Post Weekend Topic Suggestions Here
Please post your weekend topic suggestions 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
Any stories to share? — Friends don’t let friends buy Real Estate.
Have any readers tried to convince a friend / acquaintance
that right now is most certainly not a good time
to purchase real estate?
I did, and his reaction was startling.
Not only did my acquaintance flatly refuse to accept the very real possibility that real estate could substantially decline in the coming years, but his attitude was one of extreme anger (towards me),
delusion and denial (that prices could go down).
Our friendship is now strained.
Do other readers have the same / similar experiences to share?
Maybe we collectively could discover a common thread within
the ‘buy before it’s too late’ mindset?
What’s inside that mindset?
A few possibilites gleaned from this blog and elsewhere:
a) Plain old fear and greed.
b) Immense pressure to live
unsustainable lifestyles in
order to gain social acceptance.
c) A culture of instant gratification,
gotta-have-it-now.
d) A pervasive addiction to ‘financial
crack cocaine’ (AKA debt / cheap money).
e) An amazing (appalling?) lack of basic
financial / math skills by
the general population.
f) A belief that we live in a entitlement
society (government pays for anything
we can’t afford).
g) The phenomena of ‘Cognitive dissonance’,
a term used by psychologists to describe
how individuals attempt to resolve
conflicting pieces of information..
We don’t want to turn Ben’s blog into the Internet version
of TV’s ‘Dr. Phil’, but
a) understanding others thinking might
reveal some valuable insight into why
this bubble even started
b) more importantly, what will be the
financial and emotional impact to
those overextended individuals
(and to society as a whole) who chose
to purchase overvalued real estate.
I have talked a few people into waiting. It took time to convince them, but eventually they got the picture. Seeing that the entire state of Florida is for sale should be a clue. They must have heard GetStucco yell FIRE!!! For those that buy is this market, it’s their funeral, not mine.
HURRICANE!!!
That is much more appropriate. You can bet Florida will get smacked again this year.
I live in Langley BC, Canada. I try to warn people that prices cannot keep going up for ever. I know many people who are flipping, and I am trying to give them some warning of what is going to happen. One person thanked me for my advice and told me that they will sell at the end of the year. I tell people that property prices have started to fall in some parts of California, and the reactions are varied. Some people acknowledge that it will happen here too, and others do not. The ones that do not, get very angry and come up with a thousand reasons why every body wants to live here, the 2010 winter olypics in Whistler will keep our house prices up, they are not making any more land, and repeat a thousand realtor cliches. Recently a popular radio show announced that at the current rate of appreciation, the average house here will cost $820K by 2010, and people believe it. I’ve talked to a number of poeple that take it as a fact.
I think greed and status play a very large role in this issue. People simply feel “rich” when they can quote house prices in the neighbourhood. It has become somewhat of a class struggle between owners and renters.
I distinctly remember a person who bought a house recently during the sudden price increasing feeling sorry for us for not jumping in to realestate. They have since bought a bigger house, way over valued, spent the gains from the first house on a Ford Expedition, and are probably heading towards forclosure.
I think the MAJOR factor in this bubble is that people simply do not understand that the price of a house is a function of the local economy.
LOL. I’ve experiened the same thing. Even when you tell people about halting markets and falling prices in the US, Vancouverites are sure that “it’s different here” because “everyone wants to live here” and “the Olympics” (2 wks of snow sports) have made the lower mainland invulnerable to downturns experienced elsewhere.
I mentioned future price drops to a colleague yesterday, not thinking anything of it as she bought a decade ago…she suddenly looked worried and said that prices might drop a little, but not a lot. I realized then that she’s been using the equity ATM.
It all constantly reminds me of 1981, just before the whole thing collapsed in ‘82.
I have two stories. One of the girls who works on the same floor was looking to buy a condo. She is currently living with her parents has one child and is making $11 dollars an hour. She sometimes gets child support. She was looking at a condo that was listed at 145K. I send her the link to Ben’s blog and printed out info on the possibility of Phoenix RE going down. She took my advise and is still living with her parents for now.
Second friend. Girl that I play golf with. She works part time at a call center and cleans houses on the side, including mine. She was living in a condo close to the golf course. The girl that owns the condo decided to sell and my friend was faced with either moving or paying 170K for a 2 bedroom 900 sf 30 year old condo in bad condition. Every time she came to my house to clean I left a print out of one of Ben’s articles and all the comments that people submitted. I told her over and over that she is nuts to buy the condo that probably went for 40 to 50K just a couple of years ago. She took my advise and moved into another condo the is right on the golf course. The difference between buying and renting is about 800 a month.
