Resales of U.S. single-family homes and condos fell a surprisingly bad 8.6% in November ... the National Association of Realtors reported Tuesday, even as home prices fell at the fastest annual pace on record. ...Don't worry about all this. The place where you live is special. Also, the recovery is right around the corner, as it has been for the past three-and-a-half years. The recovery originally scheduled for late-2005 is now expected in mid-2009. The economists who overlooked the housing bubble can't possibly be wrong this time.
In the past year the median sales price fell 13.2% — the largest decline since data collection began in 1968 and likely since the Great Depression — to $181,300. Separately, the Federal Housing Finance Agency reported that U.S. home prices fell 7.5% over the 12 months ending in October, according to a monthly index that includes prices for houses with mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac.
The inventory of unsold homes on the market rose 0.1% to 4.2 million, an 11.2-month supply at the current sales pace, according to NAR. The 11.2-month supply matches a recent peak set in April, and is the highest since the mid 1980s, according to NAR. ...
Elsewhere Tuesday, the Commerce Department reported that U.S. new-home sales fell to their lowest level in over 17 years in November. ... New home sales are 35.3% below their level in November 2007. ...
On Monday, federal regulators reported that the proportion of modified loans delinquent by 30 days or more was 55% after six months, while modified loans that were 30 or more days delinquent after three months stood at 37%.
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Elementary economic theory indicates that an over-supply of currency produces inflation.
ReplyDeleteThe current and future US federal administrations are 'printing' currency at a record pace.
The US and world economies in general are experiencing deflation. All are in agreement that the situation is bad.
The US and world governments are striving to reverse the deflationary trend and to produce inflation.
They're going to succeed. We will see hyper-inflation.
The European economy experienced hyper-inflation after the first world war. That inflationary period was a catalyst for WWII.
Are you insulated against inflation? How does one go about insulating themselves against inflation, recognizing that no one is immune? Do snark blog posts protect the blogger from inflation?
Golly James. It's obvious from your postings that you believe that all neighborhoods are exactly the same, that DC is West Virginia, and that nothing in the world has ever changed since the beginning of time. You have obviously never heard of gentrification, which I will explain to you later when I no longer have to work due to membership in the landed aristocracy. You might think you're sitting pretty, but 2009 is going to wipe that smirk right off your face (which I can see right through these blog comments, into your soul). Why do you have to be such a nimrod and not invest in assets whose values are dropping like rocks? Do you hate freedom or what?
ReplyDeleteOh sure, it might look like someone who posts that you're a bitter renter, then is angry at you for not buying, then accuses people of not having a nice countertop is the one who is sweating. But I know it is actually you who is sweating. Because you know that the US about to turn into a West-African type of economy, and those who bought houses, sure they might look silly now, but they will be the overlords in the new society. That will wipe that living-in-the basement renter loser arrogant refusin' to buy smirk right off your face, James. I can prove all of this, of course, but I choose not to. Do you really think I'm going to reveal the secrets of which of us know how to choose the islands of immunity that will protect us from the new world order? To a reactionary change-hater like you?
Merry Christmas, folks!
Let's take bets on how far we get into 2009 before James loses his job.
ReplyDeleteOf course, this depends upon James being forethcoming about his work status.
Patience, do you have a job? or are you living on the massive profits from your perfectly-timed "sale at the top"?
If I tell you about my employment situation, confident, secure anonymous blog posters will just call me arrogant and say it's impossible that I could have advanced skills in a growing industry. What's the point?
ReplyDeleteAre you insulated against inflation? How does one go about insulating themselves against inflation, recognizing that no one is immune?
ReplyDeleteBuy commodities, gold, porkbellies, wheat even HOUSES! I disagree on the hyperinflation call. But if it did come true (and thats a huge IF) anyone who didnt buy a house now would miss the deal of a lifetime.
Some job skills work well both in today's economy and in a post-apocalyptic type situation. Just sayin'.
ReplyDeleteI would think that a lot of the type of people who are savers, skeptical of financial fads and runups, and carefully research their investments might show the same type of thought process when choosing to invest in learning a profession. That's just my opinion. I don't know if it will be fruitful for anyone to try to find some kind of imagined weakness in the position of comment posters...maybe just evaluate the content of their posts since that's what we have here? If not, why not?
