Posted by: Timothy Ellis (The Tim)

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.

90 responses to “Even More Delightful NAR Propaganda”

  1. Mel Torme

    … the family actually physically sitting on a fence.” Chain link, white picket, or barb wire? It makes a big difference, believe you me.*

    * NO, I don’t want to click on the link to find out! I’m too busy to be clickin on sh!t, when I’ve got dinner on the stove, a crying baby, halloween candy to finish, and smart-ass comments to make.

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  2. softwarengineer

    If NAR Was Really Empathetic About American Grandkids

    They’d get the federal real estate debt off of them from the last decade, which we already put on their backs.

    Lower prices and less interest deductions is one way to start.

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  3. Scotsman

    I’m sorry, but that ad was dark. Why am I supposed to want a house after seeing that?

    NAR: load gun, point at foot, pull trigger. Repeat.

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  4. Mel Torme

    RE: The Tim @ 3 – Hmmm, I don’t know the name for this type of fence either. It looks like the type you see in horse country (the bluegrass area) in Kentucky, except for those are real wood, but the one in the picture is probably the cheap 16-gauge (or so) extruded aluminum that had to be replaced subsequent to the photo shoot ;-) Well, at least it matches the plastic shutters, papier-mache locust tree*, plastic honeycomb real estate sign, and astro-turf lawn taken from the dumpster outside the recently shut-down putt-putt course and glued to the bedrock with liquid nails. Man, I’m getting cynical – it’s not all your fault, though, Tim.

    * OK, just kidding about the tree. It may be a chestnut (?) and may even be real wood.

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  5. Scotsman

    RE: Mel Torme @ 5

    “and may even be real wood.”

    Whoa! Not very “green” to suggest that. I’m sure no trees were harmed in the making of that set. . .

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  6. Ray Pepper

    “The NAR is here to protect us”….I’m trying to think of what from……..

    ………..Is it losing our home? From non payment? We have the FED for that…and the AG…and Mediators….Housing Counselors…Attorney’s…..and even Howard Bono….

    how many life vests do we need………..

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  7. wreckingbull

    How about protecting me against unreasonable transaction costs?

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  8. David Losh

    RE: The Tim @ 3

    It’s a paddock fence.

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  9. Toad37

    That is one creepy ad. NAR strikes out again.

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  10. Scotsman

    RE: gr8day @ 11

    I’m stunned- do you have many friends? /sarc ;-)

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  11. gr8day

    Scotsman – not sure what your sarc comment meant.

    If lenders had required $$ down, a job, and some savings after closing, the US would be in a better financial situation right now. A lot of the growth of the last 10 years was based on debt, and people living above their means. People were too willing to borrow, and lenders will too willing to lend.

    And children – I truly believe that teaching them personal responsibility financially from a young age is necessary. We give our children allowances – and when they run out of $$$ they cannot have the XXX they want. It is fun to watch them be resourceful.

    I wish I had “lived below my means” when I was younger. Typical of youth – they want stuff….and I fell into that trap more than once. My father always said “live within your means” but I did not always do it. I do now.

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  12. CCG

    gr8day @

    Or better yet, break every one of these rules and let the politicians rob someone else to pay for it so they can buy your vote.

    By gr8day @ 14:

    Scotsman – not sure what your sarc comment meant.

    He’s one of the people who lives by the rules you mentioned, which means he’s a fourth- or fifth-class citizen in modern-day Amerika. Doing what you were raised (properly) to do and being screwed for it can make one sarcastic and cynical.

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  13. Scotsman

    RE: Ira Sacharoff @ 13

    It’s being threatened because junior/grandson is going to be taxed to death to pay for grand pa’s medical and social security, not to mention his own mom’s and dad’s. Then there’s the city/county taxes to cover those under-funded public sector pensions, and the falling wages, etc. It’s gonna be tough to save that 20%. Good thing food stamps will pretty much be available for all by the time he’s out of school. Maybe Michelle Obama will be presidente’ by then and she can buy him a house. . .

    Sorry, I’m a bit ticked off today. ;-)

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  14. Scotsman

    RE: gr8day @ 14

    Sorry- I’m completely on your side, in agreement, etc. Tell ‘em, brother!

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  15. CCG

    By Ira Sacharoff @ 13:

    I think I know! It’s being threatened because there’s talk of actually requiring buyers to have a down payment. Good heavens, there goes the American way of life.

    That or maybe a preemptive strike against eliminating the mortgage interest deduction. Same kind of crap we heard from Wall Street when they extorted the bailout – “we’re strapped with dynamite and we’ll blow up ourselves and everything else unless you appease us.”

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  16. David Losh

    RE: gr8day @ 14

    “If lenders had required $$ down, a job, and some savings after closing, the US would be in a better financial situation right now.”

    Baloney, it would have made no difference what so ever other than more people losing more money.

    Live within your means?

    That’s not American. We are a country of excess, and we exported that way of life. Ask Kary and he’ll tell you debt is what makes the world go around.

    Debt makes your pay roll, finances equipment, generates a financial market place, spurs investment, and managed risk is how you create wealth.

    The American Dream is financial independence.

    The problem is that a very select few got extremely greedy. The more you did things “correctly” in the past ten years the more you lost. If you built a stock portfolio, had savings, bought a house, or “lived within your means,” you have less today, with less of a chance for manipulating your circumstances.

    Massive cash positions are swooping in to take advantage of the “cash is king” economy we have today. They are raising prices, firing people, asking for more tax loop holes, and trying to buy an election. The fact individuals think it’s their fault is really self defeating.

    There are things you can do by playing the system as it lies, because the larger players don’t need to care about you. You’re going to have to take risks, use the courts, hire an attorney, and force your own destiny.

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  17. David Losh

    RE: Scotsman @ 17

    Sorry, I’m a little ticked off today. Somebody called me whitey.

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  18. Scotsman

    RE: David Losh @ 21

    ” These expectations are not about me. Rather, they are rooted, I believe, in a discontent with the status quo that has allowed us to be increasingly defined by our differences.”

    Barack Obama

    And speaking of pessimism:

    http://www.commentarymagazine.com/article/the-case-for-pessimism/

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  19. Peter Witting

    RE: gr8day @ 11 – Why do you hate America so much? ;)

    Preachin’ to the choir, brother!

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  20. Azucar

    By David Losh @ 20:

    RE: gr8day @ 14

    “If lenders had required $$ down, a job, and some savings after closing, the US would be in a better financial situation right now.”

    Baloney, it would have made no difference what so ever other than more people losing more money.

    What caused the bubble to blow up was people were allowed to take loans for more money than they could be expected to be able to pay back. Because the bubble was inflating, the bank didn’t care because they figured they’d be able to repossess an asset that had appreciated in value. The home purchaser didn’t care because they figured that once the ARM or “interest only” adjusted and the payment got too big for them to make, they’d sell at a profit (the more leverage the better! a $1 million place going up 10 percent gives twice as much increased equity than a $500k place going up the same percentage!) and use the profits to either buy a better place or retire into a smaller one.

