Please vote in this poll using the sidebar.
The current economic path will lead the USA to...
- a slow recovery over the next 3-5 years. (33%, 45 Votes)
- a 5-10 year plateau, followed by slow recovery. (15%, 21 Votes)
- an extended 10-20 year slow downturn. (26%, 35 Votes)
- a multi-year false recovery followed by a complete collapse. (15%, 20 Votes)
- a complete collapse in the near future. (11%, 16 Votes)
Total Voters: 137
This poll will be active and displayed on the sidebar through 11.15.2009.
David Losh » Nov 8, 2009 at 9:28 am
You need to define complete collapse.
If you mean that Great Deppression type of collapse, that will never happen. If you mean a collapse of the free enterprise, capitalistic, stock market speculation that generates a false sense of economy, well OK then.
AMS » Nov 8, 2009 at 9:32 am
RE: David Losh @ 1 – How about a complete collapse is on the opposite end of the spectrum from of a complete recovery.
David Losh » Nov 8, 2009 at 9:34 am
RE: AMS @ 2 –
There will be no recovery.
AMS » Nov 8, 2009 at 9:38 am
RE: David Losh @ 3 – Did I suggest that there would be a recovery? No.
Read my message about Vegas going from $345k to $140k in about 3 years.
What I am suggesting, however, is that one might define collapse on one end of the spectrum and recovery on the other end.
-10, -9, -8, …, -1, 0, 1, …, 8, 9, 10.
-10 is complete collapse
10 is complete recovery
0 is in the middle.
AMS » Nov 8, 2009 at 9:42 am
My comment here: AMS @ 56 (click)
patient » Nov 8, 2009 at 10:25 am
Currently the economy is an illusion created by huge amounts of borrowed money. This includes stock markets, housing, commodities, GDP etc. This illussion can not be sustained for long, at some stage our credit worthiness will run out. Hopefully we reach a “collapse” sooner than later since the longer we keep this up the less chance that we will be able to recover to an acceptable level. With a reset where the economy incl. stocks,housing etc are built on solid fundamentals confidence and financial health can return and true recovery start to take place. It’s very hard to determine when one of these scenarios will take place due to intriquate and unpredictable national and international political games,corruption and short term thinking being the dominating ingredients. I hope we have a stock market crash Q1 2010 and housing declines that will prove the current path to be useless and that it will lead us to an economic bottom some time in 2012 followed by a sound recovery pace but that will be from a much, much lower level than today and we might not recover to what we are used to for decades to come.
James Lupori » Nov 8, 2009 at 11:39 am
I would like to ask a sincere question: A recovery to what?
Am I alone in believing that the U.S. has been on trajectory that will ultimately bring us an economy more like Latin America?
It seems that we are unwilling (or unable) to make some huge shifts in our thinking about “wealth creation,” living standards, consumption levels, dependence on foreign energy sources and investments in our national institutions. If the critics are correct, what sort of “future” will the next generation inherit if all of our efforts are merely to line the pockets of industry without investing in the things that make the country run?
We seem to be quite comfortable with an out-of-control military budget, an unsustainable health care system and fragile social safety net (SSI & Medicare). And I do understand that government has played a role in this; however, I would like to know in what way the private sector is going to “innovate and enterprise” as it so often advertises. In the end, if all the “free market” can offer us is more things to shop for (cheap stuff) then we may never see a “recovery.”
AMS » Nov 8, 2009 at 12:10 pm
RE: James Lupori @ 7 – Just as one can ask, “Recovery to what,” or, similarly, “Recovery from what,” or one might ask the question, “Collapse to what,” or “Collapse from what?”
Most of the time these polls are just for fun, but from time-to-time there can be serious problems.
I have no further comment. I don’t want any men in black suits showing up at my door. If they do show up, then I wil let tell them I only used this as an article about a bad poll.
I am not suggesting anything, but you might want to read this regrading a poll gone wrong:
http://www.hindustantimes.com/americas/Facebook-kills-kill-obama-poll/470483/H1-Article1-459508.aspx
(Again, I had nothing to do with the poll above; I am not suggesting that anyone take any action. It is my understanding that the Secret Service located the juvenile who created the poll mentioned in the article, and such juvenile had no improper intent. If you want my recommendation, it is to stay at home alone and never post any polls about anything.)
Trigger » Nov 8, 2009 at 12:35 pm
RE: AMS @ 8 – AMS – You are exaggerating. There is no threat in this poll. There is still freedom of speech in America and you can say that I think America will recover or collapse or whatever you think. Threatening to kill is another story.
AMS » Nov 8, 2009 at 12:49 pm
RE: Trigger @ 9 – I don’t see anything wrong with the current poll on seattlebubble.com. I referenced another poll that required Secret Service investigation.
What I am saying is that I only reference that other poll as an example. I don’t want any men in black suits showing up at my door about my reference to the other poll. Answering to the Secret Service is not on my “to do” list.
As far as free speech goes, that has limits, as noted in the article I referenced.
Kevin » Nov 8, 2009 at 1:58 pm
I have to say it’s disappointing that this blog has lately become a place for people to vent frustrations instead of providing useful information normal people like me are eagerly seeking.
Tim, you might want to be careful here because I imagine you would want to make some income out of the advertisers. It’s certainly fun to have a group of similarly angry people condemning everythng, but I don’t know what it will do for your traffic.
