We're not in denial yet, as there is not a huge amount to deny. Even with pretty high inventory numbers, we're not experience price declines (by most measures at least) and you can still sell a house pretty quickly as long as you don't take the value of comps and then add a greedy 10% on top, like so many are doing (I suppose that's denial of sorts).
Once the declines arrive, the MSM/public will be in denial for 6-12 months IMO. Even in "crashing" markets, prices are not coming down as fast as they went up, so we're going to have to be patient.
Need stock market to go boom-boom, which it seems to be doing, so once we get the recession underway, no more low unemployment, stupid consumer spending (well who knows about that one), then the housing market will start to take a speedy nose dive.
"Need stock market to go boom-boom, which it seems to be doing, so once we get the recession underway, no more low unemployment, stupid consumer spending (well who knows about that one), then the housing market will start to take a speedy nose dive."
I agree, but that's going to be a scary time to get out there and buy a house, even IF interest rates are favorable. My plan:
-Wait for darkest corner of nastiest recession, and hope that I still have a job
-Buy house with 20% down-payment, minimum
-$20K left in the bank in cash, minimum
-Immediately get HELOC for 10% of house value (90% LTV rates are usually decent) and keep this available (not extracted) for emergency fund.
If the wife and I lose both our jobs, we'll be able to keep going for a good few years on unemployment, savings, and the HELOC until good times roll around.
BTW, this is one area in which I really recommend HELOCs. If you have the ability to NOT SPEND THE DAMN MONEY they can make a great emergency fund which is usually at a decent interest rate, considering how much you can borrow. It's not a replacement for a cash emergency fund, but if you can get it and stay away from it, then why not...
Anyone on here who is excited about a recession needs to take a small step back.
Why do you think Greenspan encouraged a housing bubble? He was an expert in the field, so why would anyone who knows anything about economics encourage a bubble when one otherwise would not occur?
This is pure speculation, but I think it's because if we have a recession, our economy has no recover plan. Let me restate that. If we go into recession, WE WILL BE STUCK IN IT.
Why? Because we do not manufacture anything anymore. How do you get out of a recession? You build things, and then sell them to people who do have money. What are we going to sell to China? Houses? That's the main real thing we've built in the last 7 years.
Whoa, I am not hoping for anyone to loose their jobs, seriously. I think a recession is coming, when is a bit hard to tell as usual (thanks for the Flash, Gordon!). I think the unwinding of the subprime mess will begin the downturn in the stock market. Please don't read this as me hoping for major layoffs, I don't.
EXPECTING a recession to come is not the same thing as being EXCITED about one coming.
I EXPECT a recession to come and so I will prepare for it. I also happen to believe that a recession will be the inevitable consequence of recent times, and also believe it will come sooner rather than later.
EXPECTING a recession to come is not the same thing as being EXCITED about one coming.
I EXPECT a recession to come and so I will prepare for it. I also happen to believe that a recession will be the inevitable consequence of recent times, and also believe it will come sooner rather than later.
I was referring to earlier posts that stated things like :
Coincidentally, quotes like that one do suggest a desire for a downturn. I can relate to that. Honestly, I can. We all have goals, and some of our goals may be put on hold because of housing mania, leveraged buyout mania, the declining dollar, or even commodities mania. I'm just trying to raise awareness that while a rising tide lifts all boats, a sinking tide will hurt everyone.
This is obvious, but...there's more to the economy than manufacturing and you get out of a recession (if it happens) with economic growth. Manufucturing is one reason why we still have double digit growth, but there's also powerhouses here in high-tech, biotech, retail, banking, etc, etc.
I don't hope for a recession, but the economy is cyclical just like housing markets. It will go down and then it will go back up. Buy low sell high.
That's a really interesting topic, rose-colored. Especially with the heavy hitter hedge funds and bond investment markets going kerflooey, it's been interesting to see the different views around on hard vs. soft landings and the advantages/disadvantages of each.
To me, right now the most compassionate thinking on this also seems the toughest. These are the folks who fear that, without a hard landing, we won't change our bubble-seeking behavior, at the individual or policy level. Most impressively for me, these folks appear to be saying look, bubbles are literally not better than nothing, and hurt more than they help. The thinking is that economic bubbles, relying as they do on historically unsustainable conditions, high-velocity risk transfers, and cheap credit, keep the economy vulnerable, on a false footing. They suggest that bubble-seeking behavior by consumers, institutions and policymakers can be quelled only if bubbles are allowed--not forced, but allowed--to deflate just as quickly as their built-up energy requires. Letting the current credit and housing bubbles deflate at will can hasten our chance to start on a better footing, they believe; moreover, they suggest, the greater the force of the explosion, the more willingly consumers, institutions and policymakers will choose a rational growth strategy from here on. That's just my impression of what I read in the posts and some comments here, at HBB and Calculated Risk, etc. so please take it with a grain of salt. Thanks.
"Manufucturing is one reason why we still have double digit growth, but there's also powerhouses here in high-tech, biotech, retail, banking, etc, etc"
I work for the biotech powerhouse here Seattle and right now we have a hiring freeze until '09. So don't count on biotech to fuel growth in this area for awhile.
I worry about manufacturing. Boeing and Paccar are the two big employers, right?
Trucking is usually one of the first sectors to contract in a downturn.
Boeing is betting heavily on the 787 - and they have 600+ orders, which is great. However - the new line they built in Everett to assemble the 787? It takes 1100 people to build one new plane every 3 days... That compares to maybe 30,000 to build 737's, which take weeks. Most of the work on the 787 is outsourced to everywhere but here. It's brilliant design, but in the long run even as they are wildly successful, 757 jobs will be going away and not replaced.