    But when prices started decreasing, people who had no skin in the game just decided “I can take a credit score hit and just walk away.” That magnified the effect of the bubble bursting and caused it to implode worse than it otherwise would have.

    If someone had bought a $700k house in Greenlake and paid CASH for it, do you think they’d walk away from it when it’s value decreased to $450k? It’s the financing that allowed people to make risky investments, without putting any skin in the game, that caused the bubble’s popping to be so dramatic. Had people been required to put 20% down, and also had real income sources, there would be a lot less people contributing to the glut of people wanting to get rid of their debt by walking away from their home.

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  21. David Losh

    RE: Azucar @ 24

    Oh my Gawd!?

    I’m starting to get the sense of the disconnect here from the reality of the global market place.

    Are you really trying to tell me that a global economic collapse is caused by some one buying a house without a down payment? Or that the value of the house went down because people couldn’t or wouldn’t make the payments?

    What a load of crap, pardon my French.

    Are you really trying to make an argument that if everybody just stayed at their jobs, saved their money, lived frugally, that the corporate interests that gave you the gift of a pay check would all play nice? You’re telling me that all these little bitty inconsequential home buyers, or work a day lackeys could have prevented a set of bean counters from figuring out that by selling debt packages they could create a phantom market place?

    Come on!

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  22. David Losh

    RE: Scotsman @ 22

    “a room filled with representatives of Iran, Sudan, Saudi Arabia, North Korea, Venezuela, and the whole gang of evil,”

    Once you start with that, then finish with what we have learned from Israel, well, you just have to know what the truth really is.

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  23. Ray Pepper

    RE: Ira Sacharoff @ 13

    Ira…you got a bluey!

    One of these days I will get one too!!!!

    I still say the fades to white are my favorites to try and read..

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  24. David Losh

    RE: Ray Pepper @ 27RE: Ira Sacharoff @ 13

    What? How does that get a bluey? Good catch, I’m going to have to pay closer attention.

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  25. Ira Sacharoff

    By David Losh @ 28:

    RE: Ray Pepper @ 27RE: Ira Sacharoff @ 13

    What? How does that get a bluey? Good catch, I’m going to have to pay closer attention.

    Who you callin Bluey, Whitey?

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  26. Ray Pepper

    RE: Azucar @ 24

    nope..Property values in Nevada and Arizona are down **80%** from their highs…20% down would have just made the homeowners think a bit longer if they should walk away….

    911, Greenspan slow to act, Wall Street Opportunity, and like lemmings our Country held hands and JUMPED IN!

    Life is NEVER fair and the playing field is always changing in a Capitalistic Society. If you are unable to adapt then you will spend your life crying and pointing fingers like so many do here at the NAR, Mortgage Reps, Banks, etc…

    If you are able to change your game plan and ADAPT life will NEVER RUN YOU OVER!

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  27. Ray Pepper

    RE: David Losh @ 28

    I never got a bluey…The ones that wear the BADGE OF HONOR though, are ALWAYS the fades to white..I think Michael B, and just a few others got those…I rarely see them…

    I never got one of those either….

    I think I post too many educational videos instead of offering the REAL GOODS! Those I charge for!!

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  28. David Losh

    RE: Ray Pepper @ 30

    Whoa???? Ray?

    Adapt or die. There is no place in the market for those who are waiting. There is always a deal, there is always a choice, there is always a way out.

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  29. David Losh

    RE: Ray Pepper @ 31

    Oh, well, yes, I have gotten the fade to white, I think more than once, hence my nick name, on The Bubble.

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  30. Ira Sacharoff

    RE: Ray Pepper @ 31
    This was my first bluey. And I agree: the ones I’m always attracted to are the fades to white. Like the wreck on the side of the road. You’re not supposed to look, but you can’t help it.

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  31. Ray Pepper

    RE: Ira Sacharoff @ 34

    Its your 1st Bluey!! Holy Crap!…………

    The Wa Law Boys get the blueys…I know its not for their insight though….They obviously gave The Tim either a Wa Law hat, form fitting shirt, or a Wa Law license plate frame..

    I will be finding out which one..I must know..

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  32. Scotsman

    RE: Ira Sacharoff @ 29

    Oh yeah! Ira’s “double tap.” ;-)

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  33. Scotsman

    RE: David Losh @ 33

    Heh. Love ya David!

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  34. Jonness

    You guys are completely missing the point.

    The NAR is lobbying to keep house prices way higher than most people can afford to pay. That way, when the grandpa dies, his home will fetch big money, and the kid will inherit a trust fund containing the entire sales amount.

    The grandpa has 100% of his wealth tied up in that house. He is understandably worried the house will lose most of its value before he dies, and the kid’s trust fund will turn out to be worth next to nothing.

    Normally, it wouldn’t be that big of a deal, but the grandpa pulled out $200K in equity during the bubble peak. The neighbors across the street pulled $320K about the same time, and now they are losing their home. The NAR needs to step in and help good, honest, and hard working families like this.

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  35. Hugh Dominic

    This ad is horrendous on many levels, but on another level it is a delicious puzzle to solve.

    Who is threatened? Grandpa looks across the street at the foreclosure.

    – Are we supposed to be sympathetic to the family that is moving out? I doubt it, because that family is not the focus of the ad.

    – Is Grandpa projecting a future for his grandson where he, someday, will be foreclosed? It doesn’t seem like it. It seems like a stretch to make that connection. Logically the foreclosed house is a better deal for the grandson (he could move in across the street!) and other NAR ads directed at buyers tout today’s great prices.

    – Is Grandpa concerned about losing his own house? Maybe. I say that because (1) he glances nervously around as if his entire neighborhood was sliding in value as a result of the foreclosure, and (2) because his house and its history is positioned as the sympathetic figure.

    But he’s lived there for decades. By now he must have paid it off and would be at no risk of losing ownership. Unless… he leveraged it up, with no income to pay off his cash-out refi other than his fixed pension. But that would be downright irresponsible, and would make this a really dark ad.

    My best guess is that Real-Tohrs are going to protect home ownership by blocking foreclosures in some way. The foreclosure is positioned as the enemy in this ad. Somehow blocking foreclosures will result in his Grandson getting a home, or Grandpa keeping his and handing it down or something.

    But I can’t figure out why. I just can’t figure it out on any basis other than a raw emotional play.

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  36. Hugh Dominic

    RE: Jonness @ 38 – Yeah, maybe. Maybe it’s not a home ownership ad after all. Maybe it’s a home equity ad, targeted at baby boomers.

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  37. Azucar

    By David Losh @ 25:

    RE: Azucar @ 24

    Are you really trying to tell me that a global economic collapse is caused by some one buying a house without a down payment? Or that the value of the house went down because people couldn’t or wouldn’t make the payments?

    What a load of crap, pardon my French.

    Are you really trying to make an argument that if everybody just stayed at their jobs, saved their money, lived frugally, that the corporate interests that gave you the gift of a pay check would all play nice? You’re telling me that all these little bitty inconsequential home buyers, or work a day lackeys could have prevented a set of bean counters from figuring out that by selling debt packages they could create a phantom market place?

    Come on!

