patrick.net

... They don't see each other. They only see what they want to see. They don't know they're in debt.

Needless to say my favorite is P/E ratio. I will even look at a convincing forward-looking P/E ratio.

How about astrological indicators? I have not heard anyone here quoting them yet.

Another good indicator: sixth sense.

And how about "common sense" ?

And how about “common sense” ?

Nah, if they don't "see the debt" they're sure as heck not going to see "common sense."

Right now my favorite indicator is the mortagage/rent gap.

I'd have to say, as far as leading indicators are concerned, the price-to-rent (a.k.a. "PE") ratio is also my favorite, followed by the HAI and price-to-income ratio.

How about this ratio:

Let i be the 30-YR FRM interest rate
Let p be the price of the home
Let r be the annual rent of a comparable home

Ratio = (p * i) / r

This ratio is similar to "mortagage/rent gap" but it counts only the cost of money (interest).

Fake P, the ratio is for comparison only. Those fees, tax, and deductions are more or less constant over time for the same home anyway. I do not want to have a complex buy-vs-rent calculator. I do have a formula though.

Is this a sign?

Anonymous said...
I posted a while back about two condos for sale in my building. One went up for sale before Mother's Day, the other shortly after.

weather has been nice though

How about a waiver to acknowledge that weather can change due to global warming?

Was that before or after the one waiving the buyer's right to actually see/inspect the house before buying?

Peter P, your formula should include HOA and property tax and income tax deductions to be more accurate.

Fake, here's a Rent vs. Buy calculator that includes those items:
tinyurl.com/bkecn

Jack, inflation is well contained, not by the FED but by the process of globalization. The simple true is that so long as wage inflation is tamed, inflation is not a major factor in house prices.

Oil prices belongs to the global commodities demand competition group. Inflation in this category behave like taxation. It will have deflationary effects on housing.

Can you tell me more details about the causes of inflation in health case and education? I am not too clear about them.

Finally, the inflation of house prices is irrelevant because we are in a bubble. There is no rent inflation.

BTW, there is nothing wrong about using rent in the calculation of CPI. But I have problem by doing so AND over-promoting the benefits of homeownership at the same time.

House prices are high because people KNOW that money isnt going to be worth anything very soon.

Why not commodities? You get huge leverage and great liquidity.

I am AFRAID to sell the house, because all that cash doesnt translate into “security” like the house does.

Who told you to sell your house?

Jack
I don't just think it's the boomer generation wanting a home, it's wanting more than one home. What's really sickening is the few I know who buy second or third homes and then give one to the kids as an "investment."

I agree that we have some imbalances in health care and education. My question is, where are the additional costs going to? Lawyers? Government?

Will the extra costs have inflation-like effects or are they a simple wealth transfer?

I am no economist either. Economics is a voodoo science at best. :)

So there ARE many people in the bay area who ARE wealthy enough to buy two or three houses, not just for themselves, but to GIVE ONE TO THE KIDS!

Of course they are such people. Are there many of them? I do not know.

Which one is more sickening: owning 5 homes or flying private jets?

The answer is neither. One is free to use his money to do whatever he wants. Money is amoral.

But the point is that a few people who are not overextending will not underming bubble claims, when 60% of new purchases are IO/ARM loans and the median downpayment of first time homebuyers is 3%.

"But the point is that THESE PEOPLE ARE PROBABLY NOT OVEREXTENDED!
(Therefore UNDERMINING bubble claims)"

Not necessarily --any assumptions about what % of the market "such people" constitute or wht type of financing they're using are just that --unproven assumptions. What I find more telling are the 50% who used IO or neg-am loans in CA last year, and the 70% who are using them this year.

BTW, wealth will not stop a bubble from bursting. People were wealthy in Hong Kong and Tokyo but I heard that many "wealthy" people including movie stars went broke after the housing bust.