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- Chelsy_
- Contributions:480
According to the NAR, only 16 markets out of 154 currently have median prices over $300,000. Housing has NEVER been this affordable. Unfortunately, fear of job loss and declining value, and greed, waiting for houses to get even cheaper, will keep people out of even this affordable market.
That's the stupiest thing I ever heard.. so the buyers waiting for cheaper price is gready, and the seller selling $700k for a condo in 2005 is what??
You must be a realtor or desperate investor who bought in buble years.
That's the stupiest thing I ever heard.. so the buyers waiting for cheaper price is gready, and the seller selling $700k for a condo in 2005 is what??
You must be a realtor or desperate investor who bought in buble years.
- NTETS, "Mr Caveat"
- Contributions:6436
wow, i never knew nvchaz had ever picked up a book. good for you!
MB wrote:
Randy_H - Increase money supply will lead to inflation eventually. Whether it is stagflation or 'mere inflation' will be determined with how many crooks, v/s how many legit folks, end up getting 'enriched' at the end of this cycle.
i just wanted to point out that until the money supply has a net increase, and that the fed so far has failed to create one, there are many other factors that will influence "eventually"
MB wrote:
Randy_H - Increase money supply will lead to inflation eventually. Whether it is stagflation or 'mere inflation' will be determined with how many crooks, v/s how many legit folks, end up getting 'enriched' at the end of this cycle.
i just wanted to point out that until the money supply has a net increase, and that the fed so far has failed to create one, there are many other factors that will influence "eventually"
- Randy_H
- Contributions:4385
You have yet to answer my half dozen questions, grasshopper.
But I'll give you a clue about your little wiki-pic. Go look up the global share of value-weighted manufacturing by nation. You'll be quite surprised at who produces the most global manufactured goods by value.
I'm done with your trolling. I will not reply to you further unless and until you decide to engage honestly.
But I'll give you a clue about your little wiki-pic. Go look up the global share of value-weighted manufacturing by nation. You'll be quite surprised at who produces the most global manufactured goods by value.
I'm done with your trolling. I will not reply to you further unless and until you decide to engage honestly.
- Randy_H
- Contributions:4385
I'll answer your question when you answer the half dozen of mine you ignored. You were going good, then seemed to lose focus. As for what you think I am, it brings a smile to my face. I usually get accused of being not academic enough. My blog articles on Capitalism 2.0 are regularly criticized by real academics for being inadequately referenced, not peer reviewed, etc.
That I seem to rub you and them the wrong way tells me that I'm exactly on the right track.
That I seem to rub you and them the wrong way tells me that I'm exactly on the right track.
- Bette Defarm
- Contributions:4697
Randy,
He obviously hasn't bothered reading many of your posts, has no idea who you are and how off he is. Those of us who are familiar with your posts (here and elsewhere) can only laugh at his pathetic reaching.
He obviously hasn't bothered reading many of your posts, has no idea who you are and how off he is. Those of us who are familiar with your posts (here and elsewhere) can only laugh at his pathetic reaching.
- Randy_H
- Contributions:4385
chaz, chaz, chaz
I normally don't usually blog over weekends. Check the history of my posts if you don't believe. I prefer to spend that time with my family.
I'm sorry that I apparently struck a nerve so much that you feel the need to lash out. I guess when you can't hold an argument the only resort is to make insults.
Just keep in mind, you're a anonymous coward who has already enjoyed more of my (and others) attention than you ever merited. If you wish to debate further, step up and come out from hiding in the shadows. Otherwise, everything you say is just so much prattle. Yea yea yea, I was born on planet Krypton and was a troubled youth also...
I normally don't usually blog over weekends. Check the history of my posts if you don't believe. I prefer to spend that time with my family.
I'm sorry that I apparently struck a nerve so much that you feel the need to lash out. I guess when you can't hold an argument the only resort is to make insults.
Just keep in mind, you're a anonymous coward who has already enjoyed more of my (and others) attention than you ever merited. If you wish to debate further, step up and come out from hiding in the shadows. Otherwise, everything you say is just so much prattle. Yea yea yea, I was born on planet Krypton and was a troubled youth also...
