Over the long-term it is not really a choice between monetization and catastrophic debt-induced depression, for monetization, depending on its degree will eventually lead to a catastrophic debt-induced depression. Inflation begets deflation is an old economic adage that you surely must have come across. Just look at the after effects of Germanyâs 1923 fling with monetization to see the future if the US chooses to go down that road. Unfortunately for the US, if the Fed had acted responsibly under Greenspan it need not have come to this. As for the Japanese it may be a surprise to you that they have in fact been heavily monetizing over the years, mainly to support the US$, and the US consumer. I just did a quick google search to find their M3 growth figure and came across this www.gold-eagle.com/editorials_05/saxena111405.html The reality for the Japanese is that if they had allowed economic forces to clear the excesses that were needlessly created by their monetary expansion during the 1980âs then they would not be in the mess that they are in today, and their economy would have been healthily growing from a sound footing years ago. I really donât want to say any more here as we may end up bringing this excellent thread off topic.
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Housing Rolling Along 2
- Thread starter Covertibility
- Start date
Over the long-term it is not really a choice between monetization and catastrophic debt-induced depression, for monetization, depending on its degree will eventually lead to a catastrophic debt-induced depression. Inflation begets deflation is an old economic adage that you surely must have come across. Just look at the after effects of Germanyâs 1923 fling with monetization to see the future if the US chooses to go down that road. Unfortunately for the US, if the Fed had acted responsibly under Greenspan it need not have come to this. As for the Japanese it may be a surprise to you that they have in fact been heavily monetizing over the years, mainly to support the US$, and the US consumer. I just did a quick google search to find their M3 growth figure and came across this www.gold-eagle.com/editorials_05/saxena111405.html The reality for the Japanese is that if they had allowed economic forces to clear the excesses that were needlessly created by their monetary expansion during the 1980âs then they would not be in the mess that they are in today, and their economy would have been healthily growing from a sound footing years ago. I really donât want to say any more here as we may end up bringing this excellent thread off topic.
well that seems more dependent on local economy. where did these people who left in droves move to then? the mountains? could it be so easy for a family to foreclose on a million dollar home and then rent the same exact one for few hundred $ today? if so, everyone should just foreclose in a bubble.
i cannot imagine all financial professionals in nyc leaving cos of a real estate bubble, to the point where streets become ghost town.. say they do all leave and go to jersey. then areas in jersey rise in value. becomes a function of location after real estate peaks on national level. musical chairs.
i cannot imagine all financial professionals in nyc leaving cos of a real estate bubble, to the point where streets become ghost town.. say they do all leave and go to jersey. then areas in jersey rise in value. becomes a function of location after real estate peaks on national level. musical chairs.
Quote from jficquette:
One thing you are leaving out is the number of vacant homes due to foreclosure.
Remember the last cycle when you could pay "house sitting" rent way below market?? A friend of mine was paying $400 a month to rent a 5000 sq foot house in Atlanta.
Rents are not going anywhere in the bust areas because people will be leaving in droves.
John
National Association of Realtors said today in Washington. The number of unsold homes was the highest since April 1986
http://quote.bloomberg.com/apps/news?pid=10000103&sid=aRyq1_LKolwk&refer=news_index
http://quote.bloomberg.com/apps/news?pid=10000103&sid=aRyq1_LKolwk&refer=news_index
Quote from DrChaos:
if the choice is between monetization and catastrophic debt-induced depression, then monetization is a better choice, out of two bad choices. The Japanese should have been monetizing, and writing off bad debt at banks quickly, instead of muddling through with pointless and corrupt government infrastructure projects.
I don't think the "value of the $" is more important than actual economic activity. Some people sound as if there is some moral nature to it, like preserving virginity or something.
What in the end really matters is what real people do in the real physical world---and which policies encourage the best outcomes.
Dollars are not people nor do they have any moral value, they are a unit of accounting.
At present I don't see how or why the USD would drop significantly against all other currencies---most other majors have at least as many problems. The housing boom is global.
The one currency it needs to drop against is of course the yuan, but China is actively stopping this as a matter of policy. Their intent is strategic deindustrialization of the US: mercantalism, not capitalism. Despite the orthodoxy of the economists, it may just well work.
The reason the Japenese did what they did is because their culture cares about the future generations whereas ours don't.
The Japanese felt it was better to make the current generation grunt through the problems they created rather then punish the future generations with higher prices and a debased currency.
This Baby boomer generation was a bust and this will create tremendous polictial change when the young of today get old enough to care about being stuck with $15 trillion in debt.
John
What you aren't acknowledging with your reasoning is the number of rookie/novice real estate investors that have purchased properties in the past 2-3 years...Your next door neighbor who decides to "invest" in a rental property or second home. I think that might fill in your gap. We have also had substantial international investment in our real estate markets.
For a more concrete example, look at the lease rates in your area compared with what it would cost to purchase the same property with a mortgage and down payment.
For a more concrete example, look at the lease rates in your area compared with what it would cost to purchase the same property with a mortgage and down payment.
Quote from Lights:
well that seems more dependent on local economy. where did these people who left in droves move to then? the mountains? could it be so easy for a family to foreclose on a million dollar home and then rent the same exact one for few hundred $ today? if so, everyone should just foreclose in a bubble.
i cannot imagine all financial professionals in nyc leaving cos of a real estate bubble, to the point where streets become ghost town.. say they do all leave and go to jersey. then areas in jersey rise in value. becomes a function of location after real estate peaks on national level. musical chairs.