I worry about manufacturing. Boeing and Paccar are the two big employers, right?
Trucking is usually one of the first sectors to contract in a downturn.
Boeing is betting heavily on the 787 - and they have 600+ orders, which is great. However - the new line they built in Everett to assemble the 787? It takes 1100 people to build one new plane every 3 days... That compares to maybe 30,000 to build 737's, which take weeks. Most of the work on the 787 is outsourced to everywhere but here. It's brilliant design, but in the long run even as they are wildly successful, 757 jobs will be going away and not replaced.
Well said DJO. But don't worry about those 757 assembly workers. They will simply transition their skills to the biotech or banking industries where the jobs are flowing like honey.
We act like the information economy will replace all previous economies. That is not how the world works. The industrial revolution did not replace agriculture, but it did make it a smaller part of the economy. Likewise, the intellectual revolution cannot replace agriculture or manufacturing, but it may marginalize their importance.
Comments
Glad I'm not a homedebtor or real estate clerk right about now.
Once the declines arrive, the MSM/public will be in denial for 6-12 months IMO. Even in "crashing" markets, prices are not coming down as fast as they went up, so we're going to have to be patient.
I agree, but that's going to be a scary time to get out there and buy a house, even IF interest rates are favorable. My plan:
-Wait for darkest corner of nastiest recession, and hope that I still have a job
-Buy house with 20% down-payment, minimum
-$20K left in the bank in cash, minimum
-Immediately get HELOC for 10% of house value (90% LTV rates are usually decent) and keep this available (not extracted) for emergency fund.
If the wife and I lose both our jobs, we'll be able to keep going for a good few years on unemployment, savings, and the HELOC until good times roll around.
BTW, this is one area in which I really recommend HELOCs. If you have the ability to NOT SPEND THE DAMN MONEY they can make a great emergency fund which is usually at a decent interest rate, considering how much you can borrow. It's not a replacement for a cash emergency fund, but if you can get it and stay away from it, then why not...
Why do you think Greenspan encouraged a housing bubble? He was an expert in the field, so why would anyone who knows anything about economics encourage a bubble when one otherwise would not occur?
This is pure speculation, but I think it's because if we have a recession, our economy has no recover plan. Let me restate that. If we go into recession, WE WILL BE STUCK IN IT.
Why? Because we do not manufacture anything anymore. How do you get out of a recession? You build things, and then sell them to people who do have money. What are we going to sell to China? Houses? That's the main real thing we've built in the last 7 years.
Just be careful what you wish for.
I EXPECT a recession to come and so I will prepare for it. I also happen to believe that a recession will be the inevitable consequence of recent times, and also believe it will come sooner rather than later.
I was referring to earlier posts that stated things like : .
Coincidentally, quotes like that one do suggest a desire for a downturn. I can relate to that. Honestly, I can. We all have goals, and some of our goals may be put on hold because of housing mania, leveraged buyout mania, the declining dollar, or even commodities mania. I'm just trying to raise awareness that while a rising tide lifts all boats, a sinking tide will hurt everyone.
This is obvious, but...there's more to the economy than manufacturing and you get out of a recession (if it happens) with economic growth. Manufucturing is one reason why we still have double digit growth, but there's also powerhouses here in high-tech, biotech, retail, banking, etc, etc.
I don't hope for a recession, but the economy is cyclical just like housing markets. It will go down and then it will go back up. Buy low sell high.
To me, right now the most compassionate thinking on this also seems the toughest. These are the folks who fear that, without a hard landing, we won't change our bubble-seeking behavior, at the individual or policy level. Most impressively for me, these folks appear to be saying look, bubbles are literally not better than nothing, and hurt more than they help. The thinking is that economic bubbles, relying as they do on historically unsustainable conditions, high-velocity risk transfers, and cheap credit, keep the economy vulnerable, on a false footing. They suggest that bubble-seeking behavior by consumers, institutions and policymakers can be quelled only if bubbles are allowed--not forced, but allowed--to deflate just as quickly as their built-up energy requires. Letting the current credit and housing bubbles deflate at will can hasten our chance to start on a better footing, they believe; moreover, they suggest, the greater the force of the explosion, the more willingly consumers, institutions and policymakers will choose a rational growth strategy from here on. That's just my impression of what I read in the posts and some comments here, at HBB and Calculated Risk, etc. so please take it with a grain of salt. Thanks.
I work for the biotech powerhouse here Seattle and right now we have a hiring freeze until '09. So don't count on biotech to fuel growth in this area for awhile.
Trucking is usually one of the first sectors to contract in a downturn.
Boeing is betting heavily on the 787 - and they have 600+ orders, which is great. However - the new line they built in Everett to assemble the 787? It takes 1100 people to build one new plane every 3 days... That compares to maybe 30,000 to build 737's, which take weeks. Most of the work on the 787 is outsourced to everywhere but here. It's brilliant design, but in the long run even as they are wildly successful, 757 jobs will be going away and not replaced.
Well said DJO. But don't worry about those 757 assembly workers. They will simply transition their skills to the biotech or banking industries where the jobs are flowing like honey.
We act like the information economy will replace all previous economies. That is not how the world works. The industrial revolution did not replace agriculture, but it did make it a smaller part of the economy. Likewise, the intellectual revolution cannot replace agriculture or manufacturing, but it may marginalize their importance.