New condo building under construction in Chicago area that will also house a Century 21 Realty Office on the first floor.
Subscribe to:
Post Comments (Atom)
Bubble Meter is a national housing bubble blog dedicated to tracking the continuing decline of the housing bubble throughout the USA. It is a long and slow decline. Housing prices were simply unsustainable. National housing bubble coverage. Please join in the discussion.
Posts
The Bubble Meter Philosophy
The best way to get the housing market thriving again is to drop prices to the point where supply equals demand. Home sellers might not like it, but it's good for buyers and it's great for Realtors.
For Realtors, the best way to make more money is to sell houses quickly, and the best way to sell houses quickly is to convince the seller to drop the price.
For Realtors, the best way to make more money is to sell houses quickly, and the best way to sell houses quickly is to convince the seller to drop the price.
My Other Blog
Housing Prices Since 1970
National Housing Sites
Regional Housing Sites
- Bay Area Real Estate Blog
- Boston Bubble
- Burbed (San Francisco)
- DC Home Prices
- Flippers in Trouble (Sacramento)
- Frankly Realty (Virginia)
- Greater Northern VA Housing Bubble Fallout
- Irvine Housing Blog
- New Jersey Real Estate Report
- Patrick.net (San Francisco)
- Portland Housing
- Proffesor Piggington (San Deigo)
- Sacramento Land(ing) Blog
- Seattle Bubble
- SoCal Real Estate Bubble Blog
- Socket Site (San Francisco)
- Vancouver Condo Info
Economic Sites
Iacono Research (ad)
When will inflation-adjusted DC-area housing prices return to pre-bubble levels?
Are housing prices about to experience a double-dip?
How should the U.S. government balance the budget? (Check all that apply.)
What is your political affiliation?
What sparked the housing bubble?
Is the recession over?
Who bears responsibility for the housing bubble? (Check all that apply.)
What is your living situation?
Was subprime lending a cause or an effect of the housing bubble?
Follow Bubble Meter
Bubble Meter Archive
-
▼
2006
(546)
-
▼
August
(42)
- Deceptive Flyer from Mortgage Broker
- Two More Housing Bubble Sites
- Bubble Meter is in Lockdown Mode
- Chicago Housing Market
- Senate Square Condos in Washington, DC
- New Condos in Downtown San Deigo
- Average American is Waking Up to The Housing Bubble
- Tropical Storm Ernesto Aims For Bubblicious Miami
- Personal Bubble Stories
- BubbleSphere Roundup
- New Home Sales for July
- OFHEO Delays Report: What is Up?
- David Lereah's 'Greatest' Hits
- July Existing Home Sales Decline
- Who Is To Blame?
- David Lereah Continues To Spout 'Soft Landing' BS
- Pictures of New Housing Coming in Washington, DC
- Club Year Over Year Declines in Median Sales Price
- Discredited: National Association of Realtors' Ant...
- BubbleSphere Roundup
- Bubblicious Building in Chicago Area
- DROdio Real Estate Inc. Uses Lies, Deception, and ...
- NAR 2Q 2006 Existing Home Sales
- Months Supply of Housing Units by Jurisdiction: Ju...
- Back in Washington, DC
- Pictures from San Diego
- Washington, DC Area July MRIS Numbers
- USATODAY: For Some Renting Makes More Sense
- BubbleSphere Roundup
- Centex Development in Miami Metro Area
- Observations From San Diego
- Traveling To Bubblicious Southern California
- Housing Example. Buying Vs. Renting in A Declinin...
- To Buy or Not To Buy That is The Question
- Dean Baker: The Coming Housing Crash
- Mortgage Activity Down To May 2002 Levels
- BubbleSphere Roundup
- Capitol Gateway Complex
- Daily Reckoning: ARMS and Interest Rates
- Monthly Traffic On Bubble Meter Blog
- Hurricane Season Heats Up in Bubblicious Florida
- Butterfly At Home Depot
-
▼
August
(42)
c'mon guys, "Suzanne reserached this"...and not only that, but she'll be right downstairs...
ReplyDeleteDavid,
ReplyDeleteDo you remember where about in Chicago that was at?
Thanks
I think this is at Northwest Highway and Devon, just a hair southeast of Edison Park. I haven't driven that stretch for a while so the brick facade is new.
ReplyDeleteSouthwest corner of NW Highway and N Harlem. It is located just south of Devon Ave.
ReplyDeleteI am one of those who is still rolling in dow thanks to what you call a bubble. You seem to have missed the boat to financial freedom. Stop being a loser and go back to economics 101. Remember supply and demand? Well, mr. ignoramous, this is how it works: You have x ammount of population growth and Y ammount of housing supply. Let's suppose inteligently that the U.S population is growing, as the census numbers reflect, then there is only Y ammount of buildable land available for housing ie. especially in desirable areas with less commute, then you are looking for a freakin bubble that refuses to go away and never bursts. What we are currently experiencing is a price correction, not a deflation. You and your bubble theories smack of loser *ism , and jealousy, plus deffinitely not realistic. So who is the one refusing to accept reality?? My guess would be you and your feable, loser mind that is easily swayed by the media, as opposed to what is reality in the real world economic apporach in understanding housing vallue. Get a life loser and hope you will some day get out of your economic ignorance cave. By then, it would trully be too late for the likes of you.
ReplyDelete"I am one of those who is still rolling in dow (sic)"
ReplyDeleteWow, Donald Trump reads this blog.
"My guess would be you and your feable, loser mind that is easily swayed by the media, as opposed to what is reality in the real world economic apporach in understanding housing vallue"
ReplyDeleteI was blogging about the bubble in May 2005, well before the mainstream media caught on to the story!
Anony-mouse (1:31 PM).
ReplyDelete1) Go start your own blog already.
2) David (blog author) has been doing this blog longer than the main stream media has been addressing the issue.
3) I am an economist and have a firm grasp of supply and demand. It appears that there is more going on than "they're not making any more land + population/job growth". Things like investor speculation, changes in lending standards, changes in interest rates.
4) if you indeed are "rolling in dow".. did you (a) sell your primary residence and rent, (b) sell an investment property (c) use a HELOC as an ATM ? Obviously not (a) since you are writing this rant. Maybe (b).. but then why wouldn't you hold on to the property if real estate is only going up? right. so probably (c) which means that you are probably underwater if you cashed out the full appraised value a year ago...
Anon 1:31
ReplyDeleteBasically you expect a soft-landing. OK?! You disagree with bubbleheads, you don't have to insult us. You must have some severe personnal issue to throw insults like that at us. I don't expect a soft landing but I don't insult people who believe that a soft landing will occur. I do insult jerks like you.
"Remember supply and demand?"
ReplyDeleteYes, right now there is too much supply and to little demand.
"...there is only Y ammount of buildable land available for housing..."
Let's see, Japan, which is roughly half the size of Texes with 6 times the population, has been experiencing a housing busts for 15 years now. They're not making anymore land in Japan, the population is growing yet housing is down. Shoots that theory to hell.
Folks, look into the demographics of Japan. Things are very different demographically in Japan.
ReplyDeleteI remember thinking just before the US invaded Afghanistan: "Hell, the Soviets couldn't dominate that nation after years of trying; what makes people think the US can do it?"
It was done by the US in a matter of weeks.
Look for parallels, but don't seek them overseas.
(And please, don't infer anything about my political beliefs based on what I wrote about Afghanistan)
kbr7171
ReplyDeleteI like your statement about Japan. I don't remember much about Econ 101, but what I do remember is supply, demand and price were inter-related. You use supply and demand curves to set price. If price is too high it effected the demand curve. Albeit a weak explaination but this was 25 years ago when I took the class. I got a B, so at one time I did understand this stuff. Anyhow your comment fits the supply-demand-price theory that I learned in ECON 101. By the way, it seems like demand for gas has gone down, Hmmmmm could a 100% increase in price have anything to do with this?
"it seems like demand for gas has gone down, "
ReplyDeleteDemand for gasoline in the United States is at or near record highs. Recent price dips are related to the BP pipeline from Alaska being partially re-opened, and the end of hostilities between Isreal and Lebanon.