    No, what I’m saying is that housing prices would not have inflated to what they did had people not been allowed to take loans beyond their means. How did a $300k become a $600k house over the course of several years? Here’s how:

    1 – Demand for housing increasing and overall general inflation proceeding as normal, so prices rising along with inflation or a little faster maybe
    2 – “Multiple offer madness” and hot housing market… people starting to “get priced out forever because they didn’t BUY NOW!!!”
    3 – Banks see housing climbing quickly and allow looser and looser standards for getting a mortgage. People no longer need to show that they can have enough fiscal discipline to save 20% of the price of a home before the bank puts in their 80%. Heck, it’s not even “fiscal discipline”. They don’t even need to be making the money, let alone saving it, as the documentation requirements proving income are lowered, too.
    4 – Housing market continues up, so people (so they don’t get priced out forever) take advantage of the looser lending standards and pay more for a house than they think it’s worth. That’s ok, though, ’cause in just a year they check Zillow and see how much cash they’re generating just by owning the thing. Hey, lets refinance this puppy and get a boat! Other people buy bigger houses than they normally would have on speculation that it will be a cash generator and because they qualify for a bigger loan than they would have (and don’t need the 20 percent down!)
    5 – People get to the point where they owe as much as their house is worth (but only about 80 percent of what it will be worth after it appreciates 25 percent over the next 3 years, and everyone’s content to play along)
    6 – A disturbance comes along and upsets the notion that the home will be worth more than the mortgage in a couple of years
    7 – Housing prices drop a bit, and suddenly there’s a whole bunch of people (who got the loans discussed in item 4 above) owe a lot more than their house is worth. Suddenly, it seems like a good idea to strategically default.
    8 – People walking away from their homes drives the value of them and the market down, thus furthering the disturbance that started in step 6 above
    9 – More people are affected by step 7. Rinse and repeat steps 6-8.
    10 – After some snowballing, here we are in late 2011.

    However, if everyone had been required to actually have enough income and fiscal discipline to save up 20% of the cost of the home that they want to buy BEFORE anyone else (the banks) put in the other 80%, then people wouldn’t have had the option to bid up homes as the prices were skyrocketing. They would have either continued to rent, or they would have bought cheaper houses. The bubble wouldn’t have inflated as much – it would have only inflated to the point where people’s salaries and savings habits could support the requirements to qualify for the mortgages.

    Also, step 7 (and the self-accelerating process of deflating the bubble) would have been slowed considerably, because a much larger drop would have been necessary before people got to the point where they “profited” by giving up the house and not paying the mortgage.

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  38. David Losh

    RE: Azucar @ 41

    How about threat of inflation?

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  39. Ray Pepper

    RE: Jonness @ 38

    Ok…Watched the video again..The kid at the beginning gets lofted out of his mothers arm and dumped toward his Grand pa. ” I love living here” indicates his mother either LOST the home across the street or somewhere because of doing Meth or smoking too much medical marijuana, is now a single mother, or mom is moving in with son into her childhood home because father spends his days at Occupy Movements instead of working.

    “I’m gonna have a house like this when I grow up” indicates the Mother said something like this to her son ” now look Charlie, you have to go live with Oma and Opa for a long time but when they die, which won’t be too long, you will get that home and everything it. But, for now Mom has to find herself so be good to your Grand Parents and they will be good to you ($). ”

    Just my perspective..

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  40. David Losh

    RE: Azucar @ 41

    I guess you, along with the Bubble commenters, don’t get the secondary securities market as a reason for housing prices to collapse, nor do you see that people did pay too much even though there was more than enough evidence not to.

    The same is going on today, people are paying way too much for crap housing without any regard for future value. I don’t just mean housing prices, I also mean rents.

    What this ad is saying, and what should now be common knowledge is that Real Estate has become a black hole, and money pit, for millions of people, globally. The news we get here is nothing, absolutely nothing, compared to what is happening in Europe, or China.

    But hey, forget about that, let’s forget that a growing global economy was the reason the price of property could inflate. Let’s forget that trillions, tens of trillions, of dollars were being converted from derivatives into dollars to be hoarded so when the economy was systematically gutted that cash could buy back all of those properties for pennies on those dollars.

    Hey, let’s call it a conspiracy, even though we get daily evidence that it was all just business, nothing personal.

    I’m sorry, but 20% down or proof of ability has absolutely nothing to do with what happened to housing priices. Personal greed had nothing to do with property. Real Estate, building an Estate, is a financial decision. A promise to pay is a part of that decision.

    In this ad grand pa built an Estate. The cornerstone was the family home which had become the largest asset the family will inherit. It’s tangible, looks to have value, and will give a leg up to the next generation. That corner stone, looks to be paid off, so I don’t see the 20% argument. That corner stone is losing equity by the minute.

    Through no fault of grand pa, what he built has been taken away so a very few old, rich, white guys can buy another bottle of booze over at the club where they used to play golf.

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  41. Kary L. Krismer

    By Ray Pepper @ 30:

    nope..Property values in Nevada and Arizona are down **80%** from their highs…20% down would have just made the homeowners think a bit longer if they should walk away….

    I’ve not been to LV for years, but even so I questioned projects like Trump’s wondering where the demand was going to come from. Phoenix was slightly different, however. There the buildable ground was almost infinite surrounding the city. And they were actually building on it like mad. People apparently forgot that price is determined by supply and demand.

    http://www.jparsons.net/housingbubble/phoenix.html

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  42. Kary L. Krismer

    By David Losh @ 20:

    Ask Kary and he’ll tell you debt is what makes the world go around.

    It is if you’re talking about taking on debt for investment purposes. Debt is risk and with risk comes reward. Many of the wealthiest people in the country have at times (or at all times) taken on what many might consider staggering amounts of debt. That’s because they have some use for the money that they expect will pay far more than the interest which accrues.

    Now if you’re going to take on debt to buy drinks on Friday night, clothes or even a car, that’s an entirely different matter.

    Debt on houses could fall into either camp.

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  43. gr8day

    RE: David Losh @ 20, 25
    RE: Azucar @ 24, 41

    David you stated: “Are you really trying to tell me that a global economic collapse is caused by some one buying a house without a down payment? Or that the value of the house went down because people couldn’t or wouldn’t make the payments?
    What a load of crap, pardon my French.
    I’m sorry, but 20% down or proof of ability has absolutely nothing to do with what happened to housing prices. Personal greed had nothing to do with property.”

    David – I have to agree with the postings of Acuzar.
    The basic law of supply and demand tells us that more people bidding will usually make prices go up. Prices were bid up by people who should not have been bidding. For results see Azucar’s postings at 24 and 41. The houses in Nevada that have gone down 80% would have never gone up 80% if people without the 20% down payment were not bidding.

    The housing issue did not CAUSE the entire global financial meltdown…..but it was a major contributing factor.

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  44. Kary L. Krismer

    RE: gr8day @ 47 – Just out of curiosity, when do you think the 20% down “requirement” went away?

    Seriously, car have had catalytic converters and electronic fuel injection for less time than people have been allowed to buy with less than 20% down.