"I disagree on the hyperinflation call."
ReplyDeleteThat is fair. It is a fact that inflation is a goal for world governments as of today.
Let's hope they don't overshoot. The "Money Bomb" that will be set off by the next US administration ($850 Billion as of latest estimates) should have the hairs on the back of your neck standing on end.
(The $700 Billion Money Bomb set off by the current administration should be cause enough for concern)
"If not, why not?"
ReplyDeleteBecause you are lonely and scared.
Hey, did you hear that Vladimir Putin recently declared that "The era of cheap gas is ending"?
ReplyDeleteCrazy Vlad
Did you know that Vlad runs Russia? Did you know that Russia supplies Europe with nearly half of its oil?
Hehehe. That is going to do wonders for Europe's economic recovery; whether Vlad's off his rocker or not.
Haha, if hyperinflation kicks in. A house is the last thing you want to own since the cost to maintain it will also be super inflated. Like property taxes and fees. With a $2000 lawn mowing bill, you cannot afford to keep it.
ReplyDelete"Haha, if hyperinflation kicks in. A house is the last thing you want to own since the cost to maintain it will also be super inflated. Like property taxes and fees. With a $2000 lawn mowing bill, you cannot afford to keep it."
ReplyDeleteSo whats better RENTING???? If we have hyperinflation your 2,000 a month rent will be 4,000 a month next year and 10,000 a month the year after that. By contrast, my mortgage payments would be 3,000 a month the first year, 3,000 a month the next year, and 3,000 a month the year after.
Think it through.
" $2000 lawn mowing bill"
ReplyDeleteThat's why property in the city (non-condo) is desireable in the future economy. No lawn. No mcmansion. No massive heating or cooling bills. No commuting expense. Major employment opportunities within walking distance. Rail brings supplies directly into the heart of the community without tractor-trailer rigs.
Hey, that sounds like reversion to the mean; back to the way things were before they got so out of whack!
"Haha, if hyperinflation kicks in. A house is the last thing you want to own since the cost to maintain it will also be super inflated. Like property taxes and fees. With a $2000 lawn mowing bill, you cannot afford to keep it."
ReplyDeleteI am sure then the government will certainly have to 'bail out' all the renters since we are so badly screwed compared to the home owners. Maybe they will even raise the property tax from Home owners to subsidize the renters so they can afford to rent.
Think it through further.
"Think it through further."
ReplyDeleteI think you're both suffering from a world-view that is only 50 years old, max.
We're going back to the 1940's, if we pull out of the crisis at all. That means a lot less consumption, a lot more "Made in the USA" labels, and one hell of a lot less international "trade".
"Careers" in finance and marketing will be part of history. Does anyone remember a career title called "Travel Agent"? Well, "International Hedge Fund CEO" is going the way of the Travel Agent.
Hey, my word verification for this post is: "OMENSIN"
"I think you're both suffering from a world-view that is only 50 years old, max."
ReplyDeleteMaybe, but what does that have to do with hyperinflation - other than nothing...
"what does that have to do with hyperinflation "
ReplyDeleteUmm, errr, uhhh, people who know fundamentals of economics and/or history know that hyperinflation lead to major world events in the 1940s.
Does that answer your question?
We are reverting to the mean. Less consumption, smaller homes, centralized communities, less driving, production of useful goods and services; it is going to look more like the first half of the 20th Century.
ReplyDelete"(11-25) 04:00 PST Washington -- President-elect Barack Obama turned to a leading authority on the Great Depression for his economic team Monday, tapping UC Berkeley economist Christina Romer to head his Council of Economic Advisers as part of his battle plan to address what he described as "an economic crisis of historic proportions."
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/11/25/MN8U14B2BK.DTL
"I am sure then the government will certainly have to 'bail out' all the renters since we are so badly screwed compared to the home owners. Maybe they will even raise the property tax from Home owners to subsidize the renters so they can afford to rent.
ReplyDeleteThink it through further."
You dont understand hyperinflation. In hyperinflation, you can still afford to rent, even at 10,000 a month. In hyperinflation, we have wage price spirals, meaning if you and I make 50K a year now, we will be making 100K next year, and 250K the year after that. Thus your rent is theoretically just as affordable then as it is now.
