## Record-High Home Prices Are “Affordable” Thanks To High Incomes and Low Rates

Note to subscribers: The members-only spreadsheets folder has been updated to include the charts in this post.

As promised in yesterday’s affordability post, here’s an updated look at the “affordable home” price chart.

In this graph I flip the variables in the affordability index calculation around to other sides of the equation to calculate what price home the a family earning the median household income could “afford” to buy at today’s mortgage rates, if they spent 30% of their monthly gross income on their home payment. Don’t forget that this math includes the (giant) assumption that the home buyers putting 20% down, which would be \$112,000 at today’s median price.

The “affordable” home price hit an all-time high of \$551,493 in May, thanks to increasing incomes and decreasing mortgage interest rates. The “affordable” home price of \$551,493 in King County would have a monthly payment of \$2,006.

If interest rates were at a more reasonable level of 6 percent (which is still quite low by historical standards), the “affordable” home price would be just \$382,986—about \$103,000 lower than it is today.

Here’s the alternate view on this data, where I flip the numbers around to calculate the household income required to make the median-priced home affordable at today’s mortgage rates, and compare that to actual median household incomes.

As of May, a household would need to earn \$81,472 a year to be able to “afford” the median-priced \$560,000 home in King County. This is up from the low of \$46,450 in February 2012, but about 18 percent below the all-time high set in July 2007. Meanwhile, the actual median household income is about the same at around \$80,235.

If interest rates were 6% (around the pre-bust level), the income necessary to buy a median-priced home would be \$107,439—34 percent above the current median income. If the commenters on yesterday’s post are correct and absurdly low rates are here to stay, then today’s home prices, as sky high as they are, are completely reasonable.

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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. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

1. 1
Mike says:

Let’s also consider that homes are affordable because Seattle homeowners have 300K+ to put down.

2. 2
Weasel says:

They’re also affordable if you get over the trendy neighborhood with the fancy school. If schools are that important, buy a cheaper house and send your kids to a private school, and ride the sounder train to work with the rest of us commoners.

3. 3
ess says:

By Mike @ 1:

Let’s also consider that homes are affordable because Seattle homeowners have 300K+ to put down.

With all these all cash deals, apparently some folks have a great deal more money to buy a house.

Some think that low interest rates are here to stay – I would never guess on what interest rates are going to do in the longer term. But I hope those who believe that low interest rates are here for good are correct. It will not only encourage more residential purchases, but housing prices can continue their upward price climb as affordability increases.

4. 4
5. 5
Action says:

This seems like a win-win situation for homeowners with a mortgage.

If rates stay low, home values should continue to climb due to cheap money and investors chasing safe assets to stash their money.

If mortgage rates increase to the reasonable level of 6% as Tim suggests, that would also mean inflation and wage growth had also increased to more normal levels. So locking in a low rate now becomes all the more beneficial.

Would be interesting to see the Seattle affordability graphs compared with other cities.

6. 6
Erik says:

RE: Action @ 5
It’s a win for everyone that owns. The faster we can expand this bubble, the faster this bubble is going to pop and create buying opportunities for renters. I encourage everyone to keep buying so we can make some serious cash when this bubble pops.

If you get caught with a underwater mortgage, live in the house for 5 years rent free to recoup your costs. That’s a real win-win. Hard to lose money buying if you know the rules.

Bring back the negative amortization loans for everyone. Bring back the NINJA loans. I’m ready to do it again.

7. 7

Doesn’t the graph also tell that there is not much more room for additional increase in home prices? That’s because affordability and home prices are currently almost at the same level.
If prices continue to increase at the same pace (which is faster than increase in income), then in a year (or two maximum) homes will become unaffordable?

From the graph I see that today’s situation is similar to 2005 situation?

8. 8
Ted says:

Just wondering how the affordable \$550k home would have a payment of only \$2,006/month – does this not include insurance and property taxes? My \$360k 3.625% 30 year mortgage payment was recently increased to \$2,125 due to increased property taxes (no PMI involved). If property taxes and insurance aren’t being included in the affordability calculation, this seems like a glaring omission as they’re a non-negotiable cost of owning a home. Not to mention \$300 month in utilities and additional upkeep of an aging Seattle home but I understand why we don’t include those costs here.

9. 9
Action says:

If prices continue to increase at the same pace (which is faster than increase in income), then in a year (or two maximum) homes will become unaffordable?

Yes, they will become unaffordable to the median household. But there is not enough new homes being constructed for every median household to have a home in the future. A more useful graph would show the median household income of the top 20% of households, since they are the ones buying homes and the only ones who will be buying in this area in the future.

10. 10
ess says:

By Action @ 9:

If prices continue to increase at the same pace (which is faster than increase in income), then in a year (or two maximum) homes will become unaffordable?

Yes, they will become unaffordable to the median household. But there is not enough new homes being constructed for every median household to have a home in the future. A more useful graph would show the median household income of the top 20% of households, since they are the ones buying homes and the only ones who will be buying in this area in the future.

A very astute point has been made in the above statement in Action’s response. It isn’t the median income that is important to the continued increases of real estate prices in the expensive areas of Seattle and the east side – it is the upper percentages and how much money they have to spend on housing. The median folks will live further out and in less” desirable” areas, in smaller houses, rent and even double up if they have to.

So long as there are more individuals in that upper 20% attempting to buy houses than are available, prices will continue to increase. Don’t know for how much or how long – but when I read houses selling for a million plus with all cash deals as have been documented in this site and elsewhere – I figure there is lots of money sloshing around and people way above the “median” buying houses.

11. 11
GoHawks says:

The “affordable” home price of \$551,493 in King County would have a monthly payment of \$2,006.

My “assumption” is that the average affordable house would rent out for more than it’s monthly payment of \$2,006. Another reason people are buying.

12. 12
AJT says:

RE: Action @ 5
Action, may I ask in what capacity is there an advantage to a homeowner to have the value of their home increase to a great degree barring a) the homeowner is selling and moving out of the area or b) the homeowner is also a landlord and can charge more in rent? Thank you for your thoughts on this.

13. 13
The Tim says:

By Ted @ 8:

Just wondering how the affordable \$550k home would have a payment of only \$2,006/month – does this not include insurance and property taxes?

Correct, the calculation for the affordability index does not include property taxes or homeowner’s insurance. For a more detailed explanation of what goes into it (and what doesn’t) check out this post.

14. 14

RE: GoHawks @ 11 – If you include property tax, insurance, etc, it will break even.

15. 15
Blake says:

By ess @ 3:

By Mike @ 1:

Let’s also consider that homes are affordable because Seattle homeowners have 300K+ to put down.

But I hope those who believe that low interest rates are here for good are correct. It will not only encourage more residential purchases, but housing prices can continue their upward price climb as affordability increases.

Be careful what you wish for… the reason rates are staying so low – even after the Fed tapered their QE buying – is… not… good… And don’t assume asset prices will stay high.

China’s problem… and the world’s
With real-estate investment still accounting for more than 14% of GDP last year, plummeting growth in the sector has put considerable downward pressure on the economy as a whole, helping to push China into a debt-deflation spiral. As overcapacity drives down the producer price index – which has now been falling for 51 consecutive months – real debt rises. This is undermining corporate profitability, spurring companies to deleverage and reduce investment, and fueling further declines in PPI.
… When there is slack in the economy, the only way to escape the debt-deflation trap is to grow strongly. (end quote)

https://en.wikipedia.org/wiki/Debt_deflation
Prior to his theory of debt deflation, Fisher had subscribed to the then-prevailing, and still mainstream, theory of general equilibrium. In order to apply this to financial markets, which involve transactions across time in the form of debt – receiving money now in exchange for something in future – he made two further assumptions:
(A) The market must be cleared—and cleared with respect to every interval of time.(B) The debts must be paid. (Fisher 1930, p.495)

In view of the Depression, he rejected equilibrium, and noted that in fact debts might not be paid, but instead defaulted on: “It is as absurd to assume that, for any long period of time, the variables in the economic organization, or any part of them, will “stay put,” in perfect equilibrium, as to assume that the Atlantic Ocean can ever be without a wave.”
— (Fisher 1933, p. 339)

Blake sez: Ahhh… but today, Creditors reign and say “no defaults allowed!” (Greece, Puerto Rico, Argentina, US students…) For millennia debtors defaulted, banks crashed and we “started over”… but no more!

This was written almost 3 years ago…
http://www.forbes.com/sites/mikepatton/2013/07/01/the-truth-behind-the-feds-monetary-expansion/#607fcc955642
Because deflation is considered to be such a destructive force, and since Bernanke is a student of the depression and acutely familiar with the Japanese deflationary spiral, the Fed has embarked on QEI, QEII, Operation Twist (QEIII?), and QE Forever, an \$85 billion dollar per month monetary expansion. The idea is to pump so much liquidity into the system that the value of the dollar will decline and deflation will be defeated. However, as we have seen, even with such an excessive amount of monetary stimulus, inflation is still very low and the risk of deflation persists. The ace-in-the-hole here is the consumers’ willingness to go on a spending spree as they did in the 20 years prior to the 2008 crisis. Therefore, it’s important to keep tabs on such items as retail sales and durable goods.

Thus far, it appears that pumping an excessive amount of liquidity into the system has not translated into substantially higher demand. Yes, there have been some victories, and yes, we may indeed be on the road to recovery. But in my estimation we’re not out of the woods quite yet. (end quote)

Nope… kinda missed the “recovery” boat, eh? … drifting… towards … ??

http://gunsandbutter.org/transcript-the-slow-crash << This is good!
http://www.marketwatch.com/story/morgan-stanley-fears-policy-makers-repeating-mistakes-of-1930s-2016-06-16
http://seekingalpha.com/article/3982411-central-banks-destroyed-middle-class
Summary:
• Misguided central bank policies have been greatly counter-productive and harmful.
• Zero and negative interest rates lead to deflation, not inflation.
• Yield-chasing asset price bubbles will likely soon burst, resulting in bear markets.

16. 16
Mike says:

RE: GoHawks @ 11 – If you include property tax, insurance, etc, it will break even.

Or better. The only \$550K-ish house sold near me recently was sort of a dump, but it had 2 complete floors with kitchens and 2 bedrooms. Easily \$1500/mo+ each or more if air BnB’d. Payment would be around \$2500 w/ taxes and insurance. Not the best margin, but cash flow positive with not too much maintenance.

