patrick.net

...bought a house in a brand new development last month for $500K. They are now selling for $450K. .."

Ouch...did they give a reason for selling so quickly--are they afraid of losing a chunk of equity?

All stellar points Allah. I am spayed like Mr. Fuchs. It may in fact be different this time.

In the spirit of fairness I will not poke fun, I will merely correct. Male cats are nuetered, females are spayed. FYI.

It doesn't seem you know what inflation even is, but to tell people to place their life's saving in real estate at this time really demonstrates your lack of financial wisdom.

Sorry, that last message was directed at Jack

If an engineer cant afford a house in the bay area, tuff titty. Rent motherfucker. Be glad you got a job. And you better work as hard as those H1b’s. All it takes is an email to move the whole project to China.

SSTW, I just want to hug you man. Sooo true, sooo true.

It does seem that Gen-X is bidding up prices and is partly "responsible" for being the sheeple in this bubble. Perhaps our generation is not cunning enough. Let's all change that. :twisted:

Price appreciation is a consequence of monetary inflation - the real problem here. It's the reason real estate prices have escalated.

Monetary inflation is the introduction of more liquidity into the system. But
it takes more than just a fed printing press to accomplish this. Short of dropping money from a helicopter, Bernanke will have a difficult time introducing more liquidity into this market as witnessed by the recent decreasing rate of consumer debt.

Deflation is still a very big possibility here - it's actually the cure we need.
Inflation hurts everyone in the long term - homeowners notwithstanding.
If you are sitting on significant real estate equity right now, I suggest selling and/or downsizing. Diversification is always a safe strategy - hold some real estate, some precious metals, some other commodities and some cash.

Lastly, deflation does not cause depressions. Deflation of excess artificial liquidity is actually a very good thing for the consumer.

straight from the horses mouth

http://tinyurl.com/7m2wz

Key point:

But if Bernanke is confirmed as Fed chief, and if the housing market slows more than he expects, he would be unlikely to use the central bank's power over short-term interest rates to prop up falling housing prices for the sake of individual homeowners, according to comments he has made in numerous speeches and statements in academic papers.

Let the games begin. Oh how nice it will be if this truly happens. My plan is when it starts to free fall, I am going to "bid" on a couple of homes, drag the process out, and then bail. I plan on doing this as many times as I can. "but we DESERVE this equity, no one said it would go down".

:) :) :) :)

Allah, I generally am in agreement with you but must humbly disagree on this one. Just don't see the level of irresponsiblity from the Gen-X crowd as I do with the boomers. I see many of my generation making sacrifices the boomers would never even consider. Like staying at home and making sure our kids have at least one full time parent. Shit, >90% of the people I know don't even have new cars. No one in my personal circle has any monthly reoccuring debt payments. Again, you might see it differently but I have witnessed much more irresponsibility from the boomer crowd than all others. And why not? They were allowed to act this way.

Flak. Great post. Lets look at the numbers in the US, 78mil boomers, 38mil Gen-X and 82mil echo's. How could the small numbers of Gen-X produce a bubble of this magnitude?

1960-66 were not great years to be born

Tell me about it! :(

Flak. Great post. Lets look at the numbers in the US, 78mil boomers, 38mil Gen-X and 82mil echo’s. How could the small numbers of Gen-X produce a bubble of this magnitude?

Most boomers already bought and most echoes are not buying yet. Us Gen-X-ers may be the active ingredients of the bubble. :)

Ok. But I just don't see it. Seems very unreasonable to me, this thing is indeed nationwide, and how can less than 1/4 of the population make a beast of this magnitude?

I have nothing against boomers and I am not going to blame them

I am very worried about Gen-Y though.

We should echo-target. The entitlement generation is willing to spend foolishly and we should set up businesses to take advantage of that. Any suggestion?

"ummm… or the fathers could stay home. Or you could lobby your employer for better (or even the existence of) parental leave."

Oh dear flak, you are just wasting your breath with such a logical comment. Allah (AKA God) is just trying to make my head explode with his discourse on how Women are the root of all evil (see end of previous thread).

"What if the echoes all have big families? The mind boggles."

I think they are going to be too busy instant messaging each other to ever produce many kids.

"Well hell, I was born in ‘60 but always thought that made me a boomer f*ck. Am I not?"

