HousingPanic Stupid Question of the Day

November 09, 2006

HousingPanic Stupid Question of the Day

Are HP'ers just smarter than the sheeple?

92 comments:

Metroplexual said...: Yes, I actually made my computer from coconuts and bamboo. I got Gilligan peddling right now to power the generator.; November 09, 2006 3:22 PM
Anonymous said...: yes; November 09, 2006 3:36 PM
Bill said...: And i have Ginger & Maryann saying hello to my skipper.

For real we are more intuned to the ponzi way of things thats for sure, you would be amazed at the people i run into that have not a clue, they tell me enjoy life you could die tomorrow, as they reach for the med bottle.

Hey i enjoy life but reality is reality, and not owing is a lot more comforting than owing in my book.; November 09, 2006 3:41 PM
Anonymous said...: I'd rather own a house outright with no debt. I should achieve this goal in the late parts of next year........ and yes, in general I'd say most posters here are a little more intelligent than most talmudvision indoctrinated sheeple, though still not hip to the problem, just the symptoms of it.; November 09, 2006 3:49 PM
Anonymous said...: Nope, you guys are actually all the brain dead idiots in the world feeding of your nonsense ideas. Go own thinking that home prices will drop by 60%. Retards...; November 09, 2006 3:52 PM
Metroplexual said...: Sounds expensive PE, what does that run? $3,000?; November 09, 2006 4:05 PM
Anonymous said...: But the problem with you people is that because you see a street with 5 houses for sale then you believe that this is happening everywhere. Idiots like Keith like to quote places like Arizona and Florida as examples of overbuilt areas that are prime for huge price concessions. These are the places where the baby boom population with the highest homeownership rate will be moving. Also, 1,000 people are moving to Florida a day. Any overbuilding will be able to be absorbed quickly.; November 09, 2006 4:14 PM
Metroplexual said...: NO we see a loads of houses for sale in many cities. As for 1000 peole per day, I am skeptical at best. Lets see 1000 * 365 * 3 years. 1,000,000 people in 3 years, that sounds bogus to me.; November 09, 2006 4:26 PM
Jip said...: No, we just aren't so hard up to be in the "In Crowd" that we drink the Kool-Aid. Heck, let's face it; Even smart people get sucked into cults (which is what this "Ownership Society" thing is)...; November 09, 2006 4:31 PM
Metroplexual said...: Amen JIP.; November 09, 2006 4:32 PM
Anonymous said...: i have a coworker that bought a 450+ condo in norhtern VA. when i mention a housing bubble he gets a bit irritated and exclaims that there cannot be a bubble in housing becuase unlike the dotcom bubble (which he also bought into) housing is a tangible asset.

hope that answers your question keith.; November 09, 2006 4:34 PM
Roccman said...: Nope - because most here believe the Dems sweeping both houses means all is well captain - full steam ahead.

If anyone thinks the horrors of the Bush Imperium are somehow at an end – or will even be seriously impaired – by the results of yesterday's election, they have a harsh and bitter awakening to come.

http://www.informat ionclearinghouse .info/article155 42.htm

Election 2006: Been Down So Long It Looks Like Up To Me

By Chris Floyd

11/08/06 "Information Clearing House" -- -- Ordinarily, the elevation of a gaggle of corporate bagmen, spine-free time-servers and craven accomplices of tyranny and aggression to the control of Congress would not be a cause for rejoicing. With a few notable exceptions, the Democratic Party has displayed nothing but cowardice and cluelessness over the past five years, betraying the interests of the American people at every single gut-check point in the long march to the self-proclaimed "Unitary Executive" dictatorship of George W. Bush. Whenever it really counted – Supreme Court nominations, tax cuts for the rich, the class-warfare nuclear bomb of the Bankruptcy Bill, the appointment of sleazy, third-rate officials such as torture-enabler and Constitution- gutter Alberto Gonzales to high office, and of course, the eager goose-stepping into the war crime of Iraq (which was, let us remember, approved by a Democratic-controll ed Senate) – the Democrats folded, would not even go down fighting.

Is there any greater example of this than the vote, just a few weeks ago, on the "Military Commissions Act," the republic-killing measure that gave the president virtually unlimited, unchecked, unappealable powers over the life and liberty of every citizen? The Democratic "leadership" – now suddenly basking in media lionization – would not even mount a filibuster to defend the Constitution (not to mention the Magna Carta).; November 09, 2006 4:44 PM
Anonymous said...: Florida Population Growth 2000 - 2030: 12,703,391

12,703,391 / 30 / 365 = 1,160 people per day

Also, just because a house is a tangible asset doesn't mean that asset bubbles can't happen. The argument against the 60% drop in prices, that the demented, inept, and retarded Keith thinks will happen, is that housing is a necessary part of life and houses are much more illiquid than stock and tulips are. You don't wake up one day are think that your house with 3 bedrooms for you, your wife and 2.5 children is worth half of what you paid for it. There is a certain standard of living that people are accustomed to and people aren't going to from a 3 bedroom place with 4 people living there to a 2 bedroom places with you and all your relatives living there.

You guys need to look at the long term history of fundamentals before you start jumping all over every news article that came from the uninformed MSM. Never get your stock picks from the media because they just heard it somewhere else and regurgitated the information.; November 09, 2006 4:53 PM
Anonymous said...: Oh no, not somebody with a dissenting opinion!!! Hurry boot him off before he makes us think!!; November 09, 2006 5:07 PM
Anonymous said...: Richard, If the brain-deads memory can hold up over the next year or so, they may start to realize that there really is no difference between them on important issues. Sure they may differ on health care or social security, but they are both in lockstep in regards to fighting joo wars. Maybe after several of their children are slaughtered over there in some hellhole in the desert they will start to get the picture?; November 09, 2006 5:07 PM
Anonymous said...: Anon
"Thursday, November 09, 2006 4:53:08 PM "

I hope your postings make you feel more comfortable about your situation...
Hope you don't get foreclosed on...
Glad to see that you can tell the future about who is moving where in 20+ years. That is impressive.
Is there a major for that?

