tag:blogger.com,1999:blog-15223784.post114615306673078797..comments2023-10-08T06:24:07.089-07:00Comments on Seattle Bubble: Housing Prices A "Simple" ProblemThe Timhttp://www.blogger.com/profile/14832570891451659976noreply@blogger.comBlogger37125tag:blogger.com,1999:blog-15223784.post-1146277261276144442006-04-28T19:21:00.000-07:002006-04-28T19:21:00.000-07:00"Grow up, Nick."You grow up. You get all condesce..."Grow up, Nick."<BR/><BR/>You grow up. You get all condescending about an "F" in math and nonsense like that- and as it turns out YOU are the one who misread everything.Vanitay Prabakashhttps://www.blogger.com/profile/05024556885689008062noreply@blogger.comtag:blogger.com,1999:blog-15223784.post-1146269428476908622006-04-28T17:10:00.000-07:002006-04-28T17:10:00.000-07:00Grow up, Nick.Grow up, Nick.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-15223784.post-1146263909266139502006-04-28T15:38:00.000-07:002006-04-28T15:38:00.000-07:00Also, it might help if you could even read what th...Also, it might help if you could even read what the other person wrote before establishing yourself so handily as a condescending douchebag.<BR/><BR/>"The house going from $250K to $340K would have been 36% appreciation over 5 years. That annualizes at between 6 and 7%. That might be higher than it should be in your opinion, but it's far from stratospheric."<BR/><BR/>That's exactly what I wrote. At no point- NO POINT- did I ever say anything about the IRR between 250 and 400. No, that was YOU- the douchebag- making those words up and putting them in my mouth.Vanitay Prabakashhttps://www.blogger.com/profile/05024556885689008062noreply@blogger.comtag:blogger.com,1999:blog-15223784.post-1146263751004455802006-04-28T15:35:00.000-07:002006-04-28T15:35:00.000-07:00"A) You get an "F" in math. $250k to $400k annuali..."A) You get an "F" in math. $250k to $400k annualizes to about 10% growth over 5 years, not 7%."<BR/><BR/>Um, no. You are the one who said "a drop to 340K would be a rosy scenario". So, that means you are de facto saying that if the growth had only been from 250 to 340, then that would have been a "rosy scenario" also. My math applies, and it is 100% accurate and pertinent to the scenario you laid out there.Vanitay Prabakashhttps://www.blogger.com/profile/05024556885689008062noreply@blogger.comtag:blogger.com,1999:blog-15223784.post-1146259762187766822006-04-28T14:29:00.000-07:002006-04-28T14:29:00.000-07:00Rising interest rates, lack of speculation, and a ...<I>Rising interest rates, lack of speculation, and a tentative job market will absolutely kill real estate.<BR/><BR/>It is my opinion that the bulk of today's buyers/owners are overextended, and are betting the entire house on it going up in value. The leverage that got them into the house will pop them out.</I><BR/><BR/>Exactly.<BR/><BR/>If the Pollyanas complaining of 'negativity' want a happy story instead of reality, then they should check out the Disney channel.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-15223784.post-1146252865428336662006-04-28T12:34:00.000-07:002006-04-28T12:34:00.000-07:00OK, everyone. How does one calculate IRR for a sp...OK, everyone. How does one calculate IRR for a speculative rental in a declining market with negative cash flow?Eleuahttps://www.blogger.com/profile/08248482892459370601noreply@blogger.comtag:blogger.com,1999:blog-15223784.post-1146252470735626672006-04-28T12:27:00.000-07:002006-04-28T12:27:00.000-07:00Nick,A) You get an "F" in math. $250k to $400k an...Nick,<BR/><BR/>A) You get an "F" in math. $250k to $400k annualizes to about 10% growth over 5 years, not 7%.<BR/><BR/>B) I was being conservative. The last 3 years have seen closer to 15% annual growth in home prices. Prior to that, it was slightly lower. We can debate the use of the word "stratospheric," but I think it's safe to say that these numbers justify the use of the term "insane."<BR/><BR/>If you're going to nit-pick people, you should make sure that your arguments are logical. At the least, learn how to calculate annualized growth....Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-15223784.post-1146251810689905802006-04-28T12:16:00.001-07:002006-04-28T12:16:00.001-07:00If interest rates were to rise, thus knocking many...If interest rates were to rise, thus knocking many buyers out of the market, and sellers held their prices, there would be no market.<BR/><BR/>Nothing would move. Median house price would be zero. We would have piles of inventory and no lookers.<BR/><BR/>In order to create a market, buyers would have to shell out even more money for homes. This is unrealistic, as the only reason people are taking out these exotic loans is because they are MAXED OUT (and this is in a "good" economy). Also, buyers are treating homes as investments, so there is investment money in the price people are paying. If the market starts to sour, people will pull their investment money away from homes.<BR/><BR/>On the seller side of the equation...<BR/><BR/>They would have to lower their price to keep the buyers in the market. Granted, if they don't have to sell, they can sit on their home as long as they can make the payments. They can chirp that it is worth $1B, but without a sale, who the hell cares?<BR/><BR/>If they get forced to sell in a bad climate, they will have to plumb the depths of the market to find a buyer. You do this by lowering your price. In an inventory glut, they would have to lower it enough to find a buyer, and lower it enough to make their property stand out above all others.<BR/><BR/>Rising interest rates, lack of speculation, and a tentative job market will absolutely kill real estate.<BR/><BR/>It is my opinion that the bulk of today's buyers/owners are overextended, and are betting the entire house on it going up in value. The leverage that got them into the house will pop them out.Eleuahttps://www.blogger.com/profile/08248482892459370601noreply@blogger.comtag:blogger.com,1999:blog-15223784.post-1146251776232962672006-04-28T12:16:00.000-07:002006-04-28T12:16:00.000-07:00meshugy,It seems that you always try to bring up r...meshugy,<BR/><BR/>It seems that you always try to bring up rosy articles to defend this housing boom. I have a single question to ask all the housing bulls out there – where do the banks/lenders get the money to give loans to American people to buy more and more expensive houses while the saving rate of our country is negative for the whole year last year, the first time since the Great Depression? They get it from the foreigners – Chinese, Oil exporters, Japanese, etc. We are living on borrow time because of the kindness of the strangers. For what ever reason, if they think that buying up our debts is no longer profitable or feasible, then the whole housing pyramid will tumble like a stack of cards…Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-15223784.post-1146251293397637562006-04-28T12:08:00.000-07:002006-04-28T12:08:00.000-07:00emcityjill,Your question is best answered here or ...emcityjill,<BR/><BR/>Your question is best answered <A HREF="http://clearcutbainbridge.blogspot.com/2006/01/do-math-why-real-estate-will-get-cut.html" REL="nofollow">here</A> or if you prefer a humorous approach, try <A HREF="http://clearcutbainbridge.blogspot.com/2006/04/math-for-real-estate-professionals.html" REL="nofollow">this link.</A><BR/><BR/>The long and the short of it is, as far as affordability goes, the house may be the same, but as far as the price that gets you that same house payment, it will drop dramatically as interest rates go up.<BR/><BR/>If you have higher interest rates, AND a crappy job market, coupled with inflation (stagflation - very real scenario), the property value just freefalls.<BR/><BR/>We have not had stagflation for almost 30 years.Eleuahttps://www.blogger.com/profile/08248482892459370601noreply@blogger.comtag:blogger.com,1999:blog-15223784.post-1146250017078506592006-04-28T11:46:00.000-07:002006-04-28T11:46:00.000-07:00"You're underestimating the percentages. Consider ..."You're underestimating the percentages. Consider that 5 years ago, that $400k house was worth about $250k. A drop to $340k is a rosy scenario."