Crash / Recession!

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Wise One
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Crash / Recession!

Postby Wise One » 2008 Apr 16 20:48

The housing news is multidimensional and scary, touching on dozens of national concerns. It's important and complicated, so I leave that to others for the moment.

For now, here's just one point that may not have dawned on you. Bush Republicans, for all their failures and incompetence and corruption, may actually be solving a long-standing national problem. Amazing !?!

For a decade, growing scarcity of "affordable housing" has closed growing numbers out of home ownership. Good news - housing is getting affordable again!

My personal prediction is that average national house prices will decline by 30% from their peak before they stabilize about 5 years from now. During this time opportunities will finally appear for many young and less-affluent people to enter the housing market.

Of course, this is the last thing that Bushies wanted, or planned for, or did anything on purpose to achieve. It is the consequence of irresponsible, boneheaded deregulation. Predatory lenders, irresponsible appraisers and real estate agents, funny-money securitization of bundles of mortgages, fraudulent bundling of bundles of that crap into even bigger hedge funds, etc., ad nauseum, all proceeded with Bushies saying only, "More deregulation!"

So congratulations - we're getting cheap housing again. If you are unlucky enough already to own a house, you're paying for it - as you watch its value go down by 1/3.

:smile3: But I'll be fine under my umbrella. :smile3:
"If your only tool is a hammer, every problem looks like Donald Trump."

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loverockbridge
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Re: Pop! Goes the Housing Bubble

Postby loverockbridge » 2008 Apr 17 21:49

Good point and one I had not thought of. Meanwhile, I cannot help but notice that building continues unabated in Rockbridge. There is a new house under construction every mile or so across the county, it seems. Try to hire an excavator, carpenter, plumber or electrician and rotsa ruck. And with this alleged excess of housing, why is William Campbell building over an 100 new residences on Greenhouse Road? Who is going to buy them when local realtors are crying the blues they cannot move existing houses? Is he going to be able to sell them for less than what an existing house is selling for? Cheap as in poorly-built, is the only way to do that, it seems to me. Is the county going to get stuck with another development with a sinkhole or worse that the taxpayers are going to have to pony up the money to fix?
So either the housing recession has not hit Rockbridge and there are more people wanting houses than houses to be sold, or these developers are building on yesterday and financial disaster is right around the corner.

10thFO
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Re: Pop! Goes the Housing Bubble

Postby 10thFO » 2008 Apr 18 05:19

Wise One what in the world are you talking about? There won't be affordable housing in Rockbridge until the prices are cut in half. then again we could take down all the white fences and put up barbed wired ones and the prices would fall in due time. 5 years? Have you been paying attention to the global economy? People will move if they see a 10% decrease in prices, afraid that the property they were eyeing for their retirement, or dream home could soon be gone if it goes any further. Surely you don't understand the economics of housing in Rockbridge. You could buy 4 times the house in Roanoke as you can in this county.

Also our Realtors here crying the blues, because now our homes are taking as long as what homes in other markets averaged during the "good" years we just left? That is funny. Most Realtors only see the quick buck anyway, so when the quick buck leaves and they can't afford the lifestyle they have been living, then sure they are going to complain, but no matter what they say the market here is still very stable, do to the lack of overage of housing unlike other areas. You see none of the really "big" developers ever came to Rockbridge. Not enough infrastructure, and when you have to start putting that in, you start cutting into profits. No they were going to areas like Staunton and Charlottesville that had a lot in place. So there was one good thing about our "we do things at our own pace" Board of Supervisors. They kept the big guys out.

If William Campbell goes belly up on his project then so be it. The county has better measures in place now than they did with the Jake Moore learning experience in Natural Bridge. Always one to toot the "we are damned" horn aren't you? Rockbridge is in a protected zone, we are not feeling the wrath of falling prices like other areas have.

