Housing's Big Picture Isn't Pretty 48 comments
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This article originally appeared on TheStreet.com.
While economists and real estate investors "celebrate" the slight deceleration in the pace of home price declines in the recent data, a quick look at home price trajectories over the past 100 and 50 years reveals little to cheer about and much to be feared.
More significant than small month-to-month changes is the flow of home price patterns over decades. In his book Irrational Exuberance, Robert Shiller determined that in the 100 years between 1900 and 2000, home prices in the U.S. increased by an average of about 3.4% per year. These figures have not been adjusted for inflation. If they had, home prices would have outpaced inflation by only the slimmest of margins.
This 100-year period includes the Great Depression, when home prices sank significantly, and it also involves decades in which our current home mortgage infrastructure simply did not exist. The second half of the century, with its baby boom, heightened inflation, suburban expansion and institutionalized mortgage apparatus, was much kinder to home prices. Even so, in the 50 boom years between 1950 and 2000, home prices increased an average of 4.4% per year. Even this pace barely beat inflation.
Case-Shiller Home Price Index -- History
By all accounts, the home price boom that began in late 1997 (when the high of the previous 1989 peak was finally eclipsed) and topped out in June 2006 was extraordinary. The Case-Shiller 10-City Index, an amalgam of the home price trends in 10 of the largest U.S. cities, gained on average 19.4% per year during that time. The movements had very little to do with market fundamentals and everything to do with distortive government policies, a national mania for real estate wealth and a torrent of temporarily easy credit.
If we assume that the bubble was artificial, we can instead imagine that home prices should have followed the more typical path during that time. When you do these extrapolations, a very sobering picture emerges.
The authors of the Case-Shiller index had assigned the index a value of 100.0 in January of 2000. This figure does not represent a dollar value for home prices but is simply a benchmarking tool. In December 2008, after a severe 28% decline from its June 2006 peak of 226.29, the Case-Shiller 10 City index stood at 162.1. However, if home prices had followed the 3.4% annual 100-year trend line from December 1997 (when the index was at 82.3), then the index would have arrived at only 118.92 in December 2008.
This would suggest that the index would need to decline an additional 27% to get back to the historical trend line. Extrapolating along the sunnier 50-year annual average increase would put the index at 132.2 by December 2008. This would still put the trend line 18.5% below current prices.
A cursory look at the chart below should disabuse anyone of the notion that home prices have now hit bottom. Policymakers and economists should by no means rely upon projections that see home prices turning around in the near term.
10-City Composite Index
However, the story by no means ends there. Given the current conditions in the real estate market, with bloated inventories, growing unemployment, nonexistent consumer credit and shattered illusions of real estate riches, it would be logical to assume that prices will fall below the trend line. How much is anybody's guess, but 10% would be conservative.
Given that we are entering uncharted territory with price declines much sharper than those seen in the Great Depression, I would argue that the 100-year price trend would be the better projection to use. In such a scenario, the index would bottom out at around 108 if a 10% overshoot on the downside is seen. That leaves another 34% decline in home prices on the table.
But that doesn't mean that I believe home prices will actually reach those levels, at least in nominal terms. Inflation will likely be the biggest difference between the current recession and what is now called the Great Depression of the 1930s, (I expect a new name will be needed in a few years, much as the Great War is now called World War I.) Throughout the Depression, prices fell for everything, not just houses. At the time, even the pump-priming policies of Roosevelt's New Deal did not expand the money supply at anywhere near the current pace. As a result, the deflationary pressures of a recession were allowed to push prices down.
In the coming years, the opposite will happen. The government, through deficit spending, stimuli and bailouts, is literally pumping trillions and trillions of new dollars into the economy. Once the bloated inventories of the boom years are worked through, this torrent of new cash will push prices up with across the board. Inflation, more virulent than the variety seen in the 1970s, will put a nominal floor under home prices. But the benefits of seemingly stable home prices will be illusory. What good is a $200,000 house if it costs nearly that much to fill the refrigerator?
