There was a good discussion of housing market schadenfreude (or lack thereof) over the holiday weekend in the comments to a recent post. I thought would be worth posting the highlights of the conversation, and chiming in with a few thoughts of my own.
rose-colored-ghoulaid:
I for one don’t want misfortune to shine on others. At least not indiscriminately. But I do think a return to rationality will mean some particularly vocal cheerleaders will receive their comeupance. But in my mind, this is more akin to hoping the heads of Enron become felons, or that history books correctly cite Greenspan as the source of more economic problems than he ’solved’.When a single mother is foreclosed out of a house (she had no business buying), I still feel sorry for her. But when a serial flipper loses his home due to gambling on the market, I feel no pity. Nor am I happy he lost the house, it is just how markets work, and that person played a game they didn’t understand. At that point I remember I’m in the catbird seat, and I might derive some joy out of that.
Jonny:
My main feeling about hoping for a market decline is simply that I will be happy to see affordable housing again. In the unlikely event that a decline doesn’t happen, it is extremely remote that I will ever own a home in this lifetime. I am, BTW, over 40 and well-employed. Think about that.
…
However, if you must insist on seeing things this way, it seems to me that the logic works in reverse: people who currently own overpriced homes have been enjoying a feeling of schadenfreude with respect to those without them for years. So, when we return to a normal market and those with overpriced assets are forced to sell them, just don’t forget all those years that these unfortunate sellers enjoyed those assets while the rest of us have been forced to rent and endure this idiotic bubble. There will be casualties on all sides of this before it is over. Just don’t forget that the real villain is Greenspan.
disbelief:
I want to chime in and say that “schadenfreude” is not a fair term based on what I feel, and what the majority here have written. This seems to also be the main accusation of the RE cheerleaders who visit this blog. The only motive I have is to be able to own a house again without sacrificing virtually everything else.
Angie:
Schadenfreude is enjoyment of the misery of others. Despite the protestations today, there is a wide streak of that running through this blog.
…
I think that if housing prices in this area get to the point that they’d be affordable by traditional standards, the economy in general will be in the toilet. So, be careful what you wish for.
…
About being 40, well-employed, and never able to buy a house—there’s a lot more there to think about. My first thought is, unless there’s more going on in the background ($100K in law school debt, four kids and a disabled wife, whatever), there is no reason why you couldn’t sock away a big down payment and buy a modest place.I’m going to presume that you’re single and without those major encumbrances, and that “well-employed” means “over median income”, which is ~$54K for a single head of household in Seattle. (If it’s not true for you, Jonny, I gather that it applies to not a few other people who frequent this site.) People in this situation should easily be able to put together a substantial down payment (say $30-40K) in two to three years, even while shoveling away 10-15% for retirement. Just grow a backbone, show a little restraint, and start being fiscally responsible.
notabull:
Angie, there are not just two choices:a) Buy a house immediately.
b) Never buy a house, and continue to rent foreverYou seem to think that most on this board are choosing (b), hence your stupid comment about being fiscally responsible. Ultimately, it *would* be fiscally irresponsible for most people to never buy a house.
However, and please try to understand, there is a THIRD choice:
c) Save a down-payment, wait for prices to return to fundamental levels (whatever you deem them to be), and then buy a house.
Sure, I could go out and buy a house right NOW. I have a ton of money in the bank earning decent interest, but I’m not going to. Why? Because I’m being fiscally responsible, am saving $6000 in CASH a month (after tax) by TEMPORARILY renting, and then I will buy once the market softens some more, which I fully expect it to.
If it doesn’t soften more, I’ll just shrug my shoulders and buy a house anyway. But I’m not about to do so when all indications are that prices are heading down and about to head down some more. I didn’t get my big bank balance by being stupid.
Notabull accurately summarizes most of my sentiments quite succinctly. When prices are higher than any logical and sane measure indicates they should be (as they are now), and all signs point to an extended period of price declines (as they do now), the best way to “show a little restraint, and start being fiscally responsible” is by not buying, rent for a massive discount, and save the difference. That’s what I’m doing, and what many others who frequent this blog are doing as well.
I would also like to address Angie’s comment that prolonged and/or large home price declines will result in an economy that is “in the toilet.” In my opinion, the source of the problem is that the prosperous economic times that we have enjoyed for the last 5-10 years have been largely (not entirely, but largely) funded by a massive, unprecedented accumulation of debt. A large portion of that debt was the result of the housing bubble, which allowed people to “extract equity” from their homes (i.e. - take on more debt) to fund spending on vacations, plasma TVs, cars, and other non-necessary purchases. This was great for the “economy,” but the problem is that you can’t just keep borrowing your way to prosperity forever. Unfortunately, we (as a nation) borrowed prosperity from the future so we could enjoy ourselves in the here and now.
Eventually the bill will come due, and it will indeed be painful; even for those that did not participate in the irresponsible run-up in any way. That sucks. But when everything does shake out, and eventually homes are priced reasonably* again, is it “schadenfreude” to be grateful that insanity no longer reigns?
Is it schadenfreude to point out that while others were accumulating more and more debt, I was eliminating debt and accumulating liquid assets? Is it schadenfreude to point out the inevitable result of our nation’s debt-fueled spending spree? Is it schadenfreude to look forward to a time when people who have been and continue to be financially responsible—who didn’t buy things they couldn’t afford and actually regularly saved money—will receive the economic rewards they deserve?
If that is schadenfreude, then I guess the bubble blogs are schadenfreude central. To me, schadenfreude is what I felt when I watched the Yankees blow a three game lead and get beat in New York by the Red Sox in Game 7 of the 2004 ALCS (also when they blew a 9th-inning lead in Game 7 of the 2001 World Series). I derive no such pleasure from seeing poor people that should never have bought a house in the first place being foreclosed on and forced to go back to renting again. Watching people that bought at an inflated price who are now unable to sell because they are upside-down on their loan does not make me happy. I feel that these are the unfortunate, inevitable, and expected results of the mess we have gotten ourselves into.
* By “priced reasonably,” I of course mean relative to their location. I don’t think anyone ever expects homes in Seattle to sell for the same price as homes in Fargo.
