Real House Prices Back To 1999-2000 Levels


By JFP   Follow   Thu, 27 Dec 2012, 8:37am   4,144 views   91 comments
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According to Calculated Risk, real house prices, and the price-to-rent ratio, are back to late 1999 to 2000 levels. Does anyone seriously expect a drop below these levels? See http://www.calculatedriskblog.com/2012/12/comment-on-house-prices-real-house.html

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  1. Buster


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    52   10:00am Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  
  2. Dan8267


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    53   10:42am Mon 31 Dec 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Call it Crazy says

    Exactly!! Which is why this "housing recovery" this year can't sustain itself.....

    What some people call a recovery, others call a bull trap.

  3. Dan8267


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    54   10:46am Mon 31 Dec 2012   Share   Quote   Permalink   Like (2)   Dislike  

    Buster says

    But I really don't buy the fact that there is no discretionary spending room left in the average american's budget.

    You don't have to buy that as that is not my argument. My argument is that discretionary spending isn't nearly enough to support real estate speculation, which is what drove prices up in the first place, or spending more on a house than what it is really worth.

    Furthermore, interest rates cannot stay low indefinitely. Such low rates have many cumulative negative effects including deterring investment. When interest rates rise, expect housing prices to plummet simply because people can only afford such and such monthly payments.

  4. Dan8267


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    55   10:47am Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Buster says

    How can people afford these rent increases? Same question....

    http://finance.yahoo.com/news/cities-with-the-highest-rent-spikes-in-2012-201103748.html?page=1

    People do one of four things:
    1. Relocate to somewhere less expensive.
    2. Move back in with parents.
    3. Move into a smaller apartment.
    4. Apply for Section 8 housing assistance.

    All four of these things are happening.

  5. lostand confused


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    56   10:48am Mon 31 Dec 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Even if you have discretionary spending, people will be wary of spending-when you don't know if you will still have your job or will be able to get one if you lose your job-you are not going to spend as much.

  6. Buster


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    57   11:06am Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Dan8267 says

    How can people afford these rent increases? Same question....

    http://finance.yahoo.com/news/cities-with-the-highest-rent-spikes-in-2012-201103748.html?page=1

    People do one of four things:

    1. Relocate to somewhere less expensive.

    2. Move back in with parents.

    3. Move into a smaller apartment.

    4. Apply for Section 8 housing assistance.

    All four of these things are happening.

    Yea, I agree. Number 5 is happening as well; 5. Rent increases.

  7. Buster


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    58   11:11am Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Look, I am not arguing Don or Dan. My point is this. The educated and the top 10% are making plenty of money and more of it every year. The bottom 90, not so much. So in areas where the 90% live, my prediction is you will continue to see flat or falling prices if housing stock grows at the same pace of population increases. In areas that attract the top 10%, there is plenty of room for price increases and my prediction is that in these areas you will continue to see price appreciation. Both however will have appreciation regardless of income level if housing starts remain anemic or less as they have been over the last 6 years. Population continues to increase, recession or not. Supply and demand kicks in here.

  8. Dan8267


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    59   11:14am Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Buster says

    Yea, I agree. Number 5 is happening as well; 5. Rent increases.

    Rents always fluctuate. I haven't seen any market rent increases in the south Florida area over the past four or five years. I haven't personally had a single dollar rent increase in over five years and there's no way my land lord is going to. He's damn glad to have me a a tenant as there are far more properties for rent than there are renters and I'm a much better tenant than most of what's out there.

    South Florida was way overbuilt during the bubble. Even with foreign investors, there simply are more rental units unoccupied than people considering renting.

    Naturally, your area may be completely different. As I said, the bubble correction has completed in areas where the bubble was least blown up. But in the places where the bubble was overblown the most, it's still deflating.

    As a side note, places that had the least housing inflation are the places which were the least impacted by the Second Great Depression. So much for bubbles being good for the economy.