On the topic of recovery, time after time, economy always recovers. So we will be fine this time as well, though it will not be a speedy recovery like 2001. Some jobs are gone forever, so people need to retrain and re-adapt – but there will always be another cycle of boom and bust.
softwarengineer » Nov 8, 2009 at 2:14 pm
RE: Kevin @ 11 –
Hi Kevin
Are you a:
RE investor?
Landlord?
Banker?
Just wondering.
scotsman » Nov 8, 2009 at 2:18 pm
RE: Kevin @ 11 –
Really? Twenty years on, is Japan in what you would define as recovery? Does a slow drift down become the new normal, and is it then acceptable?
Trigger » Nov 8, 2009 at 2:24 pm
RE: scotsman @ 13 – Scotsman – However you have to factor in that at some point new technology will come that will revolutionize the whole world. In the 1980’s and 90’s it was the computer. In 2010 and beyond maybe it will be robotics or sthg new completely. And if that happens the economy will not be drifting down.
But if nothing comes along I agree. It will be a slow race to the bottom.
Would you not agree with this statement?
Trigger » Nov 8, 2009 at 2:30 pm
RE: Kevin @ 11 – Kevin – I disagree. There are different people who hang out on Seattlebubble. I think everybody is allowed to express opinion.
You believe that based on historical analysis we are in the middle of a bust cycle and we will recover. And this is cool and fine. But take into account that earlier people thought that you cannot lose in real estate. Some people disagree with you and some agree. Everybody can say whatever they want.
David Losh » Nov 8, 2009 at 2:35 pm
Japan’s a good example of military spending. Once they stopped having an army, the greatest navy on earth, and the only air force to successfully attack the United States they had no economy.
We need to retool and rethink what our economy is and move forward.
softwarengineer » Nov 8, 2009 at 2:39 pm
RE: Trigger @ 14 –
Its Likely a No Win for America, New Tech or Not
Once we theoretically invent it, the NWO CEOs, chewing fat cigars will insource/outsource slave labor to build, manage and engineer it anyway.
RE is on the same path as American wages, whether we like it or not..
My solution is have America invent it and have it built on stimulus “Buy American” contracts…..call me socialistic and anti-globalism….ya got a better idea?
Scotsman » Nov 8, 2009 at 2:46 pm
RE: Trigger @ 14 –
Technology can be a game-changer, if we can afford to develop and implement it. Robotics, nanotech, something in energy, all of those could raise productivity, the requirement at hand. But it would take 20 years if we started now to fully work a major change into society. That’s a full generation. Or we could continue down, slowly but surely, for another full generation.
How old are you, and what part of your life cycle will be most affected?
AMS » Nov 8, 2009 at 2:58 pm
RE: Kevin @ 11 – Maybe you could suggest a few new topics? What would you like discussed more?
I guess we could discuss how people don’t discuss what you want to discuss. That’s something new, but I am not sure how interesting it will remain.
Scotsman » Nov 8, 2009 at 3:07 pm
That’s going to be some tax increase…..
“The difference between promised benefits and expected revenues for Social Security and Medicare amounts to about $107 trillion dollars, which Doug Bandow of the Cato Institute points out is double the annual Gross Domestic Product of the entire world.”
What? That’s BEFORE free health care, free houses, free vacations and retirement at 50? Heh, heh.
Kevin » Nov 8, 2009 at 3:14 pm
RE: softwarengineer @ 12 –
I am a Software Engineer at you-know-who, and I personally found your gang here (AMS, Scotsman, etc) very distracting to all the great information Tim provides.
You guys don’t know how to read graphs, numbers, you don’t contribute to healthy and contructive discussions – all you guys do is to whine and complain about everything: Bush, Obama, Congress, bankers, realtors and how this country will be doomed.
Of course you are absoutely free to post here whatever you like, but I am sure you guys turn a lot of audience away from Tim including myself.
AMS » Nov 8, 2009 at 3:30 pm
RE: Kevin @ 21 – Who’s whining?
What would you like to discuss?
Scotsman » Nov 8, 2009 at 3:37 pm
RE: Kevin @ 21 –
Or maybe you just don’t like the message? I don’t know how old you are, or the breadth of your background, or where you are in the discovery/education process regarding the economy at large. Some of us here have been in the process of analyzing the economy and specifically housing trends for several years. We’ve done the numbers, the politics, the structural issues, and come to an awareness that there doesn’t appear to be a door out, the vaunted “exit strategy.” So yes, the message is a bit predetermined for some. I’d suggest you dive into the discussion, do the work of looking at the numbers and the trends, and help find that exit we all seek.
If you think we’re gloomy, you should track down some of the earlier posters with real economic knowledge, such as Eulea, who have since given up and moved on. I’d still like to be wrong. Help me see how that happens- but come prepared with numbers and reality based analysis. Don’t just shoot the messengers because you don’t like the message. Fair enough?
Kevin » Nov 8, 2009 at 3:44 pm
RE: AMS @ 22 –
- What will the expanded credit do to the winter market? Next June?
- With the credit, what’s the seller / buyers’ sentiments around you? Your co-workers, friends?
- What’s happening in your own neighborhood? Do well-priced units move quickly or slowly now?