Mr. Wad, you have the sarcastic humor of a Gen-Xer, but... How's Trophy? Busy polishing your bong? ;-)

I don’t owe anyone a nickel, Surfex, how ’bout you?

Nope, had some student loans but paid them back. No CC, no car loan, nada. Just Uncle Sam asspacking me.

@Mr.BoomerF*ck

superwayuncool changing and changing the screen name.

You really, really, really do know how to hurt a guy, doncha?

LOL

sorry.

Aw shucks, am I “superwayuncool”?

No, just a fucking dick, but then again you already knew this.

This blog started out as a reasonable question posed:
Inflation or Deflation?

It's evolved into a shooting war between the Boomers and Gen-x.

Perhaps the new question should be: Boomers vs. Gen-x: a Civil War?

In the final analysis, when the dust settles, should the goal of the scattered tribe of California Gen-xers--that have had to flee to other States to survive(e.g. NV, AZ, TX, & CO)--be to begin a mass migration back to the promised land to take back what is rightly ours.

Can we then declare the four decades of Boomer, hippy-ass excesses--that have been both so slickly pimped and marketed to us (remember Woodstock & then when the hippies turned into yuppies in the 80s, the US festival?) as great civilizational milestones-- to be an utter failure and mercifully relegate them, along with the last vestiges of the Bill Clinton regime, to the trashheap of history?

Darn, that name calling stuff really hurts my feelings.

Ok how about we just call a troll a troll. Fascinating creatures the trolls are. Seem to be so bored that they actually take joy from posting dribble. Well you've found your niche, I say run with it. Perhaps you could even induce your Cousin MP to come back and pee in the pool also. What's next for you today? My money is on stealing school childrens milk money or hangin with your vile gen-y offspring. Well anyhoo, enjoy.

Huh?

Price reduction appears to be accelerating in the Bay Area.

One townhouse-style condo in Menlo park I looked at is reduced from the 738 to 698.

Another condo I track in San Mateo is reduced from 725 to 699.

My feel is that attached homes above 650K are hitting a wall.

Both have been sitting for less than two months. So much for sticky down...

Mr. *** is not a troll. I like him just fine. :)

My feel is that attached homes above 650K are hitting a wall.

Let me further clarify, it appears that many DINKs in the Bay Area are selling their 2/2 attached homes. Many condo complexes suddenly have multiple listings. They used to wait for new comps and ask above old prices.

DINKs are usually professional that are slightly better-informed than the mass. They do not represent the smart money but theie actions can be used as a leading indicator.

By the way. Real estate is not an investment. Gold is. You diversify. I like views.

Gold is not an investment, it is a currency. Gold does not "produce" anything other than glare. How can it be an investment?

If it’s civil war, though, the boomers will win, since they have the advantage of numbers, and won’t start dying until the 2030s.

Even if we go to war, can we at least have the illusion of diplomacy? :)

>Isn’t deflation a consequence of depression?
>Like bread for 10 cents because there is no DEMAND?

Not exclusively nor necessarily. For example, outsourcing of jobs to cheap foreign labor (and other improvements to efficiency in production) can be a cause of price deflation. Generally, any movement towards open markets and competition is price deflationary (Consumer electronics is a good example). This is not an economic problem, but rather can be beneficial because it drives down the prices of goods and services and increases our standard of living. However people do have an irrational fear of deflation probably brought on by misinformed journalists. Really the only people who should fear price deflation are the feds because it makes their favorite tool of manipulation (inflation) less effective.

The Great Depression witnessed a different type of deflation caused by the collapse of the fractional-reserve banks when their depositors called upon them to redeem their notes en masse after depositors lost confidence in the banking system. It was the rigidity of prices and wage rates induced by the "stabilization" polices of Hoover and Roosevelt that prevented the deflationary adjustment process from operating to effect the reallocation of resources that subsequently caused the economy to contract 30% from 1929 to 1933.

In fact there is a bad form of deflation inflicted on the economy by political authorities by outright confiscation of people's cash. It has occurred quite a few times in the last two decades in Brazil, the former Soviet Union and Argentina in the 80s and in Ecuador and Argentina again within the past few years.

Gee, I go off to disembowel some puppies and what do I miss?

Huh? I thought the "hanging, drawing, and quartering" punishment applies only to people.

