Bits Bucket for June 21, 2013
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.
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Name:Ben Jones
Location:Northern Arizona, United States
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paraphrase from a short story by british author irvine welsh, on being lost in the desert southwest:
‘that’s impossible. this is america. you’re never more than 5 minutes away from someone trying to sell you something’
Good god, you should have seen the guy I had to spend the day working with today. All sales, all the time. I need a shower…and a nap…
“DC Rents Are Falling. Are House Prices Next?”
http://www.thedailybeast.com/articles/2013/01/11/dc-rents-are-falling-are-house-prices-next.html
HEEHAW! LOLZ
“Why are apartment rents falling in D.C. but rising in Philly?”
Read more at http://www.philly.com/philly/blogs/inq-phillydeals/Why-are-rents-falling-in-DC-but-rising-in-Philly-.html#BgkHLr4RJ1PPuftw.99
It’s always sunny?
Fairfield County, CT: Rental Rates Declining in Third Wealthiest County in the US
http://www.zillow.com/local-info/CT-Fairfield-County-home-value/r_2694/#metric=mt%3D46%26dt%3D1%26tp%3D4%26rt%3D6%26r%3D2694%252C3806%252
I think it’s cute you take Zillow data seriously. Lemme guess, you also think Wikipedia is reliable.
I think it’s cute you take NAR data seriously. Lemme guess, you also think Wikipedia is reliable.
See how that works Slithers?
Now….
I have a proposition for you Slithers. Right here publicly.
Why don’t you demonstrate for us what it costs YOU to build using a simple take-off. It’s not difficult. Especially considering you’re in the construction business.
Go ahead. Consider this the blogs challenge to you. Publicly.
I’m in the construction business? News to me amigo.
But if you share with me the secret to building houses for $50/sq ft including land and make a profit, I just might start a construction company.
You have no idea.
Thanks for confirming.
$50 is no exageration. At the height of the Bubble a friend built a standard house in Jacksonville for $35/ft2 not including land. He didn’t do the work himself, it was all contractors. I think materials and labor are somewhat less now than then.
Some people want to pay a lot more though. I don’t know why.
It does depend on what you are building. Building has picked up in California’s Eastern Sierra. Most of the houses we are working on range from $250-$500/ft2.
The exception would be tribal houses.
What is so radically different about those Sierra houses vs a stick built on the East Coast?
“It does depend on what you are building.”
Not really. In fact not at all. We’re talking about SFR’s.
I’m an insulation contractor so my perspective is limited, here are a few items.
Cost of land ( a high percentage of current work is located ski-in/ski-out )
Cost of high seismic requirements
Cost of high snow load requirements
Cost of sprinklers ( mandatory in all residences )
Cost of non-ventilated attics ( fire districts are prohibiting ventilation and the required non-permeable, usually spray-foam adds up to $20k / home.
No locally sourced materials.
Here in Mammoth median priced homes are not being built, they cannot compete with the resale market so an abnormally high percentage is high end housing where the high end finish materials and other upgrades can drive the price up. We insulated on house for near six-figures, this was unheard of in the past.
Geo-thermal heating is catching on and is really expensive due to all the glacial boulders just under the top soil.
I’m talking about SFR’s as well. For someone with such a loud voice you sure are clueless.
Interesting CT, thanks for the explanation. Lots more than our basic shelters here. The most expensive things in my home are the engines.
Tribal houses…they are exempt from some of these rules or just more modest?
Cost of sprinklers ( mandatory in all residences ) ??
That one item alone runs about $3.00 per sq.ft….
The tribal homes are both modest and located in the deserts just east of the sierra where the requirements are less.
They seem to be somewhat exempt on code issues too.
You want a real jaw dropper;
2040 square foot house….Sewer, water, Gas, electric, architectural, structural, cable, school fee’s & city fee’s…
Right at $55. per square foot…Thats $110,000. before you ever put a shovel in the ground…
The sprinklers cost more up here. You can no longer protect to -40F via glycerine. You are now limited to 50% glycerine and that gets you -20F, the rest has to come from locating the wet system in a warm space. For this purpose the definition of a warm space can be on the outside of the insulation envelope and the thickness of the envelope can be increased to include the sprinkler pipes. The extra protection from me can be another $1,500
If you dried the sprinkler system with a vacuum pump after pressure testing, you wouldn’t need to keep the space heated. This technique is known in the museum world.
I don’t design them, but I have to protect them.
My mantra is, locate everything wet in warm areas and use dry pendants or stems if they penetrate into cold areas.
Its obvious to me that dry systems cost more because they are avoided in almost all cases.
“Most of the houses we are working on range from $250-$500/ft2.”
That cuts out the first time buyers, I hope. Fingers crossed!
