patrick.net

David9 says

Heck, I would have bought in Phoenix the last few years.

Here in California, homes in the hood (We say that affectionately here) are still 200k.

http://www.redfin.com/CA/Compton/1610-E-San-Luis-St-90221/home/7362923

Shit, a similar home in the tech hood is 3x that value. 688K for 1000 sqft of Ikea building materials. Awesome!

http://www.redfin.com/CA/Mountain-View/485-S-Rengstorff-Ave-94040/home/616001

Bellingham Bill says

Hysteresis says

i don't think rates can drop another 2% since the fed fund rate is already at 0%.

Rates are 2% in Japan. They do that by having their Fed buy loan points for you.

didn't know that. thanks.

if the US fed starts buying points, then that would be more evidence that the economy is not stable (not enough sustainable organic growth).

RentingForHalfTheCost says

1000 sqft of Ikea building materials. Awesome!

I suppose Ikea is one step up from the Home Depot materials I posted, lol.

RentingForHalfTheCost says

Back in the dot com collapse there were signs of strain on the housing market. That was when the trouble first started, instead of letting the market come down to its health, the feds started to get greedy and thought they could have their cake and eat it too. Drop rates, drop rates, drop rates, with no regard to the side effects. Pretty soon you got everyone refinancing, buying, etc. and making an economy that is completely virtual and not true.

the problem wasn't that Greenspan lowered the interest rates. the problem was he did it for too long. as long as they don't overdo it this time it will be fine.

this system has been in place since 1913 and interest rates have gone up and down since then, why do you think it is suddenly making the economy "virtual"? in this aspect, the economy is no more virtual than it was in 1960's.

the real problem facing the economy is job loss, not the FED's manipulation of interest rates.

robertoaribas says

Phoenix prices are up well over 10% on everything I own since just six months ago, not to mention rental income...

Not because of a healthy economy. Have salaries improved? Has GDP growth come back? Have companies started to hire again. Has immigration growth come back? No, No, No and No. So, what is driving the upward pressure? Nothing that leads to health in my opinion. The gov't buying its own bonds to artificially keep rates low. Upteen programs to keep people from foreclosing that is only helping the few and adding to the Deficit/Debt. Banks back to their old schemes again trying to prop up earnings by selling to the people who shouldn't be allowed to buy. It will not end well. Good luck to you.

If prices rise 20 pct next year my 875k estate will be up 175k. Try saving that much in one year. Saving and paying down debt will keep you poor in bernanke printsville zirptopia town. Must use leverage or get buried by inflation.

PockyClipsNow says

If prices rise 20 pct next year my 875k estate will be up 175k. Try saving that much in one year. Saving and paying down debt will keep you poor in bernanke printsville zirptopia town. Must use leverage or get buried by inflation.

All depends on finding the greater fool. i.e. Ponzi scheme

Mark D says

the real problem facing the economy is job loss, not the FED's manipulation of interest rates.

Disagree. The problem was trying to hold onto housing values when they should have let it decompress in a downward market. Back in 2002-2003 it just would of meant prices stabilizing. Everyone was caught up in growth, even the feds. Greed too over everyone's thinking, from bankers, realtors, title insurance companies, appraisers, builders, etc. The whole housing industry was a paradise. The job losses came much later and were because of the continued greed. Saying job losses are the cause is not going deep enough IMHO. Trying to prop up a market that should have stumbled slightly is the root cause. Now we are doing the same to even a greater extent. Good luck with that. I got years to wait for the collapse, and it will be a duzy!

RentingForHalfTheCost says

The problem was trying to hold onto housing values when they should have let it decompress in a downward market.

if we're talking 2002-2004, that was not on the table since the Fed's job is to raise rates on Democratic presidents and lower them on Republicans.

http://research.stlouisfed.org/fred2/graph/?g=dO7

The problem that bit them in the ass 2004-2006 was the fraudulent lending and temporary "affordability" products like negative-am and liar loans that boosted purchasing power, but for only a couple of years.

