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This week's Barron's has cover story on this being bottom. Today's WSJ has article strongly argueing to let Fannie and Freddie go buh-bye. Hit to Treasury would be smaller than S&L crisis. Of course that assuming that only non-current loans are forgiven. Somehow I think a whole lot of FHA borrowers would decide to stop paying if the media made a big enough story about this being a bail out. Funny how that works AGAINST really fixing things...
Helicopter Ben testified this morning that the economy and real estate should turn around and see modest growth again by 2010.
This coming from the eternal optomist, the guy who said that "sub-prime was contained" a while back and he also said not too long ago that "inflation was well-anchored".
Of course, now he's singing a different tune about the economy and inflation being problematic.
My point is, if Bernanke says 2010, then you had better brace yourself b/c it will be longer than that.
'The fact that you have never heard of Kiawah (KEE-a-wah) Island really puts it into perspective for me. I think I get why we will never see eye to eye- you just are not living in the same "lifestyle" as we are, so I get that it's hard for you to understand how economics work differently for different situations. I think the "who's *i#k is bigger" contest has been won.'
That fact that you don't understand sarcasm makes me understand how uptight you are. I heard of the island you arrogant, pompous pr!ck. Not living the same lifestyle.. LMFAO. We all now know who the real condascending a-hole is on here. As far as the contest, there is no way for you to win. How is it possible for such a 'pu$$y' that posts in collaboration with his wife (and prob has her sign off on posts) win a biggest d!ck contest.
I don't really care about FMV's personal life. They (husband and wife) have been very open about their situation on this board, which I appreciate. Still, I am more pessimistic regarding real estate prices here in Chicago than they are.
I basically agree with much of what you are saying with regards to where real estate prices are headed, down, and at least for a little while longer (12-18 months I predict).
That black eye comment for women still seemed weird, whether you meant it in jest or not.
FMV,
That last post was condescending. Sorry, but I call it as I see it.
Mojo,
You make a good point about Bernanke. If he is saying 2010 for price recovery it could be awhile. Maybe it will be longer than the 12-18 months I am predicting for bottom or prices will bottom and then stay stagnant for 1-3 years before actually going up again. Time will tell.
As I have said before, I don't worry all that much about the "great big soup" of all housing prices. I think some markets will fall, some will hover, and others will see small gains and the AVERAGE will be much flatter than most people are used to but that is to be expected give the long long rise. Most of the "big hits" are behind most people, but there are certainly plenty of ways that more big hits can keep coming. The driver for these things are partly macro-economic but also psychological. There are plenty of events that could happen to dial up the drama OR make the fundamentals worse, especially over the next 18 months. (can anybody say "election"???) When you look at the sorts of things that the FHA did with Jumbo caps there is a lot of lag that in the system. While this sucks for people who want/need to sell/buy RIGHT NOW a slow moving market is generally safer. If buying in a falling market is like "catching a dropped knife" then when prices are RAPIDLY moving it is like trying to catch one not just dropped but flung down with great force -- much likely to result is serious damage, probably splattering the bystanders with all manner of blood and viscera...
I don' think Bernake is just being a cheerleader, the reality is that some major shocks have been dealt with in pretty creative ways. He has "his sea legs" to a certain degree and just as Greenspan was able to walk a fine line between causation and reaction Bernake seems aware that there are many things he and FRBOMC can do/ say, along with the Treasury Sec, to get people to behave in ways that will allow them to leave intrest rates alone as much as possible. Stability is a wonderful thing...
But the FED is overcompensating and purposely trying to inflate its way out of this.
Then why isn't it showing up in the money supply? Again sort of hard to claim there is hard core inflation when 1.) The money supply is weakening, 2.) Credit is weakening.
Quote:
Every single bailout that the FED introduces is inflationary.
If $10 billion in credit/money was destroyed and the FED then injects $5 in credit/money into the system then the action is not inflationary. The amount of credit made available by the FED is less than the credit that is being destroyed throughout the market.
Quote:
I still haven't heard a good argument from you about why the price of food, energy, and consumer "necessities" are increasing as a result of this so called deflation.
Again, I never stated this was the cause. Food and energy aren't going up because deflation, but the increases appear to have little to do with actual inflation either.
Quote:
Of course, now he's singing a different tune about the economy and inflation being problematic.
Perhaps you don't understand the jobs over at the FED. They aren't there to speculate about the economy, everything they say in public is purely data driven. They will say subprime is contained until the data clearly shows its not. They will say we aren't in a recession until we are officially by definition in a recession. That is their job. It would be rather bad if the folks at the FED speculated about the economy in public.
But anyhow, Humbolt1 I still haven't heard how real estate is going "recover" in real terms.
Then why isn't it showing up in the money supply? Again sort of hard to claim there is hard core inflation when 1.) The money supply is weakening, 2.) Credit is weakening.
If $10 billion in credit/money was destroyed and the FED then injects $5 in credit/money into the system then the action is not inflationary. The amount of credit made available by the FED is less than the credit that is being destroyed throughout the market.
Again, I never stated this was the cause. Food and energy aren't going up because deflation, but the increases appear to have little to do with actual inflation either.
Perhaps you don't understand the jobs over at the FED. They aren't there to speculate about the economy, everything they say in public is purely data driven. They will say subprime is contained until the data clearly shows its not. They will say we aren't in a recession until we are officially by definition in a recession. That is their job. It would be rather bad if the folks at the FED speculated about the economy in public.
But anyhow, Humbolt1 I still haven't heard how real estate is going "recover" in real terms.