One of the houses getting under way requires the demolition of a multi million dollar house. The new house is too large to fit on the vacant lot alone.
requires the demolition of a multi million dollar house ??
Reminds me of a article I read some time ago discussing incline village on the lake…. Billionaires are buying out the millionaires…Money is no object…They want it…They can afford it…They buy it…
“I’m an insulation contractor so my perspective is limited”
Indeed it is.
So you really don’t know anything about bidding a project other than tossing batts above a grid ceiling. For someone so uniformed your sure do run off at the mouth.
2040 square foot house….Sewer, water, Gas, electric, architectural, structural, cable, school fee’s & city fee’s…
Right at $55. per square foot…Thats $110,000. before you ever put a shovel in the ground…
—————————————————————–
Fantasy….
And as far as we can tell, you’re all about fee’s and BS. You’ve never operated a shovel in your life.
“If you dried the sprinkler system with a vacuum pump after pressure testing, you wouldn’t need to keep the space heated. This technique is known in the museum world.”
They’re a dry system and they’re quite common. But we’re talking houses here…. the notion that sprinklers are a requirement in a non-public structure is laughable. Worse yet…. these clowns are tossing around AIA and code issues that don’t exist. Compounding that are these backslapping hilarious numbers. It they were remotely truthful, we’d all be building houses for a living. The reality is something entirely different.
the notion that sprinklers are a requirement in a non-public structure is laughable.
I now have to protect 100% of new residential structures from freezing their sprinkler system but you say the requirement for sprinklers don’t exist? http://osfm.fire.ca.gov/codedevelopment/residentialsprinklerandcacodes.php
Someone as clueless as you should speak with a softer voice, you look foolish.
And this “requirement” is $300/sq ft huh PinkGooGuy? $600? Maybe $1000/a square foot?
Stick to tossing fiberglass batts. You don’t know what you’re talking about.
you throw out those numbers and then tell me to shut up as though they are my numbers?
why haven’t you been banned? your countless, attacks take credibility away from this blog.
why don’t you go do a take off and create a bid estimate to establish your credibility? do you know how stupid you sound?
Then what is it then PinkGooGuy? Whats the wet system M&L costs??? Explain your inflated construction costs. They’re your numbers, not ours.
Proceed.
Oh knock it off, Analyeast. You literally have no idea what you’re talking about here. When was the last time you bid a job in Mammoth Lakes,? Or built ANYTHING in rural CA?
Charlie and SDdave are absolutely correct; the fees, studies, permits, assessments, remediations, reports and special taxes ALONE can add up to more than $55/sq ft, and that’s before you even get equipment to the site to grade it, let alone start in on infrastructure or pay your architect. Then there’s 100 mile+ transport for all your non-local sourced material, housing for your competent labor, upgrade to local HOA specs, and climate considerations. Then, MAYBE, you can build your cruddy manufactured-home type SFR for $55/sq ‘. But I doubt it.
Once again…. you don’t know what you’re talking about but that’s what drama queens do. Put themselves right in the middle of something they know nothing of.
“Manhattan rents are coming back toward earth”
http://www.bizjournals.com/newyork/news/2013/02/13/average-manhattan-rent-dropped-for.html
I have a feeling today is going to be a very good day for Wall Street.
Buy stocks on margin first thing in the morning, and make a killing today!
I said it yesterday: they are back to their old ways, making dough off the churn just on the talk of “Bernanke’s gonna” shut off the spigot. They’ll try to keep it going right up until the moment somebody actually puts their hand on the valve.
Love love love the Federal Reserve.
And thank them for keeping the value of the dollar stable since 1913.
the only thing they have done to try and fix the economy is print money. that’s real ingenius.
Before they had to give a call to John Pierpont Morgan, so there is progress
What interests me is how many investors fully bought into the Fed’s “We’re gonna tighten soon” threat. Meanwhile, FOMC members are already trying to back peddle from the impression investors took.
the only thing that has kept the system going is the ability of americans to finance big purchase items. Every thing is about a monthly payment. what happens when homes and cars get so exspensive that they cannot afford the monthly payments anymore?
They have made the banks part of everything you buy. They get to skim some interest of your purchases.
“what happens when…”
No, really? You are supposed to be the one who understands this game that quite a few of us are not playing.
Debt slavery is voluntary.
I’m not saying i’m the only one who understands. Just trying to communicate my thoughts and get some feedback.
You don’t understand and you communicate that fact clearly every day.
u going to spread more rubbish data on here all day today?
U going proceed thinking youre flying under the radar today?