- What’s the employment situation in your city (Seattle, Bellevue, Everett, etc)?
- What kind of steals / deals do people you know get?
- What experiences / stories you hear can you share in negotiating with buyer / sellers?
Is any of the gang here actually looking for a place that you can contribute to those discussions? Or Bubble is just a great place to hang out with other haters?
AMS » Nov 8, 2009 at 4:01 pm
RE: Kevin @ 24 – All of those are survey type items. There is no way for me to discuss a survey that has not happened. I have no idea what my neighbor thinks about the tax credit, for example. My co-workers, friends, and so on probably don’t tell me the truth of what they are thinking, and I am not a survey professional. Even if I asked my neighbor, he might not tell me the truth, and I would find it difficult to separate fact from fiction. This sort of work takes a lot of money. I could easily spend $20,000 partially answering any one item. I have been known to subscribe to the work of professionals who do this sort of work, but unless I pay the bill, then I don’t get in on the design of the survey.
wreckingbull » Nov 8, 2009 at 4:27 pm
RE: Kevin @ 24 – Actually while I like Tim’s posts, it is the community here that keeps me coming back. I have learned just as much from people like Eleua, Scotsman, Ira, and S-Crow as I have learned from the data-driven articles Tim compiles. For example, it was Eleua who first pointed out the tricks that WaMu was doing with option ARM capitalized interest. I was so fascinated by this that I had to download their annual report and verify his statements. It blew me away and made me lose all faith in that institution.
Your wish-list sounds more like cocktail-party chit-chat, so I can see why you may be dissatisfied with this blog.
Kevin » Nov 8, 2009 at 4:39 pm
RE: wreckingbull @ 26 –
My list sounds like chit-chat, I guess all the whining, blaming, I-am-a-loser-but-I-blame-everyone-else from some members of your “community” are much more enriching. =)
If you think that you have learned a lot of Scotsman, that’s where our paths become apart.
That goes back to my original question – why are you guys even here if you are not even considering real estate? It is about the “community” of haters isn’t it?
I will definitely drop back for Tim’s graphs in the future as I watch the market, but all the comments from this gang should be filtered out as “noises” for any serious buyers / sellers.
AMS » Nov 8, 2009 at 4:51 pm
RE: Kevin @ 27 – Maybe the posts here reflect what’s happening in the market?
Scotsman » Nov 8, 2009 at 5:03 pm
RE: Kevin @ 27 –
What’s up with all the talk of “haters?” Are there “haters” in most of the economic discussions you read? Sounds to me like you have your housing and economics discussions mixed up with your Huff-Po posts.
Are you looking to buy a house soon? What do you understand about economics, politics, psychology, etc? Did your BS degree prevent you from learning more about the world before you went to work- maybe a BA would have been better in the long run.
How much of your MSFT salary are you willing to give to the government to support the fine work it does?
In 20 years will you too be a “hater?” ;-)
patient » Nov 8, 2009 at 5:05 pm
RE: Kevin @ 27 – Kevin, is that you RAL?
Kevin » Nov 8, 2009 at 5:16 pm
RE: AMS @ 28 –
Dear AMS, you are massively overestimate oursevles if you think 3, 4 posters on a website would constitute “the market”. =)
And I don’t even bother to reply Scotsman because it can go no where except personal attacks now. That’s how low some hater is willing to go unfortunately.
HappyRenter » Nov 8, 2009 at 5:26 pm
RE: wreckingbull @ 26 –
I agree with wreckingbull. And about Kevin’s comment on re-adaptation: I bet that most people who blog here are in their 20s, 30s or early 40s. This people (including me) might not have a hard time to adapt to a new situation and re-train themselves for a new job. But, what about people who are 55 or older and might have to work for another 10 years or maybe even into their 70s or 80s for example to pay their health care bills? What are they going to do? There are no governmentally funded re-training programs like in some European countries and for a 55 year old person who has been a worker through all his/her life it might be difficult to learn how to use a computer or any new technology the recovery might bring us, apart from the fact that this person will compete with younger people (like us bloggers here).
The Washington Post has a very interesting article about the lack of a public spending strategy:
http://www.washingtonpost.com/wp-dyn/content/article/2009/11/06/AR2009110601900.html
What happened to the Civilian Conservation Core?
DrShort » Nov 8, 2009 at 5:28 pm
RE: Kevin @ 27 –
I’ve been on this site for a few years and recently went under contract on a house. Good homes in good neighborhoods are selling quickly. My observations from the Seattle area (600 – 800K homes):
+ Houses with great kitchens sell fast.
+ Fixer uppers aren’t moving very quickly and tend to go through a few big price reductions before selling.
+ I observed several multiple offer situations, but only a couple sold for more than list price.
+ The condo market still has a way down to go. The buildings around downtown I’ve been watching have had no sales in the past year.
+ Redfin is just totally awesome. 1/2 price and twice the service.
+ I went to 75+ open houses. If the home had just come on the market, there’d usually be 2 to 3 other couples viewing the home while I was there.
+ I viewed several expensive short sales previously owner by real estate agents.
+ Staging matters. If you’re selling, it’s worth it. Turn the heat on too. Cold empty houses on a damp Seattle day don’t show well.