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77 responses so far ↓
1
patient
// Nov 26, 2007 at 2:25 pm
It’s one of the oldest tricks in the book. If you are facing defeat by logic and reality paint a picture of your opponent as an evil villain. Unfortunately, even with some of the most disastrous results in history this tactic still works from time to time.
2
patient
// Nov 26, 2007 at 2:35 pm
Calling someone a coward in order to make them do something stupid is not exactly a new trick either.
3
Kime
// Nov 26, 2007 at 2:40 pm
Amen to your comment, Tim.
4
Dave0
// Nov 26, 2007 at 2:46 pm
It all really just depends on how you look at things. You can focus on the negative and call it schadenfreude, or you can focus on the positive side of things. If you focus on wanting housing prices to decline so homeowners that bought overinflated homes end up with negative equity, that’s schadenfreude. But wanting homes to become more affordable so that typical middle-class family can afford home-ownership once again, that’s not schadenfreude.
While you were feeling schadenfreude watching the Yankees lose, I was enjoying the Redsox come from behind in a historical uprising that gives hope to underdogs everywhere that says “if you set your mind to a goal work hard you can achieve anything” to all normal people out there.
You may be talking about the same thing as the other guy, but if you put it in a positive light the reaction is happy instead of angry. This is the trick that real estate agents use when they say we are “doom and gloom” while they are just talking about it being a buyer’s market right now.
5
softwarengineer
// Nov 26, 2007 at 2:55 pm
THE AMERICAN SUBPRIME MESS IS GLOBAL AND HIDDEN IN HEDGE HOG PAPER
A quote from Dr. Roubini:
“…And the idea that a US recession has no effect on Asia is, says Krauss, nonsense. “So Europeans should not be tempted to think that they are somehow “decoupled” from America’s foibles and woes. Until recently, many Europeans thought they were insulated from the current US housing and mortgage crisis. But in what has been a truly malignant “export” from America to Europe, the US created “garbage debt” in the form of sub-prime mortgages, and Europeans — hungry for extra yield, and as reckless as Americans — bought it. Many European banks’ balance sheets are now as contaminated as those of American banks, and no one is sure who is holding — or hiding — the junk, and how to value it.”…”
The rest of the URL:
http://www.rgemonitor.com/blog/roubini/228535/
6
Buceri
// Nov 26, 2007 at 2:56 pm
Great piece on NPR - growing pot in Renton homes. One dealer had about $6 million in properties/mortgages without holding a job.
http://www.npr.org/templates/story/story.php?storyId=16628918
7
rose-colored-turkaid
// Nov 26, 2007 at 3:06 pm
I ask this, for a while now anyone who does what Tim did (pay down debt and accept their could be harder times ahead) has been publicly derided. Angie’s comments to Jonny epitomize this mindset. If someone doesn’t run up debt, they must be a loser, spineless, or a fool.
I think by comparison the attitude that people on the bubble blogs have trend towards benevolent and even handed. Do I still want prices to fall? Of course. In the limit, if I could buy a house in Bellevue proper for $1, I would be overjoyed. Can you blame me, or say that’s because I want others to suffer? NO.
I think the real shadenfreude is homeowners who want the rest of us to be their greater fools. These are the people posting on this site in the hopes that they can convince renters to buy just so the renters will be as encumbered as they are.
8
B&W Nikes
// Nov 26, 2007 at 3:15 pm
I don’t think it’s as much schadenfreude rolling around as it is identifying the purchase of overpriced homes with easy money the risky and expensive fad that it had become. To see those commercial entities and individuals that manipulated the environment and took advantage of others finally getting hit in the pocket book is a bonus, but it’s more like watching a purse snatcher who preys on little old ladies get tackled in the street than it is enjoying any outright misery. If you don’t feel sorry for someone who puts their home up as collateral to keep gambling, you lack empathy. It doesn’t mean you are cruel to say it’s a stupid thing to do, and it’s a noble thing if you can help prevent them from doing it often.
9
biliruben
// Nov 26, 2007 at 3:35 pm
I would feel happiness at the misery of those who profited from fraud and/or risk taking and contributed to dragging our economy up to this dangerous and unsustainable precipice.
This includes, flippers, unscrupulous originators, cheerleading and gambling realtors, fraudulent and deceptive lenders and brokers, usurious and short-sited wall street brokers and investors and anyone else who made money on the backs of unwary and unsophisticated home buyers. I don’t mind saying so.
Unfortunately these people are often going to get off scott-free or at worst only paying a fraction of the booty they made.
Those who will be left holding the bag and paying a very dear price are the innocent folks who simply wanted to buy a home, and trusted their originator or Realtor to look out for them. This also includes those who make an honest living all up and down the housing food chain who will be losing business or their jobs (and subsequently their homes), but are merely guilty of not being sharp enough to seeing the coming fall. Those people will all pay the hardest price, and will also be the least able or deserving of the punishment. For those people I feel pity and anger at those in whom the trusted, as well as our government completely dropping the regulatory ball.
10
WestSideBilly
// Nov 26, 2007 at 3:57 pm
The bubble heads want house prices to decline to reasonable levels, and that’s apparently schadenfreude. But what is it when the RE industry, current sellers, and various cheerleaders want prices to stay at stratospheric levels and relegate the responsible people like The Tim to either rent or buy a 500 sq ft studio apartment in a bad neighborhood with no parking?
Angie talks about being responsible, saving up a 10-15% downpayment, and buying a property on a median salary. Has anyone looked at what $175k gets you in Seattle? Maybe it’s my midwest roots (1 acre lots, 2000 sq ft homes with 3 car garages… *sigh* ) but a dumpy 800 sq ft condo is not worth the sacrifice.
Interesting, related comment… I don’t spend a great deal of money on Christmas (usually just stuff for my parents and nephew), and everyone rails me for being a scrooge… but people who buy thousands of dollars of gifts on credit cards and spend the whole year paying them off are being “festive”.
11
disbelief
// Nov 26, 2007 at 4:13 pm
One of the things that strikes me most about the housing bubble is it’s similarity to the prior bubble- the “tech bubble”. This may be a case of stating the obvious to many here, but I believe that if more would have understood this similarity (i.e. that what was primarily driving the market upwards was that it had become the investment “du jour”- the latest path to quick riches, and thereby feuling a huge surge in demang for this “investment”) they would have been more wary, and understood that house values could not continue to rise indefinitely, and could, in fact, fall just as easily.