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  45. Scotsman

    Guys, the decline started long before the advent of liar’s loans and zero down. The housing bubble was more a symptom than a cause when looking at the global macro picture. This quote from “Haybaler” over on the economics thread sums it up nicely:

    ““If consumers don’t earn, they can’t spend, and aggregate demand goes down. Substituting easy credit for better wages is not a recipe for economic growth. A nation can (should) only consume in proportion to what it produces. Borrowing money to import the fruits of other countries’ labour is not economic growth. Neither is selling off capital assets to be able to import consumables”-Harry

    In short, we traded our productive capacity for low prices and debt, letting China, India, etc. do the real work in many of what had been decent paying industries. Increasing debt, fueled by 30 years of falling interest rates filled the gap until it became clear that our incomes were falling and rates couldn’t go low enough to make up the difference. Now we’re broke, if only in comparison to the past, and have given away many of the resources we need to rebuild. Gonna be a long road back, requiring a completely different mindset, political will, and a lot of delayed gratification. Good luck with that, eh?

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  46. Ray pepper

    Even today people are not putting 20 percent down. Heck not even 5 percent on my last few sales here and in NV. The only real money I see put down is the earnest money of usually 500 or 1000 on these sub 150k homes. Same old credit at closing for buyers closing costs makes home owners 2011 forward still walk into homes with no skin in the game..

    The 20 percent down savior theory is meaningless.

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  47. Conor MacEvilly

    Cringe worthy and embarrassing! At least you don’t have to pay $500 a year to be a forced to be a NAR member…my brokerage requires that I be a member (but I like my brokerage). Personally, the only benefit I can see is that I can use “Realtor” as a keyword in my website content. Bargain!

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  48. Kary L. Krismer

    RE: Scotsman @ 49 – I wonder how much of the blame you could lay at the feet of the big three auto makers. When Japanese cars first started coming over here people had little interest in them. Then the quality of American cars went downhill, or at least the Japanese improved. Prior to then foreign goods were viewed as cheap, as in low quality.

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  49. gr8day

    Kary-

    The 20% statement is inclusive – 20% down/job/proven record of ability to pay back/etc.

    During the bubble-The risk of the bank seemed higher than the possible reward. In my opinion, without the 20%/job/ability loans are a high risk. And then when the loan was sold on the stock market with AAA ratings…they were high risk investments but not sold as high risk.

    I still remember the 32 year old woman I met who was closing on a $450k house – she had declared bankruptcy TWICE and was still allowed to borrow the entire $450. IMO, that is high risk, but I doubt that her loan, when sold, was labeled high risk.

    I totally agree with your post on #46. Debt for long term items (bridges, roads, education) is one thing. Debt for items that are already consumed (drinks on Friday night, clothes) is another.

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  50. HappyRenter

    Americans are emotional. This type of ads is trying to exploit the emotional side of America. If you take it apart rationally, like Tim did, this ad does not make any sense. But the emotional trick is played over and over again, in particular in politics.

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  51. AndreL

    RE: Ray Pepper @ 30
    20% down would have eliminated those buyers than shouldn’t have bought in the first place, which created an increase in demand that pushed the prices up. You have it upside down, without lax lending, the prices wouldn’t have jumped.
    What triggered the bubble is a strong increase in demand by bringing into the market new buyers that shouldn’t have been allowed to buy. You and David Losh focus on the consequences instead of the cause.

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  52. Fabula Docet

    I for one applaud NAMBLA for standing up for the only group more universally reviled than themselves – realtors.

    Interesting to note that near the end this ad there’s a rare cameo by Thomas and Florence from The Jeffersons – walking their culturally progressive dog.

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  53. Scotsman

    RE: Kary L. Krismer @ 52

    One of many turning points to be sure. Steel production went offshore at about the same time, followed by textiles, then high tech. I’m astounded that we don’t even make enough of the critical components found in a common cumputer to assemble one here in the U.S. from domestic parts. We literally can’t make a current model computer without foreign cooperation and supplies. Are we more vulnerable than we think? Oh yes.

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  54. gr8day

    Scotsman @ 49 – I totally agree. The past X years (decades), the increase in spending was due to easy borrowing and access to credit, not to actual increase in production/increase in wages. (Another increase in household income is wives bringing in a second income starting in the 60’s) People could spend more if they borrowed the equity in their home, used credit cards, and paid over time.
    I remember a time when my parents could not use a credit card at restaurants – they did not accept them. Now, credit cards are easier to get, and it is easy to charge…easy to be in debt…I know, I have done it.

    I also believe that the Govt pushed housing growth as it was a product that was manufactured in the USA, and could not be outsourced to another country. As long as they (via fannie/freddie) allowed easy borrowing, housing manufacturing would keep growing. Many jobs had gone overseas (due in part to govt policy), and this was a way to keep jobs here…but when it started to tumble, too many jobs were in house manufacturing. Another contributing factor IMO.

    I agree – It will be a long haul.

    Which is why house prices need to be LOWER – not higher. Then a family has cash to spend on other things. It seems like Obama wants to keep prices higher so people “feel” like spending. Why don’t we have prices LOWER so people “feel” like spending because they have cash?

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  55. WillyNilly

    RE: Ray pepper @ 50

    Yeah Ray,

    What about the agent that showed the house we bought – she lost 8 houses. What about my previous landlord who works in customer service at a local airline manufacture but had 6 houses. What about a business associate who had like 28 properties (all accumulated in the peak bubble years) What about my sibling who is stuck with two houses and will lose them both? I have a very small social circle but I can come up with many examples (over 100) of people who put little down on 500k+ transactions; NONE of them can even do basic math! If you don’t have any skin in the game and cannot even do basic math, who cares what the price tag is. If you have an inflated pool of speculative buyers prices will go nuts – and did. Although it is a combination of several factors, they all worked off each other to create the result and conditions we now have.

    Ask yourself this anecdotal question – In that past 10 years what percentage of the population was linked to “owning” more than one property at a time? Historically, what has that percentage been? 20% matters, it may not be the end all be all savior. Try enforcing the 20% requirement across the marketplace and see what happens -even at today’s rates. FYI, we put down over 20%, and will pay off our loan in full for the agreed purchase price – honoring our contract. We are not gamers, scammers, flippers, shysters, grifters, etc. but there seems to be plenty out there f*(king up the system.

    Thank you to everyone who still has some personal integrity.

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  56. gr8day

    Kary @ 52-

    RE-Big three automakers. Bailing them out baffled me. They had been making a product that was declining in interest to the American people for DECADES. They did not look at what we wanted to buy, only considered what they wanted to produce. Then they continue to make bad decision after bad decision and then we (the taxpayer) have to bail them out. Part of the bail out was taxing me, to give another guy $4,000 to buy a new car.

    And then the big three CEO’s feel they are “entitled” to big bonuses. I truly cannot support that type of entitlement program.

    This is off-topic so I will stop here.

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  57. Jill Schlicke

    Here’s NAR’s website with more info on the “public advocacy campaign.”

    http://www.realtor.org/pac.nsf/pages/pachome

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  58. MacroInvestor

    RE: Scotsman @ 49, Kary @ 46

    Don’t confuse outsourcing with debt. Using debt reduces the amount you can spend over your lifetime. All it does is allow you to spend that lifetime of earnings RIGHT NOW. Buy that $600k house now, and all that interest over 30 years is money you will earn and never get to spend on other things. Kary is right. You usually shouldn’t use debt unless it’s for an investment return that’s far greater.