  9. Call it Crazy


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    60   11:24am Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    donjumpsuit says

    It is this graph we should be most concerned about. It is ticking upwards into the 160's.

    Not sustainable by any stretch of the imagination.

    I believe that chart is based on "seasonal adjustments". As you'll see by the chart below, the "not seasonally adjusted" growth numbers tell a different story.

    *

  10. Buster


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    61   11:25am Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Dan8267 says

    Naturally, your area may be completely different. As I said, the bubble correction has completed in areas where the bubble was least blown up. But in the places where the bubble was overblown the most, it's still deflating.

    People often state that the most bubblicious part of the country was SFBA and I agree. Problem is two fold; Many of the top 10% income earners live here & two, new construction has remained flat at best. Both factors = rent and housing price increases.

    Naturally, places that did not have huge increases in housing costs are experiencing less pain in this depression.

  11. Buster


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    62   11:30am Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Per callitcrazy's graphic above, two areas (Las Vegas & Phoenix) that had the highest bubble, it appears also have the highest price increases this past fall. This is opposite of what you have stated. "But in the places where the bubble was overblown the most, it's still deflating."

    I'm not sure how to account for this other than perhaps these two area's actually 'over corrected'.

  12. Dan8267


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    63   11:38am Mon 31 Dec 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Buster says

    Per callitcrazy's graphic above, two areas (Las Vegas & Phoenix) that had the highest bubble, it appears also have the highest price increases this past fall. This is opposite of what you have stated. "But in the places where the bubble was overblown the most, it's still deflating."

    The greater the bubble, the greater the bull trap. Over the next few years, the bubble will still deflate in those regions.

    Ask yourself one simple question: why the hell are houses worth 40% more in those areas now than they were when the houses were 12 years younger and in better shape? What has fundamentally changed about the economy that justifies historically high prices?

  13. Buster


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    64   11:45am Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Dan8267 says

    Ask yourself one simple question: why the hell are houses worth 40% more in those areas now than they were when the houses were 12 years younger and in better shape? What has fundamentally changed about the economy that justifies historically high prices?

    My point is, I don't believe that they are 40% more than the prebubble nominal trend.

  14. Dan8267


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    65   11:58am Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Buster says

    My point is, I don't believe that they are 40% more than the prebubble nominal trend.

    I, on the other hand, don't buy those graphs. I stick to the proven, canonical Case-Shiller Index, and by that index the long term trend is, by mathematical definition, a flat line with a slope exactly equal to zero. Any deviation above the norm represents an overpriced market. Any deviation below the norm represents an underpriced market.

  15. Call it Crazy


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    66   12:08pm Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Buster says

    I'm not sure how to account for this other than perhaps these two area's actually 'over corrected'.

    Good point, I don't think anyone knows at this time until we see if those trends continue. Remember, Phoenix fell like 75% from the top of the bubble. It has recently come back about 20%. So overall net, it is still below many other areas.

  16. JFP


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    67   12:11pm Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Dan8267 says

    Buster says

    My point is, I don't believe that they are 40% more than the prebubble nominal trend.

    I, on the other hand, don't buy those graphs. I stick to the proven, canonical Case-Shiller Index, and by that index the long term trend is, by mathematical definition, a flat line with a slope exactly equal to zero. Any deviation above the norm represents an overpriced market. Any deviation below the norm represents an underpriced market.

    The Case-Shiller graph you posted shows 100 as the nominal price level in 1999. What is it that makes 1999 the correct level of pricing for houses?

  17. Call it Crazy


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    68   12:11pm Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Buster says

    Per callitcrazy's graphic above, two areas (Las Vegas & Phoenix) that had the highest bubble, it appears also have the highest price increases this past fall.

    Also keep in mind, many of those recent purchases are by speculators/investors chasing a higher rate of return than other investments. There will be a point that these investors will become un-attracted to these markets if the price increases continue.

