Bits Bucket And Craigslist Finds For November 29, 2006
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
To donate by mail, or to otherwise contact this blogger, please send emails to: thehousingbubble@gmail.com
PayPal is a secure online payment method which accepts ALL major credit cards.
Links
-
April 2024 M T W T F S S « Sep 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Photo Submission: hbbphotos@gmail.com
View the HBB Photo Gallery *updated 4/13/2008
In the wake of yesterday’s bad Massachusetts housing numbers, The Boston Globe is calling the bottom.
http://www.boston.com/business/articles/2006/11/29/end_of_housing_decline_near/
“Drops in price and sales moderate, hinting market may be starting to stabilize…”
I suspect you’ll see the same “wishing” article published, month after month for the next 18-24 months, with the numbers changed around.
Yep, That’s like me quoting the used car dealer down the street about the quality of his cars……………
Just like some free world leader saying “it’s not a Civil War”, just a neighborhood gang fight, with 130,000 Americans playing referree.
David,
If we don’t fight them there, we’re going to have to fight them here. Which would you choose?
same bs that was said about Hanoi taking over SVN. It is possible for military actions to make things more unstable, you know, and with the asymmetric capabilities of the enemy it’s in our interest to find solutions that stabilize the situation not enflame it.
LipnAZ,
It’s fine to be pro-(Iraq) war. You have plenty of company. However, creating false either/or dichotomies, when in fact there is a wide array of possibilities, doesn’t further the debate.
“If we don’t fight them there, we’re going to have to fight them here. Which would you choose?”
Which “them?” Do you mean the terrorists who flew airplanes into the WTC?
O realy?
I did not know Iraqis were trying to take over America or even ever had plans to. What do you know LipnAZ that no one else does? Come on, spill the beans!
First of all, I’m not exactly “Pro Iraq war”. I wish that this war could be avoided, but in my opinion and the opinion of many others, this is a World War that will have to be fought now or in the future, at their location or at ours. I think it’s a better strategy to go after them rather than wait for the next 9/11 which could include dirty bombs, suitcase nuclear bombs, biological incidents, or whatever.
Evidence that this is a world war?
The people that flew the planes into the twin towers are the same people (Islamic Fascists) that bombed the trains in Spain, bombed the trains in London, bombed the night club in Australia, caused riots in France, and on and on.
Why do they do it? Because they hate us, they hate our way of life, they hate our freedom, and they’re convinced they’re doing their God’s will. These people will not listen to reasoning and will not stop attacking us.
Audet, I am not the only person that thinks this. I obviously have different sources of news than you do. I can hear your side without trying because it’s all available through the MSM, but do you listen to the conservative side? You know we just might be right.
Please forgive me for voicing my opinion, but I see the cheap shots all the time and sometimes I can’t resist. I will cease any political replys from now on.
Here’s an idea - don’t let them come here in the first place, then we don’t have to fight them at all.
A few bombs and crashed planes/buildings, as horrific and tragic as they are/were, are no threat whatsoever to the overall security of out nation. None.
The US army researched dirty bombs for their own use years ago and apparently determined that they aren’t effective(something about having to stand on the shards of the radioactive material for over a year to get fatally exposed). The suitcase nuke is probably more myth than reality. If I had to guess I would say that’s probably because of the minimum size for the shaped charges plus fissile material to create a critical mass probably wouldn’t come close to fitting in a suitcase.
The bio attack might be more realistic, but other than mailing anthrax powders around, very hard to develop, and if they did, they wouldn’t have to “come here.” They would just have to infect people at any busy airport with passengers bound for the US a la the movie “12 Monkeys.”
Of course I obviously have different sources of news than you do….
And sorry for joining in the threadjack….
can we leave off the political cheapshots plz? I come to this blog for schadenfreude and data not juvenile idiocy.
not idiocy, so much.
just discussions that should live on another blog
agree with you about the data that is presented here. It is invaluable for anyone considering a home purchase.
Amen, Troy.
Here here! In fairness though, people’s general feelings on security/threats do have a real impact on things like homebuying decisions.
If we don’t fight them there, we’re going to have to fight them here. Which would you choose?
Hey LipnAZ, when you make statements like that, does it make your lobotomy scars throb? Our invasion and occupation of Iraq has created far more terrorists than it’s killing, and has been a godsend for the Islamic extremists. All the mindless, discredited reasons for getting into Vietnam and staying there well beyond logical limits are being recycled for Iraq. Morons actually believed things like, “I’d rather be fighting the Communists in Vietnam than Chicago.” Such statements revealed an abject ignorance of local history and realities. When we pulled out of Vietnam (and abandoned a corrupt, unpopular regime to its fate), guess what happened? Instead of showing up in Chicago, the Vietnamese Communists invaded their not-so-brotherly Cambodian Communists, and were then invaded by the Chinese Communists. Historic emnities trumped any anti-US sentiment once we pulled out and quit trying to impose our will on the region.
I suggest you read an excellent book called IMPERIAL HUBRIS, written by a former top CIA analyst who appears to be far wiser than you are.
Luv ya Sammy
Anyone who truly believes we invaded Iraq to “fight terrorism” on foreign soil vs. US soil needs to wake up. I will support the idea that the intent for the invasion of Afganistan was fighting terrorism, given the Taliban was providing shelter and resources to Al Qaeda and the proof was clearly evident to all.
However, the invasion of Iraq had no basis in the fight against terrorism. It was done as a hedge towards securing oil resources for the largest single consumer of oil in the world. It had the secondary benefit of providing a proof-of-concept for the neo-cons desire for “Nation Building” and spreading democracy in the middle east as well as providing a launching point for any incursion against Iran (and the threat thereof, which is just as important politically and strategically).
Anyone who has an understanding of chess knows that you don’t plan one or two moves ahead, you plan three or four moves ahead. To think that the best and brightest type-A personalities which lead this country don’t think in those terms is foolish. Iran with the A-bomb and China’s growing economic/military power and it’s growing need to secure oil resources in competition with the US are the threats that keep the White House politico’s up at night.
To quote one of my favorite authors:
“I see plans within plans…” Frank Herbert, Dune
What does “stabilize” mean anyway?
Does it mean “stagnant”?
Does it mean prices move up with inflation?
Does it mean appreciation?
Not stabilize…”may be starting to” stabilize. And when it doesn’t (which I think we’re all in agreement it won’t), the tune will change yet again.
So much CYA right now it’s pathetic.
I think it means the rate of home price decline in Mass has stabilized at 6.9% down YOY.
End of globalization near?
Has the flow of jobs to developing countries of China, India and Eastern Europe ebbed?
Does 2 + 2 = 5?
Do financial journalists do their homework?