    Outsourcing is different. Moving that steel mill to India costs jobs, but the lower prices gives everyone else more buying power. That savings flows down to every other business.

    We’ve certainly been injured by both. But debt is what causes the mad cycles of boom and bust.

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  59. Scotsman

    RE: MacroInvestor @ 62

    “lower prices gives everyone else more buying power.”

    Sort of. Don’t forget the high paying job left with the outsourced mill, and the replacement service sector job doesn’t pay nearly as well. Thankfully (snark!) debt is available and rates are falling, so it all seems about the same. . . for a while.

    You’re right about interest getting you nothing. A big thing for me was to teach my kids the true cost of financed purchases, and how- as you say- we have finite lifetime earnings to spend.

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  60. softwarengineer

    RE: Scotsman @ 63

    “Don’t Cut My Social Security, Cut Someone Elses Federally Funded Income”

    Cries the Tea Party activists when all the outsourcing destroys the 60% funded federal government budget FAR worse.

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  61. MacroInvestor

    By softwarengineer @ 64:

    RE: Scotsman @ 63

    “Don’t Cut My Social Security, Cut Someone Elses Federally Funded Income”

    Cries the Tea Party activists when all the outsourcing destroys the 60% funded federal government budget FAR worse.

    That actually seems sort of fair. Workers paid for their SS. For unemployment, you can’t collect unless you’ve paid in far more.

    Most of the other social programs give people the incentive not to work. I believe only the truly (verified) disabled should get anything free. Otherwise we are all being forced to support our own families and able bodied adults who choose to be picky about what work they’ll accept.

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  62. Azucar

    Oops…

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  63. Azucar

    RE: David Losh @ 44

    “I guess you, along with the Bubble commenters, don’t get the secondary securities market as a reason for housing prices to collapse, nor do you see that people did pay too much even though there was more than enough evidence not to.”

    The secondary securities market is what facilitated step 3 (Banks see housing climbing quickly and allow looser and looser standards for getting a mortgage.) and step 5 (People get to the point where they owe as much as their house is worth (but only about 80 percent of what it will be worth after it appreciates 25 percent over the next 3 years, and everyone’s content to play along)). The bank played along… and might have even considered encouraging higher estimates and higher loan amounts, fueling the bubble even more… because they could sell the loans on the secondary market.

    “The same is going on today, people are paying way too much for crap housing without any regard for future value. I don’t just mean housing prices, I also mean rents.”

    I don’t agree with the “rents” part of that. People need a place to live, and the rent is what it is. Maybe it’s too high, but there is not a choice. They did have a choice to not buy, and the cost of buying during the bubble shot up a lot more than the cost of renting…. so the wise option was to rent, not buy (renting also doesn’t tie you to the bubble price for the term of the mortgage… just the term of the lease… so when the bubble deflates there’s no lasting effect.
    .
    “I’m sorry, but 20% down or proof of ability has absolutely nothing to do with what happened to housing priices. Personal greed had nothing to do with property. Real Estate, building an Estate, is a financial decision. A promise to pay is a part of that decision. ”

    It (and the “liars loans) has EVERYTHING to do with why the bubble inflated. If everyone wouldn’t have had such easy access to capital, they wouldn’t have been able to spend it on houses. Thus the prices wouldn’t have gone up as much. There were also a lot of people whose personal greed… or I wouldn’t even call it that – let’s say their “investment strategy” – caused them to decide it was a good idea to get into the landlord/slumlord business by buying a bunch of houses and renting them out… letting the renters make the mortgage payments for a while before the house appreciated enough to sell the place and take the “earnings” and us it for other stuff. Had they been required to actually qualify for strict loan standards (i.e. show sufficient income to pay the mortgage, show that they could afford to save up a reasonable down payment, etc.), they wouldn’t have been able to be out there bidding on houses and inflating the bubble further.

    “In this ad grand pa built an Estate. The cornerstone was the family home which had become the largest asset the family will inherit. It’s tangible, looks to have value, and will give a leg up to the next generation. That corner stone, looks to be paid off, so I don’t see the 20% argument. That corner stone is losing equity by the minute.

    Through no fault of grand pa, what he built has been taken away so a very few old, rich, white guys can buy another bottle of booze over at the club where they used to play golf.”

    Actually, if Grandpa bought the place “a long time ago” like he states, then the only thing that’s being taken away from him… the only equity that he is losing… is false equity that he only thought he had because of the illusion of the bubble (and made more real seeming by his ability to check his “Zestimate”). Grandpa is worse off than he thought he was when his house was worth (no, make that when his Zestimate was) a lot more, but really he’s better off if housing is becoming more affordable and his daughter might be able to buy a place for herself instead of moving in to his place with her kids.

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  64. David Losh

    RE: Azucar @ 66

    Wow! it must be great to live in a dream world. I used to know a family who every Thanksgiving they got a copy of the National Enquirer and believed everything in it, for that day.

    That’s what you have going. You’re trying to convince me to believe a fairy tale, and throw grand pa under the bus.

    I’m a commenter on a blog here. Tim chose to put Global Economics in a box in the corner, but over the course of time you should be able to get a sense that larger forces are at play than somebody, or anybody, taking out a mortgage.

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  65. Azucar

    RE: David Losh @ 68RE: David Losh @ 68

    What do you mean by “and throw grand pa under the bus. ”

    How is Grandpa negatively affected? He bought a house for $80k back in 1985, he finished paying it off in 2005, he thought it was worth $700k in 2007, now he thinks it’s worth $475k.

    It seems like you’re saying that the housing market shooting up had nothing to do with the fact that people were allowed to borrow the money that was required in order to make the offers that allowed the housing market to shoot up. Had the loan requirements not been loosened (I agree that that was because of the secondary market and “other economic forces”), people wouldn’t have qualified for the loans that allowed the bubble to inflate to where it did.

    In the end, the people who looked at their finances and income, looked at the market, looked at what the bank was willing to do, and then signed their name on the bottom of a mortgage that they would only afford to be able to pay if they only ate Ramen for the next 15 years are what lead us to where we are. Take away the “bank willing to loan the money to someone who will only be able to pay it back if they only eat Ramen” part, and where does the money come from when it’s time to close the sale? Now take away all 10 of the people who made those $500-$600k offers (but now don’t qualify for the loan because you actually have to have income to get one) for the $450k house, and it sells to the eleventh highest bidder… who offered $475k. Voila! No bubble!!! (Or at least a bubble only as big as the incomes in the area can support.)

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  66. David Losh

    RE: Azucar @ 69

    Sorry, my response was rushed, I had to get to the bank to make my deposits.

    I’ve been in the Real Estate business my entire life. It just happened that several of my relatives are also in the business of Real Estate. Real Estate is a business.

    My market system has been to buy at the beginning of the decade, and sell at the end. Around the turn of decades there has always been some bottom, and tops to the Real Estate market.

