Sunday, September 17, 2006

BubbleSphere Roundup

There are many other fine housing bubble blogs in the Washington, DC - Baltimore area. Such as the Baltimore Metro Area Housing Blog, Southern Maryland Housing Bubble News and DC Housing Bubble Blues.

The Socket Site blog is doing a tremendous job keeping up with the San Francisco housing market.

Many solid graphs at the Matrix Blog. These graphs show how unsustainable the housing boom has been.

Percentage of Reduced Listings Per Market brought to you by Bubble Markets Inventory Tracking. Excellent Post!

Over at Patrick.net they debate the State of the Landing.

There is a dearth of comments at the Realtors' Blog. Why?

34 comments:

  1. David,

    Here's a great article about Washington you might want to feature:

    "This is a global center. It's one of the 10 most important economic regions in the world, a place approaching the influence of a London, and to not think about it that way is tragic."

    www.washingtonpost.com/wp-dyn/content/article/2006/09/17/AR2006091700399.html

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  2. Lance, do you consider yourself part of the "Creative Class"? You think you know just enough to be Dangerous...hahahha

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  3. Interesting vidoes from Bloomburg Home price appreciation of the last 5 or 6 years to be erased
    ---http://www.europac.net/media/Schiff-Bloomberg-9-8-06_lg.wmv

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  4. "Richard Florida -- theoretician du jour about what makes cities succeed"

    aw man reading that was a struggle in smug tolerance.

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  5. So Lance, what is Mr. Schiff telling us is?

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  6. Hey Lance... that is a great article!

    I have a question though...

    If "global centers" don't have housing bubbles, then what the heck is going on in LA, NY, etc?

    Oh wait... DC is different... forgot about that.

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  7. Anon asked:
    "If "global centers" don't have housing bubbles, then what the heck is going on in LA, NY, etc?"

    Paradigm shift. We're going into a global economy where the spread between the haves and the have-nots will resemble more the model of an India than of a western democracy. In such a shift, nominal salaries of the have-nots don't get cut outright ... The purchasing power of their salaries instead gets eroded via inflation. In the end, everything costs more in nominal dollars and the haves have enough new nominal dollars to cover the increase while the have nots don't. In the new global economy, the rift between where the haves and the have-nots will live won't be discreet national boundaries but tend more toward cities with creative talent --- whereever on the globe they are located --- and cities, towns, rural areas without it.

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  8. Lance,

    I'm intrigued by your position. Could you talk a bit more about who the have's and have nots are? and how the have's will prove capable of handling this paradigm shift? Are you saying that the have's will be in DC proper while the have not's are living in surrounding suburbs or exurbs even when certain areas like Montgomery County and Fairfax County are still very expensive? Will these areas simply become havens for have nots? Will the have's who purchased out in Loudoun be content with selling their homes are a discount to the have not's? How will "have's" who currently do not live in DC proper be able to move in?

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  9. OriginalDCer asked:
    "Are you saying that the have's will be in DC proper while the have not's are living in surrounding suburbs or exurbs even when certain areas like Montgomery County and Fairfax County are still very expensive?"

    No. Montgomery County and Fairfax in this century hardly qualify as rural or separable from Washington in an economic (or even political) sense. Another way to look at the situation is, can you envision a world where the folks who live in metro Washington have a lot more in common with the folks who live in metro London then either of them have with the folks living in their respective "rust-belt" cities? It's already happening ... big time. National boundaries no longer create a strong barrier to cultural and other exchanges. It's not just jetsetters anymore who are, well, jetsetters in a figurative if not literal sense.

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  10. So, there are no housing bubbles? Just really wealthy people who will sell homes to other really wealthy people? It sounds like in the future the have's won't need the have nots for much of anything?

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  11. I just wanted to expand on this comment I made earlier:
    "more the model of an India than of a western democracy."

    It took many years for western democracies to develop and implement all the laws and practices to ensure a more even distribution of wealth. The French Revolution began the process and it continued on through to the New Deal and even into the Johnson years. However, all the laws and practices ensuring this are basically nationally-based (i.e., national laws). So, what happens when the economy is no longer nationally-based but globally based? ... When business has no barriers to seeking out the least expensive means of production ... And the only constraints to ensuring a more equal wealth distribution are international laws and regs ... which are very very weak in this area ... ? I.e., We're going to go back to a pre-"New Deal" era (at a minimum) whether we like it or not until international laws and regs can be established to ensure the same protections that the western democracies had guaranteed in the time of national economies. I.e., we shouldn't be surprised if we start to resemble an India in terms of wealth distribution (including the owning of land) more than we do wha was America in the last century.