  18. JFP


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    69   12:15pm Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Dan8267 says

    Buster says

    But I really don't buy the fact that there is no discretionary spending room left in the average american's budget.

    You don't have to buy that as that is not my argument. My argument is that discretionary spending isn't nearly enough to support real estate speculation, which is what drove prices up in the first place, or spending more on a house than what it is really worth.

    Furthermore, interest rates cannot stay low indefinitely. Such low rates have many cumulative negative effects including deterring investment. When interest rates rise, expect housing prices to plummet simply because people can only afford such and such monthly payments.

    How long do you think it will take for interest rates to rise? The Japanese have kept interest rates close to zero for 30 years now. If the Fed does the same, I will be retired by the time interest rates rise.

  19. Kevin


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    70   12:20pm Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Prediction: People insisting that housing is "more expensive" today despite all evidence to the contrary will always find some justification for never buying a home.

    Which is fine. If you think buying a house is never a good idea, don't. Just don't ignore all the people who are doing just fine having made a different choice.

  20. Dan8267


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    71   12:30pm Mon 31 Dec 2012   Share   Quote   Permalink   Like (2)   Dislike  

    JFP says

    The Case-Shiller graph you posted shows 100 as the nominal price level in 1999. What is it that makes 1999 the correct level of pricing for houses?

    Here's the full Case-Shiller graph from 1890 to 2010. Unfortunately, our dumb as rocks press doesn't have the basic intelligence to continue plotting along this graph and instead looks at a mere 10-15 year history. I've always detested such short-sighted views.

    Anyway, the value 100 in the index is defined as the arbitrary valuation point of the year 1890 which is the earliest data in the index. 100 is not defined as the norm, but simply as what real (not nominal) prices adjusted for quality in the year 1890.

    The historical average is actually below 100, but that is due to an unusual and long period where demand was low between WWI and WWII. If we start with the modern, post-WWII period, we can get a sense of what the real fair market level is. It really stands out. The 1960s, 1970s, and 1990s were dominated with relatively flat periods centered around the 110 mark. This mark is also about average for the period from 1945 to 2000, before the incredibly obvious bubble on the graph. The previous buyers and sellers market didn't move much away from 110 and the average always returned to 110.

    This is why it is my assessment that 110, not 140, represents the historical norm for housing in modern America. If someone wants to make the case that 140 should be a new historic norm, then there better be a damn good reason for it. If anything, I'd expect a new historic norm to be lower, not higher, as houses are getting cheaper to build (or to print out in the near future) and America's population isn't expanding like it used to and that we've reached Peak Baby.

    As such, there is no reason for housing prices to now be 30% higher priced today than during the past two generations. There are certainly reasons for them to be priced lower:

    1. Lack of expected population growth.
    2. Baby Boomers retiring and downsizing.
    3. Millennials moving back in with parents.
    4. Women delaying motherhood and having fewer children.
    5. Construction costs decreasing.
    6. Technology improving.
    7. Overbuilding during the bubble.
    8. Expectation of higher interest rates and thus lower prices.
    9. Massive debt in the Millennial generation.

  21. Goran_K


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    72   12:42pm Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Depends on the market. Phoenix, Atlanta, some places in Florida, Vegas, I don't see homes crashing much more than they did already.

    SoCal, SFBA, and other metro areas where people are buying homes at prices 5 to 10x the median income... look out below.

