Let’s check out the three price tiers for the Seattle area, as measured by Case-Shiller. Remember, Case-Shiller’s “Seattle” data is based on single-family home repeat sales in King, Pierce, and Snohomish counties.
Note that the tiers are determined by sale volume. In other words, 1/3 of all sales fall into each tier. For more details on the tier methodologies, hit the full methodology pdf. Here are the current tier breakpoints:
- Low Tier: < $273,459
- Mid Tier: $273,459 – $404,605
- Hi Tier: > $404,605
The breakpoints for the low tier fell slightly in October, while the high tier breakpoint rose a bit. This is the first time I’ve noticed the two breakpoints moving in opposite directions. It would seem to indicate a wider spread of homes being sold than in recent months.
First up is the straight graph of the index from January 2000 through October 2009.
The low tier rose 0.4% month-to-month, while the middle tier rose 0.4%, and the high tier bumped up 0.2%. Only the high tier regained its September losses. The “rewind” situation held steady again, with low tier sitting about where it was in April 2005 and the middle and the high tiers at May 2005 levels.
Here’s a chart of the year-over-year change in the index from January 2003 through October 2009.
The year-over-year situation improved slightly again in all three tiers, with the high tier again seeing the smallest bump. Here’s where the tiers sit YOY as of October – Low: -13.7%, Med: -10.9%, Hi: -13.0%.
Lastly, here’s a decline-from-peak graph like the one posted yesterday, but looking only at the Seattle tiers.
If interest rates start to rise next year as most people are expecting them to, and the tax credit is truly allowed to expire, it will be interesting to see if this price plateau holds.
(Home Price Indices, Standard & Poor’s, 12.29.2009)
And Once You Go On a Longterm Contract for Real Estate
You’ll hit another plateau, you’ll be making large interest/escrow payments and watch your principle stay about the same for decade(s).
“The breakpoints for the low tier fell slightly in October, while the high tier breakpoint rose a bit. This is the first time I’ve noticed the two breakpoints moving in opposite directions. It would seem to indicate a wider spread of homes being sold than in recent months.”
What has the range of the mid tier done in the past? Has it expanded, contracted or remained the same? Clearly if the 33rd percentile is moving down while the 67th percentile is moving up, the range is larger this time.
For the purposes of range, let’s define it as the 67th percentile value less the 33rd percentile value. In a rising market, the range would be expected to grow, if all homes went up at the same rate, and similarly, in a down market the range would contract if all homes went down at the same rate. Without proof, I am going to guess that the rate the range expends is directly related to how fast the homes change in value, if all homes change at the same rate. (i.e. if all homes go up 10%, then the range between 67th and 33rd also grows by 10%)
Have we looked at the assessed value of homes for the 2010 tax year? I just looked at a house that went from $378,000 for 2009 to $312,000 for 2010. Is there anything we can conclude from these sorts of shifts?
RE: BMI @ 3 – Tax assessments are very inaccurate, but in any case they are based on the prior January valuation. So the 2010 values are supposed to be the value in January 2009.
Also, in Washington state they are relatively revenue neutral. The tax rate is determined after determining the value of all the properties. The amount collected it pre-determined and restricted as to how much it can go up. That isn’t true, however, for local items such as fire districts, which are typically so many cents per thousand.
RE: Kary L. Krismer @ 4 –
To add just a little to this, the total collected is predetermined and restricted to a small increase, but individual’s property can go up a lot in taxes in one year, as long as the total of all properties remains within that small increase.
RE: Ira Sacharoff @ 5 – Yes, it’s relative to the total. If your assessment decreases 10% but the average for the county is a 20% decrease, your taxes should go up. If your assessment increases 10% but the average for the county is an increase of 20%, your taxes should go down.
“Most people” are expecting interest rates to increase next year? Funny, I haven’t met any of these people. I suppose they can’t exactly go down. But with continued job losses or even with a low level of jobs created the risk of inflation will be near 0, as it is now. Without that risk of inflation, the interest rates will stay just where they are. But of course, IANAIB.