<BR/><BR/>This seems like an awfully definitive statement based on nothing. The house going from $250K to $340K would have been 36% appreciation over 5 years. That annualizes at between 6 and 7%. That might be higher than it should be in your opinion, but it's far from stratospheric.Vanitay Prabakashhttps://www.blogger.com/profile/05024556885689008062noreply@blogger.comtag:blogger.com,1999:blog-15223784.post-1146247300878433152006-04-28T11:01:00.000-07:002006-04-28T11:01:00.000-07:00emcityjill,You're underestimating the percentages....emcityjill,<BR/><BR/>You're underestimating the percentages. Consider that 5 years ago, that $400k house was worth about $250k. A drop to $340k is a rosy scenario.<BR/><BR/>Besides...let's say that you buy now, using your 20%-down, 6%-interest fixed loan. Your principal is $400k. Next year, the market tanks, and your $400k house is now valued at $300k. You're now in a scenario that economists call "negative equity," and it means that you're screwed if something happens that would require that you sell -- relocation, sickness, natural disaster, etc. You would face the choice of losing $100,000 in <I>real</I> money, or holding onto your home, come hell or high water....Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-15223784.post-1146246639681345882006-04-28T10:50:00.000-07:002006-04-28T10:50:00.000-07:00400 to 340 is a drop of a mere 15%.The bubble popp...400 to 340 is a drop of a mere 15%.<BR/><BR/>The bubble popping will mean price drops of 25-50%. Plug in those numbers and do the calculations again.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-15223784.post-1146244291054419652006-04-28T10:11:00.000-07:002006-04-28T10:11:00.000-07:00"Can you find for me, "mainstream" article on how ..."Can you find for me, "mainstream" article on how the underlying fundamentals of Seattle's housing market might not seem as rosy as the REIC would have you believe?"<BR/><BR/>The WSJ routinely runs articles about the housing bubble. Over the pas 12 months, I would describe their coverage as "bearish".Vanitay Prabakashhttps://www.blogger.com/profile/05024556885689008062noreply@blogger.comtag:blogger.com,1999:blog-15223784.post-1146241254283068122006-04-28T09:20:00.000-07:002006-04-28T09:20:00.000-07:00Anyone who believes government econmic statistics ...Anyone who believes government econmic statistics is <A HREF="http://www.gillespieresearch.com/cgi-bin/bgn/" REL="nofollow">seriously gullible.</A> Those stats are tortured more than my ears were when I had to endure the cathartic screeds of my pacifist potheads for peace college professors.<BR/><BR/>Johnson would send his econ stats back to the labor dept until they "got it right." So did Nixon. Reagan did it for the '84 electioin. Clinton's economic numbers hit "the number" just about every time during the mid-90s. Anyone remeber the "goldilocks economy?"<BR/><BR/>Government stats are crap. It is always worse than they report. this is how you get "jobless recoveries" and how the party in power can whine about how people don't believe the economy is doing as well as they report.<BR/><BR/>Rent the movie "1984." During the bulk of the movie, you will hear the background drone of the Information Ministry chirping about how wonderful the economic output of Oceania is. It is like CNBC, just less pizzazz.<BR/><BR/>Look at the report. Consumer spending on furniture and cars (can anyone say HELOC?).Eleuahttps://www.blogger.com/profile/08248482892459370601noreply@blogger.comtag:blogger.com,1999:blog-15223784.post-1146240611722469302006-04-28T09:10:00.000-07:002006-04-28T09:10:00.000-07:00"Most of the growth came from consumer spending, w..."Most of the growth came from consumer spending, which jumped 5.5 percent after a muted 0.9 percent increase in the fourth quarter."<BR/><BR/>EXACTLY! This is the problem!!! Since the U.S. has no savings rate, in fact a negative savings rate, there's no money being moved into sustainable investment capital. Basically, there's hardly any money being invested in nerds so the nerds can come up with a new widgets/ideas to push us into a 'new economy', whethere its energy research or biomedical, etc... <BR/><BR/>If a report came out and said 50,000 new jobs were created in reneweable energy start-ups, that would be give me a warm fuzzy feeling. But 50,000 new jobs in food service? Come on, that's an industry 40,000 yrs old for crying out loud.