It's amazing how the humman psyche works. The majority of losers have their nose up someone else's rear end, (usually that would be a more successful person than they). Meanwhile the successful person ie. investor, has history, facts and analytical reasoning working on his/her behalf, and therefore is too busy blaizing trails. That entails assessing financial risks, and analysing return on investment etc... Are there idiots who are in the business of real estate just for the act of speculation? Yes we all know that, Japan's real estate economy was braught down as a result of it, in addition to the conspiration, aiding and abeting of corrupt and lax bank regulations. Today Japan's real estate is on the rebound, since it has a huge aging population, their market will remain flat for a while, marked with steady but miniscule increases.
ReplyDeleteWhat is sad is that some of you are comparing the Japanese real estate fiasco/ banking crisis that is post Japanese buble to the situation here in the U.S. Incomes here have climbed steadily since the dot come bubble. For the most part, real estate prices are reasonable; 10 times the annual income, ie. if you make $40,000 then purchasing a house to build equity in that costs $400,000 is not unreasonable. Note that I did not say CONDO. Are there idiots who will plunk down $400,000 into a condo?....Plenty. Some of you are confusing unscrupulous lendors and taken advantage of newbie buyers/investors, to mean the whole nation is in some sort of real esate bubble plague. Many of the prices that you all see are trully justified. The cost of labor has gone up, the cost for construction fees have gone up as well. These factors have to be taken into consideration when pricing a new subdivision. Most important is local enconomy and average income. The bubble theory is 30 percent true, that number accounts for over extended buyers/ investors, who continue to dump what they already couldn't afford. Appart from that correction, the majority of the nation has a realistic and a very healthy housing market. Will there be some correction as lots of housing come on the market at once? Yes, but not by much. Most sellers are willing to sit it out since they can afford the cost of holding. The one that can't ....too bad for them since they should never have gotten into it in the first place. Flipping is only for folks who can handle any adverse economic downturn, the newbies as usually do get hurt. That lesson isn't just for real estate.
Those of you who pray the housing bubble will materialize while you keep renting and carry your landlord's mortage, I want to thank you. It's folks like you that make so many of us landlords happy, let's be honest, if it weren't for overhyped and paranoid folks like you guys we wouldn't be in business. Thank you again for spreading the imaginery hysteria, just tone it down a little will ya?
"For the most part, real estate prices are reasonable; 10 times the annual income, ie. if you make $40,000 then purchasing a house to build equity in that costs $400,000 is not unreasonable."
ReplyDeleteI was going to reply to say how ridiculous that was, but then I realized that you must be doing a parody of a moronic housinghead.
Because nobody I've seen on this board, not Lance, not Investor, would tell somebody making $40,000 a year to buy a $400,000 house, absent some massive downpayment. And any person with a lick of financial sense would know that your downpayment on a house should only be a fraction of your total savings, since the rest of your savings should be in things other than real estate.
In short, you do a nice parody, but that's all it is. You can't be serious.
Excellent satire of the pro-growth position. Good job.
ReplyDeleteYou guys are obviously looking at real estate investment as a short term speculative venture. 8y, 10y...I said Y....(I am deffinitely oversimplifying the figures/formulas). I am speaking in terms of 5-10 yr plus economic growth forcasts. If a couple made 40 thousand each......assuming they have other bills, school loans, credit cards. With a total income of 80 thousand, it's not impossible to save one year salary with a diciplined approach to spending over a time span of 5 yrs. Imagine that same couple purchases a 5 yr arm 400k house with interest only, and refi on the fifth year with 20 percent down.....that wouldn't be so bad since in that 5 yr time they not only have refinanced into a fixed 15-30 yr loan for 320k, but the new appraisal will show 4 yrs worth of equity build up. On the other hand that same couple can live way way below their means and rent a very small appartment and keep saving money until they come up with a 20 percent down payment. I wouldn't recomend that approach but guess what folks? People are doing both options very very successfully. People's income increases, as their equity builds up, and next thing you know....some of these folks are actually putting up 20 percent down on second , third and fourth investment housing.
ReplyDeleteLike every thing in life, real estate investing has rules. You play by the rules, and you are bound to stay in the game. I did not say win. Real estate is deffinitely for the long term. Those who have that type of approach have historically been favored by the market, and continue to buid their real estate asset portfolio onto commercial and industrial real estate. There is no maggic formula, and no dummy can erase historical growth and proven returns on investment of 200 to 500 percent plus!!!!!!
I hope the stock market, or better yet the bubble you hang on to so much give you that much return.
Good luck and stop wishing the sky to fall, it ain't gonna happen. Go out and make deals and lots of cash instead.
Anon 2:49, 4:00 pm has my respect. I haven't read such an artfully crafted troll since the old usenet days of the alt.flame groups.
ReplyDeleteKeith, you're overdue for a post describing how awesome you are.
ReplyDelete"disuade"
ReplyDeleteYou used the word improperly.
From CIA.gov's World Factbook:
ReplyDeletePopulation of Japan; 127,463,611 (July 2006 est.)
Age structure;
0-14 years: 14.2% (male 9,309,524/female 8,849,476)
15-64 years: 65.7% (male 42,158,122/female 41,611,754)
65 years and over: 20% (male 10,762,585/female 14,772,150) (2006 est.)
Median age;
total: 42.9 years
male: 41.1 years
female: 44.7 years (2006 est.)
Birth rate:
9.37 births/1,000 population (2006 est.)
Death rate:
9.16 deaths/1,000 population (2006 est.)
Net migration rate:
0 migrant(s)/1,000 population (2006 est.)
Japan is facing a population crisis. The population is aging, and they have essentially zero population growth.
Population is a precursor to any Demand function. (as in: "Supply and Demand")
Yes, debt was and is a big problem in Japan. There are similar circumstances in the US. But note what this analysis has to say about that:
"Japan's huge government debt, which totals 170% of GDP, and the aging of the population are two major long-run problems."
The US has one of those long-term problems. The other problem, population decline (which lowers demand and increases supply) is not an issue in the US.
David,
ReplyDeleteCan you spell check anon's posts and repost them? They are wearing me out!
oc bear said:
ReplyDelete"Bank failures are tied to Foreclosure and Bankruptcy and lack of reserves to cover."
ok ... so in the US where because of the creation of federal underwriting standards almost no "mortgage" loans are currently owned by banks ( but by individuals instead), how does Japan's experience apply?
Like the original anom pointed out, one of the biggest mistakes someone can make when looking for examples overseas is forgetting that they are looking at oftentimes totally different operating environments.
I loved dc_too's post about what it takes to save up for the sort of down payment that weirdo described ($80K hh income for a $400K house).
ReplyDeleteImagine really living on that for 5 whole years. No big vacations. No splurge purchases on a new TV. No babies being born.
It explains exactly how and why exotic mortgages were SO popular. It made people feel like they could have it all. All gain, no pain...
"Once again, for those that missed civics, David is not the federal, state, or local government, or any agency or official thereof. Therefore, he cannot engage in censorship. You are complaining about his editorial philosphy, for which ther is a simple and free remedy. It may be exercised by clicking the little blue "Sign up here" link and starting your own blog.
ReplyDeleteDavid: please do not hesitate to delete this post for any or no reason."
For those of you for whom english is a second language, the word "censorship" does not imply any government involvement.
The US also doesn't have the debt relative to GDP that Japan does (about 60% vs. 170%). If we keep it up we will, but we're not there yet.
ReplyDelete"Keith, you're overdue for a post describing how awesome you are."
ReplyDeleteYou already did that for me. Thank you.
Go gett'em david.
ReplyDeleteGreat job of exposing this unethical industry.
Anon said...
ReplyDelete"Folks, look into the demographics of Japan. Things are very different demographically in Japan."
OK, explain how they are different and how that difference affected their housing market.
"You guys are obviously looking at real estate investment as a short term speculative venture."
ReplyDeleteNo, we look at it as a long investment. The people that caused this run up in prices look at it as a short term investment. If you looked at it as a long term investment you'd now the prices are out of line. Long term investments don't skyrocket in value of a realatively short period of time...with a severe correction that is.
kbr, you read the post that suggested not comparing the US to Japan, but you skipped the posts that went into details as to why things are different. Why did you do that?
