By The Tim on August 7, 2011
Will the S&P downgrade affect the U.S. housing market?
- Yes, sales & prices will tank. (72%, 127 Votes)
- Yes, but it will be positive. (3%, 6 Votes)
- No, there will be no effect. (25%, 43 Votes)
Total Voters: 176
This poll was active 08.07.2011 through 08.13.2011.
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Posted in Polls | Tagged Polls
Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.
By David Losh @ 100:
Not usually, but I do occasionally see that happen. Also there are a lot fewer seconds now than in the past.
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RE: ARDELL @ 99 –
That’s true, bad news is normally good news for Real Estate.
However, when you look at the charts for interest rate reductions to help the economy they are usually higher than we have today.
Then again, even if mortgage interest rates drop to zero, it won’t stop the decline of Real Estate prices here in Seattle, it might help Phoenix.
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RE: Kary L. Krismer @ 101 –
How do you mean fewer? because people refinanced out the HELOC? That wouldn’t have been wise would it?
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Dow closed down 6 freaking 31! Down 5.52%! The markets “don’t care”???
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By ARDELL @ 95:
That was a very long 12 minutes! ;-) :-D
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The Dow isn’t important. The S&P 500 went down 6.66% today.
Obviously S&P is the anti-christ.
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RE: Kary L. Krismer @ 92 – Maybe he meant ” AAA” country as in minor league farm team, not major league?
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RE: Kary L. Krismer @ 105 –
Tell me about it! 5.55% down…un-freaking-believable! But…the market doesn’t care about the S&P downgrade. This was just a coincidence. :)
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RE: ARDELL @ 108 –
I really don’t thik it is the downgrade, per se- it’s the fact that it caused investors to take a second look at the underlying fundamentals. When they did, they decided maybe things aren’t that great after all. As even Krugman says, there really isn’t any recovery going on, and things in Europe, etc. are continuing to get worse. Worried money moved from equities to treasuries today. More and more will continue to do so over the coming weeks.
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Meanwhile Fannie and Freddie’s fires keep burning tax payer dollars at a high clip. Freddie wants another 1.5b today. I wonder if the time for a long term profitable solution, read higher borrowing costs and stricter lending standards is getting closer. I’m for one is tired of paying for F&F + FHA continuing to encourage risky lending that requires frequent bailouts.
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We had the exact same market volatility back in summer ’08. By fall the economy froze up. I described it as everyone stopping to gape at a freeway accident. Demand dropped off… that’s when the layoffs started pouring like a Seattle rain.
David is right that everyone needs to be liquid to protect themselves. The problem this time is liquid in what? Very flawed fiat currencies, and very flawed fractional reserve banks. That is the crux of why the downgrade is so devastating. To put it in real estate terms — several hundred TRILLION dollars in paper just got appraised down. It’s my house, your house, everybody’s house.
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On the bright site, it wasn’t a bad day shorting the Treasury. ProShares UltraShort S&P500 had a vary good day.
http://www.bing.com/finance/search?q=SDS&go=&qs=n&sk=&sc=8-2&form=DTPFIN
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RE: ARDELL @ 90 – If you’re looking for market reaction specifically to the S&P downgrade, you’re not looking at the DOW, you’re looking at treasury yields.
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RE: MacroInvestor @ 91 – For someone disagreeing with me so testily, it’s a little odd that you seem to be, well, agreeing with me. A government pull back in spending will certainly cause a recession, and that will certainly effect housing. As far as my comments on the long term US budget, I’m simply pointing out that the deficit hysteria of the last month was entirely manufactured. The US may be on an unsustainable path but there certainly isn’t any problem with the debt that requires emergency action in the short term.
As for your claim about government spending being the sole creator of GDP growth for the past 11 years… well, even if I were to accept that at face value, your political analysis would suggest that the conservatives secretly managed the economy based on the Keynesian theories they constantly mock. It strains credulity more than a little.
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RE: Spherical @ 113 –
I had a discussion today with a guy who made a lot of sense. It never occurred to me until he said, “Bush should have raised taxes by 5% to pay for the wars,” problem solved.
After 9/11 I would have paid for a war. I think everybody would have paid for a war. Instead we had an unfunded war, two wars!, and a tax credit, what a crock.
If you want to put blame some place “read my lips, No New Taxes.” Then of course Bush raised taxes as the responsible thing to do, and lost an election. Then Clinton raised taxes and calmed the economy.
Now Obama has blown two chances to raise taxes, and we got down graded for being a bunch of political hacks.
If we talk budget, we talk lower spending, and increased revenue.