By contrast, my mortgage payment becomes cheaper and cheaper and cheaper. In sum, I come out way ahead of the game than you do. As does everyone else holding commodities.
So now that you understand more about how hyperinflation works, you need to try to think it through again. You may just want to not respond because its clear you made a mistake in reasoning. Its ok, it happens to the best of us. Just accept it and move on.
"Umm, errr, uhhh, people who know fundamentals of economics and/or history know that hyperinflation lead to major world events in the 1940s.
ReplyDeleteDoes that answer your question?"
No - not at all. Turkey had hyperinflation til a few years ago, yet it got out of it just fine - no 1940 world events. Further, thats not the issue. The issue is if we have hyperinflaiton, is it good to own a house or not?
Hey, here's food for thought. Years ago demographic prognosticators used to say that the retiring tsunami of baby-boomers was going to lead to a boom in real estate in "sun belt" areas of the country.
ReplyDeleteNow it is clear that baby-boomers are stuck in their homes; possibly for the rest of their lives. (savaged 401Ks and ravaged real estate values mean that they aren't going anywhere)
3,548,000 Americans were born in 1950 alone, and they are now on the cusp of retirement. The majority are stuck in place, at best.
How will this situation be remidied? It will fix itself when the boomers die.
"Turkey had hyperinflation til a few years ago, yet it got out of it just fine "
ReplyDeleteLets see; you use Turkey as the basis for your position, and then you undermine your position by stating that Turkey is irrelevant. You get points for trying!
Hey, Turkey wasn't caught up in a "GLOBAL" economic crises a few years ago. It is now.
Turkey's economy is about the size of Michael Jordan's personal financial situation, isn't it? (Mike is a multi-billionaire)
ReplyDeleteYes, Turkey makes a nice air base for the US Air Force. Otherwise...?
ReplyDeleteI hesitated to bring up the Turkey issue because it does distract from the main argument. So take this as A HUGE MEA CULPA. IM sorry I brought this up. Point to you.
ReplyDeleteNow that we have disposed of that, lets get back to the main point which you conveniently ignore. If we have hyperinflation is it better to own a house or not?
Lets see if you can focus on this part of the question now. My guess is no, but well see...
"Lets see if you can focus on this part of the question now. My guess is no, but well see..."
ReplyDeleteLets see if you can read the post with the 9:33 timestamp. My guess is that you can't, otherwise you wouldn't be asking that question.
Sorry, I dont follow. Nevertheless, lets start over: If we have hyperinflation, is it good to own a house or not?
ReplyDeleteAs a physician, I am thrilled to see the collapse of the FIRE economy. The the collapse of these non-productive jobs, staffed by uneducated sobs, making way too much money (classic example: real estate agent)was inevitable. There is no such thing as a free lunch.
ReplyDeleteactually - I forget - you can get a free lunch.... in the SOUP LINE!
ReplyDeleteBwahahahahahah
"Sorry, I dont follow. "
ReplyDeletePerhaps you should slam your head in the door repeatedly until something shakes loose or falls into place. Or both.
Otherwise, the question has been answered. "Asked and answered", in legal parlance.
The "Asked and answered" objection doesnt apply to me. I asked, I answered myself at 9:33 date stamp. I am asking you as part of my cross-examination. I asked, YOU havent answered. I am entitled to an answer.
ReplyDeleteSo I will ask again. If we have hyperinflation, is it good to own a house or not?
OR, are you saying, since at 9:33 I said if you made a mistake in reasoning, just be quiet, and this is your attempt to do so, fair enough.
ReplyDeleteSorry - I didnt know you are the same anon. I figured any educated anon who knows about "asked and answered" would have a better understanding about hyperinflation.
"I am entitled to an answer. "
ReplyDeleteNow I really have seen everything. An anon on a blog demanding an answer from another anon on that blog.
For that, you get this. Yes. I'm the person who posted about hyper-inflation in the first place. Yes, a 5.5 percent fixed conforming mortgage is much better than a year-to-year lease in times of hyper-inflation. God help you if you're on a month-to-month lease.
The geographic location of the property which secures the mortgage is just as important as the terms of the mortgage itself. Yes, all real-estate values are suffering, but we're about to see 10% unemployment, at a minimum Proximity to stable jobs is important. So is proximity to stable infrastructure.
