total implosion of the u.s. real estate market

[SouthAmerica]

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July 16, 2008

SouthAmerica: Wednesday of last week I met a friend of mine who works full time selling real Estate in the Nutley area of New Jersey. He has been doing that for the last 5 years.

I asked him what was going on regarding real estate around Nutley. He told me that most of the real estate salesperson would be lucky if they managed to sell 2 houses during 2008. He told me that he had just listed the house of his friend, who had a real nice house in Nutley. He told me that he would have listed that house at market price one year ago at around $ 330,000, and a year later he was listing his friend’s house for $ 200,000 and he was not sure that even with this major reduction in price they were going to be able to sell the property very quickly – and his friend was ready to reduce the price even further to be able to find a buyer for the property.

He said that type of reduction in price shows how bad the real estate market is getting in this area of New Jersey, and Nutley is a nice town about 20 minutes by car from New York City via Lincoln Tunnel.
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[agmccall]

Quote from OldTrader:

But isn't it clear? The world, as we know it, is ending.

OldTrader

The world as we know it is changing, not ending.
It has been changing all my life, sometimes for the better, sometimes for the not so better.

 

[FerdinandAlx]

Quote from timscott:

Feds are engineering rampant inflation for this very reason.

Inflate everything so the dollar value of the home stays up - and the banks with foreclosed homes can recoup their losses. The real value of the home has always been the same. People who bought at the high will be bailed out with obtaining pretty much what they paid for the home. Just the dollars they receive will be worth a lot less.

Save the banks at all costs!

It's the only thing the Feds can do. It's painful, but not necessarily irrational. High inflation will rebalance the ratio of debt to wages and tangible assets.

The alternative would be to shackle the United States to a mountain of debt owned by the creditor nations.

 

[Smart Money]

Quote from timscott:

Feds are engineering rampant inflation for this very reason.

Inflate everything so the dollar value of the home stays up - and the banks with foreclosed homes can recoup their losses. The real value of the home has always been the same. People who bought at the high will be bailed out with obtaining pretty much what they paid for the home. Just the dollars they receive will be worth a lot less.

Save the banks at all costs!

Then wouldn't rental property be the investment to own? You buy it leveraged at a ratio of 5 to 1 with an agreement to pay X amount of dollars for it a month. If the value of the dollar gets cut in half, you're collecting almost 2X in rent a month. So in effect, you get to keep half the rent. And at the same time, you quickly build an equity stake equal to half of the value of the property because the build costs double.

I think people are forgetting how good it is to own real estate in inflationary times. Trying to call the bottom of the housing market to get the best deal is...in light of this...is a lot of work for relatively little gain in the long run.

SM

 

[gnome]

Quote from FerdinandAlx:

It's the only thing the Feds can do. It's painful, but not necessarily irrational. High inflation will rebalance the ratio of debt to wages and tangible assets.

If you've studied world financial history, then you know the ultimate resolution of this circle-jerk is bad, BAD, B-A-D for us American citizens...

1. Hyperinflation
2. Currency debasement
3. Bankruptcy of nearly all US citizens
4. Foreigners (whose currency was not destroyed) swoop in and pick up US assets on the cheap.
5. We Americans end up doing their laundry and cleaning their (formerly our) homes.

 

[slider123456]

Looks like a case of stagflation dammed if you do damned if you don't. Happened in the 70's and looks like it is happening again. In a debt based financial system you do not want inflation higher than interest rates because then the banks have no reason to lend money when they have less purchase power when they get it back. Which means less business less jobs more unemployment. At least in the 70's. Inflation needs to be controlled unless America wants to follow the footsteps of Mexico and Argentina.

Raise interest rates Banks will lend inflation will be controlled unemployment will rise in the short run (years) then self correct Two stagflationary periods in 20 years time to review the fiscal policy maybe burst the bubble earlier before everything gets out of control or base money on something with an intrinsic value to anchor fluctuations better.

Third option with Globalization is to let inflation go rampant and hope it pulls jobs back from overseas when the American wage value is better than the country they left too but that seems like a big gamble and possible economic suicide.