Sorry - I couldn't resist.; November 09, 2006 5:16 PM
Anonymous said...: anon,

explain this to me.

why is it that my wife and i today (210k a year total household) cannot afford a nice home in a nice part of norhtern va, when (consider the same income) in 2000 we could considereing the "fundamental" inflation rate fed to me by the fed.; November 09, 2006 5:17 PM
Anonymous said...: lol...fed to me by the fed.; November 09, 2006 5:18 PM
Metroplexual said...: I stand corrected on FL growth.; November 09, 2006 5:24 PM
Anonymous said...: rdub just added himself to the ignorant list.

There isn't a major but there is an industry, FINANCE you pillow biter. The census has the most reliable information out there and if you could project where demand would be, wouldn't you invest in that area? Or are you one of the many idiots here that when you invest in the stock market you buy high and sell low?

No I didn't get foreclosed on because I don't view my home as an investment. This whole site is filled with a bunch of bitter condo flippers that are pissed they got burned.

Rdub, come back with something intelligent or do yourself a favor and just jump off a bridge because your stupidity is weighing the world down.; November 09, 2006 5:26 PM
Anonymous said...: Not sure smarter but definitely more likely to be able to handle reality and the brutal truth. Also, more horse sense and not as much need to have smoke blown up our assess to keep sense of self worth intact. More Mr. Spock types is what the world needs.

Smug; November 09, 2006 5:29 PM
Anonymous said...: anon Thursday, November 09, 2006 4:14:43 PM said 1000 people are moving to florida a day, what he did not elaborate on was that they are all ilegal mexi's and out of work UAW workers.; November 09, 2006 5:30 PM
Bill said...: Nope, you guys are actually all the brain dead idiots in the world feeding of your nonsense ideas. Go own thinking that home prices will drop by 60%. Retards...

--------------

And your here why? welcome to the Idiots club..retard!; November 09, 2006 5:35 PM
Anonymous said...: Yeah, there probably are 1000 new third worlders infesting Forida daily.; November 09, 2006 5:37 PM
Anonymous said...: strawman,

Where on this site is the analysis of long term fundamentals?

I never cared or listened when the MSM was cheering or jeering the housing market. They are all idiots and I would never listen to their opinions.

Michael, you probably have to be the biggest idiot here if you can't afford a house with 210k in salary. The median house in Vagina can't be more than $400,000 and that would cost you about $2,700 a month with 0 down and 7% fixed on a 30 year. You (supposedly) make about 10,000 a month after tax. Are you really telling me that you can't afford a house? How much credit card debt do you have and how crappy is your FICO score? I guess it's not your fault, having money doesn't mean you're smart.

Now you say a "nice" house. Not everybody can have a mansion in Beverly Hills but you can still "afford" a house. I really think if you live in Vagina and still can't afford a trailer then you should go move in with Rdub. Idiots love company.; November 09, 2006 5:38 PM
Anonymous said...: borkafatty, I actually come to some of these sites to try and educate myself to see if there are thinging I haven't thought about yet from the other side. It would do yourselves some good if you tried to look at the housing market from different angles too. Still, every time I come to this site, I realize that this is the cesspool of the housing market blogs.; November 09, 2006 5:43 PM
Anonymous said...: Pillow biter,

That is funny.
Based on your retort, I'd say you are the sensitive one.

I would trust the census to have accurate information. YEAH RIGHT!

You wouldn't be reading this site if you weren't financially sensitive to the housing market.

I'm not pissed. I sold and have got over 100K+ in a 5% savings account waiting out this mess and I'm not even 30 years old.

Don't curse me out cause I sold, and you didn't.

We are kicking back and watching the mess, while your inside - banging on the windows - slinging insults and vague statistics about population growth to the folks laughing at you from the other side.

Most of the folks reading and posting to this blog have been here for quite awhile - and are renting or have sold.

Thanks for getting my boxers in a bunch. It has been a good substitute for my morning coffee.; November 09, 2006 5:45 PM
Anonymous said...: my income is 3 times the median income in virginia yet i can afford a meidan priced home.

thanks for helping me make my point anon.; November 09, 2006 5:45 PM
Roccman said...: I think I like Rummy because I thought I was smater than him...

Gates is really scary:

http://www.cfr. org/publication/ 7194/iran. html

Iran: Time for a New Approach
Director: Suzanne Maloney
Chairs: Zbigniew Brzezinski
Robert M. Gates
Task Force Members

Council on Foreign Relations Press

July 2004

84 pages
ISBN 0-87609-345- 4
$15.00 [ I have found a free copy - here in PDF http://tinyurl. com/yg8zzj or here
in HTML http://tinyurl. com/yhx5wp / Bill ]

Task Force Report No. 52

The wars in Afghanistan and Iraq have positioned American troops along Iran¢s borders, making the United States and Iran wary competitors and neighbors who nonetheless possess overlapping interests. Meanwhile, questions continue to be raised about Iran¢s nuclear program and its involvement with terrorism. Clearly, contending with Iran will constitute one of the most complex and pressing challenges facing future U.S. administrations. This informative report, which sparked sharp debate in Washington and extensive coverage by U.S. and international media, offers a timely new approach.

Rejecting the conventional wisdom that Iran is on the verge of another revolution, the report calls for the United States to reassess its long-standing policy of non-engagement with the current Iranian government. The product of an independent Task Force chaired by Zbigniew Brzezinski, President Carter¢s national security adviser, and Robert M. Gates, director of central intelligence during the George H.W. Bush administration, the report highlights several areas in which U.S. interests would be better served by selective engagement with Tehran, and breaks with current U.S. policy by encouraging a new strategy.