- elldee
- Contributions:119
Randy, I think you nailed it with the "WIKI" bit. He was desperately trying to keep up, and did an admirable job for a while, considering his limitations. "I am self-educated," explains a lot.
- chuckdog24
- Contributions:1520
The first (3) posts said it best!
I'll give Chaz an A for effort with his "pom pom" response but rent vs. buy is still way in favor of rent here in CT.
Kudos to Randy again for his economic overview, though my gut tells me that deflation will be out of the picture by this time next year.
I'll give Chaz an A for effort with his "pom pom" response but rent vs. buy is still way in favor of rent here in CT.
Kudos to Randy again for his economic overview, though my gut tells me that deflation will be out of the picture by this time next year.
- Pat Bourgo, "Pat Bourgo"
- Contributions:1051
amen
- LyndieQ
- Contributions:236
I appreciate your taking the time to write all that out for us, Randy, plus it's also nice that you're giving the little guy (dare I say) the attention he so desperately craves (he's secretly wanted to be you all along.) And, Menudo, I'm glad you were able to word that so well. Good job explaining something that's been bugging lots of us. There's no getting around it since power corrupts and we live in an age of such deeply-imbedded absolute power... but the ways of covering up for the corruption are as old as the hills, even if now abetted by new technology. Not that I care if Madoff spends the rest of his days behind bars, but it is ludicrous how easily our animosity gets trained on one demonized individual "for us". It looks like we're a nation led by scam artists. The trick is which ones can cover for themselves the best. So... what else is new, huh?
- Kristen Blanchet, "Massachusetts Broker"
- Contributions:526
Exactly! It is a fantastic time to buy!
- Menudo Bongo
- Contributions:53
Randy_H - you are indeed a scholar and a gentleman.
I don't know why this thread, more than any other thread, somehow got injected with nuggets of wisdom that are truly profound.
I will add my $0.02.
The financial institutions created this mirage (using complicated and fancy financial derivatives - and a lot of leverage ) that gave the impression that there was a lot more money floating around than there really was (e.g. 1K was magically transformed into 40K).
Folks blame Madoff - he was blatantly running a Ponzi scheme. Reality is, all financial institutions were running a Ponzi scheme.
I guess, the Govt is now trying to fill the gap in money supply by printing money (which was previously being conjured up, out of thin air, by banks and institutions). If this gap does not overshoot, you will have prices stabilizing at the current level.
Bottom line, it depends on how much of the increased money supply goes into "productive" ends, v/s how much goes into waste, that will determine where we end up.
What scares me are the movers and shakers in the economy - the one's who are extremely skilled at one and only one thing - how to present something as extremely productive (whether it actually is productive, or a scam). I am afraid that the scam artists will end up with a big part of the stimulus pie.
I am afraid that a lot of money will be wasted on unproductive enterprises, because the fancy power-point presentations will rule over common sense.
Randy_H - Increase money supply will lead to inflation eventually. Whether it is stagflation or 'mere inflation' will be determined with how many crooks, v/s how many legit folks, end up getting 'enriched' at the end of this cycle.
I don't know why this thread, more than any other thread, somehow got injected with nuggets of wisdom that are truly profound.
I will add my $0.02.
The financial institutions created this mirage (using complicated and fancy financial derivatives - and a lot of leverage ) that gave the impression that there was a lot more money floating around than there really was (e.g. 1K was magically transformed into 40K).
Folks blame Madoff - he was blatantly running a Ponzi scheme. Reality is, all financial institutions were running a Ponzi scheme.
I guess, the Govt is now trying to fill the gap in money supply by printing money (which was previously being conjured up, out of thin air, by banks and institutions). If this gap does not overshoot, you will have prices stabilizing at the current level.
Bottom line, it depends on how much of the increased money supply goes into "productive" ends, v/s how much goes into waste, that will determine where we end up.
What scares me are the movers and shakers in the economy - the one's who are extremely skilled at one and only one thing - how to present something as extremely productive (whether it actually is productive, or a scam). I am afraid that the scam artists will end up with a big part of the stimulus pie.
I am afraid that a lot of money will be wasted on unproductive enterprises, because the fancy power-point presentations will rule over common sense.