12
disbelief
// Nov 26, 2007 at 4:19 pm
Well add to that “loose” lending, but I think that falls into the category of investment too - by banks, etc.
13
WestSideBilly
// Nov 26, 2007 at 4:49 pm
I think the housing bubble more accurately mirrors the stock bubble of the 1920s than it does the tech bubble of the 1990s. Careless lending, leveraged investing, with a bit of tech-bubble-esque irrational exuberance.
14
disbelief
// Nov 26, 2007 at 5:41 pm
WestSideBilly,
Perhaps that’s a better comparison. I’d like to hope the outcome will not be similar though!
15
greenthum
// Nov 26, 2007 at 5:42 pm
Tim:
Life ain’t fair! There is no guarantee that those of us who have lived financially responsible lives will be rewarded for our efforts. We may lose our jobs as well when this economy crashes and all that money we saved for a house will be needed for living expenses until things get better.
For my own peace of mind, I’m trying to take each day as it comes and not get too attached to a future that may not happen.
16
zzyzx
// Nov 26, 2007 at 6:00 pm
“Is it schadenfreude to look forward to a time when people who have been and continue to be financially responsible—who didn’t buy things they couldn’t afford and actually regularly saved money—will receive the economic rewards they deserve?”
No, it’s schadenfreude when people cackle about layoffs and foreclosures and mock those whose only sin was to not understand the details of their loan. That happens occasionally on bubble sites but it’s not the most common trait.
What that paragraph I quoted really reminds me of is a religion. Behave the correct way (save) and you will be rewarded. Venture into the world of debt and you will feel the wrath.
I believe in some of the core tenants of this blog - housing is somewhat overpriced and there’s likely to be a decline in prices. However, the strength of the belief among a lot of the posters here seems as irrational as the biggest real estate pusher.
17
TJ_98370
// Nov 26, 2007 at 6:51 pm
…What that paragraph I quoted really reminds me of is a religion….
Way cool! The Church of the Holy Roller Bubbleheads!
And The Tim said upon the multitudes, “Verily, verily, it shall come to pass - all flippers shall be smitten down with great vengance, for they stray from the path of prudence! And there will be great wailing and sorrow amongst the money-changers, for their gold shall be made of sand.”
18
John
// Nov 26, 2007 at 7:03 pm
“Every time a friend succeeds, I die a little.” - Gore Vidal
I am sure many don’t say what they really think in someone’s face. Everyone has had devious, evil thoughts. What’s the big deal?
19
Bitterrenter
// Nov 26, 2007 at 7:37 pm
Oh c’mon people. This is America. Land of hyper-competition, winner-takes-all and the universal home of Sore Winner-dom. Of course we’re enjoying the pain of the landed gentry and their enablers in the real estate and banking industries. Anyone here who doesn’t admit that is LYING.
The people who did well with RE LOVED rubbing others’ faces in it. “Look at my 2BR 1BA, 900 sf house I paid 180K for. It’s now worth 400K! So what happened to you (LOSER)?” And the advertising from the real estate industry chiding people to “not miss the boat!” or “buy now or be priced out forever!” The endless chatter about RE wealth, flipping, ridiculously priced condo towers from hell, units being snatched up by rich people from all over the country (or world) so they’d have a pretty place in each city to take a dump. The pretense, the ostentation. I could go on and on about the nauseating cult of real estate this phony boom has spawned. I haven’t even started on the disturbing conformity of granite counter tops and stainless steel appliances.
Well, now we get to watch it crash and burn and I LOVE IT. And if it takes us all down, I’ll still LOVE IT. Hopefully it will tear the country to shreds and we can set about punishing the "chocolate" out of the greedbag republicans and their ilk who promoted this “ownership society” from hell. Drag that supply-side freakshow Greenspan from his comfy Georgetown townhouse and hang the MF from the highest tree.
So yes, I am enjoying this like a dog with two dicks.
20
disbelief
// Nov 26, 2007 at 7:44 pm
Two words for you: Caveat Emptor
21
notabull
// Nov 26, 2007 at 7:45 pm
“I believe in some of the core tenants of this blog - housing is somewhat overpriced and there’s likely to be a decline in prices. However, the strength of the belief among a lot of the posters here seems as irrational as the biggest real estate pusher.”
Of course, for some the sky is always falling and it is always a good time to stuff gold coins under the mattress. Personally, I’m expecting the sky to gradually lower in altitude at a steady, slow velocity over a period of several years. I think this accurately summarizes the *majority* of bloggers on this site, based on what I’ve read over the months.
22
disbelief
// Nov 26, 2007 at 8:07 pm
Holly Cow Bitterrenter!
But Really, let’s get over the fact that there is such a thing as Shadenfreude, pride, envy, and ill will. There just is - we’ve all partaken to some degree.
Beyond that is the question of what is best for everyone- I say let’s hope for a roll-back of the real estate price clock 10-15 or so years to put house prices in line with the mode (not median) income. Less money tied up in housing is more money available to fuel a wider segment of the economy.
23
Brian
// Nov 26, 2007 at 8:49 pm
I was going to post something about real estate until I saw two posts lauding the Red Sux. To all Red Sux fans out there that love to hate on the Yankees for being the “Evil Empire” that buys all the best players and yada yada yada, guess what? The Red Sux are the Yankees. They just happen to be from Boston and not New York. Sux fans were always better when they cried about not winning a World Series for 80 years or how the Yankees only win because they have such a large payroll. These are the same people that love their team for the exact reason they used to hate the Yankees. Manny, Ortiz, Schilling, Drew, Lowell, Beckett, Lugo, Crisp, Dice-K, etc. Which of these guys is home grown again? Oops? None of them. They may have some home grown guys, but they won 2 World Series because they paid for them.
24
zzyzx
// Nov 26, 2007 at 9:50 pm
“Of course, for some the sky is always falling and it is always a good time to stuff gold coins under the mattress. ”
Thehousingbubbleblog.com has people who refer to the The Greater Depression all the time. Why anyone would root for that is beyond me.
25
Crashcadia
// Nov 26, 2007 at 9:59 pm
What’s in your wallet….
Schadenfreude!!!!
26
Matthew
// Nov 26, 2007 at 10:07 pm
Sometimes you have to blow someone else’s candle out to make yours burn a little brighter!
