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My bold prediction for this decade

By ¥   2011 Jan 25, 3:01pm   11,826 views   77 comments   watch (0)   quote      

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38   ¥     2011 Jan 29, 4:17pm  ↑ like (1)   ↓ dislike (1)   quote    

coop says

Any advice to this neophyte would be MUCH appreciated!

I'm just shooting the sh--t here so don't take my opinions for anything.

Like I said above, there's 3 ways this can go . . .

up, down, or sideways.

I knew things were going down by mid-2008 but I also knew there was going to be intervention, and boy was there ever!

Back in 2007 $10B was a lot of money for the government to spend on something! Now it's a rounding error.

Bernanke's $600B "quantum easing" that's going on now is also going to have some interesting follow-on effects.

What it's doing is displacing $600B of private money that would be committed to propping up Uncle Sam and liberating it to find productive use in the economy (or, more likely, find some commodity investment to park in).

But it's certainly a positive push for the economy.

But I don't know what else the current political configuration is able to gin up this year or next. All eyes seem to be on November 2012, the battle lines are drawn and the issues are stark, with the life or death of the Republican Party on the line it seems (as they've staked all their cred on killing the jobs-killing, baby-snuffing, granny-offing PPACA that's supposed to come on-line in 2014).

If the economy doesn't get a lot better next year, Republicans should have a cakewalk booting Obama, and the seats up in the Senate seems to give the Republicans a good chance of taking control of everything.

So I am not too sanguine about the prospect of any great recovery coming any time soon.

And that's not considering the state's many issues, and the macro situation about energy inflation.

So. "Advice". Dunno the capital gain, but the money you'd clear on the house should be tax-free.

I'd cash out this Spring selling season and keep myself more mobile. The 3 year treasury is 3.3% now . . . that's around $1000/mo in interest you'd collect on your new cashpile if you sold.

39   ¥     2011 Jan 29, 4:36pm  ↑ like (1)   ↓ dislike   quote    

bubblesitter says

So you think banks will catch up with that inflation and keep loaning money that high? Will employers boosts their employees salaries?

This has all happened before. And it will all happen again : )

Inflation sure got on a rip-roar in the 1970s and 80s. But our debt and demographic situation was all different then.

We had the boomers aged 13 to 28 in 1975, now they're in their 50s and 60s.

Total of household debt + gross national debt / GDP was 0.8. Now it's 1.8 and heading to the moon.

We had more untapped credit capacity I guess in the 1970s and 1980s, but now we're tapped out.

Just like Japan.

But just like Japan, they can try helicopter money. The $600B is first dose.

The CBO released a new, shocking, forecast for the next 10 years, and, they have the optimistic scenario of the national debt DOUBLING to $18T by 2021.

http://www.zerohedge.com/article/cbos-revised-budget-sees-2011-deficit-rising-500-billion-15-trillion-4-trillion-deficit-thro

There's a lot of moving parts here but I think it's entirely possible we'll see the national debt TRIPLE by 2022 (partially because the SSTF is now permanently cash-negative), since the CBO numbers are very optimistic about a lot of stuff (+200,000 jobs a month for the next few years).

With all this debt hitting the economy, money supply simply has to keep on trucking, and inflation simply has to follow. Somehow.

It is very difficult to see the future though. I want to stick to my position that this is just year 4 of a very long trainwreck.

Perhaps my living in Japan 1992-2000 is unduly coloring me "negative".

But I think there's a lot to be negative about, now.

40   doubleup     2011 Jan 29, 10:55pm  ↑ like   ↓ dislike (2)   quote    

coop says

I would cherish any advice from you gurus out there. I’m a young homeowner in Los Angeles (Woodland Hills to be exact) and in light of all this forecast pessimism, I feel the desire to sell my house this Spring and get out before shit hits the fan. There’s $230k left on the mortgage and if I sell it now I could get about $650k. The other option is to rent it out and weather the storm for the next few years. Any advice to this neophyte would be MUCH appreciated!
Thanks,
Coop

You can easily list it for what you want and see what happens. You don't have to sell if you don't get an acceptable offer. If you do sell, then you'll need a safehaven for the money. In general, I would be surprised if real estate went up but rather seems more likely to continue a slow slide downwards until it has a date with inflation at some point in the future. I won't be surprised if mortgage rates were two and a half points at some point. This could be a good economic strategy if that is what you value for the hassle of moving. Just recognize it is first and foremost about economics. Moving and renting can be a hassle.