Here is a little ditty that speaks to the overall picture with RE as the focal point.
http://news.goldseek.com/CliveMaund/1164816180.php
Hey Auger, who do you use for mobile internet satellite?
Hey Fred, I’m using a verizon broadband card. I don’t need a lot of speed and it is sufficient for my needs. The satellite internet companies are improving that product and I may switch to that technology at some point in the future.
“”Some pretty intelligent people are now buying stocks… Unless we are to have a panic — which no one seriously believes, stocks have hit bottom.”
- R. W. McNeal, financial analyst in October 1929.
Inventory still growing statewide in Florida.
Buyers are still waiting to see what happens. Looks like they will reap the rewards for waiting.
http://www.orlandosentinel.com/business/orl-homes2906nov29,0,6083351.story?coll=orl-home-headlines
bank´s willingness to lend consumer loans
this indicator has shown the last 4 periods of equity market shake-outs – 1990, 1994, 1998 and 2000
watch the chart for 2006……
http://www.immobilienblasen.blogspot.com/
The credit bubble will burst when the banks step back from their lending spree. That is the real end game.
Exactly, it’s not so much a real estate bubble as a credit bubble. As soon as people making $40k can’t get a loan for $500k then prices will really drop, or sales will totally stop.
I’m taking a poll on how much of a premium you think Californian real estate deserves compared with the rest of the country.
http://louminatti.blogspot.com/2006/11/how-much-should-california-real-estate.html
No flamage is intended, I am just curious what you think the premium (if any) should be.
25% at least.
Yea, I’d have to agree with the 25%. Coastal I would say 35%
25 to 35 % premium IMO with more for the ocean locations . You still have the affordability issue in California and a huge real estate industry job base .
You can still buy a in expensive home in California….Take a look at Weed or Tule Lake….
Its about jobs bottom line, that take it to the extreame…50% +
Personally, you couldn’t pay me enough to live in any part of California unless the government and culture change completely. Parts of it are beautiful, but most people don’t live in the beautiful parts and pay dearly for the privilege of being loosely associated with the beautiful parts.
Absurd transportation costs and many other cost premiums are built in before you even consider buying. If you buy you are paying a built in tax premium to subsidize the Proposition 13 rights of existing homeowners.
My list would be as follows:
Negative 10% for most of the central valley.
5-50% for nice areas without any special job opportunities, depending on actual views or other nice features of the property.
Same premium plus whatever would allow a person earning 10% above the local median income to buy the median house for areas with special job opportunities. Note: this probably won’t add anything for most of the urban areas because the special job opportunities are really a miniscule fraction of total jobs.
“And all the stars that never were are parking cars and pumping gas.”
I am always wondering why CA costs so much more than FL, which has better winters (I’ve lived in both) though sticky summers. One possible answer lies in the tax structure: people in high-tax states have more motivation to bury their money in RE or to get big interest deductions. Or, one could blame the loose lending practices in CA, but I believe they are more symptomatic of the speculative bubble than causative. Also, I guess CA has more restrictions on building than FL. My verdict is, CA “deserves” ZERO premium over FL, though both deserve a large premium over (let’s say) Montana.
Having lived for long periods of time in both CA and FL I can tell you - CA has *way* more to offer in general, for most people. Florida has better water activites (beaches, boating, etc.) but that’s it. CA has much more outdoors with the mountains, forests, scenic coast, national parks etc, and also has way more job opportunities, e.g. Silicon Valley etc., which is probably a bigger reason for the Cali housing premium over other states. Overall the weather in CA is better than most places, though in many cases it’s personal preference (e.g. some people don’t like winter, some do).
So I think it’s mainly a supply and demand thing - there’s just more of a desire to live in CA than most other areas. Supply is also a factor, because CA has more strict development regulation/limitation than most areas as well. In the more expensive areas - anything west of the central valley - there actually isn’t much land to build on, because a high percentage is reserved open space or parks.
Trying to sell that San Diego condo, are you?
Ha ha - no. I sold my SFH and moved out of northern CA 6 months ago. Got pretty lucky actually - sold right as the inventory started building.
As much as can be said about the crazy goings-on with the human element in CA, one can’t deny that it’s an awesome state to live in from a natural environment perspective. I’m just stating that I think that’s the primary reason why it’s more expensive there.
Comparing California to Florida is wrong. The right comparison is to compare California to the whole Atlantic coast from New York down to Florida (San Francisco is the west coasts economic version of NYC, etc.)
I am bi-costal, spending about 3/4 of my time in CA (my primary legal residence) and 1/4 in Florida.
California, while very expensive tax wise, is MUCH MUCH MUCH better than Florida. The crime here in Sunnyvale is non-existent. In the Orlando area where I spend my other time, it’s about 2x the national average.
And the weather in CA is much better. Also no mosquito problem, termites are more manageable, etc.
“I am always wondering why CA costs so much more than FL.”
It’s spelled H-U-R-R-I-C-A-N-E.
E-A-R-T-H-Q-U-A-K-E
One thing is for sure — God had something interesting in mind when he put the most desirable real estate into the path of the worst disasters…
T-S-U-N-A-M-I
more likely to wipe out the NW coasts but potential exists for CA
plus
M-U-D-S-L-I-D-E-S-
W-I-L-D-F-I-R-E-S
F-L-O-O-D-S
You pick your ground very carefully in the central valley. I was in Sacramento in 1995 and 1996. Lots of this new construction is located in some interesting areas.
and for Philadelphia:
J-O-H-N S-T-R-E-E-T
A bummer sticker I have long thought of creating:
Welcome to California!
Drought. Fire. Flood. Drought. Fire. Flood. Drought. Fire. Flood. Earthquake. Drought. Fire. Flood.
AND we are due…Last one in 1989…..
Loma Prieta (1989) for bay area, Northridge (1994) for LA. Yeah, we’re overdue.
You all with you tsunami and earthquake crap have got to be kidding. Do me a favor and look up the list of most expensive natural disaters in U.S. history, both lives and cost.
http://en.wikipedia.org/wiki/1906_San_Francisco_earthquake
The San Francisco earthquake of 1906 was a major earthquake that struck San Francisco and the coast of northern California at 5:12am on Wednesday, April 18, 1906. The most widely accepted magnitude for the earthquake is a moment magnitude (Mw) 7.8; however, other values have been proposed from 7.7 to as high as 8.3.[1] The mainshock epicenter occurred offshore about 2 miles (3 km) from the city. It ruptured along the San Andreas Fault both northward and southward for a total length of 296 miles (477 km).[2] Shaking was felt from Oregon to Los Angeles, and inland as far as central Nevada. The earthquake and resulting fire would be remembered as one of the worst natural disasters in the history of the United States. The earthquake and fire are the greatest loss of life in California’s history.