This report focuses on developments inside Iran, tapping into the Task Force members¢ extensive expertise on Iranian politics and society. It includes a comprehensive chronology of important dates in U.S.-Iranian history, economic and demographic facts about Iran, and reference materials on Iranian state institutions and governance.; November 09, 2006 5:47 PM
Roccman said...: Keefer stopped my ticker at 906 - hey bork did keefer stop yours too??

He thinks he is smarter than us sheeple me thinks.; November 09, 2006 5:48 PM
Bill said...: Anonymous said...

borkafatty, I actually come to some of these sites to try and educate myself to see if there are thinging I haven't thought about yet from the other side. It would do yourselves some good if you tried to look at the housing market from different angles too. Still, every time I come to this site, I realize that this is the cesspool of the housing market blogs.

-------------

My original question is still relevent why are you here then?

You see the angle here the truth, but you are still in denial, and that is fine, but dont sit here and call us retards, we are the smart ones in the food chain and not falling for the hype as well as the inflated cost..
I do own yes, when a house was affordable, now..forget it, I sit and wonder how you 20 somethings, can even afford such a liability non the less want the burden..but what ever ,troll around, just leave your insults to your other blogs.; November 09, 2006 5:50 PM
Bill said...: borks my bitch said...

Yes we are all smarter than the sheeple except our janitor friend.

------------

hahah! yup real smart about as smart as the 2g i picked up this morning for my weeks pay.a whole 20 hours.your right changing a bag sucks!hahah! Dont be jealous now go work your 40 hours, run now your mama is calling boy.; November 09, 2006 5:56 PM
Anonymous said...: Michael:
"my income is 3 times the median income in virginia yet i can afford a meidan priced home.

thanks for helping me make my point anon."

I don't know what point you thought I proved for you but you just said you could afford a median priced home. So half of the home in Vagina aren't good enough for you? Do you know what "meidan" means?

Rdub, yes the government has a hidden agenda and is conspriring the cheat us all our of money by providing false data. Continue to live hiding in your house in fear from all the terrorist coming to get you.

Strawman, I'm still waiting for this fictional "fundamental data analysis" that you asshats do here.

I'll leave you girls with all the sand in your vaginas.; November 09, 2006 6:03 PM
Anonymous said...: anon,

so you can use a meaningless statistic to support your position but i can not?

if you have a ziprealty account i will post what 650k gets you in a nice neighborhood in norhter va.

there is another home in the same community that my wife and i like. three months ago the FB was asking $ 1,125,000 for it.

he is following the market down. he is asking $ 925,000 for it.

i think he will go lower. i may pick it up at round 750k next year.; November 09, 2006 6:08 PM
Bill said...: borks my bitch said...

Bork you are excused today from my rhetoric. This troll is pissing me off. So troll if you think Florida is so grand buy 5 houses there give us the addresses and we will be there in 2-3 years to pick them up at your foeclosure sale. So show us how brave you are.

---------------------

Good greef whats a guy to do, i am excused..think ill go but a six pack my day is over...gold is up today bigtime...!!; November 09, 2006 6:09 PM
Anonymous said...: Anon forgot a couple of things:

- How many people a day are LEAVING Florida as soon as they can find a sucker to buy their house? There are quite a few in our Subdiv that escaped recently. Matter of fact my next door neighbor is still trying to sell his old home down there.

- How many old folks die per day down there? FL is known as "God's wating room"; November 09, 2006 6:10 PM
Anonymous said...: Should have been: God's waiting room"; November 09, 2006 6:11 PM
Anonymous said...: Anon
"Thursday, November 09, 2006 6:03:42 PM "

Technically it is not MY house since I'm renting.

Just curious,
But what industry are you in?
How long have you owned your house?
What city do you live in?

This will give us same background regarding your perspective. Unless you are here just to troll and start crap, then I'm assuming you won't answer.; November 09, 2006 6:20 PM
Anonymous said...: What I want to know is,
why do all you people bicker
ALL THE FREAKING TIME??????
Don't you get tired of it? EVER??

I've yet to see one civil conversation
(and that's in over a year).

Is that an acceptable way to behave, seriously? Is that what you do in person too? Just come out swinging whenever you disagree?

For the most part, the people here are really cool, with fantastic critical thinking skills and Keith's site combines topics like no other. (Thanks for the fresh individuality Keith.)

Why can't you obsessive "bickersons" just have some self respect (or GASP, respect for others) and learn to go one day without being SUCH MISERABLE PEOPLE!

It just seems like there is just so much stupid fighting EVERYWHERE these days.
Enough already, or God's going to send another flood.; November 09, 2006 6:20 PM
Bill said...: trolls suck said...

I like the poster borks my bitch he cracks me up. But seriously bork this guy is trying to break your balls.

----------------

Ya i know I like the challenge ..he makes me laugh! :)>; November 09, 2006 6:21 PM
Anonymous said...: bea arthur is teh funny!; November 09, 2006 6:23 PM
Anonymous said...: rdub,

i will go first to break the ice so to speek.

industry: tax senior manager for a publicly traded company.

ownership: 1 bedroom condo since about 2000.

city: alexandria virginia.; November 09, 2006 6:25 PM
Anonymous said...: The hate trolls are the worst. Always spewing racial hatred about arabs. I don't think I've ever seen more Islamophopes in my life.; November 09, 2006 6:26 PM
Anonymous said...: Strawman, looking at graphs is not fundamental analysis. Why don't you try gathering data and look at housing affodability and demand historically? One data point doesn't determine a trend.

Rdub
Finance/Investing
5 Years
Pasadena, CA; November 09, 2006 6:31 PM
Anonymous said...: anon,

this and other blogs are filled with analysis that supports a significant if not epic housing correction in many many parts of the country.

can you provide your anlaysis to the contrary?

so far your evidence consist of just one data point...floridas population growth.; November 09, 2006 6:36 PM
Anonymous said...: I'm sorry Strawman, I didn't mean to hurt your feelings. Do you want a hug? Do you want a soda?; November 09, 2006 6:37 PM
Anonymous said...: Anon
"Thursday, November 09, 2006 6:31:17 PM "

Thanks for the reply.

