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I promised an updated look at June data for the outlying counties, so let’s have a look at that. Here’s the latest update to our “Around the Sound” statistics for King, Snohomish, Pierce, Kitsap, Thurston, Island, Skagit, and Whatcom counties.
First up, a summary table:
| June 2019 | King | Snohomish | Pierce | Kitsap | Thurston | Island | Skagit | Whatcom |
|---|---|---|---|---|---|---|---|---|
| Median Price | $695,000 | $515,000 | $376,500 | $391,657 | $344,000 | $402,500 | $380,000 | $417,750 |
| Price YOY | (2.8%) | 0.7% | 7.3% | 10.6% | 5.8% | 5.1% | 11.8% | 7.1% |
| New Listings | 3,487 | 1,480 | 1,751 | 491 | 618 | 207 | 273 | 397 |
| New Listings YOY | (10.7%) | (12.2%) | (10.4%) | (17.8%) | (2.2%) | (12.7%) | 7.1% | (6.6%) |
| Active Inventory | 4,625 | 1,841 | 1,945 | 611 | 569 | 350 | 449 | 654 |
| Inventory YOY | 24.4% | 14.4% | (7.9%) | 3.7% | (14.4%) | 2.6% | 6.1% | 7.2% |
| Closed Sales | 2,718 | 1,215 | 1,521 | 432 | 553 | 186 | 213 | 326 |
| Sales YOY | (1.5%) | (1.7%) | (8.6%) | (5.5%) | (0.5%) | (11.0%) | 0.9% | (4.4%) |
| Months of Supply | 1.7 | 1.5 | 1.3 | 1.4 | 1.0 | 1.9 | 2.1 | 2.0 |
King County is the only place where prices are declining, and it also has the largest increase in active listings compared to a year ago. On the flip side, pending sales were up the most in King County, and it had one of the smallest declines in closed sales (sales rose in Skagit though). In most of the other Puget Sound counties, sales are declining, and listings are either falling or not increasing by much, and prices are rising.
Here’s a look at new listings across the region:
New listings fell everywhere but Skagit County in June. Bad news for buyers hoping to find more selection as we head into the summer.
Next up: Active inventory.
Inventory fell in Thurston and Pierce counties, but increased everywhere else. King and Snohomish saw the biggest gains, but both of those were far smaller than the gains we saw late last year and earlier this year.
Here’s the chart of median prices compared to a year ago.
The biggest increase in home prices in June was Skagit, where prices rose 12 percent. Kitsap was close behind with an 11 percent increase. Every other county was in the single digits.
Closed sales were down in every county but Skagit, where they managed an increase of less than one percent.
This graph is the most telling—every county is still a very strong sellers’ market. Most counties are slightly better for buyers than they were a year ago, but we’ve still got a long ways to go before we get even close to what most people would call a “balanced” market (4-6 months of supply).
If there is certain data you would like to see or ways you would like to see the data presented differently, drop a comment below and let me know.
” [..] but we’ve still got a long ways to go before we get even close to what most people would call a “balanced” market (4-6 months of supply)”
Alright guys, let’s hear it. (i’m serious)
(Grabs popcorn)
If we ever reach “balanced” market (4-6 months of supply), prices will have plummeted at least 20% from peak. LOL.
Agreed, 4-6 months of supply would hardly be balanced. That seems like blood in the waters.
Anyone know what the highest months of supply figure was during 2018?
Anyone know what the highest figure was during 2008-2011?
Zombie alert: The propaganda that 4-6 months of active inventory is needed for balanced market is being resurrected again and again by the the zombie bubblemongers.
Tre truth is 4-6 weeks, not months. The logic and function of a fully electronic marketplace dictates it
RE: Justme @ 4 –
first time i agree with justme.
apocalypse is near…
RE: Justme @ 4 –
Why? Plenty of healthy markets right now are at 4+ months of inventory and have been and continue to be appreciating in price. July stats for Houston, TX had months of inventory at 4.7.
If inventory in Seattle shot up to 4.7 months rapidly, I’m sure that would have a negative impact on price, but a gradual rise to those levels seems healthy. It’s working and has been working just fine for a lot of metro areas outside of Seattle.
By Justme @ 4:
You do realize I was quoting Tim, straight from the posting, right? I’m going to assume you knew that and rather just wanted to emphasize what you said…(i’m not necessarily disagreeing with you. I just wanted to clear it up in case you thought I or anyone below my original post was trying to imply otherwise)
By Justme @ 4:
LOL. You think the “fully electronic marketplace” dictates anything? The only thing that speeds up the process significantly is having an electronic system of distributing listings, and that’s been in place for decades now. You realize these numbers are from list date to contract date, so anything after that is irrelevant. Also, not every buyer is interested in every house, so there needs to be some selection for them not to feel like they are forced to settle.
I would agree 4-6 months is too long, but there’s always been debate on that. I would put it at more 2-4 months, or even 2-3.
On second thought… if I come even close to agreeing with JustHimself, it is time to reassess.
Actually it seems we are all just spitballing here. Nobody really knows what is normal for months of supply.
What has been the monthly average for KC since, say, 2000? I would imagine that at one time 4-6 months really was the norm for a balanced market. Then somewhere in the middle of this decade, it seemed more accurate to talk about Days on Market, not weeks or months. At some points, it was more like hours on market.
It could be that we have just gotten used to low figures for days on market.
Or, it could be that technology now allows buyers and sellers to find each other faster and deals to get negotiated, signed, financed and closed faster.
Anyone who has access to the NWMLS stats care to weigh in? Ideally with some historical data?
Is 4-6 weeks all the time a buyer needs to find and make a successful offer in this fully electronic marketplace?
If this does not happen, does the buyer languish on the market?
That King County is the only county in the region with a price decline is further evidence that the price change is due to the last remnants of the bidding wars that pushed some houses up over FMV last year.
I would add that the very slight increase in sales prices together with declining sales in Pierce and Snohomish counties sort of refutes the Seattle Times’ theory of buyers going in mass to those counties, partially in Snohomish County where the inventories are up so not the reason for declining sales. I’m sure it’s true of some buyers going to those places for lower prices, but that has always been true of some buyers. The Tim is evidence of that.
By Deerhawke @ 8:
All the stats are available in Tim’s charts of the King County stats. You just need to analyze it and come to conclusions. But how do you determine what was a seller’s market? Would it be just any year prices rose? You need something besides months of supply to determine that, otherwise it’s just circular.
By Deerhawke @ 8:
Maybe Ardell can give some history, but I imagine it’s always been DOM and CDOM so that small changes can be noticed. Look how some people are considering $695,000 from $715,000 to be a drop. That’s less than 3% and could be due to changes in mix or other factors. I would even argue that 25% of the change is due to late reported sales this month, but to determine that I’d have to go back and look how much June 2018 was affected by late reported sales. That would not be that much work, but it’s not worth it to know that one factor.
Here’s what the single-family months of supply (based on closed sales) looks like for as far back as I have the data in King County:
It’s been in the 4-6 range more than once, and I stand by my description of less than 4 as generally a sellers’ market and more than 6 as a buyers’ market.
RE: The Tim @ 13 – Tim, can you easily chart that against percent price change?
RE: Kary L. Krismer @ 14 – Yes, it’s a bit messy, but easy enough:
RE: The Tim @ 15 –
Now that’s a nice chart! It supports Kary’s thought that things got frothy the first half of last year and it’s taking awhile for the market to recover. I suggest that it have a place in the recurring updates here.
Very useful. A real dose of historical perspective. Thank you Tim.
By Deerhawke @ 17:
By northender @ 16:
That would be a nice chart to include in the monthly stats post. It wouldn’t change a lot from month to month, but it would give a lot of perspective.
By northender @ 16
I like the term frothy, but not the word recover. Frothy signifies properties selling for over value nicely. Rather than recover I’d maybe use the word settle.
Think of it as a beer. When you first pour it the level is higher because of the froth, but when it settles it doesn’t mean you have less beer. It just means some of the beer was higher than it should have been.
RE: The Tim @ 15 –
Awesome graph Tim.
I like the graph too. But isn’t it basically just saying as supply increases, price drops?
What is going on with Skagit and Whatcom county? Where is all that money coming from? Those distances are too far for the metro Seattle area to be commuting from… I think…… rightttt?
That can’t all be people doing 2 hour commutes one way to the city?
By TheBenBernank @ 21:
Technically it’s active inventory relative to sales, but the point of the exercise was to: (1) Determine what were historical DOM variations; and (2) to somehow try to determine what is a buyer/seller/balanced market.
Justme was trying to claim that 4-6 weeks was a balanced market. I think it’s pretty clear that’s not the case because if it were the crazy historical seller’s market would be the only balanced market in recent history. I’d also say it’s pretty clear 4-6 months is not correct either, because 6 is too high. Looking at the chart I’d say it’s 3-4 months, but again it’s very debatable.
By TheBenBernank @ 22:
I think you’d need more than two data points to determine if anything is going on up there. But assuming something is happening, maybe its retired people who want to get out of King County but don’t want to leave western Washington. As to absolute price, I’d suspect the average lot size up there is larger than King County.
RE: Kary L. Krismer @ 19 –
Beer is a good and useful analogy, but of course not a perfect one. There was a lot of froth in the market up until the end of Q1 2018. Then the market clearly did settle for 3 quarters.
But since the beginning of 2019, median prices have gone up by $95K. Not sure how this fits with the analogy, but that is no small beer. ;)
RE: TheBenBernank @ 22 –
Where do you think plumbers, HVAC techs, electricians, etc. commute from? It used to be Everett and Arlington but now it is often Mt. Vernon. And they don’t get to telecommute half the time like IT workers.
Assuming Tim’s Chart is Accurate on YOY Price Declines
I’m sorry, the charts don’t reflect monthly or even weekly data changes the bloggers allege. Where’s the monthly or weekly data referenced? Is there a way of enlarging 2018 and 2019 YOY data to monthly abscissa X-Y charting? Otherwise, IMO opinion as a math major the charts don’t help at the MOM level, too vague.
It is what is.
RE: Deerhawke @ 26 –
Yes Deerhawke
And you would know where to find that scarce labor, and where they live….out in the boonies…apparently.
I had a Seattle “local area” plumber for work [worked for those expensive Yellow Pages big companies] on my home, but let’s put it this way, a simple water 1 hour water source job for a code dish washer installation 2019 cost me $1100.
When I remodeled my Bellevue house as the contractor I had almost all the plumbing done for a fraction of the costs with my own plumbers and electricians….Kary may know the legal angles better than I do.
Are your plumbers all licensed and bonded…I ask this question for warranty purposes, but in your case, you may be like I was, who cares, re-do the job and its still far cheaper. Wing it. LOL
RE: The Tim @ 15 – I’m interested to see YOY price changing in an inverse relationship to months of supply in this chart, but there are a couple notable exceptions. From 2010 to 2012, prices declined as months of supply decreased. Then in 2018-2019, YOY price changed significantly, while months’ supply increased only modestly. That said, I’m not sure what this tells us. Will the YOY price changes trigger an increase in inventory, or will prices revert back to a generally upward trend as the months of supply measure stabilizes around its historical average?
By Deerhawke @ 25:
But you’re still equating median with value. What I’ve been saying all along is that the median the past few years was inflated by some percentage of houses (certainly not all houses) being bid up above FMV. And continuing, what’s gone down is not necessarily the value of houses, but instead the chance of selling a house for well above FMV. Again it’s just the inverse of what was happening to the median due to poor bank marketing and short sale approval practices in 2009-2012. Back then if you looked at the median of all houses it was fluctuating a lot, where the median for the non-distressed properties was staying within a relatively narrow range (400k +-20k) for over a two year period.
By Dustin @ 29:
That’s the heart of the period I was talking about in my prior post. Note the supply was actually lower than indicated because a lot of people had zero interest in or ability to purchase a short sale. And the quality of REOs was hardly high. So the “supply” was actually lower for many buyers. Conversely, the median excluding those distressed properties was relatively stable, and probably held back some by the appearances created by the broader market stats (e.g. newspapers reporting the median prices).
RE: Kary L. Krismer @ 30 –
I understand what you are getting at here and my gut basically agrees with you. But what is Fair Market Value? It kind of reminds me of what Justice Stewart said about obscenity, that he knows it when he sees it.
Appraisers are supposed to be in the business of determining fair market value, but in anything but a perfectly stable market, they are always off. Should we accept the Zestimate or the Redfin estimate as fair market value? At best, Fair Market Value is something you can only judge long after the fact and even then there will be tremendous disagreement on what it is.
So to use your beer analogy, what has the median told us (if anything) about the Fair Market Value of housing in the area since the beginning of 2019? Is the change since January beer or froth?
By Deerhawke @ 32:
I’m basically focusing on the extreme examples that were occurring.