27
Angie
// Nov 26, 2007 at 11:00 pm
Oh, for "lick"’s sake, people.
My rant was in response to Jonny’s sentiment of “woe is me, I’m deserving and grown-up and I’m NEVER going to own a home”. My response was about how he could go about doing that, because implicit in his whining was that this was something he wants to do.
The “get some discipline” line was in regards to SAVING FOR A DOWN PAYMENT. I’m sure I don’t need to cite chapter and verse to the assembled about how many people overspend and go into consumer debt, even on relatively decent incomes. One of the reasons people think they’ll never be able to afford a house is because they think they’ll to borrow the whole purchase price—which is only true for a person who doesn’t have any savings. But with, duh, some backbone, restraint, and financial discipline, someone making over the median income should be able to sock away enough for a fat down payment in a couple of years. This was presented as step 1 of a two-step process.
Step 2 was: find a modest home. The schadenfreude in this blog is leavened with a big fat streak of entitlement (WestSideBilly: Has anyone looked at what $175k gets you in Seattle? Maybe it’s my midwest roots (1 acre lots, 2000 sq ft homes with 3 car garages… *sigh* ) but a dumpy 800 sq ft condo is not worth the sacrifice.) Y’all make merciless fun of over-the-top, granite-countertop, gleaming hardwood, yadda yadda flip-perfect interior decor, and in the next breath the lot of you would not *dream* of accepting anything less.
You want those fabulous, cheap Midwestern homes? They’re still out there, at bigger bargains yet than last year. You can get a fine 2-story 4-bedroom house in Cleveland for $179K. The median home price in Detroit is $100k. Knock yourself out. Don’t forget the snow shovel and the handgun for self-defense. Write if you find work. What? You’re still here? Why? Maybe there really is something to that idea that Seattle Is Special …
But I digress.
If our Jonny here wants to buy a home, and he’s pulling in an OK-but-not-stellar income, the fact is that (this is important now, be sure to read slowly) if he’s going to be fiscally prudent with his home purchase, he will not be able to afford a fabulous 3 br + den split-level on .25 acre and the media room of his dreams. I still maintain that the only way for that spread to be attainable through reasonable, prudent financing to a moderately-but-not-spectacularly well off single person, here in the Seattle area, is for the whole economy to tank and a bunch of folks move away. Be careful what you ask for. If Jonny really wants to buy a place to live, it’s gonna have to be more modest than that. Probably he’d be best off with a smallish condo. Not glamorous but not the end of the freaking world, either. I find it hard to believe that the assembled is having such difficulty with the idea of facing reality.
Notice that in none of the above is the advice to buy right now. Notice that I too believe that prices will fall in the near term. Those of you with average reading comprehension skills will have noticed that I like that idea and I hope it happens, too. Especially attentive readers may also recall that maybe a month ago a guy who asked whether he ought to buy a house since his wife was expecting, and I suggested waiting for a while to see how things played out. Likewise with Jonny–he’ll get a better deal if he waits. Hell, if it takes a few years to pull together a down payment, the point is moot.
Finally: Is it schadenfreude to point out that while others were accumulating more and more debt, I was eliminating debt and accumulating liquid assets? Is it schadenfreude to point out the inevitable result of our nation’s debt-fueled spending spree? Is it schadenfreude to look forward to a time when people who have been and continue to be financially responsible—who didn’t buy things they couldn’t afford and actually regularly saved money—will receive the economic rewards they deserve?
Do you feel that same sense of schadenfreude about homeowners who *haven’t* used their houses as ATMs, and have been prudently paying down their mortgages and accumulating liquid assets while this whole thing has gone haywire? Is it schadenfreude when people who are fiscally unsophisticated are fleeced by “professionals” who should know better but put their own greed before their clients’ well-being? Is it schadenfreude when people act in desperation because they think their chances of ever attaining a decent, middle-class life are slipping away forever? Is it schadenfreude when the greed and overreaching of the finance professionals who MUST HAVE KNOWN how this would play out ripple through the economy and screw a whole lot of people, including the fiscally prudent, in lots more diverse ways than just how much their houses are worth, when that ripping big recession really settles in?
Do you feel that same sense of schadenfreude about homeowners who *haven’t* used their houses as ATMs, and have been prudently paying down their mortgages and accumulating liquid assets while this whole thing has gone haywire?
28
bitterowner
// Nov 26, 2007 at 11:04 pm
“I believe in some of the core tenants of this blog”
Core TENANTS? If this was intentional, this was a (rare) clever pun.
29
bitterowner
// Nov 26, 2007 at 11:07 pm
Angie,
You really shouldn’t swear in church.
30
Angie
// Nov 26, 2007 at 11:13 pm
Rose says:
I ask this, for a while now anyone who does what Tim did (pay down debt and accept their could be harder times ahead) has been publicly derided. Angie’s comments to Jonny epitomize this mindset. If someone doesn’t run up debt, they must be a loser, spineless, or a fool.
This is, of course, complete BS and not at all what I said.
Here’s a question: If Jonny, or even Tim, ever does decide to take the plunge and buy a place, do y’all advocate waiting and saving until you have enough to pay in full with cash?
If not, what’s the alternative?
31
bitterowner
// Nov 26, 2007 at 11:30 pm
Angie,
If one of the factors that causes housing prices to decline substantially in the future is that financing becomes increasingly difficult to obtain or very expensive (ie high interest rates), then wouldn’t a large downpayment theoretically be helpful in mitigating these financing issues?
32
what goes up comes down
// Nov 26, 2007 at 11:39 pm
Angie,
Take a stress pill — relax, breath deeply, imagine sitting on the beach and viewing the ocean. You are wound a little tight.
I think you may have checked out zillow one time too many and saw your paper worth decreasing.
33
EconE
// Nov 27, 2007 at 12:00 am
Angie said…
“You’re still here? Why? Maybe there really is something to that idea that Seattle Is Special …”
Well Angie…people like you make Seattle a little “less special” with your condescending attitude…at least for me. I doubt I’d want to meet you on one of your good days.
What’s that?
I should go?
OK
Buy out my lease and I’m outta here. The Caribbean is looking pretty nice right about now!
ROFLMAO!