Now imagine that same earthquake not with a population of 410,000, but millions.
The current population of San Francisco is about 800,000.
Legends validate quake theory
By Elizabeth Murtaugh
The Associated Press
When scientists figured out that seawater drowned groves of tall trees up and down the coast of Washington state the same year a tsunami hit Japan, they theorized that a massive earthquake in the Pacific most likely triggered both events.
Based on Japanese records, scientists were able to pinpoint a date — Jan. 26, 1700 — and estimate that the rupture of a long stretch of seafloor had caused a magnitude 9 quake, which would be the largest known temblor to strike what is now the contiguous United States.
http://archives.seattletimes.nwsource.com/cgi-bin/texis.cgi/web/vortex/display?slug=quakemythology14&date=20020714&query=cascadia+indian+legends+1700
Listed by 2005 inflation adjusted cost
Cost
(billions) Name Year
$81.2 Hurricane Katrina 2005
$44.9 Hurricane Andrew 1992
$20.6 Hurricane Wilma 2005
…
http://en.wikipedia.org/wiki/List_of_notable_Atlantic_hurricanes
Great link, listed by loss of life…
1 “Great Hurricane” 1780 22,000
2 Mitch 1998 11,000 – 18,000
3 “Galveston” 1900 8,000 – 12,000
4 Fifi 1974 8,000 – 10,000
5 “Dominican Republic” 1930 2,000 – 8,000
“Great link, listed by loss of life…”
Quite irrelevant for comparison purposes or for measuring today’s disaster risk. You see, there has been a bit of population growth since 1780 (over 300m last time I checked) plus a bit of westward migration which implies that the next time Seattle has a 9.0 magnitude quake, there could be a bit more loss of life and property than back in 1700.
Obviously if we get that once every 300 years event we might be screwed, a 25% chance during an average lifetime, but then if we include the risk of living on the correct 50 miles of a 1000 mile coast line, (5%) we get 1.2% overall probability.
My point is that hurricane season comes every year, and almost every year there is significant damage if not loss of life. There is no earthquake season, I could very well live to 100 without feeling a mag. 8 tremblor beneath my feet. If I lived in Palm Beach how likely is it that I’d have the opportunity to witness the destruction caused by a cat. 5, not once, but multiple times in the same 100 years.
If a Californian builds a house to code and makes it earthquake ready with straps etc. there is very little chance of loss of life or injury due to earthquake. Ditto for major structural damage. Very few of the homes seriously (non-cosmetic) damaged by Northridge were built to current codes.
“…but then if we include the risk of living on the correct 50 miles of a 1000 mile coast line, (5%) we get 1.2% overall probability.”
But there is the rub, because the probability of large-scale disaster is not uniformly distributed along the coast, but rather it is highly concentrated in the places where people most prefer to live (SF, LA and Seattle and Vancouver to name four).
I was thinking about Cal v. Fla too. Only places in Florida that I would place a premium on are places like Sanibel or Captiva.
Having just moved to CA from FL, I prefer, personally, CA…. Much more variety of things here, better summer weather, better drivers, more opportunity, you can actually get a contractor to show up on time and do honest work, etc.
People seem to forget how huge of an economic turbine the entertainment industry is here in SoCal… Film, TV, Music, etc…. it’s not just the stars who make money, but all their agents, lawyers, publicists, cinematographers, engineers, editors, etc., etc.
Aww… c’mon, guys. Everyone knows Kalifornia is Blue State Paradise. Every homedebtor here deserves a 300-400% premium over every other state (except NY, HI & Boston –a 200% premium over those places if fine).
The OC charts posted by analysis guy show an 8-30% premium over the last 30 years in household income to service mortgage debt for Orange County, CA.
http://www.paperdinero.com/reports/OC2006Q2.PDF
In my mind on this ratio/metric low teens (10-14%) premium in percent of Household income to service mortgage debt.
BTW, the premium is currently at 30% an all time high.
100% - 200%
Average San Diego December Temp: 68°
Nice try. The same could be said for most parts of Florida, but amazingly, even they don’t have price-to-income multiples of 10-12X in most cities, or PITI-to-monthly rent multiples of 2-3X, even despite the huge bubble increases of the last 6 years.
Mild weather (along the beaches) justifies 100-200% premium? All for the privilege of 2-3 hour commutes, perma-gridlock, high taxes, lousy infrastructure & schools, pollution and being surrounded by teeming “diversity? No thanks –I’ll take the crappy weather any day.
So there I am, sitting there eating my bowl of cereal and watching Good Morning America when they started talking about the housing market this morning. Robin Roberts was on there along with one of their “financial analysts” and they gave tips to ppl in the market. For sellers, price reasonably or rent. But this is what lit a fire under my ass, Roberts goes on to say “So what should buyers do? Buy now or be greedy and keep waiting?” WTF!? Greedy buyers!? @_@
How dare buyers wait for a reasonable price!! We should stop being greedy and overpay the seller.
Robin Roberts is as smart as she is pretty. That means she looks like a dude.
that was hilarious
Lol
The Boston Globe article doesn’t discuss affordability. Until you see article saying that affordability has gotten much better, we won’t see real increases.
Press article concerning condo auction in Wildwood, NJ. Original asking price in the 600’s. Starting bid for auction in the 300’s.
Rah-rah. Was it you (a couple of days ago) who said “Wildwood is toast due to blue-collar spec/flippers from Phila” ? A Cape May realtor was telling me a story about some poor soul who bought a Wildwood condo for $819K recently and can’t sell it for $575K.
Yeah Az. I’m a couple of towns up the coast.
Ocean City?
Wildwood? At those prices? Fuggedaboutit!
California’s too big a state to have a blanket statement like that. Some parts 2 miles from the beach I wouldn’t think about paying over $100,000. I worked near the Exxon Mobile refinery in the South Bay and there are POS homes there with views of the big cylindrical tanks.
Newport coast: I would say houses with ocean view should be no more than $1,000,000. Dana Point: Houses should be topped at $500,000. San Luis Obispo/Cayucos/San Simeon - houses with ocean view should be no more than $300,000. Coastal Los Angeles: Ocean view houses should be no more than $500,000 (smog should keep the prices down below Newport Coast). Phoenix: houses should be on the average no more than $200,000. Victorville: Houses should be no more than $100,000 on the average. Fresno: Houses should be no more than $125,000, on the average. El Centro: Houses should be no more than $85,000, on the average. the smaller the town and greater distance large cities, the lower the price, even if it’s ocean view. JOBS and INCOME mean something.
I’m qualifying this by saying houses less than 5 years old, quality construction (e.g. 2 X 6), 1500 square feet or more.
