You’d be wrong, possibly because 47% of Americans do not pay income taxes.

Well not too surprising, given…

24% of Americans are under 18
13% of Americans are over 65
1% of the rest are in prison
10% of the rest are unemployed
There are still quite a few stay at home moms

You get the idea

One part of his post claims: Price-to-income ratio is now below the historical average. The monthly mortgage payment for a middle income person buying a middle priced home is well below its historical norm.

My thinking is that this has to do with the low interest rates. Another thing about those rates is that as rates go up prices will decline to keep the ratios in balance. If the pent up demand turns towards the lower prices that may mean those that bought today will be losing equity.

It sounds like we are in for more loan defaults.

forget a corn house. I want a corn palace!

http://en.wikipedia.org/wiki/Corn_Palace

http://www.housingtracker.net/asking-prices/san-diego-california

75th Percentile for San Diego:

2009-10-05 $849,000

Feb 2009 $663,000

CRAZY! (Yes, these are asking prices, and no, we don’t know changes in mix, and yes, there are other potential problems, but $663k to $849k?)

RE: Kary L. Krismer @ 33 – Kary, Watch the video, those homes were $1.7m a year ago. http://www.youtube.com/watch?v=p5BX1hEUVrg&feature=player_embedded

But how much were they three years ago? Their market has been heading down a lot longer than ours.

Maybe we are fools for not hopping aboard?

Where does all the money come from to ride this “Euphoria Express?”

In helping determine who’s the fool, let’s remember the old saying, “A fool and his money are soon parted.”

This should be called the “Foreclosure Express,” as that is probably what the buyers are really riding!

1. The Dairy Farmers of Washington just told me I need to drink more milk.
2. GM tells me I need to trade in my old car.
3. T-mobile tells me I need to talk more on my cellular phone.

When I hear this from Larry Yun, I just file it with #1,#2, and #3. It is worth a few chuckles though.

Maybe NAR should dump Yun and hire hire Catherine Zeta-Jones? It would be like Billy Christal’s (sp?) joke that as a result of her commercials he owns 4 cell phones.

Anybody see Jim the Real Estate agent videos recently on Youtube? Its nuts $1m+ homes in california selling quick. Either stupidity or a lot of money out there that sat idle for a while.

Well two things. Those might have been 3 million dollar houses a few years ago, so they’re perceived as a bargain. Also, don’t underestimate the amount of wealth some people hold in this country. Those might be minor transactions for a lot of them.

The fact that very few people actually pay their mortgages off (unlike a generation ago) is a sign that we have spending problems and it encourages a mismatch between house prices and the ability to pay those prices.

I wouldn’t necessarily attribute that to prices, as much as just to people not controlling their spending in other areas. You could, of course, overspend on a house and start a death spiral down. But I’ve seen a lot of instances where people bought in 2000 (or so) and have no equity because of repeated refinances over the years. Assuming they bought too much house in 2000 they would have tanked long before now.

It must be darn strong….LOL

When I hear this from Larry Yun, I just file it with #1,#2, and #3. It is worth a few chuckles though.

RE: per_se @ 12 – well said.

While I only read this excerpt, it troubles me that there is no mention of incomes. It is like home prices exist in a vacuum with only home prices to refer to. Yes it would be nice for home prices to return to 5% annual increase but the same can be said for incomes. The problem with home prices, even at these levels, is their relationship to the incomes required to pay those prices.

The fact that very few people actually pay their mortgages off (unlike a generation ago) is a sign that we have spending problems and it encourages a mismatch between house prices and the ability to pay those prices.

That’s the way of the new economy though, even today. Max out debt and pay the bare minimum. Why pay-off your home early when instead of investing in it, you plan on upgrading in 5 years? Why not get the new car every 2 to 5 years, and all the toys instead? I agree though, home prices are now baed on 2 income households. We’ve unfortunately, with the aid of our experts at the NAR, done it to ourselves.

Going back to Yun’s statement. The fundamental problem with his argument is that homes are an asset that MUST appreciate. It’s like the bursting of the bubble had no impact on him at all, but that could be because he’s more cheerleader than economist.

While I only read this excerpt, it troubles me that there is no mention of incomes. It is like home prices exist in a vacuum with only home prices to refer to. Yes it would be nice for home prices to return to 5% annual increase but the same can be said for incomes. The problem with home prices, even at these levels, is their relationship to the incomes required to pay those prices.

The fact that very few people actually pay their mortgages off (unlike a generation ago) is a sign that we have spending problems and it encourages a mismatch between house prices and the ability to pay those prices.

Contrarian theory suggests that the opportunity is against the general sentiment, and as such, maybe now really is a good time to buy? Isn’t this exactly what Yun is suggesting? It seems he is suggesting that the general market sentiment has driven prices too low, and thus now is the time to buy. Of course when the market was high, he had the idea to buy because everyone else is doing it. I have never heard Yun say anything other than buy, buy, buy.

All that said, I think the general sentiment will continue to erode, so a contrarian would suggest that the buying opportunity is even better tomorrow.