+ Some sellers are simply nuts. They seem to think their seriously flawed, outdated homes are worth what the most expensive home in the neighborhood sold for 2 years ago.
+ There’s a lot of creepy basements out there.
+ Nice older homes (pre-1940) seem to sell faster and for more than nice newer houses of similar size/location.
+ Some of the cookie cutter homes in Bellevue I looked at sold around 2004 prices. They sat a long time.
Scotsman » Nov 8, 2009 at 5:35 pm
Great summary of current strategies to continue putting off the inevitable. By converting failing loans to interest only, owners are turned into renters, banks don’t have to book losses, and everyone lives happily ever after- for up to a decade! Party on!
Sorry, Kevin- this will work to keep housing prices up just long enough to sucker a few more buyers into the market, clearing a few more bad loans off the bank’s books, but doing nothing to correct mis-allocated assets or prices. I’d have to suggest you continue waiting, renting, etc.
http://www.doctorhousingbubble.com/
AMS » Nov 8, 2009 at 5:43 pm
RE: Kevin @ 31 – That’s why I’d rather have good, scientific surveys for all the data you are looking for. Chit-chat doesn’t take us too far.
I’ll say this, I was listening to Dave Ramsey. I listen to many financial professionals, but often not too long. I keep track of the theory. Ramsy is a “no debt” person, and I don’t think that’s quite the best way to go, but making poor purchases with debt is obviously bad. No debt = no bad purchases with debt.
Anyway, the owner of this Portland house called in:
RMLS# 9077308
http://www.johnlscott.com/propertylist.aspx?GroupID=208925066
(I identified the home based on all the information in the radio program. This was not given in the radio program, but the caller, Julia, presented far more than was needed to identify the property. She probably did not realize this, but I am not sure. Anyone who knows the power of the Internet, among other things, would know that it does not take too much information to identify specific homes, etc.)
The caller indicated that she was in over her head. She called for a modification, but she was required to be behind in the payments. After getting behind in the payments, seriously behind, she was informed she still did not qualify. Now she is trying to sell the home, at a profit. She owes about $210k. A couple weeks ago the home was listed at a range of $250k to $265k. Today it sets at $250k.
She said the typical, “There are no perfect comps, blah, blah, blah.” The right buyer needs to be found, blah, blah, blah. This one example does not make any market.
That said, I still wonder “What was she thinking when she purchased the home?”
“Will it sell for more than she owes?”
“Why is she asking so much above what she owes when she is so far behind in the mortgage?”
(She did say that she is married, and gave birth to the first child after the home was purchased. She is pregnant with a second child. And the household income went down significantly when she left the workforce to become a stay-at-home mother.)
This is all based on information she gave over a nationally syndicated radio program and public records, with a bit of my own interpretation of such. I have no inside information. I have no private information.
Ramsey suggested to get a “caffeine injected*” real estate agent to sell the home immediately. *I forget exactly what he said about the agent, but the point was clear: Get an agent that can get it sold sooner rather than later.
I have other places that I watch. I have some places that I have tracked for the last 5 years. And a few other places even longer.
HappyRenter » Nov 8, 2009 at 5:47 pm
Maybe Kevin @ 24 is right, so let’s try it out.
We don’t know. We can only speculate and keep reading Tim’s charts. But, the next 6 months will be very interesting.
Sellers hope that they will find more buyers and that prices will go up again. Buyers think that the tax break is not the reason to jump in.
No idea. Everybody rents around here (U-district).
Most people are students, so they count as employed I guess.
I know a bunch of people who would like to sell their house, but they are holding it off the market hoping for better times.
Basically, offer a lower price than what is asked.
Both, a great place to hang out and contribute to discussions :=)
Kevin » Nov 8, 2009 at 6:13 pm
Thanks for the good replies HappyRenter and DrShort and AMS!
I just wish, since this is a real estate not a politics blog, there are more posts about “oh I went to an open house last week and the seller is nuts” or “the house is priced at 2004 and it sold the next day”… than “this country is going to become Brazil” or “the Socialist Obama will screw America into the middle ages”, etc.
Scotsman » Nov 8, 2009 at 6:22 pm
I’ve been spending some time looking for more current data on the number and composition of U.S. households. It seems that over the last 30 years the number of single people living alone has increased, along with the average size of new homes. My theory is that we are well positioned to have an increase in household consolidation where previously single folks move in with other singles, or back into family homes with excess capacity. Such consolidation would support savings and debt reduction by lowering individual living costs. It would also lead to an even larger number of vacant homes and reduced demand for homes/ apts. There are about 18 million vacant homes in the U.S. at this time. While we may have to wait for the current census to get better data, if anyone has run across something please post it.
http://www.census.gov/population/www/pop-profile/hhfam.html
DrShort » Nov 8, 2009 at 6:24 pm
RE: Scotsman @ 34 –
You can find any “professional” to tell you just about anything. Lots of people told me the Dow was going to hit 3000 earlier this year and I should pull out of the market completely. Glad I didn’t listen to them.
And, at a national level anyway, housing prices are pretty close to historical fundemental levels (price:rent and price:income).
HappyRenter » Nov 8, 2009 at 6:34 pm
RE: Kevin @ 37 –
But remember that Tim’s today’s post is about “The current economic path will lead the USA to…”. Economy and politics are coupled, so it is normal that this post turned also into a political discussion. The questions you asked in blog #24 have already been discussed in previous posts and I’m sure they will be discussed in future posts, too. I think it’s good that the discussion here is diversified and that we talk not only about real estate but also anything which influences it.