An interesting thought just occurred to me:
If somehow housing prices get into a sustained recovery pattern, will we see a SeattleBubble article entitled “We were wrong: Seattle real estate can magically defy market fundamentals” ?
p.s.: not saying I want to see that happen – I’ve always enjoyed reading here AND I agree that affordable housing is a good thing;
RE: alex @ 8 – I have addressed this issue many times. High prices can go on for decades. Low prices can go on for decades too.
Do you want to buy low and hope to sell high? In this case you expect that low prices will not remain for decades.
Do you want to buy high and hope to sell even higher? In this case you expect that there will be a greater fool to sell to.
The gold market has all kinds of good examples of all of this. Remember my friend who sold his gold “at a profit” after 30 years? I call that 30 lost years, even if there was some profit.
“If interest rates start to rise next year as most people are expecting them to… it will be interesting to see if this price plateau holds.”
I’ve been hearing a lot of this talk about rates going up, but I don’t know. After so much government intervention in the real estate sector, it seems that allowing interest rates to go up would be really unwise and politically suicidal. I think that rates will be kept low for the foreseeable future, but that banking/government/housing triumvirate wants people to think that they will instead be going up soon. They want the perhaps mythical fence-sitter demographic to feel a sense of urgency. I predict that there will be a crescendo of talk about a looming interest rate increase, and then in March or April there will be last minute steps taken to keep rates low.
It would make an interesting poll, I think, to see what posters here feel will happen with rates in the first six months of 2010.
The reason that people think rates will go up is the Fed has indicated it will terminate it’s programs supporting the purchase of mortgage backed securities at the end of March.
RE: fabuladocet @ 10 –
What are the indications that interest rates will increase?
I have recently been thinking about whether it is worth to buy now with interest rates low or in a year when prices might be 10% lower but interest rates at around 7%. I used mortgagecalculator.org to calculate that. I calculated what happens if I buy now a 400K house with a 5% interest rate versus if I wait a year and buy the same house for 360K with a 7% rate. In the second case I will have paid more interests when the house is paid off in 30 years, so that it’s actually worth it to buy with the higher price but lower interest rates.
This is all hypothetical because I’m not likely to buy in the next 6 months. However, everybody tells me: “Why don’t you buy now? Interest rates are so low!” How do you respond to that?
RE: fabuladocet @ 10 – I think there is a misunderstanding about the current low interest rate environment, as evidenced by “fabuladocet”. Yes, the Fed has pushed rates lower. But they have done so at great cost. The government does not “control” interest rates, but rather “purchases” lower rates by buying securities. This buying will exceed $1.2 trillion when the program expires next March (as Kary stated). The intervention is unprecedented, and the amount of money spent to do so is unprecedented. In addition, the Fed will need to reverse this pattern and sell those securities back into the market when things stabilize.
The end of the program to push rates lower will cause rates to rise. Selling the securities from the Fed’s books into the market will also push rates up, as the Fed removes liquidity from the economy. Huge borrowings from the Treasury to run the government will push rates up. A recovering economy will push rates up.
Currently, the low interest rate environment is due to the lack of issues exerting upward pressure on rates. That era will be short-lived, and is coming to an end.
Wait – so it looks like the real estate in SEA is already leveling off. So if you buy a house now – in 5 years time you might be able to sell for the same price or slightly more?
Is 2010 a good time to jump in and buy?
By WestSeattleDave @ 13:
There was a story earlier this week about how the Fed was planning on basically selling short term instruments to banks when they had to start worrying about the money supply becoming too great. Ignoring the fact that we’re probably a long way away from that point, and the different time frame of the investment, I would think selling these securities back would accomplish the same purpose. My question would is is 1.2 Trillion not enough?
By Trigger @ 14:
It that is your only basis for jumping in, I’d suggest there are a lot of other investments you could make that would probably make more sense. Something with lower transaction costs and a more liquid market.