So what are your thoughts about people moving investments out of real estate?

Do you completely deny the existence of a housing crash?

Do you foresee people investing more in stocks? Or retreating into more stable investments?

Seems like there is still a lot of easy money to be borrowed out there... You think folks will start to take out loans to buy stocks as people try to catch "the next big thing" (My only guess to this would be stocks) ?

Nice to see we can be civil.
Figured I'd post some honest questions - rather than continue the bashing.

Did you know that right now is both a good time to buy and to sell a home?

;); November 09, 2006 6:39 PM
Anonymous said...: anon,

here is one of my favorite housing bubble sites. it's a bit more cerebral. hope you enjoy.

http://tinyurl.com/ygsa6j; November 09, 2006 6:57 PM
Paul E. Math said...: Anon recommended that we analyze the fundamentals that underly house prices and I agree.

He has offered the rate of immigration as something that will contribute to demand, thus supporting home prices. Point taken.

But immigration is not the only factor contributing to home prices, right? Charlie has given his anecdotal experience regarding rents, that it is cheaper for him to rent than to buy right now. A comparison of the cost of renting to the cost of buying is another method of fundamental analysis for the housing market. It makes sense to use this comparison because renting is always an alternative to buying. The current ratio of average home prices to average rents is now radically above the long-term average - it has never been this high.

Another method of comparison is home prices to average incomes. It makes sense to look at this ratio because, ultimately, people pay for their homes with their income. That ratio has always been 3 to 1. In fact, it used to be that no lender would qualify a borrower for more than 3 times household income. As of 2004 (this was the only data I could find immediately for florida), that ratio was 4.4 in Florida and 6 in Miami. It had never been so high and only went higher in 2005.

So even if there are a lot of immigrants, why would it make sense for them to take on so much debt relative to their incomes and why would they do so when they can rent for less?

I would be more than happy to hear some arguments against this bubble theory but immigration is not the only factor here. Nor are rents and incomes but they're pretty big ones.; November 09, 2006 6:59 PM
Anonymous said...: News Flash…

Alcohol, Preservatives in food, marijuana, drugs, and coffee all cause BRAIN DAMAGE.

This problem is compounded by watching inane propaganda on television every night after going to work while denying your voluntary slavery.

Most people can not digest the truth in these statements because an impaired mind is compelled to deny its illness in itself and others.

Break away from the status quo and nurture your mind.

Then find the humility to use your knowledge to help people instead of inflating your ego.; November 09, 2006 7:03 PM
Anonymous said...: Mike, monkey testicles are more cerebral than that guy.; November 09, 2006 7:05 PM
Anonymous said...: Anon
Rdub
Finance/Investing
5 Years
Pasadena, CA

Time will show that 5 years in Pasadena does not experience make.

anon
Finance/Investing
44 years.
Pasadena, CA.; November 09, 2006 7:07 PM
Anonymous said...: The Dems are in power with a spendthrift Republican president? Is it any wonder that gold went up today? Dems in power are always good for gold. Remember Jimmy Carter?; November 09, 2006 7:18 PM
Anonymous said...: Why shouldn't people be Islamophobic? Out of all the wars on the planet, Muslims are at the center of most of them.

They must murder people of other religions to satiate their bloodthirsty Moon-god. Hence the crescent.; November 09, 2006 7:28 PM
foxwoodlief said...: Borkafatty said, "I sit and wonder how you 20 somethings, can even afford such a liability"

Hello? Who said 20 year olds are "entitled" to buy a house? In 1962 my parent's had been married eight years, renting, when they bought their first house (small 1100 sq ft). I was 26 when I bought my first house (1600 sq ft). The problem is they want a 2800 sq ft house with all the bells and whistles in the BEST neighborhood!

Hello? What ever happened to saving, staying out of debt, paying cash instead of using credit for things like "eating out" or plasma tvs etc? What happened to a "starter" home, taking out a fifteen year mortgage, paying it down as quick as possible, selling that house and using most of the cash to "move up"?

People who can't afford to buy shouldn't!; November 09, 2006 7:30 PM
Anonymous said...: First off, since there hasn't been a major price correction in the existing home market around 2003 and before, you'd have to assume that the market was in equilibrium. Additional demand for housing comes from new housing completions. Completions have out paced demand of homes for the past 3 years and I estimate that there has been about 600 - 700k additional homes built during that period (UBS has estimates of 900k). Additional demand comes from population growth, second homes purchases and replacements. An additional 3,000,000 people per year are added to the US. Second homes purchases will be minimal in the next couple of years even though the babyboom population is less interest rate sensitive (they are waiting on the sidelines like everybody else because of negative consumer sentiment). Replacements of homes are running at about .20% of the housing stock which implies a house last 500 years. Demolitions in the future (maybe near term and maybe many years. We don't know since the housing in the US is still not mature. Median ages of homes has risen from 23 in 1985 to 32 in 2005) will increase due to dilapidated houses. The additional inventory will be worked off over the next 2-3 years since the additional inventory is all over the country and the housing market isn’t so efficient that people move to where the additional inventory is. Still, this will only temporarily drop new housing demand by about 15% a year for the next 3 years.

Housing affordability has eroded nationally but interest rates are still low relative to history and mortgage rates have continually come down since they peaked in the beginning of the year. I did believe that housing prices would have to come down 10% to bring affordability back to average. If you have been looking to invest in housing, this probably isn’t the best time. But since the average time a person stays in a house before they move is 7 years, any time is a good time to buy a home.

Beyond the fundamentals, I believe that there is an additional psychological effect that people are assuming a worst case scenario and not purchasing a home (eg. Elderly not buying a second home when they have the greatest accumulation of wealth in history and aren’t interest rate sensitive since they normally pay cash for homes). There’s no way to quantify this effect and it can only be debated. I believe this effect is like after 9/11, everybody thought that terrorists were trying to break into their houses and bomb them too after the media sensationalized it. The fact is that the airlines suffered from people’s fear to fly.