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  12. that's jusy fuggin great, hey Lance thanks for pointing out the fact that globalization is gonna turn the USA into a thrid world shit hole like India.

    doesn't 90% of people living in India live in poverty, that just sound like a real joy to me.

    BTW have = people that work for the government and have nots = everybody else.

    i guess i better look for a new country cause this sounds like nothing i would wanna be part of....that is if Lance is right.

    EOT

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  13. TK,

    Sorry to bum you out ... Actually though, I think on the whole we will do pretty well in a global context. By most standards we are better educated and possess more resources than most others. As such, becoming another India is an exaggeration I didn't mean to make ... I was just pointing out that that was the direction we were taking. Now, in this new world order will all people and all "local economies" be equally able to compete and come out on top of a new world economic order? Obviously not. For example, I see the closing of Ford plants here as only the first of many such closings. Manufacturing can be done for cheaper in places like China. And only if change our laws to allow this type of cheap labor to exist will we be able to compete for this type of business. We won't (and we shouldn't.) So, don't expect property in places like the areas around Detroit manufacturing plants or other similar places to increase in like manner as in DC or NY. Ditto for the great farming areas.

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  14. Conveniently - Lance puts himself on the 'have' side of the equation. Why? Because he owns a (currently) depreciating asset/ high housing expense.

    Sounds about right to me...

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  15. Lance,

    Do you see these other areas such as Detroit that you have pointed out as having no impact on DC or other state..or the entire country? What impact do you believe these people will have on our National Economy? if any.

    I guess I don't see DC as existing in some bubble where it doesn't impact us. If large segments of the population suffer..if major US corporations sugger it would seem like it would impact more than just those who immediately lost their jobs. But I'm not economist.

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  16. anon said:
    "Conveniently - Lance puts himself on the 'have' side of the equation."

    Sorry, I didn't state where I felt I stood ... Please stop putting words in my mouth.

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  17. originaldcer said:
    "What impact do you believe these people will have on our National Economy?"

    Bottom line is that we're quickly heading to a point where there won't be a "national" economy. It will have been replaced by a global economy. When viewed in that context, a lot of the issues you raise become irrelevant to the discussion. For example, you say "if major US corporations sugger it would seem like it would impact more than just those who immediately lost their jobs." What is a major "US" corporation when all the corporations now have equal interests abroad? What makes Ford for example and American corporation? It is the largest producer in the UK as well as other places. Its investments, sales, management, and stakeholders are global. What would tie them more to the US than to elsewhere? An even better example is Chrysler ... Bailed out by the US taxpayer and nowadays called "Daimler-Chrysler" with a mainly German management team. An anology of what to expect might be the economic shift that occured in our own nation when local/state corporations based in medium-sized New England and Midwestern Cities suddenly found themselves operating in a national environment and relocating their management teams from places like Hartford and Peroria to NYC and Chicago. The second rank places, the ones that didn't rise to lead in the new paradigm were never the same. Fortunately for us, in a world where the new paradigm is a global economy, Washington is a big player. Detroit may not be. All IMHO obviously.

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  18. one well-placed dirty bomb (thanks non-existant global borders!) will shake that paradigm to the ground.

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  19. Anonymous said...
    "one well-placed dirty bomb (thanks non-existant global borders!) will shake that paradigm to the ground."

    Not really. A dirty bomb would be a scare factor, that's all. It would kill no more people than any other package bomb. I've worked with people in the know on this, so trust me on this one. From a common sense standpoint, do you really think both Bush and Cheney and just about every other high-level govt official would be living in this area if the effect were really as great as your statement implies?

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  20. So Lance, super RE speculator, terrorist expert and now global economic authority. What pushed the US into this new “shift” during ’04, ’05. Seems that Al Gore invented the internet quite some time ago. Cars are still made in Japan/Mexico/you name it. What recent key set of circumstances set this ball a rolling? Seems to me the US has been active in this global economy for a while now. I take it you don’t agree with Schiff’s position on the economy?

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  21. Look for the answers to those questions and many more in "The Best of Lance" available in book stores this fall.

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  22. Lance,

    DC has no doubt evolved tremendously in the past 5-6 years. From my own perspective (and i'm sure yours also), it's been nice to see DC become something more respectable or representative of a national capital as opposed to the crime and drug-infested hellhole that it had been previously.

    But the statement "It's one of the 10 most important economic regions in the world, a place approaching the influence of a London, and to not think about it that way is tragic." is asinine.