Mortgage rates most often moves in tandem with the 10y treasury yield. The yield is determined by the demand for the treasuries. This demand is believed to soften in 2010 mainly since foreign buyers are getting skitty about the current size of the us debt coupled a belived huge increase in new debt issuance in 2010. Gold and stocks have also out performed treasuries lately. Our government has also been a sizeable buyer in 2009 ( $300b ) which has now pretty much ended. There are some reasons to why most think interest rates will rise in 2010 even if the FED keeps the short term rate at zero. And as others mentioned even more important is probably the end of the direct purchase of mortgage backed securities by the gov. Then again perhaps the economy crashes again and treasuries become more popular driving interest rates down, though a new crash can hardly be good for home prices even if rates manage to stay low. It’s not looking good for home prices.
RE: HappyRenter @ 12 –
So are you going to live in this home and never refinance until 2040? Many RE booms/busts will occur in 3 decades.
Maybe someone can correct me but i believe the average homeowner lives in or refinances their home every 7 years so your calculations should reflect this instead of 2% interest savings for 30 years. Also assuming you are a prudent investor, you should have accrued more savings so a higher interest rate isn’t as bad if your outstanding loan is lower.
Even my dog knows that interest rates are going up, the question is when. If you believe in deflation next year, rates should remain low, or even lower. If you believe in inflation, rates will rise substantially. I am in the camp that believes in deflation but “inflation expectations” by investors, not to be confused with real inflation, will put a wrinkle in that. But an emerging market crisis, terrorist attack, and/or weaker than expected economy would keep interest rates low.
RE: patient @ 17 – And then we have the foreclosure issue. What is the status here? How much damage has a 20%+ drop in value and unemployment at 9% done to the local home owners? How many will be able to re-finance their ARMs and how many will be able to handle re-casting i/o loans? I don’t know the answers but I do think it is enough of an issue to put more downward pressure on prices in 2010.
RE: HappyRenter @ 12 – In a sound economy and healthy housing market it would make some sense to look at it mathematically. In the current environment the risk of large price drops outweighs any potential “opportunity” with low interest rates imo. A significant risk to endup underwater on the mortgage is red light for me. When I sell I want to take my downpayment with me, not start again from a zero housing fund or worse having to bring cash to the table to get out.
RE: Kary L. Krismer @ 16 – Kary – but for sb who is looking for a house this could make sense to jump into the market that will not tank. It probably will not sizzle either. But it looks like it will not tank.
I mean say you bought a house in 2006 – now you look like a moron and you lost a bit. Say you bought a 1 mill house – well you lost at least 200K. And you could have partied pretty nicely in Hawaii for 200K. So it is better to go party in Hawaii and now buy a house for 800K.
RE: patient @ 20 – For some reason there are a lot of people who think that IF interest rates go up then suddenly people will just pay more, yet we live in an economy where an extra $20 at the gas pump kills the budget of so many. Where is all this extra money to pay extra interest coming from?
RE: Trigger @ 21 – I like buying into a market that is for sure, without risk, not going to tank.
Now if I could only find such a sure thing.
No matter how much money and credit you create, you can only steal so much demand from the future. Most of this historically unprecedented interventionary wad has gone into new bubbles in equities, financial sector bonuses, and bonds of every imaginable flavor. We also seem to be getting closer to von Mises’ final choice between popping the bubble for good or torching the currency, though I’m amazed it’s taken this long.
By HappyRenter @ 12:
I expect someone has already pointed to the demonstrations that you’re better off with a lower principal and higher rate than with a higher principal and lower rate. So I’ll merely add that we’re sitting on history’s biggest bond bubble. That said, as always, it can go on longer than the bears can remain solvent.
By AMS @ 22:
Nowhere, it’ll just be lied away. Option ARMs will reset to the sky and more people will stop paying and start living rent-free in their homes. The banks in turn will lie that these loans are current while continuing to feed off the never-ending bailouts. Not having to pay rent any more should make taxpayers a little more benign about the perpetual TARP program. The Ministry of Truth will come out with new names for it every month so they can pretend that it’s “going away”.
Like they said in the Soviet Union, “They pretend to pay us and we pretend to work!”
RE: Trigger @ 21 –
I think it’s a little early to suggest that the housing market will not tank.
Yes, absolutely, you’re far better off buying a house now than you were two or three years ago, and yes, I don’t think that we’ll see price percentages decline as much as they have already. But a month or two of stable prices does not mean the market has stabilized. When I see year over year comparisons and see no decline, they I might venture to guess that the bloodletting has stopped. But October 2009 is still 10-13% lower in prices than October 2008.