Jack, past performance is no guarantee of future results. At the risk of dating myself, I remember in the late 60s early 70s when people where simply walking away from their houses because they didn't want to pay the real estate taxes on them. And this was in NYC!

The first question to ask yourself is why did your homes appreciate so much so quickly and your next question should be "when will that same situation present itself again". Only then can you make an informed decision. Hopefully this blog will help us all obtain better anwsers to those questions.

I'm not advocating going all to cash but diversifying. To a lot of people $600K would constitute a large part of their net worth. Losing 30-50% of their net worth in the short term is a big hit. Even if real estate prices remained fixed for the next 5-7 years, that 4.7% y-o-y inflation rate measured in Sept would quickly eat away at the value of your equity.

I admire your confidence in your position, but I for one would not bet "the whole farm" on real estate given the current conditions.

Finally, I agree that your house is primarily your home, but that would be little comfort for someone entering the housing market today.

So while it is understandable for most on this board to wish for a RE deflation, you’d better brace yourself if there is a general deflation for any prolonged period of time. Yes houses may be cheaper, but jobs and credits will be scarce. Or maybe you THINK you have more cash than others. Remember there are plenty of those who sold, even on this board, with cash hoard and waiting to get back in. Can you beat them to get the house you want?

I hope for a soft-landing but RE "deflation" is what I see. We have very little risk of board deflation with Helicopter Ben.

"flak Says:

...If it’s civil war, though, the boomers will win, since they have the advantage of numbers, and won’t start dying until the 2030s."

They may have numbers, but we have brain cells.

The Boomers smoked, snorted and propagandized-out most of their grey matter years, probably decades ago.

We Gen-Xers still have our wits about us. We've been saving them up
for the right moment.

That is our secret, our force multiplier in the guerrilla war against superior numbers of hippy-ass Boomers: street smarts, economic saavy and good old fashioned horsepower, baby: brain cells!

At least not 95 per cent of the time. (And not in my whole 52 years on Asteroid 144-X!)

Then again, we're even seeing craters priced at 10X the local median wage...
But, we know these craters are safe bets...nothing could possibly make them even deeper craters.

Bad Boomer, no Hummer! --Surfer-X

Good Boomer, bad B'mer! --Michael Holliday

Two sides of the same Boomer, materialistic coin, wouldn't you say?

That is not smart, if you want kids. Why tie having kids to home ownership? I don’t understand why the 20 something are so obsessed with home ownership. Don’t you see that is part of the problem?

Again, set the goal higher, let's be obsessed with jet ownership!

H.Z., well considering that inflation redistributes wealth of savers to debtors, robs us of our savings, financially favors those connected to the government, subsidizes short-term thinking at the expense of long-term planning, drives people into the workforce who would otherwise not be there of their own choosing and prevents the free market from raising our standards of living every year, we should all prefer the alternative. In fact, the natural tendency in a free market economy under a non-fiat currency has been for general prices to persistently decline. Here's an historical note:

"Throughout the 19th century and up until WWI, we were in a deflationary trend where wholesale prices fell 30% between 1880 and 1896 (1.75%/year) while real income rose by about 85% (5%/year). This deflationary trend was only interrupted during periods of major wars which were financed by printing fiat money."

In addition, inflation usually affects poor people or people on fixed incomes much more than wealthily people who have the resources to diversify or hedge against inflation.

It is true that loans are paid back in dollars that are more valuable than the ones borrowed but that is part of the risk one takes when deciding to borrow in the first place. What deflation does is provide a disincentive to borrow and an incentive to save. It means rewarding financial prudence and this is a good thing all around.

There is nothing inherently wrong with debt. It is certainly not the panacea you make it out to be however. All the current spending and debt accumulation may be creating an illusion of prosperity without the underlying reality. The new credit makes possible spending and investment that would otherwise be unsustainable (e.g. it creates bubbles). Unfortunately, many residents in the US have become debt addicts.

As for the rest of your post, I either misunderstand or you are just pulling this sh*t out of your *ss, I haven't figured out yet, but I'm leaning towards the latter.

"If you are thinking of buying a house….come over here….a little closer….I want to smack the shit out of you………or at least knock some sense into you so you don’t make the worst financial decision of your life."

LOL, allah, I knew there was a reason I like you regardless of our previous, um, disagreement.