I think you gave Phoenix to much and San Luis Obispo with a ocean view to little ,only 300k ,(15 years ago that would be the price ).
I agree with you that jobs and income mean something .
I recall no property in SLO with an ocean view, but my recollection of the 5 years I spent there is a bit foggy. There were some pretty good views (flying over in a hang glider) at Pirate’s Cove though, I’m quite certain of that, and I’m not talking ocean views. Phoenix median should be closer to 150K. Scottsdale should be 250K, but this is a WAG..
Girl I play golf with finally sold her house in Cave Creek (North Scottsdale) 1700 sq ft on a wash with a veiw fence, built in 2001. Started with a price of 419K. Several price reductions latter was priced at 349K. Sold for 330K. The same floor plan sold in Feb 2006 for 420K. That’s a reduction of 90K or 22% in 8 months. Scottdale will fall just as hard as Phoenix.
Phoenix is phvcked.
My prediction is Phoenix drops at least 60% off peak 2005 prices, and I’m sticking to it. I know this market very well.
AZgolfer ….The point is did you beat her at golf or not .
I’m wondering if your friend made any profit at all on that POS with that kind of a drop .
She bought the house for 190K in 2001. She got devorced and had to buy her ex out. At what price I do not know. She used to brag about the rising value of her house. Ha Ha! She bought a Toll Bros condo at the peak of the market for 400K (took almost a year for it to be built). I wonder what she will think when they start to lower the other condo units and she realizes she got skrewed on two real estate deals. AND she is a crappy golfer (really bad swing) and I always beat her!
Fred,
60% is quite a drop. You have to remember Phoenix will always be the recipient of CA refugees, like me.
I think 35-40% off the top in mid 2005 is closer where the prices will drop. Of course, this is part opinion and part “hope”.
LipnAZ
I agree with you. I think 35 to 40% off the top is going to happen to people who have to sell here in Phoenix. 60% would put the cost of renting higher than buying and I don’t know if that will happen. My wish is to live in a nice house on a golf course. I hope my patence pays off.
“60% is quite a drop”
Yep, but this is the mother of all asset bubbles. Phoenix median price increased about 150% from 2000 to 2005, so 60% would simply represent an approximate reversion to inflation adjusted mean. In addition, the quality of life here worsens with each new refugee, especially as a result from those from south of the border. Consider the fact that in Maricopa County, the population is currently 3.6 million, and if I recall, is projected to double in less than 20 years. It will take that long for infrastructure to catch up to today’s needs. I could go on and on about the mess here. I’m outta here after 28 years. The only thing I’ll miss is all the golf courses. Remind me, why are people leaving California?
And besides, my view is not limited to a real estate bubble. I expect some serious global macro-economic issues will make any “rational” view of real estate values in Phoenix a moot point. I suppose my prediction may come across as unrealistic, but I did spend 20 years here as a real estate investment broker and property manager.
A 60% drop is very realistic. I know I’ve told ya’ll my story before, but let me bore ya’ll once again. I bought a condo Aug 1989 from HUD for $23.5k (PITI + HOA = 288). Previous owner paid $52k in 1985. I had to rent it out in Jan 1990 (chose to go back to school full-time and could not afford payment). Rented it out for a whole whopping $300/mo. Also, 61.8% is a typical fibonacci retracement.
I forgot to mention…this was in Chandler, AZ
Hey Fred, I thought Sheriff Joe Arpaio was rounding up all the undocumented persons in Maricopa County and throwing them right in the slammer so they couldn ‘t send home any wages. Isn’t that the tent jail somewhere down in the south part of the state? So how do they end up in the Maricopa population figures? Just asking, my business is in Pinal.
Hey, wave at the hang glider everybody! No, I mean with your hands and arms!
this should make everyone ill
NAR Thinking Big for 2007
So to sum it up, the NAR wants the newly elected idiots to give, subsidized insurance, eliminate a 3% downpayment for FHA (federally funded FHA option ARMs here we come!), increased loan limits to even more ridiculous multiples, reduce limits for 40 year mortgages, allow reverse mortgages to become even more predatory, and try to ensure the remaining 30% of Americans who dont have homes, get subsidized so they can have their piece of the American dream.
Shoot me now. What’s worse is the buffoons voted into office will buy into this garbage and turn it into law. Your tax dollars hard at work.
Voters got what they wanted. A Nanny government. Traditionally, the rainbow coalition party, the party of “victims,” the party of “fairness” (read, stealing from the “will dos” and giving to the “will nots”).
We had to throw the criminals out.
That happens *every* time Congress changes hands.
“We had to throw the criminals out. ”
True. But we were dumb enough to replace the old criminals with hard core criminals instead of libertarians.
“Voters got what they wanted.”
I believe…at least this was what was my motivation…..that people voted to send a message of what I “didn’t” want. If Dems stoop to same level, I’ll send the same message their way in 2 years.
Where’s that 3rd party when you need it? I think the time is ripe.
“If Dems stoop to same level”
That’d be a freefall from 40k feet.
No problem… they have the experience.
You sound very disappointed TJ. A penny for your thoughts? lmao..
CarrieAnn — that “third” party is the Libertarian Party. The glitch is that libertarians believe in minimal government, thus they do not not like to run for office. I recommend that, if you can find a true libertarian who is willing to run for office, you support him/her to the max.
Look up Ron Paul’s archives on his congressional website or his private posts at lewrockwell.com to see how a dedicated libertarian can perform at the national level.
Bush will just have to warm up the veto pen.
Gridlock is good for the average joe.
Calm down guys… The NAR isn’t gonna get their wish, mmmkay? It’s just a bit of wishful thinking, just like “I should earn $100k for my 2 bedroom condo because I held onto it for a year!”
“Bush will just have to warm up the veto pen.”
HAH! He lost it 6 years ago.
Friggin’ kleptocracy.
Apparently, you haven’t been keeping up with politics…. time to dust off the old paradigm, take a look around, and see who’s been responsible for record deficit spending, invasive governmental control, and general incompetence….
“time to dust off the old paradigm, take a look around, and see who’s been responsible for record deficit spending, invasive governmental control, and general incompetence”
The Federal Government. Same as it ever was. Same as it ever was.
A bit off topic.
I went to test drive a new GMC duramax last nite at a large dealer in NJ. During the test drive, I asked the shiny suited salesman what his typical customer looked like. He said, and I’ll quote, “broke, very poor credit, no money down tire kickers”.
To which I say……. howmuchamonth?
“broke, very poor credit, no money down tire kickers”.
Yikes…people who shouldn’t be in a showroom tempting themselves.
Bingo…. The funny part is, the salesman started talking about price to which I engaged, and he commented that I am negotiating like it is my own money…… I looked at him and said, “it is”. He acted very surprised.