    There is no doubt that DC is an international, influential and important city as you have repeated stated in various posts here... but keep in mind that DC's renaissance has been enabled not by the influx of legitimate, economically productive activities, but due to massive increases in federal/state/local gov't spending which has subsequently trickled down to other companies in the area, many of which are almost entirely dependent upon government expenditures.

    What is really tragic is that most people who live in DC don't stop to think for half a second most of their good fortune and wealth results from misappropriated government funds, misguided government policy, outright corruption, and the wholesale thievery of the American taxpayer.

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  23. Anon said:
    "But the statement "It's one of the 10 most important economic regions in the world, a place approaching the influence of a London, and to not think about it that way is tragic." is asinine."

    Uh thanks for attributing that quote to me, but I can't take credit for it. If you re-read my post you'll see I was quoting a Washington Post article. As for "misappropriated government funds, misguided government policy, outright corruption, and the wholesale thievery of the American taxpayer." Well, I guess if you want to consider being responsible for the entire country's well being ... and by extension the world's ... a bad thing, then I guess we should fess up to our horible deeds in making this a livable world for you and those other unappreciative citizens like yourself.

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  24. Lance,

    Interesting theory.

    But as you note we're now in the global economy. Thus, our costs must be competitive on a global basis. If the costs for a certain service get out of whack with what global competitors can provide, the work will shift across national boundries.

    Home prices have lost all identification with any non-dimensional fundamental that matters. Home prices will drop.

    Oh, if there become too many have nots in the USA, I have no worries it will be corrected. Americans have traditionally been described as "latent anarchists." If things get too out of balance, we'll have the 1960's again. Personally, I think it will correct before then. Oh... starting soon and really getting going by 2Q2007.

    Neil

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  25. Neil said:
    "If the costs for a certain service get out of whack with what global competitors can provide, the work will shift across national boundries." - my italics ...

    Lower cost competitors can't (yet) provide the necessary quanitities of high-level managerial and technoligical expertise required by today's market place. (Though as the shifting of tech jobs to India shows, that may not always be the case.) Foreign competitors also most definitely cannot provide the "security clearance" work which is mainly centered around Washington.

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  26. Dear Lance:

    I read the article and I was referring to the article. My apologies for any misunderstanding.

    You did, however, refer the rest of us to the article, where, presumably, the rest of us slack-jawed, unenlightened not-living-within-the-Beltway idiots were supposed to believe the statement that DC is on par with London, economic powerhouse, blah blah blah blah.

    But then again, judging by your comments, you're probably one of the tragic folks I was referring to in the last paragraph of my previous post.

    P.S.:

    How many more white collar thieves, lawyers and lobbyists does DC need to prop up a city that still isn't remotely on par with a Seattle, Chicago, San Francisco, Boston or New York, sir?

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  27. lance,

    It doesn't matter if DC is considered by some to be a "world-class city" or by some to be a noisy, cogested pig-sty. (I lived there from 1989-1992 and would tend to agree with the latter.)

    The only thing that matters in terms of housing prices are rent-to-mortgage and income-to-mortgage ratios.

    Everything else is realtor-speak.

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  28. Thierri, Bubble Head #06453September 19, 2006 10:55 AM

    As home prices crash through the floor I will be standing by at the ready with cash. I will swoop in and buy a home for pennies on the dollar. Also I will swoop in and pick up the hottest wives of the soon to be unemployed realtors.

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  29. Lance,
    So, with all these companies going global..you don't see any impact on white collar professionals? I mean...you mentioned that you forsee these positions eventually becoming global as well. Which would mean that everyone professional and paraprofessional is in jeopardy. How would these facts support the maintenance of home prices. Do they not mean that eventually prices would drop as more people lose their professions to people in other countries?

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  30. originaldcer, these positions already ARE global. And more are required the more global we become. It's not a zero sum game when it comes to the economy. What we're talking about is "national" "social contracts" not working in a global economy. Ask the French how that is already starting to effect them? Remember the protests there when the government wanted to take away the longstanding prohibition against firing people from a business? The government there has realized that in order for its people to be competitive in a global marketplace they can't come with such a constraint ... or the global companies will just go elsewhere to get their workforce. So, again, it's not a matter of us losing jobs ... it's a matter of no country being individually able anymore to force global companies to "do the right thing". Only a global government could do that ... And we don't have a global government. Bottom line is that modern technology has outstripped national governments' abilities to enforce "doing the right thing". In at least the shortterm, this will mean a return to the economies of old when the haves and the have-nots were separated by far larger gulfs than they are now.