17. 17
Ted says:

RE: The Tim @ 13 – thanks Tim, however I still don’t understand why these amounts aren’t included. I understand they’re variable depending on a specific property or situation but to have an “affordability” measure that so grossly understates housing costs to the tune of \$600-800/month for an average house seems to render it meaningless. If it accurately reflected what the average household with an average house actually paid in terms of total housing costs (which is what I think the 30% measures), then you would see the graph way more skewed towards less affordability. To me, taxes and insurance are just as big of a part of the picture, if not bigger, as interest rates. Though, I’m sure all of this has been debated far too much on here before.

18. 18
Mike says:

RE: Ted @ 16 – Likewise, how many people in the expensive areas are only putting 20% down on median priced properties? Everyone I know lately that has bought in an area with a median of \$550K+ has quite a bit more than 20% down, more like 50%+.

19. 19
Green-Horn Investor says:

RE: Erik @ 6

“The faster we can expand this bubble, the faster this bubble is going to pop and create buying opportunities for renters. I encourage everyone to keep buying so we can make some serious cash when this bubble pops.

If you get caught with a underwater mortgage, live in the house for 5 years rent free to recoup your costs. That’s a real win-win. Hard to lose money buying if you know the rules.

Bring back the negative amortization loans for everyone. Bring back the NINJA loans. I’m ready to do it again.”

Timing the market is really hard. There is no guarantee that it will crater 30% ever again in our lifetimes. The most recent experience was quite extreme and unusual from the perspective of economic history. If it does dip again it probably won’t drop more than 20%. Most will sell too early, missing more appreciation than any eventual dip. Others will sell too late and probably not be able to identify the bottom to reenter at the best moment. Furthermore with the >10 – 15% round trip transaction costs will it be worth it?

The only way to play is to do interregional arbitrage. Sell real estate in an expensive territory and buy in a cheap one. But this really only works one time unless the new home suddenly accelerates and passes all the other horses in the race.

20. 20
Justme says:

Everything is fine and dandy, 2008 cannot happen again, this time is different,

http://wolfstreet.com/2016/06/21/ny-fed-warns-government-insured-subprime-mortgages/

with quotes from

QUOTE: These highly leveraged government-insured loans are also typically issued to borrowers with weak to poor credit histories, further increasing the risk of default and foreclosure. Borrowers with poor credit histories are more likely to face adverse income shocks; and the combination of negative equity and a high risk of adverse income shocks implies that these mortgages are at high risk of default.

The five-year cumulative default rate (CDR) for these subprime mortgages that were originated in 2001, the best year this millennium, was 5%. For subprime mortgages originated in 2007, it was over 25%, and for borrowers with FICO scores below 600, it was over 40%!

To put these numbers into perspective, the five-year CDRs associated with loans insured by Fannie Mae and Freddie Mac (the housing government-sponsored enterprises, or GSEs) are typically an order of magnitude lower. According to our calculations, the 2002 and 2009 vintages of GSE loans had five-year CDRs of approximately 2%, while Ginnie Mae’s same vintages had five-year CDRs of almost 10% and 13%, respectively.

Even subprime mortgages originated in 2010 have a five-year (into 2015) CDR of 8.4% despite the booming housing market over the period.

21. 21
Sam Hunter says:

I love how affordable is in quotes when the data shows housing is still affordable. The data also shows historic lows, jobs continue to keep moving in, migration toward west coast cities increases every year, development still low, poor building regulations…. on and on….. Yet… for some reason the bulk of people here choose to ignore all of the data. I think they just look at the average median price graph and go “Wow it went up really high all of a sudden!! It must go down just like in the past!” I mean I guess I kinda get it… most people lost a lot in 2008. Wound is still fresh. Not only that but once there is a huge bull run up that last till ~2020 they will be the ones screaming “New norm! New norm!!!”. That is when you know to sell. It’s really sad but shows how the stupid the majority of people are, even these so called “experts” in real estate that post on this blog.

22. 22
Action says:

By AJT @ 12:

RE: Action @ 5
Action, may I ask in what capacity is there an advantage to a homeowner to have the value of their home increase to a great degree barring a) the homeowner is selling and moving out of the area or b) the homeowner is also a landlord and can charge more in rent? Thank you for your thoughts on this.

This is a fundamental question, but in general most owners of an asset see appreciation of that asset as a good thing.

I agree that for the homeowner who intends to keep and live in their home forever, appreciation on paper doesn’t matter and only means an increase in their property taxes. But likewise, for that homeowner, it doesn’t matter a great deal if the bubble pops and their home value decreases on paper and they become underwater on their mortgage. I would venture to guess that this type of homeowner would have little interest in reading or commenting on this blog.

23. 23
wreckingbull says:

RE: Mike @ 16 – You forgot two important expenses: vacancy and maintenance. I don’t think your example pencils.

24. 24
Justme says:

RE: Blake @ 15

Excellent post, Blake. Especially liked the link to the Michael Hudson interview.

I think on this blog, local people get very myopic about a perceived specialness of Seattle. It seems that every city thinks it is the most special in the world. Looking at the bigger picture of what is going on helps counteract this form of myopia.

25. 25
Justme says:

Seattle is super special! More special than New York City. More special than Boston. More special than San Francisco, too!

http://www.nasdaq.com/article/rising-supply-pressures-urban-rental-boom-20160621-00787

According to Zelman & Associates, new apartment completions in the neighborhoods where Equity Residential’s portfolio is concentrated, such as Manhattan’s Midtown West, are forecast to increase 57% in 2016 compared with 2015. AvalonBay is likely to see a 50% increase in new supply in the neighborhoods where it has the strongest presence.

“You can lean on the millennial argument…you can spin a story of how demand will absorb all of this,” said Dennis McGill, director of research at Zelman & Associates. “Demand is not going to change by 50% in a year.”

Overall, shares of publicly traded apartment companies are down 6% in 2016, according to Mr. Goldfarb at Sandler O’Neill. Student-housing companies, in comparison, are up 17%, while mall owners are up 4% and office companies are up 2%.

Analysts say it could take markets like New York years to recover. Washington saw a surge in apartment completions four years ago and rent growth remains nearly flat. Some analysts are urging apartment companies to place more emphasis on close-in suburbs with good job growth

26. 26
ronp says:

RE: Weasel @ 2 – yeah, that is good advice but many of us really like to not be car dependent and live in walkable neighborhoods, near shops, restaurants, craft beer pubs, parks, etc. hopefully more transit oriented development will start to be constructed that is affordable to all.

27. 27
Action says:

RE: Justme @ 25

If there is any risk in the bubble popping, I agree that it will be in the apartments market. That is the area where supply can be increased too quickly and greed from investors and Developers can create a glut. The question is will apartments become a substitute for SFRs and will this next generation be content renting pods in the urban core?

My bet is that even a glut in the supply of apartments would not cause a fall in the prices of SFRs in the Seattle area. If anything, cheaper apartment rents and higher vacancy rates will encourage more newcomers to the Seattle area who will then decide to stay here and put down roots, eventually adding to the demand for SFRs.

There was a great article on Curbed yesterday about this. Developers are basically misinterpreting the demand for urban housing as a longterm trend when really it’s just the current phase in millenials’ lifestyle. As millenials move from their 20s to their 30s and 40s they will care less about living in a hip area downtown and move towards suburban and rural areas that support their lifestyle. Google “amenity migration” for more on this trend.

http://www.curbed.com/2016/6/21/11956516/millennial-first-time-home-trends-suburbs

“Last year, millennials, the largest generation in American history, purchased 35 percent of homes sold in the U.S. Consider that the median age of the millennial generation is 25, and the average age of a first-time home buyer is 31, and it’s fair to say there’s a sizable wave of millennial homebuyers on its way.”

28. 28
Doug says:

RE: Justme @ 25 – Would you say that you are objectively bearish on the housing market, personally want prices to go down, or some combination of the two?

I’ve just noticed that you’re one of seemingly very few bears on this forum. Is that fair to say?

29. 29
Blurtman says:

RE: Action @ 22 – I agree with you, but economists like Yellen will describe a wealth effect – when assets appreciate in value, the unrealized gain makes folks feel wealthier and happier, and more prone to consume. The last time around, HOE fueled consumption was not uncommon.

30. 30
ESS says:

RE: Blake @ 15

From what I understand, this is why the Fed wants there to be 2% inflation before they raise interest rates. They are not meeting that target, so they have been hesitant for that and other reasons to raise interest rates on a regular basis.

I guess the Fed view as to appropriate inflation rates as akin to the Goldilocks and the Three Bears story – not to hot and not too cold is just right. We need a bit of inflation, but not as much as in the late 70s and early 80s. On the other hand – Japan is a great example of a deflationary economy – I remember when Tokyo prices for real estate were legendary – something like just Tokyo real estate was worth more than all the real estate in a large part of the US. Not any more.

So what would be the best rate for inflation and 30 year mortgage rates to sustain growth and avoid deflationary pressures? Don’t know – but these are very low mortgage rates, and folks are getting a great deal as compared to historical rates.

31. 31
ESS says:

RE: Action @ 27

I agree with your assessment that SFRs may not be a substitute for apartments. From personal experience, both having lived in apartments and houses, as well as talking to prospective tenants who are looking to get out of apartments and move into a single family house, there is an appreciation for the quiet and privacy one gains from living in a house. Furthermore, there are very few modest size houses being built, so the percentage of modestly priced single family houses for sale or rent is declining as a percentage of the whole. in the Puget Sound area.

I have heard the argument that renters don’t want to bother with lawn care, and thus prefer apartments. That is easily resolved by offering lawn care for a slight adjustment of the rent. And as rents escalate, that adjustment becomes more minimal as a percentage of the rental amount. With lawn care provided, a single family house is as convenient as an apartment, but with more benefits.

32. 32
justanotherguy says:

Those who own a home in Seattle think that the prices will keep on going up. Those who are looking to buy or not ready to buy yet think that the prices will fall. But no one knows what will happen, we are all wishful thinkers hoping that our decision is right. That is the only truth.

33. 33
Blake says:

RE: ESS @ 30
Nothing to disagree with there… my point is that the Fed has tried all sorts of crazy things and it hasn’t worked. They ended QE and rates are still falling… and that is not good… it’s bad… very bad. The central banks do not have monetary tools to deal with deflation. Bernanke spent his whole academic career studying it…

It’s the nature of capitalism to overproduce and then collapse. When they artificially intervene to prevent the collapse – bankruptcies, insolvencies – then it is sort of like suppressing fires in the western US for years and years… after a while there is all that dead, dry wood that should have burned, but hasn’t, yet…

As for Seattle being special. We are… The world is awash in money – record setting profits accruing to the millionaires and billionaires who have nothing to invest in due to overcapacity and slack demand. So they invest in silicone valley startups, “unicorns,” private equity (PE) schemes… and real estate. Seattle benefits from all this money… but much of it is speculative and things go up – – and they also go down. Seattle is up now. I post these things because I don’t want people to think that Seattle is immune to the larger macroeconomic trends happening in the world. When I moved here in 2006 my family and everyone said I had to buy buy buy! because it’s only going up up up! I was skeptical, kept my powder dry, read seattlebubble … and bought in 2011!

