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Latest Comments12 Comments
Median Housing Prices Poised to Fall Back Below $200K
I would guess that we are heading to 2.4 x median income. Given that median income will probably fall to 46k, this means we are heading for something like 115k median house price. That seems much more realistic to me.
Anything else is just more channeling of Lereah and Yun.
Roubini Was Right
The rest of the crowd (with big shout outs to the Bubbleheads at CNBC and Alan "Bubbles Don't Exist" Greenspan) kept on hyping and lying and promising it would be green grass and higher numbers forever. Even on the way down, they picked bottoms out of their asses, declaring that 20% was a bear market and therefore it would rally. Or that housing had fallen enough (just because). Or that it was a liquidity or confidence crisis. In fact, they are still claiming the last two.
It's nice to see a Bubblehead like yourself admit to being wrong, wrong, wrong, but I sense you still fail to admit that you were not wrong just on a chance bet. You were wrong because you drank the Kool-Aid and spent seven years in a state of cognitive dissonance.
Roubini is not a stock picker. He is not calling for bottoms. He has been, if anything, too optimistic about housing and stocks, which is unfortunate because he is the biggest of the bears. If he has underestimated this thing, just how bad will it get?
GSE Bailout Unlikely to Help with Housing Crisis
If you want to end the housing crisis, let prices return to affordable levels. The endless tripe about saving house prices is sickening. Where are the headlines to help gold or oil bulls? What about helping out gamblers (whoops, Paulson is already doing that!)?
Get stuffed with you BS about house prices. They are too high and need to fall another 30%. Then, maybe, we can start rebuilding the economy on a sound base.
The (Non) Crash of 2008
It seems to me that the market is in denial.
Your brief article stinks of whining and wishful thinking.
If anything, this market is headed for the mother of all crashes. I have been calling for 900 on the S+P and close to 2 for the $/Euro.
Call me an anti_pollyanna, but the pollyannas have been wrong, wrong, wrong.
Inflation: No Longer a Notion to Be Ignored
Is the US Dollar Doomed?
If you really want to drive prices down, just stick one thousand more rigs into the Gulf of Mexico. You could prices down to about 25$ in a flash. Of course, the reserves would not last long and the reservoirs would be destroyed, but, hey, cheap oil, right?
As a final note, the USD is NOT doomed. It is not merely paper, folks. No, no, no. It is actually cloth. Yes, cloth. Given the rising costs of cotton, it will soon make more sense to stop buying clothes and simply staple a few hundred dollar bills together and wear those.
Burn, baby, burn.
Lehman Selloff Accelerates
The Fed cannot keep buying every bit of toxic crap the banks have on their books. When that stops, the final notes of the music stop and Chuck can finally stop dancing.
I think Einhorn's frustrations stem from the illegal, immoral, and non-market support of Wall Street by the Fed. Had the Fed not interevened to save the salaries and bonuses of a few thousand extremely wealthy traders and bankers, Merrill, Bear, JP Morgan, Lheman, Citi and one or two others would have already filed for bankruptcy.
My God, you cry. You can't be suggesting that we let those venerable institutions go bankrupt? Yes. We should. Other than Citi, they are merely investment banks churning paper, stealing from widows and orphans, and bribing elected officials. Citi's deposits are insured by the government.
Yes, there would be job losses, but in jobs that produce nothing but numbers and profits for a select few. In any case, if the "greasing the wheels of the economy" part of IB is so important, then another bank will step in or be created. Staring up an investment bank is very easy, especially when the competition has been removed. the offices, computers and staff are all available.
Ironically, Einhorn is "one of them" and has no doubt made his fortune inside the system, so getting burned by it is justice.
NAR's Lawrence Yun Continues to Mislead on Housing
Lower house prices are good. Yes, good. You don't think so? So, then you won't accept a free mansion if I offered you one? Idiot.
NAR's Lawrence Yun Continues to Mislead on Housing
Let's ignore emotional arguments and patriotic justifications for the market doing this or that. Look at economics.
House prices are historically high versus income. So, unless someone can prove there is a new paradigm and not a bubble, prices must drop until they are in line with historical norms. Historically, median price is about 3 times median wage, meaning that the median price should return to about $140,000.
I would also argue that we are in severe housing crisis with massive oversupply and "buyers" without any savings. Low Fed funds rates are not showing up in mortgages; the low rates are in fact designed simply to restore profits to the banks (yield curve). Boomer Babies have no money to make downpayments. Prices are rocketing up while wages are stagnant.
Are there market segments and geographic locations which are "immune"? No doubt, but even the top end is getting slammed in some places. And the NAR chestnut about location, specifically someone mentioned Southern California, is a joke. Look at house prices in SoCal, Vegas, and Florida. Death spiral! And NYC? Sure, all the foreigners will save NY real estate. As Borat says, "Not!"