Wow Humanoid,
I actually agree with you on these points about the Fed and inflation (global)/deflationary (domestic) environment. Mircea puts it more elegantly in his post in the Finance/Business Forum: http://www.city-data.com/forum/busin...ml#post4469801
On interest rates they are reacting to the data vs. guessing on what might happen, ie speculating. In the most part, I think the Fed is doing a good job considering how hard it is to stabilize an irrational market.
As far as the markets recovering... I outlined the steps in a couple posts earlier. RE can also increase in value if overall economic growth occurs and the underlying "value" of US assets increase. In the long term, I think the US still has a lot of innovation, growth, and leadership ahead. Hence, a potential rebound in asset prices based on economic growth instead of inflated prices via easy credit.
With our currencies at the lowest levels on record against most others, it'll be easier for us to catch-up versus being the one caught up to. I have faith in America and Americans in their ability to "catch-up" with our global counter parts as they start getting their taste of rampant consumerism and we sober up from our debt reliance.
Production and Productivity = Growth = increase in asset prices = increase in RE and our overall well being
Hence, a potential rebound in asset prices based on economic growth vs. inflated prices via credit.
Economic growth will surely effect stocks etc, but how economic growth effects housing is unclear. If wages go up than that could effect the housing situation, but its unlikely wages are going to go up in a dramatic way as they are dragged down by global wage arbitrage. Not only that wages just tend to go up with inflation even during periods of economic growth. So, lets say prices go down some more and things become affordable.
Without wage increases above inflation how exactly will there be a rebound? Are people going to decide they want to reduce their standard of living and start paying more for a house? Anyhow, I don't see any mechanism that would cause a rebound minus another rapid expansion in credit. But, another such expansion isn't going to happen for a long time (These things seem to happen every few decades....).
The fact of the matter is what happens in the housing market over the next couple of decades is going to depend greatly on the attitudes/desires of the 20-30's group. I just don't see this generation driving up real estate like their baby boomer parents did. Baby boomers had this odd habit of "moving up" in the housing world every 10 years or so, this behavior drove up prices. Oddly the generation before them tended to stay in the same house most of their lives. Regardless, the point is that even after real estate bottoms it may never behave like it did when the baby boomers reigned. So not only will there be no rebound but buying a house will become want it use to be, buying a house not some half baked investment.
Quote:
As far as the markets recovering...
If we are talking about the credit markets, they aren't going to recover if by that you mean return to their previous state. They will stabilize sooner or later, but they will be greatly transformed. Mortgage securities just may well be a thing of the past.
Economic growth will surely effect stocks etc, but how economic growth effects housing is unclear. If wages go up than that could effect the housing situation, but its unlikely wages are going to go up in a dramatic way as they are dragged down by global wage arbitrage. Not only that wages just tend to go up with inflation even during periods of economic growth. So, lets say prices go down some more and things become affordable.
Without wage increases above inflation how exactly will there be a rebound? Are people going to decide they want to reduce their standard of living and start paying more for a house? Anyhow, I don't see any mechanism that would cause a rebound minus another rapid expansion in credit. But, another such expansion isn't going to happen for a long time (These things seem to happen every few decades....).
The fact of the matter is what happens in the housing market over the next couple of decades is going to depend greatly on the attitudes/desires of the 20-30's group. I just don't see this generation driving up real estate like their baby boomer parents did. Baby boomers had this odd habit of "moving up" in the housing world every 10 years or so, this behavior drove up prices. Oddly the generation before them tended to stay in the same house most of their lives. Regardless, the point is that even after real estate bottoms it may never behave like it did when the baby boomers reigned. So not only will there be no rebound but buying a house will become want it use to be, buying a house not some half baked investment.
If we are talking about the credit markets, they aren't going to recover if by that you mean return to their previous state. They will stabilize sooner or later, but they will be greatly transformed. Mortgage securities just may well be a thing of the past.
A growth in the US economy and a return back to basics (ie manufacturing, production, innovation, etc.) will raise the median household income. After all if more people are working (especially in production functions), then the median income should rise accordingly (a return of a larger middle class through manufacturing, and an increase of an upper middle through innovative jobs and an exchange of services). I'm not even talking about labor arbitrage, I'm talking about more people having jobs and jobs with competitive wages (which would shift the median higher). Production jobs vs. service jobs like fast food and retail, etc (we can let our teenagers have those jobs back).... I'm sure manufacturing pays more and is better for the economy. A change in the type of jobs will affect median incomes.
It's already happening now, all those who lost jobs in Michigan can move to Alabamba, Ohio, Georgia and soon Tennessee to work for Nissan, Kia, Toyota, Honda, VW, etc. and hopefully if GM and Ford gets back on track more production workers can work back in Detroit. In the Dakotas, Montana, etc. Oil production jobs abound, and wages are increasing there. California needs to be the leader in green tech and clean technologies as well as logistic centers for exports... we have the skills and the landscape for it as well as the technology. California and Washington should benefit out of the recent Boeing plane orders.
" He emphasized that sales continue to break records, with almost 900 orders to date. As of today, the program has 896 orders from 58 customers, including yesterday's order from Etihad Airways" http://www.marketwatch.com/news/stor...D%7D&dist=hppr
Therefore, if median income rises, then more people can afford houses. The fundamentals align with the price of housing and assets. So, if median income rises, so shall housing prices.
Demographics wise, looking at the Parenting forum, it appears that most people entering into parenthood prefers the suburbs and living in houses: CITY vs SUBURB
Although this is just a forum, I'm sure there are stats that show the same propensity of parents toward housing and the suburbs.
And, I totally agree that typically housing should not be considered an "Investment".
-chuck22b
Last edited by chuck22b; 07-15-2008 at 06:49 PM..
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SoCal