I’m not saying don’t buy a house. I am a real estate agent, after all, and it’s always a great time to buy:), but…if you’re trying to buy close to the bottom, I don’t see any real evidence to suggest that we’ve reached that point.
Still, not everyone has the same reasons for wanting to own a house. If you plan on occupying your home for 10 years +, you can easily afford the payments( or can pay cash), and you can find a home that can be acquired for well below market value, who am I to suggest that you not buy?
RE: CCG @ 26 – Hello Congress. I’d like to tell you that we, the banks of America, have an excellent portfolio of loans. Under the new accounting rules, which you mandated and require more accountants to audit the books, very few are behind in their payments. We don’t need to foreclose for any reason. We have great businesses! Why I am here before you is to ask a small request. Yes, it’s a small request just like the last small request. WE NEED CASH! You see, if we don’t pay million dollar bonuses, then the total economy will collapse. All those extra accountants want to be paid too. —What do you mean we should have lots of cash given our strong portfolios? That’s not the way the new banking model works. You just don’t understand. All of America is about to collapse! Just ask the latest Treasury Secretary or Fed Chairman. Injection of cash into the banking system is as American as Apple Pie!
As the economy at large continues to tank, housing prices will tank along with it. I think those in the government are finally starting to realize that they’ve kicked this can down the road just about as far as they can afford to. And if they don’t see it now, they will after the elections next fall. This has been a very expensive and only marginally effective delay of the inevitable.
I believe we’ll see the bottom when politicians start talking about the necessity of cutting programs instead of just raising taxes. That will mark the transition to a sustainable economy with growth potential. Until then it will just continue to be a slow decline.
RE: CCG @ 25 –
Thank you Flying Ape, patient and CCG for explaining this to me. I had not thought about the re-financing possibility. I thought fix-rate is fix-rate unless you sell the house. It seems like I still have a lot to learn about RE before I jump in and buy something.
CCG: “I expect someone has already pointed to the demonstrations that you’re better off with a lower principal and higher rate than with a higher principal and lower rate.”
CCG, can you please point me to some of the demonstrations you mention? I’m curious to read more about this. Thanks!
RE: Scotsman @ 29 – I wonder for how long the american people will continue to let Geithner and Bernanke plunder the tax payer to “save” the economy/banks. You can’t just increase your borrowing forever without starting to increase your payments ( interest and paying down the debt ). When this happens ( major tax hikes for sure ) and the light goes on at Joe sixpack’s it will end, probably by removal of senators and a shift in power in Washington if Obama doesn’t wake up very soon and perform some major cleaning of his own.
RE: HappyRenter @ 30 – Simply put, if you hit the lottery, you’d rather pay a lower principal balance.
More complicated, there is no such thing as “zero percent financing (interest).”
RE: patient @ 31 –
I’m encouraged- more and more of the people I talk to are figuring it out, that the banks and the political class are the winners, not the average Joe. Even those who don’t have a great understanding of budgets and economics are starting to see that the current path isn’t sustainable.
I like to explain our current situation by asking people to compare their family finances to those of the government. Assume you make $100K a year, but you spend $300K and you already have $1,000K in debt. On top of that you’ve committed to paying out another $6,000K over the next 30 years. How long could you hold that situation together? Even if you got a raise (doubled taxes) to $200K a year could you work your way out? Remember, even at double the income you still spend $100K more each year than you make. That’s the situation our government is in.
You can see the light go on in their eyes, then the horror of the realization that this will not end well.
RE: Scotsman @ 33 – I hope you are right but I’m afraid it will not hit the masses until it hits their taxes.
Very straightforward article in today’s NY Times describing the potential for a double dip in national home prices:
http://www.nytimes.com/2009/12/30/business/economy/30econ.html?ref=business
RE: Scotsman @ 33 – Yes, and the current investment is poor.
I am not sure that we will agree, but maybe the Interstate Highway System (Eisenhower System) was a good investment. Certainly we, as a society, have realized a great deal of economic value from it. The future value, or net present value, of much of the current government investment is very questionable. So some of that past debt might be the result of good investment, but I suspect a great deal of the current spending has no future value.