    My specialty is don’t wanter properties. Some are distressed, most were not bank financable.

    In 2002, going into 2003, there was an increase in activity. This is after the crash of 2000, and 2001, it’s after the Microsoft monopoly ruling, and 9/11. All of a sudden the Real Estate market starts heating up. We sold all of my crap, and bought the biggest house we could, and took every penney out of it.

    I had crap properties. One with no foundation, a stucco, one that was rat infested, and one in Greenwood built on the peet bog. The house we bought has a wetland, but hey, in the world of refinance, you don’t have to worry about buyer objections.

    Cruxify me! I collapsed the Global Real Estate market!!!! I have no money, no credit, no savings, no nothing, and I bought and sold, except for this one, four properties.

    Villify me!!! OMG!

    I still have a slight equity position, but that won’t last.

    I’m not the only guy out there who worked the system, that’s for sure. The hand writing was on the wall for all to see. Even Tim, an electrical engineer, started a blog about it.

    I’m a nobody. I’m self educated, didn’t do to well in school, but made some money in this here Real Estate thing.

    What do you think the major players are doing? What do you think is going on today?

    The reason no one wanted a down payment is that they would then be on the hook for a class action suit. No monetary damages, no grounds for a law suit. If the banks did rob people of a 20% down payment there would be a line of lawyers at the door. There again I keep expecting that, but lawyers are now in the Real Estate business doin’ “deals,” and short sales.

    You could have done everything right, but it comes down to the banking industry was deregulated. Money can now move anywhere globally, so we have no loyalty. If I can make a few billion by moving my company, if I pay less taxes in Ireland, if having my money in a savings account in Peru will pay me 14%, well, why not.

    OK, Grand Pa paid $85K in 1985. Real Estate appreciates at about 4% per year. He paid a mortgage which cost him about $170K real dollars. Today the house is worth $425K, OK $500K. What happens when the price of the property drops down to $350K?

    Gran Pa has less equity. Grand Pa has less of an estate.

    Now what about the people who bought in 1995? How about 2005? How about the billion people who made investments based on the booming global economy?

    Do you get it? Even if you lived within your means, did everything right, you lose.

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  67. Azucar

    RE: David Losh @ 70

    I guess I don’t know what point you’re trying to make with this bit:

    “OK, Grand Pa paid $85K in 1985. Real Estate appreciates at about 4% per year. He paid a mortgage which cost him about $170K real dollars. Today the house is worth $425K, OK $500K. What happens when the price of the property drops down to $350K?

    Gran Pa has less equity. Grand Pa has less of an estate.”

    So what? If Gran Pa bought a house that he could afford to pay the mortgage on, Gran Pa has a house (which is what he agreed to buy). And when it “drops” to $350k, say in 2012, that means it’s still appreciated over 400% since he bought it 27 years ago. That’s over 5% per year appreciation, plus he got to sleep in it. Not a bad deal if you ask me (or Gran Pa, as it seems like he’s sad that the li’l tike might not be able to do the same thing he did.

    “Now what about the people who bought in 1995? How about 2005? How about the billion people who made investments based on the booming global economy?”

    The people who bought (or rented) within their means still have a place to live (other than those who lost their jobs due to either sickness, the economy, or some other factor… but I don’t think we’re talking about them here). Some of them may owe more than the current “Zestimate” of their home, but they owe what they agreed to owe when they signed the mortgage (or lease). If the market gets to the point where they feel like they’re better off walking away from the place (strategically defaulting) and buying or renting something else, then I guess they can do that if they decide it’s the right move for them. But no one forced them to “invest” in home ownership. They made that decision, and the current consequences are what that decision lead to. But if they bought within their means, they still have a house and the payment terms are what they agreed to when they bought it.

    “Do you get it? Even if you lived within your means, did everything right, you lose. ”

    Lose what? People who lived within their means still have the place to live (other than the ones that we’re not discussing here – the ones who lost their jobs because of the economy). They no longer have an ATM that they can pull cash out of, but they have what they agreed to buy. How is that “losing”?

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  68. David Losh

    RE: Azucar @ 71

    Well, I can’t argue with logic like that.

    In your mind, you want to live a life of quiet deperation. Get your pay check, pay your rent, save for retirement, then die without being a burden to any one.

    You lose.

    Your land lord wins, the guy cutting your welfare, I mean pay check, wins, the government wins, the local store wins, oh yeah that was replaced with a Wal Mart, your bank wins, your E*Trade account wins. Let’s see what else, because you don’t have much to provide to any one other than you.

    In your 5% return on a place to live, did you calculate taxes, and the cost to maintain?

    Grand pa loses, the kid loses, the economy loses, all so the people you worship can get a few more dollars out of the system.

    Grand pa is one of a billion people who were swept away by a booming global market place that was all contrived of debt market scams. Your E*Trade account is loaded with them.

    It’s not just zestimates, it’s all the phoney baloney contrived propaganda that gets you to buy into some sense of security. Once you think you have it together the game changes and you lose. Billions of people lost trillions of dollars.

    Why are you so focussed on one little teeny tiny part of the over all scam? It’s just a place to live, according to you.

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  69. Azucar

    RE: David Losh @ 72

    “In your mind, you want to live a life of quiet deperation. Get your pay check, pay your rent, save for retirement, then die without being a burden to any one. ”

    I don’t think it’s a life of quiet desperation to work at a job, pay rent, go on a couple of vacations a year, save some money for retirement in an IRA and/or 401K and/or investment account, save some money to be prepared when I find a house that I want to buy at a price that I want to buy it at, own a few toys (but not every one that strikes my fancy), go out for a nice dinner when I feel like it, go out for a few beers with friends when I feel like it, and live a life that I find enjoyable on a day to day basis.

    “You lose. ”

    As compared to what? Someone who got “instant gratification” by buying a McMansion with zero down and insufficient income in the hope that after a few years when the payments get to be too much they’ll sell it, take the profits from the McMansion sale and use it to buy a more affordable home? Sorry, but the lower stress associated with not buying something that I think is overvalued in the hopes that the value will continue to increase forever is not worth it to me.

    “In your 5% return on a place to live, did you calculate taxes, and the cost to maintain?”

    Are you saying that you wouldn’t be happy having bought a house for $85k, living in it for 27 years, and then selling it for $350K? The costs of owning a home should be weighed against the costs of renting one, and then a conscious decision about what is better for the person (also taking into account things like desired ability to be mobile, job security, family needs, etc.) should be made and acted upon. But as long as the housing appreciation outpaces general inflation (including wage inflation), I don’t see where it’s a bad investment based on that part of the decision making process… especially if renting isn’t that much cheaper than buying.

    “Grand pa loses, the kid loses, the economy loses, all so the people you worship can get a few more dollars out of the system. ”

    How does Grand pa lose? He has the home, he gets to live in it for free (plus taxes, maint., etc.) now. He hasn’t lost anything from the deflation of the bubble just like he didn’t gain anything by the inflation of the bubble. He’s always lived in the house and has always paid according to the terms that he agreed to when he bought it, and it’s now paid off. There was no guarantee that it would be worth $700k or even $350k when he bought it. He bought it for what he bought it for with the understanding that it would be his once he finished paying the mortgage off. That’s what happened. How did he lose anything?