These are very difficult economic times and I see a lot more downside than upside, so be cautious…

34. 34
ESS says:

RE: Blake @ 33RE: <a href='#comment-255972'

Not only the Fed, but lots of government agencies have tried all sorts of crazy things that haven't worked – no argument there.

There is danger in everything we do including getting out of bed in the morning. Housing, stocks, gold , old masters, tulips and all other investments have to be viewed from all angles and with a healthy does of skepticism.

Is there a chance that housing will go down price in price in the Puget Sound area at some time in the future? – almost certainly as it has in the past. But looking from the perspective of a longer term investment – I personally see more upside than downside for real estate in the Puget Sound area. How much more upside – who knows? And if there is a pullback in prices – for how long and how much? Again – who knows?

As to deflation and inflation – the recent amazing collapse of oil prices didn't help inflation numbers as the price of oil just about affects the price of all goods and services. The price of oil has been rising again as the marginal producers are forced into bankruptcy, and the larger producers curtail product. That should help the inflation numbers in the near future.

And the groundswell for 15 dollars an hour for employees will also help inflation, if that movement really takes off. After the fall elections, I would be very surprised if there wasn't a huge push to raise the Federal minimum wage.

So we shall see how the inflation/deflation numbers look in the coming months and years.

But congratulations on buying your house when you did. I think it was Warren Buffet who suggested to buy when everyone else was panicking. There was certainly panic in the housing market in 2011, but I wonder how many people now wish they bought at that time?

35. 35
Blake says:

By ESS @ 34:

RE: Blake @ 33RE: <a href='#comment-255972'

Not only the Fed, but lots of government agencies have tried all sorts of crazy things that haven't worked – no argument there.

Not sure what you mean “lots of government agencies?” What crazy things have they done? Congress controls the purse strings and they’ve pursued austerity with a vengeance and increased the threat of deflation, not inflation. The 2011 Budget Control Act and subsequent sequestrations and cuts to federal programs have been devastating for the recovery… 500,000 less government jobs since 2008. Thanks Obama! ;-)

36. 36
Justme says:

RE: Action @ 27

>>My bet is that even a glut in the supply of apartments would not cause a fall in the prices of SFRs in the Seattle area. If anything, cheaper apartment rents and higher vacancy rates will encourage more newcomers to the Seattle area who will then decide to stay here and put down roots, eventually adding to the demand for SFRs.

Amazing. Lower apartment rents will NOT cause SFR prices to fall in the short term (dream on), but it WILL cause SFR to rise even more than they otherwise would in the long term. It seems like magic. No matter what, SFR prices will stay the same or rise!

What if apartment rents rise right now? Then ESS will say that such increases will make SFR rents and prices to go up, too. So there it is. SFR prices will rise whether rental prices go up or down, because magic.

37. 37
GoHawks says:

Given Tim’s two great charts on affordability, should we even be so sure this is a Bubble? If these low rates are here to stay, prices are not out of line on a monthly basis, especially when compared to comparable rents.

38. 38
Green-Horn Investor says:

RE: Blake @ 33

“When I moved here in 2006 my family and everyone said I had to buy buy buy! because it’s only going up up up! I was skeptical, kept my powder dry, read seattlebubble … and bought in 2011!”

Holy cow! I gotta get you to manage my portfolio. You’re immune to the hype and you know how to time the market.

39. 39
Justme says:

Something just dawned on me: Does median income overall match the median income of the pool of potential home buyers?

You can see why I am asking. Presumably home buyers are younger and have lower median incomes than older more established households that already bought a home.

40. 40
ESS says:

By GoHawks @ 37:

Given Tim’s two great charts on affordability, should we even be so sure this is a Bubble? If these low rates are here to stay, prices are not out of line on a monthly basis, especially when compared to comparable rents.

I guess it depends on how you define bubble. Is it a bubble when there is a shortage of a product that is necessary for survival? Residences are not tulips.

But another question, are rents driving home prices, or are home prices driving rents, or are they driving each other? Anyone know of any research on that particular subject?

41. 41
Doug says:

RE: ESS @ 40 – Pretty lengthy and technical paper, but worth a read: https://www.federalreserve.gov/pubs/feds/2004/200450/200450pap.pdf

42. 42
ESS says:

By Doug @ 41:

RE: ESS @ 40 – Pretty lengthy and technical paper, but worth a read: https://www.federalreserve.gov/pubs/feds/2004/200450/200450pap.pdf

Thank you Doug, not only a very interesting article, but right on point!

43. 43
44. 44

By Justme @ 39:

Something just dawned on me: Does median income overall match the median income of the pool of potential home buyers?.

If only someone here had been posting for years that comparing median income to median prices is nonsense because the median income includes people who are not even conceivably in the home buying market. /sarc

45. 45

By Justme @ 39:

Something just dawned on me: Does median income overall match the median income of the pool of potential home buyers?

You can see why I am asking. Presumably home buyers are younger and have lower median incomes than older more established households that already bought a home.

I am not sure if this is true. Many of the active buyers are new tech hires whose income is much higher than the median income. Tech companies nowadays offer very generous salaries to new hires. I heard on the news the other day about a young person who bought a house using Amazon’s sign up bonus only to pay the 20% down payment.

I am an employee at a tech company. I joined the company less than three years ago and my annual income is already double the median price!

46. 46
Erik says:

RE: Green-Horn Investor @ 19
20% discount may be average, but if there is mania again, you can find 50% off deals. The place I bought last run was less than 1/3rd the price it sold for at the top. Take Ray pepper got rich at the auction buying discount real estate. Buy the outliers.

47. 47
Anonymous Coward says:

RE: Justme @ 36 – I think the logic goes back to that number of bedrooms we were discussing a couple of threads back. I bet ESS and Action are both thinking that while a 3+ bedroom SFH is a substitutionary product for singles and DINKs, a 1-2 bedroom apartment is NOT a substitutionary product for families. So if apartment rents go to the moon, single people and DINKs will do the math and decide to buy a house. But if apartment rents crater, we shouldn’t expect 3+ bedroom SFHs to follow the same downward trajectory. I think action is saying (s)he expects that SFH prices/rents would decrease (as single people/DINKs move into the now cheap apartments) and then rise back years later (after the supply of single people increases to match the supply of cheap apartments, but then marry and have children). In short, it’s not just aggregate supply and demand (units and people) that matter, but also demographics. Which is why some people will argue that all real estate will crash in another 10-15 years when the boomers sell.

48. 48
Action says:

RE: Justme @ 36 – I think the logic goes back to that number of bedrooms we were discussing a couple of threads back. I bet ESS and Action are both thinking that while a 3+ bedroom SFH is a substitutionary product for singles and DINKs, a 1-2 bedroom apartment is NOT a substitutionary product for families. So if apartment rents go to the moon, single people and DINKs will do the math and decide to buy a house. But if apartment rents crater, we shouldn’t expect 3+ bedroom SFHs to follow the same downward trajectory. I think action is saying (s)he expects that SFH prices/rents would decrease (as single people/DINKs move into the now cheap apartments) and then rise back years later (after the supply of single people increases to match the supply of cheap apartments, but then marry and have children). In short, it’s not just aggregate supply and demand (units and people) that matter, but also demographics. Which is why some people will argue that all real estate will crash in another 10-15 years when the boomers sell.

I think you summed it nicely. That was one of my points is that apartments and SFRs are not perfect substitutes and are separate markets. While comparing price to rent ratios of just SFRs could be a useful metric as described in the fed paper posted, I don’t think we’re at the point where the masses will be willing to live their whole lives in apartments. I’d think that a lot of people living in apartments still aspire to someday buy a SFR.

49. 49
Anonymous Coward says:

RE: Action @ 48 – I agree with much of what you say, except I’d add that the masses would probably be willing to live their whole lives in apartments. Much of the rest of the world lives in apartments/condos and are actually pretty happy with the arrangement. I’ve spent a bit of time outside the US and visited Americans (used to SFH living) who are living happily in 2-3k sq ft 3-4br apartments. I’d certainly consider living in one. But as far as I can tell, here in Seattle, we’re not building any of those apartments. We seem to have the idea that if someone wants 3+ bedrooms and/or >2000 sq ft, they should have to buy a house. But we don’t seem to be building enough of those…

50. 50
Justme says:

>>I am an employee at a tech company. I joined the company less than three years ago and my annual income is already double the median price!

Your annual income is over \$1.1M ? That would make you extremely atypical, or maybe just a typo.

51. 51
Justme says:

I assume that person is you, Kary. Credit where credit is due. A link would be nice if there was one particular post to refer to, on the topic of median income for actual homebuyers and home-shoppers, relative to the rest of the population.

52. 52
Justme says:

>>I think action is saying (s)he expects that SFH prices/rents would decrease (as single people/DINKs move into the now cheap apartments) and then rise back years later (after the supply of single people increases to match the supply of cheap apartments, but then marry and have children)

No, he said that SFH prices/rents would NOT drop.

>>(as single people/DINKs move into the now cheap apartments) and then rise back years later (after the supply of single people increases to match the supply of cheap apartments, but then marry and have children)

Heh. It is funny to say that “the supply of single people” will increase “to match the supply of cheap apartments”. That seems like quite a stretch to me. I cannot fathom this to be true. The lead time on single people wanting to rent apartments is a minimum of 18 years. Those breeders back in 1998 must have been quite clairvoyant to get busy generating an extra supply of single people for 2016-2020. Yes, I am being a bit sarcastic here to make the point.

53. 53
Justme says:

Another story today about the building boom in DT Seattle.

Build it and they will come, used to be a saying. Or is it, they’ll come, so build it? Lots of supply pf both housing and office space. We shall see how much of that office space will sit empty.

54. 54
Mike Snyder says:

This doesn’t qualify as a “Bubble” if the people in the region can afford the home prices and incomes are rising with them.

55. 55

RE: Justme @ 51 – Yes, it was me, but in a slightly different context–assuming most lower income people were not in the market, and also pointing to students, people not necessarily planning on staying in Seattle long-term, etc., and also that people use wealth to buy homes too, not just income streams.