Another advantage is that after you sell you can shop for another house. But you can tighten up your criteria and focus on finding a real gem. Zero in on neighborhoods you really like and after a while you'll know them inside out. You'll get a great feel for the right home and price point. You can save a fair amount of money by tailoring the home to what you want and not paying for an extra bedroom, or an extra bay in the garage or a commute that is five miles too long.

41   coop     2011 Jan 30, 1:53am  ↑ like (1)   ↓ dislike (2)   quote    

Troy says

The 3 year treasury is 3.3% now . . . that’s around $1000/mo in interest you’d collect on your new cashpile if you sold.

Is that right? I'm only seeing that rate for the 10 year.
http://money.cnn.com/data/bonds/

doubleup says

You can easily list it for what you want and see what happens. You don’t have to sell if you don’t get an acceptable offer.

As a newbie, this is something I don't understand about real estate. The current CMA and comps include all the local foreclosures and short sales and thus spits out a number well below what I think the house could sell for (is the CMA especially low because it's taking comps from the winter season? Is there incentive to wait till early summer so I could have a CMA that includes the spring comps?). My instinct is to do as you say, list it for what I want and see what happens. However, I keep hearing about the dangers of over-pricing and how I need to price my home according to the bank-owned-saturated comps! Also, if my house is on the market for too long, I hear buyers get suspicious...why couldn't it just be the case that I'm holding out for the right price?

Thank you guys!!

42   ¥     2011 Jan 30, 3:57am  ↑ like   ↓ dislike   quote    

coop says

Is that right? I’m only seeing that rate for the 10 year.

my bad!

43   elliemae     2011 Jan 30, 4:05am  ↑ like (2)   ↓ dislike   quote    

According to Troy's graph, in the future:

- red & green will now make gold when mixed together.
- all lines will become arrows
- all graphs end after Jan 2012
- no more recession!

44   doubleup     2011 Jan 30, 4:35am  ↑ like   ↓ dislike (1)   quote    

You house will need to compete for buyers with anything else comparable on market. If your neighborhood is filled with bank-owned property, then that's going to affect it's market price negatively to some degree. It will also affect it's ability to get appraised when you have a buyer.

You'll have more incentive to price at the market clearing price if you goal is to get out while the getting is good. If you're just fishing for top dollar, then you'll reduce your chances to sell but you might get lucky and land a buyer that will meet your needs.

45   SubOink   52/52 = 100% civil   2011 Feb 11, 3:39pm  ↑ like   ↓ dislike   quote    

coop says

I would cherish any advice from you gurus out there. I’m a young homeowner in Los Angeles (Woodland Hills to be exact) and in light of all this forecast pessimism, I feel the desire to sell my house this Spring and get out before shit hits the fan. There’s $230k left on the mortgage and if I sell it now I could get about $650k. The other option is to rent it out and weather the storm for the next few years. Any advice to this neophyte would be MUCH appreciated!
Thanks,

Coop

Your house is 650k and you only have 230k left to pay and of course nobody here tells you to stay in it? Wow!
You're mortgage payment must must be pretty low. Rentals in Woodland Hills are $2000+ , more like $2500-2800 for a house that is worth 650k!!

Do you want to rent again for more than you pay now?

Don't sell. If anything, rent it out IMHO. You're a lucky guy!! Don't listen to the panic in this forum. They love to tell you to sell sell sell...it feeds the agenda of crashing prices and doom and gloom. Pay those $230 off as fast as you can...then you don't care what your house is worth because you own it and you pay nothing to live there and if prices really come down a lot - good for you, you'll adjust your property taxes DOWN and live even cheaper.

46   SubOink   52/52 = 100% civil   2011 Feb 11, 3:40pm  ↑ like (1)   ↓ dislike (1)   quote    

coop says

I would cherish any advice from you gurus out there. I’m a young homeowner in Los Angeles (Woodland Hills to be exact) and in light of all this forecast pessimism, I feel the desire to sell my house this Spring and get out before shit hits the fan. There’s $230k left on the mortgage and if I sell it now I could get about $650k. The other option is to rent it out and weather the storm for the next few years. Any advice to this neophyte would be MUCH appreciated!
Thanks,

Coop

Your house is 650k and you only have 230k left to pay and of course nobody here tells you to stay in it? Wow!
You’re mortgage payment must must be pretty low. Rentals in Woodland Hills are $2000+ , more like $2500-2800 for a house that is worth 650k!!

Do you want to rent again for more than you pay now?