Think again.
getting paid per post, by the National Association of Realtors®
from yesterday….anyone have any statistics on how many new cars were repo’ed under the cash for clunkers scam?
no one cares about your same rubbish posts everyday.
u going to spread more phony data and realtor lies here all day today?
i have posted no rubbish data like you spread here daily. no one wants to read your old cr@ppy data from zillow. How long have you worked for them?
is anyone who disagrees with you a realtor? your like a child.
We need credibility on this blog.
Every day you post realtor junk.
lmao i just post reality
And the reality is housing demand is at 1997 levels and falling.
“i just post reality”
http://www.counterpunch.org/2013/06/14/time-to-buy-a-house-not-on-your-life/
http://www.counterpunch.org/2013/05/17/obama-and-the-housing-boondoggle/
http://www.counterpunch.org/2013/05/03/the-housing-shell-game-prices-up-ownership-down/
http://www.counterpunch.org/2013/04/16/housings-breakout-year/
http://www.counterpunch.org/2013/02/15/obama-housing-and-the-next-big-heist/
They have made the banks part of everything you buy. They get to skim some interest of your purchases.
Indeed. In 2005-2006 credit cards made a huge push to get into the coveted under-$20 market. They want you pay interest on movie tickets and Big Macs.
Just ignore him…Don’t respond to anything he posts…..Maybe he will just go away…
“Every thing is about a monthly payment. what happens when homes and cars get so exspensive that they cannot afford the monthly payments anymore?”
“the only thing they have done to try and fix the economy is print money. that’s real ingenius.”
Neither of these posts sound remotely like anthing a realtor would say.
And how many times have you got caught BSing about your construction experience “scdave”?
“What happens when homes and cars get so exspensive that they cannot afford the monthly payments anymore?”
We just went through it. Again.
They have made the banks part of everything you buy. They get to skim some interest of your purchases.
Not me. I pay cash for a lot, and when I do use a card it’s a debit/check card through a credit union - zero fees.
I have zero debt, paying cash for rent.
Banks make almost nothing from me.
paying cash for rent ??
Your landlord loves you… : >)
Well, ok Cash as in “not borrowed or invested money.” I do have my bank automatically cut a check and mail it each month - also completely free(including postage).
s/credit union/bank
Anyone else think BB is looking out for his next job.
It’s clear WS has wanted to get people out of treasuries for some time, and I would guess they are short treasuries and real estate ect. BB gave them what they wanted.
Out of only treasuries? Hell they want people to get out of treasuries, get out of housing, get out of cars, get out of bonds, get out of SS, and get out of the mattress too. Just send your paycheck directly to Wall Street and they will take care of you.
Buy stocks on margin first thing in the morning, and make a killing today!
Don’t quit your day job.
Unfortunately Whac, you were right.
Dear stock market: Hurry up and crash already!
If you take on mortgage debt at current massively inflated housing prices, you’ll enslave yourself for the rest of your life.
“Debt is bondage.”~ Suze Orman, May 11, 2013
Don’t Be A Debt Donkey®
Suzanne researched it:
http://www.youtube.com/watch?v=hPIxrzmatq0
Imagine being married to one of those.
“the horror, the horror” — Colonel Kurtz
gaaaaaaawd….. that hag. Read the comment made by “schizlor”. He nailed it.
I dunno who is more corrupt. Century 21 or Remax.
It’s almost like the NAR put that out as a guide for wives like that to browbeat their husband into submission on an overpriced shitbox.
Married to that? There are no words…..
“Debt is bondage.”~ Suze Orman, May 11, 2013
Don’t Be A Debt Donkey®
+1 Ergo Suze doesn’t do Donkey.
From yesterday:
“Comment by Blue Skye
2013-06-20 13:58:54
The message that debt leads to financial security and that rent is cash in the trash begs for pushback. Day after day.
A theme here is whether you can borrow your way to prosperity, as an individual, as a state, as a nation, as a globe. A theme here is whether housing is in a bubble. Some posters here, like Oxy say housing and debt is not in a bubble and if you are not in you are a loser. ”
—-
Actually yes, you CAN borrow your way to prosperity.
Mitt Romney and ilk like him prosper every day borrowing money to buy companies, reap profits, pay back the loan, keeping the proceeds.
In the early 90’s, George Soros made a billion off a dramatic currency play built on leveraging.
Every microsecond trade is borrowing. Example: You think a $10 stock will rise a penny. OK. Borrow $100,000, buy 10,000 shares, wait for the stock to rise a penny, sell the stocks for $100,100, pay back the $100,000 and pocket $100. Do that every 5 seconds for a day of trading, and you can be substantially prosperous. But you need to borrow that initial $100K. You profit even faster if you can borrow $1,000,000.
