All ponzi schemes end with a dramatic change in investors' psyche. A period where people wake up, come to their senses, realize the folly of their ways.
We're there.
From Anne Taylor Fleming, this nice video essay. Here's the video, and read the whole transcript here.
In short, the air has definitely been let out of the housing bubble.
Now, we're a little shell-shocked as we look around at the crazy, manic time we have lived through and how it transformed the landscape.
In my neighborhood, there was something wild about it, a kind of frantic, optimistic acquisitiveness, packs of people spending their Sundays roaming from house to house.
Of course, it wasn't just here in Southern California. Similar things went on in many other places: Vegas and Atlanta, Houston and Miami, and New York, too. People flipping houses, buying second ones, huge places with all the appurtenances, the granite countertops, and designer faucets, and flat-screen TVs.
No question it was a status thing, people identifying themselves as one of the haves in an economically divided country.
October 14, 2006
PBS NewsHour essayist on the end of the housing bubble, a "crazy, manic time" with "something wild about it"
Subscribe to:
Post Comments (Atom)
12 comments:
when the great default comes, all the properties will be worth, to the taxpayers, is at the highest level of taxation on the loans profit,is 35%, or the amount, that the borrowers owe to uncle sam, after declaring bankruptcy, thus, all that the properties will garner, is 35% max of the last sale price, at the highest rate of taxation. why pay more?
hate to root for the "great default"
THE COMING CORRECTION
The Daily Reckoning PRESENTS: Now that the housing market, which has been propping up the U.S. economy for quite some time now, has gone soft, what's next? Well, despite a stock market rally and high consumer confidence, Bill Bonner and Addison Wiggin warn that a correction is headed our way - and it won't be pretty. Read on...
http://tinyurl.com/ym4r37
there is no housing bubble, there is a suckers bubble
there is no housing bubble, there is a suckers bubble
Confused, I feel sorry for you, asking a question like this at this stage in the housing cycle.
I have sold my home, and I am a little scared about what is coming, even though I should be in the best position to face the market’s future.
To answer your question; the prices are coming down from the peak of 2005. Some areas have produces higher peaks in 2006. Prices will decline from the peaks, whenever the happened.
Miami is a nice place. Hope you are renting. If you own a home, stay there for the next ten years or more.
Confused,
1. I thought Orlando was the magic city.
2. Don't worry, all will become clear in the near future. Prices are rolling over. Inventories are climbing, and eventually prices will have to come down to bring the supply/demand forces back into equilibrium.
I'm sure you're not half as confused as I am. I don't understand how so many fools could bid houses up to the levels we see today - let alone the peak in 2005. Part of me feels sorry for the suckers who just bought, but the other part, frankly the majority, feels incredible glee - that's right, GLEE. I want to dance a gig on these peoples' financial tombstone.
You know, I've noticed an increase in the number of get rich quick scheme infomercials on early morning tv. A good friend, a real estate "investor" is at a seminar called FreedRocks right now. He tried to get me to go, but it sounds like such a scam! I mean just the name, Freedom Rocks sounds like so much middle America, NASCAR bullsh!t. He feels so superior to me since he thinks he's made so much money in real estate because he's so damn good at picking real estate. Meanwhile, while all my education totally over 10 years studying Finance tells me that this is a bubble, and I've stayed on the sidelines renting. I guess I'm the fool in his eyes...
I heard him say he thought his real estate was worth $4mm - he's so damn delusional. I think a lot of people are used to outsized returns and have become somewhat addicted to easy money and fast returns. Since property values are now evaporating, they're so quick to jump on a new risk free (the way real estate is perceived to risk free) $4,000 + $100/mo. stock picking software - give me a break! Or, in the case of FreedomRocks, you're playing currency forex markets. If you sign up a "friend" you get a commission. Apparently, the founder of this “no risk” scam has mastered the forex (foreing exchange) markets and is from what I can only guess is out of altruism at its finiest is willing to share his secrets with you for a nominal fee. My response was if he's so good a hedge fund would have scooped this guy up and paid him $100 million a year. Or, he would just be trading on his own. Chances are he wouldn't be going on the road peddling his multi-level Amway meets foreign currency idea. But, the sheeple are used to making a fortune without working, without actually producing anything. The whole thing makes me want to puke.
notion of a neighborhood of small, friendly, affordable houses. Alas, in so many places...that world is now permanently gone.
That's the crime of it. I hope she is wrong about it being permanent.
Marinite ~ my $ .02
I doubt it's "permanent."
It will cycle, like everything else.
Less will be more. Get rich TV Gurus will turn the stage over to people touting courses on simplistic living.
Houses will come down to meet wages in most areas... because they have to.
In the past, my wife would criticize me for spending so much time researching this asset bubble.
She started to read the blogs as well as some financial books. Now she enjoys the show as much as I do.
This free entertainment is better than reality TV.
The sad thing is that this is not a TV show. It is real life, and getting voted of the island is more than just the end of a show for these people.
house prices have tracked the rate of nominal gdp for as long as it matters, which makes sense b/c gdp is a reasonable estimate of the aggregate of incomes, population, and banker mischief, i.e., inflation.
however, the avg. median house price has risen 50%+ in 4-5 yrs. or TWICE the rate of nominal gdp since '00, the slowest trend rate since the great depression at 5%. but this is the avg. national rate of increase, and places such as socal, florida, phoenix, nyc, boston, dc, and portland and seattle have risen 75-100% during the same period, whereas the state product or gdp in those states rose the same as the national rate of only ~25%.
house prices soared for one reason: the fed panicked and gave money away in real terms for 3-4 yrs. now the fed is faced with cutting rates back to the low levels JUST TO KEEP PRICES FLAT, given the obscene levels of overvaluation. the problem is that the fed is likely to have to chase inflation lower in the yrs. ahead, finding it much more difficult to achieve and sustain a negative real funds rate to reflate the financial markets and economy this time around.
thus, national house prices are overvalued by about 20-25%, which will require a min. of 4-5 yrs. of flat nominal prices to work out. but consider that this has never happened in US history since the great depression. if nominal post-bubble growth since '00 falls to 4% from 5%, the slowdown in housing will last longer.
and this does not count the effect of all of the job losses in financial services, construction, mfg., transportation, retail, etc., that are likely from the housing bust. so, the effects are likely to last longer than 4-5 yrs., perhaps as much as 6-7 yrs. and longer in the most bubbly areas.
the fed can try to mitigate the effects of flat or declining nominal house prices but it means higher inflation, slower real growth than 2%, a collapsing US$, and much higher commodities and oil and gasoline prices (passing through to that six pack and most other items in your favorite supermarket), which by extension means slower real growth and investment, higher unemployment, and lower real wages.
no matter how one looks at the situation, the fed faces some nasty business ahead and no good choices. higher inflation in the short run risks sinking real demand and a debt-deflationary meltdown, but allowing the housing bust to worsen might just mean a japan-like deflationary malaise.
i'm an economist, and i'm not supposed to believe that deflation is possible with fiat money and central bank planning, but i don't buy it.
cash is not trash in my view.
She talked like it was in the past. Here in Portland Oregon things still look to be cooking on high. Condo towers going up all over the place, expensive housing everywhere you look.
You see signs of a slowdown but nothing dramatic.
Post a Comment