How Will the Economic Future Unfold?

[beerandcandy]

I work full time and cannot afford to buy a house where i live
and my job is very demanding
i debug graphics issues for major OEM's
i like what i do but it sucks that its so expensive
i almost want to sue the banks that gave out the bad sub prime loans and f'd up the housing prices for all of us.
i am also happy that you are able to get it done with the problems you have
good job!!

[1Tanker]

Originally Posted by beerandcandy

I work full time and cannot afford to buy a house where i live
and my job is very demanding
i debug graphics issues for major OEM's
i like what i do but it sucks that its so expensive
i almost want to sue the banks that gave out the bad sub prime loans and f'd up the housing prices for all of us.
i am also happy that you are able to get it done with the problems you have
good job!!

Thanks B&C. Actually, my wife's disability pension, pays the bills(i made ~$300 in '06, and $700 in '05 )but i still get my awesome benefits from work.. I'm still fighting to get disability myself... if i get it(and i should)...things will be much smoother. My wife had to fight the government for over 5 years to get hers. When she did, they back-paid her over $50k. They kept saying no....then out of the blue...one day we got a letter saying she qualified.

[randomizer]

Thats govs for you

[halbhh]

Originally Posted by 1Tanker

Yeah..it's hit everywhere, in varying degrees.... but the States seems particularly volatile atm. Canada is keeping a very close eye on the US economy, as our economy is pretty-much shackled to theirs.

Yeah....along with the advantages of the new world economy (all the trade and extra markets for companies, etc), and the free flow of capital that's supposed to be so beneficial, and has helped Asia grow so fast.....is that now an asset bubble can happen in more than just one region at a time, and when the bubble deflates, multiple regions could be affected at once, and then....all their trade partners.....

When the Asian currency crisis hit, it hit one large region. Now.....we're in a new paradigm.

[halbhh]

Originally Posted by beerandcandy

I work full time and cannot afford to buy a house where i live
and my job is very demanding
i debug graphics issues for major OEM's
i like what i do but it sucks that its so expensive
i almost want to sue the banks that gave out the bad sub prime loans and f'd up the housing prices for all of us.
i am also happy that you are able to get it done with the problems you have
good job!!

yeah....all the innovations in mortgages priced you our of a home (since you were smart enough *not* to buy an overpriced house with a subprime loan!).....

Some folks say Greenspan had a lot of responsibility (a significant part) in the way the Fed pushed so much easy money into the US after 9/11. Some company doing subprime mortgages for inflated houses in your area was only the greedy end result. There are a lot of folks to blame.

One of the most interesting things I ran across about house prices was a study of affordibility that basically says that about 3x income (annual) is about as much as a family can well afford to pay for a home, and 2.5 is more reasonable. Presumably paying more means privations.

Here it is: http://www.demographia.com/dhi-ix2005q3.pdf

[beerandcandy]

ya a few years ago the houses i was looking to buy were 130k or so now those same houses are over 400k

[halbhh]

Here are two links on home affordibility:

http://www.demographia.com/dhi-ix2005q3.pdf

this second article from the end of 2005 is very interesting in the light of what we know now:
RealEstateJournal | Housing Affordability Hits 14-Year Low

[halbhh]

One of the best summary articles about credit liquidity in a general sense:

RealEstateJournal | How Credit Got So Easy And Why It's Tightening

if above doesn't work, please let me know.

[halbhh]

It's interesting reading today at a lot of sites. There is a growing consensus about what happened and is happening, and a great deal of anedotal stuff to go with all the big stats. This situation is different from the stock market where when everyone thinks something, that's the culmination of it, the end of it, and usually about when it will cease being true and change. Here instead of a easily traded stock or security, you have homes and CDOs and they aren't easily traded. It's more likely the consensus is instead an earlier part of the trend instead of it's climax. While stock market traders know the score, the great mass of American home owners/potential buyers are a more diverse group, and only a portion of them realize home values will fall 15%-25% in real terms over 3-6 years. It will be so slow because many won't understand why and how, etc., and realtors will tell everyone why it's the best time to buy ever each month along the way.

[randomizer]

Cheap houses for me! Now to get some $

[1Tanker]

Originally Posted by randomizer

Cheap houses for me! Now to get some $

You just need a litter box. .... and maybe a scratching post

[randomizer]

:twisted:

[fidgewinkle]

Originally Posted by halbhh

It's interesting reading today at a lot of sites. There is a growing consensus about what happened and is happening, and a great deal of anedotal stuff to go with all the big stats. This situation is different from the stock market where when everyone thinks something, that's the culmination of it, the end of it, and usually about when it will cease being true and change. Here instead of a easily traded stock or security, you have homes and CDOs and they aren't easily traded. It's more likely the consensus is instead an earlier part of the trend instead of it's climax. While stock market traders know the score, the great mass of American home owners/potential buyers are a more diverse group, and only a portion of them realize home values will fall 15%-25% in real terms over 3-6 years. It will be so slow because many won't understand why and how, etc., and realtors will tell everyone why it's the best time to buy ever each month along the way.

