Calling All California Real Estate Experts ...

[drshang]

Originally Posted by ndfmnlf

What is the population growth rate in Japan? It's -0.139% in 2008. That's minus 0.139%. Japan Population growth rate - Demographics Japan is losing people.

Meanwhile, the US population growth rate is positive 1%. The US is gaining people.

Japan has more restrictive immigration policies. The US has more liberal immigration policies. Japan has an older median age (43.8 years) of its people compared to the US (36.6 years).

These differences in demographics suggest a more favorable prospect for quicker recovery in the US real estate market compared to Japan's. Positive population growth rate through natural births and immigration and lower median age in the child-bearing and household formation years create higher demand for housing in the US. This is not the case in Japan.

Your analysis comparing the US to Japan is flawed.

In the long term, housing prices are tied to income levels, not population levels. I conceded in my analysis that the US and Japan's price situation is not really the same, but it serves as an important reminder about real estate recessions and the length of time they can take to unravel, and a warning that the US is not immune to a long term, bearish period in real estate prices.

My analysis is flawed, yes. But your analysis isn't even good enough to be flawed, it's simply irrelevant.

[ndfmnlf]

Originally Posted by drshang

In the long term, housing prices are tied to income levels, not population levels. I conceded in my analysis that the US and Japan's price situation is not really the same, but it serves as an important reminder about real estate recessions and the length of time they can take to unravel, and a warning that the US is not immune to a long term, bearish period in real estate prices.

My analysis is flawed, yes. But your analysis isn't even good enough to be flawed, it's simply irrelevant.

And please explain what income levels are tied to? Do incomes exist without people who have jobs? How do people get jobs? Aren't jobs the product of economic activity, i.e. the interaction between producers and consumers (also known as people)? Without people, there is no economic activity; without economic activity, there would be no jobs. Without jobs, there would be no incomes needed to buy homes.

Ultimately real estate prices boil down to the presence of people who create demand for goods and services, and yes, houses.

[drshang]

Originally Posted by ndfmnlf

And please explain what income levels are tied to? Do incomes exist without people who have jobs? How do people get jobs? Aren't jobs the product of economic activity, i.e. the interaction between producers and consumers (also known as people)? Without people, there is no economic activity; without economic activity, there would be no jobs. Without jobs, there would be no incomes needed to buy homes.

Ultimately real estate prices boil down to the presence of people who create demand for goods and services, and yes, houses.

This is all mostly true, but you're ignoring the fact that economic activity doesn't have to take place on a local scale. A large amount "value" and "income" generated by Americans and American corporations is the result of production and sales in areas outside of the corporate headquarters and all around the globe. The same can be said for Japan. People create economic activity, yes, but ultimately that doesn't drive the value of the home, it's wealth that drives the value of homes.

Population growth is incredibly high in cities in Brazil and Latin America, but real estate prices remain very cheap. Europe had a very large real estate boom over the last few years, despite many countries in the eurozone having very little population growth and a similar birth rate deficiency to that of Japan. If income stagnates and declines in America, real estate and other assets will exhibit deflation, regardless of population increase. Now, in localized markets where homes construction lags population growth, such as the oil sands of Alberta, Canada, you can see population growth and demand drive prices, but those short term corrections to a problem of short term demand. Once the demand for housing catches up with growth, and it does pretty quickly, you will see home valuations return to a pure income based model.

[sehnsucht5150]

Exactly the way it SHOULD be.. thats the key, yet to happen.

[ndfmnlf]

Originally Posted by drshang

This is all mostly true, but you're ignoring the fact that economic activity doesn't have to take place on a local scale. A large amount "value" and "income" generated by Americans and American corporations is the result of production and sales in areas outside of the corporate headquarters and all around the globe. The same can be said for Japan. People create economic activity, yes, but ultimately that doesn't drive the value of the home, it's wealth that drives the value of homes.

Population growth is incredibly high in cities in Brazil and Latin America, but real estate prices remain very cheap. Europe had a very large real estate boom over the last few years, despite many countries in the eurozone having very little population growth and a similar birth rate deficiency to that of Japan. If income stagnates and declines in America, real estate and other assets will exhibit deflation, regardless of population increase. Now, in localized markets where homes construction lags population growth, such as the oil sands of Alberta, Canada, you can see population growth and demand drive prices, but those short term corrections to a problem of short term demand. Once the demand for housing catches up with growth, and it does pretty quickly, you will see home valuations return to a pure income based model.

Japan has among the highest per capita incomes in the world and yet its real estate market has tanked for a long time. If real estate prices are tied to incomes, then your own example of Japan disproves your very point.

The developing countries of Brazil, Latin America, and Southeast Asia have "cheap" real estate. But cheap according to whom? Do the locals think their real estate is cheap? Do people in the Philippines (a rapidly growing Third World country) think their houses are cheap? Not at all. The homeownership rate in these places is quite low for the very reason that their real estate is expensive relative to their incomes.

Filipinos in the slums of Manila can't afford to buy homes in the same way that middle class Americans in Los Angeles can't afford to buy homes. The common denominator is that Manila and Los Angeles are both densely populated cities where there is lots of competition for homes, driving the prices of homes upward. It's basic economics - supply and demand.

[drshang]

Originally Posted by ndfmnlf

Filipinos in the slums of Manila can't afford to buy homes in the same way that middle class Americans in Los Angeles can't afford to buy homes. The common denominator is that Manila and Los Angeles are both densely populated cities where there is lots of competition for homes, driving the prices of homes upward. It's basic economics - supply and demand.

Real estate is cheaper in poor countries because people in those countries make less money, which is exactly my point...

Japan real estate has tanked because the prices were not in line with incomes...

Your own post is the exact same thing as mine...income drives real estate...income drives corporate valuations...income drives the value of pretty much every single asset...it's finance 101.

[f_m]

Originally Posted by RCLL

Dont be fooled that once prices have stabilized and prices hit rock bottom that you will be the only one bidding for a great piece of property. There will be investors looking for income producing properties, such as duplexes at a down rot low price in great areas. By the way someone should monitor that property on the OP to see when it sells and for what price. That could be a great guage of what the market is like there.

When I looked, it says pending.

[ndfmnlf]

Originally Posted by drshang

Real estate is cheaper in poor countries because people in those countries make less money, which is exactly my point...

Japan real estate has tanked because the prices were not in line with incomes...

Your own post is the exact same thing as mine...income drives real estate...income drives corporate valuations...income drives the value of pretty much every single asset...it's finance 101.

Real estate is not cheap in poor countries. From the point of view of the citizens of poor countries, their real estate is definitely not cheap. Few people own land and homes. Most of the real estate is owned by a handful of landholding elites. The upper middle class who can afford to buy homes are a very small segment of the population. The rest of the people are renters or squatters.

As an example, in the Philippines the median annual income is about 100k pesos, while the median house price is about 500k pesos. These numbers are based on my observations from having visited there and from econ stats published by the Philippine government. The income number may be overstated as this may not include the really poor peasants who live in the peripheral countryside. The 1:5 ratio of income to house price is much more unaffordable than the 1:3 ratio Americans are accustomed to.

I bet that a Mexican illegal has a higher chance of owning a home in the US than in his own country of Mexico - another example of how expensive real estate is in Third World countries when you base it from the point of view of Third World incomes.

[RCLL]

Originally Posted by f_m

When I looked, it says pending.

I'm not surprised. A great home in a great location, around million dollar properties. Even in the worst case scenerio economy, having a long term strategy aaand living in it seems like a great buy. I thought about exploring this area, but I love my short commute.