Then there is the issue of economic expansion, which you did cover. During the baby boomer period, the economy expanded. I am not sure that it will continue to expand, and even if it does, how many more derivatives does the world need?
RE: softwarengineer @ 1 –
And what about the illegal alines and overpopulation?
RE: Scotsman @ 33 – It’s not even close fair to compare US fiscal policy with family fiscal policy. The US owns the system and is in a position of advantage. A family operates within the system and is not. A typical family cannot, for example:
* Print more dollars – the very same denomination of their debt
* Impose, or achieve by manipulation, rules and regulations on the economic system that they occupy
* Achieve special consideration as the world’s largest customer, and world’s largest “wage earner”
* Operate at a scale that dwarfs almost every other entity (taxpayers, businesses, and most other countries)
* Threaten its creditors with jail, war, or nuclear annihilation
I demand that you stop using these inaccurate and misleading analogies in your effort to spread your religion. Or else I will be justified in deploying troops to your address, and entitled to receive reparations from you, under threat of nuclear action.
RE: Herman @ 38 –
Oh yeah? I bet my hamster can beat the crap out of your hamster. So there! ;-)
RE: Scotsman @ 33 – Scotsman – what are the govt present tax revenues vs debt?
This will help figure out if debt is sustainable in the long term for the govt.
Wow. Look at that:
http://finance.yahoo.com/news/Jobless-claims-fall-apf-2239818806.html?x=0&sec=topStories&pos=main&asset=&ccode=
Layoffs are easing. Fewer people are being laid off. Things are starting to look up. This should have an effect of stabilizing housing prices etc.
By HappyRenter @ 12:
You respond by pointing at a declining market. And during the first 10 years most of your payment goes to interests (and the deductions don’t make up for the losses).
You are assuming the additional 2% in rate equals to only a 10% decrease in price. Plus, as others might have mentioned already, in a declining market while you sit on the sidelines your down payment is hopefully growing in the form of new savings (if this is not happening, you are lucky you did not buy).
RE Trigger @41
Fewer people getting laid off does not mean things are looking up. It means that we’re not looking down as steeply as before. There are millions of people currently out of work in this country right now. In some places like Detroit, the guestimated REAL unemployment rate (including those who are no longer eligible for unemployment benefits and/or have stopped looking) is close to a staggering 50%. Chew on that for a few minutes (this also helps to explain why you can buy a house there for pennies on the dollar).
Things will not change until we get more JOBS, and I’m not talking about short-term stimulus-funded ones either. We need a radical game-changer in our economy, something like Detroit (automotive) in the early 20th century, or aerospace mid-to-late century, or the software industry most recently.
Study what happened in the Great Depression 1.0 very carefully, and then take a look at what is going on now. The parallels are staggering, from the public’s unfounded optimism to the government’s attempt to right the ship no matter the cost (and the entitlement mentality so prevalent today was birthed during this period–before that, nobody EXPECTED the government to take care of them, self-reliance was the norm).
Here’s a timely article by cnn today that discusses the areas we mentioned as downward pressure on housing prices including rising interest rates:
Title: “3 reasons home prices are headed lower”
http://money.cnn.com/2009/12/31/real_estate/home_price_drop/index.htm
RE: Scotsman @ 39 – will this be a clean fight or a street fight?
RE: Trigger @ 41 –
Fewer layoffs is certainly not bad news, but:
1. There are still many more people getting laid off than are being hired,
2. Economists are predicting over 9% unemployment through 2010,
3. There are still a lot of vacant houses out there, and houses now rented that were for sale. Some of them were taken off the market by discouraged sellers, who can’t continue to keep them empty, and some who are renting them out for a loss every month. There also a lot of bank owned homes that are being kept off the market.
4. At least in the Seattle area, home price to household income ratios and home price to rental ratios are still above their historic norms.
Still, it does appear that the rate of home price declines has slowed. Whether that continues, all bets are off.
