patrick.net

If there is such a huge financial collapse such that housing is your only savior you better have stored up a LOT of yams and ammo!

I'm not convinced that paying exorbitant rent is much better than paying exorbitant purchase price

Here in SE PA (pennsylvania not palo alto), one can buy 5-10 acres and custom build the house of their dreams for 250k-300k. I'm not sure what the utility of coastal californian land is that warrants house (land) prices at many multiples of the rest of the country. I guess it boils down to the limited supply of land with restrictive zonig relative to the amount of suckers I mean people that are still mezmorized by the gold rush mentality "california is so effing cool". I like the led zeppelin song Going to Calif also, but I'm not so easily duped by marketeering

Housing is just a consumption item to me. Its utility is as shelter, it carrys a cost. Math comes easy to me, so it was never a big question as to how much can I possibly afford. It was more a decision as to what makes sense, and how can I make it work for me, rather then against me. What with all the tough times in the economy, I've been able to share my extra space with boarders. Its nice to have people to split the utilities with, and they can watch the dog when I travel.. that, and they pay my mortgage

errc says

I guess it boils down to the limited supply of land with restrictive zonig relative to the amount of suckers I mean people that are still mezmorized by the gold rush mentality "california is so effing cool".

$500k is a lot of money for a small parcel of dirt. But as the old saying goes, everything is worth what it's purchaser will pay for it.

freak80 says

But as the old saying goes, everything is worth what it's purchaser will pay for it.

It's not true though, IMHO.

Tulips were never worth what the insane Dutch were paying for them in their bubble.

One lemming's overpayment should not be used as proof that all other lemmings must follow him off the cliff.

freak80 says

But as the old saying goes, everything is worth what it's purchaser will pay for it.

The problem with this saying is, it ignores a huge elephant in the room. It's called human behavior. Humans tend to think in herds sometimes and set themselves up for a disaster.

It's not true though, IMHO.
Tulips were never worth what the insane Dutch were paying for them in their bubble.

I agree...it's crazy.

But no one ever claimed humans were rational. We're emotional beings.

That's probably why religion exists. It's hard to explain rationally. But as the old joke goes, "there are no atheists in foxholes."

uomo_senza_nome says

Humans tend to think in herds sometimes and set themselves up for a disaster.

"It's true because we believe it."

"A lie told a thousand times becomes the truth."

Groupthink is the most powerful force in the universe, after compound interest.

freak80 says

Groupthink is the most powerful force in the universe, after compound interest.

There was some research done on sociology by Robert Merton in late 40's and he coined the term self-fulfilling prophecy.

http://users.ox.ac.uk/~sfos0060/prophecies.shtml

Humans are complex dynamic systems and these systems behave in unpredictable ways.

No matter what the situation, be it surrounding and being near family, etc. to be "house poor" is not going to help. We are planning to retire soon. We have been fortunate enough to rent all our lives and were able to save. We are now planning to buy as we don't want to deal with landlords when we are 85 and get kicked out, etc. on a fixed income; but we are still looking for an extremely conservative mortgage and will not "budge" from our budget so to speak. And with our retirement income and savings we have enough for repairs, travel, healthcare, etc. So always applaud yourself for not making yourself house poor. Again, as some others have said on this site, you can travel and visit your family; but think about how it would be if that family member stayed near family and lost their home as it was too expensive.....not a good choice either.
Hang in there...

uomo_senza_nome says

Humans are complex dynamic systems and these systems behave in unpredictable ways.

You must be an engineer too. ;-)

uomo_senza_nome says

There was some research done on sociology by Robert Merton in late 40's and he coined the term self-fulfilling prophecy.

Yep, a "run on a bank" is a classic self-fulfilling prophecy.

Heck our whole fractional-reserve banking system is essentialy a "confidence game." One that works! Most of the time.

Heck the value of money itself is really just an illusion.
http://www.theonion.com/articles/us-economy-grinds-to-halt-as-nation-realizes-money,2912/

freak80 says

Heck our whole fractional-reserve banking system is essentialy a "confidence game." One that works! Most of the time.

Fractional reserve banking is fascinating to me. It is essentially a self-similar structure of repetitively dividing what should be held as deposit and what can be loaned. The only change that I think is essential to FRB to function properly is every individual should get to make that choice of time preference. Today, the bank gets to do that (which the banks love). Because the banks get to do that, they can borrow short term to lend long term (which is a form of a legalized fraud). They also get to decide the time preference, which adds more risk to the system (because of centralization, rather than distributed intelligence).

freak80 says

Heck the value of money itself is really just an illusion.

Value of money is essentially a claim on human labor.

Fractional reserve banking gets into that weird world where "the velocity of money" matters more than the "store of value" concept of money.

