's that incomes won't increase at the pace of inflation, correct...?

Yes.

JG, meet stagflation.

[JG183]

Originally Posted by sholden

incomes tend not to keep up

I guess I'll keep quiet then, because I must be one of the very fortunate few to work in a field where my salary is adjusted annually to keep up with the local costs of living...