RE: Trigger @ 40 – No matter how low a person’s (or government’s) debt load, poor investment is still poor. Just because it’s only a small knife wound instead of a slash to the throat only means that the wound is not fatal. Investing in projects that have high economic value is positive. I used the highway example above. Hopefully we can agree that the highway system has brought a good deal of prosperity to America, and thus it was a good investment. Also it would have been essentially impossible for a private venture to put together a similar system because of the time and resources required.
RE: AMS @ 47 – Right. But is it better to have a wound or a slashed throat? So now that the steep spiral down is leveling off. We are still loosing jobs but fewer. Many people got hurt. But the question is whether we can get out of this mess?
In terms of debt things look like a wound and not a slashed throat.
There are parallels between GD I and now but the way we are handling it is different and we have Helicopter Ben on our side if push comes to shove.
Ideally we need a new industry springing up that will create a boom in the economy. I think we might have to wait but it will come.
RE: Trigger @ 48 – Measuring the future value of the investment does depend on the discount rate. Instant fixes are often not a good long-term strategy. Yes, my new car is still very nice, but I am not sure the government’s $4,500 expenditure was a wise investment.
RE: Trigger @ 41 -
So what if you are wrong? Are you are able to cope with “house arrest” (where you cant sell your home with an under water mortgage) . Under house arrest you wont be able to move out if you find a new job. Worst yet you would be forced into bankruptcy if you lose your job.
RE seems eerily similar to US stocks after the tech bubble. 10 Years later and prices still haven’t recovered when everyone expected it to do so. The lost decade in stocks is going to be repeated in RE. RE is an illiquid asset so it takes years for it to drop to its deflated values. Moreover the recent anemic sales volume is making it take longer (Prices cant drop unless people buy homes at the reduced values).
And if you think you can just convert it into a rental property you probably wont be able to take out a new loan and all your rental “income” will probably be eaten away by new taxes and maintenance fees.
I would prefer the freedom of moving anywhere/anytime over the risks of being stuck in an overpriced home.
By AMS @ 36:
This is a fantastic example of the appropriate role of the federal government. The federal government should only do what the private sector naturally cannot. Just as a water utility is a natural monopoly, the federal government should be entirely limited to the ‘natural monopolies’ of interstate transportation infrastructure, national defense (the ’sharp end of the stick’ part of national defense, not the politically correct machinery that currently exists), international diplomacy, agreements and treaties, and other duly apportioned Constitutional responsibilities.
A relevant example is small local government. Citizens in small localities are willing to subsidize good schools, civic ordinances and regulations that intelligently address common problems, filling potholes and maintaining common public areas, providing for necessary fire and police service and reliable and efficient utilities infrastructures.
After all that is taken care of, the role of government should be looked on with a very critical eye with regard to social services and other non-essential functions. Communities can provide the majority of social services without the aid of an organized government. Government should only get involved when there is a very obvious gap due to special, local circumstances. In general, the “one size fits all” of centralized government should be discarded along with the soviet and socialist models of the past.
In short, THIS IS AMERICA. We are exceptional. There is no debate, just look at the more legitimate Nobel prizes (in the fields of science) and which country has dominated.
American is the best. Literally, love it or leave it.
RE: EastBellevueEtherBinge @ 51 –
Agreed. Local government is best, as it is closest to the majority of the problems. The greater the number of bureaucratic layers involved, the more convoluted, inefficient, and expensive the solution. The founders understood this and emphasized power to the states. Somehow we’ve gotten pretty far away from that.
RE: Scotsman @ 52 – Scotsman look at EU for example though. There is lot of power transferred to the little nations over there. And what it does is that Europe as a whole is weak. No army. Cannot agree on many issues like foreign policy. Then the local communities get egoistic so they want sthg at the expense of others etc.
In principle I agree that local govts should function but there needs to be a federal govt overseeing this to make sure that local govts do not create a big mess.
I am also not saying that EU as whole is a total mess. It has grown a lot over the years. From concentration camps to no borders and freedom of labor movement is sthg big and special.
By HappyRenter @ 30:
I was thinking there was a whole post on this at some point. I’ll try to find it.
In short, assuming your payments are the same, a higher interest rate and lower principal means:
Smaller down payment (which means you can invest the savings elsewhere).
