patrick.net

deepcgi says

In the world of big investment, everything is paper.

And things can be liquidated overnight. That is where the real risk lies. A larger portion of home owners that could all become sellers at the same time. Once the panic starts it could be a huge disaster for all.

Yes, real estate can be liquidated overnight...

I've had another job offer. This time in Seattle, and I love Seattle. I lived there for 8 great years, but I'm going to say no to this job as well because those tiny, warped, rotted, wood homes just are not worth 650,000 dollars.

I don't see where the money will come from if the speculators move on to ANYTHING else. And they will. They have already been burned once in real estate. Cognitive dissonance drives this market bump. They refuse to admit they were foolish the first time. If the market slips even a bit, only the fools will hold on. Know one who thinks they are wise will wait to be made idiots of three times in a row. And they will blame Keynesianism this time, as they should.

deepcgi says

And they will blame Keynesianism this time, as they should.

The Cubs haven't won the World Series for 100+ years--I blame Keynesianism.

deepcgi says

Know one who thinks they are wise will wait to be made idiots of three times in a row.

And here, you're trying to be wiser than the market. LOL! The market will always be right. Don't swim against the current, or you will be drowned.

48% salary increase doesn't mean a whole lot if you're going from $30k to $44k/year. If you're going from $300k to $440k, then it is something to think about.

As usual, do what is best for you and your family. However, your narrow thinking might cost your kids an opportunity to advance much further in life than their god giving potential by staying where you are.

I just checked with our insurance agent as we are buying our retirement home, and he confirmed it.....May June were unusually crazy busy with home buying, cash etc. then July dropped dead...now he says homes every day are coming on the market and prices are also being reduced, not many buyers...yippee..we had to wait for family reasons in May and rejoined the market this week and looking at 2 beautiful homes right in our price range that we could not touch in June....so let us see what happens. I hope you are right because we are ready to buy so we can retire....

deepcgi says

Do you think they'll still have a dollar menu when the rent is 8000 per month for 800 sq feet?

Yes, because the meat will be made from the masses of homeless people.

Northern Ca about 2 hours from SFBA

deepcgi says

I don't see where the money will come from

China.

Regarding China, see my second point. There is no country who's trade imbalance is more closely tied to politics and treasuries than China. I'd keep up to date on their shadow banking system if you are relying on it.

"the market will always be right"

always go with the herd.

check. I'll consider it

and granola

deepcgi says

Regarding China, see my second point. There is no country who's trade imbalance is more closely tied to politics and treasuries than China. I'd keep up to date on their shadow banking system if you are relying on it.

I agree. That'll turn it into a stampede of cash buyers to the Left Coast. We ain't seen nothin yet compared to what may come.

LEGAL immigration? We can't have that. :-)

It's sending their kids to grad school here then either marrying the green card or getting an H1

My theory is that there will be no natural market force within China to counteract the collapse of their fiat system. If the shadow banks implode due to overexposure to international debt, the government there will simply let the pain roll down onto the people. There may be an initial exodus as you suggest, but I would predict it a temporary one. Others still rich in dollars which didn't disappear along with their banks will have a variety of choices of investment in a turbulent time in the markets. I would predict an equities crash. Commodities may soar. It's hard to see real estate maintaining steady growth. The US Fed wont be able to make China's deflation reverse with QE. Further flooding of fiat within China only makes sense if it stays within their infrastructure. If it all turns land in the US and its not in the hands of the Chinese government, but instead it's citizens, they would be shooting themselves in the foot with their two trillion in treasuries.

Everything is overextended. What does that mean? Even Keynes didn't interpret his theory as endless manipulation of credit.

Deepcgi,

No doubt. But you watch, even the sliver portion of elite Pricelings is lotsa buyers when they come from a country of one billion.

Lotsa buyers anyway compared to the small Fortress communities that they covet along the Left Coast.

China is doing all they can to court their wealthy. They build entire cities to keep them from leaving. And they still covet the Left Coast instead? Hmm.

Well, it's the Chinese governments fiscal policies which allow the shadow banking system to continue. No one in the first world has a clue the true state of that system. Will the government not change their policies to keep their wealthy where they are? If individual Chinese citizens buy up the Left Coast, the government of China owns none of it.

Of course the Chinese government will take action.

deepcgi says

China is doing all they can to court their wealthy. They build entire cities to keep them from leaving. And they still covet the Left Coast instead? Hmm.

They covet any foreign nation where they can hide their wealth, ill-gotten and otherwise, from their own government that can turn and confiscate all domestic assets with little more than a change in political winds. Real estate in foreign nations is one of the safest bets in their minds because it is damn hard for Beijing to repossess a house in the USA, and from birth they were fed the dogma that real estate is the ultimate asset. Their interest in the SFBA in particular is due to a) prices have been high for a couple of decades and more expensive = better is a general rule over there, b) said high prices make it look like a safe asset in which to park money, c) SFBA housing is a status symbol / brand name and buying elsewhere would invite ridicule in social circles.

Obviously Beijing can try to introduce measures to curb the cash exodus from its borders. It is already illegal to take lots of money out of China. However, they can't stop it. As it is, Macau is one of the #1 money laundering sites. You take a few million RMB there, "lose" it at a casino, and then get back 80-90% of it under the table as Macau currency. Macau doesn't care if you take their money on a flight to SFO. The thing that many Americans don't get is just how MUCH money we have sent to China. It is a vast amount. The people with it over there aren't stupid and they want to put it somewhere safe. Everyone there knows how it works over there, and there are good (and obvious) reasons why cash is flooding OUT of China.

RentingForHalfTheCost says

deepcgi says

In the world of big investment, everything is paper.

And things can be liquidated overnight. That is where the real risk lies. A larger portion of home owners that could all become sellers at the same time. Once the panic starts it could be a huge disaster for all.

If people dont or can't afford to buy... Then people can't sell. We would have a long drawn out stalemate. Why would i sell my 3% 30 year fixed mortgage rate home... Especially if i could rent it out for break even at worst case scenario.

...assuming the government's debt is meaningless and costs us nothing.

I want to be your landlord!

BoomAndBustCycle says

If people dont or can't afford to buy... Then people can't sell. We would have a long drawn out stalemate. Why would i sell my 3% 30 year fixed mortgage rate home... Especially if i could rent it out for break even at worst case scenario.

Rental prices depend on a healthy economy with enough jobs that pay high enough wages to support the rental market. If the recovery falters then rents will drop. So your comment that you could rent it out as a worst-case scenario is FAR from a worst-case scenario.

Yes, for people who do not need to sell there could in fact be a stalemate. But many people need two incomes to pay their mortgage so if one person loses their job then they will default in short order (Most Americans live paycheck to paycheck). This will force sales. Also people die, they want to take a job in a different location, etc.