You have to be careful. I was at a dinner party last year and made a somewhat provocative speech about what was coming in residential real estate. Another of the guests had just paid $4 million for a home nearby, and I politely suggested that might not have been such a great investment. A few weeks ago, those same guests were approached by an agent for a wealthy individual who offered to buy their home for $7 million, immediately, cash on the barrellhead. They declined, because they don’t want to move. But of course everyone else who had been at the dinner party heard about this event, and I have no doubt a lot of jokes were made at my expense. The truth is that there are broad-based trends and there are individual experiences, and most people don’t know or care about the bigger trends, they just know about what happens to them and their close friends, which might be totally different.
This is why I shut my fool mouth. I’ve believed in exceessively high prices for over three years. So I just gave up telling people my opinions.
Now I just smile, nod, and change the subject in a non-obvious way. (”I really love the area I’m living in.”… “San Diego is one of the nicest areas in the US, don’t you think?”, etc)
I have had to refrain from talking in certain situations. One of the golf girls that I do not like bought a Toll Brothers condo a year ago and is still waiting for it to be complete. She has a house in Cave Creek that she paid 190K for. She is in complete denial about the market and thought all she had to do is put a FSBO sign in the front yard and sell in a few days for 400K +. I am sure it has not sold. He He I just say well I’m sure it will sell soon, no need to drop your price.
I’m with you feepness. I just shut my mouth now. I’m just watching, quietly as this unfolds. The way I see it the information is on the table and widely available to anyone who chooses to go beyond the tales told by the RE sector. I too live in one of the nicest places in the US, Costa Mesa, CA and I sometimes drive down to San Diego for lunch at Filippis Pizza Grotto so I get to enjoy San Diego too.
When I tell people about rising inventories in bubble markets, they look at me like I have 2 heads. Most friends think their husbands have been doing their investments for years and what would I know. They think if I’ve gotten the info from the internet it can’t be trusted and is probably suspect. One friend I sent the link to this blog even e-mailed me back other info (NAR and builder statements) and said the info wasn’t in sync so they’d keep their investments as they were.
You raise an excellent point, which is that for those without at least a good college course in economics or its independent study equivalent, there is no objective means to sort out conflicting viewpoints, and at that point it comes down to a matter of religious dogma. So we all may as well agree to amend the list of topics to avoid in polite company: sex, politics, religion, and the housing market…
When do people expect y.o.y. declines in particular cities, and what do we suppose the subsequent excuses will be? (It’s because of the World Cup!
)
April will be the first month of YOY declines.
Eric in DC
and they will blame it on Mason’s run in the tourney. “first time buyers were too busy drinking and watching Mason’s improbable run, they didn’t have time to shop for a home!”
Someone sent me this link: it’s a list of layoffs in California (some only scheduled):
It doesn’t look like a healthy economy to me, but it is a very shallow view:
WARN Notices:
http://www.edd.ca.gov/eddwarncn06.pdf
That was quite disturbing Ted…Particularly the 400+ in the small town of Turlock…..If the job market starts to deteriorate in California it could get real ugly…..
They didn’t include the 1000’s of pending cuts for ATT/SBC for California (actually nationwide).
That is a shallow view, as it does not indicate what, if any, firms are hiring, and seems to only show 100 employees-worth of announced layoffs at firms here or there in a state with 35m population. We also have no way to know from those figures whether they are “normal” or “unusual”, as there is no basis of comparison. So what do you think those data show, if anything?
Stucco….400+ in a town as small as Turlock will have huge repercussions to the local community….
Quite a lot of layoffs in the mortgage industry
Keep in mind, many of these layoffs in the PDF haven’t occured yet. They are scheduled for later in 2006. The law requires 60 days notice to the governments if layoffs meet certain requirments (like plant closings).
what should be disturbing is that the 2005 list was 26 pages. 2006 is up to 21 already. Interesting names. Lots of finance, + some car places & *dread* a boatmaker. Recollection is that the boat market is a good indicator for the overall discretionary spending.
We are a society that no longer appreciates the value of working at something to build value. Its all about the quick buck and the instnat win. When I see poker and gambling so popular, I see that as a very disturbing reflection on todays values…risk for fleeting gain and a quick buck.