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Wise One
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Re: Pop! Goes the Housing Bubble

Postby Wise One » 2008 Apr 18 11:02

Thanks for your remarks, loverockbridge & 10thfo. I'm particularly intrigued by your assertions that Rockbridge is, essentially, immune to the kind of housing price deflation we see biting so deeply elsewhere.

Is it really true? What has happened in Rockbridge to the number of transactions, the best indicator of the state of the market?

In recent go-go times, the supply and demand price curves proceeded together. Thus, many transactions occurred - buyers were willing to pay sellers' prices.

Has there not appeared, in Rockbridge, a disparity between sellers' prices and buyers' bids, to cause a price gap that stalls the market, causing transactions to plummet? In most of the country, we are in the yellow stall zone where very little is moving except for rare instances when buyer and seller move to meet each other way out of their comfort zone.

If so, the number of transactions cannot recover to normal levels until sellers' prices decline to meet buyers' demands, at the right side where blue and black curves touch each other again. This must happen, because family & life changes compel sellers, eventually, to sell at the market clearing price.

Note: The top of the black curve looks flat, a reflection of human behavior. Sellers just cannot believe their houses are worth less than last year. They insist on old, high prices, denying reality as long as they can, finally and grudgingly beginning to succumb to what the market requires.
pop.gif
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Black curve = what sellers demand for their house
Blue curve = what buyers are willing to pay
Stall Zone = very few transactions occur
Market Volume = number of transactions
"If your only tool is a hammer, every problem looks like Donald Trump."

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Amy Probenski
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Re: Pop! Goes the Housing Bubble

Postby Amy Probenski » 2008 Apr 29 12:40


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Wise One
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Re: Pop! Goes the Housing Bubble

Postby Wise One » 2008 May 06 16:30

To my surprise, the latest Rockbridge Advocate contains a table of retrospective Rockbridge real estate sales data. I plotted them up, to give this:
rockbridgesales.gif
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In the spirit of my prior posting, I eyeballed curves that might be drawn through the data points, to produce this:
rockbridgesales2.gif
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"If your only tool is a hammer, every problem looks like Donald Trump."

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loverockbridge
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Re: Pop! Goes the Housing Bubble

Postby loverockbridge » 2008 May 11 20:33

Great job, Wiseone! So we are seeing a sharp decline in sales activities (transactions) in Rockbridge and the realtors are not just being whiners. So back to my original question: are we going to see Campbell's big development out on Greenhouse Road go belly up? How can anyone afford to put that kind of money into building houses that may never sell? It would be a relief to many if it did, the road out there was never designed to carry that kind of traffic and both visability and sidewalks are lacking from the new driveway down Greenhouse to the river. With the large college student population along that road, joggers and walkers are out in the road every afternoon. Going the other way, we have the hairpin turn around Hostetter Excavating and the slow zone in front of the high school. Any of us can visualize the impact on the traffic of a high volume development like this but the powers that be apparently cannot.
So more Go Slow is fine with me.

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PattyPink
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Re: Pop! Goes the Housing Bubble

Postby PattyPink » 2008 Jun 23 21:34

I figure if an engagement ring should cost 2 or 3 months' salary and a car about 10-12 months' salary, then a house shouldn't cost more than 5 years' salary. Am I living in a dream world? :dontknow:
Don't ask if you don't want to know.

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nudgewink
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Re: Pop! Goes the Housing Bubble

Postby nudgewink » 2008 Jun 26 12:46

Yours is the American dream. And, no, you are not living in a dream world - you are living in a nightmare world.

But cheer up. Bush's policies and nonperformance have set in motion a real estate crash that'll reduce housing prices about 1/3 before they stabilize, so you may be nearing your dream after all.

My first house cost 2 years salary. My present house cost 10 years salary, so I will very likely lose some of that money.