34
Faster
// Nov 27, 2007 at 12:07 am
Is it schadenfreude when people act in desperation because they think their chances of ever attaining a decent, middle-class life are slipping away forever?
That’s part of the problem. People like you trying to convince others that their lives can’t be decent unless they own a house, and the people, like you, who already believe it. I’m currently renting after having “owned” two houses over the last 9 years. My life is not all that different. It’s still decent.
It’s okay to be house proud, but thinking you’re better than someone else because you own a house and they don’t is kind of sad. People who believe that really need to examine their life and figure out why their self-esteem is so intertwined with home ownership.
35
matthew
// Nov 27, 2007 at 12:37 am
Holy overreaction Batman!
36
what goes up comes down
// Nov 27, 2007 at 2:34 am
Angie said:
“Do you feel that same sense of schadenfreude about homeowners who *haven’t* used their houses as ATMs, and have been prudently paying down their mortgages and accumulating liquid assets while this whole thing has gone haywire?”
If that is the case Angie, think for a second now, THESE people would not have anything to worry about — because they were prudent.
I really don’t know why you are so worked up, let me ask you when the market was going up were you this upset? If not then I guess it is all about PERSPECTIVE.
37
zzyzx
// Nov 27, 2007 at 7:31 am
“Core TENANTS? If this was intentional, this was a (rare) clever pun.”
Alas, it was me being overdependent on a spell checker and forgetting about homonyms. I knew I was going to do something like that too…
“If that is the case Angie, think for a second now, THESE people would not have anything to worry about — because they were prudent.”
If the economy tanks the way that some people want it to, everyone will have something to worry about, even if it’s just more crime due to an increase in desperation.
38
Kime
// Nov 27, 2007 at 8:48 am
We’ll, this is off topic, but my husband just called me and said that half the workers in his company, an electrical company that does almost all residential, have been let go today, and the other half was told that they may be out of work pretty soon, too. He said that other companies are slow, too. My husband does mostly commercial work including a lot of maintanance so he will continue to work, at least for now.
This is a very sure sign that we are entering the real slump now.
39
Kime
// Nov 27, 2007 at 8:57 am
zzyzx,
I believe you are mistaken in thinking that people here want the economy to tank. What we want is for the economy to get back into balance or better yet to not have gotten out of balance. This will not happen without a recession and in this case a really bad recession. It is sad that after a mania a bust is needed to get back into balance, but it is a fact, and people here just want to get the inevitable over with so that brighter days will then be ahead. It’s kind of like getting a painful but needed operation over with.
40
Buceri
// Nov 27, 2007 at 9:02 am
Kime; I am sorry about your husband.
41
Ira Sacharoff
// Nov 27, 2007 at 9:04 am
When housing prices tank more after places continue not to sell, some people will suffer.
If it were simply a case of unscrupulous loan originators losing their livelihoods, or CEOs going to jail, or agents who have contributed to this mess by misleading people into buying homes they couldn’t afford having to give up their BMWs and have to take the bus, I’m all for it!
But unfortunately, real estate brokerages and lenders have plenty of employees who file or answer phones or clean and I feel bad for them. And I feel bad for homeowners who were duped into buying homes and fell for the BS spread by the RE industry.
At the same time, I think there are a lot more people out there who ultimately want to own homes. I don’t think these people are any better or any worse than people who are happy renting forever. I just think they are out there, and a nice price drop is a good thing, because it will make homes more affordable.
A couple of other points:
The Boston Red Sox will never be as evil as the Yankees. The Yanks have this history of almost always being in the World Series, and they were the last team in Major League Baseball to integrate. The Red Sox weren’t the first team to integrate, but early on they had a large contingent of both African-American and Jewish ballplayers, when at the same time the Yanks had none.
42
Bitterrenter
// Nov 27, 2007 at 9:05 am
Kime,
But wasn’t it worth it? Some people got very wealthy from the housing bubble. Well, a few anyway. So now if many many more suffer that’s ok. In our system we only need a few winners and lots of losers to justify the savagery, ignorance and greed so critical to the proper functioning of that system.
We should all be so glad to live in a culture where wealth is accumulating in fewer hands, where dishonesty and marginally legal (and often illegal) behavior is rewarded and the losers get their just desserts for not playing the game.
43
Brian
// Nov 27, 2007 at 9:20 am
Ira: Whoa! Slow your horses there and learn some baseball history. The Yankees were actually the 2nd to last to integrate when they picked up Elston Howard. The last was your beloved Red Sux who brought up Pumpsie Green. Stop trying to feed people falsehoods that will forever skew their opinions. Tom Yawkey was a huge racist. The Sux are by far more “evil” than the Yankees.
44
Ira Sacharoff
// Nov 27, 2007 at 9:29 am
Sorry Brian if I got my facts wrong there. I’m not a Sox fan nearly as much as a Yankee hater, and I’m not about to give that up.
45
Ira Sacharoff
// Nov 27, 2007 at 9:32 am
…and just for accuracy, we were both wrong. The Phillies and Tigers integrated after the Yankees, but before the Red Sox.
46
Kime
// Nov 27, 2007 at 9:35 am
Buceri,
Thank you. We are thankful to God that we are in a position with cash saved to make it through the slump.
47
Brian
// Nov 27, 2007 at 9:37 am
Ira: You sure about that? Why are you a Yankee hater than if you aren’t a Red Sux fan? I’m always interested why people dislike the Yankees. Can I imagine that you hate the Patriots now since they have dominated football the last 1/2 decade? Do you hate the Lakers and the Celtics because they have won more basketball championships than any other teams? Do you believe that the Yankees are the Mariners rival (they’re not and they don’t even think about the Mariners if that is the case)? Just wondering.
48
Brian
// Nov 27, 2007 at 9:43 am
As far as real estate is concerned, I don’t see anything really that bad with what Angie has said. I do see some comments asking her why she is upset that I think are kind of funny though. Every opinion on this blog is written and not spoken. The intonation of what is being said is lost, but even with that being said, what Angie posted wasn’t really that bad. I agree with her. If you are 40 and you make what you consider to be a pretty good income, you should have been able to buy a house before the boom or at the very least have been able to save a crap lode of money for a down payment. I would be more interested in railing against people that don’t know how to save than I would be in railing against people that call those people out.