As for 2008-now, I don't have any solution but I certainly admire the problem.

As a renter, letting housing pancake sounds great in theory, but I understand that the $14T mortgage credit bubble is everybody's savings, too.

http://research.stlouisfed.org/fred2/series/HHMSDODNS

With the mass defaults come loss of savings. Maybe the Fed coulda just printed to pay the savings.

Like I said, the solution to the mistakes of 1993-2003 are not easy to find.

RentingForHalfTheCost says

The problem was trying to hold onto housing values when they should have let it decompress in a downward market.

when home prices have reached historic norms, something has to be done to prevent them from going lower. that's part of stabilizing prices.

RentingForHalfTheCost says

Has GDP growth come back? Have companies started to hire again.

yes to these actually:

http://research.stlouisfed.org/fred2/series/GDPC1

http://research.stlouisfed.org/fred2/graph/?g=dO8

Mark D says

something has to be done to prevent them from going lower

why?

RentingForHalfTheCost says

Good luck with that. I got years to wait for the collapse, and it will be a duzy!

How Sweet It Is !

Bellingham Bill says

Mark D says

something has to be done to prevent them from going lower

why?

because that's one of the main functions of the FED - stabilizing prices.

after a market crash, prices tend to go lower than historic norms and they are trying to prevent that because it's primarily driven by panic and paranoia.

new construction went from 9% of GDP to 5% of GDP after crash and that accounted for a lot of the unemployment. the economy can't have a full recovery without a healthy housing market.

now whether people have jobs to buy homes and help boost the economy is another story. so again the main issue is lack of jobs not the FED's meddling with the interest rates. they have been doing that forever. the only reason why it has been under scrutiny lately is because people STILL wanted home prices to go even lower, which i think is a little too much too ask, considering prices had gone back to normal earlier this year (for most parts of the country anyways).

Bellingham Bill says

yes to these actually

Except companies are now hiring at lower salaries, more temporary terms of employment, fewer benefits, etc. etc.

Philistine says

Except companies are now hiring at lower salaries, more temporary terms of employment, fewer benefits, etc. etc.

That's true, yes. I'm not particularly bullish on this recovery. I think the wheels can come off (like 2008) next year very easily.

Mark D says

the economy can't have a full recovery without a healthy housing market.

why not? How are you defining "healthy" here? Unaffordable again?

Well at some ponit in some year you guys should buy RE i mean if your plan is rent for life why bother being on this board? I rented from 06 to 12 and then placed large bet on RE but the bottom was 09 to 11, i waited too long. Lotsa upside left before the next downcycle IMO. You bet i will sell if i think prices will crash and i can cash in big time like i did in 06.

$40B/mo is about $300 per worker.

Wow.

Though to put that in perspective, consumers were borrowing $800/mo per worker during the height of the housing bubble:

http://research.stlouisfed.org/fred2/graph/?g=dOb

(mostly mortgage loans)

Bellingham Bill says

Mark D says

the economy can't have a full recovery without a healthy housing market.

why not? How are you defining "healthy" here? Unaffordable again?

i just said why. read my post again.

you know what healthy means.

"unaffordable" sounds like you are trying to put words in my mouth so i am going to return the favor: i guess you want prices to drop another 50% so everyone can get a house?

Call it Crazy says

Mark D says

now whether people have jobs to buy homes and help boost the economy is another story. so again the main issue is lack of jobs not the FED's meddling with the interest rates.

BINGO!!!

So, why doesn't the FED just put 40 Billion a month directly into our paychecks??? Then we could go right out and buy the biggest and best house available!!

they are making credit easily available which will help businesses and create jobs. people with jobs will buy homes. not sure what you are trying to say here.