Simmssays…
http://www.AmericanInventorSpot.com
AmericanInventorSpot.com
You should take a look sometime at an account of the experience of France with money printing several hundred years ago. The parallels are eerie. They experienced a collapse of public virtue with the rise of a gambling culture as well.
(link didn’t take the first time)
still no link - please post
http://www.gutenberg.org/dirs/etext04/fiatm10.txt
sorry you’ll have to cut and paste
You might want to exclude poker from that line of thinking. There are incredible streaks in the game, but it’s not gambling as defined by California law. Rather, it is a game of skill because, over the long haul, everyone gets the same hands in the same frequency. Any professional will confirm this.
I thought that too for about 2 years and $50,000. The problem is that most cardrooms change a rake of 5% to 15%. So though it is quite easy to outplay the other players, its very hard to outplay them enough to get over the house rake.
The problem arises when too many non-professionals enter the game, whether it be poker or real estate investing.
Whether poker is a game of skill or a game of chance is irrelevant. At the end of the day it’s a zero sum game that just moves money around without creating anything worthwhile or doing anything productive. A person who makes their living playing poker is a parasite.
Constructive suggestions to improve the blog format.
Suggestion: Switch to a Headline/First Paragraph/read more… style for the longer posts.
I agree Robert….Some of these are painfully long…In fact, when they are more than two paragraphs, I just scroll through them…
Great idea Robert,
I have definitely been known to “Wax on…”, but everyone here can get the gist of the comment (and can continue on, by scroll bar).
In general, it will make the blog thread look more impressive, with lots of comment entries vs. long lists of numbers, pasted stories from other articles, etc.
OK, I’ll shut up now
I’m wondering if there is a way to pull up your own posts at a later time. Sometimes I ask a question and come on later to see if anyone answered. With 100+ posts, looking for my original question takes quite a bit of time. Thanks for the consideration.
PREVIEW button!!!!
Yes!
-Preview/edit button
-Delete button
-And I still get lost with all the embedded threads. I understand the desire for it, but like Upstater said, you have to search for your old posts (w/o embeds, you could track the time of post, at least), and it’s hard to read ALL the new posts that are embedded throughout the day.
Just my $.02.
The housing-bubble-blog bubble colapsed? Off all the blogs I used to hit, this seems to be the only one updated in the last two weeks.
Also I am interested in how easy access to previous sale & apraisal information via the web is going to affect the bubble.
There were a lot of competitors, but Ben has the gumption to press on, updating daily. We’re demanding consumers and when authors don’t make regular posts, traffic will go down. Ben won the bubble blog war because he updates a lot.
Ben’s Blog is my favorite . People can talk with each other , the articles are well chosen , and the bloggers are a great group .
I’ll second that!!!
Since the blog has been so far out in front of the bubble, it seems reasonable for us now to talk more about all of those consequences/fallout, such as property taxes, etc., that will hurt everyone whether you acquired property in the past few years or not.
Most people I speak with about this are still oblivious to the fact that their neighbor’s house selling for 5x more than they paid many years ago could somehow be anything other than a good thing for them…
I also suspect many local governments are about to be shocked by the protests they will receive later this year, and that lots of hastily-enacted increase caps will be made where none exist now.
Are their any solid signs of distress in your market. Inventories are up, but how about notices of foreclosure or trustee’s sales. Even though Phoenix/Maricopa County inventory is skyrocketing, I can’t see any distress:
Notices of Trustee’s Sales thru 3/30/06
Jan 05 1297
Feb 05 940
Mar 05 1040
Apr 05 766
May 05 759
Jun 05 767
Jul 05 748
Aug 05 795
Sep 05 669
Oct 05 728
Nov 05 704
Dec 05 749
Jan 06 726
Feb 06 687
Mar 06 755 thru 3/30 (should add another 50 today)
a lot of the distress is not going to happen until the mortgage reset occurs. now majority of the purchases were done btw 2003 to 2005, taking the average of 3 years fix’d ARM, we are looking at 2006 to 2008 for the real bad news.
this is why so many people bought. at 1-2% I/O ARM, the monthly is incredibly low. anyone saying inventory would be at 40,000 in 3/06 would have been laughed straight out of the room. it seemed like the perfect investment opportunity, low holding cost, quick appreciation, ease of sales, and floods of snowbirds and boomers. who knew the demand was artificially created by so many like minded lemmings.