There’s a starting point: The agent and seller agreeing to list a house for a price. Now you could have situations where they are wrong, or situations where they purposefully list low to get more offers, but as a general rule the list price tends to be what the seller thinks their house is worth, and sellers tend to be optimistic!
Then the next point is the frenzy of bidding above list price, and most importantly, trying to provide seller-friendly (“pick me”) provisions in the agreement that limit the ability of the buyer to not perform if the property doesn’t appraise. Basically what they are doing is bidding more than the seller wanted, and possibly more than they think the property is likely to appraise for.
I once had a listing where the bidding war had two buyers and their agents sitting across a table from each other increasing their price. Everyone agreed that the offers were far in excess of what the property was worth, and in fact it appraised for roughly 10% less than the final offer. So there, everyone saw it! ;-)
At the bottom of the recession in mid-2010 I got word that a half-block assemblage of properties I held from 2007 onward had been upzoned. My wife asked me if that meant it was worth more. I said it was now worth even less. Since we could now build 28 townhouses rather than 20, and since we would sell each for a $50,000 loss, the negative value of the property was now $400,000 greater.
I would love to have had someone show up at that point and offer me the Fair Market Value, but nobody could get any kind of financing and nobody was buying.
By early 2012, I was able to tell my wife the good news that the property was now worth approximately nothing. In 2015, as I was starting to develop it, I got a solid 7-figure buyout offer and gladly let it go.
A mere 2 years later in 2017, I watched as my nephew put in an offer on a really bad but habitable house in the CD. It was listed at a price just above $400K that I thought was absurd. I think his escalator tapped out at $450K. His was the bottom offer of 25 offers and the final sale price was about $750K as I recall.
In individual cases, I think the only real way to measure fair market value is by seller’s remorse (or smugness) or buyer’s remorse (or smugness) after the fact. Anybody who bought in 2010 thinks they are pretty smart, even if they left a few dollars on the table. Anybody who bought in late 2017 or early 2018 probably wishes they had not.
But trying to analyze broader market trends, you have to use what you have. And what we have is median pricing.
We then have to overlay what our gut tells us on top of that. Are people being especially conservative and missing good opportunities? Or, is there a frenzy that is making people put in unreasonably high offers? Or is it stable and a bit boring and kind of going sideways with a bit of appreciation?
FED is starting another rate cut cycle. A 0.025% is for sure end of July. We are going to have 3x 0,025% cuts this year. 0% is not far (German is already -0.4%, I never heard mortgage of 1.5% but it is true in Germany). The interest payment could cut in 1/2 in Seattle. This is could bring another round if housing price appreciation. US just can not have EU have -0.5% interest and here 3.0%. Otherwise, people could easy make 3,5% by borrowing Euro and invest in US. Zero interest could happen again here again.
RE: Deerhawke @ 27 – That’s what I was thinking. Those poor souls… feel bad for them. And I thought Marysville was far…
RE: Deerhawke @ 33 – Trying to the determine the value of something is quite a deep philosophical undertaking, if you really think about it.
Well, all I can tell readers is that currently from the beginning of the year to July the majority of sales coming through our office have had price concessions and closing cost concessions or both in all price ranges from around $2M down to $50K manufactured homes. I’m talking about transactions that are closed and areas from my neck of the woods in Snohomish Co. southward to Edmonds, Capitol Hill and even into Gig Harbor.
What really is bizarre is the Facebook posts of some agents stating the the market is “back and hot.”
By TheBenBernank @ 38:
Especially if you get into Bitcoin! I actually like to follow that market because it’s sort of a market about nothing, but the market reacts to things (including motion).
The other thing that is interesting relating to value, but also values to be skeptical of: Pawn Stars.
By S-Crow @ 39:
Maybe those are agents who got out in 2010 and are just now coming back! ;-)
I see a bit of that, and have heard from a good source that there are a ton of new agents. Not surprising given what the market’s been. The same is somewhat true of loan originators based on my review of buyers’ lenders.
If one can buy a 1.0 mil house at 4% 30 year fix mortgage, how could he/she could afford to buy at 2.0% 30 year fix, very easy math. And Fed is moving toward that target.
RE: S-Crow @ 39 –
So, thinking back on everything you have ever written on this site, I am trying to remember a time when you posted some positive or upbeat news. Was there ever a time you thought the market was good or was going to get better? Was there ever a time when you didn’t see the world as circling the drain?
If so, I certainly don’t remember it.
RE: Deerhawke @ 43 – Give him a break. He has a good excuse. Every workday he’s constantly dealing with real estate agents. ;-)
Frankfurt flat per sqf more than doubled since 2015. Annual percentage is 12%. I check German 10 year mortgage now, it is around 1.7% now, saving rate is -0.4%. At this low level of interest, nobody is going to put money in the bank. House affordbility is reverse of interest rate. People could borrow close to twice as much if the interest is lowed by 50%. a quarter of percentage interest reduction from 3% is much more reduction than from 7%. So we could see Seattle housing trend tipping up if Fed lowers interest multiple quarter of percentage in the coming month.
RE: Deerhawke @ 35 –
I bought 2011, 2014, 2017 and now 2019. I’m happy about each purchase. Sold my 2011 purchase is 2013 and sold my 2014 purchase in 2019. I can’t say I have any regrets yet.
I keep seeing a lot of talk about interested rates on this site and how it will be good for housing. A few thoughts:
1. In some high flying housing markets, your property tax is higher than your mortgage interest. Home buyers are starting to realize this.
2. People are so overloaded with debt now that even a garden variety recession with job losses can cause a housing crisis where home owners with no savings can’t pay their mortgage.
3, Don’t believe the Fed is omnipotent–2008 should be a lesson. QE will destroy the dollar this time. Europe, China, and Russian all have non-dollar payment systems now precisely because they no longer trust the U.S. banking system. Don’t assume QE can control the bond market. All it takes is a failed bond auction for interest rates to shoot back up (just like a few hours ago when we had a bad auction). And American will soon need to sell one trillion dollar worth of bonds.
4. All this talk about tech companies hiring… How many of you have actually worked there? I have. I can tell you that many are young H-1B visa holders from India and other countries who are replacing white middle-aged Americans. They won’t be pushing the house prices up.
RE: Kary L. Krismer @ 44 –
Too true. Actually escrow is really a hard, thankless task. So many details to track, so many numbers to get right, so many cranky oddball people to deal with. I should have factored this in.
Cost concessions are not reflected in reported sales price. So don’t believe the reported sales price in a declining market, especially for new homes.
By Deerhawke @ 48:
And time deadlines!
By Lulu @ 36:
Right, so this means Seattle housing prices probably will continue to go up…. [all the sellers rejoice, all the buyers jeer]
RE: Lulu @ 36 –
Gosh Lulu
Are Europeans happy about paying a bank to keep their money at negative interest? Europeans are nuts if that’s true. I heard its happening in Japan too…are we turning saving money into a new global OVERPOPULATION caused Climate Change anomaly to destroy/blame the American economy too? America’s birthrate is depopulation last I heard without more immigration its now 1.7.
Has anyone of these village idiots taken Econ 101 or basic arithmetic? Why not put OVERPOPULATION demography science back in our schools again, along with math and science? Read 1984 by George Orwell, it will put these insanities back in focus.
RE: DavidE @ 47 –
Yes David
The foreigners got here from Iran and India working for Boeing in the 80s and gladly spent 80-90% of their income on housing….they love eating saw dust and noodles. Shopping at Goodwill and pretending they’re rich. They come from another planet. It is what it is.
RE: S-Crow @ 39 –
Great Input S-Crow
Your periscope obviously sees the opposite of what some bull bloggers allege. It is what it is.
Amazon is Wonderful
They paid no federal taxes on $11B in profits….
https://fortune.com/2019/02/14/amazon-doesnt-pay-federal-taxes-2019/
They should get an award for their lower wages and elimination of ma and pa local stores like K-mart, Sears, etc, etc…who needs manufacturing in America anyway. Its in AMZ’s way….
By softwarengineer @ 55:
Not the best article in the world. A lot of the reason for that is that companies can now often write off investments in new equipment and facilities instead of having to depreciate the expense over a period of years. Amazon does a lot of that.
The intent of such provisions is to increase economic activity by increasing investment in such assets. Also I suspect they have a lot of what I complain about–a credit for foreign income taxes paid. We basically subsidize other countries’ income taxes.
Interesting national perspective in this post — https://www.motherjones.com/kevin-drum/2019/07/washington-cant-solve-a-housing-crisis-that-doesnt-exist/
“Now, there’s no question that a few specific cities have seen big rises. The Bay Area is obviously one, Denver is one, and Seattle is another—though the market has responded recently in Seattle and housing development is now increasing. But if you look at big cities more broadly, there’s not even a generalized urban rent crisis.”
Buy Up Homes in Boonies
They’re much cheaper. Not.
https://www.quadranthomes.com/find-your-home/
Where’s the discount of living in the suburbs in Seattle anyway? I know, its in the fairy tale book we all love and trust….
RE: Kary L. Krismer @ 56 –
No Wonder Trump and Besos are at Each Throats
Besos pays no federal taxes and has an advantage over collection of sales tax online. The online ordering I’ve done recently points this flaw out too….Dr Leonards forced me to calculate my own sales tax or face sales tax bill collections….I guessed on the figure….it was documented no where and no way was automatic…my AMZ books orders I make calculate sales tax automatically and required no effort on my part.
https://www.theepochtimes.com/trump-accuses-jeff-bezos-of-politically-shielding-amazon-from-taxes_2065510.html
RE: softwarengineer @ 59 – Amazon has been collecting sales tax for years now, even on third party sellers.
Trump is just at Bezos’ throat because rich people do not tend to think much of Trump. And Trump doesn’t tend to think much of people who don’t like him.
By Kary L. Krismer @ 60:
I think you’re right Kary. Well said.
RE: Kary L. Krismer @ 56 – That trickle down theory chatter has been a failure. The wealth corporations saved trickled up, until now we have a wealth gap that rivals the Great Gatsby era. Corporations have been fighting FDRs taxes since they were put in place.
RE: Kary L. Krismer @ 60 –
I don’t think that is it. I think trump hates bezos because bezos owns the Washington post which has done a lot of damaging reporting on Trump.
By sfrz @ 62:
I wasn’t addressing the lower rates, just the timing of the deduction (although admittedly the timing is a lot faster now).
I know some claim that Amazon would be doing the same investment anyway, but the almost certainly are doing more because paying less taxes they have more to invest in equipment and facilities. And there are undoubtedly other companies that are making such investments at greater levels too. And that leads to increased GDP pretty clearly, although there’s a significant lag time.
RE: Dustin @ 30 –
Exactly. What Dustin said.
By Randomseattledummie @ 63:
That’s probably it too, but I would say the same thing about Trump and Mark Cuban, and he doesn’t own a paper (AFAIK).
60 posts in
Kary L. Krismer says: 20 posts
softwarengineer says: 8 posts
47 percent of this thread can be ignored.
By Longtime Listener First Time Caller @ 67:
Says the person with nothing useful to say. How many IQ points does it take to post that? I can see you’re beyond counting with your toes and fingers, so that’s impressive. /sarc
In other words, in case I’m not being clear, I think you’re a stupid troll.
Come back when you have something useful to say. And no, I’m not being serious because I don’t think you’re capable. Note I think you’re a stupid troll and that you are incapable of having anything useful to say. You certainly didn’t try to refute or even discuss anything I said. Probably because my writing style is above your grade level.
RE: Kary L. Krismer @ 66 –
Cuban is often critical of trump but bezos owns an organization with a team full of reporters digging into trump and his business and his Russian connections.
By formerSeattleite @ 51:
One problem is that all the developed countries, including the US, are threatened with the prospect of Japanese-style deflation. There are several theories why, but the popular ones involve computerization/automation/robotization and the rapid aging of the population.
The other problem is that the US dollar remains the world’s reserve currency. Any kind of global financial hiccup and money flows into the dollar and dollar-denominated assets.
Put these together and you get the prospect of persistently low interest rates for dollar denominated accounts. People tired of getting 1.75% on their savings might want to invest in real estate instead, especially when they can leverage their equity with bank financing at under 4%.
https://www.nytimes.com/2019/01/27/upshot/world-economy-low-growth-low-interest-deflation.html?smid=nytcore-ios-share
RE: Longtime Listener First Time Caller @ 67 –
I’m glad you know how to count, impressive.
“People tired of getting 1.75% on their savings might want to invest in real estate instead, especially when they can leverage their equity with bank financing at under 4%. “
Japanese RE has depreciated bigly despite low interest rates and extended (100yr?!) mortgages. Once upon a time Tokyo RE was worth more than the USA! You will be a mortgage debt slave for life if we enter serious deflation.
So what if you can get bank financing at under 4% when your asset is losing value? If you pay 4% on a million dollar home, when that home becomes $500k, your interest rate would double on a depreciating asset. And you can’t offset the loss on tax return!
Unless you can comfortably afford a home, you should not buy in this highly leveraged market to protect yourself from potential financial ruin.