Less property tax, since the lower principal is presumably tied to a lower appraised property value.
The chance to refi later on if rates go down again.
The possibility that the property value will rise if rates go down again (though of course it’s only one of many factors).
A bigger chunk of your payment is tax-deductible.
I’m sure I’m forgetting some.
RE: CCG @ 54 – Ultimately a lower purchase price is always desired. Essentially you are suggesting that someone will pay more if the payments are the same. Clearly the ideal case is lower financing costs with lower purchase price. The seller, however, does not care what your interest rate is.
RE: Trigger @ 53 –
I don’t quite agree with this. In a European country a single citizen is taken more seriously and is more likely to influence the political decisions. The US is so big that it is very difficult for a single citizen to influence what the federal government will do. It’s limited to electing the president and congress, but that’s it. It’s almost impossible for normal citizens in the US to stop the president from sending more troops to the Middle East or extending the tax credit for several years. This is because the US lacks referendums and citizen initiated referendums at federal level. The US is a bit like the ancient Roman Empire, where one person (the emperor) made the final decisions. But even at state level it’s not that easy. For example, Seattleites voted against a new stadium and the city still built it; Seattleites voted against the tunnel to replace the Alaskan Viaduct but the city is still going to build it. What happened to the democracy Americans are so proud about?
Within the EU each citizen can influence the decisions its own country will take at European level. Being part of the EU means that you get something to say. Americans are strongly focused on economical success, but what about political sovereignty? What about the ability for a single citizen to be heard? In the long term, this might be more important than the economical success.
It’s true that the EU has been economically weaker than the US. However, college education in Europe is free or almost free, health care is also either free or affordable for everybody. On top of that, most young people are free of debt because education is affordable, you are less encouraged to use credit cards and many young people live with their parents until they graduate (something considered scandalous in America). Being completely debt free at age 25 is also a form of richness and I still have not met a single American who is or was debt free at age 25.
Three factors rule our housing future.
1. Bernanke will have to raise rates, and this will have effects directly on mortgages, but also indirectly through equities and the economy.
2. The baby boom is just now turning 65 (1945), and will continue to retire for 10-20 years. Just by observation, I would bet that a vast majority of the primest real estate is owned by these people. They inherited from their parents who bought it after WWII, and some of them bought it in 70s and 80s when things were still cheap around here. Its well documented that boomers have lousy retirement savings, and with stocks having blown through two bubbles in the last decade, the stocks they do have aren’t looking too great. Their homes are their retirements. Many have not HAD to sell yet, but we’re getting there. This may be the largest effect yet.
3. Another factor in this area is in migration from hell zones like CA, FL, NV, midwest etc. but is it enough to stave off the factors for declines? Also, is our greater quality of life exaggerated?
What’s with the incredibly flat-lined Case Shiller curve for most of 2009? I’m woefully uninformed about real estate, but I don’t think I’ve ever seen any naturally occurring data that had that kind of uniformity in the absence of some external influence. It looks like something’s operating like a clamping function, preventing anything from changing. Seasonal variation is gone, for one thing, and I can’t fathom what’s happening. (I’m comfortable with variation I don’t understand, but lack of variation frightens me.)
RE: Trigger @ 40 –
http://www.usdebtclock.org/
It is very much unsustainable, has been for a long time.
* clock is broken, but the current deficit, or the yearly amount that we overspend is 1.4 trillion dollars. Our total debt is around 12 trillion, comparing that to 2008 GDP of around 14 trillion, even without factoring the tens of trillions of dollars in promises and future expenditures via social security, medicare, and medicaid; it is very apparent that the US is going down a bad road. Check out the Concord Coalition for more info.
RE: HappyRenter @ 56 –
I will tell you what happened to the democracy in the US, it gave people the option to vote and voice their opinion, thats the kicker, they get a voice, it doesn’t mean you will get your way. Too few individuals understand this.
RE: k2000k @ 60 – We have a representative democracy, which basically means we have elect people to make decisions for us. Those decisions might not be the same as what we would make. And quite frankly, I think that’s the way things should be. I really don’t want people voting on monetary policy, unless maybe the election is setup so that we don’t do whatever is the most popular.