"Proximity to stable jobs is important."
ReplyDeleteWith this, I am not referring to jobs at strip malls, big box stores or any retail outlets. Neither am I referring to jobs in the "Web 2.0" sector, unless you're talking about building classified information systems for the federal government.
But then, I think we'll see domestic civil unrest in 2009. (I don't want to see it, and I'm not advocating it, but I think we'll see it.)
agree with civil uneast rising -- the masses will be very upset that they cannot afford Doritos anymore, and therefore cannot really enjoy watching Dancing with the Stars. Of course, it will take a few months of starving until they will be "light" enough to march to the Bastille
ReplyDelete"the masses will be very upset that they cannot afford Doritos anymore, and therefore cannot really enjoy watching Dancing with the Stars."
ReplyDeleteOstentatious displays of wealth are unfashionable now. Soon, they are likely to be enough to incite riots. We're already hearing a lot of ticked-off voices about the 'bailout banks' and AIG execs getting hefty Christmas bonuses.
Wait 'til "Joe Six Pack" can't afford a six pack, a pack of cigs, and a Hungry Man meal all in one visit to the 7/11. Wait 'til he needs to choose to pay for only one of the three with his meager government assistance check.
if there is a hyper inflation inflation will go roaring ahead of wage price(playing catch up). your stable mortgage payment will be stable for the duration of that term. will the lender survive???
ReplyDeleterent buy??? buying now will be stupid because prices will come down further and there will still be more waves of foreclosure, continuing the glut in supply. if nobody has money because they have been wiped out whats the demand going to be. if a person can't pay their rent how much can you charge them before you must kick them out( and they trash the place on the way out).
if you are a landlord it will be better to find really good people to rent to and keep them happy so they stay!! by giving them a safe place they'll be nice to it.
time depreciates a property if the right kind of care and maintainance wasn't put into the house on a annual basis. if you do yours and your neighbors do not then your place will be priced to the upper end of the value of your neighbors.
the worst thing to own in the upcoming years will be "DEBT". the best thing to own will be gold and silver. Owning a home is always a good thing but you do not own it untill the debt is paid off. what if your home is a 2 hour commute away from any employment of any kind and you cannot afford the gas to get there.
it won't be long before the russians and the arabs demand to be paid in gold for their oil because the current price is too low.
(FYI) recent study I read said that the breakeven price to justify new oil development is $62 a barrel. $40(toilet paper) is really starting to hurt the russians.
The game is: to keep the perception that the fancy toilet paper we call money actually has "value". It doesn't if you don't believe it. the world is starting to disbelieve.
GOT GOLD
"The game is: to keep the perception that the fancy toilet paper we call money actually has "value". It doesn't if you don't believe it. the world is starting to disbelieve."
ReplyDeleteIn the first half of your comment, I was thinking that you are off base. Then I read the second half of your comment and I see that you are starting to get on track.
I beleive that you need to reconcile the first part of your comment "landlords desire stable renters", "property maintenance is a bitch", "your house is only as good as your neighbors", blah blah blah...
...with the second half of your comment "we owe all our wealth to russia and china", "our currency is worthless", etc.
Does the first half make any sense if the second half becomes reality? Who cares about peeling paint on the shutters when US dollars are worthless?
Personally, I think the second half of your post is fairly accurate. And that is why I said "Proximity to jobs and infrastructure are important"
Come to think of it, living in the Federal City may be the safest place to be in America by 2010; regardless of whether you rent, own, or are homeless. It is going to be defended at all costs.
A Merry Dickensonian Christmas to you!
11:59
ReplyDeleteDon't worry I get it.
If you take your comment about the best place to be is DC because it will be defended at all costs how will that value other areas. wouldn't DC be garrisoned at that time.
Although i did not say as much I do not think realestate will inflate to the same degree as commodities. therefore the own, rent, maintainance, and Defense(yours) points. I think I am not off target when one asks what your place worth if you cannot defend it.
hyperinflation will start when the rest of the world refuses US dollars for cancellation of debts. Americans will be bound by that nasty little "legal tender" tag on all US bills.
Despite all the printing the US govt is doing, as a percent of GDP, our debt now is a tiny tiny fraction of what it was after the new deal and the war.