ReplyDeleteHere is where it starts, go back and find the rest yourself:
" From CIA.gov's World Factbook:
Population of Japan; 127,463,611 (July 2006 est.)
Age structure;
0-14 years: 14.2% (male 9,309,524/female 8,849,476)
15-64 years: 65.7% (male 42,158,122/female 41,611,754)
65 years and over: 20% (male 10,762,585/female 14,772,150) (2006 est.)
Median age;
total: 42.9 years
male: 41.1 years
female: 44.7 years (2006 est.)
Birth rate:
9.37 births/1,000 population (2006 est.)
Death rate:
9.16 deaths/1,000 population (2006 est.)
Net migration rate:
0 migrant(s)/1,000 population (2006 est.)
Japan is facing a population crisis. The population is aging, and they have essentially zero population growth.
Population is a precursor to any Demand function. (as in: "Supply and Demand")
Yes, debt was and is a big problem in Japan. There are similar circumstances in the US. But note what this analysis has to say about that:
"Japan's huge government debt, which totals 170% of GDP, and the aging of the population are two major long-run problems."
The US has one of those long-term problems. The other problem, population decline (which lowers demand and increases supply) is not an issue in the US.
"
more for kbr:
ReplyDelete"The US also doesn't have the debt relative to GDP that Japan does (about 60% vs. 170%). If we keep it up we will, but we're not there yet."
Here are comparable numbers for the US.
ReplyDeletePopulation of US; 298,444,215 (July 2006 est.)
Age structure;
0-14 years: 20.4% (male 31,095,847/female 29,715,872)
15-64 years: 67.2% (male 100,022,845/female 100,413,484)
65 years and over: 12.5% (male 15,542,288/female 21,653,879) (2006 est.
Median age;
total: 36.5 years
male: 35.1 years
female: 37.8 years (2006 est.)
Population growth rate: total: 36.5 years
male: 35.1 years
female: 37.8 years (2006 est.) {Japan does not have any population growth, imagine what that does to their tax base}
Birth rate:
14.14 births/1,000 population (2006 est.)
Death rate:
8.26 deaths/1,000 population (2006 est.)
Net migration rate:
3.18 migrant(s)/1,000 population (2006 est.)
The US has the largest and most technologically powerful economy in the world, with a per capita GDP of $42,000. n this market-oriented economy, private individuals and business firms make most of the decisions, and the federal and state governments buy needed goods and services predominantly in the private marketplace. US business firms enjoy greater flexibility than their counterparts in Western Europe and Japan in decisions to expand capital plant, to lay off surplus workers, and to develop new products. At the same time, they face higher barriers to enter their rivals' home markets than foreign firms face entering US markets. US firms are at or near the forefront in technological advances, especially in computers and in medical, aerospace, and military equipment; their advantage has narrowed since the end of World War II. The onrush of technology largely explains the gradual development of a "two-tier labor market" in which those at the bottom lack the education and the professional/technical skills of those at the top and, more and more, fail to get comparable pay raises, health insurance coverage, and other benefits. Since 1975, practically all the gains in household income have gone to the top 20% of households. The response to the terrorist attacks of 11 September 2001 showed the remarkable resilience of the economy. The war in March-April 2003 between a US-led coalition and Iraq, and the subsequent occupation of Iraq, required major shifts in national resources to the military. The rise in GDP in 2004 and 2005 was undergirded by substantial gains in labor productivity. Hurricane Katrina caused extensive damage in the Gulf Coast region in August 2005, but had a small impact on overall GDP growth for the year. Soaring oil prices in 2005 and 2006 threatened inflation and unemployment, yet the economy continued to grow through mid-2006. Imported oil accounts for about two-thirds of US consumption. Long-term problems include inadequate investment in economic infrastructure, rapidly rising medical and pension costs of an aging population, sizable trade and budget deficits, and stagnation of family income in the lower economic groups.
"How is that little pecker hanging today keith? Like a turtle?"
ReplyDeleteWow, you just admitted your humiliating defeat on these boards, AnonyTroll. Good for you.
Population growth rate for US is 0.91% That is nearly 1% of nearly 300,000,000 people per year. That is a lot of people.
ReplyDeleteI'm amused at the anon rant's about housing.
ReplyDeleteYou do realize only about 5% of the population is left who can qualify for credit who doesn't already own a home?!? Compare that to the normal 20% to 25% who are sitting on the sidelines. (Please, do not forget, those close to the poverty line do not qualify for credit.)
And 10X income for a home? Whoa dude... Every time a market hits 8X income it drops to 6X income. What you say? Hey, its just historical fact here in the US. The question is, what will 10X drop to?
As a hiring manager, if you think for a second companies will stay in areas where they cannot hire due to the housing prices being out of alignment with wages... forget it. Our project just lost a group to another division in a non-bubble area. This was done at the employees request as they didn't want to deal with the local real estate prices. Do you honestly expect this to slow?!?
It doesn't matter if population is going up due to recent immigration. I do not compete in the same housing market with them.
And don't forget, they were running out of land in Florida in 1925...
History is about to repeat itself. Always look at forign and past examples.
We're in for a doozy of a recession. As others have noted, keep your powder dry.
Neil
The CIA said "stagnation of family income in the lower economic groups" is a problem in the US economy and society.
ReplyDeleteThat is probably the real problem here. It isn't whether or not a realtor has an inaccurate counter running on his website. But it is a lot easier to attack the realtor than it is to go after the social structure of the US.
neil said "And 10X income for a home? Whoa dude... Every time a market hits 8X income it drops to 6X income. What you say? Hey, its just historical fact here in the US. The question is, what will 10X drop to?"
ReplyDeleteThe CIA said "stagnation of family income in the lower economic groups" is a problem in the US economy and society.
Anon said: "That is probably the real problem here. It isn't whether or not a realtor has an inaccurate counter running on his website. But it is a lot easier to attack the realtor than it is to go after the social structure of the US."
The national economy is bifrucating. And yes, sheer numbers of people do make a difference.
If you want things to change in the economy, be sure to vote this election season.
Earlier post that bears repeating:
ReplyDeleteLance said: " As you should know, Itemized deductions = your standard deductions + real estate-related and other non-standare deductions. I.e., you get the WHOLE benefit of your itemizations that are owing to real estate such as mortgage interest and property tax etc..."
IRS sais: "Form 1040 allows taxpayers to compare their standard deduction with the total of their itemized deductions and to choose the method that results in the greater reduction to their AGI."
http://www.irs.gov/app/vita/content/0108a/0108_02_080.html
Lance is wrong again...
Lance,
ReplyDeleteYou're going to jail for tax evasion. You tried to itemize while also taking the standard deduction, which violates our clearly written rules. Don't try to claim you didn't know better. Nobody's stupid enough to think they can itemize and take the standard deductions.
"Always look at forign and past examples."
ReplyDeleteYes, be sure to look at the Zulu uprising of 1898 as being indicative of fuel prices this winter.
Comparing Japan to the US is just as ridiculous.
FDR's adivsors said: "President Roosevelt, I recommend we don't declare war on Germany. They crushed Poland in hours, they swept across France and Belgium in days. They are hammering London, and they caused the Russian army to retreat deeply into their own country. Always look at how other nations are doing before deciding what the US will do."
ReplyDeleteFDR said: "yes, you're right. Those Germans will kick our asses. No way can we have any positive influence on the war in Europe. Send Hitler a dozen roses and tell him I'll call at 7pm tomorrow night to ask him to dinner"
US to Japan: That big flash of light that obliterated Hiroshima? You want to know what that was? It was a new technology that we developed and are capable of reproducing nearly indefinitely. Now, we really don't want to invade your homeland, so why don't you just surrender? No? You don't want to surrender? OK, but don't say we didn't ask first....
ReplyDelete-flash-
That big flash of light that obliterated Nagasaki? We told you so. What? you want to surrendor now? OK. It would have been easier if you had just listened to us in the first place.
Yeah, the US never adapts to adverse circumstances. Not once has it happened.
Anon,
ReplyDeleteI'm completely aware of the flat population growth in Japan. However, the population is not at this point descreasing and even if it started decreasing this year that WOULD NOT explain a housing crisis starting 15 years earlier.
The positive birth rate in the US is happening in the low end of the income scale. These children, for the most part, WILL NOT be attending colleges, getting high paying jobs and buying housing. They don't and won't have the financial means to.