However, inflation putting a floor under home prices does nothing to increase real demand for houses. With the prices for stocks, commodities and food going up faster than the prices of homes, residential real estate will remain a lousy investment. As a result, be wary of those who have called a housing bottom and now recommend beaten-down homebuilding stocks.
Despite savage pullbacks from their mid-decade highs the nation's biggest homebuilders are still overvalued. The S&P 500 is down 4% since the last housing boom began in January 1998. But over that time, Toll Brothers (TOL), Pulte Home (PHM) and D.R. Horton (DRI) are up 195%, 100%, and 97% respectively. The truth is, America's current inventory of homes will last at least a generation or more. These stocks are still not priced accordingly.
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This article has 48 comments:
What is scarier than the long term trend line is the demographic shifts about to occur in this country. Many boomers have not taken good care of themselves. When millions of boomers die or have to move to assisted living because they lived on fast food and cigarettes they will have to sell their house.
As long as the empty subdivisions set potential buyers will avoid the poignant memory of a failed dream, and fail to respond to the lure of a new house. Well, it's only new until you buy it! The longer they set, the more powerful the memory.
These people will be working until they die, or looking for a politician to take care of them.
Ouch
Witness the crowds at Home Depot and Lowes again this spring. Witness the dramatic increase in sales of foreclosures. Witness the continued existence and popularity of HGTV.
Only when the severed digits of these knife-catchers lie strewn about the suburbs will the mindset change completely and irrevocably.
This will be the summer of knife-catching and false hopes.
On May 24 08:14 AM Daniel Herkes wrote:
> Another problem, possibly serious, is the long term psychological
> effect of the uncompleted subdivisions that dot the U.S. landscape.
> These "ghost towns" don't look very good; denuded of topsoil - only
> the most arduous weeds can purchase a foothold - yuk! Even if the
> communities succeed in rezoning the failed subdivisions, the mind
> set will settle with the consumer that "this place did not make it."
> A failed developed will not replace the topsoil, A failed developer
> cannot not correct the disrupted drainage caused by the exposed clay
> pan. The surrounding neighbors will not forget the uncut weeds, and
> the coyotes that have made dens in the dirt hills. These stimuli
> produce a decidedly negative mindset . . .
>
> As long as the empty subdivisions set potential buyers will avoid
> the poignant memory of a failed dream, and fail to respond to the
> lure of a new house. Well, it's only new until you buy it! The longer
> they set, the more powerful the memory.
Good observation. However, land is also a hostage to government taxation.
With government debt ready to soar, property taxes are set to fly higher as well.
As a resident of Nebraska I will tell you that even though home prices haven't been significantly impacted by the recession, land has. Corn prices have dropped off the highs. Most land here is priced off of a multiple of revenues you can make by producing corn.
What do you mean by "Bare land values?" ( Bare land in real estate circles is defined as land that hasn't been through permitting and approvals, not a permitted, buildable lot.) Are you saying that Toll and DR Horton incur averages costs of $30-50K per lot when building a new development, and does that exclude the cost of acquiring the raw land? Please, explain, and please don't be insulted. Thank you in advance for explaining what comprises "bare land values" to understand how you arrive at $30K-50K per lot from their annual reports.
On May 24 12:16 PM kotika98 wrote:
> what a bunch of bull! In America land is still unlimited, and home
> prices are a function of building cost only. You dont need to go
> back 50 or 100 years to try to guess what those costs are. Look at
> the annual report of DRHorton or Toll and you can find out precisely
> how much it costs to build every kind of house (depends on location
> a bit). Bare land values are 30-50K per lot and than cannot go neiter
> much lower not much higher. Bottom line - and those figures you cite
> confirm it, house prices go at the rate of inflation in the long
> run. Only in locations where land is no longer available without
> limit can prices become detached from building cost, and truly there
> is only Manhattan in the entire USA where there is not going to be
> an inch more of land to build.
With manufactured goods it is one of the most common occurances of failure... the manufacturer starts to wrap a dollar bill around every product they ship. Happens all the time.