What did the dealer mean by that? All borrowed credit?
Question is how desparate was he looking?
I’m shopping now for a new vehicle. Are they giving breaks for people using cash? I can pulling some money out of CDs or I can use a credit line at about what my CDs are making.
I was also told that buying during the last 2 weeks of dec was best.
There is absolutely no break for paying cash vs. financing on a new car… in fact, you may pay more for the final price of the vehicle if you pay cash: Manufacturers sometimes require financing through a captive finance company (like Ford Motor Credit or VW Credit) to qualify for certain rebates.
Additionally, dealerships make a considerable amount of money on the backend financing for consumers, i.e. the margin on points of interest between what the bank buys the loan at and what the consumer “qualifies for”. Then there are all the aftersells, like extended warranties, alarms, remote starts, aftermarket entertainment systems, etc. The finance office makes money on all that and a cash buyer is not a payment buyer (i.e. someone who isn’t going to blink if the F&I guy says he’s going to give you a 100K warranty for $10/mo more). If a Sales Manager/General Sales Manager knows there is no chance to make money on the back-end, there bottom line price is generally higher since there is significantly less profit to be had…
“I was also told that buying during the last 2 weeks of dec was best.”
I’ve heard that too. My sense so far is that dealers have far more room to move on used stuff and there is alot of it out there. The guy came down 4k on a 2006 duramax with 15kmiles before I was even ready to discuss seriously.
My feeling is that this dealer/salesman is hungry.
Isn’t there some new reg about car dealers have to report cash purchases of more than 10K?
“I was also told that buying during the last 2 weeks of dec was best.”
True, as dealers are pretty slow during this time…
Another good time is at the end of the model year (Jun, Jul, Aug, depending on manufacturer)… in general, the last week of any month is good, as there are anxious salespeople who may be short of quota!
My guess, based on squat, is that 2007 and 2008 will be great times to buy a new or used vehicle, for the simple reason that no one (in general) will have any money or any credit, with which to by cars. In the past two weeks, I saw more Sequoias than I’ve ever seen, so I suspected a major lease-deal, a la Lincoln Navigators in 1999. Voila. C’est vrai.
Waitin’ for a Slade or Denali, while my competition is choking on their PITI payments. Too bad, folks — you bet one way, I bet the other.
Tell them you are going to finance it and then pay cash. In CA at least you have 72 hours to pay off any loan. Let them jack up the loan rate and lower the price, then come in the next day and hand them a check.
I thought about that one Feep.
Y’all might enjoy today’s Dilbert. Very topical.
http://news.yahoo.com/news?tmpl=story&u=/umedia/cx_dilbert_umedia/latest
Frillion. Now there’s a word with a future.
That wasn’t a Dilbert cartoon…that was a series of snapshots taken at the headquarters of FNMA.
Personally, I prefer Austin Powers’ “Kajillion Bajillion.”
The easy money no down payment already got us in the mess this Nation is in . Anything to keep the party going . The 70% ownership is high enough . The real estate industry already borrowed commissions from the future in getting everybody they could into a real estate investment . This real estate trade group is so self-serving in this quest to make real estate a speculative investment ,without regard to people really qualifying .
Thanks to their lobbying efforts, we already have vast tract home developments in the middle of the desert which are destined to soon be grown over with tumbleweed. But I guess that is not enough — we need to offer more 0% downpayment loan programs so that everyone who already owns five homes can afford to buy five more…
The 70% ownership is high enough
I agree Wizard….
Out of what number does the 70% come from. Are we talking total population including convicts. Convicts have families too.
Okay, Housing Wizard, name a trade group that ISN’T self-serving. I double-dog dare ya!
Arizona Slim . I agree that every trade group is self-serving .
The real estate industry has had alot of power in the last 5 years, in part due to the advertising dollar.
If the auto industry said that car prices always go up or said that they were running out of materials to build cars ,(and it wasn’t true ), the whole world would be on their a-s for false advertising .
In that the real estate industry purchases could effect the financial well-being of this Country ,and innocent people could suffer as a result on a mass scale ,I think the REindustry hype/spin/lies should be challenged more .
I believe the REPAC is the largest in the country…Bigger than Med, Police Lawyers or Teachers….
How about 0% in the bullseye of a Florida Hurricane with federally funded hurricane insurance!
Responsibility free!
It was better when people thought those beanie babies were good inestments.
(”I’m gonna send all my grandbabies through college!”)
Sorry to keep repeating myself, but a national (GDP) recession has accompanied every residential construction recession (4 of them) going back to the 1970s. Small wonder that BB is talking about the “likely drag on economic growth into next year” already.
———————————————————————————————–
Economic signposts point to slow growth
Hopes for holiday shopping season dampened; housing market has some particularly worried
By Anne D’Innocenzio
ASSOCIATED PRESS
November 29, 2006
The U.S. economy has often been compared to a locomotive. If that’s the case, its engine may need an overhaul.
MARK LENNIHAN / Associated Press
NATIONAL: Homes across the country, like this townhouse in Brooklyn, N.Y., are staying on the market longer than they did during the boom.
Three of its pistons – consumer confidence, orders for manufactured goods and home prices – showed surprising wear and tear yesterday.
To economists, this points to slower growth ahead – just as we head into the important holiday shopping season.
The housing market, especially, has economy-watchers worried. Federal Reserve Chairman Ben Bernanke said central bankers are caught between fears about the growth-sapping real estate slump and concerns that inflation is rising.
“The slowing pace of residential construction is likely to be a drag on economic growth into next year,” Bernanke predicted in a speech to the National Italian American Foundation in New York.
An hour earlier, The National Association of Realtors reported that the median price of a home fell 3.5 percent from a year earlier to $221,000 in October. It was the biggest year-over-year price decline on record for an asset that many Americans use as a gauge of their financial well-being.
http://www.signonsandiego.com/uniontrib/20061129/news_1b29economy.html
Well based on the numbers the BLS reported we may not have a BLS approved recession for some time. Third quarter GDP growth was revised UP to 2.2%!!
Most of the change relates to an increase in inventories which may impact fourth quarter GDP downward (maybe) and lower imports (probably oil). Although third quarter GDP growth may not look healthy based on the details the headline nubmer is good to go.
I have to say the number is much better than I was expecting although the devil is in the details. Rats! Foiled again!
http://tinyurl.com/y7fp5j
“Third quarter GDP growth was revised UP to 2.2%!!”
That is from the Bureau of Economic Analysis (Dept of Commerce), not Bureau of Labor Statistics (keeper of employment stats for the Dept of Labor).
They are just trying to save the Dollar…..