Foreclosure.com lists in Maricopa county (including Phoenix): 664 foreclosures, 4,123 preforeclosures, and 2,064 bankruptcies. It doesn’t have a list of tax liens, but I would guess given the other figures, this must run in the tens of thousands. I would call these signs of distress.
A list of tax liens, I suspect, would give a much clearer picture.
Thats what Cote was suggesting….
AN EXCERPT FROM REALTY TIMES:
Written by Santa Barbara Realtor Lori Hoffman on 3/12/06
“Many buyers are taking a “wait and see” attitude. Now that a soft landing can be expected, with interest rates remaining favorable and the excessive pressure to “buy it now” lessening, buyers can relax a little. They do need to understand, however, that prices in the Santa Barbara area are not going to plummet. Therefore excessively low offers are not appropriate. Rather, Buyers should take advantage of the increase in inventory and realize that this is a great time to be buying.”
LORI HOFFMAN continues to say in her report that she rates PRICE TRENDS ARE RISING (a 4 out of 5 highest rating). (Talk about yacking out of both sides of her mouth…)
WEEKEND TOPIC, THEREFORE IS:
Does anyone else have realtor assessments/quotes that prove that they are still in a STATE OF DENIAL?? I think it would be fun for bloggers to go to REALTY TIMES (link located in right column of Ben’s Blog) and find a fun quote from your local area.
At this point, I find realty times as a “useless” tool for gauging the housing market. These realtor’s have full reign to write whatever they want, AND then they have the gall to include their websites, phone numbers and other marketing tools- in essence ADVERTISING.
What is your prediction of the next bubble. Some say interest rates will keep rising. Some say the fed will pause and start decreasing if
the economy looks sluggish. If they do start decreasing, will the stock market take off again?…
Take a close look at what is happening at GM for a hint:
1) GM has made job buyout offers for their entire union workforce (105,000 autoworkers offered $35K or so to take a permanent layoff).
2) GM is attempting to sell the most profitable part of their business, GMAC, into the headwinds of an accounting scandal and obvious problems with the future outlook for the lending industry.
3) Delphi (the biggest US auto parts supplier) announcement that they will ask the BK judge to void labor contracts, close or sell most of their US plants, and fire 8,500 salaried workers.
http://quote.bloomberg.com/apps/news?pid=10000006&sid=aB4Z_s21DxJA&refer=home
I believe the GM situation is the rather large tip of the iceberg for the US economy, and no further bubbles will be blown for the foreseeable future. Further, if you disagree, then that is only because you suffer from the same collective denial as the “no bubble” crowd.
I agree!
Ughhhh! Those Delphi salary cuts are devestating. Anyone have any comments about what other union industries may be thinking.
I don’t have any information about what other industries will do in the face of GM/Delphi’s actions, but the basic problem is that our labor costs much more than China’s or India’s. A recent NY Times article described Honda’s production of cars in China for export. In the article it mentioned that labor paid $24 an hour here was paid $.50 an hour for the same work in China.
That is our problem. And the only solution is a lowering of our standard of living until a rising standard of living in China and India matchs ours. We can’t pay $24 here and compete with China paying $.50 there. It is obvious that jobs will continue to leave the U.S. until we start adjusting to this huge mismatch in labor costs.
I don’t have any information about other industries but the problem exists across the board.
If there are any more bubbles to be blown, it’ll be in precious metals… but despite the rise to date, we’re still a long ways from bubble territory.
I don’t know too many people in a union…although actually both that I do know are in the medical field. And a pilot (has he taken some hits!) If I was in a union right now, I’d feel very uneasy. I’d worry that once the precedent was set, there could be a domino effect from others in similar situation.
Topic suggestion-
If, as some predict, the fed tried to inflate a rescue boat for those in the bubble areas (crank up prices of everything else, including wages, so as to effectively lessen household debt loads), what would be the impact for housing prices in the non-bubble areas? Would we expect to see them rise with this inflation?, or stay stagnant, along with prices in the bubble areas?
Here’s a suggestion. Go to your local builder and pose as buyers. Get the true prices they are willing to go down to. Post the development/builder/plan and the current asking price.
We can see if there are others that visited the same model a few months ago who saved the price list and do a comparison.
my feeling is we are still 1 year away from homeowners offering price reductions. But builders are always ahead of the game from the average homeowner, and they are offering the discounts now.