Quote from Lights:
people who foreclose in "bubble zone" will need to rent, driving up demand and stripping rental supply. rent prices rise. assuming the economy gains steam. rental markets get hot. real estate investors w/deep pocket then shift gear and rent out their properties for income, rather than speculate on price growth.
That sounds good, but relies on the assumption that there is actually "real" demand for all this housing, and that this real demand would be forced to seek rentals to keep a roof over their heads. I have contended all along that the recent hyper demand in house buying is a result of a sham mania that has ignored small population growth and wage gains....this very bubble we seeing right now peak and roll over. And all the while rental prices have been stable to slightly downtrending in price the last few years.
Rental prices represent REAL demand, indeed renters do not "speculate" by renting up property and sitting on it. There would be no financial reward in doing so. Interesting article below showing inventory increased 20x faster than sales! This "hidden" inventory is coming out of the woodwork to try to take advantage of the high prices. Too bad the door is not big enough for all the fat sows to fit through! OWP
http://www.philly.com/mld/philly/13263250.htm
"Demand dropped.Though the number of houses increased by almost 2,000 between the third quarter of 2004 and the third quarter of 2005, only 110 more houses - 7,397 - sold in the eight-county metropolitan area between June and September 2005 than sold in the same period last year - 7,287."
http://www.vvdailypress.com/2005/113319428486915.html
"So many sellers want to 'try' the market. This strategy will not work in our present market. By the time you decide to lower your price in 90 or 120 days, it may be too late. Potential buyers will have found something similar for a lower price."
"With more than 2,000 homes for sale in our Valley plus 2,000 more brand-new homes in planning you need to understand the competition. Forget the past. You will need to let loose of information you received about your home last spring or summer. You can not worry about what your neighbor's house sold for last December. You must compete in the market today."
Quote from Enfinity:
What you aren't acknowledging with your reasoning is the number of rookie/novice real estate investors that have purchased properties in the past 2-3 years...Your next door neighbor who decides to "invest" in a rental property or second home. I think that might fill in your gap. We have also had substantial international investment in our real estate markets.
For a more concrete example, look at the lease rates in your area compared with what it would cost to purchase the same property with a mortgage and down payment.
Crusing through Craig's List Las Vegas...the amount of brand new or near new empty homes is absolutely breathtaking. So much pain, so much debt, so little time!
Live near Celine?
http://lasvegas.craigslist.org/rfs/114113478.html
http://lasvegas.craigslist.org/rfs/114077994.html
And you can rent stuff cheap!
http://lasvegas.craigslist.org/apa/114252104.html
http://lasvegas.craigslist.org/apa/114039076.html
in nyc, it costs about a million for a 2 bedroom condo in midtown. assuming one puts down a decent down payment, about the same as leasing. $4,000/month.
Quote from Enfinity:
What you aren't acknowledging with your reasoning is the number of rookie/novice real estate investors that have purchased properties in the past 2-3 years...Your next door neighbor who decides to "invest" in a rental property or second home. I think that might fill in your gap. We have also had substantial international investment in our real estate markets.
For a more concrete example, look at the lease rates in your area compared with what it would cost to purchase the same property with a mortgage and down payment.
Quote from onewaypockets:
That sounds good, but relies on the assumption that there is actually "real" demand for all this housing, and that this real demand would be forced to seek rentals to keep a roof over their heads. I have contended all along that the recent hyper demand in house buying is a result of a sham mania that has ignored small population growth and wage gains....this very bubble we seeing right now peak and roll over. And all the while rental prices have been stable to slightly downtrending in price the last few years.
Rental prices represent REAL demand, indeed renters do not "speculate" by renting up property and sitting on it. There would be no financial reward in doing so. Interesting article below showing inventory increased 20x faster than sales! This "hidden" inventory is coming out of the woodwork to try to take advantage of the high prices. Too bad the door is not big enough for all the fat sows to fit through! OWP
http://www.philly.com/mld/philly/13263250.htm
"Demand dropped.Though the number of houses increased by almost 2,000 between the third quarter of 2004 and the third quarter of 2005, only 110 more houses - 7,397 - sold in the eight-county metropolitan area between June and September 2005 than sold in the same period last year - 7,287."
http://www.vvdailypress.com/2005/113319428486915.html
"So many sellers want to 'try' the market. This strategy will not work in our present market. By the time you decide to lower your price in 90 or 120 days, it may be too late. Potential buyers will have found something similar for a lower price."
"With more than 2,000 homes for sale in our Valley plus 2,000 more brand-new homes in planning you need to understand the competition. Forget the past. You will need to let loose of information you received about your home last spring or summer. You can not worry about what your neighbor's house sold for last December. You must compete in the market today."
Plus normal social events such as divorce, death, unemployment that cause involuntary liquidation will require prices that will scare the hell out of the othes in the neighborhood.
These events were readily absorbed for the most part over the last 5-6 years but can't be in a down market.
John
Quote from onewaypockets:
Crusing through Craig's List Las Vegas...the amount of brand new or near new empty homes is absolutely breathtaking. So much pain, so much debt, so little time!
Live near Celine?
http://lasvegas.craigslist.org/rfs/114113478.html
http://lasvegas.craigslist.org/rfs/114077994.html
And you can rent stuff cheap!
http://lasvegas.craigslist.org/apa/114252104.html
http://lasvegas.craigslist.org/apa/114039076.html
I am thinking that the market will be maniplilated up to compensate for the real estate market as much as possible.
If they can get people's 401k's to go up 20%-30% in the next 18 months or so then it may give people more confidence in owning there homes in the bust areas. Maybe slow the increase in inventory.
John