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September 12, 2037


               
2007 Apr 3, 5:37am   26,599 views  333 comments

by e   follow (0)  

http://www.time.com/time/printout/0,8816,915445,00.html

Unleashing their pent-up demands and taking advantage of fairly easy mortgage money, millions of people are shopping for houses. In Santa Rosa, Calif., a 90-minute commute north of San Francisco, buyers in June began camping out in sleeping bags on a Thursday night to be first in line Saturday morning when 27 houses in a new subdevelopment went on sale. In the Kendall neighborhood of southwestern Dade County, the last open area reasonably close to Miami, prospective buyers on weekends parade caravan-like in cars and campers through flag-festooned developments.

Sound familiar? Yet another story from 2005? Nope... the publication date of this article was September 12, 1977 - nearly 30 years ago.

Let's look at some other snippets from this time capsule:

Rachelle Resnick, 27, a San Francisco school-bus driver, counts herself fortunate to have bought-with much help from her father-a two-bedroom house that she candidly describes as "a little nothing." It cost $48,500, and she will have to spend $5,000 or so to repair termite damage. But had she waited, it almost surely would have gone higher. The house sold in June 1976 for $28,000, and has since been resold four times by four separate speculators, none of whom lived in it.

Such speculation is common in California and is beginning to appear in other states. Indeed, California is a housing Oz unto itself; its population is still growing faster than that of any other large state except Texas; the recession bit especially deep in California, creating a huge backlog of demand, and strict environmental requirements severely limit the land available for housing. Prices are starting to level off, but the level is in the stratosphere. In platinum-plated Beverly Hills, one cynical real estate broker exclaims: "Oh, I have such a dog on the market right now! Come to my Sunday open house and see what I'm offering for $185,000. I can tell you, for $185,000 you get a piece of nothing." Tom Lorch, a high school principal who is looking for a house in San Francisco, adds, "When we talk about houses, it's money, money, money-not how we're going to live, which seems wrong. And these absurd numbers, $100,000. It's some kind of fantasy world."

Does anyone know what happened to the housing market in California after 1977? Or was the impact of Prop 13 too influential in the resulting statistics?

And finally, the social impact:

Like all inflations, housing inflation has serious social effects. Some wives feel forced to go to work, not because they want to have careers or earn their own spending money, but because buying that dream house nowadays usually requires two incomes. Six out often first-time buyers are families in which both husband and wife hold jobs. Couples who want to have children sometimes face the brutal choice of a house or a child-and, more often than in past years, select the house. In the early postwar period, sociologists and merchants suggested that Americans spent too little on shelter, too much on less basic needs. If so, the market has more than corrected that tendency. In order to buy a house, couples are scrimping drastically on other spending-for cars, food and even furniture; not a few fancy new houses are almost bare inside. Young people have always asked parents for help in scraping up the down payment on a home; mortgage bankers call the payoff from papa a "gift letter." Now the pool of cash required to spend the first night in a new house-frequently $20,000 to $30,000-has made this sacrifice of independence a matter of necessity rather than choice.

So... this was in 9/1977. Now, it's hard enough predicting what 9/2007 will be like - but what do you think September 12, 2037 will be like?

Already, both parents are working, realtors are spinning the Bay Area as a place so great that you don't need to take vacations - what's next? Will child labor make a come back? ("Monta Vista High School and Fireworks Factory #88"?) How much more special can it get here?

(Bonus points for including Peak Oil in your prediction...)

#housing

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1   e   2007 Apr 3, 5:45am  

David Lereah called to tell me that his prediction for 2037 was that the starting price for a new Honda Eichler parked on El Camino (great starter home!) would be $15 million - and that if you don't buy today, you'll be priced out forever.

2   Peter P   2007 Apr 3, 5:51am  

Are you making predictions past December 21, 2012?

3   Peter P   2007 Apr 3, 5:54am  

I predict meats will be banned from the menu and the average home will cost 100x median annual income.

Guys, we need to make a stand or my predictions will come true.

4   e   2007 Apr 3, 5:58am  

What happens on 12/21/2012?