Here’s one link, but I’m not sure I went into a detailed analysis on any particular post.

https://seattlebubble.com/blog/2015/07/24/price-to-income-ratio-back-in-bubble-territory/#comment-251460

Anyway, if the median price were “affordable” for a family with median income, that would merely be coincidence.

56. 56
GoHawks says:

RE: Mike Snyder @ 54 – some pretty good logic there Mike. We have high demand, low supply, high rents, and favorable affordability. The bears are going to have to keep scratching and clawing for another year or so.

Someday they will be right and prices will correct. Funny thing is, when prices do correct 5-8% they will be patting themselves on the back (“told you it would burst!”). Never mind that many called for the “bubble” to pop 15-25% ago.

57. 57
David B. says:

By ronp @ 26:

RE: Weasel @ 2 – yeah, that is good advice but many of us really like to not be car dependent and live in walkable neighborhoods, near shops, restaurants, craft beer pubs, parks, etc. hopefully more transit oriented development will start to be constructed that is affordable to all.

That’s actually quite doable if you’re willing to give something up when it comes to space and amenities in one’s home. It’s simply not realistic to insist on living in a trendy or convenient area at the same price per square foot as a less trendy or convenient one.

58. 58
Justme says:

RE: Mike Snyder @ 54

>>This doesn’t qualify as a “Bubble” if the people in the region can afford the home prices and incomes are rising with them.

The only reason price/income ratio of 7x is deemed “affordable” is because of ZIRP and mortgages sitting at 3.8%. Without 7 years of ZIRP from FRB there is no way in hell. The criterion is a “howmuchamonth” criterion based on house price, 20% downpayment, median income and the current interest rate.

As Tim said himself, if mortgages were at 6% then prices would be much lower, I think he said 383k versus 551k.

CALCULATE: 551/383
= 1.43864229765013

59. 59
GoHawks says:

RE: Justme @ 58 – but if low rates are here to stay for a while (3-5 years?) it’s not like we can just dismiss it. Yes it’s a factor, but it’s no longer a fluke. Rates have been falling for 30 years.

60. 60
Action says:

RE: Justme @ 52

Justme, I’m a pessimist. It sounds like you are too. I am not rooting for higher prices. I’ve lived in the Seattle area my entire life and it’s sad to see long time residents priced out by all the newcomers. However, I’ve positioned myself to benefit from the higher prices but can weather a downturn as well.

When I take a step back and consider the big picture and what the biggest risk to the housing market, I don’t see a bubble pop and a repeat of history as the biggest risk. If that happens, as many on here have stated, people are waiting for it with their dry powder ready to jump in.

What I see as the worse case scenario is the continued polarization of the haves and the have nots. It will become harder and harder to become a property owner in the future if you are not one already and affordability will continue to get worse. The homeless population will continue to grow and the renters will be forced into higher density housing as the only affordable option. The previous housing meltdown will become just a blip in the long term rise in prices in this area. Price growth rates will ebb and flow as development picks up and new supply comes online but the long term trend will be that home prices will continue to climb upwards over the next 20+ years.

Seattle has long been a desirable place to live due to the environmental beauty, natural resources, mild climate, quality of life, recreational opportunities, etc. Now combine that with the boom in jobs we are seeing as Seattle is becoming a center in the new knowledge economy as well as the confines on development in place due to the geography and environmental policies and it all points to this happening.

But of course, the whole reason I’m posting here is to see if I can be proved wrong… so far I haven’t heard a convincing argument (besides earthquake).

61. 61

I think you all are missing perhaps the most likely reason prices might moderate–more houses coming on the market!

Statistics are an odd thing. Back when I was working for United Parcel in the early 80s they knew from prior semi-trailers from Bellingham what percentage of a new semi-trailer from Bellingham would be going to different locations in the state and the US. And they obviously knew which of their conveyor belts were used for such locations. When a semi-trailer was emptied, they would figure out which trailer they wanted to start unloading based on that expected mix of packages from that trailer. So they would figure out what would happen to the existing load on the belts if the next trailer they unloaded a trailer from Bellingham, as opposed to say one from Portland. Or if a belt became overloaded, they might have an unloader move to a trailer that would be expected to have less packages for that overloaded belt. What’s amazing is the somehow did this all without computers.

You can see the same thing with freeway traffic during non-rush hour. All those people are going from different point X’s to different point Y’s, and their leaving to start their trip is for the most part totally independent of everyone else leaving. But somehow you don’t get all the people wanting to go from Seattle to Bellevue leaving at 1:00 p.m. (ignoring maybe a snow storm), so you don’t typically get huge backups during non-rush hour (ignoring I-405 south which lack capacity for normal traffic).

But it doesn’t have to work so smoothly. That trailer from Bellingham might for some odd reason have 80% rather than 8% of its packages going to the San Juans, and totally mess things up.

The same thing could happen with our housing market. The flow of houses onto the market has been fairly steady, but if one month 8,000 listings more than normal came on the market in King County that would have a significant impact. That happening doesn’t depend on tech stocks crashing, England leaving the EU or any other thing. It could happen just randomly as a statistical anomaly. And if that happened without affecting future months, prices would moderate.

62. 62

By Justme @ 50:

>>I am an employee at a tech company. I joined the company less than three years ago and my annual income is already double the median price!

Your annual income is over \$1.1M ? That would make you extremely atypical, or maybe just a typo.

Sorry. It’s a typo. I meant to say “double the income required to afford the median home price.”

63. 63
Blake says:

By Action @ 60:

RE: Justme @ 52

Justme, I’m a pessimist. It sounds like you are too. I am not rooting for higher prices. I’ve lived in the Seattle area my entire life and it’s sad to see long time residents priced out by all the newcomers. …When I take a step back and consider the big picture and what the biggest risk to the housing market, I don’t see a bubble pop and a repeat of history as the biggest risk. …
What I see as the worse case scenario is the continued polarization of the haves and the have nots. It will become harder and harder to become a property owner in the future if you are not one already and affordability will continue to get worse.

Good post. One thing to consider – that most people can’t seem to accept – is that since the de-liberalization of capital markets began in the late 1990s each subsequent economic crisis was worse than the proceeding one: 1997 Asian debt crisis (saved by central banks slashing rates and providing a rescue to LTCM and others), 2000/1 dotcom crash, and the 2008 credit crisis (saved by massive bank bailouts, trillions in liquidity and rates cut to zero!) So… I can’t figure out why people suppose that the next recession and credit crisis will be mild or “routine”…? Interest rates are already near zero, the central banks’ balance sheets are already bloated, and the US, China, Japan and other countries have been engaging in massive stimulus for years… IF we go into a recession the tools we’ve used in the past are already gone! Add to this the fact that the largest banks are even larger than they were in 2007 and just as interconnected via opaque derivatives contracts, so the contagion spread internationally from wherever things start to collapse! This is why so many of the billionaire investors like Soros and Icahn and others have been buying gold and holding cash…

But you are exactly right in your post about the long term problem: “continued polarization of the haves and the have nots.” This is THE economic problem of the 21st century because the great increase in incomes and standard of living we saw in the 20th century was driven by consumer spending – – roughly 70% or the economy in developed nations. Now, under “supercapitalism,” the owners have more power to extract rents and suppress wages to make enormous profits… but the workers/consumers are having a hard time paying off debts and buying stuff… including houses.
… It’s all about power and checks and balances. We know where the power lies and that the checks and balances are ineffective, so I don’t see anything really changing… except maybe after the NEXT financial crisis and bailout!

Mervyn King, the former head of the Bank of England, is a pessimist and notes the problems still “baked into the system:”
http://www.afr.com/markets/michael-lewis-says-mervyn-kings-book-the-end-of-alchemy-will-save-banking-20160506-gontbp
… King’s starting point is that the 2008 crisis wasn’t an anomaly but the natural consequence of bad incentives that are still baked into money and banking – and so quite likely to create another, possibly even greater, crisis. “The strange thing,” he writes, “is that after arguably the biggest financial crisis in history nothing much has really changed in terms either of the fundamental structure of banking or the reliance on central banks to restore macroeconomic prosperity.”

The limited liability of shareholders still incentivises them to allow the banks in which they invest to take greater risks than they would if they were forced to live with not just the gains from financial risk-taking but also the losses. Small depositors, whose funds are being turned into risky investments, are still covered by deposit insurance, so they could care less what the bankers do.

The financial system, King reveals, is still wired so that a handful of well-connected people capture the benefits from risk-taking while the entire society bears the cost. Complexity was once used to disguise the risk in the financial system. Now it’s being used to disguise how little has actually been done to fix that system.
(end quote)

That’s a great article by Michael Lewis about his former professor Mervyn… read the whole thing!
I loved this line: “The central bank would go from being the lender of last resort to what King calls the pawnbroker for all seasons.”

64. 64
65. 65
Blurtman says:

RE: Blake @ 63 – “The financial system, King reveals, is still wired so that a handful of well-connected people capture the benefits from risk-taking while the entire society bears the cost. Complexity was once used to disguise the risk in the financial system. Now it’s being used to disguise how little has actually been done to fix that system.”

The Fed will always bail out the banks. Crises that result in bankruptcies due to unforeseen events, but crises that have been due to greed and fraud as well. The Fed does not indict bankers, it does no involve itself in investigating criminality. Yellen made that clear. Bankers don’t go to jail, and then perhaps it becomes a judgement call as to how long you can keep taking outsize risks before the system crashes. And when it does, the Fed is there to bail out, and the taxpayers get the bill.

66. 66
Blurtman says:

RE: Blake @ 63 – The Glass- Steagall Act was the first law signed by President Franklin D. Roosevelt upon taking the oath of office. Almost immediately upon enactment, the financial community lobbied to have the Act repealed. Over the years, this persistent lobbying led to a continual reinterpretation and liberalization of the Glass-Steagall Act, until the Act was repealed in 1999. On the dawn of repeal, the late Senator Paul Wellstone made an impassioned plea on the Senate floor. He said the repeal of Glass-Steagall would enable the creation of financial conglomerates which would be too big to fail. Furthermore, he believed that the regulatory structure would not be able to monitor the activities of these financial conglomerates and they would eventually fail due to engaging in excessively risky financial transactions. Ultimately, he said, prophetically, that the taxpayers would be forced to bail out these too-big-to-fail financial institutions. Clearly, Senator Wellstone was in the minority as the legislation repealing the Glass-Steagall Act was passed in both the House and the Senate with large majorities. President Bill Clinton signed the legislation into law in late November, 1999. It has now been over ten years since the repeal of Glass-Steagall and the United States is in the grip of the largest financial crisis since the Great Depression. Legislators and regulators are again questioning the role that the investment banking activities of commercial banks have played in a financial crisis. Some believe the repeal of Glass-Steagall contributed significantly to the current financial crisis. Others believe that if Glass-Steagall had still been in place, the financial crisis would be much worse. http://www.cluteinstitute.com/ojs/index.php/JBER/article/view/949

67. 67
Justme says:

RE: GoHawks @ 59

>>Rates have been falling for 30 years.