Don’t sell. If anything, rent it out IMHO. You’re a lucky guy!! Don’t listen to the panic in this forum. They love to tell you to sell sell sell…it feeds the agenda of crashing prices and doom and gloom. Pay those $230 off as fast as you can…then you don’t care what your house is worth because you own it and you pay nothing to live there and if prices really come down a lot - good for you, you’ll adjust your property taxes DOWN and live even cheaper.

47   Clarence 13X     2011 Mar 17, 6:11pm  ↑ like   ↓ dislike   quote    

Troy says

The system doing what it can to keep itself together but I suspect the best-case end result will be repeating the Japan experience of a long, slow grind.
This chart is in real terms, so a mild inflation can turn a flat housing market to look down when adjusted for inflation.

Thanks Troy!....this would mean that for me now is the time to stack my chips as one day I may be able to buy a house outright with cash.

48   ¥     2012 Feb 2, 7:41am  ↑ like (1)   ↓ dislike   quote    

From a year ago:

vs now:

Ima jenius

49   Patrick   1841/1841 = 100% civil   2012 Feb 2, 7:47am  ↑ like   ↓ dislike   quote    

Good prediction so far!

I bet you'll be right for the rest of the decade too.

50   bubblesitter     2012 Feb 2, 7:50am  ↑ like   ↓ dislike (1)   quote    

CS seems to moving along your prediction line. Isn't the CS graph indicating that 2009 bottom is already busted?

51   LAO     2012 Feb 2, 7:55am  ↑ like   ↓ dislike   quote    

I'm curious the average age of PATRICK.net posters.. especially those planning on waiting another 10 years to purchase a home?

I have a feeling many will see their grave sooner than the inside of their first home.

52   HousingWatcher     2012 Feb 2, 8:17am  ↑ like   ↓ dislike   quote    

There does come a point in which people who think home prices are going to keep declining become just as delusional as those who thought home prices would keep appreciating.

53   thomas.wong1986     2012 Feb 2, 8:31am  ↑ like   ↓ dislike   quote    

Los Angeles Owner says

I have a feeling many will see their grave sooner than the inside of their first home.

Very old... What does it mean... I pissed more beer and banged more pussy.

54   PockyClipsNow   60/60 = 100% civil   2012 Feb 2, 8:34am  ↑ like   ↓ dislike (1)   quote    

That CS graph is like a crazy skateboard ramp and just as dangerous too.

Bubbles kill people when they burst.

55   gregpfielding     2012 Feb 2, 8:35am  ↑ like   ↓ dislike   quote    

An updated housing chart today from the SF Fed:

(though I'm not sure why the caption says "steady" when the trends are clearly still down.)

56   thomas.wong1986     2012 Feb 2, 8:44am  ↑ like   ↓ dislike (2)   quote    

gregpfielding says

An updated housing chart today from the SF Fed:

Northern California was already in a bubble by late 2000. Draw the chart 15 years prior 2000 and forward to present.. that would show a different story, and change any conclusions.

57   thomas.wong1986     2012 Feb 2, 8:46am  ↑ like   ↓ dislike   quote    

Bellingham Bill says

Ima jenius

vera fidelis

58   rooemoore     2012 Feb 2, 8:52am  ↑ like   ↓ dislike (1)   quote    

Seriously, I don't think this will happen in my neighborhood. But I do think it will happen in yours.

59   ¥     2012 Feb 2, 9:17am  ↑ like (1)   ↓ dislike (1)   quote    

HousingWatcher says

There does come a point in which people who think home prices are going to keep declining become just as delusional as those who thought home prices would keep appreciating

Thing is, what if the past 30 years has been total bullshit?

http://research.stlouisfed.org/fred2/graph/?g=4JZ

What if we've gotta actually start cutting expenditures and raising taxes?

What if tightening oil supply and our trade deficit starts actually ripping wealth out of this state & country more actively:

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

What if we have to raise FICA and Medicare withholding substantially to actually pension off the boomers?

This is begging for a HItler's Bunker parody, where Hitler's first line is "That's OK, we can just print" and the OKW guys give him the bad news . . .

"Anybody here who hasn't paid off their house please leave the room."

"WHAT DO YOU MEAN WE CAN'T PRINT!"

60   1sfrenter     2012 Feb 2, 2:18pm  ↑ like   ↓ dislike (1)   quote    

Los Angeles Owner says

I'm curious the average age of PATRICK.net posters.. especially those planning on waiting another 10 years to purchase a home?

I have a feeling many will see their grave sooner than the inside of their first home.

Late 40's. Switched careers in my mid-30's, and then by the time I was settled and ready to buy the bubble hit. Been waiting 10 years now, and if I wait much longer, you're right, I'll be an old geezer buying my very first home.