I am not sure where you have gotten your 30-50k per lot cost, that varies widely by location and I would argue that the current deflation in home prices is in direct relation to the price losses in land. You are right, the cost to build a house is pretty much what it is. If a home has gone down in value from 400k to 200k, that loss is in the land. If the house costs you more than 200k to build, any builder who builds is dumb, they are wrapping a dollar around each product they sell.
The common term used to describe the current housing situation is economic obsolescence. Economically it makes no sense to build.
Overall, this is a pretty factually written article. I think the biggest glaring problem we have is that we are actually borrowing 50 cents of every dollar we spend today in our government. Arguably, we would have to double all forms of taxes today to be balanced. Can we really do that??? If not, how are we going to make it?
On May 24 12:16 PM kotika98 wrote:
> what a bunch of bull! In America land is still unlimited, and home
> prices are a function of building cost only. You dont need to go
> back 50 or 100 years to try to guess what those costs are. Look at
> the annual report of DRHorton or Toll and you can find out precisely
> how much it costs to build every kind of house (depends on location
> a bit). Bare land values are 30-50K per lot and than cannot go neiter
> much lower not much higher. Bottom line - and those figures you cite
> confirm it, house prices go at the rate of inflation in the long
> run. Only in locations where land is no longer available without
> limit can prices become detached from building cost, and truly there
> is only Manhattan in the entire USA where there is not going to be
> an inch more of land to build.
A least a hundred million Chinese would buy homes in America if the Chinese Yuan rose to parity with the dollar.
Using an Indian term ironically, (Karma) it might be that there is so much negative Karma from stealing America from the Native Americans that Lord Shiva will extract a heavier economic price than we Americans expect by sending their racial cousins, the Chinese, to our shores to wreak revenge by buying up most of our real estate.
If the price of computer chips drops far enough we Americans might end up selling chips and Apples on the corner instead of pencils and apples like we did in the last depression.
ShiShi
On May 24 02:09 PM Stone Fox Capital wrote:
> What Schiff and others fail to understand is that the price of a
> home is so dependent on rate of mortgages. Back in the 80s mortgages
> were in the teens and not they are only 5%. That greatly increases
> the value of a house and is why housing affordability is at record
> highs. So how are prices going to decline 20-40%, when houses are
> so cheap? After all isn't that what determines price? The ability
> to buy a house. The more likely scenario is that instead of prices
> going down we'll likely be in for a time period of flat prices as
> income and rates go up. Increasing ability to pay more will be sucked
> up by rising rates and hence prices won't drop. If mortagage rates
> were still 7-8%, i'd be all behind Schiff's theory, bu the facts
> don't back it up.
The basic equation is that you can only afford a house that is 3 times gross monthly income. There is no amount of funny money that can alter this basic equation. In many places, this equation is still entirely out of whack, with x4-6 or higher incomes required to purchase certain houses. During the height of the bubble, it was sometimes as much as 9. This was leverage to the extreme, and it still needs to correct itself. Prices have a long way to correct themselves. Just do a quick Redfin search and then check the price history on many of these houses, you will see original houses in 2000 selling for 2-3 times the original price.
To take it one step further, when those interest rates DO go up (which they will have to eventually), home ownership affordability gets even tougher, especially with all the ARM-like products resetting based on the interest rates.
Schiff gets it, when he mentions that inflation has the possibility of putting an artificial floor on pricing. Personally I don't see this as something that will help affordability, as wages, which have already been flat for years, will not have any inflation protection in them, and will continue to fall behind.
Great article.
On May 24 02:09 PM Stone Fox Capital wrote:
> What Schiff and others fail to understand is that the price of a
> home is so dependent on rate of mortgages. Back in the 80s mortgages
> were in the teens and not they are only 5%. That greatly increases
> the value of a house and is why housing affordability is at record
> highs. So how are prices going to decline 20-40%, when houses are
> so cheap? After all isn't that what determines price? The ability
> to buy a house. The more likely scenario is that instead of prices
> going down we'll likely be in for a time period of flat prices as
> income and rates go up. Increasing ability to pay more will be sucked
> up by rising rates and hence prices won't drop. If mortagage rates
> were still 7-8%, i'd be all behind Schiff's theory, bu the facts
> don't back it up.