"For those of you for whom english is a second language, the word "censorship" does not imply any government involvement."
ReplyDeleteThe latin root of the word censor relates to the act of a public official or magistrate. There is a modern, broader use of the word as a verb to mean "the removal of objectionable material" that is acceptable. Here, however, it is being used by the intellectually sloppy or dishonest who wish to argue that they have the right to post whatever they wish. Try that argument on any newspaper editor in the country and see how far you get. In fact, my first newspaper job involved explaining to irate nutjobs that my employer had no obligation to publish their multi-page screeds.
My advice on the little blue link still stands.
"The latin root of the word censor relates to the act of a public official or magistrate. There is a modern, broader use of the word as a verb to mean "the removal of objectionable material" that is acceptable. Here, however, it is being used by the intellectually sloppy or dishonest who wish to argue that they have the right to post whatever they wish. Try that argument on any newspaper editor in the country and see how far you get. In fact, my first newspaper job involved explaining to irate nutjobs that my employer had no obligation to publish their multi-page screeds."
ReplyDeleteThis does not say what you seem to want it to say. let me help you. Here is the definition of "censorship":
1 a : the institution, system, or practice of censoring b : the actions or practices of censors; especially : censorial control exercised repressively
2 : the office, power, or term of a Roman censor
3 : exclusion from consciousness by the psychic censor
What is the verb "to censor," you ask? Here you go:
to examine in order to suppress or delete anything considered objectionable; also : to suppress or delete as objectionable
Thank you in advance for your attention to this matter.
"The positive birth rate in the US is happening in the low end of the income scale."
ReplyDeleteLow end people? Now I see... You don't consider yourself to be at the low end of the income scale, you went to college, and you're angry because houses cost so much money, even for non "low-end" people like yourself.
Well, kbr, you are "low end" compared to millions and millions of people in this country. There are more millionaires in this country than ever before, even if you factor out their home equity gains. There are millions of millionaires. Those millionaires are comprised of people from all walks of life, not just"high-end" people like yourself.
See my posting of the CIA analysis of the challenges facing the country today. Yes, it is possible to go to college, incur massive debt, and be unable to get out from under that debt. This is despite the fact that you went to college and think it "SHOULD" mean that you aren't a "low-end" person.
And yes, Japan has zero population growth right now. Suicide is a ritual group practice in Japan, people die of accidents and disease every day there. The population is declining in real terms *right now* in Japan.
"Nobody's stupid enough to think they can itemize and take the standard deductions."
ReplyDeleteStupid, When you itemize your deductions, those deductions that are given to you as part of the standard deduction, get itemized. Standard deduction does not include mortgage interest deduction, charitable donations deduction, property tax deduction, and a few other deductions that you can only get when you itemize. So, for those of you who can read form instructions but can't think, when you are told to compare the two (i.e., standard to itemized), you are being asked to see whether you can benefit from the additional incremental deductions owing to expenses such as mortgage interest and property taxes ... i.e., those are ON TOP OF your regular deductions that you get automatically (without having to list out) when you use the standard deduction. The last time we went round about this, even Keith finally admitted that he was talking about the way the forms are worded and not about the substance ... And that, YES, you get the whole benefit of the additional deductions coming from mortgage writeoff and property tax writeoff ... and that, NO, you don't deduct all the other regular deductions contained in the standard deduction from the mortgage deduction. I know, this requires some thinking ability. Smething which most bubbleheads are reluctant to do.
Whitetower said:
ReplyDelete"The fundamentals of housing prices are rental rates and household income."
and what do you think drives these fundamentals?
in case you missed my point, the fundamentals are basic needs that drive demand and supply. Population growth drives demand because it is a "need" related to demand for housing ... AND because it plays into the equation of "household income" since availability of qualified labor is part of the equation of what drives the income paid for work done. You are missing the forest for the trees when you look at the results rather than the cause.
7:16 -- anyone can cut & paste from a dictionary. It's the intended use that matters. Please note my reference to intellectual dishonesty. And before you direct someone's attention to the proper use of words, please consider (a) citation of source, (b) the particular dictionary's policy of definition sequence, and (c) etymologies.
ReplyDeleteBTW, cutting & pasting from a closed thread shows a complete lack of manners.
David-- from here on out I promise to stay on topic. I will be good, I will be good...
"7:16 -- anyone can cut & paste from a dictionary. It's the intended use that matters. Please note my reference to intellectual dishonesty. And before you direct someone's attention to the proper use of words, please consider (a) citation of source, (b) the particular dictionary's policy of definition sequence, and (c) etymologies. "
ReplyDeletegee, I'm sorry. it was wrong of me to quote Merriam Webster's to you when you were misusing a word.
"Earlier post that bears repeating:
ReplyDeleteLance said: " As you should know, Itemized deductions = your standard deductions + real estate-related and other non-standare deductions. I.e., you get the WHOLE benefit of your itemizations that are owing to real estate such as mortgage interest and property tax etc..."
IRS sais: "Form 1040 allows taxpayers to compare their standard deduction with the total of their itemized deductions and to choose the method that results in the greater reduction to their AGI."
http://www.irs.gov/app/vita/content/0108a/0108_02_080.html
Lance is wrong again... "
You sound like you probably have a lot of experience with the 1040 EZ.
Lance said...
ReplyDelete“in case you missed my point, the fundamentals are basic needs that drive demand and supply. Population growth drives demand because it is a "need" related to demand for housing ...”
Hold on, what’s up Lance? Suddenly housing has “Fundamentals”? Is this an attempt to show some sort of correlation of numbers? Let’s back up, you’ve already “established” that inventory, foreclosures, ARM re-sets, mean “absolutely NOTHING” in regards to the price of real estate, now you want to throw in a word like “Fundamentals”?
Please, what are these “Fundamentals”? Maybe we can track them and see what the trends are? Where can we find this data? After all, we don’t want to track trivial information like inventory right?
Robert,
ReplyDeleteAnon has already told you the fundamentals that need to be observed ... Namely population growth, the money that population growth has to spend (and how divided among the various economic groups) and the amount of buildable space given both inherent expansion constraints such as distance to where jobs are and man-made constraints such as height limits and other zoning restrictions. THESE are the fundamentals that need to be observed and analysed. What you are calling fundamentals aren't fundamentals at all but rather indicators that like the cost of housing give you an indication of what the fundamentals are doing. Your trying to use some indicators to determine other indicators is erroneous because (a) they are only linked by the fundamentals themselves and many factors can cause them to go in opposite directions and, more importantly, (b) by focusing on other indicators out there rather than the fundamentals themselves, you are wasting your time "not seeing the forest for the trees". If I were looking to buy a house, I really wouldn't care what the cost of rental are because that means nothing for me as to which direction the price to buy is going. I would instead concentrate on the fundamentals ... i.e., are more people moving into the area I want to buy in? are these people well paid and going to drive prices up? are there severe zoning restrictions in place? historic zoning restrictions? Is enforcement getting stricter or laxer for these restrictions? Are county officials debating making minimum lot sizes that will futher limit buildable land? All these things are forces that influence the fundamentals. The going rental rates only marginally influence housing prices ... But I suspect you won't even bother to try to understand this ....
Lance said...
ReplyDelete“... But I suspect you won't even bother to try to understand this ....”
Oh, I understand. You had me at “there’s no bad time to buy”.
"Population growth has nothing, nothing, to do with housing prices."
ReplyDeleteLiving human beings are consumers of housing.
Next, are you going to suggest that people driving their cars have no influence on the demand for gasoline? And that prevailing cab fares drive gas prices at the pump?
Yes yes, cab fares have dropped a bit in DC. That means the price for a gallon of regular unleaded gasoline will soon follow.
ReplyDelete"you are being asked to see whether you can benefit from the additional incremental deductions owing to expenses such as mortgage interest and property taxes ... i.e., those are ON TOP OF your regular deductions that you get automatically (without having to list out) when you use the standard deduction"
ReplyDeleteThis is correct. Some medical expenses, some business expenses, charitable contributions, etc. are fair game too, *ON TOP OF* what you can claim with the standard deduction.
No no no, the number of farm animals in Nebraska drives the price for crude oil.