Randy_H - Increase money supply will lead to inflation eventually. Whether it is stagflation or 'mere inflation' will be determined with how many crooks, v/s how many legit folks, end up getting 'enriched' at the end of this cycle.
- jal74
- Contributions:1077
BECAUSE PRICES ARE STILL DECREASING.
I realize that this simple answer is still far far too complicated for a used house salesperson to understand. But to anyone who has completed more than a highschool education, it seems pretty simple.
Kind Regards
I realize that this simple answer is still far far too complicated for a used house salesperson to understand. But to anyone who has completed more than a highschool education, it seems pretty simple.
Kind Regards
- sunnyview
- Contributions:25115
Randy, your reading list must be massive. I always like the recommendations though.
- Randy_H
- Contributions:4385
Chaz
This episode is unique in a number of ways, but not so much that we're helpless. I'm a strong believer in general non-predictability myself, but more in line with Taleb (I suggest you read Fooled by Randomness, if nothing else, though The Black Swan is great reading for everyone too).
There were factors in the 1930s that were very different from today which presented differently complicated problems. For example we&most of the world had just recently erected the basis of modern labor laws and worker protections, causing one of the legs of the economy to suddenly take on an entirely different role in the ability of the government to fix things. There was also plenty of leverage in the 1930s, just not modern derivatives. But there were rough equivalents which were appropriately large given the sizes of the economies back then.
The problem is more of a tipping point one. Once things push over that threshold, it's really a roll of the dice how they land.
Also, before you despair for future generations, I suggest taking a look at Strauss & Howe's old book, The Fourth Turning. I'm not a huge cyclical theory sort, but there is something in there to give you hope vis-a-vis generational/cultural stuff.
This episode is unique in a number of ways, but not so much that we're helpless. I'm a strong believer in general non-predictability myself, but more in line with Taleb (I suggest you read Fooled by Randomness, if nothing else, though The Black Swan is great reading for everyone too).
There were factors in the 1930s that were very different from today which presented differently complicated problems. For example we&most of the world had just recently erected the basis of modern labor laws and worker protections, causing one of the legs of the economy to suddenly take on an entirely different role in the ability of the government to fix things. There was also plenty of leverage in the 1930s, just not modern derivatives. But there were rough equivalents which were appropriately large given the sizes of the economies back then.
The problem is more of a tipping point one. Once things push over that threshold, it's really a roll of the dice how they land.
Also, before you despair for future generations, I suggest taking a look at Strauss & Howe's old book, The Fourth Turning. I'm not a huge cyclical theory sort, but there is something in there to give you hope vis-a-vis generational/cultural stuff.
- cmv138
- Contributions:13
"WHY NOT BUY NOW?"
Because people are not sure that they will wake up and still have a job to pay for the house!!!
Because people are not sure that they will wake up and still have a job to pay for the house!!!
- Randy_H
- Contributions:4385
nvchaz
Your description is a good one for monetarist theory which calls for monetary expansion in excess of real growth to result in inflation.
There's a problem, however. If that theory is true, then stagflation cannot exist (and thereby didn't ever happen). But, as we know, it did. Not just some temporary deal either, but years of sustained stagflation.
See, if you increase the money supply and create inflation, then everything must inflate, including wages and eventually GDP. Maybe a quarter or two of lag, but not years.
Perhaps you and the other inflationists will be right, and the 2nd half of this year will be nothing but up up up. That means salaries too. Up up up. And probably houses. Up up up.
I rather doubt it. The amount of money being destroyed is so much bigger than anyone is grasping. Think of a gigantic upside-down pyramid called "the leverage pyramid". At the top is some two-thousand-trillion in derivative value. Layers down are different forms of levered assets. At the bottom is commodities. Barely even 1 trillion at that level.
Well, most of the top is being wiped off the face of the earth. Now, how much money do you have to print to inflate in excess of all those thousands of trillions lost? (So far the entire worlds' central banks have printed up maybe 10-15-trillion, by the way).
Your description is a good one for monetarist theory which calls for monetary expansion in excess of real growth to result in inflation.
There's a problem, however. If that theory is true, then stagflation cannot exist (and thereby didn't ever happen). But, as we know, it did. Not just some temporary deal either, but years of sustained stagflation.