(I know, humor and money are like apples and oranges ;)
But 1) if real estate values (including commercial real estate) continue to fall if, 2) stock prices resume their fall, if 3) wages (unemployment) continue to shrink and if 4) commodities continue to fall, the 800 gorilla just might stand up and sing Dixie.
Sure the Fed has done everything it can to inflate the economy but sometimes (yes Virginia) GOVERNMENT ACTION IS INEFFECTIVE,
Sorry to yell but sometimes people don't seem to want to face the moment of truth when the puntilla is being raised and the bull is about to die.
On May 24 01:43 PM ThePhoenix wrote:
> Not quite. That is the issue of deflation. It is not only possible
> but quite common that a price of a good falls below the cost to make
> the good.
>
> With manufactured goods it is one of the most common occurances of
> failure... the manufacturer starts to wrap a dollar bill around
> every product they ship. Happens all the time.
>
> I am not sure where you have gotten your 30-50k per lot cost, that
> varies widely by location and I would argue that the current deflation
> in home prices is in direct relation to the price losses in land.
> You are right, the cost to build a house is pretty much what it is.
> If a home has gone down in value from 400k to 200k, that loss is
> in the land. If the house costs you more than 200k to build, any
> builder who builds is dumb, they are wrapping a dollar around each
> product they sell.
>
> The common term used to describe the current housing situation is
> economic obsolescence. Economically it makes no sense to build.
>
>
> Overall, this is a pretty factually written article. I think the
> biggest glaring problem we have is that we are actually borrowing
> 50 cents of every dollar we spend today in our government. Arguably,
> we would have to double all forms of taxes today to be balanced.
> Can we really do that??? If not, how are we going to make it?<br/>
The worst offenders get the first, best bailouts. Banks. Throw in some Detroit, next municipal and state governments, on and on. This is not a cure, it's a feeding frenzy by connected interests to get theirs before it all collapses.
We're supposed to feel lucky the obvious wasted money to Detroit may top at $100 billion. If government wasn't drunk on it's power to waste, bankruptcy would have been quickly chosen.
With the plunge protection team trying to paint the stalks green so banks can recapitalize, many think it's time to catch falling knives. A cursory look at baby boomers needs to soon sell, rising interest rates and imminent property tax increases on steroids, I'm not a believer in the investment in the USA that real estate represents.
Gresham's Law should become part of everyone's economic vocabulary.
We may see deflation in many assets but inflation in staples like food and water.
It's my feeling that we will continue to see a huge inflation in Cash prices but offsetting deflation in Credit prices. Think of the CPI as averaging the two hence the disinformation of current low inflation be reported.
We all know the distortions of the current CPI but just simplify the basket of goods to see the problem when including both necessities and luxuries in the sam inflation metric.
2006 - Bread - $1 per loaf, 30" Flat Screen TV - $1000
2009 - Bread - $2 per loaf, 30" Flat Screen TV - $500
In 2006, $3000 would buy 1000 loaves of Bread and two 30" Flat Screens
In 2009, $3000 would buy 1000 loaves of Bread and two 30" Flat Screens
Hence no inflation, as long as you can eat a Flat Screen TV
"as long as you can eat a Flat Screen TV" Well I am feeling famished.
But bread is a bad example since CPI numbers exclude food (and oil). So the distortions in question are that of total omission.
What we are seeing now in housing prices is the inevitable result of globalization, which will-in the long run-average out the living standards between different countries for everyone but the wealthiest 1/2% of the world's population. (You didn't really think that you could have millions of Americans lose those good-paying union jobs and shuffled into 8 and 9 dollar an hour service sector employment without it eventually affecting property values did you?) As it turns out, those "more productive and higher paying jobs," that displaced workers were supposedly going to find didn't actually exist. Also, the structure of our economy is such that anytime an area becomes so affluent that working class people can no longer afford to live there, restaurants and stores start closing because they can't find workers, goods and services are no longer available, you get empty store-fronts and urban blight of commercial spaces (because even rich kids vandalize property) and everything starts going downhill. This is the end result of all those egotistical morons who thought they could kill the unions, push credit, hype real-estate and just keep growing wealthier and wealthier with no limit and no ill effects.