49
Matthew
// Nov 27, 2007 at 9:48 am
Back on topic, the S&P/Case-Schiller data is out today!
S&P Says 3rd-Quarter Housing Prices Dropped by Sharpest Rate in Index’s 21-Year History
Look out below!
50
zzyzx
// Nov 27, 2007 at 10:01 am
“I believe you are mistaken in thinking that people here want the economy to tank. What we want is for the economy to get back into balance or better yet to not have gotten out of balance. This will not happen without a recession and in this case a really bad recession.”
So in other words, you don’t want the economy to tank, you just want a really bad recession. I see ;)
And yes, I know that some people want that for our own long term health (others are just looking out for their short sells or a chance to do grasshopper/ant gloating) but there’s no promise that either this will make the economy better or that it really will be needed.
I think a better medical analogy would be having one doctor telling you you need the operation, another saying that it’s just a waste of time, and a third saying that it might help but it might also kill you. I don’t believe anyone truly understands how the economy works; all we have are simplified models to work with.
“I’m always interested why people dislike the Yankees. Can I imagine that you hate the Patriots now since they have dominated football the last 1/2 decade?”
The Yankees dislike comes out of the fact that they don’t operate under the same rules as other teams - it’s not that the Yankees have a high payroll, it’s that they can do that and still turn a profit - which undermines interest in the sport. Moreover, the Yankees fan base is largely filled with the worst sort of gloaters who also treat the rest of the majors as their farm system.
I am starting to get there with the Patriots too though…
51
Brian
// Nov 27, 2007 at 10:19 am
zzyzk: “The Yankees dislike comes out of the fact that they don’t operate under the same rules as other teams - it’s not that the Yankees have a high payroll, it’s that they can do that and still turn a profit - which undermines interest in the sport. Moreover, the Yankees fan base is largely filled with the worst sort of gloaters who also treat the rest of the majors as their farm system. ”
Well, I’m a Yankees fan and I don’t gloat. I love baseball and don’t feel any need to talk smack about how good my team is (and we haven’t won a World Series since 2000). With regards to how the Yankees operate, guess what? The same applies to the Red Sux, Mets, Cubs, White Sox, Angels, and Dodgers. It applies to any major market club that has a sweetheart of a television deal and can continue to increase their ticket prices by double digit percentages each year and still have 3,000,000 people go to their stadium. If you hate the Yankees based on this argument you have to hate all the other teams I listed. Being the baseball fan I am, I hate on teams that don’t spend money and turn a hefty profit off of revenue sharing and the MLB television contract. If your team doesn’t spend at least $50m on payroll each year, they are making money without putting a team on the field. If they do put a team on the field and get the benefit of sweetheart stadium and concession deals, there is no reason they shouldn’t have a payroll of at least $100m. That is just the reality of the game today. If you want to be angry, direct that anger towards the 20 non-major market clubs that cry poor and make millions in profit each year and cry about how unfair the economics of the game is while laughing all the way to the bank.
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Kime
// Nov 27, 2007 at 10:19 am
“I think a better medical analogy would be having one doctor telling you you need the operation, another saying that it’s just a waste of time, and a third saying that it might help but it might also kill you. I don’t believe anyone truly understands how the economy works; all we have are simplified models to work with.”
Ok, but we do know that booms (I mean manias, and if you doubt that we have been through a mania, then that is another argument.) are ALWAYS followed by busts. We don’t need a model, history shows us that this is a fact. So I would rather fact what is coming now than to make it worse by getting the economy more out of balance and making things worse, by starting new manias like the RE mania. If you think that the Dot.com mania was an example of a mania that didn’t end in a bust because the stock market recovered so quickly, well, that bust isn’t over yet, part 2 is on its way.
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rose-colored-coolaid
// Nov 27, 2007 at 10:31 am
Brian, I don’t think it’s fare to say that someone should have bought before the boom just because they are 40. I don’t know Jonny personally, and I’ll assume neither do you or Angie.
Maybe he slacked for years despite having an above average income. Or maybe he just recently finished a degree and was making a low salary prior to 2005. Or maybe he had a personal matter which was expensive and precluded wasting money on housing. The point is we don’t know, and I for one will not ride someone just because they appear to be late to the game from a materialistic viewpoint.
American’s preach that hard work is what wins. They ignore the fact that luck is often as important as that hard work. For that reason, I find it morally apprehensible to judge someone purely on their material wealth.
54
Buceri
// Nov 27, 2007 at 10:36 am
About 70% of our GDP is consumption; which was good for black friday; but will be painfully slow for the next 15 days (according to the president of the retailer’s assoc.).
With US savings rate at 0 and leaning to negative, shoppers will be a bit more cautious..eventually…and there goes the economy. This level of consumption and debt is unsustainable.
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Ira Sacharoff
// Nov 27, 2007 at 10:42 am
Brian,
My Yankee hatred is in my blood. My father was a Brooklyn Dodger fan and my mother’s family were NY Giants fans, and I grew up a Met fan before I became a Mariner fan. When I was a kid I happily traded my Mickey Mantle baseball card for a Cleon Jones. I don’t consider the Yanks the natural enemies or rivals of the M’s, The natural enemies of the M’s are themselves.
56
on topic
// Nov 27, 2007 at 10:45 am
if japan is anything to go by, we’ll see 0% interest rates, pervasive recession, and stagnant prices for 25 years.
but Japan wasn’t the world’s largest economy, didn’t control the most widely used currency in the world, wasn’t the biggest center of international scientific development, and it was the only country having such a boom, not part of a worldwide real estate boom.
so, maybe Japan isn’t anything to go by.
57
Brian
// Nov 27, 2007 at 10:57 am
Ira: I can accept that answer and agree with you 100% on the Mariners. I can say this though about Mariner fans I know. Before this year started, when I would tell Mariners fans how good their team could be and how they could contend for a playoff spot, not one of them thought it was a possibility. I haven’t found Mariner fans, generally speaking (I’m not talking about anyone that this does not apply to.), are not very baseball smart or very dedicated to their team. When the Yankees were 15 games below .500, I was still telling people they would come back and make the playoffs, because a) I believe in my team (not religiously, just in a baseball sense), and b) I knew how good the team was from top to bottom and didn’t discount or inflate anything.