    And I don’t worship any people.

    “Grand pa is one of a billion people who were swept away by a booming global market place that was all contrived of debt market scams. Your E*Trade account is loaded with them. It’s not just zestimates, it’s all the phoney baloney contrived propaganda that gets you to buy into some sense of security. Once you think you have it together the game changes and you lose. Billions of people lost trillions of dollars.”

    I think you’re wrong there about grandpa. He bought a place to live a long time ago and he has treated it like a home, not an investment/ATM. It seems to have served his purposes fine. But I agree that there are A LOT of people who were swept away by the booming global markets. But part of investing is doing the research and due diligence to decide which potential rewards are worth the risks. Any kind of leveraging (mortgage, buying stock options, buying stocks on margin, etc.) increase both the risk and the potential reward. When the markets turn(ed), that was the risks.

    “Why are you so focussed on one little teeny tiny part of the over all scam? It’s just a place to live, according to you. ”

    Because this is a housing bubble blog, and that’s what we’re talking about here. If we were talking about the stock market, I’d have similar but different arguments for/against it (but a house is a much more leveraged investment, and therefore I think it’s both more risky and rewarding as an investment… the plus side of the risk, though, is that if you’re only leveraging to the level that you can afford to keep paying off you’ll still have a home no matter what the market says it is worth). It all comes back to taking responsibility for where I choose to invest my money. You won’t see me buying gold at the prices they are today (especially on margin!), just like you didn’t see me buying a house at the prices they were in the early 2000’s-2007. Maybe I’ll buy one within the next 3-5 years, though.

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  70. David Losh

    RE: Azucar @ 73

    OK, I can tell you’re serious.

    The mortgage could have been anything. Before it was mortgages it was tech stock. Tech profits wanted tangible assets, and those profits found Real Estate; and mortgages, to a lesser extent.

    I’m going to stop here for a minute to remind you that Real Estate is a business. Check the Grand Pa had a place to live at the door. In 1985 Grand pa had a reasonable expectation of a hedge against inflation with that 5% return; inflation runs about 4%.

    Now the people who bought in 1995 could have had that expectation, but it won’t be realized. By 1998 Real Estate was a saturated market place of new construction. Everything that went on the books from 1998 to 2008 was a contrived ponzi scheme of develop, build, and sell. Each step of the way there was a new loan, new transfer, then new mortgage.

    It’s still going on today in China, and what is called “emerging markets.” People buy a house, a car, get credit, and promise to pay.

    All, of that paper,combined, auto, student, credit card, and mortgage becomes the financial markets. It a debt market. Debt is bought, sold, traded, and insured against loss. It’s worth tens of trillions of dollars.

    The fact is that the numbers are so high that they can actually cause inflation. Well, it’s not really inflation, it’s simple profiteering. Oil is what I talk about, a lot.

    Grand Pa, like billions of other people did save his entire life. He saved for his retirement. In 2008 his retirement account, the equity in his home were wiped out, in the blink of an eye. The way we are going to fix that is to cut Social Security, and MediCare.

    Since 2008 we came back with a massive infusion of $4 Trillion dollars from the United States government. Europe is in economic chaos because they obviously didn’t live within their means. Well Germany did, and France did sort of, as long as you don’t look at the books to close, but for sure Switzerland is solvent.

    As Scotsman keeps pointing out we are screwed. So you can have a couple of beers with your buddies, but your job? forget about it. Have another cock tail, and save for your retirement.

    Unless you get aggressive, I mean extremely aggressive, you will have nothing when you are done. Don’t count on your job, it’s a welfare check, at this point. Don’t count on equity in your home, or property, in another few years we’ll have disposable housing the way we have disposable cars. Your bank account will pay you whatever your bank decides it needs to make more profit. Your stock portfolio is based on complex multi national trade agreements.

    The world, as Grand Pa has pointed out, passed you by.

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  71. Hugh Dominic

    RE: Azucar @ 73 – Azucar wins. Losh, your position has been entirely refuted.

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  72. Scotsman

    RE: Hugh Dominic @ 75

    I’m not so sure- seems they’re talking past each other. David has picked up on the futility of trying to beat the new boss- global financial engineering, while Azucar hangs tough with traditional thinking. It’s an interesting dichotomy, eh? The truth is many of the old rules don’t apply. Many won’t invest in the markets now because of computer trading and the destruction of fundamental analysis. How can you trade by the “rules” when they change at the government’s or TBTF’s whim? But what can we substitute for a knowledge base? Searching, the old rules and logical analysis keep popping up, ineffective as they may be. People gotta have something to hang their reality on. David’s aware and increasingly cynical. Azucar has “room to grow” in his understanding of just how twisted traditional structures have become. In the end real estate won’t get nearly as much credit as it does now, but it takes time for a broader understanding to grow. Grampa is screwed, so is the old neighborhood, and who knows what junior’s world will really look like in 30 years. But my guess is that the difference between now and thirty year hence will be dramatically different from the contrast between now and the 1980s- 30 years past.

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  73. Ray Pepper

    geeessshhh..after reading all that crap I could have spent better time at tube8…but then my wife gets pissed at me…

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  74. Ira Sacharoff

    RE: Scotsman @ 76
    The economy may be far worse now than in the 1980’s, but at least the hairstyles are better.

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  75. NewHomeOwnerInFremont

    RE: Hugh Dominic @ 75 – I agree. Losh is out in la la land.

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  76. Azucar

    I feel like I’ve come at the subject from a more pragmatic perspective.

    The houses wouldn’t have been bid up if people weren’t allowed to borrow the money to bid them up with.

    I think that David is talking more about the back story behind why they were allowed to borrow that money (it wasn’t really risky to the banks, ’cause they were just bundling and selling off the risky mortgages).

    I tend to assign as much blame to those who took advantage of the available loans as those who offered them. Yes, I understand the temptation to “get in the game” (before getting priced out forever!). But the handwriting was all over the wall… even a caveman engineer like Tim saw it and started a blog about it. People HAD to know that there was a lot of risk going in. The reward that was dangling out there (ever increasing prices) was what they were subjecting themselves to that risk for. I think that David assigns more of the blame to those profiteering off of the loans, rather than those profiteering off of the houses that were bought with those loans. I think there’s enough blame to go around for both parties.

    But on the pragmatic side again, housing will never get to zero (or if it does, I hope I have the biggest gun!)… so at some point it will again be a good idea to buy a place — to live in (not as a retirement investment plan).

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  77. David Losh

    RE: NewHomeOwnerInFremont @ 79

    I always like strong arguments, now prove it.

    It isn’t just the bundling of loans, it’s also land use, and international building codes that crashed the housing market.

    In the 1970s, and 1980s construction was driving the economy. The other NAR ad talks about how every house built creates 3 jobs. That’s over. Another ad should say every house built adds to the durable goods manufacturing base, with washers, dryers, hot water tanks, and piping.