ReplyDeletePeople driving cars have nothing to do with it. Just like people who are alive and who wish to live indoors have nothing to do with the demand for housing.
Wow, the anonybulls seem to be getting a little worked up. One might almost say they're passing from "denial" to "anger."
ReplyDeleteSo, if population growth is the real fundamental issue, then we can assume a correlation between the 100%+ runup in property values in the DC area and a similar growth in population in this area. Right? Right??? At that rate, DC Metro would pass Mexico City in population in about another five years or so. :)
Nice try, though.
Nope. You do lose your standard deduction when you itemize.
ReplyDeleteYou do not get to itemize mortgage interest on top of your standard deduction. You choose between the two.
Lance seems confused. He's thinking that "standard deductions" are deductions like state and local taxes. Nope, those are also itemized. When you itemize, you do in fact forgo your standard deduction.
Lance screwed up, but he's the one namecalling.
"When you itemize your deductions, those deductions that are given to you as part of the standard deduction"
ReplyDeleteNope. The standard deduction is just the standard deduction. It doesn't "include" anything. If you itemize, and the total of itemized deductions are greater than the standard deduction, then you use the itemized deductions. But that is an incremental gain. You give up the standard deduction if you itemize.
For instance. If the total mortgage interest you paid plus your state and local taxes plus charity and other itemized things come out to less than $10,000, you lose by itemizing, so you use the standard deduction.
Because of this, there likely isn't a very large tax benefit to buying a house if you pay $600 a month in mortgage interest.
Let's say your total itemized deuctions are $15,000. Your standard deduction is $10,000.
So you itemize and take $15000 in deductions.
At the margin, itemizing didn't get you $15000 in deductions. It got you $5000. Still worthwhile, but you'd better understand the difference if you're thinking of buying a house, and especially if you're giving advice. It doesn't seem like Lance does.
"When you itemize your deductions, those deductions that are given to you as part of the standard deduction"
ReplyDeleteNope. The standard deduction is just the standard deduction. It doesn't "include" anything. If you itemize, and the total of itemized deductions are greater than the standard deduction, then you use the itemized deductions. But that is an incremental gain. You give up the standard deduction if you itemize.
For instance. If the total mortgage interest you paid plus your state and local taxes plus charity and other itemized things come out to less than $10,000, you lose by itemizing, so you use the standard deduction.
Because of this, there likely isn't a very large tax benefit to buying a house if you pay $600 a month in mortgage interest.
Let's say your total itemized deuctions are $15,000. Your standard deduction is $10,000.
So you itemize and take $15000 in deductions.
At the margin, itemizing didn't get you $15000 in deductions. It got you $5000. Still worthwhile, but you'd better understand the difference if you're thinking of buying a house, and especially if you're giving advice. It doesn't seem like Lance does.
"You do not get to itemize mortgage interest on top of your standard deduction. You choose between the two."
ReplyDeleteNo one said they are summed together if you do itemize. Someone (Lance?) did say that if you itemize, it *always* means you are getting a tax benefit above what the standard deduction offers.
Also, someone DID say that tax benefits of ownership aren't realized until tax time. This isn't true. It is called a "Form W-2", and you can decrease your monthly tax withholding to boost your monthly take home pay if in fact you have a reason to do so. (Like owning a home)
Your error, bubbleboy, like all bubbleheads, is to automatically discount taking the bus as a form of satisfying transportation needs.
ReplyDeleteSo mark my words: *Gas prices will fall going forward because taking the bus is a viable alternative to buying gas for private cars!*
It doesn't matter if there is one car in this country for every living human. When it is cheaper to take the bus, people will take the bus.
In short, itemizing got you an additional $5000 in deductions, which, assuming a 25% tax rate, got you an extra $1250. Nice, but you still have to analyze the difference between your total itemized deductions and standard deductions when deciding whether to buy a house, and use the incremental gain.
ReplyDeleteOtherwise, you overweight the financial benefit of homeownership.
Let's say you currently take the standard deduction.
Your total itemized deductions pre-house would be $5000. You buy a house and pay $600 a month in your mortgage.
You new-post house itemized deductions are $7200 ($600*12) + $5000.
That's $12,200. Now you itemize.
How much tax benefits did you get from buying the house?
You gained $2200 in deductions, which is the difference between your $12,200 in itemized deductions and the $10,000 standard deduction you took pre-house.
The financial benefit of that $2200 in deductions is about $550.
And that's how you'd properly analyze the tax implications of buying a house.
And yes, it is easy to smooth your cash flow by changing your withholding if you buy a house, and you should, unless you enjoy making no-interest loans to the government.
ReplyDeletechriso said:
ReplyDelete"So, if population growth is the real fundamental issue, then we can assume a correlation between the 100%+ runup in property values in the DC area and a similar growth in population in this area."
hmmm ... it sounds like you don't know much about price elasticity and how if it is low you can have a 100% run up in price for a 5% increase in demand ... are you remembering your economics classes? did you have economics classes?
Lance said...
ReplyDelete“hmmm ... it sounds like you don't know much about price elasticity and how if it is low you can have a 100% run up in price for a 5% increase in demand ... are you remembering your economics classes? did you have economics classes?”
hmmmm Lance, I’m confused. Why the need for percentages and/or economics classes. There’s just “no bad time to buy” right?
Lance is claiming to know economics when he doesn't even seem to grasp the fundamental economic principle of marginal cost, e.g. comparing the marginal gain from buying a house and itemizing. In order to calculcate the marginal tax gain from buying a house, you subtract your standard deduction from your itemized deductions. This really seemed to confuse Lance.
ReplyDeleteAll I know is: it is cheaper to take public transportation than it is to own and drive a car.
ReplyDeleteTherefore, the prevailing market prices for cars and gasoline are going to fall like rocks, and I'm going to scoop them both up with glee for pennies on the dollar, while laughing at all you chuckleheads who cannot understand the basics of supply and demand!
There will be a return to fundamentals in the area of personal transportation! The time is NOW!
whitetower:
ReplyDelete"Your error, lance, like all housingheads is to automatically discount renting as a form of satisfying housing needs."
hmmm ... so you think rental housing comes out of thin air? it's just there when you need it and if the fundamentals push up the cost of producing housing via bought houses, then you can just dip into that limitless free good called rental housing? ... this line of thought shows how separated from reality (and realty) many bubbleheads are. ALL rental housing begins as bought housing. just because you don't own it doesn't mean someone else doesn't ... and the fundamentals we discussed apply to that someone else ... and the place you are living in ... It just gets filtered for a while because the owner may have locked in a long time ago and not be incentivized to charge more now ... but eventually, someone will buy the property and HAVE to charge more to cover THEIR costs ... which will have been determined by fundamentals such as population and supply of housing stock.
"100% run up in price for a 5% increase in demand"
ReplyDeleteThe most favorable supply assumption that we can make for this scenario is that the supply of housing is completely fixed, and cannot increase at all, generating a vertical (completely inelastic) supply curve. Even with this clearly false assumption that we make to support this story, you'd need an incredibly inelastic demand curve to generate this kind of price movement.
And generally, in housing, elasticities are greater in the long run than in the short run, so price spikes followed by long declines are a fairly normal pattern.
Keith said...
ReplyDelete"In short, itemizing got you an additional $5000 in deductions, which, assuming a 25% tax rate, got you an extra $1250. Nice, but you still have to analyze the difference between your total itemized deductions and standard deductions when deciding whether to buy a house, and use the incremental gain.
Otherwise, you overweight the financial benefit of homeownership.
Let's say you currently take the standard deduction.
Your total itemized deductions pre-house would be $5000. You buy a house and pay $600 a month in your mortgage.
You new-post house itemized deductions are $7200 ($600*12) + $5000.
That's $12,200. Now you itemize.
How much tax benefits did you get from buying the house?
You gained $2200 in deductions, which is the difference between your $12,200 in itemized deductions and the $10,000 standard deduction you took pre-house.
The financial benefit of that $2200 in deductions is about $550.
And that's how you'd properly analyze the tax implications of buying a house."