RCC: I suppose I was speaking in general terms with regards to Johnny or any other 40 year old that states they make a decent living, want to own, and don’t. If a person overspent and were irresponsible with their money when they were young, that is their problem. Look, I rent, but by choice. My wife and I have plenty of money for a hefty down payment if we opt to buy, but I feel prices will come down based on the realities that exist today (tightening credit, possible recession, national news on the housing slump that causes buyers/people in any market to pause, etc.). The point I was trying to make is there is nothing inherently wrong with what Angie posted.
58
B&W Nikes
// Nov 27, 2007 at 11:16 am
zzyzx - I don’t know that anyone *wants* the economy to tank or *wants* to experience a really bad recession per se. A correction is due and I would rather get on with it than massage reality and wait until too many people are too old to recover from it with agility. Surgery is a great analogy - consequences and risks apply to both action and inaction.
If it doesn’t have enough positive tone looking to see just how far down the cliff might go, just visualize how much room for growth there will be climbing back up. It will be a great exercise getting back to the good old time of 2007, just as it has been trying to regain those halcyon days of 1999.
Oh and as long as we are talking sports, what about that pervasive Seattle choke?
59
officeboy
// Nov 27, 2007 at 11:26 am
*a warning to all saving while renting*
I’m all for saving up for a down payment or saving a ton while renting. In fact I did it for almost 2 years after cashing out at what I perceived to be the peak (and it was not the peak of prices, but was near enough to the peak of easy selling and bidding wars etc.)
But please be aware of other things that can affect home prices. While it is true that there can and will be products that sell for less then it costs to manufacture them especially used ones. Remember that a home is not some magical entity that just appears. There is a lot of work and material that goes into construction. In the last few years especially caused by the recent boom, all construction related wages are up and they will not drop rapidly. Especially with the higher then normal CPI/inflation numbers we have seen the last few years. Also “REAL” inflation (costs of things like steel, copper, lumber, oil) has been MUCH MUCH higher then CPI type numbers and all contribute to turn the home building process into a more expensive one.
Personally I have just moved into a home that I built. Putting aside the land purchase which was gotten at a steep discount from an overextended builder, the cost of construction of the home vs. a home I built in 2000 was nearly twice the rate of inflation. The homes were not the same footprint but they were similar in size, (new home is 4-500 sq ft smaller, but has a garage).
My warning is to watch your savings, Currently it looks like the fed may try to inflate consumers/businesses out of debt, and if that happens then well your down payment may just not be all you had hoped. There will be deals to be found but high costs on new construction will bolster prices on used units.
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TJ_98370
// Nov 27, 2007 at 11:46 am
More from the Church of the Holy Roller Bubbleheads -
And The Tim came forth herewith again and spoke to the multitudes, “Verily, I say unto thee, wise is the man who doth not squanderith his riches on overpriced real estate, for he shall have comfort. Ye have heard that it hath been said by men from old time that real estate always goes up, beware of these false prophets, for they know not. Have faith in the fundamentals, for ye shall not be forsaken.” And when The Tim had finished his sayings, the people were astonished for he had spoken with authority.
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Angie
// Nov 27, 2007 at 11:48 am
Thanks for the backup, Brian. It’s a tough job being the bubble boys’ favorite source for strawman arguments, but someone’s got to do it.
Rose says: American’s preach that hard work is what wins. They ignore the fact that luck is often as important as that hard work. For that reason, I find it morally apprehensible to judge someone purely on their material wealth.
I agree entirely. That’s what I was trying to get at in my post the other day, when I was talking about how the playing field isn’t level.
In the grand scheme of things, how much money a person makes in a year plays a role in where they end up in the socioeconomic strata, but there are so many other factors, too. I think that’s why so many people with decent incomes feel like so much is still out of reach, especially in places with high cost of living.
That happens in my household, too. My husband and I pull in decent-but-not-great incomes and marvel at how anyone can afford to buy in N. Seattle or the Eastside. The way we’ve coped with it is to face the facts and make very modest choices. I’m sure you all would howl with derision if you saw the my house and the street where we live, but that’s fine by me.
62
Kime
// Nov 27, 2007 at 12:03 pm
I was in a hurry before and I want to add now that the surgical analogy was supposed to show the wanting to get it over with not how we should get it over with. I am not suggesting that we take a knife to the economy to try to get it over with, the recession will happen all by itself.
“Currently it looks like the fed may try to inflate consumers/businesses out of debt”
They may try, but they are now walking a fine line between deflation and hyperinflation, and I hope they will not end up pushing us into hyperinflation. They may not be able to avoid deflation. Our money supply depends upon willing borrowers and lenders and an ever increasing load of debt. Right now the lenders are finding that they aren’t as willing to lend money to anyone breathing as they have been in the last few years, and the Fed can’t force them to lend and the Fed banks are not going to sacrifice themselves buying up bad loans to try to keep the economy afloat.
63
explorer
// Nov 27, 2007 at 2:01 pm
It may be that part of the reaction to Angie’s posts are due to her assumptions of what is possible for others to do. She seems to think everyone starts out the same, has the same opportunites and circumstances, therefore her cookie-cutter approach to this is just plain common-sense, and If don’t or are unable to do it her way, you are a loser. If you are not willing to buy into a way overvalued crackerbox, at least to start, then you can’t expect better? People who think that way seem incapable of understanding those who do not think that way. It’s a common social disease of class war.
That is the resentment and reaction that seems expressed by others about her posts. At least it is for me. Bitterrenter seems to have a good bead on the big picture here. RCC also has a strong point about luck. I would add timing to that too, not the kind that you have control over.
Angie, you sure came off that way to me at first, and your last post seems like backpedaling. But if sincere, great. Better to understand where you are coming from vs. your earlier statements.
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rose-colored-coolaid
// Nov 27, 2007 at 2:18 pm
officeboy, how do you find these builder fire sales? I am interested in purchasing land, and would be thrilled to find such a deal (if it were reasonably close in and not way out in the boonies)
thanks!
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Erik
// Nov 27, 2007 at 3:56 pm
Last week I found out that a friend and his girlfriend were both laid off from their biotech jobs. So while it is nice to hear a little less real-estate gloating, my feelings are less Schadenfreude and more sadness that this whole mess happened in the first place.