As regards the CPI, costs for health-care and education (two relatively important factors when one lives in the developed world) have been omitted from those figures for years and the CPI is really pretty much meaningless.
No home buyer or seller will ever check the 100 year trend line in making an offer or setting a list price.
It should be obvious that home prices will continue to be, as always, simply a function of supply and demand, with these long term historical trends having no causative effect. It's a mistake to use past results to predict the future. From 1900 to 2000, the Dow Jones Industrial Average rose 175 fold from 66 to 11,000. If that trend line holds, the DJIA will be at almost 2 MILLION in the year 2100! Ain't gonna happen.
However would beg to differ with Peter on his inflation call. I think inflation is unlikely in the near future at least 1-2 years - too much surplus capacity (high supply) and too little demand (job losses, and no credit availability). All the money printing the Fed is doing is to pump supply of money, but lack of credit (the multiplier) is offsetting the increase in money supply. The classical liquidity trap - loss of velocity of money. All the recent data is definitely pointing to disinflation at least.
> This is the end result of all those egotistical morons who thought
> they could kill the unions, push credit, hype real-estate and just
> keep growing wealthier and wealthier with no limit and no ill effects.
I agree with your sentiments on credit and real estate hype. I disagree with your statement about unions. Agency-shop or closed-shop states have a coercive element: the law will enforce union membership even if a potential worker (a) believes that he can negotiate a better wage than the collective bargaining agreement or (b) has qualms about providing union dues to a union that politically supports candidates who oppose his moral views (i.e. the UAW politically supporting Pres. Obama even though he favors abortion). If a union is voluntary and collects no "fair share" dues, I've got no problem with it.
> As regards the CPI, costs for health-care and education (two relatively
> important factors when one lives in the developed world) have been
> omitted from those figures for years and the CPI is really pretty
> much meaningless.
I agree that the CPI is meaningless now, but you and sticktoitiveness are incorrect about its components; it includes education, healthcare, food, and energy, though the media touts the "core" CPI number which excludes food and energy. (See www.bls.gov/cpi/cpifaq...).
Beginning during Pres. Clinton's years in office--and with input from Fed. Chmn. Alan Greenspan--the CPI included substitutions and hedonic adjustments. Thus, if steak was included in the fixed CPI basket of goods but it got "too expensive," then the basket of goods was changed because it was believed that "shoppers would substitute hamburger" instead. This masked the price increase in the supposedly fixed basket of goods. The same can be said for hedonic adjustments: a calculator that has more functions but that costs the same as a basic calculator did ten years ago is seen as a factor that lowers the index. While substitution and hedonic adjustment theories may have merits on their own, the CPI was originally intended to measure a FIXED basket of goods. Clearly, this is no longer the case.
On May 24 01:58 PM carey_jim wrote:
> America is still a land of immigrants.
>
> A least a hundred million Chinese would buy homes in America if the
> Chinese Yuan rose to parity with the dollar.
>
> Using an Indian term ironically, (Karma) it might be that there is
> so much negative Karma from stealing America from the Native Americans
> that Lord Shiva will extract a heavier economic price than we Americans
> expect by sending their racial cousins, the Chinese, to our shores
> to wreak revenge by buying up most of our real estate.
>
> If the price of computer chips drops far enough we Americans might
> end up selling chips and Apples on the corner instead of pencils
> and apples like we did in the last depression.
>
> ShiShi
This website continues to be too negative. My fund is up 50%+ over the last 6 months and all I hear is the negatives. Wake up people, the world hasn't ended!