No, rates have BEEN INTENTIONALLY FORCED DOWN by the FRB for 30 years, and we are now hitting the wall. There was nothing natural about falling rates. It was an intentional act to enrich the banks and the top 0.1% via asset inflation and debt inflation.

RE: Blake @ 63

GoHawks, what Blake said above is also relevant. The bubbles have become more and more extreme since 1988, and the next burst will be even worse than last time.

68. 68
Justme says:

RE: Doug @ 64

>>Justme, here’s some bear fodder for you: http://www.seattletimes.com/business/report-big-drop-in-bay-area-transplants-coming-to-seattle-to-take-your-homes/

Yes indeed. Not everyone wants to live in Seattle. Plenty of people prefer Austin, Texas.
And Denver, Boston and Washington, D.C, as was mentioned in the article.

69. 69
Justme says:

RE: Action @ 60

>>Justme, I’m a pessimist. It sounds like you are too. I am not rooting for higher prices.

Hmm, I’m an optimist that prices will come down. If I was a pessimist I would have bought already.

I’m not sure you really are rooting for lower prices. In my estimation you sound more like a “concern shill”. You know, like a “concern troll” with an added shilling function :-).

70. 70
Blake says:

RE: Blurtman @ 66
Once all those investment banker/gamblers got their paws on those insured deposits to use as collateral they’ll never let us take it away from them again. Plus none of the reforms passed since 2008 prevent them from selling products underwritten by their commercial side to unwitting investors… Conflict of interest? No… business as usual!

“And remember, where you have a concentration of power in a few hands, all too frequently men with the mentality of gangsters get control. History has proven that.” – Lord Acton

71. 71
Anonymous Coward says:

Under what scenario do we return to “natural” interest rates without wage inflation? Because that’s the only scenario under which we get a drop in house prices because buyers can’t afford the monthly nut.

Along those same lines, if we enter a recession with the fed “out of ammo” (due to keeping interest rates artificially low), doesn’t that imply they’ll be forced to print money directly? If one believes this is a likely scenario, shouldn’t one be taking on as much real estate debt as possible as an inflation hedge?

72. 72
Justme says:

On the topic of affordability metrics:

I went back and read (most of) the thread that Kary linked to, and I noticed that TheTim previously had been using a different metric than in the current thread. Specifically Tim was using Case-Shiller index in the form of

unaffordability= CSindex(tri-county)/per-capita-income

and also

unaffordability= medianlistprice(KingCounty)/per-capita-income

What might be the reason for now using

unaffordabilty= medianlistprice/medianincome

I did a search of the site (see reference) to see if I could spot any discussion of the change of metric, but came up empty. Maybe Tim would care to explain if he has time. By the way, I think the 2015/07/24 discussion was quite good.

References:

73. 73
Mike says:

RE: Mike @ 16 – You forgot two important expenses: vacancy and maintenance. I don’t think your example pencils.

The place I was referring to has all systems replaced, new roof, it’s just an unattractive house with some expensive to fix structural issues – but issues that don’t have to be fixed. For \$550K it’s not too far above lot value, so in a few years you tear the ugly place down and put in something that takes advantage of the sound view. At \$1500/mo for each floor (2 bed/1bath, 900 sq ft/floor) with off street parking it’s not likely to be sitting vacant much, that’s a very good rental rate in Ballard for a decent size 2 bedroom. Main problem with the house is how it’s situated on the lot and some settling that was remodeled over. It’s a dump, but not because it’s in bad shape.

74. 74
redmondjp says:

Excellent macroeconomic discussion above! Too much money sloshing around = lots of bubbles (assets, housing, tech startups) simultaneously.

So what do unemployed software developers do when they can no longer find a job? Does any developer out there have a plan B, once the VC financing runs out?

75. 75
Justme says:

Brexit is winning, hold on to your hats. Britannia ruling again is going to make some big waves.

In fact, the waves are already here. Japan is down 8.2%, Hong Kong down 4.7%. GBP/USD down 9.9%.

76. 76
Blake says:

RE: Justme @ 75
It’s carnage in the markets… gonna trigger circuit breakers in US markets tomorrow. Things will calm down and the EU will probably force Brits to change their vote, but long term… the EU is going to fail.

77. 77
Blake says:

Welcome to Black Friday…
http://www.ft.com/cms/s/0/3983d77a-396b-11e6-9a05-82a9b15a8ee7.html#axzz4CTY8QEOm
… The risk that this Friday will go down in history as altogether blacker is very real. The next move belongs to the central banks. Only when we have survived the short term, can we start to worry about the long term.

78. 78
Justme says:

France CAC40 index was just down 10.25% a few minutes ago.

>>The next move belongs to the central banks.

Gawd, I hope not. I’m sick and tired of Central Bank intervention.

79. 79

By Blake @ 76:

RE: Justme @ 75
It’s carnage in the markets… gonna trigger circuit breakers in US markets tomorrow. Things will calm down and the EU will probably force Brits to change their vote, but long term…

It’s okay. Obama already signed an executive order preventing the exit. ;-)

Seriously, I wouldn’t based the long term impact on the short term market reaction. Many in the markets love movement, so think this is a good thing.

80. 80
Doug says:

RE: Justme @ 78 – I was going to say Brexit is just what you needed to fulfill your bear narrative, but then I looked at rates…

81. 81
ess says:

By Doug @ 80:

RE: Justme @ 78 – I was going to say Brexit is just what you needed to fulfill your bear narrative, but then I looked at rates…

That is right! Economic uncertainty of this type typically results in lower interest rates. Furthermore, in a world that is looking for stability – United States paper is always a safe haven for those traveling in uncertain waters. More purchasing of US paper – lower interest rates.

82. 82
Blurtman says:

But Janet said….

83. 83
Blurtman says:

RE: Kary L. Krismer @ 79 – Drones are on the way.

84. 84
GoHawks says:

RE: ess @ 81 – mortgage rates moving to new lows for the year.

85. 85
ess says:

By GoHawks @ 84:

RE: ess @ 81 – mortgage rates moving to new lows for the year.

I know, every time I see mortgage rates go down – I say to myself – they can’t go down any more, and then they do. For someone who remembers mortgage rates north of 10% – these rates blow me away. Time to do a refi……

86. 86
pfft says:

RE: Blake @ 63 – The Glass- Steagall Act was the first law signed by President Franklin D. Roosevelt upon taking the oath of office. Almost immediately upon enactment, the financial community lobbied to have the Act repealed. Over the years, this persistent lobbying led to a continual reinterpretation and liberalization of the Glass-Steagall Act, until the Act was repealed in 1999. On the dawn of repeal, the late Senator Paul Wellstone made an impassioned plea on the Senate floor. He said the repeal of Glass-Steagall would enable the creation of financial conglomerates which would be too big to fail. Furthermore, he believed that the regulatory structure would not be able to monitor the activities of these financial conglomerates and they would eventually fail due to engaging in excessively risky financial transactions. Ultimately, he said, prophetically, that the taxpayers would be forced to bail out these too-big-to-fail financial institutions. Clearly, Senator Wellstone was in the minority as the legislation repealing the Glass-Steagall Act was passed in both the House and the Senate with large majorities. President Bill Clinton signed the legislation into law in late November, 1999. It has now been over ten years since the repeal of Glass-Steagall and the United States is in the grip of the largest financial crisis since the Great Depression. Legislators and regulators are again questioning the role that the investment banking activities of commercial banks have played in a financial crisis. Some believe the repeal of Glass-Steagall contributed significantly to the current financial crisis. Others believe that if Glass-Steagall had still been in place, the financial crisis would be much worse. http://www.cluteinstitute.com/ojs/index.php/JBER/article/view/949

too big to fail is misrepresented. During the Great Depression thousands upon thousands of banks failed. it’s easier when a large bank fails. try untying a knot of hundreds of banks! it doesn’t matter if there are 100 banks or 100,000 banks. they are all getting bailed out. If there are \$500 billion in loses does it matter if that is spread out over 1,500 banks or 150 banks? let’s say a large bank fails. do you think it’s easier to unwind that one bank or the 3 it split into? it’s all about capital requirements. that’s the real deal. even the lowliest bank gets bailed out by the FDIC. if the banks are sufficiently capitalized they won’t need a bailout. we should have smaller banks but it’s not a panacea.

87. 87
Blake says:

By Doug @ 80:

RE: Justme @ 78 – I was going to say Brexit is just what you needed to fulfill your bear narrative, but then I looked at rates…

Doug, I was a little confused by your comment, but then realized that you and many RE bulls think that as long as rates stay low the housing market will stay UP! I recommend you read what I posted @63… rates on 10 year bonds fell 10% today… that is NOT a bullish sign for the economy.

Some not very bullish remarks by the former Fed Chairman today:
http://www.marketwatch.com/story/alan-greenspan-says-brexit-is-only-the-tip-of-the-iceberg-for-europe-2016-06-24
”This is just the tip of the iceberg,” Greenspan said in an interview on CNBC. “The global economy is in real serious trouble.” The rejection of British voters of the status quo in Europe was fueled by a “massive slowing” in the growth rate of real incomes that is widespread across Europe, Greenspan said. This, he said, is creating serious political problems that are not easy to resolve.

The biggest concern is not a recession, but stagnation, the former Fed chief said.
(end quote)

Stagnation… the world economy is grinding to a halt… and the US (and Seattle) is not immune.
btw: You think if mortgage rates drop from 3.5% to 3.0% people will suddenly start buying… especially if they are being laid off? I’m not so sure that Boeing, Amazon, Expedia and other local firms will do well in such an environment…

88. 88
redmondjp says:

Now everybody sing along:

When deflation comes along
You must NIRP it
Before the market’s down too long
You must NIRP it
When something’s goin’ wrong
You must NIRP it

Now NIRP it
Into shape
Shape it up
Get straight
Go forward
Try to detect it
It’s not too late
To NIRP it
NIRP it good

89. 89
pfft says:

business insider just had an article saying that the big banks are trading like crazy and profiting off of the brexit.

good job brexiters. do brexiters really think they are going to cause all this grief AND get a better deal? brexiters are like workers who want all the benefits of being a union member w/o being in the union or paying dues…

90. 90
Blurtman says:

“Clinton: Brexit shows need for ‘experienced’ leadership.”