Frankly, house prices should be lower. It's better for everyone. Lower taxes, lower insurance, cheaper to buy. Who cares if you sell and move on? Your next home will be cheaper still.
Is there anyone dumb enough to suggest that free housing would be bad? Would you turn down Bill Gates if he offered you his house for free because houses SHOULD be expensive?
What the Housing 'Apocalypse' Prophets Aren't Revealing
Ok, great. But why are prices lower? Are you telling me that the media determines prices? So, a drop in house prices is attributable to a few magazine covers and esoteric blogs read only by those who were sceptics in the first place?
In Goldilocks land, housing prices don't matter since they will always rise. So, no matter your income, you can buy a home. This is the logic which Bubble Bulls have been espousing if not openly spouting. So now we hear more of it.
The truth remains simple. You can buy and own something you can afford. Otherwise you have to sell it. Assuming the commodity is always rising, you will always make money, but only insomuch as you can afford to hold the commodity (carrying costs) while it rises. If you buy a McMansion for a cool million, you will need to pay, let's say, $6,000 per month. How long can you carry that burden before you go broke? What kind of price rise is needed to cover brokerage, insurance, mortgage interest, maintenance, moving costs, and mental anguish? Twenty percent?
Who will now buy your house? A millionaire or just another speculator? And how will they afford it? Does it matter in the end as long as you keep flipping? Well, yes. Either you keep flipping back into million dollar homes (smaller and smaller each time) which you cannot afford anyway or you downgrade farther and farther with each flip. If everyone keeps flipping and prices keep rising, then ultimately all homes will be over one million and you will never find a house you can afford. And who will absorb all the higher and higher priced homes? Richer flippers, flipping to an infinite number of billionaires?
To make a long story slightly longer, spare me your inane bubble justifications. People buy homes mainly to live in them. Therefore they MUST buy homes they can afford, not homes they speculate with. Affordability over the past forty years has meant 2.8 times income. I am guessing that with higher taxes, shadow inflation, and recession, we will see affordability drop to 2.5 tmes income.
But, you say, that's impossible. That means median homes prices have to drop to under $130k from present $208k. Er, yes, that is what I mean. That is even predicated on buyers finding mortgages and havng sufficient downpayments. How many under thirties have $20 to $40k lying around waiting to buy a house (I don't mean emergency or retirement funds either)? Few.
Evolution has made humans short-sighted. The result of ten years of a housing bubble is that we are convinced (and I really mean that, not just that people are in denial, they really, truly believe) that it's perpetual. So, the shock of seeing declines is impossible for many to accept. Many sellers still refuse to lower prices, preferring to wait out this temporary dip. When it finally all settles down and prices are about fifty to sixty percent below the peak, owners will blame the media, the government, Wall Street. Anyone but themselves and their illogical greed.
Economics is the dismal science, mainly because there are too many factors, many of which are not even quantifiable. But to go from there to simply dismissing it because it is contrary to your own view is exactly what you accuse the Armageddonists of, and exactly what you are doing.
What that long and boring enough?
They Said Housing Prices Couldn't Fall. They Lied.
We know we have created a monstrous generation of consumers. That is what America has become. Not the Bastion of Democracy. Not the Breadbasket of the World. Not the World's Manufacturer. And, finally, no longer the Global Leader in Finance. Heck, Americans no longer exist; they are now "the American Consumer".
This would be tragic and derisable if it were not so dangerous. American now produces debt and consumes crap. We have gone from building cars to building equity in houses. Unfortunately, the bubble is so huge (trillions upon trillions of dollars, numbers which no one but astrophysicists can even begin to comprehend) that it's popping would probably spell the demise of the entire Western Financial system.
So, we put a band-aid on the boo-boo, drop Fed funds by two to three percent, pump a few hundred billion into the economy and pray to God we can keep the thing gong until it's an SEP.
SEP=somebody else's problem. Which means, we really hate our children.
Look What They're Saying About the Housing Market
Unfortunately, the market will set prices around these dreamers. And in the long term, house prices are determined by wages and affordability (interest rates and access to credit). House prices world wide are inflated well beyond long-term, reasonable measures of affordability, especially now with so many financial institutions insolvent or nearly so. The irony is that even the odd bearish realtor who speaks of reverting to mean values (median prices matching long-term median income multiples like 3.5x income) fails to understand that in order to revert to the mean, the market needs to dip below in a manner which yields an offsetting value to the value (time and ratio) spent above the mean.
All in all, this means a long, painful decline in house prices. Frankly, it is long overdue. If homeowners don't need to or want to sell, then they won't care.