Kevin » Nov 8, 2009 at 6:37 pm
By DrShort @ 39:
Historically, is price:rent or price:income a better indicator of a market rebound?
I think the price:income ratio is quite reasonable now while the price:rent ratio is still way too high – there is no way you can quickly recoup the investment through renting a house / condo out. I don’t know whether this is just how the Seattle metro market is (more affuent people & families who really don’t like renting.)
AMS » Nov 8, 2009 at 6:44 pm
RE: Kevin @ 37 – I helped my mom pick out some new luggage yesterday. I had no idea that buying a bag could take six hours and several stores. She started asking me questions about the differences in what looked like the same bag in another store. I have no idea why she decided on the bag she did. After some time they all looked the same to me. The thrill was gone after about two stores, but for her, it took far more than that.
But after some time, all the open homes seem the same. Also discussing specific homes is very difficult.
This gets to the Efficient Market Hypothesis that I discuss so much. There is only so much information in the past, but some new, unexpected, event happens, and suddenly there’s discussion.
For example, I don’t know how many people expected the $6,500 existing owner tax credit. I didn’t see it coming. I could have never discussed it, as I didn’t even envision the possibility. After such is passed, the discussion quickly slides into the politics, as those tax credits are very political. I attempt to keep my comments to financial matters, but it’s tough when you have politicians pulling the economic reigns.
I still enjoy the $4,500 discount you, and other tax payers, gave me on my new car. Thank you. I thanked my salesman too. Two years ago I would have said you’re crazy if you would have said the government would sponsor a new car purchase like that. I’d also have suggested you were crazy if you would have suggested I’d be buying a new car.
I don’t hang out in bars, iron or alcohol based. Some people do both. In any event, I wonder what people discuss in the bars. I bet the discussion is similar to what you find here, but we have a real estate thrust instead of listening to who might be servicing his wife during the next month or beer, depending on the type of bar one hangs out in.
What will Congress do next? Who knows. But after a Bill is passed, and signed into law, there’s something new to discuss.
DrShort » Nov 8, 2009 at 6:51 pm
RE: Kevin @ 41 –
I don’t think either is a good indictor of market direction. They’re probably only useful as broad measures of the fundementals that support housing prices. Short term price movements (1 – 3 years) are probably better understood by looking at:
1. Sales volume and inventory for sale (months of supply).
2. Credit conditions, interest rates, availability of loans.
3. “Animal spirits” — Are people optimistic or pessimistic about future housing prices? (this is very important but overlooked).
4. Economic conditions.
5. Population change (more so in more transitory places like Vegas).
6. Change in distressed listings as a percent of the inventory
AMS » Nov 8, 2009 at 6:52 pm
RE: Kevin @ 41 – I don’t know about historically, but
If the price:rent is too high, why would you buy?
Clearly if the price:income is too high, you should look at lower priced places.
That said, I still have not found anyone to suggest how to value all the property in an area, but I think the best way is to look at individual income. As far as I can tell, total property should be valued based on the personal income of the area.
AMS » Nov 8, 2009 at 6:58 pm
RE: DrShort @ 43 – Mass psychology & consumer behavior are two very important aspects, yet each one is so very difficult to predict.
AMS » Nov 8, 2009 at 7:38 pm
RE: Kevin @ 41 – I have no idea what the income level in SF is, but I present this data set:
http://www.housingtracker.net/asking-prices/san-francisco-california
Looking back to 2006, I note the median asking price of homes in the area was in excess of $600,000.
What level of income does a median priced home take to support? Is that near median, considering the minimum wage standards?
A 25th percentile home in that area in 2006 was about $500,000. A half-million dollars for a 25th percentile home? What’s the 25th percentile income in the area? My guess, without looking it up, is that the 25th percentile income in SF is below $50,000, yet a 25th percentile home is $500,000.
At the same time, Detroit area homes had a median price of about $175,000. The median price of SF was about 3.5 times the median Detroit price. The 25th percentile price in the Detroit area was about $120,000, or the same home in SF was about 4 times more.
http://www.housingtracker.net/asking-prices/detroit-michigan
The Seattle area is sandwiched between the two.
The price of fuel does vary from one region and mix to another, but not by multiples of 3 to 4! A $3 gallon of gas in Michigan does not cost $9 to $12 in California or Washington.
Which area has the best value?
David Losh » Nov 8, 2009 at 7:43 pm
RE: Scotsman @ 18 –
This is the Industrial Revolution theory. It has been floated for over forty years now without much success. Then we had the computer tech revolution and that was going to be the game changer.
Unfortunately human beings have to eat, sleep, breath and poop. That’s it. That’s the game.
Unless we start addressing the global population issue stocks, bonds, and government will mean very little.
Now disease can wipe out huge sections of population, along with war. That’s probably why we spend so much on military and so little on health care.
Snigliastic » Nov 8, 2009 at 8:59 pm
RE: David Losh @ 47 –
Tim, can you create a “David Losh” and “Kary Krismer” filter I can use?