Rdub-Housing correction – Yes, Housing crash – No. There absolutely was a speculative effect to the housing bubble that added fuel to the fire. Do I believe that people will invest less in housing? Yes. I believe that this will begin a more normal period of disciplined investing in assets until the next hype comes. The stock market is at an all time high (or near it) but the S&P is only trading at 17x earnings while at the top of the stock bubble it was around 40x. Your last statement I absolutely believe in. Buy a house if you actually are going to live there. Investing in a second home could be dicey if you don’t plan on owning in for a very long time.

Paul-The problem with using nominal home price to rent is that you don’t factor in your opportunity cost (investing in something else) and you don’t subtract the benefits of owning a home (interest deduction, price appreciation). The reason that the nominal home price to rent got so out of whack is that interest rates were so low and people were willing to pay more for the same house. But, when you adjust the imputed rent (price you pay to own a home) to rent, we are actually at more than affordable or average affordability. Income works the same way in the ratio.; November 09, 2006 7:31 PM
Anonymous said...: Heeeeyyyy, it sounds like you need a lesson in tolorance. Thats just part of their culture, can't you respect that? Or are you some kind of neo-nazi, bigoted hate-monger?; November 09, 2006 7:33 PM
Anonymous said...: Good point fowwoodlief.

Also, Mr. 44 years. I wasn't trying to prove that I know everything abou the Pasadena housing market. This site labels people that bought homes in the last 2 years as idiots and everybody else is fine. Rdub asked a question, I answered it. That's all.; November 09, 2006 7:35 PM
Anonymous said...: I rent a home in Del Mar, CA for $3,500 per month. Wife and I make around $400,000. Our landlord bought the house for $1.7 million and Zillow shows its value to be $1.9 million.

I figure the mortgage payment the landlord makes, if financed with a fixed rate, costs the landlord at least $7,500 per month. I haven't calculated property tax because I roughly figure mortgage interest deduction cancels out property taxes - unless of course the landlord is subject to the AMT in which case the mortgage interest deduction doesn't help much. Since the home is actually depreciating by a few thousand per month, she could be paying closer to $10,000 per month relative to me.

Some sewer lines were recently replaced and new concrete was poured in the drive. A couple of trees had to be taken out. A hot water heater was replaced last month, and part of the sprinkler system has to be replaced. Oh, and the neighbors have complained that the house needs paint touch-up and new shutters. All on the landlord's dime - I figure at least $1,000 a month in maintenance.

So if I bought the house, it would be costing me at least $7,500 per month more than it is costing me now. Unless prices start to go up again, why in the world would I consider buying? No kids so school isn't an issue. My wife would like to own, but she understands she gets to take vacations she wouldn't otherwise take, buy luxury items she couldn't otherwise afford, and most importantly, save for early retirement.

What am I missing here?; November 09, 2006 7:41 PM
foxwoodlief said...: From Ben's post on articles about Phoenix,
"So far in 2006, there have been a total of 57,375 sales, while it stood at 97,165 sales in 2005 year to date. Although the median home price improved slightly from $256,900 in September to $257,000, it was again below last year’s $259,900. The record to date was June 2006 at $267,000.”

Sounds like a major meltdown to me....NOT. I lived in Phoenix off and on for 25 years. 30,000 sales a year was considered very good, 24,000 slow, 36,000 exceptional so we all agree 60,000 permits a year was speculative. So, if over 57,000 sales recorded in 2006 how can you consider that a meltdown when the norm is under 35,000?; November 09, 2006 7:44 PM
Miss Goldbug said...: Bork said:"Good greef whats a guy to do, i am excused..think ill go but a six pack my day is over...gold is up today bigtime...!!

Yes Bork gold is flying, cheers!

I'll drink to that.; November 09, 2006 7:49 PM
Anonymous said...: Is there any greater example of this than the vote, just a few weeks ago, on the "Military Commissions Act," the republic-killing measure that gave the president virtually unlimited, unchecked, unappealable powers over the life and liberty of every citizen? The Democratic "leadership" – now suddenly basking in media lionization – would not even mount a filibuster to defend the Constitution (not to mention the Magna Carta).
+++++++++++++

Too true. And I weep to think how many Democrats actually voted FOR the Military Commissions Act, which was in direct violation of the Constitution on several counts....; November 09, 2006 7:53 PM
Anonymous said...: "...when you adjust the imputed rent (price you pay to own a home) to rent, we are actually at more than affordable or average affordability."

could you provide an example of this affordibility calculation for us idiots please.; November 09, 2006 8:07 PM
Bill said...: Borkafatty said, "I sit and wonder how you 20 somethings, can even afford such a liability"

Hello? Who said 20 year olds are "entitled" to buy a house? In 1962 my parent's had been married eight years, renting, when they bought their first house (small 1100 sq ft). I was 26 when I bought my first house (1600 sq ft). The problem is they want a 2800 sq ft house with all the bells and whistles in the BEST neighborhood!

Hello? What ever happened to saving, staying out of debt, paying cash instead of using credit for things like "eating out" or plasma tvs etc? What happened to a "starter" home, taking out a fifteen year mortgage, paying it down as quick as possible, selling that house and using most of the cash to "move up"?

People who can't afford to buy shouldn't!

----------------

But they are that is the reality. And I do agree with you.; November 09, 2006 8:08 PM
Anonymous said...: feel free to use the anon in del mar's fact pattern.; November 09, 2006 8:08 PM
Bill said...: is this the Florida troll thread that someone was looking for hard data?

http://tinyurl.com/ykgqtk

no other comment this about sums it up.; November 09, 2006 8:42 PM
FlyingMonkeyWarrior said...: What I want to know is,
why do all you people bicker
ALL THE FREAKING TIME??????
Don't you get tired of it? EVER??
===========
No, it is group. We need the therapy.