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RE: ARDELL @ 108 – HUGE rally today in US treasuries. The ten year ended with a drop in yield to 2.34 from 2.56 on Friday, an 8.6 percent drop in yield and a huge rally in price. The 30 year ended with a drop in yield from 3.88 to 3.66 in one day. Overall yields have dropped a huge percentage while the debt debate raged. Since the ten year is a good indicator of mortgage yields, if the rally lasts much longer we will see mortgage rates below 4.00 shortly. It may help a little to stabilize housing prices since the more house you can afford the higher price you can pay. Now if we can just employ about 4,000,000 more workers……..
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What is causing things to tank is not a rating…it is the sad actuality of having a nation struggle for two months to then allow the crooks to raise the debt ceiling and pilfer even more money from the Treasury.
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By Scotsman @ 98:
And Obama can assure us that despite a BB- credit rating, the U.S. will always remain a AAA country in is eyes. :)
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By Scotsman @ 9:
GDP growth that has occurred since 2007 has been priced into the stock market. Recently, this was readjusted way down. So it seems to me, the market needs to adjust for this lower outlook. When you throw in a collapsing Europe, a credit rating downgrade (meaning future borrowing must take a hit), and some other good stuff like the unemployment rate, I think it has had a cumulative affect on the way investors are feeling. People are literally getting smashed from all sides, 401K’s are vanishing into thin air, and the bullish outlook has all but evaporated amidst the chaos.
Personally, I’m keeping my eye out for a good entry point. Let’s see what Bernanke has to say about all this tomorrow. He’s usually good for a laugh. :)
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By Scotsman @ 98:
and my simplistic sense is to be right!
don’t fight the tape. that’s rule one. seriously.
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By patient @ 10:
Amen!
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We are fortunate to have lived to witness this historic day in the market. It’s a great time to be alive!
In other news, Roubini says there’s a greater than 50% chance of a double-dip recession. Meanwhile, the youth of England are on the warpath. This is truly great stuff. If it gets bad enough, the politicians will have to stop the lying and actually address our problems. Pain is good for you, but only if you have enough of it to force a change.
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By Kary L. Krismer @ 86:
But the buck stops at the CEO (well, the board, really, but they typically aren’t held responsible for much in the end). That’s why CEO’s of large companies are so well paid; they “take on the most risk”. And they set the tone of the corporate culture. And they should know what’s going on, more-so than most actually do. But really they just get paid more and generally walk away with their bank accounts when things go awry. Once they are ensconced, they get the upside and everyone else outside of the executive suite takes on the risk. It’s part of why we are in this mess.
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By Scotsman @ 9:
Perhaps, more specifically, it was an indirect reaction of the downgrade, as the US gov’t is now under even greater pressure to reduce spending or raise revenues, both of which may further stunt growth or possibly help push us back into recession. Perhaps some sellers had previously priced in a more optimistic view on near-term gov’t stimulus, or at least an absence of drastic cuts, given the kick the can status quo was recently reaffirmed.
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By Jonness @ 118:
The U.S. will always remain a quadruple A in the eyes on Obama and Buffet :)
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RE: Jonness @ 122 – Posit: politicians will not act unless the pain is intolerable. Only then will they will be motivated to make the pain tolerable – a point that must lie somewhere between the evidently tolerable pain we have, and the pain you want to see. This is pure genius. And I’m not even taking into consideration your fantasy that pain is the only thing preventing politicians from seeing the cure your way.
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pffft and krugman have been right all along. As long as nations control their cash printing presses, there is no such thing as a truly free market. And gold is as much a fiat as T-bills or real estate. Scotsman and his ilk fail to realize that the ideology of free markets has basically become a guise for global capital to exploit slave labor in the most oppressive and corrupt regimes on earth, whether its Chinese consumer goods or gold from the Congo.
When this country was prosperous, we had marginal tax rates of 70, 80, 90%. Boomers and tea partiers may remember these years (1950-1970) as the ideal America, when the dream was alive for “Americans,” not just the latest rounds of immigrants, and we were a stronger nation with a manufacturing base, government financed innovation, and a society that looked out for interests of working Americans. These folks are too indoctrinated by the cold war to
admit they were lied to by Reaganomics (Reagan, by the way, had the decency to raise taxes and the debt ceiling multiple times during his presidency).
Today’s conservatives seem to delight in the destruction of American power and wealth. They bow to their pinstriped, billionaire overlords in the name of “personal responsibility,” while giving themselves and their children the shaft. It’s class war on behalf of global capital.
As a pragmatist, I know that conservatism has its merits under the right circumstances. I can also recognize that trickle down outlived it’s current usefulness about 15 years ago. With the cowards we elected, and in the vacuum of leadership willing to stand for our country rather than the mythical bond vigilantes (who recent events have shown are non-existent,save some Chinese oligarchs who should be dealing with their own bubble soon enough), there is not much left to do but fire up the presses again. QE3, here we come!