Britain should have had experienced leadership in place, I guess. Oh, wait,…

“Greenspan: “This is the worst period, I recall since I’ve been in public service. There’s nothing like it, …”
http://www.cnbc.com/2016/06/24/alan-greenspan-says-british-break-from-eu-is-just-the-tip-of-the-iceberg.html

In spite of experienced leadership. Errr….

91. 91
Blake says:

By pfft @ 89:

business insider just had an article saying that the big banks are trading like crazy and profiting off of the brexit.

JPM, Goldman and Citi are all down 7-9% today… so Jamie Dimon is bragging that FX trading is up 3x, trying to boost his stock price. yes, they are making money (they always do), but their banks are taking a beating.

The brexiters are sick of neoliberal globalism and elite planning from on high. I find it hilarious that all the experts were sure that the vote would fail and bid up the pound and markets yesterday.
But don’t worry pfft… the EU/elites don’t take no for an answer:
http://www.moonofalabama.org/2016/06/brexit-not-gonna-happen.html

The beatings will continue until morale is restored…

92. 92
Screenname345 says:

@Blake. Alan Greenspan is a shill for the hedgefund industry now. He was also responsible for the greatest equity bubble of our generation so I wouldn’t incorporate anything he says into my investment decisions.

An unexpected but very likely consequence of Brexit and further unstability of the EU is greater investment by wealthy foreigners in US real estate. We are the flight to safety play which is why our dollar has strengthened off these macro economic events last several years now. This is exactly what has happened here in Seattle real estate due to China’s slowdown. If anything things are going to get much worse here in terms of real estate appreciation, until yes we also turn into a bubble that will pop. How long as the bubble in London been going on, I would say at least 10+ years if not more. Ours is just getting started.

93. 93
pfft says:

By Blake @ 91:

By pfft @ 89:

business insider just had an article saying that the big banks are trading like crazy and profiting off of the brexit.

JPM, Goldman and Citi are all down 7-9% today… so Jamie Dimon is bragging that FX trading is up 3x, trying to boost his stock price. yes, they are making money (they always do), but their banks are taking a beating.

The brexiters are sick of neoliberal globalism and elite planning from on high. I find it hilarious that all the experts were sure that the vote would fail and bid up the pound and markets yesterday.
But don’t worry pfft… the EU/elites don’t take no for an answer:
http://www.moonofalabama.org/2016/06/brexit-not-gonna-happen.html

The beatings will continue until morale is restored…

the brexiters don’t even know what they voted for.

94. 94
Green-Horn Investor says:

RE: Justme @ 53

Many more articles and brief updates: Check out the new Seattle Times reporter on the real estate beat – Mike Rosenberg on twitter @ByRosenberg

95. 95

By pfft @ 89:

business insider just had an article saying that the big banks are trading like crazy and profiting off of the brexit.

That’s what I was expecting when I said this:

Seriously, I wouldn’t based the long term impact on the short term market reaction. Many in the markets love movement, so think this is a good thing.

If the market stays flat, no one makes any money. If it goes up or down, someone makes money. If it goes up AND down, more people make money.

96. 96
Doug says:

RE: pfft @ 93 – Sad, but very true. The county of Cornwall emphatically voted to leave and is now worried about what’s going to happen to the massive EU subsidies it has been enjoying for years.

Whoops?

97. 97
Bob says:

Brexit will spread. People are sick of high prices, stagnant/declining wagers, economic, and inequality of opportunity. The elites and their political apparatus have cannibalized the system so badly there is no chance to recover . As this spreads via Trump and other manifestations of worldwide discontent, expect reduction of globalization, bias against immigration, lower stock prices, lower real estate prices, and an enormous rise in central bank criticism, leading to higher interest rates and return of market forces. Money printing is no longer an option after the public realizes the damage it causes. The public consciousness is almost there, if not there.

98. 98

By Bob @ 97:

WAxit?

Maybe we could join Canada. Wasn’t there talk a few years ago of the western provinces leaving Canada and joining the US?

99. 99
pfft says:

By Bob @ 97:

no it won’t. do you think another country wants to see their currency sink 13% in one day? nope. do you think they want to renegotiate trade deals again?

100. 100
Anonymous Coward says:

RE: pfft @ 99 – If Greece could convert their debt from Euros to Drachmas, they’d love to see their currency sink 13% in one day.

101. 101
boater says:

RE: pfft @ 99
Euro members have seen their currency drop from about 1.35 dollars to the euro to 1.11 currently. They’ve already seen a 10%+ drop. And they’re unemployed. The question may come down to do you want a job but the currency trades at half the dollar or would you rather have a strong currency and no job.

102. 102
Doug says:

RE: Anonymous Coward @ 100 – Yeah, that’s right. There are 2 ways to reduce debt: 1) default or 2) inflate.

Greece can do neither so they will forever be in recession. Same is true of the rest of the PIGS. I think Brexit is the catalyst that countries like Greece needed to finally leave the EU.

The great EU science experiment is finally unraveling. You can’t have a monetary union without a political union — not sure why anyone ever thought it would work.

103. 103

By pfft @ 99:

By Bob @ 97:

no it won’t. do you think another country wants to see their currency sink 13% in one day? nope. do you think they want to renegotiate trade deals again?

Yep, every major decision should be based on how the financial markets react in one day.

I’m not seeing that renegotiating the deals would be that difficult. You already know what the other side will agree to! Now maybe if you put Obama in charge of the negotiations you would get total gridlock, but other than that it should be a piece of cake.

104. 104
pfft says:

By boater @ 101:

RE: pfft @ 99
Euro members have seen their currency drop from about 1.35 dollars to the euro to 1.11 currently. They’ve already seen a 10%+ drop. And they’re unemployed. The question may come down to do you want a job but the currency trades at half the dollar or would you rather have a strong currency and no job.

you are stereotyping euro members. some countries have low unemployment. we are talking about a one day drop. if Greece didn’t leave I doubt many others will. there are a thousand things to renegotiate if you leave. you’ll never get a better deal outside the outside the union.

for example:

“I don’t want to lose my freedom to live and work in 28 different countries and hopefully my Irish grandma will help me”

Belfast Post Office runs out of Irish passport forms after Brexit

If you are British you can pay local tuition on the continent. not so anymore.

The Brexit will create ‘significant challenges’ for universities

My guess is there is a good chance of no brexit. there will be long negotiations and then Parliament won’t approve.

105. 105
pfft says:

By pfft @ 99:

By Bob @ 97:

no it won’t. do you think another country wants to see their currency sink 13% in one day? nope. do you think they want to renegotiate trade deals again?

Yep, every major decision should be based on how the financial markets react in one day.

I’m not seeing that renegotiating the deals would be that difficult. You already know what the other side will agree to! Now maybe if you put Obama in charge of the negotiations you would get total gridlock, but other than that it should be a piece of cake.

the rest of the euro nations are mad. you aren’t getting the same deal. it’s like a divorce. you aren’t sleeping on the couch while your wife sleeps in your old room. your butt is in a motel room.

106. 106
pfft says:

I should stress that the brexit vote was non-binding. britain is not out of the EU. they have to formally declare and then negotiations take place. it will take years. parliament then has to approve. who knows if they approve? if an MP from a brexit area has constituents that don’t want a brexit now how will he or she vote? in the US for example we have lawmakers who won’t vote for gun safety laws even though those laws are generally popular.

there even could be a 2nd vote. people already regret their vote. they didn’t actually think britain would leave if they voted for it.

107. 107
Justme says:

Thanks for the tip. It looks like Mike Rosenberg has written many Seattle housing reports already, but only recently got a full-time job n Seattle.

108. 108
Justme says:

My goodness, there is a lot of Brexit anxiety among the bubble-blowers here. And for good reasons. Brexit is bad for banks, good for people, and will drive asset prices downwards. One of the many reasons that Brits voted for Brexit is hat they cannot afford buying houses in their own country because of all the bankers causing asset flation, and oligarchs taking advantage of open borders and lax financial regulations. Brexit is all good.

109. 109
pfft says:

By Justme @ 107:

My goodness, there is a lot of Brexit anxiety among the bubble-blowers here. And for good reasons. Brexit is bad for banks, good for people, and will drive asset prices downwards. One of the many reasons that Brits voted for Brexit is hat they cannot afford buying houses in their own country because of all the bankers causing asset flation, and oligarchs taking advantage of open borders and lax financial regulations. Brexit is all good.

lol. brexit it terrible. they already regret it. one guy owns a vineyard in bourdeaux, he exports most of this win to Britain. good luck with that now. tons of “uncertainty.” brexit was basically supported by a bunch of old angry people. rascism and anti-immigrants fever is already rearing it’s ugly head.

Brexit Has British Expats Worried—and Very Angry
http://time.com/4381643/brexit-british-expats-european-union/

“Like others, Quinney also believes the Brexit is “a game-changer” for his business, since much of the 200,000 bottles he produces a year are sold to the U.K., which imports French wines tariff-free, under the E.U.’s single market.”

Instances of Racism and Xenophobia Documented Across Britain Following Brexit Vote
http://gawker.com/instances-of-racism-and-xenophobia-documented-across-br-1782636905

From single market to many markets, what could go wrong?

110. 110
Som says:

RE: pfft @ 108 – It’s a very slippery slope. How to become a nationalist leader:
-> First, promote pseudo nationalism and show false dreams to people to come in power.
-> Second, once in power, realize that the dreams you sold were fake and cannot be achieved by civilized means.
-> Third, concoct a reason for failure to the masses. I.e. double down on psuedo nationalism and explain that the minorities are the reason for your failure.
-> Fourth, rampage against the minority, take their wealth and distribute among the majority. Instant gratification. Continue blaming the minority till your power expires.

We learn from history that we don’t learn from history.

111. 111
Blurtman says:

By Som @ 109: It’s a very slippery slope. How to become a candidate. Works for liberals and conservatives, Democrats and Republicans alike:
-First, promote pseudo answers to perceived problems, and show false solutions to people to come in power.
-> Second, once in power, realize that the solutions you sold were fake and cannot be achieved by civilized means.
-> Third, concoct a reason for failure to the masses. I.e. double down on pseudo answers to perceived problems and explain that the – fill in the blank(s) -are the reason for your failure.
-> Fourth, rampage against the -fill in the blank(s)- Continue blaming the -fill in the blank(s)- till your power expires.

Politicans learn from the past what works to get elected.

112. 112
S-Crow says:

Speaking of learning or not from history…….