I need to know what everyone thinks, especially people different from me.

There are smart posters, in that the insults are brilliant. It is difficult to have "attitude" in writing. he he

It is funny too.

Thanks HP.; November 09, 2006 8:42 PM
Paul E. Math said...: Anon (you should really choose a name to distinguish yourself from the other anons), you have your hands full responding on multiple points here but I'll assume you have the time to continue and I'll make a few more arguments that, I believe, support my point of view. But you make valid points.

In response to your assertion about low interest rates being a fundamental in support of todays prices, I would say this will hurt prices in the future if interest rates rise. That's why we would look at inflation and the current account deficit and try to determine if interest rates are likely to change and, if so, in what direction. In another thread today we discussed Jeff Lackers hawkish stance on inflation but I acknowledge the rest of the fomc remain dovish. But if rates go up they will produce downward pressure on prices only partly counteracted by the interest rate insensitivity of retiring, 2nd-home-buying boomers.

I would also say that demand will be hurt, and supply will be supported by the recent surfeit of exotic mortgages and by the current departure of the speculative 'investor' from the residential real estate market.

We know that most buyers now choose ARMs and many have overextended themselves with interest only and option arm mortgages. When these mortgages reset, as 1 trillion dollars worth representing 12% of all mortgage value will do in 2007, many people will be paying more for their mortgage. Since incomes have not risen to the same extent that mortgage payments will rise, many home-owners will find themselves in trouble. Foreclosures have already increased by >50% this year, adding to the already high inventory levels.

We also know that around 40% of buyers list 'investment' as the purpose of their home purchases in the last couple years - it is no longer profitable to do so as prices flatten, never mind if they fall. So demand takes a serious hit if prices merely flatten. And we know that new home sale prices have, on average, dropped 10% NOT including cash-back and incentives.

Like I said, you make valid points, all factors which would indicate that supply and demand are relatively close to equilibrium. However, my judgement tells me that there are so many more forces hindering demand and bolstering supply that the equilibrium prices are more than a mere 10% below 2005 levels.

That's my call and even if I'm wrong, thinking critically in this manner still makes me smarter than all those 'sheeple' who just follow the conventional wisdom that 'housing always goes up' and that trust the advice of their realtor and their mortgage broker and sign up for a home and a mortgage for which they may qualify but which they cannot afford.

And that's my answer to the question of the day.; November 09, 2006 9:05 PM
blogger said...: ANONS - take a second and hit the "other" button and pick a name, any name

Being an "ANON" is not only gutless, it's stupid since people can't reply to your post; November 09, 2006 9:27 PM
Anonymous said...: Imputed Rent example:

1.9M House
(10%) Price Decline
1.71M House Price

1.9M Mortgage @7% for 30 Years
12,640/month

No opportunity cost since the house was fully financed.

House Price Appreciation (you can’t assume that prices will always decrease as there is no historical evidence. Historically, housing has appreciated at over 5% since 1968.)
5% of 1.71M
7,125/month

Mortgage Interest Deduction
40% of 11,083/month interest (I assumed 11,083/month interest to be constant because the actually appreciation of a house is compounded while the mortgage deduction will decrease. By assuming this, I actually raise the imputed rent since the compounding appreciation is greater than the interest deduction)
= 4433 / month

Nondeductible portion of Property tax
1.5% of 1.71M = 25,650 / 12 months = 2137/month
60% * 2137/month = 1282 / month property tax cost

Maintenance
1% of 1.71M = 17100 / 12 = 1425 / month

12640
-7215
-4433
+2137
+1425
=3789 / month

Market Rent 3500

289 more per month.

If you hold the house for 7 years (the average time a buyer owns a house before selling), House appreciation goes to 8287 per month and tax deduction goes to 4255 per month or a net change of (1162 – 178) 984. Your imputed rent would then be 2805 vs. 3500 in renting.; November 09, 2006 9:34 PM
Anonymous said...: now use these additional facts:

- interest deduction caps out at $ 1.1 million.

- house appreciation is NOT cash flow. include an 8% ROI of a $ 7,152 monthly annuity for the renter.

- also, itemized deductions phase out for taxpayers that make over 145ishk a year. the phase out caps at 80%. i assume a person that can buy a $ 1.9 million home makes well over that.; November 09, 2006 10:08 PM
Anonymous said...: after removing 80% of your interest deduction due to the the $ 1.1 mill cap and the itemized deduction phase out, make sure you increase that monthly annuity accordingly.; November 09, 2006 10:12 PM
Anonymous said...: Paul-People always believe that interest rates will rise. Why can’t they fall? Our best guess to predict future interest rates is the yield curve and it has been pretty flat for a year now. The market doesn’t expect any big moves in the future from the Fed. Also, about ARMs, the majority of loans AREN’T ARMs. At the end of 2005, only 30% nationally were ARMs. That number was lower than 2004 but higher than 2001. Also, about the foreclosure rate, the MSM makes it sound like everybody and their mother is having their homes foreclosed but in reality, home foreclosure is not that high as a percent of all homes (I don’t know the number but if foreclosures rose from 0.6% to 0.9%, that’s a 50% increase but is it statistically significant? I would need to look at more data to determine if it was). Also, demand is what it is. Population will increase and they will need a place to live (whatever the price). The demand that you are talking about is speculative demand which in nonexistent right now.

I have some issues with the supposed 10% drop in home prices last month. DR Horton closed its fiscal year in September and they are the largest HB in terms of closings. If they sold 8,000 of the 85,000 sales in September at a significant discount to boost their statements that would materially affect pricing data. Also, if you talk to HBs, on average incentives are 3%. I’m sure that DR Horton had some 10-15% discounts in their final month because HBs with a lot of owned land need to move their inventory are whatever margin so they can to generate FCF. New home prices can fall more than existing home prices because existing home prices are sticky and the homes are illiquid where a new home is a product and needs to be sold at whatever price.

