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Monday, February 19, 2007

Bubble Link Roundup

There were a lot of mildly interesting real estate stories in the local rags this weekend. So, I think it's time for another link roundup: a list of links that are worth posting, but not each as their own post. The following links happen to all be specific to the Seattle area.

Lastly, I was somewhat surprised to see this quote reprinted in the Seattle Times from a Bankrate.com article:
If you're looking for the best return on your money, you're better off investing in the stock market than buying a house. Primary homes generally don't earn the investment return of financial instruments such as mutual funds.

While the stock market's long-term average rate of return is in the range of 8 to 10 percent, housing historically has appreciated on average in the low- to mid-single digits. Don't buy solely for investment gain.
Seen any other good snippets lately?

21 comments:

T,V & Mr.B said...

Regarding the ARM article. They spoke mostly of 3 year and 5 year ARMS adjusting, but of those taken out in 2005, 70% of them were 2 year ARMs. source is the Federal Housing Finance Board statistics.
My friend and I were arguing about this and he said "no worries" most arms are 5 years and anybody who took out a 2 year ARM was an idiot. when I showed him the graph, he about crapped his pants.

synthetik said...

>better off investing in the stock market

That's obviously a sign that MSM sentiment is changing, however to give this type of advice is probably even worse than saying "buy now or be priced out forever."

The idea that the average joe reader would do better in this manic, near record number of days without a 2% down day, etc, is just preposterous.

They might do OK by listening to Cramer in the short run, but they'll totally lose their ass during the "next time down" - which, to me, seems right around the corner.

All the major indexes will take a major beating - much worse than 2002-2003.

Buy gold, silver and mining stocks!

witzend said...

Re: Mr. Nest Egg,

Just another guru offering common sense financial advice. These people kill me!

Everybody knows how to save money, it's the "doing" that takes effort. And when it comes to making money? Seems that it's always down to luck.

wreckingbull said...

Mr. Nest Egg's comments are downright misleading.

Sure the market may average a 7% annual growth, but if one were to buy today as an investment, that 7% would get whittled down to almost nothing (or even negative) once transaction costs, interest, taxes and maintenace are added in. Investment properties just don't swim on their own anymore.

He needs to wake up to this new reality and stop giving that outdated and downright bad advice

Filo said...

I thought i saw a stat that medium prices in the seattle area dropped by $40K - was this my mistake, or does someone have a link to the article?

MisterBubble said...

You have to love the way that the comments to the Times editorial (from the Boise woman) are playing out. Aside from a couple of voices of reason, the comments are split evenly between the voices of Lesser Seattle:

"don't like paying for the culture here in cultural paradise? Move back to the hinterlands, you hick!"

...and the voices of polyanna real-estate delusion:

"sigh. It sure is expensive living in these big cities, isn't it? I guess that's just the price we pay for living in the beautiful fairyland that is modern Seattle! If only we were making more land! And there were fewer of these darned Strong Jobs! Why, just yesterday, I noticed that my farts started smelling like roses when I'm in my bathroom -- I can only imagine what that will do to my home's equity! You'd better talk to a Realtor now so that you can start building some equity! You can do it! Don't lose faith! There's a moldy townhome out there with a neg-am loan pre-approved for you!"

It's such a bizarre cultural alliance -- the people who hate what has happened to Seattle, and will stop at nothing to make newcomers feel like the wall mold in a slapdash townhome, coupled with the smug yuppies who look at a condemned craftsman and see a gigantic piggy bank.

This is one weird little burg....

SLTO Troll said...

The PI article has it wrong... even richer folks can't live in Seattle without risking ruin...

It's not the lack of land or homes, it's the idea that you can buy any house without planning on ever repaying the mortgage... or even the actual interest on the note...

It's a massive pyramid scheme that is redistributing wealth from the older (landed) generation away from the younger working class...

and giving people the false idea that owning a home is easier than ever... WRONG... very few of us own homes, we actually rent them from the bank...

Now that the MSM is admitting to the housing slowdown and the funny money will be drying up, people will no longer have the OPTION of renting from the bank below cost, people will actually start looking at the price tag and when they balk, the market will have no choice but slow down (or crash)...

FinanceGuru said...

synthetik - The major stock market indexes are hitting all time highs...and all have been increasing over the past several years. Where do you see the indexes declining???

Also the stock market tends to be a predictor of the economy, which is a positive indicator since they are appreciating nicely. Thus, this means that the economy is more than likely to continue to be moderately healthy...

MisterBubble said...

"Also the stock market tends to be a predictor of the economy, which is a positive indicator since they are appreciating nicely. Thus, this means that the economy is more than likely to continue to be moderately healthy."

Holy crap, man...you can't be this much of a simpleton.

The indices were all heading up, up, up in 1999. Or, as they like to say in the "finance" world: past returns do not guarantee future results.