On May 24 03:26 PM Dave T wrote:
> I understand that interest rates have to go up but incomes? What
> do you base that on? I see incomes being miserable for years to
> come! With thousands of kids coming out of college with no where
> to go, boomers losing great jobs only to find one at $15 or $20 an
> hour, corporate America laying off thousands, soldiers coming back
> from Iraq when this ridiculous war is over, car manufacturing laying
> off thousands and you think incomes are going to go up? Puleeeez!!
>
Also, I'm only pessimistic about the next four years. After that point, there are some extraordinarily positive disruptive technologies that are coming out. The big ones that I see involve energy (just electricity, not oil) staying at the same rate for a LONG time. Extraordinarily efficient thermoelectric heat pumps and MTF fusion facilities are coming, and, in tandem, they'll increase our capabilities by 1000-fold. Like the transistor 50 years ago, these technologies will transform EVERYthing. Global warming and coal power plants will be a thing of the past.
Simply put, when the price of a house far exceeds the average annual income of the mainstream buyer, then that price must drop to a wage-sustainable level.
Excellent point by LilBob:
"One thing I find interesting is that if you look at the writings of some early 20th century economists such as Pigou and Hobson, conditions that required urban workers to spend more than 20% of their disposable income on housing were considered significant contributors to poverty. Nowadays, someone who only spends 20% of their salary on housing is considered to be doing relatively well."
" fund is up 50%+ over the last 6 months and all I hear is the negatives"
Your fund is also is likely down 50% over last 2 years. Regarding the future we will see, let us know.
On May 25 11:29 AM Stone Fox Capital wrote:
> If incomes don't go up as you suggest, then interest rates will stay
> insanely low. Either way, home prices are unlikely to drop that much
> more.Unemployment isn't an issue to that great of an extent. Your
> only talking about 5% of the population that has been impacted. The
> real issue is with the 90%+ that is employed. Getting them to have
> the confidence to buy a house is so much more important.
>
> This website continues to be too negative. My fund is up 50%+ over
> the last 6 months and all I hear is the negatives. Wake up people,
> the world hasn't ended!
>
> On May 24 03:26 PM Dave T wrote:
On May 24 07:06 PM Lightway wrote:
> Interest rates (and their effect on housing prices) do not exist
> in a vacuum. We have big unemployment, bloated home inventory (too
> much supply), and a major price correction occurring.
>
> The basic equation is that you can only afford a house that is 3
> times gross monthly income. There is no amount of funny money that
> can alter this basic equation. In many places, this equation is still
> entirely out of whack, with x4-6 or higher incomes required to purchase
> certain houses. During the height of the bubble, it was sometimes
> as much as 9. This was leverage to the extreme, and it still needs
> to correct itself. Prices have a long way to correct themselves.
> Just do a quick Redfin search and then check the price history on
> many of these houses, you will see original houses in 2000 selling
> for 2-3 times the original price.
>
> To take it one step further, when those interest rates DO go up (which
> they will have to eventually), home ownership affordability gets
> even tougher, especially with all the ARM-like products resetting
> based on the interest rates.
>
> Schiff gets it, when he mentions that inflation has the possibility
> of putting an artificial floor on pricing. Personally I don't see
> this as something that will help affordability, as wages, which have
> already been flat for years, will not have any inflation protection
> in them, and will continue to fall behind.
>
> Great article.
>
> On May 24 02:09 PM Stone Fox Capital wrote:
On May 25 11:27 AM china man wrote:
> that's xie xie to you.
We are now living in a global economy. We have labor immigration and labor outsourcing and soon we could have an international (upper) middle class as well.
If American cities remain livable, wealthy foreigners from the Middle East, Mexico, South America, Europe, Russia, China, India and other places will step into the breach and buy houses that Americans can't afford.
They will send their children to private schools but they will pay taxes, mostly for a strong police force.
I can't predict the future any more than any one else can so I should change all of the 'wills' to 'mights' but if it does happen it will be a Black Swan event, obviously because everyone probably thinks it is impossible..