RE: sfrz @ 62 –
You are parroting Robert kiasaki and his new book. You are using the buzz words he used in his book. Keep reading!!! There is lots more out there.
RE: Erik @ 73 – I haven’t read the book or the author. Maybe Warren has tho’. ““Between the first computation in 1982 and today, the wealth of the 400 increased 29-fold — from $93 billion to $2.7 trillion — while many millions of hardworking citizens remained stuck on an economic treadmill. During this period, the tsunami of wealth didn’t trickle down. It surged upward.” https://www.cnbc.com/2018/01/04/warren-buffett-on-the-failure-of-trickle-down-economics.html
RE: sfrz @ 74 – If you took Warren Buffett’s entire net worth and gave it to all 351M Americans, each would get $267.
You’d get enough for a one-way ticket to Hoboken.
RE: Kary L. Krismer @ 68 –
Sometimes it’s the stupid trolls that actually have a knack for getting the blathering trolls in-line in these forums. For a stupid troll, he made a rather intelligent point and presented data to back it up that even a stupid person could comprehend. All in about twenty words.
RE: Longtime Listener First Time Caller @ 67 – +1
RE: David @ 75 –
That wealth disparity clearly creates a dysfunctional society. Jeffrey Epstein could only give every American about $1.45. Imagine what he could’ve accomplished with Buffet’s money.
By sfrz @ 77:
+2
RE: Erik @ 46 –
And You Must Know Erik
You are a sensible “rare” hawk-eye for business planning and making the most of what is left in this imbalanced market. Most buyers are just the opposite with their”grab ’em up” quick business savvy and many have money that was inherited and not earned like your’s…a big difference. My hats off to you :-)
I did the same sort of thing when up against a daughter that just wanted to be a stay at home housewife [I had $30,000 set aside for her college at that time] with a working hubby [70% of the Milenial women polled agree with my daughter BTW] and how to get a one income family growing stronger. In five years living at the same address and owning two cars with insurance, my son-in-law now makes about $50K/yr at Bank of America [all he has is a high school diploma like Bill Gates]….he was unemployed and couldn’t hold on to a $10/hr job before he came under SWE’s family management. Those two got their dreams and I’m happy too. Win/win.
All big problems have solutions, but they aren’t easy and it takes brains to figure how to do it.
Ignore the crowd and plan outside of the box.
Oh no, Kenmoron doesn’t like what I post. I’m hurt because I think so highly of him.
Now as to some real comments . . .
We’re back up over 4,600 active listings (King County SFR) so there was some holding off for the 4th. One wide area condo search I do weekly had only one new listing last week, and ten this week. The average is 3-5.
Numbers from NWMLS sources, but not complied by or guaranteed by the NWMLS.
Now we resume our regularly scheduled comments by amateur macro-economists.
By Kary L. Krismer @ 80:
says the guy that bought at the peak of the last bubble
Mish makes a good case why current home prices are out of whack relative to fundamentals.
https://moneymaven.io/mishtalk/economics/housing-bubble-reblown-last-chance-for-a-good-price-was-7-years-ago-QG1On8G8NECXH1co69i64Q/
RE: The Tim @ 16 –
Thanks for the great chart, Tim.
Is it possible to overlay 10yr bond interest rate over the price and inventory chart you have? Thanks!
“Here’s how rapidly the U.S. housing market has cooled: Buyers are now about four times less likely to face a bidding war than they were just a year ago.
In June, 12% of buyers faced competition compared with 52% a year earlier, according to an analysis by brokerage Redfin of offers written by its agents. While San Francisco is the most competitive market, the share of listings that got multiple offers fell to 28% from 65%.”
Share of Redfin home-purchase offers that faced competition in June: SEATTLE 2019-12%; 2018-53%
https://www.bloomberg.com/news/articles/2019-07-10/home-bidding-wars-in-u-s-fall-to-a-fourth-of-last-year-s-rate
RE: Eastsider @ 82 –
Mish is a perma-bear IIRC.
Mish in April 2013 on “froth” in housing : Here’s my Greenspan imitation: “Don’t worry, it’s only some sections of the country. Besides it’s well supported by the fundamentals. And as we all know, home prices never drop.” https://archive.mishtalk.com/2013/04/30/here-we-go-again-builders-hold-lotteries-for-right-to-buy-a-house/
And a Sept 2014 article on housing prices, interest rates, and inflation: “However, the rate of growth in home prices is slowing. If home prices actually start to decline, which I believe likely…” http://globaleconomicanalysis.blogspot.com/2014/09/housing-prices-real-interest-rates-and.html#XEAoeGqEBAHHgxoT.99
I don’t really have the time to dig up different links from every year of the last decade.
RE: uwp @ 85 – Yes, Mish has been a “perma-bear” but so what? A broken clock is correct twice a day. He made a strong case why the current market is unstainable and your argument is? At least he was right in calling the last bubble. And you? You also need to take into account FED’s massive interference in the economy in the past decade. Without FED intervention, Mish would likely have been right in his assessments.
The market will boom for another 5 years, or crash tomorrow.
Why do people make predictions?
Some publish them for profit, others do it to stroke their ego (if they happen to be right), others have genuine curiosity in what data and history says. At the end of the day, nobody really knows. This is chaos folks. Too many variables. Drop a leaf in a river. For myself, I live below my means, I cash in my chips often, I reinvest often, and I diversify often. Don’t listen to me though, like I said, it’s chaos out there.
Oh, I also recommend practicing gratitude and maybe a little yoga ;-)
Good luck everyone!
By kenmorem @ 81:
Says the guy who bought and sold at the peak of the last bubble, and considered other options. The best one would have been to have bought LT bonds–but who would have guessed. At this point in time the mistake was the sale, but I have zero interest in being a landlord.
But as you know, that was in part a lifestyle choice (get out of Seattle) and renting is not an option for me.
Also, while the result hasn’t been as good as what LT bonds would have been (one of the other many options I considered), it’s been pretty good. Roughly $200,000 of tax free income (“free rent,” net of RE taxes) and appreciation to boot (which unless the law changes is also a tax free type of income if I can manage to realize on it some day–far from certain).
But in any case, so few of you understand microeconomics, which is so much easier than macro, it’s pretty obvious that any macro comments here should be taken with a bolder of salt. And also, any downturn in the economy might not be the result of the items followed, it might be N Korea, Iraq, a volcano, etc.
And finally, that lame come back hardly makes me think more of you. What you said there is hardly any better than anything else you’ve said hear over the years.
By Eastsider @ 82:
And of course, we remember everyone hear screaming “Buy! Buy!” during that period. Which also supports my point about the value of the opinions of people posting on this site.
But FWIW, I’d dispute that as being the last good time. There were people who bought and sold after that who did rather well.
By sfrz @ 84:
I didn’t bother reading the article, but odd they would go by the buy side, which they would be somewhat guessing, as opposed to the sell side, where they would not only know the percentage with great accuracy, but also know the number of offers with certainty.
Of course either side is affected by the list price relative to value. If you make an offer on an overpriced house you’re less likely to have competition than if you make an offer on a house that has been intentionally underpriced to attract multiple offers.
Let’s dig into this one.
By Eastsider @ 86:
That’s not exactly strong support. The broken clock argument is one that points out how worthless an opinion is.
His argument was to quote the subject. Not sure how you missed that.
Well again, permabear. By definition a permabear calls every downturn.
Not sure I saw a claim of being a fortune teller.
So basically if we lived in some other hypothetical world, where governments didn’t try to control their economies, the results would have been different. Hey, guess what? If we lived in a world where more people didn’t believe in modern medicine, more people would die each year too.
RE: Kary L. Krismer @ 90 –
LOL Kary
The average life span of a doctor [last I heard] is 53 and they’re giving us tips on extending our life span?
Perhaps your joke isn’t a joke after all?
The market will boom for another 5 years, or crash tomorrow.
Why do people make predictions?
Some publish them for profit, others do it to stroke their ego (if they happen to be right), others have genuine interest in what data and history says. At the end of the day, nobody really knows. This is chaos folks. Too many variables. Drop a leaf in a river. For myself, I live below my means, I cash in my chips often, I reinvest often, and I diversify often. Don’t listen to me though, like I said, it’s chaos out there.
Oh, I also recommend practicing gratitude and maybe a little yoga ;-)
Good luck everyone!
RE: Voight-kampff @ 92 –
+1. Thanks for this comment. It is easy to forget gratitude and reverence. In an age when we have so much, everyone seems to feel deprived if they don’t have more.
RE: Voight-kampff @ 92 –
100% agree!
By softwarengineer @ 91:
MYTH
RE: Kary L. Krismer @ 90 – Yeah, says the guy that bought at the peak of the last bubble. /sarc
RE: sfrz @ 74 –
You can make a lot more money by investing or starting a business than you can working at a job.
By Erik @ 97:
Depends on the business and the job.
By Voight-kampff @ 92:
Because people like to believe some people can make predictions. It’s an interesting human trait.
RE: Kary L. Krismer @ 99 –
Blathering on online forums is an interesting human trait too. Also an interesting trait of a.i. more and more these days. You are human, aren’t you? I’m just blathering on here to help keep the ratio Long Time Listener established below fifty.
By Jeff @ 100:
I’m not the one blathering here, or the one making useless comments. This site has become pretty useless, but that was only one of the reasons I went a way for a time.
But hey, don’t let not having anything interesting or insightful stop you from posting. But wow, I’m impressed. Using words like “established.” Almost makes you sound smart–by Internet standards.
RE: JWoods @ 83 –
Yeah JWoods
Interest Rates in long-term bonds rival the Raging on Fire American Stock Market YOY, but only about 2% lower difference….the reason? Lower interest rates in general.
The last 12 months have seen big increases MOM recently, like 2-3%; performing much better than foreign stocks. A great place to invest outside of American Stocks with locked in protection against risk.
RE: David @ 95 – RE: David @ 75 –
It is a Myth According to the AMA
But many cite access to opioids, stress and student debt making them die much sooner and the raw data is mixed on this topic or I would have revealed a more reliable URL that simply doesn’t exist.
https://www.quora.com/Is-the-life-expectancy-of-physicians-higher-than-that-of-the-general-population
“…Max Stanley Chartrand
Max Stanley Chartrand, PhD/President at Digicare Behavioral Research (1978-present)
Answered Nov 4, 2018
I doubt it. I see too many physicians taking drugs like they’re going out of style. Too many are over exposed to deadly radiology. Too many eat a poor, GMO, microwaves diet. Many started using drugs and high caffeine on a daily basis, because of the unnatural demands of internship, setting them up for serious health problems and compromised immunology. So I see many dying young. Some live long lives, but most seem to have too many health problems to live long….”
The raw data is a witches brew of contradictions, we need a new unbiased study? BTW David thanks for the prod, I haven’t researched this topic in decades. It needs more work IMO. We’re both right…LOL
RE: Kary L. Krismer @ 101 –
You enjoy blathering on the nature of humans making predictions. I enjoy blathering on the nature of humans blathering. Either way it’s navel gazing through and through.
If anyone would like to turn to the topic of real estate for a moment, there is an article published in the Wall Street Journal today regarding demographic changes and homeownership.
https://www.wsj.com/articles/wave-of-hispanic-buyers-boosts-u-s-housing-market-11563183000?mod=hp_lead_pos7
Summary of some of the key points:
-Hispanics were the most affected demographic group by the 2008 crash, respective homeownership dropped to an all time low in 2016. Since then, 63% of new purchases nationally have come from Hispanics.
-African American homeownership dropped to an all time low in Q1 2019
-In certain parts of the country, banks are starting to cater and target the Latinx community by hiring loan officers fluent in Spanish, and in some cases using a tax identification number instead of a social security number on a mortgage app
-States with the biggest share of Hispanic buyers include New Mexico, Texas, California, Florida, Nevada, Arizona, Illinois, Colorado, and New Jersey
RE: ohd1122 @ 107 – does not apply here. it is too expensive here.
RE: ohd1122 @ 107 –
This is exactly what created the last boom and bust. It started with racial equality for blacks and morphed into handouts to everyone. Then we tanked. Hearing this makes me smile because I’ll see it coming and hopefully get rich this time.
The Seattle income tax decision just came down from the Court of Appeals. Surprisingly they decided that the ban on an income tax by cities violated the single-subject, anti-logrolling rule, but unsurprisingly they decided the tax is unconstitutional and that they are not the court to change that. The city had made some rather frivolous arguments that their tax was not an income tax. Finally they denied attorney fees to the opponents, but seemingly that was based on a common fund argument that if the court explained it right also seemed rather frivolous.
http://www.courts.wa.gov/opinions/pdf/794477.pdf
RE: Erik @ 109 –
Can you please be more specific on how racial equality for blacks led to handouts for everyone before the last catch? I’d also like to know how you plan on getting rich from the same pattern repeating itself if that’s what’s actually happening.
