Robert Shiller discussing the real estate market – thanks doughboy!
Jim Klinge
Klinge Realty Group
Broker-Associate, Compass
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Jim, what are your feelings regarding what some people think is the ‘next’ bubble. That is, all the banks are stalling (kicking the can down the road) in hopes the market comes roaring back and the rise in values will erase losses on the reo’s and deliquencies. When (or if) this doesn’t happen, the next round of 1-200 banks fail and the government will be forced to put all the houses on the market at once like the S & L crisis resolution. Isn’t there anybody who sees more houses need to be put on the market now?
The herds mentality is shifting to “Its stupid to pay my underwater mortgage” and this is just beginning. And the herd is HUGE. This is everyone that bought late 2003 to 2007.
I have multiple former perma bull friends/clients that have just started throwing in the towel in SD and are about to get their NODs… living payment free seems like the soup du jour much like frantic buying was back in the bubble buildup.
Read between the lines… the government is doing things that have NEVER been done before… this is not a simple S&L crisis type blip.
Don’t worry though the government has got this all under control and it will come back nicely. These guys are always way ahead of the game.
Glad we reinstated bernanke:
http://www.youtube.com/watch?v=INmqvibv4UU
off topic but I just got back from a tax prep meeting and turns out I will qualify for the 8K tax credit.
I’m pleased but it feels a little dirty, like ‘theft by receiving’ from the American taxpayer.
BTW, I learned there is a caveat with the credit that I wasn’t aware of before. If you sell the house for a profit within 3 years, you have to pay the credit back.
swm, it won’t be a bubble until they ease up lending standards. As long as there are large cash down payment requirements and full doc loan requirements that will keep most hands in the game pretty strong.
If they loosen the lending requirements, that’s the time to head for the exits.
I have a degree in Economics and I can say with complete confidence that what’s going on right now is beyond anything any Economic model can account for. In the past government was looked at as a referee for controlling free markets. This type of a role works well in mathematical theories and hypothesis’s because it’s a constant. But recently that role has changed significantly. Government is actively (and at times irrationally) participating in financial transactions and on a greater and greater scale. Math creates a specific answer. But, if certain variables in the equation doesn’t fall with in a specific variance or bounds the end result is questionable
Economics as a profession is going to get more and more interesting in the very near future.
BTW after college I stopped trying to break into Economics as a career when I saw that most of what I learned in school wasn’t how things worked in the real world.
Something that scares the cr*p out of me is all the Economic people I knew from school that did go onto careers in the field. Are they seeing the same type of disconnects that I see? Or are they in positions of employment where they are forced to use what they learned in school blindly marching on even when walls are crashing around them.
Makes you think.
“BTW, I learned there is a caveat with the credit that I wasn’t aware of before. If you sell the house for a profit within 3 years, you have to pay the credit back”
California dreaming.
the ‘next’ bubble
The local real estate market is surviving on people with ample resources (job/money combo).
How many rich people are there?
Or at least have enough money and guts to comfortably make the biggest investment they’ll make for the rest of their lives?
I don’t think you have to be rich to buy a house, just gutsy enough to go along with The Program:
1. This house will last me the duration.
2. I have quantified my housing expense for the next 30 years, and am comfortable paying it.
3. If it ends up being a good investment someday, then oh happy day.
The Program helps bring homebuying into healthy perspective.
You are going to have housing expense for the next 30 years. Buying a house on a 30-year fixed rate locks in your housing expense, when renting does not. If you like having certainty in your life, then locking in your housing expense for the next 30 years might make you sleep better at night.
If you aren’t comfortable with The Program, then you should wait to buy until you are comfortable.
Under no circumstances do you want to find yourself having to sell your house in the next 3-5 years. I’ll probably be able to re-sell for at least break-even, but the closing costs alone can eat up 20-30% of your investment quickly. 20% down payment – 5% costs = 15% (or 25% loss).
Long-term, or wait.
To answer the question (finally), the more buyers that subscribe to The Program, the less-likely we’ll have another bubble.
Will there be a double-dip? I think it’ll dip every fourth quarter, just enough that it’ll look like a comeback each spring.
I might be willling to take those risks, but there’s nothing to buy out there. It’s one thing to commit financial suicide to hang your hat somewhere, but to have to compromise on the home? Tough pill to swallow. Thank you banks/govt!
anyone know of jobs where you can lock in for the next 30 years?
another problem with The Program is their is another few Programs going on simultaneously.. one of them is called The Speculative Program where folks buy real estate thinking they can make a profit off it.. some folks actually were told this Speculative Program was foolproof until they recognized who the fool was…. signing off from la-la-land…
“I have a degree in Economics and I can say with complete confidence that what’s going on right now is beyond anything any Economic model can account for.”
People saw this coming a mile away. Here’s a Peter Schiff video from November 13, 2006. It has 8 parts, but well worth it. He’s also running for senate, btw.
http://www.youtube.com/watch?v=6G3Qefbt0n4
Bubblenerd,
I wasn’t talking about the past. And I agree the housing bubble was easy to see.
I’m talking about the future. and Predicting how it will unfold.
The future is going to look like Japan;
http://dshort.com/articles/2010/Japan-US-bubbles-and-deflation.html
Government is going to try to spend it’s way out. After about 10 years, we’re going to have nothing to show for all that government debt. And we’re either going to end up defaulting or paying debt with printed money.
I agree that the Japan example is the most likely way our economy will play out in the future. But you have to keep in mind that Japan was able to work it’s way out of a hole. I’m concerned that USA might not be able to do that because we don’t manufacture anything anymore. A “service economy” only works when people have $$$ to spend.