The problem is that this and all the other bailouts, are programs paid for with money we don’t have. America is in a death spiral. We don’t contribute much to the world other than having a huge appetite for low quality cheap garbage we buy from China and finance with them buying our debt. The Wall Street Journal had an excellent opinion piece today: 40% of all individual income tax payments go towards paying interest on our national debt. 40%!!!! This interest is about $383 billion annually – enough to fund Obamacare two times over and then some. This is based on today’s debt. Obama plans to double the deficit over the next 10 years. You would think most Americans would be outraged. You’d be wrong, possibly because 47% of Americans do not pay income taxes.

The story is not about the NAR, it is about politicians and presidents – republican or democrat, it makes no difference – destroying the economic viability of our country over the past 20 years. The irony is most Americans don’t give a "golly". At least until they lose their jobs and realize a consumer based economy does not produce jobs that pay living wages. Then they want their handouts.

Are houses the new corn?

No. It’s really difficult to turn a house into a tortilla.

2006 14:1
2009 50:1

when Bear Stearns went under it’s ratio was 33:1.

FHA commisioner David Stevens: “There will be no taxpayer bailout.” Barney Frank said that too about Fannie and Freddie.

http://www.huffingtonpost.com/henry-blodget/americans-are-still-delus_b_317251.html

From a study by case-schiller, long term expectations for home appreciation are 11% a year. In the short term people are only hoping for a 2% increase.

11% a year!!! This is the delusion in the market and it needs to be snapped or it will be a long slow death.

You can try and spin anytime of the year as being better but at the end of the day if you think that prices will over-correct downwards is it better to get that over with sooner and let buyers and sellers deal with the reality of the market. The sooner we get through the pain the sooner the market will recover. Additionally, I’d add that there are probably buyers, not eligible for the credit, waiting on the sidelines until it is over and we get to a more normalized market. I happen to be one of them. I won’t be buying a home right now because I’m not about to pay some Home Credit premium for a house when I know that it will evaporate as soon as the credit is over.

If the credit expires in November and the market has dropped 5% YOY next July, I don’t think anyone would call that an over correction. More (but not all) people would if it dropped 40%. Presumably there is some number you believe would be an over correction.

I’m just saying that if you believe markets move too far down before moving up, and too far up before moving down (something I believe), that the expiration of the credit at the wrong time of year could (emphasis could) lead to an over correction.

For those that don’t like the credit, that ship has sailed. The question is how to get rid of it. I don’t like November for seasonal and news release reasons. Maybe a better way to wind it down would be to have it reduced by $2,000 each month for four months?

From 0 to $10K, the question may seem more debatable, but when you start raising the number to $50K, or $100K, or $500K, clearly, at some point, everyone will get pulled into concluding that “no, wait, something seems absurdly wrong with that – this can’t make sense.”

And indeed it doesn’t. For an Economist to make solid claims about the social costs and benefits of credits – he should be able to defend a particular number (or narrow range) and explain his method of reasoning as to why more would be counterproductive.

But we have not been presented with any empirical evidence that the cost of these credits has done nearly as much social good as they cost us (actually, our descendants). All the evidence I’ve seen is that this program has such a small multiplier that it is hardly distinguishable from a straight government transfer payment to sellers with some spillover commission profits for Realtors.

Desperate politicians rely on disastrous giveaways. Bread and circuses for everyone. There is nothing new under the sun.

That said, I still don’t like the idea of an extension of the credit longer than 3-4 months tops, and that’s only due to seasonal factors, but it does somewhat relate to his “over-correction” comment. I won’t say the market has over-corrected, but over-correction of any market is possible, and having the tax credit expire in November could lead to an over-correction. Basically my herding theory.

Kary,

I have to disagree with your assessment that it would be an “over-correction”. If the tax credit is increasing demand for housing and in effect propping up home prices then the removal of that demand would bring the market to it’s actual equilibrium. the word you are looking for is home prices would return to their non-subsidized prices not over-corrected. I think that’s what we are talking about here.

When prices were increasing heavily the attitude of the industry was laissez-faire, the market rules. Now when the market is in a downturn we need intervention. I don’t agree with letting markets run free with not controls but the real estate market get an extraordinary amount of subsidy by tax payers, tax credit for mortgages, capital gains subsidy when you sell your home, artificially lowered interest rates, government intervention with freddie and fannie, and the multitude of government programs and laws that favor home ownership. The industry is far from not getting its fair share of help. Granted we value home ownership but there has to be some limit to how far you go to subsidize it, and not in the least because doing more may actually end up having the opposite effect.

I know potential buyers would like lower prices (just as potential sellers would like higher prices), but at some point you need to factor in the effect on various entities like F&F, the FHA, the PMI entities and the banks, etc. So stabilization would be good in that regard.

That said, I still don’t like the idea of an extension of the credit longer than 3-4 months tops, and that’s only due to seasonal factors, but it does somewhat relate to his “over-correction” comment. I won’t say the market has over-corrected, but over-correction of any market is possible, and having the tax credit expire in November could lead to an over-correction. Basically my herding theory.

Overall though, I can’t really say that the excerpt says that much. And I don’t care enough about what he says to look up the rest.

Lets get some fuel on this fire!