  22. Buster


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    73   12:53pm Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Nice graph but it is old. The dotted line is where we are today and is 'solid'. San Francisco's current CS index sits at 141. It bottomed at 128 in 2011. Prices today are still below what they were in 2003.

    http://www.mortgagenewsdaily.com/12262012_home_prices_case_shiller.asp

    http://ycharts.com/indicators/case_shiller_home_price_index_san_francisco/chart#series=type%3Aindicator%2Cid%3Acase_shiller_home_price_index_san_francisco%2Ccalc%3A&format=real&recessions=false&zoom=10&startDate=&endDate=

  23. JFP


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    74   1:00pm Mon 31 Dec 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Dan8267 says

    As such, there is no reason for housing prices to now be 30% higher priced today than during the past two generations. There are certainly reasons for them to be priced lower:

    1. Lack of expected population growth.

    2. Baby Boomers retiring and downsizing.

    3. Millennials moving back in with parents.

    4. Women delaying motherhood and having fewer children.

    5. Construction costs decreasing.

    6. Technology improving.

    7. Overbuilding during the bubble.

    8. Expectation of higher interest rates and thus lower prices.

    9. Massive debt in the Millennial generation.

    You could make the same arguments about healthcare and college expenses, but they keep increasing also. I think we are in an unprecedented era of monetary manipulation, so I'm not sure we can expect things to ever revert to the "norm."

  24. Goran_K


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    75   1:03pm Mon 31 Dec 2012   Share   Quote   Permalink   Like (2)   Dislike  

    JFP says

    You could make the same arguments about healthcare and college expenses, but they keep increasing also. I think we are in an unprecedented era of monetary manipulation, so I'm not sure we can expect things to ever revert to the "norm."

    I think like Dan, many of us are betting on the fact that the FED can only manipulate so far. Seeing as each round of QE has had less effect each successive round, it seems like a safe bet for many of us.

  25. Buster


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    76   1:04pm Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    JFP says

    You could make the same arguments about healthcare and college expenses, but they keep increasing also.

    My original point except I used food and clothing as lessor examples of what you are pointing out.

  26. Dan8267


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    77   1:08pm Mon 31 Dec 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Buster says

    The dotted line is where we are today and is 'solid'.

    You, of course, are welcomed to believe that. Based on the evidence, I do not. As you stated, prices today in San Francisco are what they were in 2003. As I stated, the same is true in south Florida. The thing is, 2003 was already way into the bubble and way above every previous peak in the Case-Shiller Index. So why would anyone believe that this is the bottom?

    Again, for this to be true, there would have to be some incredibly significant reason why we are in "a new norm" of high housing prices. Every time someone says we are in a new norm of high X prices, they are shown to be wrong or lying. What reason do we have to believe that this time is different? What has changed that makes a house worth vastly more than what it was ten years ago? What has changed that makes old houses worth much more than it costs to build a shiny new house?

    I've given plenty of reasons why I think housing prices are going to drop in a few "high bubble" areas, particularly south Florida, which I'll go on the record as stating is the area I know best by far.

  27. Buster


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    78   1:08pm Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    In late 2003, the Consumer Price Index was 184. Today it is 230. CPI does not include housing. We now have housing prices at cheaper levels than 10 years ago....all the while everything else has increased substantially.

    http://ycharts.com/indicators/case_shiller_home_price_index_san_francisco/chart#series=type%3Aindicator%2Cid%3Acase_shiller_home_price_index_san_francisco%2Ccalc%3A&format=real&recessions=false&zoom=10&startDate=&endDate=

  28. Dan8267


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    79   1:13pm Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Goran_K says

    I think like Dan, many of us are betting on the fact that the FED can only manipulate so far. Seeing as each round of QE has had less effect each successive round, it seems like a safe bet for many of us.

    The federal government and the Federal Reserve has certainly delayed the correction, and in doing so caused the Second Great Depression. People like me would have spent hundreds of thousands of dollars each had the correction been allowed to take place. Instead of saving (hording) my cash, I would have bought a house, furniture, etc. and that would have stimulated the economy far more than any ejaculation of currency from the Federal Reserve.

    The stupid polices of our government and the Fed have forced millions of potential buyers and economic stimulator like me to go into hibernation mode. This is exactly why unemployment went to high. People like me, who had the money saved up, didn't buy because the government kept prices in the higher ass-fucking range. I refuse to make a mistake on the largest financial decision in my life, and I am not wasting my life earnings bailing out some greedy speculator. I worked too damn hard and made too many sacrifices to do that.