If people are moving due to job change, or have bridge loans I can’t imagine waiting a year to drop. When we were watching last year’s market we noticed lots of drops after September.
those are small minorities. I’m referring to wholesale price drops by all homeowners.
Even newly-fired Delphi salarymen?
A widely held belief about the bond market is that the Fed controls the short-term end of the yield curve, as T-bills are close substitutes for overnight loans in banks’ asset portfolios, while “the market” controls the long end. However, the extremely flat yield curve in the face of eroding economic fundamentals (e.g., US housing, automobile sectors) suggests that perhaps the Fed can now control the full duration spectrum (maybe with the help of NewBank), which means, in effect, that the govt central planning committee is controlling the price instead of market fundamentals.
My questions are:
1) What is the Fed’s scope for doing this?
2) Is this policy sustainable?
3) If it is not sustainable, what happens at the point when it is no longer sustained?
4) What are the implications of the above for the housing market, and in particular, for mortgage interest rates over the foreseeable future?
Looks like the 30-yr T-bond yield just got stucco at 4.9%. Other assets will see downward valuation adjustments to equilibrate with the re-emergence of the risk premium on the long bond.
Given that the Fed itself doesn’t seem to understand why the yield curve has been so flat, I would wager that it isn’t because of their actions. Indeed, it would seem that trying to hold both ends of the scale would be have planners working at cross purposes, and create a weird distortion somewhere else in the system.
I am merely offering a theory for what I see as very strange behavior. Check out how completely flat the yield curve was for the entire month of March and you will see my point. I am not talking about a little flat here — rather a lot more flat than Kansas, which itself is a lot flatter than a pancake.
Some people have stated that the FEDs lowering campaign we just witnessed was aimed at increasing business investment to spur innovation. Instead the free money went into inflated housing values.
Does anyone think this was actually planned as a means of storing “wealth” in America. Thoughts???
My view is it was a “Guns & Butter” policy after 9/11…..General speaking, Americans will ignore incompetent goverment if you keep the money flowing….
I don’t have any topics for this weekend. Last weekend, you already addressed my favorite topic, “What is the best punshment for David Lereah?”
1989 vs 2006
got numbers ?
I would rather see 1893 vs 2006
I think an interesting component of the bubble is the following:
The mania has been so pervasive and so personal that even the bears are caught up in the mania.
Delaying procreation
Bubble blogs
Vitriolic “debate” with housingheads see Craigslist
Strained friendships
etc.
What are some other signs of the pervasive and polarizing mania?
What are the immutable benefits of renting?
One of the great aspects of renting is mobility. When most of my competition in the job market is tied geographically to their underwater homes I will make a killing by being able to relocate.
Earthquakes - there is no good earthquake insurance and FEMA is broken (see Katrina). Why have the majority of my “wealth” tied up in an un-insurable asset in earthquake country.
Maybe we could talk about a different system to determine the value of a home . The supply/demand/interet rate market comp system is not accurate . Could there be another way that could protect people without upsetting rights to buy/sell as one damn well pleases .Should more protections be put in place by lenders regarding the appraisal process ….such as, if comps go up more than 10% a year the buyer has to put the additional increase in down payment ?
“Should more protections be put in place by lenders regarding the appraisal process ….such as, if comps go up more than 10% a year the buyer has to put the additional increase in down payment ?”
How about no more ATM cashouts for consumption purposes, on the shaky premise that real estate prices always go up, so the home equity gains are yours to blow, er I mean, spend as you please. Could someone in the lending business please offer guidance on whether home equity lines of credit were traditionally collateralized to an investment use of the funds (e.g., home improvement)?
I worked in forensics before retiring. In any criminal case you always have a lot of circumstantial evidence that points in one direction that is just as compelling as direct evidence. This is the case with the housing bubble.
Only in this case, circumstantial evidence is your earliest clue to the bubble bursting, the depths of devastation, and the earliest signs of a turn-around.
We need to start watching the circumstantial evidence. Job layoffs, increased insurance premiums, businesses going out of business, CC usage at fast food restaurants and grocery stores, sales at high-end retailers, newer vehicles for sale parked along the streets, boats for sale, motor homes for sale, etc.
If I was a cop, I would look at all the for sale signs and say ……..
….”Holy Shit …..its going down !”