Any small business borrowing leads to prosperity. If I lend $5 to a farmer in Africa, he can afford to buy a water pump so he doesn’t have to haul water. He can make $100 on his crops instead of $50. More than enough to pay off the $5 with interest, once he gets over that $5 hump. Ditto for borrowing to buy a dry cleaning machine, or a deep fryer, or even a Senator. Borrow, investment, ROI.
Hell, even Mother Nature borrows. Ever hear of an “activiation energy?” Once chemicals get over the hump of activation energy, the chemical reaction releases more energy than was borrowed.
On a personal level, in the 1950’s, my grandparents borrowed money for a mortgage. As a result, when she grew old, my grandmother “prospered” on Social Security and a paid off house.
Those are examples of individual borrowing. Does it matter whether a nation or a globe can borrow to prosperity? Not in this context. Not when Blue’s remarks to me are directed toward my borrowing as an individual.
I never made rent v. buy all or nothing. Sometimes renting is better, sometimes buying is better. In my case, buying was better. For several posters here, renting is better. The test of loserhood is not now. The test is when you’re 65 and you can no longer work. Where do you live? That decision was made 20-30 years before. At the moment, housing isn’t quite in a bubble because much of that bubble is filled with cash,* not air.
Finally, is rent cash in the trash? Maybe not all of it. But rent money that would have gone to principal pay-down IS cash in the trash, in a normal market. Even in my early days at HBB I qualified my cash-in-the-trash statements with “normal market.” The bubble was not a normal market.
—————–
*now, if the cash is simply borrowed from another source, then yes it’s still a bubble, but it will pop somewhere else. This is why I was asking what the source of the cash wash.
Donkey,
“The test” is what you paid. It’s the price ALWAYS. And you made a massively inflated price. The question in your case is how much you overpaid.
Why is it you avoid disclosing what you paid?
Oxy,
I don’t know about your cash wash thing, but I consider your perspective an example of where this country took a wrong turn. It is not about you. I am sure you do not get my point and I do not get yours.
Pass me your hash pipe.
Dude, it’s legal here now. And the kidz don’t use a pipe now, they have a hash-oil atomizer. It looks like a thick ballpoint pen with a button on the side. One of our squadettes likes to get high and she enthusiastically demonstrated how it works for us while at a concert this spring.
What are the job prospects for this squadette? I mean is she a lucky ducky or on the way to becoming one?
I understand Oxy my father didn’t want to be stuck on SS with a paid off single family house….so he built a 2 family….now my mom lives quite good on SS a part time job and $1500 rent which easily covers the $8200 RE taxes $1200 insurance water & maintenance each year…a SF home with even a third those taxes would have made big difference in her lifestyle..downward.
“Any small business borrowing leads to prosperity.”
This is often true when the small business borrowing increases productivity, revenue growth or the like.
“Every microsecond trade is borrowing.”
This type of borrowing is parasitic. A Wallstreet game. Shouldn’t be considered even remotely similar to borrowing to expand/improve a business.
Borrowing is not always good or bad, but it is always risky. The question is whether the potential reward justifies the risk.
+1 Al…I agree…
“Any small business borrowing leads to prosperity….”
and as any gambler knows, every roll is a winner.
This simply is not true. Borrowing by small businesses increases their risk exposure and debt service reduces their margins, making them less competitive. Most small buisness ventures fail anyway, more so if they are undercapitalized.
“Every hand’s a winner, and every hand’s a loser”.
In Vegas, we have a saying. People who gamble and win deserve to win. People who gamble and lose deserve to lose.
Oxy is right.
It’s the abuse of borrowing by both sides, the relentless hype to borrow and the deliberate omission of facts regarding what is being borrowed and purchased that has distorted the system beyond recognition and desire to participate by anyone who recognizes these distortions.
Capital investments have been a fact of life since recorded history.
Well maybe so, but she doesn’t speak to capital investment at all. Rather she refers to gambling with borrowed money and every one wins. That is the mainstream ideaology of an entire culture.
I think most of was meant as sarcasm.
I think that is unlikely.
Blue Skye wrote:A theme here is whether you can borrow your way to prosperity, as an individual, as a state, as a nation, as a globe. A theme here is whether housing is in a bubble. Some posters here, like Oxy say housing and debt is not in a bubble and if you are not in you are a loser.
oxide wrote:Mitt Romney and ilk like him prosper every day borrowing money to buy companies, reap profits, pay back the loan, keeping the proceeds.
There is one very important thing to remember: Romney uses the legal construct known as a corporation to do all this. He does not risk his personal wealth.
Romney does not personally carry debt. He is all net worth.
If the corporation construct runs into financial trouble, it can pay its executives and liquidate, leaving creditors to fight over the carcass. If its microsecond financing fails, the executives still walk away wealthy.