Dear Dr. Shiller, is the irrational exuberance here yet? If the seeds have been planted are they growing? If it is firmly in place, how will that, coupled with Brexit, impact our economy and housing specifically? Lots of people (particularly in banking/gov’t) said that we could never have seen the financial crisis coming.

S-Crow

113. 113
Cap''n says:

RE: Justme @ 107

Causing asset flation. Inflation of asset values. Assflation. Someone get that Wikipedia entry started.

114. 114

By pfft @ 105:

there even could be a 2nd vote. people already regret their vote. they didn’t actually think britain would leave if they voted for it.

You really are gullible, believing everything you read in the press. 33 million people voted, the press finds a couple that think that they might want to change their mind or thought it meant something else, and a measly 3 million people sign a petition, and you think that means something?

One thing is clear, the press doesn’t like Brexit. After the election they were Googling in mass: “What is the EU?” :-D

115. 115
Doug says:

RE: Justme @ 107 – How exactly will Brexit make housing affordable? By plunging the country into recession?

Seems like cutting of the nose to spite the face.

116. 116
Anonymous Coward says:

RE: Doug @ 102 – Of course, if the Southern countries had been able to have their way, the Euro would’ve been devalued. But the Germans have been trying to both keep their currency relatively high AND be a major exporter. They made it work for a while by giving cheap loans to the Greeks (and the Italians, and….) with which the Greeks would buy German goods. At this point, I think it’s the Germans who will determine the future of the EU. They’re going to be forced to choose between their banks (and lowering the Euro and changing the rules to allow more debt) and the EU itself.

117. 117

Here’s a great example of the press being extremely biased in their negative coverage.

The points of the article:

1. A political ad might not have been 100% accurate because 350 million Pounds of money going to the EU may not 100% go to British Healthcare. (And the article makes that claim even though they confusingly simultaneously argue that wasn’t a commercial of the Leave campaign.) OMG, a misleading campaign ad! Obviously the election results were a mistake! /sarc

2. Immigration numbers may not fall after the exit. Apparently this member of the press doesn’t have the IQ or the education to understand the simple difference between how many people come in and having control over how many people come in and who they are. That’s a pretty simple concept.

118. 118
Justme says:

RE: Cap”n @ 112

When I first used the term Assflation I used it as a pun on Stagflation , which was a well known term. But when I googled it, it was clear I was not the first one. But thanks for remembering, Really!

119. 119
Justme says:

RE: Doug @ 114

I think you know the answer already: By deflating the UK housing bubble. It has already been ongoing in the high-end markets for at least 6 months, and now the bubble deflation will spread to more market segments.

By the way the recession was coming either way, both in US and Europe. Brexit was just a triggering event that exposed the bad condition of banks and debt. Both US and EU are loaded to the gills with debts, with housing and corporations being the two main problem areas in the US, and international loans also being a big factor in EU.

I was referring to Seattle myopia in an earlier post, The bubblers on this blog have been going on and on about how special the conditions of Seattle are, but a few of us have been saying it just isn’t so. Now may be a good time to take a dose of reality and realize that Seattle is just a cog in a big machine, and the whole machinery has been a vulnerable state that has not gotten any better.

120. 120

RE: ess @ 3

Should they use their down payment savings to afford rent?

Here’s a 500%+ one day increase in monthly rent from your favorite sanctuary city, SF:

https://www.yahoo.com/news/san-francisco-man-fights-eviction-131043945.html

121. 121

RE: Justme @ 119
Yes Just Me

Spoken like someone who survives not on old family money, but a job income…IOWs “skin in the game”. An investor that uses their brain not the silver spoon in their mouth.

122. 122

RE: Justme @ 118
The dinky GDP [most of it just oil price gouging at the pump], Total Labor Participation [62.5% with 37.5% unemployed give ups] and DOW Plummet [it continues today with a 2 year get well] with Brexit Means One Thing

We’re CLEARLY already in a recession before Brexit.

123. 123
Justme says:

Yes, indeed. The corporate media is almost uniformly spreading anti-Brexit propaganda, including trying to create a completely false sentiment that the referendum does not matter. Well, guess what, David Cameron today came out and said THERE WILL BE NO SECOND REFERENDUM.

Then there is the propaganda that is trying to tar the Brexit supports as racist, xenophobic, backward and ignorant . Refer to post 109 by pfft for examples of that. What rubbish. Brexit supporters are anti-globalists, and against multinational banks and corporations usurping UK’s right to self-determination. It is as simple as that.

And then there is the propaganda that it will be oh-so-complicated to get a trade agreement between EU and UK (example: post 109 again). Again not true. There are several countries in Europe that never were EU members, Switzerland and Norway in particular, and they both have trade agreements with EU by being members of the European Free Trade Association (EFTA), or the European Economic Area (EEA) agreement. It should be simple enough to join at least one of those agreements.

124. 124
Doug says:

RE: Justme @ 119 – The problem is that UK housing prices won’t deflate in a vacuum. Other asset prices will go down as well and the Brexit voters won’t find themselves any better off once the dust settles.

I’m not a Seattle bubbler and I can objectively say that the US is the clear winner in a post Brexit world (combined with general uncertainties in the EU). US assets are attractive and Seattle will likely be a beneficiary.

I will say that Brexit has shown us that the populist movement is real and that has major implications for a Trump presidency.

125. 125
Blurtman says:

RE: Doug @ 124 – I just don’t see Trump getting elected president. I can see why conspiracy theorists believe he is a Democratic plant.

126. 126

RE: Doug @ 124 – I just don’t see Trump getting elected president. I can see why conspiracy theorists believe he is a Democratic plant.

Or a mainstream press plant. The free coverage he has gotten has been extreme.

127. 127
Doug says:

RE: Blurtman @ 125 – It’s just amazing how horribly wrong the pollsters and the markets were when it came to predicting Brexit. Could Trump similarly come out of nowhere to win?

His campaign has been a gigantic joke since the beginning and yet he’s still here.

128. 128
pfft says:

By Doug @ 127:

RE: Blurtman @ 125 – It’s just amazing how horribly wrong the pollsters and the markets were when it came to predicting Brexit. Could Trump similarly come out of nowhere to win?

His campaign has been a gigantic joke since the beginning and yet he’s still here.

the pollsters weren’t that wrong. it was a close vote. you know that even though the bookies had remain at 75% that still means that there was a 25% that leave would win? 1 out of 4 votes could produce that result.

The markets show brexit is a bad idea. imagine if Bernie or Hillary put forth economic programs and the dollar tanked 13% and the dow went down 9%?

Brexit still isn’t official and may not happen.

129. 129

AMZN, GOOG, MSFT, FB, …. stocks are all back to the level they were at 6 months ago. Rumors of major layoffs at Microsoft coming up in July.

What does this tell?

130. 130

By pfft @ 128:

The markets show brexit is a bad idea. imagine if Bernie or Hillary put forth economic programs and the dollar tanked 13% and the dow went down 9%?

The markets just don’t like uncertainty. It doesn’t mean it was a bad idea.

131. 131

Wow, Tim thinks homes are more affordable than NAR! ;-)

Seriously, NAR’s just taking a position to then take other positions.

132. 132
Blurtman says:

A good score.

1904 212th Ave SE,
Sammamish, WA 98075
4 beds 3 baths 2,240 sqft

\$825,000 Pending

Lot: 0.94 acres
Single Family
Built in 1977
60 days on Zillow

04/28/16 Listed for sale at \$825,000
+114%
\$368/sq.ft.

09/24/04 Sold \$385,000

http://www.zillow.com/homes/1904-212th-Ave-SE,-Sammamish,-WA-98075_rb/

133. 133
Justme says:

RE: Doug @ 124 – RE: Justme @ 119 –

>>The problem is that UK housing prices won’t deflate in a vacuum. Other asset prices will go down as well

Yeah, stocks and bonds are incredibly overvalued as well. That’s what general asset inflation means, with bubbles now appearing in pretty much ALL asset classes.

>> and the Brexit voters won’t find themselves any better off once the dust settles.

That’s where we disagree.

134. 134
Justme says:

RE: pfft @ 128

>>Brexit still isn’t official and may not happen.

My god, man, a referendum is not official? How daft can you get? That is just propaganda, plain and simple. Don’t even get started on trying to talk your way out of that one. Do come on.

135. 135
pfft says:

Two brexits in one week. not enough LOLs. Iceland!

136. 136
pfft says:

By Justme @ 134:

RE: pfft @ 128

>>Brexit still isn’t official and may not happen.

My god, man, a referendum is not official? How daft can you get? That is just propaganda, plain and simple. Don’t even get started on trying to talk your way out of that one. Do come on.

it’s non-binding vote. you have to invoke article 50 which won’t be for at least 3 months. Parliament has to approve. Apparently also if all members vote for Britain to stay in they can stay if they want. There might be another referendum. I guess you aren’t caught up with your brexit readings?

137. 137

RE: pfft @ 136 – Rather obvious you’re not an adviser to David Cameron. ;-)

138. 138
Blake says:

Brexit is just a symptom of a deeper disease… the same way Trumpf is a symptom of some larger problems with our society, the dysfunctional parties, and the horrible corporate media. (If the media were actually “liberal” they would have given Bernie 23 times more coverage than Trumpf and not the other way around!)

The referendum is not legally binding and the UK Parliament has to vote and then the Prime Minister has to invoke article 50 of the Lisbon Treaty and then a 2 year negotiation starts, etc etc…. IMHO, this will not go through.

So… why are the markets freaking out?
The vote was not legal, but it was political and it again indicates that the peasants are not too happy with globalization, the EU, and neoliberalism! This is the “elephant graph” that everyone is suddenly talking about (even though it was first published in 2012):

Bigger problems…
http://www.bloomberg.com/news/articles/2016-06-27/worst-of-brexit-pain-yet-to-be-felt-in-u-s-credit-banks-warn
There were signs economic risks were rising even before the Brexit vote: U.S. corporate profits are down 15.5 percent from a peak in the fall of 2014 and business investment has deteriorated, Richmond wrote. What’s more, companies — even large blue-chips — are about the least creditworthy they’ve ever been as they’ve borrowed rampantly in the face of weak earnings, according to Morgan Stanley. “A catalyst is here,” Richmond wrote. “The worry that global growth is weakening and central banks can’t do much about it, which was prevalent earlier this year, won’t be far behind.”