On May 25 12:40 PM Sober Realist wrote:
> "Look for a monster housing rally around the corner as the government
> announces a the Mandatory Second Home Purchase Program for Americans
> deemed to be carrying insufficient levels of debt." --- Dean M.<br/>
>
> Simply put, when the price of a house far exceeds the average annual
> income of the mainstream buyer, then that price must drop to a wage-sustainable
> level.
>
> Excellent point by LilBob:
> "One thing I find interesting is that if you look at the writings
> of some early 20th century economists such as Pigou and Hobson, conditions
> that required urban workers to spend more than 20% of their disposable
> income on housing were considered significant contributors to poverty.
> Nowadays, someone who only spends 20% of their salary on housing
> is considered to be doing relatively well."
some states like california cannot do this though - because of proposition 13.
On May 25 06:05 AM Carlos Lam wrote:
> This article by Peter points to a more fundamental shift in thought
> that he says will occur: homes will be viewed much live cars in the
> future inasmuch as they require upkeep, carrying costs (insurance
> and taxes), and do not appreciate to the extent that was once believed.
> In short, when one purchases a home, it will not be viewed as an
> investment; it will merely be a place to live.
Unlike Canada, Australia and New Zealand, you can go to the US Embassy and fill in some forms to apply to immigrate to the US.
Percentage wise, immigration to the US is much lesser than Canada, Australia and New Zealand, and maybe some countries in Europe.
I don't understand why everybody keeps saying America is still a land of immigrants, when it is so very difficult to immigrate to the US nowadays.
On May 24 01:58 PM carey_jim wrote:
> America is still a land of immigrants.
>
> A least a hundred million Chinese would buy homes in America if the
> Chinese Yuan rose to parity with the dollar.
>
> Using an Indian term ironically, (Karma) it might be that there is
> so much negative Karma from stealing America from the Native Americans
> that Lord Shiva will extract a heavier economic price than we Americans
> expect by sending their racial cousins, the Chinese, to our shores
> to wreak revenge by buying up most of our real estate.
>
> If the price of computer chips drops far enough we Americans might
> end up selling chips and Apples on the corner instead of pencils
> and apples like we did in the last depression.
>
> ShiShi
Immigrants make up a larger proportion of the population than at any other time in US history.
GM
"How are prices going to decline when prices are so cheap? Isn't that what determines price?"
YOU MORON IT IS SUPPLY AND DEMAND which determine prices. Excess inventory means lowered prices.
You have a degree in finance and manage others money? God help you and them. You are clearly out of your depth here.
However, I would caution you against basing an investment plan on magical thinking. We have governments to do that sort of thing for us.
On May 25 12:19 PM MarkitWacha wrote:
> In my opinion, Peter has the 'generation's worth of inventory' wrong.
> A whole generation could fit in the excess homes, really? I find
> that hard to believe.
>
> Also, I'm only pessimistic about the next four years. After that
> point, there are some extraordinarily positive disruptive technologies
> that are coming out. The big ones that I see involve energy (just
> electricity, not oil) staying at the same rate for a LONG time.
> Extraordinarily efficient thermoelectric heat pumps and MTF fusion
> facilities are coming, and, in tandem, they'll increase our capabilities
> by 1000-fold. Like the transistor 50 years ago, these technologies
> will transform EVERYthing. Global warming and coal power plants
> will be a thing of the past.
Some markets like Phoenix fell 4.5% MoM, even a sedate market like Minneapolis fell a whopping 6% MoM.
So no end in sight.
On May 24 02:09 PM Stone Fox Capital wrote:
> What Schiff and others fail to understand is that the price of a
> home is so dependent on rate of mortgages. Back in the 80s mortgages
> were in the teens and not they are only 5%. That greatly increases
> the value of a house and is why housing affordability is at record
> highs. So how are prices going to decline 20-40%, when houses are
> so cheap? After all isn't that what determines price? The ability
> to buy a house. The more likely scenario is that instead of prices
> going down we'll likely be in for a time period of flat prices as
> income and rates go up. Increasing ability to pay more will be sucked
> up by rising rates and hence prices won't drop. If mortagage rates
> were still 7-8%, i'd be all behind Schiff's theory, bu the facts
> don't back it up.