People however are not legal or logical constructs. They are actual physical things. And if they try to structure their personal finances like a corporation’s, and if it goes south, which it will at some point, they are on the hook for the losses. The vultures will be fighting over their personal finances, not those of a logical construct’s.
You have posted a logical construct.
Thank you!
Of the 1%, by the 1%, for the 1%:
http://opinionator.blogs.nytimes.com/2013/06/19/our-broken-social-contract/
“despite living in the wealthiest country in the history of the world, Americans are a surprisingly unhappy lot … in the last 35 years as GDP has grown, we actually haven’t seen our average happiness level go up”
http://www.pbs.org/newshour/bb/business/jan-june13/makingsense_06-20.html
Does anyone else wonder if Ann Romney is actually happy?
“Does anyone else wonder if Ann Romney is actually happy?”
not me.
Her body language during her election campaign appearances with Mitt indicated that she likely detests him. In one well-publicized instance, she actually arm blocked him as they were being interviewed together on a sofa, and used her (substantial) diamond ring to shied her face from even having to look at him.
Very telling stuff.
She is dumb enough to happy.
““despite living in the wealthiest country in the history of the world, Americans are a surprisingly unhappy lot … in the last 35 years as GDP has grown, we actually haven’t seen our average happiness level go up””
Solution: More taxes!!
http://www.fastcoexist.com/1681499/the-10-happiest-states-in-the-us#1
Interesting map of what states are happy/unhappy. The hinterlands seem to be quite content with life. The South, Midwest, Nevada and New Jersey are grumpy.
If you have ever driven in New Jersey, you know this without a study.
thanks for the chuckle..
Also, Vegas is the home of desperation and hopelessness, so that explains Nevada.
LOL on NJ! Worked there one year.
Now that’s a slide show worth clicking on.
Ralph Nader:
“Many Americans have been led to believe that corporations can and will do a better job handling certain vital tasks than government can. Such is the ideology of privatization … “Privatization” is a soft term. Let us call it what it really is — corporatization”
http://www.counterpunch.org/2013/06/21/corporatizing-national-security/
I always loved the idea of handing control over to unelected CEO’s and dark pool investors who’s financial interests don’t align with the country they live in.
What could go wrong.
know your meme.
government employees = fat lazy slobs counting down the minutes until they can retire at age 52 with $200,000 pensions and unlimited free chuck-e-cheese tokens for life.
government contractors = bootstrapping, rugged individualist, invisible hand of the free market, galt gulch, horatio alger, manifest destiny, mcguffey reader, one room schoolhouse, taming the frontier, born in a log cabin, tom sawyer and huck finn, et cetera.
To be pedantic, Huck Finn was likely closer to government employee than contractor.
Just trying to rope in as many cliches about 19th century America into the contractor meme, can’t expect them all to be accurate.
Government contractors are remember the Alamo. Government contractors are riding across the prairie in Conestoga wagons. Government contractors are the Pony Express. Government contractors are ‘49ers. Government contractors are Tippecanoe and Tyler too, et cetera…
Ken Burn’s The Civil War had a fun segment on contractors, “The Age of Shoddy.”
i know someone that left the private sector to work as a forensic accountant for the fbi.
she put together a nice pivot table and a small graph for one of the cases she is working on….they thought she was a genius.
needless to say…the bar is set pretty low there.
just an anecdote of course…so perfectly meaningless.
“I always loved the idea of handing control over to unelected CEO’s and dark pool investors who’s financial interests don’t align with the country they live in.”
Better to hand control to unelected bureaucrats appointed by Obama with zero oversight.
Most businesses have a strong financial incentive to align their interests with those of their customers, unless they become a monopoly. Appointed bureaucrats start out as a monopoly.
The worst racket imho is the insurance industry.
Especially for homeowner’s insurance. You don’t know
what you bought until you need it. It’s more than the smile
and pleasantries when you hand them your check.
“The worst racket imho is the insurance industry.”
+1 Try self-employment sometime, and you’ll learn all about the insurance industry in this litigious country.
rms
You’re right.
Self Employment is a hard road.
Insurance was insane. We just closed a
DBA in the hi-tech sector.
Better to hand control (and billions of your tax dollars) to government contractors that cost the taxpayer twice as much to perform what were once inherently governmental functions.
Lawyer downlow joe has explained all of this here before…
Outstanding and succinct explanation regarding rising interest rates and housing-price ramifications from Charles Hugh Smith. Includes a little chart-porn for those who appreciate the inherent beauty of natural curves.
http://charleshughsmith.blogspot.com/2013/06/every-asset-that-depends-on-cheap.html
…”In the golden age of growth from 1991 to 2002, mortgages rates bounced between about 7% and 9%. The band from 1970 to 1979 was about 7.5% to 10%.