RE: Erik @ 109 –
C’mon Erik.
Do you really believe that the big financial institutions and their lobbyists really care about the racial equality? Do you really think that the creation of that massive financial casino operation had anything to do with race? Do you realize that all the synthetic derivatives that were created had virtually nothing to do with real homeowners of any race?
So why are you repeating this right wing caricature?
RE: Deerhawke @ 112 – Erik is right. I attended a real estate conference in Las Vegas almost 20 years ago with Jesse Jackson as part of panel discussion. He complained about subtle redlining that precluded grocery stores, etc from building in black neighborhoods. And also the general lack of minority homeownership.
Lo and behold the Clinton and Bush admins pushed for “minority’ home ownership to INCREASE. Well it did. To get there they made credit so easy a new puppy could walk in and get credit.
Suddenly, there was a MASSIVE, MASSIVE CREDIT FRAUD outbreak. And also a lot of minority folks who simply could not afford the mortgage they agreed to under those homeownership programs.
You can be sure though, that a lot minority folk became successful homeowners because of the easy credit as well. But also a lot who really were not that into that whole long-term homeowner thing and played it like an investment scheme.
RE: ohd1122 @ 107 –
Yes Ohd
My HOA was about 20-25% Latino a decade ago. Some were undocumented. Almost all got a foreclosure or a short sale kick out Glenbrook…there’s a new group of more affluent Asians replacing them now.
RE: Erik @ 109 –
Yes Erik
Demographic planning is investor savvy and unfortunately many “snow flakes” label it Racist instead of just historical trending. Maybe that’s the “snow flake” group lacking investor savvy too, and many allege they must be given more slack than the savvy investors? Now that sounds Racist.
RE: Deerhawke @ 112 –
institutional racism did play a part in the housing bust: https://www.reuters.com/article/us-usa-foreclosures-race/racial-predatory-loans-fueled-u-s-housing-crisis-study-idUSTRE6930K520101004
the aftereffects continue to have an impact on some more than others: https://www.theatlantic.com/business/archive/2015/06/black-recession-housing-race/396725/
Yup, the Great Recession was all the fault of black folks. And the next one will be all the fault of brown ones. Really things would be just peachy if they all went back where they came from. This is what we hear from the Party of Trump.
Personally I prefer the values of a previous Republican leader. “With malice toward none, with charity for all …”
RE: Nicole @ 116 –
Completely agree with you and the points made in these articles.
But this is a far cry from saying that the movement for racial equality was a primary cause of the Great Recession.
Financial institutions used race and equality language to lobby for less oversight across the board.
You want to know what the cause of the Great Recession is? Follow the money.
You want to know why lenders relaxed underwriting standards in 2000-2007, created billions in questionable mortgages and SOLD those to unsuspecting investors… and then WALKED AWAY? It was not because they wanted to help minorities!! It’s because they wanted MONEY!
This is the best book I read about the crisis (and I read MANY). It is an on-the-ground account of the people and institutions that created the bad mortgages and they didn’t give a damn who their “marks” were! They just wanted money…
https://www.amazon.com/Monster-Predatory-Lenders-Bankers-America/dp/0805090460
And… it is a great read! Hudson is brilliant.
Reviews:
Hudson, a former Wall Street Journal reporter who now covers business and finance for the nonprofit Center for Public Integrity, delivers a chilling account of the subprime-loan scandal, which nearly brought down the U.S. and global economies. Starting at ground zero of the scandal—Orange County, California (“Con men hate snow,” one Wall Street Journal reporter put it)—Hudson runs his exposé through its principal players: big-time lenders like Roland Arnall and Russ and Becky Jedinak, juiced-up salespeople who worked for such dubious lenders, Wall Street brokerage houses that supercharged the loans, politicians who weakened once-tough lending laws, and finally, most tragically, the victims themselves. As appalling as it is informative, Hudson’s tale, which hasn’t ended by a long shot, should find a large readership. –Alan Moores
Magnificently and heartbreakingly told. . . . What I appreciated most about this tremendous, well-documented book is that it shows vividly that really filthy, face-to-face fraud and hard-sell bullying are the original ingredients, the required counters, in the increasingly abstract financial instruments that brought the economy down around our ears. (The Boston Globe)
Whereas much of the reporting of the economic meltdown has been focused on Wall Street, Hudson has a talent for describing what was happening on the ground. He takes us on a tour of the financial carnival tent pitched by subprime factories like Ameriquest… Did some people borrow beyond their means? Certainly. But as Hudson demonstrates, the public was no match for an industry that lived off deceit fueled by Wall Street. (Time Magazine)
As engagingly written as Michael Lewis’ The Big Short (which chronicles the struggles the winners endured during the last bubble), as caustic and trenchant in its analysis of the dotty economic theories that underpin our bubble economy as Yves Smith’s ECONned; and at least as cogent of the big-picture power politics as Simon Johnson’s 13 Bankers, The Monster also does what those books don’t: It reveals the inner lives of both the victims and the perpetrators of predatory lending. (Baltimore City Paper)
Hudson’s book is a guide to the worst excesses of the mortgage business . . . [and offers] a deeper, truer understanding of the many-headed subprime monster. . . . [The Monster] succeeds by entertaining us with behind-the-scenes moments and personal stories from people trading their ethics for all-expenses-paid trips to Hawaii. (The Seattle Times)
“-Hispanics were the most affected demographic group by the 2008 crash, respective homeownership dropped to an all time low in 2016. Since then, 63% of new purchases nationally have come from Hispanics.”
This is not at all what the article said.
(for those of you who don’t subscribe to WSJ):
https://www.msn.com/en-us/money/realestate/wave-of-hispanic-buyers-boosts-us-housing-market/ar-AAElOyy?li=BBnbfcN
“While Hispanics compose only 18% of the U.S. population, the group accounted for nearly 63% of new U.S. homeowner gains over the past decade, according to the National Association of Hispanic Real Estate Professionals. New homeowners include people buying first homes and those coming back into the market after a foreclosure.”
This is talking about exclusively the group of first-time purchasers or those that had been foreclosed on. Your “summary” erroneously said Hispanics were 63% of total new purchases. That’s a very different denominator.
“The Hispanic homeownership rate remains at 47.4%, well below the rate for non-Hispanic whites, which was over 73% in the first quarter.”
While there certainly has been redlining in the past, and I think it probably still is easier to white folks to get a mortgage, the lenders were duping poor and middle class folks of all colors. It more economic predation than racial predation. The CDOs allowed them to offload the loans to investors, so they had little long-term skin the game.
RE: Blake @ 119 –
+1. I have also read a lot of books and articles on the Great Recession. I will order it from Amazon and let you know what I think.
RE: Deerhawke @ 121 –
While your at it, read Bubbles, booms and busts by Thomas Sowell. You can apologize to me after you read it. It’s a must read for anyone that wants to understand housing busts and specifically the Great Recession.
This whole thing started with racial equality pushed by Frank Dodd and Barney Frank, your liberal friends. Read the book and try to make a comeback.
RE: Deerhawke @ 118 –
I totally agree with you. (I must’ve accidentally deleted the intro to that post.) I don’t think it was the cause, just wanted to point out that minority borrowers were some of the biggest victims rather than, as is often portrayed- including here on this board- as the cause of the crash. (that trope about underqualified ninja borrowers and their liberal enablers seems alive and well)
At the closing table, no client I’ve ever met eye to eye with did not understand what loan terms they were signing. NONE. I go over the Promissory Note almost paragraph by paragraph. It does not matter if someone is financially astute or not, they are always asked by me and staff “do you understand or have any questions about the Note?” However, I frequently was told by my client that they knew the terms could possibly be tough if their terms adjusted or if they refinanced again with a pre-payment penalty triggered but would comment “my loan officer said they will refi me out of it.” Until they couldn’t. Or, realized that the equity gravy train had left the terminal.
That my friends is what really went on in escrow (at least my office). So the idea that people were duped in my mind is ludicrous. They didn’t care. And then it got so bad that they didn’t care to make payments anymore because many people in the real estate AND lending industry “coached” them on how to not make payments and default strategically. That, my blogging compadres, is what I despise about working in the debt driven real estate industry. The loan products turned housing into a defacto Casino. The Casino is still present. People didn’t care. They wanted the money. Show me the MONAAY!
Deerhawke – sorry, that’s a little bit of downer comment. =)
RE: biliruben @ 120 –
Thank you for the correction. Good catch. Unfortunately I can no longer update my post.
Clearly I need to be more careful what I post here on SB!
Reminiscing: (gazes eyes skyward, with deep thoughts)
………MILA, Countrywide, WAMU, Platinum, National City, New Century, Am Trust, Greenpoint, First Magnus, Wachovia, OwnIt, Bof A Wholesale, Chase Subprime
RE: S-Crow @ 126 – Agreed. No one talks about those failed financial institutions. But if borrowers lose their homes, it is other people’s fault. Sad!
RE: Eastsider @ 127 –
Angelo Mozilo reminds us what a great guy he is:
“Countrywide was one of the greatest companies in the history of this country and probably made more difference to society, to the integrity of our society, than any company in America in the history of America,” he told federal investigators in a 2010 interview. “And that’s where I spring from.”
can anyone comment on why this listing is still pending after 3 months
8331 NE 175th St
Kenmore, WA 98028
By S-Crow @ 124:
I find that a bit hard to believe–that the number is zero. Although they do tend to know the interest rate, and I do think overall the point is accurate, except for one thing . . ..
People did not and do not understand the risks of second position loans, and I even remember a loan officer giving me a blank stare when I pointed out that the buyer would still be liable on the second mortgage if the first foreclosed. I was trying to point out to them that the slightly lower “blended rate” of an 80/20 wasn’t necessarily worth the risk. And I was even at a continuing education course taught by Jillayne where she was teaching agents that the buyer wouldn’t be liable on the second if the first foreclosed, but in her defense that was before the Beal Bank decision directly on point (but the result was pretty clear beforehand). https://caselaw.findlaw.com/wa-supreme-court/1249877.html (I would also note I was unaware of the bizarre IRS case that resulted in the Beal lower court decision.)
Conversely though, a lot of the problems brought about were also on the investor side. They would hear the debt is “secured by real estate” and assume it was safe, not considering either: (1) A decline in value; or (2) That the debt they were buying was in second position and that the first would foreclose. That lead to a lot of entities taking risks they didn’t understand and couldn’t withstand. And note that risk was present regardless of the personal liability issue, because the best way to collect in default is to realize on the property.
RE: Kary L. Krismer @ 129 – You have me thinking. You want to know what’s crazy? A bunch (understatement) of 2nd mortgages were wiped (forgiven) in the debacle. Lenders were reconveying 2nd mortgages behind the scenes and many homeowners were not aware until they tried to sell or were in a refi. The borrower would disclose a 2nd mortgage to obtain payoffs and I said, ‘what 2nd mortgage?” Then I looked deeper and found the recon’s. It shocked me. It shocked the borrower more. I was in total disbelief. If I recall correctly, BofA was doing this.
BTW – a few of those clients I met with eye to eye with were Loan officers and Realtors and “investors.” They knew the terms but they were drinking the Kool-Aide. Like I say, people had no idea how crazy and bad it was. And then the advent of the “short sale” experts and “short sale negotiator” came to fruition. Bunch of cons front running that show locally.
RE: Deerhawke @ 117 –
Ya hate Trump….so what? Stay on topic and be more concise. In most cases race has nothing to do with having access to investment savvy and sound real estate planning.
RE: Deerhawke @ 95 –
Ask the Homeless in Seattle Working Full Time That Can’t Afford Your Rent if They Have So Much
RE: S-Crow @ 130 –
Do You Have a News URL? Maybe it doesn’t exist? Great Blog!
Also new news’ URLs I found this morning related to Seattle RE:
https://www.cnbc.com/2019/07/17/foreign-purchases-of-american-homes-plunge-36percent-as-chinese-buyers-flee.html
Yep, we Bubbleheads already saw this….Chinese not buying high end in Seattle and Vancouver areas lately. It is what it is.
737 MAX 8 delayed until next year…reason? Boeing is under multiple layers of law suits and compliance revisions…the first out of court settlement was $50M to African victims…more legal relief coming, much more…
What is Boeing doing with these stalled production workers? Boeing never engineered the “suspect” Max 8 S/W with American engineers, they replaced them and used $9/hr ones from India and got junk. Maybe MSFT needs a good spanking too for their “coincidental” H-1B India tech patches and virus junk from 2000 on?
https://www.theburningplatform.com/2019/06/29/boeing-outsourced-its-737-max-software-to-9-per-hour-engineers/
.