Now that BB has been on the job for 60 days, any revised thoughts on where his policies will take the US economy?
Some possibilities:
1) Business as usual, as advertised when he took over. Under this scenario, the housing bubble, commodities bubble, and hedge fund bubble (did I forget any?) keep inflating until they eventually pop in a catastrophic, mutually-reinforcing collapse.
2) A return to normalcy. Under this scenario, he stays the course on tightening until the speculative mania is choked to death. Overvalued stock, housing, and commodities prices suffer collateral damage and T-bonds turn out to have been the place to invest.
3) Other scenarios?
3) It doesn’t matter, either way, the damage has been done, and like good ol’ Stanley Johnson, we are in debt up to our eyeballs with the record US deficit, trade deficit and household debts. There’s no end to the madness and any number of scenarios could bring down the whole house of cards. Curious GS, have you or any others here read “Empire of Debt”? I notice some comments that hint some of you have read it, but never see any direct references. Also, since you are not buying into the peak oil crowd, will you read the latest book by Steven Leeb, “The Coming Economic Collapse”?
Have not read “Empire of Debt”, but I think I already get the gist from the title.
Are you suggesting Leeb’s book as a good one to read? Why?
It’s an analysis of oil supply and demand, makes a good case for $200/barrel oil by the end of this year. T. Boone Pickens said yesterday it could hit $100 this year and reiterated what he’s been saying for some time: http://www.peakoil.net/BoonPickens.html
A thirty-second glance at that peak oil website suggests there is a shortage of economic reasoning in that particular brand of religion (we will soon run out of oil and the price will go through the stratosphere, etc…). I will stick with economics, thank you, though I have nothing against other religious dogmas.
Any good funds or whatever for those of us who don’t really trade Options? something simple like SRPIX perhaps?
The advice of the day is .. don’t take the advice:
BPT, ERF these have high dividends (ERF monthly) but can be volitile with the price of oil. Long term oil play VLO.
PSPFX Nat. Resc. fund. RYURX or RRPIX goes up when interest rates go up. RYPMX precious metal fund.
Good Luck!
An investment that protects your net worth in a world where the Fed is printing money at an insane clip is gold. Silver also. Here are a few highlights:
1. As the Fed continues to debauch the dollar, it takes more dollars to buy gold and it is quick to respond.
2. Experts say that there is a massive short position by the bullion banks which have been leasing gold from central banks and selling it into the market. At some point they will have to buy the leased gold back and return it to the central banks. Each year there is about 3 million tons of gold produced in the face of about 4 million tons of demand. Historically the central banks have filled the gap with their sales. Now there is an estimated 15 million tons short. Are the shorts covering now? Is that why the price has been rising at such a strong clip? Gold rose 13% in the quarter ending today.
3. There are new buyers in the market. Some central banks that traditionally have sold gold into the market are buying. Argentina, Russia for example. It is likely that the OPEC countries are buying too as the stock markets in several of those countries have slid hard and the money may be flowing out of stocks there into gold. China is buying more gold now than before.
Silver has a similar story but unlike gold, silver is consumed and new production is required to keep the supply stable. There is a massive short position in silver as well.
Worth a thought if you are thinking where to put some cash.
1. There’s no evidence the Fed is printing money at an “insane clip.”
2. I assume you mean 3 million ounces of gold produced, not tons.
3. There is not a direct link between the number of dollars in circulation, or inflation in general, and the price of gold. It’s a commodity, so the price is completely demand-driven. As you note, if central banks decide to buy a lot of gold, that increases demand and price; if they slow down the rate at which they buy, or decide to sell, the price will drop.
They may not be making gold anymore, but governments have vaults full of it (Fort Knox) which they can use to manipulate the price by injecting supply back into the market, and the extraction rate is also subject to a supply response to high prices (similar to home construction). Many were burned by going long gold in the late 70s just before Volcker created a series of monetary earthquakes which caused the price to crash. If Bernanke turns out to look more like Volcker than gold bugs estimate, or the long-term bond market corrects to reflect widely perceived inflation risk,
then they will get burned again this time. Buying gold is an obvious strategy (like flipping houses, going long oil stocks, or day trading tech stocks circa 1999), and these are often the ones which fail spectacularly when a change of policy regime alters the underlying “fundamentals.”
As I have already said and will say again, we are all gamblers now. Good luck to all with their bets!