See, if you increase the money supply and create inflation, then everything must inflate, including wages and eventually GDP. Maybe a quarter or two of lag, but not years.
Perhaps you and the other inflationists will be right, and the 2nd half of this year will be nothing but up up up. That means salaries too. Up up up. And probably houses. Up up up.
I rather doubt it. The amount of money being destroyed is so much bigger than anyone is grasping. Think of a gigantic upside-down pyramid called "the leverage pyramid". At the top is some two-thousand-trillion in derivative value. Layers down are different forms of levered assets. At the bottom is commodities. Barely even 1 trillion at that level.
Well, most of the top is being wiped off the face of the earth. Now, how much money do you have to print to inflate in excess of all those thousands of trillions lost? (So far the entire worlds' central banks have printed up maybe 10-15-trillion, by the way).
- Randy_H
- Contributions:4385
What exactly is your point anyway?
...
"deflation is the arch enemy of inflation?" WTF is that supposed to mean? What about "stagflation"; what about "hyper-inflation".
--qed
Consider yourself elucidated.
...
"deflation is the arch enemy of inflation?" WTF is that supposed to mean? What about "stagflation"; what about "hyper-inflation".
--qed
Consider yourself elucidated.
- Randy_H
- Contributions:4385
Stagflation: inflation with no corresponding growth in GDP.
Close, but no cigar. There's a component of labor essential to that as well. Namely, a breakdown in the relationship between incomes and growth.
Now, how can you so cocksurely declare that printing-money automatically equals inflation? For that theory to work (monetarist theory of money), then stagflation should be impossible.
Close, but no cigar. There's a component of labor essential to that as well. Namely, a breakdown in the relationship between incomes and growth.
Now, how can you so cocksurely declare that printing-money automatically equals inflation? For that theory to work (monetarist theory of money), then stagflation should be impossible.
- Randy_H
- Contributions:4385
Um... let's see now... that would be the early United States would it not?
Before we had a credible military (at the time as in a navy) there was a period of hyperinflation. Well, not actually, given hyperinflation means an order of magnitude per year, or 1% _per day_ by most definitions.
Before we had a credible military (at the time as in a navy) there was a period of hyperinflation. Well, not actually, given hyperinflation means an order of magnitude per year, or 1% _per day_ by most definitions.
- Randy_H
- Contributions:4385
And at that, please explain "stagflation" to me. What is it and why is it anything special?
Hint: don't try using Wiki, you'll go astray. Hint hint: if "stagflation" is a real phenomenon, then your theory of why printing-money creates inflation is invalid because the macro theory describing the latter states that the former is impossible.
Hint: don't try using Wiki, you'll go astray. Hint hint: if "stagflation" is a real phenomenon, then your theory of why printing-money creates inflation is invalid because the macro theory describing the latter states that the former is impossible.
- Randy_H
- Contributions:4385
Give me an example of any modern (or most antiquity) nation state that has ever suffered sustained hyperinflation so long as it maintained a credible military force.
I joyously await your answer.
I joyously await your answer.
- Randy_H
- Contributions:4385
So we agree on something. Indeed the current efforts by the Fed will have little more than a fleeting effect on "jump starting" the housing market. I love how TV pundits keep saying "give the housing market the jump start it needs". No. It doesn't need any jump start. It needs to correct. Prices _need_ to come down to 3x people's incomes.
I was using $50K because that is above the median in my old Ohio hometown, where home prices didn't bubble much to the naked eye, and most people would have a knee-jerk reaction that prices there are easily cheap, and one should buy instead of renting there. But the problem is prices there imply 4-5x the residents' incomes, which is not affordable. Those are not good deals. And those people should continue to rent, _even if renting costs more than buying_. Rent-v-buy is only part of the equation ... and the easy part at that. The hard part is affordability.
As for the long-bond. I'll let you in on a secret. I'm no inflationist, and I strongly believe there is broad-based deflation right now. I take a lot of crap for that position, in fact, among the previously-bubble-blogger community. But I shorted the 30 year (futures) when it went below 2.5% yield, and made quite a bit of $. I'll beg borrow and steal to short if it ever goes below 2%. I don't care if I'm drawn down by a quarter million for 10 years, that is a trade that is guaranteed to pay off greater than all the dreams of all the flippers combined.