There are a lot of worries in the housing market, I can agree on that. Inventory is high, speculative demand is low, there are interest rate worries. Cancellations can be a short term issue too because we haven’t seen this many cancellations before. It’s a short term issue because actual inventory added is the difference between demand and supply and cancellations only have a short term affect.

I come here to see another point of view. I hope you can appreciate a dissenting opinion as much as I can.; November 09, 2006 10:16 PM
Anonymous said...: now

what'd ya get?; November 09, 2006 10:18 PM
Anonymous said...: Michael-I know it's not a cash flow, that's why it's imputed rent. This is just a general example. The results aren't set in stone but I did it just to show that the price you pay even with a 10% price decrease will be still benificial to own a house than to rent. There are many other factors that I didn't use (state and local tax implications).; November 09, 2006 10:21 PM
Anonymous said...: but you left out the most important assumption.

the ROI of the cash flow saved by the renter.

your example is weak.; November 09, 2006 10:25 PM
Paul E. Math said...: Troll, that's a good detailed example. How do you get into the 40% tax bracket? Must be nice to make more that 337k/year and be able to deduct so much on your multi-million-dollar home.

We don't talk enough about how the mortgage interest deductibility disproportionately benefits the rich and you make that point well. Which congress and president decided that it was fair for poor renters to help the rich out with their mortgage payments, in addition to the rent they already pay?

The other conclusion that we can draw from this example is that the deductibility of mortgage interest encourages maximum leverage - is that a good thing? I guess if people don't have dead equity tied up in their homes they will have more to spend on things of value, like the stock market, bling, hookers and blow. Is that a good thing?

Also, the math changes a bit when you're a regular shmo in a lower tax bracket like so many of the people being scammed into inflated home prices and toxic mortgages.

And I dispute your historical 5% rate of appreciation - was it a steady increase or did almost all of it occur since 1998?; November 09, 2006 10:35 PM
Paul E. Math said...: Sorry, my last posting sounded a little more antagonistic than was intended.

But I do think your example is a little skewed for the reasons Michael rightly gave.

And the deductibility is a sore point both because people do often use it as an automatic justification for home buying regardless of the price and also because I think it's a scam of rich over poor.; November 09, 2006 10:46 PM
Anonymous said...: Michael-It would be interesting to see assuming all the tax codes in every state and every income bracket if a certain house is affordable but there are so many criterion that it isn't worth somebody's time. I hope you were fine with the general example. In a general sense, were you fine with the logic (exempt the tax cap exemption)?; November 09, 2006 10:53 PM
Anonymous said...: michael-the point of the example is to carve out what it really costs you to buy verse rent. Sure there is a ROI on the difference in cash flows but then you get into what kind of an investor is that person. Do they just invest in Treasuries with no risk or other investments with the chance of a loss of principal?

Here's the Fed paper on the subject:
http://www.newyorkfed.org/research/staff_reports/sr218.html

Paul-The data I have is that Existing Home prices have appreciated at 6.59% from 1968 - 2005 on average and 6.29% from 1968 - 1998 on average. I choose arbitrary appreciation for the house and tax bracket. The actual median Federal tax bracket is about 27%.; November 09, 2006 11:10 PM
foxwoodlief said...: I agree with troll on the point of discounts. Most builders discounts are a joke. Like the old clearance sale 75% off after the price was marked up 300% is it really a discount?

Also, most the builders I've checked with in Florida, Phoenix, Austin are only giving 2.5-10% discount depending on price. The higher the price the larger the discount but you know they still are making money.

The real question is how much decline in price for those who DID not buy in 2002-2006. When they see a significant decline in the value of their homes then that is a problem. (I do include those who refinanced or took out too much equity in the 2002-6 group).; November 09, 2006 11:10 PM
Anonymous said...: Another Question for "The Troll"
(Thanks for posting a name by the way).

Are you heavily invested in real estate?

I guess I should define "Heavily" here as "Greater than 500K+ in real estate 'assets'"

Just curious...

Please feed the troll feeders.; November 09, 2006 11:23 PM
Anonymous said...: Troll,

"how much decline in price for those who DID not buy in 2002-2006?"

That is a great question.

I think prices will sink to 2003 levels. I'd be really suprised if they drop below that. We bought our place in SD for 325K in 2003 (4 bdr, 1600 sq ft, .5acre)- and I had an inkling prices were inflated then...

and sold in 2005 for 495K

Any folks out there think that prices will drop below what they were in 2003?

It might be possible...; November 09, 2006 11:28 PM
Anonymous said...: Rdub-yes, but I wouldn't be if I didn't think the stocks weren't a good investment. But, like I said before, I don't view my home as an investment. I've done plenty of analysis on this industry and believe that the HBs (most of the big ones anyways) are in good shape. The valuations and long term fundamentals don't justify the multiple they are trading at.

Like I've said before, there are many concerns in the housing industry but you want to invest in things that are undervalued and out of favor. Exotic mortgages, excess inventory and other things could hurt the industry but I've looked at the data and I don't believe (as long as interest rates don't jump 200 BPS and inventory levels go to 8 months supply) any reason for a prolonged downturn period. I still believe that earnings for the HBs will be depressed until the second half of 2007 at the earliest.; November 09, 2006 11:38 PM
Anonymous said...: Rdub-I think 10% would be the most prices would have to drop. Will they even drop that much? It's so tough to say they will drop because history says they won't. Recently there was the largest YoY decrease in existing homes since WWII. A whole 1.something percent. Can't remember. But still, does that mean they have to drop further? No, housing prices could just stay flat for a prolonged period of time. In all my analysis, I've included a price drop to be conservative. I just can't see home prices dropping 30-60 percent. Also, I'm speaking on a national level. Regionally, there can be some larger price drops. This housing downturn isn't like a stock market because people are living in their houses. If you own stock, you can just sell it for a large loss or it could be worthless. Either way, you still have your house and income. A house takes time to find a buyer, sign the papers and go through escrow. Plus, you need another place to live and people aren't just going to start living in 2 bedroom homes with 20 people in it because housing is too unaffordable. Anyways, housing is illiquid and a necessity, tulips and stocks aren't.; November 09, 2006 11:53 PM
Anonymous said...: I agree with above comments saying "not necessarily smarter". In fact, early flippers made a bundle while I'd imagine many of us stood on the sidelines, fuming. More cautious and "conservative" in a limited sense. Perhaps wiser, understanding "you don't get something for nothing". More principled? It's easy to make a fortune taking unfair advantage of others, isn't it? And, OK, probably more intelligent than late-comer, holding-the-bag, biggest-fool flippers.; November 10, 2006 1:01 AM
Anonymous said...: To "The Troll"

What are your thoughts on the recent large increases in foreclosure?