In other words, in eras of strong growth and low inflation, mortgage rates have been around 7% to 9%. So what happens to the monthly payments when the mortgage rate doubles from 4% to 8%? The payments double, too. And what happens to the price of houses when rates double? They fall to the point that households borrowing money at 7.5% - 8% can afford to buy a house, i.e. a price much lower than today’s Housing Bubble 2.0 prices.
Here’s mortgage debt. If mortgage debt had expanded at the previous rate, total debt would be closer to $5 trillion instead of $10 trillion.”
They fall to the point that households borrowing money at 7.5% - 8% can afford to buy a house ??
Boy…We have tossed this around for how many years now…But, are we in a new paradigm ??
Is 7-8% unemployment here to stay ?? The size of the social programs, the entrenched military budget, the national debt that must be serviced, the acceleration of technology that reduces head count and at the very least compresses wage growth ?? The desire in DC to generate more revenue through tax reform and means testing… The exploding cost for service at the state & muni level…My water & sewer rates have doubled in the last three years…
I guess I am suggesting a contrarian view…What if its what-you-see is what-you-get if not worse ?? Just a slog through the next two decades…
“are we in a new paradigm…”
Yes we are. We are in something that no one below nursing home age has seen before in their entire lives. I think it will be a few more years before you see it clearly.
Is there a chart that shows that when mortgage rates increased before then the price of the house our asset declined? That’s the chart porn I’d like to see. We all know mortgage rates used to be higher.
Take a look at Shiller’s long-term housing graph spreadsheet. He includes in it long-term rates, so you can see the correlation between rates rising and what happens with home prices. I don’t think he specifically has mortgage rates, but the long bond certainly is correlated to what mortgage rates are.
http://www.econ.yale.edu/~shiller/data/Fig2-1.xls
This is the link to his Excel spreadsheet.
From what it looks like to me, the home price correction in the early 1980s was directly correlated to interest rates rising (they went VERY high to do so).
However, the real estate correction in the early 1990s included no such interest rate spike…in fact, it looks like rates were steady if not on the decline as home prices fell. Likewise, the recent crash continued as rates were falling.
Other than long rates getting into the low teens in the early 1980s, I don’t see much in the way of higher interest rates causing prices to fall.
Sentiment is more powerful than interest rates.
“So what happens to the monthly payments when the mortgage rate doubles from 4% to 8%? The payments double, too, if you needed a mortgage to buy the house. And what happens to the price of houses when rates double? They fall to the point that
households borrowing money at 7.5% - 8% can afford to buy a house,hedge funds buy the lower priced houses with cash and households buy no houses at all.”There Charles, I fixed it for you. And let me know when San Fran house prices are at 1987 prices. According to your prediction in 2006, that should be about now.
Yeah…. you fixed him huh Donkey? LOLZ
Still waiting for rebuttal using facts.
Your beef is with CHS…. smarten up.
i have cash…so…let’s roll!
hedge funds buy the lower priced houses with cash and households buy no houses at all
My brother just mentioned this to me when I asked him if houses are selling in his suburban Raleigh, NC nabe. He said that they sell, but are immediately rented out, and that the number of houses is not trivial.
Immediately rented out by whom? University folk? That area has a huge population of transient college kids who’s parents might be footing the bill. If this is not the case and all of these previously empty houses are immediately rented as soon as advertised, then where did these people come from? Is there a gigantic horde of refugees camped around Raleigh waiting for vacancies? My son bought a house there 6 months ago and there was ample inventory.
Cary = Containment Area for Relocated Yankees.
Mabye the question should be, where is the population that got those houses built in the first place? The build-it-and-they-will-come era is only the previous 10 years. Any house older than that generally had a family waiting to move in. Unless Raleigh has been losing population, then I assume these houses are rented by people who previously owned, or by new folk who take on both the job and house of a retiree.
Immediately rented out by whom? University folk?
He’s further out than than Cary. His is a fairly new nabe, about 5-6 years old. A single cookie cutter, 3000 sq foot model on the street. These are $200K houses.
My son bought a house there 6 months ago and there was ample inventory.
My brother didn’t say anything about shortages or bidding wars, just that it appears that the bulk of the sales are to “investors”.
“There Charles, I fixed it for you. And let me know when San Fran house prices are at 1987 prices. According to your prediction in 2006, that should be about now.”