I was using $50K because that is above the median in my old Ohio hometown, where home prices didn't bubble much to the naked eye, and most people would have a knee-jerk reaction that prices there are easily cheap, and one should buy instead of renting there. But the problem is prices there imply 4-5x the residents' incomes, which is not affordable. Those are not good deals. And those people should continue to rent, _even if renting costs more than buying_. Rent-v-buy is only part of the equation ... and the easy part at that. The hard part is affordability.
As for the long-bond. I'll let you in on a secret. I'm no inflationist, and I strongly believe there is broad-based deflation right now. I take a lot of crap for that position, in fact, among the previously-bubble-blogger community. But I shorted the 30 year (futures) when it went below 2.5% yield, and made quite a bit of $. I'll beg borrow and steal to short if it ever goes below 2%. I don't care if I'm drawn down by a quarter million for 10 years, that is a trade that is guaranteed to pay off greater than all the dreams of all the flippers combined.
- jrea3000
- Contributions:106
Randy_H - kind of stretching now aren't we? Under $75k can mean $74,999.99. If what you really meant in your original post is to say someone making $50k / year, then yes an assessment of affordablity would change. But you said "less than" $75k. And whether that is achievable in a particular market is a nit as well. The assumption was the buyer had $74,999 and my analysis used your parameters.
But we do agree on one thing, as house prices continue to fall (and likely the stock market), incomes will fall. As incomes fall house prices (and likely the stock market) will fall. As N T E T S alludes to, deflation is what we need to worry about.
So in the end, I don't think that 4.7% and $8,000 will make any difference at all. Personally I think that interest rates on a 30 year mortgage will have to get somewhere below 3%, probably close to 2%, before people see it as incentive enough to start buying. And at that, it's only my unsupported guess.
- Randy_H
- Contributions:4385
Deflation is real. You have to cut through the wall of ignorance, disinformation, and self-serving prophecy. If you read most of the "in-the-know" blogs/sites, you run into about 19-of-20 self-righteous inflationists touting something or another about gold, crude, and evil central banks. The truth is, they fear deflation to the bone because it robs them of the spoils they've been promised by their messiah, Peter Schiff.
Then there's the government, who has managed to distort official figures so badly that you can't tell what the hades is going on most of the time from the numbers. Hedonics for the sake of hedonics. If you de-hedonize the numbers by just 10 years it reveals that deflation is running about -6% right now. That's real farking bad. Devestating.
Finally there is ignorance. That can be excused inflation (and thereby deflation) is very poorly understood by most people. Even people who understand monetary inflation often miss natural growth-inflation's effect on prices.
But in theory, if you added three 0's to the end of everyone's bank dollar bills, nothing would change except price tags would be longer. In practice what would happen is a wide swath of the public would get screwed because of the way inflation-expectations lag real-inflation, which lets people exploit the situation and make money off of inefficiency.
Then there's the government, who has managed to distort official figures so badly that you can't tell what the hades is going on most of the time from the numbers. Hedonics for the sake of hedonics. If you de-hedonize the numbers by just 10 years it reveals that deflation is running about -6% right now. That's real farking bad. Devestating.
Finally there is ignorance. That can be excused inflation (and thereby deflation) is very poorly understood by most people. Even people who understand monetary inflation often miss natural growth-inflation's effect on prices.
But in theory, if you added three 0's to the end of everyone's bank dollar bills, nothing would change except price tags would be longer. In practice what would happen is a wide swath of the public would get screwed because of the way inflation-expectations lag real-inflation, which lets people exploit the situation and make money off of inefficiency.
- NTETS, "Mr Caveat"
- Contributions:6436
like any agent bothered to study "ethics" while acquiring their license...