The Kid » Nov 8, 2009 at 9:16 pm
Any “recovery” is going to have to involve job creation and widespread wage inflation. Two things that I don’t see happening anytime soon.
In addition, I think that we’re not going to see any “improvement” (price inflation) in the housing market for some time, as of those who would be one of those coveted “first time buyers” position simply do not statisically make enough money to afford these homes at their current prices. A product is overpriced when it is outside the means of your target demographic.
So, if, in order to get the market moving again, we will need new buyers, I’m curious, from the real estate people out there: What do you consider a “typical” age that someone would buy their first home? Then lets pull some income demographics for that age range and see what we come up with.
Kevin » Nov 8, 2009 at 9:19 pm
Thanks again for all the useful replies, I learned a lot just by reading them.
Same as Snigliastic above, I don’t really care for all the population theory, industrial revolution theory, productivity from nanotech theory. Let’s face it – if US’s long-term health is screwed, then all of us, whether you hold cash, stocks, real estate, have no savings, are screwed.
What I find very useful is local information, as it’s well-known that real estate is very localized – houses in one zip code might do very well while another zip code drops 20%.
Just provide some chit-chat information from my friends who went to open houses before I am gone: the market on the Eastside has officially gone crazy. All the open houses they went to, there are two, three other families looking (a big difference from spring and summer). Almost all my “interesting let’s me wait for price drop further” are gone on Redfin.
I am personally thinking to wait for a few months to see whether this is a one-time home buyer credit “high”. Too many competitors to bid at current craziness, the seller becomes visibly more stubborn on price when there are two bidders.
DrShort » Nov 8, 2009 at 9:24 pm
RE: Kevin @ 50 –
I’d wait a couple of months simply because the inventory is stale this time of year. You should keep your eyes open, but don’t offer on anything unless it’s something special. The selection will be much better in Feb – May.
AMS » Nov 8, 2009 at 9:26 pm
RE: Kevin @ 50 – Final comment: If I were going to buy and qualify for the first-time home buyer tax credit, then I’d probably be looking to buy as close to $80,000 as possible, going over a bit as necessary. That would reduce the price down by 10%. A $8k tax credit would not enough to push me into a $350,000 purchase, unless I was going to do it anyway.
The $4,500 off on my MSRP $20,000 automobile made the decision much easier (I drove off the lot for under $10k, net of other factory incentives). I ended up just over 50% off the MSRP. My car is going down in value, but I am still happy with the purchase.
meadows » Nov 8, 2009 at 9:36 pm
I’m a big fan of The Tim’s blog, and try to direct people here in Bellingham to it as a source of fact-based info re real estate in the PNW.
The future of the economy? It’s not in Real Estate. It’s in people, it’s in children, it’s in our collective dreams for a better future where we collaborate on a vision for the next generation.
Real Estate is where we park ourselves temporarily while engaging our dreams.
DrShort » Nov 8, 2009 at 9:49 pm
By meadows @ 53:
For a lot of people, real estate IS the dream. Y’know…the American Dream?Reply – Quote
AMS » Nov 8, 2009 at 9:53 pm
RE: DrShort @ 54 – I’d like to know the root of real estate being the American Dream. Why do American’s dream about owning big homes?
Too often people starve in their “big, beautiful home.” Is that really a home?
David Losh » Nov 8, 2009 at 9:55 pm
RE: Kevin @ 50 –
Here’s the thing, you are correct, there is a lot of doom and gloom on this blog. The people here also talk about Health Care, Republicans, Democrats, Obama bashing, Japan’s deflationary housing market, and monetary theory.
This week end I picked the military and military spending because there is a lot of talk about the federal deficit. Clinton used the peace dividend left over from Reagan. Obama, or any future President could do the same.
So you want to talk about Real Estate, OK, the tax credit has changed the dynamic in the price of housing. Kary made the point some months ago that people will do the darndest things for a rebate, a free offer, a percieved savings.
That’s what’s going on right now. .
I did stop at a couple of open houses today, one will be bid up and the other is having price reductions, both have views of Lake Washington. One is in city the other is in Sheridan Heights. In city I think is $525K and Sheridan is $595K. Sheridan is a better value and the owners are a reasonable couple; the In city is an estate sale. They will both sell.
They will both lose value this year and next. Steve Tyler said 5% today and I say 10%.
So the Real Estate thing is kind of rehashed all the time.
You have brought up a couple of points today that are valid. Price compared to rental income is a big factor for me. The second was the local aspect of Real Estate.
I was around the computer today doing a consult for a property on Vashon. Some properties there have lost 43% of peak value, Green Lake properties have lost very little.
The multiple offer thing is a suckers bet. Wait for interest rates to tick up. That will seperate the buyers from the rubes.
David Losh » Nov 8, 2009 at 10:00 pm
RE: DrShort @ 51 –
I think January and February because of the tax credit extension.
meadows » Nov 8, 2009 at 10:01 pm
My “american dream” is that my two college-age sons will understand themselves and their culture, and that they will will not have to go into excesssive debt to pursue this dream.
I consider my job as their father to be to inform them as to what is reasonable debt, what is excessive debt and how to tell the difference.
Tim’s blog assists this effort.