You sound like there was something organically resilient about the market in that smelly town that protected home values when Bubble 1.0 burst. Or was it something that you personally did to save the day? Or was it trillions in hot fiat put out by central banks all over the world and SF just got carried along in the tsunami like every other boat? If this chart is accurate, it looks like in 2012 SF was still back at 2004 levels. Maybe the bursting of Bubble 2.0 will get you all the way back to 1987? If it doesn’t, the next major earthquake will.
http://www.paragon-re.com/3_Recessions_2_Bubbles_and_a_Baby/
I was referring to this:
http://www.oftwominds.com/blogaug06/post-bubble-symmetry.html
are you seriously unable to read the article you just posted…comprehend it…and then discern its error based on the facts that have transpired since August, 2006?
your political bias and FIRE mindset has serioulsy borked your reason.
“hedge funds buy the lower priced houses…”
If you were reading here lately you would see that hedge funds are buying the bounce, not the dip. Money is looking for appreciation, not depreciation. When interest rates rise to 8% the buy-to-rent funds will be long gone and mortgaged house buying will be despised for an entire generation.
And your house will be worth less than half of what you paid for it, but you will find that totally unexpected.
Also, the hedge funds are buying the more expensive houses.
oxide “fixing” charles hugh smith…now that gave me a chuckle.
Sometimes the imagination kicks in when reality is stark. I once imagined an incredibly beautiful and famous actress/singer being my girlfriend. Hey, the reality of a gawky 15 year old is pretty stark.
Oxide:
Hedge funds are overpaying and fueling their own bubble. At these prices, they are not making profits. That might explain why inventory is on the rebound in the biggest hedge-fund cities. What happens to rich people who lose money their investments?
What do rich people do when they are losing money on an investment?
Depends if they still have conviction about the reason for the investment in the first place.
If they no longer have conviction, they sell.
If they still are convinced that it’s the right investment, they buy more.
“So what happens to the monthly payments when the mortgage rate doubles from 4% to 8%? The payments double, too.”
Wrong. The payment goes up by less than double…a lot less. This is due to the fact that a portion of the payment is return of principal, and as interest rates fall, more principal is repaid with the first payment, offsetting the benefit of lower rates.
Imagine a graph showing the principal portion of each payment on a 30-year loan:
At a 0% rate, each principal payment is exactly equal, at 1/360 of the total amount borrowed. The graph shows a flat line.
At a 1% rate, that flat line tilts upward ever so slightly…the last principal payment is greater than 1/360 of the total amount borrowed, and the first principal payment is less than 1/360 of the total amount borrowed.
At 2%, the line becomes steeper, and so on.
Running a few examples:
$100k at 0% for 30 years will give you a monthly payment of $277.78 (of which all of the first payment is principal reduction). The last principal payment is also $277.78.
$100k at 2% for 30 years will give you a monthly payment of $369.62 (of which $202.95 of the first payment is principal reduction). The last principal payment is $369.00.
$100k at 4% for 30 years will give you a monthly payment of $477.42 (of which $144.08 of the first payment is principal reduction). The last principal payment is $475.83.
The doubling of 2% to 4% increases the payment by 29%.
$100k at 8% for 30 years will give you a monthly payment of $733.76 (of which $67.10 of the first payment is principal reduction). The last principal payment is $728.90.
So, a doubling of rate from 4% to 8% increases the monthly payment by 54%.
I guess people forgot to read his disclaimer:
“The owner of this blog makes no representations as to the accuracy or completeness of any information on this site”
It should be tagged to every one of your posts.
saw article listing 7 potentials to replace bernanke.
i wonder which one of the geniuses will be able to print money the best?
Yellen….First woman chair…I think its a lock…
Forget qualifications. Does the candidate have the right sexual organs or the right skin tone. That’s what matters today.
It also works in reverse Smithers….For two hundred years the white/male has ruled…But change happens…You can tell by all the squealing…
Hiring people based on skin color is wrong….until it’s right. Liberal logic is fun.
the black guy or one of the chicks is not going to help anyone but the 0.1%.
Hiring people based on skin color is wrong ??
I could not agree more….You had 56 in a row until ??
http://en.wikipedia.org/wiki/List_of_Presidents_of_the_United_States
“You had 56 in a row until ??”
+1 And most of those guys at the front of that list snacked on chocolate whenever they could.
I am a CPA with over 20 years experience and I would say the number of black male CPAs I have met, worked with, or even seen during CPE courses is less than 50.
I guess nothing gets the “acting white” stigma attached to it more than a tax accountant.
“I could not agree more….You had 56 in a row until ??”
Voting for people based on skin color is wrong…..until it’s right.
Liberal logic is fun.
Slithers:
When an incompetent white man gets a job and flubs it, he is hailed for bothering to do the job at all. When an overqualified non-white female gets a job and hits it out of the park, she is kept on board. That’s it.
As far as Reality Shows go, this one is not so interesting.