<BR/><BR/>Consumer spending fueled by debt is not good news, in fact its scary because it means the burn rate's going up and we're headed towards the cliff that much faster.<BR/><BR/>I'll take the tech-boom of the late 90's over this 'housing-bubble' business anyday. Least the tech-bubble proliferated the broadband sector....Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-15223784.post-1146239738344719772006-04-28T08:55:00.000-07:002006-04-28T08:55:00.000-07:00More economic news from the NY Times:U.S. Economic...More economic news from the NY Times:<BR/><BR/><A HREF="http://www.nytimes.com/2006/04/28/business/28cnd-econ.html?hp&ex=1146283200&en=ef0c9f4aa2ac5aa2&ei=5094&partner=homepage" REL="nofollow">U.S. Economic Growth Rose Sharply in 1st Quarter</A><BR/><BR/><BR/><I>The American economy grew at its fastest pace in more than two years in the first quarter of 2006, the Commerce Department reported today, as consumers and businesses spent briskly.<BR/><BR/>The gross domestic product, the widest measure of the nation's output, grew at an annual rate of 4.8 percent in the first quarter, as Americans bought more computers, furniture and cars. Businesses invested more in office buildings, industrial equipment and transportation equipment, and the government spent more on national defense.<BR/><BR/>Stocks and bonds fell slightly after the report came out. The major stock indexes were led down by Microsoft, which fell 10 percent after warning that it may not meet Wall Street's profits expectations in the coming months.<BR/><BR/>Most of the growth came from consumer spending, which jumped 5.5 percent after a muted 0.9 percent increase in the fourth quarter. Investments in construction, equipment and software, which increased by 6.5 percent, added much of the rest.</I>meshugyhttps://www.blogger.com/profile/12332798876700147445noreply@blogger.comtag:blogger.com,1999:blog-15223784.post-1146238587101320072006-04-28T08:36:00.000-07:002006-04-28T08:36:00.000-07:00nick,Sure, people are pointing out the darker side...nick,<BR/><BR/>Sure, people are pointing out the darker side of the news.<BR/><BR/>Can you find for me, "mainstream" article on how the underlying fundamentals of Seattle's housing market might not seem as rosy as the REIC would have you believe?Eleuahttps://www.blogger.com/profile/08248482892459370601noreply@blogger.comtag:blogger.com,1999:blog-15223784.post-1146238257580211302006-04-28T08:30:00.000-07:002006-04-28T08:30:00.000-07:00"Yes! the new economy's in emptying bedpans and se..."Yes! the new economy's in emptying bedpans and serving McGriddles!!! Awesome, where do I sign up! This is the kind of industry that launched the internet, satellite technology, telecommunications..."<BR/><BR/>I love how you people always drag out the same tired talking points. Anytime the economy does poorly, there's no jobs. Any time it does well, then those jobs aren't worthy. Give me a break. You know that good news is allowed to exist SOMEtimes don't you?Vanitay Prabakashhttps://www.blogger.com/profile/05024556885689008062noreply@blogger.comtag:blogger.com,1999:blog-15223784.post-1146203811192837022006-04-27T22:56:00.000-07:002006-04-27T22:56:00.000-07:00"The other thing about this market that was not ar..."The other thing about this market that was not around in 1990: Blogging and information. Oh,and those dang lending standards. Sheesh. "<BR/><BR/>Add to your list:<BR/><BR/>77,000,000 Mouseketeers that all (well 65%) think they can fully bankroll their retirement by selling the garagemahal. This is the last opportunity for them to get their money.<BR/><BR/>Add to it the stock market (DJIA) is approaching historic highs. Granted, this is on rather weak earnings, and with a full tail wind. Once the balance sheets get gutted, and the economic winds shift to the front quarter, that will tank (I'm expecting a sub-7K DJIA).<BR/><BR/>Boomers are going to be curled up in a fetal position while they figure out how they are going to make the next payment on the Escalade, Botox, Levitra, and their kiddies college education.