Where you are erring is in your assumption that "Your total itemized deductions pre-house would be $5000." If you are entitled to a $10,000 standard deduction and you are an average taxpayer, your total itemized deductions pre-house (and pre-medical expenses and/or pre-chartiable contribution and/or pre-certain other business expenses) deductions should be around $10,000 and NOT $5,000. BY DEFINITION, the standard deduction equals what the average person would otherwise be itemizing if they didn't own a home or make charitable contributions, or have other "non-standard" deductable expenses.
I have so much more freedom now that I take the bus. I don't have to worry about door dings, I let the mechanics at the transportation authority worry about maintaining my wheels (the bus), and I let other people worry about parking, tickets, insurance, etc. Thanks guys!
ReplyDeleteThere have been major bubbles in both the auto and oil industries for a long time now. The price differential between taking the bus and owning a car is a no-brainer. I cannot believe that you autoheads subject yourself to that kind of punishment. The fundamentals between the bus and the car point to the only logical conclusion: Take The Bus.
Keith said:
ReplyDelete"you'd need an incredibly inelastic demand curve to generate this kind of price movement."
Try finding buildable land for single family homes within the District of Columbia (or even the inner suburbs) and you'll see how inelastic the demand curve is here.
"ALL rental housing begins as bought housing. just because you don't own it doesn't mean someone else doesn't"
ReplyDeleteYep, as a renter, I'm loving that accelerated depreciation, which goes into my pocket in the form of lower rents as it expands rental housing supply.
And if demand for housing is as inelastic as you claimed earlier in order to get that 100% price movement from 5% increase in demand, then that accelrated depreciation is lowering my rent a LOT. (See what happens to price when you shift supply out on an inelatics demand curve. It drops a LOT.)
"Try finding buildable land for single family homes within the District of Columbia (or even the inner suburbs) and you'll see how inelastic the demand curve is here."
ReplyDeleteUm, that's supply.
anon said:
ReplyDelete"There have been major bubbles in both the auto and oil industries for a long time now. The price differential between taking the bus and owning a car is a no-brainer. I cannot believe that you autoheads subject yourself to that kind of punishment. The fundamentals between the bus and the car point to the only logical conclusion: Take The Bus."
but you forget, the bubbleheads have already previously claimed that a car is a good investment! yes, they buy it for its investment value, so the rest is all just inconvenience!
"Try finding buildable land for single family homes within"
ReplyDeleteEver hear of "Rock Creek Park" Lance? ;-)
I'll be nice: Yes, Lance screwed up on the marginal tax analysis because he didn't understand that you subtract the standard deduction from the itemized in order to calculate the marginal gain from itemizing.
ReplyDeleteBut Lance has made worthwhile point that once you take the mortgage interest deduction, you also get to itemize a lot of other good things that weren't totalling up to $10,000 before. And that should go into the calculation.
When doing the math, just don't forget to put that $200 extra a month into the rental column to cover the standard deduction.
"There have been major bubbles in both the auto and oil industries for a long time now. "
ReplyDeleteSales are slow at GM! The bubble is bursting! The bubble is bursting! You car owners are SO screwed!
Lance said...
ReplyDelete“but you forget, the bubbleheads have already previously claimed that a car is a good investment! yes, they buy it for its investment value, so the rest is all just inconvenience!”
But Lance, there’s no bad time to buy a car! Even if you don’t have a down payment, I’m sure the car salesman will work a deal so you can drive off the lot in a new car today!
Lance said: "Where you are erring is in your assumption that "Your total itemized deductions pre-house would be $5000." If you are entitled to a $10,000 standard deduction and you are an average taxpayer"
ReplyDeleteBut it's dumb to assume you're an average taxpayer when you could just total up the itemized deductions to see where you're at in relation to the standard deduction. Why assume when I could just calculate?
Lance said: "your total itemized deductions pre-house (and pre-medical expenses and/or pre-chartiable contribution and/or pre-certain other business expenses) deductions should be around $10,000 and NOT $5,000."
Here's where you're making a serious, serious error. The average taxpayer is calculated as an average across all taxpayers. That means that it's based on homeowning and non-homeowning taxpayers.
In assuming that I'm the "average taxpayer" I'm implicitly assuming I already have at least a partial house, because the average also includes homeowning taxpayers. But that's incorrect. I want to see what going from zero house to one house does for me.
In other words, assuming that you're the average taxpayer pre-house is wrong, because the average includes homeowning taxpayers.
Keith,
ReplyDeleteNice tax example. A $600 monthly mortgage. Very realistic. Nice way to try to minimize tax benefits of home ownership. Your analysis is as poor as the data you base it upon.
kbr7171 said....
ReplyDelete"the population is growing (in Japan) yet housing is down. Shoots that theory to hell."
and then
kbr7171 said...
"Anon,
I'm completely aware of the flat population growth in Japan."
"Group suicide in Japan
ReplyDeleteShanghai Star. 2005-04-07
ON February 5, police found nine bodies in two cars in central Japan in what appeared to be two group suicides. All nine appeared to have died of carbon monoxide poisoning. "
They've been happening in especially large numbers in Japan, where suicide rates are among the world's highest. In Japan, more than 30,000 commit suicide every year. Suicides in that country hit a record high in 2003, exceeding 34,000.
If 30,000 people were to kill themselves in Texas every year, and Texas had more deaths from natural and accidental causes than it had natural live births, AND nobody was migrating into Texas at all: houses would get real cheap, real fast in Texas.
ReplyDeleteThis is what is happening in Japan TODAY, regardless of the economic mania that took place there nearly two *decades* ago.
But by all means, please do point to the distinct similarities between the US and Japan, because I don't see them.
Japanese office postulates on the effect a declining population will have on the real estate market there. Imagine, in less than 100 years, this nation will have only 50% of its current population. Why bother building new homes today?
ReplyDelete"The Japan Times recently reported the projections of Iwao Fujimasa, a demographer with the National Graduate Institute for Policy Studies. According to the Times, Fujimasa "believes that while depopulation could depress the real estate market and affect the financial standing of banks dependent on real estate prices, as well as rattle the pension system, it will probably have a big plus side. He pointed to possible trends such as boosting gender equality, breaking down generation gaps and ultimately allowing for a more relaxed way of living. Land prices will fall, people will be able to afford bigger homes, and the daily crush on trains will be lessened."
"2006 is a significant year for Japan. Demographers agree that sometime this year the Japanese population will stop increasing and start decreasing -- from today's 127 million to about half that figure by 2100, according to the National Institute of Population and Social Security Research. But when it comes to the interpretation of this scenario, there's less consensus."
http://www.wired.com/news/culture/0,70013-0.html
Anon,
ReplyDeleteFrom the very stats you posted here...
Birth rate:
9.37 births/1,000 population (2006 est.)
Death rate:
9.16 deaths/1,000 population (2006 est.)
Is that an increasing population? Yes! Is that a "flat" population growth? Yes!
Your apology is accepted.
This comment has been removed by a blog administrator.
ReplyDeleteKeith said:
ReplyDelete"In other words, assuming that you're the average taxpayer pre-house is wrong, because the average includes homeowning taxpayers."
That isn't correct from what I learned in tax class back when I earned an accounting degree. I was taught it was meant to include the average of all the "non"-special deductions such as the mortgage interest deduction. The last time we chatted about this some tax lawyer agreed with me on this ... If you have a chance, google the subject ... I will when I do. If I am correct, would that make homeowning more appealing to you even a little?
"I am one of those who is still rolling in dow thanks to what you call a bubble. You seem to have missed the boat to financial freedom."
ReplyDeleteApparently you weren't "rolling in dough" during the 1990's stock market bubble, because if you had been you would have learned your lesson about bubbles. Every newbie feels rich and smart at the top of a bubble.
Since you don't know how to spell the word "dough", I suggest you go back and retake English 101.
"Stop being a loser and go back to economics 101. Remember supply and demand? Well, mr. ignoramous, this is how it works: You have x ammount of population growth and Y ammount of housing supply."
It is good that you remember econ 101, but it is also obvious you never went much beyond that. I recommend you take a course on money and banking to learn how interest rates affect real estate prices.
By the way, I rent but my boat to financial freedom is sailing quite nicely due to a rising, but fairly reasonably priced, stock market.
