HousingPANIC Stupid Question of the Day

Do you think your fellow Americans are paying attention now to what's going on?

Enjoy

HousingPANIC Definition of the Day

Ignorance

ig·no·rance
Pronunciation: \ˈig-n(ə-)rən(t)s\
Function: noun
Date: 13th century

* the state or fact of being ignorant : lack of knowledge, education, or awareness

I love comments like these. Just shows we have a long, long, long way to go...

There are a few areas in the US that haven't crashed horrifically yet - big finance money centers like Chicago, Seattle and Manhattan especially. I'm not sure why these areas feel they're immune. The funding has dried up everywhere. Inventory is building everywhere. Jobs will be lost everywhere. No area will be immune. Some will fare better than others, but every city will fall.

And when you see things like this today, you know that even these "special areas" are about to get punked soon too. Even if they think they have 21 reasons why they won't fall.

Here's the troll view from Chicago. Too bad this poster is Anon - it's much more fun when we can go back a year later and mock them..

"You are a fool Keith for thinking that real estate prices will crash. Here in Chicago's North Side, prices are doing well thank you very much.

Yes, it is true that there are lots of properties for sale, and inventory is high, but prices are not crashing. I repeat: PRICES ARE NOT CRASHING. In the end, homes are selling but it is taking longer to sell and people are knocking off 10K to 30K not exactly a CRASH Keith.

So keep dreaming Keith about a real estate crash."

I've just finished this book - "Bubbles and How to Survive Them", and it's joined Manias, Panics and Crashes as one of my all-time favorites

The author John P. Calverley does a great job talking about what makes a bubble, what to look for, how leaders react, what to expect from the central banks, what the impact is on inflation and the currency, and how to preserve your wealth when the masses go mad and then recover their sanity one by one.

Some of my favorite quotes:
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"At some stage the bubble reaches a phase variously called euphoria or mania, where speculation mounts on top of genuine investment and expectations for potential returns reach wild heights. Strong market performance is extrapolated endlessly forward and any consideration of fundamental valuation criteria is swept aside"

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"The worst point of the Depression came in March 1933, when the wave of bank failures led to a general panic and the closure of all banks. The Dow Jones index actually bottomed before then with the close on July 8th, 1932 at 41.88, a drop of 90 percent from its peak."

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"Governments have even less interest in drawing attention to the dangers of asset bubbles. Voters generally like bubbles. Many people profit from them, though for some the gains turn out to be only on paper and disappear later... But in general it is easy to win elections during bubble periods, because people feel wealthy and the economy is doing well."

_______

In the end the author calls for an "Asset Evaluation Committee" and a warning system for when our financial system (stocks, bonds, real estate, etc) venture into bubble territory, so at least investors are warned. I like the idea, and instead of a committee of humans, I'd recommend a computer. The fundamentals are the fundamentals, and when people are paying 8 times income for a house, it's a bubble. When stocks' P/E is 40, it's a bubble. When renting is a fraction of the cost of "owning", it's a bubble. When people are camping out to buy an asset, it's a bubble.

Give us a nice color coded warning system, instead of Greenspan's "Froth" or "Irrational Exuberance" parlance, and even the masses will get it.

I highly recommend this book for all HP'ers. You owe it to yourself. Then pick up "Crash Proof" by Peter Schiff so you know how to invest, and for god's sake read Manias, Panics and Crashes. I'm not that smart - everything I predicted came from reading that one classic book.

Boston Legal takes on the housing bubble and mortgage meltdown. "Kill all the bankers"

When the housing crash finds its way into silly little primetime TV shows in America, game on. The collective consciousness on housing has changed.

Now even housewives and grandpas on Main Street who don't read the newspaper are coming to understand that something really bad is happening when it comes to housing prices, debt and the American financial system.

No matter what realtors on commission and Fox News broadcasters tell them.

FLASH: American homedebtors even dumber than I thought possible, homes won't be selling again for quite some time

Supply, demand, price, right? Wrong. There is no demand, there is huge supply, but 74% of dumb homedebtors still don't get it, and aren't lowering their prices (mark to market anyone?), so therefore homes won't be selling.

And you'll see supply continue to build and build, while sales continue to fall. And then, one day, maybe years from now, homedebtors will get it. Like Hovnanian got it the other day with their hilarious firesale. And the desperate homedebtors will FINALLY lower their prices, FINALLY mark to market, FINALLY leave denial behind. But by then, it'll be too late.

Here's CNBC's Diana Olick:

Homeowners Just Don't Understand Value Of Homes

A new survey out today from Reuters/University of Michigan looks at homeowners’ perceptions of their own homes’ values. When the survey flashed over the wires this morning, my email lit up with all the “Alert” desk folks at CNBC saying, “Omigod, this is huge.” I don’t agree. I say it’s not huge enough.

The survey’s headline says, “A record 26% of U.S. homeowners say the value of their homes has fallen during the past year.” Further, 21% of homeowners polled in September expect the value of their home to decline in the year ahead. The survey finds even bigger numbers if you look at folks just in the West, but that’s an overall national picture.

Ok, so 26% is a record, but I have to ask, why isn’t it higher?? So why do 74% of American’s not get it?

It's almost sad to read REALTROLL(TM) and Desperate Homedebtor comments. Sad that there are some people who still just don't get it, and never will.

You know HP'ers, there are some people who either don't want help, who don't want to listen and learn, and who are simply lost. There is nothing we can say or do to help them, they're just going to play out their roles as lambs to the slaughter.

Hey, we tried.

But I sometimes try to delve into their minds, to try to understand how they could be so ignorant and stubborn, ignoring mountains of evidence, and having no desire to understand economics or human behavior.

* Who do they think are going to buy all these unwanted and unneeded houses and condos, at prices detached from the fundamentals?

* Why do they think people would pay significantly more to own than rent, given that the promise of future appreciation is now dead?

* Who do they think will make up the slack, now that the speculators have fled, and new loans are tougher and tougher to get with the subprime and mortgage meltdown?

* Why can't they see that the Late Great Housing Bubble was built on the back of fraud, lies, spin, speculation and greed, and that those days are long over?

* And bottom line, why are they so blind?

Amazing. But hey, iPhones are selling! So home prices should be fine!

An astute comment from an ignorant anonatroll

Sometimes we get comments so stupid, so ignorant, so completely clueless, that they deserve their own thread.

This is one of those cases.

This anonatroll (man, I wish the trolls would pick a user name so we could mock them later) said that you can't have inflation and decreasing asset prices.

Guess what. We do. And we will.

House prices (assets) and rents are falling, while consumable and service prices are increasing. We'll continue to see asset deflation (as they're overpriced and returning to the mean, and people sell their assets to get to cash - read manias, panics and crashes) while we see inflation on other goods and services.

Also HP'ers know the government inflation data is misleading, especially since rents are the #1 category, and rents are falling thank you housing oversupply.

Another anonatroll said don't worry about home prices - they'll increase as the dollar gets more and more worthless.

Uh, got bad news for you. House prices will fall or stay even in real terms for years to come, while the dollar tanks and true inflation roars. In other words, every day your home will fall more in true value, even if its price stays the same for 10 years.

Any other thoughts or gems of wisdom on the inflation / deflation conundrum, please post here. Here's the anonatroll - I think a pretty telling statement of the lack of financial education and knowledge in America today (that helped us get into this mess in the first place).

Anonymous said...

Can't have it both ways renters. Either there is inflation or there isn't. Can't have inflation and decreasing asset prices. So choose your loonie battle, hyperinflation or housing crash, can't have both.