6   Peter P   2007 Apr 3, 6:11am  

Again, tongue-in-cheek.

7   Peter P   2007 Apr 3, 6:38am  

Part of the market psychology includes a strong favorable view of city living.

Huh?

For that price you can almost get a cruise condo.

http://www.residentialcruiseline.com/how_to_purchase/pricing/

8   Peter P   2007 Apr 3, 7:09am  

(So no one will post a respond to my questions in the last post? You guys ARE cliquey. LOL)

Huh?

9   dp337   2007 Apr 3, 7:22am  

Just saw a pow wow session on MSNBC "Kudlow & Company". They were discussing the Subprime fallout. Two were optimists and the other were skeptics. It was interesting. One question was asked to what happens to those who are about to lose their homes because they can't afford it; foreclose or what. The optimist just nonchalantly said that the lenders will renegotiate the loan. !?"My Lord" The skeptics quickly berated him. Funny...

10   Peter P   2007 Apr 3, 7:24am  

The optimist just nonchalantly said that the lenders will renegotiate the loan.

See, it is safe to borrow from loan sharks too. Just "renegotiate" the loan. :)

They may have their own evil idea of loan renegotiation though.

11   Peter P   2007 Apr 3, 7:26am  

Has anyone else noticed that the inventory numbers in Los Angeles fell drastically?

I think data may have glitches. Check out this BA site. Pay attention to the past 2-3 week.

http://www.housingtracker.net/askingprices/California/SanJose-Sunnyvale-SantaClara/

12   dp337   2007 Apr 3, 7:28am  

Oops it's CNBC

13   e   2007 Apr 3, 7:35am  

A generation ago, much of New York’s middle and some of its upper class were departing for the suburbs. Today, many empty nesters are returning, which, together with the city’s strong attraction for young college grads, artists, media workers and other members of the sought after “knowledge economy,” have revitalized life in town.

That's actually a really interesting phenomenon that's happening in Manhattan. It's not just Realtor hype either. People who moved to the 'burbs for the kids or florida are now moving back because living in the burb's or Florida is death.

It's a "only in New York" thing.

As opposed to here in the West Coast where DinOR informs me that people about to retire upgrade to larger homes.

14   Glen   2007 Apr 3, 7:37am  

Reality will set in. Fundamentals will return. Lenders will insist on a comfortable margin to lend to homebuyers. No more cheap money and no more ARMs, except for the extremely well-qualified.

As homes in desirable areas remain unaffordable due to Prop 13 squatters and jobs relocate to North Carolina and Tennessee, there will be a massive out-migration of Californians. People will move to Raleigh, Memphis, Kansas City, Sioux Falls, St. Louis, Pittsburgh, Mexico, Canada...even Detroit. The spread between CA prices vs. the rest of the world prices will be too great to ignore. People would rather live like kings in Pittsburgh than live as mortgage slaves in Fresno, Bakersfield or even SF.

CA desert communities will take the worst pounding. The "prime" areas will do better, but not enough to make it worthwhile to buy. After all, even if nice homes in SF drop to $600K, that is still a ton of money for most people. You can already get a pretty nice place in most parts of the country for less than $400K.

15   e   2007 Apr 3, 7:37am  

So if they put 20k downpayment on a house and we STILL had crashes back then (before new loan technology! ha!) how large can we expect THIS crash to be?

That's kind of amusing that 30 years ago they had to put $20k down, but now people are up in arms that you have to put $15k down.

16   Glen   2007 Apr 3, 7:44am  

Wait until you need to put $200K down (probably $20K adjusted for inflation). That should reduce demand a tad.

17   Peter P   2007 Apr 3, 7:54am  

I am against regulating the minimum downpayment. The market should make the decision.

Soon enough the rise of foreclosure will force the mortgage market to reconsider its generosity.

It is going to be bumpy but the market will survive. I hope policy makers have the will and "heart" to let people fail. Destruction is part of the creation process.

18   Peter P   2007 Apr 3, 8:06am  

Comrade Peter is a master of the dialectic process (of which I know just bare enough to pass politics at school).

Hegel?

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