Brexit is not THE problem…
http://www.bloomberg.com/news/articles/2016-06-26/the-100-trillion-bond-market-s-got-bigger-concerns-than-brexit
“Anyone can be a contrarian without doing any work — that’s just saying ‘I don’t agree,”’ he said. “I sincerely believe we have low rates for a very long time. Structural problems are outweighing any kind of cyclical bounce.” … Regardless of where forecasters are now, Major says the likelihood of a U.S. recession over the next two years will probably push the consensus outlook lower. And even if the U.S. avoids that fate, the economy may stall enough so that it feels like a recession, especially for those left behind in the recovery. That’s likely to keep the Fed from raising rates further. “It looks to me like everyone is going to end up converging on a similar view: the Fed can’t do much,” Major said. “I’m already there. It’s more of a structural story and the Fed for international and structural reasons can’t hike. Others will get there from their more cyclical approach.”

Lawrence Summers is frightened and says this is worse for Europe than the UK:
https://www.washingtonpost.com/news/wonk/wp/2016/06/24/whats-crucial-to-know-the-morning-after-brexit/?postshare=821466778533248&tid=ss_tw
As suggested by the fact that stock markets in Italy and Spain are down almost twice as much as in the U.K., the prospects for Europe may in some ways be worse than for the U.K. There is the real risk of “populist exit contagion” in a number of countries. A credit crunch is a serious risk. …Normally in response to incipient downturns, central banks lower rates by 400 basis points or more. Nowhere do they have that kind of room. Nor is there large scope for reducing term and credit spreads given their very low levels. This is no time for austerity. Greater use of fiscal policy should be on the agenda almost everywhere and certainly with the change of government in the U.K.

After Brexit, Trump, Sanders and the misforecast British and Canadian general elections, it should be clear that the term political science is an oxymoron. Political events cannot be reliably predicted by pollsters, pundits or punters. All three groups should have humility going forward. In particular no one should be confident about the outcome of the U.S. presidential election. (end quote)

139. 139
Justme says:

RE: pfft @ 136

>>it’s non-binding vote.

That’s just sophistry on your part. Please show me the part of European Union Referendum Act 2015 that says the referendum is non-binding. Here it is:

http://www.legislation.gov.uk/ukpga/2015/36/pdfs/ukpga_20150036_en.pdf

It is the responsibility of the executive branch of the government (prime minister and cabinet) to invoke Article 50, which starts the formal process of separation of a member state from the EU. Cameron says this is up to the next government, which is Cameron;s way of trying to delay the process. However, if the government/executive ignores the will of the people, they do so at their own peril, and likely it will be removed by a vote of non-confidence in parliament.

I repeat: Any statement of referendum being “non-binding” is just propaganda.

140. 140
Blurtman says:

RE: Justme @ 138 – Likely many are on the end of a bad bet and are drumming up media support to create doubt to lower their losses. Talking one’s book.

141. 141
Justme says:

RE: Blurtman @ 139

Yeah, undoubtedly that is a big part of the motivation. And that is why the losers are so eager to frighten the UK voters into submission, trying to insinuate that the referendum is “non-binding”, and other nonsense. The corporate media is all over it, and the fingerprints of bubblers, banksters, financiers and globalists are all over the stories that get printed.

142. 142
pfft says:

By Justme @ 138:

RE: pfft @ 136

>>it’s non-binding vote.

That’s just sophistry on your part. Please show me the part of European Union Referendum Act 2015 that says the referendum is non-binding. Here it is:

http://www.legislation.gov.uk/ukpga/2015/36/pdfs/ukpga_20150036_en.pdf

It is the responsibility of the executive branch of the government (prime minister and cabinet) to invoke Article 50, which starts the formal process of separation of a member state from the EU. Cameron says this is up to the next government, which is Cameron;s way of trying to delay the process. However, if the government/executive ignores the will of the people, they do so at their own peril, and likely it will be removed by a vote of non-confidence in parliament.

I repeat: Any statement of referendum being “non-binding” is just propaganda.

you couldn’t be more wrong. there is no legal action that Cameron needs to take. zero.

143. 143
pfft says:

By Justme @ 140:

RE: Blurtman @ 139

Yeah, undoubtedly that is a big part of the motivation. And that is why the losers are so eager to frighten the UK voters into submission, trying to insinuate that the referendum is “non-binding”, and other nonsense. The corporate media is all over it, and the fingerprints of bubblers, banisters, financiers and globalists are all over the stories that get printed.

actually a lot of people regret their vote. I wouldn’t doubt that there isn’t another vote.

” trying to insinuate that the referendum is “non-binding”, and other nonsense.”

it is you dope. corporate media and banker blah blah blah. some are regretting brexit so you blame the media. blah blah blah.

144. 144
pfft says:

Here’s a great example of the press being extremely biased in their negative coverage.

The points of the article:

1. A political ad might not have been 100% accurate because 350 million Pounds of money going to the EU may not 100% go to British Healthcare. (And the article makes that claim even though they confusingly simultaneously argue that wasn’t a commercial of the Leave campaign.) OMG, a misleading campaign ad! Obviously the election results were a mistake! /sarc

2. Immigration numbers may not fall after the exit. Apparently this member of the press doesn’t have the IQ or the education to understand the simple difference between how many people come in and having control over how many people come in and who they are. That’s a pretty simple concept.

you dope, the next probablePM boris johnson(this dope is the best candidate Britain can find? really?) drove around on a bus plastered with the NHS talking point. That other idiot LaBarge even repeated the lie himself before denying it. a bunch of trumps in control over there.

if it was so great, why did they lie about it?

amateur hour.

145. 145
146. 146

By pfft @ 143:

you dope, the next probablePM boris johnson(this dope is the best candidate Britain can find? really?) drove around on a bus plastered with the NHS talking point. That other idiot LaBarge even repeated the lie himself before denying it. a bunch of trumps in control over there.

if it was so great, why did they lie about it?

amateur hour.

Apparently English isn’t your strong suit, either the language or the country. Everything I wrote seemingly went right over your head. Go back, read it again, putting your finger under each word and moving your lips if that helps.

147. 147
pfft says:

By pfft @ 143:

you dope, the next probablePM boris johnson(this dope is the best candidate Britain can find? really?) drove around on a bus plastered with the NHS talking point. That other idiot LaBarge even repeated the lie himself before denying it. a bunch of trumps in control over there.

if it was so great, why did they lie about it?

amateur hour.

Apparently English isn’t your strong suit, either the language or the country. Everything I wrote seemingly went right over your head. Go back, read it again, putting your finger under each word and moving your lips if that helps.

why not spare us the trouble and just state what you mean? The NHS was the main selling point. When have political leaders abandoned their central theme THE VERY NEXT DAY!

“Apparently this member of the press doesn’t have the IQ or the education to understand the simple difference between how many people come in and having control over how many people come in and who they are. That’s a pretty simple concept.”

Not if they want to trade with the rest of Europe they won’t have restrictive immigration policies. Plus there are plenty of British expats in Europe.

Plus you know that British immigrants have behaved all that well lately. English soccer fans rioted with both Russian soccer fans AND the French police. Plus a British immigrant tried to take a cops gun at a Trump rally.

Then of course there is their brexit debacle against Iceland. LOL. They should stick to improving their soccer.

148. 148

By pfft @ 146:

why not spare us the trouble and just state what you mean?

I did. It’s not my problem that you can’t understand simple points.

The NHS was the main selling point.

You need to figure out whether it was that, or racism, or whatever. Settle on one thing. But they didn’t abandon it. Again you need to learn how to read!

Not if they want to trade with the rest of Europe they won’t have restrictive immigration policies.

So none of then non-EU countries in Europe have restrictive immigration policies, or is it that they don’t trade? And I know the US has restrictive immigration polices. Do we not trade with Europe?

Plus you know that British immigrants have behaved all that well lately. English soccer fans rioted with both Russian soccer fans AND the French police.

But you can calm down now. Your leader has told you to quit acting hysterical, and given the term hysterical was used I think we must have been specifically thinking of you! Follow his directions as you do with everything else in your life.

149. 149
Rumpole says:

I would say Russia is the clear winner with this vote. A divided Europe has been one of the main Putin goals.

150. 150
pfft says:

Farage seems like a real Donald Drumpf. He is in total denial over the pound and markets tanking. He mumbles something about the markets are up YTD. LOL. He seems like an awful person. Why did Leave have to lie so much if their case was so good?

151. 151
pfft says:

kary the whole point of leaving according to the leave campaign was the NHS and immigration. they basically the next day said none of what they were selling was true or doable. THE NEXT DAY THEY THREW AWAY THEIR WHOLE TALKING POINTS! Actually the leave campaign was motivated by anti-immigrant sentiment and rascism/xenaphobia. Just like some secessionist movements are, including during the civil war here. Is anyone shocked that a xenophobic movement is based on lies?

Leave is a terrible idea. Britain will be poorer for it and it doesn’t look like anything will be gained.

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Blurtman says:

If you look at US immigration law history, the working public was behind banning immigrants willing to work for lower wages resulting in the enacting of legislation designed to ban Chinese, Italian and Eastern European immigration. Obviously racism does not explain it. Xenophobia is extremely off target, as it does not explain the motivation. Concern about wages was a large part of the motivation. Oddly enough, if you listen to the misleading gibberish emanating from the president, Bernie and Hillary, the USA always welcomed immigrants. Actually, the USA did not.

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Forestdweller says:

I have relatives and friends in the UK, I was very surprised to hear from them that they all voted to leave. One of their main reasons is the lack of Democracy in the EU. The EU “Commissioners” – leaders – are all appointed and not elected by popular vote. The European Parliament which has representatives from all member nations cannot propose law, make law, amend law or throw out law. For many years the leading bureaucrats have been driving an ever closer political union with no popular mandate. This was their first opportunity to say “no thanks”.

154. 154

By pfft @ 151:

kary the whole point of leaving according to the leave campaign was the NHS and immigration. they basically the next day said none of what they were selling was true or doable. THE NEXT DAY THEY THREW AWAY THEIR WHOLE TALKING POINTS!

No it wasn’t and no they didn’t. But other than that, good point!

155. 155

If you look at US immigration law history, the working public was behind banning immigrants willing to work for lower wages resulting in the enacting of legislation designed to ban Chinese, Italian and Eastern European immigration. Obviously racism does not explain it. Xenophobia is extremely off target, as it does not explain the motivation. Concern about wages was a large part of the motivation. Oddly enough, if you listen to the misleading gibberish emanating from the president, Bernie and Hillary, the USA always welcomed immigrants. Actually, the USA did not.

Excellent points. Although I do think that economic inequality of large groups leads to racism, I think you’re right on the motivation.

With our modern transportation systems you no longer need to allow the low income workers to immigrate–they can stay put and impact worker earnings. I think what the politicians missed in promoting free trade is that without the imported workers the only target for worker anger becomes the politicians!