RE: S-Crow @ 130 – I think what you’re talking about is that mortgage settlement, where certain big lenders were required to “spend” billions in short sales, refinances, foregiveness, etc. Some of the reconveyances happened without any owner input, and it’s not inconceivable that some incurred a tax hit as a result. The government attorneys who negotiated the deal were not aware of possible tax consequences.
http://www.nationalmortgagesettlement.com/about.html
RE: S-Crow @ 130 – The “edit” button isn’t showing up. I was going to add:
The inverse is also true. People filing bankruptcy and discharging the debt on the second mortgage, but thinking the lien on the second mortgage also disappears. It doesn’t (in most situations). I saw an attorney asking about that situation just last week. They go to sell or refinance and then discover the lien still exists. We’re at the point though where the statute of limitations might apply (no opinion stated).
RE: Erik @ 122 –
I Like Reading Books Too Erik
I love recent Dean Koontz [fiction, but developed on today’s bubble/bust economy referenced background]….the 2019 Jane Hawke, the rogue FBI lady agent in LA, spells it out with homelessness, OVERPOPULATION crime and general lawlessness. Koontz developed his Thomas series of books on Baby Boomers giving their wealth to lower income Millineals so they could drive a car, while living in with them in rental room houses….it covers up nothing. Burger flipper wages, lower aspirations and handouts from the generous Baby Boomers…
Maybe that’s how ya become a savvy investor, throw the iPhone away and read. The majority of folks I know that are poor hardly read at all, they rely mostly on MSM brainwashing.
I’ll check out that book when I order my next shipment of books….I can get new hard covers recently for like $6 delivered…..there’s a glut of unread books, nobody reads anymore?
It has nothing to do with racist edged political excuses “nothing burgers”…
P.S. Reading prevents Alzheimers too…
Savvy investors [irrespective of race] can learn from recent books
kind of similar to what’s happen in Sydney few years ago. The price went up too high too fast, people were buying outside of Sydney. Sydney house price dropped a little, but other small area had price increase. Then last year, 2018, Australia housing market starting to crash, Sydney and other big cities starting to feel the pain.
^^^^^ Can we get this guy a muzzle? Geez.
RE: S-Crow @ 130 –
You are right. Some people really were lucky enough to turn the financial crisis in their favor.
This year, I was out to the Boston area to visit family and found that a niece’s friend was just having to leave the place she bought in mid-2007. She and her husband bought it new for $750,000 with virtually nothing down — 80/20 mortgage, interest only introductory rate and a balloon, etc. Everything went OK until 2009 when the rate readjusted, the couple lost their jobs, got a divorce– the whole recession nightmare scenario.
The husband moved out and she tried to give the house back to the lender with a deed in lieu. No response. Then a notice of foreclosure with the wrong information. She fought it as she wanted to come out with clean credit. That bank got taken over. Another notice with wrong information. She fought it. No response for a long time. This kept happening, over and over and over.
Eventually after nearly 4 years of free rent, she worked out an” interim” deal to rent the place for $800 per month that was only supposed to last for 6 months. But they never gave notice and she kept sending the checks and they kept cashing them. The people she was dealing with and the financial institutions just kept changing.
Finally last fall, she got a call from somebody who wanted to find out what the status at the house was. “Um, Miss______, as I understand it, we, um, own the house you are living in.” She could tell things were going to change because as she put it, “this one actually had a little bit of a brain.” She was ready to move on. Her kids had gone off to college and she wanted to move into Boston to be closer to her job and her boyfriend.
They worked out a deal. She would pay the rent for another 90 days while she found a new place. The lender would eliminate all the blemishes on her credit. It actually took six months but that is the way it worked out.
I am sure this is the real exception to the rule. Banks and financial institutions mostly rolled over home-owners in trouble.
By Ron @ 137:
Someone posted an extension for Chrome that would block selected commenters a few weeks ago. Unfortunately, it seems to be the only solution.
By Ron @ 137:
Just scroll down… quickly. ;-)
By Erik @ 122:
Thomas Sowell is an extreme right wing crank… it is always the government’s fault as if markets do not “boom and bust” on their own as they have from the beginning of human market activity!
Here’s a quick debunking of the theme Sowell and Trump’s “crack economic team” Kudlow and Moore keep advancing in spite of all evidence to the contrary:
https://ritholtz.com/2016/06/no-cra-not-cause-financial-crisis/
Here’s the heart of the Kudlow and Moore case: “The seeds of the mortgage meltdown were planted during Bill Clinton’s presidency. Under Clinton’s Housing and Urban Development (HUD) secretary, Andrew Cuomo, Community Reinvestment Act regulators gave banks higher ratings for home loans made in “credit-deprived” areas. Banks were effectively rewarded for throwing out sound underwriting standards and writing loans to those who were at high risk of defaulting. If banks didn’t comply with these rules, regulators reined in their ability to expand lending and deposits.”
They then argue that this was part of a broader campaign to make loans to unqualified low-income folk, which in turn caused the crisis.
Let’s just be clear about what the CRA does and doesn’t do. It simply says that if you open a branch office in a low income neighborhood and collect deposits there, you are obligated to do a certain amount of lending in that neighborhood. In other words, you can’t open a branch office in Harlem and use deposits from there to only fund loans in high-end Tribeca. A bank must make credit available on the same terms in both neighborhoods. In other words, a “red line” can’t be drawn around Harlem, a term that dates to when banks supposedly used colored pencils to draw no-loan zones on maps.
Showing that the CRA wasn’t the cause of the financial crisis is rather easy. As Warren Buffett pal Charlie Munger says, “Invert, always invert.” In this case, let’s assume Moore and Kudlow are correct, and the CRA did require banks to lend to unqualified, low-income buyers. What would that world have looked like?
Here’s what we should have seen:
. Home sales and prices in urban, minority communities would have led the national home market higher, with gains in percentage terms surpassing national figures;
. CRA mandated loans would have defaulted at higher rates;
. Foreclosures in these distressed urban CRA neighborhoods should have far outpaced those in the suburbs;
. Local lenders making these mortgages should have failed at much higher rates;
. Portfolios of banks participating in the Troubled Asset Relief Program should have been filled with securities made up of toxic CRA loans;
. Investors looking to profit should have been buying up properties financed with defaulted CRA loans;
Yet none of these things happened. And they should have, if the CRA was at fault.
…
If that isn’t enough to dismiss the claim, consider this: Where did mortgages, especially subprime mortgages, default in large numbers?
It wasn’t Harlem, Philadelphia, Baltimore, Chicago, Detroit or any other poor, largely minority urban area covered by the CRA. No, the crisis was worst in Florida, Arizona, Nevada and California. Indeed, the vast majority of the housing collapse took place in the suburbs and exurbs, not the inner cities.
Now consider that much of the rest of the developed world also had a boom and bust in residential real estate that was worse than in the U.S.
Oh, right — those countries didn’t have the CRA.
(end quote)
Also: Nearly $3 of every $4 in subprime loans made from 2004 through 2007 came from lenders who were exempt from the (CRA) law.
Now Erik, I know you seem to be immune to facts and logic, but please put your brain to the facts above and come up with a true Trumpian rebuttal!
You know what causes booms and busts? Human nature!
RE: Blake @ 141 – A good breakdown of the details!
Companies like Countrywide weren’t even subject to the CRA. The idea that lenders were forced into giving loans to people they didn’t want to, and that caused the housing crisis, is a lie that will never die.
Good post, blake. Also, removing government can cause booms and busts.
After the great depression, FDIC and other financial regulations smoothed out the booms and busts, which were far more common prior to instituting those regs .Eliminating those regulations (mainly Bush, but also some Clinton) which kept investment banks separate from the boring depository institutions who were doing most of the mortgage lending allowed the rise of CDOs, which took much of the lender’s skin out of the game, as they simply sliced and diced and sold the mortgages off to investors. So their standards understandably dropped precipitously. The investors bought insurance against a collapse, but the big re-insurers behind that insurance collapsed upon the advent of, in hindsight, the totally predictable black-swan of the housing crash and trillions of worthless CDOs. Most everyone got bailed out except the plebes who needed it most of course. They lost their homes and their life-savings.
RE: Blake @ 141 –
+1. Blake, solid post.
RE: Deerhawke @ 144 – RE: biliruben @ 143 – RE: uwp @ 142 – Blake had me at “Thomas Sowell is an extreme right wing crank…”
I was going to respond to Erik simply by saying just because it’s in print, it doesn’t make it true.
By Blake @ 140:
And another good post, although I’d add: You don’t have to read past the name . . ..
RE: Erik @ 122 –
“There is always a well-known solution to every human problem—neat, plausible and wrong.”
H. L. Mencken
Thomas Sowell is a very smart guy. He has done amazing things given where he started in life. But he has biases that infect everything he touches. He is incensed that his genius has not been properly recognized by other economists. And any hint that his race might have gotten him some tiny advantage somewhere along the line drives him completely nuts. So in fact he therefore has to argue that all programs to alleviate the effects of historical or institutional race prejudice are ineffective, counter-productive and a massive waste of money. And so of course he is called an Oreo by most black academics and this sours his mood even further. And so of course he comes off as a right-wing crank.
I can appreciate the fact that the guy is smart, but also feel that he tends to make his scholarship about his biases, not about the historical and economic facts.
Erik, you can leave aside the work of many other more liberal economists like Paul Krugman, Joseph Stieglitz and Thomas Piketty if you choose not to believe people on the left (although they are the guys really admired in the economics profession). But there are a whole range of good books on the Great Recession written by financial journalists and analysts that don’t have any particular bias– other than against the greed of the Wall St financial gambling complex.
You have probably seen the movie “The Big Short”. If you haven’t, it is a hoot. But you really should read Michael Lewis’s book of the same name. Funny and informative. Then you might try Andrew Ross Sorkin’s “Too Big to Fail” and/or “All the Devils are Here: The Hidden History of the Financial Crisis”
by Bethany McLean and Joe Nocera.
People who push a one-size fits all analysis of everything are selling something. And what they generally are trying to sell is sheep.
You might have heard it said that if the product is easy and free, you are the product.
To provide some balance, below are selected excerpts rom Wikipedia. My question is why CRA existed in the first place if the loans were profitable? Btw, Walmart went into low income neighborhoods voluntarily and became the #1 retailer in the nation.
Relationship to the 2008 financial crisis
Economist Stan Liebowitz wrote in the New York Post that a strengthening of the CRA in the 1990s encouraged a loosening of lending standards throughout the banking industry. He charged the Federal Reserve with ignoring the negative impact of the CRA. According to Manhattan Institute scholar Howard Husock, the CEO of a midsize bank reported that 20% of his institution’s CRA-related mortgages were delinquent in their first year and probably 7% would end in foreclosure. In a commentary for CNN, Congressman Ron Paul, who serves on the United States House Committee on Financial Services, charged the CRA with “forcing banks to lend to people who normally would be rejected as bad credit risks.” In a The Wall Street Journal opinion piece, economist Russell Roberts wrote that the CRA subsidized low-income housing by pressuring banks to serve poor borrowers and poor regions of the country.
According to American Enterprise Institute fellow Edward Pinto, Bank of America reported in 2008 that its CRA portfolio, which constituted 7% of its owned residential mortgages, was responsible for 29 percent of its losses. He charged that “approximately 50 percent of CRA loans for single-family residences … [had] characteristics that indicated high credit risk”, yet, per the standards used by the various government agencies to evaluate CRA performance at the time, were not counted as “subprime” because borrower credit worthiness was not considered. Krugman argues that Pinto’s category of “other high-risk mortgages” incorrectly includes loans that were not high-risk, that instead were like traditional conforming mortgages. Gene Epstein of Barron’s disputed Krugman’s claims and those of the article he cited as erroneous and misleading. Another CRA critic, Joseph Fried, concedes that “some of this CRA subprime lending might have taken place, even in the absence of CRA. For that reason, the direct impact of CRA on the volume of subprime lending is not certain.” A study by the economists, Agarwal, Benmelich, and Bergman, found that banks undergoing CRA-related regulatory exams took additional mortgage lending risk.
https://en.wikipedia.org/wiki/Community_Reinvestment_Act
RE: Blake @ 141 –
Sorry, I don’t live in the Pacific Northwest, but am interested in real estate and occasionally read this blog. BTW, Seattle isn’t the same city I use to enjoy visiting. The place has changed considerably in the last ten years. And in the downtown area, not for the better.
Blake, sorry but I’m going to respectfully disagree with some of your points.
“Thomas Sowell is an extreme right wing crank”
I’ve read all his books, and didn’t come to this conclusion. Have you read a single book of one of them? I can make recommendations if you like.
“Here’s a quick debunking of the theme Sowell and Trump’s “crack economic team” Kudlow and Moore keep advancing in spite of all evidence to the contrary:”
I liked how you had to tie Sowell to Trump and his team. I assure you that Sowell would disagree with almost all of Trump’s economic policies. Sowell is more of a free market Libertarian than Republican. He focuses more on social issues. He’s a great writer and his books are dense, trust me, nothing our president would bother with.