My esteem for he Seattle U. MBA program drops every time you post.

FinanceGuru said...

Mr. Bubble - I was mainly commenting on Synthetik's point earlier that the stock market is tanking and taking a major beating. I was just correcting him in his statement that was misleading since the stock market has had a great year in 2006 and is doing well in 2007…at least Im doing great as I own a bunch of XMSR and it just jumped 20% in the last few days, woo hoo huge profits (sold my shares) for me since I bought it last week!

For the link between stock market returns I mentioned the work "tends" to result in a healthy economy. Of course I know that the future isnt know, yet the stock market takes into account the projections of the economy. Yes the stock market did start to decline in March of 2000, yet the recession did not start until 2001...Then when the stock market started to recover in 2003 and the economy started to recover in 2004. Overall the stock market "tends" (not all the time) lead in the direction the economy is headed.

You need to take it all in perspective, as an increasing stock market indicates more optimistic than pessimistic views, is there a stock market bubble. Probably not, as the P/E ratios are slightly under the historical average...Next time please read who I was referencing to before you make off hand comments.

The Tim said...

FG,

I guess there's a reason your name isn't "ReadingComprehensionGuru"...

Quoting Synthetik (emphasis mine):

All the major indexes will take a major beating - much worse than 2002-2003.

Quoting FinanceGuru (emphasis mine):

I was mainly commenting on Synthetik's point earlier that the stock market is tanking and taking a major beating.

MisterBubble said...

Darnit...you beat me to it, Tim.

FinanceGuru said...
This comment has been removed by the author.
FinanceGuru said...

Ok, I do now see that he said "will take", sorry about the mis-reading of his statment.

However, the market from 2002 - 2003 recovered very quickly (at least the S&P 500 did) as it was at 1145.6 on 1/6/2002 and was 1108.48 on 12/28/2003. There was a huge crash in the middle...but did not stay there very long. Can thank Bush for his tax cuts for helping the stock market to recover though!

From,
ReadingComprehensionGuru

MisterBubble said...

Dude!

You do know that the S&P500 has yet to regain its all-time high (1527.46, set in March of 2000)....right?

I guess we can't call you "SecuritiesGuru," either.

MisterBubble said...

I take it all back, guru. You're an OK guy...you're always good for a laugh.

Peckhammer said...

"You do know that the S&P500 has yet to regain its all-time high"

That doesn't mean that someone that bought at it's all time high is still in negative territory, though.

FinanceGuru said...

Mr Bubble,
I was sure to make a specific example of the time frame that synthetik set out. The 2002 to 2003 time period. Then went on to show that the market over that exact period of time was virtually flat from 1/1/2002 to 12/31/2003. Did I claim that the S&P 500 is at its all time high??? NO, so please dont put words in my mouth.
Personally I have actually done extremely well in the stock market and is how I paid for my undergrad education during the downturn (shorting stocks and options, woo hoo) and now grad school...and my parents didnt help me out much.
The only thing I regret is that I had to sell most of my stocks to make a down payment for my condo. Im about to refi since it has appreciated 10% in the last 6 months (as I got a discount on my place to others, kinda a lucky situation). This way I can get rid of my 2nd mortgage and save $300 bucks a month. And no Im not over stretching myself. Im quite happy with my condo and love living downtown! Once all these construction projects get underway in Seattle people will be willing to pay anything to live near work (even if other areas decline)...just wait and see.

I have friends like you...always pessimistic and complaining about everything. Not fun to be around (and don’t hang around them much anymore) as they always have something negative to say or find the worst in any situation.

MisterBubble said...

"That doesn't mean that someone that bought at it's all time high is still in negative territory, though."

Sure it does. If you bought a share of the SPDR (or some equivalent tracking fund) on the day of the all-time S&P 500 high, and you held it, you would still be under water on that share today.

If you've purchased shares since, I know you could be ahead overall, but that's not the point.

(Actually, I'm not sure what the point is anymore, but I'm 99% sure that wasn't it.)

MisterBubble said...

"I was sure to make a specific example of the time frame that synthetik set out. The 2002 to 2003 time period."

OK, guru. You're right. The market was "flat" from 2002 to 2003. Forgive me -- I hadn't realized that you had moved on to a completely irrelevant argument.

Synthetik's original comment:

"All the major indexes will take a major beating - much worse than 2002-2003."

I fail to see how anything you've said so far is a coherent argument against this statement.

MisterBubble said...

"I have friends like you...always pessimistic and complaining about everything. Not fun to be around (and don’t hang around them much anymore) as they always have something negative to say or find the worst in any situation."

Here's a thought: maybe they weren't "fun to be around", because they couldn't stand you.

I tend to get irritated by braggarts and idiots, personally, so it's a bit of a working theory. Do with it what you will....