    We built every square inch of America by changing land use to include farm land, wet lands, and density. All the Green Built crap uses less lumber for ease of construction. Is a pre fab better than stick built?

    Housing went the way of fishing, and logging. Housing was denigrated to the same level as who had the nicest new car.

    It didn’t just happen here. My intention was to retire in Spain, where my kids were born. There are miles of new construction in Barcelona, miles, square miles. It’s the same in Athens, and Trujillio Peru. You can build, mortgage, and some sucker will buy it, with a promise to pay. China has square miles of high rises, some even have people living in them.

    Prove me wrong. Look around Fremont, there is plenty of room to build there, and it will all be built. Where is it written, other than by Ray, that construction costs mean anything except to the builder. Why would I pay you for a pile of lumber that probably needs to be reworked? Real Estate is about the dirt. How much dirt do you own, and what can you do with it? Some property has value. Most of what we have done in the world of housing since 1998 has driven the value of that property down.

    Fremont’s the perfect example. Fremont will be a bunch of town houses, and condos for the worker bees of the Burke Properties. Isn’t it great? All the little shops, and restaurants, all within walking distance of work, or just catch a bus down town. Oh man, that’s living. Let’s have another glass of wine to celebrate.

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  78. Kary L. Krismer

    By Azucar @ 80:

    People HAD to know that there was a lot of risk going in. The reward that was dangling out there (ever increasing prices) was what they were subjecting themselves to that risk for.

    People should have known, but a lot of people really did think that real estate would never go down. Maybe the possible reward blinded them to that possibility.

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  79. David Losh

    RE: Azucar @ 80

    Let me also say that before reading this blog I was a Real Estate booster. It is the path to wealth.

    Sniglet started talking about deflation. I didn’t recognize the term. It never occurred to me that prices could go down. My thought was that we would have a bout of inflation to get things back to normal. Then we took a trip to Barcelona where we have some family. It was obvious things weren’t good there, even with all the new “prosperity.” Next we went to Peru where the building was just getting out of control. Prices there had doubled in like five years. Peru still has a “booming” economy, much better than here, or Spain for sure.

    We could call this all a correction, but the basics have changed.

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  80. David Losh

    RE: Hugh Dominic @ 75

    You’re another one, prove it.

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  81. gr8day

    Scotsman @76-

    I agree with you on the financial future of the next 30 years.

    Grandpa is concerned that Jr cannot buy a house in the future, This concern is understandable. The govt has taken on MASSIVE debt and continues to be irresponsible fiscally. When Grandpa was young, the debt was being added to – today it is multiplying – and growing exponentially. Grandpa is a smart guy and aware of what may happen in the future. Grandpa also knows that the govt debt in his day was for bridges and RR tracks – that is not the case today.

    Will the govt really default?
    Will the govt raise taxes?
    Will the govt create more inflation via QE53??
    Deflation?
    Jobs that pay over $10 per hour?

    The next 30 years will not be like the last 30 years.

    IMO – that is Grandpa’s real concern.

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  82. ARDELL

    I don’t see any reference to the house across the street being sold being a foreclosure. Could be a divorce. Could be a job transfer. Could be any number of reasons why people don’t stay in their homes as long as Grandpa did with Grandma. Could be any number of reasons why people move in and out every 7 years or less.

    It’s not a scene of kids sitting on the curb with holes in their shoes while their parents and relatives are loading things up into cars and maybe a U-Haul with trash and anything not worth moving strewn all across the lawn.

    Maybe it’s a tale of buying a quaint home with a nice front porch and staying in it long enough to care about updating the windows and staying with the woman who bore your children so your children’s children can go visit Grandpa AND Grandma at the same house.

    Maybe it’s a lesson in don’t buy a brick tudor with choppy rooms with lousy curb appeal where the front door isn’t on the front of the house and looks like The Hobbit lives there.

    Grandpa’s got that “The World’s Going to Hell in a Handbasket” look that many old people have about the way life has changed. No loyalty to employees from companies or vice versa (Gramps probably worked for the same place all his life). No loyalty to spouses (Grandson is probably visiting Grandpa because his Mom is now a single Mom who has to work her butt off to feed him).

    The erosion of society is reflected in the turnover of homes for many and varied reasons. Never staying long enough to gain equity. This home is a turnover…but a foreclosure? With a professional mover team carefully marking and stacking the boxes?

    Looks more like a job transfer to me. Or moving up to a better house that doesn’t look so dark and dank. Maybe Grandpa’s hoping grandson doesn’t choose a house like the one across the street that hasn’t been able to hold a family in it for more than 5 years at a stretch.

    Maybe he’s seeing all the people who came and went from that dark brick house with the front door hidden on the side and very little natural light. A revolving door of families…while Grandpa sat and watched all the movings in and out from his quaint and spacious front porch.

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  83. NewHomeOwnerInFremont

    RE: David Losh @ 81 – David, see Azucar’s post #73. I don’t think I can state it any better. Especially this part:

    “Are you saying that you wouldn’t be happy having bought a house for $85k, living in it for 27 years, and then selling it for $350K? The costs of owning a home should be weighed against the costs of renting one, and then a conscious decision about what is better for the person (also taking into account things like desired ability to be mobile, job security, family needs, etc.) should be made and acted upon. But as long as the housing appreciation outpaces general inflation (including wage inflation), I don’t see where it’s a bad investment based on that part of the decision making process… especially if renting isn’t that much cheaper than buying.”

    I don’t think Grandpa got screwed here. He has certainly did better than most. Yes, houses cost money with maintenance, taxes and insurance. I am sure he put down some decent dough to upkeep his place. You can’t get around that when owning. Does that mean he got screwed? I guess he could always live in a cardboard box under the Aurora bridge and save big money that way but who would want to live like that? And when compared to renting, he comes out way ahead over the long term (long term being the key word here). He was able to keep most of his living expenses fixed (interest + principle) and let inflation ease his debt burden over time. As Azucar has said, there comes a time when he will own the place outright and all he will have left are taxes, insurance and maintenance which should average out to be a tiny fraction of renting a comparable place. You should know this already since you say you are involved in the real estate business.

    And a general thought: I know this is bubble blog. It is going to attract the housing bears. Appreciable assets (especially hard assets like real estate) do not go exponentially straight up forever nor do they go down forever, but they do go up over the long term. And one can make good money with real estate if bought correctly I like how Tim presents the facts and is not a perma-bear or perma-bull unlike some posters here. He would be doing everyone a disservice if we were a perma-bear.

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  84. Seattle Bubble • The Tim’s Top Ten of Twenty-Eleven

    [...] Even More Delightful NAR Propaganda – Actually pretty much everything the National Ass. of REALTORS® publishes is comedy gold. I also quite enjoyed their 2011 Voting Guide, and watching their ads over the last five years back to back is a riot. [...]

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  85. Seattle Bubble • The Tim’s Top Ten of Twenty-Eleven

    [...] Even More Delightful NAR Propaganda – Actually pretty much everything the National Ass. of REALTORS® publishes is comedy gold. I also quite enjoyed their 2011 Voting Guide, and watching their ads over the last five years back to back is a riot. [...]

    Rate this comment: Thumb up 0

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