“Let’s just be clear about what the CRA does and doesn’t do. It simply says that if you open a branch office in a low income neighborhood and collect deposits there, you are obligated to do a certain amount of lending in that neighborhood. In other words, you can’t open a branch office in Harlem and use deposits from there to only fund loans in high-end Tribeca.”
This is completely untrue. A CRA conforming mortgage only has to be given to someone who earns 80% of the median income in that area. So some mortgages in very affluent areas can be made (and qualify for CRA) to someone who earns substantially above the national median income in the country. They are not limited to the areas you listed.
“A bank must make credit available on the same terms in both neighborhoods. In other words, a “red line” can’t be drawn around Harlem, a term that dates to when banks supposedly used colored pencils to draw no-loan zones on maps.”
The original red liners were not banks, it was a government agency. The “Federal Home Loan Bank Board” and “Federal Owners’ Loan Corporation” were depression era equivalents to the current alphabet soup of government agencies to “aid” home ownership. They drew the “red lines” for the “security” of lending in certain areas. They just so happen to draw the lines on…well…. Racial lines. Banks, then and now, are more than happy to give mortgages to anyone, as long as they can find someone to sell the paper to and dump the repayment risk. This list of bankers that won’t make a loan (that they can sell) to a minority is probably a pretty short list. Bankers love collecting fees more than anything.
“If that isn’t enough to dismiss the claim, consider this: Where did mortgages, especially subprime mortgages, default in large numbers?
It wasn’t Harlem, Philadelphia, Baltimore, Chicago, Detroit or any other poor, largely minority urban area covered by the CRA. No, the crisis was worst in Florida, Arizona, Nevada and California. Indeed, the vast majority of the housing collapse took place in the suburbs and exurbs, not the inner cities.”
I don’t know where you were looking, but I assure you if you look at the Chicago, Detroit, Baltimore Case Shiller numbers, these places took some pretty good hits.
The list of states you mention do have a close correlation with the list of states that do not allow recourse mortgages. Which makes sense, if your state has decided that you can’t go after the borrower for anything other than the real estate collateral why not gamble and buy a bunch of condos? The most you can lose is the down payment (if any.) The easy solution here is for the Federal agencies to stop buying non recourse mortgages. The states that insist on keeping it this way will have to find someone else to guarantee the mortgages.
“Now consider that much of the rest of the developed world also had a boom and bust in residential real estate that was worse than in the U.S.Oh, right — those countries didn’t have the CRA.
(end quote)”
Here you make a good point. Why were all market (internationally) so coordinated? I’ve thought about this a lot and really haven’t come up with a good answer. But if your point is that the CRA doesn’t increase the pool of potential buyers, and increased demand for real estate, then let’s just end it. We both agree. But it did draw people into the market and I’d argue to their detriment. (you can decide if the end result is what matters, or your intentions and your desire to right wrongs of the past.)
“Also: Nearly $3 of every $4 in subprime loans made from 2004 through 2007 came from lenders who were exempt from the (CRA) law.”
The CRA goals got stiffer under Clinton, they were pretty mild before that. I believe the Clinton administration thought they’d be helping people in depressed areas by increasing CRA requirements. At the same time banks were all trying to merge with other banks and the government increased the CRA goals as part of the approval process in these mergers. Bush was no different. It didn’t require any funding from Congress, and he’d claim credit as part of his “Ownership” society thing.
Home loans are made the same reason that the AMC Gremlin, Pet Rocks, and IPhones are made. Because someone would buy them (for a while anyway in the first two cases.) Nobody wanted these mortgages because they were crap paper. But if you get a Fannie/Feddie (or other government agency…VA alarmingly now) guarantee on a mortgage you can sell it to anyone. It’s good. The bank makes the fees, the investor gets paid no matter what, and the taxpayer gets the risk. What could possibly go wrong?
If you read Daniel Mudd’s (Fannie Mae CEO) memo in 2004 to his staff:
We project extreme difficulty meeting our minority goals in 2005, and a progressive squeeze on HUD goals from 2006 on… There is no easy work left here. It is clear to me that after a full year of managing the goals lending efforts-the primary market is simply not going to deliver us the business it should. We meet monthly to review the numbers and deals. We have studied FHA, new products, new channels, and alternative structures… and concluded that there is only one place to change the market and acquire the business in sufficient size- subprime. In 2005, we’ll have to stop talking around that elephant under the carpet
In the same year, Paul Weech (Fannie Mae) “In 1998, 2002, and 2003 especially, the Company has had to pursue certain transactions as much for housing goals attainment as for the economics of the transactions”
If you like, I’ll take your point and CRA had nothing to do with the crisis. But what “goals” and “minority goals” are they talking about. And what was Barney Frank talking about in 2003 with his “”I want to roll the dice a little bit more in this situation toward subsidized housing.” talking about.
If Fannie/Feddie wanted to buy crap mortgages, there were banks and nonbank lenders willing to originate those loans. I’m going to blame the Johns here, they wanted to buy and the prostitutes were more than happy to sell. If Fannie/Feddie weren’t there to guarantee these loans nobody would have made them.
Getting a house and mortgage is great for the real estate broker (she gets her commission), the loan originator gets their fee (sweet), the house builder/seller gets paid, the homeowner (why do we call someone a homeowner who has a LTV of 104%?) gets an upside option on price appreciation, and the taxpayer gets the risk. How sweet an industry is this?
All of this government “help” (yes, I’m from the government and I’m here to help you) to make people homeowners have done little except for enriching the wallets of the industry that has captured them. The homeownership rate is little changed by all of these efforts. Go ahead and call the CRA goals a red herring, but the GSE’s had “goals” and “minority goals” that were a big part of their business. (Read their 10k’s from this era) They were encouraging bad loans to be made, and financially devasted the recipients of this “help.”
I’d be interested in your thoughts on these points. If not, you can simply call me names and try to change the subject.
RE: Happily Homeless @ 149 –
You may have noted that this thread started with this comment:
By Erik @ 109:
Are you making the case that efforts to create racial equality created the last boom and bust? If not, then the point of arguing about CRA here is not really relevant.
RE: Deerhawke @ 150 – Calls Thomas Sowell a right-wing crank and then references Paul Krugman as a legitimate economist.
Krugman is a leftist nutcase. A true political hack who acts and talks like he hangs out in the dark corners of a leather bar.
“Foreign purchases of American homes plunge 36% as Chinese buyers flee the market”
https://www.cnbc.com/2019/07/17/foreign-purchases-of-american-homes-plunge-36percent-as-chinese-buyers-flee.html
Good news for potential buyers
RE: Happily Homeless @ 149 – Excellent post!
“Getting a house and mortgage is great for the real estate broker (she gets her commission), the loan originator gets their fee (sweet), the house builder/seller gets paid, the homeowner (why do we call someone a homeowner who has a LTV of 104%?) gets an upside option on price appreciation, and the taxpayer gets the risk. How sweet an industry is this?”
So true. And it’s why the real estate industry plays such a big factor in the economy. The saddest part of all — the taxpayer is the ultimate victim. All these bailouts (and future bailouts) just build a bigger tax burden for our kids and their kids — most people don’t seem to care because we’re all selfish and just thinking about ourselves and not our future. “who cares about that debt? Let those guys figure it out” seems to be the motto of the day.
RE: Deerhawke @ 147 –
I found the book based on the description. I didn’t even know who the guy was until I mentioned him on here. The description of the contents made me buy the book, not the author.
Thomas Sowell says that more government interference, the deeper the recession, which I have to agree with. If we loosen loan requirements for the minority’s again, that is the first concrete sign a big crash is coming, so I’m watching for that. Last bubble it started with loosening loan requirements for African Americans, then it moved to all minority’s, and then everyone, which caused a huge economic boom and bust.
As far as my political beliefs, I wouldn’t say I’m strong either way. I just want to make money and get out of the rat race. I’d call myself liberal if I thought it would make me more money. Liberals need better presidential candidates and I’ll vote liberal.
Well, time for me to head in to do my job in manufacturing. Have a nice day you fortunate real estate mogul. I’ll be slaving away today why you sip espresso and count your stacks of money.
RE: Deerhawke @ 150 –
That is the argument I’m making. Racial equality was used to create the last boom and bust.
RE: Deerhawke @ 150 –
Deerhawke,
The issue of the CRA wasn’t brought up until Blake mentions it in a reply to Erik. The paper referencing that the CRA didn’t cause the problem is interesting, but it’s a red herring. The paper would have been more relevant if it would have investigated the result (not intentions) of ALL of the government interventions in the housing market. If the CRA was the only one we probably wouldn’t have had a large problem.
1) 30 yr mortgages. These are virtually unknown anywhere else in the world.
2) GSE (and other governmental agencies) backing of mortgages. This is a big one.
3) Fed MBS purchases
4) Clinton led / Republican followed (there are no differences in the parties here) tax change to exempt the first $500k real estate capital gain from taxation (for couples.) Because of the timing of this one, it really fits with the beginning of the surge in housing prices. If you make money selling: coffee, bitcoin, junk silver, weed, your labor, etc you don’t get this benefit. This was a “tax cut for the rich” as anyone with that much of a cap gain on their house is probably pretty wealthy. Simply indexing gains to inflation would have made much more sense. Then you’d just pay capital gains tax on actual real gains, not the inflation change in price.
5) Tax deducibility for mortgage interest. This is a great one. Because even more so now (with the $24k standard deduction) it will only apply to a small group of high earners. We actually have a tax code that will subsidizes higher income people at higher rates than lower income people for the exact same mortgage. Excellent!
6) CRA.
My point is that the CRA was just one of the many government interventions, of course it wasn’t “the cause” but instead just the icing on a very large cake of interventions.
The “efforts to create racial equality”….. how’d they do? If fine intentions are the goal, you won. The results were disastrous.
BTW, you might have not had the time to address this, but what was Barney Frank referring to with his willingness to “roll the dice…” comment. I’m sure that his boyfriend (Herb Moses) getting a high paying gig at Fannie was just a weird coincidence.
And, what were these “goals” that Fannie were trying to fulfill? They seem to be something about making non-economic loans.
https://www.seattletimes.com/seattle-news/politics/chasing-the-unicorn-suddenly-the-liberal-dream-of-an-income-tax-is-tantalizingly-real/
City of Seattle income tax, coming soon to a neighborhood near you! (And, according to the article, potentially a state income tax)
This will be a game changer folks
#4) existed before 1997. You just had to roll it into a new home within two years. Which most people did, iirc.
CDOs and lack skin in the game were the #1 real driver of the increase in mortgage lending to anyone with a pulse. I would guess it accounted for well over 90% of the irresponsible lending.
And the reason for that was removing regulations breaking down the wall, that had been there since the great depression, separating lending banks with investment banking . Removing government from the process. Laissez-faire capitalism with a pull-back in government oversight caused the great recession.
I was watching this in real-time, as I watched friends I knew were not credit-worthy get loans they couldn’t afford, starting in 2003.
RE: Happily Homeless @ 158 – Thanks for your great insights and summary.
I think GSEs probably keep mortgage rates artificially low, but I don’t see it being a driver of irresponsible loans. They dealt (or did until used to try to prop-up the crumbling RE market in 2007-9) in mainly conforming loans. Also, you know there isn’t really any guarantee. There is an implicit one, but nothing in writing.
RE: Happily Homeless @ 151 – RE: Erik @ 156 –
You wrote: “Last bubble it started with loosening loan requirements for African Americans, then it moved to all minority’s, and then everyone, which caused a huge economic boom and bust.”
When do you think the last bubble started Erik? About 2002 or so?
And when exactly did the Federal government regulators under Bush/Cheney “loosen loan requirements for African Americans?” Link please?
As biliruben points out above, in the early 2000s the innovation of securitization/CDOs enabled the loan originators to sell off their loans and walk away with no skin in the the game, so they didn’t really care if they were terrible loans. This was THE key factor that enabled bad mortgages to proliferate and grow. The big bad government didn’t create that innovation and probably SHOULD HAVE regulated it! (In fact the Democrats tried to put through legislation forcing loan originators to keep skin in the game, but the Repugs voted it down.)
Strange how obsessed you are with blaming this on African Americans, when they were such a small portion of the home buyers in the lead up to the bust: about 6-8%. You really want to blame them tho…
RE: David @ 153 –
Paul Krugman is the closest an economist comes to being a rock star. Amazing at the quantitative/modeling side of economics. A persuasive speaker. A fabulous professor who mentors high-powered students. A prolific and persuasive writer on academic and policy issues.
And he won the Nobel in 2008.
I can see why he drives people like you crazy.
Portfolio lenders around here usually have the lowest ltv, highest underwriting standards, highest note rates, and human officers with working senses of smell. Therefore, most purchase mortgage applicants go to the “originator” shops who hold nothing for very long and use the GSE’s as dumping grounds.
If you want a construction loan, though, they have the gonads to quote you and the staff to police the terms of the agreement, which is part of real banking.