The topic of Japan is dead. Much like the majority of it's population size circa 2101. (less than 100 years from now)
ReplyDeleteDavid wrote:
ReplyDelete"I was blogging about the bubble in May 2005, well before the mainstream media caught on to the story!"
The financial news media has been talking about the housing bubble for years. The Economist wrote about it in 2003 and probably earlier. (They also correctly called the 1990's stock market bubble years before it peaked.) I recognized there was a bubble in 2001. It was only a "tiny bubble in the wine" back then though.
A link to the actual article in The Economist would be relevant and useful. A link to their home page is superfluous.
ReplyDelete"The financial news media has been talking about the housing bubble for years. The Economist wrote about it in 2003 and probably earlier. (They also correctly called the 1990's stock market bubble years before it peaked.)"
ReplyDeleteThe economist is NOT the Mainstream media. Time, Newsweek, USAToday, NYTimes etc are.
Ahh, The Economist is standard reading in my neighborhood. There are stacks of them delivered to my building. Stop by sometime, and I'll show you the circulation numbers: It's more than 500,000 a week in North America. What do people subscribe to in Silver Spring? TV Guide? USWeekly? People for heavy reading?
ReplyDelete"A link to the actual article in The Economist would be relevant and useful. A link to their home page is superfluous."
ReplyDeleteMost of The Economist's articles are available for paid subscribers only, but you're in luck. Here's an article they published in 2002:
http://www.economist.com/opinion/displaystory.cfm?story_id=1057057
They wrote:
"The recent surge in house prices in many countries has largely been driven by low interest rates....
"The optimists argue that there is little to worry about. With interest rates so low,homebuyers can comfortably service bigger mortgages and so support higher house prices. But lower interest rates do not necessarily justify more borrowing and higher house prices; homebuyers may be suffering from a bout of money illusion. Short-term interest rates have fallen to their lowest for 40 years in America and Britain mainly because inflation is so low. American real long-term rates are only a tad below their historical average.
"Lower inflation shifts the profile of payments over the life of a mortgage. When inflation and interest rates are low, borrowers pay less in the early years, but more later on as the real value of the mortgage is eroded more slowly. But the total real cost of paying off the loan is exactly the same."
In 2003, they wrote an article titled "House of Cards" that is available (again for free, luckily) here: http://www.economist.com/displayStory.cfm?Story_id=1794873
"The economist is NOT the Mainstream media. Time, Newsweek, USAToday, NYTimes etc are."
ReplyDeleteThat's true.... and unfortunate. The Economist does a far better job at covering both global and economic affairs, and they avoid the useless fluff that the masses find so entertaining.
Lance,
ReplyDeleteIt's moronic to assume that you're the average taxpayer when you could just calculate all of your itemized deductions, and figure out how many non-house itemized deductions you would have. Why make an assumption when you can just calculate the answer?
And given the skewness in the distributions of possible deductions, you may not even be very likely to be the "average."
In short, calculate your itemized deductions pre-house. Add the mortgage interest deduction. Subtract the standard deduction. That's the marginal tax benefit from the house.
"If you have a chance, google the subject ... I will when I do. If I am correct, would that make homeowning more appealing to you even a little?"
ReplyDeleteNo, because I can calculate the tax benefit because I can calculate my own pre-house itemized deductions. The "average" taxpayer construct is only useful if you don't know what your itemized deductions would be pre-house.
And given that approx. 70% of taxpayers use the standard deduction, then you are calculating the itemized deductions from a very nonrepresentative sample, which makes the "average taxpayer" construct even more useless.
I like the Economist, but they do have a perma-bear tendency. They were calling for a stock market correction in 1995, if I recall correctly.
ReplyDelete"I like the Economist, but they do have a perma-bear tendency. They were calling for a stock market correction in 1995, if I recall correctly."
ReplyDeleteThey seem to make their judgments based on valuation, which makes sense because there is a high correlation between valuation and long-term future returns.
I've learned that judging valuation is easy, but predicting when the valuation will correct itself is far more difficult.
For example, former Fed chairman Alan Greenspan made his irrational exuberance speech 3-1/2 years before the market turned. (If the chairman of the Fed can't predict the near-term financial future, what chance do the rest of us have?) However, if you look at the performance of stocks between then and now (10 years), you'll see that they underperformed their historical average by about 2-3%, even though there was a huge bull market in the interim.
The late 1990's stock bubble and today's real estate bubble have been really exceptional. It's a close race, but the late 1990's stock bubble probably beat out the 1920's stock bubble to be the largest stock bubble in American history. Today's housing bubble has nothing comparable within at least the past century. This makes it difficult to use history as a guide to what will happen in the future.
Judging valuation is easy. Predicting future events is very difficult.... just ask your local meteorologist.
"Today's housing bubble has nothing comparable within at least the past century. This makes it difficult to use history as a guide to what will happen in the future."
ReplyDeleteWhat are you talking about? Don't you know? The reality on the ground in Japan right now, today, is a precise guide to the future of the United States of America. The parallels are astonishing, especially the way Japan actively blocks all immigration based upon centuries-old beliefs of their own racial superiority. It precisely mimics the US policy toward immigration from Mexico, for example.
David said:
ReplyDelete"The economist is NOT the Mainstream media"
Apparently you've never lived anywhere but the US. The Economist is the grand daddy of the mainstream media. Probably read by more people worldwide then the other 4 combined!
$8.5 trillion national debt is equivalent to almost 3 whole stacks of $1 dollar bills that reach from the Earth to the Moon. $1=.004 inches.
ReplyDelete"$8.5 trillion national debt is equivalent to almost 3 whole stacks of $1 dollar bills that reach from the Earth to the Moon. $1=.004 inches."
ReplyDeleteWe all know that the higher the stack of $1 bills, the harder they will fall, and the more doomed people who own homes will be. This is basic economics.
But the difficult question that is being avoided is: How high did the stack Japanese Yen reach before it fell? Mars? No, nothing as lowly as the moom or Mars. It reached to Saturn, people.
If ever there was a case for Keeping Our Powder Dry, it is the stack of Yen that reached Saturn before it fell and destroyed the economy for homeowners in Japan, leaving non-homeowners there unscathed.
I will say this for Lance.
ReplyDeleteI did check what our itemized deductions would have been, and they were closer to $10,000 than I expected. Our state taxes alone got us above 7k. Start throwing in our personal property taxes, charity, etc., and it gets reasonably close to 10k.
So Lance's rule of thumb of assuming pre-house itemized deductions does work well in my particular case. You should still do this for yourself, instead of using the average taxpayer rule of thumb.
Even with this, when I calculated the rent/buy decision in my area, things are still pretty crazy.
A lot of it comes down to your ownership premium. We can think about that by looking at it from the pespective of becoming your own landlord. You are now deciding what percentage of your carrying costs need to be covered from day 1 for you to make the purchase.
If you believe you need 80% of your carrying costs covered on day 1 to become your own landlord, then you would pay a 25% premium, because (1/.8)=1.25. In that case, the hedonic equivalents of my place would then be overvalued by between 25 and 30 percent.
If you believe you only need 70% of you carrying costs covered on day 1 to become your own landlord, then you would pay a 43% premium, because (1/.7)=1.43. In that case, the hedonic equivalents of my place would then be overvalued by around 15 percent.
"Start throwing in our personal property taxes"
ReplyDeleteahhh, the great State of Virginia. Pay 'personal property tax' on the same depreciating asset, over and over and over again. This is on top of the sales tax you paid when you purchased the depreciating asset.
Someone has to pay for this guy's lifestyle;
Senator says he's sorry for "macaca" comment
By Tim Craig and Michael D. Shear
The Washington Post
RICHMOND, Va. — Sen. George Allen, R-Va., apologized Monday for what his opponent's campaign said were demeaning and insensitive comments the senator made to a 20-year-old volunteer of Indian descent.
A wise man once said: "I haven't yet figured out if making racist comments in public in the state of Virginia is a help or a hinderance to a political campaign. It could go either way."
ReplyDelete"Apparently you've never lived anywhere but the US. The Economist is the grand daddy of the mainstream media. Probably read by more people worldwide then the other 4 combined!"
ReplyDeleteI was talking about the US as this is a US based housing bubble blog.
"I was talking about the US as this is a US based housing bubble blog."
ReplyDeleteDuly noted.