House of cards. Mortgage litigation up. FHA may need bailout soon.

http://www.dailyfinance.com/2012/09/12/5-reasons-why-the-housing-market-recovery-wont-last/

http://finance.yahoo.com/news/door-slamming-shut-housing-market-191719721.html

http://www.smartmoney.com/spend/real-estate/why-us-house-prices-wont-recover-1335877657114/

http://www.huffingtonpost.com/2012/04/20/housing-market-recovery-gwinnett-county_n_1438687.html

robertoaribas says

Not true historically. generally, housing is late to an economic boom and rises when the rest of the economy is already doing well.

it might have been true in history that the housing boom is late to an economy boom. but has there been a time in history when the economy was doing well with troubled housing market where many people were underwater and couldn't spend?

Call it Crazy says

Mark D says

they are making credit easily available which will help businesses and create jobs. people with jobs will buy homes. not sure what you are trying to say here.

Wasn't that the same reasoning behind QE1, QE2, QE3 and now, QE4???

Has the job situation improved much in the last few years?? We still have approximately 370K people filing for first time UE claims each WEEK.

how do you know the economy would not have gotten worse than it is now if it hadn't been for those QE's?

robertoaribas says

However, since housing has NEVER been the driver of a recovery historically

my claim wasn't that housing has been the driver of a recovery. the claim was that you can't have a full economic recovery with a troubled housing market where new construction is severely depressed, contributing to high unemployment and many home owners are underwater and not spending.

new constructions not only bring new construction jobs but boosts spending as well since moving into a newly built home requires spending money on appliances, furniture and other things.

historic data support my claim since we have not had a time in history when the economy was doing well with a housing market this bad. if you wish to dispute this i'm afraid the burden of proof is on you.

Mark D says

when home prices have reached historic norms, something has to be done to prevent them from going lower. that's part of stabilizing prices.

Funny how the logic doesn't work the other way. Everyone seems to be fine when they break-away on the up side. That, my friend, is pure GREED. It is our enemy.

Mark D says

how do you know the economy would not have gotten worse than it is now if it hadn't been for those QE's?

I think the going theory back then was that if we had just let the mother burn, we would have already gotten all this out of our system and been on a real recovery by now--real recovery implying expanding middle class, corporations actually generating productivity instead of shifting money around in derivitaves and tax loopholes, and housing that's owned by the American populace instead of the rentier class.

Ahh, those were rosier days on Patnet back in the summer of 2007

Mark D says

because that's one of the main functions of the FED - stabilizing prices.

Then they failed miserable when they let the bubble happen. That was not stability. Now, that we are tempting going under the normalized price, they go crazy. Idiots.

Call it Crazy says

It would most likely have gotten worse, but how is printing money better in the long run? It just kicks the can down the road until the fundamental problems are fixed...

I think you just answered your own question there.

PockyClipsNow says

Well at some ponit in some year you guys should buy RE i mean if your plan is rent for life why bother being on this board? I rented from 06 to 12 and then placed large bet on RE but the bottom was 09 to 11, i waited too long. Lotsa upside left before the next downcycle IMO. You bet i will sell if i think prices will crash and i can cash in big time like i did in 06.

I'll buy when I think it is a good place to put my cash. Right now, there are much better places and renting is 50 cents on the dollar where I live. I see the people around me who own. They hardly enjoy the lifestyle I got and we have the same salaries. Many opt out of 401k, don't take vacation time (get paid out), and never travel. If that is the life of an owner, then I'll rent forever. ;)

Call it Crazy says

Exactly..... I'm not a big fan of "can kicking". I rather just take the pain up front, get it over with and then rebuild from there....

Unfortunately, that's not it works. You would have ended up with a recession that was much deeper and likely longer than what we actually had.

Call it Crazy says

Mark D says

how do you know the economy would not have gotten worse than it is now if it hadn't been for those QE's?

It would most likely have gotten worse, but how is printing money better in the long run? It just kicks the can down the road until the fundamental problems are fixed...

yes there are fundamental problems but making credit more available and creating jobs in the mean time is better than doing nothing and letting a big crash happen. this is the soft landing approach. you have to take the pills slow or all at once but you cant have both.

now this $40B buying of MBS per month is not literally "money printing." moving troubled assets off of the banks' books allows banks to have more money to lend to businesses, which is good for job growth.

when the economy gets better, the FED will sell these MBS and when this money goes back to them, it is destroyed. if things going according to plans, the FED will make money from this and the profit will go to the U.S Treasury. i hear they have been making money on selling AIG shares.