By now I think we’ve already got a pretty good idea who the culprits (or at least the suspects) in the bubble were and all but the most devoted real estate bulls are at least conceding that the time of price appreciation is over. Most of us here expect a more substantial correction. Given this, I’d rather see the market take its medicine as soon as possible, in one gulp rather keep sipping at the bitter elixir. There will be some discomfort but it will be better than dragging out the sickness.
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Dave
// Nov 27, 2007 at 4:50 pm
Erik
Which Biotech?
Here those crickets Angie? They love to circle Biotech hubs. Hell, I heard Zymo isn’t doing well - they have exactly 3 jobs posted last tiem I chekced.
Dave
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Rez
// Nov 27, 2007 at 4:56 pm
I count at least 5 comments responding to what Angie never said or implied. I’ll help her out by making it simple: IF you want a house so bad that you obsess about it, then DO something that gets you closer to that goal, which may include waiting until prices are a little better and saving some money. If you want something but do nothing but whine, then that is what makes you a loser, not what you do or do not have. Sheesh.
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Rez
// Nov 27, 2007 at 5:05 pm
moreover, the bitter medicine is happening right in front of our eyes. Citi announced an 11 billion writedown and an analyst says the 7 billion investment by whatever Arab monarch is way short of the 30 billion infusion Citi needs to get back. The street is getting killed by this bad paper. The bogey men you guys want to punish so severely are already getting the crapped kicked out of them. Meanwhile the people getting foreclosed on get to live rent free 6 months — paid for by Citibank, Countrywide etc. — You bitter renters should feel some consolation that you really aren’t paying a dime for this mayhem. The people responsible are in fact paying dearly.
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uptown
// Nov 27, 2007 at 6:36 pm
The street is getting killed by this bad paper.
Is this the same Street that is paying out a record $38,000,000,000 in bonuses this year?
Nov. 19 (Bloomberg) — Shareholders in the securities industry are having their worst year since 2002, losing $74 billion of their equity. That won’t prevent Wall Street from paying record bonuses, totaling almost $38 billion.
That money, split among about 186,000 workers at Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co., Lehman Brothers Holdings Inc. and Bear Stearns Cos., equates to an average of $201,500 per person, according to data compiled by Bloomberg. The five biggest U.S. securities firms paid $36 billion to employees last year.
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John
// Nov 27, 2007 at 6:45 pm
Rez, “the bitter renters” will pay for this mess. Everyone pays. If the government has to bail out Countrywide, Freddie Mac, Fannie Mae, all tax-payers will share that burden. US Dollar is worth less every day because of our weak economy. Everyone holding this toilet paper is being affected.
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Angie
// Nov 27, 2007 at 6:53 pm
Here those crickets Angie? They love to circle Biotech hubs. Hell, I heard Zymo isn’t doing well - they have exactly 3 jobs posted last tiem I chekced.
Dude, spellcheck is your friend.
I feel for the folks who lost their jobs, and that sucks. It’s the fact that comparable companies don’t exist within 700 miles in any direction that makes Seattle the, yes, biotech hub that it is. Zymo may not pick them up, but it looks like there are lots of other options for them to pursue.
72
monzie
// Nov 27, 2007 at 7:10 pm
My condo has just asked for bids from three construction companies to reside our building. We have an estimate, made in spring, 2007. It will be (more than) interesting to see what the bids come in for in December 2007
73
WestSideBilly
// Nov 28, 2007 at 7:05 pm
Seattle is special, to a degree, or at the very least it’s a more appealing place to live. Houses should be more expensive, to a degree. Families who make median or marginally above median incomes shouldn’t necessarily be able to afford big houses with granite and stainless and 5 acres for their pink ponies to run free. My poorly made point was that the quality of homes (or condos) within range for even double the median salary is sorely lacking. A run down 90 year old 1100 sq ft rambler, with a 6′ basement that leaks 10 months of the year, no parking, and a lot not much bigger than the house itself would sell for $300k or more in some neighborhoods. That same house would sell for $60k in most of the rest of the country, even DeToilet or the Mistake by the Lake. Seattle is, ahem, special but is it really 400% special?
For what it’s worth, I don’t think it’s unreasonable that a single person making above median income should be able to afford an 800 sq ft 1&1 condo w/ secure parking in the city, without mortgaging their financial soul (i.e. not spending money on anything else) to get it. Take a gander at what $175k gets you in Seattle - 400 sq ft studios and houseboats. Is that entitlement? Maybe it is.
Somewhat of an aside, but in my vein effort to find some sub $200k properties to compare to the Mistake by the Lake, I came across This doozy. 75% appreciation in one year - perfectly reasonable! And they wonder why the sale failed. Perhaps it’s the lack of granite and stainless steel!
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Angie
// Nov 29, 2007 at 12:48 pm
I’m not sure what you’re referring to with “Mistake By The Lake” and “De Toilet”.
That is an interesting listing. I’m familiar with the area–it’s a pretty nice neighborhood, right across the street from the great W. Seattle library, not far from the Westwood Village shopping center.
$175K is a pretty good price for the area (you’re right, pickins are slim in that price range, though I’m rather impressed by the Murphy bedroom in that U district condo on 15th…!) and $100K for that unit a year ago does not seem likely for sale at market value.
Looking at the KC records for that unit, it was bought in foreclosure last year by a couple on Mercer Island, investors no doubt. Yep, $75K in one year is egregious, but if it’s what the market will bear (or close to it), well, they’re just doing what capitalists do naturally, right?
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Bellevue Ave
// Nov 29, 2007 at 3:56 pm
and if the market wont bear it, then why should there be criticism of pointing out that the market wont bear it.
there is a difference between the judgment of what you think the price should be, and pointing out that at if a unit isn’t selling at a certain price, it probably is too much.
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WestSideBilly
// Nov 29, 2007 at 4:34 pm
Mistake by the Lake is a nickname for Cleveland.
DeToilet is a play on Detroit.
Actually, as Seattle goes, that $175K unit is a relative bargain. $35k down, $870/month for P&I. A comparable rental would probably be $600/month.
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Peacemach
// Nov 29, 2007 at 4:49 pm
What I find so frustrating is that 30 years from now, when all these posters are great-grandparents, their descendants will precipitate another financial crisis by borrowing from their own future in some new (or maybe the same) foolish way. As some have pointed out, a similar messup happened about 35 years ago . . .
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