A house can be fairly liquid if foreclosures spike, and the banks need to get them off their books...

I'd be interested to hear your thoughts.

Have a good weekend everyone, I won't be back on the blog until Monday.; November 10, 2006 2:03 AM
Anonymous said...: Rdub-I really can't comment on the increase in foreclosures because I haven't looked at the data. It is something I'm going to look into once I have time away from my earnings models.

Also, a house can be as liquid as when the house is auctioned but that happens in less than 1% of homes for sale. But still, homes are quite illiquid.

Charlie-Shiller assumes that the housing "bubble" is exactly like the stock market bubble but we know that there are some very different characteristics in housing from the stock market. One of the most important is that you can walk away from the principal when you buy stock but you can't walk away from the home you live in.

Shiller also assumes (like all economists) that the housing market is efficient. The housing market is not efficient in that there are many transaction costs when selling a house and there is imperfect information about prices unlike a stock market.

Anyways, historical (either existing home prices or OFHEO) have been about 6% on average. Also, the last 3 years of price run up weren't the highest historically. From 1977-79, there was a 44% price increase compared to 2003-05 of 37%.

I also included in my analysis a 10% price decrease. Anyways, you are basing all your contradictions about prices on one man's opinion. If I were you, I wouldn't be relying my expectations for price appreciations on somebody that is on either extreme of the spectrum.

I'm not saying that home prices can't go down but I am saying that an extreme deviation of home price appreciation that you are depicting is less likely than assuming historical trends.; November 10, 2006 4:19 PM
Anonymous said...: I'm not going to waste my time with you. You are too bullheaded to think objectively.; November 10, 2006 6:22 PM
foxwoodlief said...: Let's play nice.

Are we smarter? Human nature likes to think one is smarter but in general I think a lot of what we attribute to smart is luck.

Selling my house in Phoenix in March 2005? Smart? Or luck? That isn't to say there was no though process into listing my house in November 2004 because I wanted to sell and thought the house had appreciated enought to recover my investment, pay selling costs and maybe make a little money but then I always sell within five years as I love to move.

Understanding that rates go down, prices go up, rates go up, prices go down, isn't necessarily smart as that knowledge by itself is meaningless. Are those who took a gamble to flip houses smart or lucky? Are those who bought a house in California instead of say North Dakota smart or lucky?

I only say this based on my experiences over 30 years. At 52 (just now) I've watched home prices go up and up and up always thinking this is got to stop. For every correction down the move up is always higher. Inflation? How can a 28 year old even begin to understand "statistics and numbers" without experiencing it? To my parents, imagine prices compared to 1954 when they were 20? I can remember in the late 60s when you could go to McDonalds and buy a cheeseburger for 16 cents and a large candybar for a nickel. And houses? In SJ in 1963 you could buy a nice house for $16,000. In 1970 my parent's looked at a nice rental to buy in Los Gatos on the hill overlooking downtown for $12,000. By the late 70s more than six times that price and today? That sorry ass rental would sell for over one million in dowtown Los Gatos. All my relatives who bought homes in California in the 60s/70s smart or lucky?

No different now. I'd like to think I am smart enough to read the signs and know where we are headed next but you know, I don't know for sure.

I've been wrong for 30 years that prices can't keep going up, but then isn't that an illusion? Inflation is an illusion of wealth, of increased value. As long as there is inflation there will always be the illusion of increased value as well as an increase in price. GM just said it was increasing prices on cars around $500 due to increased costs to manufacture and that is when sales are declining.

So where do we go from here? I can predict but then that is all that my thought will be, predictions. And we know how accurate prophets are.

I hope for the best, plan for the worst, and hope that I am smart enought to be lucky.; November 10, 2006 9:46 PM
foxwoodlief said...: rdub said,

I think prices will sink to 2003 levels. I'd be really suprised if they drop below that. We bought our place in SD for 325K in 2003 (4 bdr, 1600 sq ft, .5acre)- and I had an inkling prices were inflated then...
and sold in 2005 for 495K

In SD? That much? Seems pretty high. You could live in California for $500,000. In 2003 you could have bought 3200 sq ft on 1/2 acre in Litchfield Park (Phoenix area) for $265,000 and it is a major city and I'm sure pays more.

In Austin $325,000 in 2003 would have bought you a very nice house in the very best neighborhoods, NW Hills, Tarrytown, Travis heights, Lakeway, to name a few. In 2005 you could buy a 3300 sq ft semicustom out of brick and rock with all the bells and whistles on 1/2 an acre in SW Austin (OakHill) for the price you paid in 2003.

I have people on this site calling me nuts for advocating that homes between $80-105 a sq ft in major cities like Austin is reasonable in 2005 and you paid $203 a sq ft in 2003 in SD? And sold for $312 a sq ft? That sounds like a bigger bubble than buying a house in San Diego for $300 a sqft or even Phoenix.; November 11, 2006 5:40 PM
Anonymous said...: foxwoodlief - "SD" I should probably have written out "San Diego"..It seems you're probably thinking I meant South Dakota based on your comment :); November 14, 2006 12:09 AM

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November 09, 2006

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