<BR/><BR/>Of course this means that GenX grommet-heads will be paying most of their income in taxes to float their elder Disco-Ballers.<BR/><BR/>Mexico is sure looking better and better. I might try Leon.Eleuahttps://www.blogger.com/profile/08248482892459370601noreply@blogger.comtag:blogger.com,1999:blog-15223784.post-1146197143025470312006-04-27T21:05:00.000-07:002006-04-27T21:05:00.000-07:00Diversified, indeed...you get your choice:"You wan...Diversified, indeed...you get your choice:<BR/><BR/><I>"You want fries with that?" </I> (restaurants)<BR/><I>"You want prunes with that?"</I> ("healthcare" aka "keep the boomers alive")<BR/><I>"What the hell do you want?"</I> (government)<BR/><BR/>Bah. Who needs manufacturing or IT jobs....Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-15223784.post-1146196891827459082006-04-27T21:01:00.000-07:002006-04-27T21:01:00.000-07:00"health care employers have created almost 300,000..."health care employers have created almost 300,000 jobs; restaurants have added 230,000"<BR/><BR/>Yes! the new economy's in emptying bedpans and serving McGriddles!!! Awesome, where do I sign up! This is the kind of industry that launched the internet, satellite technology, telecommunications... <BR/><BR/>Oh boy! So exciting, maybe I can work my way up to a bubble-created construction job, pounding nails!! Or a new teacher, recently hired due to hyper-inflated property taxes resulting from said bubble. Nothing like creating a bunch of poorly compensated part-time teaching positions!<BR/><BR/>Its a brave new world people, get ready for greatness!!!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-15223784.post-1146196099082100842006-04-27T20:48:00.000-07:002006-04-27T20:48:00.000-07:00Shhhhhhhhhhh, don't tell the bears.Shhhhhhhhhhh, don't tell the bears.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-15223784.post-1146194408170695242006-04-27T20:20:00.000-07:002006-04-27T20:20:00.000-07:00Has anyone seen this in the NY Times?U.S. Economy ...Has anyone seen this in the NY Times?<BR/><BR/><A HREF="http://www.nytimes.com/2006/04/28/business/28econ.html?hp&ex=1146196800&en=423cb57552e7e63a&ei=5094&partner=homepage" REL="nofollow">U.S. Economy Still Expanding at Rapid Pace</A><BR/><BR/><I>The industries leading the way are ones that have been receiving far less attention than cars or real estate, though they have been adding thousands of new workers each month. In the last year, hospitals, doctors' offices and other health care employers have created almost 300,000 jobs; restaurants have added 230,000; and local governments — including schools — have added 170,000.<BR/><BR/>"The good news for the U.S. is that growth has diversified," said Nariman Behravesh, chief economist at Global Insight, an economic research firm. "We aren't just relying on the consumer and housing."<BR/><BR/><BR/>In parts of California, Florida and the Northeast — places where home prices soared in recent years — houses are no longer being snapped up, and many appeared to be selling for less than they would have last summer. But the housing market is still healthy in much of the country.<BR/><BR/>The Boeing Corporation, for instance, plans to deliver 395 commercial planes in 2006, up 36 percent from a year ago, many of them to foreign airlines. The company has already sold all the planes it will build this year and 98 percent of the planes it will build in 2007.</I>meshugyhttps://www.blogger.com/profile/12332798876700147445noreply@blogger.comtag:blogger.com,1999:blog-15223784.post-1146192760028910722006-04-27T19:52:00.000-07:002006-04-27T19:52:00.000-07:00Anon 1:31,You can still find pretty nice places in...Anon 1:31,<BR/><BR/>You can still find pretty nice places in Ballard for around 450K....especially 2 bedrooms. The three bedroom in that range are sometimes nice too.<BR/><BR/>But it does seem like we're at the top right now...I'd only buy if you knew you could stay there for 10 years or more. We might see some rough times ahead...<BR/><BR/>'mmeshugyhttps://www.blogger.com/profile/12332798876700147445noreply@blogger.com