RentingForHalfTheCost says

Mark D says

when home prices have reached historic norms, something has to be done to prevent them from going lower. that's part of stabilizing prices.

Funny how the logic doesn't work the other way. Everyone seems to be fine when they break-away on the up side. That, my friend, is pure GREED. It is our enemy.

yes i agree that Greenspan got greedy and he should have stopped it early, using the same tools the FED is using now.

Philistine says

Mark D says

how do you know the economy would not have gotten worse than it is now if it hadn't been for those QE's?

I think the going theory back then was that if we had just let the mother burn, we would have already gotten all this out of our system and been on a real recovery by now--real recovery implying expanding middle class, corporations actually generating productivity instead of shifting money around in derivitaves and tax loopholes, and housing that's owned by the American populace instead of the rentier class.

Ahh, those were rosier days on Patnet back in the summer of 2007

some prefer the hard landing approach and i'm not saying which is better. i don't know. but the soft landing approach has been chosen and i think it is safer when all things have been considered.

i believe that those in power decided that it was too risky to let it crash and burn because we might not have been able to start it over again. yes they wanted to save their banker friends but at the same time, the status of the petrodollar was also at stake. a hard landing might have led to a currency collapse - when other countries lost faith in the currency and dumped it for the Euro or when China decided to sell our debts.

tatupu70 says

Call it Crazy says

Exactly..... I'm not a big fan of "can kicking". I rather just take the pain up front, get it over with and then rebuild from there....

Unfortunately, that's not it works. You would have ended up with a recession that was much deeper and likely longer than what we actually had.

That is what everyone says, but I don't believe it. Bring on the recession. We deserve it. Our economy shouldn't be so dependant on growth. Growth should be a blessing. However, we have used the growth to go deep into debt, I mean deep. Idiots economists that if they worked on electronics, then iPhone would last about 30 seconds with a full battery charge. Idiots full of greed I say. The problem is not that hard. Spend when you can. If we are so rich as a country then why do we need to sell bonds all over the world and to ourselves. Smoke and mirrors to hide how poor we have become.

RentingForHalfTheCost says

Smoke and mirrors to hide how poor we have become.

That is the scary possible reality. And also a possible reason for certain behaviours and policies.

There is no 20% increase in housing prices on the horizon.

These companies make money by getting people to invest. They have the properties as security, along with a hefty down payment for a hard money transaction.

One of the better groups here in Seattle will lend 80% LTV for a foreclosure auction sale, with 14% interest, a 3% commission, plus a loan fee, and a cash out in Six Months.

If you can't refi, or sell the property they take it back to resell.

RentingForHalfTheCost says

Bring on the recession.

I think one has to have never experienced a depression to say that. When it's you that has to live on the street and try to find a soup kitchen to serve dinner, you might feel a little differently. I'm pretty sure you wouldn't be so worried about quantitative easing at that point.

RentingForHalfTheCost says

The problem is not that hard. Spend when you can. If we are so rich as a country then why do we need to sell bonds all over the world and to ourselves. Smoke and mirrors to hide how poor we have become.

How does a depression solve that problem anyway? It only makes things worse. Less tax revenue, more food stamps. It would be a death spiral--feedback loop.

Bellingham Bill says

if we're talking 2002-2004, that was not on the table since the Fed's job is to raise rates on Democratic presidents and lower them on Republicans.

http://research.stlouisfed.org/fred2/graph/?g=dO7

Huh? Your graph shows what I meant. In 2001 it started in a flurry. Over the course of a little over a year the rate went from 6% to under 2% trying to create the allusion that our economy was better than it was. Democrats or Republicans? Doesn't matter, the enemy is stupidity on top of GREED.