"now is the opportunity to get a piece of the rock for us poor folk"
"a fool and his gold are soon parted"
if you gave $1,000,000 to everybody in America, statistically speaking, we end up with the same breakdown in wealth that we have now. because some people cant think 2 steps ahead and others can.
and no, just because fox and NVchaz says so, do not believe for one moment that interest rates (not that rising rates is a bad thing, it pushes competition out of the market) or inflation is guaranteed in the short term
for every dollar that the Fed has printed in the last 5 years(oh yes, including the bushies) 10 dollars have been lost in the last 3...
deflation is the arch enemy of inflation
"now is the opportunity to get a piece of the rock for us poor folk"
"a fool and his gold are soon parted"
if you gave $1,000,000 to everybody in America, statistically speaking, we end up with the same breakdown in wealth that we have now. because some people cant think 2 steps ahead and others can.
and no, just because fox and NVchaz says so, do not believe for one moment that interest rates (not that rising rates is a bad thing, it pushes competition out of the market) or inflation is guaranteed in the short term
for every dollar that the Fed has printed in the last 5 years(oh yes, including the bushies) 10 dollars have been lost in the last 3...
deflation is the arch enemy of inflation
- Randy_H
- Contributions:4385
One last thing to bear in mind. The original question was about people who make UNDER $75,000/year. As real incomes fall, and the job market squeezes (hardest, I might add, in the cheapest major metro areas -- Ohio for example, where $75K/year is not a slam dunk by any measure) ... then the price a prudent buyer demands for a home falls.
$50,000/year salary buys you about $150K worth of house. Maybe up towards $200K, if that person is the 1-in-25 who is carrying no credit card debt, has no student loans, and keeps a very frugal lifestyle (so as to stay under 25% of their monthly income towards payment).
Now, I just got back from one of the worst markets in Ohio south of the lake. My old hometown, which has close to 20% unemployment now. People there are lucky to make $50K/year. But guess what? Houses still cost way over $200K/year for anything but a knock-down. So riddle me this? Are those houses overpriced?
$50,000/year salary buys you about $150K worth of house. Maybe up towards $200K, if that person is the 1-in-25 who is carrying no credit card debt, has no student loans, and keeps a very frugal lifestyle (so as to stay under 25% of their monthly income towards payment).
Now, I just got back from one of the worst markets in Ohio south of the lake. My old hometown, which has close to 20% unemployment now. People there are lucky to make $50K/year. But guess what? Houses still cost way over $200K/year for anything but a knock-down. So riddle me this? Are those houses overpriced?
- jrea3000
- Contributions:106
Randy_H. If you read my comments further, you'll see that I actually don't hold either the flippers or the fence sitters as greedy. I simply see them both as doing business as usual, although both with the same result.
I'm actually a CMA, so I follow a different Ethics statement. But I wonder why you think I'm a Realtor? In fact, wouldn't my story of woe actually support not buying a house? After all, if I stand to lose my shirt after owning a house for 10 years, wouldn't that discourage anyone from buying at all? Check out some of my other comments on other threads. I have no love for Realtors.
Did you assume I'm a Realtor simply because I point out the inevitable macroeconomic outcome of rational self-interest?
- Randy_H
- Contributions:4385
As for which markets are overpriced -- I linked the data a few days ago. Every MSA in the country. Even in states like Ohio and Pennsylvania, the densest MSAs are far overpriced relative to incomes. Only Texas in your example comes close to being at parity. Florida? You have to be kidding me. The part that's within 50 yards of Alabama doesn't count. I was specifically referring to *markets*, which is what you referenced. If you aggregate those by density of MSA, then easily 75% or more are still far overpriced relative to historical affordability metrics.
And incomes are falling. Harshly at the moment. It's not being picked up in the lagging indicators yet, but unemployment and underemployment is going to dramatically punish real incomes in the coming 2Qs, probably much further out. Expect that effect to become pronounced after about May of this year. When real incomes start falling, then houses which maybe became "well priced" suddenly become *overpriced* again. Funny how this all works, eh?
And incomes are falling. Harshly at the moment. It's not being picked up in the lagging indicators yet, but unemployment and underemployment is going to dramatically punish real incomes in the coming 2Qs, probably much further out. Expect that effect to become pronounced after about May of this year. When real incomes start falling, then houses which maybe became "well priced" suddenly become *overpriced* again. Funny how this all works, eh?
With the rates at 4.7% and $8000 tax credit for people with income under $75,000 why not buy now?
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