As for my house hunt, I’ll be sitting out a bit longer and holding my cash while this deflationary spiral continues. This unnecessary austerity has my innovative company (with no shortage of the ingenuity and hard work that made America great) on the ropes. I’ll stay flexible and keep my powder dry. Thanks, (Chinese) Tea Party!
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By Pegasus @ 116:
And if they have jobs, with income, and credit ratings that can swing mortgages, then it would prolly work.
Rick
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RE: Jonness @ 122 –
I read an interesting thought the other day. It was suggested that the current war between left and right started in the ’60′s with Vietnam. It was then that the emphasis shifted from what’s good for the country to what “our” side wants. a wound was opened that has never healed. The rise of the welfare state has further complicated the split.
One benefit of the coming crisis might be that all are forced to work together for agreed on and mutually beneficial solutions. We will be pushed to clearly define/redefine priorities and values, as a country, not just as factions within the country. In the end everyone would win, as nothing is more powerful than a boat in the water with all the oars going in the same direction, passing the competition. Sounds good to me- but we’ll see in time.
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RE: YetAnotherTim @ 27 –
My goodness.
I’m fully aware of the shortcomings of capitalism (which are fewer than you might think over the long run) and more importantly the short comings of corporatism and crony capitalism, which is what we currently suffer under. Let’s not confuse the two. I’m sure you’ve bought more than a few pieces of cheap Chinese crap, maybe even some of their nicer goods. As such, kindly remain humble and remember you’re part of the problem, and that it takes more than good intentions to make things whole.
Yes, the stated tax rates have been significantly higher in the past- as high as 70%. But the effective tax rates, what has actually been paid, has been remarkably stable for decades in the high teens. The tax rates are for public consumption and political posturing- the “loop holes” are for those who actually write the checks. The result is taxes paid equal to about 17-20% of GDP over a long period of time when the economy has been balanced and healthy.
As for this:
“Today’s conservatives seem to delight in the destruction of American power and wealth. They bow to their pinstriped, billionaire overlords in the name of “personal responsibility,” while giving themselves and their children the shaft. It’s class war on behalf of global capital.”
It may have sounded good when you wrote it for that liberal proffessor in your “Politics of Oppression” class, but it won’t fly in the real world. It is internally illogical, not much more than a jumble of current phrases and talking points. I could substitute “Obama” for “conservative” and it might be closer to the truth.
Oddly enough- we’re probably on the same side- you just don’t recognize it yet. I’m angry, as I sense you are. But things will get better, and I believe a country designed for the avcerage guy and his dreams and ambitions will once again return to it’s roots, a more equitable mix of responsbility, opportunity, and compassion. We’ll see, eh?
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By Scotsman @ 9:
And remember, the market started down before the downgrade. S&P did not announce the downgrade until after close on Friday, although there were rumors of it beforehand.
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RE: Kary L. Krismer @ 131 – Could have been leaked.
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By David Losh @ 15:
That would probably be a good way to make sure the US never went to war again! ;-)
Wars are often not popular. If you add a tax to pay for them, they would be even less popular. You might as well put Tim Eyman in charge of foreign policy.
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By Sweet Pea @ 23:
I would agree with a large part of that, although again I would note that in the case of AIG the CEO was already gone when the taxes were proposed.
As to what they should know, to some extent it’s impossible. For example, I believe that the CEO of BP hardly even knew that the well the blew in the gulf even existed, and there’s no way he could have known operational details that might have been placing the well at risk. What they could know, however, is overall stats of various types of incidents, and reacted to those stats with attempting to find ways of lowering those incidents.
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RE: Scotsman @ 129 –
Viet Nam was an economic war. We called it a war against communism, then Reagan took care of that.
The expense of crushing communism was never paid for. Bush senior raised taxes, and lost the election.
Clinton raised tax, and had some economic sensibility.
Bush junior started two unfunded wars, then advocated for a tax credit; not smart, now we need to pay for that.
The economy is simple; we need to pay debt. We raise taxes, cut spending, and make innovation a priority. Propping up old financial institutions like oil, banking, or autos, just won’t do it.
We need the advance trade agreements, and global economic cooperation.
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RE: Kary L. Krismer @ 133 –
He was talking about 9/11. I would have paid. I think most Americans would have paid.
I’m particularly bitter because, as it turns out, in hind sight, Bush did nothing in his Presidency. I voted for the guy twice, and he did nothing but sell us down the river in favor of making fortunes for his friends, and family.
I forget who you argue with, but I do think we should investigate the Bush administration and what happened in those eight years.