  29. Dan8267


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    80   1:15pm Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Buster says

    In late 2003, the Consumer Price Index was 184. Today it is 230. CPI does not include housing. We now have housing prices at cheaper levels than 10 years ago....all the while everything else has increased substantially.

    1. The CPI measures nothing. It is a constantly changing metric designed for the sole purpose of making the government look good. The CPI of this year isn't the same CPI used 5 years ago, 10 years ago, 20 years ago, or 40 years ago. Hell, by today's CPI there was no inflation in the 1970s.

    2. Call me when prices reach pre-bubble levels. I'm not greedy, but I'm not taking an ass fucking either.

  30. JFP


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    81   1:27pm Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Dan8267 says

    Again, for this to be true, there would have to be some incredibly significant reason why we are in "a new norm" of high housing prices. Every time someone says we are in a new norm of high X prices, they are shown to be wrong or lying. What reason do we have to believe that this time is different? What has changed that makes a house worth vastly more than what it was ten years ago? What has changed that makes old houses worth much more than it costs to build a shiny new house?

    I only know the Bay Area, so I'll restrict my comments to that. First, old houses still cost less than new construction in the same area. The real cost, as always, is the land. Secondly, I think there are two things sustaining the property bubble in the Bay Area: the internet bubble and a lot of foreign, primarily Chinese, money.

  31. Kevin


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    82   1:51pm Mon 31 Dec 2012   Share   Quote   Permalink   Like (2)   Dislike  

    I see a few basic arguments supporting housing prices between 20-30% above the previous 'historical norm':

    1. The homes are larger and we spend more time in them. Our houses are twice as big as they were prior to 1980. We use them for home theaters, for play areas, and for temporary housing for visiting relatives.

    2. The average finish quality of new / remodeled homes has moved to the right of the curve. In 1990, natural stone counters, hardwood floors, and professional grade appliances were considered high-end luxuries. Today they're considered basic finishes.

    3. Interest rates really are absurdly low, and I don't see anything to suggest that they'll go significantly higher in the near term.

    4. People are just willing to spend more on housing than they would have in the past. With pensions gone and 401(k)s either too confusing or unavailable for many, housing is the last "dumb" retirement planning option available. If you pay off your mortgage while you work, you can sell your home at retirement for a few hundred thousand bucks and live in comfort for the rest of your life (you can even do a reverse mortgage).

    5. Inertia. People have an idea of what a thing should cost, and it takes an enormous amount of energy to change that. A guy may be deeply underwater, but if he believes his home is worth X, he isn't going to sell it for less than X unless he has to.

    As someone involved in building a new home, I don't see any evidence that building is getting cheaper. Every advance we've made in reducing costs has been offset by something else. We use plywood / OSB instead of solid wood in framing, but we have to now sheath everything for seismic protection. We use MDF for trim but now we have to insulate to R-19 minimum. We use drywall instead of lath and plaster but now we have to use lead-free, low-voc paint that costs twice as much per gallon.

  32. Buster


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    83   1:59pm Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Well, San Francisco, by comparison, has ALWAYS had high housing costs. You may debate as to why but simply a fact. Unless all zoning laws are deemed illegal tomorrow, the internet 2.0 crashes and a plague hits wiping out a chunk of the population, this will continue to be the case.

    Since it it NYE, my predictions: SF Case Shiller Index at 175 in 5 years, 150 by next year.

  33. Buster


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    84   2:00pm Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    All good points Kevin and I agree they are all factors in the high cost of housing.

  34. Buster


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    85   2:05pm Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Actually, when you view this chart, SF median house prices are back to mid 90s prices......the authors note however the following; Since 1980, California’s median home price has been approximately 80 percent higher than the national median price on average.

  35. Kevin


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    86   2:09pm Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    I would definitely pay more to live in SF than in chicago, but I don't think I'd pay 80% more.