61   Fucking White Male   234/235 = 99% civil   2012 Feb 2, 3:56pm  ↑ like   ↓ dislike   quote    

HousingWatcher says

There does come a point in which people who think home prices are going to keep declining become just as delusional as those who thought home prices would keep appreciating.

Why does that matter? Curbed LA recently ran an article explaining that median 2bd/2ba rents in Silver Lake were $2150/mo. They then asked if people would pay mortgage size amounts to rent these homes.

The thing they forgot to mention was that 2bd/2ba homes in Silver Lake sell for $630-800K :|

62   Fucking White Male   234/235 = 99% civil   2012 Feb 2, 3:58pm  ↑ like   ↓ dislike (1)   quote    

My current rent = $1640/mo and includes around $140 in amenities that I would not get in ownership.

Buying an apples to apples loft would cost me $2200/mo.

Prices are still actively declining. That $2200/mo used to be $2800/mo

Why would I buy? Why would I care that I am not buying?

63   bigbubblemama     2012 Feb 3, 1:22am  ↑ like   ↓ dislike   quote    

I read this graph differently than the yellow arrow prediction, I see a oscillation in the graph from 2009-2012. The last time you saw a similar oscillation in the graph above was when the market hit top and was deciding to change direction. I think the market is in the process of deciding to change direction and that higher interest rates indicative of higher inflation will be catalyst make housing prices go up. Historically when interest rates went up housing followed up. Does not make sense but is true.

I think the argument that a bubble most over correct on the down side because it always has in the past is the same as what people used to say "housing prices never go down" there is no always.

I think my biggest concern has been and still is the level to which the government is determined to hold and raise housing prices. It looks like new tax payer money coming in to stop foreclosures by reducing principle and interest rates. In addition most worrisome is the bulk housing auction of shadow inventory starting this month with no public access to the selling price info being a criteria to even being an investor.

I don't know where the market is going, but I don't feel as certain as some of you that it is going down.

I also see a larger divergence in pricing due to specific market geography,If you live in a sweet spot versus an area that was over buildt and near nothing it simply isn't the same real estate market and can't be lumped together.

64   sheltielover1     2012 Feb 3, 1:37am  ↑ like   ↓ dislike   quote    

Los Angeles Owner says

I'm curious the average age of PATRICK.net posters.. especially those planning on waiting another 10 years to purchase a home?

I have a feeling many will see their grave sooner than the inside of their first home.

I agree with you! My husband and I are in our mid-40's and have rented for 7 yrs. Right now we have an opportunity to buy a house for about the same as rent and are looking to do it. By the time we calculate the yearly taxes we pay and extra utilities buying looks to be a good deal. We would like to pay the house off by the time we retire and are getting older. Rents in the area are holding pretty well if not going higher. The cost of the house is 2 1/2 times our yearly income. I don't want to rent for another decade waiting for prices to drop! That's insane!!

65   Patrick   1841/1841 = 100% civil   2012 Feb 3, 2:10am  ↑ like   ↓ dislike   quote    

The comments about German humor are all moved to this thread in the Humor forum now:

http://patrick.net/?p=1208438

Please continue the humor discussion over there, if you dare.

66   ¥     2012 Feb 3, 2:23am  ↑ like   ↓ dislike (1)   quote    

bigbubblemama says

Historically when interest rates went up housing followed up. Does not make sense but is true.

Interest rates in the past just did not "go up". They were intentionally PUSHED up by the Fed to curb borrowing and debt expansion.

http://research.stlouisfed.org/fred2/graph/?g=4Lu

blue line is the debt cycle (new debt over wages) red line is fed funds rate.

The Fed does this to prevent wages from "hyper"-inflating like they did in the 1970s. Unfortunately, we've broken our economy now and can no longer raise the interest rate:

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

Home prices are going to be driven by disposable income -- wages less taxes.

I don't know where that's going this decade and next.

67   michaelsch     2012 Feb 3, 2:29am  ↑ like (1)   ↓ dislike (1)   quote    

Bellingham Bill says

sybrib says

Nothing that $15 per gallon gasoline won’t solve

$15 gasoline means $10 cheeseburgers.

“Nessuna soluzione . . . nessun problema!„

No, it does not. Only about $4 cheeseburgers. But you will walk to the nearby McDonalds. (maybe gonna get a bit healthier.)

You don't even need $15/gallon. $8.5 will do it if we add $5/gallon taxes now.

