patrick.net

There’s a reason bear markets only last 2-4 years.

...however, this is a secular bear market.

To quote Harry Dent " The Best case is your house will be worth what it was in 2000 and at worst 1995" You will see real estate crash to levels you did not think possible. I for one happen to agree and see that being the case, and that is why I am looking for NAT. housing to get to 110-130 and East Bay to drop back to mid 1990's by 2014

Austinhousingbubble says

You assume I need help understanding what is a highly glossed-over premise. No, actually.

That's why I'm surprised you continue to argue against such an obvious point.

tatupu70 says

you can’t really justify why you think an outdated chart is better than the more recent one…

It doesnt take much brain power to figure out SF Bay Area prices tracked inflation over the past 25+ years except for the past 12 years due to insane reasons.

Outdated or not. Its simple to figure what prices should be in any one BA city for anyone home. That will be 1996-97 prices plus inflation (30-35%). Simple math and no need to look at anyone chart. Back to soberity!!

What does it mean for realtors and other vested interest ? They will see their take home earnings slashed by half to a third. Yes, the VI laugh at this...

Unfortunately, the details get lost in the haste. Your premise: if the government stepped away completely from the mortgage market as loan originator/guarantor supreme, private lenders/guarantors would be rushing to fill the void, albeit, attaching a necessary premium to offset the risk. I contend that if this were the reality, then we would already be seeing these same institutions rushing the void created by the newly dispossessed strategic default crowd -- particularly the jumbo prime loan defaulters with plenty of cash to play with. I also contend that the risk premium attached to any mortgages (particluarly, 30 yr conforming) would prove comparatively prohibitive to most families; think something along the lines of 30% minimum down, which is a number I most often see floated in this scenario. Even if a family had the 30%, the popular sentiment today is to start with as little skin in the game when it comes to home mortgages.

tatupu70 says

I’d argue that they should more closely follow wage inflation and not general inflation.

You can argue all you want! Salary/Wage increases by employers are pegged to inflation.
Talk to a corporate controller, company financial analyst or your HR department, you get the same story.

tatupu70 says

Why 1996-97 as your baseline? That seems a bit arbitrary…

If you been here, you would understand what a sober/normal period the early-mid 90s were.
Fact is we have fewer public companies and employees today than we had back in 1994.
315 Public companies in 1994 vs under 241 today. Our current number of employers are shrinking.

http://www.siliconbeat.com/2010/02/17/vanishing-public-companies-lead-to-the-incredible-shrinking-silicon-valley/

What void in lending are you talking about? Sub-prime? People without a down payment? There isn’t a void in lending and there wouldn’t be if government support ended.

I was referring to the prime jumbo defaulter with stellar credit minus foreclosure. Why is there not a private model in existence already for this class of borrower? It's a growing demographic that seems ripe for the picking for all these private lenders so eager to make these jumbo loans.

do think that sans government interference, we’d see higher down payment requirements. That’s a FAR cry from the doomsday scenarios painted here.

Much higher. Again, forget about 3.5% -- 30% seems most likely. Whether you paint it doomy or not, it'd effectively shave away a large portion of the borrowing public. And again, the popular mindset today is to have as little skin in a mortgage starting out as possible.

Of course, the more likely scenario is that prices would fall of a cliff, especially if this were accompanied by a rate hike. That, or some kind of government program, such as community service in lieu of down payment.

thomas.wong1986 says

You can argue all you want! Salary/Wage increases by employers are pegged to inflation.
Talk to a corporate controller, company financial analyst or your HR department, you get the same story

Well, that's not true. First of all, we're not talking about salary increases. We're talking about wage inflation. Those are two different things. Second--your employer may tie salary increases to inflation, but not every company does. Most look at salary surveys, etc. It's kind of difficult to pay someone who has been there 10 yrs. less than a new hire out of school--but that's what may happen if you only use inflation.

thomas.wong1986 says

If you been here, you would understand what a sober/normal period the early-mid 90s were.

So, why not use 1992 as your baseline then. You chose a mid to late 90s year. Anyways, what you consider sober/normal may not be so.

tatupu70 says

So, why not use 1992 as your baseline then. You chose a mid to late 90s year. Anyways, what you consider sober/normal may not be so.

Fine with me... use 1992 if you like.

tatupu70 says

Well, that’s not true. First of all, we’re not talking about salary increases. We’re talking about wage inflation. Those are two different things. Second–your employer may tie salary increases to inflation, but not every company does. Most look at salary surveys, etc.

Survey is called the Bradford Salary Guide and it is tied to inflation. If you noticed, any employers who deviates from inflation often go under. Silicon Graphics is a prime example of over compensation and over spending. Result .. bankruptcy!

thomas.wong1986 says

Survey is called the Bradford Salary Guide and it is tied to inflation. If you noticed, any employers who deviates from inflation often go under. Silicon Graphics is a prime example of over compensation and over spending. Result .. bankruptcy!

That is completely ridiculous. The survey is a ...wait for it... survey. It finds out what people in certain job titles/functions get paid throughout the country. It has absolutely nothing to do with inflation.

In any event, you can easily pull up a graph of median real wage over time. According to you it should be a straight horizontal line--I guarantee you it is not.