Doesn't the Austrian School believe fractional reserve banking is inherently fraudulent?

Does anyone want to comment on what's happening with Wall Street today...and all of Europe??

aragonzbooks says

Does anyone want to comment on what's happening with Wall Street today...and all of Europe??

"Buy buy buy...sell sell sell..."

robertoaribas says

Do you guys ever hear that soft whispering voice in the back of your head, that you're completely full of crap wrong about housing?

Where did I make any predictions about housing?

As far as I can tell, the "bubble" is over, at least nationally. Look at Case-Shiller.

repo4sale says

Bottoms was 2011...
Top will be about 2018-2021

Not sure about that... I'd like to agree nationally the bottom was 2011.. BUT, i don't see how a huge run up in real estate prices can happen without wage inflation, super lax lending standards coming back, and interest rates getting pushed to 1-2%...

Then we got a good chance of another bubble.

My name is Boom and Bust cycle though.. so I guess I should believe it.

RentalWatch says

Housing prices are going to fall 95%?

You are a lunatic... Yes a $200K home is going to sell for $10K.. And at 3.5% interest a 30 year loan of $10K is $55 a month including taxes.

You are a moron if you think a home in 2012 that goes for $200K will ever be able to owned for $55 a month.

RentalWatch says

How can 2011 be the price bottom when 2012 prices are lower than 2011?

Did you miss that i said NATIONALLY prices bottomed in 2011.. which so far is true.

RentalWatch says

Not it's not.

You are a lunatic... Yes a $200K home is going to sell for $10K.. And at 3.5% interest a 30 year loan of $10K is $55 a month including taxes.

You are a moron if you think a home in 2012 that goes for $200K will ever be able to owned for $55 a month.

freak80 says

Fractional reserve banking gets into that weird world where "the velocity of money" matters more than the "store of value" concept of money.

FRB is a neat way to distributing credit through the economy, where in the individual savers appetitie for risk is taken into account. Cumulatively, through each individual's own intelligence on their risk -- the overall economy has taken on the risk that is within reason.

However, FRB as it exists today is fraud because the banks get to decide what fraction to take risk with (essentially all savers deposits) and also the duration of the risk (banks go long duration on the risks).

Velocity is another fascinating variable because it is entirely non-linear and related to human behavior. The Fed wants greater velocity of money (more inflation) but you can see how hard it is to change human behavior. We are saddled with debt and people want to pay it down.

I've had a hard time getting around money as a store of value concept, because that function is totally at conflict with medium of exchange. Money needs to flow, not sit still for the economy. Money as a store of value has been a source of a lot of problems, not least the Great Depression I.

Store of value should be rare works of fine art, wine, precious metals etc. They should not circulate as medium of exchange.

freak80 says

Doesn't the Austrian School believe fractional reserve banking is inherently fraudulent?

The Austrian School in America does (Ludwig Von Mises Institute, www.mises.org ). They are hardcore libertarian right wing fringe Ron Paul movement.

FRB is not inherently fraudulent as they make out to be. If we start circulating gold coins and go to 100% reserve banking, it would be a disaster.

robertoaribas says

yeah, if the housing market doesn't follow your forecast 95% price drop, blame it on fractional reserve banking, or FED policy, or herd mentality of all those people too dumb to understand your permadoom forecasts!!!!

Roberto, not everyone is Darrell in Phoenix LOL.

But you can't deny herd mentality existed in 2005. You sold your house into that herd right?

Yup says

Roberto have you considered the impact of the fiscal cliff on your renters ability to pay rent?

A typical 50K/year family is going to lose $2500/year starting January 1, 2013 with no changes in current law. Even if they extended the bush tax cuts, they will be losing $1000/year in increased social security payments which no one is talking about extending.

For those making 100K/year you get to double it to $5000/year.

I am betting those numbers will crush the disposable income of most families. I am betting that will crush your bet that you called the housing bottom.

Of course you are probably counting on a government handout (extending the tax cuts) so people can continue to pay you rent at the cost of ever greater deficits.

Good Luck with that!

So his rent would drop from $1,200/month to $1,000/month. He will still make money, but just be making less money. Not a deal breaker though.

BoomAndBustCycle says

You are a lunatic... Yes a $200K home is going to sell for $10K.. And at 3.5% interest a 30 year loan of $10K is $55 a month including taxes.

It happened in Detroit. If they reinflate the housing bubble they will turn the whole USA into one big Detroit.

How much does a house cost in Zimbabwe in real money?

BTW, your wooden box will still cost $200K nominal or maybe even $300K. But a loaf of bread will be $500 and a gallon of gas $700.

michaelsch says

How much does a house cost in Zimbabwe in real money?

How much does a house cost in London?