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  31. Lance,

    I guess my overall question is how will this affect the prices of homes. You've said a lot about making positions global. How will this affect the prices of homes. Maybe I'm a bit slow, but I don't see how increase the gap between haves and have nots will allow the value of homes to increase of maintain value. Obviously there will be more have nots than haves...since not all of us can be employed by the government etc...and this global environment will push down wages.

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  32. Originaldcer,

    I don't have a straightforward answer for you because we are talking about a seismic shift where the very basis on which we measure things (i.e. the value of money) will shift as part of the adjustment. And since I don't have a lot of time to write tonight, let's just try to imagine together the consequences of changes that include (1) a widening divide between the haves and the have-nots (i.e. a reversion to what we had here pre-20th century .. pre-labor laws, etc.), (2) a world were economies of scale and efficiencies of sourcing globally are so great that the cost of production for most goods and services goes down (but not for land which is fixed barring an ability and a desire to build higher and denser, or travel longer distances), (3) a world where information becomes known quicker than ever and from many sources. Think of what a microcosm of this in the US since the Reagan years has created in terms of large WalMarts for the masses where they can buy better and more for less but with no service or "advisement" included" and the speciality shops of the wealthy where they can buy even better quality but with far more personalized service for higher prices which incidentally they can afford far easier than the Walmart shoper can afford what he/she buys ... Thick how prior to then we all shopped in the same stores (the 5 and 10s or the department stores and supermarkets) and drove cars that despite varying names were really not that very different from each other when you dug under the hood (afterall a 60s Buick was little different from a 60s Cadillac other than that it lacked the leather seats, electrionic windows, and above else, those big wings on the back!) I think it might mean fantastic city centers and "pods" of smaller satelitte cities scattered around the city center where house prices skyrocket to match the exclusivity and convenience offered by these centers, along with relatively much cheaper (but better than today) housing in other areas. And I think places like the Washington metro area and the London area and other cities where the business of the global economy gets decided become more expensive in general than cities and towns where it is not. Does that mean that overall over the longterm Washington prices will go up up and up? Yes, but so will salaries for just about all of us. Like I said the very basis of our measurement will change. The bottom line is that from a personal viewpoint I am far less concerned with timing any market now or at any time in the future and more concerned with placing myself workwise and homewise where the trend of time will carry me forward. Do you understand what I am trying to say? As an anology, if you were living in Iraq, should you be concerned with getting the best deal on a house? ...or on just getting out to a place where you and yours will have more opportunity? Like I've said over and over, a house is an expense ... not an investment. It needs to work for you in many ways but not necessarily as a means of getting "a return on your money." The minute you start to think of your home in those terms, you've lost sight of what a home really is, and you're doomed to eventually shoot yourself in the foot. You've become a flipper ... and eventually, there will come the day you lose a lot.

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  33. I laughed out loud at this and then stopped reading:

    Lance said:

    "(2) a world were economies of scale and efficiencies of sourcing globally are so great that the cost of production for most goods and services goes down (but not for land which is fixed barring an ability and a desire to build higher and denser, or travel longer distances), "

    So land is different huh? Seriously Lance, with the technology to communicate rapidly from anywhere on earth to anywhere else on earth at just about any data speed one would require, what continues to anchor people to the city? Remember, their jobs are now global, so they're not necessarily staying close to a city center for their job's sake.

    Oh yeah, and since the production costs of all of those goods and services are so depressed, and the have's are shooting way ahead of everyone else, why can't they just travel by personal jet to the "office" when they need to? Meanwhile they'll go live on their 4000 acre farm in the middle of Iowa where, and don't lose me here, land is cheap and available?

    Lance, you're spouting on and on about paradigm shifts, and massive changes on a global scale, and the concentration of wealth into the have's... You're so disjointed from a rational discussion on home prices it's ridiculous.

    My $0.02.

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  34. mytwocents said:
    "what continues to anchor people to the city? Remember, their jobs are now global, so they're not necessarily staying close to a city center for their job's sake."

    You're talking "production workers". Deals, agreements, decisions, are still made in person. The movers and shakers still need human proximity to each other ... and always will. A flat screen image is not a substitute for an in person meeting when evaluating the sincerity of another. And this doesn't even address the desire of "like to like" association as exemplified by private clubs and associations. Those who require this ... and all the people who support them on a daily basis other than "production work" end products, will always need to live within close proximity of each other. Where they enjoy that close proximity may change over time, but the fact that it is necessary will never change.

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