Topic suggestion: How much further will the ten year treasury note yield have to increase (a lot of mortgage rates are being effected too) before the hosing markets really implodes (or the implosion accelorates)!
My guess would be Mortgage rates in the 7’s….A 50% increase over the lows possibly doubling the payments of any ajustable or IO taken out 2 years ago…
Part of me says next year (after the elections in ‘06). Another part says after the elections in ‘08.
How about a share the real estate listing that ‘gets your goat.’
Here is mine. It is a 1,336 sf box in the bad part of Westchester (LA, south of Manchester and one block away from LAX). The annoying part is that it was purchased LAST MONTH for 599K and now is up for 769K. No pictures up yet (looking forward to seeing what vast $170K improvement they made in a month…), but I’ll be watching this listing closely, hoping that the flippers lose their shirts.
Lets all be honest: we may hate “flippers” now, but if we knew what we know now 5 years ago, we would have all leveraged ourselves to to gill to buy as much real estate as possible - and have sold it last summer. At least those of us who are not already comfortable… So, I know this has been discussed, but I am always interested in hearing where people feel they can make money off of the housing collapse itself, or even what bubble will be created next…
And as a previous post from a flipper quoted in the papers “What do I have to lose?”. And what does it matter to most flippers who lived on unreasonable appreciation. Start with nothing, build a paper fortune, then lose it to the bank. The upside for the flipper is greater than the downside. And as has happened in the past, the flippers and realtors and banks will all scream foul that prices dropped and ask the G to bail them out.
On the subject of being honest. If the homeowners holding out for high prices are greedy sellers aren’t we bears holding out for lower prices greedy buyers?
No, nothing wrong with buying and selling at a FAIR price.
Topic suggestion: how much has your professional productivity suffered because of addiction to this blog?
You Dog…
Yeah, that’s crossed my mind before- too
I was really thinking I needed to get back to my life.
Wait….this is my life!
Ben’s blog is our “safe place” while we wait for this credit bubble to collapse. Nice to be with like-minded people who don’t go flying off in a rage when you suggest that prices just **might** be a tad high for your average home buyer.
I’ve grown rather fond of hanging around with the good folks here, hour after hour…day after day.
Can’t wait for that party…
Phoenix now stands at 40,192. Go to the comment section and leave your prediction for when we will hit 50,000.
Which will drop more - the price of lots or the homes that are later built on them? Assuming construction materials and labor costs are constant, will lower priced lots lead to smaller less fancy construction so that home prices are not out of whack with the land they are built on?
First stocks, then housing, where will the next bubble pop up? I’m guessing gold, not because I’m a gold bug but because it’ll become the next big trendy thing to invest in after people have lost their ass in stocks and real estate.
I’m guessing gold,…will become the next big trendy thing to invest in after people have lost their ass in stocks and real estate.
I don’t think it’ll be so much “trendy” as a matter of economic survival, especially if Uncle Sam continues his lunatic, dollar-destroying fiscal policies. The Flight to Quality will start with the smart money, then the herd creatures, as always, will stampede in and drive the prices into the stratosphere.
How do you guys find out the median price of homes in your area? The reason I ask is there were a few reports of a falling median last fall, and now nothing for months.
The cover story of the April 10 BUSINESS WEEK is the HOUSING MARKET. See:
http://www.businessweek.com/magazine/toc/06_15/B39790615housing.htm
There are a number of articles and places to COMMENT online.
I’m going to give them a piece of my mind. You have to believe there will be a lot of prospective buyers reading these comments!
This might be a great opportunity for one and all to comment as well!
Have any bloggers who took out I/O loans or NegAm loans in the past few years ever paid anything on the principal? Know friends who have/haven’t? Percentages, please. Insight?
I think we should talk about how a false housing boom can be prevented . I can think of some protective measures that could of prevented this false run-up of prices .Lenders use to have check and balances on to much speculation purchases . The flippers would not of been able to get 100% or low down loans in past markets . Can we have loose money without abuse ? Since the housing market is tied to interest rates, should better protections be put in place on interest only loans /arm’s to prevent neg. equity potential ,(perhaps higher down payment requirements or insurance required to pervent loss.) What percentage of a society can really afford home ownership under the best of circumstances ?Just making suggestions for possible discussions . Should the tax laws be reformed to penalize flippers/investors for short term flips? Should realtors in practice be allowed to purchase property and sell them one month later ,thereby creating a false market ,without a penalty tax?