(for another two weeks)
“The U.S. economy has often been compared to a locomotive. If that’s the case, its engine may need an overhaul.”
What was that term from last month, “slow moving train-wreck”?
Ben Bernanke’s speech yesterday had something for everyone. The SD Union Tribune picked up on the part that talked about implications of the residential construction slowdown for economic growth into next year.
Today’s WSJ was more tuned in to the part that talked about significant inflation risks. From the lead right column on p. A1:
————————————————————————————————–
Bernanke Warns Inflation Remains A Significant Risk
Fed Chief’s View Contrasts With That of Wall Street; Could Interest Rates Go Up?
In a contrast with the widely held view on Wall Street that slower economic growth will lead to interest-rate cuts, Federal Reserve Chairman Ben Bernanke offered an upbeat assessment of the nation’s economy, warning that tight labor markets could put more pressure on wages and prices.
Many investors point to declining housing construction, mixed news on holiday sales and a tame reading on inflation as indications that the economy is weakening, inflation risks are fading and that the next move by the Fed will be to cut interest rates, perhaps as soon as next spring.
However, Mr. Bernanke’s hawkish message suggests rate cuts are unlikely in the months to come.
He sure used a lot of words for saying so little.
He can’t help it. He comes from academia.
New home sales down 3.2%, but prices rise according to latest report.
That price rise is bullcrap, only a result of massive incentives offered by the builders to keep the selling price fixed. Wonder if the press will report on the incentive’s impact on price..not.
Wonder if the press will report on the incentive’s impact on price..not.
They may not, but the appraiser assessing the resale down the street will….
Median sales prices up 2% in the past year (including the value of free giveaways!). Of course, this news was enough to spark a rally in the homebuilders’ share prices…
————————————————————————————————
ECONOMIC REPORT
New homes sales fall 3.2% in October
Median sales prices up 2% in the past year
By Rex Nutting, MarketWatch
Last Update: 10:00 AM ET Nov 29, 2006
WASHINGTON (MarketWatch) - Sales of new-homes fell 3.2% in October to a seasonally adjusted annual rate of 1.004 million, the Commerce Department estimated Wednesday.
New-home sales are now down 25.4% in the past year. Sales are down 17.9% in the first 10 months of 2006 compared with 2005.
The sales pace in July, August and September was revised lower by a total of 64,000.
Economists were expecting a decline to about 1.04 million annualized in October.
Median sales prices were up 2% in the past 12 months to $248,500, reversing a trend toward falling prices year-over-year. Sales of houses priced less than $200,000 decreased by 16%.
The number of new homes on the market dropped 0.7% to 558,000, the third straight decline. The inventory represents a 7-month supply at the current sales pace, up from 6.7 months in September. The inventory peaked at 7.2 months in July.
Home builders have piled on incentives, including offering free vacations and new cars, to sell homes and reduce inventories. Such incentives are not subtracted from the sales price reported to the government.
http://tinyurl.com/yy95ox
New home sales down YOY approximately at the current rate of cancellation. Before they are adjusted for cancellations.
From today’s WSJ p. C1 “Ahead Of the Tape” (Justin Lahart)
…
HOUSING: Kevin McFall’s company — JKM Mortgage Field Services in Baltimore — monitors the properties of homeowners who are behind on mortgage payments. He’s the guy who changes the locks when they’re foreclosed. Business is picking up, even in wealthier neighborhoods. “Honestly, I think we’re just seeing the tip of the iceberg,” he says. “I think things are really going to get busy for us.”
In a nutshell: The economy is still on its feet, but Mr. Bernanke, the Fed chariman, has reason to be concerned about inflation and the housing slowdown. The greater of the two evils probably won’t be known until after Christmas.
With the Fed chairman talking up inflation concerns and reminding everyone that the Phillips curve may still be relevant, is the PPT just pushing on a string now? Bernanke may surprise everyone by taking a middle road between Miller and Volcker — keeping the FFR not too high and not too low, but just right. This would be a great way to put the Greenspan Put era (and the associated conundrum) behind us…
http://tinyurl.com/br84c
Yes, but M3 is still growing exponentially…
Read BB’s lips.
So it looks like the plan is to create enough inflation through the stock market to bail out housing and the rest of the economy. Can this work against the backdrop of a falling dollar?
More big economy-related than just housing. From the BBC, dollar hits new low against the pound and euro.
(It takes $1.94 to equal one pound and $1.31 to equal one euro.)
http://news.bbc.co.uk/2/hi/business/6194490.stm
This is the underlying problem the MSM forgets when they talk about the Fed’s choice between shoring up a slowing economy and keeping inflation under control. A falling dollar could force their hand…
I’m no economist. If the hard decision has to be made between supporting the weakening dollar or lowering interest rates due to a recession and a crumbling housing market, which way will the Fed go? I suppose inflation or deflation will have a lot to do with the decision.
Comments?
Either way they’re frelled.
Its one gigantic Orgy on easy money….party is over and now a little pain….the prudent will be spared only losing skin…the drunken sailors will not recover for 10 years if ever depending on age…going to be a Volker model without the extreme…
This doesn’t make sense to me…
I’ve got a question in regards to this. This article states that analysts are saying the FED is considering LOWERING rates due to a falling value of the dollar (inflation). But doesn’t the FED RAISE rates to combat inflation?
Also - how does one invest in the Euro? It seems like the trend of irresponsiblity on the part of our federal regulators have created quite an investment opportunity in the Euro…
I thought if the dollar is falling you want to raise rates to make the dollar a more attrctive investment?
Check out the Euro Cd account w/ Everbank.com. Although, the premium is a bit high(1 3/4%)
“Although, the premium is a bit high(1 3/4%)”
That is a dollar depreciation discount. How can you tell it is too large? Are you saying the world’s currency markets don’t know how to properly price risk?
“Are you saying the world’s currency markets don’t know how to properly price risk? ”
Let’s just say that I considered the risk and had no problem paying this premium.
Have you noticed that when rain turns to hail, people and animals run for cover? People usually utter very excited sounds when this begins, first amazement, then realization of pain…and they usually tend to act.
Not only that, but the bankers tear the umbrellas they loaned out all over the place right out of the hands of those who borrowed them.
tj: “Either way they’re frelled” — dunno that one. Is it the past tense of the verb derived from “frillion” (see above)
Frelled:
Originated from the Sci-Fi series “Farscape” as an failure in translation of the word f*ck from alien species’ languages to English via translator microbes.
Is it still a “gain” if prices are falling?
————————————————————————————————-
ECONOMIC REPORT
Home-price gains still slowing
By Rex Nutting, MarketWatch
Last Update: 5:02 PM ET Nov 28, 2006
WASHINGTON (MarketWatch) — Home prices fell or were flat in seven of 10 major U.S. metropolitan areas in September compared with August, as annual price gains slowed to their lowest rate in nine years, Standard & Poor’s said Tuesday.