Excerpt from Forbes article:
“Brazilians are some of the most highly taxed people on Earth, with little to show for it in terms of social safety nets and public infrastructure.”
Where is Rio these days?
Liberals don’t want high taxes to help poor people. They want high taxes to punish rich people.
They want high taxes to punish rich people ??
I would love to be rich & punished…
http://www.sodahead.com/living/rich-people-are-evil-and-should-be-punished/question-3291563/?page=4
Pretty much sums up the views of the Democrat Party
No, just somebody with a rant.
However, this sums up the GOP perfectly as is backed by recorded facts:
http://www.reuters.com/article/idUSTRE68R40I20100928
However, this sums up the GOP perfectly
It doesn’t *seem* perfect to me. If it were perfect I don’t think “Five members of the Senate Democratic caucus broke party ranks and opposed the bill,” would get caught in the net.
It also seems like the bill contains a lot of things in it. The article cherry picks the ones it talks about. What all is in the bill?
Democrats want to punish (in some cases even kill) rich people. No problem
Republicans vote for a tax break. They are the worstest people ever
Liberal logic is fun.
Smithers, I know plenty of people who have voted for Democrat candidates who do not hate, want to punish, want to kill other people. Sociopaths can join any club they want.
Smithers, I know plenty of people…
Forget it, he’s rolling.
-Boon
Rich people who want to be punished are a specialty of mine….
I’ve heard they are having country wide mass demonstrations down there. Apparently their credit/housing bubble, a national health care system that sucks and a several billion dollar World Cup stadium are not enough to pacify them. I expect things will get ugly when the China Commodity Ponzi implodes.
Gold flat at #1300. Silver flat at $20.00.
Oddly round numbers. Probably intended just to piss off the conspiracy theory crowd.
http://finance.yahoo.com/news/the-last-mystery-of-the-financial-crisis-154447818.html
ok so…why aren’t these people in jail?
The current govt is selective about law enforcement
Current? It’s ALWAYS been that way.
There has not ALWAYS been a target the conservatives mentality. That is so recent that it is mostly associated with this admin.
Once you have a guy in power that says things like ‘Its now time to reward our friends and punish our enemies’ then the indoctrinated can put their mindset into practice.
What goes around comes around.
But I always love when bullies cry foul when they are punished.
The type of punishment, issued by the IRS and other govt employees is ok with you? In fact you love it?
Due process is for liberals, punish the conservatives at will?
LOL…+1 eco….They were riding HIGH in the saddle when Bush/Cheney were running the show…
“LOL…+1 eco….They were riding HIGH in the saddle when Bush/Cheney were running the show…”
So you’re defense of Chicago Jesus is “but Bush did it too”. So much for Change.
*your
So you’re defense of Chicago Jesus is “but Bush did it too” ??
I am not defending anyone….Point is, you guys were “Party On Wayne” when Bush was in there..Not a peep out of you…He was Gettin-it-on showing the country and the world how its done…Kinda went up your posterior now didn’t it…??
All is revealed:
http://www.rollingstone.com/politics/news/the-last-mystery-of-the-financial-crisis-20130619#ixzz2WpbAMA5e
In incriminating e-mail after incriminating e-mail, executives and analysts from these companies are caught admitting their entire business model is crooked.
“Lord help our fucking scam . . . this has to be the stupidest place I have worked at,” writes one Standard & Poor’s executive. “As you know, I had difficulties explaining ‘HOW’ we got to those numbers since there is no science behind it,” confesses a high-ranking S&P analyst. “If we are just going to make it up in order to rate deals, then quants [quantitative analysts] are of precious little value,” complains another senior S&P man. “Let’s hope we are all wealthy and retired by the time this house of card[s] falters,” ruminates one more.”
That article should be good for the stock market. It will give investors confidence that large Wall Street companies are all perfectly crooked, so they definitely can’t ever fail.
http://finance.yahoo.com/news/former-enron-ceo-skillings-prison-193328040.html
by today’s standards this asshat is an alter boy.
I wonder what former Enron adviser and Paul Krugman thinks about it.
VIVA OBAMA
SI SE PUEDE
Word on the street is the amnesty bill will now get north of 70 votes. Hooray. Instant legalization, citizenship in a few years with absolutely ZERO border security**. No requirement to learn English. Even the payment of back taxes got thrown out.
** Yes, yes I know, there is a promise to build the fence in the bill. If you believe 1 extra foot of fencing will ever get built, give me a call, I have some oceanfront property in Nebraska for sale.
People are starving and we have this:
http://www.ebay.com/itm/321142440749?ssPageName=STRK:MEWAX:IT&_trksid=p3984.m1423.l2649
I predict anything is possible.
How much did you bid?
LOL.
I’m saving my money for $10 silver.