Do you want to admit Al Quida won? The Western world in in economic shambles. How could we have taken an event like the blowing up of the twin towers and turn that into a victory?
I’d pay today.
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By David Losh @ 136:
So he thinks Iraq was related to 9/11? ;-)
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RE: Kary L. Krismer @ 137 –
It makes no difference, that was the excuse. Like I said, I think the eight years of Bush administration needs to be investigated. He ran up a huge tab while repeating that we remember 9/11, then gave away a tax credit to boot.
During Reagan there was a goal, that we achieved, and Reagan did raise taxes.
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RE: Pegasus @ 116 –
I agree that mortgage rates will fall as the market falls…except…when it doesn’t. There will be a political effort to push interest rates up…going against the grain. Too many feel that the overall economy cannot recover without higher interest rates. Say 6% give or take.
Still…for the near future I see mortgage rates staying in the 4.5% give or take area. But one day there will be a change…based on political forces…not market forces. Change caused by politics is harder to “predict” as it is all about who is going to win.
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By David Losh @ 138:
Yes it does make a difference because you were saying people would vote to raise taxes to pay for war because of 9/11. We spent relatively little on Afghanistan the first five years in, because we relied primarily on others. For there to have been a tax to pay for war it would have been primarily for Iraq, and that was not related to 9/11, so there would be no motivation for people to pay for it.
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FOMC just came out and said essentially they expect the economy to suck for at least another two years so they will be holding interest rates between zero and 1/4%. Inflation is expected to moderate, i.e. deflation/recession ahead.
Gotta love the Fed. What they are really saying is that they’re out of bullets and have no workable options left. Looks like any dreams of QE3 are off the table. I doubt the political class can get any more “stimulus” passed given the expense and apparent failure of past efforts. So here we sit at the beginning of a long, slow drift down toward some as yet unknown bottom.
Question of the day- when will the banks recognize that a rebound in housing prices isn’t going to happen and they need to process and dump the foreclosure backlog?
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RE: Scotsman @ 141 –
I don’t think the banks are thinking they will get better prices by waiting, due to market conditions changing. I think they are just controlling the inventory so as not to create downward pressure on themselves. That’s the same strategy as a builder who sells his homes in “phases” vs all at once.
The Dow today tells us that we are back to bad…bumping along the bottom…which means we will have the normal seasonal decline coupled with lack of good inventory for the foreseeable future (6 months). That does not change my 5% to 10% decline prediction…but likely puts it in line with the average 4th quarter decline…which is often at the lower end of that range.
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RE: David Losh @ 36 –
I agree with you that it was a lost opportunity. Clearly War should be “funded” by sentiment at the time there IS strong “sentiment”. Playing catch up after the fact is near impossible…as we are experiencing.
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RE: Kary L. Krismer @ 140 –
OK, Kary, I agree Iraq was a war to protect our oil interests. The unnessecary shock, and awe of bombing infrastructure was a chance for us to put boots on the ground other than military. The goal was to entrench ourselves into the economy of the country, as well as to occupy it militarily.
It didn’t work.
But as long as Bush was beating the 9/11 drum, he could have, and should have, raised some tax revenue to pay for it.
This isn’t a debate. This was a point of view presented to me by another person. It got me thinking, that would have been a good idea, and I would have paid.
Instead of me sitting in my little government office, that had a sweeping view of the WTO riots, I went back into business. My feeling was that 9/11 was an attack on our country. Our best defense was to show economic superiority.
Everything looked great, and I am a true believer that we will dominate, economically. What I’m disappointed in is that we were lied to repeatedly. We were told we could do the impossible, and come out ahead.
Well, what happened to that? What happened to that global economy, and all boats rising?
You tell me, because I feel like a jack ass for buying into the Republican BS.
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Speaking of the Stock Market…this is floating around the internet. Disclosure: I did not verify the facts contained herein.
“If you had purchased $1,000 of shares in Delta Airlines one year ago,
you would have $49 today! If you bought $1,000 in AIG shares, you’d have $33 and if you purchased $1,000 of shares in Lehman Brothers, you’d now have $0. But, if you purchased $1,000 worth of beer, drank it all, turned in the aluminum cans for recycling, you’d have $214.00, SO, the best current investment plan is to drink heavily & recycle.”
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RE: Scotsman @ 130 –
“But things will get better, and I believe a country designed for the avcerage guy and his dreams and ambitions will once again return to it’s roots, a more equitable mix of responsbility, opportunity, and compassion. We’ll see, eh?”
All right, who are you and what have your done with Scotsman?
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RE: ARDELL @ 145 –
Hey, you’ve been peeking into my portfolio! *hic*
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