  36. JFP


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    87   2:18pm Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Kevin says

    I would definitely pay more to live in SF than in chicago, but I don't think I'd pay 80% more.

    All things equal, I wouldn't either. But, my job is here, and I hate the cold, so I end up doing so :)

  37. Buster


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    88   2:19pm Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    I suspect that is what most people say Kevin and perhaps why the population of SF has remained relatively constant for the past 60 years. 1950= 775K, 2010=805K. Source; http://en.wikipedia.org/wiki/San_Francisco

  38. SubOink


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    89   4:29pm Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    RentingForHalfTheCost says

    Yes, run out now and give you money to any owner. They worked hard to keep the house from falling apart and deserve all your money. Give then 100k over asking and don't ask any questions. Then become a slave to the bank and watch as the owners drive off in their new Mercedes.

    I think this is bad advice.

    Better run out now and rent the house from them so that they can keep driving their leased cars and eat out daily. After all, its your rent paying for their lifestyle. And don't make that mistake and take your rent payment and multiply it by 12 and then 10 years and look at it like its money you throw out. Don't do that. Hey, at least you are not a slave, right? Plus, if something breaks in the house, your landlord has to pay for it...when he gets around to it and in the cheapest manner possible but hey...can't have everything. At least you are not a slave - you are free! - remember - you can always pack everything up, kids, dogs, spouse and just move...wherever you want to..anytime. You could always rent another house. For more. Or less. Ok, I am not sure how you would gain then...but hey, at least you are not a debt slave. Right??

    Don't buy!!!

    :)

  39. Dan8267


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    90   7:59pm Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Kevin says

    The homes are larger and we spend more time in them. Our houses are twice as big as they were prior to 1980.

    I'd buy that for absolute prices, but not an increase in price per sq. ft., which is still at 2003 levels, not 1999 levels.

    Kevin says

    2. The average finish quality of new / remodeled homes has moved to the right of the curve. In 1990, natural stone counters, hardwood floors, and professional grade appliances were considered high-end luxuries. Today they're considered basic finishes.

    I'll buy that for new houses, but not old ones. I'd much rather spend $200k building a new house than spending $300k on a house of the same size built in 1978. And that's what typical in south Florida.

    Kevin says

    Interest rates really are absurdly low, and I don't see anything to suggest that they'll go significantly higher in the near term.

    Low interest rates certainly do increase the prices of homes, but not their values. Given that interest rates are almost certainly going to increase even over a short 15-year mortgage, the market price of any house bought now will drop over the course of the loan.

    Kevin says

    4. People are just willing to spend more on housing than they would have in the past. With pensions gone and 401(k)s either too confusing or unavailable for many, housing is the last "dumb" retirement planning option available.

    I think that was more true during the bubble than now. In any case, using a house as a retirement vehicle is a really bad idea for anyone younger than 65. As the Baby Boomers retire and downsize, there will be downward pressure on housing for decades. I do not think anyone buying today will see real appreciation of their house over a course of fifty years.

    The Boomers were lucky. The population of America doubled during the past half century. Now the population has stabilized. The growth in demand that the Boomers experienced is not going to be repeated for the next few generations.

    Kevin says

    Inertia. People have an idea of what a thing should cost, and it takes an enormous amount of energy to change that.

    Just remember that momentum is directly related to inertia. This would equally imply that prices will not only correct to the 1990s level but over-correct as people keep expecting more correction.

  40. Dan8267


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    91   8:05pm Mon 31 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    SubOink says

    Don't buy!!!

    :)

    I say, do the math. Don't base you decision on emotions, what people are saying the market is doing, what you read in the newspaper. Just look at the Case-Shiller Index value for the closest region, and if it's at pre-bubble levels buy, if not, don't. The numbers don't lie, but you got to trust the math and you got to make the decision rationally and dispassionately.

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