Sorry for any confusion, but I did not write what you are quoting. I pasted the sections from the link above. It was written by the fund manager Barry Ritholtz. Note that I ended the quoted section with “(end quote)”
Google Barry Ritholtz… he’s a very smart guy and has spent the last 10 years debunking this BS.
You wrote: “If you like, I’ll take your point and CRA had nothing to do with the crisis.”
I never wrote the CRA had “nothing” to do with the crisis. I argue that it was a minor factor that the right wing has seized upon to (a) blame the government (b) distract people from realizing that deregulated markets boom and bust on their own and (c) blame the poor, African Americans etc. Unfortunately (c) is what really animates the extreme right wingers in America today. Red meat for the racists. (Sad, but true: There are a lot of racists in America.)
You wrote: “Sowell is more of a free market Libertarian than Republican.”
Ummm…. so just what do you think Larry Kudlow and Stephen Moore are? Not quite free market/libertarian enough? I’ve been reading Moore and Sowell’s stuff for 30+ years and it is hard to differentiate!
You wrote: “I don’t know where you were looking, but I assure you if you look at the Chicago, Detroit, Baltimore Case Shiller numbers, these places took some pretty good hits.”
Please read the line you quoted directly above this comment where Barry Ritholtz wrote: “the vast majority of the housing collapse took place in the suburbs and exurbs, not the inner cities.” Yes, all of America took a good hit, but the VAST majority of the bad mortgages were not in minority-concentrated inner cities!
Finally, you took issue with this quote: “Now consider that much of the rest of the developed world also had a boom and bust in residential real estate that was worse than in the U.S. Oh, right — those countries didn’t have the CRA.
(end quote)”
You wrote: “Here you make a good point. Why were all market (internationally) so coordinated? I’ve thought about this a lot and really haven’t come up with a good answer.”
I got your answer for you: Markets!! They boom and bust!! :-)
You wanna learn a lot about this reading a little book? Read this:
https://www.amazon.com/Fearful-Rise-Markets-Synchronized-Meltdowns/dp/0137072996
Only 250 pages but brilliant. I read it 9 years ago when it came out and still pick it up and thumb through it. The author was the International Markets editor at the Financial Times for 29 years and has now been hired by Bloomberg. (I get his email updates several times a week.)
“This enjoyable, fast-moving book is concise, relevant, and perceptive. My bottom line is a simple one: This book should be read by all those interested in the way markets operate, be they investors, analysts, or policy makers.”
– From the Foreword by Mohamed A. El-Erian, CEO and co-CIO of PIMCO, and author of “When Markets Collide”
“This book is a must-read for anyone concerned about how we can avoid recurring debt-induced busts in the years ahead, or anyone who wonders how to invest if (when!) the crisis returns. Authers’ insights on the global financial crisis are profound.”
– Robert D. Arnott, Chairman, Research Affiliates, LLC, and author of “The Fundamental Index: A Better Way to Invest”
“John Authers has combined his journalistically honed FT skills with great insights. Serious investors and policymakers should read this book.”
– David R. Kotok, Chairman and Chief Investment Officer of Cumberland Advisors
RE: Happily Homeless @ 151 –
Sorry for any confusion, but I did not write what you are quoting. I pasted the sections from the link above. It was written by the fund manager Barry Ritholtz.
Note that I ended the quoted section with “(end quote)”
Google Barry Ritholtz… he’s a very smart guy and has spent the last 10 years debunking this BS.
You wrote: “If you like, I’ll take your point and CRA had nothing to do with the crisis.”
I never wrote the CRA had “nothing” to do with the crisis. I argue that it was a minor factor that the right wing has seized upon to (a) blame the government (b) distract people from realizing that deregulated markets boom and bust on their own and (c) blame the poor, African Americans etc. Unfortunately (c) is what really animates the extreme right wingers in America today. Red meat for the racists. (Sad, but true: There are a lot of racists in America.)
You wrote: “Sowell is more of a free market Libertarian than Republican.”
Ummm…. so just what do you think Larry Kudlow and Stephen Moore are? Not quite free market/libertarian enough? I’ve been reading Moore and Sowell’s stuff for 30+ years and it is hard to differentiate!
You wrote: “I don’t know where you were looking, but I assure you if you look at the Chicago, Detroit, Baltimore Case Shiller numbers, these places took some pretty good hits.”
Please read the line you quoted directly above this comment where Barry Ritholtz wrote: “the vast majority of the housing collapse took place in the suburbs and exurbs, not the inner cities.” Yes, all of America took a good hit, but the VAST majority of the bad mortgages were not in minority-concentrated inner cities!
Finally, you took issue with this quote: “Now consider that much of the rest of the developed world also had a boom and bust in residential real estate that was worse than in the U.S. Oh, right — those countries didn’t have the CRA.
(end quote)”
You wrote: “Here you make a good point. Why were all market (internationally) so coordinated? I’ve thought about this a lot and really haven’t come up with a good answer.”
I got your answer for you: Markets!! They boom and bust!! :-)
You wanna learn a lot about this reading a little book? Read this:
https://www.amazon.com/Fearful-Rise-Markets-Synchronized-Meltdowns/dp/0137072996
Only 250 pages but brilliant. I read it 9 years ago when it came out and still pick it up and thumb through it. The author was the International Markets editor at the Financial Times for 29 years and has now been hired by Bloomberg. (I get his email updates several times a week.)
“This enjoyable, fast-moving book is concise, relevant, and perceptive. My bottom line is a simple one: This book should be read by all those interested in the way markets operate, be they investors, analysts, or policy makers.”
– From the Foreword by Mohamed A. El-Erian, CEO and co-CIO of PIMCO, and author of “When Markets Collide”
“This book is a must-read for anyone concerned about how we can avoid recurring debt-induced busts in the years ahead, or anyone who wonders how to invest if (when!) the crisis returns. Authers’ insights on the global financial crisis are profound.”
– Robert D. Arnott, Chairman, Research Affiliates, LLC, and author of “The Fundamental Index: A Better Way to Invest”
“John Authers has combined his journalistically honed FT skills with great insights. Serious investors and policymakers should read this book.”
– David R. Kotok, Chairman and Chief Investment Officer of Cumberland Advisors
RE: Erik @ 156 –
Yes that is the life. Sipping lattes and counting stacks of cash. And it was all so easy. Wait….. Who is this guy whose life you are fantasizing about? I would sure like to meet him.
If you want to get off the treadmill, you should be reading the Bogleheads website and the FI/RE websites (financial independence/retire early) and then follow that basic pattern. Live simply–way within your means. Save 20+% of your gross. Max out your Roth, 401K and IRA. You have all kinds of resources for living a more financially liberated life than I did at your age.
By Deerhawke @ 164:
Obama won the Nobel Prize for waking up a minority. Krugman is a joke. Literally no one quotes the imbecile.
Speaking of FIRE and coffee and advice from the heart..
Never casually stroll through Mudbay’s gourmet dog biscuit aisle carrying just a latte.
RE: Blake @ 166 –
+1
This is especially well said:
“I argue that it was a minor factor that the right wing has seized upon to (a) blame the government (b) distract people from realizing that deregulated markets boom and bust on their own and (c) blame the poor, African Americans etc.”
This whole line of argumentation is a calculated distraction.
I will say it again. You want to find out who caused the Great Recession? You want to know who will cause the next big financial crisis? Then stop chasing these kinds of fool’s shiny silver objects.
Follow the money.
RE: Blake @ 163 –
And when you bring up the bubble starting in 2002, it’s worth considering the effects of policies designed to bolster the economy post dot.com-bust and 9-11. We were already in expansionary-policy mode at the time the housing bubble began.
Anti-Kruman 101: When the Government mandates loans to huge swathes of people who cannot afford those loans, there will be huge defaults.
Even Jesus wrote about the numbskull who doesn’t calculate the costs to budget for a build and then fails. Only Jesus could walk on water, not the apostles or the US Government.
“Read the book and try to make a comeback.”
Sound of needled scratching record indicating the music has stopped….
When a known real estate speculator starts talking about equity politics and poor inner city minorities as the root of the housing bubble.
From NBER Working Paper No. 23740
“A broadly accepted view contends that the 2007-09 financial crisis in the U.S. was caused by an expansion in the supply of credit to subprime borrowers during the 2001- 2006 credit boom, leading to the spike in defaults and foreclosures that sparked the crisis. We use a large administrative panel of credit file data to examine the evolution of household debt and defaults between 1999 and 2013. Our findings suggest an alternative narrative that challenges the large role of subprime credit in the crisis. We show that credit growth between 2001 and 2007 was concentrated in the prime segment, and debt to high risk borrowers was virtually constant for all debt categories during this period. The rise in mortgage defaults during the crisis was concentrated in the middle of the credit score distribution, and mostly attributable to real estate investors. We argue that previous analyses confounded life cycle debt demand of borrowers who were young at the start of the boom with an expansion in credit supply over that period.”
Don’t call it a comeback
I’ve been here for years
I’m rocking my peers
Puttin’ suckers in fear
I’m gonna knock you, I’m gonna knock you, I just knocked you out!!!!
By biliruben @ 160:
”
I remember this too. In 2005 I was at a party in So. California listening to a couple who made decent money, didn’t have a dime to put down, and a recent bankruptcy telling us how they were buying a home in Palos Verdes. (a very ritzy area if you’re not familiar with LA) I didn’t want to swear, but did walk someone outside and said “Who’s behind this loan?” I wish I would have been smart as the guys in the book/movie “The Big Short”
By Blake @ 166:
RE: Happily Homeless @ 173 –
When I moved to Seattle in 2005, my family here told me I MUST immediately buy a house!! I’d sold a 2,300 sft brick ranch in the midwest for $250k and had enough for a sizable down payment and started looking. My sister put me in touch with a “mortgage broker” friend** of hers and I sent him some of my financial info. I was self-employed doing data mining and analysis part time then, and I think I made about $72,000. The guy told me he could put me in a $700 or $800k house!! Nuts I said…
Luckily I thought the market was absurd then with people buying houses faster than they pick out shoes. I made an offer on a few $200-300k places and then backed out of the bidding war. The next year I discovered seattlebubble, put my money in bonds and then watched…
I bought a house in 2010, sold that and bought a better house on 2 1/2 acres in 2014 (I don’t live in Seattle).
**Turns out my sister’s mortgage broker friend was a true scoundrel and convicted embezzler!
All sorts of folks originating mortgages… I’m sure that’s all fixed now, right?
Seattle, Washington
“The housing market in Seattle suffered from a severe inventory shortage from 2015 to 2017, one of the worst in the country. And while inventory has increased since then, it’s still pretty tight.
This supply shortage — combined with strong demand from investors — sent prices soaring. Seattle’s median home value shot up from a fairly affordable $350,000 in 2011, to a whopping $750,000 in 2018. As you might have guessed, this has led to affordability issues for a large segment of the populace.
A predictable pattern followed: Buyers pulled back, and this drop in demand had a cooling effect on house values. The median home price in Seattle has dropped over the past few months, and the team at Zillow predicts a continuation of this downward trend into 2020.”
http://www.homebuyinginstitute.com/news/markets-that-might-have-peaked-2019/
RE: sfrz @ 176 –
Well at least they are honest in saying this at the end:
Disclaimers: This article contains housing market analysis, forecasts and predictions from third parties not associated with the Home Buying Institute. We have compiled them here as an educational service to our readers. Real estate forecasts are the equivalent of an educated guess and should be treated as such.
RE: Deerhawke @ 177 – Yup. This blogger compiles data., as do most of them. Take what helps, leave the rest.
Here is his bio:
Meet the Editor
Brandon Cornett is a consumer advocate who has covered the real estate scene for nearly a decade. He is the creator of the Home Buying Institute and several other housing-related websites.
His educational articles have appeared on thousands of websites across the United States and abroad. His work has been cited by Time magazine, Forbes, Bloomberg, Huffington Post, PBS and many more.
RE: Deerhawke @ 177 – So you don’t like what was written. Good thing that they have no vested interests in RE.
Here is a bullish article published back in 2016 –
Seattle Real Estate Market Forecast for 2017: Leading the Pack, Again?
http://www.homebuyinginstitute.com/news/seattle-market-leading-the-pack-736/
Here is a bearish article published just yesterday –
Denver, Seattle, Portland: Where Buying a Home Could Be a Bad Idea
http://www.homebuyinginstitute.com/news/where-buying-might-be-a-bad-idea/
Here is something to keep an eye on.
Half-Point Rate Cut Odds Explode to 71%
https://moneymaven.io/mishtalk/economics/half-point-rate-cut-odds-explode-to-71-so-what-it-doesn-t-matter-nkaHDW2gn0K7qrT4mW6AAw/
Increasing Odds of 50 BPs Cut
Today (one hour ago) 49.3%
Now (2:48 PM central) 71.0%
Yesterday: 34.3%
1 Week ago: 19.9%
1 Month Ago: 17.9%
By Erik @ 46:
You don’t regret the one that you defaulted on, and then subsequently had to move into your parent’s basement for a while? Was that one before 2011, or is it one of the ones that you mention above?