Now, about the Japanese economy: it is a precise model of the US economy. We only need to look to Japan for blah blah blah...
The property tax on cars in VA gets a lot of bad press. I know I dislike it.
ReplyDeleteBut still, I'd rather pay a fixed percentage on a depreciating asset than have a higher state income tax. Because, like all housing and bubble heads, my income goes up every year.
My $0.02.
"But still, I'd rather pay a fixed percentage on a depreciating asset than have a higher state income tax. Because, like all housing and bubble heads, my income goes up every year."
ReplyDeleteDo people with high incomes seek tax shelters, even if they reside in VA? I think I read that somewhere. Gee, I wonder what class of asset, and what form of financing for that asset, serves as a line of defense against the tax man?
"my income goes up every year"
ReplyDeleteSo do your operating expenses for the depreciating asset. Average yearly expense for owning a car is nearly $8K.
By the way, did anyone see that Ford is in a world of hurt? They announced multiple plant closures today.
Those of you who own cars are SO screwed! The automobile bubble is bursting, and the gasoline bubble is next! Their prices are way out of line with historical fundamentals!
Keith,
ReplyDeleteThe issue was never "is it better to do the full calcs are just assume you are better off itemizing?" Of course, one is always better off doing the full calculations! That is a given! The issue was "Do you lose all the dollars you would otherwise get from a standard deduction when you decide to itemize because you now have mortgage interest (and property taxes) to deduct?" As your example has shown, you don't. So, it is misleading when bubbleheads unequivocally say "Remember, when you take the mortgage deduction, you lose the standard deduction." Such a statement doesn't account for the other deductions you get to avail yourself of when you itemize ... as you have pointed out.
It's interesting how depending on one's perspective, a statement may or maynot be misleading. I guess this is because we all come to the table with different experiences and different beliefs on which to base our outlooks. I think this is part of the reason that David feels adamant about his having "called" that DRIO realtor out. And why he feels his threats were justified and he is ready to stand by them. I can see his viewpoint, as at his age and in his position, I probably would have felt the same. I can also agree with the ANON though who pointed out how embarrassed David will someday feel when he looks back at his threats. But, I don't think David should worry about this, or about others seeing them sometime down the road. We've all been young, and the indiscretions of youth are definitely forgivable. No, while David will someday regret his post (assuming maturity follows age), I can't see anyone holding them against the then "mature" David. They'll write it off to the "immature" David. That is the luxury of time passing. And by that point, David will be in a big house somewhere trying to sell if for top dollar ... and finally understanding why the realtor was doing the right and honest thing for his sellers by engaging in what is called "puffing" and is anything but illegal or even unethical. After all, I think I've heard David claim that he announced the bubble to the world before the mainstream newspapers ... And that is "puffing" too in its truest sense!
Keith said...
ReplyDelete"I will say this for Lance.
I did check what our itemized deductions would have been, and they were closer to $10,000 than I expected. Our state taxes alone got us above 7k. Start throwing in our personal property taxes, charity, etc., and it gets reasonably close to 10k."
ha! I just read this ... I'd already posted my last post. Note also that if you are single, the standard deduction is only $5000 ... I'm pretty sure that the standard deduction is not meant to estimate mortgage and property tax deductions and the like. If I get some time this weekend I will do more googling on it.
Ford Dealerships are offering kickbacks and incentives for buying NOW. See http://www.tedbritt.com/ou/fairfax-ford/index.do?make=ford
ReplyDeleteTed Britt Ford is offering $100 off any vehicle instantly, and they are offering a chance to "win 100,000".
This stands in stark contrast to the fact that Ford Motors just announced layoffs, plant closings, and a 21% reduction in vehicle production. *The car bubble is bursting*, yet Ted Britt expects us to buy now!?
These shameless, slimey tactics will not, nay, MUST not stand. I will report them to the BBB if they do not stop trying to incent people to buy cars in this uncertain car market!
Oh, Lance, you didn't remember that keith has a FEE-ONN-SAAAAYYYY?
ReplyDeleteI'm sure she's bubblelicious, too.
Mrs. keith
Hi, I'm the Anonymous Poster above. I keep getting owned by Keith, so now I'm obsessed with him.
ReplyDeleteThis is the Anonymous Poster again. Maybe I'll throw in some lame link, so you can all keep laughing at what a loser I am.
ReplyDelete-fling-
ReplyDeletewrrrreeeeeeeeee..... Splash.
Looks like someone is trolling for keith, and keith has been hooked.
Keith is laughing at me. I'm a dancing monkey.
ReplyDeletekeith takes every bit of bait tossed into the water. Lets see if he replies twice now..... wait for it... wait for it...
ReplyDeletePlease respond Keith. I need you.
ReplyDeleteMy life is empty without Keith's responses.
ReplyDeleteI'm still waiting. I'm anxiously hoping for Keith to respond. I need him.
ReplyDeleteOh! keith takes the bait again, and he does respond twice in a row as predicted.
ReplyDeleteSooner or later keith will catch on to the fact that the fisherman doesn't capitalize keith's name. When keith refers to himself as "Keith", it is easy to identify.
I might to start posting in Keith's name. I hope that last post fools people into thinking Keith took the bait, and I'm not here obsessing over him.
ReplyDeleteI may have to start posting in Keith's name. I need to pretend to be him.
I'm so clever. keith Keith. I love saying his name, both capitalized and uncapitalized. Over and over. How I yearn to make him pay attention to me.
ReplyDeletekeith Keith. I've been begging for your presence for the last 12 posts. Make it 13.
ReplyDeleteLOL! Dick!
ReplyDelete15
ReplyDelete17
ReplyDelete18
ReplyDelete20
ReplyDelete21
ReplyDeleteI think David should just start deleting all posts made by people who go by the name "anonymous".
ReplyDeleteAgreed.
ReplyDeleteEvery economy has an up and down cycle. While the bubble of the tech market was a very well deserved correction due to the fact that many of the dot coms had no viable or realistic business plan, not even an income projection for another 7 to 10 yrs. The real estate market on the other hand is a basic supply and demand based market. It's the most important basic need, before bread and butter, unless you want to have your dinner in a tent, out in rock creek park.
ReplyDeleteThe sad fact is that I feel dumb about replying to some idiots who have no clue about the housing market, and make dumb ass statements as population doesn't affect housing supply/cost. The absolute moronic pseudo intelectual rethorical masturbation just goes on and on in here, as in statements of absolutes disregarding other variables ie. Japan has an aging poplulation therefore it must be true that they will soon start giving away land for free. Asenine statement that disregard to explain why foreign investors and banks are begining to invest billions of dollars in purchasing Japanese real estate even if according to the mass media, Japanese are droping like flies. I hope some of you have picked out your homeless shelters, once your rent goes up another 25-35 percent next year. Rememeber not to hate your landlord or some boogy man corporation. Instead do hate yourself as increasing demand for the rental market. Begrudge as well the most educated populace on the face of the earth who happen to call the Washington dc metro area home and many of them are foreigners even from accross the southern border. An increasing many do continue to afford 3500+ a month in rent cause it's cool nowdays to live beyond your means, it's flashy and besides it makes you feel good. The real winners in the world, the real millionaires, are your typical suburbanites, driving that junk / economy car. Just as it has always been the American way, they work hard, save and invest ....even in real estate. Not your big spenders, and you won't find many at Macy's or at your local starbucks. That's why you will never find me there either, I didn't get to be where I am by renting and guessing the right time to buy. Instead I did what succeful folks have done, I save and buy and continue to do so. Every year I don't buy, I have noticed a minimum of 10 percent to even 50 percent increase. Real estate does not forgive wreckless investors and fear monguers. This is for the resolute and the long term visionaries.
You can ban anonymous blogers all you want but if you read this. I know at least that I have made an opposing view from a real world apporach. As I live and breath real estate every day. This is my life and no I am not a real estate agent or any other agent of any kind. I am here to express my right to express my taught as protected in the constitution of the United States. Some of you will never get that point since you are way way left of the spectrum, left all the way left into Stalin and lenin's lap.
I like anon 3:42's middle class mantra. It's cute.
ReplyDelete"I like anon 3:42's middle class mantra. It's cute."
ReplyDeleteYou were able to decipher that mess?