I agree with your conclusions regarding the drop in house values, though I think the total reduction could be more dramatic than 25%. I disagree with you that stock markets shift quickly. If you remember back to the 2000 stock market crash, we went through a ~3 year period of periodic drops, with idiot analysts announcing the end to the "soft landing" after each plateau. We will see the same pattern with houses, much as you have said. It might take a bit longer than the stock market, though I think that there are some factors in the market you've neglected that will push prices down more quickly, foreclosures and the home builders.

Foreclosures put homes on the market forcibly at reduced prices due to poor condition and the awkward position of the creditor. There are a lot of people out there that are used to racking up credit card debt and refinancing their homes. Most of these people will not make the changes necessary to avoid foreclosure and/or bankruptcy. This will put a lot of distressed property on the market.

The scariest part of the current climate is the evolution of the corporate home builders. These companies built up their production to fill speculative demand as well as regular demand. They have to cut production to the bone just to match current demand. This doesn't include the glut that is on the market. Further, they can avoid cutting back as hard if they can out-compete the home owner that stubbornly thinks their house is worth what it was at the peak of the market. Since these companies have assets and overhead to support, and stockholders to keep happy, I see them with incentive to move units at whatever price they can get and keep the reductions in production as small as they can. They don't want to go through the pain and expense of downsizing any more than is necessary, and they will hurt the current home owners in the process.

[haywood]

My wife works for a top 10 homebuilder. They have been letting people go every week since the beginning of the year. If you push hard enough right now you can get 25%, or more, off in incentives/upgrades on a new build. Though in Denver you can buy a "previously enjoyed" home with all the yardwork completed, sink 30-40K in improvments and still beat new home prices. Real bad here, everyone is overextended and we were leading the country in foreclosures through the first half of the year. Glad I locked in 5.5 a couple years ago.

[BaldEagle]

Originally Posted by fidgewinkle

I agree with your conclusions regarding the drop in house values, though I think the total reduction could be more dramatic than 25%. I disagree with you that stock markets shift quickly. If you remember back to the 2000 stock market crash, we went through a ~3 year period of periodic drops, with idiot analysts announcing the end to the "soft landing" after each plateau. We will see the same pattern with houses, much as you have said. It might take a bit longer than the stock market, though I think that there are some factors in the market you've neglected that will push prices down more quickly, foreclosures and the home builders.

Foreclosures put homes on the market forcibly at reduced prices due to poor condition and the awkward position of the creditor. There are a lot of people out there that are used to racking up credit card debt and refinancing their homes. Most of these people will not make the changes necessary to avoid foreclosure and/or bankruptcy. This will put a lot of distressed property on the market.

The scariest part of the current climate is the evolution of the corporate home builders. These companies built up their production to fill speculative demand as well as regular demand. They have to cut production to the bone just to match current demand. This doesn't include the glut that is on the market. Further, they can avoid cutting back as hard if they can out-compete the home owner that stubbornly thinks their house is worth what it was at the peak of the market. Since these companies have assets and overhead to support, and stockholders to keep happy, I see them with incentive to move units at whatever price they can get and keep the reductions in production as small as they can. They don't want to go through the pain and expense of downsizing any more than is necessary, and they will hurt the current home owners in the process.

In some overbought areas such as California, NYC, FL, etc... the drops are likely to be staggering with people losing over half their home value over the next couple years. Although if they have already owned it more than 8 years they should actually be about where they started due to the boom in housing prices.

Here where I live now there isn't likely to be a bust because prices never went boom, however the house I sold last is another story. I happened to have moved here from the NYC area 2 years ago and made a "killing" on my house +55% in 5 years there.
Local housing trends buck nationwide declines - Pittsburgh Tribune-Review

Want to see how your market is doing?
bizjournals: Home sales rebound still on hold -- bizjournals.com

In Columbus, Business First reports, the bankruptcy of a high-end home builder has left contractors holding the bag. Yocca Custom Homes' tumble came amid a downturn in the housing market. Those difficulties have been especially acute in Ohio, where foreclosure rates have reached record levels.

As for the new construction market I believe we are going to see a considerable shrinkage in the number of builders because their 20%+ incentives of are going to price some builders and construction workers right out of business.


Anxious Builders Pile On Incentives - WSJ.com

[Blunc]

well, if there is a big collapse, we won't be chatting about it in these forums anymore.

won't be much use for TV execs, lawyers or myspace. in a pre-apocalyptic post-economic crash society, people in large "communal/family" groups with manual skill sets will survive easier than video jocks and fashion models.

[Sailer]

My brother-in-law is in construction and he's been out of building new homes and into remodeling old ones for a few months now. I've seen what's happening in the housing market now a number of times in the past few decades. The big thing I see is how much of the world is getting involved with this. Its not just the USA, or the housing market, its everywhere. That doesn't bode well.

My kid is an accountant and he thinks it will all blow over in a few weeks, but he hasn't seen things when they got bad