By softwarengineer @ 105:
Actually, the assertion that the life expectancy of doctors is 53 is WRONG. You might be right in that is the last that you heard on the subject, but the number is wrong. Actually, I think that you’re wrong about having heard that it was 53… the story that went around maybe 15 years ago had the number at 58, not 53.
So, actually I think that David is right and both you and your assertion are wrong. But don’t let misquoting inaccurate alternative facts stop you from arguing that you’re right.
RE: Happily Homeless @ 158 –
Great post, very well said.
If I look at this the other way, 1) it’ll be foolish not to take advantage of all these benefits the system is offering to real estate. 2) we are not even close to any housing bubble as the lending standards haven’t gotten loosen anywhere close to 2005 level.
RE: Deerhawke @ 164 –
I agree with you on a lot of things but Paul Krugman isn’t one of them.
I used to think very highly of him and follow him. However he is way too academic for any real world practice, he let his political view got in the way of thinking clearly, he has been clearly wrong for the last couple of years.
Folks like Warren Buffett, Jamie Dimon offer much more useful/practical insight than Paul Krugman, Buffett publicly supported Hilary but bought tons of stocks after Trump got elected, while Krugman continued his “sky is falling” crusade.
By Eastsider @ 180:
Rate cut with a strong stock market and low unemployment… I don’t think that’s ever happened before. It suggests they see something bad about to happen. Can we guess what that bad thing is? You have to dig for this because it doesn’t hit the popular news sites — there seems to be a shortage of dollars in the banking system, and we are seeing that in the low treasury rates.
I got a laugh out of the comments saying the financial crisis was caused by minority lending. Maybe it was, but does that even matter? What matters is lending standards were relaxed so cats and dogs could get a mortgage or 10. In a way, that’s still happening because of the super low rates.
RE: Macro Investor @ 184 –
—————
“Rate cut with a strong stock market and low unemployment… I don’t think that’s ever happened before. It suggests they see something bad about to happen. Can we guess what that bad thing is? You have to dig for this because it doesn’t hit the popular news sites — there seems to be a shortage of dollars in the banking system, and we are seeing that in the low treasury rates”
—————
So what is your explanation of why there seems to be a shortage of dollars in the banking system?
RE: David @ 168 –
Klugman’s Predictions on the Lower Tax Trump Economy 27000+ DOW ROCKET
Were all wrong, the opposite came true. The guy is like a typical college educated financial advisor the last 10 years….not one of them took the SWE approach, 100% AMERICAN STOCKS since 911. I made a fortune ignoring them and accelerated my retirement ability double.
But SWE is a nut, a rich nut…LOL…I’m retired back in long-term CDs now, but my retirement plans assume 0% interest with plenty to live on for many decades in my mortgage free home. You can take your $700,000 house and $CASH$ it in and pay capital gains. Then you have to find a cheaper and decent place to live in Seattle….good luck.
Being a savvy investor is luck, scheming and not following the brainless lemmings off the cliff…
RE: JWoods @ 183 –
Yes, Its Non-partisan
I’m like Erik, I voted Democrat before 2000 when I had a good candidate for the people, without MASS welfare to the Uber rich. Or a phony climate change agenda who’s real purpose is more welfare and more trillions in debt, etc, etc…and no manufacturing engineering.
I vote my pocket book like almost everyone should….why is that wrong?
Kary
Tim’s website edit function does work….just pause for about 5 min and it flashes on “edit” for 12 min….so its working Tim/Kary. But the delay may not of been there in the past.
By JWoods @ 183:
Krugman has been spot on for the last decade on interest rates, inflation, unemployment. He made one blog post in the midst of election night despair about what a disaster the Trump presidency would be, but he reversed the call for a global recession a couple days later in a follow-up post.
https://www.nytimes.com/2016/11/14/opinion/trump-slump-coming.html
For those out of NYT articles:
Trump Slump Coming?
Let’s be clear: Installing Donald Trump in the White House is an epic mistake. In the long run, its consequences may well be apocalyptic, if only because we have probably lost our last, best chance to rein in runaway climate change.
But will the extent of the disaster become apparent right away? It’s natural and, one must admit, tempting to predict a quick comeuppance — and I myself gave in to that temptation, briefly, on that horrible election night, suggesting that a global recession was imminent. But I quickly retracted that call. Trumpism will have dire effects, but they will take time to become manifest.
In fact, don’t be surprised if economic growth actually accelerates for a couple of years.
Why am I, on reflection, relatively sanguine about the short-term effects of putting such a terrible man, with such a terrible team, in power? The answer is a mix of general principles and the specifics of our current economic situation.
First, the general principles: There is always a disconnect between what is good for society, or even the economy, in the long run, and what is good for economic performance over the next few quarters. Failure to take action on climate may doom civilization, but it’s not clear why it should depress next year’s consumer spending.
Or take the signature Trump issue of trade policy. A return to protectionism and trade wars would make the world economy poorer over time, and would in particular cripple poorer nations that desperately need open markets for their products. But predictions that Trumpist tariffs will cause a recession never made sense: Yes, we’ll export less, but we’ll also import less, and the overall effect on jobs will be more or less a wash.
We’ve already had a sort of dress rehearsal for this disconnect in the case of Brexit, Britain’s vote to leave the European Union. Brexit will make Britain poorer in the long run; but widespread predictions that it would cause a recession were, as some of us pointed out at the time, not really based on careful economic thinking. And sure enough, the Brexit recession doesn’t seem to be happening.
Beyond these general principles, the specifics of our economic situation mean that for a time, at least, a Trump administration might actually end up doing the right thing for the wrong reasons.
Eight years ago, as the world was plunging into financial crisis, I argued that we’d entered an economic realm in which “virtue is vice, caution is risky, and prudence is folly.” Specifically, we’d stumbled into a situation in which bigger deficits and higher inflation were good things, not bad. And we’re still in that situation — not as strongly as we were, but we could still very much use more deficit spending.
Many economists have known this all along. But they have been ignored, partly because much of the political establishment has been obsessed with the evils of debt, partly because Republicans have been against anything the Obama administration proposes.
Now, however, power has fallen into the hands of a man who definitely doesn’t suffer from an excess of either virtue or prudence. Donald Trump isn’t proposing huge, budget-busting tax cuts for the wealthy and corporations because he understands macroeconomics. But those tax cuts would add $4.5 trillion to U.S. debt over the next decade — about five times as much as the stimulus of the early Obama years.
True, handing out windfalls to rich people and companies that will probably sit on a lot of the money is a bad, low-bang-for-the-buck way to boost the economy, and I have my doubts about whether the promised surge in infrastructure spending will really happen. But an accidental, badly designed stimulus would still, in the short run, be better than no stimulus at all.
In short, don’t expect an immediate Trump slump.
Now, in the longer run Trumpism will be a very bad thing for the economy, in a couple of ways. For one thing, even if we don’t face a recession right now, stuff happens, and a lot depends on the effectiveness of the policy response. Yet we’re about to see a major degradation in both the quality and the independence of public servants. If we face a new economic crisis — perhaps as a result of the dismantling of financial reform — it’s hard to think of people less prepared to deal with it.
And Trumpist policies will, in particular, hurt, not help, the American working class; eventually, promises to bring back the good old days — yes, to make America great again — will be revealed as the cruel joke they are. More on that in future columns.
But all of this will probably take time; the consequences of the new regime’s awfulness won’t be apparent right away. Opponents of that regime need to be prepared for the real possibility that good things will happen to bad people, at least for a while.
RE: Azucar_80127 @ 181 –
That was one I bought in 2004 when I didn’t know what was going on.
RE: Deerhawke @ 167 –
Save my way to the top? No thanks. Poor people save and rich people invest.
RE: uwp @ 189 –
He’s been writing about both ways, sometimes if you just change the names and time in his articles, his points would still generally apply and sound intelligent. For example I don’t know what to make out of this article, “I was wrong, sky won’t fall immediately as I predicated, but things are going to be bad eventually, but probably OK for now?”
The man is clearly intelligent but he just babbles too much with fancy words, listening to him I get very high noise to signal ratio, which makes reading him not that worthwhile. On the contrary when I listen to Buffett or Dimon, they talk a lot less, but their talks are spot on and straightforward, oftentimes I can get something really valuable out from their talks, like the Buffett NYT Op-Ed, buying SFH after crisis, buying after Trump election, Dimon bottom etc.
By Deerhawke @ 188:
We won’t ever know. Again what difference does it make? Folks on this blog can’t even agree on what caused a housing crash 10 years ago.
We have the fed hinting at emergency-like measures, when things seem fine on the surface. We have big players bidding high for dollars, so much so that rates are going down even with $1 trillion in deficit spending. It would be nice to know why, but sometimes there just aren’t enough earnings to go around at the end of a big expansion of debt.
By Macro Investor @ 196:
Oh wait? You mean I’m not reading a thread from 2010? But for the references to Trump it would be hard to tell.
Thank you all for reminding me why I quit following this site. Talk about blathering. Mentioning local real estate issues every now and then would be nice.
RE: Macro Investor @ 196 –
“We have the fed hinting at emergency-like measures…It would be nice to know why”.
So the Republicans can stay in office. Same reason for the crash back when and Dodd-Frank…so Democrats could take office. Bottom line…it’s all money and politics.
Only fools believe otherwise and blame the scapegoat.
Sold my last residential property in Seattle on Wednesday. Made a fairly decent profit.
So now I am on the prowl again.
Maybe Bellevue/Redmond?
RE: Kary L. Krismer @ 197 – The recipe for all political convos is to remember one overriding truth:
The Democrat Party only exists because it’s members are from the lowest 50% of the IQ spectrum.
So this is odd. We had almost 9,000 views on Redfin the other day. When I just marked it as closed when it recorded at the County the number of views dropped to 2,013 instantly. hmmmm
https://www.redfin.com/WA/Kirkland/4510-Lake-Washington-Blvd-NE-98033/home/459928
By Eastsider @ 182:
It is looking more and more like they’ll cut 0.50%. Quite a few economic indicators are looking down and international trade is turning south. But remember that if they cut sharply it probably means a recession is upon us! Look closely at the graph on slide 5 here:
https://www.etf.com/docs/presentation2014/FixedIncome/7InsideFixedIncome.pdf
The last 3 times the Fed cut rates sharply it was just before the onset of a recession. They see if coming but can’t stop it… just soften the impact. And this time they can only cut rates a few percentage points! The last 3 times they cut rates 5, 6 and 7%…
RE: Blake @ 202 – Someone in the know, including the FED, probably see bad things coming. Otherwise, why the panic?
RE: Macro Investor @ 196 –
You identified an anomaly, a problem in search of a solution. Then when I ask you for your best shot at uan explanation, you say “We won’t ever know. Again what difference does it make?”
Knowing what is useful. Knowing why, how and when is far better.
The difference is that if you know the mechanics and linkages, you are likely to be able to have a model that predicts onset and duration.
During the last recession, I knew the what and had a good idea of the when. The guys you read about in The Big Short also knew the why and how. And were able to act on it.
Milenials Flocking to Seattle in Groves Bloomberg Alleges
https://www.bnnbloomberg.ca/millennials-are-flocking-to-the-pacific-northwest-study-finds-1.1289773
Check out the raw data in the URL above, its Fake with no column identification on the chart.
Ya see why I don’t like Bloomberg….
RE: David @ 200 – Really enjoying your Avatar. Being from the South, you no doubt know what a yellow dog is.
RE: Deerhawke @ 204 –
Trump is the only person I follow on Twitter. He is bullying the fed to cut rates because he says that when the dollar is strong, we need to keep rates low. When the dollar gets weak, we can raise rates. Trump has gone as far as threatening Jerome Powell’s job. That is why I believe rates are going down.
I’m just reporting the information and I don’t know enough to have an opinion either way.
RE: Deerhawke @ 204 –
As soon as trump messes up the economy I will bash him hard. So far he has done an awesome job with the economy, so I cannot complain. I’m telling you this because I know you are very biased because you are a left wing extremist. I do not have a large bias like you, so I’m looking at it deductively.
By Macro Investor @ 196:
The bulk of that $1t is old debt, and does not stimulate new spending just as paying your mortgage does not stimulate new spending, even if you refinance it every year. The incremental deficit growth is primarily decreasing revenue, not increasing spending. This last tax cut was also structured so that the revenue give back goes primarily to investors without any real mechanism to get it to spenders. Therefore, not much stimulus to demand for generating earnings, but much more capital looking for yield. More supply of investment dollars, and lower prices for them. That part is just plain free markets.
RE: whatsmyname @ 209 – Whoops, sorry, the debt thing is a poor analogy because we are growing the debt by the full deficit The deficit does have some ongoing effect. What I’m trying to say is that the incremental change is where you would expect to see a change on the economy.