The S&P/Case-Shiller home-price index dropped 0.3% in September and is now up just 3.7% in the past year, the smallest appreciation since 1997. A year ago, prices were rising at a 16% annual rate. Home-price appreciation peaked at 20.5% year-over-year in mid-2004.
http://tinyurl.com/yc2fcu
New home sales came out this morning, as many of you know, and I tried to comb through the numbers as best I can. Looks like another report (like the existing homes report yesterday) that contains a mix of the good, the bad, and the ugly. This time, sales were the “bad” news, prices were the “good” news and inventories were the “ugly” news. Frankly, I’m also a bit skeptical of the big jump up in prices given that I’m seeing builders offering $50,000 … $100,000 or more in discounts on homes, to say nothing of free appliances, pools, closing costs assistance and all that. But taking the numbers at face value, I did a full analysis you can read at my blog if you feel so inclined …
http://interestrateroundup.blogspot.com
Take a look at the YOY changes in the percentages of the breakdown.
jb
We toured a few new home developments this past week: Element, Shea Homes, and Hacienda. We were surprised that they all said the same thing. They all claim that activity has exploded in the past few weeks. They also said their spec. homes were all sold and that the incentives would be gone in December and to then expect price increases. This is Southeast Chandler. Wherever you look around here, there is development.
Our friend in Gilbert has not had one showing since he put his home for sale this summer. He has lowered his home by $50k and it made no difference. He is at least $20k cheaper than anything around him. He is asking $385k for 2800sf. He bought it for $220k in 2004. He wants the equity to buy a smaller home. This home is cheaper and nicer than any of the new developments around here and it is in a better location (I would buy it for $200k).
I agree with many of you that homes should be in the $100k-$200k levels. Most of the new developments are priced in the high $300k to low $400k. They are on postage stamp lots with the garage as the primary focal point. I can easily see these developments looking like crap in a few years. Many of the driveways can’t even fit a car on them because they are so short.
The Mortgage Bankers Association’s weekly purchase mortgage application index HAS popped up a bit in November. This is as close to a real-time indicator of housing demand as you get. So it’s likely sales this month are better than they were in October. But are homes flying off the shelves? I seriously doubt it. The increase in purchase apps is not a very large one … there is still a gigantic amount of inventory (both new and existing) on the market … and the power is likely to remain in the buyers’ court for a long time to come.
“We toured a few new home developments this past week: Element, Shea Homes, and Hacienda. We were surprised that they all said the same thing. They all claim that activity has exploded in the past few weeks. They also said their spec. homes were all sold and that the incentives would be gone in December and to then expect price increases. This is Southeast Chandler. Wherever you look around here, there is development. ”
Did you portray yourself as “just looking” or “ready to buy now”? I think they’re full of BS, and I smell collusion.. Anyone else with some anecdotal evidence on this?
We portrayed ourselves as “just looking”, but did specifically ask about spec. home incentives. Since these developments were within a few miles of each other, we did suspect collusion. There were at least a half a dozen cars in each of the builder’s parking lots though (many Asians with CA plates).
There are still many new subdivisions going up in SE Chandler, plus a few existing subs from 1-2 yrs ago still trying to sell out. One sub, Elite Communities, has listed new homes at 60-80k off their (inflated) beginning of year prices. (Of course, these are on postage stamp size lots 1-7500 sf lot). Alot of “luxury” new homes and subdivisions now going up too 800k-1M+. Which is fine with me…surround me with million dollar homes, lol, it only helps the “median” prices. Who is going to buy all these new homes….is beyond me. Existing homes still sit, month after month.
You have been in my sub, Sun Groves!
SD Ziprealty inventory is 19,825 today — the first time I have checked since early this year when it dipped below 20K. Yet there are 200+ homes showing up as new listings (since 11/27/06). It looks like lots of folks are still heading for the exit door, but others are pulling their listings until after the Super Bowl, when higher prices are in the bag…
I expect an inventory explosion to happen when all of the people that have been told “don’t list your house until things pick up in the spring” all put their houses up for sale at once.
The 2007 Soft and sweet, wise and wonderful, mystical, magical Spring Selling Season will be the time when there will be *no* doubt how this bubble will play out…soft landing, or Chicxulub-like impact with associated “severe decelleration trauma”.
Freshly baked cookies smell better in the spring. That is why people are more willing to buy and pay more. Those people waiting for the spring are smart. Stop trying to make fun of them.
Utah….Sales down, Prices up.
http://deseretnews.com/dn/view/0,1249,650210793,00.html
Utah seems to be holding up pretty well….Got some white flight going on here ????
It seems to become ever more difficult to push on the Wall Street string these days…
http://tinyurl.com/fzeuw
Hedge funds have carte blanche, but their investors need more regulatory oversight? This must be some kind of joke.
———————————————————————————–
SEC moves to tighten hedge-fund investor standard
By Robert Schroeder, MarketWatch
Last Update: 7:01 PM ET Nov 28, 2006
WASHINGTON (MarketWatch) — Taking a new tack in restricting hedge funds, securities regulators next week will consider requiring individual investors to have a bigger wallet before buying into the lightly regulated funds.
At a public meeting on Monday, the Securities and Exchange Commission will weigh revising the criteria as a way of ensuring that hedge-fund investors are able to withstand the higher risk associated with hedge funds.
Hedge funds, once the exclusive province of wealthy people, have become more easily accessible to smaller investors. Regulators, however, have been concerned that the investment vehicles pose risks to smaller investors because the funds are lightly regulated.
http://tinyurl.com/ympey9
“David,
If we don’t fight them there, we’re going to have to fight them here. Which would you choose? ”
Um, why would the Iraqies come here? I know this isn’t the place, but it’s time we quit repeating meaningless propoganda. The curtain was pulled earlier this year. Our emperor unfortunately has no clothes and our kids are paying for it.
So where did the rumor that the housing market has already bottomed out get started (Greenspan)? Because the facts on the ground do not support it.
——————————————————————————-
THE FED
Growth outlook has improved a bit, Beige Book finds
By Greg Robb, MarketWatch
Last Update: 2:08 PM ET Nov 29, 2006
WASHINGTON (MarketWatch) — Economic conditions have improved slightly over the past month, with increasing retail sales and cautious optimism about the holiday-shopping season, the Federal Reserve’s latest survey of economic conditions found.
The Fed’s “beige book” found that most districts reported moderate growth. Only the Dallas region said activity has slowed, but from “high levels” and the Atlanta Fed reported that activity was “mixed.”
This is in contrast with the previous survey in early October, which showed more regions feeling that activity had slowed.