DrShort » Nov 8, 2009 at 10:03 pm
RE: AMS @ 55 –
I don’t know why, but there is a strong motivation to own that has little to do with financial rationality. Our society values home ownership and it’s a clear signal of “success.” The 35 year old renter is looked down upon and the 25 year old homeowner is admired. Right or wrong, that’s how our society is and people behave accordingly.
It’s a powerful force that shouldn’t be ignored when playing the real estate prediction game.
Gerald » Nov 8, 2009 at 10:10 pm
I’m always fascinated by people who visit someone else’s website or blog and then complain that the host isn’t talking about stuff that interests the visitor. Kind of like being taken out for a free dinner and complaining that the menu didn’t include filet mignon. Weird.
AMS » Nov 8, 2009 at 10:12 pm
RE: meadows @ 58 – “I consider my job as their father to be to inform them as to what is reasonable debt, what is excessive debt and how to tell the difference.”
The underlying purchase is the biggest issue. If a purchase is bad, credit does not make it good, no matter how low the interest rate > 0.
Borrowing at 100% interest to buy a genuine Rembrandt for $10,000 is a great deal.
AMS » Nov 8, 2009 at 10:13 pm
RE: Gerald @ 60 – What’s stranger is that the person writes their own menu–he or she is free to post whatever is on his or her mind. I guess we are supposed to read everyones’ mind and feed their desires accordingly.
“Here, have a Coke!”
Objectivity » Nov 8, 2009 at 10:21 pm
RE: DrShort @ 59 –
“Our society values home ownership and it’s a clear signal of “success.†The 35 year old renter is looked down upon and the 25 year old homeowner is admired. Right or wrong, that’s how our society is and people behave accordingly.”
I think this theory is outdated. My family could easily buy a home, but we been renting very nice homes instead since 2005. At first, people said we were crazy. Now, they are calling us brilliant. There will be more and more strategic foreclosures o (people walking away from their homes that could otherwise afford them) coming. Over the next 5 years, owning will be looked down upon by many.
Good news: with this ‘quasi-recovery’, I estimate we are getting close to real estate capitulation in Seattle. Its not until every one gives up on the ‘bounce’ that we can truly begin a lasting recovery. I think we see a big drop towards the end of this winter, and next year will produce some great buys…from banks.
meadows » Nov 8, 2009 at 10:21 pm
What is important to me is a sense of place. I live here in Bellingham in funky 100 year old house that has been owned by only 3 families over the century. There are chips in the basement floor where Nick Lidstone as a young boy split the wood that fed the boiler for the same pipes that still feed the radiators that warm the house.
We’ve lived here for 16 years and plan on another 30.
When I was a college student in the 70’s I lived in the attic of a house that my paternal great grandfather built in the 1880’s. My maternal grandfather bought the house in 1932 and lived in it till my mother sold it in 1992. My maternal great grandparents lived into their 90’s in an apt. in the back where the barn used to be.
In this history, the value of real estate is meaningless. The sense of family and place is what is important.
Scotsman » Nov 8, 2009 at 10:22 pm
Unemployed people don’t buy houses, or cars, or much of anything else except the basics. They also don’t pay taxes. So when unemployment goes up, businesses and governments suffer, and even more unemployment ensues. Here’s a nice little chart of the number of people who have been unemployed for 27 weeks or more. The unemployment number is often excused as a “lagging indicator.” The total number of unemployed is a bit different, and while it too may lag recovery, at this time it still looks like it’s headed for the moon. As a quick generalization, housing prices and economic health would generally be considered to appear as the inverse of this graph:
http://3.bp.blogspot.com/_pCDyiFUv9XU/SvW3WgwtHyI/AAAAAAAAHBw/qJNY_tm6VNA/s400/Unemploy+27+weeks+or+more.png
wrusssr » Nov 8, 2009 at 11:14 pm
Government’s own data
http://data.bls.gov/PDQ/servlet/SurveyOutputServlet
Real Unemployment Statistics – Third Chart Down
http://www.shadowstats.com/alternate_data
Government, Obama, and luck have nothing to do with where we are and where we’re being steered. And the “. . .stiff upper lip, cheerio, suck-em-up plays nicely if you have a job or some income. But please, don’t tell that to someone unemployed or who’s living in a tent in one of America’s parks. Know what the ratio of job seekers—those that haven’t given up looking—to available jobs is? Try 6 to 1 at last count. The multi-national corporations moved all of America’s manufacturing jobs overseas to take advantage of slave labor and sweat shops. Know why? So they could make the same $20 shirt they were making and selling to us in America for pennies and pocket the difference. The American worker and his or her family? Well, just change your life-style. Toughen up. You can do it. Gimmie a break.
Jonness » Nov 8, 2009 at 11:49 pm
“It’s certainly fun to have a group of similarly angry people condemning everythng, but I don’t know what it will do for your traffic.”
It might prove more effective in improving this site if you send Tim $20 to help with his costs and include a short note on what you most and least appreciate and would like to see posted. If you really want to go all out, you could write a guest article with content you would most like to see here. Submit it to Tim. If it’s well-written, on topic, and includes correct data and analysis, I suspect he would probably publish it on the front blog page. That way, at least for the day, the site will be exactly as you see fit.