68   ¥     2012 Feb 3, 2:56am  ↑ like   ↓ dislike (1)   quote    

John Bailo says

if you really look at the teeny, tiny amount of land that even the largest metro area house sits upon, are they worth any thing at all

Try living with no sqft.

69   REpro     2012 Feb 3, 3:10am  ↑ like   ↓ dislike   quote    

I see “Japan” style path in housing from long time.
What could be different?
Japan was alone with huge government debt. Currently most developed countries have same problem. In past if any country had this problem, debt restructure and debt forgiveness, brought them to health.
World debt is now well connected. If each country forgives debt to each other, economy can be greatly improved and global inflation avoided.
Rising rent may affect home prices. However rent increases have its limit without rise in salary.
The rent is keep going up, but in areas with short distance to core business center. Remote areas actually showing softness in rent increases. Some folk start buying (a lot of pending sales), including people from this forum. This action releases some stock of rental units.

70   thomas.wong1986     2012 Feb 3, 3:20am  ↑ like   ↓ dislike   quote    

MarkInSF says

Nation? I think you're missing the point made. This bubble was not just in the USA. Speculators have always been with us, but what changed was the completely unregulated - literally - global financial system that enabled them.

We as a nation, seemed to have forgotten that RE prices do fall and did fall heavily as in the case in '89-'94. This was previously in our lifetime. But many over the last boom dismissed such talk. Many wrongly believed RE would appreciate 10-25-50% a year... thats just insane.

Lack of any financial regulation had little to do with this.

71   thomas.wong1986     2012 Feb 3, 3:29am  ↑ like   ↓ dislike   quote    

REpro says

The rent is keep going up, but in areas with short distance to core business center.

Business and companies move around from one end of Santa Clara County to another.. 5 years later.. its all different.

Cisco started in East Palo Alto, moved to Santa Clara, then to Milpitas. Had they been able to execute their plan in 2000, they would have moved to Way Way South San Jose.

Things change!

72   LAO     2012 Feb 3, 4:28am  ↑ like   ↓ dislike (1)   quote    

John Bailo says

Sometimes I drive around looking at new houses...large but pressed up against each other with 2 feet of air space, and I think, hey what a lot of house for $290,000...$325,000...$405,000...

Then I think back to the days of the American settlers...getting 40 acres, 100 acres...for free! Or when 50% of the American population was rural and lived on family farms...it was only 100 years ago when that was true.

Now we're crammed into houses butt up against each other and the urbists call it "sprawl". Couldn't you also call it cages?

That is to say, if you really look at the teeny, tiny amount of land that even the largest metro area house sits upon, are they worth any thing at all?

I don't know.. my 2 story home sits on a a 1/4 acre lot and it feels pretty spacious to me... More land equals more expense to maintain it.

That's why when people say you can get a home for twice the size with 4x the land outside of Los Angeles I think... Well that's at least twice the maintenance cost... so you are paying more out of pocket per month. Homes may be more expensive in Los Angeles.. but aside from potential earthquake damage.. Maintenance on smaller lots and smaller houses is minimal by comparison. Less windows to replace, less roof sq footage when replacement time comes, no snow removal....

73   JodyChunder     2013 May 9, 5:21pm  ↑ like   ↓ dislike   quote    

¥ says

there's 3 ways this can go . . .

up, down, or sideways.

That's what my bartender used to say...

74   indigenous   249/249 = 100% civil   2013 May 10, 12:08am  ↑ like   ↓ dislike   quote    

To accurately make this prediction you would have to know what is going on inside of Bennies head

75   CDon   1/1 = 100% civil   2013 May 10, 1:09am  ↑ like (1)   ↓ dislike   quote    

robertoaribas says

how'd that work out for ya?

It is interesting to look back and see what the general sentiment was at the time. If anything, it seems like a plurality of posters were dissatisfied with that prediction in that it was not pessimistic enough.

76   CDon   1/1 = 100% civil   2013 May 10, 1:11am  ↑ like (1)   ↓ dislike   quote    

For example...

thomas.wong1986 says



I agree with that extrapolation. I think prices will probably fall a little
each year for a decade or longer, like Japan.


I think we may see a much faster drop than most people expect.

77   toothfairy     2013 May 10, 1:34am  ↑ like (1)   ↓ dislike   quote    

HousingWatcher says

There does come a point in which people who think home prices are going to keep declining become just as delusional as those who thought home prices would keep appreciating.

people got burned on the way up it was inevitable that people would get burned on the way down too. Just feel good if you didn't get stung both directions like the people who bought at the peak and walked away at the bottom.

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