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PattyPink
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Re: Pop! Goes the Housing Bubble

Postby PattyPink » 2008 Jun 26 17:42

When I bought my house I paid twice my yearly salary and now, 25 years later, it is worth...twice my yearly salary. My home may not be as big and fancy as most of my friends' houses but I am not struggling to pay the bills. Maybe that is why so many folks are so deeply in debt...too much pride and not enough salary???
Don't ask if you don't want to know.

10thFO
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Re: Pop! Goes the Housing Bubble

Postby 10thFO » 2008 Jun 26 19:10

Nudgewink,

Maybe you shouldn't have tried to keep up with the Jones's. Yeah I bought my home exactly 10.5 years ago. It's worth 2x as much now, even after the "slump" But i am smart enough to know, that anything else I buy will be overpriced for the value, not to mentino I switched to a 15 year mortgage. So if I sell and buy again, that would defeat the purpose, as in 7 years my home will be paid for. it's not the markets fault, it's peoples fault for thinking their home is an investment and not a liability.

I feel for my friends that bought up, but then again, it is nice to go to their homes and have dinner. But they do seem to like my views just as well. The payment situation makes them jealous, but we can all get caught up in "keeping up with the Jones's"

So don't blame Bush, blame yourself for getting caught up in the modern day "GOLD RUSH".

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Amy Probenski
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Crash !!!

Postby Amy Probenski » 2008 Oct 11 10:19


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Uji
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Re: Crash !!!

Postby Uji » 2008 Oct 11 15:19

Thanks for that, Amy.

You're hearing the right-wing talking heads getting their stories straight, the last week or so: The "true" take on the crisis is that the government caused it. That's right, all those incentives for home ownership just made it impossible for the "market" to work properly. All those free-marketeers simply had their arms twisted into making all these irresponsible mortgage vehicles by the bleeding-heart liberals droning on about "low-cost housing." The market was just trying to do the the right thing. De-regulation? Nah, that had nothing to do with it . . .

Beyond belief... History is already being rewritten to fit doctrine.

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Amy Probenski
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Re: Crash !!!

Postby Amy Probenski » 2008 Oct 14 15:25

You are right. Those folks will not be swayed from ideology by anything at all. If the facts do not conform, they just change the facts.

The great Garrison Keillor, for a change being .

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Wise One
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Re: Pop! Goes the Housing Bubble

Postby Wise One » 2008 Oct 16 15:20

"If your only tool is a hammer, every problem looks like Donald Trump."

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Wise One
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Re: Pop! Goes the Housing Bubble

Postby Wise One » 2008 Oct 19 11:14

From my prior postings, I've been predicting a 1/3 reduction in price from the peak.

But I'm just an amateur. A true professional thinks I'm looking through rose-colored glasses ... .
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"If your only tool is a hammer, every problem looks like Donald Trump."

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Uji
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What's Really Wrong with Economic Bail-Out Package

Postby Uji » 2008 Oct 20 10:18

Wow! This is an interview from the WSJ with a 92-year-old economist, Anna Schwartz (also the wife of Milton Friedman). What a wise perspective on the whole mess -- and what's really wrong with what Bernake and the others are doing to make it better.

http://online.wsj.com/article/SB1224282 ... 08_mostpop

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Wise One
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Re: Crash !!!

Postby Wise One » 2008 Oct 24 10:25

"If your only tool is a hammer, every problem looks like Donald Trump."

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Uji
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Re: Crash !!!

Postby Uji » 2008 Oct 24 14:53

Whoa -- buying an index fund! You are a Brave- as well as a WiseOne. I'm not buying any stocks till P/E ratio is down more -- but I haven't really been following where it is. 15/1 seems to be about right; it's been well over that for a while.

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Wise One
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Re: Crash !!!

Postby Wise One » 2008 Oct 24 16:08

I'll accept the "brave" designation.

How wise this move is will be determined in the year ahead ... I have no illusions about the degree of risk it entails.

:tongue3: Jes' pretendin' to be Mini-Warren-Buffett :tongue3:
"If your only tool is a hammer, every problem looks like Donald Trump."


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