Only the automobile and housing sectors were seen as drags on activity.
Inflation seemed to be almost entirely off the radar, with only price declines for construction materials and energy products mentioned at all.
The report found that labor markets were tight, especially for high-skilled occupations. These workers were also able to request stronger wage increases.
The survey found no evidence that the housing market slowdown may be bottoming out. “Almost all Fed districts reported that overall housing market activity continued to slow, especially in the single-family segment,” the report said.
Declining home sales and rising inventories and declines in residential construction were seen across the country. There were also “scattered” reports of price reductions.
http://tinyurl.com/y8mzpu
So according to the Fed the economy will be OK as long as everybody pigs out on holiday shopping, cars and houses?
That’s right. We don’t break windows around here, but we do occasionally succumb to gluttony. Thank goodness for those Asian savers who enable our profligacy.
test
For fans of Mish (Mike Shedlock) and, particularly, his interviews with the likely most forthright real estate broker in the country, Mike Morgan, here is the long-awaited sequel to Mish’s interviews with Mike, a post entitled, “Catch 22″:
http://globaleconomicanalysis.blogspot.com/
Given the hour, will replicate this in tomorrow’s Bits Bucket.
“The crash of the housing industry is only now getting started, as it will spread virally to all of the boats it floated during the rising tide. Housing has touched every single segment of our economy, and it will darken all of those segments as the industry collapses to the worst levels we’ve seen since the Depression. The NAR and other groups producing numbers have been great cheerleaders, but when you’re pumping out misleading numbers, I don’t care how beautiful or loud the cheerleaders are, the situation is a no win catch 22 for the homebuilders no matter how one looks at it.”
Good thing that homebuilder share prices always go up
Wealth effect seen intact despite housing slowdown
By Leslie Wines, MarketWatch
Last Update: 3:46 PM ET Nov 29, 2006
NEW YORK (MarketWatch) - The unwinding of the housing bubble may not put much of a dent in the “wealth extraction effect” that allows homeowners to borrow money against their homes, a key driver of consumer activity, according to Alan Levenson, chief economist at T. Rowe Price.
There has been considerable debate in the markets about how much the housing sector is slowing and to what extent it may cut consumers off from cash and debt in the forms of refinancing, equity extraction and lines of credit.
The fact that home values were rising for years made many consumers optimistic, a phenomenon that also drove up spending. There are concerns that falling housing prices may now make homeowners apprehensive and less likely to spend.
But, unlike some economists, Levenson does not consider either the housing slowdown or the dimunition in the wealth effect to be severe. He spoke Wednesday at a T. Rowe Price outlook for 2007 in Manhattan.
Noting that the slowdown has occurred over the last 12 months, Levenson said that only those people who purchased their homes in the past year have had to contend with seeing their homes fall to values below the purchase price.
“Even after the crash, people are still pleased with the value of their home versus what they expected it to be five or ten years ago when they bought the house,” Levenson said.
“If you’ve had your home long enough, there’s still a lot of equity to withdraw and rates are still low overall,” he said.
http://tinyurl.com/ybu7rs
I am confused about a Macro 101 economics question (maybe Bernanke’s textbook offers clarification?). Since home price increases were just asset price appreciation and not inflation, is it correct to conversely conclude that home price decreases are not deflation?
This issue was brought up in July (and other times, IIRC). Here is one article:
Recent warnings by NAHB that the Federal Reserve runs the risk of turning the cooling process now underway in the nation’s housing market into a full-fledged downturn if it continues to push up interest rates resounded in congressional testimony last week by Fed Chairman Ben Bernanke.
When confronted in the Senate on July 19 with evidence of falling housing starts and permits, including the sizeable declines reported by the Commerce Department that morning for the month of June, Bernanke noted significant uncertainties and risks in the housing outlook and stressed that the Federal Reserve is watching housing “very carefully.” He repeated these points the following day under questioning in the House.
On a significant housing-related issue of a more technical nature, Chairman Bernanke acknowledged NAHB’s concern that the Fed’s inflation-fighting efforts are having a perverse impact on the government measures of core consumer price inflation that are being used to guide its policies. In written testimony, he agreed with association economists that “increases in residential rents, as well as in the imputed rent on owner-occupied homes” have contributed to higher core consumer price inflation.
In a July 18 letter advising members of Congress of the impact of rising interest rates on housing, NAHB said that the Fed has been relying on “deficient inflation measures to rationalize the interest rate hikes that have been taking a serious toll on the housing sector. Ironically, much of the recent increase in ‘core’ consumer price inflation that the Federal Reserve is trying to control with higher interest rates is coming from a weakening housing market.”
Under questioning during the Senate and House hearings, Bernanke agreed that the large imputed “owners’ equivalent rent” component of the core Consumer Price Index was being pushed up because of the weakening of home buying and the related firming-up of market rents. In this regard, he also conceded that tighter monetary policy can actually put upward pressure on core inflation through the imputed “owners’ equivalent rent” mechanism, possibly creating a self-defeating cycle of monetary policy tightening and accelerating core inflation.
Referencing the association’s letter, Senate Banking Committee Ranking Member Paul Sarbanes (D-Md.) said that “NAHB makes a rather valid point in communicating with us about this measure” and the Fed being caught in a “vicious cycle” of raising interest rates in response to a “technical measure” that doesn’t really indicate what home owners are actually paying.
http://www.nbnnews.com/NBN/issues/2006-07-24/Front+Page/index.html
IOW, I guess the REIC beleives we should ignore price increases (but gladly use imputed rents which are stable/down) during the upturn, BUT we should switch out the rent/price components during the downturn so that house price declines are counted as deflationary.
When I watched the testimony, BB actually grinned and said something like, “Yes, I understand that argument, but nobody was complaining about using imputed rents when house prices were rising.”
I am very loosely quoting, but you get the gist. He “gets it”.
Barn door is open
and the horses are astray.
Time to shut the door.
————————————————————————
S&P warns of world building ‘bubble’
By Chris Hughes in London
Published: November 29 2006 22:03 | Last updated: November 29 2006 22:03
Investment in the global infrastructure sector is inflating into a dotcom-style bubble, suffering the “dual curse” of overvaluation and excessive leverage, Standard & Poor’s warns in a study to be released on Thursday.
The gloomy prognosis follows the sector’s boom this year, with transactions so far totalling $145bn (€110bn) worldwide – a 180 per cent increase on 2000 – and up to $150bn of funds raised and waiting to be placed, according to the rating agency.
https://registration.ft.com/registration/barrier?referer=http://www.ft.com/home/us&location=http%3A//www.ft.com/cms/s/01b7455c-7ff8-11db-a3be-0000779e2340.html