ReplyDeleteEven if obama's new spending, plus say another trillion here and there, we still will only get half way into the debt crapper as we were in the mid 1940s.
The world did not up on the dollar in that time period. We worked off our debt, we survived. If the world didnt give up then, and given our problem is much smaller now, why will they give up on us now?
" debt now is a tiny tiny fraction of what it was after the new deal and the war."
ReplyDeleteOur (USA) debt, adjusted for inflation, is bigger than it has ever been. And that includes the enormous deficit spending undertaken by FDR during WWII.
Even before this crisis began, I'm sure you heard rumblings about how social security was in jeopardy? All other things being equal, the US government is on track to be total bankrupt in several decade's time.
James recently posted a link to an educational video on this very topic, on this very blog. Search for it. It is called "IOUSA"
Its a bit apples vs. oranges to include the debt of the social programs, but fair enough. I see your point, and concede the same.
ReplyDeleteThen again, look at treasury rates right now - yeilds are next to nothing, and yet they are still being bought. Right now, the world is begging us to print, print, print. Even with that, they still buy our debt, they still have faith in the US dollar. Why do you think that is?
"they still have faith in the US dollar. Why do you think that is?"
ReplyDeleteThe question is really this:
Do we allow the economy to go down the drain now? Or 40 years from now?
The answer is "40 years from now".
We really are witnessing a no-holds-barred attempt to save the US and global economies in the near term. The president-elect as said just that. No prominent economist or politician disagrees. If we can save it in the near term, then there is a chance to avoid catastrophe down the road, but to do that; things are going to change. American lifestyles, which Bush called "non-negotiable", are indeed negotiable and are due for change, whether we like it or not.
If the near-term rescue effort fails, expect to see check-points at all Potomac river crossings into the Federal City.
In fact, we'll see those checkpoints next month.
Go here
ReplyDeletethere is also Bank-implode and Builder-implode
http://ml-implode.com/
40 years from now a lot of entitlement programs will vanish. Social security will be social insurance, as FDR originally intended it to be. Earning a military retirement means you are not eligible to collect social security, unless of course you are earning disability due to combat-related injuries. The party is over. We need to start tightening our collective belts. That does not mean our standard of living will diminish. Technology will help improve productivity and further enhance how we live our lives. Look at how we live compared to the early 20th century.
ReplyDelete"Look at how we live compared to the early 20th century."
ReplyDeletePowered entirely by fairy dust and magic powder.
Wait, I mean oil. Powered entirely by oil. Plastic products. Logistics and distribution services. International freight. Personal travel. Crop fertilizers, for goodness sake, are made from oil.
It is all very different from the early 20th century; and it is all entirely dependent upon oil. THANK GOD it grows on trees!
Oil today and near future, alternative power in the not so distant future. Yes ethanol does grow from the ground with the help of fertilizers.
ReplyDeleteI question whether Baby Boomers, and their strong lobbies, will allow us to see hyper-inflation. Think about it, although the price of their home will go up in value, all of their savings, which are now likely in near cash equivalents, will be seriously devalued (even more so than they have been by the losses in the market and then their exodus to safety -- i.e., bonds/cash equivalents). I just don't see it and I think the government will put the stranglehold on inflation by raising interest rates. I agree that governments want some inflation, but that is because they feel like, through the raising of interest rates, they can control inflation better than deflation.
ReplyDelete"Yes ethanol does grow from the ground with the help of fertilizers."
ReplyDeleteEthanol doesn't scale up sufficiently. In fact, ethanol is partially responsible for recent price increases in food, and it currently takes more energy to produce a gallon of ethanol than the ethanol itself can provide. Look into it.
"I just don't see it and I think the government will put the stranglehold on inflation by raising interest rates"
That's great, but interest rates are at historic lows. We're a long way from any rate hikes. We stand to see more rate cuts. There is already talk of taking the prime rate to zero. HELOC holders are now looking at rates around 2 percent. The goal is to save the economies of the world
Nothing less is at stake.
Times are tough - I just saw the the owners of my old house were foreclosed on. I got out just in time, and the value dropped by 1/3 in the past two years based on the current list price. Meanwhile, I am getting torched on my suburban maryland home that I have been in for the past couple years.
ReplyDelete