But more importantly, it would provide Tim a short break from attempting to figure out how to please everybody all at once and also provide a broader degree of diversity in this site’s featured article content.
what goes up must come down » Nov 9, 2009 at 12:05 am
RE: Kevin @ 37 – Kevin I agree, it seems that if it becomes a political discussion maybe Tim thinks it keeps the traffic higher
Jonness » Nov 9, 2009 at 12:16 am
By Scotsman @ 20:
I believe, in the short-term, stimulus stimulates. If nothing else, it provides an echo-bubble in which everybody starts cheering about how the recession is over. But, in the mid-term, I suspect all the spending creates a drag on the economy that makes it extremely tough to grow out of. I believe we could start to see this drag forming by the middle of next year.
Nobody knows how long this little stock rally will be sustainable, but many claim it will continue until the Fed raises the short-term rates. However, I’m left wondering, will the Fed ever be able to raise the short-term rates?
History has shown echo bubbles occur even during the most severe and lengthy economic downturns. What signal do the bulls have that we are not simply in the midst of a very normal and predictable echo bubble? I mean, what are the key differences between the signals that a) the stock market is leading the rally out, and b) a giant echo bubble is forming and due to collapse?
Scotsman » Nov 9, 2009 at 2:53 am
RE: Jonness @ 68 –
It’s a tough call, isn’t it Jonness? I’m old school, a fundamentals/value type of investor, even though my thesis many years ago was written on market psychology and it’s role in pricing soy bean futures. This may or may not be the end of a bear market rally, but it sure isn’t the bottom. So I’m sitting tight on the sidelines.
Year ago I read that most investors make their money on just a handful of really good calls, and spend the rest of the time watching account balances slowly fade back to zero. The best strategy was to sit and wait for what pretty much everybody knew was a certain deal- say the recent collapse of several of the largest mortgage lending banks. But then one could sit on the sidelines for years waiting for the next move. Nothing is clear to me now, except that the current system is not sustainable.
Here’s a blurb that ties in with your comments:
http://www.bloomberg.com/apps/news?pid=20601087&sid=a9.ZzZW5rvEk&pos=1
truthtold » Nov 9, 2009 at 8:47 am
RE: meadows @ 64 – was a time I sought B’ham data for investment purpose and was left with impression that terrific town lacks solid business school or certain civilian moxy. This impression coincided with observed city corruption and simply a terrible professional integrity standard. Overvalue was and remains a predominant B’ham investment feature. Enjoy the view for sure but know that it’s not advisable to purchase the typical 100 year old B’ham residential structure… and most respectfully, focus on family is not why I read this.
AMS » Nov 9, 2009 at 8:47 am
RE: Scotsman @ 65 – “Unemployed people don’t buy houses, or cars, or much of anything else except the basics.”
Not that long ago unemployed people just kept extracting all that so-called ‘equity’ out of the homes, and there were plenty of lenders forking over the dough.
The Tim » Nov 9, 2009 at 9:43 am
Saw this on Mish this morning. Looks like an interesting read on the subject of where the current economic path leads. The Dollar Meltdown: Book Review
sead97 » Nov 9, 2009 at 3:35 pm
G20 publicly affirms its commitment to worldwide inflation (oh, they said providing stimulus until evidence the recovery is sustained). Stock markets surge, oil surges, dollar falls.
We’ll all have millions in the bank, but strangely it won’t provide quite the standard of living we were used to. But, most Americans will be deceived and will not blame the politicians who spurred inflation, but rather the companies who keep raising prices.
PhinneyDawg » Nov 10, 2009 at 2:14 pm
The thing about inflation…your wage goes up but your mortgage payment doesn’t.
To me, it appears that paying my fixed rate mortgage in 14 years is going to seem like I’m paying nearly nothing because the US dollar is going to be funny-money by then. Or am I way off?
AMS » Nov 10, 2009 at 2:32 pm
RE: PhinneyDawg @ 75 – Generally speaking, inflation erodes the value of debt and increases the value of hard assets. Workers are able to demand/command greater wages in a period of inflation.
(There are all kinds of games here, such as TIPS & I-bonds)
http://www.treasurydirect.gov/indiv/products/prod_tips_glance.htm
http://www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm
We also need to review how the government computes the rate of inflation.
In general high levels of unexpected inflation drastically reduce the value of debt and savings. Those who are living on fixed annuity payments also have reduced purchasing power.
All of that said, there is an inflation premium in the mortgage interest rate. If inflation is higher than the charged premium, the debtor wins.
what goes up must come down » Nov 11, 2009 at 2:33 am
RE: PhinneyDawg @ 75 – that is if you have wages, unemployment that is the key
wreckingbull » Nov 11, 2009 at 4:56 am
RE: PhinneyDawg @ 75 – I am not saying you are way off, but what forces will be putting upward pressure on wages?
B&W Nikes » Nov 12, 2009 at 11:41 am
The undeniable long term trends of fewer jobs for fewer people demanded by fewer sources can not lead to the kind of widespread prosperity that we call growth if we continue to apply our current values, expectations, or standards to the situation. Under the current paradigm we will continue to accept illusions of growth (stock market indexes and gdp) at the expense of acknowledging the reality of a much deeper social burden than has been realized in recent memory. What were the tax rates last time unemployment hit >10%(17%) and we were in a two front war?
RobbielL » Nov 13, 2009 at 4:47 pm
I dont understand the poll… you have np option for a Normal V shaped recovery or Other in the Poll